Willis Towers Watson Public Limited Company WTW delivered fourth-quarter 2024 adjusted earnings of $8.13 per share, which beat the Zacks Consensus Estimate by 1.5%. The bottom line increased 9% year over year.

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The quarterly results of WTW were aided by an increase in revenues and expanded operating margins at the Health, Wealth & Career and Risk & Broking segments. Higher adjusted operating income and reduced expenses also added to the upside.

Operational Update

Willis Towers posted adjusted consolidated revenues of $3 billion, up 4% year over year on a reported basis. Revenues increased 5% on an organic basis and a constant currency basis. The top line missed the Zacks Consensus Estimate by 0.3%.

The total costs of providing services decreased 0.04% year over year to $2.1 billion due to lower other operating expenses, impairment, depreciation, amortization, restructuring costs, transaction and transformation, offset by higher salaries and benefits. The metric matched our estimate.

Adjusted operating income was $1 billion, which increased 10% year over year. Margin expanded 190 basis points (bps) to 36.1%.

Adjusted EBITDA was $1.1 billion, up 8.6% year over year. Adjusted EBITDA margin was 38.6%, which expanded 150 bps year over year.

Quarterly Segment Update

Health, Wealth & Career: Total revenues of $1.8 billion rose 3% year over year (3% increase on a constant currency and an organic basis) but missed the Zacks Consensus Estimate by 1.2%. Our estimate was pegged at $1.9 billion.
Health had organic revenue growth that was led by increased project work and brokerage income in North America and the continued expansion of Global Benefits Management client portfolio in International and Europe.

Wealth generated organic revenue growth from higher levels of Retirement work globally, an increase in Investments business due to growth of LifeSight solution and capital market improvements.

Career had organic revenue growth from increased advisory services and product revenues. Benefits Delivery & Outsourcing had an organic revenue decline for the quarter as a result of deliberately moderating growth in TRANZACT.

The operating margins expanded 140 basis points from the prior-year quarter to 41.9%, primarily from Transformation savings.

Risk & Broking: Total revenues of $1.1 billion rose 6% year over year (7% increase in constant currency and on an organic basis) but missed the Zacks Consensus Estimate by 0.1%. The metric matched our estimate.

Corporate Risk & Broking had organic revenue growth driven by higher levels of new business activity and strong client retention. Insurance Consulting and Technology had organic revenue growth for the quarter due to strong software sales in Technology.

The operating margins expanded 60 basis points from the prior-year quarter to 33.5%, primarily due to operating leverage driven by organic revenue growth and disciplined expense management, as well as Transformation savings. The increases were partially offset by headwinds from book-of-business activity and foreign currency fluctuations.

Financial Update

As of Dec. 31, 2024, cash and cash equivalents were $1.8 billion, up 32.7% from 2023-end.

Long-term debt increased 16.2% to $5.3 billion at quarter-end from 2023-end.
Shareholders’ equity decreased 16.6% from the level on Dec. 31, 2023, to $7.9 billion as of Dec 31, 2024.

Cash flow from operations was $1.5 billion in 2024, up 12.4% from the prior-year period.

Free cash flow for 2024 increased 15.4% year over year to $1.4 billion. The increase was primarily driven by operating margin expansion, partially offset by cash outflows related to transformation and discretionary compensation payments.

2025 Guidance

Willis Towers expects share repurchases of $1.5 billion, subject to market conditions and potential capital allocation to organic and inorganic investment opportunities.

The insurer projects 100 basis points of average annual margin expansion over the next three years in Risk & Broking.

WTW expects incremental annual margin expansion at Health, Wealth & Career and enterprise levels.

The company divested the TRANZACT business and is no longer part of the business portfolio. TRANZACT business contributed $1.14 to adjusted diluted earnings per share in 2024.

Willis Towers expects cash outflows in 2025 from the settlement of accrued costs related to the Transformation program, which concluded in 2024.

Full-Year Highlights

Adjusted earnings of $16.93 per share beat the Zacks Consensus Estimate by 1%. The bottom line increased 17% year over year.

Total revenues rose 5% from the year-ago quarter to about $9.9 billion. The top line missed 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 Brokerage Insurers

Brown & Brown, Inc.’s BRO fourth-quarter 2024 adjusted earnings of 86 cents per share beat the Zacks Consensus Estimate by 14.7%. The bottom line increased 48.3% year over year. Total revenues of $1.2 billion beat the Zacks Consensus Estimate by 6.4%. The top line improved 15.4% year over year. The upside can be primarily attributed to commission and fees, which grew 15.4% year over year to $1.1 billion. Our estimate for commission and fees was $1 billion. The Zacks Consensus Estimate was pegged at $1.1 billion. Organic revenues improved 13.8% to $1.1 billion in the quarter under review.

Investment income increased 22.2% year over year to $22 million. The Zacks Consensus Estimate for the metric was pegged at $20.7 million and our estimate was $31.8 million.  Adjusted EBITDAC was $390 million, up 22.6% year over year. EBITDAC margin expanded 190 basis points (bps) year over year to 32.9%. Our estimate for adjusted EBITDAC was $366.3 million.

Arthur J. Gallagher & Co. AJG reported fourth-quarter 2024 adjusted net earnings of $2.13 per share, which beat the Zacks Consensus Estimate by 5.4%. The bottom line increased 17% on a year-over-year basis. Total revenues of $2.7 billion beat the Zacks Consensus Estimate by 0.1%. The top line also improved 12% year over year, driven by higher commissions, fees, supplemental revenues and interest income, premium finance revenues and other income.

Arthur J. Gallagher’s total expenses decreased 5.2% year over year to $2.4 billion in the reported quarter due to lower operating costs, reimbursements and change in estimated acquisition earnout payables.  Earnings before interest, tax, depreciation and amortization and change in estimated acquisition earnout payables (EBITDAC) grew 33.5% from the prior-year quarter to $686.7 million.

Aon plc AON reported fourth-quarter 2024 adjusted earnings of $4.42 per share, which surpassed the Zacks Consensus Estimate by 4.3%. The bottom line improved 14% year over year. Total revenues rose 23% year over year to $4.1 billion. However, the top line fell short of the consensus mark by 1.1%. Organic revenue growth was 6%. Total operating expenses of $3.06 billion increased 18% year over year. The metric was lower than our estimate of $3.14 billion.

Adjusted operating income advanced 21% year over year to $1.38 billion, higher than our estimate of $1.35 billion. The metric gained on the back of benefits reaped from the NFP acquisition, organic revenue growth and net restructuring savings. However, the adjusted operating margin of 33.3% deteriorated 50 basis points year over year.

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