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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________
FORM 10-K/A

Amendment No. 1

(Mark One)

10-K
x
(Mark One)
þANNUAL 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, 2013
or
oTRANSITION 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

(Jurisdiction of

incorporation or organization)

 

98-0352587
(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
 Ordinary Shares, nominal value $0.000115 per share
 
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 xþ     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 xþ

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 xþ     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 of Regulation 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 xþ     No ¨o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation 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 this Form 10-K or any amendment to this Form 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 definition of ‘large accelerated filer’, ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Exchange Act.

Large accelerated filerxAccelerated filer¨
Large accelerated filer þ
Accelerated filer o
Non-accelerated filero
Smaller reporting company o
 ¨  (Do(Do not check if a smaller reporting company) Smaller reporting company¨


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

The aggregate market value of the voting common equity held by non-affiliates of the Registrant, computed by reference to the last reported price at which the Registrant’s common equity was sold on June 30, 20122013 (the last day of the Registrant’s most recently completed second quarter) was $6,321,819,520.

$7,147,793,450.

As of April 24, 2013,February 14, 2014, there were outstanding 173,924,866179,021,595 ordinary shares, nominal value $0.000115 per share, of the Registrant.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table

Portions of Contents

Part III will be incorporated by reference in accordance with Instruction G(3) to Form 10-K no later than April 30, 2014.

Explanatory Note

  i 


Table of Contents

Certain Definitions
The following definitions apply throughout this annual report unless the context requires otherwise:

PART III

‘We’, ‘Us’, ‘Company’, ‘Group’, ‘Willis’, or ‘Our’Willis Group Holdings and its subsidiaries.
‘Willis Group Holdings’ or ‘Willis Group Holdings plc’Willis Group Holdings Public Limited Company, a company organized under the laws of Ireland.
‘shares’The ordinary shares of Willis Group Holdings Public Limited Company, nominal value $0.000115 per share.
‘HRH’Hilb Rogal & Hobbs Company, a 100 percent owned subsidiary acquired in 2008.


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  1Page
 

Item 10

Forward-Looking Statements
4
PART I
 

Item 1
—Business
6
Item 1A
—Risk Factors
15
Item 1B
—Unresolved Staff Comments
23
Item 2
—Properties
24
Item 3
—Legal Proceedings
24
Item 4
—Mine Safety Disclosures
24
PART II
Item 5
—Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
25
Item 6
—Selected Financial Data
28
Item 7
—Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 7A
—Quantitative and Qualitative Disclosures about Market Risk
67
Item 8
—Financial Statements and Supplementary Data
71
Item 9
—Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
197
Item 9A
—Controls and Procedures
197
Item 9B
—Other Information
199
PART III
Item 10
—Directors, Executive Officers and Corporate Governance

200
Item 11
 1

Item 11

—Executive Compensation

201
Item 12
 14

Item 12

—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

201
Item 13
 62

Item 13

—Certain Relationships and Related Transactions, and Director Independence

201
Item 14
 66

Item 14

—Principal Accounting Fees and Services

201
67
PART IV
 

PART IVItem 15

 71

Item 15

—Exhibits, Financial Statement Schedules

71
202

Signatures

77
208



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Explanatory Note

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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 or regulatory conditions on our global business operations;
the impact of current global economic conditions on our results of operations and financial condition, including as a result of those associated with the ongoing Eurozone crisis, any insolvencies of or other difficulties experienced by our clients, insurance companies or financial institutions;
our ability to implement and realize anticipated benefits of any expense reduction initiative, charge or any revenue generating initiatives;
our ability to implement and fully realize anticipated benefits of our new growth strategy and revenue generating and cost-saving initiatives;
volatility or declines in insurance markets and premiums on which our commissions are based, but which we do not control;
our ability to develop and implement technology solutions and invest in innovative product offerings in an efficient and competitive manner;
our ability to continue to manage our significant indebtedness;
our ability to compete effectively in our industry, including any impact if we continue to refuse to accept contingent commissions to date from carriers in the non-Human Capital areas of our retail brokerage business and developing new products and services;
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;
our ability to retain key employees and clients and attract new business;
the timing or ability to carry out share repurchases and redemptions;
the timing or ability to carry out refinancing 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;
fluctuations in our earnings as a result of potential changes to our valuation allowance(s) on our deferred tax assets;
any fluctuations in exchange and interest rates that could affect expenses and revenue;
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;
rating agency actions, including a downgrade to our credit rating, that could inhibit our ability to borrow funds or the pricing thereof and in certain circumstances cause us to offer to buy back some of our debt;
a significant decline in the value of investments that fund our pension plans or changes in our pension plan liabilities or funding obligations;
our ability to achieve the expected strategic benefits of transactions, including any growth from associates;
further impairment of the goodwill of one of our reporting units, in which case we may be required to record additional significant charges to earnings;
our ability to receive dividends or other distributions in needed amounts from our subsidiaries;
changes in the tax or accounting treatment of our operations and fluctuations in our tax rate;
any potential impact from the US healthcare reform legislation;
our involvement in and the results of any regulatory investigations, legal proceedings and other contingencies;
underwriting, advisory or reputational risks associated with non-core operations as well as the potential significant impact our non-core operations (including the Willis Capital Markets & Advisory operations) can have on our financial results;

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About Willis

our exposure to potential liabilities arising from errors and omissions and other potential claims against us; and
the interruption or loss of our information processing systems, data security breaches 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 “Registrant” orCompany
Willis Group Holdings is the “Company” and, together with our subsidiaries, “we,” “us” or “our”) is filing this Amendment No. 1 to the Annual Report on Form 10-K (this “Amendment”) to our Annual Report on Form 10-Kultimate holding company for the fiscal year endedGroup. 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 December 31, 2012 (the “Original Form 10-K”) that was originally filed2009, the common shares of Willis-Bermuda were canceled, the Willis-Bermuda common shareholders received, on a one-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 20 3124 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”‘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 at 1-800-SEC-0330 for information on February 28, 2013.

This Amendmentthe 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 being filed solely to include the information required in Part III (Items 10, 11, 12, 13 and 14)www.sec.gov.

The Company makes available, free of charge through our website, www.willis.com, our annual report on Form 10-K, that was previously omitted from the Originalour quarterly reports on Form 10-K in reliance10-Q, our proxy statement, current reports on General Instruction G(3)Form 8-K and Forms 3, 4, and 5 filed on behalf of directors and executive officers, as well as any amendments to Form 10-K. General Instruction G(3) to Form 10-K allows such omitted information to bethose reports filed as an amendmentor furnished pursuant to the Original Form 10-KSecurities 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, from the Company’s definitive proxy statement which involves the election of directorsinformation on our website is not later than 120 days after the end of the fiscal year covered by the Original Form 10-K. As of the datea part of this Amendment, the Company does not intend to file a 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 occurred 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

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 Amendment.

i

PART III

Item 10—Directors, Executive Officers and Corporate Governance

Directors

The following table sets forth, as of April 24, 2013, the name, age and 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 Nominating Guidelines, Audit Committee Charter, Risk Committee Charter, Compensation Committee Charter and Corporate Governance and Nominating Committee (the “Governance Committee”) has reviewedCharter are available on our website, www.willis.com, in the needsInvestor Relations-Corporate Governance section, or upon request. Requests for copies of these documents should be directed in writing to the Board and the qualities, experience and performanceCompany Secretary c/o Office of each director.

At the Governance Committee’s recommendation, the Board has renominated all current directors except Joseph J. Plumeri, our former CEO ofGeneral Counsel, Willis Group Holdings plc, who is retiringPublic Limited Company, One World Financial Center, 200 Liberty Street, New York, NY 10281.


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

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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 Chairmanan advisor and insurance broker, we act as a directoran intermediary between our clients and insurance carriers by advising our clients on July 7, 2013,their risk management requirements, helping clients determine the best means of managing risk, and Joseph A. Califanonegotiating and Jeffrey B. Lane, who have informedplacing insurance with insurance carriers through our global distribution network.
We assist clients in the Boardassessment of their respective decision notrisks, advise on the best ways of transferring suitable risk to stand for re-electionthe global insurance and reinsurance markets and then execute the transactions at the Company’s 2013 Annual General Meetingmost 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 Shareholders. In addition, the Board has nominated Jeffrey W. Ubben for electionservices to help them to identify and control their risks. These services range from strategic risk consulting (including providing actuarial analysis), to a variety of due diligence services, 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

Nomineesprovision of practical on-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 Election

The Company isour own account.

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. Commission levels generally follow the same trend as premium levels as they are derived from a leading globalpercentage of the premiums paid by the insureds. Fluctuations in these premiums charged by the insurance brokercarriers can therefore have a direct and risk advisor. Through its subsidiaries, Willis developspotentially material impact on our results of operations.
We and delivers professional insurance, reinsurance, risk management, financialour associates serve a diverse base of clients including major multinational and human resources consultingmiddle-market companies in a variety of industries, as well as public institutions and actuarial services to corporations, public entities and institutions around the world.individual clients. Many of our client relationships span decades. We have approximately 21,00021,700 employees around the world (including approximately 3,4003,700 at our associate companies) and a network of in excess of 400 offices in approximatelynearly 120 countries.

Directors

We believe we are responsibleone 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.

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Business Strategy
Today we operate in attractive growth markets with a diversified platform across geographies, industries, segments and lines of business. We aim to become the risk advisor, insurance and reinsurance broker of choice globally.
We will achieve this by being completely focused on:
where we compete and that means the areas where we can succeed by:
◦Geography - we will re-balance our business mix towards faster growing geographies, with both developed and developing markets
◦Client Segmentation - we will segment our client offering to provide distinct offerings to different types of client, focusing on the value we provide to our clients
◦Sector - we will build business lines around our industry and sector strength e.g. Human Capital and Employee Benefits.
How we compete which will be centered on meeting the needs of our client by:
◦Connection - leading to more cross-selling
◦Innovation - competing on analytics and innovation
◦Investment - focusing on earnings accretion, competitive position and fit
Through these strategies we aim to grow revenue with positive operating leverage, grow cash flows and generate compelling returns for overseeinginvestors.

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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. For information regarding revenues and operating income per segment, see Note 28 of the Company’sConsolidated 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 over 150 countries, primarily from offices in the United Kingdom, although we also serve clients from offices in the United States, Continental Europe, Asia and Australia.

The Global business is divided into:

Willis Re;

Faber Global;

Specialty; and

Willis Capital Markets & Advisory.

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.

Faber Global

Our Faber Global unit provides facultative and wholesale solutions for property and casualty, health and specialty insurances to cedants and independent wholesaler brokers worldwide who want solutions provided through the London, European and Bermudian markets.

Specialty

During first quarter 2014 we announced changes to the structure of our UK-based insurance operations, combining our Global Specialty businesses with the Willis UK retail business to create a market leading client proposition.
This combined unit has strong global positions in Aerospace, Energy, Marine, Construction, Financial and Executive Risks as well as Financial Solutions, wholesale and facultative.

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

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airlines. The specialist Inspace division is also prominent in serving the space industry by providing insurance and risk management services to approximately 30 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.

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, financial institutions and professional firms.

Construction, Property and Casualty
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 a number of the leading global construction firms. The Construction practice is now tied to Willis' specialist internal unit providing our retail colleagues' clients with access to global insurance markets, providing structuring and placing services supported by specialist knowledge and expertise across a variety of industries on a global basis in large and complex property and casualty risk exposures.

Financial Solutions
Financial Solutions is a global business unit which incorporates our Political and Credit Risk businesses, as well as Structured Finance and Project Risk Consulting teams. It also comprises specialist Trade Credit, Contingent Aviation and Mortgage teams.

Fine Art, Jewelry and Specie
The Fine Art, Jewelry and Specie unit provides specialist risk management, insurance and reinsurance services to fine art, diamond and jewelry businesses and armored car operators.

Special Contingency Risks
Special Contingency Risks specializes in people risk solutions using a combination of risk management, kidnap and ransom and personal accident services and products to meet the needs of corporations and private clients.

Hughes-Gibb
The Hughes-Gibb unit principally services the insurance and reinsurance needs of thoroughbred horse racing and horse breeding industry and of the agri-business sector, covering livestock breeders, aquaculture & agriculture industries.

UK retail operations
Our UK retail operations provide risk management, insurance brokerage and related risks services to a wide array of industry and client segments.



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Willis Capital Markets & Advisory

Willis Capital Markets & Advisory, with offices in New York and London, provides advice to companies involved in the insurance and reinsurance industry 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 large 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 segments in the United States and Canada. With around 100 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.

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 nearly 12,000 clients including approximately 20 percent of the Engineering News Record Top 400 contractors (a listing of the largest 400 North American contractors based on reported revenue). In addition, this practice group has expertise in professional liability insurance, controlled insurance programs for large projects and insurance for national homebuilders.

Human Capital
Willis Human Capital, fully integrated into the North America platform, is the Group's 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 cyber 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. Through our Loan Protector business, a specialty business acquired as part of the HRH business, this group also works with financial institutions to confirm their loans are properly insured and their interests are adequately protected.

Other industry practice groups
Other industry practice groups include Healthcare, serving the professional liability and other insurance and risk management needs of private and not-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.

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International
Our International business comprises our operations in Western Europe, Central and Eastern Europe, Asia, Australasia, the Middle East, South Africa and Latin America.
Our offices provide services to businesses locally in nearly 120 countries around the globeworld, making use of local expertise as well as 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.
As part of our on-going strategy, we continue to look for opportunities to strengthen our International market share through acquisitions and strategic investments. 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, 2013 were GS & Cie Groupe ('Gras Savoye'), a French organization (30 percent holding) and Al-Futtaim Willis Co. LLC, organized under the laws of 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.
We believe the combined total revenues of our International subsidiaries and associates provide an indication of the spread and capability of our International network. These operations generated approximately 30 percent of the Group’s total consolidated commissions and fees in 2013.
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 2013. Additionally, we place insurance with approximately 2,500 insurance carriers, none of which individually accounted for more than 10 percent of the total premiums we placed on behalf of our clients in 2013.
Competition
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 major providers of global risk management services, as well as with numerous specialist, regional and local firms. Competition for business is intense in all of our business lines and in every insurance market, and Marsh & McLennan and Aon 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, some insureds have been retaining a greater proportion of their risk portfolios than previously. Industrial and commercial companies increasingly rely 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 buy 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.
A particular area of competitive pressure is market-derived income (MDI), which is revenue that insurance intermediaries increasingly have been obtaining from insurance carriers. Contingent commissions are one type of MDI where insurance carriers remunerate intermediates based on either the volume or profitability of risks placed with the carrier. While we have recently stated that we will apply a set of criteria to evaluate on a case-by-case basis whether we will take MDI, and in what form, to date we have not accepted contingent commissions from carriers other than in our Human Capital practice. To our knowledge, we are the only insurance broker that takes this stance. To the extent that our competitors accept volume- or profit-based continent commissions we may suffer lower revenue, reduced operating margins, and loss of market share which could materially and adversely affect our business.



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About Willis

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. Our three most significant regulatory regions are described below:
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 their fiduciary duties. This requires highly-skilled individuals with various qualities, attributesthe EU single market and professional experience. The Governance Committee believescustomer protection aims. Each EU member state in which we operate is required to ensure that the slateinsurance 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.
United Kingdom
In the United Kingdom, our business was previously regulated by the Financial Services Authority ('FSA'). Under legislation enacted by the UK Parliament, the regulation of nomineesour business transitioned from the FSA to the Financial Conduct Authority ('FCA') on April 1, 2013. The FCA has a wide range of rule-making, investigatory and enforcement powers, and conducts monitoring visits to assess our compliance with regulatory requirements.
The FCA has a sole strategic objective: to protect and enhance confidence in the UK financial system. Its operational objectives are to: secure an appropriate degree of protection for consumers; promote efficiency and choice in the market for financial services; and protect and enhance the integrity of the UK financial system. The FCA also has a duty to act in a way that promotes competition, and to minimize the extent to which regulated businesses may be used for a purpose connected with financial crime. Finally, the FCA has new powers in product intervention. For instance, it can instruct firms to withdraw or amend misleading financial promotions.
Other
Certain of our activities are governed by other regulatory bodies, such as investment and securities licensing authorities. In the United States, our Willis Capital Markets & Advisory business 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 Capital Markets & Advisory Limited, which is authorized and regulated by the FCA.
Our failure, or that of our employees, to satisfy the regulators that we comply 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.

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Employees
As of December 31, 2013 we had approximately 18,000 employees worldwide of whom approximately 3,700 were employed in the United Kingdom and 6,100 in the United States, with the balance being employed across the rest of the world. In addition, our associates had approximately 3,700 employees, all of whom were located outside the United Kingdom and the United States.


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Risk factors

Item1A - 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 on Form 10-K.
Competitive Risks
Worldwide economic conditions could have an adverse effect on our business, prospects, operating results, financial condition and cash flows.
Our business and operating results are materially affected by worldwide economic conditions. Current global economic conditions, including those associated with the ongoing Eurozone crisis, coupled with low customer and business confidence may have a significant negative impact on the buying behavior of some of our clients as their businesses suffer from these conditions. Since 2008, many of our operations have been impacted by the weakened economic climate. A growing number of insolvencies associated with an economic downturn could adversely affect our brokerage business through the loss of clients or by hampering our ability to place insurance and reinsurance business. In addition, an increase in mergers and acquisitions can also result in the loss of clients. While it is difficult to predict the 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. In addition, the potential for a significant insurer to fail, be downgraded 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 or be downgraded could also result in errors and omissions claims by clients.
The credit and economic conditions of certain European Union countries remain fragile and may contribute to instability in the global credit and financial markets. If credit conditions worsen or financial market volatility increases in the Eurozone, it is possible that it could have a negative effect on the global economy as a whole, reflectsand our business, operating results and financial condition. If the collectiveEurozone crisis continues or further deteriorates, there will likely be a negative effect on our European business, as well as the businesses of our European clients. Further, were the Euro to be withdrawn entirely, or the Eurozone were to be dissolved as a common currency area, the legal and contractual consequences for holders of Euro-denominated obligations would be determined by laws in effect at such time. A significant devaluation of the Euro would cause the value of our financial assets that are denominated in Euros to be significantly reduced. Any of these conditions could ultimately harm our overall business, prospects, operating results, financial condition and cash flows.
We may not be able to fully realize the anticipated benefits of our new growth strategy.
At our 2013 Investor Conference, we stated that our goal is, over a medium-term period of five years, to deliver mid-teens total shareholder return, deliver consistent revenue growth in the mid-single digits and target revenue growth to outpace expense growth by more than 70 basis points. We emphasized that such results could fluctuate on a quarterly basis.
In order to achieve these goals, we are implementing certain revenue growth strategies and continue to strive to manage our cost base. For example, we announced a series of actions that include, among other things, the appointments of new global industry and product heads, the creation of a new Global Human Capital & Benefits Practice, a geographic realignment of the firm’s leadership team in North America and the merger of our UK retail and Global Specialty businesses. In light of the potential operational risks associated with these new initiatives, we cannot be certain whether we will be able to realize benefits from current revenue generating or cost-saving initiatives and ultimately realize our objectives. There can be no assurance that our actual results will meet these financial goals.
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 and do not determine the insurance premiums on which our commissions are generally based. Commission levels generally follow the same trend as premium levels, as they are a percentage of the premiums paid by the insureds. Fluctuations in the premiums charged by the insurance carriers can therefore have a direct and potentially material impact on our results of operations. Due to the cyclical

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nature of the insurance market and the impact of other market conditions on insurance premiums, commission levels may vary widely between accounting periods. A period of low or declining premium rates, generally known as a 'soft' or 'softening' market, generally leads to downward pressure on commission revenues and can have a material adverse impact on our commission revenues and operating margin. A 'hard' or 'firming' market, during which premium rates rise, generally has a favorable impact on our commission revenues and operating margin. Rates, however, vary by geography, industry and client segment. We have been and continue to be negatively impacted by soft market conditions across certain sectors and geographic regions. In addition, insurance carriers may seek to reduce their expenses by reducing the commission rates payable to insurance agents or brokers such as ourselves. The reduction of these commission rates, along with general volatility and/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 major global providers of global risk management services, as well as with numerous specialist, regional and local firms. Competition for business is intense in all of our business lines and in every insurance market, and Marsh & McLennan and Aon 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, some insureds have been retaining a greater proportion of their risk portfolios than previously. Industrial and commercial companies increasingly rely 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 buy insurance. Additional competitive pressures arise from the entry of non-traditional market participants, such as banks, accounting firms and insurance carriers themselves, offering risk management or transfer services. 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.

The loss of our 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 Chief Executive Officer, 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 Chief Executive Officer, Dominic Casserley, 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.

Investment in innovative product offerings may fail to yield sufficient return to cover their investment.
From time to time, we may enter new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, including the investment of significant time and resources, the possibility that these efforts will be unprofitable, and the risk of additional liabilities associated with these efforts. Failure to successfully manage these risks in the development and implementation of new lines of business and new products and services could have a material adverse effect on our business, financial condition or results for operations. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business. In addition, we can provide no assurance that the entry into new lines of business or development of new products and services will be successful.
We are continually developing and investing in new and innovative offerings that we believe will address needs that we identify in the market. Nevertheless, the ability of these efforts to produce meaningful value is dependent on a number of other factors, some of which are outside of our control. For example, we have recently launched G360, a suite of facilities for our specialty insurance clients which we expect will provide faster placement and claims agreements for our clients, and promote greater price competition in the specialty insurance market. The success of G360 will depend on client participation, market reaction as well as other factors both inside and outside our control. Additionally, our Global Human Capital and Benefits Practice has invested substantial time and resources in launching The Willis Advantage under the belief that this exchange will serve a useful role to help corporations and individuals in the US manage their growing health care expenses. But in order for The

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Willis Advantage to be successful, health care insurers and corporate and individual participants must deem it suitable to participate in, and such decisions are based on their own particular circumstances.
Our business performance and growth plans could be negatively affected if we are not able to effectively apply technology to drive value for our clients through technology-based solutions or gain internal efficiencies through the effective application of technology and related tools.
Our success depends, in part, on our ability to develop and implement technology solutions that anticipate and keep pace with rapid and continuing changes in technology, industry standards and client preferences. We may not be successful in anticipating or responding to these developments in a timely and cost-effective manner, and our ideas may not be accepted in the marketplace. Additionally, the effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses. Our competitors are seeking to develop competing technologies, and their success in this space may impact our ability to differentiate our services to our clients through the use of unique technological solutions. If we cannot offer new technologies as quickly as our competitors or if our competitors develop more cost-effective technologies, it could have a material adverse effect on our ability to obtain and complete client engagements.

Legal and Regulatory Risks
Our compliance systems and controls cannot guarantee that we comply 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, 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 substantial increase in focus on and developments in these laws and regulations. Compliance with laws and regulations that apply to our operations is complex and may increase our cost of doing business. These laws and regulations include insurance and financial industry regulations, economic and trade sanctions and laws against financial crimes, including client money and money laundering, bribery or other corruption, such as the US Foreign Corrupt Practices Act, the UK Bribery Act and other anti-competitive regulations. In most 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, monetary fines, injunctions, revocation of licenses or approvals, suspension of individuals, limitations on business activities or redress to clients. While we believe that we currently maintain good relationships with our regulators and 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 or sub-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. An example of material claims for which we are subject that are outside of the error and omissions claims context relate

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to those arising out of the collapse of The Stanford Financial Group, for which we acted as brokers of record on certain lines of insurance.
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.
Accepting market derived income (MDI) may cause regulatory or other scrutiny, which may have a material and adverse effect on our business, and our position on contingent commissions may put us at a competitive disadvantage.
Insurance intermediaries have traditionally been remunerated by commission or fees paid by clients. Intermediaries also obtain revenue from insurance carriers. This is commonly known as market derived income or 'MDI'. MDI takes a variety of forms, including volume- or profit-based contingent commissions, facilities administration charges, business development agreements, and fees for providing certain data to carriers. We have recently stated that we will apply a set of criteria to evaluate on a case-by-case basis whether we will take MDI, and in what form. 
MDI creates various risks. Intermediaries have a duty to act in the best interests of their clients and payments from carriers can incentivize intermediaries to put carriers’ interests ahead of their clients. Accordingly, MDI may be subject to scrutiny by various regulators under conflict of interest, anti-trust, unfair competition, and anti-bribery laws and regulations. While accepting MDI is a lawful and acceptable business practice, and while we will comply with all applicable laws and regulations, we cannot predict whether our position will cause regulatory or other scrutiny.
Additionally, as noted above, contingent commissions are a form of MDI. Over the past five years, other than in our Human Capital practice, we have not accepted contingent commissions from carriers. To our knowledge, integrity,we are the only insurance broker that takes this stance. If we continue to not accept contingents and our competitors accept volume- or profit-based continent commissions we may suffer lower revenue, reduced operating margins, and loss of market share which could materially and adversely affect our business.
IT and Operational Risks
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, develop and create new systems and products in order to keep pace with continuing changes in information processing technology or evolving industry and regulatory standards and to be at the forefront of a range of technology relevant to our business.
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.

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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.
Data security breaches or improper disclosure of confidential company or personal data could result in material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
Computer viruses, hackers and other external hazards could expose confidential company and personal data systems to security breaches. Additionally, 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. These increased risks, and expanding regulatory requirements regarding data security, could expose us to data loss, monetary and reputational damages and significant increases in compliance costs.
We maintain policies, procedures and technological safeguards designed to protect the security and privacy of this information in our database. However, we cannot entirely eliminate the risk of data security breaches, improper access to or disclosure of confidential company or personally identifiable information. Our technology may fail to adequately secure the private information we maintain in our databases and protect it from theft, computer viruses, hackers 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 leadership abilities,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.
Our non-core operations, such as discussedour Willis Capital Markets & Advisory business, pose certain underwriting, advisory or reputational risks and can have a significant adverse impact on our financial results.
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.
In addition, these non-core operations, although not material to the Group as a whole may, in any period, have a material effect on our results of operations. For example, our Willis Capital Markets & Advisory business is transaction-based which can cause results to differ from period-to-period. In another example, our financial results in 2011 and first two quarters of 2012 were adversely impacted by the significant deterioration of the financial results of our Loan Protector business driven by the loss of clients through attrition and M&A activity, industry-wide commission pressures and a slowdown in foreclosures.
Financial Risks
Our outstanding debt could adversely affect our cash flows and financial flexibility.
We had total consolidated debt outstanding of approximately $2.3 billion as of December 31, 2013 and our 2013 interest expense was $126 million. Although management believes that our cash flows will be sufficient to service this debt, there may be circumstances in which required payments of principal and/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;

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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 below,favorable position to access additional capital resources.
The terms of our current financings also include certain limitations. For example, the diversityagreements relating to the debt arrangements and credit facilities contain numerous operating and financial covenants, including requirements to maintain minimum ratios of skillsconsolidated EBITDA to consolidated cash interest expense and experiencemaximum 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 accountingour 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 reducing the cash available for other uses.
We have two principal defined benefit plans: one in the United Kingdom and the other in the United States, and in addition, we have several smaller defined benefit pension plans in certain other countries in which we operate. Total cash contributions to these defined benefit pension plans in 2013 were $150 million, including employees' salary sacrifice contributions. In 2014, the Company expects to make cash contributions of approximately $134 million, including employees' salary sacrifice contributions, to these pension plans, although we may elect to contribute more. Future estimates are based on certain assumptions, including discount rates, interest rates, mortality, fair value of assets and expected return on plan assets.
In 2012, we agreed a revised funding strategy with the UK plan's trustee under which we are committed to make additional cash contributions in the event that our adjusted EBITDA exceeds certain thresholds, or we make exceptional returns for our shareholders, including share buybacks or special dividends. As a result, we may be committed to make additional contributions through to 2017 based on the prior year's performance. In addition, during 2014 we will be required to negotiate a new funding arrangement with the UK pension trustee, which may further change the contributions we are required to make during 2014 and beyond.
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. Nevertheless, the determination of pension expense and pension funding is 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 through increased cash contributions. 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 alter the values and actuarial assumptions used to calculate our future pension expense and we could be required to fund our plan with significant additional amounts of cash. 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, the related net periodic costs or credits, and the required level of future cash contributions, may occur in the future due to any variance of actual results from our assumptions and changes in the number of participating employees. The need to make additional cash contributions may reduce our financial flexibility and increase liquidity risk by reducing the cash available to meet our other obligations, including the payment obligations under our credit facilities and other long-term debt, or other needs of our business.
We could incur substantial losses, including with respect to our own cash and fiduciary cash held on behalf of insurance companies and clients, if one of the financial institutions we use in our operations failed.
The deterioration of the global credit and financial services, governmentmarkets has created challenging conditions for financial institutions, including depositories and regulation, marketingthe financial strength of these institutions may continue to decline. We maintain significant cash balances at various US depository institutions that are significantly in excess of the US Federal Deposit Insurance Corporation insurance limits. We also maintain significant cash balances in foreign financial institutions. A significant portion of this fiduciary cash is held on behalf of insurance companies or clients. If one or more of the institutions in which we maintain

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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. We could also be liable to claims made by the insurance companies or our clients regarding the fiduciary cash held on their behalf.
A downgrade to our corporate credit rating and the credit ratings of our outstanding debt may adversely affect our borrowing costs and financial flexibility and, under certain circumstances, may require us to offer to buy back some of our outstanding debt.
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 a step-up in interest rates under the indentures for our 6.200% senior notes due 2017 and our 7.000% 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. This may in turn impact the assumptions when performing our goodwill impairment testing which may reduce the excess of fair value over carrying value of the reporting units.
In addition, under the indenture for our 4.625% senior notes due 2023 and our 6.125% senior notes due 2043, if we experience a ratings decline together with a change of control event, we would be required to offer to purchase our 4.625% senior notes due 2023 and our 6.125% senior notes due 2043 from holders unless we had previously redeemed those notes. We may not have sufficient funds available or access to funding to repurchase tendered notes in that event, which could result in a default under the notes. Any future debt that we incur may contain covenants regarding repurchases in the event of a change of control triggering event.
We face certain risks associated with the acquisition or disposition of businesses and lack of control over investments in associates.
In pursuing our corporate strategy, we may acquire or dispose of or exit businesses or reorganize existing investments. For example, we have a call option to acquire 100 percent of the capital of Gras Savoye. The success of our overall acquisition and disposition 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 also own an interest in a number of associates, such as Gras Savoye, where we do not exercise management control and we are therefore unable to direct or manage the business to realize the anticipated benefits that we can achieve through full integration.
If our goodwill becomes impaired, we may be required to record significant charges to earnings.
We have a substantial amount of goodwill on our balance sheet as a result of acquisitions we have completed. We review goodwill for impairment annually or whenever events or circumstances indicate impairment may have occurred.
Our annual goodwill impairment analysis is performed each year at October 1. In fiscal year 2012, we recognized an impairment charge of $492 million in the Consolidated Statement of Operations in relation to our North American business. At October 1, 2013, our analysis showed that the estimated fair values of each of our reporting units were in excess of the carrying values and therefore did not result in any impairment charge in 2013.
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. Notwithstanding the fact that we recognized an impairment charge in fiscal year 2012 for our North American reporting unit, the risk remains that a significant deterioration in a key estimate or assumption or a less significant deterioration to a combination of assumptions or the sale of a part of a reporting unit could result in an impairment charge in the future, which could have a significant adverse impact on our reported earnings.

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For further information on our testing for goodwill impairment, see ‘Critical Accounting Estimates’ under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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. For example, Willis Limited, our UK brokerage subsidiary regulated by the FCA, is currently required to maintain $126 million in unencumbered and available funds, of which at least $79 million must be in cash, for regulatory purposes. 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 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 2013.
 
US
Dollars
 
Pounds
Sterling
 Euros 
Other
currencies
Revenues60% 8% 13% 19%
Expenses49% 25% 9% 17%
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. However, any net sterling asset we are holding will be more 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 needed, we deploy a hedging strategy to mitigate part of our operating exposure to exchange rate movements, but such mitigating attempts may not be successful. For more information on this strategy, see Part II Item 8 - 'Note 26 Derivative Financial Instruments and Hedging Activities'.
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 continue to expand into new regions throughout the world, including emerging markets. The possible effects of economic and global marketsfinancial disruptions throughout the world could have an adverse impact on our businesses. These risks include:
the general economic and political conditions in foreign countries;

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Risk factors

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;
fluctuations in our effective tax rate;
difficulties in controlling operations and monitoring employees in geographically dispersed and culturally diverse locations; 
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 insurance brokers and US business operations abroad, including rules relating to the conduct of business, trade sanctions 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; and
the potential costs and difficulties in complying with local regulation for our operating subsidiaries across the globe.
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 governanceUnited 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 requires.

Qualifications

When recommendingonly in limited circumstances. Accordingly, holders of Willis Group Holdings securities may have more difficulty protecting their interests than would holders of securities of a personcorporation incorporated in a jurisdiction of the United States.



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

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Item 2 — Properties
We own and lease a number of properties for new or continued membershipuse 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 a 25-year lease on this property which expires June 2032. We sub-let approximately 17,500 square feet of the 28-story tower to a third party. We also sub-let the 10-story adjoining building.

North America
In North America, outside of New York, Chicago and Nashville, we lease approximately 1.4 million square feet around 100 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 under a lease expiring February 2025.

Nashville
In Nashville, we occupy 160,000 square feet under a lease expiring April 2026.

Rest of World
Outside of North America and London we lease approximately 1.5 million square feet of office space in over 200 locations. Two of our properties in Ipswich, United Kingdom have liens on the Board,land and buildings in connection with a revolving credit facility.
Item 3 — Legal Proceedings
Information regarding claims, lawsuits and other proceedings is set forth in Note 22 ‘Commitments and Contingencies’ to the Governance Committee considers each nominee’s individual qualificationsConsolidated Financial Statements appearing under Part II, Item 8 of this report and incorporated herein by reference.
Item 4 — Mine Safety Disclosures
Not applicable.


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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.
 
Price Range
of Shares
 High Low
2012: 
  
First Quarter$39.85
 $33.81
Second Quarter$37.38
 $34.24
Third Quarter$37.94
 $34.11
Fourth Quarter$37.62
 $31.98
2013: 
  
First Quarter$39.50
 $33.89
Second Quarter$43.02
 $37.86
Third Quarter$45.45
 $40.10
Fourth Quarter$47.22
 $42.15
2014:   
Through February 14, 2014$45.38
 $41.30
On February 14, 2014, the last reported sale price of our shares as reported by the NYSE was $41.46 per share. As of February 14, 2014 there were approximately 1,242 shareholders on record of our shares.
Dividends
We normally pay dividends on a quarterly basis to shareholders of record on March 31, June 30, September 30 and December 31. The dividend payment dates and amounts are as follows:
Payment Date$ Per Share
  
January 13, 2012$0.260
April 13, 2012$0.270
July 13, 2012$0.270
October 15, 2012$0.270
January 15, 2013$0.270
April 15, 2013$0.280
July 15, 2013$0.280
October 15, 2013$0.280
January 15, 2014$0.280

There are no governmental laws, decrees or regulations in lightIreland which will restrict the remittance of dividends or other payments to non-resident holders of the overall mixCompany’s shares.

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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 exempt 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 Boardprovisions of this treaty due to the wide scope of exemptions from Irish 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.
With respect to non-corporate US shareholders, certain dividends 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 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 the Company’s current and future needs. In its assessment of each nominee, the Governance Committee considers the person’s integrity, experience, reputation, independence and when the person is a current directorpeer group comprised of the Company, hisAon 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, 2008, assuming full dividend reinvestment.



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Share data and dividends

Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended December 31, 2013, 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
The Company is authorized to buy back its ordinary shares, by way of redemption, and will consider whether to do so from time to time based on many factors including market conditions. The Company is authorized to purchase up to one billion shares from time to time in the open market (such open market purchases would be effected as redemptions under Irish law) and it may also redeem its shares through negotiated trades with persons who are not affiliated with the Company as long as the cost of the acquisition of the Company's shares does not exceed $824 million. The Company intends to buy back $200 million in shares in 2014 to offset the increase in shares outstanding resulting from the exercise of stock options in 2013. The buybacks will be made in the open market or her performance as a director.through privately-negotiated transactions, from time to time, depending on market conditions. The Governance Committee considers each director’s ability to devoteshare buy back program may be modified, extended or terminated at any time by the time and effort necessary to fulfill responsibilities toBoard of Directors.
The information under Part III, Item 12 is incorporated herein by reference.



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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 for current directors, whether each director has attended at least 75%the related notes and Item 7 — ‘Management’s Discussion and Analysis of the aggregateFinancial Condition and Results of the total numberOperations’ included elsewhere in this report.
The selected historical consolidated financial data presented below as 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 five years ended December 31, 2013 have been derived from the audited consolidated financial statements of the Company, Board’s Committees.

The Governance Committee believes that including directors having currentwhich have been prepared in accordance with accounting principles generally accepted in the United States of America (‘US GAAP’).

 Year ended December 31,
 2013 2012 2011 2010 2009
 (millions, except per share data)
Statement of Operations Data 
  
  
  
  
Total revenues$3,655
 $3,480
 $3,447
 $3,332
 $3,253
Goodwill impairment charge—
 (492) —
 —
 —
Operating income (loss)685
 (209) 566
 753
 690
Income (loss) from continuing operations before income taxes and interest in earnings of associates499
 (337) 239
 587
 516
Income (loss) from continuing operations377
 (433) 219
 470
 455
Discontinued operations, net of tax—
 —
 1
 —
 4
Net income (loss) attributable to Willis Group Holdings$365
 $(446) $204
 $455
 $438
Earnings per share on continuing operations — basic2.07
 (2.58) 1.17
 2.68
 2.58
Earnings per share on continuing operations — diluted2.04
 (2.58) 1.15
 2.66
 2.57
Average number of shares outstanding 
  
  
  
  
— basic176
 173
 173
 170
 168
— diluted179
 173

176
 171
 169
Balance Sheet Data (as of year end) 
  
  
  
  
Goodwill$2,838
 $2,827
 $3,295
 $3,294
 $3,277
Other intangible assets, net353
 385
 420
 492
 572
Total assets (i)
14,800
 15,112
 15,728
 15,850
 15,625
Total equity2,243
 1,725
 2,517
 2,608
 2,229
Long-term debt2,311
 2,338
 2,354
 2,157
 2,165
Shares and additional paid-in capital1,316
 1,125
 1,073
 985
 918
Total Willis Group Holdings stockholders’ equity2,215
 1,699
 2,486
 2,577
 2,180
Other Financial Data 
  
  
  
  
Capital expenditures (excluding capital leases)$105
 $133
 $111
 $83
 $96
Cash dividends declared per share1.12
 1.08
 1.04
 1.04
 1.04
_________________

(i)
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 which it then remits to 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 sheet. Unremitted insurance premiums, claims or refunds (‘fiduciary funds’) are also recorded within fiduciary assets.

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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 inRegulation G of the rules of the Securities and previous leadership positionsExchange Commission ('SEC'). Wepresent such non-GAAP financial measures, specifically, organic growth in commissionsand fees, adjusted operating margin, adjusted operating income, adjusted net incomefrom continuing operations and adjusted earnings per diluted share from continuingoperations, as we believe such information is importantof interest to the Board’s abilityinvestment communitybecause it provides additional meaningful methods of evaluating certain aspects ofthe Company's operating performance from period to oversee management. Extensive knowledgeperiod on a basis that may not beotherwise apparent on a GAAP basis. Organic growth in commissions and fees excludesthe impact of acquisitions and disposals, period over period movements in foreign currency , andinvestment and other income from growth in revenues.Adjusted operating income, adjusted operating margin, adjusted net income from continuing operations andadjusted earnings per diluted share from continuing operations are calculated byexcluding the impact of certain specified items from operating income, net income or loss from continuingoperations, and earnings per diluted share from continuing operations, respectively, the most directly comparable GAAP measures. Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited. These financial measuresshould be viewed in addition to, not in lieu of, the Company’sconsolidated financialstatements for the year ended December 31, 2013.

This discussion includes forward-looking statements, including under the headings 'Executive Summary', 'Liquidity and Capital Resources', 'Critical Accounting Estimates' and 'Contractual Obligations'. Please see 'Forward-Looking Statements' forcertain cautionary information regarding forward-looking statements and a list offactors that could cause actual results to differ materially from those predicted inthose statements.

EXECUTIVE SUMMARY
Business Overview

We provide a broad range of insurance broking, risk management and consulting services to our clients worldwide and organize our business into three segments: Global, North America and International.

Our Global business provides specialist brokerage and consulting services to clients worldwide arising from specific industries and activities including Aerospace; Energy; Marine; Construction, Property and Casualty; Financial and Executive Risks; Financial Solutions; Faber Global; Fine Art, Jewelry and Specie; Special Contingency Risks; Hughes-Gibbs; Willis Capital Markets & Advisory; Placement and Reinsurance.
North America and International comprise: our retail operations and provide services to small, medium and large corporations; and the Human Capital 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 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. Commission levels generally follow the same trend as premium levels as they are derived from a percentage of the premiums paid by the insureds. Fluctuations in these premiums charged by the insurance carriers can therefore have a direct and potentially material impact on our results of operations.
Due to the cyclical nature of the insurance market and the impact of other market conditions on insurance premiums, commission revenues may vary widely between accounting periods. A period of low or declining premium rates, generally known as a 'soft' or 'softening' market, generally leads to downward pressure on commission revenues and can have a material adverse impact on our commission revenues and operating margin. A 'hard' or 'firming' market, during which premium rates rise, generally has a favorable impact on our commission revenues and operating margin. Rates, however, vary by geography, industry and client segment. As a result and due to the global and diverse nature of our business, we view rates holistically.


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Market Conditions

Market conditions in our industry are generally defined by factors such as the strength of the economies in the various geographic regions in which we serve around the world, insurance rate movements, and insurance and reinsurance buying patterns of our clients.
The industry and market in general throughout 2011 and early 2012 experienced modest increase in catastrophe-exposed property insurance and reinsurance pricing levels driven by significant catastrophe losses including the Japanese earthquake and tsunami, the New Zealand earthquake and, late in 2012, Super Storm Sandy. Also during that period, direct carriers in North America, facing persistent low investment returns, started to modestly raise rates in certain products. This firming rate environment, however, generally did not extend beyond North America to impact our International retail business.
Early in 2013 the reinsurance market was generally flat, however, as the year progressed we saw changing market sentiment driven by changes in the sources of capital and increases in capital supply in the reinsurance market, most notably within the North American catastrophe-exposed property market. The influx of third party capital coupled with changes to reinsurance buying patterns and regulatory complexity is leading to growing complexity in the reinsurance market and a softening of prices.
This pattern of new capacity and market entrants coupled with strong underwriting performance in 2013, due to the absence of natural and man-made catastrophes, means that the trend of price softening is continuing as we enter 2014 and is extending to other lines of business, not just catastrophe exposed property.
The outlook for our business, operating results and financial condition continues to be challenging due to the global economic condition. There are signs of improving conditions both in the US, and within certain European Union countries, including a return to sustained GDP growth in certain countries. If conditions in the Global economy, including the US, the UK and the Eurozone deteriorate, there will likely be a negative effect on our business as well as the businesses of our clients.
In the face of this challenging economic environment we have adopted a strategy to invest selectively in growth areas, defined by geography, industry sector and client segment, and to better align our three segments so as to, among other things, bring our clients greater access to the Company's specialty areas and analytical capabilities. Our growth strategy also involves increasing our investment in, and deployment of, our analytical capabilities.

Financial Performance
Consolidated Financial Performance
2013 compared to 2012

Total revenues in 2013 of $3,655 million increased by $175 million, or 5.0 percent, compared to 2012. This included organic growth in commissions and fees of 4.9 percent, and 0.5 percent growth from acquisitions and disposals. Organic growth was achieved in all three of our operating segments led by Global with 5.6 percent. Our North America operations reported organic growth of 4.9 percent, which included a $5 million positive revenue recognition adjustment. Our International operations achieved organic growth of 4.1 percent despite recognizing a $15 million negative revenue recognition adjustment. Foreign currency movements had a negative $12 million or 0.3 percent impact on commissions and fees in 2013.

