UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 001-16503
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
Ireland
(Jurisdiction of incorporation or organization)
c/o Willis Group Limited
51 Lime Street, London EC3M 7DQ, England
(Address of principal executive offices)
98-0352587
(I.R.S. Employer Identification No.)
(011) 44-20-3124-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
Ordinary Shares, nominal value $0.000304635 per share
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such files). Yes
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant’s knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definitions of ‘large accelerated filer’, ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Exchange Act.
No
No
No
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
(Do not check if a smaller reporting company)
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the voting common equity held by non-affiliates of the Registrant, computed by reference to the last reported price at which the
Registrant’s common equity was sold on June 30, 2017 (the last day of the Registrant’s most recently completed second quarter) was $18,544,137,403.
As of February 23, 2018, there were outstanding 132,216,177 ordinary shares, nominal value $0.000304635 per share, of the Registrant.
No
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Part III will be incorporated by reference in accordance with Instruction G(3) to Form 10-K no later than 120 days after the end of the Company’s
fiscal year.
WILLIS TOWERS WATSON
INDEX TO FORM 10-K
For the year ended December 31, 2017
Certain Definitions
Disclaimer Regarding Forward-looking Statements
PART I.
Item 1
Business
Item 1A
Risk Factors
Item 1B
Unresolved Staff Comments
Item 2
Item 3
Item 4
Properties
Legal Proceedings
Mine Safety Disclosures
PART II.
Item 5
Item 6
Item 7
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Consolidated Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A
Controls and Procedures
Item 9B
Other Information
PART III.
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV.
Item 15
Item 16
Signatures
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Page
3
4
5
16
31
31
31
31
32
36
37
75
78
175
175
177
178
178
178
178
178
179
185
186
2
Certain Definitions
The following definitions apply throughout this annual report unless the context requires otherwise:
‘We’, ‘Us’, ‘Company’, ‘Willis Towers
Watson’, ‘Our’, ‘Willis Towers Watson
plc’ or ‘WTW’
‘shares’
‘Legacy Willis’ or ‘Willis’
‘Legacy Towers Watson’ or ‘Towers
Watson’
‘Merger’
Willis Towers Watson Public Limited Company, a company
organized under the laws of Ireland, and its subsidiaries
The ordinary shares of Willis Towers Watson Public Limited
Company, nominal value $0.000304635 per share
Willis Group Holdings Public Limited Company and its
subsidiaries, predecessor to Willis Towers Watson, prior to the
Merger
Towers Watson & Co. and its subsidiaries
Merger of Willis Group Holdings Public Limited Company and
Towers Watson & Co. pursuant to the Agreement and Plan of
Merger, dated June 29, 2015, as amended on November 19, 2015,
and completed on January 4, 2016
‘Gras Savoye’
‘Miller’
GS & Cie Groupe SAS
Miller Insurance Services LLP and its subsidiaries
3
Disclaimer Regarding Forward-looking Statements
We have included in this document ‘forward-looking statements’ within the meaning of Section 27A of the Securities Act of
1933, and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by
those laws. These forward-looking statements include information about possible or assumed future results of our operations.
All statements, other than statements of historical facts, that address activities, events or developments that we expect or
anticipate may occur in the future, including such things as our outlook, future capital expenditures, future share repurchases,
growth in commissions and fees, the impact of changes to tax laws on our financial results, business strategies and planned
acquisitions, competitive strengths, goals, the benefits of new initiatives, growth of our business and operations, plans and
references to future successes, and the benefits of the Merger, including our future financial and operating results, plans,
objectives, expectations and intentions are forward-looking statements. Also, when we use words such as ‘may,’ ‘will,’ ‘would,’
‘anticipate,’ ‘believe,’ ‘estimate,’ ‘expect,’ ‘intend,’ ‘plan,’ ‘probably,’ or similar expressions, we are making forward-looking
statements. Such statements are based upon the current beliefs and expectations of the Company’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.
A number of risks and uncertainties that could cause actual results to differ materially from the results reflected in these
forward-looking statements are identified under Risk Factors in Item 1A of this Annual Report on Form 10-K. These statements
are based on assumptions that may not come true and are subject to significant risks and uncertainties.
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 Annual Report on Form 10-K, 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 unduly relying on these forward-looking statements.
4
PART I.
ITEM 1. BUSINESS
The Company
Willis Towers Watson plc was formed upon completion of the Merger on January 4, 2016, pursuant to the Agreement and Plan
of Merger dated June 29, 2015, as amended on November 19, 2015 (the ‘Merger Agreement’), between Legacy Willis, Legacy
Towers Watson, and Citadel Merger Sub, Inc., a wholly-owned subsidiary of Willis formed for the purpose of facilitating this
transaction (‘Merger Sub’). Pursuant to the Merger Agreement, Merger Sub merged with and into Towers Watson with Towers
Watson continuing as the surviving corporation and a wholly-owned subsidiary of Willis.
Immediately following the Merger, Legacy Willis effected (i) a consolidation (i.e., a reverse stock split under Irish law) of
Willis ordinary shares whereby every 2.6490 Legacy Willis ordinary shares were consolidated into one Willis Towers Watson
ordinary share (the ‘Consolidation’) and (ii) an amendment to its Constitution and other organizational documents to change its
name from Willis Group Holdings Public Limited Company to Willis Towers Watson Public Limited Company.
We trace our history to 1828, and are a leading global advisory, broking and solutions company that helps clients around the
world turn risk into a path for growth.
We continue to integrate Willis and Towers Watson while creating a unified platform for global growth, including positioning
the Company to leverage our mutual distribution strength to enhance market penetration, expand our global footprint and create
a strong platform for further innovation. The Company provides a comprehensive offering of services and solutions to clients
across four business segments: Human Capital and Benefits; Corporate Risk and Broking; Investment, Risk and Reinsurance;
and Benefits Delivery and Administration, formerly Exchange Solutions.
Our clients operate on a global and local scale in a multitude of businesses and industries throughout the world and generally
range in size from large, major multinational corporations to middle-market domestic and international companies. Our clients
include many of the world’s leading corporations, including 90% or more of the Fortune Global 500 companies, the
Fortune 1000, and the FTSE 100. We also advise substantially all of the world’s leading insurance companies. We work with
major corporations, emerging growth companies, governmental agencies and not-for-profit institutions in a wide variety of
industries, with many of our client relationships spanning decades. No one client accounted for a significant concentration of
revenues in each of the years ended December 31, 2017, 2016 and 2015. We place insurance with approximately 2,500
insurance carriers, none of which individually accounted for a significant concentration of the total premiums we placed on
behalf of our clients in 2017, 2016 or 2015.
Available Information
The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and
Exchange Commission (the ‘SEC’). You may read and copy any documents we file at the SEC’s Public Reference Room at
100 F Street, NE Washington, DC 20549. Call the SEC at 1-800-SEC-0330 for information on the Public Reference Room. The
SEC maintains a website that contains annual, quarterly and current reports, proxy statements and other information that issuers
(including Willis Towers Watson) file electronically with the SEC. The SEC’s website is www.sec.gov.
The Company makes available, free of charge through our website, www.willistowerswatson.com, our Annual Report on
Form 10-K, our quarterly reports on Form 10-Q, our proxy statement, current reports on Form 8-K and Forms 3, 4, and 5 filed
on behalf of directors and executive officers, as well as any amendments to those reports filed or furnished pursuant to the
Securities Exchange Act of 1934 (the ‘Exchange Act’) as soon as reasonably practicable after such material is electronically
filed with, or furnished to, the SEC. Unless specifically incorporated by reference, information on our website is not a part of
this Form 10-K.
The Company’s Corporate Governance Guidelines, Audit & Risk Committee Charter, Compensation Committee Charter, and
Nominating & Governance Committee Charter are available on our website, www.willistowerswatson.com, in the Investor
Relations section, or upon request. Requests for copies of these documents should be directed in writing to the Company
Secretary c/o Office of General Counsel, Willis Towers Watson Public Limited Company, Brookfield Place, 200 Liberty Street,
New York, NY 10281.
General Information
Willis Towers Watson is a leading global advisory, broking and solutions company that helps clients around the world turn risk
into a path for growth. Willis Towers Watson has more than 43,000 employees and services clients in more than 140 countries
and territories. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of
5
capital to protect and strengthen institutions and individuals. We believe our unique perspective allows us to see the critical
intersections between talent, assets and ideas - the dynamic formula that drives business performance.
We offer our clients a broad range of services to help them to identify and control their risks, and to enhance business
performance by improving their ability to attract, retain and engage a talented workforce. Our risk control services range from
strategic risk consulting (including providing actuarial analysis), to a variety of due diligence services, to the provision of
practical on-site risk control services (such as health and safety or property loss control consulting), as well as analytical and
advisory services (such as hazard modeling and reinsurance optimization studies). We assist clients in planning how to manage
incidents or crises when they occur. These services include contingency planning, security audits and product tampering plans.
We help our clients enhance their business performance by delivering consulting services, technology and solutions that help
them anticipate, identify and capitalize on emerging opportunities in human capital management as well as offer investment
advice to help them develop disciplined and efficient strategies to meet their investment goals.
As an insurance broker, we act as an intermediary between our clients and insurance carriers by advising our clients on their
risk management requirements, helping them to determine the best means of managing risk and negotiating and placing
insurance with insurance carriers through our global distribution network. We operate the largest private Medicare exchange in
the United States (‘U.S.’). Through this exchange and those for active employees, we help our clients move to a more
sustainable economic model by capping and controlling the costs associated with healthcare benefits.
We are not an insurance company, and therefore we do not underwrite insurable risks for our own account.
We derive the majority of our revenues from either commissions or fees for brokerage or consulting services. We 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. Our fees for consulting services are spread across a variety of complementary businesses that generally remain
steady during times of uncertainty. We have some businesses, such as our health and benefits and administration businesses,
which can be counter cyclical during the early period of a significant economic change.
Our colleagues serve a diverse base of clients ranging in size from large, major multinational corporations to middle-market
companies in a variety of industries, public institutions, and individual clients. Many of our client relationships span decades.
We work with established corporations, emerging growth companies, governmental agencies and not-for-profit institutions in a
wide variety of industries.
We believe we are one of only a few global advisory, broking and solutions companies in the world possessing the global
operating presence, broad product expertise and extensive distribution network necessary to effectively meet the global needs
of many of our clients.
Below are our revenues and long-lived assets for Ireland, our country of domicile, countries with significant concentrations,
and all other foreign countries for each of the years ended December 31, 2017, 2016 and 2015:
Revenues
(in millions)
Long-Lived Assets (i)
(in millions)
Ireland
$
107
$
92
$
64
$
127
$
114
$
124
2017
2016
2015
2017
2016
2015
United States
United Kingdom
Rest of World
Total Foreign Countries
3,821
1,815
2,459
8,095
3,395
2,236
2,164
7,795
1,597
1,055
1,113
3,765
9,988
3,173
3,263
16,424
11,400
2,431
2,466
16,297
$
8,202
$
7,887
$
3,829
$
16,551
$
16,411
$
1,759
2,426
1,951
6,136
6,260
____________________
(i) Long-Lived Assets do not include deferred tax assets.
6
Business Strategy
Willis Towers Watson sees that a unified approach to people and risk can be a path to growth for our clients. Our integrated
teams bring together our understanding of risk strategies and market analytics. This helps clients around the world to achieve
their objectives.
We operate in attractive markets - both growing and mature - with a diversified platform across geographies, industries,
segments and lines of business. We aim to become the premier advisory, broking and solutions company of choice. 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. We also help organizations improve performance through effective people, risk and
financial management by focusing on providing human capital and financial consulting services.
We believe we can achieve this by:
• Delivering a powerful client proposition with an integrated global platform. Our combined offerings provide
comprehensive advice, analytics, specialty capabilities and solutions covering benefits, benefits delivery solutions,
brokerage and advisory, risk and capital management, and talent and rewards;
• Leveraging our combined distribution strength and global footprint to enhance market penetration and provide a
platform for further innovation; and
• Underpinning this growth through continuous operational improvement initiatives that help make us more effective
and efficient and drive cost synergies. We do this by:
continuing to modernize the way we run our business to better serve our clients, enabling the skills of our
staff, and lowering our costs of doing business;
making the necessary changes to our processes, our IT, our real estate and our workforce locations; and
targeting and delivering identified, highly achievable cost savings as a direct consequence of the Merger.
We care as much about how we work as we do about the impact that we make. This means commitment to shared values, a
framework that guides how we run our business and serve clients.
Through these strategies we aim to accelerate revenue, cash flow, earnings before interest, taxes, depreciation and amortization
(‘EBITDA’), and earnings growth, and generate compelling returns for investors, by delivering tangible growth in revenues and
capitalizing on the identified cost synergies.
Principal Services
In 2016, we began managing our business across four integrated reportable operating segments: Human Capital and Benefits;
Corporate Risk and Broking; Investment, Risk and Reinsurance; and Benefits Delivery and Administration. Below are the
percentages of revenues generated by each segment for each of the years ended December 31, 2017, 2016 and 2015:
Year ended December 31,
2016 (i)
2015 (i)
2017
Human Capital and Benefits
Corporate Risk and Broking
Investment, Risk and Reinsurance
Benefits Delivery and Administration
____________________
39%
33%
19%
9%
40%
32%
20%
8%
15%
61%
24%
—%
(i) Beginning in 2017, we made certain changes that affect our segment results. These changes, which are detailed in the Current Report on Form 8-K
filed with the SEC on April 7, 2017, include the realignment of certain businesses within our segments, as well as changes to certain allocation
methodologies to better reflect the ongoing nature of our businesses. The prior period comparatives reflected in the tables above have been
retrospectively adjusted to reflect our current segment presentation. See Note 4 — Segment Information within Item 8 in this Annual Report on
Form 10-K for a further discussion of these changes. The recast figures do not include pro forma segment revenues from Legacy Towers Watson for
2015. For 2015 pro forma segment information, see our Form 8-K filed with the SEC on July 14, 2016.
7
The average number of employees by segment for the year ended December 31, 2017 is approximated below:
Human Capital and Benefits
Corporate Risk and Broking
Investment, Risk and Reinsurance
Benefits Delivery and Administration
Corporate and Other
Total Employees
Human Capital and Benefits
December 31,
2017
12,800
14,600
4,900
3,200
7,900
43,400
The Willis Towers Watson Human Capital & Benefits (‘HCB’) segment provides an array of advice, broking, solutions and
software for employee benefit plans, the human resources (‘HR’) organization and the management teams of our clients.
HCB is the largest segment of the Company, generating approximately 39% of our segment revenues for the year ended
December 31, 2017. Organized into four primary offerings - Retirement; Health & Benefits; Talent & Rewards; and
Technology and Administration Solutions, the segment is focused on addressing our clients’ people and risk needs to help them
take on the challenges of operating in a global marketplace.
HCB is strengthened with teams of international consultants that provide support in each of these areas to the global
headquarters of multinational clients and their foreign subsidiaries.
Retirement — The Retirement business provides actuarial support, plan design, and administrative services for traditional
pension and retirement savings plans. Our colleagues help our clients assess the costs and risks of retirement plans on cash
flow, earnings and the balance sheet, the effects of changing workforce demographics on their retirement plans and retiree
benefit adequacy and security. We offer clients a full range of integrated retirement consulting services to meet the needs of all
types of employers - including those that continue to offer defined benefit plans and those that are reexamining their retirement
benefit strategies. We bring a particular in-depth data analysis and perspective to their decision process, because we have
tracked the retirement designs of the largest public companies around the world over many years.
For clients that want to outsource some or all of their pension plan management, we offer integrated solutions that combine
investment consulting, pension administration, core actuarial services, and communication and change management assistance.
Our retirement consulting relationships are generally long-term in nature, and client retention rates for this business are high. A
significant portion of the revenues in this business is from recurring work, with multi-year contracts that are driven by the
heavily regulated nature of employee benefit plans and our clients’ annual needs for these services. Revenues for the
Retirement business are somewhat seasonal, as much of our work pertains to calendar-year plan administration and reporting
and compliance related to the completion of pension plan valuations; thus, the first quarter of the fiscal year is typically
Retirement’s strongest quarter. Major revenue growth drivers in this business include changes in regulations, capital market
conditions, increased global demand and increased market share.
Health and Benefits — The Health & Benefits (‘H&B’) business provides plan management consulting, broking and
administration across the full spectrum of health and group benefit programs, including medical, dental, disability, life and
other coverage. Our H&B reach extends from small/mid-market clients to large market clients, across the full geographic
footprint of the Company, and to most industries. We can address our clients’ insured needs in more than 140 countries.
Our consultants help clients make strategic decisions on topics such as optimizing program spend; evaluating emerging
coverage options (including publicly-subsidized health insurance exchanges and private exchanges in the U.S.); and dealing
with above-inflation-rate increases in healthcare costs. In addition to our consulting services, we manage a number of collective
purchasing initiatives, such as pharmacy and stop-loss, that allow employers to realize greater value from third-party service
providers than they can achieve on their own.
With Global Benefits Solutions, our suite of global services supporting medical, dental and risk (life, accident and disability)
programs, we have a tailored offering for multinationals. That offering includes a flexible set of ready-made offerings, proven
technology, efficient operational structure and an integrated approach to service delivery that translates to a globally consistent,
high-quality experience for our clients.
8
Finally, H&B supports our Group Marketplace, our private health insurance exchange for active employees. This offering is
integrated with our other health insurance exchange offerings covered by our Individual Marketplace, which are offered within
the Benefits Delivery and Administration segment.
Talent & Rewards — Our Talent & Rewards (‘T&R’) business provides advice, data, software and products to address clients’
total rewards and talent issues. T&R has operations across the globe, including centralized software development and analytics
teams that support the efficient delivery of services to clients.
Within our Rewards line of business, we address both executive compensation and broad-based rewards. We advise our clients’
management and boards of directors on all aspects of executive pay programs, including base pay, annual bonuses, long-term
incentives, perquisites and other benefits. Our focus is on aligning pay plans with the organization’s business strategy and
driving desired performance. Our solutions incorporate market benchmarking data and software to support compensation
administration.
Our Talent line of business offers services focused on designing and implementing talent management programs and processes
which help companies attract and deploy talent, engage them over time, manage their performance, develop their skills, provide
them with relevant career paths, communicate with them and manage organizational change initiatives. Our solutions include
employee insight and listening tools, talent assessment tools and services, and HR software to help companies administer and
manage their talent management programs and analyze talent trends.
Revenues for the T&R business are partly seasonal in nature, with a meaningful amount of heightened activity in the second
half of the calendar year during the annual compensation, benefits and survey cycles. While T&R enjoys long-term
relationships with many clients, work in several practices is often project-based and can be sensitive to economic changes. The
business benefits from regulatory changes affecting our clients that require strategic advice, program changes and
communication such as CEO pay ratio disclosure in the U.S. and gender pay gap reporting in the United Kingdom (‘U.K.’)
Additional areas of growth for T&R include evolving views on effective individual performance measurement and
management, focus on workforce productivity improvements and labor cost reductions, globalization and digitization of the
workforce, merger and acquisition (‘M&A’) activity, technology-enabled approaches for measuring and understanding
workforce engagement, and the opportunity to leverage HR software to improve the design, management and implementation
of HR processes and programs.
Technology and Administration Solutions — Our Technology and Administration Solutions (‘TAS’) business provides benefits
outsourcing services to hundreds of clients across multiple industries. Our TAS team focuses on clients outside of the U.S.
where our services are supported by high quality administration teams using robust technology platforms. We have high client
retention rates, and we are the leading administrator among the 200 largest pension plans in the U.K., as well as a leader in
Germany.
For both our defined benefit and defined contribution administration services, we use highly-automated processes and web
technology to enable benefit plan members to access and manage their records, perform self-service functions and improve
their understanding of their benefits. Our technology also provides trustees and HR teams with timely management information
to monitor activity and service levels and reduce administration costs.
Corporate Risk and Broking
Our Corporate Risk & Broking (‘CRB’) segment provides a broad range of risk advice, insurance brokerage and consulting
services to clients worldwide ranging from small businesses to multinational corporations. The segment delivers integrated
global solutions tailored to client needs and underpinned by data and analytics.
CRB generated approximately 33% of Willis Towers Watson segment revenues for the year ended December 31, 2017, and
places more than $20 billion of premium into the insurance markets, annually.
CRB operates as an integrated global team comprising both functional and geographic leadership. In addition there are three
global offerings, which aim to leverage capabilities across geographies. In these operations, we 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.
Property and Casualty — Property and Casualty provides property and liability insurance brokerage services across a wide
range of industries including construction, real estate, healthcare and natural resources. Our construction practice provides risk
management advice and brokerage services for a wide range of international construction activities. Clients of the construction
practice include contractors, project owners, project managers, consultants and financiers. Our natural resources practice
encompasses the oil and gas, mining, power and utilities sectors; and provides services including property damage, offshore
9
construction liability and other services to global clients. In addition, we also arrange insurance products and services for our
affinity client partners to offer to their customers, employees or members alongside, or in addition to, their principal business
offerings.
Financial Lines — Financial Lines specializes in brokerage services for financial, political and credit risks. Our clients include
financial institutions, professional services firms and affinity groups from around the globe that require coverage for areas
ranging from business risks, such as trade credit, directors and officers and medical malpractice, to external threats, such as
cyber attacks, terrorism and creditor payment protection.
Transport — Transport provides specialist expertise to the transportation industry and aerospace, marine and inspace practices.
Our aerospace business provides insurance brokerage and risk management services to aerospace clients worldwide, including
the world’s leading airlines, aircraft manufacturers, air cargo handlers and other airport and general aviation companies. Our
marine business provides insurance brokerage services, including hull, cargo, protection and indemnity and general marine
liabilities. Our marine clients include ship owners, ship builders, logistics operations, port authorities, traders and shippers. The
specialist inspace team is also prominent in providing insurance and risk management services to the space industry.
Facultative capabilities exist within each of the above offerings to serve as a broker or intermediary for insurance companies
looking to arrange reinsurance solutions across various classes of risk. This allows our team of experts to deliver differentiated
outcomes to their direct insureds, which in many situations are also clients of the wider Willis Towers Watson business. The
facultative team also works closely with our treaty reinsurance business to structure reinsurance solutions that deliver capital
and strategic benefits to insurance company clients.
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. The segment works closely with investors, reinsurers and insurers to
manage the equation between risk and return. Blending advanced analytics with deep institutional knowledge, IRR identifies
new opportunities to maximize performance. IRR provides investment consulting services and insurance specific services and
solutions through reserves opinions, software, ratemaking, usage-based insurance, risk underwriting, and reinsurance broking.
This segment is our third largest segment and generated approximately 19% of segment revenues for the Company for the year
ended December 31, 2017. With approximately 75% of the revenues for this segment split between North America and the
U.K., this segment includes the following businesses and offerings:
Willis Re — Willis Re provides reinsurance industry clients with an understanding of how risk affects capital and financial
performance and advises on the best ways to manage related outcomes. We operate this business on a global basis and provide
a complete range of transactional capabilities, including, in conjunction with Willis Towers Watson Securities, a wide variety of
capital markets-based products to both insurance and reinsurance companies. Our services are underpinned by modeling,
financial analysis and risk management advice.
Insurance Consulting and Technology — Insurance Consulting and Technology, formerly Risk Consulting and Software, is a
global business that provides advice and technology solutions to the insurance industry, as well as to corporate clients with
respect to their insurance programs. We leverage our industry experience, strategic perspective and analytical skills to help
clients measure and manage risk and capital, improve business performance and create a sustainable competitive advantage.
Our services include software and technology, risk and capital management, products and pricing, financial and regulatory
reporting, financial and capital modeling, M&A, outsourcing and business management.
Investment — Investment provides advice to improve investment outcomes for asset owners using a broad and sophisticated
framework for managing risk. We provide coordinated investment advice and solutions to some of the world’s largest pension
funds and institutional investors based on our expertise in risk assessment, asset-liability modeling, strategic asset allocation
policy setting, manager selection and investment execution.
Wholesale Insurance Broking — Wholesale Insurance Broking provides wholesale and specialist broking services to retail
brokers worldwide, through Willis Towers Watson and London based specialist broker Miller Insurance Services LLP.
Portfolio and Underwriting Services — Portfolio and Underwriting Services, with operations in London and North America,
brings together our existing set of Managing General Agent underwriting activities for purposes of accelerating their future
development. Within Portfolio and Underwriting Services, we act on behalf of our insurance carrier partners and self-insured
entities in product marketing and distribution, risk underwriting and selection, claims management and other general
administrative responsibilities.
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Willis Towers Watson Securities — Formerly Capital Markets & Advisory, with offices in New York, London, Hong Kong and
Sydney, provides investment banking services to companies involved in the insurance and reinsurance industries for a broad
array of merger and acquisition transactions as well as capital markets products, including acting as underwriter for primary
issuances, operating a secondary insurance-linked securities trading desk and engaging in strategic advisory work.
Max Matthiessen — Max Matthiessen is a leading advisor and broker within insurance, benefits, human resources and savings
in the Nordic region. The business specializes in providing human capital and benefits administration together with providing
market leading savings and insurance solutions.
Benefits Delivery and Administration
The Willis Towers Watson Benefits Delivery and Administration (‘BDA’, formerly 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. BDA services individual populations via its ‘group to individual’ technology platform, which tightly
integrates patented call routing technology, an efficient quoting and enrollment engine, a 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. BDA uses Software as a Service
(‘SaaS’)-based technology and related services to deliver consumer-driven healthcare and reimbursement accounts, including
health savings accounts, health reimbursement arrangements, flexible spending accounts and other consumer-directed accounts.
A significant portion of the revenues in this segment is recurring in nature, driven by either the commissions from the policies
we sell, or from long-term service contracts with our clients that typically range from three to five years. Revenues across this
segment may be seasonal, driven by the magnitude and timing of client transition activities, and we typically increase our
membership levels significantly effective January 1, after calendar year-end benefits elections.
BDA generated approximately 9% of our segment revenues for the year ended December 31, 2017. BDA provides services
across four integrated or related offerings, listed below, to customers primarily in the U.S.
Individual Marketplace (formerly Retiree & Access Exchanges) — This business provides solutions through a proprietary
technology platform, OneExchange Retiree, which enables our employer clients to transition their retirees to individual,
defined contribution health plans that provide individuals with a tax-free allowance or contribution to spend on healthcare
services at an annual cost that the employer controls, as opposed to group-based, defined benefit health plans that provide
groups of individuals with healthcare benefits at uncertain annual costs.
Group Marketplace (formerly Active Exchanges) — This business is focused on delivering group benefit exchanges, serving
the active employees of employers across the United States. Using our proprietary BenefitConnect or Bright Choices exchange
platforms, combined with our expertise in creating high-performing benefit plan designs, we believe we are well-positioned to
help our clients simplify their benefits delivery, while lowering the total costs of benefits and related administration. We have
relationships with more than 400 broker partners to access and service the small to mid-size group market and offer both fully-
insured and self-insured exchanges to meet the needs of our employer clients.
Benefits Outsourcing (formerly Technology and Administration Solutions) — Through our proprietary BenefitConnect
technology, this business provides a broad suite of health and welfare outsourcing services as well as decision support and
modeling tools for pension users within the U.S. With our disciplined approach to customer service, we offer cost-effective,
high-touch service to hundreds of clients across many industries.
Benefits Accounts (formerly Consumer-Directed Accounts) — This business uses its SaaS-based technology and related
services to deliver consumer-driven healthcare and reimbursement accounts, including health savings accounts, health
reimbursement arrangements and other consumer-directed accounts.
Competition
We face competition in all fields in which we operate, based on global capability, product breadth, innovation, quality of
service and price. We compete with Accenture plc, Aon plc, Arthur J. Gallagher & Co., Brown & Brown Inc., Cognizant
Technology Solutions Corporation, Marsh & McLennan Companies, Inc. and Robert Half International Inc., as well as with
numerous specialty, regional and local firms. Marsh & McLennan Companies and Aon plc are the two other major providers of
global risk management services. Competition for business is intense in all of our business lines and in every insurance market,
and in some business lines Marsh & McLennan Companies and Aon plc have greater market share than we do.
Competition on premium rates has also exacerbated the pressures caused by a continuing reduction in demand in some classes
of business. For example, rather than purchase additional insurance through brokers, some insureds have been retaining a
greater proportion of their risk portfolios than previously. Industrial and commercial companies increasingly rely upon their
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own subsidiary insurance companies, known as captive insurance companies, self-insurance pools, risk retention groups,
mutual insurance companies and other mechanisms for funding their risks, rather than buy insurance. Additional competitive
pressures arise from the entry of new market participants, such as banks, accounting firms and insurance carriers themselves,
offering risk management or transfer services.
The human capital and risk management consulting industries are highly competitive. We believe there are significant barriers
to entry, and we have developed competitive advantages in providing HR consulting and risk management consulting services.
We face strong competition from several sources.
Our principal competitors in the pension consulting industry are Mercer HR Consulting (a Marsh & McLennan company) and
Aon plc. Beyond these large players, the global HR consulting industry is highly fragmented.
Our major competitors in the insurance consulting and software industry include Milliman, Oliver Wyman (a Marsh &
McLennan company), the big four accounting firms and SunGard. Aon, Buck Consultants (a Conduent Company), Connextions
(a United Healthcare company), Mercer (a Marsh & McLennan company), Automatic Data Processing and Fidelity are our
primary competitors in the insurance exchange industry. With the implementation of the Patient Protection and Affordable Care
Act, we also compete with the public exchanges currently run by the U.S. federal and state governments. We now compete with
providers of account-based health plans and consumer-directed benefits such as WageWorks and HealthEquity.
The market for our services is subject to change as a result of economic, regulatory and legislative changes, technological
developments, and increased competition from established and new competitors. Regulatory and legislative actions, along with
continuously evolving technological developments, will likely have the greatest impact on the overall market for our exchange
products. We believe the primary factors in selecting an HR consulting or risk management services firm include reputation; the
ability to provide measurable increases to shareholder value and return on investment; global scale; quality of service; and the
ability to tailor services to clients’ unique needs. With regard to the marketplace for individuals and active employee exchanges,
we believe that clients base their decisions on a variety of factors that include the ability of the provider to deliver measurable
cost savings for clients, a strong reputation for efficient execution, a provider’s capability in delivering a broad number of
configurations to serve various population segments and financing options, and an innovative service delivery model and
platform. For our traditional consulting and risk management services and the rapidly evolving exchange products, we believe
we compete favorably with respect to these factors.
Regulation
Our business activities are subject to legal requirements and governmental and quasi-governmental regulatory supervision in all
countries in which we operate. Also, such regulations may require individual or company licensing to conduct our business
activities. While these requirements may vary from location to location, they are generally designed to protect our clients by
establishing minimum standards of conduct and practice, particularly regarding the provision of advice and product
information, as well as financial criteria. We are also subject to data privacy regulations in many countries. Our most significant
regulatory regions are described below:
United States
Our activities in connection with insurance brokerage services within the United States are subject to regulation and
supervision by state authorities. Although the scope of regulation and form of supervision may vary from state to state,
insurance laws in the United States are often complex and generally grant broad discretion to supervisory authorities in
adopting regulations and supervising regulated activities. That supervision generally includes the licensing of insurance brokers
and agents and the regulation of the handling and investment of client funds held in a fiduciary capacity. Our continuing ability
to provide insurance brokerage in the states in which we currently operate is dependent upon our compliance with the rules and
regulations promulgated by the regulatory authorities in each of these states. Additionally, some of our private exchange
activities are overseen by the Centers for Medicare & Medicaid Services, which is part of the Department of Health and Human
Services.
Certain of our activities are governed by other regulatory bodies, such as investment and securities licensing authorities. Our
activities in connection with investment services within the United States are subject to regulation and supervision at both the
federal and state levels. At the federal level, certain of our operating subsidiaries are regulated by the SEC through the
Investment Company Act of 1940 and the Investment Advisers’ Act of 1940; and by the Department of Labor through the
Employee Retirement Income Security Act, or ERISA. In connection with the SEC regulations, we are required to file certain
reports, and are subject to various marketing restrictions, among other requirements. In connection with ERISA regulations, we
are restricted in actions we can take for plans for which we serve as fiduciaries, among other matters. Our U.S. investment
activities are also subject to certain state regulatory schemes.
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Our Willis Towers Watson Securities business operates through its wholly-owned subsidiary, Willis Securities, Inc., a U.S.-
registered broker-dealer and member of FINRA/SIPC, primarily in connection with investment banking services and advising
on alternative risk financing transactions.
Our activities in connection with Third Party Administrator (‘TPA’) services in the United States are also subject to regulation
and supervision by many state authorities. Licensing requirements and supervision vary from state to state. As with insurance
brokerage services, our continuing ability to provide these services in states that regulate our activities is dependent upon our
compliance with the rules and regulations promulgated from time to time by the regulatory authorities in each of these states.
United Kingdom
In the United Kingdom, our business is regulated by the Financial Conduct Authority (‘FCA’). The FCA has a wide range of
rule-making, investigatory and enforcement powers, and conducts monitoring visits to assess our compliance with regulatory
requirements.
The FCA has a sole strategic objective: to ensure that the relevant markets function well. Its operational objectives are to:
secure an appropriate degree of protection for consumers; protect and enhance the integrity of the U.K. financial system; and to
promote effective competition in the interests of consumers. The FCA has powers in product intervention. For instance, it can
instruct firms to withdraw or amend misleading financial promotions. A U.K. exit from the E.U. may cause an increase in
regulations in the U.K.
European Union
In 2005, the European Union Insurance Mediation Directive introduced rules to enable insurance and reinsurance
intermediaries to operate and provide services within each member state of the European Union (‘E.U.’) on a basis consistent
with the E.U. single market and customer protection aims. Each E.U. member state in which we operate is required to ensure
that the insurance and reinsurance intermediaries resident in their country are registered with a statutory body in that country
and that each intermediary meets professional requirements in relation to their competence, good repute, professional
indemnity cover and financial capacity. The E.U. has been in the process of updating the Insurance Mediation Directive.
Various E.U. bodies have created a replacement to the Insurance Mediation Directive called the Insurance Distribution
Directive. The current timetable would require all E.U. member states to make the Insurance Distribution Directive national
law by July 1, 2018. The Insurance Distribution Directive is now proposed to become effective on October 1, 2018.
In addition, our Willis Towers Watson Securities business provides advice on securities or investments in the European Union
and Australia through our U.K. wholly-owned subsidiary, Willis Towers Watson Securities Europe Limited, which is authorized
and regulated by the FCA.
Willis Towers Watson is also subject to the new E.U. General Data Protection Regulation (‘GDPR’), which goes into effect in
May 2018. The GDPR is a new, comprehensive regime that significantly increases our responsibilities when handling personal
data, including, without limitation, requiring us to conduct privacy impact assessments, restricting the transmission of data and
requiring public disclosure of significant data breaches.
Other
Our Willis Towers Watson Securities business, through an affiliate, Willis Towers Watson Securities (Hong Kong) Limited, is
licensed to conduct certain securities-related activities, and is subject to regulation by the Hong Kong Securities and Futures
Commission. Certain of our entities that undertake pension scheme management are subject to MiFID (Markets in Financial
Instruments Directive) and MiFIR (the Markets in Financial Instruments Regulation). In addition, revisions to MiFID (‘MiFID
II’) took effect in January 2018. These revisions are aimed at strengthening investor protection and improving the function of
financial markets. MiFID II imposes a variety of new requirements that include, among others, rules relating to product
governance and independent investment advice, responsibility of management bodies, inducements, information and reporting
to clients, cross-selling, remuneration of staff, and best execution of trades for clients. Further, some of our entities are also
authorized and regulated by certain financial services authorities in countries such as Sweden, Ireland, the Netherlands and the
U.K.
All companies carrying on similar activities in a given jurisdiction are subject to regulations which are not dissimilar to the
requirements for our operations in the United States and United Kingdom. We do not consider these regulatory requirements as
adversely affecting our competitive position.
Across all geographies we are subject to various data privacy regulations that apply to medical, financial and other types of
personal information belonging to our clients, their employees and third parties, as well as our own employees.
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Our failure, or that of our employees, to satisfy the regulatory compliance requirements or the legal requirements governing our
activities, can result in disciplinary action, fines, reputational damage and financial harm.
See Part I, Item 1A-Risk Factors for an analysis of how actions by regulatory authorities or changes in legislation and
regulation in the jurisdictions in which we operate may have an adverse effect on our business.
Executive Officers of the Registrant
The executive officers of the Company as of February 28, 2018 were as follows:
Nicolas Aubert (age 52) - Mr. Aubert has served as the Head of Great Britain at Willis Towers Watson since January 4, 2016,
and as the CEO of Willis Limited, the Company’s U.K. insurance and reinsurance broking subsidiary, since September 30,
2015. Prior to his appointment as the Head of Great Britain, Mr. Aubert served as CEO of Willis GB, the operating segment of
Willis Group Holdings that included Willis’ London specialty businesses and facultative business, and the retail insurance
business in Great Britain since January 2015. Since March 2016, Mr. Aubert has served as the Chairman of the London Market
Group (LMG), a professional body representing the common interests of the London Insurance Market operators, Lloyd’s of
London, IUA, LIIBA and LMA. Prior to joining Willis, Mr. Aubert served as the Chief Operating Officer of American
International Group (AIG) in Europe, the Middle East and Africa, and formerly as the Managing Director of AIG in the U.K.
After joining AIG in June 2002 to lead AIG France, Mr. Aubert served in various other senior management positions, including
Managing Director of Southern Europe, where he oversaw operations in 12 countries, including Israel. Prior to AIG, Mr. Aubert
worked in various leadership positions at ACE, CIGNA, GAN and started his career at GENERALI. He holds specialized
Masters Degrees in Insurance Law (DESS Assurances) from Pantheon-Sorbonne University of Paris and from Institut des
Assurances de Paris (Université Paris-Dauphine) and an M.B.A. from the French High Insurance Studies Center (CHEA).
Anne D. Bodnar (age 61) - Ms. Bodnar has served as the Chief Human Resources Officer at Willis Towers Watson since
January 4, 2016. Previously, Ms. Bodnar served on Towers Watson’s Management Committee since January 2015, and as
Towers Watson’s Chief Administrative Officer since January 1, 2010. Ms. Bodnar previously served as Managing Director of
HR at Towers Perrin beginning in 2001. From 1995 to 2000, Ms. Bodnar led Towers Perrin’s recruiting and learning and
development efforts. Prior to that, she was a strategy consultant in Towers Perrin’s Human Capital business. Earlier in her
career, Ms. Bodnar held several operational and strategic planning roles at what is now JPMorgan Chase. Additionally,
Ms. Bodnar published a chapter entitled “HR as a Strategic Partner” in Human Resources Leadership Strategies: Fifteen Ways
to Enhance HR Value in Your Company. She was elected to the YWCA’s Academy of Women Achievers in 1999. Ms. Bodnar
graduated cum laude and Phi Beta Kappa from Smith College and has an M.B.A. from Harvard Business School.
Michael J. Burwell (age 54) - Mr. Burwell has served as Chief Financial Officer of Willis Towers Watson since October 3,
2017. Before joining Willis Towers Watson, Mr. Burwell spent over 30 years at PricewaterhouseCoopers LLP (PwC), where he
served in various senior leadership roles, including, most recently, as a Senior Partner driving Transformation activities with
various clients across industries since 2016. Prior to that, Mr. Burwell served as Vice Chairman, Global and US Transformation
Leader from 2012 to 2016, as Vice Chairman, US Operations Leader (COO) and Chief Financial Officer from 2007 to 2012,
and as Leader of the Transaction Services practice from 2005 to 2007. During his initial time at PwC, Mr. Burwell served 11
years in the assurance practice working on numerous audit clients. He has a bachelor’s degree in business administration from
Michigan State University and is a certified public accountant. In 2010, he was named Michigan State University’s Alumnus of
the year.
Matthew S. Furman (age 48) - Mr. Furman has served as General Counsel at Willis Towers Watson since January 4, 2016.
Previously, Mr. Furman served as Executive Vice President and Group General Counsel at Willis Group Holdings, where he
was a member of the Operating Committee since April 2015. From 2007 until March 2015, Mr. Furman was Senior Vice
President, Group General Counsel-Corporate and Governance, and Corporate Secretary for The Travelers Companies, Inc.
From 2000 until 2007, Mr. Furman was an attorney at Goldman, Sachs & Co. in New York, where he was Vice President and
Associate General Counsel in the finance and corporate legal group. Prior to that, he was in private practice, with almost six
years’ experience at Simpson Thacher & Bartlett in New York. Mr. Furman also serves as a Director of the Legal Aid Society
and a member of the U.S. Securities and Exchange Commission’s Investor Advisory Committee. He holds a bachelor’s degree
from Brown University and a law degree from Harvard Law School.
Adam L. Garrard (age 52) - Mr. Garrard has served as Head of International at Willis Towers Watson since January 4, 2016.
Previously, Mr. Garrard served as Chief Executive Officer for Willis Group Holdings in Asia since September 2012. Prior to
that, Mr. Garrard served as Chief Executive Officer for Willis in Europe since January 2009, Chief Executive Officer for Willis
in Australasia since May 2005 and Chief Executive Officer for Asia since January 2002. Mr. Garrard has resided in Singapore,
Shanghai, Sydney and London while undertaking his Chief Executive Officer roles. After graduating from De Montfort
University with a bachelor’s degree in Business Administration in 1992, Mr. Garrard joined SBJ Stephenson Insurance Brokers
before joining Willis in 1994.
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Julie J. Gebauer (age 56) - Ms. Gebauer has served as Head of Human Capital & Benefits at Willis Towers Watson since
January 4, 2016. Previously, Ms. Gebauer served as Managing Director of Towers Watson’s Talent and Rewards business
segment since January 1, 2010. Beginning in 2002, Ms. Gebauer served as a Managing Director of Towers Perrin and led
Towers Perrin’s global Workforce Effectiveness Practice and the global Towers Perrin-International Survey Research
Corporation line of business. Ms. Gebauer was a member of Towers Perrin’s Board of Directors from 2003 through 2006. She
joined Towers Perrin in 1986 as a consultant and held several leadership positions at Towers Perrin, serving as the Managing
Principal for the New York office from 1999 to 2001 and the U.S. East Region Leader for the Human Capital Group from 2002
to 2006. Ms. Gebauer is a Fellow of the Society of Actuaries. Ms. Gebauer graduated Phi Beta Kappa and with high distinction
from the University of Nebraska-Lincoln with a bachelor’s degree in Mathematics, and was designated a Chancellor’s Scholar.
Joseph Gunn (age 47) - Mr. Gunn has served as the Head of North America at Willis Towers Watson since October 27, 2016.
Previously, Mr. Gunn served as the regional director for the Northeast region of Willis Towers Watson where he led the
business in both Metro New York and New England since January 4, 2016. Prior to that, Mr. Gunn served as the National
Partner for the Northeast Region at Willis North America since July 2009, and before that, as the Chief Growth Officer for
Willis North America and regional executive officer for the South Central region of Willis North America since August 2006.
Before joining Willis in 2004, Mr. Gunn led the Marsh Client Development team for the North Texas operations and served as a
senior relationship officer on several large accounts. Mr. Gunn serves as a member of the board of trustees of Big Brothers Big
Sisters of New York. He holds a bachelor’s degree in Political Science from Florida State University.
John J. Haley (age 68) - Mr. Haley has served as Chief Executive Officer and Director at Willis Towers Watson since January
4, 2016. Previously, Mr. Haley served as the Chief Executive Officer and Chairman of the Board of Directors of Towers Watson
since January 1, 2010, and as President since October 3, 2011. Prior to that, Mr. Haley served as President and Chief Executive
Officer of Watson Wyatt beginning on January 1, 1999, as Chairman of the Board of Watson Wyatt beginning in 1999 and as a
director of Watson Wyatt beginning in 1992. Mr. Haley joined Watson Wyatt in 1977. Prior to becoming President and Chief
Executive Officer of Watson Wyatt, he was the Global Director of the Benefits Group at Watson Wyatt. Mr. Haley is a Fellow
of the Society of Actuaries, and a member of the American Academy of Actuaries and the Conference of Consulting Actuaries.
He is also a co-author of Fundamentals of Private Pensions (University of Pennsylvania Press). Mr. Haley also serves on the
board of MAXIMUS, Inc., a provider of health and human services program management, consulting services and system
solutions, and previously served on the board of Hudson Global, Inc., an executive search, specialty staffing and related
consulting services firm. He has an A.B. in Mathematics from Rutgers College and studied under a Fellowship at the Graduate
School of Mathematics at Yale University.
Carl A. Hess (age 56) - Mr. Hess has served as the Head of Investment, Risk and Reinsurance since October 27, 2016.
Previously, Mr. Hess served as the Co-Head of North America at Willis Towers Watson since January 4, 2016. Prior to that, Mr.
Hess served as Managing Director, The Americas of Towers Watson since February 1, 2014, and before that, he served as the
Managing Director of Towers Watson’s Investment business since January 1, 2010. Before his service at Towers Watson, Mr.
Hess worked in a variety of roles for over 20 years at Watson Wyatt, lastly as Global Practice Director of Watson Wyatt’s
Investment business. Mr. Hess is a Fellow of the Society of Actuaries and the Conference of Consulting Actuaries, and a
Chartered Enterprise Risk Analyst. He has a bachelor’s degree cum laude in Logic and Language from Yale University.
Todd Jones (age 53) - Mr. Jones has served as the Head of Corporate Risk and Broking since October 27, 2016. Previously,
Mr. Jones served as the Co-Head of North America at Willis Towers Watson since January 4, 2016. Prior to that, Mr. Jones
served as an executive officer and Chief Executive Officer of Willis North America since July 1, 2013. Mr. Jones joined Willis
in 2003 as the North American Practice Leader for Willis’ Executive Risks Practice and served as the President of Willis North
America from 2010 to 2013. Mr. Jones also served as a National Partner for the Northeast Region. Prior to joining Willis,
Mr. Jones held various leadership roles in the insurance brokerage industry. Before entering the brokerage industry, he was a
financial analyst and corporate banker for a regional bank that is now part of Wells Fargo. He holds a bachelor’s degree in
Business from Wake Forest University and an M.B.A. from the Stern School of Business at New York University.
Paul G. Morris (age 53) - Mr. Morris has served as Head of Western Europe at Willis Towers Watson since January 4, 2016.
Previously, Mr. Morris served as Managing Director for Towers Watson in Europe, the Middle East and Africa since
September 1, 2011. Prior to that, Mr. Morris served as Director, Consulting Services, for Towers Watson beginning January 1,
2010. Mr. Morris served as a Managing Consultant of Watson Wyatt from 2005 until the consummation of the merger of
Towers Perrin and Watson Wyatt. He joined The Wyatt Company in 1988. Following the establishment of the global Watson
Wyatt Worldwide alliance in 1995, Mr. Morris served as a Senior Consultant of Watson Wyatt Partners from 1995 through 1999
and became a partner in 1999. Mr. Morris is a Fellow of the Society of Actuaries, a Member of the Institute of Actuaries, and
has a bachelor’s degree in Applied Mathematics from Harvard College and an M.Sc. in Applied Mathematics from Harvard
Graduate School of Arts and Sciences.
15
Anne Pullum (age 35) - Ms. Pullum has served as the Chief Administrative Officer and Head of Strategy and Innovation at
Willis Towers Watson since October 27, 2016. Beginning on January 4, 2016, Ms. Pullum served as Willis Towers Watson’s
Head of Strategy, where she has played a key role in determining the Company’s strategy and worked across all business
segments and functional areas. Previously, Ms. Pullum served as the Head of Strategy for Willis Group since May 2014.
Before joining Willis, Ms. Pullum worked at McKinsey & Company, where she served financial services and natural resource
clients since October 2010. Prior to that, Ms. Pullum conducted economic research at Greenspan Associates in Washington,
D.C. and served as an analyst in the Goldman Sachs Equities Division in London. Ms. Pullum holds an M.B.A. from INSEAD
and a bachelor’s degree in International Economics from Georgetown University’s School of Foreign Service.
David Shalders (age 51) - Mr. Shalders has served as Operations and Technology Director at Willis Towers Watson since
January 4, 2016. Previously, Mr. Shalders served as an executive officer and Group Operations & Technology Director of
Willis Group Holdings since November 4, 2013. Prior to joining Willis, Mr. Shalders spent over a decade in senior operations
and IT roles at the Royal Bank of Scotland Group, most recently as Global COO for Global Banking and Markets.
Mr. Shalders also held roles as Head of London & Asia Operations and Head of Derivative Operations for NatWest at RBS.
Prior to RBS, Mr. Shalders held various IT and Operations leadership roles at Accenture, JP Morgan and SG Warburg. He has
an M.A. in Geography from Cambridge University and an M.Sc. in Computer Science from The London School of Economics.
Gene H. Wickes (age 65) - Mr. Wickes has served as the Head of Benefits Delivery and Administration (formerly Exchange
Solutions) at Willis Towers Watson since April 1, 2016. Prior to that, Mr. Wickes served as an Executive Sponsor of the
combined Willis Towers Watson Merger integration team since January 4, 2016. Previously, he served as the Managing
Director of the Benefits business segment of Towers Watson from January 1, 2010 until the closing of the Willis Towers Watson
merger. Prior to that, he served as the Global Director of the Benefits Practice of Watson Wyatt beginning in 2005 and as a
member of Watson Wyatt’s Board of Directors from 2002 to 2007. Mr. Wickes was Watson Wyatt’s Global Retirement Practice
Director in 2004 and the U.S. West Division’s Retirement Practice Leader from 1997 to 2004. Mr. Wickes joined Watson Wyatt
in 1996 as a senior consultant and consulting actuary. Prior to joining Watson Wyatt, he spent 18 years with Towers Perrin,
where he assisted organizations with welfare, retirement, and executive benefit issues. Mr. Wickes is a Fellow of the Society of
Actuaries and a member of the Conference of Consulting Actuaries, and has a B.S. in Mathematics and Economics, an M.S. in
Mathematics and an M.S. in Economics, all from Brigham Young University.
Board of Directors
A list of the Board of Directors of the Company and their principal occupations is provided below:
John J. Haley
Chief Executive Officer
James F. McCann
Non-Executive Chairman of Willis Towers
Watson, Executive Chairman of 1-800-
Flowers.com
Paul Thomas
Former CEO of Reynolds Packaging Group
Anna C. Catalano
Former Group Vice President, Marketing for
BP plc
Brendan R. O’Neill
Former CEO of Imperial Chemical
Industries PLC
Wilhelm Zeller
Former CEO of Hannover Re Group
Victor F. Ganzi
Former President & CEO of The Hearst
Corporation
Jaymin B. Patel
CEO of Brightstar Corp.
Wendy E. Lane
Chairman of Lane Holdings, Inc.
Linda D. Rabbitt
Founder, Chairman & CEO of rand*
construction corporation
ITEM 1A. RISK FACTORS
In addition to the factors discussed elsewhere in this Annual Report on Form 10-K, the following are some of the important
factors that could cause our actual results to differ materially from those projected in any forward-looking statements. These
risk factors should be carefully considered in evaluating our business. The descriptions below are not the only risks and
uncertainties that we face. Additional risks and uncertainties that are presently unknown to us could also impair our business
operations, financial condition or results. If any of the risks and uncertainties below or other risks were to occur, our business
operations, financial condition or results of operations could be materially and adversely impacted. With respect to the tax-
related consequences of acquisition, ownership and disposal of ordinary shares, you should consult with your own tax
advisors.
16
Strategic and Operational Risks
Our success largely depends on our ability to achieve our global business strategy, and our results of operations and
financial condition could suffer if the Company were unable to successfully establish and execute on its strategy and
generate anticipated revenue growth and cost savings and efficiencies.
Our future growth, profitability and cash flows largely depend upon our ability to successfully establish and execute our global
business strategy. As discussed under Item 1., “Business - Business Strategy”, we seek to be an advisory, broking and solutions
provider of choice through an integrated global platform. While we have confidence that our strategic plan reflects
opportunities that are appropriate and achievable, there is a possibility that our strategy may not deliver projected long-term
growth in revenue and profitability due to inadequate execution, incorrect assumptions, global or local economic conditions,
competition, changes in the industries in which we operate, sub-optimal resource allocation or any of the other risks described
in this “Risk Factors” section. In pursuit of our growth strategy, we may also invest significant time and resources into new
product or service offerings, and there is the possibility that these offerings may fail to yield sufficient return to cover their
investment. The failure to continually develop and execute optimally on our global business strategy could have a material
adverse effect on our business, financial condition and results of operations.
Demand for our services could decrease for various reasons, including a general economic downturn, increased
competition, or a decline in a client’s or an industry’s financial condition or prospects, all of which could materially
adversely affect us.
We can give no assurance that the demand for our services will grow or be maintained, or that we will compete successfully
with our existing competitors, new competitors or our clients’ internal capabilities. Client demand for our services may change
based on the clients’ needs and financial conditions, among other factors.
Our results of operations are affected directly by the level of business activity of our clients, which in turn is affected by the
level of economic activity in the industries and markets that they serve. Global financial markets may continue to experience
disruptions, including increased volatility and credit availability, which could substantially impact our results. While it is
difficult to predict the consequences of any deterioration in global economic conditions on our business, any significant
reduction or delay by our clients in purchasing our services or insurance or making payment of premiums could have a material
adverse impact on our financial condition and results of operations. In addition, the potential for a significant insurer to fail, be
downgraded or withdraw from writing certain lines of insurance coverages that we offer our clients could negatively impact
overall capacity in the industry, which could then reduce the placement of certain lines and types of insurance and reduce our
revenues and profitability. The potential for an insurer to fail or be downgraded could also result in errors and omissions claims
by clients.
In addition, the markets for our principal services are highly competitive. Our competitors include other insurance brokerage,
human capital and risk management consulting and actuarial firms, and the human capital and risk management divisions of
diversified professional services, insurance, brokerage and accounting firms and specialty, regional and local firms.
Competition for business is intense in all of our business lines and in every insurance market, and some competitors have
greater market share in certain lines of business than we do. Some of our competitors have greater financial, technical and
marketing resources than us, which could enhance their ability to finance acquisitions, fund internal growth and respond more
quickly to professional and technological changes. New competitors or alliances among competitors could emerge, creating
additional competition and gaining significant market share, resulting in a loss of business for us and a corresponding decline in
revenues and profit margin. In order to respond to increased competition and pricing pressure, we may have to lower our prices,
which would also have an adverse effect on our revenues and profit margin.
In addition, competitors could develop competing technologies or product or service offerings that disrupt our industries. Any
new technology or product or service offering (including insurance companies selling their products directly to consumers or
other insureds) that reduces or eliminates the need for intermediaries in insurance or reinsurance sales transactions could have a
material adverse effect on our business and results of operations. Further, the increasing willingness of clients to either self-
insure or maintain a captive insurance company, and the development of capital markets-based solutions and other alternative
capital sources for traditional insurance and reinsurance needs, could also materially adversely affect us and our results of
operations.
An example of a business that may be significantly impacted by changes in customer demand is our retirement consulting and
actuarial business, which comprises a substantial portion of our revenue and profit. We provide clients with actuarial and
consulting services relating to both defined benefit and defined contribution pension plans. Defined benefit pension plans
generally require more actuarial services than defined contribution plans because defined benefit plans typically involve large
asset pools, complex calculations to determine employer costs, funding requirements and sophisticated analysis to match
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liabilities and assets over long periods of time. If organizations shift to defined contribution plans more rapidly than we
anticipate, or if we are unable to otherwise compensate for the decline in our business that results from employers moving away
from defined benefit plans, our business, financial condition and results of operations could be materially adversely affected.
In addition, the demand for many of our core benefit services, including compliance-related services, is affected by government
regulation and taxation of employee benefit plans. Significant changes in tax or social welfare policy or other regulations could
lead some employers to discontinue their employee benefit plans, including defined benefit pension plans, thereby reducing the
demand for our services. A simplification of regulations or tax policy also could reduce the need for our services.
We could be subject to claims and lawsuits arising from our work, which could materially adversely affect our reputation,
business and financial condition.
We depend in large part on our relationships with clients and our reputation for high-quality services to secure future
engagements. Clients that become dissatisfied with our services may terminate their business relationships with us, and clients
and third parties that claim they suffered damages caused by our services may bring lawsuits against us. We are subject to
various actual and potential claims, lawsuits, investigations and other proceedings relating principally to alleged errors and
omissions in connection with the provision of our services or the placement of insurance and reinsurance in the ordinary course
of business. We are also subject to actual and potential claims, lawsuits, investigations and proceedings outside of errors and
omissions claims. See Note 13 - Commitments and Contingencies in Item 8 in this Annual Report on Form 10-K for examples
of claims to which we are subject.
Because we often assist our clients with matters involving substantial amounts of money, including actuarial services, asset
management and the placement of insurance coverage and the handling of related claims, errors and omissions claims against
us may arise that allege our potential liability for all or part of the substantial amounts in question. The nature of our work,
particularly our actuarial services, necessarily involves the use of assumptions and the preparation of estimates relating to
future and contingent events, the actual outcome of which we cannot know in advance. Our actuarial and brokerage services
also rely on substantial amounts of data provided by clients, the accuracy and quality of which we cannot ensure. In addition,
we could make computational, software programming or data management errors in connection with the services we provide to
clients.
Clients may seek to hold us responsible for alleged errors or omissions relating to any of the brokerage advice and services we
provide, including when claims they submit to their insurance carriers are disputed or denied. Given that many of our clients
have very high insurance policy limits to cover their risks, alleged errors and omissions claims against us arising from disputed
or denied claims are often significant. Moreover, in various circumstances, our brokerage, investment and certain other types of
business may not limit the maximum liability to which we may be exposed for claims involving alleged errors or omissions;
and as such, we do not have limited liability for the work we provide to the associated clients.
Further, given that we frequently work with large pension funds and insurance companies as well as other large clients,
relatively small percentage errors or variances can create significant financial variances and result in significant claims for
unintended or unfunded liabilities. The risks from such variances or errors could be aggravated in an environment of declining
pension fund asset values and insurance company capital levels. In almost all cases, our exposure to liability with respect to a
particular engagement is substantially greater than the revenue opportunity that the engagement generates for us.
Clients may seek to hold us responsible for the financial consequences of variances between assumptions and estimates and
actual outcomes or for errors. For example, in the case of pension plan actuarial work, a client’s claims might focus on the
client’s alleged reliance on actuarial assumptions that it believes were unreasonable and, based on such reliance, the client
made benefit commitments that it may later claim are not affordable or funding decisions that result in plan underfunding if and
when actual outcomes vary from actuarial assumptions.
We also continue to create new products and services and to grow the business of providing products and services to
institutional investors, financial services companies and other clients. The risk of claims from these lines of business and
related products and services may be greater than from our core products or services, and such claims may be for significant
amounts.
We also provide advice on both asset allocation and selection of investment managers. Increasingly, for some clients, we are
responsible for making decisions on both of these matters, or we may serve in a fiduciary capacity, either of which may
increase liability exposure. In addition, the Company recently launched affiliated investment funds, with plans to launch
additional funds over time. Given that our Investment business may recommend affiliated investment funds or affirmatively
invest such clients’ assets in such funds under delegated authority, this may increase our liability exposure. We may also be
liable for actions of managers or other service providers to the funds. Further, for certain clients, we are responsible for some
portions of cash and investment management, including rebalancing of investment portfolios and guidance to third parties on
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the structure of derivatives and securities transactions. Asset classes may experience poor absolute performance, and
investment managers may underperform their benchmarks; in both cases the investment return shortfall can be significant.
Clients experiencing this underperformance, including from our affiliated investment funds, may assert claims against us, and
such claims may be for significant amounts. In addition, our failure to properly execute our role can cause monetary damage to
our clients or such third parties for which we might be found liable, and such claims may be for significant amounts. Our
ability to contractually limit our potential liability may be limited in certain jurisdictions or markets or in connection with
claims involving breaches of fiduciary duties or other alleged errors or omissions.
The ultimate outcome of all of the above matters cannot be ascertained and liabilities in indeterminate amounts may be
imposed on us. It is thus possible that future results of operations or cash flows for any particular quarterly or annual period
could be materially adversely affected by an unfavorable resolution of these matters. In addition, these matters continue to
divert management and personnel resources away from operating our business. Even if we do not experience significant
monetary costs, there may be adverse publicity associated with these matters that could result in reputational harm to the
industries we operate in or to us in particular that may adversely affect our business, client or employee relationships. In
addition, defending against these claims can involve potentially significant costs, including legal defense costs.
As a highly-regulated company, we are subject from time to time to inquiries or investigations by governmental agencies or
regulators that could have a material adverse effect on our business or results of operations.
We have also been and may continue to be subject to inquiries and investigations by federal, state or other governmental
agencies regarding aspects of our clients’ businesses or our own businesses, especially regulated businesses such as our
insurance broker, securities broker-dealer and investment advisory services. Such inquiries or investigations may consume
significant management time and result in regulatory sanctions, fines or other actions as well as significant legal fees, which
could have a material adverse impact on our business, results of operations and liquidity.
Examples of these inquiries or investigations are set forth in more detail in Note 13 - Commitments and Contingencies in Item
8 in this Annual Report on Form 10-K. These include:
• The European Commission’s civil investigation proceedings in respect of an alleged exchange of commercially
sensitive information among competitors in aerospace insurance and reinsurance broking in the European Economic
Area.
• The U.K. anti-trust regulator (the Competition and Markets Authority) market study in respect of competition in the
investment consulting business in the U.K. (the ‘CMA Investment Consultancy Market Investigation’).
• The FCA’s market study to assess whether competition is working in the wholesale insurance broking sector in the
U.K. (the ‘FCA Wholesale Market Study’). The FCA Wholesale Market Study is examining, among other things: the
market power of individual brokerage firms and whether concentrated power is harming competition; conflicts of
interest including in the areas of placement selection, use of facilities and in-house underwriting; and whether broker
conduct might dampen competition.
All of these items reflect an increased focus by regulators (both in the U.K. and elsewhere) on various aspects of the operations
and affairs of our regulated businesses. We are unable to predict the outcome of these inquiries or investigations. Any proposed
changes that result from these investigations and inquiries, or any other investigations, inquiries or regulatory developments, or
any potential fines or enforcement action, could materially adversely affect our business and our results of operations.
Allegations of conflicts of interest, including in connection with accepting market derived income (‘MDI’), may have a
material adverse effect on our business, financial condition, results of operation or reputation.
We could suffer significant financial or reputational harm if we fail to properly identify and manage potential conflicts of
interest. Conflicts of interest exist or could exist any time the Company or any of its employees has or may have an interest in a
transaction or engagement that is inconsistent with our clients’ interests. This could occur, for example, when the Company is
providing services to multiple parties in connection with a transaction. In addition, as we provide more solutions-based
services, there is greater potential for conflicts with advisory services. Managing conflicts of interest is an important issue for
the Company, but can be a challenge for a large and complex company such as ours. Due to the broad scope of our businesses
and our client base, we regularly address potential conflicts of interest, including, without limitation, situations where our
services to a particular client or our own investments or other interests conflict, or are perceived to conflict, with the interests of
another client. If these are not carefully managed, this then could lead to failure or perceived failure to protect the client’s
interests, with attendant regulatory and reputational risks that could materially adversely affect us and our operations. There is
no guarantee that all potential conflicts of interest will be identified, and undetected conflicts may result in damage to our
professional reputation and result in legal liability which may have a material adverse effect on our business. Identifying
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conflicts of interest may also prove particularly difficult in the near-term while we continue to bring together and integrate
Legacy Willis, Legacy Towers Watson and Gras Savoye. In addition, we may encounter more conflicts of interest than
anticipated in connection with the Merger or the Gras Savoye acquisition and we may not be able to adequately address such
conflicts of interest.
In addition, insurance intermediaries have traditionally been remunerated by base commissions paid by insurance carriers in
respect of placements we make for clients, or by fees paid by clients. Intermediaries also obtain other revenue from insurance
carriers. This revenue, when derived from carriers in their capacity as insurance markets (as opposed to as corporate clients of
the intermediaries where they may be purchasing insurance or reinsurance or other non-market related services), is commonly
known as market derived income or ‘MDI’. MDI is another example of an area in which allegations of conflicts of interest may
arise. MDI takes a variety of forms, including volume- or profit-based contingent commissions, facilities administration
charges, business development agreements, and fees for providing certain data to carriers.
MDI creates various risks. Intermediaries in many markets have a duty to act in the best interests of their clients and payments
from carriers can incentivize intermediaries to put carriers’ or their own interests ahead of their clients. Accordingly, MDI may
be subject to scrutiny by various regulators under conflict of interest, anti-trust, unfair competition, and anti-bribery laws and
regulations. While accepting MDI is a lawful and acceptable business practice, and while we have established systems and
controls to manage these risks, we cannot predict whether our position will result in regulatory or other scrutiny and our
controls may not be effective.
