Q1 2022 Willis Towers Watson PLC Earnings Call
Good morning, welcome to the W. Tw first quarter 2022 earnings conference call.
Please refer to WCW Seo dot com for the press release and supplemental information that was issued earlier today today's call is being recorded and will be available for the next three months on W. T W's website.
Some of the comments in today's call may constitute forward looking statements within the meaning of the private Securities Reform Act of 1095. 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.
A more detailed discussion of these and other risk factors.
<unk> should review the forward looking statements section of the earnings press release issued this morning as well as other disclosures in our most recent Form 10-K and in other Willis towers Watson SEC filings.
During the call certain non-GAAP financial measures may be discussed for reconciliations of the non-GAAP measures as well as other information regarding the 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 turn the call over.
To Carl Hess Wcw's, Chief Executive Officer. Please go ahead.
Good morning, everyone. Thank you for joining guys for WWE <unk> first quarter 2022 earnings call joining.
Joining me today is Andrew Krasner, our Chief Financial Officer.
The first quarter marked a solid start to our year with results that were in line with our expectations and reflect improved momentum in our business we.
We generated organic revenue growth of 2%.
Standard adjusted operating margins by 200 basis points, driven by new business generation and continued expense discipline.
We also continue to focus on executing our capital allocation strategy and have now completed $4 1 billion in share repurchases since our 2021 Investor day.
Overall, we've had a solid start to the year and remain confident in our ability to deliver on our financial goals for both 2022 and the longer term.
Before discussing our strategic progress and operating results I'd like to share our heartbreaking dismay over the crisis in Ukraine.
We wholeheartedly wish for a peaceful solution remains steadfast in our support for all our colleagues and their families in the region who have been affected.
Our safety and well being have been top of mind in the past months.
Ww is been in daily contact with any colleagues who've chosen to remain in the Ukraine and provided financial accommodation support to those who chose to relocate our own special contingency risks operation is providing guidance and assistance to our Ukraine country leader.
We're also encouraging our colleagues to utilize our matching gift program to help increase financial donations for disaster relief.
I'm proud of how our colleagues who come together and support thank you for showing up for each other.
In addition to supporting our employees WCW supporting clients in key areas related to this crisis, including claims and risk across various lines such as political investment supply chain in cyber.
As previously announced Ww decided to withdraw from our business in Russia and transfer ownership to local management, who will operate independently in the Russian market in a few minutes, Andrew will talk more about the financial impact of our decision to exit Russia.
Now I'd like to provide a few updates on our progress against our company wide priorities.
At our last Investor day, we unveiled our grow simplify and transform strategy and we have executed against each of these strategic priorities during the first quarter.
Innovation has always been a key area of focus for us and as one Ww, we strive to bring the diverse capabilities of the enterprise together to innovate on behalf of our clients to address current unmet needs and we continue to do so in the first quarter.
Let me walk you through just a few examples.
Our risk and Broking segment launched ESG analytics, and diagnostics, which provides a multi source comprehensive analysis of our firm's ESG performance.
We also introduced a bespoke reputation where risk solution designed to help our clients understand manage and recover from reputation of crises.
Both products address ESG risk, which is an area of rapidly growing importance for our clients.
Our ongoing product innovation continues to drive growth in our risk and analytics business within risk and broking.
In health wealth and career, we unveiled a new employee insights platform called engage to help clients understand their employees views on various topics that affect the employee experience and ultimately business performance. We've had fantastic client feedback on engaged to date and are excited about its potential.
I'm pleased to say that our commitment to innovation continues to be recognized by the industry.
During the quarter WWE secured the top spot in adviser Pacesetter index, an annual recognition of product innovation leadership in the P&C insurance industry.
Wdw top P index, having launched 16, new products and services in 2021, I am proud of our team for earning this recognition, which reinforces our capabilities and our dedication to delivering innovative and actionable solutions for today's complex challenges and people risk and capital.
At our Investor Day, I also spoke to you about our actions to simplify the business and make it easier and quicker to engage with our clients as we work to bring the best of Ww to them. We've advanced on this front as well refocusing the company into two operating segments across three geographies to create a more streamlined structure and enhance the agility.
And as part of this program, we introduced W. T. W work styles, a program, which modernizes the way we work to align our real estate footprint to a hybrid working environment and contributes to our transformation program savings <unk>.
