In North America, outside of New York and Chicago, we lease approximately 1.9 million square feet over 120 locations.
In Chicago, we occupy 140,000 square feet at the Willis Tower (formerly the Sears Tower), under a lease expiring February 2025.
The selected consolidated financial data presented below should be read in conjunction with the audited consolidated financial statements of the Company and the related notes and
In our capacity as advisor and insurance broker, we act as an intermediary between our clients and insurance carriers by advising our clients on their risk management requirements, helping clients determine the best means of managing risk, and negotiating and placing insurance with insurance carriers through our global distribution network.
The years 2005 through 2010 were almost universally viewed as soft market years across most of our product offerings and our commission revenues and operating margins throughout that period were negatively impacted, although in 2009 the market experienced modest stabilization in the reinsurance market and certain specialty markets.
mid-west US tornadoes and Thailand floods. However, in general, we continued to be negatively impacted by the soft insurance market and challenging economic conditions across other sectors and most geographic regions.
This discussion includes references to non-GAAP financial measures as defined in Regulation G of the rules of the Securities and Exchange Commission (‘SEC’). We present such non-GAAP financial measures, specifically, organic growth in commissions and fees, adjusted operating margin, adjusted operating income, adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations, 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. Organic growth in commissions and fees excludes the impact of acquisitions and disposals, year over year movements in foreign exchange, legacy contingent commissions assumed as part of the HRH acquisition, and investment and other income from growth in revenues and commissions and fees. Adjusted operating margin, adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations are calculated by excluding the impact of certain specified items from net income from continuing operations, the most directly comparable GAAP measure. These financial measures should be viewed in addition to, not in lieu of, the consolidated financial statements for the year ended December 31, 2011.
Despite difficult market conditions, total revenues in 2011 of $3,447 million increased by $115 million, or 3%, compared to 2010. This included organic growth in commissions and fees of 2% driven by our International and Global operations. Our North America operations reported a revenue decline of 4%, including a 4% decline in organic commissions and fees reflecting lower revenues generated by Loan Protector, a specialty business acquired as part of the HRH business, and the continued adverse impact of difficult economic conditions in the US.
Total expenses in 2011 of $2,881 million increased $302 million compared to 2010, primarily due to incremental expense relating to the 2011 Operational Review (discussed later in this section), a $22 million write-off of an uncollectible accounts receivable balance relating to periods prior to January 1, 2011, also discussed later in this section, continued investment to support future growth, increased incentives amortization relating to our cash retention awards, reinstatement of salary reviews for all associates in March 2011 and 401(k) matching contributions for our US associates from January 2011, unfavorable foreign currency translation and an $11 million UK FSA regulatory settlement. These increases were partially offset by cost savings arising from implementation of the 2011 Operational Review, reduced pension expense of $24 million and the year-on-year $8 million benefit from the release of funds and reserves related to potential legal liabilities.
Net income attributable to Willis shareholders from continuing operations was $203 million or $1.15 per diluted share in 2011 compared to $455 million or $2.66 per diluted share in 2010. The $252 million reduction in net income compared to 2010 primarily reflects the increase in total expenses described above and the $131 million post-tax cost relating to the make-whole amounts on the repurchase and redemption of $500 million of our senior debt and the write-off of related unamortized debt issuance costs, partly offset by revenue growth achieved during the year. Net income was also adversely impacted by an $11 million reduction in interest in earnings of associates, net of tax, mainly due to declining performance in our principal associate, Gras Savoye.
Total revenues in 2010 of $3,332 million increased by $79 million, or 2%, compared to 2009, reflecting organic growth in commissions and fees of 4% being partly offset by a 1% adverse impact from foreign currency translation and decreased investment and other income. Total expenses in 2010 of $2,579 million, were $16 million higher compared to 2009. Salaries and benefits expense increased by $46 million, primarily due to a $60 million increase in incentive expense, partly offset by reduced severance costs and favorable foreign currency translation. Other operating expenses declined by $26 million, driven by reduced losses on our forward hedging program and a reduction in the amortization of intangible assets of $18 million due to a lower amortization charge for HRH-related intangibles.
Net income attributable to Willis shareholders from continuing operations was $455 million or $2.66 per diluted share in 2010 compared to $434 million or $2.57 per diluted share in 2009. The $21 million increase in net income compared to 2009 primarily reflects the revenue growth described above, partly offset by the $16 million increase in total expenses, an increase in the effective tax rate from 18% in 2009 to 24% in 2010 and a $10 million reduction in interest in earnings of associates, net of tax following the December 2009 reduction from 49% to 31% in our ownership interest in Gras Savoye.
A reconciliation of adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations to reported net income from continuing operations and reported earnings per diluted share from continuing operations, the most directly comparable GAAP measures, is as follows (in millions, except per share data):
In order to fund the higher anticipated salaries and benefits expense and continued investment for the future, we implemented a review of all our businesses in 2011 to better align our resources with our growth strategies. In connection with this review, we incurred pre-tax charges of $180 million in 2011 including:
$37 million of other salaries and benefits expense to buy out previously existing incentive schemes and other contractual arrangements that no longer align with the Group’s overall remuneration strategy; and
The full year cost of the 2011 Operational Review at $180 million represents an increase of $20 million from our third quarter 2011 estimate. This is the result of the identification of additional opportunities to achieve efficiencies.
In 2011 we realized total cost savings attributable to the 2011 Operational Review of approximately $80 million. We now expect to achieve annualized savings of approximately $135 million beginning in 2012, an increase from our previous estimate of $115 million to $125 million, and represents incremental savings in 2012 compared to 2011 of approximately $55 million.
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs
We issued $800 million of new debt in March 2011, comprised of $300 million 4.125% senior notes due 2016 and $500 million 5.750% senior notes due 2021. Net proceeds of approximately $787 million were used in part to repurchase and redeem $500 million 12.875% senior notes due 2016 and make related make-whole payments totaling $158 million. In addition to the make-whole payment we also wrote off unamortized debt issuance costs of $13 million.
