Earnings Call: Q2 2021

Aug 3, 2021

Good morning. Welcome to the Willis Towers Watson Second Quarter 2021 Earnings Conference Call. Please refer to willistowerswatson.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 3 months on Willis Towers Watson'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 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 review the forward looking statements section on the earnings press release issued this morning as well as other disclosures in the most recent Form 10 ks and in other Willis Towers Watson's 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 these measures, please refer to the most recent earnings release and other materials in the Investor Relations section of the company's website. I'll now turn the call over to John Haley, Willis Towers Watson's Chief Executive Officer, please go ahead, sir. Thank you. Good morning, everyone, and thank you for joining us on our 2nd quarter 2021 earnings call. Joining me today is Mike Burwell, our Chief Financial Officer. Today, we'll review our results For the Q2 of 2021. Let me start by thanking our 45,000 plus colleagues for their resilience, Their commitment and their focus on serving clients with excellence. At Willis Towers Watson, our colleagues have persisted Through an unprecedented global pandemic, while simultaneously preparing for a proposed integration and for potential divestitures. What our teams have accomplished is nothing short of extraordinary. We're now moving forward with clarity. Today, I'm going to share some observations on the termination of our proposed combination business combination agreement with Aon. But I really want to focus on our strong second quarter results and excellent return to shareholders. In Q2, our team delivered Segments contributed meaningfully to this result. Our adjusted operating margin improved by 3.90 basis points. This translates into 48% adjusted EPS growth rate in Q2 and 30% free cash flow improvement when normalized for one time items. Our 6% organic revenue growth for the first half reflects mid single digit or greater organic growth in 3 of our 4 segments. Turning now to the termination of our proposed business combination with Aon. We recently announced our mutual agreement to move forward independently. On behalf of Willis Towers Watson, I'd like to thank our counterparts at Aon for their professionalism over the past 16 plus months Since we announced the transaction, I again would also like to thank our Willis Towers Watson colleagues for all of their efforts as well as our clients for their continued support throughout this process. The proposed combination had Significant regulatory momentum. A notable exception was the United States, where the parties reached an impasse with the Department of Justice. In the end, working closely with AAON, we decided to terminate our agreement. We're confident this is the right decision for Willis Towers Watson, For our colleagues, for our clients and for all of our stakeholders, including our shareholders, AAON has already paid the $1,000,000,000 termination fee. We now move forward with confidence and from a position of strength. As we look to the future, we will build on our successes, which have been significant as evidenced by our performance over the last several quarters. We will also leverage our formidable resources, including our durable client relationships, our talented colleagues and our healthy financial position. It's worth noting that our client retention rates have remained at the same level as prior years. Regarding colleagues, while we're disappointed that we've lost some valued colleagues in what has become a hot talent market, Our top leadership ranks remain intact and our ability to compete continues unabated. We were pleased to announce last week that we would be reinstating our share buyback program, which had been suspended to comply with the terms of the agreement with Aon. Our announcement noted that we would be increasing the share repurchase program by $1,000,000,000 This will include $500,000,000 in accelerated Share repurchases and $500,000,000 in our normal program. Subject to market conditions and other factors, We believe we should be able to execute a majority, if not all of the repurchases by the end of 2021. Our Board of Directors has authorized a 13% increase in our quarterly dividend payment given our continued improvement in free cash flow. We've been paying down debt and we expect to have retired almost $1,000,000,000 in total by the end of the year. This, Together with the significant capacity we've generated, provides us with plenty of capacity to invest in both organic and inorganic growth going forward. We intend to use this capacity to make investments in our businesses so that we're well positioned to address evolving client needs. We're excited about the significant opportunities across our whole portfolio of businesses, both brokerage and consulting. As a result, we've asked each of our business segment leaders to look at potential areas of growth for investment. We look forward to providing you with more details about this as well as an update on the overall company at our upcoming Investor Day on September 9, 2021. I'd also like to announce today that we're conducting a review of strategic alternatives for Willis Re, our reinsurance operations. The Board has authorized us and our advisors to initiate such a process. While we highly value the Willis Re platform and our colleagues who contribute to its success, We believe now is an appropriate time to explore strategic alternatives for this business. There can be no assurance The strategic alternatives review process will result in a