Operator:

Welcome to Marsh McLennan's Earnings Conference Call. Today's call is being recorded. Second quarter 2024 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh McLennan website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. [Operator Instructions] I'll now turn this over to John Doyle, President and CEO of Marsh McLennan.

Mark McGivney:

Thank you, John, and good morning. Our second-quarter results were strong with solid underlying growth, significant margin expansion, and 10% growth in adjusted EPS. Our consolidated revenue increased 6% to $6.2 billion with underlying growth of 6%. Operating income was $1.6 billion and adjusted operating income was $1.7 billion, up 11%. Our adjusted operating margin increased 130 basis points to 29%. GAAP EPS was $2.27 and adjusted EPS was $2.41. For the first six months of 2024, underlying revenue growth was 8%, our adjusted operating income grew 11% to $3.7 billion, our adjusted operating margin increased 100 basis points and our adjusted EPS increased 12% to $5.30. Looking at Risk and Insurance Services, second-quarter revenue was $4 billion, up 8% from a year ago or 7% on an underlying basis. This result marks the 14th consecutive quarter of 7% or higher underlying growth in RIS and continues the best stretch of growth in two decades. RIS operating income was $1.3 billion in the second quarter. Adjusted operating income was also $1.3 billion, up 12% over last year and our adjusted operating margin expanded 110 basis points to 35.3%. For the first six months of the year, revenue in RIS was $8.3 billion with underlying growth of 8%, adjusted operating income increased 12% to $2.9 billion and our margin increased 90 basis points to 37.3%. At Marsh, revenue in the quarter was $3.3 billion, up 8% from a year ago or 7% on an underlying basis. This strong growth came on top of 10% growth in the second quarter of last year. Growth in the second quarter reflected strong new business and solid renewals. In US and Canada, underlying growth was 6% for the quarter. International underlying growth was 7%. EMEA was up 7%, Asia-Pacific grew 7%, and Latin America was up 8%. For the first six months of the year, Marsh's revenue was $6.3 billion with underlying growth of 7%. US and Canada grew 7% and international was up 8%. Guy Carpenter's revenue was $632 million in the quarter, up 10% or 11% on an underlying basis. This terrific result came on top of 11% growth last year and was driven by double-digit growth across most geographies and specialties. For the first six months of the year, Guy Carpenter generated $1.8 billion of revenue and 9% underlying growth. In the Consulting segment, second quarter revenue was $2.2 billion, up 2% from a year ago or 4% on an underlying basis. Consulting operating income was $410 million and adjusted operating income was $426 million, up 6%. Our adjusted operating margin in Consulting was 19.8% in the second quarter, an increase of 60 basis points. For the first six months of 2024, Consulting revenue was $4.4 billion, reflecting underlying growth of 6%. Adjusted operating income increased 7% to $870 million and our margin increased 50 basis points to 20.3%. Mercer's revenue was $1.4 billion in the quarter, flat compared to a year ago, but up 5% on an underlying basis. This was Mercer's 13th straight quarter of 5% or higher underlying growth and continues the best run of growth in 15 years. Wealth grew 3%, driven by growth in both Investment Management and DB Consulting. Our assets under management were $492 billion at the end of the second quarter, up 1% sequentially and up 25% compared to the second quarter of last year. Year-over-year growth was driven by our transaction with Vanguard, impact of capital markets, and positive net flows. Health underlying growth remained strong at 9% and reflected growth across all regions. Career revenue increased 2%, continuing the trend of modest growth following a two-year stretch of strong growth in demand. For the first six months of the year, revenue at Mercer was $2.8 billion with 6% underlying growth. Oliver Wyman's revenue in the quarter was $837 million, an increase of 3% on an underlying basis. This comes on top of 11% growth a year ago. For the first six months of the year, revenue at Oliver Wyman was $1.6 billion, an increase of 8% on an underlying basis, up from 6% growth in the first half of last year. Foreign exchange was a $0.02 headwind in the second quarter. Assuming exchange rates remain at current levels, we expect FX to be a $0.02 headwind in the third quarter and $0.02 in the fourth quarter. Total noteworthy items in the quarter were $73 million. These included $44 million of restructuring costs, mostly related to the program we began in the fourth quarter of 2022 as well as some transaction-related expenses. Our other net benefit credit was $66 million in the quarter. For the full year, we continue to expect our other net benefit credit will be approximately $265 million. Interest expense in the second quarter was $156 million, up from $146 million in the second quarter last year, reflecting higher levels of debt and higher interest rates. Based on our current forecast, we expect approximately $154 million of interest expense in the third quarter and approximately $620 million for the full year. Our adjusted effective tax rate in the second quarter was 26.2% compared with 24.2% in the second quarter of last year. Our tax rate in both periods benefited from favorable discrete items. Excluding discrete items, our adjusted effective tax rate was approximately 26.5%. When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative. Based on the current environment, we continue to expect an adjusted effective tax rate of between 25.5% and 26.5% for 2024. Turning to capital management and our balance sheet. We ended the quarter with total debt of $13.5 billion. Our next scheduled debt maturity is in the first quarter of 2025 when $500 million of senior notes mature. We continue to expect to deploy approximately $4.5 billion of capital in 2024 across dividends, acquisitions, and share repurchases. The ultimate level of share repurchase will depend on how the M&A pipeline develops. Last week, we announced a 15% increase to our quarterly dividend, making this our 15th consecutive year of dividend growth. This comes on top of a 20% increase a year ago and reflects our strong earnings growth and confidence in our outlook. Our cash position at the end of the second quarter was $1.7 billion. Uses of cash in the quarter totaled $1.2 billion and included $352 million for dividends, $500 million for acquisitions, and $300 million for share repurchases. For the first six months, uses of cash totaled $2.2 billion and included $706 million for dividends, $847 million for acquisitions, and $600 million for share repurchases. While there continues to be uncertainty in the outlook for the global economy, we feel good about the momentum in our business and the current environment remains supportive of growth. Overall, our excellent first half leaves us well-positioned for another great year in 2024. Based on our outlook today, for the full year, we continue to expect mid-single-digit or better underlying growth, margin expansion, and strong growth in adjusted EPS. And with that, I'm happy to turn it back to John.

Operator:

[Operator Instructions] And our first question comes from the line of David Motemaden with Evercore ISI.

John Doyle:

Good morning, David. Sure. So yeah, let me first of all, just say, I was pleased with our growth in the quarter. It was on top of a very big quarter a year ago at 11%. Marsh had good solid growth by region and practice on top of a tough comp. Guy Carpenter had an excellent quarter. Market improvements led to increased demand after a pretty volatile reinsurance market in 2023. Mercer again had another solid quarter of growth, as Mark noted in his comments, best growth -- stretch of growth in a long period of time. Health remains very strong. Wealth growth was solid and we actually saw an uptick in career growth from the first quarter. And Oliver Wyman had a very tough comp, but had good growth -- has had good growth year-to-date. And as we pointed out in the past, we'll have more quarter-to-quarter volatility than our other businesses. What I would say is broadly speaking, the macros continue to be supportive of growth. It's a risky environment we're all operating in, but GDP, inflation, labor markets, the cost -- rising cost of risk, rising cost of healthcare, all supportive. And I feel very, very -- I feel like we're very well-positioned. We have the best talent in the markets that we compete in. And so, we're positive on our outlook for the second half, that again remains a good market for us. And so we feel good about where we are.

John Doyle:

You want to go ahead, Mark?

John Doyle:

Thank you, David. Andrew, next question.

Jimmy Bhullar:

Hey, good morning. So first, John, just following up on your comments on Oliver Wyman. The growth this quarter slowed versus what it's been in the last few quarters. How much of that is a function of just tough comps and normal volatility in the business versus maybe a slowdown in the pipeline?

Nick Studer:

Yeah. I think John is right, Jimmy, it's a little bit of both, but in the same way that I noted last quarter that our 13% was against a weak 0% comp, this 3% is against a tougher 11%. That 8% year-to-date, I think is bang in that zone of mid to high-single-digit growth we expect to average through the cycle. And as you know, our quarters are always somewhat volatile. Mark kindly noted in his comments that the first half actually accelerated versus the first half last year. To give you a little bit of color on where we are seeing higher growth, regionally, both Asia and our India, Middle-East, and Africa regions have continued on strong growth. From an industry perspective, our communications, media, and technology practice has been our fastest-growing year-to-date, but our very strong banking and insurance practices also in positive territory as is our public sector practice. And we have a wide array of capabilities. And our economic research business, NERA, growing strongly. Our market-leading finance and risk practice, particularly in financial services, our pricing team. And importantly, our people and organizational performance practice, which really works across our industries to help on big client transformative moments. But the market is a little bit uncertain. While the economy seems to be better, it's still a pressured environment for discretionary spending, some uncertainties as John and Mark have highlighted. And we do see -- we're sort of working through some pricing pressure due to excess capacity as some of our competitors work through some of their headcount actions.

Jimmy Bhullar:

Yeah, just on -- and maybe it's for Mark on fiduciary investment income. It was -- it's been sort of flattish on a sequential basis. So should we assume given where rates are that going forward, it's going to grow just with growth in the business or was the sequential flat results in 2Q more of a function of seasonality and balances or other factors?

Mark McGivney:

Jimmy, there is -- there is seasonality in balances as we've talked about in the past. But I think the biggest driver, I think, from here is just going to be the outlook for rates. As we've talked about and you saw on our balance sheet in the quarter, we've got about $11.5 billion of fiduciary balances and so I think just where we go from here is just going to be what the central banks do with short-term interest rates. And just as you're modeling going forward, keep in mind that our balances do reflect the revenue mix of our business. So it's not just US rates, obviously that drive -- we've got balances because of the distributed nature of business all over the world. So yeah, so as I said, the outlook really is going to be mostly a function of what the rate picture looks like.

Operator:

And our next question comes from the line of Elyse Greenspan with Wells Fargo.

John Doyle:

Expense saves, can you give me a [indiscernible] Okay. Okay. Sure. Sure. Thanks, Elyse. Mark?

John Doyle:

Do you have a follow-up, Elyse?

John Doyle:

Yeah. I mean the markets are quite dynamic, right? And so, I would just caution you a little bit on pricing, right? I think Guy Carpenter is a good indication of that, right? So we saw a better market lead to increased demand. But as I mentioned earlier, it was a good solid growth by region and by practice, again in the second quarter and on top of a tough comp. But Martin, maybe you could share a little bit more color on growth international versus US and the demand you're seeing.

John Doyle:

Yeah, reflection of the liability environment in the US for sure. Thank you, Elyse, and thanks, Martin. Andrew, next question?

Scott Heleniak:

Yeah, good morning. Just a quick question. Given the M&A pace has been pretty strong over the past few quarters and certainly for the year, just wondering if we should assume kind of a deceleration in the run-rate for share backs -- share buybacks in the second half versus the first half? Just how you're thinking about that and how is your M&A tracking versus kind of what you thought going into the year?

Scott Heleniak:

Yeah. Just one quick one, too. Just generally on Mercer, the Health organic growth really strong again, and 9% has been strong for quite a while. And Career and Wealth, I guess, is a little bit slower compared to Health, but just wondering if you can just kind of flesh out what you're seeing there, the strength in Health versus the other areas, if there's anything kind of holding those -- back those areas besides just the kind of difficult comps?

Pat Tomlinson:

Sure. Thanks, and thanks so much for the question. First off, we're pleased with the Q2 underlying growth of 5%. As Mark highlighted, our 13th consecutive quarter with 5% or more growth and that all the practices are contributing to growth. Certainly, health has been contributing at a higher rate. Quickly to kind of go through the practices and what we're seeing. Health, as you highlighted, had that impressive quarter with 9% growth. The strong performance was broad-based, right? So there was double-digit growth across most regions. It comes predominantly from investments in hiring new talent, investments in thought leadership, including our Health on Demand survey, new digital tools, and a focus on client segmentation that's really designed to match our clients' healthcare needs with our innovative and tailored solutions. We benefited from renewal and some new business growth, some insurer revenue, and has been highlighted a couple of times in the call, medical cost inflation, certainly. We continue to see strong demand for digital solutions and innovative benefits underscoring really the value of -- and the breadth of advice and solutions we bring to clients. Little less growth in Wealth and Career. So let me quickly go through them. Wealth, we grew the 3% in Q2. That was balanced between DD&A and IMS, right? So DB plans funding status continue to benefit from elevated interest rates. It's driving an increase in project work, predominantly revolving around risk transfers as well as certain regulatory requirements that are out in some of the jurisdictions around the world. We head in the volatile capital markets, it's been driving some strong demand for actuarial and the investment solutions. John had highlighted in OCIO we did benefit from the transaction with Vanguard. We had some net new inflows and capital markets also provided a revenue lift. It's important to note that on IMS, from a business perspective, it's a portfolio of solutions, right, that includes some advisory work and some DC administration in addition to OCIO. So a lot of times, it's typically looked at as OCIO. And only our OCIO business is directly impacted by AUM. So as we've seen a market run-up, really, we only have a subset of that business that's directly impacted by AUM. And our AUM is a diversified portfolio where equities only make up about half of our exposure, right, because we have a lot of clients that have heavy fixed income exposure. So while the markets can drive some volatility for us, the impact of equity markets is a bit more muted in IMS growth. And then on Career, which had the most modest growth of 2%, which was up sequentially over quarter, it is following a long period of growth after the pandemic. We saw good growth momentum from a couple of our practices, talent and transformation. Rewards was a bit more muted. And I think that's predominantly reflecting the impact of lower wage inflation and reduced employee turnover, which is driving some slightly lower demand for our clients at rewards projects. But I think it's also important to note here that while the growth rates fell down, has been flat even over the last couple of quarters, it's been a bit more modest. The overall size of our Career practice is nearly 20% larger than it was pre-pandemic. So that's -- so we feel very strong about that that we've been able to maintain those levels in a predominantly project-based business. So, overall, I think the conditions have us very positive about the outlook for Mercer.

Operator:

Thank you. And our next question comes from the line of Michael Zaremski with BMO Capital Markets.

John Doyle:

Sure, sure. Sure, Mike. Thanks. Thanks for the question. I'll share some high-level thoughts, and then maybe I'll ask both Martin and Dean to talk about some market observations. I would note, Mike, just right out of the gate here that typically, larger account pricing has more volatility attached to it. If you look back on historical cycles, that's been the case. Mid-market pricing has historically been more stable or more consistent, I guess, and have less volatility from cycle to cycle. And our index is weighted towards large accounts to be clear, where we have the best data. But insurance and reinsurance markets continue to settle in the quarter after what's been many years of increases. It's not just middle versus large, it's a collection of markets. And while as I pointed out in my prepared remarks, cyber and FinPro, maybe the best example, prices continue to moderate. Some segments of the market are showing some -- what might be early signs of stress. US Excess Casualty, for example, prices were up 10%, and loss cost inflation there remains quite challenging. But overall, right now, market is providing an opportunity for our clients to revisit some decisions they've made about financing risk and that tighter market conditions led them to make uncertain decisions. So it's a welcome moment for many of our clients to revisit some of those decisions. And Guy Carpenter, as I mentioned earlier, it led to greater demand in the second quarter as evidenced by our strong growth. But Martin, maybe you could share a little bit more color on what we're seeing in the pricing market?

John Doyle:

Thanks, Martin. Dean, maybe you can just quickly cover the reinsurance market.

John Doyle:

Thanks, Dean. So, Mike, not a big shift from the first quarter, but a modest evolving market more in favor of buyers. And so that obviously factors into the advice we give to our clients and help them navigate what's a world where, again, the cost of risk continues to escalate. Do you have a follow-up?

John Doyle:

No, no. I mean at Mercer, we sold two admin businesses, one in the US, one in the UK to Aptia. And the reason we sold them is they're relatively low-growth and lower-margin businesses. And again on a relative basis, they were capital-intensive. And so we think they have a better owner now and so we feel good about that decision. Thank you, Mike. Andrew, next question, please.

Gregory Peters:

Well, good morning. I guess I'd like to just go back to some comments you made in your prepared remarks. You mentioned Blue[i]. I was wondering if you could provide some more specific data around that. It's a data analytics business, just provide some scope of how big it is inside the business because you called it out in your call.

Martin South:

Sure. So as you said, John, this is a suite of analytics tools that we use to help our clients across different product lines assess what risks to retain, what risk they could transfer, the economic cost of that. We pay them across multiple lines to give them exposure and total cost of risk scenarios. We help them analyze claims and the analytics tools in that are able to help our clients who self-insure a lot of losses to identify which losses they need to get at early and how to settled those. So it's a range of real-time analytics built really, and it's one of the unique things about our business is that we have an enormous lake of data, and we think that's one of the big moats that we have to support our business. And some of these analytics tools that we use, we call them generically Blue[i]. We deploy on clients that actually don’t even buy insurance. They tend to be some of our biggest clients in the US. So we'll continue to invest in that. And as we announced in the call last year, we added to that with supply chain capability and -- so it's the way clients expect to be engaged, and that's the tool that we use.

Gregory Peters:

I sure do. Thanks for the color on that. Just going through the operating cash flow and the free cash flow for the six months, down a little bit. It looks like it's changes in working capital. Wondering if you could just provide some additional color on the operating cash flow for the quarter and the year -- six-month basis?

Mark McGivney:

Yeah, Greg. Thanks. You will -- we always -- we'll always caution against focusing too much on a quarter's results, and that's certainly true when it comes to cash flows and free cash flow. They tend to be volatile, not only quarter to quarter, but year to year because of timing of balance sheet items. As you -- so when you look at the six months, we are seeing a decline of course, given the significant bonus payouts that we have in the first quarter, you have a little bit of a denominator -- small denominator issue. And so, you have to be cautious. But two big factors just in the first six months are the higher comp payouts that we had in the first quarter and then receivables are up because of the growth in the business. But we've got a, as you know, a long track record of double-digit growth in free cash flow that has stacked up well against our growth in earnings, and that's what you'd expect in a capital-light business like ours.

Operator:

Our next question comes from the line of Yaron Kinar with Jefferies.

John Doyle:

No. We expect margin expansion in the second half to be better than the first half. Sorry, if we created any confusion earlier, but that's what we continue to expect. And maybe I can just share a little bit of color and just remind everybody, too, margins and outcome, right? This will be year 17 of -- 17th consecutive year of margin expansion, and so we feel terrific about that. But margin is an outcome of the way we run the business. We manage investments and costs within the revenue growth of the business. It's not going to happen in every business in every single quarter, but that’s -- it's the way we approach our business. We're going to continue to make attractive investments to support medium to long-term growth. But we see opportunities. As I've mentioned in the past, we've got workflow and automation efforts inside of Marsh. Mercer and Guy Carpenter. We're testing AI at scale. So that value creation is not a meaningful 2024 or probably 2025 event. But as technologies emerge, we'll continue to challenge ourselves to get better. But again, we do expect second-half margin expansion to be better than first half. Do you have a follow-up?

John Doyle:

Got it. Thank you. Andrew, next question please.

Meyer Shields:

Great. Thanks. Good morning, all. I guess to start, can you talk about how you're advising both insurance and reinsurance clients to think about their exposure to casualty lines following the overturning of the Chevron doctrine?

Meyer Shields:

It is. Thank you. It is very good big picture. This is more of a small-picture issue. But when we look at, let's say, the two-year stacked organic growth in Career, that grew dramatically from the first quarter, I guess, you had [12% plus 1% at 13% in this quarter 6% plus 2%, to 8%] (ph). Is your outlook for Career based on the items or the issue you identified earlier, is that slowing compared to maybe what you thought at the end of the first quarter?

Meyer Shields:

Fantastic. Thank you very much.

Operator:

Certainly. And our final question comes from the line of Rob Cox with Goldman Sachs.

John Doyle:

Yeah. Again, I -- just to be clear, we're not looking to build a third-party wholesale business. We want to bring the best solutions to our clients. The E&S markets moved quite a bit over the course of the last several years. That's really a reflection of the high risk environment that I've talked about where insurers have, broadly speaking, more freedom to change rate, to get off risk, to change price -- or to change terms and conditions as well. And so just broadly speaking, we want to manage our clients' outcomes and experiences directly as possible and not outsource what's an important part of the value proposition. It's not to say that wholesalers don't do a nice job for us, they do and we'll continue to access them where it makes sense. But -- but we -- most of the -- majority of the wholesale premium, we actually access directly today or E&S markets, we do that directly today. But there's been more growth in intermediated wholesale premium over the course of the last couple of years. And so our efforts are to try to get as much access to market as we can. Do you have a follow-up, Robert?