In addition, the Company recently launched affiliated investment funds, with plans to launch additional funds over time. Given
that our Investment business may recommend affiliated investment funds or affirmatively invest such clients’ assets in such
funds under delegated authority, there may be a perceived conflict of interest. While the Company has processes, procedures
and controls in place intended to mitigate potential conflicts, such perception could cause regulatory inquiries, or could impact
client demand and the business’ financial performance, and our controls may not be effective. In addition, underperformance by
our affiliated investment funds could lead to lawsuits by clients that were invested in such funds.
Separately, the CMA Investment Consultancy Market Investigation and the FCA Wholesale Market Study are also both
expected to examine various potential conflicts of interest in the investment consultancy and the wholesale insurance brokerage
industries, respectively. There can be no assurances as to the outcome of these market investigations and market studies, and
the CMA or FCA may recommend or require significant changes in these industries or impose firm-specific remedies.
The failure or perceived failure to adequately address conflicts of interest could affect the willingness of clients to deal with us,
or give rise to litigation or enforcement actions. Conflicts of interest may also arise in the future that could cause material harm
to us.
Damage to our reputation, including due to failure of third-parties on whom we rely to perform services, could damage our
businesses.
Maintaining a positive reputation is critical to our ability to attract and maintain relationships with clients and colleagues.
Damage to our reputation could therefore cause significant harm to our business and prospects. Harm to our reputation can
arise from numerous sources, including, among others, employee misconduct, litigation or regulatory action, failure to deliver
minimum standards of service and quality, compliance failures, allegations of conflicts of interest and unethical behavior.
Negative publicity, whether or not true, may also result in harm to our prospects. In addition, the failure to deliver satisfactory
service and quality in one line of business could cause clients to terminate the services we provide to that client in many other
lines of business. This risk has increased as the Company has become larger and more complex.
In addition, as part of providing services to clients and managing our business, we rely on a number of third-party service
providers. Our ability to perform effectively depends in part on the ability of these service providers to meet their obligations,
as well as on our effective oversight of their performance. The quality of our services could suffer or we could be required to
incur unanticipated costs if our third-party service providers do not perform as expected or their services are disrupted. This
could have a material adverse effect on our reputation as well as our business and results of operations.
We may fail to realize some or all of the anticipated benefits of the Merger or related actions or those benefits may take
longer to realize than expected. We may also encounter significant difficulties in integrating the businesses.
Since the Merger was consummated in January 2016, we have endeavored to integrate the legacy Towers Watson, legacy Willis
and legacy Gras Savoye businesses. However, our ability to realize the anticipated benefits of the Merger and related actions
occurring around the time of the Merger depends, to a large extent, on our ability to complete such integration. The
combination of independent businesses is a complex, costly and time-consuming process requiring significant management
attention. The remaining integration process could disrupt the businesses and, if implemented ineffectively, could restrict the
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realization of the full expected benefits. In addition, the overall integration may result in material unanticipated costs or other
problems, expenses, liabilities, loss of client relationships or revenue, and diversion of management’s attention. The failure to
meet the challenges involved in completing the integration of the businesses and to realize the anticipated benefits of the
transactions could cause an interruption of, or a loss of momentum in, our activities and could adversely affect our results of
operations. Further, even if our operations are integrated successfully, the full benefits of the transactions, including the
synergies, cost savings or sales or growth opportunities that are expected, may not be achieved within the anticipated time
frame, or at all. All of these factors could cause dilution to our earnings per share, decrease or delay the expected benefits of the
Merger or the related actions and negatively impact the price of our ordinary shares.
The loss of key colleagues could damage or result in the loss of client relationships and could result in such colleagues
competing against us.
Our success depends on our ability to attract, retain and motivate qualified personnel, including key managers and colleagues.
In addition, our success largely depends upon our colleagues’ abilities to generate business and provide quality services. In
particular, our colleagues’ business relationships with our clients are a critical element of obtaining and maintaining client
engagements. Labor markets have become more competitive globally as the economic outlook in many countries has improved,
and we have experienced intense competition for certain types of colleagues. In the past, as a result of the Merger and
otherwise, we have lost colleagues who manage substantial client relationships or possess substantial experience or expertise; if
we lose additional colleagues such as those, it could result in such colleagues competing against us and could materially
adversely affect our ability to secure and complete engagements, which would materially adversely affect our results of
operations and prospects.
Our ability to successfully manage ongoing organizational changes could impact our business results.
We have recently undergone several significant business and organizational changes, including the Merger, the acquisitions of
Gras Savoye and Miller Insurance Services, LLP, and our Business Restructuring Program and multi-year operational
improvement program. There are also a number of other initiatives planned or ongoing to transform our processes and gain
efficiencies. In connection with these changes, we are managing a number of large-scale and complex projects. While we have
concluded that each of these large, complex projects is necessary or desirable to the execution of the Company’s business
strategy, we cannot guarantee that the collective effect of all of these projects will not adversely impact our business or results
of operations. Effectively managing these organizational changes is critical to retaining talent, servicing clients and our
business success overall. The failure to effectively manage such risks could adversely impact our resources or business or
financial results.
Data security breaches or improper disclosure of confidential company or personal data could result in material financial
loss, regulatory actions, reputational harm or legal liability.
We depend on information technology networks and systems to process, transmit and store electronic information and to
communicate among our locations around the world and with our alliance partners, insurance carriers/markets and clients.
Additionally, one of our significant responsibilities is to maintain the security and privacy of our clients’ confidential and
proprietary information and the personal data of their customers and/or employees. Our information systems, and those of our
third-party service providers and vendors, are vulnerable to an increasing threat of continually evolving cybersecurity risks.
Computer viruses, hackers and other external hazards, as well as improper or inadvertent staff behavior, could expose
confidential company and personal data systems and information to security breaches.
Many of the software applications that we use in our business are licensed from, and supported, upgraded and maintained by,
third-party vendors. Our third-party applications include enterprise cloud storage and cloud computing application services
provided and maintained by third-party vendors. These third-party applications store confidential and proprietary data of both
the Company and our clients. We have processes designed to require third-party IT outsourcing, offsite storage and other
vendors to agree to maintain certain standards with respect to the storage, protection and transfer of confidential, personal and
proprietary information. However, we remain at risk of a data breach due to the intentional or unintentional non-compliance by
a vendor’s employee or agent, the breakdown of a vendor’s data protection processes, or a cyber-attack on a vendor’s
information systems. Further, the potential impact of a data breach of our third-party vendors’ systems increases as we move
more of our and our clients’ data into our vendors’ cloud storage, we engage in IT outsourcing or we consolidate the group of
third-party vendors that provide cloud storage or other IT services for the Company.
We have experienced a number of data incidents, resulting from human error or malfeasance, as well as attempts at
unauthorized access to our information technology networks and systems, or our information through fraud or other means of
deceiving our colleagues, third-party service providers and vendors, none of which to our knowledge have been material to our
business or our clients. Over time, the sophistication of the attacks against us has increased. We maintain policies, procedures
and technological safeguards designed to protect the security and privacy of this information. However, we cannot entirely
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eliminate the risk of data security breaches, improper access to or disclosure of confidential company or personally identifiable
information. Our technology may fail to adequately secure the private information we hold and protect it from theft, computer
viruses, hackers or inadvertent loss.
If any person, including any of our colleagues, fails to comply with, disregards or intentionally breaches our established
controls with respect to such data or otherwise mismanages or misappropriates that data, we could be subject to monetary
damages, fines or criminal prosecution. Unauthorized disclosure of sensitive or confidential client or employee data, whether
through systems failure, accident, employee negligence, fraud or misappropriation, could damage our reputation and cause us
to lose clients. Similarly, unauthorized access to or through our information systems or those we develop for our clients,
whether by our colleagues or third parties, could result in significant additional expenses (including expenses relating to
notification of data security breaches and costs of credit monitoring services), negative publicity, legal liability and damage to
our reputation, as well as require substantial resources and effort of management, thereby diverting management’s focus and
resources from business operations. In addition, our failure to adhere to or successfully implement processes in response to
changing customer expectations and legal or regulatory requirements in this area, including changing legal or regulatory
requirements that may be developed or revised due to the U.K.’s exit from the E.U. (‘Brexit’), could result in legal liability or
impairment to our reputation or business.
The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are also constantly changing
and evolving; continue to become more sophisticated and complex; and may be difficult to anticipate or detect. For example,
the Cyber Division of the U.S. Federal Bureau of Investigation (‘FBI’) has noted that cyber criminals have targeted, and may
increasingly target, assets held in Health Savings Accounts and Reimbursement Accounts to fraudulently acquire the assets held
in those accounts. Assets held in Health Savings Accounts are expected to grow substantially over the next few years. Given the
Company’s move toward managing more of these assets ourselves as a Non-Bank Custodian in connection with our Benefits
Delivery and Administration Businesses, our reputation could be harmed and our business and results of operations could be
materially adversely affected if we are the target of such fraud and it goes undetected for any period of time.
We have implemented and regularly review and update processes and procedures to protect against fraud or unauthorized
access to or use of secured data and to prevent data loss. The ever-evolving threats mean we and our third-party service
providers and vendors must continually evaluate, adapt, enhance and otherwise improve our respective systems and processes,
and there is no guarantee that they will be adequate to safeguard against all fraud, data security breaches or misuses of data.
Any future significant compromise or breach of our data security or fraud, whether external or internal, or misuse of client,
colleague, supplier or company data, could result in additional significant costs, lost revenue opportunities, fines, lawsuits, and
damage to our reputation.
We are subject to numerous U.S. and foreign jurisdiction laws and regulations designed to protect this information, such as the
European Union Directive on Data Protection (and the General Data Protection Regulation (‘GDPR’) once it supersedes the
Directive on Data Protection in May 2018), regulations from other countries that prohibit the transmission of data outside of
such country’s borders and various U.S. federal and state laws governing the protection of health or other individually
identifiable information. GDPR significantly increases our responsibilities when handling personal data, including, without
limitation, requiring us to conduct privacy impact assessments, restricting the transmission of data and requiring public
disclosure of significant data breaches. Laws and regulations in this area are evolving and generally becoming more stringent.
For example, the New York State Department of Financial Services has issued cybersecurity regulations that outline a variety
of required security measures for protection of data. Further, a U.K. exit from the E.U. will increase uncertainty regarding
applicable laws and regulations pending more clarity on the terms of that exit. All of these evolving laws and regulations may
restrict the manner in which we provide services to our clients, increase the risk of non-compliance and impose significant
costs that are likely to increase over time, all of which could have a material adverse effect on our business and results of
operations.
Our inability to successfully recover should we experience a disaster or other business continuity problem could cause
material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.
Should we experience a disaster or other business continuity problem, such as an earthquake, hurricane, terrorist attack,
pandemic, security breach, power loss, telecommunications failure or other natural or man-made disaster, our continued success
will depend, in part, on the availability of our personnel, our office facilities, and the proper functioning of our computer,
telecommunication and other related systems and operations. In such an event, we could experience near-term operational
challenges with regard to particular areas of our operations.
A disaster on a significant scale or affecting certain of our key operating areas within or across regions, or our inability to
successfully recover should we experience a disaster or other business continuity problem, could materially interrupt our
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business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, damaged
client relationships or legal liability, particularly if any of these problems occur during peak times.
Interruption to or loss of our information processing capabilities or failure to effectively maintain and upgrade our
information processing hardware or systems could cause material financial loss, regulatory actions, reputational harm or
legal liability.
Our business depends significantly on effective information systems. Our capacity to service our clients relies on effective
storage, retrieval, processing and management of information. Our information systems also rely on the commitment of
significant resources to maintain and enhance existing systems, develop and create new systems and products in order to keep
pace with continuing changes in information processing technology or evolving industry and regulatory standards and to be at
the forefront of a range of technology relevant to our business.
In addition, many of the software applications that we use in our business are licensed from, and supported, upgraded and
maintained by, third-party vendors. Our third-party applications include enterprise cloud storage and cloud computing
application services provided and maintained by third-party vendors. These third-party applications store confidential and
proprietary data of both the Company and our clients. A suspension or termination of certain of these licenses or the related
support, upgrades and maintenance could cause temporary system delays or interruption that could adversely impact our
business.
If the data we rely on to run our business were found to be inaccurate or unreliable or if we fail to maintain effective and
efficient systems (including through a telecommunications failure, failure to replace or update redundant or obsolete computer
hardware, applications or software systems, or the loss of skilled people with the knowledge needed to operate older systems,
or if we experience other disruptions), this could result in material financial loss, regulatory action, reputational harm or legal
liability.
In conducting our businesses around the world, we are subject to political, economic, legal, regulatory, cultural, market,
operational and other risks that are inherent in operating in many countries.
In conducting our businesses and maintaining and supporting our global operations, we are subject to political, economic, legal,
regulatory, market, operational and other risks. Our businesses and operations continue to expand into new regions throughout
the world, including emerging markets. The possible effects of economic and financial disruptions throughout the world could
have an adverse impact on our businesses and financial results. These risks include:
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the general economic and political conditions in foreign countries;
the imposition of controls or limitations on the conversion of foreign currencies or remittance of dividends and other
payments by foreign subsidiaries;
the imposition of sanctions by both the U.S. and foreign governments;
the imposition of withholding and other taxes on remittances and other payments from subsidiaries;
the imposition or increase of investment and other restrictions by foreign governments;
fluctuations in currency exchange rates or our tax rate;
difficulties in controlling operations and monitoring employees in geographically dispersed and culturally diverse
locations; and
the practical challenge and costs of complying, or monitoring compliance, with a wide variety of foreign laws (some
of which are evolving or are not as well-developed as the laws of the U.S. or U.K. or which may conflict with U.S. or
other sources of law), and regulations applicable to insurance brokers and other business operations abroad (in more
than 140 countries and territories including many countries in Africa), including laws, rules and regulations relating to
the conduct of business, trade sanction laws administered by the U.S. Office of Foreign Assets Control, the E.U., the
U.K. and the United Nations (‘U.N.’), and the requirements of the U.S. Foreign Corrupt Practices Act as well as other
anti-bribery and corruption rules and requirements in all of the countries in which we operate.
Our business will be negatively affected if we are not able to anticipate and keep pace with rapid changes in government
laws or regulations, or if government laws or regulations decrease the need for our services or increase our costs.
A material portion of our revenues are affected by statutory or regulatory changes. An example of a statutory or regulatory
change that could materially impact us is any change to Healthcare Reform in the U.S. The new administration and certain key
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members of Congress have expressed a desire to replace or amend all or a portion of the Patient Protection and Affordable Care
Act (‘PPACA’), and the Healthcare and Education Reconciliation Act of 2010, (‘HCERA’), which we refer to collectively as
‘Healthcare Reform’. While the U.S. Congress has not passed legislation replacing or significantly amending Healthcare
Reform (other than changes to the individual mandate), such legislation, or another version of Healthcare Reform, could be
implemented in the future. If we are unable to adapt our services to potential new laws and regulations with respect to
Healthcare Reform or otherwise, our ability to provide effective services in these areas may be substantially impacted. In
addition, more restrictive rules or interpretations of the Centers for Medicare and Medicaid Services marketing rules, or judicial
decisions that restrict or otherwise change existing provisions of U.S. healthcare regulation, could have a material adverse
impact on our Benefits Delivery and Administration business.
Many areas in which we provide services are the subject of government regulation, which is constantly evolving. For example,
our activities in connection with insurance brokerage services are subject to regulation and supervision by national, state or
other authorities. Insurance laws in the markets in which we operate are often complex and generally grant broad discretion to
supervisory authorities in adopting regulations and supervising regulated activities. That supervision generally includes the
licensing of insurance brokers and agents and the regulation of the handling and investment of client funds held in a fiduciary
capacity. Our continuing ability to provide insurance brokerage in the markets in which we currently operate is dependent upon
our compliance with the rules and regulations promulgated from time to time by the regulatory authorities in each of these
locations.
Changes in government and accounting regulations in the U.S. and the U.K., two of our principal geographic markets, affecting
the value, use or delivery of benefits and human capital programs may materially adversely affect the demand for, or the
profitability of, various of our services. In addition, we have significant operations throughout the world, which further subject
us to applicable laws and regulations of countries outside the U.S. and the U.K. Changes in legislation or regulations and
actions by regulators in particular countries, including changes in administration and enforcement policies, could require
operational improvements or modifications, which may result in higher costs or hinder our ability to operate our business in
those countries.
Our compliance systems and controls cannot guarantee that we comply with all applicable federal and state or foreign laws
and regulations, and actions by regulatory authorities or changes in applicable laws and regulations in the jurisdictions in
which we operate could have an adverse effect on our business.
Our activities are subject to extensive regulation under the laws of the U.S., the U.K., the E.U. and its member states, and the
other jurisdictions around the world in which we operate. In addition, we own an interest in a number of associates where we
do not exercise management control. Over the last few years, regulators across the world are increasingly seeking to regulate
brokers who operate in their jurisdictions. The foreign and U.S. laws and regulations applicable to our operations are complex,
continually evolving and may increase the costs of regulatory compliance, limit or restrict the products or services we sell or
subject our business to the possibility of regulatory actions or proceedings. These laws and regulations include insurance and
financial industry regulations, competition law regulations, economic and trade sanctions laws relating to countries in which
certain subsidiaries do business or may do business (“Sanctioned Jurisdictions”) such as Cuba, Iran, Russia, Sudan and Syria,
anti-corruption laws such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar local laws
prohibiting corrupt payments to governmental officials and the Foreign Account Tax Compliance provisions of the Hiring
Incentives to Restore Employment Act in the U.S., as well as laws and regulations related to data privacy and cyber security.
Because of changes in regulation and Company practice, our non-U.S. subsidiaries are providing more services with
connections to various countries, including some Sanctioned Jurisdictions, that our U.S. subsidiaries are unable to perform.
In most jurisdictions, governmental and regulatory authorities have the ability to interpret and amend these laws and
regulations and impose penalties for non-compliance, including sanctions, civil remedies, monetary fines, injunctions,
revocation of licenses or approvals, suspension of individuals, limitations on business activities or redress to clients. While we
believe that we have substantially increased our focus on the geographic breadth of regulations to which we are subject,
maintain good relationships with our key regulators and our current systems and controls are adequate, we cannot assure that
such systems and controls will prevent any violations of any applicable laws and regulations. While we strive to remain fully-
compliant with all applicable laws and regulations, we cannot guarantee that we will fully comply at all times with all laws and
regulations, especially in countries with developing or evolving legal systems or with evolving or extra-territorial regulations.
In particular, given the challenges of integrating operations, many of which are de-centralized, we cannot assure that our newly-
acquired entities’ business systems and controls have prevented or will prevent any and all violations of applicable laws or
regulations.
24
The decision by the United Kingdom to leave the European Union, and the risk that other countries may follow, could
adversely affect us.
In 2017, approximately 22% of our revenues are generated in the U.K., although only about 13% of revenues are denominated
in Pounds sterling as much of the insurance business is transacted in U.S. dollars. Approximately 19% of our expenses are
denominated in Pounds sterling. Given the status of Brexit, at this time, we are not able to predict the impact that it will have on
the economy; economic, regulatory and political stability; and market conditions in Europe, including in the U.K., or on Pound
sterling, Euro or other European currencies, but any such impacts and others we cannot currently anticipate could materially
adversely affect us and our operations. Among other things, we could experience: lower growth in the region due to indecision
as businesses hold off on generating new projects or due to adverse market conditions; and reduced reported revenues and
earnings because foreign currencies may translate into fewer U.S. dollars due to the fact that we translate revenue denominated
in non-U.S. currencies such as Pounds sterling into U.S. dollars for our financial statements. In addition, there can be no
assurance that our hedging strategies will be effective.
The British government began negotiating the terms of the U.K.'s future relationship with the E.U. in 2017. While certain
separation issues have been resolved, there is still significant uncertainty with respect to the terms of the future relationship
between the E.U. and the U.K. Although we cannot anticipate what those terms will be, the Company is heavily invested in and
focused on the U.K. in our businesses and activities. If Brexit negatively impacts the U.K., then it could have a material adverse
impact on us. In addition, Brexit may result in greater restrictions on business between the U.K. and E.U. countries and
increased regulatory complexities. This and other factors could cause us to move businesses or operations outside of the U.K.
There is also uncertainty as to how the U.K.'s access to the E.U. Single Market and the wider trading, legal, regulatory, tax and
labor environments, especially in the U.K. and E.U., will be impacted, including the resulting impact on our business and that
of our clients. Any such changes may adversely affect our operations and financial results. For example, any changes to the
passporting or other regulations relating to doing business in various E.U. countries by relying on a regulatory permission in the
U.K. (or doing business in the U.K. by relying on a regulatory permission in an E.U. country) could increase our costs of doing
business, or our ability to do so. As another example, changes in labor laws may impact the ability to hire and retain non-U.K.
staff in the U.K. or U.K. staff in the E.U. In addition, the outcome of the referendum has created uncertainty with regard to the
regulation of data protection in the U.K. Among other things, it is unclear whether the U.K. will enact legislation similar to the
pending European General Data Protection Regulation after Brexit, and how data transfers to and from the U.K. will be
regulated. A change in such regulations, or other regulations, could increase our costs of doing business, or in some cases our
ability to do business, and adversely impact our operations and financial results.
There is also a risk that other countries may decide to leave the E.U. We cannot predict the impact that any additional countries
leaving the E.U. will have on us, but any such impacts could materially adversely affect us.
Our business performance and growth plans could be negatively affected if we are not able to effectively apply technology
and analytics to drive value for our clients through technology-based solutions or gain internal efficiencies through the
effective application of technology, analytics and related tools.
Our success depends, in part, on our ability to develop and implement technology and analytic solutions that anticipate, lead or
keep pace with rapid and continuing changes in technology, industry standards and client preferences. We may not be
successful in anticipating or responding to these developments in a timely and cost-effective manner, and our ideas may not be
accepted in the marketplace. Additionally, the effort to gain technological expertise and develop new technologies or analytic
techniques in our business requires us to incur significant cost. Our competitors are seeking to develop competing technologies,
and their success in this space may impact our ability to differentiate our services to our clients through the use of unique
technological solutions. If we cannot offer new technologies or analytic services or solutions as quickly or effectively as our
competitors, or if our competitors develop more cost-effective technologies or analytic tools, it could have a material adverse
effect on our ability to obtain and complete client engagements.
Our business may be harmed by any negative developments that may occur in the insurance industry or if we fail to
maintain good relationships with insurance carriers.
Many of our businesses are heavily dependent on the insurance industry. Any negative developments that occur in the insurance
industry may have a material adverse effect on our business and our results of operations. In addition, if we fail to maintain
good relationships with insurance carriers, it may have a material adverse effect on our business and results of operations.
The private health insurance industry in the U.S. has experienced a substantial amount of consolidation over the past several
years, resulting in a decrease in the number of insurance carriers. In the future, it may become necessary for us to offer
insurance plans from a reduced number of insurance carriers or to derive a greater portion of our revenues from a more
concentrated number of carriers as our business and the health insurance industry evolve. The termination, amendment or
25
consolidation of our relationship with our insurance carriers could harm our business, results of operations and financial
condition.
Changes and developments in the health insurance system in the United States could harm our business.
In 2010, the Federal government enacted significant reforms to healthcare legislation through Healthcare Reform. Many of our
lines of business depend upon the private sector of the U.S. insurance system, its role in financing health care delivery, and
insurance carriers’ use of, and payment of commissions to, agents, brokers and other organizations to market and sell individual
and family health insurance plans. Healthcare Reform contains provisions that have changed and will continue to change the
industry in which we operate in substantial ways.
The new administration, and certain key members of Congress have expressed a desire to replace or amend all or a portion of
Healthcare Reform. Any partial or complete repeal or amendment or implementation difficulties, or uncertainty regarding such
events, could increase our costs of compliance, prevent or delay future adoption of our exchange platform, and adversely
impact our results of operations and financial condition. Given the uncertainty relating to the potential repeal and replacement
of Healthcare Reform, the impact is difficult to determine, but it could have negative effects on us, including:
•
•
•
•
•
increasing our competition;
reducing or eliminating the need for health insurance agents and brokers or demand for the health insurance that we
sell;
decreasing the number of types of health insurance plans that we sell, as well as the number of insurance carriers
offering such plans;
causing insurance carriers to change the benefits and/or premiums for the plans they sell;
causing insurance carriers to reduce the amount they pay for our services or change our relationship with them in other
ways; or
• materially restricting our call center operations.
Any of these effects could materially harm our business and results of operations. For example, the manner in which the
Federal government and the states implement health insurance exchanges and the process for receiving subsidies and cost-
sharing credits could substantially increase our competition and member turnover and substantially reduce the number of
individuals who purchase insurance through us. Various aspects of Healthcare Reform could cause insurance carriers to limit
the types of health insurance plans we are able to sell and the geographies in which we are able to sell them. In addition, the
U.S. Congress may seek to find spending cuts, and such cuts may include Medicare. If cuts are made to Medicare, there may be
substantial changes in the types of health insurance plans we are able to sell. Changes in the law could also cause insurance
carriers to exit the business of selling insurance plans in a particular jurisdiction, to eliminate certain categories of products or
to attempt to move members into new plans for which we receive lower commissions. If insurance carriers decide to limit our
ability to sell their plans or determine not to sell individual health insurance plans altogether, our business, results of operations
and financial condition would be materially harmed.
Our growth strategy depends, in part, on our ability to make acquisitions and we face risks when we acquire or divest
businesses, and could have difficulty in acquiring, integrating or managing acquired businesses, or with effecting internal
reorganizations, all of which could harm our business, financial condition, results of operations or reputation.
Our growth depends in part on our ability to make acquisitions. We may not be successful in identifying appropriate acquisition
candidates or consummating acquisitions on terms acceptable or favorable to us. We also face additional risks related to
acquisitions, including that we could overpay for acquired businesses and that any acquired business could significantly
underperform relative to our expectations. If we are unable to identify and successfully make, integrate and manage
acquisitions, our business could be materially adversely affected. In addition, we face risks related to divesting businesses,
including that we may not receive adequate consideration in return for the divested business, we may continue to be subject to
the liabilities of the divested business after its divestiture (including with respect to work we might perform on behalf of the
divested business), and we may not be able to reduce overhead or redeploy assets or retain colleagues after the divestiture
closes.
In addition, we cannot be certain that our acquisitions will be accretive to earnings or that our acquisitions or divestitures will
otherwise meet our operational or strategic expectations. Acquisitions involve special risks, including the potential assumption
of unanticipated liabilities and contingencies and difficulties in integrating acquired businesses, and acquired businesses may
not achieve the levels of revenue, profit or productivity we anticipate or otherwise perform as we expect. In addition, if the
26
operating performance of an acquired business deteriorates significantly, we may need to write down the value of the goodwill
and other acquisition-related intangible assets recorded on our balance sheet.
We may be unable to effectively integrate an acquired business into our organization, and may not succeed in managing such
acquired businesses or the larger company that results from such acquisitions. The process of integrating an acquired business
may subject us to a number of risks, including, without limitation, an inability to retain the management, key personnel and
other employees of the acquired business; an inability to establish uniform standards, controls, systems, procedures and policies
or to achieve anticipated synergies; and exposure to legal claims for activities of the acquired business prior to acquisition.
We may also face similar challenges in effecting internal reorganizations. If acquisitions or internal reorganizations are not
successfully integrated, our business, financial condition and results of operations could be materially adversely affected, as
well as our professional reputation. We also own an interest in a number of associates where we do not exercise management
control and we are therefore limited in our ability to direct or manage the business to realize the anticipated benefits that we
could achieve if we had full ownership.
Limited protection of our intellectual property could harm our business, and we face the risk that our services or products
may infringe upon the intellectual property rights of others.
We cannot guarantee that trade secret, trademark and copyright law protections are adequate to deter misappropriation of our
intellectual property (including our software, which may become an increasingly important part of our business). Existing laws
of some countries in which we provide services or products may offer only limited protection of our intellectual property rights.
Also, we may be unable to detect the unauthorized use of our intellectual property and take the necessary steps to enforce our
rights, which may have a material adverse impact on our business, financial condition or results of operations. We cannot be
sure that our services and products, or the products of others that we offer to our clients, do not infringe on the intellectual
property rights of third parties, and we may have infringement claims asserted against us or our clients. These claims may harm
our reputation, result in financial liability, consume financial resources to pursue or defend, and prevent us from offering some
services or products.
Financial and Tax Risks
Our outstanding debt could adversely affect our cash flows and financial flexibility and we may not be able to obtain
financing on favorable terms or at all.
Willis Towers Watson had total consolidated debt outstanding of approximately $4.5 billion as of December 31, 2017, and our
interest expense was $188 million for the year ended December 31, 2017.
Although management believes that our cash flows will be sufficient to service this debt, there may be circumstances in which
required payments of principal and/or interest on this debt could adversely affect our cash flows and this level of indebtedness
may:
•
•
•
•
require us to dedicate a significant portion of our cash flow from operations to payments on our debt, thereby reducing
the availability of cash flow to fund capital expenditures, to pursue other acquisitions or investments, to pay dividends
and for general corporate purposes;
increase our vulnerability to general adverse economic conditions, including when we borrow at variable interest rates,
which makes us vulnerable to increases in interest rates generally;
limit our flexibility in planning for, or reacting to, changes or challenges relating to our business and industry; and
put us at a competitive disadvantage against competitors who have less indebtedness or are in a more favorable
position to access additional capital resources.
The terms of our current financings also include certain limitations. For example, the agreements relating to the debt
arrangements and credit facilities contain numerous operating and financial covenants, including requirements to maintain
minimum ratios of consolidated EBITDA to consolidated cash interest expense and maximum levels of consolidated funded
indebtedness in relation to consolidated EBITDA, in each case subject to certain adjustments. The operating restrictions and
financial covenants in our credit facilities do, and any future financing agreements may, limit our ability to finance future
operations or capital needs or to engage in other business activities.
A failure to comply with the restrictions under our credit facilities and outstanding notes could result in a default under the
financing obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The
occurrence of a default that is not cured or the inability to secure a necessary consent or waiver could cause our obligations
27
with respect to our debt to be accelerated and have a material adverse effect on our business, financial condition or results of
operations.
The maintenance and growth of our business depends on our access to capital, which will depend in large part on cash flow
generated by our business and the availability of equity and debt financing. There can be no assurance that our operations will
generate sufficient positive cash flow to finance all of our capital needs or that we will be able to obtain equity or debt
financing on favorable terms or at all, which could have a material adverse effect on us.
A downgrade to our corporate credit rating and the credit ratings of our outstanding debt may adversely affect our
borrowing costs and financial flexibility and, under certain circumstances, may require us to offer to buy back some of our
outstanding debt.
A downgrade in our corporate credit rating or the credit ratings of our debt would increase our borrowing costs including those
under our credit facilities, and reduce our financial flexibility. In addition, certain downgrades would trigger a step-up in
interest rates under the indentures for certain of our senior notes, which would increase our interest expense. If we need to raise
capital in the future, any credit rating downgrade could negatively affect our financing costs or access to financing sources.
In addition, under the indenture for our 3.600% senior notes due 2024, our 4.625% senior notes due 2023, our 6.125% senior
notes due 2043, our 3.500% senior notes due 2021, our 4.400% senior notes due 2026, and our 2.125% senior notes due 2022,
if we experience a ratings decline together with a change of control event, we would be required to offer to purchase these
notes from holders unless we had previously redeemed those notes. We may not have sufficient funds available or access to
funding to repurchase tendered notes in that event, which could result in a default under the notes. Any future debt that we
incur may contain covenants regarding repurchases in the event of a change of control triggering event.
Legislative or regulatory action in the U.S. or abroad could materially adversely affect our ability to maintain a competitive
worldwide effective corporate tax rate.
We cannot give any assurance as to what our effective tax rate will be in the future, because of, among other things, uncertainty
regarding the tax policies of the jurisdictions where we operate. Our actual effective tax rate may vary from expectations and
that variance may be material. Additionally, the tax laws of Ireland and other jurisdictions could change in the future, and such
changes could cause a material change in our effective tax rate.
On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation commonly referred to as the Tax
Cuts and Jobs Act (the ‘U.S. Tax Reform’). The U.S. Tax Reform includes numerous changes to existing tax law, including a
permanent reduction in the federal corporate income tax rate from 35% to 21%. Although the rate reduction takes effect on
January 1, 2018, the impact to the Company on the re-measurement of its deferred taxes was significant. Among other things,
U.S. Tax Reform could cause us to lose the benefit of certain tax credits and deductions (including for performance-based
compensation under Section 162(m)), limit our ability to deduct interest incurred in the U.S. and potentially increase our
income taxes due to the base erosion and anti-abuse tax and one-time transition tax on unrepatriated earnings of certain foreign
subsidiaries. While we recorded provisional estimates for 2017, we will continue to evaluate the overall impact of U.S. Tax
Reform on our operations and tax position over the next twelve months. Our expectations of the impact of U.S. Tax Reform are
also subject to change, possibly materially, due to, among other things, changes in interpretation or assumptions, and/or
updated regulatory guidance. The U.S. Tax Reform could have a material adverse effect on our financial results.
Further legislative action may be taken by the U.S. Congress which, if ultimately enacted, could limit the availability of tax
benefits or deductions that we currently claim, override tax treaties upon which we rely, or otherwise affect the taxes that the
U.S. imposes on our worldwide operations. Regulations or administrative guidance from the U.S. Treasury Department could
have similar consequences. Such changes could materially adversely affect our effective tax rate and/or require us to take
further action, at potentially significant additional expense, to seek to preserve our effective tax rate. In addition, if proposals
were enacted that have the effect of limiting our ability as an Irish company to take advantage of tax treaties with the U.S., we
could incur additional tax expense and/or otherwise experience business detriment.
In addition, the U.S. Congress, the Organisation for Economic Co-operation and Development (‘OECD’), World Trade
Organization and other government agencies in jurisdictions where we and our affiliates do business have had an extended
focus on issues related to the taxation of multinational corporations. One example is in the area of “base erosion and profit
shifting”, where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax
rates. In October 2015, the OECD released final reports addressing fifteen specific actions as part of a comprehensive plan to
create an agreed set of international rules for fighting base erosion and profit shifting. Although the timing and methods of
implementation vary, several jurisdictions have enacted legislation that is aligned with, and in some cases exceeds the scope of,
the OECD’s recommendations. Ireland is currently conducting hearings on the Irish Corporate Tax System and is considering
changes that could be adopted as part of its 2018 Budget, which could be effective as early as 2019. As a result, the tax laws in
28
the U.S., Ireland, and other countries in which we and our affiliates do business could change on a prospective or retroactive
basis, and any such changes could adversely affect us and our affiliates.
Our significant non-U.S. operations, particularly our London market operations, expose us to exchange rate fluctuations
and various other risks that could impact our business.
A significant portion of our operations is conducted outside of the U.S. Accordingly, we are subject to legal, economic and
market risks associated with operating in foreign countries, including devaluations and fluctuations in currency exchange rates;
imposition of limitations on conversion of foreign currencies into Pounds sterling or U.S. dollars or remittance of dividends and
other payments by foreign subsidiaries; hyperinflation in certain foreign countries; imposition or increase of investment and
other restrictions by foreign governments; and the requirement of complying with a wide variety of foreign laws. Additionally
and as noted above, the unknown impacts of Brexit may expose us to additional exchange rate fluctuations in the Pound
Sterling.
We report our operating results and financial condition in U.S. dollars. Our U.S. operations earn revenues and incur expenses
primarily in U.S. dollars. In our London market operations, however, we earn revenues in a number of different currencies, but
expenses are almost entirely incurred in Pounds sterling. Outside of the U.S. and our London market operations, we
predominantly generate revenues and expenses in local currencies.
Because of devaluations and fluctuations in currency exchange rates or the imposition of limitations on conversion of foreign
currencies into U.S. dollars, we are subject to currency translation exposure on the profits of our operations, in addition to
economic exposure. Furthermore, the mismatch between Pounds sterling revenues and expenses, together with any net Pound
sterling balance sheet position we hold in our U.S. dollar denominated London market operations, creates an exchange
exposure. While we do utilize hedging strategies to attempt to minimize the impact of foreign currency fluctuations, there can
be no assurance that our hedging strategies will be effective.
Changes in accounting principles or in our accounting estimates and assumptions could negatively affect our financial
position and results of operations.
We prepare our financial statements in accordance with accounting principles generally accepted in the United States of
America (‘U.S. GAAP’). Any change to accounting principles, particularly to U.S. GAAP, could have a material adverse effect
on us or our results of operations. For example, we adopted a new revenue recognition standard as of January 1, 2018. Changes
in our revenues and costs on a year over year basis could occur as a result of such adoption, and in any event the standards will
impact the presentation of our financial results.
U.S. GAAP accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and liabilities at the date of our financial statements. We are also required to
make certain judgments that affect the reported amounts of revenues and expenses during each reporting period. We
periodically evaluate our estimates and assumptions, including those relating to revenue recognition, valuation of billed and
unbilled receivables from clients, discretionary compensation, incurred but not reported liabilities, restructuring, pensions,
goodwill and other intangible assets, contingencies, share-based payments and income taxes. We base our estimates on
historical experience and various assumptions that we believe to be reasonable based on specific circumstances. Actual results
could differ from these estimates, and changes in accounting standards could have an adverse impact on our future financial
position and results of operations.
In addition, we have a substantial amount of goodwill on our balance sheet as a result of acquisitions we have completed, and
we significantly increased goodwill as a result of the Merger. We review goodwill for impairment annually or whenever events
or circumstances indicate impairment may have occurred. Application of the impairment test requires judgment, including the
identification of reporting units, assignment of assets, liabilities and goodwill to reporting units and the determination of the
fair value of each reporting unit. A significant deterioration in a key estimate or assumption or a less significant deterioration to
a combination of assumptions or the sale of a part of a reporting unit could result in an impairment charge in the future, which
could have a significant adverse impact on our reported earnings.
We have material pension liabilities that can fluctuate significantly and adversely affect our financial position or net income
or result in other financial impact.
We have material pension liabilities, some of which represent unfunded and underfunded pension and postretirement liabilities.
Movements in the interest rate environment, investment returns, inflation or changes in other assumptions that are used to
estimate our benefit obligations and other factors could have a material effect on the level of liabilities in these plans at any
given time. Most pension plans have minimum funding requirements that may require material amounts of periodic additional
funding and accounting requirements that may result in increased pension expense. For example, in 2017 we were required to
29
recognize a £27 million ($36 million) pension settlement expense related to transfer payments and the accelerated recognition
of certain accumulated losses in our U.K. pension scheme. Depending on the above factors, among others, we could be
required to recognize further pension expense in the future. Increased pension expense could adversely affect our earnings or
cause earnings volatility. In addition, the need to make additional cash contributions may reduce our financial flexibility and
increase liquidity risk by reducing the cash available to meet our other obligations, including the payment obligations under our
credit facilities and other long-term debt, or other needs of our business.
Our quarterly revenues could fluctuate, including as a result of factors outside of our control, while our expenses are
relatively fixed.
Quarterly variations in our revenues and results of operations have occurred in the past and could occur as a result of a number
of factors, such as: the significance of client engagements commenced and completed during a quarter; seasonality of certain
types of services; the number of business days in a quarter; colleague hiring and utilization rates; our clients’ ability to
terminate engagements without penalty; the size and scope of assignments; and general economic conditions.
We derive significant revenues from commissions for brokerage services, but 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
a percentage of the premiums paid by the insureds. Fluctuations in the 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 levels 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. We could be negatively impacted by soft market conditions across certain sectors and geographic regions. In
addition, insurance carriers may seek to reduce their expenses by reducing the commission rates payable to insurance agents or
brokers such as us. The reduction of these commission rates, along with general volatility and/or declines in premiums, may
significantly undermine our profitability.
A sizeable portion of our total operating expenses is relatively fixed, encompassing the majority of administrative, occupancy,
communications and other expenses, depreciation and amortization, and salaries and employee benefits excluding fiscal year-
end incentive bonuses. Therefore, a variation in the number of client assignments or in the timing of the initiation or the
completion of client assignments or our inability to forecast demand can cause significant variations in quarterly operating
results and could result in losses and volatility in our stock price.
The laws of Ireland differ from the laws in effect in the United States and may afford less protection to holders of our
securities.
It may not be possible to enforce court judgments obtained in the U.S. against us in Ireland, based on the civil liability
provisions of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland
would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities
provisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. We have
been advised that the U.S. currently does not have a treaty with Ireland providing for the reciprocal recognition and
enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by
any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would
not automatically be enforceable in Ireland.
As an Irish company, we are governed by the Irish Companies Act, which differs in some material respects from laws generally
applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer
transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to
the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers
of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly,
holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation
incorporated in a jurisdiction of the United States.
We are a holding company and, therefore, may not be able to receive dividends or other distributions in needed amounts
from our subsidiaries.
The Company is organized as a holding company, a legal entity separate and distinct from our operating subsidiaries. As a
holding company without significant operations of our own, we are dependent upon dividends and other payments from our
operating subsidiaries to meet our obligations for paying principal and interest on outstanding debt obligations, for paying
dividends to shareholders, for repurchasing shares of common stock and for corporate expenses. Legal and regulatory
restrictions, foreign exchange controls, as well as operating requirements of our subsidiaries, may limit our ability to obtain
30
cash from these subsidiaries. For example, Willis Limited, our U.K. brokerage subsidiary regulated by the FCA, is currently
required to maintain $140 million in unencumbered and available financial resources, of which at least $79 million must be in
cash, for regulatory purposes. In the event our operating subsidiaries are unable to pay dividends and other payments to the
Company, we may not be able to service debt, pay obligations or pay dividends on, or repurchase shares of, common stock.
In the event we are unable to generate cash from our operating subsidiaries for any of the reasons discussed above, our overall
liquidity could deteriorate.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
As of December 31, 2017, we operated offices in many countries and territories throughout the world and believe that our
properties are generally suitable and adequate for the purposes for which they are used. The principal properties are located in
the United States and the United Kingdom. Operations of each of our segments are carried out in owned or leased offices under
operating leases that typically do not exceed 10 years in length except for certain properties in key locations. We do not
anticipate difficulty in meeting our space needs at lease expiration.
The fixed assets owned by us represented approximately 3% of total assets as of December 31, 2017 and consisted primarily of
furniture and equipment, leasehold improvements, computer software, internally developed software and land and buildings.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are party to various lawsuits, arbitrations or mediations that arise in the ordinary course of business. The
disclosure called for by Item 3 regarding our legal proceedings is incorporated by reference herein from Note 13 —
Commitments and Contingencies, within Item 8 in this Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
31
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Share Data
Our shares began trading on the NASDAQ Global Select Market under the symbol ‘WLTW’ on January 5, 2016. The high and
low sale prices of our shares, as reported by NASDAQ, are set forth below for the periods indicated.
2016:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2017:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2018:
Through February 23, 2018
High
Low
$
$
$
$
$
$
$
$
$
126.25
129.70
133.40
132.74
132.13
150.47
156.14
165.00
164.99
$
$
$
$
$
$
$
$
$
104.11
112.59
118.08
112.76
120.87
125.66
143.10
150.64
145.80
On February 23, 2018, our share price as reported by the NASDAQ was $159.96 per share. As of February 23, 2018, there
were approximately 1,319 shareholders of record of our shares.
Dividends
We normally pay dividends on a quarterly basis to shareholders of record on March 31, June 30, September 30 and
December 31. The dividend payment dates and amounts are as follows:
Payment Date
April 15, 2016
July 15, 2016
October 17, 2016
January 17, 2017
April 17, 2017
July 17, 2017
October 16, 2017
January 16, 2018
$ Per Share
$
$
$
$
$
$
$
$
0.480
0.480
0.480
0.480
0.530
0.530
0.530
0.530
On February 23, 2018, the board of directors approved a regular quarterly cash dividend of $0.60 per common share. The
dividend is payable on or about April 16, 2018 to shareholders of record at the close of business on March 31, 2018.
There are no governmental laws, decrees or regulations in Ireland that restrict the remittance of dividends or other payments to
non-resident holders of the Company’s shares.
In circumstances where one of Ireland’s many exemptions from dividend withholding tax (‘DWT’) does not apply, dividends
paid by the Company will be subject to Irish DWT (currently 20 percent). Residents of the United States should be exempt
from Irish DWT provided relevant documentation supporting the exemption has been put in place. While the U.S.-Ireland
Double Tax Treaty contains provisions reducing the rate of Irish DWT in prescribed circumstances, it should generally be
unnecessary for U.S. residents to rely on the provisions of this treaty due to the wide scope of exemptions from Irish DWT
available under Irish domestic law. Irish income tax may also arise in respect of dividends paid by the Company. However, U.S.
residents entitled to an exemption from Irish DWT generally have no Irish income tax liability on dividends.
With respect to non-corporate U.S. shareholders, certain dividends from a qualified foreign corporation may be subject to
reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends received
32
from that corporation on shares that are readily tradeable on an established securities market in the United States, such as our
shares. Non-corporate U.S. shareholders that do not meet a minimum holding period requirement for our shares during which
they are not protected from the risk of loss or that elect to treat the dividend income as investment income pursuant to
section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign
corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related
payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum
holding period has been met. U.S. shareholders should consult their own tax advisors regarding the application of these rules
given their particular circumstances.
Total Shareholder Return
The graphs below depict cumulative total shareholder returns for (i) Legacy Willis and Legacy Towers Watson for the period
from January 1, 2013 through January 4, 2016, the day prior to the commencement of trading of Willis Towers Watson’s
ordinary shares, and (ii) Willis Towers Watson for the period from January 5, 2016 through December 31, 2017.
Each graph also depicts the total return for the S&P 500 and for a peer group for Willis Towers Watson comprised of Accenture
plc, Aon plc, Arthur J. Gallagher & Co., Brown & Brown Inc., Cognizant Technology Solutions Corporation, Marsh &
McLennan Companies, Inc. and Robert Half International Inc. The comparisons chart the performance of $100 invested on the
initial dates indicated (January 1, 2013 and January 5, 2016, respectively), assuming full dividend reinvestment.
Comparison of Cumulative Total Return Among
Willis Group Holdings, Towers Watson & Co.,
S&P 500, and a Peer Group
$250
$200
$150
$100
$50
01/01/13
12/31/13
12/31/14
12/31/15
01/04/16
Willis Group Holdings plc
Towers Watson & Co.
S&P 500 Index
Peer Group
33
Comparison of Cumulative Total Return Among
Willis Towers Watson, S&P 500, and a Peer Group
$160
$150
$140
$130
$120
$110
$100
$90
01/05/16
03/31/16
06/30/16
09/30/16
12/31/16
03/31/17
06/30/17
09/30/17
12/31/17
Willis Towers Watson
S&P 500 Index
Peer Group
Unregistered Sales of Equity Securities and Use of Proceeds
During the year ended December 31, 2017, no shares were issued by the Company without registration under the Securities Act
of 1933, as amended.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The Company is authorized to repurchase shares, by way of redemption, and will consider whether to do so from time to time,
based on many factors, including market conditions.
On April 20, 2016, the Willis Towers Watson board reconfirmed, reapproved and reauthorized the remaining portion of the
Legacy Willis program to repurchase the Company’s ordinary shares on the open market or by way of redemption or otherwise.
On November 10, 2016, the Company announced the board of directors approved an increase to the existing share repurchase
program of $1 billion. The $1 billion increase is in addition to the remaining authority on the Legacy Willis program discussed
in the preceding paragraph.
There are no expiration dates for these repurchase plans or programs. The following table presents specified information about
the Company’s repurchases of ordinary shares in the fourth quarter and the Company’s repurchase authority.
Period
October 1, 2017 through October 31, 2017
November 1, 2017 through November 30, 2017
December 1, 2017 through December 31, 2017
Total number of
shares purchased
Average price
paid per share
Total number of shares
purchased as part of publicly
announced plans or programs
Maximum number of shares that
may yet be purchased under the
plans or programs
306,264
$
136,745
$
— $
443,009
$
158.03
160.88
—
158.91
306,264
136,745
—
443,009
4,123,218
3,986,473
3,986,473
The maximum number of shares that may yet be purchased under the existing stock repurchase plan is 3,986,473. At
December 31, 2017, approximately $601 million remained on the open-ended repurchase authorities granted by the board. An
34
estimate of the maximum number of shares under the existing authority was determined using the closing price of our ordinary
shares on December 31, 2017 of $150.69.
On February 23, 2018, the board of directors approved an increase to the existing share repurchase program of $400 million.
The $400 million increase is in addition to the remaining authority of $601 million as of December 31, 2017.
35
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below should be read in conjunction with the audited consolidated financial
statements of the Company and the related notes and Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations within this Annual Report on Form 10-K.
The selected historical consolidated financial data presented below for the years ended December 31, 2017, 2016, and 2015 and
as of December 31, 2017 and 2016 has been derived from the audited consolidated financial statements of Legacy Willis and
Willis Towers Watson, as applicable, which have been prepared in accordance with U.S. GAAP and included elsewhere in this
Annual Report. Financial data set forth below for the years ended December 31, 2014 and 2013 and at December 31, 2015,
2014 and 2013, has been derived from audited consolidated financial statements with adjustment for the reverse stock split on
January 4, 2016 and not included in this Annual Report. The Merger affects the comparability of this data. See Note 3 —
Merger, Acquisitions and Divestitures within Item 8 of this Annual Report on Form 10-K for additional information.
Statement of Comprehensive Income Data
Total revenues
Income from operations
Income from operations before income taxes and interest in earnings
of associates
Net income
Net income attributable to Willis Towers Watson
Earnings per share — basic (i)
Earnings per share — diluted (i)
Average number of shares outstanding
— basic
— diluted
Balance Sheet Data (end of year)
Goodwill
Other intangible assets, net
Total assets (ii)
Total equity
Long-term debt
Short-term debt and current portion of long-term debt
Additional paid-in capital
Total Willis Towers Watson shareholders’ equity
Other Financial Data
Years ended December 31,
2017
2016
2015
2014
2013
(in millions of U.S. dollars, except per share data)
$
8,202
$
7,887
$
3,829
$
3,802
$
3,655
$
$
$
738
489
592
568
4.21
4.18
135
136
$
$
$
551
340
438
420
3.07
3.04
137
138
$
$
$
427
340
384
373
5.49
5.41
68
69
$
$
$
647
518
373
362
5.40
5.32
67
68
$
$
$
663
499
377
365
5.53
5.37
66
68
$
10,519
$
10,413
$
3,737
$
2,937
$
2,838
3,882
32,458
10,249
4,450
85
10,538
10,126
4,368
30,253
10,183
3,357
508
10,596
10,065
1,115
18,839
2,360
2,278
988
1,672
2,229
450
353
15,421
14,785
2,007
2,130
167
1,524
1,985
2,243
2,297
14
1,316
2,215
Capital expenditures (excluding capitalized software and capital
leases)
Cash dividends declared per share (i)
$
$
300
2.12
$
$
218
1.92
$
$
146
3.28
$
$
110
3.18
$
$
105
2.97
____________________
(i) Basic and diluted earnings per share, and cash dividends declared per share, for 2015, 2014 and 2013 have been retroactively adjusted to reflect the
reverse stock split on January 4, 2016. See Note 3 — Merger, Acquisitions and Divestitures within Item 8 of this Annual Report on Form 10-K for
further details.
(ii) We collect premiums from insureds and, after deducting our commissions, remit the premiums to the respective insurers; the Company also collects
claims or refunds from insurers which it then remits to insureds. Uncollected premiums from insureds and uncollected claims or refunds from insurers
(‘fiduciary receivables’) are recorded as fiduciary assets on the Company’s consolidated balance sheet. Unremitted insurance premiums, claims or refunds
(‘fiduciary funds’) are also recorded within fiduciary assets.
36
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This discussion includes forward-looking statements. See ‘Disclaimer Regarding Forward-looking Statements’ for certain
cautionary information regarding forward-looking statements and ‘Risk Factors’ in Item 1A for a list of factors that could
cause actual results to differ materially from those predicted in those statements.
This discussion includes references to non-GAAP financial measures as defined in the rules of the Securities and Exchange
Commission (‘SEC’). We present such non-GAAP financial measures, specifically, adjusted, constant currency and organic
non-GAAP financial measures, 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 under U.S. GAAP, and these provide a measure against which our businesses may
be assessed in the future.
Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be
limited. These financial measures should be viewed in addition to, not in lieu of, the consolidated financial statements for the
year ended December 31, 2017.
See ‘Non-GAAP Financial Measures’ below for further discussion of our adjusted, constant currency and organic non-GAAP
financial measures.
Executive Overview
Business Overview
Willis Towers Watson is a 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 43,000 employees and services clients in more
than 140 countries and territories. 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. We believe our unique perspective allows us
to see the critical intersections between talent, assets and ideas - the dynamic formula that drives business performance.
We offer clients a broad range of services to help them to identify and control their risks, and to enhance business performance
by improving their ability to attract, retain and engage a talented workforce. Our risk control services range from strategic risk
consulting (including providing actuarial analysis), to a variety of due diligence services, to the provision of practical on-site
risk control services (such as health and safety or property loss control consulting), as well as analytical and advisory services
(such as hazard modeling and reinsurance optimization studies). We assist clients in planning how to manage incidents or crises
when they occur. These services include contingency planning, security audits and product tampering plans. We help our clients
enhance their business performance by delivering consulting services, technology and solutions that help organizations
anticipate, identify and capitalize on emerging opportunities in human capital management as well as investment advice to help
our clients develop disciplined and efficient strategies to meet their investment goals.
As an 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 operate the largest private Medicare exchange in
the U.S. Through this exchange and those for active employees, we help our clients move to a more sustainable economic
model by capping and controlling the costs associated with healthcare benefits.
We are not an insurance company, and therefore we do not underwrite insurable risks for our own account.
We derive the majority of our revenue from either commissions or fees for broking or consulting services. No single client
represented a significant concentration of our consolidated revenues for any of the periods presented.
Our shares are traded on the NASDAQ Global Select Market.
Market Conditions
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. Rates, however, vary by geography,
37
industry and client segment. As a result, and due to the global and diverse nature of our business, we view rates in the
aggregate.
Market conditions in our broking industry are generally defined by factors such as the strength of the economies in the various
geographic regions in which we serve around the world, insurance rate movements, and insurance and reinsurance buying
patterns of our clients.
Management has considered the U.K. referendum vote on June 23, 2016 to depart from the E.U., the triggering of Article 50 of
the Treaty of Lisbon (providing the right to and procedures for a member to leave the E.U.) on March 29, 2017, the early
general election held on June 8, 2017, and the uncertainties about the near-term and longer-term effects of Brexit on the
Company. The terms of Brexit, and its impact, are highly uncertain. For a further discussion of the risks of Brexit to the
Company, see Part I, Item 1A. Risk Factors within this Annual Report on Form 10-K.
Typically, our business benefits from regulatory change, political risk or economic uncertainty. Insurance broking generally
tracks the economy, but demand for both insurance broking and consulting services usually remains steady during times of
uncertainty. We have some businesses, such as our health and benefits and administration businesses, which can be counter
cyclical during the early period of a significant economic change.
Although approximately 22% of our revenues are generated in the U.K. on an annual basis, only about 13% of revenues are
denominated in Pounds sterling as much of the insurance business is transacted in U.S. dollars. Approximately 19% of our
expenses are denominated in Pounds sterling, thus we generally benefit from a weakening Pound sterling in our income from
operations. However, we have a Company hedging strategy for this aspect of our business, which is designed to mitigate
significant fluctuations in currency.
The markets for our consulting, technology and solutions, and marketplace services are subject to changes as a result of
economic, regulatory and legislative changes, technological developments, and increased competition from established and
new competitors. We believe the primary factors in selecting a human resources or risk management consulting firm include
reputation, the ability to provide measurable increases to shareholder value and return on investment, global scale, quality of
service and the ability to tailor services to clients’ unique needs. With regard to the market for exchanges, we believe that
clients base their decisions on a variety of factors that include the ability of the provider to deliver measurable cost savings for
clients, a strong reputation for efficient execution and an innovative service delivery model and platform. Part of the employer
sponsored insurance market has matured and become more fragmented while other segments remain in the entry phase. As
these market segments continue to evolve, we may experience growth in intervals, with periods of accelerated expansion
balanced by periods of modest growth.
See Part I, Item 1A. Risk Factors in this Annual Report on Form 10-K for discussions of risks that may affect our ability to
compete.
Business Strategy
Willis Towers Watson sees that a unified approach to people and risk can be a path to growth for our clients. Our integrated
teams bring together our understanding of risk strategies and market analytics. This helps clients around the world to achieve
their objectives.
We operate in attractive markets - both growing and mature - with a diversified platform across geographies, industries,
segments and lines of business. We aim to create and become the premier advisory, broking and solutions company of choice
globally. 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. We also help organizations improve performance through effective
people, risk and financial management by focusing on providing human capital and financial consulting services.
We believe we can achieve this by:
• Delivering a powerful client proposition with an integrated global platform. Our combined offerings provide
comprehensive advice, analytics, specialty capabilities and solutions covering benefits, benefits delivery solutions,
brokerage and advisory, risk and capital management, and talent and rewards;
• Leveraging our combined distribution strength and global footprint to enhance market penetration and provide a
platform for further innovation; and
• Underpinning this growth through continuous operational improvement initiatives that help make us more effective
and efficient and drive cost synergies. We do this by:
38
continuing to modernize the way we run our business to better serve our clients, enable the skills of our staff,
and lower our costs of doing business;
making the necessary changes to our processes, our IT, our real estate and workforce locations; and
targeting and delivering identified, highly achievable cost savings as a direct consequence of the Merger.
We care as much about how we work as we do about the impact that we make. This means commitment to shared values, a
framework that guides how we run our business and serve clients.
Through these strategies we aim to accelerate revenue, cash flow, EBITDA and earnings growth, and generate compelling
returns for investors by delivering tangible growth in revenues and capitalizing on the identified cost synergies.
Merger with Towers Watson
On January 4, 2016, pursuant to the Agreement and Plan of Merger, dated June 29, 2015, as amended on November 19, 2015,
between Willis, Towers Watson, and Citadel Merger Sub, Inc., a wholly-owned subsidiary of Willis formed for the purpose of
facilitating this transaction (‘Merger Sub’), Merger Sub merged with and into Towers Watson, with Towers Watson continuing
as the surviving corporation and a wholly-owned subsidiary of Willis.
At the effective time of the Merger (the ‘Effective Time’), each issued and outstanding share of Towers Watson common stock
(the ‘Towers Watson shares’), was converted into the right to receive 2.6490 validly issued, fully paid and nonassessable
ordinary shares of Willis (the ‘Willis ordinary shares’), $0.000115 nominal value per share, other than any Towers Watson
shares owned by Towers Watson, Willis or Merger Sub at the Effective Time and the Towers Watson shares held by
stockholders who are entitled to, and who properly exercised, dissenter’s rights under Delaware law.
Immediately following the Merger, Willis effected (i) a consolidation (i.e., a reverse stock split under Irish law) of Willis
ordinary shares whereby every 2.6490 Willis ordinary shares were consolidated into one Willis ordinary share ($0.000304635
nominal value per share) and (ii) an amendment to its constitution and other organizational documents to change its name from
Willis Group Holdings Public Limited Company to Willis Towers Watson Public Limited Company.
We are continuing our integration of Legacy Willis and Legacy Towers Watson, creating a unified platform for global growth,
including positioning the Company to leverage our mutual distribution strength to enhance market penetration, expand our
global footprint and create a strong platform for further innovation.
39
As Reported Consolidated Financial Information
The table below sets forth our summarized consolidated statements of comprehensive income and data as a percentage of
revenues for the years ended December 31, 2017, 2016, and 2015.
Consolidated Statements of Comprehensive Income
($ in millions, except per share data)
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
Income from operations
Interest expense
Other expense/(income), net
Benefit from income taxes
Interest in earnings of associates, net of tax
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS
WATSON
Diluted earnings per share
Years ended December 31,
2017
2016
2015
$ 8,202
100 % $ 7,887
100 % $ 3,829
100 %
4,745
1,534
203
581
132
269
7,464
738
188
61
(100)
58 %
19 %
2 %
7 %
2 %
3 %
9 %
2 %
1 %
(1)%
3 — %
(24) — %
4,646
1,551
178
591
193
177
7,336
551
184
59 %
20 %
2 %
7 %
2 %
2 %
7 %
2 %
27 — %
(96)
(1)%
2 — %
(18) — %
60 %
19 %
2 %
2 %
3 %
2 %
2,303
718
95
76
126
84
3,402
427
11 %
4 %
(1)%
142
(55)
(33)
11 — %
(11) — %
(1)%
$
$
568
7 % $
420
5 % $
373
10 %
4.18
$
3.04
$
5.41
The Merger affects the comparability of this data between 2015 and other periods presented. See ‘Supplementary Pro Forma
Financial Information’ for additional analysis.
Consolidated Revenues
We derive the majority of our revenues from commissions from our brokerage businesses and fees for consulting services.
Brokerage commissions and fees negotiated in lieu of commissions are recognized at the later of the policy inception date or
when the policy placement is complete or as the fees are otherwise determined. Commissions on additional premiums and
adjustments are recognized when approved by or agreed between the parties and collectability is reasonably assured.
Consulting revenue is generally recognized as services are performed. No single client represented a significant concentration
of our consolidated revenues for any of our three most recent fiscal years.
The following table details our top five markets based on percentage of consolidated revenues (in U.S. dollars) from the
countries where work is performed for the year ended December 31, 2017. These figures do not represent the currency of the
related revenue, which is presented in the table below.
Geographic Region
United States
United Kingdom
France
Canada
Germany
40
% of
Revenues
47%
22%
4%
3%
3%
The table below details our revenues and expenses by transactional currency for the year ended December 31, 2017.
Transactional Currency
U.S. dollars
Pounds sterling
Euro
Other currencies
____________________
Revenues
55%
13%
15%
17%
Expenses (i)
50%
19%
13%
18%
(i) These percentages exclude certain expenses 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. These items include Merger-related amortization of intangible assets, restructuring costs, and transaction and
integration expenses.
The following table sets forth the total revenues for the years ended December 31, 2017 and 2016 and the components of the
change in total revenues for the year ended December 31, 2017, as compared to the prior year:
Years ended December 31,
2017
2016
(in millions)
Total revenues
$
8,202
$
7,887
____________________
(i) Components of revenue change may not add due to rounding.
As
Reported
Change
4%
Currency
Impact
—%
Components of Change (i)
Constant
Currency
Change
4%
Acquisitions/
Divestitures
—%
Organic
Change
5%
Total revenues for the year ended December 31, 2017 were $8.2 billion, compared to $7.9 billion for the year ended
December 31, 2016, an increase of $315 million or 4%. This growth in revenues was driven by strong performances in all
segments.
Our revenues can be materially impacted by changes in currency conversions, which can fluctuate significantly over the course
of a calendar year. For the year ended December 31, 2017, currency translation decreased our consolidated revenues by $27
million. The decrease was driven primarily by a weaker Pound sterling during the first half of the year, partially offset by
increases in the Pound sterling, Euro, the Brazilian real and Canadian dollar in the second half of the year.
The impact of acquisitions and divestitures did not have a significant impact on the change in total revenues for the year ended
December 31, 2017 since most of these transactions happened in the latter part of the year. Prospectively, our 2018 revenues
will exclude a net $65 million related to the impact of various acquisitions and divestitures initiated or completed in 2017.
The following table sets out the total revenues for the years ended December 31, 2016 and 2015 and the components of the
change in total revenues for the year ended December 31, 2016, as compared to the prior year:
Years ended December 31,
2016
2015
(in millions)
Total revenues
$
7,887
$
3,829
____________________
(i) Components of revenue change may not add due to rounding.
As
Reported
Change
106%
Currency
Impact
(6)%
Components of Change (i)
Constant
Currency
Change
112%
Acquisitions/
Divestitures
112%
Organic
Change
—%
Total revenues for the year ended December 31, 2016 were $7.9 billion, compared to $3.8 billion for the year ended
December 31, 2015, an increase of $4.1 billion, or 106%. This growth in revenues was driven by our merger with Towers
Watson and our acquisition of Gras Savoye.
For the year ended December 31, 2016, the foreign currency impact resulted from the strengthening of the U.S. dollar against a
number of currencies, most significantly the Euro and the Pound sterling.
Definitions of Constant Currency Change and Organic Change are included in the section entitled ‘Non-GAAP Financial
Measures’ elsewhere within this Form 10-K.
As Reported Segment Revenues
In 2016, we began managing our business across four integrated reportable operating segments: Human Capital and Benefits;
Corporate Risk and Broking; Investment, Risk and Reinsurance; and Benefits Delivery and Administration, formerly Exchange
Solutions.