sale of Willis Re or other strategic change or outcome. One other question that has been raised about how we will move forward independently is what is my transition plan? As part of our ongoing planning process, the Board of Directors has been working with me on CEO succession. I still intend to retire and I will continue to work with the Board to ensure a smooth transition of the CEO role. This will require an announcement of my replacement in an adequate timeframe to ensure this is accomplished. Now let's move on to our 2nd quarter results. Reported revenue for the 2nd quarter was $2,300,000,000 up 8% as In Q2, we experienced clear improvement in areas where revenue is tied to discretionary project spending as the economy continued to recover. Net income was $186,000,000 that's up 82% for the Q2 as compared to $102,000,000 of net income in the prior year Q2. Adjusted EBITDA was $557,000,000 or 24.4 percent of revenue for the 2nd quarter as compared to $441,000,000 or 20.9 percent of revenue for the same period last year. That represents a 26% increase on an adjusted EBITDA dollar basis and 3.50 basis points of margin improvement. For the quarter, diluted earnings per share were $1.41 an increase of 96% as compared to the prior year. Adjusted diluted earnings per share were $2.66 for the 2nd quarter, reflecting an increase of 48% compared to the prior year. Overall, it was a very strong quarter. We grew revenue, we enhanced margin performance and we increased earnings per share. So now we'll look at each of the segments in 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 transaction and 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 up 5% on an organic basis and 4% on a demand for advisory services across various lines of business. Talent and rewards revenue increased 22% With a major uptick in executive compensation and rewards strategy work, we anticipate continued strong demand for broad based Rewards and transaction products in the second half of the year with demand evident across all geographies. We are also experiencing strong participation rates across various data survey products in the midst of a tight labor markets And companies looking to attract and retain talent, which should fuel growth in the second half of the year. Our health and benefits revenue increased 1% for the quarter on top of similar growth in the Q2 of 2021. We continue to grow revenue from advisory work in North America and Global Benefits Management and local brokerage appointments outside of North America. However, this growth was partially offset by lower commission based revenue, which was tied to prior year book sales. In this business, we anticipate a stronger second half performance driven by U. S. Legislative changes alongside pent up demand for strategic benefits reviews. Retirement revenue was up 3% compared to the prior year, driven primarily by funding Pension equalization or GMP work in Great Britain. We expect high demand for GMP work to continue through the remainder of 2021 and into 20222023. Technology and Administration Solutions revenue grew 2%, Primarily due to increased project work and new business activity in Great Britain, we're optimistic about growth opportunities for this business As clients are engaging with us to deliver more high touch solutions with higher end service levels to support their employee base. HCB's operating margin increased by 2 10 basis points compared to the prior year Q2 as a result of continued expense reduction efforts. We're very pleased with HCB's sequential improvement and margin growth. Our long term outlook on HCB remains positive. Now let's look at Corporate Risk and Broking or CRB, which had a revenue increase of 8% on an organic and constant currency basis as compared to the prior year's Q2. North America's revenue was up 13% in the 2nd quarter, Driven by gains on book of business sales alongside new business across all regions, particularly in the FinEx and Marine lines. Revenue for Western Europe increased 3% due to new business and renewal expansion, particularly in retail and FinEx. Great Britain and International's revenue increased 2% and 9% respectively for the 2nd quarter. The revenue increases were primarily driven by new CRB revenue was $788,000,000 for the quarter with an operating margin of 22.9% compared to $701,000,000 of revenue with an operating margin of 19.2% in the prior year 2nd quarter. That's up 15% from 2019. The 3 70 basis point margin improvement Contributes to a 2 year increase of 7 70 basis points and reflects the continuation of effective cost containment. Consistent with last quarter, CRB once again delivered strong top line growth and improved profitability. CRB's 2nd quarter performance is encouraging as we look toward the future. As the economic outlook improves, We believe our Corporate Risk and Broking segment will see the demand for mitigating asset exposures and other insurance and risk mitigation strategies increase Set against the backdrop of a firm market, we expect to see investment in large scale infrastructure projects, building volumes in transportation And increasing deal volume in M and A. Our CRB segment is focused on delivering industry and product expertise and has a mature strategy in place across all its global lines of business. We believe that the depth of our Talent in these global communities coupled with our connected broking and risk and analytics strategies continue to enable us to deliver innovative solutions to both existing and prospective clients. Turning to Investment Risk and Reinsurance or IRR. Revenue for the Q2 was $400,000,000 an increase of 15% on an organic basis and a decrease of 7% on a constant currency