Willis Group Holdings Plc Q2 2013 Earnings Conference Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Thomas Mitchell - Miller Tabak - Analyst : I had one question about the North American business in that, of course the comparison of 2012 to 2011 was down 3% for commissions and fees, so that 2013 is really up about a little over 2% from second quarter of 2011. I'm wondering if the underlying trends that you describe -- obviously they are positive versus 2012, but on a continuing basis, is there something underneath that is keeping that business from returning to a more robust level? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Thomas Mitchell - Miller Tabak - Analyst : Okay. And then, on the -- is the process of delays and questions in the Affordable Healthcare Act affecting your business one way or the other?

Question: Thomas Mitchell - Miller Tabak - Analyst : That's great.

Question: Mark Hughes - SunTrust Robinson Humphrey - Analyst : Just to follow-up on that question. How much of the growth do you think is related to the, let's say, uncertainty caused by the healthcare reform in general? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Mark Hughes - SunTrust Robinson Humphrey - Analyst : Could you give a little more granularity on rates in the P&C space, specifically in North America? How you saw 2Q as compared to Q1, and then how they might be trending just very recently?

Question: Dan Farrell - Sterne, Agee & Leach, Inc. - Analyst : Just a couple of questions. Firstly, you had a very strong result, I think, in the reinsurance brokerage, particularly given some of the comments we are hearing on market conditions. I was wondering if you could talk about, or expand a little more, on what is driving the strong organic? And then also how you think about sustainability there as we go forward?

Question: Dan Farrell - Sterne, Agee & Leach, Inc. - Analyst : Thanks, that's helpful detail. And then just one other question. You did have margin growth, if you make all the adjustments in this quarter and last quarter. But with the strong organic, I would have thought that the margin could have been even better. Is there still some other stuff that is holding back the operating leverage? And how do you think about margin trending going forward?

Question: Dan Farrell - Sterne, Agee & Leach, Inc. - Analyst : Okay. Those are all helpful answers.

Question: Brian Meredith - UBS - Analyst : A couple of questions. The first one, I'm sorry if I missed this. If Todd, you said this. But on the human capital business growth,

Question: Brian Meredith - UBS - Analyst : Okay. When are we going to start seeing the real impact of that? Because I know that was one of the changes that went on in that business.

Question: Brian Meredith - UBS - Analyst : Right. And then back on the reinsurance book. I'm just curious, was any of the growth bolstered by Willis Capital Markets?

Question: Brian Meredith - UBS - Analyst : And how did that do during the quarter?

Question: Brian Meredith - UBS - Analyst : Got you. And then just lastly, on the reinsurance business, you all have been having a lot of success with new business and stuff. I am wondering if you could talk a little bit about why do you think you are winning this new business? Is it coming from competitors? Is it new programs and stuff being put on? If you could drill down a little bit on that, that would be great.

Question: Brian Meredith - UBS - Analyst : Great.

Question: Adam Klauber - William Blair & Company - Analyst : Just a clarification. Do alternative within the reinsurance -- do alternative market transaction, in other words, if you help organize a cat bond, does that fall in Reinsurance or Capital Markets?

Question: Adam Klauber - William Blair & Company - Analyst : Okay. Has there been reasonable growth in your fees related to those transactions?

Question: Adam Klauber - William Blair & Company - Analyst : Okay. Different topic. There has been a lot of talk about one of your competitors is doing a quarter-share-like transaction with Berkshire in London. Are you doing any type of similar structures?

Question: Adam Klauber - William Blair & Company - Analyst : Okay, that's helpful. In human capital, obviously nice quarter. Could you give us an idea, how much of the growth is coming from more traditional brokerage placement business versus HR consulting business or benefit consulting business?

Question: Adam Klauber - William Blair & Company - Analyst : Okay. And is that being helped by increased rates in healthcare? Or is that more market share gains?

Question: Adam Klauber - William Blair & Company - Analyst : Okay. And then as far as the construction. Obviously, nicely, that area grow, and I know you have a big practice there. Is that more smaller risks? Or is that larger construction taking off?

Question: Adam Klauber - William Blair & Company - Analyst : Okay. Great.

Question: Mike Nannizzi - Goldman Sachs - Analyst : Dominic, I think at last quarter, you implied that margin improvement in Global would be more back half of the year-loaded. Looks like it came in a bit earlier this time. And I was just curious, was it maybe less investments in the second quarter? Was it just that revenues grew faster than you expected? Or -- if you can just a little context on that, that would be great. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Mike Nannizzi - Goldman Sachs - Analyst : Great. So that's not -- the second quarter is not a pull-forward, if you will, of the [marginics]. Okay.

Question: Mike Nannizzi - Goldman Sachs - Analyst : Great.

Question: Mike Nannizzi - Goldman Sachs - Analyst : Okay. Great. And then just one question back on Re, I guess. It is great. You are certainly winning new business and retention. It sounds like it is very strong as well. I guess I'm just a little surprised that alternative capital either hasn't been maybe more disruptive, or that that hasn't been an area, a larger contributor of growth. Maybe, I think John had mentioned a pipeline and that it takes time for these transactions to move through. If we look at that pipeline from here, what do we see? And is there any color on the capital market side, where maybe some of that activity might be on the come? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Mike Nannizzi - Goldman Sachs - Analyst : Got it. I get that last part. I guess it just sounds like you are growing your share of a shrinking pie, if the pie is shrinking because the alternative capital stuff is coming in -- would come in to you through a different part of your business. So I guess it would sound even more pronounced in your terms of taking market share from peers. Does that make sense, or is that not right?

