Willis Group Sees Growth in 2004

Willis Group Holdings Ltd. reported results for the quarter and year ended Dec. 31, 2004.

“Despite a declining rate environment and extraordinary challenges facing the global insurance industry, we were able to continue growing in 2004 and expanded revenues on an underlying basis by 4 percent for the year,” commented Joe Plumeri, chairman and CEO. “The recent addition of great new talent and clients to our already strong platform makes us more enthusiastic than ever about the future.”

The results for the fourth quarter of 2004 were affected by a decline in volume and profit-related contingent commissions, following the Company’s decision to discontinue all agreements covering such income. These contingent commissions declined $14 million pre tax, compared to the fourth quarter of 2003.

Consequently, net income for the quarter ended Dec. 31, 2004 was $108 million, or $0.65 per diluted share, compared with $118 million, or $0.69 per diluted share, a year ago. Excluding non-cash compensation for performance-based stock options and net gain on disposal of operations, adjusted net income decreased 13 percent to $104 million for the quarter ended Dec. 31, 2004 from $119 million in the same period last year, while adjusted net income per diluted share fell 10 percent to $0.63 for the fourth quarter of 2004 from $0.70 a year ago. Foreign currency translation decreased fourth quarter 2004 reported earnings by $0.01 per diluted share compared to a year ago.

Net income for the year ended Dec. 31, 2004 was $427 million, or $2.54 per diluted share, compared to $414 million, or $2.45 per diluted share, a year ago. Excluding non-cash compensation for performance-based stock options, a related one-time tax benefit arising from a change in UK tax legislation in 2003, net gain on disposal of operations and a subordinated debt redemption premium, adjusted net income for the year ended Dec. 31, 2004 increased 13 percent to $437 million from $386 million in 2003, while adjusted net income per diluted share rose 14 percent to $2.60 from $2.28 in 2003. There was no net impact of foreign currency translation on reported earnings for the year ended Dec. 31, 2004 compared to a year ago.

Total reported revenues for the quarter ended Dec. 31, 2004 increased 2 percent to $588 million, from $577 million for the same period last year. The effect of foreign currency translation reduced reported revenues 4 percent and net acquisitions added 6 percent. Included in total reported revenues for the fourth quarter were volume and profit-based contingent commissions of $25 million compared with $39 million in the comparable quarter last year.

Excluding contingent commissions, organic revenue growth was 3 percent in the fourth quarter, comprised of approximately 7 percent net new business growth and a negative 4 percent impact from declining insurance premium rates.

The adjusted operating margin was 28.1 percent for the fourth quarter of 2004 compared with 33.6 percent for the same period last year. The decline in contingent commissions accounted for approximately 2 percent of the reduction in adjusted operating margin; the remainder was attributed to higher expenses related to legal, investigative and regulatory compliance, and incremental salaries and benefits expense for recruiting and retention.

Total reported revenues for the year ended Dec. 31, 2004 increased 10 percent to $2,275 million, up from $2,076 million for the corresponding period in 2003. The effect of foreign currency translation increased reported revenues 2 percent and net acquisitions added 4 percent. Included in total reported revenues for 2004 were volume and profit-based contingent commissions of $71 million in 2004 compared to $70 million in 2003.

Excluding contingent commissions, organic revenue growth was 4 percent, comprised of approximately 6 percent net new business growth and a negative 2 percent impact from declining insurance premium rates. The adjusted operating margin was 29.3 percent for the year ended December 2004, compared with 30.3 percent the previous year.

“Even though we are in a transition as we continue to build for the future, we have good momentum heading into 2005,” commented Plumeri. “We are in a good position and will do all we can to make it better. Everything we have done or are doing is designed to make sure we have the best people and the best processes to attract and look after our growing list of clients.”

In 2004, the company completed 10 acquisitions with annual revenues of approximately $155 million, including the acquisitions of Coyle Hamilton, the Republic of Ireland’s largest privately owned insurance broker, and Opus and Jeffries which strengthened the company’s middle market and large account capabilities in the United Kingdom.