Q3 2024 Marsh & McLennan Companies Inc Earnings Call
Speaker Change: Welcome to Mark McGivney's earnings conference call. Today's call is being recorded.
Unknown Executive: 2020-24 financial results and supplemental information were issued earlier this morning. They are available on the company's website and Marsh & McLennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh & McLennan website. During the call today, we may discuss certain non-GAAP financial measures.
Speaker Change: 3rd quarter, 2024 financial results and supplemental information were issued earlier this morning. They are available on the company's website and markshmaClanon.com.
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 FTC filings, including our most recent Form 10K, all of which are available on the Marshmallow website.
Unknown Executive: For reconciliation of those measures to the most recently comparable gap measures, please refer to the schedule in today's earnings release.
Speaker Change: During the call today, we may discuss certain non-gap-finding shemezures for reconciliation of those measures, so the most recently comparable gap measures please refer to the schedule in today's earnings release.
Unknown Executive: If you have a question, please press star 1-1 on your touchstone phone. If you wish to be removed from the queue, please press star 1-1 again. If you are using a speaker phone, 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 touch-tone phone.
Speaker Change: If you have a question, please press star 1-1 on your text on phone. If you wish to be removed from the queue, please press star 1-1 again.
Speaker Change: If you're using a speaker phone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star one on your chest tone phone.
John Quinlan Doyle: I'll now turn the call over to John Doyle, President & CEO of Marsh & McLennan. Good morning, and thank you for joining us to discuss our third quarter results reported earlier today. I'm John Doyle, President & 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 Clasura of Guy Carpenter, Pat Tomlinson of Mercer, and Nick Studer of Oliver Wyman. Also with us this morning for her last quarter as Head of Investor Relations is Sarah Duet. We'd like to congratulate Sarah on her new role as Chief Financial Officer of Marsh.
Speaker Change: Good morning, and thank you for joining us to discuss our third quarter results reported earlier today. I'm John Doyle, President and CEO of Marshmallow Clinic.
Speaker Change: On the call with me is Mark McGivney, our CFO, and the CEOs of our businesses, part and south of March, Dean Klusor of Guy Carpenter, Pat Tomlinson of Mercer, and Nick Studder of Oliver Wyman.
Speaker Change: Also with us this morning for her last quarter, as head of investor relations is Sarah Dewitt.
Speaker Change: We'd like to congratulate Sarah on her new role as Chief Financial Officer of Marsh.
John Doyle: Before I get into our results, I'd like to take a moment to comment on Hurricane Helene & Milton, which have devastated communities in Florida and the Southeast United States. These events are first and foremost the human tragedy, and our thoughts are with all of those impacted by the storms. Our primary concern has been the well-being of our colleagues and their families, as well as our clients, and we are actively working to assist in their recovery. While the ultimate insured loss won't be known for some time, the impact of these storms will be significant. And given their wide paths of destruction and close timing, they will put enormous pressure on resources available for recovery.
Speaker Change: Before I get into our results, I'd like to take a moment to comment on Hurricane Saline and Milton, which have devastated communities in Florida and the Southeast United States.
Speaker Change: The events are first and foremost the human tragedy and our thoughts are with all of those impacted by the storms.
Speaker Change: Our primary concern has been the well-being of our colleagues and their families, as well as our clients, and we are actively working to assist in their recovery.
Speaker Change: While the ultimate and shared loss won't be known for some time.
Speaker Change: The impact of these storms will be significant.
Speaker Change: and given their wide paths of destruction and close timing, they will put enormous pressure on resources available for recovery.
John Doyle: Both hurricanes also highlight the meaningful disparity between economic loss and insured loss. According to some estimates, Helene may have the largest multiple of economic to insured loss of any U.S. storm. This protection gap imposes a meaningful burden on the economy, makes near-term recovery more challenging, and undercuts resilience. In addition, rising frequency and severity of extreme weather events, higher property values, and increased development in cap-prone areas are driving the need for greater protection. We and the insurance industry help communities, businesses, and governments build resilience to manage these parallels.
Speaker Change: Both hurricanes also highlight the meaningful disparity between economic loss and insured loss.
Speaker Change: According to some estimates, Haleen may have the largest multiple of economic to ensure loss of any U.S. storm.
Speaker Change: This protection gap imposes a meaningful burden on the economy, makes near-term recovery more challenging and undercuts resilience.
Speaker Change: In addition, rising frequency and severity of extreme weather events.
Speaker Change: Higher property values and increased development in cap-prone areas are driving the need for greater protection.
Speaker Change: We and the insurance industry help communities, businesses, and governments build resilience to manage these parals.
John Doyle: But as these storms highlight, there is opportunity to do more through risk mitigation, event preparedness, and alternative solutions, such as community-based parametric products. Turning to our results, the third quarter marked another milestone for Marsh & McLennan. We continue to perform well across our business, and we were thrilled to announce the acquisition of McRiff Insurance Services. In the quarter, we generated five percent underlying revenue growth following 10 percent in the third quarter of last year, reflecting solid execution in RIS and consulting. We were adjusted operating income 12 percent, our adjusted operating margin expanded 110 basis points, adjusted EPS group 4 percent, or 11 percent, excluding a discrete tax benefit in the third quarter of last year, and we completed $300 million of share repurchases in the quarter.
Speaker Change: But as these storms highlight, there is opportunity to do more through risk mitigation, event preparedness, and alternative solutions such as community-based parametric products.
Speaker Change: Turning to our results, the third quarter marked another milestone for Marsh McLeanham.
Speaker Change: We continue to perform well across our business and we were thrilled to announce the acquisition of McGrip and Schernan Services.
Speaker Change: In the quarter we generated 5% underlying revenue growth following 10% in the third quarter of last year reflecting solid execution in RIS and consulting.
Speaker Change: We grew adjusted operating, come 12%.
Speaker Change: Our adjusted operating margin expanded 110 basis points, adjusted EPS group 4% or 11% excluding a discrete tax benefit in the third quarter of last year, and we completed $300 million of share repurchases in the quarter.
John Quinlan Doyle: Turning to McRiff, it is a leading provider of insurance-brokered and risk management services in the US with approximately $1.3 billion in revenue. I have long admired McRiff. They have excellent leadership, talented colleagues, and a track record of strong growth. Their deep specialty and industry capabilities will strengthen the value proposition and expand the reach of Marsh & McLennan Agency in the vast and growing middle-market segment. McRiff's client focus, culture of collaboration, and commitment to excellence and integrity mirror our own. Together, McRiff and MMA will create new opportunities for colleagues to be their best and helping them deliver even greater value to clients.
Speaker Change: Turning to McGrip, it is a leading provider of insurance-broken and risk management services in the US with approximately $1.3 billion in revenue.
Speaker Change: I have long admired McGraph. They have excellent leadership, talented colleagues, and a track record of strong growth.
Speaker Change: Their deep specialty and industry capabilities will strengthen the value proposition and expand the reach of Marshmallow and Agency in the vast and growing middle market segment.
Speaker Change: McGriff's client focus, culture of collaboration, and commitment to excellence and integrity, mirror our own. Together, McGriff and MMA will create new opportunities for colleagues to be their best and helping them deliver even greater value to clients.
