MANAGEMENT REPORT AND ANALYSIS OF THE FINANCIAL POSITION AND OPERATING RESULTS

ByRichard C. Sloan

Nov 2, 2021

Article 2.


The following discussion should be read in conjunction with the condensed
consolidated financial statements and the notes to those statements included
elsewhere in this report on Form 10-Q. This report on Form 10-Q contains certain
statements that are forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are not guarantees of future
performance and involve certain risks, uncertainties, and assumptions that are
difficult to predict. Actual outcomes and results may differ materially from
those expressed in, or implied by, our forward-looking statements. Words such as
"expects," "intends," "targets," "anticipates," "believes," "estimates,"
"guides," "provides guidance," "provides outlook," and other similar expressions
or future or conditional verbs such as "may," "will," "should," "would,"
"could," and "might" are intended to identify such forward-looking statements.
Readers of the Form 10-Q of The Western Union Company (the "Company," "Western
Union," "we," "our," or "us") should not rely solely on the forward-looking
statements and should consider all uncertainties and risks discussed in the Risk
Factors section and throughout the Annual Report on Form 10-K for the year ended
December 31, 2020. The statements are only as of the date they are made, and the
Company undertakes no obligation to update any forward-looking statement.

Possible events or factors that could cause results or performance to differ
materially from those expressed in our forward-looking statements include the
following: (i) events related to our business and industry, such as: changes in
general economic conditions and economic conditions in the regions and
industries in which we operate, including global economic downturns and trade
disruptions, or significantly slower growth or declines in the money transfer,
payment service, and other markets in which we operate, including downturns or
declines related to interruptions in migration patterns or other events, such as
public health emergencies, epidemics, or pandemics such as COVID-19, civil
unrest, war, terrorism, or natural disasters, or non-performance by our banks,
lenders, insurers, or other financial services providers; failure to compete
effectively in the money transfer and payment service industry, including among
other things, with respect to price, with global and niche or corridor money
transfer providers, banks and other money transfer and payment service
providers, including digital, mobile and internet-based services, card
associations, and card-based payment providers, and with digital currencies and
related protocols, and other innovations in technology and business models;
political conditions and related actions, including trade restrictions and
government sanctions, in the United States and abroad, which may adversely
affect our business and economic conditions as a whole, including interruptions
of United States or other government relations with countries in which we have
or are implementing significant business relationships with agents, clients, or
other partners; deterioration in customer confidence in our business, or in
money transfer and payment service providers generally; failure to maintain our
agent network and business relationships under terms consistent with or more
advantageous to us than those currently in place; our ability to adopt new
technology and develop and gain market acceptance of new and enhanced services
in response to changing industry and consumer needs or trends; changes in, and
failure to manage effectively, exposure to foreign exchange rates, including the
impact of the regulation of foreign exchange spreads on money transfers and
payment transactions; any material breach of security, including cybersecurity,
or safeguards of or interruptions in any of our systems or those of our vendors
or other third parties; cessation of or defects in various services provided to
us by third-party vendors; mergers, acquisitions, and the integration of
acquired businesses and technologies into our Company, divestitures, and the
failure to realize anticipated financial benefits from these transactions, and
events requiring us to write down our goodwill; decisions to change our business
mix; our ability to realize the anticipated benefits from restructuring-related
initiatives, which may include decisions to downsize or to transition operating
activities from one location to another, and to minimize any disruptions in our
workforce that may result from those initiatives; failure to manage credit and
fraud risks presented by our agents, clients, and consumers; changes in tax laws
or their interpretation, any subsequent regulation, and potential related state
income tax impacts, and unfavorable resolution of tax contingencies; adverse
rating actions by credit rating agencies; our ability to protect our trademarks,
patents, copyrights, and other intellectual property rights and to defend
ourselves against potential intellectual property infringement claims; our
ability to attract and retain qualified key employees and to manage our
workforce successfully; material changes in the market value or liquidity of
securities that we hold; restrictions imposed by our debt obligations;
(ii) events related to our regulatory and litigation environment, such as:
liabilities or loss of business resulting from a failure by us, our agents, or
their subagents to comply with laws and regulations and

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regulatory or judicial interpretations thereof, including laws and regulations
designed to protect consumers, or detect and prevent money laundering, terrorist
financing, fraud, and other illicit activity; increased costs, operational
burden or loss of business due to regulatory initiatives and changes in laws,
including changes in interpretations, resulting in increasing regulations and
industry practices and standards in the United States and abroad, affecting us,
our agents, or their subagents, our external business partners such as financial
institutions, or the banks with which we or our agents maintain bank accounts
needed to provide our services, including related to anti-money laundering
regulations, anti-fraud measures, our licensing arrangements, customer due
diligence, agent and subagent due diligence, registration and monitoring
requirements, consumer protection requirements, remittances, and immigration;
liabilities, increased costs or loss of business and unanticipated developments
resulting from governmental investigations and consent agreements with or
enforcement actions by regulators; liabilities resulting from litigation,
including class-action lawsuits and similar matters, and regulatory enforcement
actions, including costs, expenses, settlements, and judgments; failure to
comply with regulations and evolving industry standards regarding consumer
privacy, data use, the transfer of personal data between jurisdictions, and
information security, including with respect to the General Data Protection
Regulation in the European Union and the California Consumer Privacy Act;
failure to comply with the Dodd-Frank Wall Street Reform and Consumer Protection
Act, as well as regulations issued pursuant to it and the actions of the
Consumer Financial Protection Bureau and similar legislation and regulations
enacted by other governmental authorities in the United States and abroad
related to consumer protection and derivative transactions; effects of unclaimed
property laws or their interpretation or the enforcement thereof; failure to
maintain sufficient amounts or types of regulatory capital or other restrictions
on the use of our working capital to meet the changing requirements of our
regulators worldwide; changes in accounting standards, rules and
interpretations, or industry standards affecting our business; and (iii) other
events, such as: catastrophic events; and management's ability to identify and
manage these and other risks.

Overview

We are one of the leading providers of money transfer and payment services, operating in two lines of business:

Consumer to Consumer – Our operational consumer-to-consumer segment facilitates

money transfers, which are sent from our retail locations around the world or

via websites and mobile devices including our fast growing money transfer

transactions made and funded through websites and mobile apps

? marketed under our brands (“westernunion.com”) and transactions initiated on

websites and mobile apps hosted by our third party white label or

co-branded digital partners (with westernunion.com, “Digital Money

Transfer “). Our money transfer service is provided through a

   global network. This service is available for international cross-border
   transfers and, in certain countries, intra-country transfers.

Business Solutions – Our Business Solutions operating segment facilitates

payment and foreign exchange solutions, mainly cross-border, cross-currency

transactions, for small and medium-sized businesses and other organizations and

people. Most of the segment’s activity concerns the exchange of

? currency at spot rates, which allows customers to make cross currency payments.

In addition, in some countries we sell currency futures and options

contracts for customers to facilitate future payments. At August 4, 2021, we

has entered into an agreement to sell our Business Solutions activity to Goldfinch

SARL partners and The Baupost Group, as described in more detail below.



All businesses and other services that have not been classified in the above
segments are reported as Other, which primarily includes our bill payment
services which facilitate payments from consumers to businesses and other
organizations and our money order services. Our other services, in addition to
certain corporate costs such as costs related to strategic initiatives,
including costs for the review and closing of mergers, acquisitions, and
divestitures, are also included in Other. Additional information on our segments
is provided in the Segment Discussion below.





