Document


 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 14, 2016
_____________________
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
_____________________
Ireland
001-16503
98-0352587
(State or other jurisdiction or incorporation)
(Commission File Number)
(IRS Employer Identification No.)
c/o Willis Group Limited,
51 Lime Street, London, EC3M 7DQ, England and Wales
(Address, including Zip Code, of Principal Executive Offices)
(011) 44-20-3124-6000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
_____________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 
 
 
 





Item 7.01 Regulation FD Disclosure.

As disclosed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2016, during the second quarter of 2016 we began managing our business across four integrated reportable operating segments. Beginning in the second quarter of 2016, the Company has changed the way it manages and reports segment revenue and operating income, resulting in a change in the Company’s reporting units from eight reporting units, formerly known as Willis International, Willis North America, Willis Capital, Wholesale & Reinsurance, Willis GB, Towers Watson Benefits, Towers Watson Exchange Solutions, Towers Watson Risk and Financial Services, and Towers Watson Talent and Rewards into four reporting units: Human Capital and Benefits, Corporate Risk and Broking, Human Capital and Benefits, and Exchange Solutions.
For informational purposes only, to assist in understanding these changes, Exhibit 99.1 presents recast segment information for the three months ended March 31, 2016, each of the quarters of 2015, and for the year ended 2014. Legacy Towers Watson segment results are included in the segment information on a pro forma basis for periods prior to the Merger of Willis Group Holdings Public Limited Company and Towers Watson & Co. pursuant to that certain Agreement and Plan of Merger, dated June 29, 2015, as amended on November 19, 2015, and completed on January 4, 2016 (‘Merger’). The changes in our reporting segments will be reflected in the financial statements reported in the Quarterly Report on Form 10-Q to be filed on or about August 9, 2016.
The impact of the changes to the selected financial data described above, retrospectively applied to 2014, 2015 and the three months ended March 31, 2016 is disclosed in Exhibit 99.1.

Item 9.01 - Financial Statements and Exhibits
Exhibit No.
 
Description
99.1
 
Recast segment information


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Willis Towers Watson Public Limited Company
 
 
By:
 
/s/ SUSAN D. DAVIES
 
 
Susan D. Davies
 
 
Controller and
 
 
Principal Accounting Officer
 
 
 
Dated: July 14, 2016




Exhibit


Exhibit 99.1
As disclosed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2016, during the second quarter of 2016 we began managing our business across four integrated reportable operating segments. Beginning in the second quarter of 2016, the Company has changed the way it manages and reports segment revenue and operating income, resulting in a change in the Company’s reporting units from eight reporting units, formerly known as Willis International, Willis North America, Willis Capital, Wholesale & Reinsurance, Willis GB, Towers Watson Benefits, Towers Watson Exchange Solutions, Towers Watson Risk and Financial Services, and Towers Watson Talent and Rewards into four reporting units: Human Capital and Benefits, Corporate Risk and Broking, Investment, Risk and Reinsurance, and Exchange Solutions.
For informational purposes only, to assist in understanding these changes, this Exhibit 99.1 presents recast segment information for the three months ended March 31, 2016, each of the quarters of 2015, and for the year ended December 31, 2014. Legacy Towers Watson segment results are included in the segment information on a pro forma basis for periods prior to the Merger of Willis Group Holdings Public Limited Company and Towers Watson & Co. pursuant to that certain Agreement and Plan of Merger, dated June 29, 2015, as amended on November 19, 2015, and completed on January 4, 2016 (‘Merger’). The changes to our segment reporting will be reflected in the financial statements reported in the Quarterly Report on Form 10-Q to be filed on or about August 9, 2016.
The following reflects the impact of the segment reorganization as described above. The unaudited changes have been applied retrospectively for the three months ended March 31, 2016, each quarter for 2015 and for the year ended December 31, 2014.
Legacy Segment Information
Legacy Willis segment operating income previously excluded certain costs from its segment results including (i) costs of the holding company; (ii) costs of Group functions, leadership and projects; (iii) certain litigation provisions; (iv) Willis Towers Watson integration costs; (v) non-servicing costs and income of the defined benefit pension schemes; and (vi) corporate restructuring costs associated with the Operational Improvement Program.
Legacy Towers Watson segment revenue previously excluded amounts that were directly incurred on behalf of Towers Watson’s clients and reimbursed by them (reimbursable expenses), which is included in Revenue for US GAAP reporting. Legacy Towers Watson segment revenue also includes revenue deferred at the time of the Merger, and eliminated due to purchase accounting, which would have otherwise been recognized had the Merger not occurred. Legacy Towers Watson segment operating income excluded certain costs from its segment results, including (i) discretionary compensation and related payroll taxes; (ii) certain share-based compensation; (iii) amortization of intangibles; and (iv) Merger-related costs. To the extent that the actual expense base, upon which allocations are made, differs from the forecast/budget amount, a reconciling item is created between internally allocated expenses and the actual expense that we report for US GAAP purposes.

