Andrew Krasner
Chief Financial Officer at Willis Towers Watson Public
Thanks, Carl. Good morning, everyone. Thanks to all of you for joining us today. Our clients continue to face a host of economic challenges including rising commercial insurance rates. However, pricing increases appear to be moderating as our fourth quarter 2022 commercial lines insurance pricing survey showed an aggregate increase of just below 5%.
Data for nearly all lines continue to indicate price increases with the exception of workers' compensation and directors and officers' liability. The largest price increases came in commercial auto, followed by commercial property. We continue to focus on helping our clients with our specialized knowledge in risk and broking capabilities, so they can make more informed decisions about how to best manage their risk in the current environment.
As Carl mentioned, we had a strong start to the year with first quarter revenue up 8% on an organic basis and solid growth across our portfolio of businesses. Our adjusted operating margin was 18.6%, a 140 basis point improvement over prior year, reflecting our growth and expense discipline along with the benefits of our transformation program. The net result was adjusted diluted earnings per share of $2.84, a 7% increase over the prior year.
Let's turn to our detailed 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.
The Health, Wealth & Career segment generated revenue growth of 6% on both in organic and constant currency basis compared to the first quarter of last year. Revenue for Health increased 8% for the quarter, primarily due to increased project work in North America related to helping clients implement legislative changes and managed plan costs, as well as from strong growth in international with new client appointments supplemented by healthcare inflation and increases in clients covered populations.
Wealth grew 4% in the first quarter. The growth was primarily attributable to higher levels of retirement work in Europe and North America, including compliance and de-risking projects along with new client acquisitions. This growth was partially offset by a nominal decrease in our investments business, which continued to be pressured by the declines in capital markets that occurred in the second half of 2022.
Career experienced 4% growth in the quarter, driven by increased demand for advisory services and increases in data and software license sales.
Benefits, Delivery & Outsourcing generated 7% growth in the quarter. The increase was driven by new outsourcing clients and compliance projects plus strength in our individual marketplace with growth from higher volumes and placements of Medicare Advantage and life policies.
HWC's operating margin was 24% this quarter compared to 20.7% in the same prior year period. This strong margin growth was primarily due to higher operating leverage.
Risk & Broking revenue was up 10% on an organic basis and 5% on the constant currency basis compared to the prior year first quarter. Corporate Risk & Broking had an outstanding quarter with an organic revenue increase of 10% driven by growth across all regions in most lines of business, primarily from new business and improved retention. As we've indicated, book-of-business settlement activity has slowed after the uptick over the last two years, with only a 1 percentage point impact on organic growth for the quarter.
Investment income was $12 million for the quarter due to higher rates and impacted organic growth for the quarter by 1 percentage point. North America had a strong quarter due to new and renewal business and increased retention. A result of the strategic investments and initiatives that Carl highlighted earlier.
Europe also had solid new business performance across a number of product lines including aerospace, financial solutions and natural resources as our focus on building and strengthening our industry and product specializations continues to deliver robust growth. International also contributed to organic growth with double-digit growth in all regions.
In the Insurance Consulting & Technology business, revenue was up 7% over the prior year period, primarily driven by increased sales and retention in technology solutions. R&B's operating margin was 19.9% for the first quarter compared to 21.6% in the prior year first quarter. Margin headwinds reflect the inclusion of profits up until the date of deconsolidation from our now divested Russia business in the comparable period. Absent this headwind, margins improved as a result of organic revenue growth in CRB, transformation savings, gain on sale and interest income, and partially offset by the run rate impacts of 2022 strategic investment hires. As we expected, last year's key hires have begun to contribute our performance in a meaningful way as exemplified by the solid organic growth this quarter and we continue to expect a ramp-up in production this year.
Now let's turn to the enterprise level results. We generated profitable growth this quarter with our adjusted operating margin increasing 140 basis points to 18.6% from 17.2% in the prior year. This improvement reflects the benefits of higher operating leverage from the increased top line growth and transformation-related savings, which we expect to continue to be a key contributor to our ongoing margin expansion and the attainment of our 2024 margin goals.
Please note that the margin tailwind created by interest income and book-of-business settlement activity was offset by the margin headwind from the divestiture of our highly profitable Russia business, whose results were included in the prior year up until the date of deconsolidation.
Foreign currency was a headwind on adjusted EPS of $0.06 for the first quarter, largely due to the strength of the US dollar. Assuming today's rates continue for the remainder of the year, we'd expect a foreign currency headwind on adjusted earnings per share of $0.05.
Our US GAAP tax rate for the quarter was 19.5% versus 27.5% in the prior year. Our adjusted tax rate for the quarter was 20.5% compared to 21.1% in the prior year. The current quarter adjusted tax rate is lower primarily due to the favorable impact of discrete items in the current year. The adjusted tax rate for the full year may increase moderately as a result of the UK corporate tax rate increase, which became effective on April 1st.
Our strong balance sheet gives us continued confidence in our ability to execute a disciplined capital allocation strategy that balances capital return to shareholders with internal investments and strategic M&A to deploy our capital in the highest return opportunities.
During the quarter, we paid $87 million in dividends and repurchased approximately 432,000 shares for $104 million. We continue to view share repurchases as an attractive use of capital. We generated free cash flow of $92 million for the first quarter of 2023 compared to free cash flow of negative $10 million in the prior year.
The $102 million year-over-year improvement in free cash flow was primarily driven by more favorable working capital improvements resulting mostly from higher cash collections and lower discretionary compensation payments made in the current year quarter as compared to the prior year quarter.
Our Q1 results are reflective of the progress we've made since the beginning of 2022. We've come a long way, stabilizing the business, rebuilding our talent base, strengthening our organic revenue growth and accelerating the transformation program to drive greater profitability in the future. We're committed to delivering the same success with free cash flow generating.
Though our actions on free cash flow have not yet yielded results within the timeframe we expected, we remain focused in the near-term on driving meaningful improvement in our free cash flow margin for 2022's base of 8% free cash flow margin and in the longer term, making continual progress and moving more towards peer levels.
As free cash flow generation remains a high priority, we've made enhancements to our original improvement plans to strengthen our organizational focus on cash flow. As you may have seen in our proxy statement, we have added free cash flow as a KPI for annual incentives in the executive compensation program and are working on implementing cash flow linked KPIs for others in the organization to drive broader accountability across the Company.
In addition, we are focused on pursuing long-term structural and contractual improvements to the cash aspects of how our businesses operate. As you might expect, this is the area where we have the largest class of opportunities to improve, but those opportunities are the most time consuming to realize.
As a reminder, full-year 2023 pension income is expected to be about $112 million. If this level of pension income remains consistent in 2024, it would pose a significant headwind to our 2024 adjusted EPS target. Pension income, which is sensitive to macroeconomic conditions is remeasured at year-end. Accordingly, we will provide additional guidance on our 2024 pension income expectations and the resulting impact to the adjusted EPS target when we release Q4 2023 earnings results.
Overall, we are excited by the strong start to 2023, with business performance ramping up as expected and the benefits of our investments in talent and technology starting to meaningfully contribute to results.
In addition, our successful transformation efforts and operating leverage have allowed us to continue to drive margin expansion. We have made consistent progress in our commitments for organic revenue growth and increased operating margins and EPS.
With that, let's open it up for Q&A.