Q2 2024 Marsh & McLennan Co Inc Earnings Call
Welcome to Marsh & McLennan's earnings conference call. Today's call is being recorded. Second quarter 2024 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com.
Operator: Welcome to Marsh & McLennan's Earnings Conference Call. Today's call is being held because 2nd Quarter 2024 Financial Results and Supplemental Information were issued earlier this morning. They are available on the company's website at www.marshmclennan.com. Please note that remarks made today may include forward-looking statements, which are subject to risks and uncertainties. A variety of factors may cause actual results to differ materially from those contemplated by such studies.
Operator: For more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC file, Marsh & McLennan. During the call today, we may also discuss certain non-GAAP financial reconciliation of these measures to the most recent, Please refer to the schedule in today's earnings release. If you have a question, please press star 1-1 on your touchtone phone. All wish to be removed. Press Star 1-1-8. You may need to pick up the handset before pressing the number.
Speaker Change: 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.
Speaker Change: For more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K , all of which are available on the Marsh & McLennan website.
Speaker Change: During the call today, we may also discuss certain non-GAAP financial measures. For reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release.
Speaker Change: If you have a question, please press Star 1-1 on your touchtone phone. If you wish to be removed from the queue, please press Star 1-1 again.
Speaker Change: If you are using a speakerphone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star 1 1 on your touchtone phone.
Speaker Change: I'll now turn this over to John Doyle, President and CEO of Marsh & McLennan.
John Quinlan Doyle: Good morning, and thank you for joining us to discuss our second quarter results reported earlier today. I'm John Doyle, President and CEO of Marsh & McLennan.
John Quinlan Doyle: Again, if you have a question, please press star 1-1 on your touchtone. I'll now turn this over to John Doyle, President and CEO. Good morning, and thank you for joining us to discuss our second quarter results, which were reported earlier today. I'm John Doyle, President and CEO of Marsh & McLennan. On the call with me is Mark McGivney, our CFO, and the CEOs of our businesses. Martin South of Marsh, Dean Klisura of Guy Carpenter, Pat Tomlinson of Mercer, and Nick Studer of Oliver Wyman.
Speaker Change: On the call with me is Mark McGivney, our CFO , and the CEOs of our businesses.
Speaker Change: Martin South of Marsh, Dean Klisura of Guy Carpenter, Pat Tomlinson of Mercer, and Nick Studer of Oliver Wyman.
Speaker Change: Also with us this morning is Sarah DeWitt, Head of Investor Relations.
Speaker Change: Before I get into our results, I'd like to comment on the attempted assassination of former U.S. President Donald Trump this past weekend.
John Quinlan Doyle: Also with us this morning is Sarah DeWitt, Head of Investor Relations. Before I get into our results, I'd like to comment on the attempted assassination of former U.S. President Donald Trump this past weekend. We're thankful that he is safe, and our hearts go out to the victims and their loved ones. Violence has no place in our politics or our society.
Speaker Change: We're thankful that he is safe and our hearts go out to the victims and their loved ones.
Speaker Change: Violence has no place in our politics or our society. We condemn it and affirm our commitment to civil discussion, debate, and resolution.
Speaker Change: Our political process and democracy depend on all candidates having the ability to safely convey their visions for our country.
John Quinlan Doyle: We condemn it and affirm our commitment to civil discussion, debate, and resolution. Our political process and democracy depend on all candidates having the ability to safely convey their visions for our country. We believe that each of us can help shape peaceful public discourse and advocate for a culture of respect and unity. Now turning to the second quarter, Marsh & McLennan delivered strong results across its businesses and geographies. We generated 6% underlying revenue growth, on top of 11% in the second quarter of last year, reflecting strong execution in both RAS and consulting.
Speaker Change: We believe that each of us can help shape peaceful public discourse and advocate for a culture of respect and unity.
Speaker Change: Now turning to the second quarter, Marsh & McLennan delivered strong results across our businesses and geographies.
Speaker Change: We generated 6% underlying revenue growth, on top of 11% in the second quarter of last year, reflecting strong execution in both RAS and consulting.
Speaker Change: We grew Adjusted Operating Income 11% from a year ago, our Adjusted Operating Margin expanded 130 basis points, and Adjusted EPS grew 10%.
John Quinlan Doyle: We grew adjusted operating income 11% from a year ago. Our adjusted operating margin expanded 130 basis points, and adjusted EPS grew 10%. We also announced a 15% increase to our quarterly dividend to 81.5 cents and completed $300 million of share repurchases during the quarter.
Speaker Change: We also announced a 15% increase to our quarterly dividend to 81.5 cents and completed $300 million of share repurchases during the quarter.
Speaker Change: These results highlight our consistent focus on delivering in the near term, while investing for sustained growth over the long term.
Speaker Change: We're benefiting from organic investments we've made in our talent and capabilities.
John Quinlan Doyle: These results highlight our consistent focus on delivering in the near term while investing for sustained growth over the long term. We're benefiting from the organic investments we've made in our talent and capabilities. And we also continue to make high-quality acquisitions that build on the scale and breadth of our business. In the second quarter, we announced several significant transactions. Mercer announced an agreement to acquire Cardano, a long-term savings specialist in the UK and Netherlands.
Speaker Change: And we also continue to make high-quality acquisitions that build on the scale and breadth of our business.
Speaker Change: In the second quarter, we announced several significant transactions.
Speaker Change: Mercer announced an agreement to acquire Cardano, a long-term savings specialist in the UK and Netherlands.
John Quinlan Doyle: With approximately $66 billion in AUM, Cardano operates the 3rd largest UK master trust platform and serves more than 2 million customers across 27,000 employers. This transaction builds on our leading position in OCIO, enhances our DC offerings, and adds important trading capability. Oliver Wyman agreed to acquire Veritas Total Solutions, an advisor in commodity and energy markets, and Marsh & McLennan Agency completed three acquisitions in the quarter.
Speaker Change: With approximately $66 billion in AUM, Cardano operates the third-largest UK master trust platform and serves more than 2 million customers across 27,000 employers.
Speaker Change: This transaction builds on our leading position in OCIO.
Speaker Change: enhances our DC offerings and adds important trading capabilities.
Speaker Change: Oliver Wyman agreed to acquire Veritas Total Solutions, an advisor in commodity and energy markets.
Speaker Change: Marsh & McLennan Agency completed three acquisitions in the quarter.
Speaker Change: Fisher Brown Bettrell, one of the five largest bank affiliate agencies in the United States
Speaker Change: Specializing in commercial PNC insurance and employee benefits, FBB expands our presence across the Southeast.
John Quinlan Doyle: Fisher Brown Bettrell, one of the five largest bank affiliate agencies in the United States. Specializing in Commercial P&C Insurance and Employee Benefits, FBB expands our presence across the Southeast. AC Risk Management builds on our scale and commercial P&C in the Northeast, and Perkins Insurance Agencies adds to our commercial PNC business in Texas. Last week, MMA also announced the acquisition of Horton, a top 100 broker with over $100 million in revenue, operating primarily in the Midwest. And we recently announced the acquisitions of Ameristar, a commercial PNC high net worth agency based in Minnesota, and Hudson Shore, a public sector employee benefits agency in New Jersey.
Speaker Change: AC Risk Management builds on our scale and commercial P&C in the Northeast.
Speaker Change: and Perkins Insurance Agencies adds to our commercial PNC business in Texas.
Speaker Change: Last week, MMA also announced the acquisition of Horton, a top 100 broker with over $100 million in revenue, operating primarily in the Midwest.
Speaker Change: And we recently announced the acquisitions of Ameristar, a commercial PNC high net worth agency based in Minnesota, and Hudson Shore, a public sector employee benefits agency in New Jersey.
Speaker Change: These acquisitions are great examples of our ability to attract the very best insurance agencies to our company.
Speaker Change: and along with high rates of sustained underlying growth they've helped to make MMA a three and a half billion dollar annual revenue business.
John Quinlan Doyle: These acquisitions are great examples of our ability to attract the very best insurance agencies to our company. And along with high rates of sustained underlying growth, they've helped to make MMA a $3.5 billion annual revenue business. We also continue to help our clients thrive by investing in innovation. Drawing on our expertise, perspective, data, and insights, we are creating new solutions for a complex environment. For example... Marsh continues to evolve Blue Eyes.
Speaker Change: We also continue to help our clients thrive by investing in innovation.
Speaker Change: Drawing on our expertise, perspective, data, and insights, we are creating new solutions for a complex environment.
Speaker Change: For example, Marsh continues to evolve Blue Eye.
Speaker Change: A digital suite of solutions for insurance strategy decisions that uses our data and analytics to generate insights for clients.
Speaker Change: This quarter, we added Blue-Eye Risk Appetite Analytics.
John Quinlan Doyle: A digital suite of solutions for insurance strategy decisions that uses our data and analytics to generate insights for clients. This quarter, we introduced Blue-Eye Risk Appetite Analytics, to help clients define the amount and type of risk they're willing to retain. With customizable calculations, our insights help clients navigate a challenging landscape with greater confidence. Guy Carpenter launched CatStopPlus, a new solution to address the volatility of cyber risk using GC's proprietary analytics. CatStopPlus offers clients protection against cyber cat loss.
Speaker Change: to help clients define the amount and type of risk they're willing to retain.
Speaker Change: With customizable calculations, our insights help clients navigate a challenging landscape with greater confidence.
Guy Carpenter: Guy Carpenter launched CatStop Plus, a new solution to address the volatility of cyber risk using GC's proprietary analytics. CatStop Plus offers clients protection against cyber cat losses.
Speaker Change: Mercer Launch SelectRx
Speaker Change: A technology solution in the U.S. that creates competition amongst pharmacies for high-cost specialty medications.
Speaker Change: Leveraging free market health's cloud-based platform, SelectRx lowers costs for employers and delivers savings to employees by directing prescriptions to a curated network of specialty pharmacies.
John Quinlan Doyle: Mercer Launches SelectRx, a Technology Solution in the U.S. that creates competition amongst pharmacies for high-cost specialty medication. Leveraging FreeMarketHealth's cloud-based platform, SelectRx lowers costs for employers and delivers savings to employees by directing prescriptions to a curated network of specialty pharmacists And Oliver Wyman is helping our clients innovate in their own businesses with the launch of Quotient, which combines our expertise in AI implementation, deployment, and strategic advisory with our deep industry knowledge. Quotient moves clients beyond the hype surrounding AI to deliver real value and meaningful outcomes.
Speaker Change: And Oliver Wyman is helping our clients innovate in their own businesses with the launch of Quotient.
Speaker Change: which combines our expertise in AI implementation, deployment, and strategic advisory with our deep industry knowledge.
Unknown Executive: and Oliver Wyman is helping our clients innovate in their own businesses with the launch of Quotient, which combines our expertise in AI implementation, deployment and strategic advisory with our deep industry knowledge. quotient moves clients beyond the hype surrounding AI to deliver real value and meaningful outcomes. Our approach to balancing your term performance with investment in innovation to deliver significant value to our clients. It also enables us to sustain growth over the long term and drive consistent exceptional performance for shareholders. Shifting to the macro picture, we continue to see significant opportunity to help clients navigate the complexity they're facing today.
Speaker Change: Quotient moves clients beyond the hype surrounding AI to deliver real value and meaningful outcomes.
Speaker Change: Our approach to balancing near-term performance with investment and innovation delivers significant value to our clients.
Speaker Change: It also enables us to sustain growth over the long term and drive consistent, exceptional performance for shareholders.
John Quinlan Doyle: Our approach to balancing near-term performance with investment and innovation delivers significant value to our clients. It also enables us to sustain growth over the long term and drive consistent exceptional performance for shareholders. Shifting to the macro picture, we continue to see significant opportunity to help clients navigate the complexity they're facing today.
Speaker Change: Shifting to the macro picture, we continue to see significant opportunity to help clients navigate the complexity they're facing today.