Question: Mike Nannizzi - Goldman Sachs - Analyst : Okay. Great.

Question: Jay Cohen - BofA Merrill Lynch - Analyst : I guess for Mike, the tax rate. Obviously first half was relatively low, and you talk about, I guess, using some of the deferred tax asset. Can you -- given that situation, can you give us some guidance what the tax rate should look like in the second half and in 2014? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Jay Cohen - BofA Merrill Lynch - Analyst : And what about for next year, at this point? It should still be, I would assume, aided by your tax situation?

Question: Jay Cohen - BofA Merrill Lynch - Analyst : (multiple speakers) Just somewhere in 22% to 24% for next year as well?

Question: Jay Cohen - BofA Merrill Lynch - Analyst : Somewhere between 22% and 24% for 2014 as well?

Question: Jay Cohen - BofA Merrill Lynch - Analyst : Great. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Can you -- this is just for -- a few modeling questions. The VAT charge and the accrual reversal. What segment were those? Where did they hit?

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Yes.

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Okay. That is very helpful. I think Dominic had mentioned 450 people added since the end of June or end of July of last year. Can you give us a sense of the timing of that? So we can expect it and make sense growth?

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Okay. And Dominic also mentioned delayed revenues in the international segment. Is that something we should anticipate coming back in the third quarter?

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Okay. And do the modified credit facilities have any impact on the run rate for interest expense?

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Okay. Great.

Question: Jay Gelb - Barclays Capital - Analyst : I wanted to touch base on the pre-tax adjusted margin. I know there were a bunch of one-time items in 2Q. I'm trying to get a sense, compared to the second half of 2012, is there anything to prevent that pre-tax adjusted margin improving, relative to the as-stated numbers from back half of '12? I just want to get a sense if there are any other anticipated one-time items.

Question: Jay Gelb - Barclays Capital - Analyst : Okay, yes. I guess more importantly, directionally, when you talk about the underlying perspective in 2Q actually showing 110 basis points of margin improvement year-over-year, but for a couple of items. Is there anything that prevent that from not showing up in the back half, in terms of dated margin improvement?

Question: Jay Gelb - Barclays Capital - Analyst : I see, okay. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Jay Gelb - Barclays Capital - Analyst : Great. And then have there been -- given any thoughts to resuming share buybacks? Since there hasn't been any for the past three quarters?

Question: Jay Gelb - Barclays Capital - Analyst : Okay.

Question: Brett Huff - Stephens Inc. - Analyst : Two quick ones. You had talked a little bit about rates in North America. And you had gone through some of the different major categories, and I only caught part of that. Could you -- I know you mentioned property, specifically, that you were seeing that might sovereign. Can you just go through those major categories that you outlined again for me?

Question: Brett Huff - Stephens Inc. - Analyst : And the drivers of that, is this just an excess capital question? Is it maybe underwriters not being as disciplined? What is the driver of those?

Question: Brett Huff - Stephens Inc. - Analyst : Great. That is helpful. And then one final question, too. I think you had talked about construction as being particularly strong, or a highlight in -- I think it was North America. Can you just comment on that? Sounds like it is up year-over-year, but any particular color you can give us on that would be helpful.

Question: Brett Huff - Stephens Inc. - Analyst : Great. That is what I needed.

Question: Mike Nannizzi - Goldman Sachs - Analyst : Yes, just one quick follow-up. On the financing, Mike, or actions, I guess, in terms of delaying the maturity aids of the revolver and the credit facility. Anything coincident about that in the option date of the Gras Savoye transaction?

Question: Mike Nannizzi - Goldman Sachs - Analyst : Great.

Question: Josh Shanker - Deutsche Bank - Analyst : I just want to go over the headcount a little bit more. You said you added, I guess, 80 people since the beginning of the year. I wondered if you could talk about what the gross adds were? The people you added, whether they were client-facing or not, and where you have been growing?

Question: Josh Shanker - Deutsche Bank - Analyst : To what extent have the new hires brought in new business at this point in time, and that's fueling some growth, maybe particularly on the reinsurance side?

Question: Josh Shanker - Deutsche Bank - Analyst : And to the extent that reinsurance growth related to new hires?

Question: Josh Shanker - Deutsche Bank - Analyst : I appreciate all the color. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Just one I missed. The corporate and other expense line was, I guess, lower than it had been for awhile at $19 million. Is that a good run rate going forward?

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Okay.

Question: Meyer Shields - Keefe, Bruyette & Woods - Analyst : Okay, that helps.

Question: Thomas Mitchell - Miller Tabak - Analyst : This is just a short follow-up. On the reinsurance business, we have heard that there seems to be a trend, maybe it is a relatively long-term trend, for primary insurers to gradually become increasingly sophisticated in their decisions on whether they are going to buy reinsurance or keep business. And where they -- slicing and dicing it by lines and by tranches. I'm wondering if that feeds into your strengths? Or even if you agree that that is a trend? I'm just interested in your comments.

Question: Thomas Mitchell - Miller Tabak - Analyst : Okay.