Attached files
| file | filename |
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| 8-K - FORM 8-K - WILLIS TOWERS WATSON PLC | d677285d8k.htm |
| EX-99.1 - EX-99.1 - WILLIS TOWERS WATSON PLC | d677285dex991.htm |
 FOURTH
QUARTER 2013 RESULTS
Willis Group Holdings
February, 2014
Exhibit 99.2 |
 Important
disclosures regarding forward-looking statements 1
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 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 expense reduction initiative, charge or any revenue generating initiatives; our
ability to implement and fully realize anticipated benefits of our new growth strategy,
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-Human Capital 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; 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 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, including any growth from associates; 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 and fluctuations in our tax rate; 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 & 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, 2012, 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 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. 2 |
 Commissions and fees growth
4Q 2013
Reported
Organic
North America
6.6%
5.8%
International
3.0%
3.0%
Global
5.5%
1.4%
Willis Group
5.1%
3.7%
3
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 Organic growth excluding $9.4 million
(110 bps) net negative revenue recognition adjustment would have
been 4.8%
North America –
Excluding $5.3 million (160 bps) positive
revenue recognition adjustment, organic would
have been 4.2%
Growth well distributed across geographic
regions and solid growth in construction
International –
Excluding $14.7 million (510 bps) negative
revenue recognition adjustment, organic would
have been 8.1%
Good growth across most regions: Western
Europe, Eastern Europe, Latin America,
Australasia. Good growth in Asia, excluding
impact of revenue recognition adjustment
Global –
Mid-single digit growth in Specialty, Reinsurance
down very low-single digits, challenging 4Q
2012 WCMA comparison |
 Q4 2013
summary financial results 4
Q4
2013
Q4
2012
Adjustment
to reflect
accrual of
bonuses
throughout
2012 *
Q4 2012 –
“apples to
apples”
comparison
Change
Q4 2013 vs.
Q4 2012
“apples to
apples”
Adjusted operating
income
$ 150 m
$ 166 m
$ (15) m
$ 151 m
$ (1) m
Adjusted operating
margin
16.3%
19.1%
(180) bps
17.3%
(100) bps
Reported EPS
$ 0.37
$ (4.65)
$ (0.07)
$ (4.72)
NM
Adjusted EPS
$ 0.42
$ 0.45
$ (0.07)
$ 0.38
$ 0.04
Adjusted tax rate
21%
25%
Average diluted
shares outstanding
182 m
173 m
175 m
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 Q4
2013
reported
and
adjusted
EPS
favorably
impacted
by
$0.01
of
F/X
movement
NM = not meaningful
* See detailed information on change in remuneration policy on page 7
|
 FY 2013
summary financial results 5
2013
2012
Adjustment
to reflect
accrual of
bonuses
throughout
2012 *
2012 –
“apples to
apples”
comparison
Change
2013 vs.
2012“apples
to apples”
Adjusted operating
income
$ 730 m
$ 752 m
$ (48) m
$ 704 m
$ 26 m
Adjusted operating
margin
20.0%
21.6%
(140) bps
20.2%
(20) bps
Reported EPS
$ 2.04
$ (2.58)
$ (0.20)
$ (2.78)
NM
Adjusted EPS
$ 2.64
$ 2.58
$ (0.20)
$ 2.38
$ 0.26
Adjusted tax rate
20%
25%
Average diluted
shares outstanding
179 m
173 m
176 m
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 2013 reported and adjusted EPS
unfavorably impacted by $0.02 of F/X movements NM = Not Meaningful
* See detailed information on change in remuneration policy on page 7
|
 Total
expenses 6
$ millions
Q4
2013
Q4
2012
Total
expenses
–
reported
$ 767
$ 1,646
(53.4)%
Goodwill impairment charge
-
(492)
Write-off of unamortized
retention awards
-
(200)
2012 cash bonus accrual
-
(252)
Insurance recovery
-
5
Gain (loss) on disposal of
operations
2
(2)
Total
expenses
–
adjusted
$ 769
$705
9.1%
Y-o-Y FX movement
6
-
Total
expenses
-
underlying
$ 775
$ 705
9.9%
Adjustment to reflect accrual of
bonuses throughout 2012
-
15
Total
expenses
–
“apples
to
apples”
comparison
$ 775
$ 720
7.6%
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 7.6%
in
Q4
2013
compared
to
Q4
2012
5.7% in 2013 compared to 2012 (see
page 13 for details)
Apples to apples growth in total expenses: |