Speaker Change: Beyond the shocking assassination attempt in the U.S.
Speaker Change: The geopolitical backdrop is unsettled, with ongoing wars and areas of tension across the globe. Uncertainty also remains around the frequency of extreme weather.
Unknown Executive: Beyond the shocking assassination attempt in the US, the geopolitical backdrop is unsettled with ongoing wars and areas of tension across the globe. On certainty also remains around the frequency of extreme weather, escalating cyber attacks, and key variables in the economic outlook, like the persistence of inflation and the timing of changes to central bank policy. Despite this uncertainty, the environment remains supportive of growth in our business. In general, we see continued economic growth in most of our major markets. The cost of risk and health care continues to rise, and labor markets remain tight. And the consensus probability of a near-term recession for major economies continues to decrease.
Speaker Change: Escalating cyber attacks and key variables in the economic outlook like the persistence of inflation and the timing of changes to central bank policy.
John Quinlan Doyle: The geopolitical backdrop is unsettled, with ongoing wars and areas of tension across the globe. Uncertainty also remains around the frequency of extreme weather, escalating cyber attacks, and key variables in the economic outlook, like the persistence of inflation and the timing of changes to central bank policies. Despite this uncertainty, the environment remains supportive of growth in our business. In general, we see continued economic growth in most of our major markets. The cost of risk in healthcare continues to rise, Labor Markets Remain Tight, and the Consensus Probability of a Near-Term Recession for Major Economies Continues to Decrease.
Speaker Change: Despite this uncertainty, the environment remains supportive of growth in our business.
Speaker Change: In general, we see continued economic growth in most of our major markets.
Speaker Change: The cost of risk in health care continues to rise and labor markets remain tight.
Speaker Change: And the consensus probability of a near-term recession for major economies continues to decrease.
Speaker Change: We have performed well across economic cycles due to the resilience of our business,
Speaker Change: Sustained demand for our advice and solutions and consistent execution for our clients.
Unknown Executive: We have performed well across economic cycles through the resilience of our business, sustained demand for our advice and solutions, and consistent execution for our clients.
John Quinlan Doyle: We have performed well across economic cycles due to the resilience of our business, sustained demand for our advice and solutions, and consistent execution for our clients. Turning to insurance and reinsurance market conditions, the Marsh Global Insurance Market Index was flat overall in the second quarter versus a 1% increase in the first quarter.
Speaker Change: Turning to insurance and reinsurance market conditions.
Speaker Change: The Marsh Global Insurance Market Index was flat overall in the second quarter versus a 1% increase in the first quarter.
Speaker Change: Generally, rates in the US, Europe , and Latin America continued to increase in the low to mid single digits, while the UK, Asia, and Pacific saw low to mid single digit decreases.
John Quinlan Doyle: Generally, rates in the US, Europe, and Latin America continue to increase in the low to mid single digits, while the UK, Asia, and Pacific saw low to mid single digit decreases. Global property rates were flat versus up 3% in the first quarter.
Unknown Executive: Turning to insurance and reinsurance market conditions, the Marsh Global Insurance Market Index was flat overall in the second quarter versus a 1% increase in the first quarter. Generally, rates in the US, Europe, and Latin America continue to increase in the low to mid-single digits, while the UK, Asia, and Pacific saw low to mid-single digit decreases. Global property rates were flat versus up 3% in the first quarter. Casually increased in the low-single digits, with US excess casually up 10% in the quarter, while workers compensation decreased low-single digits. An actual and professional liability rates and cyber pricing were down 5% and 6%, respectively.
Speaker Change: Global property rates were flat versus up 3% in the first quarter.
Speaker Change: Casualty increased in the low single digits.
Speaker Change: With U.S. excess casualty up 10% in the quarter, while workers' compensation decreased low single digits.
Speaker Change: Financial and Professional Liability Rates and Cyberpricing were down 5% and 6% respectively.
John Quinlan Doyle: Casualty increased in the low single digits, with U.S. excess casualty up 10% in the quarter, while workers' compensation decreased by low single digits. Financial and Professional Liability Rates and Cyberpricing were down 5% and 6%, respectively.
Speaker Change: Mid-year reinsurance renewals reflected increased demand for property cap, with easing rates after significant increases in 2023.
Speaker Change: The majority of property placements were completed at renewal with adequate capacity.
Unknown Executive: Video reinsurance renewals reflected increased demand for property cap, with easing rates after significant increases in 2023. The majority of property placements were completed at renewal with adequate capacity. The global property cap reinsurance rates were generally flat to down mid-single digits, with greater decreases for upper layers on accounts without losses. The cap on market had the most active quarter on record with over 30 new bonds issued involving approximately $8 billion of limit. Casually programs face continued underwriting scrutiny, but there was adequate capacity in the market. Excessive loss programs with US exposure, so upward pricing pressure, while quotashare seeding commissions were flat to down slate.
John Quinlan Doyle: Mid-year reinsurance renewals reflected increased demand for property cap, with easing rates after significant increases in 2023. The majority of property placements were completed at renewal with adequate capacity. The Global Property Cat Reinsurance Rates were generally flat to down mid-single digits, with greater decreases for upper layers on accounts without loss.
Speaker Change: The global property CAT reinsurance rates were generally flat to down mid-single digits, with greater decreases for upper layers on accounts without losses.
Speaker Change: The cat bomb market had the most active quarter on record.
Speaker Change: With over 30 new bonds issued, involving approximately $8 billion of limits.
Speaker Change: Casualty programs faced continued underwriting scrutiny, but there was adequate capacity in the market. Excessive loss programs with U.S. exposure saw upward pricing pressure, while quota share seating commissions were flat to down slightly.
John Quinlan Doyle: The cap bond market had the most active quarter on record, with over 30 new bonds issued involving approximately $8 billion of limit. Casualty programs faced continued underwriting scrutiny, but there was adequate capacity in the market. Excessive loss programs with U.S. exposure saw upward pricing pressure while quota share seating commissions were flat to slightly down. As always, we are helping our clients navigate these dynamic market conditions. Now, let me turn to our second quarter financial performance.
Speaker Change: As always, we are helping our clients navigate these dynamic market conditions.
Speaker Change: Now, let me turn to our second quarter financial performance. We generated adjusted EPS of $2.41, which is up 10% from a year ago.
Unknown Executive: As always, we are helping our clients navigate these dynamic market conditions.
Speaker Change: On an underlying basis, revenue grew 6%.
John Quinlan Doyle: We generated adjusted EPS of $2.41, which is up 10% from a year ago. On an underlying basis, revenue grew 6%. Underlying revenue grew 7% in RIS and 4% in Consulting. Marsh was up 7%, Guy Carpenter 11%, Mercer 5%, and Oliver Wyman Group 3%.
John Quinlan Doyle: Now let me turn to our second quarter financial performance. We generated a just the DPS of $2.41, which is up 10% from a year ago. On an underlying basis, revenue grew 6%. Underlying revenue grew 7% in RIS and 4% in Consulting. Marsh was up 7%, got carbon to 11%, Mercer 5%, and Oliver Weyming grew 3%. Overall, the second quarter saw adjusted operating income growth of 11%, and our adjusted operating margin expanded 130 basis points year over year.
Speaker Change: Underlying revenue grew 7% in RAS and 4% in consulting.
Speaker Change: Marsh was up 7%, Guy Carpenter 11%, Mercer 5%, and Oliver Wyman grew 3%.
Speaker Change: Overall, the second quarter saw adjusted operating income growth of 11% and our adjusted operating margin expanded 130 basis points year over year.
John Quinlan Doyle: Overall, the second quarter saw adjusted operating income growth of 11%, and our adjusted operating margin expanded 130 basis points year over year. Turning to our outlook, we're well positioned for another great year in 2024. We continue to expect mid-single-digit or better underlying revenue growth, another year of margin expansion, and strong growth in adjusted EPS. Our outlook assumes current macro conditions persist. However, meaningful uncertainty remains, and the economic backdrop could be materially different from our assumptions.
Speaker Change: Turning to our outlook, we're well-positioned for another great year in 2024.
Speaker Change: We continue to expect mid-single-digit or better underlying revenue growth.
Speaker Change: Another year of margin expansion and strong growth in adjusted EPS.
John Doyle: Turning to our outlook, we are well positioned for another great year in 2024. We continue to expect mid-single-digit or better underlying revenue growth. Another year of margin expansion and strong growth in adjusted EPS. Our outlook assumes current macro conditions persist or remaining full uncertainty remains. And the economic backdrop could be materially different than our assumptions.
Speaker Change: Our outlook assumes current macro conditions persist, however meaningful uncertainty remains, and the economic backdrop could be materially different than our assumptions.
Speaker Change: Overall, I am proud of our second quarter performance, which demonstrates continued execution on key initiatives and momentum across our business.
Speaker Change: I am grateful to our colleagues for their focus and determination, and the value they deliver to our clients, shareholders, and communities.
Mark Christopher McGivney: Overall, I am proud of our second quarter performance, which demonstrates continued execution on key initiatives and momentum across our business. I'm grateful to our colleagues for their focus and determination and the value they deliver to our clients, shareholders, and community. With that, I will turn it over to Mark for a more detailed review of our results. Thank you, John, and good morning.
John Doyle: Overall, I am proud of our second quarter performance, which demonstrates continued execution on key initiatives and momentum across our business. I am grateful to our colleagues for their focus and determination and the value they delivered to our clients, shareholders, and communities.
Speaker Change: With that, let me turn it over to Mark for a more detailed review of our results.
Mark Christopher McGivney: Thank you, John , and good morning.
Mark Christopher McGivney: Our second quarter results were strong, with solid underlying growth, significant margin expansion, and 10% growth in adjusted EPS.
Mark Mcgivney: With that, let me turn it over to Mark for a more detailed review of our results.
Mark Christopher McGivney: Our consolidated revenue increased 6% to $6.2 billion with underlying growth of 6%.
Mark Mcgivney: Thank you John, good morning. Our second quarter results were strong. Solid underlying growth, significant margin expansion, 10% growth in adjusted EPS. Our consolidated revenue increased 6% to 6.2 billion, with underlying growth of 6%. Operating income was 1.6 billion, and adjusted operating income was 1.7 billion, up 11%. Our adjusted operating margin increased 130 basis points to 29%. Our adjusted EPS was 2.41. For the first six months of 2024, underlying revenue growth was 8%. Our adjusted operating income grew 11% to 3.7 billion. Our adjusted operating margin increased 100 basis points, and our adjusted EPS increased 12% to 5.30%.
Mark Christopher McGivney: Our second quarter results were strong, with solid underlying growth, significant margin expansion, and 10% growth in adjusted EPS. Our consolidated revenue increased 6% to $6.2 billion with underlying growth of 6%. Operating Income was $1.6 billion, and Adjusted Operating Income was $1.7 billion, up $11. Our adjusted operating margin increased 130 basis points to 29%. Gap EPS was $2.27, and adjusted EPS was $2.49.
Mark Christopher McGivney: Operating Income was $1.6 billion and Adjusted Operating Income was $1.7 billion, up 11%.
Mark Christopher McGivney: Our Adjusted Operating Margin increased 130 basis points to 29%.
Mark Christopher McGivney: Gap EPS was $2.27 and adjusted EPS was $2.41.
Mark Christopher McGivney: For the first six months of 2024, underlying revenue growth was 8%, our adjusted operating income grew 11% to $3.7 billion, our adjusted operating margin increased 100 basis points, and our adjusted EPS increased 12% to $5.30.
Mark Christopher McGivney: For the first 6 months of 2024, underlying revenue growth was 8%, our adjusted operating income grew 11% to $3.7 billion, our adjusted operating margin increased 100 basis points, and our adjusted EPS increased 12% to $5.33. Looking at risk and insurance services, second quarter revenue was $4 billion, up 8% from a year ago, or 7% on an underlying basis. This result marks the 14th consecutive quarter of 7% or higher underlying growth in RIS and continues the best stretch of growth in two decades.
