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

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 stabilizing 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 company include reputation, the ability to provide measurable increases to shareholder value and return on investment, global scale, quality of service and the ability to tailor services to clients’ unique needs. In that regard, we are focused on developing and implementing technology, data and analytic solutions for both internal operations and for maintaining industry standards and meeting client preferences. We have made such investments from time to time and may decide, based on perceived business needs, to make investments in the future that may be different from past practice or what we currently anticipate.

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

Risks and Uncertainties of the Economic Environment

U.S. and global markets are continuing to experience volatility and disruption as a result of the ongoing war between Russia and Ukraine and evolving events in Israel and Gaza. Although the length and impact of these ongoing situations are highly unpredictable, they have and could continue to lead to further market disruptions. The conflicts have contributed to negative impacts on the global economy and capital markets including significant inflation in many of the markets in which we operate. This impacts not only the cost of and access to liquidity, but also other costs to run and invest in our business.

Other global economic events, such as accommodative monetary and fiscal policy and geopolitical tensions beyond the ongoing wars, have also contributed to significant inflation across the globe. In particular, inflation in the United States, Europe, and other geographies has risen to levels not experienced in recent decades and we are seeing its impact on various aspects of our business. Moreover, U.S. and global economic conditions have created market uncertainty and volatility. Such general economic conditions, including inflation, stagflation, political volatility, costs of labor, cost of capital, interest rates, bank stability, credit availability, and tax rates, affect our operating and general and administrative expenses, and we have no control or limited ability to control such factors.

If our costs grow significantly in excess of our ability to raise revenue, whether as a result of the foregoing global economic factors or otherwise, our margins and results of operations may be materially and adversely impacted and we may not be able to achieve our strategic and financial objectives.

In 2022, our financial results were negatively impacted by adverse workforce factors in a number of businesses, particularly commercial risk broking and health and benefits broking. Additionally, our 2022 performance benefited from revenue from book sales, which is non-repeatable revenue. The net impact of these factors, which caused our growth in 2022 to be meaningfully slower than other competitors, may affect the comparability of our 2022 results against the same period (or periods) in 2023 or other future periods. See Part I, Item 1A ‘Risk Factors’ in our Annual Report on Form 10-K, filed with the SEC on February 24, 2023, for a discussion of risks that may affect our growth relative to expectation and our ability to compete.

Transformation Program

In the fourth quarter of 2021, the Company initiated a three-year ‘Transformation program’ designed to enhance operations, optimize technology and align its real estate footprint to its new ways of working. During the second quarter of 2023, we revised the expected costs and savings under the program and we now expect the program to generate annual cost savings in excess of $380 million by the end of 2024. The program is expected to incur cumulative costs of approximately $630 million and capital expenditures of approximately $270 million, for a total investment of $900 million. The main categories of charges will be in the following four areas:

Real estate rationalization — includes costs to align the real estate footprint to the new ways of working (hybrid work) and includes breakage fees and the impairment of right-of-use assets and other related leasehold assets.

Technology modernization — these charges are incurred in moving to common platforms and technologies, including migrating certain platforms and applications to the cloud. This category will include the impairment of technology assets that are duplicative or no longer revenue-producing, as well as costs for technology investments that do not qualify for capitalization.

Process optimization — these costs will be incurred in the right-shoring strategy and automation of our operations, which will include optimizing resource deployment and appropriate colleague alignment. These costs will include process and organizational design costs, severance and separation-related costs and temporary retention costs.

Other — other costs not included above including fees for professional services, other contract terminations not related to the above categories and supplier migration costs.

Certain costs under the Transformation program are accounted for under ASC 420, Exit or Disposal Cost Obligation, and are included as restructuring costs in the condensed consolidated statements of comprehensive income. For the three and nine months ended September 30, 2023, restructuring charges under our Transformation program totaled $17 million and $30 million, respectively; for the three and nine months ended September 30, 2022, restructuring charges under our Transformation program totaled $9 million and $71 million, respectively. Other costs incurred under the Transformation program are included in transaction and transformation and were $104 million and $231 million for the three and nine months ended September 30, 2023, respectively, and $42 million and $73 million for the three and nine months ended September 30, 2022, respectively.

From the actions taken during the third quarter of 2023, we have identified an additional $23 million of annualized run-rate savings during the year due to newly-realized opportunities and incremental sources of value. Since the inception of the program, we have identified $300 million of cumulative annualized run-rate savings, which overall are primarily attributable to the reduction of real estate and technology costs. We began to recognize the benefits from the program during 2022.

For a discussion of some of the risks associated with the Transformation program, see Part I, Item 1A ‘Risk Factors’ in our Annual Report on Form 10-K, filed with the SEC on February 24, 2023.

