UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K10-K/A

Amendment No. 1

(Mark One)

x
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

or

For the fiscal year ended December 31, 2010
or
o
¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:001-16503

WILLIS GROUP HOLDINGS PUBLIC

LIMITED COMPANY

(Exact name of Registrant as specified in its charter)

Ireland 98-0352587
Ireland98-0352587

(Jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

c/o Willis Group Limited

51 Lime Street, London EC3M 7DQ, England

(Address of principal executive offices)

(011) 44-20-3124-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class Name of each exchange on which registered
Ordinary Shares, nominal value $0.000115 per share
 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þx    No  o¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o¨    No  þx

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þx    No  o¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  þx    No  o¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definite proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.  ¨þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitionsdefinition of ‘large accelerated filer,’filer’, ‘accelerated filer’ and ‘smaller reporting company’ in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filerxAccelerated filer¨
Large acceleratedNon-accelerated filerþAccelerated filer oNon-accelerated¨  filer o(Do not check if a smaller reporting company)Smaller reporting companyo¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Act).    Yes  o¨    No  þx

As of February 18, 2011, the

The aggregate market value of the voting stockcommon equity held by non-affiliates of the Registrant, computed by reference to the last reported price at which the Registrant’s common equity was approximately $6,651,075,613.

sold on June 30, 2012 (the last day of the Registrant’s most recently completed second quarter) was $6,321,819,520.

As of February 18, 2011,April 24, 2013, there were outstanding 171,257,649173,924,866 ordinary shares, nominal value $0.000115 per share, and 40,000 ordinary shares, nominal value €1, of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions

None.

Table of Willis Group Holdings Public Limited Company’s Proxy Statement for its 2011 Annual Meeting of Shareholders are incorporated by reference into Part I and Part III of thisForm 10-K.Contents

Certain Definitions
The following definitions apply throughout this annual report unless the context requires otherwise:
‘We’, ‘Us’, ‘Company’, ‘Group’, ‘Willis’ or ‘Our’Willis-Ireland and its subsidiaries and, prior to the effective time of the redomicile of the parent company discussed in

Explanatory Note 2 to the Notes to the Consolidated Financial Statements, Willis-Bermuda and its subsidiaries.

‘Willis Group Holdings’ or‘Willis-Ireland’
Willis Group Holdings Public Limited Company, a company organized under the laws of Ireland.
‘Willis-Bermuda’Willis Group Holdings Limited, a company organized under the laws of Bermuda.
‘shares’The ordinary shares of Willis-Ireland, nominal value $0.000115 per share, and prior to the redomicile of the parent company, the common shares of Willis-Bermuda, par value $0.000115 per share.
‘HRH’Hilb Rogal & Hobbs Company.
‘Effective Time’6.59 p.m. EST on December 31, 2009.


2

Table Of Contents
   i

PART III

   1  

Item 10

—Directors, Executive Officers and Corporate Governance

   Page
Forward-looking statements41  

Item 11

 
PART I6
Item 1

— BusinessExecutive Compensation

6
Item 1A
— Risk Factors

   14  

Item 1B

12

 

— Unresolved Staff Comments

24
Item 2
— Properties
25
Item 3
— Legal Proceedings
26
PART II27
Item 5
— Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
27
Item 6
— Selected Financial Data
29
Item 7
— Management’s Discussion and Analysis of Financial Condition and Results of Operations
31
Item 7A
— Quantitative and Qualitative Disclosures about Market Risk
62
Item 8
— Financial Statements and Supplementary Data
66
Item 9
— Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
142
Item 9A
— Controls and Procedures
142
Item 9B
— Other Information
144
PART III145
Item 10
— Directors, Executive Officers and Corporate Governance
145
Item 11
— Executive Compensation
147
Item 12
— Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

   14762  

Item 13

 

—Certain Relationships and Related Transactions, and Director Independence

   14766  

Item 14

 

—Principal Accounting Fees and Services

147
PART IV148
Item 15
— Exhibits, Financial Statement Schedules
148
Signatures154
EX-4.6
EX-4.11
EX-10.16
EX-10.17
EX-10.38
EX-10.44
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


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Willis Group Holdings plc
FORWARD-LOOKING STATEMENTS

We have included in this document ‘forward-looking statements’ within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our outlook, future capital expenditures, growth in commissions and fees, business strategies, competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, plans and references to future successes, are forward-looking statements. Also, when we use the words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘intend’, ‘plan’, ‘probably’, or similar expressions, we are making forward-looking statements.
There are important uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including the following:
• the impact of any regional, national or global political, economic, business, competitive, market, environmental and regulatory conditions on our global business operations;
• the impact of current financial market conditions on our results of operations and financial condition, including as a result of any insolvencies of or other difficulties experienced by our clients, insurance companies or financial institutions;
• our ability to continue to manage our significant indebtedness;
• our ability to compete effectively in our industry;
• our ability to implement and realize anticipated benefits of the 2011 operational review, the Willis Cause or any other initiative we pursue;
• material changes in commercial property and casualty markets generally or the availability of insurance products or changes in premiums

resulting from a catastrophic event, such as a hurricane, or otherwise;
• the volatility or declines in other insurance markets and premiums on which our commissions are based, but which we do not control;
• our ability to retain key employees and clients and attract new business;
• the timing or ability to carry out share repurchases, refinancings or take other steps to manage our capital and the limitations in our long-term debt agreements that may restrict our ability to take these actions;
• any fluctuations in exchange and interest rates that could affect expenses and revenue;
• rating agency actions that could inhibit our ability to borrow funds or the pricing thereof;
• a significant decline in the value of investments that fund our pension plans or changes in our pension plan funding obligations;
• our ability to achieve the expected strategic benefits of transactions;
• our ability to receive dividends or other distributions in needed amounts from our subsidiaries;
• changes in the tax or accounting treatment of our operations;
• any potential impact from the US healthcare reform legislation;
• the potential costs and difficulties in complying with a wide variety of foreign laws and regulations and any related changes, given the global scope of our operations;
• our involvements in and the results of any regulatory investigations, legal proceedings and other contingencies;
• risks associated with non-core operations including underwriting, advisory or reputational;
• our exposure to potential liabilities arising from errors and omissions and other potential claims against us; and



4

About Willis

• the interruption or loss of our information processing systems or failure to maintain secure information systems.
The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results.
Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties

inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved.
Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.



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Willis Group Holdings plc
PART I
Item 1 — Business
History and Development of the Company

Willis Group Holdings is the ultimate holding company for the Group. We trace our history to 1828 and are one of the largest insurance brokers in the world.
Willis Group Holdings was incorporated in Ireland on September 24, 2009 to facilitate the change of the place of incorporation of the parent company of the Group from Bermuda to Ireland (the ‘Redomicile’). At the Effective Time, the common shares of Willis-Bermuda were canceled, the Willis-Bermuda common shareholders received, on aone-for-one basis, new ordinary shares of Willis Group Holdings, and Willis Group Holdings became the ultimate parent company for the Group.
For administrative convenience, we utilize the offices of a subsidiary company as our principal executive offices. The address is:
Willis Group Holdings Public Limited Company
c/o Willis Group Limited

The Willis Building
51 Lime Street
London EC3M 7DQ
England
Tel: +44 203 124 6000
For several years, we have focused on our core retail and specialist broking operations. In 2008, we acquired HRH, at the time the eighth largest insurance and risk management intermediary in the United States. The acquisition almost doubled our North America revenues and created critical mass in key markets including California, Florida, Texas, Illinois, New York, Boston, New Jersey and Philadelphia. In addition, we have made a number of smaller acquisitions around the world and increased our ownership in several of our associates and existing subsidiaries, which were not wholly-owned, where doing so strengthened our retail network and our specialty businesses.


Available Information

The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the ‘SEC’). You may read and copy any documents we file at the SEC’s Public Reference Room at 100 F Street, NE Washington, DC 20549. Please call the SEC at1-800-SEC-0330 for information on the Public Reference Room. The SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including Willis Group Holdings) file electronically with the SEC. The SEC’s website is www.sec.gov.
The Company makes available, free of charge through our website, www.willis.com, our annual report onForm 10-K, our quarterly reports onForm 10-Q, our proxy statement, current reports onForm 8-K and Forms 3, 4, and 5 filed on behalf of directors and executive officers, as well as any amendments to those reports filed or furnished

pursuant to the Securities Exchange Act of 1934 (the ‘Exchange Act’) as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Unless specifically incorporated by reference, information on our website is not a part of thisForm 10-K.
The Company’s Corporate Governance Guidelines, Audit Committee Charter, Risk Committee Charter, Compensation Committee Charter and Corporate Governance and Nominating Committee Charter are available on our website, www.willis.com, in the Investor Relations-Corporate Governance section, or upon request. Requests for copies of these documents should be directed in writing to the Company Secretaryc/o Office of General Counsel, Willis Group Holdings Public Limited Company, One World Financial, 200 Liberty Street, New York, NY 10281.



6

About Willis
General

We provide a broad range of insurance brokerage, reinsurance and risk management consulting services to our clients worldwide. We have significant market positions in the United States, in the United Kingdom and, directly and through our associates, in many other countries. We are a recognized leader in providing specialized risk management advisory and other services on a global basis to clients in various industries including aerospace, marine, construction and energy.
In our capacity as an advisor and insurance broker, we act as an intermediary between our clients and insurance carriers by advising our clients on their risk management requirements, helping clients determine the best means of managing risk, and negotiating and placing insurance risk with insurance carriers through our global distribution network.
We assist clients in the assessment of their risks, advise on the best ways of transferring suitable risk to the global insurance and reinsurance markets and then execute the transactions at the most appropriate available price, terms and conditions for our clients. Our global distribution network enables us to place the risk in the most appropriate insurance or reinsurance market worldwide.
We also offer clients a broad range of services to help them to identify and control their risks. These

services range from strategic risk consulting (including providing actuarial analyses), to a variety of due diligence services, to the provision of practicalon-site risk control services (such as health and safety or property loss control consulting) as well as analytical and advisory services (such as hazard modeling and reinsurance optimization studies). We assist clients in planning how to manage incidents or crises when they occur. These services include contingency planning, security audits and product tampering plans. We are not an insurance company and therefore we do not underwrite insurable risks for our own account.
We and our associates serve a diverse base of clients including major multinational and middle-market companies in a variety of industries, as well as public institutions and individual clients. Many of our client relationships span decades. We have approximately 20,000 employees around the world (including approximately 3,000 at our associate companies) and a network in excess of 400 offices in some 100 countries.
We believe we are one of only a few insurance brokers in the world possessing the global operating presence, broad product expertise and extensive distribution network necessary to meet effectively the global risk management needs of many of our clients.


Business Strategy

Since 2008, we have launched a series of initiatives to drive profitable growth, including Shaping Our Future, Right Sizing Willis, and Funding for Growth. In 2011, we are realigning our business model to further grow the company and deliver the Willis Cause — our value proposition to clients.

The Willis Cause is our pledge that:
• we thoroughly understand our clients’ needs and their industries;
• we develop client solutions with the best markets, price and terms;
• we relentlessly deliver quality client service; and
• we get claims paid quickly.


Our Business

Insurance and reinsurance is a global business, and its participants are affected by global trends in capacity and pricing. Accordingly, we operate as one global business which ensures all clients’ interests are handled efficiently and comprehensively, whatever their initial point of

contact. We organize our business into three segments: North America and International, which together comprise our principal retail operations, and Global. In 2010 and 2009, approximately 50 percent of our total revenue was generated from within the US, with no other country contributing in



7

Willis Group Holdings plc

excess of 20 percent. For information regarding revenues, operating income and total assets per

segment, see Note 26 of the Consolidated Financial Statements contained herein.


Global

Our Global business provides specialist brokerage and consulting services to clients worldwide for the risks arising from specific industrial and commercial activities. In these operations, we have extensive specialized experience handling diverse lines of coverage, including complex insurance programs, and acting as an intermediary between retail brokers and insurers. We increasingly provide consulting services on risk management with the objective of assisting clients to reduce the overall cost of risk. Our Global business serves clients in around 190 countries, primarily from offices in the United Kingdom, although we also serve clients from offices in the United States, Continental Europe and Asia.
The Global business is divided into:
• Global Specialties;
• Willis Re;
• London Market Wholesale; and
• Willis Capital Markets & Advisory.
Effective January 1, 2011, we have changed our internal reporting structure; Global Markets International, previously reported within our International segment, is now reported in our Global division.
Global Specialties
Global Specialties has strong global positions in Aerospace, Energy, Marine, Construction, Financial and Executive Risks as well as Financial Solutions.
• Aerospace
We are highly experienced in the provision of insurance and reinsurance brokerage and risk management services to Aerospace clients worldwide, including aircraft manufacturers, air cargo handlers and shippers, airport managers and other general aviation companies. Advisory services provided by Aerospace include claims recovery, contract and leasing risk management, safety services and market information. Aerospace’s clients include approximately one

third of the world’s airlines. The specialist Inspace division is also prominent in supplying the space industry through providing insurance and risk management services to approximately 40 companies.
• Energy
Our Energy practice provides insurance brokerage services including property damage, offshore construction, liability and control of well and pollution insurance to the energy industry. Our Energy practice clients are worldwide. We are highly experienced in providing insurance brokerage for all aspects of the energy industry including exploration and production, refining and marketing, offshore construction and pipelines.
• Marine
Our Marine unit provides marine insurance and reinsurance brokerage services, including hull, cargo and general marine liabilities. Marine’s clients include ship owners, ship builders, logistics operators, port authorities, traders and shippers, other insurance intermediaries and insurance companies. Marine insurance brokerage is our oldest line of business dating back to our establishment in 1828.
• Construction
Our Construction practice provides risk management advice and brokerage services for a wide range of UK and international construction activities. The clients of the Construction practice include contractors, project owners, project managers, project financiers, professional consultants and insurers. We are a broker for many of the leading global construction firms.
• Financial and Executive Risks
Our Financial and Executive Risks unit specializes in broking directors’ and officers’ insurance as well as professional indemnity insurance for corporations and professional firms.



8

About Willis

• Financial Solutions
Financial Solutions is a global business unit which incorporates our political risk unit, as well as structured finance and credit teams. It also places structured crime and specialist liability insurance for clients across the broad spectrum of financial institutions as well as specializing in strategic risk assessment and transactional risk transfer solutions.
Willis Re
We are one of the world’s largest intermediaries for reinsurance and have a significant market share in all of the world’s major markets. Our clients are both insurance and reinsurance companies.
We operate this business on a global basis and provide a complete range of transactional capabilities, including, in conjunction with Willis Capital Markets & Advisory, a wide variety of capital markets based products. Our services are underpinned by leading modeling, financial analysis and risk management advice. We bolster and enhance all of these services with the cutting edge knowledge derived from our Willis Research Network, the insurance industry’s largest partnership with global academic research.
London Market Wholesale
This business unit was created on January 1, 2011 and amalgamates Faber & Dumas and Global Markets International.
• Faber & Dumas
Faber & Dumas, our wholesale brokerage division, comprises London-based operation, Glencairn, together with our Fine Art, Jewelry and Specie, Special Contingency Risk and Hughes-Gibb units.

• Glencairn principally provides property, energy, casualty and personal accident insurance to independent wholesaler brokers worldwide who wish to access the London, European and Bermudan markets.
• The Fine Art, Jewelry and Specie unit provides specialist risk management and insurance services to fine art, diamond and jewelry businesses and operators of armored cars. Coverage is also obtained for vault and bullion risks.
• The Special Contingency Risks unit specializes in producing packages to protect corporations, groups and individuals against special contingencies such as kidnap and ransom, extortion, detention and political repatriation.
• The Hughes-Gibb unit principally services the insurance and reinsurance needs of the horse racing and horse breeding industry.
• Global Markets International
Global Markets International works closely with our Global business segment to further develop access for our retail clients to global markets, and provide structuring and placing skills in the relevant areas of property, casualty, terrorism, accident & health, facultative and captives.
Willis Capital Markets & Advisory
Willis Capital Markets & Advisory, with offices in New York and London, provides advice to insurance and reinsurance companies on a broad array of mergers and acquisition transactions as well as capital markets products, including acting as underwriter or agent for primary issuances, operating a secondary insurance-linked securities trading desk and engaging in general capital markets and strategic advisory work.


Retail operations

Our North America and International retail operations provide services to small, medium and

major corporate clients, accessing Global’s specialist expertise when required.


North America

Our North America business provides risk management, insurance brokerage, related risk

services, and employee benefits brokerage and consulting to a wide array of industry and client



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Willis Group Holdings plc

segments in the United States and Canada. With around 120 locations, organized into seven geographical regions including Canada, Willis North America locally delivers our global and national resources and specialist expertise through this retail distribution network.
In addition to being organized geographically and by specialty, our North America business focuses on four client segments: global, large national/middle-market, small commercial, and private client, with service, marketing and sales platform support for each segment.
• North America Construction
The largest industry practice group in North America is Construction, which specializes in providing risk management, insurance brokerage, and surety bonding services to the construction industry. Willis Construction provided these services to around 25 percent of theEngineering News RecordTop 400 contractors (a listing of the largest 400 North American contractors based on revenue). In addition, this practice group has expertise in owner-controlled insurance programs for large projects and insurance for national homebuilders.
• Other industry practice groups
Other industry practice groups include Healthcare, serving the professional liability and other insurance and risk management needs of private andnot-for-profit health systems, hospitals and physicians groups; Financial Institutions, serving the needs of large banks, insurers and other financial services firms; and Mergers & Acquisitions, providing due diligence, and risk management and insurance brokerage services to private equity and merchant banking firms and their portfolio companies.

• Employee Benefits
Willis Employee Benefits, fully integrated into the North America platform, is our largest product-based practice group and provides health, welfare and human resources consulting, and brokerage services to all of our commercial client segments. This practice group’s value lies in helping clients control employee benefit plan costs, reducing the amount of time human resources professionals spend administering their companies’ benefit plans and educating and training employees on benefit plan issues.
• Executive Risks
Another industry-leading North America practice group is Willis Executive Risks, a national team of technical professionals who specialize in meeting the directors and officers, employment practices, fiduciary liability insurance risk management, and claims advocacy needs of public and private corporations and organizations. This practice group also has expertise in professional liability, especially internet risks.
• CAPPPS
The Captive, Actuarial, Programs, Pooling, Personal Lines and Strategic Outcomes (CAPPPS) group has a network of actuaries, certified public accountants, financial analysts and pooled insurance program experts who assist clients in developing and implementing alternative risk management solutions. The program business is a leader in providing national insurance programs to niche industries including ski resorts, auto dealers, recycling, environmental, and specialty workers’ compensation. The group also works with financial institutions to confirm their loans are properly insured and their interests are adequately protected.


International

Effective January 1, 2011, we have changed our internal reporting structure; Global Markets International, previously reported within our International segment, is now reported in our Global division.

Our International business comprises our operations in Eastern and Western Europe, the United Kingdom and Ireland, Asia-Pacific, Russia, the Middle East, South Africa and Latin America.
Our offices provide services to businesses locally in over 100 countries around the world, making use of



10

About Willis

skills, industry knowledge and expertise available elsewhere in the Group.
The services provided are focused according to the characteristics of each market and vary across offices, but generally include direct risk management and insurance brokerage, specialist and reinsurance brokerage and employee benefits consulting.
We believe the combined total revenues of our International subsidiaries and associates provide an indication of the spread and capability of our International network. The team generated over 30 percent of the Group’s total consolidated commissions and fees in 2010.
As part of our on-going strategy, we look for opportunities to strengthen our International market share through acquisitions and strategic investments. We have acquired a controlling interest in a broad geographic spread of other brokers. A list of significant subsidiaries is included in Exhibit 21.1 to this document.

We have also invested in associate companies; our significant associates at December 31, 2010 were GS & Cie Groupe (‘Gras Savoye’), France (31 percent holding) and Al-Futtaim Willis Co. LLC, Dubai (49 percent holding). In connection with many of our investments we retain the right to increase our ownership over time, typically to a majority or 100 percent ownership position. In addition, in certain instances our co-shareholders have a right, typically based on some price formula of revenues or earnings, to put some or all of their shares to us. On December 17, 2009 as part of a reorganization of the share capital of Gras Savoye our interest in that company reduced from 48 percent to 31 percent. In addition, we have the option to acquire a 100 percent interest in the capital of Gras Savoye in 2015. For further information on the Gras Savoye capital reorganization see ‘Item 8 — Financial Statements and Supplementary Data — Note 13 — Investments in Associates’.


Customers

Our clients operate on a global and local scale in a multitude of businesses and industries throughout the world and generally range in size from major multinational corporations to middle-market companies. Further, many of our client relationships span decades, for instance our relationship with The Tokio Marine and Fire Insurance Company Limited

dates back over 100 years. No one client accounted for more than 10 percent of revenues for fiscal year 2010. Additionally, we place insurance with over 5,000 insurance carriers, none of which individually accounted for more than 10 percent of the total premiums we placed on behalf of our clients in 2010.


Competition

We face competition in all fields in which we operate based on global capability, product breadth, innovation, quality of service and price. According to the Directory of Agents and Brokers published by Business Insurance in July 2010, the 136 largest commercial insurance brokers globally reported brokerage revenues totaling $38 billion in 2009, of which Marsh & McLennan Companies Inc. had approximately 28 percent, Aon Corporation had approximately 20 percent and Willis had approximately 9 percent.
We compete with Marsh & McLennan and Aon as well as with numerous specialist, regional and local firms.

Insurance companies also compete with brokers by directly soliciting insureds without the assistance of an independent broker or agent.
Competition for business is intense in all our business lines and in every insurance market. Competition on premium rates has also exacerbated the pressures caused by a continuing reduction in demand in some classes of business. For example, rather than purchase additional insurance through brokers, many insureds have been retaining a greater proportion of their risk portfolios than previously. Industrial and commercial companies are increasingly relying upon captive insurance companies, self-insurance pools, risk retention



11

Willis Group Holdings plc

groups, mutual insurance companies and other mechanisms for funding their risks, rather than buying insurance.
Additional competitive pressures arise from the entry of new market participants, such as banks, accounting firms and insurance carriers themselves, offering risk management or transfer services.
In 2005, we, along with Marsh & McLennan and Aon, agreed to implement certain business reforms which included codification of our voluntary termination of contingent commission arrangements with insurers. However, most other special, regional and local insurance brokers continued to accept contingent compensation and did not disclose the compensation received in connection with providing policy placement services to its customers. In February 2010, we entered into the Amended and Restated Assurance of Discontinuance with the Attorney General of the State of New York and the Amended and Restated Stipulation with the

Superintendent of Insurance of the State of New York which ended many of the requirements previously imposed upon us. The new agreement no longer limits the type of compensation we can receive and lowers the compensation disclosure requirements we must make to our clients.
We continue to refuse to accept contingent commissions from carriers in our retail brokerage business. To our knowledge, we are the only insurance broker that takes this stance. We seek to increase revenue through higher commissions and fees that we disclose to our clients, and to generate profitable revenue growth by focusing on the provision of value-added risk advisory services beyond traditional brokerage activities. Although we continue to believe in the success of our strategy, we cannot be certain that such steps will help us to continue to generate profitable organic revenue growth.


Regulation

Our business activities are subject to legal requirements and governmental and quasi-governmental regulatory supervision in virtually all countries in which we operate. Also, such regulations may require individual or company licensing to conduct our business activities. While these requirements may vary from location to location they are generally designed to protect our clients by establishing minimum standards of conduct and practice, particularly regarding the provision of advice and product information as well as financial criteria.
United States
Our activities in connection with insurance brokerage services within the United States are subject to regulation and supervision by state authorities. Although the scope of regulation and form of supervision may vary from jurisdiction to jurisdiction, insurance laws in the United States are often complex and generally grant broad discretion to supervisory authorities in adopting regulations and supervising regulated activities. That supervision generally includes the licensing of insurance brokers and agents and the regulation of the handling and investment of client funds held in

a fiduciary capacity. Our continuing ability to provide insurance brokerage in the jurisdictions in which we currently operate is dependent upon our compliance with the rules and regulations promulgated from time to time by the regulatory authorities in each of these jurisdictions.
European Union
The European Union Insurance Mediation Directive introduced rules to enable insurance and reinsurance intermediaries to operate and provide services within each member state of the EU on a basis consistent with the EU single market and customer protection aims. Each EU member state in which we operate is required to ensure that the insurance and reinsurance intermediaries resident in their country are registered with a statutory body in that country and that each intermediary meets professional requirements in relation to their competence, good repute, professional indemnity cover and financial capacity.



12

About Willis

United Kingdom
In the United Kingdom, the statutory body is the Financial Services Authority (‘FSA’). The FSA has prescribed the methods by which our insurance and reinsurance operations are to conduct business, and has a wide range of rule-making, investigatory and enforcement powers aimed at meeting its overall aim of promoting efficient, orderly and fair markets and helping retail consumers achieve a fair deal. The FSA conducts monitoring visits to assess our compliance with regulatory requirements.
Certain of our activities are governed by other regulatory bodies, such as investment and securities licensing authorities. In the United States, Willis Capital Markets & Advisory operates through our wholly-owned subsidiary Willis Securities, Inc., a US-registered broker-dealer and investment advisor, member FINRA/SIPC, primarily in connection with investment banking-related services and advising on alternative risk financing transactions. Willis Capital Markets provides advice on securities or investments

in the EU through our wholly-owned subsidiary Willis Structured Financial Solutions Limited, which is authorized and regulated by the FSA.
Our failure, or that of our employees, to satisfy the regulators that we are in compliance with their requirements or the legal requirements governing our activities, can result in disciplinary action, fines, reputational damage and financial harm.
All companies carrying on similar activities in a given jurisdiction are subject to regulations which are not dissimilar to the requirements for our operations in the United States and United Kingdom. We do not consider that these regulatory requirements adversely affect our competitive position.
See Part I,Item 1A-Risk Factors ‘Legal and Regulatory Risks’ for discussion of how actions by regulatory authorities or changes in legislation and regulation in the jurisdictions in which we operate may have an adverse effect on our business.


Employees

As of December 31, 2010 we had approximately 17,000 employees worldwide of whom approximately 3,400 were employed in the United Kingdom and 6,500 in the United States, with the balance being

employed across the rest of the world. In addition, our associates had approximately 3,000 employees, all of whom were located outside the United Kingdom and the United States.



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Willis Group Holdings plc
Item 1A — Risk Factors

Risks Relating to our Business and the Insurance Industry


This section describes material risks affecting the Group’s business. These risks could materially affect the Group’s business, its revenues, operating income, net income, net assets, liquidity and capital

resources and ability to achieve its financial targets and, accordingly should be read in conjunction with any forward-looking statements in this Annual Report onForm 10-K.


Competitive Risks
Worldwide economic conditions could have an adverse effect on our business.


Our business and operating results are materially affected by worldwide economic conditions. Current global economic conditions coupled with declining customer and business confidence, increasing energy prices, and other challenges, may have a significant negative impact on the buying behavior of some of our clients as their businesses suffer from these conditions. In particular, financial institutions, construction, aviation, and logistics businesses such as marine cargo are most likely to be affected. Further, the global economic downturn is also negatively affecting some of the international economies that have supported the strong growth in our International operations. Our employee benefits practice may also be adversely affected as businesses continue to downsize during this period of economic turmoil. In addition, a growing number of insolvencies associated with an economic downturn, especially insolvencies in the insurance industry, could adversely affect our brokerage business through the loss of clients or by hampering our ability to place insurance and reinsurance business. While it is difficult to predict consequences of any further deterioration in global economic conditions on our business, any significant reduction or delay by our clients in purchasing insurance or making payment of premiums could have a material adverse impact on our financial condition and results of operations.

The potential for a significant insurer to fail or withdraw from writing certain lines of insurance coverages that we offer our clients could negatively impact overall capacity in the industry, which could then reduce the placement of certain lines and types of insurance and reduce our revenues and profitability. The potential for an insurer to fail could also result in errors and omissions claims by clients.
Since 2008, we have launched certain initiatives, such as the Company’s recently announced 2011 review of operations, the Willis Cause, Right Sizing Willis, Funding for Growth, and Shaping Our Future, to achieve cost-savings or fund our future growth plans. In light of the global economic uncertainty, we continue to vigorously manage our cost base in order to fund further growth initiatives, but we cannot be certain whether we will be able to realize any further benefits from these initiatives or any new initiatives that we may implement.
While we focus on our core retail and specialist broking operations, we do have certain other businesses that are not material to the Group as a whole but which, in any period, could have a material affect on our results of operations.


We do not control the premiums on which our commissions are based, and volatility or declines in premiums may seriously undermine our profitability.


We derive most of our revenues from commissions and fees for brokerage and consulting services. We

do not determine insurance premiums on which our commissions are generally based. Premiums are



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Risk factors

cyclical in nature and may vary widely based on market conditions. From the late 1980s through late 2000, insurance premium rates generally declined as a result of a number of factors, including the expanded underwriting capacity of insurance carriers; consolidation of both insurance intermediaries and insurance carriers; and increased competition among insurance carriers. From 2000 to 2003, we benefitted from a ‘hard’ market with premium rates stable or increasing. During 2004, we saw a rapid transition from a hard market, with premium rates stable or increasing, to a ‘soft’ market, with premium rates falling in most markets. The soft market continued to have an adverse impact on our commission revenues and operating margin from 2005 through 2008. Rates continued to decline in most sectors through 2005 and 2006, with the exception of catastrophe-exposed markets. In 2007, the market softened further with decreases in many of the market sectors in which we operated and this continued into 2008 with further premium rate declines across our market sectors. In 2009, the stabilization of rates in the reinsurance market and some specialty markets was offset by the continuing

soft market in other sectors and the adverse impact of the weakened economic environment across the globe. Our North America and UK and Irish retail operations have been particularly impacted by the weakened economic climate and continued soft market throughout both 2009 and 2010 with no material improvement in rates across most sectors. This resulted in declines in 2009 revenues in these operations with only modest improvement in 2010, particularly amongst our smaller clients who have been especially vulnerable to the economic downturn.
In addition, as traditional risk-bearing insurance carriers continue to outsource the production of premium revenue to non-affiliated agents or brokers such as ourselves, those insurance carriers may seek to reduce further their expenses by reducing the commission rates payable to those insurance agents or brokers. The reduction of these commission rates, along with general volatilityand/or declines in premiums, may significantly undermine our profitability.


Competition in our industry is intense, and if we are unable to compete effectively, we may suffer lower revenue, reduced operating margins and lose market share which could materially and adversely affect our business.


We face competition in all fields in which we operate, based on global capability, product breadth, innovation, quality of service and price. We compete with Marsh & McLennan and Aon, the two other providers of global risk management services, as well as with numerous specialist, regional and local firms. Competition for business is intense in all our business lines and in every insurance market, and the other two providers of global risk management services have substantially greater market share than we do. Competition on premium rates has also exacerbated the pressures caused by a continuing reduction in demand in some classes of business. For example, rather than purchase additional insurance through brokers, many insureds have been retaining a greater proportion of their risk portfolios than previously. Industrial and commercial companies have been increasingly relying upon their own subsidiary insurance companies, known as captive insurance companies,

self-insurance pools, risk retention groups, mutual insurance companies and other mechanisms for funding their risks, rather than buying insurance. Additional competitive pressures arise from the entry of new market participants, such as banks, accounting firms and insurance carriers themselves, offering risk management or transfer services.
In 2005, we, along with Marsh & McLennan and Aon, agreed to implement certain business reforms which included codification of our voluntary termination of contingent commission arrangements with insurers. However, most other special, regional and local insurance brokers continued to accept contingent compensation and did not disclose the compensation received in connection with providing policy placement services to its customers. In February 2010, we entered into the Amended and Restated Assurance of Discontinuance with the Attorney General of the State of New York and the



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Willis Group Holdings plc

Amended and Restated Stipulation with the Superintendent of Insurance of the State of New York which ended many of the requirements previously imposed upon us. The new agreement no longer limits the type of compensation we will receive and lowers the compensation disclosure requirements we must make to our clients.
We continue to refuse to accept contingent commissions from carriers in our retail brokerage business. To our knowledge, we are the only insurance broker that takes this stance. We seek to increase revenue through higher commissions and fees that we disclose to our clients, and to generate

profitable revenue growth by focusing on the provision of value-added risk advisory services beyond traditional brokerage activities. Although we continue to believe in the success of our strategy, we cannot be certain that such steps will help us to continue to generate profitable organic revenue growth. If we are unable to compete effectively against our competitors who are accepting or may accept contingent commissions, we may suffer lower revenue, reduced operating margins and loss of market share which could materially and adversely affect our business.


Dependence on Key Personnel — The loss of our Chairman and Chief Executive Officer or a number of our senior management or a significant number of our brokers could significantly impede our financial plans, growth, marketing and other objectives.


The loss of our Chairman and Chief Executive Officer or a number of our senior management or a significant number of our brokers could significantly impede our financial plans, growth, marketing and other objectives. Our success depends to a substantial extent not only on the ability and experience of our Chairman and Chief Executive Officer, Joseph J. Plumeri and other members of our senior management, but also on the individual brokers and teams that service our clients and maintain client relationships. The insurance and

reinsurance brokerage industry has in the past experienced intense competition for the services of leading individual brokers and brokerage teams, and we have lost key individuals and teams to competitors. We believe that our future success will depend in part on our ability to attract and retain additional highly skilled and qualified personnel and to expand, train and manage our employee base. We may not continue to be successful in doing so because the competition for qualified personnel in our industry is intense.


Legal and Regulatory Risks
Our compliance systems and controls cannot guarantee that we are in compliance with all applicable federal and state or foreign laws and regulations, and actions by regulatory authorities or changes in applicable laws and regulations in the jurisdictions in which we operate may have an adverse effect on our business.


Our activities are subject to extensive regulation under the laws of the United States, the United Kingdom and the European Union and its member states, and the other jurisdictions in which we operate. Indeed, over the last few years, there has been a general increase in focus and developments in these laws and regulations. Compliance with laws

and regulations that are applicable to our operations is complex and may increase our cost of doing business. These laws and regulations include insurance industry regulations, economic and trade sanctions and laws against financial crimes such as money laundering, bribery or other corruption, such as the U.S. Foreign Corrupt Practices Act. In most



16

Risk factors

jurisdictions, governmental and regulatory authorities have the ability to interpret and amend these laws and regulations and impose penalties for non-compliance, including sanctions, civil remedies, fines, injunctions, revocation of licenses or approvals, suspension of individuals, limitations on business activities or redress to clients.
Given the increased interest expressed by UK and US regulators in the effectiveness of compliance controls relating to financial crime in our market sector in particular, we began a voluntary internal review of our policies and controls four years ago. This review includes analysis and advice from external experts on best practices, review of public regulatory decisions, and discussions with government regulators in the UK and US. In

addition, the U.K. Financial Services Authority is conducting an investigation of some of our compliance systems and controls between 2005 and 2009. While we are fully cooperating with our regulators, we are unable to predict at this time when these matters will be concluded. We do not believe that such matters will result in any material fines or sanctions from UK or US regulators, but there can be no assurance that any resolution will not have an adverse impact on our ability to conduct our business in certain jurisdictions. While we believe that our current systems and controls are adequate and in accordance with all applicable laws and regulations, we cannot assure that such systems and controls will prevent any violations of applicable laws and regulations.


Our business, results of operations, financial condition or liquidity may be materially adversely affected by actual and potential claims, lawsuits, investigations and proceedings.


We are subject to various actual and potential claims, lawsuits, investigations and other proceedings relating principally to alleged errors and omissions in connection with the placement of insurance and reinsurance in the ordinary course of business. Because we often assist our clients with matters, including the placement of insurance coverage and the handling of related claims, involving substantial amounts of money, errors and omissions claims against us may arise which allege our potential liability for all or part of the amounts in question.
Claimants can seek large damage awards and these claims can involve potentially significant defense costs. Such claims, lawsuits and other proceedings could, for example, include allegations of damages for our employees orsub-agents improperly failing to place coverage or notify claims on behalf of clients, to provide insurance carriers with complete and accurate information relating to the risks being insured or to appropriately apply funds that we hold for our clients on a fiduciary basis. Errors and omissions claims, lawsuits and other proceedings arising in the ordinary course of business are covered in part by professional indemnity or other appropriate insurance. The terms of this insurance vary by policy year and self-insured risks have increased significantly in recent years. In respect of

self-insured risks, we have established provisions against these items which we believe to be adequate in the light of current information and legal advice, and we adjust such provisions from time to time according to developments. Our business, results of operations, financial condition and liquidity may be adversely affected if in the future our insurance coverage proves to be inadequate or unavailable or there is an increase in liabilities for which we self-insure. Our ability to obtain professional indemnity insurance in the amounts and with the deductibles we desire in the future may be adversely impacted by general developments in the market for such insurance or our own claims experience.
We are also subject to actual and potential claims, lawsuits, investigations and proceedings outside of errors and omissions claims. The material actual or potential claims, lawsuits and proceedings to which we are currently subject, including but not limited to errors and omissions claims, are: (1) potential claims arising out of various legal proceedings between reinsurers, reinsureds and their reinsurance brokers relating to personal accident excess of loss reinsurance placements for the years 1993 to 1998; and (2) claims relating to the collapse of The Stanford Financial Group, for which we acted as brokers of record on certain lines of insurance.



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Willis Group Holdings plc

The ultimate outcome of these matters cannot be ascertained and liabilities in indeterminate amounts may be imposed on us. It is thus possible that future results of operations or cash flows for any particular quarterly or annual period could be materially affected by an unfavorable resolution of these matters. In addition, these matters continue to divert management and personnel resources away from

operating our business. Even if we do not experience significant monetary costs, there may also be adverse publicity associated with these matters that could result in reputational harm to the insurance brokerage industry in general or to us in particular that may adversely affect our business, client or employee relationships.


Interruption to or loss of our information processing capabilities or failure to effectively maintain and upgrade our information processing systems could cause material financial loss, loss of human resources, regulatory actions, reputational harm or legal liability.


Our business depends significantly on effective information systems. Our capacity to service our clients relies on effective storage, retrieval, processing and management of information. Our information systems also rely on the commitment of significant resources to maintain and enhance existing systems and to develop new systems in order to keep pace with continuing changes in information processing technology or evolving industry and regulatory standards. The acquisition of HRH and additional information systems has added

to this exposure. If the information we rely on to run our business were found to be inaccurate or unreliable or if we fail to maintain effective and efficient systems (including through a telecommunications failure, failure to replace or update redundant or obsolete computer applications or software systems or if we experience other disruptions), this could result in material financial loss, regulatory action, reputational harm or legal liability.


Our inability to successfully recover should we experience a disaster or other significant disruption to business continuity could have a material adverse effect on our operations.


Our ability to conduct business may be adversely affected, even in the short-term, by a disruption in the infrastructure that supports our business and the communities where we are located. This may include a disruption caused by restricted physical site access, terrorist activities, disease pandemics, or outages to electrical, communications or other services used by our company, our employees or third parties with whom we conduct business. Although we have certain disaster recovery procedures in place and insurance to protect against

such contingencies, such procedures may not be effective and any insurance or recovery procedures may not continue to be available at reasonable prices and may not address all such losses or compensate us for the possible loss of clients occurring during any period that we are unable to provide services. Our inability to successfully recover should we experience a disaster or other significant disruption to business continuity could have a material adverse effect on our operations.


Improper disclosure of personal data could result in legal liability or harm our reputation.


One of our significant responsibilities is to maintain the security and privacy of our clients’ confidential

and proprietary information and the personal data of their employees. We maintain policies, procedures



18

Risk factors

and technological safeguards designed to protect the security and privacy of this information in our database. However, we cannot entirely eliminate the risk of improper access to or disclosure of personally identifiable information. Our technology may fail to adequately secure the private information we maintain in our databases and protect it from theft or inadvertent loss. In such circumstances, we may be held liable to our clients, which could result in legal liability or impairment to

our reputation resulting in increased costs or loss of revenue. Further database privacy, identity theft, and related computer and internet issues are matters of growing public concern and are subject to frequently changing rules and regulations. Our failure to adhere to or successfully implement processes in response to changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace.


Financial Risks
Our outstanding debt could adversely affect our cash flows and financial flexibility.


As of December 31, 2010, we had total consolidated debt outstanding of approximately $2.3 billion and interest expense was $166 million. Although management believes that our cash flows will be more than adequate to service this debt, there may be circumstances in which required payments of principaland/or interest on this debt could adversely affect our cash flows and this level of indebtedness may:
• require us to dedicate a significant portion of our cash flow from operations to payments on our debt, thereby reducing the availability of cash flow to fund capital expenditures, to pursue other acquisitions or investments in new technologies, to pay dividends and for general corporate purposes;
• increase our vulnerability to general adverse economic conditions, including if we borrow at variable interest rates, which makes us vulnerable to increases in interest rates generally;
• limit our flexibility in planning for, or reacting to, changes or challenges relating to our business and industry; and

• put us at a competitive disadvantage against competitors who have less indebtedness or are in a more favorable position to access additional capital resources.
The terms of our current financings also include certain limitations. For example, the agreements relating to the debt arrangements and credit facilities contain numerous operating and financial covenants, including requirements to maintain minimum ratios of consolidated adjusted EBITDA to consolidated fixed charges and maximum levels of consolidated funded indebtedness in relation to consolidated EBITDA, in each case subject to certain adjustments.
A failure to comply with the restrictions under our credit facilities and outstanding notes could result in a default under the financing obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could cause our obligations with respect to our debt to be accelerated and have a material adverse effect on our business, financial condition or results of operations.


Our pension liabilities may increase which could require us to make additional cash contributions to our pension plans.


We have two principal defined benefit plans: one in the United Kingdom and the other in the United States. Cash contributions of approximately $119 million will be required in 2011 for these pension plans, although we may elect to contribute more. Total cash contributions to these defined benefit

pension plans in 2010 were $118 million. Future estimates are based on certain assumptions, including discount rates, interest rates, fair value of assets and expected return on plan assets. In the UK, we are required to agree a funding strategy for our UK defined benefit plan with the plan’s trustees.



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Willis Group Holdings plc

In February 2009, we agreed to make full year contributions to the UK plan of $39 million for 2009 through 2012, excluding amounts in respect of the salary sacrifice scheme. In addition, if certain funding targets were not met at the beginning of any of the following years, 2010 through 2012, a further contribution of $39 million would be required for that year. In 2010, the additional funding requirement was triggered and we expect to make a similar additional contribution in 2011. A similar, additional contribution may also be required for 2012, depending on actual performance against funding targets at the beginning of 2012. We have taken actions to manage our pension liabilities, including closing our UK and US plans to new participants and restricting final pensionable salaries. Future benefit accruals in the US pension plan were also stopped, or frozen, on May 15, 2009.
The determinations of pension expense and pension funding are based on a variety of rules and regulations. Changes in these rules and regulations could impact the calculation of pension plan liabilities and the valuation of pension plan assets. They may also result in higher pension costs, additional financial statement disclosure, and accelerate and increase the need to fully fund our pension plans. Our future required cash contributions to our US and UK defined benefit pension plans may increase based on the funding reform provisions that were enacted into law. Further, a significant decline in the value of investments that fund our pension plan, if not offset

or mitigated by a decline in our liabilities, may significantly differ from or alter the values and actuarial assumptions used to calculate our future pension expense and we could be required to fund our plan with significant amounts of cash. In addition, if the US Pension Benefit Guaranty Corporation requires additional contributions to such plans or if other actuarial assumptions are modified, our future required cash contributions could increase. The need to make these cash contributions may reduce the cash available to meet our other obligations, including the payment obligations under our credit facilities and other long-term debt, or to meet the needs of our business.
In addition to the critical assumptions described above, our plans use certain assumptions about the life expectancy of plan participants and surviving spouses. Periodic revision of those assumptions can materially change the present value of future benefits and therefore the funded status of the plans and the resulting periodic pension expense. Changes in our pension benefit obligations and the related net periodic costs or credits may occur in the future due to any variance of actual results from our assumptions and changes in the number of participating employees. As a result, there can be no assurance that we will not experience future decreases in stockholders equity, net income, cash flow and liquidity or that we will not be required to make additional cash contributions in the future beyond those which have been estimated.


We could incur substantial losses if one of the financial institutions we use in our operations failed.


The deterioration of the global credit and financial markets has created challenging conditions for financial institutions, including depositories. As the fallout from the credit crisis persists, the financial strength of these institutions may continue to decline. We maintain cash balances at various US depository institutions that are significantly in excess of the US Federal Deposit Insurance Corporation insurance

limits. We also maintain cash balances in foreign financial institutions. If one or more of the institutions in which we maintain significant cash balances were to fail, our ability to access these funds might be temporarily or permanently limited, and we could face a material liquidity problem and potentially material financial losses.



20

Risk factors

A downgrade in the credit ratings of our outstanding debt may adversely affect our borrowing costs and financial flexibility.


A downgrade in our corporate credit rating or the credit ratings of our debt would increase our borrowing costs including those under our credit facilities, and reduce our financial flexibility. In addition, certain downgrades would trigger astep-up in interest rates under the indentures for our

6.2% senior notes due 2017 and our 7.0% senior notes due 2019,which would increase our interest expense. If we need to raise capital in the future, any credit rating downgrade could negatively affect our financing costs or access to financing sources.


We face certain risks associated with the acquisition or disposition of business or reorganization of existing investments.


In pursuing our corporate strategy, we may acquire or dispose of or exit businesses or reorganize existing investments. The success of this strategy is dependent upon our ability to identify appropriate opportunities, negotiate transactions on favorable terms and ultimately complete such transactions. Once we complete acquisitions or reorganizations there can be no assurance that we will realize the anticipated benefits of any transaction, including revenue growth, operational efficiencies or expected synergies. For example, if we fail to recognize some or all of the strategic benefits and synergies

expected from a transaction, goodwill and intangible assets may be impaired in future periods. In addition, we may not be able to integrate acquisitions successfully into our existing business, and we could incur or assume unknown or unanticipated liabilities or contingencies, which may impact our results of operations. If we dispose of or otherwise exit certain businesses, there can be no assurance that we will not incur certain disposition related charges, or that we will be able to reduce overheads related to the divested assets.


We are a holding company and, therefore, may not be able to receive dividends or other distributions in needed amounts from our subsidiaries.


Willis Group Holdings is organized as a holding company that conducts no business of its own. We are dependent upon dividends and other payments from our operating subsidiaries to meet our obligations for paying principal and interest on outstanding debt obligations, for paying dividends to shareholders and for corporate expenses. Legal and regulatory restrictions, foreign exchange controls, as

well as operating requirements of our subsidiaries, may limit our ability to obtain cash from these subsidiaries. In the event our operating subsidiaries are unable to pay dividends and make other payments to Willis Group Holdings, we may not be able to service debt, pay obligations or pay dividends on ordinary shares.


International Risks
Our significant non-US operations, particularly our London market operations, expose us to exchange rate fluctuations and various risks that could impact our business.


A significant portion of our operations is conducted outside the United States. Accordingly, we are subject to legal, economic and market risks

associated with operating in foreign countries, including devaluations and fluctuations in currency exchange rates; imposition of limitations on


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Willis Group Holdings plc

conversion of foreign currencies into pounds sterling or dollars or remittance of dividends and other payments by foreign subsidiaries; hyperinflation in certain foreign countries; imposition or increase of investment and other restrictions by foreign governments; and the requirement of complying with a wide variety of foreign laws.
We report our operating results and financial condition in US dollars. Our US operations earn revenue and incur expenses primarily in US dollars. In our London market operations, however, we earn revenue in a number of different currencies, but expenses are almost entirely incurred in pounds sterling. Outside the United States and our London market operations, we predominantly generate revenue and expenses in the local currency. The table gives an approximate analysis of revenues and expenses by currency in 2010.
                 
  US
  Pounds
     Other
 
  Dollars  Sterling  Euros  currencies 
 
Revenues  60%  8%  13%  19%
Expenses  53%  23%  9%  15%
Because of devaluations and fluctuations in currency exchange rates or the imposition of limitations on conversion of foreign currencies into US dollars, we are subject to currency translation exposure on the

profits of our operations, in addition to economic exposure. Furthermore, the mismatch between pounds sterling revenues and expenses, together with any net sterling balance sheet position we hold in our US dollar denominated London market operations, creates an exchange exposure.
For example, as the pound sterling strengthens, the US dollars required to be translated into pounds sterling to cover the net sterling expenses increase, which then causes our results to be negatively impacted. Our results may also be adversely impacted if we are holding a net sterling position in our US dollar denominated London market operations: if the pound sterling weakens any net sterling asset we are holding will be less valuable when translated into US dollars. Given these facts, the strength of the pound sterling relative to the US dollar has in the past had a material negative impact on our reported results. This risk could have a material adverse effect on our business financial condition, cash flow and results of operations in the future.
Where possible, we hedge part of our operating exposure to exchange rate movements, but such mitigating attempts may not be successful.


In conducting our businesses around the world, we are subject to political, economic, legal, market, nationalization, operational and other risks that are inherent in operating in many countries.


In conducting our businesses and maintaining and supporting our global operations, we are subject to political, economic, legal, market, nationalization, operational and other risks. Our businesses and operations are increasingly expanding into new regions throughout the world, including emerging markets, and we expect this trend to continue. The possible effects of economic and financial disruptions throughout the world could have an adverse impact on our businesses. These risks include:
• the general economic and political conditions in foreign countries, for example, the recent devaluation of the Venezuelan Bolivar;
• the imposition of controls or limitations on the conversion of foreign currencies or remittance of

dividends and other payments by foreign subsidiaries;
• imposition of withholding and other taxes on remittances and other payments from subsidiaries;
• imposition or increase of investment and other restrictions by foreign governments;
• difficulties in controlling operations and monitoring employees in geographically dispersed locations; and
• the potential costs and difficulties in complying, or monitoring compliance, with a wide variety of foreign laws (some of which may conflict with US or other sources of law), laws and regulations applicable to US business operations abroad, including rules relating to trade sanctions



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Risk factors

administered by the US Office of Foreign Assets Control, the EU, the UK and the UN, and the requirements of the US Foreign Corrupt Practices

Act as well as other anti-bribery and corruption rules and requirements in the countries in which we operate.


Legislative and regulatory action could materially and adversely affect us and our effective tax rate may increase.


There is uncertainty regarding the tax policies of the jurisdictions where we operate (which include the potential legislative actions described below), and our effective tax rate may increase and any such increase may be material. Additionally, the tax laws of Ireland and other jurisdictions could change in the future, and such changes could cause a material change in our effective tax rate. For example, legislative action may be taken by the US Congress which, if ultimately enacted, could override tax treaties upon which we rely or could broaden the circumstances under which we would be considered

a US resident, each of which could materially and adversely affect our effective tax rate and cash tax position. We cannot predict the outcome of any specific legislative proposals. However, if proposals were enacted that had the effect of limiting our ability to take advantage of tax treaties between Ireland and other jurisdictions (including the US), we could be subjected to increased taxation. In addition, any future amendments to the current income tax treaties between Ireland and other jurisdictions could subject us to increased taxation.


Irish law differs from the laws in effect in the United States and may afford less protection to holders of our securities.


It may not be possible to enforce court judgments obtained in the United States against us in Ireland based on the civil liability provisions of the US federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland would recognize or enforce judgments of US courts obtained against us or our directors or officers based on the civil liabilities provisions of the US federal or state securities laws or hear actions against us or those persons based on those laws. We have been advised that the United States currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any US federal or state court based on civil liability, whether or not based solely on US federal or state securities laws, would not be directly enforceable in Ireland. While not directly enforceable, it is possible for a final judgment for the payment of money rendered by any US federal or state court based on civil liability to be enforced in Ireland through common law rules. However, this

process is subject to numerous established principles and would involve the commencement of a new set of proceedings in Ireland to enforce the judgment.
As an Irish company, Willis Group Holdings is governed by the Irish Companies Acts, which differ in some material respects from laws generally applicable to US corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the Company only in limited circumstances. Accordingly, holders of Willis Group Holdings securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the United States.



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Willis Group Holdings plc

Our non-core operations pose certain underwriting, advisory or reputational risks.


We provide a broad range of brokerage, reinsurance and risk management consulting services to our clients worldwide. We also engage in certain non-core operations. For example, our Willis Capital Markets & Advisory business provides advice to insurance and reinsurance companies on a broad array of mergers and acquisition transactions as well

as capital markets products, including acting as underwriter or agent for primary issuances, operating a secondary insurance-linked securities trading desk and engaging in general capital markets and strategic advisory work. These operations may pose certain underwriting, advisory or reputational risks to our core business.


Item 1B — Unresolved Staff Comments
The Company had no unresolved comments from the SEC’s staff.


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Properties



Item 2 — Properties

We own and lease a number of properties for use as offices throughout the world and believe that our properties are generally suitable and adequate for the purposes for which they are used. The principal properties are located in the United Kingdom and the United States. Willis maintains over 4.1 million square feet of space worldwide.
London
In London we occupy a prime site comprising 491,000 square feet spread over a 28 story tower and adjoining 10 story building. We have a25-year lease on this property which expires June 2032 and wesub-let the 10-story adjoining building.
North America
In North America, outside of New York and Chicago, we lease approximately 2.0 million square feet over 130 locations.

New York
In New York, we occupy 205,000 square feet of office space at One World Financial Center under a 20 year lease, expiring September 2026.
Chicago
In Chicago, we occupy 140,000 square feet at the Willis Tower (formerly the Sears Tower), under a lease expiring February 2025.
Nashville
In 2010 we renegotiated our lease and began a major restack of our operations facility in Nashville. The first stage was completed in December 2010 and the remainder will be complete by May 2011. We reduced our square footage from 327,000 square feet to 160,000 square feet eliminating sublet space.
Rest of World
Outside of North America and London we lease approximately 1.3 million square feet of office space in over 190 locations.



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Willis Group Holdings plc

Item 3 — Legal Proceedings


Information regarding legal proceedings is set forth in Note 20 ‘Commitments and Contingencies’ to the Consolidated Financial Statements appearing under Part II, Item 8 of this report.



26

Share data and dividends



PART II
Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Share data
Our shares have been traded on the New York Stock Exchange (‘NYSE’) under the symbol ‘WSH’ since June 11, 2001. The high and low sale prices of our shares, as reported by the NYSE, are set forth below for the periods indicated, including trading of the common shares of Willis-Bermuda through December 31, 2009 and trading of the ordinary shares of Willis Group Holdings after that date.

         
  Price Range of Shares 
  High  Low 
 
2009:
        
First Quarter $26.32  $18.52 
Second Quarter $28.50  $21.12 
Third Quarter $28.67  $23.88 
Fourth Quarter $28.54  $25.06 
2010:
        
First Quarter $32.14  $26.07 
Second Quarter $34.98  $28.94 
Third Quarter $32.29  $28.91 
Fourth Quarter $34.71  $30.55 
2011:
        
Through February 18, 2011 $39.73  $34.37 
On February 18, 2011, the last reported sale price of our shares as reported by the NYSE was $39.68 per share. As of February 18, 2011 there were approximately 1,846 shareholders of record of our shares.


Dividends

We normally pay dividends on a quarterly basis to shareholders of record on March 31, June 30, September 30 and December 31. The dividend payment dates and amounts are as follows:
     
Payment Date $ Per Share 
 
January 16, 2009 $0.260 
April 13, 2009 $0.260 
July 13, 2009 $0.260 
October 12, 2009 $0.260 
January 15, 2010 $0.260 
April 16, 2010 $0.260 
July 16, 2010 $0.260 
October 15, 2010 $0.260 
January 14, 2011 $0.260 
There are no governmental laws, decrees or regulations in Ireland which will restrict the remittance of dividends or other payments tonon-resident holders of the Company’s shares.
In circumstances where one of Ireland’s many exemptions from dividend withholding tax (‘DWT’) does not apply, dividends paid by the Company will be subject to Irish DWT (currently 20 percent). Residents of the US should be exempted from Irish

DWT provided relevant documentation supporting the exemption has been put in place. While the US-Ireland Double Tax Treaty contains provisions reducing the rate of Irish DWT in prescribed circumstances, it should generally be unnecessary for US residents to rely on the provisions of this treaty due to the wide scope of exemptions from DWT available under Irish domestic law. Irish income tax may also arise in respect of dividends paid by the Company. However, US residents entitled to an exemption from Irish DWT generally have no Irish income tax liability on dividends. An exception to this position applies where a shareholder holds shares in the Company through a branch or agency in Ireland through which a trade is carried on.
With respect to non-corporate US shareholders, certain dividends received before January 1, 2011 from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends received from that corporation on shares that are readily tradable on an established securities market in the United States, such as our shares. Non-corporate US shareholders that do not



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Willis Group Holdings plc

meet a minimum holding period requirement for our shares during which they are not protected from the risk of loss or that elect to treat the dividend income as ‘investment income’ pursuant to section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the

recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. US shareholders should consult their own tax advisors regarding the application of these rules given their particular circumstances.


Total Shareholder Return


The following graph demonstrates a five-year comparison of cumulative total returns for the Company, the S&P 500 and a peer group comprised of the Company, Aon Corporation, Arthur J. Gallagher & Co., Brown & Brown Inc., and Marsh & McLennan Companies, Inc. The comparison charts the performance of $100 invested in the Company, the S&P 500 and the peer group on December 31, 2005, assuming full dividend reinvestment.



Unregistered Sales of Equity Securities and Use Of Proceeds
During the quarter ended December 31, 2010, no shares were issued by the Company without registration under the Securities Act of 1933, as amended.



Purchases of Equity Securities by the Issuer And Affiliated Purchasers


Under a share buyback program approved by the Board of Directors, the Company may purchase up to one billion shares, from time to time in the open market. The authorization to make purchases of Company shares on the open market will expire on June 30, 2011 unless varied, revoked or renewed by a resolution of the shareholders in accordance with Irish law. The Company may also purchase shares through negotiated trades with persons who are not affiliates of the Company. These negotiated trade purchases are effected by way of share redemption and do not require Shareholder approval. The authorization in

respect of open market purchases provides that the cost of the acquisition of the Company’s shares (whether by redemption or on the open market) may not exceed $925 million. During the year ended December 31, 2010, there were no shares repurchased.
The information under ‘Securities Authorized for Issuance Under Equity Compensation Plans’ under Part III, Item 12 ‘Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters’ is incorporated herein by reference.



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Financial highlights
Item 6 — Selected Financial Data
Selected Historical Consolidated Financial Data
The selected consolidated financial data presented below should be read in conjunction with the audited consolidated financial statements of the Company and the related notes and Item 7 — ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ included elsewhere in this report.
The selected historical consolidated financial data presented below as of and for each of the five years ended December 31, 2010 have been derived from the audited consolidated financial statements of the Company, which have been prepared in accordance with accounting principles generally accepted in the United States of America (‘US GAAP’).
                     
  Year ended December 31, 
  2010  2009  2008(i)  2007  2006 
  (millions, except per share data) 
 
Statement of Operations Data
                    
Total revenues $3,339  $3,263  $2,827  $2,578  $2,428 
Operating income  753   694   503   620   552 
Income from continuing operations before income taxes and interest in earnings of associates  587   520   398   554   514 
Income from continuing operations  470   457   323   426   467 
Discontinued operations, net of tax  —   2   1   —   — 
Net income attributable to Willis Group Holdings $455  $438  $303  $409  $449 
                     
Earnings per share on continuing operations — basic $2.68  $2.60  $2.04  $2.82  $2.86 
Earnings per share on continuing operations — diluted $2.66  $2.58  $2.04  $2.78  $2.84 
                     
Average number of shares outstanding                    
 — basic  170   168   148   145   157 
 — diluted  171   169   148   147   158 
                     
Balance Sheet Data (as of year end)
                    
Goodwill $3,294  $3,277  $3,275  $1,648  $1,564 
Other intangible assets, net  492   572   682   78   92 
Total assets(ii)
  15,847   15,625   16,402   12,969   13,378 
Net assets  2,608   2,229   1,895   1,395   1,496 
Total long-term debt  2,157   2,165   1,865   1,250   800 
Shares and additional paid-in capital  985   918   886   41   388 
Total stockholders’ equity  2,577   2,180   1,845   1,347   1,454 
                     
Other Financial Data
                    
Capital expenditures (excluding capital leases) $83  $96  $94  $185  $55 
Cash dividends declared per share $1.04  $1.04  $1.04  $1.00  $0.94 
(i)On October 1, 2008, we completed the acquisition of HRH, at the time the eighth largest insurance and risk management intermediary in the United States. The acquisition has significantly enhanced our North America revenues and the combined operations have critical mass in key markets across the US. We recognized goodwill and other intangible assets on the HRH acquisition of approximately $1.6 billion and $651 million, respectively.
(ii)In its capacity as an insurance agent or broker, the Company collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurers; the Company also collects claims or refunds from insurers on behalf of insureds. Effective December 31, 2010, uncollected premiums from insureds and uncollected claims or refunds from insurers, previously held within accounts receivable, are recorded as fiduciary assets on the Company’s consolidated balance sheets. Unremitted insurance premiums and claims (‘fiduciary funds’) are also recorded within fiduciary assets. Fiduciary funds represent unremitted premiums


29

Willis Group Holdings plc
received from insureds and unremitted claims received from insurers. Fiduciary funds are generally required to be kept in certain regulated bank accounts subject to guidelines which emphasize capital preservation and liquidity; such funds are not available to service the Company’s debt or for other corporate purposes. Notwithstanding the legal relationships with clients and insurers, the Company is entitled to retain investment income earned on fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds.


30

Business discussion
Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion includes references to non-GAAP financial measures as defined in Regulation G of the rules of the Securities and Exchange Commission (‘SEC’). We present such non-GAAP financial measures, 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. Organic revenue growth and organic growth in commissions and fees exclude the impact of acquisitions and disposals, year over year movements in foreign currency translation, legacy contingent commissions assumed as part of the HRH acquisition, and investment and other income from reported revenues. We believe organic revenue growth and organic growth in commissions and fees provide measures that the investment community may find helpful in assessing the performance of

operations that were part of our operations in both the current and prior periods, and provide measures against which our businesses may be assessed in the future. These financial measures should be viewed in addition to, not in lieu of, the consolidated financial statements for the year ended December 31, 2010.
This discussion includes forward-looking statements, including under the headings ‘Business Overview and Market Outlook’, ‘Executive Summary’, ‘Operating Results — Group’, ‘Operating Results — Segment Information’ and ‘Liquidity and Capital Resources’. Please see ‘Forward-Looking Statements’ for certain cautionary information regarding forward-looking statements and a list of factors that could cause actual results to differ materially from those predicted in the forward-looking statements.


BUSINESS OVERVIEW AND MARKET OUTLOOK

We provide a broad range of insurance broking, risk management and consulting services to our clients worldwide. Our core specialty businesses include Aerospace; Energy; Marine; Construction; Financial and Executive Risks; Fine Art, Jewelry and Specie; Special Contingency Risks; and Reinsurance. Our retail operations provide services to small, medium and major corporations and the employee benefits practice, our largest product-based practice group, provides health, welfare and human resources consulting and brokerage services.
In our capacity as advisor and insurance broker, we act as an intermediary between our clients and insurance carriers by advising our clients on their risk management requirements, helping clients determine the best means of managing risk, and negotiating and placing insurance risk with insurance carriers through our global distribution network.
We derive most of our revenues from commissions and fees for brokerage and consulting services and do not determine the insurance premiums on which our commissions are generally based. Fluctuations in these premiums charged by the insurance carriers

have a direct and potentially material impact on our results of operations. Commission levels generally follow the same trend as premium levels as they are derived from a percentage of the premiums paid by the insureds. Due to the cyclical nature of the insurance market and the impact of other market conditions on insurance premiums, they may vary widely between accounting periods. Reductions in premium rates, leading to downward pressure on commission revenues (a ‘soft’ market), can have a potentially material adverse impact on our commission revenues and operating margin.
A ‘hard’ market occurs when premium uplifting factors, including a greater than anticipated loss experience or capital shortages, more than offset any downward pressures on premiums. This usually has a favorable impact on our commission revenues and operating margin.
From 2000 through 2003 we benefited from a hard market with premium rates stable or increasing. During 2004, we saw a rapid transition from a hard market to a soft market, with premium rates falling in most markets. Rates continued to decline in most sectors through 2005 and 2006, with the exception



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Willis Group Holdings plc

of catastrophe-exposed markets. In 2007, the market softened further with decreases in many of the market sectors in which we operated and this continued into 2008 with further premium rate declines across our markets. The soft market had an adverse impact on our commission revenues and operating margin from 2005 through 2008.
In 2009, modest stabilization of rates in the reinsurance market and some specialty markets was offset by the continuing soft market in other sectors and the adverse impact of the weakened economic environment across the globe.
In 2010, the soft market continued across many sectors including the reinsurance market.
Our North America and UK and Irish retail operations have been particularly impacted by the weakened economic climate and continued soft market throughout both 2009 and 2010 with no material improvement in rates across most sectors.

This resulted in declines in 2009 revenues in these operations with only modest improvement in 2010, particularly amongst our smaller clients who have been especially vulnerable to the economic downturn.
In 2011, our main priorities will include:
• execution of the Willis Cause — aiming to become the broker and risk adviser of choice globally by aligning our business model to the needs of each client segment and maintaining a focus on growth;
• continued investment in technology, advanced analytics, product innovation and industry talent and expertise to support our growth strategy;
• reviewing all businesses to better align resources with our growth strategies and enable related long-term expense savings; and
• review of our debt profile.


EXECUTIVE SUMMARY
Overview

Despite the difficult market conditions during the year, we reported total revenue growth of 2 percent in 2010 mainly reflecting 4 percent organic growth in commissions and fees partly offset by a negative 1 percent impact from foreign currency translation.
Organic revenue growth was driven by our Global and International operations which both reported 6 percent organic growth, whilst revenues in our North America operations were broadly in line with 2009, as this segment continued to be adversely

impacted by the soft market and difficult economic conditions.
Operating margin was 23 percent in 2010, compared with 21 percent in 2009. The year on year improvement mainly reflected the benefit of organic growth in commissions and fees, continuing disciplined management of costs and a small favorable effect from foreign currency movements, partly offset by increased incentive costs.


Results from continuing operations: 2010 compared with 2009


Net income from continuing operations in 2010 was $455 million, or $2.66 per diluted share, compared with $436 million, or $2.58 per diluted share, in 2009.
Total revenues from continuing operations at $3,339 million for 2010 were $76 million, or 2 percent, higher than in 2009, reflecting organic commissions and fees growth of 4 percent, partly offset by an adverse impact from foreign currency translation, a $16 million decrease attributable to the year over year reduction in contingent

commissions assumed as part of the HRH acquisition and a $14 million decrease in investment and other income.
Organic commissions and fees growth of 4 percent comprised 6 percent net new business growth (which constitutes the revenue growth from business won over the course of the year net of the revenue from existing business lost) and a 2 percent negative impact from declining premium rates and other market factors.



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Business discussion

Operating margin at 23 percent was 2 percentage points higher than in 2009 with the increase mainly reflecting:
• 4 percent organic growth in commissions and fees;
• a favorable year over year impact from foreign currency translation, excluding the impact from the devaluation of the Venezuelan currency. This reflects the net benefit of: significantly lower losses on our forward rate hedging program and a weaker year over year Pound Sterling which decreases the US dollar value of our net Pound Sterling expense base; partly offset by the weakening of the Euro against the US dollar, reducing the US dollar value of our net Euro income;
• an $18 million reduction in amortization of intangible assets, equivalent to approximately 1 percentage point;
• the release of a previously established $7 million legal reserve; and
• rigorous expense management;
partly offset by
• a $60 million increase in incentive expenses including: a $31 million increase in the amortization of cash retention awards; and a $29 million increase in the accrual for producer and other incentive compensation reflecting improved performance across many regions;
• a $16 million reduction in legacy contingent commissions assumed on the acquisition of HRH;

• investment in initiatives to support current and future growth;
• a charge of $12 million relating to the devaluation of the Venezuelan currency in January 2010;
• a $12 million reduction in investment income driven by lower average interest rates and a reduced contribution to investment income from our hedging program, in 2010 compared with 2009, with other interest rates across the globe remaining consistently low, and
• an $8 million increase in share-based compensation charge, largely due to the non-recurrence of a $5 million credit in first quarter 2009.
Interest expense in 2010 was $166 million, $8 million lower than in 2009, as the benefit of the interest expense savings arising from the year over year reduction in average term loan and revolving credit facility balances was partly offset by the effect of the higher coupon payable on the $500 million of 12.875% senior unsecured notes issued in March 2009.
Income tax expense for 2010 was $140 million compared with $96 million in 2009. Both years benefited from a release of provisions for uncertain tax positions and 2009 additionally benefited from a $27 million tax credit following a change to UK tax law.
Earnings from associates were $23 million in 2010 compared with $33 million in 2009 with the decrease primarily reflecting our reduced ownership of Gras Savoye.