We started making cash retention awards in 2005 to a small number of employees. With the success of the program, we expanded it over time to include more staff and we believe it is a contributing factor to the reduction in employee turnover we have seen in recent years.
Salaries and benefits do not reflect the unamortized portion of annual cash retention awards made to employees. Employees must repay a proportionate amount of these cash retention awards if they voluntarily leave our employ (other than in the event of retirement or permanent disability) within a certain time period, currently three years. We make cash payments to our employees in the year we grant these retention awards and recognize these payments ratably over the period they are subject to repayment, beginning in the quarter in which the award is made.
During 2011, we made $210 million of cash retention award payments compared with $196 million in 2010 and $148 million in 2009. Salaries and benefits in 2011 include $185 million of amortization of cash retention award payments made on or before December 31, 2011, compared with $119 million in 2010 and $88 million in 2009. As of December 31, 2011, December 31, 2010 and December 31, 2009, we included $196 million, $173 million and $98 million, respectively, within other current assets and other non-current assets on the balance sheet, which represented the unamortized portion of cash retention award payments made on or before those dates.
We recorded a net pension charge on our UK and US defined benefit pension plans in 2011 of $6 million, and $nil respectively, compared with $28 million and $1 million respectively in 2010 and $25 million and $7 million respectively in 2009. On our international defined benefit pension plans, we recorded a net pension charge of $5 million in 2011, compared with $6 million in 2010 and $10 million in 2009.
The UK plan charge was $22 million lower compared to 2010 as the benefits of higher asset returns, lower amortization of prior period losses and a lower service cost reflecting certain changes to plan benefits were partly offset by an increased interest cost. The UK pension charge was $3 million higher in 2010 compared to 2009 as the benefit from higher asset returns was more than offset by a higher service cost, higher amortization of prior period losses and higher interest cost.
During first quarter 2011, we acquired a 23% interest in a South African brokerage at a total cost of $2 million. During third quarter 2011, we acquired a 100% interest in a Polish brokerage, Brokerskie Centrum Ubezpieczeniowe, at a total cost of $2 million. In the fourth quarter 2011, we acquired 100% of Broking Italia, a Rome-based employee benefits broker at a total cost of $12 million.
During 2010, we acquired an additional 39% of our Chinese operations at a total cost of approximately $17 million, bringing our ownership to 90% and an additional 15% of our Colombian operations at a total cost of approximately $7 million, bringing our ownership to 80% at December 31, 2010.
associated with these entities, comprising a net loss for the year of $1 million offset by the benefit of a $2 million net gain on disposal.
The 2% growth in organic commissions and fees comprised net growth in our operating segments:
International achieved 5% organic growth driven primarily by our Latin America and Eastern Europe regions; and
North America reported a 4% decline in organic commissions and fees, primarily driven by the revenue decline in Loan Protector (a small specialty business acquired as part of the HRH business that works with financial institutions to confirm their loans are properly insured and interests are adequately protected). Excluding Loan Protector, the North America segment recorded a 2% decline in organic commissions and fees as the benefit of new business generation was more than offset by a 1% decline in client retention levels, the continued negative impact of the soft market and ongoing weakened economic conditions in the US.
Other operating expenses were $92 million, or 16%, higher in 2011 compared with 2010, primarily reflecting $40 million of additional expense associated with the 2011 Operational Review, a $22 million write-off of an uncollectible accounts receivable balance relating to periods prior to January 1, 2011, and discussed earlier in this section, the $11 million second quarter UK FSA regulatory settlement and increased expense in support of revenue growth initiatives. These were partly offset by cost savings arising from implementation of the 2011 Operational Review, the year-over-year favorable comparison due to the $12 million 2010 charge relating to the devaluation of the Venezuelan currency, the $8 million year-over-year benefit from the release of funds and reserves related to potential legal liabilities and positive year-over-year foreign currency translation, driven primarily by gains in 2011 on our forward rate hedging program, compared to losses in 2010.
Depreciation expense was $74 million in 2011, compared with $63 million in 2010. The increase primarily reflects accelerated depreciation expense of $5 million in 2011 relating to systems rationalization in connection with the 2011 Operational Review and depreciation of newly capitalized systems project costs in 2011.
As described above, we issued $800 million of new debt in March 2011 and net proceeds of approximately $787 million were used to repurchase and redeem $500 million of 12.875% senior notes due 2016 and make related make-whole payments totaling $158 million. In addition to the make-whole payment we also wrote off unamortized debt issuance costs of $13 million.
The effective tax rate on ordinary income for 2011 was 24%, compared with 26% for 2010, with the reduction driven primarily by the benefit from the higher tax rates at which costs associated with the 2011 Operational Review are relieved and a different geographic mix of business. The effective tax rate on ordinary income is calculated before the impact of certain discrete items. The significant discrete items occurring in 2011 are:
the impact of the UK FSA regulatory settlement expense for which no tax relief is available;
adjustments made in respect of tax on profits of prior periods to bring in line the Company’s tax provisions to filed tax positions.
Organic commissions and fees growth by segment is discussed further in ‘Operating Results - Segment Information’ below.
Salaries and benefits increased by $46 million, or 3% in 2010 compared to 2009, primarily due to a $60 million increase in incentive expenses, comprising a $31 million increase in the amortization of cash retention awards and a $29 million increase in the accrual for non-retentive incentive compensation due to increased headcount and improved performance across many regions. The increase in incentive expense was partially offset by reduced severance costs in 2010 and favorable foreign currency translation, primarily the year-on-year strengthening of the US dollar against the Pound Sterling.
The effective tax rate was 24% for 2010 compared to 18% in 2009 as a $22 million benefit in 2010 from prior year tax adjustments was more than offset by the adverse impact from the $12 million charge relating to the devaluation of the Venezuelan currency for which no tax credits are available and positive impacts on the 2009 effective tax rate from a $27 million release relating to a 2009 change in tax law and an $11 million release relating to uncertain tax positions due to the closure of the statute of limitations on assessments for previously unrecognized tax benefits. Excluding these items, the effective tax rate of 26% on ordinary income for 2010 was broadly in line with 2009.
