Marsh & McLennan Companies, Inc.

Welcome to Marsh McLennan's conference call. Today's call is being recorded. Fourth quarter and full year 2021 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.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 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 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. I'll now turn this over to Dan Glazer, President and CEO of Marsh McLennan.

Thanks, Andrew. Good morning, and thank you for joining us to discuss our fourth quarter results reported earlier today. I'm Dan Glazer, President and CEO of Marsh McLennan. Joining me on the call today is John Doyle, our Group President and COO, Mark McGivney, our CFO, and the CEOs of our businesses, Martin South of Marsh, Dean Klesora of Guy Carpenter, Martine Ferland of Mercer, and Nick Studer of Oliver Wyman. Also with us this morning is Sarah DeWitt, Head of Investor Relations. John Doyle assumed his new role on January 1st, and I am pleased to be working alongside him. During John's five years as CEO of Marsh, the business thrived under his leadership, experiencing accelerated revenue growth and record new business. He also inspired an even stronger culture of colleague engagement, inclusion, and diversity. I look forward to unlocking the greater potential of Marsh McLennan together. I'd also like to welcome Martin South and Dean Klasora, who assumed their new roles on January 1st. Martin, who succeeded John as CEO of Marsh, has worked at Marsh for 27 years. Most recently, Martin served as CEO of Marsh U.S. and Canada, where he produced a superior track record of growth. Dean Klasura, who succeeds Peter Hearn as CEO of Guy Carpenter, has been with Marsh McLennan for nearly 30 years. During his time at Marsh McLennan, Dean has served in executive leadership roles in Marsh's global specialties and placement before joining Guy Carpenter last year as president. Dean brings deep knowledge and broad industry relationships to his new role. I look forward to seeing Marsh and Guy Carpenter continue to thrive and grow under their leadership. These moves represent further examples of the extraordinary talent in Marsh McLennan and the seamless process we have built to manage orderly succession. On behalf of the entire company, I want to express my deep gratitude to Peter Hearn for his exceptional leadership of Guy Carpenter. During Peter's tenure, Guy Carpenter achieved record financial performance and cultivated a culture where colleagues' professional success and personal fulfillment is a consistent priority. We look forward to the contributions he will continue to make as Vice Chair of Marsh McLennan. I'd also like to thank Dominic Burke for his many contributions following our acquisition of JLT and wish him the best in his retirement. His leadership ensured our combination with JLT, the largest acquisition in our history, was a win for our clients, for our company, and for our colleagues. 2021 was a banner year for Marsh McLennan. We generated the strongest underlying revenue growth in over two decades, with each of our businesses contributing meaningfully. Adjusted EPS growth was 24%, the highest in over two decades. We reported adjusted margin expansion for the 14th consecutive year. We invested meaningfully in our talent and capabilities, both organically and through attractive acquisitions. And we completed our deleveraging and resumed significant share repurchases. Across the firm, 2021 was a year of extraordinary growth and achievement. Consistent with our philosophy of balancing near-term financial results while also investing for the future, we capitalized on available opportunities to make significant investments. This is reflected in an organic increase of nearly 6,000 colleagues on a net basis, the highest level in our history. Our new colleagues not only add scale in client-facing roles, but critical capabilities, the capacity to streamline operations, drive efficiency, enhance client service outcomes, and expand the bandwidth of our market-facing operations. We pursued attractive acquisitions. MMA broadened its geographic footprint in the key middle market segment with the addition of Payne West. Oliver Wyman deepened our healthcare expertise and client service capabilities with the acquisition of Huron's Life Sciences business. And Marsh enhanced its market-leading position in India with an increase in the ownership stake in our Indian brokerage business from 49% to 92%. Portfolio optimization efforts continued as well, including the sale of Marsh's UK networks, Marsh's pension administration business in Brazil, and Marsh's U.S. associations business. Across the organization, we took steps to accelerate productivity, gain efficiency, and enhance client experience with initiatives like Marsh's Operational Excellence Program, our build-out of our India and other centers of excellence, and improving our technology and HR functions. 