Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY

INDEX TO FORM 10-K

For the year ended December 31, 2021

		Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 34)		74
Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2021		76
Consolidated Balance Sheets as of December 31, 2021 and 2020		77
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021		78
Consolidated Statements of Changes in Equity for each of the three years in the period ended December 31, 2021		79
Notes to the Consolidated Financial Statements		80

REPORT OF INDEPENDENT REGIST****ERED 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, 2021 and 2020, 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, 2021 and 2020, 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, 2021, 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, 2022, 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,

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, including evaluating changes needed or warranted given changes in the business and trends emerging from the COVID-19 pandemic, 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, 2022

We have served as the Company’s auditor since 2017.

WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY

Consolidated Statements of Comprehensive Income

(In millions of U.S. dollars, except per share data)

		Years ended December 31,
		2021				2020				2019
Revenue		$	8,998			$	8,615			$	8,370
Costs of providing services
Salaries and benefits			5,253				5,157				4,929
Other operating expenses			1,673				1,697				1,647
Depreciation			281				307				239
Amortization			369				461				488
Restructuring costs			26				24				—
Transaction and integration, net			(806	)			110				13
Total costs of providing services			6,796				7,756				7,316
Income from operations			2,202				859				1,054
Interest expense			(211	)			(244	)			(234	)
Other income, net			701				396				226
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			2,692				1,011				1,046
Provision for income taxes			(536	)			(249	)			(197	)
INCOME FROM CONTINUING OPERATIONS			2,156				762				849
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX			2,080				258				224
NET INCOME			4,236				1,020				1,073
Income attributable to non-controlling interests			(14	)			(24	)			(29	)
NET INCOME ATTRIBUTABLE TO WTW		$	4,222			$	996			$	1,044
EARNINGS PER SHARE
Basic earnings per share:
Income from continuing operations per share		$	16.68			$	5.69			$	6.32
Income from discontinued operations per share			16.20				1.99				1.73
Basic earnings per share		$	32.88			$	7.68			$	8.05
Diluted earnings per share:
Income from continuing operations per share		$	16.63			$	5.67			$	6.30
Income from discontinued operations per share			16.15				1.98				1.72
Diluted earnings per share		$	32.78			$	7.65			$	8.02
NET INCOME		$	4,236			$	1,020			$	1,073
Other comprehensive (loss)/income, net of tax:
Foreign currency translation		$	(87	)		$	139			$	78
Defined pension and post-retirement benefits			260				(266	)			(329	)
Derivative instruments			2				(4	)			21
Other comprehensive income/(loss), net of tax, before non-controlling interests			175				(131	)			(230	)
Comprehensive income before non-controlling interests			4,411				889				843
Comprehensive income attributable to non-controlling interests			(16	)			(25	)			(29	)
Comprehensive income attributable to WTW		$	4,395			$	864			$	814

See accompanying notes to the consolidated financial statements

WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY

Consolidated B****alance Sheets

(In millions of U.S. dollars, except share data)

		December 31, 2021				December 31, 2020
ASSETS
Cash and cash equivalents		$	4,486			$	2,039
Fiduciary assets			11,014				12,003
Accounts receivable, net			2,370				2,408
Prepaid and other current assets			612				479
Current assets held for sale			6				3,372
Total current assets			18,488				20,301
Fixed assets, net			851				1,013
Goodwill			10,183				10,392
Other intangible assets, net			2,555				2,989
Right-of-use assets			720				901
Pension benefits assets			971				971
Other non-current assets			1,202				1,080
Non-current assets held for sale			—				884
Total non-current assets			16,482				18,230
TOTAL ASSETS		$	34,970			$	38,531
LIABILITIES AND EQUITY
Fiduciary liabilities		$	11,014			$	12,003
Deferred revenue and accrued expenses			1,926				2,098
Current debt			613				971
Current lease liabilities			150				152
Other current liabilities			1,015				798
Current liabilities held for sale			6				3,310
Total current liabilities			14,724				19,332
Long-term debt			3,974				4,664
Liability for pension benefits			757				1,403
Deferred tax liabilities			845				561
Provision for liabilities			375				406
Long-term lease liabilities			734				917
Other non-current liabilities			253				290
Non-current liabilities held for sale			—				26
Total non-current liabilities			6,938				8,267
TOTAL LIABILITIES			21,662				27,599
COMMITMENTS AND CONTINGENCIES
EQUITY (i)
Additional paid-in capital			10,804				10,748
Retained earnings			4,645				2,434
Accumulated other comprehensive loss, net of tax			(2,186	)			(2,359	)
Treasury shares, at cost, 17,519 in 2021 and 2020			(3	)			(3	)
Total WTW shareholders’ equity			13,260				10,820
Non-controlling interests			48				112
Total equity			13,308				10,932
TOTAL LIABILITIES AND EQUITY		$	34,970			$	38,531

(i)

Equity includes (a) Ordinary shares $0.000304635 nominal value; Authorized 1,510,003,775; Issued 122,055,815 (2021) and 128,964,579 (2020); Outstanding 122,055,815 (2021) and 128,964,579 (2020); (b) Preference shares, $0.000115 nominal value; Authorized 1,000,000,000 and Issued none in 2021 and 2020.

See accompanying notes to the consolidated financial statements

WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY

Consolidated Statem****ents of Cash Flows

(In millions of U.S. dollars)

		Years ended December 31,
		2021				2020				2019
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME		$	4,236			$	1,020			$	1,073
Adjustments to reconcile net income to total net cash from operating activities:
Depreciation			281				308				240
Amortization			369				462				489
Non-cash lease expense			160				146				148
Net periodic benefit of defined benefit pension plans			(168	)			(196	)			(135	)
Provision for doubtful receivables from clients			19				29				9
Provision for/(benefit from) deferred income taxes			226				99				(72	)
Share-based compensation			101				90				74
Net (gain)/loss on disposal of operations			(2,679	)			(81	)			2
Non-cash foreign exchange (gain)/loss			(10	)			(6	)			26
Other, net			(25	)			(41	)			17
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries:
Accounts receivable			(134	)			72				(261	)
Other assets			(122	)			(205	)			(269	)
Other liabilities			(175	)			215				(264	)
Provisions			(18	)			(138	)			4
Net cash from operating activities			2,061				1,774				1,081
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
Additions to fixed assets and software for internal use			(148	)			(223	)			(246	)
Capitalized software costs			(53	)			(63	)			(59	)
Acquisitions of operations, net of cash acquired			(47	)			(69	)			(1,329	)
Proceeds from sale of operations			4,048				237				17
Cash and fiduciary funds transferred in sale of operations			(1,030	)			(25	)			—
Purchase of investments			(200	)			—				—
Other, net			—				(17	)			3
Net cash from/(used in) investing activities			2,570				(160	)			(1,614	)
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
Net payments on revolving credit facility			—				—				(131	)
Senior notes issued			—				282				997
Proceeds from issuance of other debt			—				—				1,100
Debt issuance costs			(4	)			(2	)			(13	)
Repayments of debt			(1,008	)			(327	)			(995	)
Repurchase of shares			(1,627	)			—				(150	)
Proceeds from issuance of shares			10				16				45
Net (payments)/proceeds from fiduciary funds held for clients			(40	)			812				58
Payments of deferred and contingent consideration related to acquisitions			(19	)			(12	)			(57	)
Cash paid for employee taxes on withholding shares			(16	)			(14	)			(15	)
Dividends paid			(374	)			(346	)			(329	)
Acquisitions of and dividends paid to non-controlling interests			(36	)			(28	)			(55	)
Other, net			—				(3	)			—
Net cash (used in)/from financing activities			(3,114	)			378				455
INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (i)			1,517				1,992				(78	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(127	)			126				—
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR (i)			6,301				4,183				4,261
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR (i)		$	7,691			$	6,301			$	4,183

(i)

The amounts of cash, cash equivalents and restricted cash, their respective classification on the balance sheets and how these amounts have changed for prior years have been included in Note 21 — Supplemental Disclosures of Cash Flow Information, as well as their respective portion of the change in the increase or decrease of cash, cash equivalents and restricted cash for each of the periods presented.

See accompanying notes to the consolidated financial statements

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						Redeemable Non-controlling interest (ii)				Total
Balance as of January 1, 2019			128,922			$	10,615			$	1,201			$	(3	)		$	(1,961	)		$	9,852			$	119			$	9,971					$	26
Adoption of ASU 2018-02			—				—				36				—				(36	)			—				—				—						—
Shares repurchased			(788	)			—				(150	)			—				—				(150	)			—				(150	)					—
Net income			—				—				1,044				—				—				1,044				23				1,067						6			$	1,073
Dividends declared ($2.60 per share)			—				—				(339	)			—				—				(339	)			—				(339	)					—
Dividends attributable to non-controlling interests			—				—				—				—				—				—				(21	)			(21	)					(2	)
Other comprehensive loss			—				—				—				—				(230	)			(230	)			—				(230	)					—			$	(230	)
Issuance of shares under employee stock compensation plans			556				45				—				—				—				45				—				45						—
Share-based compensation and net settlements			—				32				—				—				—				32				—				32						—
Acquisition of non-controlling interests			—				(6	)			—				—				—				(6	)			(1	)			(7	)					(30	)
Foreign currency translation			—				1				—				—				—				1				—				1						—
Balance as of December 31, 2019			128,690			$	10,687			$	1,792			$	(3	)		$	(2,227	)		$	10,249			$	120			$	10,369					$	—
Net income			—				—				996				—				—				996				24				1,020						—			$	1,020
Dividends declared ($2.75 per share)			—				—				(354	)			—				—				(354	)			—				(354	)					—
Dividends attributable to non-controlling interests			—				—				—				—				—				—				(22	)			(22	)					—
Other comprehensive (loss)/income			—				—				—				—				(132	)			(132	)			1				(131	)					—			$	(131	)
Issuance of shares under employee stock compensation plans			275				16				—				—				—				16				—				16						—
Share-based compensation and net settlements			—				46				—				—				—				46				—				46						—
Reduction of non-controlling interests (iii)			—				9				—				—				—				9				(11	)			(2	)					—
Other			—				(3	)			—				—				—				(3	)			—				(3	)					—
Foreign currency translation			—				(7	)			—				—				—				(7	)			—				(7	)					—
Balance as of December 31, 2020			128,965			$	10,748			$	2,434			$	(3	)		$	(2,359	)		$	10,820			$	112			$	10,932					$	—
Shares repurchased			(7,155	)			—				(1,627	)			—				—				(1,627	)			—				(1,627	)					—
Net income			—				—				4,222				—				—				4,222				14				4,236						—			$	4,236
Dividends declared ($3.02 per share)			—				—				(384	)			—				—				(384	)			—				(384	)					—
Dividends attributable to non-controlling interests			—				—				—				—				—				—				(29	)			(29	)					—
Other comprehensive income			—				—				—				—				173				173				2				175						—			$	175
Issuance of shares under employee stock compensation plans			246				10				—				—				—				10				—				10						—
Share-based compensation and net settlements			—				47				—				—				—				47				—				47						—
Reduction of non-controlling interests (iii)			—				(8	)			—				—				—				(8	)			(51	)			(59	)					—
Foreign currency translation			—				7				—				—				—				7				—				7						—
Balance as of December 31, 2021			122,056			$	10,804			$	4,645			$	(3	)		$	(2,186	)		$	13,260			$	48			$	13,308					$	—

(i)

Accumulated other comprehensive loss, net of tax (‘AOCL’).

(ii)

The redeemable non-controlling interest was related to Max Matthiessen Holding AB. The Company purchased the remaining non-controlling interest of Max Matthiessen Holding AB during the year ended December 31, 2019.

(iii)

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

WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY

Notes to the Consolidat****ed Financial Statements

(Tabular amounts are in millions of U.S. dollars, except per share data)

Note 1 — Nature of Operations

Willis Towers Watson plc is a leading global advisory, broking and solutions company that provides data-driven, insight-led solutions in the areas of people, risk and capital. The Company has more than 44,000 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.