 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 $15 million higher in the
fourth quarter 2012; $48 million higher in full year 2012 This
is
the
basis
on
which
we
are
accounting
for
bonuses
in
2013
and
beyond
7
$ millions
Q1
Q2
Q3
Q4
FY
Salaries and benefits –
adjusted
$ 506
500
502
515
$ 2,023
Amortization of cash
retention awards
(59)
(51)
(46)
(48)
(204)
2012 cash bonus
accrual
63
63
63
63
252
Difference
4
12
17
15
48
Salaries and benefits –
assuming cash bonus
accrued
$ 510
512
519
530
$ 2,071
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 |
 Salaries
and benefits 8
$ millions
Q4
2013
Q4
2012
Salaries and benefits –
reported
$ 569
$ 967
(41.2)%
Write-off of unamortized
retention awards
-
(200)
2012 cash bonus accrual
-
(252)
Salaries and benefits –
adjusted
$ 569
$ 515
10.5%
Y-o-Y FX movement
1
-
Salaries and benefits -
underlying
$ 570
$ 515
10.7%
Adjustment to reflect accrual of
bonuses throughout 2012
-
15
Salaries and benefits -
“apples to apples”
comparison
$ 570
$ 530
7.5%
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 Increased headcount in growth products
and regions, mainly 2H13 and
concentrated in Global
Higher production incentives driven by
higher organic growth
Annual salary increases
Full year accrual of increase in North
America 401(k) match
Increased medical insurance claim costs
in North America
“Apples to apples”
S&B growth of 7.5%
Driven by: |
 Other
operating expenses Underlying growth in other operating
expenses of 7.1%
Driven by:
Higher business development
expenses
Higher marketing expenses
Higher professional fees
9
$ millions
Q4
2013
Q4
2012
Other operating expenses
–
reported
$ 161
$ 150
7.3%
Insurance recovery
-
5
Other operating expenses
–
adjusted
$ 161
$ 155
3.9%
Y-o-Y FX movement
5
-
Other operating expenses
–
underlying
$ 166
$ 155
7.1%
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 |
 Balance
sheet and cash flow highlights 10
$ millions
As of
Dec 31,
2013
Dec 31,
2012
Cash
$796
$500
$2,326
$2,353
Year ended
Dec 31,
2013
Dec 31,
2012
Cash flow from
operations
$561
$525
$296 million increase in cash at end of 2013
compared to prior year
$36 million increase in cash flow from
operations in 2013 compared to 2012
2013 highlights:
Capital expenditures of $112 million
$155 million from option exercises
Total debt |
 APPENDICES |
 Commissions and fees growth
FY 2013
Reported
Organic
North America
5.4%
4.9%
International
3.9%
4.1%
Global
5.7%
5.6%
Willis Group
5.1%
4.9%
12
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 Mid-single digit organic growth
across all segments. Excluding $9.4 million (20 bps) net negative revenue
recognition adjustment organic growth would have
been 5.1%
North America –
Excluding $5.3 million (40 bps) positive revenue
recognition adjustment, organic would have
been 4.5%
Growth across all geographic regions; Human
Capital and Construction practices up mid-
single digits
International –
Excluding $14.7 million (150 bps) negative
revenue recognition adjustment, organic would
have been 5.6%
Growth across all regions, except UK
Global –
High single digit growth from Reinsurance and
mid single digit growth from Specialty |
 Total
expenses - 2013
2013: Underlying growth in total
expenses of 7.6%
After adjusting 2012 comparison to
reflect the $48 million negative
impact from the change in
remuneration policy, total
expenses up 5.7%
13
$ millions
2013
2012
Total expenses –
reported
$ 2,970
$ 3,689
(19.5)%
Fees related to the extinguishment of debt
(1)
-
Expense reduction initiative
(46)
-
Goodwill impairment charge
-
(492)
Write-off of unamortized retention awards
-
(200)
2012 cash bonus accrual
-
(252)
India JV settlement
-
(11)
Gain (loss) on disposal of operations
2
(3)
Write-off of uncollectible accounts
receivable
-
(13)
Insurance recovery
-
10
Total expenses –
adjusted
$ 2,925
$ 2,728
7.2%
Y-o-Y FX movement
9
-
Total expenses -
underlying
$ 2,934
$ 2,728
7.6%
Adjustment to reflect accrual of bonuses
throughout 2012
-
48
Total expenses –
“apples to apples”
comparison
$ 2,934
$ 2,776
5.7%
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 |
 Salaries
and benefits - 2013
2013: Underlying S&B growth of 8.1%
After adjusting 2012 comparison to
reflect the $48 million negative impact
from the change in remuneration policy,
S&B growth up 5.6%.
