UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-16503
For the fiscal year ended December 31, 2022
or
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:
Ordinary Shares, nominal value $0.000304635 per share
Title of each class
Trading
Symbol(s)
WTW
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
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 ☐ No ☑
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 ☑ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 ☑ No ☐
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.
Large accelerated filer ☑
Emerging growth company ☐
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
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, 2022 (the last day of the Registrant’s most recently completed second quarter) was $21,628,207,514.
As of February 16, 2023, there were outstanding 106,577,635 ordinary shares, nominal value $0.000304635 per share, of the Registrant.
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.
DOCUMENTS INCORPORATED BY REFERENCE
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
INDEX TO FORM 10-K
For the year ended December 31, 2022
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
PART II.
Item 5
Item 6
Item 7
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
[RESERVED]
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
Item 9C
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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 Accounting Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
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Certain Definitions
The following definitions apply throughout this Annual Report on Form 10-K unless the context requires otherwise:
‘We’, ‘Us’, ‘Company’, ‘WTW’, ‘Willis Towers
Watson’, ‘Our’, or ‘Willis Towers Watson plc’
Willis Towers Watson Public Limited Company, a company organized under
the laws of Ireland, and its subsidiaries
‘shares’
The ordinary shares of Willis Towers Watson Public Limited Company,
‘Legacy Willis’ or ‘Willis’
nominal value $0.000304635 per share
Willis Group Holdings Public Limited Company and its subsidiaries,
predecessor to WTW, prior to the Merger
‘Legacy Towers Watson’ or ‘Towers Watson’
Towers Watson & Co. and its subsidiaries
‘Merger’
‘Miller’
‘TRANZACT’
‘U.S.’
‘U.K.’
‘Brexit’
‘E.U.’
‘U.S. GAAP’
‘FASB’
‘ASC’
‘ASU’
‘SEC’
‘EBITDA’
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
Miller Insurance Services LLP and its subsidiaries
CD&R TZ Holdings, Inc. and its subsidiaries, doing business as TRANZACT
United States
United Kingdom
The United Kingdom’s exit from the European Union, which occurred on
January 31, 2020.
European Union or European Union 27 (the number of member countries
following the United Kingdom’s exit)
United States Generally Accepted Accounting Principles
Financial Accounting Standards Board
Accounting Standards Codification
Accounting Standards Update
United States Securities and Exchange Commission
Earnings before Interest, Taxes, Depreciation and Amortization
1
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; the impact of the COVID-19 pandemic on our business; future capital expenditures; ongoing
working capital efforts; future share repurchases; financial results (including our revenue, costs or margins) and the impact of changes
to tax laws on our financial results, existing and evolving business strategies, and acquisitions and dispositions, including transitional
arrangements in effect subsequent to the completed sale of Willis Re to Arthur J. Gallagher & Co. (‘Gallagher’); demand for our
services and competitive strengths; strategic goals; the benefits of new initiatives; growth of our business and operations; our ability to
successfully manage ongoing leadership, organizational, and technology changes, including investments in improving systems and
processes; our ability to implement and realize anticipated benefits of any cost-savings initiatives including the multi-year operational
Transformation program; and plans and references to future successes, including our future financial and operating results, short-term
and long-term financial goals, plans, objectives, expectations and intentions are all 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. Given 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. With regard to 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.
2
PART I.
ITEM 1. BUSINESS
The Company
WTW is a leading global advisory, broking and solutions company that provides data-driven, insight-led solutions in the areas of
people, risk and capital. Utilizing the global view and local expertise of our more than 46,000 colleagues serving more than 140
countries and markets, we help organizations sharpen strategies, enhance resilience, motivate workforces and maximize performance.
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. Working closely with our clients, we uncover opportunities for sustainable success.
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 approximately 93% of the FTSE 100, 89% of the Fortune 1000, and 90% of the Fortune
Global 500 companies. We also advise the majority 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. None of the Company’s customers individually represented more than 10% of its consolidated
revenue for each of the years ended December 31, 2022, 2021 and 2020. We place insurance with more than 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 2022,
2021 or 2020.
Segment Reorganization
On January 1, 2022, WTW realigned to provide its comprehensive offering of services and solutions to clients across two business
segments: Health, Wealth & Career and Risk & Broking. These changes were made in conjunction with changes in the WTW
leadership team, including the appointment of a new chief executive officer who succeeded the prior CEO as the chief operating
decision maker on that date. Prior to January 1, 2022, we operated across four segments: Human Capital and Benefits; Corporate Risk
and Broking; Investment, Risk and Reinsurance; and Benefits Delivery and Administration. Following the realignment, the two new
segments consist of the following businesses:
•
•
The Health, Wealth & Career segment includes businesses previously aligned under the Human Capital and Benefits
segment, the Benefits Delivery and Administration segment, and the Investments business, which was previously under the
Investment, Risk and Reinsurance segment.
The Risk & Broking segment includes businesses previously aligned under the Corporate Risk and Broking segment, as well
as the Insurance Consulting and Technology business, which was previously under the Investment, Risk and Reinsurance
segment.
Below are the percentages of revenue generated by each segment for each of the years ended December 31, 2022, 2021 and 2020.
These percentages exclude revenue that has been classified as discontinued operations in our consolidated statements of
comprehensive income.
Health, Wealth & Career
Risk & Broking
The following presents descriptions of our reorganized segments:
Health, Wealth & Career
2022
Year ended December 31,
2021
2020
60%
40%
60%
40%
60%
40%
The Health, Wealth & Career (‘HWC’) segment provides an array of advice, broking, solutions and technology for employee benefit
plans, institutional investors, compensation and career programs, and the employee experience overall. Our portfolio of services
support the interrelated challenges that the management teams of our clients face across human resources (‘HR’) and finance.
HWC is the larger of the two segments of the Company. Addressing four key areas, Health, Wealth, Career and Benefits Delivery &
Outsourcing, the segment is focused on addressing our clients’ people and risk needs to help them succeed in a global marketplace.
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Health
The Health & Benefits (‘H&B’) business provides strategy and design consulting, plan management service and support, broking and
administration across the full spectrum of health, wellbeing and other group benefit programs, including medical, dental, disability,
life, voluntary benefits and other coverage. Our reach extends from small/mid-market clients to large-market and multinational clients,
across the full geographic footprint of the Company, and to most industries. We can address our clients’ needs in more than 140
countries.
Our consultants help clients make strategic decisions on topics such as optimizing program spend; evaluating emerging vendors, point
solutions and 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. We also assist clients in selecting the appropriate insurance carriers to
cover benefit risks and administer the programs. In addition to our consulting and broking 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 Management, our suite of global services supporting medical, dental and risk (e.g., life, disability) programs, we
have a tailored offering for multinationals. This offering includes a flexible set of ready-made solutions, proven technology and an
integrated approach to service delivery that translates to a globally consistent, high-quality experience for our clients.
A meaningful portion of revenue in this business is from recurring work, though contracts may be annual or multi-year. Given the
balance of revenue across consulting, broking and solutions, our revenue is somewhat weighted to the first quarter.
Wealth
Our wealth-related businesses include Retirement and Investments.
The Retirement business provides actuarial support, plan design, and administrative services for all forms of 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 and solutions 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 help
multinationals coordinate plan design and actuarial services across their complex global plans. We bring in-depth data analysis and
perspective to their decision process, because we have tracked the retirement designs and financing strategies of companies around the
world over many decades.
For clients that want to outsource some or all of their pension plan management, we offer broking services, as well as integrated
solutions that can combine investment discretionary management, pension administration, core actuarial services, and communication
and change management assistance.
Retirement relationships are generally long-term in nature, and client retention rates for this business are high. A significant portion of
the revenue in this business is from recurring work, with multi-year contracts that are driven by the heavily regulated nature of pension
plans and our clients’ annual needs for these services. Revenue for the Retirement business in some geographies is somewhat
seasonal, as much of our work pertains to calendar-year plan administration, financing, reporting and compliance; thus, revenue is
typically more weighted to the first and fourth quarters of the fiscal year.
Our Investments business provides advice and discretionary investment management solutions to defined benefit and defined
contribution pension plans as well as to a range of other client types including insurers, endowments and foundations, and private
wealth investors. We provide a solution to a significant business problem faced by our clients, namely sustaining the resources and
skills required to deliver a financial services product in highly competitive capital markets. We offer a flexible approach that adapts to
a wide range of client needs and circumstances, with the objective of higher returns, lower risk and lower costs within each client’s
unique situation.
Our solutions range from single asset class activity, through complete management of entire pension plan assets including
sophisticated liability hedging programs.
We bring together a broad array of specialist investment knowledge and skills across all asset classes, a high-quality execution
platform, a cost advantage through our scale, and expert advisors with experience across all client types from the largest plans in the
world to small corporate pension plans.
We have long-term relationships with our Investments clients, with the majority of our revenue driven by retainer contracts.
4
Career
Our career-related offerings include advice, data, software and products to address clients’ total rewards and talent issues across the
globe delivered through our Work & Rewards and Employee Experience businesses.
Within our Work & Rewards business, we help clients determine the best ways to get work done, the skills needed for jobs, and how
to reward it. We address 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 an organization’s business strategy and driving desired performance. Our solutions
incorporate proprietary market benchmarking data and software to support compensation administration.
Our Employee Experience business focuses on the provision of solutions including employee insight and listening tools, talent
assessment tools and services, communication and change management services.
Revenue for our career-related businesses is partly seasonal in nature, with heightened activity in the second half of the calendar year
during the annual compensation, benefits, and survey cycles. While these businesses enjoy long-term relationships with many clients,
work in several practices is often project-based and can be sensitive to economic changes. The businesses benefit from regulatory
changes affecting our clients that require strategic advice, program changes and communication, as well as the focus on ESG as a
component of executive and board pay, the redefinition of jobs, work location and career paths as technology disaggregates work, and
the recalibration of pay and the employee experience amidst shifting labor markets.
Benefits Delivery & Outsourcing
Our Benefits Delivery & Outsourcing businesses include Benefits Delivery & Administration (‘BDA’) and Technology and
Administration Solutions (‘TAS’).
The BDA business provides primary medical and ancillary benefit exchange and outsourcing services to active employees and retirees
across both the group and individual markets, primarily in the U.S.
A significant portion of the revenue in this business 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. Revenue across this business is
seasonal and is generally higher in the fourth quarter as it is driven when typical annual enrollment activity occurs.
BDA provides services via two related offerings:
Benefits Outsourcing is focused on serving active employee groups for clients across the U.S. Working closely with other HWC
businesses, we use our proprietary technology to provide a suite of health and welfare and pension administration outsourcing
services, including tools to enable benefit modeling, decision support, enrollment and benefit choice. Drawing on expertise in H&B
and Retirement to create high-performing benefit plan designs, we believe we are well-positioned to help clients of all sizes simplify
their benefits delivery, while lowering the total costs of benefits and related administration.
Individual Marketplace offers decision support processes and tools to connect consumers with insurance carriers in private individual
and Medicare markets. Individual Marketplace serves both employer-based and direct-to-consumer populations through its end-to-end
consumer acquisition and engagement platforms, which tightly integrate call routing technology, an efficient quoting and enrollment
engine, a customer relations management system and deep links with insurance carriers. By leveraging its multiple distribution
channels and diverse product portfolio, Individual Marketplace offers solutions to a broad consumer base, helping individuals
compare, purchase and use health insurance products, tools and information for life.
Our TAS business provides pension 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.
Given the nature of the work, our revenue is distributed generally evenly across the year.
With ongoing servicing requirements and multi-year contracts in place, we have high client retention rates. 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 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.
5
Risk & Broking
The Risk & Broking (‘R&B’) 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 comprises two primary businesses:
Corporate Risk & Broking (‘CRB’)
The ‘CRB’ business places more than $25 billion of premiums into the insurance markets on an annual basis, and delivers integrated
global solutions tailored to client needs, underpinned by data and analytics through a balanced matrix of global lines of business
across all of the Company’s three geographical areas: North America, Europe (including Great Britain) and International.
The global lines of business include:
Property and Casualty — Property and Casualty provides property and liability insurance brokerage services across a wide range of
industries and segments including real estate, healthcare and retail. 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.
Aerospace — Aerospace provides specialist expertise to the aerospace and space industries. Our aerospace business provides
insurance broking, risk management services, contractual and technical advisory expertise to aerospace clients worldwide, including
the world’s leading airlines, aircraft manufacturers, air cargo handlers and other airport and general aviation companies. The specialist
InSpace team is also prominent in providing insurance and risk management services to the space industry.
Construction — Our Construction business provides services that include insurance broking, claims, loss control and specialized risk
advice for a wide range of construction projects and activities. Clients include contractors, project owners, public entities, project
managers, consultants and financiers, among others.
Global Markets Direct & Facultative — Operating in the major wholesale reinsurance hubs across the world, including London,
Bermuda, Singapore, Hong Kong and Shanghai, solutions are delivered both directly to clients for the most complex property and
casualty risks and as facultative reinsurance placements where we serve as an intermediary for insurance companies. Facultative
solutions are provided across various classes of risk for our insurer clients, some of which may also be direct clients of WTW. The
aim is to deliver optimum results for our clients by getting the right risk to the right market by the right broker, be it local, wholesale
or facultative every time.
Financial, Executive and Professional Risks (‘FINEX’) — FINEX encompasses all financial and executive risks, delivering client
solutions that range from management and professional liability, employment practices liability, crime, cyber and M&A-related
insurances to risk consulting and advisory services. Specialist teams provide risk consulting and risk transfer solutions to a broad
spectrum of clients across a multitude of industries, as well as the financial and professional service sectors.
Financial Solutions — Financial Solutions provides insurance broking services and specialized risk advice related to credit and
political risk and crisis management, including terrorism, kidnap and ransom and contingency risk. Clients include international banks,
leasing companies, commodity traders, export credit agencies, multinational corporations and sporting institutions.
Surety — The Global Surety team provides expertise in placing bonds across all industries and around the world. A surety bond is a
financial instrument that guarantees contractual performance, statutory compliance, and financial assurance for domestic and
international companies.
Marine — Marine provides specialist expertise to the maritime and logistics industries. Our Marine business provides insurance
broking services related to hull and machinery, cargo, protection and indemnity, fine art and general marine liabilities, among others.
Our Marine clients include, but are not limited to, ship owners and operators, shipbuilders, logistics operations, port authorities,
traders, shippers, exhibitors and secure transport companies.
Natural Resources — Our Natural Resources practice encompasses the oil, gas and chemicals, mining and metals, power and utilities
and renewable energy sectors. It provides sector-specific risk transfer solutions and insights, which include insurance broking, risk
engineering, contractual reviews, wording analysis and claims management.
Insurance Consulting and Technology (‘ICT’)
ICT is a global business that provides advice and technology solutions to the insurance industry. We leverage our industry experience,
strategic perspective and analytical skills to help clients measure and manage risk and capital, improve business performance and
6
create a sustainable competitive advantage. Our services include software and technology, risk and capital management, products and
product pricing, financial and regulatory reporting, financial and capital modeling, M&A, outsourcing and business management.
Available Information
The Company files annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a
website that contains annual, quarterly and current reports, proxy statements and other information that issuers (including WTW) file
electronically with the SEC. The SEC’s website is www.sec.gov.
The Company makes available, free of charge through our website, www.wtwco.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 Memorandum and Articles of Association, Corporate Governance Guidelines, Audit and Risk Committee Charter,
Operational Transformation Committee Charter, Human Capital and Compensation Committee Charter, and Corporate Governance
and Nominating Committee Charter are available on our website, www.wtwco.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
WTW offers its clients a broad range of services and solutions 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 climate risk quantification). 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 a 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 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.
Risks and Uncertainties of the Economic Environment
Beginning with the COVID-19 pandemic there have been adverse changes in global commercial activity, particularly in the global
supply chain and workforce availability, and significant volatility in the global financial markets including, among other effects,
occasional declines in the equity markets, changes in interest rates and reduced liquidity on a global basis.
Supply and labor market disruptions caused by COVID-19, accommodative monetary and fiscal policy and the Russian invasion of
Ukraine have contributed to significant inflation in many of the markets in which we operate. This impacts not only the costs to attract
and retain employees but also other costs to run and invest in our business. If our costs grow significantly in excess of our ability to
raise revenue, our margins and results of operations may be materially and adversely impacted, and we may not be able to achieve our
strategic and financial objectives.
Although we believe we have adapted to the unique challenges posed by COVID-19 surrounding how and where we do our work, we
are also impacted by the negative effect on workforce availability, which could hamper our ability to grow our capacity on pace with
7
increasing demand for our services. We expect the market for talent to remain highly competitive for at least the next several months.
We will continue to monitor the situation and assess any implications to our business and our stakeholders. Additional information
about COVID-19 related risks is discussed in Part I, Item 1A Risk Factors – ‘We have been impacted by the COVID-19 pandemic and
may be substantially and negatively impacted by COVID-19 or other pandemics in the future’.
Business Strategy
As discussed under Item 1, ‘Business – The Company’, we seek to be an advisory, broking and solutions provider of choice through
an integrated global platform.
WTW is in the business of people, risk and capital. We believe that a unified approach to these areas can be a path to growth for
organizations around the world. We harness our collective power as ‘One WTW’ to make smart connections to serve and support our
clients.
We operate in attractive markets – both growing and mature – with a diversified platform across geographies, industries, segments and
lines of business.
Our vision is to be the best advisory, broking and solutions company for the benefit of all our stakeholders – creating a competitive
advantage and delivering sustainable, profitable growth.
We believe we can achieve this through executing on our three strategic priorities – grow, simplify and transform:
• Grow at or above market in priority areas: Focus on core opportunities with the highest growth and return; innovate and
accelerate our offerings through a dynamic, yet disciplined, approach; bring targeted solutions to clients reflecting more
connected offerings; and increase scale to fill gaps in capabilities through inorganic expansion.
•
•
Simplify the business to increase agility and effectiveness: Implement the Company’s streamlined structure of two
business segments (Health, Wealth & Career and Risk & Broking; see ‘Segment Reorganization’ within this Item 1 for
further information) and three geographies (Europe, International and North America); develop a globally consistent client
management model and enhance operations to improve sales and retention outcomes; manage our portfolio of businesses
intentionally to drive optimal value; and increase speed of execution through agile decision-making processes.
Transform operations to drive savings while enhancing our client and colleague experiences: Maximize global
platforms to be as common as possible and as distinct as necessary; right-shore operations to capitalize on our scale;
rationalize real estate and build new ways of working; and modernize technology to enhance the digital experience.
We care as much about how we work as we do about the impact that we make. This means commitment to a shared purpose and
values, a framework that guides how we run our business and serve clients.
Through these strategies we aim to accelerate revenue, margin improvement, cash flow, EBITDA, and earnings growth, and to
generate compelling returns for investors, by delivering tangible growth in revenue.
For more information about risks to our strategic plans, see Part I, Item 1A Risk Factors of this Form 10-K.
Human Capital
Colleague experience – Our colleague experience is an important differentiating factor for WTW. It is designed to provide colleagues
with a strong sense of purpose and belonging where everyone is heard and valued, the opportunity to build great connections with
people and leaders, meaningful and interesting work, and opportunities to grow and thrive with recognition and reward in return. This
means we strive to foster an inclusive environment where everyone can be their authentic self, where we encourage curiosity,
innovation and a continuous improvement mindset and an environment where we are bold in our thinking and care about the impact
we have.
Our values, vision, purpose, and new Colleague Value Proposition (‘CVP’) - we’re Authentic, Curious and Bold, set the tone for what
to expect at WTW. In addition, our ‘grow, simplify and transform’ strategic priorities enhance our focus on how to continually support
and improve, as appropriate, our colleague experience. We evaluate rewards offerings, system upgrades and process efficiencies as
well as the tradeoffs that may be required. We continually explore how we can work with flexibility in an on-going hybrid model, and
fuel innovation, among other things, to attract, engage and retain the most accomplished and aspiring talent.
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Headcount – Our success depends on our ability to attract, retain, and motivate the most accomplished and aspiring talent in the
industry. The number of employees by segment as of the year ended December 31, 2022 is approximated below:
Health, Wealth & Career
Risk & Broking
Corporate and Other
Total Employees
The number of employees by geography as of the year ended December 31, 2022 is approximated below:
North America
Europe
International
Total Employees
December 31, 2022
24,000
14,000
8,600
46,600
December 31, 2022
15,900
15,000
15,700
46,600
Voluntary turnover excluding seasonal employees (rolling 12-month attrition) has stabilized in 2022 (15.2%) compared to 2021
(15.2%). Pre-COVID-19 attrition typically averaged around 12.0% and we have seen voluntary turnover begin to decline in the latter
part of 2022.
Hiring – Hiring in 2022 increased significantly as the business stabilized, demand for our services increased and we returned to our
historical experience as an employer of choice. Hiring and internal movement statistics, summarized below, consistent with prior years
excludes seasonal colleagues in TRANZACT and Individual Marketplace as the volumes are material and fluctuate significantly:
• Hires increased 34% over 2021 to over 9,700. Hiring growth was strong across all segments and geographies. At year-end,
there were approximately 2,400 open positions, which is higher than historic rates but reflective of the sharp increase in new
positions opened in the second half of the year, partly attributable to transformation hiring.
• During 2022, 14.7% of open positions were filled with internal candidates compared to 13.9% in 2021. Promotions (changes
in levels) and direct appointments into new roles brought additional opportunities for career growth and advancement.
•
Rehires represented 11.8% of total hires in 2022 (5% excluding seasonal colleagues).
Inclusion and Diversity (‘I&D’) – We believe that when our individual talents are combined, we unlock our collective potential. We
further believe that we are better together because each of us is different. WTW aims to ensure that our values and I&D commitments
are reflected in every interaction. To support this, we’re focusing on three key areas:
• Attract and hire to grow our talent pipeline of colleagues from underrepresented communities.
• Develop and promote to increase the overall diversity in business leadership.
•
Promote an inclusive culture that respects each other’s differences and celebrates what’s unique about each of us.
A key underlying theme of these priorities is a sharpened focus on our female talent and our aim to increase overall diversity in
leadership levels and throughout our talent pipeline.
At December 31, 2022, we had the following global female representation, and in the U.S. where we have the most complete data, we
had the following ethnic and racial diversity representation:
Colleague Group
Female (global)
Ethnic and racial diversity (U.S. only)
Asian
Black
Hispanic
Other non-white (i)
Total
All Colleagues
Senior Leadership (ii)
55.1%
7.3%
11.8%
6.3%
2.3%
27.7%
31.0%
4.9%
1.2%
2.0%
0.6%
8.7%
(i)
(ii)
Other non-white includes American Indian, Native Hawaiian or other Pacific Islander, and two or more races.
Senior leadership represents about 5% of our colleagues and includes those with titles of Managing and Senior Directors.
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The current board is 44% female, including the Human Capital and Compensation Committee Chair. Our board also has
representation from the LGBT+ and Black communities, and includes members with non-U.S. citizenship, including the Audit and
Risk Committee Chair.
Additionally, effective April 1, 2023, three new independent directors will join the board. Further, two current directors will not be
standing for re-election at the Company’s 2023 Annual General Meeting. Assuming all of the Company’s nominees are elected and
have joined the board, the board’s composition as of the conclusion of the 2023 Annual General Meeting will then be 40% female and
will continue to include representation from the LGBT+ and Black communities as well as directors with non-U.S. citizenship.
Our executive officers have I&D objectives as part of their individual performance component, comprising a portion of their short-
term incentive awards. Each year our leaders cascade I&D objectives throughout the organization, and we continue to reinforce
objective and fair processes that mitigate bias in all our talent programs and processes. Examples of key activities include:
• Our global I&D council, sponsored by our CEO and CHRO, sets the standard for our I&D initiatives globally. It is driven by
regional councils that provide local perspectives and help to translate our global priorities into actions within each region.
• We have I&D processes in place that are intended to ensure outcomes represent our values and progress our diversity goals.
• Our inclusion networks are designed to engage our talent and better connect us to each other, our clients and the communities
in which we work and live. Current inclusion networks include: Gender Equity, LGBT+, Multicultural, Workability (Asia,
North America, the U.K.) and Young Professionals (Asia, the U.K., Western Europe).
Total rewards – We invest significant resources in our most important asset, our colleagues. We generally seek to offer market
competitive rewards packages comprising of a mix of base salary and incentives aligned to our pay-for-performance philosophy plus
benefits that support health and wellbeing as well as the ability to plan for the future. In 2022, WTW commenced a companywide
review of total rewards, encompassing compensation, benefit offerings and lifestyle support. It entails an assessment of data attained
through surveys, interviews, focus groups and external benchmarking.
Our total rewards programs align to our commitment to colleague health and wellbeing, ensuring our colleagues are protected in the
event of accident or illness, have sufficient paid time off and can accumulate capital for personal needs and retirement.
Work Styles – In the past few years, we have adapted the way we work, enabling colleagues to work across a wide variety of different
environments. In 2022 we officially launched WTW Work Styles, our approach to recognizing that there are many different
approaches to work, which includes three distinct colleague working solutions; office-based, hybrid and remote. This new framework
has flexibility at its core, and it’s based on the idea that the work itself drives where and how the work gets done. As we grow,
simplify, and transform WTW, this cultural shift is a differentiator for us in the market and is an important part of our ongoing
strategy to attract and retain top talent.
The failure to successfully attract and retain qualified personnel could materially adversely affect our results of operations and
prospects. For more information see Part I, Item 1A Risk Factors of this Annual Report on Form 10-K.
Competition
We face competition in all fields in which we operate, based on factors including global capability, product breadth, innovation,
quality of service and price. We compete with companies such as Accenture plc, Aon plc, Arthur J. Gallagher & Co., Brown & Brown
Inc., Cognizant Technology Solutions Corporation, Marsh & McLennan Companies, Inc. (‘Marsh & McLennan’) and Robert Half
International Inc., as well as with numerous specialty, regional and local firms. Competition for business is intense in all of our
business lines and in every insurance market, and in some business lines Marsh & McLennan and Aon plc and other competitors 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 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 have arisen and are
expected to continue to arise from the entry and expansion of new market participants, such as banks, accounting firms, new brokers
and insurance carriers themselves, offering risk management or transfer services.
The human capital and risk management consulting industries are highly competitive. We believe we have developed competitive
advantages in providing HR consulting and risk management consulting services. We face strong competition from numerous sources,
including from large consulting firms, accounting firms and specialized firms focused on these services as further identified below.
See Part I, Item 1A Risk Factors – ‘Demand for our services could decrease for various reasons, including a general economic
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downturn, increased competition, or a decline in a client’s or an industry’s financial condition or prospects, all of which could
substantially and negatively affect us’, for a description of competition-related risks that may affect demand for the Company’s
services.
Our largest competitors in the pension consulting industry are Mercer HR Consulting (a Marsh & McLennan company) and Aon plc.
In addition, we face vigorous competition from numerous other companies in the global HR consulting industry.
Our major competitors in the insurance consulting and software industry include Milliman, Oliver Wyman (a Marsh & McLennan
company), the big four accounting firms (Deloitte LLP, Ernst & Young, PricewaterhouseCoopers, and KPMG), and SunGard. Aon
plc, Buck Consultants (an HIG Capital Company), Connextions (a United Healthcare company) and Mercer (a Marsh & McLennan
company). Automatic Data Processing and Fidelity are among our largest 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 also 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. See Part I, Item 1A Risk Factors – ‘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’ and related risk factors for a description of legal, non-financial regulatory, and compliance risks to the Company.
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; geographic scope; 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, a strong reputation for efficient execution, a
provider’s capability in delivering a broad number of configurations to serve various population segments, 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 that apply to health, medical, financial and other types of personal
information belonging to our employees, clients and their employees and other third parties across most jurisdictions, including,
among others, the E.U. and U.K. General Data Protection Regulations, the Personal Information Protection Law (‘PIPL’) in China and
privacy legislation in certain U.S. states. Our most significant regulatory regions are further described below:
United States
Our activities in connection with insurance brokerage services within the U.S. 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, including our TRANZACT business which focuses on direct-to-
consumer Medicare policy sales, are overseen by the Centers for Medicare & Medicaid Services, which is part of the Department of
Health and Human Services. Furthermore, certain of our activities are subject to regulation under the Health Insurance Portability and
Accountability Act (‘HIPAA’), which is enforced by the Office for Civil Rights within the Department of Health and Human Services.
As we implement and expand our direct-to-consumer sales and marketing solutions through our Benefits Delivery & Administration
business, we are subject to various federal and state laws and regulations that prescribe when and how we may market to consumers
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(including, without limitation, the Telephone Consumer Protection Act and other telemarketing laws and the Medicare
Communications and Marketing Guidelines issued by the Center for Medicare 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 limited in the 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,
and some activities also are subject to regulation by the Commodities and Futures Trading Commission under the Commodities
Exchange Act.
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 U.K., our business is regulated by the Financial Conduct Authority (‘FCA’).
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, to protect and enhance the integrity of the U.K. financial system, and to promote
effective competition in the interests of consumers. The FCA has a wide range of rule-making, investigatory and enforcement powers
(including the power to censure and fine) and conducts monitoring visits to assess our compliance with regulatory requirements. In
addition, the FCA extended the Senior Managers and Certification Regime (‘SMCR’) which became effective on December 9, 2019 in
relation to our U.K. FCA-regulated businesses. The SMCR is designed to drive improvements in culture and governance within
financial services firms and to deter misconduct by increasing individual accountability to the FCA.
New regulations and modifications to existing regulations that are specific to the U.K. have and will continue to result in differences
from the regulatory requirements of the E.U. See Part I, Item 1A Risk Factors, for a description of Brexit-related risks to the
Company.
Furthermore, as a result of Brexit, the WTW Brexit broking solution (the U.K. Branch of Willis Towers Watson SA/NV) has been
required to seek authorization from the FCA as a third country branch. This application for full authorization was submitted in March
2022 and we are currently awaiting approval from the FCA. This will result in an increase in FCA supervision in the future with
additional requirements for the branch in key areas such as SMCR.
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 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. issued an
additional Insurance Distribution Directive that expands the 2005 directive, and all E.U. member states in which we operate were
required to enact the directive and adopt local country laws by October 1, 2018.
The ‘Whistleblower Protection Directive’, on the protection of persons who report breaches of E.U. law, entered into force on
December 16, 2019 (Directive 2019/1937). This Directive includes reporting procedures for these persons. The new rules will require
the creation of safe channels for reporting both within an organization - private or public - and to public authorities. They will also
provide protection to whistleblowers against retaliation.
Other
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 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
12
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 U.S. and U.K. We do not consider these regulatory requirements as adversely affecting our
competitive position.
Across many jurisdictions we are subject to various financial crime laws and regulations through our activities, activities of associated
persons, the products and services we provide and our business and client relationships. Such laws and regulations relate to, among
other areas, sanctions and export control, anti-bribery, anti-corruption, anti-money-laundering and counter-terrorist financing.
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 as
well as compliance with evolving laws, including with respect to data privacy, cybersecurity, and Brexit, in the jurisdictions in which
we operate may have an adverse effect on our business.
Information about Executive Officers of the Registrant
The executive officers of the Company as of February 24, 2023 were as follows:
Kristy D. Banas (age 51) - Ms. Banas has served as Chief Human Resources Officer since August 16, 2021. Prior to that, she served
as the Senior Director, Global Talent Advisor for Human Capital & Benefits from March 2019 to August 2021. She also served as
Senior Director and Head of Global Total Rewards, HR Integration and the HR Business Office from November 2016 to March 2019.
From January 2016 to November 2016, Ms. Banas served as Senior Director and Global HR Leader, WTW Operations and
Technology. From July 2011 to January 2016, Ms. Banas served as Senior Vice President, Global HR Director for WTW Corporate
Functions, and was the Executive HR Sponsor for Global Operations Improvement. Ms. Banas was Vice President and Global HR
Partner with XL Capital/ XL Global Services / XL Insurance from November 2001 to June 2011. Ms. Banas has a BS in Business
Management from Fairfield University and a partial MS in Human Resource Management from the University of Connecticut.
Anne D. Bodnar (age 66) - Ms. Bodnar has served as Chief Administrative Officer at WTW since May 31, 2019 and also served as
Chief Human Resources Officer from January 4, 2016 through August 16, 2021. 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. Ms.
Bodnar graduated cum laude and Phi Beta Kappa from Smith College and has an M.B.A. from Harvard Business School.
Alexis Faber (age 45) - Ms. Faber has served as Chief Operating Officer at WTW since August 30, 2021. Previously, she served as
Chief Operating Officer for Corporate Risk & Broking from March 2018 to August 2021. Prior to that, Ms. Faber served as Global
Head of Financial Lines since January 2016, Head of FINEX for North America since April 2014, Risk Control and Claim Advocacy
Practice Leader for North America since July 2012, Chief Operating Officer for Willis North America since August 2009 and as Chief
Operating Officer for the Executive Risks practice since September 2006. Prior to that, Ms. Faber served as Regional Finance Officer
for North America since July 2004, and as Financial and Operations Controller for Global Specialties, North America since August
2003. Before joining WTW, Ms. Faber worked in investment banking at Schroder Salomon Smith Barney and at Citigroup. Ms. Faber
holds a bachelor’s degree in economics from Williams College and an M.B.A from Columbia Business School.
Matthew S. Furman (age 53) - Mr. Furman has served as General Counsel at WTW 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 Trustee of the Jewish Theological Seminary and a Director of the Legal Aid Society. He previously served as
a member of the U.S. Securities and Exchange Commission’s Investor Advisory Committee, where he served on the Executive
Committee and chaired the Market Structure Subcommittee. He holds a bachelor’s degree magna cum laude from Brown University
and a law degree magna cum laude from Harvard Law School.
Adam L. Garrard (age 57) - Mr. Garrard has served as Head of Risk and Broking since January 1, 2022. Previously, Mr. Garrard
served as Head of Corporate Risk and Broking, and International since August 14, 2019 and, prior to that, as Head of International at
WTW since January 4, 2016. Previously, Mr. Garrard served as Chief Executive Officer for Willis Group Holdings in Asia since
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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. Prior to joining WTW in
1994, Mr. Garrard started his insurance career at SBJ Stephenson Insurance Brokers in 1992 as a graduate trainee. He holds a
bachelor’s degree in business administration from De Montfort University.
Julie J. Gebauer (age 61) - Ms. Gebauer has served as Head of Health, Wealth and Career at WTW since January 1, 2022.
Previously, Ms. Gebauer served as Head of Human Capital & Benefits at WTW since January 4, 2016 and, prior to that, 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.
Carl A. Hess (age 61) - Mr. Hess has served as Chief Executive Officer at WTW since January 1, 2022 and, prior to that, served as
President since August 16, 2021. Mr. Hess was formerly Head of Investment, Risk and Reinsurance from October 27, 2016 to August
16, 2021. Previously, Mr. Hess served as the Co-Head of North America at WTW 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.
Andrew J. Krasner (age 47) - Mr. Krasner has served as Chief Financial Officer at WTW since September 7, 2021. From February
2021 to August 2021, Mr. Krasner served as Chief Financial Officer for Assured Partners. From June 2018 to January 2021, Mr.
Krasner was Global Treasurer and Head of M&A of WTW, and from 2012 to June 2018, was Head of M&A, responsible for the
Company’s Treasury operations and M&A, joint venture, divestiture, and strategic investment activity. Mr. Krasner started with
Legacy Willis in June 2009 as Senior Vice President, working on the client side with Willis Capital Markets & Advisory between June
2009 to June 2012. Prior to joining WTW, Mr. Krasner was a Principal with Banc of America Securities from October 2003 to June
2009, an Associate with Deutsche Bank from July 2002 to October 2003 and a Senior Associate with PricewaterhouseCoopers from
August 1997 to August 2000. Mr. Krasner has a B.S. degree in applied economics and business management and an M.B.A. with
distinction from Cornell University. He is also a Certified Public Accountant.
Anne Pullum (age 40) - Ms. Pullum has served as Head of Europe at WTW since August 30, 2021 and, prior to that, as Head of
Western Europe from May 31, 2019 to August 30, 2021. Previously, she served as the Chief Administrative Officer and Head of
Strategy and Innovation since October 27, 2016. Beginning on January 4, 2016, Ms. Pullum served as WTW’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.
Imran Qureshi (age 52) - Mr. Qureshi has served as Head of North America at WTW since August 30, 2021. Prior to that, he served
as the Co-Leader, U.S. from February 2017 to August 30, 2021. He also chaired the North American Inclusion & Diversity Council
during this time. He served as Region Leader, U.S. Midwest from February 2017 to October 2019, and was Market Leader, Greater
Chicago and Wisconsin from February 2016 to February 2017. Mr. Qureshi was Managing Consultant of the Chicago office from
January 2013 to January 2016, and has been with WTW in other roles since March 1999. Mr. Qureshi is currently a board director at
The Executives' Club of Chicago. Previously, he was the board chair of the Human Resources Management Association of Chicago,
and he served on the M&A Faculty of WorldatWork where he taught M&A and taught the International Benefits Course for the
International Foundation of Employee Benefit Plans. In 2004, Mr. Qureshi was honored by Business Insurance magazine as one of
“40 Under 40 People to Watch” in the commercial insurance and risk/benefits management services industries. He also has lectured on
governance and globalization at The Kellogg School of Management at Northwestern University and The University of Chicago
Booth School of Business. Mr. Qureshi holds a bachelor’s degree in pure mathematics and statistics with honors from the University
of Manchester in the U.K. and has an actuarial background.
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Pamela Thomson-Hall (age 54) - Ms. Thomson-Hall has served as the Head of International at WTW since August 30, 2021.
Previously, she served as Head of CEEMEA since July 2018, Managing Director of International since January 2017 and Chief of
Staff of International since January 2016. Prior to that, Ms. Thomson-Hall served as Program Director for business integration since
September 2014 and before that, as General Counsel of International since April 1999. Prior to joining WTW, Ms. Thomson-Hall
worked as a solicitor for Clyde & Co and DLA Piper. Ms. Thomson-Hall holds an LLB from the University College London and
completed her LPC at the College of Law.
Board of Directors
A list of the members of the Board of Directors of the Company as of this date of this Annual Report on Form 10-K and their principal
occupations are provided below:
Carl Hess
Chief Executive Officer and Board member
and CEO since January 1, 2022
Dame Inga Beale
Former CEO of Lloyd’s of London and Board
member since January 1, 2022
Fumbi Chima
Executive Vice President and Chief Information
Officer of Boeing Employees’ Credit Union and
Board member since April 1, 2022
Michael Hammond
Former CEO and Chair, Lockton International
Holdings Ltd. and Board member since
January 1, 2022
Brendan O’Neill*
Former CEO of Imperial Chemical Industries
PLC and Board member since January 4, 2016
Linda Rabbitt*
Founder and Chair of Rand Construction
Corporation and Board member since January 4,
2016
Paul Reilly
Chief Executive Officer and Chair of the
board of Raymond James Financial and Board
member since October 1, 2022
Michelle Swanback
Chief Executive Officer, TTEC Engage and
Paul Thomas
Former CEO of Reynolds Packaging Group and
Board member since January 1, 2022
Board member since January 4, 2016
*Not standing for reelection at the Company’s upcoming annual general meeting of shareholders to be held in the second quarter of 2023.
As of April 1, 2023, the following persons will join the Board of Directors of the Company:
Stephen Chipman
Former CEO of Grant Thornton U.S.
Jackie Hunt
Former executive director of Prudential plc and
Fredric Tomczyk
Former President and CEO of TD Ameritrade
CEO of Prudential UK, Europe and Africa
15
ITEM 1A. RISK FACTORS
Executive Summary of Risk Factors
The following contains a summary of each of our risk factors. For the complete disclosure of each risk factor contained herein, please
click on the respective summary.
