Marsh & McLennan Companies Inc

NYSE:MMC

Earnings Call Analysis

Marsh McLennan Reports Strong Q1 with 9% Revenue Growth

Marsh McLennan kicked off the year with a robust first-quarter performance, achieving a 9% rise in underlying revenue to $6.5 billion. This growth was consistent across all its businesses, particularly Marsh, Mercer, and Oliver Wyman. Adjusted EPS increased by 14% to $2.89, and the adjusted operating margin expanded by 80 basis points to 32%. The company reiterated its guidance for the year, expecting mid-single-digit or better revenue growth, continued margin expansion, and strong adjusted EPS growth. Investments in talent and strategic acquisitions, such as the purchase of Vanguard's OCIO business, were highlighted as key drivers for sustained growth.

Strong Start to the Year

Marsh McLennan kicked off 2024 with impressive first-quarter results, showcasing a 9% increase in consolidated revenue, reaching $6.5 billion. This growth was consistent across all segments, with adjusted operating income rising 11% to $2 billion and adjusted EPS up 14% to $2.89. The adjusted operating margin improved by 80 basis points to 32%, indicating strong profitability and efficiency gains.

Segment Performance Breakdown

In the Risk & Insurance Services (RIS) segment, revenue grew 9% to $4.3 billion. Marsh, a significant player within RIS, achieved an 8% revenue increase, driven by solid renewal and new business growth. Guy Carpenter also performed well with a 7% revenue increase. The Consulting segment saw a 9% rise in revenue to $2.2 billion, with Mercer growing 6% and Oliver Wyman experiencing robust 13% growth due to strong demand across all regions.

Geographical Insights

Marsh's performance was strong across different regions: the U.S. and Canada saw an 8% growth driven by new business and renewals; EMEA grew by 9%; Latin America by 8%; and Asia Pacific by 6%. This widespread growth highlights Marsh McLennan's ability to capitalize on opportunities in diverse markets.

Strategic Acquisitions and Innovations

Marsh McLennan continued to strengthen its strategic position through acquisitions and innovations. Mercer acquired Vanguard's OCIO business, expanding into the endowments and foundations segment, while Oliver Wyman's purchase of SeaTec enhanced its capabilities in aviation and defense. Additionally, the company introduced new digital solutions like SENTRISK to manage supply chain risks and developed ESG-focused initiatives, such as a community-based catastrophe insurance program with the Center for NYC Neighborhoods.

Guidance and Outlook

Looking ahead, Marsh McLennan's outlook for 2024 is optimistic. The company expects mid-single-digit or better underlying revenue growth, continued margin expansion, and strong adjusted EPS growth, even amidst potential macroeconomic uncertainties. The firm is committed to making investments that support medium- to long-term growth while continuing to drive operational efficiency.

Financial Management and Shareholder Returns

Marsh McLennan demonstrated prudent financial management, ending the quarter with $1.5 billion in cash and $13.5 billion in total debt. They repurchased $300 million of shares and paid $354 million in dividends. The company plans to deploy approximately $4.5 billion in capital throughout 2024, balancing acquisitions, dividends, and share repurchases, depending on the M&A pipeline developments.

Navigating Market Conditions

Despite a complex geopolitical and economic landscape, Marsh McLennan remains resilient. The company successfully managed dynamic insurance and reinsurance market conditions, maintaining stable renewal rates and capitalizing on strong client demand. The firm emphasizes the importance of risk management and innovative solutions to help clients navigate increase in risk costs and market fluctuations.

Earnings Call Transcript 2024-Q1

[Operator]

Welcome to Marsh & McLennan's earnings conference call. Today's call is being recorded. First 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 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 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. [Operator Instructions]

I will now turn this over to John Doyle, President and CEO of Marsh McLennan.

[John Doyle, executive]

Good morning. Thank you for joining us to discuss our first 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 Klisura of Guy Carpenter; Nick Studer of Oliver Wyman; and Pat Tomlinson of Mercer, who is joining us -- joining this call for the first time. Welcome, Pat. Also with us today is Sarah Dewitt, Head of Investor Relations.

Marsh McLennan had a strong start to 2024. Our first quarter results were excellent, and we are well positioned for another good year. Top line continued with 9% underlying revenue growth which was on top of 9% growth in the first quarter of last year. All of our businesses had strong revenue growth with Marsh, Mercer and Oliver Wyman accelerating growth from the fourth quarter. We grew adjusted operating income by 11% from a year ago. Our adjusted operating margin expanded 80 basis points compared to the first quarter of 2023. We had adjusted EPS growth of 14%. And we completed $300 million of share repurchases in the quarter.

In addition, we continue to add to our talent, capabilities and scale through acquisitions. These investments will help strengthen our strategic position and sustain top line growth. For example, Mercer completed the purchase of Vanguard's OCIO business which expands our reach into the endowments and foundations segment. MMA acquired 2 leading agencies in Louisiana. And Oliver Wyman closed the acquisition of SeaTec which extends our capabilities in the aviation, transportation and defense industries.

At Marsh McLennan, we bring together specialized capabilities and perspectives across risk, strategy and people to help clients make critical decisions with confidence. For example, in the area of supply chain risk, we developed a solution called [ SENTRISK ], which draws on the perspective and capabilities of Marsh and Oliver Wyman, to identify key risks in our clients' supply chains. Using this framework, we create a digital twin model of a client's supply lines, which provides for a scenario-based vulnerability assessment to help manage risk. This product is already helping clients across multiple sectors, including in the banking, manufacturing, aviation and defense industries.

