Q3 2020 Willis Towers Watson PLC Earnings Call
[music].
They will for the next three months on Willis towers Watson website. Some of the comments in today's call may constitute forward looking statements within the meaning of the private security Reform Act of 1995.
These forward looking statements are subject to risks and uncertainties actual results may differ materially from those discussed today and the company undertakes no obligation to update these statements unless required by law for a more detailed discussion of these and other risk factors investors should refer.
The forward looking statement section of the earnings press release issued today this morning.
As well as other disclosures in the most recent form 10-K.
And in other Willis towers, Watsons FCC filings during.
During the call certain non-GAAP financial.
Measures may be discussed for a reconciliation of the non-GAAP measures as well as other information regarding these measures. Please refer to the most recent earnings release and other materials in the Investor Relations section of the company's website I would now like to turn the call over to Mr., John Haley Willis Towers, Watsons Chief Executive Officer. Please go ahead.
Good.
Okay. Thank you good morning, everyone and thank you for joining us on our third quarter 2020 earnings call. Joining me today is Mike for well, our Chief Financial Officer.
In the third quarter, we continued to navigate the challenging economic conditions. Nevertheless, I'm pleased with our financial performance lower revenues continued to be impacted by the pandemic in the locked down for chicken will lead and other discretionary lines of business.
Overall performance reflects the durability and resilience of our business model.
In many of our core businesses, we continue to experience new business generation strong client retention rates and increased operating leverage we continue to reduce our control spending and improve our liquidity through prudent cash flow management.
As we navigate through the cobot 18 locked down and the resulting economic condition, the well being of our colleagues clients and communities remains it before.
It has been in our Jewish the transformative year with great changes come new opportunities for growth, which is why we continue to be excited about the proposed eight on and Willis towers Watson combination cold.
Cold at night TV as highlighted deficiencies in the way the world approaches people risk and capital issues and we believe our combination with they onboard allow us to more proactively support our clients in developing solutions to problems that are inadequately managed today.
COVID-19, he showed the world that the widespread cost of extreme events far exceed the upfront cost of prudent preparatory measures.
Wondered risk is one such area, where we see protection gosh and building greater resilience is critical similar to the COVID-19 pandemic climate change will challenge many countries with the potential for profound social economic destruction, highlighting the critical need for more efficient risk informed investment decision, making.
To help save lives and economies and the foreseeable shock in the years and decades ahead.
I'm proud of the work that was towers Watson has done to get ahead of the curve on climate.
I was I announced in the fall of 2019 were a founding member of the coalition for climate resilient investment or CCRI. The CCRI is a public private coalition of institutional investors banks ensures rating agencies and governments and was launched last year to produce solutions facilitating the energy.
Gration climate risk into investment policy.
Our work on climate has involved multiple businesses and geographies to focus our efforts we introduced climate quantified at the World Economic Forum meeting in Davos.
Earlier this year.
This is galvanizing or work in helping organizations navigate climate risk for example, we're working with a large financial institution to assess the exposure of asset portfolios to climate change. We've also been developing approaches to risk transfer such as parametric insurance, which we believe in it.
Oh protection against unpredictable, but potentially devastating risks protection that was previously unthinkable with traditional insurance.
Well lets towers Watson is not a new come on this topic in response to growing demand for our climate services and capabilities. We establish the climate resilience hub, which sits within the investment risk and reinsurance segment climate. It's been at the core of our research agenda for the last 15 years well before this made the headlines.
Climate has also been an integral component of the investment business research efforts, including those of our thinking ahead Institute.
Overall, weve invested over $50 million over the last decade to support open climate. The natural hazard research in partnership with institutions, such as the National Center for Atmospheric Research Columbia University, The National University of Singapore in New Castle, Cambridge, and exit or universities.
We continue to drive momentum on client resilience. During this year's annual climate week in New York City. The annual climate leak presented an opportunity for the company to promote resilience and sustainability showcase global climate action and maintaining the critical momentum needed to manage climate risk.