basis as compared to the prior year Q2. This organic growth is on top of 3% revenue growth in the 20 22nd quarter. The constant currency change reflects the divestitures of our wholesale subsidiary Miller and our Max Matthesen Business. The Investment business with revenue growth of 44% led the segment's growth with new business and higher fees. Investments growth was aided further by increased performance fees. Insurance consulting and technology revenue was up 13% Compared to the Q2 of the prior year when revenue growth was modest, this business benefited from increased demand for advisory work. Reinsurance revenue grew 4% through a combination of net new business and favorable renewal factors. Revenue growth was partially offset by a decline in investment income due to lower interest rates. IRR had an operating margin of 33.3%, up 60 basis points as compared to 28.7 percent from the prior year Q2. The strong margin expansion was a result of careful cost Our Investment Risk and Reinsurance segment is seeing strong demand from insurers for technology, Advice and analytics, driving new business across our insurance consulting and technology and reinsurance businesses. We believe we're well positioned to provide leading advice and innovative solutions to our clients in the transition to a low carbon future. IRR's powerful combination of advisory services, technology solutions and analytical capabilities continues to create value for companies As they reevaluate risk and reinforce resilience post pandemic, we believe this unique combination enables us to deliver industry leading expertise And innovative solutions to help our clients navigate challenges and leverage opportunities as the socioeconomic legacy of the pandemic continues to evolve The registration or BDA segment increased by 14% on an organic basis and 16% on a constant currency basis from the prior year 2nd quarter. The growth in revenue was largely driven by individual marketplace, primarily by TRANZACT, which contributed $116,000,000 to BDA's top line this Quarter with its growth in Medicare Advantage products. The benefit outsourcing business also contributed to the increase of revenue, which was largely driven by its The BDA segment had revenue of $242,000,000 with a negative 4.38 percent operating margin as compared to revenue of $209,000,000 and a negative operating margin of 4.2% in the prior year's Q2. This nominal margin decline was largely due to our increasing sales capacity ahead of the 2022 annual enrollment period, which will usher in expansion opportunities for both our individual marketplace and our benefits outsourcing lines of business. We continue to feel positive about the momentum of our BDA segment for the remainder of 2021. So overall, I'm very pleased with our results this quarter. Thanks to our colleagues' outstanding efforts and our clients' commitment, we delivered strong broad based overall financial performance across all of our business segments. We saw good top line growth, we saw meaningful margin expansion and we saw EPS growth on top of a solid second quarter in 2020. Now I'll turn the call over to Mike. Thanks, John, and good morning to everyone. Thanks to all of you for joining us. First, I'd like to extend my appreciation to all our colleagues. We've asked a lot of our teams and our colleagues over the past 16 months, and they have continued to deliver. They remain committed to our vision and upheld our values. They went above and beyond to support our company, our clients and one another. I'm extremely grateful for their patience, commitment and resilience. We delivered continued progress for both the quarter year to date period, Including 8% revenue growth in Q2, through the first half of the year, we translated strong organic revenue growth into excellent operating income growth and almost doubled earnings per share demonstrating the resilience of the Willis Towers Watson business model. We continue to expect Mid single digit revenue growth for the full year 2021. I would note that our reported revenue included the favorable impact from changes in FX rates driven by weaker U. S. Dollar versus most currencies. Our strong revenue growth and ongoing operational discipline as well as sound cost management contributed to an adjusted operating income margin growth of 3.90 basis points in Q2 And 2.40 basis points through the first half of the year. It should be noted the growth in our margins was driven by the speed of revenue growth, which outpaced our expense growth. While we made investments in people, operations and technology to enable long term growth of the first half, we expect to increase these investments during the second half of the year. We also anticipate some resumption of T and E cost over the second half of the year as well, but we anticipate continued leverage of technology to conduct much of our business remotely, enabling us to sustain our improved efficiency and reduced carbon footprint. Looking forward, we expect to deliver margin expansion for the full year 2021 and over the long term. Moving back to the results for the Q2. We've translated strong operating income into adjusted EPS growth of 48% in Q2 and 23% year to date. Foreign currency changes had a favorable impact to revenue of $87,000,000 or 4% in Q2 versus the prior year and no impact to diluted earnings per share. If currency was to remain stable at today's rates, we'd expect a modest tailwind to adjusted diluted earnings per share for the full year. As John mentioned, Anne and WCW mutually agreed to terminate our business combination agreement and move forward independently. In accordance with the business combination agreement, Anne has paid the $1,000,000,000 termination fee. Free cash flow increased 30% year to date when adjusted $185,000,000 for the previously announced Stanford and Willis Towers Watson merger settlements and higher incentive comp and benefit related items of 249,000,000 We expect and we continue to expect to drive free cash flow growth over the long term, building on our efforts over the past couple of years. We expect our CapEx expenditures to increase in the second half of the year as we invest in technology to grow our business. Given our outlook for the long term free cash flow growth, we see share repurchases as the highest return on capital opportunity for capital allocation. As John noted, we plan to implement an accelerated share repurchase strategy of $500,000,000 in addition to our normal share repurchase plans. We look to execute as much as Craftsville in fiscal year 2021 and we also raised our dividend by 13%. Now turning to our balance sheet and debt capacity. We had $2,200,000,000 of cash on our balance sheet at the end of the quarter. We plan to pay off $450,000,000 of debt outstanding in August 2021. We have no borrowings Under our $1,250,000,000 credit facility, we remain confident in the strength of our balance sheet and manage liquidity risk through a well laddered debt maturity profile. And considering our June 30 balance sheet, we have plenty of additional debt capacity for discretionary use in the second half of the year. Over the long term, we expect to return to our past practice of growing debt as EBITDA grows. It should be noted that free cash flow generation in the second half of the year is seasonally strong, stronger than in the first half of the year, and we will look to allocate cash for our best use based on return on capital. In summary, we ended the 2nd quarter in a very strong position as we delivered strong top line and bottom line results. While the termination of our Aon combination with Aon was not the outcome we originally intended, the opportunity for WKW as a standalone business is strong and exciting. We believe our disciplined approach to return on capital combined with our continued improved cash flow delivery and increased debt capacity provides flexibility to improve shareholder value It should be noted, our U. S. GAAP tax rate for the 2nd quarter was 33.8% versus 42.2 percent in the prior year. Our adjusted tax rate for the 2nd quarter was 19.3% versus 22.2% rate in the prior year. The current year quarter effective tax rate includes a $40,000,000 deferred tax expense related to the enacted U. K. Statutory tax rate change Over the prior year, effective tax rate was higher due to additional expense recognized in connection with the temporary provisions of the CARE Act. We anticipate our annual effective Adjusted tax rate will be between 20% 21% for the full year. We're very pleased with these 2nd quarter results They are a direct reflection of our incredibly talented colleagues and unwavering commitment to client service. Our second quarter results were very encouraging. We have momentum, we have solid financial results, a strong balance sheet and an excellent team, which gives me confidence in our ability to continue driving value for all our stakeholders. And I'll turn the call back to you, John. Thanks very much, Mike. And now we'll take your questions. Thank you. The floor is now open for questions. And your first question is from Greg Peters of Raymond James. Good morning. The first question will focus on retention. And Sean, I know you said that your client retention remains strong through the Q2, but you also did highlight That there were some departures on the employee side. And I was wondering if you could give us some more color behind that. In the past, you've talked about Retention as a percentage of the total employee base. Obviously, I think most of your investors are concerned about these So any color you can add here will be helpful. Yes. So thanks very much For that question, Greg. I think we When we look at our overall attrition over the last 16 months or so, That attrition is within the normal historical bounds we have. Now we've seen our attrition go up a little bit more in the second quarter Than we did before then, but that's actually something that I think has been seen by companies across the board there. And But the biggest issue we've had is not so much the attrition, although we have lost some value collater, but let me be clear about that. But the issue is we while we were in the process of the merger, it was harder to hire new people to bring them on because of the uncertainty of exactly how they would fit into the new organization. And I think what we're going to be doing now is going out aggressively Recruiting and looking to replace some of the talent we've lost. Can you just as a follow-up to that, John, you give us a sense within HCB, if you lost some healthcare brokers, can you give us a sense CRB, where the losses have been, whether it's Western Europe or North America, IRR, just some additional color there so we can sort of Use it to help build out our projections going forward. So, hey, Craig, this is Mike. I would just So one is, as you might imagine, when you think about emerging, we've lost one of the biggest places we've lost, frankly, has been our corporate and some of our corporate areas Overall in the business with the anticipation of the business combination. As John mentioned, we had lost some teams, but when you compare When you look at HCB or CRB, we or IRR, we've lost some teams. When we compare it, our turnover isn't different than what we saw back in 2019. So we have had some our reinsurance team that's been lost, let's say, in Australia or