As we noted last quarter, Marsh, Oliver Wyman and Guy Carpenter developed the Unity facility, a public private insurance solution that enables grain shipments from Ukrainian ports. In the first quarter, we worked with the Ukrainian government, DZ Bank, Lloyd's and others to expand the facility to all ships carrying nonmilitary cargo. This will help support Ukraine's economic resilience in time of war.

In the health care sector, Marsh and Mercer are working together to help clients evaluate connections between talent retention, patient safety and the cost of malpractice insurance. Marsh's risk assessment capabilities and Mercer's extensive health and human capital expertise, combined with our rich data sets are creating new, highly valued perspectives in the health care sector. These are just a few examples of how we're applying our unique expertise to address pressing challenges and deliver significant value to clients.

Recently, we released our annual ESG report. The report includes enhanced disclosure on our ESG efforts and underscores how the actions we're taking and on behalf of our clients also have a positive impact on the communities where we live and work. Let me share some examples.

We collaborated with the Center for NYC Neighborhoods to launch a community-based catastrophe insurance program. This parametric insurance program helps finance emergency grants to community members following an event, with funds reaching households within days of a catastrophe. In cyber, we developed a global personal micro insurance solution to protect against threats like online identity theft, viruses, cyberbullying and failure to deliver purchased goods.

With regard to sustainability, we are supporting the Dubai Energy & Water Authority's commitment to provide 100% of its energy from clean sources by 2050. As part of this work, we conducted a client -- a climate resilience assessment of one of the world's largest solar parks. We modeled the site's ability to withstand future climate conditions, and proposed adaptation measures to mitigate extreme risks.

We continue to improve sustainability in our own operations as well. For example, in 2023, we expanded the use of renewable electricity across our U.S. offices and in our largest U.K. locations. And we submitted our climate targets for validation as part of our goal to achieve net 0 globally by 2050. We remain committed to generating exceptional financial performance and returns for shareholders, and we also recognize that the successful outcomes we help enable for our clients and our own actions can have a lasting positive effect on communities around the world.

Shifting to the macro picture, we see significant opportunity that helps clients navigate the range of outcomes driven by a more complex environment. The geopolitical backdrop remains unsettled with multiple major wars and rising tensions globally. More than half the world's population will go to elections in 2024, and the economic outlook remains uncertain as well.

Despite this uncertainty, the environment is supportive of growth in our business. In general, we see continued economic growth in most of our major markets. Inflation and interest rates remain elevated, labor markets are tight, the cost of risk is up and health care costs continue to rise. We have a strong record of performance across economic cycles due to the resilience of our business and demand for our advice and solutions.

Turning to insurance and reinsurance market conditions. Primary insurance rates increased, with the Marsh Global Insurance Market Index up 1% overall in the quarter. Property rates increased 3% versus 6% in the fourth quarter. Casualty was up 3%, in line with last quarter. Workers' compensation decreased mid-single digits, while financial and professional liability rates were down 7% and cyber pricing decreased 6%.

Reinsurance market conditions remain stable with increased client demand and adequate capacity. In the April renewal period, U.S. property cat reinsurance rates were flat with some decreases for accounts without losses. Loss-impacted accounts averaged increases in the 10% to 20% range. The U.S. casualty reinsurance market was challenging, but rates were in line with January renewals.

In January, April 1 property cat rates overall were down slightly on a risk-adjusted basis. Early signs for June 1 Florida cat risk renewals point to improved market conditions for cedents. Increased reinsurance appetite for growth should be adequate to meet higher demand. As always, we are helping our clients navigate these dynamic market conditions.

Now let me turn briefly to our first quarter financial performance, which Mark will cover in detail. We generated adjusted EPS of $2.89, which is up 14% versus a year ago. Revenue grew 9% on an underlying basis with 9% growth in both RIS and in consulting. Marsh was up 8%; Guy Carpenter grew 8%; Mercer, 6%; and Oliver Wyman was up 13%. Overall, in the first quarter, we had adjusted operating income growth of 11% and our adjusted operating margin expanded 80 basis points year-over-year.

Turning to our outlook. We are very well positioned for another good 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.

In summary, the first quarter was a great start to the year for Marsh McLennan. Our business delivered strong performance, and we continue to execute well on our strategic initiatives. I'm proud of the focus and determination of our colleagues and the value they deliver to our clients and shareholders.

With that, let me turn it over to Mark for a more detailed review of our results.

[Mark McGivney, executive]

Thank you, John, and good morning. Our first quarter results were outstanding and represent an excellent start to the year. We saw continued momentum in underlying growth, strong margin expansion and double-digit growth in adjusted EPS.

Our consolidated revenue increased 9% in the first quarter to $6.5 billion, underlying growth of 9%. Operating income was $1.9 billion, and adjusted operating income increased 11% to $2 billion. Our adjusted operating margin increased 80 basis points to 32%, and we expect higher margin expansion for the rest of the year, particularly in the second half. GAAP EPS was $2.82 and adjusted EPS was $2.89, up 14% compared to last year.

Looking at Risk & Insurance Services. First quarter revenue was $4.3 billion, up 9% compared with a year ago on both a reported and underlying basis. This result marks the 12th consecutive quarter of 8% or higher underlying growth in RIS and continues the best stretch of growth in 2 decades. RIS operating income was $1.6 billion in the first quarter. Adjusted operating income was also $1.6 billion, up 11% over last year, and our adjusted operating margin expanded 50 basis points to 39.1%.

At Marsh, revenue in the quarter increased 9% to $3 billion or 8% on an underlying basis. This comes on top of 9% growth in the first quarter of last year. In U.S. and Canada, underlying growth was 8% for the quarter, reflecting solid renewal and new business growth. In international, underlying growth was strong at 8% and comes on top of 10% in the first quarter last year. EMEA was up 9%; Latin America grew 8%; and Asia Pacific was up 6%.