In March 2011 we issued $800 million of new debt, comprised of $300 million 4.125% senior notes due 2016 and $500 million 5.750% senior notes due 2021. We received net proceeds, after underwriting discounts and expenses of approximately $787 million, which were used largely in part to repurchase and redeem $500 million 12.875% senior notes due 2016 and make related make-whole payments totaling $158 million, which represented a slight discount to the make-whole redemption amount provided in the indenture governing this debt. In addition to the make-whole payments of $158 million, we also wrote off unamortized debt issuance costs of $13 million.
These refinancing actions have lengthened our debt maturity profile. At December 31, 2011, we have $nil outstanding under both the $500 million and the existing $20 million facility compared with December 31, 2010 when we had $90 million outstanding under our $300 million facility and $nil outstanding under our $200 million and $20 million facilities. At December 31, 2011 the only scheduled debt repayments falling due over the next 12 months are scheduled repayments on our new $300 million 5-year term loan totaling $11 million and repayment of the $4 million 6% loan notes due 2012.
Our principal sources of liquidity are cash from operations and $520 million available under our revolving credit facilities, of which the $20 million UK facility is solely for use by our main regulated UK entity in certain exceptional circumstances. At December 31, 2011 we had $436 million of cash and cash equivalents, of which approximately $100 million is available for general corporate purposes.
As of December 31, 2011, our short-term liquidity requirements consisted of $125 million payment of interest on debt, $11 million of mandatory repayments under our 5-year term loan, a $4 million mandatory repayment of our 6.000% loan notes due 2012, $1 million of revolving credit facility commitment fees, capital expenditure and working capital requirements. In addition, our estimated pension contributions for 2012 are $142 million. Our long-term liquidity requirements consist of the principal amount of outstanding notes and borrowings under our 5-year term loan facility.
their pension obligations. Such payments will only be made in limited tranches. Whilst such payments will have a positive impact on the overall liabilities of the US plan they may require us to provide additional funding to the plan.
Total net cash provided by continuing operating activities was $439 million in 2011, compared with $489 million in 2010. The decrease of $50 million primarily reflects the $57 million year-on-year increase in accounts receivable, reflecting increased revenue but also slower collections in the US due to current economic conditions; cash outflows of approximately $120 million relating to the 2011 Operational Review; and the $24 million year-on-year increase in payments for cash retention awards. These were partly offset by realized cash savings resulting from the 2011 Operational Review and other working capital movements.
Total net cash used in continuing investing activities was $101 million in 2011 compared to $94 million in 2010. The $101 million net outflow was mainly due to capital spend including fit-out of our Nashville office and IT project investments.
Total net cash used in continuing financing activities was $214 million in 2011 compared to $293 million in 2010. We issued $800 million of new debt in March 2011 and net proceeds of approximately $787 million were used to repurchase and redeem $500 million of 12.875% senior notes due 2016. As part of this debt refinancing we made a $158 million make-whole payment on the redemption of our 12.875% senior notes due 2016. Other significant financing activities in 2011 include refinancing our bank facility in December 2011, dividend payments of $180 million and receipt of $60 million from the issue of shares.
Total net cash outflow from continuing investing activities was $94 million in 2010 compared with a net cash inflow of $102 million in 2009. The 2010 outflow was primarily due to capital spend and $21 million of payments for acquisitions of subsidiaries, mainly in respect of prior year acquisitions. In 2009, capital spend of $96 million was offset by net receipts of $113 million from changes in our ownership interest in Gras Savoye, $42 million net proceeds from sale of discontinued operations, mainly attributable to the second quarter 2009 disposal of Bliss & Glennon and $21 million proceeds from the sale of short-term investments.
As of December 31, 2011, we had cash and cash equivalents of $436 million, compared with $316 million at December 31, 2010 and $520 million remained available to draw under our revolving credit facilities, compared with $430 million at December 31, 2010.
The Company is authorized to repurchase or redeem shares under a variety of methods and will consider whether to do so from time to time, based on many factors, including market conditions. There remains approximately $922 million under the current authorization. The Company did not repurchase or redeem any shares in 2011 or 2010. In February 2012, the Company announced that in 2012 it intends to buyback up to $100 million of shares through open market or privately
The following table is a summary of our operating results by segment for the three years ended December 31, 2011 (in millions except percentages):
Reported commissions and fees include a 2011 benefit of $6 million from a change in accounting within a Global Specialty business to conform to current Group accounting policy.
Our Global operations comprise Global Specialties, Reinsurance, Willis Faber & Dumas (formerly London Market Wholesale), and as of 2010, Willis Capital Markets & Advisory (WCMA). From January 1, 2011, Willis Faber & Dumas also includes our Global Markets International unit. We have retrospectively adjusted our segmental information disclosures within this discussion to reflect this change to our reporting structure.
Commissions and fees of $1,073 million were $86 million, or 9%, higher in 2011 compared with 2010, reflecting organic commissions and fees growth of 7% and a net benefit from foreign currency translation of 2%. Organic growth included the benefit of net new business generation despite the adverse impact of the continued difficult economic environment and soft market in many of the specialty classes.
Organic growth in Global Specialties was led by strong contributions from Marine, Energy, Financial Solutions and Aerospace, reflecting good new business, high retention levels, targeted hiring of producer talent and connectivity between the retail network and specialty businesses. However, the operating environment remains challenging across most Global Specialty businesses with depressed world trade and transit volumes, industry consolidation and pressure on financing of construction projects still evident.
Productivity in Global, measured in terms of revenue per FTE employee, increased to $386,000 for 2011 compared with $366,000 for 2010.
Client retention levels improved to 91% for 2011, compared with 90% for 2010.
Commissions and fees were $66 million, or 7%, higher in 2010 compared with 2009 which was driven by 7% organic commissions and fees growth.
Our WCMA business contributed to organic growth in 2010, substantially due to a $9 million fee on a single capital markets transaction in the second quarter.
Within Willis Faber & Dumas, revenues in Faber & Dumas were slightly lower than 2009, mainly reflecting the soft wholesale market, together with continued pressure on the most economically sensitive lines such as bloodstock, jewelry and fine arts.
