Exhibit 99.1
| | | | |
 | | Contacts | | |
| Investors: | | Peter Poillon |
| | | +1 212 915 8084 |
| | | Email:peter.poillon@willis.com |
| | |
| News Release | | Media: | | Juliet Massey |
| | | | +44 7984 156 739 |
| | | | Email:juliet.massey@willis.com |
Willis Group Reports Fourth Quarter and Full Year 2014 Results
Fourth quarter 2014 highlights include:
| | • | | Reported net income up 11.8%; underlying net income up 16.9% |
| | • | | Reported diluted EPS up 13.5% to $0.42; underlying diluted EPS up 17.9% to $0.46 |
| | • | | Reported commissions and fees grew 3.1%; reported expenses grew 5.8% |
| | • | | Underlying commissions and fees grew 7.2%; underlying expenses grew 7.1% |
| | • | | Organic commissions and fees grew 3.6%; organic expenses grew 2.7% |
| | • | | Announcing 2015 dividend increase of 3.3% and share buyback of $175 million |
NEW YORK, February 10, 2015 – Willis Group Holdings plc (NYSE: WSH), the global risk advisor, insurance and reinsurance broker, today reported results for the three and twelve months ended December 31, 2014.
Dominic Casserley, Willis Group Chief Executive Officer, commented, “We finished 2014 with strong top-line growth driven by both another quarter of mid-single digit organic growth in commissions and fees and the impact of our recent acquisitions. We continued to make good progress on managing our organic cost growth and implementing our Operational Improvement Program. We achieved all this despite some ongoing challenging markets, demonstrating the strength of Willis’ diversified business model and our intense focus on executing our strategy. Importantly, we delivered growth in key underlying earnings metrics, including EPS, EBITDA and operating margin.
“We continued to reshape Willis to improve earnings, both organically and through acquisition. During the quarter, we welcomed new colleagues from Max Matthiessen, SurePoint Reinsurance, and IFG into Willis and, early in 2015, reached an agreement to acquire a majority interest in Miller Insurance Services.”
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Select financial measures
| | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Reported measures | | | | | | | | | | | | | | | | |
Reported commissions and fees growth | | | 3.1 | % | | | 5.1 | % | | | 3.7 | % | | | 5.1 | % |
Reported total expenses growth | | | 5.8 | % | | | (52.9 | )% | | | 5.4 | % | | | (19.2 | )% |
Reported operating margin | | | 14.5 | % | | | 15.8 | % | | | 17.0 | % | | | 18.1 | % |
Reported diluted EPS | | $ | 0.42 | | | $ | 0.37 | | | $ | 2.00 | | | $ | 2.04 | |
Underlying measures(1) | | | | | | | | | | | | | | | | |
Underlying commissions and fees growth | | | 7.2 | % | | | 5.1 | % | | | 4.6 | % | | | 5.4 | % |
Underlying total expenses growth | | | 7.1 | % | | | 10.7 | % | | | 5.7 | % | | | 7.6 | % |
Underlying operating margin | | | 16.2 | % | | | 15.2 | % | | | 18.0 | % | | | 18.6 | % |
Underlying diluted EPS | | $ | 0.46 | | | $ | 0.39 | | | $ | 2.33 | | | $ | 2.45 | |
Organic measures(1) | | | | | | | | | | | | | | | | |
Organic commissions and fees growth | | | 3.6 | % | | | 3.7 | % | | | 3.8 | % | | | 4.9 | % |
Organic total expenses growth | | | 2.7 | % | | | 10.3 | % | | | 4.6 | % | | | 7.1 | % |
Organic operating margin | | | 16.6 | % | | | 14.9 | % | | | 18.2 | % | | | 18.4 | % |
| (1) | Underlying measures exclude the impact of certain adjusting items and period over period foreign exchange movements. Organic measures exclude the above items, and the impact of acquisitions and disposals. Please refer to supplemental financial information attached to this press release for detailed definitions of non-GAAP financial measures and accompanying reconciliations. |
Fourth Quarter 2014 Financial Results
Willis Group reported net income of $76 million, or $0.42 per diluted share, in the fourth quarter of 2014 compared to net income of $68 million, or $0.37 per diluted share, in the prior year quarter. Items which affected the year-on-year movement in net income included restructuring costs related to the Operational Improvement Program of $0.06 per diluted share, unfavorable foreign currency movements of $0.03 per diluted share, and a gain on disposal of operations of $0.02 per diluted share.
Underlying diluted EPS were $0.46 per diluted share in the fourth quarter of 2014, up 17.9% compared to $0.39 per diluted share in the fourth quarter of 2013.
Revenues
Total reported commissions and fees increased 3.1% to $939 million in the fourth quarter of 2014, from $911 million in the fourth quarter of 2013. Total commissions and fees growth included $35 million of unfavorable foreign currency movements, and a $32 million net increase in commissions and fees from acquisitions and disposals.
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Underlying commissions and fees, which exclude the net impact of foreign currency movements, grew 7.2%.
Organic commissions and fees, which exclude both the net impact of foreign currency movements and the net impact of acquisitions and disposals, grew 3.6%, driven by strong growth in Willis International (see Segment Revenue Results below).
Other income was $15 million in the fourth quarter of 2014, an increase of $11 million from the prior year period. The increase reflected a $12 million settlement related to a specialty book of business within the Global segment.
Expenses
Total Expenses
On a reported basis, total expenses increased 5.8% to $819 million in the fourth quarter of 2014, from $774 million in the fourth quarter of 2013. Total reported expense growth included $16 million of restructuring costs related to the Operational Improvement Program, $24 million of favorable foreign currency movements, and a $33 million net increase in expenses from acquisitions and disposals.
Underlying total expenses, which exclude the restructuring costs and the impact of foreign currency movements, grew 7.1%. Included in this growth is the $33 million period-over-period net increase in total expenses from acquisitions and disposals which accounted for 440 basis points of the growth.
Organic total expense growth, which excludes restructuring costs, the impact of foreign currency movements, and the net impact of acquisitions and disposals, was 2.7%, down significantly from the prior year quarter, driven primarily by expense management initiatives including the Operational Improvement Program.
Salaries and Benefits
Reported salaries and benefits were $600 million in the fourth quarter of 2014, an increase of 5.4% from $569 million in the prior year quarter. The growth in salaries and benefits included $19 million of favorable foreign currency movements and a $20 million net increase in expenses from acquisitions and disposals.
