0001140536-18-000016.txt : 20180606 0001140536-18-000016.hdr.sgml : 20180606 20180606101450 ACCESSION NUMBER: 0001140536-18-000016 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 160 CONFORMED PERIOD OF REPORT: 20171231 FILED AS OF DATE: 20180606 DATE AS OF CHANGE: 20180606 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WILLIS TOWERS WATSON PLC CENTRAL INDEX KEY: 0001140536 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 000000000 STATE OF INCORPORATION: L2 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-16503 FILM NUMBER: 18883128 BUSINESS ADDRESS: STREET 1: C/O WILLIS GROUP LIMITED STREET 2: 51 LIME STREET CITY: LONDON ENGLAND STATE: X0 ZIP: EC3M 7DQ BUSINESS PHONE: 44-20-3124-6000 MAIL ADDRESS: STREET 1: C/O WILLIS GROUP LIMITED STREET 2: 51 LIME STREET CITY: LONDON ENGLAND STATE: X0 ZIP: EC3M 7DQ FORMER COMPANY: FORMER CONFORMED NAME: WILLIS GROUP HOLDINGS PLC DATE OF NAME CHANGE: 20100104 FORMER COMPANY: FORMER CONFORMED NAME: WILLIS GROUP HOLDINGS LTD DATE OF NAME CHANGE: 20010514 10-K/A 1 wtw-20171231x10ka.htm 10-K/A Document


 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark one)
þ
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
or
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-16503
 
wtwlogohrzrgba03.jpg
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
 
Ireland
 (Jurisdiction of incorporation or organization)
 
98-0352587
 (I.R.S. Employer Identification No.) 
c/o Willis Group Limited
51 Lime Street, London EC3M 7DQ, England
(Address of principal executive offices)
 
(011) 44-20-3124-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
 Ordinary Shares, nominal value $0.000304635 per share
 
Name of each exchange on which registered
 NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).  Yes þ     No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of ‘large accelerated filer’, ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 
Emerging growth company    o
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ
The aggregate market value of the voting common equity held by non-affiliates of the Registrant, computed by reference to the last reported price at which the Registrant’s common equity was sold on June 30, 2017 (the last day of the Registrant’s most recently completed second quarter) was $18,544,137,403.
As of February 23, 2018, there were outstanding 132,216,177 ordinary shares, nominal value $0.000304635 per share, of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None.
 




WILLIS TOWERS WATSON
INDEX TO AMENDMENT No. 1 on FORM 10-K/A
For the year ended December 31, 2017  


2



Explanatory Note
This Amendment No. 1 on Form 10-K/A (the ‘Amendment’) amends Willis Towers Watson Public Limited Company’s (the ‘Company’) Annual Report on Form 10-K for the year ended December 31, 2017, as originally filed with the Securities and Exchange Commission on February 28, 2018 (the ‘Original Filing’). The Company is filing this Amendment solely to include an additional paragraph in the opinion on the 2017 financial statements of its independent auditor, Deloitte and Touche LLP, describing their procedures performed in auditing the 2017 adjustments of the Company’s reportable segment structure and adoption of ASU 2016-09 on a full retrospective basis to prior years, and their opinion on the appropriateness and proper application of such adjustments.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by the Company’s principal executive officer and principal financial officer are filed as exhibits to this Amendment under Item 15 of Part IV hereof. We have also updated our XBRL information to be based on the 2017 taxonomy, and included these files in Item 15 Exhibits 101. In addition, new consents of Deloitte & Touche LLP and Deloitte LLP have been included in Item 15 Exhibits 23.1 and 23.2.
No other changes were made to the Original Filing. Except as stated herein, this Amendment does not reflect events occurring after the date of the Original Filing, nor does it modify or update any of the financial or other disclosures as presented in the Original Filing. Information not affected by this Amendment remains unchanged and reflects the disclosures made at the time the Original Filing was filed.

3



Certain Definitions
The following definitions apply throughout this Amendment No. 1 on Form 10-K/A unless the context requires otherwise:
‘We’, ‘Us’, ‘Company’, ‘Willis Towers Watson’, ‘Our’, ‘Willis Towers Watson plc’ or ‘WTW’
 
Willis Towers Watson Public Limited Company, a company organized under the laws of Ireland, and its subsidiaries
 
 
 
‘shares’
 
The ordinary shares of Willis Towers Watson Public Limited Company, nominal value $0.000304635 per share
 
 
 
‘Legacy Willis’ or ‘Willis’
 
Willis Group Holdings Public Limited Company and its subsidiaries, predecessor to Willis Towers Watson, prior to the Merger
 
 
 
‘Legacy Towers Watson’ or ‘Towers Watson’
 
Towers Watson & Co. and its subsidiaries
 
 
 
‘Merger’
 
Merger of Willis Group Holdings Public Limited Company and Towers Watson & Co. pursuant to the Agreement and Plan of Merger, dated June 29, 2015, as amended on November 19, 2015, and completed on January 4, 2016
 
 
 
‘Gras Savoye’
 
GS & Cie Groupe SAS
 
 
 
‘Miller’
 
Miller Insurance Services LLP and its subsidiaries

4



PART II.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WILLIS TOWERS WATSON
INDEX TO AMENDMENT No. 1 on FORM 10-K/A
For the year ended December 31, 2017  



5




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Willis Towers Watson Public Limited Company

Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Willis Towers Watson Public Limited Company and subsidiaries (the “Company”) as of December 31, 2017, the related consolidated statements of comprehensive income, changes in equity and cash flows for the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
The consolidated financial statements of the Company for the year ended December 31, 2016 (the “2016 financial statements”), before the effects of the adjustments to retrospectively apply the changes in accounting discussed in Note 2 and before the effects of the retrospective adjustments to the disclosures for a change in composition of reportable segments discussed in Note 4 to the financial statements, were audited by other auditors whose report, dated March 1, 2017, expressed an unqualified opinion on those statements. We have also audited the adjustments to the 2016 financial statements to retrospectively apply the changes in accounting related to stock compensation as discussed in Note 2 and the retrospective adjustments to the disclosures for a change in the composition of reportable segments as discussed in Note 4 to the financial statements. In our opinion, such retrospective adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2016 financial statements of the Company other than with respect to the retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2016 financial statements taken as a whole.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2018 (not presented herein), expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP
Philadelphia, PA
February 28, 2018

We have served as the Company’s auditor since 2017.


6




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Willis Towers Watson Public Limited Company
Dublin, Ireland

We have audited, before the effects of the adjustments to retrospectively apply the changes in accounting discussed in Note 2 and before the effects of the retrospective adjustments to the disclosures for a change in the composition of reportable segments discussed in Note 4 to the consolidated financial statements, the consolidated balance sheet of Willis Towers Watson Public Limited Company and subsidiaries (the “Company”) as of December 31, 2016, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for the years ended December 31, 2016 and 2015 (the 2016 and 2015 consolidated financial statements before the effects of the adjustments discussed in Notes 2 and 4 to the consolidated financial statements are not presented herein). These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such 2016 and 2015 consolidated financial statements, before the effects of the adjustments to retrospectively apply the changes in accounting discussed in Note 2 and before the effects of the retrospective adjustments to the disclosures for a change in the composition of reportable segments discussed in Note 4 to the consolidated financial statements, present fairly, in all material respects, the financial position of Willis Towers Watson Public Limited Company and subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for the years ended December 31, 2016 and 2015, in conformity with accounting principles generally accepted in the United States of America.
We were not engaged to audit, review or apply any procedures to the adjustments to retrospectively apply the changes in accounting discussed in Note 2 or to the retrospective adjustments to the disclosures for a change in the composition of reportable segments discussed in Note 4 to the consolidated financial statements and, accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied. Those retrospective adjustments were audited by other auditors.

/s/ Deloitte LLP
London, United Kingdom
March 1, 2017

7



WILLIS TOWERS WATSON
Consolidated Statements of Comprehensive Income
(In millions of U.S. dollars, except per share data)
 
 
Years ended December 31,
 
 
2017
 
2016
 
2015
Revenues
 
 
 
 
 
 
Commissions and fees
 
$
8,116

 
$
7,778

 
$
3,809

Interest and other income
 
86

 
109

 
20

Total revenues
 
8,202

 
7,887

 
3,829

Costs of providing services
 
 
 
 
 


Salaries and benefits
 
4,745

 
4,646

 
2,303

Other operating expenses
 
1,534

 
1,551

 
718

Depreciation
 
203

 
178

 
95

Amortization
 
581

 
591

 
76

Restructuring costs
 
132

 
193

 
126

Transaction and integration expenses
 
269

 
177

 
84

Total costs of providing services
 
7,464

 
7,336

 
3,402

Income from operations
 
738

 
551

 
427

Interest expense
 
188

 
184

 
142

Other expense/(income), net
 
61

 
27

 
(55
)
INCOME FROM OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
 
489

 
340

 
340

Benefit from income taxes
 
(100
)
 
(96
)
 
(33
)
INCOME FROM OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
 
589

 
436

 
373

Interest in earnings of associates, net of tax
 
3

 
2

 
11

NET INCOME
 
592

 
438

 
384

Income attributable to non-controlling interests
 
(24
)
 
