Analyst Day Presentation - MASTER - 09 19 - Public V2

Towers Watson Analyst Day
Welcome
2013 Towers Watson. All rights reserved.
September 20, 2013
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 number
of 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 retain client 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
2
Non-GAAP Measures
In order to assist readers of our financial statements in understanding the core operating results that the Company's management
uses to evaluate the business and for financial planning, we present (1) Adjusted EBITDA, (2) Adjusted Net Income Attributable to
Controlling Interests, (3) Adjusted Diluted Earnings Per Share and (4) Free Cash Flow (which are all non-U.S. GAAP measures). We
use Adjusted EBITDA and Adjusted Diluted Earnings Per Share to eliminate the effect of acquisition-related expenses from the
financial results of our operations. We use Adjusted Net Income Attributable to Controlling Interests (the numerator) for the purpose of
calculating Adjusted Diluted Earnings Per Share. We use Free Cash Flow to represent cash provided by our operations that may be
available for investing or for repaying debt. The Company believes that Adjusted EBITDA, Adjusted Diluted Earnings Per Share and
Free Cash Flow are relevant and usef ul information widely used by analysts, investors and other interested parties in our industry to
provide 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 Watson
Wyatt and Towers Perrin from the Merger in January 2010 through fiscal year 2013. These acquisition-related expenses included
transaction 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 resulting
from the fair value adjustment to our investment in Fifth Quadrant upon the purchase of a controlling interest. Included in our
acquisition-related transaction and integration costs were integration consultant fees and legal, accounting, marketing and information
technology integration expenses.
Although our merger and integration activities have been completed, we will continue to provide adjusted measures as we incur a
significant amount of amortization from acquired intangibles. We expect that this amortization will continue over the estimated usef ul
lives of the related intangibles.
We consider Adjusted EBITDA, Adjusted Diluted Earnings Per Share and Free Cash Flow to be important financial measures, which
we 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 and
Adjusted Diluted Earnings Per Share are important in illustrating what our operating results would have been had we not incurred
these acquisition-related expenses.
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3
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, change
in accounting method for pension, and other non-operating income. We define Adjusted Diluted Earnings Per Share as diluted
earnings per share from continuing operations adjusted for transaction and integration expenses, non-cash stock-based
compensation, amortization of merger and acquisition accounting intangible assets, a change in accounting method for pension and
other merger related items. We define Free Cash Flow as Cash Flows from Operating Activities less cash flows used for Fixed Assets
and 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 measures
of 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 Diluted
Earnings Per Share; and Cash Flow from Operating Activities to Free Cash Flow are available in our supplemental Analyst Day slides
on our website in the Investor Relations > Financial Presentations section.
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4
Agenda
towerswatson.com
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 Services
Patricia Guinn, Managing Director, Risk and
Financial Services
10:30 a.m. Talent and Rewards
Julie 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 Solutions
Ben Pajak, SVP, Strategy and Business
Development, Exchange Solutions
11:30 a.m. OneExchange
Brian Tenner, SVP, Exchange Solutions
David Osterndorf, Chief Health Actuary, North
America
12:00 noon
Financial Overview and
FY14 Guidance
Roger Millay, Chief Financial Officer
12:15 p.m. Q&A Session
12:45 p.m. Lunch with Towers Watson Leaders
5
Opening Remarks
John Haley
September 20, 2013
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 efforts
l Free cash flow of $453 million, an increase of 136% over FY12
l Repurchased 838 thousand shares*
7
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*Shares repurchased under authority to offset dilution and authority to repurchase shares outside of the anti-
dilutive authorization
Drivers of
Towers Watson
Business
Globalization
Human Capital Key to
Business Success
Economic Uncertainty
Emerging Markets
Legislative Issues
Compliance, Accounting
and Tax Regulations
Industry-Specific Issues
De-Risking
Mergers and Acquisitions
Complexity of
Benefit Plans
Market drivers
8
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Our strategy for continued growth
9
Our strategy is focused on profitable growth
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Inorganic
Growth
l Expand core
l Adjacent spaces
Organic Growth
l Market penetration
l Emerging markets
l Target market
approach
Innovation
l Seed new capabilities
l Disciplined approach
Benefits
l Health care cost and legislative
uncertainties
l OneExchange Active HGB and TAS
Talent and Rewards
l Our work peaks with peak employment in
the 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 sovereign
