Willis Towers Watson Public Limited Company — 2024 Q1

Elyse, I think you're thinking about that correctly. We do expect continued expansion throughout the course of the year. We did make some investments in Q1, which did impact the margin expansion and operating leverage within R&B. But for the course of the year, we do expect the margin expansion to continue as well as the operating leverage generation.

Yes, thanks Elyse. We see this as actually quite manageable for us. We employ non-solicits as part of what we do. And we think that is actually quite a manageable situation for us. So we think that we're still looking through this. And of course, there may be some litigation concerning all that. But our standard restrictive covenants don't prevent our employees from working for our competitors. They are, as I said, non-solicitation, nondisclosure type agreements, and they don't function to prevent someone from taking a job a competitor. We don't think the world tied to that type of restrictive covenant. And so we've managed quite well against these in the past, and we'll manage I think quite well going...

Yes, Gregory, maybe I'll start, and Andrew can chime in as well. So with respect to health, right, we see a couple of factors as giving us confidence regarding the rest of the year. We continue to have strong performance in our global benefits management offering, where we help multinationals deliver consistent and superior program of benefits to their workforce across, our pipeline remains very strong and our hit rate within that pipeline remains very strong.

And just a couple of points of detail on that, especially as it relates to Q1 and going forward. So within health the continued expansion of the global benefits management client portfolio, which Carl alluded to, drove high-single-digit growth, particularly driven by Europe and our international geographies, as we talked about the timing of the new business contributed to lower growth in North America, where our business is typically fee-based we expect that to accelerate significantly throughout the remainder of the year, in line with high-single-digit growth expectations for the full year.

Yes, we haven't quantified any of the specific components. But here's how we think about the steps to getting to the 16% plus margin target, right? So we've got greater profitability as a result of driving margin expansion as a contributing factor that's not just from transformation and operating leverage, but also over time, improving our business mix, as we've talked about in the past, so MGAs and MGUs things of that nature.

Sure, Rob. So as we mentioned, right, we have replenished our talent base. And so our investments going forward are more focused on strategic and opportunistic hiring. And we think they put us in a position to achieve sustainable profitable growth. We're not just hiring to fill our bench. We're hiring to take advantage of specific opportunities to create value. Lucy Clarke would be a great example of one of those strategic hires. We are looking forward to we're welcoming her next -- later this year. In addition, we've had some notable strategic hires to support our industry verticals and Verita.

So the final CMS rules for '25 that address marketing and Medicare Advantage plans in the U.S. was released in early April, right? So not all that long ago. The good news of the final rule was less onerous on the proposed role in a number of ways. And while there's still some uncertainties about all of its provisions are going to be implemented, but it's not causing us to change our outlook for the year. We've been actively engaged with the carriers in this space. They have reiterated the important role that we play in the distribution of Medicare insurance solutions and the valuable services we provide beneficiaries. I guess, I just close that by saying managing regulatory change is a regular part of our business. And I think we've been quite successful in navigating these sort of changes in the past. We will continue to do so in the future.

So the unallocated net for the full year, we expect to be relatively consistent with 2023 on a 12-month basis. What you're seeing there right now is the outcome of driving down expenses at the corporate level focused on enhancing the margin profile of the company going forward. Some examples of that include things like refining our corporate support model for the businesses. as well as managing discretionary spend. So that's really where it manifests itself in the unallocated net this quarter. And again, for the full year, should be relatively consistent with last year.

So we continue to be delighted with the performance of our specialization strategy. And for the quarter, our global lines of business once again grew more than double the rest of the portfolio. So we think it is working a treat. Some of these lines are facing more challenging conditions than others. Our FINEX business, for instance, has the headwind of reduced M&A activity, which lowers the amount of work we do in transactional liability as well as the sharp decline in rates we've had over recently large number of quarters, but continues actually to still make quite good growth in -- despite these -- we see in things like Construction and Natural Resources, our unique analytic proposition, actually helping quite a bit. But in general, we're seeing strong growth across the portfolio where we have headwinds and tailwinds from rate and other conditions [indiscernible].

