Good morning. Welcome to the WTW Fourth Quarter and Full Year 2023 Earnings Conference Call. Please refer to the wtwco.com for the press release and supplemental information that were issued earlier today. Today's call is being recorded and will be available for the next three months on WTW's website. Some of the comments in today's call may constitute forward-looking statements within the meaning of the Private Securities Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements unless required by law. For a more detailed discussion of these and other risk factors, investors should review the forward-looking statements section of the earnings press release issued this morning, as well as other disclosures in the most recent Form 10-K and in other Willis Towers Watson SEC filings. During the call, certain non-GAAP financial measures may be discussed. For reconciliation of the non-GAAP measures as well as other information regarding these measures, please refer to the most recent earnings release and other materials in the Investor Relations section of the company's website. I'll now turn the call over to Carl Hess, WTW's Chief Executive Officer. Please go ahead.

Good morning, everyone. Thank you for joining us for WTW’s fourth quarter and full year 2023 earnings call. Joining me today is Andrew Krasner, our Chief Financial Officer. WTW ended 2023 on a strong note and has begun 2024 with solid momentum, as we continue to execute on our grow, simplify and transform strategic priorities. In the fourth quarter, our world-class solutions and maturing investments in talent helped generate robust organic revenue growth and our transformation program and expense discipline drove adjusted operating margin expansion and solid adjusted diluted earnings per share growth. Our performance steadily improved throughout 2023 and today WTW is stronger, more resilient and better positioned to achieve our goals. We delivered 6% organic revenue growth in the fourth quarter with an adjusted operating margin of 34.2%, up 180 basis points over the prior year. Adjusted diluted earnings per share were $7.44, an 18% increase year-over-year. For the full year, we had organic revenue growth of 8% above our mid-single digit target. We also drove 110 basis points of year-over-year margin expansion to achieve an adjusted operating margin of 22%, fulfilling our commitment of annual margin expansion. Our adjusted diluted earnings per share were $14.49, an 8% increase over the prior year. We believe these results are the product of our strong global client model, our strategic investments in talent and technology, and our team's hard work and relentless focus on best-in-class delivery. The progress we see within WTW and the enthusiastic response we're receiving from clients give us confidence that our strategies, our people, and our investments are aligned with areas that we believe to be the greatest opportunities to drive sustainable, profitable growth and create shareholder value over the long-term. Let me take a few minutes to share the progress we've made and the opportunities ahead of us across our segments. Throughout 2023, our specialization strategy in Risk & Broking was a key driver of growth for both the segment and the enterprise. Our specialty businesses continue to have significantly higher growth than the rest of the segment. This growth, driven in large part by improved client retention, expansion of existing client relationships and our strength and ability to attract new clients and win back old ones, has validated our approach. As a result, specialization continues to be our primary strategic focus in R&B. It allows us to create value for clients by tailoring solutions that close gaps in their risk management profiles. Together with digitization, data, and analytics, we can create efficiencies that enable us to provide more timely and effective insurance services. Our approach to specialization is tailored to each geography in which we operate. In 2023, we built out 12 industry verticals in North America. That process is now complete, with colleagues, processes, and infrastructure supporting that alignment. Given the success we've seen to date, we're in the process of launching this industry model across Western Europe, and we'll build out more industry verticals in our international region in 2024. This model, together with our global reach, has us positioned to win an outsized share of complex mandates, such as our recent win of a multiyear construction project for a key player in the European energy sector. Our cutting-edge data and analytics, and our ability to bring together superior industry and product expertise from our specialist teams across several countries set our proposal apart. We're also making good progress expanding into new and differentiated revenue streams, such as our new managing general underwriter, Verita, which is growing steadily since its initial launch in September. Just in the fourth quarter of 2023, we've onboarded brokers, found premiums, and received submissions from both external and our own brokerage clients. In 2024, we'll focus on their expanding our MGA and MGU strategy to additional geographies. In addition to expanding our business platforms and offerings at Risk & Broking, we're continuing to invest in our people to win new business. Our colleagues who joined us during 2022 and 2023 have become increasingly productive and have brought our talent base back to full strength, as evidenced by the segment's strong organic revenue growth in the second half of 2023. Accordingly, we're now focused on strategic and opportunistic talent investments. These investments should enhance our presence capabilities in the lines of business and geographies that we believe offer the greatest growth and profitability