Good morning. Welcome to the WTW First Quarter 2024 Earnings Conference Call. Please refer to 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 3 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 visit the forward-looking statements section of the earnings press release issued this morning as well as other disclosures in the company's most recent Form 10-K and in other filings the company has made with the SEC. During the call, certain non-GAAP financial measures will be discussed. For reconciliations of the non-GAAP measures as well as other information regarding these measures, please refer to the earnings press release issued this morning 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 First Quarter 2024 Earnings Call. Joining me today is Andrew Krasner, our Chief Financial Officer. We had a solid start to the year, delivering first quarter results in line with our expectations. Our momentum from last year has carried us into 2024 as we continue to execute on our strategic priorities to grow, simplify and transform. Our exceptional solutions, productivity from new hires, and investments in talent and technology continue to play a pivotal role in fueling organic revenue growth of 5%. Simultaneously, our transformation initiatives helped us generate adjusted operating margin expansion of 200 basis points year-over-year and 16% growth in adjusted diluted earnings per share. We had $33 million of incremental annualized savings from our transformation program during the first quarter, bringing the total to $370 million in cumulative annualized savings since the program's inception. We continue to look for more opportunities to optimize the business while leveraging our cost structure to expand our margins. This encouraging start to the year, our robust new business pipeline, and our plans for realizing operating efficiencies across the rest of the year give us a high level of confidence that we will deliver on our 2024 commitments. I'm pleased with how our strategic progress has driven this quarter's results and, more importantly, has positioned us for continued profitable growth. For the first quarter of 2024, we delivered top line growth, underscoring the heightened importance of our services in the current market. Our distinctive data-driven and industry-specific approach is making us more attuned to specific economic dynamics that allow us to enhance outcomes and mitigate risk for our clients. Our global client model continues to resonate with the market, thanks to our world-class offerings and the unwavering dedication of our colleagues. All this puts us in a strong position to achieve sustainable profitable growth and to enhance long-term shareholder value. Let me give you an update on the progress we've made and the opportunities ahead for our segments. Our specialization strategy in Risk and Broking remains a key growth driver for both the segment and the company. R&B had organic revenue growth of 8% for the quarter. Our Specialty businesses continue to strongly outpace the rest of the segment's growth. And we also continue to see sustained client retention rates in the mid-90s, a product of the ongoing value of our data and analytics focus and the effective insurance solutions that we provide to our clients. We often get questions about WTW's specialist approach and how it sets us apart. What's unique about WTW's approach is that our entire business, not just the client-facing parts, is structured around industry concentrations. This has clear benefits for both our clients and our operations. Clients can tap into both our global and local expertise, which includes unique data and analytical tools that help create a continuous cycle as we tackle industry challenges, aggregate our experience and information, and use that to further improve our solutions to meet specific industry needs. From an operational point of view, these are businesses with national or even global P&Ls and not simply an industry practice group. Our dedicated industry teams have heightened accountability for end-to-end performance and make informed decisions based on their experience and in-depth knowledge that results in exceptional value delivered to our clients while achieving strong financial results. A client win from this past quarter illustrates the effectiveness of this approach. Members of our global construction line of business based in our Europe and international geographies came together to win a multiyear contract for a rail infrastructure leader, by creating a custom solution that fit the client's unique risk management profile. The global teams were assisted by our local teams in the country where the railway was being built, enabling us to provide even further specific expertise to the situation. Our team's familiarity with the industry-specific risks associated with rail infrastructure, combined with our specialized geographic knowledge, ultimately secured us to win amidst fierce competition. In North America, our transition to industry-focused divisions is complete, enhancing our ability to meet client needs and driving innovation and new offerings through our industry verticals. One example of this is Verita, our open market MGU, which has continued to exceed our expectations since its introduction last quarter. The recent addition of workers' compensation capabilities further solidifies Verita's proposition within the insurance ecosystem, enhancing its value proposition and expanding its market reach. We continue to expect the investments made in talented technology over the last few years, combined with the reorientation of the R&B business toward specialization will drive higher levels of activity with new and existing clients that is fundamental to our organic revenue growth and margin expansion trajectory this year. In HWC, we remain focused on our core businesses while fostering smart connections to fuel sustainable organic growth of 4% in the quarter. Clients continue to recognize that the deep expertise we have at each of our HWC businesses enables us to deliver market-leading solutions across our Health, Wealth, Career, and Benefits Delivery & Outsourcing businesses and make breakthroughs that matter in a complex