Termination of Proposed Combination with Aon plc

On March 9, 2020, WTW and Aon plc (‘Aon’) issued an announcement disclosing that the respective boards of directors of WTW and Aon had reached agreement on the terms of a recommended acquisition of WTW by Aon. Under the terms of the agreement each WTW shareholder would receive 1.08 Aon ordinary shares for each WTW ordinary share. At the time of the announcement, it was estimated that upon completion of the combination, existing Aon shareholders would own approximately 63% and existing WTW shareholders would own approximately 37% of the combined company on a fully diluted basis.

On June 16, 2021, the U.S. Department of Justice filed suit in U.S. District Court in the District of Columbia against WTW and Aon, seeking to enjoin the proposed business combination between the two companies (among other relief). On July 26, 2021, WTW and Aon announced they had terminated the business combination agreement and that Aon had agreed to pay WTW $1 billion in connection with such termination, which was received by WTW on July 27, 2021 (the ‘Termination’ or the ‘Termination Agreement’). The $1 billion income receipt has been included in transaction and integration, net in the consolidated statements of comprehensive income. Under the Termination Agreement, WTW and Aon on behalf of themselves and certain other related and affiliated parties, each agreed to release the other from all claims and actions arising out of or related to the business combination agreement and the transactions contemplated thereby, subject to certain exceptions.

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. We have reclassified certain prior period amounts to conform to the current period presentation due to the recognition of discontinued operations and assets and liabilities as held-for-sale (see below for further discussion). Additionally, certain amounts on the consolidated statements of cash flows have been revised from their prior period classifications. See Note 21 - Supplemental Disclosures of Cash Flow Information for more information as to the nature of the revision and the amounts. All intercompany accounts and transactions have been eliminated in consolidation.

Risks and Uncertainties Related to the COVID-19 Pandemic and the Related Economic Environment

The COVID-19 pandemic has had an adverse impact on global commercial activity, particularly on the global supply chain and workforce availability, and has contributed to 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. With regard to the effects on our own business operations and those of our clients, suppliers and other third parties with whom we interact, the Company has regularly considered the impact of COVID-19 and the wider economic results on our business, taking into account our business resilience and continuity plans, financial modeling and stress testing of liquidity and financial resources.

Over the last two years, the COVID-19 pandemic generally did not have a material adverse impact on our overall financial results. Initially, the COVID-19 pandemic had a negative impact on our revenue growth, primarily in our businesses that are discretionary in nature, however we later saw an increased demand for these services, which improved revenue growth beginning in the second quarter of 2021. There continues to be increased demand for our services, particularly those services that address the various challenges in the global labor markets and disruptions to the supply chain. While we have fully adapted to the unique challenges posed by the pandemic 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.

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. 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 able to achieve our strategic and financial objectives.

The extent to which COVID-19 impacts our business and financial position will depend on future developments, which are difficult to predict. These future developments may include the severity and scope of the COVID-19 outbreak and the emergence of new variants, which may unexpectedly change or worsen, and the types and duration of measures imposed by governmental authorities to contain the virus or address its impact. We continue to expect that the COVID-19 pandemic and the related impacts on the wider economic environment may cause volatility to our revenue and operating results in fiscal 2022. We believe that, as a general matter, these trends and uncertainties are similar to those faced by other comparable registrants as a result of the pandemic.

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 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 $140 million in unencumbered and available financial resources, of which at least $83 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. As a result of the acquired TRANZACT collateralized facility (see Note 11 — Debt), we had $7 million of restricted cash at December 31, 2020, which is included within prepaid and other current assets on our consolidated balance sheets. 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 (see Note 3 – Acquisitions and Divestitures), 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 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 fair value hedge, the changes in the fair value of the derivative and of the hedged item associated with the hedged risk are both recognized in earnings. The amount of hedge ineffectiveness recognized in earnings is based on the extent to which an offset between the fair value of the derivative and hedged item is not achieved. Changes in 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 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 5 to 15 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.

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 represent an immaterial 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. Over 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:

	Amortization basis		Expected life (years)
Client relationships	In line with underlying cash flows		5 to 20
Software	In line with underlying cash flows or straight-line basis		4 to 7
Trademark and trade name	Straight-line basis		14 to 25
Other	In line with underlying cash flows or straight-line basis		3 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 eight reporting units as of October 1, 2021. 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, 2021 and 2020 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.

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 5% to 6% of customer contract revenue from continuing operations each year.

Broking — Representing approximately 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 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.

Beginning on July 30, 2019 with the acquisition of TRANZACT (see Note 3 — Acquisitions and Divestitures), we have a direct-to-consumer Medicare broking offering. The contractual arrangements in this offering differ from our previously existing 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 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 34% 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 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 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% 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.

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.

Recent Accounting Pronouncements

Not Adopted for 2021

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which addresses the accounting for revenue contracts with customers acquired in a business combination, as well as contract assets and contract liabilities from other contracts to which the provisions of ASC 606 apply. This ASU amends Topic 805 to add these contracts to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an entity recognize and measure such contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. This ASU becomes effective for the Company on January 1, 2023 and must be applied prospectively to business combinations occurring on or after this date. As permitted, the Company early-adopted this ASU on January 1, 2022. The Company does not expect it to have a material impact on its consolidated financial statements.

Adopted

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which clarifies and amends existing guidance, including removing certain exceptions to the general principles of accounting for income taxes. Some of the changes must be applied on a retrospective or modified retrospective basis while others must be applied on a prospective basis. The Company adopted this guidance as it became effective on January 1, 2021 without any impact to our consolidated financial statements.

Note 3 — Acquisitions and Divestitures

The following disclosures discuss significant transactions during the three-year period ended December 31, 2021.

Acquisitions

TRANZACT Acquisition

On July 30, 2019, the Company acquired TRANZACT, a U.S.-based provider of comprehensive, direct-to-consumer sales and marketing solutions for leading insurance carriers in the U.S. TRANZACT leverages digital, data and direct marketing solutions to deliver qualified leads, fully-provisioned sales and robust customer management systems to brands seeking to acquire and manage large numbers of consumers. Pursuant to the terms of the acquisition agreement, subject to certain adjustments, the consideration consisted of $1.3 billion paid in cash at closing. Additional contingent consideration in the form of an earn-out of $17 million was paid in cash in 2021 based on the achievement of certain financial targets. The acquisition was initially funded in part with a $1.1 billion

one-year term loan (see Note 11 — Debt for a description of the term loan and its repayment), with the remainder being funded from the Company’s existing revolving credit facility. TRANZACT operates as part of our Benefits Delivery and Administration segment and enhances the Company’s preexisting Medicare broking offering, while also adding significant direct-to-consumer marketing experience.

Other Acquisitions

Other acquisitions were completed during the years ended December 31, 2021 and 2020 for combined cash payments of $52 million and $79 million, respectively, and contingent consideration fair valued at $21 million and $9 million, respectively.

Divestitures

Willis Re Divestiture

As part of the potential combination with Aon, the Company entered into an agreement with Arthur J. Gallagher & Co. (‘Gallagher’), a leading global provider of insurance, risk management and consulting services, to sell its treaty-reinsurance business (‘Willis Re’) and certain of the Company’s corporate risk and broking and health and benefit businesses. Upon termination of the Aon combination, the definitive agreement with Gallagher automatically terminated in accordance with its terms.

On August 13, 2021, the Company entered into a new definitive agreement to sell Willis Re to Gallagher 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 is expected to be completed no later than the end of the second quarter of 2022, and all net earnings of the Deferred Closing businesses accumulated between the Principal Closing and Deferred Closing are payable to Gallagher at that time. The Company recognized a preliminary pre-tax gain of $2.3 billion upon completion of the sale. 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 has reclassified Willis Re assets and liabilities as held for sale on its consolidated balance sheets. The consolidated cash flow statement was not adjusted. Willis Re was previously included in the Investment, Risk and Reinsurance segment. The assets and liabilities of the Willis Re businesses that will be transferred at Deferred Closing continue to be presented as held for sale on the consolidated balance sheets at December 31, 2021, and the results of these businesses following the Principal Closing have been included in income from discontinued operations on the consolidated statement of comprehensive income.

The Company will account for the earnout as a gain contingency and therefore will 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. Fees earned under the TSA were $4 million during the year ended December 31, 2021 and have been recognized as a reduction to the costs incurred to service the TSA included in continuing operations within other operating expenses on the consolidated statements 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:

		Years ended December 31,
		2021				2020				2019
Revenue from discontinued operations		$	721			$	737			$	669
Costs of providing services
Salaries and benefits			350				350				320
Other operating expenses			59				61				72
Depreciation and amortization			2				2				2
Transaction and integration, net			33				—				—
Total costs of providing services			444				413				394
Other income, net			2				3				1
Income from discontinued operations before income taxes			279				327				276
Gain on disposal of Willis Re			2,300				—				—
Provision for income tax expense			(500	)			(69	)			(52	)
Net losses receivable from Gallagher on Deferred Closing			1				—				—
Income from discontinued operations, net of tax		$	2,080			$	258			$	224

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 will be received under the TSA.

The following table summarizes the total assets and liabilities of Willis Re classified as held for sale within our consolidated balance sheets at the balance sheet dates presented:

		December 31, 2021				December 31, 2020
Assets held for sale:
Cash and cash equivalents		$	2			$	50
Fiduciary assets			—				3,157
Accounts receivable, net			1				147
Fixed assets, net			—				1
Goodwill			—				812
Other intangible assets, net			—				54
Right-of-use assets			—				1
Other assets			2				34
Net losses receivable from Gallagher on Deferred Closing			1				—
Total assets held for sale		$	6			$	4,256
Liabilities held for sale:
Fiduciary liabilities		$	—			$	3,157
Deferred revenue and accrued expenses			4				63
Liability for pension benefits			—				2
Lease liabilities			—				1
Provision for liabilities			—				1
Other liabilities			2				112
Total liabilities held for sale		$	6			$	3,336

Certain amounts included in the consolidated balance sheets have been excluded from the held-for-sale balances disclosed since the assets are not transferring under the terms of the sale agreement, and instead will be settled by the Company. Additionally, during the fourth quarter of 2021 prior to the Principal Closing, additional assets and liabilities were agreed to be excluded from the balances transferring to Gallagher. The amounts held for sale at December 31, 2020 have been updated accordingly.

At December 31, 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 sheet are $2.6 billion of fiduciary assets and liabilities, $71 million of accounts receivable and $91 million of other current liabilities.

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 for the year ended December 31, 2021. Prior to disposal, Miller was included within the 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 sheet. Prior to disposal, Max Matthiessen was included within the Investment, Risk and Reinsurance segment.

Note 4 — Revenue

All periods presented have been recast to exclude the revenue and balances of Willis Re, which have been reclassified as discontinued operations and assets held for sale, respectively, on the Company’s consolidated financial statements (see Note 3 – Acquisitions and Divestitures).

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, 2021, 2020 and 2019. Along with reimbursable expenses and other, total revenue by service offering represents our revenue from customer contracts.

Year Ended December 31,		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
HCB
2021		$	333			$	2,303			$	502			$	279			$	3,417			$	48			$	3,465			$	30			$	3,495
2020			302				2,215				503				241				3,261				50				3,311				17				3,328
2019			278				2,269				466				262				3,275				61				3,336				23				3,359
CRB
2021			2,821				171				72				15				3,079				2				3,081				98				3,179
2020			2,707				154				66				11				2,938				2				2,940				39				2,979
2019			2,692				132				71				5				2,900				1				2,901				46				2,947
IRR
2021			72				456				16				234				778				7				785				36				821
2020			294				382				15				229				920				7				927				1				928
2019			374				406				10				160				950				9				959				12				971
BDA
2021			953				—				544				—				1,497				11				1,508				3				1,511
2020			834				—				525				—				1,359				12				1,371				—				1,371
2019			514				—				521				—				1,035				12				1,047				—				1,047
Corporate (i)
2021			—				8				—				4				12				(25	)			(13	)			5				(8	)
2020			1				5				—				3				9				(4	)			5				4				9
2019			—				11				—				4				15				28				43				3				46
Total
2021		$	4,179			$	2,938			$	1,134			$	532			$	8,783			$	43			$	8,826			$	172			$	8,998
2020		$	4,138			$	2,756			$	1,109			$	484			$	8,487			$	67			$	8,554			$	61			$	8,615
2019		$	3,858			$	2,818			$	1,068			$	431			$	8,175			$	111			$	8,286			$	84			$	8,370

(i)

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.