potential. We expect these efforts to continue throughout 2024 and beyond. Furthermore, we see opportunity for continued strong new business growth as we work closely to help clients manage a complex and challenging risk environment marked by increasingly costly natural disasters, social inflation, and geopolitical conflicts. In HWC, we've leveraged the strength of our portfolio, driving growth through and across Health, Wealth, and Career, and BD&O. We've made significant progress by staying focused on our core businesses, by making connections across the organization where it adds value for clients, and by simplifying how we work. For example, we maintained or improved client retention rates across all of HWC, including an excellent 98% retention rate for our retirement and outsourcing businesses. We added dozens of clients for our signature package solutions like our LifeSight Master Trust and Global Benefits Management offerings. We expanded our relationships with more than 1,500 clients to include at least one new service offering, and we increased the size and scope of our hub teams in key centers around the world to enhance capacity and consistency. Our intense focus on cross-selling and making it simpler to do business with us is paying off. Across industries and services, more clients are coming to WTW for a full suite of solutions. Just to mention a few from this quarter, we had a software development firm move its global benefits consulting and brokerage work to WTW and appoint us to support their employee experience through our Embark portal and our Engage software. A major global financial corporation's simple survey request turned into a multiyear engagement for us that includes supporting the client with attracting and retaining talent and the delivery of a fully integrated total reward solution using one of our portals. And we leveraged our existing pension actuarial and outsourcing relationships with a leading regional health system into support for a rollout of major changes to their health and benefits program which include the creation of a temporary health and welfare service center. We're confident HWC will provide a solid foundation for growth in 2024. And as we've discussed on prior calls, complexity in the human capital landscape continues to increase, and finding the right solutions to our clients' unique needs in this environment requires a holistic, integrated, and consultative approach. Our ability to move quickly and deliver the right resources at speed helps our clients take advantage of changing conditions and create meaningful opportunities for HWC. I'll highlight two trends we see as tailwinds for 2024. In our health business, clients are continuing to look for ways to address the increasing cost of healthcare around the world. They're turning to us for help with more effective plan management and specialty solutions that can improve their population's health status. And in our retirement business, clients are increasingly looking to capitalize on the change in the rate environment by derisking their pension plans through annuity buy-ins and buy-outs. With the funded status of the largest U.S. corporate pension plans having ended 2023 at 100%, we expect this trend will support growth in that business during 2024. We also expect our growing momentum with smart connections this quarter to continue into 2024 and also extends to cross-selling between our two segments. We continue to arm all our colleagues with a solid understanding of our full range of services and the tools to identify and facilitate cross-segment opportunities. Two large client wins in the fourth quarter illustrate the power of this approach. A P&C insurance solution at a major media company that originated with one of our retirement colleagues and a multiyear health benefits design, administration and broking engagement that began with a benefits review arranged by a CRB colleague. The progress we've made in enhancing our growth engines at HWC and R&B over the past two-plus years is also enabling us to drive increased margin expansion. During the fourth quarter, we saw a continuing improvement in productivity and a heightened focus on cost discipline. Similarly, our transformation program continues to drive a significant benefit to our bottom line, enabling us to finish the year strong and to lay the foundation for another year of adjusted operating margin expansion. We realized $37 million of incremental annualized savings from our transformation program during the fourth quarter, bringing the total to $337 million in cumulative annualized savings since the program's inception. Thanks to the success and momentum of the program, we have been able to identify additional savings and accordingly are raising our cumulative run rate transformation savings target from $380 million to $425 million by the end of 2024. Looking ahead, we're confident that we're on the right path to achieve our 2024 targets of continued mid-single digit organic revenue growth, leading to at least $9.9 billion in total revenue, adjusted operating margins of 22.5% to 23.5%, adjusted diluted earnings per share of $15.40 to $17 and additional improvement in our free cash flow margin. Andrew will touch on our 2024 guidance in more detail shortly. In closing, our performance in 2023 reflected our hard work to grow, simplify, and transform our business over the past two-plus years. I'm proud of the progress we've made and excited about the opportunities ahead. Based on our momentum and our healthy pipeline, I'm confident we can deliver continued, sustainable and profitable growth in 2024 and beyond. I want to thank our colleagues for their dedication, service and continued commitment to our clients and to WTW. And with that, I'll turn the call over to Andrew.

