Q3 2021 Willis Towers Watson PLC Earnings Call
Good morning, and welcome to the Willis Towers Watson third quarter 2021 earnings Conference call.
So first it will solve or Watson dot com.
For the press release and supplemental information Netlist issued earlier today.
This call is being recorded and will be available for the next three months on Willis powers Watson's website.
So I'll listen to comments and today's call may constitute forward looking statements within the meaning off the private Securities Reform Act of 1995.
These forward looking statements are subject to risks and uncertainties.
Actual research may differ materially from those discussed today and the company undertakes they'll obligation just need these statements unless required by law.
For a more detailed discussion of these and other risk factors investors should review the forward looking statements sections off the urn Express.
Release, you should this morning, as well as other disclosures and the most recent Form 10-K N. Other Willis towers Watson Watson F E T filings during the call.
Certain non J a P financial method measures may be discussed for reconciliation off then on J a P masters as well as the other information regarding these measures.
<unk> referred to the most recent earning beliefs and other materials and the Investor Relations section of the company's website.
I'll now turn the call over to John Haley Willis tower.
<unk> Chief Executive Officer. Please go ahead.
Thanks, very much good morning, everyone and thank you for joining us for our third quarter 2021 earnings call.
Joining me today or Andrew Crasner at Chief Financial Officer, and Karl Hess, Our President and our future Chief Executive Officer.
Today's call will be my last earnings call at C. E O of this great company.
Willis towers Watson looks remarkably different than it did 22 years ago. When I first started as CEO Watson Wyatt and even more so than when I started it why it caught me 44 years ago.
It's been an amazing journey and it underscores the resilience of this extraordinary organization.
The combination of our exceptional people and strong value has enabled this company to reinvent itself and to continually evolve.
Our history has been defined by constant innovation, new change together, we forged the legacy of quality service I'm solutions with strong client relationships.
Built a willis towers Watson culture of resilience inclusion and quiet focus.
I'm proud of what we have cheap and I feel fortunate to have had the opportunity to take the company. This far with all of you.
At the end of this year I'll officially pass the baton to Carl Hess.
Now is the time of reinvigoration for Willis towers Watson Carl's, a great leader focused on driving results and accountability by engaging colleagues. He has a wealth of knowledge and experience and he has the skills. The best lead the company. During this transform at a time.
I have every confidence that Carl will be successfully creating a new way forward and leading Willis towers Watson and our top talent to an even brighter future.
As we bring our new leadership team into place. We're also building one Willis towers Watson.
One W. T. W is about working across businesses geographies and functions to achieve more and to be better.
We're starting from a position of strength and recognize our potential we're executing on her plan or focused on a bold new vision to be the best company in the business.
We plan to drive change through new priorities to grow simplify and transform.
Will grow by investing in talent, capturing market share by innovating like expedited capabilities and evolving markets and by Britney curated solutions declines.
Will simplify by delivery more efficiently through technology and through standardization. For example, we've already be gone by developing a plan to streamline to two business segment and three geography at the beginning of 2022 and appointing a new global leadership team.
Will transform colleague client experienced is by streamlining our infrastructure by fortifying your operations and by evaluating a real estate needs. While there's no doubt work ahead of US we have confidence in our plan one W. T W and most importantly, and her colleagues.
As we continue to look ahead, I'm, especially excited about the industry Lady work, we've done and will continue to do in addressing climate.
We've recently launched climate transition pathways and accreditation framework that provides insurance companies and financial institutions with a consistent approach to identify which organizations have robust transition plans transition plans that are lying to the Paris agreement.
And it supports the role as stewards and transition to a low carbon economy.
We also carpets partnered with country go to lunch and innovative family a claim that transition indices driven by a next generation methodology that directly quantifies the impact of the Paris line climbed the transition on equity value we get valuations.
We intend to continue this nomad next week will probably participate in the 26th United Nations Climate change conference of the parties or Cop 26.
<unk> 26 will bring together world leaders government representatives businesses and citizens to collaborate on how to tackle the many facets of climate change and plan for action.
Now, let's move to our third quarter results. Please note that all metrics referenced on continuing operations basis, except where specifically stated otherwise.
Reported revenue for the third quarter was $2 billion, a 4% as compared to the prior third quarter up three per cent on a constant currency basis and up 7% on an organic basis.
<unk> Com, which includes discontinued operations was 919.
