Willis Towers Watson Public Limited Company Q4 FY2025 earnings call

• Strategic focus: Steady execution of strategy to accelerate performance, enhance efficiency, and optimize portfolio. Investments in talent and innovation in 2025. - Financial performance: Fourth quarter had 6% organic growth, 80 basis points adjusted operating margin expansion, and adjusted EPS of $8.12. Full year had 5% organic growth, 130 basis points adjusted operating margin expansion to 25.2%, and adjusted diluted earnings per share of $17.08. - Segment highlights: R&B's specialization strategy fueling new business momentum. HWC's focus on smart connections and innovative solutions driving growth. Digital platforms and WeDo enhancing efficiency and margin expansion. - Portfolio optimization: Acquisitions like Newfront, Cushion, and Flowstone Partners to optimize portfolio for growth and profitability.

In the fourth quarter, Health, Wealth, and Career (HWC) had 6% organic growth. For the full year, HWC revenue grew 4% in line with mid-single-digit organic growth target. Health business achieved 4% growth in Q4, with 7% full-year growth excluding book of business settlement activity and interest income headwinds. Wealth had 5% growth in Q4, primarily from increased retirement work globally. Career had 10% growth in Q4, driven by robust demand for advisory services. BD&O grew 5% in Q4. Risk and Broking (R&B) had 7% organic growth in Q4, with 6% full-year growth. Corporate risk and broking (CRB) had 8% Q4 growth and 7% full-year growth excluding book of business settlement activity and interest income. Insurance consulting and technology (ICT) had -1% Q4 growth and 1% full-year growth. HWC's operating margin in Q4 was 44.3%, an increase of 240 basis points compared to prior year. R&B's operating margin in Q4 was 34.7%, a 120 basis point improvement over prior year.

• Mid-single-digit organic growth expected for 2026. - Expect adjusted operating margin expansion and free cash flow margin expansion. - Plan to allocate at least $1 billion to share repurchase in 2026, subject to market conditions and potential capital allocation to organic and inorganic investment opportunities. - Continued focus on portfolio optimization through evaluating potential M&A opportunities.

• Macroeconomic and market conditions as potential headwinds to business. - Impact of Medicare changes on BD&O organic growth outlook. - Uncertainty in consulting activity in ICT in the short term. - Impact of reinsurance joint venture on EPS as a headwind of about $0.30 in 2026.

Q: Elyse Greenspan asked about drivers of organic growth in R&B and mid to high single-digit guide for 2026.

A: Carl Hess and Lucy Clarke responded that R&B had strong organic growth due to specialization strategy, new business, and investments in talent, data, and technology, and expect mid to high single-digit growth in 2026 despite pricing environment with opportunities in specialties like digital infrastructure and electrification offsetting challenges.

Q: David Motemaden asked about impact of tailwinds like digital infrastructure and M&A on R&B organic growth and market share in digital infrastructure.

A: Carl Hess and Lucy Clarke stated that R&B's organic growth is driven by multiple factors including specialization and new business, and while they discussed digital infrastructure opportunities, specific market share details weren't provided but emphasized the opportunity in that area.

Q: Robert Cox asked about talent benefits materializing in organic growth in 2026 and talent investment trend.

A: Carl Hess and Lucy Clarke mentioned that talent remains a key driver, they continue to invest strategically in talent, and strategic hires have been performing well and will continue to be made in impactful areas.

Q: Mark Hughes asked about BD&O's low single-digit growth outlook and impact of Medicare changes.

A: Julie Gebauer responded that BD&O's growth was impacted by Medicare changes but expects modest carryover in 2026, with counterbalancing demand in retiree marketplace and strong financial position and AI technology to support future growth.

Q: Andrew Anderson asked about breakdown of health business growth drivers between healthcare inflation, new business wins, and retention.

A: Carl Hess and Julie Gebauer noted that health business growth was due to new business, strong client retention, and high healthcare inflation projected to continue in 2026, with the company well-positioned to help manage cost increases.