and changing environment. For example, with many pension plans being well funded, our retirement teams around the world have helped clients derisk their plans and gain access to surplus assets not only through traditional means like annuity buy-ins and buyouts but also through novel approaches like reopening previously closed pension plans. In addition, we've assembled a unique solution involving bulk annuity purchases at our retiree health care exchange that enables U.S. organizations to derisk retiree medical obligations. After launching this solution late last year, we've already helped clients settle some $430 million in retiree medical liabilities, and we expect another $500 million in settlements over the rest of this year. In other breakthroughs, we're using artificial intelligence and broader digital tools to help clients answer some big questions about their people processes. Specifically, we've doubled our digitally enabled revenue into the career area for 2 years running and are focused on doubling again in 2024. This includes us helping dozens of the world's largest companies identify the skills their employees need to deliver solid business results and grow in their careers. We've also developed thousands of job profiles and aligned hundreds of jobs to specific career levels with AI, freeing up time for consultants so that they can spend more of their time advising clients on reward strategy and program design. Our digital solutions extended to the executive pay area with our proprietary performance modeling tool that we've deployed to help hundreds of compensation committees make decisions about executive pay and performance targets. Stepping over to healthcare, we see no shortage of opportunities. There's continued high inflation around the world and the introduction of new Specialty solutions is not abating. Clients and prospects are looking for breakthroughs to deliver value and impact, evidenced by the more than 2,500 people who recently attended our Flagship U.S. Healthcare Conference. All of our core businesses are helping organizations respond to new legislation and regulation from the Netherlands Pension Legislation to the EU Pay Transparency Requirements. An important part of core business growth in HWC is the smart connections that span the segment, which create opportunities to cultivate sustainable sticky relationships. Two examples of this came with wins this past quarter with a telecommunications provider and a global biopharmaceutical company. In both instances, we were able to create a comprehensive bundle of solutions by engaging our teams across working rewards, employee experience, retirement, and Benefits Delivery & Administration. In addition to being simply larger, these multi-business relationships are typically more embedded and more profitable as we build connections with varied client stakeholders, deliver greater value, utilize our client knowledge, and leverage common resources. Our focus on smart connections continues to gain traction across our segments, demonstrating the complementary nature of our businesses and providing further evidence of the value of our multi-industry expertise. For example, this past quarter, our colleagues in HWC helped tee up a broking opportunity for our CRB team to do a complete review of a health and benefits client's P&C insurance strategy and programs. After detailing our approach to industry specialization, our CRB colleagues were chosen for all lines of coverage over the incumbent. Putting it all together, good market demand, well-positioned core businesses, breakthrough solutions in new areas, and smart connections that add value, the outlook for HWC remains strong. In closing, I'm proud of our performance this quarter, which reflects our continued strategic progress. We're executing successfully at our priorities and as a result, we're in a solid position to deliver on our goals for 2024. I'm excited about the opportunities that lie ahead for the rest of the year and beyond. And as always, I extend my gratitude to our colleagues for continuing to stay dedicated and committed to WTW and our clients. 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 started the year on a strong note, achieving results that were in line with our expectations and position us well to achieve our 2024 targets. We remain focused on driving profitable growth through improving productivity, leveraging our specialization and smart connection strategies, and executing our transformation program. In the quarter, we delivered organic revenue growth of 5% and drove adjusted operating margin expansion of 200 basis points. The result was adjusted diluted earnings per share of $3.29, an increase of 16% over the prior 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 first quarter of last year, in line with our expectations of mid-single-digit organic revenue growth for the segment in 2024. Health revenue increased 3% for the quarter, led by high-single-digit growth in international and Europe and driven by the continued expansion of our global benefits management client portfolio. The timing of new business contributed to lower growth in North America, where our business is typically fee-based. We expect that to accelerate significantly throughout the remainder of the year, in line with high-single-digit growth expectations for the full year. Wealth grew 3% in the first quarter, driven by strong growth in our retirement business due to increased pension derisking work in North America and Europe, along with a modest increase in our Investments business due in part to new products. Career delivered 3% growth in the quarter, primarily driven by increased projects related to communication work and employee experience and more broad-based reward assignments and working reward. It is notable that at this point in the year, our compensation benchmarking participation is up double digits over 2023, creating a pipeline for accelerated growth in the latter half of 2024. Benefits Delivery & Outsourcing generated 6% growth in the quarter. The increase was driven by higher volumes and placements of Medicare Advantage and life policies in our individual marketplace business. Based on the