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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): November 3, 2005
Willis Group Holdings Limited
- --------------------------------------------------------------------------------
(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
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London EC3P 3AX, England
(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 November 2, 2005, Willis Group Holdings Limited ("WGHL") issued a
press release (the "Press Release") reporting results for the quarter and nine
months ended September 30, 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 November 2, 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: November 3, 2005 By: /s/ William P. Bowden, Jr.
---------------------------
Name: William P. Bowden, Jr.
Title: General Counsel
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Press Release of WGHL dated November 2, 2005
Exhibit 99.1
Willis Group Reports Third Quarter 2005 Results; Declares Regular Quarterly
Dividend
NEW YORK--(BUSINESS WIRE)--Nov. 2, 2005--Willis Group Holdings
Limited (NYSE: WSH), the global insurance broker, today reports
results for the quarter and nine months ended September 30, 2005.
Financial Results
Net income for the quarter ended September 30, 2005 was $49
million, or $0.30 per diluted share, compared with $75 million, or
$0.45 per diluted share, a year ago.
Total reported revenues for the quarter ended September 30, 2005
decreased 1 percent to $487 million, from $490 million for the same
period last year. The effect of foreign currency translation decreased
reported revenues 2 percent and net acquisitions added 1 percent.
Organic growth in commissions and fees excluding volume and
profit-based contingent commissions and other market remuneration was
6 percent in the third quarter, comprised of approximately 7 percent
in net new business and a negative 1 percent impact from declining
insurance premium rates and other market factors.
Reported (and adjusted) operating margin was 14.8 percent for the
quarter ended September 30, 2005, compared with 22.2 percent for the
same period last year. Approximately 4 percent of the decline in
reported (and adjusted) operating margin was due to the elimination of
contingent commissions and the decline in other market remuneration;
the remainder of the decline was mainly due to net incremental hiring
and employee retention.
Commenting on today's results, Joe Plumeri, Chairman and Chief
Executive Officer said, "Our results in the third quarter and overall
this year reflect an extraordinary year of change in the industry and
at Willis. We are successfully adjusting to a marketplace without
contingents for global brokers while we are increasing our
transparency and value proposition for our clients. At the same time,
we are retaining and attracting people in an environment of increased
talent competition. Because of our proactive initiatives, we are
pleased to report strong organic revenue growth in the third quarter
generated from net new business and solid client retention."
Total volume and profit-based contingent commissions relating to
2004 arrangements totaled $1 million in the quarter ended September
30, 2005 (all of which derived from outside the United States)
compared with $10 million a year ago. Other market remuneration
declined to $3 million in the third quarter compared with $19 million
for third quarter 2004. The decline in contingent commissions and
other market remuneration reduced organic revenue growth by 6 percent.
Reported net income for the nine months ended September 30, 2005
after net gain on disposal of operations and first quarter charges for
regulatory settlements and related expenses, severance costs and other
provisions was $240 million, or $1.45 per diluted share, compared to
$319 million, or $1.89 per diluted share, a year ago.
Total reported revenues for the nine months ended September 30,
2005 increased 1 percent to $1,705 million, up from $1,687 million for
the corresponding period in 2004. Foreign currency translation had no
impact on reported revenues and net acquisitions added 2 percent.
Organic growth in commissions and fees excluding volume and
profit-based contingent commissions and other market remuneration was
4 percent for the nine months, comprised of approximately 6 percent in
net new business and a negative 2 percent impact from declining
insurance premium rates and other market factors.
Adjusted operating margin, excluding regulatory settlements and
related expenses, severance costs and other provisions and net gain on
disposal of operations, was 23.6 percent for the nine months ended
September 30, 2005 compared with 29.1 percent for the same period last
year. Approximately 4 percent of the decline in adjusted operating
margin was due to the elimination of contingent commissions and the
decline in other market remuneration; the remainder of the decline was
mainly due to net incremental hiring and employee retention.
Outlook
For the full year 2005 the Company expects to generate a reported
operating margin of about 21 percent and an adjusted operating margin
of about 22 percent. The Company's outlook is based on expectations of
decreased revenue from contingent commissions and continued higher
expenses due to net incremental hiring and employee retention.
However, given the inherent unpredictability of our business, actual
results may differ from those predicted for a number of reasons,
including unexpected changes in market conditions, adverse
developments in litigation matters and regulatory issues.
In conclusion Mr. Plumeri added, "We have embraced the challenges
we faced this past year and made choices to best position ourselves
for the future. Our ability to be nimble during the market dislocation
has allowed us to strengthen our foundation in 2005 by attracting and
retaining key clients and professionals. We are confident that we will
be able to benefit from the opportunities that lie ahead and we
continue to believe we will grow our business next year, and beyond."