WCW work styles reflects our belief that colleagues can be successful work in a variety of our ways at our confidence that a high performing culture as a result of exceptional talent not real estate.
Speaking of talent or rate of hiring in the first quarter accelerated by 23% compared to the fourth quarter of 2021, reaching our highest hiring volume in a single order since 2019.
Our new hires in sales and client management roles tripled compared to the first quarter last year.
We also continued to see retention efforts gain more traction in Q1 with voluntary attrition dropping 19% from Q4 of 2021 and a significant decline in senior level departures. We've seen the same positive dynamics play out in our corporate risk and broking segment.
Let me take a minute now to touch on some of our financial highlights for the quarter.
An organic basis revenue was up 2% reflecting growth across most of our businesses.
Adjusted operating income was $371 million or 17.2% of revenue for the quarter up 200 basis points from $338 million or 15.2% of revenue in the same period last year as our growth and expense disciplined combined to enhance our profitability in the period.
The net result was adjusted diluted earnings per share of $2.66, representing 22% growth over the prior year in part due to our aggressive share repurchase program.
Overall, our performance in the quarter was aligned with our expectations and reflected our commitment to profitable growth and the successful execution of our strategy.
We continue to build momentum and we believe our progress has us on track to reach our financial goals for 2022 and to become a 10 billion plus company by 2024.
In closing I want to express my gratitude my incredible team of colleagues, who live our values and have delivered every day for our clients in a volatile and challenging environment.
With our sharpen focus we are well positioned to you driving growth and executing on our transformation and with that I'll turn the call over to Andrew more detail on our results.
Thanks, Carl Good morning, everyone. Thanks to all of the refrigerator. So early in the day the.
The first quarter saw dramatic macroeconomic and geopolitical changes that required us to navigate rapid and significant shifts in our markets that we expect will continue to evolve throughout the year high inflation uncertainty around how long it will last and tight labor supply are impacting our clients people strategies in a variety.
We have ways geopolitical and economic factors are affecting the insurance landscape with events in Ukraine likely to dampen the short term moderation in pricing growth monetary policy and inflationary forces are expected to translate into remeasured asset values and exposures ultimately translating it to premium.
Both.
We continue to navigate through this complex and dynamic backdrop and have delivered a good start to the year with most of our businesses contributing to organic revenue growth.
Before return to our detailed segment results, let me take a moment to touch on our exit from our Russian businesses.
As we previously reported we made the decision to exit our operations in Russia, which comprised approximately 1% of consolidated Wdw revenue for 2021, primarily within our risking broking segment.
The lost profits from Russia operations will create modest margin headwinds for the company in 2022 and beyond However, we have taken swift action to deploy near term cost mitigation measures and to identify longer term offsets, which gives us confidence in achieving our guidance for the year and reaching our 2024 financial.
Goals.
Let's turn to our detailed segment results note that that to provide clear compatibility with all periods. All commentary regarding the results of our segments will be on an organic basis, unless specifically stated otherwise.
The health wealth and career or HW C segment generated revenue growth of 2% on an organic basis and 3% on a constant currency basis compared to the first quarter of the prior year.
Career, which represents are working rewards and employee experienced businesses led revenue growth for the segment, increasing 7% in the quarter following growth of 3% in Q4 of 2021. This.
This growth was driven by strong demand for rewards consulting pay benchmarking and software health, which is comprised of our health and benefits broking and consulting business deliver.
Delivered strong growth of 6% through a combination of increased retention new client appointments and project work.
Wealth, which represents our retirement and investment businesses had a revenue increase of 1% for the quarter driven by growth from new clients.
And benefits delivery and outsourcing, which encompasses our benefits delivery and administration and benefit plan administration businesses revenue declined by 2% from the prior year first quarter. The decline was largely driven by individual marketplace and reflected a shift in revenue timing from our <unk> Medicare exchange Bitch.
<unk>, which we expect to normalize over the course of 2022 as well as lower growth in Medicare advantage revenue in our direct to consumer business. We continue to see a macro environment that supports growth opportunities for this business.
HW sees operating margin expanded 110 basis points to 27% in the first quarter, driven primarily by strong operating leverage from our growth.
We see HW C as historical industry, leading margins, continuing <unk> market, leading solutions and the Tailwinds in its core markets should continue to drive organic growth, both our near term and long term outlook on HW C remain positive.
Now, let's look at risk and broking or R&B.
