Q3 2021 Marsh & McLennan Companies Inc Earnings Call

Welcome to Marsh Mcclennan conference call.

Today's call is being recorded.

<unk> third quarter 2021 financial results and supplemental information were issued earlier this morning.

Are available on the company's website at Marshall Mcclinton Dotcom.

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.

Dot com 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.

Referred to refer to the schedule in today's earnings release.

I'll now turn this over to Dan Glaser, President and CEO of Marsh <unk> Mclennan.

Thank you good morning, and thank you for joining us to discuss our third quarter results reported earlier today.

Dan Glaser, President and CEO of Marsh.

Please mclennan joining.

Joining me on the call today is Mark Mcgivney, our CFO and the Ceos of our businesses John Doyle of Marsh, Peter Hearn of Guy Carpenter, Martine Ferland of Mercer and Nick's Studer of Oliver Wyman.

Also with US this morning is Sarah Dewitt.

<unk> head of Investor Relations.

Marsh Mclennan had another outstanding quarter, our third quarter results reflect strong momentum across all of our businesses.

Our continued strength represents a combination of the current environment as well as impressive day to day execution across the firm.

Although there continues to be uncertainty and volatility in the macroeconomic and geopolitical environment. We are seeing solid demand for our differentiated advice and solutions.

Even as COVID-19 continues to pose risks and many parts of the world vaccine Rollouts are having a.

This impact.

We are taking advantage of opportunities to add to our deep bench of world class talent at.

At the core of our business is a focus on our colleagues and we are dedicated to marsh mclennan being an exciting and dynamic place to work for outstanding people.

And we continue to innovate.

Positively the collective strengths of our organization to help clients address their most pressing concerns including climate diversity and inclusion the future of work cyber and digital strategies.

As we have discussed 2021 represents marsh mclennan.

158 year and success over such a long period of time requires constant innovation and investment to deliver sustained growth and profitability.

Like to discuss just a few recent examples of how we are innovating to develop new unique client solutions.

Thanks.

Studer leads our firm wide climate initiative.

We view climate is a significant opportunity and we are well positioned to help clients with this critical issue.

In October Oliver Wyman launched the climate action navigator, drawing on insights from across the company.

This product helps public.

In private sector leaders part of pass through climate Science.

<unk> emissions at the industry and regional level and quantifying the effects of multiple different carbon reduction technologies and actions. We believe these tools will give business and government leaders vital insights to achieve their long term climate.

And the goals and be a significant enabler of the transition to low carbon climate resilient investment in the corporate sector.

Mercer recently launched skills edge and innovative platform, allowing employees to determine the most important skills for their future and design talent strategy to assess.

To acquire and retain them.

<unk> edge provides quantitative insight into the demand and value of skills and supports both employees and organizations and rapidly reskilling for the future of work.

And just last week under the leadership of John Doyle, We launched our site.

<unk> risk analytics center. This brings together cyber risk data and analytics expertise across our firm and provides clients with a comprehensive assessment of their cyber threats existing and future controls and the potential economic impact.

We are one enterprise and these are.

Just a few recent examples of how we bring together and leverage knowledge and capabilities across the firm to offer comprehensive solutions to our clients and address their most pressing concerns.

We are a growth company as demonstrated by our track record.

Gross doesn't just happen it.

Cyber assistant vision alignment commitment and execution.

Since closing our acquisition of J L. T. We have grown our total consolidated revenue by 27%, our adjusted EPS by 34% and our colleague base by 22%.

Achieving and sustaining growth requires consistent reinvestment in the business, we always strive to balance delivering results in the short term while investing for the long term.

In 2021, we generated year to date adjusted EPS growth that is higher than any annual period and over three decades while.

Takes the same time investing for the future and making a significant press on hiring.

We grew our head count year to date by nearly 5000 or around 7%, mostly organic ads with an emphasis on client facing roles. We expect this influx of talent will drive growth.

While I could add to our capabilities and enhance our ability to serve clients.

Now let me provide an update on current P&C insurance market conditions. Many of the factors that drove the market to hard and over the last few years continue.

Suggesting an inflection to a soft market is unlikely in the near.

For the.

The Marsh global insurance market index showed price increases of 15% year over year consistent with the second quarter. This marks the 16th consecutive quarter of rate increases in the commercial P&C insurance marketplace.

Looking at pricing by line the Marsh.

Your turn index showed global property insurance was up 9% global financial and professional lines were up 32% driven in part by a near doubling in cyber rates and global casualty rates were up high single digits on average.

As a reminder, our index skews to large account.

Our business, however, small and middle market insurance rates continue to rise as well, although less than for large complex accounts.

Turning to reinsurance measured in moderate rate increases in global property catastrophe reinsurance witnessed in the first half of 2021 could persist.

Throughout the remainder of the year, reflecting adequate capacity offset by elevated global catastrophes concerns around real and social inflation and a continuation of large individual risk losses.

2021 marks another year of significant catastrophe losses hurricane.

In Ida generated material losses in both the southeast and northeast.

This is in addition to our record level of flood losses in Europe flooding in China, and the continuation of wildfire losses in many parts of the world.

Marsh Mclennan remains focused on helping our clients navigate.

Eight these challenging market conditions, and making a difference for them in the moments that matter.

Now, let me turn to our terrific third quarter financial performance.

We generated adjusted EPS of $1 eight.

Which is up 32% versus a year ago driven by.

<unk> top line growth and continued low levels of DNA.

Total revenue increased 16% versus a year ago and rose, 13% on an underlying basis, the second consecutive quarter of record underlying growth in over two decades.

Underlying revenue grew 13.

13% in RIS, and 12% and consulting.

Marsh grew 13% in the quarter on an underlying basis and benefited from strong new business and renewal growth.

Guy Carpenter grew 15% on an underlying basis in the quarter <unk> continuing its string of.

Excellent results.

Mercer underlying revenue grew 7% in the quarter the highest in over a decade.

Oliver Wyman grew underlying revenue, 25% the second consecutive quarter in excess of 20%.

Overall, the third quarter saw adjusted operating.

<unk> income growth of 19% and our adjusted operating margin expanded 10 basis points year over year.

Given our excellent third quarter and year to date performance, we are on track for a terrific year.

We expect to generate the best underlying revenue and adjusted EPS growth.

<unk> in over two decades, and expand margins for the 14th consecutive year.

Our entire organization is on its front foot.

Focused and alive and this is evident in our excellent results with that let me turn it over to Mark for a more detailed review of our results.

<unk>, you, Dan and good morning.

Our results were outstanding with record third quarter revenue second consecutive quarter of double digit underlying growth margin expansion and significant earnings growth.

Highlights from our third quarter performance included the second straight quarter of 13% underlying growth in RIS.

13% at March 15% at Guy Carpenter.

And the second consecutive quarter of 12% underlying growth in consulting with 7% at Mercer and 25% at Oliver Wyman.

Growth in adjusted earnings per share exceeded 30% for the second quarter in a row.

Consolidated revenue.

<unk> increased 16% in the third quarter to $4 6 billion, reflecting underlying growth of 13%.

Operating income in the quarter was $740 million, an increase of 37% adjusted.

Operating income increased 19% to $759 million and our adjusted operating margin.

The 10 basis points to 18, 5%.

GAAP EPS was $1 <unk> in the quarter and adjusted EPS increased 32% to $1 8 million.

For the first nine months of 2021 underlying revenue growth was 10% our adjusted operating income.

<unk> and 21% to $3 4 billion, our adjusted operating margin increased 120 basis points and our adjusted EPS increased 28% to $4 82.

Looking at risk and insurance services third quarter revenue was $2 7 billion up 17.

<unk> percent compared with a year ago or 13% on an underlying basis.

Operating income increased 21% to $403 million.

Adjusted operating income also increased 21% to $469 million.

And our adjusted operating margin expanded 20 basis points to 24%.

For the first nine months of the year revenue was 9 billion with underlying growth of 11%.

Adjusted operating income for the first nine months of the year increased 20% to two 5 billion with a margin of 33% up 80 basis points from the same period a year ago.

At March.

During the quarter was $2 4 billion up 17% compared with a year ago or 13% on an underlying basis.

Growth in the quarter was broad based and driven by nearly 40% new business growth and solid retention.

U S and Canada delivered another exceptional quarter with underlying revenue growth of 16%.

For the first nine months of the year Marsh's revenue was $7 3 billion with underlying growth.

Growth of 12%.

U S and Canada underlying growth was 14% and international was up 9%.

Guy Carpenter's third quarter revenue was $314 million up 15% compared with a year ago on both a GAAP and underlying basis.

Growth was broad based.

<unk> geographies and specialties.

Guy Carpenter has now achieved 7% or higher underlying growth in seven of the last nine quarters.

For the first nine months of the year Guy Carpenter generated $1 7 billion of revenue and 10% underlying growth.

In the consulting segment.

<unk> revenue in the quarter was $1 9 billion up 13% from a year ago or 12% on an underlying basis.

Operating income increased 45% to $404 million adjust.

Adjusted operating income increased 15% to $350 million.

The adjusted operating margin was 18, 9% in line.

With the margin in the third quarter of 2020.

Consulting generated revenue of $5 7 billion for the first nine months of 2021, representing underlying growth of 9%.

Adjusted operating income for the first nine months of the year increased 25% to $1 $1 billion and the adjusted.

<unk> operating margin expanded 180 basis points to 19, 6%.

<unk> revenue was $1 3 billion in the quarter up 7% on an underlying basis. The highest result in over a decade.

Career grew 13% on an underlying basis, reflecting the continuing rebound.

<unk> economy and business confidence.

Wealth increased 6% on an underlying basis, reflecting strong growth in investment management and modest growth in defined benefit.

Our assets under delegated management grew to nearly $400 billion at the end of the third quarter up 24% year over year.

And the globe benefiting from net new inflows and market gains.

Health underlying revenue growth was 4% in the quarter driven by growth outside the U S.

