John Haley
Chief Executive Officer and a Director at Willis Towers Watson Public
Thank you. Good morning, everyone, and thank you for joining us on our second quarter 2021 earnings call. Joining me today is Mike Burwell, our Chief Financial Officer. Today, we'll review our results for the second quarter of 2021. Let me start by thanking our 45,000-plus colleagues for their resilience, their commitment and their focus on serving clients with excellence. At Willis Towers Watson, our colleagues have persisted through an unprecedented global pandemic while simultaneously preparing for a proposed integration and for potential divestitures. What our teams have accomplished is nothing short of extraordinary. We're now moving forward with clarity.
Today, I'm going to share some observations on the termination of our proposed combination -- business combination agreement with Aon. But I really want to focus on our strong second quarter results and excellent return to shareholders. In Q2, our team delivered outstanding results, with organic revenue increasing by 8% compared to the second quarter of 2020. All our business segments contributed meaningfully to this result. Our adjusted operating margin improved by 390 basis points. This translates into 48% adjusted EPS growth rate in Q2 and 30% free cash flow improvement when normalized for onetime items. Our 6% organic revenue growth for the first half reflects mid-single-digit or greater organic growth in three of our four segments.
Turning now to the termination of our proposed business combination with Aon. We recently announced our mutual agreement to move forward independently. On behalf of Willis Towers Watson, I'd like to thank our counterparts at Aon for their professionalism over the past 16-plus months since we announced the transaction. I again would also like to thank our Willis Towers Watson colleagues for all of their efforts as well as our clients for their continued support throughout this process. The proposed combination had significant regulatory momentum. A notable exception was the United States, where the parties reached an impasse with the Department of Justice.
In the end, working closely with Aon, we decided to terminate our agreement. We're confident this is the right decision for Willis Towers Watson, for our colleagues, for our clients and for all of our stakeholders, including our shareholders. Aon has already paid the $1 billion termination fee. We now move forward with confidence and from a position of strength. As we look to the future, we will build on our successes, which have been significant, as evidenced by our performance over the last several quarters. We will also leverage our formidable resources, including our durable client relationships, our talented colleagues and our healthy financial position.
It's worth noting that our client retention rates have remained at the same level as prior years. Regarding colleagues, while we're disappointed that we've lost some valued colleagues in what has become a hot talent market, our top leadership ranks remain intact, and our ability to compete continues unabated. We were pleased to announce last week that we would be reinstating our share buyback program, which had been suspended to comply with the terms of the agreement with Aon.
Our announcement noted that we would be increasing the share repurchase program by $1 billion. This will include $500 million in accelerated share repurchases and $500 million in our normal program. Subject to market conditions and other factors, we believe we should be able to execute a majority, if not all, of the repurchases by the end of 2021. Our Board of Directors has authorized a 13% increase in our quarterly dividend payment given our continued improvement in free cash flow. We've been paying down debt, and we expect to have retired almost $1 billion in total by the end of the year. This, together with the significant capacity we've generated, provides us with plenty of capacity to invest in both organic and inorganic growth going forward.
We intend to use this capacity to make investments in our businesses so that we're well positioned to address evolving client needs. We're excited about the significant opportunities across our whole portfolio of businesses, both brokerage and consulting. As a result, we've asked each of our business segment leaders to look at potential areas of growth for investment. We look forward to providing you with more details about this as well as an update on the overall company at our upcoming Investor Day on September 9, 2021. I'd also like to announce today that we're conducting a review of strategic alternatives for Willis Re, our reinsurance operations.
The Board has authorized us and our advisers to initiate such a process. While we highly value the Willis Re platform and our colleagues who contribute to its success, we believe now is an appropriate time to explore strategic alternatives for this business. There can be no assurance the strategic alternatives review process will result in a sale of Willis Re or other strategic change or outcome. One other question that has been raised about how we will move forward independently is what is my transition plan. As part of our ongoing planning process, the Board of Directors has been working with me on CEO succession.
I still intend to retire, and I will continue to work with the Board to ensure a smooth transition of the CEO role. This will require an announcement of my replacement in an adequate time frame to ensure this is accomplished. Now let's move on to our second quarter results. Reported revenue for the second quarter was $2.3 billion, up 8% as compared to the prior year second quarter, up 4% on a constant currency basis and up 8% on an organic basis.
In Q2, we experienced clear improvement in areas where revenue is tied to discretionary project spending as the economy continued to recover. Net income was $186 million. That's up 82% for the second quarter as compared to $102 million of net income in the prior year second quarter. Adjusted EBITDA was $557 million or 24.4% of revenue for the second quarter as compared to $441 million or 20.9% of revenue for the same period last year. That represents a 26% increase on an adjusted EBITDA dollar basis and 350 basis points of margin improvement. For the quarter, diluted earnings per share were $1.41, an increase of 96% as compared to the prior year.
Adjusted diluted earnings per share were $2.66 for the second quarter, reflecting an increase of 48% compared to the prior year. Overall, it was a very strong quarter. We grew revenue, we enhanced margin performance, and we increased earnings per share. So now we'll look at each of the segments in more detail. To provide clear comparability with prior periods, all commentary regarding the results of our segments will be on an organic basis, unless specifically stated otherwise. Segment margins are calculated using segment revenue and exclude unallocated corporate costs such as amortization of intangibles, certain transaction and integration expenses resulting from mergers and acquisitions as well as other items which we consider noncore to our operating results.
The segment results do include discretionary compensation. The Human Capital & Benefits, or HCB, segment revenue was up 5% on an organic basis and 4% on a constant currency basis compared to the second quarter of the prior year. This result represents a strong return to revenue growth, which was driven by increased demand for advisory services across various lines of business. Talent and Rewards revenue increased 22%, with a major uptick in executive compensation and reward strategy work.