funds
Key growth opportunities
10
Continued Inorganic and Strategic Solutions
towerswatson.com
Towers Watson business
11
We offer solutions in the areas of benefits, talent management, rewards, and
risk and capital management
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Benefits
l Retirement (38%)
l Health and Group Benefits (8%)
l Technology and Administration
Solutions (7%)
l International (2%)
Risk and Financial
Services
l Risk Consulting and Software
(11%)
l Investment (6%)
l Reinsurance and Insurance
Brokerage (5%)
Talent and Rewards
l Rewards, Talent and
Communication (6%)
l Data, Surveys and Technology
(6%)
l Executive Compensation (4%)
Exchange Solutions
l OneExchange Retiree (3%)
l OneExchange Access
l New offering for FY14
(seasonal, part-time,
contract)
FY13 split based on total company revenues
Benefits Business drivers
l Economic environment and changing risk appetite of pension providers
leading to opportunities such as lump sum distribution and other
pension de-risking projects for the Retirement group
l The complexity of changing regulations, such as the PPACA, is
creating work for Health and Group Benefits
l Large plan benefits outsourcing driving Technology and
Administration Solutions revenue growth in EMEA and the U.S.
l International Consulting Group helping multinational organizations
provide global strategy, oversight and management of benefit
programs
l OneExchange Active: Expect enrollments to increase pace in 2015
and 2016, and beyond
12
Expect low single digit growth for FY14
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Benefits RFS
T&R
Exchange
Solutions
Risk and Financial Services
Business drivers
l In Risk Consulting and Software, insurance companies interest in
analytics, performance improvement and our leading risk and financial
software creates opportunities for us.
l Investment opportunities are created through volatile economies
around 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
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Benefits RFS
T&R
Exchange
Solutions
Talent and Rewards Business drivers
l Solid project revenue
l Intense market focus, need for benefits and HR program implementation
support
l Ongoing need for executive pay advisory services, compensation and
workforce benchmarking data
l Increasing focus on HR technology
l Differentiation through integration of technology and consulting
solutions
14
Expect mid single digit growth for FY14
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Benefits RFS
T&R
Exchange
Solutions
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
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Benefits RFS
T&R
Exchange
Solutions
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-digit
EPS growth
l Continued strong revenue stability
l Stable base of recurring revenues
l Strong client retention
16
towerswatson.com
Risk and Financial Services
Tricia Guinn
September 20, 2013
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 reporting
l 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 and
Insurance Brokerage
Risk Consulting and
Software
Investment Consulting
and Solutions
More than 50% of revenues are recurring
FY14 Guidance (does not include impact of Brokerage
sale)
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%
18
We have signed an agreement for JLT to acquire Towers
Watsons global brokerage business
l The combination of Towers Watsons (re)insurance brokerage business
with JLT Re creates a $260+ million global business which is the
clear #4 player in this space
l JLT is committed to investing in this business to further grow in this
area
l Towers Watson and JLT will have an ongoing relationship to offer a
compelling market proposition which will help drive revenue for both
organizations
19
towerswatson.com
Towers Watson is a global leader in investment advice
and implementation
20
l Trusted advisor to institutional investors
l Focus on liability-driven investing since 1990
l European Pensions Fiduciary Management
Firm of the Year 2012
Our Firm
l $2 trillion+ in global client assets under
advisement
l ~$60 billion in delegated (outsourced) global
assets
l Diverse asset pools: pensions, insurance,
sovereign funds, foundations and endowments
l Over $100 billion in liability-driven investment
strategies implemented
Our Client Base
l More than 750 associates across strategy,
consulting and research disciplines
Our People
140+
STRATEGY
CONSULTANTS
150+
RESEARCH
SPECIALISTS
750+
TOTAL INVESTMENT ASSOCIATES, INCLUDING:
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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
Increased Delegation
Our business has moved from purely advisory to greater
delegation/implementation
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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
Flexible
Partnership
Analytics Advisory Implementation
Our
Capabilities
Client
Needs
Research Clients
First
Insight
Investment Services
global depth and scale
We have a diverse delegated business
towerswatson.com
23
towerswatson.com
Towers Watson delegated assets under management
as of July 2013 US$
Towers Watson delegated client count by region and type
July 2013
Investment
Services
Investment Insight Clients First
The funds business is the next step in our journey along
the responsibility spectrum
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24
Principles
Tools Advice Delegation Delivery
Implementation
Pooled Funds Custom Portfolio
New!
