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 Russia-Ukraine and Israel-Hamas wars. Although the length and impact of these situations are highly unpredictable, they have caused disruption in the global markets and could continue to lead to further market disruptions. The conflicts have contributed to negative impacts on and volatility of the global economy and capital markets, resulting in significant inflation and fluctuating interest rates 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, supply chain disruptions and geopolitical tensions beyond the aforementioned 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 cost of doing business, including our operating and general and administrative expenses, and we have no control or limited ability to control such factors. These general economic conditions impact revenue, including revenue from customers as well as income from funds we hold on behalf of customers and pension-related income.

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.

See Part I, Item 1A ‘Risk Factors’ in our Annual Report on Form 10-K, filed with the SEC on February 22, 2024, for a discussion of risks that may affect, among other things, our growth relative to expectation and our ability to achieve our objectives.

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 fourth 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 $425 million by the end of 2024. The program is expected to incur cumulative costs of approximately $995 million and capital expenditures of approximately $130 million, for a total investment of $1.125 billion. The main categories of charges have been in the following four areas:

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

Technology modernization — these charges are incurred in moving to common platforms and technologies, including migrating certain platforms and applications to the cloud. This category includes 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 are incurred in the right-shoring strategy and automation of our operations, which includes optimizing resource deployment and appropriate colleague alignment. These costs 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 months ended March 31, 2024 and 2023, restructuring charges under our Transformation program totaled $18 million and $3 million, respectively. Other costs incurred under the Transformation program are included in transaction and transformation and were $119 million and $45 million for the three months ended March 31, 2024 and 2023, respectively.

From the actions taken during the first quarter of 2024, we have identified an additional $33 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 $370 million of cumulative annualized run-rate savings, which overall are primarily attributable to process optimization. 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 22, 2024.

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 March 31,
		2024								2023
		($ in millions, except per share data)
Revenue		$	2,341				100	%		$	2,244				100	%
Costs of providing services
Salaries and benefits			1,342				57	%			1,313				59	%
Other operating expenses			457				20	%			453				20	%
Depreciation			59				3	%			60				3	%
Amortization			60				3	%			71				3	%
Restructuring costs			18				1	%			3				—	%
Transaction and transformation			125				5	%			59				3	%
Total costs of providing services			2,061								1,959
Income from operations			280				12	%			285				13	%
Interest expense			(64	)			(3	)%			(54	)			(2	)%
Other income, net			26				1	%			25				1	%
INCOME FROM OPERATIONS BEFORE INCOME TAXES			242				10	%			256				11	%
Provision for income taxes			(48	)			(2	)%			(50	)			(2	)%
Income attributable to non-controlling interests			(4	)			—	%			(3	)			—	%
NET INCOME ATTRIBUTABLE TO WTW		$	190				8	%		$	203				9	%
Diluted earnings per share		$	1.83							$	1.88

Consolidated Revenue

Revenue for the three months ended March 31, 2024 was $2.3 billion, compared to $2.2 billion for the three months ended March 31, 2023, an increase of $97 million, or 4%, on an as-reported basis. Adjusting for the impacts of foreign currency and acquisitions and disposals, our organic revenue growth was 5% for the three months ended March 31, 2024. The increases in both as-reported and organic revenue were driven by strong performances in both segments.

Our revenue can be materially impacted by changes in currency conversions, which can fluctuate significantly over the course of a calendar year. For the three months ended March 31, 2024, currency translation increased our consolidated revenue by $10 million. The primary currencies driving this change 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 three months ended March 31, 2024. These figures do not represent the currency of the related revenue, which is presented in the next table.

Geographic Region		% of Revenue
United States			47	%
United Kingdom			18	%
France			7	%
Germany			4	%
Canada			3	%

The table below details the approximate percentage of our revenue and expenses by transactional currency for the three months ended March 31, 2024.

Transactional Currency		Revenue				Expenses (i)
U.S. dollars			53	%			53	%
Pounds sterling			11	%			16	%
Euro			19	%			13	%
Other currencies			17	%			18	%

(i)

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

The following table sets forth the total revenue for the three months ended March 31, 2024 and 2023, and the components of the change in total revenue for the three months ended March 31, 2024, as compared to the prior-year period. The components of the revenue change may not add due to rounding.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Three Months Ended March 31,								Reported		Currency		Currency		Acquisitions/		Organic
		2024				2023				Change		Impact		Change		Divestitures		Change (i)
		($ in millions)
Revenue		$	2,341			$	2,244			4%		—%		4%		(1)%		5%

(i)

Interest income contributed 1% to organic change for total revenue for the three months ended March 31, 2024. Organic change for total revenue excluding this contribution was 4% for the three months ended March 31, 2024.