Thanks Carl. Good morning and thanks for joining us today. As Carl mentioned, we finished the year with strong momentum putting us in a solid position to achieve our 2024 targets. And I'd like to share some further details on our financial results. We delivered organic revenue growth of 6% in the fourth quarter, bringing the full year growth rate to 8%. The ramp up in productivity of our investment hires, our specialization strategy in Risk & Broking and the ongoing demand for our benefits and human capital services in HWC continue to fuel the strong top-line growth. Alongside this robust growth, we also drove margin expansion for both the quarter and full year at the enterprise level and in each of our segments. The result was adjusted diluted earnings per share of $7.44 for the quarter and $14.49 for the year. Next, I'll spend some time reviewing our segment results. Note that to provide comparability with prior periods, all commentary regarding the results of our segments will be on an organic basis unless specifically stated otherwise. Health, Wealth and Career generated revenue growth of 4% compared to the fourth quarter of last year and finished the year with 6% growth. Going into 2024, we feel confident in the outlook and expect another year of similarly positive results for the segment. Revenue for Health increased 6% for the quarter or 5% when excluding the impact of some modest book-of-business activity. We delivered solid growth across all regions driven by increased brokerage income and the continued expansion of our Global Benefits Management client portfolio in Europe and international. Wealth grew 5% in the fourth quarter. Retirement growth was driven by increased project work related to derisking activity in North America as well as additional project work and pension brokerage in Europe. Investments also contributed significantly to growth for the quarter reflecting new client acquisitions and higher fees. Career delivered 6% growth in the quarter driven by increased compensation survey sales, executive compensation and board advisory services and project work related to employee experience. Benefits Delivery and Outsourcing generated 3% growth in the quarter. The increase was driven by higher volumes and placements of Medicare Advantage and life policies in our individual marketplace business and increased project activity and benefits outsourcing. HWC's operating margin increased 150 basis points compared to the prior fourth quarter to 40.5%, primarily driven by transformation savings. For the full year, HWC's operating margin increased 190 basis points over prior year to 28%. Risk & Broking revenue was up an exceptional 12% on an organic basis for the fourth quarter. Interest income was $27 million for the quarter, up $17 million from the fourth quarter last year. Note that beginning with Q1 2024 results, we plan to include the impact of investment income on organic growth at the segment and enterprise levels in our materials. For the full year, Risk & Broking grew 10% organically. We are expecting mid-single digit or better organic revenue growth for the segment in 2024 with continued contributions from our investments in talent and platforms as we identify and pursue opportunities in line with our specialization strategy. Corporate Risk & Broking had another strong quarter, growing 12% and continuing the organic revenue growth trajectory we have seen in the business over the last couple of quarters. Higher levels of new business activity, improved client retention and increased renewal revenue from rate increases drove robust organic revenue growth. Our specialty lines continue to be major contributors to the strong growth performance, led globally by natural resources, facultative, FINEX, financial solutions, crisis management, and construction. Strong growth across CRB in Europe was led by P&C, retail, facultative, natural resources, and FINEX. North America CRB benefited from strong new business in construction, natural resources, marine, aerospace, real estate, and hospitality and leisure, as we saw strong demand in the industries in which we specialize. Our international region also contributed with exceptional organic growth, including strong growth across all sub-regions led by Latin America. In the Insurance Consulting & Technology business, revenue was up 8% over the prior year period on top of a strong comparable, driven by increased sales in technology solutions, including strong new business and higher project activity. R&B's operating margin was 32.9% for the fourth quarter, a 460 basis point increase over the prior year fourth quarter. We continue to see our hiring efforts yield strong results and rising productivity, driving greater operating leverage. The margin also benefited from transformation, continued expense discipline and tailwinds from increased interest income, partially offset by some modest foreign exchange activity and investments in people and technology platforms. For the full year, R&B's operating margin increased 60 basis points over prior year to 21.8%. As Carl mentioned, we plan to continue to opportunistically invest in talent and strategic initiatives in the segment in line with our previous announcement. For 2024, we continue to expect margin expansion on a full year basis. Given the business seasonality and uncertain pacing of the investments, please note that the scale of R&B margin expansion may vary from quarter-to-quarter. At the enterprise level, adjusted operating margin for the quarter was 34.2%, a 180 basis point increase over prior year. For the full year, we saw 110 basis points of margin improvement to 22%. The benefits of our transformation program drove a large part of our margin expansion for the year. We had $37 million of incremental annualized transformation savings for the fourth quarter, bringing the total to $337 million since the program's inception. As Carl mentioned, we are raising our transformation savings target to $425 million by the end of 2024. The additional savings will primarily come from technology modernization and process optimization, which we expect to further reduce our cost structure and help unlock additional long-term growth and cost savings opportunities. The total amount of costs to achieve is now estimated at $1.125 billion. Along with their direct return on investment, these additions to the transformation program will serve as the catalyst for additional improvement by creating an infrastructure from which to drive further efficiencies. Our unallocated net was $296 million for the full year of 2023, an increase of $31 million over prior year, primarily due to a headwind from a one-time favorable item reflected in the prior year balance. Foreign exchange was a $0.02 tailwind on adjusted EPS for the quarter and a $0.06 headwind for the year. At current spot rates, we expect foreign exchange to have a $0.02 headwind on adjusted EPS for 2024 with no impact in Q1. We recorded $109 million in pension income for 2023, relatively in line with our expectations. For 2024, we expect $88 million in pension income, with the decrease driven by market performance and interest rate movements. Our U.S. GAAP tax rate for the quarter was 15.7% versus 17.7% in the prior year. Our adjusted tax rate for the quarter was 19.1% compared to 22.2% for the fourth quarter of 2022. Our U.S. GAAP tax rate for the year was 16.8% versus 15.4% in the prior year. And lastly, our adjusted tax rate for the year was 20.9% consistent with prior year. Notably, there were nonrecurring items in Q4, which resulted in one-time tax items in our 2023 adjusted tax rate. Excluding these benefits, our adjusted tax rate would have been 22.4% and our adjusted diluted EPS would have been $14.22. We expect our full year adjusted tax rate in 2024 to be closer to our 2023 adjusted tax rate, excluding these one-time benefits. In 2023, we returned nearly $1.4 billion to our shareholders with share repurchases of $1 billion and dividends of $352 million. We continue to execute a disciplined capital allocation strategy and currently view share repurchases as an attractive use of capital to create long-term shareholder value. We expect to continue repurchasing our shares in 2024 under our current share repurchase authority of which approximately $1.3 billion remains. We expect approximately $750 million of share repurchases in 2024 subject to market conditions among other relevant factors. We generated free cash flow of $1.2 billion in 2023, representing a free cash flow margin of 12.6% above our target of 12%. The improvement from the prior year was driven by the non-recurrence of one-time headwinds reflected in the comparable period operating margin expansion and improvement in transacts cash flow. These improvements were partially offset by increased transformation program related costs. Turning to our 2024 financial targets. We continue to expect mid-single digit organic revenue growth as we work towards our revenue goal of $9.9 billion plus. We expect our adjusted operating margin to expand toward the high-end of the 22.5% to 23.5% range. We also expect to deliver on our adjusted diluted earnings per share target of $15.40 to $17. Finally, we expect incremental improvement in our free cash flow margin. Our results for the fourth quarter and full year 2023 are a testament to our continued strategic progress, our operational execution, and our colleagues' relentless focus on serving our clients. We are very pleased with our performance and expect our momentum to continue into 2024 as we focus on delivering on our targets. With that, let's open it up for Q&A.

