Willis Towers Watson Public Limited Company (WTW) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Willis Towers Watson's Investor Day. Please refer to willistowerswatson.com for the Investor Day presentation and the press release that was issued earlier today. Today's webcast is being recorded and will be available for the next 3 months on Willis Towers Watson's website. Some of the comments in today's webcast may constitute forward-looking statements within the meaning of the Private Securities Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements unless required by law. For a more detailed discussion of these and other risk factors, investors should review the forward-looking statements section of the Investor Day presentation, as well as other disclosures in the most recent Form 10-K and in other Willis Towers Watson SEC filings. During the webcast, certain non-GAAP financial measures may be discussed. For reconciliations of the non-GAAP measures as well as other information regarding these measures, please refer to the appendix of the Investor Day presentation and other materials in the Investor Relations section of the company's website. I'm now pleased to introduce John Haley, Willis Towers Watson's Chief Executive Officer.

Thanks very much, Claudia, and hello, everyone, and welcome to Willis Towers Watson's Investor Day. We have the forward-looking statements here. This is the agenda. I'm going to do a brief introduction and then turn it over to our next CEO, Carl Hess, to talk about the vision going forward, and then we're going to have some of our segment leaders go into some detail, and we'll end up with a financial presentation. And we'll take questions midway through the presentation and then at the end. So let me just start off and a couple of observations about the company and where we are. I think when you look at it over the last few years, we ended up with about almost $9.5 billion of revenue in 2020. And if you look from 2018 to 2020, that's a CAGR of 4.8%. So very solid mid-single-digit growth. And that's even factoring in that we had only 2% growth in the COVID year of 2020. Our EPS has been growing at a CAGR of 10% over that time. The adjusted operating margin improved by about 200 basis points to 20.1%. And the metric that, in fact, we thought we were most efficient on at the beginning of that period, free cash flow and the one that would been really a great deal of focus, we've had a 23% CAGR. But really the most important thing we look at there is that from 2019 to 2020, we were able to nearly double our free cash flow. And we have a free cash flow right now that is not quite where we would like to be, but is very competitive, I think, with where our peers are. And I quote these statistics just to say, look, this is a company that is -- has a lot of things going right about what we're doing and a lot of the metrics of the -- what we were trying to do from 2018 to 2020 look pretty good. Beyond that, we're a company that is in a number of attractive markets. We serve both the large company market, and we serve the midsized company market. And we have some statistics here for the large size, whether it's the Fortune Global or the FTSE or the Fortune 1000, we're up over 90% of these companies that are served by -- in some way by our organization. And of course, then thousands of other non-Fortune-listed midsized companies that we work with. There are over 30 million individuals or about 30 million, I should say, individuals that use our platforms to access their business and insurance. We're a global company in over 140 locations around the world. And we've been around for a long time since 1828 with the service of putting clients first. That's an idea that we've had from the very beginning. The 2 themes I'd like to really think about though from those slides are really to say, a, we have a strong foundation and that strong foundation is evidenced by the kind of markets we're in, the kind of clients we serve, the kind of persistency we have with those clients. And then there's this theme of resilience. Because, in fact, when we look from 2018 to 2020 and we look at what happened during that COVID year, we had, as I said, good growth rates, good financial performance even during that. And that's really due to our management team, but perhaps more broadly to our colleagues, generally up and down the line, making sure that they were doing the best to service clients during some difficult time. And it's that strong foundation and that resilience that we'd like to say this is the base on which we're going to be building for the future. I'm particularly pleased that today, we're going to be introducing Carl Hess as Willis Towers Watson's future CEO. And I've known Carl for a long time, worked with him. He has a record of just exceptional leadership. He ran our Investment, Risk & Reinsurance segment most recently. During the time when he ran that from 2017 to 2020, there was a 540 basis point operating margin improvement in that segment. Carl is one of our leaders who has been -- we operate in a matrix, and Carl has not just headed up the segment, he one time headed up our investment practice, but he's also headed up geographies. So Carl is in charge of the Americas' geography. During that time, we had a 6.5% CAGR in revenue. So he obviously knows how to marshal all the different parts of the business and to bring it together to grow that. As I said, I've known Carl a long time. He's been with Willis Towers Watson, one of our predecessor companies, for over 30 years. He spent 10 years running our investment business, over 7 years in geography and segment leadership. And perhaps as important, he comes originally from the retirement and the investment side of the business, but he has extensive experience in the insurance and risk industry. He spearheaded Willis Towers Watson insurer solutions marketing strategy. He managed Willis Towers Watson Wholesale and Reinsurance Broking businesses. He managed our MGA platform, and he managed the Insurance Company Consulting and Technology business. He's also worked with insurance companies on their investment strategy, on asset liability management and governance. And so what Carl brings is a knowledge of all the different businesses we have together. He also brings not just my heartfelt support but the heartfelt support of the whole management team. I think the entire management team came to me and was delighted when we had selected Carl as the next CEO. And I think the support he has and the collaboration and the working relationship with that team is going to be fundamental to moving Willis Towers Watson forward. Carl has also been just, and this is, I think, important for investors to know, an integral part of some company-wide initiatives. He's been on our Investments Committee. Back in March of 2020, I formed a special COVID-19 response team. And back in March of 2020, when we didn't know what was happening with COVID, I was worried about what could -- what kind of disasters could lurk around there. Carl and that team worked on making sure the business performed as well as it could. They worked on liquidity management. And the results that you saw in the previous page in terms of free cash flow, the results in terms of operating margin, results in terms of EPS were largely due to the efforts of that team. Carl's worked on our new venture investment committee, sponsoring and fostering innovation throughout Willis Towers Watson, and he's been the leader in M&A activity, both acquisitions and divestitures. So I think he's seen all the areas of the business and knows the different levers to pull. But perhaps most important because Willis Towers Watson is now at an inflection point. We have gone through the aborted Aon merger, and we now have to regroup. And what we need is a bold new vision for the future, and I have every confidence that Carl would be able to deliver that. So with that, let me introduce Carl Hess.

Thank you, John, for those kind words. Good morning, everybody. Great to see you. Look, as John said, we have a strong foundation. We have a resilient foundation. We have a tremendous foundation, and I couldn't be more excited about the portfolio of businesses we have with us. Together, they generate more value than the sum of their parts. We have great talent. We have great experience to colleagues. We have great people who are in the process of becoming experienced colleagues. We've taken steps to make sure that we retain that talent, and we're attracting new talent to the organization as well. While Andrew Krasner, our new CFO, isn't exactly new talent, we're very pleased to have recruited him back to the organization. He is one of literally hundreds of people who have rejoined us this year. I was actually talking to Alastair Swift, who's our Global -- Head of Global Lines for Adam Garrard in his Corporate Risk & Broking business. Swifty was telling me that beginning about 3 weeks ago, right, his phone has been ringing off the hook with people wanting to work with us, wanting to work for us, want to become part of Willis Towers Watson can offer. We have clarity today, and that clarity is attractive to talent in the industry. Adam Garrard will talk a little bit more about talent issues and talent opportunities in Corporate Risk & Broking as we go forward. But it's no accident that the phones are ringing off the hook. We've got a culture that brings colleagues together from across the company to address client issues. Others talk about being united. We are united. Alice Underwood, who many of you may have met working in the Insurance Consulting and Technology demo earlier, there is Alice in the purple back of the room, hi, Alice, she gave me an exhibit that I used for our most recent Board meeting, showing how Insurance Consulting and Technology works with other parts of the business to bring light to new interesting solutions to client problems. And up there is right, ICT working with Talent and Rewards. ICT working with our retirement business. ICT working with Health and Benefits. ICT working with Benefits Delivery & Administration. That's just one chart, right, pointing out probably about 15 to 20 different intersections of the business where we've come together to help clients and develop solutions to the marketplace. And that's just one perspective. Together, we are stronger. Others talk it, we walk it. We sit around on top of a mountain of data, right, that information about our clients' people, information about our clients' risks. We've developed analytics to gain insight from those data so that we can better address client needs. For instance, we sit on a mountain of compensation information. We're a leading compensation consultant. We could just use that for salary surveys, but we don't, right? We use that to develop strategies, how companies can best attract, retain and motivate and engage their employees. So it's about, again, taking the information we have and bringing it to life, developing new intellectual capital that we can serve in the market. We've developed the leading tools in our industry, whether that's within Insurance Consulting and Technology, within Talent and Rewards, our industry-leading software or within Gene Wickes' Benefits Delivery & Administration business, where we can help individuals with their decision-making to find the right health care for them. And finally, we're financially strong with our best ever capital position. We will deliver results for you, our shareholders. So we have ambitions. We're going to, by 2024, be a $10 billion-plus company with an adjusted operating margin of 24% to 25%. We plan on generating free cash flow of $5 billion to $6 billion, and our EPS target for 2024, $18 to $21. And I'd be remiss if I didn't mention that along the way over the next -- by the end of 2022, we will deliver $4 billion or greater in share buybacks because we think that the principal use of our capital should be to return it to you, the shareholders, if we can't find better uses for it. That's our commitment. We will grow in line or better than our peers. We will continue to improve our operational performance and translate that into cash. We will manage your assets with care, prudence and respect they deserve. While we will be in the market for inorganic opportunities, we set a high bar for them, and that should all continue to drive shareholder returns. So to get there, I've set 3 basic pillars for the organization and our leadership team: grow, simplify, transform. First, to achieve our revenue targets, we'll invest smartly. We'll look for the places in our portfolio that offer the greatest potential. We'll exploit the portfolio effect by leveraging places our businesses intersect that will enable us to differentiate and enjoy premium pricing and/or take market share. We'll look to be disciplined about innovation, grow fast, blossom fast and fail fast if we have to. We'll look to inorganic opportunities, but not just for growth's sake, to fill in gaps or take advantage of scale effects in our portfolio. Second, we want to make it easier and quicker to do business with us. So we're simplifying the structure and adjusting our matrix management. We'll be invigorating our client management model that we paused while we had our interlude with Aon. We will embark on a program designed to cut $300 million in expenses over the next 3 years by simplifying our infrastructure, building up our operation centers and a shared services capability, revamping our real estate portfolio to reflect the lessons learned from the last 2 years and completing our journey to the cloud. Between the additional operating leverage we'll achieve through managing our costs as we grow, and this, by the way, is already underway, and the transformation program I've just described, we're going to deliver a 450 basis point improvement in margin by 2024 as compared to 2020. I've highlighted here on this slide before, primary components of our growth strategy. There are focus on our core businesses, the parts of them that have the highest potential return for shareholders, finding the intersections in our business, which create a portfolio effect; third, taking a dynamic, disciplined approach to innovation so as to maximize the payoffs for those investments; and fourth, to use inorganic expansion also in a highly disciplined manner to address gaps or add scale. We'll bring these principles to bear on areas where we think value can be created. For example, market share, we think, for instance, our broking business in North America is underweight. We're going to look for opportunities to grow in both the large and mid-market where it makes sense. Gene Wickes' individual marketplace business, as you'll hear from Gene directly in a bit, is a place where we see tremendous growth potential, and the opportunity to capture market share is substantial. We'll look to emerging and evolving markets. For instance, in the wealth space, right, the blurring of the boundaries between institutional management, defined contribution as it were and retail wealth management is growing a pace in many geographies around the world, and we're taking advantage of that. Our LifeSight master trust based in the U.K. and elsewhere, is the market leader and has already grown in the past half dozen years to over GBP 10 billion, right? Julie will get you a more precise figure in a moment, I'm sure. External analysis, not ours, external analysis says that this is a market that's projected to grow 25% annually over the next 5 or more years. We are incredibly well positioned to take advantage of that, and we are projected to be the #1 leader in that market for years to come as well. This is a lesson we can take and use in other geographies to exploit our intellectual capital around the world. So there's some really interesting opportunities for us in that space, and that's just one. We also look to fast-growing markets. So the individual marketplace and specifically our acquisition of TRANZACT designed to take advantage of a fast-growing direct-to-consumer Medicare marketplace, looking to leverage our abilities in climate where we are the market leaders across the portfolio. So not just a risk perspective, from a people perspective as well, the implications of climate change across our clients' human capital and risk capital portfolios is an area where we have led, and we will continue to lead. We also, for example, have developed something called the Climate Transition Pathway, designed to help energy companies migrate to a zero carbon future by enabling them to find insurance to be able to run their business while they evolve their business to meet zero carbon needs. And we're also looking for high-value solutions that command a premium price in the marketplace. Our secure income fund, for example, which is designed to enable U.K. pension funds, in a low-yield world, meet their obligations through alternatives to traditional fixed income is an area where we can assemble portfolios that meet client needs, but again, take advantage of scarcity in the marketplace to command premium prices. The second tenet is simplify. And we've already begun the streamlining of our organization by appointing a new leadership team, some of which are here today, and hopefully, you've had a chance to meet. Shown on the slide here are our segment and geography leaders. So we have Julie Gebauer here in the room. Adam Garrard, will be joining us on the video, our 2 segment leaders. They are matched with, not against, but with our 3 geography leaders, Anne Pullum for Europe, Imran Qureshi for North America and Pamela Thomson-Hall for International. Together, they will drive the organization working with our corporate functions and other leaders to achieve the goals we've set out. Segments remain our engines for driving superior business outcomes and creating intellectual capital. Geographies are closest to the clients. We'll bring the best of Willis Towers Watson to each and every client in an appropriate way. The new global leadership team has been designed with clear accountability and with the ability to make fast decisions so we can succeed in the marketplace. Now while we paused evolving our client model during the merger process that John talked about, we are restarting that process, taking advantage of any additional insights we have may gained from the last 18 months, whether those are external or internal but ourselves regarding market segmentation, the respective role of the segments and geographies and client management and client management process itself. And we're going to do that by standing up centralized support from growth operations to ensure quality service delivery to each and every client. The Willis Towers Watson experience will be reliable, and that in itself gets us further business. At the same time, we'll help our colleagues with speed to market by simplifying the structure of the company where possible, along with a shared services environment to promote efficiency, which leads me to the third principle, transform. I have named 2 global leadership team members principally responsible for efficiency, Cecil Hemingway as our new Head of Transformation. Cecil was formerly the Head of Health and Benefits non-North America. So comes to us from Julie's business, but is a multiyear veteran of the firm and the industry. And Alexis Faber who moved over from Corporate Risk and Broking to assume the Chief Operating Officer role. Their task to construct the new operating model for the company with a mandate to drive change, to centralize and to standardize. Real estate and technology, as I've already highlighted, will be a large part of the change. We've learned our lessons about the new ways of working that we can achieve over the last 2 years and will implement with speed, a program designed to realize a $300 million run rate savings by 2024. Adam, Julie and Andrew will all provide further details on our plans in their presentations. We do see 3 principal areas where we can achieve those savings, real estate, move to a portfolio of offices built around clients and collaboration, not about coming to the office to read e-mail. Ops and tech, complete our journey to the cloud, develop operations center, building on the success of our existing operations in Mumbai and Manila and look to create shared services across segments and across functions. Essentially, we've historically had a culture of doing excellent things 30 times, we want to move to a culture of doing excellent things once or twice and replicating them 30 times. We see all of this as contributing to that $300 million run rate savings and as a $10 billion firm, which is our ambition, that's a 300 basis point margin improvement. So to sum up, we're starting from a position of strength, but have no plans to rest on those laurels. Our efforts that I've outlined will realize a vision that will improve outcomes for our clients, engagement for our colleagues and returns for our shareholders. We've already named an inclusive, forward-looking unified leadership team that's committed to work together to deliver for you. And together with our more than 45,000 colleagues, we will deliver profitable growth. And yes, John, that is still one word around here, by employing our collective creativity to meet our clients' needs. We'll transform how we work and where we work to meet those needs more efficiently today, and throughout, we'll be prudent stewards of the financial assets at our disposal so that our shareholders enjoy superior returns on their capital. Thank you very much. And with that, I'll turn it over to Adam Garrard for a dive in to risk and broking.