(ii)

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. The significant increase in CRB’s and IRR’s interest and other income resulted from book-of-business settlements. Book-of-business settlements totaled $134 million in 2021.

The following table presents revenue by the geography where our work was performed for the years ended December 31, 2021, 2020 and 2019. The reconciliation to total revenue on our consolidated statements of comprehensive income and to segment revenue is shown in the table above.

Year Ended December 31,		North America				Great Britain				Western Europe				International				Total revenue by geography
HCB
2021		$	1,880			$	567			$	622			$	348			$	3,417
2020			1,859				491				584				327				3,261
2019			1,901				475				566				333				3,275
CRB
2021			1,220				656				699				504				3,079
2020			1,176				630				679				453				2,938
2019			1,112				656				661				471				2,900
IRR
2021			178				426				87				87				778
2020			156				523				159				82				920
2019			168				505				187				90				950
BDA
2021			1,486				—				—				11				1,497
2020			1,351				—				—				8				1,359
2019			1,033				—				—				2				1,035
Corporate
2021			9				—				2				1				12
2020			7				—				2				—				9
2019			13				—				1				1				15
Total
2021		$	4,773			$	1,649			$	1,410			$	951			$	8,783
2020		$	4,549			$	1,644			$	1,424			$	870			$	8,487
2019		$	4,227			$	1,636			$	1,415			$	897			$	8,175

Contract Balances

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, 2021 and 2020:

		December 31, 2021				December 31, 2020
Billed receivables, net of allowance for doubtful accounts of $45 million and $40 million		$	1,504			$	1,589
Unbilled receivables			431				445
Current contract assets			435				374
Accounts receivable, net		$	2,370			$	2,408
Non-current accounts receivable, net		$	23			$	35
Non-current contract assets		$	532			$	327
Deferred revenue		$	576			$	547

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 for the year ended December 31, 2021 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, 2021, 2020 and 2019.

		December 31, 2021				December 31, 2020				December 31, 2019
Balance at beginning of year		$	40			$	36			$	40
Additions charged to costs and expenses			16				28				9
Deductions/other movements			(18	)			(27	)			(11	)
Foreign exchange			7				3				(2	)
Balance at end of year		$	45			$	40			$	36

During the year ended December 31, 2021, revenue of approximately $493 million was recognized that was reflected as deferred revenue at December 31, 2020.

During the year ended December 31, 2021, the Company recognized revenue of approximately $28 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, 2021 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’).

		2022				2023				2024 onward				Total
Revenue expected to be recognized on contracts as of December 31, 2021		$	608			$	591			$	619			$	1,818

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, 2021 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.

		Costs to fulfill
		December 31, 2021				December 31, 2020				December 31, 2019
Balance at beginning of the year		$	191			$	162			$	135
New capitalized costs			454				455				453
Amortization			(451	)			(428	)			(427	)
Disposals			(4	)			—				—
Impairments			(1	)			(1	)			—
Foreign currency translation			—				3				1
Balance at end of the year		$	189			$	191			$	162

Note 5 — Segment Information

At December 31, 2021, WTW had four reportable operating segments or business areas:

Human Capital and Benefits (‘HCB’)

Corporate Risk and Broking (‘CRB’)

Investment, Risk and Reinsurance (‘IRR’)

Benefits Delivery and Administration (‘BDA’)

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 method 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.

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 integration 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.

All periods presented have been recast to exclude the operating results of Willis Re, which was included within IRR and has been reclassified to discontinued operations (see Note 3 – Acquisitions and Divestitures).

The following table presents segment revenue and segment operating income for our reportable segments for the years ended December 31, 2021, 2020 and 2019.

		Segment revenue												Segment operating income
		Years ended December 31												Years ended December 31
		2021				2020				2019				2021				2020				2019
HCB		$	3,447			$	3,278			$	3,298			$	930			$	853			$	848
CRB			3,177				2,977				2,946				732				630				578
IRR			814				921				962				159				134				134
BDA			1,500				1,359				1,035				336				320				244
Total		$	8,938			$	8,535			$	8,241			$	2,157			$	1,937			$	1,804

The following table presents reconciliations of the information reported by segment to the Company’s consolidated amounts reported for the years ended December 31, 2021, 2020 and 2019.

		Years ended December 31,
		2021				2020				2019
Revenue:
Total segment revenue		$	8,938			$	8,535			$	8,241
Reimbursable expenses and other			60				80				129
Revenue		$	8,998			$	8,615			$	8,370
Total segment operating income		$	2,157			$	1,937			$	1,804
Amortization			(369	)			(461	)			(488	)
Restructuring costs (i)			(26	)			(24	)			—
Transaction and integration, net (ii)			806				(110	)			(13	)
Provision for significant litigation (iii)			—				(65	)			—
Unallocated, net (iv)			(366	)			(418	)			(249	)
Income from operations			2,202				859				1,054
Interest expense			(211	)			(244	)			(234	)
Other income, net			701				396				226
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		$	2,692			$	1,011			$	1,046

(i)

See Note 6 — Restructuring Costs for the composition of costs for 2021. In 2020, restructuring costs related to minor restructuring activities carried out by various business lines throughout the Company.

(ii)

For the year ended December 31, 2021, includes the $1 billion income receipt related to the termination of the proposed Aon transaction, partially offset by related transaction costs; includes transaction costs related to the proposed Aon combination in 2020 and the TRANZACT acquisition in 2019.

(iii)

For additional information, see the disclosure under WTW Merger-Related Securities Litigation in Note 15 — Commitments and Contingencies.

(iv)

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

The Company does not currently provide asset information by reportable segment as it does not routinely evaluate the total asset position by segment.

None of the Company’s customers represented a significant amount of its consolidated revenue for the years ended December 31, 2021, 2020 and 2019.

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:

		Revenue												Long-Lived Assets (i)
		Years ended December 31,												December 31,				December 31,
		2021				2020				2019				2021				2020
Ireland		$	197			$	157			$	144			$	3			$	29
United States			4,621				4,359				4,106				562				691
United Kingdom			1,632				1,604				1,637				605				739
Rest of World			2,548				2,495				2,483				401				455
Total Foreign Countries			8,801				8,458				8,226				1,568				1,885
		$	8,998			$	8,615			$	8,370			$	1,571			$	1,914

(i)

Tangible long-lived assets consist of fixed assets and ROU assets.

Note 6 — Restructuring Costs

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. The program is expected to generate annual cost savings of approximately $300 million by the end of 2024. The program is expected to include cumulative costs of approximately $490 million

and capital expenditures of approximately $260 million, for a total investment of $750 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 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.

An analysis of total restructuring costs incurred under the Transformation program by category and by segment and corporate functions, as of the year ended December 31, 2021, is as follows. These costs are included in restructuring costs in the consolidated statements of comprehensive income:

		HCB				CRB				IRR				BDA				Corporate				Total
Year ended December 31, 2021
Real estate rationalization		$	—			$	—			$	—			$	—			$	19			$	19
Technology modernization			—				5				—				—				—				5
Process optimization			—				—				—				—				—				—
Other			—				—				—				—				2				2
Total		$	—			$	5			$	—			$	—			$	21			$	26

A rollforward of the liability associated with cash-based charges related to the Transformation program is as follows:

		Real estate rationalization				Technology modernization				Process optimization				Other				Total
Balance at October 1, 2021		$	—			$	—			$	—			$	—			$	—
Charges incurred			—				—				—				2				2
Cash payments			—				—				—				(1	)			(1	)
Balance at December 31, 2021		$	—			$	—			$	—			$	1			$	1

Note 7 — Income Taxes

All periods presented have been recast to exclude the tax effects of Willis Re, which have been reclassified as discontinued operations on the Company’s consolidated financial statements (see Note 3 – Acquisitions and Divestitures).

Provision for income taxes

An analysis of income from operations before income taxes by taxing jurisdiction is shown below:

		Years ended December 31,
		2021				2020				2019
Ireland		$	673			$	(5	)		$	(11	)
U.S.			516				(97	)			68
U.K.			552				184				211
Rest of World			951				929				778
Total		$	2,692			$	1,011			$	1,046

The components of the provision for income taxes include:

		Years ended December 31,
		2021				2020				2019
Current tax expense:
U.S. federal taxes		$	(79	)		$	(3	)		$	(94	)
U.S. state and local taxes			(25	)			3				(43	)
U.K. corporation tax			(33	)			(16	)			(19	)
Other jurisdictions (i)			(303	)			(134	)			(122	)
Total current tax expense			(440	)			(150	)			(278	)
Deferred tax (expense)/benefit:
U.S. federal taxes			(41	)			(79	)			62
U.S. state and local taxes			3				—				16
U.K. corporation tax			(65	)			(48	)			(15	)
Other jurisdictions			7				28				18
Total deferred tax (expense)/benefit			(96	)			(99	)			81
Total provision for income taxes		$	(536	)		$	(249	)		$	(197	)

(i)

The current tax expense of other jurisdictions during the year ended December 31, 2021 includes tax expense of $159 million for taxes payable in Ireland related to the income receipt of the termination payment.

Effective tax rate reconciliation

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:

		Years ended December 31,
		2021				2020				2019
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		$	2,692			$	1,011			$	1,046
U.S. federal statutory income tax rate			21	%			21	%			21	%
Income tax expense at U.S. federal tax rate			(565	)			(212	)			(220	)
Adjustments to derive effective tax rate:
Non-deductible expenses and dividends			(21	)			(19	)			(34	)
Net adjustments on acquisition costs			13				(15	)			(2	)
Impact of change in rate on deferred tax balances			(36	)			(7	)			—
Effect of foreign exchange and other differences			—				(4	)			1
Changes in valuation allowances			2				(8	)			6
Net tax effect on intra-group items			84				90				93
Net tax effect on disposal of operations			62				16				—
Tax differentials of non-U.S. jurisdictions			(24	)			(2	)			(7	)
Impact of U.S. state and local taxes			(23	)			4				(19	)
Global Intangible Low-Taxed Income (GILTI)			(4	)			(3	)			(7	)
Base Erosion Anti-Abuse Tax (BEAT)			(22	)			(83	)			(3	)
Other items, net			(2	)			(6	)			(5	)
Provision for income taxes		$	(536	)		$	(249	)		$	(197	)

The current year effective tax rate includes a $250 million estimated tax expense related to the income receipt of the termination payment. Included within the current period reconciliation under Net adjustments on acquisition costs is a benefit of $15 million arising from a change in the presumption for costs considered non-deductible in the prior period which are now considered deductible following the termination of the proposed combination with Aon. Also included in the current period reconciliation is tax expense of $40 million related to the remeasurement of deferred tax assets and liabilities associated with an increase in the U.K. tax rate from 19% to 25% and a benefit of $68 million from the tax-exempt gain on the sale of Miller. 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. The BEAT effectively applies a 10 percent minimum tax if modified taxable income, as adjusted for base erosion payments, is greater than the regular tax liability for a year.

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.