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Results of Operations

The following discussion of our consolidated results of operations and segment
results refers to the three and nine months ended September 30, 2021 compared to
the same periods in 2020. The results of operations should be read in
conjunction with the discussion of our segment results of operations, which
provide more detailed discussions concerning certain components of the Condensed
Consolidated Statements of Income. All significant intercompany accounts and
transactions between our segments have been eliminated. The below information
has been prepared in conformity with generally accepted accounting principles in
the United States of America ("GAAP") unless otherwise noted. All amounts
provided in this section are rounded to the nearest tenth of a million, except
as otherwise noted. As a result, the percentage changes and margins disclosed
herein may not recalculate precisely using the rounded amounts provided.

In March 2020, the World Health Organization declared the outbreak associated
with a novel coronavirus a pandemic ("COVID-19"), and governments throughout the
world instituted various actions such as lockdowns, stay-at-home orders, travel
restrictions, and closures of non-essential businesses in an effort to reduce
the spread of COVID-19. These actions negatively impacted both the demand for
and our ability to offer our retail services, primarily in 2020, through a
portion of our locations and our agent locations. However, since March 2020, we
have also experienced significant revenue growth from westernunion.com and other
digital transactions, as further described below. The duration and severity of
the pandemic as well as the responses of government authorities to the pandemic,
the macro economic consequences, and the impacts on consumer behavior are
uncertain. We expect that our consolidated and segment results will continue to
be impacted as long as such factors persist.

Our revenues and operating income for the three and nine months ended
September 30, 2021 were impacted by fluctuations in the United States dollar
compared to foreign currencies. Fluctuations in the United States dollar
compared to foreign currencies, net of the impact of foreign currency hedges,
resulted in an increase to revenues of $2.8 million and $33.1 million for the
three and nine months ended September 30, 2021, respectively, relative to the
corresponding periods in the prior year. Fluctuations in the United States
dollar compared to foreign currencies positively impacted operating income by
$4.4 million and $24.0 million for the three and nine months ended
September 30, 2021, respectively, relative to the corresponding periods in the
prior year.

On August 4, 2021, we entered into an agreement to sell our Business Solutions
business, as described above, to Goldfinch Partners LLC and The Baupost Group
for cash consideration of $910 million, subject to regulatory and working
capital adjustments. The divestiture is expected to result in a gain on the sale
and is subject to regulatory approval and other closing conditions. The sale is
expected to be completed in two closings, with the entirety of the cash
consideration due at the first closing. The first closing is expected to be
completed during the first quarter of 2022 and to exclude the operations in the
European Union and the United Kingdom. The second closing, comprised of the
operations in the European Union and the United Kingdom, is currently expected
by late 2022. Business Solutions revenues were $116.8 million and $89.1 million
for the three months ended September 30, 2021 and 2020, respectively, and $312.6
million and $266.9 million for the nine months ended September 30, 2021 and
2020, respectively. Business Solutions direct operating expenses, which exclude
corporate allocations, were $77.1 million and $77.0 million for the three months
ended September 30, 2021 and 2020, respectively, and $244.5 million and $233.3
million for the nine months ended September 30, 2021 and 2020, respectively.
Operating costs directly associated with this divestiture and incurred through
the three and nine months ended September 30, 2021 were $5.2 million and $10.7
million, respectively.



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The following table presents our consolidated operating results for the three and nine months ended. September 30, 2021 and 2020:




                                              Three Months Ended September 30,             Nine Months Ended September 30,
(in millions, except per share amounts)        2021            2020       %
Change         2021            2020       % Change
Revenues                                   $    1,286.3     $  1,258.5           2 %    $   3,786.0     $  3,563.2           6 %
Expenses:
Cost of services                                  720.1          721.7           0 %        2,181.1        2,067.3           6 %
Selling, general, and administrative              247.6          251.6     
   (2) %          798.6          755.7           6 %
Total expenses                                    967.7          973.3         (1) %        2,979.7        2,823.0           6 %
Operating income                                  318.6          285.2          12 %          806.3          740.2           9 %
Other income/(expense):
Interest income                                     0.4            0.5        (21) %            1.1            2.9        (62) %
Interest expense                                 (25.7)         (28.2)         (9) %         (79.7)         (90.4)        (12) %
Other income/(expense), net                       (1.8)            3.5         (a)             26.8            3.4         (a)
Total other expense, net                         (27.1)         (24.2)          11 %         (51.8)         (84.1)        (38) %
Income before income taxes                        291.5          261.0          12 %          754.5          656.1          15 %
Provision for income taxes                         58.8           32.4          81 %          117.5           88.9          32 %
Net income                                 $      232.7     $    228.6           2 %    $     637.0     $    567.2          12 %
Earnings per share:
Basic                                      $       0.57     $     0.56           2 %    $      1.56     $     1.38          13 %
Diluted                                    $       0.57     $     0.55           4 %    $      1.55     $     1.37          13 %
Weighted-average shares outstanding:
Basic                                             406.3          411.6                        409.1          412.5
Diluted                                           408.0          414.6                        411.3          415.5

(a) Calculation not significant.




Revenues Overview



Revenues are primarily derived from consideration paid by customers to transfer
money. These revenues vary by transaction based upon factors such as channel,
send and receive locations, the principal amount sent, whether the money
transfer involves different send and receive currencies, the difference between
the exchange rate we set to the customer and the rate available in the wholesale
foreign exchange market, and speed of service, as applicable. We also offer
several other services, including foreign exchange and payment services and
other bill payment services, for which revenue is impacted by similar factors.



Due to the significance of the effect that foreign exchange fluctuations against
the United States dollar can have on our reported revenues and the significance
of our Consumer-to-Consumer segment to our overall results, constant currency
results have been provided in the table below for consolidated revenues and for
our Consumer-to-Consumer segment revenues. Constant currency results assume
foreign revenues are translated from foreign currencies to the United States
dollar, net of the effect of foreign currency hedges, at rates consistent with
those in the same period of the prior year. Constant currency measures are
non-GAAP financial measures and are provided so that revenue can be viewed
without the effect of fluctuations in foreign currency exchange rates, which is
consistent with how management evaluates our revenue results and trends. We
believe that these measures provide management and investors with information
about revenue results and trends that eliminates currency volatility, thereby
providing greater clarity regarding, and increasing the comparability of, our
underlying results and trends. These disclosures are provided in addition to,
and not as a substitute for, the percentage change in revenue on a GAAP basis
for the three and nine months ended September 30, 2021 compared to the
corresponding periods in the prior year. Other companies may calculate and
define similarly labeled items differently, which may limit the usefulness of
this measure for comparative purposes.

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The following table presents our consolidated revenue results for the three and nine months ended. September 30, 2021 and 2020:



                                          Three Months Ended September 30,           Nine Months Ended September 30,
(dollars in millions)                      2021            2020       % Change       2021            2020       % Change
Revenues, as reported - (GAAP)         $    1,286.3     $  1,258.5           2 %  $   3,786.0     $  3,563.2           6 %
Foreign currency impact (a)                                                  0 %                                     (1) %
Revenue change, constant currency
adjusted - (Non-GAAP)                                                        2 %                                       5 %


Fluctuations of United States dollar against foreign currencies, net

of the impact of currency hedges, resulted in an increase in turnover (a) of $ 2.8 million and $ 33.1 million for the three and nine months ended

September 30, 2021, respectively, against the exchange rates in

    the corresponding periods in the prior year.