(18
)
 
(11
)
NET INCOME ATTRIBUTABLE TO WILLIS TOWERS WATSON
 
$
568

 
$
420

 
$
373

 
 
 
 
 
 
 
EARNINGS PER SHARE (i)
 
 
 
 
 
 
Basic earnings per share
 
$
4.21

 
$
3.07

 
$
5.49

Diluted earnings per share
 
$
4.18

 
$
3.04

 
$
5.41

 
 
 
 
 
 
 
Cash dividends declared per share (i)
 
$
2.12

 
$
1.92

 
$
3.28

 
 
 
 
 
 
 
NET INCOME
 
$
592

 
$
438

 
$
384

Other comprehensive income/(loss), net of tax:
 
 
 
 
 
 
Foreign currency translation
 
$
295

 
$
(353
)
 
$
(133
)
Defined pension and post-retirement benefits
 
14

 
(439
)
 
180

Derivative instruments
 
75

 
(75
)
 
(28
)
Other comprehensive income/(loss), net of tax, before non-controlling interests
 
384

 
(867
)
 
19

Comprehensive income/(loss) before non-controlling interests
 
976

 
(429
)
 
403

Comprehensive (income)/loss attributable to non-controlling interests
 
(37
)
 
2

 
(1
)
Comprehensive income/(loss) attributable to Willis Towers Watson
 
$
939

 
$
(427
)
 
$
402

____________________
(i)
Basic and diluted earnings per share and cash dividends declared per share, for the year ended December 31, 2015 have been retroactively adjusted to reflect the reverse stock split on January 4, 2016. See Note 3Merger, Acquisitions and Divestitures for further details.
See accompanying notes to the consolidated financial statements

8



WILLIS TOWERS WATSON
Consolidated Balance Sheets
(In millions of U.S. dollars, except share data)
 
 
December 31,
2017
 
December 31,
2016
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
1,030

 
$
870

Fiduciary assets
 
12,155

 
10,505

Accounts receivable, net
 
2,246

 
2,080

Prepaid and other current assets
 
430

 
337

Total current assets
 
15,861

 
13,792

Fixed assets, net
 
985

 
839

Goodwill
 
10,519

 
10,413

Other intangible assets, net
 
3,882

 
4,368

Pension benefits assets
 
764

 
488

Other non-current assets
 
447

 
353

Total non-current assets
 
16,597

 
16,461

TOTAL ASSETS
 
$
32,458

 
$
30,253

LIABILITIES AND EQUITY
 
 
 
 
Fiduciary liabilities
 
$
12,155

 
$
10,505

Deferred revenue and accrued expenses
 
1,711

 
1,481

Short-term debt and current portion of long-term debt
 
85

 
508

Other current liabilities
 
804

 
876

Total current liabilities
 
14,755

 
13,370

Long-term debt
 
4,450

 
3,357

Liability for pension benefits
 
1,259

 
1,321

Deferred tax liabilities
 
615

 
864

Provision for liabilities
 
558

 
575

Other non-current liabilities
 
544

 
532

Total non-current liabilities
 
7,426

 
6,649

TOTAL LIABILITIES
 
22,181

 
20,019

COMMITMENTS AND CONTINGENCIES
 

 

REDEEMABLE NON-CONTROLLING INTEREST
 
28

 
51

EQUITY (i)
 
 
 
 
Additional paid-in capital
 
10,538

 
10,596

Retained earnings
 
1,104

 
1,452

Accumulated other comprehensive loss, net of tax
 
(1,513
)
 
(1,884
)
Treasury shares, at cost, 17,519 in 2017 and 795,816 in 2016, and 40,000 shares, €1 nominal value, in 2017 and 2016
 
(3
)
 
(99
)
Total Willis Towers Watson shareholders’ equity
 
10,126

 
10,065

Non-controlling interests
 
123

 
118

Total equity
 
10,249

 
10,183

TOTAL LIABILITIES AND EQUITY
 
$
32,458

 
$
30,253

____________________
(i)
Equity includes (a) Ordinary shares $0.000304635 nominal value; Authorized 1,510,003,775; Issued 132,139,581 (2017) and 137,075,068 (2016); Outstanding 132,139,581 (2017) and 136,296,771 (2016); (b) Ordinary shares, €1 nominal value; Authorized and Issued 40,000 shares in 2017 and 2016; and (c) Preference shares, $0.000115 nominal value; Authorized 1,000,000,000 and Issued none in 2017 and 2016.

See accompanying notes to the consolidated financial statements

9



WILLIS TOWERS WATSON
Consolidated Statements of Cash Flows
(In millions of U.S. dollars)
 
 
Years ended December 31,
 
 
2017
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
NET INCOME
 
$
592

 
$
438

 
$
384

Adjustments to reconcile net income to total net cash from operating activities:
 
 
 
 
 
 
Depreciation
 
252

 
178

 
95

Amortization
 
581

 
591

 
76

Net periodic benefit of defined benefit pension plans
 
(91
)
 
(93
)
 
(78
)
Provision for doubtful receivables from clients
 
17

 
36

 
5

Benefit from deferred income taxes
 
(285
)
 
(244
)
 
(99
)
Share-based compensation
 
67

 
123

 
64

Non-cash foreign exchange loss/(gain)
 
77

 
(28
)
 
73

Net gain on disposal of operations and fixed and intangible assets and gain on re-measurement of equity interests
 
(13
)
 

 
(90
)
Other, net
 
(57
)
 
27

 
(8
)
Changes in operating assets and liabilities, net of effects from purchase of subsidiaries:
 
 
 
 
 
 
Accounts receivable
 
(64
)
 
(101
)
 
(155
)
Fiduciary assets
 
(1,167
)
 
(249
)
 
(508
)
Fiduciary liabilities
 
1,167

 
249

 
508

Other assets
 
(128
)
 
(233
)
 
(5
)
Other liabilities
 
(51
)
 
174

 
(61
)
Provisions
 
(35
)
 
65

 
43

Net cash from operating activities
 
862

 
933

 
244

CASH FLOWS (USED IN)/FROM INVESTING ACTIVITIES
 
 
 
 
 
 
Additions to fixed assets and software for internal use
 
(300
)
 
(218
)
 
(146
)
Capitalized software costs
 
(75
)
 
(85
)
 

Acquisitions of operations, net of cash acquired
 
(13
)
 
476

 
(857
)
Net disposals of operations
 
57

 
(1
)
 
44

Other, net
 
(4
)
 
23

 
16

Net cash (used in)/from investing activities
 
(335
)
 
195

 
(943
)
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
 
 
 
 
 
 
Net borrowings/(payments) on revolving credit facility
 
642

 
(237
)
 
469

Senior notes issued
 
649

 
1,606

 

Proceeds from issuance of other debt
 
32

 
404

 
592

Debt issuance costs
 
(9
)
 
(14
)
 
(5
)
Repayments of debt
 
(734
)
 
(1,901
)
 
(166
)
Repurchase of shares
 
(532
)
 
(396
)
 
(82
)
Proceeds from issuance of shares
 
61

 
63

 
131

Payments for share cancellation related to legal settlement
 
(177
)
 

 

Payments of deferred and contingent consideration related to acquisitions
 
(65
)
 
(67
)
 

Cash paid for employee taxes on withholding shares
 
(18
)
 
(13
)
 
(1
)
Dividends paid
 
(277
)
 
(199
)
 
(277
)
Acquisitions of and dividends paid to non-controlling interests
 
(51
)
 
(21
)
 
(21
)
Net cash (used in)/from financing activities
 
(479
)
 
(775
)
 
640

INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
 
48

 
353

 
(59
)
Effect of exchange rate changes on cash and cash equivalents
 
112

 
(15
)
 
(44
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
 
870

 
532

 
635

CASH AND CASH EQUIVALENTS, END OF YEAR
 
$
1,030

 
$
870

 
$
532


See accompanying notes to the consolidated financial statements

10



WILLIS TOWERS WATSON
Consolidated Statements of Changes in Equity
(In millions of U.S. dollars and number of shares in thousands)
 
Shares
outstanding (i)
 
Additional paid-in capital
 
Retained earnings
 
Treasury shares
 
AOCL (ii)
 
Total WTW shareholders’ equity
 
Non-controlling interests
 
Total equity
 
 
 
Redeemable Non-controlling interest (iii)
 
Total
Balance as of January 1, 2015
67,460

 
$
1,524

 
$
1,530

 
$
(3
)
 
$
(1,066
)
 
$
1,985

 
$
22

 
$
2,007

 
 
 
$
59

 
 
Shares repurchased
(646
)
 

 
(82
)
 

 

 
(82
)
 

 
(82
)
 
 
 

 
 
Net income

 

 
373

 

 

 
373

 
8

 
381

 
 
 
3

 
$
384

Dividends

 

 
(224
)
 

 

 
(224
)
 
(11
)
 
(235
)
 
 
 
(5
)
 
 
Other comprehensive income/(loss)

 

 

 

 
29

 
29

 
(6
)
 
23

 
 
 
(4
)
 
$
19

Issuance of shares under employee stock compensation plans
1,811

 
128

 

 

 

 
128

 

 
128

 
 
 

 
 