41
Beginning in 2017, we made certain changes that affect our segment results. These changes, which are detailed in the Current
Report on Form 8-K filed with the SEC on April 7, 2017, include the realignment of certain businesses within our segments, as
well as changes to certain allocation methodologies to better reflect the ongoing nature of our businesses. The prior period
comparatives reflected in the tables below have been retrospectively adjusted to reflect our current segment presentation. See
Note 4 — Segment Information within Item 8 in this Annual Report on Form 10-K for a further discussion of these changes.
Segment revenues exclude amounts that were directly incurred on behalf of our clients and reimbursed by them (reimbursed
expenses); however, these amounts are included in consolidated revenues.
The Merger affects the comparability of this data between 2015 and other periods presented. See ‘Supplementary Pro Forma
Segment Revenues Analysis’ for additional analysis.
Human Capital and Benefits (‘HCB’)
The HCB segment provides an array of advice, broking, solutions and software for our clients.
HCB is the largest segment of the Company, generating approximately 39% of our segment revenues for the year ended
December 31, 2017. HCB is focused on addressing our clients’ people and risk needs to help them take on the challenges of
operating in a global marketplace. HCB is further strengthened with teams of international consultants that provide support
through each of our business units to the global headquarters of multinational clients and their foreign subsidiaries.
The HCB segment provides services through four business units:
• Retirement — The Retirement business provides actuarial support, plan design, and administrative services for
traditional pension and retirement savings plans. Our colleagues help our clients assess the costs and risks of
retirement plans on cash flow, earnings and the balance sheet, the effects of changing workforce demographics on their
retirement plans and retiree benefit adequacy and security.
• Health and Benefits — The Health & Benefits (‘H&B’) business provides plan management consulting, broking and
administration across the full spectrum of health and group benefit programs, including medical, dental, disability, life
and other coverage.
•
•
Talent & Rewards — Our Talent & Rewards (‘T&R’) business provides advice, data, software and products to address
clients’ total rewards and talent issues.
Technology and Administration Solutions — Our Technology and Administration Solutions (‘TAS’) business provides
benefits outsourcing services to clients outside of the U.S.
The table below presents segment commissions and fees and segment interest and other income for HCB for the years ended
December 31, 2017 and 2016.
December 31,
2017
2016
($ in millions)
Commissions and fees
Interest and other income
Total segment revenues
$
$
3,163
29
3,192
$
$
3,100
17
3,117
____________________
(i) Components of revenue change may not add due to rounding.
Components of Revenue Change (i)
As
Reported
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
2%
—%
2%
(1)%
3%
HCB commissions and fees, and total segment revenues, for the year ended December 31, 2017 were $3.2 billion, compared to
$3.1 billion for the year ended December 31, 2016. Retirement revenues increased in Western Europe, International and Great
Britain and were partially offset by a decline in North America. The decline in North America was expected as bulk lump sum
projects declined year over year. Actuarial consulting projects in Great Britain were strong due to regulation changes. The
growth in Talent & Rewards was flat. Healthcare consulting revenues in Health and Benefits were up significantly for all
markets globally. North America grew due to increased consulting and product demand and Great Britain grew due to global
benefits solutions implementations. Revenue in the Technology and Administration Solutions business in Great Britain
experienced strong growth as a result of new administration clients and project activity.
42
The table below presents segment commissions and fees and segment interest and other income for HCB for the years ended
December 31, 2016 and 2015.
Commissions and fees
Interest and other income
Total segment revenues
December 31,
2016
2015
As reported
change
$
$
($ in millions)
3,100
17
3,117
$
$
583
1
584
432%
434%
HCB total segment revenues for the year ended December 31, 2016 were $3.1 billion, compared to $584 million for the year
ended December 31, 2015, an increase of $2.5 billion or 434%. This growth in revenues was driven by our Merger and our
acquisition of Gras Savoye. See the ‘Supplementary Pro Forma Segment Revenues’ section below for additional discussion of
our 2016 results.
Corporate Risk and Broking (‘CRB’)
The CRB segment provides a broad range of risk advice, insurance broking and consulting services to clients worldwide
ranging from small businesses to multinational corporations. The segment delivers integrated global solutions tailored to client
needs and underpinned by data and analytics.
CRB generated approximately 33% of Willis Towers Watson segment revenues for the year ended December 31, 2017, and
places more than $20 billion of premiums into the insurance markets, annually.
CRB operates as an integrated global team comprising both functional and geographic leadership with three global offerings:
• Property and Casualty — Property and Casualty provides property and liability insurance brokerage services across a
wide range of industries including construction, real estate, healthcare, and natural resources.
• Financial Lines — Financial Lines specializes in brokerage services for financial, political and credit risks.
•
Transport — Transport provides specialist expertise to the transportation, aerospace, marine and inspace industries.
The table below presents segment commissions and fees, and segment interest and other income for CRB for the years ended
December 31, 2017 and 2016.
December 31,
2017
2016
($ in millions)
Commissions and fees
Interest and other income
Total segment revenues
$
$
2,625
23
2,648
$
$
2,519
28
2,547
____________________
(i) Components of revenue change may not add due to rounding.
Components of Revenue Change (i)
As
Reported
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
4%
—%
4%
—%
4%
CRB commissions and fees, and total segment revenues for the year ended December 31, 2017 were $2.6 billion, compared to
$2.5 billion for the year ended December 31, 2016. All regions contributed to the strong revenue growth led by International
followed by Western Europe, North America and Great Britain. International’s growth was fueled by excellent client retention
and strong new business. Western Europe, North America and Great Britain experienced good client retention and solid new
business growth.
43
The table below presents segment commissions and fees and segment interest and other income for CRB for the years ended
December 31, 2016 and 2015.
Commissions and fees
Interest and other income
Total segment revenues
December 31,
2016
2015
As reported
change
$
$
($ in millions)
2,519
28
2,547
$
$
2,332
17
2,349
8%
8%
CRB total segment revenues for the year ended December 31, 2016 were $2.5 billion, compared to $2.3 billion for the year
ended December 31, 2015, an increase of $198 million or 8%. The growth for the year ended December 31, 2016 was primarily
due to the acquisition of Gras Savoye, which occurred on December 29, 2015. Great Britain led organic growth with solid
revenue increases across all lines of business. Western Europe contributed to organic growth with strong growth in Iberia,
partially offset by softness in Italy. North America was flat with strong retention offset by lower new business. International
organic revenue declined as a result of lower revenues in Asia and Australasia, partially offset by better performance in Latin
America and Central and Eastern Europe, Middle East and Africa (‘CEEMEA’).
Investment, Risk and Reinsurance (‘IRR’)
The IRR segment uses a sophisticated approach to risk, which helps clients free up capital and manage investment complexity.
The segment works closely with investors, reinsurers and insurers to manage the equation between risk and return. Blending
advanced analytics with deep institutional knowledge, IRR identifies new opportunities to maximize performance. IRR
provides investment consulting services and insurance specific services and solutions through reserves opinions, software,
ratemaking, usage-based insurance, risk underwriting and reinsurance broking.
This segment is our third largest segment and generated approximately 19% of segment revenues for the Company for the year
ended December 31, 2017. With approximately 75% of the revenues for this segment split between North America and the
U.K., this segment includes the following businesses and offerings:
• Willis Re — Willis Re provides reinsurance industry clients with an understanding of how risk affects capital and
financial performance and advises on the best ways to manage related outcomes.
•
Insurance Consulting and Technology — Insurance Consulting and Technology, formerly Risk Consulting and
Software, is a global business that provides advice and technology solutions to the insurance industry, as well as to
corporate clients with respect to their insurance programs. Services include software and technology, risk and capital
management, products and pricing, financial and regulatory reporting, financial and capital modeling, M&A,
outsourcing and business management.
•
Investment — Investment provides advice to improve investment outcomes for asset owners using a broad and
sophisticated framework for managing risk.
• Wholesale Insurance Broking — Wholesale Insurance Broking provides wholesale and specialist broking services to
retail brokers.
• Portfolio and Underwriting Services — Portfolio and Underwriting Services acts on behalf of our insurance carrier
partners and self-insured entities in product marketing and distribution, risk underwriting and selection, claims
management and other general administrative responsibilities.
• Willis Towers Watson Securities — Willis Towers Watson Securities, formerly Capital Markets & Advisory, provides
investment banking services to companies involved in the insurance and reinsurance industries for a broad array of
merger and acquisition transactions as well as capital markets products.
• Max Matthiessen — Max Matthiessen is a leading advisor and broker within insurance, benefits, human resources and
savings in the Nordic region. The business specializes in providing human capital and benefits administration together
with providing market leading savings and insurance solutions.
44
The table below presents segment commissions and fees, and segment interest and other income for IRR for the years ended
December 31, 2017 and 2016.
December 31,
2017
2016
($ in millions)
Commissions and fees
Interest and other income
Total segment revenues
$
$
1,505
30
1,535
$
$
1,475
59
1,534
____________________
(i) Components of revenue change may not add due to rounding.
Components of Revenue Change (i)
As
Reported
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
2%
(1)%
3%
—%
4%
IRR commissions and fees and total segment revenues for both years ended December 31, 2017 and 2016 were $1.5 billion.
Total segment revenues for the year ended December 31, 2016 included £28 million ($41 million) received for a settlement
related to the Fine Arts, Jewellery and Specie Team. Wholesale Insurance Broking, Investment, Insurance Consulting and
Technology, Max Matthiessen and Willis Re all posted commissions and fees revenue growth, primarily as a result of strong
sales and increased performance fees. Willis Towers Watson Securities growth was flat. The reduction in Portfolio and
Underwriting Services commissions and fees was driven by a loss of profit commissions following the Atlantic hurricanes, the
cancellation of a key contract, and the divestiture of small programs in the portfolio.
The table below presents segment commissions and fees and segment interest and other income for IRR for the years ended
December 31, 2016 and 2015.
Commissions and fees
Interest and other income
Total segment revenues
December 31,
2016
2015
As reported
change
$
$
($ in millions)
1,475
59
1,534
$
$
895
1
896
65%
71%
IRR total segment revenues for the year ended December 31, 2016 were $1.5 billion, compared to $896 million for the year
ended December 31, 2015, an increase of $638 million or 71%. This growth in revenues was driven by the Merger and a full
year of revenues from Miller, following our acquisition in May 2015. See the ‘Supplementary Pro Forma Segment Revenues’
section below for additional discussion of our 2016 results.
Benefit Delivery and Administration (‘BDA’)
The BDA segment, formerly Exchange Solutions, provides primary medical and ancillary benefit exchange and outsourcing
services to active employees and retirees across both the group and individual markets. A significant portion of the revenues in
this segment is recurring in nature, driven by either the commissions from the policies we sell, or from long-term service
contracts with our clients that typically range from three to five years. Revenues across this segment may be seasonal, driven
by the magnitude and timing of client transition activities, and we typically increase our membership levels significantly
effective January 1, after calendar year-end benefits elections.
BDA generated approximately 9% of our segment revenues for the year ended December 31, 2017. BDA provides services
across four integrated or related offerings to customers primarily in the U.S. through four business units:
•
Individual Marketplace (formerly Retiree & Access Exchanges) — This business provides solutions through a
proprietary technology platform, OneExchange Retiree, which enables our employer clients to transition their retirees
to individual, defined contribution health plans that provide individuals with a tax-free allowance or contribution to
spend on healthcare services at an annual cost that the employer controls, as opposed to group-based, defined benefit
health plans that provide groups of individuals with healthcare benefits at uncertain annual costs.
• Group Marketplace (formerly Active Exchanges) — This business is focused on delivering group benefit exchanges,
serving the active employees of employers across the United States through our proprietary BenefitConnect or Bright
Choices exchange platforms.
45
• Benefits Outsourcing (formerly Technology and Administration Solutions) — Through our proprietary BenefitConnect
technology, this business provides a broad suite of health and welfare outsourcing services as well as decision support
and modeling tools for pension users within the U.S.
• Benefits Accounts (formerly Consumer-Directed Accounts) — This business uses its SaaS-based technology and
related services to deliver consumer-driven healthcare and reimbursement accounts, including health savings accounts,
health reimbursement arrangements and other consumer-directed accounts.
The table below presents segment commissions and fees, and segment interest and other income for BDA for the years ended
December 31, 2017 and 2016.
December 31,
2017
2016
($ in millions)
Commissions and fees
Interest and other income
Total segment revenues
$
$
729
—
729
$
$
652
2
654
____________________
(i) Components of revenue change may not add due to rounding.
Components of Revenue Change (i)
As
Reported
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
12%
—%
12%
—%
12%
BDA total segment revenues for the years ended December 31, 2017 and 2016 were $729 million and $654 million,
respectively. Individual Marketplace revenues increased by 10%, and the rest of the segment grew by 14%, led by Group
Marketplace and Benefits Outsourcing. Growth in the Individual and Group Marketplaces resulted from the additional 2017
enrollments, and Benefits Outsourcing’s growth was a result of new client wins and special projects.
See the ‘Supplementary Pro Forma Segment Revenues’ section below for additional discussion of our 2016 results.
Costs of Providing Services
Total costs of providing services were $7.5 billion for the year ended December 31, 2017, compared to $7.3 billion for the year
ended December 31, 2016, an increase of $128 million, or 2%. Total costs of providing services were $7.3 billion for the year
ended December 31, 2016, compared to $3.4 billion for the year ended December 31, 2015, an increase of $3.9 billion. See the
analysis below for further information.
Salaries and Benefits
Salaries and benefits for the years ended December 31, 2017 and December 31, 2016 were $4.7 billion and $4.6 billion,
respectively, an increase of $99 million. The increase was primarily a result of a $36 million pension settlement charge related
to our U.K. pension plan as well as higher incentive accruals as compared to the prior year. Salaries and benefits for the years
ended December 31, 2016 and December 31, 2015 were $4.6 billion and $2.3 billion, respectively, an increase of $2.3 billion.
The increase in expenses was primarily driven by the Merger and our acquisition of Gras Savoye. As a percentage of revenues,
salaries and benefits expenses represented 58%, 59% and 60% for the years ended December 31, 2017, 2016 and 2015,
respectively.
Other Operating Expenses
Other operating expenses include occupancy, legal, marketing, licenses, royalties, supplies, technology, printing and telephone
costs, as well as insurance, including premiums on excess insurance and losses on professional liability claims, non-client-
reimbursed travel by colleagues, publications, professional subscriptions and development, recruitment, other professional fees
and irrecoverable value added and sales taxes.
Other operating expenses for the years ended December 31, 2017 and December 31, 2016 were $1.5 billion and $1.6 billion,
respectively, a decrease of $17 million. The decrease was due primarily to the Stanford litigation provision of $50 million in
2016, partially offset by reserves for the City of Houston and CalPERS litigations and increases in other litigation reserves and
professional services in 2017. Other operating expenses for the years ended December 31, 2016 and December 31, 2015 were
$1.6 billion and $718 million, respectively, an increase of $833 million. The increase was primarily driven by the Merger and
our acquisition of Gras Savoye.
46
Depreciation
Depreciation represents the expense incurred over the useful life of our tangible fixed assets and internally developed software.
Depreciation for the years ended December 31, 2017 and December 31, 2016 was $203 million and $178 million, respectively,
an increase of $25 million. This increase was due primarily to a higher depreciable base of assets resulting from additional
assets placed in service in 2016. Depreciation expense for the years ended December 31, 2016 and December 31, 2015 was
$178 million and $95 million, respectively, an increase of $83 million. This increase was primarily driven by the Merger and
our acquisition of Gras Savoye.
Amortization
Amortization includes amortization of acquired intangible assets, including acquired internally developed software.
Amortization for the years ended December 31, 2017 and December 31, 2016 was $581 million and $591 million, respectively,
a decrease of $10 million. Our intangible amortization is more heavily weighted to the initial years of the useful lives of the
related intangibles, and therefore amortization expense will decrease over time. Amortization for the years ended
December 31, 2016 and December 31, 2015 was $591 million and $76 million, respectively, an increase of $515 million. The
primary driver of the increase in amortization was our acquisition of approximately $4.0 billion in intangible assets in our
Merger with Towers Watson and our acquisition of $231 million and $440 million of intangible assets related to our
acquisitions of Miller and Gras Savoye, respectively.
Restructuring Costs
Restructuring costs for the year ended December 31, 2017 were $132 million, all of which related to the final year of the
Operational Improvement Program (‘OIP’). Restructuring costs for the year ended December 31, 2016 were $193 million, of
which $145 million related to the OIP and $48 million related to the Business Restructuring Program. Restructuring costs for
the year ended December 31, 2015 were $126 million, all of which was related to the OIP. See our discussion in the
Operational Improvement Program and Business Restructuring Program section herein and Note 5 — Restructuring Costs
within Item 8 of this Annual Report on Form 10-K for additional details about these expenses.
Transaction and integration expenses
Transaction and integration expenses for the year ended December 31, 2017 were $269 million, which consists of costs
associated with our information technology and finance initiatives and rationalization, property consolidation, benefits
harmonization and costs associated with the settlement of the Merger-related appraisal demand lawsuit (see Note 13 —
Commitments and Contingencies within Item 8 of this Annual Report on Form 10-K). Transaction and integration expenses for
the year ended December 31, 2016 were $177 million. Approximately $162 million of these expenses were related to the
Merger and $15 million were related to the acquisition of Gras Savoye. Transaction and integration expenses for the year ended
December 31, 2015 were $84 million. Approximately $58 million of these expenses were related to the Merger, $15 million
were related to the acquisition of Gras Savoye and $11 million were related to our acquisition of Miller.
Income from Operations
Income from operations for the year ended December 31, 2017 was $738 million compared to $551 million for the year ended
December 31, 2016, an increase of $187 million, or 34%. This increase resulted primarily from additional revenue of $315
million driven by growth across all segments, partially offset by additional costs resulting primarily from our integration
activities and additional salary and benefits costs. Income from operations for the year ended December 31, 2016 was $551
million compared to $427 million for the year ended December 31, 2015, an increase of $124 million or 29%. The growth in
income from operations compared to that of 2015 was primarily driven by the Merger and our acquisition of Gras Savoye.
Interest Expense
Interest expense for the years ended December 31, 2017, 2016 and 2015 was $188 million, $184 million and $142 million,
respectively. Interest expense is primarily related to interest on our senior notes and term loans. Interest expense increased by
$4 million for the year ended December 31, 2017, which primarily resulted from additional levels of indebtedness. Interest
expense increased by $42 million for the year ended December 31, 2016, which was primarily related to additional debt
acquired in the Merger and as part of the acquisition of Gras Savoye.
Other Expense/(Income), Net
Other expense/(income), net, includes other gains and losses, including gains and losses on foreign currency transactions. Other
expense/(income), net for the years ended December 31, 2017 and 2016 was expense of $61 million and $27 million,
respectively, which were primarily foreign currency transaction losses. Other expense/(income), net for the year ended
47
December 31, 2015 was income of $55 million, which included gains on disposals of operations of $25 million, and a gain on
re-measurement of equity interests related to the Gras Savoye acquisition of $59 million, partially offset by the $30 million
impact of the Venezuelan currency devaluation.
Benefit from Income Taxes
Benefit from income taxes for the years ended December 31, 2017, 2016 and 2015 was $100 million, $96 million and $33
million, respectively. The benefit in 2017 was primarily due to the impact of U.S. Tax Reform. The provisional net benefit of
$204 million includes a $208 million net benefit due to the reduction in the federal corporate tax rate and re-measurement of
net U.S. deferred tax liabilities primarily related to acquisition-based intangibles. The benefit from income taxes in 2016 was
primarily due to the release of a portion of U.S. valuation allowances and shifts in the global mix of income as a result of the
Merger. This shift resulted in additional deductions in jurisdictions with high statutory income tax rates, which reduced the
global effective tax rate. The benefit from income taxes in 2015 was primarily due to an income tax benefit from the release of
a portion of U.S. valuation allowances.
Net income attributable to Willis Towers Watson
Net income attributable to Willis Towers Watson for the year ended December 31, 2017 was $568 million, an increase of $148
million compared to $420 million for the year ended December 31, 2016. The increase was primarily driven by an
improvement of $187 million in income from operations partially offset by a $34 million increase to expense in other expense/
(income), net. Net income attributable to Willis Towers Watson for the year ended December 31, 2016 was $420 million, an
increase of $47 million compared to $373 million for the year ended December 31, 2015. The growth was primarily driven by
an improvement of $124 million in income from operations and an increase of $63 million in the benefit from income taxes,
partially offset by a $42 million increase in interest expense and an $82 million increase to expense in other expense/(income),
net.
Supplementary Pro Forma Financial Information
To assist the reader in understanding our comparative analysis, we have included discussion and analysis of pro forma financial
information for Willis Towers Watson as if the Towers Watson Merger had occurred on January 1, 2015.
The pro forma financial information for the year ended December 31, 2015 combines: (i) the historical consolidated statement
of operations of Willis Towers Watson for the year ended December 31, 2015 and (ii) the historical consolidated statement of
operations of Towers Watson for the fiscal year ended June 30, 2015 less the historical consolidated statement of operations of
Towers Watson for the six months ended December 31, 2014, plus the historical consolidated statement of operations of Towers
Watson for the six months ended December 31, 2015.
The pro forma financial information is only for Willis and Towers Watson and does not include Gras Savoye or other merger or
acquisition activity on a pro forma basis.
Pro forma financial information is for illustrative purposes only, and is based on adjustments that are estimates based upon
available information and certain assumptions that Willis Towers Watson management believes are reasonable under the
circumstances, as described in ‘Pro Forma Adjustments’ below. The pro forma financial information has not been adjusted to
give effect to certain expected financial benefits of the Merger, such as revenue synergies, tax savings and cost synergies, or the
anticipated costs to achieve these benefits, including the cost of integration activities. The pro forma financial information does
not purport to represent what the actual consolidated results of operations of Willis Towers Watson would have been had the
Merger occurred on the date indicated, nor is it necessarily indicative of future consolidated results of operations. The actual
results of operations will differ, potentially significantly, from the pro forma amounts reflected herein due to a variety of
factors, including access to additional information, changes in value not currently identified and changes in operating results
following the date of the unaudited pro forma financial information.
48
Pro Forma Consolidated Statements of Operations
(in millions of U.S. dollars, except per share data)
Total costs of providing services
7,336
93%
3,402
3,164
2016
Years ended December 31,
2015
Willis Towers Watson
Legacy
Willis
Legacy
Towers
Watson
Pro Forma
Adjustments
Pro Forma Willis
Towers Watson
$
7,887
100% $ 3,829
$ 3,664 b $
(1) a
$
7,492
100%
4,646
1,551
59%
20%
178
591
193
177
2%
7%
2%
2%
2,303
718
95
76
126
84
2,161
725 b
110
71
—
97
551
184
7%
2%
27 —%
(96)
(1)%
2 —%
438
6%
(18) —%
427
142
(55)
(33)
11
384
(11)
500
9
(57)
217
(2)
329
(1)
(33) c
3 a, d
(46) e
388 f
—
(151) k
161
(162)
13 g
—
(114) h
—
(61)
4,431
1,446
159
535
126
59%
19%
2%
7%
2%
30 —%
6,727
765
164
(112)
70
90%
10%
2%
(1)%
1%
9 —%
652
9%
—
(12) —%
$
$
$
420
5% $
373
3.07
3.04
$
$
5.49
5.41
$
$
$
328
$
(61)
4.75
4.75
$
$
$
640
9%
4.67
4.64
i, j
i, j
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Income from operations
Interest expense
Other expense/(income), net
(Benefit from)/provision for income taxes
Interest in earnings of associates, net of tax
Net income
Income attributable to non-controlling
interests
NET INCOME ATTRIBUTABLE TO
WILLIS TOWERS WATSON
Basic earnings per share
Diluted earnings per share
Pro Forma Adjustments
The unaudited pro forma financial information reflects the following adjustments:
a.
Intercompany trading. Adjustments to eliminate trading between Legacy Willis and Legacy Towers Watson of $1
million for the year ended December 31, 2015.
b. Conforming reclassifications and adjustments. Certain reclassifications have been made to amounts in the Towers
Watson historical statement of operations to conform to Willis’ presentation, including reclassifying certain contra
revenue accounts and Towers Watson’s professional and subcontracted services, occupancy and general and
administrative expenses within the relevant Willis captions.
c. Pension and post-retirement benefit amortization. Adjustments to remove the net periodic benefit costs of $33 million
for the year ended December 31, 2015 associated with the amortization of net actuarial losses and prior service credits/
costs for Towers Watson’s pension and other post-retirement benefit plans.
d. Rent. Adjustment to eliminate $5 million of historical rent expense for the year ended December 31, 2015 offset by $1
million amortization of our favorable and unfavorable lease agreements.
e. Depreciation. Adjustment related to depreciation on internally developed software of $57 million partially offset by an
increase of $11 million for the year ended December 31, 2015 due to an increase in the estimated fair value for
leasehold improvements, furniture and fixtures and computer hardware and software.
f. Amortization. Historical amortization expense of $71 million was removed and amortization expense of $459 million
has been recorded to reflect the estimated fair values of Towers Watson’s identifiable intangible assets and related
49
amortization. See Item 8, Note 3 — Merger, Acquisitions and Divestitures and Note 8 — Goodwill and Other
Intangible Assets.
g.
h.
Interest Expense. Net adjustments to interest expense include additional interest and amortization of related deferred
debt issuance costs. Approximately $13 million incremental interest expense was recorded for the year ended
December 31, 2015 related to a borrowing under a $340 million term loan as part of the funding for the pre-Merger
special dividend on December 29, 2015 and the portion of the senior notes issuance used to repay Towers Watson’s
existing debt at the time of the Merger.
Income taxes. Adjustments to record the income tax impact of the pro forma adjustments, including the removal of the
tax consequences of the repatriation of foreign earnings to partially fund the pre-Merger special dividend. The income
tax expense was calculated based on the U.S. and foreign statutory rates applicable to adjustments made. Where
applicable, a U.S. statutory rate of 40% was used. Pro forma adjustments for income tax purposes have been
determined without regard to potential tax planning strategies that may result from the Merger of Towers Watson with
Willis. Tax benefits from the Merger have not been considered in our pro forma adjustments.
i. Willis ordinary shares issuance. Approximately 184 million Willis ordinary shares (prior to the reverse stock split) were
issued to Towers Watson stockholders as the Merger Consideration in connection with the Merger, based on Towers
Watson shares of common stock outstanding as of January 4, 2016, at a per share price of $47.18, which was the
closing share price on that date, for a total value of approximately $8.7 billion.
j. Earnings per share. The pro forma consolidated basic and diluted earnings per share for the year ended December 31,
2015 are calculated as follows:
Willis historic average basic shares in issue (i)
Shares issued for Towers Watson (ii)
Willis historic average basic shares in issue
Dilutive effect of securities
Diluted weighted average shares outstanding
Pro forma net income attributable to Willis Towers Watson
Basic earnings per share
Diluted earnings per share
Year Ended
December 31, 2015
(in millions, except
per share data)
68
69
137
1
138
640
4.67
4.64
$
$
$
____________________
(i) After taking into account the impact of the reverse stock split on January 4, 2016.
(ii) Shares issued for Towers Watson based on approximately 69 million Towers Watson shares outstanding at January 4, 2016.
k. Transaction and integration expenses. Transaction and integration costs related to the Merger and have been
eliminated.
Consolidated Revenues
The following table sets out the total revenues generated for the year ended December 31, 2016, pro forma revenues generated
for the year ended December 31, 2015, and the components of the change for the year ended December 31, 2016, as compared
to the pro forma prior year.
Years ended December 31,
Components of Change
2016
Pro Forma
2015
Pro Forma
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
(in millions)
Total revenues
$
7,887
$
7,492
5%
(3)%
8%
7%
1%
Total revenues for the year ended December 31, 2016 were $7.9 billion, compared to $7.5 billion pro forma revenues for the
year ended December 31, 2015, an increase of $395 million, or 5%. This growth was driven by a 7% increase due to our
acquisitions of Gras Savoye and Miller and 1% organic revenue growth, partially offset by adverse foreign currency exchange
movements of 3%. The primary drivers of our growth were within our Corporate Risk and Broking and Benefits Delivery and
50
Administration, formerly Exchange Solutions, segments. See our segment revenues analysis for a further discussion of our
segment results.
Our results can be materially impacted by changes in currency conversions, which can fluctuate significantly over the course of
a calendar year. For the year ended December 31, 2016, currency translation decreased our consolidated revenues by $202
million on a constant currency basis from the pro forma year ended December 31, 2015. The primary currency driving the
change was the Pound sterling which weakened against the U.S. dollar during 2016.
The organic change presented above includes the reduction to revenues for the year ended December 31, 2016 related to the
fair value adjustment for deferred revenue made during purchase accounting for the Merger. If this revenue had not been
reduced, the constant currency change would have been an increase of 9% and the organic change would have been an increase
of 2%, respectively, for the year ended December 31, 2016.
Definitions of Constant Currency Change and Organic Change are included in the section entitled ‘Non-GAAP Financial
Measures’ in this Form 10-K.
Costs of Providing Services
Total costs of providing services were $7.3 billion for the year ended December 31, 2016, compared to $6.7 billion for the pro
forma year ended December 31, 2015, an increase of $609 million or 9%. See the analysis below for further information.
Salaries and Benefits
Salaries and benefits were $4.6 billion for the year ended December 31, 2016, an increase of $215 million, or 5%, compared to
$4.4 billion for the pro forma year ended December 31, 2015. The increase was primarily related to our acquisitions of Gras
Savoye and Miller, which contributed approximately $291 million of the increase, partially offset by increased net periodic
benefit credits from the adoption of the granular approach to calculating service and interest costs of $51 million.
Other Operating Expenses
Other operating expenses include occupancy, legal, marketing, licenses, royalties, supplies, technology, printing and telephone
costs, as well as insurance, including premiums on excess insurance and losses on professional liability claims, non-client-
reimbursed travel by colleagues, publications, professional subscriptions and development, recruitment, other professional fees
and irrecoverable value added and sales taxes.
Other operating expenses for the year ended December 31, 2016 were $1.6 billion, compared to $1.4 billion for the pro forma
year ended December 31, 2015, an increase of $105 million or 7%. The increase was primarily related to our acquisitions of
Gras Savoye and Miller, which contributed approximately $135 million of the increase. In 2016, we accrued $50 million for the
Stanford litigation, which was $20 million less than the $70 million accrued in 2015.
Depreciation
Depreciation represents the expense incurred over the useful life of our tangible fixed assets and internally developed software.
Depreciation was $178 million for the year ended December 31, 2016, an increase of $19 million, or 12%, compared to $159
million for the pro forma year ended December 31, 2015. The increase was primarily related to our acquisitions of Gras Savoye
and Miller and our normal capital expenditures.
Amortization
Amortization includes amortization of acquired intangible assets, including acquired internally developed software.
Amortization was $591 million for the year ended December 31, 2016, an increase of $56 million, or 10%, compared to $535
million for the pro forma year ended December 31, 2015. The increase in amortization in 2016 is primarily due to amortization
of the intangible assets acquired in our acquisitions of Gras Savoye and Miller. We acquired approximately $231 million and
$440 million in intangible assets in our acquisitions of Miller and Gras Savoye, respectively. These intangible assets are
amortized over their expected lives which range from 4 to 25 years. See Note 3 — Merger, Acquisitions and Divestitures and
Note 8 — Goodwill and Other Intangible Assets within Item 8 of this Annual Report on Form 10-K for additional information
about our intangible assets.
Transaction and integration expenses
Transaction and integration expenses were $177 million for the year ended December 31, 2016, an increase of $147 million
compared to $30 million for the pro forma year ended December 31, 2015. The increase in 2016 is primarily due to integration
expenses incurred subsequent to the Merger. For the year ended December 31, 2016, approximately $162 million of these
51
expenses were related to the Merger and $15 million were related to the integration of Gras Savoye. For the pro forma year
ended December 31, 2015, transaction expenses related to the Merger of $151 million have been eliminated as part of the pro
forma adjustments. Of the remaining $30 million of transaction and integration expenses, approximately $15 million were
related to Gras Savoye, $11 million were related to Miller, and $4 million were related to other miscellaneous M&A activity.
Restructuring costs and Interest expense
Please see the discussion in the ‘As Reported Consolidated Financial Information’ section above.
Income from Operations
Income from operations for the year ended December 31, 2016 was $551 million, compared to $765 million for the pro forma
year ended December 31, 2015, a decrease of $214 million. The decrease was primarily due to increases in transaction and
integration expenses of $147 million and restructuring costs of $67 million.
Other Expense/(Income), Net
Other expense/(income), net, includes other gains and losses, including gains and losses on foreign currency transactions. Other
expense/(income), net, for the year ended December 31, 2016 was $27 million of net expense, which was primarily foreign
currency transaction losses. Other expense/(income), net for the pro forma year ended December 31, 2015 was $112 million of
net income, which was primarily due to $80 million of gains on disposals of operations and $59 million in the gain on the re-
measurement of equity interests, partially offset by $30 million in foreign currency transaction losses in 2015.
(Benefit from)/Provision for Income Taxes
For the year ended December 31, 2016, there was a $96 million benefit from income taxes, due primarily to a benefit from the
release of a portion of our U.S. valuation allowances and shifts in the global mix of income as a result of the Merger. This shift
creates additional deductions in jurisdictions with high statutory income tax rates, which reduces the global effective tax rate.
For the pro forma year ended December 31, 2015, there was a provision for income taxes of $70 million. Legacy Willis had a
benefit from income taxes due to the release of a portion of U.S. valuation allowances in 2015 which was more than offset by
the provision for income taxes for Legacy Towers Watson.
Net Income Attributable to Willis Towers Watson
Net income attributable to Willis Towers Watson for the year ended December 31, 2016 was $420 million, a decrease of $220
million compared to $640 million for the pro forma year ended December 31, 2015. The decrease was primarily driven by
increased transaction and integration expenses of $147 million and restructuring costs of $67 million in 2016 and gains on
disposals of $80 million and re-measurement of equity interests of $59 million in 2015, partially offset by a decrease in income
tax expense of $166 million.
Supplementary Pro Forma Segment Revenues
Beginning in 2017, we made certain changes that affect our segment results. These changes, which are detailed in the Current
Report on Form 8-K filed with the SEC on April 7, 2017, include the realignment of certain businesses within our segments, as
well as changes to certain allocation methodologies to better reflect the ongoing nature of our businesses. The prior period
comparatives reflected in the tables below have been retrospectively adjusted to reflect our current segment presentation. See
Note 4 — Segment Information within Item 8 in this Annual Report on Form 10-K for a further discussion of these changes.
Human Capital and Benefits
The following table sets out the components of HCB revenues for the year ended December 31, 2016 and pro forma revenues
for the year ended December 31, 2015, and the components of the change in commissions and fees for the year ended
December 31, 2016 as compared to the pro forma prior year.
Years ended December 31,
Components of Change
2016
Pro Forma
2015
Pro Forma
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
Commissions and fees
Interest and other income
Total segment revenues
$
$
(in millions)
3,100
17
3,117
$
$
3,038
16
3,054
52
2%
(3)%
5%
5%
—%
HCB total segment revenues for the year ended December 31, 2016 and pro forma for the year ended December 31, 2015 were
$3.1 billion; commissions and fees for the year ended December 31, 2016 were $3.1 billion, compared with pro forma $3.0
billion for the year ended December 31, 2015, representing an increase of $63 million to total segment revenues and an
increase of $62 million to commissions and fees. Pro forma and constant currency revenue growth were driven by the
acquisition of Gras Savoye, which occurred on December 29, 2015. In an effort to align resources and market demand, a
significant restructuring across all lines of business took place during the second half of 2016, which caused disruption in our
billable hours. Across the segment, performance was mixed, resulting in flat organic growth. Retirement revenues declined
slightly as a result of reduced actuarial consulting, primarily in the fourth quarter. The Health and Benefits North America
consulting business continued to see demand for plan design projects and increased product revenue. The Talent and Rewards
advisory business was down period-over-period as the M&A market softened. The Technology and Administration Solutions
Great Britain business had strong performance, led by increased project and administration activity along with new
clients. Internationally, Global Wealth Solutions has been negatively impacted by adverse conditions in the Greater China
market.
Corporate Risk and Broking
The following table sets out the components of CRB revenues for the year ended December 31, 2016 and pro forma revenues
for the year ended December 31, 2015, and the components of the change in commissions and fees for the year ended
December 31, 2016 as compared to the pro forma prior year.
Years ended December 31,
Components of Change
2016
Pro Forma
2015
Pro Forma
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
Commissions and fees
Interest and other income
Total segment revenues
$
$
(in millions)
2,519
28
2,547
$
$
2,331
17
2,348
8%
(3)%
11%
12%
(1)%
CRB total segment and commissions and fees revenues for the year ended December 31, 2016 were $2.5 billion, compared to
pro forma $2.3 billion for the year ended December 31, 2015. The growth for the year ended December 31, 2016 was due to the
acquisition of Gras Savoye, which occurred on December 29, 2015. International organic revenue declined as a result of lower
revenues in Asia and Australasia, partially offset by better performance in Latin America and CEEMEA. Offsetting the
International decline was Great Britain’s organic growth as a result of solid revenue increases across all lines of business.
Western Europe contributed to organic growth with strong revenue gains in Iberia, partially offset by softness in Italy. North
America was flat with strong retention offset by lower new business.
Investment, Risk and Reinsurance
The following table sets out the components of IRR revenues for the year ended December 31, 2016 and pro forma revenues
for the year ended December 31, 2015, and the components of the change in commissions and fees for the year ended
December 31, 2016 as compared to the pro forma prior year.
Years ended December 31,
Components of Change
2016
Pro Forma
2015
Pro Forma
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
Commissions and fees
Interest and other income
Total segment revenues
$
$
(in millions)
1,475
59
1,534
$
$
1,482
—%
(3)%
3%
6%
(3)%
12
1,494
IRR total segment revenues for the year ended December 31, 2016 and pro forma for the year ended December 31, 2015 were
$1.5 billion. Included in total segment revenues for the year ended December 31, 2016 is a previously disclosed settlement with
JLT of £28 million ($41 million) related to the Fine Art, Jewellery and Specie team. Commissions and fees for the year ended
December 31, 2016 and pro forma for the year ended December 31, 2015 were $1.5 billion, representing a decrease of $7
million. The organic decline was primarily related to the following factors: soft market conditions and renewal factors
impacting our Willis Re and Portfolio and Underwriting Services businesses, particularly in North America; a decline in overall
insurance industry M&A activity impacting our Willis Towers Watson Securities business after a record year in 2015; and a
decline arising from lower demand in risk consulting projects.
53
Benefit Delivery and Administration
The following table sets out the components of BDA revenues for the year ended December 31, 2016 and pro forma revenues
for the year ended December 31, 2015, and the components of the change in commissions and fees for the year ended
December 31, 2016 as compared to the pro forma prior year.
Years ended December 31,
Components of Change
2016
Pro Forma
2015
Pro Forma
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
Commissions and fees
Interest and other income
Total segment revenues
$
$
(in millions)
652
2
654
$
$
484
3
487
35%
—%
35%
2%
33%
BDA total segment revenues for the year ended December 31, 2016 were $654 million, compared to pro forma $487 million for
the year ended December 31, 2015; and commissions and fees for the year ended December 31, 2016 were $652 million,
compared to pro forma $484 million for the year ended December 31, 2015. Individual Marketplace commissions and fees
increased by 41%, primarily as a result of the record 2016 annual enrollment season. The rest of the segment commissions and
fees increased by 27%, primarily due to Benefits Outsourcing adding new clients and experiencing higher project activity.
Impact of U.S. Tax Reform
On December 22, 2017, the U.S. government enacted comprehensive tax legislation, commonly referred to as U.S. Tax
Reform. U.S. Tax Reform makes broad and complex changes to the U.S. tax code, including, but not limited to: (1) requiring a
one-time transition tax on certain unremitted earnings of foreign subsidiaries that may be payable over eight years; (2) bonus
depreciation that will allow for a full expensing of qualified property; (3) reduction of the federal corporate tax rate from 35%
to 21%; (4) a new provision designed to tax global intangible low-taxed income (‘GILTI’), which allows for the possibility of
using foreign tax credits (‘FTCs’) and a deduction of up to 50% to offset the income tax liability (subject to some limitations);
(5) a new limitation on deductible interest expense; (6) limitations on the deductibility of certain executive compensation; (7)
limitations on the use of FTCs to reduce the U.S. income tax liability; (8) the creation of the base erosion anti-abuse tax
(‘BEAT’), a new minimum tax; and (9) a general elimination of U.S. federal income taxes on dividends from foreign
subsidiaries.
Also on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (‘SAB 118’), which provides guidance on
accounting for the tax effects of the U.S. Tax Reform. SAB 118 provides for a measurement period that should not extend
beyond one year from the U.S. Tax Reform enactment date for companies to complete the accounting under Accounting
Standards Codification (‘ASC’) 740, Income Taxes (‘ASC 740’). In accordance with SAB 118, a company must reflect the
income tax effects of those aspects of U.S. Tax Reform for which the accounting under ASC 740 is complete. Adjustments to
incomplete and unknown amounts will be recorded and disclosed prospectively during the measurement period. To the extent
that a company’s accounting for certain income tax effects of U.S. Tax Reform is incomplete but it is able to determine a
reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a
provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the
provisions of the tax laws that were in effect immediately before the enactment of U.S. Tax Reform.
At December 31, 2017, there are no material elements of U.S. Tax Reform for which the Company’s accounting is complete.
While the Company's accounting for the following elements of U.S. Tax Reform is incomplete, the Company was able to make
reasonable estimates of certain effects. Accordingly, the Company recorded provisional adjustments for the following
significant items:
Reduction of the federal corporate tax rate – Beginning January 1, 2018, the Company’s U.S. income will be taxed at a
21% federal corporate tax rate. Under ASC 740, deferred tax assets and liabilities must be recalculated as of the
enactment date using current tax laws and rates expected to be in effect when the deferred tax items reverse in future
periods, which is 21%. Consequently, the Company has recorded a provisional decrease in its net deferred tax liabilities
of $208 million, with a corresponding deferred income tax benefit of $208 million. While the Company is able to make a
reasonable estimate of the impact of the reduction in the federal corporate tax rate, it may be affected by other analyses
related to U.S. Tax Reform that could result in other adjustments to U.S. federal deferred tax balances, including analysis
of tax amounts in other comprehensive income and any future guidance issued.
One-time transition tax – The one-time transition tax is based on the Company’s total post-1986 earnings and profits
(‘E&P’) that it previously deferred from U.S. income taxes. The Company recorded a provisional amount for the one-
54
time transition tax liability for its foreign subsidiaries owned by U.S. corporate shareholders, resulting in an increase in
U.S. federal income tax expense of $70 million and state income tax expense of $2 million. The Company has a
significant number of foreign subsidiaries and therefore has not yet completed its calculation of the total post-1986 E&P
as well as non-U.S. income taxes paid for these foreign subsidiaries. Further, the transition tax is based in part on the
amount of those earnings held in cash and other specified assets, including trade receivables based on estimates. The
Company expects to revise its estimates of E&P, non-U.S. income taxes and cash balances throughout 2018 when actual
results are available. In addition, guidance may be released which could also impact these estimates.
Indefinite reinvestment assertion – Beginning in 2018, U.S. Tax Reform provides a 100% deduction for dividends
received from 10-percent owned foreign corporations by U.S. corporate shareholders, subject to a one-year holding
period. Although dividend income is now exempt from U.S. federal tax for U.S. corporate shareholders, companies must
still account for the tax consequences of outside basis differences and other tax impacts of their investments in non-U.S.
subsidiaries. As a result of U.S. Tax Reform we have analyzed our global working capital and cash requirements and the
potential tax liabilities attributable to a repatriation and have determined that we may repatriate up to $219 million, the
majority of which was previously deemed indefinitely reinvested. For those investments from which we were able to
make a reasonable estimate of the tax effects of such repatriation, we have recorded a provisional estimate for foreign
withholding and state income taxes of $1 million. In addition, we re-measured the existing deferred tax liability accrued
on certain acquired Towers Watson subsidiaries and released the deferred tax liability relating to the outside basis
difference. This resulted in an income tax benefit of $76 million as these foreign earnings were subject to the one-time
transition tax which reduced the outside basis difference.
Bonus Depreciation – While the Company has not completed its determination of all capital expenditures that qualify for
immediate expensing, for the year ended December 31, 2017, the Company recorded a provisional tax deduction of $40
million based on its current intent to fully expense all qualifying expenditures. The Company will analyze the dates all
capital expenditures were placed in service or acquired and consider any future guidance within the next twelve months
to finalize the deduction. This resulted in an increase of approximately $14 million to the Company's U.S. federal current
income taxes receivable and a corresponding increase in its net deferred tax liabilities of approximately $14 million.
Executive compensation – Starting with compensation paid in 2018, Section 162(m) will limit the Company from
deducting compensation, including performance-based compensation, in excess of $1 million paid to anyone who,
starting in 2018, serves as the Chief Executive Officer or Chief Financial Officer, or who is among the three most highly
compensated executive officers. The only exception to this rule is for compensation that is paid pursuant to a binding
contract in effect on November 2, 2017 that would have otherwise been deductible under the prior Section 162(m) rules.
Accordingly, any compensation paid in the future pursuant to new compensation arrangements entered into after
November 2, 2017, even if performance-based, will count towards the $1 million deduction limit if paid to a covered
executive. The Company recorded a provisional income tax expense of $8 million relating to our compensation plans not
qualifying for the binding contract exception. We are in the process of obtaining additional information needed to
complete our analysis of the binding contract requirement on the various compensation plans to determine the full
impact of the law change. In addition, guidance may be released which could also impact our estimates.
The Company's accounting for the following law changes of U.S. Tax Reform is incomplete, and it is not yet able to make
reasonable estimates of the effects. Therefore, no provisional adjustment was recorded.
GILTI – U.S. Tax Reform creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign
corporations (‘CFCs’) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess
of the shareholder’s ‘net CFC tested income’ over the net deemed tangible income return, which is currently defined as
the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset
investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense
taken into account in the determination of net CFC-tested income. Because of the complexity of the new GILTI tax rules,
the Company is continuing to evaluate this provision of U.S. Tax Reform and the application of ASC 740. Under U.S.
GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S.
inclusions in taxable income related to GILTI as a current-period expense when incurred (the ‘period cost method’) or
(2) factoring such amounts into a company’s measurement of its deferred taxes (the ‘deferred method’). The Company’s
selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global
income of its CFCs to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI
and, if so, what the impact is expected to be. Because whether the Company expects to have future U.S. inclusions in
taxable income related to GILTI depends on not only its current structure and estimated future results of global
operations but also its intent and ability to modify its structure and/or its business, the Company is not yet able to
reasonably estimate the effect of this provision of U.S. Tax Reform. Therefore, it has not made any adjustments related
to potential GILTI tax in its consolidated financial statements and has not made a policy decision.
55
Valuation allowances – The Company must assess whether valuation allowances assessments are affected by various
aspects of U.S. Tax Reform (e.g., limitation on net interest expense in excess of 30% of adjusted taxable income). As of
December 31, 2017, no changes to valuation allowances have been recorded as a result of U.S. Tax Reform.
Restructuring Programs
Operational Improvement Program
In April 2014, Legacy Willis announced a multi-year operational improvement program designed to strengthen its client service
capabilities and deliver future cost savings. The main elements of the program, which was completed during 2017, included:
moving more than 3,500 support roles from higher cost locations to facilities in lower cost locations; net workforce reductions
in support positions; lease consolidation in real estate; and information technology systems simplification and rationalization.
The Company is expecting to deliver $325 million of annual cost savings beginning in 2018. To achieve these savings, it has
incurred cumulative restructuring charges of $441 million for the program since it began in the second quarter of 2014.
An analysis of cumulative restructuring costs recognized for the Operational Improvement Program from its commencement
through the year ended December 31, 2017 by segment is as follows:
HCB
CRB
IRR
BDA
Corporate
Total
(in millions)
2014
Termination benefits
Professional services and other (i)
2015
Termination benefits
Professional services and other (i)
2016
Termination benefits
Professional services and other (i)
2017
Termination benefits
Professional services and other (i)
Total
Termination benefits
Professional services and other (i)
Total
____________________
$
$
$
$
$
$
— $
—
$
$
2
1
1
1
— $
3
3
5
8
$
$
15
3
24
57
18
81
25
63
82
204
286
$
$
$
$
$
$
1
—
7
2
3
4
4
6
15
12
27
$
$
$
$
$
$
— $
—
— $
—
— $
—
— $
—
— $
—
— $
— $
17
3
30
1
36
19
14
23
97
120
$
$
$
$
$
16
20
36
90
23
122
48
86
123
318
441
(i) Other includes salary and benefits, premises, and other expenses incurred to support the ongoing management and facilitation of the programs.
Business Restructuring Program
In the second quarter of 2016, we began planning targeted staffing reductions in certain portions of the business due to a
reduction in business demand or change in business focus (hereinafter referred to as the Business Restructure Program). The
main element of the program included workforce reductions, and was completed in 2016.
56
Restructuring costs related to the Business Restructuring Program for the year ended December 31, 2016 by segment are as
follows:
2016
Termination benefits
Professional services and other (i)
Total
____________________
HCB
CRB
IRR
BDA
Corporate
Total
(in millions)
$
$
32
3
35
$
$
8
—
8
$
$
3
—
3
$
$
1
—
1
$
$
1
—
1
$
$
45
3
48
(i) Other includes salary and benefits, premises, and other expenses incurred to support the ongoing management and facilitation of the programs.
Liquidity and Capital Resources
Executive Summary
Our principal sources of liquidity are funds generated by operating activities, available cash and cash equivalents and amounts
available under our revolving credit facilities or new debt offerings.
Based on our balance sheets, combined cash flows, current market conditions and information available to us at this time, we
believe that Willis Towers Watson has sufficient liquidity, which includes our undrawn revolving credit facilities, to meet our
cash needs for the next twelve months, including investing in the business for growth, creating value through the integration of
Willis, Towers Watson and Gras Savoye, scheduled debt repayments, dividend payments, and contemplated share repurchases,
subject to market conditions and other factors.
The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when the Company expects
that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the
investments. Beginning in 2016, as a result of our plan to restructure or distribute accumulated earnings of certain acquired
Towers Watson foreign operations, we accrued deferred taxes on the historical and current year earnings of those subsidiaries.
The historical cumulative earnings of our other subsidiaries had been reinvested indefinitely and therefore we had not provided
deferred tax liabilities on these amounts. As a result of U.S. Tax Reform we have analyzed our global working capital and cash
requirements and the potential tax liabilities attributable to a repatriation. For those investments from which we were able to
make a reasonable estimate of the tax effects of such repatriation, we have recorded a provisional estimate for foreign
withholding and state income taxes. In addition, we re-measured the existing deferred tax liability accrued on certain acquired
Towers Watson subsidiaries and released the deferred tax liability relating to the outside basis difference. If future events,
including material changes in estimates of cash, working capital, long-term investment requirements or additional guidance
relating to U.S. Tax Reform necessitate that these earnings be distributed, an additional provision for income and foreign
withholding taxes, net of credits, may be necessary. Other potential sources of cash may be through the settlement of
intercompany loans or return of capital distributions in a tax-efficient manner.
Events that could change the historical cash flow dynamics discussed above include significant changes in operating results,
potential future acquisitions or divestitures, material changes in geographic sources of cash, unexpected adverse impacts from
litigation or regulatory matters, or future pension funding during periods of severe downturn in the capital markets.
During the year ended December 31, 2017, we (i) entered into a $1.25 billion revolving credit facility to replace our previous
$800 million revolving credit facility. Borrowings against the $1.25 billion facility of $409 million and €45 million were used
to repay all outstanding borrowings against the $800 million facility and the 7-year term loan due July 23, 2018; (ii) repaid our
6.200% senior notes due 2017 totaling $407 million, including accrued interest; and (iii) completed an offering of $650 million
of 3.600% Senior Notes due 2024. Net proceeds of $644 million were used to pay down amounts outstanding under our
revolving credit facility and for general corporate purposes.
Cash and Cash Equivalents
Our cash and cash equivalents at December 31, 2017 totaled $1.0 billion, compared to $870 million at December 31, 2016. The
increase in cash from December 31, 2016 to December 31, 2017 was primarily due to the strengthening of various currencies
against the U.S. dollar, particularly the Pound sterling and Euro and less net debt payments made in the current year.
Additionally, at December 31, 2017, $362 million was available to draw against our $1.25 billion revolving credit facility as
compared to $557 million, which was available to draw against our previous $800 million revolving credit facility at
December 31, 2016.
57
Included within cash and cash equivalents at December 31, 2017 and December 31, 2016 are amounts held for regulatory
capital adequacy requirements, including $90 million and $87 million, respectively, held within our regulated U.K. entities.
Summarized Consolidated Cash Flows
The following table presents the summarized consolidated cash flow information for the years ended:
Years ended December 31,
2017
2016
2015
(in millions)
Net cash from/(used in):
Operating activities
Investing activities
Financing activities
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Effect of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
$
862
(335)
(479)
48
112
870
$
933
$
195
(775)
353
(15)
532
CASH AND CASH EQUIVALENTS, END OF YEAR
$
1,030
$
870
$
244
(943)
640
(59)
(44)
635
532
Cash Flows From Operating Activities
Cash flows from operating activities were $862 million for 2017, compared to cash flows from operating activities of $933
million for 2016. The $862 million net cash from operating activities for 2017 included net income of $592 million, adjusted
for $548 million of non-cash adjustments, partially offset by changes in operating assets and liabilities of $278 million. The
$548 million non-cash adjustments primarily include depreciation, amortization, and the benefit from deferred income taxes.
The $71 million decrease in cash from operations in 2017 compared to 2016 primarily resulted from changes in working capital
and higher discretionary compensation payments made in 2017 for the 2016 compensation cycle. These discretionary
compensation payments were lower in 2016 because they included only a partial payment to Legacy Towers Watson colleagues
due to the timing of the Merger.
Cash flows from operating activities were $933 million for 2016, compared to cash flows of from operating activities of $244
million for 2015. The $933 million net cash from operating activities for 2016 included net income of $438 million, adjusted
for $590 million of non-cash adjustments, partially offset by changes in operating assets and liabilities of $95 million. The $590
million of non-cash adjustments primarily include depreciation, amortization, net defined benefit pension credits, share-based
compensation, and the benefit from deferred income taxes. The $689 million increase in cash from operations in 2016
compared to 2015 was primarily due to cash from operations from Legacy Towers Watson and Gras Savoye.
Cash flows from operating activities for 2015 was $244 million, which included net income of $384 million, adjusted for $38
million of non-cash adjustments to reconcile net income to cash used in operating activities, offset by changes in operating
assets and liabilities of $178 million.
Cash Flows (Used In)/From Investing Activities
Cash flows used in investing activities for 2017 were $335 million, largely driven by $375 million of capital expenditures and
capitalized software costs.
Cash flows from investing activities for 2016 were $195 million, largely driven by $476 million of cash acquired as a result of
our Merger with Towers Watson, which was a non-cash transaction as it was consummated through the issuance of shares. Cash
inflows were partially offset by $303 million of fixed assets and software for internal use and capitalized costs of developing
software.
Cash flows used in investing activities of $943 million for the year ended December 31, 2015 were primarily driven by $857
million used in the acquisitions of operations and $146 million for capital expenditures.
Cash Flows (Used In)/From Financing Activities
Cash flows used in financing activities for 2017 were $479 million. The significant financing activities included the payment of
$177 million related to the cancellation of Towers Watson shares in connection with the settlement of the Merger-related
appraisal demand lawsuit (consisting of the portion of the settlement equal to the value of consideration that would have been
58
due to the shareholders at the closing of the Merger if they had exchanged their shares; see Part II, Item 8. Note 13 -
Commitments and Contingencies - Legal Proceedings for additional information), share repurchases of $532 million and
dividend payments of $277 million, which were partially offset by net borrowings of $580 million.
Net cash used in financing activities in 2016 was $775 million. The primary drivers during the period were debt issuance of
$2.0 billion, debt repayments of $1.9 billion, net payments on the revolving credit facility of $237 million, dividend payments
of $199 million, and share repurchases of $396 million. The debt issuance of $2.0 billion was primarily the issuance of $450
million of senior notes due 2021, $550 million of senior notes due 2026, €540 million ($609 million) of senior notes due 2022
and a $400 million drawdown on the 1-year term loan facility. The debt repayments of $1.9 billion were primarily $300 million
repayment of senior notes due 2016, $400 million repayment of Legacy Towers Watson debt and repayments of $592 million
and $400 million on the 1-year term loan facility.
Net cash from financing activities in 2015 was $640 million, primarily due to $469 million net drawings on the revolving credit
facility, a $592 million term loan draw down to fund the acquisition of Gras Savoye, and the issuance of shares of $131 million,
partially offset by dividends paid of $277 million and repurchase of shares of $82 million.
Indebtedness
Total debt, total equity, and the capitalization ratio at December 31, 2017 and December 31, 2016 were as follows:
Long-term debt
Short-term debt and current portion of long-term debt
Total debt
Total Willis Towers Watson shareholders’ equity
Capitalization ratio
December 31,
2017
2016
(in millions)
$
$
$
4,450
85
4,535
10,126
$
$
$
3,357
508
3,865
10,065
30.9%
27.7%
At December 31, 2017, our material mandatory debt repayments over the next twelve months consist of scheduled repayments
of $85 million on our term loan maturing in 2019.
In March 2017, we entered into a $1.25 billion revolving credit facility replacing our previous $800 million revolving credit
facility. Borrowings against the $1.25 billion facility of $409 million and €45 million were used to repay all outstanding
borrowings against the $800 million facility and the 7-year term loan due July 23, 2018.
Additionally in March 2017, the Company repaid the 6.200% senior notes due 2017 totaling $407 million, including accrued
interest.
In May 2017, we completed an offering of $650 million of 3.600% senior notes due 2024. Net proceeds of $644 million were
used to pay down amounts outstanding under our revolving credit facility and for general corporate purposes.
At December 31, 2017 and December 31, 2016, we were in compliance with all financial covenants.
Fiduciary Funds
As an intermediary, we hold funds, generally in a fiduciary capacity, for the account of third parties, typically as the result of
premiums received from clients that are in transit to insurers and claims due to clients that are in transit from insurers. We
report premiums, which are held on account of, or due from, clients as assets with a corresponding liability due to the insurers.
Claims held by, or due to, us which are due to clients are also shown as both Fiduciary assets and Fiduciary liabilities on our
balance sheets.
Fiduciary funds are generally required to be kept in regulated bank accounts subject to guidelines which emphasize capital
preservation and liquidity; such funds are not available to service the Company’s debt or for other corporate purposes.
Notwithstanding the legal relationships with clients and insurers, the Company is entitled to retain investment income earned
on fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with
insureds.
At December 31, 2017 and 2016, we had fiduciary funds of $3.3 billion and $2.5 billion, respectively.
59
Share Repurchase Program
The Company is authorized to repurchase shares, by way of redemption, and will consider whether to do so from time to time,
based on many factors, including market conditions.
On April 20, 2016, the Willis Towers Watson board reconfirmed, reapproved and reauthorized the remaining portion of the
Legacy Willis program to repurchase the Company’s ordinary shares on the open market or by way of redemption or otherwise.
On November 10, 2016, the Company announced the board of directors approved an increase to the existing share repurchase
program of $1 billion. The $1 billion increase was in addition to the remaining authority on the Legacy Willis program
discussed in the preceding paragraph. At December 31, 2017, approximately $601 million remained on the current repurchase
authority. The maximum number of shares that could be repurchased based on the closing price of our ordinary shares on
December 31, 2017 of $150.69 was 3,986,473.
On February 23, 2018, the board of directors approved an increase to the existing share repurchase program of $400 million.
The $400 million increase is in addition to the remaining authority of $601 million as of December 31, 2017.
There are no expiration dates for these repurchase plans or programs. The following table presents specified information about
the Company’s repurchases of ordinary shares for the year ended December 31, 2017:
Shares repurchased
Average price per share
Aggregate repurchase cost (excluding broker costs)
Year Ended
December 31, 2017
3,797,491
$140.19
$532 million
In addition to the shares reported in the table above, the Company canceled 1,415,199 Towers Watson common shares at issue
in the settlement of the Merger-related appraisal demand lawsuit (see Note 13 — Commitments and Contingencies located
within Item 8 in this Annual Report on Form 10-K for additional information) and an equivalent number of ordinary shares
represented in the Company’s issued and outstanding share count up until the settlement date. As a result, the litigation
settlement and related share cancellation had a similar impact to a share repurchase in that it reduced the number of outstanding
shares of the Company. However, it did not impact the remaining authority under the share repurchase program.
Capital Commitments
The Company has no material commitments for capital expenditures. Our capital expenditures for fixed assets and software for
internal use were $300 million for the year ended December 31, 2017. Expected capital expenditures for fixed assets and
software for internal use are approximately $285 million for the year ended December 31, 2018. We expect cash from
operations to adequately provide for these cash needs.
Dividends
Total cash dividends of $277 million were paid during the year ended December 31, 2017. In February 2018, the board of
directors approved a quarterly cash dividend of $0.60 per share ($2.40 per share annualized rate), which will be paid on or
about April 16, 2018 to shareholders of record as of March 31, 2018.
Off-Balance Sheet Arrangements and Contractual Obligations
Off-Balance Sheet Transactions
Apart from commitments, guarantees and contingencies, as disclosed herein and Note 13 — Commitments and Contingencies
located within Item 8 of this Annual Report on Form 10-K and incorporated herein by reference, as of December 31, 2017, the
Company had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect
on the Company’s financial condition, results of operations or liquidity.
60
Contractual Obligations
The Company’s material contractual obligations as of December 31, 2017 are as follows:
Debt and related interest obligations
Senior notes
Term loans
Revolving $1.25 billion credit facility
Interest on senior notes
Total debt and related interest obligations
Operating leases
U.K. pension contractual obligations
Acquisition liabilities
Other contractual obligations (i)
Total contractual obligations
____________________
Total
2018
Payments due by
2019-2020
(in millions)
2021-2022
After 2022
$
3,506
$
— $
187
$
1,594
$
1,725
170
884
1,078
5,638
1,403
442
103
95
85
—
147
232
204
76
101
39
85
—
278
550
356
140
2
12
—
884
189
2,667
258
120
—
12
—
—
464
2,189
585
106
—
32
$
7,681
$
652
$
1,060
$
3,057
$
2,912
(i) Other contractual obligations include capital lease commitments, put option obligations and investment fund capital call obligations, the timing of
which are included at the earliest point they may fall due.
Debt obligations and facilities — The Company’s material debt and related interest obligations at December 31, 2017 are
shown in the above table. Mandatory repayments of debt over the next 12 months include the scheduled repayment of the
current portion of the Company’s 2019 term loan. The Company also has the right, at its option, to prepay indebtedness under
the credit facility without further penalty and to redeem the senior notes by paying a ‘make-whole’ premium as provided under
the applicable debt instrument.
Operating Leases — We lease office space and furniture under operating lease agreements with terms typically ranging from
three to twenty years. We have determined that there is not a large concentration of leases that will expire in any one fiscal year.
Consequently, management anticipates that any increase in future rent expense on leases will be mainly market-driven. We also
lease cars and selected computer equipment under operating lease agreements. For acquired operating leases, intangible assets
or liabilities have been recognized for the difference between the contractual cash obligations and the estimated market rates at
the time of acquisition. These intangibles are amortized to rent expense but do not affect our contractual cash obligations. See
further discussion in Item 8, Note 13 — Commitments and Contingencies in this Annual Report on Form 10-K.
Pension Contributions — The Company has agreed with Trustees of certain plans in the U.K. to contribute deficit funding and
minimum ongoing accrual of benefits funding and presented those obligations in the table above. These obligations exclude
employee contributions and any potential funding level contributions, which are dependent on future funding level assessments.
There are no contractual obligations for our U.S. pension plans. Our total expected contributions to all qualified pension plans,
including amounts presented above, for the year ending December 31, 2018 are projected to be $150 million. Additionally, the
Company expects to pay $54 million in benefits directly to participants for the year ended 2018.
Tax Related Liabilities —
• Uncertain Tax Positions — The table above does not include liabilities for uncertain tax positions under ASC 740,
Income Taxes. The settlement period for the $59 million liability, which excludes interest and penalties, cannot be
reasonably estimated since it depends on the timing and possible outcomes of tax examinations with various tax
authorities.
•
Transition Tax — The table above excludes a $72 million provisional transition tax payable resulting from U.S. Tax
Reform. The Company can and will elect to pay this one-time tax liability over an eight-year period without interest.
The one-time transition tax cannot be reasonably estimated because the Company has a significant number of foreign
subsidiaries and therefore has not yet completed its calculation of the total post-1986 E&P as well as non-U.S. income
taxes paid for these foreign subsidiaries. The Company expects to revise its estimates throughout 2018 when actual
results become available. Future guidance may be released which could also impact these estimates.