Oliver Wyman revenue in the quarter was $610 million, an increase of 25% on an underlying basis.

This represents the second.

<unk> active quarter of more than 20% growth as demand remained strong across most geographies and practices.

For the first nine months of the year revenue at Oliver Wyman was $1 8 billion, an increase of 21% on an underlying basis.

Adjusted corporate expense was 60 million.

In the third quarter.

Foreign exchange had a negligible impact on earnings in Q3.

Assuming exchange rates remain at current levels, we expect FX to be a modest headwind in the fourth quarter.

Our other net benefit credit was $69 million in the quarter and we expect it will remain at this level in the fourth.

Fourth quarter.

Investment income was $13 million in the quarter on a GAAP basis and $12 million on an adjusted basis and mainly reflects gains on our private equity portfolio.

Interest expense in the third quarter was $107 million compared with 128 million.

Third quarter of 2020, reflecting lower debt levels in the period.

Based on our current forecast, we expect interest expense in the fourth quarter to be similar to the amount in the third quarter.

Our adjusted effective tax rate in the third quarter was 24, 4% compared with 26, 5%.

Sent in the third quarter last year.

Our GAAP tax rate was 24, 2% in the third quarter down from 33% in the third quarter of 2020, which was impacted by some unusual items.

Through the first nine months of the year, our adjusted effective tax rate was 24, 4% compared.

And I think four 6% last year.

Based on the current environment, we continue to expect an adjusted effective tax rate between 25, and 26% for 2021, excluding discrete items.

Given our year to date performance, we are on track for an outstanding year.

With <unk>, specifically at the fourth quarter keep in mind, the comparisons become more challenging given the rebound in growth in the fourth quarter of 2020.

We also continue to build for the long term by investing in hiring.

While we are excited about the future benefits. These investments will deliver they come with upfront costs, we absorbed in.

In the short term.

That said, we have consistently demonstrated our ability to deliver exceptional results today, while investing for the future and expect we will continue to do so.

Turning to capital management, our balance sheet.

We ended the quarter with $10 7 billion of total debt.

<unk> our next scheduled debt maturities in January of 2022 with $500 million of senior notes mature.

We continue to expect to deploy at least $3 5 billion of capital in 2021 of which at least $3 billion will be deployed across dividends acquisitions and share repurchases.

The.

The level of share repurchases will depend on how the M&A pipeline develops.

Our cash position at the end of the third quarter was $1 4 billion.

Uses of cash in the quarter totaled $665 million and included $272 million for dividend 93 million for acquisitions.

<unk> has 300 million for share repurchases.

For the first nine months uses of cash totaled $2 6 billion and included $750 million for dividends and 566 million for acquisition $734 million for share repurchases and 500 million for debt repayment.

We had a remarkable third quarter positioning us well to deliver strong growth in both revenue and adjusted earnings in 2021, and with that I'm happy to turn it back demand.

Thanks, Mark and operator, we are ready to begin Q&A.

Thank you Mr Glaser and the interest.

Addressing questions from as many participants as possible, we would ask that participants limit themselves to one question and one follow up question.

To ask a question. Please press star one on your telephone to withdraw your question press the pound key.

Okay.

Our first question comes from the line of Elyse.

<unk> a band with Wells Fargo.

Hi, good morning.

My first question goes back to the hiring that you guys have done we've seen continued have continued in the third quarter.

I was hoping to get more color on the impact youre seeing to both margin and top.

Greenfield growth.

I think you alluded to some of that coming through on the expense and margin side from the hiring but I'm, hoping to get a sense of just the potential growth that could come from these hires given garden leaves as well as potential rfps on renewables coming in 2022.

Top line Thanks Elyse.

We've been at it for 150 years, so things like gardening leave adult bother us all that much.

Definitely in it for the long haul.

As we mentioned in the script, our head count growth year to date is up nearly 5000 across the firm and the highest percentage.

<unk> growth by far is in Marsh and Guy Carpenter and of course, the majority of the hiring that we've done is in client facing roles and so.

We may not be like other firms and that we generally hire to grow capability and talent.

Other than direct short term revenue.

Production, but having said that we are a people business. Our colleagues are our engine of growth and undoubtedly our increased hiring in 2021 will benefit next year and beyond sometimes it takes a bit of time to get all the hires.

<unk> fully.

Fully integrated into the firm and producing at levels of in terms of their own capacity.

At an optimal level, but were very comfortable with that and of course, there is a cost factor with that.

We're not shy to say sophisticated talent is expensive.

But it is.

And Thats why we pursue it.

And I don't want anyone to worry out there about our long term expense base by all of this hiring we know how to run the business our comp and Ben ratio. If I look at Q3 on a rolling four quarter basis, and then go.

Worth it five years and look at Q3 on a rolling four quarter basis is virtually identical so so over time, where we're building the company we're doing it through organic and we're doing it through acquisition.

Next question.

Okay. Thanks, and then.

Paul.

No no go ahead at least from the line of.

Our next question does from the line of Jimmy Mueller with JP Morgan.

Yeah. Thanks, Andrew maybe later, we go back to a lease because he did not get a chance to ask a follow up.

Hi, good.

Go back so I just had a question on pricing and if you could talk about what's going on in primary commercial as well as reinsurance and then how much pushback are you seeing from clients now that they are facing sort of price on price.

Okay.

It's have been going up for a while now.

That's a very good.

Good morning, Jimmy and it's a tough market out there why don't we start with John and then we'll go to Peter Afterwards, and will address the primary markets and reinsurance So John sure. Good morning, Jimmy as you noted the P&C market conditions remained pretty challenging for our clients prices were up about 15% on average in the quarter, which was.

Question.

The second quarter.

Property market was plus nine versus plus 12 in the second quarter is obviously quite an active cat quarter.

Flood and wind.

And wildfire related losses with secondary barrels are getting a lot of attention from.

The underwriting community and the market casualty was up about six although closer to double digits globally globally. When you exclude the work comp market in the United States, where where things remained pretty competitive.

Excess market can remain particularly challenging here in the United States.

Our community worried.

Worried about loss cost inflation, social inflation really is S. Quartz reopen for being largely closed during the pandemic the financial lines market I think on average is the most difficult market for the moment.

For our clients, although having said that public D&O pricing it is still up but it's up about 10.

10 points versus 15 points in the second quarter and that pricing that price increase that rate of increase is the lowest it's been in the last 10 quarters, so starting to see a little bit of settling in that market.

Without question the market that is most challenging at the moment is the cyber market.

Where prices were up more than 90% on average driven by material growth in ransomware claims that I'm sure you're familiar with as well as concerns about systemic events we've had.

A few events that may be modest compared to what potentially could happen, but underwriters.

We remain concerned about that.

You asked about clients.

There are certainly frustrated by it for sure and some are retaining more risk.

Been pretty active in <unk>.

<unk> do captives and premium growth in the captive that we manage as well some are also electing to.

The writers more risk.

In some cases of course, the market is forcing some of our clients to retain more risk. So.

It's client by client exposure by exposure.

As Dan said, we're aggressively working to help our clients navigate the market.

I will add that although on average.

The price the average increase was the same globally most markets.

Right moderation the United States was was really the one exception when you look at it on a global basis.

Thanks, John Peter Thank you Tien tsin.

Jimmy a lot of my comments reflect from a reinsurance perspective, what John has said on an insurance perspective.

You've got markets that are dealing with real and social inflation youre dealing with low interest rate environment and on top of that we're facing something approaching $100 billion of global catastrophe losses in 2021, So I think it's safe to say the prospect.

Of that we will implement as property reinsurance pricing at $101 22.

But you have to look at the market through various lenses because there isn't a property market has been affected by $300 billion plus losses over the last five years.

Casualty losses.

If you look to the casualty market the significant underlying rate lift has stabilized and improved significantly property <unk> casualty.

Insurance.

Contracts and so I would say the casualty market has been more stable.

As John says and the same is true in reinsurance if I would suggest to suggest there is one element of our market right. Now. It is cyber I think reinsurers are looking at cyber capacity. The same way they look at property catastrophe capacity, where they're going to allocate.

Reasserting amount of aggregate and once they hit that aggregate. That's it so I'd say as you know we don't opine on one one pricing or any significant quarter pricing. We believe the market find its own equilibrium and as a result of that we're preparing our clients based on exposure and experience, but what they might expect at one one but.

Allocate really the property market given the fact that this is now the fifth year that reinsurers have had losses.

Is going to be challenging.

Peter Jamie do you have a follow up.

Maybe I'll ask just one on expenses and obviously in the near term I'm, assuming DNA is going to stay depressed.

But as you think about your expenses longer term are there things that youre going to change.

Resulting from the pandemic, whether it's lower real estate footprint or whatever else that you think.

I'd view more of a long term benefit.

Yes.

When we look at the impact of the pandemic I think one.

But the biggest features is that most organizations will of ours size and scale, we will adapt some sort of hybrid model I think the days of 9% to five or 8% to six five days a week in the office.

Over for most.

One of these and so that will have an impact it's a longer term impact.

Because in the short term you've got your leases are established and we want some social distancing in the office and we're not sure. How this will develop over time, so we're going to be.

Deliberated and flexible and we're not.

Comfort move that quickly on it I mean, we've had.

Efforts over many years.

To become more efficient in our use of space and and we've accomplished that quite a bit and that continues but that certainly is our view. We also think that <unk> won't come back.

Quickly and may not reach the level of 2019 for quite a while.

In March more client and our view is yes, we look forward to a day, where we're going to visit clients and markets in their location.

But we will travel with more purpose will probably.

Not going through all with less people on.

Various trips.

And we'll be more deliberate about it and I think that our clients will we will have that expectation as well so that hop on a plane anytime anywhere culture, probably takes quite a long time to come back if ever and so both.

All of those things.

Have expense implications for us that will be positive for shareholders in the long term I would say the other thing is we are constantly seeking efficiency gains and we're working throughout the firm in order to.

