Good day, ladies and gentlemen, and welcome to the Towers Watson Second Quarter Fiscal Year 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now introduce your host for today's conference, Aida Sukys, Director of Investor Relations. You may begin.

Thank you very much. Good morning, and welcome to the Towers Watson's earnings call. I'm here today with John Haley, Towers Watson's Chief Executive Officer; and Roger Millay, our Chief Financial Officer. Please refer to our website for this morning's press release. Today's call is being recorded and will be available for replay via telephone for the next 2 days by dialing (404) 537-3406, conference ID 64578329. The replay will also be available for the next 3 months on our website. This call may include forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. For a discussion of the forward-looking statements and the risks and other factors that may cause actual results or events to differ materially from those contemplated by forward-looking results, investors should review the forward-looking statements section of the earnings press release issued this morning, a copy of which is available on our website at www.towerswatson.com as well as other disclosures under the heading of risk factors and forward-looking statements in our most recent Form 10-K and our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call. During the call, we may discuss certain non-GAAP financial measures such as adjusted net income and adjusted earnings per share. For a discussion of these non-GAAP financial measures as well as a reconciliation of these non-GAAP financial measures under Regulation G to the most closely comparable GAAP measures, investors should review the press release and the accompanying financial tables we posted on our website this morning. After our prepared remarks, we will open the conference call for your questions. Now I'll turn the call over to John Haley.

Thanks, Aida. Good morning, everyone, and thanks for joining us. Today, we'll review our results for the second quarter of fiscal 2015 and our guidance for the remainder of the fiscal year. Before diving into the detailed results, I'd like to say that the record-breaking results posted for the second quarter are a testament to the thought leadership, hard work and innovation of our associates. These results don't just represent the actions that took place this past quarter, but reflect the culmination of many years of hard work in developing new products and services, building a culture of collaboration, and most of all, putting clients first, which has helped us better understand the marketplace and how we can help our clients succeed. For a second consecutive quarter, we've posted record-high organic revenue growth. Reported revenues for the quarter were $958 million, an increase of 8% over the prior year's second quarter reported revenues and up 11% on an organic and constant currency basis. Our organic growth rate adjusts for changes in foreign currency exchange rates, acquisitions and divestitures. Strong top line results and the continued focus on cost efficiencies have helped drive EBITDA margins to a record high. Our EBITDA for the quarter was $211 million or 22% of revenues. The prior year second quarter adjusted EBITDA was $172 million or 19.4% of revenues. For the quarter, diluted earnings per share were $1.57, and adjusted diluted earnings per share were $1.73. The strong momentum we experienced in the first fiscal quarter built to produce even stronger results in the second fiscal quarter. The Benefits, Talent and Rewards and Exchange Solutions segments delivered strong results. Bulk lump sum, health care consulting and pension administration drove revenue growth in the Benefits segment. An increase in client work and timing of survey delivery…

Thanks, John, and good morning, everyone. I'd also like to add my thanks and congratulations to our associates for another great quarter. Now let's turn to the financial overview. As a reminder, our segment margins are before consideration of discretionary compensation and other unallocated corporate costs, such as amortization of intangibles resulting from merger and acquisition accounting costs. For the quarter, the Benefits segment delivered a 36% NOI margin, up from 30% last year. Bulk lump sum projects drove margin growth for both the Retirement and the Technology and Administration lines of business. This was a tremendously impressive quarter for the Benefits team. They really stretched themselves to deliver great results on the top line and in profitability. Risk and Financial Services had a 27% NOI margin, an increase from 21% last year, showing a strong benefit from restructuring in fiscal '14. This is now the fourth consecutive quarter where margins have exceeded prior year comparisons. Talent and Rewards had a 37% NOI margin as compared to 31% in last year's second quarter. Revenue growth fell directly to margin as expenses were tightly managed in the quarter. The second quarter margin benefited from the strong shift of data services seasonal revenue into the second quarter this year. Exchange Solutions had a 13% NOI margin compared to 5% in last year's second quarter. OneExchange Retiree and the Health and Welfare Administration businesses drove margin growth for the segment. OneExchange Retiree experienced a significant increase in margin compared to the prior year. Last year, they experienced a loss of 18% in the second quarter as compared to an NOI margin of 23% this past quarter while enrolling a comparable number of members. The change in profitability was driven by new staffing models, continuous improvement initiatives, increased off-cycle enrollments and an increased client…

Okay. Thanks, Roger, and now we'll take your questions.