Share-based compensation

 
64

 

 

 

 
64

 

 
64

 
 
 

 
 
Additional non-controlling interests

 
(53
)
 

 

 

 
(53
)
 
118

 
65

 
 
 

 
 
Foreign currency translation

 
9

 

 

 

 
9

 

 
9

 
 
 

 
 
Balance as of December 31, 2015
68,625

 
$
1,672

 
$
1,597

 
$
(3
)
 
$
(1,037
)
 
$
2,229

 
$
131

 
$
2,360

 
 
 
$
53

 
 
Shares repurchased
(3,170
)
 

 
(300
)
 
(96
)
 

 
(396
)
 

 
(396
)
 
 
 

 
 
Net income

 

 
420

 

 

 
420

 
11

 
431

 
 
 
7

 
$
438

Dividends

 

 
(265
)
 

 

 
(265
)
 
(9
)
 
(274
)
 
 
 
(5
)
 
 
Other comprehensive loss

 

 

 

 
(847
)
 
(847
)
 
(16
)
 
(863
)
 
 
 
(4
)
 
$
(867
)
Issuance of shares under employee stock compensation plans
1,342

 
66

 

 

 

 
66

 

 
66

 
 
 

 
 
Issuance of shares for acquisitions
69,500

 
8,686

 

 

 

 
8,686

 

 
8,686

 
 
 

 
 
Replacement share-based compensation awards issued on acquisition

 
37

 

 

 

 
37

 

 
37

 
 
 

 
 
Share-based compensation

 
123

 

 

 

 
123

 

 
123

 
 
 

 
 
Additional non-controlling interests

 
7

 

 

 

 
7

 
1

 
8

 

 

 
 
Foreign currency translation

 
5

 

 

 

 
5

 

 
5

 
 
 

 
 
Balance as of December 31, 2016
136,297

 
$
10,596

 
$
1,452

 
$
(99
)
 
$
(1,884
)
 
$
10,065

 
$
118

 
$
10,183

 
 
 
$
51

 
 

(Continued)












11



WILLIS TOWERS WATSON
Consolidated Statements of Changes in Equity
(In millions of U.S. dollars and number of shares in thousands)
(Continued)
 
Shares
outstanding (i)
 
Additional paid-in capital
 
Retained earnings
 
Treasury shares
 
AOCL (ii)
 
Total WTW shareholders’ equity
 
Non-controlling interests
 
Total equity
 
 
 
Redeemable Non-controlling interest (iii)
 
Total
Adoption of ASU 2016-16 (See Note 2)

 

 
(3
)
 

 

 
(3
)
 

 
(3
)
 
 
 

 
 
Shares repurchased
(3,797
)
 

 
(532
)
 

 

 
(532
)
 

 
(532
)
 
 
 

 
 
Shares canceled
(1,415
)
 
(177
)
 
(96
)
 
96

 

 
(177
)
 

 
(177
)
 
 
 

 
 
Net income

 

 
568

 

 

 
568

 
16

 
584

 
 
 
8

 
$
592

Dividends

 

 
(285
)
 

 

 
(285
)
 
(15
)
 
(300
)
 
 
 
(3
)
 
 
Other comprehensive income

 

 

 

 
371

 
371

 
7

 
378

 
 
 
6

 
$
384

Issuance of shares under employee stock compensation plans
1,055

 
62

 

 

 

 
62

 

 
62

 
 
 

 
 
Share-based compensation

 
67

 

 

 

 
67

 

 
67

 
 
 

 
 
Acquisition of non-controlling interests

 

 

 

 

 

 
(3
)
 
(3
)
 
 
 
(34
)
 
 
Foreign currency translation

 
(10
)
 

 

 

 
(10
)
 

 
(10
)
 
 
 

 
 
Balance as of December 31, 2017
132,140

 
$
10,538

 
$
1,104

 
$
(3
)
 
$
(1,513
)
 
$
10,126

 
$
123

 
$
10,249

 
 
 
$
28

 
 
_____________________________________________
(i)
The nominal value of the ordinary shares and the number of ordinary shares issued in the year ended December 31, 2015 have been retroactively adjusted to reflect the reverse stock split on January 4, 2016. See Note 3Merger, Acquisitions and Divestitures for further details.
(ii)
Accumulated other comprehensive loss, net of tax (‘AOCL’).
(iii)
The non-controlling interest is related to Max Matthiessen Holding AB.

See accompanying notes to the consolidated financial statements



12



WILLIS TOWERS WATSON
Notes to the Consolidated Financial Statements
(Tabular amounts are in millions of U.S. dollars, except per share data)
Note 1 — Nature of Operations
Willis Towers Watson plc is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. Willis Towers Watson has more than 43,000 employees and services clients in more than 140 countries and territories. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. We believe our broad perspective allows us to see the critical intersections between talent, assets and ideas - the dynamic formula that drives business performance.
We offer our clients a broad range of services to help them identify and control their risks, and to enhance business performance by improving their ability to attract, retain and engage a talented workforce. Our risk control services range from strategic risk consulting (including providing actuarial analysis), to a variety of due diligence services, to the provision of practical on-site risk control services (such as health and safety or property loss control consulting), as well as analytical and advisory services (such as hazard modeling and reinsurance optimization studies). We assist clients in planning how to manage incidents or crises when they occur. These services include contingency planning, security audits and product tampering plans. We help our clients enhance their business performance by delivering consulting services, technology and solutions that help them anticipate, identify and capitalize on emerging opportunities in human capital management as well as investment advice to help our clients develop disciplined and efficient strategies to meet their investment goals.
As an insurance broker, we act as an intermediary between our clients and insurance carriers by advising our clients on their risk management requirements, helping them determine the best means of managing risk and negotiating and placing insurance with insurance carriers through our global distribution network. We operate the largest private Medicare exchange in the United States (‘U.S.’). Through this exchange and those for active employees, we help our clients move to a more sustainable economic model by capping and controlling the costs associated with healthcare benefits.
We are not an insurance company, and therefore we do not underwrite insurable risks for our own account.
The Merger with Towers Watson that closed on January 4, 2016 affects the comparability between 2015 and the later periods presented. See Note 3Merger, Acquisitions and Divestitures for additional information.
Note 2Basis of Presentation, Significant Accounting Policies and Recent Accounting Pronouncements
Significant Accounting Policies
Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Willis Towers Watson and those of our majority-owned and controlled subsidiaries. Intercompany accounts and transactions have been eliminated.
We determine whether we have a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (‘VIE’). Variable interest entities are entities that lack one or more of the characteristics of a voting interest entity and therefore require a different approach in determining which party involved with the VIE should consolidate the entity. With a VIE, either the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties, or the equity holders, as a group, do not have the power to direct the activities that most significantly impact its financial performance, the obligation to absorb expected losses of the entity, or the right to receive the expected residual returns of the entity. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE.
Voting interest entities are entities that have sufficient equity and provide equity investors voting rights that give them the power to make significant decisions related to the entity’s operations. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. Accordingly, we consolidate our voting interest entity investments in which we hold, directly or indirectly, more than 50% of the voting rights.
Use of Estimates — These consolidated financial statements conform to accounting principles generally accepted in the United States of America (‘U.S. GAAP’), which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our estimates, judgments and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. Estimates are used when accounting for revenue recognition, the selection of useful lives of fixed and intangible assets, impairment testing, valuation of billed and unbilled receivables from