Productivity in Global, measured in terms of revenue per FTE employee, increased to $366,000 for 2010 compared with $352,000 for 2009.
Client retention levels remained high at 90% for 2010, in line with 2009.
Operating margin was 32% in 2010 compared with 33% in 2009. This decrease primarily reflected the adverse impact of foreign currency translation, as the positive effect on our Pound sterling expense base from the strengthening US dollar, was more than offset by the adverse impact of foreign currency movements on sterling-denominated balances.
Included in North America reported commissions and fees were legacy HRH contingent commissions of $5 million in 2011, compared with $11 million in 2010 and $27 million in 2009.
The decline in the financial performance of our Loan Protector business had a 2% negative impact on North America organic growth in commissions and fees and for the full year 2011 negatively impacted the segment’s revenue by $27 million. The Loan Protector decline was driven by the loss of clients through attrition and M&A activity, industry-wide commission pressures and a slowdown in foreclosures in the US in 2011.
Despite the decline in revenues, productivity in North America, measured in terms of revenue per FTE employee, increased to $235,000 for 2011 compared with $234,000 for 2010.
Operating margin in North America was 20% in 2011 compared with 23% in 2010, reflecting the adverse impact from the 4% decline in organic commissions and fees growth discussed above, a period-over-period increase in 401(k) match expense of $10 million following its reinstatement in January 2011 and a $7 million increase in incentive expense, including amortization of cash retention award payments. These were partly offset by a $5 million decrease in stock-based compensation expense and the benefit of cost reductions driven by the 2011 Operational Review and continued focus on expense management.
Commissions and fees of $1,369 million were $12 million, or 1%, lower for 2010 compared with 2009. Excluding the $16 million decrease in legacy contingency commissions assumed as part of the HRH acquisition, there was a modest increase in commissions and fees.
Organic commissions and fees growth was flat for 2010. We experienced strong performance in our specialty businesses, driven by good business growth together with a $7 million increase in commissions and fees from a change in accounting of an acquired specialty business in North America to conform to Group accounting policy. Our employee benefits practice recorded 3% growth despite the soft labor market and we achieved good net new business generation, with improved client retention. This was offset by a negative 2% impact from rate declines and other market factors and a further decline in our Construction business and smaller declines elsewhere reflecting continued soft market conditions and the weak US economy.
Despite the small decline in revenues, productivity in North America, measured in terms of revenue per FTE employee, increased to $234,000 for 2010 compared with $223,000 for 2009.
Client retention levels increased to 92% for 2010, compared with 91% for 2009.
The following table sets out revenues, operating income, organic commissions and fees growth and operating margin for the three years ended December 31, 2011(in millions, except percentages):
The single-digit organic commissions and fees growth in our large retail operation in Continental Europe was primarily driven by strong growth in Italy, Spain and Germany, despite the ongoing challenging economic conditions in this region, offset by lower commissions and fees in Denmark and the Netherlands.
Organic commissions and fees growth in our UK and Ireland retail operations, declined 2% in 2011, compared with the same period 2010, driven by the economic pressures that continue to affect both the UK and Ireland.
Productivity in our International business, measured in terms of revenue per FTE employee, increased to $160,000 for 2011 compared with $150,000 for 2010.
Client retention levels increased to 94% for 2011, compared with 93% for 2010.
Commissions and fees of $937 million were $39 million, or 4%, higher for 2010 compared with 2009, as the benefits of 5% organic commissions and fees growth and 1% from the net effect of acquisitions and disposals were partly offset by a 2% adverse impact from foreign currency translation. Organic growth included net new business growth of 8% and there was a negative 3% impact from rates and other market factors.
Other includes $12 million in 2011 from the release of funds and reserves related to potential legal liabilities (2010: $7 million, 2009: $nil).
We maintain defined benefit pension plans for employees in the US and UK. Both these plans are now closed to new entrants and, with effect from May 15, 2009 we closed our US defined benefit plan to future accrual. New entrants in the UK 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. We also have smaller defined benefit schemes in Ireland, Germany, Norway and the Netherlands. These international schemes have combined total assets of $128 million and a combined net liability for pension benefits of $3 million as of December 31, 2011. Elsewhere, pension benefits are typically provided through defined contribution plans.
We recorded a net pension charge on our UK and US defined benefit pension plans in 2011 of $6 million, and $nil respectively, compared with $28 million and $1 million respectively in 2010. On our international defined benefit pension plans, we recorded a net pension charge of $5 million in 2011, compared with $6 million in 2010.
During 2011, we moved from an index based approach to determining the discount rate to a duration based approach which more closely matches the actual timings of expected cash flows to the applicable discount rate. The selected rate used to discount UK plan liabilities was 4.80% compared with 5.45% at December 31, 2010 with the decrease reflecting a reduction in UK long-term bond rates in 2011. Under the old approach, the discount rate at the end of 2011 would have been 4.65%. We estimate the impact of this change was to:
The lower discount rate generated an actuarial loss of approximately $240 million at December 31, 2011.
Expected long-term rates of return on plan assets are developed from the expected future returns of the various asset classes using the target asset allocations. The expected long-term rate of return used for determining the net UK pension expense in 2011 was 7.50% (2010: 7.75%), equivalent to an expected return in 2011 of $161 million (2010: $141 million). The decrease in the expected long-term rate of return followed a change in the underlying target asset mix.
The expected and actual returns on UK plan assets for the three years ended December 31, 2011 were as follows:
During 2011, we amended the mortality assumptions to more closely align them to those used in the most recent funding valuation. The mortality assumption is now the 90 / 105% PNA00 table for males / females (2010: 100% PNA00 table without an age adjustment).
This change gave rise to an approximate $85 million increase in the 2011 projected benefit obligation compared to using the 2010 mortality assumptions.
As an indication of the longevity assumed, our calculations assume that a US male retiree aged 65 at December 31, 2011, would have a life expectancy of 19 years.
We review goodwill for impairment annually or whenever events or circumstances indicate impairment may have occurred.
