Q4 2023 Marsh & McLennan Co Inc Earnings Call
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Welcome to Marsh Mclennan. This earnings conference call today's call is being recorded fourth quarter 2023 financial results and supplemental information were issued earlier this morning.
They are available on the company's website at Marsh Mcclennan 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 refer to our earnings release for this quarter and so 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.
Reconciliation of these measures to the most closely comparable GAAP measures. Please refer to the schedule in today's earnings release.
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Speaker Change: I'll now turn this over to John Doyle, President and CEO of Marsh Mclennan.
Speaker Change: Good morning, and thank you for joining us to discuss our fourth quarter results reported earlier today I'm, John Doyle, our president and CEO of Marsh Mclennan.
John Q. Doyle: Joining me on the call today is Mark Mcgivney, our CFO and the Ceos of our businesses Martin South of Marsh deem closer of Guy Carpenter, Martine Ferland, Mercer and Nick Studer of Oliver Wyman.
John Q. Doyle: Also with US. This morning is Sarah Dewitt head of Investor Relations.
John Q. Doyle: 2023 was an outstanding year for Marsh Mcclennan.
Total revenue grew 10% to $22 $7 billion, we generated 9% underlying revenue growth continue our best period of growth and more than two decades with each of our businesses delivering strong results adjusted.
Sarah E. DeWitt: Operating income grew 17% to $5 $6 billion is on top of 11% growth in 2022 or.
Our adjusted operating margin increased 130 basis points, marking the 16th consecutive year, we've reported margin expansion.
And adjusted EPS grew 17%.
Sarah E. DeWitt: We invested $1.6 billion in acquisitions that added to our talent capabilities and scale.
Sarah E. DeWitt: This was our largest year for acquisitions in nearly two decades aside from 2019, when we acquired J L T.
Sarah E. DeWitt: Our acquisition of Gram expanded MMA is mid Atlantic presence.
Sarah E. DeWitt: <unk> strengthened our Australia middle market business.
Sarah E. DeWitt: And our transaction with Westpac created one of Australia's most competitive super funds.
Sarah E. DeWitt: At the same time, we continued to optimize our portfolio with the sale of two administration businesses at Mercer.
Sarah E. DeWitt: <unk> closed on January one 'twenty 'twenty four.
Sarah E. DeWitt: And we delivered significant capital returned to shareholders, raising our dividend by 20% and completing $1.15 billion of share repurchases I'm proud of what our team achieved in 2023, our colleagues executed on key initiatives and generated value for clients and shareholders.
Sarah E. DeWitt: Our performance reflects execution of a well defined strategy, which includes bill.
Building, a culture that attracts and retains top talent.
Sarah E. DeWitt: Strengthening our capabilities through organic and inorganic investment.
Speaker Change: Positioning ourselves in segments and geographies with attractive growth and margin profiles.
Speaker Change: Leveraging data insights and innovation to support clients in managing uncertainty and finding new opportunities.
Speaker Change: And delivering the powered marsh mclennan as perspective to help clients thrive.
Okay.
Speaker Change: I just returned from the World Economic Forum, where geopolitical economic climate technology, and social risks, we're all very much top of mind for business and government leaders.
Speaker Change: Marsh Mclennan is uniquely positioned to help clients manage the broad range of outcomes.
Speaker Change: Theyre confronting from these issues.
Speaker Change: The launch of the unity facility with Ukraine in November is a great example.
Speaker Change: Marsh, Oliver Wyman and Guy Carpenter came together to create an innovative insurance solutions through a public private partnership.
<unk> is now providing access to affordable war risk insurance for grain shipments in the Black Sea.
Ukrainian government: Ukrainian government's ambition is for the facility to enable nearly 1000 shipments annually.
Ukrainian government: Helping to support their economy and global food security.
Oliver Wyman: Launching this facility was a proud moment for us and I can't think of a better example of our purpose our capabilities and our impact inaction.
Oliver Wyman: And so many ways Marsh mclennan is well positioned to address today's challenges and we are only just beginning to harness our combined capabilities, which are a distinct advantage. We are inspired by the possibilities and consider it a privilege to do this important work.
Oliver Wyman: Our business strategy is complemented by a balanced approach to expense and capital management.
Oliver Wyman: We focus on generating consistent strong earnings growth and have a discipline of growing revenue faster than expenses.
Our approach to capital allocation delivers results today, while investing to sustain growth in the future.
Oliver Wyman: And we are implementing new ways to operate.
Oliver Wyman: Reduced complexity and organize for impact.
The strong value propositions of our individual businesses.
Oliver Wyman: The upside from bringing our collective strength of clients.
And our restructuring actions position us well for 2024.
Oliver Wyman: Looking to the year ahead, we continue to see a complex macro environment.
Oliver Wyman: Major economies continue to face the risk of recession, but moderating inflation and the possibility of easing interest rates make a soft landing more likely.
Oliver Wyman: The geopolitical situation remains unsettled with multiple wars.
Oliver Wyman: Scalia conflict throughout the middle East and rising tension in the South China Sea.
Despite these challenges we continue to believe there are factors that are supportive of growth in our business.
Oliver Wyman: Nominal GDP expectations for 'twenty 'twenty four remain healthy for our major markets.
Oliver Wyman: While inflation has moderated it is still elevated and.
And tight labor markets and supply chain challenges persist.
Oliver Wyman: Continued low unemployment and sustained payroll growth support demand in health and benefits and exposure unit growth in workers compensation.
Oliver Wyman: The cost of risk continues to increase as insurers account for rising frequency and severity of catastrophe losses, the risks of social inflation and higher reinsurance costs.
Oliver Wyman: Health care costs, driven in part by the rising cost of prescription drugs accelerated in 2023 and are expected to remain elevated.
Oliver Wyman: And while short term interest rates could ease they remain at the highest level since the financial crisis.
Oliver Wyman: As we've stated before we have a track record of resilience and performance across economic cycles.
