Marsh & McLennan Companies, Inc.

Welcome to Marsh McLennan's earnings conference call. Today's call is being recorded. Second quarter 2024 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties and 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. If you have a question, please press Star 1-1 on your touchtone phone. If you wish to be removed from the queue, please press Star 1-1 again. If you are using a speakerphone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press Star 1-1 on your touchtone phone. 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 second quarter results reported earlier today. I'm John Doyle, President and CEO of Marsh McLennan. On the call with me is Mark McGivney, our CFO, and the CEOs of our businesses, Martin South of Marsh, Dean Klusur of Guy Carpenter, Pat Tomlinson of Mercer, and Nick Studer of Oliver Wyman. Also with us this morning is Sarah DeWitt, Head of Investor Relations. Before I get into our results, I'd like to comment on the attempted assassination of former US President Donald Trump this past weekend. We're thankful that he is safe and our hearts go out to the victims and their loved ones. Violence has no place in our politics or our society. We condemn it and affirm our commitment to civil discussion, debate, and resolution. Our political process and democracy depend on all candidates having the ability to safely convey their visions for our country. We believe that each of us can help shape peaceful public discourse and advocate for a culture of respect and unity. Now, turning to the second quarter, Marsh McLennan delivered strong results across our businesses and geographies. We generated 6% underlying revenue growth on top of 11% in the second quarter of last year, reflecting strong execution in both RAS and consultings. We grew adjusted at our operating income 11% from a year ago, our adjusted operating margin expanded 130 basis points, and adjusted EPS grew 10%. We also announced a 15% increase to our quarterly dividend to 81.5 cents and completed $300 million of share repurchases during the quarter. These results highlight our consistent focus on delivering in the near term while investing for sustained growth over the long term. We're benefiting from organic investments we've made in our talent and capabilities, and we also continue to make high-quality acquisitions that build on the scale and breadth of our business. In the second quarter, we announced several significant transactions. Mercer announced an agreement to acquire Cardano, a long-term savings specialist in the UK and Netherlands. With approximately $66 billion in AUM, Cardano operates the third largest UK Master Trust platform and serves more than 2 million customers across 27,000 employers. This transaction builds on our leading position in OCIO, enhances our DC offerings, and adds important trading capabilities. Oliver Wyman agreed to acquire Veritas Total Solutions, an advisor in commodity and energy markets. And Marsh McLennan Agency completed three acquisitions in the quarter. Fisher Brown Betrell, one of the five largest bank-affiliated agencies in the United States, specializing in commercial P&C insurance and employee benefits, FBB expands our presence across the Southeast. AC Risk Management builds on our scale in commercial P&C in the Northeast, and Perkins Insurance Agencies adds to our commercial P&C business in Texas. Last week, MMA also announced the acquisition of Horton, a top 100 broker with over $100 million in revenue, operating primarily in the Midwest. And we recently announced the acquisitions of Ameristar, a commercial P&C high net worth agency based in Minnesota, and Hudson Shore, a public sector employee benefits agency in New Jersey. These acquisitions are great examples of our ability to attract the very best insurance agencies to our company. And along with high rates of sustained underlying growth, they've helped to make MMA a $3.5 billion annual revenue business. We also continue to help our clients thrive by investing in innovation. Drawing on our expertise, perspective, data, and insights, we are creating new solutions for a complex environment. For example, Marsh continues to evolve BlueEye, a digital suite of solutions for insurance strategy decisions that uses our data and analytics to generate insights for clients. This quarter, we added Blue Eye Risk Appetite Analytics to help clients define the amount and type of risk they're willing to retain. With customizable calculations, our insights help clients navigate a challenging landscape with greater confidence. Guy Carpenter launched CatStop Plus, a new solution to address the volatility of cyber risk using GC's proprietary analytics. CatStop Plus offers clients protection against cybercat losses. Mercer launched SelectRx, a technology solution in the U.S. that creates competition amongst pharmacies for high-cost specialty medications. Leveraging free market health's cloud-based platform, SelectRx lowers costs for employers and deliver savings to employees by directing prescriptions to a curated network of specialty pharmacies. And Oliver Wyman is helping our clients innovate in their own businesses with the launch of Quotient, which combines our expertise in AI implementation, deployment, and strategic advisory with our deep industry knowledge. Quotient moves clients beyond the hype surrounding AI to deliver real value and meaningful outcomes. Our approach to balancing