Willis Group Reports Increased First Quarter 2006 Results; Declares Regular Quarterly Dividend.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Willis Wil·lis , Thomas 1621-1675. English anatomist and physician known for his studies of the nervous system and the brain. He discovered the circle of Willis at the base of the brain. Group Holdings Limited (NYSE NYSE See: New York Stock Exchange : WSH See Windows Script Host. ), the global insurance broker, today reported results for the quarter ended March 31, 2006. Commenting on today's results, Joe Plumeri, Chairman and Chief Executive Officer, said, "Last year we made disciplined decisions for the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. best interest of our Company, including investments in talent, processes and technology. We are pleased that the first quarter 2006, with 6 percent organic revenue growth and improved earnings, reflects the early results of these investments." First Quarter 2006 Financial Results Total reported revenues for the quarter ended March 31, 2006 were $671 million, compared with $669 million for the same period last year. The effect of foreign currency translation decreased reported revenues by 5 percent and net disposal of operations reduced reported revenues by 1 percent. Organic growth in commissions and fees excluding total market remuneration REMUNERATION. Reward; recompense; salary. Dig. 17, 1, 7. was 6 percent in the first quarter 2006, comprised of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 6 percent in net new business and a negligible  This article or section is written like a personal reflection or and may require .Please [ improve this article] by rewriting this article or section in an . impact from insurance premium rates and other market factors. Although we continue to see rates moderating, the impact is varied geographically ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge and according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. product line. Net income for the quarter ended March 31, 2006 was $140 million, or $0.88 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $67 million, or $0.41 per diluted share, a year ago. Excluding certain items which affected net income for the quarter ended March 31, 2005, as detailed in the Supplemental Financial Information of this press release, adjusted net income was $0.88 for the first quarter of 2006 compared to $0.82 for the same period last year, an increase of 7 percent. The impact of foreign currency translation reduced first quarter 2006 net income by $0.03 per diluted share compared with first quarter 2005. On January January: see month. 1, 2006, the Company adopted FAS 123R share-based payment and also changed the methodology used to calculate the market-related value of UK pension plan assets. Comparative figures for 2005 have been adjusted to reflect the retrospective LAW, RETROSPECTIVE. A retrospective law is one that is to take effect, in point of time, before it was passed. 2. Whenever a law of this kind impairs the obligation of contracts, it is void. 3 Dall. 391. application of the accounting changes. The Company also revised the expected long-term rate of return assumption on the UK pension plan assets. Each of these accounting changes is discussed in more detail in the Supplemental Financial Information of this press release. Salaries and benefits expense for the quarter ended March 31, 2006 was $348 million, or 51.9 percent of total revenues, compared with $365 million, or 54.6 percent of total revenues in the comparable period last year, excluding first quarter 2005 severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs. The improvement in this compensation ratio was helped by both increased revenue contribution from recent hires and the benefit in the first quarter 2006 of a more even quarterly recognition of incentive compensation than in 2005. Other expenses for the first quarter of 2006 were $105 million, or 15.6 percent of total revenues, compared to $96 million, or 14.3 percent in the comparable period last year, excluding first quarter 2005 costs related to regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. settlements and other provisions. Reported (and adjusted) operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was 30.4 percent for the quarter ended March 31, 2006, compared with a 13.0 percent reported margin and 29.1 percent adjusted operating margin for the same period last year. Excluding the effects on taxation of amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , disposals of operations and share-based compensation, the underlying tax rate in the first quarter of 2006 was 31.5 percent, the same as for the full year 2005. Outlook For the full year 2006, the Company anticipates continued growth in organic commissions and fees. The net impact of the accounting changes for stock options and pension on salaries and benefits and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. in 2006 is not expected to be significant. For the full year 2006, the Company expects salaries and benefits expense as a percentage of total revenues to be less than 59 percent and expects modest operating margin expansion. This outlook assumes a more selective approach toward recruiting opportunities in an environment which remains highly competitive. In conclusion, Mr. Plumeri added, "As we move into the next chapter at Willis we are committed to generating sustainable profitable growth by increasing value to our clients and delivering that value efficiently. From our already strong platform, we expect to expand our market share and continue to enhance our top line and bottom line. We anticipate that we will see significant benefits from this strategy in 2007." Other Items The Board of Directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a regular quarterly cash dividend on the Company's common stock of $0.235 per share, an annual rate of $0.94 per share. The dividend is payable on July July: see month. 