<PAGE>
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the Quarter ended September 30, 1999
------------------------
WILLIS GROUP LIMITED
(Translation of registrant's name into English)
Ten Trinity Square, London EC3P 3AX
(Address of principal executive offices)
------------------------
(Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F _X_ Form 40-F __
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes __ No _X_
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-__________.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues
Commissions and fees........................................ 163.4 149.8 525.0 488.8
Interest and investment income.............................. 9.6 10.3 29.3 30.4
------ ------ ------ ------
173.0 160.1 554.3 519.2
Operating expenses.......................................... (178.7) (167.6) (524.0) (475.3)
Operating expenses--pensions review (Note 2)................ -- -- (15.0) (25.0)
------ ------ ------ ------
Operating income / (loss)................................... (5.7) (7.5) 15.3 18.9
Share of profit of associates............................... 0.9 0.4 10.2 7.6
Interest receivable (Note 3)................................ 14.3 -- 43.2 --
Interest payable............................................ (13.7) (0.8) (41.3) (2.5)
Profit/(loss) on disposal of operations..................... 0.5 -- 1.0 (28.0)
------ ------ ------ ------
Income / (loss) before taxation............................. (3.7) (7.9) 28.4 (4.0)
Taxation.................................................... 1.2 (0.5) (10.1) (13.8)
------ ------ ------ ------
Income / (loss) after taxation.............................. (2.5) (8.4) 18.3 (17.8)
Minority interests.......................................... 0.5 (0.2) (0.7) (1.0)
------ ------ ------ ------
Net income / (loss) (i)..................................... (2.0) (8.6) 17.6 (18.8)
------ ------ ------ ------
Net income / (loss) per Ordinary Share (i).................. (0.4)p (2.0)p 3.7p (4.4)p
====== ====== ====== ======
Average number of ordinary shares outstanding (in
millions)................................................. 469.1 423.1 469.1 423.1
====== ====== ====== ======
</TABLE>
- ------------------------------
(i) A summary of the significant adjustments to net income that would be
required if United States generally accepted accounting principles were to
be applied instead of those generally accepted in the United Kingdom is set
forth in Note 6 of Notes to Condensed Financial Statements.
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income/(loss)........................................... (2.0) (8.6) 17.6 (18.8)
Currency translation differences............................ 26.4 (2.8) 1.4 (2.6)
------ ------ ------ ------
Total recognized gains and losses (ii)...................... 24.4 (11.4) 19.0 (21.4)
====== ====== ====== ======
</TABLE>
- ------------------------------
(ii) A statement of Comprehensive Income under U.S. GAAP is set forth in Note 6
of Notes to Condensed Financial Statements.
The Notes to Condensed Financial Statements are an integral part of these
Condensed Consolidated Financial Statements.
1
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998(I)
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and short-term deposits.............................. 274.0 317.1
Investments............................................... 386.8 281.6
Receivables............................................... 3,969.9 3,794.6
------- -------
4,630.7 4,393.3
------- -------
Fixed assets
Intangible assets......................................... 23.0 19.7
Tangible assets........................................... 138.5 141.6
Investments............................................... 48.1 34.4
------- -------
209.6 195.7
------- -------
Total assets................................................ 4,840.3 4,589.0
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade payables............................................ 3,162.5 2,860.3
Corporate tax............................................. 20.2 17.7
Accruals and deferred income.............................. 54.8 67.6
Bank loans and overdrafts................................. 9.6 352.7
Other..................................................... 732.6 817.4
------- -------
3,979.7 4,115.7
------- -------
Noncurrent liabilities
Bank loans................................................ 265.2 276.4
9% Senior subordinated notes due 2009..................... 328.2 --
Other..................................................... 6.9 5.0
------- -------
600.3 281.4
------- -------
Provisions for liabilities and charges...................... 106.8 94.8
Minority interests.......................................... 9.0 8.1
------- -------
Total liabilities and minority interests.................... 4,695.8 4,500.0
Shareholders' equity (ii)
Share capital............................................. 59.4 53.6
Share premium............................................. 115.6 28.5
Revaluation reserve....................................... 14.9 14.9
Retained (deficit)........................................ (45.4) (8.0)
------- -------
144.5 89.0
------- -------
Total liabilities and shareholders' equity.................. 4,840.3 4,589.0
======= =======
</TABLE>
- ------------------------
(i) The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
(ii) A summary of the significant adjustments to shareholders' equity that would
be required if United States generally accepted accounting principles were
to be applied instead of those generally accepted in the United Kingdom is
set forth in Note 6 of Notes to Condensed Financial Statements.