John Doyle:

Yeah. The economics can be different, of course, and they're different from treaty to treaty as well. We work with our insurance company clients. As we talked about when the market was particularly tight last year, while commission is a factor and growing price was a factor in many respects, really what we do with our large insurance company clients is big wholesale relationships where effectively we work on, what amounts to a fee.

Operator:

I would now like to turn the call back over to John Doyle, President and CEO of Marsh McLennan for any closing remarks.

Operator:

Welcome to Marsh McLennan's Earnings Conference Call. Today's call is being recorded. First quarter 2024 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh McLennan website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. [Operator Instructions] I will now turn this over to John Doyle, President and CEO of Marsh McLennan.

Mark McGivney:

Thank you, John, and good morning. Our first quarter results were outstanding and represent an excellent start to the year. We saw continued momentum in underlying growth, strong margin expansion, double-digit growth in adjusted EPS. Our consolidated revenue increased 9% in the first quarter to $6.5 billion, underlying growth of 9%. Operating income was $1.9 billion, and adjusted operating income increased 11% to $2 billion. Our adjusted operating margin increased 80 basis points to 32%, and we expect higher margin expansion for the rest of the year, particularly in the second half. GAAP EPS was $2.82, and adjusted EPS was $2.89, up 14% [Technical Difficulty] last year. Looking at Risk and Insurance Services, first quarter revenue was $4.3 billion, up 9% compared with a year ago on both a reported and underlying basis. This result marks the 12th consecutive quarter of 8% or higher underlying growth in RIS and continues the best stretch of growth in two decades. RIS operating income was $1.6 billion in the first quarter. Adjusted operating income was also $1.6 billion, up 11% over last year, and our adjusted operating margin expanded 50 basis points to 39.1%. At Marsh, revenue in the quarter increased 9% to $3 billion or 8% on an underlying basis. This comes on top of 9% growth in the first quarter of last year. In US and Canada, underlying growth was 8% for the quarter, reflecting solid renewal and new business growth. In international, underlying growth was strong at 8% and comes on top of 10% in the first quarter last year. EMEA was up 9%, Latin America grew 8%, and Asia-Pacific was up 6%. Guy Carpenter's revenue was $1.1 billion, up 7%, or 8% on an underlying basis, driven by growth across most regions and Global Specialties. This was the fifth straight quarter of 8% or higher underlying growth at Guy Carpenter. In the Consulting segment, first quarter revenue was $2.2 billion, up 9% on an underlying basis. Consulting operating income was $432 million, and adjusted operating income was $444 million, up 9%. Our adjusted operating margin in Consulting was 20.7% in the first quarter, an increase of 40 basis points. Mercer's revenue was $1.4 billion in the quarter, up 6% on an underlying basis. This was Mercer's 12th straight quarter of 5% or higher underlying growth and continues the best run of growth in 15 years. Health underlying growth was 10% and reflected strong momentum across all regions. Wealth grew 5%, driven by growth in both investment management and DB Consulting. Our assets under management were $489 billion at the end of the first quarter, up 17% sequentially and up 38% compared to the first quarter of last year. Year-over-year growth was driven by our transactions with Westpac and Vanguard, rebounding capital markets and positive net flows. Career revenue increased 1%, reflecting a tough comparison to a period of strong growth last year, as well as softness in the US. Oliver Wyman's revenue in the first quarter was $789 million, up 13% on an underlying basis from the slow start we had in the first quarter of last year, and reflected strength across all regions. Foreign exchange had very little impact on earnings in the first quarter. Assuming exchange rates remain at current levels, we expect FX to be a $0.02 headwind in the second quarter and a further $0.01 headwind in the second half. Total noteworthy items in the quarter were $49 million. The majority of these items were restructuring costs, mostly related to the program we began in the fourth quarter of 2022. Our other net benefit credit was $67 million in the quarter. For the full year, we expect our other net benefit credit will be approximately $265 million. Interest expense in the first quarter was $159 million, up from $136 million in the first quarter of 2023, reflecting higher levels of debt and higher interest rates. Based on our current forecast, we expect $158 million of interest expense in the second quarter and approximately $620 million for the full year. Our adjusted effective tax rate in the first quarter was 23.9% compared with 25% in the first quarter of last year. Our tax rate benefited from favorable discrete items, the largest of which was the accounting for share-based compensation, similar to a year ago. Excluding discrete items, our adjusted effective tax rate was approximately 26.5%. When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative. Based on the current environment, we continue to expect an adjusted effective tax rate of between 25.5% and 26.5% for 2024. Turning to capital management and our balance sheet. We ended the quarter with total debt of $13.5 billion. Our next scheduled debt maturity is in the second quarter, when $600 million of senior notes mature. Our cash position at the end of the first quarter was $1.5 billion. Uses of cash in the quarter totaled $1 billion, and included $354 million for dividends, $347 million for acquisitions, and $300 million for share repurchases. We continue to expect to deploy approximately $4.5 billion of capital in 2024 across dividends, acquisitions and share repurchases. The ultimate level of share repurchase will depend on how our M&A pipeline develops. While there continues to be uncertainty in the outlook for the global economy, we feel good about the momentum in our business and the current environment remains supportive of growth. Overall, our strong start leaves us well-positioned for another good year in 2024. Based on our outlook today, for the full year, we continue to expect mid-single-digit or better underlying growth, margin expansion and strong growth in adjusted EPS. With that, I'm happy to turn it back to John.

Operator:

Certainly. We'll now begin the question-and-answer session. [Operator Instructions] And our first question comes from the line of David Motemaden with Evercore ISI.

John Doyle:

Thanks, David, for the question, and good morning. We work very hard not to be an index on P&C pricing, right? It's an element. It's a macro factor that obviously does have some impact. But less than half of Marsh's revenue is exposed to P&C pricing. What I would also say to you is that where we're most exposed to commission is in the middle-market. Our index skews to larger account data. Pricing is up a bit more in the middle-market than it is in the large account segment, and typically is less cyclical than what you see in the large account market. But I want to just talk about growth overall. I was very pleased with the start to the year, 9% on top of 9% last year and accelerated growth from the fourth quarter of 7%, as I mentioned. Marsh, Mercer and Oliver Wyman all had accelerated growth from the fourth quarter. The macros continue to be supportive, David. Solid GDP growth in most major markets, although it's under a bit of pressure. Inflation and interest rates remain elevated. There's tight labor markets, as I said before, rising healthcare cost. The overall cost of risk continues to increase. And demand remains very strong. Not long out of the pandemic, of course, we've got a couple of global wars happening, supply chain stress. Our clients are showing broader risk awareness. We're talking to them about that and really trying to help them find better balance between resilience and efficiency. And we continue to invest through this cycle, right? I talked about a couple of the acquisitions we did. We're improving our mix of business as well. We sold some admin businesses at Mercer in the quarter. And I'm very, very pleased with how our colleagues are executing, too. We've been working on our client engagement model and improving that, continue to invest in sales operations. And as I've talked about, over the course of the last year, we're collaborating more than ever. It starts with the talent that we have. We have the best talent in the markets that we operate in. We're, of course, not immune to macros, including pricing on some level, but we're a resilient business and we're quite excited about 2024. Do you have a follow-up?

John Doyle:

Sure, yeah. Marsh in the US got off to a terrific start, US and Canada, I would point out. And Martin, maybe you could give David a little bit more color.

John Doyle:

Thanks, Martin. David, I would add, it wasn't a bang-out quarter in terms of M&A activity in our transaction risk business, but it's a smaller part of our -- smaller part of our business now. It's a little feedback there. It's a smaller part of our business after the slowdown. So, the impact was less. But we did see some volume in M&A activity pick up during the quarter, which of course is encouraging. So, thank you for your questions. Andrew, next question, please.

Jimmy Bhullar:

Good morning. So, I was wondering if you could just elaborate on the comments John had on the reinsurance market. And it seems like things -- the market is less tight than it was over the past year. But what are you seeing in terms of buyer behavior? Are cedents trying to buy more, given that pricing has come in a little bit, or are they trying to save money and keep sort of coverage levels consistent with what they've had in the past year?

Dean Klisura:

Yeah. Thanks, John. And Jimmy, I'll give you a little bit more color on the April 1 reinsurance renewal, that would be helpful. As John noted, we saw a continuation of market conditions that we experienced at January 1. And as John noted, market conditions are stable, but we're definitely seeing increased client demand to provide additional property cat limit, particularly at the top end of programs. That was very pronounced throughout the first quarter at 1/1 through the quarter. And certainly that trend continued on April 1. Strong capital inflows into the reinsurance market, driven by strong reinsurer returns, double-digit returns in 2023. We talked about last quarter on the call, reinsurer appetite has increased for property cat. There is an inflow of capital and capacity. Competition at the top end of programs, it's been good for both buyers and sellers in the marketplace. Specifically to property cat, in the US, at April 1, as I said, capacity was strong. As John noted, the market was generally flat to down incrementally for clients without cat losses. Accounts with cat losses saw 10% to 20% kind of rate increases. But keep in mind, we give you rate-adjusted figures. But when you factor in inflation, exposure growth, value growth, premiums on these cat programs are still increasing year-over-year. It continues to be a tailwind for Guy Carpenter in the marketplace. And as I said, there's a lot of competition for cat business. US casualty, as John noted, was challenging, just as challenging on April 1 as it was at the January 1 renewal. Reinsurers are exerting pressure on pricing in terms and conditions. Ceding commissions are facing downward pressure from reinsurers on certain quota-share contracts, particularly financial lines, which Martin has talked about in the past. Excess-of-loss contracts are seeing rate increases across the board, in some cases, double-digit. However, there was adequate casualty capacity in the marketplace at April 1, and all of the programs that we placed got completed in full. But I would balance that against continued reinsurer concern with the adverse development, driven by social inflation and increasing loss cost trends. I think that's a good summary of where we were in the US market. Just a note on Japan. Big April 1 cat date in Japan, a very orderly market, sufficient capacity, many cat programs were oversubscribed. We didn't observe any structural changes. Attachment points stayed where they were from a year ago. And again, it was a market that was down on average 5% from a rating perspective, and we didn't really observe any rate impact from the January earthquake in Japan. Overall, a very orderly market at April 1 in Japan.

Jimmy Bhullar:

[Technical Difficulty] income, it was flat sequentially and lower than 3Q. I'm assuming that's more seasonality. But if you could just talk about your expectation for that given where short-term rates are currently?

Mark McGivney:

Yeah. Jimmy, there is a little season, as you pointed out. There is a little -- tends to be a little seasonality in our fiduciary balances. Q1 and Q4 tend to be seasonal lows modestly. So that would explain that. In terms of outlook, we'll see what happens to the rate environment. The interest -- our fiduciary interest income is going to be a function of balances and rates, and we've got about $11.5 billion of balances. So, depending on what you want to assume for the trajectory of rates, the math is pretty straightforward.

Operator:

And our next question comes from the line of Elyse Greenspan with Wells Fargo.

John Doyle:

Good morning, Elyse. We expect again good margin expansion in 2024. As you pointed out, Mark noted, we expect the second half to be better than the first half. We have some expected headwinds, not really seasonality, but really driven from a higher [merit pool] (ph) a year ago, some acquisition-related costs, and some higher reimbursable expenses. But I want to remind everybody not to focus on any one particular quarter. Again, margin is an outcome of really how we run the business, and it's not a primary objective of ours. Again, having said that, we see opportunity for margin improvement, continued margin improvement. But we're going to continue to make attractive investments to support the medium to long-term growth of the business. We have a number of different efforts underway, ongoing workflow and automation efforts at Marsh, Mercer and Guy Carpenter. And we continue to press for opportunities to improve efficiency at the intersections of our businesses as well. So, we see opportunity. And as we pointed out, we expect the second half to be better than the first. Do you have a follow-up, Elyse?

John Doyle:

So, let me be clear, Elyse, we're not looking to build a third-party wholesale business. There's obviously been considerable growth in the wholesaler to E&S market over the course of the last several years. We want to bring the best solutions in the marketplace to our clients. Generally, we're preferring admitted solutions for our clients. Not that there aren't good things that happen in the E&S market. Of course, there are, and innovation is one of the areas where the E&S market is important. But we want to access as much of that E&S market directly. We actually access most of our E&S market solutions directly today. But we want to continue to press and make sure that we can access as much of that market directly. So, it's client-driven, It's about us managing the client outcomes, client experiences, really as directly as possible. Having said that, we'll continue to use wholesalers for niche expertise. They serve us very well and our clients very well. In those cases, they also have strong program businesses as well. So, anyway, that's what it's about. It's just, again, making sure we can directly access as much capital directly as possible for our clients. Thank you for that. Andrew, next question?

Greg Peters:

Good morning, everyone. I'd like to pivot to -- for the first question, pivot to the Consulting business, which had a nice quarter. I'm wondering if you can provide some additional color around how the different pieces are moving. I know some of the management consultants have pre-announced that they're going to be cutting staff this year. Not really seeing any signs of weakness in your pipeline, but maybe you could give us some color, because forecasting this out seems to be a little bit of a black box?

Nick Studer:

Thank you, John, and thank you, Greg. Yeah, 13% was a very pleasing start to the year, it makes a marvelous headline, and we're very, very proud of a good start on what, as you noted, is a tough environment for many in our profession. John has already given the caution about taking the two-year view. We also probably benefited from a few little timing benefits of things that might have shown up in Q2, might have shown up in Q1. And we still very much give guidance through the cycle. This should be a mid-to-high single-digit business. And you noted the sort of forecasting it out is a tricky challenge. That is true because we have a relatively short backlog. The nature of our work is such that when clients need assistance, they need it quickly. And so, we are always ready to move very, very nimbly. To give you a little bit more color, we grew pretty strongly across all the four regions of our management consulting business and our economic research business, NERA, also grew very strongly, fastest in the Middle East, but in the double-digits or very close to double-digits in all three of the other major regions we have. And sectorally, it was also fairly broadly spread. Our communications media and technology team grew well, healthcare grew well, banking seeing a rebound in private capital work, which I've noted on previous calls, has been pretty robust even in the face of obviously a very much lower deal market, but our work on portfolio company performance has helped us there. But insurance also growing, and quite broadly across the capabilities that we bring to bear as well. So, we think we're in a good position. We're very confident we gained share over the last few years, but it's a tough consulting environment. And our pipeline indicates that mid-to-high single-digit growth environment, growth forecast, is how we think about this business through the cycle.

Pat Tomlinson:

Sure. Thanks, John. Yes, we are pleased with our Q1 2024 underlying growth, as mentioned earlier, of 6%. It was our 12th consecutive quarter with 5% or more growth, especially the breadth across the practices. Health, another impressive quarter with 10% growth in Q1. That growth was really [Technical Difficulty] double-digit growth nearly across all regions. And it comes on the back of investments in hiring new talent, focus on thought leadership, creating digital tools and really focusing in on client segmentation, trying to match client healthcare needs, based upon industry segment size with the innovative and adaptive solutions that we have. So, really trying to meet clients where they are. We certainly benefited from strong retention. We had good renewal growth. Insurer revenue and medical cost inflation has an impact there. We see significant demand for digital solutions and the innovative benefits that are kind of underscoring the value that we're providing to clients. If I pivot over to wealth, we grew 5% in Q1. There was good, balanced, equally strong performance in [DB&A] (ph) and IMS. We see DB plans funding statuses continue to benefit from elevated interest rates that's driving an increase in risk transfer over the last couple of years, as well as we have some regulatory requirements and demands that are creating some project work. If you add in some capital -- some volatile capital markets, it's driving strong demand for both our actuarial and our investment solutions business. Speaking of investment solutions, in OCIO, we benefited from some transactions in Westpac and Vanguard, Mark mentioned that earlier, but also good net new inflows and capital markets provided us some revenue lift in Q1. From a career perspective, growth was muted to 1% for the quarter, but we're following a period of strong growth over the past several years, including a challenging 12% comparable last year. The growth was strong in international, is very broad across all practices and regions. We did see, as was mentioned, some softness in US career, specifically in rewards in the transformation space, as I would say, clients are starting to navigate some of the macro conditions, right? So, let me highlight the career practices coming off that very long period of high growth. As I mentioned, double-digits in -- for the past eight quarters, driven in large part, I would say, by inflation and employee attrition. If we all remember the great resignation back coming out of the pandemic, which drove a lot of labor shortages and really created a lot of demand for projects with clients as they were trying to think about the rewards and how to pay people to keep them retained, the skills that they might need if they had to pivot, because they didn't have the right resources, and also starting to think about transformation as they were having less resources to work with, and there was innovation in technology, as we've all talked about AI, in the past and helping clients through those. So certainly, I think from that perspective, we feel good that there's good breadth of our solutions and demand in the market as we go ahead and fill those needs. John quickly asked me to talk a little bit about how I think about the business and the priorities too. So, obviously, my first call. On April 1, I got to step in and begin this opportunity of a lifetime leading Mercer and our 21,000 colleagues from around the world, as we are focused on creating brighter futures for our clients and for their people. I am extremely humbled and honored to be the CEO of this fantastic firm. And personally, I really want to thank Martine Ferland for a very smooth transition and for the growth momentum and culture that she helped create here. Priority-wise, I want to accelerate that momentum. From the impact that we're having to clients to the fantastic careers we build for colleagues here, the collaboration amongst our colleagues across Marsh McLennan, we can leverage new technologies, and we perform really purpose-driven work, and can have a positive impact on our communities as well. I think we're very well-positioned, as we've been repositioning ourselves over the last several years, reshaping our portfolio. Mark mentioned the divestitures. We've been divesting admin practices. We've been building capabilities and reach and global benefits in OCIO. We've been accelerating acquisitions and we're really just creating more value for clients at scale. And that's what we've been focused in on. So, I'm very optimistic about our future.

Greg Peters:

I do. Thanks for the detail on that answer. I want to pivot to M&A. And specifically, Mark, I think you mentioned the interest expense outlook for the company and we note the higher interest rate cost of the debt that's being issued versus that which is being paid off. So, I'm curious if there's been any follow-through on those higher costs in the terms of valuation of transactions that you're looking at. And, I'm also curious if there's any valuation difference between larger properties versus smaller properties that you're looking at in the M&A market. Thank you.

Operator:

And our next question comes from the line of Michael Zaremski with BMO Capital Markets.

John Doyle:

Thanks, Mike. Mark, you want to...

John Doyle:

Thank you. Mike, do you have a follow-up?

John Doyle:

Yeah. Mike, I would say that, it doesn't feel like a soft market to our clients after five years of price increases. And as I noted, our index skews to larger accounts and where there's a bit more volatility, typically, throughout the cycle. I expect cycles to be shorter and narrower than what they've been in the past, right? There's better data, better technology on the underwriting front. Capital moves so much more quickly in and out. That's part of the E&S market dynamic that you all have observed over the course of the last several years. So, I expect kind of more relative stability. And from time to time, of course, certain areas of risk, things will change in some meaningful way and that will maybe bounce a particular product outside of a normal cycle. Insurer and reinsurer underwriting results have improved in the aggregate over the course of the last couple of years. And I think most feel good about how their book -- how their portfolios are positioned. It's not all one result, of course. We saw some reserve additions in the fourth quarter results overall. And as I mentioned on our call in the first quarter, the great unknown is casualty loss costs, right? There's lots of emerging data that's troubling for our entire ecosystem, for our client, and it contributes to that rising cost of risk that I mentioned earlier. I maybe should also point out, and Dean touched on this a little bit that our index adjusts for limit, exposure, attachment point, and it includes new business, right? You see some other indices that are out in the market that don't necessarily adjust for all of those factors. And then maybe the last point, Mike, that I would make is that, that number doesn't necessarily correlate directly with what premium growth is in the market, right, because at the end of the day, I mean, it might be at -- you might have less of an increase, you might have certain clients buying more. I think that's most prevalent in the reinsurance market at the moment, but we're seeing that in some cases at Marsh as well, where clients again having adjusted to the new market pricing and new market equilibrium has led to a higher level of demand for coverage from our clients. So, anyway, I hope that's helpful. Andrew, next question, please.

Yaron Kinar:

Thank you. Good morning. Two questions on Marsh and the market environment you're seeing there. And I think the first one maybe ties well to your last comments, John. Are you surprised to see casualty rates only up 3% just given the loss trends? I guess I'd love to hear your views both as the CEO of Marsh but also maybe as a former underwriter.

