Willis Towers Watson Public Limited Company · NASDAQ:WTW
Willis Towers Watson Public — Willis Group Holdings — Investor Day (July 2013)
109 slides from Willis Towers Watson Public's investor day presentation, Jul 30, 2013
Slide 1: Investor Conference, New York, July 30, 2013
Exhibit 99.1 Investor Conference July 30, 2013 I New York Willis Group Holdings plc.
Slide 2: Disclaimer: forward-looking statements
Disclaaimer Important disclosures regarding forward-looking statements These presentations contain certain “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 saf
Slide 3: Disclaimer: forward-looking statements continued
Disclaimer Important disclosures regarding forward-looking statements continued 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
Slide 4: Disclaimer: non-GAAP measures
Disclaimer Important disclosures regarding non-GAAP measures This presentation contains references to “non-GAAP financial measures" as defined in Regulation G of SEC rules. We present these measures because we believe they are of interest to the investment community and they provide additional meani
Slide 5: Overview
Dominic Casserley CEO Willis Group Holdings plc Investor Conference, New York, July 30, 2013 5 Overview
Slide 6: Global risk advisor and broker
1 2 3 Global risk advisor and broker POTENTIAL Solid fundamentals and room for growth Where and How to compete EXECUTION SUCCESS Growing revenues with positive operating leverage to improve cash flow and deliver compelling shareholder returns
Slide 7: Global risk advisor and broker
Global risk advisor and broker
Slide 8: Global risk advisor and broker
Global risk advisor and broker $3.5 billion in revenues globally 17,500 associates offices countries
Slide 9: Global risk advisor and broker revenue
North America International Global 38% 32% 30% Global risk advisor and broker revenue - $3.48 billion
Slide 10: Global interconnected core
Covers specialty risk Served by an international office Covers North American risk GLOBAL SPECIALTY Global interconnected core North American Client International Client Energy Specialty Client
Slide 11: Agenda
13:00 – 13:40 13:40 – 14:00 14:00 – 14:15 14:15 – 14:30 14:30 – 15:00 15:00 – 15:30 15:30 – 16:00 16:00 – 16:45 Overview: Dominic Casserley Finance Overview: Michael Neborak Q&A Break Willis North America: Todd Jones Willis International: Tim Wright Willis Global: Steve Hearn Wrap up and Q&A Investo
Slide 12: Why risk?
Why risk? Why risk? Setting the context Why risk advisory and broking? Why Willis?
Slide 13: Attractive long-term structural drivers for the sector
5% CAGR 2% CAGR 3% CAGR 5% CAGR 5.9% CAGR Attractive long-term structural drivers for the sector Source: UN, EIA, Munich Re Expanding middle class TODAY 4.8 billion Urbanization TODAY 4.9 billion World GDP $139 trillion TODAY Property & Casualty market $2.4 trillion Total insurance market $6.5 trill
Slide 14: An expanding set of risks
An expanding set of risks Supply chain uncertainty
Slide 15: An expanding set of risks
An expanding set of risks Cyber security
Slide 16: An expanding set of risks
An expanding set of risks Seismic activity
Slide 17: An expanding set of risks
An expanding set of risks Extreme weather
Slide 18: An expanding set of risks
An expanding set of risks Income statement Balance sheet Cash flow Boardroom
Slide 19: Why risk advisory and broking?
Setting the context Why risk? Why risk advisory and broking? Why Willis?
Slide 20: From product provider to risk advisor
Client Insurer Client Insurer Advisor Broker Broker From product provider to risk advisor
Slide 21: Why Willis?
Setting the context Why risk advisory and broking? Why Willis? Why risk? Why Willis?