14, 2006 to shareholders of record on June June: see month. 30, 2006. During the quarter ended March 31, 2006 the Company completed 4 acquisitions with annual revenues of approximately $13 million. Cash and cash equivalents totaled $158 million, including approximately $53 million of immediately available cash at March 31, 2006. There were no shares repurchased during the first quarter 2006, and there is $140 million available under the existing $500 million buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may authorization The right or permission to use a system resource; the process of granting access. See access control. . At March 31, 2006, total long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. was $600 million and total stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was approximately $1.4 billion. The capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. ratio (total long-term debt to total long-term debt and stockholders' equity) was 30 percent at March 31, 2006. Conference Call and Web Cast A conference call to discuss first quarter 2006 results will be held May 4, 2006 at 8:00 a.m. Eastern Time. To participate in the live teleconference, please dial (800) 857-6553 (US) or (773) 756-0108 (International) with a pass code of "Willis". The live audio web cast (which will be listen-only) may be accessed at www.willis.com. This call will be available by replay starting at approximately 10:00 a.m., Eastern Time, and ending May 18, 2006. To access the audio replay, please dial (866) 442-1775 (US), or (203) 369-1075 (International), or by accessing the web site. Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. , risk management, financial and human resource consulting Services Provided Human Resource Consulting firms provides advice to their clients regarding the financial and retirement security, health, productivity, and employment relationships of their global workforce. and actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin services to corporations, public entities and institutions around the world. With over 300 offices in some 80 countries, its global team of approximately 15,400 associates serves clients in some 190 countries. Additional information on Willis may be found on its web site www.willis.com. This press release may contain certain statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future results, which are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as that term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors such as general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, changes in premium rates, the competitive environment and the actual cost of resolution of contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. . Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results are contained in the Company's filings with the Securities and Exchange Commission. This press release includes supplemental financial information which may contain references to non-GAAP financial measures as defined in Regulation G of SEC rules. Consistent with Regulation G, a reconciliation of this supplemental financial information to our generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) information follows. We present such non-GAAP supplemental financial information as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company's operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. This supplemental financial information should be viewed in addition to, not in lieu of Instead of; in place of; in substitution of. It does not mean in addition to. , the Company's condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: statements of operations for the quarter ended March 31, 2006.
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months ended
March 31,
----------------
2005
As
adjusted
2006 (Note 2)
------ --------
Revenues
Commissions and fees $652 $651
Investment income 19 18
------ --------
Total Revenues 671 669
------ --------
Expenses
Salaries and benefits (including share-based
compensation of $3, $4) 348 393
Other operating expenses 105 125
Regulatory settlements - 51
Depreciation expense and amortization of intangible
assets 14 13
------ --------
Total Expenses 467 582
------ --------
Operating Income 204 87
Interest expense, net 9 6
------ --------
Income before Income Taxes, Equity in Net Income of
Associates and Minority Interest 195 81
Income taxes 62 24
------ --------
Income before Equity in Net Income of Associates and
Minority Interest 133 57
Equity in net income of associates, net of tax 14 14
Minority interest, net of tax (7) (4)
------ --------
Net Income $140 $67
====== ========
Earnings per Share
- Basic $0.89 $0.41
- Diluted $0.88 $0.41
====== ========
Average Number of Shares Outstanding
- Basic 157 163
- Diluted 159 165
====== ========
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