Results from continuing operations: 2009 compared with 2008


Net income from continuing operations in 2009 was $436 million, or $2.58 per diluted share, compared with $302 million, or $2.04 per diluted share, in 2008. This increase included organic growth in commissions and fees, a reduction in costs associated with our 2008 expense review from $0.45 per diluted share in 2008 to $0.11 per diluted share for severance costs in 2009 and a one-time tax release in 2009 relating to a change in UK tax law in 2009 equivalent to $0.16 per diluted share.

Total revenues from continuing operations at $3,263 million for 2009 were $436 million, or 15 percent, higher than in 2008. Organic revenue growth of 2 percent and a 19 percent benefit from net acquisitions and disposals in 2009, driven by the fourth quarter 2008 acquisition of HRH, were partly offset by a negative 4 percent impact from foreign currency translation and a $31 million decrease in investment income compared to 2008.
Organic revenue growth of 2 percent comprised 5 percent net new business growth (which



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Willis Group Holdings plc

constitutes the revenue growth from business won over the course of the year net of the revenue from existing business lost) and a 3 percent negative impact from declining premium rates and other market factors.
Operating margin at 21 percent was 3 percentage points higher than in 2008 with the increase mainly reflecting:
• 2 percent organic growth in commissions and fees;
• the realization of savings from prior years’ Shaping Our Future initiatives and disciplined cost control; and

• a favorable year over year impact from foreign currency translation, equivalent to 3 percentage points.
partly offset by
• a $66 million increase in pension costs, mainly driven by lower asset levels in our UK pension plan and excluding the $12 million US curtailment gain and the impact of the UK salary sacrifice scheme;
• a $31 million reduction in investment income; and
• a $64 million increase in the amortization of intangible assets, including additional charges in respect of intangible assets recognized on the HRH acquisition.


2011 Operational review

Willis aims to be the broker and risk adviser of choice globally by aligning our business model to the needs of each client segment and maintaining a focus on growth: this is our value proposition which we call the ‘Willis Cause’.
We expect 2011 salaries and benefits expense to include an increase of approximately $100 million compared with 2010 as a result of the following:
• an approximately $65 million increase due to higher amortization of cash retention payments;
• the reinstatement of annual salary reviews for all employees from April of this year; and
• the reinstatement of a 401(k) match for North American employees.
We estimate that of those items noted above, approximately $20 million to $25 million will continue through to 2012 as incremental expense: reflecting a further but significantly lower increase in the amortization of cash retention awards in 2012

compared with 2011, and the full year impact of the 2011 annual salary review.
In addition to these costs, we will continue to invest in technology, advanced analytics, product innovation, and industry talent and expertise to support the growth strategy and continued execution of the Willis Cause through 2011 and beyond.
In order to fund the higher anticipated salaries and benefits expense and these investments, we are undertaking a review of all our businesses to better align our resources with our growth strategies. We expect to complete this review in the first quarter of 2011.
In connection with this review, we anticipate that we will incur pre-tax charges of approximately $110 million to $130 million, primarily recorded in the first quarter of 2011. We also anticipate that the operational review will result in cost savings of approximately $65 million to $80 million in 2011, reaching annualized savings of approximately $90 million to $100 million in 2012.


Outlook

As a result of the 2011 operational review and the continued investment in our business model, we expect to deliver:
• modest adjusted margin expansion (operating margin excluding net gains and losses on disposals and other one-time items) and modest

adjusted earnings per diluted share (diluted earnings per share excluding net gains and losses on disposals and other one-time items) growth in 2011; and



34

Business discussion

• significantly accelerated adjusted margin and adjusted diluted earnings per share growth in 2012 and beyond.
The statements under ‘2011 Operational Review’ and ‘Outlook’ constitute forward-looking statements.

Please see ‘Forward-Looking Statements’ for certain cautionary information regarding forward-looking statements and a list of factors that could cause actual results to differ materially from those predicted in the forward-looking statements.


Venezuela currency devaluation

With effect from January 1, 2010 the Venezuelan economy was designated as hyper-inflationary. The Venezuelan government also devalued the Bolivar Fuerte in January 2010. As a result of these actions,

we recorded a $12 million charge in other expenses in 2010 to reflect the re-measurement of our net assets denominated in Venezuelan Bolivar Fuerte at January 1, 2010.


Acquisitions


During 2010, we acquired:
• an additional 39 percent of our Chinese operations at a total cost of approximately $17 million, bringing our ownership to 90 percent as at December 31, 2010; and

• an additional 15 percent of our Colombian operations at a total cost of approximately $7 million, bringing our ownership to 80 percent as at December 31, 2010.


Cash and financing


Cash at December 31, 2010 was $316 million, $95 million higher than at December 31, 2009. This increase in cash was partly attributable to additional cash balances being held in our main UK regulated company.
Net cash generated from operating activities in 2010 was $489 million compared with $419 million in 2009.
Net cash generated from operating activities in 2010 of $489 million was used to fund debt repayments of $209 million; dividends to stockholders of $176 million; and fixed asset additions of $83 million.
In August 2010, we entered into a new revolving credit facility agreement under which a further $200 million is available. This facility is in addition to the remaining availability under our previously existing $300 million revolving credit facility.
In addition, in June 2010, we entered into an additional facility solely for the use of our main UK

regulated entity under which a further $20 million would be available in certain exceptional circumstances. This facility is secured against the freehold of the UK regulated entity’s freehold property in Ipswich.
At December 31, 2010, we have $nil outstanding under both the $200 million and the $20 million facilities and $90 million outstanding under ourpre-existing $300 million facility.
Total debt, total equity and the capitalization ratio at December 31, 2010 were as follows:
         
  December 31,
  December 31,
 
  2010  2009 
  (millions, except percentages) 
 
Long-term debt $2,157  $2,165 
Short-term debt and current portion of long-term debt  110   209 
         
Total debt
 $2,267  $2,374 
         
Total equity
 $2,608  $2,229 
         
Capitalization ratio
  47%  52%
         


Liquidity

Our principal sources of liquidity are cash from operations, cash and cash equivalents of $316 million at December 31, 2010 and

$430 million remaining availability under our revolving credit facilities.



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Willis Group Holdings plc

We remain committed to our previously stated goals of ongoing debt repayment and returning capital to shareholders.
Consistent with this strategy, we are currently reviewing our debt profile and, subject to prevailing market conditions, may seek to take advantage of attractive financing rates to reduce the cost and extend the maturity profile of our existing debt.
Such actions may include redemption of the entire $500 million in aggregate principal amount of

12.875% senior notes due 2016. If the 2016 senior notes are redeemed, we anticipate that we would incur a one-time pre-tax charge of approximately $180 million relating to the make-whole premium provided under the terms of the indenture governing the notes, as calculated at December 31, 2010.
Based on current market conditions and information available to us at this time, we believe that we have sufficient liquidity to meet our cash needs for at least the next 12 months.


Management structure

Effective January 1, 2011, we have changed our internal reporting structure; Global Markets International, previously reported within our International segment, is now reported in our Global

division. In addition, Mexico, which was previously reported within our International segment, is now reported in our North America segment.


OPERATING RESULTS — GROUP
Revenues
Total revenues for the Group and by operating segment for the years ended December 31, 2010, 2009 and 2008 are shown below:


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Business discussion
2010 compared with 2009
                             
              Change attributable to:    
           Foreign
  Acquisitions
       
           currency
  and
  Contingent
  Organic revenue
 
  2010  2009  % Change  translation  disposals  Commissions(b)  growth(a) 
  (millions)                
 
Global $873  $822   6%  —%  —%  —%  6%
North America(c)
  1,359   1,368   (1)%  —%  —%  (1)%  —%
International  1,068   1,020   5%  (2)%  1%  —%  6%
                             
Commissions and fees $3,300  $3,210   3%  (1)%  —%  —%  4%
                             
Investment income  38   50   (24)%                
Other income  1   3   (67)%                
                             
Total revenues $3,339  $3,263   2%                
                             
(a)Organic revenue growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; (iii) the net commission and fee revenues related to operations disposed of in each period presented; (iv) in North America, legacy contingent commissions assumed as part of the HRH acquisition and that had not been converted into higher standard commission; and (v) investment income and other income from reported revenues.
(b)Included in North America reported commissions and fees were legacy HRH contingent commissions of $11 million in 2010, compared with $27 million in 2009.
(c)Reported commissions and fees included a favorable impact from a change in accounting methodology in a specialty business in North America of $7 million in the year ended December 31, 2010.
Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Revenues for 2010 at $3,339 million were $76 million, or 2 percent higher than in 2009, reflecting organic growth in commissions and fees of 4 percent, offset by a 1 percent adverse year over year impact from foreign currency translation and decreased investment and other income.
Investment income was $38 million for 2010, $12 million lower than 2009 with the impact on investment income of lower interest rates across the globe, particularly on our Euro-denominated deposits, only partially mitigated by our forward hedging program. While we expect this forward hedging program to generate additional income in 2011 compared to current LIBOR based rates, there will be a lower benefit than in 2010 as older, more beneficial hedges, continue to expire. Consequently, we expect investment income to be closer to $30 million in 2011.
Our International and Global operations earn a significant portion of their revenues in currencies other than the US dollar, including the Euro and Pound Sterling. For the year ended December 31,

2010, reported revenues were adversely impacted by the year over year effect of foreign currency translation: in particular due to the strengthening of the US dollar against the Euro, Venezuelan Bolivar Fuerte and Pound Sterling, partly offset by its weakening against the Australian dollar.
Organic growth in commissions and fees was 4 percent for 2010. Global achieved 6 percent growth, driven by good growth in our Reinsurance, Willis Capital Markets & Advisory (WCMA) and Global Specialties businesses. International also achieved 6 percent growth driven by double digit organic growth in Latin America and Asia, together with solid growth in Europe. North America organic revenue growth was flat, as the benefits of double digit new business growth and a change in accounting policy in an acquired specialty business, were offset by the impact of the continued soft market and ongoing weakened economic conditions.
Organic revenue growth by segment is discussed further in ‘Operating Results — Segment Information’ below.



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Willis Group Holdings plc
2009 compared with 2008
                             
              Change attributable to:    
              Acquisitions
       
           Foreign currency
  and
     Organic revenue
 
  2009  2008  % Change  translation  disposals  Contingent Commissions(b)  growth(a) 
  (millions)                
 
Global $822  $784   5%  (3)%  4%  —%  4%
North America  1,368   905   51%  —%  57%  (3)%  (3)%
International  1,020   1,055   (3)%  (8)%  1%  —%  4%
                             
Commissions and fees $3,210  $2,744   17%  (4)%  20%  (1)%  2%
                             
Investment income  50   81   (38)%                
Other income  3   2   50%                
                             
Total revenues $3,263  $2,827   15%                
                             
(a)Organic revenue growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; (iii) the net commission and fee revenues related to operations disposed of in each period presented; (iv) in North America, legacy contingent commissions assumed as part of the HRH acquisition and that had not been converted into higher standard commission; and (v) investment income and other income from reported revenues.
(b)Included in North America reported commissions and fees were legacy HRH contingent commissions of $27 million in 2009, compared with $50 million in 2008.
Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Revenues for 2009 at $3,263 million were $436 million, or 15 percent higher than in 2008, reflecting a 20 percent benefit from net acquisitions and disposals, principally attributable to HRH, and organic growth in commissions and fees of 2 percent, offset by a 4 percent adverse year over year impact from foreign currency translation, a reduction in legacy HRH contingent commissions and lower investment income.
Investment income was $50 million for 2009, $31 million lower than 2008, with the decrease reflecting significantly lower average interest rates in 2009. The impact of rate decreases on our investment income was partially mitigated by our forward hedging program.
Our International and Global operations earn a significant portion of their revenues in currencies

other than the US dollar. For the year ended December 31, 2009, reported revenues were adversely impacted by the year over year effect of foreign currency translation: in particular due to the strengthening of the US dollar against the Pound Sterling and against the Euro, compared with 2008.
Organic growth in commissions and fees was 2 percent for 2009, despite a negative 3 percent impact from declining premium rates and other market factors. Our overall organic growth comprised good growth in our Global operations and many of our International operations, partly offset by declines in our North America, UK and Irish retail operations reflecting the weak economic environments and soft market conditions experienced in these territories.


General and administrative expenses
             
  2010  2009  2008 
  (millions, except percentages) 
 
Salaries and benefits $1,873  $1,827  $1,638 
Other  566   595   603 
             
General and administrative expenses $2,439  $2,422  $2,241 
             
Salaries and benefits as a percentage of revenues  56%  56%  58%
Other as a percentage of revenues  17%  18%  21%

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Business discussion
2010 compared with 2009

Salaries and benefits
Salaries and benefits were 56 percent of revenues for both 2010 and 2009, as the benefits of:
• a $9 million reduction in severance costs to $15 million from $24 million: whilst approximately 550 positions were eliminated in 2010 compared with 450 positions in 2009 as part of our continued focus on managing expense, the average cost per eliminated position was lower in 2010; and
• a year over year net benefit from foreign currency translation driven primarily by the strengthening of the US dollar against the Pound Sterling (in which our London Market based operations incur the majority of their expenses);
were offset by
• a $60 million increase in incentive expenses including: a $31 million increase in the amortization of cash retention payments; and a $29 million increase in the accrual for incentive compensation reflecting increased headcount and improved performance across many regions;
• an $8 million increase in share-based compensation mainly reflecting the non-recurrence of a $5 million credit in first quarter 2009. The credit in 2009 related to accumulated compensation expense for certain 2008 awards which were dependent upon performance targets which the Company did not achieve; and
• investment in new client-facing hires and spending on other growth initiatives.

Cash retention awards
We have a cash retention award program in place. We started making cash retention awards in 2005 to a small number of employees. With the success of the program, we have expanded it over time to include more staff and we believe it is a contributing factor to the reduction in employee turnover we have seen in recent years.
Salaries and benefits do not reflect the unamortized portion of annual cash retention awards made to employees. Employees must repay a proportionate amount of these cash retention awards if they voluntarily leave our employ (other than in the event of retirement or permanent disability) before a certain time period, currently three years. We make cash payments to our employees in the year we grant these retention awards and recognize these payments ratably over the period they are subject to repayment, beginning in the quarter in which the award is made. A significant majority of the Company’s incentive compensation for non-production compensation is paid in the form of a retention payment versus bonus awards which typically are made for prior service and accrued over the prior service period.
During 2010, we made $196 million of cash retention payments compared with $148 million in 2009. Salaries and benefits in 2010 include $119 million of amortization of cash retention payments made on or before December 31, 2010 compared with $88 million in 2009. As of December 31, 2010 and December 31, 2009, we included $173 million and $98 million, respectively, in other assets on the balance sheet, which represented the unamortized portion of cash retention payments made on or before those dates.


Other expenses

Other expenses were 17 percent of revenues in 2010, compared with 18 percent in 2009, reflecting the benefits of:
• significantly lower losses on our forward rate hedging program in 2010 of $15 million, compared with $40 million in 2009;
• the release of a previously established $7 million legal reserve; and

• continued disciplined management of discretionary expenses;
partly offset by
• the $12 million first quarter 2010 charge relating to the devaluation of the Venezuelan currency; and
• increases in travel and entertaining expenses in support of our revenue growth initiatives.



39

Willis Group Holdings plc
2009 compared with 2008
Salaries and benefits

Salaries and benefits were 56 percent of revenues for 2009, compared with 58 percent in 2008 reflecting the benefits of:
• good cost controls, including our previous Shaping our Future and 2008 expense review initiatives, together with the initial benefits from our Right Sizing Willis initiatives in 2009;
• the non-recurrence of $66 million of costs incurred as part of the 2008 expense review;
• a year over year benefit from foreign currency translation driven primarily by the significant strengthening of the US dollar against the Pound Sterling (in which our London market based operations incur the majority of their expenses); and
• a $12 million curtailment gain realized on the closure of our US defined benefit pension plan to accrual of benefit for future service (see below);

partly offset by
• a $66 million increase in pension costs, mainly driven by lower asset levels in our UK pension plan and excluding the $12 million US curtailment gain and the $8 million impact of the introduction of a UK salary sacrifice scheme. The increase attributable to the salary sacrifice scheme was marginally more than offset by a reduction in salaries and payroll taxes.
Effective May 15, 2009, we closed our US defined benefit pension plan to future accrual and recognized a curtailment gain of $12 million in second quarter 2009. As a result the full year 2009 charge for the US plan was $7 million compared with an expected $39 million charge had the plan not been closed to future accrual.
We also suspended the company match for our US 401(k) plan which benefited 2009 by $9 million compared with 2008.


UK salary sacrifice scheme

With effect from April 2009, the Company offered UK employees an alternative basis on which to fund contributions into the UK pension plans. UK employees can now agree to sacrifice an amount of their salary and in return the Company makes additional pension contributions on their behalf, equivalent to the value of the salary sacrificed.

From a payroll tax perspective, this is a more efficient method of making pension contributions.
As a result of this change, the Company made additional pension contributions of $10 million in 2010 and $8 million in 2009, with marginally higher savings in salaries and payroll taxes.


Other expenses

Other expenses were 18 percent of revenues for 2009 compared with 21 percent in 2008, reflecting the benefit of:
• the non-recurrence of $26 million of costs incurred as part of the 2008 expense review;
• a reduction in discretionary expenses including travel and entertaining, advertising, printing and a number of other areas, driven by our Right Sizing Willis initiatives; and
• lower foreign exchange losses relating to the UK sterling pension asset;
partly offset by

• foreign currency translation losses on our forward rate hedging program of $40 million, compared with losses on the equivalent program in 2008 of $12 million.
We have a program that hedges our sterling cash outflows from our London market operations, a part of which hedges the sterling denominated cash contributions into the UK pension plan. However, we do not hedge against the pension benefits asset or liability recognized for accounting purposes.
The effects of the above increases were partly mitigated by the benefits of our continued focus on cost controls.



40

Business discussion
Amortization of intangible assets

Amortization of intangible assets of $82 million in 2010 was $18 million lower than in 2009.
The decrease primarily reflects: the year over year benefit of the 2009 accelerated amortization of $7 million relating to the HRH brand name; and the declining charge for the amortization of the HRH customer relationship intangible, which is being amortized in line with the underlying discounted cash flows.
We expect the amortization of intangible assets expense in 2011 to further decrease to approximately $65 million.
Amortization of intangible assets of $100 million in 2009 was $64 million higher than in 2008. The

significant year over year increase was primarily attributable to additional charges of $58 million in 2009 in respect of intangible assets recognized on the HRH acquisition, including $7 million of accelerated amortization relating to the HRH brand name. Following the success of our integration of HRH into our previously existing North America operations, we announced on October 1, 2009 that we were changing the name of our North America operations from Willis HRH to Willis North America. Consequently the intangible asset recognized on the acquisition of HRH relating to the HRH brand name was fully amortized.


Operating income and margin (operating income as a percentage of revenues)
             
  2010  2009  2008 
  (millions, except percentages) 
 
Revenues $3,339  $3,263  $2,827 
Operating income  753   694   503 
Operating margin or operating income as a percentage of revenues  23%  21%  18%
2010 compared with 2009

Operating margin was 23 percent for 2010, compared with 21 percent for 2009, reflecting the benefits of:
• 4 percent organic growth in commissions and fees;
• a favorable year over year impact from foreign currency translation, excluding the impact from the devaluation of the Venezuelan currency. This reflects the net benefit of: significantly lower losses on our forward rate hedging program and a weaker year over year Pound Sterling which decreases the US dollar value of our net Pound Sterling expense base; partly offset by the weakening of the Euro against the US dollar, reducing the US dollar value of our net Euro income;
• an $18 million reduction in amortization of intangible assets, as explained above, equivalent to approximately 1 percentage point;
• the release of a previously established $7 million legal reserve; and

• rigorous expense management;
partly offset by
• a $60 million increase in incentive expenses including: a $31 million increase in the amortization of cash retention awards; and a $29 million increase in the accrual for incentive compensation reflecting producer and other improved performance across many regions;
• a $16 million reduction in legacy contingent commissions assumed on the acquisition of HRH;
• investment in initiatives to support current and future growth;
• a charge of $12 million relating to the devaluation of the Venezuelan currency in January 2010;
• a $12 million reduction in investment income driven by lower average interest rates, particularly on Euro denominated deposits, in 2010 compared with 2009, with other interest rates across the globe remaining consistently low, and



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Willis Group Holdings plc

• an $8 million increase in share-based compensation charge, largely due to the non-

recurrence of a $5 million credit in first quarter 2009.


2009 compared with 2008

Operating margin was 21 percent for 2009 compared with 18 percent for 2008. This increase reflected the benefit of:
• the year over year benefit of $92 million of costs incurred in 2008 associated with our 2008 expense review;
• 2 percent organic growth in commissions and fees;
• the $12 million US pension curtailment gain recognized in second quarter 2009; and
• disciplined cost control;

partly offset by
• a $66 million increase in pension costs, excluding the $12 million US curtailment gain and the $8 million impact of the UK salary sacrifice scheme discussed above;
• a $64 million increase in amortization of intangible assets, principally attributable to HRH;
• a $31 million year over year decline in investment income, reflecting the impact of the significant decline in global interest rates; and
• $24 million of severance expense in 2009 relating to our Right Sizing Willis initiative.


Interest expense
             
  2010 2009 2008
  (millions)
 
Interest expense $166  $174  $105 

Interest expense in 2010 of $166 million was $8 lower than in 2009, as the benefit of the interest expense savings arising from the year over year reduction in average term loan and revolving credit facility balances was partly offset by the effect of the higher coupon payable on the $500 million of 12.875% senior unsecured notes issued in March 2009.
We are reviewing our current debt profile to identify opportunities to reduce our financing costs by taking advantage of current low global interest rates.

Interest expense in 2009 of $174 million was $69 million higher than in 2008. This increase primarily reflects higher average debt levels following the HRH acquisition, but also includes $5 million of premium and costs relating to the early repurchase in September 2009 of $160 million of our 5.125% senior notes due July 2010 at a premium of $27.50 per $1,000 face value.


Income taxes
             
  2010  2009  2008 
  (millions, except percentages) 
 
Income from continuing operations before taxes $587  $520  $398 
Income tax charge  140   96   97 
Effective tax rate  24%  18%  24%

2010 compared with 2009
The effective tax rate for 2010 of 24 percent was impacted by:
• a $22 million benefit from prior year tax adjustments;

• an adverse impact from the $12 million charge relating to the devaluation of the Venezuelan currency for which no tax credits are available; and



42

Business discussion

• the tax impact of the net loss on disposal of operations.

Excluding these items, the underlying effective tax rate for 2010 was broadly in line with 2009.


2009 compared with 2008

The effective tax rate in 2009 was 18 percent compared with 24 percent in 2008. The decrease in rate reflects:
• a $27 million release relating to a 2009 change in tax law. As at June 30, 2009 we held a provision of $27 million relating to tax that would potentially be payable should the unremitted earnings of our foreign subsidiaries be repatriated. Following a change in UK tax law effective in third quarter 2009, these earnings may now be

repatriated without additional tax cost and, consequently, the provision was released; and
• an $11 million release relating to uncertain tax positions due to the closure of the statute of limitations on assessments for previously unrecognized tax benefits. There was a similar $5 million release of uncertain tax positions in 2008.
Excluding the benefit of these items, the underlying effective tax rate for 2009 was 26 percent.


Interest in earnings of associates

Interest in earnings of associates, net of tax, in 2010 of $23 million was $10 million lower than in 2009. This fall is primarily driven by the reduction from 49 percent to 31 percent in our ownership interest in Gras Savoye, as part of the reorganization of their capital structure in December 2009. Interest receivable on the vendor financing we provided as part of the capital reorganization is also recorded under this caption.

Interest in earnings of associates, net of tax, was $33 million in 2009, $11 million higher than in 2008, reflecting a year over year increased ownership share in Gras Savoye. As described above, our interest in Gras Savoye subsequently reduced in December 2009 following the reorganization of that company’s capital.


Net income and diluted earnings per share from continuing operations
             
  2010  2009  2008 
  (millions, except per share data) 
 
Net income from continuing operations $455  $436  $302 
Diluted earnings per share from continuing operations $2.66  $2.58  $2.04 
Average diluted number of shares outstanding  171   169   148 
2010 compared with 2009

Net income from continuing operations for 2010 was $455 million compared with $436 million in 2009, reflecting the benefits of:
• the $59 million net increase in operating income discussed above; and
• an $8 million decrease in interest expense, largely reflecting a year over year reduction in the outstanding balances on our term loan and revolving credit facility debt;

partly offset by
• the year over year increase in tax charge of $44 million, primarily attributable to the 2009 one-off tax benefits of $38 million;
• a reduction in earnings from associates of $10 million; and
• a reduction in noncontrolling interests share of net income.
Diluted earnings per share from continuing operations for 2010 increased to $2.66 compared to $2.58 in 2009.



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Willis Group Holdings plc

Foreign currency translation, excluding the impact of the Venezuelan currency devaluation, had a $0.04 favorable impact on diluted earnings per share. This was more than offset by the $0.07 per diluted share negative impact from the Venezuela currency devaluation in January 2010.

Average share count for 2010 was 171 million compared with 169 million in 2009. The increased share count had a negative $0.03 impact on diluted earnings per share.


2009 compared with 2008

Net income from continuing operations for 2009 was $436 million compared with $302 million in 2008. The $134 million increase primarily reflected the $191 million increase in operating income, discussed above, partly offset by the $69 million increase in interest expense.
Diluted earnings per share from continuing operations for 2009 increased to $2.58 compared to $2.04 in 2008 as the benefit of the increased net

income was partly offset by a 21 million increase in average diluted shares outstanding due primarily to the shares issued on October 1, 2008 for the HRH acquisition. The additional shares issued had a negative $0.36 impact on earnings per diluted share in 2009.
Foreign currency translation had a year over year $0.27 positive impact on earnings per diluted share in 2009.


OPERATING RESULTS — SEGMENT INFORMATION

We organize our business into three segments: Global, North America and International. Our Global business provides specialist brokerage and consulting services to clients worldwide for risks arising from specific industries and activities. North America and International comprise our retail

operations and provide services to small, medium and major corporations.
The following table is a summary of our operating results by segment for the three years ended December 31, 2010:


                                     
  2010  2009  2008 
     Operating
  Operating
     Operating
  Operating
     Operating
  Operating
 
  Revenues  Income  Margin  Revenues  Income  Margin  Revenues  Income  Margin 
  (millions)     (millions)     (millions)    
 
Global $880  $262   30% $835  $255   31% $814  $240   29%
North America  1,375   319   23%  1,386   328   24%  922   142   15%
International  1,084   285   26%  1,042   276   27%  1,091   306   28%
                                     
Total Retail  2,459   604   25%  2,428   604   25%  2,013   448   22%
Corporate & Other  —   (113)  n/a   —   (165)  n/a   —   (185)  n/a 
                                     
Total Consolidated $3,339  $753   23% $3,263  $694   21% $2,827  $503   18%
                                     
Global

Our Global business comprise Global Specialties, Willis Re, London Market Wholesale, and as of 2010, Willis Capital Markets & Advisory (WCMA).
Faber & Dumas includes Glencairn, our London-based wholesale brokerage operation and our Fine Art, Jewelry and Specie; Special Contingency Risk and Hughes-Gibb units. WCMA provides financial

advice on mergers and acquisitions and capital markets products and may place or underwrite securities.
The following table sets out revenues, organic revenue growth and operating income and margin for the three years ended December 31, 2010:



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Business discussion
             
  2010  2009  2008 
  (millions, except percentages) 
 
Commissions and fees $873  $822  $784 
Investment income  7   13   30 
             
Total revenues $880  $835  $814 
             
Operating income $262  $255  $240 
Organic revenue growth(a)
  6%  4%  2%
Operating margin  30%  31%  29%
(a)Organic revenue growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; (iii) the net commission and fee revenues related to operations disposed of in each period presented; and (iv) investment income and other income from reported revenues.
Revenues
2010 compared with 2009

Commissions and fees of $873 million were $51 million, or 6 percent, higher in 2010 compared with 2009 which was driven by 6 percent organic revenue growth, with a 1 percent benefit from acquisitions and disposals offset by the impact of foreign currency translation.
Our Reinsurance and Global Specialties businesses both reported mid-single digit organic growth in 2010, driven by good net new business generation despite the adverse impact of the continued difficult rate environment and soft market in many of the specialty classes.
Reinsurance reported strong new business growth across all segments in 2010 and client retention levels remained high. Despite high loss levels earlier in the year, rates remain soft except for Marine and Energy.
Organic growth in Global Specialties was led by strong contributions from Financial and Executive Risks, Construction and Energy, reflecting strong new business, improved retention, targeted hiring of producer talent and global connectivity. However, the operating environment remains tough with depressed world trade and transit volumes, industry

consolidation and pressure on financing of construction projects still evident.
As a result of strong reinsurance underwriting profits in 2009, with the exception of marine and energy, there has been a general but disciplined softening of rates in 2010 which remain a significant headwind for growth.
Our WCMA business also contributed to positive organic revenue growth in 2010, substantially due to a $9 million fee on a single capital markets transaction in the second quarter. WCMA is a transaction oriented business and its results are more variable than some of our other businesses.
Faber & Dumas revenues were slightly lower than 2009, mainly reflecting the soft wholesale market, together with continued pressure on the most economically sensitive lines such as bloodstock, jewelry and fine arts.
Productivity in Global, measured in terms of revenue per FTE employee, increased to $365,000 for 2010 compared with $358,000 for 2009.
Client retention levels remained high at 90 percent for 2010, in line with 2009.


2009 compared with 2008


Commissions and fees of $822 million were $38 million, or 5 percent, higher in 2009 compared with 2008 of which 4 percent was attributable to the acquisition of the HRH UK wholesale business, Glencairn and 4 percent to organic revenue growth.

These were partly offset by a 3 percent negative impact from foreign exchange movements.
Net new business growth was 5 percent and there was a 1 percent adverse impact from rates and other market factors. Reinsurance led the growth in net new business. Global Specialties organic revenues


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Willis Group Holdings plc

were slightly higher than in 2008, as growth in Marine, Aerospace and Financial and Executive Risks was offset by reductions elsewhere. There was continued softness in most specialty rates although there were some signs of stabilization and firming in some areas, including Aerospace and Energy. The

Faber & Dumas businesses continue to be adversely impacted by the weakening economic environment.
There was a sharp decline in investment income in 2009 compared with 2008 as global interest rates fell markedly in the latter half of 2008 and early 2009.


Operating margin
2010 compared with 2009

Operating margin was 30 percent in 2010 compared with 31 percent in 2009. This decrease primarily reflected the adverse impact of foreign currency translation, as the positive effect on our Pound Sterling expense base of a strengthening US dollar, was more than offset by the adverse impact of foreign currency movements on sterling-denominated balances.
Operating margin in Global is impacted by foreign exchange movements as the London Market businesses within our Global operations earn

revenues in US dollars, Pounds Sterling and Euros and primarily incur expenses in Pounds Sterling. In addition, they are exposed to exchange risk on certain sterling-denominated balances.
Excluding the impact of this foreign currency translation, Global’s operating margin remained flat as the benefits of good organic revenue growth and disciplined cost control were offset by the impact of costs associated with continued support of current and future growth.


2009 compared with 2008


Operating margin was 31 percent in 2009 compared with 29 percent in 2008. This improvement reflected a significant benefit from foreign currency translation, together with organic revenue growth, particularly driven by our Reinsurance business, and

good cost controls including a reduction in discretionary expenses.
The benefit of these was partly offset by a significant increase in the UK pension expense and a sharp reduction in investment income.



46

Business discussion
North America

Our North America business provides risk management, insurance brokerage, related risk services and employee benefits brokerage and consulting to a wide array of industry and client segments in the United States and Canada.

The following table sets out revenues, organic revenue growth and operating income and margin for the three years ended December 31, 2010:


             
  2010  2009  2008 
  (millions, except percentages) 
 
Commissions and fees(a)(b)
 $1,359  $1,368  $905 
Investment income  15   15   15 
Other income  1   3   2 
             
Total revenues $1,375  $1,386  $922 
             
Operating income $319  $328  $142 
Organic revenue growth(c)
  0%  (3)%  (1)%
Operating margin  23%  24%  15%
(a)Included in North America reported commissions and fees were legacy HRH contingent commissions of $11 million in 2010, compared with $27 million in 2009 and $50 million in 2008.
(b)Reported commissions and fees included a favorable impact from a change in accounting methodology in a specialty business in North America of $7 million in the year ended December 31, 2010.
(c)Organic revenue growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; (iii) the net commission and fee revenues related to operations disposed of in each period presented; (iv) in North America, legacy contingent commissions assumed as part of the HRH acquisition and that had not been converted into higher standard commission; and (v) investment income and other income from reported revenues.
Revenues
2010 compared with 2009

Commissions and fees of $1,359 million were $9 million, or 1 percent, lower for 2010 compared with 2009.
Excluding the $16 million decrease in legacy contingency commissions assumed as part of the HRH acquisition, there was a modest increase in commissions and fees.
Organic revenue growth was flat for 2010 as the benefits of:
• strong growth in our specialty businesses, driven by good growth in the business, together with a $7 million increase in commissions and fees from a change in accounting of an acquired specialty business in North America to conform with Group accounting policy;
• 3 per cent growth in our employee benefits practice, which represents approximately 25 percent of North America’s commission and fee base, despite the soft labor market; and

• good net new business generation, with improved client retention;
partly offset by
• a negative 2 percent impact from rate declines and other market factors;
• a further decline in our Construction business, which represents approximately 10 percent of North America’s commission and fee base, reflecting the ongoing challenges in that sector. However, declines in commissions and fees were single digits in 2010 compared with the double digit declines experienced in 2009; and
• smaller declines elsewhere reflecting the impact of the continued soft market conditions and weak US economy.
Net new business growth includes the benefit of higher standard commissions where these have been negotiated in lieu of contingent commissions. These



47

Willis Group Holdings plc

higher standard commissions however may not have been negotiated at the same level or be received in the same periods as the related contingent commissions. Furthermore, the business to which they related may not have been renewed.

Despite the small decline in revenues, productivity in North America, measured in terms of revenue per FTE employee, increased to $238,000 for 2010 compared with $227,000 for 2009.
Client retention levels increased to 92 percent for 2010, compared with 91 percent for 2009.


2009 compared with 2008

Commissions and fees in North America were 51 percent higher in 2009 compared with 2008 reflecting the uplift from the additional revenues of HRH, partly offset by 3 percent negative organic growth. Our North America operations were significantly adversely impacted by soft market conditions, the weakened US economy and a reduction in project based revenues which more than offset a positive impact from net new business. In particular, our Construction division saw significant declines.

Our primary focus in North America in 2009 was the integration of HRH into our existing operations and the improvement of margin. Additionally, in the second half of the year we refocused our efforts on revenue growth and we believe this led to double digit new business generation in parts of the business during that time period.
Despite the significant decline in revenues, our productivity measured in terms of revenue per FTE employee remained high, with a marginal increase to $227,000 for 2009 compared with $225,000 for 2008.


Operating margin
2010 compared with 2009

Operating margin in North America was 23 percent in 2010 compared with 24 percent in 2009, as the benefits of:
• continued disciplined cost control; and
• lower pension expense in 2010, excluding the second quarter 2009 curtailment gain, following the closure of the US pension plan to future accrual in second quarter 2009;
were more than offset by

• the reduction in legacy HRH contingent commissions of $16 million in 2010;
• the non-recurrence of a $9 million benefit in 2009 from the curtailment of the US pension plan relating to our North America retail employees; and
• increased incentive expense in 2010, including the impact of increased amortization of cash retention award payments.


2009 compared with 2008


Operating margin in North America was 24 percent in 2009 compared with 15 percent in 2008. The higher margin reflected:
• the acquisition of HRH and the synergies and cost savings achieved from the integration of HRH with our existing North America operations;
• a reduction in underlying expense base reflecting the benefits of our 2008 Expense Review and Right Sizing Willis initiatives; and

• a $9 million benefit from the curtailment of the US pension scheme relating to our North America retail employees;
partly offset by
• the decline in organic revenues against the backdrop of the soft market and weak economic conditions discussed above.



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Business discussion
International

Our International business comprises our retail operations in Eastern and Western Europe, the United Kingdom and Ireland, Asia-Pacific, Russia, the Middle East, South Africa and Latin America. The services provided are focused according to the characteristics of each market and vary across offices, but generally include direct risk

management and insurance brokerage and employee benefits consulting.
The following table sets out revenues, organic revenue growth and operating income and margin for the three years ended December 31, 2010:


             
  2010  2009  2008 
  (millions, except percentages) 
 
Commissions and fees $1,068  $1,020  $1,055 
Investment income  16   22   36 
             
Total revenues $1,084  $1,042  $1,091 
             
Operating income  285   276   306 
Organic revenue growth(a)
  6%  4%  9%
Operating margin  26%  26%  28%
(a)Organic revenue growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; (iii) the net commission and fee revenues related to operations disposed of in each period presented; and (iv) investment income and other income from reported revenues.
Revenues
2010 compared with 2009

Commissions and fees of $1,068 million were $48 million, or 5 percent, higher for 2010 compared with 2009, as the benefits of 6 percent organic revenue growth and 1 percent from the net effect of acquisitions and disposals was partly offset by a 2 percent adverse impact from foreign currency translation. Net new business growth was 9 percent and there was a negative 3 percent impact from rates and other market factors.
A significant part of International’s revenues are earned in currencies other than the US dollar. The US dollar has strengthened against a number of these currencies in 2010 compared with 2009, most notably the Euro, Venezuelan Bolivar Fuerte, Danish Kroner and Pound Sterling. The adverse impact of this strengthening was partly offset by the weakening of the US dollar against the Australian dollar. The net impact of these movements was a 2 percent reduction in 2010 revenues compared to 2009.
There were strong contributions to our organic growth from most regions, led by growth in Latin

America, Asia and Europe. In particular, there was good growth in:
• Venezuela, Argentina, Brazil and Chile in Latin America;
• China, Indonesia and Korea in Asia; and
• Germany, Spain and Denmark in continental Europe, despite the challenging economic environment in this region.
There was further positive growth in our Eastern Europe operations in 2010, driven by a strong contribution from Russia.
Organic revenue growth was also positive in our UK and Irish retail operations, driven by new business growth in the UK as we begin to see signs of an improving economy. Our employee benefits practice, which represents approximately 10 percent of International commissions and fees, continued to perform well in 2010 with growth in the mid single digits.
Productivity in our International business, measured in terms of revenue per FTE employee, increased to



49

Willis Group Holdings plc

$160,000 for 2010 compared with $156,000 for 2009.

Client retention levels remained high at 92 percent for 2010.


2009 compared with 2008


Commissions and fees in International were $35 million, or 3 percent, lower in 2009 compared with 2008 as double digit new business generation in many of our International units was more than offset by an adverse impact from foreign exchange of 8 percent, a 3 percent adverse impact from rates and other market factors, and significantly lower revenues in our UK and Irish retail operations.
A significant part of International’s revenues are earned in currencies other than the US dollar which strengthened significantly in 2009 on a year over year basis against a number of these currencies, most notably the Euro, Pound Sterling, Danish kroner and Australian dollar, consequently reducing

International revenues on a year over year basis when reported in US dollars.
Despite the slowdown of the global economy, International continued its organic growth. Excluding our UK and Irish retail divisions, organic revenue growth was 8 percent in 2009, with Latin America and Asia, led by Brazil, Columbia and China, all reporting strong organic growth. However, our UK and Irish retail division saw a 6 percent revenue decline, reflecting weak local economic conditions.
Client retention levels remained high at approximately 90 percent for 2009.


Operating margin
2010 compared with 2009

Operating margin in International was 26 percent in both 2010 and 2009, as the benefits of:
• 6 percent organic revenue growth; and
• continued focus on disciplined expense management to drive future growth;
were offset by
• an adverse impact from foreign currency translation, reflecting the negative impact of the weakening of the Euro and other currencies in

which we earn a significant portion of our operating income against the US dollar;
• increased incentive expenses, including amortization of cash retention award payments;
• a reduction in investment income, driven by lower interest rates, particularly in the Euro zone; and
• spending on initiatives to drive future growth, including a year on year increase in International headcount of approximately 200.


2009 compared with 2008


Operating margin in International was 26 percent in 2009 compared with 28 percent in 2008, as the benefits of:
• strong organic revenue growth outside of Ireland; and
• focused expense management including savings in discretionary costs driven by our Right Sizing Willis initiatives;

were more than offset by
• increased pension expense for the UK pension plan;
• a sharp reduction in investment income reflecting lower global interest rates; and
• a weak performance by our Irish retail operations reflecting their difficult market conditions.



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Business discussion
Corporate & Other
Corporate & Other includes the following:
             
  2010  2009  2008 
  (millions) 
 
Amortization of intangible assets $(82) $(100) $(36)
Foreign exchange hedging  (16)  (42)  (13)
Foreign exchange on the UK pension plan asset  3   (6)  (34)
HRH integration costs  —   (18)  (5)
Net (loss) gain on disposal of operations  (2)  13   — 
2008 expense review  —   —   (92)
Gain on disposal of London headquarters  —   —   7 
Venezuela currency devaluation  (12)  —   — 
Release of previously established legal provision  7   —   — 
Redomicile of parent company costs  —   (6)  — 
Other  (11)  (6)  (12)
             
  $(113) $(165) $(185)
             
CRITICAL ACCOUNTING ESTIMATES

Our accounting policies are described in Note 2 to the Consolidated Financial Statements. Management considers that the following accounting estimates or assumptions are the most important to the

presentation of our financial condition or operating performance. Management has discussed its critical accounting estimates and associated disclosures with our Audit Committee.


Pension expense


We maintain defined benefit pension plans for employees in the US and UK. Both these plans are now closed to new entrants and, with effect from May 15, 2009 we closed our US defined benefit plan to future accrual. New entrants in the UK are offered the opportunity to join a defined contribution plan and in the United States are offered the opportunity to join a 401(k) plan. We also have smaller defined benefit schemes in Ireland, Germany, Norway and the Netherlands. These International schemes have combined total assets of $125 million and a combined net liability for pension benefits of $10 million as of December 31, 2010. Elsewhere, pension benefits are typically provided through defined contribution plans.
We make a number of assumptions when determining our pension liabilities and pension expense which are reviewed annually by senior management and changed where appropriate. The discount rate will be changed annually if underlying rates have moved whereas the expected long-term return on assets will be changed less frequently as

longer term trends in asset returns emerge or long term target asset allocations are revised. Other material assumptions include rates of participant mortality, the expected long-term rate of compensation and pension increases and rates of employee termination.
We recorded a net pension charge on our UK and US defined benefit pension plans in 2010 of $29 million, compared with $32 million in 2009, a decrease of $3 million.
On our International defined benefit pension plans, we recorded a net pension charge of $6 million in 2010, compared with $10 million in 2009, a decrease of $4 million.
The UK plan charge was $3 million higher as the benefit of higher asset returns from higher asset levels was more than offset by:
• a higher service cost reflecting higher inflation, the first full year of the salary sacrifice arrangement and a lower discount rate;



51

Willis Group Holdings plc

• higher amortization of prior period losses; and
• an increased interest cost.
The US pension charge was $6 million lower in 2010 compared with 2009 reflecting:
• an increased asset return from a higher asset base;
• a reduction in amortization of prior period losses; and

• the first full year’s benefit from closing the scheme to future accrual in May 2009;
partly offset by
• the non-recurrence of a $12 million curtailment gain in 2009.
Based on December 31, 2010 assumptions, we expect the net pension charge in 2011 to decrease by: $20 million for the UK plan; $1 million for the US plan; and a net $2 million for the International plans.


UK plan
                 
     Impact of a
       
  As disclosed
  0.50 percentage
  Impact of a
    
  using
  point increase
  0.50 percentage
  One year
 
  December 31,
  in the expected
  point increase
  increase in
 
  2010
  rate of return
  in the discount
  mortality
 
  assumptions(i)  on assets(ii)  rate(ii)  assumption(ii)(iii) 
  (millions) 
 
Estimated 2011 expense $8  $(10) $(16) $6 
Projected benefit obligation at December 31, 2010  1,906   n/a   (153)  39 
(i)Except for expected rate of return updated to 7.50%.
(ii)With all other assumptions held constant.
(iii)Assumes all plan participants are one year younger.

Expected long-term rates of return on plan assets are developed from the expected future returns of the various asset classes using the target asset allocations. The expected long-term rate of return used for determining the net UK pension expense in 2010 remained unchanged at 7.8 percent, equivalent to an expected return in 2010 of $141 million.

Effective January 1, 2011, the expected long-term rate of return was decreased to 7.50%, following a change in the underlying target asset mix.
The expected and actual returns on UK plan assets for the three years ended December 31, 2010 were as follows:


         
  Expected
  Actual
 
  return on
  return on
 
  plan assets  plan assets 
  (millions) 
 
2010 $141  $245 
2009  127   234 
2008  184   (509)

During the latter half of 2008 the value of assets held by our UK pension plan was significantly adversely affected by the turmoil in worldwide markets. The holdings of equity securities were particularly affected in 2008, but have recovered, to some extent, in 2009 and 2010.
Rates used to discount pension plan liabilities at December 31, 2010 were based on yields prevailing at that date of high quality corporate bonds of appropriate maturity. The selected rate used to discount UK plan liabilities was 5.5 percent compared with 5.8 percent at December 31, 2009

with the decrease reflecting a reduction in UK long-term bond rates in the latter part of 2010. This lower discount rate generated an actuarial loss of $84 million at December 31, 2010.
Mortality assumptions at December 31, 2010 were unchanged from December 31, 2009. The mortality assumption is the 100 percent PNA00 table without an age adjustment. As an indication of the longevity assumed, our calculations assume that a UK male retiree aged 65 at December 31, 2010 would have a life expectancy of 22 years.



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Business discussion
US plan
                 
     Impact of a
       
  As disclosed
  0.50 percentage
  Impact of a
    
  using
  point increase
  0.50 percentage
  One year
 
  December 31,
  in the expected
  point increase
  increase in
 
  2010
  rate of return
  in the discount
  mortality
 
  assumptions(i)  on assets(ii)  rate(ii)  assumption(ii)(iii) 
  (millions) 
 
Estimated 2011 expense $—  $(3) $(1) $2 
Projected benefit obligation at December 31, 2010  756   n/a   (46)  22 
(i)Except for expected rate of return updated to 7.50%.
(ii)With all other assumptions held constant.
(iii)Assumes all plan participants are one year younger.

The expected long-term rate of return used for determining the net US pension scheme expense in 2010 was 8.0 percent, consistent with 2009. Effective January 1, 2011, the expected long-term rate of return was decreased to 7.50%, following a change in the underlying target asset mix.
The rate used to discount US plan liabilities at December 31, 2010 was 5.6 percent, determined

based on expected plan cash flows discounted using a corporate bond yield curve, a small reduction from 6.1 percent at December 31, 2009.
The expected and actual returns on US plan assets for the three years ended December 31, 2010 were as follows:


         
  Expected
  Actual
 
  return on
  return on
 
  plan assets  plan assets 
  (millions) 
 
2010 $42   $70 
2009  36   86 
2008  47   (142)

As for the UK plan, the 2008 actual return on assets was adversely impacted by the turmoil in worldwide markets.
The mortality assumption at December 31, 2010 is the RP-2000 Mortality Table (blended for annuitants and non-annuitants), projected to 2011 by Scale AA

(December 31, 2009: projected to 2010 by Scale AA). As an indication of the longevity assumed, our calculations assume that a US male retiree aged 65 at December 31, 2010, would have a life expectancy of 19 years.


Intangible assets


Intangible assets represent the excess of cost over the value of net tangible assets of businesses acquired. We classify our intangible assets into three categories:
• Goodwill;
• ‘Customer and Marketing Related’ includes client lists, client relationships, trade names and non-compete agreements; and
• ‘Contract-based, Technology and Other’ includes all other purchased intangible assets.
Client relationships acquired on the HRH acquisition are amortized over twenty years in line with the

pattern in which the economic benefits of the client relationships are expected to be consumed. Over 80 percent of the client relationships intangible will have been amortized after 10 years. Non-compete agreements acquired in connection with the HRH acquisition were amortized over two years on a straight line basis. Intangible assets acquired in connection with other acquisitions are amortized over their estimated useful lives on a straight line basis. Goodwill is not subject to amortization.
To determine the allocation of intangible assets between goodwill and other intangible assets and the estimated useful lives in respect of the HRH



53

Willis Group Holdings plc

acquisition we considered a report produced by a qualified independent appraiser. The calculation of the allocation is subject to a number of estimates and assumptions. We base our allocation on

assumptions we believe to be reasonable. However, changes in these estimates and assumptions could affect the allocation between goodwill and other intangible assets.


Goodwill impairment review

We review goodwill for impairment annually or whenever events or circumstances indicate impairment may have occurred. Application of the impairment test requires judgment, including:
• the identification of reporting units;
• assignment of assets, liabilities and goodwill to reporting units; and
• determination of fair value of each reporting unit.
The fair value of each reporting unit is estimated using a discounted cash flow methodology and, in aggregate, validated against our market capitalization. This analysis requires significant judgments, including:
• estimation of future cash flows which is dependent on internal forecasts;

• estimation of the long-term rate of growth for our business;
• determination of our weighted average cost of capital.
We base our fair value estimates on assumptions we believe to be reasonable. However, changes in these estimates and assumptions could materially affect the determination of fair value and result in a goodwill impairment.
Our annual goodwill impairment analysis, which we performed during the fourth quarter of 2010, showed the estimated fair value of our reporting units was in excess of their carrying values, and therefore did not result in an impairment charge (2009: $nil, 2008: $nil).


Income taxes

We recognize deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating and capital loss and tax credit carry-forwards. We estimate deferred tax assets and liabilities and assess the need for any valuation allowances using tax rates in effect for the year in which the differences are expected to be recovered or settled taking into account our business plans and tax planning strategies.
At December 31, 2010, we had gross deferred tax assets of $294 million (2009: $390 million) against which a valuation allowance of $87 million (2009: $92 million) had been recognized. To the extent that:
• the actual future taxable income in the periods during which the temporary differences are expected to reverse differs from current projections;

• assumed prudent and feasible tax planning strategies fail to materialize;
• new tax planning strategies are developed; or
• material changes occur in actual tax rates or loss carry-forward time limits,
we may adjust the deferred tax asset considered realizable in future periods. Such adjustments could result in a significant increase or decrease in the effective tax rate and have a material impact on our net income.
Positions taken in our tax returns may be subject to challenge by the taxing authorities upon examination. We recognize the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on examination by the tax authorities upon lapse of the relevant statute of limitations, or when positions are effectively settled. The benefit recognized is the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized on settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Company adjusts its recognition of



54

Business discussion

these uncertain tax benefits in the period in which new information is available impacting either the recognition or measurement of its uncertain tax positions. In 2010, $7 million was released relating to uncertain tax positions due to the closure of the statute of limitations on assessments for previously unrecognized tax benefits. There was a similar

$11 million release of uncertain tax positions in 2009. The Company recognizes interest relating to unrecognized tax benefits and penalties within income taxes. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.


Commitments, contingencies and accrued liabilities


We purchase professional indemnity insurance for errors and omissions claims. The terms of this insurance vary by policy year and self-insured risks have increased significantly over recent years. We have established provisions against various actual and potential claims, lawsuits and other proceedings relating principally to alleged errors and omissions in connection with the placement of insurance and

reinsurance in the ordinary course of business. Such provisions cover claims that have been reported but not paid and also claims that have been incurred but not reported. These provisions are established based on actuarial estimates together with individual case reviews and are believed to be adequate in the light of current information and legal advice.


NEW ACCOUNTING STANDARDS

There were no new accounting standards issued during the year that would have a significant impact on the Company’s reporting.



LIQUIDITY AND CAPITAL RESOURCES

Effective December 31, 2010, we changed the presentation of certain items on our balance sheet. Uncollected premiums from insureds and uncollected claims or refunds from insurers, previously reported within accounts receivable, are now recorded as fiduciary assets on the Company’s consolidated balance sheets. Unremitted insurance premiums and

claims (‘fiduciary funds’) are also recorded within fiduciary assets. The obligations to remit these funds, previously reported within accounts payable, are now recorded as fiduciary liabilities on the Company’s consolidated balance sheets. Accordingly, prior year comparatives and commentary below have been recast to reflect this revised presentation.


We remain committed to our previously stated goals of ongoing debt repayment and returning capital to shareholders.
Consistent with this strategy, we are reviewing our current debt profile and, subject to prevailing market conditions, may seek to take advantage of attractive financing rates to reduce the cost and extend the maturity profile of our existing debt.
Such actions may include redemption of the entire $500 million in aggregate principal amount of 12.875 percent senior notes due 2016. If the 2016 senior notes are redeemed, we anticipate that we would incur a one-time pre-tax charge of approximately $180 million relating to the make-whole premium provided under the terms of the

indenture governing the notes, as calculated at December 31, 2010.
Total debt as of December 31, 2010 decreased to $2.3 billion, compared with $2.4 billion at December 31, 2009.
In 2010, we made $110 million of mandatory repayments against the5-year term loan, thereby reducing the outstanding balance as at December 31, 2010 to $411 million. We also repurchased the remaining $90 million of 5.125% senior notes due July 2010 and repaid in full a $9 million fixed rate loan due 2010.
In August 2010, we entered into a new revolving credit facility agreement under which a further $200 million is available. This facility is in addition



55

Willis Group Holdings plc

to the remaining availability under our previously existing $300 million revolving credit facility.
In addition, in June 2010, we entered into an additional facility solely for the use of our main UK regulated entity under which a further $20 million would be available in certain exceptional circumstances. This facility is secured against the freehold of the UK regulated entity’s freehold property in Ipswich.

At December 31, 2010, we have $nil outstanding under both the $200 million and the $20 million facilities and $90 million outstanding under our pre-existing $300 million facility, compared with $nil at December 31, 2009.
At December 31, 2010 the only mandatory debt repayments falling due over the next 12 months are scheduled repayments on our $700 million5-year term loan totaling $110 million.


Liquidity


Our principal sources of liquidity are cash from operations, cash and cash equivalents of $316 million at December 31, 2010 and remaining availability of $430 million under our revolving credit facilities.
As of December 31, 2010, our short-term liquidity requirements consisted of:
• payment of interest on debt and $110 million of mandatory repayments under our 5-year term loan;
• capital expenditure; and
• working capital.

Our long-term liquidity requirements consist of:
• the principal amount of outstanding notes; and
• borrowings under our 5-year term loan and revolving credit facility.
Based on current market conditions and information available to us at this time, we believe that we have sufficient liquidity to meet our cash needs for at least the next 12 months.
We continue to identify and implement further actions to control costs and enhance our operating performance, including future cash flow.


Fiduciary funds


As an intermediary, we hold funds generally in a fiduciary capacity for the account of third parties, typically as the result of premiums received from clients that are in transit to insurers and claims due to clients that are in transit from insurers. We report premiums, which are held on account of, or due from, clients as assets with a corresponding liability due to the insurers. Claims held by, or due to, us which are due to clients are also shown as both assets and liabilities.

Fiduciary funds are generally required to be kept in certain regulated bank accounts subject to guidelines which emphasize capital preservation and liquidity; such funds are not available to service the Company’s debt or for other corporate purposes. Notwithstanding the legal relationships with clients and insurers, the Company is entitled to retain investment income earned on fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds.


Own funds


As of December 31, 2010, we had cash and cash equivalents of $316 million, compared with $221 million at December 31, 2009 and $430 million

of the total $520 million under our revolving credit facilities remained available to draw.


Operating activities
2010 compared to 2009


Net cash provided by operations was $489 million in 2010 compared with $419 million in 2009.

The $70 million increase in 2010 compared with 2009 primarily reflected the benefits of:



56

Business discussion

• a $141 million increase in net income from continuing operations before the non-cash charges for: amortization of intangible assets; amortization of cash retention award payments; provision for deferred taxation; the Venezuela currency devaluation in January 2010; and share-based compensation;

partly offset by
• increased pension scheme contributions of $130 million in 2010, compared with $82 million in 2009; and
• the timing of cash collections and other working capital movements.


2009 compared to 2008


Net cash provided by operations was $419 million in 2009 compared with $253 million in 2008. The $166 million increase between 2008 and 2009 mainly reflects:
• a $161 million increase in net income before the non-cash charges for: amortization of intangible assets; amortization of cash retention award payments; provision for deferred taxation; and share-based compensation; and

• a $72 million reduction in pension scheme contributions to $82 million in 2009, compared with $154 million in 2008;
partly offset by
• the timing of cash collections and other working capital movements, including a year over year negative impact from foreign currency translation.


Pension contributions
UK Plan


We made total cash contributions to our UK defined benefit pension plan of $88 million in 2010, (including amounts in respect of the salary sacrifice contributions) compared with $49 million in 2009 and $140 million in 2008.
The additional $39 million cash contribution in 2010 reflects an additional payment required under the UK plan’s funding strategy which we are required to agree with the plan’s trustees.
The funding strategy was agreed in February 2009 and requires full year contributions to the UK plan of $39 million for 2009 through 2012, excluding

amounts in respect of the salary sacrifice scheme. In addition, if certain funding targets were not met at the beginning of any of the following years, 2010 through 2012, a further contribution of $39 million would be required for that year.
In 2010, the additional funding requirement was triggered and we expect to make a similar additional contribution in 2011. A similar, additional contribution may also be required for 2012, depending on actual performance against funding targets at the beginning of 2012.


US Plan


We made total cash contributions to our US defined benefit pension plan of $30 million in 2010, compared with $27 million in 2009 and $8 million in 2008.
For the US plan, expected contributions are the contributions we will be required to make under

US pension legislation based on our December 31, 2010 balance sheet position. We currently expect to contribute $30 million in 2011.


International Plans


We made cash contributions to our International defined benefit pension plans of $12 million in 2010, compared with $6 million in both 2009 and 2008.

In 2011, we expect to contribute approximately $6 million to our International plans.



57

Willis Group Holdings plc

Investing activities
2010 compared to 2009


Total net cash outflow from investing activities was $94 million in 2010 compared with an inflow of $102 million in 2009 mainly reflecting:
• the $155 million received in December 2009 from the reorganization of Gras Savoye, less a $42 million payment in January 2009 for an additional investment in Gras Savoye made in December 2008;
• the year over year decrease of $42 million in net proceeds from sale of operations, mainly

attributable to the second quarter 2009 disposal of Bliss & Glennon;
• the 2009 proceeds from the sale of short-term investments of $21 million; and
• a $21 million increase in cash payments in 2010 for acquisitions of subsidiaries, mainly reflecting payments in respect of prior year acquisitions.


2009 compared to 2008


Total net cash inflow from investing activities was $102 million in 2009 compared with an outflow of $1,033 million in 2008, primarily reflecting:
• the $926 million net cash outflow attributable to the HRH acquisition in 2008;
• $113 million cash received in 2009 in respect of investments in associates, compared with $31 million paid in 2008. The 2009 receipt

includes $155 million from the reorganization of Gras Savoye, less $42 million settled in January 2009 for an additional investment in Gras Savoye made in December 2008; and
• a $40 million increase in net proceeds from sale of operations, mainly attributable to the second quarter 2009 disposal of Bliss & Glennon.


Financing activities
2010 compared to 2009


Net cash used in financing activities was $293 million in 2010 compared with $516 million in 2009.
The net decrease in cash used in financing activities of $223 million was mainly attributable to:
• a $90 million increase in the drawdown against our revolving credit facilities; and
• a $880 million reduction in debt repayments, largely due to the 2009 repayment/refinancing of

$750 million of the then outstanding interim credit facility;
partly offset by
• the 2009 proceeds, net of issuance costs, from issuing senior notes of $778 million to finance debt repayments.


2009 compared to 2008


Net cash used in financing activities was $516 million in 2009 compared with an inflow of $808 million in 2008.
In March 2009, we issued $500 million of senior unsecured notes due 2016 at 12.875%.
We used the $482 million net proceeds of the notes, together with $208 million cash generated from operating activities and $60 million cash in hand, to

pay down the $750 million outstanding on our interim credit facility as of December 31, 2008.
In September 2009, we issued $300 million of 7.0% senior notes due 2019. We then launched a tender offer on September 22, 2009 to repurchase any and all of our $250 million 5.125% senior notes due July 2010 at a premium of $27.50 per $1,000 face value. Notes totaling approximately $160 million were tendered and repurchased on September 29, 2009.



58

Business discussion

In December 2009, we applied the net cash proceeds of $155 million from the Gras Savoye transaction, together with other cash in hand, to reduce the balance outstanding on the 5-year term loan by approximately $180 million to

$521 million, of which $27 million related to our first mandatory debt repayment.
As of December 31, 2009, there were no amounts outstanding under our $300 million revolving credit facility (2008: $nil).


Share buybacks


We did not buyback any shares in 2010 or 2009. There remains $925 million under the current buyback authorization.
In 2008, we repurchased 2.3 million shares at a cost of $75 million.

In 2009, the Company filed a Tender Offer Statement with the SEC to repurchase for cash options to purchase Company shares. The tender offer expired on August 6, 2009. Approximately 1.6 million options to purchase Company shares were repurchased at an average per share price of $2.04.


Dividends


Cash dividends paid in 2010 were $176 million compared with $174 million in 2009 and $146 million in 2008.
The $2 million increase in 2010, compared with 2009 is driven by the small increase in share count during the year.

The $28 million increase in 2009, compared with 2008, primarily reflects dividend payments on the 24 million additional shares issued in connection with the fourth quarter 2008 acquisition of HRH.
In February 2011, we declared a quarterly cash dividend of $0.26 per share, an annual rate of $1.04 per share.


CONTRACTUAL OBLIGATIONS


The Company’s contractual obligations as at December 31, 2010 are presented below:
                     
        Payments due
       
Obligations Total  2011  by 2012- 2013  2014- 2015  After 2015 
  (millions) 
 
5-year term loan facility expires 2013
 $411  $110  $301  $—  $— 
Interest on term loan  19   9   10   —   — 
Revolving $300 million credit facility  90   —   90   —   — 
6.000% loan notes due 2012  4   —   4   —   — 
5.625% senior notes due 2015  350   —   —   350   — 
Fair value adjustments on 5.625% senior notes due 2015  12   —   —   12   — 
12.875% senior notes due 2016  500   —   —   —   500 
6.200% senior notes due 2017  600   —   —   —   600 
7.000% senior notes due 2019  300   —   —   —   300 
Interest on senior notes  867   142   285   285   155 
                     
Total debt and related interest  3,153   261   690   647   1,555 
Operating leases(i)
  1,295   157   202   143   793 
Pensions  417   119   238   60   — 
Other contractual obligations(ii)
  127   32   7   12   76 
                     
Total contractual obligations $4,992  $569  $1,137  $862  $2,424 
                     
(i)Presented gross of sublease income.
(ii)Other contractual obligations include capital lease commitments, put option obligations and investment fund capital call obligations, the timing of which are included at the earliest point they may fall due.


59

Willis Group Holdings plc

Debt obligations and facilities


The Company’s debt and related interest obligations at December 31, 2010 are shown in the above table.
During 2010, the Company entered into a new revolving credit facility agreement under which a further $200 million is available and a new UK facility under which a further $20 million is available. As at December 31, 2010 no drawings had been made on either facility.
These facilities are in addition to the remaining availability of $210 million (2009: $300 million)

under the Company’s previously existing $300 million revolving credit facility.
The only mandatory repayment of debt over the next 12 months is the scheduled repayment of $110 million current portion of the Company’s5-year term loan. We also have the right, at our option, to prepay indebtedness under the credit facility without further penalty and to redeem the senior notes at our option by paying a ‘make whole’ premium as provided under the applicable debt instrument.


Operating leases


The Company leases certain land, buildings and equipment under various operating lease arrangements. Original non-cancellable lease terms typically are between 10 and 20 years and may contain escalation clauses, along with options that permit early withdrawal. The total amount of the minimum rent is expensed on a straight-line basis over the term of the lease.
As of December 31, 2010, the aggregate future minimum rental commitments under all non-cancellable operating lease agreements are as follows:
             
  Gross rental
  Rentals from
  Net rental
 
  commitments  subleases  commitments 
  (millions) 
 
2011 $157  $(16) $141 
2012  115   (13)  102 
2013  87   (11)  76 
2014  73   (11)  62 
2015  70   (10)  60 
Thereafter  793   (42)  751 
             
Total $1,295  $(103) $1,192 
             

The Company leases its London headquarters building under a25-year operating lease, which expires in 2032. The Company’s contractual obligations in relation to this commitment included in the table above total $744 million (2009: $785 million). Annual rentals are $31 million per year and the Company has subleased approximately 25 percent of the premises under leases up to 15 years. The amounts receivable from subleases, included in the table above, total $87 million (2009: $100 million; 2008: $106 million).
Rent expense amounted to $131 million for the year ended December 31, 2010 (2009: $154 million; 2008: $151 million). The Company’s rental income from subleases was $22 million for the year ended December 31, 2010 (2009: $21 million; 2008: $22 million).


Pensions


Contractual obligations for our pension plans reflect the contributions we expect to make over the next five years into our US and UK plans. These contributions are based on current funding positions and may increase or decrease dependent on the future performance of the two plans.
In the UK, we are required to agree a funding strategy for our UK defined benefit plan with the

plan’s trustees. In February 2009, we agreed to make full year contributions to the UK plan of $39 million for 2009 through 2012, excluding amounts in respect of the salary sacrifice scheme. In addition, if certain funding targets were not met at the beginning of any of the following years, 2010 through 2012, a further contribution of $39 million would be required for that year. In 2010, the


60

Business discussion

additional funding requirement was triggered and we expect to make a similar additional contribution in 2011. A similar, additional contribution may also be required for 2012, depending on actual performance against funding targets at the beginning of 2012.

The total contributions for all plans are currently estimated to be approximately $125 million in 2011, including amounts in respect of the salary sacrifice scheme.


Guarantees


Guarantees issued by certain of Willis Group Holdings’ subsidiaries with respect to the senior notes and revolving credit facilities are discussed in Note 18 — Debt in these consolidated financial statements.
Certain of Willis Group Holdings’ subsidiaries have given the landlords of some leasehold properties occupied by the Company in the United Kingdom and the United States guarantees in respect of the performance of the lease obligations of the subsidiary holding the lease. The operating lease

obligations subject to such guarantees amounted to $855 million and $903 million at December 31, 2010 and 2009, respectively.
In addition, the Company has given guarantees to bankers and other third parties relating principally to letters of credit amounting to $11 million and $5 million at December 31, 2010 and 2009, respectively. Willis Group Holdings also guarantees certain of its UK and Irish subsidiaries’ obligations to fund the UK and Irish defined benefit pension plans.


Other contractual obligations


For certain subsidiaries and associates, the Company has the right to purchase shares (a call option) from co-shareholders at various dates in the future. In addition, the co-shareholders of certain subsidiaries and associates have the right to sell (a put option) their shares to the Company at various dates in the future. Generally, the exercise price of such put options and call options is formula-based (using revenues and earnings) and is designed to reflect fair value. Based on current projections of profitability and exchange rates, the potential amount payable from these options is not expected to exceed $40 million (2009: $49 million).

In December 2009, the Company made a capital commitment of $25 million to Trident V, LP, an investment fund managed by Stone Point Capital. In July 2010, we withdrew from Trident V, LP and subscribed to Trident V Parallel Fund, LP (with the total capital commitment remaining the same). As at December 31, 2010 there had been approximately $1 million of capital contributions.
Other contractual obligations at December 31, 2010 also include the capital lease on the Company’s Nashville property of $63 million, payable from 2012 onwards.


OFF BALANCE SHEET TRANSACTIONS


Apart from commitments, guarantees and contingencies, as disclosed in Note 20 to the Consolidated Financial Statements, the Company has no off-balance sheet arrangements that have, or

are reasonably likely to have, a material effect on the Company’s financial condition, results of operations or liquidity.



61

Willis Group Holdings plc
Item 7A — Quantitative and Qualitative Disclosures about Market Risk
Financial Risk Management

We are exposed to market risk from changes in foreign currency exchange rates and interest rates. In order to manage the risk arising from these exposures, we enter into a variety of interest rate and foreign currency derivatives. We do not hold financial or derivative instruments for trading purposes.

