Exhibit 99.1
Willis Group Reports Fourth Quarter and Full Year 2005 Results;
Increases Quarterly Cash Dividend 9 Percent to $0.94 Annually
NEW YORK--(BUSINESS WIRE)--Feb. 8, 2006--Willis Group Holdings Limited
(NYSE: WSH), the global insurance broker, today reported results for the quarter
and year ended December 31, 2005.
Separately, the Board of Directors today approved a 9 percent increase in
the regular quarterly cash dividend on the Company's common stock to $0.235 per
share, an annual rate of $0.94 per share. The dividend is payable on April 14,
2006 to shareholders of record on March 31, 2006.
Commenting on today's results, Joe Plumeri, Chairman and Chief Executive
Officer said, "Our results in the fourth quarter and throughout 2005 were the
direct result of hard work in a year filled with challenges and opportunities.
Our 8 percent organic growth in commissions and fees reflects the strength of
our sales culture. Our essential investments during the year helped us attract
and retain the industry's best talent and enhance our value proposition for our
clients."
Fourth Quarter 2005 Financial Results
Total reported revenues for the quarter ended December 31, 2005 decreased 4
percent to $562 million, from $588 million for the same period last year. The
effect of foreign currency translation decreased reported revenues 3 percent and
net disposal of operations reduced reported revenues by 3 percent.
Organic growth in commissions and fees excluding volume and profit-based
contingent commissions and other market remuneration was 8 percent in the fourth
quarter, comprised of approximately 9 percent in net new business and a negative
1 percent impact from declining insurance premium rates and other market
factors.
Net income for the quarter ended December 31, 2005 was $60 million, or
$0.38 per diluted share, compared with $108 million, or $0.65 per diluted share,
a year ago.
Reported (and adjusted) operating margin was 19.0 percent for the quarter
ended December 31, 2005, compared with a 28.9 percent reported and 27.9 percent
adjusted operating margin for the same period last year. Approximately 5 percent
of the decline in adjusted operating margin was due to the elimination of
contingent commissions and the decline in other market remuneration. The
remainder of the decline was due to higher compensation costs, the effect of
foreign currency translation and Stewart Smith, which was sold in April 2005.
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2005 Financial Results
Total reported revenues for the year ended December 31, 2005 were $2,267
million, compared to $2,275 million for the corresponding period in 2004.
Foreign currency translation had no net impact on reported revenues and
acquisitions net of disposal of operations added 1 percent.
Organic growth in commissions and fees excluding volume and profit-based
contingent commissions and other market remuneration was 5 percent for the
twelve months, comprised of approximately 6 percent in net new business and a
negative 1 percent impact from declining insurance premium rates and other
market factors.
Reported net income for the year ended December 31, 2005 after net gain on
disposal of operations and first quarter charges for regulatory settlements and
related expenses, severance costs and other provisions was $300 million, or
$1.83 per diluted share, compared to $427 million, or $2.54 per diluted share, a
year ago.
Adjusted operating margin, excluding regulatory settlements and related
expenses, severance costs and other provisions and net gain on disposal of
operations, was 22.5 percent for the year ended December 31, 2005 compared with
28.8 percent for the same period last year. Approximately 4 percent of the
decline in adjusted operating margin was due to the elimination of contingent
commissions and the decline in other market remuneration. The remainder of the
decline was due to higher compensation costs, the effect of foreign currency
translation and Stewart Smith, which was sold in April 2005.
Outlook
The Company anticipates growth in organic commissions and fees to continue
in 2006. Salaries and benefits expense as a percentage of total revenues is
expected to remain at about 2005 levels. For the full year 2005, salaries and
benefits expense (excluding the first quarter 2005 severance charge) was 58.6
percent of total revenues. The outlook assumes that recruiting opportunities in
2006 will be similar to those in 2005 and that the competition for talent will
not abate. For the full year 2006 the Company expects to generate modest
operating margin expansion compared to the 22.5 percent adjusted operating
margin reported for 2005.