Oliver Wyman: Okay.
Oliver Wyman: Now, let me turn to insurance and reinsurance market conditions Pri.
Oliver Wyman: Primary insurance rates increased for the 25th consecutive quarter with the Marsh Global insurance market index up 2% overall compared to a 3% increase in the third quarter.
Oliver Wyman: Property rates increased 6% versus 7% in the third quarter.
And casualty pricing continued to be up low single digits.
Oliver Wyman: Workers' compensation decreased slightly while financial and professional liability rates were down mid single digits.
Oliver Wyman: Cyber pricing decreased modestly after several years of increases.
Oliver Wyman: In reinsurance the January one renewals reflected a market with more balanced trading conditions than a year ago.
Oliver Wyman: As we expected underwriting discipline continued but the market was more responsive to client objectives.
Oliver Wyman: Capacity was generally adequate and we saw increased demand from clients.
Oliver Wyman: And global property Cat reinsurance accounts without losses saw rates up modestly while loss impacted accounts increase between 10% and 30%.
Oliver Wyman: Casualty programs face more scrutiny this year with pressure on pro rata seeding commissions and excess of loss pricing.
Oliver Wyman: However, casualty capacity was adequate.
As always we are helping our clients navigate these dynamic market conditions.
Oliver Wyman: Now, let me briefly turn to our fourth quarter financial performance, which Mark will cover in detail we generated.
Mark: Adjusted EPS of $1, 68, which is up 14% versus a year ago.
Mark: Revenue grew 7% on an underlying basis with 8% growth in RIS and 7% in consulting.
Mark: Overall in the fourth quarter, we had adjusted operating income growth of 16% and our adjusted operating margin expanded 130 basis points year over year.
Oliver Wyman: In summary, 2023 was another outstanding year for Marsh Mcclennan.
Oliver Wyman: All of our businesses delivered generating excellent revenue and earnings growth we.
Oliver Wyman: We executed on our strategic initiatives invested in high quality acquisitions made the largest dividend increase in 25 years and made meaningful share repurchases.
Oliver Wyman: Looking forward, we are well positioned for 2024, we expect mid single digit or better underlying revenue growth margin expansion and strong adjusted EPS growth.
Mark: Our outlook assumes current macro conditions persist however, meaningful uncertainty remains in the economic backdrop could be materially different than our assumptions with that let me turn it over to Mark for a more detailed review of our results.
Mark: Thank you John and good morning.
Our strong fourth quarter results capped an excellent year.
Mark: Consolidated revenue increased 11% in the fourth quarter of $5 6 billion with underlying growth 7%.
Mark: Operating income was $1 1 billion and adjusted operating income was $1 2 billion up 16% from a year ago.
Oliver Wyman: Our adjusted operating margin increased 130 basis points to 23, 3%.
Oliver Wyman: GAAP EPS was $1 52.
Oliver Wyman: Adjusted EPS was $1 68 up 14%.
Oliver Wyman: Our full year 2023 results were outstanding.
Oliver Wyman: Operating income for the year was $5 3 billion and adjusted operating income was $5 6 billion, an increase of 17% over 2022.
Oliver Wyman: Adjusted EPS grew 17% to $7 99.
Oliver Wyman: And our adjusted operating margin expanded 130 basis points, marking our 16th consecutive year of reported margin expansion.
Oliver Wyman: 2023 was also a strong year for capital management.
Oliver Wyman: We deployed $4 billion of capital enhanced our short term liquidity.
Oliver Wyman: Raised our quarterly dividend, 20% and saw Moody's upgrade our senior unsecured debt rating to <unk> III.
Looking at risk and insurance services fourth quarter revenue increased 11% to $3 3 billion or 8% on an underlying basis.
Oliver Wyman: This result marks the 11th consecutive quarter of 8% or higher underlying growth in RIS and continues the best stretch of growth in two decades.
RIS operating income was $753 million in the fourth quarter.
Oliver Wyman: Adjusted operating income increased 15% to $791 million and our adjusted margin expanded 140 basis points to 27%.
For the full year revenue in <unk> was $14 1 billion, representing an increase of 11% on an underlying basis.
Oliver Wyman: Adjusted operating income grew 17% for the year and our adjusted operating margin in RIS increased 150 basis points to 31, 3%.
Oliver Wyman: At Marsh revenue in the quarter increased 7% to $2 9 billion or 6% on an underlying basis.
Oliver Wyman: For the full year revenue at Marsh was 11 $4 billion, reflecting underlying growth of 8%.
Oliver Wyman: In U S and Canada underlying growth was 5% for the quarter, reflecting solid renewal and new business growth. Despite continued headwinds in financial and professional lines.
Oliver Wyman: We also saw a headwind of nearly a point from lower flood claims in our MGA business.
Oliver Wyman: For the full year underlying growth in U S and Canada was strong at 7%.
Oliver Wyman: In international underlying growth was 7% in the quarter with Latin America up, 11% Asia Pacific up, 10% and EMEA up 5%.
Oliver Wyman: For the full year underlying growth in international was excellent at 9%.
Oliver Wyman: Guy Carpenter's revenue was $252 million up 9% on an underlying basis driven by growth across global specialties in most regions.
Oliver Wyman: For the year Guy Carpenter generated $2 3 billion of revenue and 10% underlying growth our strongest year since 2003.
Oliver Wyman: In the consulting segment fourth quarter revenue was $2 3 billion up 10% from a year ago or 7% on an underlying basis.
Oliver Wyman: Consulting operating income was $443 million and adjusted operating income was $480 million up 18%.
Oliver Wyman: Our adjusted operating margin expanded 130 basis points in the quarter to 21, 3%.
Oliver Wyman: For the full year consulting revenue was $8 7 billion, an increase of 7% on an underlying basis.
Oliver Wyman: Adjusted operating income for the year increased 13% to $1 7 billion and our adjusted operating margin increased 70 basis points to 24%.