Financial Statement Overview

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,
		2023								2022								2023								2022
		($ in millions, except per share data)
Revenue		$	2,166				100	%		$	1,953				100	%		$	6,569				100	%		$	6,144				100	%
Costs of providing services
Salaries and benefits			1,359				63	%			1,225				63	%			4,019				61	%			3,802				62	%
Other operating expenses			396				18	%			384				20	%			1,282				20	%			1,263				21	%
Depreciation			60				3	%			60				3	%			184				3	%			191				3	%
Amortization			62				3	%			71				4	%			203				3	%			239				4	%
Restructuring costs			17				1	%			9				—	%			30				—	%			71				1	%
Transaction and transformation			113				5	%			50				3	%			265				4	%			108				2	%
Total costs of providing services			2,007								1,799								5,983								5,674
Income from operations			159				7	%			154				8	%			586				9	%			470				8	%
Interest expense			(61	)			(3	)%			(54	)			(3	)%			(172	)			(3	)%			(154	)			(3	)%
Other income, net			66				3	%			85				4	%			126				2	%			205				3	%
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			164				8	%			185				9	%			540				8	%			521				8	%
Provision for income taxes			(25	)			(1	)%			(1	)			—	%			(99	)			(2	)%			(63	)			(1	)%
INCOME FROM CONTINUING OPERATIONS			139				6	%			184				9	%			441				7	%			458				7	%
INCOME/(LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX			—				—	%			8				—	%			—				—	%			(27	)			—	%
Income attributable to non-controlling interests			(3	)			—	%			(2	)			—	%			(8	)			—	%			(10	)			—	%
NET INCOME ATTRIBUTABLE TO WTW		$	136				6	%		$	190				10	%		$	433				7	%		$	421				7	%
Diluted earnings per share from continuing operations		$	1.29							$	1.65							$	4.06							$	3.95

Consolidated Revenue (Continuing Operations)

Revenue for the three months ended September 30, 2023 was $2.2 billion, compared to $2.0 billion for the three months ended September 30, 2022, an increase of $213 million, or 11%, on an as-reported basis. Adjusting for the impacts of foreign currency and acquisitions and disposals, our organic revenue growth was 9% for the three months ended September 30, 2023. Revenue for the nine months ended September 30, 2023 was $6.6 billion, compared to $6.1 billion for the nine months ended September 30, 2022, an increase of $425 million, or 7%, on an as-reported basis. Adjusting for the impacts of foreign currency and acquisitions and disposals, our organic revenue growth was 8% for the nine months ended September 30, 2023. The increases in both as-reported and organic revenue were driven by strong performances in both segments as well as the recognition of higher interest income, on a year-to-date basis, that is not allocated to the 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, 2023, currency translation increased our consolidated revenue by $32 million. The primary currencies driving this change were the Euro and Pound Sterling. For the nine months ended September 30, 2023, currency translation decreased our consolidated revenue by $40 million. The primary currencies driving this change were the Argentine Peso, Canadian Dollar and Pound Sterling.

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, 2023. These figures do not represent the currency of the related revenue, which is presented in the next table.

Geographic Region		% of Revenue
United States			51	%
United Kingdom			19	%
France			5	%
Canada			3	%
Germany			3	%

The table below details the approximate percentage of our revenue and expenses from continuing operations by transactional currency for the nine months ended September 30, 2023.

Transactional Currency		Revenue				Expenses (i)
U.S. dollars			57	%			53	%
Pounds sterling			12	%			17	%
Euro			15	%			13	%
Other currencies			16	%			17	%

(i)

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

The following tables set forth the total revenue for the three and nine months ended September 30, 2023 and 2022 and the components of the changes in total revenue for the three and nine months ended September 30, 2023, as compared to the prior year periods. The components of the revenue change may not add due to rounding.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Three Months Ended September 30,								Reported		Currency		Currency		Acquisitions/		Organic
		2023				2022				Change		Impact		Change		Divestitures		Change
		($ in millions)
Revenue		$	2,166			$	1,953			11%		2%		9%		—%		9%

												Components of Revenue Change
										As		Less:		Constant		Less:
		Nine Months Ended September 30,								Reported		Currency		Currency		Acquisitions/		Organic
		2023				2022				Change		Impact		Change		Divestitures		Change
		($ in millions)
Revenue		$	6,569			$	6,144			7%		(1)%		8%		(1)%		8%

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 24, 2023.

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

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

For each table presented below, the components of the revenue change may not add due to rounding.

Health, Wealth & Career

The Health, Wealth & Career (‘HWC’) segment provides an array of advice, broking, solutions and technology for employee benefit plans, institutional investors, compensation and career programs, and the employee experience overall. Our portfolio of services supports the interrelated challenges that the management teams of our clients face across human resources and finance.

HWC is the larger of the two segments of the Company. Addressing four key areas, Health, Wealth, Career and Benefits Delivery & Outsourcing, the segment is focused on addressing our clients’ people and risk needs to help them succeed in a global marketplace.

The following table sets forth HWC revenue for the three months ended September 30, 2023 and 2022 and the components of the change in revenue for the three months ended September 30, 2023 from the three months ended September 30, 2022.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Three Months Ended September 30,								Reported		Currency		Currency		Acquisitions/		Organic
		2023				2022				Change		Impact		Change		Divestitures		Change
		($ in millions)
Segment revenue		$	1,282			$	1,162			10%		2%		8%		—%		9%

HWC segment revenue for the three months ended September 30, 2023 and 2022 was $1.3 billion and $1.2 billion, respectively. Organic growth was led by Benefits Delivery & Outsourcing, driven by new clients and increased compliance and other project activity in Outsourcing and growth from higher volumes and placements of Life and Medicare Advantage in Individual Marketplace. Our Wealth businesses generated organic revenue growth from higher levels of Retirement work in North America and Europe, along with new client acquisitions and higher fees in Investments. Organic revenue growth in Health was driven by the continued expansion of our Global Benefits Management client portfolio, new local clients, expanding consulting work for existing clients and increased brokerage income. Career had organic revenue growth from increased compensation survey sales, executive compensation and other reward-based advisory services, including pay transparency work and change communication services.

