Willis Towers Watson PLC (WTW) 2012 Q3 法說會逐字稿

Welcome and thank you for standing by.

At this time all participants have been placed in a listen-only mode until the question-and-answer session.

(Operator Instructions)

Today's conference is being recorded.

If you have any objections please disconnect at this time.

I would now like to turn the conference over to Mr. Peter Poillon, Head of Investor Relations for Willis Group.

You may begin.

Thank you and welcome to our third quarter 2012 earnings conference call and webcast.

Our call today is hosted by Joe Plumeri, Willis Group Holdings Chairman and Chief Executive Officer.

A webcast replay of the call can be accessed through the investor relations section of our website at www.willis.com.

If you have any questions after the call, my direct line is (212) 915-8084.

As we begin our call, let me remind you that we may make certain statements relating to future results which are forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995.

Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those estimated or anticipated.

These statements reflect our opinions only as of today's date and we undertake no obligation to revise or publicly update them in light of new information or future events.

Please refer to our SEC filings, including our annual report on Form 10K for the year ended December 31, 2011, and subsequent filings, as well as our earnings press release for a more detailed discussion of the risk factors that may affect our results.

Copies may be obtained from the SEC or by visiting the investor relations section of our website.

Also, please note that certain financial measures we use on the call are expressed on a non-GAAP basis.

Our GAAP results and GAAP to non-GAAP reconciliation can be found in our earnings press release.

I will now turn the call over to Joe.

Thanks, Peter.

Hi, everybody and thank you for joining our call today.

You've read our news release.

You've had a chance to look at our results.

We are in London today, and like you we have had a chance to read your preliminary reports, and we're going to limit our remarks today so we can quickly get to answering your questions.

So with me are Mike Neborak, our CFO, and Vic Krauze, our Head of North America, they'll both make comments after my introduction.

With us are also Steve Hearn, Head of Willis Global, and Tim Wright, Head of Willis International.

They're available if you want to drill deeply into those business units.

But the most important thing is that we mix it up and we talk about the things that you want to talk about and we have a lot of time for questions that you will have.

You all saw our news release last week and wrote about it, and I'm sure there are questions out there, because it's the last time I will sit in this seat to be able to answer them.

Three months ago, you will also recall you heard from Vic, Steve, and Tim, it was important that you got their strategies from their mouths so that they have all been promoted into their positions within the last two years and you hadn't had a chance obviously to meet them.

The purpose of those calls was to give you a chance to understand what they were -- the direction they were taking their business in.

As you saw from our news release about the third quarter, the businesses are fully embarked on the strategies that they laid out for you in early August.

We are now in the fourth quarter, my last as CEO of Willis.

The third quarter, what we're talking about today, has been, I think, a watershed one which the team strategies have put in place and all of those overhanging issues that we talked about over the last few calls are out the door.

We are leaving a clean slate behind for Dominic, Steve, and what I think is an outstanding team.

So the purpose here is to take your questions to eliminate any doubt that the noise has quieted.

Your judgment should rest on the results that Willis delivers when its numbers are added up at the end of the fourth quarter.

Free of the costly and distracting issues you had to sift through these past months.

So let's talk about the third quarter.

When you unpack our 2% organic growth, Willis International is back to its historic range of 5% organic growth.

Aided by an impressive turnaround for our UK business.

And Willis North America came in flat, both substantial improvements from the prior quarter.

And you saw that Willis Global came in with 3% organic growth with some real standout performances within the unit.

The results are starting to come in.

These are great leaders with great businesses.

In January, Dominic will take over an outstanding Company and a truly wonderful team.

Recall that our second quarter earnings call we laid out our reasons for optimism about the second half.

2% for the third quarter is not where we wanted to be as we talked to you today, our optimism remained high, actually right up to the end of the quarter.

Without getting granular deal by deal, those final days of the quarter saw about $12 million of revenue deferred to the fourth quarter and beyond.

It's just the way it goes sometimes.

That equates to about 160 basis points of additional organic growth right there.

So what happened?

Most notably, a number of deals that our Willis Capital Markets team has been diligently working on haven't closed yet, waiting for regulatory sign offs and the like.

Those deals closest to closing, while not guaranteed to close in the fourth quarter, we feel fairly certain that the associated revenues will close in the near future.

Movement of revenues happened in this business.

Take Venezuela, for example.

There was a delay in insurance buying there ahead of the recent presidential elections.

People were worried about currency fluctuations.

The political uncertainty there in a country where we are dominant had a real effect on our results.

We also saw a noticeable deferral of revenues for future periods in China and South Africa, but none of these regional bumps dull our genuine enthusiasm for our business and prospects that we laid out for you after the second quarter.

To the contrary, you will hear on this call we progressed during the quarter, how North America is no longer negative, Willis UK achieved positive growth, and how pipelines continue to improve.

These are all important positive forward indicators that will set Dominic, Steve, and the team up the next time you'll meet.

Let me offer a brief overview of the numbers before I pass the phone on to Mike.

Our fully diluted adjusted earnings per share came in at $0.22; excluding the $0.01 of positive foreign exchange, earnings were $0.21 per diluted share.

That compares to a year ago quarter of $0.41 per diluted share.

Much as I would like to say no explanation is necessary, our underlying earnings results are better than they appear at first glance relative to the prior-year results.

So let me expand on my quote in the news release to provide some more background so I break it down for you, and I explain why it doesn't look as it appears.

First, last year our third quarter included the impact from a profitability initiative in our reinsurance business that amounted to about $5 million, or $0.02 a share.

Those revenues did not recur.

Second, our third-quarter results last year also included $5 million of expense benefits from release of funds related to potential legal liabilities.

We talked about those in some detail a year ago.

That difference equals another $0.02 a share relative to prior year.

Third, in last year's results, we benefited from a catch-up tax adjustment to align our effective tax rate based on our year-to-date results at the time.

That amounted to almost $0.05 a share.

In the current quarter we recorded a similar but far smaller tax adjustment.

So that's another almost $0.05 differential.

Fourth, as I discussed last quarter, North America had a lopsided comparison related to the fraud we uncovered and reported earlier this year.

I know I'm tired about talking about that fraud, too, but it's over.

That hurt our current quarter earnings by $0.01 relative to a year ago.

The third quarter is the last quarter where we have a negative comparison related to that issue.

So you can do the math to pro forma last year results and compare it to this quarter's results, and after you do that, obviously, we're still below last year's results, so there's a few other things I need you to keep in mind.

One.

Consider that our current quarter investment income is $3 million, or about $0.01 lower simply due to lower yields.

Two, our associate line which primarily Gras Savoye is most about, is about $12 million lower and that is an after-tax figure.

Gras Savoye, as discussed last quarter, is in the midst of an operational review this year that we expect will drive improved profitability in the future, and we said we expect far lower results this year relative to last year.

Now finally, if you weigh everything we just laid out and add to it the revenues that moved in the last few days of the quarter, you see a picture that emerges that's quite different from a headline reading adjusted earnings-per-share falls $0.19.

