Marsh & McLennan Companies, Inc.

Welcome to Marsh McLennan's earnings conference call. Today's call is being recorded. Fourth quarter 2022 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 a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings included in 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 a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. 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 speakerphone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star 1-1 on your touchstone phone. I'll now turn this over to John Doyle, President and CEO of Marsh McLennan.

Good morning, and thank you for joining us to discuss our fourth quarter results reported earlier today.

I'm John Doyle, President and CEO of Marsh McLennan. Joining me on the call today is Mark McGivney, our CFO, and the CEOs of our businesses, Martin South of Marsh, Dean Klasur of Guy Carpenter, Martin Furlan of Mercer, and Nick Studer of Oliver Wyman. Also with us this morning is Sarah DeWitt, Head of Investor Relations. I am excited to be leading this call today for the first time as President and CEO. Marsh McLennan is an outstanding company with unique capabilities in the critical areas of risk, strategy, and people. We help clients address their greatest challenges and find new possibilities as they navigate dynamic environments. We have exceptional talent, a wide range of solutions, and a track record of execution and financial performance. Our leadership team is focused on delivering the full capabilities of Marsh McLennan to our clients, continuously improving the client and colleague experience, efficiently managing capital, and driving growth and value for shareholders. Over the past year, I've been meeting with colleagues and clients to exchange ideas about how we can accelerate impact for clients and enable their success. These conversations reinforce my conviction that we are in the right businesses, with strong brands and deep client relationships. I am confident that we have meaningful opportunity at the intersections of our businesses where together our scale, data, insights, and solutions are highly valued by clients. The strength of our unique value proposition has us well positioned for the years ahead. Today, we are focused, aligned, and succeeding together as our results demonstrate. 2022 was an outstanding year for Marsh McLennan. We generated 9% underlying revenue growth, continuing our best period of growth in more than two decades, with each of our businesses delivering strong results. Our total revenue surpassed $20 billion and adjusted operating income grew 11% to $4.8 billion. This was on top of 18% growth in 2021. We reported adjusted margin expansion for the 15th consecutive year. Adjusted EPS growth was 11%. I am particularly pleased with this performance as our results included costs related to our strategic investments in talent and the continued normalization of T&E. These results also came on top of 24% growth in 2021. And we delivered significant capital return to shareholders, raising our dividend by 10% and completing $1.9 billion of share repurchases the largest annual amount in our history. We also added to our talent and capabilities, both organically and through attractive acquisitions. MMA acquired two top 100 agencies in 2022 and has now surpassed 100 acquisitions since its inception in 2009. Oliver Wyman expanded its capabilities in geographic reach with the acquisitions of specialty consultant Avicent and Booz Allen Hamilton's MENA practice. and Mercer expects to close its transactions from Westpac in Australia in the first half of this year. We overcame significant foreign exchange and capital market headwinds to generate these results through execution, growth, and exceptional client engagement. I'm particularly proud of these achievements amid a year of seamless leadership transitions at Marsh and Guy Carpenter. Our purpose and strategy underpin our performance. Marsh McLennan makes a difference in the moments that matter for our clients, colleagues, and our communities. Turning purpose into practice, our strategy focuses on several core elements. Promoting a culture that attracts and retains top talent in our business, investing to strengthen our capabilities organically and inorganically, positioning ourselves in segments and geographies with attractive fundamentals, leveraging data and insights to help clients become more resilient and find new opportunities, and delivering Marsh McLennan's full value proposition to enable client success. We complement our colleague and client facing strategy with our approach to expense and capital management. We focus on growing revenue faster than expenses, which contributes to annual margin expansion and adjusted EPS growth. And we manage capital allocation to balance performance in the near term, with investing for the long term. We are accelerating collaboration across our business to drive greater growth and efficiency. We are implementing new ways to operate, reduce complexity, and organize for impact. In this regard, we took actions in the fourth quarter to align our workforce and skill sets with evolving needs, rationalize technology, and reduce our real estate footprint. Together, these actions resulted in approximately $230 million of charges Based on our outlook today, we expect they will drive $125 to $150 million of savings in 2023. Overall, they reflect an opportunity to accelerate impact for clients, reinvest in our capabilities, and to be more efficient and connected. Now let me provide an update on P&C insurance and reinsurance market conditions. The January 1 reinsurance renewals proved to be the most challenging in nearly two decades. The property cat reinsurance market was stressed, with pricing and attachment points increasing significantly, reflecting several years of higher than expected cat losses, macroeconomic factors, and supply and demand imbalances. Global property cat reinsurance rate increases range from 25 to 60%, with loss impacted clients often seeing higher pricing. In the US, property cat reinsurance rate increases were the highest in 17 years, generally in a range of 40% to 60%. It is important to note that seeded premiums were tempered by higher retentions in most cases. Meanwhile, commercial P&C insurance pricing continues to rise on average across many lines and geographies. While the pace of price increases continued to moderate after rising for 21 consecutive quarters, the tight reinsurance market could have knock-on effects particularly for property insurance rates. We are focused on helping our clients navigate these difficult insurance and reinsurance markets and the evolving risk landscape. Now let me turn to our fourth quarter financial performance. We generated adjusted EPS of $1.47, which is up 8% versus a year ago, or 12%, excluding the impact of foreign exchange. On an underlying basis, revenue grew 7%. Underlying revenue grew 8% in RIS and 6% in consulting. Marsh grew 6%, Guy Carpenter grew 5%, Mercer grew 5%, and Oliver Wyman grew 8%. Overall, the fourth quarter saw adjusted operating income growth of 13% and our adjusted operating margin expanded 160 basis points year over year. As we look ahead to 2023, we see a mixed economic picture. While there is a risk of recession for major economies, we also believe there are many factors that remain supportive of growth for our business. Softer real GDP growth is offset by elevated inflation, which drives higher insured values and loss costs. P&C insurance rates continue to increase as insurers account for rising frequency and severity of catastrophe losses, the risks of social inflation, and higher reinsurance costs. Health care costs continue to rise due to higher wages and labor shortages in the health care sector. The U.S. labor market continues to remain among the tightest employment environments of the past half century, with 3.5% unemployment and over 10 million unfilled jobs. And short-term interest rates are at the highest level since the financial crisis, increasing our fiduciary income. When the world is volatile and uncertain, demand for our services typically rises. This year's Global Risks Report, which we just published in collaboration with the World Economic Forum, highlights that risks confronting our clients extend well beyond economic and insurance cycle concerns. The report identified the cost of living crisis, failure to mitigate and adapt to climate change, extreme weather, natural resource crises, the erosion of social cohesion, cybercrime, and geoeconomic confrontation among the top risks facing society over the near term and next decade. In these areas and many others, we are working with clients to meet these challenges, build resilience, and capture new opportunities. Our colleagues are inspired by the opportunity to work on these critical issues and to make a difference in the moments that matter. Looking forward, we are well positioned for 2023 and beyond. We expect mid-single-digit or better underlying revenue growth in 2023, another year of margin expansion, and strong growth in adjusted EPS. Our outlook assumes current macro conditions persist, but meaningful uncertainty exists, and the economic backdrop could be materially different than our assumptions. However, we have a track record of resilience across economic cycles. In summary, 2022 was an outstanding year for Marsh McLennan. one in which all of our businesses delivered strong performance. We generated record revenues and earnings, saw the benefit of recent investments and growth, continued to execute on our acquisition strategy, and made record share repurchases. We are proud of the focus and determination of our colleagues and the value they deliver to our clients and shareholders. We close the year on a high note and look forward to another year of strong performance in 2023. With that, let me turn it over to Mark for a more detailed review of our results.