13



clients, discretionary compensation, income taxes, pension assumptions, incurred but not reported claims, legal reserves and goodwill and intangible assets.
Going Concern — Management evaluates at each annual and interim period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. Management’s evaluation is based on relevant conditions and events that are known and reasonably knowable at the date that the consolidated financial statements are issued. Management has concluded that there are no conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date of these financial statements.
Fair Value of Financial Instruments — The carrying values of our cash and cash equivalents, accounts receivable, accrued expenses, revolving lines of credit and term loans approximate their fair values because of the short maturity and liquidity of those instruments. We consider the difference between carrying value and fair value to be immaterial for our senior notes. The fair value of our senior notes are considered Level 2 financial instruments as they are corroborated by observable market data. See Note 11 — Fair Value Measurements for additional information about our measurements of fair value.
Investments in AssociatesInvestments are accounted for using the equity method of accounting, included within other non-current assets in the consolidated balance sheets, if the Company has the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company has an equity ownership in the voting stock of the investee between 20 and 50 percent, although other factors, such as representation on the board of directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is carried at the cost of acquisition, plus the Company’s equity in undistributed net income since acquisition, less any dividends received since acquisition.
The Company periodically reviews its investments in associates for which fair value is less than cost to determine if the decline in value is other than temporary. If the decline in value is judged to be other than temporary, the cost basis of the investment is written down to fair value. The amount of any write-down is included in the consolidated statements of comprehensive income.
Common Shares Split — On January 4, 2016, the Company effected a 1 to 2.6490 reverse share split to shareholders of record as of January 4, 2016. All share and per share information has been retroactively adjusted to reflect the reverse share split and show the new number of shares. See Note 3Merger, Acquisitions and Divestitures for additional information about our Merger and reverse share split.
Cash and Cash Equivalents — Cash and cash equivalents primarily consist of time deposits with original maturities of 90 days or less. Willis Limited, our U.K. brokerage subsidiary regulated by the Financial Conduct Authority, is currently required to maintain $140 million in unencumbered and available financial resources, of which at least $79 million must be in cash, for regulatory purposes. Term deposits and certificates of deposits with original maturities greater than 90 days are considered to be short-term investments. There is no restricted cash included in our cash and cash equivalents balance, as these amounts are included in fiduciary assets.
Fiduciary Assets and Liabilities — Fiduciary funds represent unremitted premiums received from insureds and unremitted claims or refunds received from insurers. Fiduciary funds are generally required to be kept in certain regulated bank accounts subject to guidelines which emphasize capital preservation and liquidity. Such funds are not available to service the Company’s debt or for other corporate purposes. Notwithstanding the legal relationships with insureds and insurers, the Company is entitled to retain investment income earned on fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds. The period for which the Company holds such funds is dependent upon the date the insured remits the payment of the premium to the Company, or the date the Company receives refunds from the insurers, and the date the Company is required to forward such payment to the insurer, or insured, respectively. In certain instances, the Company advances premiums, refunds or claims to insurance underwriters or insureds prior to collection. Such advances are made from fiduciary funds and are reflected in the consolidated balance sheets as fiduciary assets. Fiduciary liabilities represent the obligations to remit fiduciary funds and fiduciary receivables to insurers or insureds. Certain of our health and welfare benefits administration outsourcing agreements require us to hold funds on behalf of clients to pay obligations on their behalf. These amounts are included in fiduciary assets and fiduciary liabilities on the consolidated balance sheets.
Accounts Receivable — Accounts receivable includes both billed and unbilled receivables and is stated at estimated net realizable values. Provision for billed receivables is recorded, when necessary, in an amount considered by management to be sufficient to meet probable future losses related to uncollectible accounts. Accrued and unbilled receivables are stated at net realizable value which includes an allowance for accrued and unbillable amounts. See Note 14Supplementary Information for Certain Balance Sheet Accounts for additional information about our accounts receivable.

14



Income Taxes — The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and capital loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the consolidated statement of comprehensive income in the period in which the change is enacted. Deferred tax assets are reduced through the establishment of a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized. The Company adjusts valuation allowances to measure deferred tax assets at the amounts considered realizable in future periods if the Company’s facts and assumptions change. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and the results of recent financial operations. We place more reliance on evidence that is objectively verifiable.
Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon examination. The Company recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on the basis of the technical merits of the position assuming the tax authorities have full knowledge of the position and all relevant facts. Recognition also occurs upon either the lapse of the relevant statute of limitations, or when positions are effectively settled. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely to be realized on settlement with the tax authority. The Company adjusts its recognition of uncertain tax benefits in the period in which new information is available impacting either the recognition or measurement of its uncertain tax positions. Such adjustments are reflected as increases or decreases to income taxes in the period in which they are determined.
The Company recognizes interest and penalties relating to unrecognized tax benefits within income taxes. See Note 6Income Taxes for additional information regarding the Company’s income taxes.
Foreign Currency — Transactions in currencies other than the functional currency of the entity are recorded at the rates of exchange prevailing at the date of the transaction. Monetary assets and liabilities in currencies other than the functional currency are translated at the rates of exchange prevailing at the balance sheet date and the related transaction gains and losses are reported as income or expense in the consolidated statements of comprehensive income. Certain intercompany loans are determined to be of a long-term investment nature. The Company records transaction gains and losses from re-measuring such loans as other comprehensive income in the consolidated statements of comprehensive income.
Upon consolidation, the results of operations of subsidiaries and associates whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the average exchange rates and assets and liabilities are translated at year-end exchange rates. Translation adjustments are presented as a separate component of other comprehensive income in the financial statements and are included in net income only upon sale or liquidation of the underlying foreign subsidiary or associated company.
Derivatives — The Company uses derivative financial instruments for other than trading purposes to alter the risk profile of an existing underlying exposure. Interest rate swaps have been used to manage interest risk exposures. Forward foreign currency exchange contracts are used to manage currency exposures arising from future income and expenses. The fair values of derivative contracts are recorded in other assets and other liabilities. The effective portions of changes in the fair value of derivatives that qualify for hedge accounting as cash flow hedges are recorded in other comprehensive income. Amounts are reclassified from other comprehensive income into earnings when the hedged exposure affects earnings. If the derivative is designated and qualifies as an effective fair value hedge, the changes in the fair value of the derivative and of the hedged item associated with the hedged risk are both recognized in earnings. The amount of hedge ineffectiveness recognized in earnings is based on the extent to which an offset between the fair value of the derivative and hedged item is not achieved. Changes in fair value of derivatives that do not qualify for hedge accounting, together with any hedge ineffectiveness on those that do qualify, are recorded in other operating expenses or interest expense as appropriate.
The Company evaluates whether its contracts include clauses or conditions which would be required to be separately accounted for at fair value as embedded derivatives. See Note 9Derivative Financial Instruments for additional information about the Company’s derivatives.
Commitments, Contingencies and Provisions for Liabilities — The Company establishes provisions against various actual and potential claims, lawsuits and other proceedings relating principally to alleged errors and omissions in the ordinary course of business. Such provisions cover claims that have been reported but not paid and also unasserted claims and related legal fees. These provisions are established based on actuarial estimates together with individual case reviews and are believed to be adequate in light of current information and legal advice. In certain cases, where a range of loss exists, we accrue the minimum amount in the range if no amount within the range is a better estimate than any other amount. To the extent such losses can be recovered under the Company’s insurance programs, estimated recoveries are recorded when losses for insured events are recognized and the recoveries are likely to be realized. Significant management judgment is required to estimate the amounts of such unasserted claims and the related insurance recoveries. The Company analyzes its litigation exposure based on available

15



information, including consultation with outside counsel handling the defense of these matters, to assess its potential liability. These contingent liabilities are not discounted. See Note 13Commitments and Contingencies and Note 14Supplementary Information for Certain Balance Sheet Accounts for additional information about our commitments, contingencies and provisions for liabilities.
Share-Based Compensation — The Company has equity-based compensation plans that provide for grants of restricted stock units and stock options to employees and non-employee directors of the Company.
The Company expenses equity-based compensation, which is included in Salaries and benefits in the consolidated statements of comprehensive income, primarily on a straight-line basis over the requisite service period. The significant assumptions underlying our expense calculations include the fair value of the award on the date of grant, the estimated achievement of any performance targets and estimated forfeiture rates. The awards under equity-based compensation are classified as equity and included as a component of equity on the Company’s consolidated balance sheets, as the ultimate payment of such awards will not be achieved through use of the Company’s cash or other assets. See Note 17Share-based Compensation for additional information about the Company’s share-based compensation.
Fixed Assets — Fixed assets are stated at cost less accumulated depreciation. Expenditures for improvements are capitalized; repairs and maintenance are charged to expense as incurred. Depreciation is computed primarily using the straight-line method based on the estimated useful lives of assets.
Depreciation on internally developed software is amortized over the estimated useful life of the asset ranging from 3 to 10 years. Buildings include assets held under capital leases and are depreciated over the lesser of 50 years, the asset lives or the lease terms. Depreciation on leasehold improvements is calculated over the lesser of the useful lives of the assets or the remaining lease terms. Depreciation on furniture and equipment is calculated based on a range of 3 to 10 years. Land is not depreciated.
Long-lived assets are tested for recoverability whenever events or changes in circumstance indicate that their carrying amounts may not be recoverable. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. Recoverability is determined based on the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. See Note 7Fixed Assets for additional information about our fixed assets.
Operating Leases —Rentals payable on operating leases are charged on a straight-line basis to Other operating expenses in the consolidated statements of comprehensive income over the lease term. See Note 13Commitments and Contingencies for additional information about our operating leases.
Goodwill and Other Intangible Assets — In applying the acquisition method of accounting for business combinations, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment annually as of October 1, and whenever indicators of impairment exist. The fair values of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.
Acquired intangible assets are amortized over the following periods:
 
Amortization basis
 
Expected life
(years)
Client relationships
In line with underlying cash flows
 
5 to 20
Software
In line with underlying cash flows or straight-line basis
 
4 to 7
Product
In line with underlying cash flows
 
17.5
Trademark and trade name
Straight-line basis
 
14 to 25
Favorable agreements
Straight-line basis
 
7
Management contracts
Straight-line basis
 
18
Goodwill is tested for impairment annually as of October 1, and whenever indicators of impairment exist. Goodwill is tested at the reporting unit level, and the Company had nine reporting units as of October 1, 2017. In the first step of the impairment test, the fair value of each reporting unit is compared with its carrying value, including goodwill. If the carrying value of a reporting

