Marsh McLennan - Q2 2024
July 18, 2024
Transcript
Operator (participant)
Welcome to Marsh McLennan's earnings conference call. Today's call is being recorded. Second quarter 2024 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh McLennan website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release.
If you have a question, please press star one one on your touchtone phone. If you wish to be removed from the queue, please press star one one again. 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. I'll now turn this over to John Doyle, President and CEO of Marsh McLennan.
John Doyle (President and CEO)
Good morning, and thank you for joining us to discuss our second quarter results reported earlier today. I'm John Doyle, President and CEO of Marsh McLennan. On the call with me is Mark McGivney, our CFO, and the CEOs of our businesses, Martin South of Marsh, Dean Klisura of Guy Carpenter, Pat Tomlinson of Mercer, and Nick Studer of Oliver Wyman. Also with us this morning is Sarah DeWitt, Head of Investor Relations. Before I get into our results, I'd like to comment on the attempted assassination of former U.S. President Donald Trump this past weekend. We're thankful that he is safe, and our hearts go out to the victims and their loved ones. Violence has no place in our politics or our society. We condemn it and affirm our commitment to civil discussion, debate, and resolution.
Our political process and democracy depend on all candidates having the ability to safely convey their visions for our country. We believe that each of us can help shape peaceful public discourse and advocate for a culture of respect and unity. Now, turning to the second quarter, Marsh McLennan delivered strong results across our businesses and geographies. We generated 6% underlying revenue growth on top of 11% in the second quarter of last year, reflecting strong execution in both RIS and consulting. Our adjusted operating income grew 11% from a year ago. Our adjusted operating margin expanded 130 basis points and adjusted EPS grew 10%. We also announced a 15% increase to our quarterly dividend to $0.815 and completed $300 million of share repurchases during the quarter.
These results highlight our consistent focus on delivering in the near term while investing for sustained growth over the long term. We're benefiting from organic investments we've made in our talent and capabilities, and we also continue to make high-quality acquisitions that build on the scale and breadth of our business. In the second quarter, we announced several significant transactions. Mercer announced an agreement to acquire Cardano, a long-term savings specialist in the U.K. and Netherlands. With approximately $66 billion in AUM, Cardano operates the third-largest U.K. master trust platform and serves more than 2 million customers across 27,000 employers. This transaction builds on our leading position in OCIO, enhances our DC offerings, and adds important trading capabilities. Oliver Wyman agreed to acquire Veritas Total Solutions, an advisor in commodity and energy markets. Marsh McLennan Agency completed three acquisitions in the quarter.
Fisher Brown Bottrell, one of the five largest bank-affiliated agencies in the United States, specializing in commercial P&C insurance and employee benefits. FBB expands our presence across the Southeast. AC Risk Management builds on our scale in commercial P&C in the Northeast, and Perkins Insurance Agencies adds to our commercial P&C business in Texas. Last week, MMA also announced the acquisition of Horton, a top 100 broker with over $100 billion in revenue, operating primarily in the Midwest. We recently announced the acquisitions of AmeriStar, a commercial P&C high net worth agency based in Minnesota, and Hudson Shore, a public sector employee benefits agency in New Jersey.
These acquisitions are great examples of our ability to attract the very best insurance agencies to our company, and along with high rates of sustained underlying growth, they've helped to make MMA a $3.5 billion annual revenue business. We also continue to help our clients thrive by investing in innovation. Drawing on our expertise, perspective, data, and insights, we are creating new solutions for a complex environment. For example, Marsh continues to evolve Blue[i], a digital suite of solutions for insurance strategy decisions that uses our data and analytics to generate insights for clients. This quarter, we added Blue[i] Risk Appetite Analytics to help clients define the amount and type of risk they're willing to retain. With customizable calculations, our insights help clients navigate a challenging landscape with greater confidence.
