Q1 2023 Marsh & McLennan Companies Inc Earnings Call

Participants

Dean M. Klisura; President & CEO; Guy Carpenter & Company, LLC

John Quinlan Doyle; President, CEO & Director; Marsh & McLennan Companies, Inc.

Mark Christopher McGivney; CFO; Marsh & McLennan Companies, Inc.

Martin C. South; President & CEO; Marsh Ltd.

Martine Ferland; Vice Chair; Marsh & McLennan Companies, Inc.

Nicholas Mark Studer; President & CEO; Oliver Wyman Group

Andrew Scott Kligerman; MD & Senior Life Insurance Analyst; Crédit Suisse AG, Research Division

Brian Robert Meredith; MD, Financials Research Sector Head & Global Insurance Strategist; UBS Investment Bank, Research Division

David Kenneth Motemaden; MD & Fundamental Research Analyst; Evercore ISI Institutional Equities, Research Division

Elyse Beth Greenspan; Director & Senior Analyst; Wells Fargo Securities, LLC, Research Division

Jamminder Singh Bhullar; Senior Analyst; JPMorgan Chase & Co, Research Division

Meyer Shields; MD; Keefe, Bruyette, & Woods, Inc., Research Division

Michael David Zaremski; MD & Senior Equity Research Analyst; BMO Capital Markets Equity Research

Robert Cox; Research Analyst; Goldman Sachs Group, Inc., Research Division

Yaron Joseph Kinar; Equity Analyst; Jefferies LLC, Research Division

Presentation

Operator

Welcome to Marsh & McLennan's earnings conference call. Today's call is being recorded.
First quarter 2023 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'll now turn this over to John Doyle, President and CEO of Marsh McLennan.

John Quinlan Doyle

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 continue 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 continue to increase as carriers price 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 U.S. 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 in risks, 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, U.S. property cat reinsurance rates saw increases of 40% to 60% on average for non-loss-affected accounts, with higher increases for loss-affected business. U.S. 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 U.S. 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 insurers' 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 advance New York State's goal of obtaining 70% of electricity statewide from renewable sources by 2030.
Mercer Career, an economist from Oliver Wyman, delivered an executive compensation solution for a joint venture between 2 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 are also finding ways to operate, reduce complexity and organize for impact. As we noted in January, we took actions to align our workforce and skill sets with evolving needs, rationalize technology and reduce 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 2 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.

