2022 brokerage revenue: $8.73B
Percent decrease: -1.1%

Willis Towers Watson PLC’s brokerage revenue slipped last year as it continued to rebuild its operations following its failed sale to Aon PLC, but its organic revenue growth accelerated in the second half of 2022. 

The brokerage, which saw Carl Hess take the helm as CEO at the start of last year, also revamped its senior leadership, made changes to its North American corporate risk and broking arm and continued to make progress with its transformation program. 

High-profile hires included Michael Chang, formerly with Sompo International Holdings Ltd., as head of corporate risk and broking for North America. Under Mr. Chang’s leadership, the business has since been restructured into industry verticals. 

Employee growth accelerated last year, and while WTW will always be in the market for talent, the rebuilding is largely complete, Mr. Hess said. 

“There’s always a lag between when you bring somebody on and when they’re fully productive, but the revenue associated with the people we brought in is in line with our expectations, even if there’s still room for them to fully ramp up,” Mr. Hess said. 

Employee retention has been trending favorably, in part because WTW is “a much more stable organization” than it was 18 months ago, he said. 

Among its hires over the past year, WTW brought back almost 800 people who had previously worked for the company. 

WTW reported $8.73 billion in brokerage revenue in 2022, a 1.1% decline from the prior year, and retained its position as the world’s third-largest brokerage. 

After picking up in the second half of 2022, organic growth continued to improve into this year’s first quarter, as WTW’s risk and broking operation saw a 10% increase.

Some 4% of brokerage revenue WTW reported in 2022 came from organic growth, which refers to the growth in commission and fees, and excludes acquisitions, discontinued operations and foreign currency exchange fluctuations.

The company is still working its way back to performing consistently among its broking peers, analysts say. In the first quarter, WTW revised its free cashflow guidance and flagged pension income as a potential earnings headwind. 

Consensus analyst estimates for company revenues and earnings for the balance of this year and next year are already lower than WTW’s guidance, said C. Gregory Peters, managing director-equity research, at St. Petersburg, Florida-based Raymond James & Associates Inc. 

Once WTW’s management makes those revisions, the hope is that things will have “bottomed out” for the brokerage, Mr. Peters said. 

WTW “no longer has a reinsurance business and that’s one of the businesses right now showing the strongest growth in the brokerage market,” but the company’s growth in the second half of 2022 and this year’s first quarter did start to improve, said Elyse Greenspan, managing director, equity research, insurance, at Wells Fargo Securities LLC in New York. 

The company sold its reinsurance business to Arthur J. Gallagher & Co. in late 2021. 

WTW’s exit from Russia in March last year was another headwind that hit its margins and earnings per share expectations and guidance, she said. 

“We put together a series of targets not just for EPS but for revenue and profitability for 2024, and we see what the bridge is we have to construct to get there on that,” Mr. Hess said, adding, “It’s a bridgeable gap.” 

In general, growth is robust and above average in all specialty areas, including natural resources and construction, Mr. Hess said. Directors and officers liability insurance has slowed due to declining rates, while transactional business across the industry has also slowed with rising interest rates, he said. 

WTW has said it expects to deliver mid-single-digit revenue growth this year. 

Mergers and acquisitions are also back on the table, though “big, transformative M&A” is not what WTW has in mind, Mr. Hess said. 

“If there are organizations that help us, whether it’s deepening one of our specialty businesses or helping with the geographic footprint that lets us serve multinational organizations more effectively, we’re interested and we’re going to explore,” he said. 

Last year, WTW acquired Butterwire Ltd., a financial analytics company with expertise in climate risks, and completed the acquisition of Leaderim, an insurance broking and risk consultancy business in Israel. It also acquired the remaining 51% of its India joint venture.