Marsh & McLennan Companies Q3 2022 Earnings Report

Marsh & McLennan Companies EPS Results

• Actual EPS: $1.18
• Consensus EPS: $1.16
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $1.08

Marsh & McLennan Companies Revenue Results

• Actual Revenue: $4.77 billion
• Expected Revenue: $4.87 billion
• Beat/Miss: Missed by -$103.72 million
• YoY Revenue Growth: +4.10%

Marsh & McLennan Companies Announcement Details

• Quarter: Q3 2022
• Date: 10/20/2022
• Time: Before Market Opens
• Conference Call Date: Thursday, October 20, 2022
• Conference Call Time: 8:30AM ET

Marsh & McLennan Companies (NYSE:MRSH), now operating under the name Marsh McLennan, is a global professional services firm that helps organizations manage risk, strategy and people-related challenges. Its businesses serve corporations, governments, institutional investors and other organizations across a broad range of industries and geographies.

The company’s principal businesses include Marsh, an insurance brokerage and risk advisory firm; Guy Carpenter, which provides reinsurance brokerage and related risk management services; Mercer, which offers consulting in areas such as talent, health, retirement and investments; and Oliver Wyman, a management consulting firm. Together, these businesses provide insurance placement, risk analytics, employee benefits consulting, investment advice and strategic and operational guidance.

Founded in 1905, Marsh McLennan is headquartered in New York City and serves clients through operations around the world. John Doyle has served as the company’s president and chief executive officer since 2023.

Marsh & McLennan Companies Q3 2022 Earnings Call Transcript

Key Takeaways

• President and CEO Dan Glaser announced his retirement effective year‐end, with Group President and COO John Doyle succeeding him on January 1, underscoring the firm’s leadership continuity.
• In Q3, Marsh McLennan delivered 8% underlying revenue growth (6th consecutive quarter ≥8%), record adjusted operating income of $851 million (+12% year-over-year) and adjusted EPS up 9%.
• The company repurchased $500 million of shares in Q3 and $1.6 billion year-to-date—its highest ever annual repurchase level.
• By segment, Risk & Insurance Services grew 9% underlying (Marsh +8%, Guy Carpenter +7%), while Consulting rose 8% underlying (Mercer +5%, Oliver Wyman +13%).
• Despite an uncertain macro backdrop and Hurricane Ian’s impact, management expects high single-digit underlying revenue growth, solid adjusted EPS growth and a 15th straight year of margin expansion in 2022.

Presentation

[Operator]

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, 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]

If you have a question, please press star one one on your touch-tone phone. 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 one one on your touch-tone phone. I'll now turn this over to Dan Glaser, President and CEO of Marsh McLennan.

[Dan Glaser, President and CEO at Marsh McLennan]

Thank you, Andrew. Good morning, and thank you for joining us to discuss our third quarter results reported earlier today. I'm Dan Glaser, President and CEO of Marsh McLennan. Joining me on the call today is John Doyle, our Group President and COO, 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 DeSanctis, Head of Investor Relations. Today is my 60th earnings call at Marsh McLennan and 40th as CEO. After 10 years as President and CEO, I will be retiring from Marsh McLennan at the end of the year. Leading this firm over the past decade has been the honor of a lifetime.

[Dan Glaser, President and CEO at Marsh McLennan]

Before I jump into our results, I'd like to say how pleased I am about the leadership succession we announced. The appointment of John Doyle as President and Chief Executive Officer, effective January first, continues to underscore Marsh McLennan's deep pool of industry-leading talent. During John's tenure as President and CEO of Marsh, he drove exceptional revenue and earnings growth. As Group President and COO, John is finding new ways to harness the capabilities of Marsh McLennan across our business, accelerating impact for clients, colleagues, and communities. John has been an indispensable partner to me and the other members of our executive committee in shaping and executing our strategy. He knows our business well and is focused on delivering outstanding performance for clients and shareholders. I am confident that our extraordinary success will continue under John's leadership. Marsh McLennan's third quarter results demonstrated strength on strength.

[Dan Glaser, President and CEO at Marsh McLennan]

Top-line momentum continued across our business, extending the best run of quarterly underlying growth in over two decades. We generated strong top and bottom line results despite difficult year-over-year comparison. Underlying growth of 8% in the quarter reflects considerable strength across our organization. It represents the sixth consecutive quarter of 8% or higher top-line growth, building on 13% growth a year ago. Adjusted operating income of $851 million was a third quarter record and grew 12% on top of 19% in the third quarter of 2021. Adjusted EPS growth of 9% is excellent, especially given costs related to our strategic talent investments, the rebound of T&E, and 32% growth in the third quarter of 2021.

[Dan Glaser, President and CEO at Marsh McLennan]

We completed $500 million of share repurchases in the third quarter, bringing year-to-date repurchases to $1.6 billion, which is higher than any full year level of repurchases in our history. While the economic and geopolitical backdrop is uncertain, we have a proven track record of being resilient through cycles and are well positioned. Overall, our third quarter performance highlights the strength of Marsh McLennan, the critical nature of what we do for our clients, and the unmatched expertise of our colleagues. With that, let me turn it over to John.

[John Doyle, Group President and COO at Marsh McLennan]

Thanks, Dan, and good morning, everyone. I am honored to become Marsh McLennan's next president and CEO, and grateful for the trust and confidence Dan and the board have placed in me to lead this exceptional company. I'm eager to work with our colleagues in realizing new possibilities to serve our clients, create value for our shareholders, and support our communities. I'm pleased with our third quarter results. We delivered strong growth despite a macro backdrop that is becoming more uncertain. We are delivering solutions to help clients navigate volatile economic, geopolitical, and risk landscape. As we discussed last quarter, there are aspects of the current environment that remain supportive of our growth. Higher inflation offsets lower real GDP growth, rising interest rates boost our fiduciary income, and the challenging insurance market drives a flight to quality.

[John Doyle, Group President and COO at Marsh McLennan]

We also have a track record of success in being resilient through cycles, and I believe Marsh McLennan is well positioned to perform. I would like to take a moment to discuss Hurricane Ian, which has had a devastating impact on the people and communities in Florida. Ian has the potential to be the costliest insured event in Florida's history and the second most damaging insured loss of all time. We are working with insurers to help our clients receive much-needed support. Insurance has a critical role to play in rebuilding homes and restoring shuttered businesses. Our work reinforces Marsh McLennan's purpose to be there in the moments that matter for our clients and communities.

