Steven Wevodau - Insurance Mergers & Acquisitions

Willis Group Reports First Quarter 2009 Results - Posted by Steven Wevodau

Steve9982 — Sat, 02 May 2009 16:29:12 +0000

On Wednesday April 29, 2009, 4:36 pm EDT

NEW YORK–(BUSINESS WIRE)–Willis Group Holdings Limited (NYSE: WSH - News), the global insurance broker, today reported results for the quarter ended March 31, 2009. Highlights of the first quarter include:

Reported earnings per diluted share from continuing operations of $1.15 (adjusted $1.16)
Adjusted earnings per diluted share from continuing operations of $1.30, excluding year-on-year foreign exchange impact
19 percent reported growth in commissions and fees
2 percent organic growth in commissions and fees; International and Global segments each with 5 percent growth
Reported operating margin of 29.5 percent; adjusted operating margin of 29.8 percent
Interim bridge facility reduced to $103 million at March 31, 2009

“We continue to deliver solid financial results in the face of global economic and financial headwinds, despite an ongoing soft insurance market,” said Joe Plumeri, Chairman and Chief Executive Officer, Willis Group Holdings. “Our revenue growth reflects the strength of our geographic and business line diversity and our earnings and operating margin demonstrate our ability to manage the expense base through these difficult times.

“We remain focused on top line growth while relentlessly managing costs through our Right Sizing Willis initiative and the integration of HRH,” Plumeri added. “We have overcome various headwinds to our adjusted operating margin, including lower investment income, higher pension expense, dilution from the HRH acquisition, higher severance expense and unfavorable foreign currency impact in the quarter. These factors combined had an unfavorable impact of over 900 basis points, yet we were still able to deliver an adjusted operating margin of close to 30 percent in the first quarter of 2009.”

Financial Results

Reported net income from continuing operations for the quarter ended March 31, 2009 was $192 million, or $1.15 per diluted share, compared with $166 million, or $1.16 per diluted share, in the same period a year ago. Reported first quarter net income was significantly affected by the acquisition of Hilb Rogal & Hobbs Company (HRH), certain other non-operating items and foreign currency translation.

Excluding certain items, which are reviewed in detail in this release, adjusted earnings per diluted share from continuing operations were $1.16 in the first quarter of 2009 compared with $1.32 in the first quarter of 2008, a decrease of 12 percent. The results for the first quarter of 2009 were also significantly impacted by foreign currency translation, which reduced earnings per diluted share by $0.14 compared with the first quarter of 2008. This was primarily the result of the significant strengthening of the US dollar relative to the Euro.

Total reported revenues for the quarter ended March 31, 2009 were $930 million compared with $795 million for the same period last year, an increase of 17 percent. This increase was primarily due to the HRH acquisition. The effect of foreign currency decreased reported revenues by 12 percent.

Organic growth in commissions and fees was 2 percent in the first quarter of 2009 compared with the first quarter of 2008. This growth reflected net new business won of 7 percent offset, by a negative 5 percent impact from declining premium rates and other market factors, such as higher commission rates, changes in insured values and changes in limits and exposures. Continued strong client retention levels and momentum from Shaping our Future growth initiatives, such as Shaping our Future Marketing and Client Profitability, also contributed to organic growth.

The International business segment contributed 5 percent organic growth in commissions and fees in the first quarter of 2009 compared with the same period in 2008. This growth came from steady net new business and continued traction from Shaping our Future growth initiatives, which more than offset the soft rate environment. Latin America, Asia and Europe performed well, especially Spain, Denmark and Russia.

The North America segment reported a 5 percent decline in organic commissions and fees compared with the first quarter of 2008, reflecting soft insurance market conditions, the ongoing focus on the integration of HRH, as well as increased weakness in the US economy, which has especially impacted the US Construction and Financial Institutions practices. The operating margin in North America expanded to 24.9 percent in the first quarter of 2009 as a result of HRH integration synergies and management of the cost base.

The Global segment, which comprises Global Specialties and Reinsurance, recorded 5 percent organic growth in commissions and fees in the first quarter of 2009 compared with the first quarter of 2008. Global Specialties had positive organic growth in commissions and fees across many specialty businesses, with especially strong growth in Marine, Energy and Construction, while Reinsurance benefited from strong net new business as well as a stabilizing rate environment to drive strong positive organic growth.

Reported operating margin was 29.5 percent for the quarter ended March 31, 2009 compared with 28.3 percent for the same period last year. Excluding certain items, adjusted operating margin was 29.8 percent for the quarter ended March 31, 2009 compared with 32.5 percent a year ago. Operating margin faced significant financial headwinds that were tempered by good underlying business performance and benefits from the ongoing expense review. The decline in the adjusted operating margin reflected dilution from the HRH acquisition (410 basis points), higher pension expense (220 basis points), higher severance expense (180 basis points), lower investment income (70 basis points) and unfavorable foreign currency impact (40 basis points).

Salaries and benefits were $480 million, or 51.6 percent of total revenue, in the first quarter of 2009 compared with $411 million, or 51.7 percent, in the first quarter of 2008. On an adjusted basis, salaries and benefits were $479 million, or 51.5 percent of revenues, in the first quarter of 2009 compared with $396 million, or 49.8 percent, in the first quarter of 2008. The increase in salaries and benefits on an adjusted basis reflected the acquisition of HRH, higher pension expense ($20 million) and higher severance expense ($15 million), tempered by diligent expense management and favorable foreign currency.

