This discussion includes references to non-GAAP financial measures as defined in Regulation G of the rules of the Securities and Exchange Commission ('SEC'). We present such non-GAAP financial measures, specifically, organic growth in commissions and fees, adjusted operating margin, adjusted operating income, adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations, as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company's operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. Organic growth in commissions and fees excludes the impact of acquisitions and disposals, period over period movements in foreign exchange, legacy contingent commissions assumed as part of the HRH acquisition, and investment and other income from growth in revenues and commissions and fees. Adjusted operating margin, adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations are calculated by excluding the impact of certain specified items from operating income, net income from continuing operations, and earnings per diluted share from continuing operations, respectively, the most directly comparable GAAP measures. These financial measures should be viewed in addition to, not in lieu of, the consolidated financial statements for the three and six months ended June 30, 2012.

This discussion includes forward-looking statements. Please see 'Forward-Looking Statements' for certain cautionary information regarding forward-looking statements and a list of factors that could cause actual results to differ materially from those predicted in those statements.

EXECUTIVE SUMMARY

Business Overview

We provide a broad range of insurance broking, risk management and consulting services to our clients worldwide and organize our business into three segments:
Global, North America and International.

Our Global business provides specialist brokerage and consulting services to clients worldwide arising from specific industries and activities including Aerospace; Energy; Marine; Construction; Financial and Executive Risks; Fine Art, Jewelry and Specie; Special Contingency Risks; and Reinsurance.

North America and International comprise our retail operations and provide services to small, medium and large corporations and the employee benefits practice, our largest product-based practice group, provides health, welfare and human resources consulting and brokerage services.

In our capacity as advisor and insurance broker, we act as an intermediary between our clients and insurance carriers by advising our clients on their risk management requirements, helping clients determine the best means of managing risk, and negotiating and placing insurance with insurance carriers through our global distribution network.

We derive most of our revenues from commissions and fees for brokerage and consulting services and do not determine the insurance premiums on which our commissions are generally based. Commission levels generally follow the same trend as premium levels as they are derived from a percentage of the premiums paid by the insureds. Fluctuations in these premiums charged by the insurance carriers can therefore have a direct and potentially material impact on our results of operations.

Due to the cyclical nature of the insurance market and the impact of other market conditions on insurance premiums, commission revenues may vary widely between accounting periods. A period of low or declining premium rates, generally known as a 'soft' or 'softening' market, generally leads to downward pressure on commission revenues and can have a material adverse impact on our commission revenues and operating margin. A 'hard' or 'firming' market, during which premium rates rise, generally has a favorable impact on our commission revenues and operating margin.

Market Conditions

The years 2005 through 2010 were generally viewed as soft market years across most of our product offerings and our commission revenues and operating margins throughout that period were negatively impacted, although in 2009 the market experienced modest stabilization in the reinsurance market and certain specialty markets.

Willis Group Holdings plc

Our North America and UK and Irish retail operations were particularly impacted by the weakened economic climate and continued soft market throughout 2009 and 2010 with no material improvement in rates across most sectors in these geographic regions. This resulted in declines in revenues in these operations, particularly amongst our smaller clients who have been especially vulnerable to the economic downturn.

In 2011, we saw some modest increases in catastrophe-exposed property insurance and reinsurance pricing levels driven by significant 2011 catastrophe losses including the Japanese earthquake and tsunami, the New Zealand earthquake, the mid-west US tornadoes and Thailand floods. However, in general, we continued to be negatively impacted by the soft insurance market and challenging economic conditions across other sectors and most geographic regions.

Thus far in 2012, the trend in rates noted in 2011 in catastrophe-exposed regions continues as insurance and reinsurance rates in such regions have firmed or hardened.

There have been recent signs that the unprofitability of certain business lines such as property catastrophe and workers' compensation is slowly firming rates in those lines. However, we believe that, in the absence of a significant catastrophe loss or capital impairment in the industry, a universal turn in market rates is not likely to occur.

