Post on 13-Apr-2018
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
1/85
Towers Watson Analyst Day
Welcome
2013 Towers Watson. All rights reserved.
September 20, 2013
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
2/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You
can identify these statements and other forward-looking statements in this document by words such as may, will, would, expect,
anticipate, believe, estimate, plan, intend, continue, or similar words, expressions or the negative of such terms or other
comparable terminology. Such statements are based upon the current beliefs and expectations of Towers Watson's management,
and are subject to significant risks and uncertainties. Actual results may differ fromthose set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: a
decline in client demand (for example, resulting from the reduced use of defined benefit plans); the risk of a disclosure breach of
company or client data; the ability to successfully make suitable acquisitions and divestitures; the risk that the acquisition of Extend
Health is not profitable or is not otherwise successfully integrated; the ability to successfully address issues surrounding the numberof company shares that will become freely tradable on January 1, 2014; the risk that potential changes in federal and state health care
regulations, or future interpretation of existing regulations, may have a material adverse impact on our business; the risk that our
Exchange Solutions business fails to maintain good relationships with insurance carriers, becomes dependent upon a limited number
of insurance carriers or fails to develop new insurance carrier relationships; the risk that changes and developments in the health
insurance system in the United States could harm our business; our ability to respond to rapid technological changes; the ability to
recruit and retain qualified employees and to retainclient relationships; and the risk that a significant or prolonged economic downturn
could have a material adverse effect on Towers Watson's business, financial condition and results of operations. Additional risks and
factors are identified under Risk Factors in Towers Watsons most recent Annual Report on Form 10-K filed with the SEC.
You should not rely upon forward-looking statements as predictions of future events because these statements are based on
assumptions that may not come true and are speculative by their nature. Towers Watson does not undertake an obligation to update
any of the forward-looking information included in this document, whether as a result of new information, future events, changed
expectations or otherwise.
towerswatson.com
2013 Towers Watson. All rights reserved.
2
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
3/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Non-GAAP Measures
In order to assist readers of our financial statements in understanding the core operating results that the Company's managementuses to evaluate the business and for financial planning, we present (1) Adjusted EBITDA, (2) Adjusted Net Income Attributable toControlling Interests, (3) Adjusted Diluted Earnings Per Share and (4) Free Cash Flow (which are all non-U.S. GAAP measures). Weuse Adjusted EBITDA and Adjusted Diluted Earnings Per Share to eliminate the effect of acquisition-related expenses from thefinancial results of our operations. We use Adjusted Net Income Attributable to Controlling Interests (the numerator) for the purpose ofcalculating Adjusted Diluted Earnings Per Share. We use Free Cash Flow to represent cash provided by our operations that may beavailable for investing or for repaying debt. The Company believes that Adjusted EBITDA, Adjusted Diluted Earnings Per Share andFree Cash Flow are relevant and useful information widely used by analysts, investors and other interested parties in our industry toprovide a baseline for evaluating and comparing our operating results.
We incurred significant acquisition-related expenses related to our merger and integration activities necessary to combine WatsonWyatt and Towers Perrin from the Merger in January 2010 through fiscal year 2013. These acquisition-related expenses includedtransaction and integration costs, severance costs, non-cash charges for amortization of intangible assets and merger-related stock-based compensation costs from the issuance of merger-related restricted shares. Acquisition-related gains include a gain resultingfrom the fair value adjustment to our investment in Fifth Quadrant upon the purchase of a controlling interest. Included in ouracquisition-related transaction and integration costs were integrationconsultant fees and legal, accounting, marketing and informationtechnology integration expenses.
Although our merger and integration activities have been completed, we will continue to provide adjusted measures as we incur asignificant amount of amortization from acquired intangibles. We expect that this amortization will continue over the estimated usefullives of the related intangibles.
We consider Adjusted EBITDA, Adjusted Diluted Earnings Per Share and Free Cash Flow to be important financial measures, whichwe use to internally evaluate and assess our core operations, and benchmark our operating results against our competitors. We use
Adjusted EBITDA and Adjusted EPS to evaluate and measure our performance-based compensation plans. Adjusted EBITDA andAdjusted Diluted Earnings Per Share are important in illustrating what our operating results would have been had we not incurredthese acquisition-related expenses.
towerswatson.com
2013 Towers Watson. All rights reserved.
3
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
4/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Non-GAAP Measures
We define Adjusted EBITDA as net income before non-controlling interests adjusted for provision for income taxes, interest, net,depreciation and amortization, transaction and integration expenses, acquisition related non-cash stock-based compensation, changein accounting method for pension, and other non-operating income. We define Adjusted Diluted Earnings Per Share as dilutedearnings per share from continuing operations adjusted for transaction and integration expenses, non-cash stock-basedcompensation, amortization of merger and acquisition accounting intangible assets, a change in accounting method for pension andother merger related items. We define Free Cash Flow as Cash Flows from Operating Activities less cash flows used for Fixed Assetsand Software for Internal Use, each of which is presented on the GAAP Consolidated Statements of Cash Flows. These non-U.S.GAAP measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measuresof other companies. Non-U.S. GAAP measures should be considered in addition to, and not as a substitute for, the information
contained within our financial statements.
Reconciliations of Net Income before Non-Controlling Interests to Adjusted EBITDA; Diluted Earnings Per Share to Adjusted DilutedEarnings Per Share; and Cash Flow from Operating Activities to Free Cash Flow are available in our supplemental Analyst Day slideson our website in the Investor Relations > Financial Presentations section.