Mark Christopher McGivney: Looking at risk and insurance services, second quarter revenue was $4 billion, up 8% from a year ago, or 7% on an underlying basis.
Mark Christopher McGivney: This result marks the 14th consecutive quarter of 7% or higher underlying growth in RIS, and continues the best stretch of growth in two decades.
Mark Mcgivney: Looking at risk and insurance services, second quarter revenue was 4.8% from a year ago or 7% on an underlying basis. This result marks the 14th consecutive quarter of 7% or higher underlying growth in RIS and continues the best stretch of growth in 2 decades. RIS operating income was 1.3 billion in the second quarter. Adjusted operating income was also $1.3 billion, up 12% over last year, and our adjusted operating margin expanded 110 basis points to 35.3%. For the first six months of the year, revenue in RIS was 8.3 billion with underlying growth of 8%. Adjusted operating income increased 12% to 2.9 billion, and our margin increased 90 basis points to 37.3 billion.
Mark Christopher McGivney: RIS Operating Income was $1.3 billion in the second quarter.
Mark Christopher McGivney: Adjusted operating income was also 1.3 billion, up 12% over last year, and our adjusted operating margin expanded 110 basis points to 35.3%.
Mark Christopher McGivney: RIS operating income was $1.3 billion in the second quarter. The adjusted operating income was also $1.3 billion, up 12% over last year. And our adjusted operating margin expanded 110 basis points to 35.3%. For the first six months of the year, revenue in RIS was $8.3 billion with underlying growth of 8%. Adjusted operating income increased 12% to $2.9 billion.
Mark Christopher McGivney: For the first six months of the year, revenue in RIS was $8.3 billion with underlying growth of 8%.
Mark Christopher McGivney: Adjusted operating income increased 12% to $2.9 billion.
Mark Christopher McGivney: And our margin increased 90 basis points to 37.3%.
Mark Christopher McGivney: At Marsh, revenue in the quarter was $3.3 billion, up 8% from a year ago, or 7% on an underlying basis.
Mark Christopher McGivney: And our margin increased 90 basis points to 37.3%. Marsh's revenue in the quarter was $3.3 billion, up 8% from a year ago, or 7% on an underlying basis. This strong growth came on top of 10% growth in the second quarter of last year. Growth in the second quarter reflected strong new business and solid renewal. In the US and Canada, underlying growth was 6% for the quarter, while international underlying growth was 7%.
Mark Christopher McGivney: This strong growth came on top of 10% growth in the second quarter of last year.
Mark Christopher McGivney: Growth in the second quarter reflected strong new business and solid renewals.
Mark Christopher McGivney: In the U.S. and Canada, underlying growth was 6% for the quarter. In the international, underlying growth was 7%.
Mark Christopher McGivney: EMEA was up 7%, Asia Pacific Group 7%, and Latin America was up 8%.
Mark Christopher McGivney: For the first six months of the year, Marsh's revenue was $6.3 billion with underlying growth of 7%.
Mark Christopher McGivney: EMEA was up 7%, the Asia Pacific Group was up 7%, and Latin America was up. For the first six months of the year, Marsh's revenue was $6.3 billion, with underlying growth of 7%. DiCarpenter's revenue was $632 million in the quarter, up 10% or 11% on an underlying basis.
Mark Christopher McGivney: U.S. and Canada grew 7%, and international was up 8%.
DiCarpenter: Dicarpenter's revenue was $632 million in the quarter, up 10% or 11% on an underlying basis.
DiCarpenter: This terrific result came on top of 11% growth last year and was driven by double-digit growth across most geographies and specialties.
DiCarpenter: For the first six months of the year, Guy Carpenter generated $1.8 billion of revenue and 9% underlying growth.
Speaker Change: In the consulting segment, second quarter revenue was $2.2 billion, up 2% from a year ago or 4% on an underlying basis.
Mark Christopher McGivney: This terrific result came on top of 11% growth last year and was driven by double-digit growth across most geographies and specialties. For the first six months of the year, Guy Carpenter generated $1.8 billion of revenue and 9% underlying growth. In the consulting segment, second quarter revenue was $2.2 billion, up 2% from a year ago, or 4% on an underlying basis. Consulting operating income was $410 million, and adjusted operating income was $426 million, up 6%. Our adjusted operating margin in consulting was 19.8% in the second quarter, an increase of 60 basis points.
Speaker Change: Consulting operating income was $410 million and adjusted operating income was $426 million up 6%.
Speaker Change: Our adjusted operating margin in consulting was 19.8% in the second quarter, an increase of 60 basis points.
Speaker Change: For the first six months of 2024, consulting revenue was $4.4 billion, reflecting underlying growth of 6%.
Speaker Change: Adjusted operating income increased 7% to $870 million and our margin increased 50 basis points to 20.3%.
Mark Christopher McGivney: For the first six months of 2024, consulting revenue was $4.4 billion, reflecting underlying growth of 6%. Adjusted operating income increased 7% to $870 million, and our margin increased 50 basis points to 20.3%. Mercer's revenue was $1.4 billion in the quarter, flat compared to a year ago, but up 5% on an underlying basis.
Speaker Change: Mercer's revenue was $1.4 billion in the quarter, flat compared to a year ago, but up 5% on an underlying basis.
Speaker Change: This was Mercer's 13th straight quarter of 5% or higher underlying growth and continues the best run of growth in 15 years.
Speaker Change: WealthGroove 3% driven by growth in both investment management and DB consulting.
Mark Christopher McGivney: This was Mercer's 13th straight quarter of 5% or higher underlying growth and continues the best run of growth in 15 years; wealth grew 3% driven by growth in both investment management and DB consulting. Our assets under management were $492 billion at the end of the second quarter, up 1% sequentially and up 25% compared to the second quarter of last year. Year-over-year growth was driven by our transaction with Vanguard, the impact of capital markets, and positive net flows. However, health-underlying growth remained strong at 9% and reflected growth across all regions.
Speaker Change: Our assets under management were $492 billion at the end of the second quarter, up 1% sequentially, and up 25% compared to the second quarter of last year.
Speaker Change: Year-over-year growth was driven by our transaction with Vanguard, impact of capital markets, and positive net flows.
Speaker Change: Health-underlying growth remained strong at 9% and reflected growth across all regions.
Speaker Change: Career revenue increased 2%, continuing the trend of modest growth following a two-year stretch of strong growth and demand.
Speaker Change: For the first six months of the year, revenue at Mercer was $2.8 billion with 6% underlying growth.
Mark Christopher McGivney: Career Revenue increased 2%, Continuing the trend of modest growth following a 2-Year Stretch of Strong Growth and Development. For the first six months of the year, revenue at Mercer was $2.8 billion, with 6% underlying growth. Oliver Wyman's revenue in the quarter was $837 million, an increase of 3% on an underlying basis, coming on top of 11% growth a year ago. For the first six months of the year, revenue at Oliver Wyman was $1.6 billion, an increase of 8% on an underlying basis, up from 6% growth in the first half of last year.
Speaker Change: Oliver Wyman's revenue in the quarter was $837 million, an increase of 3% on an underlying basis.
Speaker Change: This comes on top of 11% growth a year ago.
Speaker Change: The first six months of the year, revenue at Oliver Wyman was $1.6 billion, an increase of 8% on an underlying basis, up from 6% growth in the first half of last year.
Speaker Change: Foreign Exchange was a two-cent headwind in the second quarter.
Speaker Change: Assuming exchange rates remain at current levels, we expect FX to be a two cent headwind in the third quarter and two cents in the fourth quarter.
Mark Christopher McGivney: Foreign exchange was a two-cent headwind in the second quarter. Assuming exchange rates remain at current levels, we expect FX to be at $0.02 a headwind in the third quarter and $0.02 in the fourth quarter. Total noteworthy items in the quarter were $73 million.
Speaker Change: Total noteworthy items in the quarter were $73 million.
Speaker Change: These included $44 million of restructuring costs, mostly related to the program we began in the fourth quarter of 2022, as well as some transaction-related expenses.
Mark Christopher McGivney: These included $44 million of restructuring costs, mostly related to the program we began in the fourth quarter of 2022, as well as some transaction-related expenses. Our other net benefit credit was $66 million in the quarter. For the full year, we continue to expect our other net benefit credit will be approximately $265 million. Interest expense in the second quarter was $156 million, up from $146 million in the second quarter last year, reflecting higher levels of debt and higher interest rates.
Speaker Change: Our other net benefit credit was $66 million in the quarter.
Speaker Change: For the full year, we continue to expect our other net benefit credit will be approximately $265 million.
Speaker Change: Interest expense in the second quarter was $156 million, up from $146 million in the second quarter last year, reflecting higher levels of debt and higher interest rates.
Speaker Change: Based on our current forecast, we expect approximately $154 million of interest expense in the third quarter and approximately $620 million for the full year.
Speaker Change: Our adjusted effective tax rate in the second quarter was 26.2% compared with 24.2% in the second quarter of last year.
Mark Christopher McGivney: Based on our current forecast, we expect approximately $154 million of interest expense in the third quarter and approximately $620 million for the full year. Our adjusted effective tax rate in the second quarter was 26.2% compared with 24.2% in the second quarter of last year. Our tax rate in both periods benefited from favorable discrete items. Excluding discrete items or adjusted effective tax rate, our tax rate was approximately 26.5%.
Speaker Change: Our tax rate in both periods benefited from favorable discrete items.
Speaker Change: Excluding discreet items or adjusted effective tax rate was approximately 26.5%.
Speaker Change: When we give forward guidance around our tax rate, we do not project discrete items which can be positive or negative.
Speaker Change: Based on the current environment, we continue to expect an adjusted effective tax rate of between 25.5% and 26.5% for 2024.
Mark Christopher McGivney: When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative. Based on the current environment, we continue to expect an adjusted effective tax rate of between $25.5 and $26.5 in 2024. Earnings Capital Management on our balance sheet, we ended the quarter with total debt of $13.5 billion. Our next scheduled debt maturity is in the first quarter of 2025 when $500 million of senior notes. We continue to expect to deploy approximately $4.5 billion of capital in 2024 across dividends, acquisitions, and share repurchase.
Speaker Change: Earnings Capital Management in our balance sheet, we ended the quarter with total debt of $13.5 billion.
Speaker Change: Our next scheduled debt maturity is in the first quarter of 2025 when 500 million of senior notes mature.
Speaker Change: We continue to expect to deploy approximately $4.5 billion of capital in 2024 across dividends, acquisitions, and share repurchases.
Speaker Change: The ultimate level of share repurchase will depend on how the M&A pipeline develops.
Speaker Change: Last week, we announced a 15% increase to our quarterly dividend, making this our 15th consecutive year of dividend growth.
Mark Christopher McGivney: The ultimate level of share repurchase will depend on how the M&A pipeline develops. Last week, we announced a 15% increase in our quarterly dividend, making this our 15th consecutive year of dividend growth. This comes on top of a 20% increase a year ago and reflects our strong earnings growth and confidence in our outlook. Our cash position at the end of the second quarter was $1.7 billion. Uses of cash in the quarter totaled $1.2 billion and included $352 million for dividends, $500 million for acquisitions, and $300 million for share repurchase.
Speaker Change: This comes on top of a 20% increase a year ago and reflects our strong earnings growth and confidence in our outlook.
Speaker Change: Our cash position at the end of the second quarter was $1.7 billion.
Speaker Change: Uses of cash in the quarter totaled $1.2 billion and included $352 million for dividends, $500 million for acquisitions, and $300 million for share repurchases.
Speaker Change: For the first six months, the uses of cash totaled $2.2 billion and included $706 million for dividends, $847 million for acquisitions, and $600 million for share repurchases.
