Executive Summary / Key Takeaways

• Strategic Transformation Driving Performance: Willis Towers Watson (NASDAQ: WTW) has successfully transitioned from its "Grow, Simplify, Transform" phase to a new strategy focused on accelerating performance, enhancing efficiency, and optimizing its portfolio. This strategic evolution, coupled with a disciplined approach to capital allocation, is driving robust organic growth and significant margin expansion across its diversified business segments.
• Technological Leadership as a Core Differentiator: WTW is leveraging advanced AI and digital platforms, including Radar 5, Gemini, Neuron, and various AI-powered analytical tools, to streamline operations, enhance client solutions, and create a competitive moat. These technologies deliver tangible benefits, such as a 75% reduction in routine work processing time and a 40% increase in process efficiency in specific areas.
• Resilient Growth Amidst Macroeconomic Headwinds: Despite a softening commercial insurance market, geopolitical uncertainties, and cautious client spending in some consulting areas, WTW achieved 5% organic revenue growth in Q3 2025, with strong contributions from both Health, Wealth & Career (HWC) and Risk & Broking (R&B). The company's diversified, recurring revenue base and specialization strategy provide resilience.
• Strong Margin Expansion and Free Cash Flow Generation: The company reported a 230 basis point expansion in adjusted operating margin to 20.4% in Q3 2025, supported by operational efficiencies from the WE DO initiative and the divestiture of TRANZACT. Free cash flow for the nine months ended September 30, 2025, increased to $1 billion, and WTW is on track for annual free cash flow margin expansion.
• Outlook and Capital Allocation: WTW maintains its 2025 guidance for mid-single-digit organic growth, adjusted operating margin expansion, adjusted EPS growth, and ongoing free cash flow margin improvement. Share repurchases remain a primary capital return method, with approximately $1.5 billion targeted for 2025, alongside strategic, value-accretive M&A.

Setting the Scene: A Global Leader Forging a New Path

Willis Towers Watson Public Limited Company, a global advisory, broking, and solutions powerhouse, stands at the intersection of people, risk, and capital. Founded in 1828, the company has evolved significantly, most recently transforming its operational and strategic blueprint to thrive in a dynamic global economy. With approximately 49,000 colleagues serving over 140 countries and markets, WTW designs and delivers data-driven, insight-led solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital for institutions and individuals.

The company's overarching strategy, articulated nearly a year ago, centers on accelerating performance, enhancing efficiency, and optimizing its portfolio. This is not a radical departure but an evolution, building upon the successful "Grow, Simplify, Transform" initiatives that concluded in late 2024. This strategic pivot is crucial for WTW to maintain its competitive edge in an industry characterized by significant competition from global giants like Aon plc , Marsh & McLennan Companies, Inc. , and Arthur J. Gallagher & Co. , as well as emerging fintech and HR software providers.

WTW's foundational strengths lie in its integrated service offerings across its Health, Wealth & Career (HWC) and Risk & Broking (R&B) segments, its extensive global network, and increasingly, its proprietary technology. These elements are critical in a market influenced by macroeconomic uncertainty, persistent inflation, fluctuating interest rates, and complex regulatory changes. The company's ability to provide tailored, holistic solutions, particularly in areas like healthcare cost management and pension derisking, positions it favorably against competitors who may have a more specialized or fragmented approach.

Technological Edge: The Engine of Differentiation

At the heart of WTW's strategic acceleration is its commitment to technological differentiation and innovation. The company has made substantial investments in developing and deploying advanced digital tools, AI, and analytics solutions, not just for internal operations but as core components of its client offerings. These technologies are foundational to its competitive moat and directly contribute to its financial performance and market positioning.

WTW's core technology suite includes:

