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TheStreet Open House

Willis Group Reports Fourth Quarter 2012 Results

Stocks in this article: WSH

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.

Non-GAAP Supplemental Financial Information

This press release contains references to non-GAAP financial measures as defined in Regulation G of SEC rules. Consistent with Regulation G, a reconciliation of this supplemental financial information to our GAAP information is in the note disclosures that follow. We present such non-GAAP supplemental financial information, 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. This supplemental financial information should be viewed in addition to, not in lieu of, the Company’s condensed consolidated financial statements.

WILLIS GROUP HOLDINGS plc

CONDENSED CONSOLIDATED INCOME STATEMENTS

(in millions, except per share data)

(unaudited)

 
 

Three months ended

 

Twelve months ended

December 31,

December 31,

2012   2011 2012   2011
Revenues
Commissions and fees

$

867

$ 810 $ 3,458 $ 3,414
Investment income 4 8 18 31
Other income   -     1     4     2  
Total revenues   871     819     3,480     3,447  
 
Expenses
Salaries and benefits (including share-based compensation of $8 million, $9 million, $32 million, $41 million) 967 510 2,475 2,087
Other operating expenses 150 194 581 656
Depreciation expense 20 18 79 74
Amortization of intangible assets 15 16 59 68
Goodwill impairment charge 492 - 492 -
Loss/(gain) on disposal of operations   2     -     3     (4 )
Total expenses   1,646     738     3,689     2,881  
 
Operating (Loss) Income (775 ) 81 (209 ) 566
 
Make-whole amounts on repurchase and redemption of Senior Notes and write-off of unamortized debt issuance costs - - - 171
Interest expense   31     44     128     156  
(Loss) Income from Continuing Operations before Income Taxes and Interest in Earnings of Associates (806 ) 37 (337 ) 239
Income tax (credit) charge   (13 )   (2 )   101     32  
(Loss) Income from Continuing Operations before Interest in Earnings of Associates (793 ) 39 (438 ) 207
 
Interest in earnings of associates, net of tax   (7 )   (11 )   5     12  
(Loss) Income from Continuing Operations (800 ) 28 (433 ) 219
 
Discontinued Operations, net of tax   (1 )   1  

 

 

-

    1  
Net (Loss) Income (801 ) 29 (433 ) 220
Net income attributable to non-controlling interests   (4 )   (4 )   (13 )   (16 )
Net (Loss) Income attributable to Willis Group Holdings plc

$

(805

) $ 25   $ (446 ) $ 204  
Amounts attributable to Willis Group Holdings plc shareholders
(Loss) Income from Continuing Operations, net of tax

$

(804

) $ 24 $ (446 ) $ 203
(Loss) Income from Discontinued Operations, net of tax   (1 )   1     -     1  
Net (Loss) Income attributable to Willis Group Holdings plc

$

(805

) $ 25   $ (446 ) $ 204  
 

WILLIS GROUP HOLDINGS plc

CONDENSED CONSOLIDATED INCOME STATEMENTS (Continued)

(in millions, except per share data)

(unaudited)

 
 

Three months ended

 

Twelve months ended

December 31,

December 31,

2012   2011 2012   2011
Earnings per Share – Basic and Diluted
Basic Earnings per Share:
Continuing Operations $ (4.65 ) $ 0.14 $ (2.58 ) $ 1.17
Discontinued Operations   -     -     -   $ 0.01  
Net (Loss) Income attributable to Willis Group Holdings plc shareholders $ (4.65 ) $ 0.14   $ (2.58 ) $ 1.18  
Diluted Earnings per Share:
Continuing Operations $ (4.65 ) $ 0.14 $ (2.58 ) $ 1.15
Discontinued Operations   -     -     -     0.01  
Net (Loss) Income attributable to Willis Group Holdings plc shareholders $ (4.65 ) $ 0.14   $ (2.58 ) $ 1.16  
Average Number of Shares Outstanding
- Basic 173 174 173 173
- Diluted 173 176 173 176
Shares Outstanding at December 31 (thousands) 173,179 173,830 173,179 173,830
 

WILLIS GROUP HOLDINGS plc

SUMMARY DRAFT BALANCE SHEETS

(in millions) (unaudited)

 
 