Mark Christopher McGivney

Thank you, John, and good morning. Our first quarter results were outstanding and reflected continued momentum in underlying growth, strong margin expansion and double-digit growth in adjusted EPS. Our consolidated revenue increased 7% in the first quarter to $5.9 billion, with underlying growth of 9%. Operating income was $1.7 billion, and adjusted operating income increased 13% to $1.8 billion.
Our adjusted operating margin increased 150 basis points to 31.2%. GAAP EPS was $2.47, and adjusted EPS was $2.53, up 10% over last year.
Looking at Risk & Insurance Services. First quarter revenue was $3.9 billion, up 10% compared with a year ago or 11% on an underlying basis. This result marks the eighth consecutive quarter of 8%-or-higher underlying growth in RIS, continues the best stretch of growth in nearly 2 decades. Adjusted operating income increased 17% to $1.4 billion, and our adjusted operating margin expanded 210 basis points to 38.6%.
At Marsh, revenue in the quarter was $2.7 billion, up 8% from the first quarter of last year or 9% on an underlying basis. This comes on top of 11% growth in the first quarter of last year and reflects acceleration from the fourth quarter. Growth in the first quarter reflected excellent retention and strong new business.
In U.S. and Canada, underlying growth was 7% for the quarter, a solid result given the continued headwind from lower M&A and capital markets activity.
In international, underlying growth was strong at 10% and comes on top of 11% growth in the first quarter of 2022. Asia Pacific was up 11%, EMEA was up 10% and Latin America grew 10%.
Guy Carpenter's revenue was $1.1 billion, up 7% or 10% on an underlying basis, driven by strong growth across all regions and global specialties and reflecting the tighter reinsurance market conditions.
In the Consulting segment, first quarter revenue was $2 billion, up 1% from a year ago or 5% on an underlying basis. Consulting operating income was $411 million and adjusted operating income was $406 million, up 1%, reflecting continued foreign exchange headwinds and the softer quarter at Oliver Wyman. Our adjusted operating margin in Consulting was 20.3% in the first quarter, a decrease of 30 basis points.
Mercer's revenue was $1.3 billion in the quarter, up 7% on an underlying basis. Career revenue increased 12%, the eighth straight quarter of double-digit growth and reflected continued demand in rewards, talent strategy and workforce transformation.
Health underlying growth was 12% and reflected strength in employer and government segments and momentum across all regions. Wealth grew 2% on an underlying basis, driven by continued strength in defined benefits consulting, partly offset by a decline in investment management due to continued capital market headwinds.
Our assets under management were $354 billion at the end of the first quarter, up 3% sequentially but down 9% from the first quarter of last year due to market declines and foreign exchange that more than offset positive net flows.
Oliver Wyman's revenue in the first quarter was $687 million, which was flat on an underlying basis. As John noted, this follows a nearly 40% increase in Oliver Wyman's revenue over the past 2 years.
Recent sales activity has been encouraging, however, suggesting we could see a return to modest growth in Oliver Wyman in the second quarter.
Foreign exchange was a $0.04 headwind in the first quarter. Assuming exchange rates remain at current levels, we expect FX to be at $0.02 headwind in the second quarter and mostly neutral in the second half.
I want to provide an update on the restructuring program we discussed last quarter. Based on our plans today, we expect total charges related to this program of between $375 million and $400 million. To date, we have incurred nearly $250 million of charges and currently expect to incur most of the remaining costs in 2023. We expect to achieve total savings of approximately $300 million by 2024, with $160 million to $180 million realized in 2023 and the balance in 2024.
Our other net benefit credit was $58 million in the quarter. For the full year 2023, we continue to expect our other net benefit credit will be about $235 million.
Investment income was $2 million in the quarter -- in the first quarter on a GAAP basis or $4 million on an adjusted basis. This compares to $17 million of investment income in the first quarter of 2022 on an adjusted basis. Interest expense in the first quarter was $136 million, up from $110 million in the first quarter of 2022. This reflects an increase in long-term debt and higher interest rates on commercial paper, which we use for efficient working capital management. Based on our current forecast, we expect approximately $150 million of interest expense in the second quarter and approximately $575 million for the full year.
Our effective adjusted tax rate in the first quarter was 25% compared with 23.1% 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 compensations similar to a year ago. Excluding discrete items, our effective adjusted tax rate was approximately 25.5%.
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, it's reasonable to assume a tax rate between 25% and 26% for 2023.
Turning to capital management and our balance sheet. We ended the quarter with total debt of $13 billion. This includes the $600 million of senior notes we issued in March. Our next scheduled debt maturity is October 2023, when $250 million of senior notes mature.
Our cash position at the end of the first quarter was $1 billion. Uses of cash in the quarter totaled $876 million and included $296 million for dividends, $280 million for acquisitions and $300 million for share repurchases. We continue to expect to deploy approximately $4 billion of capital in 2023 across dividends, acquisitions and share repurchases. The ultimate level of share repurchase will depend on how the 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 there are factors in the macro environment that remains supportive of growth.
I would also note that while our current outlook contemplates margin expansion in the second quarter, we expect it will be more modest than in the other quarters, reflecting the talent investments we continue to make last year, timing of the annual raises and the continued rebound in expenses such as T&E relative to last year.
Overall, our strong start leaves us well positioned for another good year in 2023. Based on our outlook today, for the full year, we continue to expect mid-single-digit or better underlying growth, margin expansion and strong growth in adjusted EPS.
And with that, I'm happy to turn it back to John.

John Quinlan Doyle

Thank you, Mark. Operator, we're ready to begin Q&A.

Question and Answer Session

Operator

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

David Kenneth Motemaden

I had a question just on the increased cost saves from the restructuring. So a pretty big increase in that target. I'm wondering, John, if maybe you could just talk about the sources of those benefits and if this is all we -- if there's anything more that we could expect potentially in the future.

John Quinlan Doyle

Sure. Thanks, David. So as I mentioned in my prepared remarks, we're excited about the opportunities at the intersections of our businesses. We're being more deliberate and focused on areas of collaboration, and that's creating both revenue and expense or efficiency opportunities for us. I shared or spoke about the news about Flavio and Pat's appointments. So I'm excited about that and the other region leaders and country leaders that we put in place to really capture these opportunities for us, so -- but from an efficiency point of view, they're in the similar areas to what we talked about on the fourth quarter call earlier this year. It's in the area of talent, of course, and re-skilling and moving talent to important growth opportunities.
And I would point out, we are reinvesting as well, although the savings we talked about, that's net of reinvestment. Beyond people, it's technology and real estate. And so it's our best estimate at the moment. But again, we're going to continue to look for opportunities along the way.

