its expectations for cost savings from the program. The annual cost savings expected to be generated by the end of 2017 are now expected to be $325 million and the cumulative savings are now expected to be in excess of $490 million through the end of the program. The program cumulative expected savings exclude merger-related savings.
$9 million in Willis CWR, comprising $7 million termination benefits and $2 million professional services and other program costs; and
A reconciliation of reported total revenues and operating income, the most directly comparable GAAP measure, to underlying and organic total revenues, and underlying and organic operating income, is as follows (in millions, except percentages):
Willis GB reported a 3.8 percent reduction in commissions and fees as organic growth of 1.8 percent was offset by a 5.4 percent negative impact from foreign currency translation and a net 0.2 percent decline from acquisitions and disposals primarily due to the disposal of our niche classic car business and Preston and Dundee retail operations, partially offset by the acquisition of PMI and certain Miller businesses.
adverse impact from acquisitions and disposals, primarily due to a disposal in second quarter 2013, was partially offset by a 1.4
As part of the integration of Willis, Towers Watson and Gras Savoye, the Company is considering restructuring its debt financing in the near term to both extend maturities and refinance certain items as they fall due during 2016. We anticipate this restructuring will include raising market finance of $1.5 billion to $2.0 billion. Any such restructuring is dependent on market and other conditions at the time.
The $243 million cash from operations comprises net income of $384 million, adjusted for $38 million of non-cash adjustments to reconcile net income to cash provided by operating activities net of $179 million of negative working capital movements.
The 1.0 percent organic growth in commissions and fees was primarily due to growth in Reinsurance and new business wins in Willis Capital Markets & Advisory.
Commissions and fees of $1,298 million were $20 million, or 1.5 percent, lower in 2015 compared with 2014.
Organic total expenses, which exclude a $105 million increase due to acquisitions and disposals, a $21 million increase in restructuring costs related to the Operational Improvement Program and a $10 million increase in M&A transaction-related costs, primarily due to the acquisition of Gras Savoye, partially offset by $127 million of favorable foreign currency movements, increased $45 million, or 6.3 percent, compared with 2014.
These increases were partially offset by the non-recurrence of 2013 Expense Reduction Initiative costs of $46 million, $1 million of fees related to the extinguishment of debt and $4 million of favorable foreign exchange movements.
The expected and actual returns on US plan assets for the three years ended December 31, 2015 were as follows:
We use comparable market earnings multiple data and our Company’s market capitalization to corroborate our reporting unit valuations.
Additionally, during 2015 $9 million (2014: $10 million) was paid into the Legacy Willis UK plan in respect of employees’ salary sacrifice contributions.
The Company has two principal defined benefit pension plans which cover approximately one third of employees in the United States and United Kingdom. Both these plans are now closed to new entrants. New employees in the United Kingdom are offered the opportunity to join a defined contribution plan and in the United States are offered the opportunity to join a 401(k) plan. In addition to the Company’s UK and US defined benefit pension plans, the Company has several smaller defined benefit pension plans in certain other countries in which it operates including a US non-qualified plan and an unfunded plan in the UK. Elsewhere, pension benefits are typically provided through defined contribution plans.
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatility is based on historical volatility of the Company’s stock. The Company uses the simplified method set out in Accounting Standard Codification (‘ASC’) 718-10-S99 to derive the expected term of options granted as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The risk-free rate for periods within the expected life of the option is based on the US Treasury yield curve in effect at the time of grant.
During the years ended December 31, 2015 and 2014 we made the following acquisitions in line with our strategy to invest in targeted acquisitions with a focus on earnings accretion, competitive position, and fit.
The aggregate costs incurred and recognized within other operating expenses relating to all acquisitions for the year ended December 31, 2015 and 2014 were $84 million (2014: $7 million).
Additional consideration estimated at $29 million is payable in annual installments over the next 5 years, based on a multiple of EBITDA of the entities acquired, during the period from May 25, 2014 until September 2, 2019. This consideration was assessed to have a fair value of $12 million at the date of acquisition.
At December 31, 2015, Legacy Willis recorded, on the Consolidated Balance Sheets, the following:
In 2016, Legacy Willis expects to make contributions to the UK plan of approximately $83 million and $nil to the US plan. In addition, approximately $9 million will be paid in 2016 into the UK defined benefit plan related to employee’s salary sacrifice contributions.
For disclosure purposes these smaller additional US and UK plans are combined with its other defined benefit pension plans in the tables below.
Represents the transfer in of $202 million of plan assets as a result of acquiring Miller Insurance Services LLP.
As of December 31, 2015, the aggregate future minimum rental commitments under all non-cancellable operating lease agreements are as follows:
As outlined in Note 10 - Acquisitions, Willis Towers Watson has deferred and contingent consideration due to be paid on existing acquisitions until 2020. Most notably the acquisition of Miller Insurance Services LLP in May 2015, for which deferred and contingent consideration of $150 million is payable. Other payments include deferred and contingent consideration of $16 million in respect of the CKA Risk Solutions acquisition, Gras Savoye, with a deferred consideration of $15 million (including assumed liabilities) over 2016 and 2017; and the Charles Monat Group acquired in 2014, with a contingent consideration of $15 million payable in installments from 2016 till 2020 on the anniversaries of the acquisition.
In July 2010, the Company made a capital commitment of $25 million to Trident V Parallel Fund, LP, an investment fund managed by Stone Point Capital. This replaced a capital commitment of $25 million that had been made to Trident V, LP in December 2009. As at December 31, 2015 there have been approximately $22 million of capital contributions.
given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation and disputes with insurance companies, it is possible that an adverse outcome or settlement in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods.
non-servicing elements of the defined benefit pension schemes cost (income); and
All direct obligations under the senior notes were jointly and severally, irrevocably and fully and unconditionally guaranteed by Willis Netherlands Holdings B.V, Willis Investment UK Holdings Limited, TA I Limited, Willis Group Limited and Willis North America, Inc, collectively the ‘Other Guarantors’, and with Willis Towers Watson, the ‘Guarantor Companies’.