A discussion of our accounting policies for financial and derivative instruments is included in Note 2 — Basis of Presentation and Significant Accounting Policies of Notes to the Consolidated Financial Statements, and further disclosure is provided in Note 24 — Derivative Financial Instruments and Hedging Activities.


Foreign exchange risk management

Because of the large number of countries and currencies we operate in, movements in currency exchange rates may affect our results.
We report our operating results and financial condition in US dollars. Our US operations earn revenue and incur expenses primarily in US dollars. Outside the United States, we predominantly generate revenues and expenses in the local currency with the exception of our London market operations which earns revenues in several currencies but incurs expenses predominantly in pounds sterling.

The table below gives an approximate analysis of revenues and expenses by currency in 2010.
                 
  US
  Pounds
     Other
 
  Dollars  Sterling  Euros  currencies 
 
Revenues  60%  8%  13%  19%
Expenses  53%  23%  9%  15%
Our principal exposures to foreign exchange risk arise from:
• our London market operations; and
• translation.


London market operations

In our London market operations, we earn revenue in a number of different currencies, principally US dollars, pounds sterling, euros and Japanese yen, but incur expenses almost entirely in pounds sterling.
We hedge this risk as follows:
• to the extent that forecast pound sterling expenses exceed pound sterling revenues, we limit our exposure to this exchange rate risk by the use of forward contracts matched to specific, clearly identified cash outflows arising in the ordinary course of business; and
• to the extent our London market operations earn significant revenues in euros and Japanese yen, we limit our exposure to changes in the exchange rate between the US dollar and these currencies by the use of forward contracts matched to a percentage of forecast cash inflows in specific currencies and periods.

Generally, it is our policy to hedge at least 25 percent of the next 12 months’ exposure in significant currencies. We do not hedge exposures beyond three years.
In addition, we are also exposed to foreign exchange risk on any net sterling asset or liability position in our London market operations. Where this risk relates to short-term cash flows, we hedge all or part of the risk by forward purchases or sales.
However, where the foreign exchange risk relates to any sterling pension assets benefit or liability for pensions benefit, we do not hedge the risk. Consequently, if our London market operations have a significant pension asset or liability, we may be exposed to accounting gains and losses if the US dollar and pounds sterling exchange rate changes. We do, however, hedge the pounds sterling contributions into the pension plan.



62

Market risk
Translation risk

Outside our US and London market operations, we predominantly earn revenues and incur expenses in the local currency. When we translate the results and net assets of these operations into US dollars for reporting purposes, movements in exchange rates will affect reported results and net assets. For example, if the US dollar strengthens against the euro, the reported results of our Eurozone operations in US dollar terms will be lower.
We do not hedge translation risk.

The table below provides information about our foreign currency forward exchange contracts, which are sensitive to exchange rate risk. The table summarizes the US dollar equivalent amounts of each currency bought and sold forward and the weighted average contractual exchange rates. All forward exchange contracts mature within three years.


                         
  Settlement date before December 31, 
  2011  2012  2013 
     Average
     Average
     Average
 
  Contract
  contractual
  Contract
  contractual
  Contract
  contractual
 
December 31, 2010 amount  exchange rate  amount  exchange rate  amount  exchange rate 
  (millions)     (millions)     (millions)    
 
Foreign currency sold
                        
US dollars sold for sterling $209  $1.53 = £1  $91  $1.51 = £1  $15  $1.49 = £1 
Euro sold for US dollars  86  €1 = $1.40   61  €1 = $1.39   10  €1 = $1.38 
Japanese yen sold for US dollars  26  ¥91.69 = $1   23  ¥86.38 = $1   15  ¥82.38 = $1 
                         
Total $321      $175      $40     
                         
Fair Value(1)
 $3      $3      $—     
                                 
  Settlement date before December 31, 
  2010  2011  2012  2013 
     Average
     Average
     Average
     Average
 
  Contract
  contractual
  Contract
  contractual
  Contract
  contractual
  Contract
  contractual
 
December 31, 2009 amount  exchange rate  amount  exchange rate  amount  exchange rate  amount  exchange rate 
  (millions)     (millions)     (millions)     (millions)    
 
Foreign currency sold
                                
US dollars sold for sterling $168  $1.77 = £1  $63  $1.57 = £1  $30  $1.52 = £1   —   n/a 
Euro sold for US dollars  84  €1 = $1.42   63  €1 = $1.41   38  €1 = $1.42   —   n/a 
Japanese yen sold for US dollars  24  ¥97.03 = $1   21  ¥92.89 = $1   11  ¥88.73 = $1   2   ¥83.95 = $1 
                                 
Total $276      $147      $79      $2     
                                 
Fair Value(1)
 $(15)     $—      $1      $—     
(1)Represents the difference between the contract amount and the cash flow in US dollars which would have been receivable had the foreign currency forward exchange contracts been entered into on December 31, 2010 or 2009 at the forward exchange rates prevailing at that date.

Income earned within foreign subsidiaries outside of the UK is generally offset by expenses in the same local currency but the Company does have exposure to foreign exchange movements on the net income

of these entities. The Company does not hedge net income earned within foreign subsidiaries outside of the UK.


Interest rate risk management

Our operations are financed principally by $1,750 million fixed rate senior notes issued by subsidiaries and $411 million under a5-year term loan facility. Of the fixed rate senior notes,

$350 million are due 2015, $500 million are due 2016, $600 million are due 2017 and $300 million are due 2019. The5-year term loan facility amortizes at the rate of $27 million per quarter. As of



63

Willis Group Holdings plc

December 31, 2010 we had access to, $520 million under revolving credit facilities of which $90 million has been drawn. The interest rate applicable to the bank borrowing is variable according to the period of each individual drawdown.
We are also subject to market risk from exposure to changes in interest rates based on our investing activities where our primary interest rate risk arises from changes in short-term interest rates in both US dollars and pounds sterling.
As a consequence of our insurance and reinsurance broking activities, there is a delay between the time we receive cash for premiums and claims and the time the cash needs to be paid. We earn interest on this float, which is included in our consolidated financial statements as investment income.
This float is regulated in terms of access and the instruments in which it may be invested, most of which are short-term in maturity. We manage the interest rate risk arising from this exposure primarily through the use of interest rate swaps. It is our policy that, for currencies with significant balances, a minimum of 25 percent of forecast income arising is hedged for each of the next three years.
During the year ended December 31, 2010, the Company entered into a series of interest rate swaps

for a total notional amount of $350 million to receive a fixed rate and pay a variable rate on a semi-annual basis, with a maturity date of July 15, 2015. The Company has designated and accounts for these instruments as fair value hedges against its $350 million 5.625% senior notes due 2015. The fair values of the interest rate swaps are included within other assets or other liabilities and the fair value of the hedged element of the senior notes is included within the principal amount of the debt.
The table below provides information about our derivative instruments and other financial instruments that are sensitive to changes in interest rates. For interest rate swaps, the table presents notional principal amounts and average interest rates analyzed by expected maturity dates. Notional principal amounts are used to calculate the contractual payments to be exchanged under the contracts. The duration of interest rate swaps varies between one and five years, with re-fixing periods of three to six months. Average fixed and variable rates are, respectively, the weighted-average actual and market rates for the interest hedges in place. Market rates are the rates prevailing at December 31, 2010 or 2009, as appropriate.



64

Market risk
                                 
  Expected to mature before December 31,          
                       Fair
 
December 31, 2010 2011  2012  2013  2014  2015  Thereafter  Total  Value(i) 
  ($ millions, except percentages) 
 
Fixed rate debt
                                
Principal ($)      4           350   1,400   1,754   2,059 
Fixed rate payable      6.00%          5.63%  8.56%  8.14%    
Floating rate debt
                                
Principal ($)  110   109   282               501   501 
Variable rate payable  2.70%  3.05%  3.53%              3.36%    
Interest rate swaps
                                
Variable to Fixed(ii)
                                
Principal ($)  240   40   225   220           725   11 
Fixed rate receivable  4.14%  1.84%  2.31%  1.81%          2.44%    
Variable rate payable  0.65%  0.78%  1.07%  2.51%          1.33%    
Principal (£)  56   74   50   49           229   3 
Fixed rate receivable  5.77%  4.18%  2.28%  2.44%          3.16%    
Variable rate payable  0.93%  1.52%  1.81%  2.86%          1.88%    
Principal (€)  53   31   46   25           155   1 
Fixed rate receivable  4.19%  1.99%  1.86%  2.12%          2.18%    
Variable rate payable  1.30%  1.60%  1.74%  2.39%          1.81%    
Fixed to Variable(iii)
                                
Principal (€)                  350       350   14 
Fixed rate payable                  2.71%      2.71%    
Variable rate receivable                  2.04%      2.04%    
(i)Represents the net present value of the expected cash flows discounted at current market rates of interest or quoted market rates as appropriate.
(ii)Excludes accrued interest of $3 million, which is recorded in prepayments and accrued income in other assets.
(iii)Excludes accrued interest of $3 million, which is recorded in accrued interest payable in other liabilities.
                             
  Expected to mature before December 31,        Fair
 
December 31, 2009 2010  2011  2012  2013  Thereafter  Total  Value(i) 
  ($ millions, except percentages) 
 
Fixed rate debt
                            
Principal ($)  99       4       1,750   1,853   2,088 
Fixed rate payable  5.13%      6.00%      8.14%  8.12%    
Floating rate debt
                            
Principal ($)  110   109   110   192       521   521 
Variable rate payable  2.85%  3.54%  4.17%  4.54%      4.16%    
Interest rate swaps(ii)
                            
Principal ($)  235   240   40   90       605   17 
Fixed rate receivable  5.20%  4.37%  1.84%  2.80%      4.72%    
Variable rate payable  0.54%  1.10%  2.34%  2.77%      1.85%    
Principal (£)  77   58   61           196   7 
Fixed rate receivable  5.21%  5.71%  4.90%          5.23%    
Variable rate payable  0.86%  1.25%  2.44%          1.78%    
Principal (€)  16   57   18           91   2 
Fixed rate receivable  4.30%  4.08%  2.30%          3.55%    
Variable rate payable  1.19%  1.48%  2.22%          1.69%    
(i)Represents the net present value of the expected cash flows discounted at current market rates of interest or quoted market rates as appropriate.
(ii)Excludes accrued interest of $4 million, which is recorded in prepayments and accrued income in other assets.


65

Willis Group Holdings plc
Item 8 — Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary Data
Page
Report of Independent Registered Public Accounting Firm
   67  

Consolidated Statements of Operations for each of the three years in the period ended December 31, 2010PART IV

68
Consolidated Balance Sheets as of December 31, 2010 and 2009
69
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2010

   71  

Item 15

Consolidated Statements of Changes in Equity and Comprehensive Income for each of the three years in the period ended December 31, 2010—Exhibits, Financial Statement Schedules

   7371  

Notes to the Consolidated Financial StatementsSignatures

   7477  


66

Explanatory Note

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Willis Group Holdings Public Limited Company
Dublin, Ireland
We have audited the accompanying consolidated balance sheets of Willis Group Holdings Public Limited Company and subsidiaries (the ‘Company’) as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Willis Group Holdings Public Limited Company and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
Deloitte LLP
London, United Kingdom
February 25, 2011


67

Willis Group Holdings plc
CONSOLIDATED STATEMENTS OF OPERATIONS
                 
     Years ended December 31, 
  Note  2010  2009  2008 
     (millions, except per share data) 
 
REVENUES                
Commissions and fees     $3,300  $3,210  $2,744 
Investment income      38   50   81 
Other income      1   3   2 
                 
Total revenues      3,339   3,263   2,827 
                 
EXPENSES                
Salaries and benefits  3   (1,873)  (1,827)  (1,638)
Other operating expenses      (566)  (591)  (603)
Gain on disposal of London headquarters      —   —   7 
Depreciation expense  10   (63)  (64)  (54)
Amortization of intangible assets  12   (82)  (100)  (36)
Net (loss) gain on disposal of operations  6   (2)  13   — 
                 
Total expenses      (2,586)  (2,569)  (2,324)
                 
OPERATING INCOME      753   694   503 
Interest expense  18   (166)  (174)  (105)
                 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES      587   520   398 
Income taxes  7   (140)  (96)  (97)
                 
INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES      447   424   301 
Interest in earnings of associates, net of tax  13   23   33   22 
                 
INCOME FROM CONTINUING OPERATIONS      470   457   323 
Discontinued operations, net of tax      —   2   1 
                 
NET INCOME      470   459   324 
Less: net income attributable to noncontrolling interests      (15)  (21)  (21)
                 
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS     $455  $438  $303 
                 
AMOUNTS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS SHAREHOLDERS                
Income from continuing operations, net of tax     $455  $436  $302 
Income from discontinued operations, net of tax      —   2   1 
                 
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS     $455  $438  $303 
                 
EARNINGS PER SHARE — BASIC AND DILUTED  8             
BASIC EARNINGS PER SHARE                
 — Continuing operations     $2.68  $2.60  $2.04 
                 
DILUTED EARNINGS PER SHARE                
 — Continuing operations     $2.66  $2.58  $2.04 
                 
CASH DIVIDENDS DECLARED PER SHARE     $1.04  $1.04  $1.04 
                 
The accompanying notes are an integral part of these consolidated financial statements.


68

Financial statements
CONSOLIDATED BALANCE SHEETS
             
     December 31, 
  Note  2010  2009(i) 
     (millions, except share data) 
 
ASSETS
CURRENT ASSETS            
Cash and cash equivalents     $316  $221 
Accounts receivable, net  16   839   816 
Fiduciary assets  9   9,569   9,659 
Deferred tax assets  7   36   81 
Other current assets  14   340   198 
             
Total current assets      11,100   10,975 
             
NON-CURRENT ASSETS            
Fixed assets, net  10   381   352 
Goodwill  11   3,294   3,277 
Other intangible assets, net  12   492   572 
Investments in associates  13   161   156 
Deferred tax assets  7   7   3 
Pension benefits asset  17   179   69 
Other non-current assets  14   233   221 
             
Total non-current assets      4,747   4,650 
             
TOTAL ASSETS     $15,847  $15,625 
             
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
CURRENT LIABILITIES            
Fiduciary liabilities     $9,569  $9,659 
Deferred revenue and accrued expenses      298   301 
Income taxes payable      57   46 
Short-term debt and current portion of long-term debt  18   110   209 
Deferred tax liabilities  7   9   5 
Other current liabilities  15   266   278 
             
Total current liabilities      10,309   10,498 
             
NON-CURRENT LIABILITIES            
Long-term debt  18   2,157   2,165 
Liability for pension benefits  17   164   187 
Deferred tax liabilities  7   83   26 
Provisions for liabilities  19   179   226 
Other non-current liabilities  15   347   294 
             
Total non-current liabilities      2,930   2,898 
             
Total Liabilities      13,239   13,396 
             
(i)The 2009 balance sheet has been recast to conform to the current year presentation. See Note 2 — Basis of Presentation and Significant Accounting Policies for details
(Continued on next page)


69

Willis Group Holdings plc
CONSOLIDATED BALANCE SHEETS (Continued)
             
     December 31, 
  Note  2010  2009(i) 
     (millions, except share data) 
 
             
COMMITMENTS AND CONTINGENCIES  20         
EQUITY            
Shares, $0.000115 nominal value; Authorized: 4,000,000,000; Issued and outstanding, 170,883,865 Shares in 2010 and 168,661,172 Shares in 2009. Shares, €1 nominal value; Authorized: 40,000; Issued and outstanding, 40,000 shares in 2010 and 2009     $—  $— 
Additional paid-in capital      985   918 
Retained earnings      2,136   1,859 
Accumulated other comprehensive loss, net of tax  21   (541)  (594)
Treasury shares, at cost, 46,408 Shares in 2010 and 54,310 Shares in 2009 and 40,000 shares, €1 nominal value, in 2010 and 2009      (3)  (3)
             
Total Willis Group Holdings stockholders’ equity      2,577   2,180 
Noncontrolling interests  22   31   49 
             
Total Equity      2,608   2,229 
             
TOTAL LIABILITIES AND EQUITY     $15,847  $15,625 
             
(i)The 2009 balance sheet has been recast to conform to the current year presentation. See Note 2 — Basis of Presentation and Significant Accounting Policies for details
The accompanying notes are an integral part of these consolidated financial statements.


70

Financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
     Years ended December 31, 
  Note  2010  2009(i)  2008(i) 
     (millions) 
 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income     $470  $459  $324 
Adjustments to reconcile net income to total net cash provided by operating activities:                
Income from discontinued operations      —   (2)  (1)
Net loss (gain) on disposal of operations, fixed and intangible assets and short-term investments      3   (14)  (2)
Gain on disposal of London headquarters      —   —   (7)
Depreciation expense      63   64   54 
Amortization of intangible assets      82   100   36 
Release of provision for doubtful accounts      —   (1)  (8)
Provision for deferred income taxes      77   (21)  46 
Excess tax benefits from share-based payment arrangements      (2)  (1)  (6)
Share-based compensation  4   47   39   40 
Undistributed earnings of associates      (18)  (21)  (13)
Non-cash Venezuela currency devaluation      12   —   — 
Effect of exchange rate changes on net income      6   (4)  56 
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries:                
Fiduciary assets      70   773   (745)
Fiduciary liabilities      (70)  (773)  745 
Other assets      (266)  (28)  (352)
Other liabilities      60   (192)  58 
Movement on provisions      (45)  44   28 
                 
Net cash provided by continuing operating activities      489   422   253 
Net cash used in discontinued operating activities      —   (3)  — 
                 
Total net cash provided by operating activities      489   419   253 
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Proceeds on disposal of fixed and intangible assets      10   20   6 
Additions to fixed assets      (83)  (96)  (94)
Acquisitions of subsidiaries, net of cash acquired      (21)  —   (940)
Acquisition of investments in associates      (1)  (42)  (31)
Investment in Trident V Parallel Fund, LP      (1)  —   — 
Proceeds from reorganization of investments in associates  6   —   155   — 
Proceeds from sale of continuing operations, net of cash disposed      2   4   11 
Proceeds from sale of discontinued operations, net of cash disposed      —   40   — 
Proceeds on sale of short-term investments      —   21   15 
                 
Total net cash (used in) provided by investing activities      (94)  102   (1,033)
                 
(i)The 2009 and 2008 Consolidated Statements of Cash Flows have been recast to conform to the new balance sheet presentation. See Note 2 — Basis of Presentation and Significant Accounting Policies for details
(continued on next page)


71

Willis Group Holdings plc
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                 
     Years ended December 31, 
  Note  2010  2009(i)  2008(i) 
     (millions) 
 
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM OPERATING AND INVESTING ACTIVITIES     $395  $521  $(780)
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from draw down of revolving credit facility  18   90   —   — 
Proceeds from issue of short-term debt, net of debt issuance costs      —   —   1,026 
Proceeds from issue of long-term debt, net of debt issuance costs      —   —   643 
Repayments of debt  18   (209)  (1,089)  (641)
Senior notes issued, net of debt issuance costs      —   778   — 
Repurchase of shares      —   —   (75)
Proceeds from issue of shares      36   18   15 
Excess tax benefits from share-based payment arrangements      2   1   6 
Dividends paid      (176)  (174)  (146)
Acquisition of noncontrolling interests      (10)  (33)  (7)
Dividends paid to noncontrolling interests      (26)  (17)  (13)
                 
Total net cash (used in) provided by financing activities      (293)  (516)  808 
                 
INCREASE IN CASH AND CASH EQUIVALENTS      102   5   28 
Effect of exchange rate changes on cash and cash equivalents      (7)  11   (23)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR      221   205   200 
                 
CASH AND CASH EQUIVALENTS, END OF YEAR     $316  $221  $205 
                 
(i)The 2009 and 2008 Consolidated Statements of Cash Flows have been recast to conform to the new balance sheet presentation. See Note 2 — Basis of Presentation and Significant Accounting Policies for details
The accompanying notes are an integral part of these consolidated financial statements.


72

Financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
AND COMPREHENSIVE INCOME
                 
     December 31, 
  Note  2010  2009  2008 
     (millions, except share data) 
 
SHARES OUTSTANDING (thousands)                
Balance, beginning of year      168,661   166,758   143,094 
Shares issued      14   486   24,720 
Repurchase of shares      —   —   (2,270)
Exercise of stock options and release of non-vested shares      2,209   1,417   1,214 
                 
Balance, end of year      170,884   168,661   166,758 
                 
ADDITIONAL PAID-IN CAPITAL                
Balance, beginning of year     $918  $886  $41 
Issue of shares under employee stock compensation plans and related tax benefits      37   18   20 
Repurchase of shares      —   —   (55)
Issue of shares for acquisitions      1   12   840 
Share-based compensation      47   39   40 
Acquisition of noncontrolling interests      (18)  (33)  — 
Repurchase of out of the money options      —   (4)  — 
                 
Balance, end of year      985   918   886 
                 
RETAINED EARNINGS                
Balance, beginning of year      1,859   1,593   1,463 
Net income attributable to Willis Group Holdings(a)
      455   438   303 
Dividends      (178)  (172)  (154)
Repurchase of shares      —   —   (19)
                 
Balance, end of year      2,136   1,859   1,593 
                 
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX                
Balance, beginning of year      (594)  (630)  (153)
Foreign currency translation adjustment(b)
      (6)  27   (89)
Unrealized holding gain (loss)(c)
      2   (1)  — 
Pension funding adjustment(d)
      51   (33)  (355)
Net gain (loss) on derivative instruments(e)
      6   43   (33)
                 
Balance, end of year  21   (541)  (594)  (630)
                 
TREASURY SHARES                
Balance, beginning of year      (3)  (4)  (4)
Shares reissued under stock compensation plans      —   1   — 
                 
Balance, end of year      (3)  (3)  (4)
                 
TOTAL WILLIS GROUP HOLDINGS SHAREHOLDERS’ EQUITY     $2,577  $2,180  $1,845 
                 
NONCONTROLLING INTERESTS                
Balance, beginning of year     $49  $50  $48 
Net income      15   21   21 
Dividends      (26)  (17)  (13)
Purchase of subsidiary shares from noncontrolling interests, net      (5)  (10)  (4)
Additional noncontrolling interests      —   5   — 
Foreign currency translation      (2)  —   (2)
                 
Balance, end of year      31   49   50 
                 
TOTAL EQUITY     $2,608  $2,229  $1,895 
                 
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS(a+b+c+d+e)
     $508  $474  $(174)
                 
The accompanying notes are an integral part of these consolidated financial statements.


73

Willis Group Holdings plc
1.  NATURE OF OPERATIONS
Willis Group Holdings plc (‘Willis Group Holdings’) and subsidiaries (collectively, the ‘Company’ or the ‘Group’) provide a broad range of insurance and reinsurance broking and risk management consulting services to its clients worldwide, both directly and indirectly through its associates. The Company provides both specialized risk management advisory and consulting services on a global basis to clients engaged in specific industrial and commercial activities, and services to small, medium and major corporates through its retail operations.
In its capacity as an advisor and insurance broker, the Company acts as an intermediary between clients and insurance carriers by advising clients on risk management requirements, helping clients determine the best means of managing risk, and negotiating and placing insurance risk with insurance carriers through the Company’s global distribution network.
2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Redomicile to Ireland
On September 24, 2009, (“Willis Group Holdings, was incorporated in Ireland, in order to effectuate” the change of“Registrant” or the place of incorporation of the parent company of the Group. Willis Group Holdings operated as a wholly-owned subsidiary of Willis-Bermuda until December 31, 2009, when the outstanding common shares of Willis-Bermuda were canceled“Company” and, Willis Group Holdings issued ordinary sharestogether with substantially the same rights and preferences on aone-for-one basisour subsidiaries, “we,” “us” or “our”) is filing this Amendment No. 1 to the holders of the Willis-Bermuda common shares that were canceled. Upon completion of this transaction, Willis Group Holdings replaced Willis-Bermuda as the ultimate parent company and Willis-Bermuda became a wholly-owned subsidiary of Willis Group Holdings. On July 29, 2010 Willis-Bermuda was liquidated.
This transaction was accounted for as a merger between entities under common control; accordingly, the historical financial statements of Willis-Bermuda for periods prior to this transaction are considered to be the historical financial statements of Willis Group Holdings. No changes in capital structure, assets or liabilities resulted from this transaction, other than Willis Group Holdings has provided a guarantee of amounts due under certain borrowing arrangements of one of its subsidiaries as described in Note 28.
Balance sheet presentation
Further to the Company’s redomiciliation to Ireland at the end of 2009, the Group is required to file consolidated financial statements for fiscal year 2010 with the Irish regulator. These consolidated financial statements are prepared under US GAAP and also incorporate additional Irish Companies Act disclosures. To facilitate this process, the Group has decided to incorporate these requirements within its US filings and consequently has recast the presentation of its 2010 and 2009 consolidated balance sheets. In addition, the company has taken the opportunity to provide additional disclosure within the consolidated balance sheet of the Group’s non-fiduciary balances and the further distinction between those assets and liabilities that are expected to be realized within or later than twelve months of the balance sheet date. The Company believes this amended presentation better reflects the Company’s liquidity position and exposures to credit risk.
The 2009 and 2008 consolidated statements of cash flows have been recast to conform with the new balance sheet presentation.
Significant Accounting Policies
These consolidated financial statements conform to accounting principles generally accepted in the United States of America (‘US GAAP’). Presented below are summaries of significant accounting policies followed in the preparation of the consolidated financial statements.


74

Notes to the financial statements
2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Willis Group Holdings and its subsidiaries, which are controlled through the ownership of a majority voting interest. Intercompany balances and transactions have been eliminated on consolidation.
Foreign Currency Translation
Transactions in currencies other than the functional currency of the entity are recorded at the rates of exchange prevailing at the date of the transaction. Monetary assets and liabilities in currencies other than the functional currency are translated at the rates of exchange prevailing at the balance sheet date and the related transaction gains and losses are reported in the statements of operations. Certain intercompany loans are determined to be of a long-term investment nature. The Company records transaction gains and losses from remeasuring such loans as a component of other comprehensive income.
Upon consolidation, the results of operations of subsidiaries and associates whose functional currency is other than the US dollar are translated into US dollars at the average exchange rate and assets and liabilities are translated at year-end exchange rates. Translation adjustments are presented as a separate component of other comprehensive income in the financial statements and are included in net income only upon sale or liquidation of the underlying foreign subsidiary or associated company.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the year. In the preparation of these consolidated financial statements, estimates and assumptions have been made by management concerning: the valuation of intangible assets and goodwill (including those acquired through business combinations); the selection of useful lives of fixed and intangible assets; impairment testing; provisions necessary for accounts receivable, commitments and contingencies and accrued liabilities; long-term asset returns, discount rates and mortality rates in order to estimate pension liabilities and pension expense; income tax valuation allowances; and other similar evaluations. Actual results could differ from the estimates underlying these consolidated financial statements.
Cash and Cash Equivalents
Cash and cash equivalents primarily consist of time deposits with original maturities of three months or less.
Fiduciary Assets and Fiduciary Liabilities
In its capacity as an insurance agent or broker, the Company collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurers; the Company also collects claims or refunds from insurers on behalf of insureds.
Fiduciary Assets
Effective December 31, 2010, the Company changed the presentation of its fiduciary balances. Uncollected premiums from insureds and uncollected claims or refunds from insurers, previously held within accounts receivable, are now recorded as fiduciary assets on the Company’s consolidated balance sheets. Unremitted insurance premiums and claims (‘fiduciary funds’) are also recorded within fiduciary assets.


75

Willis Group Holdings plc
2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fiduciary Liabilities
The obligations to remit these funds to insurers or insureds are recorded as fiduciary liabilities on the Company’s consolidated balance sheets. The period for which the Company holds such funds is dependent upon the date the insured remits the payment of the premium to the Company and the date the Company is required to forward such payment to the insurer. Balances arising from insurance brokerage transactions are reported as separate assets or liabilities unless such balances are due to or from the same party and a right of offset exists, in which case the balances are recorded net.
Fiduciary Funds
Fiduciary funds represent unremitted premiums received from insureds and unremitted claims received from insurers. Fiduciary funds are generally required to be kept in certain regulated bank accounts subject to guidelines which emphasize capital preservation and liquidity; such funds are not available to service the Company’s debt or for other corporate purposes. Notwithstanding the legal relationships with clients and insurers, the Company is entitled to retain investment income earned on fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds.
Included in fiduciary funds are cash and cash equivalents consisting primarily of time deposits. The debt securities are classified asavailable-for-sale. Accordingly, they are recorded at fair market value with unrealized holding gains and losses reported, net of tax, as a component of other comprehensive income.
In certain instances, the Company advances premiums, refunds or claims to insurance underwriters or insureds prior to collection. Such advances are made from fiduciary funds and are reflected in the accompanying consolidated balance sheets as fiduciary assets.
Accounts Receivable
Accounts receivable are stated at estimated net realizable values. Allowances are recorded, when necessary, in an amount considered by management to be sufficient to meet probable future losses related to uncollectible accounts.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Expenditures for improvements are capitalized; repairs and maintenance are charged to expenses as incurred. Depreciation is computed using the straight-line method based on the estimated useful lives of assets.
Depreciation on buildings and long leaseholds is calculated over the lesser of 50 years or the lease term. Depreciation on leasehold improvements is calculated over the lesser of the useful life of the assets or the remaining lease term. Depreciation on furniture and equipment is calculated based on a range of 3 to 10 years.
Recoverability of Fixed Assets
Long-lived assets are tested for recoverability whenever events or changes in circumstance indicate that their carrying amounts may not be recoverable. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. Recoverability is determined based on the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.


76

Notes to the financial statements
2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Operating Leases
Rentals payable on operating leases are charged straight line to expenses over the lease term as the rentals become payable.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of businesses acquired over the fair market value of identifiable net assets at the dates of acquisition. The Company reviews goodwill for impairment annually and whenever facts or circumstances indicate that the carrying amounts may not be recoverable. In testing for impairment, the fair value of each reporting unit is compared with its carrying value, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the amount of an impairment loss, if any, is calculated by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.
Acquired intangible assets are amortized over the following periods:
Expected
Amortization basislife (years)
Acquired intangible assetsStraight line10
Acquired HRH customer relationshipsIn line with underlying cashflows20
Acquired HRH non-compete agreementsStraight line2
Acquired HRH trade namesStraight line4
Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Investments in Associates
Investments are accounted for using the equity method of accounting if the Company has the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company has an equity ownership in the voting stock of the investee between 20 and 50 percent, although other factors, such as representation on the Board of Directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting the investment is carried at cost of acquisition, plus the Company’s equity in undistributed net income since acquisition, less any dividends received since acquisition.
The Company periodically reviews its investments in associates for which fair value is less than cost to determine if the decline in value is other than temporary. If the decline in value is judged to be other than temporary, the cost basis of the investment is written down to fair value. The amount of any write-down is included in the statements of operations as a realized loss.
All other equity investments where the Company does not have the ability to exercise significant influence are accounted for by the cost method. Such investments are not publicly traded.
Derivative Financial Instruments
The Company uses derivative financial instruments for other than trading purposes to alter the risk profile of an existing underlying exposure. Interest rate swaps are used to manage interest risk exposures. Forward foreign currency exchange contracts are used to manage currency exposures arising from future income and expenses. The fair values of derivative contracts are recorded in other assets and other liabilities. The effective portions of changes in the fair value of derivatives that qualify for hedge accounting as cash flow hedges are recorded in other comprehensive income. Amounts are reclassified from other comprehensive income into earnings when the hedged exposure affects earnings. If the derivative is designated as and qualifies as an


77

Willis Group Holdings plc
2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
effective fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. Changes in fair value of derivatives that do not qualify for hedge accounting, together with any hedge ineffectiveness on those that do qualify, are recorded in other operating expenses or interest expense as appropriate.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and capital loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period in which the enactment date changes. Deferred tax assets are reduced through the establishment of a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized. The Company adjusts valuation allowances to measure deferred tax assets at the amount considered realizable in future periods if the Company’s facts and assumptions change. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.
Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon examination. The Company recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on examination by the tax authorities upon lapse of the relevant statute of limitations, or when positions are effectively settled. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely to be realized on settlement with the tax authorities, assuming full knowledge of the position and all relevant facts. The Company adjusts its recognition of these uncertain tax benefits in the period in which new information is available impacting either the recognition or measurement of its uncertain tax positions. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.
Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on the Company’s results of operations, cash flows or financial position.
The Company recognizes interest and penalties relating to unrecognized tax benefits within income taxes.
Provisions for Liabilities
The Company is subject to various actual and potential claims, lawsuits and other proceedings. The Company records liabilities for such contingencies including legal costs when it is probable that a liability has been incurred before the balance sheet date and the amount can be reasonably estimated. To the extent such losses can be recovered under the Company’s insurance programs, estimated recoveries are recorded when losses for insured events are recognized and the recoveries are likely to be realized. Significant management judgment is required to estimate the amounts of such contingent liabilities and the related insurance recoveries. The Company analyzes its litigation exposure based on available information, including consultation with outside counsel handling the defense of these matters, to assess its potential liability. Contingent liabilities are not discounted.
Pensions
The Company has two principal defined benefit pension plans which cover the majority of employees in the United States and United Kingdom. Both these plans are now closed to new entrants. New entrants in the


78

Notes to the financial statements
2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
United Kingdom are offered the opportunity to join a defined contribution plan and in the United States are offered the opportunity to join a 401(k) plan. In addition, there are smaller plans in certain other countries in which the Company operates. Elsewhere, pension benefits are typically provided through defined contribution plans.
Defined benefit plans
The net periodic cost of the Company’s defined benefit plans are measured on an actuarial basis using the projected unit credit method and several actuarial assumptions. The most significant of which are the discount rate and the expected long-term rate of return on plan assets. Other material assumptions include rates of participant mortality, the expected long-term rate of compensation and pension increases and rates of employee termination. Gains and losses occur when actual experience differs from actuarial assumptions. If such gains or losses exceed ten percent of the greater of plan assets or plan liabilities the Company amortizes those gains or losses over the average remaining service period of the employees.
In accordance with US GAAP the Company records on the balance sheet the funded status of its pension plans based on the projected benefit obligation.
Defined contribution plans
Contributions to the Company’s defined contribution plans are recognized as they fall due. Differences between contributions payable in the year and contributions actually paid are shown as either other assets or other liabilities in the consolidated balance sheets.
Share-Based Compensation
The Company accounts for share-based compensation as follows:
• the cost resulting from all equity awards is recognized in the financial statements at fair value estimated at the grant date;
• the fair value is recognized (generally as compensation cost) over the requisite service period for all awards that vest; and
• compensation cost is not recognized for awards that do not vest because service or performance conditions are not satisfied.
Revenue Recognition
Revenue includes insurance commissions, fees for services rendered, certain commissions receivable from insurance carriers, investment income and other income.
Brokerage income and fees negotiated instead of brokerage are recognized at the later of policy inception date or when the policy placement is complete. Commissions on additional premiums and adjustments are recognized as and when advised.
Fees for risk management and other services are recognized as the services are provided. Negotiated fee arrangements for an agreed period covering multiple insurance placements, the provision of risk managementand/or other services are determined, contract by contract, on the basis of the relative fair value of the services completed and the services yet to be rendered. The Company establishes contract cancellation reserves where appropriate: at December 31, 2010, 2009 and 2008, such amounts were not material.
Investment income is recognized as earned.


79

Willis Group Holdings plc
2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Other income comprises gains on disposal of intangible assets, which primarily arise on the disposal of books of business. Although the Company is not in the business of selling intangible assets (mainly books of business), from time to time the Company will dispose of a book of business (a customer list) or other intangible assets that do not produce adequate margins or fit with the Company’s strategy.
3.  EMPLOYEES
The average number of persons, including Executive Directors, employed by the Company is as follows:
             
  Years ended December 31, 
  2010  2009  2008 
 
Global  3,810   3,657   3,510 
             
North America  6,577   6,962   5,608 
International  6,714   6,514   6,348 
             
Total Retail  13,291   13,476   11,956 
             
Total average number of employees for the year  17,101   17,133   15,466 
             
Salaries and benefits expense comprises the following:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Salaries and other compensation awards including amortization of cash retention awards of $119 million, $88 million and $58 million (see below) $1,623  $1,570  $1,446 
Share-based compensation  47   39   40 
Severance costs  15   24   26 
Social security costs  119   117   109 
Retirement benefits — defined benefit plan expense (income)  35   42   (19)
Retirement benefits — defined contribution plan expense  34   35   36 
             
Total salaries and benefits expense $1,873  $1,827  $1,638 
             
Severance Costs
The Company incurred severance costs of $15 million in the year ended December 31, 2010 (2009: $24 million; 2008: $26 million) relating to approximately 550 positions (2009: 450 positions; 2008: 100 positions) that have been, or are in the process of being, eliminated as part of the Company’s continuing focus on managing expense. Severance costs for these employees were recognized pursuant to the terms of their existing benefit arrangements or employment agreements.
Cash Retention Awards
The Company makes annual cash retention awards to its employees. Employees must repay a proportionate amount of these awards if they voluntarily leave the Company’s employ (other than in the event of retirement or permanent disability) before a certain time period, currently up to three years. The Company makes cash payments to its employees in the year it grants these retention awards and recognizes these payments ratably over the period they are subject to repayment, beginning in the quarter in which the award is made. The unamortized portion of cash retention awards is recorded within other assets.


80

Notes to the financial statements
3.  EMPLOYEES (Continued)
The following table sets out the amount of cash retention awards made and the related amortization of those awards for the years ended December 31, 2010, 2009 and 2008:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Cash retention awards made $196  $148  $74 
Amortization of cash retention awards included in salaries and benefits  119   88   58 
Unamortized cash retention awards totaled $173 million as of December 31, 2010 (2009: $98 million; 2008: $41 million).
4.  SHARE-BASED COMPENSATION
On December 31, 2010, the Company had a number of open share-based compensation plans, which provide for the grant of time-based and performance-based options, restricted stock units and various other share-based grants to employees. All of the Company’s share-based compensation plans under which any options, restricted stock units or other share-based grants are outstanding as at December 31, 2010 are described below. The compensation cost that has been charged against income for those plans for the year ended December 31, 2010 was $47 million (2009: $39 million; 2008: $40 million). The total income tax benefit recognized in the statement of operations for share-based compensation arrangements for the year ended December 31, 2010 was $14 million (2009: $12 million; 2008: $12 million).
2001 Share Purchase and Option Plan
This plan, which was established on May 3, 2001, provides for the granting of time-based options, restricted stock units and various other share-based grants at fair market value to employees of the Company. There are 25,000,000 shares available for grant under this plan. Options are exercisable on a variety of dates, including from the first, second, third, sixth or eighth anniversary of grant, although for certain options the exercisable date may accelerate depending on the achievement of certain performance goals. The Board of Directors has adopted severalsub-plans under the 2001 plan to provide employee sharesave schemes in the UK, Ireland and internationally. Unless terminated sooner by the Board of Directors, the 2001 Plan (and allsub-plans) will expire 10 years after the date of its adoption. That termination will not affect the validity of any grant outstanding at that date.
2008 Share Purchase and Option Plan
This plan, which was established on April 23, 2008, provides for the granting of time and performance-based options, restricted stock units and various other share-based grants at fair market value to employees of the Company. There are 8,000,000 shares available for grant under this plan. Options are exercisable on a variety of dates, including from the third, fourth or fifth anniversary of grant. Unless terminated sooner by the Board of Directors, the 2008 Plan will expire 10 years after the date of its adoption. That termination will not affect the validity of any grant outstanding at that date.
HRH Option Plans
Options granted under the Hilb Rogal and Hamilton Company 2000 Stock Incentive Plan (‘HRH 2000 Plan’) and the Hilb Rogal & Hobbs Company 2007 Stock Incentive Plan (the ‘HRH 2007 Plan’) were converted into options to acquire shares of Willis Group Holdings. No further grants are to be made under the HRH 2000 Plan. Willis is authorized to grant equity awards under the HRH 2007 Plan until 2017 to employees who were formerly employed by HRH and to new employees who have joined Willis or one of its subsidiaries since October 1, 2008, the date that the acquisition of HRH was completed.


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Willis Group Holdings plc
4.  SHARE-BASED COMPENSATION (Continued)
Employee Stock Purchase Plans
The Company has adopted the Willis Group Holdings 2001 North America Employee Share Purchase Plan, expiring May 31, 2011 and the Willis Group Holdings 2010 North America Employee Stock Purchase Plan. They provide certain eligible employees to the Company’s subsidiaries in the US and Canada the ability to contribute payroll deductions to the purchase of Willis Shares at the end of each offering period.
The Company may also issue 245,000 Shares to directors upon exercise of options.
Option Valuation Assumptions
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatility is based on historical volatility of the Company’s stock. With effect from January 1, 2006, the Company uses the simplified method set out in Accounting Standard Codification (‘ASC’)718-10-S99 to derive the expected term of options granted. The risk-free rate for periods within the expected life of the option is based on the US Treasury yield curve in effect at the time of grant.
             
  Years ended December 31, 
  2010  2009  2008 
 
Expected volatility  30.4%  32.4%  30.0%
Expected dividends  3.4%  3.9%  2.5%
Expected life (years)  5   5   4 
Risk-free interest rate  2.2%  3.0%  3.9%


82

Notes to the financial statements
4.  SHARE-BASED COMPENSATION (Continued)
A summary of option activity under the plans at December 31, 2010, and changes during the year then ended is presented below:
                 
     Weighted
       
     Average
  Weighted Average
  Aggregate
 
     Exercise
  Remaining
  Intrinsic
 
(Options in thousands) Options  Price(i)  Contractual Term  Value 
           (millions) 
 
Time-based stock options
                
Balance, beginning of year  13,398  $32.23         
Granted  466  $27.41         
Exercised  (1,463) $26.25         
Forfeited  (831) $33.45         
Expired  (121) $29.89         
                 
Balance, end of year  11,449  $32.73   4 years  $36 
                 
Options vested or expected to vest at December 31, 2010  11,183  $32.85   4 years  $34 
Options exercisable at December 31, 2010  7,939  $33.04   3 years  $23 
Performance-based stock options
                
Balance, beginning of year  8,869  $32.67         
Granted  1,252  $28.17         
Exercised  (1) $3.12         
Forfeited  (671) $31.75         
                 
Balance, end of year  9,449  $32.14   6 years  $31 
                 
Options vested or expected to vest at December 31, 2010  5,403  $30.52   6 years  $26 
Options exercisable at December 31, 2010  —   —   —  $— 
(i)Certain options are exercisable in pounds sterling and are converted to dollars using the exchange rate at December 31, 2010.
The weighted average grant-date fair value of time-based options granted during the year ended December 31, 2010 was $5.25 (2009: $5.87; 2008: $6.20). The total intrinsic value of options exercised during the year ended December 31, 2010 was $8 million (2009: $3 million; 2008: $7 million). At December 31, 2010 there was $17 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements under time-based stock option plans; that cost is expected to be recognized over a weighted average period of 1 year.
The weighted average grant-date fair value of performance-based options granted during the year ended December 31, 2010 was $7.11 (2009: $5.89; 2008: $9.37). The total intrinsic value of options exercised during the year ended December 31, 2010 was $nil (2009: $1 million; 2008: $3 million). At December 31, 2010 there was $37 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements under performance-based stock option plans; that cost is expected to be recognized over a weighted-average period of 2 years.


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Willis Group Holdings plc
4.  SHARE-BASED COMPENSATION (Continued)
A summary of restricted stock unit activity under the Plans at December 31, 2010, and changes during the year then ended is presented below:
         
     Weighted Average
 
     Grant Date
 
(Units awarded in thousands) Shares  Fair Value 
 
Nonvested shares (restricted stock units)
        
Balance, beginning of year  2,204  $28.88 
Granted  466  $32.32 
Vested  (745) $31.17 
Forfeited  (127) $28.89 
         
Balance, end of year  1,798  $28.82 
         
The total number of restricted stock units vested during the year ended December 31, 2010, was 744,633 shares at an average share price of $32.17 (2009: 550,224 shares at an average share price of $24.53). At December 31, 2010 there was $15 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements under the plan: that cost is expected to be recognized over a weighted average period of 1 year.
Cash received from option exercises under all share-based payment arrangements for the year ended December 31, 2010 was $37 million (2009: $19 million; 2008: $11 million). The actual tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements totaled $10 million for the year ended December 31, 2010 (2009: $5 million; 2008: $7 million).
5.  AUDITORS’ REMUNERATION
An analysis of auditors’ remuneration is as follows:
             
  Years ended December 31, 
  2010  2009  2008 
  (thousands) 
 
Audit fees(i)
 $6,024  $5,981  $5,767 
Audit related fees(ii)
  207   132   76 
Tax fees(iii)
  193   33   336 
Other services provided by Group auditors(iv)
  1,145   20   — 
             
Total auditors’ remuneration $7,569  $6,166  $6,179 
             
(i)Fees for the audits of the Company’s annual financial statements and reviews of the financial statements included in the Company’s quarterly reports for that fiscal year, services relating to the Company’s registration statements and US Generally Accepted Accounting Principles (‘US GAAP’) accounting consultations and Sarbanes-Oxley Section 404 work.
(ii)Audit related fees relate primarily to professional services such as employee benefit plan audits and non-statutory audits.
(iii)Tax fees comprise fees for various tax compliance engagements.
(iv)All other fees relate primarily to assistance with regulatory inquiries and other advisory services.
6.  NET (LOSS) GAIN ON DISPOSAL OF OPERATIONS
Total proceeds for 2010 were $4 million, comprising $2 million relating to 2010 disposals of operations and $2 million of deferred proceeds relating to prior year. A loss on disposal of $2 million is recorded in the consolidated statements of operations for the year ended December 31, 2010.


84

Notes to the financial statements
6.  NET (LOSS) GAIN ON DISPOSAL OF OPERATIONS (Continued)
Total proceeds from the disposal of operations for 2009 were $315 million, including $281 million for 18 percent of the Group’s 49 percent interest in Gras Savoye and $39 million for 100 percent of Bliss & Glennon. A gain on disposal of $13 million is recorded in the statement of consolidated operations for the year ended December 31, 2009, of which $10 million relates to Gras Savoye as shown below.
On December 17, 2009, the Company completed a leveraged transaction with the original family shareholders of Gras Savoye and Astorg Partners, a private equity fund, to reorganize the capital of Gras Savoye (‘December 2009 leveraged transaction’), its principal investment in associates. The Company, the family shareholders and Astorg now own equal stakes of 31 percent in Gras Savoye and have equal representation of one third of the voting rights on its board. The remaining shareholding is held by a large pool of Gras Savoye managers and minority shareholders.
As a result of the December 2009 leveraged transaction the Company recognized a gain of $10 million in the consolidated statement of operations from the reduction of its interest in Gras Savoye from 49 percent to 31 percent. The Company received total proceeds of $281 million, comprising cash and interest bearing vendor loans and convertible bonds issued by Gras Savoye. An analysis of the proceeds and the calculation of the gain is as follows:
     
  (millions) 
 
Proceeds:    
Cash $155 
Vendor Loans  47 
Convertible Bonds  79 
     
Net proceeds  281 
Less net assets disposed of  (97)
Less interest in new liabilities of Gras Savoye  (174)
     
Gain on disposal $10 
     
Total proceeds for 2008 were $11 million, comprising $7 million relating to 2008 disposal of operations and $4 million of deferred proceeds relating to prior years. There was no net gain on disposal in the consolidated statement of operations.
7.  INCOME TAXES
An analysis of income from continuing operations before income taxes and interest in earnings of associates by location of the taxing jurisdiction is as follows:
             
  Years ended December 31, 
  2010  2009  2008 
     (millions)    
 
Ireland $3  $(2) $18 
US  84   6   19 
UK  183   204   125 
Other jurisdictions  317   312   236 
             
Income from continuing operations before incomes taxes and interest in earnings of associates $587  $520  $398 
             


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Willis Group Holdings plc
7.  INCOME TAXES (Continued)
The provision for income taxes by location of the taxing jurisdiction consisted of the following:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Current income taxes:            
Irish corporation tax $1  $—  $2 
US federal tax  (30)  41   (10)
US state and local taxes  —   18   2 
UK corporation tax  54   17   (2)
Other jurisdictions  41   52   61 
             
Total current taxes  66   128   53 
             
Non-current taxes:            
US federal tax  (3)  (9)  (2)
US state and local taxes  (3)  (2)  — 
Other jurisdictions  3   —   — 
             
Total non-current taxes  (3)  (11)  (2)
             
Deferred taxes:            
US federal tax  57   (24)  10 
US state and local taxes  9   (3)  — 
UK corporation tax  3   1   38 
Other jurisdictions  8   5   (2)
             
Total deferred taxes  77   (21)  46 
             
Total income taxes $140  $96  $97 
             


86

Notes to the financial statements
7.  INCOME TAXES (Continued)
The reconciliation between US federal income taxes at the statutory rate and the Company’s provision for income taxes on continuing operations is as follows:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions, except percentages) 
 
Income from continuing operations before income taxes and interest in earnings of associates $587  $520  $398 
             
US federal statutory income tax rate  35%  35%  35%
             
Income tax expense at US federal tax rate  205   182   140 
Adjustments to derive effective rate:            
Non-deductible expenditure  7   4   4 
Movement in provision for non-current taxes  (3)  (11)  (2)
Release of provision for unremitted earnings  —   (27)  — 
Impact of change in tax rate on deferred tax balances  (4)  —   — 
Adjustment in respect of prior periods  (22)  (6)  1 
Non-deductible Venezuelan foreign exchange loss  4   —   — 
Non-taxable profit on disposal of Gras Savoye  1   (3)  — 
Effect of foreign exchange and other differences  (15)  —   — 
Other  —   2   (7)
Tax differentials of foreign earnings:            
UK earnings  (13)  (13)  (8)
Other jurisdictions and US state taxes  (20)  (32)  (31)
             
Provision for income taxes $140  $96  $97 
             


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Willis Group Holdings plc
7.  INCOME TAXES (Continued)
The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:
         
  December 31, 
  2010  2009 
  (millions) 
 
Deferred tax assets:        
Accrued expenses not currently deductible $34  $131 
US state net operating losses  47   34 
UK net operating losses  2   2 
Other net operating losses  3   — 
UK capital losses  49   56 
Accrued retirement benefits  62   52 
Deferred compensation  46   68 
Stock options  51   47 
         
Gross deferred tax assets  294   390 
Less: valuation allowance  (87)  (92)
         
Net Deferred tax assets $207  $298 
         
Deferred tax liabilities:        
Cost of intangible assets, net of related amortization $155  $220 
Cost of tangible assets, net of related depreciation  25   — 
Prepaid retirement benefits  50   — 
Accrued revenue not currently taxable  7   — 
Cash retention award  10   — 
Tax-leasing transactions  3   4 
Financial derivative transactions  6   3 
Other  —   18 
         
Deferred tax liabilities  256   245 
         
Net deferred tax (liabilities) assets $(49) $53 
         


88

Notes to the financial statements
7.  INCOME TAXES (Continued)
         
  December 31, 
  2010  2009 
  (millions) 
 
Balance sheet classifications:        
Current:        
Deferred tax assets $36  $81 
Deferred tax liabilities  (9)  (5)
         
Net current deferred tax assets  27   76 
         
Non-current:        
Deferred tax assets  7   3 
Deferred tax liabilities  (83)  (26)
         
Net non-current deferred tax liabilities  (76)  (23)
         
Net deferred tax (liability) asset $(49) $53 
         
At December 31, 2010, the Company had valuation allowances of $87 million (2009: $92 million) to reduce its deferred tax assets to estimated realizable value. The valuation allowances at December 31, 2010 relate to the deferred tax assets arising from UK capital loss carryforwards ($49 million) and other net operating losses ($1 million), which have no expiration date and to the deferred tax assets arising from US State net operating losses ($37 million). Capital loss carryforwards can only be offset against future UK capital gains.
                     
     Additions/
          
     (releases)
          
  Balance at
  charged to
     Foreign
    
  beginning
  costs and
  Deductions / Other
  exchange
  Balance at
 
Description of year  expenses  movements  differences  end of year 
  (millions) 
 
Year ended December 31, 2010                    
Deferred tax valuation allowance $92  $—  $(4) $(1) $87 
                     
Year ended December 31, 2009                    
Deferred tax valuation allowance  85   —   2   5   92 
                     
Year ended December 31, 2008                    
Deferred tax valuation allowance $69  $34  $—  $(18) $85 
                     
At December 31, 2010, the Company had deferred tax assets of $207 million (2009: $298 million), net of the valuation allowance. Management believes, based upon the level of historical taxable income and projections for future taxable income, it is more likely than not that the Company will realize the benefits of these deductible differences, net of the valuation allowance. However, the amount of the deferred tax asset considered realizable could be adjusted in the future if estimates of taxable income are revised.
The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when the Company expects that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the investments. The Company does not, however, provide for income taxes on the unremitted earnings of certain other subsidiaries where, in management’s opinion, such earnings have been indefinitely reinvested in those operations, or will be remitted either in a tax free liquidation or as dividends

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Willis Group Holdings plc
7.  INCOME TAXES (Continued)
with taxes substantially offset by foreign tax credits. It is not practical to determine the amount of unrecognized deferred tax liabilities for temporary differences related to these investments.
Unrecognized tax benefits
Total unrecognized tax benefits as at December 31, 2010, totaled $13 million. During the next 12 months it is reasonably possible that the Company will recognize approximately $1 million of tax benefits related to the release of provisions no longer required due to either settlement through negotiation or closure of the statute of limitations on assessment.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
             
  2010  2009  2008 
  (millions) 
 
Balance at January 1 $17  $33  $20 
Reductions due to a lapse of the applicable statute of limitation  (7)  (11)  (5)
Adjustment to assessment of acquired HRH balances  —   (8)  — 
Increase of HRH opening balances  —   —   15 
Other movements  3   3   3 
             
Balance at December 31 $13  $17  $33 
             
All of the unrecognized tax benefits at December 31, 2010 would, if recognized, favorably affect the effective tax rate in future periods.
The Company files tax returns in the various tax jurisdictions in which it operates. The 2006 US tax year closed in 2010 upon the expiration of the statute of limitations on assessment. US tax returns have been filed timely. The Company has received notice that the IRS will be examining the 2009 tax return. The Company has not extended the federal statute of limitations for assessment in the US.
All UK tax returns have been filed timely and are in the normal process of being reviewed, with HM Revenue & Customs making enquiries to obtain additional information. There are no material ongoing enquiries in relation to filed UK returns other than in relation to the quantification of foreign tax reliefs available on the remittance of foreign earnings.
8.  EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing net income attributable to Willis Group Holdings by the average number of shares outstanding during each period. The computation of diluted earnings per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue shares were exercised or converted into shares or resulted in the issue of shares that then shared in the net income of the Company.
For the year ended December 31, 2010, time-based and performance-based options to purchase 11.5 million and 9.4 million (2009: 13.4 million and 8.9 million; 2008: 16.9 million and 5.8 million) shares, respectively, and 1.8 million restricted stock units (2009: 2.2 million; 2008: 1.4 million), respectively, were outstanding.


90

Notes to the financial statements
8.  EARNINGS PER SHARE (Continued)
Basic and diluted earnings per share are as follows:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions, except per share data) 
 
Net income attributable to Willis Group Holdings $455  $438  $303 
             
Basic average number of shares outstanding  170   168   148 
Dilutive effect of potentially issuable shares  1   1   — 
             
Diluted average number of shares outstanding  171   169   148 
             
Basic earnings per share:            
Continued operations $2.68  $2.60  $2.04 
Discontinued operations  —   0.01   0.01 
             
Net income attributable to Willis Group Holdings shareholders $2.68  $2.61  $2.05 
             
Dilutive effect of potentially issuable shares  (0.02)  (0.02)  — 
             
Diluted earnings per share:            
Continued operations $2.66  $2.58  $2.04 
Discontinued operations  —   0.01   0.01 
             
Net income attributable to Willis Group Holdings shareholders $2.66  $2.59  $2.05 
             
Options to purchase 13.9 million shares for the year ended December 31, 2010 were not included in the computation of the dilutive effect of stock options because the effect was antidilutive (2009: 16.1 million shares; 2008: 22.1 million shares).
9.  FIDUCIARY ASSETS
The Company collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurers; the Company also collects claims or refunds from insurers on behalf of insureds. Uncollected premiums from insureds and uncollected claims or refunds from insurers (‘fiduciary receivables’) are recorded as fiduciary assets on the Company’s consolidated balance sheets. Unremitted insurance premiums and claims (‘fiduciary funds’) are also recorded within fiduciary assets.
Fiduciary assets therefore comprise both receivables and funds held in a fiduciary capacity.
Fiduciary funds, consisting primarily of time deposits with original maturities of less than or equal to three months, were $1,764 million as of December 31, 2010 (2009: $1,683 million). Accrued interest on funds is recorded as other assets.
Consolidation of fiduciary funds
The financial statements as at December 31, 2010 and 2009 reflect the consolidation of one Variable Interest Entity (‘VIE’), a UK non-statutory trust that was established in January 2005 following the introduction of statutory regulation of insurance in the UK by the Financial Services Authority. The regulation requires that all fiduciary funds collected by an insurance broker such as the Company be paid into a non-statutory trust designed to give additional credit protection to the clients and insurance carriers of the Company. This trust restricts the financial instruments in which such funds may be invested and affects the timing of transferring commission from fiduciary funds to own funds.


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Willis Group Holdings plc
9.  FIDUCIARY ASSETS (Continued)
As of December 31, 2010, the fair value of the fiduciary funds in the VIE was $976 million (2009: $903 million) and the fair value of the associated liabilities was $976 million (2009: $903 million). There are no assets of the Company that serve as collateral for the VIE.
10.  FIXED ASSETS, NET
An analysis of fixed asset activity for the years ended December 31, 2010 and 2009 are as follows:
                 
     Leasehold
       
  Land and
  improvements
  Furniture and
    
  buildings(i)  (millions)  equipment  Total 
 
Cost: at January 1, 2009 $41  $148  $359  $548 
Additions  —   23   73   96 
Disposals  —   (8)  (65)  (73)
Foreign exchange  4   11   23   38 
                 
Cost: at December 31, 2009  45   174   390   609 
Additions  24   13   69   106 
Disposals  —   (4)  (45)  (49)
Foreign exchange  (2)  (1)  (9)  (12)
                 
Cost: at December 31, 2010 $67  $182  $405  $654 
                 
Depreciation: at January 1, 2009 $(14) $(27) $(195) $(236)
Depreciation expense provided  (2)  (12)  (50)  (64)
Disposals  —   5   56   61 
Foreign exchange  (2)  (2)  (14)  (18)
                 
Depreciation: at December 31, 2009  (18)  (36)  (203)  (257)
Depreciation expense provided  (2)  (12)  (49)  (63)
Disposals  —   2   39   41 
Foreign exchange  1   —   5   6 
                 
Depreciation: at December 31, 2010 $(19) $(46) $(208) $(273)
                 
Net book value:                
At December 31, 2009 $27  $138  $187  $352 
                 
At December 31, 2010 $48  $136  $197  $381 
                 
(i)Included within land and buildings are assets held under capital leases. At December 31, 2010, cost and accumulated depreciation were $23 million and $1 million respectively (2009: $nil and $nil respectively; 2008: $nil and $nil respectively). Depreciation in the year ended December 31, 2010 was $1 million (2009: $nil; 2008: $nil).
11.  GOODWILL
Goodwill represents the excess of the cost of businesses acquired over the fair market value of identifiable net assets at the dates of acquisition. Goodwill is not amortized but is subject to impairment testing annually and whenever facts or circumstances indicate that the carrying amounts may not be recoverable.
The Company’s annual goodwill impairment tests for 2010 and prior years have not resulted in an impairment charge (2009: $nil; 2008: $nil).


92

Notes to the financial statements
11.  GOODWILL (Continued)
When a business entity is sold, goodwill is allocated to the disposed entity based on the fair value of that entity compared to the fair value of the reporting unit in which it is included.
The changes in the carrying amount of goodwill by operating segment for the years ended December 31, 2010 and 2009 are as follows:
                 
     North
       
  Global  America  International  Total 
  (millions) 
 
Balance at January 1, 2009 $1,046  $1,810  $419  $3,275 
Goodwill acquired during 2009  4   1   14   19 
Purchase price allocation adjustments  24   (4)  —   20 
Goodwill disposed of during 2009  —   (27)  (1)  (28)
Foreign exchange  (9)  —   —   (9)
                 
Balance at December 31, 2009 $1,065  $1,780  $432  $3,277 
Purchase price allocation adjustments  —   6   —   6 
Other movements(i)
  —   (3)  —   (3)
Foreign exchange  (2)  —   16   14 
                 
Balance at December 31, 2010 $1,063  $1,783  $448  $3,294 
                 
(i)North America — tax benefit arising on the exercise of fully vested HRH stock options which were issued as part of the acquisition of HRH in 2008.
12.  OTHER INTANGIBLE ASSETS, NET
Other intangible assets are classified into the following categories:
• ‘Customer and Marketing Related’, including
• client relationships,
• client lists,
• non-compete agreements,
• trade names; and
• ‘Contract based, Technology and Other’ includes all other purchased intangible assets.
The major classes of amortizable intangible assets are as follows:
                         
  December 31, 2010  December 31, 2009 
  Gross
     Net
  Gross
     Net
 
  carrying
  Accumulated
  carrying
  carrying
  Accumulated
  carrying
 
  amount  amortization  amount  amount  amortization  amount 
        (millions)       
 
Customer and Marketing Related:                        
Client Relationships $695  $(207) $488  $691  $(138) $553 
Client Lists  9   (7)  2   9   (6)  3 
Non-compete Agreements  36   (36)  —   36   (23)  13 
Trade Names  11   (10)  1   11   (10)  1 
                         
Total Customer and Marketing Related  751   (260)  491   747   (177)  570 
                         
Contract based, Technology and Other  4   (3)  1   4   (2)  2 
                         
Total amortizable intangible assets $755  $(263) $492  $751  $(179) $572 
                         


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Willis Group Holdings plc
12.  OTHER INTANGIBLE ASSETS, NET (Continued)
The aggregate amortization of intangible assets for the year ended December 31, 2010 was $82 million (2009: $100 million; 2008: $36 million). The estimated aggregate amortization of intangible assets for each of the next five years ended December 31 is as follows:
     
  (millions) 
 
2011 $67 
2012  60 
2013  52 
2014  45 
2015  38 
Thereafter  230 
     
Total $492 
     
13.  INVESTMENTS IN ASSOCIATES
The Company holds a number of investments which it accounts for using the equity method. The Company’s approximate interest in the outstanding stock of the more significant associates is as follows:
             
     December 31, 
  Country  2010  2009 
 
Al-Futtaim Willis Co. L.L.C.   Dubai   49%  49%
GS & Cie Groupe  France   31%  31%
The Company’s principal investment as of December 31, 2010 and 2009 is GS & Cie Groupe (‘Gras Savoye’), France’s leading insurance broker.
The Company’s original investment in Gras Savoye was made in 1997, when it acquired a 33 percent ownership interest. Between 1997 and December 2009 this interest was increased by a series of incremental investments to 49 percent.
On December 17, 2009, the Company completed a leveraged transaction with the original family shareholders of Gras Savoye and Astorg Partners, a private equity fund, to reorganize the capital of Gras Savoye (‘December 2009 leveraged transaction’). The Company, the original family shareholders and Astorg now own equal stakes of 31 percent in Gras Savoye and have equal representation of one third of the voting rights on its board. The remaining shareholding is held by a large pool of Gras Savoye managers and minority shareholders.
A put option that was in place prior to the December 2009 leveraged transaction, and which could have increased the Company’s interest to 90 percent, has been canceled and the Company now has a new call option to purchase 100 percent of the capital of Gras Savoye. If the Company does not waive the new call option before April 30, 2014, then it must exercise the new call option in 2015 or the other shareholders may initiate procedures to sell Gras Savoye. Except with the unanimous consent of the supervisory board and other customary exceptions, the parties are prohibited from transferring any shares of Gras Savoye until 2015. At the end of this period, shareholders are entitled to pre-emptive and tag-along rights.
As a result of the December 2009 leveraged transaction the Company recognized a gain of $10 million in the consolidated statement of operations for the year ended December 31, 2009 from the reduction of its interest in Gras Savoye from 49 percent to 31 percent. The Company received total proceeds of $281 million, comprising cash and interest bearing vendor loans and convertible bonds issued by Gras Savoye. See Note 6 — Net (Loss) Gain on Disposal of Operations for an analysis of the proceeds and the calculation of the gain.
The carrying amount of the Gras Savoye investment as of December 31, 2010 includes goodwill of $88 million (2009: $94 million) and interest bearing vendor loans and convertible bonds issued by Gras Savoye of $44 million and $78 million respectively (2009: $46 million and $78 million, respectively).


94

Notes to the financial statements
13.  INVESTMENTS IN ASSOCIATES (Continued)
As of December 31, 2010 and 2009, the Company’s other investments in associates, individually and in the aggregate, were not material to the Company’s operations.
Unaudited condensed financial information for associates, in the aggregate, as of and for the three years ended December 31, 2010, is presented below. For convenience purposes: (i) balance sheet data has been translated to US dollars at the relevant year-end exchange rate, and (ii) condensed statements of operations data has been translated to US dollars at the relevant average exchange rate.
             
  2010  2009  2008 
  (millions) 
 
Condensed statements of operations data(i):
            
Total revenues $510  $534  $574 
Income before income taxes  61   96   86 
Net income  43   64   51 
Condensed balance sheets data(i):
            
Total assets  2,043   2,204   1,538 
Total liabilities  (1,825)  (1,767)  (1,262)
Stockholders’ equity  (218)  (437)  (276)
(i)Disclosure is based on the Company’s best estimate of the results of its associates and is subject to change upon receipt of their financial statements for 2010.
For the year ended December 31, 2010, the Company recognized $5 million (2009: $12 million; 2008: $9 million) in respect of dividends received from associates.
14.  OTHER ASSETS
An analysis of other assets is as follows:
         
  December 31, 
  2010  2009 
  (millions) 
 
Other current assets        
Unamortized cash retention awards $125  $66 
Prepayments and accrued income  73   59 
Income taxes receivable  69   — 
Derivatives  17   9 
Debt issuance costs  8   8 
Other receivables  48   56 
         
Total other current assets $340  $198 
         
Other non-current assets        
Deferred compensation plan assets $114  $107 
Unamortized cash retention awards  48   32 
Derivatives  30   26 
Debt issuance costs  27   35 
Other receivables  14   21 
         
Total other non-current assets $233  $221 
         
Total other assets $573  $419 
         


95

Willis Group Holdings plc
15.  OTHER LIABILITIES
An analysis of other liabilities is as follows:
         
  December 31, 
  2010  2009 
  (millions) 
 
Other current liabilities        
Accrued dividends payable $46  $44 
Other taxes payable  41   46 
Accounts payable  39   27 
Accrued interest payable  21   27 
Derivatives  6   18 
Other payables  113   116 
         
Total other current liabilities $266  $278 
         
Other non-current liabilities        
Incentives from lessors $150  $133 
Deferred compensation plan liability  120   115 
Capital lease obligation  23   — 
Derivatives  6   5 
Other payables  48   41 
         
Total other non-current liabilities $347  $294 
         
Total other liabilities $613  $572 
         
16.  ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at estimated net realizable values. The allowances shown below as at the end of each period are recorded as the amounts considered by management to be sufficient to meet probable future losses related to uncollectible accounts.
                     