David Kenneth Motemaden

Got it. And -- oh, sorry, go ahead.

John Quinlan Doyle

Oh, go ahead. Sorry, David, follow-up.

David Kenneth Motemaden

I guess I would just follow up on that and just ask talent is one that you had mentioned. I'm just wondering, the Marsh operational excellence program and using centers of excellence, I'm just wondering how many employees do you have in these centers? And where you think you can get that due over what time period?

John Quinlan Doyle

Yes. It's -- we're not in the early stages of the game in terms of mid- and back-office efficiency opportunity. And I would point out, it's broader than Marsh or have similar work underway at Mercer and at Guy Carpenter as well. There's still opportunities in front, but we're also still investing in capabilities, including in talent and in technology to support these efforts. And so that will drive further efficiencies for us down the road. Thank you, David.

Operator

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

Jamminder Singh Bhullar

So I had a question on organic growth and the acceleration you reported in the first quarter in the RIS division. Just wondering, to what extent results benefited from sort of one-off type timing of business type things or were there other factors that you think are more sustainable in nature?

John Quinlan Doyle

Yes. I am sure, Jimmy. Yes, very pleased with the start to the year. As you noted, and I pointed out in my prepared remarks, it's an acceleration from our growth in the fourth quarter. I talked about some of the macros that are supportive of growth, not just in RIS, but in our business more broadly.
But I also want to point out, we've invested in talent, in growth areas. We've deployed capital in markets that we think have strong growth fundamentals. And we've also been quite focused all throughout the company in investing in our sales operations' capabilities, in tools as well. There's nothing really one-off about what happened in the first quarter. And we feel good about -- feel good again about the revenue growth. Maybe I'll ask Martin to share some details, and then Dean to give a little bit of more color of where we saw some of the strong growth in RIS in the quarter.

Martin C. South

Thank you, John. I'd be delighted to, yes. We're very pleased with the strong organic growth of 9% in Q1, which is on top of the 11% posted in Q1 '22, our strongest quarter last year and better than the full year growth of 8%. Solid growth was across international at 10%; APAC at 11%; EMEA, 10%; LAC at 10%; U.S. and Canada are at 7%. And as expected, the U.S. and Canada results were once again impacted through tough comps and transactional risk and elevated M&A, SPAC and capital markets activity at the beginning of '22. And the overall 9% growth in the quarter was on top of the 11% in -- Q1 '22.
Specialty growth was good. Credit specialties, construction, aviation and marine cargo easily overset the drop in M&A growth. Renewal growth is very strong in U.S. and Canada, fueled by the new business we've put on in '22; and stronger client retention and reduced loss business, which is very pleasing. So we feel very good how we're positioned. We're very good about our talent, the capabilities in the business and the consistency of the performance across the book and over a number of quarters.

John Quinlan Doyle

All right. Great. Thanks, Martin. Dean, do you want to share some thoughts on the reinsurance market?

Dean M. Klisura

Thanks, John. Similar to Martin, we're very pleased with Guy Carpenter's 10% underlying growth in the quarter, again, following 11% growth in the first quarter of 2022. We had very strong growth, consistent growth across all of our regions globally. And despite significant headwinds in the ILS capital market impacting retrocession placements, our global specialty team had a very, very strong first quarter. Certainly, our results reflect tightening market conditions and restrictions in capacity, as John noted, but I think demand for our advice and solutions remains very, very strong in a very challenging environment for our clients. We think the marketplace will be a pricing tailwind moving throughout 2023 and beyond. And keep in mind, at Guy Carpenter, we hired significant talent in the marketplace in the last 3 years. And that showed up with record new business levels in 2022, with very strong momentum into the first quarter and beyond.

John Quinlan Doyle

Great. Thanks, Dean. Jimmy, do you have a follow-up?

Jamminder Singh Bhullar

Yes, just a similar question on Oliver Wyman. I think Mark mentioned that you expect modest growth in the second quarter. But should we assume that the results this quarter were impacted by just economic uncertainty? And to the extent that continues, then that's a business that will see slower growth through the course of this year?