Total expenses for 2013 of $2,970 million were $719 million or 19.5 percent lower compared to 2012.
The 2013 total expenses included $46 million related to the Expense Reduction Initiative (see 'Expense Reduction Initiative' section below) conducted earlier in the year. The 2012 total expenses included a $492 million non-cash goodwill impairment charge related to our North American reporting unit, a $200 million write-off of unamortized cash retention awards following the decision to eliminate the repayment requirement of past awards, and a $252 million expense related to the accrual for 2012 cash bonuses paid in 2013. Foreign currency movements had a $9 million positive impact on total expenses in 2013.
Excluding the items noted above, total expenses in 2013 were $188 million, or 6.8 percent, higher than in 2012. The largest driver of this was the increase in salaries and benefits due to annual salary reviews, higher charges for share-based compensation and new hires and investments in targeted businesses and geographies. In addition to these, we recorded higher incentives as a result of growth in commissions and fees, and the change in remuneration policy. Other operating expenses also increased due to travel, accommodation and client entertaining costs to support business development, marketing costs, strategic review charges and higher professional fees.

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Business discussion

The Company incurred a loss on extinguishment of debt of $60 million from the refinancing that was completed during 2013.
The tax rate for the full year was affected by an incremental US tax expense of $9 million recorded after taking into account the impact of adjustments to the valuation allowance placed against our US deferred tax assets.
Earnings from associates were down $5 million, net of tax, mainly due to costs of a reorganization program in our principal associate, Gras Savoye.
Net income attributable to Willis shareholders from continuing operations was $365 million or $2.04 per diluted share in 2013 compared to a loss of $446 million or $2.58 per diluted share in 2012. The $811 million increase in net income compared to 2012 can be attributed primarily to the non-recurrence of the 2012 items discussed above and growth in commissions and fees partially offset by growth in expenses.
2012 compared to 2011

Total revenues in 2012 of $3,480 million increased by $33 million, or 1.0 percent, compared to 2011, including a $59 million or 1.7 percent negative impact from movements in foreign exchange. Organic growth in commissions and fees of 3.1 percent was driven by our International and Global operations. Our North America operations reported a decline of 0.6 percent in commissions and fees, due to lower revenues generated by Loan Protector, a specialty business acquired as part of the HRH business, and the industry is an important qualitycontinued adverse impact of difficult economic conditions in the US.

Total expenses in 2012 of $3,689 million increased $808 million compared to 2011, primarily due to the recognition of a $492 million non-cash goodwill impairment charge related to our North American reporting unit, a $200 million write-off of unamortized cash retention awards following the decision to eliminate the repayment requirement of past awards, and a $252 million expense related to the accrual for directors. Additionally, because2012 cash bonuses paid in 2013.

Excluding these expenses, total operating expenses declined $136 million, or 4.7 percent, principally due to $180 million expense recognized in 2011 related to the Operational Review and favorable movements in foreign exchange partially offset by increases in salary and benefits expenses linked to annual pay reviews, new hires and investments in targeted businesses and geographies.

Net loss attributable to Willis shareholders from continuing operations was $446 million or a loss of $2.58 per diluted share in 2012 compared to a profit of $203 million or $1.15 per diluted share in 2011. The $649 million decrease in net income compared to 2011 primarily reflects the increase in total expenses described above and the $113 million charge to establish a valuation allowance against deferred tax assets in our US operations, partially offset by the non-recurrence of the Company’s global reach, international experience$131 million post-tax cost in 2011 relating to the make-whole amounts on the repurchase and redemption of $500 million of our senior debt and the write-off of related unamortized debt issuance costs and by the revenue growth achieved during the year. Net income in 2012 was also adversely impacted by a $7 million reduction in interest in earnings of associates, net of tax, mainly due to declining performance in our principal associate, Gras Savoye.


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Adjusted Operating Income, Adjusted Net Income from Continuing Operations and Adjusted Earnings per Diluted Share from Continuing Operations
Our non-GAAP measures of adjusted operating income, adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations are calculated by excluding the impact of certain items (as detailed below) from operating income (loss), net income (loss) from continuing operations, and earnings per diluted share from continuing operations, respectively, the most directly comparable GAAP measures.

The following items are excluded from operating income (loss) and net income (loss) from continuing operations as applicable:

(i)the additional incentive accrual recognized following the replacement of annual cash retention awards with annual cash bonuses which will not feature a repayment requirement;
(ii)write-off of unamortized cash retention awards following the decision to eliminate the repayment requirement on past awards;

(iii)goodwill impairment charge;

(iv)valuation allowance against deferred tax assets;

(v)write-off of uncollectible accounts receivable balance and associated legal fees arising in Chicago due to fraudulent overstatement of commissions and fees;

(vi)costs associated with the 2011 Operational Review;

(vii)significant legal and regulatory settlements which are managed centrally;

(viii)gains and losses on the disposal of operations;

(ix)insurance recoveries;

(x)make-whole amounts on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs;

(xi)loss and fees related to the extinguishment of debt; and
(xii)costs associated with the Expense Reduction Initiative.

We believe that excluding these items, as applicable, from operating income (loss), net income (loss) from continuing operations and earnings per diluted share from continuing operations provides a more complete and consistent comparative analysis of our results of operations. We use these and other measures to establish Group performance targets and evaluate the performance of our operations.

As set out in the tables below, adjusted operating margin at 20.0 percent in 2013, was down 160 basis points compared to 2012, while adjusted net income from continuing operations at $472 million was $18 million higher than in 2012. Adjusted earnings per diluted share from continuing operations was $2.64 in 2013, compared to $2.58 in 2012.

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A reconciliation of reported operating income or knowledgeloss, the most directly comparable GAAP measure, to adjusted operating income is as follows (in millions, except percentages):
 Year Ended December 31,
 2013 2012 2011
Operating income (loss), GAAP basis$685
 $(209) $566
Excluding:     
Additional incentive accrual for change in remuneration policy (a)
—
 252
 —
Write-off of unamortized cash retention awards (b)
—
 200
 —
Goodwill impairment charge (c)
—
 492
 —
India JV settlement (d)
—
 11
 —
Insurance recovery (e)
—
 (10) —
Write-off of uncollectible accounts receivable balance (f)
—
 13
 22
Net (gain) loss on disposal of operations(2) 3
 (4)
2011 Operational Review (g)
—
 —
 180
FSA regulatory settlement (h)
—
 —
 11
Expense Reduction Initiative (i)
46
 —
 —
Fees related to the extinguishment of debt1
 —
 —
Adjusted operating income$730
 $752
 $775
Operating margin, GAAP basis, or operating income (loss) as a percentage of total revenues18.7% (6.0)% 16.4%
Adjusted operating margin, or adjusted operating income as a percentage of total revenues20.0% 21.6 % 22.5%
_________________
(a)
Additional incentive accrual recognized following the replacement of annual cash retention awards with annual cash bonuses which will not feature a repayment requirement.
(b)
Write-off of unamortized cash retention awards following the decision to eliminate the repayment requirement on past awards.
(c)
Non-cash charge recognized related to the impairment of the carrying value of the North America reporting unit's goodwill.
(d)
$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, a $1 million loss on disposal of operations was recorded related to the termination.
(e)
Insurance recovery related to the previously disclosed fraudulent activity in Chicago. See 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below.
(f)
Write-off of uncollectible accounts receivable balance relating to periods prior to January 1, 2011, see 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below.
(g)
Charge relating to the 2011 Operational Review, including $98 million of severance costs related to the elimination of approximately 1,200 positions for the full year 2011.
(h)
Regulatory settlement with the UK Financial Services Authority (FSA), now the Financial Conduct Authority (FCA).
(i)
Charge related to the assessment of the Company's organizational design. See 'Expense Reduction Initiative' section below.







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A reconciliation of reported net income or loss from continuing operations and reported earnings per diluted share from continuing operations, the most directly comparable GAAP measures, to adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations is as follows (in millions, except per share data):
 
Year Ended
December 31,
 
Per diluted share
Year Ended December 31,
 2013 2012 2011 2013 2012 2011
Net income (loss) from continuing operations, GAAP basis$365
 $(446) $203
 $2.04
 $(2.58) $1.15
Excluding:           
Additional incentive accrual for change in remuneration policy, net of tax ($nil, $77, $nil) (a)
—
 175
 —
 —
 0.99
 —
Write-off of unamortized cash retention awards, net of tax ($nil, $62, $nil) (b)
—
 138
 —
 —
 0.78
 —
Goodwill impairment charge, net of tax ($nil, $34, $nil) (c)
—
 458
 —
 —
 2.60
 —
India JV settlement, net of tax ($nil, $nil, $nil) (d)
—
 11
 —
 —
 0.06
 —
Insurance recovery, net of tax ($nil, $4, $nil) (e)
—
 (6) —
 —
 (0.03) —
Write-off of uncollectible accounts receivable balance, net of tax ($nil, $5, $9) (f)
—
 8
 13
 —
 0.05
 0.08
Net (gain) loss on disposal of operations, net of tax ($1, $nil, $nil)(1) 3
 (4) (0.01) 0.02
 (0.02)
2011 Operational Review, net of tax ($nil, $nil, $52) (g)
—
 —
 128
 —
 —
 0.73
FSA regulatory settlement, net of tax ($nil, $nil, $nil) (h)
—
 —
 11
 —
 —
 0.06
Make-whole amounts on repurchase and redemption of Senior Notes and write-off of unamortized debt issuance costs, net of tax ($nil, $nil, $50)—
 —
 131
 —
 —
 0.74
Expense Reduction Initiative, net of tax ($8, $nil, $nil) (i)
38
 —
 —
 0.21
 —
 —
Fees related to the extinguishment of debt, net of tax ($nil, $nil, $nil)1
 —
 —
 0.01
 —
 —
Loss on extinguishment of debt, net of tax ($nil, $nil, $nil)60
 —
 —
 0.34
 —
 —
Impact of US valuation allowance9
 113
 —
 0.05
 0.64
 —
Dilutive impact of potentially issuable shares (j)
—
 —
 —
 —
 0.05
 —
Adjusted net income from continuing operations$472
 $454
 $482
 $2.64
 $2.58
 $2.74
Average diluted shares outstanding, GAAP basis (j)
179
 173
 176
      
_________________

(a)
Additional incentive accrual recognized following the replacement of annual cash retention awards with annual cash bonuses which will not feature a repayment requirement.
(b)
Write-off of unamortized cash retention awards debtor following the decision to eliminate the repayment requirement on past awards.
(c)
Non-cash charge recognized related to the impairment of the carrying value of the North America reporting unit's goodwill.
(d)
$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, a $1 million loss on disposal of operations was recorded related to the termination.
(e)
Insurance recovery related to the previously disclosed fraudulent activity in Chicago. See 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below.
(f)
Write-off of uncollectible accounts receivable balance relating to periods prior to January 1, 2011, see 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below.
(g)
Charge relating to the 2011 Operational Review, including $98 million pre-tax of severance costs related to the elimination of approximately 1,200 positions for the full year 2011.
(h)
Regulatory settlement with the UK Financial Services Authority (FSA), now the Financial Conduct Authority (FCA).
(i)
Charge related to the assessment of the Company's organizational design. See 'Expense Reduction Initiative' section below.
(j)
Potentially issuable shares were not included in the calculation of diluted earnings per share, GAAP basis, because the Company's net loss from continuing operations rendered their impact anti-dilutive.


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Goodwill Impairment
Our annual goodwill impairment analysis is performed each year at October 1. At October 1, 2013 our analysis showed the estimated fair value of each reporting unit was in excess of the carrying value, and therefore did not result in an impairment charge (2012: $492 million; 2011: $nil).
In 2012 an impairment charge for the North America reporting unit was required and amounted to $492 million. There was no impairment for the Global and International reporting units, as the fair values of these units were significantly in excess of their carrying value.
Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods
As previously disclosed, in early 2012 we identified through our internal financial control process and a key geographic areasubsequent internal investigation an uncollectible accounts receivable balance of approximately $40 million in Chicago from the fraudulent overstatement of Commissions and fees from the years 2005 to 2011.
We concluded that the total $40 million of overstatement did not materially affect our previously issued financial statements for any of the prior periods and we corrected the misstatement by recognizing a charge to Other operating expenses to write off the uncollectible receivable (a) of $13 million (including legal expenses) in the first quarter of 2012 and (b) of $22 million in the fourth quarter of 2011. In the fourth quarter 2011 we also reversed a $6 million balance of Commissions and fees which had been recorded during 2011 and $2 million of Salaries and benefits expense representing an over-accrual of production bonuses relating to the overstated revenue. During 2012, we recorded within Other operating expenses a $10 million insurance settlement from insurers in respect of our claim under Group insurance policies, for compensation paid out in the years 2005 to 2010 on the fraudulently overstated revenues discussed above.
The employees in question, who have been terminated, were not members of Willis executive management nor did they play a significant role in internal control over financial reporting. Based on the results of our investigation, which has now been completed, we do not believe that any client or carrier funds were misappropriated or that any other business units were affected.
We have enhanced our internal controls in relation to the business unit in question, including enhanced procedures over receipt of checks and application of cash, increased segregation of duties between the operating unit and the accounting and settlement function, and additional central sign off requirement on revenue recognition.
Expense Reduction Initiative
The Company recorded a pre-tax charge of $46 million in the first quarter of 2013 related to the previously announced assessment of the Company's organizational design. In connection with this assessment, we incurred the following pre-tax charges:
$29 million of severance and other staff related costs towards the elimination of 207 positions; and
$17 million of Other operating expenses and Depreciation resulting from the rationalization of property and systems.
The Company did not incur any further charges related to this review.
The actions taken resulted in total cost savings of approximately $20 million exclusive of the costs incurred in 2013. It is also important.anticipated that we will achieve prospective annualized cost savings of approximately $25 million to $30 million.
Cash Retention Awards
For the past several years, certain cash retention awards under the Company's annual incentive programs included a feature which required the recipient to repay a proportionate amount of the annual award if the employee voluntarily left the Company before a specified date, which was generally three years following the award. As previously disclosed, the Company’s business also requires continuous compliance with regulatory requirements and agencies, it is imperative for some directorsCompany made the cash payment to have legal, governmental, political or diplomatic expertise. If a person has served or currently servesthe recipient in the public arena (whether through political service, employment as a CEOyear of a public company or membership on a boardgrant and recognized the payment in expense ratably over the period it was subject to repayment, beginning in the quarter in which the award was made. The unamortized portion of a public company), his or her integritycash retention awards was recorded within 'other current assets' and reputation is also a matter'other non-current assets' in the consolidated balance sheets.
The following table sets out the amount of public record on which Companycash retention awards made and its shareholders may rely. The Governance Committee also believes thatthe related amortization of those awards for the three years ended December 31, 2013.

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  Years ended December 31,
  2013 2012 2011
  (millions)
Cash retention awards made $12
 $221
 $210
Amortization of cash retention awards included in salaries and benefits 6
 216
 185

In December 2012, the Company distinguishes itselfdecided to eliminate the repayment requirement from its competitors through marketingpast annual cash retention awards and, as a result, recognized a strong marketing perspective should be represented. non-cash, pre-tax charge of $200 million which represents the write-off of the unamortized balance of past awards at that date.
There were, however, a number of off-cycle awards with a fixed period guarantee attached, for which we have not waived the repayment requirement. The unamortized portion of these awards amounted to $15 million at December 31, 2013 (2012: $9 million; 2011: $196 million).
In lightaddition, in 2012, the Company replaced annual cash retention awards with annual cash bonuses which did not include a repayment requirement. As at December 31, 2012, the Company had accrued $252 million for these bonuses.
Pension Expense
We recorded a net periodic benefit income on our UK defined benefit pension plan in 2013 of its public$5 million (2012: $5 million; 2011: cost of $6 million). On our US defined benefit pension plan, we recorded a net periodic benefit income of $4 million in 2013 (2012: cost of $3 million; 2011: $nil). On our other defined benefit pension plans, we recorded a net pension cost of $5 million in 2013 (2012: $4 million; 2011: $5 million).
The periodic benefit income on the UK plan in 2013 is flat compared to 2012 as higher asset returns were offset by higher amortization of unrecognized actuarial losses and global nature (including conductingincreased service costs.
The movement to $5 million income on the UK plan in 2012 from a $6 million cost in 2011 was primarily due to higher asset returns partially offset by higher amortization of unrecognized actuarial losses and increased interest cost.
On the US plan, the movement to a $4 million income in 2013 from a $3 million cost in 2012 was primarily due to higher asset returns.
The 2012 US pension cost was $3 million higher compared with 2011 was primarily due to an increase in amortization of unrecognized actuarial losses partially offset by higher asset returns.

See 'Contractual Obligations' below for further information on our obligations relating to our pension plans.
Acquisitions and Disposals
In first quarter 2014 the Company agreed to acquire Charles Monat Limited, a market-leading life insurance solutions adviser to high net worth clients. The acquisition represents a key enhancement to our expanding Global Wealth Solutions practice, particularly in Asia, however completion of the transaction is currently subject to regulatory approval.
During first quarter 2014 the Company disposed of Insurance Noodle, a small online wholesale business in different countries and currencies),Willis North America, to Insureon.
In fourth quarter 2013 the Company also seeks international experienceacquired the employee benefits consulting division of Capital Strategies Group, Inc. based in Birmingham, Alabama. We disposed of the trade and assets associated with Willis of Northern New England to a small Maine-based broker specializing in attorneys, not-for-profit organizations, hospitals and contractors.
In third quarter 2013, the Company disposed of the trade and assets associated with CBT, our book of small commercial clients in the UK, to Chesham Insurance Brokers.
In second quarter 2013, the Company acquired 100 percent of PPH Limited and its subsidiary Prime Professions Limited (together referred to as Prime Professions), a leading UK based professional indemnity insurance broker, at a cost of $29 million.
In first quarter 2013, the Company acquired 100 percent of CBC Broker Srl, an Italian broker, at a cost of $1 million.


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Management Structure
During first quarter 2014 we announced changes to the structure of our UK-based insurance operations, combining our Global Specialty insurance business with the Willis UK retail business to create a market leading client proposition. Following this change, effective January 1, 2014, UK retail, previously reported as part of our International reporting segment will be reported in our Global reporting segment.
In addition, effective January 1, 2014 Mexico which was previously reported within our North America reporting segment, will be reported in our International reporting segment, Placement which was previously reported as part of our Global reporting segment will be reported within Corporate and other, and our US Captive consulting business and Facultative reinsurance businesses, which were previously reported as part of our North America reporting segment will be reported in our Global reporting segment.



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Business Strategy

Today we operate in attractive growth markets with a diversified platform across geographies, industries, segments and lines of business. We aim to become the risk advisor, insurance and reinsurance broker of choice globally.

We will achieve this by being completely focused on:

where we compete and that means the areas where we can succeed by:
◦Geography - we will re-balance our business mix towards faster growing geographies, with both developed and developing markets
◦Client Segmentation - we will segment our client offering to provide distinct offerings to different types of client, focusing on the value we provide to our clients
◦Sector - we will build business lines around our industry and sector strength e.g. Human Capital and Employee Benefits.
How we compete which will be centered on meeting the needs of our client by:
◦Connection - leading to more cross-selling
◦Innovation - competing on analytics and innovation
◦Investment - focusing on earnings accretion, competitive position and fit

Through these strategies we aim to grow revenue with positive operating leverage, grow cash flows and generate compelling returns for investors.






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REVIEW OF CONSOLIDATED RESULTS
The following table is a summary of our revenues, operating income (loss), operating margin, net income (loss) and diluted earnings per share (in millions, except per share data and percentages):
 Year Ended December 31,
 2013 2012 2011
REVENUES 
  
  
Commissions and fees$3,633
 $3,458
 $3,414
Investment income15
 18
 31
Other income7
 4
 2
Total revenues3,655
 3,480
 3,447
EXPENSES 
  
  
Salaries and benefits(2,207) (2,475) (2,087)
Other operating expenses(616) (581) (656)
Depreciation expense(94) (79) (74)
Amortization of intangible assets(55) (59) (68)
Goodwill impairment charge—
 (492) —
Net gain (loss) on disposal of operations2
 (3) 4
Total expenses(2,970) (3,689) (2,881)
OPERATING INCOME (LOSS)685
 (209) 566
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs—
 —
 (171)
Loss on extinguishment of debt(60) —
 —
Interest expense(126) (128) (156)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES499
 (337) 239
Income taxes(122) (101) (32)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES377
 (438) 207
Interest in earnings of associates, net of tax—
 5
 12
INCOME (LOSS) FROM CONTINUING OPERATIONS377
 (433) 219
Discontinued operations, net of tax—
 —
 1
NET INCOME (LOSS)377
 (433) 220
Less: net income attributable to noncontrolling interests(12) (13) (16)
NET INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$365
 $(446) $204
      
Salaries and benefits as a percentage of total revenues60.4% 71.1 % 60.5%
Other operating expenses as a percentage of total revenues16.9% 16.7 % 19.0%
Operating margin (operating income (loss) as a percentage of total revenues)18.7% (6.0)% 16.4%
Diluted earnings per share from continuing operations$2.04
 $(2.58) $1.15
Average diluted number of shares outstanding179
 173
 176


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Willis Group Holdings plc


Consolidated Results for 2013 compared to 2012
Revenues
Total revenues by segment for 2013 and 2012 are shown below (millions, except percentages):
       Change attributable to:
Year ended December 31,2013 2012 % Change Foreign
currency translation		 Acquisitions
and disposals		 
Organic
commissions and fees growth(a)
          
Global$1,188
 $1,124
 5.7 % (0.9)% 1.0% 5.6%
North America(b)
1,377
 1,306
 5.4 % (0.1)% 0.6% 4.9%
International(c)
1,068
 1,028
 3.9 % (0.2)% —% 4.1%
Commissions and fees$3,633
 $3,458
 5.1 % (0.3)% 0.5% 4.9%
Investment income15
 18
 (16.7)%  
  
  
Other income7
 4
 75.0 %  
  
  
Total revenues$3,655
 $3,480
 5.0 %  
  
  
_________________
(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; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.
(b)
North America commissions and fees in 2013 included the positive impact of a $5 million adjustment to align the recognition of revenue in the North America Personal Lines business with the rest of the Group.
(c)
International commissions and fees in 2013 included the negative impact of a $15 million adjustment to align the recognition of revenue in China with the rest of the Group.

Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Total revenues increased by $175 million, or 5.0 percent, in 2013 compared to 2012. This was primarily due to 5.1 percent growth in commissions and fees and an increase of $3 million in other income arising from the disposal of books of business, partially offset by a $3 million decrease in investment income due to continued falling yields on deposits.

Total commissions and fees in 2013 were $3,633 million, up $175 million, or 5.1 percent, from $3,458 million in 2012. This increase was due to organic growth of 4.9 percent and growth through acquisitions and disposals of 0.5 percent partially offset by negative foreign currency movements of $13 million or 0.3 percent.
Organic growth of 4.9 percent was driven by low double-digit new business growth tempered by lost business.
Commissions and fees were reduced by a net $9 million impact of two revenue recognition adjustments in the North America and International segments discussed below.
The Global segment reported 5.7 percent growth in commissions and fees, comprising 5.6 percent organic growth and a net 1.0 percent growth from acquisitions and disposals mainly due to Prime Professions which was acquired in second quarter 2013. This growth was partially offset by a 0.9 percent negative impact from foreign currency translation.
Organic commissions and fees growth of 5.6 percent was led by high levelsingle-digit growth in Reinsurance, where all the divisions reported positive growth. Global Specialties reported mid single-digit growth primarily due to strong growth from Financial and Executive Risk, and P&C and Construction. Willis Capital Markets & Advisory performed solidly but was down compared to the very strong result it recorded in 2012 relating to meaningfully higher volumes of financial literacyadvisory fees and experiencecatastrophe bond deals.
The North America segment reported 5.4 percent growth in commissions and fees compared to 2012. This comprised organic growth of 4.9 percent and acquisitions of 0.6 percent from Avalon Actuarial Inc., which was acquired at the end of fourth quarter 2012, partially offset by a negative 0.1 percent impact from foreign currency translation. Organic growth in commissions and fees was positively impacted by a $5 million adjustment to align the recognition of revenue in the North America Personal Lines business with the rest of the Group.
Organic growth was driven by double-digit new business growth and increased client retention levels compared to 2012. Growth was achieved across all of our North America regions, led by the Metro, Midwest, Canada and CAPPPS regions.

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Similarly, most of the major practice groups recorded positive growth including mid-single digit growth in our two largest practices, Human Capital and Construction.
The International segment reported 3.9 percent growth in commissions and fees compared with 2012, comprising 4.1 percent organic growth slightly offset by a 0.2 percent negative impact from foreign currency translation. Organic growth in commissions and fees included the negative impact of a $15 million adjustment to align the recognition of revenue in China with the rest of the Group.
Organic growth was led by double-digit growth in our Latin America region and high single-digit growth in Eastern Europe. We reported low single-digit growth in Western Europe, despite the generally weak economic conditions within the region. Despite the negative impact of the $15 million revenue adjustment, we recorded good growth in Asia, predominantly in Hong Kong and Singapore. We also reported low single-digit growth in Australasia.
Organic commissions and fees growth by segment is discussed further in 'Review of Segmental Results', below.
Salaries and Benefits
Salaries and benefits were $268 million, or 10.8 percent, lower in 2013 compared with 2012. Foreign currency movements lowered salaries and benefits by $9 million, or 0.4 percent.
In 2012 we recorded a $452 million charge as a result of the change in remuneration policy for future incentive awards and the elimination of the repayment requirement on past awards. Excluding the impact of this change and foreign currency movements, salaries and benefits were up by $193 million or 9.5 percent. This increase is primarily due to annual salary reviews, increased headcount due to targeted investments, increased incentives from the change in remuneration policy and growth in commissions and fees, and an additional charge to increase the 401(k) match. It also includes $29 million relating to the Expense Reduction Initiative that was undertaken in first quarter 2013 (see 'Executive Summary - Expense Reduction Initiative' section above for further details).
Other Expenses
Other operating expenses were $35 million, or 6.0 percent, higher in 2013 compared with 2012. The $35 million increase includes $12 million of costs that were incurred in first quarter 2013 as part of our Expense Reduction Initiative (see 'Executive Summary - Expense Reduction Initiative' above for details).

The remaining $23 million increase was primarily due to higher business development costs, consulting and professional fees to assist us in our growth initiatives, and marketing costs.
Depreciation expense was $94 million in 2013, compared with $79 million in 2012. The increase of $15 million includes $5 million which was incurred in first quarter 2013 relating to the rationalization of property and systems as part of our Expense Reduction Initiative (see 'Executive Summary - Expense Reduction Initiative' above for details). The remaining $10 million increase is primarily due to a number of significant information technology related projects becoming operational during the year and the write-off of replaced systems and other assets.
Amortization of intangible assets was $55 million in 2013, a reduction of $4 million compared to 2012. The decrease primarily reflects the ongoing reduction in the HRH acquisition amortization.
Net gain on disposal of operations of $2 million was related principally to the disposal of our share in an Iberian associate.
Loss on Extinguishment of Debt
The Company incurred total losses on extinguishment of debt of $60 million during the year ended December 31, 2013. This was made up of a tender premium of $65 million, the write-off of unamortized debt issuance costs of $2 million and a credit for the reduction of the fair value adjustment on 5.625% senior notes due 2015 of $7 million.

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Income Taxes

The effective tax rate on ordinary income for 2013 was 20 percent, compared with 25 percent for 2012. The effective tax rate on ordinary income is calculated before the impact of certain discrete items. Discrete items occurring in 2013 with a significant impact on the Boardtax rate were:
an incremental US tax expense of $9 million recorded after the taking into account the impact of adjustments to the valuation allowance placed against US deferred tax assets, US costs of $16 million associated with the Expense Reduction Initiative, and Audit Committee.

Diversity

The Company is committedUS costs of $61 million associated with the extinguishment of debt;


further non-US costs of $30 million associated with the Expense Reduction Initiative that are generally relieved at a rate higher than the underlying rate;

a net benefit of $4 million associated with a reduction in the corporation tax rate being applied to maintaining diversitytemporary tax differences in the UK;

a net benefit of $7 million associated with a change in the recognition of unrecognized tax benefits outside of the US; and

a net expense of $1 million associated with tax on profits of prior periods to bring in line the Company’s tax provision to filed tax positions.
Including the impact of discrete items, the tax rate for 2013 was 24 percent. This compares to a tax charge of $101 million recorded on the Board as providednet loss from continuing operations of $337 million in 2012.

Interest in Earnings of Associates, net of Tax

The majority of our interest in earnings of associates relates to our share of ownership of Gras Savoye, the leading broker in France. Interest in earnings of associates, net of tax, in 2013 was $nil compared to $5 million in 2012. The decline was mainly driven by lower net income recorded in Gras Savoye due to the costs recognized in relation to a reorganization program undertaken in the Company’s Corporate Governance Guidelines. year designed to drive growth in revenues and operational efficiencies.
Consolidated Results for 2012 compared to 2011
Revenues
       Change attributable to:
Year ended December 31,2012 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 America1,306
 1,314
 (0.6)% — % —% (0.6)%
International1,028
 1,027
 0.1 % (4.8)% —% 4.9 %
Commissions and fees$3,458
 $3,414
 1.3 % (1.8)% —% 3.1 %
Investment income18
 31
 (41.9)%  
  
  
Other income4
 2
 100.0 %  
  
  
Total revenues$3,480
 $3,447
 1.0 %  
  
  
_________________
(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; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.

Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited.


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Total revenues increased by $33 million, or 1.0 percent, in 2012 compared to 2011, including 3.1 percent growth in organic commissions and fees partially offset by a $59 million, or 1.8 percent, negative impact from foreign exchange and a $13 million decrease in investment income due to continued falling yields on deposits.

Total commissions and fees in 2012 were $3,458 million, up $44 million, or 1.3 percent, from $3,414 million in 2011. Foreign currency movements negatively impacted commissions and fees by 1.8 percent. Organic commissions and fees growth was 3.1 percent.

New business growth was in the double-digits and there were modest benefits in the year from improving rates in certain business lines and geographies; these positive movements were however, offset by a slight increase in lost business.

The BoardGlobal segment reported 4.8 percent growth in commissions and fees, comprising 6.1 percent organic growth in commissions and fees and a 1.3 percent negative impact from foreign currency translation. Organic commissions and fees growth of 6.1 percent was led by high single-digit growth across Reinsurance and Willis Faber & Dumas. Global Specialties reported low single-digit growth as strong growth from our Marine, Energy, Financial Solutions, and Construction specialties were partially offset by declines in Aerospace, which continues to be hampered by competitive pricing and a soft rate environment.
The North America segment reported a 0.6 percent decline in organic commissions and fees, compared to 2011. Whilst new business levels were higher than in 2011 resulting in growth in certain regions and business segments, these were more than offset by lower Loan Protector revenues, the impact of the weakened economy, which negatively impacted our Construction and Human Capital practice groups, and a modest decrease in client retention levels.
The International segment reported essentially flat growth in commissions and fees compared with 2011, comprising 4.9 percent organic commissions and fees growth and a 4.8 percent negative impact from foreign currency translation. Organic growth in commissions and fees was led by double digit growth in our Latin America region, supported by high single-digit growth in Asia and Eastern Europe. Our Western Europe operations reported low single-digit growth despite the continued weakness of economies within the Eurozone.
Investment income in 2012 at $18 million was $13 million lower than in 2011, primarily due to declining net yields on cash and cash equivalents. Organic commissions and fees growth by segment is discussed further in 'Review of Segmental Results', below.
Salaries and Benefits

Salaries and benefits increased by $388 million, or 18.6 percent, in 2012 compared with 2011. Foreign currency movements lowered salaries and benefits by $34 million, or 1.6 percent. The year-on-year net favorable impact from foreign currency translation was driven primarily by the movement of the US dollar against the pound sterling (in which our London Market based operations incur the majority of their expenses).

Excluding the impact of foreign exchange, salaries and benefits increased by $422 million, or 20.2 percent, compared with 2011 primarily due to the $452 million expense recognized as a result of the change in remuneration policy for future incentive awards and the Governance Committee believe that diversityelimination of the repayment requirement on past awards; an approximate $55 million increase in salaries, including associated taxes and benefits, resulting from new hires and annual pay reviews; increases in incentives linked to production; long term incentive plans and the amortization of cash retention awards. These increases were partially offset by the $135 million expense recognized in salaries and benefits associated with the 2011 Operational Review and lower defined benefit pension plan expenses.
Other Expenses
Other operating expenses were $75 million, or 11.4 percent, lower in 2012 compared with 2011. Foreign currency movements positively impacted expenses by $35 million, or 5.3 percent.
Excluding the impact of foreign exchange, other operating expenses decreased by $40 million or 6.1 percent compared with 2011 primarily due to the non-recurrence of the $73 million expense recognized in other operating expenses associated with the 2011 Operational Review and the $10 million insurance recovery in 2012 related to the previously disclosed fraudulent activity, partially offset by increases in certain other costs, including provisioning for bad debts and higher technology expenditure.

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Depreciation expense was $79 million in 2012, compared with $74 million in 2011. The increase is primarily due to a number of information technology related projects becoming operational at the end of 2011 and during first half 2012 partially offset by $5 million depreciation charge incurred in 2011 related to the Operational Review.
Amortization of intangible assets was $59 million in 2012, a reduction of $9 million compared to 2011. The decrease primarily reflects the ongoing reduction in the HRH acquisition amortization.
Goodwill impairment charge was $492 million in 2012. This was a non-cash charge recognized related to the impairment of the carrying value of the North America reporting unit's goodwill. For further information on our testing for goodwill impairment, see 'Critical Accounting Estimates', below.
Net loss on disposal of operations of $3 million was related principally to the dissolution of a joint venture operation in India and loss recognized on disposal of Mauritian reinsurance operation.
Interest Expense
Interest expense was $128 million in 2012 compared to $156 million in 2011. The decrease in interest expense primarily reflects the non-recurrence of a $10 million write-off of debt fees in 2011 related to the refinancing of the term loan and revolving credit facility and savings as a result of the lower coupon payable and reduced fee amortization on our new debt issued in March 2011 and December 2011.
Income Taxes

The effective tax rate on ordinary income for 2012 was 25 per cent, compared with 24 per cent for 2011, with the increase driven primarily by higher than anticipated US state income tax expense, the benefit from the higher tax rates at which costs associated with the 2011 Operational Review are relieved and from a different geographic mix of earnings. The effective tax rate on ordinary income is calculated before the impact of certain discrete items. Discrete items occurring in 2012 with a significant impact on the Boardtax rate are:

a tax credit of $34 million on the $492 million charge related to the impairment of the carrying value of the North America reporting unit's goodwill. The tax credit arises in relation to that part of the charge that is importantattributable to ensuringtax deductible goodwill;

tax related to the $252 million charge for the additional incentive accrual arising from a rounded perspective. Diversitychange in remuneration policy which is broadly interpretedgenerally relieved at a higher rate than the underlying rate;

tax related to the $200 million charge for the write-off of unamortized retention awards which is generally relieved at a higher rate than the underlying rate;

a valuation allowance of $125 million made against US deferred tax assets recorded following cumulative losses being incurred in the US. The cumulative losses are primarily attributable to exceptional charges associated with the 2011 Operational review, the impairment of North America goodwill and the additional incentive costs associated with the change in remuneration policy. Of the total valuation allowance, $113 million was recorded in the income statement and $12 million in other comprehensive income;

a non-deductible charge of $11 million for a settlement with former partners related to the termination of a joint venture arrangement in India;

adjustments made in respect of tax on profits of prior periods to bring in line the Company's tax provisions to filed tax positions; and

the net tax impact of the $3 million loss on disposal of operations.

Including the impact of discrete items, a tax charge of $101 million was recorded on a net loss from continuing operations before interest in earnings of associates of $337 million. This compares to a tax rate of 13 percent in 2011.



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Interest in Earnings of Associates, net of Tax

The majority of our interest in earnings of associates relates to our share of ownership of Gras Savoye, the leading broker in France. Interest in earnings of associates, net of tax, in 2012 was $5 million compared to $12 million in 2011. The decline was mainly driven by a reduction in net income reported by our principal associate, Gras Savoye.
Similar to many businesses located in the Eurozone, Gras Savoye's operations are being pressured by the Boardeconomic conditions. In addition, Gras Savoye appointed a new CEO and began undergoing a business review that was designed to include viewpoints, background, experience, industry knowledge,drive growth in revenues and geography, as well as more traditional characteristicsimprove operational efficiencies.
Discontinued Operations, net of diversity, such as raceTax
There were no discontinued operations in 2012.
In 2011 the Company disposed of Global Special Risks, LLC, Faber & Dumas Canada Ltd and gender. the trade and assets of Maclean, Oddy & Associates, Inc. The gain (net of tax) on this disposal was $2 million.

LIQUIDITY AND CAPITAL RESOURCES
Liquidity

We believe that our commitmentbalance sheet and strong cash flow provide us with the platform and flexibility to remain committed to our cash allocation strategy of:

•investing in the business for growth;
•value-creating merger and acquisition activity;
•generating a steadily rising dividend; and
•the repurchase of shares.

Our principal sources of liquidity are cash from operations, available cash and cash equivalents and amounts available under our three revolving credit facilities, excluding the UK facility which is demonstratedsolely for use by our main regulated UK entity in certain exceptional circumstances.

Our principal short-term uses of liquidity and capital resources are operating expenses, capital expenditures, shareholder returns, funding defined benefit pension plans and the repurchase of shares.

Our long-term liquidity requirements consist of the principal amount of outstanding notes; borrowings under our 7-year term loan and revolving credit facilities; and our pension contributions as discussed below.

As at December 31, 2013 cash and cash equivalents were $796 million, an increase of $296 million compared to December 31, 2012. Included within cash and cash equivalents is $707 million available for corporate purposes and $89 million held within our regulated UK entities for regulatory capital adequacy requirements.

Cash flows from operating activities increased to $561 million in 2013 from $525 million in 2012. In addition, funds were also provided from the disposal of fixed and intangible assets $12 million (2012: $5 million), $155 million proceeds from the issue of shares (2012: $53 million), and $20 million proceeds from the disposal of operations (2012: $nil).

As at December 31, 2013 there was $nil drawn down on the revolving credit facilities (2012: $nil).

The primary uses of funds during 2013 included $346 million of cash incentive award payments relating to 2012, $193 million related to payments of dividends, $150 million cash contributions, including employees' salary sacrifice contributions, to our defined benefit schemes, capital expenditures of $112 million related to leasehold improvements, information technology and transformation projects, $30 million for the acquisition of Prime Professions and CBC Broker Srl, and a $4 million cash payment to acquire the remaining noncontrolling interest in our Colombia reinsurance operation.


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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 the next twelve months.
The Company is authorized to buy back its ordinary shares by way of redemption, and intends to buy back $200 million shares in 2014 to offset the increase in shares from the exercise of employee stock options.
The impact of movements in liquidity, debt and EBITDA in 2013 had a negative impact on the interest coverage ratio and a positive impact on the leverage ratio. Both ratios remain well within the requirements of the revolving credit facility covenants.

Debt
Total debt, total equity and the capitalization ratio at December 31, 2013 and 2012 were as follows (in millions, except percentages):
 December 31, 2013 December 31, 2012
Long-term debt$2,311
 $2,338
Short-term debt and current portion of long-term debt$15
 $15
Total debt$2,326
 $2,353
Stockholders' equity$2,215
 $1,699
Capitalization ratio51.2% 58.1%
On July 23, 2013 we entered into an amendment to our existing credit facilities to extend both the amount of financing and the maturity date of the facilities. As a result of this amendment, our revolving credit facility was increased from $500 million to $800 million. The maturity date on both the revolving credit facility and the $300 million term loan was extended to July 23, 2018, from December 16, 2016. At the amendment date we owed $281 million on the term loan and there was no change to this amount as a result of the refinancing.
The 7-year term loan facility expiring 2018 bears interest at LIBOR plus 1.50% and is repayable in quarterly installments and a final repayment of $186 million is due in the third quarter of 2018. In 2013, we made $15 million of mandatory repayments against this 7-year term loan. Drawings under the $800 million revolving credit facility bear interest at LIBOR plus 1.50%. These margins apply while the Company’s debt rating remains BBB-/Baa3. As of December 31, 2013 $nil was outstanding under this revolving credit facility (December 31, 2012: $nil).
On August 15, 2013 the Company issued $250 million of 4.625% senior notes due 2023 and $275 million of 6.125% senior notes due 2043. The effective interest rates of these senior notes are 4.696% and 6.154%, respectively, which include the impact of the discount upon issuance.
On July 25, 2013 the Company commenced an offer to purchase for cash any and all of its 5.625% senior notes due 2015 and a portion of its 6.200% senior notes due 2017 and its 7.000% senior notes due 2019 for an aggregate purchase price of up to $525 million. On August 22, 2013 the proceeds from the issue of the senior notes due 2023 and 2043 were used to fund the purchase of $202 million of 5.625% senior notes due 2015, $206 million of 6.200% senior notes due 2017 and $113 million of 7.000% senior notes due 2019.
The Company incurred total losses on extinguishment of debt of $60 million during the year ended December 31, 2013. This was made up of a tender premium of $65 million, the write-off of unamortized debt issuance costs of $2 million and a credit for the reduction of the fair value adjustment on 5.625% senior notes due 2015 of $7 million.
The agreements relating to our 7-year term loan facility expiring 2018 and the revolving $800 million credit facility contain requirements to maintain maximum levels of consolidated funded indebtedness in relation to consolidated EBITDA and minimum level of consolidated EBITDA to consolidated cash interest expense, 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, 2013, the Company was in compliance with all covenants.
These refinancing actions have lengthened our debt maturity profile. At December 31, 2013, we had $nil outstanding under the $800 million facility (December 31, 2012: $nil), the UK $20 million facility (December 31, 2012: $nil) and the RMB facility

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(December 31, 2012: $nil). At December 31, 2013 the only mandatory debt repayments falling due over the next 12 months are scheduled repayments on our 7-year term loan totaling $15 million.
Pensions
UK plan
The Company made cash contributions of $88 million in 2013 (2012: $80 million) into the UK defined benefit pension plan, and $12 million (2012: $12 million) in respect of employees' salary sacrifice contributions.
Contributions to the UK defined benefit pension plan in 2014 are expected to total $83 million, of which approximately $23 million relates to on-going contributions calculated as 15.9 percent of active plan members’ pensionable salaries and approximately $60 million relates to contributions towards funding the deficit. Additionally $12 million will be made in respect of employees' salary sacrifice contributions.
In addition, further contributions may be payable based on a profit share calculation (equal to 20 percent of EBITDA in excess of $900 million per annum as defined by the current structurerevised schedule of contributions) and an exceptional return calculation (equal to 10 percent of any exceptional returns made to shareholders, for example, share buybacks and special dividends). Aggregate contributions under the deficit funding contribution and the profit share calculation are capped at £312 million ($517 million) over the six years ended December 31, 2017.
The schedule of contributions is automatically renegotiated after three years and at any earlier time jointly agreed by the Company and the Trustee. During 2014 we will be required to negotiate a new funding arrangement which may change the contributions we are required to make in the future.
US plan
We made cash contributions to our US defined benefit plan of $40 million in 2013 and in 2012.
We will make cash contributions of approximately $30 million to the US plan in 2014.
Other defined benefit pension plans
We made cash contributions to our other defined benefit pension plans of $10 million in 2013 and $11 million 2012.
In 2014, we expect to contribute approximately $9 million to these schemes.

