<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 June 30, 1999
------------------------
WILLIS CORROON 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-________.)
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<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS
JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
--------- --------- --------- ---------
OPERATING REVENUES
Commissions and fees........................................................ 168.2 156.2 361.6 339.0
Interest and investment income.............................................. 10.1 10.4 19.7 20.1
--------- --------- --------- ---------
178.3 166.6 381.3 359.1
Operating expenses.......................................................... (173.4) (152.6) (345.3) (307.7)
Operating expenses--pensions review (Note 2)................................ (15.0) (25.0) (15.0) (25.0)
--------- --------- --------- ---------
OPERATING INCOME/(LOSS)..................................................... (10.1) (11.0) 21.0 26.4
Share of profit of associates............................................... 0.7 0.6 9.3 7.2
Interest receivable......................................................... 14.6 -- 28.9 --
Interest payable............................................................ (13.5) (0.8) (27.6) (1.7)
Profit/(loss) on disposal of operations..................................... 0.5 (28.0) 0.5 (28.0)
--------- --------- --------- ---------
INCOME/(LOSS) BEFORE TAXATION............................................... (7.8) (39.2) 32.1 3.9
Taxation.................................................................... (0.1) 2.3 (11.3) (13.3)
--------- --------- --------- ---------
INCOME/(LOSS) AFTER TAXATION................................................ (7.9) (36.9) 20.8 (9.4)
Minority interests.......................................................... (0.5) (0.5) (1.2) (0.8)
--------- --------- --------- ---------
NET INCOME/(LOSS) (i)....................................................... (8.4) (37.4) 19.6 (10.2)
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME/(LOSS) PER ORDINARY SHARE (i).................................... (1.8)p (8.8)p 4.2p (2.4)p
--------- --------- --------- ---------
--------- --------- --------- ---------
Average number of ordinary shares outstanding (in millions)................. 466.2 422.3 466.2 422.3
--------- --------- --------- ---------
--------- --------- --------- ---------
</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 5 of Notes to Condensed Financial Statements.
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS
JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
--------- --------- --------- ---------
NET INCOME/(LOSS)........................................................... (8.4) (37.4) 19.6 (10.2)
Currency translation differences............................................ (9.0) 0.5 (25.0) 0.2
--------- --------- --------- ---------
TOTAL RECOGNIZED GAINS AND LOSSES (ii)...................................... (17.4) (36.9) (5.4) (10.0)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(ii) A statement of Comprehensive Income under U.S. GAAP is set forth in Note 5
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 CORROON GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998(I)
--------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term deposits........................................................... 376.9 317.1
Investments............................................................................ 322.0 281.6
Receivables............................................................................ 4,197.4 3,794.6
--------- -------------
4,896.3 4,393.3
--------- -------------
FIXED ASSETS
Intangible assets...................................................................... 21.3 19.7
Tangible assets........................................................................ 142.2 141.6
Investments............................................................................ 50.1 34.4
--------- -------------
213.6 195.7
--------- -------------
TOTAL ASSETS............................................................................. 5,109.9 4,589.0
--------- -------------
--------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables......................................................................... 3,369.1 2,860.3
Corporate tax.......................................................................... 24.1 17.7
Accruals and deferred income........................................................... 58.0 67.6
Bank loans and overdrafts.............................................................. 4.1 352.7
Other.................................................................................. 793.0 817.4
--------- -------------
4,248.3 4,115.7
--------- -------------
NONCURRENT LIABILITIES
Bank loans............................................................................. 275.7 276.4
Other.................................................................................. 350.1 5.0
--------- -------------
625.8 281.4
--------- -------------
PROVISIONS FOR LIABILITIES AND CHARGES................................................... 109.4 94.8
MINORITY INTERESTS....................................................................... 8.0 8.1
--------- -------------
TOTAL LIABILITIES AND MINORITY INTERESTS................................................. 4,991.5 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)..................................................................... (71.5) (8.0)
--------- -------------
118.4 89.0
--------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................................... 5,109.9 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 5 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 CORROON GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
<S> <C> <C>
1999 1998
--------- ---------
NET CASH INFLOW FROM OPERATING ACTIVITIES........................................................ 136.0 96.0
DIVIDENDS FROM ASSOCIATED UNDERTAKINGS........................................................... 1.3 1.3
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received.............................................................................. 19.8 --
Interest paid.................................................................................. (18.7) (1.7)
Minority dividends paid........................................................................ (1.1) --