Other operating expenses were $138 million, or 14.8 percent of total revenues, in the first quarter of 2009 compared with $149 million, or 18.7 percent, in the first quarter of 2008. On an adjusted basis, other operating expenses in the first quarter of 2009 were $136 million, or 14.6 percent of revenues compared with $131 million, or 16.5 percent of revenues in the first quarter of 2008. The increase in other expenses on an adjusted basis reflects the acquisition of HRH, partially offset by synergies and cost savings from diligent cost management, which resulted in an improvement in the other expenses to revenues ratio.

Tax

The effective underlying tax rate for the quarter ended March 31, 2009 was 26 percent, the same as the 2008 full year rate.

Discontinued Operations

Income from discontinued operations, net of tax was $1 million, or $0.01 per diluted share, in the first quarter of 2009. Subsequent to the first quarter, the Company entered into an agreement to dispose of Bliss & Glennon, its US-based wholesale insurance operation. Consequently, Bliss & Glennon’s assets and liabilities have been classified as held-for-sale and their results reported as discontinued operations for the quarter. The transaction was finalized in April 2009 for net proceeds of $39 million. No net gain or loss was recognized relating to this transaction.

Capital

The Board of Directors declared a regular quarterly cash dividend on the Company’s common stock of $0.26 per share, or an annual rate of $1.04 per share. The dividend is payable on July 13, 2009 to shareholders of record on June 30, 2009.

As of March 31, 2009, cash and cash equivalents totaled $147 million and total debt was $2.654 billion. Total stockholders’ equity was $2.086 billion.

Conclusion

“We’re off to a good start in 2009 in an environment with significant economic and financial headwinds,” Plumeri said. “Our priorities for 2009 remain the same: focus on growth with continued execution of Shaping our Future, the integration of HRH and our ongoing expense review to right size Willis for the current environment. With long-term capital in place, we continue to strengthen the balance sheet and enhance our financial flexibility.”

Conference Call and Web Cast

A conference call to discuss the first quarter 2009 results will be held on Thursday, April 30, 2009, at 8:00 AM Eastern Time. To participate in the live teleconference, please dial (866) 803-2143 (domestic) or +1 (210) 795-1098 (international) with a pass code of “Willis Q1”. 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 AM Eastern Time, and through May 30, 2009 at 11:59 PM Eastern Time, by calling (866) 360-8717 (domestic) or +1 (203) 369-0181 (international) with no pass code, or by accessing the website.

Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 20,000 Associates serving clients in some 190 countries. Additional information on Willis may be found at www.willis.com.

Forward-Looking Statements

We have included in this document ‘‘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 the potential benefits of the business combination transaction involving Willis and HRH, our outlook and guidance regarding future adjusted operating margin and adjusted earnings per diluted share, future capital expenditures, expected growth in commissions and fees, business strategies, competitive strengths, goals, the anticipated 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 regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

our ability to achieve the expected cost savings, synergies and other strategic benefits as a result of the acquisition of HRH or the amount of time it may take to achieve such cost savings, synergies and benefits expected to be realized as a result of the integration of HRH with our operations,
our ability to continue to manage our indebtedness,
our ability to implement and realize anticipated benefits of the Shaping our Future initiative and other new initiatives,
our ability to retain existing clients and attract new business, and our ability to retain key employees,
changes in commercial property and casualty markets, or changes in premiums and availability of insurance products due to a catastrophic event such as a hurricane,
volatility or declines in other insurance markets and the premiums on which our commissions are based,
impact of competition,
the impact of insolvencies of clients or insurance companies resulting from an economic downturn,
the timing or ability to carry out share repurchases or take other steps to manage our capital and limitations in our long-term debt agreements that may restrict our ability to take these actions,
a significant decline in the value of investments that fund our pension plans or changes in our pension plan funding obligations,
fluctuations in exchange and interest rates that could affect expenses and revenue,
rating agency actions that could inhibit ability to borrow funds or the pricing thereof,
domestic and foreign legislative and regulatory changes affecting both our ability to operate and client demand,
potential costs and difficulties in complying with a wide variety of foreign laws and regulations, given the global scope of our operations,
the impact of current financial market conditions on the results of our operations and financial condition,
changes in the tax or accounting treatment of our operations,
our exposure to potential liabilities arising from errors and omissions claims against us,
the results of regulatory investigations, legal proceedings and other contingencies, and
the timing of any exercise of put and call arrangements with associated companies.

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 factors see also Part I, Item 1A ‘‘Risk Factors’’ included in Willis’ Form 10-K for the year ended December 31, 2008. Copies of the 10-K 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 document, 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 document may not occur, and we caution you against unduly relying on these forward-looking statements.

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 (GAAP) information is in the note disclosures that follow. 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, the Company’s condensed consolidated income statements for the three months ended March 31, 2009 and balance sheet as at that date.


WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in millions, except per share data)
(unaudited)

	Three months ended March 31,
	2009		2008
Revenues
Commissions and fees	$ 915		$ 772
Investment income	13		22
Other income	2		1
Total revenues	930		795
Expenses
Salaries and benefits	480		411
Other operating expenses	138		149
Depreciation expense	14		13
Amortization of intangible assets	24		3
Net gain on disposal of London headquarters	-		(6	)
Total expenses	656		570
Operating Income	274		225
Interest expense	38		16
Income from Continuing Operations before Income Taxes and Interest in
Earnings of Associates	236		209
Income taxes	62		60
Income from Continuing Operations before Interest in Earnings of Associates	174		149
Interest in earnings of associates, net of tax	26		26
Income from Continuing Operations	200		175
Discontinued Operations, net of tax	1		-
Net Income	201		175
Net income attributable to noncontrolling interests	(8	)	(9	)
Net Income attributable to Willis Group Holdings Limited	$ 193		$ 166


WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENTS (Continued)
(in millions, except per share data)
(unaudited)