incidence of growth projected by carriers in the Medicare Advantage space, we expect more moderated growth later in the year. Offsetting the BDA growth was low growth in our outsourcing business as we absorbed a revenue headwind due to a large client insourcing its health and other benefits administration. HWC's operating margin was 25.1%, an increase of 110 basis points compared to the prior year first quarter, primarily driven by transformation savings. Risk and Broking revenue was up 8% on an organic basis for the first quarter. There was a $5 million unfavorable year-over-year impact from book of business activity. Interest income was $28 million for the quarter, up $16 million from the first quarter last year. Corporate Risk & Broking had another strong quarter, growing 9% or 10% excluding the impact of book-of-business activity primarily driven by strong client retention across all geographies and a higher level of new business activity. Our specialty lines continue to be a major contributor to the strong growth performance led globally by financial solutions and natural resources. Growth across CRB in Europe was led by Financial Solutions, Aerospace, Natural Resources, Marine, and P&C. North America CRB had solid growth driven by new business across several lines, including Construction, Natural Resources, and Real Estate, Hospitality, and Leisure, as well as contributions from our new Verita business. Our international region also contributed strong organic growth across all subregions, led by countries in Central and Eastern Europe, Middle East, and Africa. Looking at the insurance industry more broadly in terms of rates, the market remains a bit mixed with some flattening and even softening in specific insurance lines such as D&O and cyber. However, the current risk environment is marked by increased frequency in natural disasters, social inflation, and geopolitical conflicts. As a result of that, we see rate increases across various lines such as casualty, especially in North America, and globally in political violence and terrorism. Insurance Consulting & Technology revenue was flat with the prior year due to the timing of consulting and technology revenue between quarters. We expect ICT to achieve mid- to high-single-digit growth for the full year and in line with our overall expectations for Risk and Broking. R&B's operating margin was 20.8% for the quarter, a 90-basis-point increase over the prior year first quarter, primarily due to interest income, transformation savings, and solid organic revenue growth in CRB. R&B also faced margin headwinds this quarter from the impact of book of business activity as well as foreign exchange. In addition, as we mentioned at year-end, now that our talent base in R&B is back to full strength, we are focused on strategic and opportunistic talent investments with industry expertise as well as investments in technology that will eventually yield more revenue than what is currently in the mix. These investments impacted R&B's margins this quarter. However, they will enhance our presence and capabilities in the lines of business and geographies that we believe offer the greatest growth and profitability potential. We continue to expect margin expansion on a full-year basis and as we mentioned last quarter, given the business' seasonality and uncertain pacing of our investments, the scale of R&B margin expansion may vary from quarter to quarter but should improve over the course of the year. Now let's turn to the enterprise level results. At the enterprise level, adjusted operating margin for the quarter was 20.6%, a 200-basis-point increase over the prior year. The benefits of our transformation program drove a large part of our margin expansion for the quarter alongside improved operating leverage. We had $33 million of incremental annualized transformation savings for the quarter, bringing the total to $370 million since the program's inception. The benefits this program provides will better position us to drive sustainable operating leverage going forward. Our unallocated net was negative $56 million for the first quarter. We continue to expect the full year 2024 balance to be relatively consistent with 2023. Foreign exchange did not have a meaningful impact on adjusted EPS for the quarter, and at current spot rates, we expect foreign exchange to have a headwind of approximately $0.05 on adjusted EPS for the year. Our U.S. GAAP tax rate for the quarter was 19.9% versus 19.5% in the prior year. Our adjusted tax rate for the quarter was 22.4% compared to 20.5% for the first quarter of 2023. We continue to expect our adjusted tax rate for the year to be close to our 2023 rate, excluding the one-time tax items we mentioned last quarter. During the quarter, we returned $187 million to our shareholders with share repurchases of $101 million and dividends of $86 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 continue to expect approximately $750 million of share repurchases in 2024, subject to market conditions and other relevant factors. Our interest expense for the quarter was $64 million versus $54 million in the first quarter of 2023. We actively managed our leverage profile by issuing $750 million of new debt in March. A portion of those proceeds will be used to pay our upcoming $650 million debt maturity in June. We generated free cash flow of negative $9 million for the first quarter, a decline of $101 million from the prior year, primarily driven by increased cash outflows related to transformation and discretionary compensation payments, partially offset by higher inflows from collections. The free cash flow results for the quarter are in line with what we planned as free cash flow margin was not intended to be a linear path for the year. We continue to be confident in our expectations of year-over-year improvement in our full year free cash flow margin. Our results this quarter were a solid start to 2024, and reflect a continuation of the significant progress we have been making on our strategy and operational performance. We expect our momentum to continue throughout the rest of the year and are confident in achieving our 2024 targets. With that, let's open it up for Q&A.