     Additions/
          
  Balance
  (releases)
        Balance
 
  at
  charged to
  Deductions/
  Foreign
  at
 
  beginning
  costs and
  Other
  exchange
  end of
 
Description of year  expenses  movements  differences  year 
  (millions) 
 
Year ended December 31, 2010                    
Allowance for doubtful accounts $  16  $  —  $  (4) $  —  $  12 
Year ended December 31, 2009                    
Allowance for doubtful accounts $20  $(1) $(4) $1  $16 
Year ended December 31, 2008                    
Allowance for doubtful accounts $20  $(3) $7  $(4) $20 
17.  PENSION PLANS
The Company maintains two principal defined benefit pension plans that cover the majority of our employees in the United States and United Kingdom. Both of these plans are now closed to new entrants. New entrants in the United Kingdom are offered the opportunity to join a defined contribution plan and in the United States are offered the opportunity to join a 401(k) plan. In addition to the Company’s UK and US defined benefit pension plans, the Company has several smaller defined benefit pension plans in certain other countries in


96

Notes to the financial statements
17.  PENSION PLANS (Continued)
which it operates. Elsewhere, pension benefits are typically provided through defined contribution plans. It is the Company’s policy to fund pension costs as required by applicable laws and regulations.
Effective May 15, 2009, the Company closed the US defined benefit plan to future accrual. Consequently, a curtailment gain of $12 million was recognized during the year ended December 31, 2009.
At December 31, 2010, the Company recorded, on the Consolidated Balance Sheets:
• a pension benefit asset of $179 million (2009: $69 million) in respect of the UK defined benefit pension plan; and
• a total liability for pension benefits of $164 million (2009: $187 million) representing:
• $154 million (2009: $157 million) in respect of the US defined benefit pension plan; and
• $10 million (2009: $30 million) in respect of the International defined benefit pension plans.
UK and US defined benefit plans
The following schedules provide information concerning the Company’s UK and US defined benefit pension plans as of and for the years ended December 31:
                 
  UK Pension Benefits  US Pension Benefits 
  2010  2009  2010  2009 
  (millions) 
 
Change in benefit obligation:                
Benefit obligation, beginning of year $1,811  $1,386  $686  $649 
Service cost  37   28   —   7 
Interest cost  100   96   40   40 
Employee contributions  2   4   —   — 
Actuarial loss  84   208   57   19 
Benefits paid  (72)  (62)  (27)  (25)
Foreign currency changes  (56)  151   —   — 
Curtailment  —   —   —   (4)
                 
Benefit obligations, end of year  1,906   1,811   756   686 
                 
Change in plan assets:                
Fair value of plan assets, beginning of year  1,880   1,497   529   441 
Actual return on plan assets  245   234   70   86 
Employee contributions  2   4   —   — 
Employer contributions  88   47   30   27 
Benefits paid  (72)  (62)  (27)  (25)
Foreign currency changes  (58)  160   —   — 
                 
Fair value of plan assets, end of year  2,085   1,880   602   529 
                 
Funded status at end of year $179  $69  $(154) $(157)
                 
Components on the Consolidated Balance Sheets:                
Pension benefits asset $179  $69  $—  $— 
Liability for pension benefits  —   —   (154)  (157)


97

Willis Group Holdings plc
17.  PENSION PLANS (Continued)
Amounts recognized in accumulated other comprehensive loss consist of:
                 
  UK Pension Benefits  US Pension Benefits 
  2010  2009  2010  2009 
     (millions)    
 
Net actuarial loss $571  $648  $169  $143 
Prior service gain  (30)  (36)  —   — 
The accumulated benefit obligations for the Company’s UK and US defined benefit pension plans were $1,906 million and $756 million, respectively (2009: $1,811 million and $686 million, respectively).
The components of the net periodic benefit cost and other amounts recognized in other comprehensive loss for the UK and US defined benefit plans are as follows:
                         
  Years Ended December 31, 
  UK Pension Benefits  US Pension Benefits 
  2010  2009  2008  2010  2009  2008 
  (millions) 
 
Components of net periodic benefit cost:                        
Service cost $37  $28  $35  $—  $7  $23 
Interest cost  100   96   114   40   40   38 
Expected return on plan assets  (141)  (127)  (184)  (42)  (36)  (47)
Amortization of unrecognized prior service gain  (5)  (5)  (3)  —   —   (1)
Amortization of unrecognized actuarial loss  37   33   —   3   8   — 
Curtailment gain  —   —   —   —   (12)  — 
                         
Net periodic benefit cost (income) $28  $25  $(38) $1  $7  $13 
                         
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):                        
Net actuarial (gain) loss $(20) $102  $445  $29  $(31) $165 
Amortization of unrecognized actuarial loss(i)
  (37)  (33)  —   (3)  (12)  — 
Prior service gain  —   —   (33)  —   —   (6)
Amortization of unrecognized prior service gain  5   5   3   —   —   1 
Curtailment gain  —   —   —   —   12   — 
                         
Total recognized in other comprehensive (loss) income $(52) $74  $415  $26  $(31) $160 
                         
Total recognized in net periodic benefit cost and other comprehensive income $(24) $99  $377  $27  $(24) $173 
                         
(i)2009 US Pension Benefits figure includes $4 million due to curtailment.


98

Notes to the financial statements
17.  PENSION PLANS (Continued)
The estimated net loss and prior service cost for the UK and US defined benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are:
         
  UK Pension
  US Pension
 
  Benefits  Benefits 
  (millions) 
 
Estimated net loss $30  $3 
Prior service gain  5   — 
The following schedule provides other information concerning the Company’s UK and US defined benefit pension plans:
                 
  Years Ended December 31, 
  UK Pension
  US Pension
 
  Benefits  Benefits 
  2010  2009  2010  2009 
 
Weighted-average assumptions to determine benefit obligations:                
Discount rate  5.5%  5.8%  5.6%  6.1%
Rate of compensation increase  2.6%  2.5%  N/A   N/A 
                 
Weighted-average assumptions to determine net periodic benefit cost:                
Discount rate  5.8%  6.5%  6.1%  6.3%
Expected return on plan assets  7.8%  7.8%  8.0%  8.0%
Rate of compensation increase  2.5%  3.5%  N/A   N/A 
                 
The expected return on plan assets was determined on the basis of the weighted-average of the expected future returns of the various asset classes, using the target allocations shown below. The expected returns on UK plan assets are: UK and foreign equities 8.85 percent, debt securities 5.10 percent and real estate 5.80 percent. The expected returns on US plan assets are: US and foreign equities 10.25 percent and debt securities 4.75 percent.
The Company’s pension plan asset allocations based on fair values were as follows:
                 
  Years Ended December 31, 
  UK Pension
  US Pension
 
  Benefits  Benefits 
Asset Category 2010  2009  2010  2009 
 
Equity securities  51%  57%  54%  58%
Debt securities  24%  25%  45%  42%
Hedge funds  20%  15%  —   — 
Real estate  4%  3%  —   — 
Cash  1%  —   1%  — 
                 
Total  100%  100%  100%  100%
                 
The Company’s investment policy includes a mandate to diversify assets and the Company invests in a variety of asset classes to achieve that goal. The UK plan’s assets are divided into 10 separate portfolios according to asset class and managed by 11 investment managers. The broad target allocations are UK and foreign equities (59 percent), debt securities (20 percent), hedge funds (16 percent) and real estate (5 percent). The US plan’s assets are currently invested in 17 funds representing most standard equity and debt security classes. The broad target allocations are US and foreign equities (61 percent) and debt securities (39 percent).


99

Willis Group Holdings plc
17.  PENSION PLANS (Continued)
Fair Value Hierarchy
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value:
• Level 1: refers to fair values determined based on quoted market prices in active markets for identical assets;
• Level 2: refers to fair values estimated using observable market based inputs or unobservable inputs that are corroborated by market data; and
• Level 3: includes fair values estimated using unobservable inputs that are not corroborated by market data.
The following tables present, at December 31, 2010 and 2009, for each of the fair value hierarchy levels, the Company’s UK pension plan assets that are measured at fair value on a recurring basis.
                 
  UK Pension Plan 
December 31, 2010 Level 1  Level 2  Level 3  Total 
  (millions) 
 
Equity securities:                
US equities $421  $90  $—  $511 
UK equities  303   97   —   400 
Other equities  —   149   —   149 
Fixed income securities:                
US Government bonds  49   —   —   49 
UK Government bonds  348   —   —   348 
Other Government bonds  17   —   —   17 
UK corporate bonds  57   —   —   57 
Other corporate bonds  14   —   —   14 
Derivatives  —   22   —   22 
Real estate  —   —   83   83 
Cash  31   —   —   31 
Other investments:                
Hedge funds  —   —   415   415 
Other  —   (13)  2   (11)
                 
Total $1,240  $345  $500  $2,085 
                 


100

Notes to the financial statements
17.  PENSION PLANS (Continued)
                 
  UK Pension Plan 
December 31, 2009 Level 1  Level 2  Level 3  Total 
  (millions) 
 
Equity securities:                
US equities $348  $80  $—  $428 
UK equities  264   302   —   566 
Other equities  —   83   —   83 
Fixed income securities:                
US Government bonds  51   —   —   51 
UK Government bonds  330   —   —   330 
Other Government bonds  21   —   —   21 
UK corporate bonds  56   —   —   56 
Other corporate bonds  16   —   —   16 
Derivatives  —   (17)  —   (17)
Real estate  —   —   54   54 
Cash  11   —   —   11 
Other investments:                
Hedge funds  —   —   272   272 
Other  —   7   2   9 
                 
Total $1,097  $455  $328  $1,880 
                 
The UK plan’s real estate investment comprises UK property and infrastructure investments which are valued by the fund manager taking into account cost, independent appraisals and market based comparable data. The UK plan’s hedge fund investments are primarily invested in various ‘fund of funds’ and are valued based on net asset values calculated by the fund and are not publicly available. Liquidity is typically monthly and is subject to liquidity of the underlying funds.
The following tables present, at December 31, 2010 and 2009, for each of the fair value hierarchy levels, the Company’s US pension plan assets that are measured at fair value on a recurring basis.
                 
  US Pension Plan 
December 31, 2010 Level 1  Level 2  Level 3  Total 
  (millions) 
 
Equity securities:                
US equities $201  $—  $—  $201 
Non US equities  127   —   —   127 
Fixed income securities:                
US Government bonds  112   —   —   112 
US corporate bonds  111   —   —   111 
Non US Government bonds  47   —   —   47 
Cash  —   5   —   5 
Other investments:                
Other  —   (1)  —   (1)
                 
Total $598  $4  $—  $602 
                 

101

Willis Group Holdings plc
17.  PENSION PLANS (Continued)
                 
  US Pension Plan 
December 31, 2009 Level 1  Level 2  Level 3  Total 
  (millions) 
 
Equity securities:                
US equities $162  $—  $—  $162 
Non US equities  145   —   —   145 
Fixed income securities:                
US Government bonds  107   —   —   107 
US corporate bonds  70   —   —   70 
Non US Government bonds  44   —   —   44 
Cash  —   2   —   2 
Other investments:                
Other  —   (1)  —   (1)
                 
Total $528  $1  $—  $529 
                 
Equity securities comprise:
• common stock and preferred stock which are valued using quoted market prices; and
• pooled investment vehicles which are valued at their net asset values as calculated by the investment manager and typically have daily or weekly liquidity.
Fixed income securities comprise US, UK and other Government Treasury Bills, loan stock, index linked loan stock and UK and other corporate bonds which are typically valued using quoted market prices.
As a result of the inherent limitations related to the valuations of the Level 3 investments, due to the unobservable inputs of the underlying funds, the estimated fair value may differ significantly from the values that would have been used had a market for those investments existed.
The following table summarizes the changes in the UK pension plan’s Level 3 assets for the years ended December 31, 2010 and 2009:
     
  UK Pension
 
  Plan
 
  Level 3
 
  (millions) 
 
Balance at January 1, 2009 $213 
Purchases, sales, issuances and settlements, net  68 
Unrealized gains relating to instruments still held at end of year  33 
Realized losses relating to investments disposed of during the year  (1)
Foreign exchange  15 
     
Balance at December 31, 2009 $328 
Purchases, sales, issuances and settlements, net  156 
Unrealized gains relating to instruments still held at end of year  22 
Foreign exchange  (6)
     
Balance at December 31, 2010 $500 
     
In 2011, the Company expects to contribute $89 million to the UK plan, of which $11 million is in respect of salary sacrifice contributions, and $30 million to the US plan.

102

Notes to the financial statements
17.  PENSION PLANS (Continued)
The following benefit payments, which reflect expected future service, as appropriate, are estimated to be paid by the UK and US defined benefit pension plans:
         
  UK Pension
  US Pension
 
Expected future benefit payments Benefits  Benefits 
  (millions) 
 
2011 $78  $30 
2012  83   33 
2013  86   36 
2014  89   39 
2015  90   41 
2016-2020  496   240 
Effective May 15, 2009, the Company closed the US defined benefit plan to future accrual. Consequently, a curtailment gain of $12 million was recognized during the year ended December 31, 2009.
Willis North America has a 401(k) plan covering all eligible employees of Willis North America and its subsidiaries. The plan allows participants to make pre-tax contributions which the Company, at its discretion may match. During 2009, the Company has decided not to make any matching contributions other than for former HRH employees whose contributions were matched up to 75 percent under the terms of the acquisition. All investment assets of the plan are held in a trust account administered by independent trustees. The Company’s 401(k) matching contributions for 2010 were $nil million (2009: $5 million; 2008: $8 million).
International defined benefit pension plans
In addition to the Company’s UK and US defined benefit pension plans, the Company has several smaller defined benefit pension plans in certain other countries in which it operates.
A $10 million pension benefit liability (2009: $30 million) has been recognized in respect of these schemes.


103

Willis Group Holdings plc
17.  PENSION PLANS (Continued)
The following schedules provide information concerning the Company’s international defined benefit pension plans:
         
  International Pension
 
  Benefits 
  2010  2009 
  (millions) 
 
Change in benefit obligation:        
Benefit obligation, beginning of year $150  $118 
Service cost  4   6 
Interest cost  7   8 
Actuarial (gain) loss  (4)  11 
Benefits paid  (15)  (2)
Curtailment  1   — 
Foreign currency changes  (8)  9 
         
Benefit obligations, end of year  135   150 
         
Change in plan assets:        
Fair value of plan assets, beginning of year  120   89 
Actual return on plan assets  15   19 
Employer contributions  12   8 
Benefits paid  (15)  (2)
Foreign currency changes  (7)  6 
         
Fair value of plan assets, end of year  125   120 
         
Funded status at end of year $(10) $(30)
         
Components on the Consolidated Balance Sheets:        
Liability for pension benefits $(10) $(30)
Amounts recognized in accumulated other comprehensive loss consist of a net actuarial loss of $10 million (2009: $24 million).
The accumulated benefit obligation for the Company’s international defined benefit pension plans was $131 million (2009: $133 million).


104

Notes to the financial statements
17.  PENSION PLANS (Continued)
The components of the net periodic benefit cost and other amounts recognized in other comprehensive loss for the international defined benefit plans are as follows:
             
  International Pension
 
  Benefits 
  2010  2009  2008 
  (millions) 
 
Components of net periodic benefit cost:            
Service cost $4  $6  $6 
Interest cost  7   8   7 
Expected return on plan assets  (6)  (6)  (8)
Amortization of unrecognized actuarial loss  —   2   — 
Curtailment loss  1   —   — 
Other  —   —   1 
             
Net periodic benefit cost $6  $10  $6 
             
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):            
Amortization of unrecognized actuarial loss $—  $(2) $— 
Net actuarial gain  (13)  (2)  31 
             
Total recognized in other comprehensive loss  (13)  (4)  31 
             
Total recognized in net periodic benefit cost and other comprehensive (loss) income $(7) $6  $37 
             
The estimated net loss for the international defined benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $nil million.
The following schedule provides other information concerning the Company’s international defined benefit pension plans:
         
  International
  Pension Benefits
  2010 2009
 
Weighted-average assumptions to determine benefit obligations:        
Discount rate  4.00%–5.10%  5.00%–5.30%
Rate of compensation increase  2.50%–3.00%  2.00%–3.00%
Weighted-average assumptions to determine net periodic benefit cost:        
Discount rate  5.00%–5.30%  5.00%–6.50%
Expected return on plan assets  4.60%–6.31%  5.60%–6.50%
Rate of compensation increase  2.00%–3.00%  2.00%–4.50%
The determination of the expected long-term rate of return on the international plan assets is dependent upon the specific circumstances of each individual plan. The assessment may include analyzing historical investment performance, investment community forecasts and current market conditions to develop expected returns for each asset class used by the plans.


105

Willis Group Holdings plc
17.  PENSION PLANS (Continued)
The Company’s international pension plan asset allocations at December 31, 2010 based on fair values were as follows:
         
  International
 
  Pension Benefits 
Asset Category 2010  2009 
 
Equity securities  44%  39%
Debt securities  42%  44%
Real estate  4%  4%
Other  10%  13%
         
Total  100%  100%
         
The investment policies for the international plans vary by jurisdiction but are typically established by the local pension plan trustees, where applicable, and seek to maintain the plans’ ability to meet liabilities of the plans as they fall due and to comply with local minimum funding requirements.
Fair Value Hierarchy
The following tables present, at December 31, 2010 and 2009, for each of the fair value hierarchy levels, the Company’s international pension plan assets that are measured at fair value on a recurring basis.
                 
  International Pension Plans 
December 31, 2010 Level 1  Level 2  Level 3  Total 
  (millions) 
 
Equity securities:                
US equities $23  $—  $—  $23 
UK equities  4   —   —   4 
Overseas equities  21   —   —   21 
Unit linked funds  7   —   —   7 
Fixed income securities:                
Other Government bonds  30   2   —   32 
Real estate  —   —   5   5 
Cash  12   —   —   12 
Other investments:                
Derivative instruments  —   21   —   21 
                 
Total $97  $23  $5  $125 
                 


106

Notes to the financial statements
17.  PENSION PLANS (Continued)
                 
  International Pension Plans 
December 31, 2009 Level 1  Level 2  Level 3  Total 
  (millions) 
 
Equity securities:                
US equities $14  $—  $—  $14 
UK equities  7   —   —   7 
Overseas equities  6   —   —   6 
Unit linked funds  24   —   —   24 
Fixed income securities:                
Other Government bonds  31   2   —   33 
Real estate  —   —   5   5 
Cash  9   —   —   9 
Other investments:                
Derivative instruments  —   22   —   22 
                 
Total $91  $24  $5  $120 
                 
Equity securities comprise:
• common stock which are valued using quoted market prices; and
• unit linked funds which are valued at their net asset values as calculated by the investment manager and typically have daily liquidity.
Fixed income securities comprise overseas Government loan stock which is typically valued using quoted market prices. Real estate investment comprises overseas property and infrastructure investments which are valued by the fund manager taking into account cost, independent appraisals and market based comparable data. Derivative instruments are valued using an income approach typically using swap curves as an input.
Assets classified as Level 3 investments did not materially change during the year ended December 31, 2010. In 2011, the Company expects to contribute $7 million to the international plans.
The following benefit payments, which reflect expected future service, as appropriate, are estimated to be paid by the international defined benefit pension plans:
     
  International
 
  Pension
 
Expected future benefit payments Benefits 
  (millions) 
 
2011 $3 
2012  4 
2013  4 
2014  4 
2015  4 
2016-2020  25 

107

Willis Group Holdings plc
18.  DEBT
Short-term debt and current portion of the long-term debt consists of the following:
         
  December 31, 
  2010  2009 
  (millions) 
 
Current portion of5-year term loan facility
 $110  $110 
5.125% senior notes due 2010  —   90 
6.000% loan notes due 2010  —   9 
         
  $110  $209 
         
Long-term debt consists of the following:
         
  December 31, 
  2010  2009 
  (millions) 
 
5-year term loan facility
 $301  $411 
Revolving $300 million credit facility  90   — 
6.000% loan notes due 2012  4   4 
5.625% senior notes due 2015  350   350 
Fair value adjustment on 5.625% senior notes due 2015  12   — 
12.875% senior notes due 2016  500   500 
6.200% senior notes due 2017  600   600 
7.000% senior notes due 2019  300   300 
         
  $2,157  $2,165 
         
Until December 22, 2010, all direct obligations under the 12.875% senior notes listed above were guaranteed by Willis Group Holdings, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, TA IV Limited, Willis Group Limited and Willis North America Inc., and all direct obligations under the 5.625%, 6.200% and 7.000% senior notes were guaranteed by Willis Group Holdings, Willis Netherland Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited.
On that date and in connection with a group reorganization, TA II Limited, TA III Limited and TA IV Limited transferred their obligations as guarantors to the other Guarantor Companies. TA II Limited, TA III Limited and TA IV Limited entered member’s voluntary liquidation on December 31, 2010.
Debt issuance
During the year ended December 31, 2010, the Company entered into a series of interest rate swaps for a total notional amount of $350 million to receive a fixed rate and pay a variable rate on a semi-annual basis, with a maturity date of July 15, 2015. The Company has designated and accounts for these instruments as fair value hedges against its $350 million 5.625% senior notes due 2015. The fair values of the interest rate swaps are included within other assets or other liabilities and the fair value of the hedged element of the senior notes is included within long-term debt.
The5-year term loan facility bears interest at LIBOR plus 2.250% and is repayable at $27 million per quarter, with a final payment of $115 million due in the fourth quarter of 2013. Drawings under the revolving $300 million credit facility bear interest at LIBOR plus 2.250% and the facility expires on October 1, 2013. On August 9, 2010, Willis North America, Inc. agreed an additional revolving credit facility for $200 million. Drawings on this facility bear interest at LIBOR plus a margin of either 1.750% or 2.750% depending upon


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Notes to the financial statements
18.  DEBT (Continued)
the currency of the loan. This margin applies while the Company’s debt rating remainsBBB-/Baa3. This facility expires on October 1, 2013. As at December 31, 2010 no drawings had been made on the facility.
On June 22, 2010, a further revolving credit facility of $20 million was put in place which bears interest at LIBOR plus 1.700% until 2012 and LIBOR plus 1.850% thereafter. The facility expires on December 22, 2012. As at December 31, 2010 no drawings had been made on the facility.
The $20 million revolving credit facility put in place on June 22, 2010 is solely for the use of our main UK regulated entity and would be available in certain exceptional circumstances. This facility is secured against the freehold of the UK regulated entity’s freehold property in Ipswich.
In March 2009, Trinity Acquisition plc issued 12.875% senior notes due 2016 in an aggregate principal amount of $500 million to Goldman Sachs Mezzanine Partners which generated net proceeds of $482 million. These proceeds were used to refinance part of an interim credit facility.
In September 2009, Willis North America, Inc. issued $300 million of 7.000% senior notes due 2019. A tender offer was launched on September 22, 2009, to repurchase any and all of the $250 million 5.125% senior notes due July 2010 at a premium of $27.50 per $1,000 face value. Notes totaling approximately $160 million were tendered and repurchased.
The agreements relating to our 5-year term loan facility and the Willis North America, Inc. revolving credit facility contain requirements to maintain maximum levels of consolidated funded indebtedness in relation to consolidated EBITDA and minimum levels of consolidated EBITDA to consolidated fixed charges, subject to certain adjustments. In addition, the agreements relating to our credit facilities and senior notes include, in the aggregate, covenants relating to the delivery of financial statements, reports and notices, limitations on liens, limitations on sales and other disposals of assets, limitations on indebtedness and other liabilities, limitations on sale and leaseback transactions, limitations on mergers and other fundamental changes, maintenance of property, maintenance of insurance, nature of business, compliance with applicable laws, maintenance of corporate existence and rights, payment of taxes and access to information and properties. At December 31, 2010, the Company was in compliance with all covenants.
Lines of credit
The Company also has available $2 million (2009: $7 million) in lines of credit, of which $nil was drawn as of December 31, 2010 (2009: $nil).


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Willis Group Holdings plc
18.  DEBT (Continued)
Analysis of interest expense
The following table shows an analysis of the interest expense for the years ended December 31:
             
  Year ended
 
  December 31, 
  2010  2009  2008 
  (millions) 
 
5-year term loan facility
 $17  $26  $10 
Revolving $300 million credit facility  3   3   5 
5.625% senior notes due 2015  14   20   20 
12.875% senior notes due 2016  67   55   — 
6.200% senior notes due 2017  38   38   38 
7.000% senior notes due 2019  21   5   — 
5.125% senior notes due 2010  3   16   13 
Interim credit facility  —   7   17 
Other  3   4   2 
             
Total interest expense $166  $174  $105 
             
19.  PROVISIONS FOR LIABILITIES
An analysis of movements on provisions for liabilities is as follows:
             
  Claims,
       
  lawsuits and other
  Other
    
  proceedings(i)  provisions  Total 
  (millions) 
 
Balance at January 1, 2009 $147  $27  $174 
Net provisions made during the year  56   32   88 
Utilised in the year  (30)  (14)  (44)
Foreign currency translation adjustment  5   3   8 
             
Balance at December 31, 2009 $178  $48  $226 
Net provisions made during the year  19   (7)  12 
Utilised in the year  (50)  (7)  (57)
Foreign currency translation adjustment  (2)  —   (2)
             
Balance at December 31, 2010 $145  $34  $179 
             
(i)The claims, lawsuits and other proceedings provision includes E&O cases which represents management’s assessment of liabilities that may arise from asserted and unasserted claims for alleged errors and omissions that arise in the ordinary course of the Group’s business. Where some of the potential liability is recoverable under the Group’s external insurance arrangements, the full assessment of the liability is included in the provision with the associated insurance recovery shown separately as an asset. Insurance recoveries recognised at December 31, 2010 amounted to $15 million (2009: $63 million).


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Notes to the financial statements
20.  COMMITMENTS AND CONTINGENCIES
The Company’s contractual obligations as at December 31, 2010 are presented below:
                     
        Payments due
       
Obligations Total  2011  by 2012- 2013  2014- 2015  After 2015 
  (millions) 
 
5-year term loan facility expires 2013
 $411  $110  $301  $—  $— 
Interest on term loan  19   9   10   —   — 
Revolving $300 million credit facility  90   —   90   —   — 
6.000% loan notes due 2012  4   —   4   —   — 
5.625% senior notes due 2015  350   —   —   350   — 
Fair value adjustments on 5.625% senior notes due 2015  12   —   —   12   — 
12.875% senior notes due 2016  500   —   —   —   500 
6.200% senior notes due 2017  600   —   —   —   600 
7.000% senior notes due 2019  300   —   —   —   300 
Interest on senior notes  867   142   285   285   155 
                     
Total debt and related interest  3,153   261   690   647   1,555 
Operating leases(i)
  1,295   157   202   143   793 
Pensions  417   119   238   60   — 
Other contractual obligations(ii)
  127   32   7   12   76 
                     
Total contractual obligations $4,992  $569  $1,137  $862  $2,424 
                     
(i)Presented gross of sublease income.
(ii)Other contractual obligations include capital lease commitments, put option obligations and investment fund capital call obligations, the timing of which are included at the earliest point they may fall due.
Debt obligations and facilities
The Company’s debt and related interest obligations at December 31, 2010 are shown in the above table.
During 2010, the Company entered into a new revolving credit facility agreement under which a further $200 million is available and a new UK facility under which a further $20 million is available. As at December 31, 2010 no drawings had been made on either facility.
These facilities are in addition to the remaining availability of $210 million (2009: $300 million) under the Company’s previously existing $300 million revolving credit facility.
The only mandatory repayment of debt over the next 12 months is the scheduled repayment of $110 million current portion of the Company’s5-year term loan. We also have the right, at our option, to prepay indebtedness under the credit facility without further penalty and to redeem the senior notes at our option by paying a ‘make whole’ premium as provided under the applicable debt instrument.
Operating leases
The Company leases certain land, buildings and equipment under various operating lease arrangements. Original non-cancellable lease terms typically are between 10 and 20 years and may contain escalation clauses, along with options that permit early withdrawal. The total amount of the minimum rent is expensed on a straight-line basis over the term of the lease.


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Willis Group Holdings plc
20.  COMMITMENTS AND CONTINGENCIES (Continued)
As of December 31, 2010, the aggregate future minimum rental commitments under all non-cancellable operating lease agreements are as follows:
             
  Gross rental
  Rentals from
  Net rental
 
  commitments  subleases  commitments 
  (millions) 
 
2011 $157  $(16) $141 
2012  115   (13)  102 
2013  87   (11)  76 
2014  73   (11)  62 
2015  70   (10)  60 
Thereafter  793   (42)  751 
             
Total $1,295  $(103) $1,192 
             
The Company leases its London headquarters building under a25-year operating lease, which expires in 2032. The Company’s contractual obligations in relation to this commitment included in the table above total $744 million (2009: $785 million). Annual rentals are $31 million per year and the Company has subleased approximately 25 percent of the premises under leases up to 15 years. The amounts receivable from subleases, included in the table above, total $87 million (2009: $100 million; 2008: $106 million).
Rent expense amounted to $131 million for the year ended December 31, 2010 (2009: $154 million; 2008: $151 million). The Company’s rental income from subleases was $22 million for the year ended December 31, 2010 (2009: $21 million; 2008: $22 million).
Pensions
Contractual obligations for our pension plans reflect the contributions we expect to make over the next five years into our US and UK plans. These contributions are based on current funding positions and may increase or decrease dependent on the future performance of the two plans.
In the UK, we are required to agree a funding strategy for our UK defined benefit plan with the plan’s trustees. In February 2009, we agreed to make full year contributions to the UK plan of $39 million for 2009 through 2012, excluding amounts in respect of the salary sacrifice scheme. In addition, if certain funding targets were not met at the beginning of any of the following years, 2010 through 2012, a further contribution of $39 million would be required for that year. In 2010, the additional funding requirement was triggered and we expect to make a similar additional contribution in 2011. A similar, additional contribution may also be required for 2012, depending on actual performance against funding targets at the beginning of 2012.
The total contributions for all plans are currently estimated to be approximately $125 million in 2011, including amounts in respect of the salary sacrifice scheme.
Guarantees
Guarantees issued by certain of Willis Group Holdings’ subsidiaries with respect to the senior notes and revolving credit facilities are discussed in Note 18 — Debt in these consolidated financial statements.
Certain of Willis Group Holdings’ subsidiaries have given the landlords of some leasehold properties occupied by the Company in the United Kingdom and the United States guarantees in respect of the performance of the lease obligations of the subsidiary holding the lease. The operating lease obligations subject to such guarantees amounted to $855 million and $903 million at December 31, 2010 and 2009, respectively.


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Notes to the financial statements
20.  COMMITMENTS AND CONTINGENCIES (Continued)
In addition, the Company has given guarantees to bankers and other third parties relating principally to letters of credit amounting to $11 million and $5 million at December 31, 2010 and 2009, respectively. Willis Group Holdings also guarantees certain of its UK and Irish subsidiaries’ obligations to fund the UK and Irish defined benefit pension plans.
Other contractual obligations
For certain subsidiaries and associates, the Company has the right to purchase shares (a call option) from co-shareholders at various dates in the future. In addition, the co-shareholders of certain subsidiaries and associates have the right to sell (a put option) their shares to the Company at various dates in the future. Generally, the exercise price of such put options and call options is formula-based (using revenues and earnings) and is designed to reflect fair value. Based on current projections of profitability and exchange rates, the potential amount payable from these options is not expected to exceed $40 million (2009: $49 million).
In December 2009, the Company made a capital commitment of $25 million to Trident V, LP, an investment fund managed by Stone Point Capital. In July 2010, we withdrew from Trident V, LP and subscribed to Trident V Parallel Fund, LP (with the total capital commitment remaining the same). As at December 31, 2010 there had been approximately $1 million of capital contributions.
Other contractual obligations at December 31, 2010 also include the capital lease on the Company’s Nashville property of $63 million, payable from 2012 onwards.
Claims, Lawsuits and Other Proceedings
In the ordinary course of business, the Company is subject to various actual and potential claims, lawsuits, and other proceedings relating principally to alleged errors and omissions in connection with the placement of insurance and reinsurance. Similar to other corporations, the Company is also subject to a variety of other claims, including those relating to the Company’s employment practices. Some of the claims, lawsuits and other proceedings seek damages in amounts which could, if assessed, be significant.
Errors and omissions claims, lawsuits, and other proceedings arising in the ordinary course of business are covered in part by professional indemnity or other appropriate insurance. The terms of this insurance vary by policy year and self-insured risks have increased significantly in recent years. In respect of self-insured risks, the Company has established provisions which are believed to be adequate in the light of current information and legal advice, and the Company adjusts such provisions from time to time according to developments.
On the basis of current information, the Company does not expect that the actual claims, lawsuits and other proceedings, to which the Company is subject, or potential claims, lawsuits, and other proceedings relating to matters of which it is aware will ultimately have a material adverse effect on the Company’s financial condition, results of operations or liquidity. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation and disputes with insurance companies, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods.
The material actual or potential claims, lawsuits and other proceedings, of which the Company is currently aware, are:
Inquiries and Investigations
In connection with the investigation launched by the New York State Attorney General in April 2004 concerning, among other things, contingent commissions paid by insurers to insurance brokers, in April 2005, the Company entered into an Assurance of Discontinuance (‘Original AOD’) with the New York State Attorney General and the Superintendent of the New York Insurance Department and paid $50 million to


113

Willis Group Holdings plc
20.  COMMITMENTS AND CONTINGENCIES (Continued)
eligible clients. As part of the Original AOD, the Company also agreed not to accept contingent compensation and to disclose to customers any compensation the Company will receive in connection with providing policy placement services to the customer. The Company also resolved similar investigations launched by the Minnesota Attorney General, the Florida Attorney General, the Florida Department of Financial Services, and the Florida Office of Insurance Regulation for amounts that were not material to the Company.
Similarly, in August 2005 HRH entered into an agreement with the Attorney General of the State of Connecticut (the ‘CT Attorney General’) and the Insurance Commissioner of the State of Connecticut to resolve all issues related to their investigations into certain insurance brokerage and insurance agency practices and to settle a lawsuit brought in August 2005 by the CT Attorney General alleging violations of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act. As part of this settlement, HRH agreed to take certain actions including establishing a $30 million national fund for distribution to certain clients; enhancing disclosure practices for agency and broker clients; and declining to accept contingent compensation on brokerage business. The Company has cooperated fully with other similar investigations by the regulatorsand/or attorneys general of other jurisdictions, some of which have been concluded with no indication of any finding of wrongdoing.
On February 16, 2010, the Company entered into the Amended and Restated Assurance of Discontinuance with the Attorney General of the State of New York and the Amended and Restated Stipulation with the Superintendent of Insurance of the State of New York (the ‘Amended and Restated AOD’) on behalf of itself and its subsidiaries named therein. The Amended and Restated AOD was effective February 11, 2010 and supersedes and replaces the Original AOD.
The Amended and Restated AOD specifically recognizes that the Company has substantially met its obligations under the Original AOD and ends many of the requirements previously imposed. It relieves the Company of a number of technical compliance obligations that have imposed significant administrative and financial burdens on its operations. The Amended and Restated AOD no longer limits the types of compensation the Company can receive and has lowered the compensation disclosure requirements.
The Amended and Restated AOD requires the Company to:  (i) in New York, and each of the other 49 states of the United States, the District of Columbia and U.S. territories, provide compensation disclosure that will, at a minimum, comply with the terms of the applicable regulations, as may be amended from time to time, or the provisions of the AOD that existed prior to the adoption of the Amended and Restated AOD; and (ii) maintain its compliance programs and continue to provide appropriate training to relevant employees in business ethics, professional obligations, conflicts of interest, and antitrust and trade practices compliance. In addition, in placing, renewing, consulting on or servicing any insurance policy, it prohibits the Company from directly or indirectly (a) accepting from or requesting of any insurer any promise or commitment to use any of the Company’s brokerage, agency, producing or consulting services in exchange for production of business to such insurer or (b) knowingly place, renew or consult on or service a client’s insurance business through a wholesale broker in a manner that is contrary to the client’s best interest.
In 2006, the European Commission issued questionnaires pursuant to its Sector Inquiry or, in respect of Norway, the European Free Trade Association Surveillance Authority, related to insurance business practices, including compensation arrangements for brokers, to at least 150 European brokers including our operations in nine European countries. The Company filed responses to the European Commission and the European Free Trade Association Surveillance Authority questionnaires. The European Commission reported on a final basis on September 25, 2007, expressing concerns over potential conflicts of interest in the industry relating to remuneration and binding authorities and also over the nature of the coinsurance market. The Company co-operated with both the European Free Trade Association Surveillance Authority and the European Commission to resolve issues raised in its final report regarding coinsurance as required of the industry by the European Commission.


114

Notes to the financial statements
20.  COMMITMENTS AND CONTINGENCIES (Continued)
Since August 2004, the Company and HRH (along with various other brokers and insurers) have been named as defendants in purported class actions in various courts across the United States. All of these actions have been consolidated into a single action in the US District Court for the District of New Jersey (‘MDL’). There are two amended complaints within the MDL, one that addresses employee benefits (‘EB Complaint’) and one that addresses all other lines of insurance (‘Commercial Complaint’). HRH was a named defendant in the EB Complaint, but has since been voluntarily dismissed. HRH is a named defendant in the Commercial Complaint. The Company is a named defendant in both MDL complaints. Each of the EB Complaint and the Commercial Complaint seeks monetary damages, including punitive damages, and equitable relief and makes allegations regarding the practices and conduct that have been the subject of the investigation of state attorneys general and insurance commissioners, including allegations that the brokers have breached their duties to their clients by entering into contingent compensation agreements with either no disclosure or limited disclosure to clients and participated in other improper activities. The complaints also allege the existence of a conspiracy among insurance carriers and brokers and allege violations of federal antitrust laws, the federal Racketeer Influenced and Corrupt Organizations (‘RICO’) statute and the Employee Retirement Income Security Act of 1974 (‘ERISA’). In separate decisions issued in August and September 2007, the antitrust and RICO Act claims were dismissed with prejudice and the state claims were dismissed without prejudice from the Commercial Complaint. In January 2008, the Judge dismissed the ERISA claims with prejudice from the EB Complaint and the state law claims without prejudice.
Plaintiffs filed a notice of appeal regarding the dismissal of the antitrust and RICO claims and oral arguments on this appeal were heard in April 2009. In August 2010, the United States Court of Appeals for the Third Circuit issued its decision on plaintiffs’ appeal. The Court upheld the dismissal of all claims against HRH and the Company, with the exception of one RICO related claim. The Court remanded the RICO claim to the District Court for further consideration. The District Judge is allowing HRH and the Company (and the other affected defendants) to submit new motions to dismiss the remanded RICO claim. The motion has been filed, but a decision is not expected until sometime in 2011. Additional actions could be brought in the future by individual policyholders. The Company disputes the allegations in all of these suits and has been and intends to continue to defend itself vigorously against these actions. The outcomes of these lawsuits, however, including any losses or other payments that may occur as a result, cannot be predicted at this time.
Reinsurance Market Dispute
Various legal proceedings are pending, have concluded or may commence between reinsurers, reinsureds and in some cases their intermediaries, including reinsurance brokers, relating to personal accident excess of loss reinsurance for the years 1993 to 1998. The proceedings principally concern allegations by reinsurers that they have sustained substantial losses due to an alleged abnormal ‘spiral’ in the market in which the reinsurance contracts were placed, the existence and nature of which, as well as other information, was not disclosed to them by the reinsureds or their reinsurance broker.
A ‘spiral’ is a market term for a situation in which reinsureds and reinsurers reinsure each other with the effect that the same loss or portion of that loss moves through the market multiple times.
The reinsurers concerned have taken the position that, despite their decisions to underwrite risks or a group of risks, they are no longer bound by their reinsurance contracts. As a result, they have stopped settling claims and are seeking to recover claims already paid. The Company also understands that there have been arbitration awards in relation to a ‘spiral’, among other things, in which the reinsurer successfully argued that it was no longer bound by parts of its reinsurance program. Willis Limited, the Company’s principal insurance brokerage subsidiary in the United Kingdom, acted as the reinsurance broker or otherwise as intermediary, but not as an underwriter, for numerous personal accident reinsurance contracts. Due to the small number of reinsurance brokers generally, Willis Limited also utilized other brokers active in this market assub-agents, including brokers who are parties to the legal proceedings described above, for certain contracts and may be


115

Willis Group Holdings plc
20.  COMMITMENTS AND CONTINGENCIES (Continued)
responsible for any errors and omissions they may have made. In July 2003, one of the reinsurers received a judgment in the English High Court against certain parties, including asub-broker Willis Limited used to place two of the contracts involved in this trial. Although neither the Company nor any of its subsidiaries were a party to this proceeding or any arbitration, Willis Limited entered into tolling agreements with certain of the principals to the reinsurance contracts tolling the statute of limitations pending the outcome of proceedings between the reinsureds and reinsurers.
Two former clients of Willis Limited, American Reliable Insurance Company and one of its associated companies (collectively, ‘ARIC’), and CNA Insurance Company Limited and two of its associated companies (‘CNA’) terminated their respective tolling agreements with Willis Limited and commenced litigation in September 2007 and January 2008, respectively, in the English Commercial Court against Willis Limited. ARIC alleged conspiracy between a former Willis Limited employee and the ARIC underwriter as well as negligence and CNA alleged deceit and negligence by the same Willis Limited employee both in connection with placements of personal accident reinsurance in the excess of loss market in London and elsewhere. On June 9, 2009, Willis Limited entered into a settlement agreement under which Willis Limited paid a total of $139 million to ARIC, which was covered by errors and omissions insurance. On September 11, 2009, Willis Limited entered into a settlement agreement under which Willis Limited paid a total of $130 million to CNA. The Company has substantially collected and believes it will collect in full the $130 million required under the CNA settlement agreement from errors and omissions insurers. The settlements include no admission of wrongdoing by any party. Each party also realized and waived all claims it may have against any of the other parties arising out of or in connection with the subject matter of the litigation.
Various arbitrations relating to reinsurance continue and, from time to time, the principals request co-operation from the Company and suggest that claims may be asserted against the Company. Such claims may be made against the Company if reinsurers do not pay claims on policies issued by them. The Company cannot predict at this time whether any such claims will be made or the damages that may be alleged.
Gender Discrimination Class Action
In March 2008, the Company settled an action in the United States District Court for the Southern District of New York commenced against the Company in 2001 on behalf of an alleged nationwide class of present and former female officer and officer equivalent employees alleging that the Company discriminated against them on the basis of their gender and seeking injunctive relief, money damages, attorneys’ fees and costs. Although the Court had denied plaintiffs’ motions to certify a nationwide class or to grant nationwide discovery, it certified a class of approximately 200 female officers and officer equivalent employees based in the Company’s offices in New York, New Jersey and Massachusetts. The settlement agreement provides for injunctive relief and a monetary payment, including the amount of attorney fees plaintiffs’ counsel are entitled to receive, which was not material to the Company. In December 2006, a former female employee, whose motion to intervene in the class action was denied, filed a purported class action in the United States District Court, Southern District of New York, with almost identical allegations as those contained in the suit that was settled in 2008, except seeking a class period of 1998 to the time of trial (the class period in the settled suit was 1998 to the end of 2001). The Company’s motion to dismiss this suit was denied and the Court did not grant the Company permission to immediately file an appeal from the denial of its motion to dismiss. The parties are in the discovery phase of the litigation. The suit was amended to include one additional plaintiff and another filed an arbitration demand that includes a class allegation.
In January 2011, the Company reached an agreement with plaintiffs on a monetary settlement to settle all class claims and the claims of the individual named plaintiffs as well as the plaintiff that filed an arbitration demand. The amount of this settlement is not material. However, before this matter can be settled in its entirety, the parties must reach agreement on any injunctive measures the Company will implement and the Court must approve all terms of the settlement.


116

Notes to the financial statements
20.  COMMITMENTS AND CONTINGENCIES (Continued)
World Trade Center
The Company acted as the insurance broker, but not as an underwriter, for the placement of both property and casualty insurance for a number of entities which were directly impacted by the September 11, 2001, destruction of the World Trade Center complex, including Silverstein Properties LLC, which acquired a99-year leasehold interest in the twin towers and related facilities from the Port Authority of New York and New Jersey in July 2001. Although the World Trade Center complex insurance was bound at or before the July 2001 closing of the leasehold acquisition, consistent with standard industry practice, the final policy wording for the placements was still in the process of being finalized when the twin towers and other buildings in the complex were destroyed on September 11, 2001. There have been a number of lawsuits in the United States between the insured parties and the insurers for several placements and other disputes may arise in respect of insurance placed by us which could affect the Company including claims by one or more of the insureds that the Company made culpable errors or omissions in connection with our brokerage activities. However, the Company does not believe that our role as broker will lead to liabilities which in the aggregate would have a material adverse effect on our results of operations, financial condition or liquidity.
Stanford Financial Group
On July 2, 2009, a putative class action complaint, captionedTroice, et al. v. Willis of Colorado, Inc., et al., C.A.No. 3:09-CV-01274-N, was filed in the U.S. District Court for the Northern District of Texas against Willis Group Holdings, Willis of Colorado, Inc. and a Willis associate, among others, relating to the collapse of The Stanford Financial Group (’Stanford’), for which Willis of Colorado, Inc. acted as broker of record on certain lines of insurance. The complaint generally alleged that the defendants actively and materially aided Stanford’s alleged fraud by providing Stanford with certain letters regarding coverage that they knew would be used to help retain or attract actual or prospective Stanford client investors. The complaint alleged that these letters, which contain statements about Stanford and the insurance policies that the defendants placed for Stanford, contained untruths and omitted material facts and were drafted in this manner to help Stanford promote and sell its allegedly fraudulent certificates of deposit. The putative class consisted of Stanford investors in Mexico and the complaint asserted various claims under Texas statutory and common law and sought actual damages in excess of $1 billion, punitive damages and costs. On August 12, 2009, the plaintiffs filed an amended complaint, which, notwithstanding the addition of certain factual allegations and Texas common law claims, largely mirrored the original and sought the same relief.
On July 17, 2009, a putative class action complaint, captionedRanni v. Willis of Colorado, Inc., et al., C.A.No. 09-22085, was filed against Willis Group Holdings and Willis of Colorado, Inc. in the U.S. District Court for the Southern District of Florida, relating to the same alleged course of conduct as the Troice complaint described above. Based on substantially the same allegations as the Troice complaint, but on behalf of a putative class of Venezuelan and other South American Stanford investors, the Ranni complaint asserts a claim under Section 10(b) of the Securities Exchange Act of 1934 andRule 10b-5 thereunder, as well as various claims under Florida statutory and common law, and seeks damages in an amount to be determined at trial and costs.
On or about July 24, 2009, a motion was filed by certain individuals (collectively, the ‘Movants’) with the U.S. Judicial Panel on Multidistrict Litigation (the ‘JPML’) to consolidate and coordinate in the Northern District of Texas nine separate putative class actions — including the Troice and Ranni actions described above, as well as other actions against various Stanford-related entities and individuals and the Commonwealth of Antigua and Barbuda — relating to Stanford and its allegedly fraudulent certificates of deposit.
On August 6, 2009, a putative class action complaint, captionedCanabal, et al. v. Willis of Colorado, Inc., et al., C.A.No. 3:09-CV-01474-D, was filed against Willis Group Holdings, Willis of Colorado, Inc. and the same Willis associate, among others, also in the Northern District of Texas, relating to the same alleged course


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Willis Group Holdings plc
20.  COMMITMENTS AND CONTINGENCIES (Continued)
of conduct as the Troice complaint described above. Based on substantially the same allegations as the Troice complaint, but on behalf of a putative class of Venezuelan investors, the Canabal complaint asserted various claims under Texas statutory and common law and sought actual damages in excess of $1 billion, punitive damages, attorneys’ fees and costs.
On or about August 10, 2009, the Movants filed with the JPML a Notice of Related Action that referred the Canabal action to the JPML. On October 6, 2009, the JPML ruled on the transfer motion, transferring seven of the subject actions (including the Troice and Ranni actions) — i.e., the original nine actions minus two that had since been dismissed — for consolidation or coordination in the Northern District of Texas. On October 27, 2009, the parties to the Canabal action stipulated to the designation of that action as a related case and properly part of the new Stanford MDL proceeding in the Northern District of Texas.
On September 14, 2009, a complaint, captionedRupert, et al. v. Winter, et al., Case No. 2009C115137, was filed on behalf of 97 Stanford investors against Willis Group Holdings, Willis of Colorado, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). Based on substantially the same allegations as the Troice complaint, the Rupert complaint asserts claims under the Securities Act of 1933, as well as various Texas statutory and common law claims, and seeks rescission, damages, special damages and consequential damages of $79.1 million, treble damages of $237.4 million under the Texas Insurance Code, attorneys’ fees and costs. On October 20, 2009, certain defendants, including Willis of Colorado, Inc., (i) removed the Rupert action to the U.S. District Court for the Western District of Texas, (ii) notified the JPML of the pendency of this additional ‘tag-along’ action and (iii) moved to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. In November 2009, the JPML issued a conditional transfer order (the ‘CTO’) for the transfer of the Rupert action to the Northern District of Texas. On December 22, 2009, the plaintiffs filed a motion to vacate, or alternatively stay, the CTO, to which Willis of Colorado, Inc. responded on January 4, 2010. On April 1, 2010, the JPML denied the plaintiffs’ motion to vacate the CTO and issued a final transfer order for the transfer of the Rupert action to the Northern District of Texas.
On December 18, 2009, the parties to the Troice and Canabal actions stipulated to the consolidation of those actions and, on December 31, 2009, the plaintiffs therein, collectively, filed a Second Amended Class Action Complaint, which largely mirrors the Troice and Canabal predecessor complaints, but seeks relief on behalf of a worldwide class of Stanford investors. Also on December 31, 2009, the plaintiffs in the Canabal action filed a Notice of Dismissal, dismissing the Canabal action without prejudice. On February 25, 2010, the defendants filed motions to dismiss the Second Amended Class Action Complaint in the consolidated Troice/Canabal action. Those motions are currently pending. On May 24, 2010, the plaintiffs in the consolidated Troice/Canabal action filed a motion for leave to file a Third Amended Class Action Complaint, which, among other things, adds several Texas statutory claims. That motion is also currently pending.
On September 16, 2010, a complaint, captionedCasanova, et al. v. Willis of Colorado, Inc., et al., C.A.No. 3:10-CV-01862-O, was filed on behalf of seven Stanford investors against Willis Group Holdings, Willis Limited, Willis of Colorado, Inc. and the same Willis associate, among others, also in the Northern District of Texas. Although this is not a class action, the Casanova complaint is based on substantially the same allegations as the Second Amended Class Action Complaint in the consolidated Troice/Canabal action. The Casanova complaint asserts various claims under Texas statutory and common law and seeks actual damages in excess of $5 million, punitive damages, attorneys’ fees and costs.
The defendants have not yet responded to the Ranni or Rupert or Casanova complaints.
Additional actions could be brought in the future by other investors in certificates of deposit issued by Stanford and its affiliates. The Company disputes these allegations and intends to defend itself vigorously


118

Notes to the financial statements
20.  COMMITMENTS AND CONTINGENCIES (Continued)
against these actions. The outcomes of these actions, however, including any losses or other payments that may occur as a result, cannot be predicted at this time.
St. Jude
In January 2009, Willis of Minnesota, Inc. was named as a third party defendant in a lawsuit between American Insurance Company (‘AIC’) and St. Jude Medical, Inc. (‘St. Jude’) pending in the United States District Court, District of Minnesota, that arose out of a products liability insurance program for St. Jude in which AIC provided one layer of insurance and the Company acted as the broker. St. Jude sought a judgment against AIC requiring AIC to pay its policy limits of $50 million plus interest and costs for certain personal injury claims filed against St. Jude and denied by AIC. To the extent there was a finding that AIC does not have to provide coverage for these claims, St. Jude alternatively alleged standard errors and omissions claims against the Company for the same amount.
On December 22, 2010, the parties to this suit entered into a settlement agreement that fully resolves all claims in the lawsuit. Under the settlement agreement, the Company agreed to make and has already made an immaterial one-time payment to St. Jude. As part of the settlement agreement, each party has also fully and completely released and waived all claims it may have against any of the other parties arising out of or in connection with the subject matter of the litigation. The settlement includes no admissions of wrongdoing by any party. The lawsuit was dismissed with prejudice on January 3, 2011.
21.  ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX
The components of comprehensive income (loss) are as follows:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Net income $470  $459  $324 
Other comprehensive income (loss), net of tax:            
Foreign currency translation adjustment (net of tax of $nil in 2010, 2009 and 2008)  (6)  27   (89)
Unrealized holding gain (loss) (net of tax of $nil in 2010, 2009 and 2008)  2   (1)  — 
Pension funding adjustment (net of tax of $(12) million in 2010, $6 million in 2009 and $160 million in 2008)  51   (33)  (355)
Net gain (loss) on derivative instruments (net of tax of $(3) million in 2010, $(16) million in 2009 and $13 million in 2008)  6   43   (33)
             
Other comprehensive income (loss) (net of tax of $(15) million in 2010, $(10) million in 2009 and $173 million in 2008)  53   36   (477)
             
Comprehensive income (loss)  523   495   (153)
Noncontrolling interests  (15)  (21)  (21)
             
Comprehensive income (loss) attributable to Willis Group Holdings $508  $474  $(174)
             


119

Willis Group Holdings plc
21.  ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX (Continued)
The components of accumulated other comprehensive loss, net of tax, are as follows:
             
  December 31, 
  2010  2009  2008 
  (millions) 
 
Net foreign currency translation adjustment $(52) $(46) $(73)
Net unrealized holding loss  —   (2)  (1)
Pension funding adjustment  (503)  (554)  (521)
Net unrealized gain (loss) on derivative instruments  14   8   (35)
             
Accumulated other comprehensive loss, attributable to Willis Group Holdings, net of tax $(541) $(594) $(630)
             
22.  EQUITY AND NONCONTROLLING INTERESTS
The components of equity and noncontrolling interests are as follows:
                                     
  December 31, 2010  December 31, 2009  December 31, 2008 
  Willis Group
        Willis Group
        Willis Group
       
  Holdings’
  Noncontrolling
  Total
  Holdings’
  Noncontrolling
  Total
  Holdings’
  Noncontrolling
  Total
 
  stockholders  interests  equity  stockholders  interests  equity  stockholders  interests  equity 
 
Balance at beginning of period $2,180  $49  $2,229  $1,845  $50  $1,895  $1,347  $48  $1,395 
Comprehensive income:                                    
Net income  455   15   470   438   21   459   303   21   324 
Other comprehensive income, net of tax  53   —   53   36   —   36   (477)  —   (477)
                                     
Comprehensive income  508   15   523   474   21   495   (174)  21   (153)
Dividends  (178)  (26)  (204)  (172)  (17)  (189)  (154)  (13)  (167)
Additional paid-in capital  67   —   67   32   —   32   845   —   845 
Shares reissued under stock compensation plans  —   —   —   1   —   1   —   —   — 
Repurchase of shares  —   —   —   —   —   —   (19)  —   (19)
Purchase of subsidiary shares from noncontrolling interests  —   (5)  (5)  —   (10)  (10)  —   (4)  (4)
Additional noncontrolling interests  —   —   —   —   5   5   —   —   — 
Foreign currency translation  —   (2)  (2)  —   —   —   —   (2)  (2)
                                     
Balance at end of period $ 2,577  $31  $ 2,608  $ 2,180  $49  $ 2,229  $ 1,845  $50  $ 1,895 
                                     
The effects on equity of changes in Willis Group Holdings ownership interest in its subsidiaries are as follows:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Net income attributable to Willis Group Holdings $455  $438  $303 
Transfers from noncontrolling interest:            
Decrease in Willis Group Holdings’ paid-in capital for purchase of noncontrolling interest  (19)  (23)  — 
Increase in Willis Group Holdings’ paid-in capital for sale of noncontrolling interest  —   1   — 
             
Net transfers from noncontrolling interest  (19)  (22)  — 
             
Change from net income attributable to Willis Group Holdings and transfers from noncontrolling interests $436  $416  $303 
             


120

Notes to the financial statements
23.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Supplemental disclosures regarding cash flow information and non-cash flow investing and financing activities are as follows:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Supplemental disclosures of cash flow information:            
Cash payments for income taxes, net of cash received $99  $80  $59 
Cash payments for interest  163   179   122 
             
Supplemental disclosures of non-cash flow investing and financing activities:            
Assets acquired under capital leases $23  $—  $— 
Non cash proceeds from reorganization of investments in associates (Note 6)  —   126   — 
Issue of stock on acquisitions of subsidiaries  —   1   799 
Issue of loan notes on acquisitions of noncontrolling interests  —   13   — 
Issue of stock on acquisitions of noncontrolling interests  —   11   4 
Deferred payments on acquisitions of subsidiaries  —   1   — 
Deferred payments on acquisitions of noncontrolling interests  13   1   — 
             
Acquisitions:            
Fair value of assets acquired $12  $28  $1,737 
Less:            
Liabilities assumed  (18)  (55)  (1,521)
Cash acquired  —   (12)  (56)
             
Net (liabilities) assets assumed, net of cash acquired $(6) $(39) $160 
             
24.  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Fair value of derivative financial instruments
In addition to the note below, see Note 25 for information about the fair value hierarchy of derivatives.
Primary risks managed by derivative financial instruments
The main risks arising from the Company’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The Company’s board of directors reviews and agrees policies for managing each of these risks as summarized below.
The Company enters into derivative transactions (principally interest rate swaps and forward foreign currency contracts) in order to manage interest rate and currency risks arising from the Company’s operations and its sources of finance. The Company does not hold financial or derivative instruments for trading purposes.
Interest Rate Risk
As a result of the Company’s operating activities, the Company receives cash for premiums and claims which it deposits in short-term investments denominated in US dollars and other currencies. The Company earns interest on these funds, which is included in the Company’s financial statements as investment income. These funds are regulated in terms of access and the instruments in which they may be invested, most of which are short-term in maturity. In order to manage interest rate risk arising from these financial assets, the Company enters into interest rate swaps to receive a fixed rate of interest and pay a variable rate of interest fixed in the various currencies related to the short-term investments. The use of interest rate contracts essentially converts groups of short-term variable rate investments to fixed rates.


121

Willis Group Holdings plc
24.  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
The fair value of these contracts is recorded in other assets and other liabilities. For contracts that qualify as cash flow hedges for accounting purposes, the effective portions of changes in fair value are recorded as a component of other comprehensive income.
At December 31, 2010 and 2009, the company had the following derivative financial instruments that were designated as cash flow hedges of interest rate risk:
                     
     December 31, 
           Weighted Average
 
           Interest Rates 
     Notional
  Termination
       
     Amount(i)  Dates  Receive  Pay 
 
       (millions)      %  %
2010
                    
US dollar  Receive fixed-pay variable  $725   2011-2014   2.44   1.33 
Pounds sterling  Receive fixed-pay variable   229   2011-2014   3.16   1.88 
Euro  Receive fixed-pay variable   155   2011-2014   2.18   1.81 
2009
                    
US dollar  Receive fixed-pay variable  $605   2010-2013   4.72   1.85 
Pounds sterling  Receive fixed-pay variable   196   2010-2012   5.23   1.78 
Euro  Receive fixed-pay variable   91   2010-2012   3.55   1.69 
(i)Notional amounts represent US dollar equivalents translated at the spot rate as of December 31.
The Company’s operations are financed principally by $1,750 million fixed rate senior notes and $411 million under a5-year term loan facility. Of the fixed rate senior notes $350 million are due 2015, $500 million are due 2016, $600 million are due 2017 and $300 million are due 2019. The Company also has access to $520 million under three revolving credit facilities; as of December 31, 2010 $90 million was drawn from the5-year $300 million revolving credit facility. All debt is issued by subsidiaries of the Company.
The interest rates applicable to the borrowings under the5-year term loan and the revolving credit facilities vary according to LIBOR on the date of individual drawdowns.
During the year ended December 31, 2010, the Company entered into a series of interest rate swaps for a total notional amount of $350 million to receive a fixed rate and pay a variable rate on a semi-annual basis, with a maturity date of July 15, 2015. At the year end the weighted average fixed rate payable was 2.71% and variable rate receivable was 2.04%. The Company has designated and accounts for these instruments as fair value hedges against its $350 million 5.625% senior notes due 2015. The fair values of the interest rate swaps are included within other assets or other liabilities and the fair value of the hedged element of the senior notes is included within long-term debt.
At December 31, 2010 and 2009, the Company’s interest rate swaps were all designated as hedging instruments.
Liquidity Risk
The Company’s objective is to ensure that it has the ability to generate sufficient cash either from internal or external sources, in a timely and cost-effective manner, to meet its commitments as they fall due. The Company’s management of liquidity risk is embedded within its overall risk management framework. Scenario analysis is continually undertaken to ensure that the Company’s resources can meet its liquidity requirements. These resources are supplemented by access to $520 million under three revolving credit facilities.


122

Notes to the financial statements
24.  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Foreign Currency Risk
The Company’s primary foreign exchange risks arise:
• from changes in the exchange rate between US dollars and pounds sterling as its London market operations earn the majority of their revenues in US dollars and incur expenses predominantly in pounds sterling, and may also hold a significant net sterling asset or liability position on the balance sheet. In addition, the London market operations earn significant revenues in euros and Japanese yen; and
• from the translation into US dollars of the net income and net assets of its foreign subsidiaries, excluding the London market operations which are US dollar denominated.
The foreign exchange risks in its London market operations are hedged as follows:
• To the extent that forecast pound sterling expenses exceed pound sterling revenues, the Company limits its exposure to this exchange rate risk by the use of forward contracts matched to specific, clearly identified cash outflows arising in the ordinary course of business;
• To the extent the UK operations earn significant revenues in euros and Japanese yen, the Company limits its exposure to changes in the exchange rate between the US dollar and these currencies by the use of forward contracts matched to a percentage of forecast cash inflows in specific currencies and periods; and
• To the extent that the net sterling asset or liability position in its London market operations relate to short-term cash flows, the Company limits its exposure by the use of forward purchases and sales. These forward purchases and sales are not effective hedges for accounting purposes.
The Company does not hedge net income earned within foreign subsidiaries outside of the UK.
The fair value of foreign currency contracts is recorded in other assets and other liabilities. For contracts that qualify as accounting hedges, changes in fair value resulting from movements in the spot exchange rate are recorded as a component of other comprehensive income whilst changes resulting from a movement in the time value are recorded in interest expense. For contracts that do not qualify for hedge accounting, the total change in fair value is recorded in interest expense. Amounts held in comprehensive income are reclassified into earnings when the hedged exposure affects earnings.
At December 31, 2010 and 2009, the Company’s foreign currency contracts were all designated as hedging instruments.
The table below summarizes by major currency the contractual amounts of the Company’s forward contracts to exchange foreign currencies for pounds sterling in the case of US dollars and US dollars for Euro and Japanese yen. Foreign currency notional amounts are reported in US dollars translated at contracted exchange rates.
         
  December 31, 
  Sell
  Sell
 
  2010(i)  2009 
  (millions) 
 
US dollar $315  $261 
Euro  157   185 
Japanese yen  64   58 
(i)Forward exchange contracts range in maturity from 2011 to 2013.


123

Willis Group Holdings plc
24.  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Credit Risk and Concentrations of Credit Risk
Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to perform as contracted and from movements in interest rates and foreign exchange rates. The Company does not anticipate non-performance by counterparties. The Company generally does not require collateral or other security to support financial instruments with credit risk; however, it is the Company’s policy to enter into master netting arrangements with counterparties as practical.
Concentrations of credit risk that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Financial instruments on the balance sheet that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and derivatives which are recorded at fair value.
The Company maintains a policy providing for the diversification of cash and cash equivalent investments and places such investments in an extensive number of financial institutions to limit the amount of credit risk exposure. These financial institutions are monitored on an ongoing basis for credit quality predominantly using information provided by credit agencies.
Concentrations of credit risk with respect to receivables are limited due to the large number of clients and markets in which the Company does business, as well as the dispersion across many geographic areas. Management does not believe significant risk exists in connection with the Company’s concentrations of credit as of December 31, 2010.
Derivative financial instruments
The table below presents the fair value of the Company’s derivative financial instruments and their balance sheet classification at December 31:
           
    Fair value 
  Balance sheet
 December 31,
  December 31,
 
Derivative financial instruments designated as hedging instruments: classification 2010  2009 
    (millions) 
 
Assets:          
Interest rate swaps (cash flow hedges)(i)
 Other assets $17  $27 
Interest rate swaps (fair value hedges)(ii)
 Other assets  14   — 
Forward exchange contracts Other assets  16   8 
           
Total derivatives designated as hedging instruments   $47  $35 
           
Liabilities:          
Interest rate swaps (cash flow hedges) Other liabilities $(2) $(1)
Forward exchange contracts Other liabilities  (10)  (22)
           
Total derivatives designated as hedging instruments   $(12) $(23)
           
(i)Excludes accrued interest of $3 million (2009: $4 million), which is recorded in prepayments and accrued income, in other assets.
(ii)Excludes accrued interest of $3 million (2009: $nil), which is recorded in accrued interest payable in other liabilities.


124

Notes to the financial statements
24.  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Cashflow Hedges
The table below presents the effects of derivative financial instruments in cash flow hedging relationships on the consolidated statements of operations and the consolidated statements of equity for years ended December 31, 2010, 2009 and 2008:
                 
          Location of
 Amount of
 
          gain (loss)
 gain (loss)
 
     Location of
 Amount of
  recognized
 recognized
 
  Amount of
  gain (loss)
 gain (loss)
  in income
 in income
 
  gain (loss)
  reclassified
 reclassified
  on derivative
 on derivative
 
  recognized
  from
 from
  (Ineffective
 (Ineffective
 
  in OCI(i)
  accumulated
 accumulated
  hedges and
 hedges and
 
  on
  OCI(i) into
 OCI(i) into
  ineffective
 ineffective
 
  derivative
  income
 income
  element of
 element of
 
Derivatives in cash flow
 (Effective
  (Effective
 (Effective
  effective
 effective
 
hedging relationships element)  element) element)  hedges) hedges) 
  (millions)    (millions)    (millions) 
 
Year ended December 31, 2010
            
Interest rate swaps $15  Investment income $(26) Other operating expenses $— 
Forward exchange contracts  —  Other operating expenses  20  Interest expense  — 
                 
Total $15    $(6)   $— 
                 
Year ended December 31, 2009
            
Interest rate swaps $16  Investment income $(27) Other operating expenses $(1)
Forward exchange contracts  25  Other operating expenses  45  Interest expense  — 
                 
Total $41    $18    $(1)
                 
Year ended December 31, 2008
            
Interest rate swaps $32  Investment income $(5) Other operating expenses $1 
Forward exchange contracts  (78) Other operating expenses  5  Interest expense  (1)
                 
Total $(46)   $—    $— 
                 
(i)OCI means other comprehensive income. Amounts above shown gross of tax.
For interest rate swaps all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. For foreign exchange contracts only the changes in fair value resulting from movements in the spot exchange rate are included in this assessment.
At December 31, 2010 the Company estimates there will be $7 million of net derivative gains reclassified from accumulated comprehensive income into earnings within the next twelve months.
Fair Value Hedges
The table below presents the effects of derivative financial instruments in fair value hedging relationships on the consolidated statements of operations for the year ended December 31, 2010. The Company did not have any derivative financial instruments in fair value hedging relationships during 2009 and 2008.


125

Willis Group Holdings plc
24.  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
               
       Loss
  Ineffectiveness
 
    Gain
  recognized
  recognized in
 
Derivatives in fair value hedging
 Hedged item in fair value hedging
 recognized
  for hedged
  interest
 
relationships relationship for derivative  item  expense 
    (millions) 
 
Year ended December 31, 2010
              
Interest rate swaps 5.625% senior notes due 2015 $14  $(12) $(2)
               
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
25.  FAIR VALUE MEASUREMENTS
The Company’s principal financial instruments, other than derivatives, comprise the fixed rate senior notes, the5-year term loan, a revolving credit facility, fiduciary assets and liabilities, and cash deposits.
The following table presents, for each of the fair-value hierarchy levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis:
                 
  December 31, 2010 
  Quoted
          
  prices in
          
  active
          
  markets
  Significant
  Significant
    
  for
  other
  other
    
  identical
  observable
  unobservable
    
  assets  inputs  inputs    
  Level 1  Level 2  Level 3  Total 
  (millions) 
 
Assets at fair value:                
Cash and cash equivalents $316  $—  $—  $316 
Fiduciary funds — restricted (included within Fiduciary assets)  1,764   —   —   1,764 
Derivative financial instruments(i)
  —   47   —   47 
                 
Total assets $2,080  $47  $—  $2,127 
                 
Liabilities at fair value:                
Derivative financial instruments $—  $12  $—  $12 
Changes in fair value of hedged debt(ii)
  —   12   —   12 
                 
Total liabilities $—  $24  $—  $24 
                 
(i)Excludes accrued interest of $6 million, $3 million is recorded in prepayments and accrued income, and $3 million is recorded in accrued interest payable.
(ii)Changes in the fair value of the underlying hedged debt instrument since inception of the hedging relationship are included in long-term debt.
                 
  December 31, 2009 
  Level 1  Level 2  Level 3  Total 
  (millions) 
 
Assets at fair value:                
Cash and cash equivalents $221  $—  $—  $221 
Fiduciary funds — restricted (included within Fiduciary assets)  1,683   —   —   1,683 
Derivative financial instruments(i)
  —   35   —   35 
                 
Total assets $1,904  $35  $—  $1,939 
                 
Liabilities at fair value:                
Derivative financial instruments $—  $23  $—  $23 
                 
Total liabilities $—  $23  $—  $23 
                 
(i)Excludes accrued interest of $4 million, which is recorded in prepayments and accrued income in other assets.

