01—Abstract
Summary
Summary of the 10-K filed March 1, 2010. Cited figures are marked; the original filing is the authoritative source.
Willis Group Holdings Public Limited Company, filed under the name Willis Group Holdings plc, reported total revenues of $3.263 billiona for 2009, up from $2.827 billion in 2008, and operating income of $694 million versus $503 million.
Net income attributable to Willis Group Holdings was $438 millionb, or $2.58 per diluted share from continuing operations, compared with $2.04 in 2008. The filing attributes the improvement to 2% organic growth in commissions and fees, cost control, the full-year contribution of the HRH acquisition completed October 1, 2008, and a $27 million tax release tied to a UK tax law change. Operating margin rose to 21% from 18%.
The balance sheet reflects the HRH acquisition: goodwill of $3.277 billionc and other intangible assets of $572 million, with total debt of $2.374 billion at year-end 2009 (2008: $2.650 billion). Management reports a debt to adjusted EBITDA ratio of 2.6 times against a target below 2.5 times, and no share repurchases were made in 2009, leaving $925 million under the buyback program. Cash from operations was $418 million, up from $224 million, and the company refinanced the interim credit facility with 12.875% senior notes due 2016 and 7.0% senior notes due 2019.
The filing also describes the December 2009 reorganization of Gras Savoye, which reduced Willis's stake from 49% to 31% and produced $155 milliond in cash proceeds. It also describes the Redomicile of the parent from Bermuda to Ireland, which the company does not expect to have a material impact on its financial results. Key risks disclosed include the continuing soft insurance premium market, errors and omissions litigation including the Stanford Financial Group class actions seeking damages above $1 billion, and pension funding obligations of about $122 million expected in 2010.
02—Key points
Key Highlights
- Total revenues rose 15% to $3.263 billion in 2009 from $2.827 billion, with a 19% benefit from net acquisitions and disposals driven by HRH and 2% organic growth in commissions and fees.
- Operating income increased to $694 million from $503 million, and operating margin improved to 21% from 18%.
- Diluted earnings per share from continuing operations were $2.58, up from $2.04, including a $0.16 one-time tax release related to a 2009 UK tax law change.
- Total debt was $2.374 billion at December 31, 2009, with a debt to adjusted EBITDA ratio of 2.6 times against a target below 2.5 times, and no shares were repurchased in 2009.
- The December 2009 Gras Savoye reorganization reduced the company's interest from 49% to 31%, producing $155 million in cash proceeds and a $10 million gain.
- Operating cash flow was $418 million in 2009 versus $224 million in 2008, helped by a reduction in pension contributions to $82 million from $154 million.
- Pension contributions of approximately $120 million to $122 million are expected in 2010, and the company recognized a $12 million curtailment gain from closing its US defined benefit plan.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed March 1, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $3.25B$2.83B | +15.1% |
| Operating Expenses | $2.56B$2.32B | +10.3% |
| Operating Income | $690.00M$503.00M | +37.2% |
| Interest Expense | $174.00M$105.00M | +65.7% |
| Net Income | $438.00M$303.00M | +44.6% |
| EPS (Basic) | $2.61$2.04 | +27.9% |
| EPS (Diluted) | $2.59$2.04 | +27.0% |
| Shares Outstanding (Basic) | 168.00M— | — |
| Shares Outstanding (Diluted) | 169.00M— | — |
05—Questions
Frequently Asked Questions
How did the HRH acquisition affect Willis's 2009 results?
HRH was acquired on October 1, 2008, and its full-year inclusion lifted 2009 revenues. The filing attributes a 19% benefit from net acquisitions and disposals to HRH, and general and administrative expenses rose $414 million from HRH. The company reports about $205 million of cost savings achieved from integrating HRH in 2009, and it recorded $58 million of additional amortization on HRH intangible assets.
What is the company's debt position and what are management's stated priorities?
Total debt was $2.374 billion at year-end 2009, including $2.165 billion of long-term debt and $209 million of short-term debt. Management's short-term capital priority is debt reduction, targeting a debt to adjusted EBITDA ratio below 2.5 times from an actual 2.6 times. Share buybacks will be considered only once the ratio is at or below that target.
What are the main litigation exposures disclosed?
The filing discloses errors and omissions claims, contingent commission investigations, a reinsurance market dispute over 1993 to 1998 personal accident contracts, a gender discrimination class action, and Stanford Financial Group-related class actions. The Stanford complaints seek actual damages in excess of $1 billion, and the company states the outcomes cannot be predicted at this time.
What does the Redomicile to Ireland change for shareholders?
Willis Group Holdings was incorporated in Ireland on September 24, 2009, and Willis-Bermuda shareholders received ordinary shares on a one-for-one basis. The company states it does not expect the Redomicile to have a material impact on its financial results, and it continues to report in US dollars under US GAAP and to be subject to SEC reporting requirements. The shares continue to trade on the NYSE under the symbol WSH.
06—Continue