Yaron Kinar:

Yes, I do. And thanks for the color there. So, in Marsh, organic, obviously, was strong and then we certainly saw a very nice result in US and Canada. I guess the only place I could maybe poke a little bit if I were to try would be Asia Pacific where we saw a step down. Is that -- is there a timing issue there with some one-offs? I know you had a very, very strong 1Q '23 there. But anything you could point to in terms of the organic results in Asia Pacific would be helpful.

Operator:

Certainly. One moment, please. Our next question comes from the line of Meyer Shields with KBW.

John Doyle:

It's a good question, Meyer. We're very, very focused on trying to bring scale benefits to our -- well, to all of our key stakeholders, right, including our colleagues, right? We want them -- when they work here, we want them to feel like they have nearly 90,000 folks helping support them with learning and development, data and analytics, market access that you might not have, should you choose to work somewhere else in our industry. So, we certainly think about it from the colleague perspective, we think about it from the client perspective, and we think about it from an investor point of view as well. What I would say, from a client perspective, broadly speaking, again, and this is maybe a bit more upmarket than some of the fragmented segments that you talked about before. Our clients are more risk aware than they've been in the past. I think we have had a role to play in that in trying to make them more risk aware of some meta risks. And again, recent events have certainly helped heighten that. But it's incumbent upon us to bring those scale benefits to the market. And not just scale benefits in terms of data analytics or market access, but different types of solutions. I mentioned earlier, our captive business. We're the largest captive manager in the world, and that's been a meaningful outlet for our clients to manage risk and the rising rate environment over the course of the last several years. So, yes, scale matters. I would also tell you that it plays a role for some of the sellers in the market as well as we talk through with potential M&A targets, why they may look to sell at the moment at times. It's regarding scale type -- scaled-up-type capabilities that we have that are difficult for them to replicate. And so, as I said earlier, we're looking for well led businesses with really solid growth fundamentals, but we know we can make them better too. And that's the exciting part for us. Do you have a follow-up?

John Doyle:

No, it's -- I mean, in both of the segments you mentioned, it is a highly competitive market, and we love competition. There's nothing that gets me more fired up than getting out in front of clients and, of course, winning ultimately. And our team is the same way. We're passionate about the value that we try to deliver to our clients. And so, as I mentioned earlier, we're collaborating more than ever. And in those particular segments you mentioned, I think it's been particularly meaningful over the course of the last year or so, our efforts to bring a broader set of capabilities to that client set. But no, it's a very, very competitive market and we welcome it. It makes us better. Thanks, Meyer. Andrew, next question? And maybe the last one.

Robert Cox:

Hey, thanks. In the prepared remarks, there were some comments on healthcare costs continuing to rise. I was hoping you guys could talk about what you're seeing there and maybe parts of the business, maybe between brokerage and consulting that are generating the strongest organic growth in that 10% organic in health.

Pat Tomlinson:

Sure. So, the way that healthcare inflation impacts the business varies based upon the area of the world that we're in. In certain areas of the world where predominantly fee based, it's more large market that would predominantly be from a Mercer perspective inside like the US and some of our more mature larger markets. And then, in a lot of the markets, we are a little bit more brokerage-based to where it's based that way. But let me be clear, even the spots where we're fixed fee, healthcare inflation drives significant increased cost to clients. So, it does create a lot of -- it creates demand for work for us, a lot of project work. So, we will see projects out of that healthcare inflation, it's not necessarily directly driven that way. And even if there's healthcare inflation in the other areas where it's brokerage, it's not a linear type activity from a commission perspective because we're -- once that cost is flowing through to the client P&L, we're always out there doing plan redesign for a client to help make sure that that full cost of healthcare inflation is not flowing through their P&L, right, because they really don't control -- that's one of the larger costs that they don't control themselves based upon the activity that they've had. So that's really where a lot of the inflation helps us. Part of it is increased activity and project work. Occasionally it does create higher rates that flows through in brokerage, but many times those higher rates, we're still doing plan design with the client to try and mitigate the impact that is going to have on the client P&L even in a spot where it's straight commission based brokerage, we're trying to mitigate those costs.

Robert Cox:

Yeah, very helpful. Thank you. Maybe just last question. On the wealth segment, correct me if I'm wrong, but I think last year, probably, the pension business was growing stronger than your investment business. Did that occur as well in the first quarter here or were both of them kind of similar to the 5% organic growth that was achieved in well?

Operator:

Thank you. I would now like to turn the call back over to John Doyle, President and CEO of Marsh & McLennan, for any closing remarks.

Operator:

This concludes today's conference. Thank you for participating, and you may now disconnect.

Operator:

Welcome to Marsh McLennan's earnings conference call. Today's call is being recorded. Fourth Quarter 2023 financial results and supplemental information were issued earlier this morning. They are available on the company's website at Marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh McLennan website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. [Operator Instructions]. I'll now turn this over to John Doyle, President and CEO of Marsh McLennan.

Mark McGivney:

Thank you, John, and good morning. Our strong fourth quarter results capped an excellent year. Our consolidated revenue increased 11% in the fourth quarter to $5.6 billion, with underlying growth of 7%. Operating income was $1.1 billion, and adjusted operating income was $1.2 billion, up 16% from a year ago. Our adjusted operating margin increased 130 basis points to 23.3%. GAAP EPS was $1.52. Adjusted EPS was $1.68, up 14%. Our full year of 2023 results were outstanding. Operating income for the year was $5.3 billion, and adjusted operating income was $5.6 billion, an increase of 17% over 2022. Adjusted EPS grew 17% to $7.99, and our adjusted operating margin expanded 130 basis points, marking our 16th consecutive year of reported margin expansion. 2023 was also a strong year for capital management. We deployed $4 billion of capital, enhanced our short-term liquidity, raised our quarterly dividend 20%, and saw Moody's upgrade our senior unsecured debt rating to A3. Looking at risk and insurance services, fourth quarter revenue increased 11% to $3.3 billion, or 8% on an underlying basis. This result marks the 11th consecutive quarter of 8% or higher underlying growth in RIS, and continues the best stretch of growth in two decades. RIS operating income was $753 million in the fourth quarter. Adjusted operating income increased 15% to $791 million, and our adjusted margin expanded 140 basis points to 27%. For the full year, revenue in RIS was $14.1 billion, representing an increase of 11% on an underlying basis. Adjusted operating income grew 17% for the year, and our adjusted operating margin in RIS increased 150 basis points to 31.3%. At Marsh, revenue in the quarter increased 7% to $2.9 billion, or 6% on an underlying basis. For the full year, revenue at Marsh was $11.4 billion, reflecting underlying growth of 8%. In US and Canada, underlying growth was 5% for the quarter, reflecting solid renewal and new business growth, despite continued headwinds in financial and professional lines. We also saw a headwind of nearly a point from lower flood claims in our MGA business. For the full year, underlying growth in US and Canada was strong at 7%. In international, underlying growth was 7% in the quarter, with Latin America up 11%, Asia Pacific up 10%, and EMEA up 5%. For the full year, underlying growth in international was excellent at 9%. Guy Carpenter's revenue was $252 million, up 9% on an underlying basis, driven by growth across global specialties in most regions. For the year, Guy Carpenter generated $2.3 billion of revenue and 10% underlying growth, our strongest year since 2003. In the consulting segment, fourth quarter revenue was $2.3 billion, up 10% from a year ago, or 7% on an underlying basis. Consulting operating income was $443 million, and adjusted operating income was $480 million, up 18%. Our adjusted operating margin expanded 130 basis points in the quarter to 21.3%. For the full year, consulting revenue was $8.7 billion, an increase of 7% on an underlying basis. Adjusted operating income for the year increased 13% to $1.7 billion, and our adjusted operating margin increased 70 basis points to 20.4%. Mercer's revenue was $1.4 billion in the quarter, reflecting underlying growth of 5%. This was Mercer's 11th straight quarter of 5% or higher underlying growth, and continues the best run of growth in 15 years. Health grew 9% in the fourth quarter, reflecting strength in employer and government segments, and momentum across all regions. Wealth was up 4%, driven by growth and investment management and DB administration. Our assets under management were $420 billion at the end of the fourth quarter, up 11% sequentially, and up 22% compared to the fourth quarter of last year. Year-over-year growth was driven by our transaction with Westpac, a rebound in capital markets, and positive net flows. Career revenue increased 1%, reflecting tough comparables following a period of strong growth in the reward space. For the year, revenue at Mercer was $5.6 billion, an increase of 7% on an underlying basis, the best result since 2008. Oliver Wyman's revenue in the fourth quarter was 856 million, an increase of 9% on an underlying basis, like strength in Europe and the Middle East. For the full year, Oliver Wyman's revenue was $3.1 billion, reflecting underlying growth of 8%. Adjusted corporate expense was $78 million in the quarter. Foreign exchange had very little impact on earnings in the fourth quarter and was a $0.07 headwind for the full year. Assuming exchange rates remain at current levels, we expect FX will have a negligible impact on the first quarter and full year of 2024. Total noteworthy items in the quarter were $90 million, the majority of which related to our restructuring actions, partly offset by a $58 million gain related to a legal settlement. We reported $131 million of total restructuring costs, approximately $113 million of which relates to the program we launched in the fourth quarter of 2022. These charges largely reflect costs related to severance, lease exits, and streamlining our technology environment. We expect total charges under this program of approximately $475 million, and expect total savings of roughly $400 million, of which approximately $230 million was realized in 2023. We expect to realize the bulk of the remaining savings in 2024. To date, we've incurred approximately $440 million of charges under this program. Our other net benefit credit was $59 million in the quarter and $239 million for the full year. For 2024, we currently expect our other net benefit credit will be up slightly. Cash contributions to our global defined benefit plans were $111 million in 2023. We expect a similar amount in 2024. Investment income was a loss of $1 million in the fourth quarter on both a GAAP and adjusted basis, and we aren't currently projecting any investment income in the first quarter of 2024. Interest expense in the fourth quarter was $151 million, up from $127 million in the fourth quarter of 2022, reflecting higher levels of debt and higher interest rates. Based on our current forecast, we expect interest expense for the full year 2024 of approximately $625 million, with $159 million in the first quarter. Our adjusted effective tax rate in the fourth quarter was 25.5%. This compares with 22.9% in the fourth quarter last year, which benefited from favorable discrete items. For the full year 2023, our adjusted effective tax rate was 24%, compared with 23.5% in 2022. Both periods benefited from favorable discrete items. When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative. Based on the current environment, we expect an adjusted effective tax rate of between 25.5% and 26.5% for 2024. Turning to capital management and our balance sheet, we ended the year with total debt of $13.5 billion. Our next scheduled debt maturities are in the first quarter of 2024, when $1 billion of senior notes mature, and in the second quarter when another $600 million of notes come due. Recall that last September we issued $1.6 billion of new debt to fund these maturities. Our cash position at the end of the fourth quarter was $3.4 billion. Uses of cash in the quarter totaled $1.1 billion, and included $354 million for dividends, $486 million for acquisitions, and $250 million for share repurchases. For the year, uses of cash totaled $4 billion and included $1.3 billion for dividends, $1.6 billion for acquisitions, and $1.15 billion for share repurchases. I want to take a minute to reiterate our approach to capital management. We have consistently followed a balanced capital management strategy that helps us deliver solid performance in the near term, while investing for sustained growth over the long term. We prioritize investment in our business, both through organic investments and acquisitions. We favor attractive acquisitions over share repurchases, and believe they are the better value creator for shareholders and the company over the long term. However, we also recognize that returning capital to shareholders generates meaningful returns for investors over time, and each year we target raising our dividend and reducing our share cap. Looking ahead to 2024, based on our outlook today, we expect to deploy approximately $4.5 billion of capital across dividends, acquisitions, and share repurchases. The ultimate level of share repurchase will depend on how the M&A pipeline develops. As John noted, there is significant uncertainty in the outlook for the global economy. However, we feel good about our momentum and position, and despite the uncertainty, there are factors that remain supportive of growth. For 2024, we currently expect mid-single-digit or better underlying revenue growth, margin expansion, and strong growth in adjusted EPS. With that, I'm happy to turn it back to John.

Operator:

[Operator Instructions] And our first question comes from the line of Elyse Greenspan with Wells Fargo.

John Doyle:

Good morning, Elyse. Mark, maybe you could comment on that.

Elyse Greenspan:

Okay. Thanks.

Elyse Greenspan:

And then my second - yes, my second question. I was hoping to get more color on both the US and Canada and EMEA, which did see growth slow in the quarter. I know Mark alluded to one point headwind from lower flood business within the US and Canada. I wasn't sure if there was anything else to point out in the quarter, and also hoping to get similar color on anything one-off within organic growth within EMEA as well.

Martin South:

Yes, thank you, John. As you said, we had a very good year, with 7% growth this year. And Marsh for the quarter at 5% growth, was also the same as the prior year. MMA had an outstanding performance, driven really by great retention new business. Our M&A pipeline is robust. The US business continued to perform well. There's some headwinds in the capital markets activity and pressure on financial minds, but our advisory business grow - it was partially offset by Canada, which is impacted more by macro headwinds. And of course, we mentioned a lot of flood claims in the MGA business. So, in EMEA, we had an excellent year in EMEA, 9% growth. Q4 was 5% growth. The European business within EMEA is the smallest quarter by some margin. And so, it's susceptible to some slowdown in some of the projects, but we had a very strong year, strong quarter in the Middle East, steady results in the UK. And so, that was really it. Nothing remarkable, strong momentum, we'd expect to be very confident going into next year.

Operator:

Thank you. And our next question comes from the line of Jimmy Bhullar with J.P. Morgan.

John Doyle:

Yes, thanks for the question, Jimmy. Guy Carpenter just had an excellent year helping clients navigate what was a very, very choppy market in 2023. We certainly began 2024 with a more orderly market, but growth was outstanding, and I feel terrific about how we're positioned to help clients going forward. But Dean, maybe could share a little bit more insight on the market on 1/1.

John Doyle:

Thanks, Dean. Jimmy, I would add, just in both the insurance and reinsurance market, the pace of loss cost inflation in casualty is the great unknown at the moment. We all know it's increasing. We all see mounting evidence of it, but that's the challenge for all of us in the market to sort through at the moment. Do you have a follow-up, Jimmy?

John Doyle:

Sure. Mark, you want to?

John Doyle:

Thanks, Jimmy. Operator, next question, please.

MichaelZaremski:

Good morning. Back to the organic growth commentary, especially on the brokerage side, you’re loud and clear on kind of some of the pluses and minuses. I didn't hear anything about any influence from maybe a diminishing tailwind from some of the excess hires you've made in past years. Is that a dynamic we should be thinking about as we think about 2024 and 2025?

MichaelZaremski:

Understood. And my follow-up, switching gears a little bit to Mercer. In your prepared remarks, I think you made, John, some comments about medical or health inflation. Some of the data points we've seen are - the medical costs for employers should - might accelerate in 2024. Should that have a tailwind or any influence on the health segment specifically? Thanks.

Martine Ferland:

Yes. Thanks, John, and thanks, Mike, for the question. We're very pleased with the results in health, and we have had a quarter of 9% a year of 10 in overall health, and it comes from all regions, and it comes from many places. Of course, full employment does drive good results there, more people to cover in our employers’ benefit programs. But we also have invested in innovative and adaptive solutions. And medical cost inflation is there, and what it drives for us is a lot of consulting around trying to help clients and their employees control costs by better design, better fit for purpose programs. So, we'll see. There's not a huge portion of our business that is actually directly linked to inflation. We have a lot of fee-based revenue in the business. So, usually, whether there's a lot of inflation or inflation abates a little bit is not a big factor in the overall results. I think it's more around access to healthcare, innovative form of healthcare, like digital health, mental health, good affordability for clients and their employees. That's mostly driving our business results.

Operator:

Certainly. Our next question comes from the line of David Motemaden with Evercore ISI.

John Doyle:

Yes, thanks, David. Oliver Wyman had a terrific year, and as we all recall, we had a flat start to 2023. So, demand continued to pick up and sales continued to pick up throughout the course of the year, and we had a real strong finish. But Nick, maybe you could share a bit more color on what drove the growth and your outlook a bit.

John Doyle:

Thank you, Nick. And David, I would add, Oliver Wyman is just one of the ways in which we can show up in a very, very different way in front of clients and prospects. And so, we have a unique collection of capabilities, certainly with them and the family. Do you have a follow-up, David?

John Doyle:

Yes, thanks, David. As I said just a couple of minutes ago, I think we're a better business entering 2024 than we were in 2023. I thought we were an outstanding business leading into 2023, but we've been working hard at being a better growth business for many years now. Part of that's reshaping the mix of business. As we've talked about, investing organically and inorganically. We've spent a lot of time refining our client engagement models and investing in sales operations and technology to support sales. And of course, in 2019, we made the biggest acquisition in our history with JLT. So, we were building up these capabilities going into 2020 when, of course, the pandemic hit. So, I knew we were ready to run coming out of the pandemic. The macro environment, of course, has been supportive since the pandemic. And as I mentioned earlier, we expect the macros to continue to be supportive in in 2024. So, we think we're well positioned. As I mentioned earlier, we expect mid single-digit revenue growth or better. So, we're excited and quite optimistic heading into the year. Operator, next question, please.

Robert Cox:

Hey, thanks for taking my question. So, just curious if you could give us some more color on any changes in the middle market operating environment in particular, and anything you guys are thinking about in terms of competitive dynamics as some large peers enter this space in a bigger way.

Robert Cox:

That's great. Yes. So, just for a follow-up, maybe going back to the health space, I think you guys have discussed how you're largely compensated on a fee per employee basis, and employment growth is much lower than the 9% organic you achieved in the quarter. So, I was just wondering if you could help me understand, is this more consulting, new business opportunities out there? Are you raising fees and maybe is brokerage growing at a similar pace to the headline 9% organic?

Martine Ferland:

Yes. Well, first a correction. The large part of our business is actually consulting fees. It's not fees per member, as you mentioned, Robert. So, just to be clear about that. There's a small portion of the business in the US that is fee per participant, but that's the business that we divested. It's more in a (NIM) business. It’s how those businesses are usually paid out. So, the bulk of our business, some of it is based on the commission, but as I said, clients are really trying to control costs. So, there's not a direct link to inflation in premium there, because they would change the attachment point, as my colleagues in reinsurance like to talk about. They would vary the benefit programs, et cetera. And there's a large part that is project-based. And to your point, our growth has been in part full employment because there's much more work to be done to cover the employee population. But there's also a lot of change. High cost of prescription drugs, for example, accessibility through different means, technology coming into the space to help out people choose the right providers, the right programs, and we're there with them helping them design those programs, communicate them to employees, measure them in terms of efficacy, but also cost, et cetera. So, that's what's been - and you know that the health space everywhere is also seeing lots of change, lots of pressure on cost. So, I don't see us being not busy anytime soon. Nothing climbs through that.

Operator:

Our next question comes from the line of Meyer Shields with KBW.

John Doyle:

Mark, maybe you can?

Meyer Shields:

Oh, okay. Thank you.

Meyer Shields:

Yes, a quick one. When you've got the flood claims revenues in last year's I guess US and Canada operations with risk and insurance services, did that have any impact on last year's margins or the year-over-year progress?

Operator:

And our next question comes from the line of Brian Meredith with UBS.

John Doyle:

Yes. Look, Brian, what I would say first and foremost about talent acquisition is that we are very, very focused. I mentioned this in my prepared remarks about building a culture that attracts and retains the best in our work. The way we frame it, and we talk about being at your best at Marsh McLennan, right? How can we - for those that want to commit their career to risk strategy and people-related work, how is it that being at Marsh McLennan, you can be your best? And we frame those programs around learning and development, mobility, various aspects of wellness. And you get to do really purposeful work here. I mentioned the Ukraine work as an example earlier. You get to work with exceptional talent, and it's a collaborative environment and a learning environment. And so, I feel like we have the best talent in our business. I feel like our brand as an employer in the market is very, very strong. It doesn't mean everybody wants to work here. Of course, we're a big company and as we all know, there's lots of things that come with working at a bigger company. But I like how we're positioned. So, M&A, yes. Does it create opportunities for talent acquisition? Much like - we saw a bit of talent breakage when we acquired JLT. Folks sign up for working at a certain place, and when you have that kind of change, it's an opportunity possibly for folks to think through what they want to do going forward. I like how we're positioned in that respect. And then back to your other comment, yes, there are a number of bigger businesses, particularly in the risk space that are likely to change hands over time.