Oliver Wyman: <unk> revenue was $1 4 billion in the quarter, reflecting underlying growth of 5%.
Oliver Wyman: This was <unk>, 11th straight quarter of 5% or higher underlying growth and continues the best run of growth in 15 years.
Oliver Wyman: Health grew 9% in the fourth quarter, reflecting strength in employer and government segments and momentum across all regions.
Wealth was up 4% driven by growth in investment management and DB administration.
Our assets under management were 420 billion at the end of the fourth quarter up 11% sequentially and up 22% compared to the fourth quarter of last year.
Oliver Wyman: Year over year growth was driven by our transaction with Westpac a rebound in capital markets and positive net flows.
Oliver Wyman: Career revenue increased 1%, reflecting tough comparables following a period of strong growth in the rewards space.
Oliver Wyman: For the year revenue at Mercer was $5 6 billion, an increase of 7% on an underlying basis.
Oliver Wyman: Best results since 2008.
Oliver Wyman: Oliver Wyman revenue in the fourth quarter was $856 million, an increase of 9% on an underlying basis.
Oliver Wyman: <unk> in Europe, and the Middle East.
Oliver Wyman: For the full year, Oliver Wyman revenue was $3 $1 billion, reflecting underlying growth of 8%.
Oliver Wyman: Adjusted corporate expense was $78 million in the quarter.
Oliver Wyman: Foreign exchange had very little impact on earnings in the fourth quarter and was a 7% headwind for the full year.
Oliver Wyman: Assuming exchange rates remain at current levels, we expect FX will have a negligible impact on the first quarter and full year of 2024.
Oliver Wyman: Total noteworthy items in the quarter were $90 million, the majority of which related to our restructuring actions, partly offset by a $58 million gain related to a legal settlement.
Oliver Wyman: We reported $131 million of total restructuring costs, approximately $113 million of which relates to the program. We launched in the fourth quarter of 2022.
These charges largely reflect costs related to severance lease exits and streamlining our technology environment.
Oliver Wyman: We expect total charges under this program of approximately $475 million.
And expect total savings of roughly $400 million of which approximately 230 million was realized in 2023.
Oliver Wyman: We expect to realize the bulk of the remaining savings in 2024.
Oliver Wyman: To date, we have incurred approximately $440 million of charges under this program.
Oliver Wyman: Our other net benefit credit was $59 million in the quarter and $239 million for the full year.
Oliver Wyman: For 2024, we currently expect our other net benefit credit will be up slightly.
Oliver Wyman: Cash contributions to our global defined benefit plans were $111 million in 2023, we expect a similar amount in 2024.
Oliver Wyman: Investment income was a loss of $1 million in the fourth quarter on both a GAAP and adjusted basis and we arent currently projecting any investment income in the first quarter of 2024.
Oliver Wyman: Interest expense in the fourth quarter was $151 million up from $127 million in the fourth quarter of 2022, reflecting higher levels of debt and higher interest rates.
Oliver Wyman: Based on our current forecast, we expect interest expense for the full year 2024, or approximately $625 million with $159 million in the first quarter.
Oliver Wyman: Our adjusted effective tax rate in the fourth quarter was 25, 5%.
Oliver Wyman: This compares with 22, 9% in the fourth quarter last year, which benefited from favorable discrete items.
Oliver Wyman: For the full year 2023, our adjusted effective tax rate was 24% compared with 23, 5% in 2022, both periods benefited from favorable discrete items.
When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative.
Based on the current environment, we expect an adjusted effective tax rate of between 25, five and $26 five for 2024.
Oliver Wyman: Turning to capital management, our balance sheet.
Oliver Wyman: We ended the year with total debt of $13 5 billion.
Oliver Wyman: Our next scheduled debt maturities are in the first quarter of 2020 411 billion of senior notes mature and in the second quarter when another $600 million of notes come due.
Oliver Wyman: Recall that last September we issued $1 6 billion of new debt to fund these maturities.
Oliver Wyman: Our cash position at the end of the fourth quarter was $3 4 billion uses of cash in the quarter totaled $1 1 billion and included 354 million for dividends $486 million for acquisitions and $250 million for share repurchases.
Oliver Wyman: For the year uses of cash totaled $4 billion and included $1 3 billion for dividends and $1 6 billion for acquisitions at 1.15 billion for share repurchases.
Oliver Wyman: I want to take a minute to reiterate our approach to capital management.
Oliver Wyman: We have consistently followed a balanced capital management strategy that helps us deliver solid performance in the near term while investing for sustained growth over the long term.
Oliver Wyman: We prioritize investment in our business, both through organic investments and acquisitions.
We favor attractive acquisitions over share repurchases and believe they are the better value creator for shareholders and the company over the long term.
Oliver Wyman: However, we also recognize that returning capital to shareholders generate meaningful returns for investors over time, and each year, we target raising our dividend and reducing our share count.
Oliver Wyman: Looking ahead to 2024 based on our outlook today, we expect to deploy approximately $4 5 billion of capital across dividends acquisitions and share repurchases.
The ultimate level of share repurchase will depend on how the M&A pipeline develops.
Oliver Wyman: As John noted there is significant uncertainty in the outlook for the global economy. However, we feel good about our momentum and position and despite the uncertainty there are factors that remain supportive of growth.
Oliver Wyman: For 2024, we currently expect mid single digit or better underlying revenue growth margin expansion and strong growth in adjusted EPS.
John Q. Doyle: With that I'm happy to turn it back to John.
John Q. Doyle: Thank you Mark Andrew we're ready to begin Q&A.
John Q. Doyle: Yes.
John Q. Doyle: Thank you we will now begin the question and answer session. If you have a question. Please press star one one on your Touchtone phone.
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John Q. Doyle: Once again, if you have a question. Please press star one one on your Touchtone telephone.
John Q. Doyle: And in the interest of addressing questions from as many participants as possible, we ask that participants limit themselves to one question and one follow up question.