61
Guarantees, Acquisition Liabilities and Other Contractual Obligations — Information regarding guarantees and other
contractual obligations and their impact on the financial statements is set forth in Item 8, Note 13 — Commitments and
Contingencies in this Annual Report on Form 10-K.
Claims, Lawsuits and Other Proceedings, including Stanford Financial Group Litigation — Information regarding claims,
lawsuits and other proceedings, including the Stanford Financial Group litigation, and their impact on the consolidated
financial statements is set forth in Item 8, Note 13 — Commitments and Contingencies in this Annual Report on Form 10-K.
Non-GAAP Financial 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 purposes, we present the following non-GAAP
measures and their most directly comparable U.S. GAAP measure:
Most Directly Comparable U.S. GAAP Measure
Non-GAAP Measure
Total revenues
As reported change
As reported change
Income from operations
Net income
Adjusted revenues
Constant currency change
Organic change
Adjusted operating income
Adjusted EBITDA
Net income attributable to Willis Towers Watson
Diluted earnings per share
Income from operations before income taxes and interest in
earnings of associates
Adjusted net income
Adjusted diluted earnings per share
Adjusted income before taxes
Provision for income taxes/U.S. GAAP tax rate
Adjusted income taxes/tax rate
Net cash from operating activities
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 the measures referred to as “adjusted”, we have adjusted 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. These items include the following:
• Restructuring costs and transaction and integration expenses - Management believes it is appropriate to adjust for
restructuring costs and 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 one-time
Merger-related transaction expenses. We believe the adjustment is necessary to present how the Company is
performing, both now and in the future when these programs will have concluded.
•
•
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.
Fair value adjustment to deferred revenue - Adjustment in 2016 to normalize for the deferred revenue written down as
part of the purchase accounting for the Merger.
• Gains and losses on disposals of operations - Adjustment to remove the gain or loss resulting from disposed
operations.
•
Provision for Stanford and other significant litigation - The 2016 provision for the Stanford litigation matter, which we
consider to be a non-ordinary course litigation matter. We will also include other litigation matters which we believe
are not representative of our core business operations.
• Venezuelan currency devaluation - Foreign exchange losses incurred as a consequence of the Venezuelan
government’s enforced changes to exchange rate mechanisms.
• Tax effects of internal reorganizations - Relates to the U.S. income tax expense resulting from the completion of
internal reorganizations of the ownership of certain businesses that reduced the investments held by our U.S.-
controlled subsidiaries.
62
• Tax effect of U.S.Tax Reform - Relates to the (1) U.S. income tax adjustment of deferred taxes upon the change in the
federal corporate tax rate, (2) the impact of the one-time transition tax on accumulated foreign earnings net of foreign
tax credits, and (3) the re-measurement of our net deferred tax liabilities associated with the U.S. tax on certain foreign
earnings offset with a write-off of deferred tax assets that will no longer be realizable under U.S. Tax Reform.
• Deferred tax valuation allowance - Adjustment to remove the effects of a release of the valuation allowance against
certain U.S. deferred tax assets.
• Gain on re-measurement of equity interests - The Company recognized a gain as a result of re-measuring its prior
equity interest in Gras Savoye held before the business combination in 2015.
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 consolidated financial statements.
The pro forma financial information for 2015 is only for Willis and Towers Watson and does not include Gras Savoye or other
M&A activity on a pro forma basis.
Adjusted Revenues
We consider adjusted revenues to be an important financial measure, which is used to internally evaluate and assess our core
operations and to benchmark our operating results against our competitors.
Adjusted revenues is defined as total revenues adjusted for the fair value adjustment for deferred revenues that would otherwise
have been recognized but for the purchase accounting treatment of these transactions. U.S. GAAP accounting requires the
elimination of this revenue.
We have included the reconciliation of total revenues to adjusted revenues in the table below, together with our reconciliation
of the pro forma revenues change to the constant currency and organic changes.
Constant Currency Change and Organic Change
We evaluate our revenues on an as reported (U.S. GAAP), constant currency and organic basis. We believe providing constant
currency and organic information provides valuable supplemental information regarding our comparable results, consistent
with how we evaluate our performance internally.
• Constant Currency Change - Represents the year over year change in revenues 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 revenues, translated at the
current year monthly average exchange rates, to the current year as reported revenues, for the same period. We believe
constant currency measures provide useful information to investors because they provide transparency to performance
by excluding the effect that foreign currency exchange rate fluctuations have on period-over-period comparability
given volatility in foreign currency exchange markets.
• Organic Change - Excludes both the impact of fluctuations in foreign currency exchange rates, as described above, as
well as the period-over-period impact of acquisitions and divestitures. 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 incurred these transaction-related
items, since the nature, size and number of these transaction-related items can vary from period to period.
The constant currency and organic change results, and a reconciliation from the reported results for consolidated revenues, are
included in the Consolidated Revenues section within this Form 10-K. These measures are also reported by segment in the ‘As
Reported Segment Revenues’ and ‘Supplementary Pro Forma Segment Revenues’ sections within this Form 10-K.
63
A reconciliation of total revenues to adjusted revenues for the years ended December 31, 2017 and 2016, and a reconciliation of
the reported change to the constant currency and organic changes for the year ended December 31, 2017 from the prior year is
as follows:
Years Ended December 31,
2017
2016
($ in millions)
Components of Revenue Change(i)
As
Reported
Change
Currency
Impact
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
Total revenues
Fair value adjustment for
deferred revenue
Adjusted revenues
$
$
8,202
$
7,887
4%
—%
4%
—%
5%
—
58
8,202
$
7,945
3%
—%
4%
—%
4%
____________________
(i) Components of revenue change may not add due to rounding.
A reconciliation of total revenues to adjusted revenues for the year ended December 31, 2016 and pro forma 2015, and a
reconciliation of the pro forma change to the constant currency and organic changes for the year ended December 31, 2016
from the prior year is as follows:
Year Ended
December 31,
Pro Forma
2016
2015
(in millions)
Pro Forma
Change
Currency
Impact
Components of Change
Constant
Currency
Change
Acquisitions/
Divestitures
Organic
Change
7,887
$
7,492
5%
(3)%
8%
58
—
7,945
$
7,492
6%
(3)%
9%
7%
7%
1%
2%
Total revenues
Fair value adjustment for
deferred revenue
Adjusted revenues
$
$
Adjusted Operating Income
We consider adjusted operating income to be an important financial measure, which is used to internally evaluate and assess
our core operations and to benchmark our operating results against our competitors.
Adjusted operating income is defined as income from operations adjusted for amortization, restructuring costs, transaction and
integration expenses, significant litigation settlements, significant pension settlement and curtailment activity, the fair value
adjustment for deferred revenue and non-recurring items that, in management’s judgment, significantly affect the period-over-
period assessment of operating results.
A reconciliation of income from operations to adjusted operating income for the years ended December 31, 2017 and 2016 is as
follows:
Income from operations
Adjusted for certain items:
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Pension settlement and curtailment gains and losses
Years Ended December 31,
2017
2016
$
(in millions)
738
$
581
132
269
11
—
36
551
591
193
177
50
58
—
Adjusted operating income
$
1,767
$
1,620
64
Adjusted operating income for the year ended December 31, 2017 increased to $1.8 billion, from $1.6 billion for the year ended
December 31, 2016, an increase of $147 million, or 9%. Income from operations increased by $187 million, largely due to
revenue growth across all segments partially offset by higher salary and benefits costs. The prior year also included settlement
income of £28 million ($41 million) related to the Fine Arts, Jewellery and Specie team.
A reconciliation of income from operations to adjusted operating income for the year ended December 31, 2016 and pro forma
year ended December 31, 2015 is as follows:
Income from operations
Adjusted for certain items:
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Adjusted operating income
_____________________
Year Ended
December 31, 2016
Year Ended
December 31, 2015
Willis Towers
Watson
Legacy Willis
Pro Forma
Towers Watson (i)
Pro Forma Willis
Towers Watson
$
551
$
591
193
177
50
58
(in millions)
427
76
126
73
70
—
338
$
459
—
(58)
—
—
765
535
126
15
70
—
$
1,620
$
772
$
739
$
1,511
(i)
Includes pro forma adjustments made in the Supplementary Pro Forma Financial Information section in this Form 10-K.
Adjusted operating income for the year ended December 31, 2016 was $1.6 billion, compared to pro forma $1.5 billion for the
year ended December 31, 2015, an increase of $109 million. The increase in adjusted operating income for the year ended
December 31, 2016 was primarily driven by our acquisition of Gras Savoye, the settlement with JLT of £28 million ($41
million) related to the Fine Art, Jewellery and Specie team, and the performance of our Benefits Delivery and Administration
segment.
Adjusted EBITDA
We consider adjusted EBITDA to be an important financial measure, which is used to internally evaluate and assess our core
operations, to benchmark our operating results against our competitors, and to evaluate and measure our performance-based
compensation plans.
Adjusted EBITDA is defined as net income/(loss) adjusted for provision for/(benefit from) income taxes, interest expense,
depreciation and amortization, restructuring costs, transaction and integration expenses, significant litigation settlements,
significant pension settlement and curtailment activity, the fair value adjustment for deferred revenue, loss/(gain) on disposal of
operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of
operating results.
65
A reconciliation of net income to adjusted EBITDA for the years ended December 31, 2017 and 2016 is as follows:
NET INCOME
Benefit from income taxes
Interest expense
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Pension settlement and curtailment gains and losses
Gain on disposal of operations
Venezuela currency devaluation
Adjusted EBITDA
Years Ended December 31,
2017
2016
$
(in millions)
$
592
(100)
188
203
581
132
269
11
—
36
(13)
2
438
(96)
184
178
591
193
177
50
58
—
(2)
—
$
1,901
$
1,771
Adjusted EBITDA for the year ended December 31, 2017 was $1.9 billion, compared to $1.8 billion for the year ended
December 31, 2016, an increase of $130 million, or 7%. The increase in Adjusted EBITDA for the year ended December 31,
2017 was largely due to revenue growth across all segments partially offset by higher salary and benefits costs. The prior year
also included settlement income of £28 million ($41 million) related to the Fine Arts, Jewellery and Specie team.
A reconciliation of net income to adjusted EBITDA for the year ended December 31, 2016 and pro forma year ended
December 31, 2015 is as follows:
Year Ended
December 31, 2016
Year Ended
December 31, 2015
Willis Towers
Watson
Legacy Willis
Pro Forma
Towers Watson (i)
Pro Forma Willis
Towers Watson
(in millions)
NET INCOME
$
(Benefit from)/provision for income taxes
Interest expense
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Gain on disposal of operations
Venezuela currency devaluation
Gain on re-measurement of equity interests
$
438
(96)
184
178
591
193
177
50
58
(2)
—
—
Adjusted EBITDA
____________________
$
1,771
$
384
(33)
142
95
76
126
73
70
—
(25)
30
(59)
879
$
$
268
103
22
64
459
—
(58)
—
—
(55)
—
—
$
803
$
652
70
164
159
535
126
15
70
—
(80)
30
(59)
1,682
(i) Includes pro forma adjustments made in the Supplementary Pro Forma Financial Information section in this Form 10-K.
Adjusted EBITDA for the year ended December 31, 2016 was $1.8 billion, compared to pro forma $1.7 billion for the year
ended December 31, 2015, an increase of $89 million. The increase in Adjusted EBITDA for the year ended December 31,
2016 was primarily driven by our acquisition of Gras Savoye, the settlement with JLT of £28 million ($41 million) related to
the Fine Art, Jewellery and Specie team, and the performance of our Benefits Delivery and Administration segment.
66
Adjusted Net Income and Adjusted Diluted Earnings Per Share
Adjusted net income is defined as net income attributable to Willis Towers Watson adjusted for amortization, restructuring
costs, transaction and integration expenses, significant litigation settlements, significant pension settlement and curtailment
activity, the fair value adjustment of deferred revenue, loss/(gain) on disposal of operations and non-recurring items that, in
management’s judgment, significantly affect the period-over-period assessment of operating results and the related tax effect of
those adjustments, the tax effects of internal reorganizations and U.S. Tax Reform. This measure is used solely for the purpose
of calculating adjusted diluted earnings per share.
Adjusted diluted earnings per share is defined as adjusted net income divided by the weighted average number of shares of
common stock, diluted. Adjusted diluted earnings per share is used to internally evaluate and assess our core operations and to
benchmark our operating results against our competitors.
67
A reconciliation of net income attributable to Willis Towers Watson to adjusted diluted earnings per share for the years ended
December 31, 2017 and 2016 is as follows:
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON
$
Years Ended December 31,
2017
2016
($ in millions)
568
$
Adjusted for certain items:
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Pension settlement and curtailment gains and losses
Gain on disposal of operations
Venezuela currency devaluation
Tax effect on certain items listed above (i)
Tax effects of internal reorganizations
Tax effect of U.S. Tax Reform
Deferred tax valuation allowance
Adjusted net income
Weighted average shares of common stock — diluted (millions of shares)
Diluted earnings per share, as reported from operations
Adjusted for certain items:
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Pension settlement and curtailment gains and losses
Gain on disposal of operations
Venezuela currency devaluation
Tax effect on certain items listed above (i)
Tax effects of internal reorganizations
Tax effect of U.S. Tax Reform
Deferred tax valuation allowance
Adjusted diluted earnings per share
____________________
581
132
269
11
—
36
(13)
2
(275)
48
(204)
—
$
$
1,155
$
136
4.18
$
4.28
0.97
1.98
0.08
—
0.27
(0.09)
0.01
(2.02)
0.35
(1.50)
—
$
8.51
$
420
591
193
177
50
58
—
(2)
—
(320)
—
—
(69)
1,098
138
3.04
4.28
1.40
1.28
0.36
0.42
—
(0.01)
—
(2.31)
—
—
(0.50)
7.96
(i) The tax effect was calculated using an effective tax rate for each item.
Our adjusted diluted earnings per share increased for the year ended December 31, 2017 as compared to the prior year
primarily due to revenue growth across all segments partially offset by higher salary and benefits costs. The prior year also
included settlement income of £28 million ($41 million) related to the Fine Arts, Jewellery and Specie team.
68
A reconciliation of net income attributable to Willis Towers Watson to adjusted diluted earnings per share for the years ended
December 31, 2016 and 2015 is as follows:
Year Ended December 31,
2016
Willis Towers
Watson
2015 (ii)
Legacy Willis
(in millions, except per share amounts)
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON
$
420
$
Adjusted for certain items:
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Gain on disposal of operations
Venezuela currency devaluation
Gain on re-measurement of equity interests
Tax effect on certain items listed above (i)
Deferred tax valuation allowance
Adjusted net income
Weighted average shares of common stock — diluted (millions of shares)
Diluted earnings per share, as reported from operations
Adjusted for certain acquisition related items:
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Gain on disposal of operations
Venezuela currency devaluation
Gain on re-measurement of equity interests
Tax effect on certain items listed above (i)
Deferred tax valuation allowance
Adjusted diluted earnings per share
____________________
591
193
177
50
58
(2)
—
—
(320)
(69)
1,098
$
138
3.04
$
4.28
1.40
1.28
0.36
0.42
(0.01)
—
—
(2.31)
(0.50)
7.96
$
$
$
$
373
76
126
73
70
—
(25)
30
(59)
(83)
(96)
485
69
5.41
1.10
1.83
1.06
1.01
—
(0.36)
0.43
(0.86)
(1.20)
(1.39)
7.03
(i) The tax effect was calculated using the statutory tax rate applicable to the item being adjusted for in the jurisdiction from which each adjustment
arises.
(ii) We have not presented this measure on a comparative pro forma basis because it is not practical to present the 2015 adjusted income tax effects on a
pro forma basis, as making tax-effected non-GAAP adjustments on a proforma basis would be highly speculative in nature.
Adjusted Income Before Taxes and Adjusted Income Taxes/Tax Rate
Adjusted income before taxes is defined as income from operations before income taxes and interest in earnings of associates
adjusted for amortization, restructuring costs, transaction and integration expenses, significant litigation settlements, significant
pension settlement and curtailment activity, the fair value adjustment of deferred revenue, (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 is defined as the provision for/(benefit from) income taxes adjusted for taxes on certain items of
amortization, restructuring costs, transaction and integration expenses, significant litigation settlements, significant pension
69
settlement and curtailment activity, the fair value adjustment for deferred revenue, loss/(gain) on disposal of operations, tax
effects of internal reorganizations and U.S. Tax Reform, 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.
Management believes the adjusted income tax rate presents a rate that is more closely aligned to the rate we would incur if not
for the reduction of pre-tax income for the adjusted items, the tax effects of our internal reorganizations and the tax effect of
U.S. Tax Reform, which are not core to our current and future operations.
Reconciliations of income from operations before income taxes and interest in earnings of associates to adjusted income before
taxes and provision for/(benefit from) income taxes to adjusted income taxes for the years ended December 31, 2017 and 2016
are as follows:
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND INTEREST IN
EARNINGS OF ASSOCIATES
Adjusted for certain items:
Amortization
Restructuring costs
Transaction and integration expenses
Provision for Stanford and other significant litigation
Fair value adjustment for deferred revenue
Pension settlement and curtailment gains and losses
Gain on disposal of operations
Venezuela currency devaluation
Adjusted income before taxes
Benefit from income taxes
Tax effect on certain items listed above(i)
Tax effects of internal reorganizations
Tax effect of U.S. Tax Reform
Deferred tax valuation allowance
Adjusted income taxes
U.S. GAAP tax rate
Adjusted income tax rate
____________________
Years Ended December 31,
2016 (ii)
2017
($ in millions)
$
489
$
581
132
269
11
—
36
(13)
2
1,507
(100)
275
(48)
204
—
331
$
$
$
$
$
$
340
591
193
177
50
58
—
(2)
—
1,407
(96)
320
—
—
69
293
(20.5)%
21.9 %
(28.1)%
20.8 %
(i) The tax effect was calculated using an effective tax rate for each item.
(ii) We have not presented this measure on a comparative basis with 2015 because it is not practical to present the 2015 adjusted income tax rate on a pro
forma basis, as making tax-effected non-GAAP adjustments on a proforma basis would be highly speculative in nature.
Our adjusted income tax rates were 21.9% and 20.8% for the years ended December 31, 2017 and 2016, respectively. The
lower adjusted tax rate for the year ended December 31, 2016 was primarily due to a prior year tax benefit resulting from an
enacted statutory tax rate reduction in the U.K.
Free Cash Flow
Free cash flow is defined as cash flows from operating activities less cash used to purchase fixed assets and software for
internal use and is used to evaluate our liquidity.
70
Reconciliations of cash flows from operating activities to free cash flow for the years ended December 31, 2017, 2016 and
2015 are as follows:
Cash flows from operating activities
Less: Additions to fixed assets and software for internal use
Free Cash Flow
__________________________
Years ended December 31,
2016(i)
2015(i)
2017
(in millions)
$
$
862
(300)
562
$
$
933
(218)
715
$
$
244
(146)
98
(i) As a result of the adoption of ASU 2016-09, cash flows from operating activities for the years ended December 31, 2016 and 2015 increased by $13
million and $1 million, respectively, increasing free cash flow by the same amount. See Item 8, Note 2 - Basis of Presentation and Significant Accounting
Policies of this Form 10-K report for a further discussion of this change.
The decrease in free cash flows in 2017 as compared to 2016 primarily resulted from higher capital expenditures and higher
discretionary compensation payments made in 2017 for the 2016 compensation cycle. These discretionary compensation
payments were lower in 2016 because they included only a partial payment to Legacy Towers Watson colleagues due to the
timing of the Merger.
Critical Accounting Policies and Estimates
These consolidated financial statements conform to U.S. GAAP, which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates,
judgments and assumptions are continually evaluated based on available information and experience. Because of the use of
estimates inherent in the financial reporting process, actual results could differ from those estimates. The areas that we believe
are critical accounting policies include valuation of billed and unbilled receivables from clients, discretionary compensation,
income taxes, commitments, contingencies and accrued liabilities, pension assumptions, and goodwill and intangible assets.
The critical accounting policies discussed below involve making difficult, subjective or complex accounting estimates that
could have a material effect on our financial condition and results of operations. These critical accounting policies require us to
make assumptions about matters that are highly uncertain at the time of the estimate or assumption. Different estimates that we
could have used, or changes in estimates that are reasonably likely to occur, may have a material effect on our financial
condition and results of operations.
Valuation of Billed and Unbilled Receivables from Clients
We maintain allowances for doubtful accounts to reflect estimated losses resulting from the clients’ failure to pay for the
services after the services have been rendered, including allowances when client disputes may exist. The related provision is
recorded as a reduction to revenue. Our allowance policy is based on the aging of the billed and unbilled client receivables and
has been developed based on the write-off history. Facts and circumstances such as the average length of time the receivables
are past due, general market conditions, current economic trends and our clients’ ability to pay may cause fluctuations in our
valuation of billed and unbilled receivables.
Discretionary Compensation
Our compensation program includes a discretionary bonus that is determined by management and has historically been paid
once per fiscal year in the form of cash and/or deferred stock units after our annual operating results are finalized.
An estimated annual bonus amount is initially developed at the beginning of each fiscal year in conjunction with our budgeting
process. Estimated annual operating performance is reviewed quarterly and the discretionary annual bonus amount is then
adjusted, if necessary, by management to reflect changes in the forecast of pre-bonus profitability for the year.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences of events attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and
operating and capital loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted rates in
effect for the year in which the differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of changes in tax rates is recognized in the statement of comprehensive income in the period in which the change is
enacted. Deferred tax assets are reduced through the establishment of a valuation allowance at such time as, based on available
evidence, it is more likely than not that the deferred tax assets will not be realized. The Company adjusts valuation allowances
71
to measure deferred tax assets at the amount considered realizable in future periods if the Company’s facts and assumptions
change. In making such determination, the Company considers all available positive and negative evidence, including future
reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and the results of
recent financial operations. We place more reliance on evidence that is objectively verifiable.
Commitments, Contingencies and Accrued Liabilities
We have established provisions against various actual and potential claims, lawsuits and other proceedings relating principally
to alleged errors and omissions in connection with the placement of insurance and reinsurance and consulting services in the
ordinary course of business. Such provisions cover claims that have been reported but not paid and also claims that have been
incurred but not reported. These provisions are established based on actuarial estimates together with individual case reviews
and are believed to be adequate in the light of current information and legal advice. In certain cases, where a range of loss
exists, we accrue the minimum amount in the range if no amount within the range is a better estimate than any other amount.
See Note 13 — Commitments and Contingencies in Item 8 within this Annual Report on Form 10-K.
Pension Assumptions
We maintain defined benefit pension plans for employees in several countries, with the most significant defined benefit plans
offered in the U.S. and U.K. Our disclosures in Note 12 — Retirement Benefits contain additional information about our other
less significant but material retirement plans. Within our critical accounting policy discussion, we have excluded analysis for
plans outside of those noted in the description below, as any variance of recorded information based on management’s
estimates would be immaterial.
Descriptions of our U.S. and U.K. plans, which comprise 91% of our projected benefit obligations and 93% of our plan assets,
are below:
United States
Legacy Willis – This plan was frozen in 2009. Approximately one-quarter of the Legacy Willis employees in the
United States have a frozen accrued benefit under this plan.
Willis Towers Watson Plan – Substantially all U.S. employees are eligible to participate in this plan. Benefits are
provided under a stable value pension plan design. The original stable value design came into effect on January 1,
2012. As of July 1, 2017, existing plan participants earn benefits without having to make employee contributions, and
all newly eligible employees are required to contribute 2% of pay to participate in the plan.
United Kingdom
Legacy Willis – This plan covers approximately one third of the Legacy Willis employees in the United Kingdom. The
plan is now closed to new entrants. New employees in the United Kingdom are offered the opportunity to join a
defined contribution plan.
Legacy Towers Watson – Benefit accruals earned under the Legacy Watson Wyatt defined benefit plan (predominantly
pension benefits) ceased on February 28, 2015, although benefits earned prior to January 1, 2008 retain a link to salary
until the employee leaves the Company. Benefit accruals earned under the legacy Towers Perrin defined benefit plan
(predominantly lump sum benefits) were frozen on March 31, 2008. All participants now accrue defined contribution
benefits.
Legacy Miller – The plan provides retirement benefits based on members’ salaries at the point at which they ceased to
accrue benefits under the scheme.
The determination of the Company’s obligations and annual expense under the plans is based on a number of assumptions that,
given the longevity of the plans, are long-term in focus. A change in one or a combination of these assumptions could have a
material impact on our projected benefit obligation. However, certain of these changes, such as changes in the discount rates
and other actuarial assumptions, are not recognized immediately in net income, but are instead recorded in other comprehensive
income. The accumulated gains and losses not yet recognized in net income are amortized into net income as a component of
the net periodic benefit cost/(credit) based on the average working life expectancy of each of the plan’s active participants to
the extent that the net gains or losses as of the beginning of the year exceed 10% of the greater of the market-related value of
plan assets or the projected benefit obligation.
Willis Towers Watson considers several factors prior to the start of each fiscal year when determining the appropriate annual
assumptions, including economic forecasts, relevant benchmarks, historical trends, portfolio composition and peer company
comparisons. These assumptions, used to determine our pension liabilities and pension expense are reviewed annually by senior
72
management and changed when appropriate. A discount rate will be changed annually if underlying rates have moved, whereas
the expected long-term return on assets will be changed less frequently as longer term trends in asset returns emerge or long
term target asset allocations are revised. To calculate the discount rate, we use the granular approach to determining service cost
and interest cost. We began using this method to calculate the discount rate in 2016. This was treated as a change in accounting
estimate, and resulted in a credit of $51 million included in our total net periodic benefit income. The expected rate of return
assumptions for all plans are supported by an analysis of the weighted-average yield expected to be achieved with the
anticipated makeup of investments. Other material assumptions include rates of participant mortality, and the expected long-
term rate of compensation and pension increases.
Funding is based on actuarially determined contributions and is limited to amounts that are currently deductible for tax
purposes, or as agreed to with the plan trustees for the U.K. plans. Since funding calculations are based on different
measurements than those used for accounting purposes, pension contributions are not equal to net periodic benefit cost.
We recorded a combined $113 million net periodic benefit income for our U.S. and U.K. plans for the year ended December 31,
2017. For the U.S. and U.K. plans, the following table presents our estimated net periodic benefit income for 2018 and the
impact to both plans of a 0.25% increase and decrease to both the expected return on assets (‘EROA’) and the discount rate
assumptions, and the projected benefit obligations as of December 31, 2017 and the impact of a 0.25% increase and decrease to
the discount rates:
Totals -
current
estimates
Impact of 0.25% change to
EROA
Impact of 0.25% change to
discount rate
Increase
Decrease
Increase
Decrease
Estimated 2018 (income):
U.S. Plans
U.K. Plans
Projected benefit obligation at December 31, 2017:
U.S. Plans
U.K. Plans
$
$
$
$
(56) $
(164) $
(9) $
(12) $
9
12
$
$
2
$
(9) $
4,476
4,165
N/A
N/A
N/A $
N/A $
(139) $
(190) $
3
11
146
203
Economic factors and conditions often affect multiple assumptions simultaneously and the effects of changes in key
assumptions are not necessarily linear.
Goodwill and Intangible Assets — Impairment Review
In applying the acquisition method of accounting for business combinations, amounts assigned to identifiable assets and
liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill.
Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of
intangible asset. Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for
impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment annually as of
October 1, and whenever indicators of impairment arise. The fair value of the intangible assets is compared with their carrying
value and an impairment loss would be recognized for the amount by which the carrying amount exceeds the fair value.
Goodwill is tested for impairment annually as of October 1, and whenever indicators of impairment arise.
Goodwill is tested at the reporting unit level, and the Company had nine reporting units as of October 1, 2017.
During fiscal year 2017, the Company performed Step 1 of the two-step impairment test for all reporting units. Each of the
reporting units' estimated fair values were in excess of their carrying values. To perform the test, we used valuation techniques
to estimate the fair value of a reporting unit that fall under income or market approaches. Under the discounted cash flow
method, an income approach, the business enterprise value is determined by discounting to present value the terminal value
which is calculated using debt-free after-tax cash flows for a finite period of years. Key estimates in this approach were internal
financial projection estimates prepared by management, business risk, and expected rates of return on capital. The guideline
company method, a market approach, develops valuation multiples by comparing our reporting units to similar publicly traded
companies. Key estimates and selection of valuation multiples rely on the selection of similar companies, obtaining estimates
of forecast revenues and EBITDA estimates for the similar companies and selection of valuation multiples as they apply to the
reporting unit characteristics. Under the similar transactions method, a market approach, actual transaction prices and operating
data from companies deemed reasonably similar to the reporting units is used to develop valuation multiples as an indication of
how much a knowledgeable investor in the marketplace would be willing to pay for the business units.
73
If the Company was required to perform Step 2, we would determine the implied fair value of the reporting unit used in Step 1
to all of the assets and liabilities of that reporting unit (including any recognized or unrecognized intangible assets) as if the
reporting unit had been acquired in a business combination. Then the implied fair value of goodwill would be compared to the
carrying amount of goodwill to determine if goodwill is impaired. For the year ended December 31, 2017, we did not record
any impairment losses of goodwill or intangibles.
Recent Accounting Pronouncements
While we are still in the process of analyzing the various Accounting Standards Updates (‘ASU’) issued by the Financial
Accounting Standards Board (‘FASB’), those which we believe will have a material impact to our financial statements are
listed below. See Note 2 — Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements
within Item 8 of this Form 10-K for additional information.
• ASU No. 2014-09 ‘Revenue From Contracts With Customers’
The Company has adopted the standard using the modified retrospective approach on January 1, 2018, and
has applied the new standard only to contracts that are not completed as of the transition date.
Certain revenue streams have accelerated revenue recognition timing. In particular, the revenue recognition
for our Individual Marketplace (formerly Retiree & Access Exchanges) has moved from monthly ratable
recognition over the policy period, to the recognition upon placement of the policy. Consequently, the
Company will now recognize the majority of one calendar year of expected commissions during its fourth
quarter of the preceding calendar year. Therefore, at the adoption date, we have reflected an adjustment to
retained earnings for the portion of the revenue that would otherwise have been recognized during our 2018
calendar year since our earnings process was largely completed during the fourth quarter of 2017.
Additionally, the revenue recognition for proportional treaty broking commissions has moved from
recognition upon the receipt of the monthly or quarterly statements, to the recognition of an estimate of
expected commissions upon the policy effective date. Since the majority of revenue recognized historically
based on these monthly or quarterly statements was received over a two-year period, we will reflect an
adjustment to retained earnings at the adoption date for the portion of revenue that would otherwise have
been recognized during our 2018 calendar year related to policies effective in 2017 or prior.
Revenue recognition for certain other revenue streams has changed from recognizing revenue at a point in
time to recognizing revenue over time. Specifically, certain arrangements in our Health and Benefits broking
business will now be recognized evenly over the year to reflect the nature of the ongoing obligations to our
customers as well as receipt of the monthly commissions. These contracts are monthly or annual in nature
and are considered complete as of the transition date. Therefore, no retained earnings adjustment is required.
Our accounting for deferred costs will change. First, for those portions of the business that previously
deferred costs (related to system implementation activities), the length of time over which we amortize those
costs will extend to a longer estimated contract term. For 2017 calendar year and prior, these costs were
amortized over a typical period of 3-5 years in accordance with the initial stated terms of the customer
agreements. Second, other types of arrangements with associated costs now meet the criteria for cost deferral
under ASC 606, Revenue from Contracts with Customers. This guidance will now apply to our broking
arrangements and certain consulting engagements. We have calculated a retained earnings adjustment to
reflect this cumulative change for contracts not complete as of the transition date.
Although we are still finalizing the impact to retained earnings as of January 1, 2018, we expect the total
range of adjustment, before the effect of taxes, to be an increase to retained earnings of $375 million to $475
million.
• ASU No. 2016-02 ‘Leases’
The majority of our leases are currently considered operating leases and will be capitalized as a lease asset on
our balance sheets with a related lease liability for the obligated lease payments when the ASU is adopted.
The ASU becomes effective for the Company at the beginning of the 2019 fiscal year; early adoption is
permitted.
74
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial Risk Management
We are exposed to market risk from changes in foreign currency exchange rates and interest rates. In order to manage the risk
arising from these exposures, we enter into a variety of interest rate and foreign currency derivatives. We do not hold financial
or derivative instruments for trading purposes.
A discussion of our accounting policies for financial and derivative instruments is included in Note 2 — Basis of Presentation,
Significant Accounting Policies and Recent Accounting Pronouncements and Note 9 — Derivative Financial Instruments
within Item 8 of this Form 10-K.
Foreign Exchange Risk
Because of the large number of countries and currencies we operate in, movements in currency exchange rates may affect our
results.
We report our operating results and financial condition in U.S. dollars. Our U.S. operations earn revenues and incur expenses
primarily in U.S. dollars. Outside the United States, we predominantly generate revenues and expenses in the local currency
with the exception of our London market operations which earn revenues in several currencies but incur expenses
predominantly in Pounds sterling.
The table below gives an approximate analysis of revenues and expenses by currency in 2017.
Revenues
Expenses (i)
____________________
U.S.
dollars
55%
50%
Pounds
sterling
13%
19%
Euro
15%
13%
Other
currencies
17%
18%
(i) These percentages exclude certain expenses 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. These items include Merger-related amortization of intangible assets, restructuring costs, transaction and
integration expenses, and significant pension settlements.
Our principal exposures to foreign exchange risk arise from:
•
•
our London market operations; and
translation.
London market operations
The Company’s primary foreign exchange risks in its London market operations arise from changes in the exchange rate
between the U.S. dollar and Pound sterling as its London market operations earn the majority of its revenues in U.S. dollars but
incurs expenses predominantly in Pounds sterling, and may also hold a significant net sterling asset or liability position on the
balance sheet. In addition, the London market operations earn significant revenues in Euro and Japanese yen.
The foreign exchange risks in our London market operations are hedged to the extent that:
•
•
forecast Pounds sterling expenses exceed Pounds sterling revenues, in which case the Company limits its exposure to this
exchange rate risk by the use of forward contracts matched to forecast Pounds sterling outflows arising in the ordinary
course of business. In addition, we are also exposed to foreign exchange risk on any net Pounds sterling asset or liability
position in our London market operations;
the U.K. operations also earn significant revenues in Euro and Japanese yen. The Company limits its exposure to changes
in the exchange rate between the U.S. dollar and these currencies by the use of foreign exchange contracts matched to a
proportion of forecast cash inflows in these specific currencies and periods; and
• Miller Insurance Services LLP, which is a Pounds sterling functional entity, earns significant non-functional currency
revenues, in which case the Company limits its exposure to exchange rate changes by the use of foreign exchange
contracts matched to a proportion of forecast cash inflows in specific currencies and periods.
Translation risk
Outside our U.S. and London market operations, we predominantly earn revenues and incur expenses in the local currency.
When we translate the results and net assets of these operations into U.S. dollars for reporting purposes, movements in
75
exchange rates will affect reported results and net assets. For example, if the U.S. dollar strengthens against the Euro, the
reported results of our Eurozone operations in U.S. dollar terms will be lower.
With the exception of foreign currency hedges for certain intercompany loans that are not designated as hedging instruments,
we do not hedge translation risk.
The table below provides information about our foreign currency forward exchange contracts, which are sensitive to exchange
rate risk. The table summarizes the U.S. dollar equivalent amounts of each currency bought and sold forward and the weighted
average contractual exchange rates. All forward exchange contracts mature within three years.
December 31, 2017
Foreign currency sold
U.S. dollars sold for Pounds
sterling
Euros sold for U.S. dollars
Japanese yen sold for U.S.
dollars
Euros sold for Pounds sterling
Total
Fair value (i)
Contract
amount
(millions)
$
$
$
392
78
29
15
514
(25)
2018
Average contractual
exchange rate
Settlement date before December 31,
Contract
amount
(millions)
2019
Average contractual
exchange rate
Contract
amount
(millions)
2020
Average contractual
exchange rate
$1.40 = £1
$
€1 = $1.16
¥110.67 = $1
€1 = £1.22
$
$
236
47
17
9
309
3
$1.36 = £1
$
€1 = $1.20
¥105.19 - $1
€1 = £1.13
91
15
4
4
$1.37 = £1
€1 = $1.23
¥104.11 = $1
€1 = £1.10
$
$
114
1
____________________
(i) Represents the difference between the contract amount and the cash flow in U.S. dollars which would have been receivable had the foreign currency
forward exchange contracts been entered into on December 31, 2017 at the forward exchange rates prevailing at that date.
Income earned within foreign subsidiaries outside of the United Kingdom is generally offset by expenses in the same local
currency but the Company does have exposure to foreign exchange movements on the net income of these entities.
Interest Rate Risk
The Company has access to (i) $1.25 billion under a revolving credit facility expiring March 7, 2022, and (ii) $20 million
available under another revolving credit facility which is only available for specific regulatory purposes. As of December 31,
2017, $884 million was drawn on these facilities. We are also subject to market risk from exposure to changes in interest rates
based on our investing activities where our primary interest rate risk arises from changes in short-term interest rates in both
U.S. dollars and Pounds sterling.
As a result of our operating activities, we receive cash for premiums and claims which we deposit in short-term investments
denominated in U.S. dollars and other currencies. We earn interest on these funds, which is included in our consolidated
financial statements as interest income. These funds are regulated in terms of access and the instruments in which they may be
invested, most of which are short-term in maturity.
The table below provides information about our derivative instruments and other financial instruments that are sensitive to
changes in interest rates. For interest rate swaps, the table presents notional principal amounts and average interest rates
analyzed by expected maturity dates. Notional principal amounts are used to calculate the contractual payments to be
exchanged under the contracts. The duration of the interest rate swaps was three years, with re-fixing periods of three months.
Average fixed and variable rates are, respectively, the weighted-average actual and market rates for the interest rate hedges in
place. Market rates are the rates prevailing at December 31, 2017. We have evaluated the need for a sensitivity analysis, and
based on the Company's debt, we believe this to be immaterial.
76
Fixed rate debt
Principal
Fixed rate payable
Floating rate debt
Principal
Variable rate payable (ii)
Derivatives - interest rate swaps
Notional principal
Fixed rate receivable
Variable rate payable
Expected to mature before December 31,
2018
2019
2020
2021
2022
Thereafter
Total
($ millions, except percentages)
Fair
Value(i)
— $
—
187
7.000%
— $
—
950
4.684%
$
644
2.125%
$ 1,725
$ 3,506
$
3,737
4.406%
4.201%
$
$
85
3.339%
85
3.597%
— $
—
—
300
1.167%
0.567%
—
—
—
—
—
— $
—
884
3.965%
— $ 1,054
—
3.885%
$
1,054
—
—
—
—
—
—
— $
—
—
300
1.167%
0.567%
—
____________________
(i) Represents the net present value of the expected cash flows discounted at current market rates of interest or quoted market rates as appropriate.
(ii) Represents the estimated interest rate payable.
Credit Risk and Concentrations of Credit Risk
Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to perform as contracted.
The Company currently does not anticipate non-performance by its counterparties. The Company generally does not require
collateral or other security to support financial instruments with credit risk.
Concentrations of credit risk that arise from financial instruments exist for groups of customers or counterparties when they
have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions. Financial instruments on the balance sheet that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents, fiduciary funds, accounts receivable and derivatives
which are recorded at fair value.
The Company maintains a policy providing for the diversification of cash and cash equivalent investments and places such
investments in an extensive number of financial institutions to limit the amount of credit risk exposure. These financial
institutions are monitored on an ongoing basis for credit quality predominantly using information provided by credit agencies.
Concentrations of credit risk with respect to receivables are limited due to the large number of clients and markets in which the
Company does business, as well as the dispersion across many geographic areas. Management does not believe significant risk
exists in connection with the Company’s concentrations of credit as of December 31, 2017.
77
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WILLIS TOWERS WATSON
INDEX TO FORM 10-K
For the year ended December 31, 2017
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2017
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2017
Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31, 2017
Notes to the Consolidated Financial Statements
Page
79
81
82
83
84
86
78
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Willis Towers Watson Public Limited Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Willis Towers Watson Public Limited Company and
subsidiaries (the “Company”) as of December 31, 2017, the related consolidated statements of comprehensive income, changes
in equity and cash flows for the period ended December 31, 2017, and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2017, and the results of its operations and its cash flows for the period ended December 31,
2017, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 28, 2018, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Philadelphia, PA
February 28, 2018
We have served as the Company’s auditor since 2017.
79
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Willis Towers Watson Public Limited Company
Dublin, Ireland
We have audited, before the effects of the adjustments to retrospectively apply the changes in accounting discussed in Note 2
and before the effects of the retrospective adjustments to the disclosures for a change in the composition of reportable segments
discussed in Note 4 to the consolidated financial statements, the consolidated balance sheet of Willis Towers Watson Public
Limited Company and subsidiaries (the “Company”) as of December 31, 2016, and the related consolidated statements of
comprehensive income, changes in equity, and cash flows for the years ended December 31, 2016 and 2015 (the 2016 and 2015
consolidated financial statements before the effects of the adjustments discussed in Notes 2 and 4 to the consolidated financial
statements are not presented herein). These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such 2016 and 2015 consolidated financial statements, before the effects of the adjustments to retrospectively
apply the changes in accounting discussed in Note 2 and before the effects of the retrospective adjustments to the disclosures
for a change in the composition of reportable segments discussed in Note 4 to the consolidated financial statements, present
fairly, in all material respects, the financial position of Willis Towers Watson Public Limited Company and subsidiaries as of
December 31, 2016, and the results of their operations and their cash flows for the years ended December 31, 2016 and 2015,
in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review or apply any procedures to the adjustments to retrospectively apply the changes in
accounting discussed in Note 2 or to the retrospective adjustments to the disclosures for a change in the composition of
reportable segments discussed in Note 4 to the consolidated financial statements and, accordingly, we do not express an opinion
or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied.
Those retrospective adjustments were audited by other auditors.
/s/ Deloitte LLP
London, United Kingdom
March 1, 2017
80
WILLIS TOWERS WATSON
Consolidated Statements of Comprehensive Income
(In millions of U.S. dollars, except per share data)
Years ended December 31,
2017
2016
2015
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
Income from operations
Interest expense
Other expense/(income), net
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND INTEREST IN
EARNINGS OF ASSOCIATES
Benefit from income taxes
INCOME FROM OPERATIONS BEFORE INTEREST IN EARNINGS OF
ASSOCIATES
Interest in earnings of associates, net of tax
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON
EARNINGS PER SHARE (i)
Basic earnings per share
Diluted earnings per share
Cash dividends declared per share (i)
NET INCOME
Other comprehensive income/(loss), net of tax:
Foreign currency translation
Defined pension and post-retirement benefits
Derivative instruments
Other comprehensive income/(loss), net of tax, before non-controlling interests
Comprehensive income/(loss) before non-controlling interests
Comprehensive (income)/loss attributable to non-controlling interests
Comprehensive income/(loss) attributable to Willis Towers Watson
$
$
$
$
$
$
$
$
8,116
86
8,202
4,745
1,534
203
581
132
269
7,464
738
188
61
489
(100)
589
3
592
(24)
568
4.21
4.18
2.12
592
295
14
75
384
976
(37)
939
$
$
$
$
$
$
$
$
7,778
109
7,887
4,646
1,551
178
591
193
177
7,336
551
184
27
340
(96)
436
2
438
(18)
420
3.07
3.04
1.92
438
$
$
$
$
$
$
(353) $
(439)
(75)
(867)
(429)
2
(427) $
3,809
20
3,829
2,303
718
95
76
126
84
3,402
427
142
(55)
340
(33)
373
11
384
(11)
373
5.49
5.41
3.28
384
(133)
180
(28)
19
403
(1)
402
____________________
(i) Basic and diluted earnings per share and cash dividends declared per share, for the year ended December 31, 2015 have been retroactively adjusted to
reflect the reverse stock split on January 4, 2016. See Note 3 — Merger, Acquisitions and Divestitures for further details.
See accompanying notes to the consolidated financial statements
81
WILLIS TOWERS WATSON
Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
ASSETS
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Prepaid and other current assets
Total current assets
Fixed assets, net
Goodwill
Other intangible assets, net
Pension benefits assets
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Fiduciary liabilities
Deferred revenue and accrued expenses
Short-term debt and current portion of long-term debt
Other current liabilities
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred tax liabilities
Provision for liabilities
Other non-current liabilities
Total non-current liabilities
TOTAL LIABILITIES
December 31,
2017
December 31,
2016
$
1,030
$
$
$
$
$
12,155
2,246
430
15,861
985
10,519
3,882
764
447
16,597
32,458
12,155
1,711
85
804
14,755
4,450
1,259
615
558
544
7,426
22,181
870
10,505
2,080
337
13,792
839
10,413
4,368
488
353
16,461
30,253
10,505
1,481
508
876
13,370
3,357
1,321
864
575
532
6,649
20,019
COMMITMENTS AND CONTINGENCIES
REDEEMABLE NON-CONTROLLING INTEREST
EQUITY (i)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Treasury shares, at cost, 17,519 in 2017 and 795,816 in 2016, and 40,000 shares, €1
nominal value, in 2017 and 2016
Total Willis Towers Watson shareholders’ equity
Non-controlling interests
Total equity
TOTAL LIABILITIES AND EQUITY
28
51
10,538
1,104
(1,513)
(3)
10,126
123
10,249
$
32,458
$
10,596
1,452
(1,884)
(99)
10,065
118
10,183
30,253
____________________
(i) Equity includes (a) Ordinary shares $0.000304635 nominal value; Authorized 1,510,003,775; Issued 132,139,581 (2017) and 137,075,068 (2016);
Outstanding 132,139,581 (2017) and 136,296,771 (2016); (b) Ordinary shares, €1 nominal value; Authorized and Issued 40,000 shares in 2017 and 2016;
and (c) Preference shares, $0.000115 nominal value; Authorized 1,000,000,000 and Issued none in 2017 and 2016.
See accompanying notes to the consolidated financial statements
82
WILLIS TOWERS WATSON
Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Years ended December 31,
2016
2015
2017
NET INCOME
Adjustments to reconcile net income to total net cash from operating
activities:
Depreciation
Amortization
Net periodic benefit of defined benefit pension plans
Provision for doubtful receivables from clients
Benefit from deferred income taxes
Share-based compensation
Non-cash foreign exchange loss/(gain)
Net gain on disposal of operations and fixed and intangible assets and
gain on re-measurement of equity interests
Other, net
Changes in operating assets and liabilities, net of effects from purchase of
subsidiaries:
Accounts receivable
Fiduciary assets
Fiduciary liabilities
Other assets
Other liabilities
Provisions
Net cash from operating activities
CASH FLOWS (USED IN)/FROM INVESTING ACTIVITIES
Additions to fixed assets and software for internal use
Capitalized software costs
Acquisitions of operations, net of cash acquired
Net disposals of operations
Other, net
Net cash (used in)/from investing activities
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
Net borrowings/(payments) on revolving credit facility
Senior notes issued
Proceeds from issuance of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Payments for share cancellation related to legal settlement
Payments of deferred and contingent consideration related to
acquisitions
Cash paid for employee taxes on withholding shares
Dividends paid
Acquisitions of and dividends paid to non-controlling interests
Net cash (used in)/from financing activities
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Effect of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
$
592
$
438
$
384
252
581
(91)
17
(285)
67
77
(13)
(57)
(64)
(1,167)
1,167
(128)
(51)
(35)
862
(300)
(75)
(13)
57
(4)
(335)
642
649
32
(9)
(734)
(532)
61
(177)
(65)
(18)
(277)
(51)
(479)
48
112
870
1,030
$
178
591
(93)
36
(244)
123
(28)
—
27
(101)
(249)
249
(233)
174
65
933
(218)
(85)
476
(1)
23
195
(237)
1,606
404
(14)
(1,901)
(396)
63
—
(67)
(13)
(199)
(21)
(775)
353
(15)
532
870
$
$
95
76
(78)
5
(99)
64
73
(90)
(8)
(155)
(508)
508
(5)
(61)
43
244
(146)
—
(857)
44
16
(943)
469
—
592
(5)
(166)
(82)
131
—
—
(1)
(277)
(21)
640
(59)
(44)
635
532
See accompanying notes to the consolidated financial statements
83
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B
WILLIS TOWERS WATSON
Notes to the Consolidated Financial Statements
(Tabular amounts are in millions of U.S. dollars, except per share data)
Note 1 — Nature of Operations
Willis Towers Watson plc is a leading global advisory, broking and solutions company that helps clients around the world turn
risk into a path for growth. Willis Towers Watson has more than 43,000 employees and services clients in more than 140
countries and territories. 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. We believe our broad perspective allows us to see the
critical intersections between talent, assets and ideas - the dynamic formula that drives business performance.
We offer our clients a broad range of services to help them identify and control their risks, and to enhance business
performance by improving their ability to attract, retain and engage a talented workforce. Our risk control services range from
strategic risk consulting (including providing actuarial analysis), to a variety of due diligence services, to the provision of
practical on-site risk control services (such as health and safety or property loss control consulting), as well as analytical and
advisory services (such as hazard modeling and reinsurance optimization studies). We assist clients in planning how to manage
incidents or crises when they occur. These services include contingency planning, security audits and product tampering plans.
We help our clients enhance their business performance by delivering consulting services, technology and solutions that help
them anticipate, identify and capitalize on emerging opportunities in human capital management as well as investment advice
to help our clients develop disciplined and efficient strategies to meet their investment goals.
As an insurance broker, we act as an intermediary between our clients and insurance carriers by advising our clients on their
risk management requirements, helping them determine the best means of managing risk and negotiating and placing insurance
with insurance carriers through our global distribution network. We operate the largest private Medicare exchange in the United
States (‘U.S.’). Through this exchange and those for active employees, we help our clients move to a more sustainable
economic model by capping and controlling the costs associated with healthcare benefits.
We are not an insurance company, and therefore we do not underwrite insurable risks for our own account.
The Merger with Towers Watson that closed on January 4, 2016 affects the comparability between 2015 and the later periods
presented. See Note 3 — Merger, Acquisitions and Divestitures for additional information.
Note 2 — Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements
Significant Accounting Policies
Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Willis Towers
Watson and those of our majority-owned and controlled subsidiaries. Intercompany accounts and transactions have been
eliminated.
We determine whether we have a controlling financial interest in an entity by first evaluating whether the entity is a voting
interest entity or a variable interest entity (‘VIE’). Variable interest entities are entities that lack one or more of the
characteristics of a voting interest entity and therefore require a different approach in determining which party involved with
the VIE should consolidate the entity. With a VIE, either the entity does not have sufficient equity at risk to finance its activities
without additional subordinated financial support from other parties, or the equity holders, as a group, do not have the power to
direct the activities that most significantly impact its financial performance, the obligation to absorb expected losses of the
entity, or the right to receive the expected residual returns of the entity. The entity that has a controlling financial interest in a
VIE is referred to as the primary beneficiary and is required to consolidate the VIE.
Voting interest entities are entities that have sufficient equity and provide equity investors voting rights that give them the
power to make significant decisions related to the entity’s operations. The usual condition for a controlling financial interest in
a voting interest entity is ownership of a majority voting interest. Accordingly, we consolidate our voting interest entity
investments in which we hold, directly or indirectly, more than 50% of the voting rights.
Use of Estimates — These consolidated financial statements conform to accounting principles generally accepted in the United
States of America (‘U.S. GAAP’), which require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. Our estimates, judgments and assumptions are
continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial
reporting process, actual results could differ from those estimates. Estimates are used when accounting for revenue recognition,
the selection of useful lives of fixed and intangible assets, impairment testing, valuation of billed and unbilled receivables from
86
clients, discretionary compensation, income taxes, pension assumptions, incurred but not reported claims, legal reserves and
goodwill and intangible assets.
Going Concern — Management evaluates at each annual and interim period whether there are conditions or events, considered
in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that
the consolidated financial statements are issued. Management’s evaluation is based on relevant conditions and events that are
known and reasonably knowable at the date that the consolidated financial statements are issued. Management has concluded
that there are no conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a
going concern within one year after the date of these financial statements.
Fair Value of Financial Instruments — The carrying values of our cash and cash equivalents, accounts receivable, accrued
expenses, revolving lines of credit and term loans approximate their fair values because of the short maturity and liquidity of
those instruments. We consider the difference between carrying value and fair value to be immaterial for our senior notes. The
fair value of our senior notes are considered Level 2 financial instruments as they are corroborated by observable market data.
See Note 11 — Fair Value Measurements for additional information about our measurements of fair value.
Investments in Associates — Investments are accounted for using the equity method of accounting, included within other non-
current assets in the consolidated balance sheets, if the Company has the ability to exercise significant influence, but not
control, over the investee. Significant influence is generally deemed to exist if the Company has an equity ownership in the
voting stock of the investee between 20 and 50 percent, although other factors, such as representation on the board of directors
and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is
appropriate. Under the equity method of accounting, the investment is carried at the cost of acquisition, plus the Company’s
equity in undistributed net income since acquisition, less any dividends received since acquisition.
The Company periodically reviews its investments in associates for which fair value is less than cost to determine if the decline
in value is other than temporary. If the decline in value is judged to be other than temporary, the cost basis of the investment is
written down to fair value. The amount of any write-down is included in the consolidated statements of comprehensive income.
Common Shares Split — On January 4, 2016, the Company effected a 1 to 2.6490 reverse share split to shareholders of record
as of January 4, 2016. All share and per share information has been retroactively adjusted to reflect the reverse share split and
show the new number of shares. See Note 3 — Merger, Acquisitions and Divestitures for additional information about our
Merger and reverse share split.
Cash and Cash Equivalents — Cash and cash equivalents primarily consist of time deposits with original maturities of 90 days
or less. Willis Limited, our U.K. brokerage subsidiary regulated by the Financial Conduct Authority, is currently required to
maintain $140 million in unencumbered and available financial resources, of which at least $79 million must be in cash, for
regulatory purposes. Term deposits and certificates of deposits with original maturities greater than 90 days are considered to
be short-term investments. There is no restricted cash included in our cash and cash equivalents balance, as these amounts are
included in fiduciary assets.
Fiduciary Assets and Liabilities — Fiduciary funds represent unremitted premiums received from insureds and unremitted
claims or refunds received from insurers. Fiduciary funds are generally required to be kept in certain regulated bank accounts
subject to guidelines which emphasize capital preservation and liquidity. Such funds are not available to service the Company’s
debt or for other corporate purposes. Notwithstanding the legal relationships with insureds and insurers, the Company is
entitled to retain investment income earned on fiduciary funds in accordance with industry custom and practice and, in some
cases, as supported by agreements with insureds. The period for which the Company holds such funds is dependent upon the
date the insured remits the payment of the premium to the Company, or the date the Company receives refunds from the
insurers, and the date the Company is required to forward such payment to the insurer, or insured, respectively. In certain
instances, the Company advances premiums, refunds or claims to insurance underwriters or insureds prior to collection. Such
advances are made from fiduciary funds and are reflected in the consolidated balance sheets as fiduciary assets. Fiduciary
liabilities represent the obligations to remit fiduciary funds and fiduciary receivables to insurers or insureds. Certain of our
health and welfare benefits administration outsourcing agreements require us to hold funds on behalf of clients to pay
obligations on their behalf. These amounts are included in fiduciary assets and fiduciary liabilities on the consolidated balance
sheets.
Accounts Receivable — Accounts receivable includes both billed and unbilled receivables and is stated at estimated net
realizable values. Provision for billed receivables is recorded, when necessary, in an amount considered by management to be
sufficient to meet probable future losses related to uncollectible accounts. Accrued and unbilled receivables are stated at net
realizable value which includes an allowance for accrued and unbillable amounts. See Note 14 — Supplementary Information
for Certain Balance Sheet Accounts for additional information about our accounts receivable.
87
Income Taxes — The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences of events
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and operating and capital loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using
enacted rates in effect for the year in which the differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of changes in tax rates is recognized in the consolidated statement of comprehensive income in the period
in which the change is enacted. Deferred tax assets are reduced through the establishment of a valuation allowance at such time
as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized. The Company adjusts
valuation allowances to measure deferred tax assets at the amounts considered realizable in future periods if the Company’s
facts and assumptions change. In making such determination, the Company considers all available positive and negative
evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning
strategies and the results of recent financial operations. We place more reliance on evidence that is objectively verifiable.
Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon examination. The
Company recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the
position will be sustained on the basis of the technical merits of the position assuming the tax authorities have full knowledge
of the position and all relevant facts. Recognition also occurs upon either the lapse of the relevant statute of limitations, or
when positions are effectively settled. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent
likely to be realized on settlement with the tax authority. The Company adjusts its recognition of uncertain tax benefits in the
period in which new information is available impacting either the recognition or measurement of its uncertain tax positions.
Such adjustments are reflected as increases or decreases to income taxes in the period in which they are determined.
The Company recognizes interest and penalties relating to unrecognized tax benefits within income taxes. See Note 6 —
Income Taxes for additional information regarding the Company’s income taxes.
Foreign Currency — Transactions in currencies other than the functional currency of the entity are recorded at the rates of
exchange prevailing at the date of the transaction. Monetary assets and liabilities in currencies other than the functional
currency are translated at the rates of exchange prevailing at the balance sheet date and the related transaction gains and losses
are reported as income or expense in the consolidated statements of comprehensive income. Certain intercompany loans are
determined to be of a long-term investment nature. The Company records transaction gains and losses from re-measuring such
loans as other comprehensive income in the consolidated statements of comprehensive income.
Upon consolidation, the results of operations of subsidiaries and associates whose functional currency is other than the U.S.
dollar are translated into U.S. dollars at the average exchange rates and assets and liabilities are translated at year-end exchange
rates. Translation adjustments are presented as a separate component of other comprehensive income in the financial statements
and are included in net income only upon sale or liquidation of the underlying foreign subsidiary or associated company.
Derivatives — The Company uses derivative financial instruments for other than trading purposes to alter the risk profile of an
existing underlying exposure. Interest rate swaps have been used to manage interest risk exposures. Forward foreign currency
exchange contracts are used to manage currency exposures arising from future income and expenses. The fair values of
derivative contracts are recorded in other assets and other liabilities. The effective portions of changes in the fair value of
derivatives that qualify for hedge accounting as cash flow hedges are recorded in other comprehensive income. Amounts are
reclassified from other comprehensive income into earnings when the hedged exposure affects earnings. If the derivative is
designated and qualifies as an effective fair value hedge, the changes in the fair value of the derivative and of the hedged item
associated with the hedged risk are both recognized in earnings. The amount of hedge ineffectiveness recognized in earnings is
based on the extent to which an offset between the fair value of the derivative and hedged item is not achieved. Changes in fair
value of derivatives that do not qualify for hedge accounting, together with any hedge ineffectiveness on those that do qualify,
are recorded in other operating expenses or interest expense as appropriate.
The Company evaluates whether its contracts include clauses or conditions which would be required to be separately accounted
for at fair value as embedded derivatives. See Note 9 — Derivative Financial Instruments for additional information about the
Company’s derivatives.
Commitments, Contingencies and Provisions for Liabilities — The Company establishes provisions against various actual and
potential claims, lawsuits and other proceedings relating principally to alleged errors and omissions in the ordinary course of
business. Such provisions cover claims that have been reported but not paid and also unasserted claims and related legal fees.
These provisions are established based on actuarial estimates together with individual case reviews and are believed to be
adequate in light of current information and legal advice. In certain cases, where a range of loss exists, we accrue the minimum
amount in the range if no amount within the range is a better estimate than any other amount. To the extent such losses can be
recovered under the Company’s insurance programs, estimated recoveries are recorded when losses for insured events are
recognized and the recoveries are likely to be realized. Significant management judgment is required to estimate the amounts of
such unasserted claims and the related insurance recoveries. The Company analyzes its litigation exposure based on available
88
information, including consultation with outside counsel handling the defense of these matters, to assess its potential liability.
These contingent liabilities are not discounted. See Note 13 — Commitments and Contingencies and Note 14 —
Supplementary Information for Certain Balance Sheet Accounts for additional information about our commitments,
contingencies and provisions for liabilities.
Share-Based Compensation — The Company has equity-based compensation plans that provide for grants of restricted stock
units and stock options to employees and non-employee directors of the Company.
The Company expenses equity-based compensation, which is included in Salaries and benefits in the consolidated statements of
comprehensive income, primarily on a straight-line basis over the requisite service period. The significant assumptions
underlying our expense calculations include the fair value of the award on the date of grant, the estimated achievement of any
performance targets and estimated forfeiture rates. The awards under equity-based compensation are classified as equity and
included as a component of equity on the Company’s consolidated balance sheets, as the ultimate payment of such awards will
not be achieved through use of the Company’s cash or other assets. See Note 17 — Share-based Compensation for additional
information about the Company’s share-based compensation.
Fixed Assets — Fixed assets are stated at cost less accumulated depreciation. Expenditures for improvements are capitalized;
repairs and maintenance are charged to expense as incurred. Depreciation is computed primarily using the straight-line method
based on the estimated useful lives of assets.
Depreciation on internally developed software is amortized over the estimated useful life of the asset ranging from 3 to 10
years. Buildings include assets held under capital leases and are depreciated over the lesser of 50 years, the asset lives or the
lease terms. Depreciation on leasehold improvements is calculated over the lesser of the useful lives of the assets or the
remaining lease terms. Depreciation on furniture and equipment is calculated based on a range of 3 to 10 years. Land is not
depreciated.
Long-lived assets are tested for recoverability whenever events or changes in circumstance indicate that their carrying amounts
may not be recoverable. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and
exceeds its fair value. Recoverability is determined based on the undiscounted cash flows expected to result from the use and
eventual disposition of the asset or asset group. Long-lived assets and certain identifiable intangible assets to be disposed of are
reported at the lower of carrying amount or fair value less cost to sell. See Note 7 — Fixed Assets for additional information
about our fixed assets.
Operating Leases —Rentals payable on operating leases are charged on a straight-line basis to Other operating expenses in the
consolidated statements of comprehensive income over the lease term. See Note 13 — Commitments and Contingencies for
additional information about our operating leases.
Goodwill and Other Intangible Assets — In applying the acquisition method of accounting for business combinations, amounts
assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the
remainder recorded as goodwill. Intangible assets are initially valued at fair value using generally accepted valuation methods
appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over their estimated useful lives
and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for
impairment annually as of October 1, and whenever indicators of impairment exist. The fair values of intangible assets are
compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount
exceeds its fair value.
Acquired intangible assets are amortized over the following periods:
Client relationships
In line with underlying cash flows
Amortization basis
Software
Product
Trademark and trade name
Favorable agreements
Management contracts
In line with underlying cash flows or straight-line basis
In line with underlying cash flows
Straight-line basis
Straight-line basis
Straight-line basis
Expected life
(years)
5 to 20
4 to 7
17.5
14 to 25
7
18
Goodwill is tested for impairment annually as of October 1, and whenever indicators of impairment exist. Goodwill is tested at
the reporting unit level, and the Company had nine reporting units as of October 1, 2017. In the first step of the impairment test,
the fair value of each reporting unit is compared with its carrying value, including goodwill. If the carrying value of a reporting
89
unit exceeds its fair value, the amount of an impairment loss, if any, is calculated in the second step of the impairment test by
comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The Company’s
goodwill impairment tests for the years ended December 31, 2017 and 2016 have not resulted in any impairment charges. See
Note 8 — Goodwill and Other Intangible Assets for additional information about our goodwill and other intangible assets.
Pensions — The Company has multiple defined benefit pension and defined contribution plans. The net periodic cost of the
Company’s defined benefit plans are measured on an actuarial basis using various methods and actuarial assumptions. The
most significant assumptions are the discount rates (calculated from the 2016 fiscal year and forward using the granular
approach to calculating service and interest cost) and the expected long-term rates of return on plan assets. Other material
assumptions include rates of participant mortality, the expected long-term rates of compensation and pension increases and
rates of employee termination. Gains and losses occur when actual experience differs from actuarial assumptions. If such gains
or losses exceed ten percent of the greater of plan assets or plan liabilities, the Company amortizes those gains or losses over
the average remaining service period or average remaining life expectancy, as appropriate, of the plan participants. In
accordance with U.S. GAAP, the Company records on its consolidated balance sheets the funded status of its pension plans
based on the projected benefit obligation.
Contributions to the Company’s defined contribution plans are recognized as incurred. Differences between contributions
payable in the year and contributions actually paid are shown as either other assets or other liabilities in the consolidated
balance sheets. See Note 12 — Retirement Benefits for additional information about our pensions.
Revenue Recognition — Revenues include insurance commissions, fees in lieu of commission, fees for consulting services
rendered, hosted and delivered software, survey sales, interest and other income.
