Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion includes forward-looking statements. See ‘Disclaimer Regarding Forward-looking Statements’ for certain cautionary information regarding forward-looking statements and a list of factors that could cause actual results to differ materially from those predicted in those statements.

This discussion includes references to non-GAAP financial measures as defined in the rules of the SEC. We present such non-GAAP financial measures, specifically, adjusted, constant currency and organic non-GAAP financial measures, as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company’s operating performance from period to period on a basis that may not be otherwise apparent under U.S. GAAP, and these provide a measure against which our businesses may be assessed in the future.

See ‘Non-GAAP Financial Measures’ below for further discussion of our adjusted, constant currency and organic non-GAAP financial measures.

Executive Overview

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.

The transaction was approved by the shareholders of both WTW and Aon during meetings of the respective shareholders held on August 26, 2020. 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 $1 billion income receipt has been included in transaction and integration, net in the condensed consolidated statements of operations. See Note 1 – Nature of Operations in Part I, Item 1 ‘Financial Statements’ in this Form 10-Q for additional information.

2022 Business Organization

During the third quarter of 2021, the Company announced its intention to align under two segments effective January 1, 2022. These changes are being made in conjunction with changes in the WTW leadership team, including the appointment of a new chief executive officer who will be the chief operating decision maker on that date. In 2022, the two new segments will be Health, Wealth and Career (‘HWC’) and Risk and Broking (‘RB’). The HWC segment will include businesses currently aligned under the Human Capital and Benefits segment, the Benefits Delivery and Administration segment, and the Investment business, currently under the Investment, Risk and Reinsurance segment. The RB segment will include businesses currently aligned under the Corporate Risk and Broking segment, as well as the Insurance Consulting and Technology business, currently under the Investment, Risk and Reinsurance segment.

Market Conditions

Typically, our business benefits from regulatory change, political risk or economic uncertainty. Insurance broking generally tracks the economy, but demand for both insurance broking and consulting services usually remains steady during times of uncertainty. We have some businesses, such as our health and benefits and administration businesses, which can be counter cyclical during the early period of a significant economic change.

Within our insurance and brokerage business, due to the cyclical nature of the insurance market and the impact of other market conditions on insurance premiums, commission revenue may vary widely between accounting periods. A period of low or declining premium rates, generally known as a ‘soft’ or ‘softening’ market, generally leads to downward pressure on commission revenue and can have a material adverse impact on our revenue and operating margin. A ‘hard’ or ‘firming’ market, during which premium rates rise, generally has a favorable impact on our revenue and operating margin. Rates, however, vary by geography, industry and client segment. As a result, and due to the global and diverse nature of our business, we view rates in the aggregate. Overall, we are currently seeing a modest but definite improvement with pricing in the market.

Market conditions in the broking industry in which we operate are generally defined by factors such as the strength of the economies in the various geographic regions in which we serve around the world, insurance rate movements, and insurance and reinsurance buying patterns of our clients.

The markets for our consulting, technology and solutions, and marketplace services are affected by economic, regulatory and legislative changes, technological developments, and increased competition from established and new competitors. We believe that the primary factors in selecting a human resources or risk management consulting firm include reputation, the ability to provide measurable increases to shareholder value and return on investment, global scale, quality of service and the ability to tailor services to clients’ unique needs. In that regard, we are focused on developing and implementing technology, data and analytic solutions for both internal operations and for maintaining industry standards and meeting client preferences. We have made such investments from time to time and may decide, based on perceived business needs, to make investments in the future that may be greater than we currently anticipate. Conversely, particularly given the impact of the COVID-19 pandemic, we may make fewer information technology-based investments than previously anticipated, which could potentially create business operational risk.

With regard to the market for exchanges, we believe that clients base their decisions on a variety of factors that include the ability of the provider to deliver measurable cost savings for clients, a strong reputation for efficient execution and an innovative service delivery model and platform. Part of the employer-sponsored insurance market has matured and become more fragmented while other segments remain in the entry phase. As these market segments continue to evolve, we may experience growth in intervals, with periods of accelerated expansion balanced by periods of modest growth. In recent years, growth in the market for exchanges has slowed, and we expect this trend may continue.

From time to time, including but not limited to the period that followed the announcement of the proposed Aon combination, we have lost (and may in the future continue to lose) colleagues who manage substantial client relationships or possess substantial experience or expertise; when we lose colleagues such as those, it often results in such colleagues competing against us. Further, the full impact of this competition may be delayed due to the timing of restrictive covenants or client renewals. We expect that this dynamic, which was most pronounced in our Corporate Risk and Broking segment in the second and third quarters of 2021, may cause the segment’s near-term growth rates to steer towards the lower end of the range of industry-expected averages (that is, around mid-single digit growth). This dynamic may be difficult to predict, given that the adverse impact in future periods is more significant than in the current period, and it is possible that growth could be different than expected and our results of operations could be significantly and adversely impacted.

See Part I, Item 1A ‘Risk Factors’ in our Annual Report on Form 10-K, filed with the SEC on February 23, 2021, for a discussion of risks that may affect our ability to compete.

Brexit

Following the occurrence of Brexit and the end of the formal transition period on December 31, 2020, a trade agreement has been established between the U.K. and E.U. As expected, the agreement largely addresses goods and not services, and the Company has therefore completed the establishment of appropriate arrangements for the continued servicing of client business in all relevant E.U. countries. Further negotiations between the U.K. and E.U. resulted in the agreement of a Memorandum of Understanding to address matters related to financial services, though the outcome of future engagement between the U.K. and E.U. in relation to services, including financial services and potential impact on the Company, are not yet fully known. For a further discussion of the risks of Brexit to the Company, see Part I, Item 1A ‘Risk Factors’ in our Annual Report on Form 10-K, filed with the SEC on February 23, 2021.

On an annual basis for 2021, although we expect that approximately 18% of our revenue from continuing operations will be generated in the U.K., we expect that approximately 12% of revenue from continuing operations will be denominated in Pounds sterling, as much of the insurance business is transacted in U.S. dollars. We expect that approximately 18% of our expenses from continuing operations will be denominated in Pounds sterling. We have a Company hedging strategy for this aspect of our business, which is designed to mitigate significant fluctuations in currency.

Risks and Uncertainties of 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.

Generally, the COVID-19 pandemic did not have a material adverse impact on our overall financial results during 2020 or on our results through the third quarter of 2021; however, during 2020 and through the first quarter of 2021, the COVID-19 pandemic had a negative impact on our revenue growth, primarily in our businesses that are discretionary in nature. We saw an increased demand for these services, which improved revenue growth, in the second and third quarters of 2021. We believe this positive trend could continue for the remainder of the year with some variability based on further disruptions to the supply chain, workforce availability, vaccination rates and further social-distancing orders in jurisdictions where we do business.

We have considered this outlook as part of the significant estimates and assumptions that are inherent in our financial statements, including the collectability of billed and unbilled receivables, the estimation of revenue, and the fair value of our reporting units, tangible and intangible assets and contingent consideration. Although the primary revenue impact of the pandemic has been on certain discretionary lines of business, non-discretionary lines of business have also been, to some extent, adversely affected and may be adversely affected in the future. Further, reduced economic activity or disruption in insurance markets could reduce the demand for or the extent of insurance coverage. Also, the increased frequency and severity of coverage disputes between our clients and (re)insurers arising out of the pandemic could increase our professional liability risk. In 2021, global labor market shifts have become more pronounced, having a 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.

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, 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 will negatively impact our revenue and operating results in fiscal 2021. We believe that these trends and uncertainties are similar to those faced by other comparable registrants as a result of the pandemic. See Part I, Item 1A ‘Risk Factors’ in our Annual Report on Form 10-K, filed with the SEC on February 23, 2021 for a discussion of actual and potential impacts of COVID-19 on our business, clients and operations.

Daily Operations - We continue to closely monitor the spread and impact of COVID-19, including the availability of vaccines, while adhering to government health directives. The Company continues to have its own restrictions on business travel, office access, and meetings and events, but is actively developing its return-to-work plans with a focus on safe utilization based on appropriate social-distancing guidelines. We have thorough business continuity and incident management processes in place that have been activated, including split team operations and work-from-home protocols for essential workers which continue to be globally effective. We are communicating frequently with clients and critical vendors, while meeting our objectives via remote working capabilities, overseen and coordinated by our incident management response team. While no contingency plan can eliminate all risk of temporary service interruption, we regularly assess and update our plans to help mitigate reasonable risks to the extent possible.