To drive efficiency.

<unk> gain and to become better at operations.

So why don't I turn to John for a second so we can talk a little bit because.

Some of our head count growth was in <unk>.

Opex.

In the effort to drive some efficiency within the Marsh operation.

It's in its early stages, but there was a pretty significant increase in head count in that area. So John you want to talk about that a second sure Dan.

We have the largest ever organic hiring in our history. This year.

Quite excited about it Dan touched on the market facing talent that we brought in.

A bit earlier.

I will say it starts with the team we began the year with our teams to deepen as strong as it's ever been we worked really hard to.

Come together with the team at <unk>, and we worked on purpose and culture and our colleagues are highly engaged and focused.

But one of the things have been worked.

It is.

Been investing aggressively in our client service operations as well we have a broad program called the Opex short for operational excellence to improve efficiency to improve client service outcomes, but also in <unk>.

Kris the capacity of our market facing colleagues as well so a fair amount.

Looking out hiring came.

In service centers around the world and of course, it's not just talent.

Supporting that challenge with investments in technology, as we try to automate more and more of our processes.

Thanks, John next question please.

And we have a follow up question from Elyse Greenspan with Wells Fargo.

Fargo.

Hi, Thanks for taking me back on.

Welcome back Lee.

Okay.

Yes.

You guys have appointed 10% organic growth so far this year, we'll see how the Q4 shaked out so.

So it puts us within the range of double digit for the year typically.

Amount of I talk to a 3% to 5% view on obviously, we have been better. This year you have all the hiring that seems like it will be incremental to revenue next year as well so could you give us.

The initial view I know you guys typically wait till the fourth quarter, but just some initial thoughts that you could share with us when we think about the organic.

Organic growth outlook for 2022.

Sure sure I'll just start with.

The idea of the fourth quarter, the topline becomes a little bit more challenging right. Because March grew 4% in the fourth quarter of last year Carpenter grew 5% O W grew.

4% Mercer was down.

You got 3%, so so across the piece a little bit tougher, but we've got good momentum in the business and we feel good.

About this year, we also feel good about next year and the year. After I mean, we have been fundamentally improving the company over the last decade, we are.

Down stronger in our capabilities our geographic breadth.

Our ability to serve all of those areas have really dramatically improved and we believe we are in fundamental growth market in the areas of risk strategy and people I don't care what organization you are and what size of.

Strides account or a mid size account you have to address those on a strategic basis and it is incredibly relevant to the C suites of those companies and organizations to address broadly risk strategy and people.

And I think we have enduring competitive advantages as well.

The Euro we were talking before.

Nothing happens here without our colleagues I mean, the quality of our organization. The talent that we have the culture that we have the broad capabilities the global footprint.

All enduring competitive advantages.

We also continue to acquire talent in.

In the market and acquire businesses, which improve us and improve our capabilities.

In particular in middle market.

On the brokerage side so.

So there's a lot of growth opportunities.

A touch as well on expansion opportunities.

We're still weighted into upper middle market and large account, we have gotten better in the mid middle market, we're going to continue to get better we're going to continue to brought in.

AUM into the lower middle market and small commercial consumer.

Youll see us in all of those areas.

We are in the future now, it's not going to be.

From one year to the next seeing some just massive change but this is inevitable in terms of how we build out our business.

We're leveraging the combined strengths of our organization as one enterprise like never before in areas.

Areas of key societies, cyber protection gaps climate I mean, all of those areas.

<unk> to market and addressing our clients' issues with them on a broad basis not on a narrow basis and saw our opportunities for revenue growth in my view are significant.

Does that help.

I'll give you a number right now for 2022, but.

I think that having not only broken out of the three to five but actually.

Tremendously exceeded the 5% level.

I think this company can can be a real.

Both firm and then we will prove that over time, we like to do and then say rather than the opposite so I think it'll be exciting times at Marsh <unk> Mclennan.

Next question please.

Our next question comes from the line of David <unk> with.

With Evercore ISI.

Hi, Thanks, good morning.

I just had a question on the head count adds and so I'm just looking back you added 500, new head count in the fourth quarter of 2020, and then 2000 in the first half of 2021.

I'm just wondering did that have any impact on the organic growth this quarter at all or is or is that still on the comm.

Yes, it's negligible we are seeing some.

Revenue benefited from hiring that we've done at the end of last year and into this year, but most of.

It's on the comp so tends to be you get the expenses right away and you get the revenue a bit later.

Got it thanks.

And just to follow up on that last point, Dan just on it sounds like.

Really big hiring quarter this quarter 3000, new head count if I sort of take the five.

It was in that you said you've hired year to date.

Is there any rule of thumb just to think about or maybe any sort of number you can give me just how much that.

How much that weighed on the operating margins in this quarter specifically.

Yes.

<unk>.

Get into the expense that we're bearing now as a result, I think the one of the reasons that we have been.

Pressing on hiring is.

Two fold one we are growing very well on the top line and that was our anticipation.

And.

Also market opportunity and so we are in our view an employer of choice in this space and we are pressing our advantage.

At this moment in time, the hiring spurt is not going to last forever, but ultimately we saw an opportunity.

I'm not in the market dislocation.

And other factors and we really pressed on that.

On that level.

At the end of our expenses are relatively high.

Yeah.

Compared to historical type of expense growth for us.

Our expense growth is essentially driven.

By sales competencies by compensation and benefit.

But at its very hard sales compensation due to much higher levels of new business.

Variable compensation due to much higher levels of profitability.

And hiring so comp and Ben is driving most of our sales most of our expense growth in the quarter and will ease itself out, but it's matching well with current levels of revenue growth. So we feel that this was.

Tremendously opportune time to builds.

<unk> utilities with within the firm on an organic basis.

Got it great makes sense. Thank you.

Next question please.

Our next question comes from the line of Meyer Shields with K B W.

Great. Thanks.

Quick question, we saw sort.

Kate.

A bit of a falloff in organic revenue growth in EMEA and an acceleration in Latin America.

If you could talk about what's going on in those individual markets.

Sure Meyer, John you want to take that.

Really nothing all that extraordinary that happened in either region.

To.

Obviously, you can see some some variation we did have a bit of nonrecurring.

Issues and tougher comps.

In the quarter, but but they werent material either I'm pleased with the growth in both regions.

And I expect us to continue to perform in both territories going forward.

Okay. Thanks, and then more broadly.

Obviously, the organic growth is phenomenal I'm wondering is there any element of the growth that is specific to like a post pandemic era that wouldn't recur.

Well.

It's a good question, we're going to find out over time.

Quarter.

I think the one issue.

Bear in mind is the awareness around issues is higher.

Yes.

And I say that because risk awareness is far higher I think people awareness is far higher there is whole categories.

<unk> of <unk>.

<unk> in the world for Us and others.

In areas, such as ESG, which which was not.

Which is always considered by companies and organizations, but not nearly to the extent it is today and so when you think about.

Just just what's going on in the world.

With regard to climate or DNI.

Sponsor world investing et cetera. These are all new areas of growth for us.

You think about things like climate, which was probably not even considered by US 10 years ago and we.

It's one of our major growth opportunities as a firm on a going forward basis and so so.

Say, we want to be a leader on ESG and we look at the addressable market is ESG is being enormous and right now it's kind of the developed world public companies it's going.

To be all companies everywhere and so from that standpoint, the addressable market is going to be.

Right large and we will be a significant player in it.

Great. Thank you very much.

Next question please.

Our next question comes from the line of Mike.

Zarinsky with Wolfe research.

Hey, great. Good morning, I guess, a follow up to <unk>.

<unk> question, maybe leases too. So you are talking about you've been talking a while but broadening March these capabilities.

New categories, which are exciting just curious if this kind of changes your views.

<unk> on an M&A into new areas or technologies over time or is it really just kind of what we should be thinking about kind of same sandbox M&A sandbox is hearing currently.

Okay.

Our M&A sandbox is very broad and maybe our M&A that we've actually executed on is narrow.

Narrower than what we actually look at but the sandbox is quite broad and I think you'd be surprised at some of the adjacencies in areas. We look at I mean, we.

As I was mentioning earlier the areas of risk strategy and people.

All kinds of elements to them that would enable us to to continue.

<unk> to build capabilities with acquiring firms.

<unk>.

We like firms that have recurring revenue, we like firms that are advisory based with transactions.

Doesn't mean that all of our acquisitions will fit that criteria, but that's a lot of them.

And then we also like firms, where we can see.

<unk>.

The business benefitted the financial benefit to us even if it's a bit out there we can see it and some of the things we looked at it frankly in the.

The amount of liquidity in money, that's being generated in the.

A world and available we just look at images, we casually we liked the company and its interesting but boy.

We don't have 30 years to figure out whether it worked or not and so we are a disciplined acquirer and we want to acquire things that not only build our capabilities, but also help us financially as well even.

Only on an incremental basis. So so I would say we have a very broad sandbox, but our level of execution has been relatively narrow over the last five or 10 years and that probably continues on that basis. We look at a lot of things and we execute on on things that we're really committed to.

Okay great.

I guess my follow up not to harp on it too much but.

Cause accident year results were excellent, but it sounds like you are saying that.

Some of the.

Margins were impacted by new hires.

The main points are there other items, we should be thinking about it.

Does this hiring spurred should we expect it to continue in the near term and so we should be kind of thinking about that as we project margins and then maybe I guess.

When hiring slows you have maybe easier comps.

In outer years.

Yes.

First of all I wouldn't fret about the margins.

And I guess water.

Ultimately we've said many times you have to look about margin expansion over longer stretches of time, we have improved our margins for 14 consecutive years and the results are really remarkable from from a basis point improvement.

Our margin is up 120.

Year to date and Thats on top of 120 bps in 2020, and 110 bps in 2019, so theres. Another another all of our margins and I would expect that our margins next year are going to be better than they are this year and so that's the way we.