For the three and nine months ended September 30, 2021, revenues increased 2%
and 6%, respectively, when compared to corresponding periods in the prior year,
primarily due to continued recovery from the negative impacts of COVID-19 on our
prior year results as previously discussed above, including revenue growth from
our Business Solutions segment. For the three and nine months ended
September 30, 2021, transactions and revenues from our Digital Money Transfer
services, including from white label partnerships, continued to grow. We believe
that our growth in Digital Money Transfer transactions for the nine months ended
September 30, 2021 was due, in part, to shifts in consumer behavior to send
money through digital channels, including as a result of COVID-19. However, this
growth rate began to decelerate in the second quarter of 2021 and has continued
to decelerate into the third quarter as a result of the strong growth in Digital
Money Transfer transactions we experienced in the corresponding periods in the
prior year. Fluctuations in the exchange rates between the United States dollar
and foreign currencies positively impacted revenue by 1% for the nine months
ended September 30, 2021, compared to the corresponding period in the
prior year.



Operating Expenses Overview


Improved regulatory compliance




The financial services industry, including money services businesses, continues
to be subject to increasingly strict legal and regulatory requirements, and we
continue to focus on and regularly review our compliance programs. In connection
with these reviews, and in light of growing and rapidly evolving regulatory
complexity and heightened attention of, and increased dialogue with,
governmental and regulatory authorities related to our compliance activities, we
have made, and continue to make, enhancements to our processes and systems
designed to detect and prevent money laundering, terrorist financing, and fraud
and other illicit activity, and enhancements designed to improve consumer
protection. Some of these changes have had, and we believe will continue to
have, an adverse effect on our business, financial condition, and results of
operations.


Restructuring expenses




On August 1, 2019, our Board of Directors approved a plan to change our
operating model and improve our business processes and cost structure by
reorganizing our senior management, including those managers reporting to our
chief executive officer, reducing our headcount, and consolidating various
facilities. We incurred approximately $150 million of total expenses through
December 31, 2020, with approximately $110 million related to severance and
employee-related benefits and approximately $40 million related to costs
associated with the relocation of various operations to other Company
facilities, facility closures, lease terminations, consulting, and other
expenses. As of December 31, 2020, all expenses associated with this plan have
been incurred and substantially all have been paid in cash. In 2020, the plan
generated expense savings of more than $50 million. For 2021, we continue to
expect the plan to generate expense savings of approximately $100 million,
compared to our operating model in effect prior to this plan, which is our
estimate and subject to change.



For the three and nine months ended September 30, 2020, we incurred $9.1 million
and $24.8 million, respectively, of expenses related to this plan. For the three
and nine months ended September 30, 2020, $0.8 million and $2.5 million,

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respectively, of these expenses have been included in the cost of services, and $ 8.3 million and $ 22.3 million, respectively, these expenses have been included in Sales, general and administrative expenses in the condensed consolidated statements of earnings.

These expenses are specific to this initiative; however, the types of expenses associated with this initiative are similar to expenses we have already incurred and can reasonably expect to incur in the future.



Cost of Services


Cost of services primarily consists of agent commissions, which represented
approximately 60% of total cost of services for both the three and nine months
ended September 30, 2021. For the three months ended September 30, 2021, cost of
services was flat compared to the corresponding period in the prior year.
Decreases in agent commissions in our Consumer-to-Consumer money transfer
business were offset by increases in information technology costs and bank fees
associated with digital transactions. For the nine months ended September 30,
2021 compared to the corresponding period in the prior year, cost of services
increased primarily due to increases in information technology costs, agent
commissions in our Consumer-to-Consumer money transfer business, and bank fees
associated with digital transactions.



Selling, general and administrative expenses

Selling, general and administrative expenses decreased for the three months
ended September 30, 2021 compared to the corresponding period in the prior year
primarily due to a reduction in marketing costs. Selling, general, and
administrative expenses increased for the nine months ended September 30, 2021
compared to the corresponding period in the prior year due to increases in
employee-related expenses, including incentive compensation and as a result of
reduced hiring that we implemented in response to COVID-19 in the prior period,
marketing costs, and costs related to strategic initiatives, including for the
review of mergers, acquisitions, and divestitures, partially offset by a
reduction in restructuring-related expenses and fluctuations between the United
States dollar and foreign currencies.



Total Other Expense, Net



Total other expense, net during the nine months ended September 30, 2021 when
compared to the corresponding periods in the prior year benefited from a $47.9
million gain recorded from the sale of a substantial majority of the
noncontrolling interest we held in a private company for cash proceeds of $50.9
million, partially offset by costs associated with the repayment of our 3.6%
unsecured notes due in 2022. Total other expense, net for the three and nine
months ended September 30, 2021 compared to the corresponding periods in the
prior year benefited from a reduction in interest expense driven by lower
average debt balances outstanding and a lower weighted-average interest rate on
our outstanding debt.



On July 22, 2021, our Board of Directors approved a plan to terminate and settle
our frozen defined benefit pension plan, which was in an overfunded position as
of September 30, 2021 and December 31, 2020. Upon termination and settlement,
which is expected in the fourth quarter of 2021 and subject to required notices,
filings, and reviews, the pre-tax balance in Accumulated other comprehensive
loss associated with the defined benefit pension plan, along with any related
costs of the settlement, will be recorded as a component of Total other expense,
net, with the related income tax effects recorded in Provision for income taxes,
in the Condensed Consolidated Statements of Income.



Income Taxes



Our provision for income taxes for the three and nine months ended
September 30, 2021 and 2020 is based on the estimated annual effective tax rate,
in addition to discrete items. Our effective tax rates on pre-tax income were
20.2% and 12.4% for the three months ended September 30, 2021 and 2020,
respectively, and 15.6% and 13.5% for the nine months ended September 30, 2021
and 2020, respectively. The increase in our effective tax rate for the three and
nine months ended September 30, 2021 compared to the corresponding periods in
the prior year was primarily due to increased deferred tax expense arising from
changes to certain of our permanent reinvestment assertions related to our
decision to classify our Business Solutions business as held for sale in the
current period.



We have established contingency reserves for a variety of material, known tax
exposures. As of September 30, 2021, the total amount of tax contingency
reserves was $315.3 million, including accrued interest and penalties, net
of
related

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items. Our tax reserves reflect our judgment as to the resolution of the issues
involved if subject to judicial review or other settlement. While we believe
that our reserves are adequate to cover reasonably expected tax risks, there can
be no assurance that, in all instances, an issue raised by a tax authority will
be resolved at a financial cost that does not exceed our related reserve. With
respect to these reserves, our income tax expense would include: (i) any changes
in tax reserves arising from material changes in facts and circumstances (i.e.,
new information) surrounding a tax issue during the period, and (ii) any
difference from our tax position as recorded in the financial statements and the
final resolution of a tax issue during the period. Such resolution could
materially increase or decrease income tax expense in our consolidated financial
statements in future periods and could impact our operating cash flows.



Earnings Per Share



During the three months ended September 30, 2021 and 2020, basic earnings per
share were $0.57 and $0.56, respectively, and diluted earnings per share were
$0.57 and $0.55, respectively. During the nine months ended September 30, 2021
and 2020, basic earnings per share were $1.56 and $1.38, respectively, and
diluted earnings per share were $1.55 and $1.37, respectively. Outstanding
options to purchase Western Union stock and unvested shares of restricted stock
are excluded from basic shares outstanding. Diluted earnings per share reflects
the potential dilution that could occur if outstanding stock options at the
presented dates are exercised and shares of restricted stock have vested. For
the three months ended September 30, 2021 and 2020, there were 2.2 million and
1.3 million, respectively, and for both the nine months ended September 30, 2021
and 2020, there were 1.7 million of shares excluded from the diluted earnings
per share calculation under the treasury stock method, primarily due to
outstanding restricted stock units and options to purchase shares of Western
Union stock, as the assumed proceeds of the restricted stock and options per
unit were above our weighted-average share price during the periods and their
effect was anti-dilutive.