towerswatson.com
2013 Towers Watson. All rights reserved.
4
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
5/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Agenda
towerswatson.com
2013 Towers Watson. All rights reserved.
Time Session Speaker 9:30 a.m. Continental Breakfast
10:00 a.m. Opening Remarks John Haley, Chief Executive Officer
10:15 a.m. Risk and Financial ServicesPatricia Guinn, Managing Director, Risk andFinancial Services
10:30 a.m. Talent and RewardsJulie Gebauer, Managing Director, Talent and
Rewards
10:45 a.m. Benefits Gene Wickes, Managing Director, Benefits
11:00 a.m. Break
11:15 a.m. Exchange SolutionsBen Pajak, SVP, Strategy and BusinessDevelopment, Exchange Solutions
11:30 a.m. OneExchange
Brian Tenner, SVP, Exchange Solutions
David Osterndorf, Chief Health Actuary, NorthAmerica
12:00 noonFinancial Overview andFY14 Guidance
Roger Millay, Chief Financial Officer
12:15 p.m. Q&A Session
12:45 p.m. Lunch with Towers Watson Leaders5
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
6/85
Towers Watson Analyst Day
Opening Remarks
2013 Towers Watson. All rights reserved.
John Haley
September 20, 2013
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
7/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
FY13 Performance
l Top-line revenue growth: +5% constant currency, +4% organic growth
l All segments ended the year with constant currency revenue growth
l Adjusted diluted EPS $5.57, up 8% vs. FY12
l Adjusted EBITDA 19.1%
l Completed the Towers Watson integration effortsl Free cash flow of $453 million, an increase of 136% over FY12
l Repurchased 838 thousand shares*
7
towerswatson.com
2013 Towers Watson. All rights reserved.
*Shares repurchased under authority to offset dilution and authority to repurchase shares outside of the anti -dilutive authorization
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
8/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Drivers ofTowers Watson
Business
Globalization
Human Capital Key toBusiness Success
Economic Uncertainty
Emerging Markets
Legislative Issues
Compliance, Accountingand Tax Regulations
Industry-Specific Issues
De-Risking
Mergers and Acquisitions
Complexity ofBenefit Plans
Market drivers
8
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
9/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Our strategy for continued growth
9
Our strategy is focused on profitable growth
towerswatson.com
2013 Towers Watson. All rights reserved.
InorganicGrowth
l Expand core
l Adjacent spaces
Organic Growth
l Market penetration
l Emerging markets
l Target marketapproach
Innovation
l Seed new capabilities
l Disciplined approach
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
10/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Benefits
l Health care cost and legislativeuncertainties
l OneExchange Active HGB and TAS
Talent and Rewards
l Our work peaks with peak employment inthe economy
l Emerging markets competition for talent
l Technology
Exchange Solutions
l OneExchange Access
l OneExchange Retiree
l Fidelity channel partner
Investment
l Delegated investment solutions
l Diversification of clients: insurers,endowments, foundations and sovereignfunds
Key growth opportunities
10
Continued Inorganic and Strategic Solutions
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
11/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Towers Watson business
11
We offer solutions in the areas of benefits, talent management, rewards, andrisk and capital management
towerswatson.com
2013 Towers Watson. All rights reserved.
Benefitsl Retirement (38%)
l Health and Group Benefits (8%)
l Technology and AdministrationSolutions (7%)
l International (2%)
Risk and FinancialServicesl Risk Consulting and Software
(11%)
l Investment (6%)
l Reinsurance and InsuranceBrokerage (5%)
Talent and Rewardsl Rewards, Talent and
Communication (6%)l Data, Surveys and Technology
(6%)
l Executive Compensation (4%)
Exchange Solutionsl OneExchange Retiree (3%)
l OneExchange Accessl New offering for FY14
(seasonal, part-time,contract)
FY13 split based on total company revenues
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
12/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Benefits Business drivers
l Economic environment and changing risk appetite of pension providersleading to opportunities such as lump sum distribution and otherpension de-risking projects for the Retirement group
l The complexity of changing regulations, such as the PPACA, iscreating work for Health and Group Benefits
l Large plan benefits outsourcing driving Technology andAdministration Solutions revenue growth in EMEA and the U.S.
l International Consulting Group helping multinational organizationsprovide global strategy, oversight and management of benefitprograms
l OneExchangeActive: Expect enrollments to increase pace in 2015and 2016, and beyond
12
Expect low single digit growth for FY14
towerswatson.com
2013 Towers Watson. All rights reserved.
Benefits RFS
T&RExchangeSolutions
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
13/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Risk and Financial Services Business drivers
l In Risk Consulting and Software, insurance companies interest inanalytics, performance improvement and our leading risk and financialsoftware creates opportunities for us.
l Investment opportunities are created through volatile economiesaround the globe as clients seek to improve their fund governance,
control their risks and increase their returns.
13
Expect low to mid single digit decline for FY14
towerswatson.com
2013 Towers Watson. All rights reserved.
Benefits RFS
T&RExchangeSolutions
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
14/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Talent and Rewards Business drivers
l Solid project revenue
l Intense market focus, need for benefits and HR program implementationsupport
l Ongoing need for executive pay advisory services, compensation andworkforce benchmarking data
l Increasing focus on HR technology
l Differentiation through integration of technology and consultingsolutions
14
Expect mid single digit growth for FY14
towerswatson.com
2013 Towers Watson. All rights reserved.
Benefits RFS
T&RExchangeSolutions
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
15/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Exchange Solutions Business drivers
l OneExchange Retiree post- and pre-65 retirees
l OneExchange Access seasonal, contractors, part-time
l Contract with Centers for Medicare & Medicaid Services (CMS)
l Partnership opportunities
l The PPACA provides future opportunities to enter new markets
15
Expect around 60% growth for FY14
towerswatson.com
2013 Towers Watson. All rights reserved.
Benefits RFS
T&RExchangeSolutions
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
16/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Strategic outlook
l Increasing revenue at stable margins in our core business
l Continue to leverage existing business portfolio
l Expanded global target market focus
l Organic and inorganic capability enhancement
l
Continue record of mid-single-digit revenue growth and double-digitEPS growth
l Continued strong revenue stability
l Stable base of recurring revenues
l Strong client retention
16
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
17/85
Towers Watson Analyst Day
Risk and Financial Services
Tricia Guinn
September 20, 2013
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
18/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Risk and Financial Services Business overview
Profile
l Investment Consulting and Solutions
l Investment policy, governance and risk assessment
l Investment strategy
l Structured products design
l Manager structure, selection, monitoring and evaluation
l Delegated/implemented consulting
l Risk Consulting and Software
l Financial and regulatory reportingl Enterprise risk and capital management
l M&A and corporate restructuring
l Product and market strategies, including pricing
l Financial modeling software and implementation support
l Reinsurance and Insurance Brokerage
l Discontinued operations as of Q1 FY14
Revenue by Line of Business*
Revenue by Geography*
Reinsurance andInsurance Brokerage
Risk Consulting andSoftware
Investment Consultingand Solutions
More than 50% of revenues are recurring
FY14 Guidance (does not include impact of Brokeragesale)
l Low-to mid-single-digit constant FX revenue decline
NOI margin in the low- 20% range *FY13 split based on total RFS Segment revenue.FY13 constant currency revenue growth of 1%FY13 NOI margin of 22%