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Cash flow
Summary consolidated cash flow information (in millions):
 Year Ended December 31,
 2013 2012 2011
Cash provided by operating activities 
  
  
Net cash provided by continuing operating activities$561
 $525
 $441
Net cash used in discontinued operations—
 —
 (2)
Total net cash provided by operating activities561
 525
 439
Cash flows from investing activities 
  
  
Total net cash used in continuing investing activities(120) (172) (101)
Cash flows from financing activities 
  
  
Total net cash used in continuing financing activities(137) (291) (214)
Increase in cash and cash equivalents304
 62
 124
Effect of exchange rate changes on cash and cash equivalents(8) 2
 (4)
Cash and cash equivalents, beginning of year500
 436
 316
Cash and cash equivalents, end of year$796
 $500
 $436
This summary consolidated cash flow should be viewed in addition to, not in lieu of, the Company’s consolidated financial statements.
Consolidated Cash Flow for 2013 compared to 2012
Operating Activities
Net cash provided by operating activities in 2013 increased by $36 million to $561 million compared with 2012.
The $561 million cash from operations comprises net income of $377 million, net $313 million of non-cash adjustments to reconcile net income to cash provided by operating activities and working capital movements
The non-cash adjustments included depreciation, amortization of intangible assets, share-based compensation, gain on derivative instruments, provision for deferred income taxes and the tender premium on early redemption of our Boarddebt, which is presented as a financing cash item.
Movements in working capital included $346 million of incentive payments and $150 million cash contributions (including $12 million for employees’ salary sacrifice) to our defined benefit pension schemes. Additionally, there was a $116 million increase in accounts receivable, as revenue recognized in 2013 was greater than cash collection, and $445 million positive movement in other liabilities which included incentives accrued during 2013 that will be paid in 2014.
The $36 million increase in cash provided by operating activities in 2013 compared to 2012 was primarily driven by favorable movements in working capital versus the prior year.
Investing Activities
Net cash used in investing activities in 2013 was $120 million including, capital expenditure of $112 million, cash used to purchase subsidiaries, intangible assets and other investments of $44 million partly offset by $12 million cash received from the sale of fixed and intangible assets and $24 million of proceeds from the disposal of operations and the varied backgroundssale of the Company’s holding in a Spanish associate company.
Financing Activities
Net cash used in financing activities in 2013 was $137 million primarily due to total dividends paid, including dividends paid to noncontrolling interests, of $203 million, a net $72 million outflow in relation to the refinancing in the third quarter 2013, discussed below, and skill sets$15 million of mandatory repayments against the term loan offset by cash receipts of $155 million from the issue of shares.

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The refinancing during 2013 resulted in a net cash outflow of $72 million which included: $521 million cash paid to repurchase $202 million of 5.625% senior notes due 2015, $206 million of 6.200% senior notes due 2017 and $113 million of 7.000% senior notes due 2019, the tender premium of $65 million and debt issuance costs of $8 million; this was primarily funded by $522 million cash inflow from senior notes issued, discussed earlier, and free operating cash flows.
Consolidated Cash Flow for 2012 compared to 2011
Operating Activities
Total net cash provided by continuing operating activities was $525 million in 2012, compared with $441 million in 2011. The increase of $84 million primarily reflects a $100 million reduction in cash outflows relating to the 2011 Operational Review and a higher volume of collections made on higher revenues and accounts receivable compared with 2011, partially offset by the modest decline in operating earnings, adjusted for non-cash items; and the $11 million year-on-year increase in payments for cash retention awards.
Investing Activities
Total net cash used in continuing investing activities was $172 million in 2012 compared to $101 million in 2011. The $71 million increase in net outflow was due to higher capital spend, including; the fit-out and refurbishment of certain leasehold properties, including the completion of the European Data Center; development and implementation of a number of information technology projects including, financial systems and trading platforms; a $23 million increase in payments to acquire subsidiaries, primarily related to the acquisition of Avalon Actuarial, Inc, a Canadian actuarial consulting firm; and the non-recurrence of proceeds from the disposal of certain businesses during 2011.
Financing Activities
Total net cash used in continuing financing activities was $291 million in 2012 compared to $214 million in 2011. The $77 million increase in cash used was the result of the $100 million cash outflow relating to the repurchase of 2.8 million shares during 2012 and the $30 million year-on-year increase in payments made to acquire noncontrolling interests including, Gras Savoye Re, and our Columbian retail operation; partially offset by the reduction in repayments of debt, net of the refinancing during 2011.
Consolidated Cash Flow for 2011 compared to 2010
Operating Activities
Total net cash provided by continuing operating activities was $441 million in 2011 compared with $491 million in 2010. The decrease of $50 million primarily reflects the $57 million year-on-year increase in accounts receivable, reflecting increased revenue but also slower collections in the US due to current economic conditions; cash outflows of approximately $120 million relating to the 2011 Operational Review; and the $24 million year-on-year increase in payments for cash retention awards. These were partly offset by realized cash savings resulting from the 2011 Operational Review and other working capital movements.
Investing Activities
Total net cash used in continuing investing activities was $101 million in 2011 compared to $94 million in 2010. The $101 million net outflow was mainly due to capital spend including fit-out of our Nashville office and IT project investments.
Financing Activities
Total net cash used in continuing financing activities was $214 million in 2011 compared with $293 million in 2010. We issued $800 million of new debt in March 2011 and net proceeds of approximately $787 million were used to repurchase and redeem $500 million of 12.875% senior notes due 2016. As part of this debt refinancing we made a $158 million make-whole payment on the redemption of our 12.875% senior notes due 2016. Other significant financing activities in 2011 included refinancing our bank facility in December 2011, dividend payments of $180 million and receipt of $60 million from the issue of shares.

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Own funds
As of December 31, 2013, we had cash and cash equivalents of $796 million, compared with $500 million at December 31, 2012. Additionally, $822 million was available to draw under our revolving credit facilities at December 31, 2013, compared with $520 million at December 31, 2012.
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. As of December 31, 2013, we had fiduciary funds of $1.7 billion, compared with $1.8 billion at December 31, 2012.
Share buybacks

The Company is authorized to buy back shares, by way of redemption, and will consider whether to do so from time to time, based on many factors, including market conditions. The Company is authorized to purchase up to one billion shares from time to time in the open market (such open market purchases would be effected as redemptions under Irish law) and it may also redeem its shares through negotiated trades with persons who are not affiliated with the Company as long as the cost of the acquisition of the Company's shares does not exceed $824 million.

As of February 14, 2014 there remains approximately $824 million available to purchase common shares under the current directorsauthorization.
The Company intends to buy back $200 million in shares in 2014 to offset the increase in shares outstanding resulting from the exercise of employee stock options. The buybacks will be made in the open market or through privately-negotiated transactions, from time to time, depending on market conditions.
The share buy back program may be modified, extended or terminated at any time by the Board of Directors.
Dividends
Cash dividends paid in 2013 were $193 million compared with $185 million in 2012 and nominees, which include$180 million in 2011. In February 2014, we declared a quarterly cash dividend of $0.30 per share, an annual rate of $1.20 per share, an increase of 7.1 percent over the prior 12 month period.



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REVIEW OF SEGMENTAL RESULTS
We organize our business into three women, a person of Asian descentsegments: Global, North America and a mix of American, BritishInternational. Our Global business provides specialist brokerage and Irish citizens.

Biographical Information

Set forth below is each current director’sconsulting services to clients worldwide for risks arising from specific industries and each director nominee’s biographical information. Below such informationactivities. 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, 2013 (in millions except percentages):
 2013 2012 2011
 Revenues 
Operating
Income
 
Operating
Margin
 Revenues 
Operating
Income (Loss)
 
Operating
Margin
 Revenues 
Operating
Income
 
Operating
Margin
Global$1,191
 $334
 28.0% $1,129
 $372
 32.9 % $1,082
 $352
 32.5%
North America1,386
 269
 19.4% 1,313
 240
 18.3 % 1,323
 271
 20.5%
International1,078
 181
 16.8% 1,038
 183
 17.6 % 1,042
 221
 21.2%
Total Retail2,464
 450
 18.3% 2,351
 423
 18.0 % 2,365
 492
 20.8%
Corporate & Other—
 (99) n/a
 —
 (1,004) n/a
 —
 (278) n/a
Total Consolidated$3,655
 $685
 18.7% $3,480
 $(209) (6.0)% $3,447
 $566
 16.4%
Global
Our Global operations comprise Global Specialties, Willis Re, Placement, and Willis Capital Markets & Advisory (WCMA).
The following table sets out revenues, operating income, organic commissions and fees growth and operating margin for the three years ended December 31, 2013 (in millions, except percentages):
 2013 2012 2011
Commissions and fees$1,188
 $1,124
 $1,073
Investment income3
 5
 9
Total revenues$1,191
 $1,129
 $1,082
Operating income$334
 $372
 $352
Revenue growth5.5% 4.3% 8.6%
Organic commissions and fees growth (a)
5.6% 6.1% 6.6%
Operating margin28.0% 32.9% 32.5%
_________________
(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; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.
2013 compared to 2012
Revenues
Commissions and fees of $1,188 million were $64 million, or 5.7 percent, higher in 2013 compared with 2012. The increase includes organic growth of 5.6 percent and 1.0 percent growth from acquisitions and disposals, most notably from the acquisition of Prime Professions in second quarter 2013, partially offset by a 0.9 percent negative impact from foreign currency movements.
The 5.6 percent organic growth in commissions and fees was driven by strong new business growth and higher client retention levels compared with the year ago period, partially offset by lost business. Rates had no material impact on commissions and fees.
Willis Re reported high single-digit growth, with North America leading the way with double-digit results. New business was strong across all three divisions and we reported increased client retention levels compared to the prior year.
Specialty reported mid single-digit growth, with solid performance in our Financial and Executive Risk, and P&C and Construction. Growth from new business was solid and we saw increased client retention levels compared to 2012.

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Willis Capital Markets & Advisory performed solidly but was down compared to the very strong result it recorded in 2012 relating to meaningfully higher volumes of advisory fees and catastrophe bond deals.
Client retention levels improved to 91.9 percent for 2013, compared with 90.3 percent for 2012.
Expenses
Total operating expenses of $857 million were $100 million, or 13.2 percent, higher for 2013 compared with 2012. Excluding the $8 million, or 1.1 percent, impact of favorable foreign currency movements, total operating expenses increased $108 million or 14.3 percent.
The year-on-year growth in expenses was primarily due to higher salaries and benefits as a result of increased incentives
from the change in remuneration policy and growth in commissions and fees. In addition, this increase also included the impact of the increase in headcount relative to the prior year, annual salary reviews and higher charges for share-based compensation.
Other expenses also increased compared to 2012 due to higher travel, accommodation and client entertaining costs to support business development and increased professional fees related to the strategic review of the segment.
Operating margin

Full year operating margin was 28.0 percent in 2013 and 32.9 percent in 2012. The decline was driven by the additional expenses discussed above, partially offset by solid commissions and fees growth.
2012 compared to 2011
Revenues
Commissions and fees of $1,124 million were $51 million, or 4.8 percent, higher in 2012 compared with 2011. Foreign exchange movements had a net 1.3 percent negative impact on commissions and fees; organic growth was 6.1 percent.
Organic growth included positive growth across Reinsurance, Global Specialties, Willis Faber & Dumas and WCMA, as strong new business and higher one-off transactions, primarily in WCMA, were partially offset by increases in lost business.
Organic growth in Global Specialties was led by strong performances from Energy, Marine, Financial Solutions and Construction Specialties reflecting single-digit net new business. This growth was partially offset by declines in Aerospace, which continued to be negatively impacted by competitive pricing and rate decreases.
Reinsurance reported mid single-digit growth in 2012, as growth in the International, Specialty and North America divisions was partially offset by the non-recurrence of a fee related to a 2011 profitability initiative. Rates had a modest positive impact on commission and fees in the year.
Willis Faber & Dumas also reported mid-single digit growth in 2012.WCMA is a transaction-oriented business and its results are more variable than some of our other businesses. In 2012 we reported significantly higher organic commissions and fees than in 2011. Growth in the key qualifications, attributes, skillsWCMA business was positively impacted by a higher volume of advisory and experiencescatastrophe bond deals closing during the year.
Client retention levels declined to 90.3 percent for 2012, compared with 91.3 percent for 2011.
Operating margin

Operating margin was 32.9 percent in 2012 and 32.5 percent in 2011. The organic growth in commissions and fees discussed above, thatand lower defined benefit pension costs were consideredoffset by higher salary and benefit expense due to the impact of annual salary increases and new hires, higher production linked incentives and increases to discretionary costs.

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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, Canada and Mexico.
The following table sets out revenues, operating income, organic commissions and fees growth and operating margin for the three years ended December 31, 2013 (in millions, except percentages):
 2013 2012 2011
Commissions and fees (a)
$1,377
 $1,306
 $1,314
Investment income2
 3
 7
Other income (b)
7
 4
 2
Total revenues$1,386
 $1,313
 $1,323
Operating income$269
 $240
 $271
Revenue growth5.6% (0.8)% (4.5)%
Organic commissions and fees growth (c)
4.9% (0.6)% (3.5)%
Operating margin19.4% 18.3 % 20.5 %
_________________
(a)
Commissions and fees included a positive $5 million adjustment to align the recognition of revenue in the North America Personal Lines business with the rest of the Group.
(b)
Other income comprises gains on disposal of intangible assets, which primarily arise from settlements through enforcing non-compete agreements in the event of losing accounts through producer defection or the disposal of books of business.
(c)
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; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.

2013 compared to 2012
Revenues
Commissions and fees of $1,377 million were $71 million, or 5.4 percent, higher in 2013 compared with 2012.
This increase was primarily due to organic growth of 4.9 percent and 0.6 percent positive impact from the acquisition of Avalon Actuarial, Inc. in fourth quarter 2012 partially offset by a 0.1 percent negative impact from foreign currency movements.
Commissions and fees included a positive $5 million adjustment to align the recognition of revenue in the North America Personal Lines business with the rest of the Group.
The 4.9 percent organic growth in commissions and fees was driven by strong new business growth and higher client retention levels compared with the year ago period, partially offset by lost business. Rates had a small positive impact on the full year's commissions and fees.
Growth was achieved across all our North America regions, led by the Governance CommitteeMetro, Midwest, Canada and CAPPPS regions. This was attributed to new business growth as well as increased client retention rates in almost all regions.
Similarly, most of the major practice groups recorded positive growth. Our two largest practices, Human Capital and Construction, recorded mid single-digit growth and in our other practices we recorded high single-digit growth in Real Estate and low single-digit growth in Financial & Executive Risks, Healthcare and Manufacturing.
Client retention levels were 92.0 percent in 2013 compared with 90.7 percent in 2012.

Expenses
Total operating expenses of $1,117 million were $44 million or 4.1 percent, higher for 2013 compared to 2012.
The year-on-year growth is primarily due to higher salaries and benefits most notably as a result of annual salary reviews. Salaries and benefits were also impacted by a higher incentives charge as a result of higher commissions and fees and the

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change in remuneration policy, and additional 401(k) match and medical charges, partially offset by lower charges for share-based compensation and pensions.
In addition, there was an increase in other expenses due to a $6 million write-off of a receivable related to a non-E&O settlement, professional fees related to the strategic review of the segment, and higher travel and accommodation expense to support revenue growth and client retention, partially offset by a $4 million insurance premium accrual reversal.
Foreign currency movements had no material impact on expenses.
Operating margin

Operating margin in North America was 19.4 percent in 2013 compared with 18.3 percent in 2012 driven by solid commissions and fees growth.
2012 compared to 2011
Revenues
Commissions and fees of $1,306 million were $8 million, or 0.6 percent, lower in 2012 compared with 2011.
Organic commissions and fees growth declined 0.6 percent in 2012 compared with 2011, whilst new business levels were higher than in 2011, resulting in growth in certain regions and business segments. These were more than offset by lower Loan Protector revenues and the impact of the weakened economy.
The decline in the financial performance of our Loan Protector business had a 0.8 percent negative impact on North America organic growth in commissions and fees and negatively impacted the segment's revenue by $10 million. The Loan Protector decline was driven by the loss of clients through attrition and M&A activity, industry-wide commission pressures and a slowdown in business in its specialized market in the US in 2011.
Client retention levels were 90.7 percent in 2012 compared with 91.5 percent in 2011.
Operating margin

Operating margin in North America was 18.3 percent in 2012 compared with 20.5 percent in 2011, reflecting the adverse impact from the 0.6 percent decline in organic commissions and fees growth discussed above, a $4 million reduction in investment income due to declining yields, and increases to incentive expenses, production linked awards and share-based compensation. These were partly offset by a reduction to other expenses, including lower premises costs and a reduction in E&O provisions.

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International
Our International business comprises our retail operations in Western Europe, Central and Eastern Europe, the United Kingdom, Asia, Australasia, 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, operating income, organic commissions and fees growth and operating margin for the three years ended December 31, 2013 (in millions, except percentages):
 2013 2012 2011
Commissions and fees (a)
$1,068
 $1,028
 $1,027
Investment income10
 10
 15
Total revenues$1,078
 $1,038
 $1,042
Operating income181
 183
 221
Revenue growth3.9% (0.4)% 9.6%
Organic commissions and fees growth (b)
4.1% 4.9 % 4.8%
Operating margin16.8% 17.6 % 21.2%
________________
(a)
Commissions and fees in 2013 included a negative $15 million adjustment to align the recognition of revenue in China with the rest of the Group.
(b)
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; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.

2013 compared to 2012
Revenues
Commissions and fees of $1,068 million were $40 million, or 3.9 percent, higher in 2013 compared with 2012. Organic commissions and fees growth was 4.1 percent partially offset by 0.2 percent negative impact from foreign currency movements.
Organic growth included double-digit new business growth partly offset by lost business. Rates had no significant impact on commissions and fees.
Commissions and fees included the negative impact of a $15 million adjustment to align the recognition of revenue in China with the rest of the Group.
Latin America reported double-digit growth arising primarily from Brazil and Venezuela which was partially offset by a double-digit decline in Colombia.
Asia reported low-single digit growth. We recorded good growth throughout the region especially in Hong Kong and Korea, however the negative $15 million revenue recognition adjustment partially offset these results.
Eastern Europe reported high single-digit growth arising primarily from Russia tempered by a mid-single digit decline in Poland.
Western Europe reported low single-digit growth. Despite difficult economic conditions, Italy and Iberia produced mid-single digit growth partially offset by mid single-digit declines in Ireland and the Netherlands.
The UK reported a low single-digit decline amid a challenging economic environment.
Client retention rates were largely flat at 93.1 percent for 2013 compared to 93.3 percent for 2012.
Expenses

Total operating expenses of $897 million were $42 million, or 4.9 percent, higher for 2013 compared with 2012. Foreign currency movements favorably impacted operating expenses by $12 million or 1.4 percent; excluding the impact of foreign currency movements total operating expenses increased $54 million or 6.3 percent.

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This increase was due primarily to higher salaries and benefits as a result of new hires, annual salary reviews, higher incentives due to the change in remuneration policy and an increased charge for share-based compensation.
In addition to this, we incurred professional fees related to the strategic review of the segment, higher travel and accommodation expense to support business development, and a $5 million VAT related charge. These charges were partially offset by a reduced bad debt expense and non-recurring 2012 legal claims settlements.
Operating margin

Operating margin in International was 16.8 percent in 2013, compared with 17.6 percent in 2012. The decline was driven by the increase in expenses discussed above partially offset by solid commissions and fees growth.
2012 compared to 2011
Revenues
Commissions and fees of $1,028 million were $1 million, or 0.1 percent, higher in 2012 compared with 2011. Organic commissions and fees growth of 4.9 percent was partially offset by negative foreign exchange movements of 4.8 percent. Organic growth included double digit new business growth, partly offset by slight increases to lost business. Rates and other market factors had no significant impact on commissions and fees in the year.
Despite the ongoing economic difficulties faced by the Eurozone, our large retail operations in the region delivered low single-digit growth in 2012, driven by strong growth in Germany, Sweden and Denmark, although this growth was partially offset by declines in Ireland and Norway.
Our Latin American operation delivered high double-digit growth in 2012, the result of significant new business growth; principally in Brazil, Venezuela and Argentina.
Asia reported high single-digit growth in 2012 led by strong growth in Japan, China and Korea.
Organic growth in our UK retail operation was flat in 2012, compared with 2011, this reflects a stabilization of the business in the region following a 2.3 percent decline in 2011.

A significant part of International's revenues are earned in currencies other than the US dollar, most notably the euro and the Australian dollar. The net 4.8 percent negative impact from foreign currency translation in 2012 primarily reflected the weakening of the US dollar against these and other currencies in which we earn International revenues.

Client retention levels decreased to 93.3 percent for 2012, compared with 93.7 percent for 2011.
Operating margin

Operating margin in International was 17.6 percent in 2012, compared with 21.2 percent in 2011. The decrease primarily reflected significant increases in salaries and benefits as a result of new hires supporting growth in targeted geographies, annual pay increases, the negative impact of foreign exchange on revenues and increases to certain provisions including bad debts. These were partly offset by the benefit from organic commissions and fees discussed above.

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Corporate and Other
The Company evaluates the performance of its segments based on organic commissions and fees growth and operating income. For internal reporting and segmental reporting, items for which segmental management are not held responsible for are held within ‘Corporate and Other’.
Corporate and Other comprises the following (in millions):
 2013 2012 2011
      
Amortization of intangible assets$(55) $(59) $(68)
Additional incentive accrual for change in remuneration policy (a)
—
 (252) —
Write-off of unamortized cash retention awards (b)
—
 (200) —
Goodwill impairment charge (c)
—
 (492) —
India joint venture settlement (d)
—
 (11) —
Insurance recovery (e)
—
 10
 —
Write-off of uncollectible accounts receivable balance in Chicago (f)
—
 (13) (22)
Net gain (loss) on disposal of operations (d)
2
 (3) 4
Foreign exchange hedging3
 8
 5
Foreign exchange gain (loss) on the UK pension plan asset8
 (1) —
2011 Operational Review—
 —
 (180)
FSA Regulatory settlement—
 —
 (11)
Expense Reduction Initiative(46) —
 —
Fees related to the extinguishment of debt(1) —
 —
Other (g)
(10) 9
 (6)
Total Corporate and other$(99) $(1,004) $(278)
_________________
(a)
Additional incentive accrual recognized following the replacement of annual cash retention awards with annual cash bonuses which do not feature a repayment requirement.
(b)
Write-off of unamortized cash retention awards following the decision to eliminate the repayment requirement on past awards.
(c)
Non-cash charge recognized related to the impairment of the carrying value of the North America reporting unit's goodwill.
(d)
$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, a $1 million loss on disposal of operations was recorded related to the termination.
(e)
Insurance recovery, recorded in Other operating expenses, related to a previously disclosed fraudulent activity in Chicago. See 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods' discussed above.
(f)
Write-off of uncollectible accounts receivable balance relating to periods prior to January 1, 2011, see 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods' discussed above.
(g)
Other includes $7 million in 2013 (2012: $7 million, 2011: $12 million) from the release of funds and reserves related to potential legal liabilities.


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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:
pension expense (discount rates, expected asset returns and mortality);
intangible assets and goodwill impairment (determination of reporting units, fair value of reporting units and annual goodwill impairment analysis);
income taxes; and
commitments, contingencies and accrued liabilities.
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 of 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 employees in the UK are offered the opportunity to join a defined contribution plan and in the US are offered the opportunity to join a 401(k) plan. We also have smaller defined benefit plans in Ireland, Germany, Norway and the Netherlands, a non-qualified plan in the US and an unfunded plan in the UK. These smaller defined benefit plans have combined total assets of $168 million and a combined net liability for pension benefits of $27 million as of December 31, 2013. Elsewhere, pension benefits are typically provided through defined contribution plans.
We recorded a $5 million and a $4 million net periodic benefit income on our UK and US defined benefit pension scheme respectively in 2013, compared with a net periodic benefit income of $5 million on the UK scheme and a net periodic benefit cost of $3 million on the US scheme in 2012. On our international defined benefit pension plans, US non-qualified plan and UK unfunded plan, we recorded a net periodic benefit cost of $5 million in 2013, compared with $4 million in 2012.
Based on December 31, 2013 assumptions (except for one update - the expected rate of return in the UK pension plan changed from 7.25% to 7.00%), we expect the net pension credit in 2014 will increase $7 million for the UK plan. The net pension credit will increase by $4 million for the US plan and the net pension charge will decrease by $1 million for the other 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. Our approach to determining appropriate assumptions for our UK and US pension plans is set out below.
UK plan
 
As disclosed
using
December 31,
2013
assumptions(a)
 
Impact of a
0.50 percentage
point increase
in the expected
rate of return
on assets(b)
 
Impact of a
0.50 percentage
point increase
in the discount
rate(b)
 
One year
increase in
mortality
assumption(c)
 (millions)
Estimated 2014 (income) / expense$(12) $(15) $(24) $8
Projected benefit obligation at December 31, 20132,785
 n/a
 (254) 56
_________________
(a)
Except for the expected rate of return updated to 7%.
(b)
With all other assumptions held constant.
(c)
Assumes all plan participants are one year younger.

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Discount rate
During 2013 we continued to use a duration-based approach, which more closely matches the actual timing of expected cash flows to the applicable discount rate. The selected rate used to discount UK plan liabilities in 2013 was 4.40% consistent with the 4.40% used at December 31, 2012. During 2013, sterling high-quality corporate bond yields had risen slightly at shorter to median durations but fallen at longer durations however, the rate consistent with expected maturity of the plan's liabilities was unchanged.
Expected and actual asset returns
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 2013 was 7.25% (2012: 7.50%), equivalent to an expected return in 2013 of $191 million (2012: $181 million). Effective January 1, 2014, the expected long-term rate of return was decreased to 7.00%. The decrease in the expected long-term rate of return followed a change in the underlying target asset mix, which reflects the actions taken during 2013 in accordance with the de-risking strategy proposed by the Trustees which will lead to a strategic target asset allocation with a greater weighting to non-return seeking assets.
The expected and actual returns on UK plan assets for the three years ended December 31, 2013 were as follows:
 
Expected
return on
plan assets
 
Actual
return
on plan
assets
 (millions)
2013$191
 $255
2012181
 226
2011161
 269
Mortality
The mortality assumption used during 2013 is the 90/105% PNA00 table for males and females, and is unchanged from the assumptions used during 2012.
As an indication of the longevity assumed, our calculations assume that a UK male retiree aged 65 at December 31, 2013 would have a life expectancy of 24 years.
US plan
 
As disclosed
using
December 31, 2013
assumptions
 
Impact of a
0.50 percentage
point increase
in the expected
rate of return
on assets(a)
 
Impact of a
0.50 percentage
point increase
in the discount
rate(a)
 
One year
increase in
mortality
assumption(b)
 (millions)
Estimated 2014 (income) / expense$(8) $(4) $—
 $2
Projected benefit obligation at December 31, 2013864
 n/a
 (51) 22
_________________
(a)
With all other assumptions held constant.
(b)
Assumes all plan participants are one year younger.
Discount rate
The discount rate at December 31, 2013 was 4.76%, an increase of 69 basis points from the discount rate of 4.07% at December 31, 2012. The increase in the discount rate reflects the increase in high-quality corporate bond yields during 2013.
The impact of the higher discount rate in 2013 decreased the projected benefit obligation by approximately $86 million.

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Expected and actual asset returns
The expected long-term rate of return used for determining the net US pension scheme expense in 2013 was 7.25% (2012: 7.25%)
The expected and actual returns on US plan assets for the three years ended December 31, 2013 were as follows:
 
Expected
return on
plan assets
 
Actual
return
on plan
assets
 (millions)
2013$51
 $60
201246
 80
201144
 34
Mortality
The mortality assumption at December 31, 2013 is the RP-2000 Mortality Table (blended for annuitants and non-annuitants), projected by Scale AA to 2021 for annuitants and 2029 for non-annuitants (December 31, 2012: RP-2000 Mortality Table (blended for annuitants and non-annuitants), projected by Scale AA to 2020 for annuitants and 2028 for non-annuitants).
As an indication of the longevity assumed, our calculations assume that a US male retiree aged 65 at December 31, 2013, 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’ which includes client lists, client relationships, trade names and non-compete agreements; and
•‘Contract-based, Technology and Other’ which 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% 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.
We review purchased intangible assets with finite lives for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability of these intangible assets is assessed based on the estimated undiscounted future cash flows expected to result from the continued use of the asset. If the undiscounted future cash flows are less than the carrying amount, the purchased intangible assets with finite lives are considered to be impaired. The amount of the impairment is measured as the difference between the carrying value and the fair value.
Goodwill impairment review
We test goodwill for impairment annually or whenever events or circumstances indicate impairment may have occurred.
The goodwill impairment test is a two step analysis. Step One requires the fair value of each reporting unit to be compared to its carrying value. If the fair value of a reporting unit is determined to be greater than the carrying value of the reporting unit, goodwill is not considered impaired and no further testing is necessary. If the fair value of a reporting unit is less than the carrying value, we perform Step Two. Step Two requires the implied fair value of reporting unit goodwill to be compared with the carrying amount of that goodwill. Determining the implied fair value of goodwill requires a valuation of the reporting unit’s tangible and intangible assets and liabilities in a manner similar to the allocation of the purchase price in a business combination. Any excess of the value of a reporting unit over the amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

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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.
Determination of reporting units
We have determined our reporting units to be consistent with our operating segments: North America; International and Global. Goodwill is allocated to these reporting units based on the original purchase price allocation for acquisitions within the reporting units.
Fair value of reporting units
The fair value of each reporting unit is estimated using a discounted cash flow methodology and, in aggregate, validated against our market capitalization.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include estimations of future cash flows which are dependent on internal forecasts, long-term rate of growth for our business and determination of our weighted average cost of capital.
We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Therefore changes in these estimates and assumptions could materially affect the determination of fair value and result in goodwill impairment.
In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each person nominatedof our reporting units.
Annual goodwill impairment analysis
Our annual goodwill impairment analysis is performed each year at October 1. At October 1, 2013 our analysis showed the estimate fair value of each reporting unit was in excess of carrying value, and therefore did not result in an impairment charge.
The goodwill impairment analysis as of October 1, 2012 concluded that an impairment charge was required to reduce the carrying value of the goodwill associated with the Company's North America reporting unit. The goodwill impairment charge for election atthe North America reporting unit amounted to $492 million. There was no impairment for the Global and International reporting units, as the fair values of these units were significantly in excess of their carrying value.
Under the income approach, the fair value of the North America reporting unit was determined based on the present value of estimated future cash flows. The fair value measurements used unobservable inputs in a discounted cash flow model based on the Company's most recent forecasts. Such projections were based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions, and the uncertainty related to the reporting unit's ability to execute on the projected cash flows with consideration of market comparables where appropriate. The discount rate was based on the weighted-average cost of capital adjusted for the relevant risk associated with market participant expectations of characteristics of the individual reporting units.
As the fair value of the reporting unit was less than its carrying value, the second step of the impairment test was performed to measure the amount of any impairment loss. In the second step, the North America reporting unit's fair value was allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets. The fair value of intangible assets associated with the North America reporting unit included customer relationship intangible assets, which were valued using a multiple period excess earnings approach involving discounted future projections of associated revenue streams.
The decline in the fair value of the North America reporting unit, as well as differences between fair values and carrying values for other assets and liabilities in the second step of the goodwill impairment test, resulted in an implied fair value of goodwill substantially below the carrying value of the goodwill for the reporting unit. As a result, the Company recorded a goodwill impairment charge of $492 million in 2012.
As previously disclosed, the North America reporting unit had been hampered by the declining Loan Protector business results, the effect of the soft economy in the U.S., which had significantly impacted the Construction and Human Capital sectors, and declining retention rates primarily related to M&A activity and lost legacy HRH business.
The decline in the estimated fair value of the reporting unit resulted from lower projected revenue growth rates and profitability levels as well as an increase in the discount rate used to calculate the discounted cash flows. The increase in the discount rate was due to increases in the risk-free rate and small company premium offset by a reduction to the expected market rate of

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return. The lower projected profitability levels reflect changes in assumptions related to organic revenue growth and cost rates which can be attributed to the declines discussed above and also includes consideration of the uncertainty related to the business's ability to execute on the projected cash flows.
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 next Annual General Meetingbusiness plans and tax planning strategies.
At December 31, 2013, we had gross deferred tax assets of Shareholders. (The absence$383 million (2012: $451 million) against which a valuation allowance of $196 million (2012: $221 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 particular bullet-point forsignificant increase or decrease in the effective tax rate and have a director doesmaterial 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 mean that the director doesposition will be sustained on examination by the tax authorities. The benefit recognized is the largest amount of tax benefit that has a greater than 50% 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 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 2013, there was a net increase in uncertain tax positions of $4 million compared to a net increase of $21 million in 2012. 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 possesspaid 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.

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CONTRACTUAL OBLIGATIONS
The Company’s contractual obligations as at December 31, 2013 are presented below:
 Payments due by
Obligations (c)
Total 2014 2015-2016 2017-2018 After 2018
 (millions)
7-year term loan facility expires 2018$274
 $15
 $39
 $220
 $—
Interest on term loan19
 5
 9
 5
 —
Revolving $500 million credit facility commitment fees9
 2
 4
 3
 —
5.625% senior notes due 2015148
 —
 148
 —
 —
Fair value adjustments on 5.625% senior notes due 20154
 —
 4
 —
 —
4.125% senior notes due 2016300
 —
 300
 —
 —
6.200% senior notes due 2017394
 —
 —
 394
 —
7.000% senior notes due 2019187
 —
 —
 —
 187
5.750% senior notes due 2021500
 —
 —
 —
 500
4.625% senior notes due 2023250
 —
 —
 —
 250
6.125% senior notes due 2043275
 —
 —
 —
 275
Interest on senior notes1,011
 115
 209
 146
 541
Total debt and related interest3,371
 137
 713
 768
 1,753
Operating leases (a)
1,235
 131
 213
 167
 724
Pensions566
 122
 244
 161
 39
Other contractual obligations (b)
91
 24
 16
 12
 39
Total contractual obligations$5,263
 $414
 $1,186
 $1,108
 $2,555
__________________
(a)
Presented gross of sublease income.
(b)
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.
(c)
The above excludes $41 million for liabilities for unrecognized tax benefits as we are unable to reasonably predict the timing of settlement of these liabilities.
Debt obligations and facilities
The Company’s debt and related interest obligations at December 31, 2013 are shown in the above table.
On July 23, 2013 we entered into an amendment to our existing credit facilities to extend the amount of financing of the facilities. As a result of this amendment, our revolving credit facility was increased from $500 million to $800 million. As at December 31, 2013 $nil was outstanding under the revolving credit facility.
This facility is in addition to the remaining availability of $22 million under the Company’s two other qualifications or skills in that area).

previously existing revolving credit facilities.

Joseph A. Califano, Jr. — Mr. Califano, age 81, joinedThe only mandatory repayments of debt over the Board on April 21, 2004 and currently serves as a membernext 12 months are the scheduled repayment of $15 million current portion of the Company’s Governance Committee7-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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As of December 31, 2013, the aggregate future minimum rental commitments under all non-cancellable operating lease agreements are as follows:
 
Gross rental
commitments
 
Rentals from
subleases
 
Net rental
commitments
 (millions)
2014$131
 $(15) $116
2015114
 (14) 100
201699
 (13) 86
201788
 (12) 76
201879
 (8) 71
Thereafter724
 (16) 708
Total$1,235
 $(78) $1,157
The Company leases its main London building under a 25-year operating lease, which expires in 2032. The Company’s contractual obligations in relation to this commitment included in the table above total $719 million (2012: $730 million). Annual rentals are $36 million (2012: $32 million) per year and the Executive Committee. Mr. CalifanoCompany has subleased approximately 29 percent (2012: 29 percent) of the premises under leases up to 15 years. The amounts receivable from subleases, included in the table above, total $66 million (2012: $76 million; 2011: $82 million).
Rent expense amounted to $141 million for the year ended December 31, 2013 (2012: $135 million; 2011: $127 million). The Company’s rental income from subleases was $15 million for the year ended December 31, 2013 (2012: $17 million; 2011: $18 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.
UK plan
During 2013, the Company made cash contributions to the UK defined benefit pension plan of $88 million (2012: $80 million; 2011: $81 million), additionally $12 million (2012: $12 million; 2011: $11 million) was paid into the plan in respect of employees' salary sacrifice contributions.
In March 2012, the Company agreed to a revised schedule of contributions towards on-going accrual of benefits and deficit funding contributions the Company will make to the UK plan over the six years ended December 31, 2017. Contributions in each of the next four years are expected to total approximately $83 million, of which approximately $23 million relates to on-going contributions calculated as 15.9 percent of active plan members' pensionable salary and approximately $60 million that relates to contributions towards the funding deficit.
In addition, further contributions will be payable based on a profit share calculation (equal to 20 percent of EBITDA in excess of $900 million per annum as defined by the revised schedule of contributions) and an exceptional return calculation (equal to 10 percent of any exceptional returns made to shareholders, for example, share buybacks, and special dividends). Upon finalization of these calculations the Company made a further contribution in 2013 of $10 million, calculated as 10 percent of the $100 million share buy-back program completed during 2012. Aggregate contributions under the deficit funding contribution and the profit share calculation are capped at £312 million ($517 million) over the six years ended December 31, 2017.
The schedule of contributions is automatically renegotiated after three years and at any earlier time jointly agreed by the Company and the Trustee. During 2014 we will be required to negotiate a new funding arrangement which may further change the contributions we are required to make in the future.
US plan
We made total cash contributions to our US defined benefit pension plan of $40 million in 2013, compared with $40 million in 2012 and $30 million in 2011.

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Business discussion

We expect to make contributions of approximately $30 million in 2014 through 2019.
Other defined benefit pension plans
We made total cash contributions to our other defined benefit pension plans of $10 million in 2013, compared with $11 million in 2012 and 13 million in 2011.
In 2014, we expect to contribute approximately $9 million to our international plans.
The final 2014 contribution for all plans is expected to be approximately $122 million, excluding salary sacrifice which compares to an equivalent 2013 total contribution of $138 million.
Guarantees
Guarantees issued by certain of Willis Group Holdings’ subsidiaries with respect to the senior notes and revolving credit facilities are discussed in Note 20 — '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 $828 million and $829 million at December 31, 2013 and 2012, respectively. The capital lease obligations subject to such guarantees amounted to $11 million as at December 31, 2013 (2012: $nil).
In addition, the Company has given guarantees to bankers and other third parties relating principally to letters of credit amounting to $11 million and $10 million at December 31, 2013 and 2012, respectively. Willis Group Holdings also guarantees certain of its UK and Irish subsidiaries’ obligations to fund the UK and Irish defined benefit 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 their shares (a put option) 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 and assuming the put options are exercised, the potential amount payable from these options is not expected to exceed $12 million (2012: $19 million).
In July 2010, the Company made a capital commitment of $25 million to Trident V Parallel Fund, LP, an investment fund managed by Stone Point Capital. This replaced a capital commitment of $25 million that had been made to Trident V, LP in December 2009. As at December 31, 2013 there have been approximately $15 million of capital contributions.
In May 2011, the Company made a capital commitment of $10 million to Dowling Capital Partners I, LP. As at December 31, 2013 there have been approximately $4 million of capital contributions.
Other contractual obligations at December 31, 2013, also include certain capital lease obligations totaling $63 million (2012: $53 million), primarily in respect of the Company's Nashville property.

NEW ACCOUNTING STANDARDS
Other Comprehensive Income
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, Presentation of Comprehensive Income to revise the manner in which entities present comprehensive income in their financial statements. These changes require that components of comprehensive income be standingpresented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.This guidance is effective for re-electioninterim and annual periods beginning after December 15, 2011 and has been applied retrospectively.

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ASU No. 2011-05 also requires entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. In December 2011, the FASB issued ASU No. 2011-12 in order to defer those changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments. In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASB's deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income but do require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This guidance is effective for interim and annual periods beginning after December 15, 2012 and has been applied retrospectively.

Presentation of Unrecognized Tax Benefits
In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists a consensus of the FASB Emerging Issues Task Force. The ASU does not affect the recognition or measurement of uncertain tax positions under US GAAP.
However, under the ASU, unrecognized tax benefits, or portions of unrecognised tax benefits, must be presented in the financial statements as a reduction to deferred tax assets when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists except when:
a net operating loss carryforward, a similar tax loss or a tax credit carryfoward is not available at the reporting date under the governing tax laws to settle taxes that would result from the disallowance of the tax position; or
the entity does not intend to use the deferred tax asset for this purpose, provided that the tax law permits a choice.

If either of these conditions exists, an entity should present an unrecognized tax benefit in the financial statements as a liability and should not net the unrecognized tax benefit with a deferred tax asset.
The amendments under the ASU:
are effective prospectively for annual and interim periods beginning after December 15, 2013 annual general meetingalthough early adoption is permitted; and
should be applied to all unrecognized tax benefits that exist as of shareholders. Hethe effective date although entities may choose to apply the amendments retrospectively to each prior reporting period presented.

The Company has decided to not adopt this guidance early. However, as an indication of the likely balance sheet reclassification based on the position at December 31, 2013, the Company had recognized $22 million of unrecognized tax benefits within Other non-current liabilities that would be reclassified to Non-current deferred tax assets. The Company has not yet determined whether it will apply the amendments to the prior reporting period for its first quarter 2014 reporting.
Other than the changes described above, there were no new accounting standards issued during 2013 that would impact on the Company’s reporting.
OFF BALANCE SHEET TRANSACTIONS
Apart from commitments, guarantees and contingencies, as disclosed in Note 22 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.

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Market risk

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 26 — '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 2013.
 
US
Dollars
 
Pounds
Sterling
 Euros 
Other
currencies
Revenues60% 8% 13% 19%
Expenses49% 25% 9% 17%
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 pounds 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. In addition, we are also exposed to foreign exchange risk on any net sterling asset or liability position in our London market operations.
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.
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.

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With the exception of foreign currency hedges for certain intercompany loans, that are not designated as hedging instruments, 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,
 2014 2015 2016
December 31, 2013Contract amount Average contractual exchange rate Contract amount Average contractual exchange rate Contract amount Average contractual exchange rate
 (millions)   (millions)   (millions)  
Foreign currency sold 
    
    
  
US dollars sold for sterling$212
 $1.57 = £1 $91
 $1.53 = £1 $—
 —
Euro sold for US dollars60
 €1 = $1.33 37
 €1 = $1.36 —
 —
Japanese yen sold for US dollars23
 ¥ 88.08=$1 12
 ¥ 97.98 = $1 —
 —
Total$295
   $140
   $—
  
Fair Value (i)
$13
   $8
   $—
  
 Settlement date before December 31,
 2013 2014 2015
December 31, 2012Contract amount Average contractual exchange rate Contract amount Average contractual exchange rate Contract amount Average contractual exchange rate
 (millions)   (millions)   (millions)  
Foreign currency sold 
    
    
  
US dollars sold for sterling$167
 $1.59 = £1 $88
 $1.60 = £1 $—
 —
Euro sold for US dollars55
 €1 = $1.36 ��
 — —
 —
Japanese yen sold for US dollars22
 ¥ 81.72=$1 10
 ¥ 79.02=$1 —
 —
Total$244
   $98
   $—
  
Fair Value (i)
$7
   $2
   $—
  
_________________
(i)
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, 2013 or 2012 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.
Interest rate risk management
Our operations are financed principally by $2,054 million fixed rate senior notes issued by the Group and $274 million under a 7-year term loan facility. Of the fixed rate senior notes, $148 million are due 2015, $300 million are due 2016, $394 million are due 2017, $187 million are due 2019, $500 million are due 2021, $250 million are due 2023, and $275 million are due 2043. The 7-year term loan facility is repayable in quarterly installments and a final repayment of $186 million is due in the second quarter of 2018. As of December 31, 2013 we had access to $822 million under three revolving credit facilities and, as at this date, no amount was outstanding under those facilities. 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.

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As a result of our operating activities, we receive cash for premiums and claims which we deposit in short-term investments denominated in US dollars and other currencies. We earn interest on these funds, which is included in our consolidated 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, we entered into interest rate swaps to receive a fixed rate of interest and pay a variable rate of interest in the various currencies related to the short-term investments. The use of interest rate contracts essentially converted groups of short-term variable rate investments to fixed rates. However, in the fourth quarter of 2011, we stopped renewing hedged positions on their maturity given the flat yield curve environment. Further to this, during second quarter 2012, the Company closed out its legacy position for these interest rate swap contracts.
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 had previously designated these instruments as fair value hedges against its $350 million 5.625% senior notes due 2015 and had accounted for them accordingly until the first quarter of 2013 at which point these swaps, although remaining as economic hedges, no longer qualified for hedge accounting. During the three months ended September 30, 2013 the Company closed out the above interest rate swaps and received a cash settlement of $13 million on termination.
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 varied 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 rate hedges in place. Market rates are the rates prevailing at December 31, 2013 or 2012, as appropriate.

