Willis Group Reports Q2 Results

July 24, 2003

Willis Group Holdings Limited reported record results for the quarter and six months ended June 30, 2003.

Separately, the Board of Directors approved a 30 percent increase in the regular quarterly cash dividend on the company’s common stock to $0.1625 per share, an annual rate of $0.65 per share. The dividend is payable on Oct. 14, 2003 to shareholders of record on Sept. 30, 2003.

The Board of Directors also approved a plan to purchase, from time to time in the open market or through negotiated trades with persons who are not affiliates of the company, shares of the company’s common stock at an aggregate purchase price of up to $100 million. The timing and extent of the purchases will depend on market conditions. The funds required for the stock purchase will be provided from the company’s cash balances and operating cash flow.

Joe Plumeri, chairman and CEO said, “Over the past several years, we have diligently enhanced cash flow through improved performance. This has allowed us to make substantial debt repayments far ahead of schedule and initiate a quarterly dividend this past February, less than two years following the initial public offering of our stock.

“We remain committed to pursuing acquisitions at the appropriate time and price,” Plumeri continued. “However, as we continue to evaluate the best use of our capital, increasing the dividend now, given the recent change in the U.S. tax laws, is consistent with our goal to deploy capital effectively for the benefit of our shareholders. This action, as well as the Board’s authorization for the common stock buyback plan, illustrates continued confidence in our long-term growth and profitability.”

Net income for the quarter ended June 30, 2003 was $80 million, or $0.47 per diluted share compared to a loss of $(7) million, or $(0.05) per diluted share, a year ago. Net income for the six months ended June 30, 2003 was $197 million, or $1.17 per diluted share, compared to $61 million, or $0.38 per diluted share, a year ago.

Excluding non-cash compensation for performance-based stock options and gain or loss on disposal of operations, adjusted net income for the second quarter increased 39 percent to $82 million for the quarter ended June 30, 2003 from $59 million in the same period last year, while adjusted net income per diluted share rose 40 percent to $0.49 from $0.35 a year ago.

For the six months ended June 30, 2003, adjusted net income increased 44 percent to $205 million from $142 million in the first half of 2002, while adjusted net income per diluted share rose 42 percent to $1.21 for the six months ended June 30, 2003 from $0.85 in the first half of 2002.

Total revenues for the quarter ended June 30, 2003 increased 20 percent to $492 million, up from $411 million for the corresponding quarter last year. Of this 20 percent increase in revenues, approximately 4 percent represented the effect of foreign currency exchange rate movements and approximately (2) percent was attributable to the effect of acquisitions and disposals. Adjusting for these items, organic revenue growth was 18 percent in the second quarter of 2003.

Total revenues for the six months ended June 30, 2003 increased 21 percent to $1,047 million, up from $862 million for the corresponding period in 2002. Of this 21 percent increase in revenues, approximately 5 percent represented the effect of foreign currency exchange rate movements and approximately (2) percent was attributable to the effect of acquisitions and disposals. Adjusting for these items, organic revenue growth was 18 percent in the first half of 2003.

Plumeri said, “By exemplifying a sales culture, maintaining our steadfast expense discipline, and delivering world-class client service, we continue to deliver solid revenue growth while enhancing operating margins and earnings. With 14 consecutive quarters of record results, we are accumulating a strong track record and continue to build the platform for success in all market environments.”

Commenting on the current insurance marketplace, Plumeri said, “While rates for some very large, complex property and energy placements have declined, the global carriers need to maintain pricing discipline and are seeking rate increases for property risks in certain classes. Many clients continue to see rate increases, especially for casualty lines. From our global vantage, some markets have lagged the U.S. in rate increases, and have further to go to reach appropriate rate levels.

“As investment returns have declined over the past several years, there has been a greater focus placed on profitable underwriting,” Plumeri offered. “Insurers’ combined ratios, which are impacted by pricing shifts, will continue to shape the duration and volatility of the market, and those ratios must approach levels that generate suitable shareholder returns.”

At June 30, 2003, total long-term debt was $490 million, down 28 percent from $677 million a year ago. Total stockholders’ equity at quarter end was approximately $1,052 million. The capitalization ratio, or the ratio of total long-term debt to total long-term debt and stockholders’ equity, declined to 32 percent at quarter end compared to 44 percent a year ago. There was approximately $178 million of immediately available cash at June 30, 2003, providing significant financial flexibility to support the cash needs of the Company.

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