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): May 1, 2019  

Willis Towers Watson Public Limited Company
(Exact Name of Registrant as Specified in Charter)

Ireland 001-16503 98-0352587
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification Number)

 

c/o Willis Group Limited, 51 Lime Street, London, EC3M 7DQ, England and Wales
(Address of Principal Executive Offices) (Zip Code)

(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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On May 1, 2019, Willis Towers Watson Public Limited Company (“Willis Towers Watson”) issued a press release announcing its financial results for the period ended March 31, 2019. Willis Towers Watson also posted a slide presentation to its website, which it may refer to during its conference call to discuss the results.

A copy of Willis Towers Watson’s press release and slide presentation are attached hereto as exhibits to this Current Report on Form 8-K and are incorporated by reference herein. A reconciliation between certain non-GAAP financial measures and reported financial results is provided as an attachment to the press release.

Item 7.01. Regulation FD Disclosure.

The slide presentation referred to in Item 2.02 above is attached hereto as Exhibit 99.2 and incorporated herein by reference.

The information contained in Item 2.02 and Item 7.01 of this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.   Description
     
99.1   Press release, dated May 1, 2019, announcing the financial results for the period ended March 31, 2019, for Willis Towers Watson plc.    
99.2   Slide Presentation, supplementing the above press release.


SIGNATURE

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
     
   
Date: May 1, 2019 By:  /s/ Neil D. Falis        
    Neil D. Falis
    Deputy Corporate Secretary
   

EdgarFiling

EXHIBIT 99.1

Willis Towers Watson Reports Strong First Quarter 2019 Earnings

ARLINGTON, Va. and LONDON, May 01, 2019 (GLOBE NEWSWIRE) -- Willis Towers Watson (NASDAQ: WLTW) (the “Company”), a leading global advisory, broking and solutions company, today announced financial results for the first quarter ended March 31, 2019.

“We are pleased with our first-quarter financial results and the continued momentum in our business,” said John Haley, Willis Towers Watson’s chief executive officer. “We delivered strong organic revenue growth, reflecting solid demand for our solutions and services across all of our core businesses. Likewise, we made solid progress in driving profitable growth, as demonstrated by our year-over-year margin expansion. With the disciplined execution of our strategy, we remain confident in our ability to drive profitable growth and deliver value for our clients and shareholders.” 

First Quarter Company Highlights

Revenue was $2.31 billion for the first quarter of 2019, an increase of 1% (5% increase constant currency and organic) as compared to $2.29 billion for the same period in the prior year.

Net income attributable to Willis Towers Watson for the first quarter of 2019 was $287 million, an increase of 33% from $215 million for the prior-year first quarter. For the quarter, diluted earnings per share were $2.20 and adjusted diluted earnings per share were $2.98. Net income attributable to Willis Towers Watson and diluted earnings per share for the first quarter of 2019 included pre-tax $6 million of transaction and integration expenses related to the pending TRANZACT acquisition. The U.S. GAAP tax rate for the quarter was 18.8%, and the adjusted income tax rate for the quarter used in calculating adjusted diluted earnings per share was 20.1%.

Net income for the first quarter of 2019 was $293 million, or 12.7% of revenue, an increase from net income of $221 million, or 9.6% of revenue for the prior-year first quarter. Adjusted EBITDA for the first quarter of 2019 was $601 million, or 26.0% of revenue, an increase from Adjusted EBITDA of $557 million, or 24.3% of revenue. The first quarter is seasonally strong due to the renewal periods for some lines of business.

Operating income margin improved by 420 basis points compared to the first quarter of the prior year. Adjusted operating income margin improved by 200 basis points to 21.3% from 19.3% in the prior-year first quarter. The margin improvement was driven by enhanced margin performance within the Human Capital and Benefits (HCB) segment, the Corporate Risk and Broking (CRB) segment, and the Benefits Delivery and Administration (BDA) segment, partially offset by a margin decrease in our Investment Risk and Reinsurance (IRR) segment.

Cash flows from operating activities for the quarter ended March 31, 2019 was ($47) million compared to $18 million for the prior-year first quarter. Free cash flow for the quarters ended March 31, 2019 and 2018 was ($104) million and ($47) million, respectively. During the quarter ended March 31, 2019, the Company had no share repurchase activity.

Segment Highlights

Human Capital & Benefits

The HCB segment had revenue of $829 million, a nominal decrease (3%increase constant currency and 3% increase organic) from $832 million in the prior-year first quarter. On an organic basis, Health and Benefits delivered significant revenue growth, driven by increased consulting and brokerage services, growth in specialty products, and expansion of our client portfolio for both local and global appointments. Health and Benefits’ revenue growth was bolstered further by revenue reductions in the prior year resulting from the initial adoption of the new revenue standard implemented last year. Our Talent and Rewards business generated moderate revenue growth, resulting from increased product revenue and advisory work in North America and Western Europe. Retirement revenue declined somewhat compared to the prior year first quarter primarily as a result of a timing difference in the current quarter along with the impact of being an “off year” in the triennial valuation cycle in both Canada and Great Britain. Technology and Administration Solutions revenue also declined slightly due to decreased project demand in Great Britain. The HCB segment had an operating margin of 25%, as compared to 23% for the prior-year first quarter.

Corporate Risk & Broking

The CRB segment had revenue of $728 million, a decrease of 2% (3%increase constant currency and 4% increase organic) from $740 million in the prior-year first quarter. On an organic basis, North America continued to lead the segment, followed by Western Europe and International, primarily with new business generation along with strong management of the renewal book portfolio. Revenue in Great Britain decreased nominally. The CRB segment had an operating margin of 17.4%, as compared to 16.8% for the prior year first quarter.