[John Doyle, Group President and COO at Marsh McLennan]

Ian's Category 4 strength, incredible size, and slow pace resulted in tremendous damage, the cost of which is exacerbated by the effects of coastal development, the escalation of property values, general inflation, and persistent supply chain challenges. While the ultimate insured loss won't be known for some time, the impact on an already stressed property market will be significant. At mid-year reinsurance renewals, property market is already exhibiting strains. Following Ian, the property cat market is likely to tighten even further and perhaps see a significant supply-demand imbalance. We are harnessing our collective expertise, scale, and capabilities to bring solutions to help our clients navigate this complex risk environment. Turning to our third quarter financial performance, we generated strong results.

[John Doyle, Group President and COO at Marsh McLennan]

Adjusted EPS of $1.18 is up 9% versus a year ago, which is impressive on top of 32% growth in the third quarter of 2021. Total revenue increased 4% versus a year ago and rose 8% on an underlying basis, with 9% in RIS and 8% in consulting. This is a terrific result, especially considering the prior year third quarter underlying growth was 13%. Marsh had an excellent quarter. Growth was 8%, reflecting new business and strong renewal growth. Guy Carpenter grew 7% for the quarter, continuing its string of terrific results. Mercer grew 5% in the quarter despite capital market headwinds. Oliver Wyman grew 13%, the seventh consecutive quarter of double-digit growth.

[John Doyle, Group President and COO at Marsh McLennan]

The third quarter saw adjusted operating income growth of 12%, and our adjusted operating margin expanded 110 basis points year-over-year. Overall, I am proud of our third quarter performance, which demonstrates the strength and resilience of our business. Given our strong third quarter and year-to-date performance, we are on track for an outstanding year. We expect to generate high single-digit growth, underlying revenue, solid growth in adjusted EPS, and to report margin expansion 15 consecutive years. We are focused, aligned, and succeeding together as our results demonstrate. Before I turn it over to Mark, I'd like to say a few words about Dan. During Dan's tenure at the helm of Marsh McLennan, the company has been transformed. Our revenue has nearly doubled, our adjusted EPS has more than tripled, and our market cap has quadrupled.

[John Doyle, Group President and COO at Marsh McLennan]

Our scale and capabilities have been enhanced, and our talent is unmatched. Dan led our expansion into new client segments and launched Marsh McLennan Agency, which has grown to $2.5 billion of annual revenue, closed 100 acquisitions in just over a decade. Dan also successfully led the company's $5.6 billion acquisition of JLT in 2019, the largest in our history. Most importantly, Dan has led our firm with vision, courage, and integrity. Faced with the consequences of the pandemic, his values-first leadership ensured that the tough choices were made to safeguard our colleagues, to protect jobs and incomes, deliver for clients, bolster liquidity, and still produce significant growth. His decisions were an inspiration to our colleagues and an example to the broader business community.

[John Doyle, Group President and COO at Marsh McLennan]

Our financial performance speaks for itself, with Marsh McLennan's total shareholder return more than doubling the S&P 500 during Dan's stewardship as CEO. Less visible, but even more significant, is the sense of pride and the culture that Dan has instilled in the firm. Under his leadership, we are not only a great stock, but a great company. We owe him our gratitude. On behalf of our 86,000 colleagues, I thank Dan for his leadership. With that, I'll turn the call over to Mark for further detail on our financial results and a discussion of our outlook for the rest of 2022.

[Mark McGivney, CFO at Marsh McLennan]

Thank you, John, and good morning. As Dan and John mentioned, our performance in the third quarter reflects continued momentum across our business. We saw another quarter of strong underlying revenue growth, meaningful earnings growth despite tough revenue and expense comparisons. Consolidated revenue increased 4% to $4.8 billion and reflected underlying growth of 8%. Operating income was $791 million. Adjusted operating income was $851 million. Our adjusted operating margin was 19.6%, up 110 basis points from last year. The increase was driven by modest operating leverage and a benefit from foreign exchange. We generated GAAP EPS of $1.08 this quarter and adjusted EPS of $1.18, up 9% year-over-year. For the first nine months of 2022, underlying revenue growth was 9%.

[Mark McGivney, CFO at Marsh McLennan]

Our adjusted operating income increased 11% to $3.7 billion. Our adjusted operating margin increased 60 basis points to 25.6%, and our adjusted EPS increased 12% to $5.38. Looking at risk and insurance services, third quarter revenue was $2.8 billion, up 6% compared with a year ago, or 9% on an underlying basis. Operating income increased 32% to $529 million. Adjusted operating income increased 20% to $562 million, and our adjusted operating margin expanded 200 basis points to 22.4%. For the first nine months of the year, revenue was $9.7 billion, underlying growth 10%.

[Mark McGivney, CFO at Marsh McLennan]

Adjusted operating income for the first nine months increased 13% to $2.8 billion with a margin of 31.1%, up 80 basis points from the same period in 2021. At Marsh, revenue for the quarter was $2.5 billion, up 5% from a year ago. Revenue growth was 8% on an underlying basis, supported by strong retention and new business. U.S. and Canada had 5% underlying growth, a solid result considering the 16% growth in the third quarter of 2021 that included the benefit of significant M&A and SPAC-related activity. International underlying growth was 11%. Latin America grew 15%. Asia Pacific was up 14%. EMEA was up 9%. First nine months of the year, Marsh's revenue was $7.8 billion. Underlying growth was 9%. U.S. and Canada was up 8%.

[Mark McGivney, CFO at Marsh McLennan]

International grew 10%. Guy Carpenter's third quarter revenue was $328 million, up 7% on an underlying basis, reflecting solid production and retention. Guy Carpenter has now achieved underlying revenue growth of 7% or higher in six of the last seven quarters. For the first nine months of the year, Guy Carpenter generated $1.8 billion revenue and 10% underlying growth. In the consulting segment, revenue of $2 billion was up 1% from a year ago or 8% on an underlying basis, building on 12% in the third quarter of 2021. Operating income decreased 14% to $350 million, reflecting a one-time noteworthy benefit a year ago. Adjusted operating income increased 3% to $362 million, while solid earnings growth was masked by a drag from foreign exchange.

[Mark McGivney, CFO at Marsh McLennan]

The adjusted operating margin expanded 20 basis points to 19.1%. Consulting generated revenue of $6 billion for the first nine months of 2022, an underlying growth of 9%. Adjusted operating income for the first nine months of the year increased 5% to $1.1 billion. The adjusted operating margin was 19.6% flat versus the third quarter of 2021. Mercer's revenue was $1.3 billion in the third quarter, up 5% on an underlying basis, which is impressive given the impact of market declines on our investment services. Career grew 15% on an underlying basis, the sixth consecutive quarter of mid- to high-teens growth. We continued to see strong demand for solutions around workforce transformation as well as compensation and reward.