Financial Statement Overview

For all financial information presented herein, the operating results of Willis Re have been reclassified as discontinued operations (see Note 3 – Divestitures in Part I, Item 1 ‘Financial Statements’ in this Form 10-Q for additional information).

The table below sets forth our summarized condensed consolidated statements of comprehensive income and data as a percentage of revenue for the periods indicated.

		Three Months Ended September 30,																Nine Months Ended September 30,
		2021								2020								2021								2020
		($ in millions, except per share data)
Revenue		$	1,973				100	%		$	1,897				100	%		$	6,292				100	%		$	5,946				100	%
Costs of providing services
Salaries and benefits			1,255				64	%			1,238				65	%			3,991				63	%			3,807				64	%
Other operating expenses			385				20	%			370				20	%			1,169				19	%			1,210				20	%
Depreciation			69				3	%			73				4	%			212				3	%			237				4	%
Amortization			85				4	%			108				6	%			285				5	%			347				6	%
Transaction and integration, net			(952	)			(48	)%			42				2	%			(877	)			(14	)%			65				1	%
Total costs of providing services			842								1,831								4,780								5,666
Income from operations			1,131				57	%			66				3	%			1,512				24	%			280				5	%
Interest expense			(50	)			(3	)%			(61	)			(3	)%			(161	)			(3	)%			(184	)			(3	)%
Other income, net			105				5	%			156				8	%			617				10	%			321				5	%
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			1,186				60	%			161				8	%			1,968				31	%			417				7	%
Provision for income taxes			(267	)			(14	)%			(42	)			(2	)%			(386	)			(6	)%			(133	)			(2	)%
INCOME FROM CONTINUING OPERATIONS			919				47	%			119				6	%			1,582				25	%			284				5	%
(LOSS)/INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX			(12	)			(1	)%			3				—	%			247				4	%			253				4	%
Income attributable to non-controlling interests			(4	)			—	%			(1	)			—	%			(9	)			—	%			(17	)			—	%
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON		$	903				46	%		$	121				6	%		$	1,820				29	%		$	520				9	%
Diluted earnings per share		$	6.99							$	0.93							$	14.00							$	3.99

Consolidated Revenue (Continuing Operations)

Revenue was $2.0 billion for the three months ended September 30, 2021, compared to $1.9 billion for the three months ended September 30, 2020, an increase of $76 million, or 4%, on an as-reported basis. Adjusting for the impacts of foreign currency and acquisitions and disposals, our organic revenue growth was 7% for the three months ended September 30, 2021. Revenue for the nine months ended September 30, 2021 was $6.3 billion, compared to $5.9 billion for the nine months ended September 30, 2020, an increase of $346 million, or 6%, on an as-reported basis. Adjusting for the impacts of foreign currency and acquisitions and disposals, our organic revenue growth was 6% for the nine months ended September 30, 2021. The increases to our as-reported revenue for both the current and prior-year periods were driven by strong performances in all segments.

Our revenue can be materially impacted by changes in currency conversions, which can fluctuate significantly over the course of a calendar year. For the three months ended September 30, 2021, currency translation increased our consolidated revenue by $27 million. For the nine months ended September 30, 2021, currency translation increased our consolidated revenue by $190 million. The primary currencies driving these changes were the Pound sterling and Euro.

The following table details our top five markets based on the percentage of consolidated revenue (in U.S. dollars) from the countries where work was performed for the nine months ended September 30, 2021. These figures do not represent the currency of the related revenue, which is presented in the next table.

Geographic Region		% of Revenue
United States			49	%
United Kingdom			19	%
France			5	%
Canada			3	%
Germany			3	%

The table below details the percentage of our revenue and expenses by transactional currency for the nine months ended September 30, 2021.

Transactional Currency		Revenue				Expenses (i)
U.S. dollars			55	%			52	%
Pounds sterling			13	%			19	%
Euro			17	%			13	%
Other currencies			15	%			16	%

(i)	These percentages exclude certain expenses for significant items which will not be settled in cash, or which we believe to be items that are not core to our current or future operations. These items include amortization of intangible assets and transaction and integration, net.

The following tables set forth the total revenue for the three and nine months ended September 30, 2021 and 2020 and the components of the changes in total revenue for the three and nine months ended September 30, 2021, as compared to the prior-year period:

														Components of Revenue Change (i)
										As								Constant
		Three Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Revenue		$	1,973			$	1,897			4%				1%				3%				(4)%				7%

														Components of Revenue Change (i)
										As								Constant
		Nine Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Revenue		$	6,292			$	5,946			6%				3%				3%				(4)%				6%

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

Definitions of Constant Currency Change and Organic Change are included under the section entitled ‘Non-GAAP Financial Measures’ elsewhere within Item 2 of this Form 10-Q.

Segment Revenue

The segment descriptions below should be read in conjunction with the full descriptions of our businesses contained in Part I, Item 1 ‘Business’ within our Annual Report on Form 10-K, filed with the SEC on February 23, 2021.

Segment revenue excludes amounts that were directly incurred on behalf of our clients and reimbursed by them (reimbursed expenses); however, these amounts are included in consolidated revenue.

The Company experiences seasonal fluctuations in its revenue. Revenue is typically higher during the Company’s first and fourth quarters due primarily to the timing of broking-related activities.

Impact of the COVID-19 Pandemic on our Segments

The COVID-19 pandemic has had, and is projected to continue to have, an impact on certain of our service offerings. These impacts, which primarily affect our revenue, have been negative in some instances and positive in others and may in the future be material in either event. In addition, the potential negative impacts on our results may lag behind the developments to date related to the COVID-19 pandemic. We have thus far seen the impact of COVID-19 primarily on our business offerings that are discretionary in nature, such as consultative project work, which spans our segments, but primarily affected our HCB segment. However, most of the services we provide, including broking for various insurance products, compliance and valuation services, risk mitigation and outsourced administration for both pension and health and welfare plans, are considered non-discretionary to our clients and recurring in nature. We have seen that these non-discretionary businesses are the least impacted of our offerings, and while we expect that trend to continue, our non-discretionary businesses may be adversely affected due to changing demands in the market.

We expect to continue to experience unpredictable volatility in demand around our discretionary services and solutions. Clients may defer or delay decision-making on planned work or seek to terminate existing agreements for these discretionary services and solutions.

We recognize that the broad, global nature of the COVID-19 crisis has generally impacted the liquidity of our clients and led to disruptions in workforce availability. We continue to monitor the global outbreak of the COVID-19 pandemic and are taking steps to mitigate the risks to us posed by its spread by working with our clients, colleagues, suppliers and other stakeholders. Due to the global breadth of the COVID-19 spread and the range of governmental and community reactions thereto, there is on-going uncertainty around its duration, severity, ultimate impact and the timing of recovery. We will continue to monitor global developments in the rollout of vaccines and government rules and restrictions. We believe the pandemic and workforce availability issues will continue to cause an extended disruption of economic activity for the remainder of 2021 and into 2022, and the impact on our consolidated results of operations, financial position and cash flows could be material. Meanwhile, although we cannot predict how long this situation will last, we continue to focus on maintaining a strong balance sheet, liquidity and financial flexibility.

Human Capital and Benefits (‘HCB’)

The HCB segment provides an array of advice, broking, solutions and software for our clients. HCB is the largest segment of the Company and is focused on addressing our clients’ people and risk needs to help them take on the challenges of operating in a global marketplace. This segment is further strengthened with teams of international consultants who provide support through each of our business units to the global headquarters of multinational clients and their foreign subsidiaries.

The following table sets forth HCB segment revenue for the three months ended September 30, 2021 and 2020, and the components of the change in revenue for the three months ended September 30, 2021 from the three months ended September 30, 2020.