2021 was also a year in which we accelerated impact for clients through innovation in areas of pressing concern. Marsh McLennan provided thought leadership on key global issues in partnership with the World Economic Forum. For the 17th consecutive year, we collaborated in the production of the annual Global Risk Report, which was issued earlier this month. This year's report identifies climate action failure and extreme weather, the decline of social cohesion, infectious diseases, cybersecurity failure, mental health deterioration, and digital inequality among the top 10 risks facing society. Marsh McLennan's business is to help clients adapt to this evolving risk landscape and to plot a course through longer-term secular challenges. In areas like cyber risk, climate resilience, digitization, diversity and inclusion, healthy societies, and new ways of working, we brought forward creative solutions for our clients in 2021. All of this is consistent with our legacy as an innovator for the past 150 years. Since the founding of our company in 1871, we have been at our clients' sides, finding opportunities and navigating uncertainty in the areas of risk, strategy, and people. This approach has translated to significant value creation for our shareholders over time. Since our IPO in 1962, our consolidated revenue has grown from $52 million to nearly $20 billion. Our adjusted EPS has increased from two cents per share to over $6 a share. And our headcount has risen from 3,000 colleagues to nearly 83,000 today. This translates to an average of 11 percent revenue growth, 10 percent adjusted EPS growth, and 6 percent headcount growth each year over this period. And we exit this first century and a half on a high note with terrific 2021 results. Now let me provide an update on current P&C insurance market conditions. Rate increases continue to persist, reflecting losses, low returns, Concerns about inflation and affirming reinsurance market. The Marsh Global Insurance Market Index showed price increases of 13% year over year. This marks the 17th consecutive quarter of rate increases in the commercial P&C insurance marketplace. Looking at pricing by line, the Marsh Market Index showed global property insurance was up 8%. Global financial and professional lines were up 31%, driven in part by cyber rates more than doubling in some geographies, and global casualty rates were up mid-single digits on average. As a reminder, our index skews to large account business. However, small and middle market insurance rates continue to rise as well, although less than for large complex accounts. At the January renewals, capacity in most areas was available, although insurers pushed for price increases and, in some cases, coverage changes and tighter terms and conditions. Turning to reinsurance, the January 1st reinsurance renewals reflected an evolving market. Capacity was adequate, but reinsurers adjusted their risk appetite and pricing thresholds for certain sectors. This was in response to ongoing and emerging challenges, such as the frequency and severity of catastrophe losses, climate change, core inflation, social inflation, and underlying rate increases. The overall Guy Carpenter Global Property Catastrophe Rate Online Index increased 10.8%, with non-loss impacted clients being generally flat to up 7%, and loss impacted up from 10% to over 30%. Marsh McLennan remains focused on helping our clients navigate challenging PNC rates and the evolving risk environment. As we look ahead to 2022, we continue to see a good runway for growth, given the outlook for above average GDP growth, sustained firm PNC pricing conditions, the inflationary impact on exposures, further opportunities from disruption in the brokerage sector, and the benefit of our recent organic investments. Taking a longer view, we believe demand for our solutions will remain strong, given rising levels of complexity, volatility, and uncertainty across the economic landscape, supporting growth in years ahead. The global macroeconomic outlook remains positive even as there continues to be uncertainty due to the Omicron variant, geopolitical pressures, supply chain challenges, inflation, and tightening monetary conditions. In 2021, we broke out of the 3% to 5% underlying growth range of recent years. We believe we will sustain that momentum, driving mid-single-digit or better growth in 2022. We also expect to continue our track record of annual margin expansion and solid EPS growth. With that, let me turn it over to John for his comments on the quarter and other business trends.