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 22, 2024.

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 March 31, 2024 and 2023, and the components of the change in revenue for the three months ended March 31, 2024 from the three months ended March 31, 2023.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Three Months Ended March 31,								Reported		Currency		Currency		Acquisitions/		Organic
		2024				2023				Change		Impact		Change		Divestitures		Change
		($ in millions)
Segment revenue excluding interest income		$	1,327			$	1,282			4%		—%		3%		(1)%		4%
Interest income			9				5
Total segment revenue		$	1,336			$	1,287			4%		—%		3%		(1)%		4%

HWC segment revenue for both the three months ended March 31, 2024 and 2023 was $1.3 billion. Organic revenue growth in Health was driven by the continued expansion of our Global Benefits Management client portfolio in International and Europe. Our Wealth businesses generated organic revenue growth from higher levels of Retirement work in North America and Europe. Career had organic revenue growth from increased project work in Employee Experience and Work & Rewards. Organic growth in Benefits Delivery & Outsourcing was driven by higher volumes and placements of Medicare Advantage and life policies in Individual Marketplace.

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 March 31, 2024 and 2023, and the components of the change in revenue for the three months ended March 31, 2024 from the three months ended March 31, 2023.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Three Months Ended March 31,								Reported		Currency		Currency		Acquisitions/		Organic
		2024				2023				Change		Impact		Change		Divestitures		Change
		($ in millions)
Segment revenue excluding interest income		$	950			$	892			7%		—%		6%		—%		6%
Interest income			28				12
Total segment revenue		$	978			$	904			8%		—%		8%		—%		8%

R&B segment revenue for the three months ended March 31, 2024 and 2023 was $978 million and $904 million, respectively. Corporate Risk & Broking had organic revenue growth primarily driven by strong client retention across all geographies and higher levels of new business activity. Insurance Consulting and Technology had flat organic revenue growth for the quarter primarily due to the timing of consulting and technology revenue between quarters.

Costs of Providing Services

Total costs of providing services for the three months ended March 31, 2024 was $2.1 billion, compared to $2.0 billion for the three months ended March 31, 2023, an increase of $102 million, or 5%. See the following discussion for further details.

Salaries and Benefits

Salaries and benefits for both the three months ended March 31, 2024 and 2023 were $1.3 billion, an increase of $29 million. The increase in the current year is primarily due to higher salary expense, driven by increased colleague headcount and cost-of-living compensation adjustments and higher benefit costs for the period, partially offset by lower incentive costs.

Salaries and benefits, as a percentage of revenue, represented 57% and 59% for the three months ended March 31, 2024 and 2023, respectively.

Other Operating Expenses

Other operating expenses for the three months ended March 31, 2024 were $457 million, compared to $453 million for the three months ended March 31, 2023, an increase of $4 million. The increase was primarily due to increased marketing expenses, partially offset by lower occupancy costs for the current year as compared to the prior year.

Depreciation

Depreciation for the three months ended March 31, 2024 was $59 million, compared to $60 million for the three months ended March 31, 2023, a decrease of $1 million, or 2%. The year-over-year decrease was primarily due to a lower depreciable base of assets resulting from business disposals and a lower dollar value of assets placed in service during the past few years.

Amortization

Amortization for the three months ended March 31, 2024 was $60 million, compared to $71 million for the three months ended March 31, 2023, a decrease of $11 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 has decreased and will continue to decrease over time.

Restructuring Costs

Restructuring costs for the three months ended March 31, 2024 were $18 million, compared to $3 million for the three months ended March 31, 2023. 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 March 31, 2024 were $125 million, compared to $59 million for the three months ended March 31, 2023, an increase of $66 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 period as compared to the prior-year comparable period.

Income from Operations

Income from operations for the three months ended March 31, 2024 was $280 million, compared to $285 million for the three months ended March 31, 2023, a decrease of $5 million. This decrease resulted primarily from higher transformation and transaction costs, higher salary expense, higher restructuring costs and higher marketing costs in the current year, partially offset by higher revenue and lower incentive and occupancy costs in the current-year period.

