Willis Group Unveils Q3 Report

November 2, 2005

Willis Group Holdings Limited, the global insurance broker, reported results for the quarter and nine months ended Sept. 30, 2005.

Net income for the quarter ended Sept. 30, 2005 was $49 million, or $0.30 per diluted share, compared with $75 million, or $0.45 per diluted share, a year ago.

Total reported revenues for the quarter ended Sept. 30, 2005 decreased 1 percent to $487 million, from $490 million for the same period last year. The effect of foreign currency translation decreased reported revenues 2 percent and net acquisitions added 1 percent.

Organic growth in commissions and fees excluding volume and profit-based contingent commissions and other market remuneration was 6 percent in the third quarter, comprised of approximately 7 percent in net new business and a negative 1 percent impact from declining insurance premium rates and other market factors.

Reported (and adjusted) operating margin was 14.8 percent for the quarter ended Sept. 30, 2005, compared with 22.2 percent for the same period last year. Approximately 4 percent of the decline in reported (and adjusted) operating margin was due to the elimination of contingent commissions and the decline in other market remuneration; the remainder of the decline was mainly due to net incremental hiring and employee retention.

Commenting on the results, Joe Plumeri, chairman and CEO said, “Our results in the third quarter and overall this year reflect an extraordinary year of change in the industry and at Willis. We are successfully adjusting to a marketplace without contingents for global brokers while we are increasing our transparency and value proposition for our clients. At the same time, we are retaining and attracting people in an environment of increased talent competition. Because of our proactive initiatives, we are pleased to report strong organic revenue growth in the third quarter generated from net new business and solid client retention.”

Total volume and profit-based contingent commissions relating to 2004 arrangements totaled $1 million in the quarter ended Sept. 30, 2005 (all of which derived from outside the United States) compared with $10 million a year ago. Other market remuneration declined to $3 million in the third quarter compared with $19 million for third quarter 2004. The decline in contingent commissions and other market remuneration reduced organic revenue growth by 6 percent.

Reported net income for the nine months ended Sept. 30, 2005 after net gain on disposal of operations and first quarter charges for regulatory settlements and related expenses, severance costs and other provisions was $240 million, or $1.45 per diluted share, compared to $319 million, or $1.89 per diluted share, a year ago.

Total reported revenues for the nine months ended Sept. 30, 2005 increased 1 percent to $1,705 million, up from $1,687 million for the corresponding period in 2004. Foreign currency translation had no impact on reported revenues and net acquisitions added 2 percent.

Organic growth in commissions and fees excluding volume and profit-based contingent commissions and other market remuneration was 4 percent for the nine months, comprised of approximately 6 percent in net new business and a negative 2 percent impact from declining insurance premium rates and other market factors.

Adjusted operating margin, excluding regulatory settlements and related expenses, severance costs and other provisions and net gain on disposal of operations, was 23.6 percent for the nine months ended Sept. 30, 2005 compared with 29.1 percent for the same period last year. Approximately 4 percent of the decline in adjusted operating margin was due to the elimination of contingent commissions and the decline in other market remuneration; the remainder of the decline was mainly due to net incremental hiring and employee retention.

Outlook

For the full year 2005 the company expects to generate a reported operating margin of about 21 percent and an adjusted operating margin of about 22 percent. The company’s outlook is based on expectations of decreased revenue from contingent commissions and continued higher expenses due to net incremental hiring and employee retention. However, given the inherent unpredictability of our business, actual results may differ from those predicted for a number of reasons, including unexpected changes in market conditions, adverse developments in litigation matters and regulatory issues.

In conclusion, Plumeri added, “We have embraced the challenges we faced this past year and made choices to best position ourselves for the future. Our ability to be nimble during the market dislocation has allowed us to strengthen our foundation in 2005 by attracting and retaining key clients and professionals. We are confident that we will be able to benefit from the opportunities that lie ahead and we continue to believe we will grow our business next year, and beyond.”

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