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Willis Towers (WTW) Q4 Earnings Top Estimates, Increase Y/Y

Willis Towers Watson Public Limited Company WTW delivered fourth-quarter 2022 adjusted earnings of $6.33 per share, which beat the Zacks Consensus Estimate by 0.6%. The bottom line improved 12% year over year.

WTW witnessed a solid performance of the Health, Wealth & Career segment and lower expenses, which was offset by soft performance in Risk & Broking segment.

Willis Towers Watson Public Limited Company Price, Consensus and EPS Surprise

Willis Towers Watson Public Limited Company Price, Consensus and EPS Surprise
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 $2.7 billion, up 1% year over year on a reported basis. Revenues increased 5% on an organic basis and 4% on a constant currency basis. The top line beat the Zacks Consensus Estimate by 1.4%.

The total cost of providing services decreased 0.09% year over year to $2 billion due to lower depreciation and amortization.

Adjusted operating income was $882 million, up 1.3% year over year.  Margin expanded 20 basis points (bps) to 32.4%.

Adjusted earnings before Interest, taxes, depreciation, and amortization (EBITDA) was $1 billion, down 1.4% year over year. Adjusted EBITDA margin was 37.1%, contracted 80 bps.

Quarterly Segment Update

Health, Wealth & Career: Total revenues of $1.72 billion increased 2% year over year (5% increase constant currency and organic). Organic growth was led by Benefits Delivery & Outsourcing, driven by Medicare Advantage sales.

Wealth businesses generated organic revenue growth from increased project activity across all geographies, primarily related to financial market volatility, as well as higher levels of regulatory work in Great Britain.

Career businesses grew revenues organically with increased reward-based advisory services and other project activity, as well as increased sales of compensation benchmarking surveys.

Organic growth in Health businesses remained unchanged, primarily due to headwinds from book-of-business settlement revenues in the comparable period.

The operating margin was 39%, which increased 80 bps from the prior-year fourth quarter, primarily from higher operating leverage.

Risk & Broking: Total revenues of $952 million decreased 2% year over year (3% increase constant currency and 5% increase organic).

On an organic basis, Corporate Risk & Broking generated organic revenue growth across all geographies, primarily driven by global lines of business, most notably in Construction and Aerospace.

Corporate Risk & Broking’s organic revenue growth rate was under pressure because of the headwinds from book-of-business settlement revenues in the comparable period.

Insurance Consulting and Technology's organic revenues grew on the back of favorable timing of software sales and increased advisory work.

The operating margin decreased 180 bps from the prior-year fourth quarter to 28.3%, primarily due to headwinds from book sales and investments in talent.

Full-Year Highlights

Adjusted earnings of $13.41 per share missed the Zacks Consensus Estimate by 0.1%. The bottom line increased 16% year over year.

Total revenues decreased 1% from the year-ago quarter to about $8.9 billion. However, the top line beat the Zacks Consensus Estimate by 0.3%.

Financial Update

Cash and cash equivalents of $1.3 billion at 2022 end decreased 71.9% from the 2021-end level.

Long-term debt increased 12.5% to $4.5 billion at quarter-end from 2021 end.
Shareholders’ equity decreased 24.5% from the level on Dec 31, 2021 to $10 billion as of Dec 31, 2022.

Cash flow from operations was $812 million on Dec 31, 2022, decreased 60.6% year over year.

Free cash flow decreased 64.7% to $674 million on Dec 31, 2022.

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.

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 Some Other Insurers

Brown & Brown, Inc.’s BRO fourth-quarter 2022 adjusted earnings of 50 cents per share beat the Zacks Consensus Estimate by 13.4%. The bottom line increased 19% year over year. Total revenues of $901.4 million beat the Zacks Consensus Estimate by 0.6%. The top line improved 22.1% year over year. The upside can be primarily attributed to commission and fees, which grew 21.3% year over year to $864.8 million.

Organic revenues improved 7.8% to $764.7 million in the quarter under review. Investment income increased year over year to $4.7 million from $0.2 million in the year-ago quarter. Adjusted earnings before interest, taxes, depreciation, amortization and the change in estimated acquisition earn-out payables (EBITDAC) was $283.1 million, up 34.9% year over year. EBITDAC margin expanded 560 bps year over year to 31.2%. Total expenses increased 18.3% to $707.2 million on account of a rise in employee compensation and benefits, other operating expenses, amortization, depreciation and interest expenses.

Arthur J. Gallagher & Co. AJG reported fourth-quarter 2022 adjusted net earnings of $1.54 per share, which beat the Zacks Consensus Estimate by 2.7% and our estimate of $1.49. Moreover, the bottom line increased about 18.5% on a year-over-year basis. Total revenues were $1.9 billion, up 2.8% year over year, primarily driven by higher commissions, fees and supplemental and contingent revenues. Moreover, the top line beat the Zacks Consensus Estimate by 2.7%.

Arthur J. Gallagher’s total expense increased 2.5% year over year to $1.9 billion, attributed to higher compensation, higher operating cost, higher interest, amortization and change in estimated acquisition earnout payables. The figure is higher than our estimate of $1.5 billion. Adjusted EBITDAC grew 25.9% from the prior-year quarter to $528.1 million. The figure is lower than our estimate of $576.4 million.

Aon plc AON reported fourth-quarter 2022 operating earnings of $3.89 per share, which beat the Zacks Consensus Estimate of $3.67 and our estimate of $3.58. The bottom line also climbed 5% year over year. Total revenues of $3,130 million were up 2% from a year ago and beat the consensus mark of $3,120 million and our estimate of $3,079.9 million.

Total operating expenses increased 1% year over year to $2,118 million driven by 17% and 9% increases in information technology and other general expenses, respectively, partially offset by a 1% decrease in compensation and benefits. The reported figure was higher than our estimate of $2,080.3 million. Adjusted operating income jumped 3% year over year to $1,038 million and beat our estimate of $1,030.4 million. Adjusted operating margin expanded 40 bps to 33.2%.

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