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Willis Towers Watson Public Limited Company delivered third-quarter 2020 adjusted earnings of $1.33 per share, which beat the Zacks Consensus Estimate of $1.28 by 3.9%. The bottom line improved 1.5% year over year.
The company witnessed solid performance of Investment, Risk & Reinsurance, Benefits Delivery & Administration, which was offset by soft performance of Human Capital and Benefits (HCB) segment.
Willis Towers Watson Public Limited Company Price, Consensus and EPS Surprise
Willis Towers Watson posted adjusted consolidated revenues of $2 billion, up 1% year over year on a reported basis. Revenues decreased 1% on an organic basis but remained flat on constant currency basis. The top line beat the Zacks Consensus Estimate by 1.4%.
Total cost of providing services increased 2.9% year over year to $1.9 billion due to higher salaries and benefits, depreciation, transaction and integration expenses.
Adjusted operating income was $238 million, up 3% year over year. Margin increased 20 basis points (bps) to 11.8%.
Adjusted EBITDA was $382 million, up 11% year over year. Adjusted EBITDA margin was 19%, up 170 basis points (bps).
Quarterly Segment Update
Human Capital & Benefits: Total revenues of $796 million decreased 1.3% year over year (down 2% in both constant currency and organic basis). On an organic basis, the global impact of COVID-19 negatively impacted demand in the Talent and Rewards business, causing the majority of the segment’s revenues to decline. Operating margin was 26.3%, reflecting a decrease of 30 bps.
Corporate Risk & Broking: Total revenues of $649 million decrease 0.3% year over year (down 1% in both constant currency and organic basis). On an organic basis, revenues declined in North America due to the non-recurrence of a one-time benefit reflected in the prior-year results in connection with a book of business sale. Revenues decreased in Great Britain due to a change in the remuneration model for certain lines of business. The revenue decrease was offset by revenue increase in Great Britain, primarily as a result of new business. Both Western Europe and International revenues increased as a result of new business and strong renewals. Operating margin was 12.5% in the quarter under review, up 10 bps.
Investment, Risk & Reinsurance: Total revenues of $331 million increased 2% from the prior-year quarter (flat constant currency and 3% increase organic). On an organic basis, most lines of business contributed to the growth. Reinsurance growth was driven by new business wins and favorable renewal factors while Insurance Consulting and Technology revenues grew from technology sales. Max Matthiessen and Investment revenue increased as a result of positive volatility in financial markets. Operating margin was 8.6%, down 70 bps.
Benefits Delivery & Administration: Total revenues of $226 million improved 26% (up 26% constant currency and 6% increase organic). The increase was driven by the inclusion of TRANZACT in the organic results beginning in August 2020, with growth across all products. TRANZACT generated $96 million of revenues. Operating margin was negative 5.3% compared with negative 11.9% in the year-ago quarter.
Financial Update
Cash and cash equivalents were $1.6 billion at third-quarter end, up 85.7% from the 2019-end level.
Long-term debt decreased 12.4% to nearly $4.6 billion at quarter-end from 2019 end.
Shareholders’ equity increased 2.6% from the level on Dec 31, 2019 to $10.5 billion as of Sep 30, 2020.
Cash flow from operations was $1.2 billion in the first nine months of 2020, up 94.5% year over year. Free cash flow in the first nine months of 2020 was $1 billion, reflecting a surge of 130% year over year.
During the nine months ended Sep 30, 2020, the company did not engage in share repurchase activity.
2020 Guidance
Due to the uncertainties caused by the COVID-19 pandemic, Willis Towers Watson had previously withdrawn its full-year 2020 guidance. It is still unable to predict the extent of the impact of the COVID-19 pandemic, and remains focused on maintaining a strong balance sheet, liquidity, and financial flexibility.
Third-quarter earnings of Brown & Brown, Inc. (BRO - Free Report) , RLI Corp. (RLI - Free Report) and W.R. Berkley Corporation (WRB - Free Report) beat the respective Zacks Consensus Estimate.