Earnings per share for both the three and nine months ended September 30, 2021
compared to the corresponding periods in the prior year were impacted by the
previously described factors impacting net income and a lower number of shares
outstanding. The lower number of shares outstanding is due to stock repurchases
exceeding stock issuances related to our stock compensation programs.



Segment Discussion


We manage our business around the consumers and businesses we serve and the
types of services we offer. Each of our segments addresses a different
combination of consumer groups, distribution networks, and services offered. Our
segments are Consumer-to-Consumer and Business Solutions. On August 4, 2021, we
entered into an agreement to sell our Business Solutions business to Goldfinch
Partners LLC and The Baupost Group, as further described above.



During the three and nine months ended September 30, 2020 we incurred $9.1
million and $24.8 million, respectively, of restructuring-related expenses, as
further discussed above. While certain of these expenses may be identifiable to
our segments, primarily to our Consumer-to-Consumer segment, they have been
excluded from the measurement of segment operating income provided to the Chief
Operating Decision Maker for purposes of assessing segment performance and
decision making with respect to resource allocation.



The following table presents the components of segment revenues as a percentage of the consolidated totals for the three and nine months ended.
September 30, 2021 and 2020:




                          Three Months Ended       Nine Months Ended
                            September 30,            September 30,
                          2021          2020       2021         2020
Consumer-to-Consumer          86 %          88 %       87 %         87 %
Business Solutions             9 %           7 %        8 %          7 %
Other                          5 %           5 %        5 %          6 %
                             100 %         100 %      100 %        100 %




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Consumer-to-consumer segment

The following table presents the operating results of our consumer-to-consumer segment for the three and nine months ended. September 30, 2021 and 2020:



                                             Three Months Ended September 30,             Nine Months Ended September 30,
(dollars and transactions in millions)        2021            2020       % Change         2021            2020       % Change
Revenues                                  $    1,104.5     $  1,106.5           0 %    $   3,282.5     $  3,098.5           6 %
Operating income                          $      268.2     $    272.4         (2) %    $     708.1     $    695.1           2 %
Operating income margin                             24 %           25 %                         22 %           22 %
Key indicator:
Consumer-to-Consumer transactions                 76.6           77.3      
  (1) %          227.6          212.1           7 %



Our Consumer-to-Consumer money transfer service facilitates money transfers sent
from our retail agent locations worldwide and our Digital Money Transfer
services. The segment includes five geographic regions whose functions are
primarily related to generating, managing, and maintaining agent relationships
and localized marketing activities. We include Digital Money Transfer
transactions in our regions, including transactions from our arrangements with
financial institutions and other third parties to enable such entities to offer
money transfer services to their own customers under their brands. By means of
common processes and systems, these regions, including Digital Money Transfer
transactions, create one interconnected global network for consumer
transactions, thereby constituting one Consumer-to-Consumer money transfer
business and one operating segment.

Transaction volume is the primary generator of revenue in our
Consumer-to-Consumer segment. A Consumer-to-Consumer transaction constitutes the
transfer of funds to a designated recipient utilizing one of our consumer money
transfer services. The geographic split for transactions and revenue in the
table that follows, including Digital Money Transfer transactions, is determined
based upon the region where the money transfer is initiated. Included in each
region's transaction and revenue percentages in the tables below are Digital
Money Transfer transactions for the three and nine months ended
September 30, 2021 and 2020. Where reported separately in the discussion below,
Digital Money Transfer, and its subset westernunion.com, consist of 100% of the
transactions conducted and funded through those respective channels.

The table below sets forth revenue and transaction changes by geographic region
compared to the same period in the prior year. Consumer-to-Consumer segment
constant currency revenue growth/(decline) is a non-GAAP financial measure, as
further discussed in Revenues Overview above.

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                                      Three Months Ended September 30, 2021                                 Nine Months Ended September 30, 2021
                          Revenue                              Constant                                                           Constant
                     Growth/(Decline),      Foreign            Currency                             Revenue         Foreign       Currency
                            as             Exchange             Revenue           Transaction       Growth         Exchange        Revenue      Transaction
                        Reported -        Translation   

Growth / (Decline) (a) – Growth / as presented – Conversion Growth (a) – Growth /

                          (GAAP)            Impact            (Non-GAAP)           (Decline)        (GAAP)          Impact       (Non-GAAP)      (Decline)
Consumer-to-Consumer
regional
growth/(decline):
North America
(United States &
Canada) ("NA")                     (2) %            0 %                    (2) %          (5) %              1 %            0 %            1 %            0 %
Europe and
Russia/CIS ("EU &
CIS")                              (3) %            2 %                    (5) %            3 %              7 %            4 %            3 %           18 %
Middle East, Africa,
and South Asia
("MEASA")                          (2) %            0 %                    (2) %            2 %              5 %            0 %            5 %           12 %
Latin America and
the Caribbean
("LACA")                            25 %          (1) %                     26 %           10 %             28 %          (2) %           30 %           12 %
East Asia and
Oceania ("APAC")                     1 %            2 %                    (1) %         (13) %              9 %            5 %            4 %          (5) %
Total
Consumer-to-Consumer
growth:                              0 %            1 %                    (1) %          (1) %              6 %            2 %            4 %            7 %

Digital Money
Transfer(b)                         15 %            1 %                     14 %           19 %             25 %            1 %           24 %           38 %
westernunion.com(b)                 12 %            1 %                     11 %            9 %             21 %            1 %           20 %           24 %



Income growth in constant currencies assumes that income denominated in foreign currencies (a) is converted into United States dollar, net of the effect of

currency hedges, at rates consistent with those of

previous period.

Revenue from digital money transfer has been included in the above regions. As (b) stated above, westernunion.com is a subset of Digital Money Transfer and is

included in regions and digital money transfer revenues.



The table below sets forth regional revenues as a percentage of our
Consumer-to-Consumer revenue for the three and nine months ended
September 30, 2021 and 2020:


                                                         Three Months Ended       Nine Months Ended
                                                           September 30,            September 30,
                                                         2021          2020       2021         2020
Consumer-to-Consumer revenue as a percentage of
segment revenue:
NA                                                           37 %          38 %       37 %         39 %
EU & CIS                                                     32 %          33 %       33 %         32 %
MEASA                                                        15 %          16 %       15 %         16 %
LACA                                                          9 %           7 %        9 %          7 %
APAC                                                          7 %           6 %        6 %          6 %




Digital Money Transfer, which is included in the regional percentages above,
represented approximately 24% and 21% of our Consumer-to-Consumer revenues for
the three months ended September 30, 2021 and 2020, respectively, and 24% and
20% for the nine months ended September 30, 2021 and 2020, respectively.

