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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 27, 2005
Willis Group Holdings Limited
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(Exact Name of Registrant as Specified in Its Charter)
Bermuda
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(State or Other Jurisdiction of Incorporation)
001-16503 98-0352587
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(Commission File Number) (IRS Employer Identification No.)
c/o Willis Group Limited
Ten Trinity Square
London EC3P 3AX, England
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(Address of Principal Executive Offices)
(44) (20) 7488-8111
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On April 27, 2005, Willis Group Holdings Limited ("WGHL") issued a press
release (the "Press Release") reporting results for the quarter ended March 31,
2005. A copy of the Press Release is attached as Exhibit 99.1 to this Report on
Form 8-K and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release of WGHL dated April 27, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WILLIS GROUP HOLDINGS LIMITED
Date: April 28, 2005 By: /s/ Mary E. Caiazzo
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Name: Mary E. Caiazzo
Title: Assistant General Counsel
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Press Release of WGHL dated April 27, 2005
Exhibit 99.1
Willis Group Reports First Quarter 2005 Results
NEW YORK--(BUSINESS WIRE)--April 27, 2005--Willis Group Holdings
Limited (NYSE: WSH), the global insurance broker, today reports
results for the quarter ended March 31, 2005. Net income for the
quarter ended March 31, 2005 after regulatory settlements and related
expenses, severance costs and other provisions was USD72 million, or
USD0.43 per diluted share, compared with USD148 million, or USD0.87
per diluted share, a year ago. Total reported revenues rose 1 percent
to USD669 million for first quarter 2005.
The results of the first quarter were affected by the following
significant developments:
-- On April 8, 2005, Willis announced agreements with the New
York Attorney General, New York Department of Insurance and
the Minnesota Attorney General to resolve issues raised by the
industry-wide investigation into contingent commissions. The
Company agreed to establish reimbursement funds totaling USD51
million, and also recorded USD9 million in legal and
administrative expenses in relation to the settlements (USD36
million, or USD0.21 per diluted share, after tax).
-- The Company continues to review its expense base in light of
an evolving business model for insurance brokerage; as of
March 31, 2005, approximately 500 positions were identified
and are being eliminated. Severance costs and related expenses
were recorded in the amount of USD28 million (USD19 million,
or USD0.11 per diluted share, after tax).
-- Based on the quarter-end review of current legal proceedings,
the Company increased its provision for claims by an
additional USD20 million (USD14 million, or USD0.08 per
diluted share, after tax).
-- Total volume and profit-based contingent commissions relating
to 2004 arrangements outside the United States totaled USD3
million in the quarter ended March 31, 2005 compared with
USD21 million a year ago. These fees were abolished in 2004
and will continue to run off. The decline in volume and
profit-based contingent commissions reduced organic revenue
growth by 3 percent. Other market remuneration declined to
USD3 million in the quarter compared with USD22 million for
first quarter 2004. We continue to work with the insurance
markets to restructure the existing relationships and
anticipate recovering a portion of these fees over time. The
decline in other market remuneration reduced organic revenue
growth by 3 percent.
"We have confronted and put behind us a number of issues during
the first quarter. The resulting changes we are embracing in our
business model define this transitional period in the new world of
insurance," said Joe Plumeri, Chairman and Chief Executive Officer.
"We are challenging our own conventions and assumptions in order to
reinforce our business around the world and are confident we will
emerge with a stronger more resilient model for long-term success."
Financial Results
Total reported revenues for the quarter ended March 31, 2005
increased 1 percent to USD669 million, from USD665 million for the
same period last year. The effect of foreign currency translation
increased reported revenues 2 percent and net acquisitions added 3
percent.
Organic revenue growth excluding volume and profit-based
contingent commissions and other market remuneration was 2 percent in
the first quarter, comprised of approximately 4 percent in net new
business and a negative 2 percent impact from declining insurance
premium rates and other market factors.
"We are pleased with the revenue growth this quarter, in spite of
the continued decline in insurance premium rates across most lines and
challenging market conditions," Plumeri noted. "Our recruiting efforts
continue to yield success as we add recognized professionals to the
Willis team, and together have welcomed many new clients."