We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Therefore changes in these estimates and assumptions could materially affect the determination of fair value and result in goodwill impairment.
In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units.
In the fourth quarter of 2011 our North America segment continued to be hampered by declining Loan Protector business results, the effect of the soft economy in the U.S. and declining retention rates primarily related to M&A activity and lost legacy HRH business. Consequently, the annual impairment test described above included additional sensitivity analysis, over and above that we would usually perform, in relation to our North America segment’s goodwill impairment review. This additional analysis included reductions to assumed rates of revenue growth, increases to assumed rates of expense growth and flexing the assumed weighted average cost of capital. Although our testing concluded there is no impairment, the analysis indicated that in respect of the North America segment, in the event of either a significant deterioration in a key estimate or assumption or a less significant deterioration to a combination of assumptions or the sale of part of the reporting unit there could be an impairment to the carrying value in future periods.
At December 31, 2011 the only mandatory debt repayments falling due over the next 12 months are scheduled repayments on our new $300 million 5-year term loan totaling $11 million and repayment of the $4 million 6% loan notes due 2012.
The Company leases its main London building under a 25-year operating lease, which expires in 2032. The Company’s contractual obligations in relation to this commitment included in the table above total $715 million (2010: $744 million). Annual rentals are $30 million per year and the Company has subleased approximately 29% of the premises under leases up to 15 years. The amounts receivable from subleases, included in the table above, total $82 million (2010: $87 million; 2009: $100 million).
Contractual obligations for our pension plans reflect the contributions we expect to make over the next five years into our US, UK and international plans. These contributions are based on current funding positions and may increase or decrease dependent on the future performance of the plans.
The amounts included as contractual obligations in the table above reflect those payable under the current funding strategy which expires in March 2015, including amounts in respect of the salary sacrifice arrangements. Negotiations between the Company and the plan trustees on a revised funding strategy are continuing as set out in the ‘Liquidity and Capital Resources’ section.
We expect to make contributions of approximately $40 million in 2012 through 2016 under US pension legislation based on our December 31, 2011 balance sheet position.
to be finalized shortly and the final 2012 contribution for all plans is expected to be approximately $142 million, including salary sacrifice which compares to an equivalent 2011 total contribution of $135 million.
Certain of Willis Group Holdings’ subsidiaries have given the landlords of some leasehold properties occupied by the Company in the UK and the US guarantees in respect of the performance of the lease obligations of the subsidiary holding the lease. The operating lease obligations subject to such guarantees amounted to $828 million and $855 million at December 31, 2011 and 2010, respectively.
In May 2011, the Financial Accounting Standards Board (‘FASB’) issued new guidance to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between US GAAP and International Financial Reporting Standards (‘IFRS’). The guidance changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements.
In September 2011, the FASB also issued guidance to allow an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. All of the above accounting changes become effective for the Company from first quarter 2012.
Apart from commitments, guarantees and contingencies, as disclosed in Note 21 to the Consolidated Financial Statements, the Company has no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the Company’s financial condition, results of operations or liquidity.
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2011
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2011
Consolidated Statements of Changes in Equity and Comprehensive Income for each of the three years in the period ended December 31, 2011
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
This transaction was accounted for as a merger between entities under common control; accordingly, the historical financial statements of Willis-Bermuda for periods prior to this transaction are considered to be the historical financial statements of Willis Group Holdings. No changes in capital structure, assets or liabilities resulted from this transaction, other than Willis Group Holdings providing a guarantee of amounts due under certain borrowing arrangements of one of its subsidiaries as described in Note 29.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income to revise the manner in which entities present comprehensive income in their financial statements. These changes require that components of comprehensive income be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
This guidance is effective for interim and annual periods beginning after December 15, 2011 and is applied retrospectively.
The Company uses derivative financial instruments for other than trading purposes to alter the risk profile of an existing underlying exposure. Interest rate swaps are used to manage interest risk exposures. Forward foreign currency exchange contracts are used to manage currency exposures arising from future income and expenses. The fair values of derivative contracts are recorded in other assets and other liabilities. The effective portions of changes in the fair value of derivatives that qualify for hedge accounting as cash flow hedges are recorded in other comprehensive income. Amounts are reclassified from other comprehensive income into earnings when the hedged exposure affects earnings. If the derivative is designated as and qualifies as an effective fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are both recognized in earnings. The amount of hedge ineffectiveness recognised in earnings is based on the extent to which an offset between the fair value of the derivative and hedged item is not achieved. Changes in fair value of derivatives that do not qualify for hedge accounting, together with any hedge ineffectiveness on those that do qualify, are recorded in other operating expenses or interest expense as appropriate.
The Company has two principal defined benefit pension plans which cover approximately half of employees in the United States and United Kingdom. Both these plans are now closed to new entrants. New entrants 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, there are smaller plans in certain other countries in which the Company operates. Elsewhere, pension benefits are typically provided through defined contribution plans.
The Company evaluates the performance of its operating segments based on organic commissions and fees growth and operating income. For internal reporting and segmental reporting, segmental management are not held accountable for certain items deemed to be centrally-controlled costs and initiatives, which includes the 2011 Operational Review. See Note 27 - Segment Information for an analysis of centrally-controlled costs and initiatives, including the 2011 Operational Review costs, disclosed within ‘Corporate and Other’.
The following table sets out the amount of cash retention awards made and the related amortization of those awards for the years ended December 31, 2011, 2010 and 2009:
Unamortized cash retention awards totaled $196 million as of December 31, 2011 (2010: $173 million; 2009: $98 million).
On December 31, 2011, the Company had a number of open share-based compensation plans, which provide for the grant of time-based options and performance-based options, restricted stock units and various other share-based grants to employees. All of the Company’s share-based compensation plans under which any options, restricted stock units or other share-based grants are outstanding as at December 31, 2011 are described below. The compensation cost that has been recognized for those plans for the year ended December 31, 2011 was $41 million (2010: $47 million; 2009: $39 million). The total income tax benefit recognized in the statement of operations for share-based compensation arrangements for the year ended December 31, 2011 was $11 million (2010: $14 million; 2009: $12 million).