The following table sets forth HWC segment revenue for the nine months ended September 30, 2023 and 2022 and the components of the change in revenue for the nine months ended September 30, 2023 from the nine months ended September 30, 2022.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Nine Months Ended September 30,								Reported		Currency		Currency		Acquisitions/		Organic
		2023				2022				Change		Impact		Change		Divestitures		Change
		($ in millions)
Segment revenue		$	3,784			$	3,565			6%		—%		7%		—%		7%

HWC segment revenue for the nine months ended September 30, 2023 and 2022 was $3.8 billion and $3.6 billion, respectively. Organic growth was led by Benefits Delivery & Outsourcing, driven by higher volumes and placements of Medicare Advantage and Life policies in Individual Marketplace and increased project activity in Outsourcing. Our Wealth businesses generated organic revenue growth from higher levels of Retirement work in North America and Europe, along with new client acquisitions and higher fees in Investments. Health had organic revenue growth driven by the continued expansion of our client portfolio, expanded consulting work and increased brokerage income. Career had organic revenue growth from increased compensation survey sales and executive compensation and other reward-based advisory services.

Risk & Broking

The Risk & Broking (‘R&B’) segment provides a broad range of risk advice, insurance brokerage and consulting services to clients worldwide ranging from small businesses to multinational corporations. The segment comprises two primary businesses - Corporate Risk & Broking and Insurance Consulting and Technology.

The following table sets forth R&B revenue for the three months ended September 30, 2023 and 2022 and the components of the change in revenue for the three months ended September 30, 2023 from the three months ended September 30, 2022.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Three Months Ended September 30,								Reported		Currency		Currency		Acquisitions/		Organic
		2023				2022				Change		Impact		Change		Divestitures		Change
		($ in millions)
Segment revenue		$	855			$	765			12%		2%		10%		—%		10%

R&B segment revenue for the three months ended September 30, 2023 and 2022 was $855 million and $765 million, respectively. Corporate Risk & Broking generated solid organic revenue growth driven by strong new business, improved client retention and rate increases. Insurance Consulting and Technology had organic revenue growth from software sales and increased project revenue.

The following table sets forth R&B segment revenue for the nine months ended September 30, 2023 and 2022 and the components of the change in revenue for the nine months ended September 30, 2023 from the nine months ended September 30, 2022.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Nine Months Ended September 30,								Reported		Currency		Currency		Acquisitions/		Organic
		2023				2022				Change		Impact		Change		Divestitures		Change
		($ in millions)
Segment revenue		$	2,659			$	2,508			6%		(1)%		7%		(2)%		9%

R&B segment revenue for the nine months ended September 30, 2023 and 2022 was $2.7 billion and $2.5 billion, respectively. Despite significant pressure from headwinds from book-of-business settlement revenue in the comparable period, Corporate Risk & Broking generated solid organic revenue growth driven by strong new business, improved client retention and rate increases. Insurance Consulting and Technology had organic revenue growth from software sales and increased project revenue.

Costs of Providing Services (Continuing Operations)

Total costs of providing services for the three months ended September 30, 2023 were $2.0 billion, compared to $1.8 billion for the three months ended September 30, 2022, an increase of $208 million, or 12%. Total costs of providing services for the nine months ended September 30, 2023 were $6.0 billion, compared to $5.7 billion for the nine months ended September 30, 2022, an increase of $309 million, or 5%. See the following discussion for further details.

Salaries and Benefits

Salaries and benefits for the three months ended September 30, 2023 were $1.4 billion, compared to $1.2 billion for the three months ended September 30, 2022, an increase of $134 million, or 11%. The increase in the current year is primarily due to higher salary expense and increased incentive and benefit costs for the period. Salaries and benefits, as a percentage of revenue, represented 63% for both the three months ended September 30, 2023 and 2022.

Salaries and benefits for the nine months ended September 30, 2023 were $4.0 billion, compared to $3.8 billion for the nine months ended September 30, 2022, an increase of $217 million, or 6%. The increase in the current year is primarily due to higher salary expense and increased incentive and benefit costs for the period. Salaries and benefits, as a percentage of revenue, represented 61% and 62% for the nine months ended September 30, 2023 and 2022, respectively.

Other Operating Expenses

Other operating expenses for the three months ended September 30, 2023 were $396 million, compared to $384 million for the three months ended September 30, 2022, an increase of $12 million, or 3%. The increase was primarily due to higher professional service and marketing-related expenses for the current-year period as compared to the prior-year comparable period, and higher travel and entertainment costs as post-pandemic activity continued to increase, partially offset by lower external labor fees in the current-year period.

Other operating expenses for both the nine months ended September 30, 2023 and 2022 were $1.3 billion, an increase of $19 million. The increase was primarily due to higher professional service and marketing-related expenses for the current-year as compared to the prior-year comparable period, and higher travel and entertainment costs due to continued increasing post-pandemic activity, partially offset by the absence of the prior-year asset impairments incurred, mostly accounts receivables, related to Russian insurance contracts placed by U.K. brokers in the London market (see Note 3 — Acquisitions and Divestitures within Part I, Item 1 ‘Financial Statements’ in this Form 10-Q for additional information) and lower external labor fees in the current year.

Depreciation

Depreciation for both the three months ended September 30, 2023 and 2022 was $60 million. Depreciation for the nine months ended September 30, 2023 was $184 million, compared to $191 million for the nine months ended September 30, 2022, a decrease of $7 million, or 4%. The decrease for the nine months ended September 30, 2023 is primarily due to a lower depreciable base of assets resulting from business disposals over the last two years and a lower dollar value of assets placed in service during the past few years.