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Our consumers transferred $27.7 billion and $26.9 billion in
Consumer-to-Consumer principal for the three months ended September 30, 2021 and
2020, of which $26.5 billion and $25.5 billion related to cross-border principal
for the same corresponding periods described above, respectively. Our consumers
transferred $81.3 billion and $69.4 billion in Consumer-to-Consumer principal
for the nine months ended September 30, 2021 and 2020, of which $77.6 billion
and $65.3 billion related to cross-border principal for the same corresponding
periods described above, respectively. The increase in principal and
cross-border principal transferred during the three and nine months ended
September 30, 2021 compared to the corresponding periods in the prior year was
primarily attributable to growth in Digital Money Transfer. Consumer-to-Consumer
principal is the amount of consumer funds transferred to the designated
recipient. Cross-border principal is the amount of consumer funds transferred to
a designated recipient in a country or territory that differs from the country
or territory from which the transaction was initiated. Consumer-to-Consumer
principal and cross-border principal are metrics used by management to monitor
and better understand the growth in our underlying business relative to
competitors, as well as changes in our market share of global remittances.

Income


Consumer-to-Consumer money transfer revenue was flat and transactions decreased
1% for the three months ended September 30, 2021, and revenue increased 6% and
transactions increased 7% for the nine months ended September 30, 2021 compared
to the corresponding periods in the prior year. For the nine months ended
September 30, 2021, revenues increased when compared to corresponding periods in
the prior year, primarily due to continued recovery from the negative impacts of
COVID-19 on our prior year results as previously discussed above. For the three
and nine months ended September 30, 2021, transactions and revenues from our
Digital Money Transfer services, including from white label partnerships,
continued to grow. We believe that our growth in Digital Money Transfer
transactions for the nine months ended September 30, 2021 was due, in part, to
shifts in consumer behavior to send money through digital channels, including as
a result of COVID-19. However, this growth rate began to decelerate in the
second quarter of 2021 and has continued to decelerate into the third quarter as
a result of the strong growth in Digital Money Transfer transactions we
experienced in the corresponding periods in the prior year. Fluctuations in the
United States dollar compared to foreign currencies, net of the impact of
foreign currency hedges, positively impacted revenue by 1% and 2% for the three
and nine months ended September 30, 2021 compared to the corresponding periods
in the prior year.

NA region revenue decreased for the three months ended September 30, 2021
compared to the corresponding period in the prior year, primarily due to a
decline in cross-border transaction growth, including transactions sent from the
United States to Cuba, as these money transfer services were suspended in the
fourth quarter of 2020, and transactions sent and received within the United
States. For the three months ended September 30, 2021 compared to the
corresponding period in the prior year, the EU & CIS region experienced
transaction volume and revenue declines from our retail services, partially
offset by revenue growth in Russia, and transaction volumes for both the EU &
CIS and MEASA regions continued to benefit from growth in Digital Money
Transfer, including white label partnerships, for both the three and nine months
ended September 30, 2021. The revenue growth in the LACA region was primarily
due to an increase in principal transferred during the three and nine months
ended September 30, 2021 compared to the corresponding periods in the prior
year, including due to the prolonged negative impacts of COVID-19 in this
region, including retail agent location closures, during the prior periods.
Price increases in APAC were offset by transaction declines for the three and
nine months ended September 30, 2021. Digital Money Transfer revenue, including
westernunion.com, increased during the three and nine months ended
September 30, 2021 compared to the corresponding periods in the prior year due
to an increase in digital transaction volumes, partially offset by price
reductions in the nine months ended September 30, 2021.

We have historically implemented price reductions or price increases throughout
many of our global corridors. We will likely continue to implement price changes
from time to time in response to competition and other factors. Price reductions
generally reduce margins and adversely affect financial results in the short
term and may also adversely affect financial results in the long term if
transaction volumes do not increase sufficiently. Price increases may adversely
affect transaction volumes, as consumers may not use our services if we fail to
price them appropriately.

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Operating Income

Consumer-to-Consumer operating income decreased 2% for the three months ended
September 30, 2021 compared to the corresponding period in the prior year
primarily due to increases in information technology costs, partially offset by
a decrease in agent commissions. Consumer-to-Consumer operating income increased
2% for the nine months ended September 30, 2021, compared to the corresponding
period in the prior year primarily due to the increase in revenues, as discussed
above, and fluctuations in the United States dollar compared to foreign
currencies, partially offset by increases in information technology costs,
employee-related expenses, including incentive compensation and as a result of
reduced hiring that we implemented in response to COVID-19 in the prior year
period, and marketing costs.



Business Solutions

The following table presents the operating results of our Business Solutions segment for the three and nine months ended. September 30, 2021 and 2020:



                                            Three Months Ended September 30,               Nine Months Ended September 30,
(dollars in millions)                      2021           2020          % Change           2021           2020        % Change
Revenues                                $     116.8     $    89.1               31 %    $    312.6     $    266.9           17 %
Operating income                        $      38.4     $     9.4              (a)      $     61.9     $     24.6          (a)
Operating income margin                          33 %          11 %                             20 %            9 %





(a) Calculation not significant.




Revenues



Business Solutions revenue increased 31% and 17% for the three and nine months
ended September 30, 2021, respectively, compared to the corresponding periods in
the prior year primarily due to an increase in payment services activity in
Europe and North America, and increased hedging activity. We believe this
increase was due, in part, to the continued recovery from the downturn in
economic activity and trade caused by the negative impacts of COVID-19 on our
prior year results. Fluctuations in the exchange rates between the United States
dollar and foreign currencies positively impacted revenue by 3% and 6% for the
three and nine months ended September 30, 2021.



Operating Income


For the three and nine months ended September 30, 2021, the increase in operating profit and operating profit margin compared to the corresponding periods of the previous year is mainly due to the increase in revenues, as indicated above, and to a reduction in expenses of ‘amortization. The operating result was negatively impacted by an increase in personnel expenses, notably due to the reduction in hiring that we implemented in response to COVID-19 during periods of the previous year.



Other


Other mainly consists of our cash bill payment business in Argentina
and United States, in addition to our money order services.




The following table sets forth Other results for the three and nine months ended
September 30, 2021 and 2020:


                                           Three Months Ended September 30,              Nine Months Ended September 30,
(dollars in millions)                     2021          2020          % Change           2021           2020        % Change
Revenues                                $    65.0     $    62.9                3 %    $    190.9     $    197.8          (4) %
Operating income                        $    12.0     $    12.5              (6) %    $     36.3     $     45.3         (20) %
Operating income margin                        18 %          20 %                             19 %           23 %






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Revenues


For the three months ended September 30, 2021 compared to the corresponding
period in the prior year, Other revenues increased due to an increase in
transaction volumes in our cash-based bill payments services offered at retail
locations, in part due to continued recovery from the negative impacts of
COVID-19 on our prior year results as previously discussed above, partially
offset by the strengthening of the United States dollar against the Argentine
peso. For the nine months ended September 30, 2021 compared to the corresponding
period in the prior year, Other revenues decreased due to the strengthening of
the United States dollar against the Argentine peso, partially offset by the
increase in transaction volumes in our cash-based bill payment services offered
at retail locations.



Operating Income



Other operating income decreased for both the three and nine months ended
September 30, 2021 compared to the corresponding periods in the prior year
primarily due to an increase in costs associated with strategic initiatives,
including for the review of mergers, acquisitions, and divestitures. For the
three months ended September 30, 2021, Other operating income also benefited
from an increase in revenues, as discussed above.