John Doyle:

Yes, thanks, Brian. We remain very active in the market. As I said earlier, last year was our biggest year of acquisitions, other than 2019 when we did JLT, over a long period of time. We're very selective. We’re looking for high performing businesses, well led businesses in attractive markets. As I mentioned, we want growth businesses with the ability to grow earnings as well. The three bigger deals that I highlighted in my prepared remarks, we're very excited about Honan in Australia. It gives us really an anchor platform deeper into the middle market in what's a very important and attractive market for us. Graham here in the United States, another step forward for us at MMA and then BT Westpac in Australia, strengthening our wealth business. So, we have a couple of deals that we announced in the later part of last year. Vanguard's OCIO operation, a career business, those will close sometime over the next the next few months. So, we're going to continue to be active. Much like I was talking about our brand as an employer, our brand as a buyer is also quite strong, right? We do what we say we're going to do. And so - and then on valuations, four really attractive assets. Their multiples remain high. And so, anyway, but we'll continue to deploy capital that way. And as Mark mentioned, we'd rather deploy capital on attractive inorganic and organic investment for that matter over share buybacks. But in the course of a year, you never know how things will run. But the pipeline is quite strong at the moment. Thank you, Brian. Andrew, next question.

Andrew Kligerman:

Hey, good morning. John, you talked about the great unknown in terms of loss cost inflation, social inflation. On the flip side, we've seen a few carriers report, and their results have been exceptional. So, I understand that you're kind of projecting out some good pricing, but at what point does that give and take ratio change and we kind of see some softer pricing, and how would that affect Marsh?

Andrew Kligerman:

Thanks for that one. And then my second question is just the stellar growth, underlying growth in Asia Pacific at 10%, LATAM at 11% in risk and insurance services. Question is, what particularly you seeing in those markets that is driving some of that excellent growth? And then underlying that, what is Marsh doing differently from the competitors?

Martin South:

Yes, as you say, I mean, we’re the clear market leader by some margin in Asia-Pac. There's several factors. We have literally market leadership in every single major geography there. We are able to bring all of our best capabilities from around the world to there. We have great teams, very specialized, a very strong employee benefits business. We have scale. We're able to attract and retain talent in a way - there's just - there's real momentum there. And the same can be said in Latin America. Slightly different economic dynamics, obviously, with Latin America. A big protection gap. A lot of opportunities market leadership in the areas there, and still quite an unconsolidated marketplace. So, we like the fact that we built our businesses organically, so the cultures are strong. There's not much on the M&A pipeline in those markets that we like. We are confident that we can build our businesses organically. And the differentiation of having global service and our global capabilities is really well sought out to by our clients.

Operator:

Our next question comes from the line of Bob Huang with Morgan Stanley.

John Doyle:

So, we obviously don't separately report MMA's results, but it's an important part of our business in the United States, and it continues to perform exceptionally well. We couldn't be more pleased, as I mentioned earlier. And as I also said, I think we're just getting started, right? So, and what I would also say is that the broader Marsh has learned a great deal from MMA about what it takes to win in the middle market. And Martin and the team apply those lessons as we expand in the middle market all over the world and where possible even deploy inorganic investment like we did in in the case of Honan in Australia. But our business at MMA also benefits from being part of Marsh. They're excellent at really mining Marsh for content and capability that can enable them to show up with scale in local markets in a way that really distinguishes themselves from others. So, as I mentioned earlier, we've been methodically building out MMA over the course of the last 12 years piece by piece and A+ asset by A+ asset. And so, we couldn't be more excited, and we think there's a long road ahead of us. Do you have a follow-up, Bob?

John Doyle:

Okay. Thank you, Andrew. Next question, please.

Michael Ward:

Thanks, guys. Good morning. Just on the capital deployment target, I think it was up over 10%. I was just wondering if that's a function of the cost savings program rolling off or anything else.

Mark McGivney:

We had a, if you saw, a strong year of free cash flow generation. We have significant financial flexibility. Our balance sheet is strong. And so, it's just really a reflection of the growth in our outlook for capital - cash generation.

John Doyle:

Yes, thanks, Mike, for that question. One of the things that I think makes us a better business is we're working better together than we ever have, right? And we have shared with you where we are on the expense side of things, but we're showing up together in front of clients and prospects. As I mentioned earlier, the strength of our individual business propositions will continue to drive the growth of our business overall. But more and more, we can show up in a very, very unique way. And so, we made good progress during 2023. We've certainly learned a great deal. We've done some testing, and we'll continue to refine that. But we have a number of global growth opportunities where we're showing up in front of clients and prospects together. And what we really did was create a framework for our folks in the field. As you'll recall, we appointed Marsh McLennan leaders in each of the regions. And so, a big part of their day is making sure that we're bringing our collective capabilities to market at a local level where it makes sense. So, we continue to be excited about what that'll mean to future growth.

John Doyle:

Thanks, Andrew, and I want to thank you all for joining us on the call this morning. In closing, I want to thank our colleagues for their hard work and dedication. I also want to thank our clients for their continued support. Thank you all very much, and we look forward to speaking with you again next quarter.

Operator:

Welcome to Marsh McLennan's earnings conference call. Today's call is being recorded. Third Quarter 2023 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh McLennan website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. [Operator Instructions]. I'll now turn this over to John Doyle, President and CEO of Marsh McLennan.

Mark McGivney :

Thank you, John, and good morning. Our third quarter results were outstanding, continued momentum in underlying growth, strong double-digit adjusted EPS growth and significant margin expansion. Our consolidated revenue increased 13% to $5.4 billion, with underlying growth of 10%. Operating income was $996 million and adjusted operating income was $1.1 billion, up 24% from a year ago. Our adjusted operating margin increased 170 basis points to 21.3%. GAAP EPS was $1.47 and adjusted EPS was $1.57, up 33% over last year. Note that adjusted EPS in the third quarter included a $0.10 discrete tax benefit from the release of the valuation allowance on foreign deferred tax assets. Even without this benefit, our adjusted EPS grew 25% in the quarter. For the first nine months of 2023, underlying revenue growth was 10%. Adjusted operating income grew 17% to $4.4 billion. Our adjusted operating margin increased 130 basis points and adjusted EPS increased 17% to $6.31. Looking at Risk and Insurance Services, third quarter revenue was $3.2 billion, up 12% from a year ago or 11% on an underlying basis. This result marks the tenth consecutive quarter of 8% or higher underlying growth in RIS and continues the best stretch of growth in nearly two decades. Operating income increased 21% to $640 million. Adjusted operating income increased 19% to $671 million and our adjusted operating margin expanded 100 basis points to 23.4%. For the first nine months of the year, revenue in RIS was $10.8 billion. With underlying growth of 12%, adjusted operating income increased 18% to $3.3 billion. Margin increased 150 basis points to 32.6%. At Marsh, revenue in the quarter was $2.7 billion, up 9% from a year ago or 8% on an underlying basis. This comes on top of 8% growth in the third quarter of last year. Growth in the third quarter reflected solid new business and strong retention. In U.S. and Canada, underlying growth was 6% for the quarter, led by strong growth in MMA. In International, underlying growth was 10% and comes on top of 11% in the third quarter of last year. Latin America was up 14%. Asia Pacific was up 10% and EMEA grew 9%. For the first nine months of the year, Marsh's revenue was $8.5 billion, with underlying growth of 9%. U.S. and Canada grew 7% and International was up 10%. Guy Carpenter's revenue was $359 million in the quarter, up 9% or 8% on an underlying basis, driven by strong growth across our global specialties and regions. For the first nine months of the year, Guy Carpenter generated $2 billion of revenue, 10% underlying growth. In the Consulting segment, third quarter revenue was $2.2 billion, up 13% from a year ago or 9% on an underlying basis. Consulting operating income was $424 million. Adjusted operating income increased 24% to $447 million, and the adjusted operating margin expanded 170 basis points to 20.8%. For the first nine months of 2023, consulting revenue was $6.4 billion, with underlying growth of 7%. Adjusted operating income increased 11% to $1.3 billion. The adjusted operating margin expanded 50 basis points to 20.1%. Mercer's revenue was $1.4 billion in the quarter, up 8% on an underlying basis. This was Mercer's best quarter of underlying growth in 15 years. Wealth grew 7%, driven by continued demand in defined benefits consulting and higher growth in investment management. Our assets under management were $379 billion at the end of the third quarter, up 19% compared to the third quarter of last year and down 4% sequentially. Year-over-year growth was driven by our transaction with Westpac, a rebound in capital markets, and positive net flows. Health underlying growth was 8% and reflected strength in all segments and regions. Career revenue increased 7%, on top of 15% growth in the third quarter of last year. We continue to see growth in rewards and talent strategy. For the first nine months of the year, revenue at Mercer was $4.1 billion, with 7% underlying growth. Oliver Wyman's revenue in the quarter was $781 million, an increase of 12% on an underlying basis that reflected strength in the Middle East and Europe. For the first nine months of the year, revenue at Oliver Wyman was $2.3 billion, an increase of 8% on an underlying basis. Foreign exchange was a $0.01 headwind to EPS in the third quarter. Assuming exchange rates remain at current levels, we expect FX will have an immaterial effect on fourth quarter earnings. We reported $52 million of total restructuring costs in the quarter, approximately $37 million of which relates to the program we announced in the fourth quarter last year. These charges include costs related to severance, lease exits and streamlining our technology environment. We've continued to pursue efficiencies under this program, and our outlook for savings has increased. As John noted, we now expect total charges of $425 million to $475 million and expect total savings of roughly $400 million, of which approximately $225 million will be realized in 2023. To date, we have incurred approximately $325 million of charges under this program. We currently expect to incur the majority of the remaining charges by the end of 2023 and to realize the bulk of the remaining savings in 2024. Our other net benefit credit was $62 million in the quarter. For the full year 2023, we expect our other net benefit credit will be about $240 million. Investment income was $1 million in the third quarter on a GAAP basis and $2 million on an adjusted basis. Interest expense in the third quarter was $145 million, up from $118 million in the third quarter of 2022, reflecting higher levels of debt and higher interest rates. Based on our current forecast, we expect approximately $157 million of interest expense in the fourth quarter. Our effective adjusted tax rate in the third quarter was 20.5% compared with 24.6% in the third quarter of last year. Our tax rate in both periods benefited from favorable discrete items. The largest discrete item this quarter was a $48 million release of a valuation allowance on foreign deferred tax assets. Excluding discrete items, our effective adjusted tax rate was approximately 25.5%. When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative. Based on the current environment, it is reasonable to assume a tax rate of around 25.5% for 2023. Turning to capital management and our balance sheet. We ended the quarter with total debt of $13.6 billion. This includes the $1.6 billion of senior notes we issued in September. Our next scheduled debt maturities are in March 2024, when $1 billion of senior notes mature and in May, when another $600 million of senior notes come due. We also recently took the opportunity to increase borrowing capacity under our credit facility, increasing the size of the facility to $3.5 billion from $2.8 billion and extending the term of the facility by 2.5 years to 2028. This was a prudent step to increase our access to short-term funding given the significant growth in our business since we last renewed the facility in April 2021. We are also pleased that Moody's upgraded our senior unsecured debt rating to A3 in September. We continue to expect to deploy approximately $4 billion of capital in 2023 across dividends, acquisitions and share repurchases. Our cash position at the end of the third quarter was $2.9 billion. Uses of cash in the quarter totaled $1 billion, included $353 million for dividends, $368 million for acquisitions, and $300 million for share repurchases. For the first nine months, uses of cash totaled $2.9 billion and included $944 million for dividends, $1.1 billion for acquisitions, and $900 million for share repurchases. Overall, we remain on track for a terrific 2023. Based on our outlook today and assuming current conditions persist, we expect to generate 9% to 10% full-year underlying revenue growth, strong growth in adjusted EPS and to report margin expansion for the 16th consecutive year. And with that, I'm happy to turn it back to John.

Operator:

[Operator Instructions]. And our first question comes from the line of Elyse Greenspan with Wells Fargo.

John Doyle:

Sure, Elyse. Good morning. Thanks for the question. Again, overall, I was quite pleased with the growth -- the revenue growth in the quarter. We had good growth at Marsh. Best growth at Mercer in 15 years. And again, strong performance at Guy Carpenter and Oliver Wyman. Marsh U.S., inclusive of MMA, and I would also note our MGA operation had a good quarter as well. Growth was strong. Marsh U.S. was up 6% versus 5% a year ago. Again, we caution you to look at growth at any one -- at any one quarter. We think we're well-positioned, and our team is executing well. Martin, do you have any other color on what impacted growth at Marsh this quarter?

John Doyle:

Thanks, Martin. Elyse, do you have a follow-up?

John Doyle:

So really, backing up a little bit, Elyse. As our business has operated more closely together, we've just identified additional opportunities. They're largely in the same areas, right? It's around realigning our workforce and mostly in functions, I would say, as opposed to market-facing workforce talent, real estate, and technology. We've not broken it out by group, but the costs are severance, lease terminations, and streamlining technology. So again, we're excited about some of the opportunities that we've uncovered and I'm proud of the team. We're executing against them.

Jimmy Bhullar:

Good morning. So, first question on the reinsurance market. I think you mentioned the word firm in terms of pricing. And are you expecting prices to be up further from these current levels? Or firm just means that they'll be somewhat stable? And then how do you think that will affect your growth? At Guy Carpenter, you've grown double digits this year. I'm not sure how much of that is because of the tailwind from pricing.

Dean Klisura :

Thanks, John. And Jimmy, maybe I'll give you a little color between property cat and casualty as John mentioned. As John noted, we expect challenging market conditions to persist for property cat at the upcoming January 1 renewal, as John noted, driven by inflation. As you're reading about, I mean, cat losses continue to be very elevated. Many attritional losses. Many billion dollar plus events this year. Political instability continues. We do expect pricing to remain firm in property cat. It will vary region by region. It won't be what we saw last year, as an example, in the U.S. and Europe, but we do think that firmness will be there. We do expect additional capacity and an increased appetite from reinsurers to write more business, particularly at higher attaching property cat layers. But I think the key is we expect reinsurers to continue to exhibit that discipline on attachment points, pricing and terms, and I don't see anything going backwards. As John noted, we think property cat capacity in the market will remain adequate. And as John noted, we think it will be a more manageable renewal for our clients. without that significant supply, demand imbalance and dislocation that we saw last year. And we do expect increased demand for our clients to buy more reinsurance and particularly key regions like Europe. On the casualty side, for U.S. Casualty, as John noted, the market is trending very cautiously. And all of our meetings with reinsurers this fall, everybody expressed concern with prior year loss development in U.S. casualty and certain lines, again, driven by economic and social inflation. And we do expect some downward pressure from reinsurers on seating commissions for our clients with quota share contracts and certain casualty lines. But in casualty, we do expect capacity to remain adequate.

Jimmy Bhullar:

Just on Oliver Wyman. I think typically, you think of Oliver Wyman as being sensitive to economic uncertainty. And this year, the business has shown a lot of momentum. So maybe -- I know you won the UBS, I don't know UBS Credit Suisse integration contract, but I'm not sure how material that is. But what's really driving Oliver Wyman? And what's your sort of pipeline look like? And how do you think about it performing if the economy does, in fact, slow down?

Nick Studer :

Thank you, John, and thank you, Jimmy. Yes, let me enlarge on that a little bit. It's definitely not an easy environment for discretionary spending in our clients. I still see a fairly wide range of possible economic paths. But John called out our wider resilience of Marsh McLennan, and I'm proud that Oliver Wyman has demonstrated that resilience and chlorine our way back from a flat to Q1. And as Martin said as well, we do try to look at the business on a year-over-year basis more than a quarter-over-quarter basis, but it does matter. We're quite a diverse business now, and we've been becoming more diverse. So, if you think about the sectors that are driving our growth in the regions, our India, Middle East and Africa region has been the biggest contributor to our regional growth with Europe also contributing strongly. On the sectoral side, public sector, which is quite present in the Middle East, our communications, media and technology practice followed by banking, followed by transportation and services. So again, quite a wide array of industry sectors there. And maybe just an interesting case study on the industry side would be our private equity, private capital practice. Clearly, it's not been a great deal environment. But that practice has been doing quite well, driven by portfolio company work. And over the last few years, I've said a few times and have been asked questions about our offerings through the cycle, which we've been seeking to broaden our economic research practices grew strongly, our digital team, our restructuring practice, which is nascent, grew very strongly. Our work on performance transformation with clients, which is more of a tough economic environment offering as well as our people in organizational performance work where we do a lot of collaboration with Mercer. So ultimately, I'm optimistic in our long-term growth prospects, but we continue to plan for mid to high single-digit growth over the longer term. And our pipeline is looking in line with that at this moment.

Michael Zaremski:

Good morning, thanks. I guess just a follow-up to the last question about kind of global growth. So, Marsh's growth clearly records high levels. I feel like historically, there's been more of a correlation between growth and nominal GDP. If you do agree with that, it just feels like there's been a decoupling of that relationship recently and a good way for you, obviously. And just curious if there's anything structurally permanently that's changed? Or is it -- are there kind of temporary phenomenon with tires? Or anything you want to call out if you agree with the premise of my question.

Michael Zaremski:

Okay. That's helpful. If I could ask a follow-up, and hopefully, it's not out of left field, but there's been a chatter in the media and at a recent wholesale conference about potentially some of the larger brokers getting back into the wholesale business. I'm not sure if you want to comment on that or can. But maybe you can at least offer some perspective on why Marsh doesn't have as big of a wholesale presence relative to just its market share of non-wholesale insurance?

Operator:

And our next question comes from the line of David Motemaden with Evercore ISI.

John Doyle:

No, I don't -- thanks, David. I don't see it as an acceleration in the quarter. Certainly, on a GAAP basis, in the quarter, expense growth was impacted by M&A, restructuring, but also FX. And even on an adjusted basis, obviously, FX played a role there. But as I said earlier, we're trying to balance delivering today and investing for the future. We're not trying to optimize margins in a particular quarter or for that matter, in a year. We've got a track record, a disciplined track record of growing revenue faster than expense, but we're not going to do it in every quarter, in every business, and every quarter. And so, we see right opportunities to make investments that we think are going to create opportunities for us to deliver value for our clients. We're going to make them.

John Doyle:

Yes, it's not a market. I would suggest it's really a collection of markets. And what we saw in the third quarter was, on average, pretty similar to what we experienced in the second quarter. I would note, as it relates to our income statement, we have different levels of commission exposure to different products, right? So, it doesn't always add up to the same amount. But it's a mixed market, and maybe I'll ask Martin to share some thoughts. And just to remind everyone, it's our role is to get the best solution for our retail clients in the marketplace. And we have a role as a market maker, too. And so, we've done a few things as a market maker to try to bring more efficient financing solutions to our clients. Martin?

John Doyle:

Yes. Thanks, Martin. What I would also say, David, and I mentioned this to Jimmy, but clearly, the cost of risk is rising, right? So, whether it's a frequency of cat events, including extreme weather, casualty loss costs, whether it's core inflation, social inflation, some of the underwriting community referring to as legal system abuse, the growth in litigation funding, concerns for our clients for sure and the underwriting community as well. Thanks, David.

Robert Cox :

Thanks, for taking my question. So, I think last quarter, there were some comments that I interpreted as expectations for the level of margin expansion to accelerate in RIS in the second half, but it was just a bit lower. So just curious if you could talk about the puts and takes with respect to the margin relative to and whether it's still fair to assume that the second half of the year will have stronger margin expansion than 2Q?

Robert Cox :

Got it. And maybe just a follow-up. I think some peers have highlighted expectations for medical costs to increase. So, I was hoping if you could discuss the trends you're seeing in the health and benefit space and expectations as we look into 2024.

Martine Ferland:

Yes. Thank you, Robert, for the question. Thank you, John. Indeed, medical inflation is increasing. And as John just said, it's an advantage for our clients. At the same time, it's not a big part of our revenue sources because a lot of our clients are on fee-based or those kinds of things. When -- we're also working a lot with clients to try to control those costs, control those increases. Because, as you may know, in the health benefit space, very, very often, employers would share the cost with the employee base. So, in this time of our inflation, they're pretty concerned about passing on those costs. So, we're looking at design of the plan, access in a different way, leveraging technology, et cetera. So, there's many different ways that our clients -- that we can help our clients address those increase in costs. And it's impacting revenue a little bit, but honestly, it's a small part for us given all of the counterpoints.

Meyer Shields:

Good morning. Two quick questions, if I can. First, John, you talked about macroeconomic uncertainty. I'm wondering how that impacts near-term visibility typically for Mercer in terms of revenue?