Amortization

Amortization for the three months ended September 30, 2023 was $62 million, compared to $71 million for the three months ended September 30, 2022, a decrease of $9 million, or 13%. Amortization for the nine months ended September 30, 2023 was $203 million, compared to $239 million for the nine months ended September 30, 2022, a decrease of $36 million, or 15%. Our intangible

amortization is generally more heavily weighted to the initial years of the useful lives of the related intangibles, and therefore amortization related to intangible assets will continue to decrease over time.

Restructuring Costs

Restructuring costs for the three months ended September 30, 2023 were $17 million, compared to $9 million for the three months ended September 30, 2022. Restructuring costs for the nine months ended September 30, 2023 were $30 million, compared to $71 million for the nine months ended September 30, 2022. Restructuring costs in both the current-year and prior-year periods primarily related to the real estate rationalization component of the Transformation program commenced by the Company during the fourth quarter of 2021 (see ‘Transformation Program’ within this Part I, Item 2 and Note 6 — Restructuring Costs within Part I, Item 1 ‘Financial Statements’ of this Quarterly Report on Form 10-Q).

Transaction and Transformation

Transaction and transformation for the three months ended September 30, 2023 were $113 million, compared to $50 million for the three months ended September 30, 2022, an increase of $63 million. Transaction and transformation for the nine months ended September 30, 2023 were $265 million, compared to $108 million for the nine months ended September 30, 2022, an increase of $157 million. Transaction and transformation costs for the current year were higher primarily due to increased consulting and compensation costs related to our Transformation program (see ‘Transformation Program’ within this Part I, Item 2) incurred in the current-year periods as compared to the prior-year comparable periods.

Income from Operations

Income from operations for the three months ended September 30, 2023 was $159 million, compared to $154 million for the three months ended September 30, 2022, an increase of $5 million. This increase resulted primarily from higher revenue, partially offset by higher salary expense and incentive and benefit costs, increased transaction and transformation costs, and higher professional service and marketing-related expenses in the current-year period as compared to the prior-year period.

Income from operations for the nine months ended September 30, 2023 was $586 million, compared to $470 million for the nine months ended September 30, 2022, an increase of $116 million. This increase resulted primarily from higher revenue, the absence of the prior-year’s asset impairment expense discussed above, and lower restructuring costs in the current year, partially offset by higher salary expense and incentive and benefit costs, increased transaction and transformation costs, higher professional service and marketing-related expenses, and increased travel and entertainment costs in the current-year period as compared to the prior-year period.

Interest Expense

Interest expense for the three months ended September 30, 2023 was $61 million, compared to $54 million for the three months ended September 30, 2022, an increase of $7 million, or 13%. Interest expense for the nine months ended September 30, 2023 was $172 million as compared to $154 million for the nine months ended September 30, 2022, an increase of $18 million, or 12%. These increases were primarily the result of higher levels of indebtedness in the current year.

Other Income, Net

Other income, net for the three months ended September 30, 2023 was $66 million, compared to $85 million for the three months ended September 30, 2022, a decrease of $19 million. Other income, net for the nine months ended September 30, 2023 was $126 million, compared to $205 million for the nine months ended September 30, 2022, a decrease of $79 million. These decreases were mostly due to lower pension income, which was primarily attributable to higher interest costs resulting from higher assumed discount rates in the current year, partially offset by greater gains on disposals in the current year.

Provision for Income Taxes

Provision for income taxes for the three months ended September 30, 2023 was $25 million, compared to $1 million for the three months ended September 30, 2022, an increase of $24 million. The effective tax rate was 15.5% for the three months ended September 30, 2023 and 0.7% for the three months ended September 30, 2022. Provision for income taxes for the nine months ended September 30, 2023 was $99 million, compared to $63 million for the nine months ended September 30, 2022, an increase of $36 million. The effective tax rate was 18.3% for the nine months ended September 30, 2023 and 12.1% for the nine months ended September 30, 2022. 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 prior-year quarter effective tax rate was lower due to certain discrete tax benefits related to amending the Company’s U.S. federal and state tax returns in order to change certain elections available under the Coronavirus Aid, Relief, and Economic Security (‘CARES’) Act, and excess tax benefits on executive share-based compensation.

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

Income from discontinued operations, net of tax for the three months ended September 30, 2022 was $8 million, and loss from discontinued operations, net of tax for the nine months ended September 30, 2022 was $27 million. The operations of our Willis Re business were reclassified to discontinued operations upon our entering into an agreement to sell the business during the third quarter of 2021 (see Note 3 – Acquisitions and Divestitures in Part I, Item 1 ‘Financial Statements’ in this Form 10-Q). Gains and losses from discontinued operations in the prior year were primarily attributable to the adjustments to the gain on disposal resulting from updating the purchase price and the operations of the deferred closing entities and run-off activity associated with the divestiture.

Net Income Attributable to WTW

Net income attributable to WTW for the three months ended September 30, 2023 was $136 million, compared to $190 million for the three months ended September 30, 2022, a decrease of $54 million, or 28%. This decrease resulted primarily from higher salary expense and incentive and benefit costs, increased transaction and transformation costs, higher professional service and marketing-related expenses and lower pension income in the current-year period, partially offset by higher revenue and gains on disposals in the current-year period.

