Willis Tower' (WLTW) Strategy to Drive Growth, Shareholder Value
Willis Towers Watson Public Limited Company WLTW has summarized a growth strategy, with a focus on improving operating margins, higher free cash flow conversion and driving sustainable revenue growth. The strategy was intended to spur long-term growth and return more value to shareholders.
Per Carl Hess, president and future CEO of Willis Towers Watson, “The central priorities of our strategy – grow, simplify and transform – build upon our core strengths”.
Post the fallout of the merger between Willis Towers and Aon plc AON in July, Willis Towers has been working diligently to identify growth opportunities across portfolio of businesses. Thus, the growth strategy encompass.
Willis Towers focus on core opportunities with highest growth and return, which include gaining market share in Risk and Broking and Individual Marketplace. It innovated and developed its offerings in markets, boosted its abilities in fast-growth markets like health insurance, cyber and climate, and brought targeted solutions to clients.
In a bid to improve sales and retention outcomes, it simplified operational structure, developed a strong client model and strengthened growth operations.
The company projects $300 million in cost reductions to contribute 300 bps of margin improvement toward fiscal 2024 margin target by maximizing global platforms, right-shoring operations, rationalizing real estate and modernizing IT.
Concurrently, Willis Towers Watson has updated its financial targets. By the end 2024, the insurer expects to increase its revenues to more than $10 billion by delivering growth in the mid-single-digit range, with reinvestment in differentiated solutions and scalable innovation and increasing market share.
It intends to improve margins to 24-25% through more than $300 million net run-rate savings, driven by transformation and efficiency initiatives as well as operating leverage as the business grows.
The insurance broker expects to generate higher free cash flow conversion to deliver $5-$6 billion in free cash flow, which, when combined with the after-tax proceeds from the Willis Re divestiture and current cash balances, will provide the company $10-$11 billion of available cash by 2024 end to help drive shareholder value.
Willis Towers aims to return capital to shareholders, beginning with the execution of more than $4 billion in share buybacks between 2021 and 2022. Also, it will continue to invest in bolt-on opportunities to boost growth, acquire industry-leading capabilities and support Willis Towers’ world-class team.
It targets adjusted EPS of minimum $18-$21 and deliver industry-leading total shareholder return.
Shares of this Zacks Rank #2 (Buy) company have gained 14.2% in a year compared with the industry’s growth of 17.7%. The company's operational efficiencies, investment in growth avenues and effective capital deployment will continue to drive shares in the days ahead.
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Other Stocks to Consider
Some other top-ranked stocks from the insurance sector are Brown & Brown, Inc. BRO and Fanhua Inc. FANH, both carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brown & Brown beat estimates in each of the trailing four quarters, the average surprise being 21.40%.
Fanhua surpassed estimates in two of the last four quarters and missed in the other two, the average surprise being 7.77%.
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