So let me be clear as I say that.

We own our numbers, and I'm not making any excuses, but it's important that I clarify a lot of these comparisons for you.

The discussion about one off comparables this quarter to the prior quarter is simply offered to provide insight and a better understanding of our results year-over-year.

Everyone at Willis is clear about what we need to do.

Our job is simply to generate more revenue in the periods ahead.

I'll say that again.

Our job is to simply generate more revenue in the periods ahead.

I am supremely confident in our ability to do just that.

I'm equally confident in our business strategies and the teams that are executing those strategies.

Our leadership team remains excited about growth opportunities throughout our businesses over the coming several quarters.

Before I turn it over to Vic and Mike, let me run through some numbers and go into a little bit more detail on our businesses.

Organic commissions and fees growth for the Company came in at 2%, as I said earlier.

For North America, and you'll be hearing this in a minute from Vic, I am pleased to report that organic commission and fees from the quarter are flat relative to third quarter of last year.

Flat growth isn't usually something you're pleased about, so I'm not jumping for joy.

But considering that last quarter we were down 3%, and dealing with a bumpy economy and uncertainty with healthcare reform, we consider this a strong achievement.

And I believe Vic and his team are doing a great job of turning the business around.

And yes, if you were to put aside the impact of the fraudulent activity we talked about before, North America is actually up 1%.

For International, organic revenues are up 5%.

That's a great uptick over the 2% growth we reported last year, and it's back in line with the unit's historical growth levels of 4% to 6%.

If you remember, I said that International in the second quarter was an anomaly, and now you understand why.

Importantly, within International, our Willis UK business returned to growth.

The fresh numbers are a tribute to everyone in our UK business for making that happen.

Beyond the UK, we saw relative ability in our businesses within the euro zone, with Spain returning to growth, which is an amazing thing to do, especially with the economy in Spain.

And across the world, we also had strong performances from several of our Latin American and Asian businesses.

Lastly, our Global segment exhibited steady growth in the third quarter, coming in at 3% year-to-date, Global has grown 5%.

During the quarter, Global Specs grew mid single digits with strong results from Financial Solutions, FINEX, and Energy.

Willis Faber & Dumas grew low single digits, even though it was one of those businesses that experienced some negative timing in the quarter.

Reinsurance came in slightly negative, but remembering that list of comparables that I laid out a few minutes ago, it also is one of those areas where the comparison between this third quarter and the last one was going to create an uneven picture.

If you allowed for the exclusion of those nonrecurring prior-year revenues, that business was up mid-single digits in the quarter.

Willis Re performed particularly well in the International region, with very strong growth from our Asian and Latin American operations.

All told, Willis Re has delivered significant growth year-to-date.

With that, I did want to ask Vic to join Mike and me on the call to give some positive things that we are doing to improve our financial results into the future.

Vic?

Thank you, Joe.

I do want to start off by saying I am really looking forward to the day when North America joins International and Global in delivering sustained organic growth.

And I can join Tim and Steve in being available solely for questions.

As Joe mentioned, we are making good progress at Willis North America.

While the flat number isn't what we were aiming for, it is definitely an improvement from recent quarters.

And while we know it would've been in positive territory if you exclude the fraud Joe mentioned, it's now in the rear view mirror.

But we did feel it in our Human Capital business where it accounted for approximately 400 basis points of the 5% decline in that business.

Within Human Capital, we are seeing some rate improvement.

The impact of that rate is tempered a bit due to carrier compensation model shifts we've spoken about before.

These shifts, as we said, are due to healthcare reform and rising healthcare costs.

Despite those challenges, we expect this business to improve thanks to significant investments we've have made in regional resources to take advantage of the volatility presented by healthcare reform.

In a different area of our business, and it's been quite a while since we've been able to say this, construction, our second-largest business, saw 1% growth this quarter.

That was driven by several new business wins in the Northeast.

While we love this good news, we have to remain cautious on the overall construction business as surety revenues continue to be impacted by lower rates.

Moving across our practices, we saw good results with Financial Services, M&A, Tech and Telecom, Financial, and Executive Risk.

They all did well in the quarter.

Also, across all of Willis North America, new business came in at low double digits in the quarter.

If you look at it sequentially, each quarter in 2012, we have seen increases at each juncture.

That gives us a good deal of confidence that our growing pipeline is converting to new business.

I'll talk more about those pipelines in a second.

I also know rates are very much on your mind.

Let me give you a brief update from our perspective.

We continue to see improvement in certain lines and geographic regions during the quarter.

But it was relatively modest.

On property, we're seeing average increases of 5%, driven by CAT exposed risks, down slightly from last quarter.

Non-CAT is now flat year-over-year, as we predicted on our last earnings call, due to an abundance of capacity in the market and carriers looking to diversify their portfolios.

In casualty, we saw an average of 4%, driven mainly by worker's compensation with liability increasing at a lesser amount.

Also we continue to see a positive rate in our FINEX business up 3.5% on average.

And as I said last quarter, the overall rate improvement so far in 2012 has not had a material impact on our revenue base.

To the extent it's helped, it's been offset by insurance program restructures and a reduction in products purchased, the economic environment remains a headwind with many of our clients actively managing their insurance expense.

So, echoing Joe's comments, it's good to put some of the noise in our comparables behind us.

It's also good to see progress in our strategy to improve our business.

But as I have said before, there's still more to do and we are busy doing it.

With my few minutes remaining, I'd like to update you on three key initiatives we believe will improve the business, pipelines, recruiting, and retention.

First on pipelines.

Our rolling 12 month pipeline has now improved to three times our new business goal.

That was the target we gave our teams, and I am pleased we have achieved that target.

Since January, our pipelines have roughly doubled and they continue to grow.

That goal achieved, we are now increasingly focused on conversion of that pipeline.

I'm sure you're wondering about that conversion time for our pipeline.

Unfortunately, it's a little difficult to answer.

I expect we will see some of our pipeline converting to revenues in as little as 6 to 9 months depending on certain business, while other businesses can take up to 18 to 24 months.

This all depends on the complexity of the account and the type of business.

It's just important that you appreciate that there is a gestation period between the pipeline and our financial results.

Second, we are continuing to build a sustainable recruiting platform that attracts experienced producers to Willis.

Our headcount remains positive for 2012 and we're still working towards a goal of increasing producer count 3% to 4% annually while actively managing underperformers.

Third and last, I'm pleased with our retention rate of 91% in both the quarter and year-to-date.

Building up our retention levels underpins our growth objectives.

We are working hard to retain our current clients, ensuring we understand how they view our performance so we can make it better.

Beyond those three priorities, we also continue to expand our Sales 2.0 rollout across North America.

Through the first nine months of the year, we have held around 1,700 Sales 2.0 meetings with clients and prospects.

Of those, we have converted over 18% of those meetings into new business wins.