[Operator Instructions] Our first question comes from Andrew Steinerman of JPMorgan.

John, I have a question about operating leverage. What is Towers Watson doing in the Retiree Exchange Solutions to drive operating leverage over the near term and intermediate term? And what milestones should we be looking for to achieve operating leverage?

Yes, I'll let Roger handle that.

Sure. Sure. Thanks, Andrew. I'll start. There's really 2 pieces as you look at exchanges, Retiree versus Active. And on the Retiree side, and we referred to a number of the things in the script. But with the maturing of that business and greater experience and just handling the enrollment periods and the volumes that we've been at, we're seeing efficiencies operationally. And again, I think it was in John's remarks about the best operating metrics that we've had. And with that, we're just finding ways continually to enhance the leverage against cost of the number of people we can enroll. And that on top of the scale in Retiree is driving margins. In addition, with the off-cycle enrollments, we're just smoothing out the cost base and are able to keep processes consistent during the year and resources consistent during the year. And that's adding to productivity as well in smoothing things out. It's, of course, it's a different story on the Active side. We're continuing to build for Actives. We're building out our platform. We'll building out resources. And the operating leverage there is to come, because we're building for a much bigger business. So I think that's the story and it will be -- will drive over the next couple of years, leverage on both sides. But it will be more pronounced in terms of the margins that we have. It'll be more pronounced in the Retiree business.

And you mentioned off-cycle enrollment earlier in the call. Is there any more trends towards off-cycle enrollments?

Yes, very much so in the Retiree part of the market. And as we -- I think in the remarks, we mentioned one big one as of April 1 that we have for the Actives that's sort of an off-cycle enrollment.

Our next question comes from the line of George Tong of Piper Jaffray.

Two-part question for John. First, could you clarify how many Active lives were enrolled during the open enrollment period? And then secondly, you noted Active enrollments could lag expectations this year. Can you discuss what could be driving this and actions you have planned to mitigate on the downside?

Okay.

Yes, I'll just take the number there. That's 60,000 Actives were enrolled.

Right. And I think -- look, different things can -- we had one client that was -- we were expecting to enroll as of 1/1/2015. And they actually ended up deferring the decision until -- I think they've actually decided to go ahead with the exchange, but they're going ahead as of 1/1/2016. So that was a -- they've already signed the contract for 1/1/16, but that's one that got deferred. Another example is there's a client that we were -- that has implemented with us they're -- they were a big client and they've divested some operations. And so now we're getting fewer people that we had expected. So we're seeing things like that, that are affecting it at the margin there. I don't think it's -- we're not going to -- we're not saying we're going to lag behind by some really big number, but it will probably be -- the Actives will probably be a little bit lower than we had and the Retirees will probably be a little bit higher. We'll probably come out about where we thought.

Right. And just to clarify, the 60,000, that's employees, if you express that in terms of lives, what would the number be?

Well, the rule of thumb is to double that.

And so George, just to -- and to clarify, because I know these are important numbers for people. That is the new enrollees, right.

Right. Not the total in force.

Yes.

Right. And then sticking to the Exchange business, can you discuss how your pipeline is building for next year's enrollment period?

Well, I think, we're -- we have a very active pipeline. We have the -- people that we spent time talking to last year, virtually all of them are back now talking to us again about this year, the ones that didn't already implement, and we're seeing more clients talking about this. So I think we have a -- at this stage, we're very pleased with the pipeline we have there. It's just a question of how many decide to adopt.