Rfps revenue was flat on organic in constant currency basis as compared to the prior year first quarter, excluding a headwind book of business gain on sale that was recorded in the prior comparable period Riskin broking organic revenue growth was 2%.
Any insurance consulting or technology, or ICT business revenue is up 9% compared to the prior year first quarter with increased technology solution sales alongside increased demand for advisory work.
Corporate risk and broking or CRB revenue declined 1%, excluding the book of business sale mentioned earlier and Russia related revenue CRB increased 3% with growth across all regions, primarily from new business with notable strength in our Phoenix and M&A lines.
Excluding headwinds from prior year book of business sales North America, led crb's growth, where crop colleague retention rates at senior levels have continued to show significant improvement.
Excluding or Russia business International in Europe also contributed to Crv's growth.
Risking broking operating margin was twenty-one dollars, 6% for the first quarter compared to 21.9% in the prior year first quarter.
Excluding the headwind from book of business sale and the prior period the margin increased 130 basis points for the first quarter as a result of top line growth alongside continued cost management.
As the impacts of our actions build and headwinds subside.
Overall, our outlook for risk and broken remains positive with mid single digit revenue growth expected over the longer term.
Now, let's turn to the enterprise level results in Q1, we generated profitable growth with adjusted operating margins, increasing 200 basis points to 17, 2% from 15, 2% in the prior year a product of our focus on strategic priorities and cost management, we continue to expect margin improvement.
Each year as we work to deliver on our 2024 margin goals as Carl mentioned, our transformation initiatives will be a key contributor to that ongoing margin expansion. Our early efforts in this area have been very successful and we have already surpassed our $30 million annualized run rate savings goal for the year, we are actively seeking.
Further cost transformation opportunities and we'll update you as those progress.
We had free cash flow of negative $10 million for the first quarter of 2020 to a $155 million increase from free cash flow of negative $165 million in the prior year and.
Approximately $50 million of the increase was core free cash flow improvement, while the remaining $105 million was driven by one time items.
The one time items consist primarily of legal settlement paid payments made in the prior year totaling 185 million, partially offset by a net $80 million and other nonrecurring items, such as cash inflows from now divested businesses like reinsurance, which increased prior year free cash flow.
And cash payments related to transaction and transformation costs, which decreased current year free cash flow.
We continue to prioritize returning capital to shareholders and executed aggressively on those commitments, we paid $98 million in dividends for the first quarter of 2022, and repurchased nine 9 million shares for $2 $2 5 billion, achieving the 4 billion near term share repurchase target, we set at Investor day.
At the end of Q1, approximately $1 6 billion remain under our current repurchase authorization.
We remain committed to deploying excess capital and free cash flow into our highest return opportunities and continue to believe the return we can achieve from repurchasing shares remains highly attractive and we expect to continue to deploy free cash flow in this manner.
Overall, we're off to a good start in 2022 as we think about the rest of the year, we see macroeconomic challenges that will continue to create demand for our services and opportunities to help clients. We continue to feel positive about the investments we've made in talent last year and this year. We are confident those investments will support revenue growth and that we will achieve our.
Targets for the year.
With that let's open it up for Q&A.
Thank you to ask a question you will need to press star one on your telephone to withdraw your question press the pound key and the interest of time, we ask that you limit yourself to one question and one follow up.
Our first question comes from <unk> Kumar with Jefferies. Your line is open.
Thank you good morning, everybody.
So my first question is on the comp and benefit ratio I think it was down about 270 basis points year over year, how do you see that evolving now that attrition and hiring.
Right.
Yes.
Lot of different components, moving within the salaries and benefit.
Line part of it is FX.
We also had businesses that were part of the group last year, such as Miller, who were not in this year's numbers as well it will take some time for some of that to work through the <unk>.
System.
So we expect to return to more historical normalized ratios and levels over time as that stuff clears through.
Okay.
And.
Do you see any lingering impact from book sales for the rest of the year.
Yes, so there were no book sales this quarter.
And obviously, we had the headwind from the first quarter of last year, we expect to return to more normalized levels over time as we've talked about in the past.
However, there is always the possibility that there may be some over the next couple of quarters that relate.
Directly to events that would have transpired in 2021.
Okay. Thanks for the answers and good luck with the rest of the year.
Thank you and thank you.
Thank you. Our next question comes from David.
