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| 8-K - FORM 8-K - WILLIS TOWERS WATSON PLC | d786009d8k.htm |
 WILLIS
GROUP HOLDINGS Fact Book
Second Quarter 2014
September 2014
Exhibit 99.1 |
 Important
disclosures regarding forward-looking statements | 2
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 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
new 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; 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 additional information see also
Part I, Item 1A “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 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 | 3
This
presentation
contains
references
to
"non-GAAP
financial
measures"
as
defined
in
Regulation
G
of
SEC
rules.
We
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
of
such
items
to
GAAP
information
can
be
found
in
our
periodic
filings
with
the
SEC.
Our
method
of
calculating
these
non-
GAAP financial measures may differ from other companies and therefore comparability
may be limited. 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 operating income, underlying EBITDA, underlying net
income and underlying net income per diluted share Underlying
operating
income,
underlying
EBITDA,
underlying
net
income
and
underlying
net
income
per
diluted
share
are
calculated
by
excluding
the
impact
of
certain
items,
including
foreign
currency
translation,
from
operating
income,
net
income
and
net
income
per
diluted
share,
respectively,
the
most directly comparable GAAP measures. We believe that excluding these items, as
applicable, from operating income and net income, provides a more
complete
and
consistent
comparative
analysis
of
our
results
of
operations. |
 Global
risk adviser and broker | 4
Commission and fee mix
~ 70% / 30%
Client
Globally diverse
client base in >150
countries
Segmented: Large
corporates, small
and middle market
Insurer
Placed ~$50 billion
in premium in 2013
More than 2,500
carrier
relationships
Adviser Broker
Broad P&C
Specialty
Human Capital & Benefits
Reinsurance
Capital Markets
Analytics |
 With roots dating to 1828, Willis operates today on every continent, with
approximately 18,000 employees in over 400 offices
Across geographies, industries and specialties, Willis provides its local and
multinational clients with resilience for a risky world
Willis is known for its market-leading products and professional services in
risk management and risk transfer
Willis experts rank among the world’s leading authorities on analytics,
modelling and mitigation strategies at the intersection of global commerce
and extreme events Global risk advisor and broker
| 5
Global
International
North America
2013 revenue - $3.7 billion
|
 Strong
growth in organic revenues and operating cash flows | 6
Cash flow from operations ($ millions)
Mid-single digit organic growth
across all segments in 2013
Willis North America 4.9%
Willis International 4.1%
Willis Global 5.6%
2013 corporate/non-operating uses of
cash:
Dividends $193 million
Capex $112 million
M&A expenditures of ~$34 million
See important disclosures regarding non-GAAP measures on page 3 and
reconciliations starting on page 16 Organic commission and fee growth %
|
 2Q14
RESULTS |
 Strong
organic commission and fee growth 8
Growth well spread across all segments
North America -
growth across most
regions, led by Northeast and Atlantic;
Construction and Human Capital practices
up mid-
and low-single digits, respectively
International –
Growth in all regions, led by
Latin America, up double digits, Eastern
Europe up high single digits
Global –
Growth led by Willis Insurance
UK with strong performances from
Construction and Financial Solutions
specialties businesses; very modest
growth at Willis Re hampered by
challenging environment
See important disclosures regarding non-GAAP measures on page 3 and
reconciliations starting on page 16 2Q14 organic C&F growth in line with
mid-single digit growth goal 4.0%
6.7%
5.1%
5.1%
4.8%
5.6%
3.4%
4.5%
North America
International
Global
Group
Reported
Organic
Cash flow from operations ($ millions) |
 2Q 2014
summary financial results | 9
2Q 2014
2Q 2013
Reported C&F growth
5.1%
5.7%
Organic C&F growth
4.5%
6.3%
Reported operating margin
15.8%
18.8%
Underlying operating margin
16.1%
17.4%
Reported diluted EPS
$0.26
$0.59
Underlying diluted EPS
$0.49
$0.59
Underlying EBITDA
$187
$191
Tax items ($0.12 per diluted share impact from deferred tax valuation
allowance and
$0.05 from higher tax rate)
Venezuela devaluation ($0.07 per diluted share)
Foreign currency movements ($0.03 per diluted share)
Operational
improvement
program
and
increased
share
count
($0.01
per
diluted
share
each)
Underlying
operating
performance
accounted
for
remaining
$(0.04)
per
diluted
share
year
over
year
movement
See important disclosures regarding non-GAAP measures on page 3 and
reconciliations starting on page 16 Q2 2014 vs Q2 2013 negatively impacted a
number of items, primarily: |
 SEGMENT
OVERVIEWS |
 2013 North America C&F: $1.35 billion
Willis North America overview
| 11
(1)
CAPPPS: Captives, Actuarial, Programs, Pooling and Personal Lines
Major practices
•
More than 5,000 associates delivering
industry and product specific solutions to
our clients
•
Over 100 locations, broad geographic
reach with ability to connect with Willis
network.