Our next question comes from the line of Shlomo Rosenbaum of Stifel.

I just want to start a little bit on the line of questioning that we were on before. John, does there look -- just want to be clear, the commentary around the Actives might lag. It doesn't look like it changed in demand in the industry. It looks like just a couple of one-off things are going on that you mentioned. But can you just comment is demand consistent, demand picking up, just in terms of interest from potential clients?

Yes. So I think first of all, Shlomo, that characterization is right. This is not some big change. We just wanted to highlight that it might be a little bit below. But it's -- and really, if I took those 2 client examples I mentioned, that would really be pretty much what the difference is between what we're estimating now and what we have. So not a big difference there. Overall, the interest is there. I hesitate to say much else than that, though. Because last year, we saw a lot of interest and then people decided to wait a little bit. I think we get a little different sense this year that people have sort of kick the tires enough that we would expect to see more people adopting. When we look at this thing, one of the things we have said we were targeting is we wanted to be about 25% market share in the Active market as it developed over time. We're at the 25% market share, it's just the market hasn't grown as fast as it would. And we can try to do some things to impact that, but we're really waiting for that to develop.

Okay. So it's still as we thought beforehand, just a couple things on the margin that are changing what are initially very low numbers is what it looks like.

That's correct.

Okay. And you mentioned a little bit of pull-forward revenue into 2Q around projects. I know it's -- that kind of stuff is tough to exactly quantify. But can you take a shot at how much you think was pulled forward into 2Q around some of the different projects and things like that?

That's hard to -- that's really hard to say, Shlomo, and it is really just an alert to say. We might expect that the growth rate is probably -- the growth rate just in the health care part of TAS is probably 1% or 2%, maybe higher, than it would've been in the second quarter. And it might be 1% or 2% higher. But as for the health care part, it's the health care administration of TAS that we're talking about here. So I don't think -- what I mean by that is I don't think it's a big material impact on overall Exchange Solutions. We're not talking about 1% or 2% on the segment revenue. We're talking about 1% or 2% on the health care exchange. But it could switch each way.

Got it. And then just based on the types of clients that you have on the pipeline for the Exchange and the tire kicking going on. What do you kind of handicap the likelihood of a big marquee client signing up potentially for next year or like with the IBM thing was kind of a watershed event for retirees? What do you think the likelihood is we see something like that in the industry for Actives? Do you see that going up?

Shlomo, the best I can tell you is it's between 0% and 100%.

Our next question comes from the line of Andre Benjamin of Goldman Sachs.

My first question was if you can maybe talk a little bit about the competitive environment, how that's evolving for the exchanges, both Retiree and Active. How much of the client base that you're signing up today are existing clients versus maybe people you haven't done business with before? And similarly, how many existing clients are choosing to maybe go with a competitive solution and why?

So I think -- look, it's a -- we're seeing -- in the Active part of the market, particularly, and increasingly, in the Retirees too, we're seeing a lot of RFPs for people who are considering exchanges. Those things are by their nature, competitive. There's a group that's invited in to see them. I think the -- when you think about the concerns of employers, generally, the concerns really relate to are they going to get a quality experience when they're adopting the health care and the exchanges? And so a lot of the competition is around that is what we're seeing. It's the who can deliver the right kind of experience there. What was the second part of your question? I'm sorry.

It was about whether or not the majority of people that you're seeing decide to opt with your existing clients versus potentially people that you haven't done as much of business with in the past.

Oh, boy. It's -- so here's the issue, Andre. It depends on how you define that. When you think about it, of the large plan market, we probably already serve 75% of them in some way as clients. But if you're talking about are they people for whom we've done the health care administration part before, that's a much smaller service. So most of them, we have some relationship with where we've talked about them before. But it's probably, I don't know, broadly 50-50 between people that we've been doing some kind of either health care consulting or administration before versus ones we haven't done any of that.