Options granted under the Hilb Rogal and Hamilton Company 2000 Stock Incentive Plan (‘HRH 2000 Plan’) and the Hilb Rogal & Hobbs Company 2007 Stock Incentive Plan (the ‘HRH 2007 Plan’) were converted into options to acquire shares of Willis Group Holdings. No further grants are to be made under the HRH 2000 Plan. Willis is authorized to grant equity awards under the HRH 2007 Plan until 2017 to employees who were formerly employed by HRH and to new employees who have joined Willis or one of its subsidiaries since October 1, 2008, the date that the acquisition of HRH was completed.
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. With effect from January 1, 2006, the Company uses the simplified method set out in Accounting Standard Codification (‘ASC’) 718-10-S99 to derive the expected term of options granted. 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.
A summary of option activity under the plans at December 31, 2011, and changes during the year then ended is presented below:
Cash received from option exercises under all share-based payment arrangements for the year ended December 31, 2011 was $60 million (2010: $37 million; 2009: $19 million). The actual tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements totaled $18 million for the year ended December 31, 2011 (2010: $10 million; 2009: $5 million).
Total proceeds from the disposal of operations for 2009 were $315 million, including $281 million for 18 percent of the Group’s 49 percent interest in Gras Savoye and $39 million for 100 percent of Bliss & Glennon. A gain on disposal of
$13 million is recorded in the statement of consolidated operations for the year ended December 31, 2009, of which $10 million relates to Gras Savoye as shown below.
As a result of the December 2009 leveraged transaction the Company recognized a gain of $10 million in the consolidated statement of operations from the reduction of its interest in Gras Savoye from 49 percent to 31 percent.
At December 31, 2011 the Company had valuation allowances of $102 million (2010: $87 million) to reduce its deferred tax assets to estimated realizable value. The valuation allowances at December 31, 2011 relate to the deferred tax assets arising from UK capital loss carryforwards ($45 million) and other net operating losses ($6 million), which have no expiration date and to the deferred tax assets arising from US State net operating losses ($51 million). US State net operating losses will expire by 2030. Capital loss carryforwards can only be offset against future UK capital gains.
Total unrecognized tax benefits as at December 31, 2011, totaled $16 million. During the next 12 months it is reasonably possible that the Company will recognize approximately $1 million of tax benefits related to the release of provisions no longer required due to either settlement through negotiation or closure of the statute of limitations on assessment.
All of the unrecognized tax benefits at December 31, 2011 would, if recognized, favorably affect the effective tax rate in future periods.
All UK tax returns have been filed timely and are in the normal process of being reviewed, with HM Revenue & Customs making enquiries to obtain additional information. There are no material ongoing enquiries in relation to filed UK returns. In other jurisdictions the Company is no longer subject to examinations prior to 2002.
The net assets at December 31, 2011 were $11 million, of which $9 million related to identifiable intangible assets and goodwill. In addition, there were costs and income taxes relating to the transaction of $2 million. The gain (net of tax) on this disposal was $2 million.
Net assets and liabilities of discontinued operations consist of the following:
Goodwill represents the excess of the cost of businesses acquired over the fair market value of identifiable net assets at the dates of acquisition. Goodwill is not amortized but is subject to impairment testing annually and whenever facts or circumstances indicate that the carrying amounts may not be recoverable.
The Company’s annual goodwill impairment test for 2011 has not resulted in an impairment charge (2010: $nil; 2009: $nil).
North America - $(1) million (2010: $3 million) tax benefit arising on the exercise of fully vested HRH stock options which were issued as part of the acquisition of HRH in 2008.
The Company’s principal investment as of December 31, 2011 and 2010 is GS & Cie Groupe (‘Gras Savoye’), France’s leading insurance broker.
On December 17, 2009, the Company completed a leveraged transaction with the original family shareholders of Gras Savoye and Astorg Partners, a private equity fund, to reorganize the capital of Gras Savoye (‘December 2009 leveraged
As a result of the December 2009 leveraged transaction the Company recognized a gain of $10 million in the consolidated statement of operations for the year ended December 31, 2009 from the reduction of its interest in Gras Savoye from 49 percent to 31 percent. The Company received total proceeds of $281 million, comprising cash and interest bearing vendor loans and convertible bonds issued by Gras Savoye. See Note 6 - Net Gain (Loss) on Disposal of Operations for an analysis of the proceeds and the calculation of the gain.
Unaudited condensed financial information for associates, in the aggregate, as of and for the three years ended December 31, 2011, is presented below. For convenience purposes: (i) balance sheet data has been translated to US dollars at the relevant year-end exchange rate, and (ii) condensed statements of operations data has been translated to US dollars at the relevant average exchange rate.
For the year ended December 31, 2011, the Company recognized $4 million (2010: $5 million; 2009: $12 million) in respect of dividends received from associates.
Accounts receivable are stated at estimated net realizable values. The allowances shown below as at the end of each period, are recorded as the amounts considered by management to be sufficient to meet probable future losses related to uncollectible accounts.
The Company maintains two principal defined benefit pension plans that cover the majority of our employees in the United States and United Kingdom. Both of these plans are now closed to new entrants. New entrants 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
$9 million (2010: $3 million) in respect of the international defined benefit pension plans.
a total liability for pension benefits of $270 million (2010: $167 million) representing:
$258 million (2010: $154 million) in respect of the US defined benefit pension plan; and
The following tables present, at December 31, 2011 and 2010, for each of the fair value hierarchy levels, the Company’s UK pension plan assets that are measured at fair value on a recurring basis.
The UK plan’s real estate investment comprises UK property and infrastructure investments which are valued by the fund manager taking into account cost, independent appraisals and market based comparable data. The UK plan’s hedge fund
A $3 million net pension benefit liability (2010: $10 million) has been recognized in respect of these schemes.
The accumulated benefit obligation for the Company’s international defined benefit pension plans was $128 million (2010: $131 million).