Reported operating margin was 14.1 percent. Excluding regulatory
settlements and related expenses, severance costs and other
provisions, adjusted operating margin was 30.2 percent for the first
quarter of 2005 compared with 35.5 percent for the same period last
year. The decline in adjusted operating margin was primarily
attributable to the elimination of volume and profit-based contingent
commissions, the decline in other market remuneration and incremental
hiring expenses.
Other
At March 31, 2005, total long-term debt was USD450 million and
total stockholders' equity was approximately USD1.5 billion. The
capitalization ratio (total long-term debt to total long-term debt and
stockholders' equity) was 23 percent at March 31, 2005. The Board of
Directors has approved a new buy back program for USD300 million; this
replaces the previous program under which USD339 million was
purchased.
During the first quarter, the Company completed four acquisitions
with annual revenues of approximately USD14 million. On April 14,
2005, the Company completed the sale of Stewart Smith, our wholesale
unit, with total reported revenues of USD77 million in 2004. There was
approximately USD113 million of immediately available cash at March
31, 2005, providing significant financial flexibility to support the
cash needs of the Company.
"The entire insurance industry is undergoing sweeping
transformations. This changing environment brings challenges but many
more opportunities which we face with excitement and confidence," said
Plumeri.
Conference Call and Web Cast
A conference call to discuss first quarter 2005 results will be
held April 28, 2005 at 8:00 a.m. Eastern Standard Time. To participate
in the live teleconference, please dial (888) 324-6989 (U.S.) or (210)
839-8500 (International) with a pass code of "Willis." The live audio
web cast (which will be listen-only) may be accessed at
www.willis.com. This call will be available by replay starting at
approximately 10:00 a.m., Eastern Daylight Time, and ending May 12,
2005. To access the audio replay, please dial (800) 294-3086 (US), or
(402) 220-9766 (International), or by accessing the web site.
Willis Group Holdings Limited is a leading global insurance
broker, developing and delivering professional insurance, reinsurance,
risk management, financial and human resource consulting and actuarial
services to corporations, public entities and institutions around the
world. With over 300 offices in some 80 countries, its global team of
15,800 associates serves clients in some 180 countries. Additional
information on Willis may be found on its web site www.willis.com.
This press release may contain certain statements relating to
future results, which are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from historical results or those anticipated, depending on a variety
of factors such as general economic conditions in different countries
around the world, fluctuations in global equity and fixed income
markets, changes in premium rates, the competitive environment and the
actual cost of resolution of contingent liabilities. Further
information concerning the Company and its business, including factors
that potentially could materially affect the Company's financial
results are contained in the Company's filings with the Securities and
Exchange Commission.
This press release includes supplemental financial information
which may contain references to non-GAAP financial measures as defined
in Regulation G of SEC rules. Consistent with Regulation G, a
reconciliation of this supplemental financial information to our
generally accepted accounting principles (GAAP) information follows.
We present such non-GAAP supplemental financial information as we
believe such information is of interest to the investment community
because it provides additional meaningful methods of evaluating
certain aspects of the Company's operating performance from period to
period on a basis that may not be otherwise apparent on a GAAP basis.
This supplemental financial information should be viewed in addition
to, not in lieu of, the Company's consolidated statements of
operations for the quarter ended March 31, 2005.
NOTE: All figures are in USD unless otherwise stated.
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months
ended
March 31,
-------------
2005 2004
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Revenues:
Commissions and fees 651 648
Interest income 18 17
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Total Revenues 669 665
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Expenses:
General and administrative expenses (after charging non-
cash compensation USDnil, USD2) 511 419
Regulatory settlements 51 -
Depreciation expense 11 11
Amortization of intangible assets 2 1
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Total Expenses 575 431
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Operating Income 94 234
Interest expense 6 5
Premium on redemption of subordinated debt - 17
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Income before Income Taxes, Equity in Net Income of
Associates and Minority Interest 88 212
Income taxes 26 72
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Income before Equity in Net Income of Associates and
Minority Interest 62 140
Equity in net income of associates 14 12
Minority interest (4) (4)
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Net Income 72 148
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Net Income per Share
- Basic 0.44 0.94
- Diluted 0.43 0.87
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Average Number of Shares Outstanding
- Basic 163 158
- Diluted 168 170
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WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
Definitions of Non-GAAP Financial Measures:
We believe that investors' understanding of the Company's
performance is enhanced by our disclosure of the following non-GAAP
financial measures. Our method of calculating these measures may
differ from those used by other companies and therefore comparability
may be limited.