[Mark McGivney, CFO at Marsh McLennan]

Health underlying growth was also excellent at 10% for the quarter, reflecting strength across all geographies. Wealth decreased 1% on an underlying basis due to declines in both equity and fixed income markets. This market impact represented a 2% headwind to Mercer's overall growth for the quarter. However, solid demand and defined benefits helped mitigate the decline in investments. Our assets under management were $318 billion at the end of the third quarter, down 8% sequentially and 20% from the third quarter of last year, due entirely to market declines in foreign exchange. For the first nine months of the year, revenue at Mercer was $4 billion, up 6% on an underlying basis. Oliver Wyman's strong momentum continued. Revenue in the third quarter was $667 million, an increase of 13% on an underlying basis.

[Mark McGivney, CFO at Marsh McLennan]

This comes on top of 25% growth in the third quarter last year and reflects continued strong demand across most geographies and solutions. For the first nine months of the year, revenue at Oliver Wyman was $2 billion, an increase of 15% on an underlying basis. Adjusted corporate expense was $73 million in the third quarter. Based on our current outlook, we expect approximately $80 million for the fourth quarter. Foreign exchange had an immaterial effect on our adjusted EPS in the third quarter, although year-to-date it's been a headwind of $0.07. Assuming exchange rates remain at current levels, we expect FX to be a headwind of $0.07 in the fourth quarter. Our other net benefit credit was $57 million. For the full year of 2022, we expect our other net benefit credit to be around $230 million.

[Mark McGivney, CFO at Marsh McLennan]

We reported an investment loss of $1 million in the third quarter on a GAAP basis. On an adjusted basis, we had investment income of $3 million. Interest expense in the third quarter was $118 million compared to $117 million in the third quarter of 2021. Based on our current forecast, we expect interest expense of $121 million in the fourth quarter. Our adjusted effective tax rate in the third quarter was 24.6%, compared with 24.4% in the third quarter of last year, included a modest net benefit of discrete items. Excluding discrete items, our adjusted effective tax rate was 25% in the quarter. When we give forward guidance around our tax rate, we now project discrete items which could be positive or negative.

[Mark McGivney, CFO at Marsh McLennan]

Based on the current environment, reasonable to assume an adjusted effective tax rate of 25% for full year 2022. Turning to capital management and our balance sheet, we ended the quarter with total debt of $11.4 billion. Our next scheduled debt maturity is March of 2023, when $350 million of senior notes mature. Our cash position at the end of the third quarter was $802 million. Uses of cash in the quarter totaled $931 million, included $293 million for dividends, $138 million for acquisitions, $500 million for share repurchases. For the first nine months, uses of cash totaled $2.9 billion, included $840 million for dividends, $411 million for acquisitions, $1.6 billion for share repurchases.

[Mark McGivney, CFO at Marsh McLennan]

We continue to expect to deploy approximately $4 billion of cash in 2022, plus dividends, acquisitions, and share repurchases. Overall, we remain on track for a terrific 2022. For the full year, we expect to generate high single-digit growth in underlying revenue, solid growth in adjusted EPS, and to report margin expansion for the 15th consecutive year. With that, I'm happy to turn it back.

[Dan Glaser, President and CEO at Marsh McLennan]

Thank you, Mark. Before we open up the call for Q&A, I just want to say it has been a great privilege to lead this firm and work side by side with smart, creative, and dedicated people. I am immensely proud of our colleagues and what we have accomplished. Together, we've grown, innovated, and persevered. We launched and built MMA, expanded our capabilities in combination with JLT, and demonstrated resilience in the face of a financial crisis and global pandemic. We emerged as a better and stronger firm by relying on each other, living our values, supporting our communities, and staying focused on clients. I have always believed the greatness of our company is in how we deliver in the big moments and the small. Under John's leadership, I know Marsh McLennan will continue to thrive and prosper, make a difference in the moments that matter.

[Dan Glaser, President and CEO at Marsh McLennan]

There is no one I trust more with the company we have built together than with the important work ahead. I'd like to thank our clients for choosing to do business with us, our shareholders for their continued confidence, most importantly, our colleagues. All that we have achieved is due to their efforts. With that, operator, we are ready to begin Q&A.

[Operator]

Thank you. We will now begin the question and answer session. If you have a question, please press star one one on your touchtone phone. 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 one one on your touchtone phone. In the interest of addressing questions from as many participants as possible, we ask that participants limit themselves to one question. One moment, please. Our first question comes from the line of Elyse Greenspan with Wells Fargo.

[Elyse Greenspan, Managing Director at Wells Fargo]

Hi. Thanks. Good morning. You know, first, Dan, my congrats to you on your upcoming retirement. You know, it's been great working with you through the years. My first question, you know, was on U.S. and Canada within RIS in the quarter. The growth did slow, you know, from where you guys have been trending. I know we've had some good and bad quarters as we've gone through the pandemic and came out. Was there anything specific going on in the third quarter that you want to point out within that business?

[Dan Glaser, President and CEO at Marsh McLennan]

Thanks, Elyse. I appreciate your comments. Thank you very much, and I hope to keep in touch with you. Let me just start. I'll hand off to Martin in a second. Obviously, Marsh has been doing fantastically well, and U.S. Canada has done well as well. I would just start by saying that the comparable was pretty tough at 16% growth in U.S. Canada last year. Martin, you wanna dig in and give a little bit more color?

[Martin South, CEO at Marsh]

Thank you, Dan. Yes. Just to start that we are very pleased with the strong organic growth of 8% in the quarter, which is on top of 13% in the prior quarter 2021. Growth is strong across all the geographies. EMEA was up 9%, Asia Pac 14%, LAC was up 15%, and 5%, as you noted in the US. Overall, good year-to-date growth of 9%. While, you know, the 5% is a slowdown, it was 16% in Q3 of 2021. When we look at the US over a longer period, the US and Canada is 8% year-to-date, and 13% in the full year of 2021.

[Martin South, CEO at Marsh]

Canada's doing extremely well, and the U.S. growth last year, in the back half of the year, there was exceptional performance in M&A, SPAC, and capital markets activity. We don't see that repeating in the volatility of the markets going forward. We made fantastic investments last year in producers that are focused on recurring business, so we feel that we're very well positioned in the U.S. going forward.

[Dan Glaser, President and CEO at Marsh McLennan]

Basically, a lot of activity last year in M&A, particularly in the back half of last year, which is not repeating, and so that's a bit of a headwind. Overall nothing concerning. Do you have a follow-up, Elyse?

