Willis Towers Watson Public Limited Company

Some of the comments in today's call may constitute forward-looking statements within the meaning of the Private Securities Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements unless required by law. For a more detailed discussion of these and other risk factors, investors should review the forward-looking statements section of the earnings press release issued this morning, as well as in the most recent Form 10-K and other subsequent WTWSUC filings. During the call, certain non-GAAP financial measures may be discussed to provide direct comparability with prior periods, all commentary regarding the company's revenue growth results, will be on a non-GAAP organic basis unless specifically stated otherwise. For reconciliations of the non-GAAP measures, as well as other information regarding these measures, please refer to the most recent earnings release and other materials in the investor relations section of the company's website. I will now turn the call over to Carl Hess, WTW's Chief Executive Officer. Please go ahead.

Good morning, everyone. Thank you for joining us for WTW's fourth quarter and full year earnings call. Joining me today is Andrew Krasner, our Chief Financial Officer. Julie Gebauer, our President of Health, Wealth, and Career, and Lucy Clark, our President of Risk and Broking, are also joining us for our Q&A session. We close the year with another strong quarter, driven by our focus strategy and its steady execution by all our WTW colleagues. Throughout the year, our strategic efforts to accelerate performance, enhance efficiency, and optimize our portfolio have strengthened our business, enabling us to achieve our financial objectives for 2025 and positioning us for continued success in 2026. Our strategic investments in talent and innovation in 2025 have accelerated performance. In risk and broking, our specialization strategy continues to fuel new business momentum In health, wealth and career, our focus on smart connections and innovative recurring solutions has translated into steady growth and across the entire business, our digital platforms and advanced data and analytics continue to differentiate WTW. We do. Our enterprise delivery organization and our relentless focus on right work, right place, right tools, and right space continue to enhance our efficiency, help us modernize how we operate, and drive further margin expansion. And finally, in 2025, we strengthen our business portfolio, starting the year without Transact and ending it with acquisition announcements, including New Front, Cushion, and Flowstone Partners. These transactions demonstrate our commitment to optimizing WTW's portfolio for growth and profitability in a disciplined and thoughtful way. Let me share more details about our strong financial performance. In the fourth quarter, we generated 6% organic growth, 80 basis points of adjusted operating margin expansion, and adjusted EPS of $8.12. As a reminder, Transact contributed 80 cents to adjusted EPS in Q4 of 2024. Excluding this contribution, adjusted EPS increased 13% year-over-year. For the full year, we had organic growth of 5% in line with our mid-single-digit target. We expanded adjusted operating margin by 130 basis points year-over-year to 25.2% and delivered adjusted diluted earnings per share of $17.08. In the fourth quarter health wealth and career organic growth accelerated from earlier in the year to 6% and the segment delivered 30 basis points of operating margin expansion excluding transact. In risk and broking we generated 7% organic growth in the quarter and expanded adjusted operating margin by 120 basis points. The 8% organic growth in our corporate risk and broking business marks the 12th consecutive quarter that the business has recorded high single-digit growth, excluding the impacts of business activity and interest income, despite a more challenging pricing environment. I'm particularly pleased with the strong results in our CRB North America business, which grew by high single digits, driven by increased M&A activity and new business across several specialty lines, including construction and surety. As evidenced by our fourth quarter performance and new business wins, we saw attractive returns on our investments in talent and innovation in 2025 and will continue to prioritize investment opportunities that further accelerate our performance. A good example of this is our strong and growing presence in the digital infrastructure space, where we're proud to support five of the 10 largest data center developers globally. We recently added one of those five in a competitive RFP process for their master builders risk placement. The client shows us for the breadth and depth of our expertise in construction, energy, technology, and other specialties, as well as our global capabilities and connectivity. As that win shows, our specialization strategy underpins our ability to support clients across the full data center lifecycle, from planning to operation. We have a track record of supporting the largest developers with our industry-leading analytics. This, along with our deep subject matter expertise across cyber, contracts, environmental, and property risks, allows us to deliver comprehensive risk management solutions for every aspect of data center development and operation. Our construction specialty business is seeing strong results in CRB North America. Recently, WTW was selected as the commercial insurance broker for two major U.S. bank headquarter renovation projects collectively valued at well over $1 billion. These high-profile wins underscore our team's strong expertise and technical proficiency in construction and our unified and highly analytical approach to helping solve our clients' challenges. I also want to mention a large win across both R&B and HWC from a leading Nordic industrial company, supporting insurance, benefits, and pension programs the company had previously handled in-house. This success reflects our ability to make smart connections across segments and leverage our relationships and expertise to devise solutions that clients cannot achieve on their own. In HWC, our