near-term performance with investment and innovation delivers significant value to our clients. It also enables us to sustain growth over the long term and drive consistent, exceptional performance for shareholders. Shifting to the macro picture, we continue to see significant opportunity to help clients navigate the complexity they're facing today. Beyond the shocking assassination attempt in the U.S., the geopolitical backdrop is unsettled, with ongoing wars and areas of tension across the globe. Uncertainty also remains around the frequency of extreme weather, escalating cyber attacks, and key variables in the economic outlook, like the persistence of inflation and the timing of changes to central bank policy. Despite this uncertainty, the environment remains supportive of growth in our business. In general, we see continued economic growth in most of our major markets. The cost of risk in healthcare continues to rise, and labor markets remain tight. And the consensus probability of a near-term recession for major economies continues to decrease. We have performed well across economic cycles due to the resilience of our business, sustained demand for our advice and solutions, and consistent execution for our clients. Turning to insurance and reinsurance market conditions, the March global insurance market index was flat overall in the second quarter versus a 1% increase in the first quarter. Generally, rates in the U.S., Europe, and Latin America continued to increase in the low to mid single digits, while the U.K., Asia, and Pacific saw low to mid single digit decreases. Global property rates were flat versus up 3% in the first quarter. Casualty increased in the low single digits, with U.S. excess casualty up 10% in the quarter, while workers' compensation decreased low single digits. Financial and professional liability rates and cyber pricing were down 5% and 6%, respectively. Mid-year reinsurance renewals reflected increased demand for property cap, with easing rates after significant increases in 2023. The majority of property placements were completed at renewal with adequate capacity. The global property CAT reinsurance rates were generally flat to down mid-single digits, with greater decreases for upper layers on accounts without losses. The CAT bond market had the most active quarter on record, with over 30 new bonds issued involving approximately $8 billion of limit. Casualty programs faced continued underwriting scrutiny. but there was adequate capacity in the market. Excessive loss programs with U.S. exposure saw upward pricing pressure, while quota share seating commissions were flat to down slightly. As always, we are helping our clients navigate these dynamic market conditions. Now, let me turn to our second quarter financial performance. We generated adjusted EPS of $2.41, which is up 10% from a year ago. On an underlying basis, revenue grew 6%. Underlying revenue grew 7% in RIS and 4% in consulting. Marsh was up 7%, Guy Carpenter 11%, Mercer 5%, and Oliver Wyman grew 3%. Overall, the second quarter saw adjusted operating income growth of 11%, and our adjusted operating margin expanded 130 basis points year over year. Turning to our outlook, we are well-positioned for another great year in 2024. We continue to expect mid-single-digit or better underlying revenue growth, another year of margin expansion, and strong growth in adjusted EPS. Our outlook assumes current macro conditions persist, however meaningful uncertainty remains, and the economic backdrop could be materially different than our assumptions. Overall, I am proud of our second quarter performance, which demonstrates continued execution on key initiatives and momentum across our business. I'm grateful to our colleagues for their focus and determination and the value they deliver to our clients, shareholders, and communities. With that, let me turn it over to Mark for a more detailed review of our results.

Thank you, John, and good morning. Our second quarter results were strong, with solid underlying growth significant margin expansion and 10% growth in adjusted EPS. Our consolidated revenue increased 6% to $6.2 billion with underlying growth of 6%. Operating income was $1.6 billion and adjusted operating income was $1.7 billion, up 11%. Our adjusted operating margin increased 130 basis points to 29%. Gap EPS was $2.27. and adjusted EPS was $2.41. For the first six months of 2024, underlying revenue growth was 8%, our adjusted operating income grew 11% to $3.7 billion, our adjusted operating margin increased 100 basis points, and our adjusted EPS increased 12% to $5.30. Looking at risk and insurance services, second quarter revenue was $4 billion, up 8% from a year ago, or 7% on an underlying basis. This result marks the 14th consecutive quarter of 7% or higher underlying growth in RIS and continues the best stretch of growth in two decades. RIS operating income was $1.3 billion in the second quarter. Adjusted operating income was also $1.3 billion, up 12% over last year, and our adjusted operating margin expanded 110 basis points to 35.3%. For the first six months of the year, revenue in RIS was $8.3 billion with underlying growth of 8%. Adjusted operating income increased 12% to $2.9 billion, and our margin increased 90 basis points to 37.3%. At March, revenue in the quarter was $3.3 billion, up 8% from a year ago or 7% on an underlying basis. This strong growth came on top of 10% growth in the second