- Underlying commissions and fees grew 5.8%; underlying
expenses grew 5.6%; positive spread of 20 basis points
achieved
- Underlying net income of $230 million, or $1.26 per
diluted share up 4.1%, from prior year period (rebased for current
period exchange rates)
- Organic commissions and fees grew 3.4%; organic
expenses grew 1.7%; positive spread of 170 basis points
achieved
- Reported commissions and fees declined 0.9%, reported
expenses grew 3.0%
- Reported net income of $210 million, or $1.15 per
diluted share, negatively impacted by foreign currency movements
($0.15 per share) and restructuring charges ($0.12 per
share)
- Continued execution of M&A strategy – expected
closing of Miller by mid-year and proposal to accelerate Gras
Savoye closing
Willis Group Holdings plc (NYSE:WSH), the global risk advisory,
re/insurance broking, and human capital and benefits firm, today
reported results for the three months ended March 31, 2015.
Dominic Casserley, Willis Group Chief Executive Officer,
commented, "The first quarter was a solid start to the year that
demonstrates continued progress against our strategic goals. Most
importantly, in market conditions that are best described as
uneven, we achieved good underlying commissions and fees growth
driven by organic growth across all of our segments and solid
contributions from our 2014 acquisitions. In addition, we have
maintained our focus on our cost management initiatives as well as
achieving savings from our Operational Improvement Program. As a
result, we managed our spread between organic commissions and fees
growth and organic expense growth to positive 170 basis points.
Overall, we've started the year with very good momentum towards our
2015 goal to achieve a positive 130 basis point spread
organically."
Casserley continued, "While we expect market conditions in
certain parts of our business to remain challenging throughout
2015, we believe the combination of Willis's market and geographic
diversity, our client propositions, and the continued execution of
our cost initiatives, should allow us to achieve our organic growth
goals for the year. Additionally, momentum from our focused
acquisition strategy will be more evident in future quarters, with
the expected closing of the Miller transaction in mid-2015 and the
recent announcement of our firm offer to acquire the share of Gras
Savoye that Willis doesn't currently own at the end of the year,
both subject to regulatory approval. Overall, we are well
positioned to build shareholder value as the year goes on."
Select Willis Group
financial measures |
|
|
|
Three
months ended March 31, |
Reported measures |
2015 |
2014 |
Reported commissions and fees
growth |
(0.9)% |
4.2% |
Reported total expenses growth |
3.0% |
0.1% |
Reported operating margin |
26.9% |
29.7% |
Reported diluted EPS |
$1.15 |
$1.35 |
Underlying
measures(1) |
|
|
Underlying commissions and fees
growth |
5.8% |
3.9% |
Underlying total expenses growth |
5.6% |
5.5% |
Underlying operating margin |
29.8% |
29.7% |
Underlying diluted EPS |
$1.26 |
$1.21 |
Organic
measures(1) |
|
|
Organic commissions and fees
growth |
3.4% |
4.2% |
Organic total expenses growth |
1.7% |
5.4% |
Organic operating margin |
30.7% |
29.5% |
|
|
|
(1) Underlying measures
exclude the impact of certain items and period-over-period foreign
exchange movements. Organic measures exclude the impact of certain
items, period-over-period foreign exchange movements, and the
impact of acquisitions and disposals. We believe these measures
provide a more complete and consistent comparative analysis of our
results of operations. Please refer to the supplemental
financial information attached to this press release for detailed
definitions of our non-GAAP financial measures and accompanying
reconciliations to GAAP measures. The supplemental financial
information also includes the GAAP figures and accompanying
reconciliations for commissions and fees growth by
segment. |
First Quarter 2015 Financial Results
Willis Group reported net income of $210 million, or $1.15 per
diluted share, in the first quarter of 2015 compared to net income
of $246 million, or $1.35 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 $0.12 per diluted share, gain on disposal of
operations of $0.01, and unfavorable foreign currency movements
totaling $0.15 per diluted share.
Underlying diluted earnings per share were $1.26 in the first
quarter of 2015, up 4.1% compared to $1.21 in the first quarter
2014 (underlying diluted EPS of $1.36 that was originally announced
for the first quarter of 2014 was rebased to current period
exchange rates to remove the impact of foreign currency movements
when comparing periods).