We have trained over 2,600 of our associates in the Sales 2.0 process and close to 600 plus producers are using the process as they interact with clients and prospects.

That's a good start to a program that I take very seriously.

I fully expect it will continue to gain traction amongst our sales associates and drive increased revenue.

So overall, I'm pleased with the progress we're making in North America.

The economy notwithstanding, I firmly believe that if we maintain and execute on our three-tier strategy of improved pipelines, increased producer headcount, improved retention levels, we will return to delivering solid organic growth and improved margins.

With that, I will turn it over to Mike.

Thank you, Vic, and hello, everyone.

In reviewing the numbers, all comparisons are to Q3 2011 unless otherwise noted.

All references to adjusted figures exclude those items that we disclosed in the supplemental financial information in our press release.

Reported net income was $26 million, or $0.15 per diluted share.

That compares to $60 million or $0.35 per diluted share.

Excluding the impact of adjusting items, adjusted net income was $38 million or $0.22 per diluted share.

That compares to $72 million or $0.41 per diluted share in the third quarter of 2011.

Now, let me provide some more detail on the adjusted figures.

Excluded from adjusted net income in the current quarter is an $11 million settlement with our former joint venture partner in India recorded in other operating expenses and the related $1 million loss from dissolving that joint venture.

This settlement will allow Willis to move forward with a new partner in India, where we believe there is great opportunity for growth.

Excluded from adjusted net income in the third quarter of 2011 was $15 million of expenses related to our 2011 operational review.

$7 million of that cost was recorded in salaries and benefits, while $8 million was recorded in other operating expenses.

As noted in our press release, foreign currency fluctuations positively impacted our third quarter 2012 results by $0.01 per share.

In total, foreign exchange reduced revenue by $17 million and reduced operating expenses by $21 million, producing the $0.01 per share benefit.

The $21 million expense benefit was broken out, $13 million to the salary and benefit line, and $8 million to other operating expenses.

Now let me talk more about expenses.

Total reported expenses were up $14 million, or 2.1% from $670 million to $684 million.

Total adjusted expenses increased by $17 million from $655 million to $672 million, or 2.6%.

When the $21 million benefit from foreign exchange is excluded, underlying growth in our total adjusted expenses was $38 million or 5.8%.

That 5.8% can be broken down in terms of underlying salary and benefit growth of 6.8% and underlying growth in other operating expenses of 3.6%.

As a reminder, our third quarter 2011 other operating expenses were favorably impacted by a $5 million release of funds related to liabilities that did not show up.

There was no similar benefit in our third quarter 2012 results.

Excluding the impact of that expense credit in Q3 2011, expense growth was 5% in the current quarter.

Let me expand on the 5.8% underlying growth in total adjusted expenses by business unit.

In North America, total expenses grew $8 million to $9 million, which is about 3.5%.

International expenses grew just shy of 7% and expenses in Global grew a little bit over 8%.

But I will remind -- or I will mention that excluding the nonrecurring expense credits, which were in that business, adjusted expense growth in Global would have been 5.5%.

The important point here is that our expense increase is focused on our higher revenue growth in margin businesses.

Recall from previous discussions, we commented that in 2011 we were investing in new hires in key geographic regions such as Latin America and Asia.

At the same time, we were developing our infrastructure and investing in support areas of the Company such as compliance, our new European data center, our operations in Mumbai, and in investment technology.

So as you would expect, we are seeing an increased run rate for those investments here in 2012.

Year-to-date, total adjusted expenses grew 4.1%, excluding foreign exchange.

Now let me tell you about salaries and benefits, which as you know is the largest component of our expense base.

Adjusted salaries and benefits were up approximately 4%, or $20 million from $482 million to $502 million in the current quarter.

Excluding the $13 million of positive foreign exchange I referred to earlier, salaries and benefits, that growth was $33 million or 6.8%.

You should note that on our salary and benefit line, excluding the favorable effect of foreign exchange, has been very consistent over the first three quarters this year, coming in each quarter in a narrow range of $512 million to $515.

In contrast, last year, our S&B line declined throughout the year as we benefited from actions taken in our operational review.

Another factor which increased our S&B line this quarter is that we incurred unexpected salary and benefit increases in Latin America totaling over $3 million for a number of reasons, including mandatory pay raises in Venezuela driven by the presidential elections.

Year-to-date, adjusted salaries and benefits grew 4.3%, excluding foreign exchange.

The other large component -- other operating expenses, that line on an adjusted basis was down $3 million, or 2.2% in the quarter from $138 million to $135 million.

But if you exclude the $8 million favorable impact from foreign exchange, other operating expenses grew by $5 million or 3.6%.

All of that growth can be attributed to the $5 million of expense credits recorded in the third quarter of last year that did not recur this year.

Year-to-date, adjusted other operating expenses increased close to 4.2%, excluding foreign exchange.

I heard many comments overnight about our operating margin and the disappointment with it.

So let me explain why our adjusted operating margin contracted 290 basis points from 13.8% in Q3 2011 to 10.9% this quarter.

First, 40 basis points of that contraction came from lower investment income.

Obviously, there is little we can do about that in the current yield environment.

Then we saw the impact of nonrecurring items.

60 basis points from the non-recurrence of expense credits, 40 basis points from Chicago fraudulent activity, 40 basis points from the elevated Latin American salary and benefit expenses, and 60 basis points from the non-recurrence of the reinsurance profitability initiative.

To summarize, we had approximately 200 basis points of negative impact on our margin from the non-recurrence of several items that occurred in the third quarter of last year.

Some of that was offset by 70 basis points of beneficial foreign exchange.

So that leaves 120 basis points of decline from adjusted expense growth exceeding revenue growth.

On the tax side, if you exclude the impact of certain nonrecurring items, the estimated effective annual tax rate for the quarter and the nine months was 24%.

The number that you will see in the press release, if you do the math, is about 26%.

That is purely because the adjusting item I referred to in terms of the India joint venture cost is not tax deductible for tax purposes.

So that elevates our book tax rate.

At this point we expect the 2012 effective rate to be approximately 24%.

Let me touch on the associates line, which as you all know, is primarily Gras Savoye.

For the quarter, that line recorded a loss of $2 million, consistent with what we told you last quarter and compared to net income of $10 million in the year ago period.

This is a $12 million swing, or $0.07 per share.

I also said last quarter that we expect the associates line for the full-year 2012 to be down $6 million to $7 million versus 2011, including our expectations for Q4 to show a loss of $5 million to $6 million.

On our balance sheet, total debt outstanding at the end of the quarter was approximately $2.4 billion, and our debt to adjusted EBITDA on the latest 12 month basis was approximately 2.7 times.

During the third quarter, we generated approximately $150 million of cash from operations.

We had positive contributions from working capital.

Capital expenditures in the quarter were about $34 million.

We repaid $30 million of our revolver, leaving a balance outstanding of $20 million, and repurchased approximately 1.2 million shares of our stock at a total cost of $42 million.