	Three months ended March 31,
	2009	2008
Earnings per Share – Basic and Diluted
Basic Earnings per Share:
Continuing Operations	$ 1.15	$ 1.17
Discontinued Operations	0.01	-
Net Income attributable to Willis Group Holdings Limited common
shareholders	$1.16	$1.17
Diluted Earnings per Share:
Continuing Operations	$ 1.15	$ 1.16
Discontinued Operations	0.01	-
Net Income attributable to Willis Group Holdings Limited common
shareholders	$1.16	$1.16
Average Number of Shares Outstanding
- Basic	167	142
- Diluted	167	143

Amounts attributable to Willis Group Holdings Limited common shareholders:
Income from Continuing Operations, net of tax	$ 192	$ 166
Income from Discontinued Operations, net of tax	1	-
Net Income	$ 193	$ 166


WILLIS GROUP HOLDINGS LIMITED
SUMMARY DRAFT BALANCE SHEETS
(in millions) (unaudited)

	March 31, 2009	December 31, 2008
Assets
Cash & cash equivalents	$ 147	$ 176
Fiduciary funds—restricted	1,803	1,854
Short-term investments	17	20
Accounts receivable, net	9,688	9,131
Fixed assets, net	305	312
Goodwill and intangibles, net	3,928	3,957
Investments in associates	293	273
Deferred tax assets	64	76
Pension benefits asset	134	111
Assets held for sale	69	-
Other assets	661	492
Total Assets	$ 17,109	$ 16,402
Liabilities and Stockholders’ Equity
Accounts payable	$ 10,795	$ 10,314
Deferred revenue and accrued expenses	333	471
Deferred tax liabilities	12	21
Income taxes payable	107	18
Short-term debt	174	785
Long-term debt	2,480	1,865
Liability for pension benefits	244	237
Liabilities associated with assets held for sale	29	-
Other liabilities	849	796
Total Liabilities	15,023	14,507
Equity attributable to Willis Group Holdings Limited	2,033	1,845
Noncontrolling interests	53	50
Total Stockholders’ Equity	2,086	1,895
Total Liabilities and Stockholders’ Equity	$ 17,109	$ 16,402

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 commissions and fees growth

Organic commissions and fees growth excludes: the impact of foreign currency translation, the first twelve months of net commission and fee revenues generated from acquisitions, and net commission and fee revenues related to operations disposed of in each period presented.

Adjusted operating income and adjusted net income

Our results have been impacted by the charges related to the 2008 expense review and costs associated with the acquisition of HRH, together with net gains/losses on disposal of operations. 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.

2. Analysis of Commissions and Fees

Organic growth in commissions and fees is defined as growth in commissions and fees excluding the impact of foreign currency translation and acquisitions and disposals. The percentage change in reported commissions and fees is the most directly comparable GAAP measure, and the following table reconciles this change to organic growth in commissions and fees by business unit for the three months ended March 31, 2009:

	Three months ended March 31,			Change attributable to
	2009	2008	% Change	Foreign currency translation	Acquisitions and disposals	Organic commissions and fees Growth ^(a)
Global	$275	$277	(1)%	(8)%	2%	5%
North America	371	191	94%	(1)%	100%	(5)%
International	269	304	(12)%	(17)%	0%	5%
Commissions and fees	$915	$772	19%	(11)%	28%	2%

From fourth quarter 2008, we have changed our methodology for the calculation of organic growth in commissions and fees. Previously, organic growth included growth from acquisitions from the date of acquisition. Under the new method, the first twelve months of commissions and fees generated from acquisitions are excluded from organic growth in commissions and fees.

WILLIS GROUP HOLDINGS LIMITED

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions) (unaudited)

3. 2008 Expense Review

In 2008, we conducted a thorough review of all businesses to identify additional opportunities to rationalize the expense base. Consequently, we incurred a pre-tax charge of $33 million ($23 million or $0.16 per diluted share after tax) in the first quarter of 2008 for severance and other costs as analyzed in the following table:


		First quarter 2008
		Pre-tax
Salaries and benefits - severance (a)		$ 15
Other operating expenses (primarily relating to
property and systems rationalization)		18
		$ 33

Severance costs relate to approximately 150 positions which have been eliminated.

4. Adjusted Operating Income

Adjusted operating income is defined as operating income excluding integration costs associated with the acquisition of HRH, net gains/losses on disposal of operations and charges related to the 2008 expense review. 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, 2009 and 2008:

	Three months ended March 31,
	2009	2008	% Change
Operating Income, GAAP basis	$274	$225	22%
Excluding:
HRH integration costs	3	-
Salaries and benefits – severance (a)	-	15
Other operating expenses (primarily relating to
property and systems rationalization)	-	18

Adjusted Operating Income	$277	$258	7%
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues	(29.5%)	(28.3%)
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues	(29.8%)	(32.5%)

Severance costs excluded from adjusted operating income in 2008 relate to approximately 150 positions that were eliminated as part of the 2008 expense review. Severance costs also arise in the normal course of business and these charges (pre-tax) amounted to $16 million in the first quarter 2009 relating to approximately 300 positions ($1 million in first quarter 2008).

