Willis Towers Watson Public Limited Company (WTW) Earnings

Management highlights

- **Overall Q2 2026 Performance**: The company delivered 5% overall organic revenue growth, 100 bps of adjusted operating margin expansion (to 19.5%), and adjusted diluted EPS of $3.35, up 17% YoY. Results reflected strong cost discipline, operating leverage, and early benefits from AI/automation investments. Acquisitions contributed 3 additional points to reported revenue growth in the quarter. Free cash flow for H1 2026 was $360 million, up $143 million YoY driven by margin expansion. The company returned $450 million to shareholders via share repurchases and $90 million via dividends in Q2, and remains on track for at least $1 billion in full-year 2026 repurchases. - **Propel AI Acceleration Plan Announcement**: Management launched Propel, a company-wide AI acceleration plan expected to be completed by the end of 2028, built on the company's existing modernized tech and data foundation and prior AI investments including the New Front acquisition. The plan requires $625 million in total cash investment, and is expected to generate $400 million in annual run-rate savings, with $50 million reinvested into growth initiatives to deliver $350 million in net annual run-rate savings by 2028. The plan is expected to deliver an adjusted operating margin of ~30% at the enterprise level by 2028, with ~35% margin for HWC and ~30% margin for R&B. - **Current AI Deployments & Early Results**: AI capabilities are already live across both segments: In HWC, Rewards AI now serves over 5,000 clients (double the count from last quarter); automation in retirement actuarial work has cut core evaluation time by 7% in North America, with 9 roles backfilled for every 10 eliminated via efficiency gains; the Violet AI suite serves over 12 million plan participants, increased benefit decision support usage by 52% and reduced follow-ups by 60%. In R&B, the Neuron AI platform (integrating New Front's Willis Navigator) has cut schedule of insurance generation time from 4 hours to 5 minutes, completed real estate premium allocations in minutes (down from 2-4 weeks), and automated contract reviews. - **New Client Wins & Strategic Progress**: HWC secured a multi-year enterprise transformation engagement with a Fortune 5 health solutions leader and an end-to-end pension assessment engagement with a major U.S. bank. R&B won a three-year engagement with a leading global asset manager, a multi-asset global insurance program for a major renewable energy investor, and large-scale placements for a semiconductor fabrication project and data center construction project. The company completed the acquisition of Italian regional broker SMB Scala to expand its footprint in the underpenetrated Italian insurance market. New Front integration remains ahead of plan, with Navigator technology already integrated into the Neuron platform, and its synergies are separate and additive to Propel savings.

Guidance

- **Full Year 2026 Guidance (Unchanged)**: The company reaffirms its expectation for mid-single-digit overall organic revenue growth, continued annual adjusted operating margin expansion, and expanding free cash flow margin in 2026, even after beginning to fund Propel investments. - HWC full-year 2026: Mid-single-digit organic growth, continued margin expansion; Health expected to deliver high single-digit growth; Wealth expected to grow at the high end of the low single-digit range; Career expected low to mid-single-digit growth; BDNO expected low single-digit growth. - R&B full-year 2026: Mid-single-digit organic growth, 100 bps of full-year margin expansion. - **2026 Capital Return Guidance (Unchanged)**: The company expects at least $1 billion in share repurchases for full-year 2026, subject to market conditions; Propel is not expected to impact near-term capital return plans. Foreign exchange is expected to deliver a 35 cent full-year tailwind to adjusted diluted EPS in 2026. - **Medium-Term Updated Guidance**: Management updated its medium-term outlook to target an adjusted operating margin of ~30% enterprise-wide, ~35% in HWC, and ~30% in R&B by the end of 2028, which represents incremental margin expansion above prior guidance. Benefits from Propel are expected to begin contributing meaningfully in 2027 and compound through 2028. After Propel concludes in 2028, free cash flow margin is expected to improve significantly in 2009, commensurate with adjusted operating margin expansion. Over the long term, Propel is expected to enhance the company's capacity to return capital to shareholders.

