Willis Towers Watson - 10-Q quarterly report FY2013 Q3

Willis Towers Watson - 10-Q quarterly report FY2013 Q3

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q



(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-16503

_______________________________

WILLIS GROUP HOLDINGS PUBLIC

LIMITED COMPANY

(Exact name of registrant as specified in its charter)



Ireland (Jurisdiction of incorporation or organization)		98-0352587 (I.R.S. Employer Identification No.)

c/o Willis Group Limited

51 Lime Street, London, EC3M 7DQ, England

(Address of principal executive offices)

(011) 44-20-3124-6000

(Registrant’s telephone number, including area code)

_______________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ‘large accelerated filer’, ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of November 1, 2013 there were outstanding 177,768,767 ordinary shares, nominal value $0.000115 per share, of the Registrant.

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Willis Group Holdings plc

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Certain Definitions

The following definitions apply throughout this quarterly report unless the context requires otherwise:



‘We’, ‘Us’, ‘Company’, ‘Group’, ‘Willis’, or ‘Our’		Willis Group Holdings and its subsidiaries.

‘Willis Group Holdings’ or ‘Willis Group Holdings plc’		Willis Group Holdings Public Limited Company, a company organized under the laws of Ireland.

‘shares’		The ordinary shares of Willis Group Holdings Public Limited Company, nominal value $0.000115 per share.

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Willis Group Holdings plc

FORWARD-LOOKING STATEMENTS

We have included in this document 'forward-looking statements' within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts that address activities, events or developments that we expect or anticipate may occur in the future, including such things as our, outlook future capital expenditures, growth in commissions and fees, business strategies, competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, plans and references to future successes, are forward-looking statements. Also, when we use the words such as 'anticipate', 'believe', 'estimate', 'expect', 'intend', 'plan', 'probably', or similar expressions, we are making forward-looking statements.

There are important uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained in this document, including the following:


•	the impact of any regional, national or global political, economic, business, competitive, market, environmental or regulatory conditions on our global business operations;


•	the impact of current financial market conditions on our results of operations and financial condition, including as a result of those associated with the current Eurozone crisis, any insolvencies of or other difficulties experienced by our clients, insurance companies or financial institutions;


•	our ability to implement and realize anticipated benefits of any expense reduction initiative, charge or any revenue generating initiatives;


•	our ability to implement and fully realize anticipated benefits of our new growth strategy;


•	volatility or declines in insurance markets and premiums on which our commissions are based, but which we do not control;


•	our ability to continue to manage our significant indebtedness;


•	our ability to compete effectively in our industry, including the impact of our refusal to accept contingent commissions from carriers in the non-Human Capital areas of our retail brokerage business;


•	material changes in commercial property and casualty markets generally or the availability of insurance products or changes in premiums resulting from a catastrophic event, such as a hurricane;


•	our ability to retain key employees and clients and attract new business;


•	the timing or ability to carry out share repurchases and redemptions;


•	the timing or ability to carry out refinancing or take other steps to manage our capital and the limitations in our long-term debt agreements that may restrict our ability to take these actions;


•	fluctuations in our earnings as a result of potential changes to our valuation allowance(s) on our deferred tax assets;


•	any fluctuations in exchange and interest rates that could affect expenses and revenue;


•	the potential costs and difficulties in complying with a wide variety of foreign laws and regulations and any related changes, given the global scope of our operations;


•	rating agency actions that could inhibit our ability to borrow funds or the pricing thereof;


•	a significant decline in the value of investments that fund our pension plans or changes in our pension plan liabilities or funding obligations;


•	our ability to achieve the expected strategic benefits of transactions, including any growth from associates;


•	further impairment of the goodwill of one of our reporting units, in which case we may be required to record additional significant charges to earnings;


•	our ability to receive dividends or other distributions in needed amounts from our subsidiaries;


•	changes in the tax or accounting treatment of our operations and fluctuations in our tax rate;


•	any potential impact from the US healthcare reform legislation;


•	our involvements in and the results of any regulatory investigations, legal proceedings and other contingencies;


•	underwriting, advisory or reputational risks associated with non-core operations as well as the potential significant impact our non-core operations (including the Willis Capital Markets & Advisory operations) can have on our financial results;


•	our exposure to potential liabilities arising from errors and omissions and other potential claims against us; and


•	the interruption or loss of our information processing systems or failure to maintain secure information systems.

The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual performance and results. For more information see the section entitled ‘Risk Factors’ included in Willis’ Form 10-K for the year

ended December 31, 2012. Copies are available online at http://www.sec.gov or www.willis.com or on request from the Company as set forth in Part I, Item I ‘Business — Available Information’ in Willis’ Form 10-K.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved.

Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking statements.

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PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



		Three months ended September 30,						Nine months ended September 30,
	Note	2013			2012			2013			2012
		(millions, except per share data)
REVENUES
Commissions and fees		$	791		$	749		$	2,722		$	2,591
Investment income		4			4			11			14
Other income		—			1			3			4
Total revenues		795			754			2,736			2,609
EXPENSES
Salaries and benefits	3	(541		)	(502		)	(1,638		)	(1,508		)
Other operating expenses		(144		)	(146		)	(455		)	(431		)
Depreciation expense		(21		)	(21		)	(68		)	(59		)
Amortization of intangible assets	11	(14		)	(14		)	(42		)	(44		)
Net loss on disposal of operations		—			(1		)	—			(1		)
Total expenses		(720		)	(684		)	(2,203		)	(2,043		)
OPERATING INCOME		75			70			533			566
Loss on extinguishment of debt	14	(60		)	—			(60		)	—
Interest expense		(30		)	(32		)	(93		)	(97		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES		(15		)	38			380			469
Income taxes	4	(11		)	(10		)	(88		)	(114		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES		(26		)	28			292			355
Interest in earnings of associates, net of tax		(1		)	(2		)	11			12
(LOSS) INCOME FROM CONTINUING OPERATIONS		(27		)	26			303			367
Discontinued operations, net of tax		—			—			—			1
NET (LOSS) INCOME		(27		)	26			303			368
Less: net income attributable to noncontrolling interests		—			—			(6		)	(9		)
NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS		$	(27	)	$	26		$	297		$	359
AMOUNTS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS SHAREHOLDERS
(Loss) income from continuing operations, net of tax		$	(27	)	$	26		$	297		$	358
Income from discontinued operations, net of tax		—			—			—			1
NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS		$	(27	)	$	26		$	297		$	359

(Continued on next page)

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Financial statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)



		Three months ended September 30,					Nine months ended September 30,
	Note	2013			2012		2013		2012
		(millions, except per share data)
EARNINGS PER SHARE — BASIC AND DILUTED
— Basic earnings per share - continuing operations	5	$	(0.15	)	$	0.15	$	1.70	$	2.07
— Diluted earnings per share - continuing operations	5	$	(0.15	)	$	0.15	$	1.67	$	2.03

CASH DIVIDENDS DECLARED PER SHARE		$	0.28		$	0.27	$	0.84	$	0.81

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Willis Group Holdings plc

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



		Three months ended September 30,					Nine months ended September 30,
	Note	2013			2012		2013			2012
		(millions)
Comprehensive income		$	46		$	53	$	345		$	395
Less: comprehensive income attributable to noncontrolling interests		(1		)	—		(6		)	(9		)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	17	$	45		$	53	$	339		$	386

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Financial statements

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



	Note	September 30, 2013		December 31, 2012
		(millions, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	623	$	500
Accounts receivable, net		985		933
Fiduciary assets		9,197		9,271
Deferred tax assets		14		13
Other current assets	12	195		181
Total current assets		11,014		10,898
NON-CURRENT ASSETS
Fixed assets, net		472		468
Goodwill	10	2,846		2,827
Other intangible assets, net	11	361		385
Investments in associates		184		174
Deferred tax assets		6		18
Pension benefits asset		253		136
Other non-current assets	12	187		206
Total non-current assets		4,309		4,214
TOTAL ASSETS		$	15,323	$	15,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Fiduciary liabilities		$	9,197	$	9,271
Deferred revenue and accrued expenses		489		541
Income taxes payable		33		19
Short-term debt and current portion of long-term debt	14	17		15
Deferred tax liabilities		18		21
Other current liabilities	13	381		327
Total current liabilities		10,135		10,194
NON-CURRENT LIABILITIES
Long-term debt	14	2,315		2,338
Liability for pension benefits		229		282
Deferred tax liabilities		36		18
Provisions for liabilities		208		180
Other non-current liabilities	13	353		375
Total non-current liabilities		3,141		3,193
Total liabilities		13,276		13,387

(Continued on next page)

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Willis Group Holdings plc

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)



	Note	September 30, 2013			December 31, 2012
		(millions, except share data)
COMMITMENTS AND CONTINGENCIES	7
EQUITY
Ordinary shares, $0.000115 nominal value; Authorized: 4,000,000,000; Issued 177,299,202 shares in 2013 and 173,178,733 shares in 2012		—			—
Ordinary shares, €1 nominal value; Authorized: 40,000; Issued 40,000 shares in 2013 and 2012		—			—
Preference shares, $0.000115 nominal value; Authorized: 1,000,000,000; Issued nil shares in 2013 and 2012		—			—
Additional paid-in capital		1,258			1,125
Retained earnings		1,577			1,427
Accumulated other comprehensive loss, net of tax	16	(808		)	(850		)
Treasury shares, at cost, 46,408 shares, $0.000115 nominal value, in 2013 and 2012 and 40,000 shares, €1 nominal value, in 2013 and 2012		(3		)	(3		)
Total Willis Group Holdings stockholders’ equity	17	2,024			1,699
Noncontrolling interests	17	23			26
Total equity		2,047			1,725
TOTAL LIABILITIES AND EQUITY		$	15,323		$	15,112

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Financial statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



		Nine months ended September 30,
	Note	2013			2012
		(millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	303		$	368
Adjustments to reconcile net income to total net cash provided by operating activities:
Income from discontinued operations		—			(1		)
Net gain on disposal of operations and fixed and intangible assets		(3		)	(2		)
Depreciation expense		68			59
Amortization of intangible assets	11	42			44
Amortization of cash retention awards		5			165
Net periodic (income) cost of defined benefit pension plans	6	(3		)	1
Provision for doubtful debts		3			9
Provision for deferred income taxes		18			47
Excess tax benefits from share-based payment arrangements		(1		)	(2		)
Share-based compensation		31			24
Gain on derivative instruments		20			14
Tender premium included in loss on extinguishment of debt		65			—
Undistributed earnings of associates		(3		)	(8		)
Effect of exchange rate changes on net income		(6		)	(10		)
Change in operating assets and liabilities, net of effects from purchase of subsidiaries:
Accounts receivable		(56		)	8
Fiduciary assets		27			(1,009		)
Fiduciary liabilities		(27		)	1,009
Cash incentives paid		(328		)	(304		)
Funding of defined benefit pension plans		(125		)	(115		)
Other assets		14			(37		)
Other liabilities		294			68
Movement on provisions		28			(18		)
Net cash provided by continuing operating activities		366			310
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of fixed and intangible assets		9			8
Additions to fixed assets		(78		)	(97		)
Additions to intangible assets		(1		)	(1		)
Acquisitions of subsidiaries, net of cash acquired		(30		)	(4		)
Payments to acquire other investments		(5		)	(5		)
Net cash used in continuing investing activities		(105		)	(99		)

(Continued on next page)

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Willis Group Holdings plc

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)



		Nine months ended September 30,
	Note	2013			2012
		(millions)
INCREASE IN CASH AND CASH EQUIVALENTS FROM OPERATING AND INVESTING ACTIVITIES		$	261		$	211
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from draw down of revolving credit facilities	14	2			20
Senior notes issued	14	522			—
Debt issuance costs		(8		)	—
Repayments of debt	14	(532		)	(11		)
Tender premium on extinguishment of senior notes	14	(65		)	—
Repurchase of shares	17	—			(100		)
Proceeds from issue of shares		105			41
Excess tax benefits from share-based payment arrangements		1			2
Dividends paid		(144		)	(139		)
Proceeds from sale of noncontrolling interests		—			3
Acquisition of noncontrolling interests		(4		)	(29		)
Dividends paid to noncontrolling interests		(9		)	(11		)
Net cash used in continuing financing activities		(132		)	(224		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		129			(13		)
Effect of exchange rate changes on cash and cash equivalents		(6		)	1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		500			436
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	623		$	424

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Notes to the financial statements

(Unaudited)

1. NATURE OF OPERATIONS

Willis provides a broad range of insurance and reinsurance broking and risk management consulting services to its clients worldwide, both directly and indirectly through its associates. The Company provides both specialized risk management advisory and consulting services on a global basis to clients engaged in specific industrial and commercial activities, and services to small, medium and large corporations through its retail operations.

In its capacity as an advisor, insurance and reinsurance broker, the Company acts as an intermediary between clients and insurance carriers by advising clients on risk management requirements, helping clients determine the best means of managing risk, and negotiating and placing insurance risk with insurance carriers through the Company’s global distribution network.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated financial statements (‘Interim Financial Statements’) have been prepared in accordance with accounting principles generally accepted in the United States of America (‘US GAAP’).

The Interim Financial Statements are unaudited but include all adjustments (consisting of normal recurring adjustments) which the Company’s management considers necessary for a fair presentation of the financial position as of such dates and the operating results and cash flows for those periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The results of operations for the nine months ended September 30, 2013 may not necessarily be indicative of the operating results for the entire fiscal year.

These Interim Financial Statements should be read in conjunction with the Company’s consolidated balance sheets as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, cash flows and changes in equity for each of the three years in the period ended December 31, 2012 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2013 (‘2012 10-K’) and as amended by Current Report on Form 8-K subsequently filed on August 8, 2013.

In February 2013, the Financial Accounting Standards Board ('FASB') issued Accounting Standards Update ('ASU') No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). This guidance is the culmination of the FASB's deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income but do require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012 and has been applied for this third quarter 2013 - see Note 16 - 'Comprehensive Income'.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists - a consensus of the FASB Emerging Issues Task Force (ASU 2013-11) which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward (NOL), or similar tax loss, or a tax credit carryforward exists. Such unrecognized tax benefits are required to be presented as a reduction of a deferred tax asset for a NOL or other tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed.

This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2013 although early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on the consolidated financial statements.

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Willis Group Holdings plc

3. SALARIES AND BENEFITS EXPENSE

Severance Costs

Severance costs arise in the normal course of business and these charges amounted to $2 million in the nine months ended September 30, 2013 (nine months ended September 30, 2012: $2 million). Of these costs, $nil was incurred in the three months ended September 30, 2013 (three months ended September 30, 2012: $nil).

During the nine months ended September 30, 2013, the Company incurred additional salaries and benefits costs of $29 million, of which $28 million related to severance costs, in relation to an Expense Reduction Initiative in the first quarter. These costs related to 207 positions that have been eliminated.

4. INCOME TAXES

The tables below reflect the components of the three and nine months ended September 30, 2013 and 2012 tax charge:



	Income before tax			Tax			Effective tax rate
	(millions, except percentages)
Three months ended September 30, 2013
Non-US ordinary income taxed at estimated annual effective tax rate	$	45		$	(9	)	20	%
US ordinary income and tax charge	(60		)	(4		)	(7	)%
Items where tax effect is treated discretely:
Impact of reduction in UK tax rate on deferred tax balances	—			1			—	%
Benefit derived from the reduction in estimate of annual effective tax rate applied to ordinary income of the prior two quarters	—			1			—	%
As reported	$	(15	)	$	(11	)	(73	)%
Three months ended September 30, 2012
Ordinary income taxed at estimated annual effective tax rate	$	39		$	(9	)	24	%
Items where tax effect is treated discretely:
Impact of reduction in UK tax rate on deferred tax balances	—			1			—	%
Net adjustment in respect of prior periods	—			(3		)	—	%
Non-tax deductible loss on disposal of operations	(1		)	—			—	%
Benefit derived from the reduction in estimate of annual effective tax rate applied to ordinary income of the prior two quarters	—			1			—	%
As reported	$	38		$	(10	)	26	%

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Notes to the financial statements

(Unaudited)

4. INCOME TAXES (Continued)



	Income before tax			Tax			Effective tax rate
	(millions, except percentages)
Nine months ended September 30, 2013
Non-US ordinary income taxed at estimated annual effective tax rate	$	386		$	(79	)	20	%
US ordinary income and tax charge	(6		)	(10		)	(167	)%
Items where tax effect is treated discretely:
Impact of reduction in UK tax rate on deferred tax balances	$	—		$	1		—	%
As reported	$	380		$	(88	)	23	%
Nine months ended September 30, 2012
Ordinary income taxed at estimated annual effective tax rate	$	482		$	(117	)	24	%
Items where tax effect is treated discretely:
Write-off of uncollectible accounts receivable balance in North America	(12		)	5			41	%
Net adjustment is respect of prior periods	—			(3		)	—	%
Non-tax deductible loss on disposal of operations	(1		)	—			—	%
Impact of reduction in UK tax rate on deferred tax balances	—			1			—	%
As reported	$	469		$	(114	)	24	%

For interim income tax reporting purposes, the Company generally determines its best estimate of an annual effective tax rate and applies that rate to its year-to-date ordinary income. The Company's estimated annual effective tax rate excludes significant, unusual or infrequently occurring items and certain other items excluded pursuant to the US GAAP authoritative guidance where applicable. The income tax expense (or benefit) related to all other items is individually computed and recognized when the items occur.

An $11 million tax expense was recorded on a pre-tax net loss of $15 million which was driven by the charges related to the early extinguishment of debt that was issued by Willis North America. As previously disclosed, the Company has maintained a valuation allowance against net US deferred tax assets. Therefore, no tax benefit was recognized for the debt extinguishment charges recorded during the quarter, resulting in a higher consolidated tax expense. When looking at the quarter’s results excluding the extinguishment charges, the tax rate was approximately 24 percent.

For the nine months ended September 30, 2013, the reported tax rate was approximately 23 percent. The reported tax rate for the three and nine months ended September 30, 2012 was 26 percent and 24 percent, respectively.

The Company's tax rate differs from the US statutory income tax rate of 35 percent primarily due to income being subject to tax in numerous non-US jurisdictions with varying tax rates, as well as the valuation allowance maintained in the US due to losses incurred in recent years.

5. EARNINGS PER SHARE

Basic and diluted earnings per share are calculated by dividing net income attributable to Willis Group Holdings by the average number of shares outstanding during each period. The computation of diluted earnings per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue shares were exercised or converted into shares or resulted in the issuance of shares that then shared in the net income of the Company.

In periods where losses are reported the weighted average shares outstanding excludes the potentially issuable shares described above, because their inclusion would be antidilutive.

At September 30, 2013, time-based and performance-based options to purchase 7.8 million and 5.6 million shares (September 30, 2012: 9.2 million and 7.2 million), respectively, and 1.7 million restricted stock units (September 30, 2012: 1.2 million) were outstanding.

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Willis Group Holdings plc

5. EARNINGS PER SHARE (Continued)

Basic and diluted earnings per share are as follows:



	Three months ended September 30,					Nine months ended September 30,
	2013			2012		2013			2012
	(millions, except per share data)
Net (loss) income attributable to Willis Group Holdings	$	(27	)	$	26	$	297		$	359

Basic average number of shares outstanding	177			173		175			173
Dilutive effect of potentially issuable shares	—			2		3			3
Diluted average number of shares outstanding	177			175		178			176
Basic earnings per share:
Continuing operations	$	(0.15	)	$	0.15	$	1.70		$	2.07
Discontinued operations	—			—		—			0.01
Net (loss) income attributable to Willis Group Holdings shareholders	$	(0.15	)	$	0.15	$	1.70		$	2.08

Dilutive effect of potentially issuable shares	—			—		(0.03		)	(0.04		)
Diluted earnings per share:
Continuing operations	$	(0.15	)	$	0.15	$	1.67		$	2.03
Discontinued operations	—			—		—			0.01
Net (loss) income attributable to Willis Group Holdings shareholders	$	(0.15	)	$	0.15	$	1.67		$	2.04

Options to purchase 15.1 million and 3.8 million shares were not included in the computation of the dilutive effect of stock options for the three and nine months ended September 30, 2013 respectively because the effect was antidilutive (three and nine months ended September 30, 2012: 6.1 million and 6.2 million).

6. PENSION PLANS

The components of the net periodic benefit (income) cost of the UK, US and international and US non-qualified defined benefit plans are as follows:



	Three months ended September 30,
	UK Pension Benefits						US Pension Benefits						International and US non-qualified Pension Benefits
	2013			2012			2013			2012			2013			2012
	(millions)
Components of net periodic benefit (income) cost:
Service cost	$	10		$	9		$	—		$	—		$	—		$	1
Interest cost	26			27			10			11			2			1
Expected return on plan assets	(47		)	(45		)	(13		)	(12		)	(2		)	(2		)
Amortization of unrecognized prior service gain	(1		)	(1		)	—			—			—			—
Amortization of unrecognized actuarial loss	11			9			3			2			—			—
Net periodic benefit (income) cost	$	(1	)	$	(1	)	$	—		$	1		$	—		$	—

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Notes to the financial statements

(Unaudited)



	Nine months ended September 30,
	UK Pension Benefits						US Pension Benefits						International and US non-qualified Pension Benefits
	2013			2012			2013			2012			2013			2012
	(millions)
Components of net periodic benefit (income) cost:
Service cost	$	28		$	26		$	—		$	—		$	2		$	3
Interest cost	80			81			29			31			5			4
Expected return on plan assets	(141		)	(135		)	(38		)	(35		)	(5		)	(5		)
Amortization of unrecognized prior service gain	(4		)	(4		)	—			—			—			—
Amortization of unrecognized actuarial loss	33			29			7			6			1			—
Net periodic benefit (income) cost	$	(4	)	$	(3	)	$	(2	)	$	2		$	3		$	2

During the nine months ended September 30, 2013, the Company made cash contributions of $68 million (2012: $60 million) into the UK defined benefit pension plan. This includes a $10 million payment that arose as a result of the share buyback program discussed below. In addition to this, a further payment of $9 million (2012: $9 million) was made in respect of employees’ salary sacrifice contributions. Cash contributions of $40 million and $8 million (2012: $40 million and $6 million) were made to the US plan and international and US non-qualified defined benefit pension plans, respectively.

Contributions to the UK defined benefit pension plan in 2013 are expected to total $88 million, of which approximately $22 million relates to on-going contributions calculated as 15.9 percent of active plan members’ pensionable salaries, approximately $56 million relates to contributions towards funding the deficit and $10 million exceptional return payment related to 10 percent of the $100 million share buyback program completed during 2012, as required under the current agreed schedule of contributions.

In addition, for full year 2013, the Company will contribute approximately $12 million to the UK defined benefit pension plan related to employees’ salary sacrifice contributions. The Company also expects to contribute approximately $40 million to the US plan and $11 million to the international and US non-qualified plans for the full year 2013 (inclusive of amounts contributed in the year to date).

In addition, under the current schedule of contributions, further contributions will be payable based on a profit share calculation (equal to 20 percent of EBITDA in excess of $900 million per annum as defined by the revised schedule of contributions) and an exceptional return calculation (equal to 10 percent of any exceptional returns made to shareholders, for example, share buybacks and special dividends). Aggregate contributions under the deficit funding contribution and the profit share calculation are capped at £312 million ($505 million) over the six-year period ended December 31, 2017.