Revenue recognized in excess of billings is recorded as unbilled accounts receivable. Cash collections in excess of revenue
recognized are recorded as deferred revenue until the revenue recognition criteria are met. Client reimbursable expenses,
including those relating to travel, other out-of-pocket expenses and any third-party costs, are included in revenue, and an
equivalent amount of reimbursable expenses is included in other operating expenses as a cost of revenue. Taxes collected from
customers and remitted to government authorities are recorded net and are excluded from revenue.
Commissions and fees
Commissions revenue. Brokerage commissions and fees negotiated in lieu of commissions are recognized at the later of the
policy inception date or when the policy placement is complete. In situations in which our fees are not fixed and
determinable due to the uncertainty of the commission fee per policy, we recognize revenue as the fees are determined.
Commissions on additional premiums and adjustments are recognized when approved by or agreed between the parties and
collectability is reasonably assured.
Consulting revenue. The majority of our consulting revenues consists of fees earned from providing consulting services.
We recognize revenues from these consulting engagements when hours are worked, either on a time-and-expense basis or
on a fixed-fee basis, depending on the terms and conditions defined at the inception of an engagement with a client. We
have engagement letters with our clients that specify the terms and conditions upon which the engagements are based.
These terms and conditions can only be changed upon agreement by both parties. Individual billing rates are principally
based on a multiple of salary and compensation costs.
Revenues for fixed-fee arrangements are based upon the proportional performance method to the extent estimates can be
made of the remaining work required under the arrangement. If we do not have sufficient information to estimate
proportional performance, we recognize the fees straight-line over the contract period. We typically have four types of
fixed-fee arrangements: annual recurring projects, projects of a short duration, stand-ready obligations and non-recurring
system projects.
• Annual recurring projects and projects of short duration. These projects are typically straightforward and highly
predictable in nature. As a result, the project manager and financial staff are able to identify, as the project status is
reviewed and bills are prepared monthly, the occasions when cost overruns could lead to the recording of a loss
accrual.
•
Stand-ready obligations. Where we are entitled to fees (whether fixed or variable based on assets under management
or a per-participant per-month basis) regardless of the hours, we generally recognize this revenue on either a straight-
line basis or as the variable fees are calculated.
• Non-recurring system projects. These projects are longer in duration and subject to more changes in scope as the
project progresses. Certain software or outsourced administration contracts generally provide that if the client
90
terminates a contract, we are entitled to an additional payment for services performed through termination designed to
recover our up-front cost of implementation.
Revenue recognition for fixed-fee engagements is affected by a number of factors that change the estimated amount of
work required to complete the project such as changes in scope, the staffing on the engagement and/or the level of client
participation. The periodic engagement evaluations require us to make judgments and estimates regarding the overall
profitability and stage of project completion that, in turn, affect how we recognize revenue. We recognize a loss on an
engagement when estimated revenues to be received for that engagement are less than the total estimated costs associated
with the engagement. Losses are recognized in the period in which the loss becomes probable and the amount of the loss is
reasonably estimable.
Hosted software. We have developed various software programs and technologies that we provide to clients in connection
with consulting services. In most instances, such software is hosted and maintained by us and ownership of the technology
and rights to the related code remain with us. We defer costs for software developed to be utilized in providing services to
a client, but for which the client does not have the contractual right to take possession, during the implementation stage.
We recognize these deferred costs from the go live date, signaling the end of the implementation stage, until the end of the
initial term of the contract with the client. We determined that the system implementation and customized ongoing
administrative services are one combined service. Revenue is recognized over the service period, after the go live date, on
a straight-line basis. As a result, we do not recognize revenue during the implementation phase of an engagement.
Delivered software. We deliver software under arrangements with clients who take possession of our software. The
maintenance associated with the initial software fees is a fixed percentage which enables us to determine the stand-alone
value of the delivered software separate from the maintenance. We recognize the initial software fees as software is
delivered to the client, and we recognize the maintenance fees ratably over the contract period based on each element’s
relative fair value. For software arrangements in which initial fees are received in connection with mandatory maintenance
for the initial software license to remain active, we determined that the initial maintenance period is substantive. Therefore,
we recognize the fees for the initial license and maintenance bundle ratably over the initial contract term, which is
generally one year. Each subsequent renewal fee is recognized ratably over the contractually stated renewal period.
Surveys. We collect, analyze and compile data in the form of surveys for our clients who have the option of participating in
the survey. The surveys are published online via a web tool that provides simplistic functionality. We have determined that
the web tool is inconsequential to the overall arrangement. We record the survey revenues when the results are delivered
online and made available to our clients who have a contractual right to the data. If the data is updated more frequently
than annually, we recognize the survey revenues ratably over the contractually stated period.
Interest and other income
Interest income. Interest income is recognized as earned.
Other Income. Other income includes gains on disposal of intangible assets, which primarily arise from settlements
through enforcing non-compete agreements in the event of losing accounts through producer defection or the disposal of
books of business.
Recent Accounting Pronouncements
Not yet adopted
In May 2014, the Financial Accounting Standards Board (‘FASB’) issued Accounting Standard Update (‘ASU’) No. 2014-09,
Revenue From Contracts With Customers. The new standard supersedes most current revenue recognition guidance and
eliminates most industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict
the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing
and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in
judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full
retrospective or a modified retrospective approach for the adoption of the new standard. Additional ASUs have since been
issued which provide further guidance, examples and technical corrections for the implementation of ASU No. 2014-09. All
related guidance has been codified into, and is now known as, Accounting Standards Codification (‘ASC’) 606. The guidance
was effective for the Company at the beginning of its 2018 fiscal year, with early adoption permitted.
As a result of analyzing our various revenue streams to determine the full impact this standard will have on our revenue
recognition, cost deferral, systems and processes, the Company has determined the following:
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• The Company has adopted the standard using the modified retrospective approach on January 1, 2018, and has applied
the new standard only to contracts that are not completed as of the transition date.
• Certain revenue streams have accelerated revenue recognition timing. In particular, the revenue recognition for our
Individual Marketplace (formerly Retiree & Access Exchanges) has moved from monthly ratable recognition over the
policy period, to the recognition upon placement of the policy. Consequently, the Company will now recognize the
majority of one calendar year of expected commissions during its fourth quarter of the preceding calendar year.
Therefore, at the adoption date, we have reflected an adjustment to retained earnings for the portion of the revenue that
would otherwise have been recognized during our 2018 calendar year since our earnings process was largely
completed during the fourth quarter of 2017.
Additionally, the revenue recognition for proportional treaty broking commissions has moved from recognition upon
the receipt of the monthly or quarterly statements, to the recognition of an estimate of expected commissions upon the
policy effective date. Since the majority of revenue recognized historically based on these monthly or quarterly
statements was received over a two-year period, we will reflect an adjustment to retained earnings at the adoption date
for the portion of revenue that would otherwise have been recognized during our 2018 calendar year related to policies
effective in 2017 or prior.
• Revenue recognition for certain other revenue streams has changed from recognizing revenue at a point in time to
recognizing revenue over time. Specifically, certain arrangements in our Health and Benefits broking business will
now be recognized evenly over the year to reflect the nature of the ongoing obligations to our customers as well as
receipt of the monthly commissions. These contracts are monthly or annual in nature and are considered complete as
of the transition date. Therefore, no retained earnings adjustment is required.
• Our accounting for deferred costs will change. First, for those portions of the business that previously deferred costs
(related to system implementation activities), the length of time over which we amortize those costs will extend to a
longer estimated contract term. For 2017 calendar year and prior, these costs were amortized over a typical period of
3-5 years in accordance with the initial stated terms of the customer agreements. Second, other types of arrangements
with associated costs now meet the criteria for cost deferral under ASC 606. This guidance will now apply to our
broking arrangements and certain consulting engagements. We have calculated a retained earnings adjustment to
reflect this cumulative change for contracts not complete as of the transition date.
Although we are still finalizing the impact to retained earnings as of January 1, 2018, we expect the total range of adjustment,
before the effect of taxes, to be an increase to retained earnings of $375 million to $475 million.
In preparation for the additional disclosure requirements that will be included in our quarterly and annual filings beginning with
our calendar year 2018 first quarter filing, we have implemented additional tools and technologies to support our revenue
recognition and data collection processes.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires a lessee to recognize in the statement of financial
position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the
underlying asset for the lease term. The ASU becomes effective for the Company at the beginning of its 2019 calendar year, at
which time the Company will adopt it, although early adoption is permitted. While the Company continues to assess the impact
of the ASU to its consolidated financial statements, the majority of its leases are currently considered operating leases and will
be capitalized as a lease asset on its balance sheet with a related lease liability for the obligated lease payments.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and
Cash Payments, which amends guidance on presentation and classification of eight specific cash flow issues with the objective
of reducing diversity in practice. The ASU became effective for the Company at the beginning of its 2018 calendar year, at
which time the Company adopted it. Consistent with the transition guidance, the Company will reflect the new guidance as of
the beginning of 2018 in our first quarter Form 10-Q. The Company is still assessing the impact of this ASU, but it believes the
impact on its financial statements will be immaterial.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the
subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair
value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the
impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that
would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead,
the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a
reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying
amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill
92
allocated to that reporting unit. The ASU becomes effective for the Company on January 1, 2020. The amendments in this ASU
should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed
on testing dates after January 1, 2017, and the Company is still evaluating when to adopt this ASU. The Company does not
expect an immediate impact to its consolidated financial statements upon adopting this ASU since the most recent Step 1
goodwill impairment test resulted in fair values in excess of carrying values for all reporting units at October 1, 2017.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost, which requires entities to (1) disaggregate the current service-cost component from the other
components of net benefit cost (the ‘other components’) and present it in the income statement with other current compensation
costs for related employees and (2) present the other components elsewhere in the income statement and outside of income
from operations if that subtotal is presented. In addition, the ASU requires entities to disclose the income statement lines that
contain the other components if they are not presented or included in appropriately described separate lines. The ASU became
effective for the Company on January 1, 2018, at which time the Company adopted it, and will apply the standard
retrospectively beginning in its 2018 first quarter Form 10-Q. The Company has determined that, while the classification of
some components of net benefit cost will change within the accompanying consolidated statement of comprehensive income,
there is no material impact on its consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which provides
guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification
accounting. The ASU requires that an entity should account for the effects of a modification unless the fair value (or calculated
value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the
same as for the original award immediately before the modification. The ASU became effective for the Company on January 1,
2018, at which time the Company adopted it, and should be applied prospectively to an award modified on or after the adoption
date. There is no immediate impact to the accompanying consolidated financial statements, until such time as an award may be
modified in 2018 or forward.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for
Hedging Activities, which provides amendments under six specific objectives to better align risk management activities and
financial reporting, and to simplify disclosure, presentation, hedging and the testing and measurement of ineffectiveness. The
ASU becomes effective for the Company on January 1, 2019. Early adoption is permitted, and any adjustments should be
reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently assessing when it
will adopt this standard, and the impact that this standard will have on its consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income: Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for a reclassification from accumulated
other comprehensive income to retained earnings for ‘stranded’ tax effects (those tax effects of items within accumulated other
comprehensive income resulting from the historical corporate income tax rate reduction) resulting from the Tax Cuts and Jobs
Act. The amendments within this ASU also require certain disclosures about stranded tax effects. The ASU becomes effective
for the Company on January 1, 2019. Early adoption is permitted, and any adjustments should be reflected as of the beginning
of the fiscal year that includes that interim period. The Company is currently assessing when it will adopt this standard, and the
impact that this standard will have on its consolidated financial statements.
Adopted
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation, which simplifies several aspects of
the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either
equity or liabilities, and classification on the statement of cash flows. The ASU became effective for the Company on January
1, 2017. In accordance with the prospective adoption of the recognition of excess tax benefits and deficiencies in the
consolidated statements of comprehensive income, we recognized a $7 million tax benefit in provision for income taxes during
the year ended December 31, 2017. In addition, we elected to prospectively adopt the amendment to present excess tax benefits
on share-based compensation as an operating activity, resulting in the recognition of a $7 million excess tax benefit as an
operating activity in the consolidated statement of cash flows for the year ended December 31, 2017. We elected to continue to
estimate expected forfeitures. We also retrospectively adopted the amendment to present cash payments to tax authorities in
connection with shares withheld to meet statutory tax withholding requirements as a financing activity. As a result, these $13
million and $1 million uses of cash were reclassified from net cash from operating activities to net cash used in financing
activities in the consolidated statement of cash flows for the years ended December 31, 2016, and December 31, 2015,
respectively.
In October 2016, the FASB issued ASU No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets
Other than Inventory, which amends guidance regarding the recognition of current and deferred income taxes for intra-entity
93
asset transfers. Current U.S. GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset
transfer until the asset has been sold to an outside party. The ASU states that an entity should recognize the income tax
consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU
should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of
the beginning of the period of adoption. The Company elected to early adopt this standard on January 1, 2017, and recorded a
cumulative reduction to retained earnings of $3 million.
Note 3 — Merger, Acquisitions and Divestitures
Merger
On January 4, 2016, pursuant to the Agreement and Plan of Merger, dated June 29, 2015, as amended on November 19, 2015,
between Willis, Towers Watson, and Citadel Merger Sub, Inc., a wholly-owned subsidiary of Willis formed for the purpose of
facilitating this transaction (‘Merger Sub’), Merger Sub merged with and into Towers Watson, with Towers Watson continuing
as the surviving corporation and as a wholly-owned subsidiary of Willis.
Towers Watson was a leading global professional services firm operating throughout the world, dating back more than 100
years. The Merger allows the combined firm to go to market with complementary strategic product and services offerings.
At the effective time of the Merger (the ‘Effective Time’), each issued and outstanding share of Towers Watson common stock
(the ‘Towers Watson shares’), was converted into the right to receive 2.6490 validly issued, fully paid and nonassessable
ordinary shares of Willis (the ‘Willis ordinary shares’), $0.000115 nominal value per share, other than any Towers Watson
shares owned by Towers Watson, Willis or Merger Sub at the Effective Time and the Towers Watson shares held by
stockholders who are entitled to and who properly exercised dissenter’s rights under Delaware law.
Immediately following the Merger, Willis effected (i) a consolidation (i.e., a reverse stock split under Irish law) of Willis
ordinary shares whereby every 2.6490 Willis ordinary shares were consolidated into one Willis ordinary share ($0.000304635
nominal value per share) and (ii) an amendment to its constitution and other organizational documents to change its name from
Willis Group Holdings Public Limited Company to Willis Towers Watson Public Limited Company.
On December 29, 2015, the third business day immediately prior to the closing date of the Merger, Towers Watson declared and
paid a pre-merger special dividend of $10.00 per share of its common stock, and approximately $694 million in the aggregate
based on approximately 69 million Towers Watson shares issued and outstanding at December 29, 2015.
On December 30, 2015, all Towers Watson treasury stock was canceled.
The Merger was accounted for using the acquisition method of accounting, with Willis considered the accounting acquirer of
Towers Watson.
The table below presents the final calculation of aggregate Merger consideration.
Number of shares of Towers Watson common stock outstanding as of January 4, 2016
Exchange ratio
Number of Willis Group Holdings shares issued (prior to reverse stock split)
Willis Group Holdings price per share on January 4, 2016
Fair value of 184 million Willis ordinary shares
Value of equity awards assumed
Aggregate Merger consideration
January 4, 2016
69 million
2.6490
184 million
$
$
$
47.18
8,686
37
8,723
94
A summary of the fair values of the identifiable assets acquired, and liabilities assumed, of Towers Watson at January 4, 2016
are summarized in the following table.
Cash and cash equivalents
Accounts receivable, net
Other current assets
Fixed assets, net
Goodwill
Intangible assets
Pension benefits assets
Other non-current assets
Deferred tax liabilities
Liability for pension benefits
Other current liabilities (i)
Other non-current liabilities (ii)
Long term debt, including current portion (iii)
Net assets acquired
Non-controlling interests acquired
Allocated aggregate Merger consideration
____________________
January 4, 2016
$
$
476
825
82
204
6,783
3,991
67
115
(1,151)
(923)
(667)
(331)
(740)
8,731
(8)
8,723
(i)
(ii)
Includes $348 million in accounts payable, accrued liabilities and deferred revenue, $308 million in employee-related liabilities and $11 million in
other current liabilities.
Includes acquired contingent liabilities of $242 million. See Note 13 — Commitments and Contingencies for a discussion of our material acquired
contingencies related to Legacy Towers Watson.
(iii) Represents both debt due upon change of control of $400 million borrowed under Towers Watson’s term loan ($188 million) and revolving credit
facility ($212 million) and a draw down under a new term loan of $340 million. The $400 million debt was repaid by Willis’ borrowings under the
1-year term loan facility on January 4, 2016. The $340 million new term loan partially funded the $694 million Towers Watson pre-merger special
dividend.
The purchase price allocation as of the date of acquisition was based on a valuation of the assets acquired and liabilities
assumed in the acquisition. The purchase price allocation was complete as of December 31, 2016.
Goodwill was calculated as the difference between the aggregate Merger consideration and the acquisition date fair value of the
net assets acquired, and represents the value of the Legacy Towers Watson assembled workforce and the future economic
benefits that we expect to realize as a result of the Merger. None of the goodwill recognized on the transaction is tax deductible.
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The acquired intangible assets are attributable to the following categories:
Customer relationships
Multiple period excess earnings
In line with underlying cash flows
$
2,221
15.0
Valuation Methodology
Amortization Basis
Fair
Value
Expected
Life
(Years)
Software - income approach
Multiple period excess earnings
straight-line basis
Software - cost approach
Cost of reproduction
Straight-line basis
In line with underlying cash flows or
Product
IPR&D (i)
Trade name
Relief from royalty
Favorable lease agreements
Market approach
____________________
Multiple period excess earnings
In line with underlying cash flows
Multiple period excess earnings or
cost of reproduction
n/a
Straight-line basis
Straight-line basis
567
108
42
39
1,003
11
$
3,991
6.4
4.9
17.5
n/a
25.0
6.5
(i) Represents individual in-process research and development (‘IPR&D’) software components not placed into service as of the acquisition date.
These assets were subsequently placed into service during the three months ended March 31, 2017, were reclassified into finite-lived software
intangible assets, and are being amortized in line with underlying cash flows or on a straight-line basis.
The following pro forma financial information is unaudited and is intended to reflect the impact of the Merger on Willis Towers
Watson’s consolidated financial statements as if the Merger had taken place on January 1, 2015 and presents the results of
operations of Willis Towers Watson based on the historical financial statements of Willis and Towers Watson after giving effect
to the Merger and pro forma adjustments. Pro forma adjustments are included only to the extent they are (i) directly attributable
to the Merger, (ii) factually supportable and (iii) with respect to the consolidated statement of comprehensive income, expected
to have a continuing impact on the combined results. The accompanying unaudited pro forma financial information is presented
for illustrative purposes only and has not been adjusted to give effect to certain expected financial benefits of the Merger, such
as revenue synergies, tax savings and cost synergies, or the anticipated costs to achieve these benefits, including the cost of
integration activities. The unaudited pro forma results are not indicative of what would have occurred had the Merger taken
place on the indicated date.
Total revenues
Net income attributable to Willis Towers Watson
Diluted earnings per share
Years ended December 31,
Pro Forma
As reported
(Unaudited)
2016
2015
$
$
$
7,887
420
3.04
$
$
$
7,492
640
4.64
The above pro forma financial information for the year ended December 31, 2015 does not include pro forma adjustments for
the Gras Savoye or other acquisitions as their revenues and results of operations were immaterial to the consolidated financial
statements.
Revenues attributable to Towers Watson for the year ended December 31, 2016 were $3.6 billion. Net income attributable to
Towers Watson for the year ended December 31, 2016 was $111 million.
Acquired Share-Based Compensation Plans
In connection with the Merger, we assumed certain stock options and restricted stock units (‘RSUs’) issued under the Towers
Watson & Co. 2009 Long Term Incentive Plan (‘LTIP’), the Liazon Corporation 2011 Equity Incentive Plan, and the Extend
Health, Inc. 2007 Equity Incentive Plan.
Stock Options. The outstanding unvested employee stock options were converted into 592,486 Willis Towers Watson stock
options using the conversion ratios stated in the Merger agreement for the number of options. The fair value of the stock
options was calculated using the Black-Scholes model with a volatility and risk-free interest rate over the expected term of each
group of options and Willis Towers Watson’s closing share price on the date of acquisition. We determined the fair value of the
portion of the outstanding options related to pre-acquisition employee service using the straight-line expense methodology from
the date of grant to the acquisition date to be $7 million, which was added to the transaction consideration. The fair value of the
96
remaining portion of options related to the post-acquisition employee services was $13 million, and will be recognized over the
future vesting periods.
Restricted Stock Units. The outstanding unvested RSUs were converted into 597,307 Willis Towers Watson RSUs using the
conversion ratios as stated in the Merger agreement. The fair value of these RSUs was calculated using Willis Towers Watson’s
closing share price on the date of acquisition. We determined the fair value of the portion of the outstanding RSUs related to
pre-acquisition employee service using the straight-line expense methodology from the date of grant to the acquisition date to
be $30 million, which was added to the transaction consideration. The fair value of the remaining portion of RSUs related to
the post-acquisition employee services was $32 million, and will be recognized over the future vesting periods.
Gras Savoye Acquisition
On December 29, 2015, Legacy Willis completed the transaction to acquire substantially all of the remaining 70% of the
outstanding share capital of Gras Savoye, the leading insurance broker in France, for total consideration of €544 million ($592
million) of which $582 million in cash was paid at closing. Additionally, the previously held equity interest in Gras Savoye was
re-measured to a fair value of €221 million ($241 million) giving a total fair value on a 100% basis of €765 million ($833
million).
The union combines the Company’s global insurance broking footprint with Gras Savoye’s particularly strong presence in
France, Central and Eastern Europe, and across Africa. Gras Savoye’s expertise in high-growth markets and industry sectors
complements the Company’s global strengths, creating value for clients.
The Company funded the cash consideration with a 1-year term loan. The term loan was repaid in its entirety on May 26, 2016,
from the proceeds from the issuance of new senior notes discussed in Note 10 — Debt to these consolidated financial
statements.
Deferred consideration is payable on the first and second anniversary of the acquisition. In December 2017, the Company made
final consideration payments of $3 million. The discounted fair value of the deferred consideration at December 31, 2016 was
$4 million. None of the goodwill recognized on the transaction is tax deductible.
The following table presents the Company’s allocation of the purchase price to the assets acquired and liabilities assumed based
on their fair values:
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Goodwill
Intangible assets
Other assets
Fiduciary liabilities
Deferred revenue and accrued expenses
Short and long-term debt
Net deferred tax liabilities
Other liabilities
Net assets acquired
Decrease in paid-in capital for purchase of non-controlling interest
Non-controlling interest acquired
Purchase price allocation
December 29, 2015
$
$
87
625
89
584
440
56
(625)
(80)
(80)
(87)
(179)
830
43
(40)
833
The purchase price allocation as of the date of acquisition was based on a valuation and was subject to revision within the
purchase price allocation period as more detailed analysis was completed and additional information about the value of assets
acquired and liabilities assumed became available. During the year ended December 31, 2016, the assessment outlined above
was updated to reflect the final estimates of the fair value of assets and liabilities acquired. The purchase price allocation is
final.
97
The acquired intangible assets are attributable to the following categories:
Valuation Methodology
Amortization Basis
Fair Value
Customer relationships
Multiple period excess earnings
In line with underlying cash flows
$
Software and other intangibles Cost of reproduction
Trade name
Relief from royalty
Straight-line basis
Straight-line basis
$
339
66
35
440
Expected
Life (Years)
20
5
14
Miller Insurance Services LLP Acquisition
On May 31, 2015, Legacy Willis completed the transaction to acquire an 85 percent interest in Miller, a leading London
wholesale specialist insurance broking firm, for total consideration of $401 million, including cash consideration of $232
million.
Deferred consideration is payable at the first, second and third anniversaries of the acquisition. Contingent consideration is
payable at the third anniversary of the acquisition and is contingent on meeting certain earnings before interest, taxes,
depreciation and amortization (‘EBITDA’) performance targets. At December 31, 2017, the discounted fair values of the
deferred consideration related to the third anniversary and contingent consideration were $38 million and $40 million,
respectively. At December 31, 2016, the discounted fair values of the deferred consideration related to the second and third
anniversaries and contingent consideration were $69 million and $26 million, respectively.
The Company recognized assets and liabilities acquired of $1.1 billion and $844 million, respectively. Included within the
acquired assets are identifiable intangible assets of $231 million and goodwill of $184 million.
The purchase price allocation as of the date of acquisition was based on a valuation of the assets acquired, liabilities assumed,
and contingent consideration associated with the acquisition. There were no material revisions to the purchase price allocation
during the year ended December 31, 2016, as the purchase price allocation is final.
Divestitures
Related Party Transaction - In the third quarter of 2017, the Company divested its Global Wealth Solutions business through a
sale to an employee of the business. As part of that transaction, we financed a $50 million note payable from the employee to
purchase the business. The note amortizes over 10 years, bears interest at a weighted-average rate of 3% and is guaranteed by
$3 million in assets. Following the sale, employees of this business are no longer employees of the Company, and the
purchasing employee is no longer considered a related party. The current and non-current portions of the note receivable are
included in the tables found in Note 14 — Supplementary Information for Certain Balance Sheet Accounts to these
consolidated financial statements as Other current assets and Other non-current assets.
Cumulative Divestiture Impact - Including the divestiture of Global Wealth Solutions, we sold five businesses during the
second half of 2017. For the year ended December, 31, 2017, the total gain recognized related to business disposals was $13
million, which was recorded in Other expense/(income), net on the accompanying consolidated statements of comprehensive
income. Results from these disposals prior to the sales represented $54 million of revenue and $13 million of operating income
for the year ended December 31, 2017.
Note 4 — Segment Information
Willis Towers Watson has four reportable operating segments or business areas:
• Human Capital and Benefits (‘HCB’)
• Corporate Risk and Broking (‘CRB’)
•
Investment, Risk and Reinsurance (‘IRR’)
• Benefits Delivery and Administration (‘BDA’) - formerly known as Exchange Solutions (i)
____________________
(i) This segment and the businesses within the segment were renamed to better reflect the nature of the services we offer.
Willis Towers Watson’s chief operating decision maker is its chief executive officer. We determined that the operational data
used by the chief operating decision maker is at the segment level. Management bases strategic goals and decisions on these
segments and the data presented below is used to assess the adequacy of strategic decisions, the method of achieving these
98
strategies and related financial results. Management evaluates the performance of its segments and allocates resources to them
based on net operating income on a pre-bonus, pre-tax basis.
Beginning in 2017, we made certain changes that affect our segment results. These changes, which are detailed in the Form 8-K
filed with the SEC on April 7, 2017, include the following:
•
•
First, to better align our business within our segments, we moved Max Matthiessen, which specializes in pension
investment advice, to Investment, Risk and Reinsurance from Human Capital and Benefits; and moved Fine Art,
Jewellery and Specie, which is a specialty broker, to Corporate Risk and Broking from Investment, Risk and
Reinsurance.
Second, we recast operating income to better reflect the new segment reporting basis. As part of the further integration
of our Willis Towers Watson businesses, we updated our corporate expense allocations to standardize our
methodologies and allocate those expenses which are directly related to the business segment operations. Additionally,
we revised the presentation of certain adjustments which arose from the purchase accounting for the Merger. Due to
the long-term nature of these adjustments, which impact fixed assets and internally-developed software, we aligned
the presentation within the respective segments and consolidated operating income, thereby eliminating a reconciling
adjustment.
The prior period comparatives reflected in the tables below have been retroactively adjusted to reflect our current segment
presentation.
Under the segment structure and for internal and segment reporting, Willis Towers Watson segment revenues include
commissions and fees, interest and other income. U.S. GAAP revenues include amounts that were directly incurred on behalf of
our clients and reimbursed by them (reimbursable expenses), which are removed from segment revenues. Segment
commissions and fees excludes interest and other income. Segment operating income excludes certain costs, including (i)
amortization of intangibles; (ii) restructuring costs; (iii) certain transaction and integration expenses; (iv) certain litigation
provisions; (v) significant pension settlement and curtailment gains or losses; and (vi) 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 expense that we report for U.S. GAAP purposes.
During 2016, segment revenues and operating income both include revenue that was deferred by Towers Watson at the time of
the Merger, and eliminated due to purchase accounting. The impact of the elimination from purchase accounting (which is the
reduction to 2016 consolidated revenues and operating income) has been included in the reconciliation to our consolidated
results in order to provide the actual revenues that the segments would have recognized on an unadjusted basis.
The Company experiences seasonal fluctuations of its commissions and fees revenue. Revenue is typically higher during the
Company’s first and fourth quarters due to the timing of broking-related activities.
The table below presents segment commissions and fees, segment interest and other income, segment revenues, and segment
operating income for our reportable segments for the years ended December 31, 2017, 2016, and 2015.
HCB
CRB
2017
2016
2015
2017
2016
2015
2017
IRR
2016
2015
2017
BDA
2016
Total
2015
2017
2016
2015
Years ended December 31,
Segment
commissions and
fees
Segment interest and
other income
$3,163 $3,100 $ 583
$2,625 $2,519 $2,332
$1,505 $1,475 $ 895
$ 729 $ 652 $ — $8,022 $7,746 $3,810
29
17
1
23
28
17
30
59
1
—
2
—
82
106
19
Segment revenues
$3,192 $3,117 $ 584
$2,648 $2,547 $2,349
$1,535 $1,534 $ 896
$ 729 $ 654 $ — $8,104 $7,852 $3,829
Segment operating
income
$ 781 $ 728 $ 119
$ 488 $ 463 $ 457
$ 365 $ 383 $ 207
$ 152 $ 119 $ — $1,786 $1,693 $ 783
99
The table below presents a reconciliation of the information reported by segment to the consolidated amounts reported for the
years ended December 31, 2017, 2016, and 2015, respectively:
Revenues:
Total segment revenues
Fair value adjustment to deferred revenue
Reimbursable expenses and other
Total revenues
Total segment operating income
Fair value adjustment for deferred revenue
Amortization
Restructuring costs
Transaction and integration expenses (i)
Provision for Stanford and other significant litigation
Pension settlement and curtailment gains and losses
Unallocated, net (ii)
Income from operations
Interest expense
Other expense/(income), net
Years ended December 31,
2017
2016
2015
$
$
$
8,104
$
—
98
8,202
1,786
$
$
—
(581)
(132)
(269)
(11)
(36)
(19)
738
188
61
$
$
$
7,852
(58)
93
7,887
1,693
(58)
(591)
(193)
(177)
(50)
—
(73)
551
184
27
3,829
—
—
3,829
783
—
(76)
(126)
(73)
(70)
—
(11)
427
142
(55)
Income from operations before income taxes and interest in earnings of
associates
____________________
$
489
$
340
$
340
(i)
Includes transaction and integration expenses related to the Merger and the acquisition of Gras Savoye.
(ii)
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.
The Company does not currently provide asset information by reportable segment as it does not routinely evaluate the total
asset position by segment.
None of the Company’s customers represented a significant amount of the Company’s consolidated commissions and fees for
the years ended December 31, 2017, 2016 and 2015.
Below are our revenues and long-lived assets for Ireland, our country of domicile, countries with significant concentrations,
and all other foreign countries for each of the years ended December 31, 2017, 2016 and 2015:
Ireland
$
107
$
92
$
64
$
127
$
114
$
124
2017
Revenues
2016
2015
2017
2016
2015
Long-Lived Assets (i)
United States
United Kingdom
Rest of World
Total Foreign Countries
3,821
1,815
2,459
8,095
3,395
2,236
2,164
7,795
1,597
1,055
1,113
3,765
9,988
3,173
3,263
16,424
11,400
2,431
2,466
16,297
$
8,202
$
7,887
$
3,829
$
16,551
$
16,411
$
1,759
2,426
1,951
6,136
6,260
____________________
(i) Long-Lived Assets do not include deferred tax assets.
100
Note 5 — Restructuring Costs
The Company has two major elements of the restructuring costs included in its consolidated financial statements, which are the
Operational Improvement Program, completed as of the end of 2017, and the Business Restructure Program, which was fully
accrued and completed by the end of 2016.
Operational Improvement Program - In April 2014, Legacy Willis announced a multi-year operational improvement program
designed to strengthen its client service capabilities and to deliver future cost savings. The main elements of the program,
which were completed by the end of 2017, included: moving more than 3,500 support roles from higher cost locations to
facilities in lower cost locations; net workforce reductions in support positions; lease consolidation in real estate; and
information technology systems simplification and rationalization.
The Company recognized restructuring costs of $134 million, $145 million, and $126 million for the years ended December 31,
2017, 2016, and 2015, respectively, related to the Operational Improvement Program. The Company has spent a cumulative
amount of $441 million on restructuring charges for this program.
Business Restructure Program - In the second quarter of 2016, we began planning targeted staffing reductions in certain
portions of the business due to a reduction in business demand or change in business focus (hereinafter referred to as the
Business Restructure Program). The main element of the program included workforce reductions, and was completed in 2016.
During the year ended December 31, 2017, the Company recognized a $2 million reversal of expense related to an estimate of
previously incurred termination benefits. The Company recognized restructuring costs of $48 million for the year ended
December 31, 2016.
An analysis of total restructuring costs recognized in the consolidated statements of comprehensive income, and the costs by
segment, and costs attributable to corporate functions, for the years ended December 31, 2017, 2016 and 2015 are as follows:
HCB
CRB
IRR
BDA
Corporate
Total
Year ended December 31, 2017
Termination benefits
Professional services and other (i)
Total
Year ended December 31, 2016
Termination benefits
Professional services and other (i)
Total
Year ended December 31, 2015
Termination benefits
Professional services and other (i)
Total
___________________
$
$
$
$
$
$
— $
3
3
33
4
37
2
1
3
$
$
$
$
$
25
63
88
26
81
107
24
57
81
$
$
$
$
$
$
4
6
10
6
4
10
7
2
9
$
$
$
$
$
$
— $
—
— $
1
—
1
$
$
— $
—
— $
17
14
31
2
36
38
3
30
33
$
$
$
$
$
$
46
86
132
68
125
193
36
90
126
(i) Other includes salary and benefits, premises, and other expenses incurred to support the ongoing management and facilitation of the programs.
101
An analysis of the total cumulative restructuring costs recognized for the Operational Improvement Program from its
commencement to December 31, 2017 by segment is as follows:
HCB
CRB
IRR
BDA
Corporate
Total
2014
Termination benefits
Professional services and other (i)
2015
Termination benefits
Professional services and other (i)
2016
Termination benefits
Professional services and other (i)
2017
Termination benefits
Professional services and other (i)
Total
Termination benefits
Professional services and other (i)
Total
____________________
$
$
$
$
$
$
— $
—
$
$
2
1
1
1
— $
3
3
5
8
$
$
15
3
24
57
18
81
25
63
82
204
286
$
$
$
$
$
$
1
—
7
2
3
4
4
6
15
12
27
$
$
$
$
$
$
— $
—
— $
—
— $
—
— $
—
— $
—
— $
— $
17
3
30
1
36
19
14
23
97
120
$
$
$
$
$
16
20
36
90
23
122
48
86
123
318
441
(i) Other includes salary and benefits, premises, and other expenses incurred to support the ongoing management and facilitation of the program.
The changes in the Company’s liability under the Operational Improvement Program from its commencement to December 31,
2017, are as follows:
Balance at January 1, 2014
Charges incurred
Cash payments
Balance at December 31, 2014
Charges incurred
Cash payments
Balance at December 31, 2015
Charges incurred
Cash payments
Balance at December 31, 2016
Charges incurred
Cash payments
Balance at December 31, 2017
Termination
Benefits
Professional
Services and
Other
Total
$
— $
— $
16
(11)
5
36
(26)
15
23
(31)
7
48
(41)
14
$
20
(14)
6
90
(85)
11
122
(115)
18
86
(97)
7
$
$
—
36
(25)
11
126
(111)
26
145
(146)
25
134
(138)
21
102
Restructuring costs related to the Business Restructuring Program for the year ended December 31, 2016 by segment are as
follows:
HCB
CRB
IRR
BDA
Corporate
Total
(in millions)
2016
Termination benefits
Professional services and other (i)
Total
$
$
32
3
35
$
$
8
—
8
$
$
3
—
3
$
$
1
—
1
$
$
1
—
1
$
$
45
3
48
____________________
(i) Other includes salary and benefits, premises, and other expenses incurred to support the ongoing management and facilitation of the program.
The changes in the Company’s liability under the Business Restructure Program from its commencement to December 31,
2017, are as follows:
Termination
Benefits
Professional
Services and
Other
Total
Balance at January 1, 2016
Charges incurred
Cash payments
Balance at December 31, 2016
Adjustment to prior charges incurred
Cash payments
Balance at December 31, 2017
Note 6 — Income Taxes
Impact of U.S. Tax Reform
$
$
$
— $
45
(19)
26
(2)
(23)
1
$
$
— $
3
(3)
— $
—
—
— $
—
48
(22)
26
(2)
(23)
1
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and
Jobs Act (hereafter ‘U.S. Tax Reform’). U.S. Tax Reform makes broad and complex changes to the U.S. tax code, including,
but not limited to: (1) requiring a one-time transition tax on certain unremitted earnings of foreign subsidiaries that may be
payable over eight years; (2) bonus depreciation that will allow for a full expensing of qualified property; (3) reduction of the
federal corporate tax rate from 35% to 21%; (4) a new provision designed to tax global intangible low-taxed income (‘GILTI’),
which allows for the possibility of using foreign tax credits (‘FTCs’) and a deduction of up to 50% to offset the income tax
liability (subject to some limitations); (5) a new limitation on deductible interest expense; (6) limitations on the deductibility of
certain executive compensation; (7) limitations on the use of FTCs to reduce the U.S. income tax liability; (8) the creation of
the base erosion anti-abuse tax (‘BEAT’), a new minimum tax; and (9) a general elimination of U.S. federal income taxes on
dividends from foreign subsidiaries.
Also on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (‘SAB 118’), which provides guidance on
accounting for the tax effects of the U.S. Tax Reform. SAB 118 provides for a measurement period that should not extend
beyond one year from the U.S. Tax Reform enactment date for companies to complete the accounting under ASC 740, Income
Taxes (‘ASC 740’). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of U.S. Tax
Reform for which the accounting under ASC 740 is complete. Adjustments to incomplete and unknown amounts will be
recorded and disclosed prospectively during the measurement period. To the extent that a company’s accounting for certain
income tax effects of U.S. Tax Reform is incomplete but it is able to determine a reasonable estimate, it must record a
provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the
financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect
immediately before the enactment of U.S. Tax Reform.
At December 31, 2017, there are no material elements of U.S. Tax Reform for which the Company’s accounting is complete.
While the Company's accounting for the following elements of U.S. Tax Reform is incomplete, the Company was able to make
reasonable estimates of certain effects. Accordingly, the Company recorded provisional adjustments for the following
significant items:
103
Reduction of the federal corporate tax rate – Beginning January 1, 2018, the Company’s U.S. income will be taxed at a
21% federal corporate tax rate. Under ASC 740, deferred tax assets and liabilities must be recalculated as of the
enactment date using current tax laws and rates expected to be in effect when the deferred tax items reverse in future
periods, which is 21%. Consequently, the Company has recorded a provisional decrease in its net deferred tax liabilities
of $208 million, with a corresponding deferred income tax benefit of $208 million. While the Company is able to make a
reasonable estimate of the impact of the reduction in the federal corporate tax rate, it may be affected by other analyses
related to U.S. Tax Reform that could result in other adjustments to U.S. federal deferred tax balances, including analysis
of tax amounts in other comprehensive income and any future guidance issued.
One-time transition tax – The one-time transition tax is based on the Company’s total post-1986 earnings and profits
(‘E&P’) that it previously deferred from U.S. income taxes. The Company recorded a provisional amount for the one-
time transition tax liability for its foreign subsidiaries owned by U.S. corporate shareholders, resulting in an increase in
U.S. Federal income tax expense of $70 million and state income tax expense of $2 million. The Company has a
significant number of foreign subsidiaries and therefore has not yet completed its calculation of the total post-1986 E&P
as well as non-U.S. income taxes paid for these foreign subsidiaries. Further, the transition tax is based in part on the
amount of those earnings held in cash and other specified assets, including trade receivables, based on estimates. The
Company expects to revise its estimates of E&P, non-U.S. income taxes and cash balances throughout 2018 when actual
results are available. In addition, guidance may be released which could also impact these estimates.
Indefinite reinvestment assertion – Beginning in 2018, U.S. Tax Reform provides a 100% deduction for dividends
received from 10-percent owned foreign corporations by U.S. corporate shareholders, subject to a one-year holding
period. Although dividend income is now exempt from U.S. federal tax for U.S. corporate shareholders, companies must
still account for the tax consequences of outside basis differences and other tax impacts of their investments in non-U.S.
subsidiaries. As a result of U.S. Tax Reform we have analyzed our global working capital and cash requirements and the
potential tax liabilities attributable to a repatriation and have determined that we may repatriate up to $219 million, the
majority of which was previously deemed indefinitely reinvested. For those investments from which we were able to
make a reasonable estimate of the tax effects of such repatriation, we have recorded a provisional estimate for foreign
withholding and state income taxes of $1 million. In addition, we re-measured the existing deferred tax liability accrued
on certain acquired Towers Watson subsidiaries and released the deferred tax liability relating to the outside basis
difference. This resulted in an income tax benefit of $76 million as these foreign earnings were subject to the one-time
transition tax which reduced the outside basis difference.
Bonus Depreciation – While the Company has not completed its determination of all capital expenditures that qualify for
immediate expensing for the year ended December 31, 2017, the Company recorded a provisional tax deduction of $40
million based on its current intent to fully expense all qualifying expenditures. The Company will analyze the dates all
capital expenditures were placed in service or acquired and consider any future guidance within the next twelve months
to finalize the deduction. This resulted in an increase of approximately $14 million to the Company's U.S. federal current
income taxes receivable and a corresponding increase in its net deferred tax liabilities of approximately $14 million.
Executive compensation – Starting with compensation paid in 2018, Section 162(m) will limit the Company from
deducting compensation, including performance-based compensation, in excess of $1 million paid to anyone who,
starting in 2018, serves as the Chief Executive Officer or Chief Financial Officer, or who is among the three most highly
compensated executive officers. The only exception to this rule is for compensation that is paid pursuant to a binding
contract in effect on November 2, 2017 that would have otherwise been deductible under the prior Section 162(m) rules.
Accordingly, any compensation paid in the future pursuant to new compensation arrangements entered into after
November 2, 2017, even if performance-based, will count towards the $1 million deduction limit if paid to a covered
executive. The Company recorded a provisional income tax expense of $8 million relating to our compensation plans
not qualifying for the binding contract exception. We are in the process of obtaining additional information needed to
complete our analysis of the binding contract requirement on the various compensation plans to determine the full
impact of the law change. In addition, guidance may be released which could also impact our estimates.
The Company's accounting for the following law changes of U.S. Tax Reform is incomplete, and it is not yet able to make
reasonable estimates of the effects. Therefore, no provisional adjustment was recorded.
GILTI – U.S. Tax Reform creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign
corporations (‘CFCs’) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess
of the shareholder’s ‘net CFC tested income’ over the net deemed tangible income return, which is currently defined as
the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset
investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense
taken into account in the determination of net CFC-tested income. Because of the complexity of the new GILTI tax rules,
104
the Company is continuing to evaluate this provision of U.S. Tax Reform and the application of ASC 740. Under U.S.
GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S.
inclusions in taxable income related to GILTI as a current-period expense when incurred (the ‘period cost method’) or
(2) factoring such amounts into a company’s measurement of its deferred taxes (the ‘deferred method’). The Company’s
selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global
income of its CFCs to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI
and, if so, what the impact is expected to be. Because whether the Company expects to have future U.S. inclusions in
taxable income related to GILTI depends on not only its current structure and estimated future results of global
operations but also its intent and ability to modify its structure and/or its business, the Company is not yet able to
reasonably estimate the effect of this provision of U.S. Tax Reform. Therefore, it has not made any adjustments related
to potential GILTI tax in its consolidated financial statements and has not made a policy decision.
Valuation allowances – The Company must assess whether valuation allowances assessments are affected by various
aspects of U.S. Tax Reform (e.g., limitation on net interest expense in excess of 30% of adjusted taxable income). As of
December 31, 2017, no changes to valuation allowances have been recorded as a result of U.S. Tax Reform.
Provision for income taxes
An analysis of income/(loss) before income taxes by taxing jurisdiction is shown below:
Ireland
U.S.
U.K.
Other jurisdictions
Total
Years ended December 31,
2016
2015
2017
$
$
(23) $
(198)
31
679
489
$
(27) $
(311)
123
555
340
$
(61)
(67)
65
403
340
The components of the income tax provision for/(benefit from) income from operations include:
Current tax expense/(benefit):
U.S. federal taxes
U.S. state and local taxes
U.K. corporation tax
Other jurisdictions
Total current tax expense
Deferred tax expense/(benefit):
U.S. federal taxes
U.S. state and local taxes
U.K. corporation tax
Other jurisdictions
Total deferred tax benefit
Total benefit from income taxes
Years ended December 31,
2017
2016
2015
$
$
$
65
7
14
99
185
(268)
6
(9)
(14)
(285)
(100) $
$
35
14
28
71
148
(214)
(5)
10
(35)
(244)
(96) $
14
1
—
51
66
(113)
(3)
14
3
(99)
(33)
The U.S. federal current tax expense includes the impact of a one-time transition tax expense of $70 million related to U.S. Tax
Reform which the Company intends to elect to pay over an eight year period without interest. The Company currently estimates
that $6 million of this transition tax liability will be paid within the next twelve months.
105
Effective tax rate reconciliation
The reported income tax provision for /(benefit from) operations differs from the amounts that would have resulted had the
reported income before income taxes been taxed at the U.S. federal statutory rate. The principal reasons for the differences
between the amounts provided and those that would have resulted from the application of the U.S. federal statutory tax rate are
as follows:
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND INTEREST
IN EARNINGS OF ASSOCIATES
U.S. federal statutory income tax rate
Income tax expense at U.S. federal tax rate
Adjustments to derive effective tax rate:
Non-deductible expenses and dividends
Non-deductible acquisition costs
Disposal of non-deductible goodwill
Gain on re-measurement of equity interests
Impact of change in rate on deferred tax balances
Effect of foreign exchange and other differences
Non-deductible Venezuelan foreign exchange loss
Changes in valuation allowances
Net tax effect of intra-group items
Tax differentials of non-U.S. jurisdictions
Tax differentials of U.S. state taxes and local taxes
Impact of U.S. Tax Reform
Other items, net
Benefit from income taxes
Years ended December 31,
2017
2016
2015
$
489
35%
171
$
340
35%
119
340
35%
119
68
11
11
—
—
3
2
13
(97)
(69)
(6)
(204)
(3)
(100)
$
15
1
2
—
(15)
6
4
(74)
(98)
(80)
14
—
10
(96)
$
32
9
3
(20)
(5)
(1)
11
(104)
(30)
(42)
(2)
—
(3)
(33)
$
$
In connection with our initial analysis of U.S. Tax Reform, the Company has recorded a provisional net tax benefit of $204
million in 2017, which consists of a net benefit of $208 million due to the reduction of the federal corporate tax rate and re-
measurement of our net U.S. deferred tax liabilities primarily related to acquisition-based intangibles and a $76 million benefit
relating to the release of a deferred tax liability we had previously recorded on the accumulated earnings of certain Towers
Watson subsidiaries. These net benefit items are offset by provisional expenses of $8 million recognized as a write-off of a
deferred tax asset the Company had previously recorded on executive compensation as well as the U.S. federal and state
income tax expense of $72 million associated with the one-time transition tax on foreign earnings of our subsidiaries.
Willis Towers Watson plc is a non-trading holding company tax resident in Ireland where it is taxed at the statutory rate of 25%.
The provision for income tax on operations has been reconciled above to the U.S. federal statutory tax rate of 35% due to
significant operations in the U.S.
Deferred income taxes
Deferred income tax assets and liabilities reflect the effect of temporary differences between the assets and liabilities
recognized for financial reporting purposes and the amounts recognized for income tax purposes. We recognize deferred tax
assets if it is more likely than not that a benefit will be realized.
106
Deferred income tax assets and liabilities included in the consolidated balance sheets at December 31, 2017 and 2016 are
comprised of the following:
Deferred tax assets:
Accrued expenses not currently deductible
Net operating losses
Capital loss carryforwards
Accrued retirement benefits
Deferred compensation
Stock options
Financial derivative transactions
Gross deferred tax assets
Less: valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Cost of intangible assets, net of related amortization
Cost of tangible assets, net of related depreciation
Prepaid retirement benefits
Accrued revenue not currently taxable
Deferred tax liabilities
Net deferred tax liabilities
December 31,
2017
2016
$
$
$
$
$
131
145
28
339
69
24
18
754
(162)
592
929
56
114
62
1,161
569
$
$
$
$
$
286
116
28
467
83
36
12
1,028
(134)
894
1,431
73
85
119
1,708
814
During December 2017, the Company re-measured its U.S. deferred tax assets and liabilities as a result of U.S. Tax Reform to
the newly enacted federal tax rate, which is 21%. The net deferred income tax assets are included in other non-current assets
and the net deferred tax liabilities are included in deferred tax liabilities in our consolidated balance sheets.
Balance sheet classifications:
Other non-current assets
Deferred tax liabilities
Net deferred tax liability
December 31,
2017
2016
$
$
46
615
569
$
$
50
864
814
At December 31, 2017, we had U.S. federal and non-U.S. net operating loss carryforwards amounting to $289 million of which
$237 million can be indefinitely carried forward under local statutes. The remaining $52 million of net operating loss
carryforwards will expire, if unused, in varying amounts from 2018 through 2037. In addition, we had U.S. state net operating
loss carryforwards of $1.5 billion, which will expire in varying amounts from 2018 to 2037.
Management believes, based on the evaluation of positive and negative evidence, including the future reversal of existing
taxable temporary differences, it is more likely than not that the Company will realize the benefits of net deferred tax assets of
$592 million, net of the valuation allowance. During 2017 the Company increased its valuation allowance by $28 million
primarily due to state net operating losses as it is more likely than not that such losses will not be realized in the foreseeable
future. During 2016 the Company released a U.S. valuation allowance of $69 million relating to accrued interest not deductible
as a result of deferred tax liabilities recorded for the Merger. The future reversal of the deferred tax liabilities serve as a source
of income to recognize the deferred tax asset for accrued interest not deductible. During 2015 the Company released a U.S.
valuation allowance of $91 million due to an increase in actual and forecast U.S. earnings.
At December 31, 2017 and 2016, the Company had valuation allowances of $162 million and $134 million, respectively, to
reduce its deferred tax assets to estimated realizable value. The valuation allowance at December 31, 2017 relates to deferred
tax assets for U.K. capital loss carryforwards of $28 million, which have an unlimited carryforward period but can only be
utilized against capital gains and U.S. and non-U.S. net operating losses of $80 million and $34 million, respectively. The
valuation allowance at December 31, 2016 relates to deferred tax assets for U.K. capital loss carryforwards of $28 million,
which have an unlimited carryforward period and U.S. and non-U.S. net operating losses of $78 million and $28 million,
respectively.
107
An analysis of our valuation allowance is shown below.
Balance at beginning of year
Additions charged against/(credited to) to costs and expenses
Additions charged against/(credited to) to other accounts
Deductions
Balance at end of year
Years ended December 31,
2017
2016
2015
$
$
134
35
—
(7)
162
$
$
187
—
21
(74)
134
$
$
280
—
2
(95)
187
In 2017, the amount charged to tax expense in the table above differs from the 2017 rate reconciliation of $13 million because a
portion of the valuation allowance increase is related to the U.S. federal corporate tax rate reduction impact on the U.S. state
valuation allowance and is included in the impact of U.S. Tax Reform. The amount charged to tax expense in the table above
for 2016 differs from the effect of $74 million disclosed in the 2016 rate reconciliation primarily because the movement in this
table includes the effects of acquisition accounting, which does not impact tax expense.
The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when the Company expects
that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the
investments. In 2016 we began accruing deferred taxes on the cumulative earnings of certain acquired Towers Watson
subsidiaries. The historical cumulative earnings of our other subsidiaries have been reinvested indefinitely.
As a result of U.S. Tax Reform, we have analyzed our global working capital and cash requirements and the potential tax
liabilities attributable to a repatriation and have determined that we may repatriate up to $219 million, the majority of which
was previously deemed indefinitely reinvested. For those investments from which we were able to make a reasonable estimate
of the tax effects of such repatriation, we have recorded a provisional estimate for foreign withholding taxes and state income
taxes of $1 million. In addition, we re-measured the existing deferred tax liability accrued on certain acquired Towers Watson
subsidiaries and released the deferred tax liability relating to the outside basis difference. This resulted in an income tax benefit
of $76 million as these foreign earnings were subject to the one-time transition tax which reduced the outside basis difference.
The cumulative earnings related to amounts reinvested indefinitely as of December 31, 2017 were approximately $6.8 billion.
If future events, including material changes in estimates of cash, working capital, long-term investment requirements or
additional guidance relating to U.S. Tax Reform necessitate that these earnings be distributed, an additional provision for
income and foreign withholding taxes, net of credits, may be necessary.
Uncertain tax positions
At December 31, 2017, the amount of unrecognized tax benefits associated with uncertain tax positions, determined in
accordance with ASC 740-10, excluding interest and penalties, was $59 million. A reconciliation of the beginning and ending
balances of the liability for unrecognized tax benefits is as follows:
Balance at beginning of year
Increases related to acquisitions
Increases related to tax positions in prior years
Decreases related to tax positions in prior years
Decreases related to settlements
Decreases related to lapse in statute of limitations
Increases related to current year tax positions
Cumulative translation adjustment and other adjustments
Balance at end of year
2017
2016
2015
$
$
56
—
2
(5)
—
(2)
9
(1)
59
$
$
22
33
1
(9)
(1)
(1)
11
—
56
$
$
19
8
1
(6)
—
—
2
(2)
22
The liability for unrecognized tax benefits for the years ended December 31, 2017, 2016 and 2015 can be reduced by $3
million, $4 million and nil, respectively, of offsetting deferred tax benefits associated with timing differences, foreign tax
credits and the federal tax benefit of state income taxes. If these offsetting deferred tax benefits were recognized, there would
have been a favorable impact on our effective tax rate. There are no material balances that would result in adjustments to other
tax accounts.
108
Interest and penalties related to unrecognized tax benefits are included as a component of income tax expense. At December
31, 2017, we had cumulative accrued interest of $5 million. At December 31, 2016, the cumulative accrued interest was $4
million. Penalties accrued in 2017 were $2 million and immaterial in 2016.
Tax expense for the years ended December 31, 2017 and 2016 included immaterial interest benefits.
The Company believes that the outcomes which are reasonably possible within the next 12 months may result in a reduction in
the liability for unrecognized tax benefits in the range of $4 million to $6 million, excluding interest and penalties.
The Company and its subsidiaries file income tax returns in various tax jurisdictions in which it operates.
Willis North America Inc. is not currently under examination by the U.S. Internal Revenue Service (‘IRS’). We have ongoing
state income tax examinations in certain states for tax years ranging from fiscal year ended June 30, 2012 through calendar year
ended December 31, 2015. The statute of limitations in certain states extends back to the fiscal year ended June 30, 2012 as a
result of changes to taxable income resulting from prior year federal tax examinations.
All U.K. tax returns have been filed timely and are in the normal process of being reviewed by HM Revenue & Customs. The
Company is not currently subject to any material examinations in other jurisdictions. A summary of the tax years that remain
open to tax examination in our major tax jurisdictions are as follows:
U.S. — federal
U.S. — various states
U.K.
Ireland
France
Germany
Canada - federal
Open Tax Years
(fiscal year ending in)
2014 and forward
2012 and forward
2010 and forward
2013 and forward
2010 and forward
2002 and forward
2010 and forward
109
Note 7 — Fixed Assets
The following table reflects changes in the net carrying amount of the components of fixed assets for the year ended
December 31, 2017 and 2016:
Cost: at January 1, 2016
Additions
Acquisitions
Disposals
Foreign exchange
Cost: at December 31, 2016
Additions
Disposals
Foreign exchange
Cost: at December 31, 2017
Depreciation: at January 1, 2016
Depreciation expense
Disposals
Foreign exchange
Depreciation: at December 31, 2016
Depreciation expense (i)
Disposals
Foreign exchange
Depreciation: at December 31, 2017
Net book value:
At December 31, 2016
At December 31, 2017
____________________
$
$
$
$
$
$
Furniture,
equipment and
software
Leasehold
improvements
272
$
44
95
(8)
(21)
382
91
(21)
16
468
$
$
$
724
265
109
(28)
(61)
1,009
303
(61)
49
1,300
(393) $
(119)
17
31
(464)
(199)
37
(26)
(652) $
(94) $
(55)
5
7
(137)
(47)
14
(6)
(176) $
545
648
$
$
245
292
$
$
Land and
buildings
Total
95
2
—
—
(7)
90
—
—
4
94
$
$
(41) $
(4)
—
4
(41)
(6)
—
(2)
(49) $
49
45
$
$
1,091
311
204
(36)
(89)
1,481
394
(82)
69
1,862
(528)
(178)
22
42
(642)
(252)
51
(34)
(877)
839
985
(i) Depreciation expense included here does not equal the depreciation expense on the statement of comprehensive income for the year ended December
31, 2017 due to the inclusion of $49 million which has been classified as transaction and integration expenses.
Included within land and buildings are the following assets held under capital leases:
Capital leases
Accumulated depreciation
December 31,
2017
2016
$
$
31
(14)
17
$
$
32
(12)
20
Depreciation related to capital leases was $2 million for each of the years ended December 31, 2017, 2016 and 2015.
Note 8 — Goodwill and Other Intangible Assets
Goodwill
Goodwill represents the excess of the cost of businesses acquired over the fair market value of identifiable net assets at the
dates of acquisition. Goodwill is not amortized but is subject to impairment testing annually and whenever facts or
circumstances indicate that the carrying amounts may not be recoverable. Goodwill is allocated to our reporting units primarily
based on the original purchase price allocation for acquisitions within the reporting units, or relative fair value when an
acquisition covers multiple reporting units. When a business entity is sold, goodwill is allocated to the disposed entity based on
the relative fair value of that entity compared with the fair value of the reporting unit in which it was included.
110
The components of goodwill are outlined below for the years ended December 31, 2017 and 2016:
Balance at December 31, 2015
Goodwill, gross
Accumulated impairment losses
Goodwill, net - December 31, 2015
Purchase price allocation adjustments
Goodwill acquired during the period (i)
Goodwill disposed of during the period
Foreign exchange
Balance at December 31, 2016
Goodwill, gross
Accumulated impairment losses
Goodwill, net - December 31, 2016
Goodwill reassigned in segment realignment (ii)
Goodwill acquired during the period
Goodwill disposed of during the period
Foreign exchange
Balance at December 31, 2017
Goodwill, gross
Accumulated impairment losses
Goodwill, net - December 31, 2017
____________________
$
$
$
HCB
CRB
IRR
BDA
Total
$
$
986
(130)
856
8
3,458
—
(40)
4,412
(130)
4,282
(113)
—
(31)
74
$
$
2,212
(362)
1,850
5
—
(5)
(34)
2,178
(362)
1,816
13
8
(5)
67
$
$
1,031
—
1,031
(7)
770
—
(36)
1,758
—
1,758
100
—
(27)
20
4,342
(130)
4,212
$
2,261
(362)
1,899
$
1,851
—
1,851
$
— $
—
—
—
2,557
—
—
2,557
—
2,557
—
—
—
—
2,557
—
2,557
$
$
4,229
(492)
3,737
6
6,785
(5)
(110)
10,905
(492)
10,413
—
8
(63)
161
11,011
(492)
10,519
(i) Goodwill acquired consists primarily of goodwill recognized from the Merger.
(ii) Represents the reallocation of goodwill related to certain businesses which were realigned among the segments as of January 1, 2017. See Note 4
— Segment Information for further information.
Other Intangible Assets
The following table reflects changes in the net carrying amount of the components of finite-lived intangible assets for the year
ended December 31, 2017:
Balance at
December 31,
2016
Intangible
assets acquired
Intangible
assets disposed
Amortization (ii)
Foreign
Exchange
Balance at
December 31,
2017
Client relationships
$
2,655
$
Management contracts
Software (i)
Trademark and trade name
Product
Favorable agreements
Other
Total amortizable intangible
assets
____________________
54
570
1,006
33
11
3
13
—
36
—
—
1
—
$
(44) $
(379) $
97
$
2,342
—
—
(1)
—
—
—
(4)
(150)
(44)
(3)
(2)
(1)
6
17
5
3
—
—
56
473
966
33
10
2
$
4,332
$
50
$
(45) $
(583) $
128
$
3,882
(i) All in-process research and development intangible assets acquired as part of the Merger on January 4, 2016 of $39 million ($36 million at the date
placed into service due to changes in foreign currency exchange rates) have been placed into service during the year ended December 31, 2017 and
have been included as intangible assets acquired in this presentation.
(ii) Amortization associated with favorable lease agreements is recorded in Other operating expenses in the consolidated statements of comprehensive
income.
111
The following table reflects changes in the net carrying amount of the components of finite-lived intangible assets for the year
ended December 31, 2016:
Balance as of
December 31,
2015
$
920
Purchase
price
allocation
adjustments
2
Intangible
assets
acquired
$
2,222
62
77
50
—
2
4
—
(13)
1
—
—
—
—
675
1,003
42
11
—
Intangible
$
assets disposed Amortization (ii)
(5) $
—
Foreign
Exchange
Balance as of
December 31,
2016
(395) $
(4)
(142)
(45)
(3)
(2)
(2)
(89) $
(4)
(27)
(3)
(6)
—
1
2,655
54
570
1,006
33
11
3
—
—
—
—
—
$
1,115
(10) $
3,953
$
(5) $
(593) $
(128) $
4,332
Client relationships
Management contracts
Software (i)
Trademark and trade name
Product
Favorable agreements
Other
Total amortizable
intangible assets
____________________
(i)
In-process research and development intangible assets acquired as part of the Merger on January 4, 2016 of $39 million ($36 million at December
31, 2016) had not yet been placed in service and are not included in this presentation.
(ii) Amortization associated with favorable agreements is recorded in Other operating expenses in the consolidated statements of comprehensive
income.
We recorded amortization related to our finite-lived intangible assets, exclusive of the amortization of our favorable lease
agreements, of $581 million, $591 million, and $76 million for the years ended December 31, 2017, 2016 and 2015,
respectively.
Our acquired unfavorable lease liabilities were $26 million and $29 million as of December 31, 2017 and December 31, 2016,
respectively, and are recorded in other non-current liabilities in the consolidated balance sheet.
The following table reflects the carrying value of finite-lived intangible assets and liabilities at December 31, 2017 and
December 31, 2016:
Client relationships
Management contracts
Software
Trademark and trade name
Product
Favorable agreements
Other
Total finite-lived assets
Unfavorable agreements
Total finite-lived intangible liabilities
December 31, 2017
December 31, 2016
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
$
3,462
$
68
764
1,055
39
14
6
5,408
34
34
$
$
$
$
$
$
(1,120) $
(12)
(291)
(89)
(6)
(4)
(4)
(1,526) $
(8) $
(8) $
3,396
$
62
711
1,051
36
13
6
5,275
34
34
$
$
$
(741)
(8)
(141)
(45)
(3)
(2)
(3)
(943)
(5)
(5)
The weighted average remaining life of amortizable intangible assets and liabilities at December 31, 2017 was 14.3 years.
112
The table below reflects the future estimated amortization expense for amortizable intangible assets and the rent offset resulting
from amortization of the net lease intangible assets and liabilities for the next five years and thereafter:
Year ending December 31,
2018
2019
2020
2021
2022
Thereafter
Total
Amortization
Rent offset
$
$
535
479
426
348
289
1,795
$
3,872
$
(4)
(2)
(3)
(2)
(2)
(3)
(16)
Note 9 — Derivative Financial Instruments
We are exposed to certain interest rate and foreign currency risks. Where possible, we identify exposures in our business that
can be offset internally. Where no natural offset is identified, we may choose to enter into various derivative transactions.
These instruments have the effect of reducing our exposure to unfavorable changes in interest and foreign currency rates. The
Company’s board of directors reviews and approves policies for managing each of these risks as summarized below. Additional
information regarding our derivative financial instruments can be found in Note 2 — Basis of Presentation, Significant
Accounting Policies and Recent Accounting Pronouncements, Note 11 — Fair Value Measurements and Note 16 —
Accumulated Other Comprehensive Loss.