Thank you. Our first question comes from Gregory Peters with Raymond James. Your line is open.

Good morning, everyone. It seems like you finally stabilized the platform last year, which should bode well for your future. Regarding the mid-single digit guidance outlook for 2024 within Risk & Broking, could you provide insights on how the benefits from new business and rate increases will impact the Risk & Broking line? Additionally, concerning Health, Wealth, and Career, the BD&O line was weaker in the fourth quarter. Can you share your outlook for that?

Good morning, Greg, and thank you. Starting with Risk & Broking, I want to address the impact of interest rates, which we don’t consider a major headwind or tailwind for our portfolio in 2023 and looking into 2024. Market conditions are somewhat mixed. However, we believe that our investments in talent and the shift towards specialization in our business have truly set us apart and will continue to do so as we move into 2024. Our focus on specialization distinguishes us from others in the industry, as we've organized specialized businesses around industry divisions rather than just practices. These businesses have dedicated personnel with national or even global profit and loss responsibilities, aligning directly with our specialization strategy. This approach has led to our global lines growing at a significantly faster pace than our overall book, as we mentioned earlier. Regarding Health, Wealth, and Career, we are optimistic about our pipeline and project mid-single digit revenue growth for HWC in 2024. The current human capital landscape is quite complex due to rising healthcare costs and changes in the interest rate environment affecting pension derisking activity. We see these trends as positive for 2024. Additionally, as highlighted in our opening remarks, we expect the momentum from our smart connection strategy to carry on into 2024, and the increased cross-selling opportunities will further support HWC's revenue growth.