[Elyse Greenspan, Managing Director at Wells Fargo]

Yeah. Thanks. My follow-up question is on the outlook for Guy Carpenter. You know, you guys mentioned the loss that we saw from Hurricane Ian. You know, from what we've been hearing, it really has the potential to turn on the catastrophe reinsurance market significantly next year. You know, what are you guys seeing there? And can you just, you know, talk about how Guy Carpenter could benefit from, you know, a pretty hard reinsurance market in 2023?

[Dan Glaser, President and CEO at Marsh McLennan]

Yeah. Why don't we start with John just to talk a little bit about the overall market, primary and reinsurance, and then we'll go to Dean. John?

[John Doyle, Group President and COO at Marsh McLennan]

Sure. Thanks, Dan. You know, Elyse, the insurance markets remained challenging in the third quarter for our clients. Prices continued to rise in the quarter, although moderating slightly overall, from where we were in the second quarter. Reinsurance markets, though, you know, are different, you know, really a different matter. The property cat market, in particular, was tightening in advance of Ian. And then, you know, as I noted in my prepared remarks, we're likely headed to a, you know, much more challenging January first reinsurance renewal. With that, maybe I'll ask Dean to jump in on some of the details of what we're seeing in the market today.

[Dean Klisura, President and CEO at Guy Carpenter]

Thanks, John. As we look forward, demand for our advice and solutions remains very strong. We feel we're very well positioned to continue to create value for clients and grow our business moving forward. Demand for reinsurance, including cat property, is expected to remain very strong as our clients manage volatility and continue to address systemic risk, including cyber and the impacts of climate change and the emerging perils we're seeing around flood, wildfire, and convective storms around the world continue to accelerate and concern our clients. The impact of Hurricane Ian will certainly create challenging market conditions at January 1 in the property cat space. As John noted, a tightening cat market could be a tailwind for Guy Carpenter, but we have a track record of strong growth in any market conditions.

[John Doyle, Group President and COO at Marsh McLennan]

Terrific, Dean. Thanks. Martin, maybe you could talk a little bit about what we're starting to see in terms of the impact of Ian on the property markets that Marsh operates in, and then just broadly what's happening in pricing in the marketplace.

[Martin South, CEO at Marsh]

Yeah. Thanks, John. Well, we're into the 20th consecutive quarter of rate increases across the board. We'll be announcing our rate survey in a couple of weeks' time. It'll show 6% year-to-date in quarterly results in the property area. No question there's gonna be strain in the property market, particularly for clients that have high cat exposures. We would have thought by now at this point in the cycle after such consistent growth in property that we'd have started to see some easing off. The reverse is gonna be true, sadly for our clients, going through to the back end of the year. Across the board, though, rates. I'll just give you some color on those, John.

[Martin South, CEO at Marsh]

The composite rate is 6%, which is down a little bit from the last quarter. Casualty is up 4% still. As I mentioned, property 6%. FINPRO lines are down 1%. They were heavily weighted in the prior year and in the prior quarter from D&O, SPACs, and cyber. We will be breaking out cyber, especially this year, which is showing rate increases of 53%. That's down a little bit from rate increases in the prior quarter, but still very strong rate increases. Some of the activity we've seen there is slowing down a little bit. It's a healthy market.

[Martin South, CEO at Marsh]

Of course, you know, we're worried about our clients, and as we said, we're gonna be looking for solutions to plan them, and we see that as a potential demand driver as well.

[John Doyle, Group President and COO at Marsh McLennan]

Perfect. Next question, please.

[Operator]

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

[Jimmy Bhullar, Equity Research Analyst at JPMorgan]

Hey, good morning. I just had a question first on Oliver Wyman. I think there's concerns that if the economy slows down, that's a business that might be vulnerable to slower organic growth. But you've obviously had very strong results the last several quarters. If you could talk about what you're seeing in terms of pipeline and just what your expectations are for the business.

[Dan Glaser, President and CEO at Marsh McLennan]

Sure. As we've mentioned before, Oliver Wyman and Mercer's career business are probably the most sensitive to the economic cycle, and it represents about 17% of our business. Both have been performing remarkably well over a long stretch of time. I mean, Mercer, as we mentioned earlier, Mercer's career is up 15%, and it's their sixth quarter of double digit growth in a row. Oliver Wyman has had seven quarters of double digit growth in a row. If there are clouds somewhere in the future, we're not seeing them right today. Nick, you wanna give us more on Oliver Wyman?

[Nick Studer, President and CEO at Oliver Wyman]

Thank you, Jimmy. Yes. It is true that our market tends to prosper when the economy is healthy. At the same time, when all the questions change, our clients need new answers. I will say, we're not seeing any reversal in our business, and our pipeline continues to be robust. As Dan and Martin both mentioned, the M&A and SPAC cycle, we have seen slower pace in the businesses that thrive on M&A activity. You know, I suspect we won't be immune to some of the tough elements in the cycle. Our client offerings are less procyclical than they were perhaps five years ago. We have a strong capability in risk management.

[Nick Studer, President and CEO at Oliver Wyman]

A lot of work in performance improvement, both top line and bottom line. We've established a restructuring practice. I'd add, it's actually been an incredibly tough environment for quite a few years now in several of the sectors we serve with the effects of the pandemic. For now, the pipeline remains strong.

[Dan Glaser, President and CEO at Marsh McLennan]

Yeah. The other thing about it is that even though, you know, the career business and Oliver Wyman are more sensitive, they actually bounce back a lot quicker post a down cycle. You know, they're great businesses. We're glad we're in them. Overall, they provide us with leading growth over long stretches of time, and we're not overly concerned with short bursts. You have a follow-up, Jimmy?

[Jimmy Bhullar, Equity Research Analyst at JPMorgan]

Yeah, just on fiduciary investment income. It's up, I think, around 10x what it was a year ago and almost 3x the sequential quarter. Obviously there's a benefit there from higher interest rates, but wondering if that's all it is, and should we assume that it goes up further as rates have gone even higher since the end of the quarter, or was there any sort of discrete item that benefited the Q3 results?

[Dan Glaser, President and CEO at Marsh McLennan]

Well, it's nice to say it was up 10x. It started from a very, very low number. Mark McGivney, you wanna talk about fiduciary income?

