Towers Watson CEO: Willis Merger on Track as Profit Rise
November 2, 2015 by David Pilla, international editor, BestWeek: David.Pilla@ambest.com
ARLINGTON, Va. – Professional services consultancy Towers Watson’s chief executive officer said the firm is on target to complete its merger with broker Willis Group Holdings by the end of this year as Towers Watson itself reported a double-digit rise in fiscal first-quarter net income.
Chairman and CEO John Haley said in a conference call Towers Watson “saw strong momentum carried over from our fiscal year 2015” into the quarter, and noted the big event for the quarter continues to be the group’s proposed merger with Willis.
Haley said Towers Watson hired an outside consultant to help the company with “integration preparation” as it moves ahead with the Willis merger. He said a work committee consisting of both Towers Watson and Willis staff is working on a post-merger strategy that will include ground-level strategies and cost-effective synergies once the merged entity is in place.
In an agreement they say will create a leading global adviser and broker with a value of US$18 billion, Willis Towers Watson intend to merge (Best’s News Service, June 30, 2015). The new entity, to be known as Willis Towers Watson, will benefit from cost savings of between US$100 million and $125 million to be achieved over three years, Willis and Towers Watson said. The deal, which has received the unanimous approval of the boards of each company, is expected to be complete by the end of this year.
Haley said both Towers Watson and Willis have scheduled shareholders votes for Nov. 18 on the merger. “All of the integration work streams are in force and moving ahead,” he said.
Chief Financial Officer Roger Millay said in the call the Towers Watson and Willis integration teams are expected to create a financial power in the middle-market and large commercial markets once the merger is completed. Millay noted Towers Watson is not providing as much forward-looking guidance as in the past due to the ongoing merger process with Willis.
Towers Watson reported net income for the quarter (the first quarter for the group’s fiscal year 2016) of $123 million, up 33.9% from $82 million for the prior-year first quarter. Total revenue rose 2% to $896 million for the quarter.
For the benefits segment, revenue fell 4% to $448 million as retirement had expected lower bulk lump sum activity in the Americas, partially offset by a low double-digit increase in Europe, Middle East and Africa. Health and group benefits had mid-single digit constant currency revenue growth, due to an increase in new plan management clients and product revenue.
The exchange solutions segment saw a 37% rise in revenue to $118 million, as retiree and access exchanges revenue rose 26%, mainly due to a growing membership base.
For the risk and financial services segment, revenue fell 7% to $138 million, as risk consulting and software saw softness in the Americas.
For the quarter, the talent and rewards segment had revenues of $160 million, up 5% as executive compensation had growth in all regions, primarily due to work resulting from regulatory changes in Asia. Rewards, talent and communication had constant-currency revenue growth primarily driven by merger and acquisition activity in the Americas and EMEA regions.
Willis Group is the fourth-largest broker in the world, based on 2014 total revenue of $3.8 billion, according to Best’s Review.
Shares of Towers Watson (NASDAQ: TW) were trading at $126.11 on the afternoon of Nov. 2, up 2.07% from the previous close.
Willis Group Holdings (NYSE: WHH) stock was trading at $45.28 a share, up 1.5% from the previous close.