Interest Rate Risk - Investment Income
As a result of the Company’s operating activities, the Company holds fiduciary funds. The Company earns interest on these
funds, which is included in the Company’s consolidated financial statements in interest and other income. These funds are
regulated in terms of access as are the instruments in which they may be invested, most of which are short-term in nature.
During 2015, in order to manage interest rate risk arising from these financial assets, the Company entered into interest rate
swaps to receive a fixed rate of interest and pay a variable rate of interest. These derivatives, with total notional amounts of
$300 million, were designated as hedging instruments at December 31, 2017 and December 31, 2016 and had net fair value
liabilities of $1 million and nil, respectively.
Foreign Currency Risk
Certain non-U.S. subsidiaries receive revenues and incur expenses in currencies other than their functional currency, and as a
result, the foreign subsidiary’s functional currency revenues will fluctuate as the currency rates change. Additionally, the
forecast Pounds sterling expenses of our London brokerage market operations may exceed their Pounds sterling revenues, and
they may also hold a significant net Pounds sterling asset or liability position in the consolidated balance sheet. To reduce such
variability, we use foreign exchange contracts to hedge against this currency risk.
These derivatives were designated as hedging instruments and at December 31, 2017 and December 31, 2016 had total notional
amounts of $937 million and $945 million, respectively, and net fair value liabilities of $21 million and $110 million,
respectively.
At December 31, 2017, the Company estimates, based on current interest and exchange rates, there will be $26 million of net
derivative losses on forward exchange rates, interest rate swaps, and treasury locks reclassified from accumulated other
comprehensive income/(loss) into earnings within the next twelve months as the forecast transactions affect earnings. At
December 31, 2017, our longest outstanding maturity was 2.9 years.
113
The effects of the material derivative instruments that are designated as hedging instruments on the consolidated statements of
comprehensive income for the years ended December 31, 2017, 2016 and 2015 are as follows:
Location
of (loss)/gain
reclassified
from OCI into
income
(effective portion)
Gain/(loss) recognized in
OCI
(effective portion)
2017
2016
2015
(Loss)/gain reclassified
from OCI into income
(effective portion)
2017
2016
2015
Location of (loss)/
gain recognized in
income
(ineffective portion
and amount
excluded from
effectiveness
testing)
(Loss)/gain recognized
in income (ineffective
portion and
amount excluded from
effectiveness testing)
2017
2016
2015
Foreign exchange
contracts
$
39
$ (127) $ (38)
Other expense/
(income), net
$ (53) $ (42) $
4
Interest expense
$
(1) $
(1) $
1
We also enter into foreign currency transactions, primarily to hedge certain intercompany loans. These derivatives are not
generally designated as hedging instruments and at December 31, 2017 and December 31, 2016, we had notional amounts of
$971 million and $630 million, respectively, and had a net fair value asset of $3 million, and a net fair value liability of $8
million, respectively.
The effects of derivatives that have not been designated as hedging instruments on the consolidated statements of
comprehensive income for the years ended December 31, 2017, 2016 and 2015 are as follows:
Derivatives not designated as hedging instruments:
Location of gain/(loss) recognized in
income
Gain/(loss) recognized
in income
Foreign exchange contracts
Other expense/(income), net
$
11
$
(3) $
(3)
2017
2016
2015
Note 10 — Debt
Short-term debt and current portion of long-term debt consists of the following:
6.200% senior notes due 2017
Current portion of 7-year term loan facility
Current portion of term loan due 2019
Short-term borrowing under bank overdraft arrangement
Other debt
December 31,
2017
2016
— $
—
85
—
—
85
$
394
22
85
5
2
508
$
$
114
Long-term debt consists of the following:
Revolving $1.25 billion credit facility
Revolving $800 million credit facility
7-year term loan facility
Term loan due 2019
7.000% senior notes due 2019
5.750% senior notes due 2021
3.500% senior notes due 2021
2.125% senior notes due 2022 (i)
4.625% senior notes due 2023
3.600% senior notes due 2024
4.400% senior notes due 2026
6.125% senior notes due 2043
________________________
(i) Notes issued in Euro (€540 million )
Guarantees
December 31,
2017
2016
$
$
884
—
—
84
186
497
447
644
248
645
544
271
4,450
$
$
—
238
196
169
186
496
446
565
247
—
543
271
3,357
All direct obligations under the 6.200% (repaid during 2017), 7.000% and 3.600% senior notes are issued by Willis North
America Inc. and guaranteed by Willis Towers Watson, Willis Netherlands Holdings B.V., Willis Investment U.K. Holdings
Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited, Willis Towers Watson Sub Holdings Unlimited Company
and Willis Towers Watson UK Holdings Limited. See Note 21 — Financial Information for Parent Guarantor, Other Guarantor
Subsidiaries and Non-Guarantor Subsidiaries.
All direct obligations under the 5.750% senior notes are issued by the Company and guaranteed by Trinity Acquisition plc,
Willis Netherlands Holdings B.V., Willis Investment U.K. Holdings Limited, TA I Limited, Willis North America Inc., Willis
Group Limited, Willis Towers Watson Sub Holdings Unlimited Company and Willis Towers Watson UK Holdings Limited. See
Note 22 — Financial Information for Parent Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries.
All direct obligations under the 4.625%, 6.125%, 3.500%, 4.400%, and 2.125% senior notes are issued by Trinity Acquisition
plc and guaranteed by Willis Towers Watson, Willis Netherlands Holdings B.V., Willis Investment U.K. Holdings Limited, TA I
Limited, Willis North America Inc., Willis Group Limited, Willis Towers Watson Sub Holdings Unlimited Company and Willis
Towers Watson UK Holdings Limited. See Note 23 — Financial Information for Issuer, Parent Guarantor, Other Guarantor
Subsidiaries and Non-Guarantor Subsidiaries.
Revolving Credit Facility
$1.25 billion revolving credit facility
On March 7, 2017, Trinity Acquisition plc (see Note 23 for further information) entered into a $1.25 billion amended and
restated revolving credit facility (the ‘RCF’), that will mature on March 7, 2022. The RCF replaced the previous $800 million
revolving credit facility (see below for further information). Amounts outstanding under the RCF shall bear interest at LIBOR
plus a margin of 1.00% to 1.75%, or alternatively, the base rate plus a margin of 0.00% to 0.75%, based upon the Company’s
guaranteed senior unsecured long-term debt rating.
Borrowings of $409 million and €45 million against the RCF were used to repay all outstanding borrowings against the
previous $800 million revolving credit facility and the 7-year term loan due July 23, 2018.
Additionally, on March 28, 2017, $407 million was used to repay the 6.200% senior notes due 2017, including accrued interest.
$800 million revolving credit facility
Drawings under the previous $800 million revolving credit facility bore interest at LIBOR plus a margin of 1.25% to 2.00%, or
alternatively the base rate plus a margin of 0.25% to 1.00% based upon the Company’s guaranteed senior unsecured long-term
debt rating; a 1.375% margin applied while the Company’s debt rating remained BBB/Baa3. At December 31, 2016, $238
million was outstanding under this revolving credit facility.
115
WSI revolving credit facility
Willis Securities Inc. (‘WSI’) maintained a $400 million revolving credit facility. The WSI revolving credit facility expired on
April 28, 2017. As of December 31, 2017 and 2016, there were no borrowings outstanding under the WSI revolving credit
facility.
Senior Notes
3.600% senior notes due 2024
On May 16, 2017, Willis North America Inc. (see Note 21 for further information) issued $650 million of 3.600% senior notes
due 2024 (‘2024 senior notes’). The effective interest rate of the 2024 senior notes is 3.614%, which includes the impact of the
discount upon issuance. The 2024 senior notes will mature on May 15, 2024, and interest accrues on the 2024 senior notes from
May 16, 2017 and will be paid in cash on May 15 and November 15 of each year. The net proceeds from this offering, after
deducting underwriter discounts and commissions and estimated offering expenses, were $644 million, and were used to pay
down amounts outstanding under the RCF and for general corporate purposes.
2.125% senior notes due 2022
On May 26, 2016, Trinity Acquisition plc issued €540 million ($609 million) of 2.125% senior notes due 2022 (‘2022 senior
notes’). The 2022 senior notes are fully and unconditionally guaranteed by Willis Towers Watson. The effective interest rate of
these senior notes is 2.154%, which includes the impact of the discount upon issuance. The 2022 senior notes will mature on
May 26, 2022. Interest accrues on the notes from May 26, 2016 and will be paid in cash on May 26 of each year. The net
proceeds from this offering, after deducting underwriter discounts and commissions and estimated offering expenses, were
€535 million ($600 million). We used the net proceeds of this offering to repay Tranche A of the previous 1-year term loan
facility, which matured in 2016, and related accrued interest.
3.500% senior notes due 2021 and 4.400% senior notes due 2026
On March 22, 2016, Trinity Acquisition plc issued $450 million of 3.500% senior notes due 2021 (‘2021 senior notes’) and
$550 million of 4.400% senior notes due 2026 (‘2026 senior notes’). The 2021 senior notes and the 2026 senior notes are fully
and unconditionally guaranteed by the Company. The effective interest rates of these senior notes are 3.707% and 4.572%,
respectively, which includes the impact of the discount upon issuance. The 2021 senior notes and the 2026 senior notes will
mature on September 15, 2021 and March 15, 2026, respectively. Interest accrues on the notes from March 22, 2016 and will be
paid in cash on March 15 and September 15 of each year. The net proceeds from these offerings, after deducting underwriter
discounts and commissions and estimated offering expenses, were $988 million. We used the net proceeds of these offerings to:
(i) repay $300 million principal under the prior $800 million revolving credit facility and related accrued interest, which was
drawn to repay our previously issued 4.125% senior notes on March 15, 2016; (ii) repay $400 million principal on Tranche B of
the previous 1-year term loan facility and related accrued interest; and (iii) pay down a portion of the remaining principal
amount outstanding under the previous $800 million revolving credit facility and related accrued interest.
4.625% senior notes due 2023 and 6.125% senior notes due 2043
On August 15, 2013, the Company issued $250 million of 4.625% senior notes due 2023 and $275 million of 6.125% senior notes
due 2043. The effective interest rates of these senior notes are 4.696% and 6.154%, respectively, which include the impact of the
discount upon issuance. The proceeds were used to repurchase other previously issued senior notes.
5.750% senior notes due 2021
In March 2011, the Company issued $500 million of 5.750% senior notes due 2021. The effective interest rate of this senior note
is 5.871%, which includes the impact of the discount upon issuance. The proceeds were used to repurchase and redeem other
previously issued senior notes.
7.000% senior notes due 2019
In September 2009, Willis North America Inc. issued $300 million of 7.000% senior notes due 2019. The effective interest rates
of these senior notes are 7.081%, which include the impact of the discount upon issuance. A portion of the proceeds were used to
repurchase and redeem other previously issued senior notes. In August 2013, $113 million of the 7.000% senior notes due 2019
were repurchased.
116
Term Loan Facilities
7-year term loan facility
The 7-year term loan facility expiring 2018 bore interest at the same rate applicable to the previous $800 million revolving
credit facility and was repayable in quarterly installments of $6 million with a final repayment of $186 million due in the third
quarter of 2018. During 2017, we repaid in full and terminated the 7-year term loan with proceeds from borrowings against our
$1.25 billion revolving credit facility.
Term loan due December 2019
On January 4, 2016, we acquired a $340 million term loan in connection with the Merger. On November 20, 2015, Towers
Watson Delaware Inc. entered into a four-year amortizing term loan agreement for up to $340 million with a consortium of
banks to help fund the pre-Merger special dividend. On December 28, 2015, Towers Watson Delaware Inc. borrowed the full
$340 million.
The interest rate on the term loan is based on the Company’s choice of one, two, three or six-month LIBOR plus a spread of
1.25% to 1.75%, or alternatively the bank base rate plus 0.25% to 0.75%. The spread to each index is dependent on the
Company’s consolidated leverage ratio. The weighted-average interest rate on this term loan for the year ended December 31,
2017 was 2.33%. The term loan amortizes at a rate of $21 million per quarter, beginning in March 2016, with a final maturity
date of December 2019. The Company has the right to prepay a portion or all of the outstanding term loan balance on any
interest payment date without penalty. At December 31, 2017, the balance outstanding on the term loan was $170 million,
before reduction of $1 million in debt issuance fees.
Additional Information Regarding Fully Repaid Term Loan Facility and Senior Notes
1-year term loan facility
On November 20, 2015, Legacy Willis entered into a 1-year term loan facility. The 1-year term loan had two tranches: Tranche
A was for €550 million , of which €544 million ($592 million) was drawn on December 19, 2015 and used to finance the
acquisition of Gras Savoye. Tranche B was for $400 million and was drawn on January 4, 2016 and used to re-finance debt
held by Legacy Towers Watson which became due on acquisition. Tranche A was repaid in its entirety on May 26, 2016 from
the proceeds from the issuance of our 2022 senior notes discussed above. Tranche B was repaid in its entirety on March 22,
2016 from a portion of the proceeds from the issuance of our senior notes discussed above. The amount outstanding as of
December 31, 2015 was $592 million, gross of $5 million in debt fees related to the 1-year term loan facility.
4.125% senior notes due 2016
In March 2011, the Company issued $300 million of 4.125% senior notes due 2016. The effective interest rate of the senior notes
was 4.240%, which included the impact of the discount upon issuance. The proceeds were used to repurchase and redeem other
previously issued senior notes.
6.200% senior notes due 2017
On March 28, 2007, we issued $600 million of 10 year senior notes at 6.200%. The effective interest rate of these senior notes
was 6.253%. In August 2013, $206 million of the 6.200% senior notes were repurchased. The final balance was repaid on
March 28, 2017 from the RCF as discussed above.
Covenants
The terms of our current financings also include certain limitations. For example, the agreements relating to the debt
arrangements and credit facilities generally contain numerous operating and financial covenants, including requirements to
maintain minimum ratios of consolidated EBITDA to consolidated cash interest expense and maximum levels of consolidated
funded indebtedness in relation to consolidated EBITDA, in each case subject to certain adjustments. The operating
restrictions and financial covenants in our credit facilities do, and any future financing agreements may, limit our ability to
finance future operations or capital needs or to engage in other business activities. At December 31, 2017 and 2016, we were in
compliance with all financial covenants.
117
Debt Maturity
The following table summarizes the maturity of our debt, interest on senior notes and excludes any reduction for debt issuance
costs:
2018
2019
2020
2021
2022
Thereafter
Total
$
$
— $
187
$
— $
950
$
644
$
1,725
$
147
85
—
144
85
—
134
—
—
107
—
—
82
—
884
464
—
—
3,506
1,078
170
884
232
$
416
$
134
$
1,057
$
1,610
$
2,189
$
5,638
Senior notes
Interest on senior notes
Term loans
RCF
Total
Interest Expense
The following table shows an analysis of the interest expense for the years ended December 31:
Senior notes
Term loans
RCF
WSI revolving credit facility
Other (i)
Total interest expense
________________________
Years ended December 31,
2017
2016
2015
$
$
148
8
17
1
14
188
$
$
139
17
10
2
16
184
$
$
114
5
6
2
15
142
(i) Other primarily includes debt issuance costs, interest expense on capitalized leases and accretion on deferred and contingent consideration.
Note 11 — Fair Value Measurements
The Company has categorized its assets and liabilities that are measured at fair value on a recurring and non-recurring basis
into a three-level fair value hierarchy, based on the reliability of the inputs used to determine fair value as follows:
•
•
Level 1: refers to fair values determined based on quoted market prices in active markets for identical assets;
Level 2: refers to fair values estimated using observable market based inputs or unobservable inputs that are
corroborated by market data; and
•
Level 3: includes fair values estimated using unobservable inputs that are not corroborated by market data.
The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial
instruments:
• Available-for-sale securities are classified as Level 1 because we use quoted market prices in determining the fair
value of these securities.
• Market values for our derivative instruments have been used to determine the fair value of interest rate swaps and
forward foreign exchange contracts based on estimated amounts the Company would receive or have to pay to
terminate the agreements, taking into account observable information about the current interest rate environment or
current foreign currency forward rates. Such financial instruments are classified as Level 2 in the fair value hierarchy.
• Contingent consideration payable is classified as Level 3, and we estimate fair value based on the likelihood and
timing of achieving the relevant milestones of each arrangement, applying a probability assessment to each of the
potential outcomes, and discounting the probability-weighted payout. Typically, milestones are based on revenue or
EBITDA growth for the acquired business.
118
The following tables present our assets and liabilities measured at fair value on a recurring basis at December 31, 2017 and
December 31, 2016:
Balance Sheet Location
Level 1
Level 2
Level 3
Total
Fair Value Measurements on a Recurring Basis at December 31, 2017
Assets:
Available-for-sale securities:
Mutual funds / exchange traded
funds
Derivatives:
Prepaid and other current assets and
other non-current assets
Derivative financial instruments (i)
Prepaid and other current assets and
other non-current assets
Liabilities:
Contingent consideration:
Contingent consideration (ii)
Other current liabilities and
other non-current liabilities
Derivatives:
Derivative financial instruments (i)
Other current liabilities and
other non-current liabilities
$
$
$
$
40
$
— $
— $
— $
18
$
— $
— $
— $
51
$
— $
37
$
— $
40
18
51
37
Balance Sheet Location
Level 1
Level 2
Level 3
Total
Fair Value Measurements on a Recurring Basis at December 31, 2016
Assets:
Available-for-sale securities:
Mutual funds / exchange traded
funds
Derivatives:
Prepaid and other current assets and
other non-current assets
Derivative financial instruments (i)
Prepaid and other current assets and
other non-current assets
Liabilities:
Contingent consideration:
Contingent consideration (ii)
Other current liabilities and
other non-current liabilities
Derivatives:
Derivative financial instruments (i)
Other current liabilities and
other non-current liabilities
____________________
$
$
$
$
37
$
— $
— $
— $
15
$
— $
37
15
— $
— $
55
$
55
— $
133
$
— $
133
(i) See Note 9 — Derivative Financial Instruments for further information on our derivative instruments.
(ii) Probability weightings are based on our knowledge of the past and planned performance of the acquired entity to which the contingent consideration
applies. The weighted-average discount rate used on our material contingent consideration calculations was 9.64% and 10.76% at December 31,
2017 and December 31, 2016, respectively. Using different probability weightings and discount rates could result in an increase or decrease of the
contingent consideration payable.
The following table summarizes the change in fair value of the Level 3 liabilities:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance at December 31, 2016
Obligations assumed
Net sales
Payments
Realized and unrealized gains
Foreign exchange
Balance at December 31, 2017
December 31, 2017
$
$
55
—
(7)
(10)
9
4
51
There were no significant transfers between Levels 1, 2 or 3 during the years ended December 31, 2017 and 2016.
119
Fair value information about financial instruments not measured at fair value
The following tables present our liabilities not measured at fair value on a recurring basis at December 31, 2017 and 2016:
Liabilities:
Short-term debt and current portion of long-term debt
Long-term debt
$
$
85
4,450
$
$
85
4,706
$
$
508
3,357
$
$
513
3,504
December 31, 2017
December 31, 2016
Carrying Value
Fair Value
Carrying Value
Fair Value
The carrying values of our revolving lines of credit and term loans approximate their fair values. The fair values above are not
necessarily indicative of the amounts that the Company would realize upon disposition nor do they indicate the Company’s
intent or ability to dispose of the financial instrument. The fair value of our respective senior notes are considered level 2
financial instruments as they are corroborated by observable market data.
Note 12 — Retirement Benefits
Defined Benefit Plans and Post-retirement Welfare Plans
Willis Towers Watson sponsors both qualified and non-qualified defined benefit pension plans and other post-retirement
welfare plans (‘PRW’) plans throughout the world. The majority of our plan assets and obligations are in the United States and
the United Kingdom. We have also included disclosures related to defined benefit plans in certain other countries, including
Canada, France, Germany, Ireland and the Netherlands. Together, these disclosed funded and unfunded plans represent 99% of
Willis Towers Watson’s pension and PRW obligations and are disclosed herein.
On January 4, 2016, in connection with the Merger, we acquired additional defined benefit pension, PRW, and defined
contribution plans. Total plan assets of approximately $3.7 billion and projected benefit obligations of approximately $4.6
billion were acquired. The funded status for each of the acquired plans has been included in the values of identifiable assets
acquired, and liabilities assumed in Note 3 — Merger, Acquisitions and Divestitures and are recorded as $67 million in pension
benefits assets and $923 million in liability for pension benefits.
As part of these obligations, in the United States, the United Kingdom and Canada, we have non-qualified plans that provide
for the additional pension benefits that would be covered under the qualified plan in the respective country were it not for
statutory maximums. The non-qualified plans are unfunded.
The significant plans within each grouping are described below:
United States
Legacy Willis – This plan was frozen in 2009. Approximately one-quarter of the Legacy Willis employees in the
United States have a frozen accrued benefit under this plan.
Willis Towers Watson Plan – Substantially all U.S. employees are eligible to participate in this plan. Benefits are
provided under a stable value pension plan design. The original stable value design came into effect on January 1,
2012. As of July 1, 2017, existing plan participants earn benefits without having to make employee contributions, and
all newly eligible employees are required to contribute 2% of pay to participate in the plan.
United Kingdom
Legacy Willis – This plan covers approximately one third of the Legacy Willis employees in the United Kingdom. The
plan is now closed to new entrants. New employees in the United Kingdom are offered the opportunity to join a
defined contribution plan.
Legacy Towers Watson – Benefit accruals earned under the Legacy Watson Wyatt defined benefit plan (predominantly
pension benefits) ceased on February 28, 2015, although benefits earned prior to January 1, 2008 retain a link to salary
until the employee leaves the Company. Benefit accruals earned under the legacy Towers Perrin defined benefit plan
(predominantly lump sum benefits) were frozen on March 31, 2008. All participants now accrue defined contribution
benefits.
Legacy Miller – The plan provides retirement benefits based on members’ salaries at the point at which they ceased to
accrue benefits under the scheme.
120
Other
Canada (Legacy Towers Watson) – Participants accrue qualified and non-qualified benefits based on a career average
benefit formula. Additionally, participants can choose to make voluntary contributions to purchase enhancements to
their pension.
France (Legacy Gras Savoye) – The mandatory retirement indemnity plan is a termination benefit which provides
lump sum benefits at retirement. There is no vesting before the retirement date and the benefit formula is determined
through the collective bargaining agreement and the labor code. All employees with permanent employment contracts
are eligible.
Germany (Legacy Willis) – The defined benefit plan population consists of retirees receiving annuities and three
participants with deferred vested benefits. Other employees and former employees participate in defined contribution
arrangements.
Germany (Legacy Towers Watson) – Effective January 1, 2011, all new participants participate in a defined
contribution plan. Participants hired prior to this date continue to participate in various defined contribution and
defined benefit arrangements according to legacy plan formulas. The legacy defined benefit plans are primarily
account-based, with some long-service participants continuing to accrue benefits according to grandfathered final-
average-pay formulas.
Ireland (Legacy Willis) – The defined benefit plans provide pension benefits for approximately one third of legacy
Willis employees in Ireland. The defined benefit plans are now closed to new entrants.
Ireland (Legacy Towers Watson) – Benefit accruals earned under the scheme’s defined benefit plan ceased on May 1,
2015. Benefits earned prior to this date retain a link to salary until the employee leaves the Company.
Netherlands (Legacy Towers Watson) – Benefits under the plan used to accrue on a final pay basis on earnings up to a
maximum amount each year. The benefit accrual under the final pay plan stopped at December 31, 2010. The accrued
benefits will receive conditional indexation each year.
Post-retirement Welfare Plan
We provide certain healthcare and life insurance benefits for retired participants. The principal plans cover participants
in the U.S. who have met certain eligibility requirements. Our principal post-retirement benefit plans are primarily
unfunded. Retiree medical benefits provided under our U.S. post-retirement benefit plans were closed to new hires
effective January 1, 2011. Life insurance benefits under the plans were frozen with respect to service, eligibility and
amounts as of January 1, 2012 for active participants.
121
Amounts Recognized in our Consolidated Financial Statements
The following schedules provide information concerning the defined benefit pension plans and PRW plan as of and for the
years ended December 31, 2017 and 2016:
Change in Benefit Obligation
Benefit obligation, beginning of year
$
4,169
$ 3,899
$
732
$
113
$
976
$
2,881
$
184
$
—
2017
2016
U.S.
U.K.
Other
PRW
U.S.
U.K.
Other
PRW
Service cost
Interest cost
Employee contributions
Actuarial losses
Settlements
Benefits paid
Business combinations
Transfers in
Foreign currency changes
Benefit obligation, end of year
Change in Plan Assets
Fair value of plan assets, beginning of year
Actual return on plan assets
Employer contributions
Employee contributions
Settlements
Benefits paid
Business combinations
Transfers in
Foreign currency adjustment
Fair value of plan assets, end of year
Funded status at end of year
Accumulated Benefit Obligation
Components on the Consolidated Balance
Sheet
Pension benefits assets
Current liability for pension benefits
Non-current liability for pension benefits
$
$
$
$
$
$
$
$
$
66
139
6
293
(16)
(181)
—
—
—
32
93
1
2
(138)
(93)
—
—
369
4,476
$ 4,165
3,280
$ 4,360
$
$
464
101
6
(16)
(181)
—
—
—
290
66
1
(138)
(93)
—
—
424
3,654
$ 4,910
(822) $
745
4,476
$ 4,165
$
$
$
20
17
—
5
(1)
(29)
—
1
77
822
467
42
34
—
(1)
(29)
—
1
48
$
$
562
$
—
4
6
14
—
(14)
—
—
—
59
137
—
151
—
(166)
3,012
—
—
123
$ 4,169
$
749
153
91
—
—
(166)
2,453
—
—
4
—
6
6
—
(14)
—
—
—
2
24
114
1
852
(12)
(130)
842
—
(673)
3,899
3,478
$
$
$
$
782
106
1
(12)
(130)
906
—
(771)
$ 3,280
$
4,360
(260) $
(121) $
(889) $
461
790
$
123
$ 4,169
$
3,899
$
$
$
19
18
—
61
(61)
(24)
530
1
4
732
158
26
39
—
(58)
(24)
321
1
4
$
$
467
$
1
3
7
4
—
(14)
112
—
—
113
—
—
7
7
—
(14)
4
—
—
4
(265) $
(109)
696
$
113
— $
754
$
(40) $
— $
17
$
(6) $
— $
(5) $
— $
478
$
(47) $
— $
10
$
(7) $
(782) $
(9) $
(271) $
(116) $
(842) $
(17) $
(268) $
(822) $
745
$
(260) $
(121) $
(889) $
461
$
(265) $
—
(3)
(106)
(109)
Amounts recognized in accumulated other comprehensive loss as of December 31, 2017 and 2016 consist of:
Net actuarial loss
Net prior service gain
Accumulated other comprehensive loss
2017
2016
U.S.
U.K.
Other
PRW
U.S.
U.K.
Other
PRW
$
$
663
—
663
$
$
909
(142)
767
$
$
79
—
79
$
$
19
—
19
$
$
603
—
603
$
$
918
(147)
771
$
$
80
—
80
$
$
4
—
4
The following table presents the projected benefit obligation and fair value of plan assets for our plans that have a projected
benefit obligation in excess of plan assets as of December 31, 2017 and 2016:
Projected benefit obligation at end of year
Fair value of plan assets at end of year
U.S.
$
$
4,476
3,654
$
$
2017
U.K.
122
Other
U.S.
2016
U.K.
Other
10
$
— $
758
481
$
$
4,169
3,280
$
$
843
825
$
$
686
411
The following table presents the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for
our plans that have an accumulated benefit obligation in excess of plan assets as of December 31, 2017 and 2016.
Projected benefit obligation at end of year
Accumulated benefit obligation at end of year
Fair value of plan assets at end of year
2017
U.K.
U.S.
$
$
$
4,476
4,476
3,654
$
$
$
Other
U.S.
10
10
$
$
— $
758
726
481
$
$
$
4,169
4,169
3,280
$
$
$
2016
U.K.
Other
686
650
411
843
843
825
$
$
$
The components of the net periodic benefit income and other amounts recognized in other comprehensive (income)/loss for the
years ended December 31, 2017, 2016 and 2015 for the defined benefit pension and PRW plans are as follows:
2017
2016
2015
U.S.
U.K. Other PRW U.S.
U.K. Other PRW U.S.
U.K. Other PRW
Components of net periodic benefit (income)/cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized prior service
credit
Amortization of unrecognized actuarial loss
Settlement
Curtailment gain
$
66 $
32 $
20 $ — $
59 $
24 $
19 $
139
93
17
(245)
(284)
(30)
—
13
1
—
(18)
53
37
—
—
2
1
—
4
—
—
—
—
—
137
114
18
(240)
(253)
(27)
—
12
—
—
(19)
42
—
—
—
—
5
—
1
3
—
—
—
—
—
$ — $
33 $
3 $ —
41
107
(57)
(230)
—
11
—
—
(18)
36
—
(5)
3
(3)
—
1
—
—
—
—
—
—
—
—
Net periodic benefit (income)/cost
$ (26) $ (87) $
10 $
4
$ (32) $ (92) $
15 $
4
$
(5) $ (77) $
4 $ —
Other changes in plan assets and benefit
obligations recognized in other
comprehensive loss/(income):
Net actuarial loss/(gain)
$
74 $
(4) $
(7) $
Amortization of unrecognized actuarial loss
(13)
(53)
Prior service gain
Amortization of unrecognized prior service
credit
Settlement
Curtailment loss
—
—
(1)
—
—
18
(37)
—
(2)
—
—
(1)
—
Total recognized in other comprehensive loss/
(income)
Total recognized in net periodic benefit (income)/
60
(76)
(10)
14
—
—
—
—
—
14
$ 238 $ 323 $
62 $
4
$ (16) $
59 $
(5) $ —
(12)
(42)
—
—
—
—
—
19
—
—
226
300
—
—
—
(8)
—
54
—
—
—
—
—
4
8
(11)
(36)
— (215)
—
—
—
18
—
18
(1)
—
—
—
—
(27)
(156)
(6)
—
—
—
—
—
—
$ (32) $ (233) $
(2) $ —
cost and other comprehensive loss/(income)
$
34 $ (163) $ — $
18
$ 194 $ 208 $
69 $
During the year ended December 31, 2017, as a result of past changes in UK legislation and the low interest rate environment,
the amount of transfer payments from the Legacy Willis UK pension plan exceeded the plan’s service and interest cost. This
triggers settlement accounting which requires immediate recognition of a portion of the obligations associated with the plan
transfers. Consequently, the Company recognized a non-cash expense of $36 million.
During fiscal year 2016, we adopted the granular approach to calculating service and interest cost. This was treated as a change
in accounting estimate, and resulted in a credit of $51 million included in our total net periodic benefit income reflected above.
On March 6, 2015, Legacy Willis announced to members of the U.K. defined benefit pension plan that, effective from June 30,
2015, future salary increases would not be pensionable (the ‘salary freeze’). Legacy Willis recognized the salary freeze as a
plan amendment at the announcement date. The impact of the salary freeze reduced the plan’s projected benefit obligation by
approximately $215 million and created a prior service credit which is recognized in other comprehensive income and then
amortized to the consolidated statement of comprehensive income over the remaining expected service life of active
employees.
123
The estimated net actuarial loss and prior service gain for the defined benefit plans that will be amortized from accumulated
other comprehensive loss into net periodic benefit cost over the next fiscal year are:
Estimated net actuarial loss
Prior service gain
For the Year Ended December 31, 2018
U.S.
U.K
Other
PRW
$
$
11
$
— $
47
$
(19) $
2
$
— $
1
—
Assumptions Used in the Valuations of the Defined Benefit Pension Plans and PRW Plan
The determination of the Company’s obligations and annual expense under the plans is based on a number of assumptions that,
given the longevity of the plans, are long-term in focus. A change in one or a combination of these assumptions could have a
material impact on our projected benefit obligation. However, certain of these changes, such as changes in the discount rate and
actuarial assumptions, are not recognized immediately in net income, but are instead recorded in other comprehensive income.
The accumulated gains and losses not yet recognized in net income are amortized into net income as a component of the net
periodic benefit cost/(credit) generally based on the average working life expectancy of the plan’s active participants to the
extent that the net gains or losses as of the beginning of the year exceed 10% of the greater of the market-related value of plan
assets or the projected benefit obligation. The average remaining service period of participants for the PRW plan is
approximately 9.9 years.
The Company considers several factors prior to the start of each fiscal year when determining the appropriate annual
assumptions, including economic forecasts, relevant benchmarks, historical trends, portfolio composition and peer company
comparisons. These assumptions, used to determine our pension liabilities and pension expense, are reviewed annually by
senior management and changed when appropriate. The discount rate will be changed annually if underlying rates have moved,
whereas the expected long-term return on assets will be changed less frequently as longer term trends in asset returns emerge or
long-term target asset allocations are revised. To calculate the discount rate, we use the granular approach to determining
service and interest costs. The expected rate of return assumptions for all plans are supported by an analysis of the weighted-
average yield expected to be achieved based upon the anticipated makeup of the plans’ investments. Other material assumptions
include rates of participant mortality, and the expected long-term rate of compensation and pension increases.
The following assumptions were used in the valuations of Willis Towers Watson’s defined benefit pension plans and PRW plan.
The assumptions presented for the U.S. plans represent the weighted-average of rates for all U.S. plans. The assumptions
presented for the U.K. plans represent the weighted-average of rates for the U.K. plans. The assumptions presented for the
Other plans represent the weighted-average of rates for the Canada, France, Germany, Ireland, and Netherlands plans.
124
The assumptions used to determine net periodic benefit cost for the fiscal years ended December 31, 2017, 2016, and 2015
were as follows:
Discount rate (i)
Discount rate - PBO
Discount rate - service cost
Years ended December 31,
2017
2016
2015
U.S.
U.K. Other PRW U.S.
U.K. Other PRW U.S.
U.K. Other PRW
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3.9% 3.6% 2.3% —%
4.0% 2.6% 2.7% 4.0%
4.2% 3.8% 3.2% 4.2%
3.9% 2.6% 3.0% 3.9%
3.9% 3.8% 3.4% 4.1%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A —%
N/A —%
N/A —%
N/A —%
Discount rate - interest cost on service cost
3.2% 2.4% 2.8% 3.5%
3.2% 3.8% 3.1% 3.5%
Discount rate - interest cost on PBO
3.4% 2.3% 2.3% 3.3%
3.4% 3.4% 2.8% 3.3%
Expected long-term rate of return on assets
7.6% 6.3% 6.1% 2.0%
7.6% 6.2% 6.1% 2.0%
7.3% 6.5% 3.3% —%
Rate of increase in compensation levels
4.3% 3.2% 2.3% N/A
4.3% 3.2% 2.3% N/A
N/A
2.9% 2.2% —%
Healthcare cost trend
Initial rate
Ultimate rate
Year reaching ultimate rate
7.0%
5.0%
2022
7.0%
5.0%
2022
N/A
N/A
N/A
____________________
(i) This discount rate represents the assumption to determine net periodic benefit cost prior to the Company’s use of the granular approach to calculating
service and interest cost which began for the 2016 fiscal year.
The following tables present the assumptions used in the valuation to determine the projected benefit obligation for the fiscal
years ended December 31, 2017 and 2016:
Discount rate
Rate of increase in compensation levels
December 31, 2017
Other
U.K.
PRW
U.S.
December 31, 2016
Other
U.K.
2.6%
3.0%
2.6%
2.3%
3.5%
N/A
4.0%
4.3%
2.6%
3.2%
2.7%
2.3%
U.S.
3.6%
4.3%
PRW
4.0%
N/A
A one percentage point change in the assumed healthcare cost trend rates would have an immaterial effect on the post-
retirement benefit cost and obligation as of December 31, 2017.
The expected return on plan assets was determined on the basis of the weighted-average of the expected future returns of the
various asset classes, using the target allocations shown below. The Company’s pension plan asset target allocations as of
December 31, 2017 were as follows:
Asset Category
Equity securities
Debt securities
Real estate
Other
Total
U.S.
Willis
Towers
Watson
Willis
U.K.
Towers
Watson
Canada
Germany
Ireland
Miller
Towers
Watson
Towers
Watson
Willis
Towers
Watson
35%
54%
11%
—%
23%
43%
6%
28%
33%
47%
2%
18%
11%
56%
—%
33%
33%
55%
—%
12%
60%
40%
—%
—%
30%
51%
—%
19%
32%
27%
3%
38%
71%
29%
—%
—%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The Legacy Willis plan in Germany and the Legacy Towers Watson plan in the Netherlands are invested in insurance contracts.
Consequently, the asset allocations of the plans are managed by the insurer. The Legacy Gras Savoye plan in France is
unfunded.
Our investment strategy is designed to generate returns that will reduce the interest rate risk inherent in each of the plan’s
benefit obligations and enable the plans to meet their future obligations. The precise amount for which these obligations will be
settled depends on future events, including the life expectancy of the plan participants and salary inflation. The obligations are
estimated using actuarial assumptions, based on the current economic environment.
Each pension plan seeks to achieve total returns sufficient to meet expected future obligations when considered in conjunction
with expected future contributions and prudent levels of investment risk and diversification. Each plan’s targeted asset
allocation is generally determined through a plan-specific Asset-Liability Modeling study. These comprehensive studies
provide an evaluation of the projected status of asset and benefit obligation measures for each plan under a range of both
125
positive and negative environments. The studies include a number of different asset mixes, spanning a range of diversification
and potential equity exposures.
In evaluating the strategic asset allocation choices, an emphasis is placed on the long-term characteristics of each individual
asset class, such as expected return, volatility of returns and correlations with other asset classes within the portfolios.
Consideration is also given to the proper long-term level of risk for each plan, the impact of the volatility and magnitude of
plan contributions and costs, and the impact that certain actuarial techniques may have on the plan’s recognition of investment
experience.
We monitor investment performance and portfolio characteristics on a quarterly basis to ensure that managers are meeting
expectations with respect to their investment approach. There are also various restrictions and controls placed on managers,
including prohibition from investing in our stock.
Fair Value of Plan Assets
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value:
• Level 1: refers to fair values determined based on quoted market prices in active markets for identical assets;
• Level 2: refers to fair values estimated using observable market based inputs or unobservable inputs that are
corroborated by market data; and
• Level 3: includes fair values estimated using unobservable inputs that are not corroborated by market data.
The fair values of our U.S. plan assets by asset category at December 31, 2017 and 2016 are as follows:
December 31, 2017
December 31, 2016
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Asset category:
Cash
Short-term securities
Equity securities
Government bonds
Corporate bonds
Other fixed income
Pooled / commingled funds
Mutual funds
Private equity
Hedge funds
Total assets
$
$
10
—
202
10
—
—
—
1
—
—
223
$
$
— $
283
—
—
193
20
—
—
—
—
496
$
— $
—
—
—
—
—
—
—
—
—
— $
10
283
202
10
193
20
1,922
1
287
724
3,652
$
$
3
—
253
10
—
—
—
183
—
—
449
$
$
— $
33
8
—
169
19
—
—
—
—
229
$
— $
—
—
—
—
—
—
—
—
—
— $
3
33
260
10
170
19
1,665
183
234
692
3,269
126
The fair values of our U.K. plan assets by asset category at December 31, 2017 and 2016 are as follows:
December 31, 2017
December 31, 2016
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Asset category:
Cash
Equity securities
Government bonds
Corporate bonds
Other fixed income
Pooled / commingled funds
Mutual funds
Private equity
Derivatives
Real estate
Hedge funds
Total assets
Liability category:
Repurchase agreements
Derivatives
Net assets
$
$
$
92
24
1,841
—
—
—
—
—
—
—
—
1,957
—
—
1,957
$
$
$
— $
—
—
224
246
—
—
—
102
—
—
572
549
16
7
$
$
— $
—
—
—
—
—
—
—
—
—
—
— $
92
24
1,841
224
246
2,294
8
32
102
218
393
5,474
—
—
— $
549
16
4,909
$
$
$
49
374
1,184
—
—
—
—
—
—
—
—
1,607
—
—
1,607
$
$
$
— $
8
—
118
216
—
—
—
73
—
—
415
—
14
401
$
$
— $
—
—
—
—
—
—
—
—
—
—
— $
49
382
1,184
118
216
1,677
11
40
73
197
426
4,373
—
—
— $
—
14
4,359
The fair values of our Other plan assets by asset category at December 31, 2017 and 2016 are as follows:
December 31, 2017
December 31, 2016
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Asset category:
Cash
Pooled / commingled funds
Mutual funds
Insurance contracts
Total assets
$
$
5
—
—
—
5
$
$
— $
—
—
—
— $
— $
—
—
19
19
$
5
327
209
19
560
$
$
17
—
—
—
17
$
$
— $
—
—
—
— $
— $
—
—
17
17
$
17
214
224
17
472
Our PRW plan invests only in short-term investments and mutual funds and is not included within this fair value hierarchy
table.
We evaluate the need to transfer between levels based upon the nature of the financial instrument and size of the transfer
relative to the total net assets of the plans. There were no significant transfers between Levels 1, 2 or 3 in the fiscal years ended
December 31, 2017 and 2016.
In accordance with Subtopic 820-10, Fair Value Measurement and Disclosures, certain investments that are measured at fair
value using the net asset value per share practical expedient have not been classified in the fair value hierarchy. The fair value
amounts presented in these tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented in
the statements of net assets.
Following is a description of the valuation methodologies used for investments at fair value:
Short-term securities: Valued at the net value of shares held by the Company at year end as reported by the sponsor of the
funds.
Equity securities and Mutual Funds: Valued at the closing price reported on the active market on which the individual
securities are traded. Exchange traded mutual funds are included as Level 1 above.
Government bonds: Valued at the closing price reported in the active market in which the bond is traded.
Corporate bonds: Valued using pricing models maximizing the use of observable inputs for similar securities. This includes
basing value on yields currently available on comparable securities of issuers with similar credit ratings.
127
Other Fixed Income: Foreign and municipal bonds are valued at the closing price reported in the active market in which the
bond is traded.
Pooled / Commingled Funds and Mutual Funds: Valued at the net value of shares held by the Company at year end as reported
by the manager of the funds. These funds are not exchange traded and are not reported by level in the tables above.
Derivative investments: Valued at the closing level of the relevant index or security and interest accrual through the valuation
date.
Private equity funds, Real estate funds, Hedge funds: The fair value for these investments is estimated based on the net asset
value derived from the latest audited financial statements or most recent capital account statements provided by the private
equity fund’s investment manager or third-party administrator.
Insurance contracts: The fair values are determined using model-based techniques that include option-pricing models,
discounted cash flow models and similar techniques.
Repurchase agreements: Valued as the repurchase obligation which includes an interest rate linked to the underlying fixed
interest government bond portfolio. These agreements are short-term in nature (less than one year) and were entered into for the
purpose of purchasing additional government bonds.
The following table reconciles the net plan investments to the total fair value of the plan assets:
Net assets held in investments
PRW plan assets
Net receivable for investments purchased
Dividend and interest receivable
Fair value of plan assets
Level 3 investments
December 31,
2017
2016
9,121
$
8,100
2
2
3
3
3
3
9,128
$
8,109
$
$
As a result of the inherent limitations related to the valuations of the Level 3 investments, due to the unobservable inputs of the
underlying funds, the estimated fair value may differ significantly from the values that would have been used had a market for
those investments existed.
The following table sets forth a summary of changes in the fair value of the plans’ Level 3 assets for the fiscal year ended
December 31, 2017:
Beginning balance at December 31, 2016
Foreign exchange
Ending balance at December 31, 2017
Contributions and Benefit Payments
Level 3
Roll Forward
$
$
17
2
19
Funding is based on actuarially determined contributions and is limited to amounts that are currently deductible for tax
purposes. Since funding calculations are based on different measurements than those used for accounting purposes, pension
contributions are not equal to net periodic pension costs.
The following table sets forth our projected pension contributions to our qualified plans for fiscal year 2018, as well as the
pension contributions to our qualified plans in fiscal years 2017 and 2016:
U.S.
U.K.
Other
2018
(Projected)
2017
(Actual)
2016
(Actual)
$
$
$
50
81
13
$
$
$
50
65
13
$
$
$
50
105
29
128
Expected benefit payments from our defined benefit pension plans to current plan participants, including the effect of their
expected future service, as appropriate, are as follows:
Fiscal Year
2018
2019
2020
2021
2022
Years 2023 – 2027
Defined Contribution Plan
U.S.
U.K.
Benefit Payments
Other
PRW
Total
230
236
245
249
260
1,386
112
111
117
127
129
764
$
2,606
$
1,360
$
36
26
27
29
36
16
17
18
19
20
179
333
$
117
207
$
394
390
407
424
445
2,446
4,506
We have defined contribution plans covering eligible employees in many countries. The most significant plans are in the U.S.
and U.K. and are described here.
We have a U.S. defined contribution plan covering all eligible employees of Willis Towers Watson (the ‘Plan’). The Plan allows
participants to make pre-tax and Roth after-tax contributions and provides a 100% match by us on the first 1% of employee
contributions and 50% match on the next 5% of employee contributions. Employees vest in the employer match upon 2 years
of service. All investment assets of the plan are held in a trust account administered by independent trustees.
The Legacy Towers Watson U.K. pension plan has a money purchase component to which we make core contributions plus
additional contributions matching those of the participants up to a maximum rate. Contribution rates depend on the age of the
participant and whether or not they arise from salary sacrifice arrangements through which the participant has elected to receive
a pension contribution in lieu of additional salary.
The Legacy Willis U.K. pension plan has a money purchase component to which we make core contributions plus additional
contributions matching those of the participants up to a maximum rate. Contribution rates may arise from salary sacrifice
arrangements through which the participant has elected to receive a pension contribution in lieu of additional salary.
We made contributions to our defined contribution plans for the years ended December 31, 2017, 2016, and 2015 amounting to
$154 million, $152 million and $77 million, respectively.
Note 13 — Commitments and Contingencies
Operating Leases
The Company leases certain land, building and equipment under various operating lease commitments. The total amount of the
minimum rent is expensed on a straight-line basis over the term of the lease. Rental expenses and sub-lease rental income for
operating leases are recorded as part of other operating expenses in the consolidated statements of comprehensive income.
Rental expense, exclusive of sublease income, was $302 million, $302 million, and $142 million for the years ended December
31, 2017, 2016 and 2015, respectively. We have entered into sublease agreements for some of our excess leased space. Sublease
income was $21 million, $17 million and $17 million for the years ended December 31, 2017, 2016 and 2015, respectively.
As of December 31, 2017, the aggregate future minimum rental commitments under all non-cancellable operating lease
agreements are as follows:
2018
2019
2020
2021
2022
Thereafter
Total
Gross rental
commitments
204
$
191
165
138
120
585
1,403
$
129
$
$
Rentals from
subleases
Net rental
commitments
188
178
152
128
116
580
1,342
(16) $
(13)
(13)
(10)
(4)
(5)
(61) $
Guarantees
Guarantees issued by certain of Willis Towers Watson’s subsidiaries with respect to the senior notes and revolving credit
facilities are discussed in Note 10 — Debt.
Certain of Willis Towers Watson’s subsidiaries have given the landlords of some leasehold properties occupied by the Company
in the United Kingdom and the United States guarantees in respect of the performance of the lease obligations of the subsidiary
holding the lease. The operating lease obligations subject to such guarantees amounted to $669 million and $558 million at
December 31, 2017 and 2016, respectively. The capital lease obligations subject to such guarantees amounted to $8 million and
$9 million as of December 31, 2017 and 2016, respectively.
Acquisition liabilities
The Company has deferred and contingent consideration due to be paid on existing acquisitions until 2019 totaling $96 million
at December 31, 2017. Most notably, our liability for the acquisition of Miller Insurance Services LLP in May 2015, for which
deferred and contingent consideration, including interest, was $78 million at December 31, 2017. Total deferred and contingent
consideration paid during the year ended December 31, 2017 was $65 million.
Other contractual obligations
For certain subsidiaries and associates, the Company has the right to purchase shares (a call option) from co-shareholders at
various dates in the future. In addition, the co-shareholders of certain subsidiaries and associates have the right to sell their
shares (a put option) to the Company at various dates in the future. Generally, the exercise price of such put options and call
options is formula-based (using revenues and earnings) and is designed to reflect fair value. Based on current projections of
profitability and exchange rates, and assuming the put options are exercised, the potential amount payable from these options is
not expected to exceed $34 million.
In July 2010, the Company made a capital commitment of $25 million to Trident V Parallel Fund, LP, an investment fund
managed by Stone Point Capital. This replaced a capital commitment of $25 million that had been made to Trident V, LP in
December 2009. As of December 31, 2017 there have been approximately $24 million of capital contributions.
In May 2011, the Company made a capital commitment of $10 million to Dowling Capital Partners I, LP. As of December 31,
2017 there had been approximately $9 million of capital contributions.
Other contractual obligations at December 31, 2017 and 2016, include certain capital lease obligations totaling $48 million and
$54 million, respectively, primarily in respect of the Company’s Nashville property.
Indemnification Agreements
Willis Towers Watson has various agreements which provide that it may be obligated to indemnify the other party to the
agreement with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the
normal course of business and in connection with the purchase and sale of certain businesses. Although it is not possible to
predict the maximum potential amount of future payments that may become due under these indemnification agreements
because of the conditional nature of Willis Towers Watson’s obligations and the unique facts of each particular agreement,
Willis Towers Watson does not believe any potential liability that might arise from such indemnity provisions is probable or
material. There are no provisions for recourse to third parties, nor are any assets held by any third parties that any guarantor can
liquidate to recover amounts paid under such indemnities.
Legal Proceedings
In the ordinary course of business, the Company is subject to various actual and potential claims, lawsuits, and other
proceedings. Some of the claims, lawsuits and other proceedings seek damages in amounts which could, if assessed, be
significant. We do not expect the impact of claims or demands not described below to be material to the Company’s
consolidated financial statements. The Company also receives subpoenas in the ordinary course of business and, from time to
time, receives requests for information in connection with governmental investigations.
Errors and omissions claims, lawsuits, and other proceedings arising in the ordinary course of business are covered in part by
professional indemnity or other appropriate insurance. See Note 14 for the amounts accrued at December 31, 2017 and 2016 in
the consolidated balance sheets. The terms of this insurance vary by policy year. Regarding self-insured risks, the Company has
established provisions which are believed to be adequate in the light of current information and legal advice, or, in certain
cases, where a range of loss exists, the Company accrues the minimum amount in the range if no amount within the range is a
better estimate than any other amount. The Company adjusts such provisions from time to time according to developments.
130
On the basis of current information, the Company does not expect that the actual claims, lawsuits and other proceedings to
which the Company is subject, or potential claims, lawsuits, and other proceedings relating to matters of which it is aware, will
ultimately have a material adverse effect on the Company’s financial condition, results of operations or liquidity. Nonetheless,
given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation and
disputes with insurance companies, it is possible that an adverse outcome or settlement in certain matters could, from time to
time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual
periods. In addition, given the early stages of some litigation or regulatory proceedings described below, it is not possible to
predict their outcome or resolution, and it is possible that these events may have a material adverse effect on the Company.
The Company provides for contingent liabilities based on ASC 450, Contingencies, when it is determined that a liability,
inclusive of defense costs, is probable and reasonably estimable. The contingent liabilities recorded are primarily developed
actuarially. Litigation is subject to many factors which are difficult to predict so there can be no assurance that in the event of a
material unfavorable result in one or more claims, we will not incur material costs.
Merger-related Appraisal Demands
Between November 12, 2015 and December 10, 2015, in connection with the then-proposed Merger, Towers Watson received
demands for appraisal under Section 262 of the Delaware General Corporation Law on behalf of ten purported beneficial
owners of an aggregate of approximately 2.4% of the shares of Towers Watson common stock outstanding at the time of the
Merger. Between March 3, 2016 and March 23, 2016, three appraisal petitions were filed in the Court of Chancery for the State
of Delaware on behalf of three purported beneficial owners of Towers Watson common stock, captioned Rangeley Capital LLC
v. Towers Watson & Co., C.A. No. 12063-CB, Merion Capital L.P. v. Towers Watson & Co., C.A. No. 12064-CB, and College
Retirement Equities Fund v. Towers Watson & Co., C.A. No. 12126-CB. The appraisal petitions seek, among other things, a
determination of the fair value of the appraisal petitioners’ shares at the time of the Merger; an order that Towers Watson pay
that value to the appraisal petitioners, together with interest at the statutory rate; and an award of costs, attorneys’ fees, and
other expenses. Towers Watson answered the appraisal petitions between March 24, 2016 and April 18, 2016. On May 9, 2016,
the court consolidated the three pending appraisal proceedings under the caption In re Appraisal of Towers Watson & Co.,
Consolidated C.A. No. 12064-CB. A fourth owner filed an appraisal demand, but did not file an appraisal petition. The
aggregate amount of shares subject to appraisal from these four owners was 1,415,199. The court provisionally scheduled trial
for October 2, 2017. On September 15, 2017, the Company reached a settlement with all shareholders who made demands for
appraisal, resolving all claims related to the appraised shares. Under the terms of the settlement, these shareholders surrendered
all rights to the Towers Watson shares and all potential Merger consideration issuable for the legacy shares. In exchange, the
Company made a payment to these shareholders of approximately $211 million, which represented $134.75 per share plus
accrued interest at the statutory rate of interest. As a result of the settlement, the Court, on September 18, 2017, dismissed all
claims in the case with prejudice. The Company thereafter canceled all of the Towers Watson common shares at issue in the
appraisal proceeding.
Merger-Related Securities Litigation
On November 21, 2017, a purported former stockholder of Legacy Towers Watson filed a putative class action complaint on behalf
of a putative class consisting of all Legacy Towers Watson stockholders as of October 2, 2015 against the Company, Legacy Towers
Watson, Legacy Willis, ValueAct Capital Management (‘ValueAct’), and certain current and former directors and officers of Legacy
Towers Watson and Legacy Willis (John Haley, Dominic Casserley, and Jeffrey Ubben), in the United States District Court for
the Eastern District of Virginia. The complaint asserts claims against certain defendants under Section 14(a) of the Securities
Exchange Act of 1934 (the ‘Exchange Act’) for allegedly false and misleading statements in the proxy statement for the Merger;
and against other defendants under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such
allegedly false and misleading statements. The complaint further contends that the allegedly false and misleading statements caused
stockholders of Legacy Towers Watson to accept inadequate Merger consideration. The complaint seeks damages in an unspecified
amount. On February 20, 2018, the court appointed the Regents of the University of California as Lead Plaintiff and Bernstein
Litowitz Berger & Grossman LLP as Lead Counsel for the putative class, consolidated all subsequently filed, removed, or transferred
actions, and captioned the consolidated action “In re Willis Towers Watson plc Proxy Litigation,” Master File No. 1:17-cv-1338-
AJT-JFA. Lead Plaintiff has indicated that it intends to file a consolidated amended complaint.
On February 27, 2018, another purported former stockholder of Legacy Towers Watson filed a putative class action complaint on
behalf of a putative class of Legacy Towers Watson stockholders against the former members of the Legacy Towers Watson board
of directors, Legacy Towers Watson, Legacy Willis and ValueAct, in the Delaware Court of Chancery, captioned City of Fort
Myers General Employees’ Pension Fund v. Towers Watson & Co., et al., C.A. No. 2018-0132. Based on similar allegations, the
complaint asserts claims against the former directors of Legacy Towers Watson for breach of fiduciary duty and against Legacy
Willis and ValueAct for aiding and abetting breach of fiduciary duty. The defendants have not yet responded to the complaint.
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The Company disputes the allegations in these actions and intends to defend the lawsuits vigorously. Given the stage of the
proceedings, the Company is unable to provide an estimate of the reasonably possible loss or range of loss in respect of the
complaints.
Stanford Financial Group
The Company has been named as a defendant in 15 similar lawsuits relating to the collapse of The Stanford Financial Group
(‘Stanford’), for which Willis of Colorado, Inc. acted as broker of record on certain lines of insurance. The complaints in these
actions generally allege that the defendants actively and materially aided Stanford’s alleged fraud by providing Stanford with
certain letters regarding coverage that they knew would be used to help retain or attract actual or prospective Stanford client
investors. The complaints further allege that these letters, which contain statements about Stanford and the insurance policies
that the defendants placed for Stanford, contained untruths and omitted material facts and were drafted in this manner to help
Stanford promote and sell its allegedly fraudulent certificates of deposit.
The 15 actions are as follows:
•
Troice, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:9-CV-1274-N, was filed on July 2, 2009 in the U.S. District
Court for the Northern District of Texas against Willis Group Holdings plc, Willis of Colorado, Inc. and a Willis
associate, among others. On April 1, 2011, plaintiffs filed the operative Third Amended Class Action Complaint
individually and on behalf of a putative, worldwide class of Stanford investors, adding Willis Limited as a defendant
and alleging claims under Texas statutory and common law and seeking damages in excess of $1 billion, punitive
damages and costs. On May 2, 2011, the defendants filed motions to dismiss the Third Amended Class Action
Complaint, arguing, inter alia, that the plaintiffs’ claims are precluded by the Securities Litigation Uniform Standards
Act of 1998 (‘SLUSA’).
On May 10, 2011, the court presiding over the Stanford-related actions in the Northern District of Texas entered an
order providing that it would consider the applicability of SLUSA to the Stanford-related actions based on the decision
in a separate Stanford action not involving a Willis entity, Roland v. Green, Civil Action No. 3:10-CV-0224-N
(‘Roland’). On August 31, 2011, the court issued its decision in Roland, dismissing that action with prejudice under
SLUSA.
On October 27, 2011, the court in Troice entered an order (i) dismissing with prejudice those claims asserted in the
Third Amended Class Action Complaint on a class basis on the grounds set forth in the Roland decision discussed
above and (ii) dismissing without prejudice those claims asserted in the Third Amended Class Action Complaint on an
individual basis. Also on October 27, 2011, the court entered a final judgment in the action.
On October 28, 2011, the plaintiffs in Troice filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit.
Subsequently, Troice, Roland and a third action captioned Troice, et al. v. Proskauer Rose LLP, Civil Action No. 3:09-
CV-01600-N, which also was dismissed on the grounds set forth in the Roland decision discussed above and on appeal
to the U.S. Court of Appeals for the Fifth Circuit, were consolidated for purposes of briefing and oral argument.
Following the completion of briefing and oral argument, on March 19, 2012, the Fifth Circuit reversed and remanded
the actions. On April 2, 2012, the defendants-appellees filed petitions for rehearing en banc. On April 19, 2012, the
petitions for rehearing en banc were denied. On July 18, 2012, defendants-appellees filed a petition for writ of
certiorari with the United States Supreme Court regarding the Fifth Circuit’s reversal in Troice. On January 18, 2013,
the Supreme Court granted our petition. Opening briefs were filed on May 3, 2013 and the Supreme Court heard oral
argument on October 7, 2013. On February 26, 2014, the Supreme Court affirmed the Fifth Circuit’s decision.
On March 19, 2014, the plaintiffs in Troice filed a Motion to Defer Resolution of Motions to Dismiss, to Compel Rule
26(f) Conference and For Entry of Scheduling Order.
On March 25, 2014, the parties in Troice and the Janvey, et al. v. Willis of Colorado, Inc., et al. action discussed below
stipulated to the consolidation of the two actions for pre-trial purposes under Rule 42(a) of the Federal Rules of Civil
Procedure. On March 28, 2014, the Court ‘so ordered’ that stipulation and, thus, consolidated Troice and Janvey for
pre-trial purposes under Rule 42(a).
On September 16, 2014, the court (a) denied the plaintiffs’ request to defer resolution of the defendants’ motions to
dismiss, but granted the plaintiffs’ request to enter a scheduling order; (b) requested the submission of supplemental
briefing by all parties on the defendants’ motions to dismiss, which the parties submitted on September 30, 2014; and
(c) entered an order setting a schedule for briefing and discovery regarding plaintiffs’ motion for class certification,
which schedule, among other things, provided for the submission of the plaintiffs’ motion for class certification
(following the completion of briefing and discovery) on April 20, 2015.
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On December 15, 2014, the court granted in part and denied in part the defendants’ motions to dismiss. On January 30,
2015, the defendants except Willis Group Holdings plc answered the Third Amended Class Action Complaint.
On April 20, 2015, the plaintiffs filed their motion for class certification, the defendants filed their opposition to
plaintiffs’ motion, and the plaintiffs filed their reply in further support of the motion. Pursuant to an agreed stipulation
also filed with the court on April 20, 2015, the defendants on June 4, 2015 filed sur-replies in further opposition to the
motion. The Court has not yet scheduled a hearing on the motion.
On June 19, 2015, Willis Group Holdings plc filed a motion to dismiss the complaint for lack of personal jurisdiction.
On November 17, 2015, Willis Group Holdings plc withdrew the motion.
On March 31, 2016, the parties in the Troice and Janvey actions entered into a settlement in principle that is described
in more detail below.
• Ranni v. Willis of Colorado, Inc., et al., C.A. No. 9-22085, was filed on July 17, 2009 against Willis Group Holdings
plc and Willis of Colorado, Inc. in the U.S. District Court for the Southern District of Florida. The complaint was filed
on behalf of a putative class of Venezuelan and other South American Stanford investors and alleges claims under
Section 10(b) of the Securities Exchange Act of 1934 (and Rule 10b-5 thereunder) and Florida statutory and common
law and seeks damages in an amount to be determined at trial. On October 6, 2009, Ranni was transferred, for
consolidation or coordination with other Stanford-related actions (including Troice), to the Northern District of Texas
by the U.S. Judicial Panel on Multidistrict Litigation (the ‘JPML’). The defendants have not yet responded to the
complaint in Ranni. On August 26, 2014, the plaintiff filed a notice of voluntary dismissal of the action without
prejudice.
• Canabal, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:9-CV-1474-D, was filed on August 6, 2009 against Willis
Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate named as a defendant in Troice, among
others, also in the Northern District of Texas. The complaint was filed individually and on behalf of a putative class of
Venezuelan Stanford investors, alleged claims under Texas statutory and common law and sought damages in excess
of $1 billion, punitive damages, attorneys’ fees and costs. On December 18, 2009, the parties in Troice and Canabal
stipulated to the consolidation of those actions (under the Troice civil action number), and, on December 31, 2009, the
plaintiffs in Canabal filed a notice of dismissal, dismissing the action without prejudice.
• Rupert, et al. v. Winter, et al., Case No. 2009C115137, was filed on September 14, 2009 on behalf of 97 Stanford
investors against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate, among others, in
Texas state court (Bexar County). The complaint alleges claims under the Securities Act of 1933, Texas and Colorado
statutory law and Texas common law and seeks special, consequential and treble damages of more than $300 million,
attorneys’ fees and costs. On October 20, 2009, certain defendants, including Willis of Colorado, Inc., (i) removed
Rupert to the U.S. District Court for the Western District of Texas, (ii) notified the JPML of the pendency of this
related action and (iii) moved to stay the action pending a determination by the JPML as to whether it should be
transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions.
On April 1, 2010, the JPML issued a final transfer order for the transfer of Rupert to the Northern District of Texas. On
January 24, 2012, the court remanded Rupert to Texas state court (Bexar County), but stayed the action until further
order of the court. On August 13, 2012, the plaintiffs filed a motion to lift the stay, which motion was denied by the
court on September 16, 2014. On October 10, 2014, the plaintiffs appealed the court’s denial of their motion to lift the
stay to the U.S. Court of Appeals for the Fifth Circuit. On January 5, 2015, the Fifth Circuit consolidated the appeal
with the appeal in the Rishmague, et ano. v. Winter, et al. action discussed below, and the consolidated appeal, was
fully briefed as of March 24, 2015. Oral argument on the consolidated appeal was held on September 2, 2015. On
September 16, 2015, the Fifth Circuit affirmed. The defendants have not yet responded to the complaint in Rupert.
• Casanova, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:10-CV-1862-O, was filed on September 16, 2010 on
behalf of seven Stanford investors against Willis Group Holdings plc, Willis Limited, Willis of Colorado, Inc. and the
same Willis associate, among others, also in the Northern District of Texas. The complaint alleges claims under Texas
statutory and common law and seeks actual damages in excess of $5 million, punitive damages, attorneys’ fees and
costs. On February 13, 2015, the parties filed an Agreed Motion for Partial Dismissal pursuant to which they agreed to
the dismissal of certain claims pursuant to the motion to dismiss decisions in the Troice action discussed above and the
Janvey action discussed below. Also on February 13, 2015, the defendants except Willis Group Holdings plc answered
the complaint in the Casanova action. On June 19, 2015, Willis Group Holdings plc filed a motion to dismiss the
complaint for lack of personal jurisdiction. Plaintiffs have not opposed the motion.