1



The following table sets out the segment revenue for Willis Towers Watson for the three months ended March 31, 2016 and as reported segment revenue for Legacy Willis segments and pro forma segment revenue for the Legacy Towers Watson segments for each quarter of 2015 and for the year ended December 31, 2014:
As Reported & Pro Forma (i)
2016
 
2015
 
2014
Segment revenue
Q1
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
FY
 
(in millions)
Willis International
$
487

 
$
288

 
$
244

 
$
212

 
$
324

 
$
1,068

 
$
1,044

Willis North America
369

 
359

 
316

 
309

 
321

 
1,305

 
1,323

Willis CWR
332

 
297

 
191

 
184

 
143

 
815

 
766

Willis GB
141

 
143

 
171

 
141

 
186

 
641

 
669

Towers Watson Benefits
486

 
496

 
472

 
448

 
467

 
1,883

 
1,939

Towers Watson Exchange Solutions
152

 
97

 
98

 
118

 
132

 
445

 
329

Towers Watson Risk and Financial Services
144

 
156

 
146

 
138

 
145

 
585

 
637

Towers Watson Talent and Rewards
124

 
140

 
146

 
160

 
175

 
621

 
596

Total segment revenue
2,235

 
1,976

 
1,784

 
1,710

 
1,893

 
7,363

 
7,303

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustment to deferred revenue in purchase accounting
(32
)
 

 

 

 

 

 

Reimbursable expenses
31

 
32

 
26

 
31

 
31

 
120

 
119

As reported revenue for 2016 and pro forma revenue for 2015 and 2014
$
2,234

 
$
2,008

 
$
1,810

 
$
1,741

 
$
1,924

 
$
7,483

 
$
7,422

(i)
Pro forma means Legacy Towers Watson historical reporting plus Legacy Willis historical reporting. These figures are not in conformity with US GAAP.

2



The following table sets out the segment commissions, fees and consulting revenue for Willis Towers Watson for the three months ended March 31, 2016 and as reported segment commissions, fees and consulting revenue for Legacy Willis segments and pro forma segment commissions, fees and consulting revenue for the Legacy Towers Watson segments for each quarter of 2015 and for the year ended December 31, 2014:
As Reported & Pro Forma (i)
2016
 
2015
 
2014
Segment commissions, fees and consulting revenue
Q1
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
FY
 
(in millions)
Willis International
$
481

 
$
287

 
$
243

 
$
211

 
$
322

 
$
1,063

 
$
1,038

Willis North America
368

 
356

 
314

 
308

 
320

 
1,298

 
1,318

Willis CWR
331

 
296

 
190

 
183

 
142

 
811

 
749

Willis GB
139

 
142

 
170

 
139

 
186

 
637

 
662

Towers Watson Benefits
486

 
496

 
472

 
448

 
467

 
1,883

 
1,939

Towers Watson Exchange Solutions
152

 
97

 
98

 
118

 
132

 
445

 
329

Towers Watson Risk and Financial Services
144

 
156

 
146

 
138

 
145

 
585

 
637

Towers Watson Talent and Rewards
124

 
140

 
146

 
160

 
175

 
621

 
596

Total commissions, fees and consulting revenue
2,225

 
1,970

 
1,779

 
1,705

 
1,889

 
7,343

 
7,268

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustment to deferred revenue in purchase accounting
(32
)
 

 

 

 

 

 

Reimbursable expenses and interest and other
41

 
38

 
31

 
36

 
35

 
140

 
154

As reported revenue for 2016 and pro forma revenue for 2015 and 2014
$
2,234

 
$
2,008

 
$
1,810

 
$
1,741

 
$
1,924

 
$
7,483

 
$
7,422

(i)
Pro forma means Legacy Towers Watson historical reporting plus Legacy Willis historical reporting. These figures are not in conformity with US GAAP.