Capital resources and liquidity

Our primary source of liquidity has been cash generated from our operating
activities, primarily from net income and fluctuations in working capital. Our
working capital is affected by the timing of payments for employee and agent
incentives, interest payments on our outstanding borrowings and timing of income
tax payments, among other items. Many of our annual employee incentive
compensation and agent incentive payments are made in the first quarter
following the year they were incurred. The majority of our interest payments are
due in the second and fourth quarters. The annual payments resulting from the
United States tax reform legislation enacted in 2017 (the "Tax Act") include
amounts related to the United States taxation of certain previously
undistributed earnings of foreign subsidiaries. These payments are typically due
in the second quarter of each year through 2025.

Our future cash flows could be impacted by a variety of factors, some of which
are out of our control. These factors include, but are not limited to, changes
in economic conditions, especially those impacting migrant populations and
including as a result of COVID-19 related impacts, changes in income tax laws or
the status of income tax audits, including the resolution of outstanding tax
matters, and the settlement or resolution of legal contingencies.

Substantially all of our cash flows from operating activities have been
generated from subsidiaries. Most of these cash flows are generated from our
regulated subsidiaries. Our regulated subsidiaries may transfer all excess cash
to the parent company for general corporate use, except for assets subject to
legal or regulatory restrictions, including: (i) requirements to maintain cash
and other qualifying investment balances, free of any liens or other
encumbrances, related to the payment of certain of our money transfer and other
payment obligations, (ii) other legal or regulatory restrictions, including
statutory or formalized minimum net worth requirements, and (iii) restrictions
on transferring assets outside of the countries where these assets are located.

We currently believe we have adequate liquidity to meet our business needs,
including payments under our debt and other obligations, through our existing
cash balances, our ability to generate cash flows through operations, and our
$1.5 billion revolving credit facility ("Revolving Credit Facility"), which
expires in January 2025 and supports our commercial paper program. Our
commercial paper program enables us to issue unsecured commercial paper notes in
an amount not to exceed $1.5 billion outstanding at any time, reduced to the
extent of any borrowings outstanding on our Revolving Credit Facility. As of
September 30, 2021, we had no outstanding borrowings on our Revolving Credit
Facility and $120.0 million of outstanding borrowings on the commercial paper
program.

To help ensure availability of our worldwide cash where needed, we utilize a
variety of planning and financial strategies, including decisions related to the
amounts, timing, and manner by which cash is made available from our
international subsidiaries. These decisions can influence our overall tax rate
and impact our total liquidity. We regularly evaluate, taking tax consequences
and other factors into consideration, our United States cash requirements and
also the

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potential uses of international cash to determine the appropriate level of dividend repatriation from our foreign source income.

Cash and securities


As of September 30, 2021 and December 31, 2020, we had Cash and cash equivalents
of $1,046.4 million, which included $43.0 million related to Business Solutions,
and $1,428.2 million, respectively. As described in Part I, Item 1, Financial
Statements, Note 4, Assets Held for Sale and Investment Activities, we have
agreed to sell our Business Solutions business. We expect that our use of the
net proceeds on the sale, after taxes on the gain from the transaction, will be
consistent with our objective to maintain strong liquidity and a capital
structure consistent with investment-grade credit ratings, as further described
below. In many cases, we receive funds from money transfers and certain other
payment services before we settle the payment of those transactions. These
funds, referred to as Settlement assets on our Condensed Consolidated Balance
Sheets, are not used to support our operations. However, we earn income from
investing these funds. We maintain a portion of these settlement assets in
highly liquid investments, classified as Cash and cash equivalents within
Settlement assets, to fund settlement obligations.

Investment securities, classified within Settlement assets on the Condensed
Consolidated Balance Sheets, were $1,437.9 million and $1,990.6 million as of
September 30, 2021 and December 31, 2020, respectively, and consist primarily of
highly-rated state and municipal debt securities, including fixed-rate term
notes and variable-rate demand notes. The substantial majority of our investment
securities are held in order to comply with state licensing requirements in the
United States and are required to have credit ratings of "A-" or better from a
major credit rating agency.

Investment securities are exposed to market risk due to changes in interest
rates and credit risk. We regularly monitor credit risk and attempt to mitigate
our exposure by investing in highly-rated securities and diversifying our
investment portfolio. Our investment securities are also actively managed with
respect to concentration. As of September 30, 2021, all investments with a
single issuer and each individual security represented less than 10% of our
investment securities portfolio.

Cash flow from operating activities


Cash provided by operating activities increased to $686.0 million during the
nine months ended September 30, 2021, from $585.6 million in the corresponding
period in the prior year. Cash provided by operating activities can be impacted
by changes to our consolidated net income, in addition to fluctuations in our
working capital balances, among other factors.

Funding resources

On March 9, 2021, we issued $600.0 million and $300.0 million of aggregate
principal amount of 1.350% and 2.750% unsecured notes due March 15, 2026 ("2026
Notes") and March 15, 2031 ("2031 Notes"), respectively. Interest with respect
to these notes is payable semi-annually in arrears on March 15 and September 15
of each year, beginning on September 15, 2021. If a change of control triggering
event occurs, holders of the 2026 Notes and 2031 Notes may require us to
repurchase some or all of their notes at a price equal to 101% of the principal
amount of their notes, plus any accrued and unpaid interest. We may redeem the
2026 Notes and the 2031 Notes, in whole or in part, at any time prior to
February 15, 2026 and December 15, 2030, respectively, at the greater of par or
a price based on the applicable treasury rate plus 15 and 25 basis points,
respectively. We may redeem the 2026 Notes and the 2031 Notes at any time after
February 15, 2026 and December 15, 2030, respectively, at a price equal to par,
plus accrued interest.

Proceeds from the 2026 Notes and 2031 Notes and cash, including cash generated
from operations, were used to repay $650.0 million of the term loan facility in
the first quarter of 2021 and $500.0 million of the aggregate principal amount
of 3.600% unsecured notes due in March 2022 ("2022 Notes") in the second quarter
of 2021.

From September 30, 2021, we have outstanding loans at face value of
$ 2,870.0 million. The vast majority of these outstanding borrowings consist of unsecured fixed rate notes with maturities ranging from 2023 to 2040. Our borrowings also include our variable rate term loan.


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Our Revolving Credit Facility provides for unsecured financing facilities in an
aggregate amount of $1.5 billion, including a $250.0 million letter of credit
sub-facility. Interest due under the Revolving Credit Facility is fixed for the
term of each borrowing and is payable according to the terms of that borrowing.
Generally, interest is calculated using a selected LIBOR rate plus an interest
rate margin of 110 basis points. A facility fee is also payable quarterly at an
annual rate of 15 basis points on the total facility, regardless of usage. Both
the interest rate margin and facility fee percentage are based on certain of our
credit ratings.

The purpose of our Revolving Credit Facility, which is diversified through a
group of 19 participating institutions, is to provide general liquidity and to
support our commercial paper program, which we believe enhances our short-term
credit rating. The largest commitment from any single financial institution
within the total committed balance of $1.5 billion is approximately 11%. As of
September 30, 2021, we had no outstanding borrowings under our Revolving Credit
Facility. If the amount available to borrow under the Revolving Credit Facility
decreased, or if the Revolving Credit Facility were eliminated, the cost and
availability of borrowing under the commercial paper program may be impacted.

Pursuant to our commercial paper program, we may issue unsecured commercial
paper notes in an amount not to exceed $1.5 billion outstanding at any time,
reduced to the extent of borrowings outstanding on our Revolving Credit
Facility. Our commercial paper borrowings may have maturities of up to 397 days
from date of issuance. Interest rates for borrowings are based on market rates
at the time of issuance. We had $120.0 million of commercial paper borrowings
outstanding as of September 30, 2021. Our commercial paper borrowings as of
September 30, 2021 had a weighted-average annual interest rate of approximately
0.2% and a weighted-average term of approximately 1 day. During the nine months
ended September 30, 2021, the average commercial paper balance outstanding was
$141.4 million, and the maximum balance outstanding was $575.0 million. Proceeds
from our commercial paper borrowings were used for general corporate purposes
and working capital needs.