We operate the business, but but it's an outcome no.

We don't sit around the table figuring out how we're going to drive margin. What we do is we figure out how we're going to drive underlying growth in earnings. That's the focus of the firm and the outcome was margin expansion is how we run the firm, where we think not every quarter, but certainly every year revenue growth needs to exceed.

<unk> expense growth and Thats, what we do and we've done it consistently and so.

We're thrilled about where we are what I mentioned earlier is that a lot of the expense growth right now is being driven by by compensation around sales and around increased profitability and so as a as a.

A really good place to be and in our earnings growth is very strong remarkably strong and so.

<unk>.

I hope that I hope that answers. Your question next question. Please.

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

Hey.

Couple of questions here first just curious free cash flow down year over year is that simply just due to the hires that you are having right now and should we expect to see free cash flow start some good growth with earnings here, perhaps in 2022.

Thanks, Brian I'm going to hand off to Mark for that thank you Brian.

I think actually we're really happy with free cash flow year to date I think after the careful.

There's a lot that can happen to cause volatility in our quarter with a cash flow statement, even if even across the year.

But free cash flow growth for us has been a great story over a long period of time, if you go back over a decade, we've generated double digit.

Growth in free cash flow and we're up if you look year to date this year, we're up 5%.

And that's on top of 56% growth in free cash flow last year, So I think any growth.

Above a big stair step.

Last year is pretty good so I think overall our cash generation.

And this year strong and Thats whats, enabling us to deploy so much capital.

Great. That's really helpful and then second question.

Just a broad based question here inflation has been obviously, a hot topic just across the markets.

Just give us your perspective on kind of what's going on with inflation right now and particularly.

As it relates to some of the kind of commercial lines insurance market are you seeing any inflationary pressures when you're trying to handle claims for clients and stuff or not at this point.

Yes.

Why don't I take that and then I'll hand to Jon Edmar team to just say either you're seeing inflation in any way in the conversations with cloud.

And what we're hearing from markets.

I mean, historically, we've done some work and we've tended to we tend to do as a company better than inflationary periods I mean elements of our revenue base react to inflation, such as higher insured values and we've proven that we can manage our expense base.

So sometimes the revenue runs a little bit because of inflation and we're still managing our expense base. So when we look back to inflationary periods over the last 25 years, we've tended to outperform and do pretty well in.

Overall.

Ill.

Since you mentioned on the economic environment, not just inflation I mean, theres a lot of positive features.

About the economic environment, particularly in the United States. I mean sales are up consumer spending is up business confidence is positive, but there are a lot of potential risks and inflation is probably the biggest one.

But you also have the supply chain issues that we've all been reading about the return to office that we're all going to be navigating over the coming months.

Turns around Covid area and so it is a tremendously difficult time to look forward say.

Four quarters or so and.

One of the real bead on what the economic performance is although I do note that most GDP forecast for next year and that kind of 4% and 5% range. So so not bad but starting with John what are you hearing from markets and clients around inflation and then we will go to market team.

Tim.

Certainly.

Hearing concerns on multiple levels, maybe I'll start on the just on the claims side.

For a second that Peter mentioned earlier.

The $100 billion worth of Cat losses.

Of course were.

Typically accustomed to demand surge related kind of temporary inflation, if you will around around cat losses.

Good.

It's further.

Those issues have further exacerbated by the supply chain challenges that we're seeing in end markets. So there is some level of concern there in terms of what it will mean ultimately to loss cost around cats, I mentioned earlier, the impact of social inflation around.

Liability claims.

Claims, particularly here in the United States and a couple of other jurisdictions as courts reopened after after the pandemic and we're seeing some evidence of that although a broad based evidence is really.

Two yet to show itself.

Of course, payrolls and unemployment levels are important from a demand perspective.

Around around commercial insurance and work comp in particular.

And so there is concern about wage inflation from some of our clients and the impact on growing cost there.

With that.

And in some of our team to talk maybe more about the benefit side of things, yes, no. Thanks, John and indeed.

Wage inflation and inflation in general usually we do well in these times one because our clients really need help in managing these increased costs. So how do they manage through that.

Medical inflation, which we believe is coming back now that they can occur.

Christine.

Which is.

<unk> tended to keep premiums lower during COVID-19.

Same thing on the wage inflation looking at accelerating transformation program with clients to address that.

Pyramid and the profile of their their workforce.

And in terms of.

Pension plans as well I mean, we have to watch.

On that.

As soon as there is pressure in the economy and system.

And spike up in terms of helping clients manage the asset side of their pension funds.

Type C and therefore, that's usually.

Good for the <unk> business in our.

Management solutions, and lastly from the management of our business.

Most if not all of our multi year assignments would have an automatic adjustment to inflation. So we.

We've seen that movie before some years ago.

Okay. Thank you. Thank you I appreciate it next question please.

Our next question comes from the line of Michael Phillips with Morgan Stanley.

Thanks. Good morning first question on have you seen as a higher level any impact of tax reform on M&A activity at the industry level, either changing the timing of that of.

M&A or deals paid the multiples paid any impact there at all.

Yes.

<unk> been in.

There's a lot of deals out there, but that has been pretty consistent over the last several years and whether there is some marginal impact of people trying to get ahead of whatever could happen in the U S tax.

Environment.

It would be on the edges is not driving like.

More significant level than what we've seen there's been a lot of sellers out there I think I think there's a lot of sellers out there mainly because there is a lot of capital out there and valuations are pretty strong is probably the biggest factor as to what what's driving M&A activity.

Okay. Thanks, and then just a quick follow up on the last couple of comments on inflation.

You talked a lot about a lot of questions on the hiring you've done and possible impacts on your margins there, but I guess, specifically to you guys on on wage inflation any impacts there you seem you felt and current margins where you expect.

In fact that in.

Your margins for you guys specifically.

Yes.

Handoff to Martijn, and then and then to Nick to just talk about whether they are seeing in the client base and in fact in our own firm any pressures around wage inflation, we're watching it very closely obviously.

No.

We're all reading about.

Inflation.

In general and also.

Hum.

In the dynamic between employers and employees across many industries the employees seem to be in charge right now and so I think that not only wages and benefits, but but more broadly environment.

Of of how companies operate the attractiveness of their work environment et cetera are key factors in terms of.

The ability to retain people and the ability to attract high quality people, but why don't we start with Martine and see what Youre seeing and then we'll go to Nick Yes.

<unk> from a wage inflation point of view in the market. What we're seeing is that there is more pressure at the lower end of the wage.

From where there is a lot of movement there to attract people to job.

That has been really hard hit during the pandemic and the either higher and white collar.

What we're seeing is a little bit of a musical chair I would say so theres a great resignation as kind of people who move people are looking for different careers.

And we need to help our clients manage through these these pressures and demand, but I think this element of it will be temporary and will settle itself overtime.

I mean as clients look at as I said earlier transforming focusing on the skills they need rather than jumped enrolled we see a very important trend there Dennis spoken earlier about our skills edge platform that our clients migrate to that these are all techniques that will help clients get through.

This change that we're seeing right now.

Let me hand over to Nick with a bit of a shout out for Oliver Wyman, because two quarters in a row of 20% plus organic growth not bad not bad and Im looking forward to finalizing the budget conversation with you later on today.

Nick are you seeing some wage.

If inflation are you are you hearing from clients as well.

Yes.

Thank you Michael for the question as well.

I think I agree with the way Dawn and multi unit both characterize but if overall in all businesses. It is a competitive market for talent.

We said in our.

I think we particularly see it.

And all business.

I have been a couple of times, when we had a strong growth capacity constraints.

Constrained our ability a little bit.

I'm enormously wide buy it we are finding it.

We are hiring more than we had.

Hiring extremely rapidly, but we see some of the musical chairs with small team described across all businesses too. So in short yes. There is a period of employee power and rising wages.

Thank you.

I'll call. It I think we have time for another question or two but next question. Please.

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

Hey, Thanks, Good morning, again, I just had one.

How do you think about the growth dynamics.

The talent pool.

Industry as a whole.

Consulting you do have a P&C brokerage I guess I ask because we know there is some areas of brokerage I guess, it's more on the personal line side, where there's kind of secular talent outflow.

I'm just trying to get a sense that it's a very good question, we see no Ryan it's a great question, but we see.

And the problem with our ability to attract talent in fact, when we hire 5000 people you have to understand we are interviewing 25 to 30000 interviews taking place we are very selective in how we approach talent.

Every time, where we're seeking talent we have.

See no numerous applicants since I I think at the very heart of it is the work that we do.

We're not an insurance business, where our risk business, where we're not a people business from administrative standpoint, we are a strategic people business and so from that standpoint, the purpose of the.

Utilization of making a difference for companies.

And there are moments that matter and those inflection points.

I think it's very attractive and so where we're able to compete with the best firms in the world for for high levels of talent in.

And when would you have the.

The organ into broad base that we have you can take some risks around okay. So that person is not a subject matter expert, but boy they've got a history of success in <unk>.

See how they do and so we can go a little bit broader so we see none of the constraints that some some folks in particularly in the insurance industry.

Have in terms of inflow of talent.

Thank you.

Thank you.

I'd now like to turn the call back over to Dan Glaser, President and CEO of Marsh Mclennan for any closing remarks.

Thank you Andrew and thank you everybody for joining us on the call. This morning.

In particular I want to thank all our 81000 colleagues for their commitment hard work and dedication to Marsh Mclennan. It shows. Thank you all very much and I look forward to speaking with you next quarter.

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

Three.

Yes.

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Okay.

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Welcome to Marsh Mcclennan conference call.

Today's call is being recorded.

<unk> third quarter 2021 financial results and supplemental information were issued earlier this morning.

Are available on the company's website at Marsh Mcclennan Dot com.

Please note that remarks made today may include forward looking.

<unk>.

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.

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.