Am I on? Here we go. Sorry, everybody. I hope you can hear me. Good morning, good afternoon. And I'm sorry I could not be with you in person today despite my best endeavors. It's my pleasure to talk to you today about our Risk & Broking segment, a combination of Corporate Risk and Broking business and our Insurance Consulting and Technology business, which will come together under one umbrella in 2022. I will focus on Corporate Risk and Broking today and any and all reference to financials and other metrics in this presentation refer solely to Corporate Risk and Broking. Next slide, please. Firstly, let me start by telling you what we do. And this is not just an introductory slide. It is actually a very important statement about who we are, what we do, and most importantly, how we are positioning ourselves for the future. The broking industry will need to continuously adapt to remain relevant to its clients. We are at the forefront of that change. We saw the future early, and we have positioned the business to take advantage of the changing environment and the changing emphasis that our clients and their Board members are placing on risk. Risk & Broking is an advisory company. It's a data company. It's a technology company, and it's a solutions company all in one. Our advice based on analytical modeling helps clients make better decisions and has no parallel. Our investment in technology, particularly our new trading platform will not only be a rich source of data but will allow us to trade digitally with many carriers providing significant operational benefits. We traded USD 28 billion into the [Audio Gap] half of our clients, providing them with optimum risk hedging solutions. In short, we do so much more for our clients to procure insurance. More and more, the insurance transaction is an outcome of what we do for our clients, not all that we do for our clients. It's important to keep this in mind during the presentation because we have actually -- what we've actually done, I think, is to create a competitive advantage and create the foundation for future growth. Our challenge is not whether we have the relevant proposition for the rapidly evolving risk landscape, our challenge and indeed, our opportunity is one of scale. We need to significantly accelerate our ability to distribute our unrivaled offerings. Next slide, please. So we have the proposition. It's world class. We also have a very large and growing marketplace in which to play our trade. We estimate the existing addressable market to be in the region of USD 32 billion. The market is changing and growing, risks are becoming more complex in their nature and broader in their scope. Cyber insurance is a classic example. It's an $8 billion premium market today, but it's predicted to be $20 billion premium market by 2025, and we are well placed to capitalize. The whole area of climate change represents an enormous opportunity for us. There were $220 billion of economic loss from natural catastrophes in 2020, and that will only continue to [Audio Gap] into the need for greater risk advice and greater risk transfer expertise. We are well placed to capitalize with our unrivaled modeling capabilities and our world-leading expertise housed in our climate resilient hub. Clients will need help sourcing capital, as Carl mentioned. Sourcing capital as it pulls back under pressure from activists. We have initiatives already in place and are the first to market with a product to do just that. Clients will need help transitioning to clean operations, and that means for their risk profile. We, with our engineers and our industry expertise, have the capabilities in place to assist in this area. And finally, with regard to climate, clients will need help dealing with remediation obligations of their legacy activities, including the transfer of such obligations. We have the expertise to help. Not only are new risks emerging, but we also have in our organization now more data and more expertise that will allow us to provide solutions for those pre-existing risks which have not yet been addressed, such as non-damage business or [indiscernible]. We are dynamic and growing market. Risk is starting to occupy the top spot on every boardroom agenda. Brokers that have a superior advisory capability, coupled with a superior risk transfer offering will become, I believe, the most important adviser to boardrooms and governments over the next decade. This is the age of risk, and we are incredibly well placed to take advantage of the rapidly evolving needs of our clients and indeed, society as a whole. Next slide, please. Having said that, it's true to say that we have some headwinds and challenges that we are facing as a direct result of the aborted Aon combination. We went into 2020 feeling that it was our time, that we had the right strategy, that we had the right structure, that we had the right leadership, that our investments in data, technology and innovation would start to bear fruit. And we were about to, if not change the world, then certainly shape the world. However, it's true that we have lost [Audio Gap] to retain. Our voluntary attrition rate over the last 12 months has been 13.4%, up from 11% in 2020. The attrition rate is most pronounced actually in North America and the rest of the world being pretty near 2020 levels. Our client retention rate in H1 2021 dipped from -- to 92% from 94% in the prior year. Our recurring new business from new clients in H1 '21 was down 6% on the same period last year due to a reduction in tenders that we were invited to. However, this was offset by strong double-digit growth from recurring new business from existing clients and on one-off project work, all of which I will touch on in a moment, have stalled in their implementation, global lines of business, our sales and client management model, broking technology, operational efficiency and digitization and North American segmentation and large accounts expansion. Whilst the aborted combination was undoubtedly and predictably a setback, we have the business resilience and the foundations to bounce back and bounce back relatively [Audio Gap] Colleagues now have clarity on WTW's Risk and Broking future and are reengaged by that. The prolonged period of uncertainty tested the most loyal of colleagues. We also had [indiscernible], which has produced a well-funded bonus pool, which will reward the colleagues who have stayed the course. We have a financial and nonfinancial retention strategy for key Risk and Broking colleagues. The colleagues I speak to want to stay at WTW, are optimistic and excited about the future and what we can achieve together. There's no question. It's a [Audio Gap] but we have Risk and Broking talent and our strategy, culture and platform [Audio Gap] that we are seeing external talent reengaging [Audio Gap] and now that there is clarity on our future. We also have a clear picture of where we want to add leadership and client-facing capabilities across our global lines of business and geographies. The last year has also given us a chance to rethink our talent requirements so that we can hire smarter. We will not be filling every lever with a like-for-like replacement. Our first priority is the development of existing and of new client management talent to significantly increase our distribution capabilities. We in Corporate Risk & Broking have already hired back 100 colleagues since the announcement that the Aon [Audio Gap] to come. We expect client retention to return to pre-announcement levels. Our clients have been loyal and very patient. We will reward that patience with unrivaled service and unparalleled offerings. We expect new business levels to exceed our pre-announcement metrics as we digitize and connect the sales process. There will be an uptick in tenders from the corporations that delayed due to COVID and the Aon announcement, and we will have better win ratios as we are confident in our offering. In addition, we will reignite our initiatives and accelerate their implementation. We believe that the momentum and that coupled with our very strong underlying foundations, means we are committed to and confident of delivering both revenue growth and margin expansion in 2022. Can we move to the next slide, please? What I hope is coming across in this presentation is that despite the headwinds that we are facing, we are well positioned to take advantage of the evolving marketplace and have already invested significantly in data, analytics and technology to not only provide a competitive advantage today but to ensure that the business has a sound foundation to future proof it for tomorrow. Over 1,000 insurers worldwide use our ICT technology, which is ingrained in the very fabric of that business. Our core analytics tools, which help clients make better decisions by predicting the probability and consequence of events, are already used by 6,000 of our clients. We can deliver these at scale on a self-service basis to both our brokers and our clients through our broking platform linked to our client-facing platforms. Our Connected Risk Intelligence model offers large corporates the ability for the first time to truly optimize their risk dollar. It has the ability to look at risk types, not in isolation, but as a portfolio, taking into account the correlation and dependencies of each risk against the other, analyzing literally millions of options to provide an efficient frontier of optimal risk retention and risk transfer programs. There is nothing like it on the market. It will be shown in the foyer during the breaks and at lunch time. And if you want a view of the future of insurance broking [Technical Difficulty], you will not be able to see anything like it anywhere. Our trading platform will not only allow us to digitize the end-to-end process, but it will also allow us to transact digitally with insurers and capture an incredibly rich and valuable source of data, including how the market is trading across the globe at any one time and how it is trending over time. That data will power our optimization models and will provide data that we can feed back to carriers and for which they will be willing to pay. These investments in tools, platforms and analytical capabilities are some of the enablers of our future growth. Next slide, please. We also believe that we have so much more. One of our key strategic pillars was and is our global line of business model. Quite simply, we have managed to break the silo mentality with a combination of collaborative culture and non-optional leadership that have dogged insurance brokers for years, including the 27 years I've been in this business. We have removed the barriers of misaligned incentives and P&Ls and are able to deploy our expertise wherever it is located to the client problem wherever it is needed. We are known for our unrivaled expertise in certain sectors, and we can deploy it globally with speed and focus. Our 8 global lines of business are growing 1.5x faster than the rest of the business. We will double down on our investment in the existing 8 and redouble our efforts to add other industry-focused global lines of business to the portfolio. North America represents a single biggest geographic opportunity. We are known for our middle market capabilities in North America, and we will continue to invest in both the proposition and the distribution for this segment. We need to continue to recruit new and develop existing producers for this segment to ensure that we deliver our differentiated offering, such as our analytical tools and our service promises under engagement 365 consistently, aggressively and at scale. In addition, we need to expand our North American large account business. We are a successful large account business across the world because of our advanced analytical offering, unencumbered access to global markets and our specialized industry expertise. We need to increase the scale of distribution in North America by develop existing and hiring new large account management talent and leveraging health, wealth and career's existing large account relationships. We will also expand the markets in which we operate through new product innovation, capitalizing on our distribution platforms, such as the Affinity ATP system and addressing market gaps with acquisition opportunities. Increasing sophistication of data and analytics provides the analytical broker the opportunity to address the existing underserved risks. Add to that, the evolving risks, such as climate and cyber and the market potential is significant and our innovative track record, our analytical firepower and our technological focus, we are extremely well placed to take advantage. Next slide, please. Whilst growth is obviously a focus, we also have margin expansion top of mind. We are simplifying and digitizing our interim processes focused on implementing and connecting 4 key platforms: our CRM platform, our trading platform, our servicing platform and our client portals, in order to eliminate duplication and automate where appropriate. We expect this digitization to deliver 300 basis point margin improvement by year-end 2024. This, coupled with the efficient location of work and the enterprise-wide initiatives that Carl mentioned, such as real estate and procurement, we believe will deliver 500 basis points of margin improvement for Corporate Risk & Broking by year-end 2024. I want to give you some examples of workflow improvements that are and will deliver efficiencies. Look, this is deliberately a little detail because I think it's important that you understand that our margin improvement estimates are not based on hypothetical intentions. They are based on work that is already underway. Let's take the CRM platform. The integration of sales and marketing capabilities and the implementation of standard templates and guides for client engagement has and will eliminate numerous manual steps such as data entry, KYC, data lookups, as well as automating distribution of relevant documents across the globe through the platform. Automated tart creation and routing in the CRM platform, based on predicted rules and client plans, we'll take guesswork out and eliminate the current manual work required in coordinating across multiple teams. In respect of our new trading platform, using a rules engine, placement data is prepopulated either from last year's policies or from the CRM platform. This eliminates most of the manual renewal preparation process resulting in a sizable reduction in operational effort in the back office. Our ability to define a set of reference policy structures, as well as terms and conditions applicable to line of business or client segment and generate standardized specification documentation has enabled higher consistency, quicker onboarding of new brokers and reduced E&Os. Integrating InsurTech capabilities like ground speed and line slip into our end-to-end processes will enable us to scale the data structuring and ingestion of loss exposure and data and reduce the manual work involved. We reduced our back-office team handling exposure and loss data by 50 FTEs by building automated data ingestion capabilities and integrating the ground speed platform. This will produce higher quality exposure and loss data for use with both clients and carriers. Digital integration with carriers through portals and APIs eliminates the need for e-mail attachments and multiple versions of the documents. This reduces the efforts involved in collating data for the client proposals and also generates insights for market brokers. In respect of our service platform and our client portals, our digitized ability to work -- to move work items and tasks from front office to global locations enables efficient collaboration between teams for completing the work, tracking the progress and escalation based on predefined service models. Both the CRM and the trading platforms leverage this in conjunction with the rules engine that creates the task based on standard templates and plans. More than 80,000 tasks per month are tracked, measured and reported, resulting in a significant reduction in e-mail queries and phone calls across the front and back office. We will eliminate teams that are primarily focused on responding to e-mails in order to report the status of the tasks. Client portals enable us to share policy information and other client documents such as certificates and most importantly, provides the ability for clients to self-serve. We have increased the adoption of self-serve for certificates in North America significantly, resulting in higher client satisfaction and a reduction in back office effort. I appreciate that this was a long detailed list of actions and outcomes. But I thought it was worth going into detail because I wanted to provide you with the confidence that not only can we see a path to the 26% margin, we are some way down that path. We are clear about the journey we will take and the destination that we seek. And this, coupled with our unwavering determination to get there, will ensure success. Next slide, please. In addition, I would point out that we have a track record of margin expansion over the last few years. We have shown revenue growth and margin expansion with a consistent 100 basis points margin improvement for the last 3 years despite the challenges through continuous operational improvement and expense management. With both the growth and efficiencies -- sorry, both with the growth and efficiency initiatives mentioned previously and with the continued diligent expense management, we believe that we have all the ingredients in place to deliver on our target of annual average mid-digit revenue growth and a 26% margin by 2024. Next slide, please. Look, I hope that what we've shown is that despite the fact that we have some short-term headwinds to overcome, we have built a strong launch pad, and we are now ready and need to act by distributing our distinctive offering at greater scale. We will continue to expand the markets in which we operate by creating innovative solutions to address both complex and emerging risks, something we are rightly known for. Our culture of collaboration, diversity and excellence allows us to do things that others can simply -- cannot simply do. Successful insurance broking is a team sport, and we have the best functioning team on the pitch, which will lead to success, and in turn, allows us to attract and retain the best talent and the most sophisticated clients. Our workflow digitization is beyond the concept stage, and we are some way down the road towards the destination we seek. We are confident we will get there and the journey will deliver the target margins. We have been bruised by the aborted Aon combination, but we are applying the required ointment, and we will be better and fitter for the experience. We are ready to grow our revenue, expand our margin and disrupt the status quo. Thank you. Carl, back to you.