Interest Expense

Interest expense for the three months ended March 31, 2024 was $64 million, compared to $54 million for the three months ended March 31, 2023, an increase of $10 million, or 19%. This increase was primarily the result of higher levels of indebtedness in the current year.

Other Income, Net

Other income, net for the three months ended March 31, 2024 was $26 million, compared to $25 million for the three months ended March 31, 2023, an increase of $1 million. The increase was due primarily to favorable foreign currency movement in the current-year period, partially offset by lower pension income.

Provision for Income Taxes

Provision for income taxes for the three months ended March 31, 2024 was $48 million, compared to $50 million for the three months ended March 31, 2023, a decrease of $2 million. The effective tax rate was 19.9% for the three months ended March 31, 2024, and 19.5% for the three months ended March 31, 2023. 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-year quarter’s effective tax rate is higher due to the distribution of geographical income.

Net Income Attributable to WTW

Net income attributable to WTW for the three months ended March 31, 2024 was $190 million, compared to $203 million for the three months ended March 31, 2023, a decrease of $13 million, or 6%. This decrease resulted primarily from higher transformation and transaction costs, higher salary expense, higher restructuring costs and higher marketing costs in the current year, partially offset by higher revenue and lower incentive and occupancy costs in the current-year period.

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 facility 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 and we expect this volatility could continue.

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 first quarter of 2024, we completed an offering of $750 million aggregate principal amount of 5.900% senior notes due 2054. We plan to use the proceeds to repay in full the $650 million aggregate principal amount of 3.600% senior notes (which will mature during the second quarter of 2024) and related accrued interest, and for general corporate purposes. Additionally, during the three months ended March 31, 2024, we repurchased $101 million of shares, and have authorization to repurchase an additional $1.2 billion.

We consider many factors, including market and economic conditions, applicable legal requirements and other business considerations, when considering whether to repurchase shares. Our share repurchase program (as further described below under ‘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 March 31, 2024 totaled $1.9 billion, compared to $1.4 billion at December 31, 2023. The increase in cash from December 31, 2023 to March 31, 2024 was due primarily to $739 million of net proceeds from the issuance of 5.900% senior notes due 2054, partially offset by $101 million of share repurchases and $86 million of dividend payments.

Additionally, we had all of the borrowing capacity available to draw against our $1.5 billion revolving credit facility at both March 31, 2024 and December 31, 2023.

Included within cash and cash equivalents at March 31, 2024 and December 31, 2023 are amounts held for regulatory capital adequacy requirements, including $105 million held at both periods, within our regulated U.K. entities.

Summarized Condensed Consolidated Cash Flows

The following table presents the summarized condensed consolidated cash flow information for the three months ended March 31, 2024 and 2023:

		Three Months Ended March 31,
		2024				2023
		(in millions)
Net cash from/(used in):
Operating activities		$	24			$	134
Investing activities			(74	)			(61	)
Financing activities			1,556				(453	)
INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (i)			1,506				(380	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(47	)			21
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD (i)			3,792				4,721
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (i)		$	5,251			$	4,362

(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 $24 million for the three months ended March 31, 2024, compared to $134 million for the three months ended March 31, 2023. The $24 million of net cash from operating activities for the three months ended March 31, 2024 included net income of $194 million and $183 million of favorable non-cash adjustments, partially offset by unfavorable changes in operating assets and liabilities of $353 million. This decrease in cash flows from operations as compared to the prior year was primarily driven by increased cash outflows related to the Transformation program and discretionary compensation payments, partially offset by higher collections in the current-year quarter as compared to the prior-year quarter.

The $134 million of net cash from operating activities for the three months ended March 31, 2023 included net income of $206 million and $191 million of favorable non-cash adjustments, partially offset by unfavorable changes in operating assets and liabilities of $263 million.

Cash Flows Used In Investing Activities

Cash flows used in investing activities for the three months ended March 31, 2024 were $74 million as compared $61 million for the three months ended March 31, 2023. The cash flows used in investing activities for both the current- and prior-year periods consisted primarily of capital expenditures and capitalized software additions.

Cash Flows From/(Used In) Financing Activities

Cash flows from financing activities for the three months ended March 31, 2024 were $1.6 billion. The significant financing activities included net proceeds from fiduciary funds held for clients of $1.0 billion and $739 million of net proceeds from the issuance of debt, partially offset by share repurchases of $101 million and dividend payments of $86 million.