WILLIS GROUP HOLDINGS LIMITED

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

5. Adjusted Net Income from Continuing Operations

Adjusted net income is defined as net income from continuing operations excluding integration costs associated with the acquisition of HRH, net gains/losses on disposal of operations and charges related to the 2008 expense review. Net income from continuing operations is the most directly comparable GAAP measure, and the following table reconciles adjusted net income from continuing operations to net income from continuing operations for the three months ended March 31, 2009 and 2008:

	Three months ended March 31,			Per diluted share Three months ended March 31,
	2009	2008	% Change	2009	2008	% Change
Net Income from Continuing
Operations, GAAP basis	$192	$166	16%	$1.15	$1.16	(1)%

Excluding:
HRH integration costs,
net of tax ($1)	2	-		0.01	-
Salaries and benefits – severance,
net of tax ($nil),($5) (a)	-	10		-	0.07
Other operating expenses (primarily
relating to property and systems
rationalization), net of tax
($nil),($5)	-	13		-	0.09

Adjusted Net Income from Continuing
Operations	$194	$189	3%	$1.16	$1.32	(12)%

Diluted shares outstanding, GAAP basis	167	143

Severance costs excluded from net income in 2008 relate to approximately 150 positions that were eliminated as part of the 2008 expense review. Severance costs also arise in the normal course of business and these charges (pre-tax) amounted to $16 million in first quarter 2009 relating to approximately 300 positions ($1 million in first quarter 2008).


WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)

	2008					2009
	Q1	Q2	Q3	Q4	FY	Q1
Revenues
Commissions and fees	$ 772	$ 641	$ 556	$ 782	$2,751	$ 915
Investment income	22	20	22	17	81	13
Other income	1	-	1	-	2	2
Total revenues	795	661	579	799	2,834	930
Expenses
Salaries and benefits	411	428	359	444	1,642	480
Other operating expenses	149	141	131	184	605	138
Depreciation expense	13	14	14	13	54	14
Amortization of intangible
Assets	(3)	(3)	(6)	24	36	24
Net (gain) / loss on disposal of
London headquarters	(6)	(2)	-	1	(7)	-
Net loss / (gain) on disposal of operations	-	-	3	(3)	-	-
Total expenses	570	584	513	663	2,330	656
Operating Income	225	77	66	136	504	274
Interest expense	16	21	32	36	105	38

Income from Continuing Operations before Income
Taxes and Interest in Earnings of Associates	(209)	(56)	(34)	(100)	(399)	(236)
Income taxes	60	12	2	23	97	62

Income from Continuing Operations before
Interest in Earnings of Associates	(149)	(44)	(32)	(77)	(302)	(174)
Interest in earnings of associates, net of tax	26	(3)	6	(7)	22	26
Income from Continuing Operations	175	41	38	70	324	200
Discontinued Operations, net of tax	-	-	-	-	-	1
Net Income	175	41	38	70	324	201
Net income attributable to noncontrolling
interests	(9)	(2)	(2)	(8)	(21)	(8)
Net Income attributable to Willis Group
Holdings Limited	$166	$39	$36	$62	$303	$193

Diluted Earnings per Share
- Continuing Operations	$1.16	$0.27	$0.25	$0.37	$2.05	$1.15
- Discontinued Operations	-	-	-	-	-	0.01
Net Income attributable to Willis Group
Holdings Limited common shareholders	$1.16	$0.27	$0.25	$0.37	$2.05	$1.16
Average Number of Shares Outstanding
- Diluted	143	142	142	167	148	167


WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)

	2008					2009
	Q1	Q2	Q3	Q4	FY	Q1
Commissions and Fees
Global	$ 277	$ 191	$ 159	$ 157	$ 784	$ 275
North America	191	193	175	353	912	371
International	304	257	222	272	1,055	269
Total Commissions and Fees	$ 772	$ 641	$ 556	$ 782	$2,751	$ 915

Total Revenues
Global	$ 285	$ 199	$ 167	$ 163	$ 814	$ 278
North America	196	197	179	357	929	377
International	314	265	233	279	1,091	275
Total Revenues	$ 795	$ 661	$ 579	$ 799	$2,834	$ 930

Operating Income ^(c)
Global	$ 132	$ 60	$ 29	$ 19	$ 240	$ 127
North America	27	31	18	67	143	94
International	104	57	38	107	306	96
Corporate and Other ^{(a) (b)}	(38)	(71)	(19)	(57)	(185)	(43)
Total Operating Income	$ 225	$ 77	$ 66	$ 136	$ 504	$ 274

Organic Commissions and Fees Growth
Global	2%	0%	(2)%	9%	2%	5%
North America	3%	(1)%	(2)%	(4)%	(1)%	(5)%
International	5%	10%	10%	11%	9%	5%
Total Organic Commissions and Fees Growth	3%	3%	2%	6%	4%	2%

Operating Margin ^(c)
Global	46.3%	30.2%	17.4%	11.7%	29.5%	45.7%
North America	13.8%	15.7%	10.1%	18.8%	15.4%	24.9%
International	33.1%	21.5%	16.3%	38.4%	28.0%	34.9%
Total Operating Margin	28.3%	11.6%	11.4%	17.0%	17.8%	29.5%

(a)		Corporate and Other includes the costs of the holding company, foreign exchange hedging activities and foreign exchange on the UK pension plan asset, amortization of intangible assets, net gains and losses on disposal of operations, certain legal costs, integration costs associated with the acquisition of HRH and 2008 expense review costs.
(b)		The Company does not hold business segment management accountable for managing foreign exchange exposure on the retranslation of the UK pension plan asset. Historically, a relatively stable exchange rate environment had led to foreign exchange on the UK pension plan asset having no material impact on segment operating income and margin. However, following significant exchange rate movements in 2008, the Company decided that, effective October 1, 2008, foreign exchange on the pension plan asset would be excluded from segment operating income and reported within Corporate and Other.
(c)		Prior periods restated to conform to current period presentation.