Investment, Risk & Reinsurance

The IRR segment had revenue of $589 million, an increase of 3% (6%increase constant currency and 5% increase organic) from $574 million in the prior-year first quarter. On an organic basis, Reinsurance, Insurance Consulting and Technology, Underwriting and Capital Management, and Max Matthiessen drove the segment’s strong performance. Reinsurance and Underwriting and Capital Management growth was driven by net new business growth and favorable renewal factors, while Insurance Consulting and Technology revenue grew from strong technology sales. Max Matthiessen revenue increased as a result of overall growth in net commissions. The segment’s revenue growth was partially offset by a decline in our Wholesale business due to decreased net new business and a decline in Investment revenue, resulting from lower asset-based fees and one-time revenue items in the prior year. The IRR segment had an operating margin of 43%, as compared to 45% for the prior-year first quarter.

Benefits Delivery & Administration

The BDA segment had revenue of $135 million, an increase of 10% (10%increase constant currency and 10% increase organic) from $122 million in the prior-year first quarter. BDA’s growth was primarily led by the continued expansion of its client base and increased demand for project work in the mid-market and large-market spaces. The BDA segment had an operating margin of negative 15%, as compared to negative 26% for the prior-year first quarter.

Conference Call

The Company will host a live webcast and conference call to discuss the financial results for the first quarter. It will be held on Wednesday, May 1, 2019, beginning at 9:00 a.m. Eastern Time, and can be accessed via the Internet at www.willistowerswatson.com. The replay of the call will be available shortly after the live call for a period of three months. A telephonic replay of the call will also be available for 24 hours at 404-537-3406, conference ID 4347126.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has more than 45,000 employees and serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

Select Questions and Answers

Q1: What was the impact of the Company’s adoption of the new lease accounting standard (ASC 842, Leases)?  

ASC 842 became effective, and was adopted by the Company, on January 1, 2019. The adoption of this new guidance had no material impact to the amounts and classifications of the balances within our condensed consolidated statements of income. On our condensed consolidated balance sheets we recognized an additional $1.2 billion of lease liabilities; $1.0 billion of right-of-use assets; additional deferred tax assets of $252 million and deferred tax liabilities of $252 million on the gross lease-related liabilities and gross right-of-use assets, respectively.  See Note 12 – Leases, within the Company’s Form 10-Q for the quarter ended March 31, 2019 for a full description of the impact on the Company from adoption, adoption elections made and the newly-required disclosures.

Q2: What was the impact of foreign currency movements for the first quarter?  

For the quarter ended March 31, 2019, currency translation caused a decrease in our consolidated revenue of $84 million, resulting in a decrease of $0.12 to adjusted diluted earnings per share for the quarter.

Q3: The original tax guidance for 2019 estimated an adjusted income tax rate of approximately 22%. The first quarter adjusted income tax rate is just 20%. Is there a possibility the tax guidance will be changed?

Our adjusted income tax rate for the first quarter was 20.1%. This is lower than our full-year guidance due to one-time (or non-recurring) discrete tax benefits related to the excess tax benefit of share-based compensation and valuation allowance releases in certain non-U.S. jurisdictions.  We continue to expect our full year adjusted income tax rate to be around 22%. The 2019 annualized adjusted income tax rate will continue to be subject to movements and we will continue to update guidance as more analysis and information becomes available.

Q4: Do you have an update on the timing of the TRANZACT acquisition closing?

We are excited about our recently-announced agreement to acquire TRANZACT, and continue to expect the deal to close in the third quarter of this year. We believe TRANZACT will be an excellent complement to our BDA business, and will bring highly innovative, industry-leading, technology-driven, direct-to-consumer solutions capabilities to Willis Towers Watson. The pending acquisition will help accelerate our direct-to-consumer strategy and provide us with a significant growth opportunity in the U.S. health care space.

Q5: What is driving the significant reduction in cash flow compared to the prior year? 

Historically the first quarter has been our low season for cash flow due to incentive payouts. This quarter’s decline compared to last year is primarily the result of a shift in the timing of cash tax payments and pension contributions. Additionally our short-term incentive award payouts were higher relative to the prior year because of 2018 financial performance. 

Willis Towers Watson Non-GAAP Measures

In order to assist readers of our consolidated financial statements in understanding the core operating results that Willis Towers Watson’s management uses to evaluate the business and for financial planning, we present the following non-GAAP measures: (1) Constant Currency Change, (2) Organic Change, (3) Adjusted Operating Income, (4) Adjusted EBITDA, (5) Adjusted Net Income, (6) Adjusted Diluted Earnings Per Share, (7) Adjusted Income Before Taxes, (8) Adjusted Income Taxes/Tax Rate and (9) Free Cash Flow.

The Company believes that these measures are relevant and provide useful information widely used by analysts, investors and other interested parties in our industry to provide a baseline for evaluating and comparing our operating performance, and in the case of free cash flow, our liquidity results.

Within these measures referred to as ‘adjusted’, we adjust for significant items which will not be settled in cash, or which we believe to be items that are not core to our current or future operations. Some of these items may not be applicable for the current quarter, however they are expected to be part of our full-year results. These items include the following:

We evaluate our revenue on an as reported (U.S. GAAP), constant currency and organic basis. We believe presenting constant currency and organic information provides valuable supplemental information regarding our comparable results, consistent with how we evaluate our performance internally.

Willis Towers Watson considers Constant Currency Change, Organic Change, Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Adjusted Income Before Taxes, Adjusted Income Taxes/Rate and Free Cash Flow to be important financial measures, which are used to internally evaluate and assess our core operations and to benchmark our operating and liquidity results against our competitors. These non-GAAP measures are important in illustrating what Willis Towers Watson’s comparable operating and liquidity results would have been had the Company not incurred transaction-related and non-recurring items. Willis Towers Watson’s non-GAAP measures and their accompanying definitions are presented as follows:

Constant Currency Change – represents the year-over-year change in revenue excluding the impact of foreign currency fluctuations. To calculate this impact, the prior year local currency results are first translated using the current year monthly average exchange rates. The change is calculated by comparing the prior year revenue, translated at the current year monthly average exchange rates, to the current year as reported revenue, for the same period. We believe constant currency measures provide useful information to investors because they provide transparency to performance by excluding the effects that foreign currency exchange rate fluctuations have on period-over-period comparability given volatility in foreign currency exchange markets.