Nick Studer :

Yes. Thank you, John. Thank you, Meyer. It's -- as I said earlier on, I think it is a wide range of economic paths that I see different of our sectors do react differently -- and some of our industries have been having a pretty tough time since sort of through and since the pandemic. Some have seen little spurts of growth. We've been growing in some sectors, for example, Aerospace and Defense, where we made a significant acquisition last year, which we see as being more robust through the cycle. I do think that a tough economic outlook tends to result in slower growth for Oliver Wyman. But as I said earlier, we've been trying to develop a wider set of through-the-cycle offerings. And sometimes when the questions all change, people need help answering them. So, it's definitely not a correlation anymore. I think it probably -- that correlation has declined over time and it's pretty low now.

Martine Ferland:

Yes. absolutely. And over the last few years, we have focused also on diversifying our portfolio of businesses, and we've improved our business mix a little bit away from the more discretionary nature of the business, particularly in Career with more recurring type of work. And I would add to that, that with our -- with the current environment, there's also lots of demand, as Nick just said. You look at volatile capital markets, for example, drives demand for advice in our defined benefit and our different completion businesses well-funded, the fund benefit plan on the back of high interest rates and also creating demand for pension risk transfer. We talked about tight labor markets, the different -- the change in the ways of working, the upcoming of digital health and technology in the workplace. It's all driving demand and countering the more traditional, I would say, of previous year's impact of direct correlation to GDP, as we discussed earlier.

Meyer Shields:

I do. Just a quick one. That was very helpful. With regard to Oliver Wyman, in the past, I guess, you've communicated that Oliver Wyman, when you have strong growth, there could be some pressure on consulting margins just because of the nature of that business. And we didn't see that in this quarter. I'm wondering, is that context of lower margins of Oliver Wyman less true now?

Operator:

And our next question comes from the line of Scott Heleniak with RBC Capital Markets.

John Doyle:

Yes, sure. Happy to talk about that, Scott. Again, very pleased with our growth at Marsh. It was particularly strong in the International segment in the quarter. And in spite of mixed economic outcomes in Europe, our business is performing exceptionally well there. And we've had good growth over a long period of time in Latin America. Martin, maybe you could share some color on growth in both of those markets.

John Doyle:

Thanks, Martin. Scott, do you have a follow-up?

John Doyle:

Sure. We remain quite active in the market and the pipeline remains solid for sure. And again, I just want to emphasize how pleased we were to welcome Grant to the family in the third quarter, and we expect to close Hanon relatively soon. They're two well-led businesses. Well positioned solid growth fundamentals in both of them, expanding our presence in the middle market, which gets back to the mix point that I was making earlier. So overall, we closed five deals in the quarter. Those were the two bigger ones. We're very excited about it. We're certainly -- it's an active marketplace. While there's fewer transactions, there's a lot that is at play. And so, we're wide out about and clear on what we're looking for. Valuations remain elevated for strong businesses that are in the market. But we know what we're looking for and we know how to manage the risk of M&A. And so, we're going to be selective and disciplined, but we expect to continue to deploy capital inorganically.

Bob Huang :

Hi, thank you. So maybe if we can just go back to Oliver Wyman a little bit. Previously, you mentioned that regarding the UBS and Credit Suisse merger deal. That happened in the second quarter. Just curious if that was a meaningful driver of organic growth for Oliver Wyman into the second quarter and third quarter? And also, on top of that, do you expect any residual from that deal to come through in the fourth quarter and going forward for Oliver Wyman?

Scott Heleniak:

Yes, sure. So, one more thing very quickly. Regarding your cyber insurance practice. I know you mentioned that the cyber insurance pricing growth is slowing down a little bit. There had been a few relatively large headline cyber incidents as well as some cyber claims, namely in the casino gaming area as well as the government, and other areas. Do you expect the current slowdown in cyber pricing maybe just sort of in a soft patch? But do you expect that pricing growth to rebound back? Or do you think the cyber insurance pricing will just kind of stay where it is right now?

Operator:

Our next question comes from the line of Ryan Tunis with Autonomous Research.

John Doyle:

Thanks, Ryan, for the question. Yes, I think Martin pointed this out. There's -- I can't talk about relative exposure. But clearly, capital market volatility, the rising cost of capital, M&A activity is down. IPO activity is down. SPACs are down. DSPACs down, all those kinds of things that drive risk and create opportunities for us to offer advice and solutions are under some pressure. And somewhat related to that, as Martin also noted earlier, pricing is down as well. And so those are headwinds. But again, we have a well-diversified business in the United States. We help our clients manage a wide range of risks. And broadly speaking, again, the cost of risk continues to rise for the factors that I mentioned earlier on the call. So, thank you, Ryan. I appreciate that, and I want to thank you all for joining us on the call. In closing, I want to thank our over 85,000 colleagues for their hard work and dedication. I also want to thank our clients for their continued support. Thank you, all, very much, and we look forward to speaking with you again next quarter.

Operator:

Welcome to Marsh McLennan’s Earnings Conference Call. Today's call is being recorded. Second quarter 2023 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risk and uncertainties and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings included in our most recent Form 10-K, all of which are available on the Marsh McLennan website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. [Operator Instructions]. I'll now turn this over to John Doyle, President and CEO of Marsh McLennan.

Mark McGivney:

Thank you, John, and good morning. Our second quarter results were outstanding with continued momentum in underlying growth, mid-teens adjusted EPS growth and solid margin expansion. Our consolidated revenue increased 9% to $5.9 billion with underlying growth of 11%. Operating income was $1.5 billion and adjusted operating income was also $1.5 billion up 17%. Our adjusted operating margin increased 100 basis points to 27.7% a good result given the headwinds from the talent investments we made in 2022, the timing of our annual raises and the continued rebound in expenses such as T&E that we mentioned last quarter. GAAP EPS was $2.07 and adjusted EPS was $2.20 up 16% over last year. For the first six months of 2023, underlying revenue growth was 10%. Our adjusted operating income grew 15% to $3.3 billion. Our adjusted operating margin increased 130 basis points and our adjusted EPS increased 13% to $4.74. Looking at risk and insurance services, second quarter revenue was $3.7 billion up 12% compared with a year ago, or 13% on an underlying basis. This result marks the ninth consecutive quarter of 8% or higher underlying growth in RIS and continues the best stretch of growth in nearly two decades. Operating income increased 20% to $1.2 billon. Adjusted operating income increased 18% to $1.2 billion and our adjusted operating margin expanded 140 basis points to 34.2%. For the first six months of the year, revenue in RIS was $7.6 billion with underlying growth of 12%. Adjusted operating income increased 17% to $2.6 billion and the margin increased 170 basis points to 36.4%. At Marsh, revenue in the quarter was $3 billion up 9% from a year ago or 10% on an underlying basis. This comes on top of 9% growth in the second quarter of last year. Growth in the second quarter reflected strong new business and excellent retention. In U.S. and Canada, underlying growth was 9% for the quarter. In international, underlying growth was 10% and comes on top of 9% in the second quarter of 2022. Latin America was up 17%, EMEA was up 11% and Asia Pacific grew 6%. For the first six months of the year, Marsh's revenue was $5.8 billion with underlying growth of 9%. U.S. and Canada grew 8% and international was up 10%. Guy Carpenter's revenue was $576 million in the quarter, up 10% or 11% on an underlying basis driven by strong growth across all regions and global specialties. For the first six months of the year, Guy Carpenter generated $1.6 billion of revenue and 10% underlying growth. In the Consulting segment, second quarter revenue was $2.2 billion up 4% from a year ago or 8% on an underlying basis. Consulting operating income was $388 million. Adjusted operating income increased 9% to $403 million. The adjusted operating margin was 19.2% compared to 19.3% in the second quarter of last year. For the first six months of 2023, Consulting revenue was $4.2 billion representing underlying growth of 6% and adjusted operating income increased 5% to $809 million. Mercer's revenue was $1.4 billion in the quarter, up 6% on an underlying basis, representing the ninth consecutive quarter of 5% or higher underlying growth in Mercer. Wealth grew 3% driven by continued strength in defined benefits. Investment management also delivered modest growth. Our assets under management were $393 billion at the end of the second quarter up 11% sequentially and 14% compared to the second quarter of last year. Growth was driven by a modest rebound in capital markets, positive net flows and our transaction with Westpac. Health underlying growth was 10% and reflected strength in all segments and regions. Career revenue increased 6% on top of 17% growth in the second quarter of last year. We continue to see demand for rewards, talent strategy and workforce transformation advice and solutions. With first six months of the year, revenue at Mercer was $2.7 billion with 7% underlying growth. Oliver Wyman's revenue in the quarter was $798 million, an increase of 11% on an underlying business and reflected continued strength in the Middle East and Europe and a rebound in the Americas. With first six months of the year, revenue at Oliver Wyman was $1.5 billion, an increase of 6% on an underlying basis. Foreign exchange was a $0.02 headwind in the second quarter. Assuming exchange rates remain at current levels, we expect FX to be a $0.01 headwind in the third quarter and a $0.01 benefit in the fourth quarter. We reported $65 million of total restructuring costs in the quarter, approximately $50 million of which relates to the program we announced in the fourth quarter. These charges include costs related to severance, lease exits and streamlining our technology environment. We continue to expect total charges under this program to be $375 million to $400 million. To date, we’ve incurred approximately $300 million of charges and currently expect to incur most of the remaining costs in 2023. We still expect to achieve total savings of roughly $300 million by 2024, and now expect to realize approximately $200 million in 2023. Our other net benefit credit was $60 million in the quarter. For the full year 2023, we expect our other net benefit credit will be about $240 million. Investment income was $3 million in the second quarter on a GAAP basis and $2 million on an adjusted basis. Interest expense in the second quarter was $146 million up from $140 million in the second quarter of 2022. This reflects an increase in long-term debt and higher interest rates on short term borrowings, which we use for efficient working capital management. Based on our current forecast, we expect approximately $142 million of interest expense in the third quarter and approximately $567 million for the full year. Our effective adjusted tax rate in the second quarter was 24.2% compared with 23.7% in the second quarter of last year. Our tax rate in both periods benefited from favorable discrete items. The largest discrete item this quarter was the accounting for share-based compensation. Excluding discrete items, our effective adjusted tax rate was approximately 25.5%. When we give forward guidance around our tax rate, we do not project discrete items which can be positive or negative. Based on the current environment, it is reasonable to assume a tax rate between 25% and 26% for 2023. Turning to capital management and our balance sheet, we ended the quarter with total debt of $12.6 billion. Our next scheduled debt maturity is October 2023, when $250 million of senior notes mature. We continue to expect to deploy approximately $4 billion of capital in 2023 across dividends, acquisitions and share repurchases. The ultimate level of share repurchase will depend on how the M&A pipeline develops. Last week, we raised our quarterly dividend by 20% marking our 14th consecutive year of dividend growth. This increase, the largest in 25 years reflects our strong earnings growth over the past couple of years, confidence in our outlook. Our cash position at the end of the second quarter was $1.2 billion. Usage of cash in the quarter totaled $1 billion and included $295 million for dividends, $421 million for acquisitions and $300 million for share repurchases. The first six months, uses of cash totaled $1.9 billion and included $591 million for dividends, $701 million for acquisitions and $600 million for share repurchases. Given our strong results in the first half, we now expect high-single-digit underlying revenue growth for the full year. We continue to expect margin expansion for the full year and strong growth in adjusted EPS. This guidance is based on our outlook today, but as John mentioned, there continues to be uncertainty in the environment looking forward. So outcomes could be different than our current assumptions. Overall, our excellent start leaves us well-positioned for another great year in 2023. And with that, I'm happy to turn it back to, John.

Operator:

Certainly, we will now begin the question-and-answer session. [Operator Instructions]. And our first question comes from the line of Elyse Greenspan with Wells Fargo.

John Q. Doyle:

Good morning, Elyse. Thanks for the question. Yes, we're -- as I said, I’m quite pleased with the growth year-to-date, and the macro environment although volatile remains supportive of good strong growth, inflation, pricing, tight labor markets, our tailwinds. But, as I pointed out in my prepared remarks, we've been shifting our mix of business to better growth markets. We've been investing in talent, sales operations, client engagement. We've sold some non-core businesses and recently announced the sale of a non-core business. So, we've been working very hard at the growth profile of the company. And, our outlook remains quite positive. So, we upped our guidance to high-single-digits, it’s again a terrific start of the year. I feel like we're well-positioned. Our team is executing very well in the marketplace, and in spite of the volatile macro environment, I think we'll have a good second half of growth as well. We're not going to give specific guidance on fiduciary income, but you saw what it looked like in the second quarter, obviously meaningful growth and we expect that to likely continue in the second half.

John Q. Doyle:

Yes, I'll ask Mark to talk about the restructuring program, but I was very pleased with the margin improvement in the quarter and year-to-date 100 bps in the second quarter, 130 bps year-to-date. And, just a reminder for everyone, margins and outcome for us, it's not the primary objective, but we do expect to grow revenue more than expense over time, and we're constantly trying to balance with delivering today and investing for the future. I think we're getting that balance right. Our growth in both topline and earnings shows that. We did guide to less improvement in the second quarter, Mark talked about in his prepared remarks some of the drivers behind that. But again, I'm quite pleased with where we are. We expect solid margin expansion again for the 16th year. And, Mark, maybe you can talk about the restructuring program.

John Q. Doyle:

And we do have a bit of better second half comps from the expense -- on the expense line. So, thank you, Elyse. Operator, next question?

Jimmy Bhullar:

Hey, good morning. First, just a question on revenues in the RIS business, you've grown at a pretty fast rate the last several quarters and I think generally better than some of your larger peers, and part of that might have been just the benefit from the hiring activity that you've done over the past couple of years. Is the tailwind from that fully reflected in your results and has it fully ramped up or is there sort of more to go there?

Jimmy Bhullar:

And then just you mentioned -- sorry, go ahead.

Jimmy Bhullar:

Yes, I was just going to say you mentioned macro and geopolitical a bunch of times and geopolitical obviously is understandable. Macro, from the outside and it seems like most of the factors are tailwinds more than they’re headwinds, the equity market strong, inflation's high, GDP growth is held in. So, maybe you could just elaborate a little bit on what is it that on the macro side that you see as a negative and specifically on inflation, if it stays elevated, is that -- obviously, it's a positive on your growth, but is it a positive on your earnings as well overall or is the benefit offset by just higher expenses in your own business?

Operator:

Thank you. And our next question comes from the line of Michael Zaremski with BMO Capital Markets.

John Q. Doyle:

It's a mix of impacts, of course. So, it's difficult to say, with real precision, Mike. But again, you've started to see inflation come down here in the United States. You saw -- and in many markets you're seeing GDP growth slow, P&C pricing moderated a bit in the quarter as well, tight labor markets though remain a positive factor. And overall, at least compared to the 2010 to 2020 decade, it's certainly -- we have more tailwinds than headwinds. But again, we've been working quite aggressively to shift our mix and to improve the growth profile of the company and not just be a passive index candidly on GDP or for that matter P&C pricing. So again, we're pleased -- I forgot to mention when, Jimmy asked the question too, I talked about the economy a bit, but the geopolitical environment remains a risk as well, right? So again, just trying to thread the needle between what's been obviously a terrific first half of the year and what we think is a terrific outlook for revenue growth in the second half, but there's macro risk as well.

John Q. Doyle:

It could be a bit lumpier than earnings growth as we pointed out in the past and have demonstrated in the past, but maybe I'll ask, Mark to talk about the outlook for free cash flow growth.

John Q. Doyle:

Thank you, Mike. Operator, next question?

Robert Cox:

Hey, thanks for taking my question. Just thinking about the Marsh business, and I realize growth has been strong both domestically and internationally. But, if you look at those domestically and internationally, if you look at those two areas over the next say, the next year and the next five years, which are you most excited about?

Martin South:

Thanks, John. As we said, we had a great strong organic growth of 10% in the second quarter, which is on top of 9%, which we posted in the second quarter of ’22, and better than full year growth of 8%. As you said, great balance international was 10%, Latin America is 17%, EMEA 11%, APAC 6%, U.S. and Canada 9%. I'd say the growth has been, it’s a really nice balance across all the geographies. The specialties growth was strong. Credit specialties, construction, aviation, energy and power strong, our advisory business, part of the risk advisor of the future, very strong double-digit growth. MMB was strong. Renewal growth was strong. So, it's just a nice mix of business across the board, both new business and renewal.

Robert Cox:

Yes, thanks. And so maybe switching to Oliver Wyman, growth came in well above the levels you guys had guided from last quarter. And there have been a number of positive economic data points as of late, do you see the pipeline reflecting that? And is it looking like growth in the back half?

Nick Studer:

Yes, thank you, Robert. We still see a relatively wide range of possible future outcomes. When we gave guidance at the end of the first quarter. That was based on what we saw in our sales pipeline, which was ticking up nicely, but not aggressively. In the second quarter, we saw quite strong growth in sales. It's a, I would say, a reflection on places where Oliver Wyman’s being selected to support our clients really transformative moments led by our public sector practice, led by our banking practice, transportation and services and our telco teams. And then also some of our other businesses, our economic research consulting nearer and our brand consulting business, Lippincott showing strong growth and our digital practice is showing strong growth. So, I wouldn't say yet that it's correlated with economic uptick. Clients need to use this for that performance transformation as well as for their growth strategy. But sales in the second quarter have been better than we've expected and in the near term, I'm relatively optimistic. And the longer term, the economic outcomes are still fairly widely ranged.

Robert Cox:

I'm sorry. Next question actually that was the follow-up.

David Motemaden:

Hey, thanks. Good morning. Just had another question on the increased outlook to high single-digit for the year. Just sort of high-level question. Was that improved outlook more function of the results you've achieved to-date or has your outlook improved at all going forward?

David Motemaden:

Got it. Thanks. And maybe just a question on Mercer career. So, I saw that decelerated a little bit, the growth decelerated, and the compare wasn't that much harder than the first quarter. So, I'm just wondering is there anything that you're seeing there on the pipeline front or just anything that would indicate that any clouds on the horizon?

Martine Ferland:

Yes. Thanks, David for the question. And you touched on it. The quarter growth this quarter was on top of challenging 17% comparable for the second quarter of last year. Our quarter at 6% in Q2 now has also been impacted by the delay of start of certain projects. But I would say that the fundamentals for the business remain very strong. We have 9% growth year-to-date. The demand for service continues, our clients still grapple with labor shortages, wage inflation, dealing with new ways of working, tech in the workplace. We discussed generative AI with the clients. So, you're right, it's also a business that has the largest opponent the discretionary compliance for us at Mercer and we are always watching the macroeconomics. But I would say at this point, our sales, our pipeline, client sentiments, very strong. So it continues to give us good visibility into strength for the third quarter and beyond. So, I’m confident that the rest of the year will be good for career.

Operator:

Thank you. And our next question comes from the line of Mike Ward with Citi.

John Q. Doyle:

Sure. Thanks, Mike for the question. Maybe I'll ask Dean we're quite pleased with our execution of what's been a very, very challenging reinsurance market in the first half of this year. But Dean, maybe you can talk about the growth of GC.

John Q. Doyle:

Thank you, Dean. Martin, maybe you could talk a little bit about the growth in specialties?

John Q. Doyle:

And in a world where the cost of risk is continuing to escalate our efforts to on risk consulting are really important to our clients and driving a lot of value, Mike. I also want to point out, it's obviously been particularly on the reinsurance side of late. But after several years of pricing increases, of course, at Marsh as well. It's a difficult market. We take our role as a market maker quite seriously. And in the quarter, announced a couple of different things that I would point out a multiline facility in London that we call fast track for our clients at Marsh. And then we also created a reciprocal inside of our MGA operations at Victor, as well trying to bring new solutions to what is a difficult market for clients. Do you have a follow-up, Mike?

John Q. Doyle:

Yes, Nick, you want to talk about some of the capabilities we've been building inside of Oliver Wyman?

John Q. Doyle:

Thank you, Nick. Thank you, Mike, for the questions. Operator, next question please?

Weston Bloomer:

This is Weston Bloomer on for Brian. My first question is a follow-up on Oliver Wyman, obviously strong growth there. And you highlighted a few subsectors that saw the growth. I'm curious within financial services and banking, was any of that growth driven by the banking turmoil that we saw earlier in the year or more one-off opportunities? I guess I'm going with that too. Is that something that you think could play out in the back half of this year or 2024 just given the turmoil earlier in the year?

