Willis Towers (WLTW) Fourth Quarter Earnings Best Estimates, Revenue Lag – February 8, 2022

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Willis Towers Watson Public Limited Company (W.T.W. Free Report) generated adjusted earnings of $5.67 per share in the fourth quarter of 2021, which beat Zacks’ consensus estimate of $5.35. Net income improved 9% year-on-year.

WTW experienced strong performance in the Human Capital & Benefits (HCB) segment, Investment, Risk & Reinsurance, and Employee Benefits Delivery & Administration, which was offset by weakness in Corporate Risk & Broking.

Operational update

Willis Towers Watson posted adjusted consolidated revenue of $2.7 billion, up 1% year on year on a reported basis. Revenue grew 4% on an organic basis and 2% on a constant currency basis. The top line missed the Zacks consensus estimate by 3.4%.

Total cost of delivering services decreased 3.5% year-over-year to $2 billion due to lower salaries and benefits, operating expenses, depreciation and depreciation.

Adjusted operating profit was $871 million, up 1.4% year-on-year. The margin increased by 180 basis points (bps) to 32.2%.

Adjusted EBITDA was $1 billion, up 4.3% year-over-year. Adjusted EBITDA margin was 37.9%, up 400 basis points (bps).

Segment Quarterly Update

Human capital and benefits: Total revenue of $884 million was up 2% year over year (up 3% both in constant currency and on an organic basis). On an organic basis, growth was largely driven by Technology and Administration Solutions, partly supported by Health and Benefits and Talent and Rewards. The operating margin was 31.2%, reflecting a decline of 10 basis points.

Business Risk and Broking: Total revenue of $882 million decreased 1% year over year (up 1% in constant currency and on an organic basis). On an organic basis, North America leads the segment with a new generation of business and strong renewals. Revenues declined in Britain, Western Europe and International. The operating margin was 31.2% during the quarter under review, down 120 basis points.

Investment, Risk & Reinsurance: Total revenue of $199 million was down 2% from the prior year quarter (down 2% at constant currencies and up 32% organically). Organic growth was driven by revenues recorded as part of a backlog settlement. The operating margin was 25.3%, up 1,280 basis points.

Distribution and administration of benefits: Total revenue of $729 million increased 16% (up 5% at constant currencies and organically). The increase was driven by the individual market, mainly by TRANZACT. Profits Outsourcing revenues have also improved. The operating margin was 49.2%, down 150 basis points.

Highlights of the year

Adjusted earnings of $11.70 per share missed Zacks consensus estimate of $13.38. Net income increased 19% year over year.

Total revenue rose 4% from the year-ago quarter to around $9 billion, but just missed Zacks’ consensus estimate.

Financial update

Cash and cash equivalents of $4.7 billion at the end of 2021 more than doubled from the level at the end of 2020.

Long-term debt fell 14.8% to $4 billion at the end of the quarter compared to the end of 2020.

Shareholders’ equity increased 21.7% from December 31, 2020 levels to $13.3 billion as of December 31, 2021.

Operating cash flow was $2.1 billion in 2021, up 16% year-over-year.

Free cash flow increased 23% to $1.9 billion in 2021.

Zacks Rank

Willis Towers currently wears a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of other insurers

The results for the fourth quarter of Brown & Brown, Inc.. (BOYFRIEND free report), Arthur J. Gallagher & Co. (AJG free report) and Aon plc (AON Free Report) beat Zacks’ respective consensus estimate.

Brown & Brown’s fourth-quarter 2021 adjusted earnings of 42 cents per share beat Zacks’ consensus estimate of 10.5% as well as the year-ago figure of 31.2%. Adjusted revenue of $739 million beat Zacks’ consensus estimate by 1.5% and was up 15.1% year-over-year.

Brown & Brown’s EBITDAC was $215.7 million, up 24% year-over-year. EBITDAC margin increased by 210 basis points (bps) to 29.2%.

Arthur J. Gallagher’s fourth-quarter 2021 adjusted net income of 98 cents per share beat Zacks’ consensus estimate of 5.4% and rose 11.4% year-over-year. Total revenue was $1.9 billion, up 18.6% year over year and beating Zacks’ consensus estimate of 5.2%.

Arthur J. Gallagher adjusted earnings before interest, taxes, depreciation and amortization and change in estimated acquisition liabilities (EBITDAC) increased 18% from the prior year quarter to $436.1 million .

Aon’s operating profit of $3.71 per share beat Zacks’ consensus estimate of 9.1% and was up 42% year-over-year.

Aon’s total revenue improved 4% year over year to $3.1 billion, but missed the consensus mark by 3.6%. Adjusted operating margin increased by 590 basis points to 32.8%.

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