WILLIS TOWERS WATSON PLC

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The consummation of our pending sale of TRANZACT is subject to certain risks. The pending transaction also creates certain incremental risks for the Company that may negatively affect our operations, financial results or reputation.

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Our ability to consummate the pending sale of TRANZACT pursuant to our equity purchase agreement, dated as of September 30, 2024, is subject to important risks, including, but not limited to: the risk that we may not obtain the required regulatory approvals, including under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, or satisfy other customary closing conditions required to complete the transaction on its agreed-upon terms and the anticipated schedule, if at all. Other risks of the pending sale of TRANZACT to our operations, financial results or reputation include, but are not limited to: the risk of additional loss upon consummation of the pending transaction as a result of reclassifying TRANZACT’s assets and liabilities as ‘held-for-sale’, which accounting treatment requires us to continue to adjust the net book value of TRANZACT to fair value (less estimated costs to dispose of the business) until the transaction’s closing date; the risk that management’s attention is diverted from other matters during the pendency of the transaction and in the post-closing period; the impact of the announcement and/or the potential impact of the consummation of the pending transaction on relationships, including with employees, suppliers, carriers, clients and competitors; the risk of disruptions from the pending transaction that impact our business; the risk that the pending transaction does not yield the intended outcomes for our strategy, operations and/or financial results; the risk that there may be litigation associated with (or required to compel) consummation of the transaction; and other risks described in our other SEC filings. Failure to consummate the sale of TRANZACT may materially affect our business, financial condition or results of operations.

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Our business will be negatively affected if we are not able to anticipate and keep pace with rapid changes in government laws or regulations, or if government laws or regulations decrease the need for our services, increase our costs or limit our compensation.

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A material portion of our revenue is affected by statutory or regulatory changes. Some examples of statutory or regulatory changes that could materially impact us are any changes to the U.S. Patient Protection and Affordable Care Act (‘PPACA’), the Healthcare and Education Reconciliation Act of 2010 (‘HCERA’), which we refer to collectively as ‘Healthcare Reform’, or to the Medicare laws and regulations. While the U.S. Congress has not passed legislation replacing or fundamentally amending Healthcare Reform (other than changes to the individual mandate), such legislation, or another version of Healthcare Reform, could be implemented in the future. In addition, some U.S. political candidates and representatives elected to office have expressed a desire to amend all or a portion of Healthcare Reform or otherwise establish alternatives to employer-sponsored health insurance or replace it with government-sponsored health insurance, often referred to as ‘Medicare for All’. If we are unable to adapt our services to potential new laws and regulations, or judicial modifications, with respect to Healthcare Reform or otherwise, our ability to provide effective services in these areas may be impacted. In addition, more restrictive marketing rules or interpretations of the Centers for Medicare and Medicaid Services, or judicial decisions that restrict or otherwise change existing provisions of U.S. healthcare regulation, could have an adverse impact on our healthcare-related businesses.

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Furthermore, in the context of our direct-to-consumer sales and marketing solutions, we are subject to various federal and state laws and regulations that prescribe when and how we may market to consumers (including, without limitation, the Telephone Consumer Protection Act and other telemarketing laws and the Medicare Communications and Marketing Guidelines issued by the Centers for Medicare & Medicaid Services (‘CMS’) of the U.S. Department of Health and Human Service). Federal and state legislators and/or regulators recently have expressed concerns about certain existing methods of marketing individual health policies, particularly Medicare Advantage and Medicare Supplement policies, and have held hearings and sought information from us and from competitors. In addition, CMS has recently expanded its regulation and oversight of the marketing of Medicare Advantage policies. Changes to these laws and/or regulations, or increased scrutiny or enforcement by regulators, could negatively affect our ability to market directly to consumers and/or increase our costs or liabilities. In particular, CMS issued a proposed rule for Contract Year 2025 for the Medicare Advantage and Medicare Prescription Drug programs that modifies agent, broker, and other third-party requirements. On April 4, 2024, CMS issued its Contract Year 2025 Medicare Advantage and Part D Final Rule (the ‘CMS 2025 Final Rule’). Among other things, the CMS 2025 Final Rule restructures the compensation that Medicare Advantage and Part D organizations may pay to independent agents and brokers by increasing the amounts paid to them as ‘compensation’ and eliminating administrative payments related to enrollment. Uncertainty exists regarding the interpretation and implementation of the CMS 2025 Final Rule, particularly in light of the recent federal court decision which stayed portions of the CMS 2025 Final Rule relating to the proposed ‘fixed fee’ compensation increase and certain contract-terms restrictions. Depending on how and whether the rule is implemented, the CMS 2025 Final Rule may require changes to the way we are compensated for some of the services that we provide and has the potential to negatively impact the revenue that our Medicare Advantage and Part D insurance businesses may receive if we are unable to adjust our business to account for such changes. This could in turn impact the value of and impairment of goodwill or receivables associated with the business. In addition, in the event that we and insurance carriers interpret the rules in ways deemed incorrect, that may increase the potential for litigation, claims, fines, or other penalties which could have an adverse impact on our Medicare insurance businesses’ financial results. Further, periodic CMS rule changes, including those contained in the CMS 2025 Final Rule, may impact the profitability of Medicare Advantage and Part D plans to the Plan Sponsors, which in turn may impact the amount of compensation paid to agents …

Excerpt shortened here; the source contains the full paragraph.

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In addition, on April 23, 2024, the United States Department of Labor (‘DOL’) released a final rule (the ‘Retirement Security Rule’) that, among other things, expands the definition of an investment advice fiduciary under the Employee Retirement Income Security Act (‘ERISA’) and broadens the scope of advice that must meet fiduciary standards. As we continue to review the Retirement Security Rule, uncertainty exists regarding the Retirement Security Rule’s impact on one or more of our businesses, the conduct of which may become subject to fiduciary standards. Industry trade groups brought legal challenges to the Retirement Security Rule and, in late July 2024, two federal district courts issued stays halting the implementation of the entirety of the Retirement Security Rule until further notice. The DOL has appealed these decisions to the United States Court of Appeals for the Fifth Circuit.

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Many other areas in which we provide services are the subject of government regulation, which is constantly evolving. For example, our activities in connection with insurance brokerage services are subject to regulation and supervision by national, state or other authorities. Insurance laws in the markets in which we operate are often complex and generally grant broad discretion to supervisory authorities in adopting regulations and supervising regulated activities. That supervision generally includes the licensing of insurance brokers and agents and the regulation of the handling and investment of client funds held in a fiduciary capacity. Our continuing ability to provide insurance brokerage in the markets in which we currently operate is dependent upon our compliance with the rules and regulations promulgated from time to time by the regulatory authorities in each of these locations.

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Changes in government and accounting regulations in the U.S. and the U.K., two of our principal geographic markets, affecting the value, use or delivery of benefits and human capital programs, may materially adversely affect the demand for, or the profitability of, our various services. In addition, we have significant operations throughout the world, which further subject us to applicable laws and regulations of countries outside the U.S. and the U.K. Changes in legislation or regulations and actions by regulators in particular countries, including changes in administration and enforcement policies, could require operational improvements or modifications, which may result in higher costs or hinder our ability to operate our business in those countries.