1. Definitions of Non-GAAP Financial Measures We believe that investors' understanding of the Company's performance is enhanced by our disclosure of the following non-GAAP financial measures. Our method of calculating these measures may differ from those used by other companies and therefore comparability may be limited. Organic revenue growth Organic revenue growth excludes the impact of foreign currency translation, acquisitions and disposals and total market remuneration from reported revenues. We use organic revenue growth as a measure of business growth generated by operations that were part of the Company at the end of the period. Adjusted operating income and adjusted net income Our results for the three months ended March 31, 2005 were significantly impacted by charges for regulatory settlements and related expenses, our first quarter 2005 headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. reduction program and other provisions. We believe that excluding these items from operating income and net income as applicable, along with the GAAP measures, provides a more complete and consistent comparative analysis of our results of operations. These items did not have a material effect on the results for the three months ended March 31, 2006. 2. Accounting and reporting changes We have made a number of changes to our accounting and reporting in first quarter 2006. In particular: Revenue analysis Following a change to our internal reporting structure, North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. Global Markets and International Global Markets revenues, which were previously reported within our Global division, are now reported in the North America and International divisions, respectively. In addition, we refined our method of allocating revenues between the Global and North America divisions. We have adjusted our 2005 revenue analysis to be consistent with the new internal reporting structure. FAS 123R, Share-Based Payment Effective January 1, 2006, we adopted FAS 123R using the modified-retrospective transition method. Our 2005 comparative data has therefore been adjusted to recognize the compensation cost previously reported in the footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." disclosure to our financial statements. The retrospective application of FAS 123R has also impacted the diluted share count in prior periods as proceeds under the treasury stock method have been adjusted with a consequent con·se·quent adj. 1. a. Following as a natural effect, result, or conclusion: tried to prevent an oil spill and the consequent damage to wildlife. b. impact on diluted share count. Proceeds were adjusted to include the future potential tax consequences that will arise when the options are exercised and the average unrecognized compensation cost outstanding during the period. Pensions: market-related value FAS 87, Employers' Accounting for Pensions, requires the expected return Expected Return The average of a probability distribution of possible returns, calculated by using the following formula: on plan assets to be determined based on the expected long-term rate of return on plan assets and the market-related value of plan assets. The market-related value of plan assets may either be a fair value or a calculated value that recognizes changes in a systematic and rational manner over not more than five years. Up to December December: see month. 31, 2005, the market-related value of our UK pension plan assets was determined using a calculated value that recognized asset gains or losses over five years. With effect from January 1, 2006, the market-related value of UK pension plan assets has been determined on a fair value basis. We believe that fair value is a preferable measure of determining the market-related value of plan assets as it more fairly reflects the actual value of pension plan assets as of the balance sheet date. In addition, it brings the methodology used for calculating the market-related value of our UK plan assets into line with the fair value methodology already used to value our US plan assets. We have adjusted our 2005 comparative data to reflect the change in method of determining the market-related value of plan assets. Pensions: return on assets Return on assets (ROA) Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets). After reviewing the long-term rate of return on our UK plan assets, effective January 1, 2006, we have increased the expected long-term rate to 7.75% from 7.25%. 3. Revenue analysis Organic revenue growth Organic revenue growth is defined as revenue growth excluding the impact of foreign currency translation, acquisitions and disposals and total market remuneration. The percentage change in reported revenues is the most directly comparable GAAP measure, and the following table reconciles this change to organic revenue growth by business unit for the three months ended March 31, 2006:
Three months ended
March 31,
-----------------------
%
2006 2005(1) Change
----- ------- --------
Global $308 $326 (6)%
North America 181 162 12%
International 163 163 0%
----- ------- --------
Commissions and fees $652 $651 0%
Investment Income 19 18 6%
----- ------- --------
Total revenues $671 $669 0%
===== ======= ========
Change attributable to
-------------------------------------------------
Foreign Acquisitions Total market Organic
currency and remuneration revenue
translation disposals growth
------------ ------------ ------------- --------
Global (4)% (4)% (1)% 3%
North America 0% 1% 0% 11%
International (9)% 3% (1)% 7%
------------ ------------ ------------- --------
Commissions and fees (4)% (1)% (1)% 6%
Investment Income (7)% (5)% 0% 18%
------------ ------------ ------------- --------
Total revenues (5)% (1)% 0% 6%
============ ============ ============= ========
(1) As described in Note 2, our prior period revenue analysis has been
adjusted to reflect our new internal reporting structure.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
4. Non-GAAP Supplemental Financial Information Adjusted operating income Adjusted operating income is defined as operating income excluding net gain on disposal of operations and, for 2005, charges for regulatory settlements and related expenses, severance costs relating to our first quarter 2005 headcount reduction program and other provisions. Operating income is the most directly comparable GAAP measure, and the following table reconciles adjusted operating income to operating income for the three months ended March 31, 2006 and 2005:
Three months ended March 31,
----------------------------
2005
As adjusted %
2006 (Note 2) Change
----- --------- --------
Operating Income, GAAP basis $204 $87 134%
Excluding:
Regulatory settlements (a) - 51
Costs related to regulatory settlements
(a) - 9
Severance costs (b) - 28
Other provision (c) - 20
----- ---------
Adjusted Operating Income $204 $195 5%
===== =========
Operating Margin, GAAP basis, or Operating
Income as a percentage of Total Revenues 30.4% 13.0%
===== =========
Adjusted Operating Margin, GAAP basis, or
Adjusted Operating Income as a percentage
of Total Revenues 30.4% 29.1%
===== =========
a) Comprises $51 million to establish the reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. funds agreed with the New York and Minnesota Attorneys General List of Minnesota Attorneys General: Duties (from Attorney General website) The Attorney General is the chief legal officer for the State of Minnesota. The Office represents and provides legal advice to over 100 state agencies, boards and commissions. and New York Department of Insurance in April 2005 and $9 million of related legal and administrative expenses. b) Severance costs relate to the headcount reduction program announced in first quarter 2005 which eliminated approximately 500 positions at a cost of $28 million. c) Based on the quarterly review of legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. at March 31, 2005, the Company increased its provision for claims by an additional $20 million.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
4. Non-GAAP Supplemental Financial Information (continued) Adjusted net income Adjusted net income is defined as net income excluding net gain on disposal of operations and, for 2005, charges for regulatory settlements and related expenses, severance costs relating to our first quarter 2005 headcount reduction program and other provisions. Net income is the most directly comparable GAAP measure, and the following table reconciles adjusted net income to net income for the three months ended March 31, 2006 and 2005:
Three months ended Per diluted share
March 31, Three months ended
March 31,
----------------------- ------------------------
2005 2005
As adjusted % As adjusted %
2006 (Note 2) Change 2006 (Note 2) Change
----- -------- -------- ------ -------- --------
Net income, GAAP
basis $140 $67 109% $0.88 $0.41 115%
Excluding:
Regulatory
settlements, net
of tax ($20) - 31 - 0.19
Costs related to
regulatory
settlements, net of
tax ($4) - 5 - 0.03
Severance costs,
net of tax ($9) - 19 - 0.11
Other provision,
net of tax ($6) 14 - 0.08
----- -------- ------ --------
Adjusted net income $140 $136 3% $0.88 $0.82 7%
===== ======== ====== ========
Diluted shares
outstanding, GAAP
basis 159 165
===== ========
WILLIS GROUP HOLDINGS LIMITED
NON-GAAP FINANCIAL SUPPLEMENT
(in millions, except per share data)
(unaudited)
2005 2006
---------------------------------- ------
Q1 Q2 Q3 Q4 FY Q1
------ ------ ------ ------ ------ ------
Revenues (1)
Global $326 $235 $202 $200 $963 $308
North America 162 182 171 205 720 181
International 163 113 96 139 511 163
------ ------ ------ ------ ------ ------
Commissions and fees 651 530 469 544 2,194 652
Investment income 18 19 18 18 73 19
------ ------ ------ ------ ------ ------
Total Revenues 669 549 487 562 2,267 671
------ ------ ------ ------ ------ ------
Expenses
Salaries and benefits as
previously
reported/computed 386 309 313 348 1,356 351
Adoption of FAS 123R (2) 4 5 4 5 18 3
Pensions: market-related
value methodology (2) 3 2 2 3 10 (6)
------ ------ ------ ------ ------ ------
Salaries and benefits as
adjusted/reported 393 316 319 356 1,384 348
Other operating expenses 125 98 89 93 405 105
Regulatory settlements 51 - - - 51 -
Depreciation expense and
amortization of intangible
assets 13 14 13 14 54 14
Net gain on disposal of
operations - (78) - - (78) -
------ ------ ------ ------ ------ ------
Total Expenses 582 350 421 463 1,816 467
------ ------ ------ ------ ------ ------
Operating Income 87 199 66 99 451 204
Operating Income margin 13.0% 36.2% 13.6% 17.6% 19.9% 30.4%
Interest expense, net 6 6 9 9 30 9
------ ------ ------ ------ ------ ------
Income before Income Taxes,
Equity in Net Income
(Loss) of Associates and
Minority Interest 81 193 57 90 421 195
Income taxes as
previously
reported/computed 26 77 18 31 152 61
Adoption of FAS 123R (1) (2) (1) (2) (6) (1)
Pensions: market-related
value methodology (1) - (1) (1) (3) 2
------ ------ ------ ------ ------ ------
Income taxes as
adjusted/reported 24 75 16 28 143 62
------ ------ ------ ------ ------ ------
Income before Equity in Net
Income (Loss) of
Associates and Minority
Interest 57 118 41 62 278 133
Equity in net income (loss)
of associates, net of tax 14 (2) 5 (3) 14 14
Minority interest, net of tax (4) (2) (1) (4) (11) (7)
------ ------ ------ ------ ------ ------
Net Income $67 $114 $45 $55 $281 $140
====== ====== ====== ====== ====== ======
Earnings per Share
- Diluted (3) $0.41 $0.70 $0.28 $0.35 $1.72 $0.88
====== ====== ====== ====== ====== ======
Average Number of Shares
Outstanding
- Basic 163 163 160 157 161 157
Diluted as previously
reported 168 166 163 160 164 159
Adoption of FAS 123R (3) (3) (2) (1) (1) (1) -
------ ------ ------ ------ ------ ------
- Diluted as adjusted/
reported 165 164 162 159 163 159
====== ====== ====== ====== ====== ======
(1) As described in Note 2, our prior period revenue analysis has been adjusted to reflect our new internal reporting structure. (2) Details of the accounting and reporting changes are described in Note 2. (3) The impact on diluted share count from the retrospective application of FAS 123R is described in Note 2. |
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