Other
At September 30, 2005, total long-term debt was $600 million and
total stockholders' equity was approximately $1.3 billion. The
capitalization ratio (total long-term debt to total long-term debt and
stockholders' equity) was 32 percent at September 30, 2005.
During the third quarter, the Company completed the repurchase of
4.4 million shares of common stock for $154 million. Through the first
nine months of 2005, the Company has repurchased 8.8 million shares
for $306 million under the existing $500 million buyback
authorization.
During the nine months ended September 30, 2005 the Company
completed 5 acquisitions with annual revenues of approximately $15
million. Cash and cash equivalents totaled $185 million, including
approximately $87 million of immediately available cash at September
30, 2005.
Separately, the Board of Directors today approved a regular
quarterly cash dividend on the Company's common stock of $0.215 per
share, an annual rate of $0.86 per share. The dividend is payable on
January 16, 2006 to shareholders of record on December 31, 2005.
Conference Call and Web Cast
A conference call to discuss third quarter 2005 results will be
held November 3, 2005 at 8:00 a.m. Eastern Standard Time. To
participate in the live teleconference, please dial (888) 829-8668
(U.S.) or (210) 234-0001 (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 November
17, 2005. To access the audio replay, please dial (866) 424-3998 (US),
or (203) 369-0851 (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 and nine months ended September 30, 2005.
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
------------- ---------------
2005 2004 2005 2004
------ ------ ------- -------
Revenues:
Commissions and fees $ 469 $ 472 $1,650 $1,636
Interest income 18 18 55 51
------ ------ ------- -------
Total Revenues 487 490 1,705 1,687
------ ------ ------- -------
Expenses:
Salaries and benefits (after charging
non-cash compensation $nil, $4, $nil
and $10) 313 276 1,008 871
Other operating expenses 89 93 312 290
Regulatory settlements - - 51 -
Depreciation expense 11 10 33 31
Amortization of intangible assets 2 2 7 4
Net gain on disposal of operations - - (78) (5)
------ ------ ------- -------
Total Expenses 415 381 1,333 1,191
------ ------ ------- -------
Operating Income 72 109 372 496
Interest expense 9 6 21 15
Premium on redemption of subordinated
debt - - - 17
------ ------ ------- -------
Income before Income Taxes, Equity in
Net Income of Associates and Minority
Interest 63 103 351 464
Income taxes 18 31 121 155
------ ------ ------- -------
Income before Equity in Net Income of
Associates and Minority Interest 45 72 230 309
Equity in net income of associates 5 3 17 15
Minority interest (1) - (7) (5)
------ ------ ------- -------
Net Income $ 49 $ 75 $ 240 $ 319
====== ====== ======= =======
Net Income per Share
- Basic $0.31 $0.48 $ 1.48 $ 2.02
- Diluted $0.30 $0.45 $ 1.45 $ 1.89
====== ====== ======= =======
Average Number of Shares Outstanding
- Basic 160 157 162 158
- Diluted 163 167 166 169
====== ====== ======= =======
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
1. 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.
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 and adjusted net income
Our results for the nine months ended September 30, 2005 were
significantly impacted by net gains on disposal of operations, and
charges for regulatory settlements and related expenses, our first
quarter headcount reduction program, other provisions, and a
non-recurring premium on redemption of subordinated debt in 2004.