Our first question comes from Elyse Greenspan with Wells Fargo.

My first question is about the guidance for the margin within R&B. I think you mentioned that margin improvement is expected to increase throughout the year. I want to confirm that I understood correctly, especially since there was a significant improvement in the second half of '23. I expected those might present tougher comparisons. Are you indicating that you anticipate margin improvement to accelerate in Q2, then continue to improve in Q3 and Q4? Or did I misinterpret your comment?

Elyse, I think you're thinking about that correctly. We do expect continued expansion throughout the course of the year. We did make some investments in Q1, which did impact the margin expansion and operating leverage within R&B. But for the course of the year, we do expect the margin expansion to continue as well as the operating leverage generation.

And then my second question was just on the impact of the potential ban of noncompetes by the FTC. Can you just help us think through the impact that could have on WTW and how that could help both your ability to bring on talent and then just thoughts around potential departures, how you would think through the balance of the two, if there is a change?

Yes, thanks Elyse. We see this as actually quite manageable for us. We employ non-solicits as part of what we do. And we think that is actually quite a manageable situation for us. So we think that we're still looking through this. And of course, there may be some litigation concerning all that. But our standard restrictive covenants don't prevent our employees from working for our competitors. They are, as I said, non-solicitation, nondisclosure type agreements, and they don't function to prevent someone from taking a job with a competitor. We don't think the world is tied to that type of restrictive covenant. And so we've managed quite well against these in the past, and we'll manage I think quite well going forward.

Our next question comes from Gregory Peters with Raymond James.

Thanks for the comments, specifically, Andrew, around expectations on organic. And I wanted to revisit inside Health Wealth and Career, two comments you made about the health piece and the career piece, both of which you seem to guide to a better organic result as we go through the year. I was wondering if you could give us some color behind why you have the confidence that that's going to be a better result for the year.

Yes, Gregory, maybe I'll start, and Andrew can chime in as well. So with respect to health, right, we see a couple of factors giving us confidence regarding the rest of the year. We continue to have strong performance in our global benefits management offering, where we help multinationals deliver consistent and superior program of benefits to their workforce across. Our pipeline remains very strong and our hit rate within that pipeline remains very strong. It's sort of the beginning of the selling season in Q1 for North America. And here, we see opportunities to help companies continue to mitigate the inflation in healthcare. And specifically the impact of GLP-1 drugs, which help among other things vis-a-vis, relatively high-priced tickets, so near-term cost impact. Of course, these may help over the long term managing healthcare costs and getting improved wellness outcomes.

And just a couple of points of detail on that, especially as it relates to Q1 and going forward. So within health, the continued expansion of the global benefits management client portfolio, which Carl alluded to, drove high-single-digit growth, particularly driven by Europe and our international geographies. As we talked about, the timing of new business contributed to lower growth in North America, where our business is typically fee-based. We expect that to accelerate significantly throughout the remainder of the year, in line with high-single-digit growth expectations for the full year.

Excellent detail. For my follow-up question, I would like to shift to your investor presentation regarding the expectations for free cash flow margins, which I believe is Slide 21. I was examining the column labeled 2024 and beyond, and I would appreciate it if you could take a moment to discuss some of the variables in that section. Specifically, I'm interested in quantifying aspects such as the improvement in the TRANZACT free cash flow profile and the challenges related to cash in 2024, as well as HWC and R&B. Providing some benchmarks would help us understand how the trajectory of improvement might evolve over the next couple of years.