Contact:

Willis Group Holdings Limited
Investors:
Kerry K. Calaiaro, 212-915-8084
kerry.calaiaro@willis.com
or
Media:
Valerie Di Maria, 212-915-8272
valerie.dimaria@willis.com
or
Will Thoretz, 212-915-8251
will.thoretz@willis.comS

Brown & Brown CEO Hunts Down More Green - Posted by Steven Wevodau

Steve9982 — Sat, 02 May 2009 16:27:11 +0000

By Teresa Rivas
Posted by Steven Wevodau

THE DIFFICULT INSURANCE environment has not been kind to broker Brown & Brown (ticker: BRO), especially given the competitive market in property and casualty coverage, where the company generates most of its business. However, despite a recent earnings miss the longtime head of Brown & Brown has snapped up just under $1 million in stock.

On April 23, Chairman and Chief Executive Officer Hyatt Brown purchased 54,000 shares for $988,114, or $18.30 a share. Brown purchased …

http://online.barrons.com/article/SB124084717811459643.html?ru=yahoo&mod=yahoobarrons

Brown & Brown, Inc. Announces the Asset Acquisition of One Source Insurance, Inc.

Steve9982 — Tue, 10 Mar 2009 14:44:06 +0000

Posted by Steven Wevodau

DAYTONA BEACH, FL and TAMPA, FL–(MARKET WIRE)–Mar 2, 2009 — J. Scott Penny, Regional Executive Vice President of Brown & Brown, Inc. (NYSE:BRO - News), and R. John Elmer, President of One Source Insurance, Inc., of Noblesville, Indiana, today announced the asset acquisition of One Source Insurance, Inc. by Brown & Brown of Indiana, Inc., a subsidiary of Brown & Brown, Inc.One Source Insurance, with annual revenues of approximately $1.3 million, provides individual and group life, health, and other employee benefits products and services to individuals, businesses and organizations throughout Indiana. John Elmer and his staff will continue to operate from their existing Noblesville, Indiana office.

Mr. Penny, who is responsible for Brown & Brown’s Midwestern retail operations, commented, “The employee benefits arena is expanding and, as the recently passed stimulus bill shows, growing more and more complex. We are excited to have John and his team join us and further deepen our employee benefits expertise.”

Brown & Brown, Inc. and its subsidiaries offer a broad range of insurance and reinsurance products and services, as well as risk management, third party administration, managed health care, and Medicare set-aside services and programs. Providing service to business, public entity, individual, trade and professional association clients nationwide, the Company is ranked by Business Insurance magazine as the seventh largest independent insurance intermediary in the United States. The Company’s Web address is www.bbinsurance.com.

This press release may contain certain statements relating to future results which are forward-looking statements, including those associated with this acquisition. These statements are not historical facts, but instead represent only the Company’s current belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that the Company’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results and condition, as well as its other achievements, are contained in the Company’s filings with the Securities and Exchange Commission. Some factors include those factors relevant to Brown & Brown’s consummation and integration of the announced acquisition, including any matters analyzed in the due diligence process, material adverse changes in the customers of the company whose operations are being acquired and material adverse changes in the business and financial condition of either or both companies and their respective customers. All forward-looking statements made herein are made only as of the date of this release, and the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the Company hereafter becomes aware.

Contact:

     Contact:
     Cory T. Walker
     Chief Financial Officer
     (386) 239-7250

Source: Brown & Brown, Inc.

Let’s talk mergers… - Steven Wevodau

Steve9982 — Sun, 08 Mar 2009 15:41:23 +0000

Bhavana Acharya

The spotlight is now on mergers, with the RIL-RPL deal just around the corner, but despite the deluge of news updates and analysis, mergers may still make little sense if the concepts and terms involved are not clear. Here’s taking a look at mergers and their underlying dynamics, so you can understand why and how they happen.

To begin with, a merger is when two companies combine voluntarily, as opposed to an acquisition where one company takes over the other. It’s an easy form of what is called ‘inorganic’ expansion, as a company skips over the many years it otherwise may have taken to grow on its own. Theoretically, mergers are meant to be between equals, with the individual companies ceasing to exist in favour of the new entity. However, in reality, mergers rarely create a wholly new entity. Instead, one company is usually merged into another.

Take the RIL-RPL merger for instance. The smaller entity RPL will be merged into the bigger RIL — no new entity is formed, but RPL ceases to exist.

Merger motives: What gives?

The idea behind any merger is to create synergy — making one and one add up to three! That is to say, the value of the merged entity, by virtue of the merger itself, becomes greater than the sum of the independent values of the merging companies. Merger benefits may accrue from, say, acquisition of new technology, or when smaller, specialised companies merge with larger companies, in which case they not only profit from the technology but also gain competitive advantage. Benefits can also be cloaked as market share increases or wider geographical reach, which is especially the case in cross-country mergers. Staff benefits may be amassed through a management shake-up or the talent pool in the merging company. And since the size of the newly merged company also increases with mergers, advantages by virtue of size in terms of cost of production, bargaining power and so on may also be a significant driver of mergers.

Strategic benefits may also stem from a pre-emptive strike against competition, or by becoming big enough to overcome competition. In case of vertical mergers, wherein a company merges with its suppliers or customers, the benefits accrue by way of a greater control over the supply chain, reduced costs, and assured supply, improved coordination and much more.

These apart, tax advantages may be the other force behind mergers. If the one of the merging entities enjoys an SEZ status, that benefit may be passed on to the newly merged company. A firm with accumulated losses or a huge unabsorbed depreciation merging with a profitable firm erects tax shields which neither company may be in a position to enjoy independently.

That said, achieving synergies is easier said than done, and may not necessarily pan out as intended. In the impending RIL-RPL merger, creating a behemoth and RPL’s SEZ advantage may be the discernible benefits from the merger.

Merger money: What’s at stake?