The outlook for our business, operating results and financial condition continues to be challenging due to the economic conditions within certain European Union countries, in particular, Greece, Ireland, Italy, Portugal and Spain. If the Eurozone debt crisis continues or further deteriorates, there will likely be a negative effect on our European business as well as the businesses of our European clients. A significant devaluation of the Euro would cause the value of our financial assets that are denominated in Euros to be significantly reduced.

Financial Performance

Consolidated Financial Performance

Results from operations: second quarter 2012

Total revenues of $842 million for second quarter 2012 were $19 million, or 2 percent, lower than in second quarter 2011. Total commissions and fees for second quarter 2012 were $837 million, down from $852 million in the prior year quarter. Foreign currency movements negatively impacted commissions and fees by $24 million, or 4 percent, and organic growth was 2 percent.

Organic growth in commissions and fees was driven by 7 percent growth in our Global and 2 percent growth in our International operations whilst our North America operations reported a 3 percent decline compared to second quarter 2011. The North America result was negatively impacted by the performance of Loan Protector. Loan Protector is a specialty business acquired as part of HRH in 2008 which provides lender placed insurance and insurance tracking services to the mortgage servicing industry. This business line has declined very significantly in the last year and we do not consider it representative of our operations. We believe that excluding the results of Loan Protector gives a better measure of our financial performance. Excluding Loan Protector, North America's organic commissions and fees declined by 2 percent and overall organic commissions and fees grew by 2 percent.

Total expenses in second quarter 2012 of $663 million were $42 million, or 6 percent, lower than in second quarter 2011. Foreign currency movements positively impacted total expenses by $37 million or 5 percent.

Excluding the impact of foreign exchange, total expenses were $700 million, $5 million or 1 percent lower than in second quarter 2011. The $10 million increase in amortization of cash retention awards and the impact of salary increases and investment hires in second quarter 2012 was partially offset by a $5 million insurance recovery, while second quarter 2011 incurred non-recurring charges of $18 million relating to the 2011 Operational Review and an $11 million regulatory settlement.

Net income attributable to Willis shareholders from continuing operations was $107 million or $0.61 per diluted share in second quarter 2012 compared to $84 million or $0.48 per diluted share in second quarter 2011. The $23 million increase reflects the reduction in total expenses described above.

Foreign currency movements increased earnings by $0.06 per diluted share in second quarter 2012 compared with second quarter 2011.

Results from operations: six months ended June 30, 2012

Total revenues of $1,855 million for first half 2012 were $13 million, or 1 percent, lower than in first half 2011. Total commissions and fees for first half 2012 were $1,842 million, down from $1,851 million in first half 2011. Foreign currency movements negatively impacted commissions and fees by 2 percent and organic growth was 2 percent.

Organic growth in commissions and fees was driven by 6 percent growth in our Global and 3 percent growth in our International operations, whilst our North America operations reported a 3 percent decline compared to first half 2011. This result was negatively impacted by the performance of Loan Protector. Excluding Loan Protector, North America's organic commissions and fees declined 1 percent and overall organic commissions and fees grew 3 percent.

Total expenses in first half 2012 of $1,359 million were $114 million, or 8 percent, lower than in first half 2011. Foreign currency movements positively impacted expenses by $44 million or 3 percent.

Excluding the impact of foreign exchange, total expenses were $1,403 million, $70 million or 5 percent lower than first half 2011. First half 2012 expenses included a $28 million increase in amortization of cash retention awards, a $13 million write-off of an uncollectible accounts receivable balance together with associated legal fees (see 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below) and the impact of annual salary increases and investment hires. In first half 2011 we incurred non-recurring charges of $115 million relating to the 2011 Operational Review and an $11 million regulatory settlement.