Guy Carpenter launched CatStop+, a new solution to address the volatility of cyber risk using GC's proprietary analytics. CatStop+ offers clients protection against cyber cat losses. Mercer launched SelectRx, a technology solution in the U.S. that creates competition among pharmacies for high-cost specialty medications. Leveraging Free Market Health's cloud-based platform, SelectRx lowers costs for employers and delivers savings to employees by directing prescriptions to a curated network of specialty pharmacies. And Oliver Wyman is helping our clients innovate in their own businesses with the launch of Quotient, which combines our expertise in AI implementation, deployment, and strategic advisory with our deep industry knowledge. Quotient moves clients beyond the hype surrounding AI to deliver real value and meaningful outcomes. Our approach to balancing near-term performance with investment in innovation delivers significant value to our clients.
It also enables us to sustain growth over the long term and drive consistent, exceptional performance for shareholders. Shifting to the macro picture, we continue to see significant opportunity to help clients navigate the complexity they're facing today. Beyond the shocking assassination attempt in the U.S., the geopolitical backdrop is unsettled, with ongoing wars and areas of tension across the globe. Uncertainty also remains around the frequency of extreme weather, escalating cyber attacks, and key variables in the economic outlook, like the persistence of inflation and the timing of changes to central bank policy. Despite this uncertainty, the environment remains supportive of growth in our business. In general, we see continued economic growth in most of our major markets, the cost of risk in healthcare continues to rise, and labor markets remain tight, and the consensus probability of a near-term recession for major economies continues to decrease.
We have performed well across economic cycles through the resilience of our business, sustained demand for our advice and solutions, and consistent execution for our clients. Turning to insurance and reinsurance market conditions, the Marsh Global Insurance Market Index was flat overall in the second quarter versus a 1% increase in the first quarter. Generally, rates in the U.S., Europe, and Latin America continued to increase in the low to mid-single digits, while the U.K., Asia, and Pacific saw low to mid-single-digit decreases. Global property rates were flat versus up 3% in the first quarter. Casualty increased in the low single digits, with U.S. excess casualty up 10% in the quarter, while workers' compensation decreased low single digits. Financial and professional liability rates and cyber pricing were down 5% and 6%, respectively.
Mid-year reinsurance renewals reflected increased demand for property cat, with easing rates after significant increases in 2023. The majority of property placements were completed at renewal with adequate capacity. The global property cat reinsurance rates were generally flat to down mid-single digits, with greater decreases for upper layers on accounts without losses. The cat bond market had the most active quarter on record, with over 30 new bonds issued involving approximately $8 billion of limit. Casualty programs faced continued underwriting scrutiny, but there was adequate capacity in the market. Excess of loss programs with U.S. exposure saw upward pricing pressure, while quota share ceding commissions were flat to down slightly. As always, we are helping our clients navigate these dynamic market conditions. Now, let me turn to our second quarter financial performance.
We generated adjusted EPS of $2.41, which is up 10% from a year ago. On an underlying basis, revenue grew 6%. Underlying revenue grew 7% in RIS and 4% in consulting. Marsh was up 7%, Guy Carpenter 11%, Mercer 5%, and Oliver Wyman grew 3%. Overall, the second quarter saw adjusted operating income growth of 11%, and our adjusted operating margin expanded 130 basis points year-over-year. Turning to our outlook, we are well positioned for another great year in 2024. We continue to expect mid-single-digit or better underlying revenue growth, another year of margin expansion, and strong growth in adjusted EPS. Our outlook assumes current macro conditions persist, however, meaningful uncertainty remains, and the economic backdrop could be materially different than our assumptions.
Overall, I am proud of our second quarter performance, which demonstrates continued execution on key initiatives and momentum across our business. I'm grateful to our colleagues for their focus and determination and the value they deliver to our clients, shareholders, and communities. With that, let me turn it over to Mark for a more detailed review of our results.