Guy Carpenter's revenue was $1.1 billion, up 7% or 8% on an underlying basis, driven by growth across most regions and global specialties. This was the fifth straight quarter of 8% or higher underlying growth at Guy Carpenter. In the Consulting segment, first quarter revenue was $2.2 billion, up 9% on an underlying basis. Consulting operating income was $432 million, and adjusted operating income was $444 million, up 9%. Our adjusted operating margin in Consulting was 20.7% in the first quarter, an increase of 40 basis points.

Mercer's revenue was $1.4 billion in the quarter, up 6% on an underlying basis. This was Mercer's 12th straight quarter of 5% or higher underlying growth and continues the best run of growth in 15 years. Health underlying growth was 10% and reflected strong momentum across all regions. Wealth grew 5%, driven by growth in both investment management and DB consulting. Our assets under management were $489 billion at the end of the first quarter, up 17% sequentially and up 38% compared to the first quarter of last year.

Year-over-year growth was driven by our transactions with Westpac and Vanguard, of rebound in capital markets and positive net flows. Career revenue increased 1%, reflecting a tough comparison to a period of strong growth last year as well as softness in the U.S. Oliver Wyman's revenue in the first quarter was $789 million, up 13% on an underlying basis from the slow start we had in the first quarter of last year and reflected strength across all regions.

Foreign exchange had very little impact on earnings in the first quarter. Assuming exchange rates remain at current levels, we expect FX to be a $0.02 headwind in the second quarter and a further $0.01 headwind in the second half. Total noteworthy items in the quarter were $49 million. The majority of these items were restructuring costs, mostly related to the program we began in the fourth quarter of 2022.

Our other net benefit credit was $67 million in the quarter. For the full year, we expect our other net benefit credit will be approximately $265 million. Interest expense in the first quarter was $159 million, up from $136 million in the first quarter of 2023, reflecting higher levels of debt and higher interest rates. Based on our current forecast, we expect $158 million of interest expense in the second quarter and approximately $620 million for the full year.

Our adjusted effective tax rate in the first quarter was 23.9% compared with 25% in the first quarter of last year. Our tax rate benefited from favorable discrete items, the largest of which was the accounting for share-based compensation similar to a year ago. 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.

Turning to capital management and our balance sheet. We ended the quarter with total debt of $13.5 billion. Our next scheduled debt maturity is in the second quarter when $600 million of senior notes mature. Our cash position at the end of the first quarter was $1.5 billion. Uses of cash in the quarter totaled $1 billion and included $354 million for dividends, $347 million for acquisitions and $300 million for share repurchases.

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 our M&A pipeline develops. 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 strong start leaves us well positioned for another good 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.

With that, I'm happy to turn it back to John.

[John Doyle, executive]

Thank you, Mark. Andrew, we are ready to begin Q&A.

[Operator]

[Operator Instructions] And our first question comes from the line of David Motemaden with Evercore ISI.

[David Motemaden, analyst]

My first question is just on the Marsh growth. I -- John, I call what you said on the global pricing index, which moved down or decelerated a little bit to 1% from 2% last quarter. But the Marsh organic growth accelerated to 8% this quarter from 6% last quarter. So I'm hoping you can help me bridge the gap between accelerating growth and the decelerating pricing.

[John Doyle, executive]

Thanks, David, for the question. We work very hard not to be an index on P&C pricing, right? It's an element, it's a macro factor that obviously does have some impact, but less than half of Marsh's revenue is exposed to P&C pricing.

What I would also say to you is that where we're most exposed to commission is in the middle market. Our index skews to larger account data. Pricing is up a bit more in the middle market than it is in the large account segment and typically is less cyclical than what you see in the large account market.

But I want to just talk about growth overall. I was very pleased with the start to the year, 9% on top of 9% last year and accelerated growth from the fourth quarter of 7%. As I mentioned, Marsh, Mercer and Oliver Wyman all had accelerated growth from the fourth quarter. The macros continue to be supportive, David. Solid GDP growth in most major markets, although it's under a bit of pressure. Inflation and interest rates remain elevated. There's tight labor markets, as I said before, rising health care costs. The overall cost of risk continues to increase and demand remains very strong.

We're not long out of the pandemic, of course. We've got a couple of global wars happening, supply chain stress. Our clients are showing broader risk awareness. We're talking to them about that and really trying to help them find better balance between resilience and efficiency. And we continue to invest through this cycle, right? I talked about a couple of the acquisitions we did. We're improving our mix of business as well. We sold some admin businesses at Mercer in the quarter.

And I'm very, very pleased with how our colleagues are executing, too. We've been working on our client engagement model and improving that, continue to invest in sales operations. And as I've talked about over the course of the last year, we're collaborating more than ever. It starts with the talent that we have. We have the best talent in the markets that we operate in. We're, of course, not immune to macros, including pricing on some level, but we're a resilient business, and we're quite excited about 2024. Do you have a follow-up?

[David Motemaden, analyst]

I do. That's helpful. I guess just specifically zeroing in on the U.S. and Canada within Marsh, that had a nice acceleration in the quarter. Could you talk about the driver specifically for that business? Was it middle market? Was it capital markets activity coming back and sort of your outlook on the sustainability for the recovery and growth there?

[John Doyle, executive]

Sure, sure. Yes. Marsh, in the U.S. got off to a terrific start, U.S. and Canada, I would point out. And Martin, maybe you could give David a little bit more color.