Cash flows used in financing activities for the three months ended March 31, 2023 were $453 million. The significant financing activities included net payments from fiduciary funds held for clients of $250 million, share repurchases of $104 million and dividend payments of $87 million.

Indebtedness

Total debt, total equity, and the capitalization ratios at March 31, 2024 and December 31, 2023 were as follows:

		March 31, 2024				December 31, 2023
		($ in millions)
Long-term debt		$	5,307			$	4,567
Current debt			650				650
Total debt		$	5,957			$	5,217
Total WTW shareholders’ equity		$	9,489			$	9,520
Capitalization ratio			38.6	%			35.4	%

At March 31, 2024, our mandatory debt repayments over the next twelve months include $650 million outstanding on our 3.600% senior notes, which will mature during the second quarter of 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 March 31, 2024 and December 31, 2023, 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, some of which are invested in open-ended mutual funds as directed by the participant. 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 March 31, 2024 and December 31, 2023, we had fiduciary funds of $3.6 billion and $2.6 billion, respectively.

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 September 20, 2023, the board of directors approved a $1.0 billion increase to the existing share repurchase program. This increase brought the total approved authorization, since the announcement of the program on April 20, 2016, to $9.2 billion.

At March 31, 2024, approximately $1.2 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 March 31, 2024 of $275.00 was 4,515,411.

During the three months ended March 31, 2024, the Company had the following share repurchase activity:

			Three Months Ended March 31, 2024
Shares repurchased			374,108
Average price per share			$269.36
Aggregate repurchase cost (excluding broker costs)			$101 million

Capital Commitments

The Company’s capital expenditures for fixed assets and software for internal use were $33 million during the three months ended March 31, 2024. The Company estimates that there will be additional such expenditures, which include those incurred under its Transformation program, in the range of $140 million - $165 million during the remainder of 2024. 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, 2023.

Dividends

Total cash dividends of $86 million were paid during the three months ended March 31, 2024. In February 2024, the board of directors approved a quarterly cash dividend of $0.88 per share ($3.52 per share annualized rate), which was paid on April 15, 2024 to shareholders of record as of March 31, 2024.

Supplemental Guarantor Financial Information

As of March 31, 2024, WTW has issued the following debt securities (the ‘notes’):

a)

Willis North America Inc. (‘Willis North America’) has approximately $5.2 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, $750 million were issued on May 17, 2023, and $750 million were issued on March 5, 2024; and

b)

Trinity Acquisition plc has approximately $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 March 31, 2024.

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 March 31, 2024. 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 March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023, the intercompany balances of the Obligor group with non-guarantor subsidiaries were net receivables of $3.5 billion and $3.4 billion, respectively, and net payables of $13.6 billion and $14.0 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 March 31, 2024				As of December 31, 2023
		(in millions)
Total current assets		$	236			$	299
Total non-current assets			3,470				3,454
Total current liabilities			7,207				7,576
Total non-current liabilities			12,599				11,848

		Three months ended March 31, 2024
		(in millions)
Revenue		$	207
Income from operations			136
Loss from operations before income taxes (i)			(123	)
Net loss			(63	)
Net loss attributable to WTW			(63	)

(i)

Includes intercompany expense, net of the Obligor group from non-guarantor subsidiaries of $103 million for the three months ended March 31, 2024.

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 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:

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.

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 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’ section within this Form 10-Q. These measures are also reported by segment in the ‘Segment Revenue’ section within this Form 10-Q.

A reconciliation of the as-reported change to the constant currency and organic changes for the three months ended March 31, 2024 from the three months ended March 31, 2023 is as follows. The components of revenue change may not add due to rounding.

												Components of Revenue Change
										As		Less:		Constant		Less:
		Three Months Ended March 31,								Reported		Currency		Currency		Acquisitions/		Organic
		2024				2023				Change		Impact		Change		Divestitures		Change (i)
		($ in millions)
Revenue		$	2,341			$	2,244			4%		—%		4%		(1)%		5%

(i)

Interest income contributed 1% to organic change for total revenue for the three months ended March 31, 2024. Organic change for total revenue excluding this contribution was 4% for the three months ended March 31, 2024.

For the three months ended March 31, 2024, our as-reported revenue increased by 4% and our organic revenue grew by 5%. The increases in both as-reported and organic revenue were driven by strong performances in both segments.