3



The following table sets out the segment operating income for Willis Towers Watson for the three months ended March 31, 2016 and as reported segment operating income for Legacy Willis segments and pro forma segment operating income for the Legacy Towers Watson segments for each quarter of 2015 and for the year ended December 31, 2014:
As Reported & Pro Forma (i)
2016
 
2015
 
2014
Segment operating income
Q1
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
FY
 
(in millions)
Willis International
$
147

 
$
70

 
$
19

 
$
(12
)
 
$
88

 
$
165

 
$
195

Willis North America
83

 
78

 
32

 
34

 
43

 
187

 
232

Willis CWR
152

 
153

 
36

 
9

 
(40
)
 
158

 
224

Willis GB
20

 
21

 
39

 
24

 
59

 
143

 
148

Towers Watson Benefits
173

 
191

 
170

 
151

 
168

 
680

 
663

Towers Watson Exchange Solutions
45

 
21

 
15

 
22

 
20

 
78

 
60

Towers Watson Risk and Financial Services
34

 
49

 
32

 
34

 
37

 
152

 
170

Towers Watson Talent and Rewards
13

 
28

 
26

 
47

 
64

 
165

 
127

Total segment operating income
667

 
611

 
369

 
309

 
439

 
1,728

 
1,819

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs of the holding company

 
(2
)
 
(7
)
 
(2
)
 
3

 
(8
)
 
(13
)
Costs related to group functions, leadership and projects

 
(37
)
 
(36
)
 
(40
)
 
(54
)
 
(167
)
 
(171
)
Non-servicing elements of defined benefit pension plans

 
22

 
27

 
29

 
32

 
110

 
53

Differences in allocation methods
13

 
(1
)
 
(1
)
 
10

 
(6
)
 
2

 
30

Fair value adjustment for deferred revenue
(32
)
 

 

 

 

 

 

Amortization
(126
)
 
(15
)
 
(16
)
 
(17
)
 
(23
)
 
(71
)
 
(72
)
Restructuring costs
(5
)
 
(11
)
 
(5
)
 
(5
)
 
(12
)
 
(33
)
 
(17
)
Merger and integration costs
(44
)
 

 
(7
)
 
(19
)
 
(129
)
 
(155
)
 

Provision for litigation
(50
)
 

 

 

 
(70
)
 
(70
)
 

Share-based compensation
(15
)
 
(5
)
 
(5
)
 
(2
)
 
(6
)
 
(18
)
 
(17
)
Discretionary compensation
(84
)
 
(98
)
 
(73
)
 
(101
)
 
(81
)
 
(353
)
 
(354
)
Payroll tax on discretionary compensation
(6
)
 
(6
)
 
(2
)
 
(6
)
 
(9
)
 
(23
)
 
(21
)
Other, net
8

 
1

 
(8
)
 

 
(11
)
 
(18
)
 
(32
)
As reported income from operations for 2016 and pro forma income from operations for 2015 and 2014
$
326

 
$
459

 
$
236

 
$
156

 
$
73

 
$
924

 
$
1,205

________________________
(i)
Pro forma means Legacy Towers Watson historical reporting plus Legacy Willis historical reporting. These figures are not in conformity with US GAAP.


