Willis Towers Watson Public Limited Company (WTW Quick QuoteWTW - Free Report) delivered second-quarter 2022 adjusted earnings of $2.32 per share, which beat the Zacks Consensus Estimate by 0.4%.  The bottom line improved 9% year over year.

Willis Towers Watson witnessed lower expenses, offset by the soft performance of the Health, Wealth & Career (HWC) and Risk & Broking (R&B) segments.

Operational Update

Willis Towers Watson posted adjusted consolidated revenues of $2.03 billion, down 3% year over year on a reported basis. Revenues increased 3% on an organic basis. The top line however missed the Zacks Consensus Estimate by 2.3%.

The total costs of providing services decreased 1.4% year over year to $1.9 billion due to lower salaries and benefits, transaction and transformation, depreciation and amortization.

Adjusted operating income was $314 million, down 1% year over year. Margin expanded 30 basis points (bps) to 15.5%.

Adjusted EBITDA was $450 million, down 3% year over year. Adjusted EBITDA margin was 22.2%, down 10 bps.

Quarterly Segment Update

Health, Wealth & Career: Total revenues of $1.16 billion decreased 2% year over year (2% increase on a constant currency and organic basis). Organic growth was led by the Health business, primarily due to gains recorded in connection with book-of-business settlements.  

Excluding these settlements, Health’s revenues increased from additional consulting work in North America as well as the continued expansion of local portfolios and global benefits management appointments outside of North America.  Higher revenues in Benefits Delivery & Outsourcing were led by Individual Marketplace with growth in Medicare Advantage sales. Career contributed strong growth, which was driven by increased project activity. Organic growth was partially offset by a decline in Wealth revenues.

The operating margin was 18.7%, which increased 10 bps from the prior-year second quarter, primarily reflecting improved operating leverage.

Risk & Broking: Total revenues of $852 million decreased 4% year over year (1% increase in constant currency and 3% increase on an organic basis). On an organic basis, Insurance Consulting and Technology grew primarily as a result of new software sales as well as increased advisory work.

Corporate Risk & Broking generated revenue growth across all regions, primarily driven by global lines of business, principally from new business, notably in Aerospace, Natural Resources and FINEX.

The operating margin decreased 340 bps from the prior-year second quarter to 19.7%, primarily due to ongoing investments in talent.

Financial Update

As of Jun 30, 2022, cash and cash equivalents was $1.9 billion, down 57.2% year over year.

Long-term debt increased 18.8% to $4.7 billion at quarter-end from 2021 end.
Shareholders’ equity decreased 22% from the level on Dec 31, 2021 to $10.3 billion as of Jun 30, 2022.

Cash flow from operations was $258 million in the first half of 2022, down 29.5% from the prior-year period. Free cash flow for the first half of 2022 was $198 million.

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.

2022 Guidance

Willis Towers expects to deliver mid-single-digit organic revenue growth.

The insurer projects to deliver adjusted operating margin expansion for 2022.

Willis Towers expects to deliver in excess of $80 million in cumulative run-rate savings from the Transformation Program by the end of 2022, up from $30 million earlier.

Willis Towers expects an approximately $20 million year-over-year decline in non-cash pension income.

Performance of Some Other P&C Insurers

Of the insurance industry players that have reported second-quarter results so far, The Travelers Companies (TRV Quick QuoteTRV - Free Report) , AXIS Capital Holdings Limited (AXS Quick QuoteAXS - Free Report) and Chubb Limited (CB Quick QuoteCB - Free Report) beat the respective Zacks Consensus Estimate for earnings.

Travelers’ core income of $2.57 per share beat the Zacks Consensus Estimate by 28.5% but decreased 26% year over year. Total revenues increased 7% year over year, primarily due to higher premiums and beat the consensus estimate by 1.8%. Net written premiums increased 11%, driven by strong retention rates and positive renewal premium changes across all the segments. Underwriting gain of $113 million decreased 65% year over year in the reported quarter.

Travelers’ combined ratio deteriorated 300 bps year over year to 98.3 due to higher catastrophe losses and a higher underlying combined ratio.

AXIS Capital Holdings posted second-quarter 2022 operating income of $1.74 per share, beating the Zacks Consensus Estimate by about 13%. However, the bottom line decreased 13% year over year. Total operating revenues of $1.4 billion beat the Zacks Consensus Estimate by 5.5%. The top line rose 7.8% year over year on higher net premiums earned.

Net investment income decreased 20.2% year over year to $92.2 million, primarily attributable to lower gains from other investments. AXIS Capital’s underwriting income of about $117 million decreased 21.3% year over year. The combined ratio deteriorated 280 bps to 93.4.

Chubb reported second-quarter 2022 core operating income of $2.40 per share, which outpaced the Zacks Consensus Estimate by about 17%. The bottom line also improved 16% from the year-ago quarter. Net premiums written improved 7.9% year over year to $10.3 billion in the quarter. Net premiums earned rose 8.4% to $9.6 billion. Adjusted net investment income was a record $950 million, up 0.5%.

Property and casualty underwriting income was a record $1.4 billion, up 21.1% from the year-ago quarter. Chubb incurred an after-tax catastrophe loss of $241 million, up 6.6% year over year. The combined ratio improved 150 bps on a year-over-year basis to a record 84% in the quarter under review.