672% for the third quarter as compared to 119 million of net income in the prior quarter. It should be noted that gap profitability measures include the $1 billion in proceeds received in connection with the termination of the proposed company business combination with a.
<unk>.
Adjusted EBITDA was $427 million, 21% of revenue for the third quarter as compared to 372 million or 19.6% of revenue for the same period last year.
Representing a 15% increase on an adjusted EBITDA dollar basis, and 200 basis points of margin improvement.
For the quarter diluted earnings per share, which include discontinued operations, where $6.99 an increase of 140% as compared to the prior year adjusted diluted earnings per share were $1.73 for the third quarter, reflecting an increase of 32% compared to $1.30.
The one in the prior year overall it was a strong quarter. We grew revenue we enhanced margin and we increased started as for sure now let's look at each of the segments in some more detail too.
To provide clear comparability with prior periods all commentary regarding 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 the tangibles certain transaction and integration expenses resolving some mergers and acquisitions as well as other items, which we consider nine core to our operating results. The segment resolves to include.
Discretionary compensation.
The human capital and benefit so R. H a segment revenue was up 6% on an organic basis and 5% on a constant currency basis compared to the third quarter of the prior year. This result represented sequential revenue improvement compared to a prior quarter, which was driven by continue.
<unk> increased demand for advisory service.
Calling and rewards revenue increased 22% driven by strong market demand for broad based rewards advisory work, coupled with talent and compensation products inclusive of compensation survey is hiring assessments, an employee listening and engagement offerings.
Our health and benefits revenue increased 5% for the quarter. We continue to grow revenue from advisory work in North America, driven by U S. Legislative changes in strategic benefit reviews revenue also grew outside of North America as a result of global benefit management and local brokerage appointments.
Retirement revenue was flat compared to the prior year with funding and Gary Payton minimum pension equalization work in Great Britain, all set by declines in North America as less favourable market conditions for Derisking work drove lower demand for bulk lumps in work.
Check out would you have administration's solutions revenue grew 9% primarily due to increased project work, a new business activity in Great Britain.
H C V is operating margin increased by 210 basis points compared to the prior your third quarter. As a result of continued sustainable expense reduction efforts were pleased with H E B sequential improvement and with their margin growth historically, H b as head industry, leading margins and we believe.
That trend will continue H C boots talent base remains stable and overall market Tailwinds should continue to drive organic growth momentum for H C. Big both our near term and long term outlook on H B remain constant.
Now, let's look at corporate Brooks B R. C. R B, which had a revenue increase of 6% on organic in constant currency basis as compared to the prior your third quarter.
North America is revenue was up by 12% in the third quarter, driven by new business, particularly in M&A FINEX construction in aerospace lines.
International in Great Britain revenues increased 4% and 2% respectively for the third quarter. The revenue increases work, primarily driven by clothes in the retail end FINEX insurance lines.
Revenue for Western Europe was up normally do the growth in Poland in Sweden, being largely all set by the departure of see your step, which pressured business in certain Geography's C. R. Beers revenue was not $697 million for the quarter with an operating margin of 16.3%.
Compared to 647 million of revenue with an operating margin of 12.5% in the prior year third quarter.
The 380 basis point margin improvement, mainly reflects the continuation of effective cost containment and to a lesser degree the benefit of games from book of business sales and settlements from time to time colleague to manage client relationships leave the company when we lose colleagues such as those it may result in them.
Joining competitors the impact of this on revenue may be delayed this dynamic which was most pronounced in a corporate briskin broking segment in the second and third quarters of 2021 is cost C. R. B's organic growth to chair to trail industry expect averages so far in 2021, and we expect to get.
Up to narrow by the end of the first half of 2022 during the third quarter, we focused on stemming attrition in hiring cow on a net basis core C. R. B head count is down about 100 colleagues or just under 1% as compared to the third quarter of last year, we have executed on our incentive.
Plan, which provide both short term and long term retention benefits and we believe attrition rates have already foresee all day. So while we may have some transitory headwinds ahead of us we expect that the worst of the business disruptions in Congress and a longer term at lunch for CRB remains plaza.
Now I'm, turning to investment risk and redrawn to Iowa revenue for the third quarter was 172 million an increase of 10% on again and faces and a decrease of 24% on a constant currency basis as compared to the prior year quarter IRR revenue excludes the reinsurance.