Yes, we haven't quantified any of the specific components. But here's how we think about the steps to getting to the 16% plus margin target, right? So we've got greater profitability as a result of driving margin expansion as a contributing factor that's not just from transformation and operating leverage, but also over time, improving our business mix, as we've talked about in the past, so MGAs and MGUs things of that nature. The second component, obviously, will have the abatement of the transformation-related cash outlays. That will taper off throughout the first half of 2025. And then as we think about the TRANZACT business, we still expect that to be positive within the next few years. That's going to come as a result of the maturing of the business and the portfolio as well as continuing to improve the product mix. I do think it's important to note that even when TRANZACT turns positive from a cash flow perspective, it will still be a drag on the enterprise free cash flow margin as it's not going to be converting right at the same rate as the rest of the business. So it will take some time for that headwind to subside. And then in the other direction, as we've talked about, we do have some temporary headwinds from cash investments within the business for product development and technology to support future growth and inefficiencies. But at the end of the day, we are committed to making annual progress on the free cash flow margin as we drive towards that 16% plus.

Our next question comes from Rob Cox with Goldman Sachs.

Just had a first question on talent. I was just hoping you guys could give us an update on sort of the talent base in terms of hiring trends, attrition trends, and perhaps you could comment on some of the staff reductions that were reported in media articles over the quarter?

Certainly, Rob. As we previously mentioned, we have strengthened our talent base. Moving forward, our investments are focused on strategic and opportunistic hiring, which we believe positions us for sustainable profitable growth. We are not merely hiring to fill vacancies; we are looking to seize specific opportunities that create value. Lucy Clarke represents a prime example of such a strategic hire, and we are eager to welcome her later this year. Additionally, we have made other significant strategic hires to bolster our industry verticals and Verita. Regarding attrition, it has decreased to levels that are now within our normal range and are manageable for our business. We still see ourselves as a leader in talent, and retaining our existing talent is just as vital as attracting new talent. I would like to thank our colleagues for their contributions during these discussions. As for recent press reports, I would emphasize that we always anticipated relocating certain work as part of our transformation program, so I don’t see this as new information—just reporting.

Great. Just a follow-up. I think there were some updated rules from CMS regarding Medicare Advantage broker compensation, have you been able to assess if there is an expected impact on TRANZACT from any of those changes?

So the final CMS rules for '25 that address marketing and Medicare Advantage plans in the U.S. was released in early April, right? So not all that long ago. The good news of the final rule was less onerous on the proposed role in a number of ways. And while there's still some uncertainties about all of its provisions are going to be implemented, but it's not causing us to change our outlook for the year. We've been actively engaged with the carriers in this space. They have reiterated the important role that we play in the distribution of Medicare insurance solutions and the valuable services we provide beneficiaries. I guess, I just close that by saying managing regulatory change is a regular part of our business. And I think we've been quite successful in navigating these sort of changes in the past. We will continue to do so in the future.

Our next question comes from Mike Ward with Citi.

Just on the unallocated expense items. Just wondering if you have any expectations for the rest of the year? And does that depend on interest rate levels?

So the unallocated net for the full year, we expect to be relatively consistent with 2023 on a 12-month basis. What you're seeing there right now is the outcome of driving down expenses at the corporate level focused on enhancing the margin profile of the company going forward. Some examples of that include things like refining our corporate support model for the businesses as well as managing discretionary spend. So that's really where it manifests itself in the unallocated net this quarter. And again, for the full year, it should be relatively consistent with last year.

Okay. And then maybe on Global Specialties. I was hoping you could expand on the kind of growth outlook and maybe which lines you're expecting faster or slower growth?

We are pleased with the performance of our specialization strategy. For the quarter, our global lines of business grew more than double that of the rest of the portfolio, indicating that it is effective. However, some lines are experiencing more challenging conditions than others. For example, our FINEX business is facing the challenges of decreased M&A activity, which affects our work in transactional liability, along with a significant decline in rates over several quarters. Despite these challenges, we are still seeing decent growth, especially in areas like Construction and Natural Resources, where our unique analytic approach is proving beneficial. Overall, we are experiencing strong growth across the portfolio, although we do encounter both headwinds and tailwinds from varying rate conditions and other factors.

Our next question comes from Andrew Kligerman with TD Cowen.

I'd like to follow up on Rob's earlier question about the staffing. Should I take it that, Carl, when you say strategic hires, and then couple that you mentioned what we had read about 120 to 130 staff members were reduced. That was just kind of the normal course of business. So as I net that out, should we be thinking that WTW does not plan to grow? They just want to selectively hire and reduce where it's impactful? Is that in terms of staffing? Is that the right way to think about it?

