WTW’s strategy is centred on three drivers: growing at or above market in priority areas; simplifying the business to increase agility and effectiveness; and transforming operations to drive savings while enhancing client and colleague experiences.
“Our grow initiatives take advantage of the opportunities in both core and fast-growing markets using our analytics capabilities and specialist knowledge to help create a more valuable and differentiated client experience,” Hess said during WTW’s latest earnings call.
“In risk and broking, our specialised approach coupled with the strategic hires we’ve made over the past year has driven accelerated growth. In health, wealth, and career, we’ve had success cross-selling new solutions and products alongside our core advisory work.
“Our focus on specialisation has driven us to find improvements to existing solutions, new product innovation, and most recently identification and successful execution on opportunities for strategic collaboration.”
Examples of these partnerships include WTW’s digital trading integration with Zurich; a tie-up with insurance software provider Sapiens; and a deal with Transamerica for administration and record-keeping oversight.
“Shifting to our simplify initiatives, we believe our improved sales and retention outcomes have resulted in part from our efforts to streamline the back-end shared operation to our businesses,” Hess said. “This has enabled us to deploy a more cohesive and consistent global model that leverages our scale and provides a smoother client experience from prospect to renewal.
“Finally, our transformation programme delivered US$75 million of incremental annualised savings during the first quarter, consistent with the expected pacing of US$100 million in incremental run rate savings we expect to generate from the programme this year.”
According to the CEO, whose camp continues to search for additional opportunities for savings, total cumulative annualised savings since the programme’s inception stands at US$224 million.
“Overall, we believe we’re making progress toward our long-term organic growth, margin expansion, and EPS (earnings per share) targets,” Hess said. “Continued execution of our strategic initiatives [in the first] quarter delivered healthier organic revenue growth, strong adjusted operating margin expansion, and further savings from our transformation programme.”
In terms of free cash flow (FCF) targets, WTW’s original goal was to deliver US$5 billion to US$6 billion in free cash flow over three years, to give the company US$10 billion to US$11 billion of available cash by 2024 after combining FCF with the after-tax proceeds from the Willis Re divestiture and cash balances.
WTW, when the company’s Q1 financial results were announced, revised its target of generating US$4.3 billion to US$5.3 billion in cumulative FCF between 2022 and 2024.
Lifting the lid on the modified outlook, Hess said: “Our previous target for three-year cumulative free cash flow through 2024 reflected our goal of substantially improving our free cash flow margin, this being in addition to achieving our revenue and margin targets.
“We have made timely and meaningful progress toward our goals for revenue and adjusted operating margins, and we continue to believe that our long-term free cash flow improvement opportunities remain substantial and achievable.
“These opportunities include optimising structural and contractual aspects of our business, enhancing our system and processes and streamlining our working capital. However, we now believe that the best and most sustainable paths to realising those opportunities will take us beyond the end of 2024.”
Hess went on to “make it very, very clear” that WTW remains committed to delivering on its core operating results.
“Our achievements on those fronts so far, including our very solid start to 2023, give us confidence that we will be successful in delivering on those goals,” he said.
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