Nick Studer:

Yes, there were different puts and takes in our growth numbers, but perhaps 35% to 40% of our growth was driven by our banking practice. As you know, that is really a preeminent business for us. And at the beginnings of that, crisis. We felt that was just adding to uncertainty may lead to some pauses in decisions which may slow down the pipeline. In the second quarter, we did see some work coming through from it. It's hard to separate out exactly how much is driven by crisis response versus banks preparing to get ahead of capabilities that they now know they need given the very different interest rate environment. There are a lot of the core essentials of the banking system, our muscles that haven't had to be used in the very low-rate environment we've had for a very, very long time. And so, there is work on liability management, interest rate risk management, deposit management, the value of the branch network. Not to mention tuning ourselves up for the new tech and AI capabilities that might be helpful. But yes, we have seen that be a driver of some business already and we continue to expect that over the coming quarters.

Weston Bloomer:

And you highlighted that 35% to 40% of growth was driven within financial services. Have you given a real thumb, I'd always assume that financial services was the largest subsector within OI? Just want to confirm that that's the case or if you've given a breakout there?

Weston Bloomer:

Got it. And then just one more within Guy Carpenter. Can you talk about the dynamic versus treaty versus FAC placements? In the kind of the growth outlook that you're seeing there. Are there more opportunities within FAC given just changes in buying or buyer behaviour?

Operator:

Thank you. And our next question comes from the line of Paul Newsome with Piper Sandler.

John Q. Doyle:

Yes, sure, Paul. We remain quite active in the market and have a solid pipeline. We're, of course, we continue to look for businesses with solid growth fundamentals that are well led and terrific talent and not only will they make us better, but hopefully we think we can make them better as well. I'd say the pipeline is pretty broad from both an RAS and consulting perspective. We of course did a big deal in Mercer investments on the 1st of April, so we're excited about that in Australia. We were just in Australia as a team. So excited about the acquisition there and what it means to our investments. The market obviously the number of deals was down. Some buyers, primarily financial buyers are sitting it out at the moment, but strategic players are still quite active. And what I would say, demand is strong. For higher quality businesses that are out there. And so, while obviously the cost of capital has increased quite a bit. Priced assets are still trading at a premium. So, but again, we're excited about what's possible there. We've worked very hard and have built a very strong reputation as a buyer in the market and that creates a lot of opportunity for us. Do you have a follow-up, Paul?

John Q. Doyle:

Yes. No, thanks. Sorry to jump in on you there. They are relatively modest in size, but we are being thoughtful about the portfolio in that respect. And for the most part, they've happened at Mercer. Again, we recently announced the divestiture of what really is an admin business primarily or really entirely an admin business. And so not core, lower growth, capital intensive, operations and candidly, there are better owners of assets like that than us, others that can bring greater scale and technology and solutions. So, we don't expect to do a lot of it, but where we see the opportunity and it makes us better and stronger and enables us to invest in our core, we'll take steps to do that. Thank you, Paul. Operator. Next question.

Jing Li :

Hi there. Thank you for taking my questions. Just a question on Asia Pacific business. Can you add some color on -- since I see that just a rate of some for this quarter? So, do you expect it to continue for the coming quarters?

Martin South:

Okay. I think the important thing when we look at international, we like to look at growth over longer periods of time. With regard to APAC 6% underlying growth in the quarter. It's 8% year-to-date. We think that's much more indicative of what the growth would be like over a longer period of time. Likewise, we probably have slightly elevated growth in Latin America, we'd expect that to normalize over a period of time as well. So, I just think it's something that we're not worried about. We have a great business in Asia Pac and feel very confident about the future.

Jing Li :

Yes. So, for this quarter, 6% I guess. So, you mean you guys mean it's kind of like a one-time thing. So, continue to be a double-digit kind of going forward?

Operator:

I'm showing no questions at the moment. [Operator Instructions].

Operator:

I'm showing we do have a question, a follow-up.

Operator:

One moment, please. Our follow-up question comes from Robert Cox with Goldman Sachs.

John Q. Doyle:

Sure. Maybe I'll ask Martine to unpack our growth at Mercer Investments a bit, Martine?

John Q. Doyle:

Thank you, Martine, and thanks Rob for the follow-up. I want to thank you all for joining us on the call this morning. In closing, I want to thank our over 85,000 colleagues for their hard work and dedication. I also want to thank our clients for their continued support. So, thank you all very much and we look forward to speaking with you next quarter. Operator, thank you.

Operator:

Welcome to Marsh & McLennan's Earnings Conference Call. Today's call is being recorded. First quarter 2023 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh McLennan website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. [Operator Instructions] I'll now turn this over to John Doyle, President and CEO of Marsh & McLennan.

Oliver:

As we drive deeper collaboration, we're also finding new ways to operate, reduce complexity and organize for impact. As we noted in January, we took actions to align our workforce and skillsets with evolving needs, rationalized technology, and reduced our real estate footprint. We see opportunities for savings beyond the actions we have already taken. Mark will provide further details, but overall, we now expect roughly $300 million of savings by 2024 with total cost to achieve these savings of $375 million to $400 million. Our leadership appointments, go-to-market collaboration and restructuring actions are an opportunity to accelerate impact for clients, reinvest in our capabilities, and to be more efficient and connected. Before I turn to our results, I want to comment on ESG. Our recently released ESG report highlights the many ways in which Marsh McLennan is meeting these challenges and helping clients better manage their strategies. We have a track record of ESG engagement, and it's an area where we continue to see an opportunity to support our colleagues, clients, and communities. Sometimes this work takes place at the macro or community level like Guy Carpenter's work helping communities build resilience in the face of natural disasters through community-based catastrophe insurance. But more often it takes place in our work with clients such as helping clients navigate an evolving climate landscape or our efforts to help organizations address gender and racial pay equity and ensure fairness in rewards. We are proud of the work we do in this area and consider it a privilege to help clients progress their ESG strategies. Now, let me turn to our first quarter financial performance. We generated adjusted EPS of $2.53, which is up 10% from a year ago, or 12%, excluding the impact of foreign exchange. On an underlying basis revenue grew 9%. Underlying revenue grew 11% in RIS and 5% in consulting. Marsh was up 9%, Guy Carpenter grew 10%, Mercer grew 7%, and Oliver Wyman was flat after growing revenue nearly 40% over the last two years. Overall the first quarter saw adjusted operating income growth of 13% and our adjusted operating margin expanded 150 basis points year-over-year. Turning to our outlook, we are well positioned for 2023 and continue to expect mid-single digit or better underlying revenue growth, another year of margin expansion and strong growth in adjusted EPS. Our outlook contemplates that current macro conditions persist, but as we discussed earlier, there's uncertainty regarding the economic backdrop, which could turn out to be different than our assumptions. In summary, the first quarter was a great start to the year for Marsh McLennan. Our business delivered strong performance and we continue to execute well on our strategic initiatives. I'm proud of the focus and determination of our colleagues and the value that they deliver to our clients and shareholders. With that, let me turn it over to Mark for a more detailed review of our results.

John Doyle:

Thank you, Mark. Operator, we're ready to begin Q&A.

David Motemaden:

Thanks, good morning. I had a question just on the increased cost saves from the restructuring, so a pretty big increase in that target. I'm wondering, John, if maybe you could just talk about the sources of those benefits and if this is all we, if there's anything more that we could expect potentially in the future?

David Motemaden:

Got it, thanks and, oh sorry, go ahead.

David Motemaden:

Yes, I guess I would just follow up on that and just ask, talent is one that you had mentioned. I'm just wondering the Marsh Operational Excellence program and using Centers of Excellence, I'm just wondering how many employees do you have in these centers and where do you think you can get that to over what time period?

Operator:

Our next question comes from the line of Jimmy Bhullar with JP Morgan.

John Doyle:

Yes, sure Jimmy, and good morning. You know, I was very pleased with the start to the year, as you noted, and I pointed out in my prepared remarks, it's an acceleration from our growth in the fourth quarter. You know, I talked about some of the macros that are supportive of growth, not just in RIS, but in our business more broadly. But I also want to point out we've invested in talent in growth areas. We've deployed capital in markets that we think have strong growth fundamentals. And we've also been quite focused all throughout the company in investing in our sales operations capabilities, in tools as well. There's nothing really one-off about what happened in the first quarter. And we feel good about, feel good again about the revenue growth. Maybe I'll ask Martin to share some details and then Dean, to give a little bit of more color of where we saw some of the strong growth in RIS in the quarter.

John Doyle:

All right, great, thanks Martin. Dean, do you want to share some thoughts on the reinsurance market?

John Doyle:

Great, thanks Dean. Jimmy, do you have a followup?

John Doyle:

Sure. Jimmy, I'll ask Nick to jump in, but I want to reiterate again, there's a step change in the size of Oliver Wyman's business over the last couple of years. We saw 40% growth and so there is good demand for capabilities at Oliver Wyman. But Nick, maybe you can talk a little bit more about the first quarter and what you're seeing in the pipeline at the moment.

John Doyle:

Thanks Nick. Before we leave the revenue growth story, I want to ask Martine to jump in here as well. We had a terrific quarter at Mercer, a particularly strong growth in both Career and our Benefits business, but also a rebound in investments. Martine, maybe you could share some thoughts.

John Doyle:

Thank you, Martine. Operator, next question?

Michael Zaremski:

Hey, good morning. I hope the questions, I don't have less yield, but I wonder, I'm curious about any comments on the U.S. Federal Trade Commission proposal to get rid of noncompetes. One of your peers commented publicly that they were against that. Any color? Did you guys make a comment and do most? Is it correct that most producers in the U.S. do have noncompetes in their contracts?

Michael Zaremski:

Okay, understood. My followup is on the good, better-than-expected consulting results ex-Oliver Wyman. Just digging in maybe more, it sounds like from your comments, you're not really calling out any kind of one-offs. Just kind of curious if you'd be willing to share whether the results were better than you internally had expected given the kind of macro outlook, especially in like Career, or are things really just we're maybe focusing too much on some of the headlines you read, and things underneath the surface aren't as bad as some of the headlines might suggest.

Operator:

Thank you. And our next question comes from the line of Elyse Greenspan with Wells Fargo.

John Doyle:

Sure. Thanks, Elyse, for the question. Mark, do you want to talk a bit more about that?

John Doyle:

Do you have a followup, Elyse?

John Doyle:

Sure, Elyse. Look, again, it was a terrific start to the year. I'm very proud of our team. It's a very difficult marketplace and helping our insurance company clients navigate in a very, very challenging market. And it obviously has a follow-on effect on our clients at Marsh as well and so we're investing in our capabilities there and are well positioned for growth. It is -- it's an active talent market. As I said earlier, it's a -- from a talent point of view, I really like how we're positioned. Our focus from a talent value proposition is about being your best at Marsh McLennan in all of our businesses and again we've been a net winner there. From time to time, obviously, we'll -- we do have some voluntary turnover, but the turnover you may have read about, it won't impact the trajectory of Guy Carpenter or our business. So we'll see where the market heads. Both Dean and I commented, property cat is the big headline at the moment, that's a line of business that's most acute here in the United States we have a much bigger, broader business than that. But demand for our services there remains quite strong. So we look forward to a good year at Guy Carpenter. Operator, next question?

Robert Cox:

Hey, thanks for taking my question. I was hoping to drill into the retirement business and just any comments on how the economic backdrop may be impacting the business in providing any benefits?

Martine Ferland:

Yes. No, my pleasure to do so. Thanks for the question, Robert. It was a good quarter for defined benefit business. And basically, the market condition, the volatility, there's a lot that we can do to help clients navigate through these changes. And I'm pretty proud of the team that has been quite innovative and proactive in addressing these challenges. With the rise of interest rate, even though the asset side of the pension plans are depressed through equity, we've seen a great improvement in the funding of these plans. And when the funding of these plans become better a lot of our clients looked for ways to divest the liabilities and assets to insurers. So we're seeing activities there in the buyout space, and that has fueled the DB Consulting business. So that being said, of course, the DB segment itself on the market is in structural decline. So underneath this, you'll continue to see this. But in the meantime, with the volatility, it does require quite a lot of work, and we're happy to help clients through these times. The other side of that equation in retirement is also the investment side. On the Consulting side, again, we were very busy helping through the volatility, the decline in equity, et cetera. And our OCIO business, which is directly related, we're taking basis points up of the value of assets as a way to pay for the services we render and of course, when the value of assets are depressed, our revenue goes down. But we have net flows into that business. It's a business that has very good long-term growth through net flows through return. It's just been a more difficult period over the last year and a half. We're seeing still quarter-over-quarter like year-over-year headwinds, because the decline in market really started later in Q2 and then through Q3 last year. So that pressure on the year-over-year basis should ease out at current if the current AUM value stay at current level, we should see that starting to turn around in Q3.

Robert Cox:

Yes, thanks and just one followup. Are you seeing any benefit from China reopening in RIS? And just wondering if that's something you expect could potentially be a tailwind as we progress through the year?

Operator:

Thank you. And our next question comes from the line of Meyer Shields with KBW.

John Doyle:

Yes. Look, obviously, fiduciary income is a -- it's a factor in our overall results. We don't look at it separately. We're constantly trying to balance near-term performance, delivering excellent results in the near term with also investing in the capabilities that are going to lead to sustainable growth in the future. We're very thoughtful about how we manage our expense base. That leads to very few surprises for us around our results. And I think we've read that needle well, if you will, nailed that balance over the course of the last couple of years. So we're very pleased with the start to the year from a margin point of view. As we've talked about in the past, margins are -- particularly in a quarter, are not our primary objective. It's an outcome of the way we've run the business. We've had 15 consecutive years of margin expansion. We expect 2023 to be year number 16. But from quarter-to-quarter, some seasonality to investments we make and some other variability that could lead to a different outcome from a -- so it won't be a straight line quarter-to-quarter.

John Doyle:

Well, where we are in commission, obviously it could be helpful and we get paid in different ways and in different EH&B markets around the world. And so again, it's not a straight line. And much like we've talked about in the context of reinsurance, we're very transparent about the compensation we earn and how we get paid with our clients. But effectively, a rising cost of risk is a tailwind, whether it's in P&C or in benefits to us. But we also provide other services and consulting services to our clients to help them navigate some of the challenges. And the tight labor market is a factor here as well. So Martine, maybe you can offer a little more color?

John Doyle:

One other point on our Health and Benefits business, just to share with everyone, is that it's kind of an important proof point around some of the possibilities around collaboration inside of the company. This is a business that Mercer and Marsh work on together all over the world and it's been a really important growth driver for us over the course of the last couple of years, and it's been a bit of a source of inspiration around what's possible as we come together more and bring our collective capabilities to the client. So thank you, Meyer. Operator, next question?

Yaron Kinar:

Good morning. Thanks for taking my questions. I have two, both margin-related. So the first one, maybe piggybacking on Meyer's last -- first question. So clearly, you've had three consecutive quarters of 200 basis points or more of adjusted margin improvement in RIS, that's very notable. At the same time, if I'm doing the math correctly, fiduciary income added, what 230 basis points of margins this quarter? Cost saves, I think, by Mark's comments, add another 100 basis points. So there seemed to have been some offsets in RIS. Could you talk about those?

Yaron Kinar:

And I apologize if I'm belaboring the point, but I'm still a little confused, because I thought the $160 million to $180 million of cost saves that were going to be ratable over the year were net of reinvestments. And it sounds like there was some reinvestment in growth this quarter.

Yaron Kinar:

Got it. Okay. And my second question is on the consulting side. So I think if it weren't for the JLT legacy legal charges, adjusted operating margin would have expanded quite nicely this quarter. I guess, where are we with these charges? And we were at, what, four years from now the acquisition, do you expect those to continue?

Andrew Kligerman:

Hey, good morning. I have two quick questions. I think, Martin on Marsh mentioned a bit of a headwind still from the robust IPO and M&A markets in the first quarter of last year. Maybe could you help us size that headwind in the first quarter? And then next quarter, maybe some color on sort of the tailwind of not having it there, I mean I had heard from some competitors that you had a 5% dampening effect on organic revenue growth last year. So just curious if you could help us size that at Marsh?

Andrew Kligerman:

Got it, okay. So no more headwinds at least. And then you had another good year of net hiring. I think it was around 3,000 last year following 6,000 in 2021. Curious what your outlook is for 2023. Are you expecting to see material net hiring? Maybe any color on what you'd like to do and the geographies of the company where you do it?

Operator:

Thank you. And our next question comes from the line of Brian Meredith with UBS.

John Doyle:

Thanks, Brian. Look, we have a little less visibility into the pipeline at Oliver Wyman. That's historically been the case with that business. But as Mark pointed, recent sales activity has been better. We appreciate the advertisement on our FI practice. We have a great team of people there. But Nick, maybe you could add a little more color.

John Doyle:

Brian, do you have a followup?

John Doyle:

Yes. Thanks, Brian. I don't think our clients at Marsh think it's a good strong increase in pricing. But yes, we did observe higher rate change in property as we expected in the first quarter, given what happened late in the year and what we saw in the reinsurance market at January 1. So what I would say is, broadly speaking, it's a challenging market for our insurance clients at Marsh. Inflation broadly is driving a higher cost of risk, the frequency of weather-related losses, as you point out. And we did see the U.S. retail market -- property market begin to react to some of the reinsurance market changes as well. But Mark, maybe you could talk about pricing in the market broadly and in property?

John Doyle:

And Brian, maybe just one last point on the retail property market. A lot of the retail wind and quake risk is from February 1st or even March 1st through the 1st of June. And so really beginning to see what's happening from a risk appetite and from a marketplace perspective. So we're in the middle of the story right now. Thank you.

John Doyle:

All right, thank you, Andrew, and thank you all for joining us on the call this morning. In closing, I want to thank our over 85,000 colleagues for their hard work and dedication. I also want to thank our clients for their continued support. And thank you all very much. I look forward to speaking with you again next quarter.

President and Chief Executive Officer:

Mark McGivney - Chief Financial Officer Martin South - President and CEO, Marsh Dean Klisura - President and CEO, Guy Carpenter Martine Ferland - President and CEO, Mercer Nick Studer - President and CEO, Oliver Wyman

John Doyle:

Good morning and thank you for joining us to discuss our fourth quarter results reported earlier today. I'm John Doyle, the President and CEO of Marsh McLennan. Joining me on the call today is Mark McGivney, our CFO; and the CEOs of our businesses, Martin South of Marsh; Dean Klisura of Guy Carpenter; Martine Ferland of Mercer; and Nick Studer of Oliver Wyman. Also with us this morning is Sarah Dewitt, Head of Investor Relations. I am excited to be leading this call today for the first time as President and CEO. Marsh McLennan is an outstanding company with unique capabilities in the critical areas of risk, strategy and people. We help clients address their greatest challenges and find new possibilities as they navigate dynamic environments. We have exceptional talent, a wide range of solutions and a track record of execution in financial performance. Our leadership team is focused on delivering the full capabilities of Marsh McLennan to our clients, continuously improving the client and colleague experience, efficiently managing capital and driving growth and value for shareholders. Over the past year, I've been meeting with colleagues and clients to exchange ideas about how we can accelerate impact for clients and enable their success. These conversations reinforce my conviction that we are in the right businesses with strong brands and deep client relationships. I am confident that we have meaningful opportunity at the intersections of our businesses, where together our scale, data, insights and solutions are highly valued by clients. The strength of our unique value proposition has us well positioned for the years ahead. Today, we are focused, aligned, and succeeding together as our results demonstrate. 2022 was an outstanding year for Marsh McLennan. We generated 9% underlying revenue growth, continuing our best period of growth in more than two decades with each of our businesses delivering strong results. Our total revenue surpassed $20 billion and adjusted operating income grew 11% to $4.8 billion. This was on top of 18% growth in 2021. We reported adjusted margin expansion for the 15th consecutive year. Adjusted EPS growth was 11%. I am particularly pleased with this performance as our results included costs related to our strategic investments in talent and the continued normalization of T&E. These results also came on top of 24% growth in 2021, and we delivered significant capital return to shareholders raising our dividend by 10% and completing $1.9 billion of share repurchases the largest annual amount in our history.