I wanted to shift the discussion to the expectations for free cash flow margins, specifically the long-term goal of over 16%. I'm interested in more details regarding the comments made on the slide about potential positive and negative impacts. Additionally, when considering this target of 16%, are we looking at a five-year or ten-year time frame, and what guidelines are you setting for management in relation to this objective?

Yeah. Hey, Greg. It's Andrew. Thanks for the question. The 12.6% margin in 2023, it was good progress on a year-over-year basis. We do expect incremental improvement in 2024 as we work towards the long-term free cash flow margin target. We expect to see that margin improvement in 2024 and beyond really through three main factors. So, the first one's going to be greater profitability as a result of driving margin expansion. We'll be intent to do this not just through transformation in operating leverage, but also by improving our business mix. For example, deepening our footprint in the area of MGA's, MGU's things of that nature. The second piece is the abatement of the transformation related spend, which we're expecting through the first half of 2025. The third piece is improved cash conversion in the transact business, which we expect to be positive within the next few years, that's going to come as a result of the maturation of the business as well as the improving, changing the product mix within that business. Over the near term, progress on some of those factors is going to be temporarily offset by cash investments in HWC and R&B for product development to support future growth, things like our LifeSight business where we continue to invest, a new ICT software and I also mentioned the MGA and MGU business as an example of that.

Thank you. Please stand by for our next question. Our next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open.

Hi, thank you. My first question is about the EPS guidance. You reaffirmed the guidance provided in July, but it seems you expect to be at the high end of the operating margin target. Additionally, it appears that the pension situation is somewhat favorable compared to the midpoint of the guidance update from last summer. So, why not raise or tighten the range upwards? Do you believe there is potential for the results to exceed the upper limit of the range, or is there a level of conservatism in your approach at the start of the year?

Yeah. Thanks for the question, Elyse. So, we remain confident in the EPS target range of $15.40 to $17 for 2024 that we had set out. As we laid out in our supplemental materials, you can see the puts and takes there, a meaningful portion coming from operating income along with the increase in the share repurchase activity that we mentioned about $750 million expected there. The offset there as you mentioned, some of the reduced pension income that's going to be about a $0.14 share headwinds as well as the increase in interest expense and adjusted tax rate. And when we thought through all of those puts and takes, we felt still very confident about landing within the range there.

Thanks. So then my second question is on the share repurchase guidance. So Andrew, I think you said $750 million in 2024. That's a lower than what you guys bought back in 2023 yet your free cash flow conversion should improve, right, from the 2023 level. And then I guess even though it's not a 2024 event, right, in the first half of 2025, right, you guys I believe should receive $750 million from the Willis Re earnout. So why would it buybacks be more than $750 million in 2024 or is M&A part of the equation? I'm just trying to square the free cash flow improvement and the lower level of buyback in 2024.

Sure. The $750 million, right, is our expectation for the year. That level is lower than at 2023 where we did $1 billion. You have to keep in mind that throughout 2023, we took on some incremental leverage in May and throughout the year capitalized on the opportunity to buy more shares when there was pressure on the stock price. So the $750 million is not necessarily static. We continuously monitor cash levels, market conditions and if the opportunity presents itself to accelerate share repurchases will take advantage of it just like we did last year. We continue, as you might expect to evaluate all of our options for capital allocation as we always have, which does include share buybacks, internal investment and carefully considered strategic M&A as part of that to ensure that we're maximizing value creation for our shareholders.

Thank you. Please stand by for our next question. Our next question comes from the line of Robert Cox with Goldman Sachs. Your line is open.

Hey, thanks for taking my question. Maybe a similar question to when you've already received on free cash flow in some ways. But if I exclude the $430 million or so cash restructuring charges this year, I get to a free cash flow margin over 17% in 2023, is that correct? And when you think ahead to a future where restructuring spend is zero and the transact free cash flow drag has improved, couldn't there be meaningful upside to the 16% long-term free cash flow margin target. Am I thinking about that correctly, or are there any headwinds I'm not considering?

I believe you are on the right track with your calculations, Rob, particularly regarding the positive aspect indicated after the 16% in our long-term goals. It does take some time for certain challenges to diminish. For instance, consider the transact; even when it becomes free cash flow positive, it will still impact the free cash flow margin negatively. This is because it may not be converting at the same rate as other parts of the business, and the revenue from transact can still grow as well. Therefore, there are various factors that influence the margin calculation.