The Notes to Condensed Financial Statements are an integral part of these
Condensed Consolidated Financial Statements.
2
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Net cash inflow from operating activities................... 116.3 60.2
Dividends from associated undertakings...................... 2.2 2.1
Returns on investments and servicing of finance
Interest received......................................... 42.4 --
Interest paid............................................. (39.9) (2.5)
Minority dividends paid................................... (1.1) --
Bank fees on borrowings................................... (4.7) --
------ -----
(3.3) (2.5)
------ -----
Taxation.................................................... (5.7) (13.6)
Capital expenditure and financial investment
Purchase of tangible fixed assets......................... (20.4) (21.7)
Sale of tangible fixed assets............................. 5.5 2.6
Purchase of fixed asset investments....................... (0.5) (1.9)
Sale of fixed asset investments........................... 0.8 --
------ -----
(14.6) (21.0)
------ -----
Acquisitions and disposals
Purchase of subsidiaries.................................. (5.2) (1.6)
Purchase of associates.................................... (10.3) (19.9)
Sale of subsidiaries...................................... 8.5 5.3
Net cash transferred on purchase/sale of subsidiaries..... (0.3) (4.1)
------ -----
(7.3) (20.3)
------ -----
Equity dividends paid....................................... (10.0) (19.8)
------ -----
Cash flow before management of liquid resources and
financing................................................. 77.6 (14.9)
Management of liquid resources.............................. (62.3) (13.8)
Financing
Issue of ordinary shares.................................. -- 0.7
Amounts due from parent company........................... 15.2 --
Debt due within a year: Decrease in short-term
borrowings.............................................. (348.5) --
Debt due beyond a year: Increase in long-term
borrowings.............................................. 319.4 29.0
Capital element of finance lease rental payments.......... -- (0.7)
------ -----
(13.9) 29.0
------ -----
Increase in cash............................................ 1.4 0.3
====== =====
</TABLE>
The significant differences between the consolidated statement of cash flows
presented above and that required under U.S. GAAP are described in Note 6 of
Notes to Condensed Financial Statements
The Notes to Condensed Financial Statements are an integral part of these
Condensed Consolidated Financial Statements.
3
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
NOTE 1--BASIS OF PREPARATION
These condensed consolidated financial statements, which are unaudited, have
been prepared in accordance with U.K. GAAP and the accounting policies described
in the Company's audited consolidated financial statements for the year ended
December 31, 1998. In the opinion of the Company's management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
NOTE 2--OPERATING EXPENSES--PENSIONS REVIEW
As required by its U.K. regulator, the Group is undertaking a review of
personal pension plans sold between 1988 and 1994 to determine whether redress
should be made to customers. A further provision of L15.0 million was made in
the second quarter 1999 (in addition to the L25 million provided in the second
quarter 1998) to reflect the expected higher cost of redress as a consequence of
lower U.K. interest rates.
The ultimate exposure, as presently calculated, is subject to a number of
variable factors including among others, the number of cases to be offered
redress and the amount of redress which is affected by interest rates and other
financial assumptions prescribed by the U.K. regulator, which are issued on a
quarterly basis.
NOTE 3--INTEREST RECEIVABLE
Interest receivable for the three months and the nine months ended
September 30, 1999 included interest of L14.0 million and L42.5 million,
respectively, receivable from the Company's parent company, Trinity Acquisition
plc ("Trinity").