Net income attributable to WTW for the nine months ended September 30, 2023 was $433 million, compared to $421 million for the nine months ended September 30, 2022, an increase of $12 million, or 3%. This increase resulted primarily from higher revenue, the absence of the prior-year’s asset impairment expense discussed above, lower restructuring costs, and higher gains on disposals in the current year, partially offset by higher salary expense and incentive and benefit costs, increased transaction and transformation costs, higher professional service and marketing-related expenses, higher travel and entertainment costs and lower pension income in the current year.

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.

There has been significant volatility in financial markets, including occasional declines in equity markets, inflation and changes in interest rates and reduced liquidity on a global basis. Specific to WTW, following the reduced spending driven by the COVID-19 pandemic, spending on travel and associated expenses began to increase in 2022, and this trend has continued in 2023 following the return to office for many companies which have increased in-person interactions.

Based on our current balance sheet and cash flows, current market conditions and information available to us at this time, we believe that WTW has access to sufficient liquidity, which includes all of the borrowing capacity available to draw against our $1.5 billion revolving credit facility, to meet our cash needs for the next twelve months, including investments in the business for growth and those related to our Transformation program, scheduled debt repayments, share repurchases and dividend payments. During the second quarter of 2023, we completed an offering of $750 million aggregate principal amount of 5.350% senior notes due 2033 and used the net proceeds during the current quarter to repay in full the $250 million aggregate principal amount and related accrued interest of 4.625% senior notes. The Company will use the remaining net proceeds for general corporate purposes. Additionally, during the nine months ended September 30, 2023 we repurchased $804 million of shares, with remaining authorization to repurchase an additional $1.5 billion.

From time to time, we will consider whether to repurchase shares based on many factors, including market and economic conditions, applicable legal requirements and other business considerations. The share repurchase program has no termination date and may be suspended or discontinued at any time.

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. Excluding these certain subsidiaries, we continue to assert that the historical cumulative earnings for the remainder of our subsidiaries have been reinvested indefinitely and therefore do not provide deferred taxes

on these amounts. If future events, including material changes in estimates of cash, working capital, long-term investment requirements or additional legislation, necessitate that these earnings be distributed, an additional provision for income and foreign withholding taxes, net of credits, may be necessary. Other potential sources of cash may be through the settlement of intercompany loans or return of capital distributions in a tax-efficient manner.

Cash and Cash Equivalents

Our cash and cash equivalents at September 30, 2023 totaled $1.2 billion, compared to $1.3 billion at December 31, 2022, a decrease of $15 million. In addition to cash flows generated by our operations, the significant cash activities during the first nine months of 2023 included share repurchases of $804 million, dividend payments, capital expenditures, and net proceeds from debt of $488 million.

Additionally, we had all of the borrowing capacity available to draw against our $1.5 billion revolving credit facility at both September 30, 2023 and December 31, 2022.

Included within cash and cash equivalents at September 30, 2023 and December 31, 2022 are amounts held for regulatory capital adequacy requirements, including $100 million and $99 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, 2023 and 2022:

		Nine Months Ended September 30,
		2023				2022
		(in millions)
Net cash from/(used in):
Operating activities		$	823			$	437
Investing activities			(1,030	)			(58	)
Financing activities			(728	)			(3,109	)
DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (i)			(935	)			(2,730	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(54	)			(290	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD (i)			4,721				7,691
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (i)		$	3,732			$	4,671

(i)

The amounts of cash, cash equivalents and restricted cash, their respective classification on the condensed consolidated balance sheets, as well as their respective portions of the increase or decrease in cash, cash equivalents and restricted cash for each of the periods presented, have been included in Note 19 — Supplemental Disclosures of Cash Flow Information within Part I, Item I ‘Financial Statements’ within this Quarterly Report on Form 10-Q.

Cash Flows From Operating Activities

Cash flows from operating activities were $823 million for the nine months ended September 30, 2023, compared to $437 million for the nine months ended September 30, 2022. The $823 million of net cash from operating activities for the nine months ended September 30, 2023 included net income of $441 million and $484 million of favorable non-cash adjustments, partially offset by unfavorable changes in operating assets and liabilities of $102 million. This increase in cash flows from operations as compared to the prior year was primarily due to the non-recurrence of prior-year headwinds, including realized losses on foreign currency hedges, payments made in the prior year for certain discretionary compensation and taxes for one-time gains recorded in connection with the Willis Re sale and the income receipt from the termination of the then-proposed Aon transaction. These prior-year cash flows were partially offset by increased Transformation program-related costs in the current year.

The $437 million of net cash from operating activities for the nine months ended September 30, 2022 included net income of $431 million and $437 million of favorable non-cash adjustments, partially offset by unfavorable changes in operating assets and liabilities of $431 million.

Cash Flows Used In Investing Activities

Cash flows used in investing activities for the nine months ended September 30, 2023 were $1.0 billion as compared to $58 million for the nine months ended September 30, 2022. The cash flows used in investing activities for the nine months ended September 30, 2023 consist primarily of cash and fiduciary funds of $922 million associated with the transfer to Gallagher under a new side letter to the Willis Re SAPA (see Note 3 — Acquisitions and Divestitures within Part I, Item 1 ‘Financial Statements’ in this Form 10-Q for additional information) and $182 million of capital expenditures and capitalized software additions. The cash flows used in investing activities in the prior-year period primarily include capital expenditures and capitalized software additions of $150 million,

acquisitions of $80 million, and cash and fiduciary funds transferred on disposal of $29 million, partially offset by sales of investments of $200 million.