Okay. Thanks. And just to follow-up on expenses in the Risk & Broking business. Could you talk about the incremental expense savings in the quarter versus last quarter, some of the things that you started to enact last quarter? And then, just some more color on how sustainable those savings are outside of the transformation program?

We discussed the need for ongoing expense discipline across the entire platform, not just in R&D. We aim to balance our focus on expenses with revenue growth to generate operating leverage on top of the transformation savings. Additionally, we have been making significant investments in that business, which has had an impact during certain parts of the year. Carl, do you have anything to add?

Yeah. I guess, as we've highlighted in prior quarters we have substantial investment in that business principally in talent. And now that our talent base is back to full strength, right, we're concentrating on strategic opportunistic hires to capitalize on the opportunities we see ahead and the geography that we offer the greatest potential for profitable growth, right? So I think it's just a momentum story at this point as opposed to a rebuild story which leads to a smoother pattern of expense growth.

Thank you. Please stand by for our next question. Our next question comes from the line of Michael Zaremski with BMO. Your line is open.

Great. Good morning. Now regarding the free cash flow, thank you for the detailed information. I understand one of the offsets was cash investments in product development. Should we be considering your historical capital expenditures ratio relative to revenues, and are you suggesting that it might rise to a higher level than it currently is, or am I overanalyzing some of your comments?

It's a good question. We would expect the margin to increase a little bit. Keep in mind that it has been somewhat low in terms of spend ratio over the last few years. There has been a significant increase in transformation spending and capital expenditures, but the business-as-usual capital expenditures as we continue to expand the platform and invest for the future will provide a modest temporary offset to some of the positive factors I mentioned earlier.

Okay. That makes sense. It was great to hear about the HWC segment. Specifically, regarding retirement, I know Willis has a leading defined benefit retirement solutions segment, which you have historically indicated may not have a high growth rate or is not expected to grow much in the long term. However, you mentioned that in the near term, due to the environment, it is experiencing growth, which could support growth in 2024. I just want to confirm that I understood those comments correctly.

Yeah. I think you've got that right. We see several factors as working for us going forward and we do have the market leading retirement business, right? Given the economic environment we find ourselves in and the funded status our pension clients enjoy, right, there still remains a substantial appetite for derisking strategies and with funded positions are better, right, that there's the capability to do that is increased. And we're well-equipped to help our clients that journey. In addition, the investments we've made in growing areas of the pension landscape such as the LifeSight business Andrew talked about just earlier, have enabled our growth in a number of economies where these strategies, Master Trust are an attractive place. Our corporate clients can gain efficiency of the provision of retirement.

Thank you. Please stand by for our next question. Our next question comes from the line of Mark Hughes with Truist Securities. Your line is open.

Yeah. Thanks. Good morning. I wonder if you could just talk a little bit about the transact what your experience was this quarter the BDO business. Organic growth was below average for the business as a whole. Did you see any kind of change in that market? And does it influence your long-term outlook for the business?

We evaluate growth opportunities based on their profitability. If the cost required to generate a policy commission doesn’t make economic sense, we choose not to pursue it. This year, we've successfully managed the balance between growth and profits, making prudent decisions given the current circumstances we are facing.

And just to add one thing to that if you recall, we had some revenue time into Q3 from that business which I think we had mentioned on the last call, so that did factor into the quarterly growth rate within that component of HWC. So I think the best way to think about is if you look at the full year growth rate really representative of where we expect the business to head in the future.

Thank you. Please stand by for our next question. Our next question comes from the line of David Motemaden with Evercore ISI. Your line is open.

Hi, thanks. Good morning. I had a question, you guys had called out. I think it was about a 200 basis points adverse impact to free cash flow margins from transact in 2022. Could you just level set us on? How much of a drag that was in 2023? And then, it sounds like you guys are expecting it to be a free cash flow positive in the near term, which is a little sooner than I'd expected. So, if you could just talk about what's driving that it would be helpful.

Yeah. Sure. We had about 60 basis points year-over-year improvement in the free cash flow margin drag from that business. So, quite pleased with the progress that we've made there at that business matures and as we think through the portfolio of products within transact. The drivers of getting to free cash flow positive within that business, the next few years is know more focus on the product portfolio, different products have different cash conversion profiles so we seek to balance that appropriately. As Carl mentioned, we run that business for profitable growth. So, we're always making trade-off decisions there as part of that. And the business will continue to mature. So we think that will be a contributor to getting us to free cash flow positive within that business as well.