Underlying salaries and benefits, which exclude the impact from foreign currency movements, grew 9.1%. Included in this growth is the $20 million period-over-period net increase in salaries and benefits from acquisitions and disposals which accounted for 360 basis points of the growth.
Organic salaries and benefits, which exclude the impact from foreign currency movements and net expenses from acquisitions and disposals, grew 5.5%, primarily driven by period-over-period headcount growth of approximately 1%, annual salary increases, and increased production incentives driven by improved commissions and fees growth in the International segment during the quarter.
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Other operating expenses
Reported other operating expenses were $165 million in the fourth quarter of 2014, a decrease of 0.6% from $166 million in the prior year quarter. The decline in other operating expenses included $5 million of favorable foreign currency movements and a $9 million net increase in expenses from acquisitions and disposals.
Underlying other operating expenses, which exclude the impact from foreign currency movements, increased 2.5%. Included in this growth is the $9 million period-over-period net increase in other operating expenses from acquisitions and disposals which accounted for 560 basis points of growth.
Organic other operating expenses, which exclude the impact from foreign currency movements and net expenses from acquisitions and disposals, declined 3.1% driven by company-wide cost management initiatives and reflecting the non-recurrence of certain branding-related expenses that were incurred in the prior period.
Operating margin
Willis Group reported operating margin was 14.5% in the fourth quarter of 2014, a decrease of 130 basis points compared to the fourth quarter 2013 margin.
Underlying operating margin, which excludes the restructuring costs and the net impact from foreign currency movements, was 16.2% in the fourth quarter of 2014, an increase of 100 basis points compared to the fourth quarter 2013.
Organic operating margin, which further excludes the net impact of revenues and expenses from acquisitions and disposals, was 16.6% in the fourth quarter 2014, an increase of 170 basis points from 14.9% in the prior year quarter. The increase was driven by improved organic revenue growth and expense management initiatives.
Taxes
The reported tax rate for the fourth quarter of 2014 was approximately 28%. The full year 2014 reported tax rate was approximately 31%. After excluding the impact of certain items as described in note 6, the tax rates for the quarter and full year were approximately 24% and 25%, respectively. The most significant underlying adjustment for the full year was a non-cash adjustment to the deferred tax asset valuation allowance.
Segment Revenue Results
Willis North America
Organic commissions and fees in the Willis North America segment declined 2.1% in the fourth quarter of 2014 compared with the fourth quarter of 2013. Organic growth was negatively impacted by the non-recurrence in the current quarter of a $5 million revenue recognition adjustment that positively impacted revenue in the fourth quarter of 2013. Excluding the impact from this one-time adjustment, organic commissions and fees would have been down 0.5%.
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The modest decline was largely driven by the Construction and Real Estate/Hospitality practices both being down mid-single digits in the quarter. These practices were impacted by reduced project-driven revenues partly due to timing of such projects moving to past and future quarters.
Notwithstanding the weakness in those two practices, the North America segment continued to generate solid levels of new business and retention levels were consistent with the prior year. The Human Capital and FINEX practices performed well during the quarter, delivering mid-single digit and high-single digit growth, respectively.
Willis North America organic commission and fees for the full year 2014 grew 2.8%.
Willis International
The Willis International segment achieved 15.9% organic growth in commissions and fees in the fourth quarter 2014 compared with the same period in 2013. Organic growth benefited from the non-recurrence in the quarter of a revenue recognition adjustment in China that negatively impacted revenue in the fourth quarter of 2013. Excluding the impact of this change in revenue recognition, organic growth in International would have been 11.0%.
Growth in Willis International came from all regions. Despite challenging economic conditions, operations in Western Europe grew double digits, with growth across most markets in the region. Eastern Europe also grew double digits, with significant growth in Russia. Latin America grew high single digits, led by Brazil, Venezuela and Argentina. Asia grew double digits, with growth across most countries in the region.
Willis International organic commission and fees for the full year 2014 grew 9.0%.
Willis Global
Organic commissions and fees in the Willis Global segment, which comprises Willis Re, Willis Insurance UK, Facultative, Risk, and Willis Capital Markets & Advisory, declined 0.3% in the fourth quarter of 2014 compared with the fourth quarter of 2013.
This performance reflects varied results across the segment’s businesses. Willis Re grew mid-single digits in what is seasonally its quietest quarter, with good growth in both the North America and International businesses. Willis Insurance UK was down low single digits. Natural Resources, FAJS/Hughes-Gibb and UK Large Accounts showed solid growth, but this growth was offset by revenue decreases in the Transport, Construction, Real Estate and Insolvency businesses.
Willis Global organic commission and fees for the full year 2014 grew 1.4%.
Operational Improvement Program
Willis generated savings from the operational improvement program of $9 million in the fourth quarter and $11 million for the full year 2014, modestly better than anticipated.
Restructuring costs from the program were $16 million in the fourth quarter of 2014. Restructuring costs for the full year 2014 were $36 million. Details of the costs by segment and type of expense are included in note 7 of the supplemental financial information attached to the release.
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The Company will provide an update on the progress of the Program and associated spend and savings estimates when it reports its second quarter 2015 results.
Full Year 2014 Financial Results
Reported net income for the twelve months ended December 31, 2014 was $362 million, or $2.00 per diluted share, compared with $365 million, or $2.04 per diluted share, in the same period a year ago. Underlying earnings per diluted share were $2.33 for full year 2014, compared with $2.45 in 2013.
Total commissions and fees were $3,767 million for the twelve months ended December 31, 2014 compared to $3,633 million for 2013. Organic growth in commissions and fees was 3.8% over the same period.
Reported operating income and reported operating margin were $647 million and 17.0%, respectively, for the twelve months ended December 31, 2014, compared with $663 million and 18.1%, respectively, for the prior year. Underlying operating margin was 18.0% in 2014, a decrease of 60 basis points from 18.6% in 2013. Excluding the net impact of acquisitions and disposals, organic operating margin was 18.2%, a decrease of 20 basis points from 18.4% in 2013.
Balance Sheet Highlights
As of December 31, 2014, cash and cash equivalents were $635 million, total debt was $2,309 million and total equity was $2,007 million. As of December 31, 2013, cash and cash equivalents totaled $796 million, total debt was $2,326 million and total equity was $2,243 million.
Dividends
At its February 2015 Board meeting, the Board of Directors approved a 3.3% increase in the regular quarterly cash dividend from $0.30 per share to $0.31 per share (an annual rate of $1.24 per share). The dividend is payable on April 15, 2015 to shareholders of record at March 31, 2015.
Share Buyback
Willis intends to buy back approximately $175 million in shares in 2015 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 buyback program may be modified, extended or terminated at any time by the Board of Directors.