[Martin South, executive]

Yes. It wasn't just the U.S. and Canada. It was great balance growth across the business. But I'll dig into the U.S. a little bit and give you some color on some of the drivers of growth there, and it's really been a product of a lot of work in the last few years to get where we are. So the overall growth of 8%, our businesses, the mid-market business, MMA had a terrific start to the year. The growth in that business is driven both by renewal and fantastic new business.

Victor, our MGA business rebounded, has a great performance, very strong performance in Canada. [ They ] had a tough year last year, it bounced back, and the core business in the U.S. grew nicely. So very good. The drivers really, particularly in the specialty areas, construction was very strong in the first quarter. MMP business was strong. Our advisory business in the U.S. was very strong as part of the risk adviser of the future to the tip of the spear and makes our relationship much stickier.

So our renewal growth was good, and our loss business rate was down. So we feel very good about all the areas that we've been focusing on, that client relationship specialization, industry-focused advisory, all these things are the drivers for growth. So we feel very good about things.

[John Doyle, executive]

Thanks, Martin. David, I would add, it wasn't a bang-out quarter in terms of M&A activity in our transaction risk business, but it's a smaller part, smaller part of our business now -- a little feedback there. It's a smaller part of our business after the slowdown, so the impact was less. But we did see some volume in M&A activity pick up during the quarter, which, of course, is encouraging. So thank you for your questions. Andrew, next question, please.

[Operator]

Our next question comes from the line of Jimmy Bhullar with JPMorgan.

[Jamminder Bhullar, analyst]

So I was wondering if you could just elaborate on the comments John had on the reinsurance market. And it seems like things -- the market is less tight than it was over the past year. But what are you seeing in terms of buyer behavior? Are cedents trying to buy more given that pricing has come in a little bit? Or are they trying to save money and keep sort of coverage levels consistent with what they've had in the past year?

[John Doyle, executive]

Sure, Jimmy. Thanks for the question. Maybe I'll elaborate a little bit on some of my prepared remarks and then ask Dean to talk a bit about the reinsurance market. But I think both markets continue to stabilize on average in the quarter. And again, I would remind everyone, it's a collection of markets, not a single market. That stabilization is good for our clients. And in some cases, a better market has led to increased demand in both insurance and reinsurance.

I would also point out that in recent years, we've had higher premium growth in the captives that we manage at Marsh compared to the premium flow into the traditional market. That may change a bit now. We'll see as markets stabilize and our clients can adjust to what the market looks like going forward. I mentioned earlier, our index skews to major accounts. So pricing in the middle market continues to move up a bit more than the data points I mentioned earlier.

But I would also say that insurers and reinsurers are cautious about that rising cost of risk environment that I mentioned as well. And so while, again, a stabilizing market is better for our clients overall, I don't expect that relative stability to change anytime soon given some of the rising cost of risk issues that the insurance community is confronting.

So Dean, maybe you can talk a little bit more about what's happening in reinsurance.

[Dean Klisura, executive]

Yes. Thanks, John. And Jimmy, I'll give you a little bit more color on the April 1 reinsurance renewal. That would be helpful. As John noted, we saw a continuation of market conditions that we experienced in January 1. As John noted, market conditions are stable, but we're definitely seeing increased client demand by additional property cat limits, particularly at the top end of programs. That was very pronounced throughout the first quarter at 1/1 through the quarter.

And certainly, that trend continued on April 1, strong capital inflows into the reinsurance market driven by strong reinsurer returns, double-digit returns in 2023. We talked about that last quarter on the call. Reinsurer appetite is increased for property cat. There's an inflow of capital and capacity, competition at the top end of programs. It's been good for both buyers and sellers in the marketplace.

Specifically to property cat in the U.S. at April 1, as I said, capacity was strong. As John noted, the market was generally flat to down incrementally for clients without cat losses. Accounts with cat losses saw a 10% to 20% kind of rate increases. But keep in mind, we give you rate adjusted figures. But when you factor in inflation, exposure growth, value growth, premiums on these cat programs are still increasing year-over-year. It continues to be a tailwind for Guy Carpenter in the marketplace. And as I said, there's a lot of competition for cat business.

U.S. Casualty, as John noted, was challenging. Just as challenging on April 1 as it was at the January 1 renewal. Reinsurers are exerting pressure on pricing and terms and conditions. Ceding commissions are facing downward pressure from reinsurers on certain quota share contracts, particularly financial lines, which Martin has talked about in the past. Excess of loss contracts are seeing rate increases across the board, in some cases, double-digit.

However, there was adequate casualty capacity in the marketplace in April 1. And all of the programs that we placed got completed in full. But I would balance that against continued reinsurer concern with adverse development, driven by social inflation and increasing loss cost trends. I think that's a good summary of where we were in the U.S. market.

Just a note on Japan, big April 1 cat date in Japan, a very orderly market, sufficient capacity, many CAT programs were oversubscribed. We didn't observe any structural changes, attachment points stayed where they were from a year ago. And again, it was a market that was down, on average, 5% from a rating perspective. And we didn't really observe any rate impact from the January earthquake in Japan. Overall, a very orderly market at April 1 in Japan.

[John Doyle, executive]

Terrific, Dean. Thank you. Jimmy, do you have a follow-up?

[Jamminder Bhullar, analyst]

Perhaps on income, it was flat sequentially and lower than 3Q. I'm assuming that's more seasonality. But if you could just talk about your expectation for that given where short-term rates are currently.

[John Doyle, executive]

Mark, do you want to jump on that one?