Revenues
First quarter 2015 total reported commissions and fees of $1,081
million were down 0.9% from $1,090 million in the first quarter of
2014, impacted by $69 million from unfavorable foreign currency
movements. Total commissions and fees were also impacted by a $25
million period-over-period net increase from acquisitions and
disposals completed in the past twelve months.
Underlying commissions and fees, which exclude the impact of
foreign currency movements, grew 5.8%.
Organic commissions and fees, which exclude both the impact of
foreign currency movements and the net impact of acquisitions and
disposals, grew 3.4%, led by solid growth in Willis North America
and Willis International.
Expenses
Total Expenses
On a reported basis, total expenses increased $23 million, or
3.0%, to $794 million in the first quarter of 2015, from $771
million in the first quarter of 2014. Total reported expense growth
included $31 million of restructuring costs related to the
Operational Improvement Program, and a $29 million
period-over-period net increase from acquisitions and disposals.
Expenses were favorably impacted by $48 million from foreign
currency movements.
Underlying total expenses, which exclude restructuring costs and
the impact of foreign currency movements, grew 5.6%. Included in
this growth is the $29 million period-over-period net increase in
total expenses from acquisitions and disposals which accounted for
390 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 1.7%, driven primarily by
increased salaries and benefits and costs associated with the
proposed acquisition of Gras Savoye.
Salaries and Benefits
Reported salaries and benefits were $567 million in the first
quarter of 2015, a decrease of 0.5% from $570 million in the prior
year quarter. Salaries and benefits in the period include a $17
million period-over-period net increase from acquisitions and
disposals but were favorably impacted by $37 million from foreign
currency movements.
Underlying salaries and benefits grew 6.4%. Included in this
growth is the $17 million period-over-period net increase from
acquisitions and disposals which accounted for 310 basis points of
the growth.
Organic salaries and benefits grew 3.3%. Salaries and benefits
were impacted in the quarter by mandatory pay rises in Latin
America and increased incentives. Headcount excluding the impact of
acquisitions and disposals increased 0.9% compared to the first
quarter of 2014.
Other operating expenses
Reported other operating expenses were $160 million in the first
quarter of 2015, a decrease of 3.2% from $165 million in the prior
year quarter. Other operating expenses in the period include an $8
million net period-over-period increase from acquisitions and
disposals but were favorably impacted by $10 million from foreign
currency movements.
Underlying other operating expenses grew 2.9%. Included in this
growth is the $8 million period-over-period net increase from
acquisitions and disposals.
Organic other operating expenses decreased 2.4% primarily as a
result of progress on cost management initiatives, partially offset
by costs associated with the due diligence process and other costs
associated with the proposed acquisition of Gras Savoye.
Operating margin
Willis's reported operating margin was 26.9% in the first
quarter of 2015, a decrease of 280 basis points compared to the
first quarter of 2014 as a result of increased restructuring
charges related to the Operational Improvement Program.
Underlying operating margin, which excludes the restructuring
costs and the net impact from foreign currency movements, was 29.8%
in the first quarter of 2015, an increase of 10 basis points
compared to the first quarter 2014.
Organic operating margin, which further excludes the net impact
of revenues and expenses from acquisitions and disposals, was 30.7%
in the first quarter 2015, an increase of 120 basis points from
29.5% in the prior year quarter. The increase reflects good organic
revenue growth combined with solid execution of the Company's cost
management initiatives.
Taxes
The reported tax rate for the first quarter of 2015 was
approximately 22.0%. After excluding the impact of certain
items as described in note 6, the tax rate for the quarter was
approximately 22.4%.
Segment Revenue Results
Willis GB
Organic commissions and fees in Willis GB, which comprises
Willis's Great Britain-based Specialty and Retail businesses, grew
1.1% in the first quarter of 2015 compared with the first quarter
of 2014. The segment's underlying commissions and fees also grew
1.1%.
The quarter's performance reflects varied performance across the
segment's businesses. The segment had strong growth in Financial
Lines and mid-single digit growth in Property and Casualty. However
that growth was partially offset by a decline in Retail Networks
spurred by weak Insolvency and Commercial Network business.
Willis Capital, Wholesale and Reinsurance
Organic commissions and fees in Willis CW&R, which comprises
Willis Re, Willis Capital Markets & Advisory, Willis's
wholesale operations and Willis Portfolio and Underwriting
Services, grew 1.3% in the first quarter of 2015 compared with the
first quarter of 2014. The segment's underlying commissions and
fees grew 1.7%, positively impacted by the acquisition of SurePoint
Re in 2014.