Mark Christopher McGivney: In the first six months, the uses of cash totaled $2.2 billion and included $706 million for dividends, $847 million for acquisitions, and $600 million for share repurchase. While there continues to be uncertainty in the outlook for the global economy, we feel good about the momentum in our business, and the current environment remains supportive of growth. Overall, our excellent first half leaves us well-positioned for another great year in 2024. Based on our outlook today, for the full year, we continue to expect mid-single-digit or better underlying growth, margin expansion, and strong growth in adjusted EPS. And with that, I'm happy to turn it back to Jon.
Speaker Change: While there continues to be uncertainty in the outlook for the global economy, we feel good about the momentum in our business, and the current environment remains supportive of growth.
Speaker Change: Overall, our excellent first half leaves us well-positioned for another great year in 2024.
Speaker Change: Based on our outlook today, for the full year, we continue to expect mid-single-digit or better underlying growth, margin expansion, and strong growth in adjusted EPS. And with that, I'm happy to turn it back to Jon.
John Quinlan Doyle: Thank you, Mark. Andrew, we are ready to begin Q&A.
Speaker Change: Certainly.
Speaker Change: We will now begin the question and answer session. If you have a question, please press star 1 1 on your touchtone phone.
Operator: Thank you, Mark. Andrew, we are ready to begin Q&A. We will now begin the question and answer session. If you have a question, please press star one one on your touchtone phone. If you wish to be removed from, if you are a Star 11 again, if you are using a Star 11, you are using a Star 11 again. You may need to pick up the handset before pressing the number.
Andrew: If you wish to be removed from the queue, please press star 1 1 again.
Speaker Change: If you are using a speakerphone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star 1 1 on your touchtone phone.
Speaker Change: 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. One moment, please.
Operator: Again, if you have a question... Press star 1-1 on your touch tone. And in the interest of time, Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q&A Q& This question comes from the line of David Motemaden. Thanks. Good morning. I just had a question on the underlying revenue growth outlook for Digital Grader. You guys just did 8% in the first half, underlying revenue growth, but aren't Unknown Executive, Jon Newsome, Robert Cox, Meyer Shields, Martin South, Unknown Executive. Morning, David. Sure.
Speaker Change: And our first question comes from the line of David Motemaden with Evercore ISI.
David Kenneth Motemaden: Thanks, good morning. Just had a question on the underlying revenue growth outlook of mid-single-digit or greater
David Kenneth Motemaden: You guys just did 8% in the first half of underlying revenue growth, but aren't increasing the range.
David Kenneth Motemaden: It's a high single digit. Could you just help me think through the puts and takes in terms of why you guys aren't increasing the range?
Speaker Change: Morning, David. Sure. So, yeah, I mean,
Speaker Change: You know, first of all, just say, you know, it's pleased with our growth in the quarter.
Speaker Change: You know, it was on top of a very big quarter a year ago at 11%. Marsh had good, solid growth by region and practice, you know, on top of a tough comp. Corbin are at an excellent quarter.
John Quinlan Doyle: So yeah, I mean, first of all, just say I was pleased with our growth in the quarter. You know, it was on top of a very big quarter a year ago at 11%. Marsh had good, solid growth by region and practice, you know, on top of a tough comp. Carpenter had an excellent quarter.
Speaker Change: Market improvements led to increased demand after a pretty volatile reinsurance market in 2023. Mercer, again, had another solid quarter of growth, as Mark noted in his comments.
John Quinlan Doyle: You know, market improvements led to increased demand after a pretty volatile reinsurance market in 2023. Mercer, again, had another solid quarter of growth. Mark noted in his comments, the best growth, and stretch growth in a long period of time.
Speaker Change: Best growth stretch growth in a long period of time health remains very strong
Speaker Change: Wealth growth was solid, and we actually saw an uptick in career growth, you know, from the first quarter. You know, Oliver Wyman had a very tough comp, but had good growth, has had good growth year-to-date. And, you know, as we pointed out in the past,
John Quinlan Doyle: Health remains very strong, and wealth growth is solid. And we actually saw an uptick in career growth, you know, from the first quarter. You know, Oliver Wyman had a very tough comp, but he had good growth, and has had good growth year to date. And, you know, as we pointed out in the past, we'll have more quarter to quarter volatility than, you know, than our other businesses. But, what I would say is, broadly speaking, the macros continue to be supportive of growth. It's a risky environment we're all operating in.
Speaker Change: You know, we'll have more quarter-to-quarter volatility than, you know, than our other businesses. You know, what I would say is, broadly speaking, the macros continue to be supportive of growth. It's a...
Speaker Change: It's a risky environment we're all operating in.
Speaker Change: But, you know, GDP, inflation, labor markets, you know, the cost, rising cost of risk.
Speaker Change: Rising Cost of Health Care.
Speaker Change: You know, all supportive and I feel very, very.
John Quinlan Doyle: But, you know, GDP, inflation, labor markets, the cost of risk, rising cost of health care, you know, all supportive of my feeling that we're very well positioned, we have the best talent in the markets that we compete in. And so we're positive on our outlook, you know, for the second half, and, you know, again, remains a good market for us. And so, you know, we feel good about where we are. Got it.
Speaker Change: I feel like we're very well positioned. We have the best talent in the markets that we compete in, and so we're positive on our outlook for the second half. Again, it remains a good market for us, and so we feel good about where we are.
Unknown Speaker: Got it. Thanks, John . And then, Mark, I think you mentioned on last quarter's call that you guys are expecting greater margin expansion in the second half than in the first half. Is that still the case?
Mark Christopher McGivney: Thanks, John. And then, Mark, I think you mentioned on last quarter's call that you guys are expecting greater margin expansion in the second half. I was in the first half. Is that still the case? Unknown Speaker Yeah. We're really happy with 130 basis points, you know, and it validated the statements we made about the first quarter margin expansion despite headwinds from several items.
Unknown Speaker: You want to go ahead, Mark? Yeah.
Mark Christopher McGivney: We're really happy with 130 basis points, you know, and it validated the statements we made about the first quarter margin expansion facing headwinds from several
Mark Christopher McGivney: items so we were good we're glad to see the acceleration and you know we're on track for solid margin expansion for for the year
Mark Christopher McGivney: So we were good. We're glad to see the acceleration. And, you know, we're on track for solid margin expansion for the year. Thank you, David.
Speaker Change: Thank you, David. Andrew, next question. One moment, please, for our next question.
Speaker Change: Our next question comes from the line of Jimmy Buhler with JP Morgan.
Operator: Andrew, next question. Our next question comes from the line of Jimmy Buhler with J.P. Morgan. Hey, good morning.
Jimmy Buehler: Hey, good morning. So first, John , just following up on your comments on Oliver Byman, the growth this quarter slowed versus what it's been the last few quarters. How much of that is a function of just tough comps and normal volatility in the business versus maybe a slowdown in the pipeline? Yeah. Yeah. Yeah.
John Quinlan Doyle: So first, John, just following up on your comments about Oliver Byman, the growth this quarter slowed versus what it has been the last few quarters; how much of that is a function of just tough comps and normal volatility in the business versus maybe a slowdown in the pipeline? Yeah, Jimmy. Thanks for the question. You know, I'll hand it to Nick here. But you know, was it tough? I think it's some of both, right? But it's a, you know, it was a tough comp, for sure.
Nick: Yeah, Jimmy, thanks for the question, you know, and I'll hand it to Nick here, but you know, it was a tough, I think it's some of both, right? But it's a, you know, it was a tough comp for sure.
Nick: I feel very good about the year-to-day growth. Nick, do you want to add a little bit more depth? Yeah, I think Jon's right, Jimmy, it's a little bit of both, but in the same way that I noted last quarter that our 13% was against a weak 0% comp.
Nicholas Mark Studer: But I feel very good about the year to date growth. Excuse me, Nick, you want to add a little bit more depth? Yeah, I think Jon's right, Jimmy. It's a little bit of both. But in the same way that I noted last quarter that our 13% was against the weak 0% comp, this three is against the tougher 11. That 8% year to date, I think is bang in that zone of mid to high single-digit growth we expect to average through the cycle.
Nick: [inaudible]
Speaker Change: To give you a little bit of color on where we are seeing higher growth, regionally both Asia and our India, Middle East and Africa regions have continued on strong growth from an industry perspective.
Nicholas Mark Studer: And as you know, our quarters are always somewhat volatile. Mark kindly noted in his comments that the first half actually accelerated versus the first half last year. To give you a little bit of color on where we are seeing higher growth, regionally, both Asia and our India, Middle East, and Africa regions have continued to see strong growth from an industry perspective.
Speaker Change: Our communications, media and technology practice has been our fastest growing year to date. But our very strong banking and insurance practice is also in positive territory, as is our public sector practice.
Nicholas Mark Studer: Our communications, media, and technology practice has had its fastest-growing year to date, but our very strong banking and insurance practice is also in positive territory, as is our public sector practice. And we have a wide array of capabilities. Our economic research business, Nira, is growing strongly; our market-leading finance and risk practice, particularly financial services, our pricing team, and importantly, our people and organizational performance practice, which really works across our industries to help with big client transformative moments. But the market is a little bit uncertain. While the economy seems to be better, it's still a pressured environment for discretionary spending.
Speaker Change: We have a wide array of capabilities. Our economic research business, Nira, growing strongly, our market-leading finance and risk practice, particularly financial services, our pricing team.
Speaker Change: Importantly, our people and organizational performance practice, which really works across our industries to help on big client transformative moments.
Speaker Change: But the market is a little bit uncertain. While the economy seems to be better, it's still a pressured environment for discretionary spending. Some uncertainties, as John and Mark have highlighted.
Speaker Change: We do see we're sort of working through some pricing pressure due to excess capacity as some of our competitors work through some of their headcount actions.
Nicholas Mark Studer: Some uncertainties, as John and Mark have highlighted, and we do see that we're sort of working through some pricing pressure due to excess capacity as some of our competitors work through some of their headcount actions. Thank you, Nick.
Speaker Change: Thank you, Nick. Jimmy, do you have a follow-up?
Jimmy Buehler: Yeah, just on and maybe for Mark on fiduciary investment income, it was, it's been sort of flattish on a sequential basis. So should we assume given where rates are that going forward, it's going to grow just with growth in the business or was the
Operator: Jimmy, do you have a follow-up? Yeah, just on and maybe for Mark on fiduciary investment income, it's been sort of flattish on a sequential basis. So should we assume given where rates are that going forward, it's going to grow just with growth in the business? Or was the sequential flat results in Tokyo more of a function of seasonality and balances?
Speaker Change: sequential flat results in Tokyo more of a function of seasonality and balances of other factors.
Mark Christopher McGivney: Mark. Mark. Mark.
Mark Christopher McGivney: Jimmy, there is seasonality and balances, as we've talked about in the past, but I think the biggest driver, I think, from here is just going to be the outlook for
Speaker Change: You know, for rates, as we've talked about, and you saw on our balance sheet in the quarter, got about eleven and a half billion of fiduciary balances. And, you know, so I think just.
Mark Christopher McGivney: Jimmy, there is seasonality in balances, as we've talked about in the past, but I think the biggest driver, I think, from here is just going to be the outlook for rates. As we've talked about and you saw on our balance sheet in the quarter, we've got about $11.5 billion of fiduciary balances. So I think just where we go from here is just going to be what the central banks do with short-term interest rates.
Speaker Change: where we go from here is just going to be what the central banks do with short term interest rates. And just as you're modeling going forward, keep in mind...
Speaker Change: That our balances do reflect the revenue mix of our business so it's not just u.s. rates, obviously, that drive. We've got balances because of the distributive nature of business all over the world.
Mark Christopher McGivney: Our balances do reflect the revenue mix of our business, so it's not just U.S. rates, obviously, that drive our balance because of the distributive nature of business all over the world. So, yeah, as I said, the outlook really is going to be mostly a function of what the rate picture is. Thank you, Jimmy.