commitment to smart connections, technical depth, and product innovation continues to drive growth across our businesses. For example, our health and benefits and retirement teams connected to unseat the incumbent of a UK headquartered global engineering company to win a comprehensive benefits project to ensure competitive and cost-effective coverage for private medical insurance and other employee benefits and pensions. In another example, a leading financial services company with employees in all the EU member states chose us to prepare them for the EU Pay Transparency Directive. Our sophisticated pay equity analysis that incorporates the value of benefits, our proven career framework, and our communication and change management approach were the differentiators that helped us secure the business. Finally, our new products and solutions like LifeSite continue to gain market share. In a notable example, a Fortune 50 technology company chose LifeSite as its master trust pension program in the UK due to their confidence in our investment proposition and our differentiated member experience. This appointment added 400 billion sterling of assets under management to LifeSite. As you see in our fourth quarter and full year results, we delivered margin expansion along with our growth. We do continue to be a major driver of our growing profitability. In particular, WeDo enabled AI and automation are central to enhancing our efficiency across the company, maintaining operational discipline, and creating lasting cost savings. These capabilities are already embedded in our enterprise operating model and global delivery centers, enabling teams to solve real business challenges, accelerate priority initiatives, and unlock new sources of value. Building on this momentum, we're advancing smarter, more efficient solutions that enhance client service, including partnerships with leading agentic AI innovators to explore high-impact use cases. Our approach is focused on solutions that complement human expertise, boost productivity, and simplify operations, all while maintaining robust governance in alignment with WTW standards. We do as a critical driver of our operating margin expansion in 2025, and we expect to see continued benefits as we scale automation, expand our delivery centers, and further embed these capabilities across WTW. Finally, I'd like to highlight our progress in optimizing our portfolio. We've shared our inorganic priorities, improving our business mix, expanding our reach across the value chain, and enhancing our growth, margin, and free cash flow profile. We advanced these priorities in 2025, which was highlighted by our recent acquisition announcements and the divestiture of Transact. Going forward, we'll continue to evaluate potential opportunities to optimize our portfolio. As we announced last week, we closed the new front acquisition on January 27th, and the business is now operating as part of WTW. Newfront brings a modern, technology-enabled approach to middle-market broking, combining deep specialty expertise with a proprietary digital and AI-driven platform. Their approach aligns closely with our focus on specialization, innovation, and efficiency, and we're proud to welcome the Newfront team to WTW. During 2026, we'll be laser-focused on seamlessly integrated Newfront's team and technology into WTW, retaining an empowering talent bringing our resources, scale, and global footprint to Newfront clients, and combining our highly complementary technology and capabilities to deliver an integrated end-to-end technology platform that will drive growth, enhance efficiency, and better serve our clients. Spike Lipkin, Newfront's CEO and co-founder, will be focused on integration, client development, talent acquisition, and technology. We're taking a deliberate and thoughtful approach to ensure we maintain continuity for new front clients and minimize disruption. We've established a dedicated integration management office to oversee the transition and to carry out a disciplined and phased approach to integration. We continue to see meaningful opportunities to generate synergies over the next three years. I also want to highlight other transactions that will further optimize our portfolio and reinforce our capabilities in high growth markets. During the fourth quarter, we announced the acquisition of Cushion, a cutting-edge UK fintech pensions and savings provider, which will strengthen our position in the fast-growing UK defined contribution master trust market. Cushion's innovative, technology-led solutions complement LifeSite and enhance our master trust offerings. We expect to complete the acquisition of Cushion in the first half of 2026. We also agreed to acquire Flowstone Partners, a private equity secondary specialist that will expand access to private markets for individual and institutional investors. We expect to complete the Flowstone acquisition later this quarter. Taken together, these transactions reflect a disciplined and deliberate approach to portfolio optimization aligned with the strategic priorities and financial framework we laid out at our 2024 Investor Day. As I look at the year ahead, I feel confident in our position and our positive outlook for 2026. This outlook aligns with our long-term guidance of mid-single digit organic growth, adjusted operating margin expansion, and free cash flow margin expansion, and is supported by the same core tailwinds that contributed to our success in 2025. We have strong momentum in the market. We continue to make steady progress executing our strategy. And the political and regulatory environment worldwide remains highly dynamic, driving clients to seek our advice and solutions to protect and strengthen their businesses. While we remain positive about current macroeconomic and market conditions, of course, we're closely monitoring potential headwinds to our business in the year ahead so that we can respond appropriately. That said, given our competitive advantages and momentum across the business, I'm confident in our ability to deliver on our goals. With that, I'll pass it to Andrew for a more detailed discussion of the financials and 2026 outlook.