Motor Madden with Evercore ISI your line is open.
Hi, Thanks. Good morning, just just a question you had spoken in the previous response about returning to a more normalized comp and Ben ratio over time.
Obviously, a lot of different things have been moving around here.
From from business sales.
And I guess I'm, just wondering what would you define as a more normalized comp and Ben ratio that we should think about over over time.
Yes.
Yes.
I think the best way to look at that is to go backwards.
Look at some of our historical comp and van ratios when there was less M&A activity.
Less ins and out within the business and.
Some more stable.
FX.
Got it okay. That's helpful.
And then maybe.
Good to see on a on the share repurchase that was completed the 4 billion ahead of schedule.
Understanding you still have some left on the authorization.
But I guess I'm just wondering you know cash level still look healthy leverage is still below your target I.
I guess, maybe you could talk about how youre thinking about and how we should think about timing of a new authorization and completing the existing one.
Yes, I mean in terms of authorization right.
Net.
We always make sure we have enough headroom to be able to capitalize on opportunities that may present themselves.
And of course, we balanced the share repurchase pacing.
With free cash flow now that we're sort of through the large amount of cash on the balance sheet from the termination payment and the.
The divestiture of <unk>.
So I would expect the pace to moderate over the over the rest of the year, but we continue to believe that.
Our highest return opportunity is the <unk>.
Investment in our own shares.
Great. Thank you.
Thank you. Thank you.
Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.
Hi, Thanks.
Good morning. My first question was just on client retention can you give us a sense of where the client retention was this quarter where was it last quarter and then how should we think about how that's going to impact organic in 2022, and what kind of the base case for client retention for the year embedded within that mid <unk>.
And we will take it organic growth guidance.
Yes, so good.
Good morning.
We don't disclose retention.
But.
Clearly some of the headwinds we faced last year have dissipated and we expect that to show up in the retention figures as well.
There are a couple of factors there right one.
One is organizational uncertainty, which is clearly dissipated with a clear path forward.
The merger termination.
And second is the human capital effects.
The uncertainty had within our workforce and the fact that we've been able to reverse that with our hiring successes.
And.
Building back the team to where it needs to be so we're quite happy with both of those and we think that that tells a pretty good story for what retention can be going forward as well as of course attraction of new business.
Okay, and then I noticed you guys did not provide the <unk>.
Revenue this quarter I'm not sure if you're willing to disclose that if you can and then I see okay.
The benefits delivery and Allison I think business right that was negative 2% organic so I'm, assuming you saw a decline within transact and would that be ex that.
And that that business would decline this year and is that also embedded within the mid single digit organic growth guidance.
Yes, Lisa.
It's Andrew I think there were a couple of pieces to that so I'll try and unpack all of that and if I Miss anything. Please. Please let me know so so first the metrics that we're providing are aligned with the way that we're running our business under the new segmentation.
In the past years, we did provide growth figures for transact to give further clarity.
The growth for the first few years during the acquisition.
We'll continue to give color on that business.
But the.
The level of detail will be different just given the new the new segmentation.
In terms of growth for that business.
There were some timing headwinds for transact that occurred in Q1, we fully expect those to normalize over the full over the full year.
As mentioned previously on some calls we run that business for profitable growth.
<unk> to have high expectations that transact.
Can continue.
Strong growth.
We see a macro environment, which really supports the growth opportunities in that in that business.
Okay. Thanks for the color.
Okay.
Thank you. Our next question comes from Josh Shanker with Bank of America. Your line is open.
Yes. Thank you for taking my question.
All items, one is in terms of thinking about.
The book of business drag can we quantify that and should.
Should we expect it to continue through <unk> 'twenty one.
We're trying to do this.
Yeah. So.
The book of business <unk>.
Drag for.
For this quarter over last quarter is about $15 million.
So that's what's created that headwind for that particular business.
As you can imagine these things are a bit episodic.
And involve sometimes lengthy discussions with counterparties as they get worked through so it's hard to say.
With any certainty what the timing may look like for any of those throughout the rest of the year.
As I said earlier, we do expect to return to a normalized level over time.
And.
Anything that does.
Pop up throughout the rest of this year directly related to events from 2021.
And do we need to budget anything in for revenue loss on the Russian side.
Inorganic numbers.
No.
It's divested so it'll come out in the organic numbers.
Okay and then one last one can you maybe you can't.