During the quarter, Willis Re grew mid-single digits driven by
double digit growth from strong new business and favorable timing
in Willis Re North America. Willis Re International and Specialties
both declined during the quarter impacted by lower rates and
declining demand. Willis Capital Markets & Advisory and Willis
Portfolio and Underwriting Services were approximately flat to
prior year.
Willis North America
Organic commissions and fees in Willis North America grew 4.7%
in the first quarter of 2015 compared with the first quarter of
2014. The segment's underlying commissions and fees grew 0.7%,
negatively impacted by the sales of certain non-core offices over
the past 12 months.
The increase in organic commissions and fees growth was driven
by strong growth from the M&A, FINEX and Real
Estate/Hospitality practices and mid-single digit growth in the
Human Capital practice. The Construction practice was up low single
digits in the quarter due to project-driven revenue despite a
decline in Surety revenue compared to the prior year period.
Willis International
Organic commissions and fees in Willis International grew 5.3%
in the first quarter 2015 compared with the same period in 2014.
The segment's underlying commissions and fees grew 21.1%,
positively impacted by the acquisitions of Max Matthiessen, Charles
Monat and the IFG pension and financial advisory businesses over
the past 12 months.
The performance in Willis International was primarily driven by
strong growth in Latin America where Brazil and Colombia showed
double digit growth; high single digit growth in Asia driven by
good growth in Global Wealth Solutions and Marine specialty
business; and mid-single digit growth in Eastern Europe. Western
Europe grew low single digits with strong results in Spain,
Portugal and Norway.
Operational Improvement Program
Willis generated savings from the Operational Improvement
Program of approximately $10 million in the first quarter of
2015.
Restructuring costs from the program were $31 million in the
first quarter of 2015. Details of the costs by segment and type of
expense are included in note 7 of the supplemental financial
information attached to the release.
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.
Balance Sheet Highlights
As of March 31, 2015, cash and cash equivalents were $503
million, total debt was $2,305 million and total equity was $2,321
million. 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.
Strategic M&A
Willis's measured acquisition strategy, which is focused on high
quality, specialized firms with leading market positions, is
contributing to the Company's overall growth rate. Revenues from
acquisitions closed over the past twelve months, excluding any
impact from divestitures, have increased group revenues by $39
million relative to the prior year quarter. Additionally, those
businesses improved group EBITDA in the current quarter by
approximately $9 million compared to the prior year period.
In line with this strategy, as previously announced, Willis has
made a firm offer to pay approximately €510 million to acquire the
remaining 70% of Gras Savoye that it does not currently own.
Additionally, Willis would pay an estimated €40 million to repay
third party debt. For the year ended December 31, 2014, under U.S.
GAAP, Gras Savoye's net revenue was approximately €370 million, and
EBITDA was approximately €65 million. The transaction is expected
to close on or around December 31, 2015, subject to customary
regulatory consents and approvals, and acceptance of the firm offer
by Gras Savoye's shareholders, which can only occur after
consultation with Gras Savoye's workers' councils.
Uniting both companies will enhance Willis as a truly
multinational risk advisory, re/insurance broking and human capital
and benefits firm with a presence in 131 countries, of which 84 are
wholly-owned operations. Gras Savoye will bring a significant
footprint in France; greater expertise and reach to serve
multinationals based in France and worldwide; and stronger access
to high-growth economies in Central and Eastern Europe, the Middle
East, and Africa.
In addition to this firm offer, Willis has issued notice
preserving its right under an existing shareholder agreement to
acquire the remaining shares in Gras Savoye in June 2016, should
the offer not be accepted. In that case, the purchase price would
be determined by a formula under that agreement and the expected
closing of the transaction would be mid-2016.
With the expected closing of the Miller transaction by the
middle of this year and the proposed close of Gras Savoye for the
start of 2016, both subject to regulatory approval, the Company
expects that this strategy will continue to provide measurable
growth for the foreseeable future.
Dividends
At its April 2015 Board meeting, the Board of Directors approved
a regular quarterly cash dividend of $0.31 per share (an annual
rate of $1.24 per share). The dividend is payable on July 15, 2015
to shareholders of record at June 30, 2015.
Share Buyback
In February, Willis announced that it 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. Since the announcement and through the end of the first
quarter of 2015, the Company bought back approximately 300,000
shares for approximately $15 million.