Thanks, Dan, and good morning, everyone. I'm excited about the new role and the opportunity to work with Dan and the Executive Committee on Marsh McLennan's overall strategic and operational objectives. I'm also excited for the leadership that Martin and Dean bring to Marsh and Guy Carpenter and to support them in their new roles. Since I joined Marsh McLennan almost six years ago, I continue to be impressed by the strength and depth of our talent and capabilities across the areas of risk, strategy, and people. I've also been impressed by the unwavering commitment of our colleagues to clients, to one another, and to the communities where we live and work. I'm meeting with our colleagues, clients, and business leaders to identify areas where we can have greater impact and accelerate growth. As Dan noted, our clients are operating in a volatile environment where emerging issues are creating both challenges and opportunities. Our expertise, scale, data, and insights position us well to meet their needs. I believe we have meaningful runway to harness the power of Marsh McLennan across our businesses and find the intersections where we can have outsized client impact. Together, we can accelerate innovation, deliver critical solutions, and drive growth and value for shareholders. Marsh McLennan has tremendous momentum, as evidenced by our strong fourth quarter results. Highlights include continued double-digit underlying revenue growth and record-adjusted operating income. We closed out a fantastic year, with fourth quarter underlying revenue growth of 10%, the third consecutive quarter of double-digit growth, and the longest stretch of double-digit quarterly growth in over two decades. Looking at risk and insurance services, fourth quarter revenue was $3 billion, of 20% compared with a year ago, or 9% on an underlying basis. Adjusted operating income increased 6% to $557 million, while our adjusted operating margin decreased 80 basis points to 22.7%, reflecting investments made in the business. For the year, revenue was a record $12.1 billion, with underlying growth of 10%. Adjusted operating income for the year increased 17% to a record $3 billion, with a margin of 28.5% of 50 basis points from the same period a year ago. At March, revenue in the quarter was $2.9 billion, up 22% compared with a year ago. Revenue growth was 9% on an underlying basis. U.S. and Canada delivered another exceptional quarter, with underlying revenue growth in the double digits for the third consecutive quarter at 11%. In international, underlying revenue growth was 7%, Latin America grew 14%, Asia Pacific was up 10%, and EMEA was up 5%. For the year, Marsh's revenue was $10.2 billion, with underlying growth of 11%. U.S. and Canada underlying revenue growth was 13%, and international was up 9%, the highest since we began reporting these regions in 2008. Guy Carpenter's fourth quarter revenue was $170 million, up 5% on an underlying basis. For the year, Guy Carpenter generated $1.9 billion of revenue and 9% underlying growth. In the consulting segment, revenue of $2.1 billion was a fourth quarter record, up 10% from a year ago or 11% on an underlying basis, the third consecutive quarter of double-digit growth. Adjusted operating income increased 6% to $410 million. The adjusted operating margin was 20.2%. down 120 basis points versus a year ago, reflecting investments in the business. Consulting generated revenue of $7.8 billion for the year, representing underlying growth of 10%, the highest in nearly 15 years. Adjusted operating income for the year increased 19% to $1.5 billion, and the adjusted operating margin expanded 100 basis points to 19.8%. Mercer's revenue was $1.4 billion in the quarter, up 6% on an underlying basis. Career grew 15% on an underlying basis. This is the third straight quarter of double-digit growth in the career business. We are seeing strong demand for solutions linked to new ways of working, skills gaps, workforce transformation, and D&I issues like pay equity. Wealth increased 4% on an underlying basis, reflecting growth in both investment management and defined benefits. Our assets under management grew to $415 billion at the end of the fourth quarter, up 16% year-over-year, benefiting from net new inflows and market gains. Health underlying revenue growth was 4% in the quarter. For the year, revenue at Mercer was $5.3 billion, an increase of 5% on an underlying basis, the highest in over a decade. Oliver Wyman's revenue in the quarter was $722 million, an increase of 22% on an underlying basis. This represents the fourth consecutive quarter of double-digit growth and reflects continued strong demand across geographies and practices. For the year, revenue at Oliver Wyman was $2.5 billion, an increase of 21% on an underlying basis. Overall, our strong fourth quarter and full-year 2021 performance, as well as the investments we made in the year, sets us up for success in 2022 and beyond. Now I'll turn the call over to Mark for further detail on our financial results and a discussion of our initial outlook for 2022.