John Quinlan Doyle

Sure, Jimmy. I'll ask Nick to jump in, but I want to reiterate again, there's a step change in the size of Oliver Wyman's business over the last couple of years. We saw 40% growth. And so, there is good demand for our capabilities at Oliver Wyman. But Nick, maybe you could talk a little bit more about the first quarter and what you're seeing in the pipeline at the moment?

Nicholas Mark Studer

Thank you very much for the question, Jimmy. We've known it was coming. I think, as I was looking back over the transcripts, it's 4, 5 quarters, I've had the question about economic uncertainty and growth. And you can see from the business headlines, it's a tougher environment for consulting firms right now.
We have flat underlying growth. We have added some size through excellent acquisitions. Even at that level, I'm confident that we continue to gain share. It's a fragmented market. It's falling back from the peaks of the last couple of years.
And we signaled in Q4, a slowing in our sales as our clients, and probably a little bit us as well, paused after a torrid 2 years. When we were taking stock, they were taking stock. In our clients' cases, there was that economic uncertainty that you've highlighted. And add on top of that, the regular drumbeat of deal-driven revenues in our private equity practice and across our industry practices also remains depressed.
I'm extremely confident for the future. We continue to be selected to support clients in significant transformations around the world. We have growth in a range of our businesses, our India, Middle East and Africa business, where we had a good acquisition last year, it's growing strongly. Our top sectors of the public sector, automotive and manufacturing and energy to quite broad-based. Our Lippincott brands in innovation business; our economic consultancy, NERA, are in robust health.
Our digital practice continues well. And as I've said before, we've been preparing for more countercyclical offerings and our nascent restructuring practice. Although it's small, it's growing strongly. So we generally guide that through the cycle, we expect mid- to high single-digit growth. But last year was obviously much higher than this. We're now in the slower part of the cycle. But as Mark said, we are currently expecting modest growth in Q2.

John Quinlan Doyle

Thanks, Nick. Before we leave the revenue growth story, I want to ask Martine to jump in here as well. We had a terrific quarter at Mercer, particularly strong growth in both career and our benefits business, but also a rebound in investments. Martine, maybe you can share some thoughts.

Martine Ferland

Yes. No, thank you, John. And indeed, we're very pleased with our results, 7% overall and -- following a 6% Q1 last year. It's across all the regions. And I would say, there's -- the current macroeconomic environment is really supportive of the services that we bring to market. Our inflation and interest rate, volatile capital market, well-funded defined benefit plans, tight labor markets, demand for digital health services, new ways of working. And we've made quite a lot of investments as well in clear strategy, client segmentation, much more focused their investment in talent, in digital tools and intellectual capital. And therefore, I would say that these market conditions, combined with clarity of our strategy, our investment, are conducive to this kind of growth.
The pipeline that we see, the sales that we are entering Q2 with is strong, and we have good visibility in the next quarter and probably a little bit over. Of course, we're always monitoring the macroeconomic conditions, as we've discussed with Oliver Wyman. But over the years, we've also invested in diversifying our portfolio towards faster growth elements and more recurring businesses in the portfolio. So it looks solid for the continuity in the year.

John Quinlan Doyle

Thank you, Martine.

Operator

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

Michael David Zaremski

I hope the questions don't have less yield, but I want to hear -- I'm curious about any comments on the U.S. Federal Trade Commission proposal to get rid of noncompetes. One of your peers commented publicly that they were against that. Any color? Did you guys make a comment and do most -- is it correct that most producers in the U.S. do have noncompetes in their contracts?

John Quinlan Doyle

Thanks, Mike. I don't think there's a lot to report on here. We, of course, are always monitoring any potential regulatory changes or possible impacts on our business. We're certainly very well aware of the FTC proposal, and we've offered feedback through a number of different industry channels. We think Marsh McLennan is an employer of choice in a very competitive industry. We see a healthy environment for sure. And there really aren't noncompetes in businesses for our producers. And if you read the trade press, you see pretty active market for talent. It's a market that we're a net winner in. But nonetheless, there's an active market and talent moving around throughout the industry.

Michael David Zaremski

Okay. Understood. My follow up is on the good better-than-expected consulting results ex Oliver Wyman. I am just digging in maybe more. It sounds like from your comments, you're not really calling out any kind of one-offs. Just kind of curious if you'd be willing to share whether the results were better than you internally had expected given the kind of macro outlook, especially in like Career? Or are things really just -- we're maybe focusing too much on some of the headlines you read, and things underneath the surface aren't as bad as some of the headlines might suggest.