If you can talk about gross hires versus net hires.
In.
In the quarter.
I'm talking about.
How are you growing and whatnot is there any.
Youre going to have some percentages, but we don't have the basis can you talk about in terms of head count.
Okay.
Yes, yes, we don't give that level of detail but.
At least from my point of view I guess in the happy place of hiring being up and departures being down which.
The net effect therefore has to be positive.
And do you or give the employee count at quarter end yet.
Annually.
Only annually okay. Thank you.
Yes. Thank you.
Our next question comes from Greg Peters with Raymond James Your line is open.
Good morning.
So.
Carl I guess, we're about seven months into.
On your.
Your results since you mapped out what your fiscal year 2024 targets would be.
And.
I'm just curious if you could give us an updated view.
On how you view the progress to date.
This is where you want to be and what you mapped out to investors for fiscal year 'twenty four.
Sure Greg Thanks, and good morning to you.
I mean, we're pretty happy with where we are with both respect is kind of how we're doing in 2022 and 2024, we're making progress and what we said we would do and I think the signs that that's happening or there right in terms of kind of the resumption of growth in <unk>.
Talk a little bit about the human capital aspect of that.
Starting to see that take care of the hires we.
It did in 2021 begin to generate results for us in 2022, and the steps we took to stabilize the workforce.
Again, leading to retention and growth efforts.
And with respect to our plans for 2024 right. The transformation progress has been at or above what we said it would and we're continuing to see good opportunities. There. So I think my general tone is I think we're pretty happy we've done what we said we would do.
Hopefully yogurt.
So so the bottom line on that is that you are you are you.
You are holding firm on your targets, you think theres still achievable it looks like the revenue number might be a little bit of a it's not a lay up anymore, especially with Russia falling off but.
That would be the the assessment that you'd like us to take away from this right.
That's right.
We didn't know about Russia, and no one no one knew about Russia, but we knew and making our plans things would happen alright, good things and not so good things.
Alright got it.
Yes.
I guess the second question I had.
This isn't news to you and you have heard it in some of the prior questions, but it's just.
There is this there is.
The new hires come at a cost and there is a lag between the time you onboard them Theyre actually and then they actually produce revenue and.
So there is there is this.
As you know.
Inflection point of increased cost versus limited revenue and I guess as we sit on the outside watching your progress trying to understand the cadence of how that's working within the company you talk about the wonderful new higher results and I assume a big chunk of that is forward facing sales, but we're.
Sure.
Try not.
See how that works with the margin assumptions, because the upfront cost versus revenue if that all makes sense.
Okay.
Couple of points, and then I'll, let Andrew talk as well first first of all I mean, not all businesses have that delay.
<unk> Onboarding in revenue right. So demand for for instance of what's going on today in our work and rewards business is such that we can put people to work.
As soon as we get them on the payroll right. There's a lot of demand in the marketplace for those services.
The training time to do it the WCW way.
It's pretty quick.
And of course, some people in sales and client management roles will come to us with existing relationships that there'll be bring with us as well. So it's not a sort of nothing for a long time.
The natural way of doing this.
Yes.
The other thing I would add is.
When we set out our 'twenty four targets.
We accounted for the need to make investment hires throughout that period.
As the pace of margin improvement over that period won't be won't be linear.
But we do expect it to be present every year throughout that journey.
And of course, we've got various.
Levers at our disposal to make sure that that that happens.
Got it thanks for the answers.
Okay, great. Thank you.
Our next question comes from Mark Mckone.
Baird Your line is open.
Good morning, and thanks for taking my questions.
Wondering if you can just talk about your how you were conceiving the mid single digit organic revenue growth for the year in terms of that target.
To what extent do you think.
You were intending for that to be backend loaded because of the dynamics that we talked about with regards to.
Newer hires.
Taking a while to to add revenue at least within corporate risk and broking.
And to what extent.
Should we.
Modify our expectations.
Now that.
There are more concerns from a cyclicality perspective in terms of where it could end up occurring within the economy as rate hikes.
Our pursued in Europe is kind of going through.
Energy stresses.
Yes, it's Andrew why don't I take the first part of that and then I'll hand, it over to Carl to talk about the macro environment.
So in terms of pacing of organic growth I think it's in line exactly with our expectations going into this year we did.
Expect the pace of that to accelerate during the second half of the year as we continue to narrow the gap with some of our peers.
<unk>.