Organic Change – excludes the impact of fluctuations in foreign currency exchange rates, as described above and the period-over-period impact of acquisitions and divestitures on current-year revenue. We believe that excluding transaction-related items from our U.S. GAAP financial measures provides useful supplemental information to our investors, and it is important in illustrating what our core operating results would have been had we not included these transaction-related items, since the nature, size and number of these translation-related items can vary from period to period.

Adjusted Operating Income – Income from Operations adjusted for amortization, transaction and integration expenses and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results.

Adjusted EBITDA – Net Income adjusted for provision for income taxes, interest expense, depreciation and amortization, transaction and integration expenses, (gain)/loss on disposal of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results.

Adjusted Net Income – Net Income Attributable to Willis Towers Watson adjusted for amortization, transaction and integration expenses, (gain)/loss on disposal of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results, the related tax effect of those adjustments and the tax effects of internal reorganizations. This measure is used solely for the purpose of calculating adjusted diluted earnings per share.

Adjusted Diluted Earnings Per Share – Adjusted Net Income divided by the weighted-average number of shares of common stock, diluted.

Adjusted Income Before Taxes – Income from operations before income taxes adjusted for amortization, transaction and integration expenses, (gain)/loss on disposal of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted income before taxes is used solely for the purpose of calculating the adjusted income tax rate.

Adjusted Income Taxes/Tax Rate – Provision for income taxes adjusted for taxes on certain items of amortization, transaction and integration expenses, (gain)/loss on disposal of operations, the tax effects of internal reorganizations, and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results, divided by adjusted income before taxes. Adjusted income taxes is used solely for the purpose of calculating the adjusted income tax rate.

Free Cash Flow – Cash flows from operating activities less cash used to purchase fixed assets and software for internal use. Free Cash Flow is a liquidity measure and is not meant to represent residual cash flow available for discretionary expenditures.

These non-GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP measures should be considered in addition to, and not as a substitute for, the information contained within our condensed consolidated financial statements.

Reconciliations of these measures are included in the accompanying tables with the following exception.

The Company does not reconcile its forward looking non-GAAP financial measures to the corresponding U.S. GAAP measures, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible; and because not all of the information, such as foreign currency impacts necessary for a quantitative reconciliation of these forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure, is available to the Company without unreasonable efforts. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The Company provides non-GAAP financial measures that it believes will be achieved, however it cannot accurately predict all of the components of the adjusted calculations and the U.S. GAAP measures may be materially different than the non-GAAP measures.

Willis Towers Watson Forward-Looking Statements

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements and other forward-looking statements in this document by words such as “may”, “will”, “would”, “expect”, “anticipate”, “believe”, “estimate”, “plan”, “intend”, “continue”, or similar words, expressions or the negative of such terms or other comparable terminology. These statements include, but are not limited to, such things as our outlook, future capital expenditures, future share repurchases, growth in revenue, the impact of changes to tax laws on our financial results, business strategies and planned acquisitions (including the pending acquisition of TRANZACT), competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, plans and references to future successes, including our future financial and operating results, plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Willis Towers Watson’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. All forward-looking disclosure is speculative by its nature.

There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ materially from those in the forward-looking statements contained herein, including the following: the ability of the company to successfully establish, execute and achieve its global business strategy as it evolves; changes in demand for our services, including any decline in defined benefit pension plans or the purchasing of insurance; changes in general economic, business and political conditions, including changes in the financial markets; significant competition that the company faces and the potential for loss of market share and/or profitability; the impact of seasonality and differences in timing of renewals; the risk of increased liability or new legal claims arising from our new and existing products and services, and expectations, intentions and outcomes relating to outstanding litigation; the risk the Stanford litigation settlement approval will be overturned on appeal, the risk that the Stanford bar order may be challenged in other jurisdictions, and the risk that the charge related to the Stanford settlement may not be deductible; the risk of material adverse outcomes on existing litigation or investigation matters; changes in the regulatory environment in which the company operates, including, among other risks, the impact of pending competition law and regulatory investigations; various claims, government inquiries or investigations or the potential for regulatory action; the company’s ability to make divestitures or acquisitions and its ability to integrate or manage such acquired businesses (including with respect to the pending acquisition of TRANZACT and the timeline for its completion); failure to protect client data or breaches of information systems; the ability to comply with complex and evolving regulations related to data privacy and cyber security; the potential impact of Brexit; the ability of the company to properly identify and manage conflicts of interest; reputational damage; reliance on third-party services; the loss of key employees; the ability to successfully manage ongoing organizational changes; disasters or business continuity problems; doing business internationally, including the impact of exchange rates; compliance with extensive government regulation; the risk of sanctions imposed by governments, or changes to associated sanction regulations; technological change; changes and developments in the insurance industry or the United States healthcare system; the risk that the company may not be able to repurchase the intended number of outstanding shares due to M&A activity or investment opportunities, market or business conditions, or other factors; the inability to protect the company’s intellectual property rights, or the potential infringement upon the intellectual property rights of others; fluctuations in the company’s pension liabilities; the ability of the company to meet its financial guidance, the company’s capital structure, including indebtedness amounts, the limitations imposed by the covenants in the documents governing such indebtedness and the maintenance of the financial and disclosure controls and procedures of each; the ability of the company to obtain financing on favorable terms or at all; adverse changes in the credit ratings of the company; the impact of recent changes to U.S. tax laws, including on our effective tax rate, and the enactment of additional, or the revision of existing, state, federal, and/or foreign regulatory and tax laws and regulations; U.S. federal income tax consequences to U.S. persons owning at least 10% of the company’s shares; changes in accounting principles, estimates or assumptions; fluctuation in revenue against the company’s relatively fixed expenses; the laws of Ireland being different from the laws of the United States and potentially affording less protections to the holders of our securities; and the company's holding company structure potentially preventing it from being able to receive dividends or other distributions in needed amounts from our subsidiaries. These factors also include those described under “Risk Factors” in the company’s most recent 10-K filing and subsequent filings filed with the SEC. 