25
towerswatson.com
Transformation work is another area of opportunity
Mission
and
Beliefs
Value
Chain
Culture
Risk
Policy
Investment
Management
Global Best
Practices
Organizational
Design
Investment
Management
Cycle
Bringing best practices to internal investment management
FY13 was a challenging year for the Risk Consulting
and Software business
l Continuation of EMEA financial crisis caused clients to decrease
discretionary consulting spend
l Shelving of Solvency II requirements led to the deferral or cancellation
of 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
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26
While FY14 outlook is strong for Software, it remains
mixed for our consulting businesses
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27
Americas Consulting
l Expect stable client demand
l P&C/Corporate practices have a strong
base of recurring revenue and a good
pipeline
l Life practice remains dependent on M&A
and will continue to be volatile
Asia Pacific Consulting
l Expect modest growth, but revenue in
region will continue to be volatile
l Key growth areas are China, Southeast
Asia and insurance management
consulting and UBI
EMEA Consulting
l Economic outlook remains uncertain
l Anticipate continued depressed client
demand
Software
l Expect continued growth driven by
expansion of sales force and new
products
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
towerswatson.com
28
We are taking action to align our business with market
demand and improve profitability
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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 services
l Emphasize growth of annuity
revenue
l Align staffing with market demand
l Drive delivery efficiency and
improved utilization
l Prioritize product development
efforts
l Scale back certain investments
We continue to believe in the longer-term outlook for
Risk Consulting and Software
towerswatson.com
Strong franchise
Right vision for the business
Taking appropriate action
Need time to see results
30
Talent and Rewards
Julie Gebauer
September 20, 2013
Talent and Rewards business overview
32
13%
26%
61%
Asia Pacific
EMEA
Americas
23%
36%
41%
*FY13 split based on total T&R Segment revenue
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 300
consultants in 35 offices in 16 countries providing advice to
over 3,000 clients
l Compensation data covering 110 countries, over 40
industry sectors, 50 functions/job families and 9,900 jobs
l Decades of experience surveying over 40 million employees
from more than 3,000 companies in more than 106 countries
Executive
Compensation
Rewards, Talent and
Communication
Data, Surveys and
Technology
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
Greater opportunity for integrated
projects 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 complementary
practices
l Within T&R: to provide complete solutions, from strategy to implementation
l Across segments: to support the employee experience associated with
design and administration of benefits and Exchange Solutions
33
FY14 mix of work expected to
create stronger backlog and
pipeline during year
towerswatson.com
Focus for FY2014
Key ingredients for profitable growth
towerswatson.com
Low-cost operations
Standardized processes
Offshored resource center
Close management of
controllable costs
High-performance standards
Sales and delivery expectations
Few pure management roles
Annuity/product revenue
Benchmarking data
Employee attitude surveys
SaaS
New productized offerings
Market-responsive staffing model
Hiring just behind demand
Staffing across boundaries
Balance of FTEs/contractors
Stable
margins
Foundation
for growth
34
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, Exchange
Solutions (retiree and active exchanges)
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35
Regional variations
towerswatson.com
l Ongoing
demand
for HR
technology
l Ongoing need for
basic HR consulting
l Low to moderate
demand for HR
consulting
l Moderate demand for
basic HR consulting
l New pull for HR
technology
l Continuing need
for implementation
support
l Selected
opportunity for
technology sales
36
Benefits Segment
Gene Wickes
September 20, 2013
Benefits business overview
38
3%
30%
67%
Asia Pacific
EMEA
Americas
4%
13%
15%
68%
*FY13 split based on total Benefits Segment revenue.