John Quinlan Doyle: The $7.75 billion transaction will be funded by cash on hand and debt financing. We expect to close by year end, subject to regulatory approval. We would also expect a transaction to be modestly accretive to adjust the EPS excluding amortization in year 1 and become more meaningfully accretive in year 2 and beyond. We have a terrific track record of acquiring and integrating businesses, and we are excited to welcome McRiff's over 3,500 colleagues to the company when the deal closes.
Speaker Change: The $7.75 billion transaction will be funded by cash on hand and death financing.
Speaker Change: We expect to close by year end subject to regulatory approval.
Speaker Change: We would also expect a transaction to be modestly agreed to adjust the EPS, excluding amortization in year one, and become more meaningfully agreed of in year two and beyond.
Speaker Change: We have a terrific track record of acquiring and integrating businesses, and we are excited to welcome McGivs over 3,500 colleagues to the company when the deal closes.
John Doyle: McRiff has added to what is already an active year for MMA across our business. We are on track record for the largest MMA year in Marsh & McLennan's history with nearly $10 billion of capital committed to acquisitions year-to-date, including McRiff, Vanguard's US-OCIO business, Cardano, Horton, and FBI. These acquisitions highlight our strategy to deploy capital to faster growing segments of our business. As we have said before, we consistently focus on delivering in the near term while investing for sustained growth over the long term.
Speaker Change: McGriff has added to what is already an active year for M&A across our business.
Speaker Change: We're on track record for the largest M&A year in Marshminkland and History, with nearly $10 billion of capital committed to acquisitions year to date, including McGriff, Vanguard's U.S. OCI O Business, Cardano, Horton and FBBI.
Speaker Change: These acquisitions highlight our strategy to deploy capital to faster growing segments of our business.
Speaker Change: As we have said before, we consistently focus on delivering in the near term while investing for sustained growth over the long term.
John Doyle: Shifting to the macro environment, the overall backdrop remains supportive of growth despite what continues to be a complex and volatile landscape. Central banks have begun a cycle of easing, and consensus views of the likelihood of near-term recession for most major economies are well below where they were coming into the year. McRiff's over 3,500 colleagues have begun a cycle of easing and consensus views over the long term. We continue to see economic growth across most of our major markets. Invasion, inflation remains elevated but declining. Labor markets remain healthy, and the cost of risk and health care continue to rise.
Speaker Change: Shifting to the macro environment, the overall backdrop remains supportive of growth, despite what continues to be a complex and volatile landscape.
Speaker Change: Central banks have begun a cycle of easing and consensus views of the likelihood of near-term recession for most major economies are well below where they were coming into the year.
Speaker Change: We continue to see economic growth across most of our major markets.
Speaker Change: Invations, inflation remains elevated, but declining.
John Quinlan Doyle: That said, uncertainty remains with rising geopolitical tensions and continuing conflicts in Ukraine and the Middle East. Clients across the world continue to assess the implications of technology advances and AI, the ever-persistent threat from cyber attacks, supply chain risk, and the impact of increasing frequency and severity of extreme weather events on their businesses. Our talent, expertise, and solutions help clients manage challenges and accelerate opportunities to thrive. So we remain positive in our outlook for growth. We are well positioned and have a track record of performing across economic cycles due to the enduring value we bring to clients and the resilience of our business.
Speaker Change: Labor Markets remain healthy, and the cost of risk in healthcare continues to rise.
Speaker Change: That said, uncertainty remains with rising geopolitical tensions and continuing conflicts in Ukraine and the Middle East.
Speaker Change: Clients across the world continue to assess the implications of technology advances in AI.
Speaker Change: The ever persistent threat from cyber attacks, supply chain risk, and the impact of increasing frequency and severity of extreme weather events on their businesses.
Speaker Change: Our talent, expertise, and solutions help clients manage challenges and accelerate opportunities to thrive.
Speaker Change: So, we remain positive on our outlook for growth. We are well positioned in a track record of performing across economic cycles due to the enduring value we bring to clients and the resilience of our business.
John Doyle: Turning to insurance and re-insurance market conditions, the Marsh Global Insurance Market Index was down 1 percent overall in the third quarter versus flat in the second quarter. Rates in the US and Latin America were up low single digits, Europe was flat, and in the UK, Asia, and Pacific, rates were down mid single digits. Global property rates were down 2 percent versus flat in the second quarter. However, global casualty rates increased 6 percent, with US excess casualty up approximately 20 percent in the quarter. Workers' compensation decreased low single digits. Global financial and professional liability rates were down 7 percent, while cyber decreased 6 percent.
Speaker Change: Turning to insurance and reinsurance market conditions.
Speaker Change: The Mars Global Insurance Market Index was down 1% over all in the third quarter, versus flat in the second quarter.
Speaker Change: Rates in the U.S. in Latin America, we're up low single digits.
Speaker Change: Europe was flat.
Speaker Change: and in the UK, Asia and Pacific rates were down in single digits.
Speaker Change: Global property rates were down 2% versus flat in the second quarter.
Speaker Change: However, global casualty rates increase 6% with U.S. excess casualty up approximately 20% in the quarter.
Speaker Change: Workers' Compensation decreased low single digits, global financial and professional liability rates were down 7% while cyber decreased 6%.
John Quinlan Doyle: In re-insurance, the man continued to rise, and capacity remained adequate in the quarter. While it is too early to know the ultimate insured losses from hurricanes Helene and Milton, we expect there to be an impact on 2025 property insurance and re-insurance pricing. Capons, which posted record volume in the first half, remain likely to have elevated issuance activity through year-end driven by a heavy maturity schedule. And capacity for casualty programs is expected to be adequate despite concerns over the pace of lost cost inflation. As always, we are helping clients navigate these dynamic market conditions.
Speaker Change: In Reinsurance, the man continued to rise and capacity remained adequate in the quarter.
Speaker Change: While it is too early to know the ultimate insured losses from hurricanes, Haleen and Milton, we expect there to be an impact on 2025 property insurance and re-insurance pricing.
Speaker Change: Capons, which posted record volume in the first half, remain likely to have elevated issuance activity through your end, driven by a heavy maturity schedule.
Speaker Change: and capacity for casualty programs is expected to be adequate despite concerns over the pace of lost cost inflation.
Speaker Change: As always, we are helping clients navigate these dynamic market conditions.
John Doyle: Now, let me turn to our third quarter financial performance. We generated adjusted EPS of $1.63, which is up 4 percent from a year ago, or 11 percent, excluding a 10 cent discrete tax benefit in the third quarter of last year. On an underlying basis, revenue grew 5 percent. Underlying revenue grew 6 percent in RIS and 4 percent in Consulting. Marsh was up 7 percent. Guy Carpenter 7 percent. Mercer 5 percent. And Oliver Wyman grew 1 percent. Overall, on the third quarter, adjusted operating income grew 12 percent. And our adjusted operating margin expanded 110 basis points year over year.
Speaker Change: Now, let me turn to our third quarter financial performance. We generated a just at EPS of $1.63 which is up 4% from a year ago or 11% excluding a 10 cent discrete tax benefit in the third quarter of last year.
Speaker Change: in an underlying basis revenue grew 5%.