John Quinlan Doyle

Look, I think the -- yes, yes. No, thanks, Mike. Look, the economy has proven to be quite resilient, right? There's no question about that. And I think when you think about Mercer's career business, there are services that we provide that were probably more discretionary in the past than they are in the current environment. Martine also noted how we've really tried to move into and deploy capital into more growth markets. We have high expectations for our businesses. And so again, we're pleased with the start to the year was good, terrific growth. Martine talked about the environment. It remains quite strong. So no major surprises. But again, we're pleased with the start to the year.

Operator

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

Elyse Beth Greenspan

My first question is on the savings program. Can you give us a sense of how much of those $160 million to $180 million hit your results in the first quarter? And I'm also interested in getting a breakdown between RIS and Consulting? And also, can you give us a sense of the pacing for whatever saves are left? And how that should hit results for the balance of the year?

John Quinlan Doyle

Sure. Thanks, Elyse, for the question. Mark, do you want to talk a bit more about that?

Mark Christopher McGivney

Elyse, we haven't been terribly specific, but I'll try to be helpful. So in terms of the how much hit in the first quarter, I think we took a lot of action in the fourth quarter of last year, as you saw through the size of the charges. So I think it's probably a reasonable assumption to -- if you wanted to assume a ratable pacing of the $180 million to -- $160 million to $180 million throughout this year. That's probably not bad. And as John noted earlier, that's net of reinvestment so that will fall to the bottom line.
In terms of split across businesses, we haven't been specific there, but you could look at the proportion of charges in some of our disclosures and make a rough approximation there as well. And so I think ratable spreading of the $160 million to $180 million through this year is not a bad way to go.

John Quinlan Doyle

Do you have a follow-up, Elyse?

Elyse Beth Greenspan

Yes. On the reinsurance side, you guys have highlighted that's an area where you've hired a lot of talent over the last few years. I think I've also seen recently, you might have lost some talent, which we often see in the industry. So just as you think about like the tailwinds of strong pricing in that business, which came up earlier, do you think we can continue to see double-digit organic growth within that business as we kind of see the full impact of the midyear renewals and beyond?

John Quinlan Doyle

I am sure, Elyse. Look, again, it was a terrific start to the year. I'm very proud of our team. It's a very difficult marketplace and helping our insurance company clients navigate a very, very challenging market. And it obviously has a follow-on effect on our clients at Marsh as well. And so we're investing in our capabilities there and are well positioned for growth.
It is -- it's an active talent market. As I said earlier, it's a -- from a talent point of view, I really like how we're positioned. Our focus from a talent value proposition is about being your best at Marsh McLennan in all of our businesses. And again, we've been a net winner there. From time to time, obviously, we'll -- we do have some voluntary turnover. But the turnover you may have read about, it won't impact the trajectory of Guy Carpenter or our business. So we'll see where the market heads, both Dean and I commented. Property cat, a big headline at the moment. That's A line of business. most acute here in the United States. We have a much bigger, broader business than that. But demand for our services there remains quite strong. So we look forward to a good year at Guy Carpenter.

Operator

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

Robert Cox

I was hoping to drill into the retirement business and just any comments on how the economic backdrop may be impacting the business in providing any benefits.

John Quinlan Doyle

Sure, Robert. Thanks for the question. May I ask Martine to unpack some of the investment in Mercer Wealth results overall. Martine?

Martine Ferland

Yes. No, my pleasure to do so. Thanks for the question, Robert. It was a good quarter for defined benefit business. And basically, the market condition, the volatility, there's a lot that we can do to help clients navigate through these changes. And I'm pretty proud of the team that has been quite innovative and proactive in addressing these challenges.
With the rise of interest rate, even though the asset side of the pension plans are depressed through equity, we've seen a great improvement in the funding of these plans. And when the funding of these plans become better, a lot of our clients looked for ways to divest the liabilities and assets to insurers. So we're seeing activities there in the buyout space, and that has fueled the DB Consulting business.
So that being said, of course, the DB segment itself on the market is in structural decline. So underneath this, you'll continue to see this. But in the meantime, with the volatility, it does require quite a lot of work, and we're happy to help clients through these times.
The other side of that equation in retirement is also the investment side. On the Consulting side, again, we were very busy helping through the volatility, the decline in equity, et cetera.
And our OCIO business, which is directly related, we're taking basis points above the value of assets as a way to pay for the services we render. And of course, when the value of assets are depressed, our revenue goes down. But we have net flows into that business. It's a business that has very good long-term growth through net flows, through return.
It's just been a more difficult period over the last 1.5 years. We're seeing still quarter-over-quarter like year-over-year headwinds because the decline in market really started later in Q2 and then through Q3 last year. So that pressure on the year-over-year basis should ease out at current -- if the current AUM value stay at current level, we should see that starting to turn around in Q3.