December 31,

 

December 31,

2012

2011

Current Assets
Cash & cash equivalents $ 500 $ 436
Accounts receivable, net 941 910
Fiduciary assets 9,303 9,338
Deferred tax assets

11

44
Other current assets  

173

    259  
Total current assets  

10,928

    10,987  
 
Non-current Assets
Fixed assets, net 468 406
Goodwill 2,829 3,295
Other intangible assets, net 385 420
Investments in associates 174 170
Deferred tax assets

18

22
Pension benefits asset 136 145
Other non-current assets   209     283  
Total non-current assets  

4,219

    4,741  
Total Assets $

15,147

  $ 15,728  
 
Liabilities and Equity
Current Liabilities
Fiduciary liabilities $ 9,303 $ 9,338
Deferred revenue and accrued expenses 571 320
Income taxes payable 19 15
Short-term debt and current portion of long-term debt 15 15
Deferred tax liabilities

22

26
Other current liabilities  

291

    282  
Total current liabilities  

10,221

    9,996  
 
Non-current Liabilities
Long-term debt 2,338 2,354
Liability for pension benefits 282 270
Deferred tax liabilities

18

32
Provision for liabilities 175 196
Other non-current liabilities   388     363  
Total non-current liabilities  

3,201

    3,215  
Total Liabilities  

13,422

    13,211  
 
Equity attributable to Willis Group Holdings plc 1,699 2,486
Noncontrolling interests   26     31  
Total Equity   1,725     2,517  
Total Liabilities and Equity $

15,147

  $ 15,728  
 

WILLIS GROUP HOLDINGS plc

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

 

1.

     

Definitions of Non-GAAP Financial Measures

 

We believe that investors’ understanding of the Company’s performance is enhanced by our disclosure of the following non-GAAP financial measures. Our method of calculating these measures may differ from those used by other companies and therefore comparability may be limited.

 

Organic commissions and fees growth

 

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; (iii) the net commission and fee revenues related to operations disposed of in each period presented; (iv) in North America, legacy contingent commissions assumed as part of the HRH acquisition and that had not been converted into higher standard commission; and (v) investment income and other income from reported revenues.

 

We believe organic growth in commissions and fees provides a measure that the investment community may find helpful in assessing the performance of operations that were part of our operations in both the current and prior periods, and provides a measure against which our businesses may be assessed in the future.

 

Adjusted operating income and adjusted net income from continuing operations

 

Adjusted operating income and adjusted net income from continuing operations are calculated by excluding the impact of certain items from operating income and net income from continuing operations, respectively, the most directly comparable GAAP measures. We believe that excluding these items, as applicable, from operating income and net income from continuing operations, provides a more complete and consistent comparative analysis of our results of operations.

 

WILLIS GROUP HOLDINGS plc

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

 

2.

     

Analysis of Commissions and Fees

 
The following table reconciles organic commissions and fees growth by segment to the percentage change in reported commissions and fees for the three and twelve months ended December 31, 2012:
         

Three months ended

 

December 31,

Change attributable to

   

Organic

Foreign

Acquisitions

commissions

   

%

currency

and

and fees

2012

2011

Change

translation

disposals

growth (a)

Global $ 237 $ 213 11.3 % (0.3 )% - % 11.6 %
North America 331 316 4.7 % (0.3 )% - % (b) 5.0 %
International   299     281   6.4 % (1.0 )% - % 7.4 %
Commissions

and fees

$ 867   $ 810   7.0 % (0.5 )% - % 7.5 %
 
 

Twelve months ended

December 31,

Change attributable to

Organic

Foreign

Acquisitions

commissions

%

currency

and

and fees

2012

2011

Change

translation

disposals

growth (a)

Global $ 1,124 $ 1,073 4.8 % (1.3 )% - % 6.1 %
North America 1,306 1,314 (0.6 )% - % - % (b) (0.6 )%
International   1,028     1,027   0.1 % (4.8 )% - % 4.9 %
Commissions

and fees

$ 3,458   $ 3,414   1.3 % (1.8 )% - % 3.1 %
       

(a)

 

Organic commission 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; (iii) the net commission and fee revenues related to operations disposed of in each period presented; (iv) in North America, legacy contingent commissions assumed as part of the HRH acquisition and that had not been converted into higher standard commission; and (v) investment income and other income from reported revenues.