[Mark McGivney, executive]

Yes, Jimmy, there is a little seas, as you pointed out. There is a little -- tends to be a little seasonality in our fiduciary balances. Q1 and Q4 tend to be seasonal lows modestly. So that would explain that. In terms of outlook, we'll see what happens to the rate environment. The interest -- fiduciary interest income is going to be a function of balances and rates. And we've got about $11.5 billion of balances. So depending on what you want to assume for the trajectory of rates, the math is pretty straightforward.

[John Doyle, executive]

Thank you, Mark, and thank you, Jimmy. Andrew, next question, please.

[Operator]

And our next question comes from the line of Elyse Greenspan with Wells Fargo.

[Elyse Greenspan, analyst]

My first question was on the margin guidance. You guys said more margin expansion in the back half of the year. What's driving that? Is there just more investment in the first half, more savings falling in the second half or something else that's driving the seasonality within the margin expansion this year?

[John Doyle, executive]

Elyse, we expect, again, good margin expansion in 2024. As you pointed out, Mark noted, we expect the second half to be better than the first half. We have some expected headwinds, not really seasonality, but really driven from a higher merit pool a year ago. Some acquisition-related costs and some higher reimbursable expenses.

But I want to remind everybody not to focus on any one particular quarter, again, margin of outcome of really how we run the business, and it's not a primary objective of ours. Again, having said that, we see opportunity for margin improvement, continued margin improvement. But we're going to continue to make attractive investments to support the medium- to long-term growth of the business.

We have a number of different efforts underway, ongoing workflow and automation efforts at Marsh, Mercer and Guy Carpenter. And we continue to press for opportunities to improve efficiency at the intersections of our businesses as well. So we see opportunity. And as we pointed out, we expect the second half to be better than the first. Do you have a follow-up, Elyse?

[Elyse Greenspan, analyst]

Yes. And then my second question, Marsh recently launched its wholesale venture, Victor Access. I know it's early days, but what was the impetus for this strategy? And is there any reason why the majority of the wholesale risk currently placed by Marsh with third-party wholesalers couldn't potentially be internalized through Victor over time?

[John Doyle, executive]

So let me be clear, Elyse, we're not looking to build a third-party wholesale business. There's obviously been considerable growth in the wholesale or the E&S market over the course of the last several years. We want to bring the best solutions in the marketplace to our clients. Generally, we're preferring admitted solutions for our clients. Not that there aren't good things that happened in the E&S market. Of course, there are. And innovation is one of the areas where the E&S market is important.

But we want to access as much of that E&S market directly. We actually access most of our E&S market solutions directly today, but we want to continue to press and make sure that we can access as much of that market directly. So it's client driven and it's about us managing the client outcomes, client experiences really as directly as possible.

Having said that, we'll continue to use wholesalers for niche expertise. They serve us very well and our clients very well in those cases. They also have strong program businesses as well. So anyway, that's what it's about. It's just, again, making sure we can directly access as much capital directly as possible for our clients.

Thank you for that. Andrew, next question.

[Operator]

Our next question comes from the line of Greg Peters with Raymond James.

[Charles Peters, analyst]

I'd like to pivot to -- for the first question, pivot to the consulting business, which had a nice quarter. Wondering if you can provide some additional color around how the different pieces are moving. I know some of the management consultants have preannounced that they're going to be cutting staff this year. Not really seeing any signs of weakness in your pipeline, but maybe you could give us some color because forecasting this out seems to be a little bit of a black box.

[John Doyle, executive]

Okay. Thanks, Greg. Yes, we are very pleased to the start to the year. As you recall, of course, Oliver Wyman had a slow start to the year; in 2023, had a nice year overall of growth. There's going to be a bit more volatility to revenue growth at Oliver Wyman, but we also expect better growth on average from Oliver Wyman over the medium to longer term. Nick, maybe you can share with Greg some color on demand in the first quarter.

[Nicholas Studer, executive]

Thank you, John. Thank you, Greg. Yes, 13% was a very pleasing start to the year. It makes a marvelous headline. And we're very, very proud of a good start on what, as you noted, is a tough environment for many in our profession. John's already given the caution about taking the 2-year view. We also probably benefit from a few little timing benefits of things that might have shown up in Q2, might have shown up in Q1. And we still very much give guidance through the cycle. This should be a mid- to high single-digit business.

And you noted that the sort of forecasting it out is a tricky challenge. That is true because we have a relatively short backlog. The nature of our work as such that when clients need assistance, they need it quickly. And so we are always ready to move very, very nimbly.

To give you a little bit more color, we grew pretty strongly across all the 4 regions of our management consulting business. And our economic research business, NERA, also grew very strongly, fastest in the Middle East, but in the double digits or very close to double digits in all 3 of the other major regions we have.

And sectorally, it was also fairly broadly spread. Our communications, media and technology team grew well, health care grew well, banking. Seeing a rebound in private capital work, which I've noted on previous calls, has been pretty robust even in the face of, obviously, a very much lower deal market. But our work on portfolio company performance has helped us there. And insurance also growing and quite broadly across the capabilities that we bring to bear as well.

So we think we're in a good position. We're very confident. We've gained share over the last few years, but it's a tough consulting environment. And our pipeline indicates that, that mid- to high single-digit growth environment, growth forecast is how we think about this business through the cycle.

[John Doyle, executive]

Thank you, Nick. That's very helpful. And Greg, maybe I'll ask Pat Tomlinson also to share some thoughts just on the first quarter at Mercer given our consulting operations there. And Pat, while you have the floor, as I mentioned, obviously, you're joining this call for the first time, maybe you could talk a bit about your priorities at Mercer.

