Willis Towers (WTW) Q4 Earnings Top Estimates, Revenues Up Y/Y
Willis Towers Watson Public Limited Company WTW delivered fourth-quarter 2023 adjusted earnings of $7.44 per share, which beat the Zacks Consensus Estimate by 5.7%. The bottom line increased 17.5% year over year.
WTW witnessed an increase in revenues and expanded operating margins at the Health, Wealth & Career and Risk & Broking segments, as well as improved adjusted operating income, offset by higher expenses.
Willis Towers Watson Public Limited Company Price, Consensus and EPS Surprise
Willis Towers Watson Public Limited Company price-consensus-eps-surprise-chart | Willis Towers Watson Public Limited Company Quote
Operational Update
Willis Towers posted adjusted consolidated revenues of $2.9 billion, up 7% year over year on a reported basis. Revenues increased 6% on an organic basis and a constant currency basis. The top line beat the Zacks Consensus Estimate by 0.3%.
The total costs of providing services increased 6% year over year to $2.1 billion due to higher salaries and benefits, restructuring costs, transaction and transformation costs as well as other operating expenses. Our estimate was $2 billion.
Adjusted operating income was $998 million, which increased 13.1% year over year. Margin expanded 180 basis points (bps) to 34.2%.
Adjusted EBITDA was $1.1 billion, up 7% year over year. Adjusted EBITDA margin was 37.1%, which remained flat year over year.
Quarterly Segment Update
Health, Wealth & Career: Total revenues of $1.79 billion rose 4% year over year (3% increase on a constant currency and 4% on an organic basis). The Zacks Consensus Estimate and our estimate were both pegged at $1.8 billion.
Organic growth in Benefits Delivery & Outsourcing was driven by higher volumes and placements of Medicare Advantage and life policies in Individual Marketplace and increased compliance and other project activity in Outsourcing.
Wealth businesses generated organic revenue growth from higher levels of Retirement work in North America and Europe, along with new client acquisitions, pension brokerage and higher fees in Investments. Organic revenue growth in Health was driven by the continued expansion of the Global Benefits Management client portfolio, higher brokerage income as well as a modest tailwind from book-of-business settlement revenues.
Career had organic revenue growth from compensation survey sales and executive compensation, reward-based advisory and employee experience services.
The operating margins expanded 150 basis points from the prior-year quarter to 40.5%, primarily from Transformation savings.
Risk & Broking: Total revenues of $1.08 billion rose 13% year over year (12% increase in constant currency and on an organic basis) and beat the Zacks Consensus Estimate of $1.03 billion. Our estimate was $1 billion.
Corporate Risk & Broking generated exceptional organic revenue growth, driven by strong new business, improved client retention and rate increases. Insurance Consulting and Technology had organic revenue growth from software sales and increased project revenues.
The operating margins expanded 460 basis points from the prior-year quarter to 32.9%, due to higher operating leverage, driven by strong organic revenue growth and increased productivity from recent hires and Transformation savings.
Financial Update
As of Dec 31, 2023, cash and cash equivalents were $1.4 billion, up 12.8% from 2022 end.
Long-term debt increased 2.1% to $4.5 billion at quarter-end from 2022 end.
Shareholders’ equity decreased 4.9% from the level on Dec 31, 2022, to $9.5 billion as of Dec 31, 2023.
Cash flow from operations was $1.3 billion in 2023, up 65.6% from the prior-year period.
Free cash flow for 2023 increased 76.8% year over year to $1.2 billion.
2024 Guidance
Willis Towers expects to deliver revenues of $9.9 billion and mid-single-digit organic revenue growth.
The insurer projects to deliver an adjusted operating margin in the range of 22.5-23.5% for 2024.
WTW expects to deliver adjusted diluted earnings per share in the range of $15.40-$17.
The company projects around $88 million in non-cash pension income for 2024.
Willis Towers expects a foreign currency headwind on adjusted earnings per share of approximately $0.02 for 2024 at today’s rates.
WTW expects to deliver around $425 million of cumulative run-rate savings from the Transformation program by the end of 2024, up from $380 million previously. The company anticipates total program costs of $1.125 billion, up from $900 million previously.
Full-Year Highlights
Adjusted earnings of $14.49 per share beat the Zacks Consensus Estimate by 2.6%. The bottom line increased 8% year over year.
Total revenues increased 7% from the year-ago quarter to about $9.5 billion. The top line beat the Zacks Consensus Estimate by 0.1%.
Zacks Rank
Willis Towers currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Aon plc AON reported fourth-quarter 2023 adjusted earnings of $3.89 per share, which missed the Zacks Consensus Estimate by 4.4%. The bottom line remained flat year over year. Total revenues advanced 8% year over year to $3.4 billion in the quarter under review and surpassed the consensus mark by 0.6%. The top line consisted of organic revenue growth of 7% and a 2% favorable impact from foreign currency translation. It also had a 1% favorable impact from fiduciary investment income.
Total operating expenses of $2.6 billion escalated 23% year over year in the fourth quarter and came higher than our estimate of $2.2 billion. The increase was primarily due to a 9% higher compensation and benefits and 70% higher other general costs. Adjusted operating income was $1.1 billion, which rose 10% year over year and met our estimate. The adjusted operating margin of 33.8% increased from 33.2% a year ago and came lower than our estimate.
Arthur J. Gallagher & Co. AJG reported fourth-quarter 2023 adjusted net earnings of $1.85 per share, which beat the Zacks Consensus Estimate by 1.09%. The bottom line increased 24% on a year-over-year basis. AJG’s performance was driven by higher adjusted revenues and margin expansion across the Brokerage and Risk Management segments, partially offset by higher expenses.
Total revenues of $2.4 billion beat the Zacks Consensus Estimate by 0.9%. The top line also improved 19.3% year over year. Arthur J. Gallagher’s total expenses increased 31.9% year over year to $2.5 billion in the reported quarter due to higher compensation, operating, reimbursements, interest, depreciation, amortization and change in estimated acquisition earnout payables. Earnings before interest, tax, depreciation and amortization and change in estimated acquisition earnout payables grew 13.7% from the prior-year quarter to $514.3 million.
Marsh & McLennan Companies, Inc. MMC has reported fourth-quarter 2023 adjusted earnings per share of $1.68, which beat the Zacks Consensus Estimate by 5%. The bottom line rose 14% year over year. Consolidated revenues improved 11% year over year to $5.6 billion in the quarter under review. The figure increased 7% on an underlying basis. Also, the top line outpaced the consensus mark by a whisker.
Total operating expenses of $4.5 billion increased 2.5% year over year in the fourth quarter and beat our estimate of $4.3 billion. The year-over-year increase was due to higher compensation and benefits costs. Total expenses in the Risk and Insurance Services segment witnessed a 1.8% year-over-year increase, whereas the Consulting segment’s expenses grew 5.6% year over year. MMC has reported an adjusted operating income of $1.2 billion in the quarter under review, which climbed 16% year over year. The adjusted operating margin of 23.3% improved 130 bps year over year.
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