Strategic and Operational Transformation Risks
•
Our success largely depends on our ability to achieve our global business strategy as it evolves, 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.
• We may not be able to fully realize the anticipated benefits of our growth strategy.
•
Our ability to successfully manage ongoing organizational changes could impact our business results, where the level of costs
and/or disruption may be significant and change over time, and the benefits may be less than we originally expect.
Our growth strategy depends, in part, on our ability to make acquisitions. We face risks when we acquire or divest
businesses, and we 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.
The sale of Willis Re to Gallagher, including transitional arrangements, creates incremental business, operational, regulatory
and reputational risks.
Our business performance and growth plans could be negatively affected if we are not able to effectively apply technology,
data 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.
•
•
•
Business Environment Risks
•
•
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 substantially and negatively
affect us.
Our business, financial condition, results of operations, and long-term goals may continue to be adversely affected, possibly
materially, by negative impacts on the global economy and capital markets resulting from the war between Russia and
Ukraine or any other geopolitical tensions.
• We have been impacted by the COVID-19 pandemic and may be substantially and negatively impacted by COVID-19 or
•
•
other pandemics in the future.
Damage to our reputation, including due to the failure of third parties on whom we rely to perform services or public
opinions of third parties with whom we associate, could adversely affect our businesses.
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.
• Macroeconomic trends, including inflation, increased interest rates and trade policies could continue to adversely affect our
business, results of operations or financial condition.
Human Capital Risks
• We depend on the continued services of our executive officers, senior management team, and skilled individual contributors,
and any changes in our management structure and in senior leadership could affect our business and financial results.
The loss of key colleagues or a large number of colleagues could damage or result in the loss of client relationships and could
result in such colleagues competing against us.
Failure to maintain our corporate culture, including in a remote or hybrid work environment, could damage our reputation.
•
•
Intellectual Property, Technology, Cybersecurity and Data Protection Risks
•
•
•
Data and cyber security breaches or improper disclosure of confidential company or personal data could result in material
financial loss, regulatory actions, reputational harm, and/or legal liability.
Our inability to comply with complex and evolving laws and regulations related to data privacy and cybersecurity could
result in material financial loss, regulatory actions, reputational harm and/or legal liability.
Our inability to successfully mitigate and recover should we experience a disaster or other business continuity problem could
cause material financial loss, loss of human capital, regulatory actions, reputational harm, and/or legal liability.
• Material 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, and/or
legal liability.
Limited protection of our intellectual property could harm our business and our ability to compete effectively, and we face
the risk that our services or products may infringe upon the intellectual property rights of others.
•
16
Legal, Non-Financial/Regulatory and Compliance Risks
•
•
•
•
•
•
•
•
•
•
From time to time, we receive claims and are party to lawsuits arising from our work, which could materially adversely affect
our reputation, business and financial condition.
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.
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.
Sanctions imposed by governments, or changes to such sanction regulations (such as sanctions imposed on Russia), and
related counter-sanctions, could have a material adverse impact on our operations or financial results.
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.
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.
Allegations of conflicts of interest or anti-competitive behavior, 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.
Changes and developments in the health insurance system in the United States could harm our business.
Increasing scrutiny and changing expectations from investors, clients and our colleagues with respect to our environmental,
social and governance (‘ESG’) practices may impose additional costs on us or expose us to reputational or other risks.
The United Kingdom’s exit from the European Union, which occurred on January 31, 2020, and the risk that other countries
may follow, could adversely affect us.
Financial and Related Regulatory Risks
• We have material pension liabilities that can fluctuate significantly and adversely affect our financial position or net income
•
•
•
•
•
or result in other financial impacts.
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.
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.
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.
Changes in accounting principles or in our accounting estimates and assumptions could negatively affect our financial
position and results of operations.
Our quarterly revenue and cash flow could fluctuate, including as a result of factors outside of our control, while our
expenses may remain relatively fixed or be higher than expected.
• While we have incorporated provisions for the use of successor benchmarks in our existing external and intercompany
floating-rate facilities which use the London Interbank Offered Rate (‘LIBOR’) as a reference rate, there remains uncertainty
as to how the anticipated discontinuation of LIBOR may affect the market for or pricing of any LIBOR-linked securities,
loans, derivatives, and other financial obligations which we may seek to obtain in the future.
• We are a holding company and, therefore, may not be able to receive dividends or other distributions in needed amounts from
our subsidiaries.
Tax Risks
•
If a U.S. person is treated as owning at least 10% of our shares, such a holder may be subject to adverse U.S. federal income
tax consequences.
Legislative or regulatory action or developments in case law in the U.S. or elsewhere could have a material adverse impact on
our worldwide effective corporate tax rate.
Risks Related to Being an Irish-Incorporated Company
•
•
•
The laws of Ireland differ from the laws in effect in the United States and may afford less protection to holders of our
securities.
As an Irish public limited company, certain decisions related to our capital structure will require the approval of shareholders,
which may limit our flexibility to manage our capital structure.
17
RISK FACTORS
Our financial performance, including our business results, financial condition, result of operations, cash flows and price of our
ordinary shares, is subject to various risks and uncertainties, including as described in this Item 1A of Part I of our Annual Report. 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. Risks in this section are grouped into categories; the headings of these
categories are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation
of any of the risk factors described herein. Many risks affect more than one category, and the risks are not in order of significance or
probability of occurrence solely because they have been grouped by categories. With respect to the tax-related consequences of
acquisition, ownership, and disposal of ordinary shares, you should consult with your own tax advisors.
Strategic and Operational Transformation Risks
Our success largely depends on our ability to achieve our global business strategy as it evolves, 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
addition, our strategy continues to evolve, and it is possible that we will be unable to successfully execute the associated strategy
changes, due to factors discussed above or elsewhere 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.
We may not be able to fully realize the anticipated benefits of our growth strategy.
We have stated certain goals at our 2021 Investor Day and our outlook for the next several years, including with respect to our cash
flows, our growth and margin targets, and our share repurchases, and in 2022, in light of the completion of the divestiture of our
Russian subsidiaries to local management (and updated conditions and assessments about the impact of the divestiture on future
revenue and expenses), we recast our previously stated outlook and financial targets.
Our initiatives aiming to implement our recast targets and future financial objectives pose potential operational risks and may result in
distraction of management and employees. We cannot be certain whether we will be able to realize benefits from current revenue-
generating or cost-saving initiatives and ultimately realize our objectives. There can be no assurance that our actual results will meet
these recast financial goals.
Our ability to successfully manage ongoing organizational changes could impact our business results, where the level of costs
and/or disruption may be significant and change over time, and the benefits may be less than we originally expect.
We have in the past few years undergone several significant business and organizational changes, including multi-year operational
transformation programs and a new management and organizational structure, among others. There are also a number of other
initiatives planned or ongoing to transform and update our systems and processes and gain efficiencies. In addition, our strategy
continues to evolve, and such evolution may result in further organizational changes or more or different investments than we
currently anticipate. In connection with all these changes, we may manage a number of large-scale and complex projects. Such
projects may include multiple and connected phases, many of which may be dependent on factors that are outside of our control.
While we plan to undertake these types of large, complex projects based on our determination that each is necessary or desirable for
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 or that the benefits will be as we originally expected. Effectively managing
these organizational changes (including ensuring that they are implemented on schedule, within budget and without interruption to the
existing business, or that transitions to new systems do not create significant control vulnerabilities during the period of transition) is
critical to retaining talent, servicing clients and our business success overall. We may have difficulty attracting, training, and retaining
the talent that we need to successfully manage this change. Further, many of the risks described herein increase during periods of
18
significant organizational change and transformation. The failure to effectively manage such risks could adversely impact our
resources or business or financial results.
Our growth strategy depends, in part, on our ability to make acquisitions. We face risks when we acquire or divest businesses, and
we 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. In addition, we may not repurchase as many of our outstanding shares as anticipated due to our acquisition activity
or investment opportunities, as well as other market or business conditions. 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 have performed 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. For example, we completed the divestiture of the Willis Re business to Gallagher in 2022 which may give rise to such risks
including those risks associated with managing transition arrangements.
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 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 consolidated 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
savings; and exposure to legal claims or regulatory censure for activities of the acquired business prior to acquisition.
With respect to any such acquisition transactions, we face the risk related to the potential impacts of the transaction and integration on
relationships, including with employees, correspondents, suppliers, clients and competitors, as well as the risk related to contingent
liabilities (including litigation) potentially creating material liabilities for the Company. The following risks, in addition to those
described above, may also adversely affect our ability to successfully implement and integrate these acquisitions: material changes in
U.S. and foreign jurisdiction regulations (including those related to the healthcare system and Medicare and insurance brokerage,
pension advisory, and investment services); changes in general economic, business and political conditions in relevant markets,
including changes in the financial markets; significant competition in the marketplace; and compliance with extensive and evolving
government regulations in the U.S. and in foreign jurisdictions.
If acquisitions are not successfully integrated and the intended benefits of the acquisitions are not achieved, 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 and companies 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.
The sale of Willis Re to Gallagher, including transitional arrangements, creates incremental business, operational, regulatory and
reputational risks.
The completion of the agreed-upon transaction to sell our Willis Re business to Gallagher, which has occurred in all jurisdictions
globally, entails important risks, including, among others: the risk that the post-closing transition arrangements, which are complex,
may impose costs or liabilities or may give rise to errors in execution, be distracting to our management, or cause disruption to our
business or our relationships with clients, employees, suppliers, regulators, competitors, and other third parties; the risk that the
triggers for the potential earnout payment may not be met; the risk that transaction and/or transition costs may be greater than
expected, including as a result of the complexity of the transition arrangements in domestic and international jurisdictions across the
globe; the risk that management’s attention is diverted from other matters during the post-closing period; the risk that litigation
associated with the Gallagher transaction or with contingent liabilities we have retained, if any, arises; the risk of disruptions from the
completion of the Gallagher transaction and transition arrangements that impact our business, including current plans and operations,
including the risk of exacerbating existing disruptions or challenges we face; and other risks in this Annual Report on Form 10-K and
in our other SEC filings.
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Our business performance and growth plans could be negatively affected if we are not able to effectively apply technology, data
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, data and analytic solutions that anticipate, lead or
keep pace with rapid and continuing changes in technology both for internal operations and for maintaining industry standards and
meeting client preferences. We may not be successful in anticipating or responding to these developments in a timely and cost-
effective manner or in attracting and maintaining personnel with the necessary skills in this area. Additionally, our ideas may not lead
to the desired internal efficiencies or be accepted in the marketplace. In addition, we may not be able to implement technology-based
solutions as quickly as desired if, for example, greater resources are required than originally expected or resources are otherwise
needed elsewhere. The effort to gain technological and data expertise and develop new technologies or analytic techniques in our
business requires us to incur significant cost and attract qualified technical talent who are in high demand. Our competitors are seeking
to develop competing or new 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. In certain cases, we may decide, based on perceived business needs, to make
investments that may be greater than we currently anticipate. If we cannot offer new technologies or data and 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.
Business Environment Risks
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 substantially and negatively affect us.
The demand for our services may not grow or be maintained, and we may not be able to 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. For example, any changes in U.S. trade policy (including any increases
in tariffs that result in a trade war), recessionary conditions in some of the markets where we do business, inflationary conditions,
ongoing stock market volatility or an increase in, or unmet market expectations with respect to, interest rates could adversely affect the
general economy. As a result, global financial markets may continue to experience disruptions, including increased volatility and
reduced credit availability, which could substantially impact our results. Likewise, COVID-19 and related economic disruptions have
impacted and could have a material adverse impact on global demand from our clients, as well as our operations as discussed
elsewhere in this report. 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
revenue 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
(including direct-to-consumer Medicare 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, as well as increasing and evolving consolidation or alliances among
existing competitors, have created and could continue to create additional competition and could significantly reduce our market
share, resulting in a loss of business for us and a corresponding decline in revenue 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 revenue and profit
margin.
20
In addition, existing and new competitors (whether traditional competitors or non-traditional competitors, such as technology
companies) 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 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 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 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. Furthermore, large and complex consulting
projects, often involving dedicated personnel, resources and expenses, comprise a significant portion of this business, which are based
on our clients’ discretionary needs and may be reduced based on a decline in a client’s or an industry’s financial condition or
prospects. We also face the risk that certain large and complex project contracts may be reduced or terminated based on dissatisfaction
with service levels, which could result in reduced revenue, write-offs of assets associated with the project, and disputes over the
contract, all of which may adversely impact our results and business.
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 could also reduce the need for our services.
Our business, financial condition, results of operations, and long-term goals may continue to be adversely affected, possibly
materially, by negative impacts on the global economy and capital markets resulting from the war between Russia and Ukraine or
any other geopolitical tensions.
U.S. and global markets are experiencing volatility and disruption as a result of the war between Russia and Ukraine. Although the
length and impact of the ongoing situation is highly unpredictable, as the war in Ukraine continues, it has and could continue to lead to
further market disruptions.
Additionally, during the first quarter of 2022, we announced our intention to transfer ownership of our Russian subsidiaries to local
management who will operate independently in the Russian market. Due to the sanctions and prohibitions on certain types of business
and activities, we deconsolidated our Russian entities on March 14, 2022. The transfer of our Russian subsidiaries to local
management was completed on agreed-upon terms on July 18, 2022, and the transfer was registered in Russia on July 25, 2022. The
deconsolidation in the first quarter of 2022 resulted in a loss of $57 million. Further, total net assets impaired, including accounts
receivable balances related to our Russian business that are held outside of our Russian entities, were $81 million during the year
ended December 31, 2022. The Russian entities comprised approximately 1% of consolidated WTW revenue for 2021, primarily
within our Risk & Broking segment. Our Russian operation was a high-margin business and the lost profits from our Russian
operations have impacted and are anticipated to continue to impact operating income and cash flow.
Sanctions imposed by the U.S., the E.U., the U.K. and other countries on Russia, as well as Russian counter-sanctions, are extensive.
Additional sanctions and penalties have also been enacted, proposed and/or threatened. Russian actions and the resulting sanctions
could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets. The
ramifications of the hostilities and sanctions, however, may not be limited to Russia and Russian companies but may spill over to and
negatively impact other regional and global economic markets (including Europe and the United States), companies in other countries
(particularly those that have done business with Russia) and various sectors, industries and markets for securities and commodities
globally, such as oil and natural gas. Accordingly, the actions discussed above and the potential for a wider conflict could increase
financial market volatility and could cause severe negative effects on regional and global economic markets, industries, and
companies. In addition, Russia may take retaliatory actions and other countermeasures, including cyberattacks and espionage against
other countries and companies around the world, which may negatively impact such countries and companies. The extent and duration
of the Russian actions or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions
and volatility, and the result of any diplomatic negotiations cannot be predicted. For additional sanctions-related risks, also see
‘Sanctions imposed by governments, or changes to such sanction regulations (such as sanctions imposed on Russia), and related
counter-sanctions, could have a material adverse impact on our operations or financial results’ below.
Any of the above-mentioned factors, or other geopolitical tensions, could adversely affect our business, prospects, financial condition,
and operating results. The extent and duration of the crisis, sanctions and resulting market disruptions are impossible to predict, but
could be substantial.
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We have been impacted by the COVID-19 pandemic and may be substantially and negatively impacted by COVID-19 or other
pandemics in the future.
The COVID-19 pandemic has had an adverse impact on global commercial activity, including the global supply chain, and at times
has contributed to strain in financial markets, including, among other effects, significant volatility in equity markets, changes in
interest rates and reduced liquidity on a global basis. It has also resulted in increased travel restrictions and extended shutdowns of
businesses in various industries including, among others, travel, trade, tourism, health systems and food supply, and significantly
reduced overall economic output. As such, there is a risk that COVID-19 and its variants could continue to have a negative impact,
potentially substantial, on client demand and cash flow in certain or all of our businesses.
COVID-19 risks magnify other risks discussed in this report and any of our other SEC filings. For example, the effectiveness of
external parties, including governmental and non-governmental organizations, in combating the spread and severity of COVID-19 and
its variants could have a material impact on demand for our business. In addition, steps taken by market counterparties such as
insurance carriers to limit their exposures to COVID-19 and related risks could have an impact on their willingness to provide or
renew coverage for our clients on historical terms and pricing, which could again impact demand for our business. Coverage disputes
arising out of the pandemic, some of which have already emerged, could also increase our professional liability risk by increasing the
frequency and severity of allegations by others that, in the course of providing services, we have committed errors or omissions for
which we should have liability. The continued fluidity of the COVID-19 pandemic, including the ongoing development, availability,
distribution and acceptance of effective vaccines and the emergence of vaccine-resistant variants, precludes any prediction as to the
duration of the effects of the COVID-19 pandemic and the ultimate adverse impact of COVID-19 on our business. As a result, the
COVID-19 pandemic continues to present material uncertainty and risk with respect to demand for and delivery of our products and
services.
In addition, COVID-19 has disrupted certain aspects of our business and could continue to disrupt, possibly materially, our business
operations and the services we provide, as well as the business operations of our clients, suppliers and other third parties with whom
we interact. As an increasing percentage of our colleagues continue to work remotely, we face resiliency risks, such as the risk that our
information technology platform could potentially be inadequate to support increasing demand, as well as the risk that unusual
working arrangements could impact the effectiveness of our operations or controls. Economic disruption caused by COVID-19 or
other factors may impact the pace at which we make information technology-based investments, and we may continue to make fewer
information technology-based investments than previously anticipated, which could potentially create business operational risk. In
addition, we depend on third-party platforms and other infrastructure to provide certain of our products and services, and such third-
party infrastructures face similar resiliency risks. These factors have exposed us to increased phishing and other cybersecurity attacks
as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic, as well as an increase in the number of points of
potential attack, such as laptops and mobile devices (both of which are now being used in increased numbers as many of our
employees work remotely), to be secured. A failure to effectively manage these risks, including to promptly identify and appropriately
respond to any cyberattacks, may adversely affect our business.
Also, a potential COVID-19 infection of any of our key colleagues could substantially and negatively impact our operations. Further,
it is possible that COVID-19 causes us to close down call centers and hubs and other processes on which we rely, or impacts processes
of third-party vendors on whom we rely, which could also materially impact our operations. Resultant changes in financial markets
could also have a material impact on our own hedging and other financial transactions, which could impact our liquidity. In addition, it
is possible that COVID-19 restrictions could create difficulty for satisfying our legal or regulatory filing or other obligations,
including with the SEC and other regulators.
As noted above, supply and labor market disruptions caused by COVID-19 as well as other factors, such as accommodative monetary
and fiscal policy, have contributed to significant inflation in many of the markets in which we operate. For additional economic risks,
also see ‘Macroeconomic trends, including inflation, increased interest rates and trade policies could continue to adversely affect our
business, results of operations or financial condition’ below. This impacts not only the costs to attract and retain employees but also
other costs to run and invest in our business. If our costs grow significantly in excess of our ability to raise revenues, our margins and
results of operations may be materially and adversely impacted and we may not be able to achieve our strategic and financial
objectives.
All of the foregoing events or potential outcomes, including in combination with other risk factors included in this Annual Report on
Form 10-K, could cause a substantial negative effect on our results of operations in any period and, depending on their severity, could
also substantially and negatively affect our financial condition. Furthermore, such potential material adverse effects may lag behind
the developments related to the COVID-19 pandemic. Such events and outcomes also could potentially impact our reputation with
clients and regulators, among others.
Damage to our reputation, including due to the failure of third parties on whom we rely to perform services or public opinions of
third parties with whom we associate, could adversely affect 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
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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. Such harm could also arise from negative
public opinion or political conditions arising from our association with third parties in any number of activities or circumstances.
Negative perceptions or publicity, whether or not true, may result in harm to our prospects. In addition, the failure to deliver
satisfactory service and quality performance, on time and within budget, in one line of business could cause clients to terminate the
services we provide to those clients in many other lines of business. This risk has increased as the Company has become larger and
more complex and as we take on increasingly complicated projects for our clients (such as complex outsourcing engagements and
technology solutions development/implementation projects that require a significant amount of dedicated personnel resources and
expenses).
In addition, as part of providing services to clients and managing our business, we not only depend on a number of third-party service
providers and suppliers today, but we expect to engage the services of new third parties in the future as we continue to implement our
operational transformation programs. 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.
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 revenue from a more concentrated number of carriers as
our business and the health insurance industry continue to evolve. The termination, amendment or consolidation of our relationships
with our insurance carriers in the U.S. or in any other jurisdiction could harm our business, results of operations and financial
condition.
Macroeconomic trends, including inflation, increased interest rates and trade policies could continue to adversely affect our
business, results of operations or financial condition.
Global economic events and other factors, such as accommodative monetary and fiscal policy and the impacts of the COVID-19
pandemic, have contributed to significant inflation in many of the markets in which we operate. In particular, inflation in the United
States, Europe and other geographies has risen to levels not experienced in recent decades and we are seeing its impact on various
aspects of our business, which in some cases have, or could in the future, negatively affect our business and financial condition. In
order to combat inflation and restore price stability, a number of central banks around the world have raised interest rates and are
expected to keep increasing interest rates in 2023. Increased inflation and interest rates may hinder the economic growth in a number
of markets where we do business, and has had, and may continue to have, far reaching effects on the global economy. This weakness
in the economy and the possibility of a global recession has had, and may continue to have, a negative effect on our business and
financial condition, including on the value of our ordinary shares.
Moreover, U.S. and global economic conditions have created market uncertainty and volatility. Such general economic conditions,
such as inflation, stagflation, political volatility, costs of labor, cost of capital, interest rates and tax rates, affect our operating and
general and administrative expenses, and we have no control or limited ability to control such factors. If our costs grow significantly
in excess of our ability to raise revenue, our margins and results of operations may be materially and adversely impacted and we may
not be able to achieve our strategic and financial objectives. These conditions also affect our clients’ businesses and the markets that
they serve and may reduce demand for our services, increase demands for pricing accommodations or cause a higher rate of delays in
the collection of, or losses on, our accounts receivable, which could adversely affect our results of operations.
Further, the continued slowdown in the global economy, including a recession, or in a particular region or industry, inflation or a
tightening of the credit markets could negatively impact our business, financial condition and liquidity, including our ability to
continue to access preferred sources of liquidity when we would like, and our borrowing costs could increase. In particular, further
tightening of the credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures, if
and when needed. In addition, we could experience losses on our holdings of cash and investments due to failures of financial
institutions and other parties. Thus, a continued deterioration or prolonged period of negative or stagnant macroeconomic conditions
in the U.S. and globally could adversely affect our business, results of operations or financial condition.
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Human Capital Risks
We depend on the continued services of our executive officers, senior management team, and skilled individual contributors, and
any changes in our management structure and in senior leadership could affect our business and financial results.
Our success and future performance has depended largely upon the continued services of our executive officers, senior management,
and other highly skilled personnel. We have relied on our leadership team to execute on our business plan, for strategy, growth,
research and development, marketing, sales, provision, maintenance, and support of our products and services, and general and
administrative functions, and on mission-critical individual contributors. From time to time, our executive management team and the
groups of skilled individual contributors may change from the hiring or departure of executive officers or such contributors, which
could disrupt our business. The employment agreements with our executive officers (to the extent our officers are party to such
agreements) and other key personnel will not require them to continue to work for us for any specified period; therefore, they could
terminate their employment at any time. The loss of one or more of our executive officers, senior management, or other key
employees (including any limitation on the performance of their duties or short-term or long-term absences as a result of COVID-19)
could significantly delay or prevent the achievement of our development and strategic objectives.
A leadership transition may also increase the likelihood of turnover among our employees and result in changes in our business
strategy, which may create uncertainty and negatively impact our ability to execute our business strategy quickly and effectively.
Leadership transitions may also impact our relationships with customers and other market participants, and create uncertainty among
investors, employees, and others concerning our future direction and performance. Any significant disruption, uncertainty or change in
business strategy could adversely affect our business, operating results and financial condition.
The loss of key colleagues or a large number of 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. Our ability to
provide services our clients demand requires such skills and training, in insurance, actuarial, human resources and other areas, which
are also in high demand among our competitors. The market for employees in our industry is extremely competitive, and competitors
for talent increasingly attempt to hire, and to varying degrees have been successful in hiring, our employees or employment
candidates. In particular, our colleagues’ business relationships with our clients are a critical element of obtaining and maintaining
client engagements. Labor markets have continued to tighten globally, and we have experienced intense competition and increased
costs for certain types of colleagues, especially as new entrants in the insurance business (among others) continue to expend
significant resources in their own hiring. Also, in the past, including following the announcement and the termination of the proposed
Aon plc combination, we have lost colleagues who manage substantial client relationships or possess substantial experience or
expertise; if we lose additional colleagues such as those, or if we lose a large number of other colleagues, it could result in such
colleagues competing against us. Voluntary attrition in a number of business lines remains elevated, and it may take longer than
expected to hire new colleagues to replace colleagues who have left and/or these new colleagues may be subject to restrictive
covenants that impact the amount of business they can generate while those covenants are in effect. Further, the increased availability
of remote working arrangements has also expanded the pool of companies that can compete for our employees and employment
candidates. Our operational transformation efforts require us to attract, onboard, and retain individuals relevant for those efforts and
we may not be able to do that successfully. The failure to successfully attract and retain qualified personnel could materially adversely
affect our ability to secure and complete engagements or could disrupt our business or cause increased operational risk, which would
materially adversely affect our results of operations and prospects.
Failure to maintain our corporate culture, including in a remote or hybrid work environment, could damage our reputation.
We aim to foster a culture that is based on a strong client focus, an emphasis on teamwork, integrity, mutual respect and striving for
excellence. Our colleagues are the cornerstone of this culture, and acts of misconduct by any colleague, and particularly by senior
management, could erode trust and confidence and damage our reputation among existing and potential clients and other stakeholders.
Our business is managing people, risk and capital, and our success depends on our ability to develop and promote an ethical culture of
trust, integrity and other important qualities in which our colleagues are comfortable speaking up about potential misconduct. While
we do not believe we have experienced any material adverse cultural impacts as a result of our remote and hybrid work environment,
this may manifest over time. As a result, remote and hybrid work arrangements may negatively impact our ability to maintain and
promote our culture and increase related risks.
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Intellectual Property, Technology, Cybersecurity and Data Protection Risks
Data and cyber security breaches or improper disclosure of confidential company or personal data could result in material
financial loss, regulatory actions, reputational harm, and/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, clients and third-party vendors.
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 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. We are the target of
computer viruses, hackers, distributed denial of service attacks, malware infections, ransomware attacks, phishing and spear-phishing
campaigns, and/or other external hazards, as well as improper or inadvertent workforce behavior which, 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, but are not limited to, enterprise cloud storage and cloud computing application
services provided and maintained by third-party vendors. These third-party applications store or may afford access to confidential and
proprietary data of the Company, our employees and our clients. We have processes designed to require third-party vendors that
provide IT outsourcing, offsite storage and other services to agree to maintain certain standards with respect to the storage, protection
and transfer of confidential, personal and proprietary information. However, this data is at risk of compromise or unauthorized access
or use in the event of a breakdown of a vendor’s data protection processes, a data breach due to the intentional or unintentional non-
compliance by a vendor’s employee or agent, or as a result of a cyber-attack on the product, software or information systems of a
vendor in our software supply chain. Any compromise of the product, software, data or infrastructure of a Company vendor, including
a software or IT vendor in our supply chain, could in turn result in the compromise of Company data or infrastructure or result in
material operational disruption. Further, the risk and potential impact of a data breach on our third-party vendors’ products, software
or systems increase as we move more of our data and our clients’ data into our vendors’ cloud storage, engage in IT outsourcing, and
consolidate the group of third-party vendors that provide cloud storage or other IT services for the Company. Over time, the
frequency, severity and sophistication of the attacks against us and our vendors have increased, including due to the use of artificial
intelligence for purposes of cybercrime, and the broader range of threat actors, including state-sponsored actors and hacker activists.
We and our vendors regularly experience cybersecurity incidents, including successful attacks from time to time, and we expect that to
continue going forward. Cybersecurity incidents include those resulting from human error or malfeasance, implantation of malware
and viruses, phishing and spear-phishing attacks, unauthorized access to our information technology networks and systems, and
unauthorized access to data or individual account funds through fraud or other means of deceiving our colleagues, clients, third-party
service providers and vendors. We have experienced successful attacks, by various types of hacking groups, in which personal and
commercially sensitive information, belonging to the Company or its clients, has been compromised. However, none of these
cybersecurity incidents or attacks to our knowledge have been material to our business or financial results. We cannot assure that such
cybersecurity incidents or attacks will not have a material impact on our business or financial results in the future. When required by
law, we have notified individuals, clients and relevant regulatory authorities (such as insurance/financial services regulators and
privacy regulators) of such cybersecurity incidents or attacks.
We maintain policies, procedures and administrative, physical and technological safeguards (such as, where in place, multifactor
authentication and encryption of data in transit and at rest) designed to protect the security and privacy of the data in our custody and
control. However, such safeguards are time-consuming and expensive to deploy broadly and are not necessarily always in place or
effective, and we cannot entirely eliminate the risk of data security breaches, improper access to, takeover of or disclosure of
confidential company or personally identifiable information. We may not be able to detect and assess such issues, or implement
appropriate mitigation or remediation, in a timely manner. We are engaged in an ongoing effort to enhance our protections against
such attacks; this effort will require significant expenditures and may not be successful. 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, intentionally or unintentionally 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, regulatory enforcement, and/or criminal prosecution. Unauthorized disclosure of sensitive or confidential
client, supplier 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 incident response and investigation, remediation work, notification of data security breaches and costs of credit monitoring
services), negative publicity, operational disruption, legal liability and/or damage to our reputation, as well as require substantial
resources and effort of management, thereby diverting management’s focus and resources from business operations.
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The methods used to obtain unauthorized access to, disable or degrade service or sabotage the Company’s systems are also constantly
evolving, are increasingly sophisticated, and may be difficult to anticipate or detect. For example, the U.S. Federal Bureau of
Investigation, the Cybersecurity and Infrastructure Security Agency, and other U.S. federal agencies continue to issue warnings about
trends in cybercriminal and nation-state activity and other threats that are consistent with some of the types of incidents we have
experienced. To our knowledge, these incidents have not had a material impact on our business or operations thus far. However, our
reputation could be harmed and our business and results of operations could be materially and adversely affected if we were to be the
target of such attacks in the future, or if, despite our controls and efforts to detect breaches, we were to be the victim of an undetected
breach.
We have implemented and regularly review and update processes and procedures to protect against fraud and unauthorized access to
and use of secured data and to prevent data loss. The ever-evolving threats mean that we and our third-party service providers and
vendors must continually evaluate, adapt, enhance and otherwise improve our respective systems and processes, especially as we grow
our mobile, cloud and other internet-based services. There is no guarantee that such efforts will be adequate to safeguard against all
fraud, data security breaches, unauthorized access, operational impacts or misuses of data. For example, our policies, employee
training (including phishing prevention training), procedures and technical safeguards may be insufficient to prevent or detect
improper access to confidential, personal or proprietary information by employees, vendors or other third parties with otherwise
legitimate access to our systems. In addition, we may not be able to implement such efforts as quickly as desired if, for example,
greater resources are required than originally expected or resources and management’s focus are insufficient. 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, disruption of operations and service, fines, lawsuits, and
damage to our reputation with our clients and in the broader market.
Our inability to comply with complex and evolving laws and regulations related to data privacy and cybersecurity could result in
material financial loss, regulatory actions, reputational harm, and/or legal liability.
We are subject to numerous laws and regulations in the U.S. and foreign jurisdictions, only certain of which are named here, designed
to protect the personally identifiable information of client and company constituents and suppliers, notably the European Union’s
General Data Protection Regulation (‘GDPR’), which became effective on May 25, 2018, the California Consumer Privacy Act and its
implementing regulations (‘CCPA’), which became effective on January 1, 2020, and the Virginia Consumer Data Protection Act
(‘VCDPA’), which became effective on March 2, 2021. We are also subject to regulations from other countries that prohibit or restrict
the transmission of data outside of such countries’ borders, and to various U.S. federal and state laws governing the protection of
health, financial or other individually identifiable information. The GDPR, as well as other more recently-enacted privacy laws,
significantly increased 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. Violations of the
GDPR may result in possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is
higher). A July 2020 judgment by the Court of Justice of the European Union on Schrems II has made cross border data transfers to
organizations outside the European Economic Area more onerous and uncertain. Further, as a result of the U.K.’s withdrawal from the
European Union (‘Brexit’), the data transfer regime between the U.K. and the European Economic Area is subject to some uncertainty
if the U.K.’s data strategy diverges from the E.U.’s in the coming years. The Company is also subject to numerous U.S. and foreign
marketing and telecommunications laws and regulations designed to protect consumers from unwanted or fraudulent communications.
A violation of any such law may lead to litigation or regulatory liability, including substantial financial damages or fines.
Laws and regulations in this area are evolving and generally becoming more stringent, including, without limitation, the U.S. Health
Insurance Portability and Accountability Act of 1996 (‘HIPAA’), enforced by the Office for Civil Rights within the Department of
Health and Human Services, and the New York State Department of Financial Services’ cybersecurity regulations outlining required
security measures for the protection of data. Certain U.S. states have also recently enacted laws requiring certain data security and
privacy measures of regulated entities, notably the CCPA and VDCPA. We expect that other U.S. states and other countries will
follow in implementing their own data privacy and data security laws. For example, Brazil recently enacted the Lei Geral de Proteção
de Dados Pessoais, a national data protection law modeled on the GDPR. The People’s Republic of China and India, among other
countries, are also expected to enact data protection laws that could, among other things, restrict data transfers out of each of those
countries.
Each of these evolving laws and regulations, in the United States and abroad, as well as laws applicable to the Company that are not
named here, may be subject to evolving and conflicting interpretations, restrict the manner in which we provide services to our clients,
divert resources from other important initiatives, increase the risk of non-compliance, impose significant compliance and other costs
that are likely to increase over time, and increase the risk of fines, lawsuits or other potential liability, all of which could have a
material adverse effect on our business and results of operations. Our failure to adhere to or successfully develop processes in
response to legal or regulatory requirements, including legal or regulatory requirements that may be developed or revised due to
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economic or geopolitical changes such as Brexit, and changing customer expectations in this area, could result in substantial legal
liability and impairment to our reputation or business.
In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards
that either legally or contractually apply to us. We also expect that there will continue to be new proposed laws and regulations
concerning privacy, data protection and information security, but cannot yet determine the impact such future laws, regulations and
standards may have on our business. New laws, amendments to or re-interpretations of existing laws and regulations, industry
standards, contractual obligations and other obligations may require us to incur additional costs and restrict our business operations.
Because the interpretation and application of laws and other obligations relating to privacy and data protection are still uncertain, it is
possible that these laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data
management practices. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally
change our business activities and practices, which could harm our business. We may be unable to make such changes and
modifications in a commercially reasonable manner or at all. Any inability to adequately address privacy concerns, even if unfounded,
or comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability,
damage to our reputation, or harm to our business.
Our inability to successfully mitigate and recover should we experience a disaster or other business continuity problem could cause
material financial loss, loss of human capital, regulatory actions, reputational harm, and/or legal liability.
Should we or a third party on whom we rely experience a disaster or other business continuity problem, such as an earthquake,
hurricane, terrorist attack, pandemic, including prolonged effects of the COVID-19 pandemic, security breach, ransomware or
destructive malware attack, 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, our outsourcing providers or other vendors, access to data,
and the proper functioning of our computer, telecommunication and other related systems and operations. In such an event, we could
experience operational challenges with regard to 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 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.
Material 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, and/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 financial
and other 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. We rely on being at the
forefront of a range of technology options relevant to our business, including by staying ahead of the technology offered by our
competitors, and attracting, developing, and retaining skilled individuals in the cybersecurity space. The market for such qualified
individuals is competitive and we may be unable to hire the necessary talent to mitigate the foregoing risks.
In addition, many of the software applications, including enterprise cloud storage and cloud computing application services, that we
use in our business are licensed from, and supported, upgraded and maintained by, third-party vendors. We are significantly increasing
our use of such cloud services and expect this to continue over time. These third-party applications store confidential and proprietary
data of the Company, our clients and our employees. A suspension or termination of certain of these licenses or the related support,
upgrades and maintenance could cause temporary system delays or interruptions that could adversely impact our business. As a global
organization, we occasionally acquire other companies or divest certain of our existing business lines and companies. These strategic
business decisions may require us to manage complex integrations or dissolutions of information systems or the transfer of
information from one system to another, and we may fail to identify vulnerabilities in our targets’ information systems or in integrated
components of our respective information systems. These transactions may make us more susceptible to cyberattacks and could result
in the theft of Company intellectual property, the compromise of Company, employee, and client data or operational disruption.
Any finding that the data we rely on to run our business is inaccurate or unreliable, that 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 that we
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experience cost overruns, delays, or other disruptions, could result in material financial loss, regulatory action, reputational harm or
legal liability.
Limited protection of our intellectual property could harm our business and our ability to compete effectively, 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, or our internal policies and procedures regarding our
management of intellectual property, 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. In addition, these claims, whether with or without merit, could be expensive, take
significant time and divert management’s focus and resources from business operations. Successful challenges against us could
require us to modify or discontinue our use of technology or business processes where such use is found to infringe or violate the
rights of others, or require us to purchase licenses from third parties, any of which could adversely affect our business, financial
condition and operating results.
Legal, Non-Financial/Regulatory and Compliance Risks
From time to time, we receive claims and are party to 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 15 -
Commitments and Contingencies within Item 8 of 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 and complex regulatory requirements,
including actuarial services, asset management, technology solutions development and implementation 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 may not be able to 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. This risk is likely to be higher in
circumstances, such as claims related to COVID-19 (some of which have already emerged), where there are significant disputes
between clients and insurance carriers over coverage and clients allege claims against us. This risk also may be higher in
circumstances where we have significant numbers of departures or new joiners or other disruptions to our business, such as changes in
ways of working. 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 certain 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
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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 (including increasingly complex technology solutions) 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 as we take on increasingly complicated projects, including those with complex regulatory requirements.
We also provide advice on both asset allocation and selection of investment managers. Increasingly, for many 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 offers affiliated investment funds, including in the U.S. and Ireland, with plans to launch
additional funds over time. Given that our Investments 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 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 expected expansion of this business geographically and in new
offerings will subject us to additional contractual exposures and obligations with investors, asset managers and third-party service
providers, as well as increased regulatory exposures. Overall, 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.
In addition, our insurance coverage may not be sufficient in type or amount to cover us against such liabilities. 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. Also, we may face additional regulatory scrutiny as we expand our businesses
geographically and in new products and services that we offer.
Examples of these inquiries or investigations are set forth in more detail in Note 15 — Commitments and Contingencies within Item 8
of this Annual Report on Form 10-K. These include various ongoing civil investigation proceedings in respect of alleged exchanges of
commercially sensitive information among competitors in aviation and aerospace insurance and reinsurance broking.
All of these items reflect an increased focus by regulators (in the U.K., U.S., 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.
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 political, economic, financial and climate change related disruptions
throughout the world could have an adverse impact on our businesses and financial results. These risks include:
•
the general economic and political conditions in the U.S. and foreign countries (including political and social unrest in certain
regions);
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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 rates;
difficulties in controlling operations and monitoring employees in geographically dispersed and culturally diverse locations;
and
the practical challenges 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, including many in emerging markets), 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 (‘FCPA’), as well as other anti-bribery and
corruption rules and requirements in all of the countries in which we operate.
Sanctions imposed by governments, or changes to such sanction regulations (such as sanctions imposed on Russia), and related
counter-sanctions, could have a material adverse impact on our operations or financial results.