16



unit exceeds its fair value, the amount of an impairment loss, if any, is calculated in the second step of the impairment test by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The Company’s goodwill impairment tests for the years ended December 31, 2017 and 2016 have not resulted in any impairment charges. See Note 8Goodwill and Other Intangible Assets for additional information about our goodwill and other intangible assets.
Pensions — The Company has multiple defined benefit pension and defined contribution plans. The net periodic cost of the Company’s defined benefit plans are measured on an actuarial basis using various methods and actuarial assumptions. The most significant assumptions are the discount rates (calculated from the 2016 fiscal year and forward using the granular approach to calculating service and interest cost) and the expected long-term rates of return on plan assets. Other material assumptions include rates of participant mortality, the expected long-term rates of compensation and pension increases and rates of employee termination. Gains and losses occur when actual experience differs from actuarial assumptions. If such gains or losses exceed ten percent of the greater of plan assets or plan liabilities, the Company amortizes those gains or losses over the average remaining service period or average remaining life expectancy, as appropriate, of the plan participants. In accordance with U.S. GAAP, the Company records on its consolidated balance sheets the funded status of its pension plans based on the projected benefit obligation.
Contributions to the Company’s defined contribution plans are recognized as incurred. Differences between contributions payable in the year and contributions actually paid are shown as either other assets or other liabilities in the consolidated balance sheets. See Note 12Retirement Benefits for additional information about our pensions.
Revenue RecognitionRevenues include insurance commissions, fees in lieu of commission, fees for consulting services rendered, hosted and delivered software, survey sales, interest and other income.
Revenue recognized in excess of billings is recorded as unbilled accounts receivable. Cash collections in excess of revenue recognized are recorded as deferred revenue until the revenue recognition criteria are met. Client reimbursable expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included in revenue, and an equivalent amount of reimbursable expenses is included in other operating expenses as a cost of revenue. Taxes collected from customers and remitted to government authorities are recorded net and are excluded from revenue.
Commissions and fees
Commissions revenue. Brokerage commissions and fees negotiated in lieu of commissions are recognized at the later of the policy inception date or when the policy placement is complete. In situations in which our fees are not fixed and determinable due to the uncertainty of the commission fee per policy, we recognize revenue as the fees are determined. Commissions on additional premiums and adjustments are recognized when approved by or agreed between the parties and collectability is reasonably assured.
Consulting revenue. The majority of our consulting revenues consists of fees earned from providing consulting services. We recognize revenues from these consulting engagements when hours are worked, either on a time-and-expense basis or on a fixed-fee basis, depending on the terms and conditions defined at the inception of an engagement with a client. We have engagement letters with our clients that specify the terms and conditions upon which the engagements are based. These terms and conditions can only be changed upon agreement by both parties. Individual billing rates are principally based on a multiple of salary and compensation costs.
Revenues for fixed-fee arrangements are based upon the proportional performance method to the extent estimates can be made of the remaining work required under the arrangement. If we do not have sufficient information to estimate proportional performance, we recognize the fees straight-line over the contract period. We typically have four types of fixed-fee arrangements: annual recurring projects, projects of a short duration, stand-ready obligations and non-recurring system projects.
Annual recurring projects and projects of short duration. These projects are typically straightforward and highly predictable in nature. As a result, the project manager and financial staff are able to identify, as the project status is reviewed and bills are prepared monthly, the occasions when cost overruns could lead to the recording of a loss accrual.
Stand-ready obligations. Where we are entitled to fees (whether fixed or variable based on assets under management or a per-participant per-month basis) regardless of the hours, we generally recognize this revenue on either a straight-line basis or as the variable fees are calculated.
Non-recurring system projects. These projects are longer in duration and subject to more changes in scope as the project progresses. Certain software or outsourced administration contracts generally provide that if the client

17



terminates a contract, we are entitled to an additional payment for services performed through termination designed to recover our up-front cost of implementation.
Revenue recognition for fixed-fee engagements is affected by a number of factors that change the estimated amount of work required to complete the project such as changes in scope, the staffing on the engagement and/or the level of client participation. The periodic engagement evaluations require us to make judgments and estimates regarding the overall profitability and stage of project completion that, in turn, affect how we recognize revenue. We recognize a loss on an engagement when estimated revenues to be received for that engagement are less than the total estimated costs associated with the engagement. Losses are recognized in the period in which the loss becomes probable and the amount of the loss is reasonably estimable.
Hosted software. We have developed various software programs and technologies that we provide to clients in connection with consulting services. In most instances, such software is hosted and maintained by us and ownership of the technology and rights to the related code remain with us. We defer costs for software developed to be utilized in providing services to a client, but for which the client does not have the contractual right to take possession, during the implementation stage. We recognize these deferred costs from the go live date, signaling the end of the implementation stage, until the end of the initial term of the contract with the client. We determined that the system implementation and customized ongoing administrative services are one combined service. Revenue is recognized over the service period, after the go live date, on a straight-line basis. As a result, we do not recognize revenue during the implementation phase of an engagement.
Delivered software. We deliver software under arrangements with clients who take possession of our software. The maintenance associated with the initial software fees is a fixed percentage which enables us to determine the stand-alone value of the delivered software separate from the maintenance. We recognize the initial software fees as software is delivered to the client, and we recognize the maintenance fees ratably over the contract period based on each element’s relative fair value. For software arrangements in which initial fees are received in connection with mandatory maintenance for the initial software license to remain active, we determined that the initial maintenance period is substantive. Therefore, we recognize the fees for the initial license and maintenance bundle ratably over the initial contract term, which is generally one year. Each subsequent renewal fee is recognized ratably over the contractually stated renewal period.
Surveys. We collect, analyze and compile data in the form of surveys for our clients who have the option of participating in the survey. The surveys are published online via a web tool that provides simplistic functionality. We have determined that the web tool is inconsequential to the overall arrangement. We record the survey revenues when the results are delivered online and made available to our clients who have a contractual right to the data. If the data is updated more frequently than annually, we recognize the survey revenues ratably over the contractually stated period.
Interest and other income
Interest income. Interest income is recognized as earned.
Other Income. Other income includes gains on disposal of intangible assets, which primarily arise from settlements through enforcing non-compete agreements in the event of losing accounts through producer defection or the disposal of books of business.
Recent Accounting Pronouncements
Not yet adopted
In May 2014, the Financial Accounting Standards Board (‘FASB’) issued Accounting Standard Update (‘ASU’) No. 2014-09, Revenue From Contracts With Customers. The new standard supersedes most current revenue recognition guidance and eliminates most industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. Additional ASUs have since been issued which provide further guidance, examples and technical corrections for the implementation of ASU No. 2014-09. All related guidance has been codified into, and is now known as, Accounting Standards Codification (‘ASC’) 606. The guidance was effective for the Company at the beginning of its 2018 fiscal year, with early adoption permitted.
As a result of analyzing our various revenue streams to determine the full impact this standard will have on our revenue recognition, cost deferral, systems and processes, the Company has determined the following:

18



The Company has adopted the standard using the modified retrospective approach on January 1, 2018, and has applied the new standard only to contracts that are not completed as of the transition date.
Certain revenue streams have accelerated revenue recognition timing. In particular, the revenue recognition for our Individual Marketplace (formerly Retiree & Access Exchanges) has moved from monthly ratable recognition over the policy period, to the recognition upon placement of the policy. Consequently, the Company will now recognize the majority of one calendar year of expected commissions during its fourth quarter of the preceding calendar year. Therefore, at the adoption date, we have reflected an adjustment to retained earnings for the portion of the revenue that would otherwise have been recognized during our 2018 calendar year since our earnings process was largely completed during the fourth quarter of 2017.
Additionally, the revenue recognition for proportional treaty broking commissions has moved from recognition upon the receipt of the monthly or quarterly statements, to the recognition of an estimate of expected commissions upon the policy effective date. Since the majority of revenue recognized historically based on these monthly or quarterly statements was received over a two-year period, we will reflect an adjustment to retained earnings at the adoption date for the portion of revenue that would otherwise have been recognized during our 2018 calendar year related to policies effective in 2017 or prior.
Revenue recognition for certain other revenue streams has changed from recognizing revenue at a point in time to recognizing revenue over time. Specifically, certain arrangements in our Health and Benefits broking business will now be recognized evenly over the year to reflect the nature of the ongoing obligations to our customers as well as receipt of the monthly commissions. These contracts are monthly or annual in nature and are considered complete as of the transition date. Therefore, no retained earnings adjustment is required.
Our accounting for deferred costs will change. First, for those portions of the business that previously deferred costs (related to system implementation activities), the length of time over which we amortize those costs will extend to a longer estimated contract term. For 2017 calendar year and prior, these costs were amortized over a typical period of 3-5 years in accordance with the initial stated terms of the customer agreements. Second, other types of arrangements with associated costs now meet the criteria for cost deferral under ASC 606. This guidance will now apply to our broking arrangements and certain consulting engagements. We have calculated a retained earnings adjustment to reflect this cumulative change for contracts not complete as of the transition date.
Although we are still finalizing the impact to retained earnings as of January 1, 2018, we expect the total range of adjustment, before the effect of taxes, to be an increase to retained earnings of $375 million to $475 million.
In preparation for the additional disclosure requirements that will be included in our quarterly and annual filings beginning with our calendar year 2018 first quarter filing, we have implemented additional tools and technologies to support our revenue recognition and data collection processes.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The ASU becomes effective for the Company at the beginning of its 2019 calendar year, at which time the Company will adopt it, although early adoption is permitted. While the Company continues to assess the impact of the ASU to its consolidated financial statements, the majority of its leases are currently considered operating leases and will be capitalized as a lease asset on its balance sheet with a related lease liability for the obligated lease payments.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which amends guidance on presentation and classification of eight specific cash flow issues with the objective of reducing diversity in practice. The ASU became effective for the Company at the beginning of its 2018 calendar year, at which time the Company adopted it. Consistent with the transition guidance, the Company will reflect the new guidance as of the beginning of 2018 in our first quarter Form 10-Q. The Company is still assessing the impact of this ASU, but it believes the impact on its financial statements will be immaterial.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill

19



allocated to that reporting unit. The ASU becomes effective for the Company on January 1, 2020. The amendments in this ASU should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and the Company is still evaluating when to adopt this ASU. The Company does not expect an immediate impact to its consolidated financial statements upon adopting this ASU since the most recent Step 1 goodwill impairment test resulted in fair values in excess of carrying values for all reporting units at October 1, 2017.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires entities to (1) disaggregate the current service-cost component from the other components of net benefit cost (the ‘other components’) and present it in the income statement with other current compensation costs for related employees and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In addition, the ASU requires entities to disclose the income statement lines that contain the other components if they are not presented or included in appropriately described separate lines. The ASU became effective for the Company on January 1, 2018, at which time the Company adopted it, and will apply the standard retrospectively beginning in its 2018 first quarter Form 10-Q. The Company has determined that, while the classification of some components of net benefit cost will change within the accompanying consolidated statement of comprehensive income, there is no material impact on its consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Stock Compensation - Scope of Modification Accounting, which provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU requires that an entity should account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU became effective for the Company on January 1, 2018, at which time the Company adopted it, and should be applied prospectively to an award modified on or after the adoption date. There is no immediate impact to the accompanying consolidated financial statements, until such time as an award may be modified in 2018 or forward.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which provides amendments under six specific objectives to better align risk management activities and financial reporting, and to simplify disclosure, presentation, hedging and the testing and measurement of ineffectiveness. The ASU becomes effective for the Company on January 1, 2019. Early adoption is permitted, and any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently assessing when it will adopt this standard, and the impact that this standard will have on its consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows for a reclassification from accumulated other comprehensive income to retained earnings for ‘stranded’ tax effects (those tax effects of items within accumulated other comprehensive income resulting from the historical corporate income tax rate reduction) resulting from the Tax Cuts and Jobs Act. The amendments within this ASU also require certain disclosures about stranded tax effects. The ASU becomes effective for the Company on January 1, 2019. Early adoption is permitted, and any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently assessing when it will adopt this standard, and the impact that this standard will have on its consolidated financial statements.
Adopted
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The ASU became effective for the Company on January 1, 2017. In accordance with the prospective adoption of the recognition of excess tax benefits and deficiencies in the consolidated statements of comprehensive income, we recognized a $7 million tax benefit in provision for income taxes during the year ended December 31, 2017. In addition, we elected to prospectively adopt the amendment to present excess tax benefits on share-based compensation as an operating activity, resulting in the recognition of a $7 million excess tax benefit as an operating activity in the consolidated statement of cash flows for the year ended December 31, 2017. We elected to continue to estimate expected forfeitures. We also retrospectively adopted the amendment to present cash payments to tax authorities in connection with shares withheld to meet statutory tax withholding requirements as a financing activity. As a result, these $13 million and $1 million uses of cash were reclassified from net cash from operating activities to net cash used in financing activities in the consolidated statement of cash flows for the years ended December 31, 2016, and December 31, 2015, respectively.
In October 2016, the FASB issued ASU No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory, which amends guidance regarding the recognition of current and deferred income taxes for intra-entity

20



asset transfers. Current U.S. GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The ASU states that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company elected to early adopt this standard on January 1, 2017, and recorded a cumulative reduction to retained earnings of $3 million.
Note 3Merger, Acquisitions and Divestitures
Merger
On January 4, 2016, pursuant to the Agreement and Plan of Merger, dated June 29, 2015, as amended on November 19, 2015, between Willis, Towers Watson, and Citadel Merger Sub, Inc., a wholly-owned subsidiary of Willis formed for the purpose of facilitating this transaction (‘Merger Sub’), Merger Sub merged with and into Towers Watson, with Towers Watson continuing as the surviving corporation and as a wholly-owned subsidiary of Willis.
Towers Watson was a leading global professional services firm operating throughout the world, dating back more than 100 years. The Merger allows the combined firm to go to market with complementary strategic product and services offerings.
At the effective time of the Merger (the ‘Effective Time’), each issued and outstanding share of Towers Watson common stock (the ‘Towers Watson shares’), was converted into the right to receive 2.6490 validly issued, fully paid and nonassessable ordinary shares of Willis (the ‘Willis ordinary shares’), $0.000115 nominal value per share, other than any Towers Watson shares owned by Towers Watson, Willis or Merger Sub at the Effective Time and the Towers Watson shares held by stockholders who are entitled to and who properly exercised dissenter’s rights under Delaware law.
Immediately following the Merger, Willis effected (i) a consolidation (i.e., a reverse stock split under Irish law) of Willis ordinary shares whereby every 2.6490 Willis ordinary shares were consolidated into one Willis ordinary share ($0.000304635 nominal value per share) and (ii) an amendment to its constitution and other organizational documents to change its name from Willis Group Holdings Public Limited Company to Willis Towers Watson Public Limited Company.
On December 29, 2015, the third business day immediately prior to the closing date of the Merger, Towers Watson declared and paid a pre-merger special dividend of $10.00 per share of its common stock, and approximately $694 million in the aggregate based on approximately 69 million Towers Watson shares issued and outstanding at December 29, 2015.
On December 30, 2015, all Towers Watson treasury stock was canceled.
The Merger was accounted for using the acquisition method of accounting, with Willis considered the accounting acquirer of Towers Watson.
The table below presents the final calculation of aggregate Merger consideration.
 
 
January 4, 2016
Number of shares of Towers Watson common stock outstanding as of January 4, 2016
 
69 million

Exchange ratio
 
2.6490

Number of Willis Group Holdings shares issued (prior to reverse stock split)
 
184 million

Willis Group Holdings price per share on January 4, 2016
 
$
47.18

Fair value of 184 million Willis ordinary shares
 
$
8,686

Value of equity awards assumed
 
37

Aggregate Merger consideration
 
$
8,723


21



A summary of the fair values of the identifiable assets acquired, and liabilities assumed, of Towers Watson at January 4, 2016 are summarized in the following table.
 
 
January 4, 2016
Cash and cash equivalents
 
$
476

Accounts receivable, net
 
825

Other current assets
 
82

Fixed assets, net
 
204

Goodwill
 
6,783

Intangible assets
 
3,991

Pension benefits assets
 
67

Other non-current assets
 
115

Deferred tax liabilities
 
(1,151
)
Liability for pension benefits
 
(923
)
Other current liabilities (i)
 
(667
)
Other non-current liabilities (ii)
 
(331
)
Long term debt, including current portion (iii)
 
(740
)
Net assets acquired
 
8,731

Non-controlling interests acquired
 
(8
)
Allocated aggregate Merger consideration
 
$
8,723

____________________
(i)
Includes $348 million in accounts payable, accrued liabilities and deferred revenue, $308 million in employee-related liabilities and $11 million in other current liabilities.
(ii)
Includes acquired contingent liabilities of $242 million. See Note 13Commitments and Contingencies for a discussion of our material acquired contingencies related to Legacy Towers Watson.
(iii)
Represents both debt due upon change of control of $400 million borrowed under Towers Watson’s term loan ($188 million) and revolving credit facility ($212 million) and a draw down under a new term loan of $340 million. The $400 million debt was repaid by Willis’ borrowings under the 1-year term loan facility on January 4, 2016. The $340 million new term loan partially funded the $694 million Towers Watson pre-merger special dividend.
The purchase price allocation as of the date of acquisition was based on a valuation of the assets acquired and liabilities assumed in the acquisition. The purchase price allocation was complete as of December 31, 2016.
Goodwill was calculated as the difference between the aggregate Merger consideration and the acquisition date fair value of the net assets acquired, and represents the value of the Legacy Towers Watson assembled workforce and the future economic benefits that we expect to realize as a result of the Merger. None of the goodwill recognized on the transaction is tax deductible.