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 Collaborative
l 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 top
300 pension funds than any other professional services
firm
International
Retirement
Health and Group Benefits
Technology and
Administration Solutions
FY14 Guidance
Low- single- digit constant FX revenue growth
NOI Margin in the low-to mid - 30% range 38
towerswatson.com
Retirement outlook: Overview of pension de-risking
market
towerswatson.com
Liability-Driven
Asset Strategies
Plan Termination
Traditional
Ongoing Plans
Close Plan to
New Entrants
Freeze Benefit
Accruals
Prospective
Lump Sum Option
Bulk Lump
Sums (Former
Employees)
Bulk Lump
Sums (Retirees)
Annuity
Purchases
Increased
Funding
Account-Based
Plans
Spectrum of Pension De-Risking Actions
39
Retirement outlook: Leading indicators U.S. August
2013
40
Indicator July 31, 2013
De-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 many
sponsors 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 early
2014 given interest rate movements
l Limited activity (but significant potential) in mega ($1B+) annuity market
Accounting/Regulatory
Change
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 under
review 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/to Favorable Emerging Unfavorable
towerswatson.com
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 reduce
state pension and health care provision
l Grow Benefits Brokerage business
l Launch Data Solution services
towerswatson.com
41
HGB North America outlook
l Towers Watson is helping clients continue with self-managed programs
or 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-managed
programs or OneExchange.
l OneExchange shifting of revenue source, greater market share is
expected
towerswatson.com
Client demand is being driven by the imperative to have high-performing health
and welfare programs to enable affordable coverage for employees,
to maintain a healthy workforce and to avoid the 2018 excise tax.
42
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 for
the next few years
l DB market activity is expected to be strong
l Strong selling season in 2013 impacting 2014 revenues due to deferral
accounting
EMEA
l UK and Germany continue to be active markets for pension administration
outsourcing
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 private
sector funds in UK and market leader in Germany
towerswatson.com
TAS well-positioned for growth
43
OneExchange
towerswatson.com
44
FY14 enrollment
period ends
FY15 enrollment
period begins
F
Y
1
4

Q
1
F
Y
1
4

Q
2
F
Y
1
4

Q
3
F
Y
1
4

Q
4
F
Y
1
5

Q
1
F
Y
1
5

Q
2
F
Y
1
5

Q
3
F
Y
1
5

Q
4
$'s
Revenue Expense
FY14 all investment/revenue in
guidance
FY15 and beyond expect profit
at company average
TAS/HGB
Retiree
Populations
COBRA
Part-Time
Employees
Active
Employees
OneExchange
Active
OneExchange
Access
OneExchange
Retiree
Seasonal
Global Health and Group Benefits Solutions (GHGB)
l Client demand for GHGB consulting and brokerage is increasing as clients expand their
global 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 are
continuing 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 is
approximately $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
45
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 solutions
for our clients in key countries where they dont have critical mass to justify
custom approaches
l Engage a limited number of pilot clients on a global basis as we build out our
capabilities
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 suggest
profitability in line with Segment margins within three years. Profitable as
of second year.