• Neuron Digital Trading Platform: This platform connects brokers and insurers in real-time, streamlining complex specialty risk placements, particularly for DNO (Directors & Officers) and cyber risks. Its adoption is progressing on schedule, enhancing service delivery and efficiency.
• Radar Software Suite: Radar, an end-to-end rating and analytics software, is widely used by insurers. Radar 5, the newest version launched in Q3 2025, incorporates advanced capabilities, including GenAI techniques. This provides greater speed and agility for pricing, portfolio management, claims, and underwriting, enabling insurers to unlock smarter data-driven decision-making at scale. WTW also offers Radar Vision, an AI-driven modeling tool for insurer clients, which generates early actionable insights related to inflation, markets, competitors, and customer behaviors.
• Gemini Global Digital Placement Facility: Launched in Q3 2025, Gemini provides efficient access to additional insurance capacity, addresses the increasing complexity of risk and market volatility, and offers competitive pricing at a guaranteed discount, backed by A+ rated void syndicates.
• HealthMAPS®: This comprehensive suite of health rating manuals, analytics, and software tools, with over 50 years of actuarial expertise, is integrated into Merit Medicine's predictive analytics platform, Merit Predict. It provides actuarial rigor for group health underwriting, enhancing precision for small and mid-sized group health plans.

Beyond these platforms, WTW leverages AI-powered solutions across its operations. Its Enterprise Delivery Organization (WE DO) utilizes automation and AI to enhance efficiency and deliver savings. For instance, AI-powered solutions are enhancing real-time analytics and reducing manual effort, leading to a 75% reduction in routine work processing time in some instances. The "Coverage Clarified" tool in its construction business uses AI to verify insurance coverage adequacy and contractual compliance, making the process up to 40% more efficient. An AI-driven automated job leveling tool helped a major oil and gas company evaluate 300 roles in just three days, demonstrating significant speed and confidence in workforce restructuring.

The "so what" for investors is clear: these technological differentiators translate into improved operational efficiency, lower costs, enhanced client value propositions, and stronger competitive positioning. By automating routine tasks and providing deeper analytical insights, WTW can offer superior service, attract new clients, and retain existing ones, ultimately contributing to higher margins and sustainable growth. This technological roadmap is a critical component of WTW's strategy to accelerate performance and enhance its competitive moat against rivals.

Competitive Landscape: Differentiating in a Crowded Market

WTW operates in a highly competitive global market, vying for clients against other professional services giants. Its competitive standing is a blend of established strengths and areas requiring continuous innovation.

Against Aon plc (AON): WTW's integrated solutions for total rewards and talent management offer a holistic approach that can differentiate it from Aon's more specialized risk and reinsurance focus. While Aon is often perceived as more advanced in analytics-driven solutions, WTW's proprietary tools like Radar and its AI-powered analytics are rapidly closing this gap, aiming for comparable efficiency in data processing and client deliverables. WTW's strong brand and global network, particularly in benefits outsourcing, foster deep client loyalty, which can be a powerful counter to Aon's technological prowess in certain niches.

Against Marsh & McLennan Companies, Inc. (MMC): MMC benefits from an extensive network and strong brand recognition. WTW's strategy of providing end-to-end advisory and broking services is similar, but WTW differentiates through its emphasis on career and talent solutions, offering a unique value proposition in human resources consulting. WTW's specialized expertise in plan administration for retirement services, exemplified by its LifeSight platform, can foster stronger customer loyalty. While MMC's scale might offer advantages in certain areas, WTW's disciplined focus on cost management and operational efficiency, driven by initiatives like WE DO, aims to deliver competitive profitability margins.

Against Arthur J. Gallagher & Co. (AJG): AJG's growth is often driven by an aggressive acquisition strategy. WTW, while also engaging in strategic M&A, emphasizes organic growth through its specialization strategy and integrated service offerings. WTW's broader scope in health and career consulting provides more comprehensive solutions, potentially leading to greater client retention in diversified services. Its actuarial and retirement services offer a depth that can be a key differentiator. While AJG's acquisitive model can lead to rapid market share capture, WTW's focus on organic growth, technological innovation, and operational efficiency aims for more sustainable and profitable expansion.

Competitive Advantages (Moats): WTW's strong brand in advisory services and its global network translate into enhanced customer loyalty and recurring revenue streams. Its proprietary technology, such as the AI-driven tools for risk modeling and process optimization, provides improved accuracy and efficiency, allowing it to compete effectively and maintain strong margins. The launch of the Global Risk Engineering team further enhances its specialization, combining global expertise with local insights and advanced analytics to deliver tailored solutions.

Vulnerabilities: WTW faces potential vulnerabilities from market concentration risks in certain geographies or service lines, and the continuous need to invest heavily in technology to keep pace with rapidly evolving digital capabilities of its larger rivals. The consulting environment's weakness and client caution on large multiyear technology implementations, as seen in its ICT segment, highlight these challenges.

