Willis Towers Watson Public Limited Company

Good morning. Welcome to the WTW earnings conference call. Please refer to WTWCO.com for the press release and supplemental information that were issued earlier today. Today's call is being recorded and will be available for the next three months on WTW's website. 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 WTWSCC 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 first quarter 2026 earnings call. Joining me today is Andrew Krasner, our Chief Financial Officer, and Spike Lipkin, our Chief AI Officer, who will share his perspective and touch on our integration efforts following our acquisition of New Front. 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. As a first order of business, I want to note my deep appreciation for our colleagues in the Middle East who have remained available to address client needs even as their lives have been disrupted by conflict. I also want to express our ongoing commitment to supporting our colleagues and clients as they manage this stressful environment. Now I'll turn to our results. In the first quarter, we delivered 3% organic growth with adjusted operating margin of 22.3% and $3.72 of adjusted diluted earnings per share. Revenue came in at the low end of our plan as we saw the effects of a more challenging and volatile global market environment during the quarter, particularly considering our meaningful presence in the Middle East region. Despite the slower than expected growth, our ongoing efforts to enhance efficiency helped us generate operating leverage and 70 basis points of year-over-year margin expansion. External conditions in the first quarter were mixed. We saw high healthcare inflation, regulatory changes, and a higher volume of corporate transactions, along with elevated geopolitical risk, economic uncertainty, market volatility, and rapid technological change. These conditions created both opportunities and challenges for our business. Throughout the quarter, clients sought our counsel to better manage cost and risk, asking for advice, contextual judgment, and specialized expertise to weather dynamic markets. At the same time, we saw short-term headwinds as conditions in the Middle East caused clients in the region to postpone advisory projects. Unfavorable market movements and uncertainty also weighed in on economically sensitive businesses and led some clients to pause more discretionary spending and delay some decisions. Nonetheless, we continue to see solid traction in the market for our solutions, with our strategic focus on specialization, data and analytics, and smart connections resonating with clients. We remain confident in our long-term outlook and our ability to accelerate performance and drive growth through our investments in our solutions, talent, technology, and data. Notably, our AI enabled solutions are gaining scale and generating growth as they deliver better outcomes for clients. For example, in HWC, Rewards AI, which applies generative AI to WTW's proprietary data for compensation benchmarking, now serves over 2,500 client users. Our AI assistant expert was named a 2026 Lighthouse Tech Award winner in the category of Practical AI, recognized for delivering measurable efficiency gains and value for HR and benefits teams. And we expect many clients to undertake AI workforce transformation projects that we will deliver with our newly developed WorkView agent, which evaluates the automation potential of all roles across an organization. In risk and broking, following two successful pilots in the second half of 2025, we're implementing an AI-powered operating system across the business. This accelerates the core technology that we've developed in our broking platform and integrates our risk and analytics modeling tools into our service platforms. The result is radically improved insight on risk and an expedited placement process. During the first quarter, we also introduced some elements of NuFront's proven technology to enhance the front end and add more agenda capabilities. substantially reducing the administrative burden on our people and transforming our ability to serve our clients. In claims, we're rolling out our digital global claims platform that builds on our broader CRB strategy. The platform uses AI and advanced analytics to reduce process complexity, shorten claims life cycles, and improve outcomes for clients. It also gives us better insight into claims performance standards across carriers and geographies. These investments use technology to strengthen and scale our human led judgment, advocacy and accountability. The same applied innovation mindset also extends to how we're helping clients manage complex and fast moving risk environments. Recently, our physical risk climate team was recognized for its work with a large semiconductor client for whom we developed new solutions to help manage climate and infrastructure related vulnerabilities across multiple geographies. These capabilities enable clients across the technology industry to quantify and prepare for risks that fall outside traditional frameworks. Against that backdrop, we saw several notable client engagements this quarter that demonstrate how WTW is helping clients navigate complexity by combining data and analytics, insight and technology. In health, wealth, and career, a large global employer in the consumer cyclical sector selected WTW for support on a quick burn project to prepare for a divestiture. The client valued our divestiture in a box offering that incorporates prepackaged solutions with technology-enabled delivery. In another HWC win, the CHRO of a global technology company recognized that HR needed a trusted partner, a partner with deep expertise on work design, jobs, and skills to help them develop an AI strategy they could execute. Our work and rewards and employee experience teams were engaged to build an end-to-end solution, including a talent and skills framework, a transformation roadmap, a process to build newly needed skills, and overall change management strategy. Our subject matter expertise and our AI tools differentiated us. In risk and broking, we're particularly proud of the team who recently won all lines for a global Fortune 100 company in the U.S. following a multi-stage process that highlighted our analytics expertise and