Nine a business, which has been reported is discontinued operations. It also excludes revenue from Massachusetts, which was sold in September of 2020, and Miller I O R. Wholesale broking subsidiary, which was sold in March of 2021.
Insurance consulting and technology business with revenue growth of 18% led the segments grows with increased demand for advisory work alongside technology sales. The investment business grew by 6% from performance days, new business and growth of delegated assets under management.
IRR had an operating margin of 12.9% up 360 basis points as compared to 9.3% for the player. Your third quarter. The strong margin expansion was the result of careful cost containment efforts, coupled with solid top line growth.
Revenue for the Bennett, that's delivery and administration or B D. H said increased by seven per cent on an organic basis in constant currency basis from the prior year third quarter.
The growth in revenue was largely driven by individual marketplace, primarily by transact, which contributed $111 million bva's top blindness quarter with growth in Medicare advantage in life products. The benefits outsourcing business also contribute it to the increase in revenue, which was largely <unk>.
Driven by its expanded quite it's expanded client base.
The BDA segment had revenue of 242 million with a minus 7.9% operating margin as compared to revenue of 226 million and an operating margin of minus 5.3% in the prior your third quarter.
The margin decline was largely due to an increase in sales capacity ahead of the 2022 annually <unk> Roman period, which will usher in expansion opportunities for both of us individual marketplace and benefits outsourcing wants a business. We continue to feel positive about the moment of the C D a business going into the fourth.
Quarter, which is R seasonally spelled this quarter.
So in conclusion overall I'm very pleased with our results. This quarter, we delivered strong overall financial performance with topline gross margin expansion at E. P. S growth all while undergoing a massive shift in a go forward strategy.
In closing I'd like to express my deepest gratitude to our colleagues our clients and our shareholders for their trusting Willis towers Watson and for the opportunity to be C. E. O of this extraordinary organization I believe the companies well positioned to meet the opportunities and challenges that lie ahead, and it's been a privilege to serve you.
Now I'll turn the call over to Andrew.
Thanks, John we all wish you the best in your retirement at the end of the year. Good morning, everyone. Thanks to all of you for joining US first I'd like to extend my appreciation to all of our colleagues. We have asked a lot of our teams and our colleagues continue to pull together and deliver.
I'm proud of all the work they've done to continue supporting our clients each other and the communities in which we work and live.
John noted we continue to make progress in the third quarter highlighted by another quarter of strong organic revenue growth continued operational improvement and effective capital management. We are reassured by the continued improve demand for our discretionary services and solutions and by our ability to generate profitable growth.
Moreover, we feel we are well positioned to execute on the long term goals, we announced during the Investor day meeting that'd be hosted last month.
We are excited about the early progress we are making with our transformation efforts the investments, we're making to transform our operations will create better scalability more flexibility and enhanced colleague and client experience.
Through streamlining global platforms, right shoring operations rationalizing real estate and modernizing I T. We expect to deliver $300 million and expected cost reductions and contribute 300 basis points of margin improvement toward our fiscal year 2024, adjusted operating margin target of 24 to 25.
Percent now.
Now I'll turn to the overall detailed financial results. As a reminder, you can see the detailed quarterly continuing operations results for 2020, and 2021 year to date on page nine of the supplemental materials.
And coming from continuing operations for the third quarter, which included the 1 billion dollar termination fee was 1.1 billion or 57.3% of revenue up from the prior year third quarter income from operations of 66 million four 3.5% of revenue.
Adjusted operating income for the third quarter was 264 million or 13.4% of revenue of 120 basis points from $231 million for 12.2% of revenue in the prior to your third quarter.
For the third quarters of 2021, and 2020 or diluted EPS from continuing operations for $7.08 and 91 cents, respectively and that 2021 figure includes the 1 billion dollar termination fee.
For the third quarter of 2021 hour adjusted EPS was up 32% to $1.73 for sure as compared to $1.31 cents per share in the prior year third quarter.
Further discontinued operations represented a nine cent loss on a diluted EPS basis for the third quarter of 2021, and two cents a day they'd EPS basis for the third quarter of 2020 total diluted EPS, including both continued and discontinued operations increased to $6.99 for the third quarter.
Of 2021 compared to the prior year third quarter of 93 cents.
Foreign currency rate changes caused an increase in a consolidated revenue of 27 million or 1% of revenue for the quarter compared to the prior year third quarter with negative one cent headwind to adjusted diluted earnings per share this quarter.