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved.

Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this document may not occur, and we caution you against relying on these forward-looking statements.

Contact

INVESTORS

Rich Keefe | +1 215 246 3961 | Rich.Keefe@willistowerswatson.com

WILLIS TOWERS WATSON
Supplemental Segment Information
(In millions of U.S. dollars)
(Unaudited)

REVENUE

   
        Components of Revenue Change(i)
  Three Months Ended
March 31,
  As Reported  Currency  Constant
Currency
  Acquisitions/  Organic
  2019  2018  % Change  Impact  Change  Divestitures  Change
                       
Human Capital & Benefits $829  $832  0%  (3)%  3%  0%  3%
Corporate Risk & Broking  728   740  (2)%  (5)%  3%  0%  4%
Investment, Risk & Reinsurance  589   574  3%  (4)%  6%  1%  5%
Benefits Delivery & Administration  135   122  10%  0%  10%  0%  10%
Segment Revenue  2,281   2,268  1%  (4)%  4%  0%  4%
Reimbursable expenses and other  31   24               
Revenue $2,312  $2,292  1%  (4)%  5%  0%  5%
                       

(i) Components of revenue change may not add due to rounding.

SEGMENT OPERATING INCOME (i)

  Three Months Ended March 31,
 2019  2018
        
Human Capital & Benefits$204  $193 
Corporate Risk & Broking 127   125 
Investment, Risk & Reinsurance 252   261 
Benefits Delivery & Administration (21)  (32)
Segment Operating Income$562  $547 
        

(i) Segment operating income excludes certain costs, including amortization of intangibles, restructuring costs, integration expenses, certain litigation provisions, and to 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 expenses reported for US GAAP purposes.

Reconciliation of Segment Operating Income to Income from operations before income taxes

 Three Months Ended March 31,
 2019  2018
        
Segment Operating Income$562  $547 
Amortization (127)  (141)
Transaction and integration expenses (6)  (43 
Unallocated, net(i) (70)  (104)
Income from Operations 359   259 
Interest expense (54)  (51)
Other income, net 55   56 
Income from operations before income taxes$360  $264 
        

(i) Includes certain costs, primarily related to corporate functions which are not directly related to the segments, and certain differences between budgeted expenses determined at the beginning of the year and actual expenses that we report for U.S. GAAP purposes.

WILLIS TOWERS WATSON
Reconciliations of Non-GAAP Measures
(In millions of U.S. dollars, except per share data)
(Unaudited)

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON TO ADJUSTED DILUTED EARNINGS PER SHARE

 Three Months Ended March 31,
  2019   2018 
        
Net Income attributable to Willis Towers Watson$287  $215 
Adjusted for certain items:       
Amortization 127   141 
Transaction and integration expenses 6   43 
Loss on disposal of operations    9 
Tax effect on certain items listed above(i) (32)  (47)
Adjusted Net Income$388  $361 
        
Weighted-average shares of common stock, diluted 130   133 
        
Diluted Earnings Per Share$2.20  $1.61 
Adjusted for certain items:(ii)       
Amortization 0.97   1.06 
Transaction and integration expenses 0.05   0.32 
Loss on disposal of operations    0.07 
Tax effect on certain items listed above(i) (0.25)  (0.35)
Adjusted Diluted Earnings Per Share$2.98  $2.71 
        

(i) The tax effect was calculated using an effective tax rate for each item.
(ii) Per share values and totals were calculated using extended values.

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA

 Three Months Ended March 31, 
  2019      2018    
              
Net Income$293  12.7% $221  9.6%
Provision for income taxes 67      43    
Interest expense 54      51    
Depreciation 54      49    
Amortization 127      141    
Transaction and integration expenses 6      43    
Loss on disposal of operations       9    
Adjusted EBITDA and Adjusted EBITDA Margin$601  26.0% $557  24.3%
              

RECONCILIATION OF INCOME FROM OPERATIONS TO ADJUSTED OPERATING INCOME

 Three Months Ended March 31, 
  2019      2018    
              
Income from operations$359  15.5% $259  11.3%
Adjusted for certain items:             
Amortization 127      141    
Transaction and integration expenses 6      43    
Adjusted operating income$492  21.3% $443  19.3%
              

RECONCILIATION OF GAAP INCOME TAXES/TAX RATE TO ADJUSTED INCOME TAXES/TAX RATE

 Three Months Ended March 31, 
  2019   2018 
Income from operations before income taxes$360  $264 
        
Adjusted for certain items:       
Amortization 127   141 
Transaction and integration expenses 6   43 
Loss on disposal of operations    9 
Adjusted income before taxes$493  $457 
        
Provision for income taxes$67  $43 
Tax effect on certain items listed above(i) 32   47 
Adjusted income taxes$99  $90 
        
U.S. GAAP tax rate 18.8%  16.3%
Adjusted income tax rate 20.1%  19.7%
        

(i) The tax effect was calculated using an effective tax rate for each item.

RECONCILIATION OF CASH FLOWS (USED IN)/FROM OPERATING ACTIVITIES TO FREE CASH FLOW

 Three Months Ended March 31, 
  2019   2018 
Cash flows (used in)/from operating activities$(47) $18 
Less: Additions to fixed assets and software for internal use (57)  (65)
Free Cash Flow$(104) $(47)
        


 
WILLIS TOWERS WATSON
Condensed Consolidated Statements of Income
(In millions of U.S. dollars, except per share data)
(Unaudited)
 
  Three Months Ended March 31,
  2019
 2018
         
Revenue $2,312  $2,292 
         
Costs of providing services        
Salaries and benefits  1,348   1,377 
Other operating expenses  418   423 
Depreciation  54   49 
Amortization  127   141 
Transaction and integration expenses  6   43 
Total costs of providing services  1,953   2,033 
         
Income from operations  359   259 
         
Interest expense  (54)  (51)
Other income, net  55   56 
         
INCOME FROM OPERATIONS BEFORE INCOME TAXES 360   264 
         
Provision for income taxes  (67)  (43)
         