Let me clarify that a bit, Andrew. One of our main objectives heading into '22 and '23 was to rebuild our talent base, which had been negatively impacted by the events of '20 and '21. That rebuilding phase is now complete. This doesn’t mean we’ve stopped hiring, as we are always on the lookout for exceptional talent. However, we are no longer in a rebuilding mode; we are now in a growth phase. Regarding non-front-office operations, the impact of our transformation program has two aspects. First, we are engaged in various projects that may not necessarily lead to a reduction in headcount since we could be relocating work rather than cutting jobs. The decision-making in this context is driven more by costs than by headcount. The second factor is technology. Our transformation goes beyond just relocating the workforce; it also encompasses automation and efficiency, which we see as essential for the future. However, implementing this technology requires investment, so you might notice shifts in certain expense categories as we continue to optimize our operations.

Got it. Okay. And I was really intrigued by the smart connections example that you provided earlier. Could you tell a little bit about if HWC recommends a big opportunity to CRB and they're successful. Is there some compensation to the referral people within WTW and maybe you could elaborate if there is?

Well, I'm not going to go into details of our compensation programs for obvious competitive reasons, Andrew. But I will say that as the world leading compensation consultant, and that includes sales compensation, we have a very good adviser internally on how we structure programs to make sure we maximize the value of the internal crossover.

Our next question comes from Mark Hughes with Truist Securities.

Carl, you talked about the opportunity in pension derisking, et cetera. The organic in wealth at 3%. Do you anticipate that will pick back up?

We've characterized back our Investor Day where wealth is a low- to mid-single-digit growth business. So it's performing within those areas of expectation. We do see the environment potential risk management as being one where we continue to be a valuable role for our clients over the upcoming year. We see that there continues to be interest in opportunities, whether those are annuity buy-ins and buyouts. We're probably less favorable environment for bulk lump sums, but we think that other derisking actions will make up for those opportunities. And as we alluded to during the first part of the call, right, it's not just about derisking for some clients; actually, we have seen clients reopening their pension plan to take advantage of utilizing surplus to improve their overall compensation programs.

Right. And then the interest expense for this year, can you give us a sense of what you're looking for?

Yes, sure. So remember, we took on some incremental debt in the first quarter, and we're sitting on the cash related to a large portion of that related to the maturity that we have coming up in June. Again, that's $650 million. We took out $750 million. So you'll see a temporary uptick in interest expense as we're carrying both components of that for a couple of months.

Our next question comes from Bob Huang with Morgan Stanley.

My first question is about the growth outlook. The first quarter U.S. GDP was 1.6%, while the European Union has been relatively weaker. Given our significant business in Europe and the U.S., can you share what clients are experiencing and your expectations for the rest of the year, particularly regarding the European business and the increasingly complex geopolitical concerns? I’d like to hear your perspective on this.

Yes, sure. Thanks. I guess I'd look at it this way. The current tightened risk landscape and potentially changing rate environment creates more opportunities for us to help our clients manage their risk profile given the scale and depth of the solutions we can offer them. And given the demand we see in the marketplace, we feel good about delivering on our top line targets of mid-single-digit organic revenue growth and at least $9.9 billion in revenue. In R&B, we see opportunities for growth given our ability to help our clients address complex and challenging risks, such as natural disasters, social inflation, things like media impact, and litigation in total reform and public sentiment will factor their way into that. Geopolitical conflicts, where Europe is sort of on the edge of a couple of those. And more importantly, we're seeing increased demand for our customized tools and specialized solutions. So that will ensure that clients receive the best return for their premium dollar across their entire portfolio of risks. And given the success we've seen from these efforts, we'll continue to grow and expand this strategy into additional geographies, industry verticals. You heard us talk earlier about specialization now making its way into select industries in Europe and internationally. So we think this is a very sound footing for us.

Got it. That's very helpful. A follow-up question. I know that you addressed part of this. Just trying to put everything together. Obviously, on Slide 21, your cash flow walk, you mentioned that cash investment in transformation will subside after 2024. Obviously, in the first quarter 2024 earnings, free cash flow decreased because of transformation discretionary comp payments. Just curious how much of that was transformation in the first quarter? And I understand that it's not linear, but can you maybe help us think about how we should think about that transformation impact for 2024 on free cash flow?