R U S gap tax rate for the third quarter was 22.5% versus $26, 6% in the prior year are adjusted tax rate for the third quarter was 23.3% down from 29.3% in the prior year, which was elevated due to the unfavorable impact of nonrecurring disc.
<unk> items.
Turning to the balance sheet, we ended the third quarter with a strong capital and liquidity position with cash question quick cash and cash equivalents of $2.2 billion in full capacity on our Undrawn, one and a half billion revolving credit facility.
We also successfully reduced our leverage profile by repaying $450 million of bonds outstanding during the quarter.
Whereas towers Watson remains well positioned from a liquidity perspective, we aim to continue to maintain a strong and durable balance sheet and believe we have significant financial flexibility.
Free cash flow, which includes discontinued operations.
1.7 billion in the first nine months of 2021 compared to 1 billion in the same period of the prior year the increase in year over year free cash flow was due to the receipt of the termination fee net of increased transaction and integration fees of $942 million.
This was partially offset by net legal settlement payments of approximately $185 million for the previously announced Stanford and Willis tower was watching merger settlements and higher incentive compensation of approximately $189 million absolute these items free cash flow would've been 1.2 billion are up 17.3% versus.
Prior year.
In terms of capital allocation, we paid $275 million in dividends for the nine months ended September 30, and repurchased 4.5 million shares for $1 billion at a recent investor day, we communicated that we expect to generate tend to $11 billion of cash through 2024, we remain committed to deploy net capital.
<unk> and to share repurchases to capitalize on short term price weakness at current price levels will terrorist Watson stock continues to be our highest returning opportunity and we have significant resources to capitalize upon that.
As part of our Investor Day discussion, we communicated approximately $4 billion of near term share repurchase activity with the first 1 billion completed we will commence repurchases where the remaining component of that in 2021 and expect to conclude that during 2022.
Looking ahead to the fourth quarter and full year, we recognize that the company's recent strategic shifts alongside unique macroeconomic factors have created complexity and setting expectations for our performance for the year. This.
This year, our core performance metrics have been clouded by discontinued operations reporting a one time $1 billion termination fee divestitures and they still evolving economic recovery. So we would like to clarify and say that for the full year 2021, we expect to reduce around 6% organic revenue growth and then adjusted operating.
Margin of 19, and a half 20% on a continuing operations basis.
We expect this to be the new baseline to begin the path to our fiscal year and 2024 goal of 24% to 25% adjusted operating margin.
Please note that the 2021 margin guide includes the negative impact of stranded costs from the sale of Willow Street, which we intend to right size during the period in which we received cost relief under a transition services agreement.
Going forward, we prefer to keep the focus on long term value drivers of the business and will not continue providing quarterly or annual guidance.
We were very pleased with the third quarter results and they are a direct reflection of our resilience and our focus on strategic priorities. We have strong momentum solid financial results are robust balance sheet and an excellent team, which gives me confidence in our ability to continue driving value for all our stakeholders as I think about our future.
I'm excited to continue to work with Carl and the rest of the leadership team to drive the company forward and explore the opportunities ahead I have confidence in our leadership team will towers Watson as talented colleagues and in our strong culture and now I will turn the call back to John.
Thanks, very much Andrew and as I mentioned at the beginning of the call we have Carl Hess on the line with US all so we anticipate that most of your questions are going to be about what our results need for the future and so while I may chime in some time.
The time call and Andrew are going to be answering with asphalt questions. So let's turn to your questions.
Thank you at this time I figure Minder, if you wish to ask a question. Please press Star followed me the number one on your telephone keypad again that star one to ask a question.
First question from and the screens then they'd lost Fargo. Your line is open.
Hi, Thanks. Good morning. My first question on you know on the organic Guy and also the view for C. R. B T like put out at 2021 died and 6% organic which one in five 6% in the fourth quarter, given a year to date with that.
Thank you plant make sure that that thinking is correct and then the second question within C. R. B Q and impact on some departure it down having peaked I can get.
Well there could be compressed.
Two different Catholic next year.
We think that P. R b.
Stagnate remain kind of within that 6% organic on for you know the next to me corner.
Yeah sure. Thanks at least this is this is Andrew so I'll take the first part of your question around organic growth for the rest of the year.
Thank you are thinking about that properly in terms of where we would expect.