towerswatson.com
46
Exchange Solutions
Ben Pajak
September 20, 2013
Exchange Solutions Business Overview
48
0%
0%
100%
Asia Pacific
EMEA
Americas
Revenue by Geography
Profile
l Private Exchange infrastructure (Extend Health
acquired in 2012)
l Largest private Medicare insurance exchange
l 10% of Fortune 500
l 400,000+ Medicare plan participants
l Patented technology platform
l Growing Individual market, pre Medicare, population
l Partnerships with third party advisors and
administrators, i.e., Fidelity
l Most Exchange Solutions revenues come from the
commissions we receive from insurance carriers
l Over the long term, NOI margin is expected to be at
least in the mid-20% range
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 and
excluding purchase accounting revenue adjustments in FY12 and FY13
**excluding purchase accounting revenue adjustments in FY13
Significant growth opportunity for Exchange Solutions
49
towerswatson.com
Medicare-Eligible Retirees With Employer-Sponsored Coverage
Towers
Watson
Others
<10%
Penetrated
90% Opportunity Market
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
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-Rand
Company, Bridgestone/Firestone
l Signed largest retiree client in company history (IBM)
l Partnering closely with other LOBs and segments to launch the
OneExchange offering and drive growth
51
towerswatson.com
Video in progress
OneExchange delivers value to your entire population
53
Retiree
Populations
Part-Time
Employees
COBRA
Active
Employees
OneExchange
Active
OneExchange
Access
OneExchange
Retiree
Seasonal
towerswatson.com
Connecting individuals to new Marketplaces
All state and federal exchanges
All Carriers
Right Answer
Right Coverage
Best Price
Employer-
Provided
Access
OneExchange Benefit Advisors
State State FFE
State State FFE
l Subsidy Optimization
l Transition Services
l Public Exchanges
l Personalization
l Carrier and Exchange
Connectivity
l Advocacy
OneExchange Access Part-time employees, seasonal workers, COBRA eligibles
OneExchange Retiree Early Retirees (Pre-65, not Medicare eligible)
54
towerswatson.com
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
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
IN
IL
OH
KY
TN
MS
AL
FL
GA
SC
NC
VA
WV
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
Retail partnership pilot overview
l Three-state, 50-store program
l Co-branded, in-store health
education center (kiosk) staffed
by Towers Watson
l Eligibility/appointment tool will
reside within each kiosk
l Pre- and post-65 insurance
options in pilot states
l Post-65 insurance options only in
non-pilot states
l Several marketing programs
planned to drive online traffic
towerswatson.com
57
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
IL
IN
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
OneExchange
Dave Osterndorf
Brian Tenner
September 20, 2013
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 Administration
Outsourcing Report
The acquisition of Extend Health brought together the expertise of
Towers Watsons core benefits business with the market leading Medicare exchange.
OneExchange is developed, managed and maintained
entirely by Towers Watson.
towerswatson.com
OneExchange delivers value to any or all of an employers
populations
Retiree
Populations
COBRA
Part-Time
Employees
Active
Employees
OneExchange
Active
OneExchange
Access
OneExchange
Retiree
Delivers transition
assistance for
full-time employee
populations moving to
our high-performing
exchange-based plans
Delivers transition assistance
for part-time and other (e.g.,
seasonal) employees to
individual market plans on
public and private exchanges
Delivers transition assistance for
post- and pre-65 retirees
moving from employer-sponsored
health care coverage to individual
Medicare market plans, or public
and private exchanges
Seasonal
Creates
positive behavior change, and
improved physical and financial
well-being
Accesses
new/increased federal funding
Connects
to lower-cost risk pool and
more federal money
towerswatson.com
60
How will participants and companies find value in exchanges?
61
Towers Watson has the know-how and capability to connect
employees and retirees to value in exchanges
Value opportunities for
employers 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
Market Opportunity for Exchange Offerings
towerswatson.com
62
OneExchange Access and Retiree facilitate the transition from
group to individual
Platinum
OneExchange Access or
Retiree
l Contracts with/provides
preferred plans
l Supports communications and
enrollment
l Administers employer subsidies
(where applicable)
Participants
l Evaluate preferred options
l Elect coverage
l Work with OneExchange to
resolve issues
Gold
Silver
Employer
Census
Limited
interaction
Plans*
Bronze
Catastrophic
Ancillary
63
Funding
(optional)
*Public Marketplace plans shown other options use private market offerings (e.g., Medicare retiree Medigap/MA/Part D plans)
towerswatson.com
Eligibility
Determination for
Federal Subsidy
Application Dispatched to Carrier
Public Marketplace QHPs
With Federal Subsidy
OneExchange Access enrollment process
64
Application Dispatched
to Public Marketplace
Public Marketplace
QHPs Without
Federal Subsidy
Private
Exchange
QHPs
Eligible Ineligible
Early Retiree/Non-FT Employee
+
towerswatson.com
Towers Watson role and compensation Access/Retiree
Towers Watson is responsible for:
Companies save time and money by providing participants with this
alternative enrollment process and access to greater market choice.