Bank fees on borrowings........................................................................ (4.7) --
--------- ---------
(4.7) (1.7)
--------- ---------
TAXATION......................................................................................... (4.4) (6.3)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets.............................................................. (12.8) (14.9)
Sale of tangible fixed assets.................................................................. 2.8 2.2
Purchase of fixed asset investments............................................................ (0.1) --
Sale of fixed asset investments................................................................ 0.3 (1.8)
--------- ---------
(9.8) (14.5)
--------- ---------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries....................................................................... (1.3) --
Purchase of associates......................................................................... (10.1) (15.6)
Sale of subsidiaries........................................................................... 5.8 2.1
Net cash transferred on purchase/sale of subsidiaries.......................................... (0.3) 0.3
--------- ---------
(5.9) (13.2)
--------- ---------
EQUITY DIVIDENDS PAID............................................................................ (10.0) (12.3)
--------- ---------
CASH FLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND FINANCING.................................... 102.5 49.3
MANAGEMENT OF LIQUID RESOURCES................................................................... (75.7) (37.9)
FINANCING
Issue of ordinary shares....................................................................... -- 0.8
Amounts due from parent company................................................................ 15.2 --
Debt due within a year:
Decrease in short-term borrowings............................................................ (347.8) --
Debt due beyond a year:
Increase in long-term borrowings............................................................. 319.4 0.3
Capital element of finance lease rental payments............................................... -- (0.7)
--------- ---------
(13.2) 0.4
--------- ---------
INCREASE IN CASH................................................................................. 13.6 11.8
--------- ---------
--------- ---------
</TABLE>
- ------------------------
The significant differences between the consolidated statement of cash flows
presented above and that required under U.S. GAAP are described in Note 5 of
Notes to Condensed Financial Statements
The Notes to Condensed Financial Statements are an integral part
of these Condensed Consolidated Financial Statements
4
<PAGE>
WILLIS CORROON 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 six months ended June
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 response rate to the pensions
review mailings and the interest rates and other financial assumptions
prescribed by the U.K. regulator, which are issued on a quarterly basis. The
U.K. regulator also issued revised demographic assumptions on July 30, 1999 and
announced on August 3, 1999 the target date of June 30, 2002 for completion of
the phase 2 review. The financial effect of both these announcements has yet to
be fully evaluated.
5
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED) (CONTINUED)
NOTE 3--RECONCILIATION OF OPERATING INCOME TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------
<S> <C> <C>
1999 1998
--------- ---------
OPERATING INCOME.............................................................................. 21.0 26.4
Increase in pension review provision.......................................................... 15.0 25.0
Depreciation and amortization................................................................. 13.6 11.6
Increase in receivables....................................................................... (360.3) (189.4)
Increase in payables.......................................................................... 449.3 225.6
Net movement on provisions.................................................................... (2.6) (3.2)
--------- ---------
NET CASH INFLOW FROM OPERATING ACTIVITIES..................................................... 136.0 96.0
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------
<S> <C> <C>
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 1999 1998
--------- ---------
Opening net funds............................................................................. 486.5 581.8
Net cash flow................................................................................. 13.6 11.8
Management of liquid resources................................................................ 75.7 37.9
Financing..................................................................................... 106.1 0.4
Currency exchange movements................................................................... (13.6) (6.1)
--------- ---------
NET FUNDS AT JUNE 30.......................................................................... 668.3 625.8
--------- ---------
--------- ---------
</TABLE>
NOTE 4--RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
--------- --------- --------- ---------
Net income/(loss)......................................................... (8.4) (37.4) 19.6 (10.2)
Dividends paid............................................................ (61.1) (7.4) (61.1) (14.8)
New ordinary shares issued................................................ -- 2.3 92.9 2.9
Goodwill on acquisitions eliminated....................................... -- -- -- (2.9)
Goodwill written back on disposals........................................ 3.0 30.2 3.0 30.4
Exchange adjustments...................................................... (9.0) 0.5 (25.0) 0.2
--------- --------- --------- ---------
Net (decrease)/increase in shareholders' equity........................... (75.5) (11.8) 29.4 5.6
Shareholders' equity at beginning of period............................... 193.9 142.0 89.0 124.6
--------- --------- --------- ---------
Shareholders' equity at end of period..................................... 118.4 130.2 118.4 130.2
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
6
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED) (CONTINUED)