The schedule of contributions is automatically renegotiated after three years and at any earlier time jointly agreed by the Company and the Trustee.

7. COMMITMENTS AND CONTINGENCIES

Contractual Obligations

Pensions

The Company’s pension funding obligations are set out in Note 6 — ‘Pension Plans’.

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Willis Group Holdings plc

7. COMMITMENTS AND CONTINGENCIES (Continued)

Other Contractual Obligations

In July 2010, the Company made a capital commitment of $25 million to Trident V Parallel Fund, LP. As of September 30, 2013 there had been approximately $15 million of capital contributions.

In May 2011, the Company made a capital commitment of $10 million to Dowling Capital Partners I, LP. As of September 30, 2013 there had been approximately $2 million of capital contributions.

Claims, Lawsuits and Other Proceedings

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.

Errors and omissions claims, lawsuits, and other proceedings arising in the ordinary course of business are covered in part by professional indemnity or other appropriate insurance. The terms of this insurance vary by policy year and self-insured risks have increased significantly in recent years. Regarding self-insured risks, the Company has established provisions which are believed to be adequate in the light of current information and legal advice, and the Company adjusts such provisions from time to time according to developments.

On the basis of current information, the Company does not expect that the actual claims, lawsuits and other proceedings to which the Company is subject, or potential claims, lawsuits, and other proceedings relating to matters of which it is aware, will ultimately have a material adverse effect on the Company’s financial condition, results of operations or liquidity. Nonetheless, 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 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.

The material actual or potential claims, lawsuits, and other proceedings, of which the Company is currently aware, are:

Stanford Financial Group Litigation

The Company has been named as a defendant in 13 similar lawsuits relating to the collapse of The Stanford Financial Group (‘Stanford’), for which Willis of Colorado, Inc. acted as broker of record on certain lines of insurance. The complaints in these actions generally allege that the defendants actively and materially aided Stanford’s alleged fraud by providing Stanford with certain letters regarding coverage that they knew would be used to help retain or attract actual or prospective Stanford client investors. The complaints further allege that these letters, which contain statements about Stanford and the insurance policies that the defendants placed for Stanford, contained untruths and omitted material facts and were drafted in this manner to help Stanford promote and sell its allegedly fraudulent certificates of deposit.

The 13 actions are as follows:

•

Troice, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:9-CV-1274-N, was filed on July 2, 2009 in the U.S. District Court for the Northern District of Texas against Willis Group Holdings plc, Willis of Colorado, Inc. and a Willis associate, among others. On April 1, 2011, plaintiffs filed the operative Third Amended Class Action Complaint individually and on behalf of a putative, worldwide class of Stanford investors, adding Willis Limited as a defendant and alleging claims under Texas statutory and common law and seeking damages in excess of $1 billion, punitive damages and costs. On May 2, 2011, the defendants filed motions to dismiss the Third Amended Class Action Complaint, arguing, inter alia, that the plaintiffs’ claims are precluded by the Securities Litigation Uniform Standards Act of 1998 (‘SLUSA’).

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 27, 2011, the court in Troice entered an order (i) dismissing with prejudice those claims asserted in the Third Amended Class Action Complaint on a class basis on the grounds set forth in the Roland decision discussed above and

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Notes to the financial statements

(Unaudited)

7. COMMITMENTS AND CONTINGENCIES (Continued)

(ii) dismissing without prejudice those claims asserted the Third Amended Class Action Complaint on an individual basis. Also on October 27, 2011, the court entered a final judgment in the action.

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. Following the completion of briefing and oral argument, on March 19, 2012, the Fifth Circuit reversed and remanded the actions. On April 2, 2012, the defendants-appellees filed petitions for rehearing en banc. On April 19, 2012, the petitions for rehearing en banc were denied. On July 18, 2012, defendants-appellees filed a petition for writ of certiorari with the United States Supreme Court regarding the Fifth Circuit's reversal in Troice. On January 18, 2013, the Supreme Court granted our petition and will hear our appeal. Opening briefs were filed on May 3, 2013 and the Supreme Court heard oral argument on October 7, 2013. We expect a ruling in late 2013 or early 2014.

•

Ranni v. Willis of Colorado, Inc., et al., C.A. No. 9-22085, 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.

•

Canabal, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:9-CV-1474-D, was filed on August 6, 2009 against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate named as a defendant in Troice, among others, also in the Northern District of Texas. The complaint was filed individually and on behalf of a putative class of Venezuelan Stanford investors, alleged claims under Texas statutory and common law and sought damages in excess of $1 billion, punitive damages, attorneys’ fees and costs. On December 18, 2009, the parties in Troice and Canabal stipulated to the consolidation of those actions (under the Troice civil action number), and, on December 31, 2009, the plaintiffs in Canabal filed a notice of dismissal, dismissing the action without prejudice.

•

Rupert, et al. v. Winter, et al., Case No. 2009C115137, was filed on September 14, 2009 on behalf of 97 Stanford investors against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The complaint alleges claims under the Securities Act of 1933, Texas and Colorado statutory law and Texas common law and seeks special, consequential and treble damages of more than $300 million, attorneys’ fees and costs. On October 20, 2009, certain defendants, including Willis of Colorado, Inc., (i) removed Rupert to the U.S. District Court for the Western District of Texas, (ii) notified the JPML of the pendency of this related action and (iii) moved to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. On April 1, 2010, the JPML issued a final transfer order for the transfer of Rupert to the Northern District of Texas. On January 24, 2012, the court remanded Rupert to Texas State Court (Bexar County), but stayed the action until further order of the court. The defendants have not yet responded to the complaint in Rupert.

•

Casanova, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:10-CV-1862-O, was filed on September 16, 2010 on behalf of seven Stanford investors against Willis Group Holdings plc, Willis Limited, Willis of Colorado, Inc. and the same Willis associate, among others, also in the Northern District of Texas. The complaint alleges claims under Texas statutory and common law and seeks actual damages in excess of $5 million, punitive damages, attorneys’ fees and costs. The defendants have not yet responded to the complaint in Casanova.

•

Rishmague, et ano. v. Winter, et al., Case No. 2011CI2585, was filed on March 11, 2011 on behalf of two Stanford investors, individually and as representatives of certain trusts, against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks special, consequential and treble damages of more than $37 million and attorneys’ fees and costs. On April 11, 2011, certain defendants, including Willis of Colorado, Inc., (i) removed Rishmague to the Western District of Texas, (ii) notified the JPML of the pendency of this related action and (iii) moved to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. On August 8, 2011, the JPML issued a final transfer order for the transfer of Rishmague to the Northern District of Texas, where it is currently pending. The defendants have not yet responded to the complaint in Rishmague.

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Willis Group Holdings plc

7. COMMITMENTS AND CONTINGENCIES (Continued)

•

MacArthur v. Winter, et al., Case No. 2013-07840, was filed on February 8, 2013 on behalf of two Stanford investors against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the same Willis associate, among others, in Texas state court (Harris County). The complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks actual, special, consequential and treble damages of approximately $4 million and attorneys' fees and costs. On March 29, 2013, Willis of Colorado, Inc. and Willis of Texas, Inc. (i) removed MacArthur to the U.S. District Court for the Southern District of Texas and (ii) notified the JPML of the pendency of this related action. On April 2, 2013, Willis of Colorado, Inc. and Willis of Texas, Inc. filed a motion in the Southern District of Texas to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. Also on April 2, 2013, the court presiding over MacArthur in the Southern District of Texas transferred the action to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. The defendants have not yet responded to the complaint in MacArthur.

•

Florida suits: On February 14, 2013, five law suits were filed against Willis Group Holdings plc, Willis Limited and Willis of Colorado, Inc. in Florida state court (Miami-Dade County) alleging violations of Florida common law. The five suits are: (1) Barbar, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05666CA27, filed on behalf of 35 Stanford investors seeking compensatory damages in excess of $30 million; (2) de Gadala-Maria, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05669CA30, filed on behalf of 64 Stanford investors seeking compensatory damages in excess of $83.5 million; (3) Ranni, et ano. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05673CA06, filed on behalf of two Stanford investors seeking compensatory damages in excess of $3 million; (4) Tisminesky, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05676CA09, filed on behalf of 11 Stanford investors seeking compensatory damages in excess of $6.5 million; and (5) Zacarias, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05678CA11, filed on behalf of 10 Stanford investors seeking compensatory damages in excess of $12.5 million. On June 3, 2013, Willis of Colorado, Inc. removed all five cases to the Southern District of Florida and, on June 4, 2013, notified the JPML of the pendency of these related actions. On June 10, 2013, the court in Tisminesky issued an order sua sponte staying and administratively closing that action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation and coordination with the other Stanford-related actions. On June 11, 2013, Willis of Colorado, Inc. moved to stay the other four actions pending the JPML's transfer decision. On June 20, 2013, the JPML issued a conditional transfer order for the transfer of the five actions to the Northern District of Texas, the transmittal of which was stayed for seven days to allow for any opposition to be filed. On June 28, 2013, with no opposition having been filed, the JPML lifted the stay, enabling the transfer to go forward. The defendants have not yet responded to the complaints in these actions.

•

Janvey, et al. v. Willis of Colorado, Inc., et al., Case No. 3:13-CV-03980-D, was filed on October 1, 2013 in the U.S. District Court for the Northern District of Texas against Willis Group Holdings plc, Willis Limited, Willis North America Inc., Willis of Colorado, Inc. and the same Willis associate. The complaint was filed (i) by Ralph S. Janvey, in his capacity as Court-Appointed Receiver for the Stanford Receivership Estate, and the Official Stanford Investors Committee (the ‘OSIC’) against all defendants and (ii) on behalf of a putative, worldwide class of Stanford investors against Willis North America Inc. Plaintiffs Janvey and the OSIC allege claims under Texas common law and the court’s Amended Order Appointing Receiver, and the putative class plaintiffs allege claims under Texas statutory and common law. Plaintiffs seek actual damages in excess of $1 billion, punitive damages and costs. The defendants have not yet responded to the complaint in Janvey.

Additional actions could be brought in the future by other investors in certificates of deposit issued by Stanford and its affiliates. The Company disputes these allegations and intends to defend itself vigorously against these actions. The outcomes of these actions, however, including any losses or other payments that may occur as a result, cannot be predicted at this time.

European Commission Sector Inquiry

In 2006, the European Commission ('EC') issued questionnaires pursuant to its Sector Inquiry (or, in respect of Norway, the European Free Trade Association Surveillance Authority ('EFTAS')), related to insurance business practices, including compensation arrangements for brokers, to at least 150 European brokers including our operations in nine European countries. The Company filed responses to the questionnaires. On September 25, 2007, the EC and EFTAS issued a joint report expressing concerns over potential conflicts of interest in the industry relating to remuneration and binding authorities and also over the nature of the coinsurance market.

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Notes to the financial statements

(Unaudited)

7. COMMITMENTS AND CONTINGENCIES (Continued)

The Company cooperated with both the EC and the EFTAS to resolve issues raised in their final joint report regarding coinsurance. In 2012, the EC appointed Ernst & Young to conduct a review of the coinsurance market and Ernst & Young approached one broking firm in each Member State. Three of our European subsidiaries (UK, Spain and the Netherlands) either met with Ernst & Young or received questionnaires from them on this matter in 2012. The EC published Ernst & Young's report on February 11, 2013, which described the nature and benefits of the coinsurance and subscription markets. The EC intends to consult further on these findings during 2013 before determining next steps.

Regulatory Investigation

In 2011, we and the UK Financial Services Authority (the 'FSA') announced a settlement for lapses by Willis Limited, our UK brokerage subsidiary, in its implementation and documentation of its controls to counter the risks of improper payments being made to non-FSA authorized overseas third parties engaged to help win business, particularly in high risk jurisdictions.

As a result of an FSA settlement in 2011, we conducted a further internal review of certain high-risk payments made by our UK subsidiary between 2005 and 2009. We do not believe that this further internal review will result in any material fines or sanctions, but there can be no assurance that any resolution will not have an adverse impact on us or our ability to conduct our business in certain jurisdictions. While we believe that our current systems and controls are adequate and in accordance with all applicable laws and regulations, we cannot assure that such systems and controls will prevent any violations of applicable laws and regulations.

8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Fair Value of Derivative Financial Instruments

In addition to the note below, see Note 9 — ‘Fair Value Measurement’ for information about the fair value hierarchy of derivatives.

Primary Risks Managed by Derivative Financial Instruments

The main risks managed by derivative financial instruments are interest rate risk and foreign currency risk. The Company’s Board of Directors reviews and approves policies for managing each of these risks as summarized below.

The Company enters into derivative transactions (principally interest rate swaps and forward foreign currency contracts) in order to manage interest rate and foreign currency risks arising from the Company’s operations and its sources of finance. The Company does not hold financial or derivative instruments for trading purposes.

Interest Rate Risk — Investment Income

As a result of the Company’s operating activities, the Company receives cash for premiums and claims which it deposits in short-term investments denominated in US dollars and other currencies. The Company earns interest on these funds, which is included in the Company’s financial statements as investment income. These funds are regulated in terms of access and the instruments in which they may be invested, most of which are short-term in maturity.

In order to manage interest rate risk arising from these financial assets, the Company entered into interest rate swaps to receive a fixed rate of interest and pay a variable rate of interest denominated in the various currencies related to the short-term investments. The use of interest rate contracts essentially converted groups of short-term variable rate investments to fixed rate investments. The fair value of these contracts was recorded in other assets and other liabilities. For contracts that qualified as cash flow hedges for accounting purposes, the effective portions of changes in fair value were recorded as a component of other comprehensive income, to the extent that the hedge relationships were highly effective.

From the fourth quarter of 2011, the Company stopped entering into any new hedging transactions relating to interest rate risk from investments, given the flat yield curve environment at that time. Further to this, during second quarter 2012, the Company closed out its legacy position for these interest rate swap contracts.

The fair value of these swaps at the close out date was $16 million, representing a cash settlement amount on termination. In connection with the terminated swaps, the Company retained a gain of $15 million in other comprehensive income as the

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Willis Group Holdings plc

8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

forecasted short-term investment transactions in relation to which the swaps qualified as cash flow hedges were still considered probable. These amounts are reclassified into earnings consistent with when the forecasted swap transactions affect earnings. We expect approximately $5 million of the gain to be recognized in the consolidated statement of operations in 2013 including $4 million already recognized in the nine months ended September 30, 2013.

At September 30, 2013, the Company had no derivative financial instruments that were designated as cash flow hedges of interest rate risk on investments.

Interest Rate Risk — Interest Expense

The Company's operations are financed principally by $2,054 million fixed rate senior notes maturing through 2043 and $278 million under a 7-year term loan facility. The Company has access to $800 million under a revolving credit facility expiring July 23, 2018, and $22 million under two further revolving credit facilities.

The 7-year term loan facility bears interest at LIBOR plus 1.50%. As of September 30, 2013, $nil was drawn on the $800 million revolving credit facility. Drawings under that 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. The fixed rate senior notes bear interest at various rates as detailed in Note 14 — ‘Debt’.

During the three months ended March 31, 2010, the Company entered into a series of interest rate swaps for a total notional amount of $350 million to receive a fixed rate and pay a variable rate on a semi-annual basis, with a maturity date of July 15, 2015. The Company had previously designated these instruments as fair value hedges against its $350 million 5.625% senior notes due 2015 and accounted for them accordingly until the first quarter of 2013 at which point these swaps, although remaining as economic hedges, no longer qualified for hedge accounting.

During the three months ended September 30, 2013, the Company closed out the above interest rate swaps and received a cash settlement of $13 million on termination.

Following the partial extinguishment of the 5.625% senior notes due 2015 on August 15, 2013, we have recorded a credit of $7 million to remove a corresponding partial amount of the fair value adjustment to the carrying values of the notes originally recognized in connection with the interest rate swaps. The remaining $5 million fair value adjustment will be amortized through interest expense over the period to maturity.

To hedge against the potential variability in benchmark interest rates in advance of the anticipated debt issuance, the Company entered into two short-term treasury locks during the three months ended June 30, 2013. These were closed out during the three months ended September 30, 2013 following the issue of the new senior notes described in Note 14 - 'Debt'. The fair value of these treasury locks at the close out date was $21 million, received as a cash settlement on termination.

The Company had designated the Treasury locks as effective hedges of the anticipated transaction and had recognized a gain of $19 million in other comprehensive income in relation to the effective element that qualified for hedge accounting. This amount will be reclassified into earnings consistent with the recognition of interest expense on the 4.625% senior notes due 2023 and the 6.125% senior notes due 2043. In addition, the Company recognized a $2 million gain in interest expense for the portion of the treasury locks determined as ineffective.

Foreign Currency Risk

The Company’s primary foreign exchange risks arise:

•

from changes in the exchange rate between US dollars and Pounds sterling as its London market operations earn the majority of their revenues in US dollars and incur expenses predominantly in Pounds sterling, and may also hold a significant net sterling asset or liability position on the balance sheet. In addition, the London market operations earn significant revenues in Euros and Japanese yen; and


•	from the translation into US dollars of the net income and net assets of its foreign subsidiaries, excluding the London market operations which are US dollar denominated.

The foreign exchange risks in its London market operations are hedged as follows:

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Notes to the financial statements

(Unaudited)

8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)


•	to the extent that forecast Pounds sterling expenses exceed Pounds 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. In addition, we are also exposed to foreign exchange risk on any net sterling asset or liability position in our London market operations.

The fair value of foreign currency contracts is recorded in other assets and other liabilities. For contracts that qualify as accounting hedges, changes in fair value resulting from movements in the spot exchange rate are recorded as a component of other comprehensive income while changes resulting from a movement in the time value are recorded in interest expense. For contracts that do not qualify for hedge accounting, the total change in fair value is recorded in interest expense. Amounts held in comprehensive income are reclassified into earnings when the hedged exposure affects earnings.

At September 30, 2013 and December 31, 2012, the Company’s foreign currency contracts were all designated as hedging instruments except those relating to short-term cash flows and hedges of certain intercompany loans.

The table below summarizes by major currency the contractual amounts of the Company’s forward contracts to exchange foreign currencies for Pounds sterling in the case of US dollars and US dollars for Euro and Japanese yen. Foreign currency notional amounts are reported in US dollars translated at contracted exchange rates.



	Sell		Fair value
	(millions)
US dollar	$	240	$	14
Euro	80		(2		)
Japanese yen	39		3

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. The fair values at September 30, 2013 and December 31, 2012 were immaterial.

During the nine months ended September 30, 2013, the Company entered into a number of foreign currency transactions in order to hedge certain intercompany loans. These derivatives were not designated as hedging instruments and were for a total notional amount of $118 million (December 31, 2012: $63 million). In respect of these transactions, an immaterial amount has been recognized as an asset within other current assets and a nominal gain has been recognized in other operating expenses for the period.

Derivative Financial Instruments

The table below presents the fair value of the Company’s derivative financial instruments and their balance sheet classification at September 30, 2013 and December 31, 2012:

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8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)



		Fair value
Derivative financial instruments designated as hedging instruments:	Balance sheet classification	September 30, 2013		December 31, 2012
		(millions)
Assets:
Forward exchange contracts	Other assets	$	17	$	9
Interest rate swaps (fair value hedges)	Other assets	—		22
Total derivatives designated as hedging instruments		$	17	$	31
Liabilities:
Forward exchange contracts	Other liabilities	$	2	$	—
Total derivatives designated as hedging instruments		$	2	$	—

Cash Flow Hedges

The table below presents the effects of derivative financial instruments in cash flow hedging relationships on the consolidated statements of operations and the consolidated statements of equity for the three and nine months ended September 30, 2013 and 2012:



Derivatives in cash flow hedging relationships	Amount of gain (loss) recognized in OCI⁽ⁱ⁾on derivative (effective element)		Location of gain (loss) reclassified from accumulated OCI⁽ⁱ⁾ into income (effective element)	Amount of gain (loss) reclassified from accumulated OCI⁽ⁱ⁾ into income (effective element)			Location of gain (loss) recognized in income on derivative (ineffective hedges and ineffective element of effective hedges)	Amount of gain (loss) recognized in income on derivative (ineffective hedges and ineffective element of effective hedges)
	(millions)			(millions)				(millions)
Three months ended September 30, 2013
Interest rate swaps	$	—	Investment income	$	(1	)	Other operating expenses	$	—
Treasury locks	3		Interest expense	—			Interest expense	1
Forward exchange contracts	21		Other operating expenses	—			Interest expense	—
Total	$	24		$	(1	)		$	1
Three months ended September 30, 2012
Interest rate swaps	$	—	Investment income	$	(2	)	Other operating expenses	$	—
Forward exchange contracts	—		Other operating expenses	—			Interest expense	—
Total	$	—		$	(2	)		$	—
Nine months ended September 30, 2013
Interest rate swaps	$	—	Investment income	$	(4	)	Other operating expenses	$	—
Treasury locks	19		Interest expense	—			Interest expense	2
Forward exchange contracts	7		Other operating expenses	(1		)	Interest expense	—
Total	$	26		$	(5	)		$	2
Nine months ended September 30, 2012
Interest rate swaps	$	3	Investment income	$	(5	)	Other operating expenses	$	—
Forward exchange contracts	7		Other operating expenses	—			Interest expense	—
Total	$	10		$	(5	)		$	—

____________________

Amounts above shown gross of tax.

⁽ⁱ⁾ Other Comprehensive Income

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(Unaudited)

8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

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 rates 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.

At September 30, 2013, the Company estimates there will be $15 million of net derivative gains reclassified from accumulated comprehensive income into earnings within the next twelve months as the forecasted transactions affect earnings.

Fair Value Hedges

The Company had previously designated interest rate swaps as fair value hedges against its $350 million 5.625% senior notes due 2015 and accounted for them accordingly until the first quarter of 2013 at which point these swaps, although remaining as economic hedges, no longer qualified for hedge accounting.

The table below presents the effects of derivative financial instruments in fair value hedging relationships on the consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012.



Derivative in fair value hedging relationships	Hedged item in fair value hedging relationship	(Loss) gain recognized for derivative			Gain (loss) recognized for hedged item			Ineffectiveness recognized in interest expense
		(millions)
Three months ended September 30, 2013
Interest rate swaps	5.625% senior notes due 2015	$	—		$	—		$	—
Three months ended September 30, 2012
Interest rate swaps	5.625% senior notes due 2015	$	(1	)	$	—		$	1
Nine months ended September 30, 2013
Interest rate swaps	5.625% senior notes due 2015	$	—		$	—		$	—
Nine months ended September 30, 2012
Interest rate swaps	5.625% senior notes due 2015	$	(1	)	$	(1	)	$	2

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

The table below presents the effects of derivative financial instruments no longer in fair value hedging relationships on the consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012.



Derivative no longer in fair value hedging relationships	Hedged item no longer in fair value hedging relationship	(Loss) gain recognized for derivative			Amortization of prior loss recognized on hedged item			Net (loss) gain recognized ⁽ⁱ⁾
		(millions)
Three months ended September 30, 2013
Interest rate swaps	5.625% senior notes due 2015	$	(2	)	$	(9	)	$	(7	)
Three months ended September 30, 2012
Interest rate swaps	5.625% senior notes due 2015	$	—		$	—		$	—
Nine months ended September 30, 2013
Interest rate swaps	5.625% senior notes due 2015	$	(5	)	$	(13	)	$	(8	)
Nine months ended September 30, 2012
Interest rate swaps	5.625% senior notes due 2015	$	—		$	—		$	—

____________________

⁽ⁱ⁾ the net loss was included entirely in interest expense, except for $7 million in the three and nine months ended September 30, 2013 which formed part of the loss on extinguishment of debt.