Fixed income securities comprise overseas Government loan stock which is typically valued using quoted market prices. Real estate investment comprises overseas property and infrastructure investments which are valued by the fund manager taking into account cost, independent appraisals and market based comparable data. Derivative instruments are valued using an income approach typically using swap curves as an input.
Assets classified as Level 3 investments did not materially change during the year ended December 31, 2011.
In 2012, the Company expects to contribute $12 million to the international plans.
In December 2011 we refinanced our bank facility, comprising a 5-year $300 million term loan and a 5-year $500 million revolving credit facility. The $300 million term loan replaces the $328 million balance on our $700 million 5-year term loan facility and the $500 million revolving facility replaces our $300 million and our $200 million revolving credit facilities. Unamortized debt issuance costs of $10 million relating to these facilities were written off in December 2011 following completion of the refinancing. In 2011, we made $83 million of mandatory repayments against the 5-year term loan before repaying the $328 million balance in December 2011.
The 5-year term loan facility expiring 2016 bears interest at LIBOR plus 1.50% and is repayable in quarterly installments and a final repayment of $225 million is due in the fourth quarter of 2016. Drawings under the new revolving $500 million credit facility bear interest at LIBOR plus 1.50% and the facility expires on December 16, 2016. As of
December 31, 2011 $nil was outstanding under the revolving credit facility. These margins apply while the Company’s debt rating remains BBB-/Baa3.
On June 22, 2010, a further revolving facility of $20 million was put in place which bears interest at LIBOR plus 1.700% until 2012 and LIBOR plus 1.850% thereafter. The facility expires on December 22, 2012. As at December 31, 2011 no drawings had been made on the facility. This facility is solely for the use of our main UK regulated entity and would be available in certain exceptional circumstances. The facility is secured against the freehold of the UK regulated entity’s freehold property in Ipswich.
The Company also has available $3 million (2010: $2 million) in lines of credit, of which $nil was drawn as of December 31, 2011 (2010: $nil).
The claims, lawsuits and other proceedings provision includes E&O cases which represents management’s assessment of liabilities that may arise from asserted and unasserted claims for alleged errors and omissions that arise in the ordinary course of the Group’s business. Where some of the potential liability is recoverable under the Group’s external insurance arrangements, the full assessment of the liability is included in the provision with the associated insurance recovery shown separately as an asset. Insurance recoveries recognised at December 31, 2011 amounted to $6 million (2010: $15 million).
The ‘Other’ category includes amounts relating to vacant property provisions of $20 million (2010: $14 million).
The Company’s contractual obligations as at December 31, 2011 are presented below:
The Company’s debt and related interest obligations at December 31, 2011 are shown in the above table.
This facility is in addition to the remaining availability of $20 million under the Company’s previously existing $20 million revolving credit facility.
The only mandatory repayments of debt over the next 12 months are the scheduled repayment of $11 million current portion of the Company’s 5-year term loan and the final payment of the 6.000% loan notes. We also have the right, at our option, to prepay indebtedness under the credit facility without further penalty and to redeem the senior notes at our option by paying a ‘make whole’ premium as provided under the applicable debt instrument.
permit early withdrawal. The total amount of the minimum rent is expensed on a straight-line basis over the term of the lease.
As of December 31, 2011, the aggregate future minimum rental commitments under all non-cancellable operating lease agreements are as follows:
The Company leases its main London building under a 25-year operating lease, which expires in 2032. The Company’s contractual obligations in relation to this commitment included in the table above total $715 million (2010: $744 million). Annual rentals are $30 million (2010: $31 million) per year and the Company has subleased approximately 29 percent (2010: 25 percent) of the premises under leases up to 15 years. The amounts receivable from subleases, included in the table above, total $82 million (2010: $87 million; 2009: $100 million).
Guarantees issued by certain of Willis Group Holdings’ subsidiaries with respect to the senior notes and revolving credit facilities are discussed in Note 19 - Debt in these consolidated financial statements.
Certain of Willis Group Holdings’ subsidiaries have given the landlords of some leasehold properties occupied by the Company in the United Kingdom and the United States guarantees in respect of the performance of the lease obligations of the subsidiary holding the lease. The operating lease obligations subject to such guarantees amounted to $828 million and $855 million at December 31, 2011 and 2010, respectively.
Other contractual obligations at December 31, 2011 also include the capital lease on the Company’s Nashville property of $63 million, payable from 2012 onwards.
In the ordinary course of business, the Company is subject to various actual and potential claims, lawsuits, and other proceedings relating principally to alleged errors and omissions in connection with the placement of insurance and reinsurance. Similar to other corporations, the Company is also subject to a variety of other claims, including those relating to the Company’s employment practices. Some of the claims, lawsuits and other proceedings seek damages in amounts which could, if assessed, be significant.
Similarly, in August 2005, HRH entered into an agreement with the Attorney General of the State of Connecticut and the Insurance Commissioner of the State of Connecticut to resolve all issues related to their investigations into certain insurance brokerage and insurance agency practices and to settle a lawsuit brought in August 2005 by the Connecticut Attorney General alleging violations of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act. As part of this settlement, HRH agreed to take certain actions including establishing a $30 million national fund for distribution to certain clients; enhancing disclosure practices for agency and broker clients; and declining to accept contingent compensation on brokerage business.
The Amended and Restated AOD specifically recognizes that the Company has substantially met its obligations under the Original AOD and ends many of the requirements previously imposed. It relieves the Company of a number of technical compliance obligations that have imposed significant administrative and financial burdens on its operations. The Amended and Restated AOD no longer limits the types of compensation the Company can receive and has lowered the compensation disclosure requirements. The Amended and Restated AOD requires the Company, among other things to: (i) in New York, and each of the other 49 states of the United States, the District of Columbia and U.S. territories, provide compensation disclosure that will, at a minimum, comply with the terms of the applicable regulations, as may be amended from time to time, or the provisions of the AOD that existed prior to the adoption of the Amended and Restated AOD; and (ii) maintain its compliance programs and continue to provide appropriate training to relevant employees in business ethics, professional obligations, conflicts of interest, and antitrust and trade practices compliance.