strong global coordination across our specialties. Starting with a comprehensive property and casualty review in the summer of 2025, we delivered actionable insights that established credibility and set us apart in the RFP with our advanced analytics, global connectivity, and technology-enabled service platform. This win underscores the strength of our globally integrated specialty model and our ability to translate analytics into measurable client value and will result in strong revenue growth for us this year. Another recent win by our surety team highlighted our global reach and ability to solve complex specialty placements. We were selected by a leading global supplier of nuclear technology to address the consolidation of a fragmented surety program previously managed by two global brokers. Additionally, we were tasked with structuring and executing a major syndicated surety facility designed to support the client's ambitious $80 billion project pipeline over the next three years. One of the largest non-construction surety syndications currently in the market. Securing this mandate positions CRB surety as a key strategic partner and provides a robust platform for our continued growth within the nuclear energy sector where we expect strong growth over the course of 2026. Finally, we secured a significant win in the rapidly growing AI and digital infrastructure industry with one of the leading companies in the construction and operation of advanced data centers. Our team won the entire program from a broker relationship that spanned over 15 years, covering both construction and operations by showcasing our construction specialty and analytics expertise, as well as our ability to advise on complex construction risks in almost every country in the world. Our support for the client extends beyond core services. For instance, we just assisted with a bond required for a project closure in Europe, filling a gap left by their previous surety broker. The client has appointed us on their next three data center projects without a competitive process, and we'll see that work come through in 2026. Innovation also remains a significant driver of our efforts to enhance efficiency. WeDo, our enterprise delivery organization, continues to support our businesses in deploying automation and AI and optimizing utilization of our global delivery centers. As AI adoption rises across the company, we're seeing increasing benefits to efficiency and productivity. For example, last July, we introduced our Call Note Assist tool. Since then, it's been used to summarize over 1.6 million calls in our outsourcing contact center, enabling a 33% reduction in post-call wrap-up time. DocLM, our proprietary AI document ingestion tool, extracts and organizes key terms such as exposures and insurance clauses, significantly streamlining compliance and portfolio oversight. And our CRB affinity team has used AI to achieve a 90% reduction in endorsement processing time. With that, I want to step back and underline what we're seeing and expect to see in our business regarding AI. Clients are not choosing between human expertise or technology. They expect both. They want trusted advice and a trusted partner to help them navigate the complex environment, adding analytical rigor and sound judgment to the decisions they're facing. And they want applications and platforms that give them real-time access to data and insights, regardless of how difficult it might have been to obtain the information or how much effort it would have taken to analyze it previously. This is why I believe WTW will lead and benefit from AI solutions in the long term. Our position in the industry and our structural advantages give us the opportunity to use AI to drive growth and efficiencies in ways that newcomers, carriers, and clients cannot or do not have the incentive to pursue. Let me explain. First, Our services are complex, highly specialized, and mission critical for nearly all companies. Clients value working with trusted advisors like WTW because our guidance comes with real accountability. In making complex or important decisions, expert judgment matters, and the potential upside of bypassing experienced accountable advice is not worth the downside of getting it wrong and dealing with the repercussions. Second, AI enhances efficiency, but does not enhance trust and alignment. AI streamlines workflows and lowers cost to serve, but it does not deliver the judgment, adequacy, and accountability that both clients and carriers expect. AI can inform decisions, but it does not negotiate with carriers, advocate on behalf of insurers in the claims process, or provide bespoke advice to help navigate through complexity. For buyers of our offerings, the risk of foregoing that value proposition and getting it wrong is considerable. Third, our structural advantages are hard to replicate. Our aggregated proprietary data, deep relationships and global scale, which have been developed over time, create meaningful benefits for clients and carriers. In HWC, we have decades of longitudinal workforce data, actuarial IP, and deeply embedded outsourcing platforms. In R&B, we have proprietary data which encompasses risk and placement insights across carriers and geographies. Finally, AI itself is increasing demand. In addition to growing client interest in more sophisticated analytics and advice, including guidance about AI workforce transformation, AI is creating new AI-related risks in amplifying existing risks in cyber and other markets, fueling demand for novel insurance solutions that we believe we are well-positioned to create and implement. To give you deeper insight into this, I'd like our new chief AI officer, Spike Lipkin, to share some of his thoughts. As you know, with our focus on portfolio optimization, WTW recently acquired NuFront, a San Francisco-based startup which grew into the leading AI-powered broking platform. Spike co-founded New Front and led its efforts to disrupt insurance broking. And as WTW's chief AI officer, he'll help shape how AI advances WTW's long-term strategy and integrate New Front's technology with WTW's to create a true end-to-end digital ecosystem. His experience building New Front and planning and executing this integration gives him a unique and valuable perspective. With that, I'll turn it over to Spike.