John Q. Doyle: One moment please for our first question.
John Q. Doyle: And our first question comes from the line of Elyse Greenspan with Wells Fargo.
Hi, Thanks.
John Q. Doyle: Good morning.
Elyse Greenspan: My first question.
Earlier this week we had.
Elyse Greenspan: Another insurance broker who was ups.
Updating their reported EPS metric to back out intangibles. So that does leave you guys as the only broker appear right that doesn't back out intangibles out of your adjusted EPS figure. If you guys can you given consideration to.
Elyse Greenspan: Moving towards on what's become industry common practice.
Mark: Good morning, and lease Mark maybe you could comment on that at least we don't we don't have any current plans to change our reporting we do provide.
Mark: Amortization and other information that allows you to stack us up against.
Mark: Other companies, but.
Mark: We don't plan to change.
Mark: How we report at this point.
Okay.
Mark: Yes, My second question.
Mark: I was hoping to get more color on bolt on the U S and Canada, and EMEA, which did see growth following the quarter I know Marc alluded to one point headwind from lower flood business within the U S and Canada I wasn't sure. If there was anything else to point out in the quarter and also hoping to get similar color on anything one off.
Mark: Organic growth within EMEA as well.
Mark: Sure sure lease and I'll make a couple of comments and then ask Martin to jump in first of all Marsh had an excellent year of growth at 8% underlying revenue growth for the year on a strong finish to the year, we saw fourth quarter of 2020 to have slightly lower underlay.
Underlying growth as well, but we feel like we're very well positioned mark made a few comments about the growth in the quarter, but mark maybe you can add a little bit more color, yes. Thank you John.
And as you said, we had a very good year with 7% growth this year and thus for the course of the 5% growth was also at the same as the prior year.
Mark: MMA had an outstanding performance driven really by great.
Mark: Retention new business, our M&A pipeline is robust the U S business continued to perform well there are some headwinds in the capital markets activity and pressure on financial lines.
Mark: But our advisory business growth.
It was partially offset by Canada, which is impacted more by macro headwinds and <unk>.
Of course, we mentioned a lot of flood claims in the MGA business.
Mark: In EMEA, we had.
Mark: Had an excellent year and a 9% growth Q4 was 5% growth.
The European business within EMEA is the smallest quarter by some margin.
Mark: So it's a set of tools and slowdown in some of the projects. We had a very strong year strong quarter in the middle East steady results in the UK.
Mark: And so there was really nothing.
Remarkable strong momentum we would expect.
Mark: To be very confident going into next year.
Mark: Thanks, Martin so so at least.
Mark: Pimco pricing as Mark mentioned flood claims and the continued.
Mark: M&A environment, all factored in in the U S, but but again, we feel like we're very well positioned and demand is quite strong for us in 2024.
Mark: Operator next question.
Mark: Thank you and our next question comes from the line of Jamie Mueller with JP Morgan.
Jamie Mueller: Hey, good morning, So first just a question on.
Jamie Mueller: The reinsurance brokerage business, obviously prices this year Hasnt gone up like they did last year, but what have you seen in terms of terms and conditions and buying behavior because last year, we saw.
The primary the retained a lot of risk and attachment points went up have those come back down or are they sort of terms and structures program similar to how they were last year.
Jamie Mueller: Thanks for the question Jami Guy Carpenter, just had an excellent year, helping clients navigate what was very very choppy market in 2023.
Jamie Mueller: We certainly began 2024 with a with a more orderly market, but growth was outstanding and I feel.
Jamie Mueller: I feel terrific about how we're positioned to help clients going forward, but dean maybe you can share a little bit more insight on the market on Walmart sure. Thanks John.
Dean: Jimmy Let me give you a little bit more color on the one one renewal and reinsurance as John stated, we saw balanced reinsurance market at the January one renewal overall capacity was adequate for the completion of most programs across products and classes of business.
Dean: Capacity did increase given rebounding capital in the marketplace and improved reinsurer returns in 2023.
Jimmy Bhullar: We estimate the dedicated reinsurance capital increased double digit for the one one renewal.
Jimmy Bhullar: Turning to property Cat, which I think you're mainly referring to as John noted was more consistent trading rather than last year.
<unk>. The overall was adequate to cover most non frequency exposed layers.
Jimmy Bhullar: But as John noted reinsurers held firm on terms and conditions attachment points did not come down so reinsurers held on what they achieved in 2023, continuing to expose our client's balance sheets to attritional volatility moving forward, so that certainly didn't change.
But overall I thought it was a.
It was a positive renewal.
Jimmy Bhullar: Clients bought more capacity at the top of Cat programs you saw some of those reported in the marketplace. So clients were able to get more capacity than last year achieved their objectives as John noted.
John Q. Doyle: John talked about risk adjusted rate increases for clients with non loss impacted portfolios. They saw a range of flat to high single digit kind of rate increases the clients with cat losses were in the 10% to 30%.
John Q. Doyle: Rate increase range right. So I think that was.
John Q. Doyle: Pretty robust in both the U S and European markets.
Speaker Change: Maybe a minute on casualty as well.
Speaker Change: Prior calls we talked a lot about casualty and increased scrutiny of casualty portfolios heading into the one one renewal reinsurers have been expressing concerns about adverse loss development now for several quarters and real and social inflation. However.
John: However, I would say that at one one that pricing movement was more constrained slightly more muted than we anticipated kind of earlier in the fourth quarter that said as John as John mentioned, there was downward pressure on ceding commissions for quota share contracts in excess of loss contracts saw double digit.
John: Rate increases moving forward, but in the casualty renewal I would say overall capacity was adequate.
Jimmy Bhullar: Thanks, Dean Jimmy I would add just in both the insurance and reinsurance market.
Jimmy Bhullar: The pace of loss cost inflation and casualty is that is the great unknown at the moment, we all know, it's increasing and we all see mounting evidence of it but that's the challenge for us for all of us in the market to get to sort through at the moment.