And the last piece, I apologize if you answered this in the prepared remarks. But any thoughts on the pipeline for bulk lump sum payments as we look out, say, the rest of the year into next year based on your conversations with clients and what you know about their balance sheets?

So what we've done is we had a very strong bulk lump sum enrollment for the first half of this fiscal year. We're projecting the second half to look more like what it looked like a year ago, which is a decidedly down -- I forget the numbers. Roger, do you have that?

It was down -- so we did about $50 million in the first half of the fiscal year. And we're looking at probably about $10 million or so in the second half.

Which is roughly consistent with about what it was last year.

Our next question comes from the line of Tim McHugh of William Blair.

Can you talk about how sustainable some of the project work around the mortality rate assumptions is? It sounds like that drove extra project work and is that something that's going to take a while for clients to work through or is that a really very short-term impact as clients adjust to the new kind of assumptions?

That's pretty much a fiscal year impact that we would see. So you have to think about this and resolve it, and pretty much everybody will do it this fiscal year. I don't think we have any statistics to know how many people have -- whether there's more work to be coming in the second half of the fiscal year. And I rather suspect it'll be -- it was more the first half of the fiscal year than the second. But this is not a long-term continuing impact.

Okay. And then can you just talk a little bit more about investment consulting? I get obviously it's a tough environment in Europe. And you mentioned you won some larger projects, but the growth of this has just been choppier, I guess, there. And that business has been such a strong growth channel for you for a while. So I guess, do you still feel -- I mean, it used to be a high single-digit growth essential business. Can we -- can that business get back to there over the next couple of years? Or has it just reached the scale where we need some of the newer products like the fund of funds products to really kick in before we see growth accelerate?

So I think we can certainly get back to the mid-single-digit growth in the investment area in the short term. I think we will be looking -- when we target high single-digit growth rate, it probably does require some of the innovative things like the specialized asset solutions that we have focusing more on that. We have a couple of things that have impacted the growth this quarter. We're not getting as much -- we had a lot of performance fees that we got last year. And we didn't get as many this year. We had budgeted for a slowdown in the performance fees, but it was a bit more than we had budgeted for. In terms of growth this year, we had projected winning -- in the U.K., winning 1 very large new client and about 8 to 10 smaller ones. We're on track for winning the 8 to 10 smaller ones. We're right where we'd expected to be for that. But we haven't won the big one. And the reason we haven't is no big one has come to market. So it's not that we competed and didn't win them. So there's a few things like that, that have just hurt us a little bit extra this quarter. It also was a tough comparison to last year, which was a very good quarter. So there's a few things that are coming in like that. It doesn't affect our view of this as a mid-single digit or better growth rate long run. But we think it may take another quarter or 2 to get back up to where we want to be.

We're confident we're going to see a better second half than the first half.

Yes. We think the second half will be better than the first.

Our next question comes from the line of David Styblo of Jefferies.

First one, I just want to make sure I can reconcile the beat in the second quarter here with the guidance raise. Obviously, there's about a $0.20 delta. Sounds like some of that is due to timing of revenue that got pulled forward and also, currency. Can you better quantify what those are? And is there a sense that you're still just keeping some conservatism into the guidance? Or how do we walk that bridge to the guidance raise?

Yes. I think it's broadly -- so as John said earlier, there is some impact from what we believe is pull-forward, but it's not really that material. So I think roughly 80% of the delta that you're observing is FX. I mean, it's -- as I said, again, relative to previous guidance, there's, what was it about, $75 million, $77 million of revenue that due to currency changes that we pulled out of our forecast. So that's the principal thing driving the first half, second half dynamics.

Okay. Going back to the BLF business. Understand your comments about the second half of the year. I guess, how do we think about this over the longer term, because obviously, the, I guess it was the Pension Protection Act was the catalyst for all this beginning to happen in '12, and I guess you got a bolus of revenue right away. That slowed down. Now it seems like we're having a pickup. Is that more the market conditions with the equity markets being so strong? And what's going on with the interest rates continuing to drive demand? Or how do we just think about this business moving beyond this fiscal year?

