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WTW ANNOUNCES 1Q2022 EARNINGS

Willis Towers Watson Public Limited Company (NYSE: WTW) reported 1Q22 results today with adjusted Earnings Per Share (EPS) of $2.66 on revenue of $2.16 billion. This compares to 4Q21 results of $5.67 in adjusted EPS and $2.71 billion in revenue.

Effective January 1, 2022, WTW announced it would streamline its structure by changing from four segments to two. There are now just two segments: Health, Wealth & Career (HWC) and Risk & Broking (R&B). This is intended to increase agility and effectiveness.

Here are the notable takeaways from WTW’s first quarter earnings:

  • WTW reported organic revenue growth of 2% in 1Q22 with an adjusted operating margin of 17.2%. WTW leadership saw the first quarter as a solid start to the year, with results in line with their expectations, with growth and margin improvement driven by new business generation and continued expense discipline.
  • On March 13, 2022, WTW announced it was withdrawing from all its businesses in Russia. Ownership was transferred to local management to operate independently in the Russian market. WTW’s business in Russia comprised approximately 1% of consolidated 2021 revenue and was primarily within the Risk and Broking segment.
  • On an organic basis, HWC segment grew 2% in 1Q22. Operating margin for the segment registered at 20.7% in the quarter, what would be a 110 basis-point increase from 1Q21.
  • Within the HWC segment, gains were led by 7% organic growth for Career, driven by strong demand for rewards consulting, pay benchmarking, and software. Health also delivered strong organic growth of 6% for the quarter, resulting primarily from increased consulting assignments in North America. Wealth, comprised of their retirement and investment business, increased 1% organically for the quarter, while Benefits Delivery & Outsourcing declined 2% due to a timing shift and lower growth in Medicare Advantage revenue.
  • R&B revenue was unchanged for 1Q22, with a 1% decline in Corporate Risk & Broking (CRB) business offsetting a 9% organic increase in their Insurance Consulting & Technology (ITC) business. Operating margin registered at 21.6% for the segment, a decline from 1Q21’s 21.9%.
  • Organic growth in ITC was driven by a combination of increased advisory work and software sales. CRB’s revenue decline was a result of the sale of a book of business in the prior year, as well as the departure from Russia.
  • WTW reports their hiring rate accelerated by 23% in 1Q22 compared to 4Q21, and the company reached their highest hiring volume in a single quarter since 1Q19. Additionally, voluntary attrition dropped 19% from 4Q21 with a significant decline in senior level departures.
  • WTW leadership discussed their Transformation Program and its effect on margin expansion. One notable initiative within this this program is WTW work styles, which introduced a hybrid working environment.
  • WTW completed $2.3B of share repurchases in 1Q22, which completed a previously announced plan to return $4B of capital to shareholders by the end of 2022.

WTW highlighted how they felt current macroeconomic challenges, including high inflation and tight labor supply, will continue to create demand for WTW services. Leadership felt that potential premium rate moderation can be good for WTW’s business, and a potential recessionary environment only intensifies the need for consulting and risk management solutions that WTW offers. The company expects their rate of organic growth to accelerate during the second half of the year.

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This earnings summary has been prepared by Marsh, Berry & Co., LLC. and is not intended to provide investment recommendations on any company. It is not a research report, as such term is defined by applicable laws and regulations, and it does not contain sufficient information upon which to make an investment decision. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. These materials are based solely on information contained in publicly available documents and Marsh, Berry & Co., LLC has not independently attempted to investigate or to verify such information.

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