Speaker Change: Underlying revenue groups 6% in RIS and 4% in consulting.
Speaker Change: March was up 7 percent. Guy Carpenter is 7 percent. Mercer 5 percent and Oliver Weyming grew 1 percent.
Speaker Change: 3rd quarter, adjusted operating income group 12%.
John Doyle: For the nine months, consolidated revenue grew 7 percent on an underlying basis. Adjusted operating income grew 12 percent. And our adjusted operating margin expanded 110 basis points year over year. The Justice EPS was $6.93, up 10% from a year ago.
Speaker Change: and our adjusted operating margin expanded 110 basis points year over year.
Speaker Change: For the nine months, consolidated revenue grew 7% on an underlying basis, adjusted operating income grew 12% and our adjusted operating margin expanded 110 basis points.
Speaker Change: The Justice EPS was $6.93 up 10% from a year ago.
John Doyle: Turning to our outlook, we're well positioned for another great year in 2024. We continue to expect mid-single digital better underlying revenue growth, another year of margin expansion, and strong growth in adjusted EPS. Our outlook assumes current macro-conditions persist. However, the environment remains uncertain, and the economic backdrop could be materially different than our assumptions.
Speaker Change: Turning to our outlook, we're well positioned for another great year in 2024. We continue to expect mid-single digital or better underlying revenue growth, another year of margin expansion and strong growth in adjust to the EPS.
Speaker Change: Our Outlook Assumes Current Macro Conditions Persists.
Speaker Change: However, the environment remains uncertain and the economic backdrop could be materially different than our assumptions.
John Quinlan Doyle: Overall, and please, with our third quarter performance, which demonstrates execution of our strategy and continued momentum across our business. I'm grateful to our colleagues for their focus and determination, and they valued the value they delivered to our clients, shareholders, and communities.
Speaker Change: Over all, and please, with our third quarter performance, which demonstrates execution of our strategy and continue momentum across our business.
Speaker Change: I'm grateful to our colleagues for their focus and determination and they valued the value they delivered to our clients, shareholders and communities. With that, let me turn it over to Mark for a more detailed review of our results.
Mark Mcgivney: With that, let me turn it over to Mark for a more detailed review of our results. Thank you, John, and good morning. Our momentum continues in the third quarter, with solid underlying revenue growth, significant margin expansion, is 4% growth in adjusted EPS, or 11% excluding a large discrete tax benefit last year. Our consolidated revenue increased 6% to 5.7 billion, with underlying growth of 5%. Operating income was 1.1 billion, and adjusted operating income was 1.2 billion up to 12%. Our adjusted operating margin increased 110 basis points to 22.4%. Gap EPS was $1.51; adjusted EPS was $1.63.
Mark Mcgivney: Good morning.
Mark: Our momentum continues in the third quarter, with solid underlying revenue growth, significant margin expansion, is 4% growth in adjusted EPS or 11% excluding a large discrete tax benefit last year.
Mark: Our consolidated revenue increased 6% to 5.7 billion with underlying growth of 5%.
Mark: Operating income was 1.1 billion and adjusted operating income was 1.2 billion up 12%.
Mark: are just an operating margin, increased 110 basis points to 22.4%.
Mark: Gappy TS was $1.51, adjusted ETS was $1.63.
Mark Mcgivney: For the first nine months, underlying revenue growth was 7%. Adjusted operating income grew 12% to 4.9 billion. Our adjusted operating margin increased 110 basis points to 28%. And adjusted EPS increased 10% to $6.93. Looking at risk and insurance services, third quarter revenue was 3.5 billion, up 8% from a year ago, or 6% on an underlying basis. This result marks the 15th consecutive quarter of 6% or higher underlying growth in RIS. You can use the best stretch of growth in two decades. Note that fiduciary income was 138 million in the quarter.
Mark: For the first nine months, underlying revenue growth was 7%, adjusted operating income grew 12% to 4.9 billion. Our adjusted operating margin increased 110 basis points to 28% and adjusted EPS increased 10% to $6.93.
Mark: Looking at risk and insurance services, third quarter revenue was 3.5 billion of 8% from a year ago or 6% on an underlying basis.
Mark: This result marks the 15th consecutive quarter of 6% or higher underlying growth in RIS. You can use the best stretch of growth in two decades.
Mark Mcgivney: In looking ahead to the fourth quarter, we expect to see this amount declined by approximately 30 million, reflecting recent rate cuts and a seasonal drop in fiduciary assets. Operating income in RIS increased 15% to 733 million. Adjusted operating income increased 16% to 775 million, and our adjusted operating margin expanded 130 basis points to 24.7%. The first nine months revenue in RIS was 11.7 billion, underline growth of 8%. Adjusted operating income increased 12% to 3.7 billion. The margin increased 100 basis points to 33.6%. At Marsh, revenue in the quarter was $2.9 billion, up 9% from a year ago, or 7% on an underlying basis.
Mark: Note that fiduciary income was 138 million in the quarter.
Mark: In looking ahead to the fourth quarter, we expect to see this amount declined by approximately 30 million reflecting recent rate cuts and a seasonal drop in fiduciary assets.
Mark: Operating income in RIS increased 15% to 733 million.
Mark: Adjusted Operating income increased 16% to 775 million and are adjusted to operating margin expanded 130 basis points to 24.7%.
Mark: The first nine months revenue in RIS was 11.7 billion underline growth of 8%.
Mark: adjusted operating income increased 12% to 3.7 billion and the margin increased 100 basis points to 33.6%.
Mark: At Marsh, revenue in the quarter was 2.9 billion up, 9% from a year ago, or 7% in an underlying basis.
Mark Christopher McGivney: This comes on top of 8% growth in the third quarter of last year. Growth in the third quarter was broad-based and reflected solid retention and new business growth.
Mark: This comes on top of 8% growth in the third quarter of last year.
Mark: Growth in the third quarter was broad-based and reflected solid retention and new business growth.
Mark Mcgivney: In U.S. and Canada, underlying growth was 6% for the quarter led by strong growth in MMA and in Victor, our MGA business. In International, underlying growth was 7% and comes on top of 10% in the third quarter of last year. Latin America was up 8%, and the A was up 7%, and Asia Pacific was up 5%. First nine months of the year, Marsh's revenue was 9.2 billion with underlying growth of 7%.
Mark: In U.S. and Canada, underlying growth was 6% for the quarter led by strong growth in MMA and in Victor, our MGA business.
Mark: In International, underlying growth was 7% and comes on top of 10% in the third quarter of last year.
Mark: Latin America was up 8%, EMEA was up 7% and Asia Pacific was up 5%.
Mark: First nine months of the year, Marsha's revenue was 9.2 billion, with underlying growth of 7%.
Mark Mcgivney: U.S. and Canada grew 7% and international was up 7%. Guy Carpenter's revenue was 381 million in the quarter, up 6% or 7% on an underlying basis, driven by strong growth in international, including global specialties. For the first nine months of the year, Guy Carpenter generated 2.2 billion of revenue and 8% underlying growth. In the consulting segment, third quarter revenue was 2.3 billion, up 3% from a year ago, or 4% on an underlying basis. Consulting operating income was 462 million, and adjusted operating income was 478 million, up 7%. Our adjusted operating margin consulting was 21.7% in the third quarter and increased at 90 basis points.