So once a merger and its synergies are decided, the question of financing it pops up. Merger financing may be by way of cash, stock, or both. In cash payouts, the shareholders of the merged company give up their shares in exchange for cash. This, however, leans more towards acquisitions rather than mergers.

Where mergers involve purely stock payments, swap ratios come into play. Shares in one company (merged entity) are exchanged for shares in the other (merging company). The ratio in which the shares are exchanged is termed the share swap or exchange ratio. For example, in the merger of HDFC Bank and Centurion Bank of Punjab (CBoP), 29 shares of the latter were exchanged for a single share in HDFC Bank, bringing the exchange ratio to 29:1.

The ratio is worked out based on the valuation of the two companies. Metrics used to work out valuation may be the market price per share, the book value per share or the share values derived through discounted cash flows. If market price is being used, it may be more prudent to consider the prices after the merger announcement. The exchange ratio determines two key points — the degree of control shareholders of both entities will have in the new one and the distribution of the synergies.

A range of the maximum and minimum ratios acceptable to shareholders of both companies is eked out, bound by the maximum ratio permitted by the merging company, and the minimum expected by the merged company. The ratio where the two ranges meet becomes the swap ratio.

However, as far as shareholders are concerned, the prime concern in any share swap is the fate of their holding. Though generally prices are expected to go up post any merger, it is not sacrosanct.

Shareholder interests

Wondering what then happens to the shareholders of the merging entities? Where mergers are through cash, the shareholders of the merged company simply relinquish control of their company and do not own a stake in the new entity. They may even be taxed for the consideration so received. However, in a share swap, they get partial ownership in the merging entity. In our above example, shareholders of CBoP found themselves part owners of HDFC Bank. However, in the merging entity, the stake owned by the shareholders becomes diluted.

A higher swap ratio indicates greater dilution. For instance, continuing the above example, had the swap ratio been, say, 1 share for every 20 held, instead of 29, HDFC Bank would have to give out more of its shares, diluting the stakes further. Promoter holding too diminishes, and sometimes, the extent of dilution may decide the swap ratio more than actual share values.

Shareholders aside, the assets and liabilities of the companies also need to be incorporated. There may be two ways to do this — one is to simply aggregate the lot and add it in the new balance sheet.

The other may be that the merging company ‘purchases’ the assets and liabilities from the other at the fair market price, the difference between the book value and the price paid being either goodwill (asset) or a capital reserve (liability).

Mercer to Acquire Callan Associates, Creating One of the Largest Investment Consulting Businesses in the United States - Posted by Steven Wevodau

Steve9982 — Wed, 18 Feb 2009 14:34:06 +0000

NEW YORK & SAN FRANCISCO–(BUSINESS WIRE)–Mercer announced today that it has signed a definitive agreement to merge its investment consulting business with Callan Associates, creating one of the largest investment consulting businesses in the United States. Upon completion of the transaction, Mercer will have strengthened its US investment consulting business and its leading position in global investment consulting.The transaction is expected to close near the end of the first quarter of 2009¹. Terms of the agreement were not disclosed.

“Clearly, this combination will position Mercer as one of the top US leaders in investment consulting,” said M. Michele Burns, chairman and chief executive officer of Mercer. “Callan’s solid US presence complements our US investment consulting strength, along with our strong positions in Canada, Europe and Asia Pacific. This transaction demonstrates Mercer’s commitment to invest in businesses that provide long-term strategic growth and in high-quality investment consulting services that benefit clients.”

While Mercer’s investment consulting business will be well positioned for future growth, providing top-tier service to clients remains first and foremost the objective of the merged business.

“Callan has been a leader in the investment consulting industry for over 35 years in the United States and by combining forces with Mercer, a global leader, we can offer clients a wider range of tools and resources, top-notch professional advice and enhanced research, educational and quantitative services,” said Ronald D. Peyton, chairman and chief executive officer of Callan Associates.

“With approximately 1,100 investment consulting employees in 41 offices around the world, Mercer will have the resources to offer clients customized guidance at every stage of the investment decision, risk management and investment monitoring process,” said Andrew Kirton, global head of Mercer’s investment consulting business. “Our clients will have access to leading intellectual capital, deep and broad-based manager research, and the most committed and experienced consultants in the industry.”

Callan Associates currently has US offices in San Francisco, Atlanta, Denver, Chicago and Florham Park, NJ, and the combined business will continue to have a presence in those cities in conjunction with Mercer’s US investment consulting offices in New York, Atlanta, Boston, Chicago, Dallas, Los Angeles, Philadelphia, Princeton, Richmond, San Francisco, Seattle and Washington, DC.

“Both Callan and Mercer have similar business models, cultures and values, and share a commitment to excellence,” said Jeff Schutes, Mercer’s US investment consulting leader. “In the current challenging investment environment, we believe combining our resources will significantly improve our ability to help clients make informed, sound and strategic investment decisions.”

The companies also share the philosophy that a successful consulting organization must be one that is entirely focused on meeting client needs – and leaders at both firms recognize that the ongoing client experience will ultimately determine the success of Mercer investment consulting going forward.

“We sincerely believe our clients will benefit from the experience, resources and global reach of the new organization and it is our priority that our consultants remain keenly focused on ensuring that each and every relationship continues to be serviced at the highest level,” said Jim Callahan, executive vice president, Fund Sponsor Consulting at Callan Associates. “Our clients can expect a seamless transition as we combine the two organizations and we look forward to having the opportunity to build upon the great relationships we have worked so hard to cultivate.”

About Mercer

Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer’s investment services include investment consulting and multi-manager investment management. Mercer’s 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit www.mercer.com.