Thank you very much, Adam. And I think we have time for questions now. So perhaps I'll ask Greg, if you want to begin? And we've got [ Eugene and Mike Duty. ] So if you could wait until everyone could hear it, that will be great. Thanks.

Greg Peters with Raymond James. I suppose the first question, during your comments, both your comments and Adam's comments, you talked about colleagues that had left that were coming going back. Maybe you could give us some more color on what's going on, not only within the corporate finance function, but also at the producer or agency level, getting producers back on board with Willis Towers Watson.

So Adam and -- yes, there you are. Hi, Adam, maybe we'll let you take first crack at the CRB to clarify things. Thank you. It's a great question.

I would say that it's early days -- yes, it is. Sorry. Thank you, Greg. Look, I'd say it's early days, but the signs are good, right? I mean we did lose some colleagues that we didn't want to lose. There's no question about that. But we have a very strong proposition, and particularly what I talked about in terms of our technological capability and our analytical capability. That's something that clients want now. That's not just an add-on, that's almost table stakes. And by the way, not everybody can deliver it. So people did leave because they didn't want to join Aon or they weren't comfortable with the uncertainty. And we have engaged with those people that we'd like back, and I think that we'll be pretty successful in getting them back. But on top of that, we are also looking to recruit, right? Not as I mentioned, not looking to recruit in the mirror image, but we know exactly what we want, and we're out there now trying to make sure that we can pull those people in. To be fair, we're not that far from the announcement date of the aborted Aon combination. And then most parts of the world, there are quite long notice periods. So I think you'll see the downtick in attrition and the uptick in recruitment coming through in the probably the fourth quarter and the first quarter of next year.

Yes. So across -- just to follow up across the organization, Greg. I mean our headcounts in aggregate are -- actually been remarkably constant through the last few years. So a part of this is just about making sure individual parts of the business, right, we keep that contained, right, and back on track. Adam's right, we've only been back on the market for talent a number of weeks as a newly reinvigorated independent company, but it is a huge organizational priority across the board.

Got it. And my follow-up question will be around your margin improvement plan. Obviously, for many of us in the room, including your management team, you have a jaded historical experience with something you inherited called the OIP program that really didn't deliver much to anybody other than frustrations to John and yourself and everyone else. So when we think about this new plan that you've announced to investors, help us sort of understand why this one is going to work and the other one didn't?

Yes, it's different this time, right?

Yes, exactly. You got it.

One of the things we found out with OIP as we came into -- become Willis Towers Watson and discover what was going on was that a change was happening but people weren't banking the savings, right? They were reinvesting the savings on something else. And simply put, the accounting -- as in the accountability-type of accounting wasn't there. So we very much learned the lesson of you need to actually track this and when we said we're going to save something somewhere, it needs to be saved, right? It doesn't need to be reinvested, it needs to be saved. And so there's an organizational discipline, I think we have this time around that wasn't present, frankly, when we became Willis Towers Watson, and we're not going to repeat that, full stop. One of the thing is we've had an opportunity over the last 18 months to observe another organization that's been through some of these. And their first time didn't work either, their second time did. So we'll learn the lessons from the second time and not the first time. Elyse?

Elyse Greenspan, Wells Fargo. So my first question is also on the expense program. So if I look at Slide 14, and Carl, you highlighted this, there's 4 areas that are going to drive that $300 million, global platforms, right-shoring your operations, real estate and tech modernization. And so the question that I have is, can you help us understand what is coming from each of the 4 different components? And then as we think about this being a full year 2024 target, can you help us understand how much is going to come in, maybe some this year? And then how much is going to come in 2022, 2023, as well as 2024?

So Andrew is going to talk a little bit later about some of the sequencing on that. So I'll just ask you to stay tuned about that. In terms of the pillars here, we think they're all -- we're not going to give you an exact breakdown, but we think they're all going to -- all 3 are going to contribute substantially to it. We have the best visibility today into real estate because we know where our offices are and we know what the terms of our leases are and we understand what the cost involved of that transformation would be. Second, on technology, right? We have a very good and, I think, cooperative relationship between our enterprise IT and segment IT leaders. And they -- we've already been operationalizing our journey to the cloud. And we have, I think, a very good idea of what it's going to take to finish that journey. When it comes to some of the other issues regarding automation, right, that the work yet to be fully scoped out. And so we are confident we'll get there, but I can't break it into necessarily exactly how we will get there just yet.

And then within the broking section, you guys alluded to $100 million of revenue, I think it was from middle and large account business. We also go back to when Willis and Towers came together, there were some revenue targets tied to the large account space that you don't believe were successful. So maybe similar to the savings plan, like what is different this time that you guys think you will be able to add to your market share within the large account space? Or was that more a middle market target? Just help me understand...

So Adam -- why don't we see if we get Adam back on screen. There we are. Adam, do you want to drill down on the $100 million...

Yes, look, I think there's 2 things that maybe we didn't quite contemplate when -- in 2016, when we came together with Towers Watson we had those targets. The first thing is that what I try to portray today, I guess more than anything, is that we have a right to win. We have a winning proposition. It is a differentiated proposition. And I know because I do a lot of pitches to a lot of global clients around the world. It is a proposition that resonates. Now we didn't have as well rounded as detailed as an analytical and a scientific proposition 5 years ago as we do today. And I think the other part of the story is we have and we do need to and we are committed to actually making sure that we develop our existing and hire new large account management talent. And I think that, that was also -- we didn't have enough of that in 2016, and we haven't done enough to address that. But we have some pretty interesting ideas. We don't really just want to hire large account talent from other brokers because when they turn up at the door, all they're doing is selling whatever the other broker used to sell. We're selling something completely different. We have a different conversation with our clients, and we have a conversation with [ them ] that resonates. So one of the things that we need to do with our existing large account team and those that are capable is to make sure that we train them on the proposition that we have, and that's why I put John Merkovsky in charge of our large account strategy. And his role is to make sure, first of all, we create the storyboard. We know what it is, but we just need to coalesce it little bit. And the second thing we need to do is to make sure that we train enough folks on that storyboard so that when they go out into the field, they're selling Willis Towers Watson's proposition, not the general market broking proposition because ours is very different and very compelling.

John is here today, by the way. So you have a chance to talk to him in the break and see how that resonates. No pressure at all, John.

Mike Zaremski from Wolfe Research. I guess back to a question on margin improvement. I think it was refreshing to hear your candidness about some of the challenges you're facing and kind of the ointment you're using to fix those challenges. And I think we also know that the long-term trajectory and margin improvement, you have a clear path to it. But I feel like historically, the Willis Towers Watson stock has underperformed, just factual upon earnings day because of a lack of, I guess, a mismatch of kind of investor expectations versus in the near-term path. So just kind of thinking through the challenges you're facing near term and looking at the slides talking about the benefits of the restructuring or cost programs being kind of backloaded into '23 and '24, should it be in our models and thinking more near term that some of these challenges will transpire into slower earnings growth or less margin improvement? And so just not to [ labor it ] but I'm just trying to just make sure we're clear about more near-term expectations in 2021.