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Willis Group Holdings plc

8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Credit Risk and Concentrations of Credit Risk

Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to perform as contracted and from movements in interest rates and foreign exchange rates. The Company currently does not anticipate non-performance by its counterparties. The Company generally does not require collateral or other security to support financial instruments with credit risk.

Concentrations of credit risk that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Financial instruments on the balance sheet that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and derivatives which are recorded at fair value.

The Company maintains a policy providing for the diversification of cash and cash equivalent investments and places such investments in an extensive number of financial institutions to limit the amount of credit risk exposure. These financial institutions are monitored on an ongoing basis for credit quality predominantly using information provided by credit agencies.

Concentrations of credit risk with respect to receivables are limited due to the large number of clients and markets in which the Company does business, as well as the dispersion across many geographic areas. Management does not believe significant risk exists in connection with the Company's concentrations of credit as of September 30, 2013.

9. FAIR VALUE MEASUREMENT

The Company has categorized its assets and liabilities that are measured at fair value on a recurring basis into a three-level fair value hierarchy, based on the reliability of the inputs used to determine fair value as follows:


•	Level 1: refers to fair values determined based on quoted market prices in active markets for identical assets;


•	Level 2: refers to fair values estimated using observable market based inputs or unobservable inputs that are corroborated by market data; and


•	Level 3: includes fair values estimated using unobservable inputs that are not corroborated by market data.

The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments:


•	Long-term debt excluding the fair value hedge - Fair values are based on quoted market values and so classified as Level 1 measurements.


•	Derivative financial instruments - Market values have been used to determine the fair value of interest rate swaps and forward foreign exchange contracts based on estimated amounts the Company would receive or have to pay to terminate the agreements, taking into account the current interest rate environment or current foreign currency forward rates.

Recurring basis

The following table presents, for each of the fair value hierarchy levels, the Company's assets and liabilities that are measured at fair value on a recurring basis.

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Notes to the financial statements

(Unaudited)

9. FAIR VALUE MEASUREMENT (Continued)



	September 30, 2013
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant other unobservable inputs
	Level 1		Level 2		Level 3		Total
	(millions)
Assets at fair value:
Cash and cash equivalents	$	623	$	—	$	—	$	623
Fiduciary funds (included within Fiduciary assets)	2,099		—		—		2,099
Derivative financial instruments	—		17		—		17
Total assets	$	2,722	$	17	$	—	$	2,739
Liabilities at fair value:
Derivative financial instruments	—		2		—		2
Total liabilities	$	—	$	2	$	—	$	2



	December 31, 2012
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant other unobservable inputs
	Level 1		Level 2		Level 3		Total
	(millions)
Assets at fair value:
Cash and cash equivalents	$	500	$	—	$	—	$	500
Fiduciary funds (included within Fiduciary assets)	1,796		—		—		1,796
Derivative financial instruments	—		31		—		31
Total assets	$	2,296	$	31	$	—	$	2,327
Liabilities at fair value:
Changes in fair value of hedged debt ⁽ⁱ⁾	$	—	$	18	$	—	$	18
Total liabilities	$	—	$	18	$	—	$	18

____________________


⁽ⁱ⁾	Changes in the fair value of the underlying hedged debt instrument since inception of the hedging relationship are included in long-term debt.

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.

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Willis Group Holdings plc

9. FAIR VALUE MEASUREMENT (Continued)



	September 30, 2013				December 31, 2012
	Carrying amount		Fair value		Carrying amount		Fair value
	(millions)
Assets:
Derivative financial instruments	$	17	$	17	$	31	$	31
Liabilities:
Short-term debt	$	17	$	17	$	15	$	15
Long-term debt	2,315		2,440		2,338		2,576
Derivative financial instruments	2		2		—		—

10. GOODWILL

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 has determined that its reporting units are consistent with its operating segments: North America; International and Global. Goodwill is allocated to these reporting units based on the original purchase price allocation for acquisitions within the reporting units. When a business entity is sold, goodwill is allocated to the disposed entity based on the fair value of that entity compared with the fair value of the reporting unit in which it is included.

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Notes to the financial statements

(Unaudited)

10. GOODWILL (Continued)

The changes in the carrying amount of goodwill by segment for the nine months ended September 30, 2013 and the year ended December 31, 2012 are as follows:



	Global		North America			International			Total
	(millions)
Balance at January 1, 2012
Goodwill, gross	$	1,122	$	1,782		$	391		$	3,295
Accumulated impairment losses	—		—			—			—
Goodwill, net	$	1,122	$	1,782		$	391		$	3,295
Purchase price allocation adjustments	—		—			2			2
Goodwill acquired during the year	—		10			2			12
Goodwill disposed of during the year	—		—			(1		)	(1		)
Goodwill impairment charge	—		(492		)	—			(492		)
Foreign exchange	5		—			6			11
Balance at December 31, 2012
Goodwill, gross	$	1,127	$	1,792		$	400		$	3,319
Accumulated impairment losses	—		(492		)	—			(492		)
Goodwill, net	$	1,127	$	1,300		$	400		$	2,827
Goodwill acquired during the period	15		—			1			16
Other movements ⁽ⁱ⁾	—		(1		)	—			(1		)
Foreign exchange	—		—			4			4
Balance at September 30, 2013
Goodwill, gross	$	1,142	$	1,791		$	405		$	3,338
Accumulated impairment losses	—		(492		)	—			(492		)
Goodwill, net	$	1,142	$	1,299		$	405		$	2,846

________________________________


⁽ⁱ⁾	North America — $(1) million (2012: $nil) tax benefit arising on the exercise of fully vested HRH stock options which were issued as part of the acquisition of HRH in 2008.

11. OTHER INTANGIBLE ASSETS, NET

Other intangible assets are classified into the following categories:


•	‘Customer and Marketing Related’, including:


•	client relationships;


•	client lists;


•	non-compete agreements;


•	trade names; and


•	‘Contract based, Technology and Other’ includes all other purchased intangible assets.

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Willis Group Holdings plc

11. OTHER INTANGIBLE ASSETS, NET (Continued)

The major classes of amortizable intangible assets are as follows:



	September 30, 2013							December 31, 2012
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
	(millions)
Customer and Marketing Related:
Client Relationships	$	696	$	(344	)	$	352	$	717	$	(340	)	$	377
Client Lists	3		(1		)	2		3		(1		)	2
Non-compete Agreements	4		—			4		3		—			3
Trade Names	2		(1		)	1		11		(10		)	1
Total Customer and Marketing Related	705		(346		)	359		734		(351		)	383
Contract based, Technology and Other	5		(3		)	2		4		(2		)	2
Total amortizable intangible assets	$	710	$	(349	)	$	361	$	738	$	(353	)	$	385

The aggregate amortization of intangible assets for the nine months ended September 30, 2013 was $42 million (nine months ended September 30, 2012: $44 million), of which $14 million was recognized in the three months ended September 30, 2013 (three months ended September 30, 2012: $14 million). The estimated aggregate amortization of intangible assets for each of the next five years ended December 31 is as follows:



	Remainder of 2013		2014		2015		2016		2017		Thereafter		Total
	(millions)
Amortization of intangible assets	$	14	$	49	$	41	$	36	$	32	$	189	$	361

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Willis Group Holdings plc

12. OTHER ASSETS

An analysis of other assets is as follows:



	September 30, 2013		December 31, 2012
	(millions)
Other current assets
Prepayments and accrued income	$	82	$	61
Income tax receivable	34		50
Derivatives	9		14
Debt issuance costs	3		3
Deferred compensation plan assets	24		12
Other	43		41
Total other current assets	$	195	$	181
Other non-current assets
Deferred compensation plan assets	$	80	$	97
Derivatives	8		17
Prepayments and accrued income	18		24
Debt issuance costs	16		12
Other receivables	65		56
Total other non-current assets	$	187	$	206
Total other assets	$	382	$	387

13. OTHER LIABILITIES

An analysis of other liabilities is as follows:



	September 30, 2013		December 31, 2012
	(millions)
Other current liabilities
Accounts payable	$	134	$	88
Accrued dividends payable	50		47
Other taxes payable	51		44
Accrued interest payable	7		34
Derivatives	1		—
Deferred compensation plan liability	24		12
Other payables	114		102
Total other current liabilities	$	381	$	327
Other non-current liabilities
Incentives from lessors	$	176	$	173
Deferred compensation plan liability	80		101
Capital lease obligation	24		28
Other payables	73		73
Total other non-current liabilities	$	353	$	375
Total other liabilities	$	734	$	702

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Notes to the financial statements

(Unaudited)

14. DEBT

Short-term debt and current portion of the long-term debt consists of the following:



	September 30, 2013		December 31, 2012
	(millions)
Current portion of 7-year term loan facility expires 2018	$	15	$	15
Revolving credit facility	2		—
	$	17	$	15

Long-term debt consists of the following:



	September 30, 2013		December 31, 2012
	(millions)

7-year term loan facility expires 2018	$	263	$	274
5.625% senior notes due 2015	148		350
Fair value adjustment on 5.625% senior notes due 2015	5		18
4.125% senior notes due 2016	299		299
6.200% senior notes due 2017	394		600
7.000% senior notes due 2019	187		300
5.750% senior notes due 2021	496		496
4.625% senior notes due 2023	249		—
6.125% senior notes due 2043	273		—
3-year term loan facility expires 2015	1		1
	$	2,315	$	2,338

On July 23, 2013 we entered into an amendment to our existing credit facilities to extend both the amount of financing and the maturity date of the facilities. As a result of this amendment, our revolving credit facility was increased from $500 million to $800 million. The maturity date on the $300 million term loan was extended to July 23, 2018, from December 16, 2016. There has been no increase to the remaining $278 million outstanding on that loan.

The 7-year term loan facility expiring 2018 bears interest at LIBOR plus 1.50% and is repayable in quarterly installments and a final repayment of $186 million is due in the third quarter of 2018. Drawings under the $800 million revolving credit facility bear interest at LIBOR plus 1.50% and the facility expires on July 23, 2018. These margins apply while the Company’s debt rating remains BBB-/Baa3. As of September 30, 2013 $nil was outstanding under this revolving credit facility.

On August 15, 2013 the Company issued $250 million of 4.625% senior notes due 2023 and $275 million of 6.125% senior notes due 2043. The effective interest rates of these senior notes are 4.696% and 6.154%, respectively, which include the impact of the discount upon issuance.

On July 25, 2013 the Company commenced an offer to purchase for cash any and all of its 5.625% senior notes due 2015 and a portion of its 6.200% senior notes due 2017 and its 7.000% senior notes due 2019 for an aggregate purchase price of up to $525 million. On August 22, 2013 the proceeds from the issue of the senior notes due 2023 and 2043 were used to fund the purchase of $202 million of 5.625% senior notes due 2015, $206 million of 6.200% senior notes due 2017 and $113 million of 7.000% senior notes due 2019.

The Company incurred total losses on extinguishment of debt of $60 million during the three months ended September 30, 2013. This was made up of a tender premium of $65 million, the write-off of unamortized debt issuance costs of $2 million and a credit for the reduction of the fair value adjustment on 5.625% senior notes due 2015 of $7 million.

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Willis Group Holdings plc

15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures regarding cash flow information and non-cash investing and financing activities are as follows:



	Nine months ended September 30,
	2013			2012
	(millions)
Supplemental disclosures of cash flow information:
Cash payments for income taxes, net	$	36		$	43
Cash payments for interest	115			117
Supplemental disclosures of non-cash investing and financing income (expenses):
Write-off of unamortized debt issuance costs	(2		)	—
Write-back of fair value adjustment on 5.625% senior notes due 2015	7			—
Acquisitions:
Fair value of assets acquired, net of cash acquired	$	46		$	—
Less: Fair value of liabilities assumed	(30		)	—
Net assets acquired, net of cash acquired	$	16		$	—

16. COMPREHENSIVE INCOME

The components of comprehensive income are as follows:



	Three months ended September 30,
	2013									2012
	Before tax amount			Tax			Net of tax amount			Before tax amount			Tax			Net of tax amount
	(millions)
Other comprehensive income:
Foreign currency translation adjustments	$	82		$	—		$	82		$	35		$	—		$	35
Pension funding adjustments:
Foreign currency translation on pension funding adjustments	(51		)	14			(37		)	(19		)	5			(14		)
Amortization of unrecognized actuarial loss	14			(3		)	11			11			(2		)	9
Amortization of unrecognized prior service gain	(1		)	—			(1		)	(1		)	—			(1		)
	(38		)	11			(27		)	(9		)	3			(6		)
Derivative instruments:
Interest rate swap reclassification adjustment	(1		)	—			(1		)	(2		)	—			(2		)
Gain on forward exchange contracts (effective element)	21			(4		)	17			—			—			—
Gain on treasury lock (effective element)	3			(1		)	2			—			—			—
	23			(5		)	18			(2		)	—			(2		)
Other comprehensive income	67			6			73			24			3			27
Less: Other comprehensive income attributable to noncontrolling interests	(1		)	—			(1		)	—			—			—
Other comprehensive income attributable to Willis Group Holdings	$	66		$	6		$	72		$	24		$	3		$	27



	Nine months ended September 30,
	2013									2012
	Before tax amount			Tax			Net of tax amount			Before tax amount			Tax			Net of tax amount
	(millions)
Other comprehensive income:
Foreign currency translation adjustments	$	(7	)	$	—		$	(7	)	$	21		$	—		$	21
Pension funding adjustments:
Foreign currency translation on pension funding adjustments	3			(1		)	2			(27		)	7			(20		)
Amortization of unrecognized actuarial loss	41			(8		)	33			35			(9		)	26
Amortization of unrecognized prior service gain	(4		)	1			(3		)	(4		)	1			(3		)
	40			(8		)	32			4			(1		)	3
Derivative instruments:
Gain on interest rate swaps (effective element)	—			—			—			3			(1		)	2
Interest rate swap reclassification adjustment	(4		)	1			(3		)	(5		)	1			(4		)
Gain on forward exchange contracts (effective element)	7			(1		)	6			7			(2		)	5
Forward exchange contracts reclassification adjustment	(1		)	—			(1		)	—			—			—
Gain on treasury lock (effective element)	19			(4		)	15			—			—			—
	21			(4		)	17			5			(2		)	3
Other comprehensive income (loss)	54			(12		)	42			30			(3		)	27
Less: Other comprehensive income attributable to noncontrolling interests	—			—			—			—			—			—
Other comprehensive income (loss) attributable to Willis Group Holdings	$	54		$	(12	)	$	42		$	30		$	(3	)	$	27

The components of accumulated other comprehensive loss, net of tax, are as follows:



	Net foreign currency translation adjustment			Pension funding adjustment			Net unrealized gain on derivative instruments			Total
	(millions)
Balance at December 31, 2012	$	(34	)	$	(831	)	$	15		$	(850	)
Other comprehensive income before reclassifications	(7		)	2			21			16
Amounts reclassified from accumulated other comprehensive income	—			30			(4		)	26
Net current-period other comprehensive income, net of tax and noncontrolling interests	(7		)	32			17			42
Balance at September 30, 2013	$	(41	)	$	(799	)	$	32		$	(808	)

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Willis Group Holdings plc

Amounts reclassified out of accumulated other comprehensive income into the statement of operations are as follows:



Details about accumulated other comprehensive income components	Amount reclassified from accumulated other comprehensive income						Affected line item in the statement of operations
	Three months ended September 30,
	2013			2012
	(millions)
Gains and losses on cash flow hedges (Note 8)
Interest rate swaps	$	(1	)	$	(2	)	Investment income
Foreign exchange contracts	—			—			Other operating expenses
	(1		)	(2		)	Total before tax
Tax	—			—
	$	(1	)	$	(2	)	Net of tax
Amortization of defined benefit pension items (Note 6)
Prior service gain	$	(1	)	$	(1	)	Salaries and benefits
Net actuarial loss	14			11			Salaries and benefits
	13			10			Total before tax
Tax	(3		)	(2		)
	$	10		$	8		Net of tax

Total reclassifications for the period	$	9		$	6



Details about accumulated other comprehensive income components	Amount reclassified from accumulated other comprehensive income						Affected line item in the statement of operations
	Nine months ended September 30,
	2013			2012
	(millions)
Gains and losses on cash flow hedges (Note 8)
Interest rate swaps	$	(4	)	$	(5	)	Investment income
Foreign exchange contracts	(1		)	—			Other operating expenses
	(5		)	(5		)	Total before tax
Tax	1			1
	$	(4	)	$	(4	)	Net of tax
Amortization of defined benefit pension items (Note 6)
Prior service gain	$	(4	)	$	(4	)	Salaries and benefits
Net actuarial loss	41			35			Salaries and benefits
	37			31			Total before tax
Tax	(7		)	(8		)
	$	30		$	23		Net of tax

Total reclassifications for the period	$	26		$	19

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Notes to the financial statements

(Unaudited)

17. EQUITY AND NONCONTROLLING INTERESTS

The components of stockholders’ equity and noncontrolling interests are as follows:



	September 30, 2013									September 30, 2012
	Willis Group Holdings stockholders			Noncontrolling interests			Total equity			Willis Group Holdings stockholders			Noncontrolling interests			Total equity
	(millions)
Balance at beginning of period	$	1,699		$	26		$	1,725		$	2,486		$	31		$	2,517
Comprehensive income:
Net income	297			6			303			359			9			368
Other comprehensive income, net of tax	42			—			42			27			—			27
Comprehensive income	339			6			345			386			9			395
Dividends	(147		)	(9		)	(156		)	(141		)	(11		)	(152		)
Additional paid-in capital	137			—			137			64			—			64
Repurchase of shares ⁽ⁱ⁾	—			—			—			(100		)	—			(100		)
Additional noncontrolling interests	—			—			—			2			1			3
Purchase of subsidiary shares from noncontrolling interests	(4		)	—			(4		)	(23		)	(6		)	(29		)
Balance at end of period	$	2,024		$	23		$	2,047		$	2,674		$	24		$	2,698

_________________________________


⁽ⁱ⁾	Based on settlement date we repurchased 2,796,546 shares at an average price of $35.87 in the nine months ended September 30, 2012.

The effects on equity of changes in Willis Group Holdings ownership interest in its subsidiaries are as follows:



	September 30, 2013			September 30, 2012
	(millions)
Net income attributable to Willis Group Holdings	$	297		$	359
Transfers from noncontrolling interest:
Decrease in Willis Group Holdings paid-in capital for purchase of noncontrolling interests	(4		)	(23		)
Increase in Willis Group Holdings paid-in capital for sale of noncontrolling interests	—			2
Net transfers to noncontrolling interests	(4		)	(21		)
Change from net income attributable to Willis Group Holdings and transfers from noncontrolling interests	$	293		$	338

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Willis Group Holdings plc

18. SEGMENT INFORMATION

During the periods presented, the Company operated through three segments: Global, North America and International. Global provides specialist brokerage and consulting services to clients worldwide for specific industrial and commercial activities and is organized by specialism. North America and International predominantly comprise our retail operations which provide services to small, medium and large corporations, accessing Global’s specialist expertise when required.

The Company evaluates the performance of its 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:


(i)	foreign exchange hedging activities, foreign exchange movements on the UK pension plan asset, foreign exchange gains and losses from currency purchases and sales, and foreign exchange movements on internal exposures;


(ii)	amortization of intangible assets;


(iii)	gains and losses on the disposal of operations;


(iv)	significant legal and regulatory settlements which are managed centrally;


(v)	write-off of uncollectible accounts receivable balance and associated legal fees and insurance recoveries arising in Chicago due to fraudulent overstatement of commissions and fees;


(vi)	fees related to the extinguishment of debt; and


(vii)	costs associated with the Expense Reduction Initiative.

The accounting policies of the segments are consistent with those described in Note 2 — ‘Basis of Presentation and Significant Accounting Policies’ to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and as amended by Current Report on Form 8-K subsequently filed on August 8, 2013.

There are no inter-segment revenues, with segments operating on a revenue-sharing basis equivalent to that used when sharing business with other third-party brokers.

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Notes to the financial statements

(Unaudited)

18. SEGMENT INFORMATION (Continued)

Selected information regarding the Company’s segments is as follows:



	Three months ended September 30, 2013
	Commissions and fees		Investment income		Other income		Total revenues		Depreciation and amortization		Operating income			Interest in earnings of associates, net of tax
	(millions)
Global	$	250	$	1	$	—	$	251	$	7	$	36		$	—
North America	328		1		—		329		9		57			—
International	213		2		—		215		5		(9		)	(1		)
Total Retail	541		3		—		544		14		48			(1		)
Total Segments	791		4		—		795		21		84			(1		)
Corporate and Other ⁽ⁱ⁾	—		—		—		—		14		(9		)	—
Total Consolidated	$	791	$	4	$	—	$	795	$	35	$	75		$	(1	)


	Three months ended September 30, 2012
	Commissions and fees		Investment income		Other income		Total revenues		Depreciation and amortization		Operating income			Interest in earnings of associates, net of tax
	(millions)
Global	$	235	$	—	$	—	$	235	$	7	$	52		$	—
North America	315		2		1		318		7		53			—
International	199		2		—		201		7		(9		)	(2		)
Total Retail	514		4		1		519		14		44			(2		)
Total Segments	749		4		1		754		21		96			(2		)
Corporate and Other ⁽ⁱ⁾	—		—		—		—		14		(26		)	—
Total Consolidated	$	749	$	4	$	1	$	754	$	35	$	70		$	(2	)

_________________________________


⁽ⁱ⁾	See the following table for an analysis of the ‘Corporate and Other’ line.



	Three months ended September 30,
	2013			2012
	(millions)
Amortization of intangible assets	$	(14	)	$	(14	)
Net loss on disposal of operations ^(a)	—			(1		)
India joint venture settlement ^(a)	—			(11		)
Foreign exchange hedging	—			1
Foreign exchange gain on the UK pension plan asset	4			—
Fees related to the extinguishment of debt ^(b)	(1		)	—
Other	2			(1		)
Total Corporate and Other	$	(9	)	$	(26	)

_________________________________


^(a)	$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, $1 million loss on disposal of operations was recorded related to the termination.


^(b)	$1 million of fees associated with the extinguishment of debt completed on August 15, 2013.

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Willis Group Holdings plc

18. SEGMENT INFORMATION (Continued)



	Nine months ended September 30, 2013
	Commissions and fees		Investment income		Other income		Total revenues		Depreciation and amortization		Operating income			Interest in earnings of associates, net of tax
	(millions)
Global	$	938	$	3	$	—	$	941	$	21	$	313		$	—
North America	1,024		2		3		1,029		27		203			—
International	760		6		—		766		15		104			11
Total Retail	1,784		8		3		1,795		42		307			11
Total Segments	2,722		11		3		2,736		63		620			11
Corporate and Other ⁽ⁱ⁾	—		—		—		—		47		(87		)	—
Total Consolidated	$	2,722	$	11	$	3	$	2,736	$	110	$	533		$	11

	Nine months ended September 30, 2012
	Commissions and fees		Investment income		Other income		Total revenues		Depreciation and amortization		Operating income			Interest in earnings of associates, net of tax
	(millions)
Global	$	887	$	3	$	—	$	890	$	20	$	325		$	—
North America	975		3		4		982		23		183			—
International	729		8		—		737		16		112			12
Total Retail	1,704		11		4		1,719		39		295			12
Total Segments	2,591		14		4		2,609		59		620			12
Corporate and Other ⁽ⁱ⁾	—		—		—		—		44		(54		)	—
Total Consolidated	$	2,591	$	14	$	4	$	2,609	$	103	$	566		$	12

_________________________________


⁽ⁱ⁾	See the following table for an analysis of the ‘Corporate and Other’ line.