We also had the honor of participating in the World Economic Forum sustainable development impact summit contributing towards important initiatives that will accelerate sustainability and resilience.
The COVID-19 pandemic has dramatically highlighted what happens when countries and businesses do not prepare for long term resiliency and instead prioritize short term considerations progress has been too slow in closing the protection gaps that exist.
As we cited in our recently released White paper, both AIU and Willis towers Watson share a strong commitment to helping clients navigate their most complex challenges, we're eager to bring new and innovative solutions to our clients to help them meet their evolving needs and address global problems like climate risk.
We believe our combined firm will have the capacity to take aggressive action and implemented systemic change that will have both immediate and long term impact in four key areas navigating new forms of volatility building, a resilient workforce rethinking access to capital and of course addressing the underserved.
So let's move on to our third quarter results reported revenue for the third quarter was $2 billion, that's up 1% as compared to the prior year third quarter flat on a constant currency basis and down 1% on an organic basis reported revenue included 17 million of positive currency.
Similar to last quarter, we experienced solid financial performance in areas, where we have a well established market position mature relationships and annuity or compliance driven businesses. We faced some headwinds in areas, where our revenue is more aligned to discretionary projects.
Net income was 122 million up 53% for the third quarter as compared to 80 million of net income in the prior year third quarter, adjusted EBITDA was 382 million or 19% of revenue as compared to the prior year adjusted EBITDA.
For the third quarter of $344 million or 17.3% of revenue that represents an 11% increase on an adjusted EBITDA dollar basis, and 170 basis points of margin improvement.
For the quarter diluted earnings per share, which included a gain on the sale of Max Mathias and were 93 cents an increase of.
60% as compared to the prior year adjusted diluted earnings per share were $1.33 for the third quarter, reflecting an increase of 2% compared to the prior year overall it was a solid quarter, we grew revenue and adjusted earnings per share it.
Hi, good enhanced adjusted EBITDA margin performance.
Now, let's look at each of the segments in some more detail.
To provide clear comparability with prior periods all commentary regarding the results of our segments will be on an organic basis, unless specifically stated otherwise segment margins are calculated using segment revenue and exclude unallocated corporate costs, such as amortization of intangibles certain transactions.
Integration expenses, resulting from mergers and acquisitions as well as other items, which we consider non core to our operating results. The segment results do include discretionary compensation.
The human capital and benefits or HCB segment revenue was down 2% on an organic and constant currency basis compared to the third quarter of the prior year.
That's primarily as the result of a declining demand in our profit Wyndham rewards business talent and rewards revenue decreased 9%.
With the economic turmoil receipt related to the COVID-19, lockdowns adversely impacting workforce dynamics that many companies and dampening the need for advisory work globally.
Our health and benefits revenues increased 1% for the quarter, we experienced strong client retention in North America, alongside New global benefit management and local brokerage appointments outside North America retirement revenue was flat compared to the prior year with reduced de risking activity in North America being back.
And by increased funding in GMP equalization work in Great Britain.
Technology and administrative solutions revenue declined in Western Europe, and international primarily as a result of nonrecurring project work that enhance the prior year's results. Despite the pressure on revenue HCP is operating margin decreased by only 30 basis points compared to the prior year third quarter as a result of.
Careful cost management efforts, we remain confident about the long term prospects of or HCB segment work environments have changed dramatically. This year, forcing many companies to rethink their approach to work and rewards HCB. There is to help clients make the tough decisions needed to unlock the organizational resilience and push.
Forward.
Now, let's look at corporate risk and broking, or CRB, which had a revenue decrease of 1% on an organic and constant currency basis as compared to the prior year third quarter North.
North Americas revenue was down by 4% in the third quarter.
This was mainly a result of the tough comparable from the prior year, which benefited from a one off sale of the book of business revenue for international in Western Europe increased 3% and 4%, respectively, driven by new business and strong renewal great Britains revenue declined 2% for the third quarter.