Mark: U.S. and Canada grew 7% and each her national was up 7%.
Mark: Guy Carpenter's revenue was 381 million in the quarter up 6% or 7% on an underlying basis driven by strong growth and international, including global specialties.
Mark: For the first nine months of the year, Guy Carpenter generated 2.2 billion of revenue and 8% underlying growth.
Mark: In the consulting segment, third quarter revenue was 2.3 billion up 3% for a year ago or 4% on an underlying basis.
Mark: Consulting operating income was 462 million and adjusted operating income was 478 million of 7%.
Mark: are adjusted operating margin consulting was 21.7% in the third quarter and increase it 90 basis points.
Mark Mcgivney: First nine months, consulting revenue was 6.7 billion with underlying growth of 5%. Adjusted operating income increased 7% to 1.3 billion, and our adjusted operating margin increased 60 basis points to 20.7%. Mercer's revenue was 1.5 billion in the quarter, up 5% on an underlying basis. This was Mercer's 14th consecutive quarter, a 5% or higher underlying growth. Health underlying growth remains strong at 8% and reflected growth across all regions. Career grew 5% where we saw strong growth in rewards and talent strategies. Well, grew 4% driven by continued demand to define benefits consulting and growth in investment management.
Mark: The first nine months, consulting revenue was 6.7 billion. It's with underlying growth of 5%.
Mark: Adjusted operating income increased 7% to 1.3 billion and our adjusted operating margin increased 60 basis points to 20.7%.
Mark: Mercer's revenue was 1.5 billion in the quarter up 5% in an underlying basis.
Mark: This was Mercer's 14th consecutive quarter of 5% or higher underlying growth.
Mark: Health underlying growth remains strong at 8% and reflected growth across all regions.
Mark: Career Group 5% where we saw strong growth in rewards and talent strategy.
Mark: Well, screw 4% risen by continued demand to define benefits consulting and growth and investment management.
Mark Mcgivney: Our assets under management at the end of the third quarter rose to 548 billion, up significantly from the third quarter of last year and up 11% sequentially. Year-over-year growth was driven by the impact of capital markets, our transaction with Vanguard, and positive net flows. For the first nine months of the year, revenue at Mercer was 4.3 billion with 6% underlying growth. Oliver Wyman's revenue in the quarter was 810 million, up 1% on an underlying basis. This reflects a tough comparison to 12% growth in the third quarter of last year, in softness in certain geographies.
Mark: Our assets under management at the end of the third quarter rose to 548 billion up significantly from the third quarter of last year and up 11% sequentially.
Mark: You're over your growth was driven by the impact of capital markets, our transaction with Vanguard and positive net flows.
Mark: For the first nine months of the year, Revenue at Versailles was 4.3 billion with 6% underlying growth.
Mark: Oliver Wyman's revenue in the quarter was 810 million up 1% on an underlying basis.
Mark: This reflects a tough comparison to 12% growth in the third quarter of last year in softness in certain geographies.
Mark Christopher McGivney: We currently see this trend extending into the fourth quarter. The first nine months of the year, revenue at Oliver Wyman was 2.4 billion and increase a 5% on an underlying basis.
Mark: We currently see this trend extending into the fourth court.
Mark: The first nine months of the year, Revenue at Oliver Wyman was 2.4 billion and increased a 5% on an underlying basis.
Mark Mcgivney: Barn Exchange had very little impact on earnings in the third quarter. Assuming exchange rates remain at current levels, we also expect minimal effects impact in the fourth.
Mark: Barn Exchange had very little impact on earnings in the third quarter, assuming exchange rates remain at current levels, we also expect minimal FX impact in the fourth quarter.
Speaker Change: No. We're the items in the quarter with 78 million.
Speaker Change: These included 54 million of restructuring costs, mostly related to the program we began in the fourth quarter of 2022, as well as some transaction related charges.
Speaker Change: Our other net benefit credit was 68 million in the quarter.
Speaker Change: For the full year 2024, we expect our other net benefit credit will be about 270 million.
Speaker Change: Interest Extension at third quarter was 154 million, up from 145 million in the third quarter of 2023, reflecting higher levels of debt and higher interest rates.
Speaker Change: Based in our current forecast, we expect approximately 151 million of interest expense in the fourth quarter, excluding any amounts related to the McGiv transaction.
Speaker Change: Our adjusted effective tax rate in the third quarter was 26.7% compared with 20.5% the third quarter of last year.
Speaker Change: Our tax rate last year included the release of evaluation allowance on foreign deferred tax assets.
Speaker Change: Excluding screen items are adjusted effective tax rate was approximately 26.5%.
Speaker Change: When we get 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 expect an adjusted effective tax rate of approximately 26.5% for 2024.
Speaker Change: Turning to our McGiv transaction.
Speaker Change: McGriff is a terrific company with excellent leadership, a culture similar to MMA's, a diversified business mix, presence in faster growing US markets, and a strong track record of performance.
Speaker Change: We will be paying 7.75 billion in cash consideration, funded by a combination of cash on hand and new debt, and we expect to close by year end subject to regulatory approval.
Speaker Change: As part of the transaction, we expect to assume a deferred tax asset valued at approximately 500 million.
Speaker Change: As we've noted in the past, we've maintained considerable balance sheet flexibility to position us for this type of opportunity.
Speaker Change: We've secured a committed bridge loan facility for the full amount of purchase price and currently plan to replace these commitments with permanent financing in the fourth quarter as we get closer to closing.
Speaker Change: Based on our outlook today, we expect to raise $7.25 billion in new debt to fund the transaction.
Speaker Change: We value our high quality ratings and we're pleased that all three rating agencies recently affirmed our current ratings with no changes in outlook.
Speaker Change: The Financial and Capital Management Plan contemplated in the transaction is not only consistent with maintaining our current ratings, but we also expect a meaningful flexibility for capital deployment next year.
Speaker Change: Although initially our leverage ratios will increase, the substantial cash flow we expect to generate as well as increase debt capacity through earnings growth. Blenable us to bring our leverage ratios back in line with levels necessary to maintain a strong ratings profile.
Speaker Change: As a result, while we intend to pause share repurchases in the fourth quarter, as we think about capital management into next year, we expect we will maintain our balance to approach that includes increasing our dividend and reducing our share count each year, as well as continuing to fund high-quality acquisitions.
Speaker Change: We will obviously have more guidance around our outlook for capital deployment in 2025 on our fourth quarter earnings call early next year.
Speaker Change: As John noted, we expect the transaction will be modestly agreed up to adjusted EPS excluding immunization in year one, becoming more meaningfully agreed up in year two and beyond.
Speaker Change: This transaction is a great reflection of several elements of our capital management strategy, maintaining flexibility to take advantage of opportunities, a bias to reinvest capital for growth, and delivering in the near-term while challenging ourselves to invest to sustain growth into the future.
Speaker Change: Bernie's capital management and our ballad chief, we ended the quarter with total debt, 12.8 billion.
Speaker Change: Our next scheduled debt maturity is in the 1st quarter of 2025 when 500 million of senior notes mature.