	Nine months ended September 30,
	2013			2012
	(millions)
Amortization of intangible assets	$	(42	)	$	(44	)
Net loss on disposal of operations ^(a)	—			(1		)
India joint venture settlement ^(a)	—			(11		)
Foreign exchange hedging	—			3
Foreign exchange gain on the UK pension plan asset	5			(1		)
Write-off of uncollectible accounts receivable balance in Chicago and associated legal fees^(b)	—			(13		)
Expense reduction initiative ^(c)	(46		)	—
Insurance recovery ^(d)	—			5
Fees related to the extinguishment of debt ^(e)	(1		)	—
Other	(3		)	8
Total Corporate and Other	$	(87	)	$	(54	)

_________________________________


^(a)	$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, $1 million loss on disposal of operations was recorded related to the termination.


^(b)	Write-off of uncollectible accounts receivable balance in relation to a previously disclosed fraudulent overstatement of Commissions and fees.


^(c)	Charge related to the assessment of the Company's organizational design.


^(d)	Insurance recovery, recorded in Other operating expenses, related to a previously disclosed fraudulent activity in Chicago.


^(e)	$1 million of fees associated with the extinguishment of debt completed on August 15, 2013.

Table of Contents

Notes to the financial statements

(Unaudited)

18. SEGMENT INFORMATION (Continued)

The following table reconciles total consolidated operating income, as disclosed in the segment tables above, to consolidated loss or income before income taxes and interest in earnings of associates:



	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
	(millions)
Total consolidated operating income	$	75		$	70		$	533		$	566
Loss on extinguishment of debt	(60		)	—			(60		)	—
Interest expense	(30		)	(32		)	(93		)	(97		)
(Loss) income before income taxes and interest in earnings of associates	$	(15	)	$	38		$	380		$	469


19.	FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES

Willis North America Inc. (‘Willis North America’) has $148 million senior notes outstanding that were issued on July 1, 2005, $394 million of senior notes issued on March 28, 2007 and $187 million of senior notes issued on September 29, 2009.

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, Trinity Acquisition plc and Willis Group Limited, collectively the ‘Other Guarantors’, and with Willis Group Holdings, the ‘Guarantor Companies’.

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 an effective registration statement.

Presented below is condensed consolidating financial information for:


(i)	Willis Group Holdings, which is a guarantor, on a parent company only basis;


(ii)	the Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent and are all direct or indirect parents of the issuer;


(iii)	the Issuer, Willis North America;


(iv)	Other, which are the non-guarantor subsidiaries, on a combined basis;


(v)	Consolidating adjustments; and


(vi)	the Consolidated Company.

The equity method has been used for investments in subsidiaries in the unaudited condensed consolidating balance sheets as of September 30, 2013 of Willis Group Holdings, the Other Guarantors and the Issuer. Investments in subsidiaries in the unaudited 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 Other Guarantors column as of September 30, 2013 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc and Willis Group Limited.

Table of Contents

Notes to the financial statements

(Unaudited)

Condensed Consolidating Statement of Operations



	Three months ended September 30, 2013
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	—		$	791		$	—		$	791
Investment income	—			3			—			4			(3		)	4
Other income	—			—			—			34			(34		)	—
Total revenues	—			3			—			829			(37		)	795
EXPENSES
Salaries and benefits	—			—			(48		)	(493		)	—			(541		)
Other operating expenses	3			(7		)	(43		)	(122		)	25			(144		)
Depreciation expense	—			(1		)	(5		)	(15		)	—			(21		)
Amortization of intangible assets	—			—			—			(16		)	2			(14		)
Net loss on disposal of operations	—			—			—			(8		)	8			—
Total expenses	3			(8		)	(96		)	(654		)	35			(720		)
OPERATING INCOME (LOSS)	3			(5		)	(96		)	175			(2		)	75
Investment income from Group undertakings	—			93			60			20			(173		)	—
Loss on extinguishment of debt	—			—			(60		)	—			—			(60		)
Interest expense	(11		)	(52		)	(31		)	(83		)	147			(30		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(8		)	36			(127		)	112			(28		)	(15		)
Income taxes	—			2			—			(7		)	(6		)	(11		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(8		)	38			(127		)	105			(34		)	(26		)
Interest in earnings of associates, net of tax	—			—			—			(4		)	3			(1		)
Equity account for subsidiaries	(19		)	(58		)	62			—			15			—
NET (LOSS) INCOME	(27		)	(20		)	(65		)	101			(16		)	(27		)
Less: Net income attributable to noncontrolling interests	—			—			—			—			—			—
NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	(27	)	$	(20	)	$	(65	)	$	101		$	(16	)	$	(27	)

Table of Contents

Notes to the financial statements

(Unaudited)

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Three months ended September 30, 2013
	Willis Group Holdings		The Other Guarantors		The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income (loss)	$	45	$	51	$	(62	)	$	155		$	(143	)	$	46
Less: comprehensive income attributable to noncontrolling interests	—		—		—			(1		)	—			(1		)
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	45	$	51	$	(62	)	$	154		$	(143	)	$	45

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Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Three months ended September 30, 2012
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	—		$	749		$	—		$	749
Investment income	—			2			—			4			(2		)	4
Other income	—			—			—			1			—			1
Total revenues	—			2			—			754			(2		)	754
EXPENSES
Salaries and benefits	—			—			(28		)	(474		)	—			(502		)
Other operating expenses	(1		)	(1		)	(8		)	(139		)	3			(146		)
Depreciation expense	—			—			(4		)	(17		)	—			(21		)
Amortization of intangible assets	—			—			—			(17		)	3			(14		)
Net gain on disposal of operations	—			—			—			4			(5		)	(1		)
Total expenses	(1		)	(1		)	(40		)	(643		)	1			(684		)
OPERATING (LOSS) INCOME	(1		)	1			(40		)	111			(1		)	70
Investment income from Group undertakings	6			808			63			104			(981		)	—
Interest expense	(11		)	(61		)	(48		)	(68		)	156			(32		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(6		)	748			(25		)	147			(826		)	38
Income taxes	(6		)	—			9			(19		)	6			(10		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(12		)	748			(16		)	128			(820		)	28
Interest in earnings of associates, net of tax	—			—			—			(5		)	3			(2		)
Equity account for subsidiaries	38			(701		)	17			—			646			—
INCOME FROM CONTINUING OPERATIONS	26			47			1			123			(171		)	26
Discontinued operations, net of tax	—			—			—			—			—			—
NET INCOME	26			47			1			123			(171		)	26
Less: Net income attributable to noncontrolling interests	—			—			—			—			—			—
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	26		$	47		$	1		$	123		$	(171	)	$	26

Table of Contents

Notes to the financial statements

(Unaudited)

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Three months ended September 30, 2012
	Willis Group Holdings		The Other Guarantors		The Issuer		Other		Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	53	$	74	$	2	$	144	$	(220	)	$	53
Less: comprehensive income attributable to noncontrolling interests	—		—		—		—		—			—
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	53	$	74	$	2	$	144	$	(220	)	$	53

Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Nine months ended September 30, 2013
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	—		$	2,722		$	—		$	2,722
Investment income	—			9			—			11			(9		)	11
Other income	—			—			—			(149		)	152			3
Total revenues	—			9			—			2,584			143			2,736
EXPENSES
Salaries and benefits	(1		)	—			(93		)	(1,544		)	—			(1,638		)
Other operating expenses	(2		)	(38		)	(128		)	(368		)	81			(455		)
Depreciation expense	—			(2		)	(16		)	(50		)	—			(68		)
Amortization of intangible assets	—			—			—			(48		)	6			(42		)
Net loss on disposal of operations	—			—			—			(5		)	5			—
Total expenses	(3		)	(40		)	(237		)	(2,015		)	92			(2,203		)
OPERATING (LOSS) INCOME	(3		)	(31		)	(237		)	569			235			533
Investment income from Group undertakings	—			265			195			68			(528		)	—
Loss on extinguishment of debt	—			—			(60		)	—			—			(60		)
Interest expense	(32		)	(151		)	(97		)	(256		)	443			(93		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(35		)	83			(199		)	381			150			380
Income taxes	—			8			—			(94		)	(2		)	(88		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(35		)	91			(199		)	287			148			292
Interest in earnings of associates, net of tax	—			—			—			4			7			11
Equity account for subsidiaries	332			237			184			—			(753		)	—
NET INCOME (LOSS)	297			328			(15		)	291			(598		)	303
Less: Net income attributable to noncontrolling interests	—			—			—			(6		)	—			(6		)
NET INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	297		$	328		$	(15	)	$	285		$	(598	)	$	297

Table of Contents

Notes to the financial statements

(Unaudited)

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Nine months ended September 30, 2013
	Willis Group Holdings		The Other Guarantors		The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income (loss)	$	339	$	369	$	(8	)	$	298		$	(653	)	$	345
Less: comprehensive income attributable to noncontrolling interests	—		—		—			(6		)	—			(6		)
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	339	$	369	$	(8	)	$	292		$	(653	)	$	339

Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Nine months ended September 30, 2012
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	—		$	2,591		$	—		$	2,591
Investment income	—			8			—			14			(8		)	14
Other income	—			—			—			97			(93		)	4
Total revenues	—			8			—			2,702			(101		)	2,609
EXPENSES
Salaries and benefits	(1		)	—			(50		)	(1,457		)	—			(1,508		)
Other operating expenses	(8		)	1			(63		)	(367		)	6			(431		)
Depreciation expense	—			(1		)	(11		)	(47		)	—			(59		)
Amortization of intangible assets	—			—			—			(53		)	9			(44		)
Net loss on disposal of operations	—			—			—			(19		)	18			(1		)
Total expenses	(9		)	—			(124		)	(1,943		)	33			(2,043		)
OPERATING (LOSS) INCOME	(9		)	8			(124		)	759			(68		)	566
Investment income from Group undertakings	6			994			193			118			(1,311		)	—
Interest expense	(32		)	(188		)	(122		)	(210		)	455			(97		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(35		)	814			(53		)	667			(924		)	469
Income taxes	1			3			19			(136		)	(1		)	(114		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(34		)	817			(34		)	531			(925		)	355
Interest in earnings of associates, net of tax	—			—			—			5			7			12
Equity account for subsidiaries	393			(416		)	70			—			(47		)	—
INCOME FROM CONTINUING OPERATIONS	359			401			36			536			(965		)	367
Discontinued operations, net of tax	—			—			—			1			—			1
NET INCOME	359			401			36			537			(965		)	368
Less: Net income attributable to noncontrolling interests	—			—			—			(9		)	—			(9		)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	359		$	401		$	36		$	528		$	(965	)	$	359

Table of Contents

Notes to the financial statements

(Unaudited)

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Nine months ended September 30, 2012
	Willis Group Holdings		The Other Guarantors		The Issuer		Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	386	$	428	$	41	$	574		$	(1,034	)	$	395
Less: comprehensive income attributable to noncontrolling interests	—		—		—		(9		)	—			(9		)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	386	$	428	$	41	$	565		$	(1,034	)	$	386

Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet



	As of September 30, 2013
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3		$	3		$	—		$	617		$	—		$	623
Accounts receivable, net	—			—			26			930			29			985
Fiduciary assets	—			—			—			10,123			(926		)	9,197
Deferred tax assets	1			—			—			16			(3		)	14
Other current assets	1			93			11			287			(197		)	195
Total current assets	5			96			37			11,973			(1,097		)	11,014
Investments in subsidiaries	(1,187		)	2,747			844			3,824			(6,228		)	—
Amounts owed by (to) Group undertakings	4,053			(3,361		)	(123		)	(569		)	—			—
NON-CURRENT ASSETS
Fixed assets, net	—			13			56			404			(1		)	472
Goodwill	—			—			—			1,233			1,613			2,846
Other intangible assets, net	—			—			—			523			(162		)	361
Investments in associates	—			—			—			(53		)	237			184
Deferred tax assets	—			—			—			29			(23		)	6
Pension benefits asset	—			—			—			253			—			253
Other non-current assets	4			151			7			167			(142		)	187
Total non-current assets	4			164			63			2,556			1,522			4,309
TOTAL ASSETS	$	2,875		$	(354	)	$	821		$	17,784		$	(5,803	)	$	15,323
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Fiduciary liabilities	$	—		$	—		$	—		$	10,123		$	(926	)	$	9,197
Deferred revenue and accrued expenses	3			—			26			469			(9		)	489
Income taxes payable	—			50			—			132			(149		)	33
Short-term debt and current portion of long-term debt	—			15			—			2			—			17
Deferred tax liabilities	1			—			—			19			(2		)	18
Other current liabilities	52			8			20			327			(26		)	381
Total current liabilities	56			73			46			11,072			(1,112		)	10,135
NON-CURRENT LIABILITIES
Long-term debt	795			785			734			1			—			2,315
Liabilities for pension benefits	—			—			—			229			—			229
Deferred tax liabilities	—			—			—			59			(23		)	36
Provisions for liabilities	—			—			—			221			(13		)	208
Other non-current liabilities	—			—			47			307			(1		)	353
Total non-current liabilities	795			785			781			817			(37		)	3,141
TOTAL LIABILITIES	$	851		$	858		$	827		$	11,889		$	(1,149	)	$	13,276



EQUITY
Total Willis Group Holdings stockholders’ equity	2,024		(1,212		)	(6		)	5,872		(4,654		)	2,024
Noncontrolling interests	—		—			—			23		—			23
Total equity	2,024		(1,212		)	(6		)	5,895		(4,654		)	2,047
TOTAL LIABILITIES AND EQUITY	$	2,875	$	(354	)	$	821		$	17,784	$	(5,803	)	$	15,323

Table of Contents

Notes to the financial statements

(Unaudited)

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet



	As of December 31, 2012
	Willis Group Holdings			The Other Guarantors			The Issuer		Other			Consolidating adjustments			Consolidated
	(millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1		$	—		$	—	$	499		$	—		$	500
Accounts receivable, net	—			—			—		904			29			933
Fiduciary assets	—			—			—		10,071			(800		)	9,271
Deferred tax assets	1			—			—		18			(6		)	13
Other current assets	1			65			38		241			(164		)	181
Total current assets	3			65			38		11,733			(941		)	10,898
Investments in subsidiaries	(1,542		)	2,493			553		3,824			(5,328		)	—
Amounts owed by (to) Group undertakings	4,091			(3,959		)	687		(819		)	—			—
NON-CURRENT ASSETS
Fixed assets, net	—			11			63		395			(1		)	468
Goodwill	—			—			—		1,226			1,601			2,827
Other intangible assets, net	—			—			—		484			(99		)	385
Investments in associates	—			—			—		(53		)	227			174
Deferred tax assets	—			—			—		42			(24		)	18
Pension benefits asset	—			—			—		136			—			136
Other non-current assets	5			134			41		157			(131		)	206
Total non-current assets	5			145			104		2,387			1,573			4,214
TOTAL ASSETS	$	2,557		$	(1,256	)	$	1,382	$	17,125		$	(4,696	)	$	15,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Fiduciary liabilities	$	—		$	—		$	—	$	10,071		$	(800	)	$	9,271
Deferred revenue and accrued expenses	2			—			—		543			(4		)	541
Income taxes payable	—			25			—		120			(126		)	19
Short-term debt and current portion of long-term debt	—			15			—		—			—			15
Deferred tax liabilities	1			—			—		25			(5		)	21
Other current liabilities	60			—			73		216			(22		)	327
Total current liabilities	63			40			73		10,975			(957		)	10,194
NON-CURRENT LIABILITIES
Long-term debt	795			274			1,268		1			—			2,338
Liabilities for pension benefits	—			—			—		282			—			282
Deferred tax liabilities	—			—			—		42			(24		)	18
Provisions for liabilities	—			—			—		188			(8		)	180
Other non-current liabilities	—			5			7		363			—			375
Total non-current liabilities	795			279			1,275		876			(32		)	3,193
TOTAL LIABILITIES	$	858		$	319		$	1,348	$	11,851		$	(989	)	$	13,387



EQUITY
Total Willis Group Holdings stockholders’ equity	1,699		(1,575		)	34		5,248		(3,707		)	1,699
Noncontrolling interests	—		—			—		26		—			26
Total equity	1,699		(1,575		)	34		5,274		(3,707		)	1,725
TOTAL LIABILITIES AND EQUITY	$	2,557	$	(1,256	)	$	1,382	$	17,125	$	(4,696	)	$	15,112

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Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows



	Nine months ended September 30, 2013
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments		Consolidated
	(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(43	)	$	103		$	(202	)	$	508		$	—	$	366
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of fixed and intangible assets	—			—			2			7			—		9
Additions to fixed assets	—			(4		)	(11		)	(63		)	—		(78		)
Additions to intangible assets	—			—			—			(1		)	—		(1		)
Acquisitions of subsidiaries, net of cash acquired	—			—			—			(30		)	—		(30		)
Payments to acquire other investments	—			—			—			(5		)	—		(5		)
Net cash used in investing activities	—			(4		)	(9		)	(92		)	—		(105		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from draw down of revolving credit facility	—			—			—			2			—		2
Senior notes issued	—			522			—			—			—		522
Debt issuance costs	—			(8		)	—			—			—		(8		)
Repayments of debt	—			(11		)	(521		)	—			—		(532		)
Tender premium on extinguishment of senior notes	—			—			(65		)	—			—		(65		)
Proceeds from issue of shares	105			—			—			—			—		105
Excess tax benefits from share-based payment arrangements	1			—			—			—			—		1
Dividends paid	(144		)	—			—			—			—		(144		)
Acquisition of noncontrolling interests	—			—			—			(4		)	—		(4		)
Dividends paid to noncontrolling interests	—			—			—			(9		)	—		(9		)
Amounts owed by (to) Group undertakings	83			(599		)	797			(281		)	—		—
Net cash provided by (used in) financing activities	45			(96		)	211			(292		)	—		(132		)
INCREASE IN CASH AND CASH EQUIVALENTS	2			3			—			124			—		129
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(6		)	—		(6		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1			—			—			499			—		500
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3		$	3		$	—		$	617		$	—	$	623

Table of Contents

Notes to the financial statements

(Unaudited)

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows



	Nine months ended September 30, 2012
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(43	)	$	803		$	61		$	146		$	(657	)	$	310
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of fixed and intangible assets	—			—			—			8			—			8
Additions to fixed assets	—			(6		)	(13		)	(78		)	—			(97		)
Additions to intangible assets	—			—			—			(1		)	—			(1		)
Acquisitions of subsidiaries, net of cash acquired	—			—			—			(4		)	—			(4		)
Payments to acquire other investments	—			—			—			(5		)	—			(5		)
Net cash used in investing activities	—			(6		)	(13		)	(80		)	—			(99		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from draw down of revolving credit facility	—			20			—			—			—			20
Repayments of debt	—			(7		)	—			(4		)	—			(11		)
Repurchase of shares	(100		)	—			—			—			—			(100		)
Proceeds from issue of shares	41			—			—			—			—			41
Excess tax benefits from share-based payment arrangements	—			—			—			2			—			2
Dividends paid	(139		)	—			—			(657		)	657			(139		)
Proceeds from sale of noncontrolling interests	—			—			—			3			—			3
Acquisition of noncontrolling interests	—			—			—			(29		)	—			(29		)
Dividends paid to noncontrolling interests	—			—			—			(11		)	—			(11		)
Amounts owed by (to) Group undertakings	242			(810		)	(211		)	779			—			—
Net cash provided by (used in) financing activities	44			(797		)	(211		)	83			657			(224		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1			—			(163		)	149			—			(13		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			1			—			1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			—			163			273			—			436
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1		$	—		$	—		$	423		$	—		$	424

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Willis Group Holdings plc


20.	FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES

On March 17, 2011, the Company issued senior notes totaling $800 million in a registered public offering. These debt securities are issued by Willis Group Holdings (‘Holdings Debt Securities’) and are guaranteed by certain of the Company’s subsidiaries. Therefore, the Company is providing the unaudited condensed consolidating financial information below. The following 100 percent directly or indirectly owned subsidiaries fully and unconditionally guarantee the Holdings Debt Securities on a joint and several basis: Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America (the ‘Guarantors’).

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 unaudited condensed consolidating financial information is presented in Note 19) in that Willis Group Holdings is the Parent Issuer and Willis North America is a subsidiary guarantor.

Presented below is condensed consolidating financial information for:


(i)	Willis Group Holdings, which is the Parent Issuer;


(ii)	the Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent;


(iii)	Other, which are the non-guarantor subsidiaries, on a combined basis;


(iv)	Consolidating adjustments; and


(v)	the Consolidated Company.

The equity method has been used for investments in subsidiaries in the unaudited condensed consolidating balance sheets as of September 30, 2013 of Willis Group Holdings and the Guarantors. Investments in subsidiaries in the unaudited 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 as of September 30, 2013 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America.