Great Britain's results were negatively impacted by a change in the reviewing duration model for certain lines of business. This change, which is neutral to operating income results in lower revenue and an equal reduction in salaries and benefits expense absent. This change great Britains revenue increased by 2% primarily from strong performance across most.
Most lines of business, including financial solutions and Synnex.
CRB revenue was $649 million for the quarter with an operating margin of 12.5% compared to 651 million revenue with an operating margin of 12.4% in the prior year third quarter. The margin improvement was due to topline growth coupled with cost containment efforts CR.
Combines research data and strategic insight to address our clients' most complex risk challenges companies must constantly adapt to today's ever changing business landscape and we believe CRB is well positioned to provide solutions that keep pace with our clients evolving needs.
Turning to investment risk and reinsurance or I or our revenue for the third quarter was $331 million, an increase of 3% on an organic basis and flat on a constant currency basis as compared to the prior year third quarter reinsurance with growth of 7% continued to lead the segment's growth through a combination of.
Net new business and favorable renewals insurance consulting and technology revenue was up 1% mainly from technology sales investment revenue increased 4% with continued expansion of the delegated investment services portfolio Maxima Tces revenue increased primarily from increased commission income.
As a reminder, we sold the maximum decent business in the third quarter and they will not be included in our Q4 results. Our wholesale business was down 12% on an organic basis with pressure across all lines and lower investment returns.
Yeah, our had an operating margin of 8.6% as compared to 9.3% for the prior year third quarter. We continue to feel good about Iran's momentum I Ars portfolio of offerings provides organizations with information needed to understand the risk and how it affects capital in their financial performance advising quite.
Through these turbulent times continues to be higher our core focus.
Revenue for the benefits delivery the administration or be da segment increased by 26% on a constant currency basis and increased 6% on an organic basis from the prior year third quarter. The growth in revenue was primarily driven by transact, which contributed $96 million to be da's topline this call.
The benefits outsourcing business also contributed to the increase in revenue, which was largely driven by its expanded client base.
The BA segment had revenues of 226 million with a minus 5.3 operating margin as compared to minus 11.9% in the prior year third quarter. The margin improvement was primarily driven by the topline growth.
We're optimistic about the long term growth of this business. The pandemic has threatened the wellbeing of people all over the globe in this time of heightened stress and uncertainty BDCA empowers employees and retirees spread providing easy access to the tools they need to understand their benefit options and to take control of their health care.
Overall I'm pleased with our progress we delivered steady overall financial performance with modest margin expansion and adjusted EPS growth. Despite the lingering economic turmoil. So now I'll turn the call over to Mike.
Thanks, John and good morning to everyone. Thanks to all of you for joining us.
I'd like to extend my gratitude to our colleagues for another solid quarter as well as thank our clients for their continued support and trust in us through this challenging environment.
Im proud of our leadership, our colleagues and our overall resiliency resiliency demonstrated by our businesses.
Let's turn to our financial overview.
The third quarter, we continue to face some headwinds from the COVID-19 pandemic, but we are reassured by the demand for our services and solutions and by our ability to reduce discretionary expenses and to manage our cash.
We were pleased to see another solid quarter of.
Profitability with underlying adjusted EPS growth and remarkable free cash flow growth now.
Now I'll turn to the overall detailed financial results ill.
Ill start with income from operations.
Income from operations for the third quarter was $73 million or 3.6% of revenue down 180 basis points from the prior year third quarter income from operations of $107 million or 5.4% of revenue.
Adjusted operating income for the third quarter was $238 million or 11.8% of revenue up 20 basis points from $231 million or 11.6% of revenue in the prior year third quarter.
The third quarters of 2020, and 2019, our diluted EPS were 93 cents and 58 cents respectively.
For the third quarter of 2020, our adjusted EPS was up 2% to $1.33 per share as compared to $1.31 per share in the prior year third quarter.