Speaker Change: We currently expect to deploy approximately 4.2 billion of capital in 2024 across dividends, acquisitions, and share purchases, excluding the McGris transaction.
Speaker Change: or Cash Position at the end of third quarter was $1.8 billion.
Speaker Change: uses a cash in a quarter total 1.1 billion, and included 444 million for dividends, 435 million for acquisitions, and 300 million for share repurchases.
Speaker Change: For the first nine months, uses of cash total 3.3 billion, including 1.1 billion for dividends, 1.3 billion for acquisitions, and 900 million for share repurchases.
Speaker Change: I want to spend a minute on our plans to change how we report adjusted EPS.
Speaker Change: Starting next year, we will exclude the impact of acquisition-related amortization from Adjusted ETF.
Speaker Change: We will also exclude the other Net benefit credit, another non-cash item.
Speaker Change: These changes will improve the capability of our results and give investors a better sense of our core earnings power.
Speaker Change: It will also conform our adjusted EPS reporting with how we report adjusted operating margins.
Speaker Change: While they continue to be uncertain, Dean E. 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, we are 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-digitor better underlying growth, margin expansion, and strong growth in adjusted EPS with that, I'm happy to turn it back to John.
John Doyle: Thank you Mark, Andrew, we're ready to begin Q&A.
Speaker Change: Certainly, we will now begin the question and answer session. If you have a question, please press star one one on your touchstone phone.
Speaker Change: If you wish to be wrong from the queue, please press star one one again.
Speaker Change: If you're using a speaker phone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star 11 on your touchstone phone.
Speaker Change: In the interest of addressing questions from its many participants as possible, we ask that participants limit themselves to one question and one follow a question.
Speaker Change: And our first question comes from line of the least green span with Wells Fargo.
Speaker Change: Hi, thanks. Good morning. My first question is on the griff deal. When you guys say, right, did you expect it, you know, creative to, you know, earnings less intangibles?
Speaker Change: What are your, can you give us some color on what your assumptions are on for revenue growth relative to the 1.3 billion that you're taking on and then also what are you assuming for margin? I got my questions for the year one guide but any guide you kind of want to give us, you know, for you to and beyond would be helpful as well.
Speaker Change: Fairly, and thank you for the question, you know, I just want to reiterate how excited we are to bring welcome McGivney to the family, you know, obviously subject to regulatory approval day.
Speaker Change: have a really strong culture, it's a competitive group, they're so client-focused, you know, I spoke to the town, my prepared remarks, and you know, they'll extend our reach into, you know, it's a vast and fragmented middle market, they have excellent specialty capabilities and industry focus.
Speaker Change: and working together with MMA.
Speaker Change: We know they can drive better outcomes for clients and we can create new opportunities.
Speaker Change: and for their colleagues as well, so...
Speaker Change: So we're excited about all that, you know, we've shared
Speaker Change: You know, the details that we're going to share about the business, you know, like other MMA transactions, you know, disclose their margins when we acquire them or for that matter, you know, how they're growing or but we're excited about it. You know, as I said, it'll be modestly a creative in your one and more so after that.
Speaker Change: and we expect to earn a good return on the investment over time. So there are synergies, of course, but we're conservative in our modeling and we're very excited about what the combination can mean.
Speaker Change: Thanks. And then my follow-up on U.S. and Canada, you know, growth was, you know, 6% again, this quarter. Can you just give us a sense of some of the dynamics that you're seeing within that market? And then relative to like the IPO and back in that business right that's been a headwind, you know, for a couple years. Have you seen any any improvement there in the quarter?
Speaker Change: I'm sure, you know, I'd start at least just with, you know, overall I'm very pleased with our underlying growth in the quarter. I thought we had a terrific quarter, Mars, Guy Carpenter and Mercer all had.
Speaker Change: Terrific growth.
Speaker Change: and it was really wide spread across all regions and practices and so I felt good about that. We obviously had a softer quarter of growth at our alignment but overall I thought the growth was good and we're well positioned.
Speaker Change: You know, he spoke to the macro environment, it is shifting and changing and you know, obviously interest rates have begun to come down in some major economies around the world and you know, that's meant some new opportunity.
Speaker Change: in SPACs and IPOs. Well, maybe not SPACs, but IPOs and M&A activity were starting to pick up a bit, but Martin, maybe you could talk a little bit about the US market place and some of the opportunities we're seeing. Sure, Jamminder. Thank you. As you said, very pleased with the online growth of 7%.
Speaker Change: which is kind of in line with the 8% and 3223 and 3222.
Martin: Very good balance of growth across international and in the U.S. but I'll double click a little bit on the U.S. perform very well six on top of the six in Q3.
Martin: is a very good growth from MMA and Vector.
Martin: and so this is question, we did see double digit growth in the capital markets and M&A products.
Martin: Construction Aviation perform well, and globally, you know, very strong growth in our benefit business as well. So, oh, will please for that to momentum and, you know, expect that to continue. The double digit growth at least in capital markets, of course, is off a lower base right after after a couple of years of, you know, a soft environment there. So, thank you for your questions. Andrew, next question, please.
Speaker Change: I absolutely.
Speaker Change: The next question comes from the line of Jamie Bealor.
Speaker Change: with J.K. Morgan.
Jamie Bealor: Good morning. So first, just had a question, following up on your comments on Milton and its impact on the market. So just specifically on re-insurance, just wondering what your expectations are on how Milton affects renewals and should one assume that prices could actually go up or they're just going to go down and that's given the high loss.
Speaker Change: Yeah, I think Jimmy, at the end of the day, it's too early to know that, you know, at this point, you know, there's obviously a range of estimates out there and the ranges are quite wide and so there's still a lot for us to learn.
Speaker Change: and many property owners are just getting to their facilities at this point. And so, you know, I spoke about the overall economic impact to the southeast.
Speaker Change: What it means to those communities, you know, to human level as well, it's going to be a challenging recovery and it's going to extend for a bit of period of time.
Speaker Change: You know, maybe I could ask Dean to comment a little bit about what we're expecting in advance of those storms and you know, any thoughts he has on the impact it might have.
Speaker Change: and Jimmy, as we entered the kind of fall conference season.
Speaker Change: You know, ahead of Haleen and Milton, I think are clients.
Speaker Change: and we anticipated, you know, a very competitive market environment.
Speaker Change: at the upcoming January 1 property capital rule.
Speaker Change: I think post-milton, you know, it's still early, but I think we see a flattening, a pricing, and a property cat market at the upcoming January 1 renewal. If you think about kind of lower and mid-level layers and programs.
Speaker Change: We kind of see risk adjusted, flat-ish.
Speaker Change: at this point without all the data in.
Speaker Change: and you can still see some softening, some rate reductions in more, you know, remote risk layers and property cat towers.
Speaker Change: said, you know, keep in mind it's early, we're still in wind season, there could be additional cat events over the next several weeks that would shape the market and as John noted, you know, it'll be several weeks before we have sufficient claims data to make accurate loss estimates and those impacts on our clients. And right now we're just relying on all of our cat modeling partners to come up with some of those estimates.
Speaker Change: But to sum it up, Jimny, I would say overall property cat demand should increase a January 1 from our clients.
