WTW is sharpening a strategic focus on specialty markets, as it progresses with a cost-saving transformation initiative that will wind down by 2025, said the broker’s chief executive officer.
The group made specialization a priority in its risk and broking segment, with its specialty businesses achieving higher growth than the rest of the segment, CEO Carl Hess said in a conference call.
WTW built 12 industry verticals in North America over 2023, a process now complete, he said. The broker is now launching its model across Western Europe and will build more verticals internationally in 2024.
With its earnings release, WTW announced the formation of a new team known as “strategic client engagement leaders” for large, complex clients within its 12 industry vertical divisions of corporate risk and broking in North America, to advance its specialization strategy in the risk and broking segment.
The combination of WTW’s global footprint, specialization approach and analytics give large corporate clients an opening to deal with challenges in the current macroeconomic environment, natural disasters, social inflation and geopolitical conflict, Hess said.
He said the model will allow WTW to win complex mandates, such as the recent win of a multiple-year construction project for an unnamed player in the European energy sector.
WTW is pursuing new and differentiated revenue streams, such as its new managing general underwriter Verita, which Hess said is growing steadily since its launch last September.
In 2024, the group will focus on expanding its MGU and managing general agency strategy to additional geographies, he said.
Fourth-quarter net income attributable to WTW rose to $622 million from $588 million. Revenue rose to $2.91 billion from $2.72 billion. Net income attributable to WTW for 2023 rose to $1.06 billion from $1.01 billion.
WTW realized $37 million in savings from its transformation initiative in fourth quarter, bringing total annualized savings to $337 million since the program began, Hess said. The group is raising its cumulative run-rate savings target from $380 million to $425 million by the end of 2024 and will looks to complete the process in 2025.
The added savings will come mainly from technology modernization and process optimization as WTW expects to further reduce its cost structure and help unlock further long-term growth and savings, said Chief Financial Officer Andrew Krasner in the call.
The group seeks to achieve its 2024 annual organic revenue growth target in the mid-single digits, with at least $9.9 billion in total revenue and higher free cash flow, he said.
The broker achieved organic revenue growth of 6% for the quarter and 8% for 2023, above its mid-single digit target, Hess said.
In the risk and broking segment, revenue rose 12% in the fourth quarter, led by corporate business, Krasner said. Higher new business activity, improved client retention and increased renewal revenue from rate increases drove the growth.
Strong specialty limes growth was led by natural resources; facultative; financial, professional and executive solutions; crisis management and construction, Krasner said.
The international segment saw strong growth across all sub-regions, led by Latin America, he said.
In WTW’s health, wealth and career segment, Hess sees strong 2024 growth opportunities from clients in health care worldwide.
The retirement business, clients are increasingly looking to capitalize on changes in the rate environment by derisking their pension plans with annuities buy-ins and buyouts, he said.
“With the funded status of the largest U.S. corporate pension plans having ended 2023 at 100%, we expect this trend will help support growth in that business during 2024,” Hess said.