Foreign exchange had a three cents impact on EPS for the third quarter.
Our us GAAP tax rate for the third quarter was 27.6% versus 20.4% in the prior year.
Our adjusted tax rate for the third quarter was 30% up from 22.2% rate in the prior year.
Current quarter effective tax rate was higher as a result of the enacted statutory tax rate changes in the UK.
Requiring us to re measure our UK deferred tax liabilities and recognize a discrete deferred tax expense of approximately 11 million or eight cents per share. During the three months ended September Thirtyth 2020.
Turning to the balance sheet.
As the COVID-19 situation continues to evolve I believe that we are well prepared to navigate the uncertainty that lies ahead.
We ended the third quarter with a strong capital liquidity position with cash and cash equivalent equivalents, a $1.6 billion and full capacity on our undrawn $1.25 billion revolving credit facility, we had no borrowings under our credit facility during the quarter our debt to adjusted EBITDA has improved from 2.7.
932019.
And 2.4 to 12 31 2019 to 2.39 32020.
Willis towers Watson remains well positioned from a liquidity perspective.
We aim to continue to maintain a strong and durable balance sheet continue pushing forward our cost and efficiency.
Efficiency initiatives, we continue to monitor the ever evolving the impact of the pandemic and we're prepared to take appropriate measures as needed to preserve our financial position.
For the third quarter 2020, our free cash flow was 473 million versus $262 million in the prior year.
Bringing our year to date free cash flow to 1 billion, an increase of 130% from $445 million for the first nine months of the prior year.
The year over year improvement in free cash flow as do a combination of prudent working capital management.
The disciplined approach to managing spend.
In terms of capital allocation, we paid 259 million in dividends as they're not repurchase any shares in the nine months ended September Thirtyth 2020.
As a reminder, given certain prohibitions on the transaction agreement in connection with our pending business combination with them, we do not expect to repurchase any shares during the remainder of 2020.
As a general matter the COVID-19 pandemic did not have a material adverse impact on our overall financial results for the third quarter of fiscal 2020. However, the pandemic didn't impact revenue growth, particularly in some discretionary lines and we expect the effects of COVID-19 on general economic economic activity could negatively impact our revenue results for the remainder of two.
20 and beyond.
The duration of the pandemic the full magnitude of its economic impact and the subsequent speed of recovery remain unknown.
In the meantime, we remain focused on maintaining a strong balance sheet liquidity and financial flexibility.
The COVID-19 pandemic has caused considerable economic upheaval, but I'm very proud of the leadership team and the resolve of our colleagues and supporting our clients during these difficult times.
These third quarter results are a direct reflection of the agility of our global model overall, we delivered a solid financial performance in the third quarter and I remain confident in our ability to continue driving value for all our stakeholders and I will turn the call back to John.
Thanks, Mike and now we'll take your questions.
To ask a question you need to press star one on your telephone to withdraw your question. Please press the pound key please stand by while we compile the kidney roster.
And your first question comes from the line of Paul Newsome with pipe burst and earlier.
Thank you and good morning.
So August is a theme to the brokers is that the excellent margin controls and everyone's had.
Any thoughts as we get into that.
Next quarter or beyond about just you if you'll have to incur.
Increased.
Obama spending just because hopefully things when you move it back to normal.
Yes, so I think.
Look we we expected situations grinding involved in change during during say 2021, but I think we really don't know exactly how it's going to evolve I think.
We know it's going to be different than it is today, but we don't think it's going to go back to where it was prior to COVID-19, all so to the extent we have some.
Some more expenses.
Say travel and entertainment things like that will only be undertaking them. When they are justified by generating the extra revenue. So while while we expect expenses to increase we're going to try to do that only where we also had a corresponding revenue increases.
Great and.
Completely different question, obviously, but looking in a changing.
Political environment, well with the FDA, possibly be affected by accordingly.
Any thoughts on on that business and the outlook just given the changing regulatory environment.