4



Descriptions of our new segments are as follows:
Human Capital and Benefits
The Willis Towers Watson Human Capital & Benefits (‘HCB’) segment provides an array of advice, broking, solutions and software for our clients. Generating 43% of the revenue for Willis Towers Watson in the first quarter of 2016, HCB is the largest segment of the Company. The segment is focused on addressing our clients’ people and risk agendas so that they can deliver excellent - and sustainable - employee experiences. This segment also delivers full outsourcing solutions to employers outside of the United States. From employee benefits to executive compensation, we take a rounded perspective, based on leading-edge thinking, data, analytics and software, unearthing new ways to motivate people, foster well-being and implement solutions that work.
Corporate Risk and Broking
Our Corporate Risk and Broking (‘CRB’) segment provides a broad range of risk advice, insurance broking and consulting services to clients worldwide ranging from small businesses to multinational corporations. CRB generated approximately 29% of the revenue for Willis Towers Watson during the first quarter of 2016. We deliver innovative, integrated global solutions tailored to client needs and underpinned by cutting edge data and analytics. CRB clients rely on us to identify and quantify the risks facing their businesses and to craft strategic solutions to manage, mitigate and transfer risks in light of their risk tolerance and strategic goals. The businesses within CRB have extensive specialized experience handling diverse lines of coverage, including complex insurance programs. A key objective is to assist clients in reducing their overall cost of risk.
Investment, Risk and Reinsurance
The Willis Towers Watson Investment, Risk and Reinsurance (‘IRR’) segment uses a sophisticated approach to risk which helps clients free up capital and manage investment complexity. We work closely with investors, reinsurers and insurers to manage the equation between risk and return. Blending advanced analytics with deep institutional knowledge, we reveal new opportunities to maximize performance. IRR generated approximately 21% of revenue for Willis Towers Watson for the first quarter of 2016. IRR provides investment services and insurance specific services and solutions through reserves opinions, software, ratemaking, usage-based insurance, risk underwriter, and reinsurance broking.
Exchange Solutions
Our Exchange Solutions segment provides primary medical and ancillary benefit exchange and outsourcing services to active employees and retirees across both the group and individual markets.  Exchange Solutions services individual populations via its ‘group to individual’ technology platform, which tightly integrates patented call routing technology, an efficient quoting and enrollment engine, a custom-developed Customer Relationship Management system and comprehensive insurance carrier connectivity. This segment also delivers group benefit exchanges and full outsourcing solutions serving the active employees of employers across the United States. We use Software as a Service (‘SaaS’)-based technology and related services to deliver consumer-driven health care and reimbursement accounts, including health savings accounts, health reimbursement arrangements, flexible spending accounts and other consumer-directed accounts.
Recast Segment Information
Under the new segment structure, for internal reporting and segment reporting, Willis Towers Watson segment revenue includes commissions, fees and consulting revenue, interest and other income. The segment revenue includes revenue deferred at the time of the Merger, and eliminated due to purchase accounting, which would have otherwise been recognized had the Merger not occurred. US GAAP revenue includes amounts that were directly incurred on behalf of our clients and reimbursed by them (reimbursable expenses), which are removed from segment revenue. Willis Towers Watson segment operating income excludes certain costs, including (i) amortization of intangibles; (ii) restructuring costs; (iii) certain integration expenses; (iv) certain litigation provisions; and (v) to the the extent that the actual expense based upon which allocations are made, differs from the forecast/budget amount, a reconciling item will be created between internally allocated expenses and the actual expense that we report for US GAAP purposes.

5



The following table sets out the recast segment revenue for Willis Towers Watson for the three months ended March 31, 2016, and the combined and recast as reported segment revenue for Legacy Willis segments and pro forma segment revenue for the Legacy Towers Watson segments for each quarter of 2015 and for the year ended December 31, 2014, as described in Item 7.01 to this Form 8-K.
Recast & Pro Forma (i)
2016
 
2015
 
2014
Segment revenue
Q1
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
FY
 
(in millions)
Human Capital and Benefits
$
955

 
$
892

 
$
755

 
$
741

 
$
779

 
$
3,167

 
$
3,195

Corporate Risk and Broking
645

 
527

 
585

 
523

 
683

 
2,318

 
2,381

Investment Risk and Reinsurance
479

 
458

 
339

 
326

 
288

 
1,411

 
1,403

Exchange Solutions
163

 
107

 
106

 
129

 
145

 
487

 
325

Total recast segment revenue
2,242

 
1,984

 
1,785

 
1,719

 
1,895

 
7,383

 
7,304

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments for conformity (ii)
(7
)
 
(8
)
 
(1
)
 
(9
)
 
(2
)
 
(20
)
 
(1
)
Fair value adjustment to deferred revenue in purchase accounting
(32
)
 

 

 

 

 

 