Connection to
health plans
Participant
education/
enrollment
support
Ongoing
participant
advocacy
Commissions from carriers Client fees
Towers Watson is compensated through:
OneExchange is developed,
managed and maintained by
Towers Watson.
65
towerswatson.com
Objectives in building an exchange for actives
The exchange should incorporate
best practices*
l Ongoing medical trend at half
or less than median of all companies
l Contracting strategies reward
higher-performing network providers
l Better purchasing
through cost-consciousness
l Proactive management of high-cost cases
through robust support and engagement
l Increased employee accountability
ties 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
OneExchange Active: Our private exchange model
Multiple national carriers
Four plan design choices
Primarily self-funded plans in 2014 with employer
choice in funding in future years
High-value design elements
Wellness, care/Rx management, transparency and more
Ancillary products
Dental and vision
Consumer-
Guided
Enrollment
Experience
Enrollment and
Ongoing
Administration
Platform
The goal: Deliver a high-value, sustainable framework
towerswatson.com
67
Savings opportunities: OneExchange Active
68
Best-in-market discount/
contracting arrangements
High-performance Rx
structure and contracting
Sophisticated care
management programs
Year 1
savings projections are
substantial, without cost-shifting
Medical and pharmacy
contracting terms
Health promotion/
improvement linked to
financial incentives
Improved consumer
choices
Connects physical and
financial well-being
Ongoing
trend approximately half of
prevailing national levels
$
towerswatson.com
Directed fees in
self-insured health
plans
Commissions in
fully insured health
plans and other
ancillary/welfare
benefit plans
Success-sharing
arrangements
Towers Watson role and compensation Active
Towers Watson is responsible for:
69
Carriers on the
platform
Plan designs,
clinical
management,
Rx programs,
operational
elements
Funding
approaches,
network
configurations,
cost management
strategies
Towers Watson is compensated through:
The magnitude of total benefit savings is expected to be substantial, and
Towers Watson compensation is easily ROI-justified for clients.
managed and maintained
by Towers Watson
managed and maintained by
Towers Watson.
towerswatson.com
Financial Overview and FY14 Guidance
Roger Millay
September 20, 2013
$5.57
FY13 FY11
$4.46
+25%
Strong Historical Performance
71
l Continued strong growth across
key initiatives
l Strong acquisition performance
Revenue
About $7B
$3.3B
Sep 13 Jul 10
Over 100%
$688M
$616M
FY13 FY11
18.9%
19.1%
+12%
Adj. EBITDA Revenues
Adj. EPS Market Capitalization
$3.60B
FY13
FY11
$3.26B
Earnings Leverage
l Disciplined operating margin
management
l Industry-leading margins
l Significant EPS leverage
Cash & Shareholder
Return
l Generated ~$1.1B in free cash
flow and returned ~$280 million to
shareholders through repurchases
and dividends since July 2010
+10%
Efficient Capital Structure
72
(US$ 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 EBITDAR
ratio of 2 to 3 times (rating agency basis)
l As of 6/30/13, no balance on $500
million revolver
l $250 million outstanding term loan,
matures 6/1/17
l Decrease in Retirement liability due to
increased discount rate and payments/
contributions
l ~71 million diluted shares
l Share unlock overhang has been
manageable, with no significant pressure on
the stock, 5.4 million shares remain
Solid Balance Sheet
Efficient Capital Structure
73
Cash Flow from Operations Free Cash Flow
$316M
$531M
+68%
FY13
Improvement driven by receivables recovery, integration wind-down and business
performance
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 net
income
$192M
$453M
+136%
FY12
FY13
FY12
Strong Free Cash Flow Growth
Capital Allocation Priorities
towerswatson.com
Reinvest in
Business
Repurchase
Shares
Dividends
Acquisitions
Targeting dividend
payout ratio of 10%
OneExchange platform
Global Benefits Brokerage
Seed new capabilities
OneExchange platform
Global Benefits Brokerage
Seed new capabilities
We expect to continue
to make targeted
acquisitions to enhance
our competitive position
Approximately $120 million
remains available on
Class A stock repurchase
authorization
Expect more consistent
repurchasing
74
Reinsurance and Insurance Brokerage Sale
l FY14 guidance provided in this presentation does not include the
impact of the sale. The following information provides some additional
context 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 specifics
not yet determined.