Cash Flows Used In Financing Activities

Cash flows used in financing activities for the nine months ended September 30, 2023 were $728 million. The significant financing activities included share repurchases of $804 million, dividend payments of $265 million, and net payments from fiduciary funds held for clients of $71 million, partially offset by $488 million of net proceeds from issuance of debt.

Cash flows used in financing activities for the nine months ended September 30, 2022 were $3.1 billion. The significant financing activities included share repurchases of $3.1 billion, debt repayments of $590 million and dividend payments of $280 million, partially offset by $750 million of net proceeds from issuance of debt and $157 million of net proceeds from fiduciary funds held for clients.

Indebtedness

Total debt, total equity, and the capitalization ratios at September 30, 2023 and December 31, 2022 were as follows:

		September 30, 2023				December 31, 2022
		($ in millions)
Long-term debt		$	4,565			$	4,471
Current debt			649				250
Total debt		$	5,214			$	4,721
Total WTW shareholders’ equity		$	9,410			$	10,016
Capitalization ratio			35.7	%			32.0	%

At September 30, 2023, our mandatory debt repayments over the next twelve months include $650 million outstanding on our 3.600% senior notes due 2024. For more information regarding our current and long-term debt, please see ‘Supplemental Guarantor Financial Information’ elsewhere within this Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.

At September 30, 2023 and December 31, 2022, we were in compliance with all financial covenants.

Fiduciary Funds

As an intermediary, we hold funds, generally in a fiduciary capacity, for the account of third parties, typically as the result of premiums received from clients that are in transit to insurers and claims due to clients that are in transit from insurers. We also hold funds for clients of our benefits account businesses. These fiduciary funds are included in fiduciary assets on our condensed consolidated balance sheets. We present the equal and corresponding fiduciary liabilities related to these fiduciary funds representing amounts or claims due to our clients or premiums due on their behalf to insurers on our 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 certain of these fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds.

At September 30, 2023 and December 31, 2022, we had fiduciary funds of $2.7 billion and $3.6 billion, respectively. At December 31, 2022, $945 million of these funds were attributable to the divested Willis Re business. All amounts have since been settled or transferred to Gallagher due to the termination of the co-broking agreement (see Note 3 — Acquisitions and Divestitures within Part I, Item 1 ‘Financial Statements’ of this Quarterly Report on Form 10-Q for further information).

Share Repurchase Program

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

On July 26, 2021, the board of directors approved a $1.0 billion increase to the existing share repurchase program, which was previously at $500 million. Additionally, on September 16, 2021, the board of directors approved a $4.0 billion increase to the existing share repurchase program, on May 25, 2022, approved a $1.0 billion increase to the existing share repurchase program, and on

September 20, 2023, approved a $1.0 billion increase to the existing share repurchase program. These increases brought the total approved authorization to $7.5 billion.

At September 30, 2023, approximately $1.5 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, 2023 of $208.96 was 7,362,692.

During the three and nine months ended September 30, 2023, the Company had the following share repurchase activity:

			Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
Shares repurchased			1,681,385		3,650,837
Average price per share			$208.16		$220.26
Aggregate repurchase cost (excluding broker costs)			$350 million		$804 million

Capital Commitments

The Company’s capital expenditures for fixed assets and software for internal use were $116 million during the nine months ended September 30, 2023. The Company estimates that there will be additional such expenditures, which include those incurred under its Transformation program, in the range of $50 million to $70 million during the remainder of 2023. 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, 2022.

Dividends

Total cash dividends of $265 million were paid during the nine months ended September 30, 2023. In August 2023, the board of directors approved a quarterly cash dividend of $0.84 per share ($3.36 per share annualized rate), which was paid on October 16, 2023 to shareholders of record as of September 30, 2023.

Supplemental Guarantor Financial Information

As of September 30, 2023, WTW has issued the following debt securities (the ‘notes’):

a)

Willis North America Inc. (‘Willis North America’) has approximately $4.4 billion senior notes outstanding, of which $650 million were issued on May 16, 2017, $1.0 billion were issued on September 10, 2018, $1.0 billion were issued on September 10, 2019, $275 million were issued on May 29, 2020, $750 million were issued on May 19, 2022, and $750 million were issued on May 17, 2023; and

b)

Trinity Acquisition plc has $825 million senior notes outstanding, of which $275 million were issued on August 15, 2013 and $550 million were issued on March 22, 2016, and a $1.5 billion revolving credit facility, on which no balance was outstanding at September 30, 2023.

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, 2023. 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		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

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, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, the intercompany balances of the Obligor group with non-guarantor subsidiaries were net receivables of $1.0 billion and $600 million, respectively, and net payables of $11.2 billion and $10.2 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, 2023				As of December 31, 2022
		(in millions)
Total current assets		$	243			$	216
Total non-current assets			1,007				685
Total current liabilities			6,154				6,916
Total non-current liabilities			10,416				8,212

		Nine months ended September 30, 2023
		(in millions)
Revenue		$	1,093
Income from operations			881
Income from operations before income taxes (i)			305
Net income			434
Net income attributable to WTW			434

(i)

Includes intercompany expense, net of the Obligor group from non-guarantor subsidiaries of $222 million for the nine months ended September 30, 2023.