Net income attributable to Willis shareholders from continuing operations was $332 million or $1.89 per diluted share in first half 2012 compared to $119 million or $0.68 per diluted share in first half 2011. The $213 million increase reflects the reduction in total expenses described above. Additionally, first half 2011 results include a $124 million post-tax expense relating to the make-whole amounts on the repurchase and redemption of $500 million of our senior debt and write-off of related unamortized debt issuance costs.

Foreign currency movements increased earnings by $0.04 per diluted share in first half 2012 compared with first half 2011.

Adjusted Operating Income, Adjusted Net Income from Continuing Operations and Adjusted Earnings per Diluted Share from Continuing Operations

Adjusted operating income, adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations are calculated by excluding the impact of certain items (as detailed below) from operating income, net income from continuing operations, and earnings per diluted share from continuing operations, respectively, the most directly comparable GAAP measures.

The following items are excluded from operating income and net income from continuing operations as applicable:

(i) write-off of uncollectible accounts receivable balance and associated legal fees arising in a stand-alone business due to fraudulent overstatement of commissions and fees;

(ii) costs associated with the 2011 Operational Review;

(iii) significant legal and regulatory settlements which are managed centrally;

(iv) gains and losses on the disposal of operations;

(v) insurance recoveries; and

(vi) make-whole amounts on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs.

We believe that excluding these items, as applicable, from operating income, net income from continuing operations, and earnings per diluted share, provides a more complete and consistent comparative analysis of our results of operations. We use these and other measures to establish Group performance targets and evaluate the performance of our operations. The

Willis Group Holdings plc

Company also uses both adjusted earnings per diluted share from continuing operations and adjusted operating margin measures to form the basis of establishing and assessing components of compensation.

As set out in the tables below, adjusted operating margin at 20.7 percent in second quarter 2012 was down 80 basis points compared to second quarter 2011, while second quarter 2012 adjusted net income from continuing operations was $104 million, $3 million lower than in second quarter 2011. Adjusted earnings per diluted share from continuing operations was $0.59 in second quarter 2012, compared to $0.61 in second quarter 2011.

Adjusted operating margin at 27.2 percent in first half 2012 was down 50 basis points compared to first half 2011, while first half 2012 adjusted net income from continuing operations was $337 million, $6 million higher than in first half 2011. Adjusted earnings per diluted share from continuing operations was $1.91 in first half 2012, compared to $1.89 in first half 2011.

A reconciliation of adjusted operating income to reported operating income, the most directly comparable GAAP measure, for the three and six months ended June 30, is as follows (in millions, except percentages):

                                                 Three months ended                   Six months ended
                                                      June 30,                            June 30,
                                              2012               2011             2012               2011
Operating income, GAAP basis                $     179         $      156        $     496         $      395
Excluding:
Write-off of uncollectible accounts
receivable balance and legal costs(a)               -                  -               13                  -
Insurance recovery(b)                              (5 )                -               (5 )                -
2011 Operational Review(c)                          -                 18                -                115
FSA regulatory settlement(d)                        -                 11                -                 11
Net gain on disposal of operations                  -                  -                -                 (4 )

Adjusted operating income                   $     174         $      185        $     504         $      517

Operating margin, GAAP basis, or
operating income as a percentage of
total revenues                                   21.3 %             18.1 %           26.7 %             21.1 %

Adjusted operating margin, or adjusted
operating income as a percentage of
total revenues                                   20.7 %             21.5 %           27.2 %             27.7 %

(a) Write-off of uncollectible accounts receivable balance and associated legal costs relating to periods prior to January 1, 2012. See 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below.

(b) Related to previously disclosed fraudulent activity in a stand-alone North America business. See 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below.

(c) Charge relating to the 2011 Operational Review, including $9 million and $57 million of severance costs for the three and six months ended June 30, 2011 respectively related to the elimination of approximately 150 and 600 positions in the three and six months ended June 30, 2011, respectively.

(d) Regulatory settlement with the Financial Services Authority (FSA).