Mark McGivney:

Thank you, John, and good morning. We are pleased with our strong fourth quarter results, which capped another terrific year. We delivered strength on strength from a financial performance perspective and continued to invest organically and inorganically. These investments combined with the actions we took in the fourth quarter, position us well for another good year in 2023. Consolidated revenue decreased 2% in the fourth quarter to $5 billion. As a reminder, the fourth quarter last year included a large gain related to Marsh India. Foreign exchange was also a meaningful headwind to GAAP revenue growth. However, on an underlying basis, revenue increased 7%. Operating income in the fourth quarter was $680 million and adjusted operating income increased 13% to $1 billion. Our adjusted operating margin increased 160 basis points to 22%. GAAP EPS was $0.93 and adjusted EPS was $1.47. Our full year, 2022 results were outstanding. Operating income for the year was $4.3 billion and adjusted operating income was $4.8 billion, an increase of 11% over 2021. Adjusted EPS grew 11% to $6.85 and our adjusted operating margin expanded 80 basis points marking our 15th consecutive year of reported margin expansion. 2022 was also a strong year for capital management. We deployed $3.9 billion of capital, enhanced our short-term liquidity, raised our dividend 10% and saw Moody's lift our rating outlook to positive. Looking at risk and insurance services, fourth quarter revenue decreased 3% to $2.9 billion. Note that RIS in specifically Marsh is where the India gain affected our revenue comparisons. On an underlying basis, revenue in RIS increased 8%, the strong result reflecting the momentum in our business and our resilience in the face of macro headwinds and on economic uncertainty. RIS operating income was $472 million in the fourth quarter. Adjusted operating income increased 23% to $685 million. The adjusted margin expanded 290 basis points to 25.6%. For the year, revenue in RIS was $12.6 billion and increase of 5% with underlying growth of 9%. Adjusted operating income growth for the year was impressive at 15%, our adjusted operating margin in RIS increased 130 basis points to 29.8%. At Marsh revenue in the quarter decreased 6% to $2.7 billion, but was up 6% on an underlying basis. This comes on top of a tough comparison to the fourth quarter of last year, which saw strong M&A and SPAC related activity. For the full year revenue at Marsh was $10.5 billion, an increase of 3% or 8% on an underlying basis. In U.S. and Canada, underlying growth was 5% for the quarter, a solid result given the headwind from lower M&A and capital markets activity. We expect this headwind to persist into the first quarter, but normalize as we enter the second quarter. For the full year underlying growth in U.S. and Canada was excellent at 7%. In international, underlying growth was 8% in the quarter with Asian Pacific up 12%, EMEA up 7%, and Latin America up 4%. For the full year underlying growth in international was strong at 10%. Guy Carpenter's revenue was $171 million, up 5% on an underlying basis. For the year revenue was $2 billion, an increase of 8% or 9% on an underlying basis. Based on our current outlook, we expect Guy Carpenter's growth in 2023 to benefit from a tightening reinsurance market. In the Consulting segment, fourth quarter revenue was $2.1 billion flat versus the prior year. Revenue grew 6% on an underlying basis. Consulting operating income was $336 million, and adjusted operating income was $407 million, down 1% reflecting continued foreign exchange and capital markets headwinds. The adjusted operating margin was 20% in the fourth quarter, a decrease of 20 basis points. For the full year Consulting revenue was $8.1 billion, an increase of 8% on an underlying basis. Adjusted operating income for the year increased 4% to $1.5 billion, while our adjusted operating margin decreased 10 basis points to 19.7%. Mercer's revenue was $1.3 billion in the quarter, up 5% on an underlying basis. This is a good result considering the impact of capital markets on our investments business. Wealth was flat on an underlying basis due to year-over-year declines in both equity and fixed income markets. Solid growth in defined benefits helped mitigate the drop in investments. Our assets under management were $345 billion at the end of the fourth quarter, up 9% sequentially, but down 17% from the fourth quarter of last year due to market declines in foreign exchange, which more than offset strong positive net flows. Health revenue grew 8% on an underlying basis in the fourth quarter, reflecting strength in employer and government segments and momentum across all regions. Career revenue increased 12% on an underlying basis, reflecting continued demand in rewards, talent strategy, and workforce transformation. For the year revenue at Mercer was $5.3 billion, an increase of 6% on an underlying basis, the highest result since 2008. Oliver Wyman's revenue in the fourth quarter was $765 million, an increase of 8% on an underlying basis, a solid result considering a tough comparison to 22% growth in the fourth quarter of 2021. For the full year, Oliver Wyman's revenue was $2.8 billion, an increase of 13% on an underlying basis, building on the 21% growth in 2021. As we look to 2023, we expect growth at Oliver Wyman to slow given rising economic uncertainty. Adjusted corporate expense was $68 million in the quarter. Foreign exchange was a $0.05 headwind in the fourth quarter, and for the full year was a $0.12 headwind. Assuming exchange rates remain at current levels, we expect FX to be a $0.03 headwind in 2023 with $0.05 in the first quarter and $0.02 in the second quarter, reversing to a modest tailwind in the second half. I want to spend a minute on the $344 million of noteworthy items in the quarter, the majority of which related to actions we initiated last year, as well as the final exit of JLT's headquarters in London. The largest category of noteworthy items in the quarter was $233 million relating to restructuring activities which are focused on workforce actions, rationalizing technology, and reducing our overall real estate footprint. The charges included severance associated with headcount reductions, as well as provisions related to real estate actions. Although we expect some reinvestment of the savings from these actions, the majority will flow to earnings. Based on our outlook today, we expect the benefit to earnings in 2023 could be $125 million to $150 million. We anticipate further actions under this program, which will continue through 2023 and possibly into 2024. We are still refining estimates of future opportunities, but at this point, we don't see additional charges in 2023 or 2024 exceeding the amounts taken in 2022. As we typically do on our fourth quarter calls, will give a brief update on our global retirement plans. Our other net benefit credit was $57 million in the quarter and $235 million for the full year. For 2023, based on our current expectations, we anticipate our other net benefit credit will be about $235 million. Cash contributions to our global defined benefit plans were $169 million in 2022. We expect cash contributions will be roughly $107 million in 2023. Investment income was a loss of $6 million in the fourth quarter on a GAAP basis and a loss of $5 million on an adjusted basis, and mainly reflects losses in our private equity portfolio. Given current market conditions, we anticipate negligible investment income in the first quarter of 2023. This compares to $17 [ph] million of investment income in the first quarter of 2022 on an adjusted basis. Interest expense in the fourth quarter was $127 million. Based on our current forecast, we expect interest expense for the full year of 2023 of approximately $565 million. This reflects an increase in long-term debt and higher interest rates on commercial paper, which we use for efficient working capital management. Our adjusted effective tax rate in the fourth quarter was 22.9%. This compares with 20.6% in the fourth quarter last year. Both periods benefited from favorable discrete items. For the full year 2022 our adjusted effective tax rate was 23.5% compared with 23.6% in 2021. Excluding discrete items, our adjusted effective tax rate for the full year was approximately 25%. When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative. Based on the current environment, it is reasonable to assume a tax rate of 25% to 26% for 2023. Turning to capital management in our balance sheet, we ended the year with total debt of $11.5 billion. This includes the $1 billion of senior notes we issued in October. We used a portion of the proceeds from this offering to redeem $350 million of senior notes that were scheduled to mature in March, 2023. Our next scheduled debt maturity is in October, 2023 when $250 million of senior notes mature. Our cash position at the end of the fourth quarter was $1.4 billion. Uses of cash in the quarter totaled $1 billion and included $298 million for dividends, $395 million for acquisitions, and $350 million for share repurchases. For the year uses of cash totaled $3.9 billion and included $1.1 billion for dividends, $806 million for acquisitions, and $1.9 billion for sherry purchases. As a reminder, we have a balanced capital management strategy that supports our consistent focus on delivering solid performance in the near-term while investing for sustained growth over the long-term. We prioritize reinvestment in the business, both for organic investments and acquisitions. We favor attractive acquisitions over share repurchases and believe they are the better value creator for shareholders and the company over the long-term. However, we also recognize that returning capital to shareholders generates meaningful returns for investors over time, and each year we target raising our dividend and reducing our share count. Looking ahead to 2023, based on our outlook today, we expect to deploy approximately $4 billion of capital across dividends, acquisitions, and share purchases. The ultimate level of share purchase will depend on how the M&A pipeline develops. As John noted, there is significant uncertainty in the outlook for the global economy. However, we feel good about our momentum and position, and despite the uncertainty, there are factors that remain supportive of growth in our business. Based on our outlook today for 2023, we expect mid-single digit or better underlying revenue growth, margin expansion, and strong growth in adjusted EPS. And with that, I'm happy to turn it back to John.

Operator:

Certainly. [Operator Instructions] And our first question comes from the line of David Motemaden with Evercore ISI.

John Doyle:

Good morning, David. There's nothing defensive about the move, right? We took steps to align our workforce and skill sets with the evolving needs of our clients. You know, as I noted, when I outlined some of the highlights of the global risk report, those client challenges and opportunities are constantly evolving in dynamic and we've also identified some opportunities to create some greater efficiencies across our businesses. We're working more closely together. We've rationalized some technology, reduced our real estate footprint. So it's not an indication of what we think the economic outlook is.

John Doyle:

Yes, it's a mix. It's fairly balanced between the three different areas. And you know, as Mark noted, we're still doing some work and we see some further opportunities. However, I think it's likely that further charges would be less than what we took in the fourth quarter here. But again we're challenging ourselves looking at where we've got talent, how it comes together, matching that against evolving needs in the marketplace and then pushing ourselves to operate in a different way and a more efficient way.

John Doyle:

Thanks, David. Operator, next question?

Jamminder Bhullar:

Hey, good morning, Jimmy. Hey, so John, you mentioned a little bit in your comments on just the hard market in reinsurance and also the firm market in commercial lines. Can you talk a little bit more about what you're seeing, if you're seeing any changes in client behavior, whether more sort of self-insurance or higher retention rates at both Marsh and Guy Carpenter?

Dean Klisura:

Yes, sure. Thanks John. I think in terms of client buying patterns, at January 1 in reinsurance, I mean, you mentioned increased retentions, attachment points. I mean, that was reinsured driven, right? Attachment points were up substantially for many of our clients, not only in the United States, but in all geographies with January 1 cat renewals. So our clients were forced to take more risk, more volatility on their balance sheets. In terms of buying patterns, that inflation driven demand for additional limit, everybody talked about all fall didn't really materialize. Clients mostly bought the same amount of cat limit they bought last year. Maybe up incrementally, maybe our global clients bought a little bit more, but in terms of limit, some of that limit that was eliminated at the bottom end of cat programs was put on top of programs, right? So clients made that up. But in terms of buying more, I think for many clients it was cost-prohibitive given the rate increases that John outlined around property cat, very challenging terms and conditions. You know, really reinsurers had the upper hand in this marketplace around pricing, attachment point and very challenging terms and conditions.

D&O:

In terms of behavior, our clients are constantly looking at the optimization of their programs. Our captive management business grew nearly double digits in the quarter and for the year as clients retained some more of their risk and we have a wide range of value propositions to help our clients for the risks which they retain and they manage. And so we feel bullish that the changing market is not going to dampen our growth.

Jamminder Bhullar:

Yes, just for Mark on fiduciary investment income, it's obviously gone up a lot and even sequentially up to over 50% from 3Q and 4Q. Do you expect -- should we expect a further increase in that over time? Because what we've seen recently is in some of the regions rates are actually flattish over the past several months. So is there more of sort of a lag effect of what's happened with rates in fiduciary investment income or has the portfolio mostly reset higher?

Jamminder Bhullar:

Thank you.

Operator:

Certainly. And our next question comes from the line of Elyse Greenspan with Wells Fargo.

John Doyle:

Yes, we're, I'm not going to give margin guidance, on the call, Elyse, and thanks for your question. Again, I think we're well positioned. We're in terrific businesses, just outstanding talent. And while there's some macro uncertainty, of course, that's out there, we expect strong revenue growth this year and we expect to increase our margins over the course of the year. Mark and I both shared a bit, what we expect to flow to the bottom line from the program this year. But we expect to maintain that discipline, that financial discipline that we've had for many years and to expand margin and to have strong adjusted EPS growth this year.

John Doyle:

We have been in that environment before. We've been around a long time, but it's been close to 20 years since we've operated in that kind of environment. We expect a good year of revenue growth at Guy Carpenter. As I noted in my prepared remarks ceded premiums won't track that rate increase, right? As our insurance company clients retained more risk or have their cap programs attached at a higher level. We work with our clients, of course, to manage our compensation. We're very transparent about that. In some cases, they're cat commission agreements that we have with our, with our clients, but again, we expect it to be a good year for Guy Carpenter.

John Doyle:

As I said, we work through that with our clients. We have agreements with them and a very transparent dialogue about how we're remunerated. Thank you.

John Doyle:

Andrew, next question please?

Michael Ward:

Thanks, guys. Good morning. I was wondering if you could give a sense maybe of how much more of a tail end could be left from inflation or exposures that you can see as we sit here today?

Michael Ward:

Awesome, thank you.

Michael Ward:

Yes. Actually may be on Oliver Wyman and Mercer career, I know you mentioned a possible slowdown in Wyman, but can you talk about the pipeline and whether you're seeing that slow down or just kind of anticipating businesses reducing their consulting appetite?

Nick Studer:

Yes, thanks John and thank you, Mike. As John just started to do, let me put Oliver Wyman into context. We're very happy with a second consecutive year of double digit growth. I think it's 15 years since we've achieved that. We've added over a third to this in that time, and we're confident that we gained market share in what is a pretty fragmented market. And that growth was very well balanced. We grew across all our regions, across all of our capability practices and across most of our industries in 2022. But having said that, this is my seventh call, and it's the first one that I've reported on something below double digit growth in the quarter. That 8% does reflect two things. We're certainly lapping a high growth quarter, but at the same time, we did see a slowing in the pipeline as our major clients, and we pause and digest after several pretty turbulent years. We remain optimistic in the longer-term revenue plans. Yes, there was a pretty heavy surge in the last two years, but we'll likely revert and closer to our medium term expectations of mid-to-high single digit underlying growth through the cycle.

Martine Ferland:

Yes, no, thanks John and Mike as well for the question. Yes, of course and you're right to say that our Career business is the one that has most discretionary projects. So of course we are looking at all indicators in a cautionary way. But what I want to say here is, we've had a tremendous two years in Career. Q4 was a 12% growth. The whole of 2022 was 14% growth. The demand here is really related to change in the world of work. We've added to that in 2022 wage in high inflation. We have the labor shortages issue. So we're looking at reward strategies, workforce analytics, future of work skills, gap, talent engagement, assessment of skills. It's all on top of our client's agenda. So overall at this point, we've entered 2023 with very solid growth momentum, strong sales, strong pipeline. And of course, we are confident in this year, we are monitoring development on sales pipeline and client sentiment given the macroeconomic conditions that are foreseen. But the question remains that as the people agenda stays such an elevated point for our clients that what we're seeing right now is that demand stays strong.

Operator:

Certainly. And our next question comes from the line of Robert Cox with Goldman Sachs.

John Doyle:

Well, you know, as I shared we expect mid-single-digits underlying revenue growth or better for this year, that's the guidance we're sharing. As I noted Robert in my prepared remarks, we're in terrific businesses, we're well positioned in those businesses, just have outstanding talent and a culture that makes us an employer of choice as well. So we feel good about our growth prospects for the near-term.

John Doyle:

Yes, you know, it's been manageable for us for sure. As we said we worked really, really hard on our culture and becoming an employer of choice in the markets that we operate in. I think we attract outstanding talent because of that culture, because of the strength of the brands, and it really enables talented individuals who want to devote their career in the areas of risk strategy and people to be their best when they work here. And that's how we think about it. And as I said earlier it's a privilege to do the work that we do, trying to tackle the issues of the day. We're a collaborative environment, so you do it with some really talented people who are very, very focused on client impact. And our client engagement, our colleague engagement, excuse me, remains very, very high. So we saw some elevated voluntary turnover in the early part of the year, but that moderated in the second half of the year, that I think that elevated turnover was really a bounce back from very abnormally low voluntary turnover. But wage pressure has been manageable for us. We're being thoughtful about merit pools and how we allocate those pools, but we feel very, very well positioned from a talent perspective. Thank you, Robert. Andrew, next question please?

Meyer Shields:

Thanks. Good morning. A couple of quick questions. First, John, strategically, when you can anticipate higher fiduciary income, does that translate into more latitude for longer-term investments?

Meyer Shields:

Okay, that's helpful. Second question, when we've heard a lot of comments very clearly accurate about the difficult reinsurance renewal season, does that actually impact the expenses that Guy Carpenter incurs? I mean, obviously a stressful period, but I'm wondering about the financial impact.

Operator:

Thank you. And our next question comes from the line of Andrew Kligerman with Credit Suisse.

John Doyle:

No. it would not be, it would not be negative Andrew, but, and thank you for your question. It was a very strong year of growth at both Marsh and at Guy Carpenter. I would note Guy Carpenter is a very, very small quarter. And so again, we're quite pleased with the revenue growth. And as I've said a number of times this morning, Guy Carpenter is very well positioned for good strong growth in 2023. At Marsh, it was an outstanding year. You know, 8% for the year, 6% in the quarter. You know, as we noted, I mean, I'll ask Martin to comment on this in a second. Marsh in the U.S. had some headwinds related to the capital markets, right? So, and Martin mentioned earlier the impact of pricing. We had fewer M&A with less M&A activity, less ITO activity. So as Martin pointed out that an impact on pricing there, but it was more of a volume issue. We expected that entering into the fourth quarter. It's also a headwind for us into the first quarter as well. But we expect a good growth year in 2023. Martin, maybe you could provide a little bit more color to share your thoughts on 2023 and our growth at the end of 2022.

John Doyle:

So Andrew, we're working our way through some headwinds in the capital markets, but again feel terrific about the growth in 2022 and we believe we're well positioned in 2023 as well. Do you have a follow up?

John Doyle:

It was 2019. Mark, maybe you can share with Andrew.

Andrew Kligerman:

Got it. Thanks so much.

Operator:

And our next question comes from the line of Yaron Kinar with Jefferies.

John Doyle:

You know Yaron our commission levels have been fairly constant for a number of years. As I said, with some of our larger clients at Guy Carpenter, we've had capped commission agreements that have been in place for many years. And so we work with those clients to be fairly remunerated for the work that we do over the course of the year. And so, we have good, healthy relationships with those clients and work our way through them. So I don't think there's really anything more to share than that.

John Doyle:

No. we feel terrific about the strategic talent that we brought into the organization over the course of the last couple of years. We invested in talent last year as well. The returns on those investments have been absolutely terrific and driving a meaningful amount of our growth in 2022 and we expect it to drive growth for us in 2023 as well. So as I said, the actions that we took were more about aligning our workforce and skillsets with evolving needs. And it also is connected in some part with how we challenged ourselves to operate more efficiently, more simply and bringing our businesses closer together.

John Doyle:

Thanks Yaron. I appreciate it. Andrew, next question please?

Brian Meredith:

Yes and thanks. Two of them for you. First one Mark, I'm just curious, the $4 billion of kind of planned capital deployment this year, how does that necessarily, how does that relate to kind of what your expectations are on free cash flow? Because I think you actually had $4 billion of capital when you expected to deploy last year?

Brian Meredith:

But I guess my point is, you don't expect free cash will be flat year-over-year, do you?

Brian Meredith:

Great, that's helpful. And then John, I'm just curious a lot of big corporations out there are tightening belts right now in preparation for what they see as a challenging 2023. And I appreciate you're looking for still a pretty good strong 2023. Maybe you can just remind us what's the lag effect that you see with your revenues vis-à-vis kind of a slowdown in business activity out there? I always remember there's like some lag effect.

Brian Meredith:

Great, thanks for the answer.

Operator:

And our next question comes from the line of Ryan Tunis with Autonomous Research.

John Doyle:

Yes, thanks Ryan for the question. As I said last year start 15th consecutive year of margin expansion, and we expect 2023 to be our 16th consecutive year. I was pleased with the margin improvement, particularly in light of the investments that we've made in talent. So, it's a modest improvement, slight improvement in the comp and then ratio. But again, margin is an outcome for us. We're focused on growing earnings growing the free cash of the business and we're going to invest where we think it makes sense, where we think it can make us stronger as a business and accelerate client impact. But at the same time, what's not going to change here is our focus on continuous improvement and our commitment to excellent financial performance.