NET INCOME 293   221 
         
Income attributable to non-controlling interests  (6)  (6)
         
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON $287  $215 
         
         
Earnings per share        
Basic earnings per share $2.21  $1.62 
Diluted earnings per share $2.20  $1.61 
         
Weighted-average shares of common stock, basic  130   133 
Weighted-average shares of common stock, diluted  130   133 
         


 
WILLIS TOWERS WATSON
Condensed Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
(Unaudited)
 
  March 31, December 31,
  2019 2018
         
ASSETS        
Cash and cash equivalents $992  $1,033 
Fiduciary assets  15,129   12,604 
Accounts receivable, net  2,490   2,379 
Prepaid and other current assets  409   404 
Total current assets  19,020   16,420 
Fixed assets, net  957   942 
Goodwill  10,456   10,465 
Other intangible assets, net  3,187   3,318 
Right-of-use assets  946    
Pension benefits assets  833   773 
Other non-current assets  494   467 
Total non-current assets  16,873   15,965 
TOTAL ASSETS $35,893  $32,385 
LIABILITIES AND EQUITY        
Fiduciary liabilities $15,129  $12,604 
Deferred revenue and accrued expenses  1,240   1,647 
Current debt  187   186 
Current lease liabilities  158    
Other current liabilities  940   864 
Total current liabilities  17,654   15,301 
Long-term debt  4,518   4,389 
Liability for pension benefits  1,135   1,170 
Deferred tax liabilities  544   559 
Provision for liabilities  543   540 
Long-term lease liabilities  961    
Other non-current liabilities  296   429 
Total non-current liabilities  7,997   7,087 
TOTAL LIABILITIES  25,651   22,388 
COMMITMENTS AND CONTINGENCIES        
REDEEMABLE NON-CONTROLLING INTEREST  28   26 
EQUITY(i)        
Additional paid-in capital  10,630   10,615 
Retained earnings  1,439   1,201 
Accumulated other comprehensive loss, net of tax  (1,974)  (1,961)
Treasury shares, at cost, 17,519 shares in 2019 and 2018, and 40,000 shares, €1 nominal value, in 2019 and 2018  (3)  (3)
Total Willis Towers Watson shareholders' equity  10,092   9,852 
Non-controlling interests  122   119 
Total Equity  10,214   9,971 
TOTAL LIABILITIES AND EQUITY $35,893  $32,385 

(i) Equity includes (a) Ordinary shares $0.000304635 nominal value; Authorized 1,510,003,775; Issued 129,211,111 (2019) and 128,921,530 (2018); Outstanding 129,211,111 (2019) and 128,921,530 (2018); (b) Ordinary shares, €1 nominal value; Authorized and Issued 40,000 shares in 2019 and 2018; and (c) Preference shares, $0.000115 nominal value; Authorized 1,000,000,000 and Issued none in 2019 and 2018.

 
 
WILLIS TOWERS WATSON
Condensed Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
(Unaudited)
 
  Three Months Ended March 31,
  2019
 2018
         
CASH FLOWS (USED IN)/FROM OPERATING ACTIVITIES        
NET INCOME $293  $221 
Adjustments to reconcile net income to total net cash from operating activities:        
Depreciation  54   51 
Amortization  127   141 
Non-cash lease expense  36    
Net periodic benefit of defined benefit pension plans  (32)  (61)
Provision for doubtful receivables from clients  8   7 
Benefit from deferred income taxes  (28)  (26)
Share-based compensation  10   3 
Net loss on disposal of operations     9 
Non-cash foreign exchange loss  8   17 
Other, net  4   (3)
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries:        
Accounts receivable  (121)  (43)
Fiduciary assets  (2,490)  (1,326)
Fiduciary liabilities  2,490   1,326 
Other assets  (37)  46 
Other liabilities  (379)  (393)
Provisions  10   49 
Net cash (used in)/from operating activities  (47)  18 
         
CASH FLOWS USED IN INVESTING ACTIVITIES        
Additions to fixed assets and software for internal use  (57)  (65)
Capitalized software costs  (17)  (13)
Acquisitions of operations, net of cash acquired  (1)  (5)
Net proceeds from sale of operations     4 
Net cash used in investing activities  (75)  (79)
         
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES        
Net borrowings on revolving credit facility  138   61 
Repayments of debt  (1)  (21)
Proceeds from issuance of shares  22   11 
Cash paid for employee taxes on withholding shares     (7)
Dividends paid  (77)  (68)
Net cash from/(used in) financing activities  82   (24)
         
DECREASE IN CASH AND CASH EQUIVALENTS  (40)  (85)
Effect of exchange rate changes on cash and cash equivalents  (1)  9 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  1,033   1,030 
CASH AND CASH EQUIVALENTS, END OF PERIOD $992  $954 

EdgarFiling

Exhibit 99.2

 

willistowerswatson.com Willis Towers Watson 2019 First Quarter Financial Results Supplemental Materials May 1, 2019 © 2019 Willis Towers Watson. All rights reserved.

 

 

