Willis Towers Watson(WTW) - 2021 Q3 - Quarterly Report

Revenue and Income - Revenue for Q3 2021 was $1,973 million, a 4% increase from $1,897 million in Q3 2020[158] - Income from continuing operations for Q3 2021 was $919 million, compared to $119 million in Q3 2020, representing a 671% increase[158] - The company reported a net income attributable to Willis Towers Watson of $903 million in Q3 2021, up from $121 million in Q3 2020, a 645% increase[158] - Consolidated revenue for the three months ended September 30, 2021, was $2.0 billion, a 4% increase from $1.9 billion in the same period of 2020, with organic revenue growth of 7%[159] - For the nine months ended September 30, 2021, revenue was $6.3 billion, up 6% from $5.9 billion in the prior year, with organic revenue growth of 6%[159] - Revenue for the nine months ended September 30, 2021, was $6.292 billion, reflecting a 6% increase compared to the same period in 2020[263] Costs and Expenses - The transaction and integration costs for Q3 2021 were $(952) million, compared to $42 million in Q3 2020, indicating a significant increase in costs associated with business combinations[158] - Total costs of providing services for Q3 2021 were $842 million, a decrease of 54% from $1.8 billion in Q3 2020, largely due to a $1 billion income receipt related to the termination of the proposed Aon transaction[201] - Interest expense for Q3 2021 was $50 million, down 18% from $61 million in Q3 2020, attributed to lower levels of indebtedness[209] Cash Flow and Liquidity - Cash flows from operating activities for the nine months ended September 30, 2021 were $1.9 billion, compared to $1.2 billion for the same period in 2020, reflecting improved net income and operational efficiency[232] - Cash flows from investing activities for the nine months ended September 30, 2021 were $577 million, primarily from the net proceeds of $696 million from the sale of the Miller business[234] - Cash flows used in financing activities for the nine months ended September 30, 2021 were $2.3 billion, including share repurchases of $1 billion and debt repayments of $970 million[236] - Free cash flow for the nine months ended September 30, 2021, was $1,768 million, compared to $1,023 million in 2020, indicating a 73% increase[284] Segment Performance - The Human Capital and Benefits (HCB) segment revenue for the three months ended September 30, 2021, was $852 million, a 7% increase from $796 million in the same period of 2020, with organic growth of 6%[174] - The Corporate Risk and Broking (CRB) segment revenue for the three months ended September 30, 2021, was $697 million, a 7% increase from $649 million in the same period of 2020, with organic growth of 6%[181] - BDA segment revenue for Q3 2021 was $242 million, an increase of 7% from $226 million in Q3 2020, primarily driven by Individual Marketplace growth[197] - For the nine months ended September 30, 2021, BDA segment revenue was $771 million, up 16% from $666 million in the same period of 2020, with strong performance in Medicare Advantage and Life sales[200] Tax and Income - Provision for income taxes for Q3 2021 was $267 million, an increase of $225 million from $42 million in Q3 2020, with an effective tax rate of 22.5%[212] - Adjusted income before taxes for the nine months ended September 30, 2021, was $996 million, up from $796 million in 2020, reflecting a 25% increase[280] - The U.S. GAAP tax rate for the three months ended September 30, 2021, was 22.5%, down from 26.6% in 2020[281] Shareholder Returns and Debt - The company restarted its share repurchase program in Q3 2021, repurchasing $1 billion of stock, with authorization to repurchase an additional $4.5 billion[223] - Total debt as of September 30, 2021 was $4.637 billion, down from $5.635 billion at December 31, 2020, due to significant debt repayments[238] - The capitalization ratio decreased to 28.9% as of September 30, 2021, from 34.2% at December 31, 2020, reflecting strong earnings and debt repayments[238] Market Conditions and Strategy - The company anticipates that the market for talent will remain highly competitive for the next several months due to global labor market shifts[154] - The company has established a hedging strategy to mitigate significant fluctuations in currency, particularly related to its operations in the U.K.[151] - The company has seen a modest improvement in pricing in the insurance market, indicating a potential shift towards a firmer market[144] - The company expects continued volatility in demand for discretionary services due to the ongoing impacts of the COVID-19 pandemic[169] Discontinued Operations - Loss from discontinued operations for Q3 2021 was $12 million, compared to income of $3 million in Q3 2020, reflecting a decrease of $15 million[213] - Revenue from discontinued operations for Q3 2021 was $111 million, slightly down from $112 million in Q3 2020, while year-to-date revenue increased to $668 million from $642 million[214] - The company has entered into an agreement to sell Willis Re, with the transaction expected to be completed by the end of Q1 2022[186] Financial Position - Cash and cash equivalents at September 30, 2021 totaled $2.2 billion, an increase from $2.0 billion at December 31, 2020, driven by strong operating results and the sale of the Miller business[228] - As of September 30, 2021, total current assets were $201 million, total non-current assets were $676 million, total current liabilities were $6.85 billion, and total non-current liabilities were $6.55 billion[258] - The company held $2.2 billion of fiduciary funds invested in interest-bearing accounts as of September 30, 2021[292] Adjusted Metrics - Adjusted operating income for the three months ended September 30, 2021, increased to $264 million from $231 million for the same period in 2020, and for the nine months ended September 30, 2021, it rose to $920 million from $742 million in 2020, primarily due to higher revenue[267] - Adjusted EBITDA for the three months ended September 30, 2021, was $415 million, compared to $375 million for the same period in 2020, and for the nine months ended September 30, 2021, it was $1.4 billion, up from $1.2 billion in 2020, driven by increased revenue[271] - Adjusted diluted earnings per share for the three months ended September 30, 2021, increased to $1.73 from $1.31 in 2020, and for the nine months ended September 30, 2021, it rose to $6.04 from $4.52 in 2020, primarily due to higher revenue[276]