  Expected to mature before December 31,      
December 31, 2013 2014 2015 2016 2017 2018 Thereafter Total 
Fair Value(i)
  ($ millions, except percentages)
Fixed rate debt  
  
  
  
  
  
  
  
Principal ($)   148
 300
 394
 

 1,212
 2,054
 2,185
Fixed rate payable   5.625%
 4.125% 6.200% 

 5.796% 5.617%  
Floating rate debt  
  
  
  
  
  
  
  
Principal ($) 15
 17
 23
 23
 196
  
 274
 274
Variable rate payable 1.84% 2.45% 3.51% 4.36% 4.73%  
 4.52%  
  Expected to mature before December 31,      
December 31, 2012 2013 2014 2015 2016 2017 Thereafter Total 
Fair Value (i)
  ($ millions, except percentages)
Fixed rate debt  
  
  
  
  
  
  
  
Principal ($)    
 350
 300
 600
 800
 2,050
 2,302
Fixed rate payable    
 5.625%
 4.125% 6.200% 6.219% 5.805%  
Floating rate debt  
  
  
  
  
  
  
  
Principal ($) 15
 15
 17
 242
    
 289
 289
Variable rate payable 1.89% 2.05% 2.34% 3.00%    
 2.93%  
Interest rate swaps  
  
  
  
  
  
  
  
Fixed to Variable  
  
  
  
  
  
  
  
Principal ($)  
  
  
 350
  
  
 350
 22
Fixed rate receivable  
  
  
 2.71%  
  
 2.71%  
Variable rate payable  
  
  
 0.75%  
  
 0.75%  

_________________
(i)
Represents the net present value of the expected cash flows discounted at current market rates of interest or quoted market rates as appropriate.


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Liquidity Risk
Our objective is to ensure we have the ability to generate sufficient cash either from internal or external sources, in a timely and cost-effective manner, to meet our commitments as they fall due. Our management of liquidity risk is embedded within our overall risk management framework. Scenario analysis is continually undertaken to ensure that our resources can meet our liquidity requirements. These resources are supplemented by access to $822 million under three revolving credit facilities. We undertake short-term foreign exchange swaps for liquidity purposes.
See ‘Liquidity and Capital Resources’ section under Item 7, 'Management’s Discussion and Analysis of Financial Condition and Results of Operations'.

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 currently does not anticipate non-performance by its counterparties. The Company generally does not require collateral or other security to support financial instruments with credit risk; however, it is the FounderCompany'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 Chairman Emerituscash 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, 2013.


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Financial statements

Item 8 — Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary Data
Page
Report of Independent Registered Public Accounting Firm
72
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2013
73
Consolidated Statements of Comprehensive Income for the three years in the period ended December 31, 2013
74
Consolidated Balance Sheets as of December 31, 2013 and 2012
75
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2013
77
Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31, 2013
79
Notes to the Consolidated Financial Statements
81


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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 National Center on Addictionaccompanying consolidated balance sheets of Willis Group Holdings Public Limited Company and Substance Abuse at Columbia University (“CASA”subsidiaries (the ‘Company’) as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, changes in New York Cityequity, 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 membercash flows for each of the Institute of Medicine ofthree years in the National Academy of Sciences. Mr. Califano was a senior partner ofperiod ended December 31, 2013. These consolidated financial statements are 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 memberresponsibility of the Company’s Executive Committee. Before joiningmanagement. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with 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 educational activities for Smithsonian’s National Zoological Park, serving two terms as President and later chairing its Audit Committee. On January 1, 2012, she was appointed to a two-year term on the Standing Advisory Groupstandards of the Public Company Accounting Oversight Board (PCAOB)(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, 2013 and 2012, established by Congressand the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Notes 30 to oversee32 the auditsthe financial statements, the 2012 and 2011 financial statements have been restated to be in accordance with the principles for presentation of public companies. She currently servescondensed consolidating financial information contained in the United States Code of Federation Regulations (17 CFR Part 210) Regulations S-X, Article 3-10.
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, 2013, based on the Advisory Councilcriteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Johns Hopkins University’s Whiting SchoolSponsoring Organizations of Engineeringthe Treadway Commission and our report dated February 27, 2014 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ Deloitte LLP
London, United Kingdom
February 27, 2014


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Financial statements

CONSOLIDATED STATEMENTS OF OPERATIONS
   Years ended December 31,
 Note 2013 2012 2011
   (millions, except per share data)
REVENUES 
  
  
  
Commissions and fees 
 $3,633
 $3,458
 $3,414
Investment income 
 15
 18
 31
Other income 
 7
 4
 2
Total revenues 
 3,655
 3,480
 3,447
EXPENSES 
  
  
  
Salaries and benefits3
 (2,207) (2,475) (2,087)
Other operating expenses 
 (616) (581) (656)
Depreciation expense12
 (94) (79) (74)
Amortization of intangible assets14
 (55) (59) (68)
Goodwill impairment charge13
 —
 (492) —
Net gain (loss) on disposal of operations6
 2
 (3) 4
Total expenses 
 (2,970) (3,689) (2,881)
OPERATING INCOME (LOSS) 
 685
 (209) 566
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs 
 —
 —
 (171)
Loss on extinguishment of debt20
 (60) —
 —
Interest expense20
 (126) (128) (156)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES 
 499
 (337) 239
Income taxes7
 (122) (101) (32)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES 
 377
 (438) 207
Interest in earnings of associates, net of tax15
 —
 5
 12
INCOME (LOSS) FROM CONTINUING OPERATIONS 
 377
 (433) 219
Discontinued operations, net of tax8
 —
 —
 1
NET INCOME (LOSS) 
 377
 (433) 220
Less: net income attributable to noncontrolling interests 
 (12) (13) (16)
NET INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS 
 $365
 $(446) $204
AMOUNTS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS SHAREHOLDERS 
  
  
  
Income (loss) from continuing operations, net of tax 
 $365
 $(446) $203
Income from discontinued operations, net of tax 
 —
 —
 1
NET INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS 
 $365
 $(446) $204
BASIC EARNINGS PER SHARE9
  
  
  
— Continuing operations 
 $2.07
 $(2.58) $1.17
DILUTED EARNINGS PER SHARE9
  
  
  
— Continuing operations 
 $2.04
 $(2.58) $1.15
CASH DIVIDENDS DECLARED PER SHARE 
 $1.12
 $1.08
 $1.04
The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
   Years ended December 31,
 Note 2013 2012 2011
   (millions)
        
Net income (loss)  $377
 $(433) $220
Other comprehensive income (loss), net of tax:       
Foreign currency translation adjustments  20
 46
 (29)
Pension funding adjustment:       
Foreign currency translation on pension funding adjustment  (10) (22) 8
Net actuarial gain (loss)  85
 (167) (208)
Prior service gain  —
 —
 7
Amortization of unrecognized actuarial loss  46
 38
 25
Amortization of unrecognized prior service gain  (4) (5) (4)
   117
 (156) (172)
Derivative instruments:       
Gain on interest rate swaps (effective element)  —
 2
 10
Interest rate swap reclassification adjustment  (4) (4) (10)
Gain on forward exchange contracts (effective element)  8
 9
 2
Forward exchange contracts reclassification adjustment  1
 (3) (5)
Gain on treasury lock (effective element)  15
 —
 —
   20
 4
 (3)
Other comprehensive income (loss), net of tax23
 157
 (106) (204)
Comprehensive income (loss)  534
 (539) 16
Less: Comprehensive income attributable to noncontrolling interests  (12) (13) (15)
Comprehensive income (loss) attributable to Willis Group Holdings  $522
 $(552) $1

The accompanying notes are an integral part of these consolidated financial statements.


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Financial statements

CONSOLIDATED BALANCE SHEETS
   December 31,
 Note 2013 2012
   (millions, except share data)
ASSETS 
  
  
CURRENT ASSETS 
  
  
Cash and cash equivalents 
 $796
 $500
Accounts receivable, net 
 1,041
 933
Fiduciary assets11
 8,412
 9,271
Deferred tax assets7
 15
 13
Other current assets16
 197
 181
Total current assets 
 10,461
 10,898
NON-CURRENT ASSETS 
  
  
Fixed assets, net12
 481
 468
Goodwill13
 2,838
 2,827
Other intangible assets, net14
 353
 385
Investments in associates15
 176
 174
Deferred tax assets7
 7
 18
Pension benefits asset19
 278
 136
Other non-current assets16
 206
 206
Total non-current assets 
 4,339
 4,214
TOTAL ASSETS 
 $14,800
 $15,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES 
  
  
Fiduciary liabilities 
 $8,412
 $9,271
Deferred revenue and accrued expenses 
 586
 541
Income taxes payable 
 21
 19
Short-term debt and current portion of long-term debt20
 15
 15
Deferred tax liabilities7
 25
 21
Other current liabilities17
 415
 327
Total current liabilities 
 9,474
 10,194
NON-CURRENT LIABILITIES 
  
  
Long-term debt20
 2,311
 2,338
Liability for pension benefits19
 136
 282
Deferred tax liabilities7
 56
 18
Provisions for liabilities21
 206
 180
Other non-current liabilities17
 374
 375
Total non-current liabilities 
 3,083
 3,193
Total liabilities 
 12,557
 13,387
(Continued on next page)


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CONSOLIDATED BALANCE SHEETS (Continued)
   December 31,
 Note 2013 2012
   (millions, except share data)
COMMITMENTS AND CONTINGENCIES22
 

 

EQUITY 
  
  
Ordinary shares, $0.000115 nominal value; Authorized: 4,000,000,000; Issued 178,861,250 shares in 2013 and 173,178,733 shares in 2012 
 —
 —
Ordinary shares, €1 nominal value; Authorized: 40,000; Issued 40,000 shares in 2013 and 2012 
 —
 —
Preference shares, $0.000115 nominal value; Authorized: 1,000,000,000; Issued nil shares in 2013 and 2012 
 —
 —
Additional paid-in capital 
 1,316
 1,125
Retained earnings 
 1,595
 1,427
Accumulated other comprehensive loss, net of tax23
 (693) (850)
Treasury shares, at cost, 46,408 shares in 2013 and 2012, and 40,000 shares, €1 nominal value, in 2013 and 2012 
 (3) (3)
Total Willis Group Holdings stockholders’ equity  2,215
 1,699
Noncontrolling interests24
 28
 26
Total equity  2,243
 1,725
TOTAL LIABILITIES AND EQUITY 
 $14,800
 $15,112

The accompanying notes are an integral part of these consolidated financial statements.


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Financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS
   Years ended December 31,
 Note 2013 2012 2011
   (millions)
CASH FLOWS FROM OPERATING ACTIVITIES 
  
  
  
Net income (loss) 
 $377
 $(433) $220
Adjustments to reconcile net income to total net cash provided by operating activities: 
  
  
  
Income from discontinued operations 
 —
 —
 (1)
Goodwill impairment  —
 492
 —
Net gain on disposal of operations, fixed and intangible assets 
 (7) —
 (6)
Depreciation expense12
 94
 79
 74
Amortization of intangible assets14
 55
 59
 68
Amortization and write-off of cash retention awards3
 6
 416
 185
Net periodic cost of defined benefit pension plans19
 (4) 2
 11
Provision for doubtful accounts18
 3
 16
 4
Provision for deferred income taxes 
 39
 54
 17
Gain on derivative instruments  18
 11
 3
Excess tax benefits from share-based payment arrangements 
 (2) (2) (5)
Share-based compensation4
 42
 32
 41
Tender premium included in loss on extinguishment of debt20
 65
 —
 —
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs 
 —
 —
 171
Undistributed earnings of associates 
 8
 (2) (5)
Effect of exchange rate changes on net income 
 (4) (14) 14
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries: 
  
  
  
Accounts receivable 
 (116) (17) (92)
Fiduciary assets 
 804
 111
 162
Fiduciary liabilities 
 (804) (111) (162)
Cash incentives paid  (346) (323) (310)
Funding of defined benefit pension plans19
 (150) (143) (135)
Other assets 
 14
 (1) 70
Other liabilities 
 445
 319
 101
Movement on provisions 
 24
 (20) 16
Net cash provided by continuing operating activities 
 561
 525
 441
Net cash used in discontinued operating activities 
 —
 —
 (2)
Total net cash provided by operating activities 
 561
 525
 439
(Continued on next page)


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CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
   Years ended December 31,
 Note 2013 2012 2011
   (millions)
CASH FLOWS FROM INVESTING ACTIVITIES   
  
  
Proceeds on disposal of fixed and intangible assets  12
 5
 13
Additions to fixed assets  (112) (135) (111)
Additions to intangible assets  (7) (2) —
Acquisitions of subsidiaries, net of cash acquired  (30) (33) (10)
Acquisition of investments in associates  —
 —
 (2)
Payments to acquire other investments  (7) (7) (5)
Proceeds from sale of associates  4
 —
 —
Proceeds from sale of operations, net of cash disposed  20
 —
 14
Net cash used in continuing investing activities  (120) (172) (101)
CASH FLOWS FROM FINANCING ACTIVITIES   
  
  
Repayment of revolving credit facility  —
 —
 (90)
Senior notes issued20 522
 —
 794
Debt issuance costs  (8) —
 (12)
Repayments of debt20 (536) (15) (911)
Tender premium on extinguishment of senior notes20 (65) —
 —
Proceeds from issue of term loan  —
 —
 300
Proceeds from issue of other debt  —
 1
 —
Make-whole on repurchase and redemption of senior notes  —
 —
 (158)
Repurchase of shares  —
 (100) —
Proceeds from issue of shares  155
 53
 60
Excess tax benefits from share-based payment arrangements  2
 2
 5
Dividends paid  (193) (185) (180)
Proceeds from sale of noncontrolling interests  —
 3
 —
Acquisition of noncontrolling interests  (4) (39) (9)
Dividends paid to noncontrolling interests  (10) (11) (13)
Net cash used in continuing financing activities  (137) (291) (214)
INCREASE IN CASH AND CASH EQUIVALENTS  304
 62
 124
Effect of exchange rate changes on cash and cash equivalents  (8) 2
 (4)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR  500
 436
 316
CASH AND CASH EQUIVALENTS, END OF YEAR  $796
 $500
 $436

The accompanying notes are an integral part of these consolidated financial statements.


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Notes to the financial statements

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
   December 31,
 Note 2013 2012 2011
   (millions, except share data)
SHARES OUTSTANDING (thousands)   
  
  
Balance, beginning of year  173,179
 173,830
 170,884
Shares issued  —
 24
 —
Shares repurchased  —
 (2,797) —
Exercise of stock options and release of non-vested shares  5,682
 2,122
 2,946
Balance, end of year  178,861
 173,179
 173,830
        
ADDITIONAL PAID-IN CAPITAL   
  
  
Balance, beginning of year  $1,125
 $1,073
 $985
Issue of shares under employee stock compensation plans and related tax benefits  153
 50
 49
Issue of shares for acquisitions  —
 1
 —
Share-based compensation  42
 32
 39
Acquisition of noncontrolling interests  (4) (31) —
Disposal of noncontrolling interests  —
 2
 —
Foreign currency translation  —
 (2) —
Balance, end of year  1,316
 1,125
 1,073
        
RETAINED EARNINGS   
  
  
Balance, beginning of year  1,427
 2,160
 2,136
Net income (loss) attributable to Willis Group Holdings  365
 (446) 204
Dividends  (197) (187) (180)
Repurchase of shares  —
 (100) —
Balance, end of year  1,595
 1,427
 2,160
        
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX       
Balance, beginning of year  (850) (744) (541)
Other comprehensive income (loss)23 157
 (106) (203)
Balance, end of year  (693) (850) (744)
        
TREASURY SHARES   
  
  
Balance, beginning of year  (3) (3) (3)
Balance, end of year  (3) (3) (3)
TOTAL WILLIS GROUP HOLDINGS SHAREHOLDERS’ EQUITY  $2,215
 $1,699
 $2,486
   (Continued on next page) 

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

   December 31,
 Note 2013 2012 2011
   (millions, except share data)
NONCONTROLLING INTERESTS   
  
  
Balance, beginning of year  $26
 $31
 $31
Net income  12
 13
 16
Dividends  (10) (11) (15)
Purchase of subsidiary shares from noncontrolling interests, net  —
 (8) —
Additional noncontrolling interests  —
 1
 —
Foreign currency translation  —
 —
 (1)
Balance, end of year  28
 26
 31
TOTAL EQUITY  $2,243
 $1,725
 $2,517


The accompanying notes are an integral part of these consolidated financial statements.


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Notes to the financial statements


1.NATURE OF OPERATIONS
Willis provides 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 large corporations through its retail operations.
In its capacity as an advisor, insurance and reinsurance 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
Recent Accounting Pronouncements
Other Comprehensive Income
In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, Presentation of Comprehensive Income to revise the manner in which entities present comprehensive income in their financial statements. These changes require that components of comprehensive income be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.This guidance is effective for interim and annual periods beginning after December 15, 2011 and has been applied retrospectively.
ASU No. 2011-05 also requires entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the Boardcomponents of Governorsother comprehensive income are presented. In December 2011, the FASB issued ASU No. 2011-12 in order to defer those changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments. In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the Washington FASB's deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income but do require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This guidance is effective for interim and annual periods beginning after December 15, 2012 and has been applied retrospectively.

Presentation of Unrecognized Tax Benefits
In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists a consensus of the FASB Emerging Issues Task Force. The ASU does not affect the recognition or measurement of uncertain tax positions under US GAAP.
However, under the ASU, unrecognized tax benefits, or portions of unrecognised tax benefits, must be presented in the financial statements as a reduction to deferred tax assets when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists except when:
a net operating loss carryforward, a similar tax loss or a tax credit carryfoward is not available at the reporting date under the governing tax laws to settle taxes that would result from the disallowance of the tax position; or
the entity does not intend to use the deferred tax asset for this purpose, provided that the tax law permits a choice.

If either of these conditions exists, an entity should present an unrecognized tax benefit in the financial statements as a liability and should not net the unrecognized tax benefit with a deferred tax asset.

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2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

The amendments under the ASU:
are effective prospectively for annual and interim periods beginning after December 15, 2013 although early adoption is permitted; and
should be applied to all unrecognized tax benefits that exist as of the effective date although entities may choose to apply the amendments retrospectively to each prior reporting period presented.

The Company has decided to not adopt this guidance early. However, as an indication of the likely balance sheet reclassification based on the position at December 31, 2013, the Company had recognized $22 million of unrecognized tax benefits within Other non-current liabilities that would be reclassified to Non-current deferred tax assets. The Company has not yet determined whether it will apply the amendments to the prior reporting period for its first quarter 2014 reporting.
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.
Certain reclassifications have been made to prior year amounts to conform to current year presentation.
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 Law Society. She previously servedCurrency 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.



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Notes to the financial statements

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 which it then remits to insureds.
Fiduciary Receivables
Fiduciary receivables represent uncollected premiums from insureds and uncollected claims or refunds from insurers.
Fiduciary Funds
Fiduciary funds represent unremitted premiums received from insureds and unremitted claims or refunds 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 insureds 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.
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.
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.
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. Freehold land is not depreciated.
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.
Operating Leases
Rentals payable on operating leases are charged straight line to expenses over the lease term as the rentals become payable.


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2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of businesses acquired over the fair 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 other intangible assetsStraight line10
Acquired client relationshipsIn line with underlying cashflows10 to 20
Acquired non-compete agreementsStraight line5
Acquired trade namesStraight line3 to 4
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 InovaChem Inc. Ms. Kravit holds a BADirectors and the impact of commercial arrangements, are considered in East Asian Studies from Vassar College, and a MAdetermining 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 East Asian Studies from Harvard University.undistributed net income since acquisition, less any dividends received since acquisition.

•

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 Company periodically reviews its investments in associates for which fair value is less than cost to determine if the Board on April 30, 2008 and currently servesdecline 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 memberrealized 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 effective fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are both recognized in earnings. The amount of hedge ineffectiveness recognized in earnings is based on the extent to which an offset between the fair value of the derivative and hedged item is not achieved. 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

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Notes to the financial statements

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

liabilities of changes in tax rates is recognized in the statement of operations in the period in which the change is enacted. 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 authority, 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 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 approximately half of employees in the United States and United Kingdom. Both these plans are now closed to new entrants. New employees 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, there are smaller plans in certain other countries in which the Company operates, including a non-qualified plan in the United States. 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 or average remaining life expectancy as appropriate of the plan participants.
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.



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2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 Committee. Mr. Lane will not be standing
The Company accounts for re-electionshare-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 in lieu 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 when approved by or agreed between the parties and collectability is reasonably assured.
Fees for risk management and other services are recognized as the services are provided. Consideration for negotiated fee arrangements for an agreed period covering multiple insurance placements, the provision of risk management and/or other services are allocated to all deliverables on the basis of their relative selling prices. The Company establishes contract cancellation reserves where appropriate: at December 31, 2013, Annual General Meeting2012 and 2011, such amounts were not material.
During the year ended December 31, 2013, the Company aligned the recognition of Shareholders. Herevenue in China and its North America Personal Lines business with the rest of the Group. The impact of these realignments was not material for prior periods and, consequently, the impacts of the realignments have been made in 2013.
Investment income is recognized as earned.
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, 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,
 2013 2012 2011
Global4,545
 4,304
 4,042
      
North America6,334
 6,323
 6,479
International7,072
 6,843
 6,634
Total Retail13,406
 13,166
 13,113
Total average number of employees for the year17,951
 17,470
 17,155

Salaries and benefits expense comprises the following:

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Notes to the financial statements

3. EMPLOYEES (Continued)

 Years ended December 31,
 2013 2012 2011
 (millions)
Salaries and other compensation awards including amortization and write-off of cash retention awards of $6 million, $416 million and $185 million (see below)$1,953
 $2,258
 $1,776
Share-based compensation42
 32
 41
Severance costs32
 6
 89
Social security costs135
 133
 130
Retirement benefits — defined benefit plan (income) expense(4) 2
 11
Retirement benefits — defined contribution plan expense49
 44
 40
Total salaries and benefits expense$2,207
 $2,475
 $2,087

Severance Costs
Severance costs arise in the normal course of business and these charges amounted to $4 million in the year ended December 31, 2013 (2012: $6 million; 2011: $nil).
During the year ended December 31, 2013, the Company incurred additional salaries and benefits costs of $29 million of which $28 million related to severance costs, in relation to an Expense Reduction Initiative in the first quarter. These costs related to 207 positions that have been eliminated.
During 2011, the Company incurred additional severance costs of $89 million relating to the Company's 2011 Operational Review. These costs relate to approximately 1,200 positions that were eliminated.

Cash Retention Awards
For the past several years, certain cash retention awards under the Company's annual incentive programs included a feature which required the recipient to repay a proportionate amount of the annual award if the employee voluntarily left the Company before a specified date, which was generally three years following the award. As previously disclosed, the Company made the cash payment to the recipient in the year of grant and recognized the payment in expense ratably over the period it was subject to repayment, beginning in the quarter in which the award was made. The unamortized portion of cash retention awards was recorded within 'other current Chairmanassets' and 'other non-current assets' in the consolidated balance sheet.
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, 2013, 2012 and 2011:
 Years ended December 31,
 2013 2012 2011
 (millions)
Cash retention awards made$12
 $221
 $210
Amortization of cash retention awards included in salaries and benefits6
 216
 185

In December 2012, the Company decided to eliminate the repayment requirement from the past annual cash retention awards and, as a result, recognized a one-time, non-cash, pre-tax charge of $200 million which represented the write-off of the unamortized balance of past awards at that date.

There were however, a number of off-cycle awards with a fixed guarantee attached, for which the Company has not waived the repayment requirement. The unamortized portion of retention awards amounted to $15 million at December 31, 2013 (2012: $9 million; 2011: $196 million).

In addition, in 2012, the Company replaced annual cash retention awards with annual cash bonuses which did not include a repayment requirement. As at December 31, 2012, the Company had accrued $252 million for these bonuses.

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4.SHARE-BASED COMPENSATION
On December 31, 2013, the Company had a number of open share-based compensation plans, which provide for the grant of time-based options and performance-based options, time-based restricted stock units and performance-based 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, 2013 are described below. The compensation cost that has been recognized for those plans for the year ended December 31, 2013 was $42 million (2012: $32 million; 2011: $41 million). The total income tax benefit recognized in the statement of operations for share-based compensation arrangements for the year ended December 31, 2013 was $9 million (2012: $9 million; 2011: $11 million).

2012 Equity Incentive Plan

This plan, which was established on April 25, 2012, provides for the granting of ISOs, time-based or performance-based non-statutory stock options, share appreciation rights ('SARs'), restricted shares, time-based or performance-based restricted share units ('RSUs'), performance-based awards and other share-based grants or any combination thereof (collectively referred to as 'Awards') to employees, officers, directors and consultants ('Eligible Individuals') of the Company and any of its subsidiaries (the 'Willis Group'). The Board of Directors also adopted a sub-plan under the 2012 plan to provide an employee sharesave scheme in the UK.
There are 13,776,935 shares available for grant under this plan. In addition, Shares subject to awards that were granted under the Willis Group Holdings 2008 Share Purchase and Option Plan, that terminate, expire or lapse for any reason will be made available for future Awards under this Plan. Options are exercisable on a variety of dates, including from the second, third, fourth or fifth anniversary of grant. Unless terminated sooner by the Board of CASA. He servedDirectors, the 2012 Plan will expire 10 years after the date of its adoption. That termination will not affect the validity of any grants 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. The 2008 plan was terminated as Chief Executive Officerat April 25, 2012 and no further grants will be made under this plan. Any shares available for grant under the 2008 plan were included in the 2012 Equity Incentive Plan availability.
Options are exercisable on a variety of Modern Bank,dates, including from the third, fourth or fifth anniversary of grant.
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. The Board of Directors has adopted several sub-plans under the 2001 plan to provide employee sharesave schemes in the UK, Ireland and internationally. The 2001 Plan (and all sub-plans) expired on May 3, 2011 and no further grants will be made under the plan. Options are exercisable on a private bank,variety of dates, including from Julythe 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.
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.
Employee Stock Purchase Plans
The Company has adopted the Willis Group Holdings 2001 North America Employee Share Purchase Plan, which expired on May 31, 2011 and the Willis Group Holdings 2010 North America Employee Stock Purchase Plan, which expires on May 31, 2020. They provide certain eligible employees to October 31, 2010. Priorthe Company’s subsidiaries in the US and Canada the ability to joining Modern Bank, he was Chairman and Chief Executive Officercontribute payroll deductions to the purchase of Bear Stearns Asset Management and beforeWillis Shares at the end of each offering period.

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Notes to the financial statements

4. SHARE-BASED COMPENSATION (Continued)

Option Valuation Assumptions
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model 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 Smith Barney division, and with Shearson Lehman Brothers.

Wendy E. Lane — Ms. Lane, age 61, joineduses the Boardassumptions noted in the following table. Expected volatility is based on April 21, 2004 and currently serves as the Chairmanhistorical volatility of the Company’s Compensation Committee and memberstock. The Company uses the simplified method set out in Accounting Standard Codification (‘ASC’) 718-10-S99 to derive the expected term of options granted as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free rate for periods within the expected life of the Audit Committeeoption is based on the US Treasury yield curve in effect at the time of grant.

 Years ended December 31,
 2013 2012 2011
Expected volatility24.7% 32.1% 31.4%
Expected dividends2.6% 3.2% 2.5%
Expected life (years)4
 5
 6
Risk-free interest rate1.5% 0.9% 2.2%

A summary of option activity under the plans at December 31, 2013, and Executive Committee. Shechanges during the year then ended is presented below:
   
Weighted
Average
Exercise
 
Weighted
Average
Remaining
Contractual
 
Aggregate
Intrinsic
(Options in thousands)Options 
Price(i)
 Term Value
       (millions)
Time-based stock options 
  
    
Balance, beginning of year10,152
 $33.44
    
Granted1,612
 $42.77
    
Exercised(3,697) $32.10
    
Forfeited(47) $38.42
    
Expired(37) $26.68
    
Balance, end of year7,983
 $35.95
 4 years $71
Options vested or expected to vest at December 31, 20137,308
 $35.99
 4 years $64
Options exercisable at December 31, 20133,976
 $35.38
 1 year $37
Performance-based stock options 
  
    
Balance, beginning of year6,517
 $32.19
    
Exercised(1,111) $29.27
    
Forfeited(146) $32.40
    
Balance, end of year5,260
 $32.80
 4 years $63
Options vested or expected to vest at December 31, 20134,675
 $32.61
 4 years $57
Options exercisable at December 31, 20132,716
 $31.48
 3 years $36

(i)
Certain options are exercisable in pounds sterling and are converted to dollars using the exchange rate at December 31, 2013.
The weighted average grant-date fair value of time-based options granted during the year ended December 31, 2013 was $7.74 (2012: $6.98; 2011: $9.49). The total intrinsic value of options exercised during the year ended December 31, 2013 was $32 million (2012: $8 million; 2011: $17 million). At December 31, 2013 there was $20 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 memberweighted average period of

2 years.

There were no performance-based options granted during the CEO Search Committee as well as other ad hoc Board Committees convenedyear ended December 31, 2013. The weighted average grant-date fair value of performance-based options was $7.61 in the year ended December 31, 2012 (2011: $10.26). The total intrinsic value of options exercised during the year ended December 31, 2013 was $14 million (2012: $5 million; 2011: $1 million). At

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4. SHARE-BASED COMPENSATION (Continued)

December 31, 2013 there was $7 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 1 year.
A summary of restricted stock unit activity under the Plans at December 31, 2013, 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 year2,525
 $33.80
Granted1,377
 $44.33
Vested(874) $34.02
Forfeited(99) $33.09
Balance, end of year2,929
 $38.71

The total number of restricted stock units vested during the year ended December 31, 2013 was 873,670 shares at an average share price of $41.10 (2012: 408,005 shares at an average share price of $35.82). At December 31, 2013 there was $82 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 3 years.
Cash received from time to time. She has been Chairman of Lane Holdings, Inc., an investment firm, since 1992. Prior to forming Lane Holdings, Inc., Ms. Laneoption exercises under all share-based payment arrangements for the year ended December 31, 2013 was a Principal and Managing Director of Donaldson, Lufkin and Jenrette Securities Corporation, an investment banking firm, serving in these and other positions$155 million (2012: $53 million; 2011: $60 million). The actual tax benefit recognized for the tax deductions from 1981 to 1992. Ms. Lane is also a director, and memberoption exercises of the Nominating and Corporate Governance and Audit Committeesshare-based payment arrangements totaled $28 million for the year ended December 31, 2013 (2012: $8 million; 2011: $18 million).

5.AUDITORS’ REMUNERATION
An analysis of Laboratory Corporationauditors’ remuneration is as follows:
 Years ended December 31,
 2013 2012 2011
 (millions)
Audit of group consolidated financial statements$4
 $4
 $4
Other assurance services3
 3
 3
Other non-audit services1
 1
 1
Total auditors’ remuneration$8
 $8
 $8


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Notes to the financial statements

6.NET GAIN (LOSS) ON DISPOSAL OF OPERATIONS

A gain on disposal of $2 million is recorded in the consolidated statements of operations for the year ended December 31, 2013. This principally relates to the disposal of an associated undertaking based in Spain.
A loss on disposal of $3 million is recorded in the consolidated statements of operations for the year ended December 31, 2012. This principally relates to the termination of a director and Audit Committee memberjoint venture arrangement in India.
A gain on disposal 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$4 million is recorded 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 asconsolidated statements of operations for the Board’s Presiding Independent Director, the Chairmanyear ended December 31, 2011 following conclusion of the Company’s Governance Committee,accounting for the Gras Savoye December 2009 leveraged transaction — see Note 15 — 'Investments in Associates'.


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7.INCOME TAXES
An analysis of income from continuing operations before income taxes and as a memberinterest in earnings of associates by location of the Company’s Compensation Committee and Executive Committee. On April 23, 2013, the Board appointed Mr. McCann to servetaxing jurisdiction is as non-executive Chairmanfollows:
 Years ended December 31,
 2013 2012 2011
 (millions)
Ireland$(52) $(47) $(39)
US(11) (615) (25)
UK282
 25
 (58)
Other jurisdictions280
 300
 361
Income (loss) from continuing operations before income taxes and interest in earnings of associates$499
 $(337) $239
The provision for income taxes by location of the Board, effective July 8, 2013, succeeding Mr. Plumeri upon his retirement from the Board. Mr. McCann was a membertaxing jurisdiction consisted of the CEO Search Committeefollowing:
 Years ended December 31,
 2013 2012 2011
 (millions)
Current income taxes: 
  
  
US federal tax$7
 $3
 $5
US state and local taxes3
 1
 1
UK corporation tax28
 2
 (37)
Other jurisdictions45
 41
 46
Total current taxes83
 47
 15
Deferred taxes: 
  
  
US federal tax10
 (44) (6)
US state and local taxes1
 (41) 1
Effect of additional US valuation allowance2
 113
 —
UK corporation tax17
 27
 20
Other jurisdictions9
 (1) 2
Total deferred taxes39
 54
 17
Total income taxes$122
 $101
 $32

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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 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 florist 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.

•

follows:

 Years ended December 31,
 2013 2012 2011
 (millions, except percentages)
Income (loss) from continuing operations before income taxes and interest in earnings of associates$499
 $(337) $239
US federal statutory income tax rate35% 35% 35%
Income tax expense at US federal tax rate175
 (118) 84
Adjustments to derive effective rate: 
  
  
Non-deductible expenditure19
 15
 15
Tax impact of internal restructurings11
 —
 —
Movement in provision for unrecognized tax benefits(1) 6
 3
Impairment of non-qualifying goodwill—
 137
 —
Impact of change in tax rate on deferred tax balances(4) (3) (3)
Adjustment in respect of prior periods1
 6
 (13)
Effect of foreign exchange and other differences1
 2
 1
Changes in valuation allowances applied to deferred tax assets—
 114
 5
Net tax effect of intra-group items(30) (31) (31)
Tax differentials of foreign earnings: 
  
  
Foreign jurisdictions(54) (12) (31)
US state taxes and local taxes4
 (15) 2
Provision for income taxes$122
 $101
 $32

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 February 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 Willis Group Holdings plc is a non-trading holding company tax resident in Ireland where it is taxed at the statutory rate of 25%. The provision for income tax on continuing operations has been reconciled above to the US federal statutory tax rate of 35% to be consistent with prior periods.

The net tax effect of intra-group items principally relates to transactions, the pre-tax effect of which has been eliminated in arriving at the Company’s consolidated income from 2001 until January 2013. Prior to joining the continuing operations before income taxes.


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Willis Group Mr. Plumeri spent 32Holdings 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,
 2013 2012
 (millions)
Deferred tax assets: 
  
Accrued expenses not currently deductible$153
 $120
US state net operating losses70
 64
US federal net operating losses—
 28
UK net operating losses3
 —
Other net operating losses5
 8
UK capital losses43
 42
Accrued retirement benefits47
 101
Deferred compensation37
 48
Stock options25
 40
Gross deferred tax assets383
 451
Less: valuation allowance(196) (221)
Net deferred tax assets$187
 $230
Deferred tax liabilities: 
  
Cost of intangible assets, net of related amortization$120
 $118
Cost of tangible assets, net of related amortization44
 51
Prepaid retirement benefits56
 35
Accrued revenue not currently taxable23
 29
Cash retention award—
 2
Tax-leasing transactions—
 1
Financial derivative transactions3
 2
Deferred tax liabilities246
 238
Net deferred tax (liability) asset$(59) $(8)

 December 31,
 2013 2012
 (millions)
Balance sheet classifications: 
  
Current: 
  
Deferred tax assets$15
 $13
Deferred tax liabilities(25) (21)
Net current deferred tax liabilities(10) (8)
Non-current: 
  
Deferred tax assets7
 18
Deferred tax liabilities(56) (18)
Net non-current deferred tax liabilities(49) —
Net deferred tax liabilities$(59) $(8)




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Notes to the financial statements

7. INCOME TAXES (Continued)

As a result of certain realization requirements of ASC 718 Compensation - Stock Compensation, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets of $8 million (2012: $nil), that arose directly from tax deductions related to equity compensation greater than compensation recognized for financial reporting. Equity will be increased by $8 million if and when such deferred tax assets are ultimately realized. The Company uses a 'with and without' basis when determining when excess tax benefits have been realized.
At December 31, 2013 the Company had valuation allowances of $196 million (2012: $221 million) to reduce its deferred tax assets to estimated realizable value. The valuation allowances at December 31, 2013 relate to deferred tax assets arising from UK capital loss carryforwards ($43 million) and other net operating losses ($4 million), which have no expiration date, and to the deferred tax assets in the US ($149 million). US Federal net operating losses will expire between 2028 and 2032 and US State net operating losses will expire by 2032. Capital loss carryforwards can only be offset against future UK capital gains.
 
Balance at
beginning of year
 
Additions/
(releases)
charged to
costs and expenses
 Other movements 
Foreign
exchange differences
 
Balance
at
end of year
Description    
 (millions)
Year Ended December 31, 2013 
  
  
  
  
Deferred tax valuation allowance$221
 $15
 $(40) $—
 $196
Year Ended December 31, 2012 
  
  
  
  
Deferred tax valuation allowance102
 110
 12
 (3) 221
Year Ended December 31, 2011 
  
  
  
  
Deferred tax valuation allowance87
 —
 15
 —
 102
The amount charged to tax expense in the table above differs from the effect of $nil disclosed in the rate reconciliation primarily because the movement in this table includes effects of state taxes, which are disclosed separately in the rate reconciliation. The impact of Other movements is primarily recorded in other comprehensive income.
At December 31, 2013 the Company had deferred tax assets of $187 million (2012: $230 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 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, 2013, totaled $41 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 for potential inter company pricing adjustments 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:

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7. INCOME TAXES (Continued)

 2013 2012 2011
 (millions)
Balance at January 1$37
 $16
 $13
Reductions due to a lapse of the applicable statute of limitation(5) (3) —
Increases for positions taken in current period9
 8
 —
Increases for positions taken in prior periods—
 16
 —
Other movements—
 —
 3
Balance at December 31$41
 $37
 $16
$12 million of the unrecognized tax benefits at December 31, 2013 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 2009 US tax year closed in 2013 upon the expiration of the statute of limitations on assessment. Although tax years 2008 and 2009 are closed, the IRS could make adjustments (but not assess additional tax) up to the amount of the net operating losses carried forward from those years. US tax returns have been filed timely. 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 inquiries to obtain additional information. There are no material ongoing inquiries in relation to filed UK returns. In other jurisdictions the Company is no longer subject to examinations prior to 2004.


8.DISCONTINUED OPERATIONS
On December 31, 2011, the Company disposed of Global Special Risks, LLC, Faber & Dumas Canada Ltd and the trade and assets of Maclean, Oddy & Associates, Inc.. The gain (net of tax) on this disposal was $2 million.




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Notes to the financial statements

9.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.
In periods where losses are reported the weighted average shares outstanding excludes potentially issuable shares described above, because their inclusion would be antidilutive.
For the year ended December 31, 2013, time-based and performance-based options to purchase 8.0 million and 5.3 million shares (2012: 10.2 million and 6.5 million; 2011: 9.2 million and 7.3 million), respectively, and 2.9 million restricted stock units (2012: 2.5 million; 2011: 1.2 million) were outstanding.
Basic and diluted earnings per share are as follows:
 Years ended December 31,
 2013 2012 2011
 (millions, except per share data)
Net income (loss) attributable to Willis Group Holdings$365
 $(446) $204
Basic average number of shares outstanding176
 173
 173
Dilutive effect of potentially issuable shares3
 —
 3
Diluted average number of shares outstanding179
 173
 176
Basic earnings per share: 
  
  
Continuing operations$2.07
 $(2.58) $1.17
Discontinued operations—
 —
 0.01
Net income (loss) attributable to Willis Group Holdings shareholders$2.07
 $(2.58) $1.18
Dilutive effect of potentially issuable shares(0.03) —
 (0.02)
Diluted earnings per share: 
  
  
Continuing operations$2.04
 $(2.58) $1.15
Discontinued operations—
 —
 0.01
Net income (loss) attributable to Willis Group Holdings shareholders$2.04
 $(2.58) $1.16
Options to purchase 2.1 million shares and 1.3 million restricted stock units for the year ended December 31, 2013 were not included in the computation of the dilutive effect of stock options because the effect was antidilutive (2012: 16.7 million shares and 2.5 million restricted stock units; 2011: 4.1 million shares).

10.ACQUISITIONS

In first quarter 2013, the Company acquired 100 percent of CBC Broker Srl, an Italian broker, at a cost of $1 million.
In second quarter 2013, the Company acquired 100 percent of PPH Limited and its subsidiary Prime Professions Limited (together referred to as Prime Professions), a leading UK based professional indemnity insurance broker, for cash consideration of $29 million. Additional consideration of up to approximately $2 million is payable in 2015 based on the achievement of certain revenue targets.
In relation to the acquisition of Prime Professions, the Company recognized acquired intangible assets of $17 million of which $16 million was in respect of customer relationships, which are being amortized over an expected life of 15 years. The remaining intangible assets relate to non-compete agreements and the Prime trade name which are being amortized over 8 years and 3 years, respectively. Goodwill of $15 million was recognized on the transaction.
On December 31, 2012 the Company acquired Avalon Actuarial Inc., a Canadian actuarial consulting firm for cash consideration of $25 million. Additional consideration of up to approximately $5 million is payable in 2016 based on the achievement of certain revenue targets.
In relation to the acquisition of Avalon Actuarial, the Company recognized acquired intangible assets of $20 million of which $17 million was in respect of customer relationships, which are being amortized over an expected life of 14 years. The remaining intangible assets relate to non-compete agreements and the Avalon trade name which are being amortized over 5 years and 3 years, respectively. Goodwill of $9 million was recognized on the transaction.

11.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 which it then remits to insureds. Uncollected premiums

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from insureds and uncollected claims or refunds from insurers (‘fiduciary receivables’) are recorded as fiduciary assets on the Company’s consolidated balance sheet. Unremitted insurance premiums, claims or refunds (‘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 $1,662 million as of December 31, 2013 (2012: $1,796 million). Accrued interest on funds is recorded as other assets.

12.FIXED ASSETS, NET
An analysis of fixed asset activity for the years ended December 31, 2013 and 2012 are as follows:
 
Land and
buildings (i)
 
Leasehold
improvements
 
Furniture and
equipment
 Total
 (millions)
Cost: at January 1, 2012$73
 $210
 $509
 $792
Additions3
 16
 116
 135
Disposals—
 (4) (59) (63)
Foreign exchange2
 5
 10
 17
Cost: at December 31, 201278
 227
 576
 881
Additions10
 22
 80
 112
Disposals—
 (7) (43) (50)
Foreign exchange1
 —
 5
 6
Cost: at December 31, 2013$89
 $242
 $618
 $949
        
Depreciation: at January 1, 2012$(28) $(61) $(297) $(386)
Depreciation expense provided(3) (17) (59) (79)
Disposals—
 4
 56
 60
Foreign exchange(1) (1) (6) (8)
Depreciation: at December 31, 2012(32) (75) (306) (413)
Depreciation expense provided(3) (18) (73) (94)
Disposals—
 6
 36
 42
Foreign exchange(1) —
 (2) (3)
Depreciation: at December 31, 2013$(36) $(87) $(345) $(468)
Net book value: 
  
  
  
At December 31, 2012$46
 $152
 $270
 $468
        
At December 31, 2013$53
 $155
 $273
 $481

(i)
Included within land and buildings are assets held under capital leases: At December 31, 2013, cost and accumulated depreciation were $31 million and $6 million respectively (2012: $25 million and $4 million, respectively; 2011: $23 million and $2 million respectively). Depreciation in the year ended December 31, 2013 was $2 million (2012: $1 million; 2011: $1 million).



