01—Abstract
Summary
Summary of the 10-K filed February 24, 2023. Cited figures are marked; the original filing is the authoritative source.
Willis Towers Watson plc (WTW) reported full-year 2022 revenue of $8.87 billiona, down 1% as reported from $9.00 billion in 2021, driven primarily by unfavorable foreign currency movement; organic revenue grew 4%.
Income from operations fell to $1.18 billionb from $2.20 billion, largely because 2021 included a $1 billion income receipt from the terminated Aon transaction. Net income attributable to WTW was $1.01 billion, compared with $4.22 billion in 2021, which included the gain on the Willis Re divestiture to Gallagher. Adjusted EBITDA was $2.39 billion, roughly flat year over year, with adjusted EBITDA margin of 26.9%.
The company completed the sale of Willis Re to Arthur J. Gallagher & Co. and transferred its Russian subsidiaries to local management, which the filing says will cost approximately $120 millionc of annualized revenue and lost high-margin profits. WTW reorganized into two segments, Health, Wealth & Career (about 60% of segment revenue) and Risk & Broking (about 40%), and launched a three-year Transformation program with a total investment of $900 million and annual cost savings expected to exceed $360 million by the end of 2024.
Shareholder returns were significant: the company repurchased $3.5 billiond of shares in 2022, leaving approximately $1.3 billion of authorization, and cash and cash equivalents fell to $1.26 billion from $4.49 billion. Total debt was $4.72 billion at year-end, against $1.5 billion of undrawn revolving credit capacity.
The filing notes operating cash flow of $812 million and free cash flow of $674 million, both lower than 2021 due to the prior-year Aon receipt and the loss of Willis Re cash generation. The company reports effective internal control over financial reporting, and Deloitte & Touche LLP issued an unqualified audit opinion.
02—Key points
Key Highlights
- Revenue of $8.87 billion in 2022, down 1% as reported and up 4% organically, with currency translation reducing revenue by $335 million.
- Income from operations of $1.18 billion versus $2.20 billion in 2021, reflecting the prior-year $1 billion Aon termination receipt.
- Net income attributable to WTW of $1.01 billion, versus $4.22 billion in 2021, which included the Willis Re disposal gain.
- Adjusted diluted earnings per share of $13.41, up from $11.60, supported by a lower weighted-average share count after repurchases.
- Share repurchases of $3.5 billion during 2022 (15.7 million shares), with approximately $1.3 billion of remaining authorization; quarterly dividend of $0.84 per share declared for April 2023.
- Transformation program with total investment of $900 million, targeting annual cost savings above $360 million by the end of 2024.
- Russian business divested in 2022, with a $57 million deconsolidation loss and an estimated annualized revenue impact of approximately $120 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 24, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $8.87B$9.00B | −1.5% |
| Operating Expenses | $7.69B$6.80B | +13.1% |
| Operating Income | $1.18B$2.20B | −46.5% |
| Interest Expense | $208.00M$211.00M | −1.4% |
| Net Income | $1.01B$4.22B | −76.1% |
| EPS (Basic) | $9.00$32.88 | −72.6% |
| EPS (Diluted) | $8.98$32.78 | −72.6% |
| Shares Outstanding (Basic) | 112.00M128.00M | −12.5% |
| Shares Outstanding (Diluted) | 112.00M129.00M | −13.2% |
05—Questions
Frequently Asked Questions
Why did reported net income fall so sharply in 2022?
Net income attributable to WTW fell to $1.01 billion from $4.22 billion. The 2021 results included a $2.3 billion pre-tax gain on the Willis Re sale and a $1 billion income receipt from the terminated Aon combination, neither of which recurred in 2022.
How did the Russian divestiture affect WTW's results?
WTW deconsolidated its Russian entities in March 2022 and completed the transfer to local management in July 2022. The filing reports a $57 million loss on deconsolidation, $81 million of total net assets impaired, and an estimated annualized revenue impact of about $120 million, with lost profits that the company says will continue to weigh on earnings, margins and cash flow.
How much capital did WTW return to shareholders, and how is its balance sheet positioned?
WTW repurchased $3.5 billion of shares and paid $369 million in dividends in 2022. Cash fell to $1.26 billion and total debt was $4.72 billion, with the capitalization ratio rising to 32.0% from 25.7%. The company stated it was in compliance with its financial covenants and had its full $1.5 billion revolving credit facility available.
What is the Transformation program and what does it cost?
The three-year Transformation program, started in the fourth quarter of 2021, focuses on real estate rationalization, technology modernization, process optimization and other areas. The company expects cumulative costs of $630 million and capital expenditures of approximately $270 million, for a total investment of $900 million, with annual cost savings in excess of $360 million by the end of 2024.
What are the key risks highlighted in the filing?
The filing highlights inflation and rising interest rates, competition for talent, cybersecurity and data protection exposure, regulatory and sanctions risk, Brexit effects on the U.K. business (about 18% of 2022 revenue), material pension liabilities, and the risk of soft insurance pricing reducing commission revenue.
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