Speaker Change: So yeah, so as I said, the outlook really is mostly a function of what the rate picture looks like.
Speaker Change: Thank you, Jimmy. Andrew, next question?
Speaker Change: And our next question comes from the line of Elyse Greenspan with Wells Fargo.
Elyse Beth Greenspan: Hi, thanks. Good morning. My first question, within RIS, can you give us a sense of how much the expenses helped your margins in the quarter?
Operator: Andrew, next question. And our next question comes from the line of Elyse Greenspan. Hi, thanks. Good morning. My first question within RIS is, can you give us a sense of how much the expenses help your margins? Spence Saves. Can you give me a yes?
Elyse Beth Greenspan: Expense saves, are you?
Speaker Change: Unknown Speaker Can you give me a. Unknown Speaker Yeah. Unknown Speaker Oh, okay. Okay. Yeah. Sure. Sure. Thanks, Lisa. Mark. Unknown Speaker Yeah, at least we're definitely seeing the benefit of it. We've stayed away from quantifying. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah.
Mark Christopher McGivney: Oh, okay. Okay. Yeah, sure. Okay. Thanks, Elyse. Mark.
Speaker Change: You know specifically how much is going to drop quarter to quarter.
Speaker Change: But you just even see the trend in expense growth quarter to quarter. That was definitely a factor. Our strong growth and the benefit of savings contributed to that 130 basis points of
Mark Christopher McGivney: Yeah, at least we're definitely seeing the benefit of it. We've stayed away from quantifying, specifically how much is going to drop quarter-to-quarter, but you just even see the trend in expense growth quarter-to-quarter. That was definitely a factor.
Speaker Change: Margin Expansion. So we're, as I said, we haven't quantified the amount that we're seeing each quarter, but we are on track for the level of savings that we talked about and we're seeing the benefit of it.
Mark Christopher McGivney: Our strong growth and the benefit of savings contributed to that 130 basis points of margin expansion. So we're, as I said, we haven't quantified the amount that we're seeing each quarter, but we are on track for the level of savings that we talked about, and we're seeing the. Do you have a follow-up, Elyse? Yes, and then my second question within Marsh, could you just give us a sense of what you're seeing some more color in both the US and internationally within organic growth, both for Q2 and then how you think about the outlook in the back half of the year? And US or international, are you guys more indexed to property in one versus the other?
Elyse Beth Greenspan: Do you have a follow-up, Elyse?
Elyse: Yes, and then my second question, within Marsh, could you just give us a sense of what you're seeing, some more color in both the U.S. and internationally within organic growth, both for the Q2 and then how you think about the outlook in the back half of the year? And are U.S. or internationally, are you guys more indexed to property in one versus the other?
Speaker Change: Yeah, I mean, the markets are, you know, quite dynamic, right. And so, you know, just caution you a little bit on pricing, right? I think Guy Carpenter is a good indication of that, right. So, you know, we saw a better market lead to, you know, to increase demand. But, you know, as I mentioned earlier, it was a good solid growth by region and
Martin C. South: Um, yeah, I mean, the markets are, you know, quite dynamic, right? And so, you know, just caution you a little bit on pricing, right? I think Guy Carpenter is a good indication of that, right?
Martin: And by practice, you know, again, I'm in the second quarter and on top of a tough comp, but Martin, maybe you could share a little bit more more color on on growth international versus US and the demand you're seeing. Sure.
Martin C. South: So, you know, we saw a better market lead to, you know, increase demand. But, you know, as I mentioned earlier, it was good solid growth by region and by practice, again, in the second quarter and on top of a tough comp. But Martin, maybe you could share a little bit more, more color on growth in the international versus US markets and the demand you're seeing. Sure. Just to restate 7 in the quarter, which is on top of 10 for the second quarter of 23.
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Speaker Change: Our U.S. business M&A and VITA continue to perform very well.
Martin C. South: Quite balanced growth, the international at 7 and US at 6, US and Canada at 6. Our US business MMA and BITDA continue to perform very well. In the US, Canada had a weaker quarter; some macros there affected that, and that pulled down a little bit. But across the international region, international was a 7 on top of 10 in 23. Asia Pacific accelerated from 7 on top of 6 in 23. Latin America did 8 on top of 17 in the second quarter of 23.
Martin: In the US, Canada had a weaker quarter, some macros there affected that, that pulled down a little bit.
Speaker Change: But across the international region, international was a 7 on top of 10 in 23.
Speaker Change: Asia Pacific Accelerated from 7 on top of 6 in 2023.
Martin: Latin America did 8 on top of 17 in the second quarter of 23, and EMEA did 7 on top of 11 in 23.
Martin: The performance, you know, was driven really by very strong performance internationally and in the benefits business. Construction, energy and power all came off strong, double-digit growth as well, repeating what happened last year.
Martin C. South: And EMEA did 7 on top of 11 in 23. The performance, you know, was really driven by very strong performance internationally and in the benefits business. Construction, energy, and power all came off strong double-digit growth as well, repeating what happened last year. We're beginning to see some revitalization in the US capital markets, which has been a headwind for new business growth, going back to 21. Renewal base growth was strong and solid, as was new business in both the US and Canada and international.
Martin: We're beginning to see some revitalization in the U.S. capital markets, which has been a headwind for new business growth, going back to 21.
Martin: Renewal-based growth was strong and solid, as was new business in both US and Canada and international.
Martin: And our lost business improved slightly as we continue to build stickier relationships with clients as we engage more deeply, and we aspire to be the risk advisor of the future, talking to them well beyond conventional risk.
Martin C. South: And our lost business improved slightly as we continue to build stickier relationships with clients as we engage more deeply. And we aspire to be the risk advisor of the future, talking to them well beyond conventional risk. And we feel very well positioned. Overall, the mix of premium in the US will be more weighted to casualty in its broad terms and probably more balanced in international for property casualty, to answer your question.
Martin: We feel very well positioned.
Speaker Change: Overall, the mix of premium in the U.S. will be more weighted to casualty in its broad terms and probably more balanced in international for property casualty to answer your question. Yeah, reflection of the liability environment in the U.S. for sure.
Speaker Change: Thank you, Elyse, and thanks, Martin. Andrew, next question? Our next question comes from the line of Scott Heleniak with RBC Capital Markets.
Martin C. South: Yeah. A reflection of the liability environment in the US, for sure. Thank you, Elise.
Speaker Change: Transcribed by https://otter.ai
Scott Gregory Heleniak: Good morning. Just a quick question. Given the M&A pace has been pretty strong over the past few quarters and certainly for the year,
Operator: And thanks, Martin. Andrew, next question. Our next question comes from the line of Scott Hellinia. Good morning.
Scott Gregory Heleniak: Just wondering if we should assume you know kind of a deceleration in the run weight for share buybacks in the second half versus the first half just how are you thinking about that and how is your M&A tracking versus kind of what you thought going into the year?
John Quinlan Doyle: Just a quick question. Given the M&A pace has been pretty strong over the past few quarters and certainly for the year, just wondering if we should assume a deceleration in the run weight for share buybacks in the second half versus the first half? How are you thinking about that, and how is your M&A tracking versus what you thought going into the year? Yeah, sure, Scott. Thanks.
Scott Gregory Heleniak: Yeah, sure, Scott. Thanks for the question. No change to our philosophy. We continue to take a balanced approach to capital management.
Speaker Change: We have about $4.5 billion to deploy during the course of the year.
John Quinlan Doyle: Thanks for the question. No change to our philosophy. We, you know, continue to take a balanced approach to capital management. We have about four and a half billion dollars to deploy during the course of the year.
Scott Gregory Heleniak: Broadly speaking, we favor, you know, attractive investments in our business, whether it's organic or inorganic over buybacks, but we're not gonna let cash
Scott Gregory Heleniak: Build up on the balance sheet either, you know, as I noted earlier, you know, we increased our dividend beginning in this quarter.
Scott Gregory Heleniak: We aspire to raise our dividend every year. We bought back 300 million of shares in the second quarter. We're pleased with what we've seen in the M&A market. As I said, it was an active quarter.
John Quinlan Doyle: Broadly speaking, we favor, you know, attractive investments in our business, whether it's organic or inorganic, over buybacks, but we're not going to let cash build up on the balance sheet either. As I noted earlier, we increased our dividends beginning this quarter, and we aspire to raise our dividend every year. We bought back 300 million shares in the second quarter. We're pleased with what we've seen in the, you know, M&A market. As I said, it was an active quarter. We announced a couple of deals really at the start of the second quarter, just after the first of July.
Scott Gregory Heleniak: We announced a couple of deals really at the, you know, at the start here of the second quarter, just after the first of July , and so we're excited about those deals, and, you know, we'll continue to be active in the market, but ultimately, the amount of share we purchase will depend on
Scott Gregory Heleniak: You know, it's obviously a volatile, you know, M&A, you know, you never know what the ultimate outcome will be in M&A, but we're seeing some good opportunities to invest in our business.
John Quinlan Doyle: And so we're excited about those deals. And, you know, we'll continue to be active in the market. But ultimately, the amount of shares we purchase will depend on, you know, what's obviously a volatile, you know, M&A, you never know what the ultimate outcome will be in M&A. But, but we're seeing some good, good opportunities to invest in our business. Do you have a follow-up?
Speaker Change: Do you have a follow-up?
Speaker Change: Yeah, just one quick one too, just generally on Mercy, the health organic growth is really strong again, and 9% has been strong for quite a while, and the career and wealth I guess is a little bit...
Speaker Change: A little bit slower compared to health, but just wondering if you can just kind of flush out what you're seeing there, the strength in health versus the other areas, if there's anything kind of holding back those areas besides just the kind of difficult comps.
John Quinlan Doyle: Yeah, just one quick one to just generally on Mercy, the health organic growth is really strong again, and 9% has been strong for quite a while. And the career and wealth, I guess, are a little bit, a little bit slower compared to health. But just wondering if you can just kind of flush out what you're seeing there, the strength and health versus the other areas, if there's anything kind of holding back those areas besides just the kind of difficult comps.
Speaker Change: Yeah, thanks, Scott. And I'll ask Pat to comment in a second. But, you know, I mentioned, you know, rising health care costs in my opening remarks. It's a big pressure point, you know, for our clients.
Patrick Tomlinson: Yeah, thanks, Scott. And I'll ask Pat to comment in a second. But, you know, I mentioned rising healthcare costs in my opening remarks, a big pressure point for our clients in this economy, and particularly given tight labor markets and, you know, in most major economies around the world. So it's really terrific value we're delivering to our clients in a, you know, in a very tough marketplace there.
Speaker Change: in this economy. And so and
Pat: Particularly given tight labor markets and you know in most major economies around the world so
Pat: It's really terrific value we're delivering to our clients in a very tough marketplace there. You know, wealth's going to have some volatility as will career quarter to quarter, but Pat, maybe you could talk a little bit about what we're seeing in the marketplace.
Pat: Sure. Thanks. Thanks so much for the question. First off, we're pleased with the
Patrick Tomlinson: You know, wealth is going to have some, you know, volatility, as will careers, quarter to quarter, but Pat, maybe you could talk a little bit about, you know, what we're seeing in the marketplace. Sure. Thanks.
Pat: Q2 underlying growth of 5%, as Mark had highlighted, our 13th consecutive quarter with 5% or more growth.
Patrick Tomlinson: And thanks so much for the question. First off, we're pleased with the Q2 underlying growth of 5%, as Margaret highlighted, our 13th consecutive quarter with 5% or more growth, and that all the practices are contributing to growth. Certainly, health has been, has been contributing at a higher rate. Quickly to kind of go through the practices and what we're seeing.
Speaker Change: And that all the practices are contributing to growth, certainly health has been contributing at a higher rate. Quickly to kind of go through the practices and what we're seeing. You know, health, as you highlighted, had that impressive quarter with 9% growth. The strong performance was broad-based.