The hiring that Karl talked about sort of depends.
Underlying business how quickly the revenue comes online and.
And we've accounted for that in our plan and commentary.
Sort of.
Pacing of organic growth throughout the rest of 2022.
And with respect to say right I mean, we think no matter what the dynamics, we deliver differentiated and tailored approach to risk management for our clients and thus EBIT.
In an environment, where the pace of rate increases moderating can be quite good for our business.
Client clients work their way through the risk exposures and.
Just as when rates go up sharply they may tend to rein in how much they're spending and retain more risk.
Rates moderate that doesn't necessarily translate to decrease spending were decreased revenue for us.
And with respect to the recessionary potential recessionary environment.
I think I would point out that the need for good advice and great risk management solutions typically only intensifies during dynamic or turbulent times in the markets and today, we are seeing numerous opportunities to provide advice and solutions to our clients as they grapple with these sort of issues.
So we continue to monitor the financial impact of our business these potential outcomes and adapt our strategies as necessary.
But in general.
These industries are ones, where they are pretty resilient.
Two economic cycles.
Great and then with regards to just your answers with regards to BDA.
The timing of certain headwinds within that business can you just <unk>.
Elaborate in terms of what you meant by that.
What would be the trigger for you.
Getting back to growth in that business prior to the new enrollment period.
Yes, yes.
You need to look at that business on an annual basis right and on an annual basis, we absolutely expect.
Meaningful growth from from that business. So.
Focused too much on the one quarter.
Our results on a year over year basis over the course of the year right.
We will continue to show positive positive momentum.
Transact really has two sales cycles right as the big Q4 cycle and a smaller Q1 cycle and they are really pretty independent.
Got it and then lastly.
The transformation program is off to a strong start.
Restructured about $11 million.
In the quarter, how should we think about that over the course of.
This year.
Yes, sorry.
We entered the year with meaningful run rate savings have achieved incremental run rate savings.
In the first quarter.
And you could probably do some simple math there to try and figure out how much of what we've announced so far will end up.
Being captured this year.
The expectation is that we will continue to look for opportunities to add to that throughout the course of the year and capture as much of that as possible.
As we discussed during the prepared remarks, we're constantly evaluating new opportunities and we will come back with an update on that as that develops.
Thank you.
Thank you.
Thank you. Our next question comes from Paul Wilson with Piper Sandler Your line is open.
Okay.
It's Paul Newsome.
That's a new.
Missing.
Usually play Newman.
A couple of.
Modeling questions.
One is on the tax rate.
Any thoughts on that.
I wouldn't think of U S tax rate 21 would be kind of a normal tax rate you folks given.
So.
Maybe just any thoughts you have.
Help us model that would be great.
Yes, we are now providing tax guidance for 2022, however, based on the current environment.
We don't foresee any large swings in our projected tax rate for 2022.
Just on where it's where it's been historically.
Of course, it doesn't take into account any future legislation, which could have a positive or negative.
Effect on our tax rate.
But if.
If we look back sort of before.
Maybe this quarter that would be kind of.
Better place to look in this quarter horizon.
Yes, I think if you look on an annual basis over the last two years. It will give you a pretty good indication of our expectations.
Great and then just a couple more modeling.
Sure.
Any thoughts on some of the restructuring the pace of some of the restructuring charges that we should.
Expect prospectively as we try to reconcile the difference between net and adjusted.
Yes, we haven't disclosed the exact pace of the spend of the $750 million, which we mentioned during Investor Day, you would expect a lot of that to be front end.
Loaded.
Over say the first two years, which would be sort of the opposite of what you would expect from the savings which might be more backend loaded and accelerate over the course of the three year period.
And then finally I guess somewhat similar.
Unallocated net always been a little bit of a black box for us trying to model.
How should we think about.
Cost savings coming through relative I assume that thats, a piece of what's going to happen.
Segment level as well maybe I'm wrong.
How should we think about that.
Yes can you can you just elaborate on the question there a little bit.
Yes.
Is it essentially a corporate right.
All of the expenses that come through.
At the segment level.
Historically, a pretty good size number.
And I was just wondering if that's part of the <unk>.
Expense cuts that we've been talking about.
How much we should think about that possibly change over time.
Yes, I think youre asking about the costs.
And those will be distributed.
Back to the areas that they're associated with.
Thank you.
My modeling question Stephen I appreciate the help.