We have now completed the $100 million share buyback that we announced earlier in the year.

And finally, at September 30, our cash and cash equivalents on our balance sheet amounted to $424 million.

That compares to $407 million at June 30.

With that, I'll turn it back to Joe.

Thanks, Mike.

Before I offer some concluding remarks, it's important that I comment on one additional matter that was included in our earnings release last night.

Here's the background.

Willis has nearly $1.8 billion of goodwill related to North America as of September 30.

The majority of that goodwill was recognized when we made our acquisition of HRH back in 2008.

Each year, we are required by, as you know, US GAAP accounting rules to test goodwill vigorously for impairment.

Willis regularly performs this test in the fourth quarter, and we are in the early stages of that work right now.

The test, as you also know, is very technical in nature -- a lot of science --and requires a determination of the fair value of the segment.

We conduct this test by doing a thorough analysis of our past results and a conservative estimate of future projections.

As you've heard before and heard again from me and Vic today, the North America segment results lagged over the past few years as its two biggest businesses, employee benefits and construction, have been hit hard by the economic downturn in the US.

The unit was also hindered by immigration issues stemming from the HRH acquisition, which included producer defections that we have all talked about before.

As such, at this time, we expect that we will record a one-time non-cash goodwill impairment charge for our North American unit during the fourth quarter which may be material to our earnings reported on a GAAP basis.

At this stage, we don't have an estimate or a range for the amount of the expected charge.

As soon as we finalize the analysis, we'll file an 8K and certainly disclose the amount.

Now, it's not reasonable for you as investors and analysts to ask if this potential goodwill impairment contradicts our view of North America's prospects going forward.

It's natural for you to suggest that.

I don't believe it does.

If we incur the impairment charge, we will do so because it's the prudent and responsible measure, based on specific accounting requirements, and because of continuing uncertainty in the market.

And so, until the North American results objectively demonstrate sustained growth, we as prudent managers of our business believe we are following the appropriate course of action.

But let me add, we remain very optimistic about the growth opportunities of North America business and are passionate about delivering growth there.

We are confident about the future, because as Vic outlined for you, we believe our pipelines are solid, our producer headcount is growing, our retention is steady.

And repeating what we have said before, we believe the integration issues are fully beyond us -- behind us.

So in sum, Vic and his team are positioned for real progress going forward.

As I conclude, let me also address one other question that I know is on your mind, having read your reports.

You, our investors and analysts, and me, have had an open and honest transparent dialogue for 12 years.

You've asked, I've answered, and importantly, we at Willis have delivered handsomely for our shareholders.

You've made mention about who will next set in this chair to answer your questions and deliver your results.

You have written that our CEO elect, Dominic Casserley, has a stellar CV with 30 years at McKinsey, working for the best companies in our industry.

You've also said you don't know him and haven't had a chance to meet him.

Let me tell you something.

When you do, I think you'll agree with me and our Board that he's an outstanding choice to lead our firm along with Steve Hearn, making the decisions building and growing the business in the best traditions of Willis, a firm with 184 years of proud history, in the last 12 of which I have been honored as its steward.

But for the third quarter and the next two months or so of the fourth quarter, the duty is mine.

The results are mine, and the responsibility is mine.

So before I take your questions, let me conclude with a couple of remarks.

The quarterly results did not come in the way we wanted them to.

As a management team, we were disappointed.

We anticipated that when we last spoke it would be better.

That said, we remain optimistic about our business going forward.

We tried to explain what happened.

As you have heard from us today, the forward indicators for growth are in place.

They are working, and we remain excited about the future.

All of the negative comparisons to the prior years created by such things as loan protector, the fraudulent activity, the expense credits, and all the other items that we have explained in I think, gory detail, are all behind us.

There is nothing that we know about between now and the end of the year that's going to come up.

Unless there is some surprise, everything is behind us.

The fourth quarter is a clean slate.

I speak on behalf of everyone here at Willis when I say with affirmation that we are looking forward to presenting clean and clear financial results going forward.

Before I ask if you have any questions, and I'm sure you do, since this is my last call, a lot of you have covered Willis since I began this great adventure 12 years ago.

Every one of these calls, numbering almost 48, have been balanced.

They've been courteous.

You've been professional.

You've treated me with a great deal of dignity.

And I can't tell you how much I appreciate that.

Moreover, not only have you been balanced and professional, but you have trusted me, trusted what I have told you, and gave me a credibility that I've been very, very honored and feel very honored to have been given.

So I want to thank you for -- This is my last opportunity -- for having been given the opportunity to serve this Company and serve you and to give you the kind of returns that we have given you and I'm very, very proud of and proud of this Company.

So I want to thank you very much for everything that you have done for me and your support.

Now I'll turn it over for questions.

Thank you.

We are now ready to begin the question-and-answer session.

(Operator Instructions)

Greg Locraft, Morgan Stanley.

Hi.

Good morning.

Thanks, Joe, and congratulations on the upcoming transition, and certainly it's been a great ride.

You've done a great job growing revenues, considerably earnings, and the stock price.

So hats off.

Thank you Greg, I have appreciated your comments as well.

Thank you.

Sure.

So since you are on the Board and going to stay on the Board, can you give us a little color behind what attracted the Board to Dominic in the search process?

What were the attributes?

And I know you did go into it a little bit, but what specifically over other candidates really stood out at the Board level for him?

Well, I think that, not to get into all the gory details, obviously, when you hear from him, this is a man who has been at McKinsey 29 years.

But more importantly than that, as a global figure.

He's lived in the United States, he's lived in Asia.

He opened their operation in Asia.

He's run their global operation out of London.

He's traveled the world.

He understands the globe.

This is a global Company.

He's advised financial services companies, a lot of them, all over the world.

He is very, very involved in and knowledgeable in insurance and financial services.

I don't think that when you look at that kind of background, the globality, the experience, and the fact that he understands these businesses, puts him in a better position to be able to lead this Company into the future.

I think it's all about taking it to the next level.

They are all passages we go through.

And when you look at what he's done, and you look at the next level we need to take it through, I don't think they could have made a better decision.

Okay, great.

You'll be Chairman of the Board for a bit, so you'll be his boss in the early days.

Any sort of specific things that you will be watching for in the first six months or so?

I'm going to make sure he stays in shape.

Okay, great.

Shifting gears, on the capital deployment side, you did exhaust the buybacks in the quarter.

I assume there's no more coming in 2012 and will then revisit that in 2013?

Yes.

Okay, great.

And then last, on the goodwill charge, $1.8 billion in North America is obviously almost two-thirds of the total equity of the Company.

Any kind of covenant issues or anything to call out at this point in time on your debt outstanding that might -- that equity owners might not be as focused on right now as you go through that process?

None whatsoever.

Okay, perfect.

Thanks again, Joe, and congratulations.

Thank you.

Thanks for your nice comments, Greg.

Adam Klauber, William Blair.

Good morning, Joe.

Pretty good.

Congrats also on a great run of the Company.