Speaker Change: Transcribed by https://otter.ai
Patrick Tomlinson: You know, health care, as you highlighted, had that impressive quarter with 9% growth. But the strong performance was broad-based, right? So there was double-digit growth across most regions.
Speaker Change: Investments in Thought Leadership, including our Health on Demand Survey, new digital tools,
Speaker Change: and a focus on client segmentation that's...
Speaker Change: Really designed to match our clients' health care needs.
Speaker Change: with our innovative and tailored solutions.
Speaker Change: We benefited from renewal and some new business growth, some insurer revenue, and as has been highlighted a couple of times, we've called medical cost inflation, certainly. We continue to see strong demand for digital solutions and innovative benefits, underscoring really the value and the breadth of advice and solutions we bring to clients.
Patrick Tomlinson: It comes predominantly from investments in hiring new talent, investments in thought leadership, including our health on demand survey, new digital tools, and a focus on client segmentation that's really designed to match our clients' healthcare needs with our innovative and tailored solutions. We benefited from renewal and some new business growth, some insurer revenue, and, as has been highlighted a couple of times here, what we call medical cost inflation. Certainly, we continue to see strong demand for digital solutions and innovative benefits, underscoring the value of and the breadth of advice and solutions we bring to clients. There is little less growth in wealth and careers, so let me quickly go through them.
Lewis: Little less growth in wealth and career, so let me quickly go through them. Wealth, we grew the 3% in Q2. That was balanced between DB&A and IMS.
Lewis: All right, so DB plans, funding status, continue to benefit from elevated interest rates.
Patrick Tomlinson: We grew the 3% in Q2. That was balanced between DB&A and IMS, all right, so DB plans, and funding status continue to benefit from elevated interest rates. It's driving an increase in project work, predominantly revolving around risk transfers as well as certain regulatory requirements that are coming into force in some jurisdictions around the world. When you add in the volatile capital markets, it's been driving some strong demand for actuarial and investment solutions.
Speaker Change: It's driving an increase in project work, predominantly revolving around risk transfers, as well as certain regulatory requirements that are out in some of the jurisdictions around the world.
Speaker Change: We add in the volatile capital markets, it's been driving some strong demand for actuarial and the investment solutions. John had highlighted it in the OCO, we did benefit from the transaction with Vanguard, we had some net new inflows, and capital markets also provided a revenue lift.
Speaker Change: It's important to note that on IMS, from a business perspective, it's a portfolio of solutions, right? That includes some advisory work.
Patrick Tomlinson: John highlighted that in OCO, we did benefit from the transaction with Vanguard, we had some net new inflows, and capital markets also provided a revenue lift. It's important to note that on IMS, from a business perspective, it's a portfolio of solutions, right, that includes some advisory work and some DC administration in addition to OCIO. So a lot of times, it's typically looked at as OCO, and only our OCO business is directly impacted by AUM.
Speaker Change: And some DC administration, in addition to OCIO, so a lot of times it's typically looked at as OCO, and only our OCO business is directly impacted by AUM. So as we've seen a market run up, really we only have a subset of that business that's directly impacted by AUM.
Speaker Change: And our AUM is a diversified portfolio where equities only make up about half of our exposure.
Patrick Tomlinson: So as we've seen a market run up, really, we only have a subset of that business that's directly impacted by AUM. And our AUM is a diversified portfolio where equities only make up about half of our exposure, right, because we have a lot of clients that have heavy fixed income exposure. So while the markets can drive some volatility for us, the impact of equity markets is a bit more muted on IMS growth.
Speaker Change: Right, because we have a lot of a lot of clients that have heavy fixed income exposure. So while the markets can drive some volatility for us, the impact of equity markets is a bit more muted in IMS growth.
Speaker Change: And then on career, which had the most modest growth of 2%, which was up sequentially over a quarter, it is following a long period of growth after the pandemic.
Speaker Change: We saw good growth momentum from a couple of our practices, Talent and Transformation, Rewards was a bit more muted.
Patrick Tomlinson: And then on career, which had the most modest growth of 2%, which was up sequentially over a quarter. It is following a long period of growth after the pandemic. We saw good growth momentum from a couple of our practices, talent, and transformation. Rewards was a bit more muted, and I think that's predominantly reflecting the impact of lower wage inflation and reduced employee turnover, which is driving some slightly lower demand for clients at reward projects.
Speaker Change: And I think that's predominantly reflecting the impact of...
Speaker Change: [inaudible]
Speaker Change: The overall size of our career practice is nearly 20% larger than it was pre-pandemic.
Patrick Tomlinson: But I think it's also important to note here that while the growth rates slowed down and have been flat even over the last couple of quarters, they've been a bit more modest. The overall size of our career practice is nearly 20% larger than it was pre-pandemic.
Pat: So we feel very strong about that, that we've been able to maintain those levels in a predominantly project-based business. So overall, I think the conditions have us very positive about the outlook for Mercer. Terrific. Thank you, Pat. Scott, thank you for your questions. Andrew, next question.
Patrick Tomlinson: So that's, we feel very strong about that, that we've been able to maintain those levels in a predominantly project-based business. So overall, I think the conditions have us very positive about the Outlook commercial. Terrific.
Speaker Change: And our next question comes from the line of Michael Zaremski with BMO Capital Markets.
Operator: Thank you, Pat. Scott, thank you for your questions. Andrew, next question. And our next question comes from the line of Michael Zaremski with BMO Capital Marks. Kate, great.
Michael David Zaremski: Focusing on the property cash key pricing environment, I guess competitive environment, John , I believe you said
Speaker Change: The Marsh Index desolves again to zero from one.
John Quinlan Doyle: Good morning. Focusing on the property cash key pricing environment, I guess the competitive environment. John, I believe you said that the Marsh index desolved again to zero from one.
Speaker Change: I'm just curious, you know, given Marsh does have a lot more small to mid-account business now too, it feels like there's like two different, tales of two different stories going on between the large account and the mid-account.
John Quinlan Doyle: Just curious, given Marsh does have a lot more small to mid-account business now too, it feels like there's like two different tales of two different stories going on between the large account and the. Unknown Speaker I don't know if you'd agree with that. And if so, if you know any color you could offer and kind of why we're seeing two different trends there.
Speaker Change: Smith Accounts. I don't know if you'd agree with that. And if yes, if you know any color you could offer and kind of why we're seeing two different trends there.
Speaker Change: Sure, sure, Mike. Thanks for the question. I'll share some high-level thoughts and then maybe I'll ask both Martin and Dean to talk about...
Speaker Change: You know some market observations
John Quinlan Doyle: Unknown Speaker Sure, sure. Sure, Mike. I'll, I'll share some high-level thoughts. And then maybe I'll ask both Martin and Dean to talk about, you know, some market observations. You know, I would note, Mike, just right out of the gate here that typically larger account pricing has more volatility attached to it. If you look back, you know, on historical cycles, that's been the case. Mid-market pricing has historically been more stable, or more consistent, I guess, and has less volatility from cycle to cycle.
Speaker Change: You know, I would note, Mike, just right out of the right out of the gate here that
John Quinlan Doyle: And our index is weighted towards large accounts, you know, to be clear where we have the best data. But insurance and reinsurance markets, you know, continue to settle in the quarter. It's not just middle versus large; it's a collection of markets. And while, as I pointed out in my prepared remarks, you know, cyber and fin pro may be the best example, prices continue to moderate, some segments of the market are showing some, you know, what might be early signs of stress. Us excess casualty, for example, prices were up 10%. And lost cost inflation there remains quite challenging.
Speaker Change: Typically, larger account pricing has more volatility attached to it. If you look back, you know, on historical cycles, that's been the case.
Speaker Change: Mid-market pricing has historically been more stable, or more consistent, I guess, and have less volatility from cycle to cycle. And our index...
Speaker Change: is weighted towards large accounts, you know, to be to be clear where we have the best data. But insurance and reinsurance markets, you know, continue to settle in the quarter, you know, after what's been many years of, you know, increases.
Speaker Change: It's not just middle, you know, versus large, it's a collection of markets. And, and while, as I pointed out, my
Speaker Change: prepared remarks you know cyber and finpro may be the best example prices continue to moderate some some segments of market are showing some you know what might be early signs of stress
Speaker Change: U.S. Excess Casualty, for example, prices were up 10%.
John Quinlan Doyle: But you know, overall, right now, markets are providing an opportunity for our clients to revisit some decisions they've made about financing risk. And, you know, that tighter market conditions have led them to make certain decisions. So it's a welcome moment for, you know, many of our clients to revisit some of those decisions. And, you know, Guy Carpenter, as I mentioned earlier, it led to greater demand in the second quarter, as evidenced by our strong growth. Martin, maybe you could share a little bit more color on what we're seeing in the pricing market. Sure.
Speaker Change: Lost cost inflation there remains remains quite challenging but you know overall right now markets are providing an opportunity for our clients to revisit some decisions they've made about
Speaker Change: Financing Risk, and you know that tighter market conditions, you know, led them to make certain decisions. So it's a welcome moment for, you know, for many of our clients to revisit some of those decisions and, you know, Guy Carpenter, as I mentioned earlier,
Speaker Change: You know it led to greater demand in the second quarter as you know evidenced by our strong growth But Martin maybe you could share a little bit more color on you know what we're seeing in the pricing market sure
Martin: Just reminding ourselves, 26 quarters of rate increases which just turned flat now.
Martin: And as John noted, our index is geared much more towards the larger account segment of our business, and obviously the mid-market business on the smaller end has less volatility in pricing. But, you know, just by line of business, casualty...
Martin C. South: Just reminding ourselves, 26 courses of rate increases, which just turned flat now. And, as John noted, our index is geared much more towards the larger account segment of our business. And obviously, the mid-market business in the smaller end has less volatility in pricing. But just by line of business, casualty... in the U.S., is up 3%, which, as Jon said, is really dominated by the 10% increase in the umbrella book, which we talked about earlier, of course, about the volatility and claims inflation there. Property is flat in most regions except for the Middle East and India, where we're still seeing some increases in property, maybe as a result of some of the activity in the Middle East in this past quarter.
Martin: The U.S. is up 3%, which, as Jon said, is really dominated by the 10% increase in the umbrella book, which we talked about in earlier calls about the volatility and claims inflation there.
Speaker Change: Property's flat in most regions except for the Middle East and India where we're still seeing some increases in property, maybe as a result of some of the activity in the Middle East in this past quarter.
Speaker Change: Core FinPro contracting at 5% with rate decline pretty much across the world and cyber contracting 6% which is mostly consistent with what we saw in Q1.
Martin C. South: Core fin probe contracting at 5%, with rate decline pretty much across the world, and cyber contracting 6%, which is mostly consistent with what we saw in Q1. The pricing trend is consistent with recent courses. We're seeing some slight increases in geographies, but rate contraction is more the norm.
Speaker Change: The pricing trend is consistent with recent courses. We're seeing some slight increases in geographies, but rate contraction is more the norm.
Speaker Change: And so those are the key issues, really, that I would comment on now. But of course, as far as our business is concerned, you know, where a lot of our business is fee-based or control commission-based.
Martin C. South: And so those are the key issues, really, that I would comment on now. But of course, as far as our business is concerned, you know, where a lot of our business is fee-based or on a control commission basis. And exposure growth has been significant over the last few years as well, which is a counterweight to that. Thanks, Martin. Dean, maybe you could just quickly cover the reinsurance market. Yeah, thanks, John.
Speaker Change: And exposure growth has been significant over the last few years as well, which is a counterweight to that.
Dean: Thanks Martin. Dean, maybe you could just quickly cover the reinsurance market. Yeah, thanks John and Mike. Just a couple headlines about the
Dean: PropertyCat Reinsurance Market, which certainly is connected to the underlying property market that Martin's describing. You know, as John noted, it's a much more predictable and smooth market.