Cash Priorities

Liquidity

Our objective is to maintain strong liquidity and a capital structure consistent
with investment-grade credit ratings. We have existing cash balances, cash flows
from operating activities, access to the commercial paper markets, and our
Revolving Credit Facility available to support the needs of our business.

Our ability to grow the business, make investments in our business, make
acquisitions, return capital to shareholders, including through dividends and
share repurchases, and service our debt and tax obligations will depend on our
ability to continue to generate excess operating cash through our operating
subsidiaries and to continue to receive dividends from those operating
subsidiaries, our ability to obtain adequate financing and our ability to
identify acquisitions that align with our long-term strategy. For additional
information, please refer to Part II, Item 5, Market for Registrant's Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in
our Annual Report on Form 10-K for the year ended December 31, 2020.

Investment in Saudi digital payments company

We entered into an agreement in November 2020, and as subsequently amended, to
acquire an ownership interest in stc Bank (formerly Saudi Digital Payments
Company), a subsidiary of Saudi Telecom Company and one of our
Consumer-to-Consumer digital white label partners. Under the terms of the
amended agreement, we agreed to invest $200.0 million for a 15% investment in
stc Bank, and this transaction closed in October 2021.

Capital expenditure


The total aggregate amount paid for contract costs, purchases of property and
equipment, and purchased and developed software was $180.2 million and $106.3
million for the nine months ended September 30, 2021 and 2020, respectively.
Amounts paid for new and renewed agent contracts vary depending on the terms of
existing contracts as well as the timing of new and renewed contract signings.
Other capital expenditures during these periods included investments in our
information technology infrastructure and purchased and developed software.

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During the first quarter of 2021, we transitioned a majority of our money
transfer settlement processes to our new global platform. This project has been
and will continue to be complex, as we have defined, created, and implemented
new settlement solutions that are specific to the needs of our agents and other
partners, who span a number of countries and regulatory regimes. In future
periods, we will transition the remaining processes, primarily including money
transfers sent from the United States and Canada, to the new platform. We expect
that this will require the continued assistance of our third-party software
provider, with whom we have worked on this project over the past several years.
For further discussion of the risks associated with interruptions in our
systems, see risk factor, "Interruptions in our systems, including as a result
of cyber attacks, or disruptions in our workforce may have a significant adverse
effect on our business" in Part I, Item 1A, Risk Factors in our Annual Report on
Form 10-K for the year ended December 31, 2020.

Share buybacks and dividends


During the nine months ended September 30, 2021 and 2020, 9.6 million and 8.5
million shares were repurchased for $225.0 million and $217.4 million,
respectively, excluding commissions, at an average cost of $23.45 and $25.45,
respectively. As of September 30, 2021, $557.6 million remained available under
the share repurchase authorization approved by our Board of Directors through
December 31, 2021.

Our Board of Directors declared quarterly cash dividends of $0.235 per common
share in each of the first three quarters of 2021, representing $287.6 million
in total dividends.

Material Cash Requirements

Debt Service Requirements
Our 2021 and future debt service requirements will include payments on all
outstanding indebtedness, including any borrowings under our commercial paper
program. Our next scheduled principal payment on our outstanding notes and term
loan is in 2023.

United States Federal Tax Liability in 2017


The Tax Act imposed a tax on certain of our previously undistributed foreign
earnings. This tax charge, combined with our other 2017 United States taxable
income and tax attributes, resulted in a 2017 United States federal tax
liability of approximately $800 million, of which approximately $541 million
remained as of September 30, 2021. We have elected to pay this liability in
periodic installments through 2025. Under the terms of the law, we are required
to pay the remaining installment payments as summarized in the Capital Resources
and Liquidity discussion located in Part II, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations in our Annual Report
on Form 10-K for the year ended December 31, 2020. These payments have affected
and will continue to adversely affect our cash flows and liquidity and may
adversely affect future share repurchases.

Operating leases


We lease real properties for use as administrative and sales offices, in
addition to transportation, office, and other equipment. Refer to Part II, Item
8, Financial Statements and Supplemental Data, Note 13, Leases, in our Annual
Report on Form 10-K for the year ended December 31, 2020 for details on our
leasing arrangements, including future maturities of our operating lease
liabilities.

We have no material off-balance sheet arrangements that have or are reasonably
likely to have a material current or future effect on our financial condition,
results of operations, liquidity, capital expenditures, or capital resources.

Other commercial commitments

We had approximately $470 million in outstanding letters of credit and bank
guarantees as of September 30, 2021 primarily held in connection with
safeguarding consumer funds, lease arrangements, and certain agent agreements.
We expect to renew most of our letters of credit and bank guarantees prior
to
expiration.

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As of September 30, 2021, our total amount of unrecognized income tax benefits
was $372.4 million, including associated interest and penalties. The timing of
related cash payments for substantially all of these liabilities is inherently
uncertain because the ultimate amount and timing of such liabilities are
affected by factors which are variable and outside our control.

Critical accounting conventions and estimates


The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts and disclosures in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Our Critical Accounting Policies and Estimates disclosed in Part II,
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations in our Annual Report on Form 10-K for the year ended December 31,
2020, for which there were no material changes, included:

? Income taxes, including tax contingencies

? Derivative financial instruments


 ? Goodwill


 ? Other intangible assets


 ? Legal contingencies

In our Annual Report on Form 10-K for the year ended December 31, 2020, we
disclosed that the fair value of the Business Solutions reporting unit was
sensitive to changes in projections for revenue growth rates and Earnings before
Interest, Taxes, Depreciation, and Amortization ("EBITDA") margins, quantified
the decrease in the projected revenue growth rate that would result in the fair
value of the reporting unit approximating its carrying value, and described key
factors impacting our ability to achieve the projected revenue growth and EBITDA
margins. The reporting unit's fair value continues to be sensitive to changes in
projected revenue growth rates and EBITDA margins, which are impacted by these
same factors. As of September 30, 2021, the Business Solutions reporting unit
had goodwill of $532.0 million.

Recent accounting positions

Refer to Part I, Item 1, Financial Statements, Note 1, Business and Basis of Presentation for further discussion.

Risk management


We are exposed to market risks arising from changes in market rates and prices,
including changes in foreign currency exchange rates and interest rates and
credit risk related to our agents and customers. A risk management program is in
place to manage these risks.

Foreign currency exchange rate


We provide our services primarily through a network of agent locations in more
than 200 countries and territories. We manage foreign exchange risk through the
structure of the business and an active risk management process. We currently
settle with the substantial majority of our agents in United States dollars,
Mexican pesos, or euros, requiring those agents to obtain local currency to pay
recipients, and we generally do not rely on international currency markets to
obtain and pay illiquid currencies. However, in certain circumstances, we settle
in other currencies. The foreign currency exposure that does exist is limited by
the fact that the majority of transactions are paid by the next day after they
are initiated, and agent settlements occur within a few days in most instances.
To mitigate this risk further, we enter into short duration foreign currency
forward contracts, generally with maturities from a few days up to one month, to
offset foreign exchange rate fluctuations between transaction initiation and
settlement. We also have exposure to certain foreign currency denominated cash
and other asset and liability positions and may utilize foreign currency forward
contracts, typically with

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maturities of less than one year at inception, to offset foreign exchange rate
fluctuations on these positions. In certain consumer money transfer, bill
payment, and Business Solutions transactions involving different send and
receive currencies, we generate revenue based on the difference between the
exchange rate set by us to the consumer or business and the rate available in
the wholesale foreign exchange market, helping to provide protection against
currency fluctuations. We attempt to promptly buy and sell foreign currencies as
necessary to cover our net payables and receivables which are denominated in
foreign currencies.