A reconciliation of reported net income from continuing operations and reported earnings per diluted share from continuing operations, the most directly comparable GAAP measures, to adjusted net income from continuing operations and adjusted earnings per diluted share from continuing operations, is as follows (in millions, except per share data):

                                                                                        Per diluted share
                                                   Three months ended                  Three months ended
                                                        June 30,                            June 30,
                                                                      %                                     %
                                              2012       2011      Change         2012         2011      Change
Net income from continuing operations
attributable to Willis Group Holdings plc     $ 107      $  84        27.4 %     $  0.61      $ 0.48        27.1 %
Excluding:
Insurance recovery, net of tax ($2,
$nil)(b)                                         (3 )        -                     (0.02 )         -
2011 Operational Review charge, net of tax
($nil, $6)(c)                                     -         12                         -        0.07
FSA regulatory settlement, net of tax
($nil, $nil)(d)                                   -         11                         -        0.06

Adjusted net income                           $ 104      $ 107        (2.8 )%       0.59        0.61        (3.3 )%

Diluted shares outstanding, GAAP basis          176        176

                                                  Six months ended                     Per diluted share
                                                      June 30,                     Six months ended June 30,
                                                                     %                                       %
                                            2012       2011       Change         2012         2011        Change
Net income from continuing operations
attributable to Willis Group Holdings plc   $ 332      $ 119        179.0 %    $   1.89      $  0.68        177.9 %
Excluding:
Write-off of uncollectible accounts
receivable balance and legal costs, net
of tax ($5, $nil)(a)                            8          -                       0.04            -
Insurance recovery, net of tax ($2,
$nil)(b)                                       (3 )        -                      (0.02 )          -
2011 Operational Review charge, net of
tax ($nil, $34)(c)                              -         81                          -         0.46
FSA regulatory settlement, net of tax
($nil, $nil)(d)                                 -         11                          -         0.06
Gain on disposal of operations, net of
tax ($nil, $nil)                                -         (4 )                        -        (0.02 )
Make-whole amounts on repurchase and
redemption of Senior Notes and write-off
of unamortized debt issuance costs, net
of tax ($nil, $47)                              -        124                          -         0.71

Adjusted net income                         $ 337      $ 331          1.8 %        1.91         1.89          1.1 %

Diluted shares outstanding, GAAP basis        176        175

(a) Write-off of uncollectible accounts receivable balance and associated legal costs relating to periods prior to January 1, 2012. See 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below.

(b) Related to previously disclosed fraudulent activity in a stand-alone North America business. See 'Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods', below.

(c) Charge relating to the 2011 Operational Review, including $9 million of severance costs relating to the elimination of approximately 150 positions in the second quarter of 2011 and $57 million of severance costs related to the elimination of approximately 600 positions in the first half 2011.

(d) Regulatory settlement with the Financial Services Authority (FSA).

Correction of Commissions and Fees Overstatement Relating to 2011 and Prior Periods

As previously disclosed, in early 2012 we identified through our internal financial control process and a subsequent internal investigation an uncollectible accounts receivable balance of approximately $40 million in a stand-alone business unit from the fraudulent overstatement of Commissions and fees from the years 2005 to 2011.

We concluded that the total $40 million of overstatement does not materially affect our previously issued financial statements for any of the prior periods and we corrected the misstatement by recognizing a charge to Other operating expenses to write off the uncollectible receivable (a) of $13 million (including legal expenses) in the first quarter of 2012 and (b) of $22 million in the fourth quarter of 2011. In the fourth quarter 2011 we also reversed a $6 million balance of Commissions and fees which had been recorded during 2011 and $2 million of Salaries and benefits expense representing an over-accrual of production bonuses relating to the overstated revenue. During the second quarter 2012, we have recorded within Other operating expenses a $5 million insurance recovery being an interim settlement from insurers in respect of our claim under Group insurance policies, for compensation paid out in the years 2005 to 2010 on the fraudulently overstated revenues discussed above.