Additional actions could be brought in the future by individual policyholders. The Company disputes the allegations in all of these suits and has been and intends to continue to defend itself vigorously against these actions. The outcomes of these lawsuits, however, including any losses or other payments that may occur as a result, cannot be predicted at this time.
Ranni v. Willis of Colorado, Inc., et al., C.A. No. 09-22085, was filed on July 17, 2009 against Willis Group Holdings plc and Willis of Colorado, Inc. in the U.S. District Court for the Southern District of Florida. The complaint was filed on behalf of a putative class of Venezuelan and other South American Stanford investors and alleges claims under Section 10(b) of the Securities Exchange Act of 1934 (and Rule 10b-5 thereunder) and Florida statutory and common law and seeks damages in an amount to be determined at trial. On October 6, 2009, Ranni was transferred, for consolidation or coordination with other Stanford-related actions (including Troice), to the Northern District of Texas by the U.S. Judicial Panel on Multidistrict Litigation (the ‘JPML’). The defendants have not yet responded to the complaint in Ranni.
On May 10, 2011, the court presiding over the Stanford-related actions in the Northern District of Texas entered an order providing that it would consider the applicability of SLUSA to the Stanford-related actions based on the decision in a separate Stanford action not involving a Willis entity, Roland v. Green, Civil Action No. 3:10-CV-0224-N. On August 31, 2011, the court issued its decision in Roland, dismissing that action with prejudice under SLUSA
On October 28, 2011, the plaintiffs in Troice filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit. Subsequently, Troice, Roland and a third action captioned Troice, et al. v. Proskauer Rose LLP, Civil Action No. 3:09-CV-01600-N, which also was dismissed on the grounds set forth in the Roland decision discussed above and on appeal to the U.S. Court of Appeals for the Fifth Circuit, were consolidated for purposes of briefing and oral argument. The appeals have been fully briefed and the Fifth Circuit heard oral argument on February 7, 2012. A ruling is expected sometime this year.
As a result of the FSA settlement, we are conducting a further internal review of all payments made between 2005 and 2009. We also continue to fully cooperate with our US regulators, however we are unable to predict at this time when our discussions with them will be concluded. We do not believe that this further internal review or our discussions with the US regulators will result in any material fines or sanctions, but there can be no assurance that any resolution will not have an adverse impact on our ability to conduct our business in certain jurisdictions. While we believe that our current
At December 31, 2011 and 2010, the Company had the following derivative financial instruments that were designated as cash flow hedges of interest rate risk:
Notional amounts represent US dollar equivalents translated at the spot rate as of December 31.
The Company’s operations are financed principally by $2,050 million fixed rate senior notes and $300 million under a 5-year term loan facility.
The Company also has access to $520 million under two revolving credit facilities; as of December 31, 2011 $nil was drawn on these facilities. The 5-year term loan facility bears interest at LIBOR plus 1.50%. Drawings under the revolving $500 million credit facility bear interest at LIBOR plus 1.50%. These margins apply while the Company’s debt rating remains BBB-/Baa3. Should the Company’s debt rating change, then the margin will change in accordance with the credit facilities agreements.
to the extent that forecast pound sterling expenses exceed pound sterling revenues, the Company limits its exposure to this exchange rate risk by the use of forward contracts matched to specific, clearly identified cash outflows arising in the ordinary course of business; and
to the extent the UK operations earn significant revenues in Euros and Japanese yen, the Company limits its exposure to changes in the exchange rate between the US dollar and these currencies by the use of forward contracts matched to a percentage of forecast cash inflows in specific currencies and periods.
At December 31, 2011 and 2010, the Company’s foreign currency contracts were all designated as hedging instruments except for those relating to short-term cash flows in its London market operations.
In addition to forward exchange contracts we undertake short-term foreign exchange swaps for liquidity purposes, these are not designated as hedges and do not qualify for hedge accounting. Both the fair value and the year to date gain/loss at December 31, 2011 and 2010 were immaterial.
For interest rate swaps all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. For foreign exchange contracts only the changes in fair value resulting from movements in the spot exchange rate are included in this assessment. In instances where the timing of expected cash flows can be matched exactly to the maturity of the foreign exchange contract, then changes in fair value attributable to movement in the forward points are also included.
Changes in the fair value of the underlying hedged debt instrument since inception of the hedging relationship are included in long-term debt.
Cash and cash equivalents-The estimated fair value of these financial instruments approximates their carrying values due to their short maturities.
Long-term debt excluding the fair value hedge-Fair values are based on quoted market values.
The Company evaluates the performance of its operating segments based on organic commissions and fees growth and operating income. For internal reporting and segmental reporting, the following items for which segmental management are not held accountable are excluded from segmental expenses:
Other includes $12 million (2010: $7 million, 2009: $nil) from the release of funds and reserves related to potential legal liabilities.
The Company has investments in the following subsidiary undertakings which principally affect the net income or net assets of the Group.
A full list of the Group’s subsidiary undertakings is included within the Company’s annual return.
Willis North America Inc. (‘Willis North America’) has $350 million senior notes outstanding that were issued on July 1, 2005. Willis North America issued a further $600 million of senior notes on March 28, 2007 and another $300 million on September 29, 2009.
The debt securities that were issued by Willis North America and guaranteed by the entities described above, and for which the disclosures set forth below relate and are required under applicable SEC rules, were issued under a ‘shelf’ registration statement on Form S-3, including our current June 2009 registration statement (the ‘Willis Shelf’).
The entities included in the Other Guarantors column for the year ended December 31, 2011 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, Trinity Acquisition plc, TA I Limited and Willis Group Limited.
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by Willis North America (the ‘Willis North America Debt Securities’) (and for which condensed consolidating financial information is presented in Note 29) in that Willis Group Holdings is the Parent Issuer and Willis North America is a subsidiary guarantor.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets for the year ended December 31, 2011 of Willis Group Holdings and the Guarantors. Investments in subsidiaries in the condensed consolidating balance sheet for Other, represents the cost of investment in subsidiaries recorded in the parent companies of the non-guarantor subsidiaries.
The entities included in the Guarantors column for the year ended December 31, 2011 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America.
FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)