willistowerswatson.com Willis Towers Watson Forward Looking Statements © 2019 Willis Towers Watson. All rights reserved. This document contains “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements and other forward - looking statements in this document by words such as “may”, “will”, “would”, “expect”, “anticipate”, “believe”, “estimate”, “ pla n”, “intend”, “continue”, or similar words, expressions or the negative of such terms or other comparable terminology. These statements include, but are not limited to, such things as our out look, future capital expenditures, future share repurchases, growth in revenue, the impact of changes to tax laws on our financial results, business strategies and planned a cqu isitions (including the pending acquisition of TRANZACT), competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, plans and re fer ences to future successes, including our future financial and operating results, plans, objectives, expectations and intentions and other statements that are not historical fac ts. Such statements are based upon the current beliefs and expectations of Willis Towers Watson’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward - looking statements. All forward - looking disclosure is speculative by its nature. There are important risks, uncertainties, events and factors that could cause our actual results or performance to differ mat eri ally from those in the forward - looking statements contained herein, including the following: the ability of the company to successfully establish, execute and achieve its glob al business strategy as it evolves; changes in demand for our services, including any decline in defined benefit pension plans or the purchasing of insurance; changes in general econo mic , business and political conditions, including changes in the financial markets; significant competition that the company faces and the potential for loss of market share and/or pr ofi tability; the impact of seasonality and differences in timing of renewals; the risk of increased liability or new legal claims arising from our new and existing products and servic es, and expectations, intentions and outcomes relating to outstanding litigation; the risk the Stanford litigation settlement approval will be overturned on appeal, the risk that the Sta nford bar order may be challenged in other jurisdictions, and the risk that the charge related to the Stanford settlement may not be deductible; the risk of material adverse outcomes on e xis ting litigation or investigation matters; changes in the regulatory environment in which the company operates, including, among other risks, the impact of pending competition law and re gulatory investigations; various claims, government inquiries or investigations or the potential for regulatory action; the company’s ability to make divestitures or acquisition s a nd its ability to integrate or manage such acquired businesses (including with respect to the pending acquisition of TRANZACT and the timeline for its completion); failure to pr ote ct client data or breaches of information systems; the ability to comply with complex and evolving regulations related to data privacy and cyber security; the potential impact of B rex it; the ability of the company to properly identify and manage conflicts of interest; reputational damage; reliance on third - party services; the loss of key employees; the ability to s uccessfully manage ongoing organizational changes; disasters or business continuity problems; doing business internationally, including the impact of exchange rates; compliance wi th extensive government regulation; the risk of sanctions imposed by governments, or changes to associated sanction regulations; technological change; changes and developmen ts in the insurance industry or the United States healthcare system; the risk that the company may not be able to repurchase the intended number of outstanding shares due to M &A activity or investment opportunities, market or business conditions, or other factors; the inability to protect the company’s intellectual property rights, or the potential inf ringement upon the intellectual property rights of others; fluctuations in the company’s pension liabilities; the ability of the company to meet its financial guidance, the company’s c api tal structure, including indebtedness amounts, the limitations imposed by the covenants in the documents governing such indebtedness and the maintenance of the financial and di scl osure controls and procedures of each; the ability of the company to obtain financing on favorable terms or at all; adverse changes in the credit ratings of the company; the im pac t of recent changes to U.S. tax laws, including on our effective tax rate, and the enactment of additional, or the revision of existing, state, federal, and/or foreign regulatory a nd tax laws and regulations; U.S. federal income tax consequences to U.S. persons owning at least 10% of the company’s shares; changes in accounting principles, estimates or assu mpt ions; fluctuation in revenue against the company’s relatively fixed expenses; the laws of Ireland being different from the laws of the United States and potentially a ffo rding less protections to the holders of our securities; and the company's holding company structure potentially preventing it from being able to receive dividends or other distribut ion s in needed amounts from our subsidiaries. These factors also include those described under “Risk Factors” in the company’s most recent 10 - K filing and subsequent filings filed with the SEC. Although we believe that the assumptions underlying our forward - looking statements are reasonable, any of these assumptions, and therefore also the forward - looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in th e f orward - looking statements included in this document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be achieved. Our forward - looking statements speak only as of the date made and we will not update these forward - looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, the forward - looking events discussed in this document may not occur, and we caution you against relying on these forward - looking statements. 1

 

 

willistowerswatson.com Willis Towers Watson Non - GAAP Measures © 2019 Willis Towers Watson. All rights reserved. In order to assist readers of our consolidated financial statements in understanding the core operating results that Willis T owe rs Watson’s management uses to evaluate the business and for financial planning, we present the following non - GAAP measures: (1) Constant Currency Change, (2) Organic Change, (3) Ad justed Operating Income, (4) Adjusted EBITDA, (5) Adjusted Net Income, (6) Adjusted Diluted Earnings Per Share, (7) Adjusted Income Before Taxes, (8) Adjusted Income Taxes /Ta x Rate and (9) Free Cash Flow. The Company believes that these measures are relevant and provide useful information widely used by analysts, investors and o the r interested parties in our industry to provide a baseline for evaluating and comparing our operating performance, and in the case of free cash flow, our liquidity results. Within these measures referred to as ‘adjusted’, we adjust for significant items which will not be settled in cash, or which we believe to be items that are not core to our current or future operations. Some of these items may not be applicable for the current quarter, however they are expected to be part of ou r full - year results. These items include the following: Transaction and integration expenses - Management believes it is appropriate to adjust for transaction and integration expenses when they relate to a specific significant program with a defined set of activities and costs that are not expected to continue beyond a defined period of time, or significant acq uisition - related transaction expenses. We believe the adjustment is necessary to present how the Company is performing, both now and in the future when the incurrence of these cos ts will have concluded. ▪ Gains and losses on disposals of operations - Adjustment to remove the gain or loss resulting from disposed operations. ▪ Pension settlement and curtailment gains and losses - Adjustment to remove significant pension settlement and curtailment gains and losses to better present how the Company is performing. ▪ Provisions for significant litigation - We will include provisions for litigation matters which we believe are not representativ e of our core business operations. ▪ Tax effects of internal reorganization - Relates to the U.S. income tax expense resulting from the completion of internal reorga nizations of the ownership of certain businesses that reduced the investments held by our U.S. - controlled subsidiaries. We evaluate our revenue on an as reported (U.S. GAAP), constant currency and organic basis. We believe presenting constant cu rre ncy and organic information provides valuable supplemental information regarding our comparable results, consistent with how we evaluate our performance internally. Willis Towers Watson considers Constant Currency Change, Organic Change, Adjusted Operating Income, Adjusted EBITDA, Adjusted Ne t Income, Adjusted Diluted Earnings Per Share, Adjusted Income Before Taxes, Adjusted Income Taxes/Rate and Free Cash Flow to be important financial measures, which are used to internally evaluate and assess our core operations and to benchmark our operating and liquidity results against our competitors. These non - GAAP measures are import ant in illustrating what Willis Towers Watson’s comparable operating and liquidity results would have been had the Company not incurred transaction - related and non - recurring it ems. Willis Towers Watson’s non - GAAP measures and their accompanying definitions are presented as follows: ▪ Constant Currency Change – represents the year - over - year change in revenue excluding the impact of foreign currency fluctuations . To calculate this impact, the prior year local currency results are first translated using the current year monthly average exchange rates. The change is calculated by comp ari ng the prior year revenue, translated at the current year monthly average exchange rates, to the current year as reported revenue, for the same period. We believe constan t c urrency measures provide useful information to investors because they provide transparency to performance by excluding the effects that foreign currency exchange rate fluct uat ions have on period - over - period comparability given volatility in foreign currency exchange markets. ▪ Organic Change – excludes the impact of fluctuations in foreign currency exchange rates, as described above, and the period - over - period impact of acquisitions and divestitures on current - year revenue. We believe that excluding transaction - related items from our U.S. GAAP financial measures provides usef ul supplemental information to our investors, and it is important in illustrating what our core operating results would have been had we not included these transaction - relate d items, since the nature, size and number of these translation - related items can vary from period to period. 2