Table of Contents

Notes to the financial statements

(Unaudited)

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Three months ended September 30, 2013
	Willis Group Holdings - the Parent Issuer			The Guarantors			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	791		$	—		$	791
Investment income	—			3			4			(3		)	4
Other income	—			—			34			(34		)	—
Total revenues	—			3			829			(37		)	795
EXPENSES
Salaries and benefits	—			(48		)	(493		)	—			(541		)
Other operating expenses	3			(50		)	(122		)	25			(144		)
Depreciation expense	—			(6		)	(15		)	—			(21		)
Amortization of intangible assets	—			—			(16		)	2			(14		)
Net loss on disposal of operations	—			—			(8		)	8			—
Total expenses	3			(104		)	(654		)	35			(720		)
OPERATING INCOME (LOSS)	3			(101		)	175			(2		)	75
Investment income from Group undertakings	—			153			20			(173		)	—
Loss on extinguishment of debt	—			(60		)	—			—			(60		)
Interest expense	(11		)	(83		)	(83		)	147			(30		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(8		)	(91		)	112			(28		)	(15		)
Income taxes	—			2			(7		)	(6		)	(11		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(8		)	(89		)	105			(34		)	(26		)
Interest in earnings of associates, net of tax	—			—			(4		)	3			(1		)
Equity account for subsidiaries	(19		)	69			—			(50		)	—
NET (LOSS) INCOME	(27		)	(20		)	101			(81		)	(27		)
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	(27	)	$	(20	)	$	101		$	(81	)	$	(27	)

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Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Three months ended September 30, 2013
	Willis Group Holdings - the Parent Issuer		The Guarantors		Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	45	$	51	$	155		$	(205	)	$	46
Less: comprehensive income attributable to noncontrolling interests	—		—		(1		)	—			(1		)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	45	$	51	$	154		$	(205	)	$	45

Table of Contents

Notes to the financial statements

(Unaudited)

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Three months ended September 30, 2012
	Willis Group Holdings - the Parent Issuer			The Guarantors			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	749		$	—		$	749
Investment income	—			2			4			(2		)	4
Other income	—			—			1			—			1
Total revenues	—			2			754			(2		)	754
EXPENSES
Salaries and benefits	—			(28		)	(474		)	—			(502		)
Other operating expenses	(1		)	(9		)	(139		)	3			(146		)
Depreciation expense	—			(4		)	(17		)	—			(21		)
Amortization of intangible assets	—			—			(17		)	3			(14		)
Net gain on disposal of operations	—			—			4			(5		)	(1		)
Total expenses	(1		)	(41		)	(643		)	1			(684		)
OPERATING (LOSS) INCOME	(1		)	(39		)	111			(1		)	70
Investment income from Group undertakings	6			871			104			(981		)	—
Interest expense	(11		)	(109		)	(68		)	156			(32		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(6		)	723			147			(826		)	38
Income taxes	(6		)	9			(19		)	6			(10		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(12		)	732			128			(820		)	28
Interest in earnings of associates, net of tax	—			—			(5		)	3			(2		)
Equity account for subsidiaries	38			(685		)	—			647			—
INCOME FROM CONTINUING OPERATIONS	26			47			123			(170		)	26
NET INCOME	26			47			123			(170		)	26
Less: Net income attributable to noncontrolling interests	—			—			—			—			—
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	26		$	47		$	123		$	(170	)	$	26

Table of Contents

Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Three months ended September 30, 2012
	Willis Group Holdings - the Parent Issuer		The Guarantors		Other		Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	53	$	74	$	144	$	(218	)	$	53
Less: comprehensive income attributable to noncontrolling interests	—		—		—		—			—
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	53	$	74	$	144	$	(218	)	$	53

Table of Contents

Notes to the financial statements

(Unaudited)

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Nine months ended September 30, 2013
	Willis Group Holdings - the Parent Issuer			The Guarantors			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	2,722		$	—		$	2,722
Investment income	—			9			11			(9		)	11
Other income	—			—			(149		)	152			3
Total revenues	—			9			2,584			143			2,736
EXPENSES
Salaries and benefits	(1		)	(93		)	(1,544		)	—			(1,638		)
Other operating expenses	(2		)	(166		)	(368		)	81			(455		)
Depreciation expense	—			(18		)	(50		)	—			(68		)
Amortization of intangible assets	—			—			(48		)	6			(42		)
Net loss on disposal of operations	—			—			(5		)	5			—
Total expenses	(3		)	(277		)	(2,015		)	92			(2,203		)
OPERATING (LOSS) INCOME	(3		)	(268		)	569			235			533
Investment income from Group undertakings	—			460			68			(528		)	—
Loss on extinguishment of debt	—			(60		)	—			—			(60		)
Interest expense	(32		)	(248		)	(256		)	443			(93		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(35		)	(116		)	381			150			380
Income taxes	—			8			(94		)	(2		)	(88		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(35		)	(108		)	287			148			292
Interest in earnings of associates, net of tax	—			—			4			7			11
Equity account for subsidiaries	332			436			—			(768		)	—
NET INCOME	297			328			291			(613		)	303
Less: Net income attributable to noncontrolling interests	—			—			(6		)	—			(6		)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	297		$	328		$	285		$	(613	)	$	297

Table of Contents

Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Nine months ended September 30, 2013
	Willis Group Holdings - the Parent Issuer		The Guarantors		Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	339	$	369	$	298		$	(661	)	$	345
Less: comprehensive income attributable to noncontrolling interests	—		—		(6		)	—			(6		)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	339	$	369	$	292		$	(661	)	$	339

Table of Contents

Notes to the financial statements

(Unaudited)

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Nine months ended September 30, 2012
	Willis Group Holdings - the Parent Issuer			The Guarantors			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	2,591		$	—		$	2,591
Investment income	—			8			14			(8		)	14
Other income	—			—			97			(93		)	4
Total revenues	—			8			2,702			(101		)	2,609
EXPENSES
Salaries and benefits	(1		)	(50		)	(1,457		)	—			(1,508		)
Other operating expenses	(8		)	(62		)	(367		)	6			(431		)
Depreciation expense	—			(12		)	(47		)	—			(59		)
Amortization of intangible assets	—			—			(53		)	9			(44		)
Net loss on disposal of operations	—			—			(19		)	18			(1		)
Total expenses	(9		)	(124		)	(1,943		)	33			(2,043		)
OPERATING (LOSS) INCOME	(9		)	(116		)	759			(68		)	566
Investment income from Group undertakings	6			1,187			118			(1,311		)	—
Interest expense	(32		)	(310		)	(210		)	455			(97		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(35		)	761			667			(924		)	469
Income taxes	1			22			(136		)	(1		)	(114		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(34		)	783			531			(925		)	355
Interest in earnings of associates, net of tax	—			—			5			7			12
Equity account for subsidiaries	393			(382		)	—			(11		)	—
INCOME FROM CONTINUING OPERATIONS	359			401			536			(929		)	367
Discontinued operations, net of tax	—			—			1			—			1
NET INCOME	359			401			537			(929		)	368
Less: Net income attributable to noncontrolling interests	—			—			(9		)	—			(9		)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	359		$	401		$	528		$	(929	)	$	359

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Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Nine months ended September 30, 2012
	Willis Group Holdings - the Parent Issuer		The Guarantors		Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	386	$	428	$	574		$	(993	)	$	395
Less: comprehensive income attributable to noncontrolling interests	—		—		(9		)	—			(9		)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	386	$	428	$	565		$	(993	)	$	386

Table of Contents

Notes to the financial statements

(Unaudited)

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet



	As of September 30, 2013
	Willis Group Holdings - the Parent Issuer			The Guarantors			Other			Consolidating adjustments			Consolidated
	(millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3		$	3		$	617		$	—		$	623
Accounts receivable, net	—			26			930			29			985
Fiduciary assets	—			—			10,123			(926		)	9,197
Deferred tax assets	1			—			16			(3		)	14
Other current assets	1			104			287			(197		)	195
Total current assets	5			133			11,973			(1,097		)	11,014
Investments in subsidiaries	(1,187		)	3,597			3,824			(6,234		)	—
Amounts owed by (to) Group undertakings	4,053			(3,484		)	(569		)	—			—
NON-CURRENT ASSETS
Fixed assets, net	—			69			404			(1		)	472
Goodwill	—			—			1,233			1,613			2,846
Other intangible assets, net	—			—			523			(162		)	361
Investments in associates	—			—			(53		)	237			184
Deferred tax assets	—			—			29			(23		)	6
Pension benefits asset	—			—			253			—			253
Other non-current assets	4			158			167			(142		)	187
Total non-current assets	4			227			2,556			1,522			4,309
TOTAL ASSETS	$	2,875		$	473		$	17,784		$	(5,809	)	$	15,323
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Fiduciary liabilities	$	—		$	—		$	10,123		$	(926	)	$	9,197
Deferred revenue and accrued expenses	3			26			469			(9		)	489
Income taxes payable	—			50			132			(149		)	33
Short-term debt and current portion of long-term debt	—			15			2			—			17
Deferred tax liabilities	1			—			19			(2		)	18
Other current liabilities	52			28			327			(26		)	381
Total current liabilities	56			119			11,072			(1,112		)	10,135
NON-CURRENT LIABILITIES
Long-term debt	795			1,519			1			—			2,315
Liabilities for pension benefits	—			—			229			—			229
Deferred tax liabilities	—			—			59			(23		)	36
Provisions for liabilities	—			—			221			(13		)	208
Other non-current liabilities	—			47			307			(1		)	353
Total non-current liabilities	795			1,566			817			(37		)	3,141
TOTAL LIABILITIES	$	851		$	1,685		$	11,889		$	(1,149	)	$	13,276



EQUITY
Total Willis Group Holdings stockholders’ equity	2,024		(1,212		)	5,872		(4,660		)	2,024
Noncontrolling interests	—		—			23		—			23
Total equity	2,024		(1,212		)	5,895		(4,660		)	2,047
TOTAL LIABILITIES AND EQUITY	$	2,875	$	473		$	17,784	$	(5,809	)	$	15,323

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Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet



	As of December 31, 2012
	Willis Group Holdings - the Parent Issuer			The Guarantors			Other			Consolidating adjustments			Consolidated
	(millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1		$	—		$	499		$	—		$	500
Accounts receivable, net	—			—			904			29			933
Fiduciary assets	—			—			10,071			(800		)	9,271
Deferred tax assets	1			—			18			(6		)	13
Other current assets	1			103			241			(164		)	181
Total current assets	3			103			11,733			(941		)	10,898
Investments in subsidiaries	(1,542		)	3,012			3,824			(5,294		)	—
Amounts owed by (to) Group undertakings	4,091			(3,272		)	(819		)	—			—
NON-CURRENT ASSETS
Fixed assets, net	—			74			395			(1		)	468
Goodwill	—			—			1,226			1,601			2,827
Other intangible assets, net	—			—			484			(99		)	385
Investments in associates	—			—			(53		)	227			174
Deferred tax assets	—			—			42			(24		)	18
Pension benefits asset	—			—			136			—			136
Other non-current assets	5			175			157			(131		)	206
Total non-current assets	5			249			2,387			1,573			4,214
TOTAL ASSETS	$	2,557		$	92		$	17,125		$	(4,662	)	$	15,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Fiduciary liabilities	$	—		$	—		$	10,071		$	(800	)	$	9,271
Deferred revenue and accrued expenses	2			—			543			(4		)	541
Income taxes payable	—			25			120			(126		)	19
Short-term debt and current portion of long-term debt	—			15			—			—			15
Deferred tax liabilities	1			—			25			(5		)	21
Other current liabilities	60			73			216			(22		)	327
Total current liabilities	63			113			10,975			(957		)	10,194
NON-CURRENT LIABILITIES
Long-term debt	795			1,542			1			—			2,338
Liabilities for pension benefits	—			—			282			—			282
Deferred tax liabilities	—			—			42			(24		)	18
Provisions for liabilities	—			—			188			(8		)	180
Other non-current liabilities	—			12			363			—			375
Total non-current liabilities	795			1,554			876			(32		)	3,193
TOTAL LIABILITIES	$	858		$	1,667		$	11,851		$	(989	)	$	13,387



EQUITY
Total Willis Group Holdings stockholders’ equity	1,699		(1,575		)	5,248		(3,673		)	1,699
Noncontrolling interests	—		—			26		—			26
Total equity	1,699		(1,575		)	5,274		(3,673		)	1,725
TOTAL LIABILITIES AND EQUITY	$	2,557	$	92		$	17,125	$	(4,662	)	$	15,112

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Notes to the financial statements

(Unaudited)

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows



	Nine months ended September 30, 2013
	Willis Group Holdings - the Parent Issuer			The Guarantors			Other			Consolidating adjustments		Consolidated
	(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(43	)	$	(99	)	$	508		$	—	$	366
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of fixed and intangible assets	—			2			7			—		9
Additions to fixed assets	—			(15		)	(63		)	—		(78		)
Additions to intangible assets	—			—			(1		)	—		(1		)
Acquisitions of subsidiaries, net of cash acquired	—			—			(30		)	—		(30		)
Payments to acquire other investments	—			—			(5		)	—		(5		)
Net cash used in investing activities	—			(13		)	(92		)	—		(105		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from draw down of revolving credit facility	—			—			2			—		2
Senior notes issued	—			522			—			—		522
Debt issuance costs	—			(8		)	—			—		(8		)
Repayments of debt	—			(532		)	—			—		(532		)
Tender premium on extinguishment of debt	—			(65		)	—			—		(65		)
Proceeds from issue of shares	105			—			—			—		105
Excess tax benefits from share-based payment arrangement	1			—			—			—		1
Dividends paid	(144		)	—			—			—		(144		)
Acquisition of noncontrolling interests	—			—			(4		)	—		(4		)
Dividends paid to noncontrolling interests	—			—			(9		)	—		(9		)
Amounts owed by (to) Group undertakings	83			198			(281		)	—		—
Net cash provided by (used in) financing activities	45			115			(292		)	—		(132		)
INCREASE IN CASH AND CASH EQUIVALENTS	2			3			124			—		129
Effect of exchange rate changes on cash and cash equivalents	—			—			(6		)	—		(6		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1			—			499			—		500
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3		$	3		$	617		$	—	$	623

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Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows



	Nine months ended September 30, 2012
	Willis Group Holdings - the Parent Issuer			The Guarantors			Other			Consolidating adjustments			Consolidated
	(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(43	)	$	864		$	146		$	(657	)	$	310
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of fixed and intangible assets	—			—			8			—			8
Additions to fixed assets	—			(19		)	(78		)	—			(97		)
Additions to intangible assets	—			—			(1		)	—			(1		)
Acquisitions of subsidiaries, net of cash acquired	—			—			(4		)	—			(4		)
Payments to acquire other investments	—			—			(5		)	—			(5		)
Net cash used in investing activities	—			(19		)	(80		)	—			(99		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from draw down of revolving credit facility	—			20			—			—			20
Repayments of debt	—			(7		)	(4		)	—			(11		)
Repurchase of shares	(100		)	—			—			—			(100		)
Proceeds from issue of shares	41			—			—			—			41
Excess tax benefits from share-based payment arrangement	—			—			2			—			2
Dividends paid	(139		)	—			(657		)	657			(139		)
Proceeds from sale of noncontrolling interests	—			—			3			—			3
Acquisition of noncontrolling interests	—			—			(29		)	—			(29		)
Dividends paid to noncontrolling interests	—			—			(11		)	—			(11		)
Amounts owed by (to) Group undertakings	242			(1,021		)	779			—			—
Net cash provided by (used in) financing activities	44			(1,008		)	83			657			(224		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1			(163		)	149			—			(13		)
Effect of exchange rate changes on cash and cash equivalents	—			—			1			—			1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			163			273			—			436
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1		$	—		$	423		$	—		$	424

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Notes to the financial statements

(Unaudited)


21.	FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES

Trinity Acquisition plc has $525 million senior notes outstanding that were issued on August 15, 2013.

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 Group Holdings, the 'Guarantor Companies'.

The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by the Company and Willis North America (the ‘Willis North America Debt Securities’) in that Trinity Acquisition plc is the issuer and not a subsidiary guarantor, and Willis North America, Inc. is a subsidiary guarantor.

Presented below is condensed consolidating financial information for:


(i)	Willis Group Holdings, which is a guarantor, on a parent company only basis;


(ii)	the Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent. Willis Netherlands B.V, Willis Investment UK Holdings Limited and TA 1 Limited are all direct or indirect parents of the issuer and Willis Group Limited and Willis North America, Inc, are 100 percent direct or indirectly owned subsidiaries or the issuer;


(iii)	Trinity Acquisition plc, which is the issuer and is a 100 percent indirectly owned subsidiary of the parent;


(iv)	Other, which are the non-guarantor subsidiaries, on a combined basis;


(v)	Consolidating adjustments; and


(vi)	the Consolidated Company.

The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets as of September 30, 2013 of Willis Group Holdings, the Other Guarantors and the Issuer. 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 Other Guarantors column as of September 30, 2013 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, Willis North America, TA I Limited and Willis Group Limited.

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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GURANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Three months ended September 30, 2013
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	—		$	791		$	—		$	791
Investment income	—			3			—			4			(3		)	4
Other income	—			—			—			34			(34		)	—
Total revenues	—			3			—			829			(37		)	795
EXPENSES
Salaries and benefits	—			(48		)	—			(493		)	—			(541		)
Other operating expenses	3			(50		)	—			(122		)	25			(144		)
Depreciation expense	—			(6		)	—			(15		)	—			(21		)
Amortization of intangible assets	—			—			—			(16		)	2			(14		)
Net loss on disposal of operations	—			—			—			(8		)	8			—
Total expenses	3			(104		)	—			(654		)	35			(720		)
OPERATING INCOME (LOSS)	3			(101		)	—			175			(2		)	75
Investment income from Group undertakings	—			137			16			20			(173		)	—
Loss on extinguishment of debt	—			(60		)	—			—			—			(60		)
Interest expense	(11		)	(71		)	(12		)	(83		)	147			(30		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(8		)	(95		)	4			112			(28		)	(15		)
Income taxes	—			4			(2		)	(7		)	(6		)	(11		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(8		)	(91		)	2			105			(34		)	(26		)
Interest in earnings of associates, net of tax	—			—			—			(4		)	3			(1		)
Equity account for subsidiaries	(19		)	71			(35		)	—			(17		)	—
NET (LOSS) INCOME	(27		)	(20		)	(33		)	101			(48		)	(27		)
Less: Net income attributable to noncontrolling interests	—			—			—			—			—			—
NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	(27	)	$	(20	)	$	(33	)	$	101		$	(48	)	$	(27	)

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Notes to the financial statements

(Unaudited)

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Three months ended September 30, 2013
	Willis Group Holdings		The Other Guarantors		The Issuer		Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	45	$	51	$	31	$	155		$	(236	)	$	46
Less: comprehensive income attributable to noncontrolling interests	—		—		—		(1		)	—			(1		)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	45	$	51	$	31	$	154		$	(236	)	$	45

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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GURANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Three months ended September 30, 2012
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	—		$	749		$	—		$	749
Investment income	—			2			—			4			(2		)	4
Other income	—			—			—			1			—			1
Total revenues	—			2			—			754			(2		)	754
EXPENSES
Salaries and benefits	—			(28		)	—			(474		)	—			(502		)
Other operating expenses	(1		)	(9		)	—			(139		)	3			(146		)
Depreciation expense	—			(4		)	—			(17		)	—			(21		)
Amortization of intangible assets	—			—			—			(17		)	3			(14		)
Net gain on disposal of operations	—			—			—			4			(5		)	(1		)
Total expenses	(1		)	(41		)	—			(643		)	1			(684		)
OPERATING (LOSS) INCOME	(1		)	(39		)	—			111			(1		)	70
Investment income from Group undertakings	6			1,743			966			104			(2,819		)	—
Interest expense	(11		)	(100		)	(9		)	(68		)	156			(32		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(6		)	1,604			957			147			(2,664		)	38
Income taxes	(6		)	14			(5		)	(19		)	6			(10		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(12		)	1,618			952			128			(2,658		)	28
Interest in earnings of associates, net of tax	—			—			—			(5		)	3			(2		)
Equity account for subsidiaries	38			(1,571		)	(913		)	—			2,446			—
INCOME FROM CONTINUING OPERATIONS	26			47			39			123			(209		)	26
Discontinued operations, net of tax	—			—			—			—			—			—
NET INCOME	26			47			39			123			(209		)	26
Less: Net income attributable to noncontrolling interests	—			—			—			—			—			—
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	26		$	47		$	39		$	123		$	(209	)	$	26

Table of Contents

Notes to the financial statements

(Unaudited)

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Three months ended September 30, 2012
	Willis Group Holdings		The Other Guarantors		The Issuer		Other		Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	53	$	74	$	8	$	144	$	(226	)	$	53
Less: comprehensive income attributable to noncontrolling interests	—		—		—		—		—			—
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	53	$	74	$	8	$	144	$	(226	)	$	53

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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GURANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Nine months ended September 30, 2013
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	—		$	2,722		$	—		$	2,722
Investment income	—			9			—			11			(9		)	11
Other income	—			—			—			(149		)	152			3
Total revenues	—			9			—			2,584			143			2,736
EXPENSES
Salaries and benefits	(1		)	(93		)	—			(1,544		)	—			(1,638		)
Other operating expenses	(2		)	(166		)	—			(368		)	81			(455		)
Depreciation expense	—			(18		)	—			(50		)	—			(68		)
Amortization of intangible assets	—			—			—			(48		)	6			(42		)
Net loss on disposal of operations	—			—			—			(5		)	5			—
Total expenses	(3		)	(277		)	—			(2,015		)	92			(2,203		)
OPERATING (LOSS) INCOME	(3		)	(268		)	—			569			235			533
Investment income from Group undertakings	—			415			45			68			(528		)	—
Loss on extinguishment of debt	—			(60		)	—			—			—			(60		)
Interest expense	(32		)	(219		)	(29		)	(256		)	443			(93		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(35		)	(132		)	16			381			150			380
Income taxes	—			12			(4		)	(94		)	(2		)	(88		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(35		)	(120		)	12			287			148			292
Interest in earnings of associates, net of tax	—			—			—			4			7			11
Equity account for subsidiaries	332			448			275			—			(1,055		)	—
NET INCOME	297			328			287			291			(900		)	303
Less: Net income attributable to noncontrolling interests	—			—			—			(6		)	—			(6		)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	297		$	328		$	287		$	285		$	(900	)	$	297

Table of Contents

Notes to the financial statements

(Unaudited)

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Nine months ended September 30, 2013
	Willis Group Holdings		The Other Guarantors		The Issuer		Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	339	$	369	$	326	$	298		$	(987	)	$	345
Less: comprehensive income attributable to noncontrolling interests	—		—		—		(6		)	—			(6		)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	339	$	369	$	326	$	292		$	(987	)	$	339

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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GURANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations



	Nine months ended September 30, 2012
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
REVENUES
Commissions and fees	$	—		$	—		$	—		$	2,591		$	—		$	2,591
Investment income	—			8			—			14			(8		)	14
Other income	—			—			—			97			(93		)	4
Total revenues	—			8			—			2,702			(101		)	2,609
EXPENSES
Salaries and benefits	(1		)	(50		)	—			(1,457		)	—			(1,508		)
Other operating expenses	(8		)	(63		)	1			(367		)	6			(431		)
Depreciation expense	—			(12		)	—			(47		)	—			(59		)
Amortization of intangible assets	—			—			—			(53		)	9			(44		)
Net loss on disposal of operations	—			—			—			(19		)	18			(1		)
Total expenses	(9		)	(125		)	1			(1,943		)	33			(2,043		)
OPERATING (LOSS) INCOME	(9		)	(117		)	1			759			(68		)	566
Investment income from Group undertakings	6			2,191			1,284			118			(3,599		)	—
Interest expense	(32		)	(284		)	(26		)	(210		)	455			(97		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(35		)	1,790			1,259			667			(3,212		)	469
Income taxes	1			32			(10		)	(136		)	(1		)	(114		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(34		)	1,822			1,249			531			(3,213		)	355
Interest in earnings of associates, net of tax	—			—			—			5			7			12
Equity account for subsidiaries	393			(1,421		)	(877		)	—			1,905			—
INCOME FROM CONTINUING OPERATIONS	359			401			372			536			(1,301		)	367
Discontinued operations, net of tax	—			—			—			1			—			1
NET INCOME	359			401			372			537			(1,301		)	368
Less: Net income attributable to noncontrolling interests	—			—			—			(9		)	—			(9		)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	359		$	401		$	372		$	528		$	(1,301	)	$	359

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Notes to the financial statements

(Unaudited)

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income



	Nine months ended September 30, 2012
	Willis Group Holdings		The Other Guarantors		The Issuer		Other			Consolidating adjustments			Consolidated
	(millions)

Comprehensive income	$	386	$	428	$	342	$	574		$	(1,335	)	$	395
Less: comprehensive income attributable to noncontrolling interests	—		—		—		(9		)	—			(9		)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	386	$	428	$	342	$	565		$	(1,335	)	$	386

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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GURANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet



	As of September 30, 2013
	Willis Group Holdings			The Other Guarantors			The Issuer		Other			Consolidating adjustments			Consolidated
	(millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3		$	3		$	—	$	617		$	—		$	623
Accounts receivable, net	—			26			—		930			29			985
Fiduciary assets	—			—			—		10,123			(926		)	9,197
Deferred tax assets	1			—			—		16			(3		)	14
Other current assets	1			103			1		287			(197		)	195
Total current assets	5			132			1		11,973			(1,097		)	11,014
Investments in subsidiaries	(1,187		)	3,066			3,398		3,824			(9,101		)	—
Amounts owed by (to) Group undertakings	4,053			(3,761		)	277		(569		)	—			—
NON-CURRENT ASSETS
Fixed assets, net	—			69			—		404			(1		)	472
Goodwill	—			—			—		1,233			1,613			2,846
Other intangible assets, net	—			—			—		523			(162		)	361
Investments in associates	—			—			—		(53		)	237			184
Deferred tax assets	—			—			—		29			(23		)	6
Pension benefits asset	—			—			—		253			—			253
Other non-current assets	4			148			10		167			(142		)	187
Total non-current assets	4			217			10		2,556			1,522			4,309
TOTAL ASSETS	$	2,875		$	(346	)	$	3,686	$	17,784		$	(8,676	)	$	15,323
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Fiduciary liabilities	$	—		$	—		$	—	$	10,123		$	(926	)	$	9,197
Deferred revenue and accrued expenses	3			26			—		469			(9		)	489
Income taxes payable	—			35			15		132			(149		)	33
Short-term debt and current portion of long-term debt	—			—			15		2			—			17
Deferred tax liabilities	1			—			—		19			(2		)	18
Other current liabilities	52			24			4		327			(26		)	381
Total current liabilities	56			85			34		11,072			(1,112		)	10,135
NON-CURRENT LIABILITIES
Long-term debt	795			734			785		1			—			2,315
Liabilities for pension benefits	—			—			—		229			—			229
Deferred tax liabilities	—			—			—		59			(23		)	36
Provisions for liabilities	—			—			—		221			(13		)	208
Other non-current liabilities	—			47			—		307			(1		)	353
Total non-current liabilities	795			781			785		817			(37		)	3,141
TOTAL LIABILITIES	$	851		$	866		$	819	$	11,889		$	(1,149	)	$	13,276
EQUITY
Total Willis Group Holdings stockholders’ equity	2,024			(1,212		)	2,867		5,872			(7,527		)	2,024
Noncontrolling interests	—			—			—		23			—			23
Total equity	2,024			(1,212		)	2,867		5,895			(7,527		)	2,047
TOTAL LIABILITIES AND EQUITY	$	2,875		$	(346	)	$	3,686	$	17,784		$	(8,676	)	$	15,323

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Notes to the financial statements

(Unaudited)

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet



	As of December 31, 2012
	Willis Group Holdings			The Other Guarantors			The Issuer		Other			Consolidating adjustments			Consolidated
	(millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1		$	—		$	—	$	499		$	—		$	500
Accounts receivable, net	—			—			—		904			29			933
Fiduciary assets	—			—			—		10,071			(800		)	9,271
Deferred tax assets	1			—			—		18			(6		)	13
Other current assets	1			102			1		241			(164		)	181
Total current assets	3			102			1		11,733			(941		)	10,898
Investments in subsidiaries	(1,542		)	3,025			2,548		3,824			(7,855		)	—
Amounts owed by (to) Group undertakings	4,091			(3,581		)	309		(819		)	—			—
NON-CURRENT ASSETS
Fixed assets, net	—			74			—		395			(1		)	468
Goodwill	—			—			—		1,226			1,601			2,827
Other intangible assets, net	—			—			—		484			(99		)	385
Investments in associates	—			—			—		(53		)	227			174
Deferred tax assets	—			—			—		42			(24		)	18
Pension benefits asset	—			—			—		136			—			136
Other non-current assets	5			172			3		157			(131		)	206
Total non-current assets	5			246			3		2,387			1,573			4,214
TOTAL ASSETS	$	2,557		$	(208	)	$	2,861	$	17,125		$	(7,223	)	$	15,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Fiduciary liabilities	$	—		$	—		$	—	$	10,071		$	(800	)	$	9,271
Deferred revenue and accrued expenses	2			—			—		543			(4		)	541
Income taxes payable	—			14			11		120			(126		)	19
Short-term debt and current portion of long-term debt	—			—			15		—			—			15
Deferred tax liabilities	1			—			—		25			(5		)	21
Other current liabilities	60			73			—		216			(22		)	327
Total current liabilities	63			87			26		10,975			(957		)	10,194
NON-CURRENT LIABILITIES
Long-term debt	795			1,268			274		1			—			2,338
Liabilities for pension benefits	—			—			—		282			—			282
Deferred tax liabilities	—			—			—		42			(24		)	18
Provisions for liabilities	—			—			—		188			(8		)	180
Other non-current liabilities	—			12			—		363			—			375
Total non-current liabilities	795			1,280			274		876			(32		)	3,193
TOTAL LIABILITIES	$	858		$	1,367		$	300	$	11,851		$	(989	)	$	13,387
EQUITY
Total Willis Group Holdings stockholders’ equity	1,699			(1,575		)	2,561		5,248			(6,234		)	1,699
Noncontrolling interests	—			—			—		26			—			26
Total equity	1,699			(1,575		)	2,561		5,274			(6,234		)	1,725
TOTAL LIABILITIES AND EQUITY	$	2,557		$	(208	)	$	2,861	$	17,125		$	(7,223	)	$	15,112

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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GURANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows



	Nine months ended September 30, 2013
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments		Consolidated
	(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(43	)	$	(120	)	$	21		$	508		$	—	$	366
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of fixed and intangible assets	—			2			—			7			—		9
Additions to fixed assets	—			(15		)	—			(63		)	—		(78		)
Additions to intangible assets	—			—			—			(1		)	—		(1		)
Acquisitions of subsidiaries, net of cash acquired	—			—			—			(30		)	—		(30		)
Payments to acquire other investments	—			—			—			(5		)	—		(5		)
Net cash used in investing activities	—			(13		)	—			(92		)	—		(105		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from draw down of revolving credit facility	—			—			—			2			—		2
Senior notes issued	—			—			522			—			—		522
Debt issuance costs	—			—			(8		)	—			—		(8		)
Repayments of debt	—			(521		)	(11		)	—			—		(532		)
Tender premium on extinguishment of debt	—			(65		)	—			—			—		(65		)
Proceeds from issue of shares	105			—			—			—			—		105
Excess tax benefits from share-based payment arrangements	1			—			—			—			—		1
Dividends paid	(144		)	—			—			—			—		(144		)
Acquisition of noncontrolling interests	—			—			—			(4		)	—		(4		)
Dividends paid to noncontrolling interests	—			—			—			(9		)	—		(9		)
Amounts owed by (to) Group undertakings	83			722			(524		)	(281		)	—		—
Net cash provided by (used in) financing activities	45			136			(21		)	(292		)	—		(132		)
INCREASE IN CASH AND CASH EQUIVALENTS	2			3			—			124			—		129
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(6		)	—		(6		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1			—			—			499			—		500
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3		$	3		$	—		$	617		$	—	$	623

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Notes to the financial statements

(Unaudited)

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows



	Nine months ended September 30, 2012
	Willis Group Holdings			The Other Guarantors			The Issuer			Other			Consolidating adjustments			Consolidated
	(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(43	)	$	1,894		$	1,259		$	146		$	(2,946	)	$	310
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of fixed and intangible assets	—			—			—			8			—			8
Additions to fixed assets	—			(19		)	—			(78		)	—			(97		)
Additions to intangible assets	—			—			—			(1		)	—			(1		)
Acquisitions of subsidiaries, net of cash acquired	—			—			—			(4		)	—			(4		)
Payments to acquire other investments	—			—			—			(5		)	—			(5		)
Net cash used in investing activities	—			(19		)	—			(80		)	—			(99		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from draw down of revolving credit facility	—			—			20			—			—			20
Repayments of debt	—			—			(7		)	(4		)	—			(11		)
Repurchase of shares	(100		)	—			—			—			—			(100		)
Proceeds from issue of shares	41			—			—			—			—			41
Excess tax benefits from share-based payment arrangements	—			—			—			2			—			2
Dividends paid	(139		)	(1,220		)	(1,069		)	(657		)	2,946			(139		)
Proceeds from sale of noncontrolling interests	—			—			—			3			—			3
Acquisition of noncontrolling interests	—			—			—			(29		)	—			(29		)
Dividends paid to noncontrolling interests	—			—			—			(11		)	—			(11		)
Amounts owed by (to) Group undertakings	242			(818		)	(203		)	779			—			—
Net cash provided by (used in) financing activities	44			(2,038		)	(1,259		)	83			2,946			(224		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1			(163		)	—			149			—			(13		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			1			—			1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	—			163			—			273			—			436
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1		$	—		$	—		$	423		$	—		$	424

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Willis Group Holdings plc

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, period over period movements in foreign currency movements, and investment and other income from growth in revenues. Adjusted operating income, 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 operating income, net income from continuing operations, and earnings per diluted share from continuing operations, respectively, the most directly comparable GAAP measures. Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited. These financial measures should be viewed in addition to, not in lieu of, these condensed consolidated financial statements for the three and nine months ended September 30, 2013.

This discussion includes forward-looking statements included under the heading 'Executive Summary'. Please see ‘Forward-Looking Statements’ for certain cautionary information regarding forward-looking statements and a list of factors that could cause actual results to differ materially from those predicted in those statements.

EXECUTIVE SUMMARY

Business Overview

We provide a broad range of insurance broking, risk management and consulting services to our clients worldwide and organize our business into three segments: Global, North America and International.

Our Global business provides specialist brokerage and consulting services to clients worldwide arising from specific industries and activities including Aerospace; Energy; Marine; Construction, Property and Casualty; Financial and Executive Risks; Financial Solutions; Faber Global; Fine Art, Jewelry and Specie; Special Contingency Risks; Hughes-Gibbs; Willis Capital Markets & Advisory; Placement and Reinsurance.

North America and International comprise our retail operations and provide services to small, medium and large corporations and the Human Capital practice, our largest product-based practice group, provides health, welfare and human resources consulting and brokerage services.

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.

We derive most of our revenues from commissions and fees for brokerage and consulting services and do not determine the insurance premiums on which our commissions are generally based. Commission levels generally follow the same trend as premium levels as they are derived from a percentage of the premiums paid by the insureds. Fluctuations in these premiums charged by the insurance carriers can therefore have a direct and potentially material impact on our results of operations.

Due to the cyclical nature of the insurance market and the impact of other market conditions on insurance premiums, commission revenues may vary widely between accounting periods. A period of low or declining premium rates, generally known as a ‘soft’ or ‘softening’ market, generally leads to downward pressure on commission revenues and can have a material adverse impact on our commission revenues and operating margin. A ‘hard’ or ‘firming’ market, during which premium rates rise, generally has a favorable impact on our commission revenues and operating margin. Rates, however, vary by geography, industry and client segment. As a result and due to the global and diverse nature of our business, we view rates holistically.

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Business discussion

Market Conditions

Market conditions in our industry are generally defined by factors such as the strength of the economies in the various geographic regions in which we serve around the world, insurance rate movements, and insurance and reinsurance buying patterns of our clients. The industry in general was negatively impacted by the soft insurance market that steadily existed throughout the years 2005 through 2010. Additionally, many of our retail operations, but especially our larger operations in North America, the UK and Ireland, have been particularly impacted by the weakened economic climate since 2008. These factors combined resulted in declines in revenues in these operations.

In 2011, the market experienced modest increases in catastrophe-exposed property insurance and reinsurance pricing levels driven by significant 2011 catastrophe losses including the Japanese earthquake and tsunami, the New Zealand earthquake, the mid-west US tornadoes and Thailand floods. The trend in rates noted in 2011 in catastrophe-exposed regions continued into early 2012 as insurance and reinsurance rates in such regions firmed or hardened steadily.

In late 2012, as insurance rates were beginning to level or soften, super storm Sandy hit the metropolitan New York, New Jersey and Connecticut area tempering what most forecasters expected to be a year of declining insurance rates.

In the first quarter 2013 the reinsurance market was flat, however during the second and third quarters we have seen changing market sentiment driven by changes in the sources of capital and increases in capital supply. The influx of third party capital, coupled with changes to reinsurance buying patterns and regulatory complexity is leading to growing complexity in the reinsurance market.

The outlook for our business, operating results and financial condition continues to be challenging due to the economic conditions within certain European Union countries, in particular, Greece, Ireland, Italy, Portugal and Spain. If the Eurozone crisis continues or further deteriorates, there will likely be a negative effect on our European business as well as the businesses of our European clients. A significant devaluation of the Euro would cause the value of our financial assets that are denominated in Euros to be reduced.

In the face of this challenging economic environment we have adopted a strategy to invest selectively in growth areas, defined by geography, industry sector and client segment, and to better align our three segments so as to, among other things, bring our clients greater access to the Company's specialty areas and analytical capabilities. Our growth strategy also involves increasing our investment in, and deployment of, our analytical capabilities.

Financial Performance

Consolidated Financial Performance

Results from operations: third quarter 2013

Total revenues of $795 million for third quarter 2013 were $41 million, or 5.4 percent, higher than in third quarter 2012. Total commissions and fees for third quarter 2013 were $791 million, up $42 million or 5.6 percent, from $749 million in the prior year quarter. Organic commissions and fees growth was 5.7 percent and there was a positive 0.5 percent impact from acquisitions and disposals; which was partially offset by a negative 0.6 percent impact from foreign currency movements.

Organic growth in commissions and fees was driven by positive growth in each of our operating segments, with 6.4 percent growth in Global, 3.9 percent growth in North America and 7.8 percent in International compared with third quarter 2012.

Total expenses in third quarter 2013 of $720 million were $36 million, or 5.3 percent, higher than in third quarter 2012. Foreign currency movements favorably impacted total expenses by $4 million.

Excluding the impact of foreign currency movements, total expenses were $40 million, or 5.8 percent, higher than in third quarter 2012. The largest driver of this increase was higher cost of salaries and benefits driven by increased headcount relative to the prior year, annual salary reviews, the change in remuneration policy and higher incentives charge as a result of growth in commissions and fees. The increase also includes higher travel, accommodation and client entertaining costs to support business development, and higher professional fees.

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Willis Group Holdings plc

Third quarter 2012 included an $11 million charge related to a settlement with a former joint venture partner in India and a $1 million loss on disposal from dissolving that joint venture.

In third quarter 2013 the Company incurred total losses and fees on extinguishment of debt of $61 million from the refinancing that was completed on August 22, 2013. This was made up of a tender premium of $65 million, the write-off of unamortized debt issuance costs of $2 million, $1 million of fees related to the extinguishment of debt and a credit from the write-down of the fair value adjustment on 5.625% senior notes due 2015 of $7 million

Despite reporting a pre-tax net loss of $15 million for the quarter ended September 30, 2013 the tax charge for third quarter 2013 was $11 million, $1 million higher than in third quarter 2012. The tax rate for the quarter reflected charges related to the early extinguishment of debt that was issued by Willis North America. As previously disclosed, the Company has tax losses in the US and has maintained a valuation allowance against net US deferred tax assets. Consequently, no tax benefit was recognized for the debt extinguishment charges recorded during the quarter, resulting in the negative tax rate. When looking at the quarter’s results excluding the debt extinguishment charges, the tax rate was approximately 24 percent.

Net loss from continuing operations attributable to Willis shareholders was $27 million or $0.15 per diluted share in third quarter 2013 compared with net income of $26 million or $0.15 per diluted share in third quarter 2012. The $53 million decrease was primarily due to the losses on extinguishment of debt and the increase in total expenses, partially offset by the increase in total revenues.

Interest in earnings of associates, net of tax was a loss of $1 million in third quarter 2013, compared to $2 million in third quarter 2012.

Foreign currency movements had no impact on earnings per diluted share in third quarter 2013 compared with third quarter 2012.

Results from operations: nine months ended September 30, 2013

Total revenues of $2,736 million for first nine months 2013 were $127 million, or 4.9 percent, higher than in first nine months 2012. Total commissions and fees for first nine months 2013 were $2,722 million, up $131 million or 5.1 percent, from $2,591 million in first nine months 2012. Reported commission and fees growth of 5.1 percent includes organic growth of 5.3 percent and 0.3 percent growth from acquisitions and disposals which were partially offset by a negative impact from foreign currency movements of 0.5 percent.

Organic growth in commissions and fees was driven by 6.7 percent growth in our Global segment, 4.5 percent growth in our North America segment and 4.5 percent growth in our International segment compared to first nine months 2012.

Total expenses in first nine months 2013 of $2,203 million were $160 million, or 7.8 percent, higher than in first nine months 2012. Foreign currency movements favorably impacted expenses by $4 million.

Excluding the impact of foreign currency movements, total expenses were $2,207 million, $164 million or 8.0 percent higher than first nine months 2012. The largest driver of this increase was higher cost of salaries and benefits as a result of increased headcount relative to the prior year, annual salary reviews, the change in remuneration policy, and higher incentives charge as a result of growth in commissions and fees. This increase also includes $46 million relating to the Expense Reduction Initiative (see 'Expense Reduction Initiative' section below), $7 million of one-time VAT-related charges, a $6 million write-off of a receivable related to a non-E&O settlement, higher travel, accommodation and client entertaining costs to support business development, and higher professional fees partially offset by compensation and insurance premium accrual reversals relating to prior periods amounting to $14 million.

First nine months 2012 expenses included $13 million write-off of an uncollectible accounts receivable balance together with associated legal fees, a $5 million benefit related to a previously disclosed insurance recovery, an $11 million charge related to a settlement with a former joint venture partner in India, and the related $1 million loss on dissolving that joint venture.

In third quarter 2013 the Company incurred total losses on extinguishment of debt of $61 million from the refinancing that was completed on August 22, 2013. This was made up of a tender premium of $65 million, the write-off of unamortized debt issuance costs of $2 million, $1 million of fees related to the extinguishment of debt and a credit from the write down of the fair value adjustment on 5.625% senior notes due 2015 of $7 million.

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Business discussion

The reported tax rate in the first nine months 2013 was 23 percent, compared with 24 percent for the same period of 2012. Excluding the debt extinguishment charges, the tax rate was approximately 19 percent. The reason the year to date tax rate, excluding the debt extinguishment charges, is lower in 2013 compared to 2012, is primarily due to the impact of a valuation allowance maintained against net US deferred tax assets, which resulted in a lower tax charge on US profits in the current period compared with prior interim periods.

Net income from continuing operations attributable to Willis shareholders was $297 million or $1.67 per diluted share in first nine months 2013 compared to $358 million or $2.03 per diluted share in first nine months 2012. The $61 million decrease reflects the losses on extinguishment of debt and the increase in total expenses partially offset by the increase in total revenues and a lower tax charge.

Foreign currency movements decreased earnings by $0.04 per diluted share in first nine months 2013 compared with first nine months 2012.

Adjusted Operating Income, Adjusted Net Income from Continuing Operations and Adjusted Earnings per Diluted Share from Continuing Operations

Our non-GAAP measures of adjusted operating income, adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations are calculated by excluding the impact of certain items (as detailed below) from operating income, net (loss) income from continuing operations, and earnings per diluted share from continuing operations, respectively, the most directly comparable GAAP measures.

The following items are excluded from operating income and net loss or income from continuing operations as applicable:


(i)	write-off of uncollectible accounts receivable balance and associated legal fees arising in Chicago due to fraudulent overstatement of commissions and fees;


(ii)	insurance recoveries;


(iii)	loss and fees related to the extinguishment of debt;


(iv)	costs associated with the Expense Reduction Initiative;


(v)	significant legal and regulatory settlements which are managed centrally; and


(vi)	gains and losses on the disposal of operations.

We believe that excluding these items, as applicable, from operating income, net loss or income from continuing operations and earnings per diluted share from continuing operations provides a more complete and consistent comparative analysis of our results of operations. We use these and other measures to establish Group performance targets and evaluate the performance of our operations.

As set out in the tables below, adjusted operating margin at 9.6 percent in third quarter 2013 was down 130 basis points compared with third quarter 2012, while third quarter 2013 adjusted net income from continuing operations was $34 million, $4 million lower than in third quarter 2012. Adjusted earnings per diluted share from continuing operations were $0.19 in third quarter 2013, compared with $0.22 in third quarter 2012.

Adjusted operating margin of 21.2 percent in first nine months 2013 was down 130 basis points compared with first nine months 2012, while first nine months 2013 adjusted net income from continuing operations was $396 million, $21 million higher than in first nine months 2012. Adjusted earnings per diluted share from continuing operations were $2.22 in first nine months 2013, compared with $2.13 in first nine months 2012.

A reconciliation of reported operating income, the most directly comparable GAAP measure, to adjusted operating income for the three and nine months ended September 30, is as follows (in millions, except percentages):

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	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Operating income, GAAP basis	$	75		$	70		$	533		$	566
Excluding:
India JV settlement^(a)	—			11			—			11
Loss on disposal of operations^(a)	—			1			—			1
Write-off of uncollectible accounts receivable balance and legal costs ^(b)	—			—			—			13
Insurance recovery ^(c)	—			—			—			(5		)
Expense Reduction Initiative ^(d)	—			—			46			—
Fees related to the extinguishment of debt ^(e)	1			—			1			—
Adjusted operating income	$	76		$	82		$	580		$	586

Operating margin, GAAP basis, or operating income as a percentage of total revenues	9.4		%	9.3		%	19.5		%	21.7		%
Adjusted operating margin, or adjusted operating income as a percentage of total revenues	9.6		%	10.9		%	21.2		%	22.5		%

_________________________________


^(a)	$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, a $1 million loss on disposal

of operations was recorded related to the termination.


^(b)	Write-off of uncollectible accounts receivable balance and associated legal costs relating to periods prior to January 1, 2012.


^(c)	Related to previously disclosed fraudulent activity in Chicago.


^(d)	Charge related to the assessment of the Company's organizational design. See 'Expense Reduction Initiative' section below.


^(e)	Fees related to the extinguishment of debt completed on August 22, 2013. See 'Liquidity and Capital Resources' section below.