Well, you've followed this Company and me a long time, I appreciate very much at how balanced you've been and the courtesies you have given me.

Thank you.

Thanks.

Thanks.

As we look going forward, in a challenging economic environment, it doesn't seem like the US or globally we are growing quite rapidly.

What do you think the key is to balancing, continuing to grow the producer force yet hold expenses in line?

Well, I think -- I think a couple of things.

I think that if you look at the experience of the last three or four years, it's pretty obvious that the results and the fact that we haven't grown the earnings per share have been predominantly due to the acquisition that we made.

I think somebody made a comment that I read overnight that it was a mistake.

It was not a mistake.

I think it was bad timing that had we known the world was going to fall apart, I'm not sure the decision would've been made.

But it was not a mistake.

I guarantee you, three or four years from now, or even sooner, somebody is going to look back and the history is a more clear indicated than current events are.

So I do not think was a mistake.

I think it purely -- and a great foundation supported the fact that we have locations all over North America that will serve the middle-market very well and beyond.

I don't think growing the producer headcount is, when you see that lots of you always believe, because we have talked about this before, that that's going to mean that the expenses are going to go up a lot.

The expenses in North America have been kept to a very low minimum.

So we have room in North America as we begin to grow the revenue, and we put a lot of the comparables and the issues that we've talked about behind us, I think we have enough room on the expense side to be able to use the money, to grow the headcount, and to be able to grow the revenues as that's happening.

So I mean, the lowest expense growth in the Company has been North America.

So I think there's room to selectively recruit.

Vic is doing a lot of that now, so don't believe that the expenses are going to go up through the roof just because we're going to increase our headcount.

It's going to be selective at that.

Vic, do you want to add anything to that?

The only thing I would add, Joe, is our target is to grow our producer headcount 3% to 4% a year on a net basis.

That's 30, 35 producers.

That is not exorbitant producer recruiting in my mind.

Thanks, Vic.

And also remember that I think that the worst of the employee benefit and the construction issues, as Vic said, are behind us.

In the last quarter, we did not mention this, but the employee benefit business in terms of new accounts grew substantially.

And that is very heartening for the employee benefits going forward.

So I think when you start to see the revenues improve in North America, and you start to see the headcount go up nicely, we have not had, as Vic mentioned in the last call, any defections of any note for now, almost a year, in North America.

You're starting to see a runoff that is now getting very, very slim as it relates to the defections that occurred in '10 and '11.

So all this stuff is starting to come together.

You're going to start to see the cleanliness of North America start to show.

Thanks.

And one other follow-up.

Within Global, which has been probably the highest growth unit, reinsurance has been one of your -- probably the primary driver of growth there.

As that market softens a little and probably even gets more competitive, can reinsurance still be the driver that it was and are there other segments of the business that can come up and take its place?

I think a lot of the answer to that question has to do with a lot of the restructuring that Steve is doing.

I'll let him answer the question.

Yes, thanks.

Joe, I guess probably a couple of comments.

Firstly, relative market share, you're absolutely right.

The reinsurance business has been at the heart of driving the growth in our Global segment.

It's roughly half of the Global's turnover and a significant profit driver for Global and for the Company more generally.

But we have relative market share to look at in terms of where we are in that business.

So if you took Europe, we have dominant market share in some industry sectors in some countries.

If you looked at somewhere like North America, arguably the most mature reinsurance environment, our market share would be in high single-digits.

If you took our two larger competitors, the intermediated business, their market share would be as much as north of 70% of that market.

So we have a huge space to grow even somewhere like that.

If I get to China, and emerging reinsurance opportunities, again, significant growth potential for us.

As Joe says, this touches on the more strategic work that we've been doing in terms of transformation of Global as well, insofar as, as I've talked about on the previous couple of calls, the transformation that we've been doing in Global in terms of connecting our reinsurance and insurance and placement businesses more closely together.

And I think through there you'll see good growth.

One of the things with reinsurance, as you may know, is the success of this year is actually borne out of the results of next year.

And I can tell you we've had a very good run of new business wins around the world during this year and should bode well for next year.

Okay?

Thank you very much.

Thank you.

Appreciate it.

Mark Hughes, SunTrust.

Good morning.

My congratulations as well, Joe.

Best of luck.

Thank you, Mark.

I appreciate the support.

Thank you.

The International business expense is up 7%.

It sounds like there were some unusual items in the quarter.

What should we expect for expense growth there over the next six months?

I'll answer the first part of the question.

We had a couple, as Mike said to you, we had a couple of unusual items in South America where we had to give raises to everybody in Venezuela prior to the election.

It's a good way to get elected, by the way, just make sure everybody gets a raise.

It makes them feel good when they go to the polls.

And we have a big operation.

We dominate in Venezuela, so we had to give everybody raises there.

And there were a few other unusual items that jacked the expenses up.

So they really were not ongoing operational expenses.

So they were much lower than that.

Tim, do you want to answer the second part of the question?

Yes, Joe.

I think that's absolutely right.

There were a number of things together that drove up expenses in this quarter.

One was the Venezuela situation which we've talked about.

Second was some restructuring of certain operations that we're looking to turn around, which we've talked about on prior calls.

Also, we are investing in this business.

We see a lot of growth potential in different parts of the world, and we've invested behind that.

So these are out of line with long term expense expectations.

Any comments on the International business, especially in Europe, Spain returned to growth, UK was positive.

How about -- and it sounds like you're taking share.

How about the underlying demand for insurance?

How did it fare this quarter compared to prior quarters?

That's absolutely right.

And obviously, the UK and the rest of Europe is a considerable part of our business.

And the economic environment that we faced there probably means that the overall market we're operating in is flat or down.

The evidence that we have is that we are taking share in those markets.

It varies from country to country.

And actually, we think there continue to be sure taking opportunities across the UK and the European markets.

So we think we're actually doing well in a difficult environment.

Thank you.

Okay.

Thank you, Mark.

Dan Farrell, Sterne Agee.

Hi.

Good morning.

Can you talk a little bit more about some of the underlying trends at Gras Savoye and maybe some of the strategies that are being put in place there on a go forward basis?

And then I apologize if you've commented on, but if you haven't, on guidance for both the affiliate line and the minority interest line for 2013.

If you can give us any indication of what you're thinking along that?

Well, the first part of that, Gras Savoye, I'll answer, is that we're going through in Gras Savoye, as we've talked about before.

We have a new CEO who is looking at the business, doing an operational review.

And you're going to see that take place over the course of the next 12 months or so.

We feel very good about Gras Savoye.

We feel very good about our affiliation, our possibilities in the future.

The company was run by one person for 37 years.

Bringing a new face in with a fresh attitude, strategically and operationally, it's just going to take a little time.

And to get rid of a lot of costs in a place like Gras Savoye is not so easy, in France.

There's a lot of things that you've got to go through.

So I don't want to get more specific other than generally to tell you that there will be a big operational review, and I think that will breed a lot of profits for us in the future as the years go by.