[Patrick Tomlinson, executive]

Sure. Thanks, John. Yes, we are pleased with our Q1 2024 underlying growth. As mentioned earlier, it was 6%, it was our 12th consecutive quarter with 5% or more growth, especially the breadth across the practices. Health, another impressive quarter with 10% growth in Q1. That growth was really -- with double-digit growth nearly across all regions. And it comes on the back of investments in hiring new talent, focus on thought leadership, creating digital tools and really focusing it on client segmentation, trying to match client health care needs based upon industry segment size, with the innovative and adaptive solutions that we have. So really trying to meet clients where they are.

We certainly benefited from strong retention. We had good renewal growth, insurer revenue and medical cost inflation has an impact there. We see significant demand for digital solutions and the innovative benefits that are kind of underscoring the value that we're providing to clients.

If I pivot over to Wealth, we grew 5% in Q1. There was a good, balanced, equally-strong performance in DBA and IMS. We see DB plans, funding statuses continue to benefit from elevated interest rates that's driving an increase in risk transfer over the last couple of years as well as we have some regulatory requirements and demands that are creating some project work.

If you add in some capital -- some volatile capital markets, it's driving strong demand for both our actuarial and our investment solutions business. Speaking of investment solutions, in OCIO we benefited from some transactions in Westpac and Vanguard. Mark mentioned that earlier, but also good net new inflows, and capital markets provided us some revenue lift in Q1.

From a career perspective, growth was muted to 1% for the quarter, but we're following a period of strong growth over the past several years, including a challenging 12% comparable last year. The growth was strong in international, was very broad across all practices and regions. We did see, as was mentioned, some softness in U.S. Career, specifically in rewards in the transformation space.

As I would say, clients are starting to navigate some of the macro conditions, right? So let me highlight the career practices coming off that very long period of growth, as I mentioned, double digits in -- for the past 8 quarters, driven in large part, I would say, by inflation and employee attrition.

If we all remember the great resignation back coming out of the pandemic, which drove a lot of labor shortages and really created a lot of demand for projects with clients as they were trying to think about the rewards and how to pay people to keep them retained, the skills that they might need if they had to pivot because they didn't have the right resources. And also starting to think about transformation as they were having less resources to work with and there was innovation and technology, as we've all talked about AI over -- in the past and helping clients through those. So certainly, I think from that perspective, we feel good that there's good breadth of our solutions and demand in the market as we go ahead and fill those needs.

John quickly asked me to talk a little bit about how I think about the business and the priorities, too. So obviously, my first call on April 1, I got to step in and begin this opportunity of a lifetime leading Mercer and our 21,000 colleagues from around the world as we are focused on creating brighter futures for our clients and for their people. I am extremely humbled and honored to be the CEO of this fantastic firm.

And personally, I really want to thank Martine Ferland for a very smooth transition and for the growth momentum and culture that she helped create here. Priority-wise, I want to accelerate that momentum. From the impact that we're having to clients to the fantastic careers we built for colleagues here, the collaboration amongst our colleagues across Marsh McLennan, we can leverage new technologies, and we perform really purpose-driven work and can have a positive impact on our communities as well.

I think we're very well positioned as we've been repositioning ourselves over the last several years, reshaping our portfolio. Mark mentioned the divestitures, we've been divesting admin practices. We've been building capabilities and reach and global benefits in OCIO. We've been accelerating acquisitions, and we're really just creating more value for clients at scale. And that's what we've been focused in on. So I'm very optimistic about our future.

[John Doyle, executive]

Thank you, Pat. We're excited to have you at this table. Greg, do you have a follow-up?

[Charles Peters, analyst]

I do. I want to pivot to M&A and specifically, Mark, I think you mentioned the interest expense outlook for the company. And we note the higher interest rate cost of the debt that's being issued versus that which is being paid off. So I'm curious if there's been any follow-through on those higher costs in the terms of valuation of transactions that you're looking at. And I'm also curious if there's any valuation difference between larger properties versus smaller properties that you're looking at in the M&A market.

[John Doyle, executive]

Yes. Thanks, Greg. What I would say is we remain quite active in the market. There's a good -- we have a good, strong pipeline. As I've talked about in the past, we have an excellent reputation in that marketplace as being a good owner as well. So we're excited about the deals we did in the first quarter. And again, we're going to continue to remain active in the market.

I think valuations have remained stubbornly high, I would say, on the other side of things. And while we might expect that for top quality assets, I would also point out that some lesser quality assets have traded at some very, very high multiples of late. And so we're going to be picky. We're looking for well-led businesses with real strong growth fundamentals that make us better and are a good cultural fit for our organization. We've been very successful at it. And again, as Mark pointed out, we expect to continue to deploy capital in the market going forward.

[Operator]

Our next question comes from the line of Michael Zaremski with BMO Capital Markets.

[Michael Zaremski, analyst]

Probably for Mark, on the margins and the expense buckets. If I look over the last year plus, the margin improvements come much more so from the general and other bucket rather than comp and ben. It looks like it flipped a little bit there, the relationship this quarter, if I'm correct. And anything changing there, given the expense management programs or just in terms of how we should think about where the margin improvement is coming from -- on a go-forward basis?

[John Doyle, executive]

Thanks, Mike. Mark, do you want to?

[Mark McGivney, executive]

I think it's a great point that you're making, and I think it reflects the strategy of the company. We've said we've continually invested in positioning ourselves for the future. And over the last several years, we've talked about the heavy investments we've made organically in talent. And so I think we've done a terrific job really being thoughtful about all of our other operating expenses, functional costs, how we're leveraging things across the firm, T&E. Really, some of the gains we made in the pandemic, we've harvested them.

So as you point out, a lot of our margin expansion over the last 5 years has come from being really disciplined on things far away from the client and investing heavily in client-facing talent. And so I think that is a factor in our growth. And I think also as we look forward, there's going to be leverage in those investments, which is why we're optimistic about margins going forward.