4
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
NOTE 4--RECONCILIATION OF OPERATING INCOME TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Operating income............................................ 15.3 18.9
Addition to pensions review provision....................... 15.0 25.0
Depreciation and amortization............................... 21.5 17.7
Goodwill on disposal of business............................ 1.3 --
Increase in receivables..................................... (203.6) (75.1)
Increase in payables........................................ 271.1 89.7
Net movement on provisions.................................. (4.3) (16.0)
------ ------
Net cash inflow from operating activities................... 116.3 60.2
====== ======
</TABLE>
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Net funds at beginning of period............................ 486.5 581.8
Net cash flow............................................... 1.4 0.3
Management of liquid resources.............................. 62.3 13.8
Financing................................................... 106.8 (29.0)
Currency exchange movements................................. (5.1) (12.2)
----- -----
Net funds at end of period.................................. 651.9 554.7
===== =====
</TABLE>
NOTE 5--RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Net income/(loss)........................................... 17.6 (18.8)
Dividends paid.............................................. (61.1) (22.2)
New ordinary shares issued.................................. 92.9 3.7
Goodwill eliminated on acquisitions......................... -- (1.7)
Goodwill on disposals written back.......................... 4.7 30.4
Exchange adjustments........................................ 1.4 (2.6)
----- -----
Net increase / (decrease) in shareholders' equity........... 55.5 (11.2)
Shareholders' equity at beginning of period................. 89.0 124.6
----- -----
Shareholders' equity at end of period....................... 144.5 113.4
===== =====
</TABLE>
5
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
NOTE 6--DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED KINGDOM AND THE UNITED STATES
The unaudited condensed consolidated financial statements are prepared in
accordance with U.K. GAAP which differ in certain respects from U.S. GAAP.
Summaries of the significant differences as they apply to the Company are set
forth in Note 31 of Notes to the Company's Consolidated Financial Statements for
the year ended December 31, 1998, except for pensions review costs. Following
the acquisition of the Company by Trinity, the additional liability for pensions
review costs has been accounted for, under U.S. GAAP, as a fair value adjustment
in the financial statements of Trinity resulting in additional goodwill which
has been pushed down to the Company.
The effect on net income, comprehensive income and shareholders' equity of
applying the significant differences between U.K. GAAP and U.S. GAAP described
above is summarized as follows:
NET INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income/(loss) as reported in the consolidated
statement of income.................................. (2.0) (8.6) 17.6 (18.8)
ADJUSTMENTS
Operating expenses--pensions review.................... -- -- 15.0 --
Goodwill............................................... (3.4) (4.3) (10.5) (3.7)
Revaluation of forward exchange contracts.............. 2.3 1.5 0.3 0.3
Pension costs.......................................... (1.4) 5.8 (16.2) (2.2)
Deferred taxes--effect of above adjustments............ (0.1) (2.2) 6.0 0.6
----- ----- ----- -----
Net income/(loss) as adjusted to accord with U.S.
GAAP................................................. (4.6) (7.8) 12.2 (23.8)
===== ===== ===== =====
</TABLE>
COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income/(loss) as adjusted to accord with U.S.
