ARLINGTON, Va. and LONDON, Feb. 09, 2021 (GLOBE NEWSWIRE) -- Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company, today announced financial results for the fourth quarter and full year ended December 31, 2020.

“Our performance in the fourth quarter provided a strong finish to a good year in a difficult environment,” said John Haley, Willis Towers Watson’s chief executive officer. “We produced solid margins, almost doubled free cash flow, and delivered remarkable adjusted EPS growth. The results reflect the strong dedication and adaptability of our colleagues and their commitment to the values that underpin our Company. I couldn’t be prouder of Willis Towers Watson’s accomplishments to date and I look forward to our continued momentum in 2021 as we move toward our planned combination with Aon.”

Company Highlights

Cash flows from operating activities for the year ended December 31, 2020 were $1.8 billion, up 64% compared to $1.1 billion for the prior year. Free cash flow for the year ended December 31, 2020 was $1.6 billion, up 86% compared to $835 million for the prior year. The increase in cash flows from operations as compared to the prior year was primarily due to positive cash flows from our improved working capital for the year ended December 31, 2020 as compared to December 31, 2019. During the year ended December 31, 2020, the Company had no share repurchase activity.

Revenue was $2.76 billion for the fourth quarter of 2020, an increase of 3% (1% increase constant currency and 2% increase organic) as compared to $2.69 billion for the same period in the prior year.

For the year ended December 31, 2020, revenue was $9.35 billion, an increase of 3% (4% increase constant currency and 2% increase organic) as compared to $9.04 billion for the same period in the prior year.

Income from operations for the fourth quarter of 2020 was $587 million, or 21.2% of revenue, a decrease of 430 basis points compared to the same period in the prior year. Adjusted operating income was $820 million, or 29.7% of revenue, down 40 basis points compared to the same period in the prior year. Net income attributable to Willis Towers Watson for the fourth quarter of 2020 was $476 million, a decrease of 13% from $544 million for the same period in the prior year. For the quarter, diluted earnings per share were $3.66, down 12% from $4.18 for the same period in the prior year. For the quarter, adjusted diluted earnings per share were $5.23, up 7% from $4.90 for the same period in the prior year. Net income attributable to Willis Towers Watson and diluted earnings per share for the fourth quarter of 2020 included pre-tax $45 million of transaction and integration expenses mostly related to the pending business combination with Aon plc and $50 million of provisions for significant litigation. The U.S. GAAP tax rate for the quarter was 19.7%, and the adjusted income tax rate for the quarter used in calculating adjusted diluted earnings per share was 17.8%.

For the year ended December 31, 2020, income from operations was $1.2 billion, or 12.6% of revenue, a decrease of 210 basis points compared to the prior year. Adjusted operating income was $1.9 billion, or 20.1% of revenue, down 20 basis points compared to the prior year. Net income attributable to Willis Towers Watson for the year ended December 31, 2020 was $996 million, a decrease of 5% from $1.04 billion for the prior year. For the year ended December 31, 2020, diluted earnings per share were $7.65, down 5% from $8.02 for the prior year. For the year ended December 31, 2020, adjusted diluted earnings per share were $11.70, up 7% from $10.96 for the prior year. Net income attributable to Willis Towers Watson and diluted earnings per share for the year ended December 31, 2020 included pre-tax $110 million of transaction and integration expenses mostly related to the pending business combination with Aon plc and $65 million of provisions for significant litigation. For the year ended December 31, 2020, the U.S. GAAP tax rate was 23.8%, and the adjusted income tax rate used in calculating adjusted diluted earnings per share was 20.8%.

Net income for the fourth quarter of 2020 was $483 million, or 17.5% of revenue, a decrease from net income of $551 million, or 20.5% of revenue for the same period in the prior year. Adjusted EBITDA for the fourth quarter of 2020 was $967 million, or 35.0% of revenue, an increase from Adjusted EBITDA of $930 million, or 34.6% of revenue for the same period in the prior year.

For the year ended December 31, 2020, net income was $1.02 billion, or 10.9% of revenue, a decrease from net income of $1.07 billion, or 11.9% of revenue for the prior year. Adjusted EBITDA for the year ended December 31, 2020 was $2.5 billion, or 26.4% of revenue, an increase from Adjusted EBITDA of $2.3 billion, or 25.4% of revenue for the prior year.