(b)

Included in North America reported commissions and fees were legacy HRH contingent commissions of $nil in the fourth quarter of 2012 and the fourth quarter of 2011 and $2 million in 2012 compared with $5 million in 2011.

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

WILLIS GROUP HOLDINGS plc

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

 

3.

     

Cash Retention Awards

 
For the past several years, certain cash retention awards under the Company’s annual incentive programs included a feature which required the recipient to repay a proportionate amount of the annual award if the employee voluntarily left the Company before a specified date, which was generally three years following the award. As previously disclosed, the Company made the cash payment to the recipient in the year of grant and recognized the payment in expense ratably over the period it was subject to repayment, beginning in the quarter in which the award was made. The unamortized portion of cash retention awards was recorded within “other current assets” and “other non-current assets” in the consolidated balance sheets.
 
The following table sets out the amount of cash retention awards made and the related amortization of those awards for the three and twelve months ended December 31, 2012 and 2011:
             

Three months ended

   

Twelve months ended

December 31,

December 31,

2012   2011 2012   2011
 
Cash retention awards made $ 2 $ 2 $ 221 $ 210
 
Amortization of cash awards

(included in Salaries and benefits)

$ 51 $ 49 $ 216 $ 185
       

As previously disclosed, the Company has eliminated the repayment requirement from the past annual cash retention awards and, as a result, has recognized a non-cash, pre-tax charge of $200 million in the fourth quarter of 2012 which represents the unamortized balance of past awards. An immaterial amount of unamortized cash retention awards remained on the Company’s balance sheet at December 31, 2012.

 
In addition, the Company has replaced annual cash retention awards with annual cash bonuses which will not include a repayment requirement. Fourth quarter 2012 salaries and benefits therefore reflect an accrual of $252 million for these 2012 cash bonuses to be paid in 2013.
 

WILLIS GROUP HOLDINGS plc

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

 

4.

     

Adjusted Operating Income

 
The following table reconciles operating (loss) income, the most directly comparable GAAP measure, to adjusted operating income, for the three and twelve months ended December 31, 2012 and 2011:
         

Three months ended

December 31,

2012   2011  

% Change

Operating (Loss) Income $ (775 ) $ 81 NM
Excluding:
Goodwill impairment charge (a) 492 -
Write-off of unamortized cash retention awards (b) 200 -
2012 cash bonus accrual (c) 252 -
Insurance recovery (d) (5 ) -
Loss on disposal of operations 2 -
Write-off of uncollectible accounts receivable and legal fees (e) - 22
2011 Operational Review (g)   -     50  
Adjusted Operating Income $ 166   $ 153   8.5 %

Operating Margin, or Operating Income as a percentage of Total Revenues

 

(89.0

)%

 

9.9

%

Adjusted Operating Margin, or Adjusted Operating Income as a percentage of Total Revenues

 

19.1

%

 

18.7

%

 
 

Twelve months ended

December 31,

2012 2011

% Change

Operating (Loss) Income

$

(209

)

$ 566 NM
Excluding:
Goodwill impairment charge (a) 492 -
Write-off of unamortized cash retention awards (b) 200 -
2012 cash bonus accrual (c) 252 -
Insurance recovery (d) (10 ) -
Loss/(gain) on disposal of operations 3 (4 )
Write-off of uncollectible accounts receivable and legal fees (e) 13 22
India JV settlement (f) 11 -
2011 Operational Review (g) - 180
Financial Services Authority regulatory settlement - 11
   
Adjusted Operating Income

$

752

  $ 775  

(3.0

)%

Operating Margin, or Operating Income as a percentage of Total Revenues

 

(6.0

)%

 

16.4

%

Adjusted Operating Margin, or Adjusted Operating Income as a percentage of Total Revenues

 

21.6

%

 

22.5

%

       

(a)

 

Impairment charge to reduce carrying value of North America segment goodwill.

(b)

Charge to write-off unamortized balance of past cash retention awards.

(c)

Accrual for 2012 bonuses to be paid in 2013.

(d)

Insurance recovery related to previously disclosed improperly recorded revenue in Chicago.