Correct.
Thank you.
Thank you. Our next question comes from Shlomo Rosenbaum with Stifel. Your line is open.
Yeah.
Hi, Good morning, and thank you for taking my questions I had a quick questions just about the.
The head count for hiring and attrition again, the sequential numbers our R. R.
We are showing improvement.
But we are dealing with a situation where the fourth quarter is a situation where it's <unk>.
Don't move around all that much and I was wondering if you can.
Just on the historical experience you've had.
With Willis towers Watson, if you could talk about what the levels of hiring and attrition are relative to kind of historical levels that you would normally see in kind of the first quarter just to give us some.
Context on a longer term basis.
Yes.
So amit.
First quarter hiring was the highest we've had in any quarter since the first quarter of 2019, So I mean, it's.
I think quite strong by any measure.
In terms of attrition, we see this getting back to normal levels.
If you look at things like 12 months Rolling attrition right did things get very distorted by the effect of Covid and then coming out of Covid. So those numbers a little tough to read if we look at things like monthly attrition of course, there's a lot of lumpiness to the figures and some timing that we have to exam.
<unk> for instance.
Yes, as you said fourth quarter termination rates versus immediately after we pay our short term incentives right and so there is volatile and those numbers. However, we see this normalizing.
It's way to put it to levels that are much more in line with what we've seen historically for the organization pre combination.
So if you go to pre Covid times.
You significantly different or are you just modestly different right now with the good line of sight to normalization.
Again, if there is visibility.
Visibility here is a little hard to say if you look at it on a 12 month basis, we're factoring in Covid periods. If we look at it on a monthly basis, right, taking something and annualizing. It magnifies what might be a pretty small number of differences. So I don't want to over generalize here, but.
We're pretty happy with the numbers, we're seeing on the attraction and retention.
Okay, great. Thank you very much.
Thank you. Our next question comes from Brian Meredith with UBS. Your line is open.
Yes. Thanks, two questions. Your first hopefully the first one is a quick simple one here Andrew what was the actual benefit from book sales in the second quarter of 2021, just so we know what the headwind is as we look at organic for 2022 to 2022.
For Q2 of 2021 morning, Yes, exactly yes, exactly for <unk> 2021 what was the benefit of book sales. So we can kind of understand kind of what the impact will be in <unk> 'twenty on the headwind will be.
Yes, I think if my memory serves me correctly it was about $30 million three zero.
$30 million great. Thank you that's helpful. And then the second question I'm just curious.
So if I think back when the merger was going on and I'm sure. There were a number of clients that left during the merger or decide to leave during the merger because of some of the regulatory stuff that was going on I'm just curious.
What impact do you think that's having on your organic revenue growth call. It fourth quarter and this quarter and what do you think the drag will be here in the next couple of quarters.
So I mean I.
There was clearly an impact in two fold one is clients, leaving the other sort of new clients not signing up right again back to my earlier comments about <unk>.
<unk> two rfps out instead of one.
We see that dissipating over the balance of the year right and part of that is due to.
A strong vibrant WCW is definitely a magnet for clients as well as people and we're very happy about that and the second being comparables.
Effect, so some of that goes away and looking at versus prior year numbers. So if you want to sort of take that as a straight line out.
Yes.
Not a bad place to start in terms of consumption.
Great. Thank you.
Thank you and we have a question from your own Kumar with Jefferies. Your line is open.
Thank you.
Just one quick follow up on transact.
So I think since the.
The acquisition, we've seen the publicly traded peers valuations.
Compressed quite a bit.
At what point does that factor into looking at a potential goodwill impairment charge.
Yes, so its Andrew Thank you for the question.
We continue to believe and I think we've demonstrated that we've got a very different business than some of the.
Standalone publicly traded peers.
We have different relationships with the carriers we've got.
Different processes around lead generation and verification.
So while we while we do take a look at that of course, we.
We don't believe we're impacted by completely the same dynamics as those companies.
Understood. Thank you.
Thank you Anna.
I am showing no other questions in the queue I'd like to turn the call back to management for any closing remarks.
So we thank everyone for joining us this morning, as we said we're happy about the progress we've made with respect to 2022 and our 2024 goals. We look forward to further engagement with you as we take <unk> forward to be the best that we can be thank you very much and have a great morning.
This concludes today's conference call. Thank you for participating you may now disconnect.
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