2013 Towers Watson. All rights reserved.
18
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
19/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
We have signed an agreement for JLT to acquire TowersWatsons global brokerage business
l The combination of Towers Watsons (re)insurance brokerage businesswith JLT Re creates a $260+ million global business which is theclear #4 player in this space
l JLT is committed to investing in this business to further grow in thisarea
l Towers Watson and JLT will have an ongoing relationship to offer acompelling market proposition which will help drive revenue for bothorganizations
2013 Towers Watson. All rights reserved.
19
towerswatson.com
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
20/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Towers Watson is a global leader in investment adviceand implementation
20
l Trusted advisor to institutional investors
l Focus on liability-driven investing since 1990
l European Pensions Fiduciary ManagementFirm of the Year 2012
Our Firm
l $2 trillion+ in global client assets underadvisement
l ~$60 billion in delegated (outsourced) global
assets
l Diverse asset pools: pensions, insurance,sovereign funds, foundations and endowments
l Over $100 bil lion in liability-driven investmentstrategies implemented
Our Client Base
l More than 750 associates across strategy,consulting and research disciplines
Our People
140+STRATEGYCONSULTANTS150+RESEARCHSPECIALISTS
750+TOTAL INVESTMENT ASSOCIATES, INCLUDING:
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
21/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
The Investment business has a strong history of revenue growth
$120
$158$174
$194 $195
$208
$225
$0
$50
$100
$150
$200
$250
FY07 FY08 FY09 FY10 FY11 FY12 FY13
Revenue ($ in Millions)
towerswatson.com
21
Margins have generally been around the company average
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
22/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Increased Delegation
Our business has moved from purely advisory to greaterdelegation/implementation
towerswatson.com
22
l Current state and desired future state
l Goals, risk tolerance/return objectives
l Governance and roles/responsibilities
l Stakeholder approach to change
l Investment beliefs
l Balance sheet/enterprise risk position
l Liquidity and timing requirements
l Tax/accounting/regulatory implications
FlexiblePartnership
Analytics Advisory Implementation
OurCapabilities
ClientNeeds
Research ClientsFirst
Insight
Investment Servicesglobal depth and scale
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
23/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
We have a diverse delegated business
towerswatson.com
23
towerswatson.com
2013 Towers Watson. All rights reserved.
Towers Watson delegated assets under management as of July 2013 US$
Towers Watson delegated client count by region and type July 2013
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
24/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
InvestmentServices
Investment Insight Clients First
The funds business is the next step in our journey alongthe responsibility spectrum
towerswatson.com
24
Principles
Tools Advice DelegationDelivery
Implementation
Pooled Funds Custom Portfolio
2013 Towers Watson. All rights reserved.
New!
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
25/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
25
towerswatson.com
Transformation work is another area of opportunity
Missionand
Beliefs
ValueChain
Culture
RiskPolicy
InvestmentManagementGlobal Best
Practices
OrganizationalDesign
InvestmentManagement
Cycle
Bringing best practices to internal investment management
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
26/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
FY13 was a challenging year for the Risk Consultingand Software business
l Continuation of EMEA financial crisis caused clients to decreasediscretionary consulting spend
l Shelving of Solvency II requirements led to the deferral or cancellationof consulting projects, and meant we were overstaffed in EMEA
l Lower level of demand led to intense competition for consulting
business and severe pricing pressures
l Lower level of M&A activity than prior year
towerswatson.com
2013 Towers Watson. All rights reserved.
26
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
27/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
While FY14 outlook is strong for Software, it remainsmixed for our consulting businesses
towerswatson.com
2013 Towers Watson. All rights reserved.
27
Americas Consulting
l Expect stable client demand
l P&C/Corporate practices have a strongbase of recurring revenue and a goodpipeline
l Life practice remains dependent on M&Aand will continue to be volatile
Asia Pacific Consulting
l Expect modest growth, but revenue inregion will continue to be volatile
l Key growth areas are China, SoutheastAsia and insurance managementconsulting and UBI
EMEA Consulting
l Economic outlook remains uncertain
l Anticipate continued depressed client
demand
Software
l Expect continued growth driven byexpansion of sales force and new
products
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
28/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Life Financial Modeling
Our market-leading software solutions
MoSes
MoSes Azure (NEW)
MoSes HPC
RiskAgility MoSes
RiskAgility
Enterprise Modeling Platform
RiskAgility EC
Economic Capital
P&C Pricing
Classifier
Emblem
Optimiser
Radar (NEW)
Rate Assessor
ResQ
P&C Reserving
Replica
Replicating Portfolio
P&C Capital Modeling
Igloo
Igloo Compact Edition
Igloo DCC
Igloo Enterprise
Technology Consulting Services
Global Alliance Partner
towerswatson.com
2013 Towers Watson. All rights reserved.
towerswatson.com
28
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
29/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
We are taking action to align our business with marketdemand and improve profitability
towerswatson.com
2013 Towers Watson. All rights reserved.
29
Revenue Enhancement Expense Reduction
l Move to more sales-oriented culture
l Recruit rainmakers to drive sales
l Broaden out and raise value add
of our servicesl Emphasize growth of annuity
revenue
l Align staffing with market demand
l Drive delivery efficiency andimproved utilization
l
Prioritize product developmentefforts
l Scale back certain investments
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
30/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
We continue to believe in the longer-term outlook forRisk Consulting and Software