Slide 22: Willis has strong fundamentals
Willis has strong fundamentals (1) 2011 figures
Slide 23: Our potential
23% Our potential 5% Average = 3% Average = 5% Organic C&F growth C&F Interest income Other income $2.3 $2.3 $2.4 $2.6 $2.8 $3.3 $3.3 $3.4 $3.5 $1.9 H1 2013
Slide 24: What is the plan? Where to compete
What is the plan? Where to compete
Slide 25: We will rebalance towards faster growth geographies and sectors
Other developed markets Developing markets North America North America Other developed markets Developing markets 49% 17% 34% 38% 28% We will rebalance towards faster growth geographies and sectors Illustrative and not to scale. Revenue is region of origin not BU reporting. Geographic revenue mix 20
Slide 26: What is the plan? Where to compete
Innovation Connection Investment What is the plan? Where to compete Geography Sector Client segment
Slide 27: We will segment our client offering, focusing on value
We will segment our client offering, focusing on value SME Accounts, Affinity, Personal • Dedicated operations • Commercial network • Product to meet needs Large Corporate Accounts • Growing priority • Global proposition • Industry expertise and analytics • Trusted advisor • Product and solution neu
Slide 28: What is the plan? Where to compete
Geography Client segment Innovation Connection Investment What is the plan? Where to compete Sector
Slide 29: We will build business lines around our sector strength
We will build business lines around our sector strength Aerospace Energy Healthcare Mining Leisure Construction Financial Services Marine Real Estate Utilities Renewables Life Sciences Reinsurance Tech Media Telecom Agribusiness
Slide 30: The opportunity in human capital / employee benefits
Aging population Challenges The opportunity in human capital / employee benefits Source : United Nations Department of Economic and Social Affairs/Population Division World Population to 230 Diabetes Cancer Obesity Dementia Healthcare innovation 39% 54% 7% 0-14 25-64 20% 64% 16% 0-14 25-64
Slide 31: The opportunity in human capital / employee benefits
86% P&C The opportunity in human capital / employee benefits Very strong middle market and selected large corporate franchise in North America Strong position in other markets Significant multinational client base Growing well in our focused areas Healthcare focused business globally 3% Developing m
Slide 32: What is the plan? How to compete
What is the plan? Sector Geography Client segment Innovation Connection Investment Where to compete How to compete
Slide 33: Connection – leading to more cross-selling
The opportunities Improving connectivity Connection – leading to more cross-selling Improved cross-sales targets Offer incentives Training and development Relocation of skills Retail network use global specialties Increased geography: geography cross-sales Improved retention Client wins from a conne
Slide 34: What is the plan? How to compete
What is the plan? Sector Geography Client segment Connection Investment How to compete Innovation
Slide 35: Competing on analytics and innovation
Competing on analytics and innovation
Slide 36: What is the plan? How to compete
What is the plan? Sector Geography Client segment Innovation Connection Where to compete How to compete Investment
Slide 37: Investment criteria
Economics Competitive position Fit Inorganic Organic Investment criteria • Revenue Growth • NPV • Earnings accretion • Little or no capital risk • Strong and leading competitive positions • Link to Willis value add • Sustainable talent proposition • Operational fit • Sustainable business – managed r
Slide 38: Gras Savoye – an attractive option
France Rest of world 71% 29% Gras Savoye – an attractive option Geographical revenues 2012 revenue: ~$430m Company overview • Market leader for over 25 years • 28 offices in France • Offices in 44 countries • 3,800 employees worldwide • Willis has a 30% ownership stake with an option to acquire 100%
Slide 39: Gras Savoye – an attractive option
Economics Competitive position Fit Gras Savoye – an attractive option Source :Gras Savoye, Swiss Re, Munich Re Option decision April – exercisable June Increase stake from 30 to 100% NPV Earnings accretion Decision process • ~$430m revenue • Recovery of French economy short term and long term prospe
Slide 40: Executing our strategy on the ground
NORTH AMERICA GLOBAL INTERNATIONAL Executing our strategy on the ground Where to compete How to compete Geography Client segment Sector Connection Innovation Investment
Slide 41: Management incentives aligned to shareholder value creation
Long-term incentive program Annual incentive program Management incentives aligned to shareholder value creation Profit over 3 year period Adjusted EBITDA $ growth By excluding depreciation and amortization, avoids “in year” impact from decisions taken years previously Adjusted EBIT $ growth with co