John Quinlan Doyle

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

Robert Cox

Yes. And just one follow-up. Are you seeing any benefit from China reopening in RIS? And just wondering if that's something you expect could potentially be a tailwind as we progress through the year.

John Quinlan Doyle

It's hard to say overall, Robert. I mean what I would tell you is that our business in China has performed well, even through, if you want to call it, the shutdown of the economy. So we've had good solid growth in our business, both in the Mainland and in Hong Kong. I think -- obviously, I think, broadly speaking, the reopening of that economy should ease some of the economic uncertainty all around the world. And to the extent that, that could be helpful from a macro point of view, we certainly are -- we're certainly pleased with those developments. But it's hard to draw a direct correlation. We haven't seen a meaningful uptick, for example, in our -- in growth in China since the reopening.

Operator

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

Meyer Shields

I know you've talked about this in the past, John, but I was hoping you could walk us through the impact of higher fiduciary income on margins. I'm asking specifically about second quarter, where you were talking about more cautious margin expansion expectations despite the fact that, at least in the first quarter, your fiduciary income was up like 2,000%?

John Quinlan Doyle

Yes. Look, obviously, fiduciary income is a -- it's a factor in our overall results. We don't look at it separately. We're constantly trying to balance near-term performance, delivering excellent results in the near term with also investing in the capabilities that are going to lead to sustainable growth in the future. We're very thoughtful about how we manage our expense base. That leads to very few surprises for us around our results. And I think we've thread that needle well, if you will, nailed that balance over the course of the last couple of years.
So we're very pleased with the start to the year from a margin point of view. As we've talked about in the past, margins are -- particularly in a quarter, are not our primary objective. It's an outcome of the way we've run the business. We've had 15 consecutive years of margin expansion. We expect 2023 to be year #16. But from quarter-to-quarter, some seasonality to investments we make and some other variability that could lead to a different outcome from -- so it won't be a straight line quarter-to-quarter.

Meyer Shields

Okay. That's helpful. The second question, if I can. In your prepared remarks, you talked about healthcare costs going up. And I was hoping you could talk us through from, I guess, our perspective, how that impacts -- I'm thinking predominantly Mercer because I wouldn't think it would have the same upside that P&C rate increases have.

John Quinlan Doyle

Well, where we are in commission, obviously, it could be helpful. And we get paid in different ways and in different EH&B markets around the world. And so again, it's not a straight line. And much like we've talked about in the context of reinsurance, we're very transparent about the compensation we earn and how we get paid with our clients. But effectively, a rising cost of risk is a tailwind, whether it's in P&C or in benefits to us. But we also provide other services and consulting services to our clients to help them navigate some of the challenges. And the tight labor market is a factor here as well. So Martine, maybe you can offer a little more color?

Martine Ferland

You're absolutely right. There's also another element within Health that distinguish it from P&C in a way, is that very often, our clients are looking to not increase net cost for their employees because they very often sharing the cost. So we see a lot of demand for services from our part on a consulting basis to change the design of these plans to come up with digital solutions instead so that we can control the cost.
So the inflation is not always directly manifesting itself in the premiums or in the coverage. There's also, as you said, John, a good part of our book that is on fees rather than on commission. So overall, there are many different components pushing the pressure because you're absolutely right, the healthcare costs are increasing all over the world. But the reaction from employers is to try to mitigate these costs through innovative solutions.

John Quinlan Doyle

One other point on our Health and Benefits business, that just to share with everyone is that it's kind of an important proof point around some of the possibilities around collaboration inside of the company. This is a business that Mercer and Marsh work on together all over the world. And it's been a really important growth driver for us over the course of the last couple of years, and it's been a bit of a source of inspiration around what's possible as we come together more and bring our collective capabilities to the client. So thank you, Meyer.

Operator

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

Yaron Joseph Kinar

I have 2, both margin related. So the first one, maybe piggybacking on Meyer's last -- first question. So clearly, you've had 3 consecutive quarters of 200 basis points or more of adjusted margin improvement in RIS, that's very notable. At the same time, if I'm doing the math correctly, fiduciary income added, what, 230 basis points of margins this quarter? Cost saves, I think, by Mark's comments, add another 100 basis points. So there seemed to have been some offsets in RIS. Can you talk about those?