So I think here's the way -- let me give you the overall view that, I think, we have at this, and then I'll talk about some of the specific factors that drive it. But overall, when we think about our business, we think about the Benefits business, which is a low-single digits, 1% or 2% growth rate in general. And then, with these -- there will be like discrete little lumps of activity that will occur as a result of bulk lump sum, which will drive specific quarters up from time to time. So it'll be this slow-growth business punctuated with these very granular activities of bulk lump sum activity. The kind of factors that will drive the bulk lump sum activity are, first of all, just the general desire to derisk the company's half, wanting to get pension liabilities off the balance sheet. Of course, we have larger PBGC premiums, which are encouraging companies to reduce their participant counts, because there's per-head charges that they get there. And those per-head charges are especially onerous for the terminated vested participants who tend to have low lump sums and low liabilities. So the per-head charge is a big portion of that. There's some concern that minimum lump sums will soon be calculated using a new mortality assumption, which will increase the minimum required amounts. That's driven some of the activity we've seen the last couple of quarters. And then, when the lump sum interest rates are at levels where they're at or below the interest rates used to calculate the liability for the company's accounting and for their balance sheet, then in those cases, you can -- you get some arbitrage that people are interested in. So companies tend to pay their lump sums near the calendar year end when that relationship between the interest rate used to calculate the lump sum and the interest rate used for accounting purposes can be estimated with more confidence. So that's why you see the bulk lump sum work in the quarter 3 and quarter 4. And so it's -- anyway, that's how we see it overall though. It's not something that we think we can predict with a lot of confidence that it's going to be -- if we look out in FY '16, we're going to see an event here or there. Although, we just know it'll punctuated with periods of bulk lump sum activity.

Okay. That's very helpful. And then if I could just sneak in one, of course, on the exchanges here. How important is the Cadillac Tax in your mind for catalyst? I guess, it's -- the way I think about it is private exchanges are an alternative way to address that, but is that a big part of the discussion and driver as you're talking to employers to switch over to private exchange? Because I would assume they could do other things with their benefits to avoid that, but again, just want to come to an exchange because it simplifies the process.

So we have -- I think we see a reaction of employers to that all across the spectrum. And indeed, I think even in inside Towers Watson, we may have some different views as to how important the Cadillac Tax is today. Overall, what we see happening though is that the -- I think for the most part, we see employers when we talk to them about the Cadillac Tax right now, they just say that's so far off, they're not thinking about it. We have a small group that is very interested in it and has us do a lot of analysis about it. I think my view is that the Cadillac Tax, if it stays in place, it will be a very significant factor about 1 year or 2 before it's about to hit, but not right now. And so I think you always get some people who plan a little further out. But most employers look at it and say "Who knows what the law will be then."

Our next question comes from the line of Tobey Sommer of SunTrust.

This is Frank, in for Tobey. Can you remind us the seasonality of the Talent and Rewards business going into the next quarter? And do you expect any changes from traditional patterns there?

Yes. Frank, so the seasonality of the business is much more weighted to the first half of the fiscal year and lower revenue levels in the second half. A lot of that is driven by the data services business with the surveys being delivered in the fall basically. We don't expect a difference there. And so traditional kind of seasonal patterns is what we built in.

Okay, great. And on the Risk and Financial Services segment, there's some nice margin expansion there. Can you talk about some of the levers driving that and how sustainable that is going forward?

Yes. I mean, I'll comment first, Frank. So now, let's see, it was, I guess, over a year ago now that the business restructured to resize to where the market opportunity was. And so it's really been good cost management relative to revenue levels that's driven the margin performance.

Okay. And then, lastly, you've talked about the impact of M&A on a couple of the segments. If we step back and we assume kind of higher levels of M&A generally as we've seen recently, how does that impact the business across a few different segments?