In conclusion Mr. Plumeri added, "Looking ahead, our goal is to achieve
sustainable long-term growth for Willis. We welcome 2006 as a year for us to
move forward. We are making the right investments in our Company, enhancing our
client advocacy program and increasing productivity and efficiency. We will
continue to execute on our plan and remain focused on being a leader in the
insurance brokerage industry."
Other
At December 31, 2005, total long-term debt was $600 million and total
stockholders' equity was approximately $1.3 billion. The capitalization ratio
(total long-term debt to total long-term debt and stockholders' equity) was 31
percent at December 31, 2005.
During the fourth quarter, the Company repurchased 1.5 million shares of
common stock for $54 million. Through the twelve months of 2005, the Company
repurchased 10.3 million shares for $360 million under the existing $500 million
buyback authorization.
During the year ended December 31, 2005 the Company completed 8
acquisitions with annual revenues of approximately $21 million. Cash and cash
equivalents totaled $193 million, including approximately $94 million of
immediately available cash at December 31, 2005.
Excluding the effects on taxation of amortization of intangibles, disposals
of operations and performance-based stock options, the underlying tax rate in
2005 was 31.5 percent compared to the underlying tax rate of 33 percent in 2004.
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Conference Call and Web Cast
A conference call to discuss fourth quarter 2005 results will be held
February 9, 2006 at 8:00 a.m. Eastern Standard Time. To participate in the live
teleconference, please dial (888) 829-8668 (U.S.) or (210) 234-0001
(International) with a pass code of "Willis." The live audio web cast (which
will be listen-only) may be accessed at www.willis.com. This call will be
available by replay starting at approximately 10:00 a.m., Eastern Daylight Time,
and ending February 23, 2006. To access the audio replay, please dial (888)
568-0121 (US), or (203) 369-3458 (International), or by accessing the web site.
Willis Group Holdings Limited is a leading global insurance broker,
developing and delivering professional insurance, reinsurance, risk management,
financial and human resource consulting and actuarial services to corporations,
public entities and institutions around the world. With over 300 offices in some
80 countries, its global team of approximately 15,800 associates serves clients
in some 180 countries. Additional information on Willis may be found on its web
site www.willis.com.
This press release may contain certain statements relating to future
results, which are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or those
anticipated, depending on a variety of factors such as general economic
conditions in different countries around the world, fluctuations in global
equity and fixed income markets, changes in premium rates, the competitive
environment and the actual cost of resolution of contingent liabilities. Further
information concerning the Company and its business, including factors that
potentially could materially affect the Company's financial results are
contained in the Company's filings with the Securities and Exchange Commission.
This press release includes supplemental financial information which may
contain references to non-GAAP financial measures as defined in Regulation G of
SEC rules. Consistent with Regulation G, a reconciliation of this supplemental
financial information to our generally accepted accounting principles (GAAP)
information follows. We present such non-GAAP supplemental financial information
as we believe such information is of interest to the investment community
because it provides additional meaningful methods of evaluating certain aspects
of the Company's operating performance from period to period on a basis that may
not be otherwise apparent on a GAAP basis. This supplemental financial
information should be viewed in addition to, not in lieu of, the Company's
consolidated statements of operations for the quarter and year ended December
31, 2005.
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WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months ended Year ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Commissions and fees $ 544 $ 569 $ 2,194 $ 2,205
Interest income 18 19 73 70
-------- -------- -------- --------
Total Revenues 562 588 2,267 2,275
-------- -------- -------- --------
Expenses:
Salaries and benefits
(after charging non-cash
compensation $nil, $1, $nil
and $11) 348 311 1,356 1,182
Other operating expenses 93 101 405 391
Regulatory settlements - - 51 -
Depreciation expense and
amortization of intangible
assets 14 12 54 47
Net gain on disposal of
operations - (6) (78) (11)
-------- -------- -------- --------
Total Expenses 455 418 1,788 1,609
-------- -------- -------- --------
Operating Income 107 170 479 666
Interest expense, net 9 7 30 22
Premium on redemption of
subordinated debt - - - 17
-------- -------- -------- --------
Income before Income Taxes,
Equity in Net (Loss) Income
of Associates and Minority
Interest 98 163 449 627
Income taxes 31 53 152 208
-------- -------- -------- --------
Income before Equity in Net
(Loss) Income of Associates
and Minority Interest 67 110 297 419
Equity in net (loss) income of
associates, net of tax (3) - 14 15
Minority interest, net of tax (4) (2) (11) (7)
-------- -------- -------- --------
Net Income $ 60 $ 108 $ 300 $ 427
======== ======== ======== ========
Net Income per Share
- Basic $ 0.38 $ 0.69 $ 1.86 $ 2.72
- Diluted $ 0.38 $ 0.65 $ 1.83 $ 2.54
======== ======== ======== ========
Average Number of Shares
Outstanding
- Basic 157 157 161 157
- Diluted 160 166 164 168
======== ======== ======== ========
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WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
1. Definitions of Non-GAAP Financial Measures
We believe that investors' understanding of the Company's performance is
enhanced by our disclosure of the following non-GAAP financial measures.