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, 2021 and 2020 are comprised of the following:

		December 31,
		2021				2020
Deferred tax assets:
Accrued expenses not currently deductible		$	142			$	212
Net operating losses			71				92
Capital loss carryforwards			1				40
Accrued retirement benefits			189				334
Operating lease liabilities			153				165
Deferred compensation			92				90
Stock options			22				25
Financial derivative transactions			1				1
Gross deferred tax assets			671				959
Less: valuation allowance			(42	)			(84	)
Net deferred tax assets		$	629			$	875
Deferred tax liabilities:
Cost of intangible assets, net of related amortization		$	735			$	788
Operating lease right-of-use assets			142				159
Cost of tangible assets, net of related depreciation			95				78
Prepaid retirement benefits			228				152
Financial derivative transactions			—				1
Accrued revenue not currently taxable			195				163
Deferred tax liabilities		$	1,395			$	1,341
Net deferred tax liabilities		$	766			$	466

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. The change to net deferred income tax in the current year includes $130 million recognized as part of deferred tax expense within discontinued operations.

		December 31,
		2021				2020
Balance sheet classifications:
Other non-current assets		$	79			$	95
Deferred tax liabilities			845				561
Net deferred tax liability		$	766			$	466

At December 31, 2021, we had U.S. federal and non-U.S. net operating loss carryforwards amounting to $139 million of which $93 million can be indefinitely carried forward under local statutes. The remaining $46 million of net operating loss carryforwards will expire, if unused, in varying amounts from 2022 through 2041. In addition, we had U.S. state net operating loss carryforwards of $711 million, of which $64 million can be indefinitely carried forward, while the remaining $647 million will expire in varying amounts from 2022 to 2041.

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 $629 million, net of the valuation allowance. 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 discontinuing operations. During 2020, the Company increased its valuation allowance by $8 million, primarily related to non-U.S. deferred tax assets. During 2019, the Company

decreased its valuation allowance by $5 million primarily related to non-U.S. deferred tax assets now considered realizable. The U.S. restructuring provided a source of positive evidence and enabled the Company to release its valuation allowance on certain state deferred tax assets now considered realizable. In addition, the Company reassessed certain state net operating losses and determined that certain losses and the related valuation allowance would never be realized.

At December 31, 2021 and 2020, the Company had valuation allowances of $42 million and $84 million, respectively, to reduce its deferred tax assets to their estimated realizable values. The valuation allowance at December 31, 2021 primarily relates to deferred tax U.S. state and non-U.S. net operating losses of $28 million and $15 million, respectively.

An analysis of our valuation allowance is shown below.

		Years ended December 31,
		2021				2020				2019
Balance at beginning of year		$	84			$	76			$	81
Additions charged to costs and expenses			3				17				7
Deductions			(45	)			(9	)			(12	)
Balance at end of year		$	42			$	84			$	76

The movement in the current year differs from the 2021 rate reconciliation above because part of the benefit was recognized in discontinued operations. The change in 2019 differs from the 2019 rate reconciliation due to changes in foreign currency translation.

The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when the Company expects that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the investments.

The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when the Company expects that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the investments. At December 31, 2021 the Company has $14.2 billion of undistributed earnings in subsidiaries where no deferred tax has been recognized. Of this amount $7.7 billion relates to earnings which have been reinvested indefinitely and $6.5 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, 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, 2021, the amount of unrecognized tax benefits associated with uncertain tax positions, determined in accordance with ASC 740-10, excluding interest and penalties, was $43 million. A reconciliation of the beginning and ending balances of the liability for unrecognized tax benefits is as follows:

		2021				2020				2019
Balance at beginning of year		$	50			$	49			$	49
Increases related to acquisitions			—				4				—
Increases related to tax positions in prior years			—				1				2
Decreases related to tax positions in prior years			—				—				(1	)
Decreases related to settlements			—				(3	)			—
Decreases related to lapse in statute of limitations			(6	)			(2	)			(1	)
Cumulative translation adjustment and other adjustments			(1	)			1				—
Balance at end of year		$	43			$	50			$	49

The liability for unrecognized tax benefits for each of the years ended December 31, 2021, 2020 and 2019 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, 2021 and 2020, we had cumulative accrued interest of $5 million. Accrued penalties were immaterial in 2021 and 2020.

Tax expense allocated to continuing operations for both the years ended December 31, 2021 and 2020 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 $7 million to $9 million, excluding interest and penalties.

The Company and its subsidiaries file income tax returns in various tax jurisdictions in which it operates.

Willis North America Inc. and subsidiaries’ federal income tax filings for the tax years ended December 31, 2017 and December 31, 2018 are currently under examination by the Internal Revenue Service (‘IRS’). As of December 31, 2021, the IRS has not advised the Company of any adjustments to income tax as reported.

We have ongoing state income tax examinations in certain states for tax years ranging from calendar years ended December 31, 2014 through December 31, 2018. The statute of limitations in certain states remains open back to calendar year 2014.

All U.K. tax returns have been filed timely and are in the normal process of being reviewed by Her 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:

	Open Tax Years (fiscal year ending in)
U.S. — federal	2017 and forward
U.S. — various states	2015 and forward
U.K.	2010 and forward
Ireland	2017 and forward
France	2016 and forward
Germany	2008 and forward
Canada - federal	2014 and forward

Note 8 — Fixed Assets

All periods presented have been recast to exclude the assets of Willis Re, which have been reclassified as assets held for sale (see Note 3 – Acquisitions and Divestitures).

The following table reflects changes in the net carrying amount of the components of fixed assets for the years ended December 31, 2021 and 2020:

		Furniture, equipment and software				Leasehold improvements				Land and buildings				Total
Cost: at January 1, 2020		$	1,297			$	549			$	90			$	1,936
Additions			238				31				—				269
Acquisitions			1				—				—				1
Disposals			(65	)			(12	)			(1	)			(78	)
Abandonment of long-lived asset (i)			(35	)			—				—				(35	)
Foreign exchange			31				9				1				41
Cost: at December 31, 2020			1,467				577				90				2,134
Additions			176				18				—				194
Disposals (ii)			(145	)			(61	)			(2	)			(208	)
Foreign exchange			(21	)			(7	)			—				(28	)
Cost: at December 31, 2021		$	1,477			$	527			$	88			$	2,092
Depreciation: at January 1, 2020		$	(590	)		$	(244	)		$	(57	)		$	(891	)
Depreciation expense (i)			(213	)			(55	)			(4	)			(272	)
Disposals			56				10				—				66
Foreign exchange			(17	)			(6	)			(1	)			(24	)
Depreciation: at December 31, 2020			(764	)			(295	)			(62	)			(1,121	)
Depreciation expense			(227	)			(51	)			(3	)			(281	)
Disposals			103				41				2				146
Foreign exchange			11				4				—				15
Depreciation: at December 31, 2021		$	(877	)		$	(301	)		$	(63	)		$	(1,241	)
Net book value:
At December 31, 2020		$	703			$	282			$	28			$	1,013
At December 31, 2021		$	600			$	226			$	25			$	851

(i)

Depreciation expense on the consolidated statement of comprehensive income for the year ended December 31, 2020 includes both the depreciation expense presented here as well as the abandonment of an internally-developed software asset of $35 million prior to being placed in service.

(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).

Included within land and buildings are the following assets held under finance leases:

		December 31,
		2021				2020
Finance leases		$	26			$	28
Accumulated depreciation			(20	)			(20	)
		$	6			$	8

Note 9 — Goodwill and Other Intangible Assets

All periods presented have been recast to exclude the goodwill and intangible assets of Willis Re, which were included within our IRR segment and which have been reclassified as assets held for sale (see Note 3 – Acquisitions and Divestitures).

Goodwill

The components of goodwill are outlined below for the years ended December 31, 2021 and 2020.

		HCB				CRB				IRR				BDA				Total
Balance at December 31, 2019
Goodwill, gross		$	4,298			$	2,309			$	986			$	3,284			$	10,877
Accumulated impairment losses			(130	)			(362	)			—				—				(492	)
Goodwill, net - December 31, 2019			4,168				1,947				986				3,284				10,385
Goodwill acquired			15				30				2				3				50
Goodwill disposals			(12	)			(1	)			(117	)			—				(130	)
Acquisition accounting adjustment			—				—				—				(9	)			(9	)
Foreign exchange			45				40				11				—				96
Balance at December 31, 2020
Goodwill, gross			4,346				2,378				882				3,278				10,884
Accumulated impairment losses			(130	)			(362	)			—				—				(492	)
Goodwill, net - December 31, 2020			4,216				2,016				882				3,278				10,392
Goodwill acquired			—				8				—				43				51
Goodwill disposals			—				(7	)			(193	)			—				(200	)
Foreign exchange			(35	)			(27	)			2				—				(60	)
Balance at December 31, 2021
Goodwill, gross			4,311				2,352				691				3,321				10,675
Accumulated impairment losses			(130	)			(362	)			—				—				(492	)
Goodwill, net - December 31, 2021		$	4,181			$	1,990			$	691			$	3,321			$	10,183

Other Intangible Assets

The following table reflects changes in the net carrying amounts of the components of finite-lived intangible assets for the year ended December 31, 2021 and 2020:

	Client relationships				Software				Trademark and trade name				Other				Total
Balance at December 31, 2019:
Intangible assets, gross	$	3,976			$	753			$	1,051			$	134			$	5,914
Accumulated amortization		(1,728	)			(551	)			(176	)			(31	)			(2,486	)
Intangible assets, net - December 31, 2019		2,248				202				875				103				3,428
Intangible assets acquired		30				—				—				27				57
Intangible asset disposals		(19	)			—				—				(48	)			(67	)
Amortization		(301	)			(103	)			(43	)			(14	)			(461	)
Foreign exchange		26				3				2				1				32
Balance at December 31, 2020:
Intangible assets, gross		4,012				761				1,054				103				5,930
Accumulated amortization		(2,028	)			(659	)			(220	)			(34	)			(2,941	)
Intangible assets, net - December 31, 2020		1,984				102				834				69				2,989
Intangible assets acquired		14				—				—				—				14
Intangible asset disposals		(47	)			—				(8	)			—				(55	)
Amortization		(250	)			(61	)			(43	)			(15	)			(369	)
Foreign exchange		(25	)			—				(1	)			2				(24	)
Balance at December 31, 2021:
Intangible assets, gross		3,794				742				1,039				102				5,677
Accumulated amortization		(2,118	)			(701	)			(257	)			(46	)			(3,122	)
Intangible assets, net - December 31, 2021	$	1,676			$	41			$	782			$	56			$	2,555

The weighted-average remaining life of amortizable intangible assets and liabilities at December 31, 2021 was 13.0 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,			Amortization
2022			$	313
2023				257
2024				224
2025				204
2026				198
Thereafter				1,359
Total			$	2,555

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.

These derivatives were designated as hedging instruments and at December 31, 2021 and December 31, 2020 had total notional amounts of $155 million and $340 million, respectively, and had net asset fair values of $3 million and $5 million, respectively. At December 31, 2020, we had derivatives designated as hedging instruments with notional values of $15 million and $27 million, related to our Willis Re and Miller businesses, respectively, that were closed prior to their contract expirations as part of and prior to our disposal of these businesses (see Note 3 – Acquisitions and Divestitures).

At December 31, 2021, the Company estimates, based on current exchange rates, there will be $2 million of net derivative gains 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, 2021, 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, 2021, 2020 and 2019 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, 2021, 2020 and 2019.

		Gain/(loss) recognized in OCL (effective element)
		2021				2020				2019
Foreign exchange contracts		$	5			$	(13	)		$	15

Location of (loss)/gain reclassified from Accumulated OCL into income (effective element)		(Loss)/gain reclassified from Accumulated OCL into income (effective element)
		2021				2020				2019
Revenue		$	(3	)		$	(5	)		$	(7	)
Salaries and benefits			6				(3	)			1
Discontinued operations			3				(1	)			(3	)
		$	6			$	(9	)		$	(9	)

We also enter into foreign currency transactions, primarily to hedge certain intercompany loans and other balance sheet exposures in currencies other than the functional currency of a given entity. These derivatives are not generally designated as hedging instruments, and at December 31, 2021 and December 31, 2020, we had notional amounts of $2.9 billion and $1.5 billion, respectively, and had net asset fair values of $15 million at both balance sheet dates presented.