Dean M. Klisura: And Mike, just a couple of headlines about the PropertyCat reinsurance market, which certainly is connected to the underlying property market that Martin's describing. You know, as John noted, it's a much more predictable and smooth market than we experienced last year in the 2023 hard market for PropertyCat. You know, placements have been completed on time.
Dean: than we experienced last year in the 2023.
Speaker Change: Hard Market for PropertyCat. Placements have been completed on time. There's been adequate capacity in the marketplace for our clients.
Speaker Change: There's an increased re-insurer appetite in the market, and we know why, right? They're driving 20% plus ROEs in this market.
Dean M. Klisura: There's been adequate capacity in the marketplace for our clients. There's an increased reinsurer appetite in the market, and we know why, right? They're driving 20 percent plus ROEs in this market, given the rate increases of last year and the higher attachment points our clients have been forced to absorb with greater volatility. We're seeing very strong ILS activity in the market. You know, John noted record cap bond issuance in the quarter, 34 discrete cap bonds, some 8 billion of limit in the quarter.
Speaker Change: Given the rate increases of last year and the higher attachment points our clients have
Speaker Change: Unknown Speaker We're seeing very strong ILS activity in the market. You know, John noted record cap bond issuance in the quarter, 34 discrete cap bonds, some eight billion of limit in the quarter.
John Quinlan Doyle: And I think that, you know, we're seeing moderating cat rates in the market compared to 2023.
Speaker Change: But I would say that if you look at year-over-year premium spend for PropertyCat and our Rate Online Index, it's still up 1% year-over-year. It has not gone negative in the market.
Dean M. Klisura: And I think that, you know, we're seeing moderating cat rates in the market compared to 2023. But I would say that if you look at year-over-year premium spend for PropertyCat and our rate online index, it's still up 1 percent year-over-year. It has not gone negative in the market.
Mike: Really, as John noted, Mike, I think the headline, the key takeaway is significant increased client demand for additional property cap limit.
Dean M. Klisura: And really, as John noted, Mike, I think the headline, the key takeaway is significant increased client demand for additional PropertyCat. In the first half of the year, two-thirds of our U.S. clients bought more property cap coverage across an additional $10 billion of limit, which is truly significant in the marketplace. We're also seeing clients re-insure with more retrocession coverage with improved pricing, market dynamics, and improved appetite by sellers, both for rated and ILS vehicles in the market.
John Quinlan Doyle: In the first half of the year, two-thirds of our U.S. clients bought more property cap coverage across an additional $10 billion of limit, which is truly significant in the marketplace.
Speaker Change: We are also seeing clients re-insure by more retro session coverage with improved pricing, market dynamics. We are also seeing clients re-insure by more retro session coverage with improved pricing,
Speaker Change: Improved Appetite by Sellers, both Rated and ILS Vehicles in the Market. And I think the last headline for you is, there's caution in the property market.
Speaker Change: There's $50 billion plus of insured losses in the first half of the year when you think about severe convective storms in the U.S. and Japan, Taiwanese earthquake.
Dean M. Klisura: And I think the last headline for you is there's caution in the property market. There was $50 billion plus of insured losses in the first half of the year. When you think about severe convective storms in the U.S. and Japan, the Taiwan earthquake, floods in Germany, the UAE, the Baltimore Bridge collapse, Hurricane Beryl, I mean, we could be on track for another $100 billion a year of insured losses.
Speaker Change: Pledge in Germany, the UAE,
Speaker Change: Baltimore Bridge Collapse, Hurricane Beryl. I mean, we could be on track for another $100 billion a year of insured losses. So there's caution in the market around property and property debt.
Mike: Thanks, Dean. So, Mike, not a big shift from, you know, from the first quarter, but, you know, a modest, you know, evolving market, you know, more in favor of buyers. And so, you know, that obviously factors into the advice we, you know, we give to our clients and...
Dean M. Klisura: So there's caution in the market around property and property debt. Thanks, Dean. So, Mike, not a big shift from the first quarter, but a modest evolving market, more in favor of buyers. And so that obviously factors into the advice we give to our clients and helps them navigate what's a world where, again, the cost of risk continues to escalate. Do you have a follow-up?
Mike: you know, help them navigate what's a, you know, world where again, the cost of risk continues to escalate. Do you have a follow up?
Speaker Change: A very quick follow up. Thank you. I'm just, you know, not to nitpick, but if I'm just looking at.
Speaker Change: Total Revenue Growth and I guess ultimately EBITDA adjusted I think
Speaker Change: Diversitures and maybe a little FX is what I think us and maybe the the consensus was off on a little bit So I just want to make sure there's nothing I'm missing and I you know It's still a net net acquire in terms of of M&A, but is there
John Quinlan Doyle: Yeah, a very quick follow-up. Thank you. I'm just, you know, not to nitpick, but if I'm just looking at total revenue growth, and I guess, ultimately EBITDA adjusted, I think divested shares and maybe a lot of taxes are what I think us and maybe the consensus was off on a little bit. So I just want to make sure there's nothing missing.
Speaker Change: Chunky divestitures, is that anything I should be thinking about in the very near term in terms of that impact?
Speaker Change: No, no. At Mercer, we sold two admin businesses, one in the U.S., one in the U.K. to Aptia.
Speaker Change: You know, the reason we sold them is they're relatively low growth and lower margin businesses and
John Quinlan Doyle: You know, still a net net acquirer in terms of M&A, but there are, you know, Chunky divestitures. Is that anything I should be thinking about in the very near term in terms of that impact? No, no, I mean, at Mercer, we sold two admin businesses, you know, one in the US and one in the UK to Aptia, you know, and the reason we sold them is that they were relatively low growth and lower margin businesses. And, and again, on a relative basis, they were capital intensive.
Speaker Change: And again, on a relative basis, they were capital intensive. And so, you know, we think they have a better owner now. And so, you know, we feel good about that decision.
Speaker Change: Thank you, Mike. Andrew, next question, please.
Andrew: Well, good morning.
John Quinlan Doyle: And so, you know, we think they have a better owner now. And, and so, we feel good about that decision. Thank you, Mike. Andrew, next question, please. Our next question comes from the line of Gregory Peters with Raymond J. Good morning.
Speaker Change: I guess I'd like to just go back to some comments you made in your prepared remarks. You mentioned Blue Eye.
Andrew: I was wondering if you could provide some more specific...
John Quinlan Doyle: I guess... End. Go back to some comments you made in your prepared... Blue Eye. I was wondering if you could provide some, (inaudible) Yeah, it's, you know, it's not a business, it's part of really how we advise our clients at Marsh. And so, you know, BlueEye is kind of the brand, if you will, for our suite of analytics. And, you know, Martin, maybe you could just share some insight on the range of types of tools that we use that help our clients think about how they manage and finance risk. Sure.
Andrew: Specific data around that.
Speaker Change #100: You know, it's a data analytics business, just.
Speaker Change #100: Provide some
Speaker Change #100: some scope of how big it is inside the
Speaker Change #100: Business.
Speaker Change #101: Yeah, it's a, you know, it's not a business. It's part of really how we advise our clients at Marsh. And so, you know, Blue Eyes kind of the brand, if you will, for
Speaker Change #101: for our suite of analytics and you know Martin maybe you could just share some insight on the range of types of tools that we use that help our clients.
Martin: Think about how they...
Martin: Managing finance risk. Sure. So, as you said, John, this is a suite of analytics tools that we use to help our clients across different product lines, assess what risks to retain, what risks they could transfer, the economic cost of that. We pay them across multiple lines to give them exposure and total cost of risk.
Martin C. South: So, as you said, John, this is a suite of analytics tools that we use to help our clients across different product lines assess what risks to retain, what risks they could transfer, and the economic cost of that. We pay them across multiple lines to give them exposure and total cost of risk scenarios. We help them analyze claims, and the analytics tools in that are able to help our clients who self-insure.
Martin: Scenarios
Martin: We help them analyze claims and the analytics tools in that are able to help our clients who self-insure a lot of
Martin: to identify which losses they need to get out early and how to settle those. So it's a range of real-time analytics built really
Martin: And it's one of the unique things about our business is that we have an enormous lake of data and we think that's one of the big moats that we have to support our business and, you know, some of these analytics tools that we use, we call them generically BlueEye.
Speaker Change #102: Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change #102: So, it's the way clients expect to be engaged and that's the tool that we use.
Martin C. South: So we'll continue to invest in that, and as we announced on the call last year, we added to that with supply chain capability. And so it's the way clients expect to be engaged, and that's the tool that we use. So, you know, we use these tools to help, and it's really mostly upfront, but to help them understand, our clients understand those risks. Unknown Executive, Jon Newsome, Robert Cox, Meyer Shields, Martin South, Unknown Executive, Operates under a different brand; the same would be said for the way we approach our clients in the market at Guy Carpenter. Do you have a follow-up, Craig? I sure do; thanks for the color on that.
Speaker Change #102: So, you know, we use these tools to help, and it's really mostly up front, but to help them understand, our clients understand those risks.
Speaker Change #102: Strategies to Manage and Mitigate those Risks.
Speaker Change #102: Most of our time on these calls, for good reasons, talking about the financing of risk when we go to market, but it's an important part of our value proposition.
Speaker Change #102: It's another example of where we can bring scale benefits to the market, given the unique data set that we have and the range of proprietary analytics we use.
Speaker Change #105: operates under a different brand, the same would be said for the way we approach our clients in the market at Guy Carpenter.
Speaker Change #102: Do you have a follow-up, Craig?
Craig: I sure do. Thanks for the color on that.
Craig: I'm just going to the operating cash flow and the free cash flow for the six months.
Speaker Change #107: Unknown Speaker ... ... ... ... ... ... ...
John Quinlan Doyle: Operating Catering Sure, Greg. Yeah, it's going to be volatile from quarter to quarter. But Mark, maybe, Yeah, great. Thanks. You will.
Speaker Change #109: Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change #104: Unknown Speaker Yeah, great. Thanks. You will. We always appreciate it.
Speaker Change #113: We'll always caution against focusing too much on a quarter's results and, you know, that's, that's...
Speaker Change #113: Certainly true when it comes to to cash flows and free cash so they tend to be volatile not only quarter to quarter but year to year because of
Mark Christopher McGivney: We'll always caution against focusing too much on a quarter's result, and you know, that's certainly true when it comes to cash flows and free cash. So they tend to be volatile, not only quarter to quarter but year to year because of this. You have to be cautious, but the two big factors just in the first six months are the higher comp payouts that we had in the first quarter and then receivables are up because of the growth in the. But we've got a, as you know, a long track record of double-digit growth and free cash flow that is stacked up well against our And that's what you'd expect in a capital like business like ours.
Speaker Change #104: Timing of balance sheet items as you put so when you look at the six months we are
Speaker Change #104: We are seeing a decline.
Speaker Change #106: Of course, given the significant bonus payouts that we have in the first quarter, you have a little bit of a denominator, small denominator issue and so.
Speaker Change #106: You have to be cautious but the two big factors just in the first six months are the higher comp payouts that we had in the first quarter and then receivables are up because of the growth growth in the business.
Speaker Change #114: Transcripts provided by Transcription Outsourcing, LLC.
Unknown Speaker: like ours.
Speaker Change #106: Thank you, Mark, and thanks, Greg, for the questions. Andrew, next question, please.
Speaker Change #108: Our next question comes from the line of Yaron Kinar with Jefferies.
Yaron Joseph Kinar: Thank you. Good morning. I just had a follow-up on an earlier question on margins.
Mark Christopher McGivney: Thank you, Mark. And thanks, Greg, for the questions. Andrew, next question, please. Our next question comes from the line of Yaron Kinar. Thank you. Good morning.
Speaker Change #111: So I think last quarter you had said that you expected the margin to accelerate particularly in the second half of the year.