														Components of Revenue Change (i)
										As								Constant
		Three Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Segment revenue		$	852			$	796			7%				2%				5%				—%				6%

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

HCB segment revenue for the three months ended September 30, 2021 and 2020 was $852 million and $796 million, respectively. On an organic basis, Talent and Rewards led the segment’s revenue growth, driven by strong market demand for rewards advisory work coupled with talent and compensation products. Health and Benefits revenue grew primarily from increased consulting work and commissions in North America alongside continued expansion of our local portfolios and global benefits management appointments outside of North America. Technology and Administrative Solutions revenue increased due to new project and client activity in Great Britain. Retirement revenue was materially flat with growth in Great Britain driven by funding and Guaranteed Minimum Pension (‘GMP’) equalization work largely offset by a decline in revenue in North America, resulting from decreased de-risking activity.

The following table sets forth HCB segment revenue for the nine months ended September 30, 2021 and 2020, and the components of the change in revenue for the nine months ended September 30, 2021 from the nine months ended September 30, 2020.

														Components of Revenue Change (i)
										As								Constant
		Nine Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Segment revenue		$	2,563			$	2,413			6%				3%				3%				—%				3%

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

HCB segment revenue for the nine months ended September 30, 2021 and 2020 was $2.6 billion and $2.4 billion, respectively. On an organic basis, Talent and Rewards led the segment’s revenue growth, driven by strong market demand for broad-based talent and rewards advisory work coupled with talent and compensation products. Health and Benefits revenue grew primarily from increased consulting work in North America alongside continued expansion of our local portfolios and global benefits management appointments outside of North America. Retirement revenue increased with growth in Great Britain driven by funding and Guaranteed Minimum Pension (‘GMP’) equalization work and increased consulting project activity in Western Europe and International. Technology and Administrative Solutions revenue increased due to new project and client activity in Great Britain.

Corporate Risk and Broking (‘CRB’)

The CRB segment provides a broad range of risk advice, insurance broking and consulting services to our clients worldwide, ranging from small businesses to multinational corporations. The segment delivers integrated global solutions tailored to client needs and underpinned by data and analytics.

The following table sets forth CRB segment revenue for the three months ended September 30, 2021 and 2020, and the components of the change in revenue for the three months ended September 30, 2021 from the three months ended September 30, 2020.

														Components of Revenue Change (i)
										As								Constant
		Three Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Segment revenue		$	697			$	649			7%				1%				6%				—%				6%

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

CRB segment revenue for the three months ended September 30, 2021 and 2020 was $697 million and $649 million, respectively. On an organic basis, North America led the segment primarily from new business across M&A, FINEX, Construction and Aerospace alongside gains recorded in connection with book-of-business settlements. The gains from the book-of-business sales relate to settlements when colleagues depart for a competitor, which has the impact of increasing revenue in the quarter of the settlement. However, we expect these departures will result in decreasing revenue going-forward due to the increase in competition. Revenue in International, Great Britain and Western Europe also increased with new business generation and strong renewals across several insurance lines, most notably, in FINEX and Retail.

The following table sets forth CRB segment revenue for the nine months ended September 30, 2021 and 2020, and the components of the change in revenue for the nine months ended September 30, 2021 from the nine months ended September 30, 2020.

														Components of Revenue Change (i)
										As								Constant
		Nine Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Segment revenue		$	2,295			$	2,089			10%				3%				6%				—%				6%

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

CRB segment revenue for the nine months ended September 30, 2021 and 2020 was $2.3 billion and $2.1 billion, respectively. On an organic basis, North America led the segment with strong renewals, primarily in FINEX, alongside gains recorded in connection with book-of-business settlements. International and Great Britain revenue increased with new business generation primarily in the FINEX and Construction insurance lines. Revenue in Western Europe was materially flat as new business wins and renewal expansion was offset by challenges related to senior staff departures.

Investment, Risk and Reinsurance (‘IRR’)

The IRR segment uses a sophisticated approach to risk, which helps our clients free up capital and manage investment complexity. This segment works closely with investors, reinsurers and insurers to manage the equation between risk and return. Blending advanced analytics with deep institutional knowledge, IRR identifies new opportunities to maximize performance. This segment provides investment consulting and discretionary management services and insurance-specific services and solutions through reserves opinions, software, ratemaking, risk underwriting and reinsurance broking.

In August 2021, the Company entered into an agreement with Arthur J. Gallagher & Co. to sell Willis Re, with the transaction expected to be completed no later than the end of the first quarter of 2022 (see Note 3 — Divestitures within Item 1 of this Quarterly Report on Form 10-Q for further information). As a result, we have reclassified revenue associated with Willis Re to discontinued operations within our condensed consolidated statements of comprehensive income, and therefore it is not included for each of the periods presented below.

In September 2020, the Company sold its Max Matthiessen business, and the sale of Miller, its wholesale insurance broking subsidiary, was completed on March 1, 2021 (see Note 3 — Divestitures within Item 1 of this Quarterly Report on Form 10-Q for further information).

The following table sets forth IRR segment revenue for the three months ended September 30, 2021 and 2020, and the components of the change in revenue for the three months ended September 30, 2021 from the three months ended September 30, 2020.

														Components of Revenue Change (i)
										As								Constant
		Three Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Segment revenue		$	172			$	220			(22)%				2%				(24)%				(34)%				10%

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

IRR segment revenue for the three months ended September 30, 2021 and 2020 was $172 million and $220 million, respectively. On an organic basis, advisory-related fees led the revenue growth in both our Insurance Consulting and Technology business and Investment business, which was further aided by increased contingent performance fees.

The following table sets forth IRR segment revenue for the nine months ended September 30, 2021 and 2020, and the components of the change in revenue for the nine months ended September 30, 2021 from the nine months ended September 30, 2020.

														Components of Revenue Change (i)
										As								Constant
		Nine Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Segment revenue		$	615			$	716			(14)%				4%				(18)%				(30)%				12%

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

IRR segment revenue for the nine months ended September 30, 2021 and 2020 was $615 million and $716 million, respectively. On an organic basis, advisory-related fees led the revenue growth in both our Investment business and Insurance Consulting and Technology business. Revenue growth in these businesses was further aided by increased contingent performance fees and software sales. The growth was partially offset by a decline in Wholesale’s revenue in the first quarter as a result of headwinds across coverage lines coupled with a strategic shift in its operating model.

Benefits Delivery and Administration (‘BDA’)

The BDA segment provides primary medical and ancillary benefit exchange and outsourcing services to active employees and retirees across both the group and individual markets. A significant portion of the revenue in this segment is recurring in nature, driven by either the commissions from the policies we sell, or from long-term service contracts with our clients that typically range from three to five years. Revenue across this segment may be seasonal, driven by the magnitude and timing of client enrollment activities, which often occur during the fourth quarter, with increased membership levels typically effective January 1, after calendar year-end benefits elections.

The following table sets forth BDA segment revenue for the three months ended September 30, 2021 and 2020, and the components of the change in revenue for the three months ended September 30, 2021 from the three months ended September 30, 2020.

														Components of Revenue Change (i)
										As								Constant
		Three Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Segment revenue		$	242			$	226			7%				—%				7%				—%				7%

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

BDA segment revenue for the three months ended September 30, 2021 and 2020 was $242 million and $226 million, respectively. BDA’s organic revenue increase was led by Individual Marketplace, primarily by TRANZACT, which generated revenue of $111 million in the third quarter with strong growth in Medicare Advantage and Life sales. Benefits Outsourcing revenue also increased, driven by its expanded client base.

The following table sets forth BDA segment revenue for the nine months ended September 30, 2021 and 2020, and the components of the change in revenue for the nine months ended September 30, 2021 from the nine months ended September 30, 2020.

														Components of Revenue Change (i)
										As								Constant
		Nine Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Segment revenue		$	771			$	666			16%				—%				16%				1%				15%

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

BDA segment revenue for the nine months ended September 30, 2021 and 2020 was $771 million and $666 million, respectively. BDA’s organic revenue increase was led by Individual Marketplace, primarily by TRANZACT, which generated year-to-date revenue of $375 million with strong growth in Medicare Advantage and Life sales. Benefits Outsourcing revenue also increased, driven by its expanded client base.

Costs of Providing Services (Continuing Operations)

For all financial information presented herein, the operating results of Willis Re have been reclassified as discontinued operations (see Note 3 – Divestitures in Part I, Item 1 ‘Financial Statements’ in this Form 10-Q for additional information).