Conference Call, Webcast and Slide
Presentation
A conference call to discuss the first quarter 2015 results will
be held on Wednesday, April 29, 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 at
www.willis.com.
A replay of the call will be available through May 29, 2015 at
5:00 PM Eastern Time, by calling (866) 430-4730 (U.S.) or + 1 (203)
369-0930 (international). A replay of the webcast will be available
through the website.
About Willis
Willis Group Holdings plc is a leading global risk advisory,
re/insurance broking, and human capital and benefits firm. 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 and planned acquisitions, 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 cost-savings or operational improvement initiative, including
our ability to achieve expected savings and other benefits 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 as well as the impact of the program on business
processes and competitive dynamics;
- the rejection of our Gras Savoye offer or failure to obtain
regulatory approval;
- our ability to consummate acquisitions, including Miller
Insurance Services and Gras Savoye, or achieve the expected
benefits;
- our ability to effectively integrate any acquisition into our
business;
- volatility or declines in insurance markets and premiums on
which our commissions are based, but which we do not control;
- our ability to compete in our industry;
- 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 including at a time when the Company is pursuing various
strategic initiatives;
- our ability to develop new products and services;
- the practical challenges and costs of complying with a wide
variety of foreign laws and regulations and any related changes,
given the global scope of our operations and those of any acquired
business and the associated risks of non-compliance and regulatory
enforcement action;
- our ability to develop and implement technology solutions and
invest in innovative product offerings in an efficient and
effective manner;
- fluctuations in our earnings as a result of potential changes
to our valuation allowance(s) on our deferred tax assets;
- changes in the tax or accounting treatment of our operations
and fluctuations in our tax rate;
- 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 inability to exercise full management control over our
associates;
- our ability to continue to manage our significant
indebtedness;
- 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;
- any material fluctuations in exchange and interest rates that
could adversely affect expenses and revenue;
- a significant decline in the value of investments that fund our
pension plans or changes in our pension plan liabilities or funding
obligations;
- 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;
- our ability to receive dividends or other distributions in
needed amounts from our subsidiaries;
- our involvement in and the results of any regulatory
investigations, legal proceedings and other contingencies;
- our exposure to potential liabilities arising from errors and
omissions and other potential claims against us;
- underwriting, advisory or reputational risks associated with
our business;
- 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, 2014 and our subsequent filings with the
Securities and Exchange Commission. Copies are available online at
http://www.sec.gov or www.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.
WILLIS GROUP HOLDINGS
plc |
CONDENSED CONSOLIDATED
INCOME STATEMENTS |
(in millions, except per share
data) |
(unaudited) |
|
|
|
|
Three months
ended |
|
March
31, |
|
2015 |
2014 |
Revenues |
|
|
Commissions and fees |
$1,081 |
$1,090 |
Investment income |
3 |
4 |
Other income |
3 |
3 |
Total revenues |
1,087 |
1,097 |
Expenses |
|
|
Salaries and benefits (including share-based
compensation of $18 million, $14 million) |
567 |
570 |
Other operating expenses |
160 |
165 |
Depreciation expense |
22 |
23 |
Amortization of intangible assets |
14 |
13 |
Restructuring costs |
31 |
-- |
Total expenses |
794 |
771 |
Operating income |
293 |
326 |