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A reconciliation of reported net loss or income from continuing operations and reported earnings per diluted share from continuing operations, the most directly comparable GAAP measures, to adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations, is as follows (in millions, except per share data):



								Per diluted share
	Three months ended September 30,							Three months ended September 30,
	2013			2012		% Change		2013			2012		% Change
Net (loss) income from continuing operations attributable to Willis Group Holdings plc, GAAP basis	$	(27	)	$	26	NM		$	(0.15	)	$	0.15	NM
Excluding:
India JV settlement, net of tax ($nil, $nil) ^(a)	—			11				—			0.06
Loss on disposal of operations, net of tax ($nil, $nil)^(a)	—			1				—			0.01
Fees related to the extinguishment of debt, net of tax ($nil, $nil) ^(e)	1			—				0.01			—
Loss on extinguishment of debt, net of tax ($nil, $nil) ^(e)	60			—				0.33			—
Adjusted net income from continuing operations	$	34		$	38	(10.5	)%	$	0.19		$	0.22	(13.6	)%

Average diluted shares outstanding, GAAP basis ^(f)	177			175



								Per diluted share
	Nine months ended September 30,							Nine months ended September 30,
	2013		2012			% Change		2013		2012			% Change
Net income from continuing operations attributable to Willis Group Holdings plc, GAAP basis	$	297	$	358		(17.0	)%	$	1.67	$	2.03		(17.7	)%
Excluding:
India JV settlement, net of tax ($nil, $nil)^(a)	—		11					—		0.06
Loss on disposal of operations, net of tax ($nil, $nil) ^(a)	—		1					—		0.01
Write-off of uncollectible accounts receivable balance and legal costs, net of tax ($nil, $5) ^(b)	—		8					—		0.05
Insurance recovery, net of tax ($nil, $2)^(c)	—		(3		)			—		(0.02		)
Expense Reduction Initiative, net of tax ($8, $nil) ^(d)	38		—					0.21		—
Fees related to the extinguishment of debt, net of tax ($nil, $nil)^(e)	1		—					0.01		—
Loss on extinguishment of debt, net of tax ($nil, $nil) ^(e)	60		—					0.33		—
Adjusted net income from continuing operations	$	396	$	375		5.6	%	$	2.22	$	2.13		4.2	%

Average diluted shares outstanding, GAAP basis	178		176

_____________________________________


^(a)	$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, a $1 million loss on disposal

of operations was recorded related to the termination.


^(b)	Write-off of uncollectible accounts receivable balance and associated legal costs relating to periods prior to January 1, 2012.


^(c)	Related to previously disclosed fraudulent activity in Chicago.


^(d)	Charge related to the assessment of the Company's organizational design. See 'Expense Reduction Initiative' section below.


^(e)	Loss and fees related to the extinguishment of debt completed on August 22, 2013. See 'Liquidity and Capital Resources' section below.


^(f)	Potentially issuable shares were not included in the calculation of diluted earnings per share, GAAP basis, for third quarter 2013 because the Company's net loss from continuing operations rendered their impact anti-dilutive. The dilutive impact of three million potentially issuable shares had $nil impact on reconciling to adjusted earnings per share from continuing operations.

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Expense Reduction Initiative

The Company recorded a pre-tax charge of $46 million in the first quarter of 2013 related to the previously announced assessment of the Company's organizational design. In connection with this assessment, we incurred the following pre-tax charges:


•	$29 million of severance and other staff related costs towards the elimination of 207 positions; and


•	$17 million of Other operating expenses and Depreciation resulting from the rationalization of property and systems.

The Company does not expect to incur any further charge related to this review.

Willis Group anticipates that the actions taken will result in total cost savings of approximately $20 million exclusive of the costs incurred in 2013. It is also anticipated that we will achieve prospective annualized cost savings of approximately $25 to $30 million.

Pension Expense

We recorded net pension income on our UK defined benefit pension plan of $1 million in both third quarter 2013 and 2012. On our US defined benefit pension plan we recorded a net pension charge of $nil in third quarter 2013 compared with $1 million in third quarter 2012. On our International and US non-qualified defined benefit pension plans, we recorded net pension income of $nil in both third quarter 2013 and 2012.

We recorded net pension income on our UK defined benefit pension plan of $4 million in first nine months 2013 and $3 million first nine months 2012. On our US defined benefit pension plan we recorded a net pension income of $2 million in first nine months 2013 compared with a charge of $2 million in first nine months 2012. On our International and US non-qualified defined benefit pension plans, we recorded a net pension charge of $3 million in first nine months 2013 and $2 million in first nine months 2012.

Associates

The Company currently owns approximately 30 percent of Gras Savoye, as does the private equity firm Astorg Partners and the original family shareholders. The previous Shareholders' Agreement provided a call option for us to acquire full ownership of the company in 2015. An amended Agreement, which we signed on April 15, 2013, extends the exercise date of the call option by one year to June 2016, providing additional time both for Gras Savoye's new management team to complete its restructuring and also for all parties to plan for the proposed transition in 2016. Additionally, the call option is based on an agreed-upon formula for determining enterprise and equity value of Gras Savoye in 2016 based on Gras Savoye's 2014 and 2015 consolidated accounts. The formula is based on a weighting of revenue and EBITDA averaged over a one-to-two year period to which certain pre-determined market multiples would be applied, the potential range of market multiples having been narrowed from the previous agreement.

Acquisitions and Disposals

In first quarter 2013, the Company acquired 100 percent of CBC Broker Srl, an Italian broker, at a cost of $1 million.

In second quarter 2013, the Company acquired 100 percent PPH Limited and its subsidiary Prime Professions Limited (together referred to as Prime Professions), a leading UK based professional indemnity insurance broker, at a cost of $29 million.

In third quarter 2013, the Company agreed to sell the trade and assets associated with CBT, our book of small commercial clients in the UK, to Chesham Insurance Brokers. The transaction was completed in early October.

Business Strategy

Our aim is to be the risk advisor, insurance and reinsurance broker of choice globally.

Our business model is aligned to the needs of each client segment:


•	Insurer — platform-neutral capital management and advisory services;

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Business discussion


•	Large Accounts — delivering Willis’ global capabilities through client advocacy;


•	Mid-Market — mass-customization through our Sales 2.0 model;


•	Commercial — providing products and services to networks of retail brokers; and


•	Personal — focused on affinity models and High Net Worth segments.

Our business model has three elements:


•	Organic growth;


•	Recruitment of teams and individuals; and

•

Strategic acquisitions. From time to time, the Company considers investment and acquisition opportunities. We approach investments and acquisitions in a strict and disciplined manner. The ability of the Company to pursue or ultimately consummate any such investment or acquisition opportunities is dependent upon, among other things, its ability to fund and obtain financing for, and to source, execute on and integrate, such opportunities.

In addition, as discussed above, we have adopted a strategy to invest selectively in growth areas, to better align our three segments so as to, among other things, bring our clients greater access to the Company's specialty areas and analytical capabilities.

Our business goal is set to grow revenues with positive operating leverage to improve cash flow and deliver strong shareholder returns.

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Willis Group Holdings plc

REVIEW OF CONSOLIDATED RESULTS

The following table is a summary of our revenues, operating income, operating margin, net (loss) income and diluted earnings per share (in millions, except per share data and percentages):



	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
REVENUES
Commissions and fees	$	791		$	749		$	2,722		$	2,591
Investment income	4			4			11			14
Other income	—			1			3			4
Total revenues	795			754			2,736			2,609
EXPENSES
Salaries and benefits	(541		)	(502		)	(1,638		)	(1,508		)
Other operating expenses	(144		)	(146		)	(455		)	(431		)
Depreciation expense	(21		)	(21		)	(68		)	(59		)
Amortization of intangible assets	(14		)	(14		)	(42		)	(44		)
Net loss on disposal of operations	—			(1		)	—			(1		)
Total expenses	(720		)	(684		)	(2,203		)	(2,043		)
OPERATING INCOME	75			70			533			566
Loss on extinguishment of debt	(60		)	—			(60		)	—
Interest expense	(30		)	(32		)	(93		)	(97		)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES	(15		)	38			380			469
Income taxes	(11		)	(10		)	(88		)	(114		)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES	(26		)	28			292			355
Interest in earnings of associates, net of tax	(1		)	(2		)	11			12
(LOSS) INCOME FROM CONTINUING OPERATIONS	(27		)	26			303			367
Discontinued operations, net of tax	—			—			—			1
NET (LOSS) INCOME	(27		)	26			303			368
Less: net income attributable to noncontrolling interests	—			—			(6		)	(9		)
NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS	$	(27	)	$	26		$	297		$	359

Salaries and benefits as a percentage of total revenues	68.1		%	66.6		%	59.9		%	57.8		%

Other operating expenses as a percentage of total revenues	18.1		%	19.4		%	16.6		%	16.5		%

Operating margin (operating income as a percentage of total revenues)	9.4		%	9.3		%	19.5		%	21.7		%

Diluted earnings per share from continuing operations	$	(0.15	)	$	0.15		$	1.67		$	2.03

Average diluted number of shares outstanding	177			175			178			176

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Business discussion

Revenues

Total revenues for the Group and by segment for the three and nine months ended September 30, 2013 and 2012 are shown below (millions, except percentages):



							Attributable to:
Three months ended September 30,	2013		2012		% Change		Foreign currency translation		Acquisitions and disposals		Organic commissions and fees growth^(a)

Global	$	250	$	235	6.4	%	(0.8	)%	0.8	%	6.4	%
North America	328		315		4.1	%	(0.4	)%	0.6	%	3.9	%
International	213		199		7.0	%	(0.8	)%	—	%	7.8	%
Commissions and fees	$	791	$	749	5.6	%	(0.6	)%	0.5	%	5.7	%
Investment income	4		4		—	%
Other income	—		1		N/A
Total revenues	$	795	$	754	5.4	%



							Attributable to:
Nine months ended September 30,	2013		2012		% Change		Foreign currency translation		Acquisitions and disposals		Organic commissions and fees growth^(a)

Global	$	938	$	887	5.7	%	(1.2	)%	0.2	%	6.7	%
North America	1,024		975		5.0	%	(0.1	)%	0.6	%	4.5	%
International	760		729		4.3	%	(0.4	)%	0.2	%	4.5	%
Commissions and fees	2,722		2,591		5.1	%	(0.5	)%	0.3	%	5.3	%
Investment income	11		14		(21.4	)%
Other income	3		4		(25.0	)%
Total revenues	$	2,736	$	2,609	4.9	%

_________________________________


^(a)	Organic commissions and fees growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.

Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Third quarter 2013

Revenues of $795 million for third quarter 2013 were $41 million, or 5.4 percent, higher than in same period of 2012.

Total commissions and fees for third quarter 2013 were $791 million, up $42 million or 5.6 percent, from $749 million in the prior year quarter. This reflects organic commissions and fees growth of 5.7 percent and a positive 0.5 percent impact from acquisitions and disposals primarily due to Avalon Actuarial Inc. acquired in 2012 and Prime Professions acquired in second quarter 2013. This was partially offset by a negative 0.6 percent impact from foreign currency movements.

The Global segment reported 6.4 percent growth in reported commissions and fees. Organic growth in commissions and fees was also 6.4 percent. The positive 0.8 percent impact from acquisitions and disposals was offset by the negative 0.8 percent impact from foreign currency movements. There was positive growth across all divisions, the most notable being Willis Re. The segment's growth was driven by strong new business levels and higher client retention levels compared with the same period of 2012.

The North America segment reported 4.1 percent growth in reported commissions and fees. This reflects organic commissions and fees growth of 3.9 percent and a positive 0.6 percent impact from acquisitions and disposals, partially offset by a negative 0.4 percent impact from foreign currency movements. Growth was achieved across most geographic regions led by strong new business growth and higher client retention levels compared with the same period of 2012. We reported positive growth in our largest North America practices, namely Human Capital and Construction.

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The International segment reported 7.0 percent growth in reported commissions and fees. Organic growth of 7.8 percent was partially offset by a 0.8 percent negative impact from foreign currency movements. The segment achieved high double-digit growth in Asia, mid-teen growth in Latin America, and low double digit growth in Australasia and Eastern Europe. Our Western Europe region reported flat results compared to the prior year period whilst our UK operations reported a mid-single digit decline.

Investment income was $4 million in both third quarter 2013 and third quarter 2012.

Nine months ended September 30, 2013

Revenues of $2,736 million for first nine months 2013 were $127 million, or 4.9 percent, higher than in same period of 2012.

Total commissions and fees for first nine months 2013 were $2,722 million, up $131 million or 5.1 percent, from $2,591 million in the same period of 2012. This reflects organic commissions and fees growth of 5.3 percent and a positive 0.3 percent impact from acquisitions and disposals, however there was a negative 0.5 percent impact from foreign currency movements.

The Global segment reported 5.7 percent growth in reported commissions and fees. This was comprised of organic commissions and fees growth of 6.7 percent and a positive 0.2 percent impact from acquisitions and disposals, partially offset by a negative 1.2 percent impact from foreign currency movements. The segment's growth was led by Willis Re and was driven by strong new business levels and higher client retention levels compared with the same period of 2012.

The North America segment reported 5.0 percent growth in reported commissions and fees. Organic commissions and fees growth was 4.5 percent and there was a positive 0.6 percent impact from acquisitions and disposals. Foreign currency movements had a negative 0.1 percent impact. The segment's growth was driven by strong new business growth across all the regions and higher client retention levels compared with the same period of 2012.

The International segment reported 4.3 percent growth in reported commissions and fees. Organic growth of 4.5 percent and the positive impact from acquisitions and disposals of 0.2 percent were partially offset by the negative 0.4 percent impact from foreign currency movements. Organic growth was led by high-teen growth in Asia and Latin America. Eastern Europe reported high single digit growth however Western Europe and UK reported a low single digit decline.

Investment income was $11 million for first nine months 2013, $3 million lower than in same period of 2012, primarily due to declining net yields on cash and cash equivalents.

Salaries and Benefits

Third quarter 2013

Salaries and benefits increased by $39 million, or 7.8 percent, in third quarter 2013, compared with third quarter 2012. Excluding the $3 million impact of favorable foreign currency movements, salaries and benefits increased by $42 million, or 8.4 percent, in third quarter 2013 compared with third quarter 2012.

The increase in salaries and benefits was due to the impact of new hires, annual pay reviews and the increase in our incentives charge as a result of a change in our remuneration policy.

Nine months ended September 30, 2013

Salaries and benefits increased by $130 million, or 8.6 percent, in first nine months 2013 compared with same period of 2012. Excluding the $8 million impact of favorable foreign currency movements, salaries and benefits increased by $138 million, or 9.2 percent, in first nine months 2013 compared with first nine months 2012.

The year-on-year growth in salaries and benefits is due to increased headcount relative to prior year, annual salary reviews and higher incentives charge due to the change in our remuneration policy. It also includes $29 million relating to the Expense Reduction Initiative in first quarter 2013 (see 'Expense Reduction Initiative' section above for further details). This increase was partially offset by compensation accrual reversals relating to prior periods amounting to $10 million.

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Business discussion

Other Expenses

Third quarter 2013

Other operating expenses decreased by $2 million, or 1.4 percent, in third quarter 2013 compared with third quarter 2012. Excluding the $1 million impact of favorable foreign currency movements, Other operating expenses decreased by $1 million, or 0.7 percent, compared with third quarter 2012.

Depreciation expense was $21 million in both third quarter 2013 and third quarter 2012.

Amortization of intangible assets was $14 million in both third quarter 2013 and third quarter 2012.

Nine months ended September 30, 2013

Other operating expenses increased by $24 million, or 5.6 percent, in first nine months 2013 compared with the same period of 2012. Excluding the impact of $4 million unfavorable foreign currency movements, Other operating expenses increased by $20 million, or 4.6 percent, compared with first nine months 2012.

Other operating expenses in first nine months 2013 includes $12 million relating to the Expense Reduction Initiative (see 'Expense Reduction Initiative' section above), $7 million of one-time VAT-related charges, a $6 million write-off of a receivable related to a non-E&O settlement and $1 million of fees related to the extinguishment of debt. This increase was partially offset by insurance premium accrual reversals relating to prior periods amounting to $4 million.

First nine months 2012 included a $13 million write-off of uncollectible accounts receivable and associated legal costs, an $11 million charge related to a settlement with former partners on the termination of a joint venture arrangement in India, and a $5 million benefit related to a previously disclosed insurance recovery.

Depreciation expense was $68 million in first nine months 2013 compared with $59 million in the same period of 2012. First nine months 2013 included $5 million in relation to the Expense Reduction Initiative (see section above for further details).

Amortization of intangible assets was $42 million in first nine months 2013 compared with $44 million for the same period of 2012.

Interest Expense

Interest expense in third quarter 2013 was $30 million compared with $32 million for the same period of 2012. Interest expense in first nine months 2013 was $93 million compared with $97 million for the same period of 2012.

Income Taxes

Despite reporting a pre-tax net loss of $15 million for the quarter ended September 30, 2013, the Company recorded $11 million of tax expense in the period. The tax rate for the quarter reflected charges related to the early extinguishment of debt that was issued by Willis North America. As previously disclosed, the Company has tax loses in the US and has maintained a valuation allowance against net US deferred tax assets. Therefore, no tax benefit was recognized for the debt extinguishment charges recorded during the quarter, resulting in the negative tax rate. When looking at the quarter’s results excluding the debt extinguishment charges, the tax rate was approximately 24 percent. The reported tax rate for the three months ended September 30, 2012 was 26 percent.

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Willis Group Holdings plc

Interest in Earnings of Associates

Interest in earnings of associates, net of tax, was a $1 million loss in third quarter 2013, compared with a $2 million loss for the same period of 2012. Interest in earnings of associates, net of tax, in first nine months 2013 was an $11 million profit, compared with a $12 million profit for the same period of 2012.

We expect the Associates line for full year 2013 to be a loss of between $1 million and $3 million compared with a $5 million profit for full year 2012. While this is our current estimate, as we do not have control over our Associates, actual results may not be in line with that estimate.

LIQUIDITY AND CAPITAL RESOURCES

We believe that our balance sheet and strong cash flow provide us with the platform and flexibility to remain committed to our previously stated goals of:


•	investing in the business for growth;


•	tuck-in acquisitions;


•	returning a steadily rising dividend to shareholders; and


•	maintain investment grade rating and repurchase of shares.

Our principal sources of liquidity are cash from operations, available cash and cash equivalents and amounts available under our three revolving credit facilities, excluding the UK facility which is solely for use by our main regulated UK entity in certain exceptional circumstances.

Our principal short-term uses of liquidity and capital resources are operating expenses, capital expenditures, shareholder returns and funding defined benefit pension plans.

Our long-term liquidity requirements consist of the principal amount of outstanding notes; borrowings under our 7-year term loan and revolving credit facility; and our pension contributions as discussed below.

As at September 30, 2013 cash and cash equivalents were $623 million, an increase of $123 million compared to December 31, 2012. Included within cash and cash equivalents is $509 million available for corporate purposes and $114 million held within our regulated UK entities for regulatory capital adequacy requirements.

Cash flows from operating activities increased to $366 million in the first nine months 2013 from $310 million in the year ago period. In addition, funds were provided in the first nine months 2013 of $9 million from the disposal of fixed and intangible assets (first nine months 2012: $8 million), $2 million drawdown on the revolving credit facility (first nine months 2012: $20 million) and $105 million proceeds from the issue of shares (first nine months 2012: $41 million).

The primary uses of funds during the first nine months 2013 include $328 million of payments made for cash incentive awards relating to 2012, $144 million related to payments of dividends, $125 million cash contributions, including employees' salary sacrifice contributions, to our defined benefit scheme, capital expenditures of $78 million related to leasehold improvements, information technology and transformation projects, $30 million for the acquisition of Prime Professions and CBC Broker Srl, and a $4 million cash payment to acquire the remaining noncontrolling interest in our Colombia reinsurance operation.

Based on current market conditions and information available to us at this time, we believe that we have sufficient liquidity to meet our cash needs for the next twelve months.

The Company is authorized to buy back its ordinary shares by way of redemption, and will consider whether to do so from time to time based on many factors including market conditions.

The impact of movements in liquidity, debt and EBITDA in the quarter had a negative impact on the interest coverage ratio and a positive impact on the leverage ratio. Both ratios remain well within the requirements of the revolving credit facility covenants.

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Total debt, total equity and the capitalization ratio at September 30, 2013 and December 31, 2012 were as follows (millions, except percentages):



	September 30, 2013			December 31, 2012
Long-term debt	$	2,315		$	2,338
Short-term debt and current portion of long-term debt	17			15
Total debt	$	2,332		$	2,353
Stockholder’s equity	$	2,024		$	1,699

Capitalization ratio	53.5		%	58.1		%

The Company incurred total losses on extinguishment of debt of $61 million during the three months ended September 30, 2013. This was made up of a tender premium of $65 million, the write-off of unamortized debt issuance costs of $2 million, $1 million of fees related to the extinguishment of debt and a credit for the reduction of the fair value adjustment on 5.625% senior notes due 2015 of $7 million.

In the first nine months 2013, we made $11 million of mandatory repayments against the term loan, thereby reducing the total outstanding balance as of September 30, 2013 to $278 million. In addition to these payments, we made $115 million of interest payments to service our senior notes, term loan and revolving credit facilities.

The scheduled debt repayments falling due over the next 12 months on our $300 million 7-year term loan total $15 million.

At September 30, 2013, we had $2 million outstanding under our revolving credit facilities. During the first nine months 2013, we made drawings totaling $57 million and repayments of $55 million.

The amended term loan is repayable in quarterly installments and a final repayment of $186 million is due in the third quarter of 2018.

The agreements relating to these facilities continue to contain requirements to maintain maximum levels of consolidated funded indebtedness in relation to consolidated EBITDA and minimum levels of consolidated EBITDA to consolidated interest expense, subject to certain adjustments. In connection with the amendment discussed above, we can request an increase in the maximum consolidated leverage ratio for up to four fiscal quarters following the completion of one or more acquisitions in a 15 month period where the aggregate consideration equals or exceeds an agreed threshold.

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Willis Group Holdings plc

Pension contributions

UK Plan

For the nine months ended September 30, 2013, the Company made cash contributions of $68 million (nine months ended September 30, 2012: $60 million) into the UK defined benefit pension plan, and $9 million (nine months ended September 30, 2012: $9 million) in respect of employees’ salary sacrifice contributions.

Contributions to the UK defined benefit pension plan in 2013 are expected to total $88 million (full year 2012: $80 million), of which approximately $22 million relates to on-going contributions calculated as 15.9 percent of active plan members’ pensionable salaries, approximately $56 million relates to contributions towards funding the deficit and $10 million exceptional return payment related to 10 percent of the $100 million share buyback program completed during 2012, as required under the current agreed schedule of contributions.

In addition, further contributions will be payable based on a profit share calculation (equal to 20 percent of EBITDA in excess of $900 million per annum as defined by the revised schedule of contributions) and an exceptional return calculation (equal to 10 percent of any exceptional returns made to shareholders, for example, share buybacks and special dividends). Aggregate contributions under the deficit funding contribution and the profit share calculation are capped at £312 million ($505 million) over the six years ended December 31, 2017.

The schedule of contributions is automatically renegotiated after three years and at any earlier time jointly agreed by the Company and the Trustee.

US Plan

We made cash contributions to our US defined benefit plan of $40 million in the nine months ended September 30, 2013, compared with $40 million in the nine months ended September 30, 2012.

For the US plan, expected contributions are the contributions we are required to make under US pension legislation based on our December 31, 2012 balance sheet position. We do not expect to make any more contribution in 2013.

International and US Non-Qualified Plans

We made cash contributions to our international and US non-qualified defined benefit pension plans of $8 million in the nine months ended September 30, 2013, and $6 million in the nine months ended September 30, 2012.

In full year 2013, we expect to contribute approximately $11 million to our international and US non-qualified plans.

Summary consolidated cash flow information (millions):



	Nine months ended September 30,
	2013			2012
Cash flows from operating activities
Total net cash provided by operating activities	$	366		$	310
Cash flows from investing activities
Total net cash used in investing activities	(105		)	(99		)
Cash flows from financing activities
Total net cash used in financing activities	(132		)	(224		)
Increase (decrease) in cash and cash equivalents	129			(13		)
Effect of exchange rate changes on cash and cash equivalents	(6		)	1
Cash and cash equivalents, beginning of period	500			436
Cash and cash equivalents, end of period	$	623		$	424

This summary consolidated cash flow should be viewed in addition to, not in lieu of, the Company’s condensed consolidated financial statements.