[John Doyle, executive]

Thank you. Mike, do you have a follow-up?

[Michael Zaremski, analyst]

Yes, a quick follow-up. And I know you gave a lot of commentary on kind of commercial primary insurance pricing power, you told us the Marsh Index declined a bit. Just curious if you can offer any more context, 1% kind of feels like a soft market number.

What is it -- are you seeing just returns on behalf of your carrier partners being kind of excellent that's kind of driving the pricing power downwards in light of kind of what still seems like inflationary trends? Or just any more color there on kind of what's causing the decel. I know you gave us by-line commentary. So I don't know...

[John Doyle, executive]

Yes. Mike, I would say that, I mean, it doesn't feel like a soft market to our clients, after 5 years of price increases. And as I noted, our index skews to larger accounts and where there's a bit more volatility typically throughout the cycle. I expect cycles to be shorter and narrower than what they've been in the past, right?

There's better data, better technology on the underwriting front. Capital moves so much more quickly in and out. That's part of the E&S market dynamic that you all have observed over the course of the last several years. So I expect kind of more relative stability. And from time to time, of course, certain areas of risk, things will change in some meaningful way, and that will maybe bounce a particular product outside of a normal cycle.

Insure and reinsure underwriting results have improved in the aggregate over the course of the last couple of years. And I think most feel good about how their book -- how their portfolios are positioned. It's not all one result, of course. We saw some reserve additions in the fourth quarter results overall. And as I mentioned on our call in the first quarter, the great unknown is casualty loss costs, right? There's lots of emerging data that's troubling for our entire ecosystem, for our client. And it contributes to that rising cost of risk that I mentioned earlier.

And maybe, I should also point out, and Dean touched on this a little bit that our index adjusts for limit, exposure, attachment point, and it includes new business, right? You see some other indices that are out in the market that don't necessarily adjust for all of those factors.

And maybe the last point, Mike, that I would make is that, that number doesn't necessarily correlate directly with what the premium growth is in the market, right? Because at the end of the day, it might be a -- you might have less of an increase. You might have certain clients buying more. I think that's most prevalent in the reinsurance market at the moment. But we're seeing that in some cases, at Marsh as well, where clients, again, having adjusted to the new market pricing and new market equilibrium, has led to a higher level of demand for coverage from our clients. So anyway, I hope that's helpful.

Andrew, next question, please.

[Operator]

Our next question comes from the line of Yaron Kinar with Jefferies.

[Yaron Kinar, analyst]

Two questions on Marsh and the market environment you're seeing there. And I think the first one maybe ties well to your last comments, John. Are you surprised to see casualty rates only up 3%, just given the loss trends? And I guess I'd love to hear your views, both as the CEO of Marsh, but also maybe as a former underwriter.

[John Doyle, executive]

It's a -- I actually -- it's very, very hard right now. As I mentioned earlier, there's some troubling data points, right? And thrown in the mix of the last several accident years, of course, a couple of years of the impact of the pandemic, right? And so just on the clients where we help them, larger clients with big risk management programs that have a level of frequency, it's very, very difficult to project where loss costs are.

But as I said, the underwriting community is better than it's ever been. They have better data, better technology. But there, again, are some troubling signs. It's not just increased frequency, it's not just kind of nuclear verdicts, that term gets kind of thrown around or even some of the bigger settlements is a frequency of larger events. See the Francis Scott Key Bridge as an example, that will be a big loss in the market, maybe not as much a casualty loss, but a big loss in the market.

But even in commercial auto, and you've certainly seen that play out in the personal lines auto market, just kind of more frequency type events just costing more to get resolved. And so we're putting our efforts to helping our clients think through how to better runoff liabilities that they assume and even transfer into the market. And the insurers are investing quite a bit in their claims capabilities as well to try to get ahead of this. But I think we're all pointing to, again, some flashing yellow signals out there about the rising costs overall. Do you have a follow-up?

[Yaron Kinar, analyst]

Yes, I do. And thanks for the color there. So in Marsh, organic obviously was strong, and then we certainly saw a very nice result in U.S. and Canada. I guess the only place I could maybe poke a little bit if I were to try would be Asia Pacific, where we saw a step down. Is that -- is there a timing issue there with some one-offs? I know you had a very, very strong 1Q '23 there. But anything you could point to terms of the organic results in Asia Pacific would be helpful.

[John Doyle, executive]

Yes, I don't -- no one-offs or major issues there. Just on top of a couple of years of very, very good comps and strong growth, we love how we're positioned in Asia. Big protection gaps throughout Asia. We have really strong in-country operations all throughout the region. So we're not just a regional center. We're in-country and working very, very closely with our clients there.

As we've said to you in the past, I wouldn't look at any one particular quarter. And again, it's on top of what's been some outstanding growth in Asia over the last couple of years. So we feel good about where we're headed in Asia overall.

Andrew, next question, please.

[Operator]

Our next question comes from the line of Meyer Shields with KBW.

[Meyer Shields, analyst]

I was hoping to discuss the competitive environment in RIS, maybe from 2 perspectives. First, I'm wondering whether there is a difference in the market share gain potential when you're in a rising rate environment. And the enormously-fragmented brokerage world includes a lot of companies that just don't have the resources to help clients manage higher insurance costs as successfully as a company with Marsh's resources. How much difference does that make?

[John Doyle, executive]

It's a good question, Meyer. We're very, very focused on trying to bring scale benefits to our -- well, to all of our key stakeholders, right, including our colleagues, right? We want them -- when they work here, we want them to feel like they have nearly 90,000 folks helping support them with learning and development, data and analytics, market access that you might not have should you choose to work somewhere else in our industry. So we certainly think about it from the colleague perspective, we think about it from the client perspective, and we think about it from an investor point of view as well.