Driven by:
14
$ millions
2013
2012
Salaries and benefits –
reported
$ 2,207
$2,475
(10.8)%
Expense reduction initiative
(29)
-
Write-off of unamortized
retention awards
-
(200)
2012 cash bonus accrual
-
(252)
Salaries and benefits –
adjusted
$ 2,178
$2,023
7.7%
Y-o-Y FX movement
9
-
Salaries and benefits -
underlying
$ 2,187
$2,023
8.1%
Adjustment to reflect accrual of
bonuses throughout 2012
-
48
Salaries and benefits –
“apples to apples”
comparison
$ 2,187
$2,071
5.6%
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 Increased headcount
Increased production incentive
Annual salary increases |
 Other
operating expenses 2013: Other operating expenses
increased 6.3% on both adjusted and
underlying basis
Driven by:
Higher business development expenses
Higher marketing expenses
Higher professional fees
Higher IT & systems expenses
15
$ millions
2013
2012
Other operating expenses
–
reported
$ 616
$ 581
6.0%
Fees related to the
extinguishment of debt
(1)
-
Expense reduction initiative
(12)
-
India JV settlement
-
(11)
Write-off of uncollectible
accounts receivable
-
(13)
Insurance recovery
-
10
Other operating expenses
–
adjusted
$ 603
$ 567
6.3%
Y-o-Y FX movement
-
-
Other operating expenses
–
underlying
$ 603
$ 567
6.3%
See important disclosures regarding non-GAAP measures on page 2 and
reconciliations starting on page 16 |
 Important disclosures regarding non-GAAP measures
16
Commissions and fees analysis
2013
2012
Change
Foreign
currency
translation
Acquisitions
and
disposals
Organic
commissions
and fees
growth
($ millions)
%
%
%
%
Three months ended
December 31, 2013
North America
$353
$331
6.6
0.0
0.8
5.8
International
308
299
3.0
0.4
(0.4)
3.0
Global
250
237
5.5
(0.4)
4.5
1.4
Total
$911
$867
5.1
0.0
1.4
3.7
2013
2012
Change
Foreign
currency
translation
Acquisitions
and
disposals
Organic
commissions
and fees
growth
($ millions)
%
%
%
%
Twelve months ended
December 31, 2013
North America
$1,377
$1,306
5.4
(0.1)
0.6
4.9
International
1,068
1,028
3.9
(0.2)
0.0
4.1
Global
1,188
1,124
5.7
(0.9)
1.0
5.6
Total
$3,633
$3,458
5.1
(0.3)
0.5
4.9 |
 Important disclosures regarding non-GAAP measures
17
Operating income (loss) to adjusted operating income
2012
2013
(In millions)
1Q
2Q
3Q
4Q
FY
1Q
2Q
3Q
4Q
FY
Operating Income (Loss)
$317
$179
$70
($775)
($209)
$287
$171
$75
$152
$685
Excluding:
Tender related fees
-
-
-
-
-
-
-
1
-
1
Expense reduction initiative
-
-
-
-
-
46
-
-
-
46
Goodwill impairment charge
-
-
-
492
492
-
-
-
-
-
Write-off of unamortized cash retention awards
-
-
-
200
200
-
-
-
-
-
2012 cash bonus accrual
-
-
-
252
252
-
-
-
-
-
Write-off of uncollectible accounts receivable and
legal fees
13
-
-
-
13
-
-
-
-
-
Net (gain) loss on disposal of operations
-
-
1
2
3
-
-
-
(2)
(2)
Insurance recovery
-
(5)
-
(5)
(10)
-
-
-
-
-
India JV settlement
-
-
11
-
11
-
-
-
-
-
Adjusted Operating Income
$330
$174
$82
$168
$752
$333
$171
$76
$150
$730
Operating Margin
31.3%
21.3%
9.3%
(89.0%)
(6.0%)
27.3%
19.2%
9.4%
16.5%
18.7%
Adjusted Operating Margin
32.6%
20.7%
10.9%
19.1%
21.6%
31.7%
19.2%
9.6%
16.3%
20.0% |
 Important disclosures regarding non-GAAP measures
18
Net income (loss) to adjusted net income
2012
2013
(In millions, except per share data)
1Q
2Q
3Q
4Q
FY
1Q
2Q
3Q
4Q
FY
Net Income from continuing operations
$225
$107
$26
($804)
($446)
$219
$105
($27)
$68
$365
Excluding the following, net of tax:
Debt tender related fees
-
-
-
-
-
-
-
1
-
1
Debt extinguishment charge
-
-
-
-
-
-
-
60
-
60
Expense reduction initiative
-
-
-
-
-
38
-
-
-
38
Goodwill impairment charge
-
-
-
458
458
-
-
-
-
-
Write-off of unamortized cash retention awards
-
-
-
138
138
-
-
-
-
-
2012 cash bonus accrual
-
-
-
175
175
-
-
-
-
-
Net (gain) loss on disposal of operations
-
-
1
2
3
-
-
-
(1)
(1)
Write-off of uncollectible accounts receivable and legal fees
8
-
-
-
8
-
-
-
-
-
Insurance recovery
-
(3)
-
(3)
(6)
-
-
-
-
-
India JV settlement
-
-
11
11
-
-
-
-
-
Deferred tax valuation allowance
-
-
-
113
113
-
-
-
9
9
Adjusted Net Income from continuing operations
$233
$104
$38
$79
$454
$257
$105
$34
$76
$472
Diluted shares outstanding
176
176
175
175
176
176
178
180
182
179
Net income
per diluted share
$(2.58)
$(0.15)
$ 0.37
Adjusted net income
per diluted share
$2.58
$2.04
$2.64
$0.19
$0.59
$1.46
$0.45
$0.22
$0.59
$0.59
$1.24
$1.32
$(4.65)
$0.61
$1.28
$0.15
$0.42 |
 IR
Contacts Peter Poillon
Tel: +1 212 915-8084
Email: peter.poillon@willis.com
Mark Jones
Tel: +1 212 915-8796
Email: mark.p.jones@willis.com
19 |
 FOURTH
QUARTER 2013 RESULTS
Willis Group Holdings
February, 2014 |