No I mean, I think what we would say is we think that the.
Services that we provide I talked at the end of my remarks about how that particularly the services we provide the BDNA.
Let.
Employees at.
Individuals take control of their benefits and their health care and I think Thats a theme that you see around the world whatever.
Wait politicians or the particular methods they use for providing health care. They want individuals to be in charge of their own health care and take responsibility for it and so we feel pretty good about the services we provide.
Great. Thank you very much.
And your next question comes from the line of E., Lee Greenspan with Wells Fargo.
Hi, Thanks good.
Good morning, Mike.
First question on CRB.
Q1 off sale in North America I.
I think you gave the impact right.
Great Britain, one off item, there that GBP sort of enough to put that well on CRB have done in the quarter. If we adjust for the one time in North America and in Great Britain.
Yes at least that I mean, we would have been.
Slight now we've been flat overall to slight increase.
It's kind of really where we would have been for that for the quarter. Obviously, we look at the quarter.
Overall, we look at the year to date results and when we look at that we feel like we're operating pretty favorably comparison to the market.
And so that's kind of that's kind of how we how we think about it.
Okay, Great and then wholesale I think I heard you say that that was down 12% within.
I know you guys like anything.
Well by the about the potential sale of Miller I'm not sure that had an impact. So we just had a little bit more color.
You saw within wholesale and if anything they're kind of one time to Q3, and how we should think about that trajectory of that business from here.
Yes, when we look at Miller overall, thank you for the question on lease.
One of the things that happens with Miller as they insure a lot of.
Events in a particular sporting events and so obviously, there's been a lot of those that havent transpired or been put on hold and so thats. What we really saw in terms of driving the reduction in revenue growth for the quarter.
No we continue to evaluate strategic alternatives.
As we said for Miller.
There has been a very strong and performing business for us, but thats. The direct reason why the decline in Miller for the quarter.
Is the sporting event more pronounced to the Q3 than other quarters and would that be even throughout the year.
It's a little bit more on the Q3.
Okay and then my last question on the tax rate you.
You pointed to I think there was a UK statutory changes that led to the elevation in the quarter is there any impact on your go forward tax rate.
Yes.
As I just to repeat back at least yes, and we did the UK did raise their statutory rate by 2% as I said it had a $11 million approximately 11 million dollar impact on our our tax.
Calculation for the quarter in terms of setting that up on our on our deferred tax liabilities and.
But it but also.
We could not adjust for that on a onetime basis, let an eight cents impact into our results for the quarter. So and then for the year. You know we will it will have a slight impact.
For us and thinking about the year, but but nonetheless, not not bounded within a think about them within a roughly a 1% kind of number.
For the year of animate if I can just have one more in the free cash flow is $1 billion year to date that obviously been a major focus of Willis towers Watson anyway hold on your guidance at the start.
Started coded like most other players in the space, but what was your free cash flow target for the year on so obviously you guys have hit that one quarter ahead of time on anything.
Thanks to the free cash flow conversion has couple of quarters or was it just being kind of on.
Lacking and Kathleen and all the things that you guys are focused on in terms of.
Payables and receivables really drive that conversion up.
Yes at least so thank you for pointing that out.
It's really the effort by our colleagues our colleagues have worked extremely hard.
On this overall as we have as a collective group as a leadership team in terms of driving and focused on us. So as you know it has been something a topic of conversation thats happened historically.
We continue to focus on.
How it is that we manage our relationships with our clients.
Doing the right things in the in the face of the pandemic, but equally been very focused on making sure that we have the right terms and we collect our cash appropriately and so is.
As well as pay appropriately and so all those things factored into our continued focus on it.
And that's we're proud that we.
Where we sit through the third quarter and will look to continue to deliver as we move forward in the fourth quarter.
Okay. Thanks, I appreciate all the color.
Okay.
Your next question comes from the line of Greg Peters with Raymond James.