The employees in question, who have been terminated, were not members of Willis executive management nor did they play a significant role in internal control over financial reporting. Based on the results of our investigation, which has now been completed, we do not believe that any client or carrier funds were misappropriated or that any other business units were affected.

We have enhanced our internal controls in relation to the business unit in question, including enhanced procedures over receipt of checks and application of cash, increased segregation of duties between the operating unit and the accounting and settlement function, and additional central sign off on revenue recognition.

Willis Group Holdings plc

Cash Retention Awards

We started making cash retention awards in 2005 to a small number of employees. With the success of the program, we expanded it over time to include more staff and we believe it is a contributing factor to the reduction in employee turnover we have seen in recent years.

Salaries and benefits do not reflect the unamortized portion of annual cash retention awards made to employees. Employees must repay a proportionate amount of these cash retention awards if they voluntarily leave our employ (other than in the event of redundancy, retirement or permanent disability) within a certain time period, currently three years. We make cash payments to our employees in the year we grant these retention awards and recognize these payments ratably over the period they are subject to repayment, beginning in the quarter in which the award is made.

During second quarter and first half 2012, we made $25 million and $217 million, respectively, of cash retention award payments compared with $11 million and $206 million in the same periods of 2011. Salaries and benefits expense in second quarter and first half 2012 include $54 million and $116 million, respectively, of amortization of cash retention award payments made on or before June 30, 2012, compared with $44 million and $88 million in the same periods of 2011.

Included within the $116 million amortization of cash retention awards is a $7 million charge for retention waivers. In certain circumstances we may choose to waive repayment of retention awards when an employee leaves the Company. Therefore when we make the retention award payments we book a provision to reflect the anticipated level of waivers.

The remaining increase of $21 million reflects the higher level of cash retention awards paid and expected to be paid in 2012 compared to cash retention awards paid in 2009, which were fully amortized in 2011.

As of June 30, 2012, December 31, 2011 and June 30, 2011, we included $301 million, $196 million and $293 million, respectively, within Other current assets and Other non-current assets on the balance sheet, which represented the unamortized portion of cash retention award payments made on or before those dates.

Pension Expense

We recorded a net pension income on our UK defined benefit pension plan in second quarter and first half 2012 of $1 million, and $2 million, respectively, compared with a net charge of $2 million and $4 million in the same periods of 2011. On our US defined benefit pension plan we recorded a net pension charge in second quarter and first half 2012 of $nil, and $1 million respectively, compared with $nil and $nil in the same periods of 2011. On our international defined benefit pension plans, we recorded a net pension charge of $1 million and $2 million in second quarter and first half, respectively, of both 2012 and 2011.

The UK pension charge was $3 million and $6 million lower in second quarter 2012 and first half 2012, respectively, compared to second quarter 2011 and first half 2011 due to an increased asset return from a higher asset base partly offset by an increase in amortization of prior period losses. The US pension charge was $1 million higher in first half 2012 compared to first half 2011 reflecting an increase in amortization of prior period losses.

See 'Contractual Obligations' below for further information on our obligations relating to our pension plans.

Acquisitions and Disposals

In second quarter 2012, we acquired 100 percent of Attain Consulting Limited and Trustee Principles Limited at a total cost of $3 million.

In first quarter 2012 we acquired 49.9 percent of Gras Savoye Re at a cost of $29 million, increasing our shareholding from 50.1 percent to 100 percent.

We sold 49.9 percent of our retail operation in Peru, Willis Corredores de Seguros S.A. to Grupo Credito S.A for $3 million reducing our shareholding to 50.1 percent. Grupo Credito S.A. is an investment arm of Peru's largest financial services holding company.

Business Strategy

Our aim is to be the insurance broker and risk adviser of choice globally.

Our business model is aligned to the needs of each client segment:

• Insurer - platform-neutral capital management and advisory services;

• Large Accounts - delivering Willis' global capabilities through client advocacy;

• Mid-Market - mass-customization through our Sales 2.0 model;

• Commercial - providing products and services to networks of retail brokers; and

. . .