About Callan Associates

Founded in 1973, Callan Associates is one of the largest independently-owned investment consulting firms in the country. Headquartered in San Francisco, Calif., the firm provides research, education, decision support and advice to a broad array of institutional investors through five distinct lines of business: Fund Sponsor Consulting, Independent Adviser Group, Institutional Consulting Group, Callan Investments Institute and the Trust Advisory Group. Callan employs more than 170 people and maintains four regional offices located in Denver, Chicago, Atlanta and Florham Park, NJ. For more information, visit www.callan.com.

¹ Subject to customary approvals and conditions

Contact:

Mercer
Charles Salmans, 212-345-4512 or 203 536 1271
charles.salmans@mercer.com
or
Callan Associates
Nancy Malinowski, 415-274-3011
malinowski@callan.com

Source: Mercer
Posted by Steven Wevodau

Arthur J. Gallagher & Co. Acquires Fidelity Benefits & Insurance Services

Steve9982 — Sun, 15 Feb 2009 10:21:36 +0000

Posted by Steven Wevodau

ITASCA, Ill., Feb. 12 /PRNewswire/ — Arthur J. Gallagher & Co. today announced the acquisition of Fidelity Benefits & Insurance Services in Waco, Texas. Terms of the transaction were not disclosed.Founded in 2003, Fidelity Benefits & Insurance Services (FBIS) is an employee benefits consultant and insurance broker offering a broad range of employee benefits insurance and consulting services to their Texas clients. They specialize in group life, accident, health, dental, retirement, long and short term disability and cafeteria plans. Todd Dorton and his associates will continue to operate at their current location under the direction of John Neumaier, South Central Regional Executive Vice President of Gallagher’s employee benefit consulting and brokerage operation.

“Part of FBIS’ success stems from their tradition of industry leadership and quality client service,” said J. Patrick Gallagher, Jr., Chairman, President and CEO. “Their commitment to delivering the highest professional standards combined with their technology-based strategic solutions will be a terrific complement to our employee benefits operations. We are pleased to welcome Todd and his team to our growing Gallagher family of professionals.”

Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Illinois, has operations in 15 countries and does business in more than 100 countries around the world through a network of correspondent brokers and consultants. Gallagher is traded on the New York Stock Exchange under the symbol AJG.

Source: Arthur J. Gallagher & Co.

AIG Financial Products Corp. Closes Two Transactions - Posted by Steven Wevodau

Steve9982 — Sun, 15 Feb 2009 10:19:55 +0000

Part Of Continuing Effort To Reduce Investment Portfolio And Risk

NEW YORK–(BUSINESS WIRE)–AIG Financial Products Corp. (AIGFP), an AIG company (AIG), reported today that it has closed the sale of its interests in two transactions and related commodity hedges from its energy and infrastructure book of business for total net proceeds of $60.5 million. The purchaser was not disclosed.The two transactions, known as volumetric production payment (VPP) transactions, comprise limited-term overriding royalty interests entitling the VPP owner to a priority allocation of a fixed monthly production of oil and natural gas from designated producing reserves located in Texas, Louisiana and Mississippi.

The sale of these interests follows AIGFP’s January agreement to sell its commodity index business.

“These successful asset dispositions provide further evidence of the progress we are making in reducing AIGFP’s investment portfolio and overall risk profile,” said Gerry Pasciucco, AIGFP Interim Chief Operating Officer. As previously disclosed, AIGFP began the process of unwinding certain of its businesses and portfolios late last year.

American International Group, Inc. (”AIG”), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.

Contact:

AIG
Communications:
Nick Ashooh, 212-770-3523
Nick.Ashooh@aig.com
or
Investor Relations:
Teri Watson, 212-770-7074
Teri.Watson@aig.com

Source: AIG Financial Products Corp.

Arthur J. Gallagher & Co. Acquires PartnerSource, Inc. - Posted by Steven Wevodau

Steve9982 — Sat, 07 Feb 2009 12:21:47 +0000

ITASCA, Ill., Feb. 6 /PRNewswire-FirstCall/ — Arthur J. Gallagher & Co. today announced the acquisition of PartnerSource, Inc. in Dallas, Texas. Terms of the transaction were not disclosed.

Organized in 1994, PartnerSource, Inc. is a retail insurance broker and consultant specializing in the design, implementation and ongoing support for nonsubscription programs, an alternative for Texas workers compensation, for their clients with operations in Texas. They also provide non-medical employee benefit programs. Their national and multi-national clients are generally in the retail, manufacturing, healthcare, transportation, food service and hospitality industries. Bill Minick, Russell Huber, Richard Johnson and their associates will continue as a separate operating unit under the direction of Mike Henthorn, South Central Regional Manager of Gallagher’s retail property/casualty brokerage operation.

“PartnerSource is highly regarded for their commitment to continuous quality improvement and client and market relationships,” said J. Patrick Gallagher, Jr., Chairman, President and CEO. “Their professional staff has an outstanding reputation for their nonsubscriber expertise which will be a great addition to our niche practice groups. We are pleased to welcome Bill, Russell, Richard and their team to our growing Gallagher family of professionals.”

RSA Ins Grp UK Regulatory Announcement: Acquisition

Steve9982 — Thu, 05 Feb 2009 20:55:50 +0000

Posted by Steven Wevodau

RSA announces signing of an agreement to acquire the remaining 50% of its joint venture in Central & Eastern Europe

RSA Insurance Group plc announces the signing of a framework agreement with Direct Insurance Financial Investments (DIFI), to acquire DIFI’s 50% holding in Intouch Insurance Group BV, a joint venture with market leading direct operations in Poland, the Czech Republic and Russia for €70m in cash.

The proposed investment is consistent with the Group’s Emerging Markets’ strategy to develop its direct distribution capability and its focus on motor as a core proposition.

