WILLIS TOWERS WATSON PLC - FORM 8-K - EX-99.2

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EX-99.1 - EX-99.1 - WILLIS TOWERS WATSON PLC	d485441dex991.htm
8-K - FORM 8-K - WILLIS TOWERS WATSON PLC	d485441d8k.htm

FOURTH QUARTER 2012

RESULTS

Willis Group Holdings

February, 2013

Exhibit 99.2

Important disclosures regarding forward-looking statements

This presentation contains certain “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, included in this document that address activities, events or developments that we expect or anticipate may occur in the future,

including such things as our outlook, potential cost savings and accelerated adjusted operating margin and adjusted earnings per share growth, 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 financial market conditions on our results of operations and financial condition, including as a result of those associated with the

current Eurozone sovereign debt crisis, any insolvencies of or other difficulties experienced by our clients, insurance companies or financial institutions; our ability to implement and

realize anticipated benefits of any operational charges or any revenue generating initiatives; volatility or declines in insurance markets and premiums on which our commissions are

based, but which we do not control; our ability to continue to manage our significant indebtedness; our ability to compete effectively in our industry, including the impact of our refusal to

accept contingent commissions from carriers in the non-Employee Benefit areas of our retail brokerage business; 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; 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 that could inhibit our ability to borrow funds or the pricing thereof; a significant decline in the value of investments that fund our pension plans or changes in our pension plan

liabilities or funding obligations; our ability to achieve the expected strategic benefits of transactions or growth from associates; the further impairment of the goodwill of one of our

reporting units, in which case we may be required to record additional significant charges to earnings; our ability to receive dividends or other distributions in needed amounts from our

subsidiaries; changes in the tax or accounting treatment of our operations; any potential impact from the US healthcare reform legislation; our involvements 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 and Advisory operations) can have on our financial results; our exposure to potential liabilities arising from errors

and omissions and other potential claims against us; and the interruption or loss of our information processing systems or failure to maintain secure information systems.

The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For additional information see also

Part I, Item 1A “Risk Factors” included in Willis’ Form 10-K for the year ended December 31, 2011, and our subsequent filings with the Securities and Exchange Commission, including

our Form 10-Q for the quarter ended September 30, 2012. Copies are available online at http://www.sec.gov or on request from the Company.

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 presentation,

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 presentation may not occur, and we caution you against unduly relying on these forward-looking statements.

Important disclosures regarding non-GAAP measures

This

presentation

contains

references

"non-GAAP

financial

measures"

defined

Regulation

SEC

rules.

present

these measures because we believe they are of interest to the investment community and they provide 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 generally accepted accounting principles (GAAP) basis. These financial measures should be

viewed in addition to, not in lieu of, the Company’s condensed consolidated income statements and balance sheet as of the

relevant date.

Consistent with Regulation G, a description of such information is provided below and a reconciliation of certain

such

items

GAAP

information

can

found

our

periodic

filings

with

the

SEC.

Our

method

calculating

these

non-

GAAP

financial

measures

may

differ

from

other

companies

and

therefore

comparability

may

limited.

Balance sheet and cash flow highlights

As of

Dec 31,

2012

Dec 31,

2011

Cash

$500

$436

$2.35 bn

$2.37 bn

See important disclosures regarding Non-GAAP measures starting on page 13

Year ended

Dec 31,

2012

Dec 31,

2011

Cash flow from

operations

$524

$439

$64 million increase in cash at end of

2012 vs. prior year

$15 million debt repayment in 2012

$85 million increase in cash flow from

operations in 2012 vs. 2011

Major uses of 2012 cashflow:

Paid dividends of $185 million

Capital expenditures of $135 million

Share repurchases of $100 million

M&A expenditures of $69 million

Total debt

Summary financial results

Q4 2012

Q4 2011

FY 2012

FY 2011

Organic

commission

and fee growth

7.5%

(2.3)%

3.1%

1.8%

Adjusted

operating

income

$166m

$153m

$752m

$775m

Adjusted

operating

margin

19.1%

18.7%

21.6%

22.5%

Reported EPS

$(4.65)

$0.14

$(2.58)

$1.15

Adjusted EPS

$0.45

$2.58

$2.74

See important disclosures regarding Non-GAAP measures starting on page 13

Total expenses

Q4 2012 total adjusted expenses

up 5.9%, or 6.5% on an underlying

basis

Primarily driven by 8.6% growth

in adjusted S&B

Other operating expense decline

1.9% on an adjusted basis

Full year 2012, total adjusted

expenses grew 2.1%, or 4.7% on

an underlying basis

$ millions

2012

2011

1,646

738

123.0%

North America segment

goodwill impairment

(492)

2012 cash bonus accrual

(252)

Write-off unamortized cash

retention awards

(200)