(e)

Write-off of an uncollectible accounts receivable balance, together with associated legal fees, related to overstatement of Commissions and Fees from the years 2004 to 2011, in Chicago.

(f)

Settlement with former partners related to the termination of a joint venture arrangement in India.

(g)

Charge relating to the 2011 Operational Review, including $34 million of severance costs relating to the elimination of approximately 400 position in the fourth quarter of 2011 and $98 million of severance costs relating to the elimination of approximately 1,200 positions for the full year 2011.

 

WILLIS GROUP HOLDINGS plc

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

 

5.

     

Adjusted Net Income from Continuing Operations

 
The following table reconciles net (loss) income from continuing operations and earnings per diluted share from continuing operations, the most directly comparable GAAP measures, to adjusted net income from continuing operations and earnings per diluted share from continuing operations, for the three and twelve months ended December 31, 2012 and 2011:
           

Per diluted share

Three months ended

Three months ended

December 31,

December 31,

2012

 

2011

 

% Change

2012

 

2011

 

% Change

Net (Loss) Income from Continuing Operations attributable to Willis Group Holdings plc $ (804 ) $ 24 NM $ (4.65 ) $ 0.14 NM
 
Excluding:
Goodwill impairment charge, net of tax ($34, $nil) (a) 458 - 2.62 -
Write-off of unamortized cash retention awards, net of tax ($62, $nil) (b) 138 - 0.79 -
Accrual of 2012 cash bonus, net of tax ($77, $nil) (c) 175 - 1.00 -
Insurance recovery, net of tax ($2, $nil) (d) (3 ) - (0.02 )
Loss on disposal of operations, net of tax ($nil, $nil) 2 - 0.01
Write-off of uncollectible accounts receivable and legal fees, net of tax ($nil, $9) (f) - 13 - 0.07
Write-off of unamortized debt issuance costs, net of tax ($nil, $4) - 6 - 0.04
2011 Operational Review charge, net of tax ($nil, $14) (g) - 36 - 0.20
Deferred tax valuation allowance (h) 113 - 0.64 -
Dilutive impact of potentially issuable shares (i) - - 0.06 -
           
Adjusted Net Income from Continuing Operations $ 79   $ 79   - % $ 0.45   $ 0.45   - %
 
Diluted shares outstanding   175     176  
 

WILLIS GROUP HOLDINGS plc

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

 

5.

     

Adjusted Net Income from Continuing Operations (continued)

 
   

Per diluted share

Twelve months ended

Twelve months ended

December 31,

December 31,

2012   2011  

% Change

2012   2011  

% Change

Net (Loss) Income from Continuing Operations attributable to Willis Group Holding plc $ (446 ) $ 203 NA $ $(2.58 ) $ 1.15 NM
 
Excluding:
Goodwill impairment charge, net of tax ($34, $nil) (a) 458 - 2.60 -
Write-off of unamortized cash retention awards, net of tax ($62, $nil) (b) 138 - 0.78 -
Accrual of 2012 cash bonus, net of tax ($77, $nil) (c) 175 - 0.99 -
Insurance recovery, net of tax ($4, $nil) (d) (6 ) - (0.03 ) -
Loss/(gain) on disposal of operations, net of tax ($nil, $nil) 3 (4 ) 0.02 (0.02 )
India JV settlement, net of tax ($nil, $nil) (e) 11 - 0.06 -
Write-off of uncollectible accounts receivable balance and legal fees, net of tax ($5, $9) (f) 8 13 0.05 0.08
2011 Operational Review charge, net of tax ($nil, $52) (g) - 128 - 0.73
Financial Services Authority regulatory settlement, net of tax ($nil, $nil) - 11 - 0.06
Make-whole amounts on repurchase and redemption of Senior Notes and write-off of unamortized debt issuance costs, net of tax ($nil, $50) - 131 - 0.74
Deferred tax valuation allowance (h) 113 - 0.64 -
Dilutive impact of potentially issuable shares (h) - - 0.05 -
       
Adjusted Net Income from Continuing Operations $ 454   $ 482   (5.8 )% $ 2.58   $ 2.74   (5.8 )%
 
Diluted shares outstanding   176     176  
       

(a)

 

Impairment charge to reduce carrying value of North America segment goodwill.