Our specialized businesses and global lines comprise roughly half of the portfolio for the CRB business. We are experiencing nearly double the growth rate, which offers a clearer perspective on our relative performance.

Thank you. Please stand by for our next question. Our next question comes from the line of Andrew Kligerman with TD Cowen. Your line is open.

Good morning. The R&B growth was impressive at 12%. Looking ahead to new hires, Carl mentioned being strategic and opportunistic. What should we anticipate for new hires next year? Will it be flat, slightly up, or slightly down? Regarding the strategic client engagement you mentioned, I'm still unclear on how that benefits the specialty groups. Does it potentially slow things down with new people involved, or how does it enhance the specialty instead of making it more complex?

Sure. Thanks, Andrew, for the question. First of all, regarding our talent acquisition plans, you're correct. We're focusing on strategic and opportunistic hiring. Adam Garrard has done an excellent job over the past few years in rebuilding this business to full strength. However, we will always be on the lookout for talent. If we can find individuals who are attracted to our proposition and can add value and revenue, we will pursue them. As for our strategic client engagement, I view it as our goal to deliver best-in-class service to our clients. This means understanding their risks better than anyone else, which requires specialization, and fulfilling their needs effectively. Client engagement is equally important. I see this as complementary rather than conflicting.

And one of the primary focuses of the strategic client engagement concept is really going to be a focus on the industry verticals, but in particular, think about Fortune 1000 type clients where risk profiles may be more expensive and more complex than other organizations.

Thank you. Please stand by for our next question. Our next question comes from the line of Yaron Kinar with Jeffries. Your line is open.

Thank you. Good morning, everybody. I guess my first question actually goes back to Elyse's question earlier in the call. When we see guidance and we see some of the underlying pieces move a bit namely where we're seeing higher expectation of cost-saves from restructuring, and at the same time we see the EPS and margin guidance essentially remain unchanged. I just want to make sure and again going back to Elyse's question, is there a degree of conservatism in there or are you seeing some offsets potentially that are keeping you at kind of the unchanged EPS guidance?

Yeah. I think it's probably a little bit of both there. We are want to make sure that we are focused on delivering on our commitments for 2024. And we talked about some of the puts and takes that we expect to play through 2024 as well.

Okay. And can you maybe elaborate a little bit on kind of what the variables would be that would get you to the upper end versus the lower end of that guidance? What the main variables that you foresee today are?

I believe that the main driver will be organic growth, which should lead to additional operating leverage beyond our current expectations. Thus, I think that will be the most significant factor.

Thank you. Please stand by for our next question. Our next question comes from the line of Mark Marcon with Baird. Your line is open.

Good morning. Thanks for taking my questions. Two questions. First, on the specialty lines, you said you're basically generating 2x the growth of the general lines. So to what extent or how long do you think you can keep up that higher level of growth on the specialty lines? In other words, are they still relatively new in the market and this is truly differentiated and this can enable you to continue to gain a lot of share? Or did we have a boost because of the talent additions and things will settle out? So, how should we think about that from a longer term perspective?

So part of this is strategic, right? In that we are focusing on these businesses that's where we are continue to invest and we see a return there. We've been a specialist broker for nearly 200 years right? So, I would hurt you that it's not likely to play itself out over the next couple. We've been doing this very successfully for a very long time. The differentiator for us remember is that we're actually organizing the business around this as opposed to on the side of someone's desk and that enables us to focus on delivering enhanced value to superior analytics and client engagement that we think has a very attractive proposition. We don't see that abating.

Great. Can you discuss the pension and retirement business? How much of an increase can we expect from the change in rates and the ability to reduce risks? Additionally, are you receiving any new engagements related to IBM's policy shift?

So, I mean, we do see the macroeconomic environment and where the funded position of pension plans are as stimulating demand for buy-ins and buyouts as we've talked about that not just necessarily transacting on them with the analysis that goes into them and the preparation so that that we do think that is helpful for us and our clients going into 2024.

And some of that will be episodic, right, as clients take on derisking transactions. So it's not going to be any one pattern throughout the year.

Yeah. And with respect to the client you were alluding to who is – I guess reopened their defined benefit plan. This is the same where we all come. There's interest out there at least examining this on behalf of other plan sponsors who may be similarly situated. And we're well poised and well-positioned to help clients with that evaluation.

Thank you. Please stand by for our next question. Our next question comes from the line of Maya Shields with Keefe, Bruyette & Woods. Your line is open.

