Re/insurance broker WTW has posted 7% organic revenue growth for the second quarter of 2023, as total revenues increased by 6% to $2.16 billion.
WTW saw net income decline by 16%, from $114 million to $96 million, while income from operations rose by 4% from $137 million to $142 million.
The Risk & Broking business segment had revenue of $900 million, an increase of 6% from $852 million in the prior-year second quarter, but an increase of 6% on an organic basis.
Despite facing challenges from book-of-business settlement revenue in the same period last year, Corporate Risk & Broking achieved robust organic revenue growth in all regions. This growth was mainly fueled by new business opportunities, better customer retention, and substantial contributions from our global lines of business.
Operating margins in the R&B segment decreased 360 basis points from the prior-year second quarter to 16.1%, which WTW says was primarily due to ongoing investments in talent.
Turning to the Health, Wealth & Career segment, revenue was $1.22 billion, representing an increase of 5% from Q2 last year, or an increase of 5% on an organic basis.
The main driver of organic growth was Benefits Delivery & Outsourcing, which saw increased volumes and placements of Medicare Advantage and Life policies in the Individual Marketplace, along with a rise in project activity in the Outsourcing sector.
For 2023, WTW’s targets include mid-single digit organic revenue growth, adjusted operating margin expansion, $160 million of incremental run-rate savings from the Transformation Program, and approximately $112 million in non-cash pension income.
However, there will be a foreign currency headwind on adjusted earnings per share of about $0.05. The full-year 2023 free cash flow margin is expected to be around 12%.
Looking ahead to 2024, WTW is adjusting its targets due to an anticipated decline in pension income of $1.65 per share. It also plans to increase investments in talent and strategic initiatives to support long-term growth in Risk & Broking.
The Company is confident in its Transformation Program’s success and aims to achieve total annualised run-rate savings of $380 million by 2024, with no changes to the previously-announced $900 million cost for achieving these savings.
“As our strong organic revenue growth demonstrates, our strategic initiatives continue to gain traction in the marketplace, highlighting the value of our investments in talent and technology,” said Carl Hess, WTW’s Chief Executive Officer.
“However, headwinds from prior-year book sales, inflationary conditions and the costs of our investments negatively impacted our margins and earnings this quarter. We have reduced our 2024 adjusted operating margin and adjusted EPS targets to account for these short-term trends, as well as our ongoing strategic investments and the unfavorable pension income dynamics we have previously noted,” Hess continued.
“We believe we are well-positioned to resume steady growth in margins, earnings and free cash flow from current levels,” Hess added.
In the first half of 2023, cash flows from operating activities amounted to $430 million, a significant increase compared to the $258 million reported in the same period of the previous year.
The free cash flow for the six months ending June 30, 2023, and June 30, 2022, was $350 million and $198 million, respectively, indicating an improvement of $152 million. Moreover, during the quarter ending June 30, 2023, the Company conducted a share repurchase of $350 million in WTW shares.