Thanks, Carl. Good morning, and thanks, everyone, for joining us today. In the fourth quarter, we delivered solid organic revenue growth of 6%, and expanded adjusted operating margin by 80 basis points year-over-year to 36.9%, with 30 basis points of year-over-year improvement when excluding Transact. Adjusted diluted earnings per share were $8.12, which is an increase of 13% over the prior year when excluding Transact. For the full year, our strong results were in line with our long-term financial framework. We delivered organic revenue growth of 5%. Adjusted operating margin expanded 130 basis points to 25.2%, reflecting 80 basis points of year-over-year improvement, excluding Transact. Adjusted diluted earnings per share were $17.08, up 13% over the prior year when excluding Transact. Our fourth quarter results reflect the benefits of our investments in talent and technology, as well as the commitment and diligence of our colleagues. Our strategy continues to resonate despite ongoing macro uncertainty, and we remain focused on executing our strategic objectives and creating long-term shareholder value. Turning to our segment results, health, wealth and career revenue grew 6% compared to the fourth quarter of last year. For the full year, HWC revenue grew 4% in line with our outlook of mid single digit organic growth. Our health business achieved solid growth of 4% this quarter. This was on top of the 18% growth rate achieved in the prior year quarter. Excluding book of business settlement activity, and interest income headwinds, growth was 6% for the quarter and 7% for the full year, primarily driven by double-digit increases in international and strong performance in Europe. Results in international were driven by new business acquisition, successful renewals, healthcare inflation, and market expansion. In Europe, the strength of new business and renewals generated growth. In North America, growth was offset by a book of business sale in the prior year fourth quarter. We continue to expect strong demand across the global business, driven by healthcare inflation and employers' continued focus on managing costs while maintaining competitive employee benefits. As a result, we expect health to deliver high single-digit growth in 2026. Wealth had strong growth of 5% in the fourth quarter, primarily from increased levels of retirement work globally. Demand for our core defined benefit work including new client appointments and support for regulatory changes and data projects, remained strong. We also saw growth from project work to support pension surplus utilization and workforce management. New solutions in Europe, including an innovative pension risk transfer solution in Germany and early retirement services in Spain, also contributed to growth. Our investments business grew due to new products alongside enhanced capital market conditions and client wins. With good momentum in the wealth business, we expect growth at the high end of the low single-digit range in 2026. Career growth was 10% in the fourth quarter, primarily driven by robust demand for broad-based advisory services, compensation benchmarking and survey work, and the impact of a change in survey delivery patterns, which we highlighted on the Q3 call. This dynamic shifted some revenue from last quarter into this quarter. In addition, a book of business sale contributed to careers revenue growth this quarter. For 2026, we expect mid-single-digit growth for career based on our continued focus on product and technology offerings, recurring services, and increased demand for a wide range of advisory services, including those related to implementation of the EU Pay Transparency Directive. Benefits Delivery and Outsourcing, or BDNO, grew 5% versus last year's fourth quarter, primarily driven by increased commission revenue in our individual marketplace business. As we had indicated on our prior calls, this was expected as BDNO generates almost half its revenue during the fourth quarter, primarily due to the timing of commissions and onboarding of new clients. Global outsourcing also grew revenue this quarter from core administration engagements and expanded project work. While we expect BDNO to achieve mid-single-digit growth over the long term, We are projecting low single-digit growth in 2026 as we absorb the impact of changes in the Medicare market. In line with the revenue pattern I mentioned, growth will be concentrated in the fourth quarter, and rates in the first three quarters could fluctuate considerably. HWC's operating margin in the fourth quarter was 44.3%, an increase of 240 basis points compared to the prior year. or an increase of 30 basis points excluding the impact of the transactive estature. For the full year, HWC's operating margin grew 230 basis points or 60 basis points excluding the impact of the transactive estature compared to the prior year. This result demonstrates our ability to consistently deliver incremental margin expansion regardless of cyclical macro conditions and supports our expectation of continued margin expansion in HWC in 2026. Moving to risk and broking, the strong revenue growth of 7% in the fourth quarter reflects the continued momentum in the business. Our specialization strategy and investments in talent, data, and technology continue to drive sustainable growth. For the full year, R&B revenue grew 6%. Excluding the impact of book of business settlement activity and interest income, growth was 7% for the full year. Corporate risk and broking grew 8% for the quarter. For the full year, CRB revenue grew 7%. Excluding the impact of book of business settlement