Yes, we expect the full year to be slightly higher than last year. However, from a payment timing perspective, we will extend into 2025. All costs will be incurred in 2024, but there will be a couple of months delay as payments are processed. Therefore, we anticipate a net headwind year-over-year for free cash flow margin.

Our next question comes from Michael Zaremski with BMO.

First question, in regards to the Risk and Broking segment, continued excellent organic growth levels. Curious if Willis has been the beneficiary of like reverse book sales that are aiding growth like meaning you've been a book sale buyer? Or would that be netted out within the book sales line item, I think, that you've disclosed?

Yes, there's nothing meaningful in there that's contributing to the growth from that. And mostly it's been driven by new business retention rates, very little impact from rate.

Okay. Yes, you guys have been clear about the reinvestment in talent hire. Okay, got it. Lastly, on interest income, and I don't think we have the fiduciary asset levels yet, but it looks like the yield implied is kind of high. Is there anything unusual in there? Or is that the run rate or anything we should be thinking about seasonality wise?

No, I think it's a good run rate. The asset levels obviously vary by quarter. But on an annual basis, I think the yield should be fairly consistent.

Our next question comes from Mark Marcon with Baird.

There has been notable progress in margin expansion, and efforts to improve efficiency and utilization have been successful. However, I would like to understand the impact of pricing. What trends are you observing, recognizing that it varies by segment? In general, how significant has pricing been as a factor in margin expansion? Additionally, if that is true, how sustainable is that effect?

Within R&B, as mentioned earlier, the rate has not been a factor in our business. Our results have been driven by excellent retention and strong new business. We believe our specialization strategy supports these results as sustainable, and we need to maintain our focus on this. Regarding HWC, we are working to provide differentiated solutions in the market that allow us to fairly charge for the exceptional work we do. We are highly engaged with our clients to ensure our already impressive retention rates remain strong. We have been successful in delivering value that significantly exceeds the fees we charge, and our clients appreciate this as we maintain trusted adviser relationships that, in some instances, have lasted for decades.

Terrific. And then for my follow-up, just on BDO, you did mention that there was one large client that ended up insourcing some of the retirement programs. Wondering, do you have a perspective in terms of why that was? And is this kind of a one-off? Or is this anything to be concerned about on a go-forward basis?

So we very much view that as a one-off. This is a client that had a pronounced bend towards technology bent towards self-service. And we were a bit of an outlier in their portfolio of advisers. So while we would have preferred a different decision, we understand that decision. If anything, though, we see the market going the other way as clients continue to deal with the complexity of what it takes to administer these programs and companies such as us can offer a more turnkey solution they could ever develop on their own.

The next question comes from Meyer Shields with KBW.

Carl, you distinguished between sort of the rebuilding that was necessary after 2020, 2021 and more recent hiring. When you talk about the hires that have come on in the first stage of that, are they fully productive in line with the longer-term legacy Willis Towers Watson employees? Or is there still more room to go over time?

Yes. So I mean, we are very pleased with the progress this group of hires has made and they are contributing to our success. But we think there is still more room to go, especially for the more recent vintages, right? This effort began in early '22 and continued through '23. The people we hired in '23 still don't have from their perspective. And we've always said 6 to 18 months become fully productive.

Okay. Perfect. And then if I could just go back to the timing issue in health. Does that timing impact the expenses as well?

We expect the expenses to be relatively even throughout the year in that regard, and it's really just the pacing of the revenue for project work that we expect to pick up throughout the rest of the year to get to that mid- to high-single-digit growth rate.

I mean that business is a combination of commissions, which is outside the U.S. is largely how we collect things. And then in the U.S., we have a very successful large market consulting business that's fee-based. So we're typically collecting fees as we earn them, but we keep the people on throughout the year.

Our next question comes from David Motemaden with Evercore ISI.

I just had a question for Andrew. So I heard you on the moderated TRANZACT growth later in the year, given the projected growth by the carriers in Medicare Advantage. Just wanted to know if that changes your view at all on the free cash flow trajectory. Does that pull forward sort of the timing in terms of how you think about getting to that 16%. Or just how that lower growth in the TRANZACT business might help or aid free cash flow throughout this year?