l Allocation of cash proceeds will assess the cash needs of the
company but overall we anticipate becoming more active in share
repurchases.
l Will provide an update on the next earnings call.
towerswatson.com
TW Guidance - Update
First 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
Guidance does not include impact of Brokerage Sale
Segment Guidance - Update
First Quarter Fiscal 2014
77
Q1 FY13
Constant Currency
Growth Rate
Reported Currency
Growth Rate
NOI Range
Benefits $457 about flat about flat around 30%
Risk and Financial
Services
$192
mid single digit
decline
mid single digit
decline
mid teens
Talent and Rewards $140
mid- to high- single
digit
mid- to high- single
digit
low- to mid- 20%
Exchange Solutions $ 14 around 145% around 145% high single digit
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
Segment Guidance Full Year FY14
79
FY13
Constant Currency
Growth Rate
Reported Currency
Growth Rate
NOI Range
Benefits $1,994 low single digit low single digit low- to mid- 30%
Risk and Financial
Services
$ 812
low- to- mid single
digit decline
low- to- mid single
digit decline
low 20%
Talent and Rewards $ 573 mid single digit mid single digit low- to mid- 20%
Exchange Solutions $ 95 around 60% around 60% low 20%
Strong Financial Profile
Significant recurring revenues
Consistent margins
Diversified client base
Largest client relationship <1% of revenue
Counter-cyclical business aspects
Strong cash flows and solid balance sheet
Strategic use of capital for M&A, share repurchase, dividends
80
Driving Shareholder Value
towerswatson.com
Appendix
September 20, 2013
Fiscal 2013 Impact of Reserve Methodology Change
towerswatson.com
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 reserving
methodology. This table provides the impact to FY13 NOI margins as if in FY13 Towers Watson had followed the new
reserving methodology.
83
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 and
employee 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 a
Fellow 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 consulting
actuary 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 executive
officer in 1998. Under his leadership, the company went public in 2000, and completed two historic mergers, in 2005
and 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, and
has served as 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 financial
officer positions, 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 health
actuarial practice in both policy/practices and product development activities. He is a Fellow of the Society of Actuaries
and 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 of
the 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 in
2007.
Brian Tenner Brian Tenner is Senior Vice President, Exchange Solutions. Since 2004 Brian has led sales and business
development for major market segments. Brian has held executive level leadership positions at Ceres Group and
Hewitt 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 enrolled
actuary under ERISA.
towerswatson.com
84
Towers Watson Leaders
85
Jim Foreman Jim Foreman is Managing Director, Americas. He also is a member of the companys executive committee. He
worked for more than 20 years at Towers Perrin in a number of leadership positions, which included global
responsibilities.
Carl Hess Carl Hess is Managing Director, Investment. He joined the Watson Wyatt in 1989. He has worked with many of the
worlds 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 Conference
of 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 experience
consulting on health and welfare, retirement, plan administration and other benefits areas. Mark is an Associate in the
Society 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, Consulting
Services for Towers Watsonand 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 in
1991 in London and qualified as a Fellow of the Institute of Actuaries. He has spent most of his career working in the
field of executive compensation, primarily advising board compensation committees, working in both the U.S. and
Europe.
towerswatson.com

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