We anticipate continued strong demand for broad-based rewards and transaction projects in the second half of the year, with demand evident across all geographies. We are also experiencing strong participation rates across various data survey products in the midst of the tight labor markets and companies looking to attract and retain talent, which should fuel growth in the second half of the year. Our Health and Benefits revenue increased 1% for the quarter on top of similar growth in the second quarter of 2021.
We continue to grow revenue from our advisory work in North America and global benefits management and local brokerage appointments outside of North America. However, this growth was partially offset by lower commission-based revenue, which was tied to prior year book sales. In this business, we anticipate a stronger second half performance driven by U.S. legislative changes alongside pent-up demand for strategic benefits reviews. Retirement revenue was up 3% compared to the prior year driven primarily by funding and Guaranteed Minimum Pension equalization, or GMP, work in Great Britain.
We expect high demand for GMP work to continue through the remainder of 2021 and into 2022 and 2023. Technology and Administration Solutions revenue grew 2% primarily due to increased project work and new business activity in Great Britain. We're optimistic about growth opportunities for this business as clients are engaging with us to deliver more high-touch solutions with higher-end service levels to support their employee base. HCB's operating margin increased by 210 basis points compared to the prior year second quarter as a result of continued expense reduction efforts.
We're very pleased with HCB's sequential improvement and margin growth. Our long-term outlook on HCB remains positive. Now let's look at Corporate Risk & Broking, or CRB, which had a revenue increase of 8% on an organic and constant currency basis as compared to the prior year second quarter. North America's revenue was up 13% in the second quarter, driven by gains on book of business sales alongside new business across all regions, particularly in the FINEX and marine lines. Revenue for Western Europe increased 3% due to new business and renewal expansion, particularly in retail and FINEX. Great Britain and International's revenue increased 2% and 9%, respectively, for the second quarter.
The revenue increases were primarily driven by new business wins across multiple lines, including FINEX, aerospace, construction, marine and retail insurance lines. CRB revenue was $788 million for the quarter with an operating margin of 22.9% compared to $701 million of revenue with an operating margin of 19.2% in the prior year second quarter. That's up 15% from 2019. The 370 basis point margin improvement contributes to a 2-year increase of 770 basis points and reflects the continuation of effective cost containment. Consistent with last quarter, CRB once again delivered strong top line growth and improved profitability. CRB's second quarter performance is encouraging as we look toward the future.
As the economic outlook improves, we believe our Corporate Risk & Broking segment will see the demand for mitigating asset exposures and other insurance and risk mitigation strategies increase, set against the backdrop of a firm market. We expect to see investment in large-scale infrastructure projects building volumes in transportation and increasing deal volume in M&A. Our CRB segment is focused on delivering industry and product expertise and has a mature strategy in place across all its global lines of business.
We believe that the depth of our talent in these global communities, coupled with our connected broking and risk and analytics strategies, continue to enable us to deliver innovative solutions to both existing and prospective clients. Turning to Investment, Risk & Reinsurance, or IRR. Revenue for the second quarter was $400 million, an increase of 15% on an organic basis and a decrease of 7% on a constant currency basis as compared to the prior year second quarter.
This organic growth is on top of 3% revenue growth in the 2020 second quarter. The constant currency change reflects the divestitures of our wholesale subsidiary, Miller, and our Max Matthiessen business. The Investment business, with revenue growth of 44%, led the segment's growth with new business and higher fees. Investment's growth was aided further by increased performance fees. Insurance Consulting and Technology revenue was up 13% compared to the second quarter of the prior year when revenue growth was modest. This business benefited from increased demand for advisory work.
Reinsurance revenue grew 4% through a combination of net new business and favorable renewal factors. Revenue growth was partially offset by a decline in investment income due to lower interest rates. IRR had an operating margin of 33.3%, up 460 basis points as compared to 28.7% for the prior year second quarter. The strong margin expansion was a result of careful cost containment efforts, coupled with solid top line growth. Our Investment Risk & Reinsurance segment is seeing strong demand from insurers for technology, advice and analytics, driving new business across our Insurance Consulting and Technology and Reinsurance businesses.
We believe we're well positioned to provide leading advice and innovative solutions to our clients in the transition to a low-carbon future. IRR's powerful combination of advisory services, technology solutions and analytical capabilities continues to create value for companies as they reevaluate risk and reinforce resilience post pandemic. We believe this unique combination enables us to deliver industry-leading expertise and innovative solutions to help our clients navigate challenges and leverage opportunities as the socioeconomic legacy of the pandemic continues to evolve and the world adapts to meet the increasing challenge of climate change events.
Revenue for the Benefits Delivery & Administration, or BDA, segment increased by 14% on an organic basis and 16% on a constant currency basis from the prior year second quarter. The growth in revenue was largely driven by Individual Marketplace, primarily by TRANZACT, which contributed $160 million to BDA's top line this quarter, with its growth in Medicare Advantage products. The Benefit Outsourcing business also contributed to the increase of revenue, which was largely driven by its expanded client base.
The BDA segment had revenue of $242 million with a negative 4.3% operating margin as compared to revenue of $209 million and a negative operating margin of 4.2% in the prior year second quarter. This nominal margin decline was largely due to our increasing sales capacity ahead of the 2022 annual enrollment period, which will usher in expansion opportunities for both our Individual Marketplace and our Benefits Outsourcing lines of business. We continue to feel positive about the momentum of our BDA segment for the remainder of 2021. So overall, I'm very pleased with our results this quarter. Thanks to our colleagues' outstanding efforts and our clients' commitment, we delivered strong broad-based overall financial performance across all of our business segments. We saw good top line growth, we saw meaningful margin expansion, and we saw EPS growth on top of a solid second quarter in 2020.
Now I'll turn the call over to Mike.