Well, it can have -- so I know we mentioned it, for example, in exec comp, and clearly, there's a -- when you're consulting on executives' packages and there's M&A, that's often a -- leads to a lot of work there. When you look at the Benefits business, whether it's Retirement or Health Care, there can be enormous projects when people have retirement plans or healthcare plans that need to be harmonized or modified in one form or another. When there's M&A, of course, in the insurance company area, that can have not just the impacts we already talked about, but it can also -- that can be a very significant driver of RCS revenue. And then finally, on Talent and Rewards, we have -- I mentioned exec comp, but in terms of employee opinion, employee engagement surveys, those are often very important things to help measure what's happening with M&A work and help get the kind of culture that you want going forward. So there's a lot of work that M&A can really affect virtually every segment we have.

Our next question comes from the line of Sara Gubins of Bank of America.

It looks like Retiree revenue was up sequentially in the second quarter. And I'm wondering if there was an increase in enrollment that would drive that or was it more in pricing?

Yes, Sara. Yes, it was really off-cycle activity that happened in the first quarter, but then the revenue kicked in the beginning of the second quarter.

Okay, great. And so should we expect to see sequential revenue growth from the second to the third quarter in Retiree or should that be about flat?

Well, so that's our big seasonal quarter, right? Because of the folks who enrolled for insurance in calendar '15, the revenue cycle for that actually starts on January 1 of '15. So that's a big step-up period that we get every year from the annual enrollment period.

That's what I thought. Okay. So that means that what we would then see on the Health and Welfare side might mean a sequential slowdown because of, you were suggesting maybe some of the revenue is pulled forward into the second quarter, correct?

No. We were talking about -- we were talking there about the health care administration piece.

Not in the Exchange segment?

Not in the Exchange. It's in Exchange Solutions, but it's not -- I just want to clarify, it's not the Retiree Exchange.

Right.

Right, sorry. Yes. Okay, great. And then separately, could you talk about discretionary compensation levels for the rest of the year and how you're thinking about that?

Yes. We still expect to be in that mid-30s kind of range overall for the year, maybe more like in the range of 35% to 37% as opposed to 34% to 36%, but still in the mid-30s.

Great. And then just last, again, in Risk and Financial Services and the cost management efforts given the challenged top line. Given that you have been really focused on managing cost in that segment for quite some time, I'm wondering, do you have a lot more levers to pull if you need to in the next couple of quarters?

Well, I mean, so the broad answer to that from a business point of view is we do have levers to pull to manage costs relative to revenue. I think we feel this level that they're running at now, which is as I think we said now for the full year, mid-20% range. I think, as I recall, it was like 27% this quarter. At the revenue levels that they're at, that's the margin levels that we think are appropriate to where the business is running. But we always -- we're always attentive to that relationship clearly.

And our next question comes from the line of Mark Marcon of Robert W. Baird.

I'd like to delve a little bit more into the exchanges. You've given us in the slide deck where we stood with regards to enrollments at December 31. Can you give us where we stood mid-January or end of January?

Well, I mean, look, we're -- so in terms of -- are you talking about, Mark, sorry, new enrollments or just the total number of...

Total number.

Total lives?

Yes.

So look, we're around -- as we said, when you add the 60,000 of employees that were added for Actives and 160,000 of retirees, we're around 1.1 million in terms of total lives, so...

Right now?

Yes. Well, that's not marking like the 2 weeks, but it wouldn't have changed much other at January 1. So there's not a big change between January 1 and today, let's say. But it's around 1.1 million relative to the 1.2 million target that we had talked about.

All right. And then -- but we still have that big Active that is going to be signing up in April. Is that included in that 1.1 million?

No, it is not.

Okay. And so roughly speaking, how big would that one be?

I mean, I don't -- we haven't given a number on that. So I mean, I think it's -- if you think about other clients we've talked about in Actives, I think you can get a pretty good sense relative to numbers we put out there. But it's -- we haven't...

This one sounds like it's larger than some of the other ones that you've...

