Yahoo Finance Willis Towers (WTW) Q1 Earnings, Revenues Top, Increase Y/Y
Willis Towers Watson Public Limited Company WTW delivered first-quarter 2023 adjusted earnings of $2.84 per share, which beat the Zacks Consensus Estimate by 1.1%. The bottom line improved 6.8% year over year.
The solid performance of WTW’s Health, Wealth & Career segment and lower expenses were offset by the soft performance of the Risk & Broking segment.
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 Watson posted adjusted consolidated revenues of $2.2 billion, up 4% year over year on a reported basis. Revenues increased 7% on an organic basis and 8% on a constant currency basis. The top line beat the Zacks Consensus Estimate by 2.1%.
The total cost of providing services decreased 1.1% year over year to about $2 billion due to lower salaries and benefits, operating expenses, depreciation, amortization, and restructuring costs. Adjusted operating income was $418 million, up 13% year over year. Adjusted margin expanded 140 basis points (bps) to 18.6%.
Adjusted earnings before Interest, taxes, depreciation, and amortization (EBITDA) was $503 million, up 3% year over year. Adjusted EBITDA margin was 22.4%, down 160 bps.
Quarterly Segment Update
Health, Wealth & Career: Total revenues of $1.3 billion increased 3% year over year (6% increase constant currency and organic). Organic growth was led by Health, driven by increased project activity in North America and the continued expansion of its International client portfolio.
Wealth businesses generated organic revenue growth from higher levels of Retirement work in Europe and North America, including compliance and de-risking projects along with new client acquisitions.
Benefits Delivery & Outsourcing generated organic revenue growth through new clients and compliance project work in Outsourcing and higher volumes and placements of Medicare Advantage and Life policies in Individual Marketplace.
Career businesses grew revenues organically through increased demand for Advisory services and increases in data and software license sales.
The operating margin was 24%, which increased 330 bps from the prior-year fourth quarter, primarily from higher operating leverage.
Risk & Broking: Total revenues of $904 million decreased 1% year over year (5% increase in constant currency and 10% increase on an organic basis).
On an organic basis, Corporate Risk & Broking generated excellent organic revenue growth across all geographies, primarily driven by new business and increased retention in global lines of business, most notably in Aerospace, Financial Solutions and Natural Resources. Insurance Consulting and Technology witnessed organic revenue growth, primarily from software sales
The operating margin decreased 170 bps from the prior-year fourth quarter to 19.9%, primarily due to the divestiture of its Russian operations.
Financial Update
Cash and cash equivalents of $1.1 billion at quarter end decreased 10.1% from the 2022-end level. Long-term debt increased 0.02% to $4.5 billion at quarter-end from 2022 end. Shareholders’ equity increased 0.8% from the level on Dec 31, 2022 to $10 billion as of Mar 31, 2023.
Cash flow from operations was $134 million, up more than six-fold year over year. Free cash flow was $92 million versus an outflow of $10 million in the year-ago quarter.
WTW bought back shares worth $104 million in the quarter.
2023 Guidance
Willis Towers expects to deliver mid-single-digit organic revenue growth. The insurer projects to deliver adjusted operating margin expansion. Willis Towers expects to deliver approximately $100 million of incremental run-rate savings from the Transformation Program in 2023. Willis Towers expects approximately $112 million in non-cash pension income.
WTW expects a foreign currency headwind on adjusted earnings per share of approximately 5 cents for 2023.
Zacks Rank
WTW currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
The Travelers Companies TRV reported first-quarter 2022 core income of $4.11 per share, which beat the Zacks Consensus Estimate of $3.64 and our estimate of $3.41. However, the bottom line decreased 2.6% year over year. Travelers’ total revenues increased 10% from the year-ago quarter to $9.7 billion, primarily driven by higher premiums. The top-line figure however missed the Zacks Consensus Estimate of $9.8 billion.
Net written premiums increased 12% year over year to a record $9.4 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $8.9 billion.
Catastrophe losses totaled $422 million, wider than $36 million pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from severe wind and hail storms in multiple states. Travelers witnessed an underwriting gain of $501 million, down 12.9% year over year. The combined ratio deteriorated 410 bps year over year to 95.4
The Progressive Corporation’s PGR first-quarter 2023 earnings per share of 65 cents missed the Zacks Consensus Estimate of $1.44 as well as our estimate of $1.50. The bottom line declined 20.7% year over year.
Operating revenues were about $14.2 billion, up 15.8% year over year. This improvement was driven by a 15% increase in premiums, 18.5% higher fees and other revenues, a 7.1% increase in service revenues and 73.2% higher investment income. The top line exceeded the Zacks Consensus Estimate of $14.1 billion and our estimate of $13.1 billion.
Net premiums earned grew 15% to $13.5 billion and beat our estimate of $12.6 billion. The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 450 bps from the prior-year quarter’s level to 99.
RLI Corp. RLI reported first-quarter 2023 operating earnings of $1.63 per share, beating the Zacks Consensus Estimate by 34.7%. The bottom line improved 14% from the prior-year quarter. Operating revenues for the reported quarter were $335 million, up 19.4% year over year, driven by 14.3% higher net premiums earned and 51.5% higher net investment income. The top line however missed the Zacks Consensus Estimate by 2.2%.
Gross premiums written increased 15.6% year over year to $415 million. This uptick can be attributed to the solid performance of the Casualty (up 1%), Property (up 45%) and Surety segments (up 13.6%). Underwriting income of $67.9 million increased 14.1%, primarily due to higher profitability in its Property and Casualty segment. Combined ratio remained flat year over year at 77.9.
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