126

Notes to the financial statements
25.  FAIR VALUE MEASUREMENTS (Continued)
The estimated fair value of the Company’s financial instruments held or issued to finance the Company’s operations is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that the Company would realize upon disposition nor do they indicate the Company’s intent or ability to dispose of the financial instrument.
                 
  December 31, 
  2010  2009 
  Carrying
  Fair
  Carrying
  Fair
 
  amount  Value  amount  Value 
  (millions) 
 
Assets:                
Cash and cash equivalents $316  $316  $221  $221 
Fiduciary funds — restricted (included within Fiduciary assets)  1,764   1,764   1,683   1,683 
Derivative financial instruments(i)
  47   47   35   35 
Liabilities:                
Short-term debt $110  $110  $209  $211 
Long-term debt  2,157   2,450   2,165   2,409 
Derivative financial instruments  12   12   23   23 
(i)Excludes accrued interest of $6 million (2009: $4 million); $3 million (2009: $4 million) is recorded in prepayments and accrued income, and $3 million (2009: $nil) is recorded in accrued interest payable.
The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments:
Cash and Cash Equivalents —The estimated fair value of these financial instruments approximates their carrying values due to their short maturities.
Fiduciary Funds — Restricted —Fair values are based on quoted market values
Long-Term Debt excluding the fair value hedge —Fair values are based on quoted market values.
Derivative Financial Instruments —Market values have been used to determine the fair value of interest rate swaps and forward foreign exchange contracts based on estimated amounts the Company would receive or have to pay to terminate the agreements, taking into account the current interest rate environment or current foreign currency forward rates.
26.  SEGMENT INFORMATION
During the periods presented, the Company operated through three segments: Global; North America and International. Global provides specialist brokerage and consulting services to clients worldwide for specific industrial and commercial activities and is organized by specialism. North America and International predominantly comprise our retail operations which provide services to small, medium and major corporates, accessing Global’s specialist expertise when required.
The Company evaluates the performance of its operating segments based on organic revenue growth and operating income. For internal reporting and segmental reporting, the following items for which segmental management are not held accountable are excluded from segmental expenses:
i)    costs of the holding company;
ii)   foreign exchange loss from the devaluation of the Venezuelan currency;


127

Willis Group Holdings plc
26.  SEGMENT INFORMATION (Continued)
iii)  foreign exchange hedging activities, foreign exchange movements on the UK pension plan asset and foreign exchange gains and losses from currency purchases and sales;
iv)   amortization of intangible assets;
v)    gains and losses on the disposal of operations and major properties;
vi)   significant legal settlements which are managed centrally;
vii)  integration costs associated with the acquisition of HRH; and
viii)  costs associated with the redomicile of the Company’s parent company from Bermuda to Ireland.
The accounting policies of the operating segments are consistent with those described in Note 2 — Basis of Presentation and Significant Accounting Policies. There are no inter-segment revenues, with segments operating on a revenue-sharing basis equivalent to that used when sharing business with other third-party brokers.
Selected information regarding the Company’s operating segments is as follows:
                             
                    Interest in
 
                    earnings
 
              Depreciation
     of
 
  Commissions
  Investment
  Other
  Total
  and
  Operating
  associates
 
  and fees  income  income  revenues  amortization  income  net of tax 
  (millions) 
 
Year ended December 31, 2010
                            
Global $873  $7  $—  $880  $18  $262  $— 
North America  1,359   15   1   1,375   23   319   — 
International  1,068   16   —   1,084   22   285   23 
                             
Total Retail  2,427   31   1   2,459   45   604   23 
                             
Total Operating Segments  3,300   38   1   3,339   63   866   23 
Corporate and Other(i)
  —   —   —   —   82   (113)  — 
                             
Total Consolidated $3,300  $38  $1  $3,339  $145  $753  $23 
                             
Year ended December 31, 2009
                            
Global $822  $13  $—  $835  $15  $255  $— 
North America  1,368   15   3   1,386   23   328   — 
International  1,020   22   —   1,042   26   276   33 
                             
Total Retail  2,388   37   3   2,428   49   604   33 
                             
Total Operating Segments  3,210   50   3   3,263   64   859   33 
Corporate and Other(i)
  —   —   —   —   100   (165)  — 
                             
Total Consolidated $3,210  $50  $3  $3,263  $164  $694  $33 
                             


128

Notes to the financial statements
26.  SEGMENT INFORMATION (Continued)
                             
                    Interest in
 
                    earnings
 
              Depreciation
     of
 
  Commissions
  Investment
  Other
  Total
  and
  Operating
  associates
 
  and fees  income  income  revenues  amortization  income  net of tax 
  (millions) 
 
Year ended December 31, 2008
                            
Global $784  $30  $—  $814  $13  $240  $— 
North America  905   15   2   922   16   142   — 
International  1,055   36   —   1,091   25   306   22 
                             
Total Retail  1,960   51   2   2,013   41   448   22 
                             
Total Operating Segments  2,744   81   2   2,827   54   688   22 
Corporate and Other(i)
  —   —   —   —   36   (185)  — 
                             
Total Consolidated $2,744  $81  $2  $2,827  $90  $503  $22 
                             
(i)Corporate and Other includes the following:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Amortization of intangible assets $(82) $(100) $(36)
Foreign exchange hedging  (16)  (42)  (13)
Foreign exchange on the UK pension plan asset  3   (6)  (34)
HRH integration costs  —   (18)  (5)
Net (loss) gain on disposal of operations  (2)  13   — 
2008 expense review  —   —   (92)
Gain on disposal of London headquarters  —   —   7 
Venezuela currency devaluation  (12)  —   — 
Release of previously established legal provision  7   —   — 
Redomicile of parent company costs  —   (6)  — 
Other  (11)  (6)  (12)
             
Total corporate and other $(113) $(165) $(185)
             
The following table reconciles total consolidated operating income, as disclosed in the operating segment tables above, to consolidated income from continuing operations before income taxes and interest in earnings of associates.
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Total consolidated operating income $753  $694  $503 
Interest expense  (166)  (174)  (105)
             
Income from continuing operations before income taxes and interest in earnings of associates $587  $520  $398 
             

129

Willis Group Holdings plc
26.  SEGMENT INFORMATION (Continued)
The Company does not routinely evaluate the total asset position by segment, and the following allocations have been made based on reasonable estimates and assumptions:
         
  December 31, 
  2010  2009 
  (millions) 
 
Total assets:        
Global $9,636  $9,544 
         
North America  4,032   4,408 
International  2,109   2,246 
         
Total Retail  6,141   6,654 
         
Total Operating Segments  15,777   16,198 
Corporate and Eliminations  70   (573)
         
Total Consolidated $15,847  $15,625 
         
Operating segment revenue by product is as follows:
                                                 
  Years ended December 31, 
  2010  2009  2008  2010  2009  2008  2010  2009  2008  2010  2009  2008 
  Global  North America  International  Total 
  (millions) 
 
Commissions and fees:                                                
Retail insurance services $—  $—  $—  $1,359  $1,368  $905  $1,068  $1,020  $1,055  $2,427  $2,388  $1,960 
Specialty insurance services  873   822   784   —   —   —   —   —   —   873   822   784 
                                                 
Total commissions and fees  873   822   784   1,359   1,368   905   1,068   1,020   1,055   3,300   3,210   2,744 
Investment income  7   13   30   15   15   15   16   22   36   38   50   81 
Other income  —   —   —   1   3   2   —   —   —   1   3   2 
                                                 
Total Revenues $880  $835  $814  $1,375  $1,386  $922  $1,084  $1,042  $1,091  $3,339  $3,263  $2,827 
                                                 
None of the Company’s customers represented more than 10 percent of the Company’s consolidated commissions and fees for the years ended December 31, 2010, 2009 and 2008.
Information regarding the Company’s geographic locations is as follows:
             
  Years ended December 31, 
  2010  2009  2008 
  (millions) 
 
Commissions and fees(i)
            
UK $902  $859  $860 
US  1,510   1,518   1,054 
Other(ii)
  888   833   830 
             
Total $3,300  $3,210  $2,744 
             


130

Notes to the financial statements
26.  SEGMENT INFORMATION (Continued)
         
  December 31, 
  2010  2009 
  (millions) 
 
Fixed assets        
UK $163  $172 
US  178   141 
Other(ii)
  40   39 
         
Total $381  $352 
         
(i)Commissions and fees are attributed to countries based upon the location of the subsidiary generating the revenue.
(ii)Other than in the United Kingdom and the United States, the Company does not conduct business in any country in which its commissions and fees and/or fixed assets exceed 10 percent of consolidated commissions and fees and/or fixed assets, respectively.
27.  SUBSIDIARY UNDERTAKINGS
The Company has investments in the following subsidiary undertakings which principally affect the net income or net assets of the Group.
A full list of the Group’s subsidiary undertakings is included within the Company’s annual return.
Country of
Percentage
Subsidiary NameRegistrationClass of shareOwnership
Holding companies
TAI LimitedEngland and WalesOrdinary shares100%
Trinity Acquisition plcEngland and WalesOrdinary shares100%
Willis Faber LimitedEngland and WalesOrdinary shares100%
Willis Group LimitedEngland and WalesOrdinary shares100%
Willis Investment UK Holdings LimitedEngland and WalesOrdinary shares100%
Willis Netherlands Holdings B.V.NetherlandsOrdinary shares100%
Willis Europe B.V. England and WalesOrdinary shares100%
Insurance broking companies
Willis HRH, Inc.USACommon shares100%
Willis LimitedEngland and WalesOrdinary shares100%
Willis North America, Inc. USACommon shares100%
Willis Re, IncUSACommon shares100%
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
On July 1, 2005, Willis North America Inc. (‘Willis North America’) issued senior notes totaling $600 million under its February 2004 registration statement. On March 28, 2007, Willis North America issued further senior notes totaling $600 million under its June 2006 registration statement. On September 29, 2009, Willis North America issued senior notes totaling $300 million under its June 2009 registration statement (Note 18 — Debt).
Until December 22, 2010, all direct obligations under the senior notes were jointly and severally, irrevocably and fully and unconditionally guaranteed by Willis Group Holdings, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, Trinity Acquisition plc, TA III Limited, TA IV Limited, and Willis Group Limited, the Guarantor Companies. On that date and in connection with an internal group reorganisation, TA II Limited, TA III Limited and TA IV Limited transferred their obligations

131

Willis Group Holdings plc
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
as guarantors to the other Guarantor Companies. TA II Limited, TA III Limited and TA IV Limited entered member’s voluntary liquidation on December 31, 2010. The assets of these companies were distributed to the other Guarantor Companies, either directly or indirectly, as a final distribution paid prior to their entering member’s voluntary liquidation. These final distributions have been excluded from the 2010 results and cash flows of the Other Guarantors. The final distributions comprise: a $4.3 billion dividend from TA IV Limited to Trinity Acquisition plc; a $5.1 billion distribution from TA III Limited to TA II Limited and a $4.7 billion distribution from TA II Limited to TA I Limited. Since all of the liquidated guarantors were ultimately liquidated into another guarantor, these transactions did not have a material impact on the guarantees of the senior notes and did not require the consent of the noteholders under the applicable indentures.
Willis Group Holdings was incorporated on September 24, 2009 and, as discussed in Note 2, replaced Willis-Bermuda as the ultimate parent company on December 31, 2009. Willis Netherlands Holdings B.V. was incorporated on November 27, 2009.
The debt securities that were issued by Willis North America and guaranteed by the entities described above, and for which the disclosures set forth below relate and are required under applicable SEC rules, were issued under a “shelf” registration statementsReport on Form S-3, including our current June 2009 registration statement (the “Willis Shelf”10-K (this “Amendment”). The Willis Shelf also covers and contemplates possible issuances of securities by, and guarantees by, other Willis group entities, including Willis Group Holdings. One possible structure originally contemplated by the Willis Shelf was for debt securities issued by Trinity Acquisition plc and guaranteed by certain of its direct and indirect parent entities, but not guaranteed by its direct and indirect subsidiaries, including Willis North America, and the financial statements included in to our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 included2012 (the “Original Form 10-K”) that was originally filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2013.

This Amendment is being filed solely to include the information required in Part III (Items 10, 11, 12, 13 and 14) of Form 10-K that was previously omitted from the Original Form 10-K in reliance on General Instruction G(3) to Form 10-K. General Instruction G(3) to Form 10-K allows such omitted information to be filed as an amendment to the Original Form 10-K or incorporated by reference from the Company’s definitive proxy statement which involves the election of directors not later than 120 days after the end of the fiscal year covered by the Original Form 10-K. As of the date of this Amendment, the Company does not intend to file a footnote (Note 25)definitive proxy statement containing the information required in Part III within such 120-day period. Accordingly, the Company is filing this Amendment to include such omitted information as part of the Original Form 10-K.

Except as expressly set forth herein, this Amendment does not reflect events that correspondedoccurred after the date of the Original Form 10-K and does not modify or update any of the other disclosures contained therein in any way. This Amendment No. 1 should be read in conjunction with the Original Form 10-K and the Company’s other filings with the SEC. This Amendment consists solely of the preceding cover page, this explanatory note, Part III (Items 10, 11, 12, 13 and 14), the signature page and the certifications required to be filed as exhibits to this possible issuance structure. We have determined that we will not utilizeAmendment.

i

PART III

Item 10—Directors, Executive Officers and Corporate Governance

Directors

The following table sets forth, as of April 24, 2013, the Willis Shelf to issue debt securities using such a structure,name, age and we therefore have not included a corresponding footnote in these financial statements.

Presented below is condensed consolidating financial information for:
(i)  Willis Group Holdings, which is a guarantor, on a parent company only basis;
(ii)  the Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent and are all direct or indirect parents of the issuer;
(iii)  the Issuer, Willis North America;
(iv)  Other, which are the non-guarantor subsidiaries, on a combined basis;
(v)  Eliminations; and
(vi)  Consolidated Company.
summary background of each of our current directors and director nominees. Directors are elected by our shareholders at our Annual General Meeting of Shareholders and serve until the next Annual General Meeting of Shareholders or until his or her earlier resignation or removal. The equity methodNominating and Corporate Governance Committee (the “Governance Committee”) has been used for investments in subsidiaries inreviewed the condensed consolidating balance sheets forneeds of the year ended December 31, 2010Board and the qualities, experience and performance of each director.

At the Governance Committee’s recommendation, the Board has renominated all current directors except Joseph J. Plumeri, our former CEO of Willis Group Holdings plc, who is retiring as Chairman and as a director on July 7, 2013, and Joseph A. Califano and Jeffrey B. Lane, who have informed the Other GuarantorsBoard of their respective decision not to stand for re-election at the Company’s 2013 Annual General Meeting of Shareholders. In addition, the Board has nominated Jeffrey W. Ubben for election to the Board.

Director and Director Nominees  Age  Director
Since		  Summary Background

Joseph A. Califano, Jr.

  81  2004  Former U.S. Secretary of Health, Education and Welfare

Dominic Casserley

  55  2013  CEO of Willis Group Holdings plc

Anna C. Catalano

  53  2006  Former Group Vice President, Marketing for BP plc

Sir Roy Gardner

  67  2006  Chairman of Compass Group, PLC

The Rt. Hon. Sir Jeremy Hanley, KCMG

  67  2006  Former Member of Parliament for Richmond and Barnes

Robyn S. Kravit

  61  2008  Chief Executive Officer of Tethys Research, LLC

Jeffrey B. Lane

  70  2008  Former Chairman and CEO of Bear Stearns Asset Management

Wendy E. Lane

  61  2004  Chairman of Lane Holdings, Inc.

James F. McCann

  61  2004  Chairman and CEO of 1-800-Flowers

Joseph J. Plumeri

  69  2001  Former CEO of Willis Group Limited plc

Douglas B. Roberts

  65  2003  Professor and the Director for Institute of Public Policy and Social Research - Michigan State University

Dr. Michael J. Somers

  70  2010  Former CEO of Irish National Treasury Management Agency

Jeffrey W. Ubben

  51  Nominee  Founder and CEO of ValueAct Capital Management

Nominees for Election

The Company is a leading global insurance broker and risk advisor. Through its subsidiaries, Willis develops and delivers professional insurance, reinsurance, risk management, financial and human resources consulting and actuarial services to corporations, public entities and institutions around the world. We have approximately 21,000 employees around the world (including approximately 3,400 at our associate companies) and a network of in excess of 400 offices in approximately 120 countries.

Directors are responsible for overseeing the Company’s business around the globe consistent with their fiduciary duties. This requires highly-skilled individuals with various qualities, attributes and professional experience. The Governance Committee believes that the slate of nominees as a whole reflects the collective knowledge, integrity, reputation, and leadership abilities, and, as discussed more below, the diversity of skills and experience with respect to accounting and financial services, government and regulation, marketing and operations and global markets that the governance of the Company requires.

Qualifications

When recommending a person for new or continued membership on the Board, the Governance Committee considers each nominee’s individual qualifications in light of the overall mix of attributes represented on the Board and the Issuer. Investments in subsidiaries inCompany’s current and future needs. In its assessment of each nominee, the condensed consolidating balance sheet for Other, representsGovernance Committee considers the cost of investment in subsidiaries recorded inperson’s integrity, experience, reputation, independence and when the parent companiesperson is a current director of the non-guarantor subsidiaries.

Company, his or her performance as a director. The entities included inGovernance Committee considers each director’s ability to devote the Other Guarantors column for the year ended December 31, 2010 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, Trinity Acquisition plc, TA I Limited, TA II Limited, TA III Limited, TA IV Limitedtime and Willis Group Limited. See the discussion above describing the liquidation of certain of these entities.


132

Noteseffort necessary to fulfill responsibilities to the financial statements
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
Condensed Consolidating StatementCompany and, for current directors, whether each director has attended at least 75% of Operations
                         
  Year ended December 31, 2010 
  Willis
                
  Group
  The Other
  The
     Consolidating
    
  Holdings  Guarantors  Issuer  Other�� adjustments  Consolidated 
  (millions) 
 
REVENUES                        
Commissions and fees $—  $—  $—  $3,300  $—  $3,300 
Investment income  —   10   2   36   (10)  38 
Other income  —   —   —   1   —   1 
                         
Total revenues  —   10   2   3,337   (10)  3,339 
                         
EXPENSES                        
Salaries and benefits  —   —   —   (1,888)  15   (1,873)
Other operating expenses  335   (10)  (110)  (762)  (19)  (566)
Depreciation expense  —   —   (9)  (54)  —   (63)
Amortization of intangible assets  —   —   —   (82)  —   (82)
Net (loss) gain on disposal of operations  (347)  —   —   350   (5)  (2)
                         
Total expenses  (12)  (10)  (119)  (2,436)  (9)  (2,586)
                         
OPERATING (LOSS) INCOME  (12)  —   (117)  901   (19)  753 
Investment income from Group undertakings  —   1,683   356   952   (2,991)  — 
Interest expense  —   (423)  (157)  (374)  788   (166)
                         
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES  (12)  1,260   82   1,479   (2,222)  587 
Income taxes  —   16   29   (186)  1   (140)
                         
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES  (12)  1,276   111   1,293   (2,221)  447 
Interest in earnings of associates, net of tax  —   —   —   16   7   23 
                         
                         
(LOSS) INCOME FROM CONTINUING OPERATIONS  (12)  1,276   111   1,309   (2,214)  470 
                         
NET (LOSS) INCOME  (12)  1,276   111   1,309   (2,214)  470 
                         
Less: Net income attributable to noncontrolling interests  —   —   —   (15)  —   (15)
EQUITY ACCOUNT FOR SUBSIDIARIES  467   (823)  (76)  —   432   — 
                         
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS $455  $453  $35  $1,294  $(1,782) $455 
                         


133

the aggregate of the total number of meetings held by the Board and any committee on which he or she served. In 2012 each director satisfied this requirement. The Governance Committee believes service on other public or private boards (including international companies) also enhances a director’s knowledge and board experience. It considers the experience of a director on other boards and board committees in both this nomination decision and in recommending the membership slate for each of the Company Board’s Committees.

Willis Group Holdings plc
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
Condensed Consolidating Statement of Operations
                         
  Year ended December 31, 2009 
  Willis
                
  Group
  The Other
  The
     Consolidating
    
  Holdings  Guarantors  Issuer  Other  adjustments  Consolidated 
  (millions) 
 
REVENUES                        
Commissions and fees $—  $—  $—  $3,210  $—  $3,210 
Investment income  —   —   4   46   —   50 
Other income  —   —   —   3   —   3 
                         
Total revenues  —   —   4   3,259   —   3,263 
                         
EXPENSES                        
Salaries and benefits  —   —   —   (1,836)  9   (1,827)
Other operating expenses  —   57   (62)  (590)  4   (591)
Depreciation expense  —   —   (8)  (56)  —   (64)
Amortization of intangible assets  —   —   —   (100)  —   (100)
Net gain on disposal of operations  —   —   —   13   —   13 
                         
Total expenses  —   57   (70)  (2,569)  13   (2,569)
                         
OPERATING INCOME (LOSS)  —   57   (66)  690   13   694 
Investment income from Group undertakings  —   917   492   504   (1,913)  — 
Interest expense  —   (415)  (173)  (346)  760   (174)
                         
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES  —   559   253   848   (1,140)  520 
Income taxes  —   (5)  20   (112)  1   (96)
                         
INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES  —   554   273   736   (1,139)  424 
Interest in earnings of associates, net of tax  —   —   —   33   —   33 
                         
INCOME FROM CONTINUING OPERATIONS  —   554   273   769   (1,139)  457 
Discontinued operations, net of tax  —   —   —   2   —   2 
                         
NET INCOME  —   554   273   771   (1,139)  459 
Less: Net income attributable to noncontrolling interests  —   —   —   (4)  (17)  (21)
EQUITY ACCOUNT FOR SUBSIDIARIES  438   (156)  (30)  —   (252)  — 
                         
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS $438  $398  $243  $767  $(1,408) $438 
                         


134

NotesThe Governance Committee believes that including directors having current and previous leadership positions is important to the financial statements
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
Condensed Consolidating Statement of Operations
                         
  Year ended December 31, 2008 
  Willis
                
  Group
  The Other
  The
     Consolidating
    
  Holdings  Guarantors  Issuer  Other  adjustments  Consolidated 
  (millions) 
 
REVENUES                        
Commissions and fees $—  $—  $—  $2,744  $—  $2,744 
Investment income  —   —   16   377   (312)  81 
Other income  —   —   —   2   —   2 
                         
Total revenues  —   —   16   3,123   (312)  2,827 
                         
EXPENSES                        
Salaries and benefits  —   —   —   (1,647)  9   (1,638)
Other operating expenses  (12)  (154)  20   (485)  28   (603)
Depreciation expense  —   —   (6)  (48)  —   (54)
Amortization of intangible assets  —   —   —   (23)  (13)  (36)
Gain on disposal of London headquarters  —   —   —   7   —   7 
Net loss on disposal of operations  (5)  —   —   —   5   — 
                         
Total expenses  (17)  (154)  14   (2,196)  29   (2,324)
                         
OPERATING (LOSS) INCOME  (17)  (154)  30   927   (283)  503 
Investment income from Group undertakings  222   828   121   245   (1,416)  — 
Interest expense  (2)  (261)  (104)  (411)  673   (105)
                         
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES  203   413   47   761   (1,026)  398 
Income taxes  —   33   23   (153)  —   (97)
                         
INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES  203   446   70   608   (1,026)  301 
Interest in earnings of associates, net of tax  —   —   —   22   —   22 
                         
INCOME FROM CONTINUING OPERATIONS  203   446   70   630   (1,026)  323 
Discontinued operations, net of tax  —   —   —   1   —   1 
                         
NET INCOME  203   446   70   631   (1,026)  324 
Less: Net income attributable to noncontrolling interests  —   —   —   (4)  (17)  (21)
EQUITY ACCOUNT FOR SUBSIDIARIES  100   (417)  (10)  —   327   — 
                         
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS $303  $29  $60  $627  $(716) $303 
                         


135

Willis Group Holdings plc
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
Condensed Consolidating Balance Sheet
                         
  As at December 31, 2010 
  Willis
                
  Group
  The Other
  The
     Consolidating
    
  Holdings  Guarantors  Issuer  Other  adjustments  Consolidated 
  (millions) 
 
ASSETS
CURRENT ASSETS                        
Cash and cash equivalents $—  $—  $76  $240  $—  $316 
Accounts receivable  2   —   —   809   28   839 
Fiduciary assets  —   —   —   10,167   (598)  9,569 
Deferred tax assets  —   —   1   35   —   36 
Other current assets  19   23   57   274   (33)  340 
                         
Total current assets  21   23   134   11,525   (603)  11,100 
                         
                         
Investments in subsidiaries  (1,058)  3,814   1,455   3,855   (8,066)  — 
Amounts owed by (to) Group undertakings  3,659   (4,590)  1,002   (71)  —   — 
                         
NON-CURRENT ASSETS                        
Fixed assets  —   —   52   330   (1)  381 
Goodwill  —   —   —   1,696   1,598   3,294 
Other intangible assets  —   —   —   492   —   492 
Investments in associates  —   —   —   (51)  212   161 
Deferred tax assets  —   —   —   7   —   7 
Pension benefits asset  —   —   —   179   —   179 
Other non-current assets  —   166   41   149   (123)  233 
                         
Total non-current assets  —   166   93   2,802   1,686   4,747 
                         
TOTAL ASSETS $2,622  $(587) $2,684  $18,111  $(6,983) $15,847 
                         
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES                        
Fiduciary liabilities $—  $—  $—  $10,167  $(598) $9,569 
Deferred revenue and accrued expenses  1   —   —   297   —   298 
Income taxes payable  —   —   —   69   (12)  57 
Short-term debt  —   —   110   —   —   110 
Deferred tax liabilities  —   3   1   5   —   9 
Other current liabilities  44   15   38   189   (20)  266 
                         
Total current liabilities  45   18   149   10,727   (630)  10,309 
                         
NON-CURRENT LIABILITIES                        
Long-term debt  —   500   1,653   4   —   2,157 
Liabilities for pension benefits  —   —   —   164   —   164 
Deferred tax liabilities  —   3   26   54   —   83 
Provisions for liabilities  —   —   —   183   (4)  179 
Other non-current liabilities  —   10   16   321   —   347 
                         
Total non-current liabilities  —   513   1,695   726   (4)  2,930 
                         
TOTAL LIABILITIES $45  $531  $1,844  $11,453  $(634) $13,239 
                         
EQUITY                        
Total Willis Group Holdings stockholders’ equity $2,577  $(1,118) $840  $6,627  $(6,349) $2,577 
Noncontrolling interests  —   —   —   31   —   31 
                         
Total equity  2,577   (1,118)  840   6,658   (6,349)  2,608 
                         
TOTAL LIABILITIES AND EQUITY $2,622  $(587) $2,684  $18,111  $(6,983) $15,847 
                         


136

NotesBoard’s ability to the financial statements
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
Condensed Consolidating Balance Sheet
                         
  As at December 31, 2009(i) 
  Willis
                
  Group
  The Other
  The
     Consolidating
    
  Holdings  Guarantors  Issuer  Other  adjustments  Consolidated 
  (millions) 
 
ASSETS
CURRENT ASSETS                        
Cash and cash equivalents $—  $—  $104  $117  $—  $221 
Accounts receivable  —   —   —   673   143   816 
Fiduciary assets  —   —   —   10,206   (547)  9,659 
Deferred tax assets  —   —   —   96   (15)  81 
Other current assets  —   85   21   532   (440)  198 
                         
Total current assets  —   85   125   11,624   (859)  10,975 
                         
                         
Investments in subsidiaries  2,180   3,693   1,132   3,867   (10,872)  — 
Amounts owed by (to) Group undertakings  —   (2,459)  1,012   1,447   —   — 
                         
NON-CURRENT ASSETS                        
Fixed assets  —   —   35   317   —   352 
Goodwill  —   —   —   1,722   1,555   3,277 
Other intangible assets  —   —   —   542   30   572 
Investments in associates  —   —   —   76   80   156 
Deferred tax assets  —   —   —   3   —   3 
Pension benefits asset  —   —   —   69   —   69 
Other non-current assets  —   14   18   189   —   221 
                         
Total non-current assets  —   14   53   2,918   1,665   4,650 
                         
TOTAL ASSETS $2,180  $1,333  $2,322  $19,856  $(10,066) $15,625 
                       �� 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES                        
Fiduciary liabilities $—  $—  $—  $10,206  $(547) $9,659 
Deferred revenue and accrued expenses  —   —   —   324   (23)  301 
Income taxes payable  —   86   —   205   (245)  46 
Short-term debt  —   —   200   9   —   209 
Deferred tax liabilities  —   —   —   5   —   5 
Other current liabilities  —   —   1   287   (10)  278 
                         
Total current liabilities  —   86   201   11,036   (825)  10,498 
                         
NON-CURRENT LIABILITIES                        
Long-term debt  —   500   1,661   4   —   2,165 
Liabilities for pension benefits  —   —   —   187   —   187 
Deferred tax liabilities  —   —   15   26   (15)  26 
Provisions for liabilities and charges  —   —   —   200   26   226 
Other non-current liabilities  —   —   39   255   —   294 
                         
Total non-current liabilities  —   500   1,715   672   11   2,898 
                         
TOTAL LIABILITIES $—  $586  $1,916  $11,708  $(814) $13,396 
                         
EQUITY                        
Total Willis Group Holdings stockholders’ equity  2,180   747   406   8,144   (9,297)  2,180 
Noncontrolling interests  —   —   —   4   45   49 
                         
Total equity  2,180   747   406   8,148   (9,252)  2,229 
                         
TOTAL LIABILITIES AND EQUITY $2,180  $1,333  $2,322  $19,856  $(10,066) $15,625 
                         
(i)The 2009 balance sheet has been recast to conform to the current year presentation. See Note 2 — Basis of Presentation and Significant Accounting Policies for details


137

Willis Group Holdings plc
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
Condensed Consolidating Statement of Cash Flows
                         
  Year ended December 31, 2010 
  Willis
                
  Group
  The Other
  The
     Consolidating
    
  Holdings  Guarantors  Issuer  Other  adjustments  Consolidated 
  (millions) 
 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $  (9) $1,170  $83  $1,572  $(2,327) $  489 
                         
CASH FLOWS FROM INVESTING ACTIVITIES                        
Proceeds on disposal of fixed and intangible assets  —   —   —   10   —   10 
Additions to fixed assets  —   —   (7)  (76)  —   (83)
Acquisitions of subsidiaries, net of cash acquired  —   —   —   (21)  —   (21)
Acquisitions of investments in associates  —   —   —   (1)  —   (1)
Investment in Trident V Parallel Fund, LP  —   —   —   (1)  —   (1)
Proceeds from sale of continuing operations, net of cash disposed  —   —   —   2   —   2 
                         
Net cash used in investing activities  —   —   (7)  (87)  —   (94)
                         
CASH FLOWS FROM FINANCING ACTIVITIES                        
Proceeds from draw down of revolving credit facility  —   —   90   —   —   90 
Repayments of debt  —   —   (200)  (9)  —   (209)
Proceeds from issue of shares  36   —   —   —   —   36 
Excess tax benefits from share-based payment arrangement  —   —   —   2   —   2 
Amounts owed by (to) Group undertakings  106   (317)  6   205   —   — 
Dividends paid  (133)  (849)  —   (1,521)  2,327   (176)
Acquisition of noncontrolling interests  —   (4)  —   (6)  —   (10)
Dividends paid to noncontrolling interests  —   —   —   (26)  —   (26)
                         
Net cash provided by (used in) financing activities  9   (1,170)  (104)  (1,355)  2,327   (293)
                         
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS  —   —   (28)  130   —   102 
Effect of exchange rate changes on cash and cash equivalents  —   —   —   (7)  —   (7)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR  —   —   104   117   —   221 
                         
CASH AND CASH EQUIVALENTS, END OF YEAR $—  $—  $76  $240  $—  $316 
                         


138

Notes to the financial statements
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
Condensed Consolidating Statement of Cash Flows
                         
  Year ended December 31, 2009(i) 
  Willis
                
  Group
  The Other
  The
     Consolidating
    
  Holdings  Guarantors  Issuer  Other  adjustments  Consolidated 
  (millions) 
 
NET CASH PROVIDED BY OPERATING ACTIVITIES $  —  $867  $390  $27  $(865) $  419 
                         
CASH FLOWS FROM INVESTING ACTIVITIES                        
Proceeds on disposal of fixed and intangible assets  —   —   —   20   —   20 
Additions to fixed assets  —   —   (17)  (79)  —   (96)
Acquisitions of investments in associates  —   —   —   (42)  —   (42)
Proceeds from reorganization of investments in associates  —   —   —   155   —   155 
Proceeds from sale of continuing operations, net of cash disposed  —   —   —   4   —   4 
Proceeds from sale of discontinued operations, net of cash disposed  —   —   —   40   —   40 
Proceeds on sale of short-term investments  —   —   —   21   —   21 
                         
Net cash (used in) provided by investing activities  —   —   (17)  119   —   102 
                         
CASH FLOWS FROM FINANCING ACTIVITIES                        
Repayments of debt  —   —   (1,090)  1   —   (1,089)
Senior notes issued, net of debt issuance costs  —   482   296   —   —   778 
Proceeds from issue of shares  —   —   —   18   —   18 
Amounts owed by (to) Group undertakings  —   (646)  525   121   —   — 
Excess tax benefits from share-based payment arrangements  —   —   —   1   —   1 
Dividends paid  —   (703)  —   (336)  865   (174)
Acquisition of noncontrolling interests  —   —   —   (33)  —   (33)
Dividends paid to noncontrolling interests  —   —   —   (17)  —   (17)
                         
Net cash used in financing activities  —   (867)  (269)  (245)  865   (516)
                         
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  —   —   104   (99)  —   5 
Effect of exchange rate changes on cash and cash equivalents  —   —   —   11   —   11 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR  —   —   —   205   —   205 
                         
CASH AND CASH EQUIVALENTS, END OF YEAR $—  $—  $104  $117  $—  $221 
                         
(i)The 2009 Consolidated Statements of Cash Flows has been recast to conform to the new balance sheet presentation. See Note 2 — Basis of Presentation and Significant Accounting Policies for details


139

Willis Group Holdings plc
28.  FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)
Condensed Consolidating Statement of Cash Flows
                         
  Year ended December 31, 2008(i) 
  Willis
                
  Group
  The Other
  The
     Consolidating
    
  Holdings  Guarantors  Issuer  Other  adjustments  Consolidated 
  (millions) 
 
NET CASH PROVIDED BY OPERATING ACTIVITIES $  202  $426  $5  $606  $(986) $253 
                         
CASH FLOWS FROM INVESTING ACTIVITIES                        
Proceeds on disposal of fixed and intangible assets  —   —   —   6   —   6 
Additions to fixed assets  —   —   (6)  (88)  —   (94)
Acquisitions of subsidiaries, net of cash acquired  —   —   —   (940)  —   (940)
Acquisitions of investments in associates  —   —   —   (31)  —   (31)
Proceeds from sale of continuing operations, net of cash disposed  —   —   —   11   —   11 
Proceeds on sale of short-term investments  —   —   —   15   —   15 
                         
Net cash used in investing activities  —   —   (6)  (1,027)  —   (1,033)
                         
CASH FLOWS FROM FINANCING ACTIVITIES                        
Proceeds from issue of short-term debt, net of debt issuance costs  —   —   1,026   —   —   1,026 
Proceeds from issue of long-term debt, net of debt issuance costs  —   —   643   —   —   643 
Repayments of debt  —   —   (641)  —   —   (641)
Repurchase of shares  (75)  —   —   —   —   (75)
Proceeds from issue of shares  15   —   —   —   —   15 
Amounts owed by (to) Group undertakings  5   241   (1,100)  854   —   — 
Excess tax benefits from share-based payment arrangements  —   —   —   6   —   6 
Dividends paid  (146)  (667)  —   (319)  986   (146)
Acquisition of noncontrolling interests  (2)  —   —   (5)  —   (7)
Dividends paid to noncontrolling interests  —   —   —   (13)  —   (13)
                         
Net cash (used in) provided by financing activities  (203)  (426)  (72)  523   986   808 
                         
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS  (1)  —   (73)  102   —   28 
Effect of exchange rate changes on cash and cash equivalents  —   —   —   (23)  —   (23)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR  1   —   73   126   —   200 
                         
CASH AND CASH EQUIVALENTS, END OF YEAR $—  $—  $—  $205  $—  $205 
                         
(i)The 2008 Consolidated Statements of Cash Flows has been recast to conform to the new balance sheet presentation. See Note 2 — Basis of Presentation and Significant Accounting Policies for details


140

Notes to the financial statements
29.  QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for 2010 and 2009 were as follows:
                 
  Three Months Ended
  March 31, June 30, September 30, December 31,
  (millions, except per share data)
 
2010
                
Total revenues $972  $799  $733  $835 
Total expenses  (671)  (630)  (627)  (658)
Net income  211   91   65   103 
Net income attributable to Willis Group Holdings  204   89   64   98 
Earnings per share — continuing operations                
 — Basic $1.21  $0.52  $0.38  $0.57 
 — Diluted $1.20  $0.52  $0.37  $0.57 
Earnings per share — discontinued operations                
 — Basic $—  $—  $—  $— 
 — Diluted $—  $—  $—  $— 
2009
                
Total revenues $930  $784  $725  $824 
Total expenses  (656)  (619)  (643)  (651)
Net income  201   91   81   86 
Net income attributable to Willis Group Holdings  193   87   79   79 
Earnings per share — continuing operations                
 — Basic $1.15  $0.52  $0.46  $0.47 
 — Diluted $1.15  $0.52  $0.46  $0.47 
Earnings per share — discontinued operations                
 — Basic $0.01  $—  $0.01  $— 
 — Diluted $0.01  $—  $0.01  $— 


141

Willis Group Holdings plc
Item 9 —Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

Item 9A —Controls and Procedures


Evaluation of Disclosure Controls and Procedures

As of December 31, 2010, the Company carried out an evaluation, under the supervision and with the participationoversee management. Extensive knowledge of the Company’s management, includingbusiness and the industry is an important quality for directors. Additionally, because of the Company’s global reach, international experience or knowledge of a key geographic area is also important. As the Company’s business also requires continuous compliance with regulatory requirements and agencies, it is imperative for some directors to have legal, governmental, political or diplomatic expertise. If a person has served or currently serves in the public arena (whether through political service, employment as a CEO of a public company or membership on a board of a public company), his or her integrity and reputation is also a matter of public record on which Company and its shareholders may rely. The Governance Committee also believes that the Company distinguishes itself from its competitors through marketing and, as a result, a strong marketing perspective should be represented. In light of its public and global nature (including conducting business in different countries and currencies), the Company also seeks international experience and a high level of financial literacy and experience on the Board and Audit Committee.

Diversity

The Company is committed to maintaining diversity on the Board as provided in the Company’s Corporate Governance Guidelines. The Board and the Governance Committee believe that diversity on the Board is important to ensuring a rounded perspective. Diversity is broadly interpreted by the Board to include viewpoints, background, experience, industry knowledge, and geography, as well as more traditional characteristics of diversity, such as race and gender. We believe that our commitment is demonstrated by the current structure of our Board and the varied backgrounds and skill sets of our current directors and nominees, which include three women, a person of Asian descent and a mix of American, British and Irish citizens.

Biographical Information

Set forth below is each current director’s and each director nominee’s biographical information. Below such information is a summary of some of the key qualifications, attributes, skills and experiences discussed above that were considered by the Governance Committee for each person nominated for election at our next Annual General Meeting of Shareholders. (The absence of a particular bullet-point for a director does not mean that the director does not possess other qualifications or skills in that area).

Joseph A. Califano, Jr. — Mr. Califano, age 81, joined the Board on April 21, 2004 and currently serves as a member of the Company’s Governance Committee and the Executive Committee. Mr. Califano will not be standing for re-election at the 2013 annual general meeting of shareholders. He is the Founder and Chairman Emeritus of the Board of the National Center on Addiction and Substance Abuse at Columbia University (“CASA”) in New York City and previously served as CASA’s Chairman from 1992 to 2011. Mr. Califano has served as Adjunct Professor of Public Health at Columbia University’s Medical School and School of Public Health and is a member of the Institute of Medicine of the National Academy of Sciences. Mr. Califano was a senior partner of the Washington, D.C. office of the law firm Dewey Ballantine from 1983 to 1992. Mr. Califano served as the United States Secretary of Health, Education, and Welfare from 1977 to 1979, and as President Lyndon B. Johnson’s Assistant for Domestic Affairs from 1965 to 1969. He is the author of 12 books. He is a director and member of the Audit Committee and the Nominating and Corporate Governance Committee of CBS, Inc. and he formerly served as a director of Chrysler, Automatic Data Processing, Midway Games, Inc. and Viacom.

Dominic Casserley — Mr. Casserley, age 55, joined the Company, as our new CEO and as a director on January 7, 2013 and currently serves as a member of the Company’s Executive Committee. Before joining the Company, he served as a senior partner of McKinsey & Company, which he joined in New York in 1983. During his 29-years at McKinsey & Company, Mr. Casserley was based in the U.S. for 12 years, Asia for five and, from 2000 until 2012, he worked across Europe from the London office. During his time at McKinsey & Company, Mr. Casserley led McKinsey’s Greater China Practice and its UK and Ireland Practice. Mr. Casserley was a member of McKinsey’s Shareholder Council, the firm’s global board, from 1999 to 2012 and for four years served as the Chairman of its Finance Committee. Mr. Casserley is a graduate of Cambridge University.

•

International Business Experience — Mr. Casserley’s expertise in the global financial services industry, including experience with insurance companies, and the opportunities of expanding into new markets, was obtained during his 29-year tenure at McKinsey where he spent 17 years working in Asia, Europe and London and, during which time, he led the firm’s Greater China Practice and its UK and Ireland Practice.

•

CEO/Management Experience — Mr. Casserley has served as the Company’s current Chief Executive Officer since January 7, 2013. In addition to serving as a senior partner at McKinsey & Company he served on the company’s global board for over 10 years and served as Chairman of the Finance Committee of that board for four.

Anna C. Catalano — Ms. Catalano, age 53, joined the Board on July 21, 2006 and currently serves as a member of the Company’s Governance Committee and Risk Committee. She was Group Vice President, Marketing for BP plc from 2001 to 2003. Prior to that she held various executive positions at BP and Amoco, including Group Vice President, Emerging Markets at BP; Senior Vice President, Sales and Operations at Amoco; and President of Amoco Orient Oil Company. She

currently serves on the Board and Compensation Committee and Governance Committee of Mead Johnson Nutrition and on the Boards and Compensation Committees of Chemtura Corporation and Kraton Performance Polymers. She serves on the Executive Committee of the Houston Chapter of the Alzheimer’s Association and serves as a director on the National Board of the Alzheimer’s Association. Ms. Catalano formerly served on the boards of SSL International plc, Hercules Incorporated, Aviva plc and U.S. Dataworks and as an advisory board member of BT Global Services. Ms. Catalano holds a BS degree in Business Administration from the University of Illinois, Champaign-Urbana.

•

International Business— Ms. Catalano has significant executive experience in international business operations through her roles as: Group Vice President, Marketing at BP plc; Group Vice President, Emerging Markets at BP; Senior Vice President, Sales and Operations at Amoco; and President of Amoco Orient Oil Company. In 2001, Ms. Catalano was recognized by Fortune Magazine as being among the “Most Powerful Women in International Business.”

•

Marketing Experience — Ms. Catalano has over 25 years of experience in global marketing and operations. During her tenure as the head of marketing for BP plc, she was instrumental in the internal and external repositioning of the BP brand and was a primary voice behind the campaign to establish BP’s “Beyond Petroleum” positioning. She is also a frequent speaker on strategic and global branding.

•

Board and Committee Experience — Ms. Catalano has significant experience as a director and committee member from her service on other public company boards including her current service as a current member of the Governance Committee of Mead Johnson Nutrition and the Compensation Committees of Mead Johnson Nutrition, Chemtura Corporation and Kraton Performance Polymers as well as her former service on the international company boards of SSL International plc and Aviva plc.

Sir Roy Gardner — Sir Roy Gardner, age 67, joined the Board on April 26, 2006 and currently serves as the Chairman of the Company’s Risk Committee and a member of the Executive Committee. He is a Chartered Certified Accountant and will serve as Chairman of Compass Group PLC, a food and support services company, until his retirement from the position in February 2014. He also serves as Chairman of the Nominating Committee of Compass Group PLC. He is a Senior Advisor to Credit Suisse and also a Director and Chairman of the Nominating Committee of Mainstream Renewable Power Limited, Chairman of the Advisory Board of the Energy Futures Lab of Imperial College London, President of Carers UK, Chairman of the Apprenticeship Ambassadors Network and Chairman and member of several board committees of Enserve Group Ltd. In addition, he was Chairman of Connaught plc between May and September 2010. He previously held positions as a former Chief Executive of Centrica plc, Chairman of Manchester United plc, Finance Director of British Gas plc, Managing Director of GEC-Marconi Ltd, Director of GEC plc and Director of Laporte plc.

•

International Business and Board Experience — The United Kingdom is an important market for the Company. Sir Roy Gardner is a well-respected British businessman who began his career in 1963 and has held leadership positions at or held director positions on the boards of a number of UK and other European companies.

•

CEO/Management Experience — Sir Roy Gardner’s senior leadership roles include his position as former Chief Executive of Centrica plc for 9 1/2 years. Centrica plc is a large multinational utility company that is based in the United Kingdom but also has interests in North America. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

•

Extensive Knowledge of the Company’s Business — Sir Roy Gardner’s seven years of experience on the Board, his financial background as a UK-Chartered Certified Accountant and his former service as the Chairman of the Company’s Compensation Committee provides him with an extensive knowledge of the Company’s business and allows him to serve as an effective Chairman of the Company’s Risk Committee.

The Rt. Hon. Sir Jeremy Hanley, KCMG — Sir Jeremy Hanley, age 66, joined the Board on April 26, 2006 and currently serves as a member of the Company’s Audit Committee. He is a Chartered Accountant and a director of Willis Limited, a subsidiary of the Company, and a director and member of the Audit and Remuneration Committees of Langbar International Limited and of London Asia Capital plc. He also serves on the International Advisory Committee for Lottomatica S.p.A. Sir Jeremy was a Member of Parliament for Richmond and Barnes from 1983 to 1997 and held a number of ministerial position in the U.K. government, including Under Secretary of State for Northern Ireland, Minister of State for the Armed Forces, Cabinet Minister without Portfolio at the same time as being Chairman of the Conservative Party and Minister of State for Foreign & Commonwealth Affairs. He retired from politics in 1998. He also served on the Boards of Lottomatica S.p.A., Onslow Suffolk Limited, Mountfield Group Limited, Nymex London Limited and ITE Group plc. and the Audit Committee of the Joint Arab British Chamber of Commerce.

•

Legal, Governmental, Political or Diplomatic Expertise — Sir Jeremy Hanley has a deep understanding of UK governmental and regulatory affairs and public policy based on his 14 years as a member of Parliament and significant ministerial positions in the UK government. Sir Jeremy Hanley’s background is important for his role as a director of Willis Limited, a subsidiary of the Company regulated by the Financial Services Authority, the regulator of the financial services industry in the UK.

•

Financial Background — Sir Jeremy Hanley, a member of the Company’s Audit Committee, is a UK-Chartered accountant which qualifies him as an audit committee financial expert.

•

International Board and Committee Experience — Sir Jeremy Hanley also brings experience from his service on numerous international boards, including his former service on the Board and Audit Committee of Lottomatica S.p.A., an Italian company.

Robyn S. Kravit — Ms. Kravit, age 61, joined the Board on April 23, 2008 and currently serves as a member of the Company’s Audit Committee. She is an international business executive with almost 30 years of experience in establishing and directing significant China-based operations engaged in the international trading of industrial raw materials. Ms. Kravit co-founded Tethys Research LLC, a biotechnology company, and has acted as its Chief Executive Officer since 2000. From 2001 through 2010, Ms. Kravit was a Director of FONZ, the organization which manages commercial and the Group Chief Financial Officer, of the effectiveness of the designeducational activities for Smithsonian’s National Zoological Park, serving two terms as President and operation of the Company’s disclosure controls and procedures

pursuantlater chairing its Audit Committee. On January 1, 2012, she was appointed to Exchange ActRule 13a-15(e). Based upon that evaluation, the Chief Executive Officer and the Group Chief Financial Officer concluded that, as of that date, the Company’s disclosure controls and procedures as defined inRule 13a-15(e) are effective.


Management’s Report on Internal Control over Financial Reporting


Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a-15(f) under the Securities Exchange Act of 1934.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2010, baseda two-year term on the criteria related to internal control over financial reporting described inInternal Control — Integrated Frameworkissued by the

Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2010.
Our independent registered public accountants, Deloitte LLP, who have audited and reported on our financial statements, have undertaken an assessment of the Company’s internal control over financial reporting. Deloitte’s report is presented below.
February 25, 2011.



142

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of WillisStanding Advisory Group Holdings Public Limited Company,
Dublin, Ireland
We have audited the internal control over financial reporting of Willis Group Holdings Public Limited Company and subsidiaries (the ‘Company’) as of December 31, 2010, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform(PCAOB), established by Congress to oversee the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understandingaudits of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control basedpublic companies. She currently serves on the assessed risk,Advisory Council of Johns Hopkins University’s Whiting School of Engineering and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervisionBoard of Governors of the Washington Foreign Law Society. She previously served on the Board of InovaChem Inc. Ms. Kravit holds a BA in East Asian Studies from Vassar College, and a MA in East Asian Studies from Harvard University.

•

International Experience — China is an emerging market for the Company and Ms. Kravit’s almost 30 years of experience in international business, focusing on the Far East markets, provides the Company with an extensive knowledge base. She is fluent in Mandarin Chinese. She has established and directed significant China-based operations engaged in the international trading of industrial raw materials and has experience in devising marketing plans that adapt to evolving political and economic environments. She also has extensive experience in the management of foreign trade transactions and international risk management.

•

CEO/Management Experience — Ms. Kravit founded and since 2000 has been the Chief Executive Officer of Tethys Research LLC, a biotechnology company, and is responsible for contract, administrative and financial operations. Prior to Tethys, as Managing Director for Asian operations, Ms. Kravit functioned as CEO of a major business unit within a complex multinational corporation.

•

Financial Background — Ms. Kravit is a member of the Company’s Audit Committee and was recently appointed to a two-year term on the Standing Advisory Group of the PCAOB. The Standing Advisory Group advises the PCAOB on issues relating to the development of auditing standards.

Jeffrey B. Lane — Mr. Lane, age 70, joined the Board on April 30, 2008 and currently serves as a member of the Company’s Compensation Committee. Mr. Lane will not be standing for re-election at the 2013 Annual General Meeting of Shareholders. He is the current Chairman of the Board of CASA. He served as Chief Executive Officer of Modern Bank, a private bank, from July 1, 2008 to October 31, 2010. Prior to joining Modern Bank, he was Chairman and Chief Executive Officer of Bear Stearns Asset Management and before that, Vice Chairman of Lehman Brothers, Co-Chairman of Lehman Brothers Asset Management and Alternatives Division, and Chairman of Neuberger Berman Inc. He has also held senior management positions with Travelers Group, including Vice Chairman of that company’s principal executiveSmith Barney division, and principal financial officers, or persons performing similar functions,with Shearson Lehman Brothers.

Wendy E. Lane — Ms. Lane, age 61, joined the Board on April 21, 2004 and effected bycurrently serves as the company’s boardChairman of directors, management,the Company’s Compensation Committee and member of the Audit Committee and Executive Committee. She was a member of

the CEO Search Committee as well as other ad hoc Board Committees convened from time to time. She has been Chairman of Lane Holdings, Inc., an investment firm, since 1992. Prior to forming Lane Holdings, Inc., Ms. Lane was a Principal and Managing Director of Donaldson, Lufkin and Jenrette Securities Corporation, an investment banking firm, serving in these and other personnelpositions from 1981 to provide reasonable assurance regarding the reliability of financial reporting1992. Ms. Lane is also a director, and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositionsmember of the assetsNominating and Corporate Governance and Audit Committees of Laboratory Corporation of America, and a director and Audit Committee member of UPM-Kymmene Corporation, a Finnish publicly-held corporation. Ms. Lane holds a BA from Wellesley College and a MBA from Harvard Business School.

•

Financial Background — Ms. Lane has more than 15 years of experience in investment banking, including financings, mergers and acquisitions and advisory projects. Prior to forming her own investment firm in 1992, Ms. Lane was a Principal and Managing Director of Donaldson, Lufkin and Jenrette Securities Corporation, an investment banking firm, serving in these and other positions from 1981 to 1992. From 1977 to 1980, she was an investment banker at Goldman Sachs. Ms. Lane’s financial background qualifies her as an audit committee financial expert.

•

Extensive Knowledge of the Company’s Business — Ms. Lane’s service as a director of the Company for nine years, financial expertise, current dual service as the Chairman of the Company’s Compensation Committee and member of the Audit Committee and former service as a member of the Company’s Nominating and Corporate Governance Committee have provided Ms. Lane with an invaluable knowledge base of the Company and a deep understanding of the interrelationships of issues and decisions between the Committees. She was also part of the Search Committee formed by the Board in connection with appointing a new CEO.

•

International Board Experience — Ms. Lane has served for seven years on the board of UPM-Kymmene Corporation, a Finnish publicly held corporation with worldwide operations and revenues exceeding $11.5 billion.

•

Board and Committee Experience — As well as serving on almost all of Willis’ Committees, Ms. Lane has chaired the Audit and Compensation Committees of Laboratory Corporation of America, serves on the Audit Committees at Laboratory Corporation of America and UPM-Kymmene Corporation, serves on the Nominating and Governance Committee of Laboratory Corporation of America and has extensive committee experience on all of her current and past boards.

James F. McCann — Mr. McCann, age 61, joined the Board on April 21, 2004 and currently serves as the Board’s Presiding Independent Director, the Chairman of the company; (2) provide reasonable assurance that transactions are recordedCompany’s Governance Committee, and as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expendituresa member of the company are being made only in accordance with authorizations of managementCompany’s Compensation Committee and directorsExecutive Committee. On April 23, 2013, the Board appointed Mr. McCann to serve as non-executive Chairman of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or dispositionBoard, effective July 8, 2013, succeeding Mr. Plumeri upon his retirement from the Board. Mr. McCann was a member of the company’s assets that could haveCEO Search Committee as well as other ad hoc Board Committees convened from time to time. He has served since 1976 as Chairman and Chief Executive Officer of 1-800-FLOWERS.COM, Inc., a material effectflorist and gift shop company. He also serves as a director for Dearborn National and JPMorgan Chase Regional Advisory Board. He previously served as a director and Compensation Committee member of Lottomatica S.p.A. and a director of Gateway, Inc. and The Boyds Collection, Ltd.

•

CEO/Management Experience — Mr. McCann has substantial management, strategic and operational experience as Chairman and CEO of 1-800-FLOWERS.COM, Inc. The knowledge and experience he has gained through his leadership of a consumer-product and service-based public company for over 30 years continues to benefit the Company both in his role as a director, the Presiding Independent Director, the Chairman of the Governance Committee, and a member of the Compensation Committee.

•

Extensive Knowledge of the Company’s Business — Mr. McCann’s service as a director of the Company for nine years, service as the Board’s Presiding Independent Director, Chairman of the Governance Committee and member of the Company’s Compensation Committee has provided him with an in-depth knowledge of the Company’s business and structure. He was also part of the Search Committee formed by the Board in connection with appointing a new CEO.

•

Board and Committee Experience — Mr. McCann, as a current member of the Compensation Committee, has benefited from his service as a former director and member of the Compensation Committee of Lottomatica S.p.A., an Italian headquartered company.

Joseph J. Plumeri —Mr. Plumeri, age 69, joined the Board on the financial statements.

BecauseFebruary 8, 2001 and currently serves as non-Executive Chairman and will serve until his retirement on July 7, 2013. Mr. Plumeri served as CEO of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2010 of the Company and our report dated February 25, 2011 expressed an unqualified opinion on those financial statements.
Deloitte LLP
London, United Kingdom
February 25, 2011


143

Willis Group Holdings plc

Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal controls over financial reporting during the three months ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B —Other Information
As discussed in ourForm 8-K furnished on February 10, 2011 and in Management’s Discussion & Analysis, we anticipate that we will incur pre-tax charges of approximately $110 million to $130 million, primarily recorded in the first quarter of 2011, in connection with our operational review, certain of which charges will be costs associated with exit or disposal activities under Item 2.05 ofForm 8-K. The Board of Directors authorized senior management to implement such plan on February 3, 2011.



144

Directors and officers
PART III
Item 10 —Directors, Executive Officers and Corporate Governance
Except for the information regarding executive officers (other than Joseph J. Plumeri) required by Item 401 ofRegulation S-K which is set forth below, as of February 21, 2011, we incorporate the information required by this item by reference to the headings ‘Election of Directors’, ’Corporate Governance’, ‘Section 16 Beneficial Ownership Reporting Compliance’ and ‘Ethical Code’ in our 2011 Proxy Statement.
Adam G. Ciongoli — Mr. Ciongoli, age 42, was appointed an executive officer and Group General Counsel on March 26, 2007. He was appointed Group Secretary on August 1, 2009. from 2001 until January 2013. Prior to joining the Willis Group, heMr. Plumeri spent 32 years as an executive with Citigroup Inc. and its predecessors, where his responsibilities included overseeing the 450 North American retail branches of Citigroup’s Citibank unit. Before that, Mr. Plumeri served as Chairman and Chief Executive Officer of Citigroup’s Primerica Financial Services from 1995 to 1999. In 1994, Mr. Plumeri was appointed Vice Chairman of Citigroup’s predecessor, Travelers Group Inc. In 1993, Mr. Plumeri became the President of a

predecessor of Citigroup’s Salomon Smith Barney unit after overseeing the merger of Smith Barney and Shearson and serving as the President and Managing Partner of Shearson since 1990. He is also a board member of a number of organizations, including The National Center on Addiction and Substance Abuse at Columbia University, and formerly served as a counselordirector of Commerce Bancorp Inc. and law clerkThe Board of Visitors of the College of William & Mary and a Trustee for the Granum Value Fund.

Douglas B. Roberts — Mr. Roberts, age 65, joined the Board on February 13, 2003 and currently serves as the Chairman of the Company’s Audit Committee and a member of the Executive Committee. He is the former Treasurer for the State of Michigan, a position held from April 2001 to US Supreme Court Justice Samuel A. Alito, Jr. duringDecember 2002 and from January 1991 to November 1998. From January 1999 to March 2001 he was Vice President of Business Development and Best Practices at Lockheed Martin IMS. Prior to January 1991, Mr. Roberts worked in the Justice’s first TermMichigan Senate as Director, Senate Fiscal Agency from April 1988 to December 1990 and as Deputy Superintendent of Public Instruction for the Department of Education. Mr. Roberts holds a doctorate in Economics from Michigan State University. Currently, Mr. Roberts is both a Professor and the Director for the Institute for Public Policy and Social Research at Michigan State University.

•

Legal, Governmental, Political or Diplomatic Experience — Mr. Roberts has a deep understanding of public finance and other public policy matters from his 28-year tenure in state government, including his years as a Michigan state treasurer and his current academic position. As Michigan state treasurer, he oversaw the state’s revenue and cash positions during a period of rebirth in Michigan’s finances and economy which included five ratings upgrades. In addition, the state Treasurer is the sole fiduciary of the state’s pension systems valued at approximately $50 billion.

•

Financial Background and Extensive Knowledge of the Company’s Business — Mr. Roberts’ business experience and education also qualify him as an audit committee financial expert and have positioned him well to serve as a Company’s director for 10 years and as the Chairman of our Audit Committee since 2004.

Dr. Michael J. Somers — Dr. Somers, age 70, joined the Board on April 21, 2010 and currently serves as a member of the Company’s Risk Committee. He was Chief Executive Officer of the Irish National Treasury Management Agency from 1990, when it was established, until the end of 2009. The Agency, which is a commercial entity outside the civil service, was initially set up to arrange Ireland’s borrowing and manage its national debt. Its remit was extended to establish and manage the National Pensions Reserve Fund, of which Dr. Somers was a Commissioner, and the National Development Agency, of which he was Chairman. It also incorporated the State Claims Agency, which handles claims against the State and against hospitals and other medical institutions. Dr. Somers previously worked in the Irish Department of Finance and the Central Bank and served as Secretary General of the Department of Defense from 1985 to 1987. He was the Irish member of the EU Monetary Committee from 1987 to 1990 and chaired the EU group that established the European Bank for Reconstruction and Development. He served on the Court. Previously, Mr. Ciongoli was Senior Vice Presidentboard of the Irish Stock Exchange until the end of 2009. He is currently the Irish Director on the Board of the European Investment Bank and General Counsel for TimeWarner Europe,also serves on the Boards of Allied Irish Banks plc, St. Vincent’s Healthcare Group Ltd., the Institute of Directors, Hewlett Packard International Bank plc, Fexco Holdings Ltd., and the Counselor to United States Attorney General John Ashcroft. Mr. Ciongolias Chairman of Goodbody Stockbrokers, a subsidiary of Fexco. He also serves as Chairman of the Audit Committees of Hewlett Packard International Bank plc and St. Vincent’s Healthcare Group and Chairman of the Risk Committee of the AIB Bank. He was awarded the honor of Chevalier of the Légion d’Honneur by the President of France. He previously served as a Council Member of the Dublin Chamber of Commerce and Ulysses Securitization plc, a government established special consultantpurpose entity whose purpose has expired and assets have been liquidated. He holds various degrees, including a master’s degree in economic science and a doctorate from University College Dublin. He is President of the Ireland Chapter of the Ireland-U.S. Council.

•

Financial Background — Dr. Somers has an extensive finance background as a result of his experience relating to Ireland’s borrowing and managing its national debt as well as his experience as the Irish member of the EU Monetary Committee.

•

International Business and Board Experience — Dr. Somers has extensive knowledge and experience in serving the Irish and European financial, business and governmental communities, including through his service on a number of Irish Boards. The Irish market is important to the Company which completed its redomicile to Ireland, in part, to facilitate business expansion. Dr. Somers also brings his experience on the Audit Committee and Risk Committee of various entities.

Jeffrey W. Ubben — Mr. Ubben, age 51, is a nominee for election to the New York City Police Department,Board at the 2013 Annual General Meeting of Shareholders and, if elected, will serve until the Company’s 2014 Annual General Meeting of Shareholders. If elected, it is expected that the Board will appoint Mr. Ubben to the Risk Committee. Mr. Ubben is a Founder, Chief Executive Officer and the Chief Investment Officer of ValueAct Capital. Prior to founding ValueAct Capital in 2000, Mr. Ubben was a Managing Partner at Blum Capital Partners for more than five years. Previously, Mr. Ubben spent eight years at Fidelity Investments where he managed the Fidelity Value Fund. Mr. Ubben is a former director and member of the Compensation Committee of Acxiom Corp., a former director and member of the Compensation Committee of Gartner Group, Inc., a former director and member of the Audit and Finance Committee of Misys, plc, a former director and member of the Nomination and Governance Committee of Omnicare, Inc., a former director and member of the Audit and Finance Committee of Sara Lee Corp. and a former director of several other public and private companies. In addition, Mr. Ubben serves as chairman of the national board of the Posse Foundation, is on the board of trustees of Northwestern University, and is also on the board of the American Conservatory Theater. He has a B.A. from Duke University and an adjunct professorM.B.A. from the J. L. Kellogg Graduate School of lawManagement at Columbia University Law School.

Northwestern University.

•

Financial Background — Mr. Ubben has more than 20 years of experience in the investment management business.

•

CEO/Management Experience — Mr. Ubben’s leadership roles include serving as Chief Executive Officer and Chief Investment Officer of ValueAct Capital since 2000 and as Managing Partner at Blum Capital Partners for more than five years prior to joining ValueAct.

•

Board and Committee Experience — Mr. Ubben also brings experience from his prior service as a director and board committee member of numerous global public companies.

On April 25, 2013, the Company entered into a Nomination Agreement with ValueAct pursuant to which the Company’s Board of Directors agreed to nominate Mr. Ubben for election at the 2013 Annual General Meeting of Shareholders. In addition, ValueAct agreed, subject to exceptions, not to engage in certain transactions regarding the Company and its securities until a date specified in the Nominating Agreement.

Peter HearnExecutive Officers

The following table sets forth, as of April 24, 2013, the name, age and position of each of our executive officers. Executive officers are elected by, and serve at the pleasure of, our Board of Directors.

NameAgePosition

Celia Brown

59Willis Group Human Resources Director

Dominic Casserley

55Chief Executive Officer of Willis Group Holdings plc; Director

Stephen Hearn

46Group Deputy CEO

Victor Krauze

53Chairman and Chief Executive Officer of Willis North America

Michael K. Neborak

56Group Chief Financial Officer

Adam L. Rosman

47Group General Counsel

Timothy D. Wright

51CEO of Willis International

Biographical Information

The following sets forth information about our current executive officers other than Dominic Casserley, the Company’s CEO, whose qualifications are set forth above.

Celia Brown — Mr. Hearn,Ms. Brown, age 55,59, was appointed an executive officer on April 10, 2007.January 23, 2012. Ms. Brown joined the Willis Group in 2010 and serves as the Willis Group Human Resources Director. Prior to joining the Willis Group, Ms. Brown spent over 20 years at XL Group plc where she held a number of senior roles. Ms. Brown served from 2006 to 2009 as the Executive Vice President, Head of Global HR and Corporate Relations at XL Group plc. Following XL Group plc, Ms. Brown formed an independent management consultancy, providing human resources services to not-for-profit, corporate and individual clients.

Stephen Hearn — Mr. Hearn, age 46, was appointed an executive officer on January 1, 2012. Mr. Hearn joined the Willis Group in January 1994 as a Senior Vice President to open and manage the Philadelphia office2008 and was appointed Eastern Region Managernamed Chairman and CEO of Willis Global in October 19942011 and Executive Vice PresidentGroup Deputy CEO in 1997. Most recently,2013. Since joining the Willis Group, Mr. Hearn was appointed Chief Executive Officerhas served as Chairman of Willis Re in November 2006 and will be appointedSpecial Contingency Risk, Chairman of Willis Re.Facultative and Chairman and CEO of Glencairn Limited. From 2009 until 2011 he led Faber & Dumas, Global Markets International and Willis Facultative. Prior to joining the Willis Group, Mr. Hearn served as ViceChairman and CEO of the Glencairn Group Limited and as President and PrincipalCEO of Towers Perrin Reinsurance. Mr. Hearn has 31 years of experience in the insurance brokerage industry.

Marsh Affinity Europe.

Victor P. Krauze — Mr. Krauze, age 51,53, was appointed an executive officer on December 3, 2010 and named Chairman and Chief Executive Officer of Willis North America. Previously, Mr. Krauze was President and Chief Operating Officer for Willis North America, a position in which he had served since 2009. Mr. Krauze has also served as President/CEO for Willis’ Minnesota operations, National Partner of the Great Lakes region and Regional Executive Officer (National Partner) of Willis’ Central Region. Prior to joining Willis in 1997, Mr. Krauze gained experience as a casualty marketing specialist with another major global broker where his early roles included Producerproducer and Account Executive.account executive. Mr. Krauze has over 20 years of experience in the insurance industry.

David B. Margrett — Mr. Margrett, age 57, was appointed an executive officer on January 25, 2005. Mr. Margrett joined the Willis Group in September 2004 as a Managing Director of Global Markets. He was appointed Chief Executive Officer, Global Specialties in January 2005 and Chairman and Chief Executive Officer of Willis Limited on April 1, 2007. Prior to joining the Willis Group, Mr. Margrett had been with Heath Lambert Group, or its predecessors, since 1973, holding a number of senior positions, including Chief Executive from 1996 to 2004. Mr. Margrett has 37 years experience of the insurance industry.

Grahame J. Millwater — Mr. Millwater, age 47, was appointed an executive officer on December 18, 2001. He was appointed Group President on February 29, 2008, having been Chief Operating Officer since November 29, 2006. He has held several other senior positions since joining the Willis Group in September 1985, including Chairman and Chief Executive Officer of Willis Re. Mr. Millwater has 24 years of experience in the insurance brokerage industry, all of which have been with the Willis Group.
Michael K. Neborak — Mr. Neborak, age 54,56, was appointed an executive officer and Group Chief Financial Officer on July 6, 2010. Mr. Neborak joined Willis from MSCI Inc., a NYSE listed company, where he was Chief Financial Officer. With more than 30 years of experience in finance and accounting, Mr. Neborak also held senior positions with Citigroup, including divisional CFO and co-head of Corporate Strategy & Business Development, from 2000 —- 2006, and prior to that, in the investment banking group at Salomon Smith Barney from 1982 —- 2000. He began his career as an accountant with Arthur Andersen & Co.