Again, Mike, I think that we perhaps wait until the finance presentation at the end of this, and that will help clarify some of the sequencing. And perhaps we'll have Andrew and Mike up here with me to sort of talk about how you might factor that in your models. So...

Okay. And maybe one follow-up then. To all the press releases about certain people leaving, and I think you alluded to a healthy bonus pool, will some of the Aon breakup fee be used to give people bonuses that are expected potential bonuses if the merger had gone through?

So cash is fungible, right? I mean the $1 billion we got from Aon, which is pretax, of course, we owe some tax on that, is no different than the $1 billion or $2 billion we have in the house already, just to start with, right? We have taken steps to make sure that we are paying retention, where retention is warranted. I would point out, right, that the Aon retention bonus pool was set up to retain colleagues, some of whom are going to be heading into a 2-people-for-1-job situation and that's no longer the case. So simply redirect -- just simply saying we're going to pay out those bonuses would have not been in our shareholders' interest, whereas paying retention to people who we actually need with us for the journey ahead is in our shareholders' interest. And we think we've made a smart decision by refashioning the program to be a Willis Towers Watson retention program, not an Aon combination retention program. Sorry. I won't be involved in microphone selection anymore.

Weston Bloomer from UBS. My question is on the free cash flow target. You alluded to certain initiatives that are currently underway and others that you're going to expand on and grow into. Can you just talk to, I guess, what is currently being done? And what are the new initiatives? Is it improvement in days sales outstanding, lower CapEx? And then the 3-year target, does that include the back half of 2021? Just a clarification there.

So the -- or with regard to the first part of your question, yes, we have taken steps over the last a couple of years to move to a much more disciplined effort regarding CapEx. Mike and I have been part of that investment committee right, which has looked at our CapEx spend across the organization, rationalized it and made sure that we've taken a very disciplined and prioritized view on where CapEx is warranted and where it should not be, and we will be maintaining those efforts going forward. That's been a very successful activity for us and no seeds since pausing. Andrew and I were actually on the start-up for the committee that was looking at cash management and DSO has been sweeping cash out of our organization into a centralized treasury has been an integral part of that effort. That task force continues to meet every week. I'm still there. I'm sure they'll kick me off it at some point. But we've actually accomplished, I think, great things and continue to accomplish great things with respect to our organizational discipline [ around ] free cash.

And then my follow-up is on inorganic opportunities. You mentioned areas where you could look to acquire business lines. On the flip side, are there any areas where you could potentially look to be a net seller, either by segment or by line? So I guess built into that $10 billion 2024 revenue target, does that assume that you're going to be a net acquirer over that time period? Or how do you think about M&A, I guess, more broadly?

So we haven't addressed divestiture in this because, frankly, we like the businesses we have right now. And we think they fit together very nicely, and they create a portfolio effect. So while we've had some dispositions over the past couple of years, we're actually much more excited about our position to grow, not to shrink at this point. So I've identified a few, right? And you've seen our announcement regarding potential deal in Israel, right, which helps with our geographic footprint. We think these sort of acquisitions, which can help us become everything we want to be with respect to a global force in our chosen markets straight down the middle, right? And I say -- we're not looking for anything ginormous, right? We are looking to make sure it strengthens the capabilities we have already nor are we about to expand into businesses we aren't in, right? We like the businesses that we're in.

Ryan Tunis, Autonomous Research. I guess just given some of the attrition issues we heard Adam talk about, why is now a time to focus on margin improvement rather than investing in talent?

So I'm going to steal one from my colleague, Julie Gebauer's notebook and point out the word is and. It's not or, it's and. We can do both. So we want to be out there for talent and we think we can find that talent. The talent fits in with our current strategy, and we believe can be accretive quickly. So it's an and.

Got it. And then a follow-up, I guess. Carl, you were, I think, overseeing Willis Re that you identified as a nonstrategic fit to the Willis organization. Why is corporate risk and broking more of a strategic fit, if Willis Re wasn't?

I think the fundamental nature of our business is the vast, vast majority of our client relationships are with corporations, right? And that's the customers for Adam's business. The customers for Willis Re are insurance companies, which are an important component of who we do business with and it's ICT's client base. So it's not as if we're abandoning that segment, we're actually very, very happy about our insurance company relationships. So we think the -- be deep and broad even without Willis Re. But the overlap in terms of just who you're focusing on with respect to your client base is basically 100% between risk and broking and health, wealth and career. And that's just simply not going to be the case for a business that specializes in one particular industry. This gentleman in the front has been very, very patient.

Tobey Sommer with Truist Securities. Could you elaborate a little bit on where you see market gaps or opportunities at the beginning? I think you mentioned broking in North America and individual marketplaces.

Yes. Those were the 2 areas I highlighted, but there are other places where we think we can grow as well. Our market share in North America is smaller than it could be, right? It's a very fragmented market. And if you look at how we -- our market share in most other major developed economies, we're relatively light in North America, and we think that there remains very good potential there for both organic and inorganic opportunities with respect to risk and broking. As Adam has already highlighted, right, we're very much a large market broker in other parts of the world, and we're right in that aspect of our North America business. So again, these are areas where we can [Audio Gap] our intellectual capital, and that's a vibrant intellectual capital proposition, Adam has outlined and bring it to North America. We think that's a real plus for us. With regard to individual marketplace, you'll hear a bit more from Gene here later, but this is an area that's got -- it's large, it's growing, and we already have an extremely strong position. And with some of the bumps our competitors have faced, we don't have them. And so we think there's the ability to capitalize on that over the short term.

And as a follow-up, could you comment on how the company's market position and capabilities across 2 themes map against the changes in the marketplace? And how you may be able to grow, specifically climate and ESG? I was curious about how the company is sort of tackling those...

Sure. And they're related, right? Because last I looked, the E part of ESG is environmental, and the reverberations from climate change definitely have social and governance themes as well. So I'll address these a bit blended, right? So first of all, one of the things we established a number of years ago, it's gotten several names. It's now the client and resilience hub, whereas a center of excellence that was reporting into me previously, now reports into Julie for all things climate, it employs risk modelers, climate scientists and people with other expertise that can bring the important nature of climate change and what it's going to mean to our client base into reality and actual revenue, right? So we like to think of it as doing good while doing well. And it's -- how is deliberately sort of off in its own portfolios that could influence the segment's work, we view this as an important initiative for us, but it is cross-company. And as Adam would say, right, as we talked about the client transition pathway, which is a broking solution to climate change, we think this has impact across the entire portfolio. [ Something bit sooner rather than others. ] With regard to ESG, this is something where we've seen developments across a number of businesses in the portfolio. So in Talent and Reward, there are clear direct implications for executive compensation, as well as for how risk behavior works within organizations that could have impact on the risk and broking side as well. So I talked about sort of grow fast, blossom fast, fail fast. This is where we're seeing growing fast and blossoming faster across the portfolio. Well, this may be a first, all questioned [ out ]. Shall we move to break at this point? And [indiscernible]? We'll let you know. I guess we'll let you know. All right, please do have a look at the exhibits on the hall. For those of you online, it's a chance to go catch up on your e-mail. Thank you very much. We'll see you again shortly with Julie Gebauer. [Break]