2015 Outlook
Dominic Casserley stated, “We enter the new year well positioned. We expect to drive our 2015 performance with mid-single digit organic revenue growth, supported by our recent acquisitions which we expect will deliver underlying EBITDA ranging from $55 million to $65 million, depending on when we close the Miller transaction. Finally, we expect that our organic cost management actions, combined with the impact of our Operational Improvement Program, will allow us to deliver at least 130 basis points of positive spread between organic revenue and expense growth in 2015.”
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Conference Call, Webcast and Slide Presentation
A conference call to discuss the fourth quarter 2014 results will be held on Wednesday, February 11, 2015, at 8:00 AM Eastern Time. To participate in the live call, please dial (866) 803-2143 (U.S.) or +1 (210) 795-1098 (international) with a pass code of “Willis”. A live (listen-only) audio web cast may be accessed through the investor relations section of the Company website atwww.willis.com.
A replay of the call will be available through March 13, 2015 at 5:00 PM Eastern Time, by calling (800) 513-1167 (U.S.) or + 1 (402) 344-6797 (international). A replay of the webcast will be available through the website.
About Willis
Willis Group Holdings plc is a leading global risk advisor, insurance and reinsurance broker. With roots dating to 1828, Willis operates today on every continent with more than 18,000 employees in over 400 offices. Willis offers its clients superior expertise, teamwork, innovation and market-leading products and professional services in risk management and transfer. Our experts rank among the world’s leading authorities on analytics, modelling and mitigation strategies at the intersection of global commerce and extreme events. Find more information at our Website,www.willis.com, our leadership journal,Resilience, or our up-to-the-minute blog on breaking news,WillisWire. Across geographies, industries and specialisms, Willis provides its local and multinational clients with resilience for a risky world.
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 Eurozone, any insolvencies of or other difficulties experienced by our clients, insurance companies or financial institutions; |
| | • | | our ability to implement and fully realize anticipated benefits of our growth strategy and revenue generating initiatives; |
| | • | | our ability to implement and realize anticipated benefits of any expense reduction initiative, including our ability to achieve expected savings from the multi-year operational improvement program as a result of unexpected costs or delays and demand on managerial, operational and administrative resources and/or macroeconomic factors affecting the program; |
| | • | | changes in the tax or accounting treatment of our operations and fluctuations in our tax rate; |
| | • | | 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 effective manner; |
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| | • | | our ability to continue to manage our significant indebtedness; |
| | • | | our ability to compete in our industry; |
| | • | | our ability to develop 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 anticipated benefits of any acquisition or other transactions in which we may engage, including any revenue growth or operational efficiencies; |
| | • | | our ability to effectively integrate any acquisition into our business; |
| | • | | our inability to exercise full management control over our associates, such as Gras Savoye; |
| | • | | our ability to receive dividends or other distributions in needed amounts from our subsidiaries; |
| | • | | 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; |
| | • | | our exposure to potential liabilities arising from errors and omissions and other potential claims against us; |
| | • | | the interruption or loss of our information processing systems, data security breaches or failure to maintain secure information systems; and |
| | • | | impairment of the goodwill in one of our reporting units, in which case we may be required to record significant charges to earnings. |
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. For more information see the section entitled ‘‘Risk Factors’’ included in Willis’ Form 10-K for the year ended December 31, 2013 and our subsequent filings with the Securities and Exchange Commission. Copies are available online at http://www.sec.gov orwww.willis.com.
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.
Non-GAAP supplemental financial information
This press release contains references to non-GAAP financial measures as defined in Regulation G of SEC rules. Consistent with Regulation G, a reconciliation of this supplemental financial information to our GAAP information is in the earnings release or the note disclosures that follow. We present such non-GAAP supplemental financial information, as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company’s operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. This supplemental financial information should be viewed in addition to, not in lieu of, the Company’s condensed consolidated financial statements.
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WILLIS GROUP HOLDINGS plc
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in millions, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Revenues | | | | | | | | | | | | | | | | |
Commissions and fees | | $ | 939 | | | $ | 911 | | | $ | 3,767 | | | $ | 3,633 | |
Investment income | | | 4 | | | | 4 | | | | 16 | | | | 15 | |
Other income | | | 15 | | | | 4 | | | | 19 | | | | 7 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 958 | | | | 919 | | | | 3,802 | | | | 3,655 | |
| | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | |
Salaries and benefits (including share-based compensation of $14 million, $11 million, $57 million, $42 million) | | | 600 | | | | 569 | | | | 2,314 | | | | 2,207 | |
Other operating expenses | | | 165 | | | | 166 | | | | 659 | | | | 636 | |
Depreciation expense | | | 22 | | | | 26 | | | | 92 | | | | 94 | |
Amortization of intangible assets | | | 16 | | | | 13 | | | | 54 | | | | 55 | |
Restructuring costs | | | 16 | | | | — | | | | 36 | | | | — | |
| | | | | | | | | | | | | | | | |
Total expenses | | | 819 | | | | 774 | | | | 3,155 | | | | 2,992 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 139 | | | | 145 | | | | 647 | | | | 663 | |
Loss on extinguishment of debt | | | — | | | | — | | | | — | | | | 60 | |
Other (income) expense, net | | | (18 | ) | | | (7 | ) | | | (6 | ) | | | (22 | ) |
Interest expense | | | 34 | | | | 33 | | | | 135 | | | | 126 | |
| | | | | | | | | | | | | | | | |
Income before income taxes and interest in (losses) earnings of associates | | | 123 | | | | 119 | | | | 518 | | | | 499 | |
Income taxes | | | 35 | | | | 34 | | | | 159 | | | | 122 | |