Mark McGivney (CFO)
Thank you, John, and good morning. Our second quarter results were strong, with solid underlying growth, significant margin expansion, and 10% growth in adjusted EPS. Our consolidated revenue increased 6% to $6.2 billion, with underlying growth of 6%. Operating income was $1.6 billion, and adjusted operating income was $1.7 billion, up 11%. Our adjusted operating margin increased 130 basis points to 29%. GAAP EPS was $2.27, and adjusted EPS was $2.41. For the first six months of 2024, underlying revenue growth was 8%. Our adjusted operating income grew 11% to $3.7 billion. Our adjusted operating margin increased 100 basis points, and our adjusted EPS increased 12% to $5.30.
Looking at Risk and Insurance Services, second quarter revenue was $4 billion, up 8% from a year ago, or 7% on an underlying basis. This result marks the 14th consecutive quarter of 7% or higher underlying growth in RIS and continues the best stretch of growth in two decades. RIS operating income was $1.3 billion in the second quarter. Adjusted operating income was also $1.3 billion, up 12% over last year, and our adjusted operating margin expanded 110 basis points to 35.3%. For the first six months of the year, revenue in RIS was $8.3 billion, with underlying growth of 8%. Adjusted operating income increased 12% to $2.9 billion, and our margin increased 90 basis points to 37.3%.
At Marsh, revenue in the quarter was $3.3 billion, up 8% from a year ago, or 7% on an underlying basis. This strong growth came on top of 10% growth in the second quarter of last year. Growth in the second quarter reflected strong new business and solid renewals. In U.S. and Canada, underlying growth was 6% for the quarter. In international, underlying growth was 7%. EMEA was up 7%, Asia Pacific grew 7%, and Latin America was up 8%. For the first six months of the year, Marsh's revenue was $6.3 billion, with underlying growth of 7%. U.S. and Canada grew 7%, and international was up 8%. Guy Carpenter's revenue was $632 million in the quarter, up 10% or 11% on an underlying basis.
This terrific result came on top of 11% growth last year and was driven by double-digit growth across most geographies and specialties. For the first six months of the year, Guy Carpenter generated $1.8 billion of revenue and 9% underlying growth. In the consulting segment, second quarter revenue was $2.2 billion, up 2% from a year ago, or 4% on an underlying basis. Consulting operating income was $410 million, and adjusted operating income was $426 million, up 6%. Our adjusted operating margin in consulting was 19.8% in the second quarter, an increase of 60 basis points. For the first six months of 2024, consulting revenue was $4.4 billion, reflecting underlying growth of 6%.
Adjusted operating income increased 7% to $870 million, and our margin increased 50 basis points to 20.3%. Mercer's revenue was $1.4 billion in the quarter, flat compared to a year ago, but up 5% on an underlying basis. This was Mercer's 13th straight quarter of 5% or higher underlying growth and continues the best run of growth in 15 years. Wealth grew 3%, driven by growth in both investment management and DB consulting. Our assets under management were $492 billion at the end of the second quarter, up 1% sequentially and up 25% compared to the second quarter of last year. Year-over-year growth was driven by our transaction with Vanguard, impact of capital markets, and positive net flows. Health underlying growth remained strong at 9% and reflected growth across all regions.
Core revenue increased 2%, continuing the trend of modest growth following a 2-year stretch of strong growth and demand. For the first six months of the year, revenue at Mercer was $2.8 billion, with 6% underlying growth. Oliver Wyman's revenue in the quarter was $837 million, an increase of 3% on an underlying basis. This comes on top of 11% growth a year ago. For the first six months of the year, revenue at Oliver Wyman was $1.6 billion, an increase of 8% on an underlying basis, up from 6% growth in the first half of last year. Foreign exchange was a 2-cent headwind in the second quarter. Assuming exchange rates remain at current levels, we expect FX to be a 2-cent headwind in the third quarter and 2 cents in the fourth quarter.