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Notes to the financial statements

13.GOODWILL
Goodwill represents the excess of the cost of businesses acquired over the fair 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 has determined that its reporting units are consistent with its operating segments: North America; International and Global. Goodwill is allocated to these reporting units based on the original purchase price allocation for acquisitions within the reporting units. 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 segment for the years ended December 31, 2013 and 2012 are as follows:
 Global 
North
America
 International Total
 (millions)
Balance at January 1, 2012       
Goodwill, gross$1,122
 $1,782
 $391
 $3,295
Accumulated impairment losses—
 —
 —
 —
Goodwill, net1,122
 1,782
 391
 3,295
Purchase price allocation adjustments—
 —
 2
 2
Goodwill acquired during the year—
 10
 2
 12
Goodwill disposed of during the year—
 —
 (1) (1)
Goodwill impairment charge—
 (492) —
 (492)
Foreign exchange5
 —
 6
 11
Balance at December 31, 2012       
Goodwill, gross1,127
 1,792
 400
 3,319
Accumulated impairment losses—
 (492) —
 (492)
Goodwill, net$1,127
 $1,300
 $400
 $2,827
Purchase price allocation adjustments—
 (1) —
 (1)
Goodwill acquired during the year15
 —
 1
 16
Goodwill disposed of during the year—
 (14) —
 (14)
Other movements (i)
—
 (1) —
 (1)
Foreign exchange3
 —
 8
 11
Balance at December 31, 2013       
Goodwill, gross1,145
 1,776
 409
 3,330
Accumulated impairment losses—
 (492) —
 (492)
Goodwill, net$1,145
 $1,284
 $409
 $2,838

(i)
North America — $1 million (2012: $nil) tax benefit arising on the exercise of fully vested HRH stock options which were issued as part of the acquisition of HRH in 2008.

Impairment Review
The Company reviews goodwill for impairment annually. In the first step of the impairment test, the fair value of each reporting unit is compared with its carrying value, including goodwill. If the carrying value of a reporting unit exceeds its fair value, the amount of an impairment loss, if any, is calculated in the second step of the impairment test by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.
The Company's goodwill impairment test for 2013 has not resulted in an impairment charge (2012: $492 million; 2011: $nil).
In 2012, the Company concluded that an impairment charge was required to reduce the carrying value of the goodwill associated with the Company's North America reporting unit. The goodwill impairment charge for the North America reporting

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13. GOODWILL (Continued)

unit amounted to $492 million. There was no impairment for the Global and International reporting units, as the fair values of these units were significantly in excess of their carrying value.
The decline in the fair value of the North America reporting unit, as well as differences between fair values and carrying values for other assets and liabilities in the second step of the goodwill impairment test, resulted in an implied fair value of goodwill substantially below the carrying value of the goodwill for the reporting unit. As a result, the Company recorded a goodwill impairment charge of $492 million as of October 1, 2012.
As previously disclosed, the North America reporting unit had been hampered by the declining Loan Protector business results, the effect of the soft economy in the U.S., which had significantly impacted the Construction and Human Capital sectors, and declining retention rates primarily related to merger and acquisition activity and lost legacy HRH businesses.
The decline in the estimated fair value of the reporting unit resulted from lower projected revenue growth rates and profitability levels as well as an executive with Citigroup Inc.increase in the discount rate used to calculate the discounted cash flows. The increase in the discount rate was due to increases in the risk-free rate and its predecessors, where his responsibilitiessmall company premium offset by a reduction to the expected market rate of return. The lower projected profitability levels reflected changes in assumptions related to organic revenue growth and cost rates which could be attributed to the declines discussed above and also included overseeingconsideration of the 450 North American retail branchesuncertainty related to the business's ability to execute on the projected cash flows.


14.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
‘Contract based, Technology and Other’ includes all other purchased intangible assets.
The major classes of Citigroup’s Citibank unit. Before that, Mr. Plumeri servedamortizable intangible assets are as Chairman and Chief Executive Officerfollows:
 December 31, 2013 December 31, 2012
 
Gross carrying
amount
 
Accumulated
amortization
 Net carrying amount 
Gross carrying
amount
 
Accumulated
amortization
 Net carrying amount
 (millions)
Customer and Marketing Related: 
  
  
  
  
  
Client Relationships$671
 $(326) $345
 $717
 $(340) $377
Client Lists3
 (1) 2
 3
 (1) 2
Non-compete Agreements4
 (1) 3
 3
 —
 3
Trade Names2
 (1) 1
 11
 (10) 1
Total Customer and Marketing Related680
 (329) 351
 734
 (351) 383
Contract based, Technology and Other5
 (3) 2
 4
 (2) 2
Total amortizable intangible assets$685
 $(332) $353
 $738
 $(353) $385

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Notes to 1999. In 1994, Mr. Plumerithe financial statements
14. OTHER INTANGIBLE ASSETS, NET (Continued)

The aggregate amortization of intangible assets for the year ended December 31, 2013 was appointed Vice Chairman$55 million (2012: $59 million; 2011: $68 million). The estimated aggregate amortization of Citigroup’s predecessor, Travelers Group Inc. In 1993, Mr. Plumeri becameintangible assets for each of the President of a

predecessor of Citigroup’s Salomon Smith Barney unit after overseeing the merger of Smith Barney and Shearson and servingnext five years ended December 31 is as the President and Managing Partner of Shearson since 1990. He is also a board member offollows:

 (millions)
2014$50
201543
201638
201733
201829
Thereafter160
Total$353

15.INVESTMENTS IN ASSOCIATES
The Company holds a number of organizations,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 2013 2012
Al-Futtaim Willis Co. L.L.C. Dubai 49% 49%
GS & Cie GroupeFrance 30% 30%
The Company’s principal investment as of December 31, 2013 and 2012 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 30 percent in the capital structure of 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 amended and the Company now has a call option to purchase 100 percent of the capital of Gras Savoye. If the Company does not waive the call option before April 30, 2015, then it must exercise the call option in 2016 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 2016. At the end of this period, shareholders are entitled to pre-emptive and tag-along rights.
In 2011 the Company’s ownership of Gras Savoye reduced from 31 percent to 30 percent following issuance of additional share capital as part of an employee share incentive scheme.
The carrying amount of the Gras Savoye investment as of December 31, 2013 includes goodwill of $84 million (2012: $83 million) and interest bearing vendor loans and convertible bonds issued by Gras Savoye of $46 million and $110 million respectively (2012: $47 million and $96 million, respectively).
A gain of $4 million was recorded in 2011 following conclusion of the accounting for the December 2009 leveraged transaction.
As of December 31, 2013 and 2012, the Company’s other investments in associates, individually and in the aggregate, were not material to the Company’s operations.

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15. INVESTMENTS IN ASSOCIATES (Continued)


Condensed financial information for associates, in the aggregate, as of and for the three years ended December 31, 2013, 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.
 2013 2012 2011
 (millions)
Condensed statements of operations data (i):
 
  
  
Total revenues$502
 $497
 $527
(Loss) income before income taxes(48) (17) 5
Net loss(36) (14) (2)
Condensed balance sheets data (i):
 
  
  
Total assets1,685
 1,670
 1,882
Total liabilities1,611
 1,559
 1,736
Stockholders’ equity74
 111
 146

(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 2013.
For the year ended December 31, 2013, the Company recognized $3 million (2012: $3 million; 2011: $4 million) in respect of dividends received from associates.


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Notes to the financial statements

16.OTHER ASSETS
An analysis of other assets is as follows:
 December 31,
 2013 2012
 (millions)
Other current assets   
Prepayments and accrued income$73
 $61
Income taxes receivable32
 50
Deferred compensation plan assets26
 12
Other receivables66
 58
Total other current assets$197
 $181
Other non-current assets 
  
Prepayments and accrued income16
 24
Deferred compensation plan assets88
 97
Income taxes receivable21
 12
Accounts receivable, net28
 25
Other investments19
 12
Other receivables34
 36
Total other non-current assets$206
 $206
Total other assets$403
 $387

17.OTHER LIABILITIES
An analysis of other liabilities is as follows:
 December 31,
 2013 2012
 (millions)
Other current liabilities 
  
Accounts payable$123
 $88
Accrued dividends payable51
 47
Other taxes payable51
 44
Deferred compensation plan liability26
 12
Incentives from lessors12
 9
Other payables152
 127
Total other current liabilities$415
 $327
Other non-current liabilities 
  
Incentives from lessors$183
 $173
Deferred compensation plan liability89
 101
Income taxes payable40
 33
Other payables62
 68
Total other non-current liabilities$374
 $375
Total other liabilities$789
 $702


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18.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.
 
Balance at
beginning of year
 
Additions/
(releases)
charged to
costs and expenses
 
Deductions
/ Other movements
 
Foreign
exchange differences
 
Balance at
end of year
Description         
 (millions)
Year Ended December 31, 2013 
  
  
  
  
Allowance for doubtful accounts$14
 $3
 $(4) $—
 $13
Year Ended December 31, 2012 
  
  
  
  
Allowance for doubtful accounts$13
 $16
 $(15) $—
 $14
Year Ended December 31, 2011 
  
  
  
  
Allowance for doubtful accounts$12
 $4
 $(3) $—
 $13


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Notes to the financial statements

19.PENSION PLANS
The Company maintains two principal defined benefit pension plans that cover approximately half of our employees in the United States and United Kingdom. Both of these plans are now closed to new entrants and with effect from May 15, 2009, the Company closed the US defined benefit plan to future accrual. New employees 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 which it operates including a US non-qualified plan and an unfunded plan in the UK. 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.
At December 31, 2013, the Company recorded, on the Consolidated Balance Sheets:

a pension benefit asset of $278 million (2012: $136 million) representing:

$276 million (2012: $134 million) in respect of the UK defined benefit pension plan; and

$2 million (2012: $2 million) in respect of the international defined benefit pension plans.

a total liability for pension benefits of $136 million (2012: $282 million) representing:

$107 million (2012: $250 million) in respect of the US defined benefit pension plan; and

$29 million (2012: $32 million) in respect of the international, US non-qualified and UK unfunded defined benefit pension plans.

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19. PENSION PLANS (Continued)

UK and US defined benefit plans
The National Centerfollowing 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
 2013 2012 2013 2012
 (millions)
Change in benefit obligation: 
  
  
  
Benefit obligation, beginning of year$2,582
 $2,217
 $958
 $895
Service cost37
 35
 —
 —
Interest cost109
 108
 38
 41
Employee contributions2
 2
 —
 —
Actuarial loss (gain)79
 186
 (81) 71
Benefits paid(78) (77) (51) (49)
Foreign currency changes54
 111
 —
 —
Benefit obligations, end of year2,785
 2,582
 864
 958
Change in plan assets: 
  
  
  
Fair value of plan assets, beginning of year2,716
 2,353
 708
 637
Actual return on plan assets255
 226
 60
 80
Employee contributions2
 2
 —
 —
Employer contributions100
 92
 40
 40
Benefits paid(78) (77) (51) (49)
Foreign currency changes66
 120
 —
 —
Fair value of plan assets, end of year3,061
 2,716
 757
 708
Funded status at end of year$276
 $134
 $(107) $(250)
Components on the Consolidated Balance Sheets: 
  
  
  
Pension benefits asset$276
 $134
 $—
 $—
Liability for pension benefits—
 —
 (107) (250)

Amounts recognized in accumulated other comprehensive loss consist of:
 UK Pension Benefits US Pension Benefits
 2013 2012 2013 2012
   (millions)  
Net actuarial loss$815
 $831
 $233
 $332
Prior service gain(24) (29) —
 —
The accumulated benefit obligations for the Company’s UK and US defined benefit pension plans were $2,701 million and $864 million, respectively (2012: $2,519 million and $958 million, respectively).

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Notes to the financial statements

19. PENSION PLANS (Continued)

The components of the net periodic benefit (income) 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
 2013 2012 2011 2013 2012 2011
     (millions)    
Components of net periodic benefit (income) cost: 
  
  
  
  
  
Service cost$37
 $35
 $36
 $—
 $—
 $—
Interest cost109
 108
 106
 38
 41
 41
Expected return on plan assets(191) (181) (161) (51) (46) (44)
Amortization of unrecognized prior service gain(5) (6) (5) —
 —
 —
Amortization of unrecognized actuarial loss45
 39
 30
 9
 8
 3
Net periodic benefit (income) cost$(5) $(5) $6
 $(4) $3
 $—
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss): 
  
  
  
  
  
Net actuarial loss (gain)$15
 $141
 $164
 $(90) $37
 $137
Amortization of unrecognized actuarial loss(45) (39) (30) (9) (8) (3)
Prior service gain—
 —
 (10) —
 —
 —
Amortization of unrecognized prior service gain5
 6
 5
 —
 —
 —
Total recognized in other comprehensive income (loss)$(25) $108
 $129
 $(99) $29
 $134
Total recognized in net periodic benefit cost and other comprehensive income$(30) $103
 $135
 $(103) $32
 $134

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
Benefits
 
US Pension
Benefits
 (millions)
Estimated net loss$42
 $6
Prior service gain(3) —


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19. PENSION PLANS (Continued)

The following schedule provides other information concerning the Company’s UK and US defined benefit pension plans:
 Years ended December 31,
 UK Pension Benefits US Pension Benefits
 2013 2012 2013 2012
Weighted-average assumptions to determine benefit obligations: 
  
  
  
Discount rate4.4% 4.4% 4.8% 4.1%
Rate of compensation increase3.2% 2.3% N/A
 N/A
Weighted-average assumptions to determine net periodic benefit cost: 
  
  
  
Discount rate4.4% 4.8% 4.1% 4.6%
Expected return on plan assets7.3% 7.5% 7.3% 7.3%
Rate of compensation increase2.3% 2.1% N/A
 N/A
The expected return on Addictionplan 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 Substance Abuseforeign equities 9.27 percent, debt securities 4.42 percent, hedge funds 7.86 percent and real estate 6.53 percent. The expected returns on US plan assets are: US and foreign equities 10.40 percent and debt securities 4.10 percent.
The Company’s pension plan asset allocations based on fair values were as follows:
  Years ended December 31,
  UK Pension Benefits US Pension Benefits
Asset Category 2013 2012 2013 2012
Equity securities 36% 41% 52% 49%
Debt securities 38% 37% 46% 50%
Hedge funds 17% 17% —% —%
Real estate 3% 3% —% —%
Cash 6% 2% —% —%
Other —% —% 2% 1%
Total 100% 100% 100% 100%

In the UK the pension trustees in consultation with the Company maintain a diversified asset portfolio and this together with contributions made by the Company is expected to meet the pension scheme’s liabilities as they become due. The UK plan’s assets are divided into 13 separate portfolios according to asset class and managed by 10 investment managers. The broad target allocations are UK and foreign equities (31.5 percent), debt securities (45 percent), hedge funds (17.5 percent) and real estate (6 percent). In the US the Company’s investment policy is to maintain a diversified asset portfolio, which together with contributions made by the Company is expected to meet the pension scheme’s liabilities as they become due. 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 (50 percent) and debt securities (50 percent).
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.

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Notes to the financial statements

19. PENSION PLANS (Continued)

The following tables present, at Columbia University,December 31, 2013 and formerly served2012, 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, 2013 Level 1 Level 2 Level 3 Total
    (millions)  
Equity securities:  
  
  
  
US equities $659
 $81
 $—
 $740
UK equities 239
 17
 —
 256
Other equities 40
 63
 —
 103
Fixed income securities:  
  
  
  
US Government bonds 31
 —
 —
 31
UK Government bonds 656
 —
 —
 656
Other Government bonds 7
 —
 100
 107
UK corporate bonds 75
 —
 —
 75
Other corporate bonds 151
 —
 —
 151
Derivatives —
 154
 —
 154
Real estate —
 —
 92
 92
Cash 163
 —
 —
 163
Other investments:  
  
  
  
Hedge funds —
 28
 477
 505
Other —
 28
 —
 28
Total $2,021
 $371
 $669
 $3,061

  UK Pension Plan
December 31, 2012 Level 1 Level 2 Level 3 Total
    (millions)  
Equity securities:  
  
  
  
US equities $492
 $108
 $—
 $600
UK equities 317
 59
 —
 376
Other equities 28
 97
 —
 125
Fixed income securities:  
  
  
  
US Government bonds 11
 —
 —
 11
UK Government bonds 625
 —
 —
 625
Other Government bonds 13
 —
 —
 13
UK corporate bonds 112
 —
 —
 112
Other corporate bonds 29
 —
 —
 29
Derivatives —
 217
 —
 217
Real estate —
 —
 76
 76
Cash 53
 —
 —
 53
Other investments:  
  
  
  
Hedge funds —
 27
 431
 458
Other 8
 13
 —
 21
Total $1,688
 $521
 $507
 $2,716

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Willis Group Holdings plc

19. PENSION PLANS (Continued)

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, 2013 and 2012, 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, 2013 Level 1 Level 2 Level 3 Total
    (millions)  
Equity securities:  
  
  
  
US equities $120
 $125
 $—
 $245
Non US equities 116
 33
 —
 149
Fixed income securities:  
  
  
  
US Government bonds —
 55
 —
 55
US corporate bonds —
 151
 —
 151
International fixed income securities 58
 42
 —
 100
Municipal & Non US government bonds —
 30
 —
 30
Other investments:  
  
  
  
Mortgage backed securities —
 12
 —
 12
Other 9
 6
 —
 15
Total $303
 $454
 $—
 $757

  US Pension Plan
December 31, 2012 Level 1 Level 2 Level 3 Total
    (millions)  
Equity securities:  
  
  
  
US equities $144
 $78
 $—
 $222
Non US equities 98
 27
 —
 125
Fixed income securities:  
  
  
  
US Government bonds —
 69
 —
 69
US corporate bonds —
 144
 —
 144
International fixed income securities 52
 39
 —
 91
Municipal & Non US government bonds —
 35
 —
 35
Other investments:  
  
  
  
Mortgage backed securities —
 13
 —
 13
Other 3
 6
 —
 9
Total $297
 $411
 $—
 $708
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.

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Notes to the financial statements

19. PENSION PLANS (Continued)

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, 2013 and 2012:
 UK Pension
 Plan
 Level 3
 (millions)
Balance at January 1, 2012$476
Purchases, sales, issuances and settlements, net(2)
Unrealized and realized gains relating to instruments still held at end of year17
Foreign exchange16
Balance at December 31, 2012$507
Purchases, sales, issuances and settlements, net121
Unrealized and realized gains relating to instruments still held at end of year29
Foreign exchange12
Balance at December 31, 2013$669

In 2014, the Company expects to make contributions to the UK plan of approximately $83 million and $30 million to the US plan. In addition, approximately $12 million will be paid in 2014 into the UK defined benefit plan related to employee's salary sacrifice contributions.
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:
Expected future benefit payments UK Pension Benefits US Pension Benefits
  (millions)
2014 84
 38
2015 88
 42
2016 89
 44
2017 93
 46
2018 94
 49
2019-2023 518
 271
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 had 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 2013 were $15 million (2012: $10 million; 2011: $10 million), matching contributions were increased 1 percent during 2013.


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Willis Group Holdings plc

19. PENSION PLANS (Continued)

Other 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 together with a non-qualified defined benefit pension plan in the US and an unfunded defined benefit pension plan in the UK.
These smaller additional US and UK plans are incorporated with the Company's other defined benefit pension plans.
In total, a $27 million net pension benefit liability (2012: $30 million) has been recognized in respect of these other schemes.
The following schedules provide information concerning the Company’s international, US non-qualified and UK unfunded defined benefit pension plans:
 Other defined benefit plans
 2013 2012
 (millions)
Change in benefit obligation: 
  
Benefit obligation, beginning of year$180
 $131
Service cost3
 3
Interest cost7
 7
Actuarial (gain) loss(5) 30
Benefits paid(6) (6)
Employee contributions—
 1
Reclassification from other non-current liabilities (i)
10
 9
Foreign currency changes6
 5
Benefit obligations, end of year195
 180
Change in plan assets: 
  
Fair value of plan assets, beginning of year150
 128
Actual return on plan assets9
 11
Employer contributions10
 11
Employee contributions—
 1
Benefits paid(6) (6)
Foreign currency changes5
 5
Fair value of plan assets, end of year168
 150
Funded status at end of year$(27) $(30)
Components on the Consolidated Balance Sheets: 
  
Pension benefits asset$2
 $2
Liability for pension benefits$(29) $(32)

(i)
Transfer in of benefit obligation for UK unfunded and US non-qualified plans from non-current other liabilities.

Amounts recognized in accumulated other comprehensive loss consist of a net actuarial loss of $27 million (2012: $35 million).
The accumulated benefit obligation for the Company’s other defined benefit pension plans was $191 million (2012: $177 million).

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Notes to the financial statements

19. PENSION PLANS (Continued)

The components of the net periodic benefit cost and other amounts recognized in other comprehensive loss for the other defined benefit pension plans are as follows:
 Other defined benefit plans
 2013 2012 2011
 (millions)
Components of net periodic benefit cost: 
  
  
Service cost$3
 $3
 $4
Interest cost7
 7
 7
Expected return on plan assets(6) (6) (6)
Amortization of unrecognized actuarial loss1
 —
 1
Curtailment gain—
 —
 (1)
Net periodic benefit cost$5
 $4
 $5
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss): 
  
  
Amortization of unrecognized actuarial loss$(1) $—
 $(1)
Net actuarial (gain) loss(8) 25
 2
Total recognized in other comprehensive (income) loss(9) 25
 1
Total recognized in net periodic benefit cost and other comprehensive (income) loss$(4) $29
 $6

The estimated net loss for the other defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $nil.
The following schedule provides other information concerning the Company’s other defined benefit pension plans:
 Other defined benefit plans
 2013 2012
Weighted-average assumptions to determine benefit obligations:   
Discount rate3.30% - 4.40% 2.50% - 3.75%
Rate of compensation increase2.00% - 2.50% 2.00%
Weighted-average assumptions to determine net periodic benefit cost:   
Discount rate2.50% - 4.40% 3.30% - 5.30%
Expected return on plan assets 2.00% - 4.66% 2.00% - 5.73%
Rate of compensation increase2.00% - 2.50% 2.50% - 3.00%

The determination of the expected long-term rate of return on the other defined benefit 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.
The Company’s other defined benefit pension plan asset allocations at December 31, 2013 based on fair values were as follows:

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19. PENSION PLANS (Continued)

  Other defined benefit plans
Asset Category 2013 2012
Equity securities 35% 35%
Debt securities 39% 39%
Real estate 3% 3%
Derivatives 14% 16%
Other 9% 7%
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, 2013 and 2012, for each of the fair value hierarchy levels, the Company’s other defined benefit pension plan assets that are measured at fair value on a recurring basis.
  Other defined benefit plans
December 31, 2013 Level 1 Level 2 Level 3 Total
    (millions)  
Equity securities:  
  
  
  
US equities $29
 $—
 $—
 $29
UK equities 5
 —
 —
 5
Overseas equities 26
 —
 —
 26
Fixed income securities:  
  
  
  
Other Government bonds 61
 —
 —
 61
Corporate bonds 4
 —
 —
 4
Derivative instruments —
 23
 —
 23
Real estate —
 —
 5
 5
Cash 8
 —
 —
 8
Other investments:  
  
  
  
Other investments —
 —
 7
 7
Total $133
 $23
 $12
 $168




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Notes to the financial statements

19. PENSION PLANS (Continued)

  Other defined benefit plans
December 31, 2012 Level 1 Level 2 Level 3 Total
    (millions)  
Equity securities:  
  
  
  
US equities $24
 $—
 $—
 $24
UK equities 5
 —
 —
 5
Overseas equities 22
 —
 1
 23
Fixed income securities:  
  
  
  
Other Government bonds 49
 —
 —
 49
Corporate bonds —
 9
 —
 9
Derivative instruments —
 24
 —
 24
Real estate —
 —
 5
 5
Cash 5
 —
 —
 5
Other investments:  
  
  
  
Other investments —
 1
 5
 6
Total $105
 $34
 $11
 $150

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, 2013.
In 2014, the Company expects to contribute $9 million to the other defined benefit pension plans.
The following benefit payments, which reflect expected future service, as appropriate, are estimated to be paid by the other defined benefit pension plans:
  Other defined benefit plans
  Pension
Expected future benefit payments Benefits
  (millions)
2014 $6
2015 6
2016 6
2017 6
2018 7
2019-2023 35




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20.DEBT
Current portion of the long-term debt consists of the following:
 December 31,
 2013 2012
 (millions)
Current portion of 7-year term loan facility expires 2018$15
 $15
Long-term debt consists of the following:
 December 31,
 2013 2012
 (millions)
7-year term loan facility expires 2018$259
 $274
5.625% senior notes due 2015148
 350
Fair value adjustment on 5.625% senior notes due 20154
 18
4.125% senior notes due 2016299
 299
6.200% senior notes due 2017394
 600
7.000% senior notes due 2019187
 300
5.750% senior notes due 2021496
 496
4.625% senior notes due 2023249
 —
6.125% senior notes due 2043274
 —
3-year term loan facility expires 20151
 1
 $2,311
 $2,338
All direct obligations under the 5.625%, 6.200% and 7.000% senior notes are guaranteed by Willis Group Holdings, Willis Netherlands B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc and Willis Group Limited.
All direct obligations under the 4.625% and 6.125% senior notes are guaranteed by Willis Group Holdings, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Willis North America Inc. and Willis Group Limited.
All direct obligations under the 4.125% and 5.750% senior notes are guaranteed by Trinity Acquisition plc, Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Willis North America Inc. and Willis Group Limited.
Debt issuance
On July 23, 2013 we entered into an amendment to our existing credit facilities to extend both the amount of financing and the maturity date of the facilities. As a result of this amendment, our revolving credit facility was increased from $500 million to $800 million. The maturity date on both the revolving credit facility and the $300 million term loan was extended to July 23, 2018, from December 16, 2016. At the amendment date we owed $281 million on the term loan and there was no change to this amount as a director of Commerce Bancorp Inc. and The Board of Visitorsresult of the College of William & Maryrefinancing.
The 7-year term loan facility expiring 2018 bears interest at LIBOR plus 1.50% and is repayable in quarterly installments and a Trusteefinal repayment of $186 million is due in the third quarter of 2018. In 2013, we made $15 million of mandatory repayments against this 7-year term loan. Drawings under the $800 million revolving credit facility bear interest at LIBOR plus 1.50%. These margins apply while the Company’s debt rating remains BBB-/Baa3. As of December 31, 2013 $nil was outstanding under this revolving credit facility (December 31, 2012: $nil).
On August 15, 2013 the Company issued $250 million of 4.625% senior notes due 2023 and $275 million of 6.125% senior notes due 2043. The effective interest rates of these senior notes are 4.696% and 6.154%, respectively, which include the impact of the discount upon issuance.


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Notes to the financial statements

20. DEBT (Continued)

On July 25, 2013 the Company commenced an offer to purchase for cash any and all of its 5.625% senior notes due 2015 and a portion of its 6.200% senior notes due 2017 and its 7.000% senior notes due 2019 for an aggregate purchase price of up to $525 million. On August 22, 2013 the proceeds from the issue of the senior notes due 2023 and 2043 were used to fund the purchase of $202 million of 5.625% senior notes due 2015, $206 million of 6.200% senior notes due 2017 and $113 million of 7.000% senior notes due 2019.
The Company incurred total losses on extinguishment of debt of $60 million during the year ended December 31, 2013. This was made up of a tender premium of $65 million, the write-off of unamortized debt issuance costs of $2 million and a credit for the Granum Value Fund.

Douglas B. Roberts — Mr. Roberts, age 65, joinedreduction of the Boardfair value adjustment on February 13, 20035.625% senior notes due 2015 of $7 million.

The agreements relating to our 7-year term loan facility expiring 2018 and currently servesthe revolving $800 million credit facility contain requirements to maintain maximum levels of consolidated funded indebtedness in relation to consolidated EBITDA and minimum level of consolidated EBITDA to consolidated cash interest expense, 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, 2013, the Company was in compliance with all covenants.
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 had previously designated these instruments as fair value hedges against its $350 million5.625% senior notes due 2015 and accounted for them accordingly until the Chairmanfirst quarter of 2013 at which point these swaps, although remaining as economic hedges, no longer qualified for hedge accounting.
During the year ended December 31, 2013, the Company closed out the above interest rate swaps and received a cash settlement of $13 million on termination.
Following the partial extinguishment of the 5.625% senior notes due 2015 on August 15, 2013, the Company has recorded a credit of $7 million to remove a corresponding partial amount of the fair value adjustment to the carrying values of the notes originally recognized in connection with the interest rate swaps. The remaining $5 million fair value adjustment as at that date will be amortized through interest expense over the period to maturity.
On November 7, 2012, a further revolving credit facility of $20 million, available solely for the use of our main UK regulated entity and available for use in certain circumstances, was renewed. The facility bears interest at LIBOR plus 1.55% until 2014 and LIBOR plus 1.700% thereafter. The facility expires on November 6, 2015. As at December 31, 2013 no drawings had been made on the facility. The facility is secured against the freehold of the UK regulated entity’s freehold property in Ipswich.
On July 11, 2013, a revolving credit facility of 15 million Chinese Yuan Renminbi 'RMB' ($2 million) was renewed. This facility bears interest at 110 percent of the applicable short term interest rate an RMB loan having a term equal to the tenor of that drawing as published by the People's Bank of China 'PBOC' prevailing as at the drawdown date of that drawing. The facility expires on July 10, 2014. As at December 31, 2013 ¥nil ($nil) (2012: ¥nil ($nil)) had been drawn down on the facility. This facility was solely for the use of our Chinese subsidiary and is available for general working capital purposes.

Lines of credit
The Company also has available $4 million (2012: $4 million) in lines of credit, of which $nil was drawn as of December 31, 2013 (2012: $nil).

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Willis Group Holdings plc
20. 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,
 2013 2012 2011
 (millions)
5.625% senior notes due 2015$12
 $12
 $12
12.875% senior notes due 2016—
 —
 15
4.125% senior notes due 201613
 13
 10
6.200% senior notes due 201733
 38
 38
7.000% senior notes due 201918
 21
 21
5.750% senior notes due 202129
 29
 23
4.625% senior notes due 20234
 —
 —
6.125% senior notes due 20436
 —
 —
7-year term loan facility expires 20186
 6
 —
5-year term loan facility repaid 2011—
 —
 14
Revolving $800 million credit facility2
 1
 —
Revolving $300 million credit facility—
 —
 4
Other(i)
3
 8
 19
Total interest expense$126
 $128
 $156

(i)
In 2013, Other includes $nil (2012: $nil; 2011:$10 million ) relating to the write-off of unamortized debt issuance fees.

21.PROVISIONS FOR LIABILITIES
An analysis of movements on provisions for liabilities is as follows:
 
Claims,
lawsuits and
other
proceedings(i)
 
Other
provisions(ii)
 Total
  (millions) 
Balance at January 1, 2012$158
 $38
 $196
Net provisions made during the year23
 (2) 21
Utilized in the year(31) (10) (41)
Foreign currency translation adjustment2
 2
 4
Balance at December 31, 2012$152
 $28
 $180
Net provisions made during the year28
 6
 34
Balances transferred in during the year (iii)
—
 13
 13
Utilized in the year(17) (6) (23)
Foreign currency translation adjustment1
 1
 2
Balance at December 31, 2013$164
 $42
 $206

(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 recognized at December 31, 2013 amounted to $nil (2012: $6 million).

(ii)
The ‘Other’ category includes amounts relating to vacant property provisions of $10 million (2012: $13 million).

(iii)
Provisions held in the UK for ongoing post placement services, long term disability provisions and legal claim provisions all previously recognized within Deferred Revenue and Accrued Expenses were transferred to Provisions for Liabilities during 2013.

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22.COMMITMENTS AND CONTINGENCIES
The Company’s contractual obligations as at December 31, 2013 are presented below:
 Payments due by
Obligations (iii)
Total 2014 2015-2016 2017-2018 After 2018
 (millions)
7-year term loan facility expires 2018$274
 $15
 $39
 $220
 $—
Interest on term loan19
 5
 9
 5
 —
Revolving $800 million credit facility commitment fees9
 2
 4
 3
 —
5.625% senior notes due 2015148
 —
 148
 —
 —
Fair value adjustments on 5.625% senior notes due 20154
 —
 4
 —
 —
4.125% senior notes due 2016300
 —
 300
 —
 —
6.200% senior notes due 2017394
 —
 —
 394
 —
7.000% senior notes due 2019187
 —
 —
 —
 187
5.750% senior notes due 2021500
 —
 —
 —
 500
4.625% senior notes due 2023250
 —
 —
 —
 250
6.125% senior notes due 2043275
 —
 —
 —
 275
Interest on senior notes1,011
 115
 209
 146
 541
Total debt and related interest3,371
 137
 713
 768
 1,753
Operating leases(i)
1,235
 131
 213
 167
 724
Pensions566
 122
 244
 161
 39
Other contractual obligations(ii)
91
 24
 16
 12
 39
Total contractual obligations$5,263
 $414
 $1,186
 $1,108
 $2,555

(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.
(iii)
The above excludes $41 million of liabilities for unrecognized tax benefits as the Company is unable to reasonably predict the timing of settlement of these liabilities.

Debt obligations and facilities
The Company’s debt and related interest obligations at December 31, 2013 are shown in the above table.
On July 23, 2013 we entered into an amendment to our existing credit facilities to extend the amount of financing of the facilities. As a result of this amendment, our revolving credit facility was increased from $500 million to $800 million. As at December 31, 2013 $nil was outstanding under the revolving credit facility.
This facility is in addition to the remaining availability of $22 million under the Company’s two other previously existing revolving credit facilities.
The only mandatory repayments of debt over the next 12 months are the scheduled repayment of $15 million current portion of the Company’s Audit Committee7-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.

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22. COMMITMENTS AND CONTINGENCIES (Continued)


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, 2013, the aggregate future minimum rental commitments under all non-cancellable operating lease agreements are as follows:
 
Gross rental
commitments
 
Rentals from
subleases
 
Net rental
commitments
   (millions)  
2014$131
 $(15) $116
2015114
 (14) 100
201699
 (13) 86
201788
 (12) 76
201879
 (8) 71
Thereafter724
 (16) 708
Total$1,235
 $(78) $1,157
The Company leases its main London building under a 25-year operating lease, which expires in 2032. The Company’s contractual obligations in relation to this commitment included in the table above total $719 million (2012: $730 million). Annual rentals are $36 million (2012: $32 million) per year and the Company has subleased approximately 29 percent (2012: 29 percent) of the premises under leases up to 15 years. The amounts receivable from subleases, included in the table above, total $66 million (2012: $76 million; 2011: $82 million).
Rent expense amounted to $141 million for the year ended December 31, 2013 (2012: $135 million; 2011: $127 million). The Company’s rental income from subleases was $15 million for the year ended December 31, 2013 (2012: $17 million; 2011: $18 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 March 2012, the Company agreed to a revised schedule of contributions towards on-going accrual of benefits and deficit funding contributions the Company will make to the UK plan over the six years ended December 31, 2017. Contributions in each of the next four years are expected to total approximately $83 million, of which approximately $23 million relates to on-going contributions calculated as 15.9 percent of active plan members' pensionable salary and approximately $60 million that relates to contributions towards the funding deficit.
In addition, further contributions will be payable based on a profit share calculation (equal to 20 percent of EBITDA in excess of $900 million per annum as defined by the revised schedule of contributions) and an exceptional return calculation (equal to 10 percent of any exceptional returns made to shareholders, for example, share buybacks, and special dividends). Aggregate contributions under the deficit funding contribution and the profit share calculation are capped at £312 million ($517 million) over the six years ended December 31, 2017.
During 2014 we will be required to negotiate a new funding arrangement which may further change the contributions we are required to make during 2014 and beyond.
In addition, approximately $12 million will be paid annually into the UK defined benefit plan related to employee's salary sacrifice contributions.
The total contracted contributions for all plans in 2014 are expected to be approximately $122 million, excluding approximately $12 million in respect of the salary sacrifice scheme.

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22. COMMITMENTS AND CONTINGENCIES (Continued)

Guarantees
Guarantees issued by certain of Willis Group Holdings’ subsidiaries with respect to the senior notes and revolving credit facilities are discussed in Note 20 — 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 $828 million and $829 million at December 31, 2013 and 2012, respectively. The capital lease obligations subject to such guarantees amounted to $11 million as at December 31, 2013 (2012: $nil).
In addition, the Company has given guarantees to bankers and other third parties relating principally to letters of credit amounting to $11 million and $10 million at December 31, 2013 and 2012, respectively. Willis Group Holdings also guarantees certain of its UK and Irish subsidiaries’ obligations to fund the UK and Irish defined benefit 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 their shares (a put option) 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 and assuming the put options are exercised, the potential amount payable from these options is not expected to exceed $12 million (2012: $19 million).
In July 2010, the Company made a capital commitment of $25 million to Trident V Parallel Fund, LP, an investment fund managed by Stone Point Capital. This replaced a capital commitment of $25 million that had been made to Trident V, LP in December 2009. As at December 31, 2013 there have been approximately $15 million of capital contributions.
In May 2011, the Company made a capital commitment of $10 million to Dowling Capital Partners I, LP. As at December 31, 2013 there had been approximately $4 million of capital contributions.
Other contractual obligations at December 31, 2013, also include certain capital lease obligations totaling $63 million (2012: $53 million), primarily in respect of the Company's Nashville property.
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. Regarding 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:


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22. COMMITMENTS AND CONTINGENCIES (Continued)


Stanford Financial Group Litigation
The Company has been named as a defendant in 13 similar lawsuits 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 complaints in these actions generally allege 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 complaints further allege 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 13 actions are as follows:
Troice, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:9-CV-1274-N, was filed on July 2, 2009 in the U.S. District Court for the Northern District of Texas against Willis Group Holdings plc, Willis of Colorado, Inc. and a memberWillis associate, among others. On April 1, 2011, plaintiffs filed the operative Third Amended Class Action Complaint individually and on behalf of a putative, worldwide class of Stanford investors, adding Willis Limited as a defendant and alleging claims under Texas statutory and common law and seeking damages in excess of $1 billion, punitive damages and costs. On May 2, 2011, the defendants filed motions to dismiss the Third Amended Class Action Complaint, arguing, inter alia, that the plaintiffs’ claims are precluded by the Securities Litigation Uniform Standards Act of 1998 (‘SLUSA’).
On May 10, 2011, the court presiding over the Stanford-related actions in the Northern District of Texas entered an order providing that it would consider the applicability of SLUSA to the Stanford-related actions based on the decision in a separate Stanford action not involving a Willis entity, Roland v. Green, Civil Action No. 3:10-CV-0224-N. On August 31, 2011, the court issued its decision in Roland, dismissing that action with prejudice under SLUSA.
On October 27, 2011, the court in Troice entered an order (i) dismissing with prejudice those claims asserted in the Third Amended Class Action Complaint on a class basis on the grounds set forth in the Roland decision discussed above and (ii) dismissing without prejudice those claims asserted in the Third Amended Class Action Complaint on an individual basis. Also on October 27, 2011, the court entered a final judgment in the action.
On October 28, 2011, the plaintiffs in Troice filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit. Subsequently, Troice, Roland and a third action captioned Troice, et al. v. Proskauer Rose LLP, Civil Action No. 3:09-CV-01600-N, which also was dismissed on the grounds set forth in the Roland decision discussed above and on appeal to the U.S. Court of Appeals for the Fifth Circuit, were consolidated for purposes of briefing and oral argument. Following the completion of briefing and oral argument, on March 19, 2012, the Fifth Circuit reversed and remanded the actions. On April 2, 2012, the defendants-appellees filed petitions for rehearing en banc. On April 19, 2012, the petitions for rehearing en banc were denied. On July 18, 2012, defendants-appellees filed a petition for writ of certiorari with the United States Supreme Court regarding the Fifth Circuit's reversal in Troice. On January 18, 2013, the Supreme Court granted our petition. Opening briefs were filed on May 3, 2013 and the Supreme Court heard oral argument on October 7, 2013. On February 26, 2014, the Supreme Court affirmed the Fifth Circuit’s decision.
Ranni v. Willis of Colorado, Inc., et al., C.A. No. 9-22085, was filed on July 17, 2009 against Willis Group Holdings plc and Willis of Colorado, Inc. in the U.S. District Court for the Southern District of Florida. The complaint was filed on behalf of a putative class of Venezuelan and other South American Stanford investors and alleges claims under Section 10(b) of the Executive Committee. He isSecurities Exchange Act of 1934 (and Rule 10b-5 thereunder) and Florida statutory and common law and seeks damages in an amount to be determined at trial. On October 6, 2009, Ranni was transferred, for consolidation or coordination with other Stanford-related actions (including Troice), to the former TreasurerNorthern District of Texas by the U.S. Judicial Panel on Multidistrict Litigation (the ‘JPML’). The defendants have not yet responded to the complaint in Ranni.
Canabal, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:9-CV-1474-D, was filed on August 6, 2009 against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate named as a defendant in Troice, among others, also in the Northern District of Texas. The complaint was filed individually and on behalf of a putative class of Venezuelan Stanford investors, alleged claims under Texas statutory and common law and sought damages in excess of $1 billion, punitive damages, attorneys’ fees and costs. On December 18, 2009, the parties in Troice and Canabal stipulated to the consolidation of those actions (under the Troice civil action number), and, on December 31, 2009, the plaintiffs in Canabal filed a notice of dismissal, dismissing the action without prejudice.

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22. COMMITMENTS AND CONTINGENCIES (Continued)

Rupert, et al. v. Winter, et al., Case No. 2009C115137, was filed on September 14, 2009 on behalf of 97 Stanford investors against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The complaint alleges claims under the Securities Act of 1933, Texas and Colorado statutory law and Texas common law and seeks special, consequential and treble damages of more than $300 million, attorneys’ fees and costs. On October 20, 2009, certain defendants, including Willis of Colorado, Inc., (i) removed Rupert to the U.S. District Court for the StateWestern District of Michigan,Texas, (ii) notified the JPML of the pendency of this related action and (iii) moved to stay the action pending a position held fromdetermination 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. On April 20011, 2010, the JPML issued a final transfer order for the transfer of Rupert to December 2002the Northern District of Texas. On January 24, 2012, the court remanded Rupert to Texas state court (Bexar County), but stayed the action until further order of the court. The defendants have not yet responded to the complaint in Rupert.
Casanova, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:10-CV-1862-O, was filed on September 16, 2010 on behalf of seven Stanford investors against Willis Group Holdings plc, Willis Limited, Willis of Colorado, Inc. 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 workedthe same Willis associate, among others, also in the Michigan Senate as Director, Senate Fiscal Agency from April 1988Northern District of Texas. The complaint alleges 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 December 1990the complaint in Casanova.
Rishmague, et ano. v. Winter, et al., Case No. 2011CI2585, was filed on March 11, 2011 on behalf of two Stanford investors, individually and as Deputy Superintendentrepresentatives of Public Instructioncertain trusts, against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks special, consequential and treble damages of more than $37 million and attorneys’ fees and costs. On April 11, 2011, certain defendants, including Willis of Colorado, Inc., (i) removed Rishmague to the Western District of Texas, (ii) notified the JPML of the pendency of this related 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. On August 8, 2011, the JPML issued a final transfer order for the Departmenttransfer of Education. Mr. Roberts holds a doctorateRishmague to the Northern District of Texas, where it is currently pending. The defendants have not yet responded to the complaint in Economics from Michigan State University. Currently, Mr. Roberts is both a ProfessorRishmague.
MacArthur v. Winter, et al., Case No. 2013-07840, was filed on February 8, 2013 on behalf of two Stanford investors against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the Directorsame Willis associate, among others, in Texas state court (Harris County). The complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks actual, special, consequential and treble damages of approximately $4 million and attorneys' fees and costs. On March 29, 2013, Willis of Colorado, Inc. and Willis of Texas, Inc. (i) removed MacArthur to the U.S. District Court for the InstituteSouthern District of Texas and (ii) notified the JPML of the pendency of this related action. On April 2, 2013, Willis of Colorado, Inc. and Willis of Texas, Inc. filed a motion in the Southern District of Texas 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. Also on April 2, 2013, the court presiding over MacArthur in the Southern District of Texas transferred the action to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. The defendants have not yet responded to the complaint in MacArthur.
Florida suits: On February 14, 2013, five law suits were filed against Willis Group Holdings plc, Willis Limited and Willis of Colorado, Inc. in Florida state court (Miami-Dade County) alleging violations of Florida common law. The five suits are: (1) Barbar, et al. v. Willis Group Holdings Public PolicyLimited Company, et al., Case No. 13-05666CA27, filed on behalf of 35 Stanford investors seeking compensatory damages in excess of $30 million; (2) deGadala-Maria, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05669CA30, filed on behalf of 64 Stanford investors seeking compensatory damages in excess of $83.5 million; (3) Ranni, et ano. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05673CA06, filed on behalf of two Stanford investors seeking compensatory damages in excess of $3 million; (4) Tisminesky, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05676CA09, filed on behalf of 11 Stanford investors seeking compensatory damages in excess of $6.5 million; and Social Research(5) Zacarias, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05678CA11, filed on behalf of 10 Stanford investors seeking compensatory damages in excess of $12.5 million. On June 3, 2013, Willis of Colorado, Inc. removed all five cases to the Southern District of Florida and, on June 4, 2013, notified the JPML of the pendency of these related actions. On June 10, 2013, the court in Tisminesky issued an order sua sponte staying and administratively closing that action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation and coordination with the other Stanford-related actions. On June 11, 2013, Willis of Colorado, Inc. moved to stay the other four actions pending the JPML's transfer decision. On June 20, 2013, the JPML issued a conditional transfer order for the

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22. COMMITMENTS AND CONTINGENCIES (Continued)


transfer of the five actions to the Northern District of Texas, the transmittal of which was stayed for seven days to allow for any opposition to be filed. On June 28, 2013, with no opposition having been filed, the JPML lifted the stay, enabling the transfer to go forward. The defendants have not yet responded to the complaints in these actions.
Janvey, et al. v. Willis of Colorado, Inc., et al., Case No. 3:13-CV-03980-D, was filed on October 1, 2013 also in the Northern District of Texas against Willis Group Holdings plc, Willis Limited, Willis North America Inc., Willis of Colorado, Inc. and the same Willis associate. The complaint was filed (i) by Ralph S. Janvey, in his capacity as Court-Appointed Receiver for the Stanford Receivership Estate, and the Official Stanford Investors Committee (the ‘OSIC’) against all defendants and (ii) on behalf of a putative, worldwide class of Stanford investors against Willis North America Inc. Plaintiffs Janvey and the OSIC allege claims under Texas common law and the court’s Amended Order Appointing Receiver, and the putative class plaintiffs allege claims under Texas statutory and common law. Plaintiffs seek actual damages in excess of $1 billion, punitive damages and costs. On November 15, 2013, plaintiffs filed the operative First Amended Complaint, which added certain defendants unaffiliated with Willis. On February 28, 2014, the defendants will file motions to dismiss the First Amended Complaint.