Other expense (income), net |
6 |
-- |
Interest expense |
33 |
32 |
Income before income taxes and
interest in earnings of associates |
254 |
294 |
Income taxes |
56 |
63 |
Income before interest in earnings of
associates |
198 |
231 |
Interest in earnings of associates, net of
tax |
16 |
19 |
Net income |
214 |
250 |
Less: Net income attributable to
noncontrolling interests |
(4) |
(4) |
Net income attributable to Willis
Group Holdings |
$210 |
$246 |
|
|
|
Earnings per Share – Basic and
Diluted |
|
|
Net income attributable to Willis
Group Holdings shareholders: |
|
|
- Basic |
$1.17 |
$1.37 |
- Diluted |
1.15 |
1.35 |
Average Number of Shares
Outstanding |
|
|
- Basic |
179 |
179 |
- Diluted |
182 |
182 |
Shares Outstanding at March 31
(thousands) |
179,587 |
179,249 |
|
|
|
|
|
|
WILLIS GROUP HOLDINGS
plc |
CONDENSED DRAFT BALANCE
SHEETS |
(in millions) (unaudited) |
|
|
|
|
March 31, |
December 31, |
|
2015 |
2014 |
Current assets |
|
|
Cash & cash
equivalents |
$503 |
$635 |
Accounts receivable, net |
1,150 |
1,044 |
Fiduciary assets |
9,444 |
8,948 |
Deferred tax assets |
13 |
12 |
Other current assets |
218 |
214 |
Total current assets |
11,328 |
10,853 |
|
|
|
Non-current assets |
|
|
Fixed assets, net |
462 |
483 |
Goodwill |
2,889 |
2,937 |
Other intangible assets,
net |
418 |
450 |
Investments in associates |
167 |
169 |
Deferred tax assets |
6 |
9 |
Pension benefits asset |
606 |
314 |
Other non-current assets |
229 |
220 |
Total non-current assets |
4,777 |
4,582 |
Total assets |
$16,105 |
$15,435 |
|
|
|
Liabilities and equity |
|
|
Current liabilities |
|
|
Fiduciary liabilities |
$9,444 |
$8,948 |
Deferred revenue and accrued
expenses |
408 |
619 |
Income taxes payable |
49 |
33 |
Current portion of long-term
debt |
168 |
167 |
Deferred tax liabilities |
18 |
21 |
Other current liabilities |
461 |
444 |
Total current liabilities |
10,548 |
10,232 |
|
|
|
Non-current liabilities |
|
|
Long-term debt |
2,137 |
2,142 |
Liability for pension
benefits |
277 |
284 |
Deferred tax liabilities |
185 |
128 |
Provision for liabilities |
188 |
194 |
Other non-current
liabilities |
398 |
389 |
Total non-current liabilities |
3,185 |
3,137 |
Total liabilities |
13,733 |
13,369 |
|
|
|
Redeemable noncontrolling interest |
51 |
59 |
|
|
|
Total Willis Group Holdings stockholders'
equity |
2,298 |
1,985 |
Noncontrolling interests |
23 |
22 |
Total equity |
2,321 |
2,007 |
Total liabilities and
equity |
$16,105 |
$15,435 |
|
|
|
|
|
|
WILLIS GROUP
HOLDINGS plc |
CONDENSED DRAFT CASH
FLOW STATEMENTS |
(in millions) (unaudited) |
|
|
|
|
Three months
ended |
|
March
31, |
|
2015 |
2014 |
Cash flows from operating
activities |
|
|
Net income |
$214 |
$250 |
Adjustments to reconcile net
income to total net cash provided by operating activities |
72 |
42 |
Changes in operating assets and
liabilities, net of effects from purchase of subsidiaries |
(350) |
(287) |
Net cash (used in) provided by
operating activities |
$ (64) |
$5 |
|
|
|
Net cash used in investing
activities |
$ (8) |
$ (21) |
|
|
|
Net cash used in financing
activities |
$ (39) |
$ (49) |
|
|
|
Decrease in cash and cash
equivalents |
$ (111) |
$ (65) |
Effect of exchange rate changes
on cash and cash equivalents |
(21) |
3 |
Cash and cash equivalents,
beginning of period |
635 |
796 |
Cash and cash equivalents, end of
period |
$503 |
$734 |
|
|
|
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 movements; (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 business 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 earnings per diluted share
("Underlying measures").
Underlying measures are calculated by
excluding the impact of certain items, including foreign currency
movements, 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 movements 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.
2. Underlying and organic commissions
and fees
The following table reconciles
reported commissions and fees growth to underlying and organic
commissions and fees growth, as defined in note 1 of the
supplemental financial information, for the three months ended
March 31, 2015.