| | | | | | | | | | | | | | | | |
| | | | |
Income before interest in (losses) earnings of associates | | | 88 | | | | 85 | | | | 359 | | | | 377 | |
| | | | |
Interest in (losses) earnings of associates, net of tax | | | (5 | ) | | | (11 | ) | | | 14 | | | | — | |
| | | | | | | | | | | | | | | | |
| | | | |
Net income | | | 83 | | | | 74 | | | | 373 | | | | 377 | |
Less: Net income attributable to noncontrolling interests | | | (7 | ) | | | (6 | ) | | | (11 | ) | | | (12 | ) |
| | | | | | | | | | | | | | | | |
Net income attributable to Willis Group Holdings | | $ | 76 | | | $ | 68 | | | $ | 362 | | | $ | 365 | |
| | | | | | | | | | | | | | | | |
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WILLIS GROUP HOLDINGS plc
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in millions, except per share data)
(unaudited)
| | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Earnings per Share – Basic and Diluted | | | | | | | | | | | | |
Net income attributable to Willis Group Holdings shareholders: | | | | | | | | | | | | |
- Basic | | $ | 0.43 | | | $ | 0.38 | | | $ | 2.03 | | | $ | 2.07 | |
- Diluted | | | 0.42 | | | | 0.37 | | | | 2.00 | | | | 2.04 | |
| | | | | | | | | | | | | | | | |
Average Number of Shares Outstanding | | | | | | | | | | | | |
- Basic | | | 177 | | | | 178 | | | | 178 | | | | 176 | |
- Diluted | | | 180 | | | | 182 | | | | 181 | | | | 179 | |
Shares Outstanding at December 31 (thousands) | | | 178,701 | | | | 178,861 | | | | 178,701 | | | | 178,861 | |
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WILLIS GROUP HOLDINGS plc
CONDENSED DRAFT BALANCE SHEETS
(in millions) (unaudited)
| | | | | | | | |
| | | December 31,
2014 | | | December 31,
2013 | |
Current assets | | | | | | | | |
Cash & cash equivalents | | $ | 635 | | | $ | 796 | |
Accounts receivable, net | | | 1,044 | | | | 1,041 | |
Fiduciary assets | | | 8,948 | | | | 8,412 | |
Deferred tax assets | | | 12 | | | | 15 | |
Other current assets | | | 214 | | | | 197 | |
| | | | | | | | |
Total current assets | | | 10,853 | | | | 10,461 | |
| | | | | | | | |
| | |
Non-current assets | | | | | | | | |
Fixed assets, net | | | 483 | | | | 481 | |
Goodwill | | | 2,937 | | | | 2,838 | |
Other intangible assets, net | | | 450 | | | | 353 | |
Investments in associates | | | 169 | | | | 176 | |
Deferred tax assets | | | 9 | | | | 7 | |
Pension benefits asset | | | 314 | | | | 278 | |
Other non-current assets | | | 220 | | | | 206 | |
| | | | | | | | |
Total non-current assets | | | 4,582 | | | | 4,339 | |
| | | | | | | | |
Total assets | | $ | 15,435 | | | $ | 14,800 | |
| | | | | | | | |
| | |
Liabilities and equity | | | | | | | | |
| | |
Current liabilities | | | | | | | | |
| | |
Fiduciary liabilities | | $ | 8,948 | | | $ | 8,412 | |
Deferred revenue and accrued expenses | | | 619 | | | | 586 | |
Income taxes payable | | | 33 | | | | 21 | |
Current portion of long-term debt | | | 167 | | | | 15 | |
Deferred tax liabilities | | | 21 | | | | 25 | |
Other current liabilities | | | 444 | | | | 415 | |
| | | | | | | | |
Total current liabilities | | | 10,232 | | | | 9,474 | |
| | | | | | | | |
| | |
Non-current liabilities | | | | | | | | |
Long-term debt | | | 2,142 | | | | 2,311 | |
Liability for pension benefits | | | 284 | | | | 136 | |
Deferred tax liabilities | | | 128 | | | | 56 | |
Provision for liabilities | | | 194 | | | | 206 | |
Other non-current liabilities | | | 389 | | | | 374 | |
| | | | | | | | |
Total non-current liabilities | | | 3,137 | | | | 3,083 | |
| | | | | | | | |
Total liabilities | | | 13,369 | | | | 12,557 | |
| | | | | | | | |
| | |
Redeemable noncontrolling interest | | | 59 | | | | — | |
| | |
Total Willis Group Holdings stockholders’ equity | | | 1,985 | | | | 2,215 | |
Noncontrolling interests | | | 22 | | | | 28 | |
| | | | | | | | |
Total equity | | | 2,007 | | | | 2,243 | |
| | | | | | | | |
Total liabilities and equity | | $ | 15,435 | | | $ | 14,800 | |
| | | | | | | | |
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WILLIS GROUP HOLDINGS plc
CONDENSED DRAFT CASH FLOW STATEMENTS
(in millions) (unaudited)
| | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Cash flows from operating activities | | | | | | | | | | | | |
Net income | | $ | 83 | | | $ | 74 | | | $ | 373 | | | $ | 377 | |
Adjustments to reconcile net income to total net cash provided by operating activities | | | 60 | | | | 77 | | | | 254 | | | | 313 | |
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries | | | 53 | | | | 44 | | | | (150 | ) | | | (129 | ) |
| | | | | | | | | | | | | | | | |
Net cash provided by operating activities | | $ | 196 | | | $ | 195 | | | $ | 477 | | | $ | 561 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net cash used in investing activities | | $ | (159 | ) | | $ | (15 | ) | | $ | (276 | ) | | $ | (120 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net cash used in financing activities | | $ | (40 | ) | | $ | (5 | ) | | $ | (323 | ) | | $ | (137 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
(Decrease) increase in cash and cash equivalents | | $ | (3 | ) | | $ | 175 | | | $ | (122 | ) | | $ | 304 | |
Effect of exchange rate changes on cash and cash equivalents | | | (18 | ) | | | (2 | ) | | | (39 | ) | | | (8 | ) |
Cash and cash equivalents, beginning of period | | | 656 | | | | 623 | | | | 796 | | | | 500 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of period | | $ | 635 | | | $ | 796 | | | $ | 635 | | | $ | 796 | |
| | | | | | | | | | | | | | | | |
12
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 1. | Definitions of non-GAAP financial measures |
We believe that investors’ understanding of the Company’s performance is enhanced by our disclosure of the following non-GAAP financial measures. Our method of calculating these measures may differ from those used by other companies and therefore comparability may be limited.
Organic commissions and fees growth
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, from reported commissions and fees growth.
We believe organic growth in commissions and fees provides a measure that the investment community may find helpful in assessing the performance of operations that were part of our operations in both the current and prior periods, and provides a measure against which our businesses may be assessed in the future.
Underlying commissions and fees, underlying revenues, underlying total expenses, underlying salaries and benefits, underlying other operating expenses, underlying operating income, underlying operating margin, underlying EBITDA, underlying net income and underlying net income per diluted share (“Underlying measures”).
Underlying measures are calculated by excluding the impact of certain items, including foreign currency translation, from the most directly comparable GAAP measures. We believe that excluding such items provides a more complete and consistent comparative analysis of our results of operations.