Well, it's larger than -- again, if you think about the activity in Actives, it's one of the larger ones that we've had. I suppose it's probably fair to say, it's the largest one. But again, it's relative to the overall numbers we've given for Actives and the momentum we've seen there.

So the point is, I mean, we're still getting to that 1.2 million at least.

We feel pretty good about the 1.2 million. I mean, we're at 1.1 million already, right?

Yes. That's -- I just wanted to be clear, because -- and it sounds like when we look at the Actives, originally, we were thinking, okay, we could get to, potentially, by end of the fiscal year, this was coming out of one of the discussions that you'd had in a public forum, potentially getting up to 425,000. It doesn't sound like it's going to be materially off of that level. Is that correct?

Yes. I'm not sure -- I'm not connecting back to that forum you're talking about. But I think what we see is consistent with what we've said generally, so yes, I think that's right.

Okay. And then, can you -- let's go to the value proposition. You mentioned that the satisfaction levels are exceeding expectations as well as the enrollments. Can you give us a little bit of color there? And then, I just recently attended an exchange conference where I talked to a lot of benefits managers. And at the end of the day, they're still looking for bending the health care cost curve. Can you talk a little bit more about additional learnings that you've had with regards to year 1 savings, and then the inflation rate afterwards?

Yes, so I mean, let me talk about that last part first. I mean, we've been extraordinarily pleased with the bending of the health care cost curve that we've seen so far. In fact, it's been a little better than we had projected. If you look at the most recent CPI we have, it's 1.5%. The OneExchange for Actives that we had, so our 2015 over 2014 was 1.8% increase. Surveys of mid-sized large employers with planned changes to try to mitigate the health care cost increase, that came in at 4%. Mid-size large employers with no planned changes came in at 5.2%; and Aon Hewitt reported their -- for their active health exchange, a 5.3% increase. So we feel pretty good about the positioning of the 1.8% against all of them and feel like it's a pretty good value proposition. And of course, by going into an exchange to begin with, you can have a onetime lowering of the thing. But you were talking about also bending the health care cost curve.

Right. And then with regards to like your 3 big Actives that are new for this year. Does it look like they're going to be on track to experience the year 1 savings that you ended up achieving with your first 3 big Actives?

We see no reason not to. I mean, it's a broad range, Mark, and it depends on what you're starting point is. But we generally tend to think that we can offer people savings in between 5% and 15%. Those who get only the 5% sort of savings are those who already had the highest-performing features in their plan design. So for example, when Towers Watson adopted an exchange for its own employees, we already had all the best designs we thought in our existing health care plan. So we only saved 6%. I say only, I mean, 6% on your health care cost is enormous. But if you have planned design changes that you can make to high deductible plans and others like that at the same time you're making the exchange, that's when you can get up closer to 15%.

Great. And then can you just talk about the satisfaction levels that you cited in the press release, a little bit more color?

Well, the satisfaction levels, as we said, we've always been well in it, well ahead of what is quoted as industry standard for satisfactions on all of these. We've been well ahead of them. This last year, even though we had this enormous number that we ended up enrolling, we actually approved our satisfactions to the highest level ever. So we're just -- we couldn't be more pleased with the hard work that our operations guys in Exchange Solutions did. It was absolutely fantastic.

Our next question comes from the line of Paul Ginocchio from Deutsche Bank.

Quick one for Roger, then one for John. Roger, you're kind enough to break out Retiree margins for the December quarter. Would you want to just give us a view on what you think fiscal '15 will look like in Retiree? And then second, John, I think last year, some of the kind of gating factors on converting the Active pipeline as I read various surveys, there's sort of lack of maturity the business model, lack of data, clients not believing in the sustainability of the savings or basically clients waiting for their peers to do it. Have the sort of conversations changed or are those are still the things holding clients back?

Yes. I'll just start on the Retiree margin. So we don't break that out as you know. But Paul, you also know the business well. So you know that with new business coming in on January 1 that, that is incremental to the platform as it exists today. So we like the momentum there. There will continue to be some bumps up and down, depending on how large the annual enrollment period is. But again, the second half is the higher-margin half of the year for Retiree.