towerswatson.com
2013 Towers Watson. All rights reserved.
Strong franchise
Right vision for the business
Taking appropriate action
Need time to see results
30
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
31/85
Towers Watson Analyst Day
Talent and Rewards
Julie Gebauer
September 20, 2013
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
32/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Revenue by Line of Business*
Revenue by Geography*
Talent and Rewards business overview
32
13%
26%
61%
Asia Pacific
EMEA
Americas
23%
36%
41%
*FY13 split based on total T&R Segment revenueFY13 constant currency revenue growth of 2%FY13 NOI margin of 20%
Profile
l Rewards, Talent and Communication
l Base pay and incentive design
l Leadership services and talent management
l Change management and communication strategy
l Data, Surveys and Technology
l Employee opinion surveys
l Compensation benchmarking
l HR technology implementation
l Proprietary technology solutions to support HR processes
l Executive Compensation
l Executive pay philosophy and strategy development
l Public disclosure development and technical reviews
l Top executive compensation consultancy with over 300consultants in 35 offices in 16 countries providing advice toover 3,000 clients
l
Compensation data covering 110 countries, over 40industry sectors, 50 functions/job families and 9,900 jobs
l Decades of experience surveying over 40 million employeesfrom more than 3,000 companies in more than 106 countries
ExecutiveCompensation
Rewards, Talent andCommunication
Data, Surveys andTechnology
2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
FY14 Guidance
Mid- single digit constant FX revenue growth NOI Margin in the low- to mid-20% range
32
towerswatson.com
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
33/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Greater opportunity for integratedprojects relative to point solutions in
strong economy
Talent and Rewards market proposition
l Consulting in areas of strategic importance
l Competing on differentiated value through:
l Depth of expertise
l Industry focus
l Data and analytics
l Delivering point solutions and appropriately linking complementarypractices
l Within T&R: to provide complete solutions, from strategy to implementation
l Across segments: to support the employee experience associated withdesign and administration of benefits and Exchange Solutions
33
FY14 mix of work expected tocreate stronger backlog and
pipeline during year
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
34/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Focus for FY2014
Key ingredients for profitable growth
towerswatson.com
2013 Towers Watson. All rights reserved.
Low-cost operationsStandardized processes
Offshored resource center
Close management of
controllable costs
High-performance standardsSales and delivery expectations
Few pure management roles
Annuity/product revenueBenchmarking data
Employee attitude surveys
SaaS
New productized offerings
Market-responsive staffing modelHiring just behind demand
Staffing across boundaries
Balance of FTEs/contractors
Stablemargins
Foundationfor growth
34
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
35/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Current market conditions
HR Consulting Budgets
l Stable to modest increases in mature markets for target clients,partially due to minimal regulatory change
l Meaningful increases in selected emerging markets
HR Technology Budgets
l Meaningful increases across markets
l But relatively small portion of our T&R portfolio
Implementation Support
l
Strong demand related to pension changes, PPACA, ExchangeSolutions (retiree and active exchanges)
towerswatson.com
2013 Towers Watson. All rights reserved.
35
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
36/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Regional variations
towerswatson.com
2013 Towers Watson. All rights reserved.
l Ongoingdemand
for HRtechnology
l Ongoing need forbasic HR consulting
l Low to moderatedemand for HRconsulting l Moderate demand for
basic HR consultingl New pull for HR
technology
l Continuing needfor implementationsupport
l Selectedopportunity fortechnology sales
36
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
37/85
Towers Watson Analyst Day
Benefits Segment
Gene Wickes
September 20, 2013
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
38/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Benefits business overview
38
Revenue by Line of Business*
3%
30%
67%
Asia Pacific
EMEA
Americas
4%
13%
15%
68%
*FY13 split based on total Benefits Segment revenue.FY13 constant currency revenue growth of 5%FY13 NOI margin of 34%
Revenue by Geography*
Profile
l Retirement
l Strategy and plan design
l De-Risking
l Actuarial services, compliance and governance strategies
l Defined contribution solutions
l Health and Group Benefits
l Program strategy, design and pricing
l OneExchange Active
l Wellness, Rx Collaborativel Vendor evaluation, selection and management
l Technology and Administration Solutions
l Pension and retirement plan administration
l Health and welfare administration
l OneExchange Active
l International
l Cost and risk control solutions for employee benefit plans
globally
l Provides actuarial services to more of the worlds top300 pension funds than any other professional servicesfirm
International
Retirement
Health and Group Benefits
Technology andAdministration Solutions
2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
FY14 Guidance
Low- single- digit constant FX revenue growth NOI Margin in the low-to mid - 30% range 38
towerswatson.com
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
39/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Retirement outlook: Overview of pension de-riskingmarket
towerswatson.com
2013 Towers Watson. All rights reserved.
Liability-DrivenAsset Strategies
Plan TerminationTraditionalOngoing Plans
Close Plan toNew Entrants
Freeze BenefitAccruals
ProspectiveLump Sum Option
Bulk LumpSums (Former
Employees)
Bulk LumpSums (Retirees)
AnnuityPurchases
IncreasedFunding
Account-BasedPlans
Spectrum of Pension De-Risking Actions
39
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
40/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Retirement outlook: Leading indicators U.S. August2013
40
Indicator July 31, 2013De-Risking
Assessment
Interest Rates l High-quality corporate bond indices generally unchanged during July and +70-80 bps YTD
l Long-term Treasuries +8-12 bps during July and +70-80 bps YTD
Funded Status
l Strong equity market performance during July and YTD (S&P 500 +19.62%, Russell 2500+22.96%, EAFE +9.60%)
l
YTD funded status improvement for many sponsors in the +10-15% range (although manysponsors still underfunded on a plan termination basis)
Market Movers
l Significant uptick in de-risking activity
l Sponsors proceeding with lump sum programs during 2013 contemplating delay until early2014 given interest rate movements
l Limited activity (but significant potential) in mega ($1B+) annuity market
Accounting/RegulatoryChange
l Verizon class-action lawsuit dismissed by Texas court
l Subsequent retiree lump sum PLRs under review by IRS we are aware of a PLR underreview since mid-2012 with no response
l IRS-sponsored research being conducted regarding de-risking activities
Innovation
l Continued annuity marketplace evolution
l Settlement readiness initiative gaining traction
l Plan termination initiative under way to better coordinate delivery approach
Change from/toFavorable Emerging Unfavorable
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
41/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Benefits outlook: EMEA
l Regulatory changes in the UK and Netherlands
l Auto enrollment
l New Pension Accord
l Launch of Premium Pension Institute
l Design and execution of new market standard for DC plans
l Launch of health care practice
l Increasing demand and costs of retirement and health care provisions
l Economic crisis and demographic changes increasing pressure to reducestate pension and health care provision
l Grow Benefits Brokerage business
l Launch Data Solution services
towerswatson.com
2013 Towers Watson. All rights reserved.
41
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
42/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
HGB North America outlook
l Towers Watson is helping clients continue with self-managed programsor access high performance plans via OneExchange Active
l Investments in OneExchange: Impact on Utilization
l Working with carriers to develop high performance plans
l HGB associates involved with Access and Retirees sales
l Client education and analysis regarding active market
l Long term revenue prospects:
l We have good prospects either path a client selects; self-managedprograms or OneExchange.
l OneExchange shifting of revenue source, greater market share is
expected
towerswatson.com
2013 Towers Watson. All rights reserved.
Client demand is being driven by the imperative to have high-performing healthand welfare programs to enable affordable coverage for employees,
to maintain a healthy workforce and to avoid the 2018 excise tax.