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Willis Group Holdings plc
Martin J. SullivanAdam L. Rosman — Mr. Sullivan,Rosman, age 56,47, was appointed Group General Counsel on May 7, 2012 and is responsible for legal, corporate secretary, compliance, audit and risk management. He joined Willis in 2009 and served for three years as the company’s Deputy Group General Counsel, responsible for Willis’ worldwide legal operations. Before joining Willis, Adam was Senior Vice President and Associate General Counsel at Cablevision Systems Corporation in Bethpage, NY, and before that he was a partner at the Washington D.C.-based law firm of Zuckerman Spaeder LLP, where he advised public companies and senior executives on a range of topics, including Sarbanes-Oxley. Between 1997 and 2003, Adam was an Assistant United States Attorney in Washington, D.C., where he prosecuted a wide range of matters. He also worked in 2000-2001 as Deputy Assistant to the President and Deputy Staff Secretary for President Clinton.

Timothy D. Wright — Mr. Wright, age 51, was appointed an executive officer on September 7, 2010. Mr. Sullivan joined Willis as Deputy Chairman, Willis Group Holdings plc,in 2008 and Chairman andin 2012 was appointed CEO of Willis Global Solutions, which oversees the brokerage and risk management advisory services for Willis’ multinational and global accounts. Mr. Sullivan previously served as President and Chief Executive Officer of American International Group, Inc. (‘AIG’), from2005-2008 and was Vice Chairman and Co-Chief Operating Officer from May 2002 until March 2005. He first joined AIG in the UK in 1971 and in the intervening years served in a number of positions of increasing responsibility, culminating in his election as Senior Vice President, Foreign General Insurance in 1996 and Executive Vice President, Foreign General Insurance in 1998. In 1996, he was appointed Chief Operating Officer of AIU in New York and named President in 1997.

Sarah J. Turvill — Ms. Turvill, age 57, was appointed an executive officer on July 1, 2001. Ms. Turvill joined the Willis Group in May 1978 and has held a number of senior management roles in our international business, particularly in Europe where she was Managing Director from 1995 to 2001. Ms. Turvill is currently Chief Executive Officer of Willis International, a position she has held since July 2001, and was additionally appointed Chairman in November 2006. She has 31 years of experience in the insurance brokerage industry, all of which have been with the Willis Group.
Timothy D. Wright —International. Mr. Wright age 49, was appointed an executive officer andserved as Group Chief Operating Officer on September 1, 2008.from 2008 to 2012. Prior to joining the Willis Group, he was a Partner of Bain & Company where he led their Financial Services practice in London. Mr. Wright was previously UK Managing Partner of Booz Allen & Hamilton and led their insurance work globally. He has more than 20 years of experience in the insurance and financial service industries internationally.

Corporate Governance

The Board’s Committees

The Committees and its members, as of April 24, 2013, are described below in further detail:

Audit
Committee		Compensation
Committee		Governance
Committee		Risk
Committee		Executive
Committee

Joseph A. Califano*

XX

Dominic Casserley

X

Anna C. Catalano

XX

Sir Roy Gardner

CX

Sir Jeremy Hanley

X, F

Robyn S. Kravit

X

Jeffrey B. Lane*

X

Wendy E. Lane

X, FCX

James F. McCann

XC, PX

Joseph J. Plumeri*

X

Douglas B. Roberts

C, FX

Michael J. Somers

X

Jeffrey W. Ubben

N

CCommittee Chairman
FFinancial Expert
XCommittee Member
PPresiding Independent Director
NIf elected, it is expected that the Board will appoint director nominee Mr. Ubben to the Risk Committee.
*Messrs. Califano and Lane have elected not to stand for re-election to the Board at the 2013 Annual General Meeting of Shareholders. Messrs. Califano and Lane will serve out their remaining terms on the Board and their respective Committees until the conclusion of the 2013 Annual General Meeting of Shareholders. Mr. Plumeri will retire from the Board and the Committee on which he serves on July 7, 2013.

TheExecutive Committee has the full powers, authorities and discretions of the Board of the Directors, when it is not in session, in the management of the business and affairs of the Company, except as otherwise provided in the resolutions of the Board and under applicable law. The Executive Committee, currently consists of Joseph J. Plumeri (Chairman), Dominic Casserley, James McCann, Joseph A. Califano, Sir Roy Gardner, Wendy E. Lane and Douglas Roberts and did not hold any meetings in 2012. Mr. Plumeri will retire from the Board on July 7, 2013.

TheAudit Committee assists the Board in fulfilling its oversight responsibilities with respect to:

The integrity of the Company’s financial statements;


146

The selection and oversight of the independent auditors;

The Company’s compliance with legal and regulatory requirements;

The independent auditors’ qualifications and independence;

The performance of the independent auditors and the Company’s internal audit function;

The establishment and maintenance of proper internal accounting controls and procedures; and

The treatment of employees’ concerns regarding accounting or auditing matters as reported under the Company’s whistleblower policy.

In addition, the Audit Committee provides an avenue for communication among internal audit, the independent auditors, management and the Board. The Audit Committee also focuses on major financial risk exposures, the steps management has taken to monitor and control such risks, and, if appropriate, discusses with the independent auditor the guidelines and policies governing the process by which senior management and the relevant departments of the Company assess and manage the Company’s financial risk exposure. The Audit Committee operates under a charter, a copy of which can

be found in the Investor Relations — Corporate Governance section of the Company’s website atwww.willis.com. The Audit Committee currently consists of Douglas B. Roberts (Chairman), Sir Jeremy Hanley, Robyn S. Kravit and Wendy E. Lane and met formally eight times during 2012. In addition to holding formal meetings, the Audit Committee members met informally during the course of the year to discuss and review financial matters related to the Company as well as the Company’s filings with the SEC. After regularly scheduled meetings, the Committee also meets in executive session, which includes meetings with management, the internal auditors and external auditors. Mr. Roberts, Sir Jeremy Hanley and Ms. Lane are considered to be Audit Committee Financial Experts in light of their financial experience described in their biographies above.

TheCompensation Committee determines the Company’s CEO’s compensation and recommends to the Board the compensation of other executive officers and non-employee directors. In addition, the Compensation Committee oversees the administration of the Company’s share-based award plans and, in consultation with senior management, establishes the Company’s general compensation philosophy and oversees the development and implementation of the Company’s compensation programs. In connection with those objectives, the Compensation Committee is also responsible for:

Reviewing and approving annually performance goals and objectives relevant to the compensation of the CEO and other executive officers and evaluating their performance in light of those goals and objectives;

Reviewing and approving compensation policies applicable to the senior management of the Company;

Making recommendations to the Board on the Company’s existing and proposed incentive compensation plans and equity-based plans and overseeing the administration of these plans;

In consultation with senior management, overseeing regulatory compliance with respect to compensation matters;

Reviewing and discussing with senior management the Compensation Discussion and Analysis and approving its inclusion in the Company’s Proxy Statement and Annual Report on Form 10-K;

Reviewing the results of the “say-on-pay” proposals included in the Proxy Statement and the appropriate response;

Annually evaluating the independence of its compensation consultants, legal counsel or other advisors taking into consideration the factors enumerated in the NYSE listing standards and evaluating whether any conflict of interest exists with respect to its Compensation Consultant; and

Reviewing an assessment of compensation risk to determine whether any material risks were deemed to be likely to arise from the Company’s compensation policies and programs, what mitigating factors are in place, and whether these risks would be reasonably likely to have a material adverse effect on its business.

The Compensation Committee operates under a charter, a copy of which can be found in the Investor Relations — Corporate Governance section of the Company’s website atwww.willis.com. The Compensation Committee is currently comprised of Wendy E. Lane (Chairman), Jeffrey B. Lane and James F. McCann and met formally six times during 2012. In addition to holding formal meetings, the Compensation Committee members met informally during the course of the year to discuss compensation related matters and acted from time to time by unanimous written consent. After regularly scheduled meetings, the Committee also meets in executive session, which includes meetings with its Compensation Consultant.

TheRisk Committee is responsible for assisting the Board in:

Monitoring oversight of the Company’s enterprise risk management;

Overseeing, on the basis of proposals from management, the creation, and subsequent iteration, of a framework, for approval by the Board, in relation to the management of risk;

Reviewing the adequacy of the Company’s resources to perform its risk management responsibilities;

Reviewing the activities of the Company’s Enterprise Risk Management Committee (“ERMC”), as well as reviewing and approving annually the Company’s Enterprise Risk Management Policy;

Meeting with the chairman and/or other members of the Company’s ERMC and Audit Committee, as needed or advisable, to discuss the Company’s corporate risk management framework and/or related areas; and

Reviewing and recommending any major transactions or decisions affecting the Company’s risk profile or exposure.

The Risk Committee operates under a charter, a copy of which can be found in the Investor Relations — Corporate Governance section of the Company’s website atwww.willis.com. The Risk Committee currently consists of Sir Roy Gardner (Chairman), Anna C. Catalano and Michael J. Somers and met formally five times in 2012. After regularly scheduled meetings, the Committee also meets in executive session.

TheCorporate Governance and Nominating Committee is responsible for assisting the Board in:

Directors’

Developing and auditors’ remunerationrecommending director independence standards to the Board and periodically reviewing those standards;

Developing and recommending to the Board the director selection process for identifying, considering and recommending candidates to the Board and director qualification standards for use in selecting new nominees and periodically reviewing the process and standards;

Recommending to the Board the nominees to stand for election as directors at the next annual shareholder meeting and in the event of director vacancies;

Recommending to the Board, from time to time, changes the Committee believes is desirable to the size of the Board or any Committee thereof;

Recommending to the independent and non-management directors a nominee for Presiding Independent Director and recommending to the Board nominees and chairman for each Board Committee;

Recommending changes to the Board, from time to time, to the Company’s Corporate Governance Guidelines;

Reviewing the appropriateness of continued service on the Board of members whose circumstances have changed or who contemplate accepting a directorship to another company or an appointment to an audit committee of another company;

Administering and overseeing, on behalf of the Board, the evaluation process for the overall effectiveness of the Board (including the effectiveness of the Committees); and

Assisting the Board in reviewing succession plans prepared by management for all senior management.

The Governance Committee identifies potential director nominees by preparing a candidate profile based upon the current Board’s strengths and needs and from a variety of sources, including engaging search firms or utilizing business contacts of the Board and senior management. Nominees must meet minimum qualification standards with respect to a variety of criteria including integrity, reputation, judgment, experience, maturity, skills and personality, commitment and independence. The Governance Committee may also take into consideration additional factors it deems appropriate, which may include skill, experience with business and other organizations, the interplay of the candidate’s experience with the experience of other Board members and the extent to which the candidate would be a desirable addition to the Board and any committee thereof.

With feedback from the Board members, members of the Governance Committee initiate contact with preferred candidates and, following feedback from interviews conducted by Governance Committee and Board members, recommend candidates to join the Board. The Governance Committee has the authority to retain a search firm to assist with this process. The Governance Committee considers candidates nominated by shareholders and ensures that such nominees are given appropriate consideration in the same manner as other candidates.

The Governance Committee operates under a charter, a copy of which can be found in the Investor Relations — Corporate Governance section of the Company’s website atwww.willis.com. The Governance Committee currently consists of James

McCann (Chairman), Joseph A. Califano and Anna C. Catalano and met formally five times during 2012. After regularly scheduled meetings, the Committee also meets in executive session. Mr. McCann was appointed Chairman of the Governance Committee on October 17, 2012 upon Senator Bradley’s resignation from that role.

2012 Amendments to the Company’s Corporate Governance Guidelines

In 2012, based on the recommendation of the Governance Committee’s recommendation, the Board amended the Company’s Corporate Governance Guidelines to include, among other things, the following policies:

Requiring the CEO to seek approval of the Governance Committee before serving on any other public company board;

Restricting directors (other than the CEO who is further restricted as noted above) from serving on the boards of more than 3 publicly-traded companies in addition to the Company’s Board;

Requiring a director who experiences materially changed circumstances to offer his or her resignation from the Board; and

Prohibiting directors and executive officers from having margin accounts and pledging Company shares.

Our Corporate Governance Guidelines and all Board Committee Charters can be found in the Investor Relations — Corporate Governance section of our website atwww.willis.com. Copies are also available free of charge on request from the Company Secretary, Willis Group Holdings Public Limited Company, c/o Office of General Counsel, One World Financial Center, 200 Liberty Street, New York, NY 10281-1033.

Ethical Code

The Company has adopted an Ethical Code applicable to all our directors, officers and employees, including our CEO, the Group Chief Financial Officer, the Group Financial Controller and all those involved in the Company’s accounting functions. Our Ethical Code can be found in the Investor Relations — Corporate Governance section of our website atwww.willis.com. A copy is also available free of charge on request from the Company Secretary, c/o Office of the General Counsel, Willis Group Holdings Public Limited Company, One World Financial Center, 200 Liberty Street, New York, NY 10281-1033. The Company intends to post on its website any amendments to, or waivers of, a provision of its Ethical Code in accordance with Item 406 of Regulation S-K.

Section 16 Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership (Forms 3, 4 and 5) with the SEC and the NYSE. Executive officers, directors and such security holders are required by SEC regulation to furnish the Company with copies of all such forms which they file. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and information provided by the reporting persons, all of its directors and executive officers made all required filings on time during 2012 with the exception of one delinquent report on Form 4 reporting the sale of 29,000 shares by Sarah Turvill on May 1, 2012.

Item 11 — Executive Compensation

Compensation Discussion and Analysis

The following is an overview and analysis of the Compensation Committee’s philosophy and objectives in designing compensation programs for the Group CEO, the Group CFO, and the Company’s three other most highly compensated executive officers, collectively our “named executive officers.” For the fiscal year ended December 31, 2012, our named executive officers were:

Joseph Plumeri (2012 CEO);

Michael Neborak (Group CFO);

Stephen Hearn (CEO and Chairman, Willis Global);

Timothy Wright (CEO, Willis International); and

Victor Krauze (CEO and Chairman, Willis North America).

Mr. Plumeri resigned as CEO on January 6, 2013 but remained as Chairman of the Board. He will retire as Chairman on July 7, 2013. Mr. Dominic Casserley became the current CEO of the Company, effective January 7, 2013. Mr. Hearn was appointed Deputy CEO, effective January 1, 2013.

1.0Executive Summary of our Named Executive Officer 2012 Compensation

1.1.Background

The Compensation Committee establishes, implements, and monitors the Company’s compensation programs, philosophy, and objectives. The Committee has two primary objectives: (1) to attract and retain highly qualified executives in the competitive marketplace in which the Company operates; and (2) to create appropriate incentives for our executives to improve their individual performance. To achieve these objectives, the Compensation Committee evaluates and sets the total compensation for each of our named executive officers – base salary, annual incentive compensation, and long-term incentive compensation – considering the scope of the named executive officer’s role, level of expertise, individual performance, Company performance, and compensation paid to similarly-situated executives in our peer group companies. To assist the Compensation Committee in all aspects of the named executive officer and the Company’s compensation program, the Compensation Committee has retained Towers Watson as its independent compensation consultant.

The Compensation Committee spent significant time in 2012 reviewing, evaluating, and re-designing our named executive officer compensation program, partly in response to the “say-on-pay” vote at our 2012 Annual General Meeting. While a majority of shareholders approved our 2012 compensation program, the percentage approval was down considerably from 2011 (54% compared to 94%). Although this vote was non-binding, the Board and Compensation Committee wanted to understand why the approval rate was low, especially because our named executive officer compensation program remained essentially unchanged from 2011 to 2012.

Accordingly, at the Board’s and Compensation Committee’s direction, management reached out to the Company’s shareholders to understand their concerns. We learned that there was no single area of shareholder concern. Rather, our shareholders expressed a variety of concerns, not all of which related to compensation and included disappointment in the Company’s financial performance, concern about the level of CEO compensation relative to that performance (structured pursuant to his 2010 employment contract), use of guaranteed bonuses, the use of the same financial metrics for short-term and long-term incentive awards, use of non-traditional share ownership guidelines, and the lack of prohibitions against directors and executive officers entering into margin accounts and pledging shares.

The Committee and Board considered the results of the vote, the various viewpoints expressed by our shareholders and market factors, and adopted several changes to Company policies and our named executive officer compensation program, including:

Revising the Company’s financial metrics for its 2013 annual incentive compensation awards and performance-based long-term incentive awards to emphasize both short-term and long-term financial performance. The annual and long-term incentive awards will have different metrics, all of which will be key drivers to increase cash flow and, therefore, important constituents of shareholder value enhancement.

•

Confirming our philosophy that incentive pay should be performance driven and not guaranteed. Accordingly, unless there are compelling circumstances (i.e., on a limited basis, in connection with new hires), the Compensation Committee will not approve guaranteed incentive awards.

Lowering our new CEO’s total target pay package by 26% compared to Mr. Plumeri and lowering his amount of fixed pay by almost 45%.

1.2The Company’s 2012 Financial Performance and Named Executive Officer Compensation

2012 was characterized by an ongoing challenging macroeconomic environment, especially in two of our key geographic regions, Western Europe and North America. Reported EPS was ($2.58) and Adjusted EPS was $2.58 ($2.52 excluding the impact of foreign exchange) and our reported Operating Margin was (6.0%) and Adjusted Operating Margin was 21.6% (20.9% excluding the impact of foreign exchange). This compares to 2011 reported EPS of $1.15 and Adjusted EPS of $2.74 and reported Operating Margin of 16.4% and Adjusted Operating Margin of 22.5%. We refer to organic growth in commissions and fees, Adjusted EPS and Adjusted Operating Margin, which are Non-GAAP financial measures. A reconciliation of our GAAP to Non-GAAP financial information can be found in Exhibit A.

In a difficult environment, however, the Company also delivered the following:

1.3% reported commissions and fees growth and 3.1% organic commissions and fees growth;

Significant improvement in the Company’s financial performance in the fourth quarter, with 7.5% organic commissions and fees growth (representing the best organic growth result in over six years) and improved Adjusted Operating Margin by 40 basis points; and

Substantive progress on key growth initiatives (pipelines development and management, producer retention, and recruitment) and operational initiatives (Financial Transformation Project, global brokerage systems, global placement system).

While these results showed positive momentum moving into 2013, they did not meet established incentive targets, and, accordingly, the payout of our named executive officers’ 2012 annual incentive compensation awards was below target.

Mr. Plumeri’s annual incentive compensation award was calculated under the terms of his 2010 employment agreement, and was based on the Company’s performance measured by growth in Adjusted EPS (for 50% of the award) and Adjusted Operating Margin (for the remaining 50%). The Committee set “threshold,” “target” and “stretch” payout goals of 250%, 375% and 500%, respectively, of his base salary. After the 2012 budget had been approved, however, because of slow EPS growth compared to 2011, Mr. Plumeri proposed and the Compensation Committee agreed, to reduce his target payout from 375% to 250%. Based on the Company’s performance in 2012, Mr. Plumeri was awarded an annual incentive compensation award of $905,963, representing 24% of his original target payout and 36% of his revised target payout.

The annual incentive compensation awards for our four other named executive officers were based on a combination of the Company’s performance (60%) and individual and business unit performance (40%)1. Based on that formula, the annual incentive compensation awards to our named executive officers were as follows:

Michael Neborak was awarded $528,000, representing 88% of his target payout.

Stephen Hearn was awarded £815,000 (or $1,291,775), representing 93% of his target payout.

Timothy Wright was awarded £775,000 (or $1,228,375), representing 89% of his target payout.

Victor Krauze was awarded $910,000. While he does not have a formal annual incentive compensation award target, this represents 74% of the target used for Messrs. Hearn and Wright.

Each named executive officer also received long-term incentive awards. Based on the Company’s financial performance, the performance-based portion of the awards were reduced to 88% of the grant value. As a result, the value of the 2012 long-term incentive awards for our named executive officers were as follows: Joseph Plumeri ($5,280,000); Michael Neborak ($940,000); Stephen Hearn £1,304,732 (or $2,068,000); Timothy Wright £889,590 (or $1,410,000); and Victor Krauze ($1,128,000). Stephen Hearn also received 6,500 restricted stock units in connection with his promotion to Chairman and CEO of Willis Global.

2.0The Company’s Named Executive Officer Compensation Program

The Compensation Committee is responsible for establishing, implementing and monitoring the Company’s compensation programs, philosophy and objectives. The Company has two primary objectives in designing compensation programs for our named executive officers: (1) to attract and retain highly qualified and talented executives and professionals in the highly competitive marketplace in which the Company operates (which includes large financial services companies); and (2) to create appropriate incentives for our executives to improve their individual performance with the objective of improving the Company’s long-term performance, thereby creating value and wealth for our shareholders. Against those objectives, we consider each named executive officer’s total compensation in the context of compensation paid to similarly-situated executives in our peer group companies, the scope of the role, the individual’s level of expertise and other market factors, and the performance of the individual, his or her business unit and the Company.

2.1Compensation Committee Consultant

The Compensation Committee has the independent authority to hire external consultants and, accordingly, has retained Towers Watson since April 2011 to provide advice to the Compensation Committee on all matters related to the senior executives’ compensation and compensation programs. The Compensation Committee has the independent authority to terminate Towers Watson’s services at its discretion. Representatives from Towers Watson attended all of the Compensation Committee’s regularly scheduled meetings in 2012.

Towers Watson reports directly to the Compensation Committee and provides data on U.S. and U.K. executive compensation trends in the sectors in which the Company competes for senior executive talent as well as the broader market. In 2012 and 2013, Towers Watson advised the Compensation Committee on the redesign of the named executive officer compensation program and, in particular, the compensation package of Mr. Casserley, the Company’s new CEO, and certain changes to the compensation packages for the Company’s other executive officers. Towers Watson also assists with selecting appropriate peer companies and assessing non-employee director compensation. The fees paid to Towers Watson in 2012 for these services totaled $167,866.

The Compensation Committee uses the data and analysis provided by Towers Watson to better ensure that the Company’s compensation practices are consistent with the Company’s compensation philosophy and objectives for both the amount and composition of executive compensation, including that of the CEO. Based on the data and analysis provided by Towers Watson as well as information from management and outside counsel, the

1

The Company performance portion (60%) was calculated measuring Adjusted EPS against a target of $2.74 (50%) and Adjusted Operating Margin against a target of 21.8% (50%).

Compensation Committee applies business judgment in recommending compensation awards, taking into account the dynamic nature of the insurance sector internationally and the adaptability and response required by the Company’s leadership to manage significant changes that arise during the course of a year.

Before its appointment as the consultant to the Compensation Committee in 2011, Towers Watson had been providing investment advisory services for the Company’s UK pension plan and was engaged directly by the fiduciary trustees of the plan. These trustees operate independently of the Company’s management. In addition, Towers Watson also provides human resource consulting services to certain of the Company’s subsidiaries (the majority of which are international subsidiaries where Towers Watson was hired by local management). The additional services provided to the Company’s significant subsidiaries totaled $957,181 for 2012, of which $854,462 related to the services provided for UK pension plan and $102,719 related to the human resource consulting services. The decision to engage Towers Watson for the human resource consulting services before 2011 was originally approved by management and since that time the Compensation Committee has reviewed and approved such services. None of the Towers Watson representatives that advise the Compensation Committee provide any other services to the Company’s subsidiaries. The Compensation Committee determined that those services, based on the independence factors specified in the NYSE listing rules, produced no conflicts of interest.

2.2Analysis of Alignment of Pay and Performance

In advance of the impending requirement under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Compensation Committee directed Towers Watson to analyze the alignment of total executive officers’ pay in relation to the Company’s performance as compared to the peer companies’ performance over a three-year performance measurement period (2009 – 2011). We evaluated our named executive officers’ performance over this period using the following key metrics: total shareholder return, Adjusted EPS growth and Adjusted Operating Margin. This performance was then compared to “realizable/earned pay,” which is defined as the actual value of compensation earned for the three-year measurement period and includes base pay, annual incentive compensation paid, “in the money” value of stock option grants, market value of time-vested RSUs and market/cash value of performance based awards. The analysis indicated in aggregate a strong alignment between our executive officers’ realizable/earned pay (62nd percentile of our peer group) and the Company’s composite performance over the three-year measurement (75th percentile of our peer group) period.

2.3Peer Group and Market Data

As providers of insurance brokerage and risk consultancy services, we have no direct competitors of comparable financial size in our marketplace. However, we compete for talent with brokers of all sizes, with insurance carriers, and with companies in other financial services sectors. Accordingly, to assist the Compensation Committee in judging the reasonableness of its compensation recommendations, we typically use data related to a group of peer companies in the insurance sector, some of whom do not directly operate as insurance brokers.

The Compensation Committee reviews its peer group on an annual basis to ensure that it remains reasonable and justifiable. It seeks to avoid changes unless there is some significant rationale. The 2012 peer group, which has remained unchanged from 2010, was approved by the Compensation Committee following a review by Towers Watson and subsequent discussions between the Compensation Committee, Towers Watson and management. The peer group is a combination of large and small insurance brokers and insurance carriers and consists of:

Insurance BrokersInsurance Carriers

AON plc

Ace Limited
Item 11 —

Arthur J. Gallagher & Co.

Executive CompensationArch Capital Group Limited
The information under the heading ‘Executive Compensation’ in the 2011 Proxy Statement is incorporated herein by reference. Nothing in this report shall be construed to incorporate by reference the Board Compensation Committee Report on Executive Compensation which is contained in the 2011 Proxy Statement.
Item 12 —

Brown & Brown Inc.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersAxis Capital Holdings Limited

Jardine Lloyd Thompson Group plc

The Chubb Corporation

Marsh & McLennan Companies, Inc.

XL Group plc

Our executive officers are based in both the United States and the United Kingdom. The informationcountry of each executive officer’s primary location is taken into account when reviewing and determining his or her annual base salary and, particularly, benefits.

In order to attract and retain exceptional senior executives, the Compensation Committee generally sets the executive officer’s base salary at the median but evaluates the executive officer’s total compensation (defined as base salary, annual incentive compensation and long-term incentive compensation) in the context of compensation paid to similarly-situated executives in our peer group companies, considering the scope of the role, the individual’s level of expertise and other market factors as well as both the performance of the individual and the Company.

The Compensation Committee reviews each element of compensation separately, as well as the total compensation of named executive officers. Compensation differences among the named executive officers reflect their different roles, their contributions, and the different market pay relating to those roles.

2.4Redesign of Our Named Executive Officer Compensation for 2013 in Response to Advisory Vote

At our 2012 Annual General Meeting of Shareholders, a majority of votes (72,159,795 votes or approximately 54%) were cast in favor of the compensation of the Company’s named executive officers. Although this vote was non-binding, the Board and the Compensation Committee sought to understand why the approval rate was low, especially because our executive pay program had remained substantially the same as the program that received 94% support the previous year. Accordingly, at the Board and Compensation Committee’s request and under their guidance, management began an outreach program to the Company’s shareholders to gather feedback and enable the Board and the Compensation Committee to better understand shareholder concerns.

We solicited feedback through a survey and direct outreach to shareholders representing approximately 73% of the Company’s shares. We then engaged in substantial discussions with investors representing over 40% of our outstanding shares. During these discussions, we learned that there was no single area of shareholder concern. Rather, our shareholders expressed a variety of concerns, not all of which related to compensation and included disappointment in the Company’s financial performance, concern about the level of CEO compensation relative to that performance (structured pursuant to his 2010 employment contract), use of guaranteed bonuses, the use of the same financial metrics for short-term and long-term incentive awards, use of non-traditional share ownership guidelines, and the lack of prohibitions against directors and executive officers entering into margin accounts and pledging shares.

The Board and Compensation Committee considered the vote results and the viewpoints expressed by shareholders through the Company’s outreach efforts and, as a result, with input from their outside advisors, adopted several changes to Company policies and to the Company’s executive compensation program. It is important to note, however, that most of these changes did not take effect until 2013 and therefore will not be reflected until our 2014 Proxy Statement. The Board and Compensation Committee, with assistance from management, responded to the outreach program by:

Seeking advice from its independent compensation consultant, Towers Watson, regarding the design of its new CEO compensation package, including the level of pay relative to the market, the mix of fixed to variable pay components and the relationship of the CEO’s pay level compared to the other named executive officers’ compensation.

Revising Company financial metrics for its annual incentive compensation awards and performance-based long-term incentive awards to differentiate between and to emphasize both short-term and long-term financial performance.

For annual incentive compensation awards for 2013, the Board and the Compensation Committee replaced previously used metrics, Adjusted EPS and Adjusted Operating Margin, with organic commissions and fees growth and Adjusted EBITDA. The Board selected those metrics because they believe they are key drivers of increasing cash flow and, therefore, important constituents of shareholder value enhancement. Additionally, Adjusted EBITDA (which excludes the impact of non-cash expenses, depreciation and amortization) is an appropriate short-term metric because it measures cash-based operating income and ensures that appropriate investment in the Company is encouraged.

For the long-term incentive compensation awards for 2013, the Board and the Compensation Committee eliminated the one-year performance period targets and adopted three-year performance period targets to encourage sustained financial performance. They also replaced previously used metrics, Adjusted EPS and Adjusted Operating Margin, with organic commissions and fees growth and Adjusted EBIT (modified by a cost of capital charge for acquisitions or a cost of capital credit for dispositions made during the performance period). Adjusted EBIT (modified as described above) is an appropriate long-term metric because it provides management accountability for investment decisions (mergers and acquisitions and capital expenditures) over time.

Adopting a strict policy prohibiting directors and executive officers from entering into margin accounts or pledging shares.

•

Confirming our philosophy that incentive pay should be performance driven and not guaranteed. Accordingly, unless there are material and compelling circumstances (i.e., on a limited basis, in connection with new hires), the Compensation Committee will not approve guaranteed incentive awards. As discussed further below, our new Chief Executive Officer’s compensation does not include any guaranteed annual incentive compensation awards.

Revising our executive officer share ownership guidelines to require each executive officer to own shares equivalent in value to a multiple of his or her base salary, as set forth below:

Position

Multiple

Group CEO

6.0 x base salary

Executive Officers Leading Major Business Units and Group CFO

3.0 x base salary

Other Executive Officers

2.0 x base salary

Executives are required to retain at least 50% of shares received under equity award programs until the ownership guidelines are met.

Finally, as discussed below, we changed the design of our new CEO’s compensation.

In January 2013, the Board appointed Dominic Casserley as the Company’s new CEO. The Company recruited Mr. Casserley from McKinsey & Company, where he led McKinsey’s Greater China Practice and its UK and Ireland Practice and served as a senior partner and member of the firm’s global board. Consistent with the Compensation Committee’s and Board’s compensation philosophy for 2013 and beyond, we structured the CEO compensation as follows:

Lowered the CEO’s total target pay package by over 25% compared to Mr. Plumeri resulting in less disparity between the compensation of the CEO and other named executive officers.

Lowered the CEO’s amount of fixed pay by almost 45%, increased the proportion of long-term incentive compensation relative to annual incentive compensation, as illustrated below, and added a cap on his annual incentive compensation awards.

Provided the CEO, as a transition payment, with a one-time sign-on cash award of $1,500,000, which will not be paid until the start of his second year of service. We believed this payment was reasonable and consistent with market practice given that our CEO was moving from McKinsey & Company’s all-cash based compensation system to a system that combines cash and equity.

Provided that the CEO’s 2013 annual incentive compensation awards, if any, will be paid partially in equity.

Revised the CEO’s 2013 annual incentive compensation award to be based 80% on the Company’s financial metrics and 20% on strategic goals, with no guaranteed payment.

Continued the practice of providing a double trigger for accelerating vesting of the CEO’s equity upon a change of control.

2.5Summary Chart of the Components of Our Named Executive Officers Compensation

The chart below sets forth the main components, objectives, key features and details of our named executive officer compensation program. It also highlights certain features adopted by the Compensation Committee in response to the Company’s shareholder outreach program that will be included within our 2013 named executive officer compensation and reflected in the 2014 proxy. As discussed in more detail in Section 3.0, the three components of our named executive officers’ compensation are: base salary, annual incentive compensation, and long-term incentive compensation.

ComponentObjectiveKey Features/DetailForward-Looking Changes

BASE SALARY

(Fixed)

•        Provide secure base of cash compensation

•        Attract and retain highly talented executives

•        Positioned at/around median level in our peer group companies

•        Salary adjustments made only to reflect changes in responsibilities or when competitive market conditions warrant

•        Lowered the CEO’s amount of fixed pay by almost 45%.

ANNUAL INCENTIVE COMPENSATION

(Variable)

•        Incent and reward executive officer contribution in generating:

•        strong financial performance at Company

•        strong financial/strategic performance at their business/functional unit

•        Retain strong performers

•        Provide annual performance-driven wealth creation

•        Awards for the CEO were based 100% and awards for the other named executive officers were based 60% on the Company’s performance against established targets for certain financial metrics(1)(2) that include:

•        Adjusted Operating Margin

•        Adjusted EPS

•        Paid entirely in the form of cash(3)

•        Payout determined using annual incentive sliding scale that incorporated symmetrical relationship between performance and payouts

•        Company financial metrics had a higher performance threshold for the CEO than the other named executive officers and the pool established for other employees (resulting in a zero payout to Mr. Plumeri with respect to the Adjusted EPS measure)

•        The Company utilized a high ratio of variable pay to fixed pay to tie compensation to performance. For example, because performance metrics were not achieved, Mr. Plumeri’s annual incentive award was reduced to 24% of his original target payout and 36% of his reduced target payout.

•        Annual incentive compensation awards for 2013 performance period will be determined using new revenue and profit metrics(4):

•        Organic Commissions and Fees Growth

•        Adjusted EBITDA

•        Compensation Committee confirmed its philosophy that incentive pay should be performance driven and not guaranteed(5)

•        Company financial metrics have a higher performance threshold for the CEO and other named executive officers than the pool established for other employees

•        A cap has been added to the CEO’s annual incentive compensation awards

•        For the CEO, lowered the proportion of target annual incentive compensation relative to long-term incentive compensation

LONG-TERM INCENTIVE COMPENSATION

(Variable)

•        Align executive officers’ interests with those of our shareholders

•        Incent long-term decision making

•        Reward exceptional performance by executive officers

•        Retain strong performers

•        Grants made in the form of

•        performance-based RSUs

•        time-based options

•        time-based RSUs

•        Earned performance-based RSUs were based on the Company’s performance against established targets for certain financial
metrics(2)(3) that include:

•        Adjusted Operating Margin

•        Adjusted EPS

•        Earned performance-based RSUs were determined using long-term incentive sliding scale that incorporates symmetrical relationship between performance and payouts

•        Dividends were not payable on any performance-based RSUs

•        Earned performance portion of 2013 long-term incentive compensation will be determined using new revenue and profitmetrics that are different from annual incentive compensation metrics(4):

•        Organic Commissions and Fees Growth

•        Adjusted EBIT (with Cost of Capital Modifier)

•        2013 Long-Term Incentive Program will include three-year performance period to better reflect pay for long-term performance

•        For CEO, increased the proportion of long-term incentive compensation relative to annual incentive compensation

(1)These financial metrics represented how the Company manages its profitability (Adjusted Operating Margin) and enhances growth in shareholder value (Adjusted EPS).
(2)These financial metrics were the same for all employees in the Company and its subsidiaries, who received annual incentive compensation awards or performance-based equity.
(3)From time to time, the Company may pay a portion of annual incentive compensation awards in the form of RSUs, provided there is sufficient available share capacity.
(4)The Board and Compensation Committee believe these metrics are key drivers of cash flow and shareholder value creation.
(5)Accordingly, unless there are material and compelling circumstances (i.e., on a limited basis, in connection with new hires), the Compensation Committee will not approve guaranteed incentive awards.

3.0Named Executive Officer Compensation for 2012

3.1The Company’s 2012 Financial Performance

2012 was characterized by an ongoing challenging macroeconomic environment, especially in two of our key geographic regions, Western Europe and North America. Reported EPS was ($2.58) and Adjusted EPS was $2.58 ($2.52 excluding the impact of foreign exchange) and our reported Operating Margin was (6.0%) and Adjusted Operating Margin was 21.6% (20.9% excluding the impact of foreign exchange). This compares to 2011 reported EPS of $1.15 and Adjusted EPS of $2.74 and reported Operating Margin of 16.4% and Adjusted Operating Margin of 22.5%.

As discussed below, these results were below the incentive targets established by our Compensation Committee and, accordingly, the Committee and the Board reduced our named executive officers’ incentive awards. However, the Company also delivered the following in 2012:

1.3% reported commissions and fees growth and 3.1% organic commissions and fees growth:

6.1% organic commissions and fees growth in our Global segment;

4.9% organic commissions and fees growth in our International segment; and

(0.6)% decline in organic commissions and fees in our North America segment, representing a significant improvement over the prior year.

Significant improvement in the Company’s financial performance in the fourth quarter, with 7.0% reported commissions and fees growth, 7.5% organic commissions and fees growth (representing the best quarterly organic growth result in over six years) and improvement in Adjusted Operating Margin by 40 basis points.

2012 cash flow from operating activities of $525 million, up $86 million, or 20%, from the prior year.

$285 million returned to shareholders through share repurchases and dividends.

Substantive progress on key growth initiatives (pipeline development and management, producer retention and recruitment) and operational initiatives (Financial Transformation Project, global brokerage systems, global placement system).

3.2Named Executive Officers’ Annual Compensation

The key components of our named executive officers’ annual compensation are:

Base salary;

Annual incentive compensation (payable in cash and/or equity awards); and

Long-term incentive compensation.

Base Salary — Base salary is intended to provide a fixed level of remuneration to fairly compensate and retain executives for their time and effort based on the individual’s role, experience and skill. The Compensation Committee strives to set base salary at a competitive level in the relevant markets in which our executive officers operate. Base salaries are reviewed by the Compensation Committee for all the Company’s executive officers relative to our peer group and, from time to time, against other U.S. or U.K. survey data, as applicable. The base salary levels are generally positioned around the median of our peer group companies. In line with our compensation philosophy, exceptional performance by our executive officers is generally rewarded through annual and/or long-term incentive compensation and not through base salaries. Before he resigned as CEO effective January 6, 2013, Mr. Plumeri’s base salary had not changed since he joined Willis in October 2000. This reflects the Company’s and Mr. Plumeri’s shared view that his pay was best aligned with shareholder interests if most of his annual compensation was at risk and tied to the Company’s performance.

Adjustments to base salaries are made by the Compensation Committee to reflect changes in responsibilities or when competitive market conditions warrant. The following reflects the changes to the base salaries of our named executive officers during the past year:

Based on the results of a market review, effective April 2012, Mr. Neborak received an increase to his annual base salary to $600,000 from $500,000.

As a result of the increase in responsibilities related to his promotion to Chairman and CEO of Willis Global, Mr. Hearn received an increase in his annual base salary to £500,000 ($792,500) from £400,000 ($634,000), effective January 1, 2012. As a result of the increase in responsibilities related to his promotion to Deputy CEO, Mr. Hearn received a further increase in his annual base salary to £530,000 ($840,050), effective January 1, 2013.

As a result of increase of responsibilities related to his promotion to CEO of Willis International, Mr. Wright received an increase in his annual base salary to £500,000 (or $792,500) from £405,000 (or $641,925).

Based on the increased scope of his role and increasingly competitive market conditions, effective April 2012, Mr. Krauze received an increase to his annual base salary $700,000 from $625,000.

Annual Incentive Compensation — Our annual incentive compensation plan is designed to incent and reward our named executive officers for their contribution in generating strong financial performance at the Company, strong financial or strategic performance at their business or functional unit, as well as to retain strong performers.

The Compensation Committee set Mr. Plumeri’s annual incentive compensation for 2012 in accordance with his 2010 employment agreement. Other than Mr. Plumeri, each named executive officer is eligible to receive an annual incentive compensation award under the heading ‘Security Ownership-SecurityCompany’s Annual Incentive Plan (“AIP”). AIP awards are an integral component of the executive officer’s total compensation and are based on specific company financial results as well as individual executive officer strategic objectives. The AIP is intended to deliver exceptional pay for exceptional performance and provides a well-timed link between recent performance and individual compensation, which is especially pertinent with the de-emphasis on regular base-pay increases.

Annual incentive compensation, which may be paid in cash and/or equity, is granted under the Willis Group Senior Management Incentive Plan (the “SMIP”) to the extent named executive officers are “covered employees” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”). Generally, annual incentive compensation awards to the executive officers are approved and, for named executive officers who are “covered employees” under Section 162(m), are typically certified by the Compensation Committee in February, with payments made in March. Previously, if annual incentive compensation awards were paid in the form of a cash retention award, then the executive officer would be required to repay a proportionate amount of the award if he or she voluntarily left the Company’s employment before a specified date, which was generally three years. In December 2012, the Board changed its Company-wide remuneration policy and eliminated the repayment requirement from prior annual cash retention awards. Awards for 2012 were in the form of standard cash bonuses which do not include a repayment requirement. Current and prior annual incentive compensation awards continue to remain subject to the clawback provisions discussed in Section 4.0.

Annual Incentive Compensation Award for Joseph Plumeri (2012 CEO)

Pursuant to Mr. Plumeri’s 2010 employment agreement, Mr. Plumeri’s annual incentive compensation award was based 100% on the achievement by the Company of certain performance targets. Accordingly, pursuant to that 2010 agreement, each fiscal year the Compensation Committee established a threshold, target, and stretch financial performance goals (with maximum goals being no greater than 110% of the target goal). In February 2012, consistent with 2011 and based on the criteria in his employment agreement, the Compensation Committee approved annual incentive compensation performance goals of:

Threshold Payout

Target Payout

Stretch Payout

250% of his base salary if 95% of the performance targets were achieved.375% of his base salary if 100% of the performance targets were achieved.500% of his base salary if 105% of the performance targets were achieved.

Upon final approval of the 2012 budget, however, in consideration for the lack of growth in the Adjusted EPS target for 2012 relative to 2011, Mr. Plumeri proposed and the Compensation Committee agreed, to reduce his target payout to 250% (down from 375%) if 100% of the financial targets were achieved. This change is reflected in the revised payout column in the table below entitled “Summary of Annual Incentive Compensation Calculation For all Named Executive Officers.”

In 2012, the Company financial measures used for determining Mr. Plumeri’s annual incentive compensation award were Adjusted EPS (for 50% of the payment) and Adjusted Operating Margin (for 50% of the payment). These are measures that represent how the Company manages its profitability (through the use of the Adjusted Operated Margin) and enhances growth in shareholder value (as measured by the Adjusted EPS).

Applying the Company’s performance against Mr. Plumeri’s Adjusted EPS target produced the following opportunity:

Adjusted
EPS Target		  Payout
         Opportunity        
as a % of
Base  Salary
(Original)		 Payout
         Opportunity        
as a % of
Base Salary
(Revised)
(Stretch) $2.88  250% 250%
(Target) $2.74  187.5% 125%
(Threshold) $2.60  125% 83.5%
<$2.60  0% 0%

As set forth in the Company’s Annual Report on Form 10-K for the year ended 2012, the Company reported Adjusted EPS of $2.58. The Compensation Committee, however, eliminated the positive impact of foreign exchange (deemed outside of management’s control) and thus reduced, for compensation purposes, 2012 Adjusted EPS to $2.52. Because the Company did not achieve the Adjusted EPS threshold of $2.60, this portion of Mr. Plumeri’s annual incentive compensation award was $0.

Applying the Company’s performance against Mr. Plumeri’s Adjusted Operating Margin target produced the following result:

Adjusted
Operating
Margin
Target		  Payout
         Opportunity        
as a % of
Base Salary
(Original)		 Payout
         Opportunity        
as a % of
Base Salary
(Revised)
(Stretch) 22.9%  250% 250%
(Target) 21.8%  187.5% 125%
(Threshold) 20.7%  125% 83.5%
<20.7%  0% 0%

As set forth in the Company’s Annual Report on Form 10-K for the year ended 2012, the Company reported Adjusted Operating Margin of 21.6%. The Compensation Committee eliminated the positive impact of foreign exchange and this reduced, for compensation purposes, 2012 Adjusted Operating Margin to 20.9%. Because the Company exceeded the 20.7% threshold and met 96% of the 21.8% target, this portion of Mr. Plumeri’s annual incentive compensation award was 48% of his target payout opportunity or 72% of his revised total target payout opportunity or $905,963.

Accordingly, based on the formula discussed above, combining the results of both the Adjusted EPS and Adjusted Operating Margin formulas, the Compensation Committee approved an annual incentive compensation award to Mr. Plumeri of $905,963 (i.e., 24% of his total target payout opportunity of $3,750,000 or 36% of his revised total target payout opportunity of $2,500,000). Because Mr. Plumeri is no longer serving as the Company’s CEO and will retire as Chairman of the Board on July 7, 2013, the Compensation Committee elected to pay Mr. Plumeri’s 2012 annual incentive compensation award 100% in cash rather than partially in equity and partially in cash as in prior years.

Annual Incentive Compensation Awards for Michael Neborak, Stephen Hearn, Timothy Wright and Victor Krauze

The 2012 annual incentive compensation awards under the AIP for Messrs. Neborak, Hearn, Wright and Krauze were structured by the Compensation Committee as follows:

60% based on the following Company financial results:

30% based on how the Company performed against an Adjusted EPS target of $2.74 per share (the same target used for the payout pool for all Company employees in the AIP); and

30% based on how the Company performed against an Adjusted Operating Margin target of 21.8% (the same target used for the payout pool for all Company employees in the AIP); and

40% based on how the named executive officer performed against individual strategic objectives, which for Messrs. Hearn, Wright and Krauze was largely based on the financial performance of their business units.

The resulting percentage was applied against the officer’s annual incentive compensation target award, which is a percentage of the officer’s base salary. Under Mr. Hearn’s amendment to his employment agreement as a result of his promotion to Chairman and CEO of Willis Global in early 2012, he was entitled to receive a minimum AIP for the first year in his new role. Based on his performance as described below, Mr. Hearn’s actual AIP award exceeded this minimum. No executive officer has any guaranteed annual incentives for 2013.

Company Performance Portion of Annual Incentive Compensation (60% of AIP)

With respect to the EPS-based component of the award, the following scale applied:

Adjusted
EPS
Target		  Payout
as % of
Base Salary
$2.88  110%
$2.74  100%
$2.60  90%
$2.47  80%
$2.33  70%
<$2.33  0%

As stated above, the Company reported 2012 Adjusted EPS of $2.58, but the Compensation Committee eliminated the positive impact of foreign exchange, reducing Adjusted EPS to $2.52. Based on the above sliding scale, because the Adjusted EPS result was between the $2.74 and $2.60, this portion of each named executive officer’s annual incentive award was funded at 84%.

With respect to the Adjusted Operating Margin component of the award, the following scale applied:

Adjusted
Operating
Margin
Target		 Payout
Measurement
22.9% 110%
21.8% 100%
20.7% 90%
19.6% 80%
18.5% 70%
<18.5% 0%

As stated above, the Company reported 2012 Adjusted Operating Margin of 21.6%, but the Compensation Committee eliminated the positive impact of foreign exchange, reducing Adjusted Operating Margin to 20.9%. Based on the above sliding scale, this produced a payout percentage of 92% for this portion of each of the named executive officer’s annual incentive award.

Based on the application of the above two scales, the blended payout percentage for the Company’s performance against the Adjusted EPS and Adjusted Operating Margin targets was 88% of target. This comprised 60% of each of the named executive officer’s annual incentive compensation award.

Individual Strategic Objectives and Business Unit Financial Goals (40% of AIP)

The Compensation Committee then considered the individual strategic objectives and business unit financial goals based on operating income and organic commissions and fees growth for Messrs. Neborak, Hearn, Wright and Krauze which were established at the beginning of 2012. The Compensation Committee reviewed the executives’ performance against those objectives in the context of the overall Company financial and strategic performance. Key factors and resulting payout decisions are set forth below:

Michael Neborak

Led efforts to contain group-wide expense growth.

Made significant progress in Financial Transformation Project.

Completed 3-year Financial Operating Model.

As a result of the achievement of these goals, the Compensation Committee funded this portion of his annual incentive compensation award at 88%.

Stephen Hearn

Willis Global achieved $372 million operating income and 6.1% organic commissions and fees growth.

Demonstrated leadership in development of a vision and strategy for the alignment of the Global business.

Made significant progress in the deployment of an enterprise-wide placement initiative.

Demonstrated leadership and support during the CEO transition.

As a result of the achievement of these goals, the Compensation Committee funded this portion of his annual incentive compensation award at 100%.

Timothy Wright

Willis International achieved operating income of $183 million and 4.9% organic commissions and fees growth.

Achieved notable year-over-year commissions and fees growth despite poor economies in major markets, with growing momentum in the second half of 2012.

Supported the deployment of enterprise-wide placement initiative in all major countries.

As a result of the achievement of these goals, the Compensation Committee funded this portion of his annual incentive compensation award at 89%.

Victor Krauze

Willis North America achieved $240 million of operating income. Despite a full-year decline in organic commissions and fees of (0.6)%, it achieved substantial shift in growth momentum culminating in 3.1% organic growth in the fourth quarter of 2012.

Expanded emphasis on producer recruitment resulting in 3.2% net producer growth in 2012.

Continued to successfully deploy Sales 2.0.

Despite these achievements, the Compensation Committee funded this portion of his annual incentive compensation award at 54%, reflecting the overall impact of Willis North America’s financial results on Company performance.

The following table sets forth the calculation for 2012 annual incentive compensation awards all named executive officers:

Summary of Annual Incentive Compensation Calculation for all Named Executive Officers

       Payout % Relating to
Company Portion of AIP		      

Named Executive Officer

  2012
Salary		 Bonus
Target as
% of
Salary ($/£)		 Adjusted
EPS		 Adjusted
Operating
Margin		 Payout %
Relating to
Individual
Portion of
AIP		 Total
Payout
as a % of
Bonus
Target		 Bonus
Payout $/£

Joseph Plumeri (original target)

  $1,000,000 375%

($3,750,000)

 0% 92% N/A 24% $905,963

Joseph Plumeri (revised target)

  $1,000,000 250%

($2,500,000)

 0% 92% N/A 36% $905,963

Michael Neborak

  $600,000 100%

($600,000)

 84% 92% 88% 88% $528,000

Stephen Hearn(1)

  £500,000
or
($792,500)		 175%

(£875,000)
or
($1,386,875)

 84% 92% 100% 93% £815,000
or
($1,291,775)

Timothy Wright(1)

  £500,000
or
($792,500)		 175%

(£875,000)
or
($1,386,875)

 84% 92% 89% 89% £775,000
or
($1,228,375)

Victor Krauze

  $700,000 N/A(2) 84% 92% 54% 74% $910,000

(1)Messrs. Hearn and Wright receive their salaries and bonuses in pounds sterling; the above figures have been converted into dollars at the average exchange rate for 2012 (£1:$1.585).
(2)Mr. Krauze did not have a formal bonus target. To calculate Mr. Krauze’s 2012 bonus the Compensation Committee utilized the same bonus target as Messrs. Hearn and Wright (175% of salary).

All annual incentive compensation awards were paid in cash. Further details of the 2012 annual incentive compensation awards made to our named executive officers are shown in the Bonus and Non-Equity Incentive Plan Columns of the “Summary Compensation” table.

Further details regarding the changes made to the 2013 annual incentive compensation program of our CEO and other named executive officers are reflected in Section 2.4, “The Redesign of Our Named Executive Officer Compensation for 2013 in Response to Advisory Vote” and Section 2.5 “Summary Chart of the Components of Our Named Executive Officers Compensation.”

Long-Term Incentive Compensation

Our long-term incentives are a significant element of our executive officers’ compensation and have typically been in the form of equity awards. For several years, we did not have a consistent long-term incentive program and. in 2010, in light of economic conditions, we did not make regular equity awards to our named executive officers except to satisfy pre-existing commitments or in connection with sign-on equity awards made to attract new competitive talent to the Company. In 2011, we implemented a Long-Term Incentive Program for senior leaders. In that year, we granted options and deferred cash as a portion of the long-term incentive plan as an alternative to the use of RSUs due to the lack of share availability under the Company’s equity plans at the time.

2012 Long-Term Incentive Program

In April 2012, the Compensation Committee adopted the 2012 Long-Term Incentive Program (the “2012 LTI Program”), which had both performance-based and time-based components to both reward performance and help ensure retention. Grants of options, performance-based RSUs and time-based RSUs were made in December 2012 and, for the performance-based equity, included performance targets established in the second quarter of 2012. All named executive officers, other than Mr. Plumeri, were eligible to participate and, as a result, Messrs. Neborak, Hearn, Wright and Krauze received awards under the 2012 LTI Program.

For the named executive officers, their individual 2012 awards were comprised of:

Options  Performance-Based RSUs Time-Based RSUs
 25%  50% 25%

The equity granted under the 2012 LTI Program was made under the recently adopted Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan (the “2012 Plan”). The options, time-based RSUs and performance-based RSUs earned based on the performance of the 2012 targets discussed below, will vest 50% on the second and third anniversaries of the grant date (i.e., December 26, 2014 and December 26, 2015), subject to the continued employment of the participant during the vesting period. Dividends are not payable on any of the equity granted under the 2012 LTI Program.

Similar to the annual incentive compensation awards, the amount of performance-based RSUs granted under the 2012 LTI Program would be earned 50% based on the achievement of an Adjusted EPS target of $2.74 and 50% based on the achievement of an Adjusted Operating Margin target of 21.8%. However, if the targets were not achieved at 100%, the earned amount of the performance-based RSU award would be reduced in accordance with the following sliding scales:

Performance
Against
Applicable
Adjusted
EPS Target		 % of Earned
Performance
Based-RSUs
$2.74 100%
$2.60 90%
$2.47 80%
<$2.47 0%

Performance
Against
Adjusted
Operating
Margin
Target		 % of  Earned
Performance
Based-RSUs
21.8% 100%
20.7% 90%
19.6% 80%
<19.6% 0%

The Compensation Committee applied the same analysis in determining financial performance against applicable targets that they used in determining the annual incentive compensation awards for the named executive officers. As a result, 88% of the performance-based RSUs granted under the 2012 LTI Program were earned by the respective named executive officer and they received long-term incentive awards equal in value to: Michael Neborak ($940,000); Stephen Hearn £1,304,732 (or $2,068,000); Timothy Wright £889,590 (or $1,410,000); and Victor Krauze ($1,128,000).

Grants to 2012 Named Executive Officers Outside of the 2012 Long-Term Incentive Program

In 2012, under the terms of his 2010 employment agreement, performance-based RSUs were granted to Mr. Plumeri. This was the last equity grant required under Mr. Plumeri’s employment agreement.

The RSUs were 100% performance related and similar to the performance-based RSUs granted under the 2012 LTI Program, 50% of the award would be earned if an Adjusted EPS target of $2.74 was met and 50% of the award would be earned if an Adjusted Operating Margin of 21.8% was met. However, if the targets were not achieved at 100%, the amount of the performance-based RSU award would be reduced in accordance with the same equity sliding scale as the 2012 LTI Program. The Compensation Committee applied the same analysis in determining financial performance against applicable targets that they used in determining the annual incentive compensation awards and the 2012 LTI Program for the named executive officers. As a result, 88% of the performance-based RSUs granted to Mr. Plumeri were earned and Mr. Plumeri received a long-term incentive award value equal to $5,280,000.

In connection with his promotion in January 2012 from CEO of Willis Re to Chairman and CEO of Willis Global, Mr. Hearn received 6,500 time-based RSUs. These RSUs vest in equal tranches on the first, second and third anniversaries of the grant date.

Details of the 2012 equity award grants made to the named executive officers and the awards earned as a result of the Company’s financial performance are contained in the compensation tables “Grant of Plan-Based Awards” and “Outstanding Equity Awards at Fiscal Year End.” Details concerning the employment agreements of the named executive officers are set forth in the sections entitled “Compensation Tables — Joseph Plumeri’s Employment Agreement (2012 CEO)” and “— Other Named Executive Officers’ Employment Agreements.”

Long-term incentive awards that are intended to be “qualified performance-based compensation” under Section 162(m) were granted under the SMIP or under a combination of the SMIP and one of the Company’s equity plans or any sub-plans thereto, including the 2012 Plan, the Willis Group Holdings 2008 Share Purchase and Option Plan (the “2008 Plan”), the 2000 Hilb, Rogal and Hamilton Share Incentive Plan (the “2000 HRH Plan”) and the 2007 Hilb Rogal and Hobbs Share Incentive Plan (the “2007 HRH Plan” and together with the 2012 Plan, the 2008 Plan and the 2000 HRH Plan, the “Plans”).

Further details regarding the changes made to the 2013 long-term incentive compensation program of our CEO and other named executive officers are reflected in Section 2.4, “The Redesign of Our Named Executive Officer Compensation for 2013 in Response to Advisory Vote” and Section 2.5 “Summary Chart of the Components of Our Named Executive Officers Compensation.”

3.3Perquisites and Other Benefits

The Company does not believe that providing generous executive perquisites is either necessary to attract and retain executive talent or consistent with our pay-for-performance philosophy. Therefore, other than the benefits described in the “Summary Compensation” table, we do not provide perquisites such as personal use of aircraft, excise tax gross-ups, financial planning services, club memberships or vacation homes to our executive officers. Our corporate aircraft use policy permits a guest of an executive officer or director to accompany them on a business flight on Company aircraft if a seat is available and they reimburse the Company the equivalent of a first-class airline ticket.

In order for Mr. Plumeri to exercise stock options or to receive RSUs when they vest under our equity programs, he is required by federal law to file a notification and report form under the Hart–Scott–Rodino Antitrust Improvements Act of 1976. The Compensation Committee determined that the Company should pay the filing fee and associated legal costs, since otherwise Mr. Plumeri would not receive the same benefit from the equity compensation components as other executive officers of the Company. Accordingly, “Other Compensation” for Mr. Plumeri in the “Summary Compensation Table” includes the filing fee paid on his behalf during 2012.

In addition, the Company provides retirement, life insurance and medical benefits to our executive officers to be competitive with the marketplace in which our executive officers operate (which are the same as those provided to other employees in the workplace).

Retirement income is provided to Mr. Plumeri and some other executive officers through our defined benefit retirement plans. The U.S. defined benefit plan was closed to new hires on January 1, 2007 and was frozen on May 15, 2009. Newly hired executive officers only participate in defined contribution plans. The Company also maintains the Willis Pension Scheme (UK), an approved U.K. defined benefit plan. The Willis Pension Scheme (UK) was closed to new members beginning on January 1, 2006. In 2006, it was replaced by a defined contribution plan for new employees. Details of the retirement benefits received by the named executive officers are contained in the compensation tables in the section entitled “Pension Benefits.”

For U.S. employees, a 401(k) Plan is available for saving towards retirement. In order to provide the opportunity to accumulate retirement income and improve retention, the Company reinstated a matching contribution (which had been suspended in recent years) to the 401(k) Plan effective as of January 1, 2011. The matching contribution was made on December 31, 2012 for eligible employees who were still employed by the Company on that date.

We also maintain a deferred compensation plan for certain U.S. employees whose annual salary is in excess of $225,000 that allows them to plan their tax position through a deferral of part of their annual compensation. Messrs. Plumeri and Krauze both currently participate in this plan. The Company may also make certain contributions to the deferred compensation plan on behalf of Mr. Plumeri. As provided in his 2010 employment agreement, the Company contributes $800,000 annually on behalf of Mr. Plumeri to provide him with retirement income. The final installment of the contribution for Mr. Plumeri’s under this plan was paid on April 15, 2013, reflecting a pro-rata payment for 2013.

4.0Clawback Policy

Under the Company’s clawback policy, the Board, or any of its committees, may to the extent permitted by applicable law, cancel or require reimbursement of any incentive payments or equity-based awards received by an executive officer after December 31, 2008, if and to the extent that (i) the incentive payment or equity award was based on the achievement of Company financial results which are subsequently restated, (ii) the Compensation Committee determines that the executive officer engaged in fraud, negligence or other misconduct that contributed to the need to restate the Company’s financial results and (iii) the incentive payments or equity-based award values made to the executive officer would have been lower if the Company’s results had been properly reported. In such cases, the Company will seek to recover from the executive officer the amount by which the actual incentive payment or equity award for the relevant period exceeded the amount that the executive officer would have received based on the restated results. The Company’s clawback policy is posted on its website under Investor Relations — Corporate Governance.

The Company will comply, and has modified its award agreements to so indicate, with the provisions of the Dodd-Frank Act, and will adopt a revised mandatory clawback policy that will require the Company, in the event of

a restatement, to recover from current and former executives any incentive-based compensation, for the three years preceding the restatement, that would not have been awarded under the restated financial statements. The Compensation Committee periodically reviews the Company’s clawback policy and, to ensure full compliance, will propose its final recommendations to the full Board once it has had the benefit of reviewing the SEC’s proposed and final rules for the legislation.

5.0Executive Officer and Outside Director Share Ownership Guidelines

We maintain share ownership guidelines under which executive officers and outside directors are expected to acquire a meaningful level of share ownership in the Company, so as to further align their interests with those of our shareholders. In February 2013, the Compensation Committee revised the executive officer share ownership guidelines to require them to own shares equivalent in value to a multiple of his or her base salary, as set forth below:

Position

Multiple

Group CEO

6.0 x base salary

Executive Officers Leading Major Business Units and Group CFO

3.0 x base salary

Other Executive Officers

2.0 x base salary

Executives are encouraged to comply with their applicable guideline as soon as practical given their individual circumstances and no later than five years from (i) March 1, 2013 (the date of the implementation of the policy (i.e., March 1, 2018)) or (ii) the date of the executive’s hiring or promotion. The failure to comply with or make reasonable progress towards meeting the share ownership guidelines in a timely fashion will result in the executive being required to retain all net shares acquired by him or her under the exercise of share options or the vesting of RSUs (net of shares surrendered for the payment of the exercise price and any taxes).

For purposes of meeting the executive officer share ownership guidelines, the related value using the three-month average share price of the following shares will be counted towards achieving and maintaining compliance: shares owned outright; shares or units held in Willis broad-based share purchase plans (i.e., the ESPP, UK Sharesave); unvested RSUs and RSUs subject to time-based vesting; and unvested earned performance-based RSUs. Options and unearned performance RSUs are not counted as shares owned for purposes of the guidelines.

Executives are required to retain at least 50% of the net shares received under equity award programs until the ownership guidelines are met.

As discussed below under “Outside Director Compensation,” outside directors are required to hold shares equal to the lesser of 3.5 times the directors’ cash retainer of $100,000 (i.e., $350,000) or 10,000 shares.

6.0Anti-Hedging Policies

The Company prohibits executive officers and directors from pledging any Company shares, entering into margin accounts, short selling any Company shares, selling shares “against the box” and buying or selling puts or calls relating to Company shares.

7.0Share Award Policy

The Board of Directors’ has a policy governing the granting of options and other share-based awards under the Company’s Plans.

It is the Company’s policy to neither backdate option grants or other share-based awards to take advantage of a lower share price nor to schedule grants of options or other share-based awards before or after specific events to take advantage of anticipated movements in the price of our shares.

It is also the Company’s policy to grant options with an exercise price no less than the closing sales price as quoted on the NYSE on the date of grant, except in the case of any sharesave sub-plans adopted by the Company for non-U.S. taxpayers outside of the U.S., for which the exercise price of the option is set at a 5% or 10% discount off the closing sales price on the date before employees are invited to participate, consistent with past practice to incent employee ownership.

In addition to approving Share-based awards to executive officers, the Compensation Committee is responsible for approving the overall allocation of Share-based awards to the employees of the Company and its subsidiaries and affiliates for the forthcoming year. Implementation of the granting of such awards within the agreed annual plan is delegated to the Share Award Committee consisting of the CEO, the Group Chief Financial Officer and the Group Human Resources Director. The members of the Share Award Committee work closely with the Chairman of the Compensation Committee to ensure that, in particular, the timing of grants is appropriate.

Awards may be made at a time when the Company is in possession of material non-public information, so long as the timing of the award is not motivated by an intention to improperly use any such material non-public information for the benefit of the recipient.

Under this policy, annual share-based awards are authorized by the Compensation Committee and the grant date shall be the date of that meeting or a date specified by the Compensation Committee no later than 30 days following that meeting. Except as directed by the Compensation Committee, share-based awards granted in connection with a new hire, a promotion or the assignment of additional responsibilities to an existing employee or for retention purposes will be considered granted on March 5th, May 10th, August 10th, November 10th or December 5th (or if the applicable grant date is not a trading day, the next trading day) on the date most closely following the month in which such recipient’s employment or promotion or assignment of new responsibilities commenced and such retention award was approved.

8.0Tax and Accounting Implications

The Compensation Committee considers the anticipated tax treatment to the Company and to the executive officers in its review and establishment of compensation programs and payments. Section 162(m) imposes a limit on the amount the Company may deduct for U.S. tax purposes for compensation paid to our CEO and our three most highly compensated executive officers employed at the end of the year (other than the Chief Financial Officer). However, compensation which qualifies as “performance-based” under Section 162(m) is excluded from the limit if, among other requirements, the compensation is payable only upon the attainment of pre-established, objective performance goals under a plan approved by the Company’s shareholders.

The SMIP, which was approved by shareholders at the 2005 Annual General Meeting, is intended to comply with the provisions of, and to be administered in compliance with the requirements of, Section 162(m). The Company is also authorized to grant equity awards that qualify as “performance-based” compensation under certain of the Company’s Plans.

The SMIP provides for an annual incentive compensation award equal to 5% of the Company’s earnings for the fiscal year, which the Compensation Committee may reduce (but not increase) in its discretion. For this purpose, “earnings” means the Company’s operating income before taxes and extraordinary loss as reported in its audited consolidated financial statements, as adjusted to eliminate the effect of certain events specified in the SMIP. The Compensation Committee also takes other performance metrics into consideration in determining amounts payable under the SMIP (including, among other things, revenue and profit metrics), but the amounts payable under the SMIP may not exceed the amount described above. The Compensation Committee designates the executive officers who participate in the SMIP.

The Compensation Committee may consider the following performance criteria when granting performance-based awards: (i) annual revenue, (ii) budget comparisons, (iii) controllable profits, (iv) EPS or Adjusted EPS, (v) expense management, (vi) improvements in capital structure, (vii) net income, (viii) net or gross sales, (ix) operating income (pre- or post-tax), (x) profit margins, (xi) operating or gross margin, (xii) profitability of an identifiable business unit or product, (xiii) return on investments, (xiv) return on sales, (xv) return on stockholders’ equity, (xvi) total return to stockholders, (xvii) assets under management, (xviii) investment management performance, (xix) mutual and other investment fund performance, (xx) cash flow, operating cash flow, or cash flow or operating cash flow per share (before or after dividends), (xxii) price of the shares or any other publicly traded securities of the Company, (xxiii) reduction in costs, (y) return on capital, including return on total capital or return on invested capital, (xiv) improvement in or attainment of expense levels or working capital levels, and (xv) performance of the Company relative to a peer group of companies and/or relevant indexes on any of the foregoing measures.

Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the control of the Compensation Committee can affect deductibility of compensation and there can be no assurance that compensation paid to our executive officers who are covered by Section 162(m) will be treated as qualified performance-based compensation. Our general policy is to preserve the tax deductibility of compensation paid to the CEO and other named executive officers, including annual incentives and equity awards under the terms of the Company’s Plans. The Compensation Committee reserves the right to use its judgment to authorize compensation payments that may not be deductible when the Compensation Committee believes that such payments are appropriate and in the best interests of the Company, taking into consideration changing business conditions and the performance of its employees.

The Compensation Committee will continue to monitor developments and assess alternatives for preserving the deductibility of compensation payments and benefits to the extent reasonably practicable, consistent with its compensation policies and as determined to be in the best interests of the Company and its shareholders.

It is also the Company’s general policy to deliver equity-based compensation to employees in as tax-efficient a manner as possible, taking into consideration the overall cost to the Company, for which the Company accounts in accordance with FAS 123R.