Insurance recovery

Loss on disposal

(2)

2011 Operational review

(50)

Write-off uncollectible

accounts receivable

(22)

705

666

5.9%

Y-o-Y FX movement

709

666

6.5%

See important disclosures regarding Non-GAAP measures starting on page 13

Total expenses – reported

Total expenses – adjusted

Total expenses - underlying

Salaries and benefits

Q4 2012: 8.6% adjusted and

underlying S&B growth, driven by:

Difficult comparison as Q4 2011

included largest savings from 2011

operational review

Headcount up by approx. 400 FTEs

Salary increases

Underlying S&B consistent

throughout

2012:

$512

$515m

each

quarter

See important disclosures regarding Non-GAAP measures starting on page 13

$ millions

2012

2011

Salaries and benefits –

reported

967

510

89.6%

2012 cash bonus accrual

(252)

Write-off unamortized

retention awards

(200)

2011 Operational review

(36)

Salaries and benefits –

adjusted

515

474

8.6%

Y-o-Y FX movement

Salaries and benefits -

underlying

515

474

8.6%

Full year 2012 adjusted S&B up 3.6%,

underlying S&B up 5.4%

Salaries

and

benefits

–

assuming

cash

bonus

accrued

throughout 2012

Above shows salaries and benefits expense as if we had been accruing for a cash bonus throughout

2012

S&B would have been $48 million higher

This is the basis on which we will be accounting for bonuses in 2013 and beyond

$ millions

Salaries and benefits

–

adjusted

$ 506

500

502

515

$ 2,023

Amortization of cash

retention awards

(59)

(51)

(46)

(48)

(204)

2012 cash bonus

accrual

252

Salaries and benefits

–

assuming cash

bonus accrued

$ 510

512

519

530

$ 2,071

$48 m

increase

See important disclosures regarding Non-GAAP measures starting on page 13

Impact

adjusted

EPS

–

assuming

cash

bonus

accrued

throughout 2012

Adjusted EPS –

disclosed

$1.32

$0.59

$0.22

$0.45

$2.58

Adjusted EPS –

assuming

cash bonus accrued

$1.31

$0.54

$0.15

$0.38

$2.38

Difference

$(0.01)

$(0.05)

$(0.07)

$(0.20)

If we had been accruing for a cash bonus throughout 2012:

S&B would have been $48 million higher

Adjusted EPS would have been $0.20 lower

See important disclosures regarding Non-GAAP measures starting on page 13

Other operating expenses

Q4 2012: Other operating expenses

declined 1.9% on an adjusted basis

On an underlying basis (excluding

FX movement), other operating

expenses were up a modest 0.6%

Full year 2012, Other operating

expenses declined 2.7% on an

adjusted basis, and increased

3.3% on an underlying basis

$ millions

2012

2011

Other operating

expenses –

reported

150

194

(22.7)%

Insurance recovery

Write-off of

uncollectible accounts

receivable

(22)

2011 Operational

review

(14)

Other operating

expenses –

adjusted

155

158

(1.9)%

Y-o-Y FX movement

Salaries and benefits -

underlying

159

158

0.6%

See important disclosures regarding Non-GAAP measures starting on page 13

Adjusted operating margin

Adjusted operating margin up 40 bps

driven by

Higher commissions and fees

Offset by higher S&B and lower

investment income

See important disclosures regarding Non-GAAP measures starting on page 13

2012

2011

Operating margin –

reported

(89.0)%

9.9%

Operating margin –

adjusted

19.1%

18.7%

+40bps

APPENDICES

Important disclosures regarding non-GAAP measures

Commissions and fees analysis

(a) Included in North America reported commissions and fees were legacy HRH contingent commissions of $nil in the fourth quarter of 2012 and the fourth quarter of

2011 and $2 million in 2012 compared with $5 million in 2011.

2012

2011

Change

Foreign

currency

translation

Acquisitions

and disposals

Organic

commissions

and fees growth

($ millions)

Three months ended

December 31, 2012

Global

$237

$213

11.3

(0.3)

11.6

North America

(a)

331

316

4.7

(0.3)

5.0

International

299

281

6.4

(1.0)

7.4

Commissions and Fees

$867

$810

7.0

(0.5)

7.5

Twelve months ended

December 31, 2012

Global

$1,124

$1,073

4.8

(1.3)

6.1

North America

(a)

1,306

1,314

(0.6)

International

1,028

1,027

0.1

(4.8)

4.9

Commissions and Fees

$3,458

$3,414

1.3

(1.8)

3.1

Important disclosures regarding non-GAAP measures

Operating income and adjusted operating income

2011

2012

(In millions)

Operating Income

$239

$156

$90

$81

$566

$317

$179

$70

($775)

($209)

Excluding:

Goodwill impairment charge

492

Write-off of unamortized cash retention awards

200

2012 cash bonus accrual

252

2011 Operational review charge

180

FSA regulatory settlement

Write-off of uncollectible accounts receivable and legal

fees

Net (gain)/loss on disposal of operations

(4)

Insurance recovery

(5)

(10)

India JV settlement

Adjusted Operating Income

$332

$185

$105

$153

$775

$330

$174

$82

$166

$752

Operating Margin

23.7%

18.1%

11.8%

9.9%

16.4%

31.3%

21.3%

9.3%

(89.0)%

(6.0)%

Adjusted Operating Margin

33.0%

21.5%

13.8%

18.7%

22.5%

32.6%

20.7%

10.9%

19.1%

21.6%

Important disclosures regarding non-GAAP measures

Net income to adjusted net income

2011

2012

(In millions, except per share data)

Net Income

$35

$84

$60

$24

$203

$225

$107

$26

($804)

($446)

Excluding the following, net of tax:

Goodwill impairment charge

458

Write-off of unamortized cash retention awards

138

2012 cash bonus accrual

175

2011 operational review charge

128

FSA regulatory settlement

Net (gain)/loss on disposal of operations

(4)

Make-whole amounts on repurchase and redemption of Senior

Notes and write-off of unamortized debt costs

124

131

Write-off of uncollectible accounts receivable and legal fees

Insurance recovery

(3)

(6)

India JV settlement

Deferred tax valuation allowance

113

Adjusted Net Income

$224

$107

$72

$79

$482

$233

$104

$38

$79

$454

Diluted shares outstanding

174

176

175

176

Net income

$0.20

$0.48

$0.34

$0.14

$1.15

$1.28

$0.61

$0.15

($4.65)

($2.58)

per diluted share

Adjusted net income

$1.29

$0.61

$0.41

$0.45

$2.74

$1.32

$0.59

$0.22

$0.45

$2.58

per diluted share

Important disclosures regarding non-GAAP measures

Adjusted EBITDA and Debt/Adjusted EBITDA

2011

2012

(In millions)

Operating Income

$239

$156

$90

$81

$566

$317

$179

$70

($775)

($209)

Excluding:

Goodwill impairment charge

492

Write-off of unamortized cash retention awards

200

2012 cash bonus accrual

252

2011 Operational review charge

180

FSA regulatory settlement

Write-off of uncollectible accounts receivable and

legal fees

Insurance recovery

(5)

(10)

Net (gain)/loss on disposal of operations

(4)

India JV settlement

Adjusted Operating Income

$332

$185

$105

$153

$775

$330

$174

$82

$166

$752

Add back

Depreciation

Amortization of intangibles

Adjusted EBITDA

$365

$220

$140

$187

$912

$364

$208

$117

$201

$890

Debt

2,369

2,353

Debt / Adjusted EBITDA

2.6x

Total expenses -

2012

$ millions

2012

2011

3,689

2,881

28.0%

North America segment

goodwill impairment

(492)

2012 cash bonus accrual

(252)

Write-off unamortized cash

retention awards

(200)

Insurance recovery

Loss on disposal

(3)

2011 Operational review

(180)

Write-off uncollectible

accounts receivable

(13)

(22)

India JV

(11)

FSA Settlement

(11)

2,728

2,672

2.1%

Y-o-Y FX movement

2,798

2,672

4.7%

See important disclosures regarding Non-GAAP measures starting on page 13

Total expenses – reported

Total expenses – adjusted

Total expenses - underlying

Salaries and benefits -

2012

See important disclosures regarding Non-GAAP measures starting on page 13

$ millions

2012

2011

Salaries and benefits –

reported

2,475

2,087

18.6%

2012 cash bonus accrual

(252)

Write-off unamortized

retention awards

(200)

2011 Operational review

(135)

Salaries and benefits –

adjusted

2,023

1,952

3.6%

Y-o-Y FX movement

Salaries and benefits -

underlying

2,057

1,952

5.4%

Other operating expenses -

2012

$ millions

2012

2011

Other operating expenses

–

reported

581

656

(11.4)%

Insurance recovery

Write-off of uncollectible

accounts receivable

(13)

(22)

2011 Operational review

(40)

India JV

(11)

FSA settlement

(11)

Other operating expenses

–

adjusted

567

583

(2.7)%

Y-o-Y FX movement

Salaries and benefits -

underlying

602

583

3.3%

See important disclosures regarding Non-GAAP measures starting on page X

See important disclosures regarding Non-GAAP measures starting on page 13

IR Contacts

Peter Poillon

Tel: 212-915-8084

Email: peter.poillon@willis.com

Mark Jones

Tel: 212-915-8796

Email: mark.p.jones@willis.com

FOURTH QUARTER 2012

RESULTS

Willis Group Holdings

February, 2013

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