GAAP................................................. (4.6) (7.8) 12.2 (23.8)
Other comprehensive income:
Foreign currency translation adjustments............. (9.6) (8.4) 0.9 (9.7)
Unrealized holding losses............................ (0.2) 0.1 (1.5) --
----- ----- ----- -----
Comprehensive income/(loss)............................ (14.4) (16.1) 11.6 (33.5)
===== ===== ===== =====
</TABLE>
6
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
NOTE 6--DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED KINGDOM AND THE UNITED STATES (CONTINUED)
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Shareholders' equity as reported in the consolidated balance
sheet..................................................... 144.5 89.0
ADJUSTMENTS
Intangible assets:
Goodwill--cost............................................ 821.4 800.6
--amortization..................................... (22.8) (6.9)
Current assets:
Investments............................................... (0.7) 0.8
Receivables--forward exchange contracts................... 3.0 2.7
--pension costs prepayment...................... (32.8) (16.3)
Provisions for liabilities and charges:
Deferred taxes--effect of above adjustments............... 11.7 5.5
----- -----
Shareholders' equity as adjusted to accord with U.S. GAAP... 924.3 875.4
===== =====
</TABLE>
The categories of cashflow activity under U.S. GAAP can be summarized as
follows:
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash inflow from operating activities....................... 110.6 46.2
Cash inflow of investing activities......................... 18.8 22.5
Cash inflow/(outflow) of financing activities............... (21.7) 17.0
----- -----
Increase in cash and cash equivalents....................... 107.7 85.7
Effect of foreign exchange rate changes..................... (5.2) (6.8)
Cash and cash equivalents at beginning of period............ 499.9 448.6
----- -----
Cash and cash equivalents at end of the period.............. 602.4 527.5
===== =====
</TABLE>
7
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
NOTE 7--WILLIS NORTH AMERICA INC. AND WILLIS PARTNERS
Willis North America Inc. is a wholly-owned subsidiary of Willis Partners,
of which Willis Group Limited is the 99.9% general partner and Willis Faber UK
Group Limited, a wholly-owned subsidiary of Willis Group Limited, is the 0.1%
general partner. Willis Group Limited and Willis Partners have jointly and
severally, fully and unconditionally, guaranteed the $550 million 9% Senior
Subordinated Notes ("the Notes"), issued by Willis North America Inc.
Willis North America Inc. prepares its financial information in accordance
with U.K. GAAP. Willis Group has not presented separate financial statements for
Willis North America Inc. because management has determined that such
information is not material to holders of the Notes. Summarized financial
information under U.K. GAAP relating to Willis North America Inc. is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total operating revenues................ 92.2 88.6 265.5 247.0
Operating income........................ 9.8 9.7 14.4 18.8
Net income.............................. 7.6 4.4 9.6 6.1
==== ==== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Current assets.............................................. 1,804.8 1,806.5
Fixed assets................................................ 65.9 59.9
------- -------
1,870.7 1,866.4
------- -------
Current liabilities......................................... 1,740.6 1,756.5
Noncurrent liabilities...................................... 42.8 35.8
Shareholders' equity........................................ 87.3 74.1
------- -------
1,870.7 1,866.4
======= =======
</TABLE>
Willis Partners, formed on November 11, 1998, has no assets other than the
capital stock of Willis North America Inc. and conducts no business other than
the holding of such capital stock. Willis Group has not presented separate
financial statements or summarized financial information for Willis Partners
because management has determined that such information is not material to
holders of the Notes.
8
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING REVENUES
Commissions and fees increased by 9.1% in the third quarter of 1999 to
L163.4 million and by 7.4% to L525.0 million for the first nine months when
compared with the corresponding periods of 1998. These increases were partly
attributable to the acquisition of Gruppo Ital Brokers in Italy and the
increased investment in the Group's Spanish operations, both of which occurred
in the third quarter of 1998. Movements in foreign currency exchange rates had a
favorable impact on commissions and fees of L0.4 million in the third quarter
and L4.1 million for the first nine months of 1999 when compared with the
corresponding periods of 1998.
Interest and investment income arising from fiduciary funds in the third
quarter and first nine months decreased marginally as a result of lower
prevailing interest rates in both the U.K. and the U.S. when compared to the
corresponding periods in 1998.
Total operating revenues increased by 8.1% in the third quarter of 1999 to
L173.0 million and by 6.8% in the first nine months to L554.3 million compared
to the respective periods last year. Adjusting for acquisitions and disposals,
principally Gruppo Ital Brokers and the Spanish operations as if they had
occurred on January 1, 1998, and adjusting for exchange rate movements, total
operating revenues for the third quarter were 5.5% ahead of the corresponding
period last year and 2.3% ahead for the nine months.
OPERATING EXPENSES
Total operating expenses increased by 6.6% to L178.7 million in the third
quarter of 1999 and by 7.7% to L539.0 million in the first nine months when
compared to the corresponding periods in 1998. The impact of foreign currency
exchange rate movements was L3.2 million adverse for the quarter and
L6.2 million adverse for the nine months.