NOTE 5-- 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 Acquisition plc ("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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
NET INCOME 1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET INCOME/(LOSS) AS REPORTED IN THE CONSOLIDATED STATEMENT
OF INCOME.................................................. (8.4) (37.4) 19.6 (10.2)
ADJUSTMENTS
Operating expenses--pensions review.......................... 15.0 -- 15.0 --
Amortization of goodwill..................................... (2.1) 5.3 (7.1) 0.6
Revaluation of forward exchange contracts and other financial
instruments................................................ (1.2) (0.9) (2.0) (1.2)
Pension costs................................................ (14.5) (2.9) (14.8) (8.0)
Deferred taxes--effect of above adjustments.................. 5.8 1.1 6.1 2.8
--------- --------- --------- ---------
NET INCOME/(LOSS) AS ADJUSTED TO ACCORD WITH U.S. GAAP....... (5.4) (34.8) 16.8 (16.0)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
COMPREHENSIVE INCOME 1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET INCOME/(LOSS) AS ADJUSTED TO ACCORD WITH U.S. GAAP....... (5.4) (34.8) 16.8 (16.0)
Other comprehensive income:
Foreign currency translation adjustments................... 6.1 (1.0) 10.5 (1.3)
Unrealized holding losses.................................. (1.3) (0.1) (1.3) (0.1)
--------- --------- --------- ---------
COMPREHENSIVE INCOME/(LOSS).................................. (0.6) (35.9) 26.0 (17.4)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
7
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED) (CONTINUED)
NOTE 5-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED KINGDOM AND THE UNITED STATES (CONTINUED)
The categories of cashflow activity under U.S. GAAP can be summarized as
follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
SHAREHOLDERS' EQUITY 1999 1998
----------- -------------
<S> <C> <C>
Shareholders' equity as reported in the consolidated balance sheet.... 118.4 89.0
ADJUSTMENTS
Intangible assets:
Goodwill--cost...................................................... 884.9 800.6
--amortization............................................... (44.7) (6.9)
Current assets:
Investments......................................................... (0.5) 0.8
Receivables--forward exchange contracts............................. 0.7 2.7
--pension costs prepayment................................ (32.3) (16.3)
Provisions for liabilities and charges:
Deferred taxes--effect of above adjustments......................... 12.1 5.5
----- -----
SHAREHOLDERS' EQUITY AS ADJUSTED TO ACCORD WITH U.S. GAAP............. 938.6 875.4
----- -----
----- -----
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS 1999 1998
----------- -------------
<S> <C> <C>
Cash inflow from operating activities................................. 121.5 89.3
Cash inflow/(outflow) of investing activities......................... 13.3 (27.8)
Cash (outflow) of financing activities................................ (19.4) (11.5)
----- -----
Increase in cash and cash equivalents................................. 115.4 50.0
Effect of foreign exchange rate changes............................... 11.1 (5.5)
Cash and cash equivalents at beginning of period...................... 499.9 448.6
----- -----
Cash and cash equivalents at end of the period........................ 626.4 493.1
----- -----
----- -----
</TABLE>
NOTE 6--WILLIS CORROON CORPORATION AND WILLIS CORROON PARTNERS
Willis Corroon Corporation is a wholly-owned subsidiary of Willis Corroon
Partners, of which Willis Corroon Group Limited is the 99.9% general partner and
Willis Group Limited, a wholly-owned subsidiary of Willis Corroon Group Limited,
is the 0.1% general partner. Willis Corroon Group Limited and Willis Corroon
Partners have jointly and severally, fully and unconditionally, guaranteed the
$550 million 9% Senior Subordinated Notes due 2009 ("the Notes"), issued by
Willis Corroon Corporation.
8
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS OF POUNDS STERLING)
(UNAUDITED) (CONTINUED)
NOTE 6--WILLIS CORROON CORPORATION AND WILLIS CORROON PARTNERS (CONTINUED)
Willis Corroon Corporation prepares its financial information in accordance
with U.K. GAAP. Summarized financial information under U.K. GAAP relating to
Willis Corroon Corporation is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS
JUNE 30, ENDED JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
--------- --------- --------- ---------
Total operating revenues...................................................... 85.2 77.4 173.3 158.4
Operating income/(loss)....................................................... (1.5) 4.6 4.6 9.1
Net income.................................................................... 0.9 0.8 2.0 1.7
--- --- --------- ---------
--- --- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------- -------------
<S> <C> <C>
Current assets.......................................................................... 1,911.4 1,806.5
Fixed assets............................................................................ 67.5 59.9
--------- -------------
1,978.9 1,866.4
--------- -------------
--------- -------------
Current liabilities..................................................................... 1,855.5 1,756.5
Noncurrent liabilities.................................................................. 41.8 35.8
Shareholders' equity.................................................................... 81.6 74.1
--------- -------------
1,978.9 1,866.4
--------- -------------
--------- -------------
</TABLE>
Willis Corroon Group has not presented separate financial statements for
Willis Corroon Corporation because management has determined that such
information is not material to holders of the Notes.
Willis Corroon Partners, formed on November 11, 1998, has no assets other
than the capital stock of Willis Corroon Corporation and conducts no business
other than the holding of such capital stock.
Willis Corroon Group has not presented separate financial statements or
summarized financial information for Willis Corroon Partners because management
has determined that such information is not material to holders of the Notes.
9
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATING RESULTS
The insurance marketplace is still competitive. There are signs of premium
rates firming in certain parts of the world but there is still a lot of capacity
in the U.S. markets.