We use longer-term foreign currency forward contracts to help mitigate risks
associated with changes in foreign currency exchange rates on revenues
denominated primarily in the euro, and to a lesser degree, the Canadian dollar,
the British pound, and other currencies. We use contracts with maturities of up
to 36 months at inception to mitigate some of the impact that changes in foreign
currency exchange rates could have on forecasted revenues, with a targeted
weighted-average maturity of approximately one year. We believe the use of
longer-term foreign currency forward contracts provides predictability of future
cash flows from our international operations.

We have additional foreign exchange risk and associated foreign exchange risk
management requirements due to the nature of our Business Solutions business.
The majority of this business' revenue is from exchanges of currency at spot
rates, which enable customers to make cross-currency payments. In certain
countries, this business also writes foreign currency forward and option
contracts for our customers to facilitate future payments. The majority of these
derivative contracts have a duration at inception of less than one year.
Business Solutions aggregates its foreign exchange exposures arising from
customer contracts, including the derivative contracts described above, and
hedges the resulting net currency risks by entering into offsetting contracts
with established financial institution counterparties.

As of September 30, 2021, a hypothetical uniform 10% strengthening or weakening
in the value of the United States dollar relative to all other currencies in
which our net income is generated would have resulted in a decrease/increase to
pre-tax annual income of approximately $40 million, based on our forecast of
unhedged exposure to foreign currency at that date. There are inherent
limitations in this sensitivity analysis, primarily due to the following
assumptions: (i) foreign exchange rate movements are linear and instantaneous,
(ii) fixed exchange rates between certain currency pairs are retained, (iii) the
unhedged exposure is static, and (iv) we would not hedge any additional
exposure. As a result, the analysis is unable to reflect the potential effects
of more complex market changes that could arise, which may positively or
negatively affect income.

Interest rate


We invest in several types of interest-bearing assets, with a total value as of
September 30, 2021 of approximately $2.9 billion. Approximately $1.7 billion of
these assets bear interest at floating rates. These assets primarily include
cash in banks, money market instruments, and state and municipal variable rate
securities and are included in our Condensed Consolidated Balance Sheets within
Cash and cash equivalents and Settlement assets. To the extent these assets are
held in connection with money transfers and other related payment services
awaiting redemption, they are classified as Settlement assets. Earnings on these
investments will increase and decrease with changes in the underlying short-term
interest rates.

The remainder of our interest-bearing assets primarily consists of highly-rated
state and municipal debt securities, which are fixed rate term notes. These
investments may include investments made from cash received from our money order
services, money transfer business, and other related payment services awaiting
redemption and are classified within Settlement assets in the Condensed
Consolidated Balance Sheets. As interest rates rise, the fair value of these
fixed-rate interest-bearing securities will decrease; conversely, a decrease to
interest rates would result in an increase to the fair values of the securities.
We have classified these investments as available-for-sale within Settlement
assets in the Condensed Consolidated Balance Sheets, and accordingly, recorded
these instruments at their fair value with the net unrealized gains and losses,
net of the applicable deferred income tax effect, being added to or deducted
from our Total stockholders' equity in our Condensed Consolidated Balance
Sheets.

As of September 30, 2021, we had a total of $300.0 million of borrowings under
our term loan that are subject to floating interest rates. The interest on these
borrowings is calculated using a selected LIBOR rate plus an interest rate
margin of 125 basis points. Borrowings under our commercial paper program mature
in such a short period that the

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the financing is also effectively variable rate. From September 30, 2021, there was $ 120.0 million in outstanding borrowings under our commercial paper program.


We review our overall exposure to floating and fixed rates by evaluating our net
asset or liability position and the duration of each individual position. We
manage this mix of fixed versus floating exposure in an attempt to minimize
risk, reduce costs, and improve returns. Our exposure to interest rates can be
modified by changing the mix of our interest-bearing assets as well as adjusting
the mix of fixed versus floating rate debt. The latter is accomplished primarily
through the use of interest rate swaps and the decision regarding terms of any
new debt issuances (i.e., fixed versus floating). From time to time, we use
interest rate swaps designated as hedges to vary the percentage of fixed to
floating rate debt, subject to market conditions. As of September 30, 2021, our
weighted-average effective rate on total borrowings was approximately 3.4%. For
further detail on our variable rate borrowings, see risk factor "We have
substantial debt and other obligations that could restrict our operations" in
Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year
ended December 31, 2020.

At September 30, 2021, a hypothetical 100 basis point increase/decrease in
interest rates would result in a decrease/increase to pre-tax income for the
next twelve months of approximately $4 million based on borrowings that are
sensitive to interest rate fluctuations, net of the impact of hedges. The same
100 basis point increase/decrease in interest rates, if applied to our cash and
investment balances on September 30, 2021 that bear interest at floating rates,
would result in an offsetting increase/decrease to pre-tax income for the next
twelve months of approximately $17 million. There are inherent limitations in
the sensitivity analysis presented, primarily due to the assumptions that
interest rate changes would be instantaneous and consistent across all
geographies in which our interest-bearing assets are held and our liabilities
are payable. As a result, the analysis is unable to reflect the potential
effects of more complex market changes, including changes in credit risk
regarding our investments, which may positively or negatively affect income. In
addition, the mix of fixed versus floating rate debt and investments and the
level of assets and liabilities will change over time, including the impact from
commercial paper borrowings that may be outstanding in future periods.

Credit risk


To manage our exposures to credit risk with respect to investment securities,
money market fund investments, derivatives, and other credit risk exposures
resulting from our relationships with banks and financial institutions, we
regularly review investment concentrations, trading levels, credit spreads, and
credit ratings, and we attempt to diversify our investments among global
financial institutions.

We are also exposed to credit risk related to receivable balances from agents in
the money transfer, walk-in bill payment, and money order settlement process. We
perform a credit review before each agent signing and conduct periodic analyses
of agents and certain other parties we transact with directly. In addition, we
are exposed to losses directly from consumer transactions, particularly through
our digital channels, where transactions are originated through means other than
cash and are therefore subject to "chargebacks," insufficient funds or other
collection impediments, such as fraud, which are anticipated to increase as
digital channels become a greater proportion of our money transfer business.

We are exposed to credit risk in our Business Solutions business relating to:
(i) derivatives written by us, primarily to our customers, and (ii) the
extension of trade credit when transactions are paid to recipients prior to our
receiving cleared funds from the sending customers. For the derivatives, the
duration of these contracts at inception is generally less than one year. The
credit risk associated with our derivative contracts increases when foreign
currency exchange rates move against our customers, possibly impacting their
ability to honor their obligations to deliver currency to us or to maintain
appropriate collateral with us. For those receivables where we have extended
trade credit, collection ordinarily occurs within a few days. To mitigate the
risk associated with potential customer defaults, we perform credit reviews of
the customer on an ongoing basis, and, for our derivatives, we may require
certain customers to post or increase collateral.

Our losses represented approximately 2% or less of our consolidated revenues for all periods presented.


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