•
Rishmague, et ano. v. Winter, et al., Case No. 2011CI2585, was filed on March 11, 2011 on behalf of two Stanford
investors, individually and as representatives of certain trusts, against Willis Group Holdings plc, Willis of Colorado,
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Inc., Willis of Texas, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The
complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks special,
consequential and treble damages of more than $37 million and attorneys’ fees and costs. On April 11, 2011, certain
defendants, including Willis of Colorado, Inc., (i) removed Rishmague to the Western District of Texas, (ii) notified
the JPML of the pendency of this related action and (iii) moved to stay the action pending a determination by the
JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with
the other Stanford-related actions. On August 8, 2011, the JPML issued a final transfer order for the transfer of
Rishmague to the Northern District of Texas, where it is currently pending. On August 13, 2012, the plaintiffs joined
with the plaintiffs in the Rupert action in their motion to lift the court’s stay of the Rupert action. On September 9,
2014, the court remanded Rishmague to Texas state court (Bexar County), but stayed the action until further order of
the court and denied the plaintiffs’ motion to lift the stay. On October 10, 2014, the plaintiffs appealed the court’s
denial of their motion to lift the stay to the Fifth Circuit. On January 5, 2015, the Fifth Circuit consolidated the appeal
with the appeal in the Rupert action, and the consolidated appeal was fully briefed as of March 24, 2015. Oral
argument on the consolidated appeal was held on September 2, 2015. On September 16, 2015, the Fifth Circuit
affirmed. The defendants have not yet responded to the complaint in Rishmague.
• MacArthur v. Winter, et al., Case No. 2013-07840, was filed on February 8, 2013 on behalf of two Stanford investors
against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the same Willis associate, among
others, in Texas state court (Harris County). The complaint alleges claims under Texas and Colorado statutory law and
Texas common law and seeks actual, special, consequential and treble damages of approximately $4 million and
attorneys’ fees and costs. On March 29, 2013, Willis of Colorado, Inc. and Willis of Texas, Inc. (i) removed
MacArthur to the U.S. District Court for the Southern District of Texas and (ii) notified the JPML of the pendency of
this related action. On April 2, 2013, Willis of Colorado, Inc. and Willis of Texas, Inc. filed a motion in the Southern
District of Texas to stay the action pending a determination by the JPML as to whether it should be transferred to the
Northern District of Texas for consolidation or coordination with the other Stanford-related actions. Also on April 2,
2013, the court presiding over MacArthur in the Southern District of Texas transferred the action to the Northern
District of Texas for consolidation or coordination with the other Stanford-related actions. On September 29, 2014, the
parties stipulated to the remand (to Texas state court (Harris County)) and stay of MacArthur until further order of the
court (in accordance with the court’s September 9, 2014 decision in Rishmague (discussed above)), which stipulation
was ‘so ordered’ by the court on October 14, 2014. The defendants have not yet responded to the complaint in
MacArthur.
• Florida suits: On February 14, 2013, five lawsuits were filed against Willis Group Holdings plc, Willis Limited and
Willis of Colorado, Inc. in Florida state court (Miami-Dade County) alleging violations of Florida common law. The
five suits are: (1) Barbar, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05666CA27,
filed on behalf of 35 Stanford investors seeking compensatory damages in excess of $30 million; (2) de Gadala-
Maria, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05669CA30, filed on behalf of 64
Stanford investors seeking compensatory damages in excess of $83.5 million; (3) Ranni, et ano. v. Willis Group
Holdings Public Limited Company, et al., Case No. 13-05673CA06, filed on behalf of two Stanford investors seeking
compensatory damages in excess of $3 million; (4) Tisminesky, et al. v. Willis Group Holdings Public Limited
Company, et al., Case No. 13-05676CA09, filed on behalf of 11 Stanford investors seeking compensatory damages in
excess of $6.5 million; and (5) Zacarias, et al. v. Willis Group Holdings Public Limited Company, et al., Case No.
13-05678CA11, filed on behalf of 10 Stanford investors seeking compensatory damages in excess of $12.5 million.
On June 3, 2013, Willis of Colorado, Inc. removed all five cases to the Southern District of Florida and, on June 4,
2013, notified the JPML of the pendency of these related actions. On June 10, 2013, the court in Tisminesky issued an
order sua sponte staying and administratively closing that action pending a determination by the JPML as to whether it
should be transferred to the Northern District of Texas for consolidation and coordination with the other Stanford-
related actions. On June 11, 2013, Willis of Colorado, Inc. moved to stay the other four actions pending the JPML’s
transfer decision. On June 20, 2013, the JPML issued a conditional transfer order for the transfer of the five actions to
the Northern District of Texas, the transmittal of which was stayed for seven days to allow for any opposition to be
filed. On June 28, 2013, with no opposition having been filed, the JPML lifted the stay, enabling the transfer to go
forward.
On September 30, 2014, the court denied the plaintiffs’ motion to remand in Zacarias, and, on October 3, 2014, the
court denied the plaintiffs’ motions to remand in Tisminesky and de Gadala Maria. On December 3, 2014 and March
3, 2015, the court granted the plaintiffs’ motions to remand in Barbar and Ranni, respectively, remanded both actions
to Florida state court (Miami-Dade County) and stayed both actions until further order of the court. On January 2,
2015 and April 1, 2015, the plaintiffs in Barbar and Ranni, respectively, appealed the court’s December 3, 2014 and
March 3, 2015 decisions to the Fifth Circuit. On April 22, 2015 and July 22, 2015, respectively, the Fifth Circuit
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dismissed the Barbar and Ranni appeals sua sponte for lack of jurisdiction. The defendants have not yet responded to
the complaints in Ranni or Barbar.
On April 1, 2015, the defendants except Willis Group Holdings plc filed motions to dismiss the complaints in
Zacarias, Tisminesky and de Gadala-Maria. On June 19, 2015, Willis Group Holdings plc filed motions to dismiss the
complaints in Zacarias, Tisminesky and de Gadala-Maria for lack of personal jurisdiction. On July 15, 2015, the court
dismissed the complaint in Zacarias in its entirety with leave to replead within 21 days. On July 21, 2015, the court
dismissed the complaints in Tisminesky and de Gadala-Maria in their entirety with leave to replead within 21 days. On
August 6, 2015, the plaintiffs in Zacarias, Tisminesky and de Gadala-Maria filed amended complaints (in which,
among other things, Willis Group Holdings plc was no longer named as a defendant). On September 11, 2015, the
defendants filed motions to dismiss the amended complaints. The motions await disposition by the court.
•
Janvey, et al. v. Willis of Colorado, Inc., et al., Case No. 3:13-CV-03980-D, was filed on October 1, 2013 also in the
Northern District of Texas against Willis Group Holdings plc, Willis Limited, Willis North America Inc., Willis of
Colorado, Inc. and the same Willis associate. The complaint was filed (i) by Ralph S. Janvey, in his capacity as Court-
Appointed Receiver for the Stanford Receivership Estate, and the Official Stanford Investors Committee (the ‘OSIC’)
against all defendants and (ii) on behalf of a putative, worldwide class of Stanford investors against Willis North
America Inc. Plaintiffs Janvey and the OSIC allege claims under Texas common law and the court’s Amended Order
Appointing Receiver, and the putative class plaintiffs allege claims under Texas statutory and common law. Plaintiffs
seek actual damages in excess of $1 billion, punitive damages and costs. As alleged by the Stanford Receiver, the total
amount of collective losses allegedly sustained by all investors in Stanford certificates of deposit is approximately
$4.6 billion.
On November 15, 2013, plaintiffs in Janvey filed the operative First Amended Complaint, which added certain
defendants unaffiliated with Willis. On February 28, 2014, the defendants filed motions to dismiss the First Amended
Complaint, which motions, other than with respect to Willis Group Holding plc’s motion to dismiss for lack of
personal jurisdiction, were granted in part and denied in part by the court on December 5, 2014. On December 22,
2014, Willis filed a motion to amend the court’s December 5 order to certify an interlocutory appeal to the Fifth
Circuit, and, on December 23, 2014, Willis filed a motion to amend and, to the extent necessary, reconsider the court’s
December 5 order. On January 16, 2015, the defendants answered the First Amended Complaint. On January 28, 2015,
the court denied Willis’s motion to amend the court’s December 5 order to certify an interlocutory appeal to the Fifth
Circuit. On February 4, 2015, the court granted Willis’s motion to amend and, to the extent necessary, reconsider the
December 5 order.
As discussed above, on March 25, 2014, the parties in Troice and Janvey stipulated to the consolidation of the two
actions for pre-trial purposes under Rule 42(a) of the Federal Rules of Civil Procedure. On March 28, 2014, the Court
‘so ordered’ that stipulation and, thus, consolidated Troice and Janvey for pre-trial purposes under Rule 42(a).
On January 26, 2015, the court entered an order setting a schedule for briefing and discovery regarding the plaintiffs’
motion for class certification, which schedule, among other things, provided for the submission of the plaintiffs’
motion for class certification (following the completion of briefing and discovery) on July 20, 2015. By letter dated
March 4, 2015, the parties requested that the court consolidate the scheduling orders entered in Troice and Janvey to
provide for a class certification submission date of April 20, 2015 in both cases. On March 6, 2015, the court entered
an order consolidating the scheduling orders in Troice and Janvey, providing for a class certification submission date
of April 20, 2015 in both cases, and vacating the July 20, 2015 class certification submission date in the original
Janvey scheduling order.
On November 17, 2015, Willis Group Holdings plc withdrew its motion to dismiss for lack of personal jurisdiction.
On March 31, 2016, the parties in the Troice and Janvey actions entered into a settlement in principle that is described
in more detail below.
• Martin v. Willis of Colorado, Inc., et al., Case No. 201652115, was filed on August 5, 2016, on behalf of one Stanford
investor against Willis Group Holdings plc, Willis Limited, Willis of Colorado, Inc. and the same Willis associate in
Texas state court (Harris County). The complaint alleges claims under Texas statutory and common law and seeks
actual damages of less than $100,000, exemplary damages, attorneys’ fees and costs. On September 12, 2016, the
plaintiff filed an amended complaint, which added five more Stanford investors as plaintiffs and seeks damages in
excess of $1 million. The defendants have not yet responded to the amended complaint in Martin.
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• Abel, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:16-cv-2601, was filed on September 12, 2016, on behalf of
more than 300 Stanford investors against Willis Group Holdings plc, Willis Limited, Willis of Colorado, Inc. and the
same Willis associate, also in the Northern District of Texas. The complaint alleges claims under Texas statutory and
common law and seeks actual damages in excess of $135 million, exemplary damages, attorneys’ fees and costs. On
November 10, 2016, the plaintiffs filed an amended complaint, which, among other things, added several more
Stanford investors as plaintiffs. The defendants have not yet responded to the complaint in Abel.
The plaintiffs in Janvey and Troice and the other actions above seek overlapping damages, representing either the entirety or a
portion of the total alleged collective losses incurred by investors in Stanford certificates of deposit, notwithstanding the fact
that Legacy Willis acted as broker of record for only a portion of time that Stanford issued certificates of deposit. In the fourth
quarter of 2015, the Company recognized a $70 million litigation provision for loss contingencies relating to the Stanford
matters based on its ongoing review of a variety of factors as required by accounting standards.
On March 31, 2016, the Company entered into a settlement in principle for $120 million relating to this litigation, and
increased its provisions by $50 million during that quarter. Further details on this settlement in principle are given below.
The settlement is contingent on a number of conditions, including court approval of the settlement and a bar order prohibiting
any continued or future litigation against Willis related to Stanford, which may not be given. Therefore, the ultimate resolution
of these matters may differ from the amount provided for. The Company continues to dispute the allegations and, to the extent
litigation proceeds, to defend the lawsuits vigorously.
Settlement. On March 31, 2016, the Company entered into a settlement in principle, as reflected in a Settlement Term Sheet,
relating to the Stanford litigation matter. The Company agreed to the Settlement Term Sheet to eliminate the distraction,
burden, expense and uncertainty of further litigation. In particular, the settlement and the related bar orders described below, if
upheld through any appeals, would enable the Company (a newly-combined firm) to conduct itself with the bar orders’
protection from the continued overhang of matters alleged to have occurred approximately a decade ago. Further, the
Settlement Term Sheet provided that the parties understood and agreed that there is no admission of liability or wrongdoing by
the Company. The Company expressly denies any liability or wrongdoing with respect to the matters alleged in the Stanford
litigation.
On or about August 31, 2016, the parties to the settlement signed a formal Settlement Agreement memorializing the terms of
the settlement as originally set forth in the Settlement Term Sheet. The parties to the Settlement Agreement are Ralph S. Janvey
(in his capacity as the Court-appointed receiver (the ‘Receiver’) for The Stanford Financial Group and its affiliated entities in
receivership (collectively, ‘Stanford’)), the Official Stanford Investors Committee, Samuel Troice, Martha Diaz, Paula Gilly-
Flores, Punga Punga Financial, Ltd., Manuel Canabal, Daniel Gomez Ferreiro and Promotora Villa Marina, C.A. (collectively,
‘Plaintiffs’), on the one hand, and Willis Towers Watson Public Limited Company (formerly Willis Group Holdings Public
Limited Company), Willis Limited, Willis North America Inc., Willis of Colorado, Inc. and the Willis associate referenced
above (collectively, ‘Defendants’), on the other hand. Under the terms of the Settlement Agreement, the parties agreed to settle
and dismiss the Janvey and Troice actions (collectively, the ‘Actions’) and all current or future claims arising from or related to
Stanford in exchange for a one-time cash payment to the Receiver by the Company of $120 million to be distributed to all
Stanford investors who have claims recognized by the Receiver pursuant to the distribution plan in place at the time the
payment is made.
The Settlement Agreement also provides the parties’ agreement to seek the Court’s entry of bar orders prohibiting any
continued or future litigation against the Defendants and their related parties of claims relating to Stanford, whether asserted to
date or not. The terms of the bar orders therefore would prohibit all Stanford-related litigation described above, and not just the
Actions, but including any pending matters and any actions that may be brought in the future. Final Court approval of these bar
orders is a condition of the settlement.
On September 7, 2016, Plaintiffs filed with the Court a motion to approve the settlement. On October 19, 2016, the Court
preliminarily approved the settlement. Several of the plaintiffs in the other actions above objected to the settlement, and a
hearing to consider final approval of the settlement was held on January 20, 2017, after which the Court reserved decision. On
August 23, 2017, the Court approved the settlement, including the bar orders. Several of the objectors have since appealed the
settlement approval and bar orders to the Fifth Circuit. The appeals are currently pending. The Company expects the briefing in
connection with the appeals to be completed by early April 2018. There is no date certain for when the appeal will be decided.
The Company will not make the $120 million settlement payment unless and until the appeals are decided in its favor and the
settlement is not subject to any further appeal.
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City of Houston
On August 1, 2014, the City of Houston (‘plaintiff’) filed suit against Legacy Towers Watson in the United States District Court
for the Southern District of Texas, Houston Division. On March 8, 2016, plaintiff filed its First Amended Complaint.
In the amended complaint, plaintiff alleges various deficiencies in pension actuarial work-product and advice stated to have
been provided by Legacy Towers Watson’s predecessor firm, Towers Perrin, in its capacity as principal actuary to the Houston
Firefighters’ Relief and Retirement Fund (the ‘Fund’). Towers Perrin is stated to have acted in this capacity between “the early
1980s until 2003.”
In particular, the amended complaint alleges “misrepresentations and miscalculations” in valuation reports allegedly issued by
Towers Perrin from 2000 through 2002 upon which plaintiff claims to have relied. Plaintiff asserts that Towers Perrin assigned
a new team of actuaries to the Fund in 2002 “to correct Towers’ own earlier mistakes” and that the new team “altered” certain
calculations which “increased the actuarial accrued liability by $163 million.” Plaintiff claims that the reports indicated that the
City’s minimum contribution percentages to the Fund would remain in place through at least 2019 and that existing benefits
under the Fund could be increased, and new benefits could be added, without increasing plaintiff’s financial burden, and
without increasing plaintiff’s rate of annual contributions to the Fund. The amended complaint alleges that plaintiff relied on
these reports when supporting a new benefits package for the Fund. These reports, and other advice, are alleged, among other
things, to have been negligent, to have misrepresented the present and future financial condition of the Fund and the
contributions required to be made by plaintiff to support those benefits. Plaintiff asserts that, but for Towers Perrin’s alleged
negligence and misrepresentations, plaintiff would not have supported the benefits increase, and that such increased benefits
would not and could not have been approved or enacted. It is further asserted that Towers Perrin’s alleged “negligence and
misrepresentations damaged the City to the tune of tens of millions of dollars in annual contributions.” The amended complaint
seeks the award of punitive damages, actual damages, exemplary damages, special damages, attorney’s fees and expenses, costs
of suit, pre- and post- judgment interest at the maximum legal rate, and other unspecified legal and equitable relief.
On October 10, 2014, Legacy Towers Watson filed a motion to dismiss plaintiff’s entire complaint on the basis that the
complaint fails to state a claim upon which relief can be granted. On November 21, 2014, the City filed its response in
opposition to Legacy Towers Watson’s motion to dismiss. On September 23, 2015, Legacy Towers Watson’s motion to dismiss
was denied by the United States District Court for the Southern District of Texas, Houston Division. The court entered a
Scheduling Order setting trial for May 30, 2017. On June 20, 2016, the Court entered a Second Amended Scheduling Order
setting trial for October 31, 2017. On March 27, 2017, the Court entered a Third Amended Scheduling Order setting trial for
January 16, 2018.
On May 8, 2017, Legacy Towers Watson received the City’s expert’s damages report, which asserted the City has incurred
actual damages of approximately $430 million through July 1, 2017, and will incur future damages that have a present value of
approximately $400 million as of July 1, 2017 if the Fund pension benefits remain unchanged. On June 30, 2017, Legacy
Towers Watson served its expert reports in rebuttal to the City’s expert reports. Legacy Towers Watson’s experts concluded that
Legacy Towers Watson’s work was reasonable and conformed with the actuarial standards of practice, and that Legacy Towers
Watson did not cause any damages to the City. Legacy Towers Watson’s experts also concluded that the City’s damages model
is flawed.
On January 9, 2018, Legacy Towers Watson and the City participated in a mediation and reached a settlement in principle.
Pursuant to the settlement in principle, in exchange for a dismissal of the claims of the City related to Legacy Towers Watson’s
pension actuarial advice to the Fund, and any potential claims the City may have related to Legacy Towers Watson’s pension
actuarial advice to the Houston Municipal Employees Pension System and the Houston Police Officers Pension System,
Legacy Towers Watson would pay a total of $40 million. The Company accrued $11 million during the three months ended
December 31, 2017 in respect of this settlement. This settlement in principle remains subject to completion of settlement
documentation between the City and Legacy Towers Watson and to approval by the City of Houston City Council.
In the event the settlement documentation is not finalized by the City and Legacy Towers Watson or the settlement is not
approved by the City of Houston City Council, the Company is currently unable to provide an estimate of the reasonably
possible loss or range of loss. The Company disputes the allegations, and in the event the settlement is not finalized or
approved, the Company intends to defend the lawsuit vigorously.
Meriter Health Services
On January 6, 2015, Meriter Health Services, Inc. (‘Meriter’), plan sponsor of the Meriter Health Services Employee
Retirement Plan (the ‘Plan’) filed a complaint in Wisconsin state court against Towers Watson Delaware Inc. (‘TWDE’), a
wholly-owned subsidiary of the Company, and against its former lawyers, individual actuaries, and insurers.
137
In the Third Amended Complaint, served on April 12, 2016, Meriter alleged that Towers, Perrin, Forster & Crosby, Inc.
(‘TPFC’) and Davis, Conder, Enderle & Sloan, Inc. (‘DCES’), and other entities and individuals, including Meriter’s former
lawyers, acted negligently concerning the benefits consulting advice provided to Meriter; these allegations concern matters
including TPFC and the lawyers’ involvement in the Plan design and drafting of the Plan document in 1987 by TPFC, and
DCES and the lawyers’ Plan review, Plan redesign, Plan amendment, and drafting of ERISA section 204(h) notices in the early
2000s. Additionally, Meriter asserted that TPFC, DCES, and the individual actuary defendants breached alleged fiduciary
duties to advise Meriter regarding the competency of Meriter’s then ERISA counsel. Meriter has asserted causes of action for
contribution, indemnity, and equitable subrogation related to amounts paid to settle a class action lawsuit related to the Plan that
was filed by Plan participants against Meriter in 2010, alleging a number of ERISA violations and related claims. Meriter
settled that lawsuit in 2015 for $82 million. In this litigation, Meriter sought damages in a revised amount of approximately
$190 million which includes amounts it claims to have paid to settle and defend the class action litigation, and amounts it
claims to have incurred as a result of improper plan design. Meriter sought to recover these alleged damages from TWDE and
the other defendants.
On January 12, 2016, TWDE and the other defendants filed a motion for partial summary judgment seeking dismissal of
Meriter’s negligence and breach of fiduciary duty claims. On April 18, 2016, TWDE and the other defendants filed a motion to
dismiss the contribution, indemnification, and equitable subrogation claims. On May 4, 2016, the parties appeared for oral
argument on the motion for partial summary judgment, which the court granted in part and denied in part. The court dismissed
the fiduciary duty claims, but not the negligence claims. Meriter subsequently moved for reconsideration of the dismissal of its
breach of fiduciary duty claims, which motion was denied as to TWDE on August 16, 2016. On June 22, 2016, the court
granted in part TWDE’s motion to dismiss, and dismissed the contribution and equitable subrogation claims, but denied the
motion as to Meriter’s indemnification claim without prejudice to the right of any defendant to raise the issue again by later
motion. On February 28, 2017, TWDE and the other defendants filed a motion to amend the scheduling order. The motion was
granted on March 9, 2017, and the trial was re-scheduled to begin on December 11, 2017.
On June 15, 2017, the Company and Meriter agreed to a settlement to resolve all claims in this case against the actuary
defendants. The terms of the settlement are confidential. The settlement amount is not materially in excess of previously
accrued amounts. As a result of the settlement, the Court, on July 27, 2017, dismissed all of Meriter’s claims in this case, in
their entirety, with prejudice.
Elma Sanchez, et. al
On August 6, 2013, three individual plaintiffs filed a putative class action suit against the California Public Employees’
Retirement System (‘CalPERS’) in Los Angeles County Superior Court. On January 10, 2014, plaintiffs filed an amended
complaint, which added as defendants several members of CalPERS’ Board of Administration and three Legacy Towers Watson
entities, Towers Watson & Co., Towers Perrin, and Tillinghast-Towers Perrin (‘Towers Perrin’).
Plaintiffs’ claims all relate to a self-funded, non-profit Long Term Care Program that CalPERS established in 1995 (the ‘LTC
Program’). Plaintiffs’ claims seek unspecified damages allegedly resulting from CalPERS’ 2012 decision to implement in 2015
and 2016 an 85 percent increase in the premium rates of certain of the long term care policies it issued between 1995 and 2004
(the ‘85% Increase’).
The amended complaint alleges claims against CalPERS for breach of contract and breach of fiduciary duty. It also includes a
single cause of action against Towers Perrin for professional negligence relating to actuarial services Towers Perrin provided to
CalPERS relating to the LTC Program between 1995 and 2004.
Plaintiffs principally allege that CalPERS mismanaged the LTC Program and its investment assets in multiple respects and
breached its contractual and fiduciary duties to plaintiffs and other class members by impermissibly imposing the 85% Increase
to make up for investment losses. Plaintiffs also allege that Towers Perrin recommended inadequate initial premium rates at the
outset of the LTC Program and used unspecified inappropriate assumptions in its annual valuations for CalPERS. Plaintiffs
claim that Towers Perrin’s allegedly negligent acts and omissions, prior to the end of its retainer in 2004, contributed to the
need for the 85% Increase.
In May 2014, the court denied the motions to dismiss filed by CalPERS and Towers Perrin addressed to the sufficiency of the
complaint. On January 28, 2016, the court granted plaintiffs’ motion for class certification. The certified class as currently
defined includes those long term care policy holders whose policies were “subject to” the 85% Increase. The court thereafter set
an October 2, 2017 trial date.
In May 2016, the case was reassigned to a different judge. The court agreed that Towers Perrin may file a motion for summary
judgment which was initially scheduled to be heard on February 3, 2017. The motion was then fully briefed, and the hearing
date was thereafter moved to March 8, 2017.
138
On March 1, 2017, Towers Perrin and Plaintiffs participated in a mediation and reached a settlement in principle. Pursuant to
the settlement in principle, in exchange for a dismissal of the claims of all class members and a release of Towers Perrin by all
class members, Towers Perrin would pay a total of $9.75 million into an interest-bearing settlement fund, to be used to
reimburse class counsel's costs, and for later distribution to class members as approved by the Court. This proposed settlement
amount was accrued during the three months ended March 31, 2017. A formal settlement agreement was submitted to the Court
for its preliminary approval on May 18, 2017. On October 25, 2017, the Court preliminarily approved the settlement and
granted the Company’s unopposed motion for a good faith settlement determination. At the hearing on final approval held on
January 26, 2018, the Court granted final approval of the settlement. Class members who properly objected to the settlement
have standing to appeal within sixty days of the date notice of entry of judgment is made.
Based on the stage of the proceedings, in the event the final approval of the settlement were to be reversed on appeal, the
Company is unable to provide an estimate of the reasonably possible loss or range of loss in respect of the plaintiffs’ complaint.
European Commission and FCA Regulatory Investigations
In April 2017, the Financial Conduct Authority (‘FCA’) informed Willis Limited, our U.K. broking subsidiary, that it had
opened a formal investigation into possible agreements/concerted practices in the aviation broking sector.
In October 2017, the European Commission (‘Commission’) disclosed to us that it has initiated civil investigation proceedings
in respect of a suspected infringement of E.U. competition rules involving several broking firms, including our principal U.K.
broking subsidiary and one of its parent entities. In particular, the Commission has stated that the civil proceedings concern the
exchange of commercially sensitive information between competitors in relation to aviation and aerospace insurance and
reinsurance broking products and services in the European Economic Area, as well as possible coordination between
competitors. The initiation of proceedings does not mean there has been a finding of infringement, merely that the Commission
will investigate the case.
Now that the Commission has initiated proceedings, the FCA has closed its competition act investigation. However, it retains
its jurisdiction over broking regulatory matters arising from the conduct being investigated.
Given the status of the investigation, the Company is currently unable to assess the terms on which this investigation, or any
other regulatory matter or civil claims emanating from the conduct being investigated, will be resolved, and thus is unable to
provide an estimate of the reasonably possible loss or range of loss.
U.K. Investment Consulting Investigation
In September 2017, the FCA announced that it would make a market investigation referral with respect to the investment
consulting industry to the U.K. Competition & Markets Authority (the ‘CMA’). The CMA then commenced a market
investigation, and the Company is currently cooperating with the investigation.
The CMA investigation of the investment consulting market is expected to take at least 18 months to conclude. Provisional
findings should be issued in the third quarter of 2018. Given the early stage of the investigation, the Company is currently
unable to assess whether the CMA will find any adverse effects on competition, and, if the CMA does find any adverse effects
on competition, what remedies it may impose on the industry. Given this, the Company is unable to provide an estimate of the
reasonably possible loss or range of loss.
London Wholesale Insurance Broker Market Study
In November 2017, the FCA published its Terms of Reference for its Market Study into insurance broking activities in the
London Wholesale Market including market power, conflicts of interest and broker conduct. This is an industry-wide inquiry
and not particular to the Company. The FCA is using its powers under the UK Financial Services and Markets Act 2000 and
will collate information and aims to issue an interim report in or about the fourth quarter of 2018. The Study is expected to take
2 years to conclude. Extensive data requests have been received by two of the Company’s subsidiaries with phased response
times from March to April 2018. It is possible that outcomes of the Study could include new rules, changes to market practices,
referral to the U.K. Competition & Markets Authority for a market investigation, and/or individual firm investigations on
specific issues. Given the early stage of the Study, the Company is currently unable to assess whether the FCA will find that
competition in the sector is working in the interests of clients or not, and, if the FCA does find that competition in the sector is
not working in the interests of clients, what remedies it may impose on the industry or on any industry participants. Given this,
the Company is unable to provide an estimate of the reasonably possible loss or range of loss.
Note 14 — Supplementary Information for Certain Balance Sheet Accounts
Additional details of specific balance sheet accounts are detailed below.
139
Accounts receivable, net consists of the following:
Billed, net of allowance for doubtful debts of $45 million and $40 million
Accrued and unbilled, at estimated net realizable value
Accounts receivable, net
December 31,
2017
December 31,
2016
$
$
1,933
313
2,246
$
$
1,789
291
2,080
Accounts receivable are stated at estimated net realizable values. The provisions, shown below as of the end of each period, are
recorded as the amounts considered by management to be sufficient to meet probable future losses related to uncollectible
accounts.
Balance at beginning of year
Additions charged to costs and expenses
Charges to other accounts - acquisitions
Deductions/other movements
Foreign exchange
Balance at end of year
Prepaid and other current assets consist of the following:
Prepayments and accrued income
Derivatives and investments
Deferred compensation plan assets
Retention incentives
Corporate income and other taxes
Other current assets
Total prepaid and other current assets
Other non-current assets consist of the following:
Prepayments and accrued income
Deferred compensation plan assets
Deferred tax assets
Accounts receivable, net
Other investments
Other non-current assets
Total other non-current assets
Other current liabilities consist of the following:
Accounts payable
Income and other taxes payable
Contingent and deferred consideration on acquisition
Payroll-related liabilities
Derivatives
Third party commissions
Other current liabilities
Total other current liabilities
140
December 31,
2017
December 31,
2016
December 31,
2015
$
$
40
17
—
(9)
(3)
45
$
$
22
36
8
(27)
1
40
$
$
12
5
11
(7)
1
22
December 31,
2017
December 31,
2016
$
$
132
29
21
7
170
71
430
$
$
131
32
15
7
97
55
337
December 31,
2017
December 31,
2016
$
$
18
135
46
33
26
189
447
$
$
15
111
50
27
30
120
353
December 31,
2017
December 31,
2016
$
$
136
90
55
209
32
172
110
804
$
$
117
91
53
200
80
184
151
876
Provision for liabilities consists of the following:
Claims, lawsuits and other proceedings
Other provisions
Total provision for liabilities
Other non-current liabilities consist of the following:
Incentives from lessors
Deferred compensation plan liability
Contingent and deferred consideration on acquisitions
Derivatives
Other non-current liabilities
Total other non-current liabilities
Note 15 — Other Expense/(Income), Net
Other expense/(income), net consists of the following:
Gain on disposal of operations
Gain on re-measurement of equity interests (i)
Impact of Venezuelan currency devaluation (ii)
Foreign exchange loss/(gain)
Other expense/(income), net
____________________
December 31,
2017
December 31,
2016
$
$
474
84
558
$
$
508
67
575
December 31,
2017
December 31,
2016
$
$
138
135
41
5
225
544
$
$
Years ended December 31,
2017
2016
2015
$
$
(13) $
—
2
72
61
$
(2) $
—
—
29
27
$
133
111
89
51
148
532
(25)
(59)
30
(1)
(55)
(i) Prior to the acquisition date, the Company accounted for its 30% interest in Gras Savoye as an equity-method investment. The acquisition-date fair
value of the previously held equity interest was $158 million and is included in the measurement of the consideration transferred. The Company
recognized a gain of $59 million as a result of remeasuring its prior equity interest in Gras Savoye held before the business combination.
(ii) On December 31, 2015 the Company began using the SIMADI rate for the Venezuelan bolivar (approximately Venezuelan bolivars 198.7 = U.S.
dollar 1) instead of the SICAD I auction rate (approximately Venezuelan bolivars 13.5 = U.S. dollar 1) to translate on Venezuelan retail operations. In
March 2016, the DICOM mechanism replaced the SIMADI mechanism. At December 31, 2017, the DICOM rate was approximately Venezuelan
bolivars 3,345 = U.S. dollar 1. The Company does not expect the additional devaluation which occurred in January 2018 to be material.
Note 16 — Accumulated Other Comprehensive Loss
The components of other comprehensive income/(loss) are as follows:
December 31, 2017
December 31, 2016
December 31, 2015
Before
tax
amount
Net of
tax
amount
Before
tax
amount
Net of
tax
amount
Before
tax
amount
Tax
Tax
Net of
tax
amount
Tax
Other comprehensive income/(loss):
Foreign currency translation
$
295
$ — $
295
$ (353) $ — $ (353) $ (133) $ — $ (133)
Defined pension and post-retirement benefits
Derivative instruments
Other comprehensive income/(loss)
Less: Other comprehensive (income)/loss
attributable to non-controlling interests
Other comprehensive income/(loss) attributable
to Willis Towers Watson
3
90
388
(13)
11
(15)
(4)
—
14
75
384
(553)
(87)
(993)
(13)
20
114
12
126
—
(439)
(75)
(867)
20
233
(35)
65
10
(53)
7
(46)
—
$
375
$
(4) $
371
$ (973) $
126
$ (847) $
75
$
(46) $
180
(28)
19
10
29
141
Changes in the components of accumulated other comprehensive loss, net of tax, are included in the following table. This table
excludes amounts attributable to non-controlling interests, which are not material for further disclosure.
Balance, January 1, 2015
Other comprehensive (loss)/income before reclassifications
Loss reclassified from accumulated other comprehensive loss (net of
income tax expense of $8)
Net other comprehensive (loss)/income
Balance, December 31, 2015
Other comprehensive loss before reclassifications
Loss reclassified from accumulated other comprehensive loss (net of
income tax benefit of $5)
Net other comprehensive loss
Balance, December 31, 2016
Other comprehensive income/(loss) before reclassifications
Loss reclassified from accumulated other comprehensive loss (net of
income tax benefit of $18)
Net other comprehensive income
Balance, December 31, 2017
____________________
Foreign currency
translation (i)
Cash flow hedges (i)
Defined pension
and post-
retirement
benefit costs (ii)
Total
$
$
$
$
(191) $
18
$
(893) $
(1,066)
(123)
—
(123)
(31)
3
(28)
158
22
180
4
25
29
(314) $
(10) $
(713) $
(1,037)
(336)
—
(336)
(110)
38
(72)
(483)
44
(439)
(929)
82
(847)
(650) $
(82) $
(1,152) $
(1,884)
285
—
285
28
44
72
(26)
40
14
287
84
371
(365) $
(10) $
(1,138) $
(1,513)
(i) Reclassification adjustments from accumulated other comprehensive income are included in Other expense/(income), net in the accompanying
consolidated statements of comprehensive income. See Note 9 — Derivative Financial Instruments for additional details regarding the
reclassification adjustments for the hedge settlements.
(ii) Reclassification adjustments from accumulated other comprehensive loss are included in the computation of net periodic pension cost (see Note 12
— Retirement Benefits) which is included in Salaries and benefits in the accompanying consolidated statements of comprehensive income.
Note 17 — Share-based Compensation
Plan Summaries
On December 31, 2017, the Company had a number of open share-based compensation plans, which provide for the grant of
time-based and performance-based options, time-based and performance-based restricted stock units, and various other share-
based grants to employees. All of the Company’s share-based compensation plans under which any options, restricted stock
units or other share-based grants are outstanding as of December 31, 2017 are described below. The compensation cost that has
been recognized for these plans for the years ended December 31, 2017, 2016 and 2015 was $67 million, $123 million and $64
million, respectively. The total income tax benefit recognized in the consolidated statement of comprehensive income for share-
based compensation arrangements for the years ended December 31, 2017, 2016, and 2015 was $22 million, $35 million and
$15 million, respectively.
2012 Equity Incentive Plan
This plan, which was established on April 25, 2012, provides for the granting of incentive stock options, time-based or performance-
based non-statutory stock options, share appreciation rights, restricted shares, time-based or performance-based RSUs,
performance-based awards and other share-based grants or any combination thereof (collectively referred to as ‘Awards’) to
employees, officers, non-employee directors and consultants (‘Eligible Individuals’) of the Company. The board of directors also
adopted a sub-plan under the 2012 plan to provide an employee sharesave scheme in the United Kingdom.
There were approximately 7 million shares remaining available for grant under this plan as of December 31, 2017. Options are
exercisable on a variety of dates, including from the second, third, fourth or fifth anniversary of grant. Unless terminated
sooner by the board of directors, the 2012 Plan will expire 10 years after the date of its adoption. That termination will not
affect the validity of any grants outstanding at that date.
Towers Watson Share Plans
In January 2016, in connection with the Merger, we assumed the Towers Watson & Co. 2009 Long-Term Incentive Plan
(‘LTIP’) and converted the outstanding unvested restricted stock units and options into Willis Towers Watson RSUs and options
using a conversion ratio stated in the Merger Agreement. We determined the fair value of the portion of the outstanding RSUs
and options related to pre-acquisition employee service using the straight-line methodology from date of grant to the
142
acquisition date to be $37 million, which was added to the transaction consideration. The fair value of the remaining portion of
RSUs and options related to the post-acquisition employee services was $45 million, and is being recorded over the future
vesting periods. For the years ended December 31, 2017 and 2016, we recorded $11 million and $31 million of non-cash stock
based compensation, respectively.
The acquired awards include performance-vested RSUs. Under the RSU agreement, participants become vested in a number of
RSUs based on the achievement of specified levels of financial performance during the performance period set forth in the
Merger Agreement, provided that the participant remains in continuous service with us through the end of the performance
period. Dividend equivalents will accrue on these RSUs and vest to the same extent as the underlying shares. The
Compensation Committee of the board of directors may provide for continuation of vesting of RSUs upon an employee’s
termination under certain circumstances such as qualified retirement. The definition of qualified retirement is age 55 with 15
years of service with the Company and a minimum of one year service in the performance period. Due to the terms of the RSU
agreement, the achievement of the level of financial performance is determined at the higher of 100% or the level attained at
the time of the Merger.
The Company does not intend to grant future awards under the 2009 LTIP plan.
Employee Stock Purchase Plans
The Company adopted the Willis Group Holdings 2010 North America Employee Stock Purchase Plan, which expires on
May 31, 2020. These plans provide certain eligible employees in the United States and Canada with the ability to contribute
payroll deductions to the purchase of Willis Towers Watson ordinary shares at the end of each offering period.
Share-based Compensation Valuation Assumptions
Options
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model that uses the
assumptions noted in the following table. Expected volatility is based on historical volatility of the Company’s shares. The
Company uses the simplified method set out in ASC 718 – Compensation – Stock Compensation to derive the expected term of
options granted as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the
expected term. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in
effect at the time of grant. The assumptions noted in the table below represent the weighted-average of each assumption for
each grant during the year.
Expected volatility
Expected dividends
Expected life (years)
Risk-free interest rate
Years ended December 31,
2017
2016
2015
19.8%
1.4%
4.2
1.6%
21.0%
1.5%
2.7
0.7%
17.4%
2.7%
4.0
1.5%
143
Share-based Compensation Award Activity
Options
Classification of options as time-based or performance-based is dependent on the original terms of the award. Performance
conditions on the majority of options have been met. A summary of option activity under the plans at December 31, 2017, and
changes during the year then ended is presented below:
Time-based stock options
Balance as of December 31, 2016
Granted
Exercised
Forfeited
Balance as of December 31, 2017
Options vested or expected to vest at December 31, 2017
Options exercisable at December 31, 2017
Performance-based stock options
Balance as of December 31, 2016
Exercised
Forfeited
Balance as of December 31, 2017
Options vested or expected to vest at December 31, 2017
Options exercisable at December 31, 2017
____________________
Weighted-
Average
Exercise
Price(i)
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Options
(thousands)
1,201
38
$
$
(448) $
(37) $
754
751
581
883
$
$
$
$
(182) $
(21) $
680
680
190
$
$
$
102.38
143.60
100.61
103.22
105.47
105.17
101.43
101.95
87.49
82.90
106.42
106.42
95.36
4 years
4 years
4 years
4 years
4 years
1 year
$
$
$
$
$
$
34
34
29
30
30
11
(i) Certain options are exercisable in Pounds sterling and are converted to dollars using the exchange rate at December 31, 2017.
The weighted-average grant-date fair values of time-based options granted during the years ended December 31, 2017, 2016
and 2015 were $27.69, $16.88 and $14.77, respectively. The total intrinsic values of options exercised during the years ended
December 31, 2017, 2016 and 2015 were $19 million, $25 million and $17 million, respectively. At December 31, 2017 there
was $2 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements under
time-based stock option plans; that cost is expected to be recognized over a weighted-average period of 2.4 years.
There were no performance-based options granted during the three years ended December 31, 2017, 2016 or 2015. However,
520,295 performance-based options were acquired during the year ended December 31, 2016, at which time the performance
conditions were met. The total intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015
was $10 million, $9 million and $25 million, respectively. At December 31, 2017 there remains an immaterial amount of total
unrecognized compensation cost related to nonvested share-based compensation arrangements under performance-based stock
option plans; that cost is expected to be recognized over a weighted-average period of 6 months.
144
RSUs
The fair value of each time-based RSU is based on the grant date fair value, or the fair value on the acquisition date in the case
of acquired awards. The fair value of each performance-based RSU is estimated on the grant date using a Monte-Carlo
simulation that uses the assumptions noted in the following table. Expected volatility is based on the historical volatility of the
Company’s shares. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The
assumptions noted in the table below represent the weighted-average of each assumption for each grant during the year. There
were no performance-based RSUs granted during the year ended December 31, 2015.
Expected volatility
Expected dividend yield
Expected life (years)
Risk-free interest rate
Years ended December 31,
2017
2016
20.2%
—%
2.4
1.4%
20.3%
—%
2.6
0.8%
A summary of time-based and performance-based RSU activity under the plans at December 31, 2017, and changes during the
year then ended, is presented below:
Nonvested shares (time-based RSUs)
Balance, beginning of year
Granted
Vested
Forfeited
Balance, end of year
Nonvested shares (performance-based RSUs)
Balance, beginning of year
Granted
Vested
Forfeited
Balance, end of year
Shares
(thousands)
Weighted-
Average
Grant Date
Fair Value
437
17
$
$
(179) $
(132) $
143
$
1,200
140
$
$
(319) $
(140) $
881
$
118.98
153.40
119.50
119.09
122.27
121.78
148.18
119.63
121.30
90.61
The total number of time-based RSUs that vested during the year ended December 31, 2017 was 178,574 shares at an average
share price of $150.81. The total number of time-based RSUs that vested during the year ended December 31, 2016 was
459,838 shares at an average share price of $120.42.The total number of RSUs that vested during the year ended December 31,
2015 was 408,032 shares at an average share price of $117.72. At December 31, 2017 there was $11 million of total
unrecognized compensation cost related to nonvested share-based compensation arrangements under the plan; that cost is
expected to be recognized over a weighted-average period of 0.8 years.
The total number of performance-based RSUs that vested during the year ended December 31, 2017 was 318,714 shares at an
average share price of $140.32. The total number of performance-based RSUs that vested during the year ended December 31,
2016 was 258,536 shares at an average share price of $119.75. The total number of performance-based RSUs that vested during
the year ended December 31, 2015 was 63,180 shares at an average share price of $117.88. At December 31, 2017 there was
$28 million of total unrecognized compensation cost related to nonvested performance-based share-based compensation
arrangements under the plan; that cost is expected to be recognized over a weighted-average period of 1.5 years.
Cash received from option exercises under all share-based payment arrangements for the years ended December 31, 2017, 2016
and 2015 was $61 million, $63 million and $124 million, respectively. The actual tax benefit recognized for the tax deductions
from option exercises of the share-based payment arrangements totaled $7 million, $6 million and $12 million for the years
ended December 31, 2017, 2016 and 2015, respectively. The actual tax benefit recognized for the tax deductions from RSUs
that vested totaled $19 million, $25 million and $13 million for the years ended December 31, 2017, 2016 and 2015,
respectively.
145
Note 18 — Earnings Per Share
Basic and diluted earnings per share are calculated by dividing net income attributable to Willis Towers Watson by the average
number of ordinary shares outstanding during each period. The computation of diluted earnings per share reflects the potential
dilution that could occur if dilutive securities and other contracts to issue shares were exercised or converted into shares or
resulted in the issuance of shares that then shared in the net income of the Company.
At December 31, 2017 and 2016, there were 0.8 million and 1.2 million time-based share options; 0.7 million and 0.9 million
performance-based options; 0.1 million and 0.4 million restricted time-based stock units; and 0.9 million and 1.2 million
restricted performance-based stock units outstanding, respectively.
Basic and diluted earnings per share are as follows:
Net income attributable to Willis Towers Watson
$
568
$
420
$
373
Years ended December 31,
2017
2016
2015(i)
Basic weighted-average number of shares outstanding
Dilutive effect of potentially issuable shares
Diluted weighted-average number of shares outstanding
Basic earnings per share
Dilutive effect of potentially issuable shares
Diluted earnings per share
____________________
135
1
136
137
1
138
$
$
4.21
(0.03)
4.18
$
$
3.07
(0.03)
3.04
$
$
68
1
69
5.49
(0.08)
5.41
(i) Shares outstanding, potentially issuable shares, basic and diluted earnings per share, and the dilutive effect of potentially issuable shares, for the year
ended December 31, 2015 have been retroactively adjusted to reflect the reverse stock split effected on January 4, 2016. See Note 3 — Merger,
Acquisitions and Divestitures for further details.
There were no anti-dilutive options for the year ended December 31, 2017. Options to purchase 0.5 million and 0.6 million
shares for the years ended December 31, 2016 and 2015, respectively, were not included in the computation of the dilutive
effect of stock options because their effect was anti-dilutive. There were no anti-dilutive RSUs for the years ended December
31, 2017 and 2016. For the year ended December 31, 2015, 0.5 million RSUs were not included in the computation of the
dilutive effect of potentially issued shares because their effect was anti-dilutive. The number of options for 2015 has been
retroactively adjusted to reflect the reverse stock split on January 4, 2016. See Note 3 — Merger, Acquisitions and Divestitures
for further details.
Note 19 — Supplemental Disclosures of Cash Flow Information
Supplemental disclosures regarding cash flow information and non-cash investing and financing activities are as follows:
Supplemental disclosures of cash flow information:
Cash payments for income taxes, net
Cash payments for interest
Cash acquired
Supplemental disclosures of non-cash investing and financing activities:
Issuance of shares and assumed awards in connection with the Merger
Fair value of deferred and contingent consideration related to acquisitions
Years Ended December 31,
2017
2016
2015
$
$
$
$
$
203
169
$
$
— $
— $
— $
158
143
476
8,723
$
$
$
$
— $
91
126
148
—
204
146
Note 20 — Quarterly Financial Data (Unaudited)
Quarterly financial data for 2017 and 2016 were as follows:
2017
Total revenues
Total costs of providing services
Income from operations
Net income/(loss)
Net income/(loss) attributable to Willis Towers Watson
Earnings/(loss) per share
— Basic
— Diluted
2016
Total revenues
Total costs of providing services
Income from operations
Net income/(loss)
Net income/(loss) attributable to Willis Towers Watson
Earnings/(loss) per share
— Basic
— Diluted
March 31,
June 30,
September 30, December 31,
Three Months Ended
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,319
1,856
463
352
344
2.51
2.50
2,234
1,908
326
245
238
1.76
1.75
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,953
1,829
124
41
33
0.24
0.24
1,949
1,813
136
76
72
0.52
0.51
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,852
1,811
41
$
$
$
(54) $
(54) $
(0.40) $
(0.40) $
1,777
1,776
1
$
$
$
(31) $
(32) $
(0.23) $
(0.23) $
2,078
1,968
110
253
245
1.85
1.84
1,927
1,839
88
148
142
1.04
1.03
During the fourth quarter of 2016, management corrected an error by recording a $103 million benefit from income taxes
related to the release of a portion of our U.S. deferred tax valuation allowance. A portion of the correction should have been
recorded in each of the three fiscal year 2016 Quarterly Reports on Form 10-Q. Management determined that the error was
immaterial to the previously filed 2016 quarterly financial statements and had no impact on prior year financial statements.
147
Note 21 — Financial Information for Parent Guarantor, Other Guarantor Subsidiaries and Non-Guarantor
Subsidiaries
Willis North America Inc. (‘Willis North America’) has $837 million senior notes outstanding of which $187 million were
issued on September 29, 2009, and $650 million were issued on May 16, 2017. Additionally, Willis North America had $394
million of senior notes issued on March 28, 2007; these were subsequently repaid on March 28, 2017.
All direct obligations under the senior notes are jointly and severally, irrevocably and fully and unconditionally guaranteed by
Willis Netherlands Holdings B.V., Willis Investment U.K. Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis
Group Limited, Willis Towers Watson Sub Holdings Unlimited Company and Willis Towers Watson UK Holdings Limited,
collectively the ‘Other Guarantors’, and with Willis Towers Watson, the ‘Guarantor Companies’.
On August 11, 2017 a newly formed entity, Willis Towers Watson UK Holdings Limited, became the successor to, and assumed
all guarantees of, WTW Bermuda Holdings Ltd. under the outstanding indentures for the senior notes described above. As both
entities are direct subsidiaries of TA I Limited, and sub-consolidate within the ‘Other Guarantors’ columns of the financial
statements presented herein, there is no significant impact on the condensed consolidating financial statements from what has
previously been disclosed.
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by Willis
Towers Watson described in Note 22 and the guarantor structure associated with the senior notes and revolving credit facility
issued by Trinity Acquisition plc described in Note 23.
Presented below is condensed consolidating financial information for:
(i) Willis Towers Watson, which is a guarantor, on a parent company only basis;
(ii) the Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent and are all direct
or indirect parents of the issuer;
(iii) the Issuer, Willis North America;
(iv) Other, which are the non-guarantor subsidiaries, on a combined basis;
(v) Consolidating adjustments; and
(vi) the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets of Willis
Towers Watson, the Other Guarantors and the Issuer.
148
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2017
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
— $
— $
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other (income)/expense, net
(LOSS)/INCOME FROM OPERATIONS
BEFORE INCOME TAXES AND INTEREST
IN EARNINGS OF ASSOCIATES
(Benefit from)/provision for income taxes
(LOSS)/INCOME FROM OPERATIONS
BEFORE INTEREST IN EARNINGS OF
ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS
TOWERS WATSON
Comprehensive income before non-controlling
interests
Comprehensive income attributable to non-
controlling interests
Comprehensive income attributable to Willis
Towers Watson
$
$
$
—
—
4
3
—
—
—
—
7
(7)
—
—
30
(35)
(2)
—
(2)
—
570
568
—
—
—
—
92
6
3
8
73
182
(182)
(535)
62
102
—
189
(51)
240
—
353
593
—
19
—
19
48
20
—
—
15
19
102
(83)
(219)
185
35
—
(84)
29
(113)
—
171
58
—
$
8,097
$
— $
8,116
86
8,183
4,693
1,419
197
581
109
177
7,176
1,007
(148)
655
21
(142)
621
(78)
699
3
—
702
(24)
—
—
—
—
—
(3)
—
—
(3)
3
902
(902)
—
238
(235)
—
(235)
—
(1,094)
(1,329)
—
86
8,202
4,745
1,534
203
581
132
269
7,464
738
—
—
188
61
489
(100)
589
3
—
592
(24)
568
$
593
$
58
$
678
$
(1,329) $
568
939
$
953
$
197
$
1,050
$
(2,163) $
976
—
—
—
(37)
—
(37)
939
$
953
$
197
$
1,013
$
(2,163) $
939
149
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2016
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other (income)/expense, net
(LOSS)/INCOME FROM OPERATIONS
BEFORE INCOME TAXES AND INTEREST
IN EARNINGS OF ASSOCIATES
(Benefit from)/provision for income taxes
(LOSS)/INCOME FROM OPERATIONS
BEFORE INTEREST IN EARNINGS OF
ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS
TOWERS WATSON
Comprehensive loss before non-controlling
interests
Comprehensive loss attributable to non-
controlling interests
Comprehensive loss attributable to Willis Towers
Watson
$
— $
— $
—
—
2
3
—
—
—
1
6
(6)
(3)
3
32
—
(38)
—
(38)
—
458
420
—
2
2
1
112
5
—
29
16
163
(161)
(500)
74
89
(2)
178
(36)
214
—
234
448
—
19
—
19
15
88
14
—
39
26
182
(163)
(287)
178
39
—
(93)
(86)
(7)
—
157
150
—
$
7,759
$
— $
7,778
107
7,866
4,628
1,348
159
591
125
134
6,985
881
(136)
671
24
29
293
26
267
2
—
269
(18)
—
—
—
—
—
—
—
—
—
—
926
(926)
—
—
—
—
—
—
(849)
(849)
—
109
7,887
4,646
1,551
178
591
193
177
7,336
551
—
—
184
27
340
(96)
436
2
—
438
(18)
$
$
420
$
448
$
150
$
251
$
(849) $
420
(427) $
(380) $
(266) $
(550) $
1,194
$
(429)
—
—
—
2
—
2
$
(427) $
(380) $
(266) $
(548) $
1,194
$
(427)
150
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2015
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
— $
— $
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other expense/(income), net
(LOSS)/INCOME FROM OPERATIONS
BEFORE INCOME TAXES AND INTEREST
IN EARNINGS OF ASSOCIATES
(Benefit from)/provision for income taxes
(LOSS)/INCOME FROM OPERATIONS
BEFORE INTEREST IN EARNINGS OF
ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS
TOWERS WATSON
Comprehensive income before non-controlling
interests
Comprehensive income attributable to non-
controlling interests
Comprehensive income attributable to Willis
Towers Watson
$
$
$
—
—
1
8
—
—
—
4
13
(13)
—
—
43
10
(66)
—
(66)
—
439
373
—
1
1
—
100
6
—
28
14
148
(147)
(225)
31
39
(42)
50
(29)
79
9
347
435
—
11
—
11
77
1
16
—
13
—
107
(96)
(236)
189
42
—
(91)
(17)
(74)
—
106
32
—
$
3,798
$
— $
3,809
19
3,817
2,225
609
73
76
85
66
3,134
683
(110)
351
18
(23)
447
13
434
2
—
436
(11)
—
—
—
—
—
—
—
—
—
—
571
(571)
—
—
—
—
—
—
(892)
(892)
—
20
3,829
2,303
718
95
76
126
84
3,402
427
—
—
142
(55)
340
(33)
373
11
—
384
(11)
373
$
435
$
32
$
425
$
(892) $
373
402
$
462
$
49
$
455
$
(965) $
403
—
—
—
(1)
—
(1)
402
$
462
$
49
$
454
$
(965) $
402
151
Condensed Consolidating Balance Sheet
As of December 31, 2017
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
ASSETS
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Prepaid and other current assets
Amounts due from group undertakings
Total current assets
Investments in subsidiaries
Fixed assets, net
Goodwill
Other intangible assets, net
Pension benefits assets
Other non-current assets
Non-current amounts due from group
undertakings
$
$
2
—
—
—
6,202
6,204
4,506
—
—
—
—
—
—
Total non-current assets
4,506
1
—
—
45
1,331
1,377
8,836
25
—
60
—
34
5,375
14,330
$
— $
1,027
$
— $
1,030
—
4
267
1,661
1,932
6,125
—
—
—
—
115
861
7,101
12,155
2,242
264
3,626
19,314
—
960
10,519
3,882
764
388
—
16,513
—
—
(146)
(12,820)
(12,966)
(19,467)
—
—
(60)
—
(90)
(6,236)
(25,853)
12,155
2,246
430
—
15,861
—
985
10,519
3,882
764
447
—
$ 10,710
$ 15,707
$
9,033
$ 35,827
16,597
$ (38,819) $ 32,458
TOTAL ASSETS
LIABILITIES AND EQUITY
Fiduciary liabilities
Deferred revenue and accrued expenses
Short-term debt and current portion of long-
term debt
Other current liabilities
Amounts due to group undertakings
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred tax liabilities
Provision for liabilities
Other non-current liabilities
Non-current amounts due to group
undertakings
Total non-current liabilities
TOTAL LIABILITIES
REDEEMABLE NON-CONTROLLING
INTEREST
EQUITY
Total Willis Towers Watson shareholders’
equity
Non-controlling interests
Total equity
$
— $
— $
— $ 12,155
$
— $ 12,155
—
—
87
—
87
497
—
—
—
—
—
497
584
—
7
—
60
8,100
8,167
2,883
—
—
—
5
—
2,888
11,055
19
—
83
2,790
2,892
986
—
—
120
19
519
1,644
4,536
1,685
—
1,711
85
724
1,930
16,579
84
1,259
704
438
520
5,717
8,722
25,301
—
(150)
(12,820)
(12,970)
—
—
(89)
—
—
(6,236)
(6,325)
(19,295)
85
804
—
14,755
4,450
1,259
615
558
544
—
7,426
22,181
—
—
28
—
28
10,126
—
10,126
4,652
—
4,652
4,497
—
4,497
10,375
123
10,498
(19,524)
—
(19,524)
10,126
123
10,249
$ (38,819) $ 32,458
TOTAL LIABILITIES AND EQUITY
$ 10,710
$ 15,707
$
9,033
$ 35,827
152
Total non-current assets
3,409
$ 10,638
$ 14,251
$
7,616
$ 32,526
16,461
$ (34,778) $ 30,253
ASSETS
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Prepaid and other current assets
Amounts due from group undertakings
Total current assets
Investments in subsidiaries
Fixed assets, net
Goodwill
Other intangible assets, net
Pension benefits assets
Other non-current assets
Non-current amounts due from group
undertakings
TOTAL ASSETS
LIABILITIES AND EQUITY
Fiduciary liabilities
Deferred revenue and accrued expenses
Short-term debt and current portion of long-
term debt
Other current liabilities
Amounts due to group undertakings
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred tax liabilities
Provision for liabilities
Other non-current liabilities
Non-current amounts due to group
undertakings
Total non-current liabilities
TOTAL LIABILITIES
REDEEMABLE NON-CONTROLLING
INTEREST
EQUITY
Total Willis Towers Watson shareholders’
equity
Non-controlling interests
Total equity
Condensed Consolidating Balance Sheet
As of December 31, 2016
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
— $
— $
— $
870
$
— $
870
$
— $
— $
— $ 10,505
$
—
—
—
7,229
7,229
3,409
—
—
—
—
—
—
—
—
77
—
77
496
—
—
—
—
—
496
573
—
—
—
49
1,706
1,755
7,733
34
—
64
—
10
—
7
23
1,190
1,220
5,480
—
—
—
—
80
4,655
12,496
836
6,396
10,505
2,073
324
2,370
16,142
—
805
10,413
4,368
488
310
—
16,384
—
—
(59)
(12,495)
(12,554)
(16,622)
—
—
(64)
—
(47)
(5,491)
(22,224)
10,505
2,080
337
—
13,792
—
839
10,413
4,368
488
353
—
15
22
94
8,323
8,454
2,506
—
—
—
48
—
2,554
11,008
27
394
23
2,075
2,519
186
—
—
120
15
518
839
1,488
92
684
2,097
14,866
169
1,321
1,013
455
483
4,973
8,414
3,358
23,280
— $ 10,505
(49)
1,481
—
(2)
(12,495)
(12,546)
—
—
(149)
—
(14)
(5,491)
(5,654)
(18,200)
508
876
—
13,370
3,357
1,321
864
575
532
—
6,649
20,019
—
—
51
—
51
10,065
—
10,065
3,243
—
3,243
4,258
—
4,258
9,077
118
9,195
(16,578)
—
(16,578)
10,065
118
10,183
$ (34,778) $ 30,253
TOTAL LIABILITIES AND EQUITY
$ 10,638
$ 14,251
$
7,616
$ 32,526
153
Condensed Consolidating Statement of Cash Flows
NET CASH FROM/(USED IN) OPERATING
ACTIVITIES
CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
Additions to fixed assets and software for
internal use
Capitalized software costs
Acquisitions of operations, net of cash
acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing
activities
Repayments of intercompany investing
activities
Reduction in investment in subsidiaries
Additional investment in subsidiaries
Net cash from/(used in) investing
activities
CASH FLOWS (USED IN)/FROM
FINANCING ACTIVITIES
Net borrowings on revolving credit facility
Senior notes issued
Proceeds from issuance of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Payments for share cancellation related to
legal settlement
Payments of deferred and contingent
consideration related to acquisitions
Cash paid for employee taxes on
withholding shares
Dividends paid
Acquisitions of and dividends paid to non-
controlling interests
Proceeds from intercompany financing
activities
Repayments of intercompany financing
activities
Net cash (used in)/from financing
activities
Year ended December 31, 2017
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
743
$
(725) $
114
$
939
$
(209) $
862
—
—
—
—
—
(8)
—
—
—
—
1,042
1,326
—
—
—
—
—
19
(292)
(75)
(13)
57
(4)
—
—
—
—
—
1,237
(3,624)
—
104
(1,139)
(994)
1,188
(503)
(74)
100
(215)
(1,722)
618
(153)
2,790
(2,010)
2,010
(300)
(75)
(13)
57
(4)
—
—
—
—
$
7
$
1,009
$
(170) $
(347) $
(834) $
(335)
—
—
—
—
—
(532)
61
—
—
—
(277)
—
—
—
487
—
—
(4)
(220)
—
—
—
—
—
—
—
1,518
155
649
—
(5)
(394)
—
—
—
—
—
(58)
—
203
—
—
32
—
(120)
—
—
(177)
(65)
(18)
(151)
(51)
—
—
—
—
—
—
—
—
—
—
209
—
1,069
(2,790)
(2,064)
(494)
(1,066)
3,624
642
649
32
(9)
(734)
(532)
61
(177)
(65)
(18)
(277)
(51)
—
—
$
(748) $
(283) $
56
$
(547) $
1,043
$
(479)
INCREASE IN CASH AND CASH
EQUIVALENTS
Effect of exchange rate changes on cash and cash
equivalents
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF
YEAR
2
—
—
1
—
—
—
—
—
45
112
870
—
—
—
48
112
870
$
2
$
1
$
— $
1,027
$
— $
1,030
154
Condensed Consolidating Statement of Cash Flows
NET CASH (USED IN)/FROM OPERATING
ACTIVITIES
CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
Additions to fixed assets and software for
internal use
Capitalized software costs
Acquisitions of operations, net of cash
acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing
activities
Repayments of intercompany investing
activities
Reduction in investment in subsidiaries
Additional investment in subsidiaries
Net cash from/(used in) investing
activities
CASH FLOWS (USED IN)/FROM
FINANCING ACTIVITIES
Net payments on revolving credit facility
Senior notes issued
Proceeds from issuance of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Payments of deferred and contingent
consideration related to acquisitions
Cash paid for employee taxes on
withholding shares
Dividends paid
Acquisitions of and dividends paid to non-
controlling interests
Proceeds from intercompany financing
activities
Repayments of intercompany financing
activities
Net cash (used in)/from financing
activities
(DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS
Effect of exchange rate changes on cash and cash
equivalents
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF
YEAR
Year ended December 31, 2016
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
(20) $
128
$
(83) $
1,114
$
(206) $
933
—
—
—
—
—
—
(79)
—
—
—
—
163
(3,751)
4,600
—
(4,114)
3,600
(4,600)
(12)
—
—
—
33
—
—
—
—
(221)
(85)
476
(4)
20
30
(769)
—
(3,600)
94
—
—
3
(30)
(193)
8,634
(8,200)
8,200
(218)
(85)
476
(1)
23
—
—
—
—
$
849
$
(5,030) $
21
$
(4,153) $
8,508
$
195
—
—
—
—
(300)
(396)
63
—
—
(199)
—
—
—
(237)
1,606
400
(14)
(1,037)
—
—
—
—
—
—
4,204
—
—
—
—
—
—
—
—
—
(49)
—
164
—
—
4
—
(564)
—
—
(67)
(13)
(90)
(21)
—
—
—
—
—
—
—
—
—
139
—
4,266
(8,634)
(22)
(53)
(118)
193
(237)
1,606
404
(14)
(1,901)
(396)
63
(67)
(13)
(199)
(21)
—
—
$
(832) $
4,900
$
62
$
3,397
$
(8,302) $
(775)
(3)
—
3
(2)
—
2
—
—
—
358
(15)
527
—
—
—
$
— $
— $
— $
870
$
— $
353
(15)
532
870
155
Condensed Consolidating Statement of Cash Flows
NET CASH (USED IN)/FROM OPERATING
ACTIVITIES
CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
Additions to fixed assets and software for
internal use
Acquisitions of operations, net of cash
acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing
activities
Repayments of intercompany investing
activities
Additional investment in subsidiaries
Net cash from/(used in) investing
activities
CASH FLOWS (USED IN)/FROM
FINANCING ACTIVITIES
Net borrowings on revolving credit facility
Proceeds from issue of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Cash paid for employee taxes on
withholding shares
Dividends paid
Acquisitions of and dividends paid to non-
controlling interests
Proceeds from intercompany financing
activities
Repayments of intercompany financing
activities
Net cash (used in)/from financing
activities
Year ended December 31, 2015
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
(10) $
583
$
43
$
(222) $
(150) $
244
(10)
(8)
(128)
—
—
—
—
321
(82)
—
—
—
—
49
(746)
(598)
—
—
—
87
—
—
—
—
—
—
(857)
44
16
151
(608)
(181)
—
1,009
598
(146)
(857)
44
16
—
—
—
$
239
$
(1,305) $
79
$
(955) $
999
$
(943)
—
—
—
—
(82)
124
—
(277)
—
—
—
469
592
(5)
(16)
—
—
—
—
—
154
(472)
—
—
—
(149)
—
—
—
—
—
27
—
—
—
—
(1)
—
—
—
—
—
—
605
(598)
(1)
(150)
(21)
—
150
—
828
(1,009)
(136)
608
469
592
(5)
(166)
(82)
131
(1)
(277)
(21)
—
—
$
(235) $
722
$
(122) $
1,124
$
(849) $
640
DECREASE IN CASH AND CASH
EQUIVALENTS
Effect of exchange rate changes on cash and cash
equivalents
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF
YEAR
$
(6)
—
9
3
$
156
—
—
2
2
—
—
—
(53)
(44)
624
—
—
—
(59)
(44)
635
$
— $
527
$
— $
532
Note 22 — Financial Information for Parent Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries
On March 17, 2011, the Company issued senior notes totaling $800 million in a registered public offering. On March 15, 2016,
$300 million of these senior notes was repaid, leaving $500 million outstanding. These debt securities were issued by Willis
Towers Watson (‘WTW Debt Securities’) and are guaranteed by certain of the Company’s subsidiaries. Therefore, the
Company is providing the condensed consolidating financial information below. The following wholly owned subsidiaries
(directly or indirectly) fully and unconditionally guarantee the WTW Debt Securities on a joint and several basis: Willis
Netherlands Holdings B.V., Willis Investment U.K. Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group
Limited, Willis North America Inc., Willis Towers Watson Sub Holdings Unlimited Company and Willis Towers Watson UK
Holdings Limited (the ‘Guarantors’).