As described above, our businesses are subject to the risk of sanctions imposed by the U.S., the E.U., the U.K. and other governments.
In the past year, there was an increase in U.S. designations in relation to Russia and China (including recent sanctions imposed on
Russia by the U.S. as well as the E.U. and U.K. due to Ukraine), and there has also been an increased risk of counter-sanctions in
some locations, such as China and Russia in response to the recently imposed sanctions. Touchpoints with sanctioned individuals,
entities or locations can be difficult to identify and, given the increased scope of complexity of sanctions, there is an increased risk of
non-compliance. We have also seen a maturing of the U.K. sanctions regime, which has navigated a differing path from the E.U. and
U.S. sanctions regimes but largely with the same objectives. A number of volatile geopolitical events are likely to affect the
implementation of sanctions such as the change of regime in Afghanistan, the escalation of sanctions towards Belarus, Russia's
invasion of Ukraine, the uncertainty around the Nord Stream 2 pipeline, negotiations between the E.U., U.S. and Iran over a new
nuclear deal as well as the continuing trade war between the U.S. and China with their sanctions and subsequent counter-sanctions.
Some of these jurisdictions, such as China, may be significant businesses for us. As a result, we cannot predict the impacts of any
changes in the U.S., E.U., U.K. or other sanctions, and whether such changes could have a material adverse impact on our operations
or financial results.
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 revenue is affected by statutory or regulatory changes. An example of a statutory or regulatory change that
could materially impact us is any change to the U.S. 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 fundamentally amending Healthcare Reform (other than changes to the individual mandate),
such legislation, or another version of Healthcare Reform, could be implemented in the future. In addition, some U.S. political
candidates and representatives elected to office have expressed a desire to amend all or a portion of Healthcare Reform or otherwise
establish alternatives to employer-sponsored health insurance or replace it with government-sponsored health insurance, often referred
to as ‘Medicare for All’. If we are unable to adapt our services to potential new laws and regulations, or judicial modifications, with
respect to Healthcare Reform or otherwise, our ability to provide effective services in these areas may be substantially impacted. In
addition, more restrictive marketing rules or interpretations of the Centers for Medicare and Medicaid Services, or judicial decisions
that restrict or otherwise change existing provisions of U.S. healthcare regulation, could have a material adverse impact on our
healthcare-related businesses. In addition, as we implement and expand our direct-to-consumer sales and marketing solutions, we are
subject to various federal and state laws and regulations that prescribe when and how we may market to consumers (including, without
limitation, the Telephone Consumer Protection Act and other telemarketing laws and the Medicare Communications and Marketing
Guidelines issued by the Center for Medicare Services (‘CMS’) of the U.S. Department of Health and Human Service). Federal and
state legislators and/or regulators recently have expressed concerns about existing methods of marketing individual health policies,
particularly Medicare Advantage and Medicare Supplement policies, and CMS has recently expanded its regulation and oversight of
the marketing of Medicare Advantage policies. Changes to these laws and/or regulations could negatively affect our ability to market
directly to consumers or increase our costs or liabilities.
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Many other 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,
our various 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 and companies 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,
antitrust and competition laws, economic and trade sanctions laws relating to countries in which certain subsidiaries do business or
may do business (‘Sanctioned Jurisdictions’) such as Crimea, Cuba, Iran, Russia, Sudan, Syria and Venezuela, anti-corruption laws
such as the FCPA, 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, cyber security and telemarketing. 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 decentralized, we cannot assure that acquired or decentralized entities’ business systems and controls have
prevented or will prevent any and all violations of applicable laws or regulations.
Allegations of conflicts of interest or anti-competitive behavior, 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.
The ways in which insurance intermediaries are compensated receive scrutiny from regulators in part because of the potential for anti-
competitive behavior and conflicts of interest. We could suffer significant financial or reputational harm if we fail to properly identify
and manage any such potential conflicts of interest or allegations of anti-competitive behavior. Conflicts of interest exist or could exist
any time the Company or any of its employees have 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 could then 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.
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Identifying conflicts of interest may also prove particularly difficult as we continue to bring systems and information together and
integrate newly acquired businesses. In addition, 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, conduct 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 offers affiliated investment funds, with plans to launch additional funds over time. Given that our
Investments 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.
The failure or perceived failure to adequately address actual or potential conflicts of interest or allegations of anti-competitive
behavior could affect the willingness of clients to deal with us or give rise to litigation or enforcement actions. Conflicts of interest or
anti-competitive activities may also arise in the future that could cause material harm to us.
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 provisions have changed and will continue to change the industry in which we operate in
substantial ways. Any changes to the roles of the private and public sectors in the health insurance system could also substantially
change the industry.
Healthcare legislation and changes to government-funded healthcare programs remain a focus in Congress, while various aspects of
Healthcare Reform have been challenged in the judicial system with some success. Any partial or complete repeal or amendment,
judicial modifications or implementation difficulties, or uncertainty regarding such events, could increase our costs of compliance,
prevent or delay future adoption or revisions to our business, and adversely impact our results of operations and financial condition. In
addition, other members of Congress and certain state governments have expressed a desire to establish alternatives to employer-
sponsored health insurance or replace it with government-sponsored health insurance, often referred to as ‘Medicare for All’. Given
the uncertainties relating to the potential repeal and replacement of Healthcare Reform or other alternative proposals related to health
insurance plans, the impact is difficult to determine, but it could have material negative effects on us, including:
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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, 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
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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, especially through our Individual
Marketplace business, which focuses on direct-to-consumer Medicare policy sales. Further, changes in customer demand for these
Medicare policies, particularly differences in customer persistency and renewals from what we have currently assumed, could cause us
to write down receivable assets we have booked. 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.
Increasing scrutiny and changing expectations from investors, clients and our colleagues with respect to our environmental, social
and governance (‘ESG’) practices may impose additional costs on us or expose us to reputational or other risks.
There is increased focus, including from governmental organizations, investors, colleagues and clients, on ESG issues such as
environmental stewardship, climate change, diversity and inclusion, racial justice and workplace conduct. Negative public perception,
adverse publicity or negative comments in social media and other forums could damage our reputation if we do not, or are not
perceived to, adequately address any one or more of these issues. Any harm to our reputation could impact colleague engagement and
retention and the willingness of clients and others to do business with us.
Investors, in particular, have increased their emphasis on the ESG practices of companies across all industries, including with respect
to climate and human capital management. Certain investors have developed their own ESG ratings while others use third-party
benchmarks or scores to measure a company’s ESG practices and make investment decisions or otherwise engage with the company
to influence its practices in these areas. Additionally, our clients may evaluate our ESG practices and/or request that we adopt certain
ESG policies in order to work with us. Also, organizations that provide ratings information to certain investors on ESG matters may
assign unfavorable ratings to the Company, which may lead to negative investor sentiment and the diversion of investment capital to
other companies or industries, which could have a negative impact on our stock price and our costs of capital.
New government regulations could also result in new or more stringent forms of ESG oversight and new mandatory and voluntary
reporting, diligence and disclosure. As we work to align with the recommendations of the Financial Stability Board’s Task Force on
Climate-related Financial Disclosures, the Sustainability Accounting Standards Board, changes to applicable regulatory requirements,
and our own ESG assessments and priorities, we may disclose additional metrics against which we may measure ourselves or be
measured and tracked by others over time. Our failure to meet expectations or metrics, whether expectations or metrics set by us or by
investors or other stakeholders, or to any other failure to make progress in this area on a timely basis, or at all, may negatively impact
our reputation and our business.
The United Kingdom’s exit from the European Union, which occurred on January 31, 2020, and the risk that other countries may
follow, could adversely affect us.
In 2022, approximately 18% of our revenue from continuing operations was generated in the U.K., although only about 11% of
revenue from continuing operations was denominated in Pounds sterling as much of the insurance business is transacted in U.S.
dollars or other currencies. Approximately 17% of our expenses from continuing operations were denominated in Pounds sterling. It
remains difficult to predict with any level of certainty the impact that Brexit will have on the economy; economic, regulatory and
political stability; and market conditions in Europe, including in the U.K., or on the 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 by businesses holding off on generating new projects or due
to adverse market conditions; and reduced reported revenue 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.
On December 24, 2020, the E.U. and the U.K. agreed to the terms of a Trade and Cooperation Agreement (the ‘TCA’) that reflects
certain matters agreed upon between the parties in relation to a broad range of separation issues, which provisionally applied as of
January 1, 2021, and entered into force on May 1, 2021. While many separation issues have been resolved, some uncertainty remains
in relation to the future regulation of financial services, among other matters. The TCA addresses issues related to financial services
on a limited basis. The E.U. and the U.K have separately agreed to a Memorandum of Understanding to establish a framework for
future regulatory cooperation. The British government and the E.U. will therefore continue over time to negotiate certain terms of the
U.K.’s future relationship with the E.U. that are not addressed in the TCA. The Company is heavily invested in the U.K. through our
businesses and activities. If the outcomes of Brexit and the TCA negatively impact the U.K., then it could have a material adverse
impact on us.
Brexit has resulted in greater restrictions on business conducted between the U.K. and E.U. countries and has increased regulatory
complexities. Uncertainty remains as to how changes to the U.K.’s access to the E.U. Single Market and the wider trading, legal,
regulatory, tax, social and labor environments, especially in the U.K. and E.U., will be impacted over time, including the resulting
impacts on our business and that of our clients. For example, the loss of pre-Brexit passporting rights or regulatory limitations on the
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ability to conduct business in various E.U. countries by relying on a regulatory permission in the U.K. (or, conversely, doing business
in the U.K. by relying on a regulatory permission in an E.U. country) may increase our costs of doing business or our ability to
conduct business in impacted jurisdictions. These Brexit-related changes may adversely affect our operations and financial results.
We believe we have implemented appropriate arrangements for the continued servicing of client business in the countries most
affected. These arrangements include the transaction of certain businesses and/or the movement of certain businesses outside of the
U.K. However, various significant risks remain in relation to the effects of the post-Brexit arrangements between the E.U. and U.K.
some of which have yet to be agreed upon, including the following, among others:
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the risk that our implemented business solutions could cost more than expected, or that regulators in the U.K. or E.U may
issue amended guidance or regulations in relation to those solutions (including any amended E.U. regulatory guidance in
connection with the use of third-country branches of E.U.-domiciled insurance intermediary entities, whether following
supervisory statements such as that issued by European Insurance and Occupational Pensions Authority (‘EIOPA’) on
February 3, 2023 or otherwise) or that we fail to gain regulatory authorizations which could affect our business, operations or
strategic plans;
the risk that we may require further changes to client contract terms and have to address additional regulatory requirements,
including with respect to data protection and privacy standards;
the risk over time of a loss of key talent, or an inability to hire sufficient and qualified talent, or the disruption to client
servicing as a result of equivalence not being granted on qualifications or qualification requirements themselves being
changed, or a need to relocate talent or roles or both between or within the E.U. and the U.K. as the regulatory and business
environment changes following Brexit;
the risk that the efforts and resources allocated to the post-Brexit evolution of regulations and laws, and associated changes to
our operations, cause disruptions to our existing businesses, whether inside or outside the U.K., or both;
the risk that the business solutions implemented by our market counterparties change as the U.K.-E.U. regulatory
environment evolves in a way that necessitates further alterations to our business models, with the risks described above;
the risk that the U.K. will continue to have in place a limited number of trade agreements with the E.U. member states and/or
any non-E.U. states leading to potentially adverse trading conditions with other territories; and
the risk that the way in which the U.K.-E.U. regulatory and legal environment evolves differs from current expectations,
resulting in the need to quickly and materially change our plans, and the risks described above with respect to any associated
changes in such plans.
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.
Financial and Related Regulatory Risks
We have material pension liabilities that can fluctuate significantly and adversely affect our financial position or net income or
result in other financial impacts.
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. 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 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.
WTW had total consolidated debt outstanding of approximately $4.7 billion as of December 31, 2022, and our interest expense was
$208 million for the year ended December 31, 2022.
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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 level of indebtedness may:
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require us to dedicate a significant portion of our cash flow 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;
limit our flexibility in 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 or a cross-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 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. Also, we could be at risk to rising interest rates in the future to the
extent that we borrow at floating rates under our existing borrowing agreements or refinance existing debt at higher rates. 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. Real or anticipated changes in our credit ratings will generally affect any
trading market for, or trading value of, our securities. Such changes could result from any number of factors, including the
modification by a credit rating agency of the criteria or methodology it applies to particular issuers, a change in the agency’s view of
us or our industry, or as a consequence of actions we take to implement our corporate strategies. If we need to raise capital in the
future, any credit rating downgrade could negatively affect our financing costs or access to financing sources. A change in our credit
rating could also adversely impact our competitive position.
In addition, under the indentures for our 4.625% senior notes due 2023, our 3.600% senior notes due 2024, our 4.400% senior notes
due 2026, our 4.650% senior notes due 2027, our 4.500% senior notes due 2028, our 2.950% senior notes due 2029, our 6.125%
senior notes due 2043, our 5.050% senior notes due 2048, and our 3.875% senior notes due 2049, 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.
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; adverse or unexpected impacts of fiscal and monetary policies of
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.
We report our operating results and financial condition in U.S. dollars. Our U.S. operations earn revenue and incur expenses primarily
in U.S. dollars. In our London market operations however, we earn revenue in a number of different currencies, but expenses are
35
almost entirely incurred in Pounds sterling. Outside of the U.S. and our London market operations, we predominantly generate
revenue 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 revenue and expenses, together with any net Pounds 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 reduce 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 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.
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 revenue 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 consolidated balance sheet as a result of acquisitions we have completed.
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.
Our quarterly revenue and cash flow could fluctuate, including as a result of factors outside of our control, while our expenses
may remain relatively fixed or be higher than expected.
Quarterly variations in our revenue, cash flow 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; our ability to enhance our billing, collection and working capital
management efforts; differences in timing of renewals; non-recurring revenue from disposals and book-of-business sales; and general
economic conditions.
We derive significant revenue 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
revenue and can have a material adverse impact on our commission revenue 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. Because we do not
determine the timing or extent of premium pricing changes, it is difficult to accurately forecast our commission revenue, including
whether they will significantly decline. As a result, we may have to adjust our plans for future acquisitions, capital expenditures,
dividend payments, loan repayments and other expenditures to account for unexpected changes in revenue, and any decreases in
premium rates may adversely affect the results of our operations.
In addition to movements in premium rates, our ability to generate premium-based commission revenue may be challenged by
disintermediation and the growing availability of alternative methods for clients to meet their risk-protection needs. This trend
includes a greater willingness on the part of corporations to self-insure, the use of captive insurers, and the presence of capital
markets-based solutions for traditional insurance and reinsurance needs. Further, the profitability of our risk and broking businesses
36
depends in part on our ability to be compensated for the analytical services and other advice that we provide, including the consulting
and analytics services that we provide to insurers. If we are unable to achieve and maintain adequate billing rates for all of our
services, our margins and profitability could decline.
A sizeable portion of our total operating expenses is relatively fixed or may even be higher than expected, 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 and collection of accounts
receivable, 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.
While we have incorporated provisions for the use of successor benchmarks in our existing external and intercompany floating-
rate facilities which use the London Interbank Offered Rate (‘LIBOR’) as a reference rate, there remains uncertainty as to how
the anticipated discontinuation of LIBOR may affect the market for or pricing of any LIBOR-linked securities, loans, derivatives,
and other financial obligations which we may seek to obtain in the future.
In the recent past, concerns have been publicized regarding the calculation of LIBOR, the London interbank offered rate, which
present risks for the financial instruments that use LIBOR as a reference rate. LIBOR has been the basic rate of interest used in
lending between banks on the London interbank market and has widely been used as a reference for setting the interest rate on loans
globally. On March 5, 2021, LIBOR’s regulator, the Financial Conduct Authority, and administrator, ICE Benchmark Administration
Limited, announced that the publication of the one-week and two-month USD LIBOR maturities and non-USD LIBOR maturities will
cease immediately after December 31, 2021, with the remaining USD LIBOR maturities ceasing immediately after June 30, 2023.
In response, the Company has incorporated provisions for the use of successor benchmarks (such as the Secured Overnight Financing
Rate (‘SOFR’) in the U.S. and the Sterling Overnight Index Average (‘SONIA’) in the U.K.) where required in all of its external
borrowing facilities that provide for floating-rate borrowing, including our amended and restated $1.5 billion revolving credit facility.
Additionally, where the Company engages in floating-rate intercompany lending, we have made arrangements to benchmark the
borrowing off successor market rates to maintain arms-length pricing. While we do not expect that the transition from LIBOR and
risks related thereto will have a material adverse impact on our financing costs given the measures we have taken to install successor
benchmark provisions in our floating-rate facilities, there remains the possibility that the transition away from LIBOR could affect the
pricing of any future LIBOR-linked securities, loans, derivatives, or other financial obligations or extensions of credit which we may
seek to obtain.
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 our ordinary shares 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 cash from these subsidiaries. For
example, Willis Limited, our U.K. brokerage subsidiary regulated by the FCA, is currently required to maintain $105 million in
unencumbered and available financial resources, of which at least $66 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, our ordinary shares. 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.
Tax Risks
If a U.S. person is treated as owning at least 10% of our shares, such a holder may be subject to adverse U.S. federal income tax
consequences.
Under current U.S. federal tax law, many of our non-U.S. subsidiaries are now classified as ‘controlled foreign corporations’ (‘CFCs’)
for U.S. federal income tax purposes due to the expanded application of certain ownership attribution rules within a multinational
corporate group. If a U.S. person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power
of our shares, such a person may be treated as a U.S. shareholder with respect to one or more of our CFC subsidiaries. In addition, if
our shares are treated as owned more than 50% by U.S. shareholders, we would be treated as a CFC. A U.S. shareholder of a CFC
may be required to annually report and include in its U.S. taxable income, as ordinary income, its pro-rata share of Subpart F income,
global intangible low-taxed income, and investments in U.S. property by CFCs, whether or not we make any distributions to such U.S.
shareholder. An individual U.S. shareholder generally would not be allowed certain tax deductions or foreign tax credits that would be
allowed to a corporate U.S. shareholder with respect to a CFC. A failure by a U.S. shareholder to comply with its reporting obligations
may subject the U.S. shareholder to significant monetary penalties and may extend the statute of limitations with respect to the U.S.
37
shareholder’s U.S. federal income tax return for the year for which such reporting was due. We cannot provide any assurances that we
will assist investors in determining whether we or any of our non-U.S. subsidiaries are CFCs or whether any investor is a U.S.
shareholder with respect to any such CFCs. We also cannot guarantee that we will furnish to U.S. shareholders any or all of the
information that may be necessary for them to comply with the aforementioned obligations. U.S. investors should consult their own
advisors regarding the potential application of these rules to their investments in us.
Legislative or regulatory action or developments in case law in the U.S. or elsewhere could have a material adverse impact on our
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 laws and policies of the jurisdictions where we operate. Our actual effective tax rate may vary from expectations,
and that variance may be material.
The tax laws of Ireland and other jurisdictions could change in the future. There may be an enactment of additional, or the revision of
existing, state, federal and/or non-U.S. regulatory and tax laws, and/or a development of case law, regulations and policy changes in
the jurisdictions in which we operate. Any such changes could cause a material change in our effective tax rate.
Further, it is possible that taxing authorities may propose significant changes, which, if ultimately executed, 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
Ireland, the U.S. or other territories impose on our worldwide operations.
Such new legislation (or changes to existing legislation or interpretation thereof) 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.
Relatedly, 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. or other territories, we could incur additional tax expense and/or otherwise experience business detriment.
For example, in August 2022, the U.S. enacted the Inflation Reduction Act of 2022 (‘IRA’), which, among other effects, creates a new
corporate alternative minimum tax of at least 15% on consolidated GAAP pre-tax income for corporations with average book income
in excess of $1 billion. The book minimum tax will first apply to us in 2023, although we do not expect the IRA to have a material
impact on our effective tax rate.
In addition, the U.S. Congress, the Organization for Economic Co-operation and Development (‘OECD’), the World Trade
Organization and other government agencies in non-U.S. 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. Several
jurisdictions have enacted legislation that is aligned with, and in some cases exceeds the scope of, the recommendations in the
OECD’s 2015 reports addressing 15 specific actions as part of a comprehensive plan to create an agreed set of international rules for
fighting base erosion and profit shifting.
Finally, on October 8, 2021, the OECD announced an international agreement with more than 130 countries to implement a two-pillar
solution to address tax challenges arising from digitalization of the economy. The agreement introduced rules that would result in the
reallocation of certain taxing rights from multinational companies from their home countries to the markets where they have business
activities and earn profits, regardless of physical presence (‘Pillar One’) and introduced a global corporate minimum tax of 15% for
certain large multinational companies starting in 2023 (‘Pillar Two’). Significant progress has been made on implementation of Pillar
Two, with the Model Rules for implementation being released in December 2021 and related commentary in March 2022. On
December 12, 2022, E.U. member states reached an agreement to implement Pillar Two which requires E.U. member states to enact
domestic legislation by the end of 2023.
These changes, when enacted by various countries in which we do business, could increase uncertainty and may adversely affect our
tax rate and cash flow in future years.
Risks Related to Being an Irish-Incorporated Company
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.
38
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.
As an Irish public limited company, certain decisions related to our capital structure will require the approval of shareholders,
which may limit our flexibility to manage our capital structure.
Irish law generally provides that a board of directors may allot and issue shares (or rights to subscribe for or convert into shares) if
authorized to do so by a company’s constitution or by an ordinary resolution of shareholders. Such authorization may be granted in
respect of up to the entirety of a company’s authorized but unissued share capital and for a maximum period of five years, at which
point it must be renewed by another ordinary resolution. The Company’s constitution authorizes our directors to allot shares up to the
maximum of the Company’s authorized but unissued share capital for a period of five years. This authorization will need to be
renewed by ordinary resolution upon its expiration and at periodic intervals thereafter. Under Irish law, an allotment authority may be
given for up to five years at each renewal, but governance considerations may result in renewals for shorter periods or in respect of
less than the maximum permitted number of shares being sought or approved.
Additionally, under Irish law, we may only pay dividends and, generally, make share repurchases and redemptions from distributable
profits. Distributable profits may be created through the earnings of the Company or other methods (including certain intragroup
reorganizations involving the capitalization of the Company’s undistributable profits and their subsequent reduction). While it is our
intention to maintain a sufficient level of distributable profits in order to pay dividends on our ordinary shares and make share
repurchases, there is no assurance that the Company will maintain the necessary level of distributable profits to do so.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We operate offices in many countries 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. In addition, we
have other offices in various locations, including among others, Europe, Asia, Australia and Latin America. 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.
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 15 — Commitments and
Contingencies, within Item 8 in this Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
39
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Share Data
Our ordinary shares trade on the NASDAQ Global Select Market under the symbol ‘WTW’ as of January 10, 2022. Our ordinary
shares previously traded under the symbol ‘WLTW’ starting on January 5, 2016. As of February 16, 2023, there were 1,079
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. In
February 2023, the board of directors approved a quarterly cash dividend of $0.84 per share ($3.36 per share annualized rate), which
will be paid on or around April 17, 2023 to shareholders of record as of March 31, 2023.
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 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.
40
Performance Graph
Comparison of Five-Year Cumulative Total Shareholder Return
The graph below depicts cumulative total shareholder returns for WTW for the period from December 31, 2017 through December 31,
2022.
The graph also depicts the total return for the S&P 500 and for a peer group for WTW comprised of Aon plc, Arthur J. Gallagher &
Co., Automatic Data Processing, Inc., Booz Allen Hamilton Holding Corporation, Cognizant Technology Solutions Corporation,
Conduent Incorporated, Fidelity National Financial, Inc., Fidelity National Information Services, Inc., First American Financial
Corporation, Fiserv, Inc., Marsh & McLennan Companies, Inc., Principal Financial Group, Inc., Robert Half International Inc., S&P
Global Inc., The Hartford Financial Services Group, Inc., and Unum Group. The graph charts the performance of $100 invested on the
initial date indicated, December 31, 2017, assuming full dividend reinvestment.
Comparison of Cumulative Total Return Among
Willis Towers Watson, S&P 500, and a Peer Group
$200
$150
$100
$50
12/31/17
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
Willis Towers Watson
S&P 500 Index
Peer Group
Unregistered Sales of Equity Securities and Use of Proceeds
During the year ended December 31, 2022, 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. Since April 20, 2016, when the WTW board reconfirmed, reapproved and reauthorized
the remaining $529 million portion of the Legacy Willis program to repurchase the Company’s ordinary shares on the open market or
by way of redemption or otherwise, the following additional authorizations have occurred:
• November 10, 2016 — the Company announced that the board of directors approved an additional authorization of $1.0
billion.
•
•
February 23, 2018 — the Company announced that the board of directors approved an additional authorization of $400
million.
February 26, 2020 — the Company announced that the board of directors approved an additional authorization of $251
million.
41
•
•
July 26, 2021 — the Company announced that the board of directors approved an additional authorization of $1.0 billion.
September 16, 2021 — the Company announced that the board of directors approved an additional authorization of $4.0
billion.
• May 25, 2022 — the Company announced that the board of directors approved an additional authorization of $1.0 billion.
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, 2022 through October 31, 2022
November 1, 2022 through November 30, 2022
December 1, 2022 through December 31, 2022
Total number of
shares purchased
617,691
671,294
647,247
1,936,232
Average price
paid per share
207.67
$
229.41
$
244.08
$
227.38
$
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
617,691
671,294
647,247
1,936,232
6,808,160
6,136,866
5,489,619
At December 31, 2022, the maximum number of shares that may be purchased under the existing stock repurchase program is
5,489,619, with approximately $1.3 billion remaining on the current open-ended repurchase authority granted by the board. An
estimate of the maximum number of shares under the existing authorities was determined using the closing price of our ordinary
shares on December 31, 2022 of $244.58.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information, as of December 31, 2022, about the securities authorized for issuance under the Company’s
equity compensation plans and is categorized according to whether or not the equity plan was previously approved by shareholders.
Plan Category
Equity Compensation Plans
Approved by Security Holders (ii)
Equity Compensation Plans Not
Approved by Security Holders (iv)
Total
Number of Shares to be Issued
Upon Exercise of Outstanding
Options, Warrants and Rights
Weighted Average Exercise Price
of Outstanding Options,
Warrants and Rights (i)
Number of Shares Remaining
Available for Future Issuance (iii)
994,516
207
994,723
$116.27
—
$116.27
4,769,269
—
4,769,269
(i)
(ii)
(iii)
(iv)
The weighted-average exercise price set forth in this column is calculated excluding restricted stock units (‘RSUs’) or other awards for which recipients are not
required to pay an exercise price to receive the shares subject to the awards. The $116.27 is related to time-based options.
Includes options and RSUs outstanding under the Towers Watson & Co. 2009 Long-Term Incentive Plan and the 2012 Equity Incentive Plan (‘2012 Plan’). The
Company intends to only grant future awards under the 2012 Plan.
Represents shares available for issuance pursuant to awards that may be granted under the 2012 Plan (3,711,668 shares) and the 2010 North American Employee
Stock Purchase Plan (1,057,601 shares).
Includes incentive stock options outstanding under the Extend Health, Inc. 2007 Equity Incentive Plan and the Liazon Corporation 2011 Equity Incentive Plan. The
Company does not plan to grant future awards under these plans.
42
ITEM 6. [Reserved]
43
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 Part I, Item 1A Risk Factors 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 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, 2022.
See ‘Non-GAAP Financial Measures’ below for further discussion of our adjusted, constant currency and organic non-GAAP
financial measures.
Executive Overview
Market Conditions
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.
Within our insurance and brokerage business, due to the cyclical nature of the insurance market and the impact of other market
conditions on insurance premiums, commission revenue 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 revenue and
can have a material adverse impact on our revenue and operating margin. A ‘hard’ or ‘firming’ market, during which premium rates
rise, generally has a favorable impact on our revenue and operating margin. Rates, however, vary by geography, industry and client
segment. As a result, and due to the global and diverse nature of our business, we view rates in the aggregate. Overall, we are
currently seeing a modest but definite increase in pricing in the market.
Market conditions in the broking industry in which we operate 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.
The markets for our consulting, technology and solutions, and marketplace services are affected by economic, regulatory and
legislative changes, technological developments, and increased competition from established and new competitors. We believe that 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. In that regard, we are focused on developing and implementing technology, data and analytic solutions for both
internal operations and for maintaining industry standards and meeting client preferences. We have made such investments from time
to time and may decide, based on perceived business needs, to make investments in the future that may be different from past practice
or what we currently anticipate.
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. In recent years, growth in the market for exchanges has
slowed, and this trend may continue.
From time to time, including but not limited to the period after the announcement of the proposed Aon plc (‘Aon’) combination
through the period that has followed the termination of the proposed combination, we have lost (and may in the future continue to
lose) colleagues who manage substantial client relationships or possess substantial experience or expertise; when we lose colleagues
such as those, it often results in such colleagues competing against us. Further, the full impact of this competition may be delayed due
to the timing of restrictive covenants or client renewals. We believe that this dynamic, which was most pronounced in our Risk &
44
Broking segment during 2021, has caused the segment’s growth rate for 2022 to be meaningfully slower than other competitors. This
dynamic may be difficult to predict, given that the adverse impact in future periods is more significant than in the periods in which
employees departed. It is possible that growth could be different than expected and our results of operations could be significantly and
adversely impacted by this factor going into 2023.
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.
Outlook Following Russia Divestiture
In the third quarter of 2022, we completed the transfer of ownership of our Russian subsidiaries to local management and, given
current conditions, do not anticipate resuming operations in Russia within the foreseeable future. The Russian entities were primarily
within our Risk & Broking segment. We have estimated that the annualized run-rate impact from the divestiture of our Russian
operations is approximately $120 million of revenue. Additionally, the Russian business was highly profitable, with operating margins
in excess of double the enterprise-level margins. Because we did not receive significant proceeds in connection with the divestiture
with which to reinvest in the business, the lost profits will adversely impact earnings, margins and cash flow. For additional
information about the risks relating to lost profits following the divestiture of our Russian subsidiaries see Part I, Item 1A Risk Factors
– ‘Our business, financial condition, results of operations, and long-term goals may continue to be adversely affected, possibly
materially, by negative impacts on the global economy and capital markets resulting from the war between Russia and Ukraine or any
other geopolitical tensions’.
Transformation Program
In the fourth quarter of 2021, we initiated a three-year ‘Transformation program’ designed to enhance operations, optimize technology
and align our real estate footprint to our new ways of working. During the third quarter of 2022, we revised the expected costs and
savings under the program and we now expect the program to generate annual cost savings in excess of $360 million by the end of
2024. The program is expected to incur cumulative costs of $630 million and capital expenditures of approximately $270 million, for a
total investment of $900 million. The main categories of charges will be in the following four areas:
•
•
•
Real estate rationalization — includes costs to align the real estate footprint to our new ways of working (hybrid work) and
includes breakage fees and the impairment of right-of-use assets and other related leasehold assets.
Technology modernization — these charges are incurred in moving to common platforms and technologies, including
migrating certain platforms and applications to the cloud. This category will include the impairment of technology assets that
are duplicative or no longer revenue-producing, as well as costs for technology investments that do not qualify for
capitalization.
Process optimization — these costs will be incurred in the right-shoring strategy and automation of our operations, which
will include optimizing resource deployment and appropriate colleague alignment. These costs will include process and
organizational design costs, severance and separation-related costs and temporary retention costs.
• Other — other costs not included above including fees for professional services, other contract terminations not related to the
above categories and supplier migration costs.
Certain costs under the Transformation program are accounted for under ASC 420, Exit or Disposal Cost Obligation, and are included
as restructuring costs in the consolidated statements of comprehensive income. For the years ended December 31, 2022 and 2021,
restructuring charges under our Transformation program totaled $99 million and $26 million, respectively. Other costs incurred under
the Transformation program are included in transaction and transformation, net and were $136 million for the year ended December
31, 2022. From the actions taken during 2022, we have identified an additional $129 million of annualized run-rate savings during the
year due to newly-realized opportunities and incremental sources of value, and $149 million of cumulative annualized run-rate savings
identified to date since the inception of the program, which savings overall are primarily attributable to the reduction of real estate and
technology costs, as well as process optimization. The benefits from the program began to be recognized during 2022.
For a discussion of some of the risks associated with the Transformation program, please see Part I, Item 1A Risk Factors - ‘We may
not be able to fully realize the anticipated benefits of our growth strategy’ and other Risk Factors in this Annual Report on Form 10-K.
45
Financial Statement Overview
For management’s discussion of our results of operations for the year ended December 31, 2021 in comparison with the year ended
December 31, 2020, please see our Annual Report on Form 10-K filed with the SEC on February 24, 2022.
The tables below set forth our summarized consolidated statements of comprehensive income and data as a percentage of revenue for
the periods indicated.
Consolidated Statements of Comprehensive Income
($ in millions, except per share data)
Revenue
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and transformation, net
Total costs of providing services
Income from operations
Interest expense
Other income, net
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
Provision for income taxes
INCOME FROM CONTINUING OPERATIONS
(LOSS)/INCOME FROM DISCONTINUED OPERATIONS,
NET OF TAX
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WTW
Diluted earnings per share from continuing operations
Consolidated Revenue (Continuing Operations)
Years ended December 31,
2022
2021
$
8,866
100% $
8,998
100%
5,065
1,776
255
312
99
181
7,688
1,178
(208)
288
1,258
(194)
1,064
(40)
(15)
1,009
9.34
$
$
57%
20%
3%
4%
1%
2%
13%
(2)%
3%
14%
(2)%
12%
—%
—%
11% $
$
5,253
1,673
281
369
26
(806)
6,796
2,202
(211)
701
2,692
(536)
2,156
2,080
(14)
4,222
16.63
58%
19%
3%
4%
—%
(9)%
24%
(2)%
8%
30%
(6)%
24%
23%
—%
47%
We derive the majority of our revenue from commissions from our brokerage services and fees for consulting and administration
services. No single client represented a significant concentration of our consolidated revenue for any of our three most recent fiscal
years.
The following table details our top five markets based on percentage of consolidated revenue (in U.S. dollars) from the countries
where work was performed for the year ended December 31, 2022. These figures do not represent the currency of the related revenue,
which is presented in the next table.
Geographic Region
United States
United Kingdom
France
Canada
Germany
% of Revenue
54%
18%
4%
3%
3%
46
The table below details the approximate percentage of our revenue and expenses from continuing operations by transactional currency
for the year ended December 31, 2022.
Transactional Currency
U.S. dollars
Pounds sterling
Euro
Other currencies
Revenue
Expenses (i)
60%
11%
14%
15%
55%
17%
12%
16%
(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 amortization of intangible assets and transaction and transformation, net.
The following table sets forth the total revenue for the years ended December 31, 2022 and 2021 and the components of the change in
total revenue for the year ended December 31, 2022, as compared to the prior year. The components of the revenue change may not
add due to rounding.
Revenue
$
Years Ended December 31,
2021
2022
($ in millions)
8,866
$
As
Reported
Change
Less:
Currency
Impact
Components of Revenue Change
Constant
Currency
Change
Less:
Acquisitions/
Divestitures
Organic
Change
8,998
(1)%
(4)%
2%
(1)%
4%
Revenue for the year ended December 31, 2022 was $8.9 billion, compared to $9.0 billion for the year ended December 31, 2021, a
decrease of $132 million, or 1%, on an as-reported basis. This decrease was primarily driven by unfavorable foreign currency
exchange movement. Adjusting for the impact of foreign currency and acquisitions and disposals, our organic revenue growth was 4%
for the year ended December 31, 2022. The increase in organic revenue was driven by both segments.
Our revenue 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, 2022, currency translation decreased our consolidated revenue by $335 million. The
primary currencies driving these changes were the Euro and 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.
Segment Revenue
For further information on our segment reorganization and a full description of our businesses, please see Part I, Item 1, ‘Business –
Segment Reorganization’ elsewhere within this Annual Report on Form 10-K. Due to the reorganization of our segments in 2022,
prior-year segment information has been retrospectively adjusted to conform to the current-year presentation.
Segment revenue excludes amounts that were directly incurred on behalf of our clients and reimbursed by them (reimbursed
expenses); however, these amounts are included in consolidated revenue, as permitted by applicable accounting standards and SEC
rules. See Note 5 – Segment Information within Item 8 of this Annual Report on Form 10-K for more information about how our
segment revenue is calculated and a reconciliation to our GAAP results.
The Company experiences seasonal fluctuations in its revenue. Revenue is typically higher during the Company’s first and fourth
quarters due primarily to the timing of broking-related activities.
For all tables presented below, the components of the revenue change may not add due to rounding.
Health, Wealth & Career (‘HWC’)
The HWC segment provides an array of advice, broking, solutions and technology for employee benefit plans, institutional investors,
compensation and career programs, and the employee experience overall.
HWC is the larger of the two segments of the Company, generating approximately 60% of our segment revenue for the year ended
December 31, 2022. Addressing four key areas, Health, Wealth, Career and Benefits Delivery & Outsourcing, the segment is focused
on addressing our clients’ people and risk needs to help them succeed in a global marketplace.
47
The following table sets forth HWC segment revenue for the years ended December 31, 2022 and 2021, and the components of the
change in revenue for the year ended December 31, 2022 from the year ended December 31, 2021.
Segment revenue
$
Years Ended December 31,
2021
2022
($ in millions)
5,287
$
As
Reported
Change
Less:
Currency
Impact
Components of Revenue Change
Constant
Currency
Change
Less:
Acquisitions/
Divestitures
Organic
Change
5,268
—%
(3)%
4%
—%
3%
HWC segment revenue for both the years ended December 31, 2022 and 2021 was $5.3 billion. Organic growth was led by the
Benefits Delivery & Outsourcing business driven by Medicare Advantage sales and its expanded client base. The Health business’
revenue grew from improved retention and expansion of our client portfolio. Career also contributed strong growth, driven by demand
for our advisory services, survey offerings, compensation benchmarking products and project activity. Year-over-year organic growth
in our Wealth businesses was flat, with increases from higher project activity across all regions, primarily related to financial market
volatility and higher levels of regulatory work in Great Britain, offset by declines in our Investments business due to headwinds from
the negative impact of capital market performance and performance fees received in the prior year.
The following table sets forth HWC segment revenue for the years ended December 31, 2021 and 2020, and the components of the
change in revenue for the year ended December 31, 2021 from the year ended December 31, 2020.
Segment revenue
$
Years Ended December 31,
2020
2021
($ in millions)
5,268
$
As
Reported
Change
Less:
Currency
Impact
Components of Revenue Change
Constant
Currency
Change
Less:
Acquisitions/
Divestitures
Organic
Change
4,895
8%
2%
6%
—%
6%
HWC segment revenue for the years ended December 31, 2021 and 2020 was $5.3 billion and $4.9 billion, respectively. On both an
as-reported and organic basis, Benefits Delivery & Administration was led by Individual Marketplace, primarily by TRANZACT,
which had strong growth in Medicare Advantage sales. Career revenue growth was driven by strong market demand for rewards
advisory work and talent and compensation products. Wealth revenue increased with notable growth in Europe, driven by funding
advice and Guaranteed Minimum Pension equalization work, along with advisory-related fees in our Investments business. Health
revenue grew from increased consulting work and a gain recorded in connection with a book-of-business settlement in North America,
alongside continued expansion of our local portfolios and global benefits management appointments outside of North America.
Benefits Delivery & Outsourcing revenue increased primarily due to new project and client activity in Europe and in North America,
driven by an expanded client base and project work stemming from temporary federal policy changes affecting group healthcare plans.
Risk & Broking (‘R&B’)
The R&B segment provides a broad range of risk advice, insurance brokerage and consulting services to clients worldwide ranging
from small businesses to multinational corporations.