Good morning, China, Mike.
My first question would be on just an update on the merger can you talk about the role of the UK regulator on your merger process.
Especially in the context of Brexit and do you still anticipate minimal disposals.
Yeah, So look Greg thanks, Thanks for the question.
Unfortunately, we cant comment made a comment on any specific approvals obtained or.
Still outstanding there are several global antitrust filings that are required in connection with the proposed transaction and the.
The specific process varies by jurisdiction, but I can tell you we are still planning to submit all of our antitrust filings in required jurisdictions and we're still expecting to have all clearances in the first half of 2021.
Got it thanks for the update.
The second question I saw it.
Looking just at the consolidated income statement I think it's on page 13 of the press release.
And it's clear that the operating other operating expenses are down I think that's just a reflection of your tight control over TV, but I was I was I was struck by the salary and benefits line, which as a percentage of the revenue.
And stuff I think it was like 64.5% last year.
And then this year, it's above 66%. So can you can you walk us through maybe.
And on a consolidated basis and maybe at the segment level why salary and benefits as a percentage of revenue is running higher in the third quarter. This year than it did the third quarter last year.
Sure Greg So thank you for the question and in terms of looking at SMB.
We obviously.
I have.
Bringing the right talent onboard is important for each of our businesses and in particular when you look at the growth that we've had in our BD a segment specifically we've brought on more talent.
In that particular business overall.
Obviously, we have.
Think about our overall.
Incentive compensation numbers in terms of that we accrue on a year over year basis in terms of thinking about it. So we you know it is just a function of the people and our drive associated with it we looked at it impacting resources.
Overall as a decision of last resort not that we wouldn't impact people, but that was the decision of last resort and so our colleagues have bonded together to drive cost benefits.
Out and we as a leadership team have been really managing managing that line. The best that we can yes, it's up slightly in my mind in comparison to the prior year, but we've been able to offset a heck of a lot of other costs through that.
We have a you don't just cut that off immediately with the level of talent that you're continuing to bring into the organization in terms of what that looks like.
Maybe I'll, just maybe I'll just add that I think Greg.
We've.
We're looking to try to get to and incentive compensation.
For this year that is.
Around the same as we were last year, although the actual way, we accrued that by quarter, sometimes varies a little bit and I think we did accrue more this quarter than we did the same quarter last year, we're still looking to get to around the same bonus pool I mean, ideally we'd like these and have it be a slightly better but we're looking to get to around the same bonus pools, we had last year.
We also have some headwinds from stock compensation as we get charges for that as the stock price goes up.
Got it.
Thanks for that color eight this stuff my final I know you through and a comment around transact and you are in the annual enrollment period for that business right now.
Can you give us an update you know from where you are set on how that business looks to grow in the fourth quarter of this year.
Well I mean, it's it's too early for us to say anything about what the the fourth quarter is going to be like this year I think you know thats really.
Just beginning but.
Overall.
As I think we've said on prior calls too we're very excited about this business I think we.
We were incredibly enthused, when we were able to acquire transact and folded into Willis towers Watson and were even more enthused about the business today. So we feel pretty good about the long range prospects here and we think it's a perfect fit with the rest of the organization.
Got it thanks for the answers.
Your next question comes from the line of Mark Mark on that.
Yes, good morning, Hey, congrats on the free cash flow that was really great to see.
Wondering if you are not giving us any guidance.
For the fourth quarter, but I'm wondering if you can just talk.
Across the different segments HCT.
CRB IR are mbd, a just in terms of what you were seeing as the quarter unfolded in terms of new business development efforts and how that may potentially end up impacting the fourth quarter and a little bit beyond that just because there's obviously a lag between when you engage.
Agents are signed and May actually turn into revenue and then also if you could tell us what the what the impact would be.
Max Multistem in terms of that being disposed.
Yeah, So I'll, let Mike go through and give us some thoughts about the about the new business, but let me just make one comment at the beginning as we were not giving any guidance because in today's with todays world. It's just so hard to know how things are going to impact.