For a reconciliation of these measures to the most closely comparable GAAP measures. Please refer to the schedule in today's earnings release.

Now I'll turn this over.

Including Dan Glaser, President and CEO of Marsh <unk> Mclennan.

Thank you good morning, and thank you for joining us to discuss our third quarter results reported earlier today.

Dan Glaser, President and CEO of Marsh Mclennan.

Joining me on the call today is mark Mcgivney, our CF.

To do so.

And the Ceos of our businesses.

John Doyle of Marsh, Peter Hearn of Guy Carpenter.

Our team for long of Mercer and Nick's Studer of Oliver Wyman.

Also with US. This morning is Sarah Dewitt head of Investor Relations.

Marsh Mclennan had another.

Outstanding quarter, our third quarter results reflect strong momentum across all of our businesses.

Our continued strength represents a combination of the current environment as well as impressive day to day execution across the firm.

Although there continues to be uncertainty and volatility in the.

Second geopolitical environment, we are seeing solid demand for our differentiated advice and solutions.

Even as COVID-19 continues to pose risks and many parts of the world vaccine Rollouts are having a positive impact.

We're taking advantage of opportunities to.

Economic our deep bench of World class talent at.

At the core of our business is a focus on our colleagues and we are dedicated to marsh mclennan being an exciting and dynamic place to work for outstanding people.

And we continue to innovate and leverage the collective strengths of our organization to help clients.

To address their most pressing concerns including climate diversity and inclusion the future of work.

Cyber and digital strategies.

As we have discussed 2021 represents marsh Mclennan is 158 year and success over such a long period of.

To drive requires constant innovation and investment to deliver sustained growth and profitability.

I'd like to discuss just a few recent examples of how we are innovating to develop new unique client solutions.

Nick's Studer leads our firm wide climate initiative.

We view.

Time, it is a significant opportunity and we are well positioned to help clients with this critical issue.

In October Oliver Wyman launched the climate action navigator, drawing on insights from across the company.

This product helps public and private sector leaders part of pass through climate Science.

<unk>.

Climb missions at the industry and regional level and quantifying the effects of multiple different carbon reduction technologies and actions. We believe these tools will give business and government leaders vital insights to achieve their long term climate goals that would be a significant enabler of the transition to low.

Finding them in climate resilient investment in the corporate sector.

Mercer recently launched skills edge and innovative platform, allowing employees to determine the most important skills for their future and design of talent strategy to assess acquire and retain them skills.

Skills edge provides quantitative.

Quantitative insight into the demand and value of skills that supports both employees and organizations and rapidly reskilling for the future of work.

And just last week under the leadership of John Doyle, We launched our cyber risk analytics Center. This brings together cyber risk data.

Data and analytics expertise across our firm and provides clients with a comprehensive assessment of their cyber threats.

<unk> and future controls and the potential economic impact.

We are one enterprise and these are just a few recent examples of how we bring together and leverage knowledge.

<unk> abilities across the firm to offer comprehensive solutions to our clients and address their most pressing concerns.

We are a growth company as demonstrated by our track record.

Growth doesn't just happen it takes a consistent vision alignment commitment and execution.

And cadence closing our acquisition of J L. T. We have grown our total consolidated revenue by 27%, our adjusted EPS by 34% at our colleague base by 22%.

Achieving and sustaining growth requires consistent reinvestment in the business.

Always strive to balance delivering results in the short term, while investing for the long term.

In 2021, we generated year to date adjusted EPS growth that is higher than any annual period and over three decades, while at the same time investing for the future and making a significant press.

We are hiring.

We grew our head count year to date by nearly 5000 or around 7%, mostly organic ads with an emphasis on client facing roles. We expect this influx of talent will drive growth add to our capabilities and enhance our ability to serve clients.

Cheers.

Now let me provide an update on current P&C insurance market conditions. Many of the factors that drove the market to heart and over the last few years continue suggesting an inflection to a soft market is unlikely in the near term.

The March global insurance market index showed price increases of 15%.

On a year over year consistent with the second quarter. This marks the 16th consecutive quarter of rate increases in the commercial P&C insurance marketplace.

Looking at pricing by line. The March market Index showed global property insurance was up 9% global financial.

<unk> professional lines were up 32% driven in part by a near doubling in cyber rates and global casualty rates were up high single digits on average.

As a reminder, our index skews to large account business, however, small and middle market insurance rates continue to rise as well although.

And for less than for large complex accounts.

Turning to reinsurance measured in moderate rate increases in global property catastrophe reinsurance witness in the first half of 2021 could persist throughout the remainder of the year, reflecting adequate capacity offset by elevated.

<unk> global catastrophes concerns around real and social inflation and a continuation of large individual risk losses.

2021 marks another year of significant catastrophe losses.

Hurricane Ida generated material losses in both the southeast and northeast.

This is in addition to our record level of flood losses in Europe flooding in China, and the continuation of wildfire losses in many parts of the world.

Marsh Mclennan remains focused on helping our clients navigate these challenging market conditions, and making a difference for them in the moments that matter.

Now, let me turn to our terrific third quarter financial performance with.

We generated adjusted EPS of $1 eight.

Which is up 32% versus a year ago, driven by strong top line growth and continued low levels of TNA.

Total revenue increased 16%.

<unk> versus a year ago, and rose, 13% on an underlying basis, the second consecutive quarter of record underlying growth in over two decades.

Underlying revenue grew 13% in RIS and 12% in consulting.

<unk> grew 13% in the quarter on another.

Underlying basis and benefited from strong new business and renewal growth.

Guy Carpenter grew 15% on an underlying basis in the quarter continuing its string of excellent results.

Mercer underlying revenue grew 7% in the quarter the highest in over.

Over a decade.

Oliver Wyman grew underlying revenue, 25% the second consecutive quarter in excess of 20%.

Overall, the third quarter saw adjusted operating income growth of 19% and our adjusted operating margin expanded 10 basis points year over year.

Yeah.

Given our excellent third quarter and year to date performance, we are on track for a terrific year.

We expect to generate the best underlying revenue and adjusted EPS growth and over two decades and expand margins for the 14th consecutive year.

Our entire organization.

Year <unk> is on its front foot focused and aligned and this is evident in our excellent results with that let me turn it over to Mark for a more detailed review of our results.

Thank you Dan and good morning.

Our results were outstanding with record third quarter revenue.

Second consecutive.

Decorative quarter of double digit underlying growth margin expansion and significant earnings growth.

Highlights from our third quarter performance included the second straight quarter of 13% underlying growth in RIS with 13% at March 15% in Guy Carpenter and.

And the second consecutive quarter of 12.

Percent underlying growth in consulting with 7% at Mercer and 25% at Oliver Wyman.

Growth in adjusted earnings per share exceeded 30% for the second quarter in a row.

Consolidated revenue increased 16% in the third quarter to $4 6 billion, reflecting underlying growth of 13%.

Operating income in the quarter was $740 million, an increase of 37% adjusted.

Operating income increased 19% to $759 million and our adjusted operating margin increased 10 basis points to 18, 5%.

GAAP EPS was $1 <unk> in the quarter.

Adjusted EPS increased 32% to $1 eight.

For the first nine months of 2021 underlying revenue growth was 10%. Our adjusted operating income grew 21% to $3 4 billion. Our adjusted operating margin increased 120 basis points and our adjusted EPS.

<unk> increased 28% to $4 82.

Looking at risk and insurance services third quarter revenue was $2 7 billion up 17% compared with a year ago or 13% on an underlying basis.

Operating income increased 21% to 400.

<unk> hundred $3 million.

Adjusted operating income also increased 21% to $469 million.

And our adjusted operating margin expanded 20 basis points to 24%.

For the first nine months of the year revenue was 9 billion with underlying growth of 11%.

Adjusted.

Operating income for the first nine months of the year increased 20% to two 5 billion with a margin of 33% up 80 basis points from the same period a year ago.

At Marsh revenue in the quarter was $2 4 billion up 17% compared with a year ago or 13% on an underlying basis.

Growth in the quarter was broad based and driven by nearly 40% new business growth and solid retention.

U S and Canada delivered another exceptional quarter with underlying revenue growth of 16%.

In international underlying growth was 9% Latin America grew 12% its best growth since the.

The fourth quarter of 2015 Asia Pacific was up 9% and EMEA was up 8%.

For the first nine months of the year Marsh's revenue was $7 3 billion with underlying growth of 12%.

U S and Canada underlying growth was 14% and international was up 9%.

Guy Carpenter's third quarter revenue was $314 million up 15% compared with a year ago on both a GAAP and underlying basis.

Growth was broad based across geographies and specialties.

Guy Carpenter has now achieved 7% or higher underlying growth in seven of the last nine quarters.

The first nine months of the year Guy Carpenter generated $1 7 billion of revenue and 10% underlying growth.

In the consulting segment revenue in the quarter was $1 9 billion up 13% from a year ago or 12% on an underlying basis.

Operating income increased 45% to four.

With $4 million.

Adjusted operating income increased 15% to $350 million.

The adjusted operating margin was 18, 9% in line with the margin in the third quarter of 2020.

Consulting generated revenue of $5 7 billion for the first nine months of 2021.

400, presenting underlying growth of 9%.

Adjusted operating income for the first nine months of the year increased 25% to $1 $1 billion and the adjusted operating margin expanded 180 basis points to 19, 6%.

Mercer revenue was $1 3 billion in the quarter up seven.

<unk> percent on an underlying basis, the highest result in over a decade.

Career grew 13% on an underlying basis, reflecting the continuing rebound in the global economy and business confidence.

Wealth increased 6% on an underlying basis, reflecting strong growth in investment management and modest growth in.

We're a benefit.

Our assets under delegated management grew to nearly $400 billion at the end of the third quarter up 24% year over year benefiting from net new inflows and market gains.

Health underlying revenue growth was 4% in the quarter driven by growth outside the U S.

Oliver Wyman revenue in the quarter was $610 million, an increase of 25% on an underlying basis.