Yes, it's a good question. Naturally, slower growth within that business, which is a net consumer of cash will foster a quicker move up the curve there on getting to breakeven, and if positive on free cash flow. So that would definitely be a tailwind there if it did play out that way based on what we're hearing from some of the carriers at the moment in their expected growth rates.

Our next question comes from Michael Zaremski with BMO.

First question, in regards to the Risk and Broking segment, continued excellent organic growth levels. Curious if Willis has been the beneficiary of like reverse book sales that are aiding growth like meaning you've been book sale buyer? Or would that be netted out within the book sales line item, I think, that you've disclosed?

Yes, there's nothing meaningful in there that's contributing to the growth from that. And mostly it's been driven by new business retention rates, very little impact from rate.

Our next question comes from Mark Marcon with Baird.

There has been significant progress in margin expansion, and successful efforts in efficiency and utilization. However, I'm trying to understand the impact of pricing. What are your observations regarding its effects, keeping in mind that this varies by segment? Generally, how much has pricing contributed positively to margin expansion, and if it has, how sustainable is that?

Within R&B, rate has not been a significant factor in our business, and as Andrew mentioned, our results have been driven by excellent retention and robust new business. We believe that with our strategy of specialization, these trends are sustainable, and we need to maintain our focus. Regarding HWC, we are working to provide differentiated solutions in the market that allow us to charge fair value for the high-quality work we deliver. We remain actively engaged with our clients to ensure that our already high retention rates are maintained. We believe we have been successful in delivering value that far exceeds the fees we charge, and our clients appreciate us as trusted advisers with relationships that in some cases have lasted for decades.

Terrific. And then for my follow-up, just on BDO, you did mention that there was one large client that ended up in-sourcing some of the retirement programs. Wondering, do you have a perspective in terms of why that was? And is this kind of a one-off? Or is this anything to be concerned about on a go-forward basis?

So we very much view that as a one-off. This is a client that had a pronounced bend towards technology bent towards self-service. And we were a bit of an outlier in their portfolio of advisers. So while we would have preferred a different decision, we understand that decision. If anything, though, we see the market going the other way as clients continue to deal with the complexity of what it takes to administer these programs and companies such as us can offer a more turnkey solution they could ever develop on their own.

The Next question comes from Meyer Shields with KBW.

Carl, you distinguished between sort of the rebuilding that was necessary after 2020, 2021 and more recent hiring. When you talk about the hires that have come on in the first stage of that, are they fully productive in line with the longer-term legacy Willis Towers Watson employees? Or is there still more room to go over time?

Yes. So I mean, we are very pleased with the progress this group of hires has made and they are contributing to our success. But we think there is still more room to go, especially for the more recent vintages, right? This effort began in early '22 and continued through '23. The people we hired in '23 still don't have from their perspective. And we've always said 6 to 18 months become fully productive.

Okay. Perfect. And then if I could just go back to the timing issue in health. Does that timing impact the expenses as well?

We expect the expenses to be relatively even throughout the year in that regard, and it's really just the pacing of the revenue for project work that we expect to pick up throughout the rest of the year to get to that mid- to high-single-digit growth rate.

I mean that business is a combination of commissions, which is outside the U.S. is largely how we collect things. And then in the U.S., we have a very successful large market consulting business that's fee-based. So we're typically collecting fees as we earn them, but we keep the people on throughout the year.

Our next question comes from David Motemaden with Evercore ISI.

I just had a question for Andrew. So I heard you on the moderated TRANZACT growth later in the year given the projected growth by the carriers in Medicare Advantage. Just wanted to know if that changes your view at all on the free cash flow trajectory. Does that pull forward sort of the timing in terms of how you think about getting to that 16%. Or just how that lower growth in the TRANZACT business might help or aid free cash flow throughout this year?

Yes, it's a good question. Naturally, slower growth within that business, which is a net consumer of cash will foster a quicker move up the curve there on getting to breakeven, and if positive on free cash flow. So that would definitely be a tailwind there if it did play out that way based on what we're hearing from some of the carriers at the moment in their expected growth rates.

This concludes the question-and-answer session. I would now like to turn it back to Carl Hess for closing remarks.

Thank you. Thank you all again for joining us. I appreciate the hard work of all our WTW colleagues globally who've helped us start the year on such a solid note. I'd like to thank you, our shareholders for your continued support of our efforts. Have a great day.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.