John Quinlan Doyle

I don't -- certainly don't think of it in terms of offsets. Again, I'm pleased with the margin expansion in the quarter. As I said, we're very disciplined about how we manage our cost base. And we're not trying to optimize margins in any given quarter, right? We're trying to strike that balance between delivering terrific results today and sustainable growth and investment in capabilities that our clients are looking for in the future. So I'm very pleased with our start to the year from a margin perspective.

Yaron Joseph Kinar

And I apologize if I'm belaboring the point, but I'm still a little confused because I thought the $160 million to $180 million of cost saves that were going to be ratable over the year were net of reinvestments. And it sounds like there was some reinvestment in growth this quarter.

John Quinlan Doyle

We're always investing, of course, in future capabilities that will lead to sustainable growth in the future. There are some direct hiring that we did and investment that we did -- connected with some growth opportunities in our efforts to be more deliberate around collaboration, but we continue to invest broadly across the business as well. There's also T&E pressure. There's other inflationary impacts on the expense base of the company. But again, I'm pleased with 150 basis points of margin expansion in the quarter.

Yaron Joseph Kinar

Got it. Okay. And my second question is on the consulting side. So I think, if it weren't for the JLT legacy legal charges, adjusted operating margin would have expanded quite nicely this quarter. I guess where are we with these charges? And we were at, what, 4 years from how the -- the acquisition? Do you expect those to continue?

John Quinlan Doyle

Yes. We're pretty far along in that story. That could be -- [reasonably] some smaller charges that will happen going forward. They are excluded in the adjusted margin that we report, just so you're aware of that. Most of what happened in the first quarter was the resolution of some legacy litigation that existed at JLT. I think there could be some real estate that we're still sorting our way through, but we're largely past these charges.

Operator

Our next question comes from the line of Andrew Kligerman with Credit Suisse.

Andrew Scott Kligerman

Two quick questions. I think Martin on Marsh mentioned a bit of a headwind still from the robust IPO and M&A markets in the first quarter of last year. Maybe could you help us size that headwind in the first quarter? And then next quarter, maybe some color on sort of the tailwind of not having it there. I mean I had heard from some competitors that you had a 5% dampening effect on organic revenue growth last year. So just curious if you could help us size that at Marsh.

John Quinlan Doyle

Yes. We're not going to size that, Andrew. We talked about it a bit in the fourth quarter. It was a bit more of a headwind in the fourth quarter than it was in the first quarter, but it remained a headwind for us. Again, we're pleased with the growth overall. Capital markets are just one input to the overall macro environment and then, of course, what we're doing to execute and to expand our growth. But I mean, you can look at the big data and get a sense of when, obviously, M&A activity started to tail off an IPO activity. And while it won't be as much of a headwind of the -- must have projecting a major rebound in the market over the course of the next quarter or 2 as well.

Andrew Scott Kligerman

Got it. Okay. So no more headwinds, at least. And then you had another good year of net hiring. I think it was around 3,000 last year following 6,000 in 2021. Curious what your outlook is for 2023. Are you expecting to see material net hiring? Maybe any color on what you'd like to do and the geographies of the company where you do it?

John Quinlan Doyle

Sure. Thanks, Andrew. A lot of the hiring we did last year, some of it was connected to the mid- and back-office, some of the work, the investments that we're making to drive some efficiency. Some of it, we brought some contractors on as full-time employees. It was the right economic trade and the rate trade from a service perspective as well. But we're always active in the market in trying to bring talent that will make us better and stronger.
And I mentioned earlier, we feel very, very good about our brand in the market as an employer. We work very, very hard at it. And voluntary turnovers in all of our businesses at or below historical levels. And so we feel terrific. Our colleagues are highly engaged. And it's a complex operating environment, and they're delivering exceptional value to our clients. We'll hire less this year than we did last year or the year before. But again, it's not only the number, the raw number. It's who's on the team and making sure that we're aligning our talent with our clients' needs.

Operator

And our next question comes from the line of Brian Meredith with UBS.

