The operator introduces the Marsh McLennan earnings conference call and reminds listeners that the call is being recorded. They also mention that the company's financial results and supplemental information are available on their website and that the remarks made during the call may include forward-looking statements. The CEO, John Doyle, and other executives of the company are present on the call. The company had a successful year in 2023 with a 10% increase in revenue and 17% increase in adjusted operating income.

In 2023, Marsh McLennan reported a 130 basis point increase in adjusted operating margin and a 17% growth in adjusted EPS. They invested $1.6 billion in acquisitions, the largest in two decades. They also optimized their portfolio and returned capital to shareholders through a dividend increase and share repurchases. The company's success is attributed to their well-defined strategy, which includes building a strong culture, investing in capabilities, and leveraging data and innovation. They are well-positioned to help clients manage various risks, as shown by their launch of the Unity facility with Ukraine.

Marsh McLennan, along with Marsh, Oliver Wyman, and Guy Carpenter, have created a public-private partnership to provide affordable war risk insurance for grain shipments in the Black Sea. This initiative, called Unity, aims to support the Ukrainian economy and global food security. The company is proud of this achievement and sees it as an example of their purpose, capabilities, and impact. They also have a balanced approach to expense and capital management and are focused on generating strong earnings growth. Despite a complex macro environment, they believe there are factors that support growth in their business.

Inflation is still high and labor market and supply chain challenges persist, leading to increased costs for insurers. Healthcare costs are also expected to remain elevated. Primary insurance rates have increased for 25 consecutive quarters, while reinsurance market conditions have become more balanced compared to the previous year. Underwriting discipline continues, but the market is more responsive to client objectives. Capacity is generally adequate, and rates for property cat reinsurance have increased modestly for accounts without losses and 10-30% for loss-impacted accounts. Casualty programs are facing more scrutiny, but capacity is still adequate.

Marsh McLennan had a strong fourth quarter and an excellent year overall. Their revenue and earnings grew significantly, and they made strategic investments and increased dividends. Looking ahead, they expect continued growth and margin expansion, but acknowledge potential uncertainty in the economic climate. In the fourth quarter, their consolidated revenue increased 11%, operating income was $1.1 billion, and adjusted operating income was $1.2 billion, with an adjusted operating margin of 23.3%. For the full year of 2023, operating income was $5.3 billion and adjusted operating income was $5.6 billion, a 17% increase from the previous year.

In 2023, the company saw strong financial performance with adjusted EPS growing 17% and adjusted operating margin expanding by 130 basis points. They also deployed $4 billion in capital, raised their dividend, and received an upgrade in their debt rating. In the risk and insurance services division, revenue increased by 11% in the fourth quarter and 11% for the full year, with operating income growing by 15% and adjusted operating margin expanding by 140 basis points. At Marsh, revenue increased by 7% in the quarter and 8% for the full year, with strong growth in the US and Canada and internationally. Guy Carpenter also saw a 9% increase in revenue for the quarter.

In 2019, Guy Carpenter generated $2.3 billion in revenue and saw 10% underlying growth, their strongest year since 2003. The consulting segment had a fourth quarter revenue of $2.3 billion, a 10% increase from the previous year, with operating income of $443 million. Mercer's revenue was $1.4 billion in the quarter, with underlying growth of 5%. Health and Wealth both saw growth, and assets under management increased by 11%. Mercer's revenue for the year was $5.6 billion, the best result since 2008. Oliver Wyman's revenue in the fourth quarter was $856 million, a 9% increase on an underlying basis. For the full year, their revenue was $3.1 billion, reflecting 8% underlying growth. Adjusted corporate expense was $78 million in the quarter.

In the fourth quarter, foreign exchange had little impact on earnings and is expected to have a negligible impact in 2024. The company had $90 million in noteworthy items, mostly related to restructuring actions. They expect to incur $475 million in charges and realize $400 million in savings from the program launched in 2022. The company had a net benefit credit of $59 million and expects a similar amount in 2024. Cash contributions to global defined benefit plans were $111 million in 2023 and are expected to be similar in 2024. Investment income was a loss of $1 million and no income is projected for the first quarter of 2024. Interest expense was $151 million in the fourth quarter, up from $127 million in the same period in 2022. The company expects interest expense of $625 million for the full year 2024. The adjusted effective tax rate in the fourth quarter was 25.5%.

The company's adjusted effective tax rate for the full year 2023 was 24%, and for 2024 it is expected to be between 25.5% and 26.5%. The company ended the year with total debt of $13.5 billion and has scheduled debt maturities in the first and second quarters of 2024. The company's cash position at the end of the fourth quarter was $3.4 billion, and uses of cash in the quarter included dividends, acquisitions, and share repurchases. The company follows a balanced capital management strategy, prioritizing investment in the business and favoring acquisitions over share repurchases. However, the company also recognizes the importance of returning capital to shareholders and aims to raise dividends and reduce share capital each year.

The company expects to deploy $4.5 billion in capital for dividends, acquisitions, and share repurchases in 2024, but the level of share repurchases will depend on the M&A pipeline. Despite uncertainty in the global economy, the company remains optimistic about its momentum and position. They expect mid-single-digit revenue growth, margin expansion, and strong growth in adjusted EPS for 2024. The company does not plan to change its reporting to back out intangibles from adjusted EPS, unlike other insurance brokers. In the US and Canada, lower flood business was a one point headwind, while growth slowed in EMEA.

In response to a question about the company's recent quarter and organic growth in the EMEA region, John Doyle and Martin South discuss Marsh's overall strong performance and 8% underlying revenue growth for the year. They mention some challenges in the US market, such as pressure on financial minds and flood claims in the MGA business, but overall they are confident in the company's momentum and demand for their services in 2024.