Jimmy Bhullar: I have a follow up.
Jimmy Bhullar: Yes, just on fiduciary investment income so it had been increasing at a pretty sharp rate end declined modestly sequentially is that a function of just what's happened with interest rates or.
Jimmy Bhullar: Something to do with fiduciary balances or seasonality or something else.
Jimmy Bhullar: Sure Mark you want to yes.
Mark: Yes, Jimmy this seasonality our R. R balances tend to have a pattern of seasonality results in Q4, and Q1 tend to be seasonal lows for average balances. So it's purely a function of that.
Mark: Okay.
Jami: Thanks, Jami operator next question please.
Jami: Next question comes from the line of Michael Rimsky with BMO capital markets.
Jami: Hey, good morning back.
Jami: Back to the.
Jami: Organic growth commentary.
Jami: Especially on the brokerage side.
Jami: Loud and clear on kind of some of the pluses and minuses I didn't hear anything.
Jami: Any influence from maybe a diminishing.
Jami: Tailwind from some of the excess hires you've made.
Jami: <unk>.
In past years is that a dynamic we should be thinking about as we think about 'twenty four 'twenty five.
Jami: Yeah. Thanks, Thanks, Mike No I don't think so we continue to invest both organically and inorganically.
Jami: Maybe not at the pace of a few years ago, but that's an important metric for us that we track around how we're driving production capacity and in all of our businesses. So.
Jami: As I mentioned in my prepared remarks, we think the macro environment continues to be supportive of growth I mean, our business nominal GDP.
We will drive some growth inflation, while easing is still elevated tight labor markets. We are just talking about the cost of risk in casualty as well and.
Jami: As a result of that we think pricing in the market will maintain will remain relatively stable as it's been really throughout most of 2023. So.
Jami: We're quite optimistic about 2024, our outlook is positive.
Jami: I would also.
Jami: Say a couple of other things, we're a better business entering 2024, we've been working hard at that our mix continues to improve I talked about that a little bit about some of the divestiture activity, but also.
Jami: Inorganic investment, we made and will continue to invest organically in the business as well and demand remained strong. So so we're excited about 2024.
John: Understood and my follow up switching gears little bit to commercial <unk> in your prepared remarks, I think you made John some comments about medical or health inflation that some of the data points, we've seen our medical costs for employers should might accelerate in 'twenty four should that.
John: Have a tailwind or any influence on the on the health segment specifically thanks.
John: Sure sure.
John: Health was a terrific story for us in 2023.
John: Helping employers navigate what's a very very complex and increasing cost environment.
John: We will be very much on the top of our agenda in 2024 as well maybe Martin I'll ask you to comment a little bit about how we finished the year and what your outlook is around health for for 2024, yes, Thanks, John and thanks, Mike for the question.
John: We're very pleased with the results in house.
We have had a quarter of 9% in the year of 10 and overall.
Martin: It comes from all regions and it comes from many places of course full employment does drive.
Good results there are more people to cover and our employers.
Martin: Programs.
Martin: But we also have invested in innovative and adapted solutions.
Martin: <unk>.
Martin: And medical cost inflation is there.
Martin: What it drives for us as a leader.
Martin: Consulting around trying to help clients and their employees control costs.
Martin: Better design.
A better fit for purpose programs. So we'll see.
Martin: There's not a huge portion of our business is actually directly linked to inflation. We have a lot of fee based revenue in the business. So usually whether there is a lot of inflation or inflation that base a little bit is not a big factor in the overall results I think it's more around access to health care.
Martin: Her innovative form of health care like digital health mental health.
Martin: Good good affordability for for clients employees, that's mostly driving our business results.
Martin: Thanks Martin.
Martin: Andrew next question please.
Martin: Certainly our next question comes from the line of David <unk> with Evercore ISI.
Martin: Hi, Thanks, good morning.
David <unk>: I had a question just on Oliver Wyman and.
David <unk>: I know a few quarters ago, we spoke about.
David <unk>: The pipeline that had slowed a little bit but growth has remained pretty resilient there.
David <unk>: I'm wondering if you could just talk about some of the drivers there.
David <unk>: Within Oliver Wyman for organic and we've seen a few more a little bit more activity on the life insurance transaction side, just M&A activity is that something thats been an outside just driver to results.
David <unk>: Yeah, Thanks, David Oliver Wyman had a terrific year and as we all recall, we had a flat start to 2023, so demand continue to pick up in sales continue to pick up throughout the.
Nick Studer: The course of the year and we had a real strong finish, but Nick maybe you could share a bit more color on what drove the growth in your outlook a bit. Thank you David for the question.
Nick Studer: 12 months ago, we were coming off a pretty strong, but we knew the first quarter of this going to be tough.
Nick Studer: <unk> basketball Linda it was indeed, a pretty tough market place for many of our competitors and for the industry and we're very proud of clawing back from a slow start to the <unk>.
Nick Studer: Yeah, It was pretty wide based growth.
Nick Studer: As Mark mentioned in his prepared remarks, our middle East business.
Strongly of excellent growth in Europe.
Nick Studer: Had strong growth in <unk>.
Nick Studer: Excellent research capabilities as well as in digital and finance and risk.
Jimmy Bhullar: Some of our.
Jimmy Bhullar: Other cases, those whose grew our pizza organizational performance capability and I've mentioned, a few times that we've been building our restructuring practice is still not a big restructuring cycle that practice continues to grow very strongly.
Jimmy Bhullar: And across the industry is again broad based growth in the public sector, which is a strong practice for us, particularly in the middle East.
Jimmy Bhullar: Good growth in banking.
Jimmy Bhullar: You mentioned life insurance and consolidation, we have a strong insurance practice, we've seen a lot more activity.
Jimmy Bhullar: <unk>.
Jimmy Bhullar: Post merger integration of M&A, a cross sell sectors.