R&B generated approximately 40% of our segment revenue for the year ended December 31, 2022. The segment comprises two
primary businesses - Corporate Risk & Broking and Insurance Consulting and Technology.
The following table sets forth R&B segment revenue for the years ended December 31, 2022 and 2021, and the components of the
change in revenue for the year ended December 31, 2022 from the year ended December 31, 2021.
Segment revenue
$
Years Ended December 31,
2021
2022
($ in millions)
3,460
$
As
Reported
Change
Less:
Currency
Impact
Components of Revenue Change
Constant
Currency
Change
Less:
Acquisitions/
Divestitures
Organic
Change
3,564
(3)%
(5)%
2%
(2)%
3%
R&B segment revenue for the years ended December 31, 2022 and 2021 was $3.5 billion and $3.6 billion, respectively. This decrease
on an as-reported basis was primarily driven by unfavorable foreign currency exchange movement. On an organic basis, CRB’s
revenue grew across all regions, driven by our global lines of business, primarily Aerospace and Construction. ICT’s organic revenue
grew from increased software sales and advisory work.
48
The following table sets forth R&B segment revenue for the years ended December 31, 2021 and 2020, and the components of the
change in revenue for the year ended December 31, 2021 from the year ended December 31, 2020.
Segment revenue
$
Years Ended December 31,
2020
2021
($ in millions)
3,564
$
As
Reported
Change
Less:
Currency
Impact
Components of Revenue Change
Constant
Currency
Change
Less:
Acquisitions/
Divestitures
Organic
Change
3,316
7%
2%
5%
—%
5%
R&B segment revenue for the years ended December 31, 2021 and 2020 was $3.6 billion and $3.3 billion, respectively. On both an as-
reported and organic basis, CRB North America led the segment with gains recorded in connection with book-of-business sales and
settlements alongside strong renewals, primarily in FINEX, Marine, Aerospace and Construction. CRB International revenue
increased with new business generation, primarily in the FINEX and Construction insurance lines. Advisory-related fees led the
revenue growth in Insurance Consulting and Technology. CRB Revenue in Europe was down due to challenges related to senior staff
departures.
Costs of Providing Services (Continuing Operations)
Total costs of providing services for the year ended December 31, 2022 were $7.7 billion, compared to $6.8 billion for the year ended
December 31, 2021, an increase of $892 million, or 13%. This increase was primarily due to the $1 billion income receipt related to
the termination of our then-proposed Aon transaction, which was received during the third quarter of 2021 and partially offset total
costs in that year. See the following discussion for further details.
Salaries and Benefits
Salaries and benefits for the year ended December 31, 2022 were $5.1 billion, compared to $5.3 billion for the year ended December
31, 2021, a decrease of $188 million, or 4%. The decrease in the current year is primarily due to lower salary expense related to our
non-U.S. workforce resulting from favorable foreign currency exchange movements and lower discretionary and incentive costs.
Overall, currency translation decreased our salaries and benefits expense by $234 million during 2022.
Salaries and benefits, as a percentage of revenue, represented 57% and 58% for the years ended December 31, 2022 and 2021,
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, travel by colleagues,
publications, professional subscriptions and development, recruitment, other professional fees and irrecoverable value-added and sales
taxes. Additionally, other operating expenses included costs historically allocated to our Willis Re business which are partially offset
by fees under a cost reimbursement Transition Services Agreement (‘TSA’; see Note 3 — Acquisitions and Divestitures within Item 8
of this Annual Report on Form 10-K) with Gallagher.
Other operating expenses for the year ended December 31, 2022 were $1.8 billion, compared to $1.7 billion for the year ended
December 31 2021, an increase of $103 million, or 6%. This increase was primarily due to asset impairments associated with our
Russian divestiture. These impairments were mostly accounts receivables derived from Russian insurance contracts placed by U.K.
brokers in the London market (see Note 3 — Acquisitions and Divestitures within Item 8 of this Annual Report on Form 10-K).
Additionally, costs increased due to higher travel and entertainment costs as post-pandemic activity increased, local office expenses,
professional services and business insurance costs. These costs were partially offset by lower non-income-related tax expense and
occupancy costs which are the result of actions taken in our restructuring program.
Depreciation
Depreciation represents the expense incurred over the useful lives of our tangible fixed assets and internally-developed software.
Depreciation for the year ended December 31, 2022 was $255 million, compared to $281 million for the year ended December 31,
2021, a decrease of $26 million, or 9%. The year-over-year decrease was primarily due to a lower depreciable base of assets resulting
from business disposals over the last two years, a lower dollar value of assets placed in service during 2021 and favorable foreign
currency exchange movements.
49
Amortization
Amortization represents the amortization of acquired intangible assets, including acquired internally-developed software.
Amortization for the year ended December 31, 2022 was $312 million, compared to $369 million for the year ended December 31,
2021, a decrease of $57 million, or 15%. Our intangible amortization is generally more heavily weighted to the initial years of the
useful lives of the related intangibles, and therefore amortization related to intangible assets will continue to decrease over time.
Restructuring Costs
Restructuring costs for the years ended December 31, 2022 and 2021 were $99 million and $26 million, respectively. Restructuring
costs in the current year primarily related to the real estate rationalization and technology modernization components of the
Transformation program (see Transformation Program within this section and Note 6 — Restructuring Costs within Item 8 of this
Annual Report on Form 10-K). Restructuring costs in the prior year primarily related to the real estate rationalization component of
the Transformation program.
Transaction and Transformation, Net
Transaction and transformation, net for the year ended December 31, 2022 was $181 million of expenses, compared to income of
$806 million for the year ended December 31, 2021. Transaction and transformation expenses for the current year were comprised of
costs related to our Transformation program, primarily compensation costs and consulting fees, as well as legal fees and other
transaction-related costs. The income for the prior year consisted mostly of the $1 billion income receipt related to the termination of
our then-proposed combination with Aon, and was partially offset by legal and other professional fees related to this terminated
transaction.
Income from Operations
Income from operations for the year ended December 31, 2022 was $1.2 billion, compared to $2.2 billion for the year ended
December 31, 2021, a decrease of $1.0 billion. The decrease was primarily due to the prior-year $1 billion income receipt from the
termination of the then-proposed Aon transaction, which resulted in lower total costs.
Interest Expense
Interest expense for the years ended December 31, 2022 and 2021 was $208 million and $211 million, respectively. Interest expense,
which arose primarily from our senior notes, decreased by $3 million for the year ended December 31, 2022, which was primarily the
result of lower average levels of indebtedness in the current year.
Other Income, Net
Other income, net includes gains and losses on disposals of operations, pension credits or expenses that are not attributable to service
expense, interest in earnings of associates, foreign exchange gains and losses and other miscellaneous non-operating income and costs.
Other income, net for the year ended December 31, 2022 was $288 million, compared to $701 million for the year ended December
31, 2021, a decrease of $413 million. Other income, net decreased primarily due to the prior year including the net gain on disposal of
our Miller business (see Note 3 — Acquisitions and Divestitures within Item 8 of this Annual Report on Form 10-K).
Provision for Income Taxes
Provision for income taxes on continuing operations for the year ended December 31, 2022 was $194 million, compared to $536
million for the year ended December 31, 2021. The effective tax rates for the years ended December 31, 2022 and 2021 were 15.4%
and 19.9%, respectively. These effective tax rates are calculated using extended values from our consolidated statements of
comprehensive income and are therefore more precise tax rates than can be calculated from rounded values. The current-year effective
tax rate includes a $34 million tax benefit associated with amending the Company’s U.S. federal income tax returns for tax years 2019
and 2020, primarily related to the reduction of Base Erosion and Anti Abuse Tax (‘BEAT’). The prior-year effective tax rate includes
a $250 million estimated tax expense related to the income receipt associated with the termination of our then-proposed combination
with Aon, as well as a $40 million tax expense related to the remeasurement of deferred tax assets and liabilities associated with an
increase in the U.K. tax rate from 19% to 25%.
50
(Loss)/Income from Discontinued Operations, Net of Tax
The following table presents selected financial information as it relates to income from discontinued operations, net of tax:
Revenue from discontinued operations
Costs of providing services
Salaries and benefits
Other operating expenses
Amortization
Transaction and transformation, net
Total costs of providing services
Other income, net
Income from discontinued operations before income taxes
(Loss)/gain on disposal of Willis Re
Benefit from/(provision for) income tax expense
Net income (payable to)/receivable from Gallagher on Deferred Closing
(Loss)/income from discontinued operations, net of tax
Years ended December 31,
2022
2021
$
48
$
14
10
—
—
24
5
29
(65)
1
(5)
(40)
$
$
721
350
59
2
33
444
2
279
2,300
(500)
1
2,080
(Loss)/income from discontinued operations, net of tax for the years ended December 31, 2022 and 2021 was a loss of $40 million and
income of $2.1 billion, respectively. The operations of our Willis Re business were reclassified to discontinued operations upon our
entering into an agreement to sell the business during the third quarter of 2021 (see Note 3 - Acquisitions and Divestitures within Item
8 of this Annual Report on Form 10-K). Gains and losses from discontinued operations in the current year are primarily attributable to
the adjustments to the gain on disposal resulting from finalizing the value of the net assets transferred and the operations of the
deferred closing entities and run-off activity associated with the divestiture.
Net Income Attributable to WTW
Net income attributable to WTW for the year ended December 31, 2022 was $1.0 billion, compared to $4.2 billion for the year ended
December 31, 2021, a decrease of $3.2 billion, or 76%. This decrease was primarily due to lower net income from the discontinued
operations of our Willis Re business and the prior-year $1 billion income receipt related to the termination of our then-proposed
combination with Aon.
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 and any new debt offerings. These sources of liquidity will fund our short-term and long-
term obligations at December 31, 2022. Our most significant long-term obligations include mandatory debt and related interest,
operating leases and pension obligations and contributions to our qualified pension plans.
There has been significant volatility in financial markets, including occasional declines in equity markets, inflation and changes in
interest rates and reduced liquidity on a global basis. Specific to WTW, over the past few years, the COVID-19 pandemic had an
initial negative impact on discretionary work we perform for our clients, but we subsequently saw increased demand for these services
begin to return in the second quarter of 2021 and continue during 2022. Although reduced in 2020 and 2021, spending on travel and
associated expenses has increased in 2022 following the return to office for many companies which has increased in-person
interactions.
Based on our current balance sheet and cash flows, current market conditions and information available to us at this time, we believe
that WTW has access to sufficient liquidity, which includes all of the borrowing capacity available to draw against our $1.5 billion
revolving credit facility, to meet our cash needs for the next twelve months, including investments in the business for growth,
scheduled debt repayments, share repurchases and dividend payments. During the year ended December 31, 2022, we completed an
offering of $750 million aggregate principal amount of 4.650% senior notes due 2027, using the proceeds in part to repay in full our
€540 million ($582 million on the date of repayment) aggregate principal amount of 2.125% Senior Notes due 2022 ($594 million
including accrued interest), which were to mature during the second quarter of 2022. Additionally, during 2022, our board of directors
approved a $1.0 billion increase to the existing share repurchase program, and during the year ended December 31, 2022 we
repurchased $3.5 billion of shares, with remaining authorization to repurchase an additional $1.3 billion.
51
From time to time, we will consider whether to repurchase shares based on many factors, including market and economic conditions,
applicable legal requirements and other business considerations. The share repurchase program has no termination date and may be
suspended or discontinued at any time.
Before its disposal last year, Willis Re’s operating cash flows approximated its pre-tax income and any adjustments for working
capital movements (see Note 3 — Acquisitions and Divestitures in Item 8 within this Annual Report on Form 10-K). Certain costs
historically allocated to the Willis Re business are included in continuing operations and were retained following the disposal, but are
being partially offset by reimbursements through the TSA. Costs incurred to service the TSA are expected to be reduced as part of the
Company’s Transformation program as quickly as possible when the services are no longer required by Gallagher.
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.
Distributable Profits - We are required under Irish law to have available ‘distributable profits’ to make share repurchases or pay
dividends to shareholders. Distributable profits are created through the earnings of the Irish parent company and, among other
methods, through intercompany dividends or a reduction in share capital approved by the High Court of Ireland. Distributable profits
are not linked to a U.S. GAAP reported amount (e.g. retained earnings). At WTW's Annual General Meeting on June 8, 2022, its
shareholders voted in favor of a proposed capital reduction. In accordance with Part 3 of the Irish Companies Act 2014 the Parent
Company submitted an application to the High Court of Ireland to reduce its share premium account. On July 19, 2022, the High
Court of Ireland approved a reduction of the share premium account of the Parent Company of approximately $9.5 billion, with the
resulting balance being treated as realized profits of the Parent Company. The High Court of Ireland's order was registered with the
Irish Companies Registration Office and became effective on July 21, 2022.
Tax considerations - The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when it
expects that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the
investments. We continue to have certain subsidiaries whose earnings have not been deemed permanently reinvested, for which we
have been accruing estimates of the tax effects of such repatriation. Excluding these certain subsidiaries, we continue to assert that the
historical cumulative earnings for the remainder of our subsidiaries have been reinvested indefinitely and therefore do not provide
deferred taxes on these amounts. If future events, including material changes in estimates of cash, working capital, long-term
investment requirements or additional legislation, 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.
Cash and Cash Equivalents
Our cash and cash equivalents at December 31, 2022 and 2021 totaled $1.3 billion and $4.5 billion, respectively. The decrease in cash
from December 31, 2021 to December 31, 2022 was due primarily to $3.5 billion of share repurchases.
Additionally, we had all of the borrowing capacity available to draw against our $1.5 billion revolving credit facility at December 31,
2022.
Included within cash and cash equivalents at December 31, 2022 and 2021 are amounts held for regulatory capital adequacy
requirements, including $99 million and $120 million, respectively, held within our regulated U.K. entities.
52
Summarized Consolidated Cash Flows
The following table presents the summarized consolidated cash flow information for the years ended:
Net cash from/(used in):
Operating activities
Investing activities
Financing activities
(DECREASE)/INCREASE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
Effect of exchange rate changes on cash, cash equivalents and restricted cash
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF
YEAR (i)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR (i)
Years ended December 31,
2021
2022
(in millions)
$
$
$
812
(173)
(3,445)
(2,806)
(164)
7,691
4,721
$
2,061
2,570
(3,114)
1,517
(127)
6,301
7,691
(i)
The amounts of the cash, cash equivalents and restricted cash, their respective classification on the consolidated balance sheets, as well as their respective portions
of the increase or decrease in cash, cash equivalents and restricted cash for each of the periods presented, have been included in Note 21 — Supplemental
Disclosures of Cash Flow Information within Item 8 of this Annual Report on Form 10-K.
Cash Flows From Operating Activities
Cash flows from operating activities were $812 million for 2022, compared to $2.1 billion for 2021. The $812 million net cash from
operating activities for 2022 included net income of $1.0 billion, and $676 million of favorable non-cash adjustments, partially offset
by unfavorable changes in operating assets and liabilities of $888 million. The $676 million of favorable non-cash adjustments
primarily includes depreciation, amortization and non-cash lease expense. The decrease in cash flows from operating activities as
compared to the prior year was due primarily to the prior-year income receipt of $1 billion related to the termination of the then-
proposed Aon transaction, 2022 tax payments related to this income receipt, and the elimination of Willis Re cash generation
following the divestiture.
Cash flows from operating activities of $2.1 billion for 2021 included net income of $4.2 billion, partially offset by $1.7 billion of
unfavorable non-cash adjustments and by unfavorable changes in operating assets and liabilities of $449 million. The $1.7 billion of
unfavorable non-cash adjustments primarily includes the net gains on sales of operations, depreciation, amortization and non-cash
lease expense. The cash flows from operating activities for 2021 mostly included the $1 billion of income receipt related to the
termination of the proposed Aon transaction, partially offset by $383 million in tax payments primarily related to the disposal of
Willis Re and the income receipt of the termination payment, net legal settlement payments of $185 million and $250 million of
increased bonus and benefit-related payments made during the year ended December 31, 2021.
Cash Flows (Used In)/From Investing Activities
Cash flows used in investing activities for the year ended December 31, 2022 were $173 million compared to cash flows from
investing activities of $2.6 billion for the year ended December 31, 2021. The cash flows used in investing activities for the year
ended December 31, 2022 consisted of capital expenditures and capitalized software additions of $204 million and net cash outflows
for acquisitions and divestitures of $169 million, partially offset by sales of investments of $200 million.
Cash flows from investing activities for the year ended December 31, 2021 were $2.6 billion, which primarily included the proceeds
from the sale of Willis Re of $3.3 billion and Miller of $696 million and other smaller disposals, partially offset by cash and fiduciary
funds transferred on disposal of $1.0 billion, purchases of investments of $200 million, capital expenditures and capitalized software
additions of $201 million and net cash paid for acquisitions of $47 million.
Cash Flows Used In Financing Activities
Cash flows used in financing activities for the year ended December 31, 2022 were $3.4 billion. The significant financing activities
included share repurchases of $3.5 billion, debt repayments of $585 million and dividend payments of $369 million, partially offset by
$750 million of net proceeds from issuance of debt and $354 million of net proceeds from fiduciary funds held for clients.
Cash flows used in financing activities for the year ended December 31, 2021 were $3.1 billion. The significant financing activities
included share repurchases of $1.6 billion, debt repayments of $1.0 billion and dividend payments of $374 million.
53
Indebtedness
Total debt, total equity, and the capitalization ratio at December 31, 2022 and December 31, 2021 were as follows:
Long-term debt
Current debt
Total debt
Total WTW shareholders’ equity
Capitalization ratio
2022
December 31,
(in millions)
2021
$
$
$
4,471
250
4,721
10,016
$
$
$
3,974
613
4,587
13,260
32.0%
25.7%
The capitalization ratio increased from December 31, 2021 primarily due to $3.5 billion of share repurchases during the year ended
December 31, 2022.
At December 31, 2022, our mandatory debt repayments over the next twelve months include $250 million outstanding on our 4.625%
senior notes due 2023. For more information regarding our current and long-term debt, please see ‘Supplemental Guarantor Financial
Information’ elsewhere within this Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.
At December 31, 2022 and 2021, 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 also hold
funds for clients of our benefits account businesses. These fiduciary funds are included in fiduciary assets on our consolidated balance
sheets. We present the equal and corresponding fiduciary liabilities related to these fiduciary funds representing amounts or claims due
to our clients or premiums due on their behalf to insurers on our consolidated 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
certain of these fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with
insureds.
At December 31, 2022 and 2021, we had fiduciary funds of $3.6 billion and $3.4 billion, respectively, of which $945 million and $719
million, respectively, are attributable to our Willis Re business.
Share Repurchase Program
The Company is authorized to repurchase shares, by way of redemption or otherwise, and will consider whether to do so from time to
time, based on many factors, including market conditions. There are no expiration dates for our repurchase plans or programs.
On July 26, 2021, the board of directors approved a $1.0 billion increase to the existing share repurchase program, which was
previously at $500 million. Additionally, on September 16, 2021, the board of directors approved a $4.0 billion increase to the existing
share repurchase program, and on May 25, 2022, approved a $1.0 billion increase to the existing share repurchase program. These
increases brought the total approved authorization to $6.5 billion. See Part II, Item 5 Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities in this Annual Report on Form 10-K for further information regarding
the Company’s share repurchase program.
At December 31, 2022, approximately $1.3 billion 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, 2022 of $244.58 was 5,489,619.
54
The following table presents specified information about the Company’s repurchases of ordinary shares for the year ended December
31, 2022:
Shares repurchased
Average price per share
Aggregate repurchase cost (excluding broker costs)
Dividends
Year ended
December 31, 2022
15,729,085
$224.42
$3.5 billion
Total cash dividends of $369 million were paid during the year ended December 31, 2022. In February 2023, the board of directors
approved a quarterly cash dividend of $0.84 per share ($3.36 per share annualized rate), which will be paid on or around April 17,
2023 to shareholders of record as of March 31, 2023.
Capital Commitments
The Company’s capital expenditures for fixed assets and software for internal use were $138 million for the year ended December 31,
2022. Capital expenditures for fixed assets and software for internal use, which include expenditures under our Transformation
program, are expected to be in the range of $225 million to $250 million for the year ended December 31, 2023. We expect cash from
operations to adequately provide for these cash needs.
Supplemental Guarantor Financial Information
As of December 31, 2022, WTW has issued the following debt securities (the ‘notes’):
a) Willis North America Inc. (‘Willis North America’) has approximately $3.7 billion senior notes outstanding, of which $650
million were issued on May 16, 2017, $1.0 billion were issued on September 10, 2018, $1.0 billion were issued on September
10, 2019, $275 million were issued on May 29, 2020, and $750 million were issued on May 19, 2022; and
b) Trinity Acquisition plc has approximately $1.1 billion senior notes outstanding, of which $525 million were issued on August
15, 2013 and $550 million were issued on March 22, 2016, and a $1.5 billion revolving credit facility, on which no balance
was outstanding at December 31, 2022.
The following table presents a summary of the entities that issue each note and those wholly-owned subsidiaries of the Company that
guarantee each respective note on a joint and several basis as of December 31, 2022. These subsidiaries are all consolidated by Willis
Towers Watson plc (the ‘parent company’) and together with the parent company comprise the ‘Obligor group’.
Entity
Willis Towers Watson plc
Trinity Acquisition plc
Willis North America Inc.
Willis Netherlands Holdings B.V.
Willis Investment UK Holdings Limited
TA I Limited
Willis Group Limited
Willis Towers Watson Sub Holdings Unlimited Company
Willis Towers Watson UK Holdings Limited
Trinity Acquisition plc
Notes
Guarantor
Issuer
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Willis North America
Inc. Notes
Guarantor
Guarantor
Issuer
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
The notes issued by Willis North America and Trinity Acquisition plc:
•
•
•
•
rank equally with all of the issuer’s existing and future unsubordinated and unsecured debt;
rank equally with the issuer’s guarantee of all of the existing senior debt of the Company and the other guarantors, including
any debt under the Revolving Credit Facility;
are senior in right of payment to all of the issuer’s future subordinated debt; and
are effectively subordinated to all of the issuer’s secured debt to the extent of the value of the assets securing such debt.
All other subsidiaries of the parent company are non-guarantor subsidiaries (‘the non-guarantor subsidiaries’).
55
Each member of the Obligor group has only a stockholder’s claim on the assets of the non-guarantor subsidiaries. This stockholder’s
claim is junior to the claims that creditors have against those non-guarantor subsidiaries. Holders of the notes will only be creditors of
the Obligor group and not creditors of the non-guarantor subsidiaries. As a result, all of the existing and future liabilities of the non-
guarantor subsidiaries, including any claims of trade creditors and preferred stockholders, will be structurally senior to the notes. As of
and for the periods ended December 31, 2022 and 2021, the non-guarantor subsidiaries represented substantially all of the total assets
and accounted for substantially all of the total revenue of the Company prior to consolidating adjustments. The non-guarantor
subsidiaries have other liabilities, including contingent liabilities that may be significant. Each indenture does not contain any
limitations on the amount of additional debt that the Obligor group and the non-guarantor subsidiaries may incur. The amounts of this
debt could be substantial, and this debt may be debt of the non-guarantor subsidiaries, in which case this debt would be effectively
senior in right of payment to the notes.
The notes are obligations exclusively of the Obligor group. Substantially all of the Obligor group’s operations are conducted through
its non-guarantor subsidiaries. Therefore, the Obligor group’s ability to service its debt, including the notes, is dependent upon the net
cash flows of its non-guarantor subsidiaries and their ability to distribute those net cash flows as dividends, loans or other payments to
the Obligor group. Certain laws restrict the ability of these non-guarantor subsidiaries to pay dividends and make loans and advances
to the Obligor group. In addition, such non-guarantor subsidiaries may enter into contractual arrangements that limit their ability to
pay dividends and make loans and advances to the Obligor group.
Intercompany balances and transactions between members of the Obligor group have been eliminated. All intercompany balances and
transactions between the Obligor group and the non-guarantor subsidiaries have been presented in the disclosures below on a net
presentation basis, rather than a gross basis, as this better reflects the nature of the intercompany positions and presents the funding or
funded position that is to be received or owed. The intercompany balances and transactions between the Obligor group and non-
guarantor subsidiaries, presented below, relate to a number of items including loan funding for acquisitions and other purposes,
transfers of surplus cash between subsidiary companies, funding provided for working capital purposes, settlement of expense
accounts, transactions related to share-based payment arrangements and share issuances, intercompany royalty arrangements,
intercompany dividends and intercompany interest. At December 31, 2022 and 2021, the intercompany balances of the Obligor group
with non-guarantor subsidiaries were net receivables of $600 million and $700 million, respectively, and net payables of $10.2 billion
and $8.1 billion, respectively.
No balances or transactions of non-guarantor subsidiaries are presented in the disclosures other than the intercompany items noted
above.
Presented below is certain summarized financial information for the Obligor group.
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Revenue
Income from operations
Income from operations before income taxes (i)
Net income
Net income attributable to Willis Towers Watson
As of
December 31, 2022
As of
December 31, 2021
$
$
(in millions)
216
685
6,916
8,212
243
862
7,747
5,298
$
Year ended
December 31, 2022
(in millions)
2,139
1,650
1,102
1,287
1,287
(i)
Includes intercompany expense, net of the Obligor group from non-guarantor subsidiaries of $132 million for the year ended December 31, 2022.
56
Non-GAAP Financial Measures
In order to assist readers of our consolidated financial statements in understanding the core operating results that WTW’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
As reported change
As reported change
Income from operations/margin
Net income/margin
Net income attributable to WTW
Diluted earnings per share
Income from continuing operations before income taxes
Provision for income taxes/U.S. GAAP tax rate
Net cash from operating activities
Non-GAAP Measure
Constant currency change
Organic change
Adjusted operating income/margin
Adjusted EBITDA/margin
Adjusted net income
Adjusted diluted earnings per share
Adjusted income before taxes
Adjusted income taxes/tax rate
Free cash flow
The Company believes that these measures are relevant and provide pertinent 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 adjust for significant items which will not be settled in cash, or which we believe to
be items that are not core to our current or future operations. These items include the following:
•
•
•
Income and loss from discontinued operations, net of tax – Adjustment to remove the after-tax income or loss from
discontinued operations and the after-tax gain attributable to the divestiture of our Willis Re business.
Restructuring costs and transaction and transformation, net – Management believes it is appropriate to adjust for restructuring
costs and transaction and transformation, net when they relate to a specific significant program with a defined set of activities
and costs that are not expected to continue beyond a defined period of time, or significant acquisition-related transaction
expenses. We believe the adjustment is necessary to present how the Company is performing, both now and in the future
when the incurrence of these costs will have concluded. Transaction and transformation, net in 2021 includes the income
receipt related to the termination of the then-proposed Aon transaction.
Impairment – Adjustment to remove the impairment related to the net assets of our Russian business that are held outside of
our Russian entities.
• Gains and losses on disposals of operations – Adjustment to remove the gains or losses resulting from disposed operations
that have not been classified as discontinued operations.
•
•
•
•
•
Pension settlement and curtailment gains and losses – Adjustment to remove significant pension settlement and curtailment
gains and losses to better present how the Company is performing.
Provisions for significant litigation – We will include provisions for litigation matters which we believe are not representative
of our core business operations. These amounts are presented net of insurance and other recovery receivables.
Tax effect of statutory rate changes – Relates to the incremental tax expense or benefit from significant statutory income tax
rate changes enacted in material jurisdictions in which we operate.
Tax effect of the Coronavirus Aid, Relief, and Economic Security (‘CARES’) Act – Relates to the incremental tax expense or
benefit, primarily from the BEAT, generated from electing or changing elections of certain income tax provisions available
under the CARES Act.
Tax effect 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.
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.
57
Constant Currency Change and Organic Change
We evaluate our revenue on an as reported (U.S. GAAP), constant currency and organic basis. We believe presenting constant
currency and organic information provides valuable supplemental information regarding our comparable results, consistent with how
we evaluate our performance internally.
•
Constant Currency Change - Represents the year-over-year change in revenue excluding the impact of foreign currency
fluctuations. To calculate this impact, the prior year local currency results are first translated using the current year monthly
average exchange rates. The change is calculated by comparing the prior year revenue, translated at the current year monthly
average exchange rates, to the current year as reported revenue, for the same period. We believe constant currency measures
provide useful information to investors because they provide transparency to performance by excluding the effects that
foreign currency exchange rate fluctuations have on period-over-period comparability given volatility in foreign currency
exchange markets.
• Organic Change - Excludes the impact of fluctuations in foreign currency exchange rates as described above and the period-
over-period impact of acquisitions and divestitures on current-year revenue. We believe that excluding transaction-related
items from our U.S. GAAP financial measures provides useful supplemental information to our investors, and it is important
in illustrating what our core operating results would have been had we not included these transaction-related items, since the
nature, size and number of these 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 revenue, are included
in the ‘Consolidated Revenue (Continuing Operations)’ section within this Form 10-K. These measures are also reported by segment
in the ‘Segment Revenue’ section within this Form 10-K.
A reconciliation of the reported change to the constant currency and organic change for the year ended December 31, 2022 from the
year ended December 31, 2021 is as follows. The components of revenue change may not add due to rounding.
Years ended December 31,
2021
2022
As
Reported
Change
Less:
Currency
Impact
Components of Revenue Change
Constant
Currency
Change
Less:
Acquisitions/
Divestitures
Organic
Change
Revenue
$
($ in millions)
8,866
$
8,998
(1)%
(4)%
2%
(1)%
4%
For the year ended December 31, 2022, our as-reported revenue declined by 1%, primarily as a result of unfavorable foreign currency
exchange movement. Adjusting for the impacts of foreign currency and acquisitions and disposals in the calculation of our organic
activity, our revenue grew by 4% for the year ended December 31, 2022. The increase to our organic revenue was driven by both
segments.
Adjusted Operating Income/Margin
We consider adjusted operating income/margin to be important financial measures, which are used internally to 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 impairment, amortization, restructuring costs,
transaction and transformation, net and non-recurring items that, in management’s judgment, significantly affect the period-over-
period assessment of operating results. Adjusted operating income margin is calculated by dividing adjusted operating income by
revenue.
58
Reconciliations of income from operations to adjusted operating income for the years ended December 31, 2022 and 2021 are as
follows:
Income from operations
Adjusted for certain items:
Impairment
Amortization
Restructuring costs
Transaction and transformation, net
Adjusted operating income
Income from operations margin
Adjusted operating income margin
$
$
Years Ended December 31,
2022
2021
($ in millions)
1,178
$
81
312
99
181
1,851
13.3%
20.9%
$
2,202
—
369
26
(806)
1,791
24.5%
19.9%
Adjusted operating income increased for the year ended December 31, 2022 to $1.9 billion, from $1.8 billion for the year ended
December 31, 2021. This increase resulted from salaries and benefits, as a percentage of revenue, reducing from 58% to 57% on an as-
reported basis, primarily related to the reduction in discretionary and incentive costs.
Adjusted EBITDA/Margin
We consider adjusted EBITDA/margin to be important financial measures, which are used internally to 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 adjusted for income from discontinued operations, net of tax, provision for income taxes,
interest expense, impairment, depreciation and amortization, restructuring costs, transaction and transformation, net, gains and losses
on disposals of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period
assessment of operating results. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue.
Reconciliations of net income to adjusted EBITDA for the years ended December 31, 2022 and 2021 are as follows:
NET INCOME
Loss/(income) from discontinued operations, net of tax
Provision for income taxes
Interest expense
Impairment
Depreciation
Amortization
Restructuring costs
Transaction and transformation, net
Gain on disposal of operations
Adjusted EBITDA
Net income margin
Adjusted EBITDA margin
$
$
Years Ended December 31,
2022
2021
($ in millions)
$
$
1,024
40
194
208
81
255
312
99
181
(7)
2,387
11.5%
26.9%
4,236
(2,080)
536
211
—
281
369
26
(806)
(379)
2,394
47.1%
26.6%
Adjusted EBITDA for both the years ended December 31, 2022 and 2021 was $2.4 billion, a decrease of $7 million. This decrease
was due to lower pension income, partially offset by salaries and benefits, as a percentage of revenue, reducing from 58% to 57% on
an as-reported basis, primarily related to the reduction in discretionary and incentive costs in the current year.
Adjusted Net Income and Adjusted Diluted Earnings Per Share
Adjusted net income is defined as net income attributable to WTW adjusted for income from discontinued operations, net of tax,
impairment, amortization, restructuring costs, transaction and transformation, net, gains and losses on disposals of operations and non-
recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results and the
related tax effect of those adjustments and the tax effects of internal reorganizations. This measure is used solely for the purpose of
calculating adjusted diluted earnings per share.
59
Adjusted diluted earnings per share is defined as adjusted net income divided by the weighted-average number of ordinary shares,
diluted. Adjusted diluted earnings per share is used to internally evaluate and assess our core operations and to benchmark our
operating results against our competitors.
Reconciliations of net income attributable to WTW to adjusted diluted earnings per share for the years ended December 31, 2022 and
2021 are as follows:
Years Ended December 31,
2022
2021
($ and weighted-average shares in millions)
NET INCOME ATTRIBUTABLE TO WTW
Adjusted for certain items:
Loss/(income) from discontinued operations, net of tax
Impairment
Amortization
Restructuring costs
Transaction and transformation, net
Gain on disposal of operations
Tax effect on certain items listed above (i)
Tax effect of statutory rate change
Tax effect of the CARES Act
Tax effect of internal reorganizations
Weighted-average ordinary shares — diluted
Diluted earnings per share
Adjusted for certain items (ii):
Loss/(income) from discontinued operations, net of tax
Impairment
Amortization
Restructuring costs
Transaction and transformation, net
Gain on disposal of operations
Tax effect on certain items listed above (i)
Tax effect of statutory rate change
Tax effect of the CARES Act
Tax effect of internal reorganizations
Adjusted diluted earnings per share
(i)
(ii)
The tax effect was calculated using an effective tax rate for each item.
Per share values and totals may differ due to rounding.
$
1,009
$
40
81
312
99
181
(7)
(188)
—
(24)
4
1,507
112
8.98
0.36
0.72
2.78
0.88
1.61
(0.06)
(1.67)
—
(0.21)
0.04
13.41
$
$
$
$
$
$
4,222
(2,080)
—
369
26
(806)
(379)
103
40
—
—
1,495
129
32.78
(16.15)
—
2.86
0.20
(6.26)
(2.94)
0.79
0.31
—
—
11.60
Our adjusted diluted earnings per share increased for the year ended December 31, 2022 as compared to the year ended December 31,
2021 primarily due to a lower weighted-average outstanding share count attributable to our share repurchase activity in the current
year.
Adjusted Income Before Taxes and Adjusted Income Taxes/Tax Rate
Adjusted income before taxes is defined as income from operations before income taxes adjusted for impairment, amortization,
restructuring costs, transaction and transformation, net, gains and losses on disposals 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 income taxes adjusted for taxes on certain items of impairment,
amortization, restructuring costs, transaction and transformation, net, gains and losses on disposals of operations, the tax effects of
internal reorganizations and non-recurring items that, in management’s judgment, significantly affect the period-over-period
assessment of operating results, divided by adjusted income before taxes. Adjusted income taxes is used solely for the purpose of
calculating the adjusted income tax rate.
60
Management believes that the adjusted income tax rate presents a rate that is more closely aligned to the rate that we would incur if
not for the reduction of pre-tax income for the adjusted items and the tax effects of internal reorganizations, which are not core to our
current and future operations.
Reconciliations of income from continuing operations before income taxes to adjusted income before taxes and provision for income
taxes to adjusted income taxes for the years ended December 31, 2022 and 2021 are as follows:
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES
Adjusted for certain items:
Impairment
Amortization
Restructuring costs
Transaction and transformation, net
Gain on disposal of operations
Adjusted income before taxes
Provision for income taxes
Tax effect on certain items listed above (i)
Tax effect of statutory rate change
Tax effect of the CARES Act
Tax effect of internal reorganizations
Adjusted income taxes
U.S. GAAP tax rate
Adjusted income tax rate
$
$
$
$
Years Ended December 31,
2022
2021
($ in millions)
1,258
$
81
312
99
181
(7)
1,924
194
188
—
24
(4)
402
15.4%
20.9%
$
$
$
2,692
—
369
26
(806)
(379)
1,902
536
(103)
(40)
—
—
393
19.9%
20.7%
(i)
The tax effect was calculated using an effective tax rate for each item.
Our U.S. GAAP tax rates were 15.4% and 19.9% for the years ended December 31, 2022 and 2021, respectively. The current-year
effective tax rate includes a $34 million tax benefit associated with amending the Company’s U.S. federal income tax returns for tax
years 2019 and 2020, primarily related to a reduction in the BEAT. The effective tax rate for the year ended December 31, 2021
includes a $250 million estimated tax expense related to the income receipt associated with the termination of our then-proposed
combination with Aon, as well as a $40 million tax expense related to the remeasurement of deferred tax assets and liabilities
associated with an increase in the U.K. tax rate from 19% to 25%.
Our adjusted income tax rates were 20.9% and 20.7% for the years ended December 31, 2022 and 2021, respectively.
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.
Free cash flow is a liquidity measure and is not meant to represent residual cash flow available for discretionary expenditures.
Management believes that free cash flow presents the core operating performance and cash generating capabilities of our business
operations.
Reconciliations of cash flows from operating activities to free cash flow for the years ended December 31, 2022 and 2021 are as
follows:
Years ended December 31,
2022
2021
Cash flows from operating activities
Less: Additions to fixed assets and software for internal use
Free cash flow
$
$
61
$
(in millions)
812
(138)
674
$
2,061
(148)
1,913
The unfavorable movement in free cash flows in the current year was due primarily to the prior-year income receipt of $1 billion
related to the termination of the then-proposed Aon transaction, tax payments in 2022 related to this income receipt, and the
elimination of Willis Re cash generation following the divestiture.
Additionally, the free cash flow for the prior year presented includes the operating cash flows of Willis Re through December 1, 2021.
Willis Re’s operating cash flows approximate its pre-tax income and any adjustments for working capital movements (see Note 3 —
Acquisitions and Divestitures within Item 8 of this Annual Report on Form 10-K for further information), the absence of which is
expected to be partially made up by reimbursements through the TSA.
Critical Accounting 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 revenue 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 include critical accounting estimates are
revenue recognition, costs to fulfill under our broking contracts, valuation of billed and unbilled receivables from clients, income
taxes, commitments, contingencies and accrued liabilities, pension assumptions, and goodwill and intangible assets. The critical
accounting estimates 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 estimates 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 results of operations and financial condition.
Revenue Recognition
We use significant estimates related to revenue recognition most commonly during our estimation of the transaction prices or where
we recognize revenue over time on a proportional performance basis. A brief description of these policies and estimates is included
below:
Estimation of transaction prices — This process occurs most frequently in certain broking transactions. In situations in which our fees
are not fixed but are variable, we must estimate the likely commission per policy, taking into account the likelihood of cancellation
before the end of the policy. For Medicare broking and Affinity arrangements, the commissions to which we will be entitled can vary
based on the underlying individual insurance policies that are placed. For Medicare broking in particular, we base the estimates of
transaction prices on supportable evidence from an analysis of past transactions, and only include amounts that are probable of being
received or not refunded (referred to as applying ‘constraint’ under ASC 606, Revenue From Contracts With Customers). In our
direct-to-consumer Medicare broking arrangements, the estimate of the total renewal commissions that will be received over the
lifetime of the policy requires significant judgment, and will vary based on product type, estimated commission rates, the expected
lives of the respective policies and other factors. The Company has applied an actuarial model to account for these uncertainties,
which is updated periodically based on actual experience. Each of these processes result in us estimating a transaction price that may
be significantly lower than the ultimate amount of commissions we may collect. The transaction price is then adjusted over time as we
receive confirmation of our remuneration through receipt of commissions, or as other information becomes available.