Hello, everyone. We'd like to get started again. I hope you all had a chance to look at the Connected Risk Intelligence demo that Adam mentioned, along with some of our other leading-edge tools and technology. We're now ready to turn to our future health, wealth and career segment. This will include our Human Capital & Benefits business or HCB. The Investments business from Investment, Risk & Reinsurance and Benefits Delivery & Administration, which we refer to as BDA. Of course, since we're still operating under our current segment structure, any financial results or outlook we provide will be on that basis. Now Gene and I are really excited to share why we are so proud of the performance of this segment and why we're looking forward to our future. The synopsis is that we have a strong track record of delivering excellent work to an impressive client base. We have opportunities to build on that strong foundation with operational excellence, connections across our business and innovations. And with attractive opportunities in the market and disciplined management will continue to drive profitable revenue growth and help unlock additional value for Willis Towers Watson. So let me repeat that. We have a strong foundation. We will not stand still, and we have plans for continued profitable revenue growth. So let's get into some of -- more of the details. I'll be focusing on HCB and investments, and then Gene is going to provide a spotlight on BDA. I think most of you will recognize our strong foundation. We have a terrific portfolio of related businesses, helping organizations and individuals in the important areas of health, wealth and career Together, we generated upwards of $3.3 billion in 2020 in HCB and another $300 million in investments. Across this portfolio, including BDA, you know we have related content. We have consistent buyers. So we'll see benefit by bringing everything together in 1 segment. However, each of our businesses operates in a distinct market. And in fact, each of them is in a leading position in its market. I want to highlight some specifics about our 2 largest businesses. In retirement, which is 40% of HCB, we are the leading actuary in key markets around the world, and we continue to grow our market share. For example, over the last 5 years, on average, we've added 11 net new actuarial clients in the U.S. and U.K., and we've also added 14 net new clients in administration in the U.S. with client retention rates that are over 98% and relationships that span several decades, each one of these additions is incredibly valuable. Now looking at health and benefits, which is about 38% of HCB. Group -- industry groups look at us as a leader here. We can serve clients in more countries than most of our competitors, and we've been first to market with notable innovations. That includes our group purchasing collaboratives, which provide group purchasing power to hundreds of employers and have been growing double digit and now have more than 5 million members. These are just a few call-outs of our track record. You'll see equally impressive points about T&R, TAS and Investments. And working from this position, even as we've continuously pruned our portfolio to make sure we're focused on profitable market segments, we've grown at industry average rates and delivered margins that are at top of the industry. And this has actually been the case since the inception of Willis Towers Watson. And to borrow some words from Carl, we have not sat on our laurels in any year. In fact, our excellent management team and our incredible colleagues have pushed for more each year, and they've achieved it. As we look forward, we expect that to continue. We are starting from a position of strength with a well-tuned portfolio that we won't have to trim to any great extent. And many of the growth drivers that we've seen in the past few years will continue. So we'll tap demand for our core services and ancillary services like derisking pension plans, offering voluntary benefits and reimagining the workplace post pandemic. We'll also generate new growth through the extra emphasis that companies are placing on the employee experience and their increased interest in bundled solutions. Now combine this with the opportunity for simplification and transformation, and we look to a future with mid-single-digit growth and continued margin expansion. Now let me tell you a little bit more about our growth priorities in each business. Turning first to Retirement. As I said 3 years ago at a similar meeting, we believe there is still life in this mature defined benefit market. And we are very well placed to make the most of it. We'll do that by putting priority on our core work servicing trillions of dollars of liabilities. And on the important role that we have in derisking plans through annuity placements and lump sum payouts. Then we'll supplement this by: first, building capacity to address a very significant compliance burden related to guaranteed minimum pensions in the U.K.; second, by growing our new and innovative offerings like our co-fiduciary offering in the U.S., which helps organizations reduce the internal costs and resources to support DB plans; and third, by gaining share in the middle market with a turnkey bundled solution that also includes investments in administration. Now complementing all this is our focus on building our presence in the very important and growing DC market, a market where assets are more than twice those supporting the defined benefit market. We have 2 main drives here. The first is our master trust product, LifeSight, which Carl already mentioned. But I do think it merits repeating. LifeSight is multiple employer pension scheme that we fully manage from selecting investment alternatives through to trustee oversight. The most significant of our products is in the U.K., where we've more than doubled in the last 3 years alone. We now boast GBP 11 billion of assets under management and 235,000 members, which is about 15% of the market and in the lead in the market. Now as Carl mentioned, the master trust market in the U.K. is expected to grow in the 20% to 25% range for each of the next 10 years, and we're poised to grow at least at that pace. And then the potential for similar products in other key markets is opening up, like in the U.S., where it's now possible for more organizations to participate in pooled employer plans. The other main thrust in the DC space is DC pension brokerage, where we help organizations place their administration and asset management of DC plans with the appropriate insurer or vendor. And with choice and complexity increasing in this area, we're seeing this market grow double digit as well. So what does this all mean for our $1.4 billion retirement business, which is anchored in a mature market? It means that our ability to innovate and adapt will enable us to generate flat revenue to low single-digit growth. Now turning next to Health and Benefits. The dynamics in this market are focusing on employers on improving the performance of their benefit plans, especially health plans. So demand for support continues to grow significantly. And our aim here is to build sufficient sales capacity, utilize all of Willis Towers Watson sales channels and hone our value proposition so that we win more than our share of the market growth, locally, regionally and globally. It's worth noting here some points about our value proposition because that helps our win rate be higher and ensures that our relationships aren't dependent on any one broker or consultant, how does that happen? With core analytics that enable employers to better understand and manage their costs across all locations, with tools to assess specific workforce needs and home in on the right benefit program with curated panels of solutions, and with software and services to deliver an enhanced employee experience, whether that's a compelling communication package or software to help someone choose the correct benefit program, setting ourselves apart from competition in this way is a core part of our strategy going forward. A few other key growth drivers for Health and Benefits. We'll continue to create and build our purchasing collaboratives. These are growing at a rate that's 50% higher than our core business, and we'll also build out our voluntary benefits offering more another area that's growing much faster than the core. So starting with a revenue base of $1.3 billion here, we expect to grow high single digits. Intelligent rewards, a market that is more volatile, as you know, we've had a successful strategy built on focus. We concentrate where we can truly distinguish ourselves and utilize our core capabilities at scale. That translates to working in areas where we can deliver returns that are consistent with the rest of our portfolio. And it's, in fact, what helped us whether the 2020 pandemic impact better than most in the industry. Now going forward, we're going to build on that success. Specifically, will 0 in on work and rewards which is defining, organizing and rewarding work and employee experience or EX solutions, defining and delivering the experience for an organization's employees. It's worth noting that EX connects with every other part of health, wealth and careers. So retirement programs, other benefits pay, they're an integral part of the employee experience and vice versa, the way an employee experiences pay and benefits has an impact on its effectiveness. That's why we're building EX into most everything we do. Now beyond the core and T&R, we've created a network of referral partners to address adjacent issues that our core issue -- our core capabilities don't address, and that also provide commercial value to us. All in, considering where we are in the economic cycle for T&R, this strategy will produce mid-single-digit growth for us. We'll deliver low to mid-single-digit growth in TAS, where we're focused on enhancing our position in the large market and building our presence in the mid-market. In Investments, our focus is to continue building with defined benefit and defined contribution sponsors and building out our specialist portfolio to help clients access capital markets and managers that might have otherwise been difficult to do. And we're also monitoring the environment here so that we can take the right time to enter adjacent growth markets, wealth, endowments, foundations and private assets. Over the next 3 years, we'll deliver mid-single-digit growth here. Now our growth strategy extends beyond these business-specific areas of focus. We are intent on gaining additional leverage working across our portfolio because as we bundle multiple capabilities across -- into solutions, 4 things happen: First is we are better able to meet our clients' needs; second, we distinguish ourselves from competitors who have narrower portfolios or are more siloed; we improved the breadth of our client relationships; and we make our sales channels more effective. Carl and I already highlighted our LifeSight master trust, which is one of our DC solutions involving retirement, TAS, T&R and Investments. I've also mentioned EX. This is a prime area of focus that will allow us to grow faster with greater efficiency. For example, we are well on our way to having all of our global benefits clients using our Embark portal, which was out in the foyer for an enhanced digital experience for their employees. The core application is part of our standard broking appointments, and that's improving our win rates. It's also creating opportunities for additional demand as clients want to buy up to additional features. Another innovative example around bundling relates to our future of work. As we help companies define and organize their work, we don't just help them figure out where to access talent or how to manage in a hybrid environment. We also consider the risk impact. So to make a new way of work sustainable, we help organizations understand and address the impact on, for example, errors and omissions or cyber risk and other sorts of risks. Overall, this additional strategic focus on bundled solutions will put us on track for mid-single-digit growth plus. Now on top of growth, you'll remember, I said there was opportunity to simplify and transform. In addition to the company-wide efforts that Carl and Adam have already noted, we have 6 specific efforts underway in this segment, 4 are focused on operational efficiency. We are well down the path within each of our businesses to use common technology platforms, common processes and common consulting methods. We're now finding common processes across businesses. For example, we'll benefit from straightforward things like standard cookie notices or one approach to single authentication and some more complex things like implementing one content management system. Next, we'll improve how work gets done. We'll automate more things like robots for actuarial valuations and compensation surveys, and we have opportunities to move more of our work to lower-cost locations. Third, we must respond to clients' demands for more real-time data access and more predictive analytics, Here, we don't need a center of excellence for each one of our businesses, no. Instead, we will be utilizing a company-wide capability. Fourth, starting with Embark, the portal I mentioned, we're using a more systematic approach to offering core products with standard features at an introductory price. This will give us access to more middle market clients and more clients in emerging markets. It will also provide more demand with buy-up options for custom solutions and bespoke solutions. The last 2 efforts are focused on more systematically connecting across our portfolio. I've already mentioned EX, so I won't say more there. But a second area of focus is building up our capability to address integrated and global issues with senior buyers and effectively leading projects across multiple businesses. We've been constrained in the past by our capacity to do this, and we've been cautious about building up the capability as we've been focusing more on our individual businesses. But now we've identified how to do both, and we're going to be leveraging a team that interfaces with the headquarters of multinationals, generalists who tap into our specialists in our vertical businesses. And we're going to expand this group to cover all of the areas that we find where we see commercial opportunity. All of these efforts will make us more efficient as we deliver consistent quality with a value proposition that is distinct from our competitors. That means that we'll be able to respond to the pricing compression we see in some of our businesses like retirement without adjusting scope or quality. That means we'll have stronger relationships that will boost our already very high client retention rates. That means we'll be delivering Willis Towers Watson's distinctions that are less reliant on any one individual. And it's why we're confident that we'll continue to add to our margins over the coming years. Now putting this all on a page, we have generated strong results in the past. Looking at the last 3 years for HCB, you can see that we delivered 1% annual revenue growth. And that is in spite of having 40% of our business in a mature market and in spite of the significant drop in discretionary spending in 2020. And even as we tuned our portfolio to align to profitable revenue. We've also improved our margins each year, ending the period at just over 26%. We have a well-devised strategy to build on that performance making the most of business-specific growth drivers and leveraging points of intersection to achieve mid-single-digit growth. We'll tap into the company-wide initiatives and drive our segment initiatives to simplify and transform and further expand margins. Now in just a few seconds, I'm going to pass the mic to Gene. But after you hear from him about how BDA adds to the story, I hope you'll agree that our future health, wealth and career segment is an excellent business operating in a strategically important space. You've heard about how we've distinguished ourselves with clients and delivered exceptional financial results with industry growth and top margins. With some detail, we've established how we'll become even stronger. Our disciplined management and our diligent colleagues will improve our operational efficiency. At the same time, with our focus on clients and with colleagues who have proven their resourcefulness in developing new solutions in a market full of opportunities will accelerate our growth. The combination will be powerful and add meaningfully to Willis Towers Watson's overall value. I hope you'll keep this in mind as you hear from Gene about BDA. Thank you, and over to you, Gene.

Thank you, Julie, and it's a pleasure to be here. Thank you all for being here. So BDA differentiates WTW from our traditional competitors. It's a unique combination of businesses and nobody else has it. We formed BDA as a segment in late 2012 when we bought Extend Health. There was something about paying $400-plus million for a company with $50 million in revenue that caused the market to question our sanity. Our stock price reacted very poorly at the announcement. And I remember saying to John, someone thinks we're idiots. And John's response was, "Gene, they might be right." And then I can hear him thinking, at least in your case, they might be right. But he said, we're going to make sure -- the answer to the question becomes known to everyone as time progresses, we are not going to bury Extend Health in the Benefits segment, which I was running at that point, but we're going to put it out as its own segment, so everyone can see clearly if we were right or wrong. We took Extend Health, we combined it with our fledgling health and welfare outsourcing business, to create a new small segment, which is now BDA. 2013 revenue for BDA was $187 million. Today or at the end of 2020, it's $1.36 billion. More than 80% of which has been organic growth. And the growth didn't just happen at the beginning. The pro forma growth for the last 3 years has been 16%. And the future is bright. We have $2 billion sitting right in our sights, and we no longer need to sit in our own segment to see whether or not this experiment proved right. We are very excited to become part of health, wealth and career, and I'm excited to work more closely with Julie. I'm not sure we can work more closely together, but I'm excited about it. So BDA is made up of 3 business lines. The first is our individual marketplace, which is focused primarily on providing Medicare-related policies, but also has an emerging life IFP and supplemental insurance businesses. Starting from the initial $50 million in 2012, revenue in this business line has grown to $943 million in 2020. Our second line of business, health and welfare benefit outsourcing which if you know the history of Wyatt and -- Watson Wyatt and Towers Watson outsourcing wasn't like the greatest thing for us but we slowly entered back into it. Health and welfare outsourcing has grown from less than $100 million in 2013 to $375 million for 2020. And our third line of business benefits accounts now maintains accounts for over 1.5 million participants. The 2 businesses in the individual marketplace, Extend Health and TRANZACT have very complementary financial profiles. The Extend Health business matured very quickly. A significant number of large employers move their retirees from a group to individual platform over a fairly short period of time, creating explosive growth. But there then became fewer employers to convert, the growth slowed down and the natural lapsing of policies due to mortality, remember, this is a very old group we have, meant most new policies were replacing lapsing ones. Revenue has been flat in the Extend Health business for the last 3 years at about $385 million. We knew that the growth in the Extend Health business was going to slow materially and began in 2017 to look for ways to broaden our addressable market. The natural path was going direct to consumers. The addressable market for Medicare is huge. Those who work for employers is a much smaller market. So we said, let's go to the broad market. We ran several pilots, which just frankly cost us a lot of money and we weren't going to be successful on our own. We could never prove that we had the skills to go direct-to-consumer. So we did an extensive search to find someone who had those skills. And after many discussions concluded the TRANZACT was exactly who we were looking for. They gave us the fuel we needed to continue our growth. The people, the culture and the assets were a perfect fit for our individual marketplace, so we merged in mid-2019. Now the businesses have differences. A key difference is where the leads come from. In Extend's case, an employer gives their retirees a sum of money and tells them to come by their insurance or supplemental insurance from us. The cost of individual leads is, therefore, low, and the free cash flow begins immediately upon sale. In TRANZACT's case, the leads must be secured one at a time. And the cost per lead is upfront. So initial cash flow must often be used to cover the lead costs. And another -- and free cash flow has some delay. But we have a strong, diverse -- our strong diverse sources of leads, we don't just buy them. If you look, we have strong relationships with the national carriers. We have the authority for most of those national carriers to market under their brands. So when you go to a website that has insurance company A dot -- medicare.com, that is generally coming to us. So we have very strong relationships with the carriers. We also have a strong insurance marketing capabilities, and we have our own proprietary brands. So right now, you can see the word Anhelo there. If you have an interest, go to Anhelo, just Google Anhelo Medicare. So Anhelo was our new Hispanic brand and offering. Most of you probably won't be able to read it. I can't because it's all in Spanish, but the Spanish Medicare eligible participants is growing rapidly, and we have a key focus. So just Anhelo -- just Google Anhelo Medicare and it will take you there. Another key difference is the accounting. So in Extend's case, revenue is recognized as commissions are paid, so the value of a sale is recognized over time and revenue and cash flow are matched, traditional accounting. But 606 accounting changed for businesses like TRANZACT. So in TRANZACT's case, revenue was recognized at the time of sale on a lifetime value basis and there is, therefore, a mismatch between revenue and cash flow. The commissions for the 2 businesses are the same, but the expenses and revenue recognition are not, and you need to keep that in mind. But the beauty for us is we have a great mixture of both businesses. We've been able to use Extend's strong cash flow to invest in TRANZACT growth and continue to build for the future. Now the addressable market is very large and the momentum is strong. We estimate there's approximately $28 billion of annual premiums for the Medicare market. And for the non-Medicare market, we estimate there's approximately $6 billion. And an exciting opportunity for us is the products in the individual insurance market for pre-65 retirees have improved significantly, and we've made material investments in our capabilities in this space. We have 2 large clients who have announced that they are converting their pre-65 retirees to the individual marketplace during the upcoming annual enrollment period. And if all goes well -- well, if it doesn't go well, I won't be here. If all goes well, we'll have a strong new lead source for the Extend Health business that has the same characteristics as that Medicare lead source that we've had. So this is a huge potential market for us as we go along. What slowed this down in the past is the products just didn't exist, but the products have gotten much better, and we'll see how these 2 clients do. We're the only -- we are also the only business in this sector who can cover all customer segments. Our winning formula leverage is all stakeholders. We have long-term relationships with over 650 corporate clients. We have high member engagement, and we're a highly trusted partner to over 125 carriers with 8 very strategic partnerships, gives the strength to continue to build and grow this business. Individual Marketplace is performing above our expectations. When we put the case together to acquire TRANZACT, we had goals as to where it would be. It has outperformed what we thought was going to happen. As I mentioned earlier, it had 2020 revenue of $943 million. It has unmatched diversification from lead sources and from carrier relationships and operational excellence at scale. Not a bad story for a business that started out at $50 million in 2012. John, I think we can proudly say we might be idiots for other reasons, but we weren't in this situation. From my standpoint and from Willis Towers Watson, we are very bullish on this business. Some of our competitors have had some hiccups, some challenges, we think we have it right, and we think you'll continue to see great growth and great results from this business as we now become part of HCE. Thank you. I'm supposed to turn Michael the mic, sorry.