Jimmy Bhullar: Our transportation and services of our communications media and technology practices also grew strongly and I think it's off the base of.
Jimmy Bhullar: Just good hiring.
Jimmy Bhullar: Good organic growth.
Some goods inorganic growth.
Jimmy Bhullar: Made a number of acquisitions over the last few years, we announced one which we hope to complete in the next couple of months.
Jimmy Bhullar: Both great partner level horizontal M&A are helping fuel that growth as well.
Jimmy Bhullar: Business is now 50% bigger than it was three years ago that scale that breadth allows us to play in more places allows us to help our clients with that big transformative moments.
Jimmy Bhullar: Thank you, Nick and David I would add Oliver Wyman is just one of the ways in which we can show up in a very very different way in front of clients and prospects and so we have a unique collection of capabilities certainly with them in the family.
Nick Studer: We have a follow up David.
David: I do yes, thanks for that just.
David: Bigger picture question.
David: I, just sort of walk over the last decade or decade pre pandemic.
David: You know marsh as a as an enterprise has grown organically in the 3% to 5% range and we've obviously been well above that.
David: Over the last three years, including 9% here in 2023.
David: Yes, there've been a number of tailwind, but you guys have also been investing in the business. So I'm wondering if you think we can sustainably grow above that 3% to 5%.
Nick Studer: Organic growth we saw in the decade pre pandemic as we think about the next several years.
Nick Studer: Yeah. Thanks, Thanks, David Yeah, as I said, just a couple of minutes ago, I think we're a better business entering 2024, and then we were in 2023 I thought were an outstanding business, leading into 2023, but we've been working hard at being a better growth business for for many years now part of that reshaping the mix of business.
David: We've talked about investing organically and Inorganically. We've spent a lot of time refining our client engagement models and.
David: And investing in sales operations and technology to support <unk>.
David: Sales so.
David: And of course in 2019, we made the biggest acquisition in our history with <unk>. So we were building up these capabilities going into 2021 of course, the pandemic hit so I knew we were ready to run coming out of the pandemic. The macro environment of course has been supportive of since the.
David: Since the pandemic and as I mentioned earlier.
David: We expect the macro to continue to be supportive in 2024. So we think we're well positioned as I mentioned earlier, we expect mid single digit revenue growth or better.
David: So we're excited and quite optimistic heading into into the year.
David: Operator next question. Please our next question comes from the line of Robert Cox with Goldman Sachs.
David: Hey, Thanks for taking my question.
Robert Cox: So just curious if you could give us some more color on any changes in the middle market operating environment in particular in <unk>.
Robert Cox: Anything you guys are thinking about in terms of competitive dynamics as some large peers enter the space in a bigger way.
Robert Cox: [laughter].
Robert Cox: I think you could ask Aon about NSP I'm happy to talk about our our middle market up offering.
Robert Cox: We.
Jamie Mueller: I believe we have the best in class Middle market U S platform and MMA.
Jamie Mueller: It has been 12 years that we've been building our hour.
Jamie Mueller: Our business here in the United States and we've been building it out methodically and very very proud of it we love competition and so I'll take car team in the market but.
Jamie Mueller: But we're excited about our prospects at MMA and candidly I think we're just getting started.
And when we began this effort 12 years ago. There were 30000 independent agents in the United States and today. There are 30000 independent agents in the United States. So there's much more in front of us.
Jamie Mueller: Do you have a follow up.
Jamie Mueller: Yes, so just for a follow up maybe going back to the health space.
Jamie Mueller: I think you guys have discussed failure largely compensated on a fee per employee basis.
Elyse Greenspan: Employment growth is much lower than the 9% organic you achieved in the quarter. So I was just wondering if you could help me understand.
Elyse Greenspan: Is this more consulting new business opportunities out there are you raising fees and.
Elyse Greenspan: And maybe is brokerage growing at a similar pace to the headline 9% organic.
Elyse Greenspan: I think all of the above but good good sales in our value proposition to clients and prospects that they appreciate very much I don't know if mortality or anything to add to that first a correction.
Elyse Greenspan: A large part of our business is actually consulting fees, it's not easy to remember as you mentioned, Robert So just to be clear about that there was a small portion of the business in the U S that is fee per participant, but that's the that's the business that we divested.
Elyse Greenspan: And NIM business, how those businesses are easily payout so the bulk of our business. Some of it is based on the commission, but as I said clients are really trying to control costs. So there's not a direct link to inflation and premium there because they will change the catchment point as my colleagues and reinsurance I'd like to talk.
Elyse Greenspan: About.
Sorry, the benefit programs et cetera, and there is a large part that is project based and to your point.
Elyse Greenspan: Our growth has been in part full employment because there is much more work to be done to cover clients.
Elyse Greenspan: To cover their employee population, but there's also a lot of change.
Elyse Greenspan: High cost of prescription drugs for example.
Elyse Greenspan: <unk> through different means technology coming into the space to help out.
Elyse Greenspan: People choose the right providers, the right programs and we're there with them, helping them design those programs communicate them to employees measure them in terms of <unk>.
Elyse Greenspan: I can see but also cost et cetera. So that's that's what's been and you know that.
Elyse Greenspan: Most states everywhere.
Elyse Greenspan: We're also seeing lots of change lots of pressure on cost so I don't see us being not busy anytime soon.
Martin: Thank you Martin.
Martin: Thank you Robert Andrew next question. Please.
Martin: Our next question comes from the line of Meyer Shields with K B W.
Martin: Great. Thank you.
Martin: Two quick questions first.
Martin: Can you give us a sense of the seasonality of the reinsurance acquisition that.
Martin: <unk> contributed so much to this quarter is growth.
Martin: Mark maybe you can Meyer, what youre seeing I think you're referring to the underlying growth schedule.
Martin: What looks like a large acquisition in Guy Carpenter is actually that column as acquisitions dispositions and other adjustments and we had Michael.