 

 

willistowerswatson.com Willis Towers Watson Non - GAAP Measures (continued) © 2019 Willis Towers Watson. All rights reserved. ▪ Adjusted Operating Income – Income from Operations adjusted for amortization, transaction and integration expenses, and non - recu rring items that, in management’s judgment, significantly affect the period - over - period assessment of operating results. ▪ Adjusted EBITDA – Net Income adjusted for provision for income taxes, interest expense, depreciation and amortization, transacti on and integration expenses, (gain)/loss on disposal of operations and non - recurring items that, in management’s judgment, significantly affect the period - over - period asses sment of operating results. ▪ Adjusted Net Income – Net Income Attributable to Willis Towers Watson adjusted for amortization, transaction and integration exp enses, (gain)/loss on disposal of operations and non - recurring items that, in management’s judgment, significantly affect the period - over - period assessment of operating results, the related tax effect of those adjustments and the tax effects of internal reorganizations. This measure is used solely for the purpose of calculating adjusted diluted earn ing s per share. ▪ Adjusted Diluted Earnings Per Share – Adjusted Net Income divided by the weighted - average number of shares of common stock, dilu ted. ▪ Adjusted Income Before Taxes – Income from operations before income taxes adjusted for amortization, transaction and integration expenses, (gain)/loss on disposal of operations and non - recurring items that, in management’s judgment, significantly affect the period - over - period assessment of ope rating results. Adjusted income before taxes is used solely for the purpose of calculating the adjusted income tax rate. ▪ Adjusted Income Taxes/Tax Rate – Provision for income taxes adjusted for taxes on certain items of amortization, transaction and integration expenses, (gain)/loss on disposal of operations, the tax effects of internal reorganizations, and non - recurring items that, in management’s judgment, significantly a ffect the period - over - period assessment of operating results, divided by adjusted income before taxes. Adjusted income taxes is used solely for the purpose of calculating the adj ust ed income tax rate. ▪ Free Cash Flow – Cash flows from operating activities less cash used to purchase fixed assets and software for internal use. Fre e Cash Flow is a liquidity measure and is not meant to represent residual cash flow available for discretionary expenditures. ▪ These non - GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non - GAAP measures should be considered in addition to, and not as a substitute for, the information contained within our condensed con sol idated financial statements. Reconciliations of these measures are included in the accompanying tables to the first quarter 2019 earnings release with the fo llowing exception. The Company does not reconcile its forward looking non - GAAP financial measures to the corresponding U.S. GAAP measures, due to v ariability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible; and because not all of the inform ati on, such as foreign currency impacts necessary for a quantitative reconciliation of these forward - looking non - GAAP financial measures to the most directly comparable U.S. GAAP finan cial measure, is available to the Company without unreasonable efforts. For the same reasons, the Company is unable to address the probable significance of the unavailable inf orm ation. The Company provides non - GAAP financial measures that it believes will be achieved, however it cannot accurately predict all of the components of the adjusted calcul ati ons and the U.S. GAAP measures may be materially different than the non - GAAP measures. 3

 

 

willistowerswatson.com Q1 2019 GAAP Financial Results, Key Figures © 2019 Willis Towers Watson. All rights reserved. $USD million, except EPS and % Q1 2018 Q1 2019 Revenue as reported % change $2,292 $2,312 +1% Income from Operations as reported % change $259 $359 +39% Operating Margin % as reported change, basis points 11.3% 15.5% +420 bps Net Income attributable to Willis Towers Watson as reported % change $215 $287 +33% Diluted EPS as reported % change $1.61 $2.20 +36% Operating Cash Flow as reported % change $18 - $47 - 361% 4

 

 

willistowerswatson.com A Strong Start in Q1 2019 for Willis Towers Watson Q1 2019 key figures, includes Non - GAAP financial results © 2019 Willis Towers Watson. All rights reserved. $ 2.3 B Q1 2019 Revenue Total Revenue + 5 % Q1 2019 Organic % Broad - Based Organic Growth Strong momentum entering 2019, and achieved another solid quarter of 5% organic revenue growth despite having a challenging comparable of 6% organic revenue growth in Q1 2018 Delivering a client winning experience across 140 countries with the combined strength of Willis Towers Watson - $ 104 M Q1 2019 Free Cash Flow Free Cash Flow - $ 57 M Q1‘19 vs. Q1 ‘18 Short - term Headwind Q1 is usually our seasonally lowest quarter for cash flow generation due to incentive payouts. The decline in Q1 year - over - year is due to increase in short - term incentive awards and the timing of cash tax payments and pension contribution We are confident in our ability to grow free cash flow by 15% or better in full year 2019 $ 2.98 Q1 2019 Adj. Diluted EPS Adj. Diluted EPS Double Digit Growth Despite Headwind Delivered on strong earnings growth of 10% despite year - over - year headwinds related to foreign currency, pension, and income taxes 21 % Q1 2019 Adj. Operating Margin Adj. Operating Margin Financial Discipline Organic revenue growth coupled with prudent expense management creating profit flow through and margin expansion. Operating income growth was led by HCB, BDA, and CRB, partially mitigating IRR margin decrease + 10 % Q1 2019 $ 2.71 Q1 2018 + 200 bps Q1 2019 19 % Q1 2018 5 + 6 % Q1 2018 Organic % - $ 47 M Q1 2018