Roger, can I ask you a different way. What was the margin in the first half? Would you be willing to give that?

Don't have that in front of me, so yes.

So Paul, I think, look, it is the -- I think the same kinds of things are some of the discussions about are others moving, what's the maturity of the business model, what kind of data do we have. Things are better this year than last year. Because, for example, I just went through talking about what our experience is in the bending the health care cost curve. We have some data on that now that we didn't have last year. We don't have a lot more because it's still only a small number adopting, but we have some data, the business model is mature by one more year. And there are at least some people that have adopted it. So things are marginally better. I think the -- when -- I know earlier in the call we were asked about some projections about how many people are going to adopt this or that. And I think the thing that stops us from making any projections is to say we feel we have more things to talk to employers about. We have some things to address some of their concerns. The question is, do we have enough data and do people start to do this? I do feel that this is the kind of thing that there's a bit of a logjam and once we get a little bit of a break in that, we're going to see a big increase. But I'm somewhat reluctant to predict exactly when that will be.

Just a final one, John. What's the -- how long do you have to sell for -- or what's the kind of drop-dead date for Liazon versus OneExchange?

So I think with OneExchange, we're looking out, let's say, selling for 1/1/2016. OneExchange, we'd really like to know by June or July, I think, as to what we're going to -- the ones we're going to be implementing. For Liazon, we would be going up into the November timeframe.

And our next question comes from the line of Ashwin Shirvaikar of Citi.

Good quarter. And in spite of everything, a good guidance, I think. I guess my question is with regards to balance sheet. As obviously, you got some strength building and it's very supportive of future M&A. Seems like you have, in terms of the pieces you need for the Exchange business, you have what you need there. You've talked in the past about geographical expansion. You talked a couple other areas. Has anything changed with regards to the pipeline with the kind of deals you might be looking at? And then the -- I guess, the follow-up question is absent M&A, could you talk about sort of use of cash because you're heading into the more productive cash generation part of the year for yourself.

Sure. So I'll just address the first part, and I'll let Roger address the second part there. So I think in M&A, nothing has really changed in terms of things we've talked about. I think we continue to be affirmed that we think -- we want to be on the lookout for potential M&A. We're somewhat conservative. We look at a lot of deals and we do a small percentage of the deals we look at. We always have some under consideration from small to large, but we're very much focused on making sure that any deal we do is a successful one. So I think we're continuing to do that. And no real change in terms of how we think about deals or strategically what we'd be trying to do. And Roger, I'll let you address the uses of cash.

Yes. And I guess, Ashwin, just say that there really hasn't been a big change in the way we think about that either. So if you match what John said about M&A, we do like to maintain a reasonable level of flexibility. But we're not going to hoard cash. So you can see the run rate that we've been at, $40 million to $45 million or so of repurchases a quarter. We increased that run rate over the past year, and we'll continue to monitor that relationship as we go forward.

And I mean, I think one way to think about this is we basically used up all the U.S. cash that we have in one way or another either by acquisitions or by repurchasing shares. And so we -- but we will -- we expect to be generating a lot more U.S. cash in the near term, so, too.

Right. So I guess that sort of begs the question with regards to your parts on repatriation of cash if needed. Any thoughts there with regards to upping the level of buyback in the absence of M&A and things like that?

I think, as Roger said, we have that $300 million authorization from the board to do that. That would -- I think if we did it, the current rates would be finished at the end of 2016. And we anticipate that we'll go at least at the level we are right now. But we don't have any plans to repatriate cash.

Okay. And then sort of a smaller question and then I'll let you guys go. It's a smaller part of your business. But any incremental impact you're beginning to see from Solvency on the insurance side?

No. We're not seeing any impact from that right now. So thanks very much, everyone, for joining us this morning. We look forward to reviewing our third quarter results with you in May.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day.