As previously reported, a further provision of L15.0 million was made in the
second quarter 1999 relating to the costs of redress and administration of the
review of personal pension plans sold between 1988 and 1994. This was in
addition to the L25.0 million provided in the second quarter 1998 and reflects
expected higher cost of redress as a consequence of falling U.K. interest rates.
There is still considerable uncertainty as to the ultimate exposure as this is
subject to a number of variable factors, including among others, the effect of
future changes in financial and other assumptions as prescribed by the U.K.
regulator.
Adjusting operating expenses for acquisitions and disposals as if those
transactions had occurred on January 1, 1998 and excluding the increases in the
pensions review provision and non-recurring fees written off in connection with
the refinancing of the Group's debt, total operating expenses were 7.8% higher
than in the third quarter of 1998 and 6.5% higher than in the first nine months
of 1998. The increase was partly due to higher severance and consultancy costs,
together with other costs incurred in connection with the acceleration of the
change program.
ASSOCIATES
The Group's share of income before taxation from associates increased by
L0.4 million to L0.9 million in the third quarter and by L2.6 million to
L10.2 million in the first nine months when compared to the corresponding
periods in 1998. The increase was principally attributable to an
9
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
improved performance by our French associate, Gras Savoye, and the increased
investment in Jaspers Wuppesahl at the beginning of 1999 and the investment in
Assurandorgruppen in September 1998.
INCOME BEFORE TAXATION
The loss before taxation for the third quarter of 1999 was L3.7 million
compared with a loss before tax of L7.9 million for the third quarter of 1998.
For the first nine months of 1999 income before tax was L28.4 million compared
with a loss before tax of L4.0 million for the first nine months of 1998. After
adjusting for the non-recurring refinancing fees referred to above, the increase
in the pensions review provision arising in the second quarter of both 1999 and
1998 and the closure of PLUM in 1998, loss before taxation for the third quarter
was L3.6 million and income before tax was L47.8 million for the first nine
months compared with income before tax of L1.4 million and L60.6 million for the
respective periods in 1998.
TAXATION
The tax charge for the nine months was L10.1 million compared with
L13.8 million for the corresponding period in 1998. The forecast tax rate on the
underlying profits of the business for the whole year is expected to be
approximately 24% compared to 37% last year. The reduction in the overall rate
is a result of relief for expenditure incurred in 1999 against provisions made
in 1998 and tax efficiencies.
LIQUIDITY AND CAPITAL RESOURCES
The Group's cash and liquid resources, net of loans and overdrafts,
increased to L651.9 million at September 30, 1999 from L486.5 million at
December 31, 1998. On February 2, 1999, the loan of $575 million drawn under the
Subordinated Bridge Facility was refinanced by the issue of $550 million of 9%
Senior Subordinated Notes due 2009.
On February 3, 1999, an interest-free convertible loan of L92.9 million from
the Company's parent company was converted into 46,464,949 ordinary shares of
the Company.
In addition to the Senior Subordinated Notes the company has loan facilities
of $587.5 million of which $150.0 million was unused at September 30, 1999.
Capital expenditure, primarily on computer systems, was L20.4 million in the
first nine months of 1999 compared with L21.7 million in the first nine months
of 1998.
ACQUISITIONS AND DISPOSALS
The Group disposed of its interest in KSA, an underwriting agency based in
the Netherlands in the second quarter of 1999 realizing a profit on disposal of
L0.5 million. The Group increased its holding in Jaspers Wuppesahl Industrie
Assekuranz GmbH & Co. KG. by 14.6% to 44.6% at the beginning of 1999.