(b)

Charge to write-off unamortized balance of past cash retention awards.

(c)

Accrual for 2012 bonuses to be paid in 2013.

(d)

Insurance recovery related to previously disclosed improperly recorded revenue in Chicago.

(e)

Settlement with former partners related to the termination of a joint venture arrangement in India.

(f)

Write-off of uncollectible accounts receivable balance, together with associated legal fees, related to overstatement of Commissions and Fees from the years 2004 to 2011, in Chicago.

(g)

Charge relating to the 2011 Operational Review, including $34 million of severance costs relating to the elimination of approximately 400 positions in the fourth quarter of 2011 and $98 million of severance costs related to the elimination of approximately 1,200 positions for the full year 2011.

(h)

Valuation allowance against deferred tax assets.

(i)

Diluted earnings per share are calculated by dividing net income by the average number of shares outstanding during each period. However, potentially issuable shares were not included in the calculation of diluted earnings per share for the three months and twelve months ended December 31, 2012 because the Company’s net loss rendered their impact anti-dilutive. The dilutive impact of potentially issuable shares is included on reconciling to adjusted earnings per share from continuing operations.

 

WILLIS GROUP HOLDINGS plc

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

 

6.   Condensed Consolidated Income Statements by Quarter

 
  2011   2012
Q1   Q2   Q3   Q4   FY     Q1   Q2   Q3   Q4   FY
Revenues
Commissions and fees $   999 $   852 $   753 $   810 $   3,414 $   1,005 $   837 $   749 $   867 $   3,458
Investment income 8 8 7 8 31 5 5 4 4 18
Other income     -       1       -     1       2       3       -       1       -       4  
Total Revenues     1,007       861       760     819       3,447       1,013       842       754       871       3,480  
Expenses
Salaries and benefits 583 505 489 510 2,087 506 500 502 967 2,475
Other operating expenses 152 164 146 194 656 156 129 146 150 581
Depreciation expense 20 19 17 18

 

74 19 19 21 20 79
Amortization of intangible assets 17 17 18 16 68 15 15 14 15 59
Goodwill impairment charge - - - - - - - - 492 492
Net (gain)/loss on disposal of operations     (4 )     -       -     -       (4 )     -       -       1       2       3  
Total Expenses     768       705       670     738       2,881       696       663       684       1,646       3,689  
Operating Income (Loss) 239 156 90 81 566 317 179 70 (775 ) (209 )
Make-whole amounts on repurchase and redemption of Senior Notes and write-off of unamortized debt issuance costs 171 - - - 171 - - - -
Interest expense     40       34       38     44       156       32       33       32       31       128  
Income (Loss) before Income Taxes and Interest in Earnings of Associates

28

122

52

37

239

285

146

38

(806

)

(337

)

Income tax charge/(credit)     1       31       2     (2 )     32       68       36       10       (13 )     (101 )
Income (Loss) before Interest in Earnings of Associates

27

91

50

39

207

217

110

28

(793

)

(438

)

Interest in earnings of associates, net of tax     16       (3 )     10     (11 )     12       15       (1 )     (2 )     (7 )     5  
Income (Loss) from Continuing Operations 43 88 60 28 219 232 109 26 (800 ) (433 )
Discontinued operations, net of tax     (1 )     1       -     1       1       -       1       -       (1 )     -  
Net Income (Loss) 42 89 60 29 220 232 110 26 (801 ) (433 )
Net Income (Loss) attributable to noncontrolling interests     (8 )     (4 )     -     (4 )     (16 )     (7 )     (2 )     -       (4 )     (13 )
Net Income (Loss) attributable to Willis Group Holdings plc $   34   $   85   $   60 $   25   $   204   $   225   $   108   $   26   $   (805 ) $   (446 )
Diluted Earnings per Share

 

 

Net Income (Loss) attributable to Willis Group Holdings plc shareholders $   0.20   $   0.48   $   0.34 $   0.14   $   1.15   $   1.28   $   0.61   $   0.15   $   (4.65 ) $   (2.58 )
Average Number of Shares Outstanding
- Diluted     174       176       176     176       176       176       176       175       173       173  
 

WILLIS GROUP HOLDINGS plc

SUPPLEMENTAL FINANCIAL INFORMATION

(in millions, except per share data) (unaudited)