Q4 to align relative to our.
Stated guidance of 6% for the full year.
Okay and this is Carl as in good morning, with respect to sort of the outlook for CRB on the revenue side.
We have seen a mitigation of the the purchase we talked about it analysts day and we're getting back on the front foot with respect to hiring there have been some encouraging trends in the business as we look toward the new hires thus terminations, where we've actually Q3 now seen.
Hiring exceeding terminations Ruby organization as.
As we know that you know hiring proceeds revenue when it comes to people, but that'll help us going into 22 and forward.
We.
We look new business results for CRB have remained strong and are up on last here. Thanks to a strong planted sales management discipline.
And I think a validation of our global light a business model.
While we have seen some revenue gains that are through.
Book sales.
The impact of the business those are a continuation of last year, it's shiny new phenomenon and in general it leads us to thinking that are CRB is going to continue to grow but probably be at the lower end of the industry averages through the first half of 2022.
And then John It said that you guys are down 100 colleagues within CRB Uhm.
Cute name races last can you tell me, what what pink I guess, we're going to look at the peak over the past couple of <unk>, what what what would that number has been when it was kind of the birth of that package. So we can get a sense of like behind that that you guys have done.
So I'll be D.
I think that's.
Hi, hard to pin down, but what we've seen is Q3 departures are lower than Q2 departures. So I think we think we're past the peak on that.
And.
The other side of that great hiring hiring was very low during the period of.
The business combination while I was out there that has resumed with a vengeance not just hire we've already made but the hair. When we continue to plan to do so are open Rex R well open.
Well increase from where they were a year ago at this time.
And one last one it was good margin improvement in the corner and guide for four here as well is that higher margin.
Inflated by that level of departure in Alatha hiring seating is that I can plan on connectors Martin or do you think one that revenue will get.
Back on track with the industry that that will kind of.
That you know any expensive have some hiring.
Yeah, I mean, I think what we're willing to say about the margin is that we're very happy with the margin improvement that we've seen through the first three quarters, we remain positive about our margin outlook we.
We do expect to deliver margin improvement in queue for.
But we do expect sort of as business activity continues to ramp up.
That there will be some slowing of the rate of margin improvement.
Okay. Thanks for the color.
Okay. Thank you. Thank you.
Next question, we have Mark Martin Your line is open.
Alright, good morning, and thanks for taking my questions first.
Congratulations on the stellar career, it's been a pleasure working with you over the decades.
Wondering if you can talk a little bit about the just kind of the pace of the the margin expansion as you progress from this year.
To your to your longer term 24 targets, how should investors. This kind of think about that sort of pacing.
You know how much of it is going to be back in loaded just in terms of framing appropriate expectations as we as we start focusing on next year and the following year.
Yeah, I saw Margaret Carl and good morning, I think two parts that right. There is there is the emerging improving we get.
Expect to get through operating leverage in the business, which I think we would say should be relatively constant through the period, maybe some short term headwinds looking into the first half of 22 as as we've already identified but no reason that shouldn't be relatively steady phenomenon throughout that period and then there's the effect of the transformation for.
Logan that we started to lay out at analyst day and.
We do think like many transformation programs right the costs tend to be front loaded and the rewards a bit backloaded.
Got it and so it would be reasonable to assume that you know.
First half of next year probably.
<unk> are going to be a little bit on the topic side.
And as we go out and for the full year, probably not a lot of improvement and then the bulk of the improvement really more on the 23 24.
Back half of twenty-three and going into 24 is that fair.
I think what.
What we say about margins in the future is that we'd refer to the investor day materials in that in that we're targeting the 24% to 25% by the end of fiscal 24.
Okay, Great and then with regards to CRB just in terms of the.
Parcher that have already occurred.
How would you characterize the the.
The revenue impacted.
Is going to occur in the future with regards to that group.
I think I think I pointed out that sort of book sales right, which impact on both sides I think.
Obviously revenue multiples on book sales theory, but with it a pretty well known range right I mean book sales make up less than 1% of the revenue.
We're talking about so you can you can take your multiples on that but I don't think the answer at a macro level is it significant for the enterprise.
Great and then which part of the business are you. The most excited about within H C. B at this point in terms of future growth.
So for the current HC B right, we identified Investor Dale that we think are health and benefits business is one where we see significant opportunity both from a scope perspective and a scale perspective in terms of what we could opening enterprise that being said, we think all our HEB businesses are.