9.0Payments on Change of Control and Termination

Historically, the Company has been selective in providing for potential payments relating to a change of control. The Compensation Committee may enter into such agreements when in its business judgment it believes that such payments are appropriate and in the best interests of the Company. No named executive officer is entitled to any automatic payments in connection with a change of control of the Company. However, certain equity awards held by our named executive officers vest in part or in full upon a change of control and the deferred cash awards held by our named executive officers may, in the discretion of the Compensation Committee, become payable upon a change of control. Treatment of equity awards in this manner (as opposed to cash payments that are not automatically accelerated) ensures that our executives are motivated primarily by the needs of the businesses for which they are responsible, rather than circumstances that are outside the ordinary course of business—i.e., circumstances that might lead to the termination of an executive’s employment or that might lead to a change in control of the Company. Generally, this is achieved by assuring our named executive officers that they will receive their equity awards if their employment is adversely affected in these circumstances, subject to certain conditions. We believe that these benefits help ensure that affected executives act in the best interests of our shareholders, even if such actions are otherwise contrary to their personal interests. This is critical because these are circumstances in which the actions of our named executive officers may have a material impact upon our shareholders.

The Company provides severance protection to key employees in limited circumstances primarily where the employee is terminated by the Company without cause or the employee resigns for good reason. The Compensation Committee believes that severance benefits are a necessary component of a competitive compensation program and, in certain cases, are in consideration for an executive’s agreement not to compete. Messrs. Plumeri, Casserley and Hearn are also entitled to enhanced severance benefits in the event their employment is terminated by us without cause or by the executive for good reason in connection with a change of control in order to avoid any associated distractions. The Compensation Committee believes that its use of severance benefits is not significantly different from the severance benefits typically in place at other companies.

Joseph Plumeri (2012 CEO)

Mr. Plumeri resigned as the Company’s CEO on January 6, 2013 but will continue to serve as non-executive chairman and as an employee of Willis North America, Inc., a subsidiary of the Company through July 7, 2013.

Change of control provisions were included in Mr. Plumeri’s employment agreement when he originally joined the Company. At that time, the Company was privately owned, predominantly by Kohlberg, Kravis & Roberts (“KKR”). In order to recruit an individual of the right caliber to fill the role of Chairman and CEO of the Company as then existed, and given the range of exit strategies available to KKR, it was considered appropriate at that time to include provisions in his employment agreement which provided protection in the case of a change of control.

During 2009, the Compensation Committee and the Board of Directors determined that it would be in the best interests of the Company to ensure Mr. Plumeri’s continued services as the Company’s Chairman and CEO until July of 2013. In addition, Mr. Plumeri, the Compensation Committee and the Board of Directors agreed that Mr. Plumeri’s prior employment agreement should be updated to reflect the evolution of best pay practices over the last several years. At the time, two members of the Compensation Committee, Sir Roy Gardner and Mr. McCann, participated in all discussions with Mr. Plumeri regarding his employment agreement and were advised during the negotiations by the Compensation Committee’s consultant.

Specifically, it was determined that the provision in Mr. Plumeri’s employment agreement allowing the executive to voluntarily terminate his employment for any reason following a change of control and receive severance payments was inconsistent with best pay practices as well as the Company’s compensation philosophy and objectives. Consequently, the amended employment agreement, which Mr. Plumeri entered into in January 2010, provided that Mr. Plumeri could no longer voluntarily terminate his employment following a “change of control” (as defined in his employment agreement) and receive severance. Instead, it provided that he is eligible to receive severance payments and benefits only if he is involuntarily terminated without “cause” or terminates employment for “good reason” (each as defined in his employment agreement). However, if Mr. Plumeri terminated his employment without “good reason” following a “change of control,” he would be credited with the amount that the Company would have contributed to his deferred compensation benefit account had he remained until the end of his contract of employment, on July 7, 2013. Further information regarding Mr. Plumeri’s employment agreement and details of the change of control and severance provisions are contained in the sections entitled “Compensation Tables — Joseph Plumeri’s Employment Agreement (2012 CEO);” “— Potential Payments to Mr. Plumeri Upon Termination or Change of Control.”

Dominic Casserley (Current CEO)

Under his employment agreement dated as of October 16, 2012, in the event that Mr. Casserley’s employment is terminated by the Company without “cause,” Mr. Casserley resigns for “good reason” (as such terms are defined in his employment agreement) or Mr. Casserley is terminated as a result of the non-renewal of his employment agreement by the Company within the first four years of employment (a “Qualifying Termination”), Mr. Casserley would be entitled to receive severance payments and benefits, including partial service vesting credit (but not performance-vesting credit) for his annual equity-based long-term incentive awards. In the event of a Qualifying Termination within two years following a “change of control” (as such term is defined in his employment agreement), certain of Mr. Casserley’s severance payments would be paid in a lump sum (rather than installments) and Mr. Casserley would receive full service-vesting credit (but not performance-vesting credit) for each of the annual equity-based long-term incentive awards granted to him. Lastly, upon termination of employment (other than for “cause”) concurrent with or following the expiration of the full five-year term of the agreement, Mr. Casserley would be entitled to partial service-vesting credit (but not performance-vesting credit) for each of the annual equity-based long-term incentive awards granted to him and such termination will be treated as retirement for purposes of compensation previously paid or payable to him. Further information regarding Mr. Casserley’s employment agreement and details of the change of control and severance provisions are contained in the section entitled “Compensation Tables — Dominic Casserley’s Employment Agreement (Current CEO).”

Other Named Executive Officers

Michael Neborak

In order to attract Mr. Neborak as the new Group CFO, the Company agreed in his employment agreement that all of his earned and unvested RSUs and options shall immediately vest in the event of a Change of Control (as such term is defined in the applicable Plans and/or RSU agreement). In the event Mr. Neborak is involuntarily terminated without “cause” (as such term is defined in his employment agreement) he is eligible to receive severance payments. Mr. Neborak has also entered into a restrictive covenant agreement with the Company that provides, in part, that we may require that Mr. Neborak refrain from working for, engaging or generally having a financial interest in certain of our competitors after the termination of his employment, in exchange for providing severance payments and continued healthcare coverage to him during such non-compete period.

Stephen Hearn

At the same time the Board appointed Mr. Casserley as the Company’s new CEO, it promoted Mr. Hearn to the new role of Deputy CEO. Mr. Hearn has been employed by the Company for almost four years and in January 2012 was promoted to Chairman and CEO of Willis Global, encompassing the Company’s global reinsurance, placement and specialty, operations. The Board believes the combination of Mr. Casserley’s external perspective and broad global experience and Mr. Hearn’s internal perspective and deep industry experience is a powerful partnership to drive the Company’s strategic direction.

On October 16, 2012, in connection with this promotion to Deputy CEO, Mr. Hearn entered into an amended employment agreement which became effective on January 1, 2013. Under the amended contract, in the event that Mr. Hearn’s employment is terminated without “cause” or Mr. Hearn resigns for “good reason” (as such terms are defined in his employment agreement), Mr. Hearn would be entitled to receive severance payments and benefits including partial acceleration of his long-term incentive awards. In the event that Mr. Hearn’s employment is terminated without “cause” or Mr. Hearn resigns for “good reason” within two years following a “change in control” (as such term is defined in his employment agreement), Mr. Hearn would be entitled to receive an enhanced severance payment.

Timothy Wright

On July 19, 2012, Mr. Wright entered into an amendment to his employment agreement which provides that in the event Mr. Wright is terminated by the Company for any reason other than for “cause” (as such term is defined in his amendment), he will be entitled to receive a severance payment.

Victor Krauze

In order to retain the services of Mr. Krauze during the transition from Mr. Plumeri to Mr. Casserley as the Group’s CEO, on October 16, 2012, a Company subsidiary entered into an amendment to Mr. Krauze’s April 8, 2011 promotion letter. Under the amendment, Mr. Krauze is eligible for enhanced severance payments and benefits if before December 31, 2013, he is involuntarily terminated by the Company other than for “good cause” (as such term is defined in the amendment to his promotion letter) or he resigns for “good reason”. “Good reason” in the amendment to his employment agreement means, (i) a material diminution in status, position, authority or duties which in Mr. Krauze’s reasonable judgment is materially inconsistent with and has a material adverse impact on his status, position, authority or duties, (ii) beginning on April 2, 2013 and ending on December 31, 2013, Mr. Krauze’s dissatisfaction with the strategy, policies or operating procedures adopted by Mr. Casserley and (iii) other events constituting good reason. Further, Mr. Krauze’s employment agreement provides that we may require that Mr. Krauze refrain from undertaking any activity deemed to be in competition with the Company for a period of up to 12 months following termination of employment in exchange for monthly payments equivalent to his base salary and continued healthcare coverage to him during the non-compete period. Such payments may be reduced by the amount of any other post-employment payments paid to Mr. Krauze.

Further information regarding Messrs. Neborak, Hearn, Wright and Krauze’s employment agreements and Mr. Neborak’s and Mr. Krauze’s restrictive covenant agreements and details of the applicable termination provisions are contained in the sections entitled “Compensation Tables — Other Named Executive Officers’ Employment Agreements” and “— Potential Payments to Other Named Executive Officers Other than the CEO Upon Termination or Change of Control.”

COMPENSATION COMMITTEE REPORT

This report is submitted to the shareholders of Willis Group Holdings Public Limited Company by the Compensation Committee of the Board of Directors. The Compensation Committee consists solely of non-executive directors who are independent, as determined by the Board in accordance with the Company’s guidelines and NYSE listing standards.

The Compensation Committee has reviewed, and discussed with management, the Compensation Discussion and Analysis contained in this Amendment to the Annual Report on Form 10-K, and based on this review and discussion, recommended to the Board that it be included in this Amendment to the Annual Report on Form 10-K.

Submitted by the Compensation Committee of the Board of Directors

Wendy E. Lane (Chairman), Jeffrey B. Lane and James F. McCann.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of our executive officers serves as a member of the Board of Directors or compensation committee of any entity that has one or more of its executive officers serving as a member of the Compensation Committee. In addition, none of our executive officers serves as a member of the compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors.

COMPENSATION TABLES

Summary Compensation Table

The following table sets forth the total compensation earned for services rendered in 2012 by the Company’s former CEO, Mr. Joseph Plumeri (who resigned as CEO on January 6, 2013 and will retire as Chairman of the Board on July 7, 2013), the Group CFO and each of the three most highly compensated executive officers of the Company.

Name and Principal
Position

  Year   Salary
($)		   Bonus
($)(1)		   Share
Awards($)(2)		   Option
Awards
($)(2)		   Non-Equity
Incentive Plan
Compensation(3)		   Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4)		  All Other
Compensation
($)(5)		   Total
($)		 

Joseph Plumeri
Former 2012 CEO

   2012     1,000,000     —       6,911,420     —       905,963     (17,281)   1,016,660     9,834,043  
   2011     1,000,000     —       8,539,014     —       729,166     10,164    1,197,933     11,476,277  
   2010     1,000,000     —       8,106,213     —       2,031,250     (21,461)   974,584     12,090,586  

Michael Neborak
Group CFO

   2012     575,000     528,000     749,955     249,993     —       —      5,000     2,107,948  
   2011     500,000     450,000     —       182,891     281,250     —      4,167     1,418,308  
   2010     244,318     500,000     500,007     —       —       —      —       1,244,325  

Stephen Hearn(6)
Deputy CEO; CEO & Chairman Willis Global

   2012     792,500     1,291,775     1,879,742     549,994     —       —      95,100     4,609,111  

Timothy Wright(6)
CEO, Willis International

   2012     792,500     1,228,375     1,124,965     374,993     —       —      33,085     3,553,918  

Victor Krauze
CEO & Chairman, Willis North America

   2012     681,250     910,000     899,979     299,993     —       257,453    23,230     2,814,452  
   2011     625,000     750,000     1,037,750     243,851     375,000     134,232    9,971     3,175,554  
                 
                 
                 
                 

(1)The Bonus column reflects only that portion of the annual incentive compensation award paid in cash to the named executive officers for services rendered for the relevant fiscal year. Because any RSUs or option awards granted as part of an annual compensation award are granted in March of the year following the one in which services are rendered, these equity awards are reflected in the Share Awards and Option Awards columns for the next year. In 2012, all named executive officers were paid 100% of their annual incentive compensation in cash. In 2010 and 2011, Mr. Plumeri’s annual incentive compensation award was paid 50% in cash and 50% in RSUs. Due to the nature of Mr. Plumeri’s employment agreement, his annual incentive compensation is reflected in the column “Non-Equity Incentive Plan Compensation” discussed in footnote (3) below.
(2)The Share Awards and Option Awards columns include any RSUs or option awards granted in the recently completed fiscal year as part of an annual incentive compensation award for services rendered in the preceding year as well as any other equity awards made during the course of the relevant fiscal year. The actual earned awards are set forth in the footnotes to the “Grant of Plan-Based Awards” table.

For awards subject to performance conditions, the amount included in the table is the full fair value at the grant date based on the probable outcome with respect to the satisfaction of the performance condition consistent with the recognition criteria in FASB ASC Topic 718 (excluding the effect of estimated forfeiture). For more information regarding the equity awards, see the “Grant of Plan-Based Awards” table and the “Outstanding Equity Awards at Fiscal Year End” table.

(3)For 2012, the Non-Equity Incentive Plan column reflects the annual incentive compensation award paid 100% in cash to Mr. Plumeri.
(4)The US Pension share was closed to new hires on January 1, 2007 and frozen on May 15, 2009. The Willis Pension Scheme (UK) was closed to new members beginning on January 1, 2006.

The Change in Pension Value and Nonqualified Deferred Compensation Earnings column includes the aggregate earnings Mr. Plumeri receives under the non-qualified deferred compensation plan, which for 2012 was ($25,741), reflecting investment earnings of $801 offset by Social Security and Medicare taxes totaling $26,542. The Change in Pension Value of $8,460 reflects changes in valuation assumptions required by applicable accounting rules and actuarial standards and a one-year increase in the executive’s age.

(5)For 2012, the All Other Compensation column for the named executive officers consisted of:

a.For Mr. Plumeri, (i) a deferred compensation credit of $800,000 pursuant to the terms of his previous employment agreement, which he receives for each year he continues to be with the Company and which is paid into a non-qualified deferred compensation plan on his behalf, after the payment of Social Security and Medicare taxes, (ii) the $200,000 Hart–Scott–Rodino Antitrust report filing fee and associated legal fees described in the “Compensation Discussion and Analysis” section and (iii) car charges.

b.For Mr. Neborak, the Company’s contribution to his 401(k) Plan.

c.For Mr. Hearn, the Company’s contribution to his defined contribution plan.

d.For Mr. Wright, contributions to a personal pension arrangement set up by Mr. Wright for his own personal benefit. The Company has no ongoing role in the governance or management of the plan and no residual liabilities in respect of it. The contributions made by the Company to the Willis Stakeholder Pension Scheme in respect of Mr. Wright includes $11,621 in lieu of entitlement to a car allowance.

e.For Mr. Krauze, (i) $18,230 tax-gross up for the 2010 calendar year to which he was entitled before his employment contract was amended to eliminate such tax gross-ups and (ii) the Company’s contribution to his defined contribution plan.

(6)Messrs. Hearn and Wright receive their salaries and bonuses in pounds sterling and the above figures have been converted into dollars at the average exchange rate for 2012 (£1:$1.585).

Grant of Plan-Based Awards

The following table sets forth the grants of plan-based awards made to the named executive officers during 2012.

        Estimated
Future
Payouts
Under
Non-
Equity
Incentive
Plan
Awards		        Estimated
Future
Payouts
Under
Equity
Incentive
Plan
Awards		        All
Other
Stock
Awards:
Number
of Shares
of Stocks
or Units
(#)		  All Other
Awards
Number
of
Securities
Underlying
Options
(#)		  Exercise
or Base
Price of
Option
Awards
($/Share)		  Grant Date
Fair
Value
of Stock
and
Option
Awards
($)		 

Name

 Grant
Date		  Approval
Date		  Threshold
($)		  Target
($)		  Maximum
($)		  Threshold
(#)		  Target
(#)		  Maximum
(#)		     

Joseph Plumeri

  —   (1)   —      1,250,000    1,875,000    2,500,000    —      —      —      —      —      —      —    
  3/1/12(2)   2/7/12    —      —      —      —      —      —      25,783    —      —      911,429  
  5/7/12(3)   4/24/12    —      —      —      66,079    165,198    165,198    —      —      —      5,999,991  

Michael Neborak

  12/26/12(4)   12/10/12    —      —      —      —      —      —      —      34,059    33.54    249,993  
  12/26/12(5)   12/10/12    —      —      —      5,963    14,907    14,907    —      —      —      499,981  
  12/26/12(6)   12/10/12    —      —      —      —      —      —      7,453    —      —      249,974  

Stephen Hearn

  3/1/12(7)   2/7/12    —      —      —      —      —      —      6,500    —      —      229,775  
  12/26/12(4)   12/10/12    —      —      —      —      —      —      —      74,931    33.54    549,994  
  12/26/12(5)   12/10/12    —      —      —      13,118    32,796    32,796    —      —      —      1,099,978  
  12/26/12(6)   12/10/12    —      —      —      —      —      —      16,398    —      —      549,989  

Victor Krauze

  12/26/12(4)   12/10/12    —      —      —      —      —      —      —      40,871    33.54    299,993  
  12/26/12(5)   12/10/12    —      —      —      7,156    17,889    17,889    —      —      —      599,997  
  12/26/12(6)   12/10/12    —      —      —      —      —      —      8,944    —      —      299,982  

Timothy Wright

  12/26/12(4)   12/10/12    —      —      —      —      —      —      —      51,089    33.54    374,993  
  12/26/12(5)   12/10/12    —      —      —      8,944    22,361    22,361    —      —      —      749,988  
  12/26/12(6)   12/10/12    —      —      —      —      —      —      11,180    —      —      374,977  

(1)Pursuant to Mr. Plumeri’s employment agreement, it was originally intended that Mr. Plumeri would receive his 2012 annual incentive compensation 50% in cash and 50% in RSUs, as in prior years. The amounts above represent the target, threshold and maximum cash amounts Mr. Plumeri may receive under his employment agreement. In March 2012, Mr. Plumeri and the Compensation Committee agreed to reduce his target payout to 250% of his base salary if 100% of his performance targets were achieved. As a result of Mr. Plumeri’s resignation as CEO in January 2013, the Compensation Committee determined to pay the 2012 annual incentive compensation 100% in cash. The actual cash amount paid to Mr. Plumeri for his 2012 annual incentive compensation is included in the Non-Equity Incentive Plan Column of the “Summary Compensation” table.
(2)As part of Mr. Plumeri’s 2011 annual incentive compensation, time-based RSUs were granted on March 1, 2012 and will vest and settle on July 7, 2013. Dividend equivalents will be paid when the RSUs vest equal to the dividend rate applicable to all record holders on record dates falling between the time of grant and the time of vest.
(3)Under Mr. Plumeri’s employment agreement, performance-based RSUs were granted on May 7, 2012, 50% of which were earned if an Adjusted EPS target for 2012 was met and 50% of the award was earned if an Adjusted Operating Margin target for 2012 was met. If the targets were not achieved at 100%, the amount of the award would be reduced on a sliding scale basis. The target and maximum amounts above reflect both the Adjusted EPS and Adjusted Operating Margins hitting at 100%. The threshold amounts reflect the minimum amount that would be earned if performance conditions were met for only one of the two applicable metrics (i.e., if 90% of either the Adjusted Operating Margin or Adjusted EPS target were met, then 80% of the performance-based RSUs as to the applicable Adjusted Operating Margin or Adjusted EPS target will become earned).

Based on the applicable performance metrics described in the “Compensation Discussion and Analysis — Long Term Incentive Compensation,” 145,374 of the performance-based RSUs were earned. These earned RSUs will vest and settle on July 7, 2013.

(4)Time-based options were granted on December 26, 2012 under the 2012 LTI Program. The options will vest 50% on each of the second and third anniversaries of the grant date.
(5)Performance-based RSUs were granted on December 26, 2012 under the 2012 LTI Program, 50% of which were earned if an Adjusted EPS target for 2012 was met and 50% of the award was earned if an Adjusted Operating Margin target for 2012 was met. If the targets were not achieved at 100%, the amount of the award would be reduced on a sliding scale basis. The target and maximum amounts above reflect both the Adjusted EPS and Adjusted Operating Margins hitting at 100%. The threshold amounts reflect the minimum amount that would be earned if performance conditions were met for only one of the two applicable metrics (i.e., if 90% of either the Adjusted Operating Margin or Adjusted EPS target were met, then 80% of the performance-based RSUs as to the applicable Adjusted Operating Margin or Adjusted EPS target will become earned).

Based on the applicable performance metrics described in the “Compensation Discussion and Analysis—Named Executive Officers’ Annual Compensation — Long Term Incentive Compensation,” the following performance-based RSUs were earned: Mr. Neborak (13,119), Mr. Hearn (28,860), Mr. Krauze (15,743) and Mr. Wright (19,677). Earned RSUs will vest 50% on each of the second and third anniversaries of the grant date.

(6)Time-based RSUs were granted on December 26, 2012 under the 2012 LTI Program. The RSUs will vest 50% on each of the second and third anniversaries of the grant date.
(7)Time-based RSUs were granted on March 1, 2012. The RSUs will vest 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively.

Outstanding Equity Awards at Fiscal Year End

The following table sets forth the options and share-based awards held by the named executive officers as of December 31, 2012.

Name

  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable		  Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable		  Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)		   Option
Exercise
Price		   Option
Expiration
Date		   Number of
Shares or
Units of
Stock
That Have
Not
Vested (#)		  Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)		   Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested(#)		  Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)(1)		 

Joseph Plumeri

   100,000(2)   —      —       38.06     3/19/2014     —      —       —      —    
   500,000(3)   —      —       32.78     6/20/2014     —      —       —      —    
   650,000(4)   —      —       37.06     5/6/2015     —      —       —      —    
   —      —      —       —       —       25,783(5)   864,504     —      —    
           57,388(6)   1,924,220     —      —    
   —      —      —       —       —       66,200(7)   2,219,686     —      —    
   —      —      —       —       —       —      —       165,198(8)   5,539,089  

Michael Neborak

   —      16,234(9)   —       41.51     5/2/2019     —      —       —      —    
   —      34,059(10)   —       33.54     12/26/2020     —      —       —      —    
   —      —      —       —       —       2,719(11)   91,168     —      —    
   —      —      —       —       —       2,719(12)   91,168     —      —    
   —      —      —       —       —       7,453(13)   249,899     —      —    
   —      —      —       —       —       —      —       14,907(14)   499,832  

Stephen Hearn

   6,249    2,083(15)   —       25.79     11/3/15     —      —       —      —    
   —      16,234(9)   —       41.51     5/2/2019     —      —       —      —    
   —      74,931(10)   —       33.54     12/26/2020     —      —       —      —    
   —      —      —       —       —       3,400(16)   114,002     —      —    
   —      —      —       —       —       6,500(17)   217,945     —      —    
   —      —      —       —       —       16,398(13)   549,825     —      —    
   —      —      —       —       —       —      —       32,796(14)   1,099,650  

Victor Krauze

   5,000(18)   —      —       30.75     7/1/2013     —      —       —      —    
   25,000(19)   —      —       38.06     3/19/2014     —      —       —      —    
   26(20)   —      —       36.60     9/22/2014     —      —       —      —    
   50,000(21)   —      —       32.78     6/20/2014     —      —       —      —    
   50,000(22)   —      —       39.96     11/5/2015     —      —       —      —    
   12,499    4,167(23)   —       37.06     5/6/2015     —      —       —      —    
   20,000    20,000(24)   —       26.17     5/5/2017     —      —       —      —    
   12,500    37,500(25)   —       31.02     10/1/2018     —      —       —      —    
   —      21,645(9)   —       41.51     5/2/2019     —      —       —      —    
   —      40,871(10)   —       33.54     12/26/2020     —      —       —      —    
   —      —      —       —       —       16,750(26)   561,628     —      —    
   —      —      —       —       —       8,944(13)   299,892     —      —    
   —      —      —       —       —       —      —       17,889(14)   599,818  

Timothy Wright

   200,000(27)   —      —       34.42     9/1/2016     —      —       —      —    
   20,832    6,943(28)   —       34.42     9/1/2015     —      —       —      —    
   50,000    50,000(24)   —       26.17     5/5/2017     —      —       —      —    
   —      21,645(9)   —       41.51     5/2/2019     —      —       —      —    
   —      51,089(10)   —       33.54     12/26/2020     —      —       —      —    
   —      —      —       —       —       11,180(13)   374,865     —      —    
   —      —      —       —       —       —      —       22,361(14)   749,764  

(1)The market value of shares or units that have not vested has been calculated using the closing price of the Company’s shares on December 31, 2012, as quoted on the NYSE ($33.53), the last business day of the year.
(2)Time-based options were granted on March 19, 2004 and are fully exercisable.
(3)Time-based options were granted on June 20, 2006 and are fully exercisable.
(4)Performance-based options were granted on May 6, 2008 and are fully exercisable.
(5)Time-based RSUs were granted on March 1, 2012 and will vest and settle on July 7, 2013.
(6)Performance-based RSUs were granted on May 3, 2010. The RSUs will vest 33 1/3% on the first, second and third anniversaries of the grant date and will settle on July 7, 2013.
(7)Performance-based RSUs were granted on May 5, 2011. The RSUs will vest 50% on each of the first and second anniversaries of the grant date and will settle on July 7, 2013.
(8)Performance-based RSUs were granted on May 7, 2012, 50% of which are earned if an Adjusted EPS target for 2012 is met and 50% of which are earned if an Adjusted Operating Margin target for 2012 is met. If the targets are not achieved at 100%, the amount of the award is reduced on a sliding scale basis. Earned RSUs will vest and settle on July 7, 2013. Based on the applicable performance metrics described in the “Compensation Discussion and Analysis — Named Executive Officers’ Annual Compensation — Long Term Incentive Compensation,” 145,374 of the performance-based RSUs were earned.
(9)Performance-based options were granted on May 2, 2011. The options will vest 50% on each of the third and fourth anniversaries of the grant date.
(10)Time-based options were granted on December 26, 2012. The options will vest 50% on each of the second and third anniversaries of the grant date.

(11)Time-based RSUs were granted on August 2, 2010. The RSUs will vest 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively.
(12)Performance-based RSUs were granted on August 2, 2010. The RSUs will vest 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively.
(13)Time-based RSUs were granted on December 26, 2012. The RSUs will vest 50% on each of the second and third anniversaries of the grant date.
(14)Performance-based RSUs were granted on December 26, 2012, 50% of which are earned if an Adjusted EPS target for 2012 is met and 50% of which are earned if an Adjusted Operating Margin target for 2012 is met. If the targets are not achieved at 100%, the amount of the award is reduced on a sliding scale basis. Earned RSUs will vest 50% on each of the second and third anniversaries of the grant date. Based on the applicable performance metrics described in the “Compensation Discussion and Analysis — Named Executive Officers’ Annual Compensation — Long Term Incentive Compensation,” the following performance-based RSUs were earned: Mr. Neborak (13,119), Mr. Hearn (28,860), Mr. Krauze (15,743) and Mr. Wright (19,677).
(15)Performance-based options were granted on November 3, 2008. The options will become exercisable 50%, 25% and 25% on the third, fourth and fifth anniversaries of the grant date, respectively.
(16)Performance-based RSUs were granted on July 1, 2010. The RSUs will vest 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively.
(17)Time-based RSUs were granted on March 1, 2012. The RSUs will vest 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively.
(18)Time-based options were granted on July 1, 2003 and are fully exercisable.
(19)Time-based options were granted on March 19, 2004 and are fully exercisable.
(20)Time-based options were granted on September 22, 2004 and are fully exercisable.
(21)Time-based options were granted on June 20, 2006 and are fully exercisable.
(22)Time-based options were granted on November 5, 2007 and are fully exercisable.
(23)Performance-based options were granted on May 6, 2008. The options will become exercisable 50%, 25% and 25% on the third, fourth and fifth anniversaries of the grant date, respectively.
(24)Performance-based options were granted on May 5, 2009. The options will become exercisable 25% on each of the second, third, fourth and fifth anniversaries of the grant date.
(25)Performance-based options were granted on October 1, 2010. The options will become exercisable 25% on each of the second, third, fourth and fifth anniversaries.
(26)Time-based RSUs were granted on May 2, 2011. The RSUs will vest 33%, 33% and 34% on the first, second and third anniversaries of the grant date, respectively.
(27)Time-based options were granted on September 1, 2008 and are fully exercisable.
(28)Performance-based options were granted on September 1, 2008. The options will become exercisable 50% on the third anniversary of the grant date and 25% on each of the fourth and fifth anniversaries of the grant date.

Option Exercises and Shares Vested

The following table sets forth the share options exercised and the RSU vestings during 2012 by the named executive officers.

   Option Awards   Share-Based Awards 

Name

  Number of
Shares
Acquired on
Exercise
(#)		   Value
Realized on
Exercise
($)		   Number of
Shares
Acquired On
Vesting
(#)		  Value
Realized On
Vesting
($)(1)		 

Joseph Plumeri

   —       —       191,591(2)   6,968,136  

Michael Neborak

   —       —       5,276    181,442  

Stephen Hearn

   —       —       3,300    120,417  

Timothy Wright

   —       —       13,600    493,408  

Victor Krauze

   —       —       12,500    454,573  

(1)The value realized in respect of vested RSUs is calculated using the closing price, as quoted on the NYSE, on the date of such RSUs vesting. If a vesting occurred on non-business day, the closing price on the previous business day was used.
(2)Pursuant to the terms of an existing agreement, the settlement of 66,201 RSUs that vested on May 2, 2012, 57,390 RSUs that vested on May 3, 2012 and 68,000 RSUs that vested on May 5, 2012 has been deferred until Mr. Plumeri incurs a separation from service as defined in Section 409A of the Internal Revenue Code.

Pension Benefits

Willis North America Inc. Pension Plan — The Company maintains a US retirement program, the Willis North America Inc. Pension Plan, a qualified defined benefits plan. This plan provides members with a pension on normal retirement age of 60 or 65 based on the length of service, pensionable remuneration and when they first joined the plan. Participants are 100% vested in the plan after completing five years of service. Employees also become 100% vested if they are participants in the plan and are employed by Company after reaching age 60. The plan was closed to new hires on January 1, 2007 and was frozen on May 15, 2009.

If participants are vested and married, their surviving spouses may be entitled to survivor benefits from the plan, if the participants die before starting retirement benefits. The default death benefit is the survivor portion of a 50% Joint & Survivor annuity commencing at an early or normal retirement date. If participants are active with 10 or more years of service, the death benefit is 50% of the accrued benefit and commences immediately. If participants are age 55 with 10 or more years of service, they may elect an enhanced survivor benefit.

As of December 31, 2012, Mr. Plumeri had approximately 12 years of vesting service. The accrued annual benefit for Mr. Plumeri, payable as a normal-form annuity beginning on January 1, 2013, is $56,184 (Mr. Plumeri is over 65). At this retirement age, the years of vesting service and annual maximum average salary for Mr. Plumeri are approximately 11 years and $202,000, respectively.

As of December 31, 2012, Mr. Krauze had approximately 16 years of vesting service. The accrued annual benefit for Mr. Krauze, payable as a normal-form annuity beginning at age 65 is $62,043. At a retirement age of 65, the years of vesting service and annual maximum average salary for Mr. Krauze are approximately 28 years and $201,001, respectively. Mr. Krauze can retire early with an unreduced accrued benefit as of February 1, 2022, assuming he remains employed to that date.

Also, Willis North America, Inc. has a 401(k) Plan covering its eligible employees and those of its subsidiaries. Shares are available as an investment option to participants in the Willis 401(k) Retirement Savings Plan. In order to provide the opportunity to accumulate retirement income and improve retention, the Company has reinstated a matching contribution (which was suspended in recent years) to the 401(k) Plan effective as of January 1, 2011. The matching contribution was made on December 31, 2012 for eligible employees who were still employed by the Company on that date.

Willis Pension Scheme (UK) — The Company also maintains a U.K. retirement program consisting of the Willis Pension Scheme, an approved defined benefits plan. The Willis Pension Scheme (UK) was closed to new members beginning on January 1, 2006. In 2006, it was replaced by a defined contribution plan for new employees. The Willis Pension Scheme (UK) provides members with a pension of up to two thirds of pensionable remuneration on normal retirement age. Normal retirement age is 65 for all benefits accruing after July 1, 2011. Some rights earned before July 1, 2011 can be drawn at the age of 60 on a reduced basis. Members accrue pension at a rate of 1/50th or 1/60thof pensionable remuneration, depending on grade and when they first joined the Willis Pension Scheme (UK), in each case subject to a maximum of two-thirds of pensionable remuneration on retirement. Other members may have different accrual rates due to individual circumstances, such as continuation of existing benefits on joining. Members contribute 10% of their pensionable remuneration.

Pensionable remuneration is based on full basic salary less an offset in respect of the U.K. State Pension, currently £5,587, in the case of most members. In addition, pensionable remuneration for members who joined the Scheme after June 1, 1989, is subject to a cap, currently £137,400. On death, pensions based on one half of the members’ pensions are payable to a surviving spouse.

Mr. Hearn and Mr. Wright do not participate in the Willis Pension Scheme because they joined the Company after 2006. Mr. Hearn participates in the Willis UK defined contribution plan and the Willis Stakeholder Pension Scheme, which is a series of individual investment policies established in the names of members and administered by a third party to which the Company contributes. The contributions made by the Company to the Willis Stakeholder Pension Scheme in respect of Mr. Hearn are made at the rate of 12% of basic salary in line with a contractual arrangement transferred from an acquired employer and exceed the standard rates payable to most other associates. Mr. Wright established a personal pension arrangement similar to the Willis UK defined contribution plan to which the Company contributes. The Company has no ongoing role in the governance or management of Mr. Wright’s plan and no residual liabilities in respect of it.

Rest of World — Elsewhere, pension benefits for our employees are typically provided in the country of operation through defined contribution plans.

The following table sets forth the retirement benefits that may be received by the named executive officers that participate in a defined benefit pension scheme:

Name

  

Plan Name

  Number
of Years
Credited
Service
(#)		   Present
Value of
Accumulated
Benefit
($’000)		   Payments
During
Last Fiscal
Year
($)		 

J. Plumeri

  Willis North America Inc. Pension Plan   12     634     —    

V. Krauze

  Willis North America Inc. Pension Plan   16     597     —    

Non-Qualified Deferred Compensation

The following table sets forth the non-qualified deferred compensation to be received by Mr. Plumeri (the Company’s 2012 CEO) and Mr. Krauze. None of the other named executive officers receives deferred compensation.

Name

  Executive
Contributions
in Last Fiscal
Year
($)		  Registrant
Contributions
in Last Fiscal
Year
($)		   Aggregate
Earnings in
Last Fiscal
Year
($)		  Aggregate
Withdrawals/
Distributions
($)		   Aggregate
Balance at
Last Fiscal
Year End
($)		 

J. Plumeri

   800,000(1)   —       (25,741)(2)   —       8,290,384  

V. Krauze

   —      —       175,040    —       1,270,796  

(1)Effective from October 15, 2003, Mr. Plumeri has received an annual deferred compensation credit of $800,000, which is made to a non-qualified deferred compensation plan on his behalf. Actual payments into the plan are made after deducting Social Security and Medicare Taxes from the $800,000 annual credit.
(2)Aggregate earnings are included in Mr. Plumeri’s Change in Pension Value in the “Summary Compensation” table. For 2012, investment earnings of $801 were offset by Social Security and Medicare taxes totaling $26,542.

Joseph Plumeri’s Employment Agreement (2012 CEO)

During 2009, the Compensation Committee and the Board of Directors determined that it would be in the best interests of the Company to ensure Mr. Plumeri’s continued services as the Company’s Chairman and CEO until July of 2013. In addition, Mr. Plumeri, the Compensation Committee and the Board of Directors agreed that Mr. Plumeri’s prior employment agreement should be updated to reflect the evolution of best pay practices over the last several years. At the time, two members of the Compensation Committee, Sir Roy Gardner and Mr. McCann, participated in all discussions with Mr. Plumeri regarding his employment agreement and were advised during the negotiations by the Compensation Committee’s consultant.

On January 6, 2013 Mr. Plumeri resigned as the Group CEO but will continue to serve as non-executive chairman and as an employee of Willis North America, Inc., a subsidiary of the Company. Until his retirement as non-executive chairman and an employee of Willis North America, Inc. on July 7, 2013, all of the terms of Mr. Plumeri’s existing employment agreement dated as of January 1, 2010, will remain in effect, except as amended on October 16, 2012 to reflect his duties, responsibilities and reduced time commitment to the Company as non-executive chairman beginning on January 7, 2013. The rationale for the new arrangements with Mr. Plumeri was to facilitate a seamless transition with the Company’s new CEO, particularly in light of Mr. Plumeri’s long tenure, deep industry knowledge and relationships. The amendment to Mr. Plumeri’s employment agreement also satisfied the requirements for his retirement or earlier resignation to constitute a “mutual retirement” for purposes of Mr. Plumeri’s unvested RSU awards and, as a result, upon Mr. Plumeri’s retirement or his earlier resignation the service requirements for Mr. Plumeri’s RSU awards will be waived.

Under his employment agreement, Mr. Plumeri’s annual base salary of $1,000,000 until his retirement date on July 7, 2013, which has not increased since he joined Willis in October 2000, will be maintained. Similarly, Mr. Plumeri will be eligible to receive a pro-rata annual incentive compensation award for 2013, subject to the achievement of performance targets to be determined by the Compensation Committee. Unlike previous awards, which were generally paid 50% in cash and 50% in RSUs, Mr. Plumeri’s 2012 award and the pro-rata award for 2013 will be paid 100% in cash. Mr. Plumeri’s employment agreement provides that the threshold, target and maximum annual incentive payout percentages for 2012 and 2013 are 250%, 375% and 500% of base salary. Mr. Plumeri will also continue to receive a pro rata portion of the same annual deferred compensation credit of $800,000, the last installment of which was contributed on April 15, 2013, subject to his continued employment.

In consideration for Mr. Plumeri complying with best pay practices when he amended his agreement in January 2010, at the time the Compensation Committee and Board provided that he would receive a grant of RSUs in 2010 that would vest only upon the achievement of performance and time-based criteria to be determined by the Compensation Committee. The agreement provided that the RSUs would have a grant date value of $6,000,000 and would vest in equal parts over a three-year period. At the time of the execution of the 2010 employment agreement, it was the expectation and intent of the Compensation Committee to award Mr. Plumeri grants of comparable value and containing comparable terms in 2011 and 2012, subject to the Compensation Committee’s good faith evaluation of changes in circumstances of the Company, the performance of the Company and the performance of Mr. Plumeri that justifies as an alternative vehicle or amount of grant. Accordingly, a similar $6,000,000 grant of performance-based RSUs was made in 2011 and 2012. Mr. Plumeri will not be entitled to receive a Long-Term Incentive award during 2013.

The employment agreement also contains non-competition, non-solicitation and confidentiality covenants.

Further information regarding the change of control and severance provisions in Mr. Plumeri’s employment agreement are contained in the section entitled “Compensation Tables—Potential Payments to Mr. Plumeri Upon Termination or Change of Control.”

Dominic Casserley’s Employment Agreement (Current CEO)

In negotiating the agreement with Mr. Casserley, the Company considered, among other things, the Company’s peer group compensation, current market practice regarding CEO pay, ISS and shareholder concerns, pay-for-performance concerns, the Committee’s policy to limit the grants of guaranteed compensation, internal executive compensation practices and the opportunity to split the roles of Chairman of the Board and CEO. These considerations were balanced with the fact that the Company needed to provide competitive pay to attract a high caliber candidate.

On October 16, 2012, Mr. Casserley executed an employment agreement with a subsidiary of the Company. The employment agreement has an initial term ending on December 31, 2015 and will automatically renew for up to two additional

one-year renewal terms, unless either party provides notice of nonrenewal at least 90 days prior to the end of the initial term or first renewal term, as applicable. Upon a “change of control” (as such term is defined in his employment agreement) the term will automatically extend until and expire upon the second anniversary of the “change of control” or, if later, December 31, 2015. Mr. Casserley’s agreement provides for him to be paid, beginning as of his commencement of employment with the Company on January 7, 2013: (i) an annual base salary of $1,000,000, (ii) an annual incentive award with a target value of 225% of his base salary (i.e., $2,250,000), a maximum value of 400% of his base salary (i.e., $4,000,000), and a lesser value for below target performance as may be established by the Board or the Compensation Committee, such annual incentive compensation awards described in further detail below, (iii) an annual equity-based long-term incentive award of 525% of base salary (i.e., $5,250,000) at target, and upon such other terms and conditions as may be established by the Board or the Compensation Committee for officers generally, (iv) reimbursement of his and his family’s relocation costs to the New York metropolitan area from London, England and, following his termination of employment with the Company other than for “cause” (as such term is defined in his employment agreement), his and his family’s return to the London metropolitan area, (v) employee benefits as are provided generally to other similarly-situated senior management employees of the Company, the use of a car and driver at his principal office location and the use of private aircraft owned or leased by the Company for business travel in accordance with the Company’s policy, and (vi) an employment commencement transition award of $1,500,000 to be paid after the completion of one year of service (i.e., January 7, 2014), 50% of which is subject to repayment if Mr. Casserley resigns without “good reason” (as such term is defined in his employment agreement) prior to the completion of two years of service.

With respect to Mr. Casserley’s annual incentive award, if Mr. Casserley is entitled to an annual incentive award exceeding $1,000,000 in respect of the Company’s 2013 fiscal year, then the first $1,000,000 will be paid in cash and any amounts exceeding $1,000,000 up to $2,500,000 will be paid in the form of equity-based awards, with one-third being immediately vested by reason of his completion of one year of service and the remainder subject to vesting on the second and third anniversaries of Mr. Casserley’s employment commencement date if Mr. Casserley is employed by the Company on each of the anniversary dates. One-half of such equity-based awards will be in the form of options to purchase ordinary shares of the Company, and one-half of such equity-based awards will be in the form of RSUs.

In the event that Mr. Casserley’s employment is terminated by the Company without “cause,” Mr. Casserley resigns for “good reason” or Mr. Casserley is terminated as a result of the non-renewal of his employment agreement by the Company within the first four years of employment (a “Qualifying Termination”), Mr. Casserley would be entitled to the following benefits: (i) an amount equal to two times the sum of his annual base salary and target annual incentive award, payable in installments over 24 months (the “Severance Payment”), (ii) a pro-rata portion of his annual incentive award for the year in which the termination of employment occurs, based on actual performance, payable at the same time that annual incentive compensation awards are payable generally, (iii) payment of the employment commencement transition award described above, to the extent unpaid, (iv) continued medical coverage at the active employee rate for Mr. Casserley, his spouse and then covered dependents for up to 18 months, (v) two years of service-vesting credit (but not performance-vesting credit) for one half of the annual equity-based long-term incentive awards granted to him during the first three years of service, (vi) one year of service-vesting credit (but not performance-vesting credit) for the remainder of the annual equity-based long-term incentive awards granted to him, (vii) each vested stock option held by Mr. Casserley will remain exercisable for three years following the termination date or, if earlier, the normal expiration date of the stock option, and (viii) accrued benefits including any annual incentive compensation awards earned but unpaid for any completed fiscal year. For purposes of determining the service-vesting credit described above each annual equity-based long-term incentive award will be deemed to have been granted not later than April 30th of the year of grant and vest at a rate not greater less than 1/3rd per year on each of the first three anniversaries of the date of grant.

In the event of a Qualifying Termination within two years following a “change of control,” Mr. Casserley would be entitled to the severance benefits described above except that the Severance Payment would be paid in a lump sum and Mr. Casserley would receive full service-vesting credit (but not performance-vesting credit) for each of the annual equity-based long-term incentive awards granted to him.

Lastly, upon termination of employment (other than for “cause”) concurrent with or following the expiration of the full five year term of his employment agreement, Mr. Casserley would be entitled to the following benefits: (i) two years of service-vesting credit (but not performance-vesting credit) for each of the annual equity-based long-term incentive awards granted to him, (ii) each vested stock option held by Mr. Casserley will remain exercisable for three years following the termination date or, if earlier, the normal expiration date of the stock option and (iii) such termination will be treated as retirement for purposes of compensation previously paid or payable to him. As described above, for purposes of determining the service-vesting credit described above each annual equity-based long-term incentive award will be deemed to have been granted no later than April 30th of the year of grant and vest at a rate not greater less than 1/3rd per year on each of the first three anniversaries of the date of grant.

The agreement also contains non-competition, non-solicitation and confidentiality covenants.

Other Named Executive Officers’ Employment Agreements

Each of the other named executive officers’ have an employment agreement with a subsidiary of the Company. The material economic terms of such agreements are described below. Each of the agreements also contains non-competition, non-solicitation and confidentiality covenants.

Further information regarding the change of control and severance provisions in Messrs. Neborak, Hearn, Wright and Krauze’s employment and restrictive covenant agreements are contained in the section entitled “Compensation Tables—Potential Payments to Other Named Executive Officers Other than the CEO Upon Termination or Change of Control.”

Michael Neborak

Mr. Neborak’s employment agreement effective as of July 6, 2010 provides for an annual base salary of $500,000, which the Committee increased to $600,000 based on the results of a market review, and an annual incentive award with a target value equal to 100% of his base salary. The employment agreement does not have a fixed term. In the event Mr. Neborak is terminated without “cause,” he will receive severance pay equal to 12 months of base salary. The Company has also entered into a separate restrictive covenant agreement with Mr. Neborak effective as of August 2, 2010, which provides, in part, that we may require that Mr. Neborak refrain from undertaking any activity deemed to be in competition with the Company for a period of up to 12 months following termination of employment, in exchange for monthly payments equivalent to his base salary and the provision of continued medical coverage during such period.

Stephen Hearn

Under Mr. Hearn’s employment agreement that remained in effect until December 31, 2012, he was entitled to (i) an annual base salary of £500,000 (or $792,500) and (ii) an annual incentive compensation award with a target value of 175% of his base salary, provided that his annual incentive compensation award in respect of the Company’s 2012 fiscal year to be no less than 150% of his base salary. Pursuant to this agreement, in 2012, Mr. Hearn also received 6,500 time-based RSUs as a result of his promotion to Chairman and CEO of Willis Global in early 2012. Pursuant to this agreement, if Mr. Hearn was terminated by the Company for any reason other than for Cause (as defined in such employment agreement), he was entitled to receive an amount equal to his contractual notice pay due to him (i.e., 12 months base salary) and an amount equal to his target annual incentive compensation award at the time of his termination.

At the same time the Board appointed Mr. Casserley as the Company’s new CEO, it promoted Mr. Hearn to the new role of Deputy CEO. Mr. Hearn has been employed by the Company for almost four years and in January 2012 was promoted to Chairman and CEO of Willis Global, encompassing the Company’s global reinsurance, placement and specialty, operations. The Board believes the combination of Mr. Casserley’s external perspective and broad global experience and Mr. Hearn’s internal perspective and deep industry experience is a powerful partnership to drive the Company’s strategic direction.

In connection with his promotion to Deputy CEO, on October 16, 2012, Mr. Hearn entered into an amended employment agreement which, when it became effective on January 1, 2013, provides (i) an annual base salary of £530,000 ($840,050), (ii) an annual incentive award with a target value of 200% of his base salary (subject to his prior employment agreement that provided for his annual incentive award in respect of the Company’s 2012 fiscal year to be no less than 150% of his base salary), and (iii) an annual long-term incentive award of 260% of his base salary at target. The employment agreement does not have a fixed term. Pursuant to Mr. Hearn’s amended employment agreement, if Mr. Hearn’s employment is terminated by the Company without Cause or by the executive for Good Reason, he would be entitled to: (i) an amount equal to 150% of the sum of his annual base salary and target annual incentive award, which amount will be offset against any pay provided during the 12-month notice period set forth in the employment agreement or any pay in lieu of notice and will be payable in a lump sum, (ii) a pro-rata portion of his annual incentive award for the year in which the termination of employment occurs, based on actual performance, payable at the same time that annual incentive compensation awards are payable generally, (iii) any annual incentive compensation awards earned but unpaid for any prior fiscal year, and (iv) continuation of group medical coverage at the same rate that is applicable to active senior executive officers.

Timothy Wright

Mr. Wright’s employment agreement, dated as of December 17, 2007 and as amended July 19, 2012, provides that Mr. Wright, who originally joined the Company as the Group Chief Operating Officer and currently serves as the CEO of Willis International, is entitled to an annual base salary of £405,000 (or $641,925) and an annual incentive award with a target value equal to 175% of his base salary. As a result of an increase in his responsibilities related to his promotion to CEO of Willis International, Mr. Wright received an increase in his annual base salary to £500,000 (or $792,500). The employment agreement does not have a fixed term. In the event Mr. Wright’s employment is terminated without “Cause” (as defined in his employment agreement), he will receive severance pay equal to the sum of his annual base salary and target annual incentive compensation award at the time he is served with notice of termination.

Victor Krauze

Mr. Krauze’s employment agreement, effective as of December 3, 2010, and promotion letter, dated as of April 8, 2011, provide for a base salary of $625,000 which the Committee increased to $700,000 in response to market conditions. The Company may terminate his employment agreement at any time by providing him 30 days’ prior written notice. In the event he is terminated without “good cause” (as defined in the promotion letter), he will receive severance pay equal to 12 months of base salary, an amount equal to 12 months of COBRA medical coverage premiums and, on or before March 15, 2013, any AIP award for the 2012 performance period. Further, the agreements provide that if we desire Mr. Krauze to refrain from undertaking any activity deemed to be in competition with the Company for a period of up to 12 months following termination of employment, the Company will make monthly payments equivalent to his base salary. Such payments may be reduced by the amount of any other post-employment payments paid to Mr. Krauze, including any severance payments paid to him in connection with a termination without Good Cause.

In order to retain the services of Mr. Krauze during the transition from Mr. Plumeri to Mr. Casserley as the Company’s CEO, on October 16, 2012, a Company subsidiary entered into an amendment to Mr. Krauze’s April 8, 2011 promotion letter. Pursuant to the amendment, Mr. Krauze is eligible for enhanced severance payments and benefits if before December 31, 2013, he is involuntarily terminated by the Company other than for “good cause” or he resigns for “good reason.” The employment agreement does not have a fixed term.

Potential Payments to Mr. Plumeri Upon Termination or Change of Control

The following table shows the estimated payments and benefits that our CEO would have received if his employment had terminated or a Change of Control (defined below) occurred on December 31, 2012.

Joseph J. Plumeri

  Severance
($)		   Deferred
Compensation
($)		   Accrued
Amounts
($)(4)		   Total
Payments on
Termination
($)		   Intrinsic
Value of
Unvested
Share-Based
Awards
($)(5)		 

Termination by the Company without Cause, by the officer with Good Reason(1)

   4,000,000     8,705,727     1,031,762     13,737,489     10,545,990  

Termination on Change of Control(2)(7)

   9,500,000     8,705,727     1,031,762     19,237,489     10,545,990  

Termination for Other Reasons(3)(7)

   —       8,705,727     1,031,762     9,737,489     10,545,990  

Change of Control(6) (7)

   —       —       —       —       10,545,990  

(1)Mr. Plumeri’s employment agreement provided that if he was terminated by the Company without Cause or by himself for Good Reason he would be entitled to a lump sum payment equal to $4,000,000 in addition to any accrued benefits. The accrued benefits included: unpaid salary and vacation pay; any bonus due as a result of actual performance but not yet paid for any completed financial year; a pro rata bonus for the year in which the termination occurs based on the performance achieved in that year; amounts due under medical, life insurance, disability and pension plans; and reimbursable business expenses.

He would also have credited to his deferred compensation benefit account the amounts he would have received had he remained until the end of the term of his employment agreement (July 7, 2013). On departure, the full amount accrued under the deferred compensation plan would become payable.

Further, the RSUs granted to Mr. Plumeri on May 3, 2010, May 2, 2011 and March 1, 2012 would vest in full and the service requirements for the RSUs granted to Mr. Plumeri on May 7, 2012 would be waived.

The table above shows the amount Mr. Plumeri would have received had termination taken place on December 31, 2012, and assuming the Board has exercised its discretion to waive the performance requirements applicable to the RSUs granted to Mr. Plumeri on May 7, 2012.

(2)Mr. Plumeri’s employment agreement provided that in the event the Company was subject to a Change of Control and Mr. Plumeri’s employment was terminated by the Company (or a successor company) without Cause or by himself for Good Reason within six months prior to or within 24 months following such Change of Control, Mr. Plumeri would receive a payment equal to two times the sum of his base salary and target annual bonus during the year in which the termination of employment occurs. Mr. Plumeri would have also continued to be entitled to receive the accrued benefits described in (1) above and he would have credited to his deferred compensation benefit account the amounts he would have received had he remained until the end of the term of his employment agreement (July 7, 2013). On departure, the full amount accrued under the deferred compensation plan would become payable.

Further, in the event the Company was subject to a Change of Control and Mr. Plumeri’s employment was terminated by the Company without Cause or by him for Good Reason, the RSUs granted to Mr. Plumeri on May 3, 2010, May 2, 2011, March 1, 2012 and May 7, 2012 would vest in full.

The table above shows the amount Mr. Plumeri would have received had termination taken place on December 31, 2012 by reason of Change of Control, including the value of Mr. Plumeri’s unvested RSUs.

(3)Where the employment was terminated by the Company for any reason other than as described in (1) and (2) above, including Disability, mutual retirement and retirement, Mr. Plumeri would be entitled to receive the accrued benefits as described in (1) above including the right to receive the full amount accrued under the deferred compensation plan, provided that in the event of a termination for Cause the executive would not be entitled to a pro-rata bonus. Pursuant to Mr. Plumeri’s amended employment agreement, if he terminated his employment without Good Reason following a Change of Control, he would have credited to his deferred compensation benefit account the amounts he would have received had he remained until the end of the term of his employment agreement (July 7, 2013). On departure the full amount accrued under the deferred compensation plan would become payable.

In the event Mr. Plumeri’s termination was due to death, Disability or mutual retirement, the RSUs granted to Mr. Plumeri on May 3, 2010, May 2, 2011 and March 1, 2012 would vest in full and the service requirements for the RSUs granted to Mr. Plumeri on May 7, 2012 would be waived.

The table above shows the amount Mr. Plumeri would have received had termination taken place on December 31, 2012 for any reason other than described in (1) and (2) above, except for Cause, and assuming the Board exercised its discretion to waive the performance requirements applicable to the RSUs granted to Mr. Plumeri on May 7, 2012.

(4)It has been assumed for this calculation that the Board, through the Compensation Committee, would have determined that Mr. Plumeri be paid a cash award in an amount equal to his full 2012 annual incentive award. The above amount reflects the actual cash amount paid to Mr. Plumeri for his 2012 annual incentive compensation as reflected in the Non-Equity Incentive Plan Column of the “Summary Compensation” table.
(5)In addition to the above, it had been agreed that Mr. Plumeri would still retain the benefit of the Company’s directors and officers insurance relating to his services for the period up to and including his date of departure where termination of employment was without Cause or for Good Reason or Change of Control. Also, under the U.S. Pension Plan, in the event of termination of employment for any of the above reasons, Mr. Plumeri would receive the same benefit as other plan participants terminated for similar reasons. For more information please see “Executive Compensation — Compensation Discussion and Analysis — Pension Benefits.”
(6)The occurrence of a Change of Control would not trigger any cash payments to Mr. Plumeri, however, the performance requirements applicable to Mr. Plumeri’s RSUs, to the extent not already achieved, would be waived. In addition, upon a Change of Control, the Board would have had discretion to waive the service requirements applicable to Mr. Plumeri’s RSU awards. For the purpose of this section, it has been assumed that such discretion had been exercised.
(7)The terms “Cause,” “Good Reason,” “Disability,” “mutual retirement,” and “retirement” are used as defined in Mr. Plumeri’s employment agreement. The term “Cause” includes, among other things, conviction of a felony, willful and continuous disregard for, or serious or persistent breach of material duties and responsibilities, gross negligence or any other form of gross misconduct. The term “Good Reason” includes, among other things, any material diminution of duties, responsibilities or authority, or the assignment to Mr. Plumeri of any duties materially inconsistent with his position or any material breach of his contract of employment by the Company.

“Change of Control” is defined in Mr. Plumeri’s agreement as:

(a)the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), of equity interests representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of the Company;

(b)occupation of a majority of the seats (other than vacant seats) on the Board of Directors of the Company by Persons who were neither (i) nominated by the Board of Directors of the Company nor (ii) appointed by directors so nominated; provided a Person shall not be deemed so nominated or appointed if such nomination or appointment is the result of a proxy contest or a threatened proxy contest;

(c)the failure of the Company to own, directly or indirectly, at least 50% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of Willis North America, Inc. (or the successor entity owning all or substantially all of the assets previously owned by Willis North America, Inc. if such assets are transferred);

(d)a merger, consolidation or other corporate transaction of the Company (a “Transaction”) such that the shareholders of the Company immediately prior to such Transaction do not own more than 50 percent of the aggregate ordinary voting power of the surviving entity (or its parent) immediately after such Transaction in approximately the same proportion to each other as immediately prior to the Transaction;

(e)the sale of all or substantially all of the assets of the Company; or

(f)approval by the Company’s shareholders of a plan of liquidation or dissolution of the Company.

Mr. Plumeri’s employment agreement further provided that the definition of “Change of Control” may be narrowed in some circumstances, to the extent necessary to comply with Section 409A of the Internal Revenue Code.

Potential Payments to Named Executive Officers other than Mr. Plumeri Upon Termination or Change of Control

The following table sets forth the estimated payments and benefits our named executive officers other than the CEO would have received assuming the named executive officer was terminated or a change of control occurred on December 31, 2012.

Name

  Severance
($)		   Value of
Unvested
Deferred
Cash
Awards
($)		   Total
Payments on
Termination
($)		   Welfare/
Other
($)		   Intrinsic
Value of
Unvested
Share-
Based
Awards
($)(1)		 

Michael Neborak

          

Termination by the Company without Cause(2)(5)

   600,000     562,500     1,162,500     17,628     932,067  

Termination by the Company without Cause on a Change of Control(3)

   600,000     562,500     1,162,500     17,628     932,067  

Termination for Other Reasons(4)(5)

   600,000     562,500     1,162,500     17,628     932,067  

Change of Control(6)

   —       562,500     562,500     —       932,067  

Stephen Hearn(7)

          

Termination by the Company without Cause(2)

   2,153,125     562,500     2,715,625     —       1,997,544  

Termination by the Company without Cause on a Change of Control(3)

   2,153,125     562,500     2,715,625     —       1,997,544  

Termination for Other Reasons(4)

   —       562,500     562,500     —       1,997,544  

Change of Control(6)

   —       562,500     562,500     —       1,997,544  

Timothy Wright(7)

          

Termination by the Company without Cause(2)

   2,071,875     750,000     2,821,875     —       1,492,630  

Termination by the Company without Cause on a Change of Control(3)

   2,071,875     750,000     2,821,875     —       1,492,630  

Termination for Other Reasons(4)

   —       750,000     750,000     —       1,492,630  

Change of Control(6)

   —       750,000     750,000     —       1,492,630  

Victor Krauze

          

Termination by the Company without Cause(2)

   1,610,000     2,020,796     3,630,796     12,653     1,702,663  

Termination by the Company without Cause on a Change of Control(3)

   1,610,000     2,020,796     3,630,796     12,653     1,702,663  

Termination for Other Reasons(4)(5)

   700,000     2,020,796     2,720,796     12,653     1,702,663  

Change of Control(6)

   —       2,020,796     2,020,796     —       1,702,663  

(1)Mr. Krauze entered into an amendment to his promotion letter dated October 16, 2012 which provides that in the event Mr. Krauze’s employment is terminated by the Company without Good Cause or by the executive for Good Reason prior to December 31, 2013, all earned and outstanding equity and long-term incentive awards granted to him through calendar year 2012 will vest in full. “Good Cause” is defined as (i) gross neglect of duties, (ii) conviction of a felony, (iii) dishonesty, embezzlement, or fraud by the executive in connection with his employment, (iv) the issuance of any final order for the executive’s removal as an associate of the Company by any state or federal regulatory agency, (v) material willful breach of the “Confidential Information and Work for Hire” or “Employee Loyalty, Non-competition and Non-solicitation” provisions in the executive’s employment agreement, (vi) any material breach of the Company’s Code of Ethics, or (vii) failure to maintain any insurance or other license necessary to the performance of the executive’s duties. “Good Reason” is defined as (i) a material diminution in status, position, authority or duties which in Mr. Krauze’s reasonable judgment is materially inconsistent with and has a material adverse impact on his status, position, authority or duties, (ii) a material reduction in base salary, (iii) a material breach by the Company of any material provision in Mr. Krause’s employment agreement or promotion letter and (iv) beginning on April 2, 2013 and ending on December 31, 2013, Mr. Krauze’s dissatisfaction with the strategy, policies or operating procedures adopted by the then CEO of the Company.

Mr. Hearn’s employment agreement that was in effect on December 31, 2012 did not provide for the acceleration of his equity or long-term incentive awards upon a termination of employment for any reason. However, Mr. Hearn entered into an amended employment agreement on October 16, 2012 that was effective on January 1, 2013 which provides that in the event Mr. Hearn’s employment is terminated by the Company without Cause or by the executive for Good Reason, any options, restricted shares, deferred cash or other long term incentive awards due to vest during the twelve month period following the termination date will vest on the termination date. “Cause” is defined as (i) gross and or chronic neglect of duties, (ii) conviction of an offence involving moral turpitude, (iii) dishonesty, embezzlement, fraud or other material willful misconduct in connection with employment, (iv) the issuance of any final order for removal as an associate or officer of the Company by any regulatory authority, (v) violation of any obligation or confidence, fiduciary duty, duty of loyalty or other material obligation owed to the Company in any employment or other agreement with the Company or implied as common law, (vi) material breach of the Company’s code of ethics, or (vii) failure to maintain any insurance or license necessary for the performance of duties to the Company. “Good Reason” is defined as (i) a reduction in base salary or a material adverse reduction in benefits (other than (a) in the case of base salary a reduction offset by an increase in bonus opportunity upon the attainment of reasonable performance goals or (b) a general reduction in compensation or benefits affecting a broad group of employees), (ii) a material adverse reduction in principal duties and responsibilities or (iii) a significant transfer away from his primary service area or primary workplace other than as permitted by existing service contracts.

The Board may, in its discretion, accelerate each of the unvested option, RSU and deferred cash awards held by Messrs. Neborak, Hearn and Wright upon a termination of employment by the Company without cause.

For purposes of this section, it has been assumed that the Company has exercised its discretion to fully vest the option, RSU and deferred cash awards (at the target level of achievement) held by Messrs. Neborak, Hearn and Wright. The table above shows the intrinsic value of all unvested option, RSU and deferred cash awards held by the executives as of December 31, 2012.

(2)Mr. Neborak entered into an employment agreement with the Company dated July 6, 2010. The agreement provides that in the event his employment is terminated by the Company without Cause, the executive will receive severance pay equal to 12 months of base salary. “Cause” is defined as (i) gross and or chronic neglect of duties, (ii) conviction of a felony or misdemeanor involving moral turpitude, (iii) material willful dishonesty, embezzlement, fraud or other material willful misconduct in connection with employment, (iv) the issuance of any final order for removal as an associate of the Company by any state or federal regulatory agency, (v) violation of the restrictive covenant provisions in an employment agreement or other agreement with the Company, (vi) material breach of any material duty owed to the Company, including, without limitation the duty of loyalty, (vii) material breach of any other material obligations under an employment or other agreement with the Company, (viii) material breach of the Company’s code of ethics, (ix) failure to achieve reasonable performance goals as specified by the Company or (x) failure to maintain any insurance or license necessary for the performance of duties to the Company.

Mr. Krauze entered into an amendment to his promotion letter dated October 16, 2012 which provides that in the event Mr. Krauze’s employment is terminated by the Company without Good Cause or by the executive for Good Reason (each as defined in footnote 1 above) prior to December 31, 2013, the executive will receive (i) 12 months of base salary and medical benefit continuation, (ii) payment of his annual incentive award for the 2012 fiscal year, subject to the achievement of the performance goals established by the Compensation Committee and (iii) a waiver of the repayment obligations applicable to his cash retention awards.

Mr. Hearn’s employment agreement that was in effect on December 31, 2012 provided that if Mr. Hearn was terminated by the Company for any reason other than for Cause (as defined in footnote 1 above), he was entitled to receive an amount equal to his contractual notice pay due to him (i.e., 12 months base salary) and an amount equal to his target annual incentive compensation award at the time of his termination. Mr. Hearn entered into an amended employment agreement on October 16, 2012 that was effective on January 1, 2013 which provides that in the event Mr. Hearn’s employment is terminated by the Company without Cause or by the executive for Good Reason, he would be entitled to: (i) an amount equal to 150% of the sum of his annual base salary and target annual incentive award, which amount will be offset against any pay provided during the 12-month notice period set forth in the employment agreement or any pay in lieu of notice and will be payable in a lump sum, (ii) a pro-rata portion of his annual incentive award for the year in which the termination of employment occurs, based on actual performance, payable at the same time that annual incentive compensation awards are payable generally, (iii) any annual incentive compensation awards earned but unpaid for any prior fiscal year, and (iv) continuation of group medical coverage at the same rate that is applicable to active senior executive officers.

Mr. Wright entered into an amendment to his employment agreement dated July 19, 2012 which provides that in the event he is terminated by the Company for any reason other than for Cause (as defined in footnote 1 above with respect to Mr. Hearn), he will be entitled to receive an amount equal to the sum of his annual base salary and target annual incentive compensation award at the time he is served with notice of termination, which amount will be offset against any pay provided during the six-month notice period set forth in the employment agreement or any pay in lieu of notice and will be payable in a lump sum.

(3)The occurrence of a Change of Control will not trigger any automatic cash payments to Messrs. Neborak, Krauze, Hearn and Wright however, pursuant to his amended employment agreement that was effective on January 1, 2013, upon a termination of employment by the Company without Cause within two years following a Change of Control, Mr. Hearn is entitled to an enhanced severance payment. The enhanced severance payment is equal to 200% (rather than 150%) of the sum of his annual base salary and target annual incentive award, which amount will be offset against any pay provided during the 12-month notice period set forth in his employment agreement or any pay in lieu of notice. Further, the deferred cash awards held by the executives may, in the discretion of the Compensation Committee, vest and become payable. Further, as described below, certain option and RSU awards held by the executives will vest.

The amounts payable to Messrs. Neborak, Krauze, Hearn and Wright in respect of termination of employment on December 31, 2012 in connection with a Change of Control would be calculated on the same basis described inTermination by the Company without Cause above.

Mr. Neborak’s employment agreement provides that in the event of Change of Control all of his RSUs and options will immediately vest in full.

The option award granted to Mr. Krauze on May 6, 2008, the option award granted to Mr. Hearn on November 3, 2008 and the performance-based option award granted to Mr. Wright on September 1, 2008 automatically vest in full upon the occurrence of a Change of Control pursuant to the Company’s 2008 Plan, to the extent such awards are not assumed or substituted. In the event those option awards are assumed or substituted, such options generally vest in full upon a participant’s termination of employment occurring within 24 months following the Change of Control.

All other RSU and option awards may vest upon the occurrence of a Change of Control, in the sole discretion of the Board.

For purposes of the option, RSU and deferred cash awards, “Change of Control” is defined as (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Exchange Act and the rules of the SEC thereunder as in effect on the date hereof) of the ordinary shares of the Company representing more than 50% of the aggregate voting power represented by the issued and outstanding ordinary shares of the Company; or (ii) occupation of a majority of the seats (other than vacant seats) on the Board of the Company by persons who were neither (a) nominated by the Company’s Board nor (b) appointed by directors so nominated.

For purposes of Mr. Hearn’s amended employment agreement “Change of Control” is defined as: (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Exchange Act and the rules of the SEC thereunder as in effect on the date hereof) of equity interests representing more than thirty (30%) of the aggregate voting power represented by the issued and outstanding equity interests of the Company; occupation of a majority of the seats (other than vacant seats) on the Board of the Company by persons who were neither (a) nominated by the Company’s Board nor (b) appointed by directors so nominated; (iii) a merger, consolidation or other corporate transaction of the Company such that shareholders of the Company immediately prior to such transaction do not own more than fifty percent (50%) of the aggregate ordinary voting power of the surviving entity (or its parent) immediately after such transaction in approximately the same proportion to each other as immediately prior to the transaction; or (iv) the sale of all or substantially all of the assets of the Company.