Non-GAAP Financial Measures

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

Most Directly Comparable U.S. GAAP Measure		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 WTW		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 pertinent information widely used by analysts, investors and other interested parties in our industry to provide a baseline for evaluating and comparing our operating performance, and in the case of free cash flow, our liquidity results.

Within the measures referred to as ‘adjusted’, we adjust for significant items which will not be settled in cash, or which we believe to be items that are not core to our current or future operations. Some of these items may not be applicable for the current quarter, however they may be part of our full-year results. Additionally, we have historically adjusted for certain items which are not described below, but for which we may adjust in a future period when applicable. Items applicable to the quarter or full year results, or the comparable periods, include the following:

Income from discontinued operations, net of tax – Adjustment to remove the after-tax income from discontinued operations and the after-tax gain attributable to the divested Willis Re business.

Restructuring costs and transaction and transformation – Management believes it is appropriate to adjust for restructuring costs and transaction and transformation 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.

Impairment – Adjustment to remove the impairment related to the net assets of our Russian business that are held outside of our Russian entities.

Gains and losses on disposals of operations – Adjustment to remove the gains or losses resulting from disposed operations that have not been classified as discontinued operations.

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

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

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

Constant Currency Change and Organic Change

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

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

foreign currency exchange rate fluctuations have on period-over-period comparability given volatility in foreign currency exchange markets.

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

The constant currency and organic change results, and a reconciliation from the reported results for consolidated revenue are included in the ‘Consolidated Revenue (Continuing Operations)’ section within this Form 10-Q. These measures are also reported by segment in the ‘Segment Revenue’ section within this Form 10-Q.

Reconciliations of the as-reported changes to the constant currency and organic changes for the three and nine months ended September 30, 2023 from the three and nine months ended September 30, 2022 are as follows. The components of revenue change may not add due to rounding.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Three Months Ended September 30,								Reported		Currency		Currency		Acquisitions/		Organic
		2023				2022				Change		Impact		Change		Divestitures		Change
		($ in millions)
Revenue		$	2,166			$	1,953			11%		2%		9%		—%		9%

												Components of Revenue Change
										As		Less:		Constant		Less:
		Nine Months Ended September 30,								Reported		Currency		Currency		Acquisitions/		Organic
		2023				2022				Change		Impact		Change		Divestitures		Change
		($ in millions)
Revenue		$	6,569			$	6,144			7%		(1)%		8%		(1)%		8%

For the three months ended September 30, 2023, our as-reported revenue increased by 11% and our organic revenue grew by 9%. For the nine months ended September 30, 2023, our as-reported revenue increased by 7% and our organic revenue grew by 8%. The increases in both as-reported and organic revenue were driven by strong performances in both segments as well as the recognition of higher interest income, on a year-to-date basis, that is not allocated to the segments.

Adjusted Operating Income/Margin

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

Adjusted operating income is defined as income from operations adjusted for impairment, amortization, restructuring costs, transaction and transformation 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, 2023 and 2022 are as follows:

	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
	($ in millions)
Income from operations	$	159			$	154			$	586			$	470
Adjusted for certain items:
Impairment		—				—				—				81
Amortization		62				71				203				239
Restructuring costs		17				9				30				71
Transaction and transformation		113				50				265				108
Adjusted operating income	$	351			$	284			$	1,084			$	969
Income from operations margin		7.3	%			7.9	%			8.9	%			7.6	%
Adjusted operating income margin		16.2	%			14.5	%			16.5	%			15.8	%

Adjusted operating income increased for the three months ended September 30, 2023 to $351 million, from $284 million for the three months ended September 30, 2022 and increased for the nine months ended September 30, 2023 to $1.1 billion from $969 million for the nine months ended September 30, 2022. These increases resulted primarily from higher revenue in the current year, partially offset by higher salary expense and incentive and benefit costs, higher professional service and marketing-related expenses, and increased travel and entertainment costs in the current-year periods as compared to the prior-year periods.

Adjusted EBITDA/Margin

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

Adjusted EBITDA is defined as net income adjusted for income from discontinued operations, net of tax, provision for income taxes, interest expense, impairment, depreciation and amortization, restructuring costs, transaction and transformation, 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, 2023 and 2022 are as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
		($ in millions)
NET INCOME		$	139			$	192			$	441			$	431
(Income)/loss from discontinued operations, net of tax			—				(8	)			—				27
Provision for income taxes			25				1				99				63
Interest expense			61				54				172				154
Impairment			—				—				—				81
Depreciation			60				60				184				191
Amortization			62				71				203				239
Restructuring costs			17				9				30				71
Transaction and transformation			113				50				265				108
(Gain)/loss on disposal of operations			(41	)			(21	)			(44	)			11
Adjusted EBITDA		$	436			$	408			$	1,350			$	1,376
Net income margin			6.4	%			9.8	%			6.7	%			7.0	%
Adjusted EBITDA margin			20.1	%			20.9	%			20.6	%			22.4	%

Adjusted EBITDA for the three months ended September 30, 2023 was $436 million, compared to $408 million for the three months ended September 30, 2022. This increase resulted primarily from higher revenue, partially offset by higher salary expense and incentive and benefit costs, higher professional service and marketing-related expenses, and lower pension income in the current-year period as compared to the prior-year period.