Rates are going to impact from one quarter to another.
I will note, though that last year, the fourth quarter of.
2019 was an extraordinarily good quarter for us and so we're facing a tough tough comparable in the fourth quarter, but.
But as I had referenced in response to an earlier question, we're still looking to try to get to about the same results as we had last year.
But Mike do you want to go run through those.
John Thanks, and Mark I mean, you know.
Again under the well not the fourth quarter hasn't happened given guidance, but just give me some some signs in our HCV business genre.
John referenced in his prepared remarks to it our retirement business, we're very pleased with its performance.
In terms of its serving the marketplace and we continue to be very pleased with where its worst per.
Performing in the context of a very difficult economic environment, our talent rewards business is going to continue to be.
You got discretionary spending that's that's out there and so you know Frank.
Frankly, it's performed better than than we expected the truth given the word.
Had previously been and when we look back in the financial crisis.
On our talent rewards business and how well that group has done overall.
Each agent be you know and we've talked about it this quarter have a 1% growth.
We continue to believe HB will continuing to perform.
Well.
And so and that business is very focused on managing its cost appropriately and so thats kind of how we think about our.
That business failing on other when I commented as our test business.
As John said in his prepared remarks, we had a very.
Year over year basis, we had a very large project.
That transpired in the prior year, we didn't have it in the current year and that will continue to have some impact as it looks at the at the fourth quarter.
But again from an overall margin standpoint, the group's done a very good job of managing its costs overall on CRB CRB team. When we look at this revenue growth and we adjust for the question that a leased assets.
Just in terms of a prior year sales, we're pleased with where CRB sits on a year to date basis.
And when you look at us growth trajectory, we believe that it will.
Should perform at market levels, and we don't see any reason why it wont and the group again similar to the HCV comments been very focused on managing its margins properly and cost management and we don't see anything different from that leadership team in terms of what are those what they're doing.
When I look at our IR our business.
Obviously, weve best divested Max.
We will we will.
In terms of its.
We think it's a very good.
Time to divest of Max it's a very good business and we think it will continue to thrive under its new new ownership structure has been a great business for us and so we'll have obviously have that out in the fourth quarter, our reinsurance business as growth at 7% when we compare that to others. We believe that thats at if not market, leading at least but.
And comparable basis.
So the marketplace overall in our ICICI business in terms of the group continues to do very well they've got some tremendous.
Talent in that business and continue to improve on their technology sales overall, our investment business increased this quarter, 4% continued.
Continued expansion of the delegated investment services.
We're very pleased with their performance and what they've continued to do.
As they have performed extraordinarily well here when we compare it to either way I think others are doing in the market or we go back and we compare it to the downturns in the early two thousands.
Talent and rewards has performed extraordinarily well and just to give you a sense of.
The difficulty in looking at some of these things.
I could take our bulk lump sum activity. So we're continuing to expect sort of a healthy pipeline there, but with this low or near zero interest rate environment.
Some sponsors are going to step back from these initiatives because with the reduced funded status and their pension plans on the other hand. So other sponsors are going to look at the reduced funded status and say geez, we're going to be spending a longer time.
The PBGC premium because of this reduce funded status that actually increases the ROI for doing a BLS project, so which of those two things is going to be predominant we don't really know at the moment I mean, we are still as I said, we still continue to expect a healthy pipeline, but probably nominally lower than last year.
But that could pickup going into 2021.
Great and then just to make sure I heard most of the comments correctly. The general sense I got as Mike was going through everything was.
Third probably doesn't sound like there was a huge deterioration as your wet month some month to month.
It was the last quarter just in terms of sales activity it sounded like it was.
Generally more stable is that a correct interpretation.
Yes, I think Thats I think thats correct okay.
Okay, and then just maximal TTR just what's the revenue impact is going to be.
On a on a quarterly basis on an annualized basis in terms of taking them out.