Speaker Change: We think capacity in a marketplace will be adequate, we think there renewal will be manageable for most of our clients.
Speaker Change: You know, the market is well capitalized to trade forward and meet client demand and keep in mind. I think to headline Jimmy is, the major of the cat losses this year will be borne by our clients, given the high attachment points that were imposed on them after hurricane in two years ago.
Speaker Change: Thank you Dean, Jimmy, do you have a follow-up? Yeah, just on Oliver Vieman, obviously the Comps were tough as well, but you noted the seeing weakness in some geographic regions, was that a function of the economy or is there something else that's caused death affecting results in the areas that you mentioned?
Speaker Change: Yeah, sure, you know, 1% obviously underlying with softer, you know, we'd plan for, you know, it was a tough comp and we're up 5% year to date and you know what I would also say is, you know, I mentioned to you in the past.
Speaker Change: is going to be more volatility quarter to quarter at Oliver Wyman. We do expect higher underlying revenue growth from Oliver Wyman over the medium to long term, but Nick maybe you could share some insights on what you're seeing in the market. Thank you, Jimmy. We often say this is a mid to high single digit.
Speaker Change: Business through the cycle, and I think it's first day.
Speaker Change: We're at a low point in the cycle and we've talked for a few quarters now.
Speaker Change: About that being a tough market and we do see that continuing.
Speaker Change: Maybe at a macro level I just note we're more than 50% larger than we were pre-pandemic were two-thirds larger than that pandemic year and I think we are consolidating those gains in that tough market.
Speaker Change: but to the quarter itself no one likes a one, no one likes a one following a three.
Speaker Change: They were at 12-11 Com. Thank you for noting that in the question. When we look at the year as a whole, we're a five.
Speaker Change: I think I do want to note wrong the front foot.
Speaker Change: in organically as well, because the reports of our business were stale does matter. And so the business is 8% larger than in the same period, first three quarters of last year. And that represents a form of progress.
Speaker Change: We've seen very strong growth in Asia and a specific region bouncing back from a tougher period and our Indian Middle East Africa business continues to grow. The regional of that is linked to...
Speaker Change: The sector lives, our best growth has been in our communications media and technology practice, on insurance and asset management practice growing very strongly, and automotive manufacturing doing well, and our large banking practice continuing to be pretty robust.
Speaker Change: but overall we see it as being a relatively tough market which will continue to work our way through.
Speaker Change: Thank you, Jimmy, for your questions. And your next question, please.
Speaker Change: Our next question comes from the line of Greg Peter.
Speaker Change: with Raymond James.
Greg Peter: Good morning, I guess for my first question, I'd like to focus on the free cash flow results I was looking in the statement of cash flow, so operating cash flow through the nine months down a little bit, not growing in line with revenue and just I'm sure there's some...
Greg Peter: Ramon, puts in takes and they're just... [inaudible]
Greg Peter: and some color there would be helpful.
Speaker Change: Yeah, sure Greg, you know, as we've noted in the past there's going to be more volatility to free cash for a growth certainly than our earnings growth, but Mark, maybe you can share some some color. Yeah, just I'll repeat that, John. I, I, we...
Speaker Change: Free cash flow is something that, you know.
Mark Mcgivney: is volatile quarter to quarter in year to year. So best looked at over long stretches of time. Our track record in free cash flow growth, as we noted before, has been terrific. So we're double digit free cash flow growth for a decade plus.
Mark Mcgivney: and that's what you'd expect for a company that's grown at TPS, double-digit, you know, given our high-cast generation capital A-Toi.
Mark Mcgivney: is a great model. There's no story in the results year to date. So, free cash flow is down, year to date was up 28% last year, was actually up in the third quarter. So, what you're seeing year to date.
Mark Mcgivney: is just a number of factors that caused this period to period volatility. So we had higher variable compensation payouts in the first quarter because of our strong results last year. Receivables are up because of growth and it's just a little bit of business mix and timing. And there's just a handful of one-timers in last year's period this period that affect the year-over-year comparison. So overall we have an outlook for continued strong growth in earnings, and therefore our free cash flow growth into the future should be strong as well.
Speaker Change: Thanks, Mark Greg, do you have a follow-up? Yeah, Mark, in your comments, I think you mentioned something about fiduciary income and interesting.
Greg Peter: and Com and provide it some guidance and I'm wondering if you could just keep.
Greg Peter: You guys are flying through so many comments.
Greg Peter: if you can just revisit those comments.
Greg Peter: And sort of, I think you're framing it for fourth quarter. [inaudible] you're, you're, you're,
Greg Peter: If we could push it out, you know.
Greg Peter: and Captain.
Greg Peter: sort of frame it for next year or two for us would be helpful.
Speaker Change: Yes, sure. Let me repeat what I said. We did have a lot in the script this quarter. So, we just wanted to flag that as we look into the fourth quarter, we typically see, especially in Guy Carpenter, just given the seasonality of their revenue with so much activity in the first half, we do see fiduciary balances that tend to fall off in the fourth quarter. So, we do expect fiduciary income to be 30 million or so lower in the fourth quarter from the level we saw in the third quarter. And it's a combination of the rate cuts that have happened.
Speaker Change: and the impact that they will have, as well as the seasonal drop in, to do sure it balances. You know, we look out to 2025, it's really going to depend on what rate actions have been.
Speaker Change: from here. What happens in the balance of this year or what happens in the next year? And so we're going to stay away from speculating there, but just to repeat some of the things we've said in the past. The math is pretty straightforward. So we've got roughly 11.5 billion of balances on average these days. And so you can use that as a basis to try to do some sensitivity analysis around what that could mean to fiduciary income. There would be some offsets. There is some interplay with some of our variable compensation programs. We obviously would pay less in terms of interest on short-term debt. But we'll just have to wait and see what happens with the further cuts as we look into next year.
Greg Peter: Greg, I would just add, you know, we're accustomed to operating in a lower rate environment, so, you know, we'll adjust our, you know, our plans accordingly, it, you know, will likely be an increasing headwind for us into, in 2025.
Greg Peter: We model out various scenarios, not just from this headwind, but from other headwinds as well, and so, you know, we...
Greg Peter: We make plans accordingly, but a lower and great environment could also, you know, likely will impact other parts of our business as well, you know, we touched on.
Greg Peter: in increasing transaction risk.
Greg Peter: You know, as a result of...
Greg Peter: Fire, Volume, and M&A Markets, IPOs, Construction, Verser, Weld, of course, overall our cost of capital. You know, we'll be impacted as well. So there'll be lots of ins and outs from a lower rate environment, and we're working our way through all those issues.
Speaker Change: Thanks, thank you Greg, Andrew next question.
Speaker Change: The next question comes from the line of Mike, is it a rimster?
Speaker Change: Key with BMO Capital Markets.
Speaker Change: Good morning. Thanks. First question on the things on the update on the marsh.
Speaker Change: Pricing Index, which moved to negative one territory, I believe. Can you help tease out how this index and kind of pricing in this marketplace is having an impact on marshes organic growth? I know that there's an element of fees and then commissions as well, but as this is the index as it's desolated in the last year or so, has it had any material impact on your marshes rate of organic growth?