things. But those We're highlighting it because it's in the window of looking at an M and A deal. But that's a normal process that had been happening And maybe slightly accelerated there recently, as John mentioned. But when I look at the numbers and just in terms of pure overall turnover numbers, Not that different from where we were in 2019. I mean to give you the turnover is generally in the 10%, maybe 11% range. I think BDA, because of the nature of that business, is the one outlier Where we have relatively high turnover rates. But we hire the people up for the seasonal Q4 and then they go away. They go away. Yes, makes sense. And then the other related area, your retention bonuses, I think Aon came out on their call and they Express their intent to pay the retention bonuses to their employees. What's your view on retention bonuses This is for your producers going forward. So, our view is that employee retention is something that we're managing Constantly, not just during deals. And so we have various incentives that are embedded within our employees' compensation Structure, the retention awards for the business combination, They were communicated in connection with the proposed combination to address specific risks and contingencies that could arise from that transaction. And since the transaction is no longer pending, we don't think those incentives are necessarily the ones we should have in place. That doesn't mean we won't put other ones in place And we won't make sure we manage retention on an ongoing basis. We will. Yes, I would expect that. I guess my last question, I'm sorry, But I had to hammer the retention thing would just be, Mike, I think in your comments, you called out the benefit Of T and E and certainly in your response, reduced corporate expenses. When I think about just the overall expense structure going forward, Is it fair to say that you're going to be making investments in this business so the expense side of your house may start to increase relative to what we saw in the Q2? Yes. I think that's a fair statement, Greg. But I would also point to the comment that I made, which is that we're focused on continued Annual improvement and we anticipate margin improvement for the year. So we'll look at those in terms of what the run rate of the company is. If we're making specific investments, we'll call them out, but our intent is to drive continue to drive margin improvement and margin expansion. And maybe just as a quick addition to that, Greg, I think As I referenced, and I think as Mike referenced in his comments, we're very excited about the growth prospects. And so we will be making investments in the business, but Those are investments that we expect to be generating revenue to. And so, we're looking to both organic and inorganic, We have a lot of enthusiasm around some of the prospects we see. Got it. Thanks for the answers. Good luck in the future. Thanks, Jim. Thank you. Your next question is from Elyse Greenspan of Wells Fargo. Hi, thanks. Good morning. My first question, John, in your prepared remarks, you addressed that you're planning to retire, which We know it was kind of planned in conjunction with the Aon merger as well. I understand that your contract runs through the end of this year. So Is the desire to put someone in place in advance of the timeframe? Is there the potential to extend your contract? And can you just tell us both internal and external candidates Doug, you'll be considered for your role. Yes. I think that thanks very much, Elyse. Yes, my contract runs through the end of the year and I think the intention would be not to extend that, but to Identify a successor and have that successor named before that time. And I'll be working with the Board on that. The Board has a very thorough process and Considers everything. Of course, we this is not new. We've been doing this for a lot of years and so we're not just starting at square 1 here. Okay, great. And then on the leverage side, your leverage is now below 2 times EBITDA And you have some debt that's coming due shortly. So I guess I'm trying to get a sense, you guys mentioned that you would look to Add to your debt capacity over the long term, if you just define that and I'm assuming you'd be willing to go up to 2.5 times EBITDA, I think that's historically where you have gone. And if you do add to debt, could additional share repurchases be considered for that additional capital in addition to looking to pursue growth? So Elyse, thanks for the question. So when we think about leverage, at times we have gone up that high in leverage, but we've always a commitment to get it down more In that kind of 2% to 2% range is kind of where we have been. So that gives us plenty of capacity to think about investments that we can make both Organically and inorganically in the business, which we're very excited about, and we have lots of opportunities. It's just making sure we deploy that in the best return thought process. But as we think about that, obviously, we will continue to look at Share repurchases, that's an important element to look at that return as we look at all three components in terms of thinking about allocation of capital. We talked about the dividend increase that we had this quarter. We'll continue to look at dividends. We will look at share repurchases. And obviously, we're looking at Inorganic and organic growth and thinking about all three of those in a balanced way going forward. Okay, great. And then on the revenue guidance, I think you said, for the full year, you guys would be at mid single digits. Was that total revenue or organic or was that meant to be both? It's meant to be organic full year. And then so I