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WILLIS TOWERS WATSON PLC (WTW)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered organic growth of 5%, adjusted operating margin of 18.5% (+150 bps YoY), and adjusted EPS of $2.86 (+20% YoY), reflecting broad-based strength in Risk & Broking and resilient Health performance despite macro caution .
  • Results beat Wall Street consensus: adjusted EPS $2.86 vs $2.60*, revenue $2.26B vs $2.24B*, and adjusted EBITDA ~$470M vs ~$462M*; margin expansion and cost discipline were the primary drivers. Bold beat on EPS and margin expansion .
  • Guidance improved on two fronts: reinsurance JV EPS headwind lowered to ~$0.20 (from $0.25–$0.35 prior), and FX now expected to be a ~$0.05 tailwind to adjusted EPS; share repurchases of ~$1.5B remain on track (Q2 buybacks $500M) .
  • Capital return and H2 setup are catalysts: management reiterated annual FCF margin expansion, BD&O seasonality should lift H2, and specialization plus AI-enabled workflow gains underpin sustained margin expansion (target ~100 bps annually in R&B) .

Note: *Consensus values from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Adjusted EPS and margin expansion exceeded expectations; adjusted EPS grew 20% YoY to $2.86 and adjusted operating margin rose 150 bps to 18.5% on strong segment execution and cost discipline .
  • Risk & Broking posted 6% organic growth and +60 bps operating margin uplift, with specialty lines growing double-digits across geographies and strong mid-90s client retention—“10th consecutive quarter” of high single-digit CRB growth ex-book-of-business/interest income .
  • Health delivered 8% organic growth (9% excluding interest/gain-on-sale), with double-digit growth outside North America; management highlighted AI and broking platform initiatives improving efficiency (up to 75% reduction in routine work in some areas) .

What Went Wrong

  • HWC reported revenue declined 6% YoY due to the sale of TRANZACT; BD&O was flat as Europe outsourcing strength was offset by lower individual marketplace commissions .
  • Free cash flow for 1H fell to $217M vs $305M a year ago, reflecting increased compensation/cash taxes and loss of TRANZACT cash inflows, partially offset by lower transformation spending; however, management expects improvement in H2 .
  • Insurance pricing is a moderate headwind (large/complex property rates trending down); WTW underscored growth drivers are not rate-dependent and mix skews to middle market, balancing commission/fee exposure .

Financial Results

Headline Results vs Prior Year (Q2 2024 → Q2 2025)

MetricQ2 2024Q2 2025
Revenue ($USD Billions)$2.265 $2.261
Diluted EPS ($)$1.36 $3.32
Adjusted Diluted EPS ($)$2.39 $2.86
Operating Margin (%)9.4% 16.3%
Adjusted Operating Margin (%)17.0% 18.5%
Adjusted EBITDA Margin (%)19.6% 20.8%

Sequential vs Prior Quarter (Q1 2025 → Q2 2025)

MetricQ1 2025Q2 2025
Revenue ($USD Billions)$2.223 $2.261
Diluted EPS ($)$2.33 $3.32
Adjusted Diluted EPS ($)$3.13 $2.86
Operating Margin (%)19.4% 16.3%
Adjusted Operating Margin (%)21.6% 18.5%
Adjusted EBITDA Margin (%)23.9% 20.8%

Results vs Wall Street Consensus (Q2 2025)

MetricConsensus*ActualSurprise
Adjusted EPS ($)2.60*2.86 +0.26*
Revenue ($USD Billions)2.24*2.261 +$0.02*
Adjusted EBITDA ($USD Millions)462.5*470 +$7.5*

Note: *Consensus values from S&P Global.

Segment Breakdown (Q2 YoY)

SegmentRevenue Q2 2024 ($MM)Revenue Q2 2025 ($MM)Reported YoYOrganic YoYOperating Margin Q2 2024Operating Margin Q2 2025
Health, Wealth & Career (HWC)$1,260 $1,180 (6)% +4% 21.9% 23.8%
Risk & Broking (R&B)$979 $1,047 +7% +6% 20.6% 21.2%

KPIs and Other Metrics

KPIQ2 2025Context
Organic Revenue Growth (%)5% Company-wide
GAAP Tax Rate (%)(6.8)% Q2
Adjusted Tax Rate (%)18.0% Q2
Adjusted EBITDA ($MM)$470 Q2
Operating Cash Flow ($MM)$326 (1H) 1H
Free Cash Flow ($MM)$217 (1H) 1H
Share Repurchases1,614,427 shares; $500M Q2
Cash & Equivalents ($MM)$1,963 6/30/25
Total Debt ($MM)$5,311 6/30/25
Debt / Adjusted EBITDA~2.0x (TTM) Slide disclosure