Mike you have that done should.
Yep.
Just us just given humor.
Sure and then Walter.
Looking at that.
Just to go back to Gregs question, let's start do you sense that theres any more regulatory challenge or less regulatory challenge with regards to 80 on than what you previously anticipated or is it basically just in line.
So I would say I think that.
There's there's nothing that has been any kind of a big surprise in terms of.
What we've done with the regulators.
I think.
When when we.
With the combination together, we felt that there were some very good arguments as to.
Why this combination made sense and why there should be we should be able to go ahead without any restrictions.
But you know it doesn't matter, what we think what matters is what the regulators think and so we've been working with them and we've been submitting all the information as I said, we havent been.
Asked for anything which is any kind of a big surprise to us at all and we're as it's.
As we stand we've been we've been working very cooperatively and we're on our on our schedule.
Okay great.
And Mark back at you know think about maximum teams and roughly about $25 million in revenue per quarter.
Great. Thank you so much.
Your next question comes from the line of Mark Hughes with Chile.
Can the impact of climate change in the efforts Youre.
Making to deal with that what do you think it means for your business in terms of.
Both opportunity is more a lot more risks more volatility.
How do you think about that.
Well I think.
There's two things I would say that a lot of the work we've been doing in climate change has.
As evolved out of the capabilities that we have in the work we normally do for clients. So weve been working with them on.
Mismanagement and on.
Having insurance against.
Things like hurricanes or or other things that are a result that can be impacted by climate change. So we have that capability will be working with them a lot of the work that we're doing for example around the coalition for climate resilient investment is not really revenue generating work, but it is work that we think.
Important contribution that were.
Uniquely positioned to provide to the market.
In the long run, though climate change is going to impact almost every part of our business, it's going to be impacting.
The severity of some of these.
Long tail or extreme events that are occurring and so we're going to have to be helping too.
Model that we're happy how helping to work with clients on risk mitigation, we are going to have to be working with them to build and resilience I mentioned about how we're working with some of the largest financial institution in the world to evaluate their loan portfolio for its exposure to the climate.
We're going to be working with in our investment consulting operations understanding.
How pension plans and other investors want to take climate into account in their investments and this is something that actually we've had about a 15 year track record as a set of having been working on that and in our talent and rewards business, we're going to be working too.
Hell put these kind of metrics into executive compensation plans. So we see this as impacting the whole broad range of businesses we have.
Appreciate that thank you.
Okay.
And your final question comes from the line of Schon written about with KBW.
This might be a little similar to past question, but.
Thinking about HCP and you mentioned, you know clients, having to rethink talent rewards and such is that project flow, you're starting to see already or is that kind of projected demand that we will really start to contribute to growth in 2021, as the economic environment Steve.
Realizes and such.
I think this is closer to say.
When I went through on the.
Bulk lump sum activity I'd sit here some reasons why it could increase in here some reasons why it might be tamped down somewhat I think with TNR. Those are some reasons why we think it might increase but it's not like we've really seen a lot of that yet.
Okay. Thank you and then thinking about the.
Like reinsurance and insurance rate environment, and such in conversations with clients.
What are the discussions about the rate environment are you preparing them for you know.
Significant mult, maybe like multiple renewals of.
Hi rate increases I know one industry CEO mentioned the industry still hasn't seen a real response from reinsurers. So that could further kind of provide more momentum in longer duration of this hardening market.
Yes, I mean, I think look we one of the things we do with our clients is too.
Discuss the environment, the pricing environment and what's out there of course, we'd.
We'd like to think we'll be able to do a better job for them than others. So they probably have a little bit less of a rate increase.
Okay. Thank you.
And there are no further questions I would now like to turn the call back over to Mr., John Haley Willis tower.
Tallow licensees Executive Officer. Please go ahead.
Okay. Thanks, very much everyone for.
Joining us on this call and we look forward to updating you in February on the full year's results.
Have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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