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Willis Towers Watson PLC on Wednesday reported 2.9% growth in 2019 second-quarter revenue and organic revenue growth of 6%, as it completed its acquisition of Fort Lee, New Jersey-based direct-to-consumer health care organization MG LLC, which does business as Tranzact.
The purchase price of Tranzact increased to $1.32 billion from $1.2 billion, subject to certain adjustments, Willis Towers Watson said in a separate U.S. Securities and Exchange Commission filing on Wednesday.
The potential earnout payment due if certain financial targets are met in 2019 and 2020 was also lowered to around $17 million, payable in cash, the filing noted.
Willis Towers Watson expects to incur between $20 million and $25 million in costs as a result of the Tranzact acquisition primarily related to transaction costs, top executives said during a conference call discussing its second-quarter results Wednesday.
Willis Towers Watson reported revenue of $2.05 billion in the second quarter of 2019, compared with $1.99 billion in the prior year period.
“I’m pleased with our second-quarter financial results and the continued momentum in our business,” John Haley, Willis Towers Watson’s CEO said during the analysts’ call.
“This marks the fourth consecutive quarter in which we’ve generated organic revenue growth of 5% or greater and improved margins,” said Mr. Haley.
Corporate risk and broking, its second largest business unit, reported revenue of $690 million for the second quarter of 2019, a 2.4% increase over the prior-year period.
Organic revenue growth for the unit was 5%, with North America’s revenues growing by 6% in the second quarter primarily as a result of new business, Mr. Haley said.
Commercial risk and broking’s international revenue grew by 8% in the second quarter, “driven by new business wins and higher renewals in central America and the Caribbean, as well as new business wins in Asia and Australasia,” he said.
Western Europe contributed 5% revenue growth in the second quarter, with growth led by “strong renewals in Sweden in addition to new business wins in large and midmarket accounts in Iberia and France,” he said. Great Britain contributed 4% revenue growth, mainly from the aerospace business, he said.
Willis Towers Watson’s investment, risk and reinsurance unit reported revenue of $409 million for the second quarter, up 6.2% from the prior-year period, and an increase of 8% on an organic basis.
Reinsurance growth of 10% led the segment’s growth, a combination of net new business and favorable renewals, Mr. Haley said during the call.
Wholesale revenues increased by 11% on an organic basis in the second quarter, driven by growth in specialty business, he said. Overall wholesale business was up 20% including results from London-based broker Miller Insurance Services LLP’s acquisition of Alston Gayler and Co. Ltd.
Willis Towers Watson is seeing pricing uplift in most lines of business, Mr. Hayley said, except for workers compensation and international liability, where rates continue to decline.
“One of the things we have to do in the face of rate increases is see what we can do to get as good a bargain for our clients as possible, and sometimes that suggests moving business, looking for alternatives or buying a little less insurance,” he said.
Only a portion of Willis Towers Watson’s business is commission-based, so the effect of rate increases doesn’t automatically flow through, he said.
For the first half of 2019, Willis Towers Watson reported revenue of $4.36 billion, a 1.8% increase over the same period in 2018.
Corporate risk and broking reported first-half revenue of $1.42 billion, unchanged from first half 2018.
The company now expects revenue growth of 7% to 8% for 2019, including the acquisition of Tranzact, it said in an earnings statement.
Willis Towers Watson PLC has agreed to buy direct-to-consumer health care organization Tranzact for $1.2 billion, the brokerage said Sunday, in a deal reflecting its renewed focus on strategic mergers and acquisitions.