Total costs of providing services for the three months ended September 30, 2021 were $842 million, compared to $1.8 billion for the three months ended September 30, 2020, a decrease of $989 million, or 54%. Total costs of providing services for the nine months ended September 30, 2021 were $4.8 billion, compared to $5.7 billion for the nine months ended September 30, 2020, a decrease of $886 million, or 16%. These decreases were primarily due to the $1 billion income receipt related to the termination of the proposed Aon transaction during the current quarter. See the following discussion for further details.

Salaries and benefits

Salaries and benefits for the three months ended September 30, 2021 were $1.3 billion, compared to $1.2 billion for the three months ended September 30, 2020, an increase of $17 million, or 1%. The increase this quarter was mostly due to higher incentive and benefit accruals as compared to the prior year. Salaries and benefits, as a percentage of revenue, represented 64% and 65% for the three months ended September 30, 2021 and 2020, respectively.

Salaries and benefits for the nine months ended September 30, 2021 were $4.0 billion, compared to $3.8 billion for the nine months ended September 30, 2020, an increase of $184 million, or 5%. The increase for the first nine months of 2021 is primarily due to higher incentive and benefit accruals for the period along with increases in our share-based compensation expense. Higher stock prices in 2021 drove most of the increase in share-based compensation expense, since our liability-classified awards are adjusted to fair value each quarter based on our share price. Salaries and benefits, as a percentage of revenue, represented 63% and 64% for the nine months ended September 30, 2021 and 2020, respectively.

Other operating expenses

Other operating expenses for the three months ended September 30, 2021 were $385 million, compared to $370 million for the three months ended September 30, 2020, an increase of $15 million, or 4%. The increase was mostly due to higher marketing and professional insurance costs, partially offset by lower non-income tax and local office costs for the current quarter as compared to the same period in the prior year. Other operating expenses were $1.2 billion for both the nine months ended September 30, 2021 and 2020, a decrease of $41 million, or 3%. This improvement was primarily due to decreases in travel and entertainment costs, local office expenses, bad debt expense and non-income tax costs, partially offset by higher marketing and insurance costs for the first nine months of 2021 as compared to the same period in the prior year.

Depreciation

Depreciation for the three months ended September 30, 2021 was $69 million, compared to $73 million for the three months ended September 30, 2020, a decrease of $4 million, or 5%. The quarter-over-quarter decrease was due to a lower depreciable base of assets due to business disposals and reduced capital expenditures in 2021. Depreciation for the nine months ended September 30, 2021 was $212 million, compared to $237 million for the nine months ended September 30, 2020, a decrease of $25 million, or 11%. The year-over-year decrease was primarily due to the prior year acceleration of depreciation of $35 million related to the abandonment of an internally-developed software asset prior to being placed in service. This decrease was partially offset by additional assets placed in service during 2020 and 2021.

Amortization

Amortization for the three months ended September 30, 2021 was $85 million, compared to $108 million for the three months ended September 30, 2020, a decrease of $23 million, or 21%. Amortization for the nine months ended September 30, 2021 was $285 million, compared to $347 million for the nine months ended September 30, 2020, a decrease of $62 million, or 18%. Our intangible amortization is generally more heavily weighted to the initial years of the useful lives of the related intangibles, and therefore amortization related to intangible assets will continue to decrease over time.

Transaction and integration, net

Transaction and integration, net for the three months ended September 30, 2021 was income of $952 million, compared to $42 million of expenses for the three months ended September 30, 2020. Transaction and integration, net for the nine months ended September 30, 2021 was $877 million of income, compared to $65 million of expenses for the nine months ended September 30, 2020. The income for both the current quarter and year-to-date was primarily due to the $1 billion income receipt related to the termination of the proposed Aon transaction during the quarter, partially offset by costs mostly related to the terminated proposed transaction. The expenses for the three and nine months ended September 30, 2020 consist of transaction costs, primarily legal fees and other professional fees, related to the proposed combination with Aon prior to its termination.

Income from Operations

Income from operations for the three months ended September 30, 2021 was $1.1 billion, compared to $66 million for the three months ended September 30, 2020, an increase of $1.1 billion. Income from operations for the nine months ended September 30, 2021 was $1.5 billion, compared to $280 million for the nine months ended September 30, 2020, an increase of $1.2 billion. The increases in both the quarter and year-to-date results were mostly due to the $1 billion income receipt from the termination of the proposed Aon transaction and higher revenue.

Interest Expense

Interest expense for the three months ended September 30, 2021 was $50 million, compared to $61 million for the three months ended September 30, 2020, a decrease of $11 million, or 18%. Interest expense for the nine months ended September 30, 2021 was $161 million, compared to $184 million for the nine months ended September 30, 2020, a decrease of $23 million, or 13%. These decreases were primarily the result of lower levels of indebtedness in the current year.

Other Income, Net

Other income, net for the three months ended September 30, 2021 was $105 million, compared to $156 million for the three months ended September 30, 2020, a decrease of $51 million, primarily resulting from a lower net gain on disposals of operations during the current-year period.

Other income, net for the nine months ended September 30, 2021 was $617 million, compared to $321 million for the nine months ended September 30, 2020, an increase of $296 million, primarily resulting from the net gain on disposals of operations, mostly due to the disposal of our Miller business (see Note 3 – Divestitures in Part I, Item 1 ‘Financial Statements’ in this Form 10-Q).

Provision for Income Taxes

Provision for income taxes on continuing operations for the three months ended September 30, 2021 was $267 million, compared to $42 million for the three months ended September 30, 2020, an increase of $225 million. The effective tax rate was 22.5% for the three months ended September 30, 2021, and 26.6% for the three months ended September 30, 2020. Provision for income taxes on continuing operations for the nine months ended September 30, 2021 was $386 million, compared to $133 million for the nine months ended September 30, 2020, an increase of $253 million. The effective tax rate was 19.6% for the nine months ended September 30, 2021 and 31.9% for the nine months ended September 30, 2020. These effective tax rates are calculated using extended values from our condensed consolidated statements of comprehensive income and are therefore more precise tax rates than can be calculated from rounded values. The current quarter effective tax rate includes a $250 million estimated tax expense related to the income receipt of the termination payment, however the prior year effective tax rate for the three months ended September 30, 2020 was higher due to an additional deferred tax expense related to the enacted U.K. statutory tax rate change. The prior-year nine months effective tax rate was higher due to additional tax expense recognized in connection with the temporary provisions of the Coronavirus Aid, Relief, and Economic Security (‘CARES’) Act.

(Loss)/Income from Discontinued Operations, Net of Tax

Loss from discontinued operations, net of tax for the three months ended September 30, 2021 was $12 million, compared to income from discontinued operations, net of tax of $3 million for the three months ended September 30, 2020, a decrease of $15 million. Income from discontinued operations, net of tax for the nine months ended September 30, 2021 was $247 million, compared to $253 million for the nine months ended September 30, 2020, a decrease of $6 million. The operations of our Willis Re business have been reclassified to discontinued operations upon our entering into an agreement to sell the business during the third quarter of 2021 (see Note 3 – Divestitures in Part I, Item 1 ‘Financial Statements’ in this Form 10-Q). See the following discussion for further details.

Revenue from discontinued operations

Revenue from discontinued operations for the three months ended September 30, 2021 was $111 million, compared to $112 million for the three months ended September 30, 2020, a decrease of $1 million. Revenue from discontinued operations for the nine months ended September 30, 2021 was $668 million, compared to revenue of $642 million for the nine months ended September 30, 2020, an increase of $26 million which was driven by new business wins and favorable renewal factors in the first half of the year.

Salaries and benefits

Salaries and benefits attributable to discontinued operations for the three months ended September 30, 2021 was $97 million, compared to $93 million for the three months ended September 30, 2020, an increase of $4 million. Salaries and benefits attributable to discontinued operations for the nine months ended September 30, 2021 was $291 million, compared to $281 million for the three months ended September 30, 2020, an increase of $10 million. The increases for both the three and nine months ended September 30, 2021 related to increased incentive accruals.

Other operating expenses

Other operating expenses attributable to discontinued operations for the three months ended September 30, 2021 was $29 million, compared to $12 million for the three months ended September 30, 2020, an increase of $17 million. Other operating expenses attributable to discontinued operations for the nine months ended September 30, 2021 were $60 million, compared to $43 million for the nine months ended September 30, 2020, an increase of $17 million. The increase in costs in 2021 is due primarily to transaction costs related to the pending sale of the business to Arthur J. Gallagher & Co.