22



The acquired intangible assets are attributable to the following categories:
 
 
Valuation Methodology
 
Amortization Basis
 
Fair Value
 
Expected Life (Years)
Customer relationships
 
Multiple period excess earnings
 
In line with underlying cash flows
 
$
2,221

 
15.0
Software - income approach
 
Multiple period excess earnings
 
In line with underlying cash flows or straight-line basis
 
567

 
6.4
Software - cost approach
 
Cost of reproduction
 
Straight-line basis
 
108

 
4.9
Product
 
Multiple period excess earnings
 
In line with underlying cash flows
 
42

 
17.5
IPR&D (i)
 
Multiple period excess earnings or cost of reproduction
 
n/a
 
39

 
n/a
Trade name
 
Relief from royalty
 
Straight-line basis
 
1,003

 
25.0
Favorable lease agreements
 
Market approach
 
Straight-line basis
 
11

 
6.5
 
 
 
 
 
 
$
3,991

 
 
____________________
(i)
Represents individual in-process research and development (‘IPR&D’) software components not placed into service as of the acquisition date. These assets were subsequently placed into service during the three months ended March 31, 2017, were reclassified into finite-lived software intangible assets, and are being amortized in line with underlying cash flows or on a straight-line basis.
The following pro forma financial information is unaudited and is intended to reflect the impact of the Merger on Willis Towers Watson’s consolidated financial statements as if the Merger had taken place on January 1, 2015 and presents the results of operations of Willis Towers Watson based on the historical financial statements of Willis and Towers Watson after giving effect to the Merger and pro forma adjustments. Pro forma adjustments are included only to the extent they are (i) directly attributable to the Merger, (ii) factually supportable and (iii) with respect to the consolidated statement of comprehensive income, expected to have a continuing impact on the combined results. The accompanying unaudited pro forma financial information is presented for illustrative purposes only and has not been adjusted to give effect to certain expected financial benefits of the Merger, such as revenue synergies, tax savings and cost synergies, or the anticipated costs to achieve these benefits, including the cost of integration activities. The unaudited pro forma results are not indicative of what would have occurred had the Merger taken place on the indicated date.
 
Years ended December 31,
 
 
 
Pro Forma
 
As reported
 
(Unaudited)
 
2016
 
2015
Total revenues
$
7,887

 
$
7,492

Net income attributable to Willis Towers Watson
$
420

 
$
640

Diluted earnings per share
$
3.04

 
$
4.64

The above pro forma financial information for the year ended December 31, 2015 does not include pro forma adjustments for the Gras Savoye or other acquisitions as their revenues and results of operations were immaterial to the consolidated financial statements.
Revenues attributable to Towers Watson for the year ended December 31, 2016 were $3.6 billion. Net income attributable to Towers Watson for the year ended December 31, 2016 was $111 million.
Acquired Share-Based Compensation Plans
In connection with the Merger, we assumed certain stock options and restricted stock units (‘RSUs’) issued under the Towers Watson & Co. 2009 Long Term Incentive Plan (‘LTIP’), the Liazon Corporation 2011 Equity Incentive Plan, and the Extend Health, Inc. 2007 Equity Incentive Plan.
Stock Options. The outstanding unvested employee stock options were converted into 592,486 Willis Towers Watson stock options using the conversion ratios stated in the Merger agreement for the number of options. The fair value of the stock options was calculated using the Black-Scholes model with a volatility and risk-free interest rate over the expected term of each group of options and Willis Towers Watson’s closing share price on the date of acquisition. We determined the fair value of the portion of the outstanding options related to pre-acquisition employee service using the straight-line expense methodology from the date of grant to the acquisition date to be $7 million, which was added to the transaction consideration. The fair value of the

23



remaining portion of options related to the post-acquisition employee services was $13 million, and will be recognized over the future vesting periods.
Restricted Stock Units. The outstanding unvested RSUs were converted into 597,307 Willis Towers Watson RSUs using the conversion ratios as stated in the Merger agreement. The fair value of these RSUs was calculated using Willis Towers Watson’s closing share price on the date of acquisition. We determined the fair value of the portion of the outstanding RSUs related to pre-acquisition employee service using the straight-line expense methodology from the date of grant to the acquisition date to be $30 million, which was added to the transaction consideration. The fair value of the remaining portion of RSUs related to the post-acquisition employee services was $32 million, and will be recognized over the future vesting periods.
Gras Savoye Acquisition
On December 29, 2015, Legacy Willis completed the transaction to acquire substantially all of the remaining 70% of the outstanding share capital of Gras Savoye, the leading insurance broker in France, for total consideration of €544 million ($592 million) of which $582 million in cash was paid at closing. Additionally, the previously held equity interest in Gras Savoye was re-measured to a fair value of €221 million ($241 million) giving a total fair value on a 100% basis of €765 million ($833 million).
The union combines the Company’s global insurance broking footprint with Gras Savoye’s particularly strong presence in France, Central and Eastern Europe, and across Africa. Gras Savoye’s expertise in high-growth markets and industry sectors complements the Company’s global strengths, creating value for clients.
The Company funded the cash consideration with a 1-year term loan. The term loan was repaid in its entirety on May 26, 2016, from the proceeds from the issuance of new senior notes discussed in Note 10Debt to these consolidated financial statements.
Deferred consideration is payable on the first and second anniversary of the acquisition. In December 2017, the Company made final consideration payments of $3 million. The discounted fair value of the deferred consideration at December 31, 2016 was $4 million. None of the goodwill recognized on the transaction is tax deductible.
The following table presents the Company’s allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values:
 
December 29, 2015
Cash and cash equivalents
$
87

Fiduciary assets
625

Accounts receivable, net
89

Goodwill
584

Intangible assets
440

Other assets
56

Fiduciary liabilities
(625
)
Deferred revenue and accrued expenses
(80
)
Short and long-term debt
(80
)
Net deferred tax liabilities
(87
)
Other liabilities
(179
)
Net assets acquired
830

Decrease in paid-in capital for purchase of non-controlling interest
43

Non-controlling interest acquired
(40
)
Purchase price allocation
$
833

The purchase price allocation as of the date of acquisition was based on a valuation and was subject to revision within the purchase price allocation period as more detailed analysis was completed and additional information about the value of assets acquired and liabilities assumed became available. During the year ended December 31, 2016, the assessment outlined above was updated to reflect the final estimates of the fair value of assets and liabilities acquired. The purchase price allocation is final.

24



The acquired intangible assets are attributable to the following categories:
 
Valuation Methodology
 
Amortization Basis
 
Fair Value
 
Expected Life (Years)
Customer relationships
Multiple period excess earnings
 
In line with underlying cash flows
 
$
339

 
20
Software and other intangibles
Cost of reproduction
 
Straight-line basis
 
66

 
5
Trade name
Relief from royalty
 
Straight-line basis
 
35

 
14
 
 
 
 
 
$
440

 
 
Miller Insurance Services LLP Acquisition
On May 31, 2015, Legacy Willis completed the transaction to acquire an 85 percent interest in Miller, a leading London wholesale specialist insurance broking firm, for total consideration of $401 million, including cash consideration of $232 million.
Deferred consideration is payable at the first, second and third anniversaries of the acquisition. Contingent consideration is payable at the third anniversary of the acquisition and is contingent on meeting certain earnings before interest, taxes, depreciation and amortization (‘EBITDA’) performance targets. At December 31, 2017, the discounted fair values of the deferred consideration related to the third anniversary and contingent consideration were $38 million and $40 million, respectively. At December 31, 2016, the discounted fair values of the deferred consideration related to the second and third anniversaries and contingent consideration were $69 million and $26 million, respectively.
The Company recognized assets and liabilities acquired of $1.1 billion and $844 million, respectively. Included within the acquired assets are identifiable intangible assets of $231 million and goodwill of $184 million.
The purchase price allocation as of the date of acquisition was based on a valuation of the assets acquired, liabilities assumed, and contingent consideration associated with the acquisition. There were no material revisions to the purchase price allocation during the year ended December 31, 2016, as the purchase price allocation is final.
Divestitures
Related Party Transaction - In the third quarter of 2017, the Company divested its Global Wealth Solutions business through a sale to an employee of the business. As part of that transaction, we financed a $50 million note payable from the employee to purchase the business. The note amortizes over 10 years, bears interest at a weighted-average rate of 3% and is guaranteed by $3 million in assets. Following the sale, employees of this business are no longer employees of the Company, and the purchasing employee is no longer considered a related party. The current and non-current portions of the note receivable are included in the tables found in Note 14 — Supplementary Information for Certain Balance Sheet Accounts to these consolidated financial statements as Other current assets and Other non-current assets.
Cumulative Divestiture Impact - Including the divestiture of Global Wealth Solutions, we sold five businesses during the second half of 2017. For the year ended December, 31, 2017, the total gain recognized related to business disposals was $13 million, which was recorded in Other expense/(income), net on the accompanying consolidated statements of comprehensive income. Results from these disposals prior to the sales represented $54 million of revenue and $13 million of operating income for the year ended December 31, 2017.
Note 4Segment Information
Willis Towers Watson has four reportable operating segments or business areas:
Human Capital and Benefits (‘HCB’)
Corporate Risk and Broking (‘CRB’)
Investment, Risk and Reinsurance (‘IRR’)
Benefits Delivery and Administration (‘BDA’) - formerly known as Exchange Solutions (i) 
____________________
(i)
This segment and the businesses within the segment were renamed to better reflect the nature of the services we offer.
Willis Towers Watson’s chief operating decision maker is its chief executive officer. We determined that the operational data used by the chief operating decision maker is at the segment level. Management bases strategic goals and decisions on these segments and the data presented below is used to assess the adequacy of strategic decisions, the method of achieving these

