Marsh & McLennan Companies(US:MMC)2023-01-26 19:01Financial Data and Key Metrics Changes - Assets under management were $345 billion at the end of Q4, up 9% sequentially but down 17% year-over-year due to market declines in foreign exchange [1] - Adjusted EPS grew 11% to $6.85, with adjusted operating income increasing 11% to $4.8 billion [77][84] - Consolidated revenue decreased 2% in Q4 to $5 billion, but underlying revenue increased 7% [104] Business Line Data and Key Metrics Changes - Health revenue grew 8% on an underlying basis in Q4, driven by strength in employer and government segments [1] - Career revenue increased 12% on an underlying basis, reflecting demand in rewards, talent strategy, and workforce transformation [1] - Revenue in Risk and Insurance Services (RIS) was $12.6 billion for the year, with underlying growth of 9% [84] Market Data and Key Metrics Changes - In the U.S. and Canada, underlying growth was 5% for Q4, with full-year growth at 7% [86] - International underlying growth was 8% in Q4, with APAC up 12%, EMEA up 7%, and Latin America up 4% [105] - The property cat reinsurance market saw rate increases ranging from 25% to 60%, with U.S. property cat reinsurance rates at the highest in 17 years [100] Company Strategy and Development Direction - The company is focused on aligning workforce and skillsets with evolving client needs, rationalizing technology, and reducing real estate footprint [80] - The strategy includes promoting a culture that attracts and retains top talent, investing in capabilities, and leveraging data to help clients [99] - The company expects mid-single-digit or better underlying revenue growth in 2023, along with margin expansion and strong adjusted EPS growth [102][125] Management's Comments on Operating Environment and Future Outlook - Management noted a mixed economic picture for 2023, with risks of recession but also factors supportive of growth [81] - The demand for services typically rises in volatile and uncertain environments, which is expected to benefit the company [54] - Management expressed optimism about growth prospects despite macroeconomic uncertainties, citing inflation and higher insured values as supportive factors [121][125] Other Important Information - The company expects to deploy approximately $4 billion of capital across dividends, acquisitions, and share purchases in 2023 [90] - Adjusted effective tax rate for Q4 was 22.9%, with an expectation of 25% to 26% for 2023 [56] Q&A Session Summary Question: Is the restructuring a defensive move based on revenue environment? - Management clarified that the restructuring is not defensive but aimed at aligning workforce with evolving client needs and creating efficiencies [110] Question: What changes are being observed in client behavior regarding self-insurance? - Management noted that clients are looking to optimize their programs, with the captive management business growing nearly double digits as clients retain more risk [9] Question: How does the company view organic growth outlook? - Management expects mid-single-digit organic growth for 2023, with a focus on continuous improvement and financial performance [24][125] Question: What impact do wage pressures have on the business? - Wage pressures have been manageable, and the company is being thoughtful about merit pools and allocations [17] Question: How does the company plan to handle commission structures amid strong pricing? - Management stated that they maintain transparency with clients regarding compensation and expect a good year for Guy Carpenter despite pricing challenges [119][120]