Martin: In my prepared remarks, I mentioned, a legal settlement that we had a noteworthy item in the quarter.
Michael: So that's what's running through that schedule it wasn't.
Michael: Our job not M&A for Guy Carpenter.
Michael: Okay, a follow up.
Jamie Mueller: Yes, a quick one.
Jamie Mueller: When you have got.
Jamie Mueller: The floods Greenfield revenues in last years I guess you.
Jamie Mueller: In Canada.
Operations with risk and insurance services does that have any impact on last year's margins or the year over year progress.
Jamie Mueller: Well, we don't report margins by by business, but you saw good margin expansion.
Jamie Mueller: During the course of the year and again, our outlook for 2024 hours for 17th year in a row to expand margins, yet again, but but so it wasn't material. We managed through it there are parts of our business that are lumpy right and Thats why we caution everybody not to get too worked up about growth rates in a particular quarter.
<unk>.
Jamie Mueller: And the flood claim activity was largely related to.
Jamie Mueller: Hurricane in.
Jamie Mueller: Related work that we did.
Jamie Mueller: At that time last year.
Jamie Mueller: Thank you Meyer.
Jamie Mueller: Andrew next question. Please and our next question comes from the line of Brian Meredith with UBS.
John: Hey, Thanks, John.
Brian Meredith: Kind of following on Rob's question, a little bit if we look at the middle market space. There are some kind of larger competitors of yours that are going through some transitions be it king acquired maybe being acquired not sure all sorts of stuff is that creating maybe another opportunity here for you to kind of ramp up talent acquisition.
Brian Meredith: Obviously, a really successful a couple of years ago doing that is that opportunity out there you think again.
Brian Meredith: Yes look Brian what I would say first and foremost about talent acquisition is that we are very very focused I mentioned this in my prepared remarks about building a culture that attracts and retains the best.
Brian Meredith: Our work are the way we frame it we talked about being at your best at Marsh Mclennan right. How can we for those that want to commit their career to risk.
Brian Meredith: Strategy and people related work how is it that being at Marsh Mcclennan you can be your best then we frame those programs around learning and development mobility various aspects of wellness.
Brian Meredith: And you get to do really purposeful work here I mentioned, the Ukraine work as an example earlier you get to work with exceptional talent.
Elyse Greenspan: And it's a collaborative environment and a learning environment and so I feel like we have the best talent in our business I feel like our brand as an employer in the market is very very strong. It doesn't mean everybody wants to work here of course, we're a big company and as we all know there's lots of things that come with working at a at a bigger company but.
Elyse Greenspan: I like how we're positioned so.
Elyse Greenspan: M&A, yes does it create opportunities for talent acquisition much like we saw a bit of talent breakage, when we acquired <unk>.
Jamie Mueller: Folks sign up for working at a certain place and when you have that kind of change.
Jamie Mueller: It's an opportunity possibly for folks to think through.
Elyse Greenspan: What they want to do going forward I like how we're positioned in that respect and then back to your other comment yes. There are number of bigger businesses in our particularly in the in the risk space that are likely to change hands overtime.
Elyse Greenspan: Great. Thanks, and then I guess my next question could you talk a little bit about kind of the M&A environment.
Elyse Greenspan: Particularly in the risk business.
Elyse Greenspan: Multiples being paid.
Elyse Greenspan: The pipeline kind of looks like they are more competitive less competitive.
Elyse Greenspan: Yes.
Brian Meredith: Thanks, Brian we remained very active in the market.
Brian Meredith: As I said earlier last year was our biggest year of acquisitions other than 2019, when we did <unk> over a long period of time.
Brian Meredith: We're very selective we're looking for high performing businesses, well led businesses in attractive markets as I mentioned, we want.
Brian Meredith: Growth businesses with the ability to grow earnings as well the three bigger deals that I highlighted in my.
Brian: My prepared remarks, we're very excited about hone and in Australia. It gives us.
Elyse Greenspan: Really an anchor platform deeper into the middle market in what's a very important and attractive market for us Graham here in the United States. Another step forward for us it at MMA, and then BT Westpac in Australia of strengthening our wealth our wealth business. So we have a couple of deals that we announced in the later part of last year.
Brian Meredith: <unk> CIO operation a career business those those will close sometime over the next the next few months. So we're going to continue to be active.
Jamie Mueller: Much like I was talking about our brand as an employer our brand as a buyer is also quite strong right. We do what we say we're going to do.
Jamie Mueller: And so.
Jamie Mueller: And then on valuations for really attractive assets there are.
Jamie Mueller: Multiples remain high.
Jamie Mueller: And so so anyway, but we'll continue to deploy capital that way.
Jamie Mueller: Mark mentioned wed rather deploy capital on attractive inorganic inorganic investment for that matter over share buybacks, but and of course of the year you never know how things will run, but but the pipeline is quite strong at the moment.
Jamie Mueller: Thank you Brian.
Jamie Mueller: Andrew next question our next.
Andrew: Next question comes from the line of Andrew <unk> with TD Cowen.
Andrew: Hey, good morning.
Andrew: John you talked about.
John: The great unknown in terms of loss cost inflation social inflation.
John: On the flip side, we've seen a few carriers.
John: And there.
John: Results have been exceptional.
John: No.
John: I understand that you're kind of projecting out some some good pricing, but at what point.
John: Does that give and take ratio change and we kind of see some softer pricing how would that affect marsh.
John: So.
John: Look we as I've said, a couple of times on this call.
Jamie Mueller: <unk> been working very hard at becoming a better growth business. We're not an index on P&C pricing of course, we are exposed to it and just to be clear I wasn't trying to project.
Elyse Greenspan: Higher casualty prices over time, our job is to is to get the most efficient risk risk financing as we can for our clients, but what I can tell you is it is quite clear that theyre stress emerging in casualty. There is no question about it there are some casualty cats that are out there.