|
Three
months |
|
|
|
|
|
|
ended
March 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Organic |
|
|
|
|
Foreign |
Underlying |
Acquisitions |
commissions |
|
|
|
% |
currency |
commissions and |
and |
and fees |
|
2015 |
2014 |
Change(1) |
movements |
fees
growth |
disposals |
growth |
Willis GB |
$142 |
$150 |
(4.6)% |
(5.7)% |
1.1% |
-- % |
1.1% |
Willis Capital, Wholesale and
Reinsurance |
296 |
303 |
(2.5)% |
(4.3)% |
1.7% |
0.4% |
1.3% |
Willis North America |
356 |
354 |
0.5% |
(0.2)% |
0.7% |
(4.1)% |
4.7% |
Willis International |
287 |
283 |
1.1% |
(20.1)% |
21.1% |
15.8% |
5.3% |
Total |
$1,081 |
$1,090 |
(0.9)% |
(6.7)% |
5.8% |
2.4% |
3.4% |
|
|
|
|
|
|
|
|
(1) Percentages may differ
due to rounding. |
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 months ended March 31, 2015 and 2014:
|
Three months
ended |
|
March
31, |
|
|
|
% |
|
2015 |
2014 |
Change(2) |
Reported Total expenses |
$794 |
$771 |
3.0 |
Excluding: |
|
|
|
Restructuring costs |
(31) |
-- |
|
Foreign currency movements
(1) |
-- |
(48) |
|
Underlying Total expenses |
$763 |
$723 |
5.6 |
Net expenses from acquisitions
and disposals |
(37) |
(8) |
|
Organic Total expenses |
$726 |
$715 |
1.7 |
|
|
|
Three months
ended |
|
March
31, |
|
|
|
% |
|
2015 |
2014 |
Change(2) |
Reported Salaries and benefits |
$567 |
$570 |
(0.5) |
Excluding: |
|
|
|
Foreign currency movements
(1) |
-- |
(37) |
|
Underlying Salaries and benefits |
$567 |
$533 |
6.4 |
Net expenses from acquisitions
and disposals |
(23) |
(6) |
|
Organic Salaries and benefits |
$544 |
$527 |
3.3 |
|
|
|
|
(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. |
(2) Percentages may differ
due to rounding. |
3. Underlying and Organic total
expenses, salaries and benefits and other operating expenses
(continued)
|
Three months
ended |
|
March
31, |
|
|
|
% |
|
2015 |
2014 |
Change(2) |
Reported Other operating expenses |
$160 |
$165 |
(3.2) |
Excluding: |
|
|
|
Foreign currency movements
(1) |
-- |
(10) |
|
Underlying Other operating expenses |
$160 |
$155 |
2.9 |
Net expenses from acquisitions
and disposals |
(9) |
(1) |
|
Organic Other operating expenses |
$151 |
$154 |
(2.4) |
|
|
|
|
(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. |
(2) Percentages may differ
due to rounding. |
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 months ended
March 31, 2015 and 2014:
|
Three months
ended |
|
March
31, |
|
|
|
% |
|
2015 |
2014 |
Change(2) |
Total revenues |
$1,087 |
$1,097 |
(0.9) |
Excluding: |
|
|
|
Foreign currency movements |
-- |
(69) |
|
Underlying revenue |
$1,087 |
$1,028 |
5.7 |
Net revenue from acquisitions
and disposals |
(39) |
(14) |
|
Organic revenue |
$1,048 |
$1,014 |
3.3 |
|
|
|
|
Operating income |
$293 |
$326 |
(10.3) |
Excluding: |
|
|
|
Restructuring costs |
31 |
-- |
|
Foreign currency movements
(1) |
-- |
(21) |
|
Underlying operating income |
$324 |
$305 |
5.9 |
Net operating income from
acquisitions and disposals |
(2) |
(6) |
|
Organic operating income |
$322 |
$299 |
7.4 |
Operating margin, or operating income as a
percentage of total revenues |
26.9% |
29.7% |
|
Underlying operating margin, or underlying
operating income as a percentage of total underlying revenues |
29.8% |
29.7% |
|
Organic operating margin, or organic
operating income as a percentage of total organic revenues |
30.7% |
29.5% |
|
|
|
|
|
(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. |
(2) Percentages may differ
due to rounding. |