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Willis Towers (WLTW) Q3 Earnings & Revenues Beat Estimates
Willis Towers Watson Public Limited Company delivered third-quarter 2020 adjusted earnings of $1.33 per share, which beat the Zacks Consensus Estimate of $1.28 by 3.9%. The bottom line improved 1.5% year over year.
The company witnessed solid performance of Investment, Risk & Reinsurance, Benefits Delivery & Administration, which was offset by soft performance of Human Capital and Benefits (HCB) 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 billion, up 1% year over year on a reported basis. Revenues decreased 1% on an organic basis but remained flat on constant currency basis. The top line beat the Zacks Consensus Estimate by 1.4%.
Total cost of providing services increased 2.9% year over year to $1.9 billion due to higher salaries and benefits, depreciation, transaction and integration expenses.
Adjusted operating income was $238 million, up 3% year over year. Margin increased 20 basis points (bps) to 11.8%.
Adjusted EBITDA was $382 million, up 11% year over year. Adjusted EBITDA margin was 19%, up 170 basis points (bps).
Quarterly Segment Update
Human Capital & Benefits: Total revenues of $796 million decreased 1.3% year over year (down 2% in both constant currency and organic basis). On an organic basis, the global impact of COVID-19 negatively impacted demand in the Talent and Rewards business, causing the majority of the segment’s revenues to decline. Operating margin was 26.3%, reflecting a decrease of 30 bps.
Corporate Risk & Broking: Total revenues of $649 million decrease 0.3% year over year (down 1% in both constant currency and organic basis). On an organic basis, revenues declined in North America due to the non-recurrence of a one-time benefit reflected in the prior-year results in connection with a book of business sale. Revenues decreased in Great Britain due to a change in the remuneration model for certain lines of business. The revenue decrease was offset by revenue increase in Great Britain, primarily as a result of new business. Both Western Europe and International revenues increased as a result of new business and strong renewals. Operating margin was 12.5% in the quarter under review, up 10 bps.
Investment, Risk & Reinsurance: Total revenues of $331 million increased 2% from the prior-year quarter (flat constant currency and 3% increase organic). On an organic basis, most lines of business contributed to the growth. Reinsurance growth was driven by new business wins and favorable renewal factors while Insurance Consulting and Technology revenues grew from technology sales. Max Matthiessen and Investment revenue increased as a result of positive volatility in financial markets. Operating margin was 8.6%, down 70 bps.
Benefits Delivery & Administration: Total revenues of $226 million improved 26% (up 26% constant currency and 6% increase organic). The increase was driven by the inclusion of TRANZACT in the organic results beginning in August 2020, with growth across all products. TRANZACT generated $96 million of revenues. Operating margin was negative 5.3% compared with negative 11.9% in the year-ago quarter.
Financial Update
Cash and cash equivalents were $1.6 billion at third-quarter end, up 85.7% from the 2019-end level.
Long-term debt decreased 12.4% to nearly $4.6 billion at quarter-end from 2019 end.
Shareholders’ equity increased 2.6% from the level on Dec 31, 2019 to $10.5 billion as of Sep 30, 2020.
Cash flow from operations was $1.2 billion in the first nine months of 2020, up 94.5% year over year. Free cash flow in the first nine months of 2020 was $1 billion, reflecting a surge of 130% year over year.
During the nine months ended Sep 30, 2020, the company did not engage in share repurchase activity.
2020 Guidance
Due to the uncertainties caused by the COVID-19 pandemic, Willis Towers Watson had previously withdrawn its full-year 2020 guidance. It is still unable to predict the extent of the impact of the COVID-19 pandemic, and remains focused on maintaining a strong balance sheet, liquidity, and financial flexibility.
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
Third-quarter earnings of Brown & Brown, Inc. (BRO - Free Report) , RLI Corp. (RLI - Free Report) and W.R. Berkley Corporation (WRB - Free Report) beat the respective Zacks Consensus Estimate.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>