¹ The revenue amounts included in this release are presented on a U.S. GAAP basis except where stated otherwise. The segment discussion is on an organic basis.

Risks and Uncertainties Related to the COVID-19 Pandemic

The extent to which COVID-19 continues to impact our business and financial position will depend on future developments, which are difficult to predict, including the severity and scope of the COVID-19 pandemic as well as the types of measures imposed by governmental authorities to contain the virus or address its impact and the duration of those actions and measures. We continue to expect that the COVID-19 pandemic will negatively impact our revenue and operating results for 2021. During 2020, the COVID-19 pandemic had a negative impact on revenue growth, particularly in our businesses that are discretionary in nature, but otherwise it generally did not have a material impact on our overall results. Some of our discretionary, project-based businesses saw a reduction in demand, and additional negative impacts on our revenue and operating results may lag behind the developments thus far related to the COVID-19 pandemic. In light of the effects on our own business operations and those of our clients, suppliers and other third parties with whom we interact, the Company has considered, and will continue to consider, the impact of COVID-19 on our business, as appropriate taking into account our business resilience and continuity plans, financial modeling and stress testing of liquidity and financial resources. For additional information on the risks posed by COVID-19, see additional disclosures in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

Fourth Quarter 2020 Segment Highlights

Human Capital & Benefits

The Human Capital & Benefits (HCB) segment had revenue of $865 million, flat (2% decrease constant currency and 1% decrease organic) compared to the prior-year fourth quarter. On an organic basis, Talent and Rewards revenue declined primarily because of a difference in timing as well as the global impact of COVID-19 having negatively impacted demand. Technology and Administrative Solutions revenue increased, having benefited from a softer comparative. Retirement revenue was materially flat as reduced de-risking activity in North America was mostly offset by increased project work in Western Europe and Great Britain. Health and Benefits revenue declined nominally, as continued expansion of our client portfolio for benefits management appointments outside of North America was offset by a decline in North America, which had a strong comparable. The HCB segment had an operating margin of 31.3%, as compared to 30.1% for the prior-year fourth quarter.

Corporate Risk & Broking

The Corporate Risk & Broking (CRB) segment had revenue of $888 million, an increase of 1% (1% decrease constant currency and 1% decrease organic) from $877 million in the prior-year fourth quarter. On an organic basis, North America led the segment with new business generation alongside strong renewals. The increase was partially offset by a decline in Western Europe, which was primarily due to the impact of COVID-19 on certain insurance lines. Revenue decreased in Great Britain and International primarily due to a change in the remuneration model for certain lines of business. This change, which is neutral to operating income, results in lower revenue and an equal reduction to salaries and benefits expense. Absent this change, Great Britain and International revenue would have decreased modestly, due to headwinds from one-time, non-recurring placements in the prior year in the construction and natural resource insurance lines coupled with reductions in airline-volume driven commissions. The CRB segment had an operating margin of 32.3%, as compared to 30.3% for the prior-year fourth quarter.

Investment, Risk & Reinsurance

The Investment, Risk & Reinsurance (IRR) segment had revenue of $292 million, a decrease of 7% (9% decrease constant currency and 1% increase organic) from $314 million in the prior-year fourth quarter. On an organic basis, Reinsurance led the segment’s revenue growth, driven by new business wins and favorable renewal factors. The growth was partially offset by declines in other businesses with pressure on discretionary work having negatively impacted both Insurance Consulting and Technology and Investments. Wholesale revenue declined as a result of headwinds across certain coverage lines coupled with a strategic shift in its operating model. In September 2020, the Company sold its Max Matthiessen business. The IRR segment had an operating margin of 11.0%, as compared to 9.1% for the prior-year fourth quarter.

Benefits Delivery & Administration

The Benefits Delivery & Administration (BDA) segment had revenue of $693 million, an increase of 16% (16% increase constant currency and 16% increase organic) from $595 million in the prior-year fourth quarter. BDA’s organic revenue increase was led by Individual Marketplace, primarily by TRANZACT. TRANZACT generated $279 million of revenue for the three months ended December 31, 2020. Benefits Outsourcing revenue also grew, driven by its expanded client base. The BDA segment had an operating margin of 50.7%, as compared to 52.4% for the prior-year fourth quarter.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has more than 46,000 employees and services clients in more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.