Willis Towers Watson: A Look at the Insurance Market and WTW’s Performance
This article examines the current performance of Willis Towers Watson Public Limited Company (NASDAQ:WTW) within the broader context of the insurance industry. We’ll explore the key market dynamics and then assesses WTW’s recent performance and strategic initiatives.
The U.S. Insurance Market: A Landscape of Opportunity
The United States boasts the largest insurance market globally, with a combined value of approximately $1.7 trillion in 2025. The industry is dominated by major players, influencing global markets. Life and health insurance remain significant segments.
The global health insurance market was valued at roughly $2.14 trillion in 2024, according to a Fortune Business Insights report, and is projected to reach $4.45 trillion by 2032, reflecting a compound annual growth rate (CAGR) of 9.7%. North America led the health insurance market at a 62.15% share in 2024.
In the property and casualty section, a Deloitte report shows underwriting gains in the first quarter of 2024 for the U.S., which generated $9.3 billion in underwriting gains – an increase from the $8.5 billion loss in Q1 2023. The combined ratio improved to 94.2%, propelled by rate increases in the personal lines sector, which surpassed the cost of claims.
Addressing Market Challenges: Natural Disasters and Other Risks
Insurers are navigating emerging loss trends and natural catastrophe risks. The commercial lines segment faces challenges, including escalating losses in employment practices liability insurance. Social inflation also concerns insurers globally.
WTW’s Natural Catastrophe Review indicates that global insured losses exceeded $140 billion in 2024, the fifth consecutive year exceeding $100 billion. Total economic damages reached nearly $350 billion, emphasizing the impacts of climate-related risks.
The U.S. property insurance industry is making adjustments to handle losses from California wildfires. A UCLA Anderson Forecast suggests that wildfires in L.A. County may have caused $95 to $164 billion in total losses, with insured losses estimated at $75 billion.
Wharton professor Benjamin Keys noted that insurance companies have been “very clear-eyed about climate change for a long time and the effect that has on their balance sheets.” He expects higher premiums in high-risk areas, which will be capitalized into house prices, ultimately leading to considerably higher premiums for homeowners.
Methodology for Evaluating Insurance Stocks
This analysis utilizes specific financial criteria to evaluate insurance companies. The methodology uses Finviz to identify companies in the insurance sector with a market capitalization of more than $5 billion. The selected companies have returns of over 15% in the previous year, as of January 26. The top-performing insurance stocks are then ranked based on the number of hedge fund holders as of Q4 2024.
The rationale behind this approach is that by tracking stocks favored by hedge funds, it is possible, according to research, to outperform the market. This strategy, used in a quarterly newsletter, selects 14 small- and large-cap stocks each quarter and has yielded a 373.4% return since May 2014, outperforming its benchmark by 218 percentage points.
Willis Towers Watson’s Performance and Strategic Initiatives
Willis Towers Watson Public Limited Company (NASDAQ:WTW) is a London-based company specializing in insurance solutions, commercial insurance, brokerage services, and strategic risk investment solutions.
In addition to commercial insurance, they are incorporating AI. WTW recently launched Expert, an AI-powered assistant to support midsize U.S. businesses in managing HR, compensation, and benefits tasks. This tool supports research, regulatory guidance, and document searches using WTW’s expertise and database of HR and benefits regulations.
The company has focused on data-driven solutions to support risk and capital management. In October 2024, WTW introduced a machine-led solution to transform insurance practices, helping improve the accuracy and efficiency of property and casualty reserving for insurers and reinsurers.
WTW’s financial performance includes 5% organic revenue growth in Q4 2024, with an adjusted operating margin of 36.1%. The company’s Transformation program has delivered $473 million in cumulative savings, improving efficiency. Additionally, the sale of TRANZACT for $632 million will strengthen growth rates, operating margins, and free cash flow in 2025.
Willis Towers Watson ended 2024 with $1.5 billion in operating cash flow and $1.4 billion in free cash flow. As of February 27, WTW offers a quarterly dividend of $0.88 per share and has a dividend yield of 1.09%.
Overall, WTW ranks seventh in this selection of top-performing insurance stocks. Although the potential of WTW as an investment is acknowledged, the analysis suggests AI stocks hold more promise for higher returns within a shorter timeframe. For those looking for a potentially more promising AI stock that trades at less than five times its earnings, refer to a related report.