For purposes of this section it has been assumed that the Company has exercised its discretion to fully vest the option, RSU and deferred cash awards (at the target level of achievement) held by Mr. Neborak, Krauze, Hearn and Wright to the extent that such awards do not automatically vest in full. The table above shows the intrinsic value of all unvested option, RSU and deferred cash awards held by the executives as of December 31, 2012.

(4)The unvested option, RSU and deferred cash awards held by Messrs. Neborak, Krauze, Hearn and Wright each vest in full upon a termination of employment due to death or permanent disability;provided, that, performance-based option and deferred cash awards only vest to the extent that performance targets have been achieved on the date of termination of employment. In addition, the Board, in its sole discretion, may accelerate the vesting of all option, RSU and deferred cash awards upon a termination of employment due to retirement.

For purposes of this section it has been assumed that the Company has exercised its discretion to fully vest the option, RSU and deferred cash awards (at the target level of achievement) held by Messrs. Neborak, Krauze, Hearn and Wright to the extent that such awards do not automatically vest in full. The table above shows the intrinsic value of all unvested option, RSU and deferred cash awards held by the executives as of December 31, 2012.

(5)Mr. Neborak entered into restrictive covenant agreements with the Company, effective on August 2, 2010. The agreement provides, in part, that for a period of 12 months directly following his termination of employment for any reason the executive must refrain from working for, engaging or generally having a financial interest in certain of the Company’s competitors. During the non-compete period the Company is obligated to make payments to the officer equal to the base salary payments the executive would have received if he had remained in the Company’s employ during such period. In addition, the Company is required to pay for the cost of the officer’s medical coverage during the non-compete period. The Company may elect to shorten the non-competition period for Mr. Neborak, in which case the Company would only be obligated to provide the officer with the base salary payments and medical benefits described above during the shortened non-compete period.

Mr. Krauze’s employment agreement and promotion letter similarly provide that for a period of up to 12 months directly following Mr. Krauze’s termination of employment for any reason the executive must refrain from working for, engaging or generally having a financial interest in certain of the Company’s competitors. During the non-compete period the Company is obligated to make payments to Mr. Krauze equal to the base salary payments the executive would have received if he had remained in the Company’s employ during such period. In addition, the Company is required to pay for the cost of the officer’s medical coverage during the non-compete period. Such payments may be reduced by the amount of any other post—employment payments paid to Mr. Krauze, including any severance payments paid to him in connection with a termination without Good Cause or for Good Reason (each as defined in footnote 2 above). Further, the Company may elect to shorten the non-competition period, in which case the Company would only be obligated to provide Mr. Krauze with the base salary payments described in this footnote 5 during the shortened non-compete period.

The table above shows the payments the officer would have received had a termination of employment taken place on December 31, 2012, assuming that payments and benefits were provided for the full 12 month non-compete period.

(6)The occurrence of a Change of Control will not trigger any automatic cash payments to Messrs. Neborak, Krauze, Hearn and Wright. However, as described inTermination by the Company on Change of Control above, certain option and RSU awards held by the executives automatically vest in full upon the occurrence of a Change of Control and the deferred cash and all other option and RSU awards held by the executives may vest upon the occurrence of a Change of Control, in the sole discretion of the Board.

For the purpose of this section, it has been assumed that the Company has exercised its discretion to fully vest the option, RSU and deferred cash awards (at the target level of achievement) held by Messrs. Neborak, Krauze, Hearn and Wright to the extent that such awards do not automatically vest in full. The table above shows the intrinsic value of all unvested option, RSU and deferred cash awards held by the executives as of December 31, 2012.

(7)Messrs. Hearn and Wright receive their salaries and annual incentive compensation awards in pounds sterling. The dollar figures shown have been calculated at the exchange rate as at December 31, 2012 (£1: $1.625).

Compensation Risk Analysis

In the first quarter of 2010, at the Compensation Committee’s request, its independent Compensation Consultant at the time, Frederick W. Cook & Co., worked with management to conduct a risk assessment of the Company’s compensation programs. This assessment included an inventory of incentive compensation plans then in place at the Company, a review of the design and features of the Company’s compensation programs with key members of management responsible for such programs and an assessment of program design and features relative to compensation risk factors.

With assistance from the Company’s Director of Risk, Frederick W. Cook & Co., also reviewed the Company’s risk profile and related risk management processes and the findings of the compensation risk assessment to determine if any material risks were deemed to be likely to arise from the Company’s compensation policies and programs and to determine whether these risks would be reasonably likely to have a material adverse effect on its business. The determination, which was reviewed and affirmed by management and the Compensation Committee, was that the Company’s pay plans and policies were not reasonably likely to have a material adverse effect on the Company. In the first quarter of 2011, this conclusion was reaffirmed.

In 2012 and 2013, at the request of the Compensation Committee, Towers Watson (its current independent Compensation Consultant) reviewed the risk assessment conducted by the previous Compensation Consultant and confirmed that the methodology used in that assessment remained valid. Towers Watson has worked with Willis to review its compensation programs and to determine if they had materially changed from the time of the initial risk assessment. As a result of this review, Towers Watson found that the only material change that had occurred was the removal in 2012 of the repayment obligation required under certain cash retention awards under Willis’ annual incentive programs. However, Towers Watson concluded that this action did not pose additional compensation risk because the repayment feature originally had been added to address retention risk versus organizational risk. Accordingly, Towers Watson determined that the 2010 risk assessment findings remain applicable. The Compensation Committee reviewed and affirmed this determination and further commissioned a full risk review of the Company’s compensation programs in 2014.

Outside Director Compensation

In 2012, all outside directors (i.e., all directors other than Mr. Plumeri), received an annual cash retainer fee of $100,000. In addition, (i) the Chairman of the Compensation Committee, the Chairman of the Governance Committee and the Chairman of the Risk Committee each received an annual cash fee of $20,000; (ii) the Chairman of the Audit Committee received an annual cash fee of $30,000; and (iii) the other members of the Audit Committee received an annual cash fee of $10,000. The Presiding Independent Director received an annual cash fee of $35,000. In 2012, the Board also authorized a one-time special cash fee of $30,000 for each of Senator Bradley, Wendy E. Lane and James McCann, as members of a CEO Search Committee, for their efforts in selecting a new CEO.

In addition, as part of their annual compensation, each non-employee director who is elected at the Company’s Annual General Meeting of Shareholders also receives time-based equity equivalent in value to $100,000 (based on the closing price of the Company’s shares as quoted on the NYSE on the date of grant) that vest in full on the one-year anniversary of the grant date. On May 7, 2012, the non-employee directors received 2,753 RSUs that will vest in full on May 7, 2013.

In 2013, the Board also approved an annual fee for the Non-Executive Chairman of the Board of $150,000 payable 50% in equity and 50% in cash, provided that the Non-Executive Chairman may elect to receive the fee 100% in stock.

Outside directors are subject to share ownership guidelines that require them to hold Company shares equal to the lesser of 3.5 times the directors’ cash retainer of $100,000 (i.e., $350,000) or 10,000 shares. Incumbent directors must comply by 2016 (i.e., five years of adoption of the guidelines). Ordinary shares, deferred shares, share equivalents, RSUs and restricted shares count toward satisfying the guidelines, but options to purchase shares do not. Each director is prohibited from transferring these shares until six months after he or she leaves Board service (other than to satisfy tax obligations on the vesting/distribution of existing equity awards), but is permitted to transfer any shares in excess of this amount. In the event an outside director has not acquired this threshold of shares, he or she is prohibited from transferring any Company shares (other than to satisfy tax obligations on the vesting/distribution of existing equity awards). In the case of financial hardship, the ownership guidelines would be waived until the hardship no longer applies or such appropriate time as the Compensation Committee determines. All directors currently satisfy the guidelines.

Sir Jeremy Hanley receives an additional annual fee of £50,000 for serving on the board of directors of Willis Limited, the Company’s principal insurance broking subsidiary outside of the USA. He has sat on the Willis Limited board of directors since March 12, 2008 and he also serves on the Willis Limited board of directors’ audit committee.

The following table sets forth cash and other compensation paid or accrued to the non-employee directors of the Company during 2012.

Name of Non-Employee Director

  Fees
Earned
or Paid
in Cash
($)		   Option
Awards
($)		   Share
Awards
($)(1)		   All Other
Compensation
($)(2)		  Total
($)

William Bradley(3)

   192,065     —       99,989     —      292,054

Joseph Califano, Jr.

   100,000     —       99,989     39,548    239,537

Anna Catalano

   100,000     —       99,989     —      199,989

Sir Roy Gardner(4)

   120,000     —       99,989     —      219,989

Sir Jeremy Hanley(5)

   110,000     —       99,989     —      209,989

Robyn Kravit(6)

   110,000     —       99,989     97,034    307,023

Jeffrey Lane

   100,000     —       99,989     —      199,989

Wendy E. Lane(7)

   160,000     —       99,989     —      259,989

James McCann(8)

   141,359     —       99,989     8,531    249,879

Douglas Roberts(9)

   130,000     —       99,989     51,740    281,729

Michael Somers

   100,000     —       99,989     —      199,989

(1)Each of the directors received 2,753 RSUs on May 7, 2012 which will vest in full on May 7, 2013 (other than Senator Bradley whose RSUs were forfeited upon his resignation from the Board). The value shown is the full fair value as at the date of grant.
(2)In connection with the Company’s redomicile to Ireland, the Company agreed to indemnify any director in the event they may need to pay additional taxes as a result of the redomicile. The above amounts reflect the gross-up payment made to the non-employee directors in 2012 in connection with taxes paid by them for the 2011 fiscal year and, in the case of Mr. McCann, the 2010 fiscal year. The Company also hired Ernst & Young in Dublin, Ireland to prepare the directors’ Irish 2012 tax returns which is expected to be less than $50,000 in the aggregate.
(3)The above fees reflect Senator Bradley’s role as the Presiding Independent Director and Chairman of the Governance Committee. He resigned from both positions effective as of October 17, 2012 and resigned from the Board effective as of November 1, 2012. The fees include the one-time special fee approved by the Board of $30,000 for his efforts in selecting a new Group CEO. They also include his 2011 $35,000 fee for serving as the Presiding Independent Director. He originally waived receipt of this fee but subsequently accepted it in 2012.
(4)The above fees reflect Sir Roy Gardner’s role as the Chairman of the Risk Committee.
(5)The above fees reflect Sir Jeremy Hanley’s role as a member of the Audit Committee. As noted above, he also receives an annual cash fee of £50,000 in connection with his service as a director on the Willis Limited board of directors.
(6)The above fees reflect Ms. Kravit’s role as a member of the Audit Committee.
(7)The above fees reflect Ms. Lane’s role as the Chairman of the Compensation Committee and a member of the Audit Committee. The fees also include the one-time special fee approved by the Board of $30,000 for her efforts in selecting a new Group CEO.
(8)The above fees reflect Mr. McCann’s role as Presiding Independent Director and Chairman of the Governance Committee. He was appointed to these positions effective October 17, 2012. They also include the one-time special fee approved by the Board of $30,000 for his efforts in selecting a new Group CEO.
(9)The above fees reflect Mr. Roberts’ role as the Chairman of the Audit Committee.

As of December 31, 2012, the non-employee directors owned the following options to purchase shares and RSUs (which include any RSUs, the settlement of which has been deferred): Mr. Califano held 5,942 RSUs; Ms. Catalano held 30,000 options and 4,114 RSUs; Sir Roy Gardner held 30,000 options and 2,753 RSUs; Sir Jeremy Hanley held 30,000 options and 5,942 RSUs; Ms. Kravit held 4,114 RSUs; Mr. Lane held 2,753 RSUs; Ms. Lane held 2,753 RSUs; Mr. McCann held 4,114 RSUs; Mr. Roberts held 5,942 RSUs; and Mr. Somers held 2,753 RSUs.

In addition to the foregoing options, 30,000 options held by Mr. Califano, 30,000 options held by Ms. Lane, 30,000 options held by Mr. McCann and 30,000 options held by Mr. Roberts, have been amended such that they will receive the intrinsic value in cash upon exercise rather than receive shares upon payment of the exercise price.

For more information regarding the number of shares beneficially owned by each director as of April 24, 2013, see Item 12, “Security Ownership of Certain Beneficial Owners and Management’ in the 2011 Proxy Statement is incorporated herein by reference.

Management and Related Stockholder Matters.”

Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information, as of December 31, 2010,2012, about the securities authorized for issuance under our equity compensation plans, and is categorized according to whether or not the equity plan was previously approved by shareholders:

             
  Number of Shares
       
  to be Issued Upon
  Weighted Average
    
  Exercise of
  Exercise Price of
  Number of Shares
 
  Outstanding
  Outstanding
  Remaining
 
  Options, Warrants
  Options, Warrants
  Available for
 
Plan Category and Rights  and Rights(1)  Future Issuance 
 
Equity compensation plans approved by security holders  21,364,574(2) $32.95   8,111,532(3)
Equity compensation plans not approved by security holders  1,331,901(4) $27.61   883,913(5)
             
Total  22,696,475  $32.64   8,995,445 
             

Plan Category

  Number of
Shares to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants
and Rights		  Weighted
Average
Exercise
Price of
Outstanding
Options,
Warrants
and
Rights (1)		   Number of
Shares
Remaining
Available for
Future
Issuance		 

Equity Compensation Plans Approved by Security Holders

   18,761,121 (2)   32.76     11,228,595 (3) 

Equity Compensation Plans Not approved by Security Holders

   433,566 (4)   27.08     690,521 (5) 
  

 

 

  

 

 

   

 

 

 
   19,194,687    32.67     11,919,116  
  

 

 

  

 

 

   

 

 

 

(1)

The weighted-average exercise price set forth in this column is calculated excluding restricted share units (‘RSUs’)RSUs or other awards for which recipients are not required to pay an exercise price to receive the shares subject to the awards.

(2)

Includes options and RSUs outstanding under the 2001, Share Purchase2008 and Option Plan and the 2008 Share Purchase and Option2012 Plan.

(3)

Represents shares available for issuance pursuant to awards that may be granted under the 2001 Share Purchase and Option2012 Plan the 2008 Share Purchase and Option Plan, the 2001 North American Employee Stock Purchase Plan(10,551,524 shares) and the 2010 North American Employee Stock Purchase Plan. The 2001 Share Purchase and Option Plan expires May 3, 2011 and the 2001 North American Employee Stock expires May 31, 2011.(677,071 shares).

(4)

Includes options and RSUs outstanding under the following plans that were assumed by Willis in connection with the acquisition by Willis of HRH:Hilb, Rogal & Hobbs: the 2000 HRH 2000 Share Incentive Plan and the 2007 HRH 2007 Share Incentive Plan (‘HRH 2007 Plan’).Plan. No future awards will be granted under the 2000 HRH 2000 Share Incentive Plan. Also includes 245,000The above amounts do not include an aggregate of 120,000 options held by certain non-employee directors pursuant to which they will receive the intrinsic value in cash rather than shares that may be issued to directors upon exercise of the options.

(5)

Represents Sharesshares that remain available for issuance under the 2007 HRH 2007 Plan. Willis is authorized to grant awards under the 2007 HRH 2007 Plan until 2017 to employees who were formerly employed by HRHHilb, Rogal & Hobbs and to new employees who have joined Willis or one of its subsidiaries since October 1, 2008, the date that the acquisition of HRHHilb, Rogal & Hobbs was completed.

Item 13 —Certain Relationships and Related Transactions, and Director Independence

Security Ownership of Certain Beneficial Owners and Management

The informationfollowing tables show the number of shares beneficially owned, as of April 24, 2013:

By each entity which is known to beneficially own 5% or more of our outstanding shares,

By each of our current directors and director nominees,

By each named executive officer listed in the 2012 Summary Compensation Table and

By each of our current directors, director nominees and executive officers as group.

The amounts and percentages of our shares beneficially owned are reported in accordance with Rule 13d-3 of the General Rules and Regulations under the headings ‘CertainSecurities Exchange Act of 1934, as amended (the “Exchange Act”). Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of that security, or investment power, which includes the power to dispose of or to direct the disposition of that security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days of April 24, 2013 (i.e., June 23, 2013). Also, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which that person has no economic interest.

5% Beneficial Owners

Name and Address

  Number of
Shares
Beneficially
Owned		   Percent
Beneficially
Owned

ValueAct Capital(1)

435 Pacific Avenue, Fourth Floor

San Francisco, CA 94133

   16,500,000    9.5%

T. Rowe Price Associates, Inc.(2)

100 E. Pratt Street,

Baltimore, MD 21202

   14,681,338    8.4%

Harris Associates L.P.(3)

Harris Associates Inc.

Two North LaSalle Street, Suite 500

Chicago, IL 60602

   11,184,000    6.5%

(1)The information is based on Amendment No. 3 to the Schedule 13D filed with the SEC on March 1, 2013 jointly by ValueAct Capital Master Fund, L.P.; VA Partners I, LLC; ValueAct Capital Management, L.P.; ValueAct Capital Management, LLC; ValueAct Holdings, L.P. and ValueAct Holdings GP, LLC and updated information provided by ValueAct Capital. The amount beneficially owned includes 16,500,000 shares over which there is shared voting power and shared dispositive power among the joint filers. Percentage of our shares beneficially owned is as reported in their Schedule 13D/A and as updated by ValueAct Capital as of April 24, 2013.
(2)The information is based solely on the Schedule 13G filed with the SEC on February 12, 2013 by T. Rowe Price Associates, Inc. The amount beneficially owned includes 4,336,925 shares over which there is sole voting power and 14,681,338 shares over which there is sole dispositive power. Percentage of our shares beneficially owned is as reported in their Schedule 13G as of December 31, 2012.
(3)The information is based solely on the Schedule 13G filed with the SEC on February 11, 2013 by Harris Associates L.P. and its general partner, Harris Associates Inc. The amount beneficially owned includes 10,891,000 shares over which there is sole voting power and sole dispositive power. As a result of advisory and other relationships with persons who own the shares, Harris Associates L.P. may be deemed to be the beneficial owner of 11,184,000 shares. Percentage of our shares beneficially owned is as reported in their Schedule 13G as of December 31, 2012.

Current Directors, Director Nominees and Executive Officers

Name and Address(1)

  Number of
Shares
Beneficially
Owned(2)		   Percent
Beneficially
Owned		 

Joseph Plumeri(3)

   3,450,562     2.0% 

Joseph Califano, Jr.(4)

   14,111         * 

Anna Catalano(5)

   42,111         * 

Sir Roy Gardner(6)

   47,020         * 

Sir Jeremy Hanley(7)

   47,676         * 

Robyn Kravit(8)

   10,283         * 

Jeffrey Lane(9)

   10,283         * 

Wendy E. Lane(10)

   10,600         * 

James McCann(11)

   12,961         * 

Douglas Roberts(12)

   18,537         * 

Michael Somers(13)

   5,375         * 

Jeffrey W. Ubben(14)

   16,500,000     9.5% 

Dominic Casserley

   27,100         * 

Stephen Hearn(15)

   10,040         * 

Victor Krauze(16)

   216,284         * 

Michael Neborak

   7,144         * 

Timothy Wright(17)

   311,950         * 

All of our Current Directors, Director Nominees and Executive Officers (19 persons)

   20,815,588     12.0% 

*Less than 1%.
(1)Unless otherwise indicated, the address of each of the persons listed below is c/o Willis Group Holdings Public Limited Company, Grand Mill Quay, Barrow Street, Dublin 4, Ireland.
(2)The number of shares that the directors and executive officers are deemed to have a beneficial interest includes shares under options that will be exercisable and/or RSUs that will vest on or before June 23, 2013 as indicated in the following notes. These shares, however, are not deemed outstanding for purposes of computing percentage of beneficial ownership of any other person.
(3)Mr. Plumeri’s shares beneficially owned include 66,200 performance-based RSUs, which are scheduled to vest on May 2, 2013, 57,390 performance-based RSUs, which are scheduled to vest on May 3, 2013, 1,250,000 options to purchase shares and 380,977 RSUs with deferred settlement until Mr. Plumeri incurs a separation of service from the Company. Mr. Plumeri will retire as Chairman of the Board on July 7, 2013.
(4)Mr. Califano’s shares beneficially owned include 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013, and 3,189 vested RSUs, the settlement of which has been deferred until the earlier of when the director ceases to serve on the Board and January 2, 2017. Additionally, Mr. Califano beneficially owns 30,000 options pursuant to which he will receive the intrinsic value in cash upon exercise rather than receive shares upon payment of the exercise price. These options are not reflected in the above table.
(5)Ms. Catalano’s shares beneficially owned include 30,000 options to purchase shares, 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013, and 1,361 vested RSUs, the settlement of which has been deferred until the earlier of when the director ceases to serve on the Board and January 2, 2017.

(6)Sir Roy Gardner’s shares beneficially owned include 30,000 options to purchase shares and 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013.
(7)Sir Jeremy Hanley’s shares beneficially owned include 30,000 options to purchase shares, 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013, and 3,189 vested RSUs, the settlement of which has been deferred until the earlier of when the director ceases to serve on the Board and January 2, 2017.
(8)Ms. Kravit’s shares beneficially owned include 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013, and 1,361 vested RSUs, the settlement of which has been deferred until the earlier of when the director ceases to serve on the Board and January 2, 2017.
(9)Mr. Lane’s shares beneficially owned include 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013.
(10)Ms. Lane’s shares beneficially owned includes 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013. She also beneficially owns 30,000 options pursuant to which she will receive the intrinsic value in cash upon exercise rather than receive shares upon payment of the exercise price. These options are not reflected in the above table.
(11)Mr. McCann’s shares beneficially owned include 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013 and 1,361 vested RSUs, the settlement of which has been deferred until the earlier of when the director ceases to serve on the Board and January 2, 2017. Additionally, Mr. McCann beneficially owns 30,000 options pursuant to which he will receive the intrinsic value in cash upon exercise rather than receive shares upon payment of the exercise price. These options are not reflected in the above table.
(12)Mr. Roberts’ shares beneficially owned include 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013, and 3,189 vested RSUs, the settlement of which has been deferred until the earlier of when the director ceases to serve on the Board and January 2, 2017. Additionally, Mr. Roberts beneficially owns 30,000 options pursuant to which he will receive the intrinsic value in cash upon exercise rather than receive shares upon payment of the exercise price. These options are not reflected in the above table.
(13)Mr. Somers’ shares beneficially owned include 2,753 time-based RSUs, which are scheduled to vest on May 7, 2013.
(14)Mr. Ubben has been nominated as a director by the Board for election at the 2013 Annual General Meeting of Shareholders. Includes 16,500,000 shares of common stock beneficially owned by ValueAct Capital Master Fund, L.P., as to which Mr. Ubben may be deemed a beneficial owner. Mr. Ubben disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein.
(15)Mr. Hearn’s shares beneficially owned include 6,249 options to purchase shares.
(16)Mr. Krauze’s shares beneficially owned include 8,250 time-based RSUs, which are scheduled to vest on May 2, 2013, 2,512 shares held indirectly by the Theresa L. Krauze Revocable Trust and 184,192 options to purchase shares (of which 10,000 options are scheduled to vest on May 5, 2013 and 4,167 options are scheduled to vest on May 6, 2013).
(17)Mr. Wright’s shares beneficially owned include 295,832 options to purchase shares (of which 25,000 options are scheduled to vest on May 5, 2013).

Item 13 — Certain Relationships and Related Transactions’Transactions, and ‘Corporate Governance’Director Independence

Review and Approval of Related Person Transactions

Willis has adopted written policies and procedures governing the review and approval of transactions between the Company and any of its directors or executive officers, nominees for directors, any security holder who is known to the Company to own of record or beneficially more than 5% of any class of the Company’s voting securities or their immediate family members (each, a “Related Person”) to determine whether such persons have a direct or indirect material interest. The Company’s directors, nominees for directors and executive officers complete an annual director and officer questionnaire which requires the disclosure of related person transactions. In addition, directors, nominees for directors and executive officers are obligated to advise the Audit Committee of any related person transactions of which they are aware, or become aware, and, in the 2011event that any such transactions involve difficult or complex issues, the directors and executive officers are obligated to advise the Group General Counsel. Further, transactions that are determined to be directly or indirectly material to a Related Person are disclosed in the Company’s Proxy Statement or Annual Report on Form 10 K in accordance with SEC rules. The Audit Committee reviews and approves or ratifies any related person transaction that is incorporated hereinrequired to be disclosed. In the course of its review and approval or ratification of a disclosable related person transaction, the Audit Committee considers, among other factors it deems appropriate:

The position within or relationship of the Related Person with the Company;

The materiality of the transaction to the Related Person and the Company, including the dollar value of the transaction, without regard to profit or loss;

The business purpose for and reasonableness of the transaction (including the anticipated profit or loss from the transaction), taken in the context of the alternatives available to the Company for attaining the purposes of the transaction;

Whether the transaction is comparable to a transaction that could be available on an arms-length basis or is on terms that the Company offers generally to persons who are not Related Persons;

Whether the transaction is in the ordinary course of the Company’s business and was proposed and considered in the ordinary course of business; and

The effect of the transaction on the Company’s business and operations, including on the Company’s internal control over financial reporting and system of disclosure controls or procedures, and any additional conditions or controls (including reporting and review requirements) that should be applied to such transaction.

Any member of the Audit Committee who is a Related Person with respect to a transaction under review may not participate in the deliberations or vote regarding the approval or ratification of the transaction, provided, however, that such director may be counted in determining the presence of a quorum at a meeting at which the Audit Committee considers the transaction.

2012 Related Person Transactions Under Item 404 of Regulation S-K

David Hearn is the brother of Peter Hearn, the Chairman of Willis Re and a 2012 executive officer, and is employed by reference.

Item 14 —Principal Accounting Fees and Services
The informationa Willis subsidiary. David Hearn’s 2012 total compensation (including salary, bonus and long-term incentive awards) was $1,225,000. Both David Hearn and Peter Hearn are unrelated to Stephen Hearn, the Group Deputy CEO, CEO and Chairman of Willis Global. No other transactions are required to be disclosed under Item 404 of Regulation S-K.

Board and Committee Member Independence

Based on the recommendation of the Governance Committee, the Board has determined that, with the exception of Mr. Casserley and Mr. Plumeri (who will retire as Chairman and a member of the Board on July 7, 2013), (i) all the directors and director nominees shown above and (ii) the current members of the Audit Committee, Compensation Committee, Governance Committee and the Risk Committee are independent under the headings ‘Fees Paid to Independent Auditors’relevant SEC rules, NYSE listing standards and the Board’s Director Independence Standards. The Board’s Director Independence Standards are part of the Company’s Corporate Governance Guidelines adopted by the Board and which comply and meet the requirements of the NYSE’s listing standards.

As discussed above, each director nominee has significant experience and affiliations with other organizations. Accordingly, in evaluating the independence of each director, the Governance Committee considered that in the 2011 Proxy Statement is incorporated hereinordinary course of business, the Company provides services (such as insurance broking or consultancy services) to, receives services from or provides charitable donations to organizations affiliated with the directors. This includes a $150,000 charitable contribution made by referencethe Company to CASA, a charitable organization that employs Messrs. Califano and as disclosedLane and whose board includes Messrs. Lane, Califano, and Plumeri. In addition, in Note 5the ordinary course of business and on an arm’s length basis, Jeffrey Lane, Robyn Kravit and James McCann receive broking or consultancy services from the Company on a personal basis. However, the Governance Committee determined that, in all of the above cases, the transactions do not impair the relevant director’s independence under the applicable SEC rules, NYSE listing standards or the Company’s Governance Guidelines.

Item 14 — Principal Accounting Fees and Services

The following fees have been, or will be, billed by Deloitte LLP and their respective affiliates for professional services rendered to the consolidated financial statements.


147

Company for the fiscal years ended December 31, 2012 and December 31, 2011.

   2012   2011 
   ($ in thousands) 

Audit fees(1)

   6,942     6,581  

Audit related fees(2)

   227     215  

Tax fees(3)

   170     124  

All other fees(4)

   980     566  
  

 

 

   

 

 

 

Total fees

   8,319     7,486  
  

 

 

   

 

 

 

(1)Fees for the audits of the Company’s annual financial statements and reviews of the financial statements included in the Company’s quarterly reports for that fiscal year, services relating to the Company’s registration statements ($31,000) and U.S. Generally Accepted Accounting Principles (“GAAP”) accounting consultations and Sarbanes-Oxley Section 404 work.
(2)Audit related fees relate primarily to professional services such as employee benefit plan audits and non-statutory audits.
(3)Tax fees comprise fees for various tax compliance engagements.
(4)All other fees in 2012 relate primarily to assist with the Company’s internal review of certain payments made by our U.K. subsidiary between 2005 and 2009, discussed in further detail in the section entitled “Commitments and Contingencies” in Note 22 to our Consolidated Financial Statements included within our Annual Report on Form 10-K, and in 2011 to assist with the Company’s Finance Transformation Project.

The Audit Committee approved all of the services described above in accordance with the Company’s pre-approval policy.

Audit Committee Pre-Approval Process

Willis Group Holdings plc
The Audit Committee has adopted a policy regarding the pre-approval of services provided by the Company’s independent auditors, which can be found in the Investor Relations — Corporate Governance section of the Company’s website atwww.willis.com. This policy requires all services provided by the Company’s independent auditors, both audit and permitted non-audit services, to be pre-approved by the Audit Committee or the Chairman of the Audit Committee or, in his absence, any other member of the Committee. The pre-approval of audit and permitted non-audit services may be given at any time before the commencement of the specified service. The decisions of a designated member of the Audit Committee shall be reported to the Audit Committee at each of its regularly scheduled meetings.

EXHIBIT A

RECONCILIATIONOF GAAPTO NON-GAAP INFORMATION

I.Analysis of Commissions and Fees

The following table reconciles organic commissions and fees growth by segment to the percentage change in reported commissions and fees for the three and twelve months ended December 31, 2012:

   Three months ended
December 31,		  Change attributable to 
   2012   2011   %
Change		  Foreign
currency
translation		  Acquisitions
and disposals		  Organic
commissions
and fees
growth(a)		 

Global

  $237    $213     11.3%   (0.3)%   —  %   11.6% 

North America

   331     316     4.7%   (0.3)%   —  % (b)   5.0%(b) 

International

   299     281     6.4%   (1.0)%   —  %   7.4% 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Commissions and fees

  $867    $810     7.0%   (0.5)%   —  %   7.5% 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
   Twelve months ended
December 31,		  Change attributable to 
   2012   2011   %
Change		  Foreign
currency
translation		  Acquisitions
and disposals		  Organic
commissions
and fees
growth(a)		 

Global

  $1,124    $1,073     4.8%   (1.3)%   —  %   6.1% 

North America

   1,306     1,314     (0.6)%   —  %     —  % (c)   (0.6)% 

International

   1,028     1,027     0.1%   (4.8)%   —  %   4.9% 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Commissions and fees

  $3,458    $3,414     1.3%   (1.8)%   —  %   3.1% 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

(a)Organic commissions and fees growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; (iii) the net commission and fee revenues related to operations disposed of in each period presented; (iv) in North America, legacy contingent commissions assumed as part of the HRH acquisition and that had not been converted into higher standard commission; and (v) investment income and other income from reported revenues.
(b)Results for Willis North America showed organic growth of 5.0% attributable, in part, to the reversal in the fourth quarter of 2011 of revenue that was improperly recorded during 2011. Excluding that revenue reversal, organic growth in Willis North America was 3.1%.
(c)Included in North America reported commissions and fees were legacy HRH contingent commissions of $nil in the fourth quarter of 2012 and the fourth quarter of 2011 and $2 million in 2012 compared with $5 million in 2011.

Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited.

II.Adjusted Operating Income

The following table reconciles operating (loss) income, the most directly comparable GAAP measure, to adjusted operating income, for the twelve months ended December 31, 2012 and 2011:

   Twelve months ended
December 31,		 
   2012  2011  %
Change		 

Operating (Loss) Income

  $(209)  $566    NM  

Excluding:

    

Goodwill impairment charge(a)

   492    —     

Write-off of unamortized cash retention awards(b)

   200    —     

Additional incentive accrual for change in remuneration
policy(c)

   252    —     

Insurance recovery(d)

   (10)   —     

Loss/(gain) on disposal of operations

   3    (4)  

Write-off of uncollectible accounts receivable and legal fees(e)

   13    22   

India JV settlement (f)

   11    —     

2011 Operational Review(g)

   —      180   

Financial Services Authority regulatory settlement

   —      11   
  

 

 

  

 

 

  

Adjusted Operating Income

  $752   $775    (3.0)% 
  

 

 

  

 

 

  

Operating Margin, or Operating Income as a percentage of Total Revenues

   (6.0)%   16.4%  
  

 

 

  

 

 

  

Adjusted Operating Margin, or Adjusted Operating Income as a percentage of Total Revenues

   21.6%   22.5%  
  

 

 

  

 

 

  

(a)Non-cash charge recognized related to the impairment of the carrying value of the North America reporting unit’s goodwill.
(b)Write-off of unamortized cash retention awards following decision to eliminate the repayment requirement on past awards.
(c)Additional incentive accrual recognized following the replacement of annual cash retention awards with annual cash bonuses which will not feature a repayment requirement.
(d)Insurance recovery related to previously disclosed improperly recorded revenue in Chicago.
(e)Write-off of an uncollectible accounts receivable balance, together with associated legal fees, related to overstatement of Commissions and Fees from the years 2004 to 2011, in Chicago.
(f)Settlement with former partners related to the termination of a joint venture arrangement in India.
(g)Charge relating to the 2011 Operational Review, including $34 million of severance costs relating to the elimination of approximately 400 position in the fourth quarter of 2011 and $98 million of severance costs relating to the elimination of approximately 1,200 positions for the full year 2011.

III.Adjusted Net Income from Continuing Operations

The following table reconciles net (loss) income from continuing operations and earnings per diluted share from continuing operations, the most directly comparable GAAP measures, to adjusted net income from continuing operations and earnings per diluted share from continuing operations, for the twelve months ended December 31, 2012 and 2011:

   Twelve months ended
December 31,		  Per diluted share
Twelve months ended
December 31,		 
   2012  2011  %
Change		  2012  2011  %
Change		 

Net (Loss) Income from Continuing Operations attributable to Willis Group Holding plc

  $(446)  $203    NA   $(2.58)  $1.15    NM  

Excluding:

       

Goodwill impairment charge, net of tax ($34, $nil)(a)

   458    —       2.60    —     

Write-off of unamortized cash retention awards, net of tax ($62, $nil)(b)

   138    —       0.78    —     

Additional incentive accrual for change in remuneration policy, net of tax ($77, $nil)(c)

   175    —       0.99    —     

Insurance recovery, net of tax ($4, $nil)(d)

   (6)   —       (0.03)   —     

Loss/(gain) on disposal of operations, net of tax ($nil, $nil)

   3    (4)    0.02    (0.02)  

India JV settlement, net of tax ($nil, $nil)(e)

   11    —       0.06    —     

Write-off of uncollectible accounts receivable balance and legal fees, net of tax ($5, $9)(f)

   8    13     0.05    0.08   

2011 Operational Review charge, net of tax ($nil, $52)(g)

   —      128     —      0.73   

Financial Services Authority regulatory settlement, net of tax ($nil, $nil)

   —      11     —      0.06   

Make-whole amounts on repurchase and redemption of Senior Notes and write-off of unamortized debt issuance costs, net of tax ($nil, $50)

   —      131     —      0.74   

Deferred tax valuation allowance(h)

   113    —       0.64    —     

Dilutive impact of potentially issuable shares(i)

   —      —       0.05    —     
  

 

 

  

 

 

   

 

 

  

 

 

  

Adjusted Net Income from Continuing Operations

  $454   $482    (5.8)%  $2.58   $2.74    (5.8)% 
  

 

 

  

 

 

   

 

 

  

 

 

  

Diluted shares outstanding

   176    176      
  

 

 

  

 

 

     

(a)Non-cash charge recognized related to the impairment of the carrying value of the North America reporting unit’s goodwill.
(b)Write-off of unamortized cash retention awards following decision to eliminate the repayment requirement on past awards.
(c)Additional incentive accrual recognized following the replacement of annual cash retention awards with annual cash bonuses which will not feature a repayment requirement.
(d)Insurance recovery related to previously disclosed improperly recorded revenue in Chicago.
(e)Settlement with former partners related to the termination of a joint venture arrangement in India.
(f)Write-off of uncollectible accounts receivable balance, together with associated legal fees, related to overstatement of Commissions and Fees from the years 2004 to 2011, in Chicago.
(g)Charge relating to the 2011 Operational Review, including $34 million of severance costs relating to the elimination of approximately 400 positions in the fourth quarter of 2011 and $98 million of severance costs related to the elimination of approximately 1,200 positions for the full year 2011.
(h)Valuation allowance against deferred tax assets.
(i)Diluted earnings per share are calculated by dividing net income by the average number of shares outstanding during each period. However, potentially issuable shares were not included in the calculation of diluted earnings per share for the three months and twelve months ended December 31, 2012 because the Company’s net loss rendered their impact anti-dilutive. The dilutive impact of potentially issuable shares is included on reconciling to adjusted earnings per share from continuing operations.

PART IV

Item 15 —– Exhibits, Financial Statement Schedules.Schedules
The following documents are filed as a part of this report:
(1) Consolidated Financial Statements of the Company consisting of:

(a) Report of Independent Registered Public Accounting Firm.

(3) Exhibits:

  2.1

(b)  ReportScheme of Independent RegisteredArrangement between Willis Group Holdings Limited and the Scheme Shareholders (incorporated by reference to Annex A to Willis Group Holdings Limited’s Definitive Proxy Statement on Schedule 14A filed on November 2, 2009 (SEC File No. 001-16503))

  3.1

Memorandum and Articles of Association of Willis Group Holdings Public Accounting FirmLimited Company (incorporated herein by reference to Exhibit No. 3.1 to the Company’s Form 8-K filed on Internal Control over Financial Reporting.January 4, 2010 (SEC File No. 001-16503))

  3.2

Certificate of Incorporation of Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit No. 3.2 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))

  4.1

Senior Indenture dated as of July 1, 2005, and First Supplemental Indenture, dated as of July 1, 2005, among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York (f/k/a JPMorgan Chase Bank, N.A.), as the Trustee, for the issuance of the 5.625% senior notes due 2015 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’s Form 8-K filed on July 1, 2005 (SEC File No. 001-16503))

  4.2

Second Supplemental Indenture dated as of March 28, 2007 among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York, as the Trustee, to the Indenture dated as of July 1, 2005, for the issuance of the 6.200% senior notes due 2017 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’s Form 8-K filed on March 30, 2007 (SEC File No. 001-16503))

  4.3

Third Supplemental Indenture dated as of October 1, 2008 among Willis North America Inc., as the Issuer, Willis Group Holdings Limited, Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of July 1, 2005 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’s Form 10-Q filed on November 10, 2008 (SEC File No. 001-16503))

  4.4

Fourth Supplemental Indenture dated as of September 29, 2009 among Willis North America Inc., as the Issuer, Willis Group Holdings Limited, Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Public Limited Company, as the Guarantors, and The Bank of New York, as the Trustee, to the Indenture dated as of July 1, 2005, for the issuance of the 7.000% senior notes due 2019 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’s Form 8-K filed on September 29, 2009 (SEC File No. 001-16503))

  4.5

Fifth Supplemental Indenture dated as of December 31, 2009 among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, Willis Group Holdings Limited, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))

  4.6

Sixth Supplemental Indenture dated as of December 22, 2010 among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-K filed on February 28, 2011 (SEC File No. 001-16503))

(c) 

  4.7

Consolidated StatementsIndenture, dated as of Operations for eachMarch 17, 2011, among Willis Group Holdings Public Limited Company, as issuer, Willis Netherlands Holdings B.V., Willis Investment Holdings UK Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America Inc., as Guarantors, and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.1 to the three years inCompany’s Form 8-K filed on March 17, 2011 (SEC File No. 001-16503))

  4.8

First Supplemental Indenture, dated as of March 17, 2011, among Willis Group Holdings Public Limited Company, as Issuer, Willis Netherlands Holdings B.V., Willis Investment Holdings UK Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America Inc., as guarantors, and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.2 to the period endedCompany’s Form 8-K filed on March 17, 2011 (SEC File No. 001-16503))

10.1

Credit Agreement, dated as of December 16, 2011, among Trinity Acquisition plc, Willis Group Holdings Public Limited Company, the Lenders party thereto, Barclays Bank PLC, as Administrative Agent, Swing Line Lender and as an L/C Issuer (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 20, 2011 (SEC File No. 001-16503))

10.2

Guaranty Agreement, dated as of December 16, 2011, among Trinity Acquisition plc, Willis Group Holdings Public Limited Company, Barclays Bank PLC, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on December 20, 2011 (SEC File No. 001-16503))

10.3

Deed Poll of Assumption dated as of December 31, 2010.2009 between Willis Group Holdings Limited and Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.4

Willis Group Senior Management Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.5

Willis Group Holdings 2010 North America Employee Share Purchase Plan (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on April 27, 2010 (SEC File No. 001-16503))†

10.6

Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.7

Form of Performance-Based Option Agreement under the Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed on May 10, 2010 (SEC File No. 001-16503))†

10.8

Form of Time-Based Option Agreement under the Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.16 the Company’s Form 10-K filed on February 28, 2011 (SEC File No. 001-16503))†

10.9

Form of Time-Based Restricted Share Unit Award Agreement under the Willis Group Holdings 2001 Share Purchase and Option Plan (for executive officers) (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.10

Form of Restricted Share Unit Award Agreement for Non-employee Directors under the Willis Group Holdings 2001 Share Purchase Option Plan (incorporated by reference to Exhibit 10.14 to the Company’s Form 10-K filed February 29, 2012 (SEC File No. 001-16503))†

10.11

Form of Performance-Based Option Agreement - 2011 Long Term Incentive Program under the Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 3, 2011 (SEC File No. 001-16503))†

10.12

Form of 2011 Long Term Incentive Program Agreement of Restrictive Covenants and Other Obligations (for US employees) (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on May 3, 2011 (SEC File No. 001-16503))†

(d) Consolidated Balance Sheets as of December 31, 2010 and 2009.

(e) 

10.13

Consolidated StatementsForm of 2011 Long Term Incentive Program Agreement of Restrictive Covenants and Other Obligations (for UK employees) (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on May 3, 2011 (SEC File No. 001-16503))†

10.14

Form of 2011 Long Term Incentive Program Cash Flows for eachAward Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 20, 2011 (SEC File No. 001-16503))†

10.15

The Willis Group Holdings 2004 Bonus and Share Plan (incorporated by reference to Exhibit 10.12 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.16

Rules of the three years inWillis Group Holdings Sharesave Plan 2001 for the period ended December 31, 2010.United Kingdom (incorporated by reference to Exhibit 10.13 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.17

The Willis Group Holdings Irish Sharesave Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on May 5, 2010 (SEC File No. 001-16503))†

10.18

The Willis Group Holdings International Sharesave Plan (incorporated by reference to Exhibit 10.15 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.19

Willis Group Holdings 2008 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.16 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.20

Form of Performance-Based Restricted Share Units Award Agreement under the Willis Group Holdings 2008 Share Purchase and Option Plan (for executive officers) (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.21

Form of Performance-Based Restricted Share Unit Award Agreement granted under the Willis Group Holdings 2008 Share Purchase and Option Plan, dated May 2, 2011, between Joseph J. Plumeri and Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit 10.7 to the Company’s Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.22

Form of Performance-Based Option Award Agreement under the Willis Group Holdings 2008 Share Purchase and Option Plan (for executive officers) (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.23

Hilb Rogal and Hamilton Company 2000 Share Incentive Plan (incorporated by reference to Exhibit 10.18 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.24

Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.19 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.25

Form of Time-Based Restricted Share Unit Award Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on August 6, 2010 (SEC File No. 001-16503))†

10.26

Form of Performance-Based Restricted Share Unit Award Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.27

Form of Time-Based Option Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed on August 6, 2010 (SEC File No. 001-16503))†

10.28

Form of Performance-Based Option Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

(f) 

10.29

Consolidated StatementsWillis Group Holdings Public Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s 8-K filed on April 30, 2012 (SEC File No. 001-16503))†

10.30

Form of Changes inTime Based Share Option Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity and Comprehensive Income for eachIncentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.31

Form of Performance Based Share Option Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.32

Rules of the three yearsWillis Group Holdings Public Limited Company 2012 Sharesave Sub-Plan for the United Kingdom to the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan(incorporated by reference to Exhibit 10.32 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.33

Form of Time Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.34

Form of Performance Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.35

Form of Time Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan (for Non-Employee Directors) (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.36

Form of 2012 Long Term Incentive Program Agreement of Restrictive Covenants and Other Obligations (for US employees) (incorporated by reference to Exhibit 10.36 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.37

Form of 2012 Long Term Incentive Program Agreement of Restrictive Covenants and Other Obligations (for UK employees) (incorporated by reference to Exhibit 10.37 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.38

Amended and Restated Willis US 2005 Deferred Compensation Plan (incorporated by reference to Exhibit 10.21 to the Company’s Form 8-K filed on November 20, 2009 (SEC File No. 001-16503))†

10.39

First Amendment to the Amended and Restated Willis U.S. 2005 Deferred Compensation Plan, effective June 1, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.40

Instrument Comprising A Guarantee In Favour of Willis Pension Trustees Limited in Respect of the period ended December 31, 2010.Willis Pension Scheme (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 5 2012 (SEC File No. 001-16503))†

10.41

Schedule of Contributions for the Willis Pension Scheme (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on April 5, 2012 (SEC File No. 001-16503))†

10.42

Form of Deed of Indemnity of Willis Group Holdings Public Limited Company with directors and officers (incorporated by reference to Exhibit 10.20 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

(g) Notes to the Consolidated Financial Statements.
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements or the Notes thereto.
     
(2) Exhibits:
 
 2.1 Scheme of Arrangement between Willis Group Holdings Limited and the Scheme Shareholders (incorporated by reference to Annex A to Willis Group Holdings Limited’s Definitive Proxy Statement on Schedule 14A filed on November 2, 2009)
 3.1 Memorandum and Articles of Association of Willis Group Holdings Public Limited Company (incorporated herein by reference to Exhibit No. 3.1 to the Company’sForm 8-K filed on January 4, 2010)
 3.2 Certificate of Incorporation of Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit No. 3.2 to the Company’sForm 8-K filed on January 4, 2010)
 4.1 Senior Indenture dated as of July 1, 2005, and First Supplemental Indenture, dated as of July 1, 2005, among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York (f/k/a JPMorgan Chase Bank, N.A.), as the Trustee, for the issuance of the 5.625% senior notes due 2015 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’sForm 8-K filed on July 1, 2005)
 4.2 Second Supplemental Indenture dated as of March 28, 2007 among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Public Limited Company, as the Guarantors, and The Bank of New York, as the Trustee, to the Indenture dated as of July 1, 2005, for the issuance of the 6.20% senior notes due 2017 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’sForm 8-K filed on March 30, 2007)
 4.3 Third Supplemental Indenture dated as of October 1, 2008 among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of July 1, 2005 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’sForm 10-Q filed on November 10, 2008)


148

Exhibits
     
(2) Exhibits (continued):
 
 4.4 Fourth Supplemental Indenture dated as of September 29, 2009 among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York, as the Trustee, to the Indenture dated as of July 1, 2005 for the issuance of the 7.00% senior notes due 2019 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’sForm 8-K filed on September 29, 2009)
 4.5 Fifth Supplemental Indenture dated as of December 31, 2009 among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, Willis Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Company’sForm 8-K filed on January 4, 2010)
 4.6 Sixth Supplemental Indenture dated as of December 22, 2010 among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition plc, TA IV Limited and Willis Group Limited, as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of July 1, 2005*
 4.7 Indenture dated as of March 6, 2009, among Trinity Acquisition plc, as Issuer, Willis Group Holdings Public Limited Company, Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, TA IV Limited, Willis Group Limited and Willis North America Inc., as the Guarantors, and The Bank of New York Mellon, as the Trustee; for the issuance of 12.875% senior notes due 2016 (incorporated by reference to Exhibit 4.2 to Willis Group Holdings Limited’sForm 8-K filed on March 12, 2009)
 4.8 First Supplemental Indenture dated as of November 18, 2009 among Trinity Acquisition plc, as the Issuer, Willis Group Holdings Public Limited Company, Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, TA IV Limited, Willis Group Limited and Willis North America Inc., as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of March 6, 2009 (incorporated by reference to Exhibit No. 4.3 to the Company’sForm 8-K filed on January 4, 2010)
 4.9 Second Supplemental Indenture dated as of December 31, 2009 among Trinity Acquisition plc, as the Issuer, Willis Group Holdings Public Limited Company, Willis Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, TA IV Limited, Willis Group Limited and Willis North America Inc., as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of March 6, 2009 (incorporated by reference to Exhibit No. 4.2 to the Company’sForm 8-K filed on January 4, 2010)
 4.10 Third Supplemental Indenture dated as of March 18, 2010 among Trinity Acquisition plc, as the Issuer, Willis Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, TA IV Limited, Willis Group Limited and Willis North America Inc., as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of March 6, 2009 (incorporated by reference to Exhibit No. 10.1 to the Company’sForm 8-K filed on March 23, 2010)
 4.11 Fourth Supplemental Indenture dated as of December 22, 2010 among Trinity Acquisition plc, as the Issuer, Willis Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, TA IV Limited, Willis Group Limited and Willis North America Inc., as the Guarantors, and The Bank of New York Mellon, as the Trustee, to the Indenture dated as of March 6, 2009*

149

Willis Group Holdings plc
     
(2) Exhibits (continued):
 
 4.12 Note Purchase Agreement dated February 10, 2009, among Trinity Acquisition plc, as Issuer, Willis Group Holdings Public Limited Company, Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, TA IV Limited, Willis Group Limited and Willis North America Inc., as the Guarantors, for the purchase by GSMP V Onshore International, Ltd., GSMP V Offshore International, Ltd., GSMP V Institutional International, Ltd. and GS Mezzanine Partners V Institutional L.P. of $500,000,000 aggregate principal amount of the Issuer’s 12.875% senior notes due 2016 (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Limited’sForm 8-K filed on March 12, 2009)
 4.13 Registration Rights Agreement dated as of March 6, 2009, among Trinity Acquisition plc, as Issuer, Willis Group Holdings Public Limited Company, Willis Investment UK Holdings Limited, TA I Limited, TA II Limited, TA III Limited, TA IV Limited, Willis Group Limited and Willis North America Inc., as the Guarantors, and GSMP V Onshore International, Ltd., GSMP V Offshore International, Ltd., GSMP V Institutional International, Ltd. and GS Mezzanine Partners V Institutional L.P., as Initial Purchasers, granting registration rights for the 12.875% senior notes due 2016 (incorporated by reference to Exhibit 4.3 to Willis Group Holdings Limited’sForm 8-K filed on March 12, 2009)
 10.1 Credit Agreement, dated as of October 1, 2008, among Willis North America Inc., Willis Group Holdings Public Limited Company, the Lenders party thereto, Bank of America, N.A., as Administrative Agent and Swing Line Lender and Banc of America Securities LLC, as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.1 to Willis Group Holdings Limited’sForm 8-K filed on October 6, 2008)
 10.2 First Amendment dated November 14, 2008 to the Credit Agreement, dated as of October 1, 2008, among Willis North America Inc., Willis Group Holdings Public Limited Company, the Lenders party thereto, Bank of America, N.A., as Administrative Agent and Swing Line Lender and Banc of America Securities LLC, as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.1 to Willis Group Holdings Limited’sForm 8-K filed on November 25, 2008)
 10.3 Second Amendment dated February 4, 2009 to the Credit Agreement, dated as of October 1, 2008, among Willis North America Inc., Willis Group Holdings Public Limited Company, the Lenders party thereto, Bank of America, N.A., as Administrative Agent and Swing Line Lender and Banc of America Securities LLC, as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.1 to Willis Group Holdings Limited’sForm 8-K filed on February 6, 2009)
 10.4 Third Amendment dated October 28, 2009 to the Credit Agreement, dated as of October 1, 2008, among Willis North America Inc., Willis Group Holdings Public Limited Company, the Lenders party thereto, Bank of America, N.A., as Administrative Agent and Swing Line Lender and Banc of America Securities LLC, as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.1 to Willis Group Holdings Limited’sForm 8-K filed on November 2, 2009)
 10.5 Fourth Amendment dated as of November 18, 2009 to the Credit Agreement, dated as of October 1, 2008, among Willis North America Inc., Willis Group Holdings Public Limited Company, the Lenders party thereto, Bank of America, N.A., as Administrative Agent and Swing Line Lender, and Banc of America Securities LLC, as Sole Lead Arranger (incorporated by reference to Exhibit 10.3 to the Company’sForm 8-K filed on January 4, 2010)
 10.6 Credit Agreement, dated as of August 9, 2010, among Willis North America, Inc., Willis Group Holdings Public Limited Company, Bank of America, N.A., as Administrative Agent and L/C Issuer and Banc of America Securities, LLC as Sole Lead Arranger and Sole Book Manager (incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed on August 11, 2010)
 10.7 Guaranty Agreement, dated as of August 9, 2010, among Willis North America, Inc., Willis Group Holdings Public Limited Company, Bank of America, N.A., as Administrative Agent and L/C Issuer and Banc of America Securities, LLC as Sole Lead Arranger and Sole Book Manager (incorporated by reference to Exhibit 10.2 to the Company’sForm 8-K filed on August 11, 2010)

150

Exhibits
     
(2) Exhibits (continued):
 
 10.8 Guaranty Agreement, dated as of October 1, 2008, among Willis North America Inc., Willis Group Holdings Public Limited Company, the other Guarantors party thereto and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed on January 4, 2010)
 10.9 Supplement to Guaranty dated as of December 31, 2009 under the Guaranty Agreement, dated as of October 1, 2008, among Willis North America Inc., Willis Group Holdings Public Limited Company, the other Guarantors party thereto and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company’sForm 8-K filed on January 4, 2010)
 10.10 Deed Poll of Assumption dated as of December 31, 2009 between Willis Group Holdings Limited and Willis Group Limited Public Limited Company (incorporated by reference to Exhibit 10.4 to the Company’sForm 8-K filed on January 4, 2010)†
 10.11 Willis Group Senior Management Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’sForm 8-K filed on January 4, 2010)†
 10.12 Willis Group Holdings 2001 North America Employee Share Purchase Plan (incorporated by reference to Exhibit 10.8 to the Company’sForm 8-K filed on January 4, 2010)†
 10.13 Willis Group Holdings 2010 North America Employee Share Purchase Plan (incorporated by reference to Exhibit 10.3 to the Company’sForm 8-K filed on April 27, 2010)†
 10.14 Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.9 to the Company’sForm 8-K filed on January 4, 2010)†
 10.15 Form of Performance-Based Option Agreement under the Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.2 to the Company’sForm 10-Q filed on May 10, 2010)†
 10.16 Form of Time-Based Option Agreement under the Willis Group Holdings 2001 Share Purchase and Option Plan†*
 10.17 Form of Time-Based Restricted Share Award Agreement under the Willis Group Holdings 2001 Share Purchase and Option Plan†*
 10.18 The Willis Group Holdings 2004 Bonus and Share Plan (incorporated by reference to Exhibit 10.12 to the Company’sForm 8-K filed on January 4, 2010)†
 10.19 Rules of the Willis Group Holdings Sharesave Plan 2001 for the United Kingdom (incorporated by reference to Exhibit 10.13 to the Company’sForm 8-K filed on January 4, 2010)†
 10.20 The Willis Group Holdings Irish Sharesave Plan (incorporated by reference to Exhibit 10.1 to the Company’sForm 10-Q filed on May 5, 2010)†
 10.21 The Willis Group Holdings International Sharesave Plan (incorporated by reference to Exhibit 10.15 to the Company’sForm 8-K filed on January 4, 2010)†
 10.22 Willis Group Holdings 2008 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.16 to the Company’sForm 8-K filed on January 4, 2010)†
 10.23 Form of Performance-Based Restricted Share Units Award Agreement under the Willis Group Holdings 2008 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.17 to the Company’sForm 8-K filed on January 4, 2010)†
 10.24 Form of Performance-Based Option Award Agreement under the Willis Group Holdings 2008 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.3 to the Company’sForm 10-K filed on May 10, 2010)†
 10.25 Hilb Rogal and Hamilton Company 2000 Share Incentive Plan (incorporated by reference to Exhibit 10.18 to the Company’sForm 8-K filed on January 4, 2010)†
 10.26 Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.19 to the Company’sForm 8-K filed on January 4, 2010)†

151

Willis Group Holdings plc
     
(2) Exhibits (continued):
 
 10.27 Form of Time-Based Restricted Share Unit Award Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’sForm 10-Q filed on August 6, 2010)†
 10.28 Form of Performance-Based Restricted Share Unit Award Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’sForm 10-Q filed on August 6, 2010)†
 10.29 Form of Time-Based Option Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’sForm 10-Q filed on August 6, 2010)†
 10.30 Form of Performance-Based Option Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’sForm 10-Q filed on August 6, 2010)†
 10.31 Amended and Restated Willis US 2005 Deferred Compensation Plan (incorporated by reference to Exhibit 10.21 to the Company’sForm 8-K filed on November 20, 2009)†
 10.32 Form of Deed of Indemnity of Willis Group Limited Public Limited Company with directors and officers (incorporated by reference to Exhibit 10.20 to the Company’sForm 8-K filed on January 4, 2010)†
 10.33 Form of Indemnification Agreement of Willis North America Inc. with directors and officers (incorporated by reference to Exhibit 10.21 to the Company’sForm 8-K filed on January 4, 2010)†
 10.34 Letter dated as of December 30, 2009 regarding Amended and Restated Employment Agreement, dated as of March 25, 2001 (as amended), between Willis Group Holdings Limited, Willis North America Inc. and Joseph J. Plumeri (incorporated by reference to Exhibit 10.22 to the Company’sForm 8-K filed on January 4, 2010)†
 10.35 2010 Amended and Restated Employment Agreement, dated as of January 1, 2010, by and between Willis North America, Inc. and Joseph J. Plumeri (incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed on January 22, 2010)†
 10.36 Form of Employment Agreement dated March 13, 2007 between Willis Limited and Grahame J. Millwater (incorporated by reference to Exhibit No. 10.2 to Willis Group Holdings Limited’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2007)†
 10.37 Offer Letter dated June 22, 2010 and Form of Employment Agreement between Willis North America, Inc. and Michael K. Neborak (incorporated by reference to Exhibit 10.1 to the Company’sForm 8-K filed on June 23, 2010)†
 10.38 Agreement of Restrictive Covenants and Other Obligations dated as of August 2, 2010 between the Company and Michael K. Neborak†*
 10.39 Form of Employment Agreement dated March 13, 2007, between Willis Limited and Patrick C. Regan (incorporated by reference to Exhibit 10.3 to Willis Group Holdings Limited’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2007)†
 10.40 Form of Employment Agreement dated January 24, 1994, between Willis Faber North America, Inc. and Peter C. Hearn (incorporated by reference to Exhibit No. 10.28 to Willis Group Holdings Limited’s Annual Report onForm 10-K for the year ended December 31, 2007)†
 10.41 Agreement of Restrictive Covenants and Other Obligations dated as of May 6, 2008 between the Company and Peter C. Hearn (incorporated by reference to Exhibit 10.2 to Willis Group Holdings Limited’sForm 8-K filed on June 26, 2008)†
 10.42 Employment Agreement, dated July 17, 2006, and as amended between, Willis Limited and Stephen E. Wood (incorporated by reference to Exhibit 10.35 to the Company’sForm 10-K filed on March 1, 2010)†
 10.43 Employment Agreement, dated September 7, 2010, between Willis North America, Inc. and Martin J. Sullivan (incorporated by reference to Exhibit 10.1 to theForm 10-Q filed November 5, 2010)†

152

Exhibits
     
(2) Exhibits (continued):
 
 10.44 Form of Willis Retention Award Letter†*
 10.45 Investment and Share Purchase Agreement dated as of November 18, 2009 by and among Willis Europe BV, Astorg Partners, Soleil, Alcee, the Lucas family shareholders, the Gras family shareholders, key managers of Gras Savoye & Cie and other minority shareholders of Gras Savoye (incorporated by reference to Exhibit 10.37 to the Company’sForm 10-K filed on March 1, 2010)
 10.46 Shareholders Agreement dated as of December 17, 2009 by and among Willis Europe BV, Astorg Partners, Soleil, Alcee, the Lucas family shareholders, the Gras family shareholders, key managers of Gras Savoye & Cie and other minority shareholders of Gras Savoye (incorporated by reference to Exhibit 10.38 to the Company’sForm 10-K filed on March 1, 2010)
 10.47 Amended and Restated Assurance of Discontinuance between the Attorney General of the State of New York and the Company on behalf of itself and its subsidiaries named therein and the Amended and Restated Stipulation between the Superintendent of Insurance of the State of New York and the Company on behalf of itself and the subsidiaries named therein, effective as of February 11, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K filed on February 17, 2010)
 10.48 Agreement between the Attorney General of the State of Connecticut and the Insurance Commissioner of the State of Connecticut and Hilb Rogal & Hobbs Company and its subsidiaries and affiliates dated August 31, 2005 (incorporated by reference to Exhibit 10.1 to the Current Report filed by Hilb Rogal & Hobbs Company onForm 8-K dated August 31, 2005, FileNo. 0-15981)
 10.49 Stipulation and Consent Order between the Insurance Commissioner of the State of Connecticut and Hilb Rogal & Hobbs Company and Hilb Rogal & Hobbs of Connecticut, LLC dated August 31, 2005 (incorporated by reference to Exhibit 10.2 to Current Report filed by the Hilb Rogal & Hobbs Company onForm 8-K dated August 31, 2005, FileNo. 0-15981)
 21.1 List of subsidiaries*
 23.1 Consent of Deloitte LLP*
 31.1 Certification Pursuant toRule 13a-14(a)*
 31.2 Certification Pursuant toRule 13a-14(a)*
 32.1 Certification Pursuant to 18 USC. Section 1350*
 32.2 Certification Pursuant to 18 USC. Section 1350*
 101.INS** XBRL Instance Document
 101.SCH** XBRL Taxonomy Extension Schema Document
 101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document
 101.DEF** XBRL Taxonomy Extension Definition Linkbase Document
 101.LAB** XBRL Taxonomy Extension Label Linkbase Document
 101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document

10.43

Form of Indemnification Agreement of Willis North America Inc. with directors and officers (incorporated by reference to Exhibit 10.21 to the Company’s Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.44

2010 Amended and Restated Employment Agreement, dated as of January 1, 2010, by and between Willis North America, Inc. and Joseph J. Plumeri (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 22, 2010 (SEC File No. 001-16503))†

10.45

First Amendment to Employment Agreement, dated as of October 16, 2012, by and between Willis North America Inc., a subsidiary of Willis Group Holdings Public Limited Company, and Joseph J. Plumeri (incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed on October 19, 2012 (SEC File No. 001-16503))†

10.46

Form of Performance Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan, dated May 7, 2012 between Joseph J. Plumeri and Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.47

Offer Letter dated June 22, 2010 and Form of Employment Agreement between Willis North America, Inc. and Michael K. Neborak (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 23, 2010 (SEC File No. 001-16503))†

10.48

Agreement of Restrictive Covenants and Other Obligations dated as of August 2, 2010 between the Company and Michael K. Neborak (incorporated by reference to Exhibit 4.1 to Willis Group Holdings Public Limited Company’s Form 10-K filed on February 28, 2011 (SEC File No. 001-16503))†

10.49

Second Restated Employment Agreement, effective as of December 3, 2010, between Willis North America Inc. and Victor Krauze (incorporated by reference to Exhibit 10.45 to the Company’s Form 10-K filed on February 29, 2012 (SEC File No. 001-16503))†

10.50

First Amendment to Offer of Promotion dated as of October 16, 2012, by and between Willis North America Inc., a subsidiary of Willis Group Holdings Public Limited Company, and Victor P. Krauze. (incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K filed on October 19, 2012)†

10.51

Employment Agreement, dated as of October 16, 2012, by and between Willis Group Holdings Public Limited Company and Dominic Casserley (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 19, 2012)†

10.52

Contract of Employment, dated as of February 28, 2011 by and between Willis Limited, a subsidiary of Willis Group Holdings Public Limited Company, and Stephen P. Hearn (incorporated by reference to Exhibit 10.52 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.53

Amendment, dated July 19, 2012, to the Contract of Employment, dated as of February 28, 2011 by and between Willis Limited, a subsidiary of Willis Group Holdings Public Limited Company, and Stephen P. Hearn (incorporated by reference to Exhibit 10.53 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.54

Contract of Employment, dated as of October 16, 2012 by and between Willis Limited, a subsidiary of Willis Group Holdings Public Limited Company, and Stephen P. Hearn (incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed on October 19, 2012)†

10.55

Contract of Employment, dated as of December 17, 2007 by and between Willis Limited, a subsidiary of Willis Group Holdings Public Limited Company, and Tim Wright (incorporated by reference to Exhibit 10.55 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.56

Amendment, dated July 19, 2012, to the Contract of Employment, dated as of December 17, 2007 by and between Willis Limited, a subsidiary of Willis Group Holdings Public Limited Company, and Tim Wright (incorporated by reference to Exhibit 10.56 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.57

Confidentiality Agreement dated as of January 17, 2008 between the Willis Group Limited, a subsidiary of Willis Group Holdings Public Limited Company, and Tim Wright (incorporated by reference to Exhibit 10.57 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.58

Investment and Share Purchase Agreement dated as of November 18, 2009 by and among Willis Europe BV, Astorg Partners, Soleil, Alcee, the Lucas family shareholders, the Gras family shareholders, key managers of Gras Savoye & Cie and other minority shareholders of Gras Savoye (incorporated by reference to Exhibit 10.37 to the Company’s Form 10-K filed on March 1, 2010 (SEC File No. 001-16503))

10.59

Shareholders Agreement dated as of December 17, 2009 by and among Willis Europe BV, Astorg Partners, Soleil, Alcee, the Lucas family shareholders, the Gras family shareholders, key managers of Gras Savoye & Cie and other minority shareholders of Gras Savoye (incorporated by reference to Exhibit 10.38 to the Company’s Form 10-K filed on March 1, 2010 (SEC File No. 001-16503))

10.60

Nomination Agreement, dated April 25, 2013, by and among Willis Group Holdings Public Limited Company, ValueAct Capital Master Fund, L.P., VA Partners I, LLC, ValueAct Capital Management, L.P., ValueAct Capital Management, LLC, ValueAct Holdings, L.P., ValueAct Holdings GP, LLC and their respective affiliates (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 26, 2013 (SEC File No. 001-16503))

12.1

Statement regarding Computation of Ratio of Earnings to Fixed Charges. (incorporated by reference to Exhibit 12.1 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))

21.1

List of subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))

23.1

Consent of Deloitte LLP (incorporated by reference to Exhibit 23.1 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))

31.1

Certification Pursuant to Rule 13a-14(a)*

31.2

Certification Pursuant to Rule 13a-14(a)*

32.1

Certification Pursuant to 18 USC. Section 1350 (incorporated by reference to Exhibit 32.1 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))

32.2

Certification Pursuant to 18 USC. Section 1350 (incorporated by reference to Exhibit 32.2 to the Company’s Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))

*Filed herewith.
†Management contract or compensatory plan or arrangement.
**Pursuant to Rule 406T ofRegulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections

153

SIGNATURES

Willis Group Holdings plc
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Willis Group Holdings PLC
(Registrant)

WILLIS GROUP HOLDINGS PLC

(REGISTRANT)

By: 
/s/  Michael K. Neborak
Michael K. Neborak
Group Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: February 25, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated this 25th day of February 2011.
By: 

/s/    Dominic Casserley        

 
/s/  

Dominic Casserley

Joseph J. Plumeri


Joseph J. Plumeri
Chairman andGroup Chief Executive Officer (Principal

(Principal Executive Officer)

/s/  William W. Bradley
William W. Bradley
Director
/s/  Joseph A. Califano, Jr.

Joseph A. Califano, Jr.
Director
Anna C. Catalano
Director
/s/  Sir Roy Gardner

Sir Roy Gardner
Director
/s/  The Rt. Hon. Sir Jeremy Hanley, KCMG
The Rt. Hon. Sir Jeremy Hanley, KCMG
Director
/s/  Robyn S. Kravit

Robyn S. Kravit
Director
/s/  Jeffrey B. Lane
Jeffrey B. Lane
Director
/s/  Wendy E. Lane

Wendy E. Lane
Director
/s/  James F. McCann
James F. McCann
Director
/s/  Douglas B. Roberts

Douglas B. Roberts
Director
/s/  Michael J. Somers
Michael J. Somers
Director


154Date: April 26, 2013

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