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 months ended
March 31, 2015 and 2014:
|
Three months
ended |
|
March
31, |
|
|
|
% |
|
2015 |
2014 |
Change(2) |
Net income attributable to Willis Group
Holdings |
$210 |
$246 |
(14.7) |
Excluding: |
|
|
|
Net income attributable to
non-controlling interests |
4 |
4 |
|
Interest in earnings of
associates, net of tax |
(16) |
(19) |
|
Income taxes |
56 |
63 |
|
Interest expense |
33 |
32 |
|
Other expense (income),
net |
6 |
-- |
|
Depreciation |
22 |
23 |
|
Amortization |
14 |
13 |
|
EBITDA |
$329 |
$362 |
(9.2) |
Excluding: |
|
|
|
Restructuring costs |
31 |
-- |
|
Foreign currency
movements(1) |
-- |
(22) |
|
Underlying EBITDA |
$360 |
$340 |
5.8 |
Net EBITDA from acquisitions
and disposals |
(7) |
(7) |
|
Organic EBITDA |
$353 |
$333 |
6.0 |
|
|
|
|
(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. |
(2) Percentages may differ due to
rounding. |
6. Underlying net income and earnings per diluted
share
The following tables reconcile net
income attributable to Willis Group Holdings and earnings per
diluted share, the most directly comparable GAAP measures, to
underlying net income and underlying net income per diluted share,
for the three months ended March 31, 2015 and 2014:
|
|
|
|
Per diluted
share |
|
Three months
ended |
Three months
ended |
|
March
31, |
March
31, |
|
|
|
|
|
|
|
|
|
|
% |
|
|
% |
|
2015 |
2014 |
Change(2) |
2015 |
2014 |
Change |
Net income attributable to
Willis Group Holdings plc |
$210 |
$246 |
(14.7) |
$1.15 |
$1.35 |
(14.8) |
Excluding: |
|
|
|
|
|
|
Restructuring
costs, net of tax ($9, $nil) |
22 |
-- |
|
0.12 |
-- |
|
Net (gain) loss
on disposal of operations, net of tax ($2, $1) |
(2) |
2 |
|
(0.01) |
0.01 |
|
Foreign currency
movements(1) |
-- |
(28) |
|
-- |
(0.15) |
|
Underlying net income |
$230 |
$220 |
4.5 |
$1.26 |
$1.21 |
4.1 |
|
|
|
|
|
|
|
Average diluted shares outstanding |
182 |
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. |
(2) Percentages may differ
due to rounding. |
7. Operational Improvement Program
restructuring costs
By segment:
|
|
|
Twelve months |
|
Total |
|
ended |
Three months |
Cumulative |
|
December 31, |
ended March |
Restructuring |
|
2014 |
31,
2015 |
Costs |
|
|
|
|
Willis GB |
$10 |
$4 |
$14 |
Willis Capital, Wholesale and
Reinsurance |
1 |
6 |
7 |
Willis North America |
3 |
7 |
10 |
Willis International |
5 |
3 |
8 |
Corporate & other |
17 |
11 |
28 |
|
|
|
|
Total restructuring costs |
$36 |
$31 |
$67 |
7. Operational Improvement Program restructuring costs
(continued)
By type of restructuring
cost:
|
|
|
Twelve months |
|
Total |
|
ended |
Three months |
Cumulative |
|
December 31, |
ended March |
Restructuring |
|
2014 |
31,
2015 |
Costs |
|
|
|
|
Termination benefits |
$16 |
$10 |
$26 |
Professional services & other |
20 |
21 |
41 |
|
|
|
|
Total restructuring costs |
$36 |
$31 |
$67 |
8. Condensed consolidated income statements by
quarter
|
2014 |
2015 |
|
Q1 |
Q2 |
Q3 |
Q4 |
FY |
Q1 |
Revenues |
|
|
|
|
|
|
Commissions and fees |
$1,090 |
$930 |
$808 |
$939 |
$3,767 |
$1,081 |
Investment income |
4 |
4 |
4 |
4 |
16 |
3 |
Other income |
3 |
1 |
-- |
15 |
19 |
3 |
Total revenues |
1,097 |
935 |
812 |
958 |
3,802 |
1,087 |
Expenses |
|
|
|
|
|
|
Salaries and benefits |
570 |
575 |
569 |
600 |
2,314 |
567 |
Other operating expenses |
165 |
173 |
156 |
165 |
659 |
160 |
Depreciation expense |
23 |
24 |
23 |
22 |
92 |
22 |
Amortization of intangible assets |
13 |
12 |
13 |
16 |