Financial Performance: A Story of Resilience and Expansion

WTW's financial performance in the nine months ended September 30, 2025, reflects a company in strategic transition, demonstrating resilience and a clear trajectory towards enhanced profitability.

Revenue Dynamics: For the three and nine months ended September 30, 2025, WTW reported organic revenue growth of 5%. This was achieved despite a 2% decrease in as-reported revenue for the nine-month period, primarily due to the divestiture of the TRANZACT business on December 31, 2024. The organic growth was driven by strong performances across both the HWC and R&B segments, underscoring the effectiveness of the company's specialization strategy and client-centric solutions. Total revenue for Q3 2025 was $2.288 billion, consistent with Q3 2024, while for the nine months, it was $6.772 billion, down from $6.895 billion in the prior year.

Profitability and Margins: The company delivered significant margin expansion. Income from operations for the nine months ended September 30, 2025, surged to $1.218 billion, a substantial increase from a loss of $274 million in the prior-year period. This dramatic improvement was primarily due to the absence of a $1.042 billion goodwill impairment charge related to the TRANZACT sale in 2024, lower transformation and transaction costs (down from $296 million to $4 million), and reduced marketing, office, and technology expenses.

Adjusted operating margin for Q3 2025 expanded by 230 basis points year-over-year to 20.4%. Excluding the TRANZACT divestiture, this improvement was 120 basis points, demonstrating underlying operational efficiencies. The HWC segment's operating margin in Q3 2025 increased by 390 basis points to 28.6% (100 basis points excluding TRANZACT), driven by operating efficiencies. The R&B segment's operating margin improved by 70 basis points to 18.8% (100 basis points excluding foreign exchange impacts), benefiting from operating leverage from strong organic revenue growth and Transformation program savings.

Earnings Per Share: Net income attributable to WTW for the nine months ended September 30, 2025, was $870 million, a significant turnaround from a net loss of $1.344 billion in the prior year. Diluted earnings per share for the nine months were $8.74, compared to a loss of $13.11 in 2024. Adjusted diluted EPS for Q3 2025 was $3.07, up 11% year-over-year.

Cash Flow and Liquidity: WTW's liquidity position remains robust. Cash and cash equivalents stood at $1.895 billion at September 30, 2025. Cash flows from operating activities for the nine months ended September 30, 2025, were $1.004 billion, an increase from $913 million in the prior year, driven by operating margin expansion and lower Transformation program residual cash outflows. Free cash flow for the nine months was $838 million, an increase of $114 million from the prior year, reflecting operating margin expansion and reduced transformation program cash costs. The company's total debt was $5.313 billion at September 30, 2025, with a capitalization ratio of 40.70%. The new $1.50 billion revolving credit facility, maturing in October 2030, further enhances its financial flexibility.

Segmental Deep Dive: Drivers of Growth

The company's performance is driven by its diversified segments. A breakdown of revenue by these key business areas for the latest period illustrates their relative contributions.

Health, Wealth & Career (HWC): This segment, the larger of the two, delivered 4% organic growth in Q3 2025 (5% excluding book of business settlements and interest income).

• Health: Achieved 7% organic growth in Q3 2025 (8% excluding certain activities), driven by strong international performance, new global benefit management appointments, and persistent healthcare inflation. Management expects high single-digit growth for the full year 2025.
• Wealth: Grew 5% organically in Q3 2025, primarily from strong retirement work in Great Britain and North America, including pension derisking and surplus utilization. The LifeSight platform, now live in 12 countries, is a key growth driver. Low single-digit growth is expected for the full year 2025.
• Career: Saw 2% organic growth in Q3 2025, with solid performance in Europe driven by EU pay transparency support. While some discretionary advisory work was delayed due to macroeconomic uncertainty, revenue growth is expected to be weighted towards the second half due to seasonality. Low to mid-single-digit growth is anticipated for 2025.
• Benefits Delivery & Outsourcing (BD&O): Grew 2% organically in Q3 2025, with increased project and core administration work in Europe. The Medicare Exchange business, which generates 80% of its revenue in Q4, is expected to drive stronger growth in the latter half of the year. Mid-single-digit growth is expected for the full year 2025.

Risk & Broking (R&B): This segment delivered 6% organic growth in Q3 2025, demonstrating continued momentum.