The effects of derivatives that have not been designated as hedging instruments on the consolidated statements of comprehensive income for the years ended December 31, 2021, 2020 and 2019 are as follows:

		Location of (loss)/gain		(Loss)/gain recognized in income
Derivatives not designated as hedging instruments:		recognized in income		2021				2020				2019
Foreign exchange contracts		Other income, net		$	—			$	(3	)		$	18

Note 11 — Debt

Current debt consists of the following:

		December 31,
		2021				2020
5.750% senior notes due 2021		$	—			$	500
3.500% senior notes due 2021			—				449
2.125% senior notes due 2022 (i)			613				—
Current portion of collateralized facility			—				22
		$	613			$	971

Long-term debt consists of the following:

		December 31,
		2021				2020
Revolving $1.5 billion credit facility		$	—			$	—
Revolving $1.25 billion credit facility			—				—
Collateralized facility (ii)			—				33
2.125% senior notes due 2022 (i)			—				659
4.625% senior notes due 2023			249				249
3.600% senior notes due 2024			648				647
4.400% senior notes due 2026			546				546
4.500% senior notes due 2028			597				596
2.950% senior notes due 2029			726				726
6.125% senior notes due 2043			271				271
5.050% senior notes due 2048			395				395
3.875% senior notes due 2049			542				542
		$	3,974			$	4,664

(i)

Notes issued in Euro (€540 million).

(ii)

At December 31, 2020, the Company had $98 million of renewal commissions receivables pledged as collateral for this facility (see below for additional information).

Guarantees

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, 2021.

Entity		Revolving credit facility 2.125% due 2022 4.625% due 2023 4.400% due 2026 6.125% due 2043		3.600% due 2024 4.500% due 2028 2.950% due 2029 5.050% due 2048 3.875% due 2049
Willis Towers Watson plc		Guarantor		Guarantor
Trinity Acquisition plc		Issuer		Guarantor
Willis North America Inc.		Guarantor		Issuer
Willis Netherlands Holdings B.V.		Guarantor		Guarantor
Willis Investment UK Holdings Limited		Guarantor		Guarantor
TA I Limited		Guarantor		Guarantor
Willis Group Limited		Guarantor		Guarantor
Willis Towers Watson Sub Holdings Unlimited Company		Guarantor		Guarantor
Willis Towers Watson UK Holdings Limited		Guarantor		Guarantor

Revolving Credit Facility

$1.5 billion revolving credit facility

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.

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

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 15 and November 15 of each year. The net proceeds from this offering, after deducting underwriter discounts and commissions and estimated offering expenses, were $644 million and were used to pay down amounts outstanding under the RCF and for general corporate purposes.

2.125% senior notes due 2022

On May 26, 2016, Trinity Acquisition plc issued €540 million ($609 million) of 2.125% senior notes due 2022 (‘2022 senior notes’). The effective interest rate of these senior notes is 2.154%, which includes the impact of the discount upon issuance. The 2022 senior notes will mature on May 26, 2022. Interest has accrued on the notes from May 26, 2016 and will be paid in cash on May 26 of each year. The net proceeds from this offering, after deducting underwriter discounts and commissions and estimated offering expenses, were €535 million ($600 million). We used the net proceeds of this offering to repay a portion of the previous 1-year term loan facility, which matured in 2016, and related accrued interest.

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.

Collateralized Facility (repaid in November 2021)

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. As a result, the renewal commissions receivables are no longer collateralizing the facility, thus cash received for these receivables is no longer classified as restricted cash on our consolidated balance sheet at December 31, 2021.

Additional Information Regarding Fully Repaid Senior Notes and Term Loan Commitment

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.

7.000% senior notes due 2019

In September 2009, Willis North America Inc. issued $300 million of 7.000% senior notes due 2019. The effective interest rate of these senior notes was 7.081%, which included the impact of the discount upon issuance. A portion of the proceeds was used to repurchase and redeem other previously issued senior notes. In August 2013, $113 million of the 7.000% senior notes due 2019 were repurchased. In September 2019, the Company repaid in full the remaining $187 million outstanding on the 7.000% senior notes due 2019 with borrowings against its revolving credit facility.

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.

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, 2021 and 2020, 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:

		2022				2023				2024				2025				2026				Thereafter				Total
Senior notes		$	614			$	250			$	650			$	—			$	550			$	2,550			$	4,614
Interest on senior notes			171				162				140				131				112				1,306				2,022
Revolving $1.5 billion credit facility			—				—				—				—				—				—				—
Total		$	785			$	412			$	790			$	131			$	662			$	3,856			$	6,636

Interest Expense

The following table shows an analysis of the interest expense for the years ended December 31, 2021, 2020 and 2019:

		Years ended December 31,
		2021				2020				2019
Senior notes		$	200			$	227			$	206
Term loans			—				6				9
Revolving credit facility			3				4				8
Collateralized facility			2				3				1
Other (i)			6				4				10
Total interest expense		$	211			$	244			$	234

(i)

Other primarily includes amortization of debt issuance costs, 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 determining the fair value of these securities.

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, 2021 and December 31, 2020:

				Fair Value Measurements on a Recurring Basis at December 31, 2021
		Balance Sheet Location		Level 1				Level 2				Level 3				Total
Assets:
Available-for-sale securities:
Mutual funds / exchange traded funds		Prepaid and other current assets and other non-current assets		$	9			$	—			$	—			$	9
		Fiduciary assets			152				—				—				152
Certificates of deposit/term deposits		Prepaid and other current assets			200				—				—				200
Derivatives:
Derivative financial instruments (i)		Prepaid and other current assets and other non-current assets		$	—			$	18			$	—			$	18
Liabilities:
Contingent consideration:
Contingent consideration (ii)		Other current liabilities and other non-current liabilities		$	—			$	—			$	51			$	51
Derivatives:
Derivative financial instruments (i)		Other current liabilities and other non-current liabilities		$	—			$	—			$	—			$	—

				Fair Value Measurements on a Recurring Basis at December 31, 2020
		Balance Sheet Location		Level 1				Level 2				Level 3				Total
Assets:
Available-for-sale securities:
Mutual funds / exchange traded funds		Prepaid and other current assets and other non-current assets		$	8			$	—			$	—			$	8
		Fiduciary assets			104				—				—				104
Derivatives:
Derivative financial instruments (i)		Prepaid and other current assets and other non-current assets		$	—			$	27			$	—			$	27
Liabilities:
Contingent consideration:
Contingent consideration (ii)		Other current liabilities and other non-current liabilities		$	—			$	—			$	45			$	45
Derivatives:
Derivative financial instruments (i)		Other current liabilities and other non-current liabilities		$	—			$	7			$	—			$	7

(i)

See Note 10 — Derivative Financial Instruments for further information on our derivative instruments.

(ii)

Probability weightings are based on our knowledge of the past and planned performance of the acquired entity to which the contingent consideration applies. The fair value weighted-average discount rates used in our material contingent consideration calculations were 11.92% and 9.46% at December 31, 2021 and December 31, 2020, respectively. The range of these discount rates was 3.53% - 13.50% at December 31, 2021. Using different probability weightings and discount rates could result in an increase or decrease of the contingent consideration payable.

The following table summarizes the change in fair value of the Level 3 liabilities:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)		December 31, 2021
Balance at December 31, 2020		$	45
Obligations assumed			21
Payments			(19	)
Realized and unrealized losses (i)			6
Foreign exchange			(2	)
Balance at December 31, 2021		$	51

(i)

Realized and unrealized losses are included within Interest expense and Other operating expenses on the consolidated statements of comprehensive income.

There were no significant transfers between Levels 1, 2 or 3 during the years ended December 31, 2021 and 2020.

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:

		December 31, 2021								December 31, 2020
		Carrying Value				Fair Value				Carrying Value				Fair Value
Assets:
Long-term note receivable		$	69			$	70			$	71			$	73
Liabilities:
Current debt		$	613			$	616			$	971			$	985
Long-term debt		$	3,974			$	4,453			$	4,664			$	5,488

The carrying values of our revolving credit facility and collateralized facility (repaid in November 2021) approximate their fair values. 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 and Post-retirement Welfare Plans

WTW sponsors both qualified and non-qualified defined benefit pension plans and other post-retirement welfare (‘PRW’) 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 99% of WTW’s pension and PRW obligations and are presented herein.

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 one-quarter of the Legacy Willis 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.

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.

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 (Legacy Willis and Legacy Towers Watson) – 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.

Post-retirement Welfare Plan

We provide certain healthcare and life insurance benefits for retired participants. The principal plan disclosed herein covers participants in the U.S. who have met certain eligibility requirements. This post-retirement benefit plan was primarily unfunded, with the remaining assets being paid out during the year ended December 31, 2019. Retiree medical benefits provided under our U.S. post-retirement benefit plan were closed to new hires effective January 1, 2011. Life insurance benefits under the plan were frozen with respect to service, eligibility and amounts as of January 1, 2012 for active participants.

Amounts Recognized in our Consolidated Financial Statements

The following schedules provide information concerning the defined benefit pension plans and PRW plan as of and for the years ended December 31, 2021 and 2020:

		2021																2020
		U.S.				U.K.				Other				PRW				U.S.				U.K.				Other				PRW
Change in Benefit Obligation
Benefit obligation, beginning of year		$	5,291			$	4,843			$	955			$	91			$	4,768			$	4,259			$	842			$	90
Service cost			79				17				24				1				72				15				21				1
Interest cost			94				56				12				2				131				73				15				2
Employee contributions			16				—				—				3				15				—				—				3
Actuarial (gains)/losses			(170	)			(109	)			(54	)			(2	)			509				494				65				5
Settlements			(6	)			(9	)			(6	)			—				(10	)			(27	)			(4	)			—
Curtailments			—				11				—				—				—				—				—				—
Benefits paid			(209	)			(145	)			(40	)			(11	)			(194	)			(146	)			(32	)			(10	)
Plan amendments			—				—				12				—				—				9				—				—
Plan (disposal)/addition			—				(257	)			46				—				—				—				(1	)			—
Other			1				—				—				—				—				—				1				—
Foreign currency changes			—				(38	)			(27	)			—				—				166				48				—
Benefit obligation, end of year		$	5,096			$	4,369			$	922			$	84			$	5,291			$	4,843			$	955			$	91
Change in Plan Assets
Fair value of plan assets, beginning of year		$	4,357			$	5,767			$	684			$	—			$	3,873			$	5,086			$	588			$	—
Actual return on plan assets			470				(68	)			44				—				602				590				64				—
Employer contributions			82				42				36				8				71				66				35				7
Employee contributions			16				—				—				3				15				—				—				3
Settlements			(6	)			(9	)			(6	)			—				(10	)			(27	)			(4	)			—
Benefits paid			(209	)			(145	)			(40	)			(11	)			(194	)			(146	)			(32	)			(10	)
Plan (disposal)/addition			—				(275	)			37				—				—				—				—				—
Other			—				—				1				—				—				—				1				—
Foreign currency changes			—				(46	)			(17	)			—				—				198				32				—
Fair value of plan assets, end of year		$	4,710			$	5,266			$	739			$	—			$	4,357			$	5,767			$	684			$	—
Funded status at end of year		$	(386	)		$	897			$	(183	)		$	(84	)		$	(934	)		$	924			$	(271	)		$	(91	)
Accumulated Benefit Obligation		$	5,096			$	4,369			$	884			$	84			$	5,291			$	4,841			$	918			$	91
Components on the Consolidated Balance Sheet
Pension benefits assets		$	—			$	903			$	48			$	—			$	—			$	932			$	28			$	—
Current liability for pension benefits		$	(52	)		$	—			$	(5	)		$	(6	)		$	(31	)		$	(1	)		$	(5	)		$	(6	)
Non-current liability for pension benefits		$	(334	)		$	(6	)		$	(226	)		$	(78	)		$	(903	)		$	(7	)		$	(294	)		$	(85	)
		$	(386	)		$	897			$	(183	)		$	(84	)		$	(934	)		$	924			$	(271	)		$	(91	)

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.