So as you probably saw, I'm Mike Burwell, you know me. But as Carl said, in the room here is Andrew Krasner, and Andrew is the new CFO effective Tuesday with WTW. I will be leaving WTW at the end of the month. I will be joining a company called Datavant as a senior leader and CFO. Andrew has been -- previously worked with WTW for well over 12 years. He worked as a Treasurer as well as Head of M&A. I absolutely love working with Andrew. I think it was absolutely great choice by Carl and John and he's going to do a wonderful job. I think for today's discussion, we're going to kind of tag team it. I'll obviously cover the historical piece of it. Andrew will cover the forward-looking stuff, and then we'll tag team any questions that you have, obviously, given the relevance and background of both of our respective knowledge base. So I guess I'd first just touch on in terms of our financial discipline and philosophy as a company. And it really is highlighted in these 3 points. The first is to manage with financial discipline. And what does that mean? You've heard it come up several times in the course of comments, which is profitable revenue growth. Not just growth for growth's sake, but profitable revenue growth, and it's 1 word. And it's something that's embedded in the culture at Willis Towers Watson. And I don't see it going away and you heard that in Carl's comments. We're also not afraid to evaluate the portfolio. I think we've been doing that. We've talked about some divestitures that have happened. We don't see any of those really happening in the future. But I would say, going forward, this company will continue to evaluate its portfolio on a rigorous basis on behalf of its shareholders. The other point here on this slide is really talking about free cash flow. And Carl alluded to it in his comments, it's been very much of focus and something that we know we needed to work on in terms of improvement and we think we've made great progress. I think John outlined that to begin with, and I don't see that going away. And I got to tell you from my perspective, free cash flow has been something I worked with Andrew and with Carl when we started out this process, it isn't going away. It's a disciplined process inside this company. And I'd be sadly disappointed if that didn't continue on going forward, and I don't expect that to be the case. When you think about our capital allocation efficiency from a philosophical standpoint, what do we think about? First, our share buybacks. That is the floor in which everything is measured and any investments that we're making. So when we look at M&A, we look at organic investments. We are looking at those against the backdrop of share buybacks. Philosophically, that's how we think about it. And third, when we deliver superior shareholder returns, what do we mean? We seek to allocate capital in ways that generate as much wealth as possible for our shareholders. That's what we think about philosophically. So let's bring this to life. Let's look at the numbers here. What's the facts? So you look at organic revenue growth, we're 4%. If you look at it from a time frame of '18 to '20. But let's look at the first half of '21. We are at 8% in the first quarter, 6% year-to-date. We said we'll be at mid-single digit or greater going forward. And when we look at in comparison back to our competitors, despite an overhang of COVID, despite what's happened in a boarded merger, we've delivered. You can't look at each quarter, but if you look at over time, we're delivering exactly similar revenue growth rates, and we see the future being mid-single digit or greater from a revenue growth standpoint. If you look at it from a margin standpoint, 20.1 adjusted operating margins were year-to-date 20.3. And as we've talked about into the future, look at 24% to 25% margins -- adjusted operating margins, out by the end of '24 is really the target. And as you look at free cash flow, the CAGR at 23%, we, obviously, will never be satisfied and always will look to continue to improve. That's organizationally will be the case, and we'll continue to drive that overall. When you look at capital allocation efficiency, we've bought -- and if you look at the value delivered to date through the first half of 2021, we're at $2.2 billion of returning capital to shareholders. And equally, we're talking about $4 billion of buybacks here, of which $1 billion we've begun and announced, which should be completed by the end of next week in terms of the $1 billion that's there. And we're talking about -- and Carl touched on it in his comments, incremental $3 billion that we'll be buying back going forward. Leverage. During the Aon combination, we really couldn't buy back shares under the BCA agreement that we had in place. So we paid down debt. So if you look at our leverage, we're at 2.0 as you look at it on an overall basis. And when we compare that, we obviously have a lot of leverage capability. You can put your number in there. But if you say we want to be in that 2 to 3, and Andrew will talk a bit more about this, we've got $1.5 billion to $2 billion of capacity easy in terms of ability to borrow money, if indeed need to be the case for what our purpose. And you look at it in terms of delivering superior results. I mean we got 10% returns from '18 to '21. If you look at it from a dividend standpoint, adjusted EPS of 10%. And you looked at a target out there of $18 to $21 from an EPS standpoint, looking out by the end of '24, that's saying that we're going to generate double-digit EPS growth over that time frame. So I think philosophically, that's what we think about as a company and an organization. I think we were delivered against that when we look at it, when you really look at those facts. And maybe I'll turn it to Andrew then to take us forward. So thanks.

Great. Thanks, Mike. Good morning, everyone. It's great to speak with all of you today. Turning to capital allocation. You can see the components of the $10 billion to $11 billion of capital that we are able to deploy over the next 3 years. First, we will execute $4 billion of share repurchase activity. The first $1 billion of repurchases, as Mike had mentioned, will be completed next week. The remaining component will commence this year and conclude during 2022. An additional $1.3 billion will be returned to shareholders via our ongoing dividends. This leaves an incremental $5 billion to $6 billion from cash on hand and free cash flow to invest in our core businesses for M&A and to execute incremental share repurchases. Of course, any organic or inorganic investment opportunities will be -- need to be superior to the return from share repurchases, consistent with the philosophy and methodology that Mike had just laid out. As you have heard, part of our margin improvement will be driven by cost savings as we grow, simplify and transform the business. The $300 million in targeted run rate cost savings will come from 4 general areas: operations, technology, business simplification and real estate. We expect to achieve approximately $30 million of run rate savings in 2022, an incremental $90 million in 2023 and an incremental $180 million in 2024. These figures were derived from bottoms-up analysis to develop achievable outcomes. The onetime cost to achieve the $300 million of run rate savings are projected at $750 million or about 2.5x the run rate savings. And the approximate split of these onetime costs is 65% operating expenses and 35% CapEx. On the next slide, you can see our key 2024 financial goals. We're targeting organic revenue growth in the mid-single digits in order to achieve revenue of $10 billion plus. Our $300 million of savings from transformational initiatives and enhanced operating leverage will drive an adjusted operating margin of 24% to 25%. This is an improvement of roughly 400 to 500 basis points from the 2020 margin of 20.1%. This improvement is comprised roughly of 300 basis points from transformation initiatives and 100 to 200 basis points of net operating leverage improvement. The operating leverage improvement of 100 to 200 basis points is net of about 120 basis point headwind from divestitures and a negative 30 basis point impact of currency in 2020. Free cash flow generation for the period is targeted at $5 billion to $6 billion, providing meaningful capacity for share repurchases and investment in the business. And the 2024 adjusted EPS target, as you've heard, is $18 to $21 per share. I would now like to turn things back over to Carl to lead the Q&A session.

So thank you, Andrew, and don't go too far. I suspect a number of the questions may come your way. Hands already, and I'm sure you know this is the part of the presentation where the management team is going to get to whiplash from turnaround to look at you. So Eugene, pick your first.

Elyse Greenspan, Wells Fargo. My first question is going back to the $10 billion to $11 billion of the available cash. So you guys are buying back $4 billion, and then I know there's a component of dividends but that still leaves a healthy amount of capital. And then in addition to that, you guys pointed out you have $1 billion to $1.5 billion of debt capacity, given that you're underlevered. So help us think through around this $5 billion to $7 billion of firepower that you have and how you guys envision. I'm assuming that's kind of bucketed for M&A-type opportunities and how you envision deals in each of your 2 businesses?

So the cash we're going to generate, and not all of that is on hand today beyond what we have, right? Look, our first hurdle is, is it better than a buyback, right? And if it's not better than the buyback, we're not going to do it. That applies to both inorganic and organic opportunities. We anticipate we're going to see some things that we do like that are generated. But where the stock price has been, right, that's a pretty high hurdle. But as conditions change and opportunities come across, we'll see what to do with that. But again, I think we've made it very clear what the hurdle is for taking on that activity. We said earlier, right, if it's going to be inorganic, we don't expect it to be giant transformational stuff. We think it's about reinforcing the incredible capabilities we have today and looking at our geographic footprint and deepening it where it needs to be and widening where it needs to be. The deal we just did in Israel is a great example of that I cited before, right? Here's a great economy. We just didn't have a direct presence in and fill that in.

And then you guys said, I just want to clarify, as of next week, you will have completed the $1 billion that you guys expected in the second half?

That's correct.

Okay. And then my second question, going back to one of the last comments. You guys said 100 to 200 basis points of net operating leverage over the next few years, and that's net of a 120 basis point headwind from divestitures. So then that makes that 220 to 320 basis points of kind of core margin improvement, is that just -- should we expect that to come from the mid-single digit or greater organic revenue growth? Can you just help us think through that kind of organic margin improvement away from the savings program.

Yes, in our view, it's about growing revenue faster than expenses, ignoring the transformation program. And we've shown good discipline about doing that. We have every intention of keeping that discipline going forward, right? Part of that is there is a virtuous cycle here that we think we can achieve as well as we get through the transformation program. We moved to a more virtual way of working where we're just collaborating. Our clients do that, too. right? So some of the expenses that have always been inherent in the business are guiding around travel, especially. We don't see those returning to 2019 levels ever, or how we go about this. And that's a pretty nice savings that we can drop right to the bottom line.

It's Greg Peters from Raymond James again. I was looking at Slide 46, and this is the transform slide where you run through the $300 million run rate savings by fiscal year-end 2024. And I see, for example, the $30 million that you've highlighted for 2022. So when we think about the sequencing of those numbers, we should -- the $30 million of savings is what you'll see in 2023s numbers from '22. Is that sort of -- I'm trying to understand the timing of the savings as we think about our projections. Andrew -- Carl is pointing to you, Andrew. So maybe you need a mic. So...

He's got one, and not for the last time, well, I'd be pointing that way.

So those are in-year achieved savings.

So they're achieved during the year, and we'll see them the following year, correct?

Correct.

Yes. And then during Julie's presentation, she talked about the business, and Gene, I don't want to -- Gene had a good presentation, too, but both of them talked about their margin-leading businesses, it seems to -- from their presentations compared with what we were hearing with Adam's presentation and is that the margin story is more on the risk and brokering business, not necessarily HCB and BDA business. But help me understand the variation?

So I mean, we think the margin story is across the business, but we do think that there is more margin we can generate -- more incremental margin we can generate from our risk and brokering business than our health, wealth and career business. By no means does Julie have a free pass, the things that apply just to HWC. But of course, the enterprise level stuff, right, real estate, enterprise technology that will benefit everybody, including HWC.

Mike from Wolfe Research. Maybe a follow-up to Gene's presentation. if you can elaborate on the initiative with the 2 large employers that could be exciting. You also -- Gene mentioned that the free cash flow dynamics, so if growth does accelerate in this segment, should we be keeping that in mind thinking about free cash flow?