Proportional performance basis over time recognition — Where we recognize revenue on a proportional performance basis, primarily
in our consulting and outsourced administration arrangements, the amount we recognize is affected by a number of factors that can
change the estimated amount of work required to complete the project, such as the staffing on the engagement and/or the level of
client participation. Our periodic engagement evaluations require us to make judgments and estimates regarding the overall
profitability and stages of project completion that, in turn, affect how we recognize revenue. We recognize a loss on an engagement
when estimated revenue to be received for that engagement is 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.
Costs to Fulfill —Broking Contracts
For our broking business, the Company must estimate the fulfillment costs incurred during the pre-placement of the broking contracts.
These judgments include the following:
• which activities in the pre-placement process should be eligible for capitalization;
•
•
•
the amount of time and effort expended on those pre-placement activities;
the amount of payroll and related costs eligible for capitalization; and,
the monthly or quarterly timing of underlying insurance and reinsurance policy inception dates.
62
Valuation of Billed and Unbilled Receivables from Clients
We maintain allowances for doubtful accounts to reflect estimated losses resulting from a client’s failure to pay for the services after
the services have been rendered, which are recorded in other operating expenses. We also maintain allowances related to our unbilled
receivables for such items as expected realization or client disputes, the related provision for which is recorded as a reduction to
revenue. Our allowance policy is based in part on the aging of the billed and unbilled client receivables and has been developed based
on our write-off history. However, facts and circumstances, such as the average length of time the receivables are past due, general
market conditions at the time we perform the work, current economic trends and our clients’ ability to pay, may cause fluctuations in
our valuation of billed and unbilled receivables.
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 carryforwards. Deferred tax assets and liabilities are measured using enacted tax 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 for continuing operations 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, which is assessed at each balance
sheet date. In making such determinations, 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 recent financial
operating results. 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 the provision of 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 15 — 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 13 — 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 89% of our projected benefit obligations and 92% of our plan assets, are
below:
United States
Legacy Willis – This plan was frozen in 2009. Approximately 600 WTW employees in the United States have a frozen
accrued benefit under this plan.
WTW 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. Plan participants prior to
July 1, 2017 earn benefits without having to make employee contributions, and all newly-eligible employees after that date
are required to contribute 2% of pay on an after-tax basis to participate in the plan.
United Kingdom
Legacy Willis – This plan covers approximately one-fifth 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.
63
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.
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/(income) over the average remaining service period or average remaining life expectancy, as appropriate, of the plan’s
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.
WTW 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. A discount rate will be changed annually if underlying rates have moved, whereas an 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. 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. We have allowed for actual and known inflation in preparing our estimates. Other material assumptions
include rates of participant mortality, and the expected long-term rates 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 $161 million net periodic benefit income for our U.S. and U.K. plans for the year ended December 31, 2022.
For the U.S. and U.K. plans, the following table presents our estimated net periodic benefit income for 2023 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, 2022 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 2023 (income):
U.S. Plans
U.K. Plans
$
(41) $
$
nil
(9) $
(7) $
Projected benefit obligation at December 31, 2022:
U.S. Plans
U.K. Plans
$
$
3,871
2,435
N/A
N/A
9
7
$
$
N/A $
N/A $
1
$
(1) $
(96) $
(78) $
(1)
1
100
84
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.
64
Goodwill is tested at the reporting unit level, and the Company had seven reporting units as of October 1, 2022. During fiscal year
2022, the Company performed the impairment test for all reporting units. Each of the reporting unit’s estimated fair values were in
excess of their carrying values, and we did not record any impairment losses of goodwill.
To perform the test, we used valuation techniques to estimate the fair value of a reporting unit that are under the income and/or market
approaches of valuation methods:
• Discounted cash flow method — 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,
assessment of business risk, and expected rates of return on capital.
• Guideline public company method — The guideline public company method, a market approach, develops valuation
multiples by comparing our reporting units to similar publicly traded companies. Key estimates and determination of
valuation multiples rely on the selection of similar companies, obtaining forecast revenue and EBITDA estimates for the
similar companies and selection of valuation multiples as they apply to the reporting unit characteristics.
• Guideline transaction method — Under the guideline transactions method, a market approach, actual transaction prices and
operating data from companies deemed reasonably similar to the reporting units are 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.
65
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. In order to manage the risk arising from these
exposures, we enter into a variety of 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 10 — Derivative Financial Instruments within Item
8 of this Annual Report on 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 revenue and incur expenses primarily
in U.S. dollars. Outside the U.S., we predominantly generate revenue and expenses in the local currency with the exception of our
London market operations which earn revenue in several currencies but incur expenses predominantly in Pounds sterling.
The table below gives an approximate analysis of revenue and expenses from continuing operations by currency in 2022.
Revenue
Expenses (i)
U.S.
dollars
60%
55%
Pounds
sterling
11%
17%
Euro
14%
12%
Other
currencies
15%
16%
(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 amortization of intangible assets and transaction and transformation, net.
Our principal exposures to foreign exchange risk arise from:
•
•
•
our London market operations;
intercompany lending between subsidiaries; 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 revenue in U.S. dollars but incur expenses
predominantly in Pounds sterling and may also hold significant foreign currency asset or liability positions on its consolidated balance
sheet. In addition, the London market operations earn significant revenue in Euro and Japanese yen.
The foreign exchange risks in our London market operations are hedged to the extent that:
•
•
forecasted Pounds sterling expenses exceed Pounds sterling revenue, in which case the Company limits its exposure to this
exchange rate risk by the use of forward contracts matched to a portion of the forecasted 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; and
the U.K. operations also earn significant revenue in Euro and Japanese yen. The Company limits its exposure to changes in
the exchange rates 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.
Intercompany lending between subsidiaries
The Company engages in intercompany borrowing and lending between subsidiaries, primarily through its in-house banking
operations which give rise to foreign exchange exposures. The Company mitigates these risks through the use of short-term foreign
currency forward and swap transactions that offset the underlying exposure created when the borrower and lender have different
functional currencies. These derivatives are not generally designated as hedging instruments and at December 31, 2022, we had
66
notional amounts of $1.7 billion (denominated primarily in U.S. dollars, Pound sterling, Euro and Australian dollars), with a net asset
fair value of $24 million. Such derivatives typically mature within three months.
Translation risk
Outside our U.S. and London market operations, we predominantly earn revenue 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 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.
The table below provides information about our foreign currency forward exchange contracts which are designated as hedging
instruments and 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 two years.
December 31, 2022
Foreign currency sold
U.S. dollars sold for Pounds
sterling
Euros sold for U.S. dollars
Japanese yen sold for U.S.
dollars
Total
Fair value (i)
Settlement date before December 31,
2023
2024
Contract
amount
(millions)
Average
contractual
exchange
rate
Contract
amount
(millions)
$
$
$
74
23
2
99
(2)
$1.26 = £1 $
€1 = $1.11
¥122.34= $1
$
$
30
5
—
35
(1)
Average
contractual
exchange
rate
$1.21 = £1
€1 = $1.03
¥127.18= $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, 2022 at the forward exchange rates prevailing at that date.
Income earned within foreign subsidiaries outside of the U.K. is generally offset by expenses in the same local currency, however the
Company does have exposure to foreign exchange movements on the net income of these entities.
Interest Rate Risk
The Company has access to $1.5 billion under a revolving credit facility (see Note 11 — Debt within Item 8 of this Annual Report on
Form 10-K for further information). As of December 31, 2022, no amount was drawn on this facility. We are also subject to market
risk from exposure to changes in interest rates based on our investing activities where our primary interest rate risk arises from
changes in short-term interest rates in U.S. dollars, Pounds sterling and Euros.
The table below provides information about our financial instruments that are sensitive to changes in interest rates. The Company had
no outstanding floating rate-based debt at December 31, 2022.
Expected to mature before December 31,
2023
2024
2025
2026
2027
($ in millions)
Thereafter
Total
Fair
Value (i)
Fixed rate debt
Principal
Fixed rate payable
$
250
$
4.625% 3.600%
650
$ — $
550
$
750
$ 2,550
$ 4,750
$ 4,317
— 4.400% 4.650%
4.186% 4.227%
(i)
Represents the net present value of the expected cash flows discounted at current market rates of interest or quoted market rates as appropriate.
Interest Income on Fiduciary Funds
We are exposed to interest rate risk. Specifically, as a result of our operating activities, we receive cash for premiums and claims
which we deposit in high-quality bank term deposit and money market funds where permitted. 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. As a result of measures taken by central banks
around the world, rates offered on these investments have increased, in some cases significantly over the course of the year. As a
result, interest income has improved substantially this year, with the greatest impact having been recognized in the second half of
67
2022. Interest income in the future will be a function of the short-term rates we are able to obtain by currency and the cash balances
available to invest in these instruments. Interest income was $55 million, $12 million and $18 million for the years ended December
31, 2022, 2021 and 2020, respectively. At December 31, 2022, we held $2.2 billion of fiduciary funds invested in interest-bearing
accounts. If short-term interest rates increased or decreased by 25 basis points, interest earned on these invested fiduciary funds, and
therefore our interest income recognized, would increase or decrease by approximately $5 million on an annualized basis.
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 of 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 that significant risk
exists in connection with the Company’s concentrations of credit as of December 31, 2022.
68
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
INDEX TO FORM 10-K
For the year ended December 31, 2022
Report of Independent Registered Public Accounting Firm (PCAOB ID: 34)
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2022
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2022
Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31, 2022
Notes to the Consolidated Financial Statements
Page
70
72
73
74
75
76
69
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 sheets of Willis Towers Watson Public Limited Company and subsidiaries
(the ‘Company’) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, changes in equity
and cash flows, for the three years then ended, 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, 2022
and 2021, and the results of its operations and its cash flows for the three years then ended, in conformity with accounting principles
generally accepted in the United States of America (‘US GAAP’).
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, 2022, 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 24, 2023, 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 audits. 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 audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Errors and Omissions Reserve — Refer to Notes 2, 15 and 16 to the financial statements
Critical Audit Matter Description
The Company has established provisions against various actual and potential claims, lawsuits and other proceedings relating
principally to alleged errors and omissions (‘E&O’) which arise in connection with the placement of insurance and reinsurance and
provision of broking, consulting and outsourcing 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 (‘IBNR’). These provisions are established based
on actuarial estimates together with individual case reviews. Significant management judgment is required to estimate the amounts of
such claims.
Auditing management’s judgments related to its E&O provision, and in particular the broking, consulting and outsourcing business
provisions related to the IBNR, and the provisions related to significant claims reported but not paid, involved especially complex and
subjective judgment and an increased extent of effort, including the need to involve our actuarial specialists.
How the Critical Audit Matter Was Addressed in the Audit
We tested the effectiveness of controls over the Company’s estimation of the E&O provisions, including controls over the underlying
historical claims data, the actuarial methodology used, the assumptions selected by management that are used to calculate the broking,
70
consulting and outsourcing business IBNR provisions, and the establishment and quarterly evaluation of provisions for reported
claims, including significant claims.
For the IBNR provisions, we evaluated the appropriateness of the IBNR models, and evaluated the consistency of the model with prior
years in order to challenge the methodology used to estimate the provisions. With the assistance of our actuarial specialists, we
assessed the methodology and models used, including key inputs and assumptions used in, and arithmetical accuracy of, the models
used. We also performed retrospective reviews of management’s estimated claims emergence in comparison to actual results and
evaluated the provisions set by management in comparison to a range of independent estimates that we developed.
We evaluated the E&O matters and the appropriateness of their projected settlement values through inquiries of, and confirmations
from, in-house counsel and external lawyers handling those matters for the Company.
/s/ Deloitte & Touche LLP
Philadelphia, PA
February 24, 2023
We have served as the Company’s auditor since 2017.
71
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
Consolidated Statements of Comprehensive Income
(In millions of U.S. dollars, except per share data)
Revenue
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation
Amortization
Restructuring costs
Transaction and transformation, net
Total costs of providing services
Income from operations
Interest expense
Other income, net
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
Provision for income taxes
INCOME FROM CONTINUING OPERATIONS
(LOSS)/INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX
NET INCOME
Income attributable to non-controlling interests
NET INCOME ATTRIBUTABLE TO WTW
EARNINGS PER SHARE
Basic earnings per share:
Income from continuing operations per share
(Loss)/income from discontinued operations per share
Basic earnings per share
Diluted earnings per share:
Income from continuing operations per share
(Loss)/income from discontinued operations per share
Diluted earnings per share
NET INCOME
Other comprehensive (loss)/income, net of tax:
Foreign currency translation
Defined pension and post-retirement benefits
Derivative instruments
Other comprehensive (loss)/income, net of tax, before non-controlling interests
Comprehensive income before non-controlling interests
Comprehensive income attributable to non-controlling interests
Comprehensive income attributable to WTW
2022
Years ended December 31,
2021
2020
$
8,866
$
8,998
$
8,615
5,065
1,776
255
312
99
181
7,688
1,178
(208)
288
1,258
(194)
1,064
(40)
1,024
(15)
1,009
9.36
(0.36)
9.00
9.34
(0.36)
8.98
1,024
(499)
65
(2)
(436)
588
(14)
574
$
$
$
$
$
$
$
$
5,253
1,673
281
369
26
(806)
6,796
2,202
(211)
701
2,692
(536)
2,156
2,080
4,236
(14)
4,222
16.68
16.20
32.88
16.63
16.15
32.78
4,236
(87)
260
2
175
4,411
(16)
4,395
$
$
$
$
$
$
$
$
5,157
1,697
307
461
24
110
7,756
859
(244)
396
1,011
(249)
762
258
1,020
(24)
996
5.69
1.99
7.68
5.67
1.98
7.65
1,020
139
(266)
(4)
(131)
889
(25)
864
$
$
$
$
$
$
$
$
See accompanying notes to the consolidated financial statements
72
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
December 31,
2022
December 31,
2021
ASSETS
Cash and cash equivalents
Fiduciary assets
Accounts receivable, net
Prepaid and other current assets
Current assets held for sale
Total current assets
Fixed assets, net
Goodwill
Other intangible assets, net
Right-of-use assets
Pension benefits assets
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
Fiduciary liabilities
Deferred revenue and accrued expenses
Current debt
Current lease liabilities
Other current liabilities
Current liabilities held for sale
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred tax liabilities
Provision for liabilities
Long-term lease liabilities
Other non-current liabilities
Total non-current liabilities
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES
EQUITY (i)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Treasury shares, at cost, 17,519 in 2022 and 2021
Total WTW shareholders’ equity
Non-controlling interests
Total equity
TOTAL LIABILITIES AND EQUITY
$
$
$
$
1,262
11,772
2,387
414
—
15,835
718
10,173
2,273
586
827
1,357
15,934
31,769
11,772
1,915
250
126
716
—
14,779
4,471
480
748
357
620
221
6,897
21,676
10,876
1,764
(2,621)
(3)
10,016
77
10,093
31,769
$
$
$
$
4,486
11,014
2,370
612
6
18,488
851
10,183
2,555
720
971
1,202
16,482
34,970
11,014
1,926
613
150
1,015
6
14,724
3,974
757
845
375
734
253
6,938
21,662
10,804
4,645
(2,186)
(3)
13,260
48
13,308
34,970
(i)
Equity includes (a) Ordinary shares $0.000304635 nominal value; Authorized 1,510,003,775; Issued 106,756,364 (2022) and 122,055,815 (2021); Outstanding
106,756,364 (2022) and 122,055,815 (2021); (b) Preference shares, $0.000115 nominal value; Authorized 1,000,000,000 and Issued none in 2022 and 2021.
See accompanying notes to the consolidated financial statements
73
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
2022
Years ended December 31,
2021
2020
$
1,024
$
4,236
$
1,020
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME
Adjustments to reconcile net income to total net cash from operating
activities:
Depreciation
Amortization
Impairment
Non-cash restructuring charges
Non-cash lease expense
Net periodic benefit of defined benefit pension plans
Provision for doubtful receivables from clients
(Benefit from)/provision for deferred income taxes
Share-based compensation
Net loss/(gain) on disposal of operations
Non-cash foreign exchange gain
Other, net
Changes in operating assets and liabilities, net of effects from purchase of
subsidiaries:
Accounts receivable
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 (payments)/proceeds from sale of operations
Cash and fiduciary funds transferred in sale of operations
Sale/(purchase) of investments
Other, net
Net cash (used in)/from investing activities
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
Senior notes issued
Debt issuance costs
Repayments of debt
Repurchase of shares
Proceeds from issuance of shares
Net proceeds/(payments) from fiduciary funds held for clients
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
Other, net
Net cash (used in)/from financing activities
255
312
81
71
120
(153)
13
(50)
99
59
(137)
6
(188)
(197)
(495)
(8)
812
(138)
(66)
(81)
(59)
(29)
200
—
(173)
750
(5)
(585)
(3,530)
7
354
(22)
(34)
(369)
(11)
—
(3,445)
(2,806)
(164)
7,691
4,721
$
281
369
—
—
160
(168)
19
226
101
(2,679)
(10)
(25)
(134)
(122)
(175)
(18)
2,061
(148)
(53)
(47)
4,048
(1,030)
(200)
—
2,570
—
(4)
(1,008)
(1,627)
10
(40)
(19)
(16)
(374)
(36)
—
(3,114)
1,517
(127)
6,301
7,691
$
308
462
—
—
146
(196)
29
99
90
(81)
(6)
(41)
72
(205)
215
(138)
1,774
(223)
(63)
(69)
237
(25)
—
(17)
(160)
282
(2)
(327)
—
16
812
(12)
(14)
(346)
(28)
(3)
378
1,992
126
4,183
6,301
(DECREASE)/INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (i)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR (i)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR (i)
$
(i)
The amounts of cash, cash equivalents and restricted cash, their respective classification on the consolidated balance sheets as well as their respective portions of the
increase or decrease in cash, cash equivalents and restricted cash for each of the periods presented have been included in Note 21 — Supplemental Disclosures of
Cash Flow Information.
See accompanying notes to the consolidated financial statements
74
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
Consolidated Statements of Changes in Equity
(In millions of U.S. dollars and number of shares in thousands)
Shares
outstanding
Additional
paid-in capital
Retained
earnings
Treasury
shares
AOCL (i)
Total WTW
shareholders’
equity
Non-controlling
interests
Total equity
128,690
—
—
—
—
275
—
—
—
—
128,965
(7,155)
—
—
—
—
246
—
—
—
122,056
(15,729)
—
—
—
—
429
—
—
—
—
106,756
$
$
$
$
10,687
—
—
—
—
16
46
9
(3)
(7)
10,748
—
—
—
—
—
10
47
(8)
7
10,804
—
—
—
—
—
7
54
—
2
9
10,876
$
$
$
$
1,792
996
(354)
—
—
—
—
—
—
—
2,434
(1,627)
4,222
(384)
—
—
—
—
—
—
4,645
(3,530)
1,009
(360)
—
—
—
—
—
—
—
1,764
$
$
$
$
(3)
—
—
—
—
—
—
—
—
—
(3)
—
—
—
—
—
—
—
—
—
(3)
—
—
—
—
—
—
—
—
—
—
(3)
$
$
$
$
(2,227)
—
—
—
(132)
—
—
—
—
—
(2,359)
—
—
—
—
173
—
—
—
—
(2,186)
—
—
—
—
(435)
—
—
—
—
—
(2,621)
$
$
$
$
10,249
996
(354)
—
(132)
16
46
9
(3)
(7)
10,820
(1,627)
4,222
(384)
—
173
10
47
(8)
7
13,260
(3,530)
1,009
(360)
—
(435)
7
54
—
2
9
10,016
$
$
$
$
120
24
—
(22)
1
—
—
(11)
—
—
112
—
14
—
(29)
2
—
—
(51)
—
48
—
15
—
(10)
(1)
—
—
27
(2)
—
77
$
$
$
$
10,369
1,020
(354)
(22)
(131)
16
46
(2)
(3)
(7)
10,932
(1,627)
4,236
(384)
(29)
175
10
47
(59)
7
13,308
(3,530)
1,024
(360)
(10)
(436)
7
54
27
—
9
10,093
Balance as of January 1, 2020
Net income
Dividends declared ($2.75 per share)
Dividends attributable to non-controlling
interests
Other comprehensive (loss)/income
Issuance of shares under employee stock
compensation plans
Share-based compensation and net settlements
Reduction of non-controlling interests (ii)
Other
Foreign currency translation
Balance as of December 31, 2020
Shares repurchased
Net income
Dividends declared ($3.02 per share)
Dividends attributable to non-controlling
interests
Other comprehensive income
Issuance of shares under employee stock
compensation plans
Share-based compensation and net settlements
Reduction of non-controlling interests (ii)
Foreign currency translation
Balance as of December 31, 2021
Shares repurchased
Net income
Dividends declared ($3.28 per share)
Dividends attributable to non-controlling
interests
Other comprehensive loss
Issuance of shares under employee stock
compensation plans
Share-based compensation and net settlements
Additional non-controlling interests
Reduction of non-controlling interests (ii)
Foreign currency translation
Balance as of December 31, 2022
(i)
(ii)
Accumulated other comprehensive loss, net of tax (‘AOCL’).
Attributable to the divestiture of businesses that are less than wholly-owned or the acquisition of shares previously owned by minority interest holders.
See accompanying notes to the consolidated financial statements
75
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
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 Public Limited Company is a leading global advisory, broking and solutions company that provides data-
driven, insight-led solutions in the areas of people, risk and capital. The Company has more than 46,000 colleagues serving more than
140 countries and markets.
We design and deliver solutions that manage risk, optimize benefits, cultivate talent and expand the power of capital to protect and
strengthen institutions and individuals.
Our risk management services include strategic risk consulting (including providing actuarial analysis), a variety of due diligence
services, the provision of practical on-site risk control services (such as health and safety and property loss control consulting), and
analytical and advisory services (such as hazard modeling). We also assist our clients with planning for addressing incidents or crises
when they occur. These services include contingency planning, security audits and product tampering plans.
We help our clients enhance business performance by delivering consulting services, technology and solutions that optimize benefits
and cultivate talent. Our services and solutions encompass such areas as employee benefits, total rewards, talent and benefits
outsourcing. In addition, we provide investment advice to help our clients develop disciplined and efficient strategies to meet their
investment goals and expand the power of capital.
As an insurance broker, we act as an intermediary between our clients and insurance carriers by advising 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 a private Medicare marketplace in the U.S. through which, along with our active employee marketplace, we help our
clients move to a more sustainable economic model by capping and controlling the costs associated with healthcare benefits. We also
provide direct-to-consumer sales of Medicare coverage.
We are not an insurance company, and therefore we do not underwrite insurable risks for our own account. We help sharpen
strategies, enhance organizational resilience, motivate workforces and maximize performance to uncover opportunities for sustainable
success.
Segment Reorganization
On January 1, 2022, WTW realigned to provide its comprehensive offering of services and solutions to clients across two business
segments: Health, Wealth & Career (‘HWC’), and Risk & Broking (‘R&B’). These changes were made in conjunction with changes in
the WTW leadership team, including the appointment of a new chief executive officer who succeeded the prior CEO as the chief
operating decision maker on that date. Prior to January 1, 2022, we operated across four segments: Human Capital and Benefits;
Corporate Risk and Broking; Investment, Risk and Reinsurance; and Benefits Delivery and Administration. Following the
realignment, the two new segments consist of the following businesses:
•
•
The HWC segment includes businesses previously aligned under the Human Capital and Benefits segment, the Benefits
Delivery and Administration segment, and the Investments business, which was previously under the Investment, Risk and
Reinsurance segment.
The R&B segment includes businesses previously aligned under the Corporate Risk and Broking segment, as well as the
Insurance Consulting and Technology business, which was previously under the Investment, Risk and Reinsurance segment.
In addition, effective January 1, 2022, the Company manages its businesses across three geographical areas: North America, Europe
(including Great Britain) and International.
Certain Investment, Risk and Reinsurance businesses that were part of the results from continuing operations in the prior-year period
presented were divested during 2021. The revenue and income from operations for these businesses have been included as ‘divested
businesses’ in the reconciliations between the total segment results and the consolidated results of the Company. However, the results
of the divested Willis Re treaty-reinsurance business are presented as discontinued operations and are therefore excluded from the
divested businesses presented in the segment reconciliations.
Segment results herein are presented on a retrospective basis to reflect the reorganization. See Note 4 — Revenue, Note 5 — Segment
Information, Note 6 — Restructuring Costs and Note 9 — Goodwill and Other Intangible Assets for the Company's segment-based
presentations.
76
Note 2 — Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements
Basis of Presentation
The accompanying audited consolidated financial statements of WTW and our subsidiaries are presented in accordance with the rules
and regulations of the SEC for annual reports on Form 10-K and are prepared in accordance with U.S. GAAP. All intercompany
accounts and transactions have been eliminated in consolidation.
Risks and Uncertainties of the Economic Environment
Beginning with the COVID-19 pandemic, there have been adverse changes in global commercial activity, particularly in the global
supply chain and workforce availability, and significant volatility in the global financial markets including, among other effects,
occasional declines in the equity markets, changes in interest rates and reduced liquidity on a global basis.
Supply and labor market disruptions caused by COVID-19, accommodative monetary and fiscal policy and the Russian invasion of
Ukraine have contributed to significant inflation in many of the markets in which we operate. This impacts not only the costs to attract
and retain employees but also other costs to run and invest in our business. If our costs grow significantly in excess of our ability to
raise revenue, our margins and results of operations may be materially and adversely impacted and we may not be able to achieve our
strategic and financial objectives.
Although we believe we have adapted to the unique challenges posed by COVID-19 surrounding how and where we do our work, we
are also impacted by the negative effect on workforce availability, which could hamper our ability to grow our capacity on pace with
increasing demand for our services. We expect the market for talent to remain highly competitive for at least the next several months.
We will continue to monitor the situation and assess any implications to our business and our stakeholders.
Significant Accounting Policies
Principles of Consolidation — The accompanying consolidated financial statements include the accounts of WTW and those of our
majority-owned and controlled subsidiaries. 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 U.S. GAAP, which requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as well as disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue 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 and related costs, the selection of useful lives of fixed and intangible assets, impairment testing, valuation of
billed and unbilled receivables from 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, cash equivalents and restricted cash, accounts receivable,
short-term investments, accrued expenses and revolving lines of credit approximate their fair values because of the short maturity and
liquidity of those instruments. The fair value of our senior notes and note receivable are considered Level 2 financial instruments as
77
they are corroborated by observable market data. See Note 12 — Fair Value Measurements for additional information about our
measurements of fair value.
Cash and Cash Equivalents — Cash and cash equivalents primarily consist of time deposits with original maturities of three months or
less. In certain of the countries in which we conduct business, we are subject to capital adequacy requirements. Most significantly,
Willis Limited, our U.K. brokerage subsidiary regulated by the Financial Conduct Authority, is currently required to maintain $105
million in unencumbered and available financial resources, of which at least $66 million must be in cash, for regulatory purposes.
Term deposits and certificates of deposits with original maturities greater than three months are considered to be short-term
investments and are included in Prepaid and other current assets. Additionally, see Note 21 — Supplemental Disclosures of Cash Flow
Information for a reconciliation of the cash, cash equivalents and restricted cash as presented on our consolidated balance sheets and
the consolidated statements of cash flows.
Fiduciary Assets and Liabilities — The Company collects premiums from insureds and, after deducting commissions, remits the
premiums to the respective insurers. The Company also collects claims or refunds from insurers on behalf of 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 or for plan participants to pay for medical costs (‘benefit funds’). Benefit funds held in cash and cash equivalents are part
of fiduciary funds. In some instances, plan participants direct us to invest these benefit funds on their behalf (‘benefit funds
investments’). Each of these transactions is reported on our consolidated balance sheets as assets and corresponding liabilities unless
such balances are due to or from the same party and a right of offset exists, in which case the balances are recorded net.
Fiduciary assets on the consolidated balance sheets are comprised of fiduciary funds, benefit funds investments and fiduciary
receivables:
Fiduciary funds – These amounts are restricted cash and cash equivalents held for unremitted insurance premiums and claims and
benefit funds not invested, and are recorded within fiduciary assets on the consolidated balance sheets. 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 and excluding earnings on benefit funds, 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 in its broking capacity is dependent upon the date
the insured remits the payment of the premium to the Company, or the date the Company receives a refund from the insurer, and
the date the Company is required to forward such payments to the insurer or insured, respectively. For the benefit funds, cash and
cash equivalents are held until the funds are directed by plan participants to either be invested in mutual funds or paid out on their
behalf. Fiduciary funds are included in the beginning and ending balances of cash, cash equivalents and restricted cash in the
consolidated statements of cash flows. See Note 21 — Supplemental Disclosures of Cash Flow Information for a reconciliation of
the fiduciary funds as presented on our consolidated balance sheets and the consolidated statements of cash flows.
Benefit funds investments – Benefit funds investments can be invested in open-ended mutual funds at the direction of the
participant. Such funds are not available to service the Company’s debt or for other corporate purposes and earnings accrue to the
participant.
Fiduciary receivables – Uncollected premiums from insureds, uncollected claims or refunds from insurers and unremitted
benefits funds are recorded as fiduciary assets on the consolidated balance sheets. 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 on the consolidated balance sheets represent the obligations to remit all fiduciary assets as required under the
terms of the various arrangements. Fiduciary receivables and liabilities for which cash has not been collected are equal and offsetting
and have not been presented in the consolidated statements of cash flows.
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 4 — Revenue for additional information about our accounts
receivable.
Acquired Accounts Receivable — As part of the acquisition accounting for the TRANZACT business in 2019, the acquired accounts
receivable arising from direct-to-consumer Medicare broking sales were present-valued at the acquisition date in accordance with
ASC 805, Business Combinations (‘ASC 805’). Cash collections for these receivables are expected to occur over a period of several
years. Due to the provisions of ASC 606, Revenue From Contracts With Customers (‘ASC 606’), these receivables are not discounted
for a significant financing component when initially recognized. Following the acquisition, the acquired renewal commissions
receivables have been accounted for prospectively using the cost-recovery method in which future cash receipts will initially be
applied against the acquisition date fair value until the value reaches zero. Any cash received in excess of the fair value determined at
78
acquisition will be recorded to earnings when it is received at a future date. The adjusted values of these acquired renewal
commissions receivables are included in Prepaid and other current assets or Other non-current assets, as appropriate, on the
consolidated balance sheets.
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 carryforwards. Deferred tax assets and liabilities are measured using enacted tax
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 for continuing operations 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, which is assessed at each
balance sheet date. In making such determinations, 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 recent financial
operating results. 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 benefits of uncertain tax positions in the financial statements when it is more likely than not that a 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 7 — 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 to alter the risk profile of an existing underlying exposure. Forward
foreign currency exchange contracts are used to manage currency exposures arising from future income and expenses and to offset
balance sheet exposures in currencies other than the functional currency of an entity. We do not hold any derivatives for trading
purposes. The fair values of derivative contracts are recorded in other assets and other liabilities in the consolidated balance sheets.
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 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
the 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 income, net 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 10 — 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
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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 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 15 —
Commitments and Contingencies and Note 16 — 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. Additionally, the Company has cash-settled share-based
compensation plans that provide for grants to employees.
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 are 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.
For the cash-settled share-based compensation, the Company recognizes a liability for the fair-value of the awards as of each reporting
date. The liability for these awards is included within Other current liabilities or Other non-current liabilities in the consolidated
balance sheets depending when the amounts are payable. Expense is recognized over the service period, and as the liability is
remeasured at the end of each reporting period, changes in fair value are recognized as compensation cost within Salaries and benefits
in the consolidated statements of comprehensive income. The significant assumptions underlying our expense calculations include the
estimated achievement of any performance targets and estimated forfeiture rates.
See Note 19 — 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 finance 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 8 — Fixed Assets for additional information about our fixed assets.
Leases — As an advisory, broking and solutions company providing services to clients in more than 140 countries, we enter into lease
agreements from time to time, primarily for the use of real estate for our office space. We determine if an arrangement is a lease at the
inception of the contract, and the nature of our operations is such that it is generally clear whether an arrangement contains a lease and
what underlying asset is being leased. The majority of the leases into which we enter are operating leases. Upon entering into leases,
we obtain the right to control the use of an identified space for a lease term and recognize these right-of-use (‘ROU’) assets on our
consolidated balance sheets with corresponding lease liabilities reflecting our obligation to make the related lease payments. ROU
assets are amortized over the term of the lease.
Our real estate leases are generally long-term in nature, with terms that typically range from three to 12 years. Our most significant
lease supports our London market operations with a lease term through 2032. Our real estate leases often contain options to renew the
lease, either through exercise of the option or through automatic renewal. Additionally, certain leases have options to cancel the lease
with appropriate notice to the landlord prior to the end of the stated lease term. As we enter into new leases, we consider these options
as we assess lease terms in our recognized ROU assets and lease liabilities. If we are reasonably certain to exercise an option to renew
a lease, we include this period in our lease term. To the extent that we have the option to cancel a lease, we recognize our ROU assets
and lease liabilities using the term that would result from using this earlier date. If a significant penalty is required to cancel the lease
at an earlier date, we assess our lease term as ending at the point when no significant penalty would be due.
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In addition to payments for previously-agreed base rent, many of our lease agreements are subject to variable and unknown future
payments, typically in the form of common area maintenance charges (a non-lease component as defined by ASC 842, Leases (‘ASC
842’)) or real estate taxes. These variable payments are excluded from our lease liabilities and ROU assets, and instead are recognized
as lease expense within Other operating expenses on the consolidated statement of comprehensive income as the amounts are incurred.
To the extent that we have agreed to fixed charges for common area maintenance or other non-lease components, or our base rent
increases by an index or rate (most commonly an inflation rate), these amounts are included in the measurement of our lease liabilities
and ROU assets. We have elected the practical expedient under ASC 842 which allows the lease and non-lease components to be
combined in our measurement of lease liabilities and ROU assets.
From time to time we may enter into subleases if we are unable to cancel or fully occupy a space and are able to find an appropriate
subtenant. However, entering subleases is not a primary objective of our business operations and these arrangements do not currently
represent a material amount of cash flows.
We are required to use judgment in the determination of the incremental borrowing rates to calculate the present values of our future
lease payments. Since the majority of our debt is publicly traded, our real estate function is centralized, and our treasury function is
centralized and generally prohibits our subsidiaries from borrowing externally, we have determined it appropriate to use the
Company’s consolidated unsecured borrowing rate, and we adjust for collateralization in accordance with ASC 842. Using the
resulting interest rate curves from publicly traded debt at this collateralized borrowing rate, we select the interest rate at lease
inception by reference to the lease term and lease currency. Approximately 90% of our leases are denominated in U.S. dollars, Pounds
sterling or Euros.
Our leases generally do not subject us to restrictive covenants and contain no residual value guarantees.
See Note 14 — Leases 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
Software
Trademark and trade name
Other
Amortization basis
In line with underlying cash flows
In line with underlying cash flows or straight-line basis
Straight-line basis
In line with underlying cash flows or straight-line basis
Expected life
(years)
3 to 21
5 to 7
5 to 25
5 to 20
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 seven reporting units as of October 1, 2022. In 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 unit exceeds its fair value,
the difference is recognized as an impairment loss. The Company’s goodwill impairment tests for the years ended December 31, 2022
and 2021 have not resulted in any impairment charges. See Note 9 — 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 is measured on an actuarial basis using various methods and actuarial assumptions. The most
significant assumptions are the discount rates (formulated 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 the market-related value of plan assets
or the projected benefit obligation, 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 the funded
status of its pension plans based on the projected benefit obligation on its consolidated balance sheets.
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
13 — Retirement Benefits for additional information about our pensions.
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Revenue Recognition — We recognize revenue from a variety of services, with broking, consulting and outsourced administration
representing our most significant offerings. All other revenue streams, which can be recognized at either a point in time or over time,
are individually less significant and are grouped in Other in our revenue disaggregation disclosures in Note 4 — Revenue. These
Other revenue streams represent approximately 6% of customer contract revenue from continuing operations each year.
Broking — Representing 47% to 48% of customer contract revenue from continuing operations each year, in our broking
arrangements, we earn revenue by acting as an intermediary in the placement of effective insurance policies. Generally, we act as an
agent and view our client to be the party looking to obtain insurance coverage for various risks, or an employer or sponsoring
organization looking to obtain insurance coverage for its employees or members. Also, prior to the disposal of Willis Re (see Note 3—
Acquisitions and Divestitures) we acted as an agent in reinsurance broking arrangements where our client was the party looking to
cede risks to the reinsurance markets. Our primary performance obligation under the majority of these arrangements is to place an
effective insurance or reinsurance policy, but there can also be significant post-placement obligations in certain contracts to which we
need to allocate revenue. The most common of these is for claims handling or call center support. The revenue recognition method for
these, after the relative fair value allocation, is described further as part of the ‘Outsourced Administration’ description below.
Due to the nature of the majority of our broking arrangements, no single document constitutes the contract for ASC 606 purposes. Our
services may be governed by a mixture of different types of contractual arrangements depending on the jurisdiction or type of
coverage, including terms of business agreements, broker-of-record letters, statements of work or local custom and practice. This is
then confirmed by the client’s acceptance of the underlying insurance contract. Prior to the policy inception date, the client has not
accepted nor formally committed to perform under the arrangement (i.e. pay for the insurance coverage in place). Therefore, in the
majority of broking arrangements, the contract date is the date the insurance policy incepts. However, in certain instances such as
employer-sponsored Medicare broking or Affinity arrangements, where the employer or sponsoring organization is our customer,
client acceptance of underlying individual policy placements is not required, and therefore the date at which we have a contract with a
customer is not dependent upon placement.
As noted, our primary performance obligations typically consist of only the placement of an effective insurance policy which precedes
the inception date of the policy. Therefore, most of our fulfillment costs are incurred before we can recognize revenue, and are thus
deferred during the pre-placement process. Where we have material post-placement services obligations, we estimate the relative fair
value of the post-placement services using either the expected cost-plus-margin or the market assessment approach.
Revenue from our broking services consists of commissions or fees negotiated in lieu of commissions. At times, we may receive
additional income for performing these services from the insurance and reinsurance carriers’ markets, which is collectively referred to
as ‘market derived income’. In situations in which our fees are not fixed but are variable, we must estimate the likely commission per
policy, taking into account the likelihood of cancellation before the end of the policy term. For employer-sponsored Medicare broking,
Affinity arrangements and historically for proportional treaty reinsurance broking, the commissions to which we will be entitled can
vary based on the underlying individual insurance policies that are placed. For employer-sponsored Medicare broking and
proportional treaty reinsurance broking in particular, we base the estimates of transaction prices on supportable evidence from an
analysis of past transactions, and only include amounts that are probable of being received or not refunded (referred to as applying
‘constraint’ under ASC 606). This is an area requiring significant judgment and results in us estimating a transaction price that may be
significantly lower than the ultimate amount of commissions we may collect. The transaction price is then adjusted over time as we
receive confirmation of our remuneration through receipt of treaty statements, or as other information becomes available.
We recognize revenue for most broking arrangements as of a point in time at the later of the policy inception date or when the policy
placement is complete, because this is viewed as the date when control is transferred to the client. For employer-sponsored Medicare
broking, we recognize revenue over time, as we stand ready under our agreements to place retiree Medicare coverage. For this type of
broking arrangement, we recognize the majority of our placement revenue in the fourth quarter of the calendar year when most of the
placement or renewal activity occurs.