For the year ended December 31, 2020, bond yields declined, which drove a decrease in the discount rates and resulted in actuarial losses. These losses, coupled with unfavorable foreign exchange effects for the U.K. and Other plans, were the most significant drivers of the increases in benefit obligations for the plans.

Amounts recognized in accumulated other comprehensive loss as of December 31, 2021 and 2020 consist of:

		2021																2020
		U.S.				U.K.				Other				PRW				U.S.				U.K.				Other				PRW
Net actuarial loss		$	776			$	1,356			$	103			$	21			$	1,143			$	1,304			$	169			$	24
Net prior service (gain)/loss			—				(7	)			10				(20	)			—				(37	)			—				(23	)
Accumulated other comprehensive loss		$	776			$	1,349			$	113			$	1			$	1,143			$	1,267			$	169			$	1

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, 2021 and 2020:

		2021												2020
		U.S.				U.K.				Other				U.S.				U.K.				Other
Projected benefit obligation at end of year		$	5,096			$	7			$	476			$	5,291			$	8			$	891
Fair value of plan assets at end of year		$	4,710			$	—			$	245			$	4,357			$	—			$	593

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, 2021 and 2020.

		2021												2020
		U.S.				U.K.				Other				U.S.				U.K.				Other
Projected benefit obligation at end of year		$	5,096			$	7			$	458			$	5,291			$	8			$	477
Accumulated benefit obligation at end of year		$	5,096			$	7			$	437			$	5,291			$	8			$	457
Fair value of plan assets at end of year		$	4,710			$	—			$	228			$	4,357			$	—			$	193

The components of the net periodic benefit income and other amounts recognized in other comprehensive (income)/loss for the years ended December 31, 2021, 2020 and 2019 for the defined benefit pension and PRW plans are as follows:

		2021																2020																2019
		U.S.				U.K.				Other				PRW				U.S.				U.K.				Other				PRW				U.S.				U.K.				Other				PRW
Components of net periodic benefit (income)/cost:
Service cost		$	79			$	17			$	24			$	1			$	72			$	15			$	21			$	1			$	65			$	14			$	20			$	1
Interest cost			94				56				12				2				131				73				15				2				157				93				18				3
Expected return on plan assets			(312	)			(170	)			(37	)			—				(291	)			(247	)			(34	)			—				(254	)			(246	)			(29	)			—
Amortization of unrecognized prior service (credit)/cost			—				(17	)			1				(4	)			—				(17	)			—				(4	)			—				(16	)			—				(4	)
Amortization of unrecognized actuarial loss			37				27				6				1				35				23				3				1				19				21				2				1
Settlement			1				2				2				—				2				3				1				—				—				—				1				—
Curtailment gain			—				(1	)			—				—				—				—				—				—				—				—				—				—
Other			1				—				—				—				—				—				—				—				—				—				—				—
Net periodic benefit (income)/cost		$	(100	)		$	(86	)		$	8			$	—			$	(51	)		$	(150	)		$	6			$	—			$	(13	)		$	(134	)		$	12			$	1
Other changes in plan assets and benefit obligations recognized in other comprehensive (income)/loss:
Net actuarial (gain)/loss		$	(328	)		$	140			$	(61	)		$	(2	)		$	198			$	151			$	35			$	5			$	232			$	157			$	32			$	5
Amortization of unrecognized actuarial loss			(37	)			(27	)			(6	)			(1	)			(35	)			(23	)			(3	)			(1	)			(19	)			(21	)			(2	)			(1	)
Prior service cost			—				—				12				—				—				9				—				—				—				—				—				—
Amortization of unrecognized prior service credit/(cost)			—				17				(1	)			4				—				17				—				4				—				16				—				4
Settlement			(1	)			(2	)			(2	)			—				(2	)			(3	)			(1	)			—				—				—				(1	)			—
Curtailment gain			—				1				—				—				—				—				—				—				—				—				—				—
Plan (disposal)/addition			—				(34	)			8				—				—				—				—				—				—				—				—				—
Total recognized in other comprehensive (income)/loss			(366	)			95				(50	)			1				161				151				31				8				213				152				29				8
Total recognized in net periodic benefit (income)/cost and other comprehensive (income)/loss		$	(466	)		$	9			$	(42	)		$	1			$	110			$	1			$	37			$	8			$	200			$	18			$	41			$	9

Assumptions Used in the Valuations of the Defined Benefit Pension Plans and PRW Plan

The determination of the Company’s obligations and annual expense under the plans is based on a number of assumptions that, given the longevity of the plans, are long-term in focus. A change in one or a combination of these assumptions could have a material impact on our projected benefit obligation. However, certain of these changes, such as changes in the discount rate and actuarial assumptions, are not recognized immediately in net income, but are instead recorded in other comprehensive income. The accumulated gains and losses not yet recognized in net income are amortized into net income as a component of the net periodic benefit cost/(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 average remaining service period of participants for the PRW plan is approximately 8.8 years.

The Company considers several factors prior to the start of each fiscal year when determining the appropriate annual assumptions, including economic forecasts, relevant benchmarks, historical trends, portfolio composition and peer company comparisons. These assumptions, used to determine our pension liabilities and pension expense, are reviewed annually by senior management and changed when appropriate. 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.

The following assumptions were used in the valuations of WTW’s defined benefit pension plans and PRW plan. The assumptions presented for the U.S. plans represent the weighted-average of rates for all U.S. plans. The assumptions presented for the U.K. plans represent the weighted-average of rates for the U.K. plans. The assumptions presented for the Other plans represent the weighted-average of rates for the Canada, France, Germany, Switzerland and Ireland plans.

The assumptions used to determine net periodic benefit cost for the fiscal years ended December 31, 2021, 2020 and 2019 were as follows:

		Years ended December 31,
		2021								2020								2019
		U.S.		U.K.		Other		PRW		U.S.		U.K.		Other		PRW		U.S.		U.K.		Other		PRW
Discount rate - PBO		2.5%		1.5%		1.7%		2.4%		3.3%		2.0%		2.1%		3.2%		4.2%		2.8%		2.8%		4.2%
Discount rate - service cost		2.7%		1.6%		2.3%		2.5%		3.4%		2.1%		2.5%		3.3%		4.3%		2.9%		3.0%		4.2%
Discount rate - interest cost on service cost		2.0%		1.4%		2.0%		1.8%		2.8%		1.9%		2.4%		2.8%		3.8%		2.8%		2.9%		3.9%
Discount rate - interest cost on PBO		1.8%		1.2%		1.3%		1.7%		2.8%		1.8%		1.9%		2.8%		3.9%		2.6%		2.5%		3.9%
Expected long-term rate of return on assets		7.2%		3.1%		5.4%		N/A		7.7%		5.0%		5.9%		N/A		7.6%		5.6%		6.0%		2.0%
Rate of increase in compensation levels		4.3%		3.0%		2.3%		N/A		4.3%		3.0%		2.3%		N/A		4.3%		3.0%		2.3%		N/A
Healthcare cost trend
Initial rate								6.3%								6.5%								6.0%
Ultimate rate								5.0%								5.0%								5.0%
Year reaching ultimate rate								2027								2027								2022

The following tables present the assumptions used in the valuation to determine the projected benefit obligation for the fiscal years ended December 31, 2021 and 2020:

		December 31, 2021								December 31, 2020
		U.S.		U.K.		Other		PRW		U.S.		U.K.		Other		PRW
Discount rate		2.8%		1.9%		2.0%		2.8%		2.5%		1.5%		1.7%		2.4%
Rate of increase in compensation levels		4.3%		3.4%		2.3%		N/A		4.3%		3.0%		2.3%		N/A

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, 2021 were as follows:

		U.S.				U.K.				Switzerland		Canada		Germany		Ireland
Asset Category		WTW		Willis		Willis		Towers Watson		WTW		WTW		Towers Watson		Willis		Towers Watson
Equity securities		23%		30%		—%		1%		49%		40%		40%		31%		42%
Debt securities		33%		33%		27%		25%		18%		50%		50%		27%		29%
Real estate		6%		11%		—%		1%		28%		5%		—%		4%		—%
Other		38%		26%		73%		73%		5%		5%		10%		38%		29%
Total		100%		100%		100%		100%		100%		100%		100%		100%		100%

The Willis plan in Germany is invested in insurance contracts. Consequently, the asset allocations of the plans are managed by the respective insurer. The French plan is unfunded.

Our investment strategy is designed to generate returns that will reduce the interest rate risk inherent in each of the plan’s benefit obligations and enable the plans to meet their future obligations. The precise amount for which these obligations will be settled depends on future events, including the life expectancy of the plan participants and salary inflation. The obligations are estimated using actuarial assumptions based on the current economic environment.

Each pension plan seeks to achieve total returns sufficient to meet expected future obligations when considered in conjunction with expected future contributions and prudent levels of investment risk and diversification. Each plan’s targeted asset allocation is generally determined through a plan-specific asset-liability modeling study. These comprehensive studies provide an evaluation of the projected status of asset and benefit obligation measures for each plan under a range of both 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.

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, 2021 and 2020 are as follows:

		December 31, 2021																December 31, 2020
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Asset category:
Cash		$	5			$	—			$	—			$	5			$	3			$	—			$	—			$	3
Short-term securities			—				65				—				65				—				106				—				106
Pooled / commingled funds			—				—				—				2,788				—				—				—				2,599
Private equity			—				—				—				537				—				—				—				415
Hedge funds			—				—				—				1,315				—				—				—				1,234
Total assets		$	5			$	65			$	—			$	4,710			$	3			$	106			$	—			$	4,357

The fair values of our U.K. plan assets by asset category at December 31, 2021 and 2020 are as follows:

		December 31, 2021																December 31, 2020
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Asset category:
Cash		$	389			$	—			$	—			$	389			$	366			$	—			$	—			$	366
Government bonds			2,610				—				—				2,610				2,684				—				—				2,684
Corporate bonds			—				504				—				504				—				898				—				898
Other fixed income			—				519				—				519				—				458				—				458
Pooled / commingled funds			—				—				—				1,537				—				—				—				1,237
Mutual funds			—				—				—				12				—				—				—				59
Private equity			—				—				—				25				—				—				—				31
Derivatives			—				226				—				226				—				376				—				376
Real estate			—				—				—				152				—				—				—				159
Insurance contracts			—				—				69				69				—				—				71				71
Total assets		$	2,999			$	1,249			$	69			$	6,043			$	3,050			$	1,732			$	71			$	6,339
Liability category:
Repurchase agreements			—				777				—				777				—				572				—				572
Net assets		$	2,999			$	472			$	69			$	5,266			$	3,050			$	1,160			$	71			$	5,767

The fair values of our Other plan assets by asset category at December 31, 2021 and 2020 are as follows:

		December 31, 2021																December 31, 2020
		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Asset category:
Cash		$	4			$	—			$	—			$	4			$	2			$	—			$	—			$	2
Pooled / commingled funds			—				—				—				648				—				—				—				635
Hedge funds			—				—				—				43				—				—				—				39
Insurance contracts			—				—				7				7				—				—				8				8
Investment in multiple- employer pension plan			—				—				37				37				—				—				—				—
Total assets		$	4			$	—			$	44			$	739			$	2			$	—			$	8			$	684

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, 2021 and 2020.

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.

Level 3 investments

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, 2021:

		Level 3 Roll Forward
Beginning balance at December 31, 2020		$	79
Purchases			37
Unrealized loss			(2	)
Foreign exchange			(1	)
Ending balance at December 31, 2021		$	113

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 2022, as well as the pension contributions to our qualified plans in fiscal years 2021 and 2020:

		2022 (Projected)				2021 (Actual)				2020 (Actual)
U.S.		$	60			$	60			$	40
U.K.		$	40			$	41			$	65
Other		$	25			$	25			$	24

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:

		Benefit Payments
Fiscal Year		U.S.				U.K.				Other				PRW				Total
2022		$	284			$	133			$	40			$	10			$	467
2023			267				126				30				10				433
2024			276				133				32				10				451
2025			281				135				33				11				460
2026			288				145				35				11				479
Years 2027 – 2031			1,454				783				199				56				2,492
		$	2,850			$	1,455			$	369			$	108			$	4,782

Defined Contribution Plans

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 2 years of service. All investment assets of the plan are held in a trust account administered by independent trustees.