Slide 42: Growth with discipline
Growth with discipline Mid-single digits revenue growth Mid-teens total shareholder return Positive margin Expense growth 70+ bps Revenue growth
Slide 43: Cash allocation strategies
Cash allocation strategies Invest in the business for growth M&A Generate a steadily rising dividend Repurchase shares Maintain investment grade
Slide 44: Global risk advisor and broker
1 2 3 Global risk advisor and broker Solid fundamentals and room for growth Where and How to compete Growing revenues with positive operating leverage to improve cash flow and deliver compelling shareholder returns POTENTIAL EXECUTION SUCCESS
Slide 45: Financial Overview
Michael Neborak Group CFO Willis Group Holdings plc Investor Conference, New York, July 30, 2013 Financial Overview
Slide 46: Key takeaways
Key takeaways 1 3 2 5 4 Key takeaways Willis Group is a growing, highly profitable, cash generative business Accelerating earnings growth should generate an increasing amount of capital for value - creating opportunities We have a disciplined approach to cost management that will drive operating mar
Slide 47: Willis is a growing company
Willis is a growing company Interest income declines 80% $18 million $96 million 5% Average = 3% Average = 5% Organic C&F growth $2.3 $2.3 $2.4 $2.6 $2.8 $3.3 $3.3 $3.4 $3.5 $1.9 H1 2013 C&F Interest income Other income Willis is a growing company Interest income declines 80%
Slide 48: Disciplined cost management
Amortization Depreciation Other operating expenses Salaries & benefits 1 3 2 75% 20% 3% 2% Target at least 70 basis points spread between revenue and cost growth Strategic framework 2012 adjusted expenses Cost discipline Collaboration between key business leaders and monthly review of expenses Produ
Slide 49: Large and growing pool of capital available to create shareholder value
Potential Cashflow available for shareholder value creation Revenue Cash from Op. activities before pension funding $3,480 $668 Flattening of capital expenditures and pension funding (1) For illustrative purposes only; not drawn to scale. Organic investment, M&A, dividends, debt management and share
Slide 50: Committed to maintaining our investment grade rating
$1.7 $2.0 $2.3 $2.3 Committed to maintaining our investment grade rating Capital structure Leverage ratio (1) Includes impact from acquisition of HRH as of 10/1/2008. Dec. 31, 2012 Jun. 30, 2013 Total equity Long-term debt 3.8 2.7 2.5 2.6 2.6 2.6 ¹ LTM 2013 Debt / adjusted EBITDA Capitalization
Slide 51: Enhanced flexibility from extending maturities
$207 Opportunity to extend maturities to later years at lower rates Maturity profile Enhanced flexibility from extending maturities 5-year term loan, scheduled amortization: $15m annually 2013-2016, $23m in 2017, balance due in 2018 Revolver Notes $500 $300 $500 $600 $300 $350 Scheduled debt maturit
Slide 52: Cash allocation strategies
Invest in the business for growth M&A Generate a steadily rising dividend Repurchase shares Maintain investment grade Cash allocation strategies
Slide 53: Key takeaways
1 2 3 4 5 Willis Group is a growing, highly profitable, cash generative business We have a disciplined approach to cost management that will drive operating margins Accelerating earnings growth should generate an increasing amount of capital for value - creating opportunities We have a healthy balan
Slide 54: Willis North America
Investor Conference, New York, July 30, 2013 Todd Jones CEO Willis North America Willis North America
Slide 55: Key takeaways
Key takeaways 1 2 3 4 5 6 Business has stabilized and returned to consistent performance Strong foundations Significant opportunity in North America for Willis Growth with discipline Significant opportunity working more closely with global specialty Unique positioning in growing fragmented human cap
Slide 56: Willis North America overview
Willis North America presence Overview
Slide 57: Overview
$1.3 billion in revenues 6,000 associates locations regions Overview
Slide 58: Regional contribution to North America
12% 22% 17% 17% 14% 4% 14% Atlantic South Midwest Other CAPPPs ¹ Metro (New York) West % of 2012 C&F Regional contribution to North America (1) CAPPPs: Captives, Actuarial, Programs, Pooling, and Personal Lines Overview
Slide 59: Product line contribution to North America
Overview 33% 67% Commission Fees 24% 76% Product line contribution to North America Approximate revenue split % of 2012 C&F Overview Human Capital P&C
Slide 60: Returning to form
Returning to form 358 328 318 319 349 315 318 331 365 335 - 4.8% - 8.9% - 4.0% 3.8% 4.6% 5.7% 85 61 62 63 82 48 53 57 89 57 Q1 – ‘11 Q2 – ‘11 Q3 – ‘11 Q4 – ‘11 Q1 – ‘12 Q2 – ‘12 Q3 – ‘12 Q4 – ‘12 Q1 – ‘13 Q2 – ‘13 % YoY change Revenue growth $m Revenue $m Operating income 23.7% 18.6% 19.5% 19.7% 23.