You will contributors to the portfolio, we've got a market leading retirement business are talented and reward business has had a phenomenal rebound last year and there's great demand for its services and we think has a lot of prominence in what we do and helps us with all our buyer hubs with respect to human capital benefits.
And we've got a very very strong technology administration services business continues to gain market share.
So there's a lot to like across that entire portfolio.
Perfect. Thank you.
Thank you next question, we have Mike <unk>.
Okay, great. Good morning, Uhm follow up on the.
Margin guidance and thanks for for all the good color.
Specifically.
If I understand correctly, you're saying that the.
The near term margin guidance includes a negative impact from the stranded costs. So.
We can be able to kind of quantify those stranded costs and kind of.
And know how to back them out or I'm, assuming they're contemplated in the long term.
Margin kind of guidance that you guys have laid out just just want to understand how material that isn't it if it's something that we should be thinking about as we think through our numbers.
Sure. That's that's not something we are going to quantify right now, but it as you alluded to is absolutely contemplated in the longer term guidance of 24% to 25%.
Okay got it uhm and maybe sticking with with some of the.
$750 million of cost I guess.
Well I know that in the distant past.
There is.
Rating agencies have looked at and not kind of excluded some of those charges I'm curious if if if those if those charges will will will be included in any kind of rating agency governors on how they calculate leverage when we think about buybacks potential and then also it's related to that cost pre.
Graham.
It looks like a lot of the you'll.
You'll be shedding a lot of your lease says if you look at the 10-K, so I wanted to be clear. It seems like we lost his direction moving towards more of a.
Remote work flexibility environment versus peers, and just wanted that to see if any if that's the right way to think about thanks. Thanks.
Yeah on the on the first part of your question. We don't expect there to have any impact from the restructuring efforts on our ability to repurchase shares.
<unk> specific rating agency calculations that may be a question for them about.
About how they're going to treat that but again, we don't expect that to be a headwind for any of our share repurchase activities or capital allocation plans.
Oh I'll ask call to chime in on the real estate point I think we had 45000 colleagues have adapted marvellously to the new ways of working that.
We we were afforded voluntarily or not as a result of COVID-19.
We have come through not just ably, but in a stellar fashion with respect to Hollywood people to team up with each other and serve our clients and the lessons we've learned with respect to how we can employ technology to continue to collaborate and have excellent client service.
We're taking those lessons and we will be implementing those.
Real estate portfolio as you correctly identified we're going to turn our real estate footprint into collaboration space rather than come to the office space.
Thank you.
Thank you.
So we have mark us the truth.
Yeah. Thank you good morning, and congratulations John.
In the H C V space the great resignation here.
Do you think this momentum could last you talked about a sharp sharp recovery turnaround uhm do clients expect these tight labor market conditions to persist.
Are you playing.
Could you clarify I'm not sure if you're talking about our workforce of our clients workforce and the demand for our survey.
Talking about your client workforce and their demand for your services. What are you hearing from your clients about how long they think they know.
Persist and then obviously that the impact your revenue opportunities. So just.
Some perspective on the durability of the upswing.
Yeah. So I mean, there's no question that our demand for talent and rewards has been driven by strong demand.
For work that.
Includes tightening labor markets.
That affects our compensation survey business hiring assessments.
<unk> engagement work all all these have seen strong demand because of that we anticipate that continue given labor markets continued to be quite tight and we are making sure that we're adequately resource to be able to meet that demand across the organization.
<unk>.
We don't think that there's.
There is a combination of both short term and near term economic effects that are going to affect us.
You tell us when vaccination rates.
Globally or to a point where supply chains around disrupted and we'll give you some insight into what that means for some of the global talent markets, but certainly we think this is a good tailwind for our business and we're doing our best to maximize the value of can break across the portfolio to us.
Fair enough and then the CRB what was the North American organic what were the regional numbers you gave I think North American International in Great Britain.
We're getting that just a second.
Yeah.
Yeah. So.
North America revenue was up 12%.
International for.
Great Britain too.
Western Europe, basically flat up nominally.
Great and then one final question I think you talked last quarter about the equalization work the pension equalization work in Great Britain.
That there was the visibility for that to be strong.
In the next year, perhaps is that still the case.
Yes, we do.
Think that will be seeing higher levels of work related to equalization and expect additional work from schemes that are better funded and of course the markets have been kind to pension schemes globally. This year.