42
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
43/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
TAS outlook
North America
l Active market anticipated for benefits administration/outsourcing
l Health and Welfare market activity expected to be very robust in 2014 and forthe next few years
l DB market activity is expected to be strong
l Strong selling season in 2013 impacting 2014 revenues due to deferralaccounting
EMEA
l UK and Germany continue to be active markets for pension administrationoutsourcing
l Slower pace than last year but some big long-term opportunities
l Very well placed competitively with biggest market share of top 100/200 privatesector funds in UK and market leader in Germany
towerswatson.com
2013 Towers Watson. All rights reserved.
TAS well-positioned for growth
43
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
44/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
OneExchange
towerswatson.com
2013 Towers Watson. All rights reserved.
44
FY14 enrollment
period ends
FY15 enrollment
period begins
FY14Q1
FY14Q2
FY14Q3
FY14Q4
FY15Q1
FY15Q2
FY15Q3
FY15Q4
$'s
Revenue Expense
FY14 all investment/revenue inguidance
FY15 and beyond expect profitat company average
TAS/HGB
Retiree
PopulationsCOBRA
Part-TimeEmployees
Active
Employees
OneExchangeActive
OneExchangeAccess
OneExchangeRetiree
Seasonal
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
45/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Global Health and Group Benefits Solutions (GHGB)
l Client demand for GHGB consulting and brokerage is increasing as clients expand theirglobal footprint and health care cost increases continue to reach high single digits
l Building on the success of our HGB businesses in North America and the U.K., we arecontinuing to expand our health and group benefits business to meet our clients emerging
needs
l The overall market size outside of North America and the U.K. for these types of services isapproximately $700M, and represents a dynamic market opportunity for Towers Watson.
0%
2%
4%
6%
8%
10%
12%
Global Asia Pacific Europe Latin America Middle East North America
2011
2012
Health Care Cost Increases by Region
towerswatson.com
2013 Towers Watson. All rights reserved.
45
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
46/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Global Health and Group Benefits Solutions (GHGB)
l Looking ahead to FY14, our plan is to:l Set up HGB businesses and obtain brokerage licenses in seven additional
countries
l Work with several major insurance companies to create prepackaged solutionsfor our clients in key countries where they dont have critical mass to justifycustom approaches
l
Engage a limited number of pilot clients on a global basis as we build out ourcapabilities
l The FY14 revenues and investments are included in the FY14 guidance.l System development approximately $500,000
l Net investment on P&L approximately $2-3 million.
l This is a multiyear project for Towers Watson estimates suggestprofitability in line with Segment margins within three years. Profitable asof second year.
towerswatson.com
2013 Towers Watson. All rights reserved.
46
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
47/85
Towers Watson Analyst Day
Exchange Solutions
2013 Towers Watson. All rights reserved.
Ben Pajak
September 20, 2013
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
48/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Exchange Solutions Business Overview
48
0%
0%
100%
Asia Pacific
EMEA
Americas
Revenue by Geography
Profile
l Private Exchange infrastructure (Extend Healthacquired in 2012)
l Largest private Medicare insurance exchange
l 10% of Fortune 500
l 400,000+ Medicare plan participants
l Patented technology platforml Growing Individual market, pre Medicare, population
l Partnerships with third party advisors andadministrators, i.e., Fidelity
l Most Exchange Solutions revenues come from thecommissions we receive from insurance carriers
l Over the long term, NOI margin is expected to be atleast in the mid-20% range
2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
FY14 Guidance
Revenue growth around 60% Low 20% NOI Margin
48
FY13 proforma* revenue growth of 58%FY13 proforma** NOI margin of 26%
*as if Towers Watson owned Extend Health for entire FY12 andexcluding purchase accounting revenue adjustments in FY12 and FY13**excluding purchase accounting revenue adjustments in FY13
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
49/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Significant growth opportunity for Exchange Solutions
49
towerswatson.com
2013 Towers Watson. All rights reserved.
Medicare-Eligible Retirees With Employer-Sponsored Coverage
TowersWatson
Others
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
50/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Exchange Solutions: Business drivers
l Continued interest and focus on Medicare exchange business(rebranded as OneExchange Retiree)
l Pre-Medicare individual market offering (OneExchange Access)launched on a pilot basis for this open enrollment period (OEP 14)
l Entered into contract with Centers for Medicare & Medicaid Services(CMS) to participate in the Federally Facilitated Marketplace (FFM)
l Fidelity relationship signed in February; showing results
l Retail partnership pilot (50 stores in CA, FL, TX) rolling out October 1
50
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
51/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Exchange Solutions: Medicare eligible retiree market
l Coming off a very strong OEP 2013 enrollment year
l Notable client wins last year
l Dupont, The Goodyear Tire & Rubber Company, Ingersoll-RandCompany, Bridgestone/Firestone
l Signed largest retiree client in company history (IBM)
l Partnering closely with other LOBs and segments to launch theOneExchange offering and drive growth
51
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
52/85
Video in progress
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
53/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
OneExchange delivers value to your entire population
53
Retiree
Populations
Part-TimeEmployees
COBRA
Active
Employees
OneExchangeActive
OneExchangeAccess
OneExchangeRetiree
Seasonal
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
54/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Connecting individuals to new Marketplaces
All state and federal exchanges
All Carriers
Right AnswerRight Coverage
Best Price
Employer-ProvidedAccess
OneExchange Benefit Advisors
State State FFE
State State FFE
l Subsidy Optimization
l Transition Services
l Public Exchanges
l Personalization
l Carrier and ExchangeConnectivity
l Advocacy
OneExchange Access Part-time employees, seasonal workers, COBRA eligibles
OneExchange Retiree Early Retirees (Pre-65, not Medicare eligible)
54
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
55/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Web broker agreement with federal government
l Signed agreement with the Centers for Medicare & Medicaid Services
l Exchange platform will integrate with federal eligibility systems
l Allows ability to assist individuals and sell plans on the federal exchange
l Single destination in all 36 states served by the federal exchange
55
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
56/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
OneExchange Access: Marketplace map 2015 OEP
56
WA
OR
CA
NV
ID
UT
AZ
MT
TX
NM
AK
HI
CO
WY
NE
OK
KS
ND*
SD
MI*
WI
MN
IA
MO
AR
LA
INIL
OH
KY
TN
MS AL
FL
GA
SC
NC
VAWV
MD
DE
PA
ME
NH
VT
RI
NY
CT
NJ
MA
DC
n Full Integration Enrollment (36)n Web Portal Integration Enrollment (14)n Guidance Referral Only (1)
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
57/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Retail partnership pilot overview
l Three-state, 50-store programl Co-branded, in-store health
education center (kiosk) staffedby Towers Watson
l Eligibility/appointment tool will
reside within each kiosk
l Pre- and post-65 insuranceoptions in pilot states
l Post-65 insurance options only innon-pilot states
l Several marketing programs
planned to drive online traffic
towerswatson.com
57 2013 Towers Watson. All rights reserved.