Depreciation and a**mortization

Depreciation and amortization was not material for the three months ended September 30, 2021 and 2020 and was $1 million and $2 million for the nine months ended September 30, 2021 and 2020, respectively.

Other income, net

Other income, net was not material for the three months ended September 30, 2021 and 2020 and was $1 million and $3 million for the nine months ended September 30, 2021 and 2020, respectively, which was entirely attributable to foreign currency transaction gains.

(Benefit from)/provision for income taxes on discontinued operations

The benefit from income taxes attributable to discontinued operations was $3 million, compared to a provision for income tax expense of $4 million for the three months ended September 30, 2021 and 2020, respectively. The provisions for income tax expense were $70 million and $66 million for the nine months ended September 30, 2021 and 2020, respectively.

Net Income Attributable to Willis Towers Watson

Net income attributable to Willis Towers Watson for the three months ended September 30, 2021 was $903 million, compared to $121 million for the three months ended September 30, 2020, an increase of $782 million. Net income attributable to Willis Towers Watson for the nine months ended September 30, 2021 was $1.8 billion, compared to $520 million for the nine months ended September 30, 2020, an increase of $1.3 billion. The increases for both periods were primarily due to the $1 billion income receipt from the termination of the proposed Aon transaction and higher revenue, with the year-to-date results also benefitting from the sale of our Miller business in the first quarter of 2021 (see Note 3 – Divestitures in Part I, Item 1 ‘Financial Statements’ in this Form 10-Q).

Liquidity and Capital Resources

Executive Summary

Our principal sources of liquidity are funds generated by operating activities, available cash and cash equivalents and amounts available under our revolving credit facilities and any new debt offerings, which were subject to the limitations set forth in the Aon combination agreement prior to the Termination.

The COVID-19 pandemic has contributed to significant volatility in financial markets, including occasional declines in equity markets, changes in interest rates and reduced liquidity on a global basis. Specific to Willis Towers Watson, the COVID-19 pandemic has had a negative impact on discretionary work we perform for our clients, although we have seen a demand for these services begin to return in the second quarter of 2021 and continue through the third quarter of 2021. We continue to have decreased spending on travel and associated expenses and third-party contractors, and we have the ability to contain spending on discretionary projects and certain capital expenditures.

Based on our current balance sheet and cash flows, current market conditions and information available to us at this time, we believe that Willis Towers Watson has access to sufficient liquidity, which includes all of the borrowing capacity available to draw against our recently-amended and restated $1.5 billion revolving credit facility (see Note 18 — Subsequent Event in Part I, Item 1 ‘Financial Statements’ in this Quarterly Report on Form 10-Q for further information), to meet our cash needs for the next twelve months, including investments in the business for growth, scheduled debt repayments, share repurchases and dividend payments. During the nine months ended September 30, 2021, we made payments of $185 million (net of reimbursements) for the settlement of obligations related to the Stanford and Willis Towers Watson merger-related securities litigations, and we repaid in full the $450 million of 3.500% senior notes which matured in the third quarter of 2021 and the $500 million of 5.750% senior notes which matured in the first quarter of 2021, along with the respective related interest, using currently available cash. During the third quarter of 2021 we also restarted our share repurchase programs and repurchased $1 billion of stock, and have authorization to repurchase a further $4.5 billion.

Additionally, the operating results and balance sheets of Willis Re were reclassified to discontinued operations during the quarter. Willis Re’s cash balances at September 30, 2021 and December 31, 2020 were $53 million and $50 million, respectively. Willis Re’s operating cash flows approximate its pre-tax income and any adjustments for working capital movements (see Note 3 — Divestitures in Part I, Item 1 ‘Financial Statements’ in this Quarterly Report on Form 10-Q for further information), and is expected to be partially offset by reimbursements through a Transition Services Agreement.

Events that could change the historical cash flow dynamics discussed above include significant changes in operating results, potential future acquisitions or divestitures, material changes in geographic sources of cash, unexpected adverse impacts from litigation or regulatory matters, or future pension funding during periods of severe downturn in the capital markets.

Undistributed Earnings of Foreign Subsidiaries

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

We continue to have certain subsidiaries whose earnings have not been deemed permanently reinvested, for which we have been accruing estimates of the tax effects of such repatriation. In addition, in connection with the Willis Re divestiture, we have recorded an estimated deferred tax expense for certain Willis Re subsidiaries whose outside basis differences are no longer considered indefinitely reinvested. Excluding these certain subsidiaries, we continue to assert that the historical cumulative earnings for the remainder of our subsidiaries have been reinvested indefinitely and therefore do not provide deferred taxes on these amounts. If future events, including material changes in estimates of cash, working capital, long-term investment requirements or additional legislation relating to U.S. Tax Reform, necessitate that these earnings be distributed, an additional provision for income and foreign withholding taxes, net of credits, may be necessary. Other potential sources of cash may be through the settlement of intercompany loans or return of capital distributions in a tax-efficient manner.

Cash and Cash Equivalents

Our cash and cash equivalents (including the cash balances of Willis Re) at September 30, 2021 totaled $2.2 billion, compared to $2.0 billion at December 31, 2020. The increase in cash from December 31, 2020 to September 30, 2021 was primarily due to the $1 billion income receipt related to the termination of the proposed Aon transaction and the net proceeds from the sale of our Miller business in the amount of $696 million along with strong operating results. However, the $1 billion of income receipt was offset by stock repurchases made during the third quarter of 2021 in the same amount. These additions to cash were further partially offset by the payments in full of our $450 million of 3.500% senior notes, $500 million of 5.750% senior notes, net legal settlement payments of $185 million (related to the Stanford and Willis Towers Watson merger settlements), and higher bonus payments and benefit-related items of $189 million made in the first half of 2021.

Additionally, we had all of the borrowing capacity available to draw against our then-current $1.25 billion revolving credit facility at both September 30, 2021 and December 31, 2020. The facility was replaced on October 6, 2021 and we now have borrowing capacity of $1.5 billion under the new revolving credit facility. See Note 18 – Subsequent Event within Item 1 of this Quarterly Report on Form 10-Q for further information on the new revolving credit facility.

Included within cash and cash equivalents at September 30, 2021 and December 31, 2020 are amounts held for regulatory capital adequacy requirements, including $120 million and $88 million, respectively, held within our regulated U.K. entities.

Summarized Condensed Consolidated Cash Flows

The following table presents the summarized condensed consolidated cash flow information for the nine months ended September 30, 2021 and 2020:

		Nine Months Ended September 30,
		2021				2020
		(in millions)
Net cash from/(used in):
Operating activities		$	1,877			$	1,206
Investing activities			577				(108	)
Financing activities			(2,305	)			(334	)
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			149				764
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(24	)			(5	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD (i)			2,096				895
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (i)		$	2,221			$	1,654

(i)

Cash, cash equivalents and restricted cash included $6 million, $7 million, $7 million and $8 million of restricted cash at September 30, 2021, December 31, 2020, September 30, 2020 and December 31, 2019, respectively, which is included within prepaid and other current assets on our condensed consolidated balance sheets. Additionally, cash, cash equivalents and restricted cash included $53 million, $50 million, $56 million and $56 million of cash attributable to discontinued operations at September 30, 2021, December 31, 2020, September 30, 2020 and December 31, 2019, respectively, which is included within assets held for sale on our condensed consolidated balance sheets.

Cash Flows From Operating Activities

Cash flows from operating activities were $1.9 billion for the nine months ended September 30, 2021, compared to $1.2 billion for the nine months ended September 30, 2020. The $1.9 billion of net cash from operating activities for the nine months ended September 30, 2021 included net income of $1.8 billion and $200 million of non-cash adjustments, partially offset by changes in operating assets and liabilities of $152 million. This increase in cash flows from operating activities as compared to the prior year was primarily due the $1 billion of income receipt related to the termination of the proposed Aon transaction partially offset by net legal

settlement payments of $185 million as well as $189 million of increased bonus and benefit-related payments made during the nine months ended September 30, 2021.

The $1.2 billion of net cash from operating activities for the nine months ended September 30, 2020 included net income of $537 million and $582 million of non-cash adjustments, as wells as favorable changes in operating assets and liabilities of $87 million.