guess you guys were at 8% for the Q2, 6% for the half year. Are there certain businesses, I mean, I know you guys addressed some of the retention and employee attrition issues in previous questions, but is Are you expecting a slowdown in the second half given some of the retention stuff or is it more to conservatism given just economic uncertainty As you think about going from 8 to, I guess, kind of what seems to be maybe 6 in the back half of the year. Yes. I mean, as The quarters, the Q1 and Q4 tend to be our largest quarters, in particular Q4 being the largest quarter, Q3 being less of a quarter. I think you may have used the word conservative in there. I don't know if it's conservative, it's our best estimate in terms of where we are right now, And we thought that guidance would be helpful. Okay. Thanks for the color. Thank you. Your next question is from Paul Newsome of Piper Sandler. Good morning. I'm curious if there's a lot of difference between the organic growth that you saw by account size As opposed to segment, basically across the broking as well as the healthcare businesses. Was there more Improvement in the larger account stuff or the middle market or about the same? It was about the same. We're really about the same, yes. And perhaps you could talk a little bit about the pricing environment And what sort of windfall that helped you within the broking side a little bit more? Yes. I mean, we publish twice a year our marketplace realities, Which we published in April October as a general rule and we include in there what our view of The marketplace is in terms of pricing. It continues to be a hard market. We continue to see a pricing tailwind. We've seen continued increases and most recently cyber being up almost 50%. And but obviously those are what you're seeing in terms of quota prices. Our role is to do the best thing that we can for our clients. And obviously, we look to manage those risks, help them understand those risks and price those risks appropriately. And so we think about that, we look Property has still been up, general liability has been up, casualty has been up, and we've seen some moderation on workers' comp And D and O, but again in aggregate across the board, we're seeing pricing tailwinds overall. So yes, we are seeing that reflected in the business. Were there any notable geographic concentrations with for the organic growth? It was pretty balanced across the board when you look at our geographies. I mean, we didn't see any particular one that I would call out, otherwise, we would have specifically said that we really saw it across all four of our segments In comparison to where they should be in the prior year and equally we saw it across all our geographies. Frankly, the business is running very strong. We're very proud of the 2nd quarter results. And I think where there were some differences across the geographies, I did call them out and I went through the segment review, right. Great. Appreciate. Thank you. Congrats on the quarter. Thank you. Thank Your next question is from Shmo Rosenbaum of Stifel. John, I thought I'd just ask you a little bit about when you have a merger like this that you're anticipating, A lot of times a company will go ahead and delay certain initiatives in anticipation of a certain joint strategy post the deal close. And with the Willis Towers Watson going out on their own more, what items might have been placed on ice before That will now be revisited or what are some strategies that you're going to be pursuing that you might not have been And beforehand, now that the company is in on its own, and I don't know if there are specific areas you could talk about more acceleration of investments into specific areas or Specific verticals, any color you could provide there would be helpful. Yes. So thanks very much for that question, Shlomo. We clearly had some initiatives that we were delaying in anticipation of the combination. And our leaders are going through and doing a review of those right now, but they're in all of our businesses. We see that in CRB. We see it in IRR. We see it in HCB. So all of these all the different businesses, we're looking at them. We're prioritizing them and at Investor Day, we're going to be presenting you a comprehensive plan at about how we're attacking them and taking them forward. So I think there clearly were ones. There are some other initiatives that we've continued to pursue Even during these 16 months, for example, our leadership on climate change, which we think is Important from just the perspective of the good work we're doing there, but also we think that will be Very nice business for us going forward. Okay. And then just the company posted very strong growth, 8%, Clearly off of a weaker 2Q comp, if we're going ahead and just looking at what the momentum, underlying momentum in the business feels like, Would you say it feels more like mid single digits like what you guided to for the year or maybe just some kind of Color around what it would be if you're looking at this in more of a normalized year over year number? Yes. I mean, I think we've been talking for a couple of years now about the overall market growing at about mid single digits and us Growing with at least as fast as the overall market. I would say if we look at it today, we feel Slightly more bullish than that. So it would be at least mid single digits is what we see for the longer run. Okay, great. Thank you. And your next question is from Suneet Kamath of Citi. Great, thanks. So Just back on retention, just a quick one. Are there any agreements in place between you and Aon regarding recruiting and hiring each other's talent? There are not. I mean, I think