<unk> remained to be true as we said it after analysts date.
Thank you very much.
Thank you.
Thank you next we have fallen you soon that 5% less.
We're going to.
A little bit of a follow up on them.
Conclusion question Uhm are you seeing in your business globally with some of these concerns that.
It's just getting more costly to hire people are key people broadly and I guess.
Just do that.
Is that something to you.
We need to manage too.
C and the new place.
So we are we are on the Burger for new talent across the organization. So we are definitely noticing that there are areas of our business that are definite hot markets for talent man I think you've probably.
Heard that from a number of people that are industry over the last week or so.
We are a global business, we are able to source tailwind globally and that does assist us and that we can trough may wide range of talent pools as we manage the organization. It gives us great resource across the organization be able to see to staff engagements to make sure we're meeting client demand.
We do factor this into our planning as a business and.
The management team has been through a few market cycles with respect to talent and I think it was very well prepared to deal with it.
Is there any reason why the.
Issues and staffing has been focused on the CRE business versus.
The crucial jewishness versus other lines of business is there anything sort of.
You think it's sort of unique different about your businesses at me as.
Get them, a little bit more I sleep in the commercial businesses.
I think there are a number of our businesses that are extremely team oriented in the way. They are constructed and served as an extreme example, I'll give you our technology administrative services business right.
Each of our relationships with our clients are longterm contracts typically five to seven years and.
And very much not dependent on any individual team member.
Being with the firm right they're extremely institutional.
At the other end of the scale you might have mid market CRB.
Where it's very relationship central business and.
Be a single face to the client.
So just fundamentally different sort of dynamics in terms of.
The economics the relationship like.
Thanks for the call congratulations to Jon.
Thank you. Thank you.
Thank you.
We have Greg Peters and Raymond James.
I'm, calling in on behalf of Greg Peters Good morning.
Mentioned CRB growth may be lower than street.
Over the next couple of quarters.
As you hire is it.
Right to expect that growth mix alright, as you go towards.
2024 towards your 10 billion dollar target.
Yes.
Okay and then.
While I understand the nature of.
Reinsurance the reinsurance Memphis, and how it's more of a standalone business.
It is a.
Margin accretive can you clarify the benefits of divesting the reinsurance business in the ongoing progress there.
So uhm the reinsurance business has been historically more profitable than the average.
As you point out is a bit of a standalone did Scott.
Buyer hub than most of the rest of the company.
We talked earlier by sort of cost pressures.
One of the major in fact be major cost in our reinsurance business is the people and this is area where compensation costs have been increasing much faster than the rest of the industry.
It's very possible look to a future where those margins are.
Significantly eroded due to higher compensation costs, and that's a problem that will no longer be hours.
In a edition.
At this point in time right one of every six or $7 in the reinsurance markets is provided by the capital markets not traditional reinsurance our margins and everybody else's margins for providing services through the capital markets are much slower than they are through traditional reinsurance brokerage and so that's an additional headwind for that business that.
We won't have to face.
With respect to the divestiture that is progressing as so we thought it would be.
The.
Timing that we've talked about is unchanged in that we deal is subject to Reg required regulatory approvals and clearances as well as other customary closing conditions and we expect it to be clean no later than the end of the first quarter of 2022.
Okay I appreciate that and maybe just a point of clarification in the press release, you mentioned gained connected to settlements in CRB can you clarify if that was.
Part of organic growth or just a part of.
Segment income.
Yes that is in the revenue figures for the segment.
Okay. Thank you very much for the questions.
Thank you. Thank you.
Next we have Ryan tennis that tournament.
This research.
Hey, Thanks, Good morning question for Carl.
I appreciate that it sounds like you need a hiring trends are headed in the right direction.
I'm more interested in kind of understanding how 'bout headwind is working its way into organic what would you say that this quarter's organic growth print kind of reflects the full.
Fully loaded impact suddenly attrition issues you you've had earlier this year or do you think you've done headwind do you expect that headwind to grow a bit more as we get them in the first half of 2022.
Yeah, I think is.
As John had alluded to in his prepared remarks.
In terms of that dynamic we expect to be towards the lower end of industry average growth rates through the first half of next year and do expect that.
Gap to narrow.
As we progress throughout the year.