Segment performance

1. **Health, Wealth, and Career (HWC)**: Organic revenue grew 4% year-over-year in Q2 2026, with an adjusted operating margin of 24.1% (up 30 bps YoY). Breakdown by sub-segment: Health grew 8% organically, driven by broad regional strength and new business wins, contributing the majority of HWC growth; Wealth grew 2% organically, with 3% organic growth in H1 2026; Career revenue was flat overall, with 3% growth outside the Middle East (where ongoing conflict constrained project work); Benefits Delivery and Outsourcing (BDNO) grew 1% organically. HWC represents approximately 51% of total company organic revenue based on margin contribution scaling. 2. **Risk and Broking (R&B)**: Organic revenue grew 7% year-over-year in Q2 2026, with an adjusted operating margin of 22.2% (up 100 bps YoY). Breakdown by sub-segment: Corporate Risk and Broking (CRB) delivered 7% organic growth, driven by new business wins, double-digit growth across almost all specialty lines, and strong global client retention; Insurance Consulting and Technology (ICT) grew 6% organically, driven by strong software sales and new multi-year client deals. R&B represents approximately 49% of total company organic revenue.

Risks & headwinds

- Persistent global market volatility and near-term headwinds: Ongoing conflict in the Middle East has led to client deferral of discretionary projects, resulting in a nearly 50% decline in project work in the region; softer labor market conditions have also pressured discretionary spending. - Insurance pricing headwinds: Insurance rates continue to decline across most lines globally, with only North American casualty seeing continued rate increases, and the pricing environment remains competitive. - Execution risk for the Propel plan: Delivery of the expected savings, margin expansion, and revenue growth from the multi-year AI plan depends on successful technology deployment, cost actions, and client adoption of new solutions. - Forward-looking statements are inherently uncertain, and actual results may differ materially from guidance due to market, geopolitical, and operational risks; investors are referred to the company's SEC filings for full risk factor disclosure.

Analyst Q&A

• Q: What drove R&B's Q2 organic growth acceleration, and is the new specialization model more volatile than the prior legacy model?

  A: The acceleration was partially driven by a small amount of Q1-delayed activity moving into Q2, as management previously signaled. Growth was broad-based: new business was strong across all regions, with double-digit growth in almost all specialty lines, high global client retention, and standout performance in North America (led by construction, natural resources, surety, and M&A), Great Britain, Latin America, and Asia. Management notes that one-off project revenue has always been a normal part of the business, and the current revenue profile should not be considered more volatile than prior models. The company maintains its full-year mid-single-digit growth outlook for R&B.

• Q: Why launch Propel now, how is it different from prior efficiency programs, and what drives the expected $400 million in savings?

  A: Propel is an acceleration of already successful AI and automation work at WTW, not a new strategic direction. The timing reflects recent rapid AI advancements and the company's already proven results from early AI deployments, creating an opportunity to free up capacity for high-value growth work. The $400 million in gross run-rate savings comes from automating routine/repetitive work, simplifying the operating model, reducing third-party spend, and retiring legacy duplicative technology. $50 million of the gross savings will be reinvested into growth initiatives, leaving $350 million in net savings that underpin the new 2028 margin targets. The program has an attractive ROI and does not change 2026 guidance or share repurchase plans.

• Q: When will revenue growth benefits from Propel start to appear in results?

  A: Propel is as much a growth plan as it is a margin plan: by automating routine manual work, it frees up colleagues to focus on high-value client advice, relationship building, and new business, and allows reinvestment in high-growth areas. The revenue benefits will build gradually over time as new talent deployed through reinvestment ramps up to full contribution and client retention improves from better service. Management will update guidance as benefits materialize, and remains confident in the current 2026 mid-single-digit growth guidance.

• Q: Will Propel lead to material staffing reductions after completion, and how is it different from competitor AI initiatives?

  A: While automation of high-volume, low-complexity work will lead to some headcount reductions, the core of the plan is reskilling and redeploying capacity to client-facing, growth-driving work rather than just cutting headcount. The plan scales already live, proven AI initiatives that are already delivering tangible efficiency and client experience gains across both segments: for example, in R&B, AI cuts insurance schedule preparation from 4 hours to 5 minutes, while in HWC, AI has reduced system configuration time by 60% and cut call wrap-up time by a third for service teams. This focus on embedding AI into end-to-end client workflows creates a durable differentiated advantage for WTW.