Thanks, Carl. I'm excited to be here because AI is clearly central to W2W's strategy and it will become a key driver of value for both our clients and our business. Gordon Wintraub and I started New Front in 2017 because we believe that advances in technology would create new risks around cyber, IP liability, property, which would expand broker revenues and at the same time reduce the cost of delivering services. While all of this has happened, there's even more opportunity ahead. And we still believe that insurance brokers, especially those with scale and data like us at WTW, will be massive beneficiaries of AI advances. At New Front, we built infrastructure to take advantage of these developments to provide better client and colleague experiences. The results are clear. Colleagues who use our technology sell about 50% more than those who do not. And our client attrition rate drops by half when clients use our tools, compared to those who do not. However, over eight years, we found that with highly advanced technology, global reach, expertise, and access to proprietary data are still tremendously important. AI is no substitute for WTW's meaningful influence with carriers to drive better client outcomes. Moreover, AI is most effective when supplied with vast amounts of proprietary data, which WTW has. Our conclusion was obvious. Lasting advantage would accrue to scaled platforms that combine data and specialized expertise with AI to supercharge the entire system. After evaluating a range of options, we made a deliberate decision to move to WTW, where we saw the foundation for that advantage in two ways. First, its position as an industry leader in data and analytics. And second, its operational agility that comes from being a genuinely integrated enterprise rather than a collection of siloed businesses. This level of integration is uncommon in the industry and critical for success. As models become widely available, much of the business impact will depend on employee adoption and reskilling. This is much more straightforward in an organization with shared processes, consistent standards, and aligned incentives than one fragmented across independent business units. Moreover, The data lives in one place rather than across a series of disconnected platforms. We believe this gives WTW a significant competitive advantage, which is why we chose to join them and build an end-to-end AI-powered broking platform together. We're now working at pace to integrate New Front's technology into WTW's environment to create this intelligence platform that unlocks significant growth and efficiency opportunities for the entire enterprise. Our goal is to allow colleagues to spend more time on client facing work and less time on administrative tasks. We also believe having the leading technology will attract talent to WTW, especially those in search of novel digital tools to deliver better client outcomes. An AI fluent workforce is a massive competitive advantage in this industry, which has historically lagged in technology adoption. Our detailed roadmap to integrate Newfront's existing tech into WTW's business starts with North America. Several tools are implementation ready, and we are embedding engineers with professional teams and seeing early successes. For example, several AI tools are being utilized by client-facing teams, like Coverage Gap Analysis, our AI-powered coverage review tool. We are also quickly rolling out Navigator, which centralizes clients insurance programs in one platform and partner management, our AI-driven third-party insurance compliance tool. And our Newfront professional teams are already benefiting from the WTW platform with several large notable wins that combine Newfront tech with WTW resources to bring on clients we never could have won on a standalone basis. For example, a multi-state mid-size healthcare provider selected us as their health and benefits broker because of WTW's deep healthcare expertise and cost management approach combined with NuFront's technology capabilities. In another case, a rapidly growing energy client selected us because of NuFront's technology combined with WTW's energy expertise. Additionally, in CRB, the combined expertise of NuFront and the WTW team enabled us to retain the P&C placement for a high profile AI developer. As we shared when the acquisition was announced, we expect momentum to build over time as we build the intelligence layer for insurance. We are keenly focused on implementation as addressing this component is more than half the challenge. This is the most exciting moment our tech team has ever experienced, and we are committed to preserving our early lead. We expect the next few years to be some of the most exciting and impactful in our business, and we're thrilled to be advancing our work at WTW.