John Doyle:

Sure. My voice has been in our strategy for nearly seven years now. As I said in my prepared remarks, we're in the right businesses. We've got market leading brands. We're well positioned, just outstanding talent. It's a real privilege to get to work with the folks that I get to work with every day. And as I said, our focus on continuous improvement and our commitment to excellent financial performance are not going to change here. Having said that, I see some real opportunities at the intersections of our businesses. Client needs are dynamic as we talked about, and those needs don't fit neatly into the boxes on our org chart. We're a big company. We need to be organized in certain ways, but those needs don't necessarily fit again against not all of them anyway, don't fit neatly into how we're organized. And so we're going to be more deliberate about how we collaborate. We've got a unique collection of capabilities. We're going to go to market together where we think it makes sense and where it makes sense is where we can accelerate client impact and enable our client success. And our colleagues are passionate about client success and the work that they do on behalf of clients. So they're excited about the possibilities. I'm excited about the possibilities. We're also going to work more closely together to drive some efficiencies across our business. So I see a lot of opportunity. Again, I think we're in terrific businesses and a terrific team here and I'm excited about the days ahead. Thank you, Ryan. Andrew that was the last question, we'll wrap it up now.

John Doyle:

Thanks, Andrew. And thank you all for joining us on the call this morning. In closing, I want to thank our over 85,000 colleagues for their hard work and dedication in a challenging year. And I also want to thank our clients for their continued confidence in Marsh McLennan. Thank you all very much and I look forward to speaking with you next quarter.

Operator:

Welcome to Marsh McLennan's Earnings Conference Call. Today's call is being recorded. Fourth quarter 2022 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh McLennan website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. [Operator Instructions]. I'll now turn this over to Dan Glaser, President and CEO of Marsh McLennan.

John Q. Doyle:

Thanks Dan and good morning everyone. I am honored to become Marsh McLennan’s next President and CEO, and grateful for the trust and confidence Dan and the Board have placed in me to lead this exceptional company. I'm eager to work with our colleagues in realizing new possibilities to serve our clients, create value for our shareholders, and support our communities. I'm pleased with our third quarter results. We delivered strong growth despite a macro backdrop that is becoming more uncertain. We are delivering solutions to help clients navigate volatile economic, geopolitical, and risk landscape. As we discussed last quarter, there are aspects of the current environment that remains supportive of our growth. Higher inflation offsets lower real GDP growth, rising interest rates, boost our fiduciary income, and the challenging insurance market drives a flight to quality. We also have a track record of success and being resilient through cycles, and I believe Marsh McLennan is well positioned to perform. I would like to take a moment to discuss Hurricane Ian, that’s had a devastating impact on the people and communities in Florida. Ian has the potential to be the costliest insured event in Florida's history and the second most damaging insured loss of all time. We are working with insurers to help our clients receive much-needed support. Insurance has a critical role to play in building homes and restoring shuttered businesses. Our work reinforces Marsh McLennan's purpose to be there in the moments that matter for our clients and communities. Ian's Category 4 strength, incredible size, and slow pace resulted in tremendous damage. The cost of which is exacerbated by the effects of coastal development, the escalation of property values, general inflation, and persistent supply chain challenges. While the ultimate insured loss won't be known for some time, the impact on an already stressed property market will be significant. At mid-year reinsurance renewals, property market is already exhibiting strains. Following Ian, the property cat market is likely to tighten even further and perhaps see a significant supply-demand imbalance. We are harnessing our collective expertise, scale and capabilities to bring solutions to help our clients navigate this complex risk environment. Turning to our third quarter financial performance, we generated strong results. Adjusted EPS of $1.18 is up 9% versus a year ago, which is impressive on top of 32% growth in the third quarter of 2021. Total revenue increased 4% versus a year ago and rose 8% on an underlying basis, with 9% in RIS and 8% in Consulting. This is a terrific result, especially considering the prior year third quarter underlying growth of 13%. Marsh had an excellent quarter. Growth was 8%, reflecting new business and strong renewal growth. Guy Carpenter grew 7% [ph] in the quarter, continuing its string of terrific results. Mercer grew 5% in the quarter despite capital market headwinds, and Oliver Wyman grew 13%, the seventh consecutive quarter of double-digit growth. The third quarter saw adjusted operating income growth of 12% and our adjusted operating margin expanded 110 basis points year-over-year. Overall, I am proud of our third quarter performance, which demonstrates the strength and resilience of our business. Given our strong third quarter and year-to-date performance, we are on track for an outstanding year. We expect to generate high single-digit growth, underlying revenue, solid growth adjusted EPS and to report margin expansion for the 15th consecutive year. We are focused, aligned and succeeding together, as our results demonstrate. Before I turn it over to Mark, I'd like to say a few words about Dan. During Dan's tenure at the helm of Marsh McLennan, the company has been transformed. Our revenue has nearly doubled, our adjusted EPS has more than tripled, and our market cap has quadrupled. Our scale and capabilities have been enhanced, and our talent is unmatched. Dan led our expansion into new client segments and launched Marsh McLennan Agency, which has grown to $2.5 billion of annual revenue, closed 100 acquisitions at just over a decade. Dan also successfully led the company's $5.6 billion acquisition, JLT in 2019, the largest in our history. Most importantly, Dan has led our firm with vision, courage and integrity. Faced with the consequences of the pandemic, his values-first leadership ensured that the tough choices were made to safeguard our colleagues, to protect jobs and incomes, deliver for clients, bolster liquidity, and still produce significant growth. His decision were an inspiration to our colleagues and an example to the broader business community. Our financial performance speaks for itself, with Marsh McLennan's total shareholder return more than doubling the S&P 500 during Dan's stewardship as CEO. Less visible but even more significant is the sense of pride and the culture that Dan has instilled in the firm. Under his leadership, we are not only a great stock but a great company. We owe him our gratitude. So on behalf of our 86,000 colleagues, I thank Dan for his leadership. And with that, I'll turn the call over to Mark for further detail on our financial results and a discussion of our outlook for the rest of 2022.

Daniel S. Glaser:

Thank you, Mark. Before we open up the call for Q&A, I just want to say it has been a great privilege to lead this firm and work side-by-side with smart, creative and dedicated people. I am immensely proud of our colleagues and what we have accomplished. Together, we've grown, innovated and persevered. We launched and built MMA, expanded our capabilities in combination with JLT, and demonstrated resilience in the face of a financial crisis and global pandemic. We emerged as a better and stronger firm by relying on each other, living our values, supporting our communities, and staying focused on clients. I have always believed the greatness of our companies is in how we deliver in the big moments and the small. Under John's leadership, I know Marsh McLennan will continue to thrive and prosper, to make a difference in the moments that matter. There is no one I trust more with the company we've built together, and with the important work ahead. I'd like to thank our clients for choosing to do business with us, our shareholders for their continued confidence, most importantly our colleagues. All that we have achieved is due to their efforts. With that, operator, we are ready to begin Q&A.

Elyse Greenspan:

Hi, thanks. Good morning. First, Dan my congrats to you on your upcoming retirement. It's been great working with you through the years. My first question is on U.S. and Canada within RIS in the quarter. The growth did slow from where you guys have been trending. I know we've had some good and bad quarters as we've gone through the pandemic and came out. Was there anything specific going on in the third quarter that you want to point out within that business?

Martin South:

Thank you, Dan. Yes. Just to start, we are very pleased with the strong organic growth of 8% in the quarter, which is on top of 13% in the prior quarter 2021. Our growth is strong across all the geographies. EMEA was up 9%, Asia Pac, 14%, LAC was up 15% -- 5%, as you noted in the U.S. Overall, good year-to-date growth of 9%. And whilst the 5% is a slowdown, it was 16% in Q3 of 2021. When we look at the U.S. over a longer period, the U.S. and Canada is 8% year-to-date and 13% in the full year of 2021. Canada is doing extremely well, and the U.S. growth last year in the back half of the year, there was exceptional performance in M&A, SPAC, and capital markets activity, and we don't see that repeating in the volatility of the markets going forward. We made fantastic investments last year in producers that are focused on recurring business, so we feel we're very well positioned in the U.S. going forward.

Elyse Greenspan:

Yes, thanks. My follow-up question is on the outlook for Guy Carpenter. You guys mentioned the loss that we saw from Hurricane Ian. From what we've been hearing, it really has the potential to turn on the catastrophe reinsurance market significantly next year. So what are you guys seeing there and can you just talk about how Guy Carpenter could benefit from a pretty hard reinsurance market in 2023?

John Q. Doyle:

Sure. Thanks, Dan. So Elyse, the insurance markets remained challenging in the third quarter for our clients. Prices continued to rise in the quarter, although moderating slightly overall from where we were in the second quarter. Reinsurance markets though, are a different -- really a different matter. The property cat market in particular was tightening in advance of Ian. And then as I noted in my prepared remarks, we're likely headed to a much more challenging January 1 reinsurance renewal. So with that, maybe I'll ask Dean to jump in on some of the details of what we're seeing in the market today.

John Q. Doyle:

Terrific. Martin, maybe you could talk a little bit about what we're starting to see in terms of the impact of Ian on the property markets, if -- that Marsh operates in, and then just probably what's happening in pricing in the marketplace?

Daniel S. Glaser:

Next question please.

Jamminder Bhullar:

Hey, good morning. I just had a question first on Oliver Wyman. I think there's concerns that if the economy slows down, that's a business that might be vulnerable to slower organic growth, but you've obviously had very strong results for the last several quarters. So if you could talk about what you're seeing in terms of pipeline and just what your expectations are for the business?

Nick Studer:

Thank you Jimmy, yes. It is true that our market tends to prosper when the economy is healthy. But at the same time, when all the questions change, our clients need nuances. And I will say we're not seeing any reversal in our business and our pipeline continues to be robust. As Dan and Martin both mentioned, the M&A and SPAC cycle, we have seen slower pace on the businesses that thrive on M&A activity, and I suspect we won't be immune to some of the tough elements in the cycle. But our client offerings are less pro-cyclical than they were perhaps five years ago. We have a strong capability in risk management, a lot of work in performance improvement, both top line and bottom line. We've established a restructuring practice, so -- and I'd add, it's actually been an incredibly tough environment for quite a few years now in several of the sectors we serve with the effects of the pandemic. So for now, the pipeline remains strong.

Jamminder Bhullar:

Yes. Just on fiduciary investment income. It's up, I think, around 10 times what it was a year ago and almost three times the sequential quarter. So obviously, there's a benefit there from higher interest rates, but wondering if that's all it is? And should we assume that it goes up further as rates have gone even higher since the end of the quarter or was there any sort of discrete items that benefited the 3Q results?

Mark McGivney:

Jimmy, there was nothing unusual or one-time in the results. So as you noted, we have $4 million a year ago in the third quarter, it was 40 million in this third quarter and it just reflects the rise in global rates, so it's definitely a source of upside for us. Obviously, we have balances all over the world, and so we're dependent on rates moving in different jurisdictions, but there's generally a trend up. And just remember, we've got over 10 billion of fiduciary balances on any given day, so 100 basis points equals 100 million of income.

Daniel S. Glaser:

Thank you very much, Jimmy. Next question please.

David Motemaden:

Hi, thanks, good morning. And Dan, congrats on the retirement. It's been quite a ride. Congrats.

David Motemaden:

Just had a question on the hiring activity that's been picking up. Obviously, the tough comp in the U.S. just on the M&A side in Marsh makes it a little tough to see any impact. But I was just wondering if you could just comment on how much this quarter benefited from some of the strategic hires that you've made over the last year and half, two years? And maybe give us a sense of how much that should ramp as we head into 2023?

John Q. Doyle:

Sure, Dan. David, we're very, very pleased. We continue to be just absolutely pleased with the strat hiring that we did last year. Not only are they producing, but we did a lot of work as we are hiring these folks to make sure that they're a right cultural fit, and that's proven to be the case as well. So we started with world-class talent. We think the best talent in the markets that we serve, and these folks have made us better. We serve our clients and teams, and they've fit in very, very nicely at both Marsh and Guy Carpenter, where we did most of it. We did some of the hiring in Mercer as well. But Martin, maybe you could just talk about the productivity to the -- of the hires.

John Q. Doyle:

So as you know, David, it's two to three years before they are fully productive. But we couldn't be more pleased with the progress to date.

David Motemaden:

I do, yes. And just on the property cat market on the reinsurance side, it sounds like that's spilling over a bit into cat exposed primary. I'm wondering if you're seeing that at all starting to spill over into non-property lines at all or if you expect that to happen?

David Motemaden:

Understood, thank you.

Operator:

Thank you. And our next question comes from the line of Yaron Kinar with Jefferies.

Daniel S. Glaser:

Yes, that's a good series of questions, and it's certainly something that's been at the executive team table as we think through how to serve clients in this kind of environment. We've been in tough markets before, but your basic point about supply and demand, yes. Demand will outstrip supply. It's already outstripping supply, so it's just an extent of how quickly the market can adapt to that. Dean, do you want to give us more?

Daniel S. Glaser:

Yes, absolutely. And so it's one of those things, very tough markets really, in some ways, it's the period where Marsh McLennan shines the most. And so Guy Carpenter will do well but in any time where there's supply and demand imbalances you could have short-term pressures of something not being able to be placed, because there's not enough capital providers willing to write a particular line of business. But solutions will be found, and we're actively working for our clients in that area. Any follow-up Yaron, although you asked about four questions. Give me another one, if you have one at the ready.

Daniel S. Glaser:

John?

Daniel S. Glaser:

Absolutely. Next question please.

Meyer Shields:

Thanks, good morning, and I want to add my congratulations to Dan. I remember where Marsh was when you first came on board. You've done an absolutely phenomenal job.

Meyer Shields:

Well yes. Anyhow, quick question. Look, I'm trying to decipher how much politics is real. But a fair amount of opposition brewing in some parts of the country to ESG, and I'm wondering how that's impacting demand for ESG-related consulting?

Martine Ferland:

Yes, for sure. And thanks, Meyer, for the question. For us at Mercer in terms of environmental and social and governance, actually, we can work with clients on all three fronts; low-carbon economy, the transitions, sustainable investment. We help clients wherever they are in their philosophy of investment and their objectives to look at the market and the best risk and rewards [ph]. So our clients invest for the long run, and they look at the risk elements of their investment. And it's with that length that we're looking at the ESG factors with them. We don't see that kind of demand and necessity to look at risk. I mean, all through the Q&A today, we have talked about climate risk, for example. So we need to figure -- factor these risks in when we look at investment in all our clients get the returns that they're looking for. Other elements, of course, CE&I, social minimum standards of benefit across the world, so we pay equity. We have a lot of work there with our clients that are focused very much on building diverse workforces and the whole governance elements around it. Whether it goes from executive compensation, to the way that they manage and govern their investment. Actually coming back to investment, it's been quite a rough year on the capital market this new year. But we've been working with clients and actually, we've been very busy on the -- consulting side of the house, in particular, to help client navigate that very intense headwinds and volatility in capital markets.

Nick Studer:

Yes. I mean, and Meyer, in Oliver Wyman, the main focus of the three would be around the climate transition, and I think that backlash that you're seeing in some places is something we've expected for quite a while. There is a delicate balance to strike in -- especially the carbon transition between security and affordability, and the transition itself. But ultimately, when many sectors are trying to reverse engineer 200 years since Industrial Revolution in 20 years, there'll be actions which overshoot, there will be actions which take on greater resistance. But as it affects our business, our climate of sustainability practice is one of the fastest-growing areas of Oliver Wyman, most investment we've made over the last three or four years, and it continues to grow in the very high double digits. We're not seeing any reduction in demand. We are seeing that the questions are getting more...

Meyer Shields:

Yes, just a brief one, maybe this is for Mark. I was hoping you could talk us through capital deployment plans as the cost of capital is reflected in the risk-free rate rises?

Meyer Shields:

Thanks.

Operator:

Thank you. Our next question comes from the line of Robert Cox with Goldman Sachs.

Daniel S. Glaser:

Sure. We'll begin with Martin in a second. I mean, in general, what we've seen in -- over, really, the last couple of decades is that you not only have regular higher levels of growth and a bit more inflation sometimes over long stretches of time in places like Asia and Latin America, but you also have increased insurance penetration. As the economy develops insurance becomes the underpinning for development, and so that has always been a benefit to us as well. Martin, do you want to give us more?

John Q. Doyle:

And Dan, I would add that JLT made us stronger in both regions as well. Absolutely.

Robert Cox:

Yes. Thanks, that's very helpful. And I just had a follow-up on Career. So there's been some favorable trends in Career driven by some of the changing dynamics in the labor market. How sustainable are those trends if unemployment rises a couple of points, could you still see strong growth given those underlying changes, or is that too optimistic?

Martine Ferland:

Yes. Thank you for the question, Robert. No, it's a good question. There's no doubt that coming out of the pandemic, the world of work has completely changed, and that has driven demand. But you look at all that's currently playing out, whether it's high inflation, it's labor shortage, it's emerging new skills that we have to help clients gravitate to reorganizing the way that you work. So we have talked before about the impact that recession has had in the past on the Career Services business. There's also the Career Product business, about half and half of revenue in that space. Career Product is actually more resilient through recessions. And Career Services, given the fundamentals that we see in the market today, we currently don't see any slowdown. Clients are really needing help to navigate all of the changes. We're not immune to a change in economic pace, but we rebound quickly, and we've -- we'll carry through. So, so far, so good.

Operator:

Thank you. And our next question comes from the line of Brian Meredith with UBS.

Daniel S. Glaser:

Yes. Looking at his chops over there. No, the M&A pipeline is good. We -- as we've said a few times before in the past, we cultivate relationships over long stretches of time. We're less interested in the call from a banker saying, hey, something's going to market, we're inviting 10 people. You want to participate? And so for us, pipeline development and meeting as a core executive team on a regular cadence to review the pipeline and talk to potential prospects in the future, that's just a part of how we go about the business. As you know, we favor building our business through acquisition over share repurchase, but they sort of go in tandem. When we have a lighter year in M&A, we'll have more share repurchase sort of like this year when we have a heavy year in M&A, we'd have less share repurchase because our dividend is -- comes first and is sacrosanct. So when we look at the pipeline, the pipeline is good. We have a transaction that we've mentioned to you before in BT Westpac [ph] which won't close until next year. But still when we're thinking about the utilization of our capital, we're pretty much thinking that it's kind of well, it's partly this year and its partly next year regardless of when the cash goes out the door. And as you know, we've sort of average, if you exclude JLT, we've sort of averaged about $1 billion a year on acquisitions, and that's likely to continue.

Mark McGivney:

Brian, it's just really too early to tell. There's so much that goes into that that calculation of the other net benefit credit. It's really not until we see, with Mercer's great help, of course, the outlook for expected returns and our year-end valuation that we really formulate a view on that. So I think when we were back together in January, I'll have a perspective then.

Daniel S. Glaser:

Thank you, take care. Next question please.

Michael Phillips:

Thanks, good morning. First question is still back on the theme of property cat reinsurance, guys. How much of a real risk has it been that some business just simply is not going to get placed at the beginning of the year? And then how material could that be?

John Q. Doyle:

Yes, Mike, happy to jump back in on this. Again, it's still quite early, and so I think most reinsurers and insurers are planning and trying to decide how to best deploy capital going forward. As we, Dean and Dan and I have all discussed, we expect some level of disruption. It's going to be a challenging market. But again, we're using the capabilities of our entire firm to bring solutions to the market. Data and analytics, new investors, new facilities. And in some cases, it may mean clients retaining more risk, both insurers but also our retail clients as well. And we're the global leader in managing captives on behalf of our clients, and so it's an example. Now some of our clients may be pushed by the market to do that, and some may choose just given what might be elevated pricing, may more elect themselves to retain more risk. So we're going to work with them to help all of our clients accomplish their risk management goals.

John Q. Doyle:

Well, Mike, I think what you've seen over the last several years is cat losses have exceeded modeled estimates. So the market is underpriced, insurers and reinsurers broadly have underpriced the risk over that period of time, right. You can look at an extended period of time and, of course, get different outcomes. So the market is reacting to that. So you've also had an escalation of values that's happened in many cat-exposed markets as well. And then broadly speaking, inflation, creating some challenges. So as I noted in my prepared remarks, we're heading to meaningful rate change prior to Ian in the 20%, 25% plus of range to cover inflation and against just the elevated weather-related events over the last several years. Now it's likely to, of course, be higher than that. And so in talking to reinsurers and insurers they're thinking about, again, about how to best deploy their capital going forward. They're in the business of taking these risks and will ultimately make choices about where to best deploy that capital. And what they're saying today is they want to reserve it for their best clients. On the reinsurance side, that might mean clients that they also support them in casualty and other lines as an example. And so thinking about Marsh for a second, it's an interesting market. We have a high net worth personal lines support inside of M&A, important business to us. This loss is going to be more of a small business and personal line loss, and so it won't impact our major accounts and really as much as other events have.