there are limitations on the use of confidential information that We've exchanged, but that's basically it. Okay. And then in the CRB business, I think in the press release, you talked about growth tied to settlements and book of business sales. So I just was hoping you could give us a sense of how much did that contribute to the growth in the quarter? And are these normal course things? Or should we be viewing this as some of this Yes. I mean, I think we as we referenced, like what we've had booked business sales, That's an ongoing feature of the business that we're in. And so we had some last year, we had some this year. We probably had a little more this year than in prior years, but Thank you. Your next question is from Mark Hughes of Truist. Yes. Thank you. Good morning. Mike, what would be a good way to approach other income that was $74,000,000 in this quarter? What's a good proxy in future quarters? Yes. I mean, I think this quarter is probably a reasonable of what we should expect or think about. I mean, there obviously seems to be some slight ups and downs, but I think it's a reasonable proxy to think about. Okay. And then John, the Willis Reade decision at this time, could you expand a little bit more on What your thinking is about maybe divesting that? Why and anything else that might fall into that category? No. As I said in the call, we have great appreciation for the Willis Re business, for our colleagues and The work they've been doing, we just thought that coming off the termination of the deal with Aon was an appropriate Time to consider strategic alternatives. That's the only business we're looking at this for. Thank you. Thank you. Your next question is from Ryan Tunis of Autonomous Research. Hey, thanks. Quick one for Mike. On free cash flow, what are you thinking You'll be able to do for the full year of 2021 after we got through the Q2? Yes, Ron. I mean, we have not given guidance And we're not intended to do it. I mean, just given the marketplaces of COVID variance, etcetera, in terms of giving I believe that we will continue to improve from what we've delivered previously. As you've seen, we're up On 30%, 31% year to date on a if you look at it on a run rate basis through the first half, which I think is consistent with where we've been over now over the last couple And I think that's accentuated in terms of our increased dividend that we that our Board and we announced here as of today. I think We continue to work on free cash flow. I mean there's continued view inside the organization on how important that is for us to have that cash that we can reinvest in the business and Buy back shares and do a variety of different things that we can do with that cash. And so I can just tell you there's a lot of focus on it. We're very proud of what we continue to do there And we'll look to continue to improve it. Thanks. And then, it seems like there's a little bit of a mixed message on Investing versus buyback, you're saying that you want to invest organically and inorganically, but and yet you're divesting Willis Re. On the other hand, the buyback could clearly be bigger than it is. So I guess thinking about the decision to sell Willis Re, What are you thinking about in terms of revenue replacement type options? Or is there any opportunity we could just see a larger share repurchase program? I think we have that Investor Day coming up September 9, and we intend to talk It's somewhat more specifics about our growth plans. But As we said in our remarks, we see a lot of growth opportunities in all of our businesses, Whether it's broking or consulting or our BDA businesses and we're going to be going through and thinking about them and What we're looking at, but we think that's probably there are opportunities there that are going to be the best use of capital To the extent we don't find ones that are as attractive as we'd like, we will probably do more share repurchase, but we're going to be guided by what's best Thank you. Your next question is from Mark Marcon of Baird. Hi, good morning and thanks for taking my questions. Just wondering with regards to this kind of the margin outlook for the second half of the year, How should we think about that visavisomereplacementhiring? And Related to replacement hiring, generally speaking, when we take a look at the Top leadership team within Willis Towers Watson and then perhaps the layer Or 2 Below. How should we think about the retention On a go forward basis, obviously, there were some agreements that were put in place To basically hold things together through the merger and some of those obviously are no longer relevant. So how should we think about that as we look through until the successor is named? Yes. So I think we One of the things we learned, we've had really incredible performance during the 16 months That we've been in this combination period where we were looking forward to that. And The reason we've had that is because of the performance of our colleagues overall, but especially because of the performance of our leaders And the broad leadership group within Willis Towers Watson has been nothing short of outstanding. And we have incredibly deep talent in this organization. And I think We recognize that. We're going to make sure we do the appropriate things to retain them and to motivate them. But we're moving forward with a lot of confidence there, Mark. Great. And what will you highlight that to a greater extent on September 9? And again, what's How should we think about the margin outlook over the next 6 months to any extent that you can illuminate that? Yes. I think we will highlight some of that on September 9. I think for the margins, we have two