Adjusted Operating Income/Margin

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

Adjusted operating income is defined as income from operations adjusted for 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 months ended March 31, 2024 and 2023 are as follows:

	Three Months Ended March 31,
	2024				2023
	(in millions)
Income from operations	$	280			$	285
Adjusted for certain items:
Amortization		60				71
Restructuring costs		18				3
Transaction and transformation		125				59
Adjusted operating income	$	483			$	418
Income from operations margin		12.0	%			12.7	%
Adjusted operating income margin		20.6	%			18.6	%

Adjusted operating income increased for the three months ended March 31, 2024 to $483 million, from $418 million for the three months ended March 31, 2023. This increase resulted primarily from higher revenue and lower incentive and occupancy costs in the current year, partially offset by higher salary expense and marketing costs in the current-year period.

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 provision for income taxes, interest expense, 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 months ended March 31, 2024 and 2023 are as follows:

		Three Months Ended March 31,
		2024				2023
		(in millions)
NET INCOME		$	194			$	206
Provision for income taxes			48				50
Interest expense			64				54
Depreciation			59				60
Amortization			60				71
Restructuring costs			18				3
Transaction and transformation			125				59
Adjusted EBITDA		$	568			$	503
Net income margin			8.3	%			9.2	%
Adjusted EBITDA margin			24.3	%			22.4	%

Adjusted EBITDA for the three months ended March 31, 2024 was $568 million, compared to $503 million for the three months ended March 31, 2023. This increase resulted primarily from higher revenue and lower incentive and occupancy costs in the current year, partially offset by higher salary expense and marketing costs in the current-year period.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

Adjusted net income is defined as net income attributable to WTW adjusted for 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 months ended March 31, 2024 and 2023 are as follows:

		Three Months Ended March 31,
		2024				2023
		($ in millions)
NET INCOME ATTRIBUTABLE TO WTW		$	190			$	203
Adjusted for certain items:
Amortization			60				71
Restructuring costs			18				3
Transaction and transformation			125				59
Tax effect on certain items listed above (i)			(52	)			(34	)
Tax effect of internal reorganizations			—				4
Adjusted net income		$	341			$	306
Weighted-average ordinary shares — diluted			104				108
Diluted earnings per share		$	1.83			$	1.88
Adjusted for certain items (ii) :
Amortization			0.58				0.66
Restructuring costs			0.17				0.03
Transaction and transformation			1.21				0.55
Tax effect on certain items listed above (i)			(0.50	)			(0.32	)
Tax effect of internal reorganizations			—				0.04
Adjusted diluted earnings per share		$	3.29			$	2.84

(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 March 31, 2024 as compared to the prior year primarily due to higher revenue and lower incentive and occupancy costs in the current year, and a lower weighted-average outstanding share count due to our share repurchase activity over the last year, partially offset by higher salary expense and marketing costs in the current-year period.

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, 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 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 months ended March 31, 2024 and 2023 are as follows:

		Three Months Ended March 31,
		2024				2023
		($ in millions)
INCOME FROM OPERATIONS BEFORE INCOME TAXES		$	242			$	256
Adjusted for certain items:
Amortization			60				71
Restructuring costs			18				3
Transaction and transformation			125				59
Adjusted income before taxes		$	445			$	389
Provision for income taxes		$	48			$	50
Tax effect on certain items listed above (i)			52				34
Tax effect of internal reorganizations			—				(4	)
Adjusted income taxes		$	100			$	80
U.S. GAAP tax rate			19.9	%			19.5	%
Adjusted income tax rate			22.4	%			20.5	%

(i)

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

Our U.S. GAAP tax rates were 19.9% and 19.5% for the three months ended March 31, 2024 and 2023, respectively. The current-year quarter’s effective tax rate is higher due to the distribution of geographical income.

Our adjusted income tax rates were 22.4% and 20.5% for the three months ended March 31, 2024 and 2023, respectively. The current-year quarter’s adjusted tax rate is higher due to the distribution of geographical income.

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 three months ended March 31, 2024 and 2023 are as follows:

		Three Months Ended March 31,
		2024				2023
		(in millions)
Cash flows from operating activities		$	24			$	134
Less: Additions to fixed assets and software for internal use			(33	)			(42	)
Free cash flow		$	(9	)		$	92

The decrease in free cash flow during the current-year period was primarily driven by increased cash outflows related to the Transformation program and discretionary compensation payments, partially offset by higher collections in the current-year quarter as compared to the prior-year quarter.

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, 2023, filed with the SEC on February 22, 2024.