Slide 61: Selected Willis industry practices
Selected Willis industry practices Opportunity Willis is well positioned to compete and win Focused on client needs through an expertise-based model Expertise and depth in our growth industries Global expertise delivered locally Construction Financial inst. Marine Energy Right geographies ~ 800 prod
Slide 62: Sustaining and building upon recent performance
1 2 3 4 Sustaining and building upon recent performance Our strategy consists of four key levers: Retention, pipelines and producers Maintain focus on client needs and improved retention Enhanced sales process and pipelines Enabled producers and workforce New business strategies Align specialties an
Slide 63: Sustaining and building upon recent performance
1 Sustaining and building upon recent performance Our strategy consists of four key levers: Retention, pipelines and producers Maintain focus on client needs and improved retention Enhanced sales process and pipelines Enabled producers and workforce
Slide 64: Strengthening the basics of our business
Strengthening the basics of our business Client retention Service excellence Responsive and collaborative Accuracy and timeliness Pipelines Robust pipelines Meaningful sales metrics and reporting Producers Improved sourcing Enhanced onboarding Strong sales leadership Sales process Expertise manageme
Slide 65: New business strategies
2 New business strategies • Align specialties and geographic footprint with market demands • Leverage industry and product through Sales 2.0 process Sustaining and building upon recent performance Our strategy consists of four key levers:
Slide 66: Industry prioritization analysis
Comprehensive listing of industries and sub-industries A B C Growth potential Industries and sub- industries that will drive highest future growth in the market Expertise as key differentiator Industries where expertise is critical to compete successfully Competitive position & current capabilities
Slide 67: Client segmentation
3 Client segmentation Clearly defined business segments Tailor value proposition to segments Our strategy consists of four key levers: Sustaining and building upon recent performance
Slide 68: Key growth levers
1 3 2 4 Key growth levers: Deepen value proposition and expertise delivery in large and middle market accounts in major growth areas Bring more expertise through the specialties to the middle market segment Manage small and large / middle market account businesses with more distinctive value proposi
Slide 69: Human Capital
Sustaining and building upon recent performance 4 Human Capital Focus on target segment Enhance offerings e.g. private exchange, voluntary benefits, consulting and expertise Our strategy consists of four key levers: Sustaining and building upon recent performance
Slide 70: Annual market opportunity
Annual market opportunity: Revenues Employers Willis HCP has ~1.5% to 2% of a highly fragmented market Of the middle market, Willis has ~3% to 4% penetration Focus of effort is on the ~$5 to $6b middle-market segment (1) Employers of 10+ employees Source: US Census Bureau of Labor Statistics & Willi
Slide 71: A growth business uniquely positioned to win
Current clients A growth business uniquely positioned to win Growth focus 1 2 3 Small 25 - Middle 100 - 2.9K Large 3K - 10K Very large 10K+ Very small 0 - Client headcount A strong foundation… • Global footprint / strong local market presence • Regional subject matter experts in partnership with loc
Slide 72: Key takeaways
Key takeaways 1 2 3 4 5 6 Business has stabilized and returned to consistent performance Strong foundations Significant opportunity in North America for Willis Growth with discipline Significant opportunity working more closely with global specialty Unique positioning in growing fragmented human cap
Slide 73: Willis International
Tim Wright CEO Willis International Investor Conference, New York, July 30, 2013 Willis International
