(The following statement was released by the rating agency)
NEW YORK, August 19 (Fitch) Fitch Ratings today affirmed the
Default Ratings (IDRs) of Willis Group Holdings PLC (Willis),
America Inc. (WNA), and Trinity Acquisition plc. The Rating
Outlook is Stable. A
full list of ratings actions is shown below.
KEY RATING DRIVERS
The affirmations reflect continued, solid performance of Willis'
brokerage operations, including positive organic growth and
profit margins that compare favorably to its closest peers.
The affirmation further reflects an expectation that projected
ranges for two
key credit ratios will remain at levels that are manageable for
Specifically, Fitch anticipates that Willis' financial leverage
as measured by
reported debt-to-EBITDA will gradually return to levels near
approximately 2.75x at year-end 2013. This key credit metric
appears poised to
improve marginally in 2014 if reported EBITDA continues to show
improvement and debt levels remain stable.
Earnings growth in the second half of 2014 may be dampened by
associated with Willis' current 'operational improvement
program' which seeks to
reduce expenses primarily by relocating more than 3,500 support
higher cost locations to lower cost relocations and workforce
Starting in the second quarter of 2014, the program is expected
to be complete
by the end of 2017. Willis expects the program to deliver
savings of approximately $420 million through 2017 and annual
cost savings of
approximately $300 million starting in 2018.
To achieve these savings, the Company expects to incur
amounting to approximately $410 million through the end of 2017.
The timing of the charges associated with this initiative is
If Willis' reported debt-to-EBITDA ratio deteriorates in 2014 as
a result of
these expenses or for other reasons, it could lead to a rating
downgrade, as for
several years Willis has operated at debt-to-EBITDA levels that
high for its current rating category of 'BBB-'. Fitch's median
debt-to-EBITDA ratio for insurance brokers is 2.25x for the
Fitch expects the company's EBITDA-to-interest expense ratio to
remain at least
in the mid-single digits where it has stabilized over the past
few years. Fitch
considers this metric to be adequate for Willis' current rating
Fitch believes that more meaningful earnings growth and
in key credit ratios will remain elusive in the near- to
medium-term due to a
challenging operating environment.
Specifically, commercial insurance rates have recently flattened
and are under
significant pressure in reinsurance lines. This trend will slow
commission-related revenue growth. The global economy could
provide a modest
tailwind as it appears to be growing, albeit at a tepid rate in
Similar to other insurance brokers that Fitch rates, Willis'
reflect that the company faces contingent risks as an occasional
litigation. While Willis purchases errors-and-omissions
insurance coverage to
protect itself against this exposure, such protection is not
always adequate to
fully indemnify the broker for monetary damages.
Key rating triggers that could result in a downgrade include a
gradually reduce Willis' debt-to-EBITDA ratio from recent
levels around 2.7x,
or a failure to maintain average EBITDA-to-interest ratios of 5x
Fitch could also downgrade Willis' ratings if the company were
to report a
material goodwill impairment that cast doubt on Willis' ability
future earnings and cash flows.
Additionally, if Willis' required pension contributions were to
increase to the
point where it strained the cash flows available to service its
Fitch could downgrade Willis' ratings.
Key rating triggers that could result in an upgrade include a
Willis' debt-to-EBITDA ratio to levels below 2.0x accompanied by
EBITDA-to-interest ratios averaging in the high single digits.
Fitch has affirmed the following ratings with a Stable Outlook:
Willis Group Holdings PLC
--IDR at 'BBB-';
--$299 million of 4.125% senior unsecured notes due 2016 at
--$496 million of 5.75% senior unsecured notes due 2021 at
Willis North America Inc.
--IDR at 'BBB-';
--$148 million 5.625% senior unsecured notes due 2015 at 'BBB-';
--$394 million 6.2% senior unsecured notes due 2017 at 'BBB-';
--$187 million 7.00% senior notes due 2019 at 'BBB-'.
Trinity Acquisition plc
--IDR at 'BBB-';
--$248 million of 4.625% senior unsecured notes due Aug. 15,
2023 at 'BBB-';
--$274 million of 6.125% senior unsecured notes due Aug. 15,
2043 at 'BBB-'.
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available on Fitch's web site at
'www.fitchratings.com'. The issuer did not participate in the
other than through the medium of its public disclosure.
Applicable Criteria and Relevant Research:
--'U.S. Insurance Broker Industry Sector Credit Factors' (May 4,
--'Corporate Rating Methodology: Including Short-Term Ratings
and Parent and
Subsidiary' (May 28, 2014).
Applicable Criteria and Related Research:
Corporate Rating Methodology - Including Short-Term Ratings and
U.S. Insurance Broker Industry Sector Credit Factors
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