Segment
•
Human Capital ~25% of 2013 North
America C&F
•
Construction ~14% of North America C&F
•
Healthcare
•
Real estate/hospitality
•
Financial and Executive risk
2013 commissions and fees – by region
|
 2013 International C&F: $0.9 billion
Willis International overview
| 12
Segment
•
Approximately 6,000 associates in over 40
countries
•
Offices designed to grow business locally
around the world, making use of the skills,
industry knowledge and expertise available
within segment and elsewhere in the
Group
Retail operations
•
Western and Eastern Europe
•
Latin America
•
Asia Pacific
•
South Africa
•
Middle East
•
Australasia
Western
Europe
54%
Latin America
20%
Australasia
9%
South Africa
1%
Asia Pacific
11%
Eastern
Europe
5%
2013 commissions and fees – by region
|
 Willis
Global overview | 13
Segment
Willis Re
•
One of the world’s largest reinsurance
brokers with three divisions: North
America, International and Specialty
•
Strong market share in major markets,
particularly marine and aviation
•
Complete range of transactional
capabilities including, in conjunction with
WCM&A, a wide variety of capital markets
based products
•
Cutting edge analytical and advisory
services, including Willis Research
Network, the insurance industry’s largest
partnership with global academic
•
Reinsurance, Specialty Insurance and
Capital Markets businesses
•
Approximately 4,000 associates
•
Clients around the globe
2013 Global C&F: $1.36 billion
Reinsurance
40%
Willis Insurance UK
49%
Facultative
4%
Risk
2%
Willis Capital
Markets
1%
Other
4%
2013 Reinsurance C&F – by
division 2013 commissions and fees – by
business |
 Willis
Global overview (continued) | 14
Willis Insurance UK
•
Combination of Global Specialty business
and UK retail business, creating a seamless
client proposition
•
Strong global positions in:
•
Transport –
includes aerospace, inspace
and marine
•
Natural resources
•
Construction
•
Political, people and terrorism (PP&T)
•
Financial and executive risk
(Finex/Finmar)
•
Fine art, jewelry, art, specie, bloodstock
•
Faber Global –
wholesale and facultative
solutions through London, European &
Bermuda markets
Willis Capital Markets & Advisory
•
Advises on M&A and capital markets
transactions
Facultative
2013 commissions and fees – by business
2013 Willis Insurance UK C&F – by specialty |
 APPENDIX |
 Important
disclosures regarding non-GAAP measures (continued) Commissions and fees
analysis | 16
2014
2013
Change
Foreign
currency
translation
Acquisitions
and
disposals
Organic
commissions
and fees
growth
($ millions)
%
%
%
%
Three months ended June
30, 2014
North America
$340
$327
4.0
-
(0.8)
4.8
International
222
208
6.7
(0.5)
1.6
5.6
Global
368
350
5.1
2.1
(0.4)
3.4
Total
$930
$885
5.1
0.7
(0.1)
4.5
2014
2013
Change
Foreign
currency
translation
Acquisitions
and
disposals
Organic
commissions
and fees
growth
($ millions)
%
%
%
%
Six months ended June
30, 2014
North America
$709
$682
4.0
(0.1)
(0.8)
4.9
International
501
472
6.1
(1.2)
0.7
6.6
Global
810
777
4.2
1.7
(0.2)
2.7
Total
$2,020
$1,931
4.6
0.5
(0.2)
4.3 |
   Important
disclosures regarding non-GAAP measures (continued) Commissions and fees
analysis | 17
2013
2012
Change
Foreign
currency
translation
Acquisitions
and
disposals
Organic
commissions
and fees growth
($ millions)
%
%
%
%
2013 Full year
North America
$1,349
$1,281
5.3
(0.1)
0.6
4.8
International
926
874
5.9
0.1
-
5.8
Global
1,358
1,303
4.2
(0.9)
0.8
4.3
Commissions and Fees
$3,633
$3,458
5.1
(0.3)
0.5
4.9
2012
2011
Change
Foreign
currency
translation
Acquisitions
and
disposals
Organic
commissions
and fees growth
($ millions)
%
%
%
%
2012 Full year
North America
$1,281
$1,285