Cash Flows From/(Used In) Investing Activities

Cash flows from investing activities for the nine months ended September 30, 2021 were $577 million as compared to cash flows used in investing activities of $108 million for the nine months ended September 30, 2020. The cash flows from investing activities for the nine months ended September 30, 2021 primarily include the net proceeds from the sale of Miller of $696 million and another smaller sale of $30 million, partially offset by capital expenditures and capitalized software additions of $149 million.

The cash flows used in investing activities in the prior year period were primarily driven by capital expenditures, capitalized software additions and an acquisition during the first quarter of 2020.

Cash Flows Used In Financing Activities

Cash flows used in financing activities for the nine months ended September 30, 2021 were $2.3 billion. The significant financing activities included share repurchases of $1.0 billion, debt repayments of $970 million along with dividend payments of $275 million.

Cash flows used in financing activities for the nine months ended September 30, 2020 were $334 million. The significant financing activities included dividend payments of $259 million and net debt-related payments of $39 million.

Indebtedness

Total debt, total equity, and the capitalization ratios at September 30, 2021 and December 31, 2020 were as follows:

		September 30, 2021				December 31, 2020
		($ in millions)
Long-term debt		$	3,993			$	4,664
Current debt			644				971
Total debt		$	4,637			$	5,635
Total Willis Towers Watson shareholders’ equity		$	11,393			$	10,820
Capitalization ratio			28.9	%			34.2	%

The capitalization ratio decreased from December 31, 2020 due to the August 2021 repayment of our $450 million 3.500% senior notes and March 2021 repayment of our $500 million 5.750% senior notes (see Note 9 — Debt in Part I, Item 1 ‘Financial Statements’ in this Quarterly Report on Form 10-Q for further information), as well as the increase in shareholders’ equity driven by strong earnings during the first nine months of the year, which included the gain on the Miller wholesale business and the income receipt related to the termination of the proposed Aon transaction, partially offset by $1.0 billion of share repurchases.

At September 30, 2021, our mandatory debt repayments over the next twelve months include $626 million outstanding on our 2.125% senior notes due 2022 and $19 million outstanding on our collateralized facility. In addition, our $1.25 billion revolving credit facility was set to expire on March 7, 2022, but was replaced on October 6, 2021 by our recently-amended and restated $1.5 billion revolving credit facility (see Note 18 — Subsequent Event in Part I, Item 1 ‘Financial Statements’ in this Quarterly Report on Form 10-Q for further information).

At September 30, 2021 and December 31, 2020 we were in compliance with all financial covenants.

Fiduciary Funds

As an intermediary, we hold funds, generally in a fiduciary capacity, for the account of third parties, typically as the result of premiums received from clients that are in transit to insurers and claims due to clients that are in transit from insurers. We report premiums, which are held on account of, or due from, clients as assets with a corresponding liability due to the insurers. Claims held by or due to us, which are due to clients, are also shown as both Fiduciary assets and Fiduciary liabilities on our condensed consolidated balance sheets.

Fiduciary funds are generally required to be kept in regulated bank accounts subject to guidelines which emphasize capital preservation and liquidity; such funds are not available to service the Company’s debt or for other corporate purposes.

Notwithstanding the legal relationships with clients and insurers, the Company is entitled to retain investment income earned on fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds.

At September 30, 2021 and December 31, 2020, we had fiduciary funds of $4.1 billion and $4.3 billion, respectively, of which $2.5 billion at both balance sheet dates presented are attributable to our Willis Re business.

Share Repurchase Program

The Company is authorized to repurchase shares, by way of redemption or otherwise, and will consider whether to do so from time to time, based on many factors, including market conditions. There are no expiration dates for our repurchase plans or programs.

On February 26, 2020, the board of directors approved a $251 million increase to the existing share repurchase program. On July 26, 2021, the board of directors approved a $1.0 billion increase to the existing share repurchase program, and on September 16, 2021, approved a $4.0 billion increase to the existing share repurchase program. These three increases brought the total approved authorization to $5.5 billion.

At September 30, 2021, approximately $4.5 billion remained on the current repurchase authority. The maximum number of shares that could be repurchased based on the closing price of our ordinary shares on September 30, 2021 of $232.46 was 19,358,169.

During the three and nine months ended September 30, 2021, the Company had the following share repurchase activity**:**

			Three Months Ended September 30, 2021					Nine Months Ended September 30, 2021
Shares repurchased				4,455,544					4,455,544
Average price per share			$224.44					$224.44
Aggregate repurchase cost (excluding broker costs)			$1.0 billion					$1.0 billion

During the first half of 2021, the Company had no share repurchase activity. A share repurchase prohibition existed under the transaction agreement for the proposed Aon combination. Following the Termination, there are no longer any contractual prohibitions on share repurchases.

Capital Commitments

Capital expenditures for fixed assets and software for internal use were $109 million during the nine months ended September 30, 2021. The Company estimates that there will be additional such expenditures of approximately $61 million during the remainder of 2021. We currently expect cash from operations to adequately provide for these cash needs. There have been no material changes to our capital commitments since December 31, 2020.

Dividends

Total cash dividends of $275 million were paid during the nine months ended September 30, 2021. In July 2021, the board of directors approved an increased quarterly cash dividend of $0.80 per share ($3.20 per share annualized rate), which was paid on October 15, 2021 to shareholders of record as of September 30, 2021.

Supplemental Guarantor Financial Information

As of September 30, 2021, Willis Towers Watson has issued the following debt securities (the ‘notes’):

	a)	Willis North America Inc. (‘Willis North America’) has approximately $2.9 billion senior notes outstanding, of which $650 million were issued on May 16, 2017, $1.0 billion were issued on September 10, 2018, $1.0 billion were issued on September 10, 2019, and $275 million were issued on May 29, 2020; and

	b)	Trinity Acquisition plc has approximately $1.7 billion senior notes outstanding, of which $525 million were issued on August 15, 2013, $550 million were issued on March 22, 2016 and €540 million ($609 million) were issued on May 26, 2016, and a $1.25 billion revolving credit facility established on March 7, 2017, on which no balance is currently outstanding.

The following table presents a summary of the entities that issue each note and those wholly-owned subsidiaries of the Company that guarantee each respective note on a joint and several basis as of September 30, 2021. These subsidiaries are all consolidated by Willis Towers Watson plc (the ‘parent company’) and together with the parent company comprise the ‘Obligor group’.

Entity		Trinity Acquisition plc Notes		Willis North America Inc. Notes
Willis Towers Watson plc (i)		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

(i) The $500 million senior notes issued on March 17, 2011 by Willis Towers Watson plc, and related interest, were fully repaid on March 15, 2021.

The notes issued by Willis North America and Trinity Acquisition plc:

	•	rank equally with all of the issuer’s existing and future unsubordinated and unsecured debt;

	•	rank equally with the issuer’s guarantee of all of the existing senior debt of the Company and the other guarantors, including any debt under the Revolving Credit Facility;

	•	are senior in right of payment to all of the issuer’s future subordinated debt; and

	•	are effectively subordinated to all of the issuer’s secured debt to the extent of the value of the assets securing such debt.

All other subsidiaries of the parent company are non-guarantor subsidiaries (‘the non-guarantor subsidiaries’).

Each member of the Obligor group has only a stockholder’s claim on the assets of the non-guarantor subsidiaries. This stockholder’s claim is junior to the claims that creditors have against those non-guarantor subsidiaries. Holders of the notes will only be creditors of the Obligor group and not creditors of the non-guarantor subsidiaries. As a result, all of the existing and future liabilities of the non-guarantor subsidiaries, including any claims of trade creditors and preferred stockholders, will be structurally senior to the notes. As of and for the periods ended September 30, 2021 and December 31, 2020, the non-guarantor subsidiaries represented substantially all of the total assets and accounted for substantially all of the total revenue of the Company prior to consolidating adjustments. The non-guarantor subsidiaries have other liabilities, including contingent liabilities that may be significant. Each indenture does not contain any limitations on the amount of additional debt that the Obligor group and the non-guarantor subsidiaries may incur. The amounts of this debt could be substantial, and this debt may be debt of the non-guarantor subsidiaries, in which case this debt would be effectively senior in right of payment to the notes.