Let me unpick that a bit, Andrew. So as I -- one of the big focuses for us coming to '22 and '23 was rebuilding our talent base, where the events of '20 and '21 had not been helpful. That rebuild job is over, right? It doesn't mean we're done hiring because we're always going [indiscernible] for great talent. But we're no longer [indiscernible] rebuild, it's a build, right? If I could differentiate it that way.

Well, I'm not going to go into details of our compensation programs for obvious competitive reasons, Andrew. But I will say that as the world leading compensation consultant, and that includes sales compensation, we have a very good adviser internally on how we structure programs to make sure we maximize the value of the internal crossing.

We've characterized back our Investor Day where wealth is a low- to mid-single-digit growth business. So it's performing within those sort of areas of expectation. We do see the environment potential risk management as being one where we continue to be a valuable role for our clients over the upcoming year. We see that there continues to be interest in opportunities, whether those are annuity buy-ins and buyouts. We're probably less favorable environment for bulk lump sums, but we think that other derisking actions will make up for those opportunities.

Yes. Sure. So remember, we took on some incremental debt in the first quarter, and we're sitting on the cash related to a large portion of that related to the maturity that we have coming up in June. Again, that's $650 million. We took out $750 million. So you'll see a temporary uptick in interest expense as we're carrying both components of that for a couple of months.

Yes, sure. Thanks. I guess I'd look at it this way. The current tightened risk landscape and potentially changing rate environment creates more opportunities for us to help our clients manage their risk profile given the scale and depth of the solutions we can offer them. And given the demand we see in the marketplace, we feel good about delivering on our top line targets of mid-single-digit organic revenue growth and at least $9.9 billion in revenue.

Yes. I think we expect for the full year for it to be marginally higher than last year. And we -- from a payment timing perspective, we'll bleed into 2025, right? But the incurrence of all the costs will be in '24. There will be a couple of month lag as payments go out. So we do expect a net headwind there year-over-year for free cash flow margin.

Yes. There's nothing meaningful in there that's contributing to the growth from that. And mostly it's been driven by new business retention rates, very little impact from rate.

No, I think it's a good run rate. The asset levels, obviously vary by quarter. But on an annual basis, I think the yield should be fairly consistent.

So within R&B, as we alluded to earlier, rate has been a nonfactor in our business, and I just don't view sort of -- as Andrew said, right, it's -- our results have been driven by great retention and great new business. And we think with our strategy of specialization, those are sustainable. And we -- and continued focus, you need to continue to do.

So we very much view that as a one-off. This is a client that had a pronounced bent toward -- technology bent towards self-service. And we were a bit of an outlier in their portfolio of advisers. So while we would have preferred a different decision, we understand that decision. If anything, though, we see the market going the other way is that clients continue to deal with the complexity of what it takes to administer these programs and companies such as us can offer a more turnkey solution they could ever develop on their own.

Yes. So I mean, we are very pleased with the progress these group of hires have made and they are contributing to our success. But we think there is still more room to go, especially for the more recent vintages, right? This effort began in early '22 and continued through '23. The people we hired in '23 still don't have from [indiscernible]. And we've always said 6 to 18 months become fully productive.

We expect the expenses to be relatively even throughout the year in that regard, and it's really just the pacing of the revenue for project work that we expect to pick up throughout the rest of the year to get to that mid- to high-single-digit growth rate.

I mean that business is a combination of commissions, which is outside the U.S. is largely how we collect things. And then in the U.S., we have a very successful large market consulting business that's fee-based. So we're typically collecting fees as we earn them, but we keep the people on throughout the year.

Yes, it's a good question. Naturally, slower growth within that business, which is a net consumer of cash will foster a quicker move up the curve there on getting to breakeven and if positive on free cash flow. So that would definitely be a tailwind there if it did play out that way based on what we're hearing from some of the carriers at the moment in their expected growth rates.

Well, I mean, we certainly think there is room for us to grow market share, right. We think we have a differentiated service offering that shows very well for clients who appreciate a calculated approach to a smarter way to risk, right, we call it. And so we continue to see great potential and that is one of the reasons we think our new business results have been so strong as they are. And we think that has certainly the ability to continue forward.

Thank you. Thank you all again for joining us. I appreciate the hard work of all our WTW colleagues globally who've helped us start the year on such a solid note. I'd like to thank you, our shareholders for your continued support of our efforts. Have a great day.