Our Legacy Towers Watson U.K. and Legacy Willis 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, 2021, 2020 and 2019 amounting to $155 million, $160 million and $150 million, respectively.

Note 14 — Leases

The following tables present amounts recorded on our consolidated balance sheets at December 31, 2021 and 2020, classified as either operating or finance leases. Operating leases are presented separately on our consolidated balance sheets. For the finance leases, the right-of-use (‘ROU’) assets are included in fixed assets, net, and the liabilities are classified within other current liabilities and other non-current liabilities.

		December 31, 2021												December 31, 2020
		Operating Leases				Finance Leases				Total Leases				Operating Leases				Finance Leases				Total Leases
Right-of-use assets		$	720			$	6			$	726			$	901			$	8			$	909
Current lease liabilities			150				4				154				152				3				155
Long-term lease liabilities			734				15				749				917				19				936

The following tables present amounts recorded on our consolidated statements of comprehensive income for the years ended December 31, 2021, 2020 and 2019:

		Years ended December 31,
		2021				2020				2019
Finance lease cost:
Amortization of right-of-use assets		$	1			$	2			$	2
Interest on lease liabilities			3				3				3
Operating lease cost			192				181				191
Short-term lease cost			1				1				2
Variable lease cost			52				53				51
Sublease income			(20	)			(21	)			(16	)
Total lease cost, net		$	229			$	219			$	233

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 $19 million that was included in restructuring costs (see Note 6 — Restructuring Costs) that primarily related to the impairment of certain right-of-use assets. 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, 2021, 2020 and 2019.

Cash paid for amounts included in the measurement of lease liabilities for the years ended December 31, 2021, 2020 and 2019, as well as its location in the consolidated statements of cash flows, is as follows:

		Years ended December 31,
		2021				2020				2019
Cash flows from operating activities:
Operating leases		$	186			$	190			$	205
Finance leases			3				3				3
Cash flows used in financing activities:
Finance leases			3				3				2
Total lease payments		$	192			$	196			$	210

Non-cash additions to our operating lease ROU assets, net of modifications, were $37 million, $70 million and $124 million during the years ended December 31, 2021, 2020 and 2019, respectively.

Our operating and finance leases have the following weighted-average terms and discount rates as of December 31, 2021 and 2020:

		December 31, 2021								December 31, 2020
		Operating Leases				Finance Leases				Operating Leases				Finance Leases
Weighted-average term (in years)			7.5				4.1				8.3				5.2
Weighted-average discount rate			3.3	%			12.7	%			3.4	%			12.9	%

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, 2021, is as follows:

		Operating Leases				Finance Leases				Total Leases
2022		$	179			$	6			$	185
2023			151				6				157
2024			135				6				141
2025			122				6				128
2026			104				1				105
Thereafter			314				—				314
Total future lease payments			1,005				25				1,030
Interest			(121	)			(6	)			(127	)
Total lease liabilities		$	884			$	19			$	903

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 $498 million and $566 million at December 31, 2021 and 2020, respectively. The finance lease obligations subject to such guarantees amounted to $4 million and $5 million at December 31, 2021 and 2020, respectively.

Acquisition liabilities

The Company has deferred and contingent consideration related to acquisitions due to be paid until 2024 totaling $51 million at December 31, 2021. Total deferred and contingent consideration paid during the year ended December 31, 2021 was $19 million.

Other contractual obligations

For certain subsidiaries and associates, the Company has the right to purchase shares (a call option) from co-shareholders at various dates in the future. In addition, the co-shareholders of certain subsidiaries and associates have the right to sell their shares (a put option) to the Company at various dates in the future. Generally, the exercise price of such put options and call options is formula-based (using revenue and earnings) and is designed to reflect fair value. Based on current projections of profitability and exchange rates, and assuming the put options are exercised, the potential amount payable from these put options is not expected to exceed $17 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, 2021, 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. We expect the impact of claims or demands not described below to be immaterial to the Company’s consolidated financial statements. The Company also receives subpoenas in the ordinary course of business and, from time to time, receives requests for information in connection with governmental investigations.

Errors and omissions claims, lawsuits, and other proceedings arising in the ordinary course of business are covered in part by professional indemnity or other appropriate insurance. 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, 2021 and 2020 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 particular quarterly or annual periods. In addition, given the early stages of some litigation or regulatory proceedings described below, it may not be possible to predict their outcomes or resolutions, and it is possible that any one or more of these events may have a material adverse effect on the Company.

The Company provides for contingent liabilities based on ASC 450, Contingencies, when it is determined that a liability, inclusive of defense costs, is probable and reasonably estimable. The contingent liabilities recorded are primarily developed actuarially. Litigation is subject to many factors which are difficult to predict so there can be no assurance that in the event of a material unfavorable result in one or more claims, we will not incur material costs.

WTW Merger-Related Securities Litigation

The Company was named as a defendant in two consolidated actions arising out of the 2016 ‘merger of equals’ between Towers Watson and Willis (the ‘Merger’), consisting of a consolidated shareholder class action pending in the United States District Court for the Eastern District of Virginia, captioned ‘In re Willis Towers Watson plc Proxy Litigation,’ Master File No. 1:17-cv-1338-AJT-JFA (the ‘Federal Action’), and a consolidated putative shareholder class action pending in the Delaware Court of Chancery, captioned ‘In re Towers Watson & Co. Stockholders Litigation,’ C.A. No. 2018-0132-KSJM (the ‘Delaware Action’). The complaints in these actions generally allege that the defendants omitted material information from the proxy disclosures relating to the Merger, including with respect to potential conflicts of interest, and, as a result, that Towers Watson’s stockholders approved the Merger based on inadequate information. Based on these allegations, among others, the complaint in the Federal Action asserts claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, and the complaint in the Delaware Action asserts claims under Delaware state law for breach of fiduciary duty and aiding and abetting breach of fiduciary duty.

On or about November 19, 2020, the parties to the Federal Action and the Delaware Action reached an agreement in principle to resolve the Federal Action and the Delaware Action for $75 million and $15 million, respectively. The Company agreed to the settlement and the payment of the settlement amounts to eliminate the distraction, burden, expense and uncertainty of further litigation. Further, in reaching the settlement, the parties understood and agreed that there is no admission of liability or wrongdoing by the Company or any of the other defendants in either the Federal Action or the Delaware Action. The Company and the other defendants expressly deny any liability or wrongdoing with respect to the matters alleged in the Federal Action and the Delaware Action.

On January 15, 2021, the parties to the Federal Action and the Delaware Action signed formal stipulations of settlement, which memorialized the terms of the agreement in principle, and which the plaintiffs in the Federal Action and the Delaware Action then filed with each of the respective courts. Also on January 15, 2021, the plaintiff in the Federal Action filed a motion to preliminarily approve the settlement. On January 21, 2021 the court in the Federal Action preliminarily approved the settlement, approved the form of notice to be disseminated to class members, and scheduled a final fairness hearing on the settlement for May 21, 2021. On May 21, 2021, following the final fairness hearing, the court in the Federal Action finally approved the settlement. On January 25, 2021 the court in the Delaware Action approved the form of notice to be disseminated to class members and scheduled a final fairness hearing on the settlement for May 25, 2021. On May 25, 2021, following the final fairness hearing, the court in the Delaware Action finally approved the settlement. The Company made the $90 million aggregate settlement payment in escrow in February 2021.

During 2020 the Company recognized $65 million of expense, net of $25 million of insurance and other recoveries. Additional insurance recoveries are possible.

Note 16 — Supplementary Information for Certain Balance Sheet Accounts

Additional details of specific balance sheet accounts are detailed below. The information at both dates presented excludes the assets and liabilities of Willis Re, which have been reclassified as held for sale as appropriate on the consolidated balance sheets.

Prepaid and other current assets consist of the following:

		December 31, 2021				December 31, 2020
Prepayments and accrued income		$	137			$	120
Short-term investments			200				—
Deferred contract costs			74				94
Derivatives and investments			35				42
Deferred compensation plan assets			19				14
Retention incentives			4				5
Corporate income and other taxes			82				82
Insurance and other recovery receivables			1				25
Restricted cash			—				7
Acquired renewal commissions receivable			11				16
Other current assets			49				74
Total prepaid and other current assets		$	612			$	479

Other non-current assets consist of the following:

		December 31, 2021				December 31, 2020
Prepayments and accrued income		$	11			$	13
Deferred contract costs			115				97
Deferred compensation plan assets			109				103
Deferred tax assets			79				95
Accounts receivable, net			23				35
Acquired renewal commissions receivable			52				84
Long-term note receivable			69				71
Other investments			55				70
Insurance recovery receivables			96				117
Non-current contract assets			532				327
Other non-current assets			61				68
Total other non-current assets		$	1,202			$	1,080

Deferred revenue and accrued expenses consist of the following:

		December 31, 2021				December 31, 2020
Accounts payable, accrued liabilities and deferred income		$	898			$	857
Accrued discretionary and incentive compensation			811				800
Litigation settlements			—				210
Accrued vacation			145				156
Other employee-related liabilities			72				75
Total deferred revenue and accrued expenses		$	1,926			$	2,098

Other current liabilities consist of the following:

		December 31, 2021				December 31, 2020
Dividends payable		$	112			$	103
Income and other taxes payable			278				97
Interest payable			55				68
Deferred compensation plan liabilities			49				55
Contingent and deferred consideration on acquisitions			24				39
Accrued retirement benefits			65				37
Payroll and other benefits-related liabilities			230				228
Derivatives			—				5
Third-party commissions			101				95
Other current liabilities			101				71
Total other current liabilities		$	1,015			$	798

Provision for liabilities consists of the following:

		December 31, 2021				December 31, 2020
Claims, lawsuits and other proceedings		$	311			$	325
Other provisions			64				81
Total provision for liabilities		$	375			$	406

Other non-current liabilities consist of the following:

		December 31, 2021				December 31, 2020
Deferred compensation plan liability		$	109			$	103
Contingent and deferred consideration on acquisitions			27				16
Liabilities for uncertain tax positions			43				49
Derivatives			—				2
Finance leases			15				19
Other non-current liabilities			59				101
Total other non-current liabilities		$	253			$	290

Note 17 — Other Income, Net

Other income, net consists of the following:

		Years ended December 31,
		2021				2020				2019
Gain/(loss) on disposal of operations		$	379			$	81			$	(2	)
Net periodic pension and postretirement benefit credits			303				304				234
Interest in earnings of associates and other investments			8				6				21
Foreign exchange gain/(loss)			8				3				(27	)
Other			3				2				—
Other income, net		$	701			$	396			$	226

Certain prior period amounts within the tables above have been reclassified to discontinued operations within the consolidated statements of comprehensive income.

Note 18 — Accumulated Other Comprehensive Loss

The components of other comprehensive (loss)/income are as follows:

		December 31, 2021												December 31, 2020												December 31, 2019
		Before tax amount				Tax				Net of tax amount				Before tax amount				Tax				Net of tax amount				Before tax amount				Tax				Net of tax amount
Other comprehensive (loss)/income:
Foreign currency translation		$	(87	)		$	—			$	(87	)		$	139			$	—			$	139			$	78			$	—			$	78
Defined pension and post-retirement benefits			343				(83	)			260				(342	)			76				(266	)			(412	)			83				(329	)
Derivative instruments			(1	)			3				2				(5	)			1				(4	)			23				(2	)			21
Other comprehensive income/(loss)			255				(80	)			175				(208	)			77				(131	)			(311	)			81				(230	)
Less: Other comprehensive income attributable to non-controlling interests			(2	)			—				(2	)			(1	)			—				(1	)			—				—				—
Other comprehensive income/(loss) attributable to WTW		$	253			$	(80	)		$	173			$	(209	)		$	77			$	(132	)		$	(311	)		$	81			$	(230	)

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.