Brian Robert Meredith

A couple of questions here. First, I want to dig into Oliver Wyman just a little bit more here. Mark, I think you said that sales activity looks like it picked up a little bit in the second quarter. So we'll see a little better. I'm assuming that's because you've got such a good financial services practice at Oliver Wyman, you're seeing some spillover from what's going on with the banking crisis. That's one.
And also, if I think about (inaudible) are you seeing any slowdown in kind of corporate spending you're thinking -- or corporations thinking about, kind of a slowdown here? And is that maybe why you're a little more cautious about what potentially could happen here going forward?

John Quinlan Doyle

Thanks, Brian. Look, we have a little less visibility into the pipeline at Oliver Wyman. That's historically been the case with that business. But as Mark pointed, recent sales activity has been better. We appreciate the advertisement on our FI practice. We have a great team of people there. But Nick, maybe you could add a little more color.

Nicholas Mark Studer

Yes. Thank you, Brian. It's a very good question. I think what we've really seen is uncertainty more than economic decline. A lot of what we do is a matter of choice. But John made a comment with respect to Mercer earlier, that some of those choices become harder not to take right now with lots of questions changing, lots of important problems to solve.
I think a number of our clients, particularly in the U.S., have been pausing because of the uncertainty. We don't necessarily see that as a big downward step. But they're not quite sure if they're investing for growth or they're investing for cost. And to some extent, the financial services of the banking turmoil extends that period of uncertainty. But we're extremely proud of our market-leading financial services practice in Oliver Wyman.
We are, of course, very engaged in that global banking situation, whether that's supporting banks on the management of their funding, deposit and interest rate risks; working with involved actors in the sale and purchase of assets; preparing some of the restructuring that will no doubt be coming. And when we think in the medium to longer term, that will continue to fuel the growth of that excellent practice.

John Quinlan Doyle

Brian, do you have a follow-up?

Brian Robert Meredith

Yes, absolutely. Just wanted to quickly chat a little bit about commercial property insurance pricing, what's going on in that market. You mentioned good strong price increases in the first quarter. Are we seeing kind of an acceleration in that in the second quarter as some of these carriers kind of adjust to higher reinsurance costs? And could that potentially be a little bit of a tailwind for you all as we look into the remainder of the year?

John Quinlan Doyle

Yes. Thanks, Brian. I don't think our clients at Marsh think it's a good strong increase in pricing. But yes, we did observe a higher rate change in property as we expected in the first quarter, given what happened late in the year and what we saw in the reinsurance market at January 1.
So what I would say is, broadly speaking, it's a challenging market for our insurance clients at Marsh. Inflation broadly is driving a higher cost of risk, the frequency of weather-related losses, as you point out. And we did see U.S. retail market -- property market begin to react to some of the reinsurance market changes as well.
But Mark, maybe you could talk about pricing in the market broadly and in property?

Mark Christopher McGivney

Yes, of course. Well, John, as you said, it's not a good day for our clients. And our focus is on obviously getting the best deals for our clients and making sure that they stay with us and they understand we're driving innovation where we can. It's the 22nd quarter of consecutive rate increases. You highlighted property, and that did, look, as that picked up momentum again into Q1. It accelerated from 7% rate increases. We reported in Q4 '22 to 10% this year. And in addition to that, from a premium perspective, there's clear inflation and exposure growth as well. So real pain for the clients.
It doesn't necessarily flow through to our business as a good chunk of that high-risk business with high cat business is fee-based. And so it provides us stability there. Other lines of business is being driven by social inflation. Casualty would have been higher, but the workers' compensation, which is pretty flat. And it's pretty well around the world.
The one area where there has been deceleration in price increases has been in the financial product areas, not just the SPAC and de-SPAC, but also some declines in D&O pricing, driven by the fact, there are 20 new carriers that have come into the marketplace over the last year. But actually, the professional intensity lines are robust, and that's really a function of a prior year [accident] deterioration in the professional lines as social inflation drives that. So it's a bit of a mixed picture. But that the highlight in terms of growth has been property, and the rest is seeming to stabilize a little bit.

John Quinlan Doyle

And Brian, maybe just one last point on the retail property market. A lot of the retail wind and quake risk is from February 1 or even March 1 through the 1st of June. And so really just beginning to see what's happening from a risk appetite and from a marketplace perspective. So we're in the middle of the story right now. Thank you.

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 Quinlan Doyle

All right. Thank you, Andrew, and thank you all for joining us on the call this morning. In closing, I want to thank our over 85,000 colleagues for their hard work and dedication. I also want to thank our clients for their continued support. And thank you all very much. I look forward to speaking with you again next quarter.

Operator

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