DIFFERENCES BETWEEN U.K. GAAP AND U.S. GAAP
Net income under U.K. GAAP for the nine months and third quarter ended
September 30, 1999 of L17.6 million and a net loss of L2.0 million,
respectively, compares with net income under U.S. GAAP of L12.2 million and a
net loss of L4.6 million, respectively. The principal differences relate to
10
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
the additional pensions review provision of L15.0 million which was charged to
income under U.K. GAAP but which, following the acquisition of the Company by
Trinity Acquisition plc ("Trinity"), has been accounted for under U.S. GAAP as a
fair value adjustment in the financial statements of Trinity and the additional
goodwill pushed down to the Company. An increase in pension liabilities of
L12.1 million in connection with an early retirement window offered to certain
U.S. employees which under U.S. GAAP is charged to income but under U.K. GAAP is
set against the pension plan surplus. Details of the reconciling differences are
given in Note 6 of Notes to the Condensed Financial Statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in either the third quarter or the first
nine months of 1999.
YEAR 2000
The "year 2000 problem" relates to computer systems that are designed using
two digits, rather than four, to represent a given year. Therefore, such systems
may recognize "00" as the year 1900 rather than 2000, possibly resulting in
major systems failures or miscalculations and causing disruptions to the
Company's operations. Also, the Company's operation could be disrupted by reason
of any failure by its clients, insurance carriers or other third parties with
whom it conducts business to achieve their own year 2000 compliance in a timely
fashion.
The Company has conducted a review of its computer systems to identify the
systems that could be affected by the year 2000 problem and is nearing
completion of the work required to be year 2000 compliant prior to December 31,
1999. As part of the program, the Company retained outside consultants, who,
working with its information technology staff, have tested computer systems and
identified problem areas. It is believed that all business critical applications
have been made compliant and tested for compliance in a simulated year 2000
environment. The Company does not expect to exceed the L4.2 million budget for
expenditures related to its year 2000 compliance program.
The Company is continuing to monitor suppliers regarding product viability.
Discussions on year 2000 readiness have been held with its strategic insurers.
The Company has received inquiries from its clients regarding its year 2000
efforts and has been able to advise its state of readiness in line with the
planned program milestones. This information is available on the Company's web
site--WILLIS.COM.
The Company's planning for year 2000 compliance also covers contingency
planning to handle the most reasonably likely worst-case scenario. These plans
aim to minimize the impact of unforeseen problems during the year-end transition
period (December 24, 1999 to January 5, 2000) and cover the potential risks to
its information technology infrastructure, fuel supplies for uninterrupted power
supply generators, building control systems, desk top systems, business critical
systems and interfaces with banks and the London insurance market. Compliance
testing of the Company's contingency plans for interfaces with the London
insurance market is required by the Company's regulator and testing was
successfully completed by the target date of June 30, 1999. There was a
monitoring review during October 1999.
The Company is dependent on a variety of third parties with which it has
business relationships, including electrical power, telephone, water, and other
necessary utilities. It is not aware currently of any material non-compliance by
these parties that will materially affect its business operations; however the
Company does not control these systems and cannot assure that they will be
converted in a timely
11
<PAGE>
WILLIS GROUP LIMITED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
fashion. While the Company believes that it is taking appropriate steps to
achieve its year 2000 compliance in a timely fashion, there can be no assurance
that its computers, or those of third parties with whom it conducts business,
will be year 2000 compliant prior to December 31, 1999, or that the costs
incurred will not materially exceed amounts budgeted.
FORWARD LOOKING INFORMATION
Forward-looking statements in this quarterly report are made pursuant to the
safe-harbor provisions of the Securities Litigation Reform Act of 1995 including
Section 21E(c) of the Securities Exchange Act of 1934. Such statements should be
taken as the informed perspective of senior management of the Company on
possible future performance. Actual results could differ materially from
management's expectations because of many reasons, including continued
deterioration of the rating environment in the insurance markets; loss of major
accounts; regulatory and competitive conditions; unexpected liabilities; further
consolidation among insurance markets or major insurance brokers; or fluctuation
of exchange rates and interest rates.
November 12, 1999
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C> <C>
WILLIS GROUP LIMITED
By: /S/ THOMAS COLRAINE
-----------------------------------------
Name: Thomas Colraine
Title: GROUP FINANCE DIRECTOR
</TABLE>
Date: November 12, 1999
