WTW’s Earnings Were Slower in 4Q 2021. What You Need to Know.
- WTW reported organic revenue growth of 4% in 4Q 2021, or 2% on a constant currency basis. WTW said that 4Q performance was negatively impacted by the “delayed impact of disruptions from earlier in the year.” Organic growth for WTW in 4Q was below peers that have reported results already, and the CEO noted that the 4Q 2021 results “do not reflect the near- and long-term potential of this company to drive organic growth and margin expansion.”
- On an organic basis, Human Capital & Benefits (HCB) saw 4Q 2021 revenue increase by 3% year-over-year. Within the segment, Technology and Administration Solutions revenue grew 11% lifted by increased project work in Great Britain and Western Europe. There was strong demand for H&B consulting and a gain related to one-time book of business settlement related to senior staff departures in 2021. Brokerage growth in the quarter was slower.
- The Talent and Rewards business had 3% revenue growth in 4Q vs. growth of 17% in the third quarter and 22% in the second. The quarter saw slower growth because of seasonality of compensation survey sales, which peaked in 3Q and 2Q, and some capacity constraints in advisory services. However, WTW believes they are well positioned in Talent and Rewards given recent increased hires and strong demand in product and advisory services.
- Corporate Risk & Broking (CRB) segment revenue increased by 1% organically in 4Q 2021 with full year growth of 5%. The segment is benefiting from decreased departures and hiring levels at historical highs. The North American segment saw 4Q revenue increase by 4% helped by book of business sales and settlements.
- Within the Investment, Risk & Reinsurance (IRR) segment, revenue was $199 million or a 2% decrease on a constant currency basis and 32% increase organically year-over-year. Some sales led to the disparity between constant currency and organic growth figures: Max Matthiessen (sold in September 2020) and Miller, WTW’s wholesale broking subsidiary, (sold in March 2021). IRR revenue also excludes the Reinsurance line of business, which is now reported as discontinued operations.
- The Business Delivery & Administration (BDA) segment’s revenue increased by 5% on both an organic and constant currency basis. This was boosted by a favorable shift in the revenue timing of B2B Medicare Exchange revenue and strong growth in the direct-to-consumer business. The Benefits Outsourcing business saw increased project work.
At its September 2021 Investor Day, WTW announced it would streamline its structure by changing from four segments (as reported above) to two effective January 1, 2022. There are now just two segments: Risk & Broking and Health, Wealth and Career. This is intended to increase agility and effectiveness.
While WTW faced some near-term business challenges in 2021 largely related to talent departures and disruptions related to its failed merger with AON, management believes WTW is in a good position for shareholder value creation. The Company is confident that its long-term strategy, recent hiring momentum, refreshed brand and reporting structure, and new stock ticker (WTW) will “narrow the gap” with its peers in 2022. CEO Carl Hess commented on WTW’s path forward: “we executed on our incentive plans which provide both short-term and long-term retention benefits, and these have been well received. We’ve also seen significant measurable improvements in colleague engagement. Meanwhile, the pace at which we’ve been attracting new talent to fuel our path forward has been truly impressive. We hired more people in the second half of 2021 that we hired during the entire year in 2020, and the elevated attrition levels we saw in ’21 are behind us.”
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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.