25



strategies and related financial results. Management evaluates the performance of its segments and allocates resources to them based on net operating income on a pre-bonus, pre-tax basis.
Beginning in 2017, we made certain changes that affect our segment results. These changes, which are detailed in the Form 8-K filed with the SEC on April 7, 2017, include the following:
First, to better align our business within our segments, we moved Max Matthiessen, which specializes in pension investment advice, to Investment, Risk and Reinsurance from Human Capital and Benefits; and moved Fine Art, Jewellery and Specie, which is a specialty broker, to Corporate Risk and Broking from Investment, Risk and Reinsurance.
Second, we recast operating income to better reflect the new segment reporting basis. As part of the further integration of our Willis Towers Watson businesses, we updated our corporate expense allocations to standardize our methodologies and allocate those expenses which are directly related to the business segment operations. Additionally, we revised the presentation of certain adjustments which arose from the purchase accounting for the Merger. Due to the long-term nature of these adjustments, which impact fixed assets and internally-developed software, we aligned the presentation within the respective segments and consolidated operating income, thereby eliminating a reconciling adjustment.
The prior period comparatives reflected in the tables below have been retroactively adjusted to reflect our current segment presentation.
Under the segment structure and for internal and segment reporting, Willis Towers Watson segment revenues include commissions and fees, interest and other income. U.S. GAAP revenues include amounts that were directly incurred on behalf of our clients and reimbursed by them (reimbursable expenses), which are removed from segment revenues. Segment commissions and fees excludes interest and other income. Segment operating income excludes certain costs, including (i) amortization of intangibles; (ii) restructuring costs; (iii) certain transaction and integration expenses; (iv) certain litigation provisions; (v) significant pension settlement and curtailment gains or losses; and (vi) to the extent that the actual expense based upon which allocations are made differs from the forecast/budget amount, a reconciling item will be created between internally allocated expenses and the actual expense that we report for U.S. GAAP purposes.
During 2016, segment revenues and operating income both include revenue that was deferred by Towers Watson at the time of the Merger, and eliminated due to purchase accounting. The impact of the elimination from purchase accounting (which is the reduction to 2016 consolidated revenues and operating income) has been included in the reconciliation to our consolidated results in order to provide the actual revenues that the segments would have recognized on an unadjusted basis.
The Company experiences seasonal fluctuations of its commissions and fees revenue. Revenue is typically higher during the Company’s first and fourth quarters due to the timing of broking-related activities.
The table below presents segment commissions and fees, segment interest and other income, segment revenues, and segment operating income for our reportable segments for the years ended December 31, 2017, 2016, and 2015.
 
Years ended December 31,
 
HCB
 
CRB
 
IRR
 
BDA
 
Total
 
2017
2016
2015
 
2017
2016
2015
 
2017
2016
2015
 
2017
2016
2015
 
2017
2016
2015
Segment commissions and fees
$
3,163

$
3,100

$
583

 
$
2,625

$
2,519

$
2,332

 
$
1,505

$
1,475

$
895

 
$
729

$
652

$

 
$
8,022

$
7,746

$
3,810

Segment interest and other income
29

17

1

 
23

28

17

 
30

59

1

 

2


 
82

106

19

Segment revenues
$
3,192

$
3,117

$
584

 
$
2,648

$
2,547

$
2,349

 
$
1,535

$
1,534

$
896

 
$
729

$
654

$

 
$
8,104

$
7,852

$
3,829

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment operating income
$
781

$
728

$
119

 
$
488

$
463

$
457

 
$
365

$
383

$
207

 
$
152

$
119

$

 
$
1,786

$
1,693

$
783


26



The table below presents a reconciliation of the information reported by segment to the consolidated amounts reported for the years ended December 31, 2017, 2016, and 2015, respectively:

Years ended December 31,

2017
 
2016
 
2015
Revenues:
 
 
 
 
 
Total segment revenues
$
8,104

 
$
7,852

 
$
3,829

Fair value adjustment to deferred revenue

 
(58
)
 

Reimbursable expenses and other
98

 
93

 

Total revenues
$
8,202

 
$
7,887

 
$
3,829


 
 
 
 
 
Total segment operating income
$
1,786

 
$
1,693

 
$
783

Fair value adjustment for deferred revenue

 
(58
)
 

Amortization
(581
)
 
(591
)
 
(76
)
Restructuring costs
(132
)
 
(193
)
 
(126
)
Transaction and integration expenses (i)
(269
)
 
(177
)
 
(73
)
Provision for Stanford and other significant litigation
(11
)
 
(50
)
 
(70
)
Pension settlement and curtailment gains and losses
(36
)
 

 

Unallocated, net (ii)
(19
)
 
(73
)
 
(11
)
Income from operations
738

 
551

 
427

Interest expense
188

 
184

 
142

Other expense/(income), net
61

 
27

 
(55
)
Income from operations before income taxes and interest in earnings of associates
$
489

 
$
340

 
$
340

____________________
(i)
Includes transaction and integration expenses related to the Merger and the acquisition of Gras Savoye.
(ii)
Includes certain costs, primarily related to corporate functions which are not directly related to the segments, and certain differences between budgeted expenses determined at the beginning of the year and actual expenses that we report for U.S. GAAP purposes.
The Company does not currently provide asset information by reportable segment as it does not routinely evaluate the total asset position by segment.
None of the Company’s customers represented a significant amount of the Company’s consolidated commissions and fees for the years ended December 31, 2017, 2016 and 2015.
Below are our revenues and long-lived assets for Ireland, our country of domicile, countries with significant concentrations, and all other foreign countries for each of the years ended December 31, 2017, 2016 and 2015:
 
Revenues
 
Long-Lived Assets (i)
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Ireland
$
107

 
$
92

 
$
64

 
$
127

 
$
114

 
$
124

 
 
 
 
 
 
 
 
 
 
 
 
United States
3,821

 
3,395

 
1,597

 
9,988

 
11,400

 
1,759

United Kingdom
1,815

 
2,236

 
1,055

 
3,173

 
2,431

 
2,426

Rest of World
2,459

 
2,164

 
1,113

 
3,263

 
2,466

 
1,951

Total Foreign Countries
8,095

 
7,795

 
3,765

 
16,424

 
16,297

 
6,136

 
$
8,202

 
$
7,887

 
$
3,829

 
$
16,551

 
$
16,411

 
$
6,260

____________________
(i)
Long-Lived Assets do not include deferred tax assets.

27



Note 5Restructuring Costs
The Company has two major elements of the restructuring costs included in its consolidated financial statements, which are the Operational Improvement Program, completed as of the end of 2017, and the Business Restructure Program, which was fully accrued and completed by the end of 2016.
Operational Improvement Program - In April 2014, Legacy Willis announced a multi-year operational improvement program designed to strengthen its client service capabilities and to deliver future cost savings. The main elements of the program, which were completed by the end of 2017, included: moving more than 3,500 support roles from higher cost locations to facilities in lower cost locations; net workforce reductions in support positions; lease consolidation in real estate; and information technology systems simplification and rationalization.
The Company recognized restructuring costs of $134 million, $145 million, and $126 million for the years ended December 31, 2017, 2016, and 2015, respectively, related to the Operational Improvement Program. The Company has spent a cumulative amount of $441 million on restructuring charges for this program.
Business Restructure Program - In the second quarter of 2016, we began planning targeted staffing reductions in certain portions of the business due to a reduction in business demand or change in business focus (hereinafter referred to as the Business Restructure Program). The main element of the program included workforce reductions, and was completed in 2016. During the year ended December 31, 2017, the Company recognized a $2 million reversal of expense related to an estimate of previously incurred termination benefits. The Company recognized restructuring costs of $48 million for the year ended December 31, 2016.
An analysis of total restructuring costs recognized in the consolidated statements of comprehensive income, and the costs by segment, and costs attributable to corporate functions, for the years ended December 31, 2017, 2016 and 2015 are as follows:
 
HCB
 
CRB
 
IRR
 
BDA
 
Corporate
 
Total
Year ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Termination benefits
$

 
$
25

 
$
4

 
$

 
$
17

 
$
46

Professional services and other (i)
3

 
63

 
6

 

 
14

 
86

Total
$
3

 
$
88

 
$
10

 
$

 
$
31

 
$
132

 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Termination benefits
$
33

 
$
26

 
$
6

 
$
1

 
$
2

 
$
68

Professional services and other (i)
4

 
81

 
4

 

 
36

 
125

Total
$
37

 
$
107

 
$
10

 
$
1

 
$
38

 
$
193

 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Termination benefits
$
2

 
$
24

 
$
7

 
$

 
$
3

 
$
36

Professional services and other (i)
1

 
57

 
2

 

 
30

 
90

Total
$
3

 
$
81

 
$
9

 
$

 
$
33

 
$
126

___________________
(i)
Other includes salary and benefits, premises, and other expenses incurred to support the ongoing management and facilitation of the programs.

28



An analysis of the total cumulative restructuring costs recognized for the Operational Improvement Program from its commencement to December 31, 2017 by segment is as follows:
 
HCB
 
CRB
 
IRR
 
BDA
 
Corporate
 
Total
2014
 
 
 
 
 
 
 
 
 
 
 
Termination benefits
$

 
$
15

 
$
1

 
$

 
$

 
$
16

Professional services and other (i)

 
3

 

 

 
17

 
20

2015
 
 
 
 
 
 
 
 
 
 
 
Termination benefits
$
2

 
$
24

 
$
7

 
$

 
$
3

 
$
36

Professional services and other (i)
1

 
57

 
2

 

 
30

 
90

2016