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 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 Michigan State University.this time.


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Notes to the financial statements

23.ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX
The components of other comprehensive income (loss) are as follows:
 December 31, 2013 December 31, 2012 December 31, 2011
 Before tax amount Tax Net of tax amount Before tax amount Tax Net of tax amount Before tax amount Tax Net of tax amount
 (millions)
Other comprehensive income:                 
Foreign currency translation adjustments$20
 $—
 $20
 $46
 $—
 $46
 $(29) $—
 $(29)
Pension funding adjustments:                 
Foreign currency translation on pension funding adjustments(15) 5
 (10) (31) 9
 (22) 8
 —
 8
Net actuarial gain (loss)83
 2
 85
 (203) 36
 (167) (303) 95
 (208)
Prior service gain—
 —
 —
 —
 —
 —
 10
 (3) 7
Amortization of unrecognized actuarial loss55
 (9) 46
 47
 (9) 38
 34
 (9) 25
Amortization of unrecognized prior service gain(5) 1
 (4) (6) 1
 (5) (5) 1
 (4)
 118
 (1) 117
 (193) 37
 (156) (256) 84
 (172)
Derivative instruments:                 
Gain on interest rate swaps (effective element)—
 —
 —
 3
 (1) 2
 13
 (3) 10
Interest rate reclassification adjustment(5) 1
 (4) (5) 1
 (4) (14) 4
 (10)
Gain on forward exchange contracts (effective element)10
 (2) 8
 11
 (2) 9
 3
 (1) 2
Forward exchange contract reclassification adjustment1
 —
 1
 (4) 1
 (3) (7) 2
 (5)
Gain on treasury lock (effective element)19
 (4) 15
 —
 —
 —
 —
 —
 —
 25
 (5) 20
 5
 (1) 4
 (5) 2
 (3)
Other comprehensive income (loss)163
 (6) 157
 (142) 36
 (106) (290) 86
 (204)
Less: Other comprehensive income attributable to noncontrolling interests—
 —
 —
 —
 —
 —
 1
 —
 1
Other comprehensive income (loss) attributable to Willis Group Holdings$163
 $(6) $157
 $(142) $36
 $(106) $(289) $86
 $(203)

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23. ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX (Continued)

The components of accumulated other comprehensive loss, net of tax, are as follows:
 Net foreign currency translation adjustment Pension funding adjustment Net unrealized gain on derivative instruments Total
 (millions)
Balance, December 31, 2010$(52) $(503) $14
 $(541)
Other comprehensive (loss) income before reclassifications(28) (193) 12
 (209)
Amounts reclassified from accumulated other comprehensive income—
 21
 (15) 6
Net current year other comprehensive income (loss), net of tax and noncontrolling interests(28) (172) (3) (203)
Balance, December 31, 2011$(80) $(675) $11
 $(744)
Other comprehensive income (loss) before reclassifications46
 (189) 11
 (132)
Amounts reclassified from accumulated other comprehensive income—
 33
 (7) 26
Net current year other comprehensive income (loss), net of tax and noncontrolling interests46
 (156) 4
 (106)
Balance, December 31, 2012$(34) $(831) $15
 $(850)
Other comprehensive income (loss) before reclassifications20
 75
 23
 118
Amounts reclassified from accumulated other comprehensive income—
 42
 (3) 39
Net current year other comprehensive income (loss), net of tax and noncontrolling interests20
 117
 20
 157
Balance, December 31, 2013$(14) $(714) $35
 $(693)




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Notes to the financial statements

23. ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX

(Continued)

Amounts reclassified out of accumulated other comprehensive income into the statement of operations are as follows:
Details about accumulated other comprehensive income components Amount reclassified from accumulated other comprehensive income Affected line item in the statement of operations
  Years ended December 31,  
  2013 2012 2011  
  (millions)    
Gains and losses on cash flow hedges (Note 26)        
Interest rate swaps $(5) $(5) $(14) Investment income
Foreign exchange contracts 1
 (4) (7) Other operating expenses
  (4) (9) (21) Total before tax
Tax 1
 2
 6
  
  $(3) $(7) $(15) Net of tax
Amortization of defined benefit pension items (Note 19)        
Prior service gain $(5) $(6) $(5) Salaries and benefits
Net actuarial loss 55
 47
 34
 Salaries and benefits
  50
 41
 29
 Total before tax
Tax (8) (8) (8)  
  $42
 $33
 $21
 Net of tax
         
Total reclassifications for the period $39
 $26
 $6
  



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24.EQUITY AND NONCONTROLLING INTEREST
The components of equity and noncontrolling interests are as follows:
 December 31, 2013 December 31, 2012 December 31, 2011
 
Willis
Group
Holdings’
stockholders
 
Noncontrolling
interests
 
Total
equity
 
Willis
Group
Holdings’
stockholders
 
Noncontrolling
interests
 
Total
equity
 
Willis
Group
Holdings’
stockholders
 
Noncontrolling
interests
 
Total
equity
 (millions)
Balance at January 1,$1,699
 $26
 $1,725
 $2,486
 $31
 $2,517
 $2,577
 $31
 $2,608
Comprehensive income: 
  
  
  
  
  
  
  
  
Net income (loss)365
 12
 377
 (446) 13
 (433) 204
 16
 220
Other comprehensive income (loss), net of tax157
 —
 157
 (106) —
 (106) (203) (1) (204)
Comprehensive income (loss)522
 12
 534
 (552) 13
 (539) 1
 15
 16
Dividends(197) (10) (207) (187) (11) (198) (180) (15) (195)
Additional paid-in capital195
 —
 195
 81
 —
 81
 88
 —
 88
Repurchase of shares (i)
—
 —
 —
 (100) —
 (100) —
 —
 —
Purchase of subsidiary shares from noncontrolling interests(4) —
 (4) (31) (8) (39) —
 —
 —
Additional noncontrolling interests—
 —
 —
 2
 1
 3
 —
 —
 —
Balance at December 31,$2,215
 $28
 $2,243
 $1,699
 $26
 $1,725
 $2,486
 $31
 $2,517

•
(i)

Legal, Governmental, Political or Diplomatic Experience — Mr. Roberts has a deep understandingBased on settlement date the Company repurchased 2,796,546 shares at an average price of public finance and other public policy matters from his 28-year tenure$35.87 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.2012.


The effects on equity of changes in Willis Group Holdings, ownership interest in its subsidiaries are as follows:
 Years ended December 31,
 2013 2012 2011
   (millions)  
Net income (loss) attributable to Willis Group Holdings$365
 $(446) $204
Transfers from noncontrolling interest: 
  
  
Decrease in Willis Group Holdings’ paid-in capital for purchase of noncontrolling interest(4) (31) —
Increase in Willis Group Holdings’ paid-in capital for sale of noncontrolling interest—
 2
 —
Net transfers from noncontrolling interest(4) (29) —
Change from net income (loss) attributable to Willis Group Holdings and transfers from noncontrolling interests$361
 $(475) $204


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Notes to the financial statements

•
25.

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.

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Dr. Michael J. Somers

Supplemental disclosures regarding cash flow information and non-cash flow investing and financing activities are as follows:
 Years Ended December 31,
 2013 2012 2011
 (millions)
Supplemental disclosures of cash flow information: 
  
  
Cash payments for income taxes, net$61
 $63
 $15
Cash payments for interest117
 118
 128
Supplemental disclosures of non-cash investing and financing activities: 
  
  
Write-off of unamortized debt issuance costs$(2) $—
 $(23)
Write-back of fair value adjustment on 5.625% senior notes due 20157
 —
 —
Assets acquired under capital leases7
 2
 —
Deferred payments on acquisitions of subsidiaries2
 4
 6
Acquisitions: 
  
  
Fair value of assets acquired$47
 $23
 $6
Less: 
  
  
Liabilities assumed30
 3
 3
Cash acquired1
 —
 3
Net assets acquired, net of cash acquired$16
 $20
 $—

26.DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Fair value of derivative financial instruments
In addition to the note below, see Note 27 - Fair Value Measurements for information about the fair value hierarchy of derivatives.
Primary risks managed by derivative financial instruments
The main risks managed by derivative financial instruments are interest rate risk and foreign currency risk. The Company’s Board of Directors reviews and approves 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 foreign 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 — Dr. Somers, age 70, joined the Board on April 21, 2010 and currently serves asInvestment Income
As a memberresult of the Company’s Risk Committee. Heoperating 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 entered into interest rate swaps to receive a fixed rate of interest and pay a variable rate of interest denominated in the various currencies related to the short-term investments. The use of interest rate contracts essentially converted groups of short-term variable rate investments to fixed rate investments. The fair value of these contracts was Chief Executive Officerrecorded in other assets and other liabilities. For contracts that qualified as cash flow hedges for accounting purposes, the effective portions of changes in fair value were recorded as a component of other comprehensive income, to the extent that the hedge relationships were highly effective.

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Willis Group Holdings plc

26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

From the fourth quarter of 2011, the Company stopped entering into any new hedging transactions relating to interest rate risk from investments, given the flat yield curve environment at that time. Further to this, during second quarter 2012, the Company closed out its legacy position for these interest rate swap contracts.
The fair value of these swaps at the close out date was $16 million, representing a cash settlement amount on termination. In connection with the terminated swaps, the Company retained a gain of $15 million in other comprehensive income as the forecasted short-term investment transactions in relation to which the swaps qualified as cash flow hedges are still considered probable. These amounts are reclassified into earnings consistent with when the forecasted swap transactions affect earnings. We expect approximately $5 million of the Irish National Treasury Management Agency from 1990, when itgain to be recognized in the consolidated statement of operations in 2014.
At December 31, 2013 and 2012, the Company had no derivative financial instruments that were designated as cash flow hedges of interest rate risk in investments.
Interest Rate Risk — Interest Expense
The Company's operations are financed principally by $2,054 million fixed rate senior notes and $274 million under a 7-year term loan facility. The Company has access to $800 million under its main revolving credit facility expiring July 23, 2018, and $22 million under two further revolving credit facilities. As of December 31, 2013 $nil was established,drawn on these facilities.
The 7-year term loan facility bears interest at LIBOR plus 1.50% and drawings under the revolving credit facility bear interest at LIBOR plus 1.50%. These margins apply while the Company’s debt rating remains BBB-/Baa3. Should the Company’s debt rating change, then the margin will change in accordance with the credit facilities agreements. The fixed rate senior notes bear interest at various rates as detailed in Note 20 — ‘Debt’.
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 had previously designated these instruments as fair value hedges against its $350 million5.625% senior notes due 2015 and had accounted for them accordingly until the endfirst quarter of 2009.2013 at which point these swaps, although remaining as economic hedges, no longer qualified for hedge accounting.
During the year ended December 31, 2013, the Company closed out the above interest rate swaps and received a cash settlement of $13 million on termination.
Following the partial extinguishment of the 5.625% senior notes due 2015 on August 15, 2013, we have recorded a credit of $7 million to remove a corresponding partial amount of the fair value adjustment to the carrying values of the notes originally recognized in connection with the interest rate swaps. The Agency, which isremaining $5 million fair value adjustment as at that date will be amortized through interest expense over the period to maturity.
To hedge against the potential variability in benchmark interest rates in advance of the anticipated debt issuance, the Company entered into two short-term treasury locks during the three months ended June 30, 2013. These were closed out during the three months ended September 30, 2013 following the issue of the new senior notes described in Note 20 - 'Debt'. The fair value of these treasury locks at the close out date was $21 million, received as a commercial entity outsidecash settlement on termination.
The Company had designated the civil service, was initially set upTreasury locks as effective hedges of the anticipated transaction and had recognized a gain of $19 million in other comprehensive income in relation to arrange Ireland’s borrowing and manage its national debt. Its remit was extended to establish and manage the National Pensions Reserve Fund,effective element that qualified for hedge accounting. This amount will be reclassified into earnings consistent with the recognition of which Dr. Somers was a Commissioner,interest expense on the 4.625% senior notes due 2023 and the National Development Agency,6.125% senior notes due 2043. In addition, the Company recognized a $2 million gain in interest expense for the portion of the treasury locks determined as ineffective.

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Notes to the financial statements

26. 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 he was Chairman. Itare 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; and
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. In addition, we are also incorporated the State Claims Agency, which handles claims against the State and against hospitalsexposed to foreign exchange risk on any net sterling asset or liability position in our London market operations.
The fair value of foreign currency contracts is recorded in other assets and other medical institutions. Dr. Somers previously workedliabilities. For contracts that qualify as accounting hedges, changes in fair value resulting from movements in the Irish Departmentspot exchange rate are recorded as a component of Financeother 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, 2013 and 2012, the Central BankCompany’s foreign currency contracts were all designated as hedging instruments except for those relating to short-term cash flows and served as Secretary Generalhedges of certain intercompany loans.
The table below summarizes by major currency the contractual amounts of the DepartmentCompany’s forward contracts to exchange foreign currencies for Pounds sterling in the case of Defense from 1985 to 1987. He was the Irish member of the EU Monetary Committee from 1987 to 1990US dollars and chaired the EU group that established the European BankUS dollars for Reconstructioneuro and Development. He served on the board 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 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 as 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 purpose entity whose purpose has expired and assets have been liquidated. He holds various degrees, including a master’s degreeJapanese yen. Foreign currency notional amounts are reported in economic science and a doctorate from University College Dublin. He is President of the Ireland Chapter of the Ireland-U.S. Council.

US dollars translated at contracted exchange rates.
 December 31,
 
Sell
2013(i)
 
Sell
2012
 (millions)
US dollar$303
 $255
Euro97
 55
Japanese yen35
 32

•

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.

•
(i)

International Business and Board Experience — Dr. Somers has extensive knowledge and experienceForward exchange contracts range 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 importantmaturity from 2014 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.

2015.

Jeffrey W. Ubben — Mr. Ubben, age 51, is a nominee for election to the 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 servesto forward exchange contracts we undertake short-term foreign exchange swaps for liquidity purposes. These are not designated as chairman ofhedges and do not qualify for hedge accounting. The fair values at December 31, 2013 and 2012 were immaterial.
During 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 M.B.A. from the J. L. Kellogg Graduate School of Management at 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,year ended December 31, 2013, the Company entered into a Nomination Agreementnumber of foreign currency transactions in order to hedge certain intercompany loans. These derivatives were not designated as hedging instruments and were for a total notional amount of $228 million (December 31, 2012: $63 million). In respect of these transactions, an immaterial amount has been recognized as an asset within other current assets and a nominal gain has been recognized in income within other operating expenses for the period.




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Willis Group Holdings plc

26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

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 2013 2012
   (millions)
Assets:   
  
Interest rate swaps (fair value hedges)Other assets —
 22
Forward exchange contractsOther assets 23
 9
Total derivatives designated as hedging instruments  $23
 $31
Liabilities:   
  
Forward exchange contractsOther liabilities 2
 —
Total derivatives designated as hedging instruments  $2
 $—
Cash Flow 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, 2013, 2012 and 2011:
Derivatives in cash flow hedging relationships
Amount of
gain (loss)
recognized
in OCI(i)on derivative (effective element)
 
Location of gain (loss)
reclassified from accumulated OCI(i) into income (effective element)
 
Amount of
gain (loss)
reclassified
from
accumulated
OCI(i) into
income(effective element)
 Location of gain (loss)
recognized in income
on derivative (ineffective hedges and ineffective element of effective hedges)		 Amount of
gain (loss)
recognized
in income
on derivative
(ineffective
hedges and
ineffective
element of effective hedges)
 (millions)   (millions)   (millions)
Year Ended December 31, 2013 
    
    
Interest rate swaps$—
 Investment income $(5) Other operating expenses $—
Treasury locks19
 Interest expense —
 Interest expense 2
Forward exchange contracts10
 Other operating expenses 1
 Interest expense 1
Total$29
   $(4)   $3
Year Ended December 31, 2012 
    
    
Interest rate swaps$3
 Investment income $(5) Other operating expenses $—
Forward exchange contracts11
 Other operating expenses (4) Interest expense 1
Total$14
   $(9)   $1
Year Ended December 31, 2011 
    
    
Interest rate swaps$13
 Investment income $(14) Other operating expenses $—
Forward exchange contracts3
 Other operating expenses (7) Interest expense (2)
Total$16
   $(21)   $(2)

Amounts above shown gross of tax.

(i)
OCI means other comprehensive income.
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. In instances where the timing of expected cash flows can be matched exactly to the maturity of the foreign exchange contract, then changes in fair value attributable to movement in the forward points are also included.

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Notes to the financial statements

26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

At December 31, 2013 the Company estimates there will be $20 million of net derivative gains reclassified from accumulated comprehensive income into earnings within the next twelve months as the forecasted transactions affect earnings.
Fair Value Hedges
The Company had previously designated interest rate swaps as fair value hedges against its $350 million 5.625% senior notes due 2015 and accounted for them accordingly until the first quarter of 2013 at which point these swaps, although remaining as economic hedges, no longer qualified for hedge accounting.
The table below presents the effects of derivative financial instruments in fair value hedging relationships on the consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011.
Derivatives in fair value hedging relationshipsHedged item in fair value hedging relationship 
(Loss) gain
recognized for derivative
 
Gain (loss)
recognized
for hedged item
 
Ineffectiveness
recognized in
interest expense
   (millions)
Year Ended December 31, 2013   
  
  
Interest rate swaps5.625% senior notes due 2015 $—
 $—
 $—
Year Ended December 31, 2012   
  
  
Interest rate swaps5.625% senior notes due 2015 $(3) $2
 $1
Year Ended December 31, 2011   
  
  
Interest rate swaps5.625% senior notes due 2015 $7
 $(8) $1
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
The table below presents the effects of derivative financial instruments no longer in fair value hedging relationships on the consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011.
Derivatives no longer in fair value hedging relationshipsHedged item in fair value hedging relationship 
Loss
recognized for derivative
 Amortization or prior loss recognized on hedged item 
Net gain recognized (i)
   (millions)
Year Ended December 31, 2013   
  
  
Interest rate swaps5.625% senior notes due 2015 $(5) $14
 $9
Year Ended December 31, 2012   
  
  
Interest rate swaps5.625% senior notes due 2015 $—
 $—
 $—
Year Ended December 31, 2011   
  
  
Interest rate swaps5.625% senior notes due 2015 $—
 $—
 $—
 ____________________
(i) The net gain was included entirely in interest expense, except for $7 million in the year ended December 31, 2013 which formed part of the loss on extinguishment of debt.

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 currently does not anticipate non-performance by its counterparties. The Company generally does not require collateral or other security to support financial instruments with ValueAct pursuantcredit risk.
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

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Willis Group Holdings plc

26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

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’s BoardCompany 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 Directors agreedcredit as of December 31, 2013.


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Notes to nominate Mr. Ubbenthe financial statements

27.FAIR VALUE MEASUREMENTS

The Company has categorized its assets and liabilities that are measured at fair value on a recurring and non-recurring basis into a three-level fair value hierarchy, based on the reliability of the inputs used to determine fair value as follows:

    Level 1: refers to fair values determined based on quoted market prices in active markets for election at the 2013 Annual General Meeting of Shareholders. In addition, ValueAct agreed, subjectidentical assets;
    Level 2: refers to exceptions,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 to engage in certain transactions regardingcorroborated by market data.

The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments:

Long-term debt excluding the fair value hedge-Fair values are based on quoted market values and its securities until a date specified inso classified as Level 1 measurements.

Derivative financial instruments-Market values have been used to determine the Nominating Agreement.

Executive Officers

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.


Recurring basis

The following table sets forth,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, 2013
 
Quoted
prices in
active
markets
for
identical
assets
 
Significant
other
observable
inputs
 
Significant
other
unobservable
inputs
  
 Level 1 Level 2 Level 3 Total
   (millions)  
Assets at fair value: 
  
  
  
Cash and cash equivalents$796
 $—
 $—
 $796
Fiduciary funds (included within Fiduciary assets)1,662
 —
 —
 1,662
Derivative financial instruments—
 23
 —
 23
Total assets$2,458
 $23
 $—
 $2,481
Liabilities at fair value: 
  
  
  
Derivative financial instruments$—
 $2
 $—
 $2
Total liabilities$—
 $2
 $—
 $2


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Willis Group Holdings plc
27. FAIR VALUE MEASUREMENTS (Continued)

 December 31, 2012
 
Quoted
prices in
active
markets
for
identical
assets
 
Significant
other
observable
inputs
 
Significant
other
unobservable
inputs
  
 Level 1 Level 2 Level 3 Total
   (millions)  
Assets at fair value: 
  
  
  
Cash and cash equivalents$500
 $—
 $—
 $500
Fiduciary funds (included within Fiduciary assets)1,796
 —
 —
 1,796
Derivative financial instruments—
 31
 —
 31
Total assets$2,296
 $31
 $—
 $2,327
Liabilities at fair value: 
  
  
  
Changes in fair value of hedged debt(i)
—
 18
 —
 18
Total liabilities$—
 $18
 $—
 $18

(i)
Changes in the fair value of the underlying hedged debt instrument since inception of the hedging relationship are included in long-term debt.
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,
 2013 2012
 
Carrying
amount
 
Fair
value
 
Carrying
amount
 
Fair
value
   (millions)  
Assets: 
  
  
  
Derivative financial instruments$23
 $23
 $31
 $31
Liabilities: 
  
  
  
Short-term debt$15
 $15
 $15
 $15
Long-term debt2,311
 2,444
 2,338
 2,576
Derivative financial instruments2
 2
 —
 —

Non-recurring basis

The remeasurement of goodwill is classified as non-recurring level 3 fair value assessment due to the significance of unobservable inputs developed using company-specific information. The Company recognized an impairment charge in its North America reporting unit during 2012. The pre-tax impairment charge of $492 million was recognized as a result of the Company's annual goodwill impairment testing performed as of April 24,October 1, 2012, which reduced the carrying value of the North America reporting unit goodwill as of that date of $1,782 million to its implied fair value of $1,290 million.

The Company used the income approach to measure the fair value of the North America reporting unit which involves calculating the fair value of a reporting unit based on the present value of the estimated future cash flows. Cash flow projections were based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions and the uncertainty related to the business's ability to execute on the projected cash flows. The discount rate used was based on the weighted-average cost of capital adjusted for the relevant risk associated with the market participant

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Notes to the financial statements
27. FAIR VALUE MEASUREMENTS (Continued)

expectations of characteristics of the individual reporting units. The unobservable inputs used to fair value this reporting unit include projected revenue growth rates, profitability and the market participant assumptions within the discount rate.

The inputs used to measure the fair value of the intangibles assets of the North America reporting unit in step two of the impairment test were largely unobservable, and accordingly, are also classified as Level 3. The fair value was estimated using a multiple period excess earnings method, which is based on management's cash flow projections of revenue growth rates, operating margins and expected customer attrition, taking into consideration industry and market conditions. The discount rate used in the fair value calculations for the intangibles was based on a weighted average cost of capital adjusted for the relevant risk associated with those assets. The unobservable inputs used in these valuations include projected revenue growth rates, and the market participant assumptions within the discount rate. For more information on this impairment measured as a nonrecurring fair value adjustment, see Note 13 - Goodwill.


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Willis Group Holdings plc


28.SEGMENT INFORMATION
During the periods presented, the Company operated through three reporting 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 large corporations, accessing Global’s specialist expertise when required.
The Company evaluates the performance of its segments based on organic commissions and fees 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)foreign exchange hedging activities, foreign exchange movements on the UK pension plan asset, foreign exchange gains and losses from currency purchases and sales, and foreign exchange movements on internal exposures;
(ii)amortization of intangible assets;
(iii)gains and losses on the disposal of operations;
(iv)significant legal and regulatory settlements which are managed centrally; 
(v)costs associated with the 2011 Operational Review;
(vi)write-off of uncollectible accounts receivable balance and associated legal fees and insurance recoveries arising in Chicago due to fraudulent overstatement of commissions and fees;
(vii)the additional incentive accrual recognized following the replacement of annual cash retention awards with annual cash bonuses which will not feature a repayment requirement;
(viii)write-off of unamortized cash retention awards following the decision to eliminate repayment requirement on past awards;
(ix)goodwill impairment charge;
(x)fees related to the extinguishment of debt; and
(xi)costs associated with the Expense Reduction Initiative.

The accounting policies of the 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.

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Notes to the financial statements
28. SEGMENT INFORMATION (Continued)

Selected information regarding the Company’s segments is as follows:
 
Commissions
and fees
 
Investment
income
 
Other
income
 
Total
revenues
 
Depreciation
and
amortization
 
Operating
income (loss)
 
Interest in
earnings of
associates,
net of tax
       (millions)      
Year Ended December 31, 2013 
  
  
  
  
  
  
Global$1,188
 $3
 $—
 $1,191
 $31
 $334
 $—
North America1,377
 2
 7
 1,386
 37
 269
 —
International1,068
 10
 —
 1,078
 21
 181
 —
Total Retail2,445
 12
 7
 2,464
 58
 450
 —
Total Operating Segments3,633
 15
 7
 3,655
 89
 784
 —
Corporate and Other(i)
—
 —
 —
 —
 60
 (99) —
Total Consolidated$3,633
 $15
 $7
 $3,655
 $149
 $685
 $—
              
Year Ended December 31, 2012 
  
  
  
  
  
  
Global$1,124
 $5
 $—
 $1,129
 $27
 $372
 $—
North America1,306
 3
 4
 1,313
 31
 240
 —
International1,028
 10
 —
 1,038
 21
 183
 5
Total Retail2,334
 13
 4
 2,351
 52
 423
 5
Total Operating Segments3,458
 18
 4
 3,480
 79
 795
 5
Corporate and Other(i)
—
 —
 —
 —
 59
 (1,004) —
Total Consolidated$3,458
 $18
 $4
 $3,480
 $138
 $(209) $5
              
Year Ended December 31, 2011 
  
  
  
  
  
  
Global$1,073
 $9
 $—
 $1,082
 $23
 $352
 $—
North America1,314
 7
 2
 1,323
 28
 271
 —
International1,027
 15
 —
 1,042
 18
 221
 12
Total Retail2,341
 22
 2
 2,365
 46
 492
 12
Total Operating Segments3,414
 31
 2
 3,447
 69
 844
 12
Corporate and Other(i)
—
 —
 —
 —
 73
 (278) —
Total Consolidated$3,414
 $31
 $2
 $3,447
 $142
 $566
 $12

(i)
See the following table for an analysis of the ‘Corporate and other’ line.


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28. SEGMENT INFORMATION (Continued)

 Years ended December 31,
 2013 2012 2011
 (millions)
Amortization of intangible assets$(55) $(59) $(68)
Additional incentive accrual for change in remuneration policy (a)
—
 (252) —
Write-off of unamortized cash retention awards debtor (b)
—
 (200) —
Goodwill impairment charge (c)
—
 (492) —
India joint venture settlement (d)
—
 (11) —
Insurance recovery (e)
—
 10
 —
Write-off of uncollectible accounts receivable balance in Chicago (f)
—
 (13) (22)
Net gain (loss) on disposal of operations (d)
2
 (3) 4
Foreign exchange hedging3
 8
 5
Foreign exchange gain (loss) on the UK pension plan asset8
 (1) —
2011 Operational Review—
 —
 (180)
FSA regulatory settlement—
 —
 (11)
Expense Reduction Initiative(46) —
 —
Fees related to the extinguishment of debt (h)
(1) —
 —
Other(g)
(10) 9
 (6)
Total Corporate and Other$(99) $(1,004) $(278)

(a)
Additional incentive accrual recognized following the replacement of annual incentive awards with annual cash bonuses which will not feature a repayment requirement.

(b)
Write-off of unamortized cash retention award debtor following the decision to eliminate the repayment requirement on past awards.

(c)
Non-cash charge recognized related to the impairment of the carrying value of the North America reporting unit's goodwill.
(d)
$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, a $1 million loss on disposal of operations was recorded related to the termination.

(e)
Insurance recovery, recorded in Other operating expenses, related to a previously disclosed fraudulent activity in Chicago, discussed above.

(f)
In early 2012 the Company identified an uncollectible accounts receivable balance of approximately $28 million in Chicago due to fraudulent overstatements of Commissions and fees. For the year ended December 31, 2011, the Company recorded an estimate of the misstatement of Commissions and fees from prior periods by recognizing in the fourth quarter of 2011 a $22 million charge to Other operating expenses to write off the uncollectible receivable at January 1, 2011.

The Company concluded its internal investigation into these matters in the three months ended March 31, 2012 and identified an additional $12 million in fraudulent overstatement of Commissions and fees, and has corrected the additional misstatement by recognizing a $13 million charge (including legal expenses) to Other operating expenses in the first quarter of 2012. The above amount represents the additional charge taken.

(g)
Other includes $7 million (2012: $7 million, 2011: $12 million) from the release of funds and reserves related to potential legal liabilities.
(h)
$1 million of fees associated with the extinguishment of debt completed on August 15, 2013.
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.

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28. SEGMENT INFORMATION (Continued)

 Years ended December 31,
 2013 2012 2011
 (millions)
Total consolidated operating income$685
 $(209) $566
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs—
 —
 (171)
Loss on extinguishment of debt(60) —
 —
Interest expense(126) (128) (156)
Income (loss) from continuing operations before income taxes and interest in earnings of associates$499
 $(337) $239
The Company does not currently provide asset information by reportable segment as it does not routinely evaluate the total asset position by segment, and as such, no segmental analysis of assets has been disclosed. Segments are evaluated on organic commissions and fees growth and operating margin.
Segment revenue by product is as follows:
 Years ended December 31,
 2013 2012 2011 2013 2012 2011 2013 2012 2011 2013 2012 2011
 Global North America International Total
 (millions)
Commissions and fees: 
  
  
  
  
  
  
  
  
  
  
  
Retail insurance services$—
 $—
 $—
 $1,377
 $1,306
 $1,314
 $1,068
 $1,028
 $1,027
 $2,445
 $2,334
 $2,341
Specialty insurance services1,188
 1,124
 1,073
 —
 —
 —
 —
 —
 —
 1,188
 1,124
 1,073
Total commissions and fees1,188
 1,124
 1,073
 1,377
 1,306
 1,314
 1,068
 1,028
 1,027
 3,633
 3,458
 3,414
Investment income3
 5
 9
 2
 3
 7
 10
 10
 15
 15
 18
 31
Other income—
 —
 —
 7
 4
 2
 —
 —
 —
 7
 4
 2
Total Revenues$1,191
 $1,129
 $1,082
 $1,386
 $1,313
 $1,323
 $1,078
 $1,038
 $1,042
 $3,655
 $3,480
 $3,447

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, 2013, 2012 and 2011.
Information regarding the name, age and positionCompany’s geographic locations is as follows:
 Years Ended December 31,
 2013 2012 2011
 (millions)
Commissions and fees(i)
 
  
  
UK$1,026
 $980
 $963
US1,549
 1,484
 1,461
Other(ii)
1,058
 994
 990
Total$3,633
 $3,458
 $3,414
 December 31,
 2013 2012
 (millions)
Fixed assets 
  
UK$233
 $218
US203
 207
Other(ii)
45
 43
Total$481
 $468

(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.

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29.SUBSIDIARY UNDERTAKINGS
The Company has investments in the following subsidiary undertakings which principally affect the net income or net assets of our executive officers. Executive officers are elected by, and serve at the pleasureGroup.
A full list of our Board of Directors.

the Group’s subsidiary undertakings is included within the Company’s annual return.
NameSubsidiary nameCountry of registrationClass of sharePercentage ownership
Holding companies Age Position

Celia Brown

TAI Limited		England 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 59 
Willis Group Human Resources DirectorHRH, Inc. USACommon shares100%
Willis LimitedEngland and WalesOrdinary shares100%
Willis North America, Inc. USACommon shares100%
Willis Re, Inc. USACommon shares100%


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Notes to the financial statements

30.FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
Willis North America Inc. (‘Willis North America’) has $148 million senior notes outstanding that were issued on July 1, 2005, $394 million of senior notes issued on March 28, 2007 and $187 million of senior notes issued on September 29, 2009.
All direct obligations under the senior notes are jointly and severally, irrevocably and fully and unconditionally guaranteed by Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc and Willis Group Limited, collectively the 'Other Guarantors', and with Willis Group Holdings, the 'Guarantor Companies'.
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 an effective registration statement.
Presented below is condensed consolidating financial information for:

Dominic Casserley

(i)		55Chief Executive Officer of Willis Group Holdings, plc; Directorwhich 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)Consolidating adjustments; and

(vi)the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets for the year ended December 31, 2013 of Willis Group Holdings, the Other Guarantors and the Issuer.


Restatement to 2011 and 2012 financial information

Regulation S-X, Article 3, Rule 3-10, allows for the presentation of condensed consolidating financial information. In accordance with these rules, the condensed consolidating financial information should be presented in accordance with U.S. GAAP, except that (i) the guarantor and non-guarantor information is presented on a combined rather than consolidated basis, which requires the elimination of intra-entity activity and (ii) investments in subsidiaries are required to be presented under the equity method of accounting. Subsequent to the issuance of our 2012 financial statements, management determined that certain balances were not presented in accordance with the above principles and have therefore restated our condensed consolidating financial information to reflect (i) gross, rather than net, presentation of intercompany balance sheet positions, (ii) dividends received from subsidiaries as reductions to the equity method investment balances opposed to as component of investment income from group undertakings, and (iii) appropriate push down accounting for goodwill.

The impacts of these changes on the previously reported 2012 and 2011 financial statements are shown in the tables below.





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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of operations for the year ended 31 December 2012     
Willis Group Holdings     
Operating loss$(6) $—
 $(6)
Net loss attributable to Willis Group Holdings(446) —
 (446)
The Other Guarantors     
Operating loss$(72) $(11) $(83)
Net loss attributable to Willis Group Holdings(389) (8) (397)
The Issuer     
Operating loss$(189) $—
 $(189)
Net loss attributable to Willis Group Holdings(228) —
 (228)
Other     
Operating income (loss)$122
 $(53) $69
Net loss attributable to Willis Group Holdings(118) (306) (424)
Consolidating adjustments     
Operating (loss) income$(64) $64
 $—
Net income attributable to Willis Group Holdings735
 314
 1,049
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of operations for the year ended 31 December 2011     
Willis Group Holdings     
Operating loss$(20) $—
 $(20)
Net income attributable to Willis Group Holdings204
 —
 204
The Other Guarantors     
Operating income (loss)$43
 $(11) $32
Net income attributable to Willis Group Holdings174
 72
 246
The Issuer     
Operating loss$(179) $—
 $(179)
Net loss attributable to Willis Group Holdings(36) (31) (67)
Other     
Operating income (loss)$754
 $(21) $733
Net income attributable to Willis Group Holdings137
 164
 301
Consolidating adjustments     
Operating (loss) income$(32) $32
 $—
Net loss attributable to Willis Group Holdings(275) (205) (480)


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of comprehensive income for the year ended 31 December 2012     
Willis Group Holdings     
Comprehensive loss attributable to Willis Group Holdings$(552) $—
 $(552)
The Other Guarantors     
Comprehensive loss attributable to Willis Group Holdings$(486) $(8) $(494)
The Issuer     
Comprehensive loss attributable to Willis Group Holdings$(263) $—
 $(263)
Other     
Comprehensive loss attributable to Willis Group Holdings$(226) $(306) $(532)
Consolidating adjustments     
Comprehensive income attributable to Willis Group Holdings$975
 $314
 $1,289
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of comprehensive income for the year ended 31 December 2011     
Willis Group Holdings     
Comprehensive income attributable to Willis Group Holdings$1
 $—
 $1
The Other Guarantors     
Comprehensive (loss) income attributable to Willis Group Holdings$(24) $72
 $48
The Issuer     
Comprehensive loss attributable to Willis Group Holdings$(117) $(31) $(148)
Other     
Comprehensive (loss) income attributable to Willis Group Holdings$(65) $164
 $99
Consolidating adjustments     
Comprehensive income (loss) attributable to Willis Group Holdings$206
 $(205) $1


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating balance sheet at 31 December 2012     
Willis Group Holdings     
Total assets$2,557
 $1,541
 $4,098
Total liabilities858
 1,541
 2,399
Total equity1,699
 —
 1,699
The Other Guarantors     
Total assets$(1,256) $4,844
 $3,588
Total liabilities319
 4,930
 5,249
Total equity(1,575) (86) (1,661)
The Issuer     
Total assets$1,382
 $1,246
 $2,628
Total liabilities1,348
 1,246
 2,594
Total equity34
 —
 34
Other     
Total assets$17,125
 $(1,483) $15,642
Total liabilities11,851
 720
 12,571
Total equity5,274
 (2,203) 3,071
Consolidating adjustments     
Total assets$(4,696) $(6,148) $(10,844)
Total liabilities(989) (8,437) (9,426)
Total equity(3,707) 2,289
 (1,418)

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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of cash flows for the year ended 31 December 2012     
Willis Group Holdings     
Net cash (used in) provided by operating activities$(42) $19
 $(23)
Net cash provided by investing activities—
 256
 256
Net cash provided by (used in) financing activities43
 (275) (232)
The Other Guarantors     
Net cash provided by operating activities$780
 $724
 $1,504
Net cash used in investing activities(7) (102) (109)
Net cash used in financing activities(773) (622) (1,395)
The Issuer     
Net cash provided by (used in) operating activities$69
 $(113) $(44)
Net cash (used in) provided by investing activities(19) 34
 15
Net cash (used in) provided by financing activities(213) 79
 (134)
Other     
Net cash provided by (used in) operating activities$431
 $(528) $(97)
Net cash (used in) provided by investing activities(146) 1,149
 1,003
Net cash used in financing activities(61) (621) (682)
Consolidating adjustments     
Net cash used in operating activities$(713) $(102) $(815)
Net cash used in investing activities—
 (1,337) (1,337)
Net cash provided by financing activities713
 1,439
 2,152
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of cash flows for the year ended 31 December 2011     
Willis Group Holdings     
Net cash (used in) provided by operating activities$(41) $85
 $44
Net cash used in investing activities—
 (711) (711)
Net cash provided by financing activities41
 626
 667
The Other Guarantors     
Net cash provided by operating activities$184
 $132
 $316
Net cash used in investing activities(4) (430) (434)
Net cash (used in) provided by financing activities(180) 298
 118
The Issuer     
Net cash provided by operating activities$88
 $46
 $134
Net cash (used in) provided by investing activities(21) 128
 107
Net cash provided by (used in) financing activities20
 (174) (154)
Other     
Net cash provided by (used in) operating activities$1,269
 $(1,138) $131
Net cash (used in) provided by investing activities(76) 123
 47
Net cash (used in) provided by financing activities(1,156) 1,015
 (141)
Consolidating adjustments     
Net cash (used in) provided by operating activities$(1,061) $875
 $(186)
Net cash provided by investing activities—
 890
 890
Net cash provided by (used in) financing activities1,061
 (1,765) (704)


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 Year Ended December 31, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
REVENUES 
  
  
  
  
  
Commissions and fees$—
 $—
 $8
 $3,625
 $—
 $3,633
Investment income—
 —
 —
 15
 —
 15
Other income—
 —
 —
 7
 —
 7
Total revenues—
 —
 8
 3,647
 —
 3,655
EXPENSES 
  
  
  
  
  
Salaries and benefits(1) —
 (103) (2,103) —
 (2,207)
Other operating expenses—
 (73) (163) (380) —
 (616)
Depreciation expense—
 (3) (20) (71) —
 (94)
Amortization of intangible assets—
 —
 —
 (55) —
 (55)
Net gain on disposal of operations—
 —
 —
 12
 (10) 2
Total expenses(1) (76) (286) (2,597) (10) (2,970)
OPERATING (LOSS) INCOME(1) (76) (278) 1,050
 (10) 685
Income from Group undertakings—
 191
 364
 86
 (641) —
Expenses due to Group undertakings(10) (34) (141) (456) 641
 —
Loss on extinguishment of debt—
 —
 (60) —
 —
 (60)
Interest expense(42) (16) (63) (5) —
 (126)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(53) 65
 (178) 675
 (10) 499
Income taxes—
 23
 —
 (145) —
 (122)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(53) 88
 (178) 530
 (10) 377
Interest in earnings of associates, net of tax—
 9
 —
 (9) —
 —
Equity account for subsidiaries418
 320
 150
 —
 (888) —
INCOME (LOSS) FROM CONTINUING OPERATIONS365
 417
 (28) 521
 (898) 377
Discontinued operations, net of tax—
 —
 —
 —
 —
 —
NET INCOME (LOSS)365
 417
 (28) 521
 (898) 377
Less: Net loss attributable to noncontrolling interests—
 —
 —
 (12) —
 (12)
NET INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$365
 $417
 $(28) $509
 $(898) $365



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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
Comprehensive income$522
 $565
 $74
 $636
 $(1,263) $534
Less: Comprehensive income attributable to noncontrolling interests—
 —
 —
 (12) —
 (12)
Comprehensive income attributable to Willis Group Holdings$522
 $565
 $74
 $624
 $(1,263) $522


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
REVENUES 
  
  
  
  
  
Commissions and fees$—
 $—
 $—
 $3,458
 $—
 $3,458
Investment income—
 —
 1
 17
 —
 18
Other income—
 —
 —
 4
 —
 4
Total revenues—
 —
 1
 3,479
 —
 3,480
EXPENSES 
  
  
  
  
  
Salaries and benefits(2) —
 (96) (2,377) —
 (2,475)
Other operating expenses(4) (82) (79) (416) —
 (581)
Depreciation expense—
 (1) (15) (63) —
 (79)
Amortization of intangible assets—
 —
 —
 (59) —
 (59)
Goodwill impairment charge—
 —
 —
 (492) —
 (492)
Net loss on disposal of operations—
 —
 —
 (3) —
 (3)
Total expenses(6) (83) (190) (3,410) —
 (3,689)
OPERATING (LOSS) INCOME(6) (83) (189) 69
 —
 (209)
Income from Group undertakings—
 201
 316
 111
 (628) —
Expenses due to Group undertakings—
 (67) (147) (414) 628
 —
Interest expense(43) (7) (70) (8) —
 (128)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(49) 44
 (90) (242) —
 (337)
Income taxes—
 31
 34
 (166) —
 (101)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(49) 75
 (56) (408) —
 (438)
Interest in earnings of associates, net of tax—
 8
 —
 (3) —
 5
Equity account for subsidiaries(397) (480) (172) —
 1,049
 —
(LOSS) INCOME FROM CONTINUING OPERATIONS(446) (397) (228) (411) 1,049
 (433)
Discontinued operations, net of tax—
 —
 —
 —
 —
 —
NET (LOSS) INCOME(446) (397) (228) (411) 1,049
 (433)
Less: Net income attributable to noncontrolling interests—
 —
 —
 (13) —
 (13)
NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$(446) $(397) $(228) $(424) $1,049
 $(446)