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Consolidated Cash Flow for first nine months 2013 compared with first nine months 2012

Operating Activities

Net cash provided by operating activities in first nine months 2013 increased by $56 million to $366 million compared with the year ago period.

The main positive contributors to net cash provided by operating activities in the period included net income of $303 million, working capital movements in other liabilities of $294 million primarily relating to accruals made for incentives to be paid in 2014 and a net $236 million for adjustments to reconcile net income to total net cash provided by operating activities. These adjustments includes depreciation, amortization of intangible assets, share-based compensation, gain on derivative instruments, provision for deferred income taxes and the tender premium on early redemption of our debt, which is presented as a financing cash item.

The main negative contributors to net cash provided by operating activities in the period included $328 million of incentive payments and $125 million cash contributions, including employees' salary sacrifice contributions, to our defined benefit scheme.

Investing Activities

Net cash used in investing activities in first nine months 2013 was $105 million including, capital expenditure of $78 million, cash used to purchase subsidiaries and other investments of $35 million partly offset by $9 million cash received from the sale of fixed and intangible assets.

Net cash used in investing activities in first nine months 2012 was $99 million. This was primarily due to capital expenditure of $97 million and cash used to purchase subsidiaries and other investments of $9 million. This was partially offset by $8 million cash received from the sale of fixed and intangible assets.

Financing Activities

Net cash used in financing activities in first nine months 2013 was $132 million primarily due to total dividends paid, including dividends paid to noncontrolling interests, of $153 million, a net $72 million outflow in relation to the refinancing in the third quarter 2013, discussed below, and $11 million of mandatory repayments against the term loan offset by cash receipts of $105 million from the issue of shares.

The refinancing outflows in third quarter 2013 resulted in a net cash outflow of $72 million which included: $521 million cash paid to repurchase $202 million of 5.625% senior notes due 2015, $206 million of 6.200% senior notes due 2017 and $113 million of 7.000% senior notes due 2019, the tender premium of $65 million and debt issuance costs of $8 million; this was primarily funded by $522 million cash inflow from senior notes issued, discussed earlier, and free operating cash flows.

Fiduciary Funds

As an intermediary, we hold funds generally in a fiduciary capacity for the account of third parties, typically as the result of premiums received from clients that are in transit to insurers and claims due to clients that are in transit from insurers. We report premiums, which are held on account of, or due from, clients as assets with a corresponding liability due to the insurers. Claims held by, or due to, us which are due to clients are also shown as both assets and liabilities.

Fiduciary funds are generally required to be kept in regulated bank accounts subject to guidelines which emphasize capital preservation and liquidity; such funds are not available to service the Company’s debt or for other corporate purposes. Notwithstanding the legal relationships with clients and insurers, the Company is entitled to retain investment income earned on fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds. As of September 30, 2013, we had fiduciary funds of $2.1 billion, compared with $1.8 billion at December 31, 2012.

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Share Buybacks

The Company is authorized to buy back its ordinary shares, by way of redemption, and will consider whether to do so from time to time based on many factors including market conditions. The Company is authorized to purchase up to one billion shares from time to time in the open market (such open market purchases would be effected as redemptions under Irish law) and it may also redeem its shares through negotiated trades with persons who are not affiliated with the Company as long as the cost of the acquisition of the Company's shares does not exceed $824 million.

Dividends

In July 2013, we declared a quarterly cash dividend of $0.28 per share, an annual 2013 rate of $1.12 per share. This represents an increase of 3.7 percent on the first nine months 2012 per share dividend of $0.27 per share.

Cash dividends paid in first nine months 2013 were $144 million compared with $139 million in first nine months 2012. The $5 million increase is driven by the period-over-period increase in dividend per share and the number of shares in issue.

REVIEW OF SEGMENTAL RESULTS

We organize our business into three segments: Global, North America and International. Our Global business provides specialist brokerage and consulting services to clients worldwide for risks arising from specific industries and activities. North America and International comprise our retail operations and provide services to small, medium and major corporations.

The following table is a summary of our operating results by segment for the three and nine months ended September 30, 2013 and 2012 (millions except percentages):



	Three months ended September 30,
	2013							2012
	Revenues		Operating income			Operating margin		Revenues		Operating income			Operating margin
Global	$	251	$	36		14.3	%	$	235	$	52		22.1	%
North America	329		57			17.3	%	318		53			16.7	%
International	215		(9		)	(4.2	)%	201		(9		)	(4.5	)%
Total Retail	544		48			8.8	%	519		44			8.5	%
Corporate & Other	—		(9		)	n/a		—		(26		)	n/a
Total Consolidated	$	795	$	75		9.4	%	$	754	$	70		9.3	%



	Nine months ended September 30,
	2013							2012
	Revenues		Operating income			Operating margin		Revenues		Operating income			Operating margin
Global	$	941	$	313		33.3	%	$	890	$	325		36.5	%
North America	1,029		203			19.7	%	982		183			18.6	%
International	766		104			13.6	%	737		112			15.2	%
Total Retail	1,795		307			17.1	%	1,719		295			17.2	%
Corporate & Other	—		(87		)	n/a		—		(54		)	n/a
Total Consolidated	$	2,736	$	533		19.5	%	$	2,609	$	566		21.7	%

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Global

Our Global operations comprise Specialty, Willis Re, Placement and Willis Capital Markets & Advisory (WCMA).

The following table sets out Global’s revenues, organic commissions and fees growth and operating income and margin for the three and nine months ended September 30, 2013 and 2012 (millions except percentages):



	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Commissions and fees	$	250		$	235		$	938		$	887
Investment income	1			—			3			3
Total revenues	$	251		$	235		$	941		$	890
Operating income	$	36		$	52		$	313		$	325
Organic commissions and fees growth^(a)	6.4		%	2.9		%	6.7		%	4.6		%
Operating margin	14.3		%	22.1		%	33.3		%	36.5		%

_________________


^(a)	Organic commissions and fees growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.

Revenues

Third quarter 2013

Commissions and fees of $250 million were $15 million, or 6.4 percent, higher in third quarter 2013 compared with the same period 2012. The increase includes organic growth of 6.4 percent and 0.8 percent growth from acquisitions and disposals, most notably the acquisition of Prime Professions towards the end of second quarter 2013, partially offset by a 0.8 percent negative impact from foreign currency movements.

The 6.4 percent organic growth in commissions and fees was driven by strong new business growth and higher client retention levels compared with the year ago period.

Willis Re reported high single-digit growth in third quarter 2013, led by strong growth in each of the three divisions: Specialties, North America and International.

Specialty reported mid single-digit growth in third quarter 2013, with particularly strong performance in Financial and Executive risk, and P&C and Construction.

WCMA's commissions and fees were essentially flat in third quarter 2013 compared to the prior year quarter.

Client retention was 92.3 percent for the third quarter 2013, compared with 90.6 percent for the same period 2012.

Nine months ended September 30, 2013

Commissions and fees of $938 million were $51 million, or 5.7 percent, higher in first nine months 2013 compared with the same period in 2012. The increase comprised organic growth of 6.7 percent and 0.2 percent growth from acquisitions and disposals, partially offset by a 1.2 percent negative impact from foreign currency movements most notably driven by the weakening of the Japanese Yen.

The 6.7 percent organic growth in commissions and fees was driven by strong new business growth and higher client retention levels compared with the year ago period.

Willis Re reported high single-digit growth in first nine months 2013, led by good growth in each of the divisions.

Specialty reported mid single-digit growth in first nine months 2013, with particularly strong performance in Financial and Executive Risk, Marine & Energy and Faber Global.

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WCMA reported lower commissions and fees in first nine months 2013 compared to the prior year. Growth in the WCMA business was negatively impacted by the expected timing of certain deal closings being deferred to the fourth quarter and beyond.

Client retention was 92.5 percent for the first nine months 2013, compared with 90.3 percent for the same period 2012.

Expenses

Third quarter 2013

Total operating expenses of $215 million were $32 million, or 17.5 percent, higher in the third quarter 2013 compared with the same period 2012. Excluding the $2 million, or 1.1 percent, impact of adverse foreign currency movements, total operating expenses increased $30 million or 16.4 percent.

The year-on-year growth in expenses was primarily due to higher cost of salaries and benefits as a result of higher incentives due to the change in remuneration policy, increased headcount relative to the prior year, annual salary reviews and higher charges for stock based compensation. In addition there were smaller increases in other expenses due to higher travel, accommodation and client entertaining costs to support business development and professional fees.

Nine months ended September 30, 2013

Total operating expenses of $628 million were $63 million, or 11.2 percent, higher in the first nine months 2013 compared with the same period 2012. Excluding the $8 million, or 1.4 percent, impact of favorable foreign currency movements, total operating expenses increased $71 million or 12.6 percent.

The year-on-year growth in expenses was primarily due to higher cost of salaries and benefits as a result of higher incentives due to the change in remuneration policy, increased headcount relative to the prior year, annual salary reviews and higher charges for stock based compensation. In addition there were increases in other expenses due to higher travel, accommodation and client entertaining costs to support business development and $2 million for a one-time VAT related charge in the second quarter 2013.

Operating margin

Operating margin was 14.3 percent in the third quarter 2013 and 22.1 percent in the same period of 2012.

Operating margin was 33.3 percent in the first nine months 2013 and 36.5 percent in the same period of 2012.

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North America

Our North America business provides risk management, insurance brokerage, related risk services and employee benefits brokerage and consulting to a wide array of industry and client segments in the United States, Canada and Mexico.

The following table sets out revenues, organic commissions and fees growth and operating income and margin for the three and nine months ended September 30, 2013 and 2012 (millions, except percentages):



	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Commissions and fees	$	328		$	315		$	1,024		$	975
Investment income	1			2			2			3
Other income ^(a)	—			1			3			4
Total revenues	$	329		$	318		$	1,029		$	982
Operating income	$	57		$	53		$	203		$	183
Organic commissions and fees growth ^(b)	3.9		%	(0.5		)%	4.5		%	(2.0		)%
Operating margin	17.3		%	16.7		%	19.7		%	18.6		%

_________________


^(a)	Other income comprises gains on disposal of intangible assets, which primarily arise from settlements through enforcing non-compete agreements in the event of losing accounts through producer defection or the disposal of books of business.


^(b)	Organic commissions and fees growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.

Revenues

Third quarter 2013

Commissions and fees of $328 million were $13 million, or 4.1 percent, higher in third quarter 2013 compared with the same period in 2012. This increase was due to organic growth of 3.9 percent and 0.6 percent from the acquisition of Avalon Actuarial, Inc. in 2012, partially offset by a 0.4 percent negative impact from foreign currency movements.

The segment reported new business growth in the mid-teens, and its client retention levels improved slightly over the year ago period. Growth was distributed geographically across most regions, led by the Midwest, Metro and West Regions and almost all the major industry practices reported positive growth with the two largest practices, Human Capital and Construction, growing low single digits and mid-single digits, respectively, during the quarter.

Client retention levels were 91.8 percent in third quarter 2013 compared with 90.9 percent in third quarter 2012.

Nine months ended September 30, 2013

Commissions and fees of $1,024 million were $49 million, or 5.0 percent, higher in first nine months 2013 compared with the same period in 2012. This increase was due to organic growth of 4.5 percent and 0.6 percent from the acquisition of Avalon Actuarial, Inc. in 2012 partially offset by a 0.1 percent negative impact from foreign currency movements.

The segment achieved low double-digit new business growth, and its client retention levels improved over the year ago period. Growth was distributed geographically across all the regions, led by the Metro, Midwest, Canada and CAPPPS+ regions. Almost all the major industry practices reported positive growth with the most notable among them being Human Capital and Construction which both grew mid-single digits.

Client retention levels were 92.2 percent in first nine months 2013 compared with 91.0 percent in for the same period 2012.

Expenses

Third quarter 2013

Total operating expenses of $272 million were $7 million, or 2.6 percent, higher in third quarter 2013 compared to the same period in 2012.

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The year-on-year growth is primarily due to higher cost of salaries and benefits as a result of increased headcount relative to the prior year and higher incentives as a result of higher commissions and fees.

Other expenses had a modest increase with additional professional fees related to the strategic review of the segment, and higher travel and accommodation expense to support business development partially offset by a $4 million release in respect of prior period insurance premium accruals. Foreign currency movements had no material impact on expenses.

Nine months ended September 30, 2013

Total operating expenses of $826 million were $27 million, or 3.4 percent, higher in first nine months 2013 compared to the same period in 2012.

The year-on-year growth is primarily due to higher cost of salaries and benefits as a result of increased headcount relative to the prior year and higher incentives charge as a result of higher commissions and fees, partially offset by lower charges for stock based compensation. Other expenses also increased due to a $6 million write-off of a receivable related to a non-E&O settlement, professional fees related to the strategic review of the segment, and higher travel and accommodation expense to support revenue growth and client retention partially offset by a $4 million insurance premium accrual reversal. Foreign currency movements had no material impact on expenses.

Operating margin

Operating margin in North America was 17.3 percent in third quarter 2013 compared with 16.7 percent in third quarter 2012.

Operating margin was 19.7 percent in the first nine months 2013 and 18.6 percent in the same period of 2012.

International

Our International business comprises our retail operations in Western Europe, Central and Eastern Europe, the United Kingdom, Asia, Australasia, the Middle East, South Africa and Latin America. The services provided are focused according to the characteristics of each market and vary across offices, but generally include direct risk management and insurance brokerage and employee benefits consulting.



	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Commissions and fees	$	213		$	199		$	760		$	729
Investment income	2			2			6			8
Total revenues	$	215		$	201		$	766		$	737
Operating income	$	(9	)	$	(9	)	$	104		$	112
Organic commissions and fees growth ^(a)	7.8		%	4.9		%	4.5		%	4.0		%
Operating margin	(4.2		)%	(4.5		)%	13.6		%	15.2		%

_________________


^(a)	Organic commissions and fees growth excludes: (i) the impact of foreign currency translation; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; and (iii) the net commission and fee revenues related to operations disposed of in each period presented.

Revenues

Third quarter 2013

Commissions and fees of $213 million were $14 million, or 7.0 percent, higher in third quarter 2013 compared with the same period in 2012, comprising 7.8 percent organic growth partially offset by a 0.8 percent negative impact from foreign currency movements. The segment reported high-teen growth from new business, however this was tempered by a small reduction in client retention levels.

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Asia reported high double-digit growth with exceptional growth in China and Hong Kong.

Latin America reported double-digit growth arising primarily from Brazil and Venezuela which was partially offset by poor performance in Colombia.

Eastern Europe reported low double-digit growth arising primarily from Russia and Poland.

Australasia was up low double digits partly as a result of positive timings of commissions moving from the second quarter to the third quarter.

Western Europe was essentially flat compared to the prior year. Strong results from Iberia, Sweden and Norway were offset by declines in Switzerland, Netherlands and Italy.

The UK declined mid-single digits.

Client retention levels were 92.9 percent for third quarter 2013 compared with 93.6 percent for third quarter 2012.

Nine months ended September 30, 2013

Commissions and fees of $760 million were $31 million, or 4.3 percent, higher in first nine months 2013 compared with the same period in 2012, comprising 4.5 percent organic growth and 0.2 percent positive impact from acquisitions and disposals, partially offset by a 0.4 percent negative impact from foreign currency movements. The segment reported high-teen growth from new business, and client retention levels were flat.

Latin America reported double-digit growth arising primarily from Brazil and Venezuela which was partially offset by poor performance in Colombia.

Asia reported mid double-digit growth arising primarily from China, Hong Kong and Korea.

Eastern Europe reported high single-digit growth arising primarily from Russia, the Czech Republic and Poland.

Western Europe and the UK reported low-single digit decline.

Client retention levels were 93.7 percent for both first nine months 2013 and 2012.

Expenses

Third quarter 2013

Total operating expenses of $224 million were $14 million or 6.7 percent higher in the third quarter 2013 compared with the same period in 2012. Excluding the impact of $6 million, or 2.9 percent, favorable foreign currency movements, total operating expenses increased $20 million or 9.5 percent.

This increase was due primarily to higher cost of salaries and benefits as a result of new hires, annual pay reviews, higher incentives due to the change in remuneration policy and an increased charge for stock based compensation. In addition to this we incurred professional fees related to the strategic review of the segment and higher travel and accommodation expense to support business development.

Nine months ended September 30, 2013

Total operating expenses of $662 million were $37 million or 5.9 percent higher in the first nine months 2013 compared with the same period in 2012. Foreign currency movements favorably impacted operating expenses by $11 million or 1.8 percent; excluding the impact of foreign currency movements total operating expenses increased $48 million or 7.7 percent.

This increase was due primarily to higher cost of salaries and benefits as a result of new hires, annual pay reviews, higher incentives due to the change in remuneration policy and an increased charge for stock based compensation. In addition to this we incurred professional fees related to the strategic review of the segment, higher travel and accommodation expense to support business development, and a one-time $5 million VAT related charge.

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Operating margin

Operating margin in International was negative 4.2 percent in third quarter 2013, compared with negative 4.5 percent in the same period of 2012.

Operating margin was 13.6 percent in the first nine months 2013 and 15.2 percent in the same period of 2012.

Corporate & Other

The Company evaluates the performance of its segments based on organic commissions and fees growth and operating income. For internal reporting and segmental reporting, items for which segmental management are not held responsible are included within ‘Corporate & Other’.

Corporate & Other operating loss comprises the following (millions):



	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Amortization of intangible assets	$	(14	)	$	(14	)	$	(42	)	$	(44	)
Net loss on disposal of operations^(a)	—			(1		)	—			(1		)
India joint venture settlement ^(a)	—			(11		)	—			(11		)
Foreign exchange hedging	—			1			—			3
Foreign exchange gain on the UK pension plan asset	4			—			5			(1		)
Write-off of uncollectible accounts receivable balance in Chicago and associated legal fees ^(b)	—			—			—			(13		)
Expense reduction initiative^(c)	—			—			(46		)	—
Insurance recovery^(d)	—			—			—			5
Fees related to the extinguishment of debt ^(e)	(1		)	—			(1		)	—
Other	2			(1		)	(3		)	8
Total Corporate and Other	(9		)	(26		)	(87		)	(54		)

_________________________________


^(a)	$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, $1 million loss on disposal of operations was recorded related to the termination.


^(b)	Write-off of uncollectible accounts receivable balance in relation to a previously disclosed fraudulent overstatement of Commissions and fees.


^(c)	Charge related to the assessment of the Company's organizational design.


^(d)	Insurance recovery, recorded in Other operating expenses, related to a previously disclosed fraudulent activity in a stand-alone North America business.


^(e)	$1 million of fees associated with the extinguishment of debt completed on August 15, 2013.

CRITICAL ACCOUNTING ESTIMATES

The accounting estimates or assumptions that management considers to be the most important to the presentation of our financial condition or operating performance are discussed in our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on February 28, 2013, as amended by the Current Report on Form 8-K filed on August 8, 2013.

There were no significant additions or changes to these assumptions in the three months ended September 30, 2013.

CONTRACTUAL OBLIGATIONS

There have been no material changes to our contractual obligations since December 31, 2012, except contractual, planned payments during third quarter 2013 and except as discussed in Note 14 - 'Debt' to the condensed consolidated financial statements.

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NEW ACCOUNTING STANDARDS

In February 2013, the Financial Accounting Standards Board ('FASB') issued Accounting Standards Update ('ASU') No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASB's deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income but do require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012 and has been applied for this second quarter 2013 - see Note 16 - 'Comprehensive Income'.

There were no other new accounting standards issued during third quarter 2013 that would have a significant impact on the Company’s reporting.

OFF BALANCE SHEET TRANSACTIONS

Apart from commitments, guarantees and contingencies, as disclosed in Note 7 — ‘Commitments and Contingencies’ to the condensed 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.

Item 3 — Quantitative and Qualitative Disclosures about Market Risk

There has been no material change with respect to market risk from that described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

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Item 4 — Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, 2013, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Group Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive Officer and the Group Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that the information required to be included in the Company’s periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to them as appropriate to allow for timely decisions regarding required disclosure.

There have been no changes in the Company's internal controls over financial reporting during the quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Other information

PART II — OTHER INFORMATION

Item 1 — Legal Proceedings

Information regarding legal proceedings is set forth in Note 7 — ‘Commitments and Contingencies’ to the Condensed Consolidated Financial Statements appearing in Part I, Item 1 of this report.

Item 1A — Risk Factors

There have been no material changes to the risk factors described in the 2012 Form 10-K which are hereby incorporated by reference.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended September 30, 2013, no shares were issued by the Company without registration under the Securities Act of 1933, as amended.

Share buybacks

The Company did not buy back, by redemption or otherwise, any shares in the third quarter of 2013.

The Company is authorized to buy back shares, by way of redemption, and will consider whether to do so from time to time, based on many factors, including market conditions. The Company is authorized to purchase up to one billion shares from time to time in the open market (such open market purchases would be effected as redemptions under Irish law) and it may also redeem its shares through negotiated trades with persons who are not affiliated with the Company so long as the cost of the acquisition of the Company’s shares does not exceed $824 million.

Item 3 — Defaults Upon Senior Securities

None.

Item 4 — Mine Safety Disclosures

Not applicable.

Item 5 — Other Information

None.

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Item 6 — Exhibits



10.1		Form of Time-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan (for Non-Employee Directors) *

10.2		Willis Group Holdings Public Limited Company Compensation Policy for Non-Employee Directors*

10.3		Form of Time-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan, dated May 10, 2013 between Dominic Casserley and Willis Group Holdings Public Limited Company *

10.4		Form of Performance-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan, dated May 10, 2013 between Dominic Casserley and Willis Group Holdings Public Limited Company *

10.5		Form of Time-Based Share Option Award Agreement under the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan, dated May 10, 2013 between Dominic Casserley and Willis Group Holdings Public Limited Company *

10.6		Second Amendment to the Amended and Restated Willis US 2005 Deferred Compensation Plan *

31.1		Certification Pursuant to Rule 13a-14(a) *

31.2		Certification Pursuant to Rule 13a-14(a) *

32.1		Certification Pursuant to 18 U.S.C. Section 1350 *

32.2		Certification Pursuant to 18 U.S.C. Section 1350 *

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

_________________________________

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



WILLIS GROUP HOLDINGS PLC (REGISTRANT)

By:		/S/ MICHAEL K. NEBORAK
		Michael K. Neborak
		Group Chief Financial Officer
		(Principal Financial and Accounting Officer)

Dated: November 5, 2013

105

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Non-accelerated filer ¨

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		Page

Forward-Looking Statements		4

PART I — Financial Information
Item 1	— Financial Statements	6
Item 2	— Management’s Discussion and Analysis of Financial Condition and Results of Operations	78
Item 3	— Quantitative and Qualitative Disclosures about Market Risk	101
Item 4	— Controls and Procedures	102
PART II — Other Information
Item 1	— Legal Proceedings	103
Item 1A	— Risk Factors	103
Item 2	— Unregistered Sales of Equity Securities and Use of Proceeds	103
Item 3	— Defaults Upon Senior Securities	103
Item 4	— Mine Safety Disclosures	103
Item 5	— Other Information	103
Item 6	— Exhibits	104
Signatures		105