As part of the HRH integration, we consolidated five offices in Chicago into one 140,000 square feet location leased in the Sears Tower, now renamed the Willis Tower. The lease on this property expires February 2025.
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 risk with insurance carriers through our global distribution network.
for over 90 percent of HRH’s contingent commissions we have either converted them into higher standard commissions or we have reaffirmed with carriers that the existing agreements will remain in force for so long as permitted by the regulatory authorities or until the commissions are converted, whichever occurs first.
$24 million of severance costs relating to approximately 350 positions which have been eliminated; and
With effect from April 2009, the Company offered UK employees an alternative basis on which to fund contributions into the UK pension plans. UK employees can now agree to sacrifice an amount of their salary and in return the Company makes additional pension contributions on their behalf, equivalent to the value of the salary sacrificed.
Global Specialties organic revenue growth reflected the benefit of good growth in Marine, Financial Institutions, Bloodstock, Jewelry, Specie and Global Markets and was achieved despite significant rate reductions.
Commissions and fees in North America were $154 million, or 21 percent, higher in 2008 compared with 2007, of which $174 million was attributable to HRH’s fourth quarter 2008 revenues. Excluding HRH, organic commissions and fees declined by 1 percent reflecting the soft market conditions.
with the decrease reflecting a reduction in UK long-term bond rates in the second half of 2009. The lower discount rate and reduced inflation assumption generated an actuarial gain of $208 million at December 31, 2009.
in September 2009, we issued $300 million of 7.0% senior unsecured notes due 2019. We then launched a tender offer on September 22, 2009 to repurchase any and all of our $250 million 5.125% senior notes due July 2010 at a premium of $27.50 per $1,000 face value. Notes totaling $160 million were tendered and repurchased on September 29, 2009.
Our principal sources of liquidity are cash from operations, cash and cash equivalents of $191 million at December 31, 2009 and remaining availability of $300 million under our revolving credit facility.
As of December 31, 2009, our short-term liquidity requirements consisted of:
Total net cash inflow from investing activities was $102 million in 2009 compared with an outflow of $1,033 million in 2008, reflecting:
On December 31, 2009, the Company had four open share-based compensation plans, under which options and other share based grants may be made to employees. All of the Company’s share-based compensation plans under which any options or other share-based grants are outstanding as at December 31, 2009 are described below. The compensation cost that has been charged against income for those plans for the year ended December 31, 2009 was $39 million (2008: $40 million; 2007: $33 million). The total income tax benefit recognized in the statement of operations for share-based compensation arrangements for the year ended December 31, 2009 was $12 million (2008: $12 million; 2007: $10 million).
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 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.
Cash received from option exercises under all share-based payment arrangements for the year ended December 31, 2009 was $19 million (2008: $11 million; 2007: $21 million). The actual tax benefit realized for the tax deductions from option exercise of the share-based payment arrangements totaled $5 million for the year ended December 31, 2009 (2008: $7 million; 2007: $9 million).
Total proceeds for 2007 were $2 million, all of which related to deferred proceeds from prior year disposals. A gain on disposal of $2 million was recorded in the consolidated statements of operations.
On April 15, 2009, the Company disposed of Bliss & Glennon, a US-based wholesale insurance operation acquired as part of the HRH acquisition. Gross proceeds were $41 million, of which $3 million is held in escrow for potential indemnification claims until second quarter 2010.
Non-compete agreements were also valued by estimating the present value of the cashflows protected by the non-compete arrangement over their expected enforcement period.
The total amount of goodwill recognized on the purchase of HRH is $1.6 billion of which $70 million is attributable to the Company’s Global operations and the remainder is attributable to our North America operations.
The unaudited pro forma financial information above reflects the following pro forma adjustments:
Elimination of amortization of intangible assets and impairment of goodwill previously recognized by HRH.
The Company’s operations are financed principally by $1,840 million fixed rate senior notes and $521 million under a 5-year term loan facility. Of the fixed rate senior notes $90 million are due 2010, $350 million are due 2015, $500 million are due 2016, $600 million are due 2017 and $300 million are due 2019. The Company also has a 5-year $300 million revolving credit facility which was undrawn as of December 31, 2009. All debt is issued by subsidiaries of the Company.
Prior to January 1, 2008, the Company reported ‘Other Income’ within ‘Commissions and Fees’. Comparatives have been adjusted accordingly.