Organic revenues, organic total expenses, organic salaries and benefits, organic other operating expenses, organic operating income, organic operating margin and organic EBITDA (“Organic measures”).
Organic measures are calculated by excluding the twelve month impact from acquisitions and disposals (together with the impact of certain items, including foreign currency translation noted above), from the most directly comparable GAAP measures. We believe that excluding these items provides a more complete and consistent comparative analysis of our results of operations.
13
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 2. | Organic commissions and fees |
The following tables reconcile reported commissions and fees growth to organic commissions and fees growth, as defined in note 1 of the supplemental financial information, for the three and twelve months ended December 31, 2014.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Change attributable to | |
| | | 2014 | | | 2013 | | | %
Change | | | Foreign
currency
movements | | | Acquisitions
and
disposals | | | Organic
commissions
and fees
growth | |
North America | | $ | 328 | | | $ | 345 | | | | (4.9 | )% | | | — | % | | | (2.8 | )% | | | (2.1 | )% |
International | | | 325 | | | | 274 | | | | 18.6 | % | | | (14.1 | )% | | | 16.8 | % | | | 15.9 | % |
Global | | | 286 | | | | 292 | | | | (2.1 | )% | | | (2.1 | )% | | | 0.3 | % | | | (0.3 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 939 | | | $ | 911 | | | | 3.1 | % | | | (4.1 | )% | | | 3.6 | % | | | 3.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | Twelve months ended
December 31, | | | Change attributable to | |
| | | 2014 | | | 2013 | | | %
Change | | | Foreign
currency
movements | | | Acquisitions
and
disposals | | | Organic
commissions
and fees
growth | |
North America | | $ | 1,365 | | | $ | 1,349 | | | | 1.2 | % | | | (0.1 | )% | | | (1.5 | )% | | | 2.8 | % |
International | | | 1,016 | | | | 926 | | | | 9.7 | % | | | (5.1 | )% | | | 5.8 | % | | | 9.0 | % |
Global | | | 1,386 | | | | 1,358 | | | | 2.1 | % | | | 0.9 | % | | | (0.2 | )% | | | 1.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 3,767 | | | $ | 3,633 | | | | 3.7 | % | | | (0.9 | )% | | | 0.8 | % | | | 3.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
14
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 3. | Underlying and Organic total expenses, salaries and benefits and other operating expenses |
The following tables reconcile total expenses, salaries and benefits and other operating expenses, respectively the most directly comparable GAAP measures to underlying and organic total expenses, underlying and organic salaries and benefits, and underlying and organic other operating expenses, for the three and twelve months ended December 31, 2014 and 2013:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | | | | | | | % | | | | | | | | | % | |
| | 2014 | | | 2013 | | | Change | | | 2014 | | | 2013 | | | Change | |
Reported Total expenses | | $ | 819 | | | $ | 774 | | | | 5.8 | | | $ | 3,155 | | | $ | 2,992 | | | | 5.4 | |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Operational improvement program | | | (16 | ) | | | — | | | | | | | | (36 | ) | | | — | | | | | |
Expense reduction initiative | | | — | | | | — | | | | | | | | — | | | | (46 | ) | | | | |
Fees related to extinguishment of debt | | | — | | | | — | | | | | | | | — | | | | (1 | ) | | | | |
Foreign currency movements(1) | | | — | | | | (24 | ) | | | | | | | — | | | | 6 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying Total expenses | | $ | 803 | | | $ | 750 | | | | 7.1 | | | $ | 3,119 | | | $ | 2,951 | | | | 5.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net expenses from acquisitions and disposals | | | (40 | ) | | | (7 | ) | | | | | | | (53 | ) | | | (19 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Organic Total expenses | | $ | 763 | | | $ | 743 | | | | 2.7 | | | $ | 3,066 | | | $ | 2,932 | | | | 4.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | | | | | | | % | | | | | | | | | % | |
| | 2014 | | | 2013 | | | Change | | | 2014 | | | 2013 | | | Change | |
Reported Salaries and benefits | | $ | 600 | | | $ | 569 | | | | 5.4 | | | $ | 2,314 | | | $ | 2,207 | | | | 4.8 | |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Expense reduction initiative | | | — | | | | — | | | | | | | | — | | | | (29 | ) | | | | |
Foreign currency movements(1) | | | — | | | | (19 | ) | | | | | | | — | | | | 3 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying Salaries and benefits | | $ | 600 | | | $ | 550 | | | | 9.1 | | | $ | 2,314 | | | $ | 2,181 | | | | 6.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net expenses from acquisitions and disposals | | | (25 | ) | | | (5 | ) | | | | | | | (33 | ) | | | (13 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Organic Salaries and benefits | | $ | 575 | | | $ | 545 | | | | 5.5 | | | $ | 2,281 | | | $ | 2,168 | | | | 5.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
15
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 3. | Underlying and Organic total expenses, salaries and benefits and other operating expenses (continued) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | | | | | | | % | | | | | | | | | % | |
| | 2014 | | | 2013 | | | Change | | | 2014 | | | 2013 | | | Change | |
Reported Other operating expenses | | $ | 165 | | | $ | 166 | | | | (0.6 | ) | | $ | 659 | | | $ | 636 | | | | 3.6 | |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Expense reduction initiative | | | — | | | | — | | | | | | | | — | | | | (12 | ) | | | | |
Fees related to extinguishment of debt | | | — | | | | — | | | | | | | | — | | | | (1 | ) | | | | |
Foreign currency movements(1) | | | — | | | | (5 | ) | | | | | | | — | | | | 2 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying Other operating expenses | | $ | 165 | | | $ | 161 | | | | 2.5 | | | $ | 659 | | | $ | 625 | | | | 5.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net expenses from acquisitions and disposals | | | (10 | ) | | | (1 | ) | | | | | | | (12 | ) | | | (3 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Organic Other operating expenses | | $ | 155 | | | $ | 160 | | | | (3.1 | ) | | $ | 647 | | | $ | 622 | | | | 4.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