We also have a direct-to-consumer Medicare broking offering. The contractual arrangements in this offering differ from our employer-
sponsored Medicare broking offering described above. The governing contracts in our direct-to-consumer Medicare broking offering
are the contractual arrangements with insurance carriers, for whom we act as an agent, that provide compensation in return for issued
policies. Once an application is submitted to a carrier, our obligation is complete, and we have no ongoing fulfilment obligations. We
receive compensation from carriers in the form of commissions, administrative fees and marketing fees in the first year, and
depending on the type of policy issued, we may receive renewal commissions for up to 25 years, provided the policies are renewed for
such periods of time.
Because our obligation is complete upon application submission to the carrier, we recognize revenue at that date, which includes both
compensation due to us in the first year as well as an estimate of the total renewal commissions that will be received over the lifetime
of the policy. This variable consideration estimate requires significant judgment, and will vary based on product type, estimated
commission rates, the expected lives of the respective policies and other factors. The Company has applied an actuarial model to
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account for these uncertainties, which is updated periodically based on actual experience, and includes an element of ‘constraint’ as
defined by ASC 606 such that no significant reversal is expected to occur in the future. Actual results will differ from these estimates.
The timing of renewal payments in our direct-to-consumer Medicare broking offering is reflective of regulatory restrictions and
insurance carriers’ protection for cancellations and varies based on policy holder decisions that are outside of the control of both the
Company and the insurance carriers. As such, the estimate of these renewal commissions receivables has not been discounted to
reflect a significant financing component.
Consulting — We earn revenue for advisory and consulting work that may be structured as different types of service offerings,
including annual recurring projects, projects of a short duration or stand-ready obligations. Collectively, our consulting arrangements
represent approximately 32% to 33% of customer contract revenue from continuing operations each year.
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.
In assessing our performance obligations, our consulting work is typically highly integrated, with the various promised services
representing inputs of the combined overall output. We view these arrangements as representing a single performance obligation. To
the extent we do not integrate our services, as is the case with unrelated services that may be sourced from different areas of our
business, we consider these separate performance obligations.
Fee terms can be in the form of fixed-fees (including fixed-fees offset by commissions), time-and-expense fees, commissions, per-
participant fees, or fees based on assets under management. Payment is typically due on a monthly basis as we perform under the
contract, and we are entitled to be reimbursed for work performed to date in the event of termination.
The majority of our revenue from these consulting engagements is recognized over time, either because our clients are simultaneously
receiving and consuming the benefits of our services, or because we have an enforceable right to payment for performance rendered to
date. Additionally, from time to time, we may be entitled to an additional fee based on achieving certain performance criteria. To the
extent that we cannot estimate with reasonable assurance the likelihood that we will achieve the performance target, we will
‘constrain’ this portion of the transaction price and recognize it when or as the uncertainty is resolved.
We use different progress measures to determine our revenue depending on the nature of the engagement:
•
•
Annual recurring projects and projects of short duration. These projects are typically straightforward and highly predictable
in nature with either time-and-expense or fixed fee terms. Time-and-expense fees are recognized as hours or expenses are
incurred using the ‘right to invoice’ practical expedient allowed under ASC 606. For fixed-fee arrangements, to the extent
estimates can be made of the remaining work required under the arrangement, revenue is based upon the proportional
performance method, using the value of labor hours spent to date compared to the estimated total value of labor hours for the
entire engagement. We believe that cost represents a faithful depiction of the transfer of value because the completion of
these performance obligations is based upon the professional services of employees of differing experience levels and thereby
costs. It is appropriate that satisfaction of these performance obligations considers both the number of hours incurred by each
employee and the value of each labor hour worked (as opposed to simply the hours worked).
Stand-ready obligations. These projects consist of repetitive monthly or quarterly services performed consistently each
period. As none of the activities provided under these services are performed at specified times and quantities, but at the
discretion of each customer, our obligation is to stand ready to perform these services on an as-needed basis. These
arrangements represent a ‘series’ performance obligation in accordance with ASC 606. Each time increment (i.e., each month
or quarter) of standing ready to provide the overall services is distinct and the customer obtains value from each period of
service independent of the other periods of service.
Where we recognize revenue on a proportional performance basis, the amount we recognize is affected by a number of factors that can
change the estimated amount of work required to complete the project such as the staffing on the engagement and/or the level of client
participation. Our 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
revenue to be received for that engagement is 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.
Outsourced Administration — We provide customized benefits outsourcing and co-sourcing solutions services in relation to the
administration of defined benefit, defined contribution, and health and welfare plans. These plans are sponsored by our clients to
provide benefits to their active or retired employees. Additionally, these services include operating call centers and may include
providing access to, and managing, a variety of consumer-directed savings accounts. The operation of call centers and consumer-
directed accounts can be provisioned as part of an ongoing administration or solutions service, or separately as part of a broking
arrangement. The products and services available to all clients are the same, but the selections by a client can vary and portray
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customized products and services based on the customer’s specific needs. Our services often include the use of proprietary systems
that are configured for each of our clients’ needs. In total, our outsourced administration services represent approximately 12% to 13%
of customer contract revenue from continuing operations each year.
These contracts typically consist of an implementation phase and an ongoing administration phase:
•
Implementation phase. Work performed during the implementation phase is considered a set-up activity because it does not
transfer a service to the customer, and therefore costs are deferred during this phase of the arrangement. Since these
arrangements are longer term in nature and subject to more changes in scope as the project progresses, our contracts generally
provide that if the client terminates a contract, we are entitled to an additional payment for services performed through the
termination date designed to recover our up-front costs of implementation.
• Ongoing administration phase. The ongoing administration phase includes a variety of plan administration services, system
hosting and support services. More specifically, these services include data management, calculations, reporting,
fulfillment/communications, compliance services, call center support, and in our health and welfare arrangements, annual
onboarding and enrollment support. While there are a variety of activities performed, the overall nature of the obligation is to
provide an integrated outsourcing solution to the customer. The arrangement represents a stand-ready obligation to perform
these activities on an as-needed basis. The customer obtains value from each period of service, and each time increment (i.e.,
each month, or each benefits cycle in our health and welfare arrangements) is distinct and substantially the same.
Accordingly, the ongoing administration services represent a ‘series’ in accordance with ASC 606 and are deemed one
performance obligation.
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. Fees for these arrangements can be fixed, per-participant-per-
month, or in the case of call center services, provided in conjunction with our broking services, with an allocation based on
commissions. Our fees are not typically payable until the commencement of the ongoing administration phase. However, in our health
and welfare arrangements, we begin transferring services to our customers approximately four months prior to payments being due as
part of our annual onboarding and enrollment work. Although our per-participant-per-month and commission-based fees are
considered variable, they are typically predictable in nature, and therefore we generally do not ‘constrain’ any portion of our
transaction price estimates. Once fees become payable, payment is typically due on a monthly basis as we perform under the contract,
and we are entitled to be reimbursed for work performed to date in the event of termination.
Revenue is recognized over time as the services are performed because our clients are simultaneously receiving and consuming the
benefits of our services. For our health and welfare arrangements where each benefits cycle represents a time increment under the
series guidance, revenue is recognized based on proportional performance. We use an input measure (value of labor hours worked) as
the measure of progress. Given that the service is stand-ready in nature, it can be difficult to predict the remaining obligation under the
benefits cycle. Therefore, the input measure is based on the historical effort expended each month, which is measured as labor cost.
This results in slightly more revenue being recognized during periods of annual onboarding since we are performing both our normal
monthly services and our annual services during this portion of the benefits cycle.
For all other outsourced administration arrangements where a month represents our time increment under the series guidance, we
allocate transaction price to the month we are performing our services. Therefore, the amount recognized each month is the variable
consideration related to that month plus the fixed monthly or annual fee. The fixed monthly or annual fee is recognized on a straight-
line basis. Revenue recognition for these types of arrangements is therefore more consistent throughout the year.
Reimbursed expenses — 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 as incurred. Reimbursed expenses represented approximately 1% or less of customer contract revenue from continuing
operations each year. Taxes collected from customers and remitted to government authorities are recorded net and are excluded from
revenue.
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.
Cost to obtain or fulfill contracts — Costs to obtain customers include commissions for brokers under specific agreements that would
not be incurred without a contract being signed and executed. The Company has elected to apply the ASC 606 ‘practical expedient’
which allows us to expense these costs as incurred if the amortization period related to the resulting asset would be one year or less.
The Company has no significant instances of contracts that would be amortized for a period greater than a year, and therefore has no
contract costs capitalized for these arrangements.
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Costs to fulfill include costs incurred by the Company that are expected to be recovered within the expected contract period. The costs
associated with our system implementation activities and consulting contracts are recorded through time entry.
For our broking business, the Company must estimate the fulfillment costs incurred during the pre-placement of the broking contracts.
These judgments include:
• which activities in the pre-placement process should be eligible for capitalization;
•
•
•
the amount of time and effort expended on those pre-placement activities;
the amount of payroll and related costs eligible for capitalization; and,
the monthly or quarterly timing of underlying insurance and reinsurance policy inception dates.
We amortize costs to fulfill over the period we receive the related benefits. For broking pre-placement costs, this is typically less than
a year. In our system implementation and consulting arrangements, we include the likelihood of contract renewals in our estimate of
the amortization period, resulting in most costs being amortized for a greater length of time than the initial contract term.
Transaction and transformation, net — Transaction and transformation, net consists of two components, transaction-related costs and
termination income receipts related to acquisitions and disposals, and transformation expenses associated with our Transformation
program (see Note 6 — Restructuring Costs).
Transaction costs primarily include legal and other professional fees as well as other costs that are directly attributable to an
acquisition or an in-process but not yet completed divestiture. Costs related to divestitures incurred during the period of the divestment
are not included in transaction costs, but are instead included in the gain or loss on disposal of a business within Other income, net on
the consolidated statements of comprehensive income. Additionally, on July 26, 2021, WTW and Aon plc (‘Aon’) announced they had
terminated the business combination agreement between the two companies previously entered into in March 2020. Per the terms of
the agreement and as part of this termination, Aon agreed to pay WTW $1 billion in connection with such termination, which was
received by WTW on July 27, 2021. The $1 billion income receipt was included within Transaction and transformation, net in the
consolidated statement of comprehensive income during the year ended December 31, 2021.
Transformation costs are costs incurred under the Transformation program but are not eligible to be classified as restructuring costs
under ASC 420, Exit or Disposal Cost Obligation (‘ASC 420’). These costs are not expected to continue beyond the defined period of
the program.
Recent Accounting Pronouncements
There were no new pronouncements that are expected to have a significant impact to the Company or its consolidated financial
statements.
Other Legislation
Inflation Reduction Act
The Inflation Reduction Act of 2022 was enacted into law on August 16, 2022 and became effective January 1, 2023. The Company is
currently evaluating the provisions of the new legislation, the most significant of which are the corporate alternative minimum tax
(‘CAMT’) and the share repurchase excise tax. The Company does not expect the CAMT or excise tax to have a significant impact on
its consolidated financial statements.
Pillar Two
On December 12, 2022, E.U. member states reached an agreement to implement Pillar Two, which introduces a global corporate
minimum tax of 15% for certain large multinational companies beginning in 2023. For the rules to take effect, E.U. member states are
required to enact domestic legislation by the end of 2023 to be effective January 1, 2024. The Company is currently evaluating the
impact Pillar Two will have on its consolidated financial statements.
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Note 3 — Acquisitions and Divestitures
The following disclosures discuss significant transactions during the three-year period ended December 31, 2022.
Acquisitions
The Company completed acquisitions during the years ended December 31, 2022, 2021 and 2020 for combined cash payments of
$111 million, $52 million, and $79 million, respectively, and contingent and deferred consideration fair valued at $28 million, $21
million, and $9 million, respectively.
Divestitures
Divestment of Russian Business
During the first quarter of 2022, WTW announced its intention to transfer ownership of its Russian subsidiaries to local management
who will operate independently in the Russian market. Due to the sanctions and prohibitions on certain types of business and
activities, WTW deconsolidated its Russian entities on March 14, 2022. The transfer of its Russian subsidiaries to local management
was completed on the agreed-upon terms on July 18, 2022, and the transfer was registered in Russia on July 25, 2022. The
deconsolidation in the first quarter of 2022 resulted in a loss of $57 million, which includes an allocation of Risk & Broking goodwill,
and was recognized as a loss on disposal of a business within Other income, net on our consolidated statement of comprehensive
income. Further, certain Russian insurance contracts were placed historically by our U.K. brokers into the London market, the
majority of which were under multi-year terms resulting in both current and non-current accounts receivables. Total net assets
impaired, including accounts receivable balances related to our Russian business that are held outside of our Russian entities, were
$81 million recorded during the three months ended March 31, 2022 in Other operating expenses on our consolidated statement of
comprehensive income.
Willis Re Divestiture
On August 13, 2021, the Company entered into a definitive agreement to sell its treaty-reinsurance business (‘Willis Re’) to Arthur J.
Gallagher & Co. (‘Gallagher’), a leading global provider of insurance, risk management and consulting services, for total upfront cash
consideration of $3.25 billion plus an earnout payable in 2025 of up to $750 million in cash, subject to certain adjustments. The deal
was subject to required regulatory approvals and clearances, as well as other customary closing conditions, and was completed on
December 1, 2021 (‘Principal Closing’). Although the majority of the Willis Re businesses transferred to Gallagher at Principal
Closing, the assets and liabilities of certain Willis Re businesses were not transferred to Gallagher at the time due to local territory
restrictions (‘Deferred Closing’). The Deferred Closing for all but one business was completed during the second quarter of 2022, and
all net earnings of the Deferred Closing businesses accumulated between the Principal Closing and Deferred Closing remained
payable to Gallagher at June 30, 2022 and September 30, 2022. The Company recognized a preliminary pre-tax gain of $2.3 billion
upon completion of the sale in 2021, and during the second quarter of 2022, WTW recognized a $60 million reduction to the pre-tax
gain related to an updated estimate of the working capital transferred upon disposal. The Company recognized the final allocation of
the proceeds and related tax expense, as well as an adjustment of certain indemnities for the three months ended September 30, 2022.
These amounts as well as the amounts payable with respect to the settled Deferred Closing businesses were remitted to Gallagher in
October 2022. The remaining Deferred Closing business occurred during the fourth quarter of 2022, and all businesses have now been
transferred to Gallagher. The gain is subject to tax in certain jurisdictions, mainly in the U.S., and is predominantly tax-exempt in the
U.K.
In connection with the transaction, the Company reclassified the results of its Willis Re operations as discontinued operations on its
consolidated statements of comprehensive income and reclassified Willis Re assets and liabilities as held for sale on its consolidated
balance sheets. The consolidated cash flow statements were not adjusted for the divestiture. Willis Re was previously included in the
Company's former Investment, Risk and Reinsurance segment. As noted above, the amounts owed as part of the Deferred Closing
were classified as held for sale on the consolidated balance sheet at December 31, 2021, and the results of these businesses following
the Principal Closing until their respective Deferred Closing dates have been included in income from discontinued operations on the
consolidated statements of comprehensive income.
The Company will account for the earnout as a gain contingency and therefore did not record any receivables upon close. Rather, the
earnout will be recognized in the Company’s consolidated financial statements, if it is received, in 2025.
A number of services are continuing under a cost reimbursement Transition Services Agreement (‘TSA’) in which WTW is providing
Gallagher support including real estate leases, information technology, payroll, human resources and accounting. These services are
expected to be provided for a period not to exceed two years from the Principal Closing. Fees earned under the TSA were $45 million
and $4 million during the years ended December 31, 2022 and 2021, respectively, and have been recognized as a reduction to the costs
incurred to service the TSA and are included in continuing operations within Other operating expenses on the consolidated statements
86
of comprehensive income. Costs incurred to service the TSA are expected to be reduced as part of the Company’s Transformation
program (see Note 6 — Restructuring Costs for a description of the program) as quickly as possible when the services are no longer
required by Gallagher.
The following selected financial information relates to the operations of Willis Re for the periods presented:
Revenue from discontinued operations
Costs of providing services
Salaries and benefits
Other operating expenses
Depreciation and amortization
Transaction and transformation, net
Total costs of providing services
Other income, net
Income from discontinued operations before income taxes
(Loss)/gain on disposal of Willis Re
Benefit from/(provision for) income tax expense
Net income (payable to)/receivable from Gallagher on Deferred Closing
(Loss)/income from discontinued operations, net of tax
2022
Years ended December 31,
2021
2020
$
48
$
721
$
14
10
—
—
24
5
29
(65)
1
(5)
(40)
$
350
59
2
33
444
2
279
2,300
(500)
1
2,080
$
$
737
350
61
2
—
413
3
327
—
(69)
—
258
The expense amounts reflected above represent only the direct costs attributable to the Willis Re business and exclude allocations of
corporate costs that will be retained following the sale. Neither the discontinued operations presented above, nor the unallocated
corporate costs, reflect the impact of any cost reimbursement that has been received under the TSA.
Amounts classified as held for sale within our consolidated balance sheet at December 31, 2021 were related to amounts payable as
part of the Deferred Closing. Certain amounts included in the consolidated balance sheets have been excluded from the held-for-sale
balances disclosed since the assets did not transfer under the terms of the sale agreement, and instead will be settled by the Company.
At December 31, 2022 and 2021, the amounts of significant assets and liabilities related to the Willis Re businesses which were not
transferred in the sale and are therefore not classified as held for sale on the consolidated balance sheets are $3.2 billion and $2.6
billion of fiduciary assets and liabilities, $29 million and $71 million of accounts receivable and $73 million and $91 million of other
current liabilities, respectively. Other than indemnified amounts, these amounts will be settled over time.
Miller Divestiture
On March 1, 2021, the Company completed the transaction to sell its U.K.-based, majority-owned wholesale subsidiary Miller for
final total consideration of GBP 623 million ($818 million), which includes amounts paid to the minority shareholder. The $356
million net tax-exempt gain on the sale was included in Other income, net in the consolidated statement of comprehensive income
during the year ended December 31, 2021. Prior to disposal, Miller was included within the Company's former Investment, Risk and
Reinsurance segment.
Max Matthiessen Divestiture
In September 2020, the Company completed the transaction to sell its Swedish majority-owned subsidiary MM Holding AB (‘Max
Matthiessen’) for total consideration of SEK 2.3 billion ($262 million) plus certain other adjustments, resulting in a tax-exempt gain
on the sale of $86 million, which is included in Other income, net in the consolidated statement of comprehensive income during the
year ended December 31, 2020. Of the total consideration, the Company financed a SEK 600 million ($68 million) note repayable by
the purchaser. The note has no fixed term but is repayable subject to certain terms and conditions and bears an interest rate that could
range from 5% to 10%, increasing the longer the note remains outstanding. This note receivable is included in Other non-current
assets in the consolidated balance sheets. Prior to disposal, Max Matthiessen was included within the Company's former Investment,
Risk and Reinsurance segment.
Other Disposals
The Company completed other disposals during the years ended December 31, 2022, 2021 and 2020 for cash proceeds of $1 million,
$75 million, and $30 million, respectively, and net gains on disposal of $64 million, $26 million, and $18 million, respectively. For the
year ended December 31, 2022, the Company recognized non-cash proceeds on disposals of $63 million; there were no non-cash
proceeds recognized on disposals for the years ended December 31, 2021 and 2020.
87
Note 4 — Revenue
Disaggregation of Revenue
The Company reports revenue by segment in Note 5 — Segment Information. The following table presents revenue by service
offering and segment, as well as a reconciliation to total revenue for the years ended December 31, 2022, 2021 and 2020. Along with
reimbursable expenses and other, total revenue by service offering represents our revenue from customer contracts. The prior years’
segment information has been retrospectively adjusted to conform to the current year presentation.
Year Ended
December
31,
HWC
2022
2021
2020
R&B
2022
2021
2020
Divested
Businesses
2022
2021
2020
Corporate (i)
2022
2021
2020
Total
2022
2021
2020
$
$
$
$
Broking
Consulting
Outsourced
Administration
Other
Total
revenue by
service
offering
Reimbursable
expenses and
other (i)
Total
revenue
from
customer
contracts
Interest and
other
income (ii)
Total
revenue
$
1,415
1,295
1,141
2,745
2,822
2,707
—
65
290
7
—
1
2,522
2,538
2,413
370
384
336
—
6
2
10
8
5
$
$
979
1,046
1,028
75
88
81
—
—
—
—
—
—
$
332
352
295
194
175
154
—
—
31
—
4
3
$
5,248
5,231
4,877
3,384
3,469
3,278
—
71
323
17
12
9
4,167
4,182
4,139
$
$
$
2,902
2,936
2,756
$
$
$
1,054
1,134
1,109
$
$
$
526
531
483
$
$
$
8,649
8,783
8,487
$
$
$
64
60
64
11
7
7
—
—
—
2
(24)
(4)
77
43
67
$
$
$
$
$
5,312
5,291
4,941
3,395
3,476
3,285
—
71
323
19
(12)
5
$
39
37
18
76
95
38
—
35
1
25
5
4
5,351
5,328
4,959
3,471
3,571
3,323
—
106
324
44
(7)
9
8,726
8,826
8,554
$
$
$
140
172
61
$
$
$
8,866
8,998
8,615
(i)
(ii)
Reimbursable expenses and other, as well as Corporate revenue, are excluded from segment revenue, but included in total revenue on the consolidated statements of
comprehensive income. Amounts included in Corporate revenue may include eliminations, adjustments to reserves and impacts from hedged revenue transactions.
Interest and other income is included in segment revenue and total revenue, however it has been presented separately in the above tables because it does not arise
directly from contracts with customers. In 2022, both HWC’s and R&B’s interest and other income resulted primarily from book-of-business settlements. For HWC
and R&B, these amounts totaled $19 million and $52 million, respectively, for the year ended December 31, 2022. For the year ended December 31, 2021, for
HWC and R&B, these amounts totaled $17 million and $82 million, respectively. Interest income comprised $55 million, $12 million and $18 million for the years
ended December 31, 2022, 2021 and 2020, respectively. In 2022, the interest income earned by HWC, R&B and Corporate was $8 million, $25 million and $22
million, respectively.
88
The following table presents revenue by the geography where our work was performed for the years ended December 31, 2022, 2021
and 2020. The reconciliation to total revenue on our consolidated statements of comprehensive income and to segment revenue is
shown in the table above. The prior years’ geographic information has been retrospectively adjusted to conform to the current year
presentation.
Year Ended
December 31,
HWC
2022
2021
2020
R&B
2022
2021
2020
Divested Businesses
2022
2021
2020
Corporate
2022
2021
2020
Total
2022
2021
2020
Contract Balances
$
$
$
$
North America
Europe
International
Total revenue by geography
$
3,569
3,456
3,287
1,328
1,295
1,237
—
17
19
7
8
7
$
1,266
1,376
1,219
1,527
1,623
1,549
—
53
298
9
3
2
4,904
4,776
4,550
$
$
$
2,802
3,055
3,068
$
$
$
413
399
371
529
551
492
—
1
6
1
1
—
943
952
869
$
$
$
$
5,248
5,231
4,877
3,384
3,469
3,278
—
71
323
17
12
9
8,649
8,783
8,487
The Company reports accounts receivable, net on the consolidated balance sheet, which includes billed and unbilled receivables and
current contract assets. In addition to accounts receivable, net, the Company had the following non-current contract assets and
deferred revenue balances at December 31, 2022 and 2021:
Billed receivables, net of allowance for doubtful accounts of $46 million and $45
million
Unbilled receivables
Current contract assets
Accounts receivable, net
Non-current accounts receivable, net
Non-current contract assets
Deferred revenue
December 31, 2022
December 31, 2021
$
$
$
$
$
1,464
457
466
2,387
9
745
646
$
$
$
$
$
1,504
431
435
2,370
23
532
576
The Company receives payments from customers based on billing schedules or terms as written in our contracts. Those balances
denoted as contract assets relate to situations where we have completed some or all performance under the contract, however our right
to consideration is conditional. Contract assets result most materially in our Medicare intermediary businesses. The significant
increases in both current and non-current contract assets relate to our direct-to-consumer Medicare broking business. Billed and
unbilled receivables are recorded when the right to consideration becomes unconditional. Deferred revenue relates to payments
received in advance of performance under the contract and is recognized as revenue as (or when) we perform under the contract.
Accounts receivable are stated at estimated net realizable values. The following table presents the changes in our allowance for
doubtful accounts for the years ended December 31, 2022, 2021 and 2020.
Balance at beginning of year
Additions charged to costs and expenses
Deductions/other movements
Foreign exchange
Balance at end of year
December 31,
2022
December 31,
2021
December 31,
2020
$
$
45
14
(20)
7
46
$
$
40
16
(18)
7
45
$
$
36
28
(27)
3
40
89
The changes in our allowance for doubtful accounts presented above do not include receivables that were impaired as a result of the
divestment of our Russian businesses in March 2022. See Note 3 — Acquisitions and Divestitures.
During the year ended December 31, 2022, revenue of approximately $430 million was recognized that was reflected as deferred
revenue at December 31, 2021.
During the year ended December 31, 2022, the Company recognized revenue of approximately $25 million related to performance
obligations satisfied in a prior period.
Performance Obligations
The Company has contracts for which performance obligations have not been satisfied as of December 31, 2022 or have been partially
satisfied as of this date. The following table shows the expected timing for the satisfaction of the remaining performance obligations.
This table does not include contract renewals or variable consideration, which was excluded from the transaction prices in accordance
with the guidance on constraining estimates of variable consideration.
In addition, in accordance with ASC 606, the Company has elected not to disclose the remaining performance obligations when one or
both of the following circumstances apply:
•
•
Performance obligations which are part of a contract that has an original expected duration of less than one year, and
Performance obligations satisfied in accordance with ASC 606-10-55-18 (‘right to invoice’).
Revenue expected to be recognized on contracts as of
December 31, 2022
2023
2024
2025 onward
Total
$
761
$
489
$
566
$
1,816
Since most of the Company’s contracts are cancellable with less than one year’s notice and have no substantive penalty for
cancellation, the majority of the Company’s remaining performance obligations as of December 31, 2022 have been excluded from the
table above.
Costs to obtain or fulfill a contract
The Company incurs costs to obtain or fulfill contracts which it would not incur if a contract with a customer was not executed.
The following table shows the categories of costs that are capitalized and deferred over the expected life of a contract.
December 31,
2022
Costs to fulfill
December 31,
2021
December 31,
2020
$
$
189
421
(407)
—
—
(6)
197
$
$
191
454
(451)
(4)
(1)
—
189
$
$
162
455
(428)
—
(1)
3
191
Balance at beginning of the year
New capitalized costs
Amortization
Disposals
Impairments
Foreign currency translation
Balance at end of the year
Note 5 — Segment Information
WTW has two reportable operating segments or business areas:
• Health, Wealth & Career (‘HWC’); and
•
Risk & Broking (‘R&B’).
WTW’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 and the methods of achieving these 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-tax basis.
The Company experiences seasonal fluctuations of its revenue. Revenue is typically higher during the Company’s first and fourth
quarters due primarily to the timing of broking-related activities.
90
Under the segment structure and for internal and segment reporting, WTW segment revenue includes commissions and fees, interest
and other income. U.S. GAAP revenue also includes amounts that were directly incurred on behalf of our clients and reimbursed by
them (reimbursable expenses), which are removed from segment revenue. Segment operating income excludes certain costs, including
(i) amortization of intangibles; (ii) restructuring costs; (iii) certain transaction and transformation expenses; (iv) certain litigation
provisions; and (v) to the extent that the actual expense based upon which allocations are made differs from the forecast/budget
amount, a reconciling item will be created between internally-allocated expenses and the actual expenses that we report for U.S.
GAAP purposes.
The following table presents segment revenue and segment operating income for our reportable segments for the years ended
December 31, 2022, 2021 and 2020. The prior years’ information has been retrospectively adjusted to conform to the current year
presentation.
HWC
R&B
Total
Segment revenue
Years ended December 31
2021
2022
2020
2022
Segment operating income
Years ended December 31
2021
$
$
5,287
3,460
8,747
$
$
5,268
3,564
8,832
$
$
4,895
3,316
8,211
$
$
1,382
734
2,116
$
$
1,346
835
2,181
$
$
2020
1,236
714
1,950
The following table presents reconciliations of the information reported by segment to the Company’s consolidated amounts reported
for the years ended December 31, 2022, 2021 and 2020.
Revenue:
Total segment revenue
Divested businesses (i)
Reimbursable expenses and other
Revenue
Total segment operating income
Divested businesses (i)
Impairment (ii)
Amortization
Restructuring costs (iii)
Transaction and transformation, net (iv)
Provision for significant litigation (v)
Unallocated, net (vi)
Income from operations
Interest expense
Other income, net
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES
$
$
$
2022
Years ended December 31,
2021
2020
$
$
$
8,747
—
119
8,866
2,116
—
(81)
(312)
(99)
(181)
—
(265)
1,178
(208)
288
$
$
$
8,832
106
60
8,998
2,181
(24)
—
(369)
(26)
806
—
(366)
2,202
(211)
701
8,211
324
80
8,615
1,950
(13)
—
(461)
(24)
(110)
(65)
(418)
859
(244)
396
$
1,258
$
2,692
$
1,011
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Represents the revenue and income from operations of certain Investment, Risk and Reinsurance businesses which were divested in 2021 and 2020 and not
classified as discontinued operations.
Represents the impairment related to the net assets of our Russian business that are held outside of our Russian entities (see Note 3 — Acquisitions and Divestitures
for further information).
See Note 6 — Restructuring Costs for the composition of costs for 2022 and 2021. In 2020, restructuring costs related to minor restructuring activities carried out
by various business lines throughout the Company.
In 2022, in addition to legal fees and other transaction costs, includes primarily consulting fees related to the Transformation program (see Note 6 — Restructuring
Costs). For the year ended December 31, 2021, includes the $1 billion income receipt related to the termination of, and fees related to, the then-proposed Aon
combination; includes transaction costs related to the then-proposed Aon combination in 2020.
Represents the recognition of settlement expense attributable to the Company's Merger-related securities litigation during the year ended December 31, 2020.
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.
91
None of the Company’s customers individually represented more than 10% of its consolidated revenue for the years ended December
31, 2022, 2021 and 2020.
Below are our revenue and tangible long-lived assets for Ireland, our country of domicile, countries with significant concentrations,
and all other foreign countries as of and for the years ended as indicated:
Ireland
United States
United Kingdom
Rest of World
Total Foreign Countries
(i)
Tangible long-lived assets consist of fixed assets and ROU assets.
Note 6 — Restructuring Costs
Revenue
Years ended December 31,
2021
2020
2022
Long-Lived Assets (i)
December 31,
2022
December 31,
2021
$
130
$
197
$
157
$
11
$
3
4,760
1,563
2,413
8,736
8,866
$
4,621
1,632
2,548
8,801
8,998
$
4,359
1,604
2,495
8,458
8,615
$
465
496
332
1,293
1,304
$
562
605
401
1,568
1,571
$
In the fourth quarter of 2021, the Company initiated a three-year ‘Transformation program’ designed to enhance operations, optimize
technology and align its real estate footprint to its new ways of working. During the third quarter of 2022, we revised the expected
costs and savings under the program and we now expect the program to generate annual cost savings in excess of $360 million by the
end of 2024. The program is expected to incur cumulative costs of approximately $630 million and capital expenditures of
approximately $270 million, for a total investment of $900 million. The main categories of charges will be in the following four areas:
•
•
•
Real estate rationalization — includes costs to align the real estate footprint to the new ways of working (hybrid work) and
includes breakage fees and the impairment of ROU assets and other related leasehold assets.
Technology modernization — these charges are incurred in moving to common platforms and technologies, including
migrating certain platforms and applications to the cloud. This category will include the impairment of technology assets that
are duplicative or no longer revenue-producing, as well as costs for technology investments that do not qualify for
capitalization.
Process optimization — these costs will be incurred in the right-shoring strategy and automation of our operations, which
will include optimizing resource deployment and appropriate colleague alignment. These costs will include process and
organizational design costs, severance and separation-related costs and temporary retention costs.
• Other — other costs not included above including fees for professional services, other contract terminations not related to the
above categories and supplier migration costs.
Certain costs under the Transformation program are accounted for under ASC 420 and are included as restructuring costs in the
consolidated statements of comprehensive income. Other costs incurred under the Transformation program are included in transaction
and transformation, net and were $136 million for the year ended December 31, 2022; there were no such costs incurred for the year
92
ended December 31, 2021. An analysis of total restructuring costs incurred under the Transformation program by category and by
segment and corporate functions, from commencement to December 31, 2022, is as follows:
2021
Real estate rationalization
Technology modernization
Process optimization
Other
2022
Real estate rationalization
Technology modernization
Process optimization
Other
Total
Real estate rationalization
Technology modernization
Process optimization
Other
Total
HWC
R&B
Corporate
Total
$
$
— $
—
—
—
— $
5
—
—
—
—
1
—
—
—
1
—
1
$
—
3
—
—
—
8
—
—
8
$
19
—
—
2
79
16
—
—
98
16
—
2
116
$
$
19
5
—
2
79
19
1
—
98
24
1
2
125
A rollforward of the liability associated with cash-based charges related to restructuring costs associated with the Transformation
program is as follows:
Balance at October 1, 2021
Charges incurred
Cash payments
Balance at December 31, 2021
Charges incurred
Cash payments
Balance at December 31, 2022
Note 7 — Income Taxes
Provision for income taxes
Real estate
rationalization
$
— $
—
—
—
27
(21)
6
$
$
Technology
modernization
Process
optimization
Other
Total
— $
—
—
—
—
—
— $
— $
—
—
—
1
(1)
— $
— $
2
(1)
1
—
(1)
— $
—
2
(1)
1
28
(23)
6
An analysis of income from continuing operations before income taxes by taxing jurisdiction is shown below:
Ireland
U.S.
U.K.
Rest of World
Total
2022
Years ended December 31,
2021
2020
(160) $
394
142
882
1,258
$
673
516
552
951
2,692
$
$
(5)
(97)
184
929
1,011
$
$
93
The components of the provision for income taxes from continuing operations include:
Current tax expense:
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 (expense)/benefit
Total provision for income taxes
Effective tax rate reconciliation
2022
Years ended December 31,
2021
2020
$
$
(103) $
(39)
(13)
(93)
(248)
52
(5)
(7)
14
54
(194) $
(79) $
(25)
(33)
(303)
(440)
(41)
3
(65)
7
(96)
(536) $
(3)
3
(16)
(134)
(150)
(79)
—
(48)
28
(99)
(249)
The reported provision for income taxes differs from the amounts that would have resulted had the reported income from continuing
operations 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 CONTINUING OPERATIONS BEFORE
INCOME TAXES
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
Net adjustments on acquisition costs
Impact of change in rate on deferred tax balances
Effect of foreign exchange and other differences
Changes in valuation allowances
Net tax effect on intra-group items
Net tax effect on disposal of operations
Tax differentials of non-U.S. jurisdictions
Impact of U.S. state and local taxes
Global Intangible Low-Taxed Income (GILTI)
Base Erosion Anti-Abuse Tax (BEAT)
Tax on unremitted earnings
Other items, net
Provision for income taxes
2022
Years ended December 31,
2021
2020
$
1,258
$
2,692
$
21%
(264)
21%
(565)
1,011
21%
(212)
(25)
(4)
(1)
28
1
84
1
20
(42)
(10)
24
(14)
8
(194)
$
(21)
13
(36)
—
2
84
62
(24)
(23)
(4)
(22)
—
(2)
(536)
$
(19)
(15)
(7)
(4)
(8)
90
16
(2)
4
(3)
(83)
—
(6)
(249)
$
The current year effective tax rate includes a $34 million tax benefit associated with amending the Company’s U.S. federal income tax
returns for tax years 2019 and 2020, primarily related to a reduction in Base Erosion and Anti Abuse Tax (‘BEAT’), and also includes
a $22 million income tax benefit associated with foreign exchange remeasurement on income tax account balances. The effective tax
rate for the year ended December 31, 2021 includes a $250 million estimated tax expense related to the income receipt of the
termination payment as well as a $40 million tax expense related to the remeasurement of deferred tax assets and liabilities associated
with an increase in the U.K. tax rate from 19% to 25%. Included in the BEAT expense for 2020 is a $29 million true-up related to the
2019 tax year as a result of certain elections of the CARES Act.
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
provisions for income tax on operations have been reconciled above to the U.S. federal statutory tax rate of 21% due to significant
operations in the U.S.
94
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.
Deferred income tax assets and liabilities included in the consolidated balance sheets at December 31, 2022 and 2021 are comprised of
the following:
Deferred tax assets:
Accrued expenses not currently deductible
Interest carryforwards
Net operating losses
Capital loss carryforwards
Accrued retirement benefits
Operating lease liabilities
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
Operating lease right-of-use assets
Cost of tangible assets, net of related depreciation
Prepaid retirement benefits
Accrued revenue not currently taxable
Unremitted earnings
Deferred tax liabilities
Net deferred tax liabilities
December 31,
2022
2021
$
$
$
$
$
69
174
44
1
85
125
97
18
4
617
(28)
589
679
106
44
142
262
36
1,269
680
$
$
$
$
$
72
91
71
1
189
153
92
22
1
692
(42)
650
735
142
95
228
194
22
1,416
766
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,
2022
2021
$
$
68
748
680
$
$
79
845
766
At December 31, 2022, we had U.S. federal and non-U.S. net operating loss carryforwards amounting to $113 million of which $61
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 2023 through 2042. In addition, we had U.S. state net operating loss carryforwards of $432
million, of which $31 million can be indefinitely carried forward, while the remaining $401 million will expire in varying amounts
from 2023 to 2042.
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 $589 million,
net of the valuation allowance. During 2022, the Company decreased its valuation allowance by $14 million, primarily related to
certain state net operating losses. The Company determined the losses and the related valuation allowance would never be realized.
During 2021, the Company decreased its valuation allowance by $42 million, primarily related to the disposal of underlying positions
which were part of the divestment of Miller. In addition, part of the decrease reflected the utilization of the U.K. capital loss
carryforward, the benefit of which was recorded in discontinued operations. During 2020, the Company increased its valuation
allowance by $8 million, primarily related to non-U.S. deferred tax assets.
95
At December 31, 2022 and 2021, the Company had valuation allowances of $28 million and $42 million, respectively, to reduce its
deferred tax assets to their estimated realizable values. The valuation allowance at December 31, 2022 primarily relates to deferred
taxes on U.S. state and non-U.S. net operating losses of $10 million and $14 million, respectively.
An analysis of our valuation allowance is shown below.
Balance at beginning of year
Additions charged to costs and expenses
Deductions
Balance at end of year
2022
Years ended December 31,
2021
2020
$
$
42
8
(22)
28
$
$
84
3
(45)
42
$
$
76
17
(9)
84
The movement in the current-year valuation allowance differs from the 2022 rate reconciliation primarily due to the write-down of
state net operating losses and the related valuation allowance. In addition, current-year and prior-year valuation allowances differ from
the 2022 and 2021 rate reconciliations, respectively, as part of the tax benefits were allocated to discontinued operations.
The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when it expects that it will recover
those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the investments. At December 31,
2022 the Company has $16.5 billion of undistributed earnings in subsidiaries where no deferred tax has been recognized. Of this
amount $9.3 billion relates to earnings which have been reinvested indefinitely and $7.2 billion relates to earnings identified as being
recoverable in an untaxable manner. It is not practicable to calculate the tax cost of repatriating the unremitted earnings which have
been reinvested indefinitely. If future events, including material changes in estimates of cash, working capital and long-term
investment requirements 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, 2022, the amount of unrecognized tax benefits associated with uncertain tax positions, determined in accordance
with ASC Subtopic 740-10, excluding interest and penalties, was $47 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
Cumulative translation adjustment and other adjustments
Balance at end of year
2022
2021
2020
$
$
43
—
16
(2)
(1)
(6)
(3)
47
$
$
50
—
—
—
—
(6)
(1)
43
$
$
49
4
1
—
(3)
(2)
1
50
At December 31, 2022, the amount of unrecognized tax benefits associated with uncertain tax positions also includes $6 million which
was allocated to tax expense in discontinued operations. The liability for unrecognized tax benefits for each of the years ended
December 31, 2022, 2021 and 2020 can be reduced by $3 million 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 be a favorable impact on our effective tax rate. There are no material balances that would result in
adjustments to other tax accounts.