activity and interest income, growth was 8% for the full year. This was on top of the 9% growth rate CRB achieved in the prior year. CRB's growth this quarter was primarily driven by our global specialization strategy, which continued to support new business wins and client renewals despite more challenging rate environments. We recorded significant new business activity across all regions this quarter with notable contributions from construction, surety, marine and credit risk solutions. As expected, we continue to see a challenging growth environment with rate softening across various lines. Nonetheless, our specialization strategy is resonating in the market and we are pleased by the results. We continue to expect mid to high single digit growth in CRB for 2026. In our insurance consulting and technology business, revenue declined 1% versus last year's fourth quarter when ICT delivered 11% growth. Full year growth was 1% compared to 4% last year. Our combined approach of consulting and technology continues to add value. However, the trends we've highlighted in the last three quarters still persist with continued weakness as expected in the consulting environment and clients remaining cautious about making large multi-year technology implementation decisions. We continue to shift the balance of our business from consulting to technology over time. We are encouraged by our pipeline on the technology sales side and do not expect to see a meaningful pickup in consulting activity in the short term. For 2026, we continue to expect low to mid single digit growth in the business. Turning back to R&B's results overall, We are pleased with our momentum entering 2026, which gives us confidence in our ability to deliver mid to high single-digit growth for the full year. R&B's operating margin was 34.7% for the fourth quarter, a 120 basis point improvement over the prior year. This was primarily driven by operating leverage from strong organic revenue growth coupled with continued expense discipline. Foreign exchange rates were a tailwind of 10 basis points operating margin in the fourth quarter, due to the weakening US dollar. For the full year 2025, we achieved 100 basis points of operating margin improvement in R&B, or 120 basis points excluding the impact of foreign currency. We remain committed to delivering 100 basis points of average annual adjusted operating margin expansion over the next two years. As Carl highlighted earlier, the investments we've made in our technology and our WeDo capabilities continue to create value and provide a strong platform for us to deliver ongoing operating leverage and efficiencies across the business. Lastly, let me provide some additional color on our enterprise level results. Adjusted operating margin for the fourth quarter was 36.9%, an 80 basis point improvement over the prior year, reflecting strong margin expansion in the segments. This result includes a 50 basis point tailwind from the transactive estature. As we enter the first quarter of the full year, All our businesses will continue operating with discipline and rigor, giving us confidence in our ability to continue to expand margins. Foreign exchange was a tailwind to adjusted EPS of 18 cents for the quarter. Based on our current outlook and at current spot rates, we expect foreign exchange to be a tailwind of approximately 30 cents to adjusted EPS for 2026. The impact is primarily expected to occur in the first quarter due to the seasonality of our Euro-denominated revenues. Our U.S. GAAP tax rate for the quarter was 20.8% versus 26% in the prior year. Our adjusted tax rate for the quarter was 20.8% compared to 21.1% for the fourth quarter of 2024. For 2026, we expect the full year adjusted tax rate to be relatively consistent with 2025. We generated free cash flow of $1.5 billion for the 12 months ending December 31st, 2025. an increase of $279 million from the prior year, bringing our free cash flow margin to 15.9% compared to 12.8% in the prior year. This was driven primarily by reduced transformation program cash costs and operating margin expansion. We expect to continue expanding our free cash flow margin in 2026 from operating margin expansion and the absence of transformation program cash costs, with partial offsets from transaction and integration expense related to our recently announced acquisitions. During the quarter, we returned $439 million to our shareholders via share repurchases of $350 million and dividends of $89 million. For the full year, we returned $2 billion in capital to shareholders. We continue to view share repurchases as one of our primary methods of capital return, and an attractive use of capital to efficiently deliver value to WTW shareholders. Looking ahead, we expect to allocate at least $1 billion to share repurchases in 2026, subject to market conditions and potential capital allocation to organic and inorganic investment opportunities. We're confident our balanced and disciplined capital allocation approach will generate long-term shareholder value. We'll continue to be selective as we invest in talent and in our platform, to ensure we're driving sustainable growth and margin expansion. As part of our investment program, we will continue to make investments in our reinsurance JV as it scales its newly launched commercial operations. We expect this to be a headwind of about 30 cents to adjusted EPS this year. In closing, we are pleased by our strong performance in 2025. We are increasingly seeing the execution of our strategy yielding tangible results and generating strong momentum as we enter 2026. With that, let's open it up for Q&A.