And you've got to remember, too, they have got great strengths in parts of the world that will be, I think, very fertile economically in the years to come, especially Africa, where there's 27 locations.

So at one point in time in the future, Dominic and the rest of the team will be looking at 30 plus locations, you know, in Africa alone.

So this all bodes very, very well.

As it relates to 2013, I can only tell you we haven't given guidance.

But I can tell you that you enter the fourth quarter, as I said earlier, without these comparisons that we've constantly gone through, without this baggage that we constantly said -- without these comments, like without this and without that it would've been this, it's done, it's over.

These comparisons are gone.

And I feel very good about the fact and so does the team, is that now you will start to see the real Willis start to emerge in the fourth quarter and beyond.

And we feel very good about that.

Okay.

Thank you.

And all the best to you in the future, Joe.

Thank you very much, Dan.

Thanks for your comments.

Bob Glasspiegel, Langen McAlenney.

Good morning, Joe, and let me add my.

Hi Bob, how are you doing?

I'm doing great.

Let me add my thanks and I have enjoyed the last 30 years plus a lot.

You're a large shareholder of Willis, and we're going to sort of watch whether your shareholder matches your words of optimism.

What should we expect to see about your holdings looking out over the next few years?

You know, I've been in -- this business, the stock business, Bobby, with you for a long time.

That's why we've known each other for a long time.

Usually, what happens is, is that when you buy stocks, you like to buy industries that you know and management that you know in businesses that you know.

I don't think I know anyone better than this one.

Other than the fact that because I've been the CEO, I've had to, and I'm honestly answering this question, I have not sold a lot of stock over a 12-year period of time.

We all have personal responsibilities and things of that nature that we have to have in terms of diversification, but I will tell you that once I get over that bit and I get over the personal things that you have to do, you will see that the preponderance of my holdings will stay intact.

Okay.

We will look and see whether -- see what you're doing outside of Willis with great interest.

So will I. I will let you know.

You used the word, clean slate, I think, to describe the goodwill accounting charge.

Are you saying that you've therefore scrubbed the entire balance sheet and we shouldn't look for any further charges beyond the goodwill?

Because normally when you get a management transition change, insurance 101 management is, you take charges, blame it on the prior management team and give yourself a little wiggle room to manage through the future.

I guess the question is, how carefully have we scrubbed the balance sheet to allow Dominic the clean slate that you say he's got?

I can't speak for him, Bobby, but obviously, he is going to do what he should do, and I obviously would endorse anything that he believes should happen.

But from this perspective right now, from a balance sheet point of view, it's clean.

What he decides to do is something that, you know, is something for him to analyze and for him to talk to you about.

I can't make any predictions about that.

But from a technical point of view, as you say 101, it's a clean balance sheet.

There's nothing in the balance sheet that is unclean about it.

But as it relates to future charges, I can't make predictions about that.

Thank you.

Thanks, Bobby.

Al Cupertino, Columbia Management.

Hi, Joe.

You gave a little more clarity around the coming goodwill charge.

You said it may be material to GAAP earnings.

I don't recall if the GAAP earnings phrase was in the release.

Material to GAAP earnings, my understanding is, means more than 10% of revenues.

So are you able to give us any sizing around that?

I can't.

I simply wanted to make sure that I covered all the bases.

I really don't know.

If I knew, I would tell you.

That's why I'm giving you a heads up about the fact that the probability exists, and I say material simply because it's a possibility.

So I want to get it all in.

I simply do not know.

But as soon as we know, I will 8K it and you'll know.

I don't want you to get blindsided.

Right.

My other question, then, was on the expense front.

In looking through the press release, it seemed like some of the third Q 2011 items were one off favorables that you were looking at, and some of the third quarter 2012 items are ongoing negatives.

So I didn't quite take the comfort that the paragraph perhaps was meant to give me about the margin comparison.

Could you react to that?

So as it relates to the third quarter 2011, most of those were nonrecurring.

But in terms of the current quarter, the Chicago fraud activity is nonrecurring.

The elevated, you know, Latin American expenses, they have become elevated and they stay there.

They're not going to continue to elevate, at least as much as we know.

So I would characterize that as nonrecurring in terms of kind of getting to that level.

And then the -- so those are really the two items in the current quarter which added up to 80 basis points.

The other two items I referred to are really the absence of those from the third quarter of 2011.

Let me just add something to that if I can, Al.

What he said also was, is that when all of that sorted itself out, we were still 120 basis points decline, if you took that into consideration.

If you add back on our revenue side the things that did not hit or were deferred, which were greater than 120 basis points, then this margin picture would look much different and so would the earnings-per-share.

That's helpful.

I appreciate that.

If I can sneak one more in, if that's okay.

Please.

Joe, you referenced the revenues that were pushed into the fourth quarter, perhaps beyond that.

I guess my question is, I assume there's always a movement back-and-forth of revenues.

You get some revenues in the third quarter that perhaps were originally expected in the second quarter and so on.

Could you give us a sense for what the gives and takes were this quarter?

Were there some revenues this quarter that perhaps had been expected three months earlier?

What's the net impact of that movement?

Sure, that's a legitimate question.

There's always going to be on a quarterly basis, because of the nature of the business, Al, a movement here or there.

I will tell you, though, that in this particular quarter, the movement has been has been more profound than usual, as a matter of fact, more profound than I have ever seen it.

That's why I went into detail earlier in my comments when I said up until a couple of weeks before the end of the quarter, there was a $12 million movement where our expectation was much greater than the 2% that you saw.

So I would tell you that yes, you're right.

There's always movement here or there, but much more profound this time.

For example, in Willis Capital Markets, there are deals that have already been announced that simply have not closed that were supposed to close in the third quarter, that amounted to a large part of that $12 million.

Then you add on the China that I talked about, you add on the Venezuela that I talked about, and some other items, and all of a sudden, you're not looking at $2 million, you're looking at well over $4 million or close to $5 million.

So that's how profound the quarter was.

So when you get rid of those comparisons, and you add back in the things that should hit and all of the issues that my associates have talked about, you get a much different picture of what Willis is.

And that's why I think you should judge it when you see the fourth quarter.

That's helpful as well.

You've got to remember also, my colleagues remind me, that the third quarter is the smallest quarter for us.

So more apt to see more volatility.

I got it.

That's very helpful.

I appreciate it.

Thank you, Joe.

Thanks so much for the question, Al.

Nice talking to you.

You as well.

Josh Shanker, Deutsche Bank.

Good morning, everyone.

How are you doing?

Good, thank you, Joe.

So just tagging on to Al's question a little bit, if we went through segment by segment trying to figure out what normalized organic growth is, taking out all the unusual items for comparables, where would we be by each segment?

It's tough to do that because if I do that, I'm giving you as close to guidance as possible and estimates, and then in the next quarter you're going to be all over Dominic and say Joe said this and Joe said that.