Total noteworthy items in the quarter were $73 million. These included $44 million of restructuring costs, mostly related to the program we began in the fourth quarter of 2022, as well as some transaction-related expenses. Our other net benefit credit was $66 million in the quarter. For the full year, we continue to expect our other net benefit credit will be approximately $265 million. Interest expense in the second quarter was $156 million, up from $146 million in the second quarter last year, reflecting higher levels of debt and higher interest rates. Based on our current forecast, we expect approximately $154 million of interest expense in the third quarter and approximately $620 million for the full year.
Our adjusted effective tax rate in the second quarter was 26.2%, compared with 24.2% in the second quarter of last year. Our tax rate in both periods benefited from favorable discrete items. Excluding discrete items, our adjusted effective tax rate was approximately 26.5%. When we give forward guidance around our tax rate, we do not project discrete items, which can be positive or negative. Based on the current environment, we continue to expect an adjusted effective tax rate of between 25.5% and 26.5% for 2024. Turning to capital management and our balance sheet, we ended the quarter with total debt of $13.5 billion. Our next scheduled debt maturity is in the first quarter of 2025, when $500 million of senior notes mature.
We continue to expect to deploy approximately $4.5 billion of capital in 2024 across dividends, acquisitions, and share repurchases. The ultimate level of share repurchase will depend on how the M&A pipeline develops. Last week, we announced a 15% increase to our quarterly dividend, making this our 15th consecutive year of dividend growth. This comes on top of a 20% increase a year ago and reflects our strong earnings growth and confidence in our outlook. Our cash position at the end of the second quarter was $1.7 billion. Uses of cash in the quarter totaled $1.2 billion and included $352 million for dividends, $500 million for acquisitions, and $300 million for share repurchases.
For the first six months, uses of cash totaled $2.2 billion and included $706 million for dividends, $847 million for acquisitions, and $600 million for share repurchases. While there continues to be uncertainty in the outlook for the global economy, we feel good about the momentum in our business, and the current environment remains supportive of growth. Overall, our excellent first half leaves us well positioned for another great year in 2024. Based on our outlook today, for the full year, we continue to expect mid-single digit or better underlying growth, margin expansion, and strong growth in adjusted EPS. And with that, I'm happy to turn it back to John.
John Doyle (President and CEO)
Thank you, Mark. Andrew, we are ready to begin Q&A.
Operator (participant)
Certainly. 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 wish to be removed from the queue, please press star one one again. 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. And in the interest of addressing questions from as many participants as possible, we ask that participants limit themselves to one question and one follow-up question. One moment, please. And our first question comes from the line of David Motemaden with Evercore ISI.
David Motemaden (Senior Equity Research Analyst)
Thanks. Good morning. Just had a question on the underlying revenue growth outlook of mid-single digit or greater. You guys just did 8% in the first half of underlying revenue growth, but aren't increasing the range to high single digit. Could you just help me think through the puts and takes in terms of why you guys aren't increasing the range?
John Doyle (President and CEO)
Good morning, David. Sure. So yeah, I mean, you know, first of all, just say, you know, I was pleased with our growth in the quarter. You know, it was on top of a very big quarter a year ago at 11%. Marsh had good, solid growth by region and practice, you know, on top of a tough comp. Guy Carpenter had an excellent quarter. You know, market improvements, you know, led to increased demand after a, you know, pretty volatile reinsurance market in 2023. Mercer, again, had another solid quarter of growth. You know, as Mark noted in his comments, best growth stretch of growth in a, in a long period of time. Health remains very strong. Wealth growth was solid, and we actually saw an uptick in career growth, you know, from the first quarter.
You know, Oliver Wyman had a very tough comp, but had good growth, has had good growth year to date. And, you know, as we pointed out, in the past, you know, we'll have more quarter-to-quarter volatility than, you know, than our other businesses. You know, what I would say is, broadly speaking, the macros continue to be supportive of, of, of growth. It's a, you know, it's a risky environment, we're all operating in, but, you know, geopolitical, inflation, labor markets, you know, the cost—rising cost of risk, rising cost of healthcare, you know, all supportive. And I feel very, very—I feel like we're very well positioned. We have the best talent in the markets that we, we compete in, and so we're positive on our outlook, you know, for the second half.