This represents the second consecutive quarter of more than 20% growth as demand remained strong across most geographies and practices.

For the first nine months of the year revenue at Oliver Wyman was $1 eight.

Define an increase of 21% on an underlying basis.

Adjusted corporate expense was $60 million in the third quarter.

Foreign exchange had a negligible impact on earnings in Q3.

Assuming exchange rates remain at current levels, we expect FX to be a modest headwind in the fourth.

Billion.

Our other net benefit credit was $69 million in the quarter and we expect it will remain at this level in the fourth quarter.

Investment income was $13 million in the quarter on a GAAP basis and $12 million on an adjusted basis and mainly reflects gains on our private equity portfolio.

Quarter, yes.

Interest expense in the third quarter was $107 million compared with $128 million in the third quarter of 2020, reflecting lower debt levels in the period.

Based on our current forecast, we expect interest expense in the fourth quarter to be similar to the amount in the third quarter.

Our adjusted effective tax rate in the third quarter was 24, 4% compared with 26, 5% in the third quarter last year.

Our GAAP tax rate was 24, 2% in the third quarter down from 33% in the third quarter of 2020, which was impacted by some unusual items.

Through the first nine months of the year, our adjusted effective tax rate was 24, 4% compared with 24, 6% last year.

Based on the current environment, we continue to expect an adjusted effective tax rate between 25, and 26% for 2021, excluding discrete items.

Given our year to date performance, we are on track for an outstanding year.

Looking specifically at the fourth quarter keep in mind that comparisons become more challenging given the rebound in growth in the fourth quarter of 2020.

We also continue to build for the long term by investing in hiring.

While we are excited.

About the future benefits these investments will deliver they come with upfront costs, we absorb in the short term.

That said, we've consistently demonstrated our ability to deliver exceptional results today, while investing for the future and expect we will continue to do so.

Turning to capital management in our balance.

Balance sheet.

We ended the quarter with $10 7 billion of total debt. Our next scheduled debt maturities in January of 2022 with $500 million of senior notes mature.

We continue to expect to deploy at least $3 5 billion of capital in 2021 of which at least $3 billion will be.

Across dividends acquisitions and share repurchases.

The ultimate level of share repurchases will depend on how the M&A pipeline develops.

Our cash position at the end of the third quarter was $1 4 billion.

Uses of cash in the quarter totaled 665.

And included $272 million for dividends and $93 million for acquisitions, and 300 million for share repurchases.

For the first nine months uses of cash totaled $2 6 billion and included $750 million for dividends and 566 million for acquisition 734.

We deployed for share repurchases and 500 million for debt repayment.

We had a remarkable third quarter positioning us well to deliver strong growth in both revenue and adjusted earnings in 2021, and with that I'm happy to turn it back to Dan.

Yes.

Thanks, Mark and operator, we are ready to begin.

Millions of M&A.

Thank you Mr Glaser and the interest of addressing questions from as many participants as possible. We would ask that participants limit themselves to one question and one follow up question.

To ask a question. Please press star one on your telephone.

To withdraw your question press the pound key.

<unk>.

Our first question comes from the line of Elyse Greenspan with Wells Fargo.

Hi, good morning.

My first question goes back to the hiring that you guys have done.

<unk> continued have continued in the third quarter.

Hoping to get more color.

The impact Youre seeing to both margin and top line growth.

I think you alluded to some of that coming through on the expense and margin side from the hiring.

But I'm, hoping to get a sense of the potential growth that could come from these hires.

Even garden leaves as well as potential rfps on renewals.

<unk> coming in 2022.

Yes. Thank you thanks Elyse.

We've been at it for 150 years, so things like gardening leave adult bother us all that much.

We're definitely in it for the long haul.

As we mentioned in the script, our head count growth year to date is up nearly five.

Our housing across the firm and the highest percentage growth by far is in Marsh and Guy Carpenter and of course, the majority of the hiring that we've done is in client facing roles and so you know.

We may not be like.

Other firms and that we generally hire to grow capability.

<unk> and talent.

Rather than direct short term revenue production, but having said that we are a people business. Our colleagues are our engine of growth and undoubtedly our increased hiring in 2021 will benefit next year and beyond sometimes it takes a bit of time to.

<unk> got all the hires.

<unk> fully integrated into the firm and producing at levels of in terms of their own capacity added at an optimal level, but were very comfortable with that and of course, there is a cost factor with that.

Not shy to say sophisticate.

<unk> talent is expensive.

But it's worth it and Thats why we pursue it.

And I don't want anyone to worry out there about our long term expense base by all of this hiring we know how to run the business our comp and Ben ratio if I look at Q3.

Again on a rolling four quarter basis, and then go back five years and look at Q3 on a rolling four quarter basis is virtually identical. So so over time, where we're building the company we're doing it through our organic and we're doing it through acquisition.

Next question.

<unk>.

And then my follow up.

Okay.

Alright go ahead at least to the lineup.

Our next question does from the line of Jimmy Mueller with JP Morgan.

Yeah. Thanks, Andrew maybe we later, we go back to a lease because he did not get a chance to ask her fault.

Hi, good morning, So I just had a question on pricing and if you could talk about what's going on in primary commercial as well as reinsurance and then how much of a pushback are you seeing from clients now that they are facing sort of right on pace.

Okay.

Right.

Follow up been going up for a while now.

That's a very good question, Jimmy and it's a tough market out there.

Why don't we start with John and then we'll go to Peter Afterwards, and will address the primary markets and reinsurance So John sure Good morning, Jimmy.

You noted the P&C market conditions remained pretty challenging for our clients.

<unk> says, we're up about 15% on average in the quarter, which was consistent with the second quarter.

Property market was plus nine.

Versus plus 12 in the second quarter.

Obviously quite an active cat quarter.

Flooded wins.

Wildfire related.

Losses secondary barrels are getting a lot of attention from the underwriting community the market casualty was up about six although.

Those are to double digits globally globally. When you exclude the work comp market in the United States, where where things remains pretty competitive.

The excess market can remain particularly.

Challenging here in the United States, the underwriting community worried about loss cost inflation, social inflation really is S. Quartz reopen for being largely closed during the pandemic the financial lines market I think on average is the most difficult market for the moment.

For our clients, although having said that.

D&O pricing it is still up but it's up about 10 points versus 15 points in the second quarter and that pricing that price increase that rate of increase is the lowest it's been in the last 10 quarters, so starting to see a little bit of settling up in that market.

Without <unk>.

Public market that is most challenging at the moment is the cyber market, where prices were up more than 90% on average driven by material growth in ransomware claims so I'm sure you're familiar with as well as concerns about systemic events we've got.

A few events that may be modest compared.

Compared to what potentially could happen, but underwriters remain concerned about that.

You asked about clients.

There are certainly frustrated by it for sure and some are retaining more risk.

Pretty active and creating new captives and there is a premium growth and the captives.

<unk> that we manage as well some are also electing to retain more risk.

In some cases of course, the market is forcing some of our clients to retain more risk. So.

It's client by client and exposure by exposure.

As Dan said, we're aggressively working to help our clients navigate the.

I will add that although on average the price with the average increase was the same globally. Most markets did see great moderation, the United States was as <unk>.

The one exception when you look at it on a global basis.

Thanks, John Peter Thank you Tien tsin.

Give me a lot of my commentary.

From a reinsurance perspective, with China set of insurance perspective.

You've got markets that are dealing with real and social inflation theyre dealing with low interest rate environment and on top of that we are facing something approaching $100 billion of.

Global catastrophe losses in 2021, so I think it's safe to say the prospect.

Of that.

That will influence property reinsurance pricing at 122.

Do you have to look at the market through various lenses because there isn't a property market has been affected by $300 billion plus losses over the last five years of catastrophe losses.

If you look to the casualty market the significant underlying rate lift.

Lyft has stabilized and improved significantly property casualty reinsurance.

Contracts and so I would say the casualty market has been more stable.

As John says and the same is true in reinsurance if I would suggest to suggest there is one element of our market right. Now it is cyber I think reinsurers are looking at cyber capacity.

<unk> the same way they look at property catastrophe capacity, where they're going to allocate a certain amount of aggregate and once they hit that aggregates. That's it. So I'd say as you know we don't opine on one one pricing or any significant quarter pricing. We believe the market finds its own equilibrium and as a result of that we're preparing our clients based.

Based on exposure and experience, but what they might expect at one one but certainly the property market given the fact that this is now the fifth year that reinsurers have had losses.

Is going to be challenging thanks.

Thanks, Peter Jamie do you have a follow up.

Maybe I'll ask just one on expenses.

Obviously in the near term I'm, assuming DNA is gonna stay depressed, but as you think about your expenses longer term are there things that youre going to change.

Resulting from the pandemic with whether it's a lower real estate footprint or whatever else that you think or what.

It'd be more of a long term benefit.

Well when we.

<unk>.

The impact of the <unk>.

Pandemic I think one of the biggest features is that most organizations will of ours size and scale, we will adapt some sort of hybrid model I think the days of 9% to five or eight to six five.

Five days a week in the office or older for most companies and so that will have an impact its a longer term impact because in the short term you've got year leases established and we want some social distancing in the office and we're not sure. How this will develop over time so.

We're going to be.

Deliberated in flexible or we're not going to move that quickly on it I mean, we've had.

Efforts over many years.

To become more efficient in our use of space.

And we've accomplished that quite a bit and that continues but that certainly is our view.

<unk>, we also think that <unk> won't come back.

Quickly and may not reach the level of 2019 for quite a while I know in March of a client and our view is yes, we look forward to a day, where we're going to visit clients and markets in their location.

Although we will travel with more purpose will probably travel with less people on.

Various trips.

And while we'll be more deliberate about it and I think that our clients will we will have that expectation as well so that hop on a plane anytime anywhere culture probably.

Well it takes quite a long time to come back if ever and so both of those things.