Slide 74: Key points
Key points Questions Answers Improving margins Goals Consistent revenue growth in the 4-6% range Quarterly volatility Growth in challenged markets Expanding margin while growing Annual growth Turnaround Share gain Portfolio mix Portfolio mix Productivity Shared services Key points
Slide 75: Willis International overview
Overview Willis International Associates and correspondents Overview
Slide 76: Overview
$1 billion in revenues 7,000 associates locations countries Overview
Slide 77: International C&F 2012
Overview CEMEA Western Europe Asia Latin America Australasia UK 7% 18% 17% 42% 7% 9% International C&F 2012: $1 billion Overview
Slide 78: Overview
83% 17% Affinity Small commercial Middle market Large accounts 7% 10% 50% 33% Overview Property & casualty Employee benefits Consistent growth Expert capabilities
Slide 79: Contribution to Group
Contribution to Group International share of Group revenue 2012 W.Europe Asia Latin America Australasia UK CEMEA Contribution to Group
Slide 80: Financial performance
18% 42% 9% 17% Margin actions 7% 7% -2% +4% +17% +5% -3% -1% +1% Total -3% W.Europe Asia Latin America Australasia UK CEMEA % C&F growth 2008-12 Change in operating margin 2008-12 Segmentation / productivity Shared services / hubbing Centers of excellence Portfolio review 2012 Mix (1) Internal repor
Slide 81: Growth strategies
7% 18% 7% 9% 17% 42% Growth strategies Turnaround Share gain Portfolio mix Australasia UK Asia LATAM CEMEA W.Europe 2012 Mix
Slide 82: Growing through turnaround
7% 18% Turnaround actions UK C&F growth (%) Australasia C&F growth (%) Growing through turnaround Australasia UK 2012 Mix Leadership changes Portfolio review Retention & sales Selective hires
Slide 83: Growth through share gain
42% 3% 5% 10% 23% Average 2008-2012 C&F growth (%) Share gain actions W.Europe Est. Market share 2012 Mix Source: Finaccord and Willis management analysis Growth through share gain Leadership Connecting with Group Selective hires / investments Affinity Innovation 4% 4% 5% 9% Denmark Germany Spain It
Slide 84: Growth through portfolio mix
7% 9% 17% Insurance penetration (% GDP) Average 2008-2012 C&F growth (%) Growth through portfolio mix Asia LATAM CEMEA 3.3% 1.5% 0.5% 1.6% 1.0% 0.1% 2012 Mix Source: AXCO, Insurance Intelligence Centre, Willis Management Analysis
Slide 85: Growth through portfolio mix
32 % 45%+ Portfolio mix actions Growth through portfolio mix Build out infrastructure Joint planning with specialisms Selective acquisitions Investment hires LATAM Asia LATAM CEMEA Indicative 2017 2012 Mix Asia CEMEA
Slide 86: Growth strategy key takeaways
1 2 3 3 2 1 Growth strategy Themes Turnaround Share gain Portfolio mix Connecting Innovating Investing Key takeaways
Slide 87: Willis Global
Steve Hearn Chairman and Chief Executive Officer, Willis Global, Deputy CEO Willis Group Holdings plc Investor Conference, New York, July 30, 2013 Willis Global
Slide 88: Key takeaways
Key takeaways Targeted investment Capitalizing on analytical broker Connection
Slide 89: Willis Global – a strong diversified business
Willis Global – a strong diversified business Willis Global presence
Slide 90: Willis Global – a strong diversified business
Willis Global – a strong diversified business $1.1 billion in revenues globally 3,600 associates 170+ countries
Slide 91: Broad complementary businesses
Capital markets Specialty insurance Treaty reinsurance 45% 53% 2% Broad complementary businesses
Slide 92: Strong performance record
2% 4% 7% 7% 6% 7% 29% 31% 32% 33% 33% 40% Organic C&F growth Operating margin Strong performance record H1 2013 H1 2013
Slide 93: Building on leadership positions
Building on leadership positions • One of the world’s largest reinsurance brokers • Ability to take share countering cyclical rate softening • Significant player in major markets, but room to grow • Complete range of transactional capabilities, including new capital intermediation • Cutting edge int
Slide 94: Targeted investment