Our method of calculating these measures may differ from those used by
other companies and therefore comparability may be limited.
Organic revenue growth
Organic revenue growth excludes the impact of foreign currency translation
and acquisitions and disposals from reported revenues. We use organic
revenue growth as a measure of business growth generated by operations that
were part of the Group at the end of the period.
Adjusted operating income and adjusted net income
Our results for the year ended December 31, 2005 were significantly
impacted by net gains on disposal of operations, and charges for regulatory
settlements and related expenses, our first quarter headcount reduction
program, other provisions and a non-recurring premium on redemption of
subordinated debt in 2004. We believe that excluding these items from
operating income and net income as applicable, along with the GAAP
measures, provides a more complete and consistent comparative analysis of
our results of operations. These items did not have a material effect on
the results for the three months ended December 31, 2005.
9
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
2. Revenue analysis
Organic revenue growth
Organic revenue growth is defined as revenue growth excluding the impact of
foreign currency translation and acquisitions and disposals. The percentage
change in reported revenues is the most directly comparable GAAP measure,
and the following tables reconcile this change to organic revenue growth by
business unit for the three months ended December 31, 2005:
Three months ended
December 31, Change attributable to
---------------------- ---------------------------------
Foreign Acquisitions Organic
% currency and revenue
2005 2004 Change translation disposals growth
----- ----- -------- ----------- ------------ --------
Global $ 226 $ 265 (15)% (3)% (6)% (6)%
North America 198 184 8% 0% 1% 7%
International 120 120 0% (7)% 1% 6%
----- ----- -------- ----------- ------------ --------
Commissions
and fees
(see below) $ 544 $ 569 (4)% (3)% (2)% 1%
Interest
Income 18 19 (5)% (9)% (3)% 7%
----- ----- -------- ----------- ------------ --------
Total
revenues $ 562 $ 588 (4)% (3)% (3)% 2%
===== ===== ======== =========== ============ ========
Commissions and fees
Organic growth in commissions and fees for the three months ended December
31, 2005 was attributable to:
Three months ended December 31,
------------------------------------------------------
Volume and Commissions
profit-based Other market and fees
Commissions contingent remuneration organic
and fees commissions (a) growth
----------- -------------- -------------- ------------
Global 9% (9)% (6)% (6)%
North America 6% 0% 1% 7%
International 9% (3)% 0% 6%
----------- -------------- -------------- ------------
Total Group 8% (5)% (2)% 1%
=========== ============== ============== ============
a) Other market remuneration includes fees received for product and market
research we carry out on behalf of insurers and income related to
administration and other services we provide to the market.