NV
CO
ND
KS
OK
MD
VT
MA
CT
CA
OR
WA
UT
ID
AZ NM
WY
MT
SD
MN
IA
NB
MO
TX
AR
MS
AL
TN
KY
GA
NC
SC
FL
WV
PA
NY
NH
ME
ILIN
OH
WI
MI
LA
ND
NV
CO
KS
OK
VA
MD
Pilot states; Pre and post-65 insurance options
National program; Post-65 insurance options only
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
58/85
Towers Watson Analyst Day
OneExchange
2013 Towers Watson. All rights reserved.
Dave OsterndorfBrian Tenner
September 20, 2013
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
59/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Health care benefits evolution
l The objective of the acquisition was to enhance the capabilities of both organizations
l is one result of that collaboration and brings together:
l The leading retiree exchange
l
Leading group health and welfare outsourcing technology and administration process*l Market-leading health care consulting
l Benefit change management expertise
l Total compensation expertise
l The acquisition also deepened and enhanced both Towers Watson and Extend Healths:
l Carrier and client relationships
l Technology platforms and administrative processes
59
*Sources: International Association of Outsourcing Professionals, 2013 Global Outsourcing List; Everest Group, 2013 Benefits AdministrationOutsourcing Report
The acquisition of Extend Health brought together the expertise ofTowers Watsons core benefits business with the market leading Medicare exchange.
OneExchange is developed, managed and maintainedentirely by Towers Watson.
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
60/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
OneExchange delivers value to any or all of an employerspopulations
RetireePopulationsCOBRA
Part-TimeEmployees
ActiveEmployees
OneExchangeActive
OneExchangeAccess
OneExchangeRetiree
Delivers transitionassistance for
full-time employeepopulations moving to
our high-performingexchange-based plans
Delivers transition assistancefor part-time and other (e.g.,
seasonal) employees toindividual market plans on
public and private exchanges
Delivers transition assistance forpost- and pre-65 retirees
moving from employer-sponsoredhealth care coverage to individual
Medicare market plans, or publicand private exchanges
Seasonal
Createspositive behavior change, andimproved physical and financialwell-being
Accessesnew/increased federal funding
Connectsto lower-cost risk pool andmore federal money
towerswatson.com
2013 Towers Watson. All rights reserved.
60
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
61/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
How will participants and companies find value in exchanges?
61
Towers Watson has the know-how and capability to connectemployees and retirees to value in exchanges
Value opportunities foremployers and participants
OneExchange
Access Active Retiree
Use other peoples money
Make people healthier
Create better consumers
Reduce company workload
Make it personal/higher
employee satisfaction
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
62/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Market Opportunity for Exchange Offerings
towerswatson.com
2013 Towers Watson. All rights reserved.
62
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
63/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
OneExchange Access and Retiree facilitate the transition fromgroup to individual
Platinum
OneExchange Access orRetiree
l Contracts with/providespreferred plans
l Supports communications andenrollment
l Administers employer subsidies(where applicable)
Participantsl Evaluate preferred options
l Elect coverage
l Work with OneExchange toresolve issues
Gold
Silver
Employer
CensusLimited
interaction
Plans*
Bronze
Catastrophic
Ancillary
63
Funding(optional)
*Public Marketplace plans shown other options use private market offerings (e.g., Medicare ret iree Medigap/MA/Part D plans)
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
64/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
EligibilityDetermination forFederal Subsidy
Application Dispatched to Carrier
Public Marketplace QHPsWith Federal Subsidy
OneExchange Access enrollment process
64
Application Dispatchedto Public Marketplace
Public MarketplaceQHPs Without
Federal Subsidy
PrivateExchange
QHPs
Eligible Ineligible
Early Retiree/Non-FT Employee
+
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
65/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Towers Watson role and compensation Access/Retiree
Towers Watson is responsible for:
Companies save time and money by providing participants with thisalternative enrollment process and access to greater market choice.
Connection tohealth plans
Participanteducation/enrollmentsupport
Ongoingparticipantadvocacy
Commissions from carriers Client fees
Towers Watson is compensated through:
OneExchange is developed,
managed and maintained byTowers Watson.
