The selected historical financial data presented below as of and for each of the five years ended December 31, 2004 have been derived from the audited consolidated financial statements of the
The Company's accounting policies are described in Note 2 of Notes to the Consolidated Financial Statements. Management considers that the following accounting estimates or assumptions are the most important to the presentation of the Company's financial condition or operating performance.
(ii)Following a change to our reporting structure effective July 1, 2004, $72 million of revenues previously reported as North America for the year ended December 31, 2003 have been reclassified as Global revenues. Global: Organic revenue growth in our Global business of 3 percent reflected good performances by most business units despite noticeable downward pressure on premium rates. Global Markets grew by 5 percent reflecting new business activity particularly within the International and Financial and Professional Risk operations. Global Specialties revenue grew marginally in 2004 with new business activity largely offset by the impact of falling rates and lower volume and profit-based contingent commissions. Reinsurance revenues grew in 2004 due to a strong new business performance, particularly from the US reinsurance unit. Premium rates were a negative factor on reinsurance revenues from the second quarter of 2004 and for full year 2004 had an adverse impact of 3 percent when compared with 2003. In addition, reinsurance brokerage was adversely affected by increased self- insurance by clients.
Excluding the non-cash compensation charge for performance-based stock options, general and administrative expenses were 16 percent higher in 2003 than in 2002. Approximately 6 percent of this increase was attributable to the impact of foreign currency translation and approximately (3) percent was attributable to the effect of acquisitions and disposals.
We became subject to new regulations in the United Kingdom in January 2005 regarding fiduciary funds held by insurance intermediaries. These regulations require fiduciary funds to be held in designated trust accounts, restrict the financial instruments in which such funds may be invested and affect the timing of transferring commissions from fiduciary funds to own funds.
Non-cash compensation amounting to $116 million in respect of UK performance options was expensed in periods prior to January 1, 2003 without any income tax benefit being recognized. Accordingly, following the change in UK tax legislation, an income tax benefit of $35 million, and a corresponding deferred asset, was recognized in 2003.
Under the new credit agreement, the Company is due to make loan repayments of $150 million on the third, fourth and fifth anniversary of the effective date. Loans under this credit agreement bear interest at a rate per annum equal to either adjusted LIBOR or adjusted EURIBOR depending on their underlying currency plus a margin of 0.75 percent to 1.50 percent determined by reference to future changes in the Company's interest coverage, leverage and credit ratings. The minimum applicable margin was 0.95 percent until December 4, 2004 and changed to 0.85 percent from this date to the year end.
All obligations of Willis North America Inc. ("Willis North America") (the borrower) under the credit agreement are guaranteed by Willis Group Holdings Limited, Trinity Acquisition Limited, Willis Group Limited, TA I Limited, TA II Limited, TA III Limited and TA IV Limited.
Fair Value-The estimated fair value of the Company's financial instruments held or issued to finance the Company's operations is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that the Company would realize upon disposition nor do they indicate the Company's intent or ability to dispose of the financial instrument.
In addition, the Company has given guarantees to bankers and other third parties relating principally to letters of credit amounting to $9 million and $9 million at December 31, 2004 and 2003, respectively.