The notes are obligations exclusively of the Obligor group. Substantially all of the Obligor group’s operations are conducted through its non-guarantor subsidiaries. Therefore, the Obligor group’s ability to service its debt, including the notes, is dependent upon the net cash flows of its non-guarantor subsidiaries and their ability to distribute those net cash flows as dividends, loans or other payments to the Obligor group. Certain laws restrict the ability of these non-guarantor subsidiaries to pay dividends and make loans and advances to the Obligor group. In addition, such non-guarantor subsidiaries may enter into contractual arrangements that limit their ability to pay dividends and make loans and advances to the Obligor group.

Intercompany balances and transactions between members of the Obligor group have been eliminated. All intercompany balances and transactions between the Obligor group and the non-guarantor subsidiaries have been presented in the disclosures below on a net presentation basis, rather than a gross basis, as this better reflects the nature of the intercompany positions and presents the funding or funded position that is to be received or owed. The intercompany balances and transactions between the Obligor group and non-guarantor subsidiaries, presented below, relate to a number of items including loan funding for acquisitions and other purposes, transfers of surplus cash between subsidiary companies, funding provided for working capital purposes, settlement of expense accounts, transactions related to share-based payment arrangements and share issuances, intercompany royalty arrangements, intercompany dividends and intercompany interest. At September 30, 2021 and December 31, 2020, the intercompany balances of the Obligor group with non-guarantor subsidiaries were net receivables of $500 million at both balance sheet dates presented and net payables of $8.3 billion and $7.6 billion, respectively.

No balances or transactions of non-guarantor subsidiaries are presented in the disclosures other than the intercompany items noted above.

Presented below is certain summarized financial information for the Obligor group.

`		As of September 30, 2021				As of December 31, 2020
		(in millions)
Total current assets		$	201			$	161
Total non-current assets			676				671
Total current liabilities			6,850				5,116
Total non-current liabilities			6,551				8,434

		Nine months ended September 30, 2021
		(in millions)
Revenue		$	246
Income from operations			1,027
Income from operations before income taxes (i)			969
Net income			847
Net income attributable to Willis Towers Watson			847

(i) Includes intercompany expense, net of the Obligor group from non-guarantor subsidiaries of $45 million for the nine months ended September 30, 2021.

Non-GAAP Financial Measures

In order to assist readers of our condensed consolidated financial statements in understanding the core operating results that Willis Towers Watson’s management uses to evaluate the business and for financial planning purposes, we present the following non-GAAP measures and their most directly comparable U.S. GAAP measure:

Most Directly Comparable U.S. GAAP Measure		Non-GAAP Measure
As reported change		Constant currency change
As reported change		Organic change
Income from operations/margin		Adjusted operating income/margin
Net income/margin		Adjusted EBITDA/margin
Net income attributable to Willis Towers Watson		Adjusted net income
Diluted earnings per share		Adjusted diluted earnings per share
Income from continuing operations before income taxes		Adjusted income before taxes
Provision for income taxes/U.S. GAAP tax rate		Adjusted income taxes/tax rate
Net cash from operating activities		Free cash flow

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

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

	•	Restructuring costs and transaction and integration, net – Management believes it is appropriate to adjust for restructuring costs and transaction and integration, net when they relate to a specific significant program with a defined set of activities and costs that are not expected to continue beyond a defined period of time, or significant acquisition-related transaction expenses. We believe the adjustment is necessary to present how the Company is performing, both now and in the future when the incurrence of these costs will have concluded. Transaction and integration, net in 2021 includes the income receipt related to the termination of the proposed Aon transaction.

	•	Gains and losses on disposals of operations – Adjustment to remove the gain or loss resulting from disposed operations.

	•	Pension settlement and curtailment gains and losses – Adjustment to remove significant pension settlement and curtailment gains and losses to better present how the Company is performing.

	•	Abandonment of long-lived asset – Adjustment to remove the depreciation expense resulting from internally-developed software that was abandoned prior to being placed into service.

	•	Provisions for significant litigation – We will include provisions for litigation matters which we believe are not representative of our core business operations. These amounts are presented net of insurance and other recovery receivables.

	•	Tax effect of statutory rate changes – Relates to the incremental tax expense or benefit from significant statutory income tax rate changes enacted in material jurisdictions in which we operate.

	•	Tax effect of the CARES Act – Relates to the incremental tax expense impact, primarily from the Base Erosion and Anti-Abuse Tax (‘BEAT’), generated from electing certain income tax provisions of the CARES Act.

	•	Tax effects of internal reorganization – Relates to the U.S. income tax expense resulting from the completion of internal reorganizations of the ownership of certain businesses that reduced the investments held by our U.S.-controlled subsidiaries.

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

For all financial information presented herein (with the exception of Free Cash Flow), the operating results of Willis Re have been reclassified as discontinued operations (see Note 3 – Divestitures in Part I, Item 1 ‘Financial Statements’ in this Form 10-Q for additional information).

Constant Currency Change and Organic Change

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

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

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

The constant currency and organic change results, and reconciliations from the reported results for consolidated revenue are included in the Consolidated Revenue section within this Form 10-Q. These measures are also reported by segment in the Segment Revenue section within this Form 10-Q.

Reconciliations of the reported changes to the constant currency and organic changes for the three and nine months ended September 30, 2021 from the three and nine months ended September 30, 2020 are as follows:

														Components of Revenue Change (i)
										As								Constant
		Three Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Revenue (ii)		$	1,973			$	1,897			4%				1%				3%				(4)%				7%

														Components of Revenue Change (i)
										As								Constant
		Nine Months Ended September 30,								Reported				Currency				Currency				Acquisitions/				Organic
		2021				2020				Change				Impact				Change				Divestitures				Change
		($ in millions)
Revenue (ii)		$	6,292			$	5,946			6%				3%				3%				(4)%				6%

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

(ii)	Excludes revenue (reclassified as discontinued operations) associated with our Willis Re business.

Adjusting for the impacts of foreign currency and acquisitions and disposals in the calculation of our organic activity, our revenue growth was 7% for the three months ended September 30, 2021 and 6% for the nine months ended September 30, 2021. The increases to our revenue for both the current and prior-year periods were driven by strong performances in all segments.

Adjusted Operating Income**/Margin**

We consider adjusted operating income/margin to be important financial measures, which are used internally to evaluate and assess our core operations and to benchmark our operating results against our competitors.

Adjusted operating income is defined as income from operations adjusted for amortization, transaction and integration, net and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted operating income margin is calculated by dividing adjusted operating income by revenue.

Reconciliations of income from operations to adjusted operating income for the three and nine months ended September 30, 2021 and 2020 are as follows:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	(in millions)
Income from operations	$	1,131			$	66			$	1,512			$	280
Adjusted for certain items:
Abandonment of long-lived asset		—				—				—				35
Amortization		85				108				285				347
Transaction and integration, net		(952	)			42				(877	)			65
Provision for significant litigation		—				15				—				15
Adjusted operating income	$	264			$	231			$	920			$	742
Income from operations margin		57.3	%			3.5	%			24.0	%			4.7	%
Adjusted operating income margin		13.4	%			12.2	%			14.6	%			12.5	%

Adjusted operating income increased for the three months ended September 30, 2021 to $264 million from $231 million for the three months ended September 30, 2020 and increased for the nine months ended September 30, 2021 to $920 million from $742 million for the nine months ended September 30, 2020. These increases resulted mostly from higher revenue.

Adjusted EBITDA/Margin

We consider adjusted EBITDA/margin to be important financial measures, which are used internally to evaluate and assess our core operations, to benchmark our operating results against our competitors and to evaluate and measure our performance-based compensation plans.

Adjusted EBITDA is defined as net income adjusted for loss/(income) from discontinued operations, net of tax, provision for income taxes, interest expense, depreciation and amortization, transaction and integration, net, gains and losses on disposals of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue.

Reconciliations of net income to adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020 are as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
		(in millions)
NET INCOME		$	907			$	122			$	1,829			$	537
Loss/(income) from discontinued operations, net of tax			12				(3	)			(247	)			(253	)
Provision for income taxes			267				42				386				133
Interest expense			50				61				161				184
Depreciation (i)			69				73				212				237
Amortization			85				108				285				347
Transaction and integration, net			(952	)			42				(877	)			65
Provision for significant litigation			—				15				—				15
Gain on disposal of operations			(23	)			(85	)			(380	)			(83	)
Adjusted EBITDA		$	415			$	375			$	1,369			$	1,182
Net income margin			46.0	%			6.4	%			29.1	%			9.0	%
Adjusted EBITDA margin			21.0	%			19.8	%			21.8	%			19.9	%

(i)	Includes abandonment of long-lived asset of $35 million for the nine months ended September 30, 2020.