65
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
66/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Objectives in building an exchange for actives
The exchange should incorporatebest practices*
l Ongoing medical trend at halfor less than median of all companies
l Contracting strategies rewardhigher-performing network providers
l Better purchasingthrough cost-consciousness
l Proactive management of high-cost casesthrough robust support and engagement
l Increased employee accountabilityties financial outcomes to actions
66
*2013 TW/NBGH Employer Survey on Purchasing Value in Health Care; Results of Best Performers
Getting to high performance can be a buy rather than build strategy
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
67/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
OneExchange Active: Our private exchange model
Multiple national carriers
Four plan design choices
Primarily self-funded plans in 2014 with employerchoice in funding in future years
High-value design elementsWellness, care/Rx management, transparency and more
Ancillary productsDental and vision
Consumer-
GuidedEnrollmentExperience
Enrollment and
OngoingAdministrationPlatform
The goal: Deliver a high-value, sustainable framework
towerswatson.com
2013 Towers Watson. All rights reserved.
67
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
68/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Savings opportunities: OneExchange Active
68
Best-in-market discount/contracting arrangements
High-performance Rxstructure and contracting
Sophisticated caremanagement programs
Year 1savings projections are
substantial, without cost-shifting
Medical and pharmacycontracting terms
Health promotion/improvement linked tofinancial incentives
Improved consumerchoices
Connects physical andfinancial well-being
Ongoingtrend approximately half ofprevailing national levels
$
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
69/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Directed fees inself-insured healthplans
Commissions infully insured healthplans and otherancillary/welfarebenefit plans
Success-sharingarrangements
Towers Watson role and compensation Active
Towers Watson is responsible for:
69
Carriers on theplatform
Plan designs,clinicalmanagement,Rx programs,operationalelements
Fundingapproaches,networkconfigurations,cost managementstrategies
Towers Watson is compensated through:
The magnitude of total benefit savings is expected to be substantial, andTowers Watson compensation is easily ROI-justified for clients.
OneExchange is developed,managed and maintainedby Towers Watson
OneExchange is developed,managed and maintained byTowers Watson.
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
70/85
Towers Watson Analyst Day
Financial Overview and FY14 Guidance
2013 Towers Watson. All rights reserved.
Roger Millay
September 20, 2013
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
71/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
$5.57
FY13FY11
$4.46
+25%
Strong Historical Performance
71
l Continued strong growth acrosskey initiatives
l Strong acquisition performance
Revenue
About $7B
$3.3B
Sep 13Jul 10
Over 100%
$688M
$616M
FY13FY11
18.9%
19.1%
+12%
Adj. EBITDARevenues
Adj. EPS Market Capitalization
$3.60B
FY13FY11
$3.26B
Earnings Leverage
l Disciplined operating marginmanagement
l Industry-leading margins
l Significant EPS leverage
Cash & ShareholderReturn
l Generated ~$1.1B in free cashflow and returned ~$280 million toshareholders through repurchasesand dividends since July 2010
+10%
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
72/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Efficient Capital Structure
72
(US$ millions) 6/30/2013
Cash and Short-Term Investments $ 589
Total Debt $ 250
Accrued Retirement Benefits/Other Employee-Related Liabilities
$ 771
Total Towers Watson Equity $ 2,724
Balance Sheet
l $461 million cash available for use as of 6/13
l Predominantly outside of U.S.
l At lower end of targeted debt to EBITDARratio of 2 to 3 times (rating agency basis)
l As of 6/30/13, no balance on $500million revolver
l $250 million outstanding term loan,matures 6/1/17
l Decrease in Retirement liability due toincreased discount rate and payments/contributions
l ~71 million diluted shares
l Share unlock overhang has beenmanageable, with no significant pressure onthe stock, 5.4 million shares remain
Solid Balance Sheet
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
73/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Efficient Capital Structure
73
Cash Flow from Operations Free Cash Flow
$316M
$531M
+68%
FY13
Improvement driven by receivables recovery, integration wind-down and businessperformance
Pension contributions a $90 million Headwind in FY13 but will be approximately a$50 million Tailwind in FY14
Going forward, we expect free cash flow to be in the neighborhood of adjusted netincome
$192M
$453M
+136%
FY12 FY13
FY12
Strong Free Cash Flow Growth
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
74/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Capital Allocation Priorities
towerswatson.com
2013 Towers Watson. All rights reserved.
Reinvest in
Business
RepurchaseShares
Dividends
Acquisitions
Targeting dividendpayout ratio of 10%
OneExchange platform
Global Benefits Brokerage
Seed new capabilities
OneExchange platform
Global Benefits Brokerage
Seed new capabilities
We expect to continueto make targetedacquisitions to enhanceour competitive position
Approximately $120 million
remains available onClass A stock repurchaseauthorization
Expect more consistentrepurchasing
74
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
75/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Reinsurance and Insurance Brokerage Sale
l FY14 guidance provided in this presentation does not include theimpact of the sale. The following information provides some additionalcontext to the guidance in relation to the sale:
l Expected close date FY14 Q2 various regulatory approvals required.
l This will be treated as a discontinued operation for Q1.
l FY13 revenues $166 million, 53% weighting in second half of fiscal year.l Gain/Loss transaction may result in either.
l Likely dilutive to EPS and margins from continuing operations specificsnot yet determined.
l Allocation of cash proceeds will assess the cash needs of thecompany but overall we anticipate becoming more active in share
repurchases.
l Will provide an update on the next earnings call.
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
76/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
TW Guidance - UpdateFirst Quarter Fiscal 2014
Revenues expected to be around the low end of the range of $850 to$870 million
Adjusted diluted EPS* expected to be within the range of $1.36 to $1.41
EBITDA margin in the range of 18.0% - 18.5%
Income tax rate* around 24%
Diluted shares outstanding of approximately 71 million
*Includes $15 million of resolved tax examinations
76
2013 Towers Watson. All rights reserved.
Guidance does not include impact of Brokerage Sale
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
77/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Segment Guidance - UpdateFirst Quarter Fiscal 2014
77
Q1 FY13Constant Currency
Growth RateReported Currency
Growth RateNOI Range
Benefits $457 about flat about flat around 30%
Risk and FinancialServices $192 mid single digitdecline mid single digitdecline mid teens
Talent and Rewards $140mid- to high- single
digitmid- to high- single
digitlow- to mid- 20%
Exchange Solutions $ 14 around 145% around 145% high single digit
2013 Towers Watson. All rights reserved.
Guidance does not include impact of Brokerage Sale
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
78/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
FY14 Guidance Full Year
Revenues around $3.7 billion
Adjusted diluted EPS* expected to be within the range of $5.90 to$6.00
EBITDA margin in the range of 19.0% - 19.5%
Income tax rate* around 32%
Capital expenditures within the range of $95 million to $100 million
Diluted shares outstanding of approximately 71 million
Guidance assumes a monthly average exchange rate of 1.00 =US$1.55 and 1.00 = US$1.32