We believe that excluding these items from operating income and
net income as applicable, along with the GAAP measures, provides a
more complete and consistent comparative analysis of our results
of operations. These items did not have a material effect on the
results for the three months ended September 30, 2005.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
2. Revenue analysis
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 tables
reconcile this change to organic revenue growth by business unit
for the quarter ended September 30, 2005:
Quarter ended
September 30, Change attributable to
--------------------- ----------------------------------
Foreign Acquisitions Organic
% Currency and Revenue
2005 2004 Change Translation Disposals Growth
----- --------------- ----------- ------------ --------
Global $219 $234 (6)% (2)% 0% (4)%
North America 168 158 6% 0% 1% 5%
International 82 80 2% (2)% 1% 3%
----- ----- --------- ----------- ------------ --------
Commissions
and fees
(see below) $469 $472 (1)% (2)% 1% 0%
Interest
Income 18 18 0% 0% 1% (1)%
----- ----- --------- ----------- ------------ --------
Total revenues $487 $490 (1)% (2)% 1% 0%
===== ===== ========= =========== ============ ========
Commissions and Fees
Organic growth in commissions and fees for the quarter ended
September 30, 2005 was attributable to:
Quarter ended September 30,
------------------------------------------------------
Commissions Volume and Other market Commissions
and fees profit-based remuneration and fees
contingent (a) organic
commissions growth
------------ -------------- -------------- -----------
Global 6% (2)% (8)% (4)%
North America 6% (1)% 0% 5%
International 4% (1)% 0% 3%
------------ -------------- -------------- -----------
Total Group 6% (2)% (4)% 0%
============ ============== ============== ===========
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
(in millions) (unaudited)
2. Revenue analysis (continued)
Organic Revenue Growth
The following table reconciles the change to organic revenue
growth by business unit for the nine months ended September 30,
2005:
Nine months ended
September 30, Change attributable to
----------------------- ---------------------------------
Foreign Acquisitions Organic
% Currency and Revenue
2005 2004 Change Translation Disposals Growth
------- --------------- ----------- ------------ --------
Global $844 $851 (1)% 0% 3% (4)%
North America 479 476 1% 0% 1% 0%
International 327 309 6% 2% 1% 3%
------- ------- ------- ----------- ------------ --------
Commissions
and fees
(see below) $1,650 $1,636 1% 1% 2% (2)%
Interest
Income 55 51 8% 3% 1% 4%
------- ------- ------- ----------- ------------ --------
Total
revenues $1,705 $1,687 1% 0% 2% (1)%
======= ======= ======= =========== ============ ========
Commissions and Fees
Organic growth in commissions and fees for the nine months ended
September 30, 2005 was attributable to:
Nine months ended September 30,
------------------------------------------------------
Commissions Volume and Other market Commissions
and fees profit-based remuneration and fees
contingent (a) organic
commissions growth
------------ -------------- -------------- -----------
Global 3% (1)% (6)% (4)%
North America 5% (5)% 0% 0%
International 3% 0% 0% 3%
------------ -------------- -------------- -----------
Total Group 4% (2)% (4)% (2)%
============ ============== ============== ===========
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
(in millions, except per share data)
(unaudited)
2. Revenue analysis (continued)
Market remuneration
Volume and profit-based contingent commissions and other market
remuneration by quarter are set out in the following table:
Volume and profit-based Other market
contingent commissions remuneration
------------------------- ----------------------
2005 2004 2005 2004
------------ ------------ ----------- ----------
First quarter $3 $21 $3 $22
Second quarter 8 15 5 20
Third quarter 1 10 3 19
Fourth quarter 25 16
------------ ----------
$71 $77
============ ==========
3. General and administrative expenses
An analysis of general and administrative expenses between
salaries and benefits and other operating expenses by quarter
is set out in the following table:
General and
Salaries and Other operating administrative
benefits (a) expenses expenses
------------------- ----------------- ----------------
2005 2004 2005 2004 2005 2004
--------- --------- ----------------- -------- -------
First quarter $386 $320 $125 $99 $511 $419
Second quarter 309 275 98 98 407 373
Third quarter 313 276 89 93 402 369
Fourth quarter 311 101 412
--------- ------- -------
$1,182 $391 $1,573
========= ======= =======
a) Salaries and benefits include salaries, pensions, non-cash
compensation, severance and other employee benefits.