Adjusted EBITDA for the three months ended September 30, 2021 was $415 million, compared to $375 million for the three months ended September 30, 2020, and was $1.4 billion for the nine months ended September 30, 2021, compared to $1.2 billion for the nine months ended September 30, 2020. These increases were primarily due to higher revenue.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

Adjusted net income is defined as net income attributable to Willis Towers Watson adjusted for loss/(income) from discontinued operations, net of tax, amortization, transaction and integration, net, gains and losses on disposals of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results and the related tax effect of those adjustments and the tax effects of internal reorganizations. This measure is used solely for the purpose of calculating adjusted diluted earnings per share.

Adjusted diluted earnings per share is defined as adjusted net income divided by the weighted-average number of shares of common stock, diluted. Adjusted diluted earnings per share is used to internally evaluate and assess our core operations and to benchmark our operating results against our competitors.

Reconciliations of net income attributable to Willis Towers Watson to adjusted diluted earnings per share for the three months ended September 30, 2021 and 2020 are as follows:

		Three Months Ended September 30,
		2021				2020
		($ in millions)
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON		$	903			$	121
Adjusted for certain items:
Loss/(income) from discontinued operations, net of tax			12				(3	)
Amortization			85				108
Transaction and integration, net			(952	)			42
Provision for significant litigation			—				15
Gain on disposal of operations			(23	)			(85	)
Tax effect on certain items listed above (i)			199				(31	)
Tax effect of the CARES Act			—				3
Adjusted net income		$	224			$	170
Weighted-average shares of common stock — diluted			129				130
Diluted earnings per share		$	6.99			$	0.93
Adjusted for certain items (ii):
Loss/(income) from discontinued operations, net of tax			0.09				(0.02	)
Amortization			0.66				0.83
Transaction and integration, net			(7.37	)			0.32
Provision for significant litigation			—				0.12
Gain on disposal of operations			(0.18	)			(0.65	)
Tax effect on certain items listed above (i)			1.54				(0.24	)
Tax effect of the CARES Act			—				0.02
Adjusted diluted earnings per share		$	1.73			$	1.31

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

(ii)	Per share values and totals may differ due to rounding.

Reconciliations of net income attributable to Willis Towers Watson to adjusted diluted earnings per share for the nine months ended September 30, 2021 and 2020 are as follows:

		Nine Months Ended September 30,
		2021				2020
		($ in millions)
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON		$	1,820			$	520
Adjusted for certain items:
Income from discontinued operations, net of tax			(247	)			(253	)
Abandonment of long-lived asset			—				35
Amortization			285				347
Transaction and integration, net			(877	)			65
Provision for significant litigation			—				15
Gain on disposal of operations			(380	)			(83	)
Tax effect on certain items listed above (i)			144				(96	)
Tax effect of statutory rate change			40				—
Tax effect of the CARES Act			—				38
Adjusted net income		$	785			$	588
Weighted-average shares of common stock — diluted			130				130
Diluted earnings per share		$	14.00			$	3.99
Adjusted for certain items (ii):
Income from discontinued operations, net of tax			(1.90	)			(1.95	)
Abandonment of long-lived asset			—				0.27
Amortization			2.19				2.66
Transaction and integration, net			(6.75	)			0.50
Provision for significant litigation			—				0.12
Gain on disposal of operations			(2.92	)			(0.64	)
Tax effect on certain items listed above (i)			1.11				(0.74	)
Tax effect of statutory rate change			0.31				—
Tax effect of the CARES Act			—				0.29
Adjusted diluted earnings per share		$	6.04			$	4.52

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

(ii)	Per share values and totals may differ due to rounding.

Our adjusted diluted earnings per share increased for both the three and nine months ended September 30, 2021 as compared to the prior year primarily due to higher revenue.

Adjusted Income Before Taxes and Adjusted Income Taxes/Tax Rate

Adjusted income before taxes is defined as income from operations before income taxes adjusted for amortization, transaction and integration, net, gains and losses on disposals of operations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results. Adjusted income before taxes is used solely for the purpose of calculating the adjusted income tax rate.

Adjusted income taxes/tax rate is defined as the provision for income taxes adjusted for taxes on certain items of amortization, transaction and integration, net, gains and losses on disposals of operations, the tax effects of internal reorganizations and non-recurring items that, in management’s judgment, significantly affect the period-over-period assessment of operating results, divided by adjusted income before taxes. Adjusted income taxes is used solely for the purpose of calculating the adjusted income tax rate.

Management believes that the adjusted income tax rate presents a rate that is more closely aligned to the rate that we would incur if not for the reduction of pre-tax income for the adjusted items and the tax effects of internal reorganizations, which are not core to our current and future operations.

Reconciliations of income from continuing operations before income taxes to adjusted income before taxes and provision for income taxes to adjusted income taxes for the three and nine months ended September 30, 2021 and 2020 are as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
		($ in millions)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		$	1,186			$	161			$	1,968			$	417
Adjusted for certain items:
Abandonment of long-lived asset			—				—				—				35
Amortization			85				108				285				347
Transaction and integration, net			(952	)			42				(877	)			65
Provision for significant litigation			—				15				—				15
Gain on disposal of operations			(23	)			(85	)			(380	)			(83	)
Adjusted income before taxes		$	296			$	241			$	996			$	796
Provision for income taxes		$	267			$	42			$	386			$	133
Tax effect on certain items listed above (i)			(199	)			31				(144	)			96
Tax effect of statutory rate change			—				—				(40	)			—
Tax effect of the CARES Act			—				(3	)			—				(38	)
Adjusted income taxes		$	68			$	70			$	202			$	191
U.S. GAAP tax rate			22.5	%			26.6	%			19.6	%			31.9	%
Adjusted income tax rate			23.2	%			29.3	%			20.3	%			24.0	%

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

Our U.S. GAAP tax rates were 22.5% and 26.6% for the three months ended September 30, 2021 and 2020, respectively, and 19.6% and 31.9% for the nine months ended September 30, 2021 and 2020, respectively. The current quarter effective tax rate includes a $250 million estimated tax expense related to the income receipt of the termination payment, however the prior year effective tax rate for the three months ended September 30, 2020 was higher due to an additional deferred tax expense related to the enacted U.K. statutory tax rate change.

Our adjusted income tax rates were 23.2% and 29.3% for the three months ended September 30, 2021 and 2020, respectively, and 20.3% and 24.0% for the nine months ended September 30, 2021 and 2020, respectively. Our adjusted tax rate for the three and nine months ended September 30, 2021 are lower than the three and nine months ended September 30, 2020 primarily due to a partial valuation allowance release on a U.K. capital loss carryforward.

Free Cash Flow

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

Management believes that free cash flow presents the core operating performance and cash generating capabilities of our business operations.

Reconciliations of cash flows from operating activities to free cash flow for the nine months ended September 30, 2021 and 2020 are as follows:

		Nine Months Ended September 30,
		2021				2020
		(in millions)
Cash flows from operating activities		$	1,877			$	1,206
Less: Additions to fixed assets and software for internal use			(109	)			(183	)
Free cash flow		$	1,768			$	1,023

The favorable movement in free cash flows in the first nine months of 2021 was primarily due to the $1 billion of income receipt related to the termination of the proposed Aon transaction and lower capital expenditures, partially offset by net legal settlement payments of $185 million as well as $189 million of increased bonus and benefit-related payments made during the period.

Additionally, the free cash flow for both the current and prior years include the operating cash flows of Willis Re. Willis Re’s operating cash flows approximate its pre-tax income and any adjustments for working capital movements (see Note 3 — Divestitures in Part I, Item 1 ‘Financial Statements’ in this Quarterly Report on Form 10-Q for further information), and is expected to be partially offset by reimbursements through a Transition Services Agreement.

Critical Accounting Policies and Estimates

There were no material changes from the Critical Accounting Policies and Estimates disclosed in our 2020 Annual Report on Form 10-K, filed with the SEC on February 23, 2021.