I can tell you the following, that International has now shown itself to be more normal than the anomaly in the second quarter.

And I think it's pretty responsible to say that we're comfortable in that area.

In Global, I think we said it correctly.

It showed 3%, but if you took away the profitability initiative that was mentioned earlier, it's really 5%, and I made a mention of that.

So you know, 5%, 6% area is what is more normalized.

I feel that there's comfort there.

I'm looking at Steve and I'm saying that that's not a guesstimate, that's what it's really been running.

In Vic's case, he gave you a good sense of employee benefits.

I gave you a good sense of employee benefits.

He's given you a good sense of pipelines.

He's given you a good sense that construction might be a little bit better than what we've experienced over the last four years.

We've had no defections.

We got the tail end of -- the weight of accounts leaving, which obviously, disallows us to show real growth because of the weight of what's rubbing up against it.

So when you look at all that together, you're looking at, I think, a revenue picture that we feel very confident about going into the future quarters that will exceed our expense growth.

Okay.

I'll take it.

And on the North American segment, if we look at the commentary from carriers and we look at just the somewhat small growth that we're seeing in the US economy, your commentary is that you're getting rate, but it's being offset by negative exposures.

Why, from your seat, are you still seeing negative exposure in the North American segment, which contradicts what we're hearing from carriers in the broad economy?

This is Vic.

The overall rate impact that we actually see across the whole revenue base is maybe -- is less than 1.5 points.

So it's not significant rate impact that we're seeing, and it's spread across different lines and different geographies.

And then you take a look at the surety business, which is actually quite compressed, and when you're only growing 1% ex the issues we talked about, it doesn't take a lot to make an impact.

When we're growing 4% or 5% in the future, which I hope to one day, then it will be less of an issue.

I also think that it's important, Josh, to mention, because I've tried to read as many of the reports with regard to the insurance companies and rates, I don't know that they make a distinction well enough between the renewable book and the new business.

The renewable book gets higher rates than the new business does because you're fighting for new business, and there's a pressure, you know, for rate there.

It's certainly firmer that was, but I don't know that if you break it down geographically by product area, new, renewable, et cetera, you're going to get the same kind of picture that's being shown.

And in addition to that, our job as brokers is to get the cheapest possible price that we can for our clients.

And in a lot of cases, people forget that our brokers are trying very, very hard to do that on a day in and day out basis.

Throw the exposures in, throw the higher deductibles in, throw the economy in, in a lot of cases businesses look at insurance costs as a T&E.

It's an expense, and they try to get it down as much as possible, especially when their businesses aren't growing.

So I've looked at that and I've questioned that, Vic will tell you I'm looking at him as were talking, what about rate, what's going on here, they're getting rate, I talk about it all the time.

I'm pretty convinced that we are doing what we could as brokers and that we're not allowing rate to get away from us, if you will.

I appreciate the comments.

Good luck to you, Joe.

Good luck to Dominic and will look to the fourth quarter.

Thanks, Josh.

I appreciate very much your comments, as always.

Meyer Shields, Stifel Nicolaus.

Hello, my friend.

How are you?

I'm well.

How are you?

I'm doing well.

It's a living.

Okay, well I hope so.

I certainly want to echo everyone's commentary wishing you the best of luck, and thank you for--

Thanks, Meyer.

I appreciate it.

A great run.

The couple of questions, again, on the expense side.

In North America, if we're talking about 3% to 4% headcount growth and we typically see the revenues lag the initial expenses when there is recruitment.

And then there's sort of the normal upward influence on salaries and benefits and so on.

Does that mean that organic expense growth in North America is somewhere in the 5% to 6% range?

No, I really don't think it does.

Actually, if I look at S&B for the year-to-date, it's down across North America while we've actually still grown our producer headcount, discretionary costs are down.

We actually watch the expense line very carefully, and it's a difficult needle to thread to grow your headcount in areas you want to grow it while still managing the overall business.

But I actually feel very comfortable with where we stand on that.

As I said, Meyer, I think the best expense controls, because we have had an unpredictable ability to be able to know what our revenue growth will be, the biggest discipline we've had, the best discipline we've had in expenses, has been in North America.

Starting way back with the acquisition, where we took a lot of costs out because of the economic depression that we were in.

So I don't have any issues, nor should you, with regard to expenses in North America going forward.

The issue is a revenue issue, it is not expense issue.

The other point, Meyer, that Vic was referring to, when he referred to 3% to 4%, he was referring to the producer population, not the employee base in North America, which are much different.

The producer population is about 800 plus total employees.

The total headcount is down.

Okay, what was the total headcount?

I'm sorry, I just missed that number.

The headcount for North America, he's talking about 3% to 4%, with regard to the producer headcount going up, the total headcount in North America has gone down for four years.

Okay.

What percentage of North American employees are producers?

800 out of a number that's somewhere between 5,000 and 6,000 people.

Oh, Okay.

All right, then.

So that clearly makes a difference.

That's why he said 3% or 4% is 30 people.

Right.

Okay.

That's very helpful.

When we look at the revenue shift that you're talking about to the fourth quarter, and I'm looking at the $12 million but I understand it's a bunch of different pieces, are all of those revenues already booked in the third quarter, or are there any, I'm sorry, are all the expenses already included in the third quarter?

Or do any of those get pushed out until the revenues can actually be booked?

I can't think of -- I'm thinking through -- the reason I'm hesitating is I'm trying to think through if any expense will follow, and I can't think of anything other than the bonuses that are normally accrued.

But operational expense has already been taken.

So the revenue has yet to come.

Okay.

And fantastic.

Thanks so much, and best of luck again.

Thank you.

Michael Nannizzi, Goldman Sachs.

Hi, thanks.

It's Eric Fraser, for Mike.

A quick follow-up on -- good, thanks.

A quick follow-up on North America exposures.

Are you seeing any bifurcation between smaller and larger accounts?

I don't really think so.

I think every client out there is looking for ways to manage their insurance costs.

So I don't think we could really come up with a segment for you on that line.

Okay.

And then can you just reiterate that if there are any one offs in Q4 '11 that we should be aware of as we think about comparisons to the fourth quarter of this year?

None.

As I said earlier, at this moment, as I speak, all of the comparables, the negative comparables are gone.

I can't speak for something that will happen in the next couple of months that I don't know about, like Venezuela came up in the last quarter, but there's nothing that I know about at this juncture that's a negative that still exists.

Sure thing.

And just one last piece of handing over a clean slate might be considered litigation.

Can you provide any update on the Stanford proceedings?

I'll give you an update on Stanford procedures -- proceedings in that there was nothing new from the last time we spoke.

My General Counsel is sitting next to me, Adam Rosman.

Adam, is there anything you want to add?

The only thing I'd add is a key part of the case -- the key part of the case, we've asked the Supreme Court to review, and they recently have asked the Solicitor General for its opinion on whether the Supreme Court should take the case.

We view that as a positive development.