Speaker Change: Look, you know, first of all, Mike, what I would say is that, you know, the markets overall on average are stable.
Speaker Change: In sure is a picked-up quite a bit of price over the course of the last several years, so...
Speaker Change: You know what?
Speaker Change: Minus 1 was, you know, some welcome relief at least for many of our clients at, you know, at March. After what's been a tough pricing environment, of course.
Speaker Change: Price is ultimately a reflection of the cost of risk over time. And so...
Speaker Change: You know, as I mentioned in my prepared remarks, the cost of risk I'm continues to escalate. About half of our business at Marsh's is sensitive to revenue, that is a sensitive to PNC pricing through commission. The rest of it, of course, is on a fee. And it's not a direct line. You know, you have, you know, you have buying habits, you know, changes. Mark itself in a bit.
Speaker Change: The risk environment changes, you may have clients, retain less risk than they had over the course of the last few years we've talked.
Speaker Change: on prior calls, for example, about the growth in our captives business, the premium and the captives that we manage have been growing faster than the premiums that we seed into the marketplace. You know, if the market continues to give a bit more competitive, that may change. So obviously it has an impact, but it's not a straight line from, you know, from price. But I would also point out to you is that our index is skewed to large accounts and that the middle market pricing is more stable and it's up. We're going to meet single digits.
Speaker Change: I hope that's helpful.
Speaker Change: You have a follow-up? Yeah, quick follow-up. I'll stick with your pricing commentary. Hopefully other people ask about commercial health being strong. But um, so the U.S. actually, I don't get, I believe you said was lost 20. Um, that's a pretty big number. Um, maybe you can talk about it whether, you know, there's this location in that marketplace or, you know, what's going on? Is it going to be moved to the E&S market? Or maybe that's not even an E&S, um, you know, maybe just anything, any car you could add that seems like it's a, uh, a number that's distressed first, certain, some of your
Speaker Change: Yeah, I'm sure my guy on the last call in fact, I talked about, you know, some real troubling signs in the U.S. liability market, maybe I'll ask Martin to share some insights on, you know, what we're seeing in that marketplace.
Speaker Change: Thank you, John.
Speaker Change: I've just started with a comment that over the composite racing index is about one and a half times since 2012.
Speaker Change: The casualty book is up 6% in North America with the access book, up 21%.
Speaker Change: and...
Speaker Change: At the moment we're not seeing dislocations in that the capacity that clients are requesting, we can place.
Speaker Change: There are smaller limits that ensures have and we're doing jobs to think what we can do to place quota-share programs for our clients.
Speaker Change: to Boy Compression of Le Mans.
Speaker Change: So we don't see anything too sinister in terms of supply for clients at this point. Certainly there's been a movement to the ENS market and we're big players in that space and that segment of the market has grown significantly. There's more agility and rate movement in those areas there so we're well positioned to help them with that and we'll be continuing to work with them as our clients deal with some of the social inflation that we talked about in the past as well. So lots of other services that we need to wrap around that to help our clients navigate this market.
Speaker Change: Thank you, Mike and thank you Martin. Andrew next question, please.
Speaker Change: Our next question comes from the line of Brian Meredith with UBS.
Brian Meredith: Yes, thank you. First one for Dean on the reinsurance side. You mentioned that you expect ample capacity in the castly lines. I'm just curious, can you maybe talk a little about how are the reinsurers you think going to be reacting to this torquent inflation?
Brian Meredith: and we continue to see in the marketplace at one one, you think.
Brian Meredith: Let's see a lot of tightening in terms of conditions, you know, what are you hearing, what are you seeing from them?
Speaker Change: We have thanks Brian. I'll hand it to Dean in a second, but you know, lost cost inflation.
Speaker Change: in casual T-lines, remains a real challenge for the Mark in place overall, and we're concerned about it from our clients perspective.
Speaker Change: and was the talk of the comfort season, I think, in advance of Alina Millden, so, you know, Dean maybe you could share some thoughts on what you're seeing and reinsurance casually. Yeah, thanks, John. You know, Brian is, is John said, I think.
Brian Meredith: You know, re-insures generally continue to express great concern about the US casualty re-insurance market.
Brian Meredith: focused in particular on excess casualty as noted by John and Martin for all the factors we've been discussing.
Brian Meredith: You know, that that said as we headed the one-one renewal season, you know, we think current market conditions will largely prevail in the casualty market at one-one, you know, that said we continue to see downward pressure on seeding commissions.
Brian Meredith: for Quartershare deals, you know, averaging 100 basis points, you know, therefore, you know, that's a rating increase.
Brian Meredith: Um...
Brian Meredith: Excessive loss contracts, more robust rating increases in the 5 to 25% range, and maybe many structural changes.
Brian Meredith: to get those deals across the line.
Brian Meredith: You know, we do expect adequate capacity in the marketplace.
Brian Meredith: may be more limited for XOL deals.
Brian Meredith: You know thus far, you know these deals are challenging, but they're getting done, they're getting across the line in the marketplace.
Brian Meredith: and I really think the key for our clients as Martin and John are said is going to be the performance of their underlying portfolios.
Brian Meredith: Are they getting underlined rating creases in their books?
Brian Meredith: Are they managing limits and excess casualty in other lines? That will be the, you know, the key formula for successful renewal But, you know, casualty is challenging right now in the market, but we think it's stable and most heels will get done So clear signs of lost cost inflation, lost development patterns disrupted by, you know, the impact of the economy and closing of courts and during the pandemic and then, you know, kind of the economic rebound, so it's, you know, it's challenging for all of us to get our arms around it, and we're obviously doing our best to help clients navigate the uncertainty around it
Speaker Change: Brian , do you have a follow-up? Yeah, absolutely. I know we talked about this before, but maybe just your perspective on the business continued to flow to the non-emitted market. Do you think that's slowing here? And then also, you know, how can Marsh kind of react to that to mitigate that or maybe recapture Sharon? Does McGriff have anything? [inaudible]
Speaker Change: You know, they're good.
Speaker Change: potentially help you benefit you in the non-imitted.
Speaker Change: Area.
Speaker Change: Well, to be clear, we're not losing share as a result of the growth in the E&S market, of in the United States, you know, you're seeing.
Speaker Change: and you have seen and observed outside growth in...
Speaker Change: Holsale Burking, you know, as a result of that. But we have access to those markets and we'll access that capital if it's the right solution for our clients. Generally, we prefer admitted solutions for our clients given what comes with, you know, with being an admitted insurer. So, you know, our strategy is about accessing as much of the market directly including the INS, I'm insurers as possible.
Speaker Change: Overwhelmingly.
Speaker Change: The E&S premium that we place into the market today, we do directly today, right? So to be clear, in terms of market growth, future market growth, you know, it's hard to say but, you know, and I certainly understand in this dynamic risk environment, certainly multi-channel insurers that have both admitted and not admitted, why they want...
Speaker Change: and your next question, please.
Speaker Change: Our next question comes from the line of Grace Carter.
Speaker Change: with Bank of America.
Grace Carter: Hi, everyone!