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WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
2. Revenue analysis (continued)
Organic revenue growth
The following table reconciles the change to organic revenue growth by
business unit for the year ended December 31, 2005:
Year ended December 31,
--------------------------
%
2005 2004 Change
------- ------- --------
Global $ 1,070 $ 1,116 (4)%
North America 677 660 3%
International 447 429 4%
------- ------- --------
Commissions and fees (see below) $ 2,194 $ 2,205 0%
Interest Income 73 70 4%
------- ------- --------
Total revenues $ 2,267 $ 2,275 0%
======= ======= ========
Change attributable to
---------------------------------
Foreign Acquisitions Organic
currency and revenue
translation disposals growth
----------- ------------ --------
Global 0% 0% (4)%
North America 0% 2% 1%
International (1)% 1% 4%
----------- ------------ --------
Commissions and fees (see below) 0% 1% (1)%
Interest Income (1)% 0% 5%
----------- ------------ --------
Total revenues 0% 1% (1)%
=========== ============ ========
Commissions and fees
Organic growth in commissions and fees for the year ended December 31, 2005
was attributable to:
Year ended December 31,
--------------------------------------------------
Volume and
profit- Commissions
based Other market and fees
Commissions contingent remuneration organic
and fees commissions (a) growth
----------- ------------ ------------- -----------
Global 5% (3)% (6)% (4)%
North America 5% (4)% 0% 1%
International 5% (1)% 0% 4%
----------- ------------ ------------- -----------
Total Group 5% (3)% (3)% (1)%
=========== ============ ============= ===========
a) Other market remuneration includes fees received for product and market
research we carry out on behalf of insurers and income related to
administration and other services we provide to the market.
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WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
2. Revenue analysis (continued)
Market remuneration
Volume and profit-based contingent commissions and other market
remuneration by quarter are set out in the following table:
Volume and profit-
based contingent Other market
commissions remuneration
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
First quarter $3 $21 $3 $22
Second quarter 8 15 5 20
Third quarter 1 10 3 19
Fourth quarter 1 25 5 16
----------- ----------- ----------- -----------
$13 $71 $16 $77
=========== =========== =========== ===========
3. General and administrative expenses
An analysis of general and administrative expenses between salaries and
benefits and other operating expenses by quarter is set out in the
following table:
General and
Salaries and Other operating administrative
benefits (a) expenses expenses
--------------- --------------- ---------------
2005 2004 2005 2004 2005 2004
------- ------- ------- ------- ------- -------
First quarter $386 $320 $125 $99 $511 $419
Second quarter 309 275 98 98 407 373
Third quarter 313 276 89 93 402 369
Fourth quarter 348 311 93 101 441 412
------- ------- ------- ------- ------- -------
$1,356 $1,182 $405 $391 $1,761 $1,573
======= ======= ======= ======= ======= =======
a) Salaries and benefits include salaries, incentive payments, pensions,
non-cash compensation, severance and other employee benefits.
4. Sale of Stewart Smith
The Company completed the sale of Stewart Smith, its wholesale division, on
April 14, 2005. The following table sets out the impact of Stewart Smith on
results in the five quarters prior to sale:
2004 2005
---------------------------------- -----
Q1 Q2 Q3 Q4 FY Q1
Revenues $15 $19 $18 $25 $77 $10
General and administrative
expenses (10) (10) (11) (13) (44) (11)
---------------------------------- -----
Operating income (loss) 5 9 7 12 33 (1)
Income taxes (2) (4) (2) (5) (13) -
---------------------------------- -----
Net income (loss) $3 $5 $5 $7 $20 $(1)
================================== =====
Contribution to net income
per diluted share $0.02 $0.03 $0.03 $0.04 $0.12 $-
====== ====== ====== ====== ====== =====
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WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
5. Adjusted operating income
Adjusted operating income is defined as operating income excluding net gain
on disposal of operations and charges for regulatory settlements and
related expenses, severance costs relating to our first quarter 2005
headcount reduction program and other provisions. Operating income is the
most directly comparable GAAP measure, and the following tables reconcile
adjusted operating income to operating income for the three months and year
ended December 31, 2005 and 2004:
Three months ended December 31,
-------------------------------
2005 2004 (a) % Change
---------- ---------- ---------
Operating income, GAAP basis $107 $170 (37)%
Excluding:
Net gain on disposal of operations - (6)
---------- ----------
Adjusted operating income $107 $164 (35)%
========== ==========
Operating margin, GAAP basis, or
Operating income as a percentage of
Total Revenues 19.0% 28.9%
========== ==========
Adjusted operating margin, or Adjusted
operating income as a percentage of
total revenues 19.0% 27.9%
========== ==========
Year ended December 31,
-------------------------------
2005 2004 (a) % Change
---------- ---------- ---------
Operating income, GAAP basis $479 $666 (28)%
Excluding:
Regulatory settlements (b) 51 -
Costs related to regulatory
settlements (b) 9 -
Severance costs (c) 28 -
Other provision (d) 20 -
Net gain on disposal of operations (78) (11)
---------- ----------
Adjusted operating income $509 $655 (22)%
========== ==========
Operating margin, GAAP basis, or
Operating income as a percentage of
total revenues 21.1% 29.3%
========== ==========
Adjusted operating margin, or Adjusted
operating income as a percentage of
total revenues 22.5% 28.8%
========== ==========
a) In 2004, adjusted operating income was reported after excluding charges for
non-cash compensation. With effect from 2005, these charges are no longer
excluded from adjusted operating income and 2004 comparatives have been
restated accordingly.