Adjusted operating income
Our first quarter 2005 results were significantly impacted by the
charges for regulatory settlements and related expenses, severance
costs and other provisions. We believe that excluding these items from
operating income, along with the GAAP measures, provides a more
complete and consistent comparative analysis of our results of
operations.
Organic revenue growth
Organic revenue growth excludes the impact of foreign currency
translation and acquisitions and disposals from reported revenues. We
use organic revenue growth as a measure of business growth generated
by operations that were part of the Group at the end of the period.
Adjusted Operating Income:
Adjusted operating income is defined as operating income excluding
charges for regulatory settlements and related expenses, severance
costs and other provisions. Operating income is the most directly
comparable GAAP measure, and the following table reconciles adjusted
operating income to operating income for the quarters ended March 31,
2005 and 2004:
Three months ended
March 31,
---------------------
2005 2004 % Change
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Operating Income, GAAP basis 94 234 (60)%
Excluding:
Regulatory settlements (a) 51 -
Costs related to regulatory settlements (a) 9
Severance costs 28 2
Other provision (b) 20 -
----- -----
Adjusted Operating Income 202 236 (14)%
===== =====
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues 14.1% 35.2%
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Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 30.2% 35.5%
===== =====
a) Comprises USD51 million to establish the reimbursement funds agreed
with the New York and Minnesota Attorneys General and New York
Department of Insurance in April 2005 and USD9 million of related
legal and administrative expenses.
b) Based on the quarter-end review of legal proceedings, the Company
increased its provision for claims by an additional USD20 million.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
Organic Revenue Growth:
Organic revenue growth is defined as revenue growth excluding the
impact of foreign currency translation and acquisitions and disposals.
The percentage change in reported revenues is the most directly
comparable GAAP measure, and the following table reconciles this
change to organic revenue growth by business unit for the quarter
ended March 31, 2005.
Quarter ended
March 31, Change attributable to
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Foreign Acquisitions Organic
currency and revenue
2005 2004 % change translation disposals growth
----- ----- --------- ----------- ------------ --------
Global 362 354 2% 2% 5% (5)%
North America 142 156 (9)% 0% 0% (9)%
International 147 138 7% 3% 1% 3%
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Commissions
and fees (see
below) 651 648 0% 1% 3% (4)%
Investment
Income 18 17 6% 5% 2% (1)%
----- ----- --------- ----------- ------------ --------
Total revenues 669 665 1% 2% 3% (4)%
===== ===== ========= =========== ============ ========
Commissions and Fees:
Organic growth in commissions and fees was attributable to:
Commissions Volume and Other market Commissions
and fees profit- remuneration and fees
based (a) organic
contingent growth
commissions
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Global 0% 0% (5)% (5)%
North America 3% (12)% 0% (9)%
International 3% 0% 0% 3%
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Total Group 2% (3)% (3)% (4)%
=========== ============ ============= ===========
a) Other market remuneration includes fees received for product and
market research we carry out on behalf of insurers and income
related to administration and other services we provide to the
market.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Volume and profit- Other market
based contingent remuneration
commissions
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2005 2004 2005 2004
---------- -------- ------- --------
First quarter 3 21 3 22
Second quarter 15 20
Third quarter 10 19
Fourth quarter 25 16
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71 77
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CONTACT: Willis Group Holdings Limited
Investors:
Kerry K. Calaiaro, 212-837-0880
calaiaro_ke@willis.com
or
Media:
Dan Prince, 212-837-0806
prince_da@willis.com