On August 11, 2017 a newly formed entity, Willis Towers Watson UK Holdings Limited, became the successor to, and assumed
all guarantees of, WTW Bermuda Holdings Ltd. under the outstanding indentures for the senior notes described above. As both
entities are direct subsidiaries of TA I Limited, and sub-consolidate within the ‘Other Guarantors’ columns of the financial
statements presented herein, there is no significant impact on the condensed consolidating financial statements from what has
previously been disclosed.
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by Willis
North America described in Note 21 and the guarantor structure associated with the senior notes and revolving credit facility
issued by Trinity Acquisition plc described in Note 23.
Presented below is condensed consolidating financial information for:
(i) Willis Towers Watson, which is the Parent Issuer;
(ii) the Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent;
(iii) Other, which are the non-guarantor subsidiaries, on a combined basis;
(iv) Consolidating adjustments; and
(v) the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets of Willis
Towers Watson and the Guarantors.
157
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2017
Willis
Towers
Watson —
the Parent
Issuer
The
Guarantors
Other
Consolidating
adjustments
Consolidated
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other (income)/expense, net
(LOSS)/INCOME FROM OPERATIONS BEFORE
INCOME TAXES AND INTEREST IN EARNINGS OF
ASSOCIATES
Benefit from income taxes
(LOSS)/INCOME FROM OPERATIONS BEFORE
INTEREST IN EARNINGS OF ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS
WATSON
Comprehensive income before non-controlling interests
Comprehensive income attributable to non-controlling
interests
$
— $
—
—
4
3
—
—
—
—
7
(7)
—
—
30
(35)
(2)
—
(2)
—
570
568
—
19
—
19
48
112
6
3
23
92
284
(265)
(645)
138
137
—
105
(22)
127
—
466
593
—
$
8,097
$
— $
8,116
86
8,183
4,693
1,419
197
581
109
177
7,176
1,007
(148)
655
21
(142)
621
(78)
699
3
—
702
(24)
—
—
—
—
—
(3)
—
—
(3)
3
793
(793)
—
238
(235)
—
(235)
—
(1,036)
(1,271)
—
86
8,202
4,745
1,534
203
581
132
269
7,464
738
—
—
188
61
489
(100)
589
3
—
592
(24)
$
$
568
$
593
$
678
$
(1,271) $
568
939
$
953
$
1,050
$
(1,966) $
976
—
—
(37)
—
(37)
Comprehensive income attributable to Willis Towers Watson
$
939
$
953
$
1,013
$
(1,966) $
939
158
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2016
Willis
Towers
Watson —
the Parent
Issuer
The
Guarantors
Other
Consolidating
adjustments
Consolidated
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other (income)/expense, net
(LOSS)/INCOME FROM OPERATIONS BEFORE
INCOME TAXES AND INTEREST IN EARNINGS OF
ASSOCIATES
(Benefit from)/provision for income taxes
(LOSS)/INCOME FROM OPERATIONS BEFORE
INTEREST IN EARNINGS OF ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS
WATSON
Comprehensive loss before non-controlling interests
Comprehensive loss attributable to non-controlling interests
Comprehensive loss attributable to Willis Towers Watson
$
— $
—
—
2
3
—
—
—
1
6
(6)
(3)
3
32
—
(38)
—
(38)
—
458
420
—
19
2
21
16
200
19
—
68
42
345
(324)
(672)
137
128
(2)
85
(122)
207
—
241
448
—
$
7,759
$
— $
7,778
107
7,866
4,628
1,348
159
591
125
134
6,985
881
(136)
671
24
29
293
26
267
2
—
269
(18)
—
—
—
—
—
—
—
—
—
—
811
(811)
—
—
—
—
—
—
(699)
(699)
—
109
7,887
4,646
1,551
178
591
193
177
7,336
551
—
—
184
27
340
(96)
436
2
—
438
(18)
420
$
448
$
251
$
(699) $
420
(427) $
—
(427) $
(380) $
—
(380) $
(550) $
2
(548) $
928
—
928
$
$
(429)
2
(427)
$
$
$
159
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2015
Willis
Towers
Watson —
the Parent
Issuer
The
Guarantors
Other
Consolidating
adjustments
Consolidated
$
— $
$
3,798
$
— $
3,809
—
—
1
8
—
—
—
4
13
(13)
—
—
43
10
(66)
—
(66)
—
439
373
—
373
402
—
$
$
11
1
12
77
101
22
—
41
14
255
(243)
(350)
109
81
(42)
(41)
(46)
5
9
421
435
—
435
462
—
$
$
19
3,817
2,225
609
73
76
85
66
3,134
683
(110)
351
18
(23)
447
13
434
2
—
436
(11)
425
455
(1)
454
—
—
—
—
—
—
—
—
—
—
460
(460)
—
—
—
—
—
—
(860)
(860)
—
20
3,829
2,303
718
95
76
126
84
3,402
427
—
—
142
(55)
340
(33)
373
11
—
384
(11)
$
$
$
(860) $
373
(916) $
403
—
(916) $
(1)
402
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other expense/(income), net
(LOSS)/INCOME FROM OPERATIONS BEFORE
INCOME TAXES AND INTEREST IN EARNINGS OF
ASSOCIATES
(Benefit from)/provision for income taxes
(LOSS)/INCOME FROM OPERATIONS BEFORE
INTEREST IN EARNINGS OF ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS
WATSON
Comprehensive income before non-controlling interests
Comprehensive income attributable to non-controlling
interests
$
$
Comprehensive income attributable to Willis Towers Watson
$
402
$
462
$
160
Condensed Consolidating Balance Sheet
As of December 31, 2017
Willis
Towers
Watson —
the Parent
Issuer
The
Guarantors
Other
Consolidating
adjustments
Consolidated
$
1,027
$
— $
1,030
ASSETS
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Prepaid and other current assets
Amounts due from group undertakings
Total current assets
Investments in subsidiaries
Fixed assets, net
Goodwill
Other intangible assets, net
Pension benefits assets
Other non-current assets
Non-current amounts due from group undertakings
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Fiduciary liabilities
Deferred revenue and accrued expenses
Short-term debt and current portion of long-term debt
Other current liabilities
Amounts due to group undertakings
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred tax liabilities
Provision for liabilities
Other non-current liabilities
Non-current amounts due to group undertakings
Total non-current liabilities
TOTAL LIABILITIES
REDEEMABLE NON-CONTROLLING INTEREST
EQUITY
Total Willis Towers Watson shareholders’ equity
Non-controlling interests
Total equity
4,506
16,414
16,513
$ 10,710
$ 18,680
$ 35,827
16,597
$ (32,759) $ 32,458
$
— $
— $ 12,155
$
— $ 12,155
—
1,711
$
$
2
—
—
—
6,202
6,204
4,506
—
—
—
—
—
—
1
—
4
312
1,949
2,266
10,463
25
—
60
—
149
5,717
12,155
2,242
264
3,626
19,314
—
960
10,519
3,882
764
388
—
—
—
87
—
87
497
—
—
—
—
—
497
584
—
26
—
143
9,846
10,015
3,869
—
—
120
24
—
4,013
1,685
85
724
1,930
16,579
84
1,259
704
438
520
5,717
8,722
14,028
25,301
—
28
10,126
—
10,126
4,652
—
4,652
10,375
123
10,498
—
—
(146)
(11,777)
(11,923)
(14,969)
—
—
(60)
—
(90)
(5,717)
(20,836)
—
(150)
(11,776)
(11,926)
—
—
(89)
—
—
(5,717)
(5,806)
(17,732)
—
(15,027)
—
(15,027)
12,155
2,246
430
—
15,861
—
985
10,519
3,882
764
447
—
85
804
—
14,755
4,450
1,259
615
558
544
—
7,426
22,181
28
10,126
123
10,249
$ (32,759) $ 32,458
TOTAL LIABILITIES AND EQUITY
$ 10,710
$ 18,680
$ 35,827
161
Condensed Consolidating Balance Sheet
As of December 31, 2016
Willis
Towers
Watson —
the Parent
Issuer
The
Guarantors
Other
Consolidating
adjustments
Consolidated
$
— $
— $
870
$
— $
870
ASSETS
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Prepaid and other current assets
Amounts due from group undertakings
Total current assets
Investments in subsidiaries
Fixed assets, net
Goodwill
Other intangible assets, net
Pension benefits assets
Other non-current assets
Non-current amounts due from group undertakings
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Fiduciary liabilities
Deferred revenue and accrued expenses
Short-term debt and current portion of long-term debt
Other current liabilities
Amounts due to group undertakings
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred tax liabilities
Provision for liabilities
Other non-current liabilities
Non-current amounts due to group undertakings
Total non-current liabilities
TOTAL LIABILITIES
REDEEMABLE NON-CONTROLLING INTEREST
EQUITY
Total Willis Towers Watson shareholders’ equity
Non-controlling interests
Total equity
—
—
—
7,229
7,229
3,409
—
—
—
—
—
—
3,409
—
7
72
1,648
1,727
8,955
34
—
64
—
90
4,973
14,116
10,505
2,073
324
2,370
16,142
—
805
10,413
4,368
488
310
—
16,384
$ 10,638
$ 15,843
$ 32,526
$
— $
— $ 10,505
$
—
—
77
—
77
496
—
—
—
—
—
496
573
—
42
416
117
9,150
9,725
2,692
—
—
120
63
—
2,875
1,488
92
684
2,097
14,866
169
1,321
1,013
455
483
4,973
8,414
12,600
23,280
—
51
10,065
—
10,065
3,243
—
3,243
9,077
118
9,195
—
—
(59)
(11,247)
(11,306)
(12,364)
—
—
(64)
—
(47)
(4,973)
(17,448)
10,505
2,080
337
—
13,792
—
839
10,413
4,368
488
353
—
16,461
$ (28,754) $ 30,253
508
1,481
— $ 10,505
(49)
—
(2)
(11,247)
(11,298)
—
13,370
3,357
876
—
—
(149)
—
(14)
(4,973)
(5,136)
(16,434)
—
(12,320)
—
(12,320)
1,321
864
575
532
—
6,649
20,019
51
10,065
118
10,183
$ (28,754) $ 30,253
TOTAL LIABILITIES AND EQUITY
$ 10,638
$ 15,843
$ 32,526
162
Condensed Consolidating Statement of Cash Flows
Year ended December 31, 2017
Willis
Towers
Watson —
the Parent
Issuer
The
Guarantors
Other
Consolidating
adjustments
Consolidated
NET CASH FROM/(USED IN) OPERATING ACTIVITIES
$
743
$
(669) $
939
$
(151) $
862
CASH FLOWS FROM/(USED IN) INVESTING
ACTIVITIES
Additions to fixed assets and software for internal use
Capitalized software costs
Acquisitions of operations, net of cash acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing activities
Repayments of intercompany investing activities
Reduction in investment in subsidiaries
Additional investment in subsidiaries
Net cash from/(used in) investing activities
$
CASH FLOWS (USED IN)/FROM FINANCING
ACTIVITIES
Net borrowings on revolving credit facility
Senior notes issued
Proceeds from issuance of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Payments for share cancellation related to legal
settlement
Payments of deferred and contingent consideration
related to acquisitions
Cash paid for employee taxes on withholding shares
Dividends paid
Acquisitions of and dividends paid to non-controlling
interests
Proceeds from intercompany financing activities
Repayments of intercompany financing activities
Net cash (used in)/from financing activities
INCREASE IN CASH AND CASH EQUIVALENTS
Effect of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
—
—
—
—
—
(8)
—
—
—
—
1,042
—
104
(1,139)
7
$
1,032
(1,068)
1,288
(718)
526
$
(292)
(75)
(13)
57
(4)
1,237
(1,722)
618
(153)
(347) $
—
—
—
—
—
(3,311)
2,790
(2,010)
2,010
(521) $
—
—
—
—
—
(532)
61
—
—
—
(277)
—
—
—
—
32
—
(120)
—
—
(177)
(65)
(18)
(151)
(51)
1,069
(1,066)
—
—
—
—
—
—
—
—
—
—
151
—
(2,790)
3,311
$
(547) $
672
$
45
112
870
—
—
—
642
649
—
(9)
(614)
—
—
—
—
—
—
—
1,721
(2,245)
144
1
—
—
1
(300)
(75)
(13)
57
(4)
—
—
—
—
(335)
642
649
32
(9)
(734)
(532)
61
(177)
(65)
(18)
(277)
(51)
—
—
(479)
48
112
870
$
1,027
$
— $
1,030
—
(748) $
2
—
—
2
$
$
$
163
Condensed Consolidating Statement of Cash Flows
Year ended December 31, 2016
Willis
Towers
Watson —
the Parent
Issuer
The
Guarantors
Other
Consolidating
adjustments
Consolidated
NET CASH (USED IN)/FROM OPERATING ACTIVITIES
$
(20) $
(4) $
1,114
$
(157) $
933
CASH FLOWS FROM/(USED IN) INVESTING
ACTIVITIES
Additions to fixed assets and software for internal use
Capitalized software costs
Acquisitions of operations, net of cash acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing activities
Repayments of intercompany investing activities
Reduction in investment in subsidiaries
Additional investment in subsidiaries
—
—
—
—
—
—
(3,751)
4,600
—
Net cash from/(used in) investing activities
$
849
$
(91)
—
—
—
33
(221)
(85)
476
(4)
20
118
(4,114)
3,600
(4,600)
(5,054) $
30
(769)
—
(3,600)
(4,153) $
94
—
—
3
(30)
(148)
8,634
(8,200)
8,200
(218)
(85)
476
(1)
23
—
—
—
—
8,553
$
195
CASH FLOWS (USED IN)/FROM FINANCING
ACTIVITIES
Net payments on revolving credit facility
Senior notes issued
Proceeds from issuance of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Payments of deferred and contingent consideration
related to acquisitions
Cash paid for employee taxes on withholding shares
Dividends paid
Acquisitions of and dividends paid to non-controlling
interests
Proceeds from intercompany financing activities
Repayments of intercompany financing activities
Net cash (used in)/from financing activities
—
—
—
—
(300)
(396)
63
—
—
(199)
—
—
—
(832) $
$
(DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS
Effect of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR
(3)
—
3
(237)
1,606
400
(14)
(1,037)
—
—
—
—
—
—
4,368
(30)
5,056
$
(2)
—
2
CASH AND CASH EQUIVALENTS, END OF YEAR
$
— $
— $
—
—
4
—
(564)
—
—
(67)
(13)
(90)
—
—
—
—
—
—
—
—
—
90
(21)
4,266
(118)
3,397
$
—
(8,634)
148
(8,396) $
358
(15)
527
870
—
—
—
$
— $
(237)
1,606
404
(14)
(1,901)
(396)
63
(67)
(13)
(199)
(21)
—
—
(775)
353
(15)
532
870
164
Condensed Consolidating Statement of Cash Flows
Year ended December 31, 2015
Willis
Towers
Watson —
the Parent
Issuer
The
Guarantors
Other
Consolidating
adjustments
Consolidated
NET CASH (USED IN)/FROM OPERATING ACTIVITIES
$
(10) $
626
$
(222) $
(150) $
244
CASH FLOWS FROM/(USED IN) INVESTING
ACTIVITIES
Additions to fixed assets and software for internal use
Acquisitions of operations, net of cash acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing activities
Repayments of intercompany investing activities
Additional investment in subsidiaries
Net cash from/(used in) investing activities
CASH FLOWS (USED IN)/FROM FINANCING
ACTIVITIES
Net borrowings on revolving credit facility
Proceeds from issue of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Cash paid for employee taxes on withholding shares
Dividends paid
Acquisitions of and dividends paid to non-controlling
interests
Proceeds from intercompany financing activities
Repayments of intercompany financing activities
Net cash (used in)/from financing activities
DECREASE IN CASH AND CASH EQUIVALENTS
Effect of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
—
—
—
—
321
(82)
—
$
239
$
(18)
—
—
—
136
(746)
(598)
(1,226) $
(128)
(857)
44
16
151
(181)
—
(955) $
—
—
—
—
(608)
1,009
(146)
(857)
44
16
—
—
598
999
$
—
(943)
—
—
—
—
(82)
124
—
(277)
—
—
—
(235) $
(6)
—
9
3
$
$
$
469
592
(5)
(165)
—
—
—
—
—
181
(472)
600
—
—
2
2
$
$
—
—
—
(1)
—
605
(1)
(150)
(21)
828
(136)
1,124
(53)
(44)
624
527
—
—
—
—
—
(598)
—
150
—
(1,009)
608
(849) $
—
—
—
— $
$
$
469
592
(5)
(166)
(82)
131
(1)
(277)
(21)
—
—
640
(59)
(44)
635
532
165
Note 23 — Financial Information for Issuer, Parent Guarantor, Other Guarantor Subsidiaries and Non-Guarantor
Subsidiaries
Trinity Acquisition plc has $2.1 billion senior notes outstanding of which $525 million were issued on August 15, 2013, $1.0
billion were issued on March 22, 2016, €540 million ($609 million) were issued on May 26, 2016, and $884 million outstanding
under the $1.25 billion revolving credit facility issued March 7, 2017.
All direct obligations under the senior notes are jointly and severally, irrevocably and fully and unconditionally guaranteed by
Willis Netherlands Holdings B.V., Willis Investment U.K. Holdings Limited, TA I Limited, Willis Group Limited, Willis North
America Inc., Willis Towers Watson Sub Holdings Unlimited Company and Willis Towers Watson UK Holdings Limited,
collectively the ‘Other Guarantors’, and with Willis Towers Watson, the ‘Guarantor Companies’.
On August 11, 2017 a newly formed entity, Willis Towers Watson UK Holdings Limited, became the successor to, and assumed
all guarantees of, WTW Bermuda Holdings Ltd. under the outstanding indentures for the senior notes described above. As both
entities are direct subsidiaries of TA I Limited, and sub-consolidate within the ‘Other Guarantors’ columns of the financial
statements presented herein, there is no significant impact on the condensed consolidating financial statements from what has
previously been disclosed.
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by Willis
North America described in Note 21 and the guarantor structure associated with the senior notes issued by Willis Towers
Watson described in Note 22.
Presented below is condensed consolidating financial information for:
(i) Willis Towers Watson, which is a guarantor, on a parent company only basis;
(ii) the Other Guarantors, which are all wholly owned subsidiaries (directly or indirectly) of the parent. Willis Towers
Watson Sub Holdings Unlimited Company, Willis Netherlands Holdings B.V, Willis Investment U.K. Holdings Limited,
TA I Limited and Willis Towers Watson UK Holdings Limited are all direct or indirect parents of the issuer and Willis
Group Limited and Willis North America Inc., are direct or indirect wholly owned subsidiaries of the issuer;
(iii) Trinity Acquisition plc, which is the issuer and is a 100 percent indirectly owned subsidiary of the parent;
(iv) Other, which are the non-guarantor subsidiaries, on a combined basis;
(v) Consolidating adjustments; and
(vi) the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets of Willis
Towers Watson, the Other Guarantors and the Issuer.
166
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2017
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
— $
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other (income)/expense, net
(LOSS)/INCOME FROM OPERATIONS
BEFORE INCOME TAXES AND INTEREST
IN EARNINGS OF ASSOCIATES
(Benefit from)/provision for income taxes
(LOSS)/INCOME FROM OPERATIONS
BEFORE INTEREST IN EARNINGS OF
ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS
TOWERS WATSON
Comprehensive income before non-controlling
interests
Comprehensive income attributable to non-
controlling interests
Comprehensive income attributable to Willis
Towers Watson
$
$
$
—
—
4
3
—
—
—
—
7
(7)
—
—
30
(35)
(2)
—
(2)
—
570
568
—
19
—
19
48
111
6
3
23
92
283
(264)
(614)
230
34
86
(24)
110
—
483
593
—
$
— $
8,097
$
— $
8,116
—
—
—
1
—
—
—
—
1
(1)
(149)
26
103
19
2
17
—
290
307
—
86
8,183
4,693
1,419
197
581
109
177
7,176
1,007
(148)
655
21
(142)
621
(78)
699
3
—
702
(24)
—
—
—
—
—
(3)
—
—
(3)
3
911
(911)
—
238
(235)
—
(235)
—
(1,343)
(1,578)
—
86
8,202
4,745
1,534
203
581
132
269
7,464
738
—
—
188
61
489
(100)
589
3
—
592
(24)
568
$
593
$
307
$
678
$
(1,578) $
568
939
$
953
$
663
$
1,050
$
(2,629) $
976
—
—
—
(37)
—
(37)
939
$
953
$
663
$
1,013
$
(2,629) $
939
167
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2016
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other (income)/expense, net
(LOSS)/INCOME FROM OPERATIONS
BEFORE INCOME TAXES AND INTEREST
IN EARNINGS OF ASSOCIATES
(Benefit from)/provision for income taxes
(LOSS)/INCOME FROM OPERATIONS
BEFORE INTEREST IN EARNINGS OF
ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS
TOWERS WATSON
Comprehensive loss before non-controlling
interests
Comprehensive loss attributable to non-
controlling interests
Comprehensive loss attributable to Willis Towers
Watson
$
— $
—
—
2
3
—
—
—
1
6
(6)
(3)
3
32
—
(38)
—
(38)
—
458
420
—
19
2
21
16
200
19
—
68
42
345
(324)
(657)
228
38
(2)
69
(125)
194
—
254
448
—
$
— $
7,759
$
— $
7,778
—
—
—
—
—
—
—
—
—
—
(132)
26
90
—
16
3
13
—
151
164
—
107
7,866
4,628
1,348
159
591
125
134
6,985
881
(136)
671
24
29
293
26
267
2
—
269
(18)
—
—
—
—
—
—
—
—
—
—
928
(928)
—
—
—
—
—
—
(863)
(863)
—
109
7,887
4,646
1,551
178
591
193
177
7,336
551
—
—
184
27
340
(96)
436
2
—
438
(18)
$
$
420
$
448
$
164
$
251
$
(863) $
420
(427) $
(379) $
(656) $
(550) $
1,583
$
(429)
—
—
—
2
—
2
$
(427) $
(379) $
(656) $
(548) $
1,583
$
(427)
168
Condensed Consolidating Statement of Comprehensive Income
Year ended December 31, 2015
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
— $
Revenues
Commissions and fees
Interest and other income
Total revenues
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and integration expenses
Total costs of providing services
(Loss)/income from operations
Income from Group undertakings
Expenses due to Group undertakings
Interest expense
Other expense/(income), net
(LOSS)/INCOME FROM OPERATIONS
BEFORE INCOME TAXES AND INTEREST
IN EARNINGS OF ASSOCIATES
(Benefit from)/provision for income taxes
(LOSS)/INCOME FROM OPERATIONS
BEFORE INTEREST IN EARNINGS OF
ASSOCIATES
Interest in earnings of associates, net of tax
Equity account for subsidiaries
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WILLIS
TOWERS WATSON
Comprehensive income before non-controlling
interests
Comprehensive income attributable to non-
controlling interests
Comprehensive income attributable to Willis
Towers Watson
$
$
$
—
—
1
8
—
—
—
4
13
(13)
—
—
43
10
(66)
—
(66)
—
439
373
—
11
1
12
77
101
22
—
41
14
255
(243)
(374)
200
41
(42)
(68)
(51)
(17)
9
443
435
—
$
— $
3,798
$
— $
3,809
—
—
—
—
—
—
—
—
—
—
(93)
26
40
—
27
5
22
—
337
359
—
19
3,817
2,225
609
73
76
85
66
3,134
683
(110)
351
18
(23)
447
13
434
2
—
436
(11)
—
—
—
—
—
—
—
—
—
—
577
(577)
—
—
—
—
—
—
(1,219)
(1,219)
—
20
3,829
2,303
718
95
76
126
84
3,402
427
—
—
142
(55)
340
(33)
373
11
—
384
(11)
373
$
435
$
359
$
425
$
(1,219) $
373
402
$
462
$
400
$
455
$
(1,316) $
403
—
—
—
(1)
—
(1)
402
$
462
$
400
$
454
$
(1,316) $
402
169
Condensed Consolidating Balance Sheet
As of December 31, 2017
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
ASSETS
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Prepaid and other current assets
Amounts due from group undertakings
Total current assets
Investments in subsidiaries
Fixed assets, net
Goodwill
Other intangible assets, net
Pension benefits assets
Other non-current assets
Non-current amounts due from group
undertakings
$
$
2
—
—
—
6,202
6,204
4,506
—
—
—
—
—
—
Total non-current assets
4,506
1
—
4
314
1,420
1,739
10,052
25
—
60
—
146
$
— $
1,027
$
— $
1,030
—
—
1
2,807
2,808
1,918
—
—
—
—
3
12,155
2,242
264
3,626
19,314
—
960
10,519
3,882
764
388
—
16,513
—
—
(149)
(14,055)
(14,204)
(16,476)
—
—
(60)
—
(90)
(6,659)
(23,285)
12,155
2,246
430
—
15,861
—
985
10,519
3,882
764
447
—
4,884
15,167
1,775
3,696
$ 10,710
$ 16,906
$
6,504
$ 35,827
16,597
$ (37,489) $ 32,458
TOTAL ASSETS
LIABILITIES AND EQUITY
Fiduciary liabilities
Deferred revenue and accrued expenses
Short-term debt and current portion of long-
term debt
Other current liabilities
Amounts due to group undertakings
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred tax liabilities
Provision for liabilities
Other non-current liabilities
Non-current amounts due to group
undertakings
Total non-current liabilities
TOTAL LIABILITIES
REDEEMABLE NON-CONTROLLING
INTEREST
EQUITY
Total Willis Towers Watson shareholders’
equity
Non-controlling interests
Total equity
$
— $
— $
— $ 12,155
$
— $ 12,155
—
—
87
—
87
497
—
—
—
—
—
497
584
—
26
—
112
10,467
10,605
986
—
—
120
24
519
1,649
12,254
—
—
33
1,658
1,691
2,883
—
—
—
—
423
3,306
4,997
1,685
—
1,711
85
724
1,930
16,579
84
1,259
704
438
520
5,717
8,722
25,301
—
(152)
(14,055)
(14,207)
—
—
(89)
—
—
(6,659)
(6,748)
(20,955)
85
804
—
14,755
4,450
1,259
615
558
544
—
7,426
22,181
—
—
28
—
28
10,126
—
10,126
4,652
—
4,652
1,507
—
1,507
10,375
123
10,498
(16,534)
—
(16,534)
10,126
123
10,249
$ (37,489) $ 32,458
TOTAL LIABILITIES AND EQUITY
$ 10,710
$ 16,906
$
6,504
$ 35,827
170
ASSETS
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Prepaid and other current assets
Amounts due from group undertakings
Total current assets
Investments in subsidiaries
Fixed assets, net
Goodwill
Other intangible assets, net
Pension benefits assets
Other non-current assets
Non-current amounts due from group
undertakings
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Fiduciary liabilities
Deferred revenue and accrued expenses
Short-term debt and current portion of long-
term debt
Other current liabilities
Amounts due to group undertakings
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred tax liabilities
Provision for liabilities
Other non-current liabilities
Non-current amounts due to group
undertakings
Total non-current liabilities
TOTAL LIABILITIES
REDEEMABLE NON-CONTROLLING
INTEREST
EQUITY
Total Willis Towers Watson shareholders’
equity
Non-controlling interests
Total equity
Condensed Consolidating Balance Sheet
As of December 31, 2016
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
— $
— $
— $
870
$
— $
870
—
—
—
7,229
7,229
3,409
—
—
—
—
—
—
3,409
—
7
74
849
930
8,621
34
—
64
—
90
—
—
1
1,595
1,596
7,309
—
—
—
—
—
4,859
13,668
1,055
8,364
10,505
2,073
324
2,370
16,142
—
805
10,413
4,368
488
310
—
16,384
$ 10,638
$ 14,598
$
9,960
$ 32,526
$
— $
— $
— $ 10,505
$
41
394
87
9,946
10,468
186
—
—
120
63
518
887
11,355
1
22
33
—
56
2,506
—
—
—
—
423
2,929
2,985
1,488
92
684
2,097
14,866
169
1,321
1,013
455
483
4,973
8,414
23,280
—
—
77
—
77
496
—
—
—
—
—
496
573
—
—
—
(62)
(12,043)
(12,105)
(19,339)
—
—
(64)
—
(47)
(5,914)
(25,364)
10,505
2,080
337
—
13,792
—
839
10,413
4,368
488
353
—
16,461
$ (37,469) $ 30,253
— $ 10,505
(49)
1,481
—
(5)
(12,043)
(12,097)
—
—
(149)
—
(14)
(5,914)
(6,077)
(18,174)
508
876
—
13,370
3,357
1,321
864
575
532
—
6,649
20,019
—
—
51
—
51
10,065
—
10,065
3,243
—
3,243
6,975
—
6,975
9,077
118
9,195
(19,295)
—
(19,295)
10,065
118
10,183
$ (37,469) $ 30,253
TOTAL LIABILITIES AND EQUITY
$ 10,638
$ 14,598
$
9,960
$ 32,526
171
Condensed Consolidating Statement of Cash Flows
NET CASH FROM/(USED IN) OPERATING
ACTIVITIES
CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
Additions to fixed assets and software for
internal use
Capitalized software costs
Acquisitions of operations, net of cash
acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing
activities
Repayments of intercompany investing
activities
Reduction in investment in subsidiaries
Additional investment in subsidiaries
Net cash from/(used in) investing
activities
CASH FLOWS (USED IN)/FROM
FINANCING ACTIVITIES
Net borrowings on revolving credit facility
Senior notes issued
Proceeds from issuance of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Payments for share cancellation related to
legal settlement
Payments of deferred and contingent
consideration related to acquisitions
Cash paid for employee taxes on
withholding shares
Dividends paid
Acquisitions of and dividends paid to non-
controlling interests
Proceeds from intercompany financing
activities
Repayments of intercompany financing
activities
Net cash (used in)/from financing
activities
Year ended December 31, 2017
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
743
$
(640) $
29
$
939
$
(209) $
862
—
—
—
—
—
(8)
—
—
—
—
—
—
—
—
—
(292)
(75)
(13)
57
(4)
—
—
—
—
—
1,042
275
1,076
1,237
(3,630)
—
104
(1,139)
(73)
1,288
(570)
(2,676)
—
(148)
(1,722)
618
(153)
4,471
(2,010)
2,010
(300)
(75)
(13)
57
(4)
—
—
—
—
$
7
$
912
$
(1,748) $
(347) $
841
$
(335)
—
—
—
—
—
(532)
61
—
—
—
(277)
—
—
—
155
649
—
(5)
(394)
—
—
—
—
—
(58)
—
487
—
—
(4)
(220)
—
—
—
—
—
—
—
—
—
32
—
(120)
—
—
(177)
(65)
(18)
(151)
(51)
—
—
—
—
—
—
—
—
—
—
209
—
1,920
1,482
1,069
(4,471)
(2,538)
(26)
(1,066)
3,630
642
649
32
(9)
(734)
(532)
61
(177)
(65)
(18)
(277)
(51)
—
—
$
(748) $
(271) $
1,719
$
(547) $
(632) $
(479)
INCREASE IN CASH AND CASH
EQUIVALENTS
Effect of exchange rate changes on cash and cash
equivalents
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF
YEAR
2
—
—
1
—
—
—
—
—
45
112
870
—
—
—
48
112
870
$
2
$
1
$
— $
1,027
$
— $
1,030
172
Condensed Consolidating Statement of Cash Flows
NET CASH (USED IN)/FROM OPERATING
ACTIVITIES
CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
Additions to fixed assets and software for
internal use
Capitalized software costs
Acquisitions of operations, net of cash
acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing
activities
Repayments of intercompany investing
activities
Reduction in investment in subsidiaries
Additional investment in subsidiaries
Net cash from/(used in) investing
activities
CASH FLOWS (USED IN)/FROM
FINANCING ACTIVITIES
Net payments on revolving credit facility
Senior notes issued
Proceeds from issuance of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Payments of deferred and contingent
consideration related to acquisitions
Cash paid for employee taxes on
withholding shares
Dividends paid
Acquisitions of and dividends paid to non-
controlling interests
Proceeds from intercompany financing
activities
Repayments of intercompany financing
activities
Net cash (used in)/from financing
activities
(DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS
Effect of exchange rate changes on cash and cash
equivalents
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF
YEAR
Year ended December 31, 2016
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
(20) $
308
$
152
$
1,114
$
(621) $
933
—
—
—
—
—
—
(91)
—
—
—
33
108
—
—
—
—
—
55
(221)
(85)
476
(4)
20
30
94
—
—
3
(30)
(193)
(3,751)
4,600
—
(3,513)
3,600
(4,600)
(602)
—
—
(769)
—
(3,600)
8,635
(8,200)
8,200
(218)
(85)
476
(1)
23
—
—
—
—
$
849
$
(4,463) $
(547) $
(4,153) $
8,509
$
195
—
—
—
—
(300)
(396)
63
—
—
(199)
—
—
—
—
—
—
—
—
—
—
—
—
(162)
—
4,368
(237)
1,606
400
(14)
(1,037)
—
—
—
—
(302)
—
1
—
—
4
—
(564)
—
—
(67)
(13)
(90)
(21)
—
—
—
—
—
—
—
—
—
554
—
4,266
(8,635)
(53)
(22)
(118)
193
(237)
1,606
404
(14)
(1,901)
(396)
63
(67)
(13)
(199)
(21)
—
—
$
(832) $
4,153
$
395
$
3,397
$
(7,888) $
(775)
(3)
—
3
(2)
—
2
—
—
—
358
(15)
527
—
—
—
$
— $
— $
— $
870
$
— $
353
(15)
532
870
173
Condensed Consolidating Statement of Cash Flows
NET CASH (USED IN)/FROM OPERATING
ACTIVITIES
CASH FLOWS FROM/(USED IN)
INVESTING ACTIVITIES
Additions to fixed assets and software for
internal use
Acquisitions of operations, net of cash
acquired
Net disposals of operations
Other, net
Proceeds from intercompany investing
activities
Repayments of intercompany investing
activities
Additional investment in subsidiaries
Net cash from/(used in) investing
activities
CASH FLOWS (USED IN)/FROM
FINANCING ACTIVITIES
Net borrowings of revolving credit facility
Proceeds from issue of other debt
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares and excess
tax benefit
Cash paid for employee taxes on
withholding shares
Dividends paid
Acquisitions of and dividends paid to non-
controlling interests
Proceeds from intercompany financing
activities
Repayments of intercompany financing
activities
Net cash (used in)/from financing
activities
Year ended December 31, 2015
Willis
Towers
Watson
The Other
Guarantors
The
Issuer
Other
Consolidating
adjustments
Consolidated
$
(10) $
593
$
33
$
(222) $
(150) $
244
—
—
—
—
321
(82)
—
(18)
—
—
—
136
—
(420)
—
—
—
—
—
(128)
(857)
44
16
—
—
—
—
151
(608)
(746)
(178)
(181)
—
1,009
598
(146)
(857)
44
16
—
—
—
$
239
$
(302) $
(924) $
(955) $
999
$
(943)
—
—
—
(149)
—
—
—
—
—
181
469
592
(5)
(16)
—
—
—
—
—
—
—
—
—
—
(82)
124
—
(277)
—
—
—
—
—
—
(1)
—
—
—
—
—
—
469
592
(5)
(166)
(82)
605
(598)
131
(1)
(150)
(21)
—
150
—
828
(1,009)
(1)
(277)
(21)
—
—
(323)
(149)
(136)
608
$
(235) $
(291) $
891
$
1,124
$
(849) $
640
DECREASE IN CASH AND CASH
EQUIVALENTS
Effect of exchange rate changes on cash and cash
equivalents
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF
YEAR
$
(6)
—
9
3
$
174
—
—
2
2
—
—
—
(53)
(44)
624
—
—
—
(59)
(44)
635
$
— $
527
$
— $
532
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of the chief executive officer (‘CEO’) and chief
financial officer (‘CFO’), of the effectiveness of the design and operation of our disclosure controls and procedures as of the
end of the period covered by this report. Based upon that evaluation, our management, including the CEO and CFO, concluded
that our disclosure controls and procedures were effective as of December 31, 2017 in providing reasonable assurance that the
information required to be disclosed in our periodic reports we file or submit under the Exchange Act is (1) recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and
communicated to our management to allow for timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting in the quarter ended December 31, 2017 that materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our CEO and CFO, and
overseen by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles, and includes those policies and procedures that:
(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and directors of the Company; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
the Company’s assets that could have a material effect on the financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because
of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance
and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can
also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these
inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process
safeguards to reduce, though not eliminate, this risk.
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
Management has used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(‘COSO’) in the report entitled Internal Control — Integrated Framework (2013) to evaluate the effectiveness of the
Company’s internal control over financial reporting. Based on this evaluation, management has concluded that the Company
maintained effective internal control over financial reporting as of December 31, 2017.
The effectiveness of our internal controls over financial reporting has been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report, which is included herein.
175
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Willis Towers Watson Public Limited Company
We have audited the internal control over financial reporting of Willis Towers Watson Public Limited Company and
subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December
31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our
report dated February 28, 2018, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Philadelphia, PA
February 28, 2018
176
ITEM 9B. OTHER INFORMATION
Iran Disclosure
Set forth below is a description of a matter reported pursuant to Section 219 of the Iran Threat Reduction and Syria Human
Rights Act of 2012 (‘ITRA’) and Section 13(r) of the Exchange Act. Concurrently with this annual report, we are filing a notice
pursuant to Section 13(r) of the Exchange Act that the matter has been disclosed in this annual report.
Gras Savoye, a non-U.S. affiliate of Willis Towers Watson, has acted as the broker for the Iranian Embassy in Paris, placing
health insurance for the diplomatic staff and handling the related claims administration. A policy was placed with GBG
Insurance Limited on December 27, 2016 for the 2017 policy year. Premium payments are made quarterly, and a premium
payment of €55,608 was received by Gras Savoye for the fourth quarter on December 8, 2017 for the policy . Gras Savoye will
retain a commission of €6,673 from this payment. Health benefits of approximately €58,699 were paid to beneficiaries during
the fourth quarter of 2017. Gras Savoye did not renew this policy at the end of 2017.
177
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to the executive officers of the Company is provided in Part I, Item 1 above under the heading
‘Executive Officers of the Registrant’. All other information required by this Item will be provided in accordance with
Instruction G(3) to Form 10-K no later than 120 days after the end of the Company’s fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K no later than 120
days after the end of the Company’s fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K no later than 120
days after the end of the Company’s fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K no later than 120
days after the end of the Company’s fiscal year.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item will be provided in accordance with Instruction G(3) to Form 10-K no later than 120
days after the end of the Company’s fiscal year.
178
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a) The following documents have been included in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements of Willis Towers Watson
Financial Statements:
Consolidated Statements of Comprehensive Income for each of the three years in the period ended
December 31, 2017
Consolidated Balance Sheets at December 31, 2017 and 2016
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2017
Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31,
2017
Notes to the Consolidated Financial Statements
b) Exhibits:
In reviewing the agreements included or incorporated by reference as exhibits to this Annual Report on Form 10-K, it
is important to note that they are included to provide investors with information regarding their terms, and are not
intended to provide any other factual or disclosure information about Willis Towers Watson or the other parties to the
agreements. The agreements contain representations and warranties made by each of the parties to the applicable
agreement. These representations and warranties have been made solely for the benefit of the other parties to the
applicable agreement, and: should not be treated as categorical statements of fact, but rather as a way of allocating risk
between the parties; have in some cases been qualified by disclosures that were made to the other party in connection
with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; may
apply standards of materiality in a way that is different from what may be material to investors; and were made only as
of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject
to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were
made or at any other time. Additional information about Willis Towers Watson may be found elsewhere in this Annual
Report on Form 10-K and our other public filings, which are available without charge through the SEC’s website at
http://www.sec.gov.
2.1
2.2
3.1
3.2
4.1
Agreement and Plan of Merger, dated as of June 29, 2015, by and among Willis Group Holdings plc,
Citadel Merger Sub, Inc. and Towers Watson & Co (incorporated by reference to Exhibit 2.1 to the
Form 8-K filed by the Company on June 30, 2015)
Amendment No. 1 to Agreement and Plan of Merger, dated November 19, 2015, by and among Willis,
Merger Sub and Towers Watson (incorporated by reference to Exhibit 2.1 to the Form 8-K filed by the
Company on November 20, 2015)
Amended and Restated Memorandum and Articles of Association of Willis Towers Watson Public
Limited Company (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Company on
June 15, 2017)
Certificate of Incorporation of Willis Group Holdings Public Limited Company (incorporated by
reference to Exhibit 3.2 to the Form 8-K filed by the Company on January 4, 2010)
Senior Indenture, dated as of July 1, 2005, and First Supplemental Indenture, dated as of July 1, 2005,
by and among Willis North America Inc., as the Issuer, Willis Group Holdings Public Limited
Company, TA I Limited, TA II Limited, TA III Limited, Trinity Acquisition Limited, TA IV Limited
and Willis Group Limited, as the Guarantors, and The Bank of New York (f/k/a JPMorgan Chase
Bank, N.A.), as the Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the
Company on July 1, 2005)
179
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
Second Supplemental Indenture, dated as of March 28, 2007, supplemental to the Indenture dated as of
July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Company on March
30, 2007)
Third Supplemental Indenture, dated as of October 1, 2008, supplemental to the Indenture dated as of
July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Form 10-Q filed by the Company on
November 10, 2008)
Fourth Supplemental Indenture, dated as of September 29, 2009, supplemental to the Indenture dated
as of July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Company on
September 29, 2009)
Fifth Supplemental Indenture, dated as of December 31, 2009, supplemental to the Indenture dated as
of July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Company on
January 4, 2010)
Sixth Supplemental Indenture, dated as of December 22, 2010, supplemental to the Indenture dated as
of July 1, 2005 (incorporated by reference to Exhibit 4.6 to the Form 10-K filed by the Company on
February 28, 2011)
Seventh Supplemental Indenture, dated as of March 9, 2016, supplemental to the Indenture, dated as of
July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Company on March
10, 2016)
Eighth Supplemental Indenture, dated as of August 11, 2017, supplemental to the Indenture dated as of
July 1, 2005 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Company on
August 16, 2017)
Indenture, dated as of March 17, 2011, by and among Willis Group Holdings Public Limited
Company, as issuer, Willis Netherlands Holdings B.V., Willis Investment Holdings U.K. Limited, TA I
Limited, Trinity Acquisition Limited, Willis Group Limited and Willis North America Inc., as
Guarantors, and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.1 to
the Form 8-K filed by the Company on March 17, 2011)
First Supplemental Indenture, dated as of March 17, 2011, supplemental to the Indenture dated March
17, 2011 (incorporated by reference to Exhibit 4.2 to the Form 8-K filed by the Company on March
17, 2011)
Second Supplemental Indenture, dated as of March 9, 2016, supplemental to the Indenture, dated as of
March 17, 2011 (incorporated by reference to Exhibit 4.2 to the Form 8-K filed by the Company on
March 10, 2016)
Third Supplemental Indenture, dated as of August 11, 2017, supplemental to the Indenture dated as of
March 17, 2011 (incorporated by reference to Exhibit 4.2 to the Form 8-K filed by the Company on
August 16, 2017)
Indenture, dated as of August 15, 2013, by and among Trinity Acquisition Limited, as issuer, Willis
Group Holdings Public Limited Company, Willis Netherlands Holdings B.V., Willis North America
Inc., Willis Investment Holdings U.K. Limited, TA I Limited and Willis Group Limited, as guarantors,
and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the
Form 8-K filed by the Company on August 15, 2013)
First Supplemental Indenture, dated as of August 15, 2013, supplemental to the Indenture dated August
15, 2013 (incorporated by reference to Exhibit 4.2 to the Form 8-K filed by the Company on August
15, 2013)
Second Supplemental Indenture, dated as of March 9, 2016, supplemental to the Indenture, dated as of
August 15, 2013 (incorporated by reference to Exhibit 4.3 to the Form 8-K filed by the Company on
March 10, 2016)
Third Supplemental Indenture, dated as of March 22, 2016, supplemental to the Indenture, dated as of
August 15, 2013 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Company on
March 22, 2016)
Fourth Supplemental Indenture, dated as of May 26, 2016, supplemental to the Indenture, dated as of
August 15, 2013 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Company on
May 26, 2016)
Fifth Supplemental Indenture, dated as of August 11, 2017, supplemental to the Indenture dated as of
August 15, 2013 (incorporated by reference to Exhibit 4.3 to the Form 8-K filed by the Company on
August 16, 2017)
Form of Indenture among Willis Towers Watson Public Limited Company, as issuer, Willis Towers
Watson Sub Holdings Unlimited Company, Willis Netherlands Holdings B.V., Willis Investment UK
Holdings Limited, TA I Limited, WTW Bermuda Holdings Ltd., Trinity Acquisition plc, Willis Group
Limited and Willis North America Inc., as guarantors, and Wells Fargo Bank, National Association, as
Trustee (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-3 filed by
the Company on March 11, 2016)
180
4.20
4.21
4.22
4.23
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
Form of Indenture among Willis North America Inc., as issuer, Willis Towers Watson Public Limited
Company, Willis Towers Watson Sub Holdings Unlimited Company, Willis Netherlands Holdings
B.V., Willis Investment UK Holdings Limited, TA I Limited, WTW Bermuda Holdings Ltd., Trinity
Acquisition plc and Willis Group Limited, as guarantors, and Wells Fargo Bank, National Association,
as Trustee (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-3 filed by
the Company on March 11, 2016)
Indenture, dated as of May 16, 2017, among Willis North America Inc., as issuer, Willis Towers
Watson Public Limited Company, Willis Towers Watson Sub Holdings Unlimited Company, Willis
Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, WTW Bermuda
Holdings Ltd., Trinity Acquisition plc and Willis Group Limited, as guarantors, and Wells Fargo Bank,
National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the
Company on May 16, 2017)
Supplemental Indenture, dated as of May 16, 2017, among Willis North America Inc., as issuer, Willis
Towers Watson Public Limited Company, Willis Towers Watson Sub Holdings Unlimited Company,
Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, WTW
Bermuda Holdings Ltd., Trinity Acquisition plc and Willis Group Limited, as guarantors, and Wells
Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Form 8-K
filed by the Company on May 16, 2017)
Second Supplemental Indenture, dated as of August 11, 2017, to the Indenture dated as of May 16,
2017 (incorporated by reference to Exhibit 4.4 to the Form 8-K filed by the Company on August 16,
2017)
Amended and Restated Credit Agreement, dated as of March 7, 2017, among Trinity Acquisition plc,
Willis Towers Watson Public Limited Company, the lenders party thereto and Barclays Bank PLC., as
Administrative Agent (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the
Company on March 9, 2017)
Amended and Restated Guaranty Agreement, dated as of March 7, 2017, among Trinity Acquisition
plc, Willis Towers Watson Public Limited Company, the other guarantors party thereto and Barclays
Bank PLC, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Form 8-K filed
by the Company on March 9, 2017)
Term Loan Credit Agreement, dated as of November 20, 2015, among Towers Watson Delaware Inc.,
as borrower, each lender from time to time party thereto, and Bank of America, N.A., as administrative
agent (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by Towers Watson on
November 24, 2015)
Amendment No. 1, dated as of December 23, 2015, to the Term Loan Credit Agreement (incorporated
by reference to Exhibit 10.1 to the Form 8-K filed by Towers Watson on December 29, 2015)
Amendment No. 2, dated as of March 31, 2017, to the Term Loan Credit Agreement dated as of
November 20, 2015, among Towers Watson Delaware Inc., as borrower, each lender from time to time
party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to
Exhibit 10.3 to the Form 10-Q filed by the Company on May 9, 2017)
Amendment No. 3, dated as of April 28, 2017, to the Term Loan Credit Agreement dated as of
November 20, 2015, among Towers Watson Delaware Inc., as borrower, each lender from time to time
party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to
Exhibit 10.4 to the Form 10-Q filed by the Company on May 9, 2017)
Deed Poll of Assumption, dated as of December 31, 2009, by and between Willis Group Holdings
Limited and Willis Group Holdings Public Limited Company (incorporated by reference to Exhibit
10.4 to the Form 8-K filed by the Company on January 4, 2010)†
Willis Group Senior Management Incentive Plan (incorporated by reference to Exhibit 10.7 to the
Form 8-K filed by the Company on January 4, 2010)†
Willis Towers Watson Public Limited Company Amended and Restated 2010 North American
Employee Stock Purchase Plan (incorporated by reference to Exhibit B to the Definitive Proxy
Statement on Schedule 14A filed by the Company on April 27, 2016)†
Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit
10.9 to the Form 8-K filed by the Company on January 4, 2010)†
Form of Performance-Based Option Agreement under the Willis Group Holdings 2001 Share Purchase
and Option Plan (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by the Company on
May 10, 2010)†
Form of Time-Based Option Agreement under the Willis Group Holdings 2001 Share Purchase and
Option Plan (incorporated by reference to Exhibit 10.16 to the Form 10-K filed by the Company on
February 28, 2011)†
Form of Performance-Based Option Agreement for the 2011 Long Term Incentive Program under the
Willis Group Holdings 2001 Share Purchase and Option Plan (incorporated by reference to Exhibit
10.1 to the Form 8-K filed by the Company on May 3, 2011)†
181
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
Rules of the Willis Group Holdings Sharesave Plan 2001 for the United Kingdom (incorporated by
reference to Exhibit 10.13 to the Form 8-K filed by the Company on January 4, 2010)†
The Willis Group Holdings Irish Sharesave Plan (incorporated by reference to Exhibit 10.1 to the
Form 10-Q filed by the Company on May 10, 2010)†
Willis Group Holdings 2008 Share Purchase and Option Plan (incorporated by reference to Exhibit
10.16 to the Form 8-K filed by the Company on January 4, 2010)†
Hilb Rogal & Hobbs Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.19
to the Form 8-K filed by the Company on January 4, 2010)†
Form of Time-Based Restricted Share Unit Award Agreement granted under the Hilb Rogal & Hobbs
Company 2007 Share Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed
by the Company on August 6, 2010)†
Form of Time-Based Option Agreement granted under the Hilb Rogal & Hobbs Company 2007 Share
Incentive Plan (incorporated by reference to Exhibit 10.3 to the Form 10-Q filed by the Company on
August 6, 2010)†
Form of Performance-Based Option Agreement granted under the Hilb Rogal & Hobbs Company
2007 Share Incentive Plan (incorporated by reference to Exhibit 10.5 to the Form 10-Q filed by the
Company on August 9, 2011)†
Willis Towers Watson Public Limited Company 2012 Equity Incentive Plan (incorporated by reference
to Exhibit A to the Definitive Proxy Statement on Schedule 14A filed by the Company on April 27,
2016)†
Form of Time-Based Share Option Award Agreement under the Willis Group Holdings Public Limited
Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form 10-Q
filed by the Company on August 9, 2012)†
Form of Performance-Based Share Option Award Agreement under the Willis Group Holdings Public
Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Form
10-Q filed by the Company on August 9, 2012)†
Form of Time-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public
Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Form
10-Q filed by the Company on August 9, 2012)†
Form of Performance-Based Restricted Share Unit Award Agreement under the Willis Group Holdings
Public Limited Company 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the
Form 10-Q filed by the Company on August 9, 2012)†
Form of Time-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public
Limited Company 2012 Equity Incentive Plan (for Non-Employee Directors) (incorporated by
reference to Exhibit 10.5 to the Form 10-Q filed by the Company on August 9, 2012)†
Form of Performance-Based Restricted Share Unit Award Agreement under the Willis Group Holdings
Public Limited Company 2012 Equity Incentive Plan for the 2013 Long-Term Incentive Program
(incorporated by reference to Exhibit 10.33 to the Form 10-K filed by the Company on February 27,
2014)†
Rules of the Willis Group Holdings Public Limited Company 2012 Sharesave Sub-Plan for the United
Kingdom to the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan
(incorporated by reference to Exhibit 10.32 to the Form 10-K filed by the Company on February 28,
2013)†
Form of 2012 Long Term Incentive Program Agreement of Restrictive Covenants and Other
Obligations (for U.S. employees) Plan (incorporated by reference to Exhibit 10.36 to the Form 10-K
filed by the Company on February 28, 2013)†
Form of 2012 Long Term Incentive Program Agreement of Restrictive Covenants and Other
Obligations (for U.K. employees) Plan (incorporated by reference to Exhibit 10.37 to the Form 10-K
filed by the Company on February 28, 2013)†
Amended and Restated Willis U.S. 2005 Deferred Compensation Plan (incorporated by reference to
Exhibit 10.1 to the Form 8-K filed by the Company on November 20, 2009)†
First Amendment to the Amended and Restated Willis U.S. 2005 Deferred Compensation Plan,
effective June 1, 2011 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by the
Company on August 9, 2011)†
Second Amendment to the Amended and Restated Willis U.S. 2005 Deferred Compensation Plan
(incorporated by reference to Exhibit 10.6 to the Form 10-Q filed by the Company on November 5,
2013)†
10.34
Amendment 2017-1 to the Amended and Restated Willis U.S. 2005 Deferred Compensation Plan†*
182
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52
10.53
Form of Deed of Indemnity of Willis Towers Watson Public Limited Company (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed by the Company on January 5, 2016)†
Form of Indemnification Agreement of Willis North America Inc. (incorporated by reference to
Exhibit 10.2 to the Form 8-K filed by the Company on January 5, 2016)†
Willis Towers Watson Public Limited Company Compensation Policy and Share Ownership
Guidelines for Non-Employee Directors (as amended May 2017) (incorporated by reference to Exhibit
10.2 to the Form 10-Q filed by the Company on August 7, 2017)†
Employment Agreement, dated as of March 1, 2016, by and between Willis Towers Watson Public
Limited Company and John J. Haley (incorporated by reference to Exhibit 10.1 to the Form 8-K filed
by the Company on March 1, 2016)†
Restricted Share Unit Award Agreement, dated as of February 26, 2016, by and between Willis Towers
Watson Public Limited Company and John J. Haley (incorporated by reference to Exhibit 10.2 to the
Form 8-K filed by the Company on March 1, 2016)†
Supplemental Restricted Share Unit Award Agreement, by and between Willis Towers Watson Public
Limited Company and John J. Haley, dated as of June 14, 2016 (incorporated by reference to Exhibit
10.1 to the Form 8-K filed by the Company on June 16, 2016)†
Offer Letter, dated August 17, 2017, from John J. Haley to Michael J. Burwell (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed by the Company on August 21, 2017)†
Letter Agreement, dated September 18, 2017, by and between the Company and Roger F. Millay
(incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by the Company on November 6,
2017)†
Offer Letter, dated July 23, 2013, and Contract of Employment, dated as of September 3, 2013, by and
between Willis Limited, a subsidiary of Willis Towers Watson Public Limited Company, and David
Shalders (incorporated by reference to Exhibit 10.3 to the Form 10-Q filed by the Company on May
10, 2016)†
Amendment, dated April 30, 2014, to the Contract of Employment, dated as of September 3, 2013, by
and between Willis Limited, a subsidiary of Willis Towers Watson Public Limited Company, and
David Shalders (incorporated by reference to Exhibit 10.4 to the Form 10-Q filed by the Company on
May 10, 2016)†
Amendment, dated as of June 29, 2015, to Contract of Employment, dated as of September 3, 2013, by
and between Willis Limited, a subsidiary of Willis Towers Watson Public Limited Company, and
David Shalders (incorporated by reference to Exhibit 10.5 to the Form 10-Q filed by the Company on
May 10, 2016)†
Offer Letter, dated November 9, 2014, and Contract of Employment, dated as of November 9, 2014,
by and between Willis Limited, a subsidiary of Willis Towers Watson Public Limited Company, and
Nicolas Aubert (incorporated by reference to Exhibit 10.6 to the Form 10-Q filed by the Company on
May 10, 2016)†
Amendment, dated as of June 29, 2015, to Contract of Employment, dated as of November 9, 2014, by
and between Willis Limited, a subsidiary of Willis Towers Watson Public Limited Company, and
Nicolas Aubert (incorporated by reference to Exhibit 10.7 to the Form 10-Q filed by the Company on
May 10, 2016)†
Letter Agreement, dated June 7, 2017, by and between the Company and Nicolas Aubert (incorporated
by reference to Exhibit 10.4 to the Form 10-Q filed by the Company on August 7, 2017)†
Employment Agreement, dated as of September 15, 2003, by and between Willis Americas
Administration, Inc. and Todd J. Jones (incorporated by reference to Exhibit 10.63 to the Form 10-K
filed by the Company on February 27, 2014)†
Letter Agreement, dated August 1, 2013, by and between Willis North America Inc. and Todd J. Jones
(incorporated by reference to Exhibit 10.64 to the Form 10-K filed by the Company on February 27,
2014)†
Amendment, dated April 30, 2014, to the Employment Agreement, dated August 1, 2013, by and
between Willis North America Inc. and Todd J. Jones (incorporated by reference to Exhibit 10.6 to the
Form 10-Q filed by the Company on May 9, 2014)†
Amendment to Employment Agreement, dated as of June 29, 2015, by and between Willis North
America Inc. and Todd Jones (incorporated by reference to Exhibit 10.4 to the Form 8-K filed by the
Company on June 30, 2015)†
Form of Time-Based Restricted Share Unit Award Agreement under the Willis Group Holdings Public
Limited Company 2012 Equity Incentive Plan, dated as of November 9, 2015, by and between
Timothy Wright / Todd Jones / Nicolas Aubert / David Shalders and Willis Group Holdings Public
Limited Company (incorporated by reference to Exhibit 10.74 to the Form 10-K filed by the Company
on February 29, 2016)†
183
10.54
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
Form of Performance-Based Restricted Share Unit Award Agreement under the Willis Group Holdings
Public Limited Company 2012 Equity Incentive Plan, dated as of November 9, 2015, by and between
Timothy Wright / Todd Jones / Nicolas Aubert / David Shalders and Willis Group Holdings Public
Limited Company (incorporated by reference to Exhibit 10.75 to the Form 10-K filed by the Company
on February 29, 2016)†
Form of Time-Based Share Option Agreement under the Willis Group Holdings Public Limited
Company 2012 Equity Incentive Plan, dated as of November 9, 2015, by and between Timothy
Wright / Todd Jones / Nicolas Aubert / David Shalders and Willis Group Holdings Public Limited
Company (incorporated by reference to Exhibit 10.76 to the Form 10-K filed by the Company on
February 29, 2016)†
Form of Performance-Based Restricted Share Unit Award Agreement for Operating Committee
Members under the Willis Towers Watson Public Limited Company Amended and Restated 2012
Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by the
Company on November 7, 2016)†
Towers Watson Amended and Restated 2009 Long Term Incentive Plan (incorporated by reference to
Exhibit 99.1 to the Registration Statement on Form S-8 filed by the Company on January 5, 2016)†
Trust Deed and Rules of the Towers Watson Limited Share Incentive Plan 2005 (U.K) (incorporated by
reference to Exhibit 10.21 to the Form 10-K filed by Watson Wyatt Worldwide Inc. on September 1,
2006)†
Towers Watson Limited Share Incentive Plan 2005 Deed of Amendment (U.K.) (incorporated by
reference to Exhibit 10.22 to the Form 10-K filed by Watson Wyatt Worldwide Inc. on September 1,
2006)†
Towers Watson Limited Share Incentive Plan 2005 Deed to Change the Trust Deed and Rules (U.K.)
(incorporated by reference to Exhibit 10.10 to the Form 10-K filed by Towers Watson on August 29,
2012)†
Share Purchase Plan 2005 (Spain) (incorporated by reference to Exhibit 10.24 to the Form 10-K filed
by Watson Wyatt Worldwide Inc. on September 1, 2006)†
Trust Deed and Rules of the Watson Wyatt Ireland Share Participation Scheme (incorporated by
reference to Exhibit 10.23 to the Form 10-K filed by Watson Wyatt Worldwide Inc. on September 1,
2006)†
Form of Non-Qualified Stock Option Award Agreement for use under the Towers Watson & Co. 2009
Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by Towers
Watson on March 8, 2010)†
Extend Health Amended and Restated 2007 Equity Incentive Plan (incorporated by reference to
Exhibit 99.3 to the Registration Statement on Form S-8 filed by the Company on January 5, 2016)†
Liazon Amended and Restated 2011 Equity Incentive Plan (incorporated by reference to Exhibit 99.4
to the Registration Statement on Form S-8 filed by the Company on January 5, 2016)†
Willis Towers Watson Non-Qualified Deferred Savings Plan for U.S. Employees (as amended and
restated effective January 1, 2017) (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed
by the Company on November 7, 2016)†
Willis Towers Watson Non-Qualified Stable Value Excess Plan for U.S. Employees (incorporated by
reference to Exhibit 10.3 to the Form 10-Q filed by the Company on August 7, 2017)†
10.68
Willis Towers Watson Public Limited Company Compensation Recoupment Policy†*
12.1
21.1
23.1
23.2
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
Statement regarding Computation of Ratio of Earnings to Fixed Charges*
List of subsidiaries*
Consent of Deloitte & Touche LLP*
Consent of Deloitte LLP*
Certification Pursuant to Rule 13a-14(a)*
Certification Pursuant to Rule 13a-14(a)*
Certification Pursuant to 18 USC. Section 1350*
Certification Pursuant to 18 USC. Section 1350*
XBRL Instance Document*
XBRL Taxonomy Extension Schema Document*
XBRL Taxonomy Extension Calculation Linkbase Document*
XBRL Taxonomy Extension Definition Linkbase Document*
XBRL Taxonomy Extension Label Linkbase Document*
184
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document*
_________________________________
*
Filed herewith.
† Management contract or compensatory plan or arrangement.
All exhibits that are incorporated by reference herein to a filing with the SEC made more than five years ago are filed under:
SEC File No. 001-16503, for any filings that were made by Willis Group Holdings or the Company; SEC File No. 001-34594,
for any filings that were made by Towers Watson; and SEC File No. 001-16159, for any filings that were made by Watson
Wyatt Worldwide.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
185
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
WILLIS TOWERS WATSON PLC
(REGISTRANT)
By:
/s/ John J. Haley
John J. Haley
Chief Executive Officer
Date: February 28, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated.
/s/ Michael J. Burwell
Michael J. Burwell
Chief Financial Officer
/s/ Victor F. Ganzi
Victor F. Ganzi
Director
/s/ James F. McCann
James F. McCann
Director
/s/ Jaymin B. Patel
Jaymin B. Patel
Director
/s/ Paul Thomas
Paul Thomas
Director
/s/ John J. Haley
John J. Haley
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Susan D. Davies
Susan D. Davies
Principal Accounting Officer and Controller
/s/ Anna C. Catalano
Anna C. Catalano
Director
/s/ Wendy E. Lane
Wendy E. Lane
Director
/s/ Brendan R. O’Neill
Brendan R. O’Neill
Director
/s/ Linda D. Rabbitt
Linda D. Rabbitt
Director
/s/ Wilhelm Zeller
Wilhelm Zeller
Director
186