John Quinlan Doyle: I just wanted to follow up on an earlier question on margins. So, I think last quarter, you said that you expected margins to accelerate, particularly in the second half of the year. Sounded like from the response this morning that maybe that's no longer the case. So just to be very clear, if we look at the 100 basis points or so of margin expansion in the first half of this year, would you expect that to be better in the second half? Or not, and I guess the second part of the question will be if there was a bit of a change, was it because the margin expansion in the second quarter was greater than you initially expected?
Speaker Change #112: Sounded like from the response this morning that maybe that's no longer the case. So just to be very clear, if we look at the 100 basis points or so of margin expansion the first half of this year, would you expect that to be better in the second half? Thank you. Thank you.
Speaker Change #115: Not, and I guess the second part of the question will be if there was a bit of a change is it because the margin expansion the second quarter was greater than you initially expected or are you all expecting some softening relative to your guidance for the second half of the year?
Speaker Change #116: No, we expect margin expansion in the second half to be better than the first half. Sorry if we created any confusion earlier, but that's what we continue to expect.
John Quinlan Doyle: Or are you expecting some softening relative to your guidance for the second half of the year? No, we expect margin expansion in the second half to be better than in the first half. Sorry, if we created any confusion earlier, but that's, you know, that's what we continue to expect. And, you know, maybe I can, you know, just share, you know, a little bit of color.
Speaker Change #117: You know what maybe I can
Speaker Change #118: You know, just share, you know, a little bit of color and just remind everybody to margins and outcome, right? This will be year 17 of
Speaker Change #118: 17th consecutive year of margin expansion, and so we feel terrific about that. But margin is an outcome of the way we run the business.
Speaker Change #119: Transcribed by https://otter.ai
John Quinlan Doyle: And just remind everybody about margins and outcomes, right? This will be the 17th consecutive year of margin expansion. And so, you know, feel terrific about that.
Speaker Change #119: We see opportunities, as I've mentioned in the past, we've got workflow and automation efforts inside of Mercer and Guy Carpenter.
John Quinlan Doyle: But margin is an outcome of the way we run the business. Managing investments and costs, you know, within, you know, within the revenue growth of the business. It's not gonna happen in every business in every single quarter. But that's, you know, it's the way we approach our business; we're going to continue to make attractive investments to support medium to long-term growth, but, you know, we see opportunities. As I've mentioned in the past, we've got workflow and automation efforts inside of Marsh, Mercer, and Guy Carpenter. We're testing AI at scale.
Speaker Change #119: We're testing AI at scale. So, you know that value creation is
Speaker Change #119: is not a meaningful 2024 or probably 2025 event, but as technologies emerge, we'll continue to challenge ourselves to get better. But again, we do expect second half margin expansion to be better than first half.
John Quinlan Doyle: So, you know, that value creation is not a meaningful 2024, probably 2025 event. But, you know, as technologies emerge, we'll continue to challenge ourselves to get better. But, but again, we do expect second half margin expansion to be better than first half. Do you have a follow-up? Thanks so much for the color and clarification. I asked a two-part question, so I'll turn it.
Speaker Change #120: Do you have a follow-up?
Speaker Change #121: Thanks so much for the coloring and clarification. I have some two-part questions, so I'll turn it back to you.
Speaker Change #121: Got it. Thank you. Andrew, next question, please.
Speaker Change #122: One moment, please.
Speaker Change #122: And our next question comes from the line of Meyer Shields with KBW.
Meyer Shields: Great, thanks. Good morning all. I guess to start, can you talk about how you're advising both insurance and re-insurance clients to think about their exposure to casualty lines following the overturning of the Chevron doctrine?
John Quinlan Doyle: Thank you. Andrew, next question, please. Our next question comes from the line of Meyer Shields with KBW. Great, thanks. Good morning, all.
John Quinlan Doyle: I guess to start, can you talk about how you're advising both insurance and reinsurance clients to think about their exposure to casualty lines following the overturning of the Chevron decision? Um, well, I'm not sure I see a direct line between that particular case and the overall environment. But, you know, what I would say to you is that what we've talked about on this call, historically, or I shouldn't say historically, but over the course of the last couple of years, are just, you know, troubling signs of lost cost inflation, particularly here in the United States. And, you know, the amount of money is large.
Speaker Change #124: Well, you know, I'm not sure I see a direct line between, you know, that particular case and the overall environment, but, you know, what I would say to you is that what we've talked about on this call
Speaker Change #124: historically, or I shouldn't say historically, but over the course of the last couple of years, it's just, you know, troubling signs of loss cost inflation, particularly here in the United States. And, you know, the amount of large, you
Speaker Change #124: Or mega judgments and settlements, you know, is quite challenging. It's so and so we spend a lot of time and you know, Martin talks briefly about the suite of analytics we use, it's, you know,
Martin: Inside of that suite of analytics, we help, you know, we help our clients think.
Martin: about a range of outcomes, what type of limits.
Martin: they should consider buying, how they might benchmark anonymously, you know, against others, you know, in their industry, you know, as an example, but that's a, those are all important inputs.
John Quinlan Doyle: Inside of that suite of analytics, we help our clients think about a range of outcomes, what type of limits they should consider buying, how they might benchmark anonymously, you know, against others in their industry, you know, as an example, but that's a, those are all important inputs. You know, and ultimately, our clients make decisions and judgments. And, you know, some have the ability to finance more risk or choose to finance more risk on their own.
Martin: you know, and ultimately our clients, you know, make make decisions and judgments and
Martin: You know, some have the ability to finance more risk or choose to finance more risk on their own. And others will, you know, will look to finance risk on the, you know, on the balance sheets of insurance companies, or in certain cases to...
John Quinlan Doyle: And others will, you know, look to finance risk on the balance sheets of insurance companies or, in certain cases, to Capital Markets as well. So I hope that that's helpful, Mayor. It is. Thank you. It's very good. Big picture. This is more of a small.
Martin: Capital Markets as well. So I hope that that's helpful.
Speaker Change #125: It is. Thank you. It's a big picture. This is more of a small picture issue. But when we look at, let's say, the two-year stacked organic growth in career, that slowed dramatically from the first quarter, I guess, you had 12 plus 1 at 13, and this quarter, 6 plus 2 is 8.
John Quinlan Doyle: Thank you. But when we look at, let's say, the two-year stacked organic growth in career, that slowed dramatically from the first quarter, I guess you had 12 plus 1 at 13, and this quarter, 6 plus 2 is 8. Is your outlook for career, based on the items or the issues that you identified earlier, is that slowing compared to maybe what you thought at the end of the first quarter? No, I don't think there's a real change from the first quarter, as you know, as Pat mentioned some of the dynamics, you know, less active labor markets from a turnover point of view, lower comp and bend.
Speaker Change #126: Is your outlook for career, based on the items or the issues that you identified earlier, is that slowing compared to maybe what you thought at the end of the first quarter?
Speaker Change #126: No, I don't think there's a real change from the first quarter as, you know, as Pat mentioned, some of the dynamics.
Speaker Change #126: [inaudible]
Pat: Less active labor markets from a, you know, from a turnover point of view, lower comp and bend. So, you know, it's a, you know, we didn't have expectations of higher growth, you know, in that business, you know.
John Quinlan Doyle: So, you know, we didn't have expectations of higher growth in that business during the course of 2024, and you know, we haven't seen anything through six months that changes that outlook. Fantastic. Thank you very much. Thank you. Andrew. Time for maybe one more.
Pat: during the course of 2024 and you know we haven't seen anything through six months that you know that changes that outlook.
Speaker Change #127: Fantastic. Thank you very much.
Speaker Change #128: Thank you. Andrew, time for maybe one more?
Speaker Change #128: Certainly.
Speaker Change #128: And our final question comes from the line of Rob Cox with Goldman Sachs.
Robert Cox: Hey, thanks for fitting me in. John , I wanted to go back to something you said last quarter, which is that Marsh accesses most of its...
John Quinlan Doyle: And our final question comes from the line of Rob Cox with Goldman Sachs. John, I want to go back to something you said last quarter, which is that Marsh accesses most of its E&S market solutions directly today. I'm curious how that split between the percentage of premiums placed directly in E&S versus through a third-party wholesaler has trended over recent years and how you think that might trend going forward.
Robert Cox: E&S Market Solutions directly today. I'm curious how that split between the percentage of premiums placed directly in E&S versus through a third-party wholesaler has trended over recent years and how you think that might trend going forward.
John Quinlan Doyle: Yeah, you know, again, I, you know, just to be clear, we're not looking to build a third party wholesale business. You know, we
Speaker Change #130: We want to bring the best solutions to our clients. The E&S markets moved quite a bit over the course of the last several years. That's really a reflection of the high-risk environment that I've talked about.
John Quinlan Doyle: Yeah, you know, again, I just want to be clear, we're not looking to build a third-party wholesale business. You know, we want to bring the best solutions to our clients. You know, the ENS markets moved quite a bit in the last several years, that's really a reflection of the high risk environment that you know, I've talked about. We insurers have, broadly speaking, more freedom to change rates, to get off risk, to change price, or to change terms and conditions as well.
Speaker Change #130: You know, we're
Speaker Change #131: Insurers have
Speaker Change #132: Broadly speaking, more freedom to change rate.
Speaker Change #132: to get off risk to change price or to change terms and conditions.
Speaker Change #132: As well, and so it's broadly speaking, you know, we want to manage our clients outcomes and experiences directly as possible and not outsource You know What's a an important part of the value proposition?
John Quinlan Doyle: And so, broadly speaking, you know, we want to manage our clients' outcomes and experiences directly as possible and not outsource what's an important part of the value proposition. It's not to say wholesalers don't do a nice job for us; they do, and we'll continue to access them, you know, where it makes sense. But, but we, most of the majority of the wholesale premium we actually access directly today, or ENS markets; we do that directly today.
Speaker Change #132: It's not to say that wholesalers don't do a nice job for us, they do and we'll continue to access them, you know, where it makes sense.
Speaker Change #132: Most of the majority of the wholesale.
Speaker Change #132: premium, we actually access directly today, or ENS markets, we do that directly today. But there's been more growth in intermediated wholesale premium over the course of the last couple of years. And so, you know, so our efforts are to, you know, try to get as much access to market as we can.
John Quinlan Doyle: But there's been more growth in the intermediated wholesale premium over the course of the last couple of years. And so, you know, so our efforts are to, you know, try to get as much access to the market as we can. Do you have a follow-up, Robert? Yeah, thank you. That's a great color.
Speaker Change #132: Do you have a follow-up, Robert?
Robert Cox: Yeah, thank you. That's great color Yeah, and the second question was just on
Robert Cox: Sort of the different economics Guy Carpenter gets from cap bonds versus traditional reinsurance placement, and if you could help us think about how much that record cap bond quarter contributed to organic growth.
John Quinlan Doyle: Yeah, and the second question was just about the different economics Guy Carpenter gets from cap bonds versus traditional reinsurance placement, and if you could help us think about how much that record cap on the quarter contributed to organic growth. Yeah, um, the economics can be different, of course, you know, and they're, they're different from treaty to treaty as well.
Speaker Change #133: Yeah, you know, the economics can be different, of course, you know, and they're different from treaty to treaty as well. You know, we work with our insurance company clients.
Robert Cox: You know as we talked about when when the market was particularly tight last year you know while while Commission is a factor and
Robert Cox: growing price was a factor in many respects really what we do with our large insurance company clients, being wholesale relationships where effectively we work on what amounts to a fee.
John Quinlan Doyle: You know, we work with our insurance company clients. As we talked about when the market was particularly tight last year, while commission is a factor and growing price was a factor, in many respects, really, what we do with our large insurance company clients, which are wholesale relationships, where, effectively, we work on what amounts to a fee. Thank you. Thanks, Andrew. And thank you all for joining us on the call this morning.
John Quinlan Doyle: 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.
John Quinlan Doyle: Thanks, Andrew, and 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 to you again next quarter.
John Quinlan Doyle: 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 to you again.
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