Interest and penalties related to unrecognized tax benefits are included as a component of income tax expense. At December 31, 2022
and 2021, we had cumulative accrued interest of $5 million. Accrued penalties were immaterial in 2022 and 2021.
Tax expense allocated to continuing operations for both the years ended December 31, 2022 and 2021 includes $1 million of interest
expense.
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 $3 million to $5 million, excluding interest and penalties.
The Company and its subsidiaries file income tax returns in various tax jurisdictions in which it operates.
96
During 2022, the Internal Revenue Service (‘IRS’) closed its examination of Willis North America Inc. and subsidiaries’ federal
income tax filings for the tax years ended December 31, 2017 and December 31, 2018. There were no significant adjustments to
income tax as reported.
We have ongoing state income tax examinations in certain states for tax years ranging from the short period July 1, 2015 to January 4,
2016 through December 31, 2019. The statute of limitations in certain states remains open back to the short tax period ended January
4, 2016.
All U.K. tax returns have been filed timely and are in the normal process of being reviewed by His Majesty’s 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
Note 8 — Fixed Assets
Open Tax Years
(fiscal year ending in)
2018 and forward
2015 and forward
2014 and forward
2018 and forward
2017 and forward
2008 and forward
2015 and forward
The following table reflects changes in the net carrying amount of the components of fixed assets for the years ended December 31,
2022 and 2021:
Cost: at January 1, 2021
Additions
Disposals (i)
Foreign exchange
Cost: at December 31, 2021
Additions
Acquisitions
Disposals (ii)
Foreign exchange
Cost: at December 31, 2022
Depreciation: at January 1, 2021
Depreciation expense
Disposals
Foreign exchange
Depreciation: at December 31, 2021
Depreciation expense
Disposals
Foreign exchange
Depreciation: at December 31, 2022
Net book value:
At December 31, 2021
At December 31, 2022
$
$
$
$
$
$
Furniture,
equipment and
software
Leasehold
improvements
577
$
18
(61)
(7)
527
24
—
(78)
(21)
452
$
$
$
1,467
176
(145)
(21)
1,477
174
1
(129)
(71)
1,452
(764) $
(227)
103
11
(877)
(211)
113
42
(933) $
600
519
$
$
(295) $
(51)
41
4
(301)
(40)
57
12
(272) $
226
180
$
$
Land and
buildings
Total
90
—
(2)
—
88
—
—
—
(5)
83
$
$
(62) $
(3)
2
—
(63)
(4)
—
3
(64) $
25
19
$
$
2,134
194
(208)
(28)
2,092
198
1
(207)
(97)
1,987
(1,121)
(281)
146
15
(1,241)
(255)
170
57
(1,269)
851
718
(i)
(ii)
Includes $5 million of furniture, equipment and software costs and $4 million of leasehold improvements costs which have been written off as part of technology
modernization and real estate rationalization, respectively, under the Transformation program (see Note 6 – Restructuring Costs).
Includes $12 million of furniture, equipment and software costs and $18 million of leasehold improvements costs which have been written off as part of technology
modernization and real estate rationalization, respectively, under the Transformation program (see Note 6 – Restructuring Costs).
97
Included within land and buildings are the following assets held under finance leases:
Finance leases
Accumulated depreciation
Note 9 — Goodwill and Other Intangible Assets
Goodwill
December 31,
2022
2021
$
$
26
(22)
4
$
$
26
(20)
6
The components of goodwill are outlined below for the years ended December 31, 2022 and 2021. The prior years’ segment
information has been retrospectively adjusted to conform to the current year presentation.
Balance at December 31, 2020
Goodwill, gross
Accumulated impairment losses
Goodwill, net - December 31, 2020
Goodwill acquired
Goodwill disposals
Foreign exchange
Balance at December 31, 2021
Goodwill, gross
Accumulated impairment losses
Goodwill, net - December 31, 2021
Goodwill acquired
Goodwill disposals
Foreign exchange
Balance at December 31, 2022
Goodwill, gross
Accumulated impairment losses
Goodwill, net - December 31, 2022
HWC
R&B
Divested
Businesses (i)
Total
$
$
7,893
(130)
7,763
43
—
(32)
7,904
(130)
7,774
—
—
(34)
7,870
(130)
7,740
$
$
2,798
(362)
2,436
8
(7)
(28)
2,771
(362)
2,409
104
(18)
(62)
2,795
(362)
2,433
$
$
$
193
—
193
—
(193)
—
—
—
—
—
—
—
—
—
— $
10,884
(492)
10,392
51
(200)
(60)
10,675
(492)
10,183
104
(18)
(96)
10,665
(492)
10,173
(i)
Represents goodwill associated with certain Investment, Risk and Reinsurance businesses which were divested in 2021.
98
Other Intangible Assets
The following table reflects changes in the net carrying amounts of the components of finite-lived intangible assets for the years ended
December 31, 2022 and 2021:
Client
relationships
Software
Trademark
and trade
name
Other
Total
$
Balance at December 31, 2020:
Intangible assets, gross
Accumulated amortization
Intangible assets, net - December 31, 2020
Intangible assets acquired
Intangible asset disposals
Amortization
Foreign exchange
Balance at December 31, 2021:
Intangible assets, gross
Accumulated amortization
Intangible assets, net - December 31, 2021
Intangible assets acquired
Intangible asset disposals
Amortization
Foreign exchange
Balance at December 31, 2022:
Intangible assets, gross
Accumulated amortization
Intangible assets, net - December 31, 2022
$
4,012
(2,028)
1,984
14
(47)
(250)
(25)
3,794
(2,118)
1,676
67
(1)
(230)
(34)
3,760
(2,282)
1,478
$
$
761
(659)
102
—
—
(61)
—
742
(701)
41
4
—
(31)
(1)
725
(712)
13
$
$
1,054
(220)
834
—
(8)
(43)
(1)
1,039
(257)
782
1
—
(42)
(1)
1,038
(298)
740
$
$
103
(34)
69
—
—
(15)
2
102
(46)
56
—
(5)
(9)
—
98
(56)
42
$
$
5,930
(2,941)
2,989
14
(55)
(369)
(24)
5,677
(3,122)
2,555
72
(6)
(312)
(36)
5,621
(3,348)
2,273
The weighted-average remaining life of amortizable intangible assets and liabilities at December 31, 2022 was 12.3 years.
The table below reflects the future estimated amortization expense for amortizable intangible assets for the next five years and
thereafter:
Years ended December 31,
2023
2024
2025
2026
2027
Thereafter
Total
Amortization
263
230
209
201
197
1,173
2,273
$
$
Note 10 — Derivative Financial Instruments
We are exposed to certain 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 foreign currency rates. The Company’s board of directors reviews and approves
policies for managing this risk 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 12 — Fair
Value Measurements and Note 18 — Accumulated Other Comprehensive Loss.
Foreign Currency Risk
Certain non-U.S. subsidiaries receive revenue and incur expenses in currencies other than their functional currency, and as a result, the
foreign subsidiary’s functional currency revenue and/or expenses will fluctuate as the currency rates change. Additionally, the forecast
Pounds sterling expenses of our London brokerage market operations may exceed their Pounds sterling revenue, and the entity with
such operations may also hold significant foreign currency asset or liability positions in the consolidated balance sheet. To reduce such
variability, we use foreign exchange contracts to hedge against this currency risk.
99
These derivatives were designated as hedging instruments and at December 31, 2022 and December 31, 2021 had total notional
amounts of $134 million and $155 million, respectively, and had a net fair value liability of $3 million and a net fair value asset of $3
million, respectively.
At December 31, 2022, the Company estimates, based on current exchange rates, there will be $2 million of net derivative losses on
forward exchange rates reclassified from accumulated other comprehensive loss into earnings within the next twelve months as the
forecast transactions affect earnings. At December 31, 2022, our longest outstanding maturity was 1.7 years.
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, 2022, 2021 and 2020 are below. Amounts pertaining to the ineffective
portion of hedging instruments and those excluded from effectiveness testing were immaterial for the years ended December 31, 2022,
2021 and 2020.
Foreign exchange contracts
Location of gain/(loss) reclassified from Accumulated OCL into income
(effective element)
Revenue
Salaries and benefits
Discontinued operations
$
$
$
(Loss)/gain recognized in OCL (effective element)
2021
2020
2022
(8)
$
5
$
(13)
Gain/(loss) reclassified from Accumulated OCL into income (effective element)
2021
2020
2022
2
(4)
—
(2)
$
$
(3)
6
3
6
$
$
(5)
(3)
(1)
(9)
The Company engages in intercompany borrowing and lending between subsidiaries, primarily through its in-house banking
operations which give rise to foreign exchange exposures. The Company mitigates these risks through the use of short-term foreign
currency forward and swap transactions that offset the underlying exposure created when the borrower and lender have different
functional currencies. These derivatives are not generally designated as hedging instruments, and at December 31, 2022 and December
31, 2021, we had notional amounts of $1.7 billion and $2.9 billion, respectively, and had net fair value assets of $24 million and $15
million, respectively. Such derivatives typically mature within three months.
The effects of these derivatives that have not been designated as hedging instruments on the consolidated statements of comprehensive
income for the years ended December 31, 2022, 2021 and 2020 are as follows (see Note 17 — Other Income, Net for the net foreign
currency impact on the Company’s consolidated statements of comprehensive income which includes the results of the offset of
underlying exposures):
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Location of (loss)/gain
recognized in income
Other income, net
(Loss)/gain recognized in income
2021
2020
2022
$
(147) $
— $
(3)
Note 11 — Debt
Current debt consists of the following:
2.125% senior notes due 2022 (i)
4.625% senior notes due 2023
December 31,
2022
2021
— $
250
250
$
613
—
613
$
$
100
Long-term debt consists of the following:
Revolving $1.5 billion credit facility
4.625% senior notes due 2023
3.600% senior notes due 2024
4.400% senior notes due 2026
4.650% senior notes due 2027
4.500% senior notes due 2028
2.950% senior notes due 2029
6.125% senior notes due 2043
5.050% senior notes due 2048
3.875% senior notes due 2049
(i)
Notes issued in Euro (€540 million).
Guarantees
December 31,
2022
2021
— $
—
649
547
744
597
726
271
395
542
4,471
$
—
249
648
546
—
597
726
271
395
542
3,974
$
$
The following table presents a summary of the entities that issued each note or entered into the revolving credit facility and those
wholly-owned and consolidated subsidiaries of the Company that guarantee each respective note and the revolving credit facility on a
joint and several basis as of December 31, 2022.
Entity
Willis Towers Watson plc
Trinity Acquisition plc
Willis North America Inc.
Willis Netherlands Holdings B.V.
Willis Investment UK Holdings Limited
TA I Limited
Willis Group Limited
Willis Towers Watson Sub Holdings Unlimited Company
Willis Towers Watson UK Holdings Limited
Revolving Credit Facility
$1.5 billion revolving credit facility
Revolving credit facility
4.625% due 2023
4.400% due 2026
6.125% due 2043
Guarantor
Issuer
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
3.600% due 2024
4.650% due 2027
4.500% due 2028
2.950% due 2029
5.050% due 2048
3.875% due 2049
Guarantor
Guarantor
Issuer
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
Guarantor
On October 6, 2021, Trinity Acquisition plc entered into a second amended and restated revolving credit facility (the ‘new RCF’) for
$1.5 billion that will mature on October 6, 2026. This new RCF replaced the previous $1.25 billion revolving credit facility which was
due to expire in March of 2022 (see below for additional information).
Borrowing costs under the $1.5 billion facility differ if the borrowing is a ‘base rate’ borrowing or a ‘Eurocurrency’ borrowing, both
as defined by the new RCF, and equal the sum of the relevant benchmark plus a margin based on the Company’s senior unsecured
long-term debt rating:
•
•
For base rate borrowings, the benchmark rate will be the greatest of (a) the Prime Rate in effect on such day, (b) the Federal
Funds Effective Rate in effect on such day plus 0.50%, and (c) the one-month LIBOR rate plus 1.0%. The margin on the
base rate benchmark is 0.00% to 0.75% depending on the Company’s senior unsecured long-term debt rating.
For Eurocurrency or Sterling Overnight Interbank Average Rate (‘SONIA’) borrowings, the rate will be the applicable
LIBOR rate or SONIA (as applicable based on the currency of the borrower) plus a margin of 1.0% to 1.75% depending on
the Company’s guaranteed unsecured long-term debt rating. In anticipation of the cessation of LIBOR, the new RCF provides
for a benchmark rate adjustment that will be added to the replacement benchmark rate to reflect the differential between
LIBOR and the replacement benchmark (e.g., the Secured Overnight Financing Rate). This adjustment amount will be a
function of both the currency and borrowing tenor.
101
The new RCF also carries a commitment fee, applicable to the unused portion, of 0.09% to 0.25%, which is also based on the
Company’s senior unsecured long-term debt rating.
$1.25 billion revolving credit facility
Amounts outstanding under the previous $1.25 billion revolving credit facility bore 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.
Senior Notes
4.650% senior notes due 2027
On May 19, 2022, the Company, together with its wholly-owned subsidiary, Willis North America Inc. as issuer, completed an
offering of $750 million aggregate principal amount of 4.650% senior notes due 2027 (‘2027 senior notes’). The effective interest rate
of the 2027 senior notes is 4.79%, which includes the impact of the discount upon issuance. The 2027 senior notes will mature on June
15, 2027. Interest on the 2027 senior notes accrues from May 19, 2022 and will be paid in cash on June 15 and December 15 of each
year, commencing on December 15, 2022. The net proceeds from this offering, after deducting the underwriting discount and
estimated offering expenses, were approximately $744 million and were used to fully repay the €540 million ($582 million on the date
of repayment) aggregate principal amount of the 2.125% Senior Notes due 2022 and related accrued interest, and for general corporate
purposes.
2.950% senior notes due 2029 and 3.875% senior notes due 2049
On September 10, 2019, the Company, together with its wholly-owned subsidiary, Willis North America Inc., as issuer, completed an
offering of $450 million aggregate principal amount of 2.950% senior notes due 2029 (the ‘initial 2029 senior notes’) and $550
million aggregate principal amount of 3.875% senior notes due 2049 (‘2049 senior notes’; collectively, the ‘2019 senior notes
offering’). On May 29, 2020, the Company, together with its wholly-owned subsidiary, Willis North America Inc., as issuer,
completed an offering of an additional $275 million aggregate principal amount of 2.950% senior notes due 2029 (the ‘additional 2029
senior notes’). The additional 2029 senior notes will be treated as a single class with, and otherwise identical to, the initial 2029 senior
notes other than with respect to the date of issuance, the issue price and the amounts paid to holders for each class of note on the first
interest payment date. The effective interest rates of the initial 2029 senior notes and 2049 senior notes are 2.971% and 3.898%,
respectively, which include the impact of the discount upon issuance. The effective interest rate of the additional 2029 senior notes is
2.697%, which includes the impact of the premium upon issuance. Both 2029 senior notes offerings will mature on September 15,
2029, and the 2049 senior notes will mature on September 15, 2049. Interest on the 2019 senior notes offering has accrued from
September 10, 2019 and is paid in cash on March 15 and September 15 of each year. Interest on the additional 2029 senior notes has
accrued from March 15, 2020 and is paid in cash on March 15 and September 15 of each year. The net proceeds from the 2019 senior
notes offering, after deducting underwriter discounts and commissions and estimated offering expenses, were approximately $988
million and were used to prepay a portion of the amount outstanding under the Company’s one-year term loan commitment (described
below) and to repay borrowings under the Company’s $1.25 billion revolving credit facility. The net proceeds from the additional
2029 senior notes offering were used to repay $175 million of the full principal amount and related accrued interest under the term
loan facility, which was set to expire in July 2020, as well as repay $105 million of borrowings outstanding under the Company’s
$1.25 billion revolving credit facility and related accrued interest.
4.500% senior notes due 2028 and 5.050% senior notes due 2048
On September 10, 2018, the Company, together with its wholly-owned subsidiary, Willis North America Inc. as issuer, completed an
offering of $600 million of 4.500% senior notes due 2028 (‘2028 senior notes’) and $400 million of 5.050% senior notes due 2048
(‘2048 senior notes’). The effective interest rates of the 2028 senior notes and 2048 senior notes are 4.504% and 5.073%, respectively,
which include the impact of the discount upon issuance. The 2028 senior notes will mature on September 15, 2028 and the 2048 senior
notes will mature on September 15, 2048. Interest has accrued on both the 2028 senior notes and 2048 senior notes from September
10, 2018 and is paid in cash on March 15 and September 15 of each year. The net proceeds from this offering, after deducting
underwriter discounts and commissions and estimated offering expenses, were $989 million and were used to prepay in full $127
million outstanding under the Company’s term loan due December 2019 and to repay a portion of the amount outstanding under the
Company’s RCF.
3.600% senior notes due 2024
On May 16, 2017, Willis North America Inc. 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 has accrued on the 2024 senior notes from May 16, 2017 and is paid in cash on May
102
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.
3.500% senior notes due 2021 (repaid in August 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 effective interest rate of the 2021 senior notes was 3.707% and the
effective interest rate on the 2026 senior notes is 4.572%, which includes the impact of the discount upon issuance. The 2021 senior
notes were to mature on September 15, 2021; the 2026 senior notes will mature on March 15, 2026. Interest on the 2026 senior notes
has accrued 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 another portion 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 revolving credit facility and related accrued interest. In August 2021, the
Company called the 2021 senior notes due to mature in September 2021 and repaid the principal and interest at that time using cash
on-hand.
4.625% senior notes due 2023 and 6.125% senior notes due 2043
On August 15, 2013, Trinity Acquisition plc issued $250 million of 4.625% senior notes due 2023 (‘2023 senior notes’) and $275 million
of 6.125% senior notes due 2043 (‘2043 senior notes’). 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. The 2023 senior notes will mature on August 15, 2023 and the 2043 senior notes will mature on August 15, 2043.
Additional Information Regarding Fully Repaid Senior Notes, Term Loan Commitment and Collateralized Facility
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 effective interest rate of these senior notes was 2.154%, which included the impact of the discount upon issuance. The 2022 senior
notes matured on May 26, 2022. Interest had accrued on the notes from May 26, 2016 and was 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 a portion of the previous 1-year term loan facility,
which matured in 2016, and related accrued interest. In May 2022, the 2022 senior notes were repaid in full using the net proceeds
from the 2027 senior notes offering discussed above.
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 these senior notes
was 5.871%, which included the impact of the discount upon issuance. The proceeds were used to repurchase and redeem other
previously-issued senior notes. In March 2021, the senior notes matured, and the Company repaid the principal and interest using cash
on-hand.
One-year Term Loan Commitment
As part of the acquisition of TRANZACT, the Company secured financing of up to $1.1 billion in the form of a one-year unsecured
term loan. Borrowing occurred in conjunction with the closing of the acquisition on July 30, 2019.
Amounts outstanding under the term loan bore interest, at the option of the borrowers, at a rate equal to (a) LIBOR plus 0.75% to
1.375% for Eurocurrency Rate Loans or (b) the highest of (i) the Federal Funds Rate plus 0.5%, (ii) the ‘prime rate’ quoted by Bank of
America, N.A., and (iii) LIBOR plus 1.00%, plus 0.00% to 0.375%, in each case, based upon the Company’s guaranteed senior-
unsecured long-term debt rating. In addition, the Company paid a commitment fee in an amount equal to 0.15% per annum on the
undrawn portion of the commitments in respect of the term loan, which we had accrued from May 29, 2019 until the closing date of
the acquisition.
The term loan was pre-payable in part or in full prior to the maturity date at the Company’s discretion. Covenants and events of
default were substantively the same as in our existing revolving credit facility. The remaining outstanding balance on the term loan
was repaid in full upon issuance of the additional 2029 senior notes discussed above.
103
Collateralized Facility
As part of the acquisition of TRANZACT, the Company assumed debt of $91 million related to borrowings by TRANZACT whereby
certain renewal commissions receivables were pledged as collateral. The Company was required to remit cash received from these
pledged renewal commissions receivables on a quarterly basis to the lenders until the borrowings and related interest were repaid, after
the payment of certain fees and other permitted distributions. No additional borrowings were made against this collateralized facility
since the acquisition. Per the terms of the collateralized facility and specific approvals having been obtained, in November 2021 the
Company repaid in full $32 million of principal and interest outstanding using cash on-hand, and the facility was subsequently closed.
Prior to this repayment, cash received for the renewal commissions receivables had been classified as restricted cash on our
consolidated balance sheet.
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 current
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, 2022 and 2021, we were in compliance with all financial covenants.
Debt Maturity
The following table summarizes the maturity of our debt and interest on senior notes and excludes any reduction for debt issuance
costs:
Senior notes
Interest on senior notes
Revolving $1.5 billion credit facility
Total
Interest Expense
2023
2024
2025
2026
2027
$
$
250
196
—
446
$
$
650
174
—
824
$
$
— $
166
—
166
$
550
147
—
697
$
$
750
123
—
873
Thereafter
2,550
$
1,200
—
3,750
$
Total
4,750
2,006
—
6,756
$
$
The following table shows an analysis of the interest expense for the years ended December 31, 2022, 2021 and 2020:
Senior notes
Term loans
Revolving credit facility
Collateralized facility
Other (i)
Total interest expense
2022
Years ended December 31,
2021
2020
196
—
3
—
9
208
$
$
200
—
3
2
6
211
$
$
227
6
4
3
4
244
$
$
(i)
Other primarily includes interest expense on finance leases and accretion on deferred and contingent consideration.
Note 12 — 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 active markets in determining
the fair value of these securities.
104
• Market values for our derivative instruments have been used to determine the fair values of 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 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,
which at times includes the use of a Monte Carlo simulation and discounting the probability-weighted payout. Typically,
milestones are based on revenue or earnings growth for the acquired business.
The following tables present our assets and liabilities measured at fair value on a recurring basis at December 31, 2022 and December
31, 2021:
Balance Sheet Location
Level 1
Level 2
Level 3
Total
Fair Value Measurements on a Recurring Basis at
December 31, 2022
Assets:
Available-for-sale securities:
Mutual funds / exchange traded funds
Derivatives:
Derivative financial instruments (i)
Liabilities:
Contingent consideration:
Contingent consideration (ii) (iii)
Derivatives:
Derivative financial instruments (i)
Assets:
Available-for-sale securities:
Mutual funds / exchange traded funds
Certificates of deposit/term deposits
Derivatives:
Derivative financial instruments (i)
Liabilities:
Contingent consideration:
Contingent consideration (ii)
Derivatives:
Derivative financial instruments (i)
Prepaid and other current assets and
Other non-current assets
Fiduciary assets
Prepaid and other current assets and
Other non-current assets
Other current liabilities and
Other non-current liabilities
Other current liabilities and
Other non-current liabilities
Balance Sheet Location
Prepaid and other current assets and
Other non-current assets
Fiduciary assets
Prepaid and other current assets
Prepaid and other current assets and
Other non-current assets
Other current liabilities and
Other non-current liabilities
Other current liabilities and
Other non-current liabilities
$
$
$
$
$
$
$
$
$
7
142
— $
—
— $
—
7
142
— $
26
$
— $
— $
— $
40
$
— $
5
$
— $
Fair Value Measurements on a Recurring Basis at
December 31, 2021
Level 1
Level 2
Level 3
Total
$
9
152
200
— $
—
—
— $
—
—
— $
18
$
— $
— $
— $
51
$
— $
— $
— $
26
40
5
9
152
200
18
51
—
(i)
(ii)
(iii)
See Note 10 — Derivative Financial Instruments for further information on our derivative instruments.
Probability weightings are based on our knowledge of the past and planned performance of the acquired entity to which the contingent consideration applies. The
fair value weighted-average discount rates used in our material contingent consideration calculations were 10.26% and 11.92% at December 31, 2022 and
December 31, 2021, respectively. The range of these discount rates was 3.53% - 13.80% at December 31, 2022. Using different probability weightings and discount
rates could result in an increase or decrease of the contingent consideration payable.
Consideration due to be paid across multiple years until 2027.
105
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, 2021
Obligations assumed
Payments
Realized and unrealized gains (i)
Foreign exchange
Balance at December 31, 2022
December 31, 2022
51
22
(22)
(10)
(1)
40
$
$
(i)
Realized and unrealized losses include accretion and adjustments to contingent consideration liabilities, which are included within Interest expense and Other
operating expenses, respectively, on the consolidated statements of comprehensive income.
There were no significant transfers between Levels 1, 2 or 3 during the years ended December 31, 2022 and 2021.
Fair value information about financial instruments not measured at fair value
The following tables present our assets and liabilities not measured at fair value on a recurring basis at December 31, 2021 and 2020:
Assets:
Long-term note receivable
Liabilities:
Current debt
Long-term debt
December 31, 2022
December 31, 2021
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
$
$
$
68
250
4,471
$
$
$
63
248
4,069
$
$
$
69
613
3,974
$
$
$
70
616
4,453
The carrying value of our revolving credit facility approximates its fair value. The fair values above, which exclude accrued interest,
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 instruments. The fair values of our respective senior notes and long-term note receivable are
considered Level 2 financial instruments as they are corroborated by observable market data.
Note 13 — Retirement Benefits
Defined Benefit Plans
WTW sponsors both qualified and non-qualified defined benefit pension plans throughout the world. The majority of our plan assets
and obligations are in the U.S. and the U.K. We have also included disclosures related to defined benefit plans in certain other
countries, including Canada, France, Germany, Switzerland and Ireland. Together, these disclosed funded and unfunded plans
represent 98% of WTW’s pension obligations and are presented herein. We have removed prior period disclosures pertaining to our
post-retirement welfare plans as the Company considers such disclosure to no longer be material.
As part of these obligations, in the U.S., the U.K. 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 600 WTW employees in the United States have a frozen
accrued benefit under this plan.
WTW 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. Plan participants prior to
July 1, 2017 earn benefits without having to make employee contributions, and all newly-eligible employees after that date
are required to contribute 2% of pay on an after-tax basis to participate in the plan.
106
United Kingdom
Legacy Willis – This plan covers approximately one-fifth 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 – This plan is no longer with WTW following the divestiture of its Miller business in March 2021 (see Note 3
— Acquisitions and Divestitures for further information). The plan provided retirement benefits based on members’ salaries
at the point at which they ceased to accrue benefits under the scheme.
Other
Canada (WTW) – 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 broking business) – 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 – The defined benefit plans are closed to new entrants and include certain legacy employee populations hired
before 2011. These benefits are primarily account-based, with some long-service participants continuing to accrue benefits
according to grandfathered final-average-pay formulas.
Ireland (Legacy Willis) – Benefit accruals ceased effective from December 31, 2019; however accrued benefits for active
employees are indexed to salary increases (to a maximum annual salary of €150,000) until the member leaves the Company.
A future service retirement provision is being provided on a defined contribution basis.
Ireland (Legacy Towers Watson) – Benefit accruals ceased effective from May 1, 2015; however accrued benefits for active
employees are indexed to salary increases (to a maximum annual salary of €160,000) until the member leaves the Company.
A future service retirement provision is being provided on a defined contribution basis.
Switzerland (WTW) – The defined benefit plans require all employees with local employment contracts to participate. The
Company provides benefits in excess of the mandatory minimum required under Swiss occupational pension law.
Participants continue to accrue benefits until retirement or upon leaving the Company.
107
Amounts Recognized in our Consolidated Financial Statements
The following schedules provide information concerning the defined benefit pension plans as of and for the years ended December 31,
2022 and 2021:
Change in Benefit Obligation
Benefit obligation, beginning of year
Service cost
Interest cost
Employee contributions
Actuarial gains
Settlements
Curtailments
Benefits paid
Plan amendments
Plan (disposal)/addition
Other
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
Plan (disposal)/addition
Other
Foreign currency changes
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
U.S.
2022
U.K.
Other
U.S.
2021
U.K.
Other
$
$
$
$
$
$
$
$
$
$
5,096
77
119
16
(1,186)
(25)
—
(226)
—
—
—
—
3,871
4,710
(694)
42
16
(25)
(226)
—
—
—
3,823
(48)
3,871
179
(26)
(201)
(48)
$
$
$
$
$
$
$
$
$
$
4,369
12
70
—
(1,434)
(5)
—
(130)
—
—
—
(447)
2,435
5,266
(1,622)
33
—
(5)
(130)
—
—
(543)
2,999
564
2,435
$
$
$
$
$
$
569
$
— $
(5)
564
$
$
922
22
15
1
(221)
(2)
—
(30)
—
—
2
(54)
655
739
(124)
38
1
(2)
(30)
—
2
(44)
580
(75)
629
57
(5)
(127)
(75)
$
$
$
$
$
$
$
$
$
$
5,291
79
94
16
(170)
(6)
—
(209)
—
—
1
—
5,096
4,357
470
82
16
(6)
(209)
—
—
—
4,710
(386)
5,096
$
$
$
$
$
$
4,843
17
56
—
(109)
(9)
11
(145)
—
(257)
—
(38)
4,369
5,767
(68)
42
—
(9)
(145)
(275)
—
(46)
5,266
897
4,369
$
$
$
$
$
$
— $
$
(52)
(334)
(386)
$
$
903
$
— $
(6)
897
$
$
955
24
12
—
(54)
(6)
—
(40)
12
46
—
(27)
922
684
44
36
—
(6)
(40)
37
1
(17)
739
(183)
884
48
(5)
(226)
(183)
For the year ended December 31, 2022, bond yields increased, driving an increase in the discount rates and actuarial gains for all
plans. The U.K. and Other plans also had favorable effects from foreign exchange on their benefit obligations.
For the year ended December 31, 2021, bond yields increased, driving an increase in the discount rates and actuarial gains for all
plans. The U.K. and Other plans also had favorable effects from foreign exchange, and the Miller disposal further reduced obligations
for the U.K. plans.
Amounts recognized in accumulated other comprehensive loss as of December 31, 2022 and 2021 consist of:
Net actuarial loss
Net prior service loss/(gain)
Accumulated other comprehensive loss
U.S.
2022
U.K.
Other
U.S.
2021
U.K.
Other
$
$
597
—
597
$
$
1,497
6
1,503
$
$
36
9
45
$
$
776
—
776
$
$
1,356
(7)
1,349
$
$
103
10
113
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, 2022 and 2021:
Projected benefit obligation at end of year
Fair value of plan assets at end of year
2022
U.K.
U.S.
$
$
939
713
$
$
Other
U.S.
5
$
— $
278
145
$
$
5,096
4,710
$
$
2021
U.K.
Other
7
$
— $
476
245
108
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, 2022 and 2021.
Projected benefit obligation at end of year
Accumulated benefit obligation at end of year
Fair value of plan assets at end of year
2022
U.K.
U.S.
$
$
$
939
939
713
$
$
$
Other
U.S.
$
5
$
5
— $
238
228
106
$
$
$
5,096
5,096
4,710
$
$
$
2021
U.K.
$
7
$
7
— $
Other
458
437
228
The components of the net periodic benefit income and other amounts recognized in other comprehensive (income)/loss for the years
ended December 31, 2022, 2021 and 2020 for the defined benefit pension plans are as follows:
U.S.
2022
U.K.
Other
U.S.
2021
U.K.
Other
U.S.
2020
U.K.
Other
Components of net periodic
benefit (income)/cost:
Service cost
Interest cost
Expected return on plan
assets
Amortization of unrecognized
prior service (credit)/cost
Amortization of unrecognized
actuarial loss
Settlement
Curtailment gain
Other
Net periodic benefit (income)/cost
Other changes in plan assets
and benefit obligations
recognized in other
comprehensive (income)/loss:
Net actuarial (gain)/loss
Amortization of unrecognized
actuarial loss
Prior service cost
Amortization of unrecognized
prior service credit/(cost)
Settlement
Curtailment gain
Plan (disposal)/addition
Total recognized in other
comprehensive (income)/loss
Total recognized in net periodic
benefit (income)/cost and other
comprehensive (income)/loss
$
$
77
119
$
12
70
(331)
(144)
—
14
4
—
—
(117)
$
$
(12)
29
1
—
—
(44)
$
22
15
(38)
1
3
(1)
—
—
2
$
$
$
79
94
$
17
56
(312)
(170)
—
37
1
—
1
(100)
$
(17)
27
2
(1)
—
(86)
$
24
12
(37)
1
6
2
—
—
8
$
$
72
131
$
15
73
(291)
—
35
2
—
—
(51)
$
(247)
(17)
23
3
—
—
(150)
$
$
$
(161)
$
332
$
(59)
$
(328)
$
140
$
(61)
$
198
$
151
$
(14)
—
—
(4)
—
—
(179)
(29)
—
12
(1)
—
—
314
(3)
—
(1)
1
—
—
(37)
—
—
(1)
—
—
(62)
(366)
(27)
—
17
(2)
1
(34)
95
(6)
12
(1)
(2)
—
8
(50)
(35)
—
—
(2)
—
—
161
(23)
9
17
(3)
—
—
151
21
15
(34)
—
3
1
—
—
6
35
(3)
—
—
(1)
—
—
31
$
(296)
$
270
$
(60)
$
(466)
$
9
$
(42)
$
110
$
1
$
37
Assumptions Used in the Valuations of the Defined Benefit Pension Plans
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/(income)
generally based on the average working life expectancy or remaining life expectancy, where appropriate, 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.
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. A discount rate will be changed annually if underlying rates have moved, whereas an 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.
109
The following assumptions were used in the valuations of WTW’s defined benefit pension plans. 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, Switzerland and Ireland plans.
The assumptions used to determine net periodic benefit cost for the fiscal years ended December 31, 2022, 2021 and 2020 were as
follows:
U.S.
2022
U.K.
Other
Years ended December 31,
2021
U.K.
U.S.
Other
U.S.
2020
U.K.
Other
Discount rate - PBO
Discount rate - service cost
Discount rate - interest cost on
service cost
Discount rate - interest cost on PBO
Expected long-term rate of return
on assets
Rate of increase in compensation
levels
2.8%
3.0%
2.5%
2.4%
7.2%
4.3%
1.9%
1.9%
1.8%
1.8%
3.0%
3.4%
2.0%
2.4%
2.2%
1.8%
5.4%
2.3%
2.5%
2.7%
2.0%
1.8%
7.2%
4.3%
1.5%
1.6%
1.4%
1.2%
3.1%
3.0%
1.7%
2.3%
2.0%
1.3%
5.4%
2.3%
3.3%
3.4%
2.8%
2.8%
7.7%
4.3%
2.0%
2.1%
1.9%
1.8%
5.0%
3.0%
2.1%
2.5%
2.4%
1.9%
5.9%
2.3%
The following tables present the assumptions used in the valuation to determine the projected benefit obligation for the fiscal years
ended December 31, 2022 and 2021:
Discount rate
Rate of increase in compensation levels
U.S.
5.4%
4.3%
December 31, 2022
U.K.
Other
U.S.
December 31, 2021
U.K.
Other
5.0%
3.4%
4.3%
2.4%
2.8%
4.3%
1.9%
3.4%
2.0%
2.3%
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, 2022
were as follows (note the French plan is unfunded):
Asset Category
Equity securities
Debt securities
Real estate
Other
Total
U.S.
U.K.
Switzerland
Canada
Germany
Ireland
WTW
Willis
Willis
23%
33%
6%
38%
100%
30%
33%
11%
26%
100%
—%
28%
—%
72%
100%
Towers
Watson
1%
22%
2%
75%
100%
WTW
WTW
WTW
Willis
49%
18%
28%
5%
100%
40%
50%
5%
5%
100%
36%
61%
—%
3%
100%
29%
29%
3%
39%
100%
Towers
Watson
40%
30%
—%
30%
100%
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 positive and negative factors. 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.
110
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, 2022 and 2021 are as follows:
Asset category:
Cash
Short-term securities
Pooled/commingled funds
Private equity
Hedge funds
Total assets
December 31, 2022
December 31, 2021
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$
$
15
—
—
—
—
15
$
$
— $
89
—
—
—
89
$
— $
—
—
—
—
— $
15
89
1,945
612
1,160
3,821
$
$
5
—
—
—
—
5
$
$
— $
65
—
—
—
65
$
— $
—
—
—
—
— $
5
65
2,788
537
1,315
4,710
The fair values of our U.K. plan assets by asset category at December 31, 2022 and 2021 are as follows:
Asset category:
Cash
Government bonds
Corporate bonds
Other fixed income
Pooled/commingled funds
Mutual funds
Private equity
Derivatives
Real estate
Insurance contracts
Total assets
Liability category:
Repurchase agreements
Derivatives
Net assets
December 31, 2022
December 31, 2021
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$
$
$
125
1,267
—
—
—
—
—
—
—
—
1,392
—
—
1,392
$
$
$
— $
—
335
189
—
—
—
229
—
—
753
$
484
98
171
$
— $
—
—
—
—
—
—
—
—
40
40
$
125
1,267
335
189
1,255
—
20
229
121
40
3,581
—
—
40
$
484
98
2,999
$
$
$
389
2,610
—
—
—
—
—
—
—
—
2,999
—
—
2,999
$
$
$
— $
—
504
519
—
—
—
226
—
—
1,249
$
— $
—
—
—
—
—
—
—
—
69
69
$
389
2,610
504
519
1,537
12
25
226
152
69
6,043
777
—
472
$
—
—
69
$
777
—
5,266
The fair values of our Other plan assets by asset category at December 31, 2022 and 2021 are as follows:
Asset category:
Cash
Pooled/commingled funds
Hedge funds
Insurance contracts
Investment in multiple-
employer pension plan
Total assets
December 31, 2022
December 31, 2021
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$
$
3
—
—
—
—
3
$
$
— $
—
—
—
—
— $
— $
—
—
5
39
44
$
3
501
32
5
39
580
$
$
4
—
—
—
—
4
$
$
— $
—
—
—
—
— $
— $
—
—
7
37
44
$
4
648
43
7
37
739
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,
2022 and 2021.
111
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.
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
values on yields currently available on comparable securities of issuers with similar credit ratings.
Other fixed income: Foreign and municipal bonds are valued using pricing models maximizing the use of observable inputs for similar
securities.
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 values for these investments are estimated based on the net asset values
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.
Investment in multiple-employer pension plan: The Company sponsors a pension plan for its Swiss employees in which assets of the
plan are invested in a collective fund with multiple employers through a Swiss insurance company. WTW does not have rights to, nor
does it have investment authority over, the individual assets of the plan. The fair value of the plan assets is estimated based on
information provided by the collective fund.
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
Net receivable for investments purchased
Fair value of plan assets
Level 3 investments
December 31,
2022
2021
7,400
2
7,402
$
$
10,715
—
10,715
$
$
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 values 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, 2022:
Beginning balance at December 31, 2021
Purchases
Unrealized loss
Foreign exchange
Ending balance at December 31, 2022
112
Level 3
Roll Forward
113
5
(26)
(8)
84
$
$
Contributions and Benefit Payments
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 2023, as well as the pension
contributions to our qualified plans in fiscal years 2022 and 2021:
U.S.
U.K.