What I would say, from a client perspective, broadly speaking, again, this is maybe a bit more upmarket than some of the fragmented segments that you talked about before. Our clients are more risk aware than they've been in the past. I think we have had a role to play in that, in trying to make them more risk aware of some meta-risks. And again, recent events have certainly helped heighten that. But it's incumbent upon us to bring those scale benefits to the market.

And not just scale benefits in terms of data analytics or market access, but different types of solutions. I mentioned earlier our captive business. We're the largest captive manager in the world. And that's been a meaningful outlet for our clients to manage risk in the rising rate environment over the course of the last several years.

So yes, scale matters. I would also tell you that it plays a role for some of the sellers in the market as well. As we talk through with potential M&A targets, why they may look to sell at the moment, at times, it's regarding scale type -- scaled-up type capabilities that we have that are difficult for them to replicate. And so as I said earlier, we're looking for well-led businesses with really solid growth fundamentals, but we know we can make them better, too. And that's the exciting part for us.

Do you have a follow-up?

[Meyer Shields, analyst]

I do, but that was very thorough. When we look at the parts of the brokerage market that are more concentrated here, I guess, I'm thinking reinsurance or Fortune 100-type accounts. In your view, is the competitive -- are competitors fighting at full strength? Are they all -- is the competition right now as intensive as it normally is? Or are there any differences from longer-term norms?

[John Doyle, executive]

No, it's -- I mean, in both of the segments you mentioned, it is a highly competitive market. And we love competition. There's nothing that gets me more fired up than getting out in front of clients and of course, winning ultimately. And our team is the same way. We're passionate about the value that we try to deliver to our clients. And so as I mentioned earlier, we're collaborating more than ever.

And in those particular segments you mentioned, and I think it's been particularly meaningful over the course of the last year or so, our efforts to bring a broader set of capabilities to that client set. But no, it's a very, very competitive market, and we welcome it. It makes us better.

Thanks, Meyer. Andrew, next question, and maybe the last one.

[Operator]

Our next question comes from the line of Robert Cox with Goldman Sachs.

[Robert Cox, analyst]

In the prepared remarks, there were some comments on health care costs continuing to rise. I was hoping you guys could talk about what you're seeing there and maybe parts of the business maybe between brokerage and consulting that are generating the strongest organic growth in that 10% organic in Health.

[John Doyle, executive]

Sure. Thank you, Robert. Health care and the health care industry is a big part of our business overall. And I don't think it's any secret that medical inflation and health care-related cost inflation is a major pressure point for our clients in many markets really around the world. It's been a big driver of growth for us, and we continue to invest in it. I talked about in my prepared remarks, some of the collaboration between Marsh and Mercer to try to bring some relief to -- and an angle of cost pressure in that marketplace.

But Pat, maybe you could talk about we're seeing and some of the cost inflation as well?

[Patrick Tomlinson, executive]

Sure. So the way that health care inflation impacts the business varies based upon the area of the world that we're in. In certain areas of the world, we're predominantly fee-based. It's more large market that would predominantly be from a Mercer perspective inside like the U.S. and some of our more mature, larger markets. And then in a lot of the markets, we are a little bit more brokerage based to where it's based that way.

But let me be clear, even the spots where we're a fixed fee, health care inflation drives significant increased costs to clients. So it does create a lot of -- it creates demand for work for us, a lot of project work. So we will see projects out of that health care inflation. It's not necessarily directly driven that way.

And even if there's health care inflation in the other areas where it's brokerage, it's not a linear type activity from a commission perspective, because we're -- once that cost is flowing through to the client P&L, we're always out there doing plan redesign for a client to help make sure that, that full cost of health care inflation is not flowing through their P&L., right? Because they really don't -- that's one of the larger costs that they don't control themselves based upon the activity that they've had.

So that's really where a lot of the inflation helps us. Part of it is increased activity and project work. Occasionally, it does create higher rates that flows through in brokerage. But many times, those higher rates, we're still doing plan design with the client to try and mitigate the impact that is going to have on the client P&L. Even in a spot where it's straight commission-based brokerage, we're trying to mitigate those costs.

[John Doyle, executive]

So rising health and benefit costs in a tight labor market, again, is a pressure point and another example where, again, we can bring scale and a broader set of capabilities to the market that our clients appreciate. Do you have a follow-up, Robert?

[Robert Cox, analyst]

Yes, very helpful. Maybe just last question. On the Wealth segment, correct me if I'm wrong, but I think last year, probably the pension business was growing stronger than your investment business. Did that occur as well in the first quarter here? Or were both of them kind of similar to the 5% organic growth that was achieved in Wealth?

[John Doyle, executive]

Yes, we had good solid growth across investment management and defined benefits. As Pat mentioned, our DB business and this period of elevated interest rates has seen a bit more growth than we expected over the course of the last couple of years, but good growth in our OCIO business and our broader set of consulting capabilities inside of our investment business. So we felt good about that.

Thank you, Robert. Andrew?

[Operator]

Thank you. I would now like to turn the call back over to John Doyle, President and CEO of Marsh McLennan for any closing remarks.

[John Doyle, executive]

All right. Thank you, Andrew, and I want to thank everyone for joining us on the call this morning. In closing, I want to thank our colleagues for their hard work and dedication. I also want to thank our clients for their continued support. Thank you all very much, and I look forward to speaking with you again next quarter.

[Operator]

This concludes today's conference. Thank you for participating, and you may now disconnect.