[Mark McGivney, CFO at Marsh McLennan]

Yeah, Jimmy, there's nothing unusual or one-time in the results. So as you noted, we had $4 million a year ago in the third quarter. It was $40 million in this third quarter, and it just reflects, you know, the rise in global rates. So it's definitely a source of upside for us. Obviously, we have balances all over the world, and so we're dependent on rates moving in different jurisdictions, but there's generally a trend up. And just remember, we've got over $10 billion of fiduciary balances on any given day, so 100 basis points equals $100 million of income.

[Jimmy Bhullar, Equity Research Analyst at JPMorgan]

Noted. Good luck and congratulations then.

[Dan Glaser, President and CEO at Marsh McLennan]

Thank you very much, Jimmy. Next question, please.

[Operator]

Thank you. Our next question comes from the line of David Motemaden with Evercore ISI.

[David Motemaden, Senior Managing Director at Evercore ISI]

Hi. Thanks. Good morning. Dan, congrats on the retirement. It's been quite a ride. Congrats.

[Dan Glaser, President and CEO at Marsh McLennan]

Thank you. Thanks, David.

[David Motemaden, Senior Managing Director at Evercore ISI]

Just had a question on you know the hiring activity that's been picking up. Obviously the tough comp in the U.S. just on the M&A side in Marsh makes it a little tough to see any impact. I was just wondering if you could just comment on how much this quarter benefited from some of the strategic hires that you've made over the last year and 2.5 years and maybe give us a sense of how much that should ramp as we head into 2023.

[Dan Glaser, President and CEO at Marsh McLennan]

Yeah. Why don't we start with John, and maybe we'll go deeper. John, why don't you take that?

[John Doyle, Group President and COO at Marsh McLennan]

Sure, Dan. You know, David, we're very, very pleased. We continue to be just, you know, absolutely pleased with the Strat hiring that we did last year. Not only are they producing, but, you know, we did a lot of work, you know, as we were hiring these folks to make sure, that they're a right cultural fit, and that's proven to be the case as well. They've. You know, we started with world-class talent. We think the best talent in the markets that we serve, and these folks have made us better. You know, we serve our clients in teams, and they've fit in very, very nicely, you know, at both Marsh & Guy Carpenter, which is where we did most of it. We did some of the hiring in Mercer as well.

[John Doyle, Group President and COO at Marsh McLennan]

Martin, maybe you could just talk about the productivity to date, you know, of the hires.

[Martin South, CEO at Marsh]

John, thank you. You know, as you said, very, very happy with the investments that we made last year. The cultural accretion to us has been significant. They've brought new skills, new insights to the firm, and they've spread it out like wildfire. We focus very heavily in investments, as you know, in areas where we thought there was high recurring revenue growth to the point. The question was, yes, we see these ramping up. Everything is penciling out exactly as we thought it would. In some areas, we're actually ahead of plan. We continue to see this as a, you know, a continuing add to our revenue, our growth, and our capabilities. Couldn't be happier.

[Martin South, CEO at Marsh]

As you know, David, it's 2-3 years before they're fully productive, but we couldn't be more pleased with the progress to date.

[Dan Glaser, President and CEO at Marsh McLennan]

I don't wanna sound like a Hollywood agent, but it is about the talent. We're a people business, it's the smart, dedicated, creative people attract other smart, dedicated, and creative people. We've got a mountain of talent within the company, and we would continue to build upon that. Do you have a follow-up, David?

[David Motemaden, Senior Managing Director at Evercore ISI]

I do, yes. Just on the property cat market, on the reinsurance side, it sounds like that's spilling over a bit into cat exposed primary. I'm wondering if you're seeing that at all starting to spill over into non-property lines at all or if you expect that to happen.

[John Doyle, Group President and COO at Marsh McLennan]

David, not at this point. I would say I wouldn't expect that to happen. You know, of course, you know, things haven't even yet begun to settle, so, you know, there's a lot for us to learn. You know, as I noted in my prepared comments, this was a major loss. You know, it will impact both the insurance and reinsurance markets, but principally in property.

[David Motemaden, Senior Managing Director at Evercore ISI]

Understood. Thank you.

[Dan Glaser, President and CEO at Marsh McLennan]

Next question, please.

[Operator]

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

[Yaron Kinar, Equity Research Analyst at Jefferies]

Thank you very much. Good morning, everybody. I also wanna congratulate Dan on a phenomenal career, and good luck in retirement. Good luck to John as well. Tough act to follow. I guess first question, going back to the reinsurance market and maybe the dislocation we're seeing in Florida and hardening and more broadly in property cat. So I think I understand the rate environment, but at the same time, we're also hearing about maybe excess of capital, private reinsurance pulling out of the market, maybe public markets looking to take on some of that bucket, if you will. I guess how are you envisioning the supply issue?

[Yaron Kinar, Equity Research Analyst at Jefferies]

How much of an impact could that have on overall growth next year? Related to that, I would think that a lot of your colleagues have actually never experienced a real hard market and certainly in Guy Carpenter. How are you preparing them to address this new environment?

[Dan Glaser, President and CEO at Marsh McLennan]

Yeah, it's a good series of questions and it's certainly something that's been at the executive team table as we think through how to serve clients in this kind of environment. We've been in tough markets before, but your basic point about supply and demand, yeah, demand will outstrip supply. It's already outstripping supply. It's just in extent of how quickly the market can adapt to that. Ian, you wanna give us more?

[Dean Klisura, President and CEO at Guy Carpenter]

Sure. Maybe I'll give you a little more color. Thanks, Dan. You know, as John noted earlier, Ian's impact on already storm-stressed property market could be significant. Prior to Ian, right? There seemed like there was increased demand from clients to absorb inflation and recent losses in the market. We're already starting to feel that ongoing stress. As John noted, following Ian, we're really starting to see the property cat market tighten, particularly in the U.S. with potential supply imbalances in the marketplace. As you noted, it's the third year in a row of $100 billion of cat losses in the market. I would say it's gonna be more, potentially more than just rate increases for U.S. cat-exposed clients, right?

[Dean Klisura, President and CEO at Guy Carpenter]

Increased retentions, changes in coverage in terms, you know, reduced capacity from individual players. Also the impact from the retrocession market, which could be significantly impacted as well. You know, some are, you know, discussing 25% of the retrocession capital being trapped by Ian in the market and not replenished for January 1. Certainly we've got some stresses there. However, I would say we're working very closely with our clients, leveraging our deep expertise in the market to work closely with clients to deliver successful outcomes, and we're investigating new capacity in the marketplace. We've been working for several months with players around the world to bring more capital, more interest into the cat market on behalf of our clients.