78
*Includes $15 million of resolved tax examinations
2013 Towers Watson. All rights reserved.
Guidance does not include impact of Brokerage Sale
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
79/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Segment Guidance Full Year FY14
79
FY13Constant Currency
Growth RateReported Currency
Growth RateNOI Range
Benefits $1,994 low single digit low single digit low- to mid- 30%
Risk and FinancialServices
$ 812low- to- mid single
digit declinelow- to- mid single
digit declinelow 20%
Talent and Rewards $ 573 mid single digit mid single digit low- to mid- 20%
Exchange Solutions $ 95 around 60% around 60% low 20%
2013 Towers Watson. All rights reserved.
Guidance does not include impact of Brokerage Sale
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
80/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Strong Financial Profile
Significant recurring revenues
Consistent margins
Diversified client base
Largest client relationship
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
81/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
towerswatson.com
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
82/85
Towers Watson Analyst Day
Appendix
September 20, 2013
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
83/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Fiscal 2013 Impact of Reserve Methodology Change
towerswatson.com 2013 Towers Watson. All rights reserved.
NOI Margin Q1 FY13 Q2 FY13 Q3 FY13 Q4 FY13
Reported Impact Reported Impact Reported Impact Reported Impact
Benefits 30% 1% 36% 0% 35% 0% 34% 0%
Risk and Financial Services 19% 0% 22% 0% 29% 0% 15% 1%
Talent and Rewards 18% 1% 34% 0% 11% 1% 11% -1%
Exchange Solutions -41% 0% -64% 0% 48% 0% 51% 0%
NOI Margin Full Year FY13
Reported Impact
Benefits 34% 0%
Risk and Financial Services 22% 0%
Talent and Rewards 20% 0%
Exchange Solutions 17% 0%
Beginning in FY14 Towers Watson has aligned the segment reserving methodology with the GAAP reservingmethodology. This table provides the impact to FY13 NOI margins as if in FY13 Towers Watson had followed the newreserving methodology.
83
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
84/85
Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Todays Speakers
Julie Gebauer Julie Gebauer is Managing Director, Talent and Rewards. During her 26 years with the company, she has held a
number of leadership roles, including U.S. East Division leader, and head of the global workforce effectiveness andemployee survey businesses. She is a Fellow of the Society of Actuaries.
Patricia Guinn Patricia Guinn is Managing Director, Risk and Financial Services. She joined Towers Perrin in 1976. Patricia is aFellow of the Society of Actuaries, a member of the American Academy of Actuaries and a Chartered Enterprise Risk
Analyst. She currently serves as a board member of the International Insurance Society.
John Haley John Haley is Chairman and Chief Executive Officer. John joined Watson Wyatt in 1977 and became the consultingactuary to several of Watson Wyatts largest clients. He negotiated the strategic alliance with Watsons in the U.K. and,in 1995, he was appointed the leader of the global retirement practice. He was named Watson Wyatts chief executiveofficer in 1998. Under his leadership, the company went public in 2000, and completed two historic mergers, in 2005and 2010, that formed present-day Towers Watson. John also serves on the board of directors of MAXIMUS and
Hudson Global, Inc. He is a Fellow of both the Society of Actuaries and the Conference of Consulting Actuaries, andhas servedas a trustee of The Actuarial Foundation.
Roger Millay Roger Millay is Vice President and Chief Financial Officer. Roger has more than 25 years of experience in financialofficerpositions, including roles at Airgas, Arthur Young & Company, Citigroup, Discovery and GE Capital.
Dave
Osterndorf
Dave Osterndorf is Chief Health Actuary, North America. Dave joined Towers Perrin in 1989 and leads our healthactuarial practice in both policy/practices and product development activities. He is a Fellow of the Society of Actuariesand a member of the American Academy of Actuaries.
Ben Pajak Ben Pajak is Senior Vice President, Strategy and Business Development, Exchange Solutions, and is a leader ofthe OneExchange health benefit solution. Prior to the acquisition of Extend Health, Ben served as a business leader for
Towers Watsons Health and Group Benefits practice. Ben joined Towers Perrin in 2003 and became a Principal in2007.
Brian Tenner Brian Tenner is Senior Vice President, Exchange Solutions. Since 2004 Brian has led sales and businessdevelopment for major market segments. Brian has held executive level leadership positions at Ceres Group andHewitt Associates.
Gene Wickes Gene Wickes is Managing Director, Benefits. Gene has 34 years of experience consulting on retirement, actuarial,plan administration and other human resource issues. He is a Fellow of the Society of Actuaries and an enrolledactuary under ERISA.
towerswatson.com
84
2013 Towers Watson. All rights reserved.
7/27/2019 Analyst Day Presentation_MASTER_09 19_Public V2
85/85
Towers Watson Leaders
85
Jim Foreman Jim Foreman is Managing Director, Americas. He also is a member of the companys executive committee. Heworked for more than 20 years at Towers Perrin in a number of leadership posi tions, which inc luded globa lresponsibilities.
Carl Hess Carl Hess is Managing Director, Investment. He joined the Watson Wyatt in 1989. He has worked with many of theworlds largest institutional investors over his 30 years of experience. Carls areas of expertise include asset allocation,risk budgeting, pension finance and governance. Carl is a Fellow of both the Society of Actuaries and the Conferenceof Consulting Actuaries, and is a Chartered Enterprise Risk Analyst.
Mark Maselli Mark Maselli is Managing Director, Health and Group Benefits, North America. He has 30 years of experienceconsulting on health and welfare, retirement, plan administration and other benefits areas. Mark is an Associate in theSociety of Actuaries and a member of the American Academy of Actuaries.
Paul Morris Paul Morris is Managing Director, Europe, Middle East and Africa. Previously, he served as Director, ConsultingServices for Towers Watson and was a Managing Consultant in Watson Wyatt. He is a Fellow of the Society of
Actuaries and a Member of the Institute of Actuaries.
Mark Reid Mark Reid is Managing Director, Talent and Rewards, Europe, Middle East and Africa. Mark joined the firm in1991 in London and qualified as a Fellow of the Institute of Actuaries. He has spent most of his career working in thefield of executive compensation, primarily advising board compensation committees, working in both the U.S. andEurope.