b) Comprises $51 million to establish the reimbursement funds agreed with the
New York and Minnesota Attorneys General and New York Department of Insurance
in April 2005 and $9 million of related legal and administrative expenses.
c) Severance costs relate to the headcount reduction program announced in first
quarter 2005 which eliminated approximately 500 positions at a cost of $28
million. Severance costs also arise in the normal course of business and
these charges amounted to $2 million in the year ended December 31, 2005 ($10
million - 2004).
d) Based on the quarterly review of legal proceedings at March 31, 2005, the
Company increased its provision for claims by an additional $20 million.
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WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
6. Adjusted net income
Adjusted net income is defined as net income excluding net gain on disposal
of operations and charges for regulatory settlements and related expenses,
severance costs relating to our first quarter 2005 headcount reduction
program, other provisions and a non-recurring premium on redemption of
subordinated debt in 2004. Net income is the most directly comparable GAAP
measure, and the following tables reconcile adjusted net income to net
income for the three months and year ended December 31, 2005 and 2004:
Per diluted share
Three months ended Three months ended
December 31, December 31,
------------------------- -------------------------
% %
2005 2004 (a) Change 2005 2004 (a) Change
----- -------- -------- ----- -------- --------
Net income, GAAP
basis $ 60 $ 108 (44)% $0.38 $ 0.65 (42)%
Excluding:
Net gain on
disposal of
operations, net
of tax ($nil,
$(1)) - (5) - (0.03)
Adjusted net ----- -------- ----- --------
income $ 60 $ 103 (42)% $0.38 $ 0.62 (39)%
===== ======== ===== ========
Diluted shares
outstanding, GAAP
basis 160 166
===== ========
Per diluted share
Year ended Year ended
December 31, December 31,
------------------------- --------------------------
% %
2005 2004 (a) Change 2005 2004 (a) Change
----- -------- -------- ------ -------- --------
Net income, GAAP
basis $ 300 $ 427 (30)% $ 1.83 $ 2.54 (28)%
Excluding:
Regulatory
settlements,
net of tax
($20) 31 - 0.19 -
Costs related to
regulatory
settlements,
net of tax ($4) 5 - 0.03 -
Severance costs,
net of tax ($9) 19 - 0.12 -
Other provision,
net of tax ($6) 14 - 0.08 -
Net gain on
disposal of
operations, net
of tax ($(37),
$(3)) (41) (8) (0.25) (0.05)
Non-recurring
premium on
redemption of
subordinated
debt, net of
tax ($7) - 10 - 0.06
Adjusted net ----- -------- ------ --------
income $ 328 $ 429 (24)% $ 2.00 $ 2.55 (22)%
===== ======== ====== ========
Diluted shares
outstanding,
GAAP basis 164 168
===== ========
a) In 2004, adjusted net income was reported after excluding charges for
non-cash compensation. With effect from 2005, these charges
are no longer excluded from adjusted net income and 2004 comparatives have
been restated accordingly.
CONTACT: Willis Group Holdings Limited
Investors:
Kerry K. Calaiaro, 212-837-0880
kerry.calaiaro@willis.com
or
Media:
Dan Prince, 212-837-0806
daniel.prince@willis.com
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