[Dan Glaser, President and CEO at Marsh McLennan]

Yeah. Absolutely. You know, it's one of those things. Very tough markets, really in some ways, it's the period where Marsh McLennan shines the most, and so Guy Carpenter will do well. In any time where there's supply and demand imbalances, you could have short-term pressures of something not being able to be placed because there's not enough capital providers willing to write a particular line of business. Solutions will be found, and we're actively working for our clients in that area. Any follow-up, Yaron? Although you asked about four questions. Give me another one if you have one at the ready.

[Yaron Kinar, Equity Research Analyst at Jefferies]

Yeah, I have one more, hopefully shorter. Cyber, you mentioned very strong rate increases. I think that's also a continuation of a couple of years of strong rate improvement. That said, my understanding is that the 2022 loss experience is starting to moderate. How are you envisioning 2023 as far as rate increases and maybe increased demand if rate increases are slower?

[Dan Glaser, President and CEO at Marsh McLennan]

John?

[John Doyle, Group President and COO at Marsh McLennan]

Yeah, Yaron Kinar, you know, I'm not gonna forecast the pricing environment for cyber. Price increases are moderating. I think you used the word improving, but I'm not sure our clients at Marsh would consider it an improving rate environment. We've had a lot of rate-on-rate. It's been a difficult market. What I would also note about cyber, you know, while ransomware, it's to some extent, I think, reflective of the reduction in ransomware in recent quarters. Underwriters have also responded to ransomware through higher retentions, lower limits, for example. Longer term, though, the cyber market's not near maturity. You know, we're still working to bring more capital to the market, better solutions to the marketplace.

[John Doyle, Group President and COO at Marsh McLennan]

The cyber insurance market should be an area of growth for us for some time as we help our clients navigate the risks of a digital economy.

[Dan Glaser, President and CEO at Marsh McLennan]

Absolutely. Next question, please.

[Operator]

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

[Meyer Shields, Managing Director at KBW]

Thanks. Good morning, and I wanna add my congratulations to Dan. I remember where Marsh was when you first came on board. You've done an absolutely phenomenal job.

[Dan Glaser, President and CEO at Marsh McLennan]

You know, I had your headline from November 2007, what else could go wrong? A statement, not a question. That was on my bulletin board for about five years there.

[Meyer Shields, Managing Director at KBW]

Well, yeah. Anyhow, quick question, and it's like, I'm trying to decipher how much of politics is real. There's a fair amount of opposition brewing in some parts of the country to ESG, and I'm wondering how that's impacting demand for ESG-related consulting.

[Dan Glaser, President and CEO at Marsh McLennan]

Sure. Yeah, it's a great question. We're reading the same reports. Why don't we go first to Martine to talk a little bit about the Mercer investment side of the business and other areas of Mercer that are impacted or that make markets in ESG, and then we'll hand over to Nick Studer as well. Martine?

[Martine Ferland, President and CEO at Mercer]

Yes, for sure. Thanks, Meyer, for the question. For us at Mercer, in terms of environmental, social, and governance, actually we can work with clients on all three fronts, low carbon economy, the transition, sustainable investment. We help clients wherever they are in their philosophy of investment and their objectives to look at the market and the best risk and reward. Our clients invest for the long run, and they look at the risk element of their investment. It's in with that lens that we're looking at the ESG factors with them. We don't see that kind of demand and necessity to look at risk. I mean, all through the Q&A today, we have talked about climate risk, for example.

[Martine Ferland, President and CEO at Mercer]

We need to factor these risks in when we look at investment and help our clients get the returns that they're looking for. Other elements, of course, DE&I, social, minimum standards of benefit across the world. We pay equity. We have a lot of work there with our clients that are focused very much on building diverse workforces and the whole governance element around it, whether it goes from executive compensation to the way that they manage and govern their investment.

[Martine Ferland, President and CEO at Mercer]

Actually coming back to investment, it's been quite a rocky year on the capital market this year, but we've been working with clients and actually we've been very busy on the DB consulting side of the house in particular to help clients navigate that very intense headwinds and volatility on capital markets.

[Dan Glaser, President and CEO at Marsh McLennan]

Thanks. Nick?

[Nick Studer, President and CEO at Oliver Wyman]

Yes. I mean, Meyer, in Oliver Wyman, the main focus of the three would be around the climate transition. I think that backlash that you're seeing in some places is something we've expected for quite some time. There's a delicate balance to strike in managing the carbon transition between security and affordability and, you know, the transition itself. Ultimately, when many sectors are trying to reverse engineer 200 years since the Industrial Revolution in 20 years, there'll be actions which overshoot, there'll be actions which take on greater resistance. As it affects our business, our climate sustainability practice is one of the fastest-growing areas of Oliver Wyman, most investment we've made over the last three or four years, and it continues to grow in the very high double digits.

[Nick Studer, President and CEO at Oliver Wyman]

We're not seeing any reduction in demand. We are seeing that the questions are getting more complex.

[Dan Glaser, President and CEO at Marsh McLennan]

Yeah. Thank you. Any follow-up?

[Meyer Shields, Managing Director at KBW]

Yeah, just a brief one. Maybe this is for Mark McGivney. I was hoping you could talk us through capital deployment plans as the cost of capital as reflected in the risk-free rate rises.

[Mark McGivney, CFO at Marsh McLennan]

Yeah, Meyer, I don't. You know, even though interest rates have come up and obviously the weighted average cost of capital for the firm has come up as a result, you know, we tend to value balance and consistency in our approaches, and they've served us well over a long period of time. Even though things have got a little more expensive in economic terms, it isn't enough to make us change our fundamental views on capital allocation, capital structure, things like that. When it comes to M&A, we've held ourselves to much higher return standards than our weighted average cost of capital, consistently, and we'll continue to do that. You know, I don't think there's anything about the current environment that makes us change our basic strategy.

[Dan Glaser, President and CEO at Marsh McLennan]

Thanks. Next question, please.

[Meyer Shields, Managing Director at KBW]

Thanks. Take care.

[Operator]

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

[Robert Cox, VP of Equity Research at Goldman Sachs]

Hey, thanks for taking my question. Latin America and Asia Pacific have been particularly strong. I was wondering if we could get a little more color on what's driving that relative to the U.S. Is it, you know, higher inflation, higher pricing, market share gains? Anything, any color on that would be great.

[Dan Glaser, President and CEO at Marsh McLennan]

Sure. We'll dig in with Martin in a second. I mean, in general, what we've seen in over really the last couple of decades is that you not only have regular higher levels of growth, and a bit more inflation sometimes over long stretches of time in places like Asia and Latin America, but you also have increased insurance penetration. As the economy develops, insurance becomes the underpinning for development. That has always been a benefit to us as well. Martin, you wanna give us more?