things that we say. We're relative we're proud of the margin expansion we've seen over the last couple of years here. We think we can continue that. We're recognizing that there are some features like some travel and entertainment expenses are probably artificially low. However, as we continue to do more of that, we're going to be Looking to make sure that we increase T and E to the extent it drives revenue. And that's what we're going to be trying to make sure we do. So we feel pretty good about continuing to drive margin expansion over the longer timeframe. Your next question comes from Meyer Shields of KBW. Thanks. I guess first question probably for John. Can you talk about how you came up with $1,000,000 as the share repurchase? I'm asking that because of how much cash there is on the balance sheet. Well, if you think about the share repurchases we've had in the past Have bounced around somewhat from year to year. But if you look at what we would have been expected to have done during the 16 months, that's about $1,000,000,000 Okay. No, that's fair. That's probably the catch up. Second question, and I know we've been talking about But it really does seem to be top of mind for investors. Is there any way of guiding or ballparking The impact on revenue growth either in the second quarter or maybe over the next 12 months from the people that you've lost? No, I mean, I think probably if you look at What Mike said about we're expecting mid single digit growth, I mean, I think that gives you the net of everything. So We don't we haven't broken things down any finer than that. Okay. Thank you. Thank you. Your next question is from Brian Meredith of BBS. Yes, thanks. Two questions here. First one, Mike, I think I recall a couple of years ago you talking about the need to integrate systems to really drive Meaningful margin improvement in the CRB business. Where are you in that process? And did the Aon merger agreement kind of put a halt on some of that integration? No, I mean, the teams continue to invest in systems and technology As appropriate. And we've continued to do that. We're obviously we're mindful of thinking about what that could mean. But we've continued to most of CRV is just it's supported really by 2 systems And that's really the way we've continued to invest in those systems. They're core to our brokering capabilities and operations. And Adam and the team are very focused on it and continue to drive efficiency and effectiveness and I see you're seeing that being reflected in their results. Great. Thanks. And then my second question, I'm just curious, John. The sale of Max Mathies and the sale of Miller's, Was that all driven by this merger? And are there certain things that maybe happened that you may not have done As a result of the merger agreement that maybe you want to kind of build rebuild in that area? No, actually both Miller and Max McKesson were started before we announced the merger. Were there anything that you probably did during the course The merger that maybe you're doing in anticipation of it that you'd want to do some reinvestment in that area? I don't think there's anything specific to look at. As we did say, we expected that we would there are some things that we were going Lower on and we'll address them on September 9 that we're going to reinvigorate some initiatives we had, but Nothing major like business whole businesses or anything like that. Great. Good to hear. Thank you. Your next question is from Phil Stefano of Deutsche Bank. Yes. Thanks and good morning. On the margin conversation, it feels like, at least for most of the investors we talked to, there's a focus on the adjusted EBITDA Margin. I think when you most recently gave guidance, it was on the adjusted operating margin. Maybe you could talk about which of these is more important, if there is one, and you want us to be focused on our margin thoughts looking forward? Yes. I mean, I think we tend to focus on operating margin overall And the business, and so I think that that's an appropriate spot for you to focus on as well. I mean that you have Appreciation and amortization that are in there as well, but I think that's really the focal point. Okay. And for my follow-up, so there's all these strategic actions that could be Happening and announced over the next couple of months, there's the potential for share repurchases, do we or don't we lever up the debt, the strategic review for Willow 3. Should we think about the timeline for all these things with the understanding that we don't have a new CEO in place? And presumably, this will be part of The job appeal to someone externally is to be have this strategic footprint and flexibility around them. So maybe you could talk about the timeline for These strategic decisions with the idea that we don't have a CEO looking forward. Yes. I mean, I think we are We're working, as I said, on a review of what opportunities we have across all the businesses, both ones we have For both new ones we've identified during the last 16 months and what we should be doing. It's an effort that is A broad based effort across our leadership and so it will have the buy in of the whole leadership of the company and We think it will be something that will be in the words of and ready for the new CEO to execute on. Thank you. We have no further questions at this time. I will hand the call back over for any additional or closing remarks. Okay. Thanks very much everyone for joining us on today's call and we look forward to seeing you on September 9, We will be discussing the company's growth plans at our Investor Day in New York City. Thank you. This does conclude today's conference call. You may now disconnect.