 

 

willistowerswatson.com Organic Revenue Growth %* Continued Growth Momentum Despite Strong Prior Year Comparable Broad - based organic revenue growth across all Segments © 2019 Willis Towers Watson. All rights reserved. 6 Q1 2018 Q1 2019 Human Capital & Benefits 4% 3% Corporate Risk & Broking 6% 4% Investment, Risk & Reinsurance 5% 5% Benefits Delivery & Administration 8% 10% Willis Towers Watson 6% 5% HCB growth led by Health and Benefits and Talent and Rewards driven by increased demand for advisory services, specialty products, and new businesses generation CRB growth was led by North America, and closely followed by Western Europe and International due to new business generation and strong retention of the renewal portfolio IRR had broad - based organic growth across Reinsurance, Insurance Consulting and Technology, Underwriting and Capital Management, and Max Matthiessen. Reinsurance continues to experience strong new business and favorable renewal factors BDA continued to show strong growth momentum attributable to expansion of the client base, many of which have long - term predictable revenue, and strong demand for one - time project work • Organic revenue growth for 2018 compared to 2017 excludes the impact of ASC 606 from both years. Organic revenue growth for 2 019 compared to 2018 includes the adoption of ASC 606 for both years

 

 

willistowerswatson.com Summary of Segment Financial Results Q1 2019 Segment results compared to Q1 2018 © 2019 Willis Towers Watson. All rights reserved. As reported, $USD million, except % Q1 2018 Q1 2019 Revenue Operating Margin % Revenue Operating Margin % Margin Year - over - year Human Capital & Benefits 832 23% 829 25% +150 bps Corporate Risk & Broking 740 17% 728 17% +50 bps Investment, Risk & Reinsurance 574 45% 589 43% - 270 bps Benefits Delivery & Administration 122 - 26% 135 - 15% +1,110 bps 7 • Revenue and Operating Margin with the adoption of ASC 606 accounting standards for both 2018 and 2019. The Operating Margin p erc entage is rounded

 

 

willistowerswatson.com Maintaining a Strong and Flexible Balance Sheet Position Significant financial flexibility to drive long - term shareholder value 8 © 2019 Willis Towers Watson. All rights reserved. $USD million Mar 31, 2018 Dec 31, 2018 Mar 31, 2019 Cash and Cash Equivalents 954 1,033 992 Total Debt 1 4,592 4,575 4,705 Total Equity 10,802 9,971 10,214 Debt to Adj. EBITDA TTM basis n/a 2 2.3x 2.3x A disciplined capital management strategy provides Willis Towers Watson with ample financial flexibility to reinvest in our Businesses, capitalize on market growth opportunities, and drive significant value for shareholders Our capital structure enabled by robust cash generation and a strong balance sheet paves the way for significant shareholder value creation over the long - term History of effectively managing our leverage with the commitment to maintain investment grade credit rating or better 1 Total Debt equals sum of Current debt and Long - term debt as shown on the Consolidated Balance Sheets 2 Q1 2018 Debt to trailing twelve months Adj. EBITDA has been excluded due to 1/1/18 cutover adoption of ASC 606 revenue acco unt ing standards

 

 

willistowerswatson.com A Capital Strategy Fit For Creating Long - Term Shareholder Value 9 © 2019 Willis Towers Watson. All rights reserved. CASH RETURNED TO SHAREHOLDERS $ 2.6 B FY2016 to Q1 FY2019 2016 $ 277 $ 709 $ 396 $ 199 2017 $ 602 $ 306 2018 2019 Q1 $ 595 $ 986 $ 908 In progress $ 77 SUSTAINABLE DIVIDEND GROWTH + 11 % Cash dividend growth 3 years CAGR $ 0.53 2018 2016 2017 2019 e $ 0.60 $ 0.48 $ 0.65 Share repurchases Dividends Quarterly cash dividend per share +11% $ million Disciplined approach to capital allocation A capital light business model and capital structure allow us to shift capital between growth and value creation based on changes in the Businesses and/or the macro environment A strong focus on return on investment to optimize the use of cash A robust pipeline of investment opportunities Focus Areas to Prioritize Use of Cash 1) Reinvesting in our Businesses 2) Investing in innovation and new business opportunities 3) Opportunistic mergers, acquisitions, and divestitures 4) Enhance Balance Sheet and strengthen liquidity 5) Return excess cash to shareholders through share repurchase 6) Sustain dividends and payout ratio

 

 

willistowerswatson.com © 2019 Willis Towers Watson. All rights reserved. around 4 % organic revenue growth FY2019 Revenue Growth around 20 % Adj. operating margin FY2019 Adjusted Operating Margin $ 10.60 to $ 10.85 Adj. diluted EPS FY2019 Adjusted Diluted EPS around 22 % Adj. tax rate Excluding discrete items FY2019 Adjusted Income Tax Rate Annual growth of 15 % or greater (over the next 3 years) Free Cash Flow Around $0.15 currency headwind on Adj. EPS Assumes average rates £1.00 = $1.31, €1.00 = $1.13 FY2019 Foreign Currency Assumptions *Guidance is for 2019, except where specified otherwise and is based on ASC 606 accounting standard *The above 2019 guidance excludes possible accretion/dilution impact from prospective acquisitions. We plan to update our 201 9 g uidance after the close of the pending acquisition of TRANZACT 10 History of Delivering on Results. A Solid Foundation for 2019* Q1 2019 management guidance update

 

 

willistowerswatson.com © 2019 Willis Towers Watson. All rights reserved. About Willis Towers Watson Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 45,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.