4. Sale of Stewart Smith
The Company completed the sale of Stewart Smith, its wholesale
division, on April 14, 2005. The following table sets out the
impact of Stewart Smith on results in the previous five quarters
prior to sale:
2004 2005
----------------------------------------- ------
Q1 Q2 Q3 Q4 FY Q1
Revenues $15 $19 $18 $25 $77 $10
General and
administrative
expenses (10) (10) (11) (13) (44) (11)
----------------------------------------- ------
Operating income/
(loss) 5 9 7 12 33 (1)
Income taxes (2) (4) (2) (5) (13) -
----------------------------------------- ------
Net income/ (loss) $3 $5 $5 $7 $20 $(1)
========================================= ======
Contribution to net
income per diluted
share $0.02 $0.03 $0.03 $0.04 $0.12 $ -
========================================= ======
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
5. Adjusted Operating Income
Adjusted operating income is defined as operating income
excluding net gain on disposal of operations and charges for
regulatory settlements and related expenses, severance costs
relating to our first quarter 2005 headcount reduction program
and other provisions. Operating income is the most directly
comparable GAAP measure, and the following tables reconcile
adjusted operating income to operating income for the quarters
ended September 30, 2005 and 2004 and the nine months ended
September 30, 2005 and 2004:
Three months ended
September 30,
-----------------------------
2005 2004 (a) % Change
-------- --------- ----------
Operating Income, GAAP basis $72 $109 (34)%
Excluding:
Net gain on disposal of operations - -
-------- ---------
Adjusted Operating Income $72 $109 (34)%
======== =========
Operating Margin, GAAP basis, or
Operating Income as a percentage
of Total Revenues 14.8% 22.2%
======== =========
Adjusted Operating Margin, or
Adjusted Operating Income as a
percentage of Total Revenues 14.8% 22.2%
======== =========
Nine months ended
September 30,
-----------------------------
2005 2004 (a) % Change
-------- --------- ----------
Operating Income, GAAP basis $372 $496 (25)%
Excluding:
Regulatory settlements (b) 51 -
Costs related to regulatory
settlements (b) 9 -
Severance costs (c) 28 -
Other provision (d) 20 -
Net gain on disposal of operations (78) (5)
-------- ---------
Adjusted Operating Income $402 $491 (18)%
======== =========
Operating Margin, GAAP basis, or
Operating Income as a percentage of
Total Revenues 21.8% 29.4%
======== =========
Adjusted Operating Margin, or Adjusted
Operating Income as a percentage of
Total Revenues 23.6% 29.1%
======== =========
a) In 2004, adjusted operating income was reported after excluding
charges for non-cash compensation. With effect from 2005,
these charges are no longer excluded from adjusted operating
income and 2004 comparatives have been restated accordingly.
b) Comprises $51 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 $9 million
of related legal and administrative expenses.
c) Severance costs relate to the headcount reduction program
announced in first quarter 2005 which eliminated approximately
500 positions. Severance costs also arise in the normal course
of business and these charges amounted to $2 million in the
nine months to September 30, 2005 ($7 million - 2004).
d) Based on the quarterly review of legal proceedings at March 31,
2005, the Company increased its provision for claims by an
additional $20 million.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
6. Adjusted Net Income
Adjusted net income is defined as net income excluding net gain on
disposal of operations and charges for regulatory settlements and
related expenses, severance costs relating to our first quarter
2005 headcount reduction program, other provisions, and a
non-recurring premium on redemption of subordinated debt in 2004.
Net income is the most directly comparable GAAP measure, and the
following tables reconcile adjusted net income to net income for
the quarters ended September 30, 2005 and 2004 and the nine months
ended September 30, 2005 and 2004:
Per Diluted Share
Three months ended Three months ended
September 30, September 30,
--------------------------- -------------------------
2005 2004 (a) % Change 2005 2004 (a) % Change
-------- -------- --------- ------ -------- ---------
Net Income, GAAP
basis $49 $75 (35)% $0.30 $0.45 (33)%
Excluding:
Net gain on
disposal of
operations, net
of tax ($nil,
$nil ) - - - -
-------- -------- ------ --------
Adjusted Net
Income $49 $75 (35)% $0.30 $0.45 (33)%
======== ======== ====== ========
Diluted shares
outstanding,
GAAP basis 163 167
======== ========
Per Diluted Share
Nine months ended Nine months ended
September 30, September 30,
--------------------------- -------------------------
2005 2004 (a) % Change 2005 2004 (a) % Change
-------- -------- --------- ------ -------- ---------
Net Income, GAAP
basis $240 $319 (25)% $1.45 $1.89 (23)%
Excluding:
Regulatory
settlements,
net of tax
($20) 31 - 0.19 -
Costs related to
regulatory
settlements,
net of tax ($4) 5 - 0.03 -
Severance costs,
net of tax ($9) 19 - 0.11 -
Other provision,
net of tax ($6) 14 - 0.08 -
Net gain on
disposal of
operations,
net of tax
($(37), $(2)) (41) (3) (0.25) (0.02)
Non-recurring
premium on
redemption of
subordinated
debt, net of
tax ($7) - 10 - 0.06
-------- -------- ------ --------
Adjusted Net
Income $268 $326 (18)% $1.61 $1.93 (17)%
======== ======== ====== ========
Diluted shares
outstanding,
GAAP basis 166 169
======== ========
a) In 2004, adjusted net income was reported after excluding
charges for non-cash compensation. With effect from 2005,
these charges are no longer excluded from adjusted net income
and 2004 comparatives have been restated accordingly.
CONTACT: Willis Group Holdings Limited
Investors:
Kerry K. Calaiaro, 212-837-0880
kerry.calaiaro@willis.com
or
Media:
Dan Prince, 212-837-0806
daniel.prince@willis.com