quarter of last year. Growth in the second quarter reflected strong new business and solid renewals. In U.S. and Canada, underlying growth was 6% for the quarter. International underlying growth was 7%. EMEA was up 7%. Asia-Pacific grew 7%. and Latin America was up 8%. For the first six months of the year, Marsh's revenue was $6.3 billion with underlying growth of 7%. U.S. and Canada grew 7%, and international was up 8%. Guy Carpenter's revenue was $632 million in the quarter, up 10% or 11% on an underlying basis. This terrific result came on top of 11% growth last year and was driven by double-digit growth across most geographies and specialties. For the first six months of the year, Guy Carpenter generated $1.8 billion of revenue and 9% underlying growth. In the consulting segment, second quarter revenue was $2.2 billion, up 2% from a year ago, or 4% on an underlying basis. Consulting operating income was 410 million, and adjusted operating income was 426 million, up 6%. Our adjusted operating margin in consulting was 19.8% in the second quarter, an increase of 60 basis points. For the first six months of 2024, consulting revenue was 4.4 billion, reflecting underlying growth of 6%. Adjusted operating income increased 7% to 870 million, and our margin increased 50 basis points to 20.3%. Mercer's revenue was $1.4 billion in the quarter, flat compared to a year ago, but up 5% on an underlying basis. This was Mercer's 13th straight quarter of 5% or higher underlying growth and continues the best run of growth in 15 years. Wealth grew 3%, driven by growth in both investment management and DB consulting. Our assets under management were $492 billion at the end of the second quarter, up 1% sequentially and up 25% compared to the second quarter of last year. Year-over-year growth was driven by our transaction with Vanguard, impact of capital markets, and positive net flows. Health underlying growth remained strong at 9% and reflected growth across all regions. Career revenue increased 2%, continuing the trend of modest growth following a two-year stretch of strong growth and demand. For the first six months of the year, revenue at Mercer was $2.8 billion, with 6% underlying growth. Oliver Wyman's revenue in the quarter was $837 million, an increase of 3% on an underlying basis. This comes on top of 11% growth a year ago. The first six months of the year, revenue at Oliver Wyman was $1.6 billion, an increase of 8% on an underlying basis, up from 6% growth in the first half of last year. Foreign exchange was a two-cent headwind in the second quarter. Assuming exchange rates remain at current levels, we expect FX to be a two-cent headwind in the third quarter and two cents in the fourth quarter. Total noteworthy items in the quarter were $73 million, These included $44 million of restructuring costs, mostly related to the program we began in the fourth quarter of 2022, as well as some transaction-related expenses. Our other net benefit credit was $66 million in the quarter. For the full year, we continue to expect our other net benefit credit will be approximately $265 million. Interest expense in the second quarter was $156 million, up from $146 million in the second quarter last year, reflecting higher levels of debt and higher interest rates. Based on our current forecast, we expect approximately $154 million of interest expense in the third quarter and approximately $620 million for the full year. Our adjusted effective tax rate in the second quarter was 26.2% compared with 24.2% in the second quarter of last year. Our tax rate in both periods benefited from favorable discrete items. Excluding discrete items, our adjusted effective tax rate was approximately 26.5%. When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative. Based on the current environment, we continue to expect an adjusted effective tax rate of between 25.5% and 26.5% for 2024. Earnings capital management in our balance sheet, we ended the quarter with total debt of $13.5 billion. Our next scheduled debt maturity is in the first quarter of 2025 when $500 million of senior notes mature. We continue to expect to deploy approximately $4.5 billion of capital in 2024 across dividends, acquisitions, and share repurchases. The ultimate level of share repurchase will depend on how the M&A pipeline develops. Last week, we announced a 15% increase to our quarterly dividend, making this our 15th consecutive year of dividend growth. This comes on top of a 20% increase a year ago and reflects our strong earnings growth and confidence in our outlook. Our cash position at the end of the second quarter was $1.7 billion. Uses of cash in the quarter totaled $1.2 billion and included $352 million for dividends, $500 million for acquisitions, and $300 million for share repurchases. The first six months, uses of cash totaled $2.2 billion and included $706 million for dividends, $847 million for acquisitions, and $600 million for share repurchases. While there continues to be uncertainty in the outlook for the global economy, we feel good about the momentum in our business, and the current environment remains supportive of growth. Overall, our excellent first half leaves us well-positioned for another great year in 2024. Based on our outlook today, for the full year, we continue to expect mid-single-digit or better underlying growth, margin expansion, and strong growth in adjusted EPS. And with that, I'm happy to turn it back to John.