Great. Thanks. Two quick questions. First, Carl, you talk about having 12 verticals and I was hoping to sort of outline how much of the Fortune 1000 that 12 verticals represent.

I don’t think that characterization is quite accurate. One of our industry verticals focuses on alternative capital, which includes private equity. This is not exclusively a public equity strategy, nor is it limited to the large market. We observe that the industry verticals also encompass smaller organizations. Therefore, we have significant coverage across corporate America with our industry verticals. Some are quite broad, while others are specifically targeted in areas where we believe we can provide distinct value, such as hospitality.

Okay, that's fair. I have a question about the staffing that Adams has brought back to full levels. Did we achieve full productivity from that team in the fourth quarter of 2023 or throughout the year? Is there still potential for this new group to increase productivity or improve margins?

Very much the latter. We do see. While we're very happy with the progress both our existing colleagues and our newer colleagues have made. We do see increased productivity as being part of the picture for our last cohorts of hires. Yes.

Thank you. Please stand by for our next question. Our next question comes from the line of Josh Shanker with Bank of America. Your line is open.

Yeah. Thank you very much for taking my question again. I just want to back a question Greg was asking at the beginning about the difference in the growth rates of the various segments. In aggregate, the growth seems pretty orderly, but by segments there seems to be a lot of volatility. Should we expect in the coming quarters that the segment organic growth rate will be volatile? That's the right way to think about how your business operates? Or should we expect there to be a general run rate where there's a trend from the previous quarter that might influence the next quarter?

Yeah. I think you're asking about sequential growth rates; parts of our business are seasonal. And we do have timing things which play out periodically between quarters year-to-year, so that is something to keep in mind and that is why we tend to focus on full year growth rates for our businesses.

Does the seasonality shown in 2023 represent a seasonality that we should consider in the 2024 year?

For the most part, I think throughout the year we call out a couple of unusual things. For example, the timing of BD&O between Q4 and Q3 revenue and I think there were a couple of other things throughout the year. And of course, you got to think about the impact of the book sales where we had some swings in some of the quarters where they were larger amounts of those, but expect to be through that largely going forward.

Thank you. Please stand by for our next question. Our next question comes from the line of Mike Ward with City. Your line is open.

Hey, guys. Thanks. Good morning. I was just curious, the margin guide relatively consistent, but you've spoken to some incremental savings. So just wondering if we should think about those savings maybe being offset by some costs? Could that actually benefit 2025 margins?

We expect to be towards the higher end of the 2024 margin target. There are benefits from the incremental savings we've discussed, and the investments we are making are aimed at future growth opportunities, which will also provide us with additional operating leverage in the future. We believe there will be ongoing advantages beyond 2024 from the investments we are making this year.

Okay. Thanks. And then you spoke into some of the booking in the quarter. Wondering if you could talk about where attrition is running? If 2024 is kind of a normal year, just curious how much of a headwind we should expect this year for booking?

No, we expect to return back towards our historical normal level, so we don't expect any significant headwinds or tailwinds from booking going forward.

I would just add sort of thinking about attrition the overall level for the company, we are back down to well within the range we've had historically. So, a very manageable situation for us.

Thank you. Please stand by for our next question. Our next question comes from the line of Brian Meredith with UBS. Your line is open.

Yeah. Thank you fit me. And Carl, I'm just curious, on the 10% organic growth you had for the year in R&B, you mentioned that it was new business and it was retentions. Is a way to kind of parse that out and how much of the kind of growth was client retention? Are you back to kind of your historical client retention levels or is there more room for that to improve?

We are back which is great to see and that is the results superior client service I think that we have many, many, many colleagues. I do not rest on our laurels, but it's very nice to be where we are. Our performance new business has been just really first rate and very proud of the effort of the team is made of representing what we can do with WTW in the marketplace. Thank you. For my second question, I am curious about your outlook for 2024. What is your baseline assumption regarding economic growth and inflation as you look ahead? Do you expect things to remain the same, or do you anticipate any changes? I think it's best to continue as we are without dwelling too much on the past. We are not expecting significant economic upheaval or major geopolitical instability, but we acknowledge that there is considerable volatility in the environment. While this situation may not be ideal for our clients, it presents us with additional opportunities to assist them in managing that volatility.

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Carl Hess for closing remarks.

So, thank you all again for joining us. I appreciate all of our WTW colleagues globally who have worked tirelessly to help us end the year on such a strong note. I am proud of everything we've achieved in 2023. I look forward to us keeping up the momentum for 2024.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.