[Martin South, CEO at Marsh]

Yes, thank you. Look, for the last few years as well, you've seen international has been slightly weaker than the U.S. That's rebounding and that's the balance thing that's so strong in our portfolio. We're really pleased with the overall balance in our business.

[Martin South, CEO at Marsh]

You know, as Dan said, the Asia Pacific very strong growth of 14%. We have a terrific franchise in Asia and Pacific, pretty well unrivaled positions in almost all the markets there. You could not buy what we have in that market. It's a mixture of, in Japan, maturity and us having been there for such a long period of time and building the trust with the local community and the carriers and doing more indigenous business. It's the protection gap that you see across Southeast Asia that's giving us share. It's strength in our benefits business across Asia. The same for Latin America. We have an unbelievable franchise there.

[Martin South, CEO at Marsh]

Very strong businesses in all the big geographies, in all the big markets in Latin America. There's some rate strength there, but it's been relatively modest for a while. It's really a question of just getting market share and strength and a terrific leadership team.

[John Doyle, Group President and COO at Marsh McLennan]

Dan, I would add that JLT made us stronger in both regions as well.

[Dan Glaser, President and CEO at Marsh McLennan]

Absolutely. Any follow up, Robert?

[Robert Cox, VP of Equity Research at Goldman Sachs]

Yeah, I think that's very helpful. I just had a follow-up on career. You know, there's been some favorable trends in career driven by you know some of the changing dynamics in the labor market. How sustainable are those trends if unemployment you know rises a couple of points? Could you still see strong growth given those underlying changes, or is that too optimistic?

[Dan Glaser, President and CEO at Marsh McLennan]

Martine?

[Martine Ferland, President and CEO at Mercer]

Yes. Thank you for the question, Robert. No, it's a good question. There's no doubt that coming out of the pandemic, the world of work has completely changed, and that has driven demand. You look at all that's currently playing out, whether it's high inflation, it's labor shortage, it's emerging new skills that we have to help client gravitate to, reorganizing the way that you work. We have talked before about the impact that recession have had in the past on the career services business. There's also the career product business, about half and half of revenue in that space. Career product is actually more resilient through recessions. Career services, given the fundamentals that we see in the market today, we currently don't see any slowdown.

[Martine Ferland, President and CEO at Mercer]

Clients are really needing help to navigate all of these changes. We're not immune to a change in economic pace, but we rebound quickly and we'll carry through. So far so good.

[Dan Glaser, President and CEO at Marsh McLennan]

Thank you. Next question, please.

[Operator]

Thank you. Our next question comes from the line of Brian Meredith with UBS.

[Brian Meredith, Managing Director at UBS]

Yeah, thanks. I also just wanna congratulate you, Dan. I wanna echo Meyer's comments. It's been an absolute pleasure watching you lead this organization for the last, you know, decade. Question for you first, M&A. What does the pipeline look like right now? Particularly as we kinda look at M&A here with private equity, you know, maybe cooling off a little bit here, becoming a little more challenging, are you seeing a better pipeline here? You know, I'm assuming that, you know, John wants to outdo you on JLT here pretty quickly.

[Dan Glaser, President and CEO at Marsh McLennan]

Yeah, licking his chops over there. You know, no, the M&A pipeline is good. You know, we, as we've said a few times before in the past, we cultivate relationships over long stretches of time. We're less interested in the call from a banker saying, "Hey, something's going to market. We're inviting 10 people. You wanna participate?" You know. For us, pipeline development and meeting as a core executive team on a regular cadence to review the pipeline and talk to potential prospects in the future, that's just a part of how we go about the business. As you know, we favor building our business through acquisition over share repurchase, but they sort of go in tandem.

[Dan Glaser, President and CEO at Marsh McLennan]

You know, when we have a lighter year in M&A, we'll have more share repurchase, sorta like this year. When we have a heavier year in M&A, we'd have less share repurchase because our dividend comes first and is sacrosanct. When we look at the pipeline, the pipeline's good. You know, we have a transaction that we've mentioned to you before in BT Westpac, which won't close until next year. Still, when we're thinking about the utilization of our capital, you know, we're pretty much thinking that it's kind of, well, it's partly this year, and it's partly next year, regardless of when the cash goes out the door.

[Dan Glaser, President and CEO at Marsh McLennan]

As you know, if you exclude JLT, we've sort of averaged about $1 billion a year on acquisitions, and that's likely to continue.

[Brian Meredith, Managing Director at UBS]

Makes sense. Thanks. Quick follow here for Mark. Mark, any initial kind of thoughts on what the net benefit from pension could look like in 2023, given the big rise we've seen in interest rates?

[Mark McGivney, CFO at Marsh McLennan]

Brian, it's just really too early to, you know, to tell. There's so much that goes into that.

[Mark McGivney, CFO at Marsh McLennan]

You know, that calculation of the other net benefit credits really not until we see, with Mercer's great help, of course, you know, the outlook for expected returns in our year-end valuation that we really formulate a view on that. I think when we're back together in January, I'll have a perspective then.

[Brian Meredith, Managing Director at UBS]

Great. Thank you.

[Dan Glaser, President and CEO at Marsh McLennan]

Thank you. Take care. Next question, please.

[Operator]

Thank you. Our next question comes from the line of Michael Phillips with Morgan Stanley.

[Michael Phillips, Executive Director, Financial Advisor, and Senior Portfolio Management Director at Morgan Stanley]

Thanks, good morning. First question, still back on this theme of property cat reinsurance, guys. How much of a real risk is it then that some business just simply is not gonna get placed, at the beginning of the year? Then how material could that be?

[Dan Glaser, President and CEO at Marsh McLennan]

John, you wanna start with that?

[John Doyle, Group President and COO at Marsh McLennan]

Yeah, Mike, you know, happy to jump back in on this. Again, it's still quite early. I think most reinsurers and insurers are planning and trying to decide how to best deploy capital going forward. As you know, Dean and Dan and I have all discussed, you know, we expect some level of disruption. You know, it's gonna be a challenging market. Again, we're using the capabilities of our entire firm to bring solutions to the market. You know, data and analytics, new investors, new facilities. In some cases it may mean clients retaining more risk, you know, both insurers but also our retail clients as well. We're the global leader in managing captives, you know, on behalf of our clients.

[John Doyle, Group President and COO at Marsh McLennan]

You know, it's an example. Now, some of our clients may be pushed by the market to do that, and some may choose, you know, just given, you know, what might be elevated pricing, you know, may more elect themselves to retain more risk. We're gonna work with them to help all of our clients accomplish their risk management goals.