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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
Comprehensive loss$(552) $(494) $(263) $(519) $1,289
 $(539)
Less: Comprehensive income attributable to noncontrolling interests—
 —
 —
 (13) —
 (13)
Comprehensive loss attributable to Willis Group Holdings$(552) $(494) $(263) $(532) $1,289
 $(552)


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
REVENUES 
  
  
  
  
  
Commissions and fees$—
 $—
 $—
 $3,414
 $—
 $3,414
Investment income—
 —
 2
 29
 —
 31
Other income—
 —
 —
 2
 —
 2
Total revenues—
 —
 2
 3,445
 —
 3,447
EXPENSES 
  
  
  
  
  
Salaries and benefits(3) —
 (69) (2,015) —
 (2,087)
Other operating expenses(17) 32
 (98) (573) —
 (656)
Depreciation expense—
 —
 (14) (60) —
 (74)
Amortization of intangible assets—
 —
 —
 (68) —
 (68)
Net gain on disposal of operations—
 —
 —
 4
 —
 4
Total expenses(20) 32
 (181) (2,712) —
 (2,881)
OPERATING (LOSS) INCOME(20) 32
 (179) 733
 —
 566
Income from Group undertakings—
 186
 324
 119
 (629) —
Expenses due to Group undertakings—
 (80) (134) (415) 629
 —
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs—
 (171) —
 —
 —
 (171)
Interest expense(34) (17) (97) (8) —
 (156)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(54) (50) (86) 429
 —
 239
Income taxes—
 59
 27
 (117) (1) (32)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(54) 9
 (59) 312
 (1) 207
Interest in earnings of associates, net of tax—
 8
 —
 4
 —
 12
Equity account for subsidiaries258
 229
 (8) —
 (479) —
INCOME (LOSS) FROM CONTINUING OPERATIONS204
 246
 (67) 316
 (480) 219
Discontinued operations, net of tax—
 —
 —
 1
 —
 1
NET INCOME (LOSS)204
 246
 (67) 317
 (480) 220
Less: Net income attributable to noncontrolling interests—
 —
 —
 (16) —
 (16)
NET INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$204
 $246
 $(67) $301
 $(480) $204













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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
Comprehensive income (loss)$1
 $48
 $(148) $114
 $1
 $16
Less: Comprehensive income attributable to noncontrolling interests—
 —
 —
 (15) —
 (15)
Comprehensive income (loss) attributable to Willis Group Holdings$1
 $48
 $(148) $99
 $1
 $1













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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 As at December 31, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
ASSETS           
CURRENT ASSETS 
  
  
  
  
  
Cash and cash equivalents$3
 $3
 $—
 $790
 $—
 $796
Accounts receivable, net—
 —
 4
 1,037
 —
 1,041
Fiduciary assets—
 —
 —
 8,412
 —
 8,412
Deferred tax assets—
 —
 —
 16
 (1) 15
Other current assets1
 21
 10
 186
 (21) 197
Amounts due from Group undertakings4,051
 903
 1,317
 1,484
 (7,755) —
Total current assets4,055
 927
 1,331
 11,925
 (7,777) 10,461
NON-CURRENT ASSETS 
  
  
  
  
  
Investments in subsidiaries—
 2,838
 1,021
 —
 (3,859) —
Fixed assets, net—
 15
 51
 415
 —
 481
Goodwill—
 —
 —
 2,838
 —
 2,838
Other intangible assets, net—
 —
 —
 353
 —
 353
Investments in associates—
 156
 —
 20
 —
 176
Deferred tax assets—
 —
 —
 7
 —
 7
Pension benefits asset—
 —
 —
 278
 —
 278
Other non-current assets4
 9
 5
 188
 —
 206
Non-current amounts due from Group undertakings—
 518
 690
 —
 (1,208) —
Total non-current assets4
 3,536
 1,767
 4,099
 (5,067) 4,339
TOTAL ASSETS$4,059
 $4,463
 $3,098
 $16,024
 $(12,844) $14,800
LIABILITIES AND STOCKHOLDERS’ EQUITY           
CURRENT LIABILITIES 
  
  
  
  
  
Fiduciary liabilities$—
 $—
 $—
 $8,412
 $—
 $8,412
Deferred revenue and accrued expenses2
 1
 28
 555
 —
 586
Income taxes payable—
 3
 —
 39
 (21) 21
Short-term debt and current portion of long-term debt—
 15
 —
 —
 —
 15
Deferred tax liabilities—
 —
 —
 25
 —
 25
Other current liabilities62
 15
 38
 300
 —
 415
Amounts due to Group undertakings—
 4,760
 1,662
 1,333
 (7,755) —
Total current liabilities64
 4,794
 1,728
 10,664
 (7,776) 9,474
NON-CURRENT LIABILITIES 
  
  
  
  
  
Investments in subsidiaries985
 —
 —
 —
 (985) —
Long-term debt795
 782
 733
 1
 —
 2,311
Liabilities for pension benefits—
 —
 —
 136
 —
 136
Deferred tax liabilities—
 1
 —
 55
 —
 56
Provisions for liabilities—
 —
 —
 206
 —
 206
Other non-current liabilities—
 —
 48
 326
 —
 374
Non-current amounts due to Group undertakings—
 —
 518
 690
 (1,208) —
Total non-current liabilities1,780
 783
 1,299
 1,414
 (2,193) 3,083
TOTAL LIABILITIES$1,844
 $5,577
 $3,027
 $12,078
 $(9,969) $12,557

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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 As at December 31, 2013
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
EQUITY 
  
  
  
  
  
Total Willis Group Holdings stockholders’ equity2,215
 (1,114) 71
 3,918
 (2,875) 2,215
Noncontrolling interests—
 —
 —
 28
 —
 28
Total equity2,215
 (1,114) 71
 3,946
 (2,875) 2,243
TOTAL LIABILITIES AND EQUITY$4,059
 $4,463
 $3,098
 $16,024
 $(12,844) $14,800


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 As at December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
ASSETS
CURRENT ASSETS 
  
  
  
  
  
Cash and cash equivalents$1
 $—
 $—
 $499
 $—
 $500
Accounts receivable, net—
 —
 —
 933
 —
 933
Fiduciary assets—
 —
 —
 9,271
 —
 9,271
Deferred tax assets—
 —
 —
 13
 —
 13
Other current assets1
 31
 38
 114
 (3) 181
Amounts due by group undertakings4,091
 993
 1,292
 864
 (7,240) —
Total current assets4,093
 1,024
 1,330
 11,694
 (7,243) 10,898
NON-CURRENT ASSETS 
  
  
  
  
  
Investments in subsidiaries—
 2,407
 553
 —
 (2,960) —
Fixed assets, net—
 11
 63
 394
 —
 468
Goodwill—
 —
 —
 2,827
 —
 2,827
Other intangible assets, net—
 —
 —
 385
 —
 385
Investments in associates—
 143
 —
 31
 —
 174
Deferred tax assets—
 —
 —
 18
 —
 18
Pension benefits asset—
 —
 —
 136
 —
 136
Other non-current assets5
 3
 41
 157
 —
 206
Non-current amounts due by group undertakings—
 —
 641
 —
 (641) —
Total non-current assets5
 2,564
 1,298
 3,948
 (3,601) 4,214
TOTAL ASSETS$4,098
 $3,588
 $2,628
 $15,642
 $(10,844) $15,112
LIABILITIES AND STOCKHOLDERS’ EQUITY           
CURRENT LIABILITIES 
  
  
  
  
  
Fiduciary liabilities$—
 $—
 $—
 $9,271
 $—
 $9,271
Deferred revenue and accrued expenses2
 —
 —
 539
 —
 541
Income taxes payable—
 4
 —
 18
 (3) 19
Short-term debt and current portion of long-term debt—
 15
 —
 —
 —
 15
Deferred tax liabilities—
 —
 —
 21
 —
 21
Other current liabilities60
 —
 73
 194
 —
 327
Amounts due to group undertakings—
 4,951
 1,246
 1,043
 (7,240) —
Total current liabilities62
 4,970
 1,319
 11,086
 (7,243) 10,194
NON-CURRENT LIABILITIES 
  
  
  
  
  
Investments in subsidiaries1,542
 —
 —
 —
 (1,542) —
Long-term debt795
 274
 1,268
 1
 —
 2,338
Liabilities for pension benefits—
 —
 —
 282
 —
 282
Deferred tax liabilities—
 —
 —
 18
 —
 18
Provisions for liabilities—
 —
 —
 180
 —
 180
Other non-current liabilities—
 5
 7
 363
 —
 375
Non-current amounts due to group undertakings—
 —
 —
 641
 (641) —
Total non-current liabilities2,337
 279
 1,275
 1,485
 (2,183) 3,193
TOTAL LIABILITIES$2,399
 $5,249
 $2,594
 $12,571
 $(9,426) $13,387

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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 As at December 31, 2012
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
EQUITY 
  
  
  
  
  
Total Willis Group Holdings stockholders’ equity1,699
 (1,661) 34
 3,045
 (1,418) 1,699
Noncontrolling interests—
 —
 —
 26
 —
 26
Total equity1,699
 (1,661) 34
 3,071
 (1,418) 1,725
TOTAL LIABILITIES AND EQUITY$4,098
 $3,588
 $2,628
 $15,642
 $(10,844) $15,112


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES$4
 $125
 $7
 $662
 $(237) $561
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 —
 3
 9
 —
 12
Additions to fixed assets—
 (7) (11) (94) —
 (112)
Additions to intangibles assets—
 —
 —
 (7) —
 (7)
Acquisitions of subsidiaries, net of cash acquired—
 (237) (230) (30) 467
 (30)
Payments to acquire other investments—
 —
 —
 (7) —
 (7)
Proceeds from sale of associates—
 —
 —
 4
 —
 4
Proceeds from sale of operations, net of cash disposed—
 —
 230
 257
 (467) 20
Proceeds from intercompany investing activities383
 211
 36
 60
 (690) —
Repayments of intercompany investing activities(347) (442) (120) (780) 1,689
 —
Net cash provided by (used in) investing activities36
 (475) (92) (588) 999
 (120)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
  
Senior notes issued—
 522
 —
 —
 —
 522
Debt issuance costs—
 (8) —
 —
 —
 (8)
Repayments of debt—
 (15) (521) —
 —
 (536)
Tender premium on extinguishment of senior notes—
 —
 (65) —
 —
 (65)
Proceeds from issue of shares155
 —
 —
 —
 —
 155
Excess tax benefits from share-based payment arrangements—
 —
 —
 2
 —
 2
Dividends paid(193) —
 (230) (7) 237
 (193)
Acquisition of noncontrolling interests—
 —
 —
 (4) —
 (4)
Dividends paid to noncontrolling interests—
 —
 —
 (10) —
 (10)
Proceeds from intercompany financing activities—
 321
 901
 467
 (1,689) —
Repayments of intercompany financing activities—
 (467) —
 (223) 690
 —
Net cash (used in) provided by financing activities(38) 353
 85
 225
 (762) (137)
INCREASE IN CASH AND CASH EQUIVALENTS2
 3
 —
 299
 —
 304
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 (8) —
 (8)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR1
 —
 —
 499
 —
 500
CASH AND CASH EQUIVALENTS, END OF YEAR$3
 $3
 $—
 $790
 $—
 $796


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES$(23) $1,504
 $(44) $(97) $(815) $525
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 —
 —
 5
 —
 5
Additions to fixed assets—
 (7) (19) (109) —
 (135)
Additions to intangible assets—
 —
 —
 (2) —
 (2)
Acquisitions of subsidiaries, net of cash acquired—
 —
 —
 (33) —
 (33)
Payments to acquire other investments—
 —
 —
 (7) —
 (7)
Proceeds from sale of operations, net of cash disposed—
 —
 —
 —
 —
 —
Proceeds from intercompany investing activities256
 216
 44
 1,230
 (1,746) —
Repayments of intercompany investing activities—
 (318) (10) (81) 409
 —
Net cash provided by (used in) investing activities256
 (109) 15
 1,003
 (1,337) (172)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
  
Repayments of debt—
 (15) —
 —
 —
 (15)
Proceeds from issue of other debt—
 1
 —
 —
 —
 1
Repurchase of shares(100) —
 —
 —
 —
 (100)
Proceeds from issue of shares53
 —
 —
 —
 —
 53
Excess tax benefits from share-based payment arrangements—
 —
 —
 2
 —
 2
Dividends paid(185) —
 —
 (815) 815
 (185)
Proceeds from sale of noncontrolling interest—
 —
 —
 3
 —
 3
Acquisition of noncontrolling interests—
 —
 —
 (39) —
 (39)
Dividends paid to noncontrolling interests—
 —
 —
 (11) —
 (11)
Proceeds from intercompany financing activities—
 81
 —
 328
 (409) —
Repayments of intercompany financing activities—
 (1,462) (134) (150) 1,746
 —
Net cash (used in) provided by financing activities(232) (1,395) (134) (682) 2,152
 (291)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS1
 —
 (163) 224
 —
 62
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 2
 —
 2
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR—
 —
 163
 273
 —
 436
CASH AND CASH EQUIVALENTS, END OF YEAR$1
 $—
 $—
 $499
 $—
 $500


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30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES$44
 $316
 $134
 $131
 $(186) $439
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 —
 —
 13
 —
 13
Additions to fixed assets—
 (4) (21) (86) —
 (111)
Acquisitions of subsidiaries, net of cash acquired—
 —
 —
 (10) —
 (10)
Acquisitions of investments in associates—
 —
 —
 (2) —
 (2)
Payments to acquire other investments—
 —
 —
 (5) —
 (5)
Proceeds from sale of operations, net of cash disposed—
 —
 —
 14
 —
 14
Proceeds from intercompany investing activities—
 —
 128
 224
 (352) —
Repayments of intercompany investing activities(711) (430) —
 (101) 1,242
 —
Net cash (used in) provided by investing activities(711) (434) 107
 47
 890
 (101)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
  
Repayments of revolving credit facility—
 —
 (90) —
 —
 (90)
Senior notes issued794
 —
 —
 —
 —
 794
Debt issuance costs(7) (5) —
 —
 —
 (12)
Repayments of debt—
 (500) (411) —
 —
 (911)
Proceeds from issue of term loan—
 300
 —
 —
 —
 300
Make-whole on repurchase and redemption of senior notes—
 (158) —
 —
 —
 (158)
Proceeds from issue of shares60
 —
 —
 —
 —
 60
Excess tax benefits from share-based payment arrangements—
 —
 —
 5
 —
 5
Dividends paid(180) —
 —
 (186) 186
 (180)
Acquisition of noncontrolling interests—
 (4) —
 (5) —
 (9)
Dividends paid to noncontrolling interests—
 —
 —
 (13) —
 (13)
Cash received on intercompany financing activities—
 741
 347
 154
 (1,242) —
Cash paid on intercompany financing activities—
 (256) —
 (96) 352
 —
Net cash provided by (used in) financing activities667
 118
 (154) (141) (704) (214)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS—
 —
 87
 37
 —
 124
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 (4) —
 (4)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR—
 —
 76
 240
 —
 316
CASH AND CASH EQUIVALENTS, END OF YEAR$—
 $—
 $163
 $273
 $—
 $436


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Notes to the financial statements

31.FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
On March 17, 2011, the Company issued senior notes totaling $800 million in a registered public offering. These debt securities were issued by Willis Group Holdings (‘Holdings Debt Securities’) and are guaranteed by certain of the Company’s subsidiaries. Therefore, the Company is providing the condensed consolidating financial information below. The following 100 percent directly or indirectly owned subsidiaries fully and unconditionally guarantee the Holdings Debt Securities on a joint and several basis: Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America (the ‘Guarantors’).
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by Willis North America (the ‘Willis North America Debt Securities’) (and for which condensed consolidating financial information is presented in Note 30) in that Willis Group Holdings is the Parent Issuer and Willis North America is a subsidiary guarantor.
Presented below is condensed consolidating financial information for:

Stephen Hearn

(i)		Willis Group Holdings, which is the Parent Issuer;

46
(ii)
the Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent;

Group Deputy CEO
(iii)Other, which are the non-guarantor subsidiaries, on a combined basis;

(iv)Consolidating adjustments; and

(v)the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets for the year ended December 31, 2013 of Willis Group Holdings and the Guarantors.


Restatement to 2011 and 2012 financial information

Regulation S-X, Article 3, Rule 3-10, allows for the presentation of condensed consolidating financial information. In accordance with these rules, the condensed consolidating financial information should be presented in accordance with U.S. GAAP, except that (i) the guarantor and non-guarantor information is presented on a combined rather than consolidated basis, which requires the elimination of intra-entity activity and (ii) investments in subsidiaries are required to be presented under the equity method of accounting. Subsequent to the issuance of our 2012 financial statements, management determined that certain balances were not presented in accordance with the above principles and have therefore restated our condensed consolidating financial information to reflect (i) gross, rather than net, presentation of intercompany balance sheet positions, (ii) dividends received from subsidiaries as reductions to the equity method investment balances opposed to as component of investment income from group undertakings, and (iii) appropriate push down accounting for goodwill.

The impacts of these changes on the previously reported 2012 and 2011 financial statements are shown in the tables below.


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 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of operations for the year ended 31 December 2012     
Willis Group Holdings - the Parent Issuer     
Operating loss$(6) $—
 $(6)
Net loss attributable to Willis Group Holdings(446) —
 (446)
The Guarantors     
Operating loss$(261) $(11) $(272)
Net loss attributable to Willis Group Holdings(389) (8) (397)
Other     
Operating income (loss)$122
 $(53) $69
Net loss attributable to Willis Group Holdings(118) (306) (424)
Consolidating adjustments     
Operating (loss) income$(64) $64
 $—
Net income attributable to Willis Group Holdings507
 314
 821
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of operations for the year ended 31 December 2011     
Willis Group Holdings - the Parent Issuer     
Operating loss$(20) $—
 $(20)
Net income attributable to Willis Group Holdings204
 —
 204
The Guarantors     
Operating loss$(136) $(11) $(147)
Net income attributable to Willis Group Holdings174
 72
 246
Other     
Operating income (loss)$754
 $(21) $733
Net income attributable to Willis Group Holdings137
 164
 301
Consolidating adjustments     
Operating (loss) income$(32) $32
 $—
Net loss attributable to Willis Group Holdings(311) (236) (547)


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of comprehensive income for the year ended 31 December 2012     
Willis Group Holdings - the Parent Issuer     
Comprehensive loss attributable to Willis Group Holdings$(552) $—
 $(552)
The Guarantors     
Comprehensive loss attributable to Willis Group Holdings$(486) $(8) $(494)
Other     
Comprehensive loss attributable to Willis Group Holdings$(226) $(306) $(532)
Consolidating adjustments     
Comprehensive income attributable to Willis Group Holdings$712
 $314
 $1,026
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of comprehensive income for the year ended 31 December 2011     
Willis Group Holdings - the Parent Issuer     
Comprehensive income attributable to Willis Group Holdings$1
 $—
��$1
The Guarantors     
Comprehensive (loss) income attributable to Willis Group Holdings$(24) $72
 $48
Other     
Comprehensive (loss) income attributable to Willis Group Holdings$(65) $164
 $99
Consolidating adjustments     
Comprehensive income (loss) attributable to Willis Group Holdings$89
 $(236) $(147)

 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating balance sheet at 31 December 2012     
Willis Group Holdings - the Parent Issuer     
Total assets$2,557
 $1,541
 $4,098
Total liabilities858
 1,541
 2,399
Total equity1,699
 —
 1,699
The Guarantors     
Total assets$92
 $4,832
 $4,924
Total liabilities1,667
 4,918
 6,585
Total equity(1,575) (86) (1,661)
Other     
Total assets$17,125
 $(1,483) $15,642
Total liabilities11,851
 720
 12,571
Total equity5,274
 (2,203) 3,071
Consolidating adjustments     
Total assets$(4,662) $(4,890) $(9,552)
Total liabilities(989) (7,179) (8,168)
Total equity(3,673) 2,289
 (1,384)


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of cash flows for the year ended 31 December 2012     
Willis Group Holdings - the Parent Issuer     
Net cash (used in) provided by operating activities$(42) $19
 $(23)
Net cash provided by investing activities—
 256
 256
Net cash provided by (used in) financing activities43
 (275) (232)
The Guarantors     
Net cash provided by operating activities$849
 $611
 $1,460
Net cash used in investing activities(26) (178) (204)
Net cash used in financing activities(986) (433) (1,419)
Other     
Net cash provided by (used in) operating activities$431
 $(528) $(97)
Net cash (used in) provided by investing activities(146) 1,149
 1,003
Net cash used in financing activities(61) (621) (682)
Consolidating adjustments     
Net cash used in operating activities$(713) $(102) $(815)
Net cash used in investing activities—
 (1,227) (1,227)
Net cash provided by financing activities713
 1,329
 2,042
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of cash flows for the year ended 31 December 2011     
Willis Group Holdings - the Parent Issuer     
Net cash (used in) provided by operating activities$(41) $85
 $44
Net cash used in investing activities—
 (711) (711)
Net cash provided by financing activities41
 626
 667
The Guarantors     
Net cash provided by operating activities$272
 $178
 $450
Net cash used in investing activities(25) (42) (67)
Net cash used in financing activities(160) (136) (296)
Other     
Net cash provided by (used in) operating activities$1,269
 $(1,138) $131
Net cash (used in) provided by investing activities(76) 123
 47
Net cash (used in) provided by financing activities(1,156) 1,015
 (141)
Consolidating adjustments     
Net cash (used in) provided by operating activities$(1,061) $875
 $(186)
Net cash provided by investing activities—
 630
 630
Net cash provided by (used in) financing activities1,061
 (1,505) (444)


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 Year Ended December 31, 2013
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 Other 
Consolidating
adjustments
 Consolidated
 (millions)
REVENUES 
  
  
  
  
Commissions and fees$—
 $8
 $3,625
 $—
 $3,633
Investment income—
 —
 15
 —
 15
Other income—
 —
 7
 —
 7
Total revenues—
 8
 3,647
 —
 3,655
EXPENSES 
  
  
  
  
Salaries and benefits(1) (103) (2,103) —
 (2,207)
Other operating expenses—
 (236) (380) —
 (616)
Depreciation expense—
 (23) (71) —
 (94)
Amortization of intangible assets—
 —
 (55) —
 (55)
Net gain on disposal of operations—
 —
 12
 (10) 2
Total expenses(1) (362) (2,597) (10) (2,970)
OPERATING (LOSS) INCOME(1) (354) 1,050
 (10) 685
Income from Group undertakings—
 466
 86
 (552) —
Expenses due to Group undertakings(10) (86) (456) 552
 —
Loss on extinguishment of debt—
 (60) —
 —
 (60)
Interest expense(42) (79) (5) —
 (126)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(53) (113) 675
 (10) 499
Income taxes—
 23
 (145) —
 (122)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(53) (90) 530
 (10) 377
Interest in earnings of associates, net of tax—
 9
 (9) —
 —
Equity account for subsidiaries418
 498
 —
 (916) —
INCOME FROM CONTINUING OPERATIONS365
 417
 521
 (926) 377
Discontinued operations, net of tax—
 —
 —
 —
 —
NET INCOME365
 417
 521
 (926) 377
Less: Net income attributable to noncontrolling interests—
 —
 (12) —
 (12)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$365
 $417
 $509
 $(926) $365


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2013
 
Willis
Group
Holdings—the Parent Issuer
 The Guarantors Other 
Consolidating
adjustments
 Consolidated
 (millions)
Comprehensive income$522
 $565
 $636
 $(1,189) $534
Less: Comprehensive income attributable to noncontrolling interests—
 —
 (12) —
 (12)
Comprehensive income attributable to Willis Group Holdings$522
 $565
 $624
 $(1,189) $522


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 Year Ended December 31, 2012
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 Other 
Consolidating
adjustments
 Consolidated
 (millions)
REVENUES 
  
  
  
  
Commissions and fees$—
 $—
 $3,458
 $—
 $3,458
Investment income—
 1
 17
 —
 18
Other income—
 —
 4
 —
 4
Total revenues—
 1
 3,479
 —
 3,480
EXPENSES 
  
  
  
  
Salaries and benefits(2) (96) (2,377) —
 (2,475)
Other operating expenses(4) (161) (416) —
 (581)
Depreciation expense—
 (16) (63) —
 (79)
Amortization of intangible assets—
 —
 (59) —
 (59)
Goodwill impairment charge—
 —
 (492) —
 (492)
Net loss on disposal of operations—
 —
 (3) —
 (3)
Total expenses(6) (273) (3,410) —
 (3,689)
OPERATING (LOSS) INCOME(6) (272) 69
 —
 (209)
Income from Group undertakings—
 409
 111
 (520) —
Expenses due to Group undertakings—
 (106) (414) 520
 —
Interest expense(43) (77) (8) —
 (128)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(49) (46) (242) —
 (337)
Income taxes—
 65
 (166) —
 (101)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(49) 19
 (408) —
 (438)
Interest in earnings of associates, net of tax—
 8
 (3) —
 5
Equity account for subsidiaries(397) (424) —
 821
 —
LOSS FROM CONTINUING OPERATIONS(446) (397) (411) 821
 (433)
Discontinued operations, net of tax—
 —
 —
 —
 —
NET LOSS(446) (397) (411) 821
 (433)
Less: Net income attributable to noncontrolling interests—
 —
 (13) —
 (13)
NET LOSS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$(446) $(397) $(424) $821
 $(446)


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2012
 
Willis
Group
Holdings—the Parent Issuer
 The Guarantors Other 
Consolidating
adjustments
 Consolidated
 (millions)
Comprehensive loss$(552) $(494) $(519) $1,026
 $(539)
Less: Comprehensive income attributable to noncontrolling interests—
 —
 (13) —
 (13)
Comprehensive loss attributable to Willis Group Holdings$(552) $(494) $(532) $1,026
 $(552)



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Notes to the financial statements

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 Year Ended December 31, 2011
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 Other 
Consolidating
adjustments
 Consolidated
 (millions)
REVENUES 
  
  
  
  
Commissions and fees$—
 $—
 $3,414
 $—
 $3,414
Investment income—
 2
 29
 —
 31
Other income—
 —
 2
 —
 2
Total revenues—
 2
 3,445
 —
 3,447
EXPENSES 
  
  
  
  
Salaries and benefits(3) (69) (2,015) —
 (2,087)
Other operating expenses(17) (66) (573) —
 (656)
Depreciation expense—
 (14) (60) —
 (74)
Amortization of intangible assets—
 —
 (68) —
 (68)
Net gain on disposal of operations—
 —
 4
 —
 4
Total expenses(20) (149) (2,712) —
 (2,881)
OPERATING (LOSS) INCOME(20) (147) 733
 —
 566
Income from Group undertakings—
 412
 119
 (531) —
Expenses due to Group undertakings—
 (116) (415) 531
 —
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs—
 (171) —
 —
 (171)
Interest expense(34) (114) (8) —
 (156)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(54) (136) 429
 —
 239
Income taxes—
 86
 (117) (1) (32)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(54) (50) 312
 (1) 207
Interest in earnings of associates, net of tax—
 8
 4
 —
 12
Equity account for subsidiaries258
 288
 —
 (546) —
INCOME FROM CONTINUING OPERATIONS204
 246
 316
 (547) 219
Discontinued operations, net of tax—
 —
 1
 —
 1
NET INCOME204
 246
 317
 (547) 220
Less: Net income attributable to noncontrolling interests—
 —
 (16) —
 (16)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$204
 $246
 $301
 $(547) $204


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2011
 
Willis
Group
Holdings—the Parent Issuer
 The Guarantors Other 
Consolidating
adjustments
 Consolidated
 (millions)
Comprehensive income$1
 $48
 $114
 $(147) $16
Less: Comprehensive income attributable to noncontrolling interests—
 —
 (15) —
 (15)
Comprehensive income attributable to Willis Group Holdings$1
 $48
 $99
 $(147) $1









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Notes to the financial statements

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 As at December 31, 2013
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 Other 
Consolidating
adjustments
 Consolidated
 (millions)
ASSETS 
  
  
  
  
CURRENT ASSETS 
  
  
  
  
Cash and cash equivalents$3
 $3
 $790
 $—
 $796
Accounts receivable, net—
 4
 1,037
 —
 1,041
Fiduciary assets—
 —
 8,412
 —
 8,412
Deferred tax assets—
 —
 16
 (1) 15
Other current assets1
 31
 186
 (21) 197
Amounts due from group undertakings4,051
 975
 1,484
 (6,510) —
Total current assets4,055
 1,013
 11,925
 (6,532) 10,461
NON-CURRENT ASSETS 
  
  
  
  
Investments in subsidiaries—
 3,788
 —
 (3,788) —
Fixed assets, net—
 66
 415
 —
 481
Goodwill—
 —
 2,838
 —
 2,838
Other intangible assets, net—
 —
 353
 —
 353
Investments in associates—
 156
 20
 —
 176
Deferred tax assets—
 —
 7
 —
 7
Pension benefits asset—
 —
 278
 —
 278
Other non-current assets4
 14
 188
 —
 206
Non-current amounts due from group undertakings—
 690
 —
 (690) —
Total non-current assets4
 4,714
 4,099
 (4,478) 4,339
TOTAL ASSETS$4,059
 $5,727
 $16,024
 $(11,010) $14,800
LIABILITIES AND STOCKHOLDERS’ EQUITY 
  
  
  
  
CURRENT LIABILITIES 
  
  
  
  
Fiduciary liabilities$—
 $—
 $8,412
 $—
 $8,412
Deferred revenue and accrued expenses2
 29
 555
 —
 586
Income taxes payable—
 3
 39
 (21) 21
Short-term debt and current portion on long-term debt—
 15
 —
 —
 15
Deferred tax liabilities—
 —
 25
 —
 25
Other current liabilities62
 53
 300
 —
 415
Amounts due to group undertakings—
 5,177
 1,333
 (6,510) —
Total current liabilities64
 5,277
 10,664
 (6,531) 9,474
NON-CURRENT LIABILITIES 
  
  
  
  
Investments in subsidiaries985
 —

—
 (985) —
Long-term debt795
 1,515
 1
 —
 2,311
Liabilities for pension benefits—
 —
 136
 —
 136
Deferred tax liabilities—
 1
 55
 —
 56
Provisions for liabilities—
 —
 206
 —
 206
Other non-current liabilities—
 48
 326
 —
 374
Non-current amounts due to group undertakings—
 —
 690
 (690) —
Total non-current liabilities1,780
 1,564
 1,414
 (1,675) 3,083
TOTAL LIABILITIES$1,844
 $6,841
 $12,078
 $(8,206) $12,557

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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)



Condensed Consolidating Balance Sheet
 As at December 31, 2013
 Willis
Group
Holdings —
the Parent
Issuer		 The
Guarantors		 Other Consolidating
adjustments		 Consolidated
 (millions)
EQUITY 
  
  
  
  
Total Willis Group Holdings stockholders’ equity2,215
 (1,114) 3,918
 (2,804) 2,215
Noncontrolling interests—
 —
 28
 —
 28
Total equity2,215
 (1,114) 3,946
 (2,804) 2,243
TOTAL LIABILITIES AND EQUITY$4,059
 $5,727
 $16,024
 $(11,010) $14,800

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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 As at December 31, 2012
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 Other 
Consolidating
adjustments
 Consolidated
 (millions)
ASSETS 
  
  
  
  
CURRENT ASSETS 
  
  
  
  
Cash and cash equivalents$1
 $—
 $499
 $—
 $500
Accounts receivable, net—
 —
 933
 —
 933
Fiduciary assets—
 —
 9,271
 —
 9,271
Deferred tax assets—
 —
 13
 —
 13
Other current assets1
 69
 114
 (3) 181
Amounts due from group undertakings4,091
 1,027
 864
 (5,982) —
Total current assets4,093
 1,096
 11,694
 (5,985) 10,898
NON-CURRENT ASSETS 
  
  
  
  
Investments in subsidiaries—
 2,926
 —
 (2,926) —
Fixed assets, net—
 74
 394
 —
 468
Goodwill—
 —
 2,827
 —
 2,827
Other intangible assets, net—
 —
 385
 —
 385
Investments in associates—
 143
 31
 —
 174
Deferred tax assets—
 —
 18
 —
 18
Pension benefits asset—
 —
 136
 —
 136
Other non-current assets5
 44
 157
 —
 206
Non-current amounts due from group undertakings—
 641
 —
 (641) —
Total non-current assets5
 3,828
 3,948
 (3,567) 4,214
TOTAL ASSETS$4,098
 $4,924
 $15,642
 $(9,552) $15,112
LIABILITIES AND STOCKHOLDERS’ EQUITY 
  
  
  
  
CURRENT LIABILITIES 
  
  
  
  
Fiduciary liabilities$—
 $—
 $9,271
 $—
 $9,271
Deferred revenue and accrued expenses2
 —
 539
 —
 541
Income taxes payable—
 4
 18
 (3) 19
Short-term debt and current portion of long-term debt—
 15
 —
 —
 15
Deferred tax liabilities—
 —
 21
 —
 21
Other current liabilities60
 73
 194
 —
 327
Amounts due to group undertakings—
 4,939
 1,043
 (5,982) —
Total current liabilities62
 5,031
 11,086
 (5,985) 10,194
NON-CURRENT LIABILITIES 
  
  
  
  
Investments in subsidiaries1,542
 —
 —
 (1,542) —
Long-term debt795
 1,542
 1
 —
 2,338
Liabilities for pension benefits—
 —
 282
 —
 282
Deferred tax liabilities—
 —
 18
 —
 18
Provisions for liabilities—
 —
 180
 —
 180
Other non-current liabilities—
 12
 363
 —
 375
Non-current amounts due to group undertakings—
 —
 641
 (641) —
Total non-current liabilities2,337
 1,554
 1,485
 (2,183) 3,193
TOTAL LIABILITIES$2,399
 $6,585
 $12,571
 $(8,168) $13,387




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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 As at December 31, 2012
 Willis
Group
Holdings —
the Parent
Issuer		 The
Guarantors		 Other Consolidating
adjustments		 Consolidated
 (millions)
EQUITY 
  
  
  
  
Total Willis Group Holdings stockholders’ equity1,699
 (1,661) 3,045
 (1,384) 1,699
Noncontrolling interests—
 —
 26
 —
 26
Total equity1,699
 (1,661) 3,071
 (1,384) 1,725
TOTAL LIABILITIES AND EQUITY$4,098
 $4,924
 $15,642
 $(9,552) $15,112


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2013
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 Other 
Consolidating
adjustments
 Consolidated
 (millions)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES$4
 $(98) $662
 $(7) $561
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 3
 9
 —
 12
Additions to fixed assets—
 (18) (94) —
 (112)
Additions to intangibles assets—
 —
 (7) —
 (7)
Acquisitions of subsidiaries, net of cash acquired—
 (237) (30) 237
 (30)
Payments to acquire other investments—
 —
 (7) —
 (7)
Proceeds from sale of associates—
 —
 4
 —
 4
Proceeds from disposal of operations, net of cash disposed—
 —
 257
 (237) 20
Proceeds from intercompany investing activities383
 223
 60
 (666) —
Repayments of intercompany investing activities(347) (120) (780) 1,247
 —
Net cash provided by (used in) investing activities36
 (149) (588) 581
 (120)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
Senior notes issued—
 522
 —
 —
 522
Debt issuance costs—
 (8) —
 —
 (8)
Repayments of debt—
 (536) —
 —
 (536)
Tender premium on extinguishment of senior notes—
 (65) —
 —
 (65)
Proceeds from the issue of shares155
 —
 —
 —
 155
Excess tax benefits from share-based payment arrangements—
 —
 2
 —
 2
Dividends paid(193) —
 (7) 7
 (193)
Acquisition of noncontrolling interests—
 —
 (4) —
 (4)
Dividends paid to noncontrolling interests—
 —
 (10) —
 (10)
Proceeds from intercompany financing activities—
 780
 467
 (1,247) —
Repayments of intercompany financing activities—
 (443) (223) 666
 —
Net cash (used in) provided by financing activities(38) 250
 225
 (574) (137)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS2
 3
 299
 —
 304
Effect of exchange rate changes on cash and cash equivalents—
 —
 (8) —
 (8)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR1
 —
 499
 —
 500
CASH AND CASH EQUIVALENTS, END OF YEAR$3
 $3
 $790
 $—
 $796


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2012
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 Other 
Consolidating
adjustments
 Consolidated
 (millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES$(23) $1,460
 $(97) $(815) $525
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 —
 5
 —
 5
Additions to fixed assets—
 (26) (109) —
 (135)
Additions to intangible assets—
 —
 (2) —
 (2)
Acquisitions of subsidiaries, net of cash acquired—
 —
 (33) —
 (33)
Payments to acquire other investments—
 —
 (7) —
 (7)
Proceeds from intercompany investing activities256
 150
 1,230
 (1,636) —
Repayments of intercompany investing activities—
 (328) (81) 409
 —
Net cash provided by (used in) investing activities256
 (204) 1,003
 (1,227) (172)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
Repayments of debt—
 (15) —
 —
 (15)
Proceeds from issue of other debt—
 1
 —
 —
 1
Repurchase of shares(100) —
 —
 —
 (100)
Proceeds from the issue of shares53
 —
 —
 —
 53
Excess tax benefits from share-based payment arrangements—
 —
 2
 —
 2
Dividends paid(185) —
 (815) 815
 (185)
Proceeds from sale of noncontrolling interest—
 —
 3
 —
 3
Acquisition of noncontrolling interests—
 —
 (39) —
 (39)
Dividends paid to noncontrolling interests—
 —
 (11) —
 (11)
Proceeds from intercompany financing activities—
 81
 328
 (409) —
Repayments of intercompany financing activities—
 (1,486) (150) 1,636
 —
Net cash used in financing activities(232) (1,419) (682) 2,042
 (291)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS1
 (163) 224
 —
 62
Effect of exchange rate changes on cash and cash equivalents—
 —
 2
 —
 2
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR—
 163
 273
 —
 436
CASH AND CASH EQUIVALENTS, END OF YEAR$1
 $—
 $499
 $—
 $500


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31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2011
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 Other 
Consolidating
adjustments
 Consolidated
 (millions)
NET CASH PROVIDED BY OPERATING
ACTIVITIES
$44
 $450
 $131
 $(186) $439
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 —
 13
 —
 13
Additions to fixed assets—
 (25) (86) —
 (111)
Acquisitions of subsidiaries, net of cash acquired—
 —
 (10) —
 (10)
Acquisitions of investments in associates—
 —
 (2) —
 (2)
Payments to acquire other investments—
 —
 (5) —
 (5)
Proceeds from sale of operations, net of cash disposed—
 —
 14
 —
 14
Proceeds from intercompany investing activities—
 96
 224
 (320) —
Repayments of intercompany investing activities(711) (138) (101) 950
 —
Net cash used in investing activities(711) (67) 47
 630
 (101)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
Repayments of revolving credit facility—
 (90) —
 —
 (90)
Senior notes issued794
 —
 —
 —
 794
Debt issuance costs(7) (5) —
 —
 (12)
Repayments of debt—
 (911) —
 —
 (911)
Proceeds from the issue of term loan—
 300
 —
 —
 300
Make-whole on repurchase and redemption of senior notes—
 (158) —
 —
 (158)
Proceeds from issue of shares60
 —
 —
 —
 60
Excess tax benefits from share-based payment arrangements—
 —
 5
 —
 5
Dividends paid(180) —
 (186) 186
 (180)
Acquisition of noncontrolling interests—
 (4) (5) —
 (9)
Dividends paid to noncontrolling interests—
 —
 (13) —
 (13)
Proceeds from intercompany financing activities—
 796
 154
 (950) —
Repayments of intercompany financing activities—
 (224) (96) 320
 —
Net cash provided by (used in) financing activities667
 (296) (141) (444) (214)
INCREASE IN CASH AND CASH EQUIVALENTS—
 87
 37
 —
 124
Effect of exchange rate changes on cash and cash equivalents—
 —
 (4) —
 (4)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR—
 76
 240
 —
 316
CASH AND CASH EQUIVALENTS, END OF YEAR$—
 $163
 $273
 $—
 $436


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32.FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
Trinity Acquisition plc has $525 million senior notes outstanding that were issued on August 15, 2013.
All direct obligations under the senior notes were jointly and severally, irrevocably and fully and unconditionally guaranteed by Willis Netherlands Holdings B.V, Willis Investment UK Holdings Limited, TA I Limited, Willis Group Limited and Willis North America, Inc, collectively the 'Other Guarantors', and with Willis Group Holdings, the 'Guarantor Companies'.
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by the Company and Willis North America (the ‘Willis North America Debt Securities’) in that Trinity Acquisition plc is the issuer and not a subsidiary guarantor, and Willis North America, Inc. is a subsidiary guarantor.
Presented below is condensed consolidating financial information for:

Victor Krauze

(i)		Willis Group Holdings, which is a guarantor, on a parent company only basis;
53
(ii)Chairmanthe Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent. Willis Netherlands Holdings B.V, Willis Investment UK Holdings Limited and Chief Executive OfficerTA I Limited are all direct or indirect parents of the issuer and Willis Group Limited and Willis North America Inc., are 100 percent directly or indirectly owned subsidiaries or the issuer;
(iii)Trinity Acquisition plc, which is the issuer and is a 100 percent indirectly owned subsidiary of the parent;
(iv)Other, which are the non-guarantor subsidiaries, on a combined basis;
(v)Consolidating adjustments; and
(vi)the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets of Willis Group Holdings, the Other Guarantors and the Issuer.


Restatement to 2011 and 2012 financial information

Regulation S-X, Article 3, Rule 3-10, allows for the presentation of condensed consolidating financial information. In accordance with these rules, the condensed consolidating financial information should be presented in accordance with U.S. GAAP, except that (i) the guarantor and non-guarantor information is presented on a combined rather than consolidated basis, which requires the elimination of intra-entity activity and (ii) investments in subsidiaries are required to be presented under the equity method of accounting. Subsequent to the issuance of our 2012 financial statements, management determined that certain balances were not presented in accordance with the above principles and have therefore restated our condensed consolidating financial information to reflect (i) gross, rather than net, presentation of intercompany balance sheet positions, (ii) dividends received from subsidiaries as reductions to the equity method investment balances opposed to as component of investment income from group undertakings, and (iii) appropriate push down accounting for goodwill.

The impacts of these changes on the previously reported 2012 and 2011 financial statements are shown in the tables below.