We have the expense implications for us that will be positive for shareholders in the long term I would say the other thing is we are constantly seeking efficiency gains and we are working throughout.

The firm in order to.

To drive efficiency gain and to become better at operations.

So I wanted to ask why don't I turn to John for a second so we can talk a little bit about some of our head count growth was in <unk>.

Opex.

Sure.

The effort to drive some efficiency within the Marsh operation.

It's early stages, but there was a pretty significant increase in head count in that area. So John you want to talk about that a second sure Dan.

We had the largest ever organic hiring in our history. This year and we're quite excited about it.

You touched on the market facing talent that we brought in.

A bit earlier.

I will say it starts with the team we began the year with our <unk>.

Our teams are deepening strides it's ever been we worked really hard to.

Come together with the team at <unk> and we were.

Worked on purpose and culture and our colleagues.

It engaged focused.

But one of the things you've been working on it.

Been investing aggressively in our client service operations as well.

Broad program called the Opex short for operational excellence to improve efficiency to improve client service outcomes, but also.

Increased.

Kris the capacity of our market facing colleagues as well so a fair amount of hiring came.

In service centers around the world and of course, it's not just talent.

Supporting that challenge with investments in technology, as we try to automate more and more of our processes.

Thanks, John next question please.

And we have a follow up question from Elyse Greenspan with Wells Fargo.

Hi, Thanks for taking me back on.

Welcome back Lee.

Yes.

As we reported 10% organic growth so far this year, we will see how the Q4 shakes out.

So quick.

But you're within the range of double digit for the year typically you guys talk to a 3% to 5% view on obviously, we've been better. This year you have all the hiring that seems like it will be incremental to revenue next year as well. So could you give us an initial view I know you guys typically wait till the fourth quarter, but you.

You had some initial thoughts that you could share with us when we think about the organic growth outlook for 2022.

Sure sure I'll just start with the.

The idea of the fourth quarter, the top line becomes a little bit more challenging right. Because March grew 4% in the fourth quarter of last year Carpenter grew 5% or <unk>.

<unk> grew.

<unk>, 4% and Mercer was down 3%, so so across the piece a little bit tougher, but we've got good momentum in the business and we feel good.

About this year, we also feel good about next year and the year. After I mean, we have been fundamentally.

Improving the company over the last decade, we are getting stronger in our capabilities, our geographic breadth our ability to serve all of those areas have really dramatically improved and we believe we are in fundamental growth market in the areas of risk strategy and people.

I don't care, what organization, you are and what size, whether you're a large account or a mid size account you have to address those on a strategic basis and it is incredibly relevant to the C suites of those companies and organizations to address broadly risk strategy and people.

I think we have endure.

<unk> competitive advantages as well.

As we were talking before.

Nothing happens here without our colleagues I mean, the quality of our organization. The talent that we have the culture that we have the broad capabilities. The global footprint are all enduring competitive advantages.

We also continue to acquire talent in the market and acquire businesses, which improve us and improve our capabilities.

<unk> in particular.

In middle market.

On the brokerage side so.

So there's a lot of growth opportunities and just touches.

As well on expansion opportunities.

We're still weighted into upper middle market and large account, we have gotten better in the mid middle market, we're going to continue to get better we're going to continue to broaden.

<unk> into the lower middle market and small commercial consumer.

Sure.

Youll see us in all of those areas in the future now it's not going to be.

From one year to the next seeing some just massive change but this is inevitable in terms of how we build out our business.

We're leveraging the combined strengths of our organization as.

Enterprise like never before in areas of healthy societies, cyber protection gaps climate all of those areas.

<unk> to market and addressing our clients' issues with them on a broad basis not on a narrow basis and saw our opportunities.

As one of the new growth in my view are significant.

I won't give you a number right now for 2022, but.

I think that having not only broken out of the three to five but actually.

Tremendously exceeded the 5% level.

For rent I think this company can can be a real growth firm.

We'll prove that over time, we like to do and then say rather than the opposite so I think it'll be exciting times at Marsh Mclennan.

Next question please.

Our next.

Question comes from the line of David <unk> with Evercore ISI.

Hi, Thanks, good morning.

I just had a question on the head count adds and so I was just looking back you added 500 of new head count in the fourth quarter of 2020, and then 2000.

In the first half of 2021 I'm, just wondering did that have any impact on the organic growth. This quarter at all or is or is that still on the come.

Yes, it's negligible we are seeing some.

Revenue benefit from hiring that we've done at the end.

Of last year and into this year, but most of it's on the come so tends to be you get the expenses right away and you get the revenue a bit later.

Got it thanks.

Just a follow up on that last point, Dan just on it sounds like.

No really big hiring quarter this quarter.

3000, new head count if I sort of take the 5000 that you said you've hired year to date.

Is there any rule of thumb just to think about or maybe any sort of number you can give me just how much that.

How much that weighed on the operating margins in this quarter.

<unk> specifically.

Yes, I'm not going to.

To get into the expense that we're bearing now as a result I think.

One of the reasons that we have been.

Pressing on hiring is.

Two fold one we are growing very well on the top line in that.

Our anticipation.

And also market opportunity.

So we are in our view an employer of choice in this space and we are pressing our advantage.

At this moment in time, the hiring spurt is not going to last forever.

But ultimately we saw an opportunity in the market through dislocation.

Other factors and we re.

Really pressed on that.

On that level.

At the end of our expenses are relatively high.

Yeah.

You compare.

Impair to historical type of expense growth for us, but our expense growth is essentially driven.

By sales competencies by compensation and benefit.

But that is very hard sales compensation due to much higher levels of new business.

Variable compensation.

Station due to much higher levels of profitability and hiring so comp and Ben is driving most of our sales.

Most of our expense growth in the quarter and will ease itself out, but it's not going well with current levels of revenue growth. So we feel that this was.

It tremendously opportune time to builds capabilities with within the firm on an organic basis.

Got it great makes sense. Thank you.

Next question please.

Our next question comes from the line of Meyer Shields with K B W.

Great.

Two quick questions.

So it's sort of a.

A bit of a falloff in organic revenue growth in EMEA and an acceleration in Latin America.

And I'm, hoping you could talk about what's going on in those individual markets.

Sure Meyer John you want to take that MRO, there's really nothing all that extraordinary that happened.

Thanks.

You need the region quarter to quarter, obviously, you can see some some variation we did have a bit of nonrecurring.

<unk> and tougher comps in EMEA in the quarter, but they werent material either I'm pleased with the growth in both regions.

And I expect us to continue.

And to do more in both territories going forward.

Okay. Thanks, and then more broadly.

Obviously organic growth is phenomenal I'm wondering is there any element of the growth that is specific to like a post pandemic era that wouldn't recur.

Right.

It's a good question, we're going to find out over time.

I think the one issue.

Bear in mind is the awareness around issues is higher and and.

And I say that because risk awareness is far higher I think.

Awareness is far higher there is whole categories of opt.

Opportunity in the world for Us and others.

In areas, such as ESG, which was not.

As always considered by companies and organizations, but not new.

People really to the extent it is today and so when you think about it.

Just what's going on in the world.

With regard to climate or DNI responsible investing et cetera. These are all new areas of growth for us.

You think about things like climate, which was.

Nearly not even considered by US 10 years ago, and we think it's one of our major growth opportunities as a firm on a going forward basis and so so I would just say we want to be a leader on ESG and we look at the addressable market is ESG is being enormous and right now it's.

Probably the developed world public companies, it's going to be all companies everywhere and so from that standpoint, the addressable market is going to be quite large and we will be a significant player in it.

Great. Thank you very much.

Next question please.

Our next question comes from the line of Mike <unk> with Wolfe Research.

Hey, great. Good morning, I guess, a follow up to.

Meyer's question, and maybe our leases too so as youre talking about you've been talking a while by broadening March these capabilities.

New cat.

And which are exciting just curious at this kind of changes your views on M&A into new areas or technologies over time or is it really just kind of what we should be thinking about kind of same sandbox M&A sandbox sharing currently.

Yes.

Our M&A sandbox is very broad maybe rns.

<unk> day that we've actually executed on is narrower than what we actually look at but the sandbox is quite broad and I think you'd be surprised at some of the adjacencies in areas we look at.

Yeah.

I think as I was mentioning earlier the areas of risk strategy and people have.

<unk> all.

Our many developments to them that would enable us to to continue to build capabilities with acquiring firms.

We like firms that have recurring revenue.

We like firms that are advisory based with transactions doesn't mean that all of our acquisition.

Acquisitions will fit that criteria, but that's a lot of them and then we also like firms where we can see.

The business benefitted the financial benefit to us even if it's a bit out there we can see it and some of the things we looked at it frankly in the <unk>.

Amount.

Out of liquidity and money, that's being generated in the world and available we just look at it we can't.

We like the company and its interesting but boy.

We don't have 30 years to figure out whether it worked or not and so we are a disciplined acquirer and we want to acquire things that not only.

<unk> build our capabilities, but also help us financially as well, even if only on an incremental basis. So so I would say we have a very broad sandbox, but our level of execution has been relatively narrow over the last five or 10 years and that that probably continues on that basis. We look at a lot of things and we execute on things.

That we're really committed to.

Okay great.

I guess my follow up not to harp on it too much but.

The accident year results were excellent.

It sounds like you are saying that.

Some of the.

Margins were impacted by new higher.

<unk>.

Is that the main points are there other items, we should be thinking about and I guess.

This hiring starts should we expect it to continue in the near term and so we should be kind of thinking about that as we project.

Margins and then maybe I guess, yes it.

Hiring slows.

Maybe easier comps.

In outer years.

Yes.

First of all I wouldn't fret about the margins in the quarter.

Ultimately we've said many times you have to look about margin expansion over longer stretches of time, we have improved our margins for 14 consecutive years and the results are really remarkable from from a basis point.

Improvement.