 

7.   Segment Information by Quarter

 
  2011     2012
Q1   Q2   Q3   Q4   FY     Q1   Q2   Q3   Q4   FY
Commissions and Fees
Global $   357 $   269 $   234 $   213 $   1,073 $   370 $   282 $   235 $   237 $   1,124
North America 356 326 316 316 1,314 (b) 346 314 315 331 1,306
International     286       257       203       281       1,027       289       241       199       299       1,028  
Total Commissions and Fees $   999   $   852   $   753   $   810   $   3,414   (b) $   1,005   $   837   $   749   $   867       3,458  
 
Total Revenues
Global $ 360 $ 272 $ 235 $ 215 $ 1,082 $ 372 $ 283 $ 235 $ 239 1,129
North America (a) 358 328 318 319 1,323 (b) 349 315 318 331 1,313
International     289       261       207       285       1,042       292       244       201       301       1,038  
Total Revenues $   1,007   $   861   $   760   $   819   $   3,447   (b) $   1,013   $   842   $   754   $   871       3,480  
 
Operating Income
Global $ 176 $ 88 $ 53 $ 35 $ 352 $ 179 $ 94 $ 52 $ 47 372
North America 85 61 62 63 271 (b) 82 48 53 57 240
International 86 56 4 75 221 81 40 (9 ) 71 183
Corporate and Other (c)     (108 )     (49 )     (29 )     (92 )     (278

)

 

    (25 )     (3 )     (26 )     (950 )     (1,004 )
Total Operating Income (Loss) $   239   $   156   $   90   $   81   $   566   (b) $   317   $   179   $   70   $   (775 )     (209 )
 
Organic Commissions and Fees Growth
Global 7.9 % 3.2 % 8.9 % 6.3 % 6.6 % 4.7 % 6.8 % 2.9 % 11.6 % 6.1 %
North America (1.2 )% (0.4 )% (4.1 )% (9.4 )% (3.5 )% (b) (2.0 )% (3.0 )% (0.5 )% 5.0 % (0.6 )%
International     6.3 %     6.5 %     4.6 %     2.2 %     4.8 %     4.3 %     2.0 %     4.9 %     7.4 %     4.9 %
Total Organic Commissions and Fees Growth     3.9 %     2.6 %     1.9 %     (2.3 )%     1.8 % (b)     2.1 %     1.5 %     2.2 %     7.5 %     3.1 %
 
Operating Margin
Global 48.9 % 32.4 % 22.6 % 16.3 % 32.5 % 48.1 % 33.2 % 22.1 % 19.7 % 32.9 %
North America 23.7 % 18.6 % 19.5 % 19.7 % 20.5 % (b) 23.5 % 15.2 % 16.7 % 17.2 % 18.3 %
International 29.8 % 21.5 % 1.9 % 26.3 % 21.2 % 27.7 % 16.4 % (4.5 )% 23.6 % 17.6 %
Total Operating Margin     23.7 %     18.1 %     11.8 %     9.9 %     16.4 % (b)     31.3 %     21.3 %     9.3 %     (89.0 )%     (6.0 )%

(a)

 

Total Revenues in the North America segment includes other income comprising gains on disposal of intangible assets, which primarily arise from settlements enforcing non-compete agreements in the event of losing accounts through producer defection or the disposal of books of business.

 

(b)

North America fourth quarter 2011 results include the reversal of $6 million of Commissions and Fees and the reversal of $2 million of Salaries and Benefits expense related to improperly recognized revenue in Chicago, as disclosed in the Company’s Form 10-K filed with the Securities and Exchange Commission in February, 2012.

 

(c)

Corporate and Other includes the costs of the holding company, foreign exchange hedging activities, foreign exchange on the UK pension plan asset, foreign exchange gains and losses from currency purchases and sales, amortization of intangible assets, net gains and losses on disposal of operations, certain legal costs, write-off of uncollectible accounts receivable and associated legal fees, Insurance recovery related to improperly recognized revenue in Chicago, India JV settlement, North America segment goodwill impairment and charges associated with the change in remuneration policy. Additionally, in 2011, Corporate and Other included the 2011 Operational Review charge.





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