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reinsurance JV EPS headwindFY 2025~$0.25–$0.35 ~$(0.20); net $(0.10) at associates (mitigated by equity gains) Lowered
FX impact on Adjusted EPSFY 2025Neutral at Q1 rates ~+$0.05 tailwind at current rates Raised
Share repurchasesFY 2025~$1.5B ~$1.5B Maintained
Adjusted Op Margin – R&BFY 2025–2027~+100 bps avg annual expansion ~+100 bps avg annual expansion Maintained
Adjusted Op Margin – HWC/EnterpriseFY 2025Incremental annual expansion Incremental annual expansion Maintained
Free cash flow (transformation cash)FY 2025Expect cash outflows from 2024 program accruals Expect cash outflows (unchanged) Maintained
DividendQ2 2025—$0.92 per share (approved) Initiated/Confirmed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 & Q1’25)Current Period (Q2’25)Trend
AI/Technology initiativesTransformation completed; margin expansion focus Broking platform rollout; AI tools reduce routine work by up to 75%; improved client experience Accelerating
Macro/trade/geopoliticsMacro caution; consulting discretionary softness Pipeline strengthened; clients increasingly seek cost/risk solutions; Health double-digit ex-NA Improving mix
Pricing environment (insurance rates)Not highlightedRates softening esp. large/complex property; moderate headwind; middle-market mix and fee/commission balance mitigate Moderating
Reinsurance JVEPS headwind guided at $0.25–$0.35 Headwind now ~$0.20; startup progressing; re-entry enthusiasm reiterated Favorable adjustment
Health cost inflationNot detailedU.S. health cost increases ~10%+; high-cost claims (e.g., $3.5M gene therapy) driving demand Persistent tailwind to Health
Free cash flowQ1 FCF negative due to timing; expectations for annual expansion 1H FCF $217M; H2 improvement expected as transformation ends and TRANZACT outflows lapse Inflecting in H2
Talent competition—Strategic specialty hiring since 2021; talent drives growth; continued focus Ongoing
Regional trends (Middle East)—New wins in Saudi Arabia; pending AlphaTame Willis buyout in UAE Expanding footprint
BD&O seasonality—~80% of individual marketplace revenue in Q4; stronger H2 expected Seasonal lift ahead

Management Commentary

  • “We delivered 5% organic growth, 150 bps of adjusted operating margin expansion, and adjusted EPS of $2.86…we remain on track to deliver on our full-year financial objectives” — Carl Hess (CEO) .
  • “CRB’s top-line performance…Q2 marks the 10th consecutive quarter where CRB recorded high single-digit growth when excluding…interest income” — Carl Hess (CEO) .
  • “There is observable progress…AI tools…streamline data ingestion and automate workflows…in some instances, we’ve seen a 75% reduction in routine work and processing time” — Carl Hess (CEO) .
  • “Health saw organic growth of 8%…double-digit increases outside of North America…we anticipate demand to remain strong driven by healthcare inflation” — Andrew Krasner (CFO) .
  • “We improved margins in R&B…we are committed to delivering 100 bps of average annual margin expansion over the next three years” — Andrew Krasner (CFO) .
  • “We remain confident in delivering free cash flow margin expansion in 2025…with a more favorable setup in the second half” — Andrew Krasner (CFO) .

Q&A Highlights

  • HWC outlook: Mid-single-digit growth reaffirmed; Health high-single-digit for FY; pipeline strengthening despite macro caution .
  • Free cash flow trajectory: 1H headwinds (comp, taxes, TRANZACT) behind; H2 tailwind expected from lower transformation outflows and TRANZACT lap; annual FCF margin expansion reiterated .
  • Talent market: Specialty strategy and targeted hires continue; talent is a key differentiator driving growth .
  • Reinsurance JV: Headwind refined to ~$0.20 with better expense insight; launch progressing; excitement about re-entry .
  • Pricing/rates: Broad softening, esp. large complex property; WTW less exposed given middle-market mix; growth not reliant on pricing .
  • M&A strategy: Focused bolt-ons in specialty and Wealth; open to larger opportunities if value creation exceeds alternatives .

Estimates Context

  • Q2 2025 beats: Adjusted EPS $2.86 vs $2.60* (+$0.26), revenue $2.261B vs $2.237B* (+$24M), adjusted EBITDA ~$470M vs ~$462.5M* (+$7.5M). Outperformance driven by segment margin expansion and expense discipline .
  • Forward look: Management reiterated mid-single-digit organic growth and annual margin expansion; consensus implies strong seasonal uplift in Q4 given BD&O seasonality and broker calendars* .

Note: *Consensus values from S&P Global.

Key Takeaways for Investors

  • Quality beat: EPS and margin expansion exceeded consensus; narrative of sustained efficiency gains and specialty-led growth intact .
  • Mix and specialization: CRB specialty momentum continues (double-digit growth), providing resilience against softening rates; pipeline strong across regions .
  • Health tailwinds: Elevated healthcare inflation sustains demand for cost management solutions; Health growth at high single digits supports HWC mid-single-digit trajectory .
  • Guidance cleaner: Reinsurance JV EPS headwind reduced to ~$0.20 and FX now a ~$0.05 tailwind—net positive vs Q1 posture .
  • H2 setup favorable: BD&O seasonality and lapping of transformation/TRANZACT cash drag point to FCF margin expansion in H2; share repurchases (~$1.5B FY) amplify EPS leverage .
  • Margin roadmap credible: R&B targeted ~100 bps average annual adjusted margin expansion; enterprise margin expansion remains a central objective .
  • Capital return: $500M Q2 repurchases and $0.92 dividend confirm balanced allocation while maintaining ~2.0x leverage and financial flexibility .