[Michael Phillips, Executive Director, Financial Advisor, and Senior Portfolio Management Director at Morgan Stanley]

Okay. Thank you. As you said, you know, the property cat market was certainly hardening a bit before Ian. I think we were hearing kind of low single digit or I'm sorry, low double digit.

[John Doyle, Group President and COO at Marsh McLennan]

Yeah.

[Michael Phillips, Executive Director, Financial Advisor, and Senior Portfolio Management Director at Morgan Stanley]

Now we're hearing pretty massive increases. The question is, are those levels that we're hearing, pick a number 30%, 40%, 50%, I don't care the number we pick, but is that strictly just Florida, or do you see such levels as well outside of Florida around the world?

[John Doyle, Group President and COO at Marsh McLennan]

Well, you know, Mike, I think what you've seen over the last several years is cat losses have exceeded modeled estimates. You know, the market has underpriced insurers and reinsurers broadly, you know, have underpriced the risk over that period of time, right? You can look at you know an extended period of time and of course get different outcomes. You know, the market is reacting to that. You've also had an escalation of values that's happened in many cat exposed markets as well. Then broadly speaking, inflation creating some challenges.

[John Doyle, Group President and COO at Marsh McLennan]

You know, as I noted in my prepared remarks, you know, we're heading to meaningful rate change prior to Ian, you know, in the 25%+ range to cover inflation and against just the elevated weather-related events of the last several years. Now it's likely to, of course, be higher than that. You know, in talking to reinsurers and insurers, you know, they're thinking about how to best deploy their capital going forward. They're in the business of taking these risks and will ultimately make choices about, you know, where to best deploy that capital. You know, what they're saying today is they wanna reserve it for their best clients.

[John Doyle, Group President and COO at Marsh McLennan]

On the reinsurance side, that might mean clients that they also support them in casualty and other lines, you know, as an example. You know, on the thinking about Marsh for a second, you know, it's an interesting market. We have a high net worth personal line supports inside of MMA, important business to us. This loss is gonna be more of a small business and personal line loss. It won't impact our major accounts really as much, as other events have.

[Michael Phillips, Executive Director, Financial Advisor, and Senior Portfolio Management Director at Morgan Stanley]

Okay. Thank you for the color. I appreciate it.

[Dan Glaser, President and CEO at Marsh McLennan]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Ryan Tunis with Autonomous Research.

[Ryan Tunis, Partner at Autonomous Research]

Hey, thanks. Good morning. Just a follow-up on the fiduciary investment income. We've had a number of years of really strong margin expansion, where that hasn't played a role at all. Is it right? Am I thinking about this right, that this should be a kind of a separate and distinct margin tailwind on top of the type of margin expansion that we've seen over the past decade? Or, you know, is there investment potentially against some of that investment income?

[Dan Glaser, President and CEO at Marsh McLennan]

No, I mean, you're basically right in that fiduciary income we didn't have. A lot of it is drops to the bottom line, so a lot of it is profit, and that will help margins in the future.

[Ryan Tunis, Partner at Autonomous Research]

Perfect. I'll follow up, I guess, for Martine. Just in wealth, is there any way you can quantify, you know, with markets rolling over, the type of impact that's having on organic growth?

[Dan Glaser, President and CEO at Marsh McLennan]

Please.

[Martine Ferland, President and CEO at Mercer]

Yes. No, no, thanks, Ryan. It has an impact. We commented on it and as you can imagine, it's what we call our OCIO business, where we're paid in basis points of the assets under management. It's been a very good business to us. It's been growing rapidly, but it is exposed to short-term volatility from capital markets.

[Martine Ferland, President and CEO at Mercer]

Based on the market value that we see at the end of Q3, we do expect a drag from capital market to continue in the fourth quarter as a reference, and I think we alluded to that in our script. In Q3, this has cost us about two points of margin at Mercer, four points on wealth-

[Dan Glaser, President and CEO at Marsh McLennan]

Top line.

[Ryan Tunis, Partner at Autonomous Research]

Two points.

[Martine Ferland, President and CEO at Mercer]

Top line.

[Dan Glaser, President and CEO at Marsh McLennan]

Yeah, yeah.

[Ryan Tunis, Partner at Autonomous Research]

Revenue.

[Martine Ferland, President and CEO at Mercer]

Revenue. Exactly.

[Dan Glaser, President and CEO at Marsh McLennan]

Mercer would have been more like a seven instead of a five.

[Martine Ferland, President and CEO at Mercer]

Yeah.

[Dan Glaser, President and CEO at Marsh McLennan]

If not four.

[Martine Ferland, President and CEO at Mercer]

Yes. Oh, you know, we had 15% in career and 10% in health, rounding this up, and also it does help us on the consulting side where we consult with clients when there's such impact on the capital market. Our portfolio is diversified, so that helps. We had also a great net new flow coming to our funds, which will impact next year. But we do have a head.

[Dan Glaser, President and CEO at Marsh McLennan]

Okay, thanks. It's a terrific business, Ryan. As we noted, you know, the assets under delegated management are down about 20% year-over-year. Having said that, if you look over the decade, over a decade, the CAGR on assets under delegated management is about a 20% number and so it's on a CAGR basis. It's a great business. We're glad we're in it, but obviously, it's a headwind in the short term, hopefully in the short term.

[Operator]

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

[Dan Glaser, President and CEO at Marsh McLennan]

Thank you. Thank you for joining us on the call this morning. I wanna thank our 86,000 colleagues for their commitment, hard work, and dedication to Marsh McLennan. From the bottom of my heart, thank you for the trust you have put in me. Serving as CEO of Marsh McLennan has been an honor. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.

Participants

Executives

• Dean Klisura, President and CEO
• John Doyle, Group President and COO
• Mark McGivney, CFO
• Martin South, CEO
• Martine Ferland, President and CEO

Analysts

• Brian Meredith, Managing Director at UBS
• Dan Glaser, President and CEO at Marsh McLennan
• David Motemaden, Senior Managing Director at Evercore ISI
• Elyse Greenspan, Managing Director at Wells Fargo
• Jimmy Bhullar, Equity Research Analyst at JPMorgan
• Meyer Shields, Managing Director at KBW
• Michael Phillips, Executive Director, Financial Advisor, and Senior Portfolio Management Director at Morgan Stanley
• Nick Studer, President and CEO at Oliver Wyman
• Robert Cox, VP of Equity Research at Goldman Sachs
• Ryan Tunis, Partner at Autonomous Research
• Yaron Kinar, Equity Research Analyst at Jefferies