Adjusted EBITDA was $1.4 billion for both the nine months ended September 30, 2023 and 2022, a decrease of $26 million. This decrease was driven by the performance in the first half of the year in which higher salary expense and incentive and benefit costs, higher professional service and marketing-related expenses, increased travel and entertainment costs, and lower pension income in the current year, was partially offset by higher revenue in the current year.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

Adjusted net income is defined as net income attributable to WTW adjusted for income from discontinued operations, net of tax, impairment, amortization, restructuring costs, transaction and transformation, 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 ordinary shares, diluted. Adjusted diluted earnings per share is used to internally evaluate and assess our core operations and to benchmark our operating results against our competitors.

Reconciliations of net income attributable to WTW to adjusted diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 are as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
		($ in millions)
NET INCOME ATTRIBUTABLE TO WTW		$	136			$	190			$	433			$	421
Adjusted for certain items:
(Income)/loss from discontinued operations, net of tax			—				(8	)			—				27
Impairment			—				—				—				81
Amortization			62				71				203				239
Restructuring costs			17				9				30				71
Transaction and transformation			113				50				265				108
(Gain)/loss on disposal of operations			(41	)			(21	)			(44	)			11
Tax effect on certain items listed above (i)			(51	)			(24	)			(128	)			(116	)
Tax effect of the CARES Act			—				(24	)			—				(24	)
Tax effect of internal reorganizations			—				—				2				—
Adjusted net income		$	236			$	243			$	761			$	818
Weighted-average ordinary shares — diluted			105				111				107				114
Diluted earnings per share		$	1.29			$	1.72			$	4.06			$	3.71
Adjusted for certain items (ii) :
(Income)/loss from discontinued operations, net of tax			—				(0.07	)			—				0.24
Impairment			—				—				—				0.71
Amortization			0.59				0.64				1.90				2.10
Restructuring costs			0.16				0.08				0.28				0.62
Transaction and transformation			1.07				0.45				2.48				0.95
(Gain)/loss on disposal of operations			(0.39	)			(0.19	)			(0.41	)			0.10
Tax effect on certain items listed above (i)			(0.48	)			(0.22	)			(1.20	)			(1.02	)
Tax effect of the CARES Act			—				(0.22	)			—				(0.21	)
Tax effect of internal reorganizations			—				—				0.02				—
Adjusted diluted earnings per share		$	2.24			$	2.20			$	7.13			$	7.20

(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 the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This increase is primarily due to a lower weighted-average outstanding share count attributable to our share repurchase activity in the current year, and higher revenue, partially offset by higher salary expense and incentive and benefit costs, higher professional service and marketing-related expenses, and lower pension income in the current-year period as compared to the prior-year period.

Our adjusted diluted earnings per share decreased for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This decrease was driven by the performance in the first half of the year in which higher salary expense and incentive and benefit costs, higher professional service and marketing-related expenses, higher travel and entertainment costs, and lower pension income in the current year, was partially offset by a lower weighted-average outstanding share count attributable to our share repurchase activity and higher revenue in the current year.

Adjusted Income Before Taxes and Adjusted Income Taxes/Tax Rate

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

Adjusted income taxes/tax rate is defined as the provision for income taxes adjusted for taxes on certain items of impairment, amortization, restructuring costs, transaction and transformation, 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 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, 2023 and 2022 are as follows:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
		($ in millions)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		$	164			$	185			$	540			$	521
Adjusted for certain items:
Impairment			—				—				—				81
Amortization			62				71				203				239
Restructuring costs			17				9				30				71
Transaction and transformation			113				50				265				108
(Gain)/loss on disposal of operations			(41	)			(21	)			(44	)			11
Adjusted income before taxes		$	315			$	294			$	994			$	1,031
Provision for income taxes		$	25			$	1			$	99			$	63
Tax effect on certain items listed above (i)			51				24				128				116
Tax effect of the CARES Act			—				24				—				24
Tax effect of internal reorganizations			—				—				(2	)			—
Adjusted income taxes		$	76			$	49			$	225			$	203
U.S. GAAP tax rate			15.5	%			0.7	%			18.3	%			12.1	%
Adjusted income tax rate			24.3	%			16.8	%			22.6	%			19.7	%

(i)

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

Our U.S. GAAP tax rates were 15.5% and 0.7% for the three months ended September 30, 2023 and 2022, respectively, and 18.3% and 12.1% for the nine months ended September 30, 2023 and 2022, respectively. The prior-year quarter effective tax rate was lower due to certain discrete tax benefits related to amending the Company’s U.S. federal and state tax returns in order to change certain elections available under the CARES Act, and excess tax benefits on executive share-based compensation.

Our adjusted income tax rates were 24.3% and 16.8% for the three months ended September 30, 2023 and 2022, respectively, and 22.6% and 19.7% for the nine months ended September 30, 2023 and 2022, respectively. The prior-year quarter adjusted effective tax rate was lower due to discrete excess tax benefits on executive share-based compensation.

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, 2023 and 2022 are as follows:

		Nine Months Ended September 30,
		2023				2022
		(in millions)
Cash flows from operating activities		$	823			$	437
Less: Additions to fixed assets and software for internal use			(116	)			(100	)
Free cash flow		$	707			$	337

The increase in free cash flow during the current-year period was primarily due to the non-recurrence of prior-year headwinds, including realized losses on foreign currency hedges, payments made in the prior year for certain discretionary compensation and taxes for one-time gains recorded in connection with the Willis Re sale and the income receipt from the termination of the then-proposed Aon transaction. These prior-year cash flows were partially offset by increased Transformation program-related costs in the current year.

Critical Accounting Estimates

There were no material changes from the Critical Accounting Estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.