The speaker, John Doyle, is responding to a question from Jimmy Bhullar about the reinsurance brokerage business. John states that Guy Carpenter had an excellent year in 2023 and is well-positioned to help clients in the future. Dean Klisura then provides more details about the 1/1 renewal in the reinsurance market, stating that there was adequate capacity and a balanced market, but reinsurers held firm on terms and conditions and attachment points did not come down. Overall, the renewal was positive.

At the 1/1 renewal, clients were able to get more capacity than last year and saw rate increases ranging from flat to high single-digit for non-loss impacted portfolios. However, those with cat losses saw rate increases of 10% to 30%. The casualty renewal saw slightly more muted pricing movement than anticipated, but there was downward pressure on seating commissions and double-digit rate increases for excess of lost contracts. The pace of loss cost inflation in casualty is a challenge for the market to sort through. Fiduciary investment income declined modestly due to seasonality.

The speaker discusses the pattern of seasonality in their balances, where Q4 and Q1 tend to be seasonal lows. They attribute this to external factors and state that their outlook for 2024 is positive. They also mention that they continue to invest in their business and that demand remains strong. The speaker then switches gears to discuss Mercer.

John Doyle and Martine Ferland discuss the performance and outlook of the health segment in 2024. They mention that health was a strong area for the company in 2023 and will continue to be a focus in 2024. They attribute the success to factors such as full employment and innovative solutions. While medical cost inflation is a factor, it is not a major driver of results. The company is focused on helping clients control costs through better design and access to healthcare.

The speaker is asking about the drivers of growth in Oliver Wyman, a company that had a slow start to the year but finished strong. The response highlights wide-based growth in various regions and capabilities, including economic research, digital, finance and risk, restructuring, public sector, and insurance. The speaker also mentions strong growth in the Middle East and in the banking and life insurance sectors.

The speaker discusses the growth and success of their company in recent years, particularly in the areas of post-merger integration and M&A. They attribute this growth to good hiring, organic growth, and strategic acquisitions. They also mention the expansion of their business and the ability to serve clients in various industries. When asked about sustaining this growth, the speaker expresses confidence in the company's ability to continue growing above the 3-5% range seen in the previous decade due to ongoing investments and improvements in the business.

The speaker discusses the company's focus on refining client engagement models and investing in sales operations and technology before the pandemic hit in 2020. They also mention the acquisition of JLT in 2019 and the supportive macro environment. The speaker expresses confidence in the company's position and expects mid single-digit revenue growth or better. When asked about competition in the middle market, the speaker confidently states that they have the best-in-class platform and welcomes competition. They also mention the growth potential in the independent agent market.

The speaker discusses the company's growth in the health space and explains that they are largely compensated on a consulting fee basis. They attribute their growth to a combination of factors, including good sales, value proposition, and new business opportunities. It is clarified that the bulk of their business is not based on fees per member, but rather on commission and project-based work. The growth is also driven by changes in the industry, such as high prescription drug costs and the use of technology.

The speaker discusses the changes and pressure on costs in the health space, and predicts that the company will remain busy. The next question asks about the seasonality of a reinsurance acquisition, to which the speaker clarifies that it was not a large M&A transaction but rather a legal settlement. The follow-up question asks about the impact of flood claims on last year's margins, to which the speaker responds that they managed through it and have consistently expanded margins year after year. The speaker cautions against getting too worked up about growth rates in a particular quarter.

During a conference call, Brian Meredith from UBS asks John Doyle about the potential for talent acquisition in the middle market space due to recent transitions and acquisitions among larger competitors. Doyle responds by emphasizing Marsh McLennan's focus on building a culture that attracts and retains top talent, citing programs for learning and development, mobility, and wellness. He also mentions the company's strong brand as an employer and the opportunities for purposeful work and collaboration. While M&A activity may create some opportunities for talent acquisition, Doyle is confident in the company's current talent and positioning.

The speaker discusses the recent changes in their company and how it presents an opportunity for employees to reassess their goals. They also mention the M&A environment, stating that they are actively looking for high-performing businesses in attractive markets. They highlight recent acquisitions and mention upcoming deals that will close in the next few months. The speaker also notes that their company has a strong reputation as a buyer and that valuations for assets remain high.

John Doyle, CEO of Marsh, discusses the current state of the P&C pricing market and the potential impact of loss cost inflation and social inflation. He also mentions the company's focus on becoming a better growth business and the concerns about rising casualty loss costs. The company has seen strong growth in the Asia Pacific and LATAM regions, with 10% and 11% growth in risk and insurance services, respectively.

The speaker is discussing the growth and success of Marsh's businesses in Asia and Latin America. They credit this success to the company's expansion and acquisition of JLT in 2019, as well as their market leadership, specialized teams, and global capabilities. They also mention the unconsolidated market in Latin America and their confidence in building their businesses organically. The speaker from Morgan Stanley asks a question about MMA, but it is not mentioned in the paragraph.

John Doyle, CEO of Marsh & McLennan, was asked about the contribution of MMA to their overall revenue for 2023 and the trajectory for MMA in 2024. He stated that while they do not separately report MMA's results, it is an important part of their business and continues to perform well. He also mentioned that Marsh has learned a lot from MMA about winning in the middle market and they have been methodically building out MMA over the past 12 years. When asked about the increase in their capital deployment target, Doyle stated that it was not a result of the cost savings program rolling off and Mark, another executive, would speak more generally about their approach.

Mark McGivney and John Doyle of Marsh McLennan discuss the company's strong year of free cash flow generation and financial flexibility. They also provide an update on the progress of synergizing business sales efforts and how the company is working together to show up in front of clients and prospects. They thank their colleagues and clients for their support and look forward to speaking with everyone again next quarter.

This summary was generated with AI and may contain some inaccuracies.