(0.3)
0.1
-
(0.4)
International
874
870
0.5
(5.8)
-
6.3
Global
1,303
1,259
3.5
(1.4)
0.2
4.7
Commissions and Fees
$3,458
$3,414
1.3
(1.8)
-
3.1
2011
2010
Change
Foreign
currency
translation
Acquisitions
and
disposals
Organic
commissions
and fees growth
($ millions)
%
%
%
%
2011 Full year
North America
$1,285
$1,344
(4.4)
(0.1)
1.3
(5.6)
International
870
777
12.0
4.7
-
7.3
Global
1,259
1,172
7.4
2.5
(2.3)
7.2
Commissions and Fees
$3,414
$3,293
3.7
2.1
(0.2)
1.8 |
 Important
disclosures regarding non-GAAP measures (continued) Operating income to
underlying operating income | 18
For prior periods, underlying measures have been rebased to current period
exchange rates to remove the impact of foreign currency movements when
comparing periods 2013
2014
(In millions)
1Q
2Q
YTD
1Q
2Q
YTD
Total revenue
$1,051
$890
$1,941
$1,097
$935
$2,032
excluding:
Foreign currency movements
3
5
8
-
-
-
Underlying revenue
$1,054
$895
$1,949
$1,097
$935
$2,032
Operating income
$281
$167
$448
$326
$148
$474
excluding:
Operational improvement program
-
-
-
-
3
3
Expense reduction initiative
46
-
46
-
-
-
Foreign currency movements
(4)
(11)
(15)
-
-
-
Underlying operating income
$323
$156
$479
$326
$151
$477
Operating margin (operating income as a
percentage of total revenue)
26.7%
18.8%
23.1%
29.7%
15.8%
23.3%
Underlying operating margin (underlying operating
income as a percentage of underlying total revenue)
30.6%
17.4%
24.6%
29.7%
16.1%
23.5% |
 Important
disclosures regarding non-GAAP measures (continued) Net income (loss) to
underlying net income | 19
2013
(In millions, except per share data)
1Q
2Q
YTD
1Q
2Q
YTD
Net income
$219
$105
$324
$246
$47
$293
Excluding the following, net of tax:
Operational improvement program
-
-
-
-
2
2
Venezuela currency devaluation
-
-
-
-
13
13
Deferred tax valuation allowance
-
-
-
-
21
21
Expense reduction initiative
38
-
38
-
-
-
Net loss on disposal of operations
-
-
-
2
-
2
Foreign currency movements
(6)
(5)
(11)
-
-
-
Underlying net income
$251
$100
$351
$248
$83
$331
Diluted shares outstanding
176
178
177
182
182
182
Net income per diluted share
$ 1.83
$1.35
$0.26
$1.61
Underlying net income per diluted share
$2.05
$1.36
$0.49
$1.88
$1.24
$0.59
$0.59
$1.46
2014
For prior periods, underlying measures (other than EPS) have been rebased to
current period exchange rates to remove the impact of foreign currency
movements when comparing periods. In the current three and six month periods only,
underlying EPS excludes the $0.03 and $0.06, respectively, negative year
over year impact of foreign currency movements in order to assist comparability to EPS figures that have been disclosed in prior periods. |
 Important
disclosures regarding non-GAAP measures (continued) Net income to underlying
EBITDA | 20
For prior periods, underlying measures have been rebased to current period
exchange rates to remove the impact of foreign currency movements when
comparing periods $ millions
%
%
2014
2013
Change
2014
2013
Change
Net income
$47
$105
(55.2)
$293
$324
(9.6)
Add back:
Net income attributable to
noncontrolling interests
1
2
5
6
Interest in earning of associates,
net of tax
3
3
(16)
(12)
Income tax charge
59
29
122
77
Interest expense
35
32
67
63
Other expense (income)
3
(4)
3
(10)
Depreciation
24
21
47
47
Amortization
12
14
25
28
EBITDA
$184
$202
(8.9)
$546
$523
4.4
Adjusting items:
Operational improvement program
3
-
3
-
Expense reduction initiative
-
-
-
41
Foreign currency movements
-
(11)
-
(14)
Underlying EBITDA
(1)
$187
$191
(2.1)
$549
$550
(0.2)
Three months
ended June 30,
Six months
ended June 30, |
 WILLIS
GROUP HOLDINGS Fact Book
Second Quarter 2014
September 2014 |