The agreement is non binding and completion of the transaction is subject to a number of conditions including obtaining regulatory approvals.

Notes to editors:

About RSA

With an almost 300 year heritage, RSA is one of the world’s leading multinational quoted insurance groups. It has the capability to write business in over 130 countries and with major operations in the UK, Scandinavia, Canada, Ireland, Asia and the Middle East and Latin America. Focusing on general insurance, it has around 22,000 employees and, in 2007, its net written premiums were £5.8bn.

About DIFI

DIFI was established in 1994 and is listed on the Tel Aviv Stock Exchange. It is the 9th largest insurance company in Israel and the number 1 direct motor insurer with 13% market share.

About Intouch Insurance Group BV

Intouch Insurance Group BV owns direct insurance operations in Poland, the Czech Republic and Russia. For the 9 months to September 2008 Intouch Insurance Group BV reported premiums of c£50m.

Link 4 was established in Warsaw in 2003 and is the leading Direct insurer in Poland with a 60% share of the direct motor market, employing 750 people. GWP as at 30 September was c£42m (c12% growth over Q3 2007 on a constant exchange basis) with approximately 283,000 policies (c20% growth over 30 September 2007).

Direct Pojistovna, based in Prague was launched in May 2007 and employs c170 people. Reported premiums at 30 September 2008 were c£4m (573% growth over Q3 2007 on a constant exchange basis) with c28,000 policies written (530% growth over Q3 2007).

Intouch launched in Russia in April 2008.

Important Disclaimer

This press release may contain “forward-looking statements” (as defined in the US Private Securities Litigation Reform Act of 1995) with respect to certain of the Company’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Company’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which the Company and its affiliates operate. As a result, the Company’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Company’s forward-looking statements. The Company undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Nothing in this press release shall be construed as a profit forecast.

Short Name: RSA Ins Grp

Category Code: ACQ

Sequence Number: 171745

Time of Receipt (offset from UTC): 20090204T181218+0000

Contacts

RSA Insurance Group Plc

For further information:

Analysts Press

Shona Cotterill Thomas Coops

Tel: +44 (0) 20 7111 7212 Tel: +44 (0) 20 7111 7047

Suzannah Seddon Simon Kutner

Tel: +44 (0) 20 7111 7140 Tel: +44 (0) 20 7111 7327

Finsbury Solutions Acquires Compassoft - Posted by Steven Wevodau

Steve9982 — Thu, 05 Feb 2009 13:30:49 +0000

LONDON, February 3 /PRNewswire/ –

- Leading Spreadsheet Control Vendor Expands Product and Customer Base Through Strategic US Acquisition

Finsbury Solutions, a leading supplier of spreadsheet management and control software, today announced it has acquired the products and assets of Compassoft Inc, a US based governance risk and compliance software vendor. The strategic acquisition of Compassoft’s End User Computing (EUC) products strengthens Finsbury’s product coverage and customer base.

Finsbury is committed to supporting and developing Compassoft’s EUC products. It will combine and integrate Compassoft’s EUC software with its Spreadsheet Workbench solution to offer an advanced product suite for the management of spreadsheets and end user databases.

Jeremy Wood, Director of Finsbury Solutions, comments: “Regulatory obligations and best practice require companies to put in place more effective controls over EUC applications. The current lack of end user computing control is a serious and growing problem, particularly in the financial services sector.

“This acquisition enables us to provide the most complete set of spreadsheet and EUC control capabilities. Compassoft’s enterprise EUC system’s discovery and risk profiling capabilities are the most comprehensive and scalable in the market. This will be combined with our existing Spreadsheet Workbench solution, which sets the standard for spreadsheet security, access control, audit and analytics. With a customer base of more than 200 blue chip organisations we are now well positioned to explore further growth opportunities in this fast moving market.”

Paul Bach, Board Director of Compassoft, comments: “We are delighted that Compassoft has been acquired by market leader Finsbury Solutions. We believe that the combined product offering and Finsbury’s commitment to customer support provides our clients and prospects with an excellent future.”

Compassoft, an early entrant in the EUC control market, was rated as the enterprise spreadsheet management market leader in March 2007 by Bloor Research. In addition, in March 2008, it received a positive rating in Gartner’s MarketScope for Spreadsheet Control Products.

Notes to Editors

About Finsbury Solutions

With a customer base of over 200 organisations Finsbury Solutions is a leading provider of enterprise spreadsheet management and compliance solutions.

Finsbury Solutions’ products benefits from the real industry experience of the Finsbury Solutions management team. With a background of the past 25 years in accountancy, financial services and IT Finsbury has extensive first hand experience of the day to day use and importance of business critical spreadsheets and has leveraged this knowledge to develop market leading products that are easy to use, business focussed and fast to implement.

Formed in 2006, the company has operations in London and New York. Further information is available on: http://www.finsburysolutions.com.

About Compassoft

Compassoft’s EUC applications reduce non-compliance risk and increase reporting accuracy by identifying, retrieving and documenting both visible and obscure sources of business-critical information. Compassoft won numerous awards for its technology and holds several US and international patents on its technology.

About the EUC control market

End user computing applications comprise spreadsheets, user controlled databases, reports and datamarts. EUC applications are commonly used in financial reporting applications which are subject to regulations requiring an effective system of internal control. Examples of such legislation include the Sarbanes Oxley Act in the USA and similar legislation in France, Japan and other countries. Financial industry regulation such as Basel II and the credit rating agencies consider the level of operation risk in a business. Companies have the potential to reduce their cost of capital and improve their credit rating by improving control over EUC applications.

Issued by Broadgate on behalf of Finsbury Solutions Limited