• Corporate Risk Broking (CRB): Achieved 6% organic growth in Q3 2025 (7% excluding book of business and interest income), marking its 11th consecutive quarter of high single-digit growth. This was fueled by the global specialization strategy, new business, and project-based placements in global specialty areas like construction, M&A, surety, and credit risk solutions. Mid-to-high single-digit growth is expected for 2025.
• Insurance Consulting & Technology (ICT): Revenue was flat in Q3 2025, reflecting a weak consulting environment and client caution on large multiyear technology implementations. However, a strong technology sales pipeline is expected for the second half of the year, with low to mid-single-digit growth anticipated for the full year 2025.

Outlook and Strategic Initiatives

WTW remains confident in delivering on its 2025 financial objectives: mid-single-digit organic growth, adjusted operating margin expansion, adjusted EPS growth, and ongoing improvement in free cash flow margin. The company's strategy to accelerate performance, enhance efficiency, and optimize its portfolio is the bedrock of this outlook.

Key initiatives underpinning this confidence include:

• WE DO (Enterprise Delivery Organization): This initiative is central to enhancing efficiency, leveraging automation and AI to streamline processes and deliver savings, which directly contributes to margin expansion and free cash flow.
• Capital Allocation: Share repurchases are a primary method of capital return, with approximately $1.5 billion targeted for 2025. The company is also actively pursuing strategic M&A that improves its business mix, expands its reach across the insurance value chain, and enhances margins and free cash flow. Recent acquisitions like Global Commercial Credit and the planned full ownership of Al-Futtaim Willis in the UAE exemplify this focused approach.
• Reinsurance Joint Venture: The minority ownership interest in a reinsurance joint venture with Bain Capital, while expected to be a headwind to adjusted EPS in its start-up phase (approximately $0.20 for 2025), is a strategic re-entry into a key market with long-term growth potential.
• Talent Acquisition: WTW continues to strategically hire accretive talent, particularly in its Specialty lines and geographies, to complement existing expertise and drive growth.

Key Risks and Challenges

Despite a positive outlook, WTW faces several pertinent risks:

• Macroeconomic Uncertainty: Persistent inflation, fluctuating interest rates, and geopolitical conflicts continue to create volatility, potentially impacting client spending on discretionary services and affecting capital markets, which could influence investment-based fees.
• Softening Insurance Market: The commercial insurance market is softening, particularly in property lines, which could exert downward pressure on commission revenue in the Risk & Broking segment. While WTW's specialization strategy aims to mitigate this, it remains a headwind.
• Consulting Environment Weakness: The cautious approach by clients towards large, multiyear technology implementations and advisory work, particularly in the ICT and Career segments, could temper growth.
• Foreign Currency Fluctuations: As a global company, WTW is exposed to foreign currency risks, which can impact reported revenue and earnings. While hedging strategies are in place, significant fluctuations can still create headwinds or tailwinds to adjusted EPS (e.g., an expected $0.10 tailwind for full-year 2025).
• Competition and Technological Pace: The intense competition from established players and emerging technologies necessitates continuous investment in innovation to maintain a competitive edge and avoid loss of market share.
• Regulatory Changes: Evolving regulations related to data privacy, cybersecurity, AI, and tax laws (e.g., OECD Pillar Two, H.R. 1) require ongoing compliance efforts and could impact operations or financial results, though WTW does not expect a material impact from recent tax legislation.

Conclusion

Willis Towers Watson is executing a well-defined strategy to accelerate performance and enhance shareholder value. The company's journey from its "Grow, Simplify, Transform" program to its current focus on efficiency, specialization, and technological innovation has created a more agile and profitable enterprise. The Q3 2025 results, marked by robust organic growth and significant margin expansion, underscore the effectiveness of this strategic pivot, even amidst a challenging macroeconomic backdrop.

WTW's technological differentiators, including its advanced AI-powered platforms and digital solutions, are not merely operational enhancements but fundamental drivers of its competitive advantage, enabling superior client service and efficiency gains. This technological leadership, combined with a diversified and resilient business model, strong client retention, and a disciplined approach to capital allocation, forms a compelling investment thesis. While macroeconomic uncertainties and a softening insurance market present challenges, WTW's proactive management, strategic investments, and commitment to operational excellence position it for continued profitable growth and sustained value creation for its discerning investor base.