		Foreign currency translation (i)				Derivative instruments (i)				Defined pension and post- retirement benefit costs (ii)				Total
Balance, January 1, 2019		$	(616	)		$	(8	)		$	(1,337	)		$	(1,961	)
Other comprehensive income/(loss) before reclassifications			78				12				(343	)			(253	)
Loss reclassified from accumulated other comprehensive loss (net of income tax benefit of $9)			—				9				14				23
Net other comprehensive income/(loss)			78				21				(329	)			(230	)
Reclassification of tax effects per ASU 2018-02 (iii)			—				—				(36	)			(36	)
Balance, December 31, 2019		$	(538	)		$	13			$	(1,702	)		$	(2,227	)
Other comprehensive income/(loss) before reclassifications			138				(12	)			(298	)			(172	)
Loss reclassified from accumulated other comprehensive loss (net of income tax benefit of $11)			—				8				32				40
Net other comprehensive income/(loss)			138				(4	)			(266	)			(132	)
Balance, December 31, 2020		$	(400	)		$	9			$	(1,968	)		$	(2,359	)
Other comprehensive (loss)/income before reclassifications			(133	)			9				191				67
Loss/(gain) reclassified from accumulated other comprehensive loss (net of income tax benefit of $12) (iv)			44				(7	)			69				106
Net other comprehensive (loss)/income			(89	)			2				260				173
Balance, December 31, 2021		$	(489	)		$	11			$	(1,708	)		$	(2,186	)

(i)

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.

(ii)

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.

(iii)

On January 1, 2019, in accordance with ASU 2018-02, we reclassified to Retained earnings $36 million of defined pension and postretirement costs, representing the ‘stranded’ tax effect of the change in the U.S. federal corporate tax rate resulting from U.S. Tax Reform.

(iv)

Includes reclassifications 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, 2021, 2020 and 2019.

Plan Summaries

On December 31, 2021, 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, 2021 are described below. The compensation cost that has been recognized for these plans for the years ended December 31, 2021, 2020 and 2019 was $101 million, $90 million and $74 million, respectively. Of the $101 million compensation cost for the year ended December 31, 2021, $7 million was recognized as transaction and integration 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, 2021, 2020, and 2019 were $17 million, $15 million and $11 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 approximately 3 million shares remaining available for grant under this plan as of December 31, 2021. 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, 2021, 2020 and 2019.

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, 2021, and changes during the year then ended is presented below:

		Options (thousands)				Weighted- Average Exercise Price (i)				Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Time-based stock options
Balance as of December 31, 2020			85			$	114.92
Exercised			(54	)		$	108.74
Cancelled			(3	)		$	121.48
Balance as of December 31, 2021			28			$	126.18			1.4 years		$	3
Options vested or expected to vest at December 31, 2021			28			$	126.18			1.4 years		$	3
Options exercisable at December 31, 2021			15			$	114.25			1.6 years		$	2
Performance-based stock options
Balance as of December 31, 2020			284			$	110.58
Exercised			(193	)		$	110.58
Balance as of December 31, 2021			91			$	110.58			0.7 years		$	12
Options vested or expected to vest at December 31, 2021			91			$	110.58			0.7 years		$	12
Options exercisable at December 31, 2021			91			$	110.58			0.7 years		$	12

(i)

Certain options are exercisable in Pounds sterling and are converted to dollars using the exchange rate at December 31, 2021.

The total intrinsic values of time-based options exercised during the years ended December 31, 2021, 2020 and 2019 were $7 million, $17 million and $16 million, respectively. At December 31, 2021, unrecognized compensation cost under time-based plans is not material.

The total intrinsic values of performance-based options exercised during the year ended December 31, 2021 was $23 million; during the year ended December 31, 2020, total intrinsic value was less than $1 million, and was $16 million for the year ended December 31, 2019. At December 31, 2021, 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, 2021, 2020 and 2019 was $10 million, $16 million and $45 million, respectively. The actual tax benefit recognized for the tax deductions from option exercises of the share-based payment arrangements totaled $8 million, $5 million and $6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Equity-settled RSUs

Valuation Assumptions

The fair value of each time-based RSU is based on the grant date fair value. Because each performance-based RSU contains a market-based performance target, 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.

		Years ended December 31,
		2021				2020				2019
Expected volatility			29.1	%			24.2	%			25.6	%
Expected dividend yield			—	%			—	%			—	%
Expected life (years)			2.9				2.9				2.7
Risk-free interest rate			0.3	%			0.4	%			2.1	%

Award Activity

A summary of time-based and performance-based RSU activity under the plans at December 31, 2021, and changes during the year then ended, is presented below:

		Shares (thousands)				Weighted- Average Grant Date Fair Value
Nonvested shares (time-based RSUs)
Balance as of December 31, 2020			11			$	190.09
Granted			399			$	240.75
Vested			(15	)		$	204.10
Forfeited			(7	)		$	238.60
Balance as of December 31, 2021			388			$	240.77
Nonvested shares (performance-based RSUs)
Balance as of December 31, 2020			439			$	245.49
Granted			277			$	302.01
Vested			(133	)		$	217.98
Forfeited			(115	)		$	269.70
Balance as of December 31, 2021			468			$	280.46

Time-based RSUs totaling 15,030, 12,586 and 21,025 vested during the years ended December 31, 2021, 2020 and 2019, respectively, with average share prices of $250.83, $195.69 and $189.42, respectively. At December 31, 2021 there was $85 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 2.7 years.

Performance-based RSUs totaling 132,975, 416,349 and 178,346 vested during the years ended December 31, 2021, 2020 and 2019, respectively, with average share prices of $224.79, $185.30 and $175.01, respectively. At December 31, 2021 there was $52 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 2.0 years.

The actual tax benefit recognized for the tax deductions from RSUs that vested totaled $12 million, $7 million and $7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Phantom RSUs

The Company granted 204,269 units of phantom stock with a market-performance feature during the year ended December 31, 2019 and did not grant phantom stock during 2021 and 2020. These are cash-settled awards with final payout based on the performance of the Company’s stock. The grant date fair value of the awards was $105.97 per share for the 2019 awards. The fair value of each phantom RSU is estimated using a Monte Carlo simulation. The Company’s stock price as of the last day of the period is one of the inputs used in the simulation. Expected volatility is based on the historical volatility of the Company’s shares. The expected term of

each plan is three years, based on the vesting terms of the awards. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.

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. For the 2019 plan, as of December 31, 2021, the liability recognized is $31 million and the estimated unrecognized compensation cost is $3 million.

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:

		Years ended December 31,
		2021				2020				2019
Income from continuing operations		$	2,156			$	762			$	849
Less: income attributable to non-controlling interests			(14	)			(24	)			(29	)
Income from continuing operations attributable to Willis Towers Watson		$	2,142			$	738			$	820
Income from discontinued operations, net of tax		$	2,080			$	258			$	224
Basic weighted-average number of shares outstanding			128				130				130
Dilutive effect of potentially issuable shares			1				—				—
Diluted weighted-average number of shares outstanding			129				130				130
Basic earnings per share from continuing operations attributable to WTW		$	16.68			$	5.69			$	6.32
Dilutive effect of potentially issuable shares			(0.05	)			(0.02	)			(0.02	)
Diluted earnings per share from continuing operations attributable to WTW		$	16.63			$	5.67			$	6.30
Basic earnings per share from discontinued operations, net of tax		$	16.20			$	1.99			$	1.73
Dilutive effect of potentially issuable shares			(0.05	)			(0.01	)			(0.01	)
Diluted earnings per share from discontinued operations, net of tax		$	16.15			$	1.98			$	1.72

There were no anti-dilutive options for the years ended December 31, 2021, 2020 and 2019. For the years ended December 31, 2021, and 2020, 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. Anti-dilutive RSUs were immaterial for the year ended December 31, 2019.

Note 21 — Supplemental Disclosures of Cash Flow Information

Supplemental disclosures regarding cash flow information and non-cash investing and financing activities are as follows:

		As of and for the Years Ended December 31,
		2021				2020				2019
Supplemental disclosures of cash flow information:
Cash and cash equivalents		$	4,486			$	2,039			$	887
Fiduciary funds (included in fiduciary assets)			3,203				4,205				3,288
Cash and cash equivalents and fiduciary funds (included in current assets held for sale)			2				50				—
Other restricted cash (included in prepaids and other current assets)			—				7				8
Total cash, cash equivalents and restricted cash		$	7,691			$	6,301			$	4,183
Increase/(decrease) in cash, cash equivalents and other restricted cash		$	2,425			$	1,180			$	(136	)
(Decrease)/increase in fiduciary funds			(908	)			812				58
Total		$	1,517			$	1,992			$	(78	)
Cash payments for income taxes, net		$	570			$	310			$	299
Cash payments for interest		$	212			$	229			$	210
Cash acquired		$	5			$	10			$	11
Supplemental disclosures of non-cash investing and financing activities:
Fair value of deferred and contingent consideration related to acquisitions		$	21			$	9			$	13

Revision of previously issued financial statements - During the year ended December 31, 2021, to reflect the guidance on restricted cash presentation in FASB ASC 230, Statement of Cash Flows, WTW corrected the classification of its fiduciary funds balances, in the amounts shown in the table above, on our consolidated statements of cash flows, by including these amounts in the total cash, cash equivalents and restricted cash amounts held at each balance sheet date. As a result, cash, cash equivalents and restricted cash balances of $2.1 billion, $895 million and $1.0 billion at December 31, 2020, 2019 and 2018, respectively, have been revised to $6.3 billion, $4.2 billion and $4.3 billion, respectively. Additionally, the effect of exchange rate changes on cash, cash equivalents and restricted cash has been updated to include the effect of exchange rate changes on the fiduciary funds balances.

Prior to this correction, the changes in fiduciary funds were presented in fiduciary assets and liabilities on a gross basis in the cash flows from operating activities, where the amounts fully offset each period. In the current presentation, an additional line item, net (payments)/proceeds from fiduciary funds held for clients, has been included within cash flows from financing activities to represent the change in fiduciary funds balances during the periods. The remaining fiduciary assets and fiduciary liabilities, in equal and offsetting amounts, are no longer presented in the cash flows from operating activities. There was no impact to the total cash flows from operating activities as a result of these changes.

Note 22 — Quarterly Financial Data (Unaudited)

WTW presents the following retrospectively-adjusted quarterly financial data to reflect the reclassification of the results of its Willis Re business as discontinued operations for each quarter of 2021 and 2020:

		Three Months Ended
		March 31,				June 30,				September 30,				December 31,
2021
Revenue		$	2,228			$	2,091			$	1,973			$	2,706
Total costs of providing services			2,017				1,921				842				2,016
Income from operations			211				170				1,131				690
Income from continuing operations			546				117				919				574
Income/(loss) from discontinued operations, net of tax			190				69				(12	)			1,833
Net income			736				186				907				2,407
Net income attributable to WTW			733				184				903				2,402
Earnings per share
— Basic: income from continuing operations		$	4.18			$	0.89			$	7.10			$	4.56
— Diluted: income from continuing operations		$	4.17			$	0.88			$	7.08			$	4.54
2020
Revenue		$	2,122			$	1,927			$	1,897			$	2,669
Total costs of providing services			1,982				1,853				1,831				2,090
Income from operations			140				74				66				579
Income from continuing operations			130				35				119				478
Income from discontinued operations, net of tax			183				67				3				5
Net income			313				102				122				483
Net income attributable to WTW			305				94				121				476
Earnings per share
— Basic: income from continuing operations		$	0.94			$	0.21			$	0.91			$	3.63
— Diluted: income from continuing operations		$	0.94			$	0.21			$	0.91			$	3.62