Nearly a year after Willis Towers Watson PLC completed the sale of its reinsurance business for an initial payment of $3.25 billion, Willis Towers Watson PLC expects to make some acquisitions of its own as the prices of businesses fall, its top executive said Thursday as he discussed the brokerage’s third quarter results.
WTW is also ramping up its hiring, following an exodus of some high-profile executives amid the uncertainty surrounding Aon PLC’s failed bid to buy the brokerage.
Meanwhile, WTW’s revenue for the third quarter fell slightly, although organic revenue increased.
While WTW will continue to focus on share buybacks in its capital allocation strategy, the company will also look to make acquisitions to fill gaps in its capabilities, CEO Carl Hess said on a call with analysts.
“Valuations seem to be coming down from levels where we just didn̵7;t think they could be value-creating for us,” he said. “There are opportunities across the spectrum of the businesses we operate in.”
Mergers and acquisitions among insurance brokers have increased sharply in recent years, although there are some signs that the volume of business is picking up as interest rates rise, among other things.
WTW has also increased its hiring after losing some senior brokers to rivals in 2020 and 2021.
“Our ongoing investments to restructure our talent base continue as expected. The hiring pace in the third quarter matched that in the first half of the year,” he said.
WTW reported $1.95 billion in revenue in the third quarter, down 1% from the same period last year. On an organic basis, which excludes currency effects, mergers, acquisitions and divestitures, revenue increased 6%.
Net income for the quarter fell to $192 million, compared to $907 million in the prior year. Transaction and transformation program costs, following the sale of its contract reinsurance business to Arthur J. Gallagher & Co. last year accounted for a significant part of the profit decline. Adjusted earnings before interest, taxes, depreciation and amortization for the third quarter were $408 million, a decrease of 2%.
WTW reported $765 million in revenue in its risk and brokerage sector in the third quarter, down 2.8% from a year earlier, but up 6% on an organic basis. Aviation, natural resources and financial lines drove much of the organic growth, WTW said in its earnings report.
Its health, wealth and career business reported $1.16 billion in revenue for the quarter, down less than 1% overall and up 4% on an organic basis.
During the third quarter, WTW completed the previously announced transfer of its Russian operations to local management. As a result of the deal, WTW lowered its 2024 revenue target to $9.9 billion or more from its previous target of $10 billion or more.