Our margin is up 120 bps year to date and Thats on top of 120 bps in 2020, and 110 bps in 2019, so theres. Another another all of our margins and I would expect that our margins next year are going to be better than they are this year and so that's the way we.

Operate the business, but but it's an outcome.

So we don't sit around the table figuring out how we're going to drive margin. What we do is we figure out how we're going to drive underlying growth in earnings. That's the focus of the currency of the firm and the outcome was margin expansion is how we run the firm.

We think not every corner.

But certainly every year revenue growth needs to exceed expense growth and Thats, what we do when we and we've done it consistently and so we're thrilled about where we are what I mentioned earlier is that a lot of the expense growth right now is being driven by by compensation around sales.

<unk> and around increased profitability and so either as a really good place to be and in our earnings growth is very strong.

Markedly stronger and so.

I hope that I hope that answers. Your question next question. Please.

Our next question comes from the lineup.

Brian Meredith with UBS.

Hey, Thanks couple of questions here first just curious free cash flow down year over year is that simply just due to the hires that you are having right now and should we expect to see free cash flow starts some good growth with earnings here, perhaps in 2022.

Thanks, Brian I'm.

And off to a mark for that thank you Brian.

Actually we're really happy with free cash flow year to date, I think you have to be careful.

There's a lot that can happen to cause volatility in our quarter with the cash flow statement, even if even across the year.

Free cash flow growth for us has been a great story.

Im going to anchor economy, you go back over a decade, we generated double digit.

Growth in free cash flow and we're up if you look year to date this year, we're up 5%.

And that's on top of 56% growth in free cash flow last year, So I think any growth.

A big stair step.

Last year.

Is pretty good so I think overall, our cash generation this year strong and thats whats, enabling us to deploy so much capital.

Great. Thanks, that's really helpful. And then second question is more just a broad based question here inflation has been obviously, a hot topic just across the markets.

Just give us your perspective.

On kind of what's going on with inflation right now and particularly as it relates to some of the kind of commercial lines insurance market or are you seeing any inflationary pressures when you're trying to handle claims for clients and stuff or.

We're not at this point.

Yes.

Why don't I take that and then I'll hand to John and Mark team to just.

Say, either you're seeing inflation in any way in the conversations with clients.

And what we're hearing from markets.

I mean, historically, we've done some work and we've tended to we tend to do as a company better than inflationary periods, I mean elements of our revenue base react to inflation such as higher insured values.

<unk> and we've proven that we can manage our expense base and so sometimes the revenue runs a little bit because of inflation and we're still managing our expense base. So when we've looked back to inflationary periods over the last 25 years, we've tended to outperform and do pretty well.

<unk>.

Overall.

Just mentioned on the economic environment, not just inflation I mean, theres a lot of positive features.

About the economic environment, particularly in the United States I mean sales are up consumer spending is up business confidence is positive.

But there are a lot of potential risks and inflation is probably the biggest one of them, but you also have the supply chain issues that we've all been reading about the return to office that we're all going to be navigating over the coming months.

Concerns around Covid area and so it is a tremendously difficult time to look forward.

Let's say.

Four quarters, or so and get a real bead on what the economic performance is although I do note that most GDP forecast for next year and that kind of 4% and 5% range. So so not bad but starting with John.

What are you hearing from markets and clients around inflation.

Forward and then we'll go to Mark <unk>.

Tim.

Certainly hearing concerns.

<unk> levels, maybe I'll start off just on the claim side first.

For a second that Peter mentioned earlier.

$101 billion worth of Cat losses.

Of course, we are.

Typically accustomed to demand surge.

<unk> kind of temporary inflation, if you will around around cat losses, but.

It's further those.

Those issues have further exacerbated by the supply chain challenges.

We're seeing in market. So there is some level of concern there in terms of what it will mean ultimately to loss cost of around cats, I mentioned earlier the impact of social inflation.

Relation around.

Liability claims, particularly here in the United States and a couple of other jurisdictions of course reopened after after the pandemic and we're seeing some evidence of that although broad based evidence is really.

Yet two yet to show itself.

Course payrolls.

And employment levels are important from a demand perspective around around commercial insurance and work comp in particular.

And so there is concern about wage inflation from some of our clients and the impact on growing costs there.

Maybe with that.

And it's Martine to talk maybe.

The benefit side of things.

Thanks, John and indeed wage inflation and inflation in general usually we do well in these times one because our clients really need help in managing these increased costs. So how do they manage through at.

Medical inflation, which we believe is coming back now that they can occur.

Well Christine.

Which has tended to keep premiums lower.

And Covid.

The same thing on wage inflation looking at accelerating transformation program with clients to address.

Pyramid and the profile of their workforce.

And in terms of.

Pension plans as well I mean, we have to watch on that.

As soon as there is pressures in.

In the economy and system governance spike up in terms of helping clients manage the asset side of their pension funds type C and therefore thats usually.

Good for the <unk> business in our investment management solutions, and lastly from the management of our business.

Most if not all of our multi year assignments would have an automatic adjustment to inflation. So we.

We've seen that movie before some years ago.

Okay.

Thank you. Thank you I appreciate it next question please.

Our next question comes from the line of Michael Phillips with Morgan Stanley.

Thanks. Good morning first question on have you seen as a higher level any impact of tax reform on M&A activity at the industry level, either changing the timing of it.

While the M&A or deals paid the multiples paid any impact there at all.

Yes.

<unk> been in.

There's a lot of deals out there, but that has been pretty consistent over the last several years and whether there is some marginal impact of people trying to get ahead of whatever could.

And then in the U S tax.

<unk> environment.

It would be on the edges, it's not driving like.

More significant level than what we've seen there's been a lot of sellers out there I think I think there's a lot of sellers out there.

Mainly because theres a lot of capital out there and valuations.

Could have a strong is probably the biggest factor as to what what's driving M&A activity.

Okay. Thanks, and then just a quick follow up on the last couple of comments on inflation.

You talked a lot about a lot of questions on the hiring you've done and possible impacts on your margins there, but I guess specifically to you guys.

On weight on wage inflation any impacts there you seem you felt and current margins where you expect.

The impact on your margins for you guys specifically.

Yes.

Handoff to Martijn, and then and then to Nick to just talk about whether they are seeing in the client base and in fact in our own firm any pressures around wage inflation.

We're watching it very closely obviously.

<unk>.

We're all reading about.

Inflation in general and also.

In the dynamic between employers and employees across many industries the employees seem to be in charge right now and so.

That not only wages and benefits, but more broadly environment of of how companies operate the attractiveness of their work environment et cetera are key factors in terms of.

The ability to retain people and the ability to attract high.

High quality people, but why don't we start with Martijn in and see what Youre seeing and then we'll go to Nick.

From a wage inflation point of view in the market. What we're seeing is that there is more pressure at the lower end of the wage spectrum, where there is a lot of movement there to attract people to job.

That.

It has been really hard hit during the pandemic.

Either higher and white collar professional what we're seeing is a little bit of a.

Musical chair I would say so theres a great resignation does China people have moved people are looking for different careers.

And we need to help our clients manage through these.

These pressures and demand, but I think this element of it will be temporary and will settle itself overtime I mean as clients look at as I said earlier.

Forming focusing on the skills, they need rather than the jobs and roles. We see a very important trend there Dennis spoken earlier about our skills edge.

Our platform that help clients migrate to that these are all techniques that will help clients get through.

This change that we're seeing right now so.

So let me hand over to Nick with a bit of a shout out for Oliver Wyman, because two quarters in a row of 20% plus organic growth not bad not bad and I'm looking.

Going forward to finalizing the budget conversation with you later on today.

Nick are you seeing some wage inflation are you are you hearing from clients as well.

Yes.

Thank you Michael for the question as well I think I agree with the way Dawn and Martina Forest characterized.

Overall in all businesses it is a competitive market for talent.

We sit and our clients I think we particularly fit.

And all business.

There have been a couple of times, when we had a strong growth capacity constrained.

Have constrained our ability a little bit.

Im enormously wide we are finding it.

Yes, we are hiring more than we've had I think maybe ever before but certainly over the last five years.

Hiring extremely rapidly, but we see some of the musical chairs with small team described across our businesses to ensure.

In short, yes, there is.

A period of employee power and rising wages.

Thank you.

I think we have time for another question or two but next question. Please.

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

Hey, Thanks, Good morning, again, I just had.

Had one.

How do you think about the growth dynamics.

Talent pool in the industry as a whole whether it's consulting you do P&C brokerage I guess I ask because we know there is some areas of <unk>.

Brokerage I guess, it's more in the personal lines side, where there's kind of secular talent.

Outflow.

I'm just trying to get a sense that it's a very good question, we see no Ryan it's a great question, but we see no problem with our ability to attract talent in fact, when we hire 5000 people you have to understand we are interviewing 25 to 30000.

<unk> is taking place.

Talent.

Selective in how we approach talent.

Every time, we are seeking talent, we have numerous applicants since I I think at the very heart of it is the work that we do we're.

We're not an insurance business, where our risk business, we're not a people business.

Very administrative standpoint, we are a strategic people business and so from that standpoint. The purpose of the organization is making a difference for for companies.

And their moments that matter and those inflection points.

It's very attractive and so where we're able.

Well to compete with the best firms in the world for for high levels of talent in.

And when would you have the broad base that we have you can take some risks around okay. So that person is not a subject matter expert, but boy they've got a history of success.

Let's see how they do and so we.

We can go a little bit broader so we see none of the constraints that some some folks in particularly in the insurance industry have in terms of inflow of talent.

Thank you.

Thank you.

I would now like to turn the call back over to Dan Glaser, President and CEO of Marsh.

Mcclinton for any closing remarks.

Thank you Andrew and thank you everybody for joining us on the call. This morning in particular I want to thank our 81000 colleagues for their commitment hard work and dedication to Marsh Mclennan. It shows. Thank you all very much and I look forward to speaking with you next quarter.

Quarter.

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