Got it and then on BDA I'm far from an expert in these things missing shock I barely know how to model. It. So I was hoping you could maybe help me in terms of how to think about fourth quarter organic.
The complex or difficult plus 16.
A year before it was plus three.
Trying to get a feel for.
What are the type of range of outcomes that we can expect given that difficult comparison a year ago.
So a couple of things maybe as color right.
One is we have bigger.
Begun staffing a bit earlier this year in our transact business to make sure. We're we're fully staffed for the ramp up for the 22 annual enrollment period to capitalize on market demand. We also acquired army direct which is a a full service direct response media agency focusing on the Hispanic market.
In July of last year, and that's driven higher growth revenue revenue growth opportunities.
And transact, although it somewhat lower margin Q4 is the seasonally highest quarter for our revenue, they're fried revenues close to 50% for the year and our revenue growth tied to the lead acquisition.
Operating income dollars will grow commensurate to the revenue dollars growth, but overall operating margin should remain about constant.
If you sort of look back right.
Our year to date growth is was materially impacted by our strong Medicare advantage open enrollment period of the first quarter that was highly correlated to the 2021, a year ago right Fourthquarter 20 annual enrollment period.
We had significantly higher Medicare advantage revenue growth in the in the annual enrollment period last year, plus 57% and that led to strong revenue growth in the open enrollment period in the fourth quarter plus 65%. We anticipate continued strong double digit growth in queue for but note that we have a strong.
Comparable from last year with a higher baser revenues were building off.
The annual enrollment period in queue for this year is not correlated to the first quarter open enrollment period.
Thank you next we have mayor shields television W.
Thanks longer term question I guess for Adam.
Does that make a lot of focus on CRB margins.
And I think most of it has been focused on expensive and I was wondering is there a revenue component.
That also contribute to maybe the margin differential between.
Willis and other leading brokers.
Sorry, it's Andrea can you can you clarify what you mean by revenue component.
Yeah.
Put it as bluntly as possible is there any element of willis's insurance brokers charging less than some other competitors.
No.
Okay. That's certainly helpful and then second small.
And hopefully quite a bit.
[laughter].
I'm sorry.
I said and hopefully quite clear sorry.
It's been pretty unequivocal here.
They made a ballpark UV impact of the.
The settlements within CRB and the impact on the margins.
Yeah sure.
So the.
Impact on margins is.
CRB produced about a 380 basis points of margin improvement during the quarter.
The book sales, which were alluded to earlier contributed about 170 basis points. So without back component. There was still would have been a 210 basis point of margin improvement in that second.
Okay perfect. Thank you so much.
Thank you. Thank you.
Next we had snow.
Needs to fill.
Hi, Thank you for taking my question. So most of my question been answered I just want to ask one question just in terms of transact growth and how should we expect that to continue.
The next you know going into 2022, you talked a little bit about some of your expectations in the fourth quarter. She has been a very strong business, but it's getting to become a bigger business.
I'm just wondering how well we should think about that in the context of of the runway ahead of you.
I think we had some comments that an enduring analysts say that we still think remained very germane first of all as I said, a couple of minutes ago right.
The very short term there tends to be a strong correlation between the first quarter activity to the prior fourth quarter that is you open enrollment period will definitely influenced the annual enrollment period looking forward. We see this as a tremendous large addressable market and we think we have a great positioning unit.
We are to a certain extent can control our destiny in terms of how people you want this to be a.
And is Jean Wix said <unk> analyst day, it is about making sure that.
We sort of make sure the picture we have for growth makes financial sense for the enterprise and we work with gene to make sure that we maximize the potential of that.
Think so.
Thank you great you could join us and with that before I pass it back to John to wrap up at.
At least I think Andrew not here would like to say thank you John.
84 calls and these.
These are very big shoes years, we're going to try and fill going forward.
<unk>.
Tremendous things for this organization and we are all very grateful for what you have done to lead US all this time.
Well, thanks, very much I appreciate that and thanks to all.
All the analysts for joining us on this call up.
I would like to say, it's been a pleasure to work with you over the years from day, one I've been impressed with the quality of our.
Analysts and the work they've done uhm I haven't always necessarily agree with your conclusions but.
I have always admired the intelligence and dedication that you bring.
Bring to your craft. So thanks, very much and good luck going forward and then Carl and Andrew will be updating you on our next call. So long.
Thank you. This concludes today's conference call. Thank you all for participating you may now disconnect.
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