Grace Carter: I was hoping to ask a couple of clean up questions regarding the griff. Is there any possibility that y'all might give us some of the below the line impacts like how much you're thinking, amortization might increase associated with the deal in any sort of transaction or integration expenses that we should expect over the next few quarters? Thanks.
Speaker Change: Good morning, Grace and thanks for the question. No, we're not prepared to do that. You know, as I said.
Speaker Change: of typical NNA transactions, you know, having disclosed margins or the underlying performance of the businesses, other than I will say.
Speaker Change: Episode 2
Speaker Change: Thanks. And I guess on the tax rate, I know it's a bit early to be looking at next year, but just kind of considering how the geographic mix of the business might be impacted by the deal. I mean, it's kind of the 25 to 26.5 original guide for this year still kind of fair to assume. And while we're on the subject of tax, you could help us maybe think about the timeline for utilizing the DTA that you're getting. Thank you.
Mark Mcgivney: Well, we're not going to guide to 2025. We'll talk about that in January on the call. So Mark, anything, you know, to share on tax overall? Just your question on the deferred taxes. So the value I talked about is the present value of the future tax deduction stream that we affect again. That is going to go out over a long period of time.
Speaker Change: Thank you. Thank you, Grace. Andrew next question, please. Certainly.
Speaker Change: Our next question comes from the line of Rob Cot.
Speaker Change: with Goldman Sachs.
Speaker Change: this
Speaker Change: Hey, thanks. Appreciate that it's the largest M&A year in MMC's history. I'm curious if the price you're paying for top 100 brokers has changed your thought process at all on relative capital deployment across the different avenues.
Speaker Change: You know, look, we've talked about our approach to capital management, we've favor investing in the business over, you know, over by Vax, you know, we.
Speaker Change: As you know, aspire to be a, to raise our dividend each and every year as well.
Speaker Change: You know, we've...
Speaker Change: have our responsibility, obviously, to be good stewards of our capital, so you know, we are, although multiples have increased over the course of the last several years.
Speaker Change: We have a great confidence in our ability to earn a return well in excess of our cost of capital and so should that change or should we see a deal that, you know, one.
Speaker Change: doesn't accomplish those objectives. We'll deploy capital elsewhere.
Speaker Change: We have a very strong reputation as a buyer in the marketplace.
Speaker Change: We spend a lot of time game planning various scenarios from small to mid-sized kind of tuck-in store business to...
Speaker Change: You know, to more material deals, you know, like McGrifft and we're very well positioned in that marketplace. Mark talked about, you know, even after McGrifft we maintain a lot of flexibility. If we see the opportunity to make, not make ourselves, not just bigger, but better as a business going forward.
Speaker Change: So that's our approach.
Speaker Change: You follow up, Rob?
Rob Cot: Yeah, thanks John. Yeah, I just wanted to ask a question of something that I feel like doesn't get a lot of airtime, but I was hoping to get an update on the commission rates and fee rates and the brokerage operations. Is there anything you can tell us about how these take rates have changed over the course of the hard market in recent years and if not what's driving the stability?
Speaker Change: So, um...
Speaker Change: I don't view the last several years as a hard market. I thought what we observed as challenging it was for our retail clients at Marsh was largely a catch-up period for insurers on average to catch up with the accelerating loss cost. It's not to say certain markets in a shorter period of time, we're challenging. For example, when ransomware picked up in the cyber market.
Speaker Change: The underrated community have not really priced for that kind of risk. You know, the market jumps pretty quickly, but then it settled quite quickly as well. And in fact, you know, the market is coming back in favor of our retail clients a bit at the moment. So I would start with that. But over a fairly extended period of time are our average commission rates at Mars have ever made fairly fairly stable. From product line to product line, you know, there's, you know, there's some movement, but for the most part, average acquisition expense through, through Marsh has been pretty constant.
Speaker Change: Thank you Rob for your questions.
Speaker Change: Andrew
Speaker Change: Another question, please.
Speaker Change: Yes, our next question comes from the line of Andrew Clegerman.
Speaker Change: with 3D Cowan.
Andrew Clegerman: Thanks for taking my questions. John, it's kind of work.
Andrew Clegerman: You know what's good?
Andrew Clegerman: You're underlying growth in RIS, you know, nothing shy about standing.
Andrew Clegerman: and we looked last year at double digit underlying growth this year.
Andrew Clegerman: and it's kind of decelerated down to 6% which is still excellent.
Speaker Change: But the question before you go forward, I know you guide to mid-single digit or better underlying growth across businesses. So what kind of gives you the confidence that it kind of holds in this?
Speaker Change: i know
Speaker Change: Six-one, maybe even slightly less, and doesn't decelerate further.
Speaker Change: Thank you, Andrew. We always have time for your Andrew just to be
Speaker Change: just to be clear.
Speaker Change: Um, you know, look, as I mentioned in our, in my prepared remarks.
Speaker Change: and the macro environment remains supportive of growth.
Speaker Change: Overall, uh-oh, the fire alarm here, sorry.
Speaker Change: Jack, we'll check in on that, but I'll try to push through it, and hopefully everybody can.
Speaker Change: Kenny Harris, let's go.
Speaker Change: But, uh...
Speaker Change: You know, we're in this elevated risk environment and geopolitical risk frequency and severity of weather.
Speaker Change: Cyber Events, LawsQuest Inflation, all those things, you know, creating opportunities for us to have clients and, you know, pricing is moderated, but markets have been disciplined.
Speaker Change: I'm over there
Speaker Change: and we've been very focused on building and adding to our capabilities, right, and, you know, a grips kind of the latest example of that, investing organically and inward organically.
Speaker Change: We've been reshaping the mix of our business over time, right? So McGriffin, another example of the point capital into the faster growing middle market. I would also note that we're working together better than we ever have as well. That's striving some real growth opportunities for us as well. So again, we'll guide you know around 2025 in January , but I feel like we're executing well and in this elevated risk environment. There's real opportunities for us to continue to drive good growth in our business.
Speaker Change: Got it, and you just touched on me faster, you know, the faster growth in MMA. Any color, John, that you could provide around, you know, how much it outpaces a large corporate business.
Speaker Change: Yeah, I mean, we're not going to disclose kind of segment growth, but it is higher. It's over time. And by the way, not in every quarter and in every year for that matter over the course of the last several years has it outpaced, you know, the upmarket growth at March, but but it's been a more consistent growth business for us. And you know, what what really excites me about that market in place is how we can bring scale benefits to clients really at a different level. So I think my grips is a great example. It's a terrific business with outstanding fundamentals, terrific leadership.
Speaker Change: Outstanding talent, all throughout its business, and we've shown, and as we've brought firms into MMA, we can make them even stronger. We can bring capabilities from MMA and more to help them better serve clients, so we are excited about that.
Speaker Change: So thank you, Andrew, I appreciate the questions, and Andrew, I think we'll wrap up the call at this point given that we're having a fire alarm in our building. So I want to thank you all for joining us on the call, and closing. I want to thank our colleagues for their hard work and dedication. I also want to thank our clients for their continued support. So thank you all, and we look forward to speaking with you again next quarter.
Speaker Change: Ladies and gentlemen, thank you for participating.
Speaker Change: and the Stels conclude today's program.
Speaker Change: and you may now disconnect.
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