Reimbursable expenses
31

 
32

 
26

 
31

 
31

 
120

 
119

As reported revenue for 2016 and pro forma revenue for 2015 and 2014
$
2,234

 
$
2,008

 
$
1,810

 
$
1,741

 
$
1,924

 
$
7,483

 
$
7,422

________________________
(i)
Pro forma means Legacy Towers Watson historical reporting plus Legacy Willis historical reporting. These figures are not in conformity with US GAAP.
(ii)
Includes adjustments to conform the accounting policies of the legacy organizations.
The following table sets out the recast segment commissions, fees and consulting revenue for Willis Towers Watson for the three months ended March 31, 2016, and the combined and recast as reported segment commissions, fees and consulting revenue for Legacy Willis segments and pro forma segment commissions, fees and consulting revenue for the Legacy Towers Watson segments for each quarter of 2015 and for the year ended December 31, 2014.
Recast & Pro Forma (i)
2016
 
2015
 
2014
Segment commissions, fees and consulting revenue
Q1
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
FY
 
(in millions)
Human Capital and Benefits
$
952

 
$
886

 
$
750

 
$
736

 
$
779

 
$
3,151

 
$
3,180

Corporate Risk and Broking
638

 
522

 
581

 
519

 
679

 
2,301

 
2,365

Investment Risk and Reinsurance
475

 
455

 
337

 
320

 
287

 
1,399

 
1,377

Exchange Solutions
163

 
107

 
105

 
128

 
144

 
484

 
324

Total recast segment commissions, fees and consulting revenue
2,228

 
1,970

 
1,773

 
1,703

 
1,889

 
7,335

 
7,246

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments for conformity (ii)
(7
)
 
(8
)
 
(1
)
 
(9
)
 
(2
)
 
(20
)
 
(1
)
Fair value adjustment to deferred revenue in purchase accounting
(32
)
 

 

 

 

 

 

Interest & other income
14

 
14

 
12

 
16

 
6

 
48

 
58

Reimbursable expenses
31

 
32

 
26

 
31

 
31

 
120

 
119

As reported revenue for 2016 and pro forma revenue for 2015 and 2014
$
2,234

 
$
2,008

 
$
1,810

 
$
1,741

 
$
1,924

 
$
7,483

 
$
7,422

________________________
(i)
Pro forma means Legacy Towers Watson historical reporting plus Legacy Willis historical reporting. These figures are not in conformity with US GAAP.


6



The following table sets out the recast segment operating income for Willis Towers Watson for the three months ended March 31, 2016, and the combined and recast as reported segment operating income for Legacy Willis segments and pro forma segment operating income for the Legacy Towers Watson segments for each quarter of 2015 and for the year ended December 31, 2014.
Recast & Pro Forma (i)
2016
 
2015
 
2014
Segment operating income
Q1
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
FY
 
(in millions)
Human Capital and Benefits
$
297

 
$
273

 
$
148

 
$
123

 
$
164

 
$
708

 
$
643

Corporate Risk and Broking
120

 
64

 
129

 
76

 
223

 
492

 
500

Investment Risk and Reinsurance
176

 
189

 
56

 
34

 
(10
)
 
269

 
316

Exchange Solutions
39

 
14

 
9

 
15

 
14

 
52

 
40

Total recast segment operating income
632

 
540

 
342

 
248

 
391

 
1,521

 
1,499

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Differences in allocation methods and other (ii)
8

 
(18
)
 
(17
)
 
(3
)
 
(25
)
 
(63
)
 
(101
)
Fair value adjustment for deferred revenue
(32
)
 

 

 

 

 

 

Amortization
(161
)
 
(29
)
 
(32
)
 
(41
)
 
(46
)
 
(148
)
 
(126
)
Restructuring costs
(25
)
 
(31
)
 
(38
)
 
(24
)
 
(33
)
 
(126
)
 
(36
)
Merger and integration costs
(52
)
 
(3
)
 
(10
)
 
(23
)
 
(132
)
 
(168
)
 

Provision for litigation
(50
)
 

 

 

 
(70
)
 
(70
)
 

Other, net
6

 

 
(9
)
 
(1
)
 
(12
)
 
(22
)
 
(31
)
As reported operating income for 2016 and pro forma revenue for 2015 and 2014
$
326

 
$
459

 
$
236

 
$
156

 
$
73

 
$
924

 
$
1,205

________________________
(i)
Pro forma means Legacy Towers Watson historical reporting plus Legacy Willis historical reporting. These figures are not in conformity with US GAAP.
(ii)
Other includes costs related to the holding company, group functions, leadership projects and non-servicing elements of the defined benefit pension plan for Legacy Willis operations.

7