Other
2023
(Projected)
2022
(Actual)
2021
(Actual)
$
$
$
— $
$
31
$
23
1
32
25
$
$
$
60
41
25
Expected benefit payments from our defined benefit pension plans to current plan participants, including the effects of their expected
future service, as appropriate, are as follows:
Fiscal Year
2023
2024
2025
2026
2027
Years 2028 – 2032
Defined Contribution Plans
U.S.
U.K.
Other
Total
Benefit Payments
$
$
270
279
285
293
297
1,497
2,921
$
$
126
117
119
128
133
710
1,333
$
$
33
28
29
31
33
190
344
$
$
429
424
433
452
463
2,397
4,598
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 WTW. The plan allows participants to make pre-tax and
Roth after-tax contributions, and the Company provides a 100% match on the first 1% of employee contributions and a 50% match on
the next 5% of employee contributions. Employees vest in the Company match upon two years of service. All investment assets of the
plan are held in a trust account administered by independent trustees.
Our U.K. pension plans provide for a defined contribution component as part of a master trust. We make contributions to the plan, a
portion of which represents matching contributions made by the participants up to a maximum rate.
We had defined contribution plan expense for the years ended December 31, 2022, 2021 and 2020 amounting to $148 million, $155
million and $160 million, respectively.
Note 14 — Leases
The following tables present amounts recorded on our consolidated balance sheets at December 31, 2022 and 2021, classified as either
operating or finance leases. Operating leases are presented separately on our consolidated balance sheets. For the finance leases, the
ROU assets are included in fixed assets, net, and the liabilities are classified within Other current liabilities and Other non-current
liabilities.
Right-of-use assets
Current lease liabilities
Long-term lease liabilities
Operating
Leases
December 31, 2022
Finance
Leases
Total
Leases
Operating
Leases
December 31, 2021
Finance
Leases
Total
Leases
$
$
586
126
620
$
4
4
12
$
590
130
632
$
720
150
734
$
6
4
15
726
154
749
113
The following tables present amounts recorded on our consolidated statements of comprehensive income for the years ended
December 31, 2022, 2021 and 2020:
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
Total lease cost, net
Years ended December 31,
2021
2020
2022
$
$
2
2
175
—
71
(15)
235
$
$
1
3
192
1
52
(20)
229
$
$
2
3
181
1
53
(21)
219
The total lease cost is recognized in different locations in our consolidated statements of comprehensive income. Amortization of the
finance lease ROU assets is included in depreciation, while the interest cost component of these finance leases is included in interest
expense. All other costs are included in other operating expenses, with the exception of $57 million and $19 million incurred during
the years ended December 31, 2022 and 2021, respectively, that were included in restructuring costs (see Note 6 — Restructuring
Costs) that primarily related to the acceleration of amortization or impairment of certain abandoned ROU assets and the payment of
early termination fees. There are no significant lease costs that have been included as discontinued operations in the consolidated
statements of comprehensive income during the years ended December 31, 2022, 2021 and 2020.
Cash paid for amounts included in the measurement of lease liabilities for the years ended December 31, 2022, 2021 and 2020, as well
as its location in the consolidated statements of cash flows, is as follows:
Cash flows from operating activities:
Operating leases
Finance leases
Cash flows used in financing activities:
Finance leases
Total lease payments
Years ended December 31,
2021
2020
2022
$
$
173
2
4
179
$
$
186
3
3
192
$
$
190
3
3
196
Non-cash additions to our operating lease ROU assets, net of modifications, were $65 million, $37 million and $70 million during the
years ended December 31, 2022, 2021 and 2020, respectively.
Our operating and finance leases have the following weighted-average terms and discount rates as of December 31, 2022 and 2021:
Weighted-average term (in years)
Weighted-average discount rate
December 31, 2022
December 31, 2021
Operating
Leases
Finance
Leases
Operating
Leases
Finance
Leases
6.9
3.4%
3.1
12.7%
7.5
3.3%
4.1
12.7%
The maturity of our lease liabilities on an undiscounted basis, including a reconciliation to the total lease liabilities reported on the
consolidated balance sheet as of December 31, 2022, is as follows:
Operating Leases
Finance Leases
Total Leases
2023
2024
2025
2026
2027
Thereafter
Total future lease payments
Interest
Total lease liabilities
$
$
148
136
123
103
82
249
841
(95)
746
$
$
6
6
6
1
—
—
19
(3)
16
$
$
154
142
129
104
82
249
860
(98)
762
114
Note 15 — Commitments and Contingencies
Guarantees
Guarantees issued by certain of WTW’s subsidiaries with respect to the senior notes and credit facilities are discussed in Note 11 —
Debt.
Certain of WTW’s subsidiaries in the U.S. and the U.K. have given the landlords of some leased properties occupied by the Company
guarantees with respect to the repayment of the lease obligations. The operating lease obligations subject to such guarantees amounted
to $399 million and $498 million at December 31, 2022 and 2021, respectively. The finance lease obligations subject to such
guarantees amounted to $3 million and $4 million at December 31, 2022 and 2021, respectively.
Acquisition liabilities
In addition to the contingent consideration that may be payable related to our acquisitions (see Note 12 — Fair Value Measurements),
we have deferred consideration of $6 million at December 31, 2022, which is payable in 2023. The Company did not have any
deferred consideration at December 31, 2021.
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 prices of such put options and call options are formula-
based (using revenue and earnings) and are 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 put options is not expected to exceed $16
million.
Additionally, the Company has capital commitments with Trident V Parallel Fund, LP, an investment fund managed by Stone Point
Capital, and Dowling Capital Partners I, LP. At December 31, 2022, the Company is obligated to make capital contributions of
approximately $2 million, collectively, to these funds.
Indemnification Agreements
WTW 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, including the disposal of Willis Re. 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 the Company’s obligations and the unique facts of each particular agreement. However, we do not believe that
any potential liability that may arise from such indemnity provisions is probable or material.
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. 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. 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 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. See Note
16 — Supplementary Information for Certain Balance Sheet Accounts for the amounts accrued at December 31, 2022 and 2021 in the
consolidated balance sheets.
On the basis of current information, the Company does not expect that the actual claims, lawsuits and other proceedings to which it 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 its 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 a particular quarterly or annual period.
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
115
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.
Note 16 — Supplementary Information for Certain Balance Sheet Accounts
Additional details of specific balance sheet accounts are detailed below.
Prepaid and other current assets consist of the following:
Prepayments and accrued income
Short-term investments
Deferred contract costs
Derivatives and investments
Deferred compensation plan assets
Corporate income and other taxes
Acquired renewal commissions receivable
Other current assets
Total prepaid and other current assets
Other non-current assets consist of the following:
Prepayments and accrued income
Deferred contract costs
Deferred compensation plan assets
Deferred tax assets
Accounts receivable, net
Acquired renewal commissions receivable
Long-term note receivable
Other investments
Insurance recovery receivables
Non-current contract assets
Other non-current assets
Total other non-current assets
Deferred revenue and accrued expenses consist of the following:
Accounts payable, accrued liabilities and deferred income
Accrued discretionary and incentive compensation
Accrued vacation
Other employee-related liabilities
Total deferred revenue and accrued expenses
December 31,
2022
December 31,
2021
$
$
$
$
$
$
132
—
71
43
16
89
9
54
414
December 31,
2022
10
126
74
68
9
29
68
90
80
745
58
1,357
December 31,
2022
975
708
142
90
1,915
$
$
$
$
$
$
137
200
74
35
19
82
11
54
612
December 31,
2021
11
115
109
79
23
52
69
55
96
532
61
1,202
December 31,
2021
898
811
145
72
1,926
116
Other current liabilities consist of the following:
Dividends payable
Income taxes payable
Interest payable
Deferred compensation plan liabilities
Contingent and deferred consideration on acquisitions
Accrued retirement benefits
Payroll and other benefits-related liabilities
Derivatives
Third-party commissions
Other current liabilities
Total other current liabilities
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:
Deferred compensation plan liability
Contingent and deferred consideration on acquisitions
Liabilities for uncertain tax positions
Finance leases
Other non-current liabilities
Total other non-current liabilities
Note 17 — Other Income, Net
Other income, net consists of the following:
Gain on disposal of operations (i)
Net periodic pension and postretirement benefit credits
Interest in earnings of associates and other investments
Foreign exchange gain (ii)
Other
Other income, net
December 31,
2022
December 31,
2021
112
260
55
49
24
65
230
—
101
119
1,015
December 31,
2021
311
64
375
December 31,
2021
$
$
$
$
$
$
102
83
49
14
17
32
225
4
124
66
716
December 31,
2022
296
61
357
December 31,
2022
74
29
40
12
66
221
$
$
$
$
$
$
109
27
43
15
59
253
81
304
6
3
2
396
2022
Years ended December 31,
2021
2020
$
$
7
272
4
—
5
288
$
$
379
303
8
8
3
701
$
$
(i)
(ii)
For the year ended December 31, 2022, includes a $24 million non-cash revaluation gain related to an acquisition completed in stages.
Includes the offsetting effects of the Company's foreign currency hedging program. See Note 10 — Derivative Financial Instruments.
117
Note 18 — Accumulated Other Comprehensive Loss
The components of other comprehensive (loss)/income are as follows:
December 31, 2022
December 31, 2021
December 31, 2020
Before
tax
amount
Net of
tax
amount
Before
tax
amount
Tax
Net of
tax
amount
Before
tax
amount
Tax
Tax
Net of
tax
amount
Other comprehensive (loss)/income:
Foreign currency translation
Defined pension and post-retirement benefits
Derivative instruments
Other comprehensive (loss)/income
Less: Other comprehensive loss/(income)
attributable to non-controlling interests
Other comprehensive (loss)/income attributable
to WTW
$ (499) $ — $ (499) $
(22)
4
(18)
87
(6)
(418)
65
(2)
(436)
(87) $ — $
343
(1)
255
(83)
3
(80)
(87) $
260
2
175
1
—
1
(2)
—
(2)
139
(342)
(5)
(208)
(1)
$ — $
76
1
77
139
(266)
(4)
(131)
(1)
$ (417) $
(18) $ (435) $
253
$
(80) $
173
$ (209) $
$ (132)
—
77
Changes in accumulated other comprehensive loss, net of non-controlling interests and net of tax are provided in the following table.
This table excludes amounts attributable to non-controlling interests, which are not material for further disclosure.
Balance, January 1, 2020
Other comprehensive income/(loss) before reclassifications
Loss reclassified from accumulated other comprehensive
loss (net of income tax benefit of $11)
Net other comprehensive income/(loss)
Balance, December 31, 2020
Other comprehensive (loss)/income before reclassifications
Loss/(gain) reclassified from accumulated other
comprehensive loss (net of income tax benefit of $12) (iii)
Net other comprehensive (loss)/income
Balance, December 31, 2021
Other comprehensive (loss)/income before reclassifications
Loss reclassified from accumulated other
comprehensive loss (net of income tax benefit of $9)
Net other comprehensive (loss)/income
Balance, December 31, 2022
$
$
$
$
Foreign currency
translation
Derivative
instruments (i)
13
(12)
(538) $
138
Defined pension
and post-
retirement
benefit costs (ii)
$
(1,702) $
(298)
—
138
(400) $
(133)
44
(89)
(489) $
(498)
—
(498)
(987) $
8
(4)
9
9
(7)
2
11
(3)
1
(2)
9
$
$
$
32
(266)
(1,968) $
191
69
260
(1,708) $
41
24
65
(1,643) $
Total
(2,227)
(172)
40
(132)
(2,359)
67
106
173
(2,186)
(460)
25
(435)
(2,621)
(i)
(ii)
(iii)
Reclassification adjustments from accumulated other comprehensive loss related to derivative instruments are included in Revenue and Salaries and benefits in the
accompanying consolidated statements of comprehensive income. See Note 10 — Derivative Financial Instruments for additional details regarding the
reclassification adjustments for the derivative settlements.
Reclassification adjustments from accumulated other comprehensive loss are included in the computation of net periodic pension cost (see Note 13 — Retirement
Benefits). These components are included in Other income, net in the accompanying consolidated statements of comprehensive income.
Includes reclassifications in 2021 of $44 million and $31 million of foreign currency translation and defined pension and post-retirement benefit costs, respectively,
attributable to the gain on disposal of our Miller business (see Note 3 — Acquisitions and Divestitures). The net gain on disposal is included in Other income, net in
the accompanying consolidated statements of comprehensive income.
Note 19 — Share-based Compensation
Amounts related to discontinued operations in the tables and other disclosures below were not material during the years ended
December 31, 2022, 2021 and 2020.
Plan Summaries
On December 31, 2022, the Company had a number of open share-based compensation plans, which provide for the granting 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 (‘RSUs’) or other
share-based grants are outstanding as of December 31, 2022 are described below.
118
During 2022, approximately 429,000 shares were issued under employee stock compensation plans, which is net of shares withheld
for taxes and option costs. The total issued shares included approximately 316,000 RSUs that vested in a prior year. See below for
further detail on the options exercised and RSUs vested in 2022.
The compensation cost that has been recognized for these plans for the years ended December 31, 2022, 2021 and 2020 was $99
million, $101 million and $90 million, respectively. Of the $99 million compensation cost for the year ended December 31, 2022, $27
million was recognized as transaction and transformation expense. The total income tax benefits recognized in the consolidated
statements of comprehensive income for share-based compensation arrangements for the years ended December 31, 2022, 2021, and
2020 were $18 million, $17 million and $15 million, respectively.
2012 Equity Incentive Plan
This plan, established on April 25, 2012 and amended and restated on June 10, 2016, 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 to employees, officers, non-employee
directors and consultants of the Company (‘2012 Plan’). The board of directors also adopted a sub-plan under the 2012 Plan to provide
an employee sharesave scheme in the U.K.
There were 3,711,668 shares remaining available for grant under this plan as of December 31, 2022. Options are exercisable on a
variety of dates, including from the second, third, fourth or fifth anniversary of the grant date. The 2012 Plan shall continue in effect
until terminated by the board of directors, except that no incentive stock option may be granted under the 2012 Plan after April 21,
2026 or after its expiration. 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 (‘2009
LTIP’) and converted the outstanding unvested restricted stock units and options into WTW RSUs and options using a conversion
ratio stated in the Merger Agreement.
The acquired awards have vested in full, and the Company does not intend to grant future awards under the 2009 LTIP plan.
Options
There were no options granted during the years ended December 31, 2022, 2021 and 2020.
Award Activity
Classification of options as time-based or performance-based is dependent on the original terms of the award. Performance conditions
on the options have been met. A summary of option activity under the plans at December 31, 2022, and changes during the year then
ended is presented below:
Time-based stock options
Balance as of December 31, 2021
Exercised
Cancelled
Balance as of December 31, 2022
Options vested or expected to vest at December 31, 2022
Options exercisable at December 31, 2022
Performance-based stock options
Balance as of December 31, 2021
Exercised
Balance as of December 31, 2022
Options vested or expected to vest at December 31, 2022
Options exercisable at December 31, 2022
Weighted-
Average
Exercise
Price (i)
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Options
(thousands)
28
$
(12) $
(1) $
$
15
$
15
$
15
91
$
(91) $
— $
— $
— $
117.45
118.90
117.92
116.27
116.27
116.27
110.58
110.58
—
—
—
0.8 years $
0.8 years $
0.8 years $
N/A $
N/A $
N/A $
2
2
2
—
—
—
(i)
Certain options are exercisable in Pounds sterling and are converted to dollars using the exchange rate at December 31, 2022.
119
The total intrinsic values of time-based options exercised during the years ended December 31, 2022, 2021 and 2020 were $1 million,
$7 million and $17 million, respectively. At December 31, 2022, there is no unrecognized compensation cost under time-based plans.
The total intrinsic value of performance-based options exercised during the year ended December 31, 2022 was $9 million; during the
year ended December 31, 2021, total intrinsic value was $23 million, and was less than $1 million for the year ended December 31,
2020. At December 31, 2022, there is no unrecognized compensation cost related to the performance-based stock option plans.
Cash received from option exercises under all share-based payment arrangements for the years ended December 31, 2022, 2021 and
2020 was $7 million, $10 million and $16 million, respectively. The actual tax benefit recognized for the tax deductions from option
exercises of the share-based payment arrangements totaled $11 million, $8 million and $5 million for the years ended December 31,
2022, 2021 and 2020, respectively.
Equity-settled RSUs
Valuation Assumptions
The grant date fair value of each time-based RSU is equal to the grant date stock price. Performance-based RSUs granted during the
year ended December 31, 2022, contain only non-market-based performance targets, and the grant date fair value of these awards is
equal to the grant date stock price. Because performance-based RSUs granted during the years ended December 31, 2021 and
December 31, 2020 contain market-based performance targets, the fair value 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 interest 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.
Expected volatility
Expected dividend yield
Expected life (years)
Risk-free interest rate
Award Activity
Years ended December 31,
2021
2020
29.1%
—%
2.9
0.3%
24.2%
—%
2.9
0.4%
A summary of time-based and performance-based RSU activity under the plans at December 31, 2022, and changes during the year
then ended, is presented below:
Time-based RSUs
Balance as of December 31, 2021
Granted
Vested
Forfeited
Balance as of December 31, 2022
Performance-based RSUs
Balance as of December 31, 2021
Granted
Vested
Forfeited
Balance as of December 31, 2022
Shares
(thousands)
Weighted-
Average
Grant Date
Fair Value
388
100
(35)
(41)
412
468
186
(32)
(34)
588
$
$
$
$
$
$
$
$
$
$
240.77
226.84
242.82
240.73
237.23
280.46
237.57
302.69
267.79
266.39
Time-based RSUs approximating 35,000, 15,000 and 13,000 vested during the years ended December 31, 2022, 2021 and 2020,
respectively, with average share prices of $202.80, $250.83 and $195.69, respectively. At December 31, 2022 there was $60 million of
total unrecognized compensation cost related to the time-based RSU plan; that cost is expected to be recognized over a weighted-
average period of 1.8 years.
Performance-based RSUs approximating 32,000, 133,000 and 416,000 vested during the years ended December 31, 2022, 2021 and
2020, respectively, with average share prices of $197.55, $224.79 and $185.30, respectively. At December 31, 2022 there was $49
million of total unrecognized compensation cost related to the performance-based RSU plan; that cost is expected to be recognized
over a weighted-average period of 1.7 years.
120
The actual tax benefits recognized for the tax deductions from RSUs that vested totaled $23 million, $12 million and $7 million for the
years ended December 31, 2022, 2021 and 2020, respectively.
The amounts reflected above include awards which will be cash-settled due to local requirements. These awards are classified as
liabilities in our consolidated balance sheets and are not material.
Phantom RSUs
During the years ended December 31, 2022 and 2021 cash payments totaling $32 million and $52 million, respectively, were made
related to phantom stock units. There were no cash payments related to phantom stock during the year ended December 31, 2020.
Phantom stock units are cash-settled awards with final payout based on the performance of the Company’s stock. Since the awards are
cash-settled, they are considered a liability. Expense is recognized over the service period. The liability is remeasured at the end of
each reporting period, and changes in fair value are recognized as compensation cost. There is no remaining liability or unearned
compensation related to phantom stock as of December 31, 2022. The Company did not grant phantom stock during 2022, 2021 and
2020.
Note 20 — Earnings Per Share
Basic and diluted earnings per share from continuing operations attributable to WTW and discontinued operations, net of tax are
calculated by dividing net income from continuing operations attributable to WTW and discontinued operations, net of tax,
respectively, 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. See Note 19 — Share-based
Compensation for a summary of our outstanding options and RSUs.
Basic and diluted earnings per share are as follows:
Income from continuing operations
Less: income attributable to non-controlling interests
Income from continuing operations attributable to WTW
(Loss)/income from discontinued operations, net of tax
Basic weighted-average number of shares outstanding
Dilutive effect of potentially issuable shares
Diluted weighted-average number of shares outstanding
$
$
$
Basic earnings per share from continuing operations attributable to WTW
Dilutive effect of potentially issuable shares
Diluted earnings per share from continuing operations attributable to WTW $
$
Basic (loss)/earnings per share from discontinued operations, net of tax
Dilutive effect of potentially issuable shares
Diluted (loss)/earnings per share from discontinued operations, net of tax
$
$
2022
Years ended December 31,
2021
2020
1,064
(15)
1,049
(40)
112
—
112
9.36
(0.02)
9.34
(0.36)
—
(0.36)
$
$
$
$
$
$
$
2,156
(14)
2,142
2,080
128
1
129
16.68
(0.05)
16.63
16.20
(0.05)
16.15
$
$
$
$
$
$
$
762
(24)
738
258
130
—
130
5.69
(0.02)
5.67
1.99
(0.01)
1.98
There were no anti-dilutive options for the years ended December 31, 2022, 2021 and 2020. For the years ended December 31, 2022,
2021 and 2020, 0.2 million, 0.3 million and 0.1 million RSUs, respectively, were not included in the computation of the dilutive effect
of potentially issuable shares because their effect was anti-dilutive.
121
Note 21 — 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 and cash equivalents
Fiduciary funds (included in fiduciary assets)
Cash and cash equivalents and fiduciary funds (included in current assets held
for sale)
Other restricted cash (included in prepaids and other current assets)
Total cash, cash equivalents and restricted cash
(Decrease)/increase in cash, cash equivalents and other restricted cash
Increase/(decrease) in fiduciary funds
Total
Cash payments for income taxes, net
Cash payments for interest
Cash acquired
Supplemental disclosures of non-cash investing and financing activities:
Non-cash consideration received
Fair value of deferred and contingent consideration related to acquisitions
Note 22 — Quarterly Financial Data (Unaudited)
As of and for the Years Ended December 31,
2020
2021
2022
$
$
$
$
$
$
$
$
$
1,262
3,459
—
—
4,721
(3,177)
371
(2,806)
428
201
30
63
28
$
$
$
$
$
$
$
$
$
4,486
3,203
2
—
7,691
2,425
(908)
1,517
570
212
5
$
$
$
$
$
$
$
— $
$
21
2,039
4,205
50
7
6,301
1,180
812
1,992
310
229
10
—
9
WTW presents the following quarterly financial data for 2021. No changes to the data provided below have been made during the
current year, and no changes have been made to 2022 quarterly data previously filed within our Quarterly Reports on Form 10-Q for
the quarters ended September 30, June 30, and March 31, 2022.
2021
Revenue
Total costs of providing services
Income from operations
Income from continuing operations
Income/(loss) from discontinued operations, net of tax
Net income
Net income attributable to WTW
Earnings per share
— Basic: income from continuing operations
— Diluted: income from continuing operations
March 31,
June 30,
September 30,
December 31,
Three Months Ended
$
$
$
$
2,228
2,017
211
546
190
736
733
$
2,091
1,921
170
117
69
186
184
$
1,973
842
1,131
919
(12)
907
903
4.18
4.17
$
$
0.89
0.88
$
$
7.10
7.08
$
$
2,706
2,016
690
574
1,833
2,407
2,402
4.56
4.54
122
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 our chief executive officer (‘CEO’) and chief
financial officer (‘CFO’), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ‘Exchange Act’), as of the end of the
period covered by this annual 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, 2022 in providing reasonable assurance that the information
required to be disclosed in the 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,
including the CEO and the CFO, as appropriate, 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, as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act, identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange Act in the
quarter and year ended December 31, 2022 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 U.S. generally accepted
accounting principles (‘U.S. GAAP’), 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
our assets;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. GAAP and that our receipts and expenditures are being made only in accordance with authorizations of
our management and directors; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
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. 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. 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 the adequacy and effectiveness of our internal control over financial
reporting. Under the supervision and with the participation of our management, including our CEO and CFO, we evaluated the
effectiveness of our internal control over financial reporting as of December 31, 2022. In making this evaluation, management used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the report entitled Internal
Control — Integrated Framework (2013). Based on this evaluation, management has concluded that we maintained effective internal
control over financial reporting as of December 31, 2022.
The effectiveness of our internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report titled “Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting,” which is included herein.
123
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Willis Towers Watson Public Limited Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Willis Towers Watson Public Limited Company and subsidiaries (the
‘Company’) as of December 31, 2022, 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, 2022, 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, 2022, of the Company and our report
dated February 24, 2023, 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 24, 2023
124
ITEM 9B. OTHER INFORMATION
Disclosures Required Pursuant to Section 13(r) of the Securities Exchange Act of 1934
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 and Section 13(r) of the Exchange Act. Concurrently with this Annual Report on Form 10-K, we are filing a notice pursuant
to Section 13(r) of the Exchange Act that the matter has been disclosed herein.
Willis Limited, WTW’s main broking entity in the U.K., at the request and on behalf of certain reinsured clients, has obtained
reinsurance coverage from the F.A.I.R. Aviation Pool (‘the Pool’), which is managed by Société Centrale de Réassurance, a Moroccan
entity (‘SCR Maroc’). The membership of the Pool changes each policy year, but has in some, but not all, years included Iranian
(re)insurance carriers, namely Bimeh Markazi Iran, Bimeh Asia (Asia Insurance Co), and Bimeh Iran (Iran Insurance Co)
(collectively, the ‘Iranian Carriers’). As a broker, Willis Limited has, on behalf of its reinsured clients, made premium payments to
SCR Maroc (acting on behalf of the Pool) and received claims payments from SCR Maroc (acting on behalf of the Pool), at times
offset against premium payments owed to the Pool. Willis Limited has not made any payments to or received any payments from the
Iranian Carriers directly. However, based on currently known information, our belief is that SCR Maroc may have paid to (or received
from) Iranian Carriers a portion of those amounts corresponding to their share of the Pool for the relevant underwriting year. We do
not believe, based on current information, that the Company teams working on the placement understood or intended the connections
with Iranian Carriers described above.
Since 2013, Willis Limited has made seven premium or netted premium/claim payments to SCR Maroc where Iranian Carriers were
members of the Pool for the relevant policy year, in amounts equal to $134,728.12 plus EUR 7,242.40 in the aggregate. From these
payments, Willis Limited retained commission of $21,860.71 plus EUR 2,566.86 in the aggregate.
An affiliate of Willis Limited has submitted a voluntary self-disclosure to the U.S. Office of Foreign Assets Control (‘OFAC’) in
relation to the above-described U.S. dollar transactions. It intends to cooperate fully with any investigation by OFAC.
The Company does not intend to engage in future transactions or dealings with the Iranian Carriers.
125
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
126
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 Business above under the heading
‘Information about 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
Information with respect to the Company’s Securities Authorized for Issuance Under Equity Compensation Plans as required by Item
201(d) of Regulation S-K is incorporated herein by reference to Item 5 of this Annual Report on Form 10-K. 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 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.
127
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 Public Limited Company
Financial Statements:
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2022
Consolidated Balance Sheets at December 31, 2022 and 2021
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2022
Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31, 2022
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 WTW 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 WTW 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.
Exhibit
Number
2.1
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
Description of Exhibit
Incorporated by Reference
Schedule/
Form
8-K
Exhibit
2.1
Filing Date
June 30, 2015
Filed
Herewith
2.2
Amendment No. 1 to Agreement and Plan of Merger, dated November 19, 2015, by and among Willis,
8-K
2.1
Merger Sub and Towers Watson
3.1
Amended and Restated Memorandum and Articles of Association of Willis Towers Watson Public Limited
8-K
3.1
November 20,
2015
June 15, 2017
Company
4.1
Description of Willis Towers Watson Public Limited Company’s ordinary shares
10-K
4.1
February 26,
2020
128
Exhibit
Number
4.2
Description of Exhibit
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 UK Holdings Limited, TA I Limited and Willis Group Limited, as guarantors, and
Computershare Trust Company, N.A., as successor to Wells Fargo Bank, National Association, as trustee
Incorporated by Reference
Schedule/
Form
8-K
Exhibit
4.1
Filing Date
August 15, 2013
Filed
Herewith
4.3
First Supplemental Indenture, dated as of August 15, 2013, supplemental to the Indenture dated as of
8-K
4.2
August 15, 2013
August 15, 2013
4.4
Second Supplemental Indenture, dated as of March 9, 2016, supplemental to the Indenture, dated as of
8-K
4.3
March 10, 2016
August 15, 2013
4.5
Third Supplemental Indenture, dated as of March 22, 2016, supplemental to the Indenture, dated as of
8-K
4.1
March 22, 2016
August 15, 2013
4.6
Fifth Supplemental Indenture, dated as of August 11, 2017, supplemental to the Indenture dated as of
8-K
4.3
August 16, 2017
August 15, 2013
4.7
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 Computershare Trust Company, N.A.,
as successor to Wells Fargo Bank, National Association, as Trustee
8-K
4.1
May 16, 2017
4.8
First Supplemental Indenture, dated as of May 16, 2017, supplemental to the Indenture dated as of May 16,
8-K
4.2
May 16, 2017
2017
4.9
Second Supplemental Indenture, dated as of August 11, 2017, supplemental to the Indenture dated as of
8-K
4.4
August 16, 2017
May 16, 2017
4.10
Third Supplemental Indenture, dated as of September 10, 2018, supplemental to the Indenture dated as of
8-K
4.1
May 16, 2017
4.11
Fourth Supplemental Indenture, dated as of September 10, 2019, supplemental to the Indenture dated as of
8-K
4.1
May 16, 2017
4.12
Fifth Supplemental Indenture, dated as of May 19, 2022, supplemental to the Indenture dated as of May 16,
8-K
4.1
September 10,
2018
September 10,
2019
May 19, 2022
2017
4.13
Officers’ Certificate of the Issuer and the Guarantors (including Form of Willis North America Inc.'s 2.95%
8-K
4.1
May 29, 2020
Senior Note due 2029 and 3.875% Senior Note due 2049), dated as of May 29, 2020
4.14
Form of Indenture among Willis Towers Watson Public Limited Company, as issuer, Willis Towers
S-3
4.6
10.1^
Watson Sub Holdings Unlimited Company, Willis Netherlands Holdings B.V., Willis Investment UK
Holdings Limited, TA I Limited, Willis Towers Watson UK Holdings Limited, Trinity Acquisition plc,
Willis Group Limited and Willis North America Inc., as guarantors, and Computershare Trust Company,
N.A., as Trustee
Second Amended and Restated Credit Agreement, dated as of October 6, 2021, among, Trinity Acquisition
plc and its indirect subsidiaries, Willis North America Inc. and Willis Netherlands Holdings B.V., Willis
Towers Watson Public Limited Company, the lenders party thereto and Barclays Bank PLC, as
Administrative Agent
129
February 28,
2022
8-K
10.1 October 7, 2021
Exhibit
Number
10.2
Second Amended and Restated Guaranty Agreement, dated as of October 6, 2021, among, Trinity
Acquisition plc, Willis Towers Watson Public Limited Company, the other guarantors party thereto and
Barclays Bank PLC, as Administrative Agent
Description of Exhibit
Incorporated by Reference
Schedule/
Exhibit
Form
8-K 10.2
Filing Date
October 7, 2021
Filed
Herewith
10.3
Deed Poll of Assumption, dated as of December 31, 2009, by and between Willis Group Holdings Limited
8-K 10.4
January 4, 2010
and Willis Group Holdings Public Limited Company
10.4
Security and Asset Purchase Agreement, dated as of August 12, 2021, by and between Willis Towers
8-K 10.1
August 16, 2021
Watson plc and Arthur J. Gallagher & Co.
10.5
Letter Agreement, dated December 1, 2021, by and between Willis Towers Watson plc and Arthur J.
8-K 10.1
Gallagher & Co.
10.6†
10.7†
Willis Towers Watson Public Limited Company 2012 Equity Incentive Plan
Form of Time-Based Share Option Award Agreement under the Willis Group Holdings Public Limited
DEF14A A
10-Q 10.1
Company 2012 Equity Incentive Plan
10.8†
Form of 2012 Equity Incentive Plan (As Amended and Restated) Restricted Share Unit Award Agreement
10-K 10.9
for Non-Employee Directors under the Willis Group Holdings Public Limited Company 2012 Equity
Incentive Plan
December 6,
2021
April 28, 2022
August 9, 2012
February 24,
2022
10.9†
Rules of the Willis Group Holdings Public Limited Company 2012 Sharesave Sub-Plan for the United
10-K 10.32 February 28,
Kingdom to the Willis Group Holdings Public Limited Company 2012 Equity Incentive Plan
10.10† Amended and Restated Willis U.S. 2005 Deferred Compensation Plan
8-K 10.1
10.11† First Amendment to the Amended and Restated Willis U.S. 2005 Deferred Compensation Plan, effective
10-Q 10.1
June 1, 2011
10.12† Second Amendment to the Amended and Restated Willis U.S. 2005 Deferred Compensation Plan
10-Q 10.6
2013
November 20,
2009
August 9, 2011
November 5,
2013
10.13† Amendment 2017-1 to the Amended and Restated Willis U.S. 2005 Deferred Compensation Plan
10-K 10.34 February 28,
10.14† Amendment 2019-1 to the Amended and Restated Willis U.S. 2005 Deferred Compensation Plan
10-Q 10.2
10.15† Form of Deed of Indemnity of Willis Towers Watson Public Limited Company
10.16† Form of Indemnification Agreement of Willis North America Inc.
10.17† Willis Towers Watson Public Limited Company Compensation Policy and Share Ownership Guidelines for
8-K 10.1
8-K 10.2
10-Q 10.1
Non-Employee Directors (as amended May 2022)
2018
November 1,
2019
January 5, 2016
January 5, 2016
July 28, 2022
10.18† Offer Letter, dated as of August 26, 2021, by and between Willis Towers Watson US LLC and Andrew
10-Q 10.4
October 28, 2021
10.19†
Krasner
Time-Based Restricted Share Unit Award Agreement, dated as of September 7, 2021, by and between
Willis Towers Watson Public Limited Company and Andrew Krasner
10-Q
10.5 October 28, 2021
130
Exhibit
Number
10.20† Employment Agreement, dated as of February 25, 2015, by and between Willis Group Holdings Public
Description of Exhibit
Limited Company and Matthew Furman
Contract of Employment, dated May 11, 2009, by and between Willis Limited and Adam Garrard
10.21†
10.22† Form of Retention Agreement
10.23† Towers Watson Amended and Restated 2009 Long Term Incentive Plan
10.24† Trust Deed and Rules of the Towers Watson Limited Share Incentive Plan 2005 (U.K.)
10.25† Towers Watson Limited Share Incentive Plan 2005 Deed of Amendment (U.K.)
Incorporated by Reference
Schedule/
Form
10-K 10.45 February 24, 2022
Filing Date
Exhibit
Filed
Herewith
X
8-K 10.1 February 5, 2021
S-8
10-K 10.21 September 1,
99.1 January 5, 2016
10-K 10.22 September 1,
2006
2006
10.26† Towers Watson Limited Share Incentive Plan 2005 Deed to Change the Trust Deed and Rules (U.K.)
10.27† Willis Towers Watson Non-Qualified Deferred Savings Plan for U.S. Employees (as amended and restated
10-K 10.10 August 29, 2012
10-Q 10.1 November 7, 2016
effective January 1, 2017)
10.28† Amendment 2018-1 to the Willis Towers Watson Non-Qualified Deferred Savings Plan for U.S.
8-K 99.3 July 18, 2018
Employees
10.29† Amendment 2020-1 to the Willis Towers Watson Non-Qualified Deferred Savings Plan for U.S.
10-K 10.62 February 23, 2021
Employees
10.30† Willis Towers Watson Non-Qualified Stable Value Excess Plan for U.S. Employees
10.31† Amendment 2017-1 to the Willis Towers Watson Non-Qualified Stable Value Excess Plan for U.S.
10-Q 10.3 August 7, 2017
10-Q 10.2 August 6, 2018
Employees
10.32† Amendment 2020-1 to the Willis Towers Watson Non-Qualified Stable Value Excess Plan for U.S.
10-K 10.63 February 23, 2021
Employees
10.33† Willis Towers Watson Public Limited Company Compensation Recoupment Policy
10.34† Form of 2021 Performance-Based Restricted Share Unit Award Agreement, including the Agreement of
10-K 10.68 February 28, 2018
10-Q
10.2 August 4, 2021
Restrictive Covenants and Other Obligations, for Operating Committee Members in the United States,
under the Willis Towers Watson Amended and Restated 2012 Equity Incentive Plan
10.35† Form of 2021 Performance-Based Restricted Share Unit Award Agreement, including the Agreement of
10-Q
10.3 August 4, 2021
Restrictive Covenants and Other Obligations, for Operating Committee Members outside the United States,
under the Willis Towers Watson Amended and Restated 2012 Equity Incentive Plan
10.36† Form of 2022 Time-Based Restricted Share Unit Award Agreement for Executive Officers under the Willis
8-K
10.1 February 28, 2022
Towers Watson Amended and Restated 2012 Equity Incentive Plan
10.37† Form of 2022 Performance-Based Restricted Share Unit Award Agreement for Executive Officers under
8-K
10.2 February 28, 2022
the Willis Towers Watson Amended and Restated 2012 Equity Incentive Plan
131
Exhibit
Number
10.38† Willis Towers Watson Public Limited Company Severance and Change in Control Pay Plan for US
Executives, adopted March 8, 2020 and as amended June 5, 2020 and February 22, 2022
Description of Exhibit
Incorporated by Reference
Schedule/
Filing Date
Form
8-K 10.3 February 28,
Exhibit
2022
Filed
Herewith
10.39† Willis Towers Watson Public Limited Company Severance and Change in Control Pay Plan for Non-US
8-K 10.4 February 28,
Executives, adopted March 8, 2020 and as amended June 5, 2020 and February 22, 2022
2022
10.40† Willis Towers Watson Public Limited Company Compensation Policy and Share Ownership Guidelines for
10-Q 10.1 July 28, 2022
10-Q 22.1 July 28, 2022
Non-Employee Directors (as amended May 2022)
21.1
22.1
23.1
31.1
List of Subsidiaries
List of Issuers and Guarantor Subsidiaries
Consent of Deloitte & Touche LLP
Certification of the Registrant’s Chief Executive Officer, Carl A. Hess, pursuant to Rules 13a-14(a) and
15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
31.2
Certification of the Registrant’s Chief Financial Officer, Andrew J. Krasner, pursuant to Rules 13a-14(a)
and 15(d)-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1** Certification of the Registrant’s Chief Executive Officer, Carl A. Hess, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2** Certification of the Registrant’s Chief Financial Officer, Andrew J. Krasner, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File
because XBRL tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
X
X
X
X
X
X
X
X
X
X
X
** Furnished herewith. Any exhibits furnished herewith (including the certifications furnished in Exhibits 32.1 and 32.2) are deemed to accompany this Annual Report on Form
10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, except to
the extent that the registrant specifically incorporates it by reference.
† Management contract or compensatory plan or arrangement.
^ Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). We agree to furnish a copy of all omitted exhibits and
schedules to the SEC upon its request.
All exhibits that are incorporated by reference herein to a filing with the SEC are filed under SEC File No. 001-16503, except for filings made more than six years ago which 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.
132
ITEM 16. FORM 10-K SUMMARY
Not applicable.
133
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 PUBLIC LIMITED
COMPANY
(REGISTRANT)
By:
/s/ Carl Hess
Carl Hess
Chief Executive Officer
Date: February 24, 2023
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/ Carl Hess
Carl Hess
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Joseph Kurpis
Joseph Kurpis
Principal Accounting Officer and Controller
/s/ Dame Inga Beale
Dame Inga Beale
Director
/s/ Michael Hammond
Michael Hammond
Director
/s/ Linda Rabbitt
Linda Rabbitt
Director
/s/ Michelle Swanback
Michelle Swanback
Director
/s/ Andrew Krasner
Andrew Krasner
Chief Financial Officer
/s/ Fumbi Chima
Fumbi Chima
Director
/s/ Brendan O’Neill
Brendan O’Neill
Director
/s/ Paul Reilly
Paul Reilly
Director
/s/ Paul Thomas
Paul Thomas
Director
134