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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of operations for the year ended 31 December 2012     
Willis Group Holdings     
Operating loss$(6) $—
 $(6)
Net loss attributable to Willis Group Holdings(446) —
 (446)
The Other Guarantors     
Operating loss$(262) $(11) $(273)
Net loss attributable to Willis Group Holdings(389) (8) (397)
The Issuer     
Operating income$1
 $—
 $1
Net loss attributable to Willis Group Holdings(427) —
 (427)
Other     
Operating income (loss)$122
 $(53) $69
Net loss attributable to Willis Group Holdings(118) (306) (424)
Consolidating adjustments     
Operating (loss) income$(64) $64
 $—
Net income attributable to Willis Group Holdings934
 314
 1,248
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of operations for the year ended 31 December 2011     
Willis Group Holdings     
Operating loss$(20) $—
 $(20)
Net income attributable to Willis Group Holdings204
 —
 204
The Other Guarantors     
Operating loss$(140) $(11) $(151)
Net income attributable to Willis Group Holdings174
 72
 246
The Issuer     
Operating income$4
 $—
 $4
Net income (loss) attributable to Willis Group Holdings218
 (1) 217
Other     
Operating income (loss)$754
 $(21) $733
Net income attributable to Willis Group Holdings137
 164
 301
Consolidating adjustments     
Operating (loss) income$(32) $32
 $—
Net loss attributable to Willis Group Holdings(529) (235) (764)


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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of comprehensive income for the year ended 31 December 2012     
Willis Group Holdings     
Comprehensive loss attributable to Willis Group Holdings$(552) $—
 $(552)
The Other Guarantors     
Comprehensive loss attributable to Willis Group Holdings$(486) $(8) $(494)
The Issuer     
Comprehensive (loss) income attributable to Willis Group Holdings$(528) $—
 $(528)
Other     
Comprehensive loss attributable to Willis Group Holdings$(226) $(306) $(532)
Consolidating adjustments     
Comprehensive income attributable to Willis Group Holdings$1,240
 $314
 $1,554
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of comprehensive income for the year ended 31 December 2011     
Willis Group Holdings     
Comprehensive income attributable to Willis Group Holdings$1
 $—
 $1
The Other Guarantors     
Comprehensive (loss) income attributable to Willis Group Holdings$(24) $72
 $48
The Issuer     
Comprehensive income attributable to Willis Group Holdings$21
 $(1) $20
Other     
Comprehensive (loss) income attributable to Willis Group Holdings$(65) $164
 $99
Consolidating adjustments     
Comprehensive income (loss) attributable to Willis Group Holdings$68
 $(235) $(167)


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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating balance sheet at 31 December 2012     
Willis Group Holdings     
Total assets$2,557
 $1,541
 $4,098
Total liabilities858
 1,541
 2,399
Total equity1,699
 —
 1,699
The Other Guarantors     
Total assets$(208) $5,618
 $5,410
Total liabilities1,367
 5,704
 7,071
Total equity(1,575) (86) (1,661)
The Issuer     
Total assets$2,861
 $408
 $3,269
Total liabilities300
 492
 792
Total equity2,561
 (84) 2,477
Other     
Total assets$17,125
 $(1,483) $15,642
Total liabilities11,851
 720
 12,571
Total equity5,274
 (2,203) 3,071
Consolidating adjustments     
Total assets$(7,223) $(6,084) $(13,307)
Total liabilities(989) (8,457) (9,446)
Total equity(6,234) 2,373
 (3,861)

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 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of cash flows for the year ended 31 December 2012     
Willis Group Holdings     
Net cash (used in) provided by operating activities$(42) $19
 $(23)
Net cash provided by investing activities—
 256
 256
Net cash provided by (used in) financing activities43
 (275) (232)
The Other Guarantors     
Net cash provided by operating activities$1,869
 $524
 $2,393
Net cash used in investing activities(26) (21) (47)
Net cash used in financing activities(2,006) (503) (2,509)
The Issuer     
Net cash provided by operating activities$1,269
 $87
 $1,356
Net cash used in investing activities—
 (53) (53)
Net cash (used in) provided by financing activities(1,269) (34) (1,303)
Other     
Net cash provided by (used in) operating activities$431
 $(528) $(97)
Net cash (used in) provided by investing activities(146) 1,149
 1,003
Net cash used in financing activities(61) (621) (682)
Consolidating adjustments     
Net cash used in operating activities$(3,002) $(102) $(3,104)
Net cash used in investing activities—
 (1,331) (1,331)
Net cash provided by financing activities3,002
 1,433
 4,435
      
 As previously reported Reclassifications As Reclassified
 (millions)
Condensed consolidating statement of cash flows for the year ended 31 December 2011     
Willis Group Holdings     
Net cash (used in) provided by operating activities$(41) $85
 $44
Net cash used in investing activities—
 (711) (711)
Net cash provided by financing activities41
 626
 667
The Other Guarantors     
Net cash provided by (used in) operating activities$209
 $(568) $(359)
Net cash used in investing activities(25) (33) (58)
Net cash (used in) provided by financing activities(97) 601
 504
The Issuer     
Net cash provided by operating activities$110
 $746
 $856
Net cash used in investing activities—
 (292) (292)
Net cash used in financing activities(110) (454) (564)
Other     
Net cash provided by (used in) operating activities$1,269
 $(1,138) $131
Net cash (used in) provided by investing activities(76) 123
 47
Net cash (used in) provided by financing activities(1,156) 1,015
 (141)
Consolidating adjustments     
Net cash (used in) provided by operating activities$(1,108) $875
 $(233)
Net cash provided by investing activities—
 913
 913
Net cash provided by (used in) financing activities1,108
 (1,788) (680)


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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Statement of Operations
 Year Ended December 31, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
REVENUES 
  
  
  
  
  
Commissions and fees$—
 $8
 $—
 $3,625
 $—
 $3,633
Investment income—
 —
 —
 15
 —
 15
Other income—
 —
 —
 7
 —
 7
Total revenues—
 8
 —
 3,647
 —
 3,655
EXPENSES 
  
  
  
  
  
Salaries and benefits(1) (103) —
 (2,103) —
 (2,207)
Other operating expenses—
 (235) (1) (380) —
 (616)
Depreciation expense—
 (23) —
 (71) —
 (94)
Amortization of intangible assets—
 —
 —
 (55) —
 (55)
Net gain on disposal of operations—
 —
 —
 12
 (10) 2
Total expenses(1) (361) (1) (2,597) (10) (2,970)
OPERATING (LOSS) INCOME(1) (353) (1) 1,050
 (10) 685
Income from Group undertakings—
 491
 68
 86
 (645) —
Expenses due to Group undertakings(10) (153) (26) (456) 645
 —
Loss from extinguishment of debt—
 (60) —
 —
 —
 (60)
Interest expense(42) (61) (18) (5) —
 (126)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(53) (136) 23
 675
 (10) 499
Income taxes—
 29
 (6) (145) —
 (122)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(53) (107) 17
 530
 (10) 377
Interest in earnings of associates, net of tax—
 9
 —
 (9) —
 —
Equity account for subsidiaries418
 515
 344
 —
 (1,277) —
INCOME FROM CONTINUING OPERATIONS365
 417
 361
 521
 (1,287) 377
Discontinued operations, net of tax—
 —
 —
 —
 —
 —
NET INCOME365
 417
 361
 521
 (1,287) 377
Less: Net income attributable to noncontrolling interests—
 —
 —
 (12) —
 (12)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$365
 $417
 $361
 $509
 $(1,287) $365



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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
Comprehensive income$522
 $565
 $504
 $636
 $(1,693) $534
Less: Comprehensive income attributable to noncontrolling interests—
 —
 —
 (12) —
 (12)
Comprehensive income attributable to Willis Group Holdings$522
 $565
 $504
 $624
 $(1,693) $522


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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Statement of Operations
 Year Ended December 31, 2012
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
REVENUES 
  
  
  
  
  
Commissions and fees$—
 $—
 $—
 $3,458
 $—
 $3,458
Investment income—
 1
 —
 17
 —
 18
Other income—
 —
 —
 4
 —
 4
Total revenues—
 1
 —
 3,479
 —
 3,480
EXPENSES 
  
  
  
  
  
Salaries and benefits(2) (96) —
 (2,377) —
 (2,475)
Other operating expenses(4) (162) 1
 (416) —
 (581)
Depreciation expense—
 (16) —
 (63) —
 (79)
Amortization of intangible assets—
 —
 —
 (59) —
 (59)
Goodwill impairment—
 —
 —
 (492) —
 (492)
Net loss on disposal of operations—
��—
 —
 (3) —
 (3)
Total expenses(6) (274) 1
 (3,410) —
 (3,689)
OPERATING (LOSS) INCOME(6) (273) 1
 69
 —
 (209)
Income from Group undertakings—
 436
 79
 111
 (626) —
Expenses due to Group undertakings—
 (185) (27) (414) 626
 —
Interest expense(43) (69) (8) (8) —
 (128)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(49) (91) 45
 (242) —
 (337)
Income taxes—
 76
 (11) (166) —
 (101)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(49) (15) 34
 (408) —
 (438)
Interest in earnings of associates, net of tax—
 8
 —
 (3) —
 5
Equity account for subsidiaries(397) (390) (461) —
 1,248
 —
LOSS FROM CONTINUING OPERATIONS(446) (397) (427) (411) 1,248
 (433)
Discontinued operations, net of tax—
 —
 —
 —
 —
 —
NET LOSS(446) (397) (427) (411) 1,248
 (433)
Less: Net income attributable to noncontrolling interests—
 —
 —
 (13) —
 (13)
NET LOSS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$(446) $(397) $(427) $(424) $1,248
 $(446)

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Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
Comprehensive loss$(552) $(494) $(528) $(519) $1,554
 $(539)
Less: Comprehensive income attributable to noncontrolling interests—
 —
 —
 (13) —
 (13)
Comprehensive loss attributable to Willis Group Holdings$(552) $(494) $(528) $(532) $1,554
 $(552)


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Condensed Consolidating Statement of Operations
 Year Ended December 31, 2011
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
REVENUES 
  
  
  
  
  
Commissions and fees$—
 $—
 $—
 $3,414
 $—
 $3,414
Investment income—
 2
 —
 29
 —
 31
Other income—
 —
 —
 2
 —
 2
Total revenues—
 2
 —
 3,445
 —
 3,447
EXPENSES 
  
  
  
  
  
Salaries and benefits(3) (69) —
 (2,015) —
 (2,087)
Other operating expenses(17) (70) 4
 (573) —
 (656)
Depreciation expense—
 (14) —
 (60) —
 (74)
Amortization of intangible assets—
 —
 —
 (68) —
 (68)
Net gain on disposal of operations—
 —
 —
 4
 —
 4
Total expenses(20) (153) 4
 (2,712) —
 (2,881)
OPERATING (LOSS) INCOME(20) (151) 4
 733
 —
 566
Income from Group undertakings—
 438
 64
 119
 (621) —
Expenses due to Group undertakings—
 (180) (26) (415) 621
 —
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs—
 —
 (171) —
 —
 (171)
Interest expense(34) (99) (15) (8) —
 (156)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES(54) 8
 (144) 429
 —
 239
Income taxes—
 47
 39
 (117) (1) (32)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES(54) 55
 (105) 312
 (1) 207
Interest in earnings of associates, net of tax—
 8
 —
 4
 —
 12
Equity account for subsidiaries258
 183
 322
 —
 (763) —
INCOME FROM CONTINUING OPERATIONS204
 246
 217
 316
 (764) 219
Discontinued operations, net of tax—
 —
 —
 1
 —
 1
NET INCOME204
 246
 217
 317
 (764) 220
Less: Net income attributable to noncontrolling interests—
 —
 —
 (16) —
 (16)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS$204
 $246
 $217
 $301
 $(764) $204













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Condensed Consolidating Statement of Comprehensive Income
 Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 Other 
Consolidating
adjustments
 Consolidated
     (millions)    
Comprehensive income$1
 $48
 $20
 $114
 $(167) $16
Less: Comprehensive income attributable to noncontrolling interests—
 —
 —
 (15) —
 (15)
Comprehensive income attributable to Willis Group Holdings$1
 $48
 $20
 $99
 $(167) $1













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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Balance Sheet
 As at December 31, 2013
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
ASSETS 
  
  
  
  
  
CURRENT ASSETS 
  
  
  
  
  
Cash and cash equivalents$3
 $3
 $—
 $790
 $—
 $796
Accounts receivable, net—
 4
 —
 1,037
 —
 1,041
Fiduciary assets—
 —
 —
 8,412
 —
 8,412
Deferred tax assets—
 —
 —
 16
 (1) 15
Other current assets1
 36
 1
 186
 (27) 197
Amounts due from group undertakings4,051
 975
 793
 1,484
 (7,303) —
Total current assets4,055
 1,018
 794
 11,925
 (7,331) 10,461
NON-CURRENT ASSETS 
  
  
  
  
  
Investments in subsidiaries—
 3,716
 2,705
 —
 (6,421) —
Fixed assets, net—
 66
 —
 415
 —
 481
Goodwill—
 —
 —
 2,838
 —
 2,838
Other intangible assets, net—
 —
 —
 353
 —
 353
Investments in associates—
 156
 —
 20
 —
 176
Deferred tax assets—
 —
 —
 7
 —
 7
Pension benefits asset—
 —
 —
 278
 —
 278
Other non-current assets4
 5
 9
 188
 —
 206
Non-current amounts due from group undertakings—
 1,113
 518
 —
 (1,631) —
Total non-current assets4
 5,056
 3,232
 4,099
 (8,052) 4,339
TOTAL ASSETS$4,059
 $6,074
 $4,026
 $16,024
 $(15,383) $14,800
LIABILITIES AND STOCKHOLDERS’ EQUITY           
CURRENT LIABILITIES 
  
  
  
  
  
Fiduciary liabilities$—
 $—
 $—
 $8,412
 $—
 $8,412
Deferred revenue and accrued expenses2
 29
 —
 555
 —
 586
Income taxes payable—
 4
 5
 39
 (27) 21
Short-term debt and current portion of long-term debt—
 —
 15
 —
 —
 15
Deferred tax liabilities—
 —
 —
 25
 —
 25
Other current liabilities62
 42
 11
 300
 —
 415
Amounts due to group undertakings—
 5,813
 157
 1,333
 (7,303) —
Total current liabilities64
 5,888
 188
 10,664
 (7,330) 9,474
NON-CURRENT LIABILITIES 
  
  
  
  
  
Investments in subsidiaries985
 —
 —
 —
 (985) —
Long-term debt795
 733
 782
 1
 —
 2,311
Liabilities for pension benefits—
 —
 —
 136
 —
 136
Deferred tax liabilities—
 1
 —
 55
 —
 56
Provisions for liabilities—
 —
 —
 206
 —
 206
Other non-current liabilities—
 48
 —
 326
 —
 374
Non-current amounts due to group undertakings—
 518
 423
 690
 (1,631) —
Total non-current liabilities1,780
 1,300
 1,205
 1,414
 (2,616) 3,083
TOTAL LIABILITIES$1,844
 $7,188
 $1,393
 $12,078
 $(9,946) $12,557

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Condensed Consolidating Balance Sheet
 As at December 31, 2013
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
EQUITY 
  
  
  
  
  
Total Willis Group Holdings stockholders’ equity2,215
 (1,114) 2,633
 3,918
 (5,437) 2,215
Noncontrolling interests—
 —
 —
 28
 —
 28
Total equity2,215
 (1,114) 2,633
 3,946
 (5,437) 2,243
TOTAL LIABILITIES AND EQUITY$4,059
 $6,074
 $4,026
 $16,024
 $(15,383) $14,800


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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Balance Sheet
 As at December 31, 2012
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
ASSETS
CURRENT ASSETS 
  
  
  
  
  
Cash and cash equivalents$1
 $—
 $—
 $499
 $—
 $500
Accounts receivable, net—
 —
 —
 933
 —
 933
Fiduciary assets—
 —
 —
 9,271
 —
 9,271
Deferred tax assets—
 —
 —
 13
 —
 13
Other current assets1
 79
 1
 114
 (14) 181
Amounts due from group undertakings4,091
 1,070
 801
 864
 (6,826) —
Total current assets4,093
 1,149
 802
 11,694
 (6,840) 10,898
NON-CURRENT ASSETS 
  
  
  
  
  
Investments in subsidiaries—
 2,939
 2,464
 —
 (5,403) —
Fixed assets, net—
 74
 —
 394
 —
 468
Goodwill—
 —
 —
 2,827
 —
 2,827
Other intangible assets, net—
 —
 —
 385
 —
 385
Investments in associates—
 143
 —
 31
 —
 174
Deferred tax assets—
 —
 —
 18
 —
 18
Pension benefits asset—
 —
 —
 136
 —
 136
Other non-current assets5
 41
 3
 157
 —
 206
Non-current amounts due from group undertakings—
 1,064
 —
 —
 (1,064) —
Total non-current assets5
 4,261
 2,467
 3,948
 (6,467) 4,214
TOTAL ASSETS$4,098
 $5,410
 $3,269
 $15,642
 $(13,307) $15,112
LIABILITIES AND STOCKHOLDERS’ EQUITY           
CURRENT LIABILITIES 
  
  
  
  
  
Fiduciary liabilities$—
 $—
 $—
 $9,271
 $—
 $9,271
Deferred revenue and accrued expenses2
 —
 —
 539
 —
 541
Income taxes payable—
 4
 11
 18
 (14) 19
Short-term debt and current portion of long-term debt—
 —
 15
 —
 —
 15
Deferred tax liabilities—
 —
 —
 21
 —
 21
Other current liabilities60
 73
 —
 194
 —
 327
Amounts due to group undertakings—
 5,714
 69
 1,043
 (6,826) —
Total current liabilities62
 5,791
 95
 11,086
 (6,840) 10,194
NON-CURRENT LIABILITIES 
  
  
  
  
  
Investments in subsidiaries1,542
 —
 —
 —
 (1,542) —
Long-term debt795
 1,268
 274
 1
 —
 2,338
Liabilities for pension benefits—
 —
 —
 282
 —
 282
Deferred tax liabilities—
 —
 —
 18
 —
 18
Provisions for liabilities—
 —
 —
 180
 —
 180
Other non-current liabilities—
 12
 —
 363
 —
 375
Non-current amounts due to group undertakings—
 —
 423
 641
 (1,064) —
Total non-current liabilities2,337
 1,280
 697
 1,485
 (2,606) 3,193
TOTAL LIABILITIES$2,399
 $7,071
 $792
 $12,571
 $(9,446) $13,387

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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Balance Sheet
 As at December 31, 2012
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
EQUITY 
  
  
  
  
  
Total Willis Group Holdings stockholders’ equity1,699
 (1,661) 2,477
 3,045
 (3,861) 1,699
Noncontrolling interests—
 —
 —
 26
 —
 26
Total equity1,699
 (1,661) 2,477
 3,071
 (3,861) 1,725
TOTAL LIABILITIES AND EQUITY$4,098
 $5,410
 $3,269
 $15,642
 $(13,307) $15,112


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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2013
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES$4
 $399
 $63
 $662
 $(567) $561
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 3
 —
 9
 —
 12
Additions to fixed assets—
 (18) —
 (94) —
 (112)
Additions to intangible assets—
 —
 —
 (7) —
 (7)
Acquisitions of subsidiaries, net of cash acquired—
 (237) —
 (30) 237
 (30)
Payments to acquire other investments—
 —
 —
 (7) —
 (7)
Proceeds from sale of associates—
 —
 —
 4
 —
 4
Proceeds from sale of operations, net of cash disposed—
 —
 —
 257
 (237) 20
Proceeds from intercompany investing activities383
 160
 132
 60
 (735) —
Repayments of intercompany investing activities(347) (120) (442) (780) 1,689
 —
Net cash provided by (used in) investing activities36
 (212) (310) (588) 954
 (120)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
  
Senior notes issued—
 —
 522
 —
 —
 522
Debt issuance costs—
 —
 (8) —
 —
 (8)
Repayments of debt—
 (521) (15) —
 —
 (536)
Tender premium on extinguishment of senior notes—
 (65) —
 —
 —
 (65)
Proceeds from issue of shares155
 —
 —
 —
 —
 155
Excess tax benefits from share-based payment arrangement—
 —
 —
 2
 —
 2
Dividends paid(193) (230) (330) (7) 567
 (193)
Acquisition of noncontrolling interests—
 —
 —
 (4) —
 (4)
Dividends paid to noncontrolling interests—
 —
 —
 (10) —
 (10)
Proceeds from intercompany financing activities—
 1,075
 147
 467
 (1,689) —
Repayments of intercompany financing activities—
 (443) (69) (223) 735
 —
Net cash (used in) provided by financing activities(38) (184) 247
 225
 (387) (137)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS2
 3
 —
 299
 —
 304
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 (8) —
 (8)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR1
 —
 —
 499
 —
 500
CASH AND CASH EQUIVALENTS, END OF YEAR$3
 $3
 $—
 $790
 $—
 $796


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32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2012
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES$(23) $2,393
 $1,356
 $(97) $(3,104) $525
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 —
 —
 5
 —
 5
Additions to fixed assets—
 (26) —
 (109) —
 (135)
Additions to intangible assets—
 —
 —
 (2) —
 (2)
Acquisitions of subsidiaries, net of cash acquired—
 —
 —
 (33) —
 (33)
Payments to acquire other investments—
 —
 —
 (7) —
 (7)
Proceeds from sale of operations, net of cash disposed—
 —
 —
 —
 —
 —
Proceeds from intercompany investing activities256
 176
 78
 1,230
 (1,740) —
Repayments of intercompany investing activities—
 (197) (131) (81) 409
 —
Net cash provided by (used in) investing activities256
 (47) (53) 1,003
 (1,331) (172)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
  
Repayments of debt—
 (4) (11) —
 —
 (15)
Proceeds from issue of other debt—
 —
 1
 —
 —
 1
Repurchase of shares(100) —
 —
 —
 —
 (100)
Proceeds from issue of shares53
 —
 —
 —
 —
 53
Excess tax benefits from share-based payment arrangement—
 —
 —
 2
 —
 2
Dividends paid(185) (1,220) (1,069) (815) 3,104
 (185)
Proceeds from sale of noncontrolling interests—
 —
 —
 3
 —
 3
Acquisition of noncontrolling interests—
 —
 —
 (39) —
 (39)
Dividends paid to noncontrolling interests—
 —
 —
 (11) —
 (11)
Proceeds from intercompany financing activities—
 81
 —
 328
 (409) —
Repayments of intercompany financing activities—
 (1,366) (224) (150) 1,740
 —
Net cash used in financing activities(232) (2,509) (1,303) (682) 4,435
 (291)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS1
 (163) —
 224
 —
 62
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 2
 —
 2
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR—
 163
 —
 273
 —
 436
CASH AND CASH EQUIVALENTS, END OF YEAR$1
 $—
 $—
 $499
 $—
 $500


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Notes to the financial statements

32. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Statement of Cash Flows
 Year Ended December 31, 2011
 Willis
Group
Holdings		 The Other
Guarantors		 The
Issuer		 Other Consolidating
adjustments		 Consolidated
     (millions)    
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES$44
 $(359) $856
 $131
 $(233) $439
CASH FLOWS FROM INVESTING ACTIVITIES 
  
  
  
  
  
Proceeds on disposal of fixed and intangible assets—
 —
 —
 13
 —
 13
Additions to fixed assets—
 (25) —
 (86) —
 (111)
Acquisitions of subsidiaries, net of cash acquired—
 —
 —
 (10) —
 (10)
Acquisitions of investments in associates—
 —
 —
 (2) —
 (2)
Payments to acquire other investments—
 —
 —
 (5) —
 (5)
Proceeds from sale of operations, net of cash disposed—
 —
 —
 14
 —
 14
Proceeds from intercompany investing activities—
 105
 —
 224
 (329) —
Repayments of intercompany investing activities(711) (138) (292) (101) 1,242
 —
Net cash (used in) investing activities(711) (58) (292) 47
 913
 (101)
CASH FLOWS FROM FINANCING ACTIVITIES 
  
  
  
  
  
Repayments of revolving credit facility—
 (90) —
 —
 —
 (90)
Senior notes issued794
 —
 —
 —
 —
 794
Debt issuance costs(7) —
 (5) —
 —
 (12)
Repayments of debt—
 (411) (500) —
 —
 (911)
Proceeds from issue of term loan—
 —
 300
 —
 —
 300
Make-whole on repurchase and redemption of senior notes—
 —
 (158) —
 —
 (158)
Proceeds from issue of shares60
 —
 —
 —
 —
 60
Excess tax benefits from share-based payment arrangements—
 —
 —
 5
 —
 5
Dividends paid(180) (47) —
 (186) 233
 (180)
Acquisition of noncontrolling interests—
 (4) —
 (5) —
 (9)
Dividends paid to noncontrolling interests—
 —
 —
 (13) —
 (13)
Proceeds from intercompany financing activities—
 1,088
 —
 154
 (1,242) —
Repayments of intercompany financing activities—
 (32) (201) (96) 329
 —
Net cash provided by (used in) financing activities667
 504
 (564) (141) (680) (214)
INCREASE IN CASH AND CASH EQUIVALENTS—
 87
 —
 37
 —
 124
Effect of exchange rate changes on cash and cash equivalents—
 —
 —
 (4) —
 (4)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR—
 76
 —
 240
 —
 316
CASH AND CASH EQUIVALENTS, END OF YEAR$—
 $163
 $—
 $273
 $—
 $436


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Willis Group Holdings plc


Michael K. Neborak

33.		56Group Chief Financial Officer

Adam L. Rosman

47Group General Counsel

Timothy D. Wright

51CEO of Willis InternationalQUARTERLY FINANCIAL DATA (UNAUDITED)

Biographical InformationQuarterly financial data for

2013 and 2012 were as follows:

 Three Months Ended
 March 31, June 30, September 30, December 31,
 (millions, except per share data)
2013 
  
  
  
Total revenues$1,051
 $890
 $795
 $919
Total expenses(764) (719) (720) (767)
Net income (loss)223
 107
 (27) 74
Net income (loss) attributable to Willis Group Holdings219
 105
 (27) 68
Earnings per share — continuing operations 
  
  
  
— Basic$1.27
 $0.60
 $(0.15) $0.38
— Diluted$1.24
 $0.59
 $(0.15) $0.37
2012 
  
  
  
Total revenues$1,013
 $842
 $754
 $871
Total expenses(696) (663) (684) (1,646)
Net income (loss)232
 110
 26
 (801)
Net income (loss) attributable to Willis Group Holdings225
 108
 26
 (805)
Earnings per share — continuing operations 
  
  
  
— Basic$1.29
 $0.62
 $0.15
 $(4.65)
— Diluted$1.28
 $0.61
 $0.15
 $(4.65)


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Controls and procedures

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, 2013, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Group Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 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 in Rule 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 in Rule 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, 2013, based on the criteria related to internal control over financial reporting described in Internal Control — Integrated Framework issued 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, 2013.
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 27, 2014.

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Willis Group Holdings plc


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 internal control over financial reporting of Willis Group Holdings Public Limited Company and subsidiaries (the 'Company') as of December 31, 2013, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The following sets forthCompany’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 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 understanding 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 based on the assessed risk, 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 supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting 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 dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because 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, 2013, based on the criteria established in Internal Control — Integrated Framework (1992) issued 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, 2013 of the Company and our report dated February  27, 2014 expressed an unqualified opinion on those financial statements.

/s/ Deloitte LLP
London, United Kingdom
February 27, 2014

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Controls and procedures

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, 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B — Other Information
None.


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Willis Group Holdings plc


PART III
Item 10—Directors, Executive Officers and Corporate Governance
Except for the information about our currentregarding executive officers other than Dominic Casserley, the Company’s CEO, whose qualifications arerequired by Item 401 of Regulation S-K which is set forth above.

below as of February 14, 2014, the information required by this item with respect to our directors and executive officers, code of ethics, procedures for recommending nominees, audit committee, audit committee financial experts and compliance with Section 16(a) of the Exchange Act will be provided in accordance with Instruction G(3) to Form 10-K no later than April 30, 2014.

Celia Brown — - Ms. Brown, age 59, was appointed an executive officer on 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.

Dominic Casserley - Mr. Casserley, age 56, was appointed as Chief Executive Officer of Willis Group Holdings plc and as a member of the Board on January 7, 2013. Prior to joining Willis, Mr. Casserley, was a senior partner of McKinsey & Company, which he joined in New York in 1983. During his 29 years at McKinsey, Mr. Casserley led the firm's Greater China Practice and its UK and Ireland Practice. Mr. Casserley had been a member of the McKinsey Shareholders Council, the firm's global board, since 1999 and for four years served as the Chairman of the Finance Committee of that board. Mr. Casserley is a graduate of Cambridge University.
Stephen Hearn — - Mr. Hearn, age 46,47, was appointed an executive officer on January 1, 2012. Mr. Hearn joined the Willis Group in 2008 and was named Chairman and CEO of Willis Global in 2011, CEO of Willis Limited in 2012 and Group Deputy CEO in 2013. Since joining the Willis Group, Mr. Hearn has served as Chairman of Special Contingency Risk, Chairman of Willis 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 Chairman and CEO of the Glencairn Group Limited and as President and CEO of Marsh Affinity Europe.

Victor P. Krauze —

Todd Jones - Mr. Krauze,Jones, age 53,49, was appointed an executive officer on December 3, 2010 and named Chairman and Chief Executive OfficerCEO of Willis North America. Previously,America on July 1, 2013. Mr. Krauze wasJones joined Willis in 2003 as the North American Practice Leader for Willis’s Executive Risks Practice and served as the President and Chief Operating Officer forof Willis North America a position in which he had served since 2009.from 2010 to 2013. Mr. Krauze hasJones also served as President/CEO for Willis’ Minnesota operations,a National Partner offor the Great Lakes region and Regional Executive Officer (National Partner) of Willis’ CentralNortheast Region. Prior to joining Willis, in 1997, Mr. Krauze gained experience as a casualty marketing specialist with another major global broker where his earlyJones held various leadership roles included producer and account executive. Mr. Krauze has over 20 years of experience in the insurance brokerage industry.

Before entering the brokerage industry, he was a financial analyst and corporate banker for a regional bank that is now part of Wells Fargo, focusing on the telecommunications industry.

Michael K. Neborak — - Mr. Neborak, age 56,57, 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 -to 2006, and prior to that, in the investment banking group at Salomon Smith Barney from 1982 -to 2000. He began his career as an accountant with Arthur Andersen & Co.

Adam L. Rosman — Mr. -Mr. Rosman, age 47,48, 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’scompany's Deputy Group General Counsel, responsible for Willis’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 2000-20012000 and 2001 as Deputy Assistant to the President and Deputy Staff Secretary for President Clinton.

David Shalders - Mr. Shalders, age 47, was appointed an executive officer and Group Operations & Technology Director on November 4, 2013. Prior to joining Willis, Mr. Shalders spent over a decade in senior operations and IT roles at the Royal Bank of Scotland Group, most recently as Global COO for Global Banking and Markets. Mr. Shalders also held roles as Head of London & Asia Operations and Head of Derivative Operations for NatWest at RBS.

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Directors and Officers

Timothy D. Wright — - Mr. Wright, age 51,52, was appointed an executive officer in 2008 and in 2012 was appointed CEO of Willis International. Mr. Wright served as Group Chief Operating Officer 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;

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:

Developing and recommending 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)information required by this Item with respect 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’sdirector 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

Arthur J. Gallagher & Co.

Arch Capital Group Limited

Brown & Brown Inc.

Axis 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 country 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 eligibleInstruction G(3) to receive an annual incentive compensation award under the Company’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 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 asrequired by this Item with respect to security ownership of December 31, 2012, about thecertain beneficial owners and management equity and 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:

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 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, 2008 and 2012 Plan.

(3)

Represents shares available for issuance pursuant to awards that may be granted under the 2012 Plan (10,551,524 shares) and the 2010 North American Employee Stock Purchase Plan (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 Hilb, Rogal & Hobbs: the 2000 HRH Plan and the 2007 HRH Plan. No future awards will be granted under the 2000 HRH Plan. The 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 upon exercise of the options.

(5)

Represents shares that remain available for issuance under the 2007 HRH Plan. Willis is authorized to grant awards under the 2007 HRH Plan until 2017 to employees who were formerly employed by Hilb, 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 Hilb, Rogal & Hobbs was completed.

Security Ownership of Certain Beneficial Owners and Management

The following 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 reportedwill be provided in accordance with Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Under these rules, a person is deemedInstruction G(3) 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 ofForm 10-K no later than 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).

30, 2014.


Item 13 — Certain Relationships and Related Transactions, and Director Independence

Review and Approval of Related Person Transactions

Willis has adopted written policies and procedures governing

The information required by this Item with respect to transactions with related persons, 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 event 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 required 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 a 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 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 affiliationsindependence will be provided in accordance with other organizations. Accordingly, in evaluating the independence of each director, the Governance Committee considered that in the ordinary course of business, the Company provides services (such as insurance broking or consultancy services)Instruction G(3) to receives services from or provides charitable donations to organizations affiliated with the directors. This includes a $150,000 charitable contribution made by the Company to CASA, a charitable organization that employs Messrs. Califano and Lane and whose board includes Messrs. Lane, Califano, and Plumeri. In addition, in the 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.

Form 10-K no later than April 30, 2014.


Item 14 — Principal Accounting Fees and Services

The followinginformation required by this Item with respect to auditors' services and fees have been, or will be billed by Deloitte LLP and their respective affiliates for professional services rendered to the 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 aboveprovided in accordance with the Company’s pre-approval policy.

Audit Committee Pre-Approval Process

The Audit Committee has adopted a policy regarding the pre-approvalInstruction G(3) to Form 10-K no later than April 30, 2014.




201
Table 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.

Contents


Willis Group Holdings plc


PART IV

Item 15 –— Exhibits, Financial Statement 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.
(b) Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.
(c) Consolidated Statements of Operations for each of the three years in the period ended

(a)(3)December 31, 2013.

(d) Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2013.
(e) Consolidated Balance Sheets as of December 31, 2013 and 2012.
(f) Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2013.
(g) Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31, 2013.
(h) 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

1.1		Underwriting Agreement, dated August 8, 2013, among Trinity Acquisition plc, as issuer, the guarantors named therein and Barclays Capital Inc. and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein (incorporated herein by reference to Exhibit No. 1.1 to the Company's Form 8-K filed on August 12, 2013 (SEC File No. 001-16503))
 
2.1Scheme of Arrangement between Willis Group Holdings Limited and the Scheme Shareholders (incorporated by reference to Annex A to Willis Group Holdings Limited’sLimited'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 Limited Company (incorporated herein by reference to Exhibit No. 3.1 to the Company’sCompany's Form 8-K filed on 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’sCompany'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’sLimited'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’sLimited'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’sLimited's Form 10-Q filed on November 10, 2008 (SEC File No. 001-16503))

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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’sLimited'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’sCompany'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’sCompany's Form 10-K filed on February 28, 2011 (SEC File No. 001-16503))

4.7

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 4.1 to the Company’sCompany'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, to the Indenture dated March 17, 2011, for the issuance of the 4.125% senior notes due 2016 and the 5.750% senior notes due 2021 (incorporated by reference to Exhibit 4.2 to the Company’sCompany's Form 8-K filed on March 17, 2011 (SEC File No. 001-16503))

10.1

4.9		Indenture, dated as of August 15, 2013, among Trinity Acquisition plc, as issuer, Willis Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis North America Inc., Willis Investment Holdings UK Limited, TA I Limited and Willis Group Limited, as guarantors, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Form 8-K filed on August 15, 2013 (SEC File No. 001-16503))
 
4.10First Supplemental Indenture, dated as of August 15, 2013, among Trinity Acquisition plc, as issuer, Willis Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis North America Inc., Willis Investment Holdings UK Limited, TA I Limited and Willis Group Limited, as guarantors, and Wells Fargo Bank, National Association, as trustee, to the Indenture dated August 15, 2013, for the issuance of 4.625% senior notes due 2023 and 6.125% senior notes due 2043 (incorporated by reference to Exhibit 4.2 to the Company's Form 8-K filed on August 15, 2013 (SEC File No. 001-16503)).
10.1Credit 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’sCompany's Form 8-K filed on December 20, 2011 (SEC File No. 001-16503))

10.2

First Amendment to Credit Agreement, dated as of July 23, 2013, to the Credit Agreement, dated as of December 12, 2011, among Trinity Acquisition PLC, Willis Group Holdings Public Limited Company, the lenders party thereto and Barclays Bank PLC, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on July 25, 2013 (SEC File No. 001-16503))
 
10.3Guaranty 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’sCompany's Form 8-K filed on December 20, 2011 (SEC File No. 001-16503))

10.3

10.4Deed Poll of Assumption dated as of December 31, 2009 between Willis Group Holdings Limited and Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit 10.4 to the Company’sCompany's Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.4

10.5Willis Group Senior Management Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’sCompany's Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†


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10.5

10.6Willis Group Holdings 2010 North America Employee Share Purchase Plan (incorporated by reference to Exhibit 10.3 to the Company’sCompany's Form 8-K filed on April 27, 2010 (SEC File No. 001-16503))†

10.6

10.7Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit 10.9 to the Company’sCompany's Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.7

10.8Form 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’sCompany's Form 10-Q filed on May 10, 2010 (SEC File No. 001-16503))†

10.8

10.9Form 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’sCompany's Form 10-K filed on February 28, 2011 (SEC File No. 001-16503))†

10.9

10.10Form 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’sCompany's Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.10

10.11Form 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’sCompany's Form 10-K filed February 29, 2012 (SEC File No. 001-16503))†

10.11

10.12Form 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’sCompany's Form 8-K filed on May 3, 2011 (SEC File No. 001-16503))†

10.12

10.13Form 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’sCompany's Form 8-K filed on May 3, 2011 (SEC File No. 001-16503))†

10.13

10.14Form 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’sCompany's Form 8-K filed on May 3, 2011 (SEC File No. 001-16503))†

10.14

10.15Form of 2011 Long Term Incentive Program Cash Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’sCompany'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 Willis Group Holdings Sharesave Plan 2001 for the United Kingdom (incorporated by reference to Exhibit 10.13 to the Company’sCompany'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’sCompany'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’sCompany's Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.20

10.19Form 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’sCompany'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

10.20Form 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’sCompany's Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.23

10.21Hilb Rogal and Hamilton Company 2000 Share Incentive Plan (incorporated by reference to Exhibit 10.18 to the Company’sCompany's Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.24

10.22Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.19 to the Company’sCompany's Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

10.25

10.23Form 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’sCompany's Form 10-Q filed on August 6, 2010 (SEC File No. 001-16503))†

10.26

10.24Form 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’sCompany's Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.27

10.25Form 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’sCompany's Form 10-Q filed on August 6, 2010 (SEC File No. 001-16503))†


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Exhibits

10.28

 
10.26Form 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’sCompany's Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.29

10.27Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’sCompany's 8-K filed on April 30, 2012 (SEC File No. 001-16503))†

10.30

10.28Form of Time Based Share Option Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’sCompany's Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.31

10.29Form 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’sCompany's Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.32

Rules of the Willis 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

10.30Form 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’sCompany's Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.34

10.31Form 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’sCompany's Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.35

10.32Form 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’sCompany's Form 10-Q filed on August 9, 2012 (SEC File No. 001-16503))†

10.36

10.33		Form of Performance-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan for the 2013 Long-Term Incentive Program*†
 
10.34Rules of the Willis 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))†
10.35Form of 2012 Long Term Incentive Program Agreement of Restrictive Covenants and Other Obligations (for US employees) Plan (incorporated by reference to Exhibit 10.36 to the Company’sCompany's Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.37

10.36Form of 2012 Long Term Incentive Program Agreement of Restrictive Covenants and Other Obligations (for UK employees) Plan (incorporated by reference to Exhibit 10.37 to the Company’sCompany's Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.38

10.37Amended and Restated Willis US 2005 Deferred Compensation Plan (incorporated by reference to Exhibit 10.21 to the Company’sCompany's Form 8-K filed on November 20, 2009 (SEC File No. 001-16503))†

10.39

10.38First 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’sCompany's Form 10-Q filed on August 9, 2011 (SEC File No. 001-16503))†

10.40

10.39		Second Amendment to the Amended and Restated Willis US 2005 Deferred Compensation Plan (incorporated by reference to Exhibit 10. 6 to the Company's Form 10-Q filed on November 5, 2013 (SEC File No. 001-16503))†
 
10.40Instrument Comprising A Guarantee In Favour of Willis Pension Trustees Limited in Respect of the Willis Pension Scheme (incorporated by reference to Exhibit 10.1 to the Company’sCompany'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’sCompany'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’sCompany's Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†

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’sCompany's Form 8-K filed on January 4, 2010 (SEC File No. 001-16503))†


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10.44

Willis Group Holdings Public Limited Company Compensation Policy for Non-Employee Directors (incorporated by reference to Exhibit 10. 1 to the Company's Form 10-Q filed on November 5, 2013 (SEC File No. 001-16503))†
 
10.452010 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’sCompany's Form 8-K filed on January 22, 2010 (SEC File No. 001-16503))†

10.45

10.46First 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’sCompany's Form 8-K filed on October 19, 2012 (SEC File No. 001-16503))†

10.46

10.47		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 (SEC File No. 001-16503))†
 
10.48Letter agreement, dated January 31, 2014, by and between Willis Group Holdings plc and Dominic Casserley.*†
10.49Form of Performance BasedTime-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan, dated May 7, 201210, 2013 between Joseph J. PlumeriDominic Casserley and Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit 10.610.3 to the Company’sCompany's Form 10-Q filed on August 9, 2012November 5, 2013 (SEC File No. 001-16503))†

10.47

10.50		Form of Performance-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan, dated May 10, 2013 between Dominic Casserley and Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q filed on November 5, 2013 (SEC File No. 001-16503))†
 
10.51Form of Time-Based Share Option Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan, dated May 10, 2013 between Dominic Casserley and Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit 10.5 to the Company's Form 10-Q filed on November 5, 2013 (SEC File No. 001-16503))†
10.52Offer 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’sCompany's Form 8-K filed on June 23, 2010 (SEC File No. 001-16503))†

10.48

10.53Agreement 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’sCompany's Form 10-K filed on February 28, 2011 (SEC File No. 001-16503))†

10.49

10.54Second 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’sCompany's Form 10-K filed on February 29, 2012 (SEC File No. 001-16503))†

10.50

10.55First 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’sCompany's Form 8-K filed on October 19, 2012)2012 (SEC File No. 001-16503))†

10.51

10.56		Employment Agreement dated as of October 16, 2012, by and between Victor P. Krauze and Willis North America, Inc., a subsidiary of Willis Group Holdings Public Limited Company, and Dominic Casserleydated July 1, 2013 (incorporated by reference to Exhibit 10.110.7 to the Company’sCompany's Form 8-K filed on October 19, 2012)July 1, 2013 (SEC File No. 001-16503))†

10.52

10.57Contract 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’sCompany's Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.53

10.58Amendment, 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’sCompany's Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.54

10.59Contract 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’sCompany's Form 8-K filed on October 19, 2012)2012 (SEC File No. 001-16503))†

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10.55

10.60Contract 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’sCompany's Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.56

10.61Amendment, 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’sCompany's Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.57

10.62Confidentiality 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’sCompany's Form 10-K filed on February 28, 2013 (SEC File No. 001-16503))†

10.58

10.63		Employment Agreement, dated September 15, 2003 between Willis Americas Administration, Inc. and Todd J. Jones*†
 
Investment and Share Purchase10.64Letter Agreement, dated asAugust 1, 2013, between Willis North America Inc., a subsidiary of November 18, 2009 byWillis Group Holdings Public Limited Company, 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))Todd J. Jones*†

10.59

10.65		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

NominationNominating 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))
10.66Investment 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))

12.1

10.67		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))
 
10.68Amended and Restated Shareholders' Agreement, dated as of April 15, 2013, by and among Willis Europe BV, Willis Netherlands Holdings BV, Astorg Partners, GS & Cie Group, 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 10.60 to the Company's Form 10-Q filed on May 8, 2013 (SEC File No. 001-16503))
12.1Statement 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))subsidiaries*

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))LLP*

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))1350*

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))1350*
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith.
†Management contract or compensatory plan or arrangement.



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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)

By: /s/ MICHAEL K. NEBORAK
Michael K. Neborak
Group Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: February 27, 2014
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 27th day of February 2014.

By:/s/ DOMINIC CASSERLEY 

/s/ Dominic Casserley        

ANNA C. CATALANO

Dominic Casserley

Group

Chief Executive Officer

and Director

(Principal Executive Officer)

Anna C. Catalano
Director
/s/ SIR ROY GARDNER/s/ THE RT. HON. SIR JEREMY HANLEY, KCMG
Sir Roy Gardner
Director
The Rt. Hon. Sir Jeremy Hanley, KCMG
Director
/s/ ROBYN S. KRAVIT/s/ WENDY E. LANE
Robyn S. Kravit
Director
Wendy E. Lane
Director
/s/ FRANCISCO

LUZÓN
/s/ JAMES F. McCANN
Francisco Luzón
Director
James F. McCann
Director
/s/ JAYMIN B. PATEL/s/ DOUGLAS B. ROBERTS
Jaymin B. Patel
Director
Douglas B. Roberts
Director
/s/ MICHAEL J. SOMERS/s/ JEFFREY W. UBBEN
Michael J. Somers
Director
Jeffrey W. Ubben
Director

Date: April 26, 2013

77



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