Sure. We have 2 of our largest clients who -- their pre-65 population. They're moving to the individual marketplace. One of them was announced it, so you could go out and Google, I'm not going to tell you who it is, but -- It's our largest client and one who had gone through an RFP process over the last 2 years. And the second one I don't think is announced yet. But the largest one has somewhere in the neighborhood of 30,000 pre-65 retirees, so it's a large group. And if the marketplace -- if this works, a lot of clients then will start looking at moving their pre-65. The beauty of the pre-65, if they move in there is when they turn 65 is then we have a relationship with them and they continue through into the 65 Medicare. So it just opens up a whole new area. We've been in the pre-65 business before. And the problem is the product was just sell thin that it was difficult to sell, not just sell policies but to help the retirees attain the policies. It's in the Extend business. So as those leads come to us if an employer says to 30,000 retirees go buy it from them, we have no marketing costs, which is a big part on the TRANZACT side. So that the costs is primarily getting them signed up and then we move through. So the cash flow comes immediately. On the TRANZACT side, we have to go to you as a retiree and we have to market to you. So we have a lot marketing expenses, which uses up a lot of the first year commission so that the cash flow doesn't come. Cash flow comes, but it's spent on marketing costs and other things in that first year. And so we don't get free cash flow coming to the second or third year on the policy.

And so just to be clear, the -- for these 2 large employers moving in to potentially signing with you guys is this won't have the cash flow drag component.

That's correct. It will not. And when Julie talks to you next year, she'll talk to you about growth and Extend Health. That's the goal, as we have growth in Extend Health.

Claudia, do we have any questions over the internet, yes?

No, we don't.

Okay.

Tobey Sommer with Truist Securities. What have your trends been in lifetime values and how have they been better than the industry trends in the news where some stand-alone competitors have had some adjustments?

So the one comment I'll make, and I made it to one of you today is we're a company run by actuaries. So lifetime values are our calculations. We value very large pension plans, which are the same kind of calculations. Lifetime value varies from year-to-year from carrier to carrier. So this year, we had some go improve, some go down, but we had a negligible change in our lifetime values. And we actually monitor them month-to-month. So unlike a pension valuation that we only do once a year, we do these valuations every month looking at them. But our lifetime values didn't have the same issues that our competitors do.

Gene, I feel obliged to point out, we have just as many great insurance actuaries as we do pension actuaries.

That's correct. We do. This valuation is similar to our pension valuation, but that's why I made that comment.

And as a follow-up on one of your slides, you had a $28 billion TAM for Medicare commissions. I'm curious if that is on a 606 basis or sort of more line with an Extend Health type accounting?

Extend Health type of accounting. What we looked at was -- and it said potential. So it isn't necessarily there, but it's the potential. How many people are on Medicare, if you get first year commissions of $400 to $500. You do the multiplication and you get $28 billion. So it's cash flow, it's not accounting.

Okay. And that would be a potential for sort of the current state of affairs today, that's not a projection out in the future.

That's correct. And I was doing it to size this. If we tell you, we have $943 million in revenue, the market is big.

Mark Hughes, Truist. For Andrew. How do you see incremental costs for the reacceleration in recruitment and retention in risk and broking. Is some of that going to be treated as a nonrecurring perhaps and adjusted out?

No, that's actually in our base operating plan. So all of the improvement that you see is coming from the transformation program and the operating leverage.

And then on the TRANZACT business, is that -- if you were to try to grow that externally or inorganically, maybe there's some values out in the public market, would you look to grow just capacity and seats and do that organically if you wanted to grow it? Or could M&A be of interest? And then the second part of that is the cash flow impact of that, if you're growing that faster and has more of a cash drag, is that optically negative you might want to avoid?

So I mean we do look at the growth on TRANZACT and the potential impact on overall cash flow as a consideration. We don't just ignore the dynamics of that. On the other hand, we want to run the business on economics right, not accounting. But to the extent we think it's going to muddy the waters, we want to just be very clear with you where it's going to take us. But we are looking to make sure that business grows within the bounds of what we can do with it, not just simply go out spending hog wild on leads that we don't think are going to be productive. I think we had an Internet question finally. So maybe, Claudia, if we could get that. Sorry, Greg.

A few people are asking how involved was Andrew Krasner in developing this plan?

I'll let Andrew Krasner answer that for himself.

Yes. Sure. It's a good question. I was involved in working with Mike and others, and it is something that I am fully committed to having spent time, getting up to speed reviewing and being involved in this development.

I mean we could have hit Andrew away and just infilled them later, but this is because he's with us, he's part of the team, and this is our plan including Andrew's Plan. So great.

Okay. So one of your shareholders has e-mailed me a question. So I'm not going to take pride of ownership of this, but I want to read the question to you and have you respond to it, if you could, please. Given your comments about capital return versus organic-inorganic initiatives and given the comments about the high hurdles for that based on the current share price, should we expect the $4 billion plus of buyback to be more front-end loaded? Also, have you been able to buyback -- they're looking for how much stock you've bought back since the deal break and given the sense of pace?

Okay. So we have bought back -- we'll finish the $1 billion we announced next week, right? So that one's pretty straightforward. And we bought that back at the pace we can. So that's been straight according to how we do these things with the permitted volume we got. I would argue that $4 billion during '21 and '22 is quite front-loaded. And so I think I'll agree we're front-loading it is the most I could do. And we will -- as we generate cash beyond what we have, we will address it then looking at all the opportunities at that time.

If -- and my follow-up question would just be on the free cash flow conversion rate. I know you guys were very proud of the results you achieved last year, which sort of went lost in the sauce because of the deal situation. When you think about free cash flow conversion rates, you've mapped out the margin improvement, you mapped out growth. What do you think about when we get to 2024, what your free cash flow conversion rate will look like? Or any helpful guidance on that would be helpful.

Yes. I mean we're committed to making continuous improvement in that metric and working through some of the continued expense management and working capital management activities that will help us get there.

Can -- I know you spoke about DSOs and the accomplishment of DSOs and your laser focus on DSOs as part of the follow-up to that question. Maybe you could give us a sense where you are on that and how you benchmark yourself against your peers?

Yes, I don't think we're prepared to go into that level of detail in terms of where we are, what our target state is, but it is something that we benchmark against our peers. You can do some calculations from the publicly available information, but it is something we look at on an enterprise-wide and business basis to make sure that we are competitive and continuing to make progress.

And this is something we have drilled down each of our businesses has a pronounced focus on DSO improvement for their business. So it's not something we're just taking from the top, we are in generating to day-to-day operations.

Elyse Greenspan, Wells Fargo. You guys laid out a bunch of financial targets today over the next 3 years. So can you just give us a sense for management compensation be tied to hitting these financial targets? Are you making any changes to how the long-term incentives are for management relative to the target you guys have laid out?

So that's up to the Board. The Board is historically -- and John is on the board, I'm not, so he can speak better to Board discussions on this, but the Board has shown no reluctance whatsoever in the past to make sure management is tied on shareholder appropriate goals in our compensation and long-term compensation according to the long-term financial goals is a very substantial part of our everyone you talk to with today's compensation.

And then on revenue growth, you guys mentioned this mid-single-digit or greater revenue growth target. And then it sounds like you will be very selective, but there could be some M&A, is the expectation if there is kind of an inorganic portion that organic and total revenue growth will be mid-single digit or greater over this 3-year period?

Yes. Yes, Elyse. That's right.

And then the $1 billion, you guys have said on your earnings call, it was going to be part in the open market part through an ASR. It sounds like it might have just been in the open market. I'm just trying to understand how we should think about buyback frontier relative to the $3 billion.

Mr. Burwell.

Yes. So when we looked at the ASR, we didn't -- there was some -- as an Irish company, it just didn't make sense for us ultimately as we look through that. So we went through just a normal 10b5 repurchase process itself. But as I say, we accelerated that as soon as we could. Two days after Carl's announcement, we started that, and we'll be completed next week, the $1 billion.

And will you continue to have 10b5s in place, meaning as we think of the new $3 billion, you can buy back stock when you're perhaps in blackout periods?

Look, we're looking through that process right now. I'll defer to Andrew and Carl as they think about that. But as Carl said, I think we're looking to front-load things. So we'll look through them.

I'm Mike from all Wolfe Research. Back to some of the broken comments, specifically on the needing more scale in the North American large account. I feel like that's been an issue for a number of years. If you can kind of elaborate more on how that's going to be achieved. And also kind of how important is that in the margin improvement story in the broken segment?

So I don't view Mike, necessarily, as part of the margin improvement story as much as the growth story. It will help on margins, right? The bigger concentration of revenue we have in any individual geography, the more efficient we tend to be, and that will help. But as far as sort of why now, I think part of it is the proposition, right? If you've had a chance to look at Connected Risk Intelligence, the lobby or some of the other tools that we're using right? We actually think these can be true magnets for talent for people who want to succeed in this space. We're not just saying, here's a desk and or here's a nameplate, here's a business card. Here are the tools you can make a difference with your client base. We think that's an incredibly powerful draw.

Okay. It's Greg again. So I want to -- one of the other pieces of the puzzle for financial projections would be tax. Could you give us some perspective around your expectations about corporate tax rates. Obviously, things can change from a legislative perspective, but what you're thinking about tax? And embedded in that, with the proceeds from the deal break and then the sale, what kind of tax implications are on those 2 pieces?

Yes. On the proceeds from the sale and the break fee, the number that we have in here is net of taxes that we expect to be able to deploy into share repurchases. And on the tax rate, that was projected on an adjusted basis about 21% to 22% going forward.

Great. And then sorry for another detailed question, but it's something that comes up frequently with your investors and that's around pension and the adjustments that happen on an annual basis that go into the flow either as a benefit or a detriment to earnings. Can you please speak to that piece as it relates to how you should think about the future projections?

Yes. So Greg, that you see it recorded in other net in our accounts. We have a plan that are well funded when you look at these plans. So obviously, you come back to the actuarial calculations that we go through in terms of what returns have been in the marketplace and the view. So you see those fluctuations go up and down, but I think it's a retention tool actually that many companies don't have. When you look at this pension that this company has overall. And I don't know, Carl, if you want to add.

Yes. It makes -- given he's got these 4 pension actuaries within view. He's definitely taking his life in this. So our 2 big funded pension plans are the U.S. and U.K., right? The U.K. pension plan is managed with a fairly tight asset-liability mismatch so that fluctuation -- it's a big plan, right, but fluctuations, the value, you're talking about the difference of a big asset and a big liability, right? So even small variations can cause a big difference in the net, and that's what we record on our balance sheet. The U.S. is managed with a looser asset-liability match, which is pretty common and you'd find our competitors do it the same way because we have more control of what we can do as compared to the U.K., which the assets are managed by independent trustees. And so again, these fluctuations can be relatively large in any one year. But if you expect your assets to outperform your liabilities over time, which ours have, and you would expect them to, generally, they'll work out in your favor.

Tobey Sommer with Truist. Over the course of my 20 years doing this, earnings releases have expanded in length and adjustments have proliferated, specifically at the company adjustments and the length of the earnings releases, it kind of expanded right with the merger with Willis. I'm not asking you to predict earnings, but do you think adjustments will be as prevalent over the next 3 years as they have been since the Willis merger?

I would expect there to be adjustments related to the transformation activities that we've been discussing, but we do look to try and minimize the number of pro forma adjustments and will only include things that we consider appropriate and provide a clearer picture of the run rate sort of performance of the business.

Clearer and comparable because adjustments are part of how it works.

Mark Hughes, Truist. I'll follow up on Greg's behalf. You were talking about the asset-liability match in the U.S. and that outperforms over time. Would we think about that being a steady degree of outperformance? Or will it kind of expand along with, say, your overall growth rate?

So I mean, that's really a function of capital markets rather than revenue or anything else.

Presumably, you have some assumption in your $18 to $21 target that has some view about that question?

So yes, there's an expected return on assets assumption and the discount rate, and it's the net of the 2 that you would expect to be the performance. Our pension footnote discloses both ...

About the same over the next few years.

There's no change anticipated in any of those assumptions that's built into that. The discount rate is set by the markets, right? It's based on current spot bond yields. So we're not in control of that. So if buying yields fluctuate, and we don't know which direction they'll go, but they're going to fluctuate, we'd expect the discount to fluctuate and thus, the surplus or deficit to fluctuate as well. So a bunch of moving parts.

