John Q. Doyle
President And Chief Executive Officer at Marsh & McLennan Companies
Good morning, and thank you for joining us to discuss our first quarter results reported earlier today. I'm John Doyle, President and CEO of Marsh McLennan. Joining me on the call is Mark McGivney, our CFO; and the CEOs of our businesses, Martin South of Marsh; Dean Klisura 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.
Marsh McLennan had a strong start to 2023. Our first quarter results were excellent and we are well positioned for another good year. Top-line momentum continued as we generated 9% underlying revenue growth on top of 10% growth in the first quarter of last year. We had strong growth across most businesses, segments and geographies, with underlying growth at Marsh, Guy Carpenter and Mercer accelerating compared to the fourth quarter.
Adjusted operating income grew 13% versus a year ago, reflecting our strong growth. Our adjusted operating margin expanded by 150 basis points compared to the first quarter of 2022 and adjusted EPS growth was strong at 10%, building on 16% in the first quarter of 2022. In addition to delivering terrific results, we continued to execute on acquisitions. On April 1, we completed the merger of BT Super with Mercer Super Trust, creating one of Australia's most competitive super funds with approximately 850,000 members and $63 billion of assets under management.
I'm pleased with our performance, especially when viewed in the context of the volatile macroeconomic environment. The global economy has been contending with high inflation, aggressive tightening of monetary policy by central banks, some recent bank failures and the effects of geopolitical instability. We have a track record of resilience across economic cycles and there are factors that support continued growth in our business.
Although the outlook for real GDP growth continues to be under pressure, inflation remains elevated, driving higher insured values and loss costs. P&C insurance and reinsurance rates continued to increase as carriers priced to account for the rising frequency and severity of catastrophe losses, social inflation and higher reinsurance costs.
Healthcare costs are trending higher and employers expect further increases in the years ahead. Labor markets remain tight in most major economies with 3.5% unemployment and nearly 10 million unfilled jobs in the US. And short-term interest rates are at the highest level since the financial crisis, lifting fiduciary income. Change and uncertainty create complexity as well as opportunity for clients. Marsh McLennan's leadership and capabilities and risk strategy and people help them navigate shifting landscapes.
Turning to insurance and reinsurance market conditions. Primary insurance rate increases persisted with the Marsh Global Insurance Market Index up 4% overall, in line with the fourth quarter. Property rate increases accelerated to 10% and casualty pricing was up in the low single-digit range. Workers' compensation was flat and financial and professional liability insurance rates were down mid-single digits. Cyber insurance saw the highest increase in our index, although the rate of increase continued to moderate.
In reinsurance, market conditions remained challenging from January 1 through April 1. Risk appetite for property catastrophe reinsurance remains constrained. Reinsurers continue to push for structural changes and tightened terms and conditions. Limited new capital has entered the market to support property catastrophe risks. At April renewals, US property cat reinsurance rates saw increases of 40% to 60% on average for non-loss affected accounts with higher increases for loss affected business. US casualty reinsurance rate increases were more modest. In Japan, property cat rates were up 15% to 25%. The impact of rate increases on ceded premiums was mitigated by higher retentions. We continue to help our clients manage through these challenging market conditions.
Now, I'd like to take a moment to provide an update on our recent strategic initiatives and highlight some of the steps we've taken. As we discussed last quarter, 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. There are meaningful opportunities at the intersections of our businesses, where our colleagues can deliver the benefits of our scale, data, insights and solutions that are highly valued by clients.
In February, we named Flavio Piccolomini to lead Marsh McLennan for International and Pat Tomlinson to lead US and Canada. Since then, we have also named additional Marsh McLennan region and country leaders. These leaders are driving greater client impact through enhanced collaboration, while at the same time maintaining the strength of the value propositions of each of our businesses. This deliberate focus on collaboration is already yielding benefits. Let me share some examples. Guy Carpenter Securities and Mercer Investments successfully arranged an insurance-linked securities transaction for a major insurer to transfer earthquake risk. This type of win, the first of its kind in the insurer's market, was possible because of the combined strength of Guy Carpenter's leadership in earthquake parametric structuring and Mercer's deep local investment and regulatory expertise.
Marsh and Guy Carpenter brought the best of our capabilities to a complex clean energy opportunity. Together, we facilitated a project to bring clean hydropower to New York City from Canada and advanced New York State's goal of obtaining 70% of electricity statewide from renewable sources by 2030. Mercer Career and economist from Oliver Wyman delivered an executive compensation solution for a joint venture between two major medical device manufacturers. Mercer designed a new equity compensation rewards program for the joint venture, while Oliver Wyman provided the modeling work for the rewards.
As we drive deeper collaboration, we're also finding new ways to operate, reduce complexity and organize for impact. As we noted in January, we took actions to align our workforce and skillsets with evolving needs, rationalized technology, and reduced our real estate footprint. We see opportunities for savings beyond the actions we have already taken. Mark will provide further details, but overall, we now expect roughly $300 million of savings by 2024 with total cost to achieve these savings of $375 million to $400 million. Our leadership appointments, go-to-market collaboration and restructuring actions are an opportunity to accelerate impact for clients, reinvest in our capabilities, and to be more efficient and connected.
Before I turn to our results, I want to comment on ESG. Our recently released ESG report highlights the many ways in which Marsh McLennan is meeting these challenges and helping clients better manage their strategies. We have a track record of ESG engagement, and it's an area where we continue to see an opportunity to support our colleagues, clients, and communities. Sometimes this work takes place at the macro or community level like Guy Carpenter's work helping communities build resilience in the face of natural disasters through community-based catastrophe insurance, but more often it takes place in our work with clients such as helping clients navigate an evolving climate landscape or our efforts to help organizations address gender and racial pay equity and ensure fairness in rewards. We are proud of the work we do in this area and consider it a privilege to help clients progress their ESG strategies.
Now, let me turn to our first quarter financial performance. We generated adjusted EPS of $2.53, which is up 10% from a year ago or 12% excluding the impact of foreign exchange. On an underlying basis, revenue grew 9%. Underlying revenue grew 11% in RIS and 5% in Consulting. Marsh was up 9%, Guy Carpenter grew 10%, Mercer grew 7%, and Oliver Wyman was flat after growing revenue nearly 40% over the last two years. Overall, the first quarter saw adjusted operating income growth of 13% and our adjusted operating margin expanded 150 basis points year over year.
Turning to our outlook, we are well positioned for 2023 and continue to expect mid-single digit or better underlying revenue growth, another year of margin expansion and strong growth in adjusted EPS. Our outlook contemplates that current macro conditions persist. But as we discussed earlier, there's uncertainty regarding the economic backdrop, which could turn out to be 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 that they deliver to our clients and shareholders.
With that, let me turn it over to Mark for a more detailed review of our results.