54 |
14 |
Restructuring costs |
-- |
3 |
17 |
16 |
36 |
31 |
Total expenses |
771 |
787 |
778 |
819 |
3,155 |
794 |
Operating income |
326 |
148 |
34 |
139 |
647 |
293 |
Other expense (income), net |
-- |
3 |
9 |
(18) |
(6) |
6 |
Interest expense |
32 |
35 |
34 |
34 |
135 |
33 |
Income (loss) before income taxes and
interest in earnings (losses) of associates |
294 |
110 |
(9) |
123 |
518 |
254 |
Income taxes |
63 |
59 |
2 |
35 |
159 |
56 |
Income (loss) before interest in
earnings(losses) of associates |
231 |
51 |
(11) |
88 |
359 |
198 |
Interest in earnings (losses) of
associates, net of tax |
19 |
(3) |
3 |
(5) |
14 |
16 |
Net income (loss) |
250 |
48 |
(8) |
83 |
373 |
214 |
Net (loss) income attributable to
non-controlling interests |
(4) |
(1) |
1 |
(7) |
(11) |
(4) |
Net income (loss) attributable to
Willis Group Holdings |
$246 |
$47 |
$ (7) |
$76 |
$362 |
$210 |
Diluted earnings per
share |
|
|
|
|
|
|
Net income (loss) attributable to Willis
Group Holdings shareholders |
$1.35 |
$0.26 |
$ (0.04) |
$0.42 |
$2.00 |
$1.15 |
Average number of shares
outstanding |
|
|
|
|
|
|
- Diluted |
182 |
182 |
178 |
180 |
181 |
182 |
9. Segment information by quarter
|
2014 |
2015 |
|
Q1 |
Q2 |
Q3 |
Q4 |
FY |
Q1 |
Commissions and fees |
|
|
|
|
|
|
Willis GB |
$150 |
$187 |
$148 |
$177 |
$662 |
$142 |
Willis Capital, Wholesale and
Reinsurance |
303 |
192 |
144 |
110 |
749 |
296 |
Willis North America |
354 |
323 |
321 |
320 |
1,318 |
356 |
Willis International |
283 |
228 |
195 |
332 |
1,038 |
287 |
Total commissions and fees |
$1,090 |
$930 |
$808 |
$939 |
$3,767 |
$1,081 |
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
Willis GB |
$153 |
$190 |
$149 |
$177 |
$669 |
$143 |
Willis Capital, Wholesale and
Reinsurance |
304 |
193 |
145 |
124 |
766 |
297 |
Willis North America |
355 |
323 |
322 |
323 |
1,323 |
359 |
Willis International |
285 |
229 |
196 |
334 |
1,044 |
288 |
Total revenues |
$1,097 |
$935 |
$812 |
$958 |
$3,802 |
$1,087 |
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
Willis GB |
$22 |
$57 |
$21 |
$48 |
$148 |
$21 |
Willis Capital, Wholesale and
Reinsurance |
168 |
63 |
9 |
(16) |
224 |
153 |
Willis North America |
83 |
47 |
45 |
57 |
232 |
78 |
Willis International |
84 |
23 |
(10) |
98 |
195 |
70 |
Corporate and other(a) |
(31) |
(42) |
(31) |
(48) |
(152) |
(29) |
Total operating income |
$326 |
$148 |
$34 |
$139 |
$647 |
$293 |
|
|
|
|
|
|
|
Organic commissions and fees
growth |
|
|
|
|
|
|
Willis GB |
(6.3)% |
6.9% |
(5.1)% |
(2.2)% |
(1.5)% |
1.1% |
Willis Capital, Wholesale and
Reinsurance |
6.3% |
2.1% |
3.6% |
2.8% |
4.3% |
1.3% |
Willis North America |
5.4% |
3.5% |
4.2% |
(1.8)% |
2.7% |
4.7% |
Willis International |
7.2% |
6.1% |
5.6% |
15.0% |
8.8% |
5.3% |
Total organic commissions and
fees growth |
4.2% |
4.5% |
2.5% |
3.6% |
3.8% |
3.4% |
|
|
|
|
|
|
|
Operating margin |
|
|
|
|
|
|
Willis GB |
14.4% |
30.0% |
14.1% |
27.1% |
22.1% |
14.9% |
Willis Capital, Wholesale and
Reinsurance |
55.3% |
32.6% |
6.2% |
(12.9)% |
29.2% |
51.7% |
Willis North America |
23.4% |
14.6% |
14.0% |
17.6% |
17.5% |
21.6% |
Willis International |
29.5% |
10.0% |
(5.1)% |
29.3% |
18.7% |
24.4% |
Total operating margin |
29.7% |
15.8% |
4.2% |
14.5% |
17.0% |
26.9% |
|
|
|
|
|
|
|
(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). |
CONTACT: Investors:
Peter Poillon
+1 212 915 8084
Email: peter.poillon@willis.com
Media:
Juliet Massey
+44 7984 156 739
Email: juliet.massey@willis.com