Maybe you have a question on the -- I did get an opportunity to get or talk with John on the back of the room, it was very interesting. Any early numbers or kind of results you can share, looks like a nifty capability. And I think your -- you make the point that you have a better capability now to pursue those larger accounts than you did, say, 5 years ago with the original merger time. Anything you can share with us just evidence of that or proves your early sales results sold, anything like that, that you'd like to share?

Yes. No, I think it is early days indeed, right? And there are just too many moving parts to be able to isolate the effect of any one component like that. Do we still have Adam on? We'll take that as a no.

I'm here. Well, I'm actually here. It is early. It was, I mean, early days. It is -- well, I think you're right, it's difficult to isolate it. Is that the thing that makes us win? But I'd tell you, what I would say is it's not just about connected risk intelligence. It's the way that we address these large account clients. And I can speak very clearly anecdotally because I do it all the time. And we talk about risk tolerance levels and then we talk about Connected Risk Intelligence, and we're really in the business of making sure. So we understand what our corporate clients can bear. We understand what the probability is going to be. We understand what the consequences of that event is. And we then have the ability for connected risk intelligence to look at that across a multiple of risks. And then we decide, okay, what's your best hedging opportunity. Now that might sound like what brokers do. And in fact, it probably is what I've done for 25 years, but this is the first time I can do it with any science behind it other than just my experience. And so as we then feed our broking platform with real-time live pricing data from the market, we'll be able to plug that into our optimization models and have real-time conversations with our clients. And look, the reason I bring this up is because it is just so very different to what our competitors have. And by the way, we had a chance to look at a couple. And I'm telling you, we are very advanced in terms of our proposition. And what we need to do is to spend some time working on how we manage to distribute our distinctive proposition to a wider client base. And that's something that the North American, Mike Liss, who runs North America, working with John and others is working on right now. But we've got to be very clear. We want to be able to articulate our proposition, not a general broking proposition because our proposition is very different and very compelling. And I know I've said that before. But that's really the key to our success, our future success, North American large accounts base.

I do want to, I think, tie back to one point we're making earlier around sort of the bodies needed to do this, right? If you look at turnover, right, at Adams business, right, pre-COVID, right, 2019, 14% right? 2020, all lockdown, no one's doing much hiring down to 11%. We're back to 13%, right? We're not in the -- this isn't a business that's fully a part, right? This business sort of still within its normal level of turnover and attrition. Would we like it to be lower? Yes, we would. Are there pockets where it's been relatively high? Yes, there are. But even in North America, right, where we've had the most publicity around departures, you're still lagging high teens, not anything beyond that. And so we think that we are -- remain in a good position to actually succeed here. And with the anecdotes, we've talked about sort of people interested in us as a place to work. We think that the -- this looks actually like a very good proposition going forward for us.

Yes. And early signs of that, any kind of details on that, that you can share over time would be very helpful.

Fair enough.

Harry Fong from MKM Partners. The financial targets that you set up with mid-single-digit organic growth, 24%, 25% operating margins. What happens if we have inorganic growth? Should we expect even better margin improvement as we push forward?

Well, there are obviously stages when you're doing anything inorganic. You're buying inorganic on what you think it's going to be not what it might be on day 1. But if we are disciplined, as we said, about making sure that our hurdle rate remains appropriately high, once you're through those initial stages, it should be accretive.

Okay. Your target of '24, '25 is essentially putting you roughly in line with the 2 largest brokers today. They continue to suggest that further margin improvement is likely. So how do you close the gap between where you're at and where they're likely to be by the time we get to 2024?

So every journey begins with the first step, right? And we are taking our first steps floral on that path. One of the sort of turn a phrase, always like is when the facts change, I change my mind. So we evaluate what we think we can do, not what we think they can do in terms of the promises we make to you. And we've made a promise we are going to keep. That being said, right, we're not -- it's not just we're done with 3 years and now set it in auto forever, right? We think after we've accomplished what we told you we can do, that it will be time to figure out the next things we can do to make sure that our margins are everything they can be. And that's -- peers are a yardstick, but they're no more than a yardstick, right? It is all about examining yourself and saying, what can we do better? And that spirit of continuous improvement is one that we have done our best to engender throughout the organization through the last 6 years, and we'll do our darndest to make sure we continue that for the next 6.

George Droulias from EdgePoint. Julie, in your presentation, you called out the loss of discretionary revenues due to the pandemic being a reason for the lower historical growth in HWC. Can you just help us quantify how much discretionary revenues were actually lost? And any sort of visibility you have on those discretionary revenues coming back?

Look, I don't have the specific breakdown, but we saw our Talent and Rewards business, which has the greatest amount of volatility and is most dependent on discretionary spending dropped 19% last year. We see that coming back every bit and more this year. Our pipeline is strong. We're just constrained by capacity to deliver on it. We see that the growth continuing this year.

So I could just follow up one point here, right? And Julie has done the tremendous job in turning the talent business away from 100% pure projects, right, to having a substantial core of recurring revenue. The same is true in Alice Underwood's insurance consulting and technology business, which I remember back when we had the global financial crisis, right, just got crushed. And this time around continued growing. And the reason for that is we transformed the business mix from 80% consulting, 20% technology to what's now 2/3 technology, which has incredible legs right during that. And so that sort of organizational focus on how do we build recurring revenue, recurring relationships with project work being great on top of that. It's an and thing, but that's the sort of business focus we have is creating a more resilient company.

For sure. And I didn't ask the question from a point of criticism. I was more trying to get a sense of how optimistic to be about this business looking forward. But thank you for the answer.

A couple more just on the savings program. So some peers have used lower cost jurisdictions outside the U.S. as a way to bring about a large amount of savings. It doesn't seem like that's a part of this program. Correct me if I'm wrong, just given the buckets that you've broken out here? Or is there a component using like kind of lower-cost jurisdictions, bringing things to other lower-cost countries that's going to drive this $300 million?

So we did identify right shoring as part of the program, yes, in addition to technology and real estate and automation.

And are you -- is right showing, is that going to be one of the larger pieces? I know you're not saying like kind of giving percentages. But is that -- if you had to rank, would that be one of the larger ones?

I think without ranking, right? But I mean, real estate, we think and technology are probably the 2 largest in and of themselves, right? So -- and would amount for more than half of what we've identified today.

And then you guys obviously spoke to the different segments, right, the 500 basis points within broking and focusing on -- just in general, improving your margins within the other segment. How much are you looking to take out of corporate? Or if you don't want to give an exact number because you mentioned corporate, can you just like trying to help us think through that, how much is corporate versus just rationalizing the 2 segments?

Yes. So I mean, we allocate a lot of these costs, right? So I mean there is not a giant real estate cost that we hold out and just say it's not part of the segment costs, right? So the answer is our corporate functions need to be as efficient as possible and in line with the size of our business, right? But we're not saying this is trimming from just one part of the business. We think this -- these efficiency efforts stretch across the entire business.

And then one last one. When you guys go to the new 2 segments next year, is the plan for the financial disclosure to remain the same, except for 2 versus 4 segments? Or are you guys thinking of larger changes to the financial statements? Or is it the discussion still ongoing?

I think the discussion is still ongoing, but will be disclosing metrics that sort of we use to manage and evaluate the business and share those as appropriate. But it's something that we continue to review.

Yaron Kinar with Jefferies. I have a follow-up question for Gene on TRANZACT, if I may. My understanding has been that some of the travails that some of the public peers have gone through have been more around turnover driven by S&P and OEP or maybe some timing and reduced productivity from agents. I'm not sure how that ties to actuarial work or maybe I'm thinking -- maybe I'm mixing apples and oranges here. But could you maybe address how TRANZACT is doing on those metrics?

Yes. So the travels are coming from several different places. One, the OEP last year, some of our competitors didn't have enough agents to sell. We actually had a good hiring season and did very well in the OEP. The other thing is the lifetime value of calculations are trying to predict what that lifetime commission stream is going to be. And if you have someone. So in the sales process, there's 3 things that happen. You have an agent who talks to someone who says, "Hey, I sold this policy." You have to take it to the insurance company who has to accept the policy. And then the person you sold to still has the right to say, I change my mind, they don't want to. So those different events. If you can't forecast accurately what's happening in those different events, your lifetime values aren't real accurate. So you actually have to look to see who -- when someone calls it a sale? Do you call it a sale when your agent says, I sold it, you call them to sale when the insurance company says I accepted or do you wait for a while to see if the person changes their mind. And so it's one of the things when you look from the company to try to get a comparison, you have to see when they call it a sale. But the lifetime value is where some of the problems are is people in one of those zones that were more who said, "I don't want it than what had been predicted" And that's what's caused some of the challenges for some of the companies.

And I think that has accelerated a bit for the industry, at least for peers over the last year or 2. So has that not been the case for TRANZACT or has TRANZACT just been able to forecast these trends better than peers to begin?

So one of the differences is we don't call it to sale until those periods are all gone, and we know whether the sale is going to stick. So in our revenues, when we say here's our revenue, our focus isn't telling you how many policies we sold. Our focus is saying, was it really a sale and is it going to stick. And that's some of the things you need to look at is are you trying to predict -- are you trying to say, "I outsold everybody. And by the way, if you looked at our public competitors and if you looked at our numbers, their sales numbers are higher than ours because we don't count a sale until we say this is going to stick. We're not going to churn through these periods. That's some of the differences in here because last season, there was more churn. There were more of the participants who -- they can change their mind. They can go from a different broker. We want to make sure that they really are there before we count them as a sale.

Weston Bloomer, UBS. I'll ask one more on TRANZACT. I think when the deal was initially announced, you said 25% to 30% growth, mid-20s margin. Given the success you've had with that business, is that still roughly the run rate that we should be thinking for that business? And I guess, why couldn't it potentially be higher over the next few years?

So that's still -- so they've more than exceeded those numbers. That's still our long-term forecast. And the reason it can't be higher is because I had a CFO and I have another CFO when I have a new boss who says, we're not going to give you any more money than that because as they said, they're managing the cash flow to invest in the TRANZACT with those first year commissions going to expenses, the cash flow takes a little while to turn and they say we have other sources we're not going to do it. So we actually manage the TRANZACT growth very closely. Our focus isn't how can we sell? So the last OEP, we could have sold a lot more policies, but the leads got expensive. And if the leads get expensive, then we're not going to meet the metrics that we need going forward. So to answer your question, I think I just did. I'm told no, you've got all the money you've got. This is profitable revenue growth we're going to have, not revenue growth.

One word.

Correct.

And then a follow-up on leverage. I think you alluded to around a 2.3x leverage target or leverage goal. Is that something that you -- or I guess, do you view leverage more as optionality. Or is there a world where we could see the leverage target hit 2.3x by the end of this year? Or could it stay south of 2x depending on the market capital needs?

Yes, I think it depends on the return profiles of the investment opportunities that we see going forward. I think it's always important to make sure we've got appropriate financial flexibility. And of course, we work with the rating agencies to manage all of that appropriately and think about the capital structure holistically in that regard.

Okay. It's Greg. I have one, I think, last question. On Page 46, again, getting back to the restructuring plan and free cash flow, you said $750 million cost, onetime cost to deliver the savings. And you may have answered this, but I've kind of forgotten if you did. How is that $750 million of expense going to flow through your cash flow? Is it going to be all done by the end of this year? Or is it going to give us some perspective on that?

Yes. You would expect, as is typical with these types of transformation activities that the cost will be more front-loaded than the benefits -- so we would expect more of that to run through the first 2 years. And then the savings, as you see here, sort of are more back-end loaded.

Okay. Since I think we've maybe run other questions, which -- surprise. I'd like to thank everyone for attending today whether in person or virtually. To reiterate, we've assembled a management team that knows our business and is going to drive the company forward with urgency and purpose. We are going to grow this business and we'll grow not only revenue, but profits not just the farm, the same, same old fields, but we're going to hunt produce solutions designed to enjoy premium pricing power. We'll deliver our offerings more efficiently using technology and standardization to realize our scale advantage. And we know you've heard loud and clear for myself and the rest of the leadership team here today that we are committed to the company's success and in achieving success, we'll deliver superior shareholder returns. Thank you again for coming. Have a great day.