16
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 4. | Underlying and organic revenue, operating income, and operating margin |
The following table reconciles total revenues and operating income, respectively the most directly comparable GAAP measures, to underlying and organic revenue, and underlying and organic operating income, for the three and twelve months ended December 31, 2014 and 2013:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | | | | | | | % | | | | | | | | | % | |
| | 2014 | | | 2013 | | | Change | | | 2014 | | | 2013 | | | Change | |
Total revenues | | $ | 958 | | | $ | 919 | | | | 4.2 | | | $ | 3,802 | | | $ | 3,655 | | | | 4.0 | |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency movements | | | — | | | | (35 | ) | | | | | | | — | | | | (30 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying revenue | | $ | 958 | | | $ | 884 | | | | 8.4 | | | $ | 3,802 | | | $ | 3,625 | | | | 4.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net revenue from acquisitions and disposals | | | (43 | ) | | | (11 | ) | | | | | | | (56 | ) | | | (30 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Organic revenue | | $ | 915 | | | $ | 873 | | | | 4.8 | | | $ | 3,746 | | | $ | 3,595 | | | | 4.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Operating income | | $ | 139 | | | $ | 145 | | | | (4.1 | ) | | $ | 647 | | | $ | 663 | | | | (2.4 | ) |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Operational Improvement program | | | 16 | | | | — | | | | | | | | 36 | | | | — | | | | | |
Expense reduction initiative | | | — | | | | — | | | | | | | | — | | | | 46 | | | | | |
Fees related to extinguishment of debt | | | — | | | | — | | | | | | | | — | | | | 1 | | | | | |
Foreign currency movements(1) | | | — | | | | (11 | ) | | | | | | | — | | | | (36 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying operating income | | $ | 155 | | | $ | 134 | | | | 15.7 | | | $ | 683 | | | $ | 674 | | | | 1.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net operating income from acquisitions and disposals | | | (3 | ) | | | (4 | ) | | | | | | | (3 | ) | | | (11 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Organic operating income | | $ | 152 | | | $ | 130 | | | | 16.9 | | | $ | 680 | | | $ | 663 | | | | 2.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating margin, or operating income as a percentage of total revenues | | | 14.5 | % | | | 15.8 | % | | | | | | | 17.0 | % | | | 18.1 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying operating margin, or underlying operating income as a percentage of total underlying revenues | | | 16.2 | % | | | 15.2 | % | | | | | | | 18.0 | % | | | 18.6 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Organic operating margin, or organic operating income as a percentage of total organic revenues | | | 16.6 | % | | | 14.9 | % | | | | | | | 18.2 | % | | | 18.4 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
17
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 5. | Underlying and organic EBITDA |
The following table reconciles net income, the most directly comparable GAAP measure to EBITDA, underlying EBITDA and organic EBITDA, for the three and twelve months ended December 31, 2014 and 2013:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Twelve months ended
December 31, | |
| | | | | | | | | % | | | | | | | | | % | |
| | 2014 | | | 2013 | | | Change | | | 2014 | | | 2013 | | | Change | |
Net income attributable to Willis Group Holdings | | $ | 76 | | | $ | 68 | | | | 11.8 | | | $ | 362 | | | $ | 365 | | | | (0.8 | ) |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to non controlling interests | | | 7 | | | | 6 | | | | | | | | 11 | | | | 12 | | | | | |
Interest in losses (earnings) of associates, net of tax | | | 5 | | | | 11 | | | | | | | | (14 | ) | | | — | | | | | |
Income taxes | | | 35 | | | | 34 | | | | | | | | 159 | | | | 122 | | | | | |
Interest expense | | | 34 | | | | 33 | | | | | | | | 135 | | | | 126 | | | | | |
Other expense (income), net | | | (18 | ) | | | (7 | ) | | | | | | | (6 | ) | | | (22 | ) | | | | |
Loss on extinguishment of debt | | | — | | | | — | | | | | | | | — | | | | 60 | | | | | |
Depreciation | | | 22 | | | | 26 | | | | | | | | 92 | | | | 94 | | | | | |
Amortization | | | 16 | | | | 13 | | | | | | | | 54 | | | | 55 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
EBITDA | | $ | 177 | | | $ | 184 | | | | (3.8 | ) | | $ | 793 | | | $ | 812 | | | | (2.3 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Operational Improvement Program | | | 16 | | | | — | | | | | | | | 36 | | | | — | | | | | |
Expense reduction initiative | | | — | | | | — | | | | | | | | — | | | | 41 | | | | | |
Fees related to extinguishment of debt | | | — | | | | — | | | | | | | | — | | | | 1 | | | | | |
Foreign currency movements(1) | | | — | | | | (11 | ) | | | | | | | — | | | | (35 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying EBITDA | | $ | 193 | | | $ | 173 | | | | 11.6 | | | $ | 829 | | | $ | 819 | | | | 1.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net EBITDA from acquisitions and disposals | | | (8 | ) | | | (4 | ) | | | | | | | (11 | ) | | | (11 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Organic EBITDA | | $ | 185 | | | $ | 169 | | | | 9.5 | | | $ | 818 | | | $ | 808 | | | | 1.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
18
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 6. | Underlying net income and earnings per diluted share |
The following tables reconcile net income and net income per diluted share, the most directly comparable GAAP measures, to underlying net income and underlying net income per diluted share, for the three and twelve months ended December 31, 2014 and 2013:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Per diluted share
Three months ended
December 31, | |
| | | 2014 | | | 2013 | | | %
Change | | | 2014 | | | 2013 | | | %
Change | |
Net income attributable to Willis Group Holdings plc | | $ | 76 | | | $ | 68 | | | | 11.8 | | | $ | 0.42 | | | $ | 0.37 | | | | 13.5 | |
| | | | | | |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Operational Improvement Program, net of tax ($5, $nil) | | | 11 | | | | — | | | | | | | | 0.06 | | | | — | | | | | |