We can't obviously predict it, but most importantly, as we've said from the beginning, we will fight this case every step of the way and we believe it's baseless.

Okay, thanks.

Best of luck.

Thank you.

Brett Huff, Stephens.

Good morning and thanks for taking my questions.

Two questions.

One on the goodwill write-down, I know you can't really size it for us yet because it's in process, but could you give us -- is there something that you all see now that you didn't see I guess last fourth quarter, or even the fourth quarter before that when you do these annual reviews?

Any insight on that that drove the particular trigger this time that you can tell us?

No.

As I said in my comments, and now I'll say in the vernacular, when you go through the process of looking at impairment, there are strict bridges and architectural procedures that are very scientific that almost suggest that you have to guarantee that growth takes place.

And when you go through those scientific procedures, that GAAP allows you or forces you to do, you can't come up with that science that makes it predictable, especially in an uncertain economy and an uncertain world.

That's the reason why we're going through the impairment process.

That's the science of it.

From an art point of view, I'm looking at pipelines, I'm looking at retention, I'm looking at all the things that we talked about, and my feeling about North America is much different than what that science forces me to do.

And so when I look at it scientifically, and I have to on a GAAP basis reinforce the predictability of North America based upon that bridge, which is very scientific, I can't do that.

So my prudence tell us me that you've got to be able to look to impairment.

Great, that's helpful.

And then the second question is more of a trend on construction.

We haven't heard a lot of good news on construction in a while.

Can you give us some more color on that?

I guess specifically it sounds like it might have been more Northeast.

Is that isolated item, is it share taking?

Is it a restarting generally that you're seeing, a broader trend?

Any comments there?

This is Vic.

I'll jump in here.

It was actually rewarding to see some growth in construction.

It's been many, many quarters since we've been able to claim that, and that business has struggled really since 2008 for us.

Actually at the start of this quarter, as I travel the country and I talked to our construction teams, and I look around the environment, I was heartened to see, I would put this as very cautious optimism, that dirt was starting to move.

Projects were starting to be let.

Our teams are starting to feel like they are having more activity, and I was hopeful that would translate into some more new business.

It was not just the northeast.

We are actually starting to see more activity around the country.

It hasn't all translated to business yet, and my teams would be very cautiously optimistic again, as I remind you.

But we had new business on the P&C side, we had some projects going.

Surety holds it back still.

That market is still soft.

But I'm cautiously optimistic.

And it's, as our second-largest business, it's one that if construction does take off like I hope it will, it will bode well for Willis North America and Willis Group.

Is a mostly new or is it restarting of existing?

I would say it's all of the above.

Contractors that are currently operating at one-third of what they used to do in 2006, 2007 are starting to see a pickup in their business, projects that had not had funding and had not been built are starting to happen.

It's all of the above.

I think construction hit its bottom and we are starting to see some signs of life.

I want to see that translate into several quarters of growth before I have a parade, but like I said, I'm starting to see some signs.

A little light at the end of the tunnel.

Yes.

Great.

Thanks for your time, and Joe, best of luck in your next efforts.

Thanks Brett, thanks for everything.

I appreciate it.

I'll see you along the way.

Ray Iardella, Macquarie.

Hi, Ray, how are you doing.

Good, how are you doing, Joe?

Just one quick question I guess, for Steve, I'll start out.

Just curious.

I'm not as familiar with the role of Deputy CEO, I'm just curious, could you give us a little bit more color on what the sort of duties are and then how you plan to manage those duties alongside running Global?

I must say every eye in the room is now turned towards me.

I want to hear this myself, Ray.

Ray, I really appreciate the question very much.

I had the pleasure of meeting Dominic for the first time two months ago through this process, and I think it's been a matter of a lot of speculation that I was a candidate for the position of CEO as well.

I can confirm I went through a very rigorous process with our Board and advisors in terms of that process.

As the outcome of that was, as you've seen, that I am Deputy CEO elect and in the new year, will take on that position.

I met Dominic back in the middle of the summer as part of his process.

And found somebody, maybe going back to an earlier question, who clearly brings with him a brain, that's obvious I guess with the 30-year career he's had at McKinsey, a strategic one at that, but also somebody I think who I can work with and the leadership team here more generally can work with very well going forward.

I will retain my responsibilities for our Global businesses until such time as Dominic decides that he has other things for me to do.

I'm also the CEO of Willis Limited, our UK regulated entity, and I will continue in that capacity working with the non executive chairman of that business, Ronnie Baker Bates.

And I think Dominic and I have concluded we have lots of other things to be getting on with in the meantime, and through that list of lots of other things, I will pick up some additional responsibilities.

I hope that satisfies my colleagues in the room, if not you, Ray, in terms of an answer.

Yes, I appreciate the additional color.

The only other question I wanted to touch on quickly is sort of the India joint venture.

Just curious, A, how large was that?

And B, why are you guys so comfortable in terms of this new joint venture in India if I think I heard you correctly, going forward?

We had, as you know, we can only own 26% of a business in India.

So you have to have a partner and we had a partner when I got here 12 years ago, and it simply didn't work out.

The license is not ours, if you will, it's the joint venture partners because they own the majority of shares.

They had an issue -- I can't get into the gory details, as you could appreciate, for legal reasons, but they had an issue in India.

When they had an issue, we had an issue.

And so to be able to disconnect ourselves from that issue, we had to pay an amount for our business, if you will, and that's the money that you heard Mike talk about.

We weren't talking about enormous amounts of money, but we're talking about double-digit, low double digit numbers in the millions.

So that's over with.

That's done.

That's another example of just another thing that occurred over the last few years that happens.

And we seem to have gotten more of this stuff happen than anybody else.

It's not quoting, it was me, but it happened, and it's over with.

The new joint venture partner I'm excited about, because we've actually been in business with them, without being on a licensed basis with them, for over a couple of years.

So we know them quite well.

We basically process whatever we do on an unpaid basis with them.

So it's not like we started anew on a Monday with them and don't know them.

So we're pretty comfortable.

We're waiting for the approval process to happen, we're waiting for all the legal processes to take place.

And so we're ready to go and we've got this behind us as well.

It's another example, thanks for bringing it up, of something that's behind us.

Okay.

Well, I appreciate the color and all the best in the future, Joe.

Thanks so much, Ray.

Nice, obviously, operating with you.

Thank you.

Cliff Gallant, KBW.

Cliff, I can't believe that it looks like you're on the list for the last question, and you --

And all my questions have been answered for 12 years.

I want to know we've been talking to each other now for 12 years.

You were one of the early people in this Company, and you believed in it early and believed in me.

I really sincerely appreciate that, Cliff.

No, thank you.

Thank you for your leadership.

I've enjoyed working with you.

My questions for today really have been answered.

So thank you and good luck, Joe.

Thank you very much.

Is there any other questions?

I'm showing no further questions.

Thank you very much, everybody.

Goodbye, and so long.

Thank you.

This does conclude today's conference.

Thank you very much for joining.

You may disconnect at this time.