Elyse Greenspan: That are concerning to underwriters and buyers and we're just seeing greater frequency of mega settlements and for that matter even judgments on an individual cases core inflation of course is something that's always a factor in.
Elyse Greenspan: In the market and you see that you've seen some of that manifests itself in shorter tail lines from carriers, but.
Brian Meredith: But we're all quite concerned inside of our risk business about where casualty loss costs are headed.
Brian Meredith: Okay. Thanks for that and then my second question is just stellar growth underlying growth in Asia Pacific at 10% and Latam at 11% in risk and insurance services.
Brian Meredith: Question is what particularly you are seeing in those markets.
Brian Meredith: It is driving some of that excellent growth and then underlying that what is what is marsh doing differently from the competitors.
Jimmy Bhullar: Yeah, I mean, we're very proud of our businesses in both of those regions they've been growth leaders for us over the last several years.
Jimmy Bhullar: I would point out.
Jimmy Bhullar: One of the things that <unk> brought to us in 2019, we.
Jimmy Bhullar: We expanded our footprint in.
Jimmy Bhullar: It.
Speaker Change: Brought along a much greater distribution in both Latin America, and Asia, but Martin maybe you could talk a little bit more about about both of those regions.
Martin: As you say I mean, we're the clear market leader by some margin in Asia Pac.
Martin: There are several factors we have.
Martin: Literally market leadership in every single major geography there.
Martin: We're able to bring all of our best capabilities from around the world. So that we have great teams very specialized very strong employee benefits business, we have scale.
Martin: We're able to attract and retain talent.
Martin: In a way that's just there is real momentum there and the same can be said in Latin America slightly different economic dynamics, obviously with with Latin America.
Nick Studer: Big protection gap sort of opportunities market leadership in the areas there.
Nick Studer: And still quite an unconsolidated marketplace.
Nick Studer: We like the fact that we built our businesses organically. So the culture is strong.
Nick Studer: There's not much on the M&A pipeline in those markets.
Nick Studer: That we like we are confident that we can build our businesses organically.
Nick Studer: And the differentiation of having global service and our global capabilities.
Nick Studer: Really is really well well sought after by our clients.
Nick Studer: Thanks, Andrew and Martin for that we continue to be excited about how we're positioned in those in those markets.
Speaker Change: Andrew next question please.
Speaker Change: Our next question comes from the line of Bob <unk> with Morgan Stanley.
Speaker Change: Hi, I only have one major question.
Bob <unk>: So if this is regarding MMA. So just curious how much did M&A contribute to the overall revenue for 2023 and as we move into 2024, how should we think about the trajectory for M&A MMA is it like should we continue to expect it to further outgrow the broader business as a whole or how should we.
Bob <unk>: Think about what the competitive dynamic overall as well.
Bob <unk>: So we obviously don't separately report MMA as results, but it's a it's an important part of our our business in the United States and it continues to perform exceptionally well, we couldnt be more pleased as I mentioned earlier and as I also said I think we're just getting started right so and and.
Bob <unk>: What I would also say is that the broader marsh has learned a great deal from MMA about what it takes to win in the middle market and Martin and the team apply those lessons as we expand in the middle market all over the world and where possible even deploy inorganic investment like we did in <unk>.
Bob <unk>: In the case of hone and in Australia.
Bob <unk>: But our.
Martin: Our business at MMA also benefits from being part of March.
Elyse Greenspan: Excellent really mining marsh for for content and capability that can enable them to show up with scale and local markets in a way that really distinguishes themselves from from others. So as I mentioned earlier.
Elyse Greenspan: We've been methodically building out MMA over the course of the last 12 years.
Elyse Greenspan: Piece by piece and a plus asset by a plus asset and so we couldnt be more excited and we think there's a long road ahead of us.
Bob <unk>: Do you have a follow up Bob.
Bob <unk>: No I think I'm good thank you.
Bob <unk>: Okay. Thank you.
Andrew: Andrew next question please.
Andrew: One moment please.
Andrew: Our next question comes from the line of Michael Ward with Citi.
Michael Ward: Thanks, guys good morning.
Michael Ward: Just on the capital deployment target.
Michael Ward: I think goes up over 10% and I was just wondering if thats a function of.
Michael Ward: The cost savings program rolling off or anything else.
Michael Ward: No, but mark maybe you could just talk generally about our approach we had eight if you saw a strong year of free cash flow generation, we have <unk>.
Michael Ward: Significant financial flexibility our balance sheet is strong and so it's just really a reflection of our growth and our outlook for capital generative cash generation.
Michael Ward: Okay.
And then.
Michael Ward: Any kind of update on the progress with.
Michael Ward: <unk> the various business sales efforts together.
Michael Ward: Yes.
Michael Ward: Thanks, Mike for that question.
Mike: One of the things that I think makes us a better business as were working better together than we ever have right and we.
Jamie Mueller: Share with you, where we are on the expense side of things, but but we're showing up together in front of clients and prospects as I mentioned earlier the strength of our individual business propositions will continue to drive the growth of our business overall bump, but more and more we can show up in a very very unique way and so we may.
Jamie Mueller: Good good progress during 2023, we've certainly learned a great deal we've done some testing and we'll continue to refine that but we have a number of global growth opportunities, where we're showing up in front of clients and prospects together and what we really did was create a framework for our folks in the field as Youll recall, we appointed Mark Mcclain and leaders in each of the regions.
Mark Mcclain: And so a big part of their day is making sure that we're bringing our collective capabilities to market at a local level, where it makes sense.
Mark Mcclain: So we continue to be excited about what that will mean to future growth.
Thank you I would now like to turn the call back over to John Doyle, President and CEO of Marsh Mclennan for any closing remarks.
Thanks, Andrew and I want to thank you all for joining us on the call. This morning in closing I want to thank our colleagues for their hard work and dedication I also want to thank our clients for their continued support. Thank you all very much and we look forward to speaking with you again next quarter.
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