Commissions and fees increased by 7.7% in the second quarter of 1999 to
L168.2 million and by 6.7% to L361.6 million for the first six months when
compared with the corresponding periods of 1998. These increases were primarily
attributable to the acquisition of Gruppo Ital Brokers in Italy and the
increased investment in our Spanish operation, both of which occurred in the
third quarter of 1998. The impact of foreign currency exchange rates on
commissions and fees was a favorable L3.0 million for the second quarter and a
favorable L3.7 million for the first six months of 1999 when compared with the
corresponding periods of 1998.
Interest and investment income arising from fiduciary funds in the second
quarter and first six 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 7.0% in the second quarter of 1999 to
L178.3 million and by 6.2% in the first six months to L381.3 million compared to
the respective periods last year. The increases were attributable to the
increase in commissions and fees.
OPERATING EXPENSES
Total operating expenses increased by 6.1% to L188.4 million in the second
quarter of 1999 and by 8.3% to L360.3 million in the first six months when
compared to the corresponding periods in 1998. 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 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.
After adjusting operating expenses for the Italian and Spanish investments
as if those investments had occurred on January 1, 1998 and excluding the
increase in the pensions review provision and non-recurring fees written off in
connection with the refinancing of the Group's debt, operating expenses were
6.9% higher than in the second quarter of 1998 and 4.7% higher than in the first
six months of 1998. The increase is partly due to the acceleration of costs in
connection with the change program. The impact of foreign currency exchange
rates was an unfavorable L3.0 million.
ASSOCIATES
The Group's share of income before taxation from associates increased by
16.7% to L0.7 million in the second quarter of 1999 and by 29.2% to L9.3 in the
first six months of 1999 when compared to the corresponding periods in 1998. The
increases were mainly because of the increased investment in Jaspers Wuppesahl
at the beginning of 1999 and the profits of Assurandorgruppen, an investment
made in September 1998.
10
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
INCOME BEFORE TAXATION
The loss before tax was L7.8 million for the second quarter of 1999 and
income before tax for the first six months of 1999 was L32.1 million compared
with a loss before tax of L39.2 million for the second quarter of 1998 and
income before tax of L3.9 million for the first six 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 quarters of both 1999 and
1998 and the closure of PLUM in 1998, income before taxation was L8.1 million
for the second quarter and L51.2 million for the first six months of 1999
compared with L13.8 million and L56.9 million for the respective periods in
1998.
TAXATION
The tax charge for the six months was L11.3 million compared with L13.3
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 in
made in 1998 and tax efficiencies.
LIQUIDITY AND CAPITAL RESOURCES
The Group's cash and liquid resources, net of loans and overdrafts,
increased to L668.3 million at June 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 June 30, 1999.
Capital expenditure, primarily on computer systems, was L12.8 million in the
first six months of 1999 compared with L14.9 million in the first six months of
1998.
ACQUISITIONS AND DISPOSALS
In the second quarter of 1999 the Group disposed of its interest in KSA, an
underwriting agency based in the Netherlands realizing a profit on disposal of
L0.5 million. During the first six months the Group increased its holding in
Jaspers Wuppesahl Industrie Assekuranz GmbH & Co. KG. by 14.6% to 44.6%.
DIFFERENCES BETWEEN U.K. GAAP AND U.S. GAAP
Net income under U.K. GAAP for the six months and second quarter ended June
30, 1999 of L19.6 million and a net loss of L8.4 million, respectively, compares
with net income under U.S. GAAP of L16.8 million and a net loss of L5.4 million,
respectively. The principal differences relate to 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
11
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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 5 of Notes to the Condensed Financial Statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in either the second quarter or the
first six 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 are nearing
completion of a plan 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. The Company does not expect to exceed the L4.2 million budget for
expenditures related to its year 2000 compliance program.
The Company is developing business continuity plans aimed at minimizing the
impact of unforeseen problems during the year-end transition period (December
31, 1999 to January 2, 2000). All business critical applications are being
tested for compliance in a simulated year 2000 environment. The Company is
continuing to monitor suppliers regarding product viability. Discussions on year
2000 readiness are underway with its strategic insurers. The Company has
received inquiries from its clients regarding its year 2000 efforts and it is
likely that its clients will require the Company to confirm that it is year 2000
compliant substantially in advance of December, 31 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 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.
The Company's planning for year 2000 compliance also covers contingency
planning to handle the most reasonably likely worst-case scenario. Its
contingency plans 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 will be a monitoring review during
October 1999.
12
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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.
August 13, 1999
13
<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 CORROON GROUP LIMITED
By: /s/ THOMAS COLRAINE
-----------------------------------------
Name: Thomas Colraine
Title: Group Finance Director
</TABLE>
Date: August 13, 1999
