From 2000 through 2003 we benefited from a hard market with premium rates stable or increasing. During 2004, we saw a rapid transition from a hard market to a soft market, with premium rates falling in most markets. The soft market continued through 2005 and 2006 with rates declining in most sectors, with the exception of catastrophe exposed markets.
•substantially improve our position in key markets including California, Florida, Texas, Illinois, New York, Boston, New Jersey and Philadelphia;
Organic growth in commissions and fees in 2008 was 4 percent compared with 2007, reflecting
General and administrative expenses at $2,247 million for 2008 were $339 million, or 18 percent, higher than in 2007 of which:
The effective tax rate in 2008 was 24 percent compared with 26 percent in 2007, with the decrease in rate reflecting:
commissions and fees was largely offset by the benefits of Shaping our Future initiatives, lower pension costs and the positive results of our continued investments to strengthen capital markets and analytics capabilities throughout the soft market.
In 2007 we purchased an additional 17 percent of Coyle Hamilton Willis (since renamed Willis Risk Services Ireland Limited), our Irish subsidiary, for $33 million; and acquired InsuranceNoodle, a US internet distributor of small business property-casualty insurance for $29 million.
In 2006, we drew down $200 million on our then existing revolving credit facility primarily to fund our increased pension contributions.
anticipates that approximately $480 million net proceeds of this issuance will be applied towards the balance of the interim credit facility. Consummation of the issuance, which is subject to customary closing conditions, is expected to take place in March 2009.
•Gras Savoye itself will buy back all the AXA shares on 23 March 2009 and as a result, we would not acquire any of them; or
•certain of the other shareholders of Gras Savoye will exercise their pre-emption rights to acquire a portion of the AXA shares. In these circumstances we believe that AXA would withdraw its notification in respect of the remaining shares held by it although we believe that it would then exercise its right to put those to us later in 2009.
The income tax provisions of FAS 141R pertaining to changes in the valuation allowance of deferred tax assets and uncertain tax positions are applicable prospectively to business combinations occurring prior to the effective date of FAS 141R. Reductions to the valuation allowance of acquired deferred tax assets and all changes to acquired uncertain tax positions occurring after the measurement period are now recorded to the statement of operations.
Severance costs also arise in the normal course of business and these charges amounted to $2 million in the year ended December 31, 2008 (2007: $2 million, 2006: $6 million).
Performance-based options became exercisable, subject to the fulfillment of vesting requirements with effect from January 1, 2003, upon the achievement of cash flow and EBITDA (as defined in the plan agreements) targets of Willis Group Limited. Options are generally exercisable in equal installments of 25 percent per year over a four-year period commencing on or after December 18, 2001.
(iii)Elimination of amortization of intangible assets and impairment of goodwill previously recognized by HRH.
The Company's fiduciary funds-restricted and short-term investments consist mainly of cash and time deposits. Accrued interest on investments is recorded as other assets.
The aggregate amortization of intangible assets for the year ended December 31, 2008 was $36 million. The estimated aggregate amortization of intangible assets for each of the next five years ended December 31 is as follows:
On October 1, 2008, we funded the HRH acquisition with $1 billion from an interim credit facility and $525 million from a $700 million 5-year term loan facility. In addition, we repaid the outstanding balance on our existing revolving credit facility and replaced this with a new $300 million revolving credit facility. During fourth quarter 2008, we repaid $250 million of the interim credit facility and drew down an additional $175 million under the 5-year term loan.
The reinsurers concerned have taken the position that, despite their decisions to underwrite risks or a group of risks, they are no longer bound by their reinsurance contracts. As a result, they have stopped settling claims and are seeking to recover claims already paid. The Company also understands that there have been at least two arbitration awards in relation to a spiral, among other things, in which the reinsurer successfully argued that it was no longer bound by parts of its reinsurance program. Willis Limited, the Company's principal insurance brokerage subsidiary in the United Kingdom, acted as the reinsurance broker or otherwise as intermediary, but not as an underwriter, for numerous personal accident reinsurance contracts, including two contracts that were involved in one of the arbitrations. Due to the small number of reinsurance brokers generally, Willis Limited was one of a small number of brokers active in the market for this reinsurance during the relevant period. Willis Limited also utilized other brokers active in this market as sub-agents, including brokers who are parties to the legal proceedings described above, for certain contracts and may be responsible for any errors and omissions they may have made. In July 2003, one of the reinsurers received a judgment in the English High Court against certain parties, including a sub-broker Willis Limited used to place two of the contracts involved in this trial.
On November 1, 2007, the Board authorized a new share buyback program for $1 billion. This replaced the previous $1 billion buyback program and its remaining $308 million authorization. The program is an open-ended plan to repurchase the Company's shares from time to time in the open market or through negotiated sales with persons who are not affiliates of the Company. In addition the board authorized in June 2008, the repurchase of up to the number of shares issued by the Company in connection with the acquisition of HRH.
(1)Forward exchange contracts range in maturity from 2009 to 2011. Credit Risk and Concentrations of Credit Risk