Fitch Affirms Willis Group's Ratings at 'BBB-'; Outlook Stable

CHICAGO--()--Fitch Ratings has affirmed the 'BBB-' Issuer Default Ratings (IDRs) of Willis Group Holdings PLC (Willis), Willis North 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 affirmation reflects Willis' strong liquidity profile with good cash flow generation and increasing financial flexibility, favorable competitive position as one of the top three global insurance brokers, positive organic growth and a 2014 operating EBIT margin of 17.2% that remains in line with the company's closest peers.

The affirmation further reflects an expectation that projected ranges for two key credit ratios, debt/EBITDA and EBITDA/interest coverage, will remain at manageable levels.

For several years, Willis has operated at debt/EBITDA levels that Fitch considers high for its rating of 'BBB-', compared with Fitch's median benchmark for insurance brokers of 2.25x for the 'BBB' rating category. Fitch anticipates that Willis' financial leverage will gradually return to levels near 2.5x, from 2.9x at Dec. 31, 2014, assuming EBITDA continues to improve and debt levels remain stable.

EBITDA of $799 million in 2014 increased 3% from the prior year, due to revenue gains and moderating expense growth. EBITDA/interest coverage was 5.9x and Fitch expects this ratio to remain stable in the mid-single digits or modestly higher, a level adequate for Willis' current rating category.

Willis' operating results remain pressured by its current operational improvement program, competitive insurance market and weaker global economic conditions affecting business demand, and pension contributions. Organic revenue growth continued at 3.8% in 2014, but slowed from 2013, as Willis has historically reported positive growth in both favorable and unfavorable insurance pricing cycles. Operating margin expansion is expected over the intermediate term as a result of the cost savings program, even with slower organic growth.

RATING SENSITIVITIES

Key rating triggers that could result in a downgrade include a failure to gradually reduce Willis' debt-to-EBITDA ratio from recent levels, or a failure to maintain average EBITDA-to-interest ratios of 5x or higher.

Fitch could also downgrade Willis' ratings if the company were to report a material goodwill impairment that cast doubt on Willis' ability to generate 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 existing debt, Fitch could downgrade Willis' ratings.

Key rating triggers that could result in an upgrade include a debt-to-EBITDA ratio sustained 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-';

--4.125% senior unsecured notes due 2016 at 'BBB-';

--5.75% senior unsecured notes due 2021 at 'BBB-'.

Willis North America Inc.

--IDR at 'BBB-';

--5.625% senior unsecured notes due 2015 at 'BBB-';

--6.2% senior unsecured notes due 2017 at 'BBB-';

--7.00% senior notes due 2019 at 'BBB-'.

Trinity Acquisition plc

--IDR at 'BBB-';

--4.625% senior unsecured notes due Aug. 15, 2023 at 'BBB-';

--6.125% senior unsecured notes due Aug. 15, 2043 at 'BBB-'.

Additional information is available on Fitch's web site at 'www.fitchratings.com'.

THE ISSUER DID NOT PARTICIPATE IN THE RATING PROCESS, OR PROVIDE ADDITIONAL INFORMATION, BEYOND THE ISSUER'S AVAILABLE PUBLIC DISCLOSURE.

Applicable Criteria and Relevant Research:

--'U.S. Insurance Broker Industry Sector Credit Factors' (May 4, 2012);

--'Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary' (May 28, 2014).

Applicable Criteria and Related Research:

U.S. Insurance Broker Industry Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677409

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=980371

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Contacts

Contact:
Primary Analyst
Martha M. Butler, CFA, +1-312-368-3191
Senior Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst:
Gretchen Roetzer, +1-312-606-2327
Director
or
Committee Chairperson
Douglas Meyer, +1-312-368-2061
Managing Director
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
alyssa.castelli@fitchratings.com
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Contact:
Primary Analyst
Martha M. Butler, CFA, +1-312-368-3191
Senior Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst:
Gretchen Roetzer, +1-312-606-2327
Director
or
Committee Chairperson
Douglas Meyer, +1-312-368-2061
Managing Director
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
alyssa.castelli@fitchratings.com
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com