Deferred tax valuation allowance | | | — | | | | 9 | | | | | | | | — | | | | 0.05 | | | | | |
Net gain on disposal of operations, net of tax ($9, $1) | | | (4 | ) | | | (1 | ) | | | | | | | (0.02 | ) | | | — | | | | | |
Foreign currency movements(1) | | | — | | | | (5 | ) | | | | | | | — | | | | (0.03 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying net income | | $ | 83 | | | $ | 71 | | | | 16.9 | | | $ | 0.46 | | | $ | 0.39 | | | | 17.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Average diluted shares outstanding | | | 180 | | | | 182 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
19
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 6. | Underlying net income and earnings per diluted share (continued) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Twelve months ended
December 31, | | | Per diluted share
Twelve months ended
December 31, | |
| | | 2014 | | | 2013 | | | %
Change | | | 2014 | | | 2013 | | | %
Change | |
Net income attributable to Willis Group Holdings plc | | $ | 362 | | | $ | 365 | | | | (0.8 | ) | | $ | 2.00 | | | $ | 2.04 | | | | (2.0 | ) |
| | | | | | |
Excluding: | | | | | | | | | | | | | | | | | | | | | | | | |
Operational Improvement Program, net of tax ($9, $nil) | | | 27 | | | | — | | | | | | | | 0.15 | | | | — | | | | | |
Venezuela currency devaluation, net of tax ($1, $nil) | | | 13 | | | | — | | | | | | | | 0.07 | | | | — | | | | | |
Deferred tax valuation allowance | | | 21 | | | | 9 | | | | | | | | 0.12 | | | | 0.05 | | | | | |
Net gain on disposal of operations, net of tax ($10 ,$1) | | | (2 | ) | | | (1 | ) | | | | | | | (0.01 | ) | | | (0.01 | ) | | | | |
Fees related to the extinguishment of debt, net of tax ($nil, $nil) | | | — | | | | 1 | | | | | | | | — | | | | 0.01 | | | | | |
Loss on extinguishment of debt, net of tax ($nil, $nil) | | | — | | | | 60 | | | | | | | | — | | | | 0.34 | | | | | |
Expense reduction initiative, net of tax ($nil, $8) | | | — | | | | 38 | | | | | | | | — | | | | 0.21 | | | | | |
Foreign currency movements(1) | | | — | | | | (34 | ) | | | | | | | — | | | | (0.19 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underlying net income | | $ | 421 | | | $ | 438 | | | | (3.9 | ) | | $ | 2.33 | | | $ | 2.45 | | | | (4.9 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Average diluted shares outstanding | | | 181 | | | | 179 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods |
20
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 7. | Operational Improvement Program restructuring costs |
| | | | | | | | | | | | | | | | | | | | |
| | | Three months ended December 31, 2014 | |
| | | North
America | | | International | | | Global | | | Corporate | | | Total | |
| | | | | |
Termination benefits | | $ | — | | | $ | — | | | $ | 2 | | | $ | — | | | $ | 2 | |
Professional services & other | | | — | | | | 2 | | | | — | | | | 12 | | | | 14 | |
| | | | | | | | | | | | | | | | | | | | |
Total restructuring costs | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | 12 | | | $ | 16 | |
| | | | | | | | | | | | | | | | | | | | |
| |
| | | Twelve months ended December 31, 2014 | |
| | | North
America | | | International | | | Global | | | Corporate | | | Total | |
| | | | | |
Termination benefits | | $ | 3 | | | $ | 3 | | | $ | 10 | | | $ | — | | | $ | 16 | |
Professional services & other | | | — | | | | 2 | | | | 1 | | | | 17 | | | | 20 | |
| | | | | | | | | | | | | | | | | | | | |
Total restructuring costs | | $ | 3 | | | $ | 5 | | | $ | 11 | | | $ | 17 | | | $ | 36 | |
| | | | | | | | | | | | | | | | | | | | |
21
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 8. | Condensed consolidated income statements by quarter |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2013 | | | 2014 | |
| | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | FY | | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | FY | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commissions and fees | | $ | 1,046 | | | $ | 885 | | | $ | 791 | | | $ | 911 | | | $ | 3,633 | | | $ | 1,090 | | | $ | 930 | | | $ | 808 | | | $ | 939 | | | $ | 3,767 | |
Investment income | | | 4 | | | | 3 | | | | 4 | | | | 4 | | | | 15 | | | | 4 | | | | 4 | | | | 4 | | | | 4 | | | | 16 | |
Other income | | | 1 | | | | 2 | | | | — | | | | 4 | | | | 7 | | | | 3 | | | | 1 | | | | — | | | | 15 | | | | 19 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | | 1,051 | | | | 890 | | | | 795 | | | | 919 | | | | 3,655 | | | | 1,097 | | | | 935 | | | | 812 | | | | 958 | | | | 3,802 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Salaries and benefits | | | 568 | | | | 529 | | | | 541 | | | | 569 | | | | 2,207 | | | | 570 | | | | 575 | | | | 569 | | | | 600 | | | | 2,314 | |
Other operating expenses | | | 162 | | | | 159 | | | | 149 | | | | 166 | | | | 636 | | | | 165 | | | | 173 | | | | 156 | | | | 165 | | | | 659 | |
Depreciation expense | | | 26 | | | | 21 | | | | 21 | | | | 26 | | | | 94 | | | | 23 | | | | 24 | | | | 23 | | | | 22 | | | | 92 | |
Amortization of intangible assets | | | 14 | | | | 14 | | | | 14 | | | | 13 | | | | 55 | | | | 13 | | | | 12 | | | | 13 | | | | 16 | | | | 54 | |
Restructuring costs | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3 | | | | 17 | | | | 16 | | | | 36 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total expenses | | | 770 | | | | 723 | | | | 725 | | | | 774 | | | | 2,992 | | | | 771 | | | | 787 | | | | 778 | | | | 819 | | | | 3,155 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Operating income | | | 281 | | | | 167 | | | | 70 | | | | 145 | | | | 663 | | | | 326 | | | | 148 | | | | 34 | | | | 139 | | | | 647 | |
| | | | | | | | | | |
Loss on extinguishment of debt | | | — | | | | — | | | | 60 | | | | — | | | | 60 | | | | — | | | | — | | | | — | | | | — | | | | — | |
Other (income) expense, net | | | (6 | ) | | | (4 | ) | | | (5 | ) | | | (7 | ) | | | (22 | ) | | | — | | | | 3 | | | | 9 | | | | (18 | ) | | | (6 | ) |
Interest expense | | | 31 | | | | 32 | | | | 30 | | | | 33 | | | | 126 | | | | 32 | | | | 35 | | | | 34 | | | | 34 | | | | 135 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes and interest in earnings (losses) of associates | | | 256 | | | | 139 | | | | (15 | ) | | | 119 | | | | 499 | | | | 294 | | | | 110 | | | | (9 | ) | | | 123 | | | | 518 | |
| | | | | | | | | | |