Talent Technology M&A Targeted investment
Slide 95: Innovation through analytics
Minimize risk Innovation through analytics Example natural hazards assessment 1.00 1.25 1.50 1.75 2.00 2.25 2.50 0.00 0.25 0.50 0.75 -1.00 -0.75 -0.50 -0.25 15.00 17.50 20.00 22.50 25.00 27.50 millions Gross 1: xs $3m 2: xs $2m swing 3: xs $2m 4: xs $1.5m
Slide 96: Terrorism scenarios
Terrorism scenarios Innovation through analytics • Ad hoc Realistic Disaster Scenarios (RDS) • Created around client exposure • Transparency on assumptions
Slide 97: Analytical broker: WillPLACE
Analytical broker: WillPLACE What makes WillPLACE different? Client-centric Carrier appetite Market security Willis Quality Index Factors beyond price Trading history Peer group knowledge
Slide 98: Third-party capital in reinsurance
Lv if) VALIDUS Nephila Brows tick the ehepper capital is going to win,endthats why we ‘have founded Aspen Capial Markets, which s essentialy an ‘endeavor to turn part of our catastrophe reinsurance expertise into asset management.” “Chris O'Kane, CEO, 2013 ‘AlpnaCet 2013 and the third party investme
Slide 99: = a |
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Slide 100: Key takeaways
Key takeaways Targeted investment Capitalizing on analytical broker Connection
Slide 101: Investor Conference, New York, July 30, 2013
Investor Conference July 30, 2013 I New York Willis Group Holdings plc.
Slide 102: Appendix
Investor Conference, New York, July 30, 2013 Appendix
Slide 103: Important disclosures regarding Non-GAAP measures
Important disclosures regarding Non-GAAP measures These presentations contain references to "non-GAAP financial measures" as defined in Regulation G of SEC rules. We present these measures because we believe they are of interest to the investment community and they provide additional meaningful meth
Slide 104: Operating Income to Adjusted Operating Income
(In millions) 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY See related footnotes on page 24 Important disclosures regarding Non-GAAP measures (cont) Operating Income (loss) to Adjusted Operating Income Operating Income $620 $503 $690 $753 $566 ($209) - Excluding: - Goodwill impairment charge (a)
Slide 105: Adjusted EBITDA and Debt/Adjusted EBITDA
(In millions) 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 1H13 LTM Important disclosures regarding Non-GAAP measures (cont) Adjusted EBITDA and Debt/Adjusted EBITDA Operating Income $620 $503 $690 $753 $566 ($209) ($247) - Excluding: - Expense reduction initiative - - - - - - - Goodwill impairme
Slide 106: Non-GAAP footnotes
(a) Impairment charge to reduce carrying value of North America segment goodwill. (b) Charge to write-off unamortized balance of past cash retention awards related to change in remuneration policy (c) Accrual for 2012 bonuses paid in 2013 related to change in remuneration policy (d) Insurance recove
Slide 107: Cash flow from operating activities before pension funding
(In millions) 2007 2008 2009 2010 2011 2012 Important disclosures regarding Non-GAAP measures (cont) Cash flow from operating activities before pension funding Cash from operating activities before pension funding Funding of defined pension benefit plans (203) (154) (82) (130) (135) (143) Cash flow
Slide 108: Willis Group Commissions and Fees Growth
(In millions) 2004 2005 2006 2007 2008 2009 2010 2011 2012 Reported growth 10% 0% 7% 6% 12% 17% 3% 4% 1% Acquisitions & Disposals / other 4% 1% 1% 1% 7% 19% 0% 0% 0% Foreign Currency Movements 2% 0% 0% 2% 1% (4)% (1)% 2% (2)% Organic growth 4% (1)% 8% 3% 4% 2% 4% 2% 3% Important disclosures regardin
Slide 109: Commissions and Fees Growth by Segment
2008 2009 2010 2011 2012 H1-13 Important disclosures regarding Non-GAAP measures (cont) Commissions and Fees Growth by Segment Willis Global Reported Growth 5% 5% 7% 9% 5% 6% Acquisitions & Disposals / other 3% 4% - - - - Foreign Currency Movements - -3% - 2% -1% -1% Organic Growth 2% 4% 7% 7% 6% 7%