WTW Posts Drop in Q2 Net Income, Revises 2024 Outlook on Russia Losses
Third-quarter net income at broker WTW was $192 million compared to $907 million during the prior-year third quarter.
Net income for the third quarter 2021 included the $1 billion income receipt that was received as a result of the break-up fee of the proposed Aon transaction, WTW said.
Third quarter 2022 revenue dropped 1% to $1.95 billion at WTW as organic revenue grew 6%.
CEO Carl Hess said third quarter performance reflected increasing momentum in the business.
“We are seeing strong demand from clients for innovative solutions and tools to help them identify, quantify and manage fast-moving risks such as more volatile financial markets, climate change, geopolitical tensions, heightened ESG risk and reputational damage to name a few,” said Hess.
WTW’s Risk & Broking segment reported revenue of $765 million, a decrease of 3%. Corporate R&B generated organic revenue growth across all regions, primarily in global lines of aerospace, natural resources and FINEX. Insurance consulting and technology saw organic revenue growth primarily as a result of new software sales, the company said.
Operating margins in the R&B segment decreased 380 basis points to 13.7%, which WTW chalked to ongoing investments in talent.
WTW said it expects to maintain its 2022 full-year targets of mid-single digit organic growth and adjusted operating margin expansion.
The company revised its outlook for 2024 following the transfer of its ownership of Russian subsidiaries, which were almost entirely within its R&B segment and comprised approximately 1% of consolidated revenue for 2021. WTW estimates that the annualized run-rate impact from the divestiture of its Russian operations is approximately $120 million of revenue.
Hess said WTW received essentially no proceeds for the “highly profitable” line of business.
“As a result of this one-off event, we are unable to replace the lost earnings through reinvestment of proceeds,” said Hess. “With the transaction complete, we believe it’s now appropriate to revise the starting and ending points of our long-term guidance to reflect the divestiture of WTW’s Russian operations, just as we would any other significant transaction.”
Russian divestiture altered 2024 revenue targets from $10+ billion to $9.9+ billion, with adjusted operated margin projected to drop 1%.
Willis Towers Watson
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