Income taxes | | | 48 | | | | 29 | | | | 11 | | | | 34 | | | | 122 | | | | 63 | | | | 59 | | | | 2 | | | | 35 | | | | 159 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) before interest in earnings (losses) of associates | | | 208 | | | | 110 | | | | (26 | ) | | | 85 | | | | 377 | | | | 231 | | | | 51 | | | | (11 | ) | | | 88 | | | | 359 | |
Interest in earnings (losses) of associates, net of tax | | | 15 | | | | (3 | ) | | | (1 | ) | | | (11 | ) | | | — | | | | 19 | | | | (3 | ) | | | 3 | | | | (5 | ) | | | 14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | | 223 | | | | 107 | | | | (27 | ) | | | 74 | | | | 377 | | | | 250 | | | | 48 | | | | (8 | ) | | | 83 | | | | 373 | |
Net (loss) income attributable to noncontrolling interests | | | (4 | ) | | | (2 | ) | | | — | | | | (6 | ) | | | (12 | ) | | | (4 | ) | | | (1 | ) | | | 1 | | | | (7 | ) | | | (11 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to Willis Group Holdings | | $ | 219 | | | $ | 105 | | | $ | (27 | ) | | $ | 68 | | | $ | 365 | | | $ | 246 | | | $ | 47 | | | $ | (7 | ) | | $ | 76 | | | $ | 362 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Diluted earnings per share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to Willis Group Holdings shareholders | | $ | 1.24 | | | $ | 0.59 | | | $ | (0.15 | ) | | $ | 0.37 | | | $ | 2.04 | | | $ | 1.35 | | | $ | 0.26 | | | $ | (0.04 | ) | | $ | 0.42 | | | $ | 2.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average number of shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
- Diluted | | | 176 | | | | 178 | | | | 177 | | | | 182 | | | | 179 | | | | 182 | | | | 182 | | | | 178 | | | | 180 | | | | 181 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
22
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 9. | Segment information by quarter |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2013 | | | 2014 | |
| | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | FY | | | Q1 | | | Q2 | | | Q3 | | | Q4 | | | FY | |
Commissions and fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global | | $ | 427 | | | $ | 350 | | | $ | 289 | | | $ | 292 | | | $ | 1,358 | | | $ | 442 | | | $ | 368 | | | $ | 290 | | | $ | 286 | | | $ | 1,386 | |
North America | | | 355 | | | | 327 | | | | 322 | | | | 345 | | | | 1,349 | | | | 369 | | | | 340 | | | | 328 | | | | 328 | | | | 1,365 | |
International | | | 264 | | | | 208 | | | | 180 | | | | 274 | | | | 926 | | | | 279 | | | | 222 | | | | 190 | | | | 325 | | | | 1,016 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total commissions and fees | | $ | 1,046 | | | $ | 885 | | | $ | 791 | | | $ | 911 | | | $ | 3,633 | | | $ | 1,090 | | | $ | 930 | | | $ | 808 | | | $ | 939 | | | $ | 3,767 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Total revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global | | $ | 428 | | | $ | 352 | | | $ | 291 | | | $ | 293 | | | $ | 1,364 | | | $ | 446 | | | $ | 371 | | | $ | 293 | | | $ | 300 | | | $ | 1,410 | |
North America | | | 357 | | | | 329 | | | | 322 | | | | 350 | | | | 1,358 | | | | 370 | | | | 341 | | | | 328 | | | | 331 | | | | 1,370 | |
International | | | 266 | | | | 209 | | | | 182 | | | | 276 | | | | 933 | | | | 281 | | | | 223 | | | | 191 | | | | 327 | | | | 1,022 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total revenues | | $ | 1,051 | | | $ | 890 | | | $ | 795 | | | $ | 919 | | | $ | 3,655 | | | $ | 1,097 | | | $ | 935 | | | $ | 812 | | | $ | 958 | | | $ | 3,802 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Operating income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global | | $ | 187 | | | $ | 108 | | | $ | 47 | | | $ | 34 | | | $ | 376 | | | $ | 181 | | | $ | 108 | | | $ | 28 | | | $ | 35 | | | $ | 352 | |
North America | | | 82 | | | | 55 | | | | 46 | | | | 66 | | | | 249 | | | | 96 | | | | 64 | | | | 49 | | | | 64 | | | | 273 | |
International | | | 78 | | | | 26 | | | | (7 | ) | | | 81 | | | | 178 | | | | 84 | | | | 23 | | | | (7 | ) | | | 97 | | | | 197 | |
Corporate and other(a) | | | (66 | ) | | | (22 | ) | | | (16 | ) | | | (36 | ) | | | (140 | ) | | | (35 | ) | | | (47 | ) | | | (36 | ) | | | (57 | ) | | | (175 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total operating income | | $ | 281 | | | $ | 167 | | | $ | 70 | | | $ | 145 | | | $ | 663 | | | $ | 326 | | | $ | 148 | | | $ | 34 | | | $ | 139 | | | $ | 647 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Organic commissions and fees growth | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global | | | 3.4 | % | | | 8.5 | % | | | 4.5 | % | | | 0.3 | % | | | 4.3 | % | | | 2.0 | % | | | 3.4 | % | | | (0.4 | )% | | | (0.3 | )% | | | 1.4 | % |
North America | | | 4.4 | % | | | 5.5 | % | | | 3.8 | % | | | 5.6 | % | | | 4.8 | % | | | 4.7 | % | | | 4.8 | % | | | 3.4 | % | | | (2.1 | )% | | | 2.8 | % |
International | | | 4.5 | % | | | 4.2 | % | | | 11.4 | % | | | 4.8 | % | | | 5.8 | % | | | 7.2 | % | | | 5.6 | % | | | 6.3 | % | | | 15.9 | % | | | 9.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total organic commissions and fees growth | | | 4.1 | % | | | 6.3 | % | | | 5.7 | % | | | 3.7 | % | | | 4.9 | % | | | 4.2 | % | | | 4.5 | % | | | 2.5 | % | | | 3.6 | % | | | 3.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
Operating margin | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Global | | | 43.7 | % | | | 30.7 | % | | | 16.2 | % | | | 11.6 | % | | | 27.6 | % | | | 40.6 | % | | | 29.1 | % | | | 9.6 | % | | | 11.7 | % | | | 25.0 | % |
North America | | | 23.0 | % | | | 16.7 | % | | | 14.3 | % | | | 18.9 | % | | | 18.3 | % | | | 25.9 | % | | | 18.8 | % | | | 14.9 | % | | | 19.3 | % | | | 19.9 | % |
International | | | 29.3 | % | | | 12.4 | % | | | (3.8 | )% | | | 29.3 | % | | | 19.1 | % | | | 29.9 | % | | | 10.3 | % | | | (3.7 | )% | | | 29.7 | % | | | 19.3 | % |
Total operating margin | | | 26.7 | % | | | 18.8 | % | | | 8.8 | % | | | 15.8 | % | | | 18.1 | % | | | 29.7 | % | | | 15.8 | % | | | 4.2 | % | | | 14.5 | % | | | 17.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Corporate and other includes certain leadership, project and other costs relating to group functions and the non-servicing or financing elements of the defined benefit pension scheme cost (income), as well as items such as expense reduction initiative costs. |
23