It, you know, again, remains a good market for us. So, you know, we feel good about where we are.
David Motemaden (Senior Equity Research Analyst)
Got it. Thanks, John. And then, Mark, I think you mentioned on last quarter's call that you guys are expecting greater margin expansion in the second half than in the first half. Is that still the case?
John Doyle (President and CEO)
You want to go ahead, Mark?
Mark McGivney (CFO)
Yeah. We're really happy with the 130 basis points, you know, and it validated the statements we made about the first quarter margin expansion facing headwinds from several items. So we were good. We're glad to see the acceleration, and you know, we're on track for solid margin expansion for the year.
John Doyle (President and CEO)
Thank you, David. Andrew, next question.
Operator (participant)
One moment, please, for our next question. Our next question comes from the line of Jimmy Bhullar with JPMorgan.
Jimmy Bhullar (Equity Research Analyst)
Hey, good morning. So first, John, just following up on your comments on Oliver Wyman. The growth this quarter slowed versus what it's, what it's been the last few quarters. How much of that is a function of just tough comps and normal volatility in the business versus maybe a slowdown in the pipeline?
John Doyle (President and CEO)
Yeah, Jimmy, thanks for the question. You know, and I'll hand it to Nick here. But, you know, I think it's some of both, right? But it's, you know, it was a tough comp, for sure, but I feel very good about the year-to-date growth, excuse me. Nick, you want to add a little bit more depth?
Nick Studer (CEO)
Yeah, I think John's right, Jimmy. It's a little bit of both, but, in the same way that I noted last quarter that our 13% was against a weak 0% comp, this 3% is against a tougher 11%. That 8% year to date, I think, is bang in that zone of mid- to high-single-digit growth we expect to average through the cycle. And as you know, our quarters are always somewhat volatile. Mark kindly noted in his comments that the first half actually accelerated versus the first half last year. To give you a little bit of color on where we are seeing higher growth, regionally, both Asia and our India, Middle East, and Africa regions have continued on strong growth.
From an industry perspective, our communications, media, and technology practice has been our fastest growing year to date, but our very strong banking and insurance practice is also in positive territory, as is our public sector practice. We have a wide array of capabilities. You know, our economic research business, NERA, growing strongly, our market-leading finance and risk practice, particularly in financial services, our pricing team, and, importantly, our people and organizational performance practice, which really works across our industries to help on big client transformative moments. But the market is a little bit uncertain. While the economy seems to be better, it's still a pressured environment for discretionary spending.
Some uncertainties, as John and Mark have highlighted, and we do see, we're sort of working through some pricing pressure due to excess capacity as some of our competitors work through some of their headcount actions.
John Doyle (President and CEO)
Thank you, Nick. Jimmy, do you have a follow-up?
Jimmy Bhullar (Equity Research Analyst)
Yeah, just on, and maybe for Mark on fiduciary investment income, it was—it's been sort of flattish on a sequential basis. So should we assume, given where rates are, that going forward, it's going to grow just with growth in the business? Or was the sequential flat results in 2Q more of a function of seasonality and balances and other factors?
John Doyle (President and CEO)
Mark?
Mark McGivney (CFO)
Yeah, Jimmy, there is seasonality and balances, as we've talked about in the past. But I think the biggest driver, I think, from here, is just going to be the outlook for, you know, for rates. As we've talked about, and you saw on our balance sheet, in the quarter, got about $11.5 billion of fiduciary balances. And, you know, so I think just, you know, where we go from here is just going to be, you know, what the central banks do with short-term interest rates. And just as you're modeling going forward, keep in mind, that our balances do reflect the revenue mix of our business, so it's not just US rates, obviously, that drive. We've got balances because of the distributed nature of our business, all over the world.
So, yeah, so as I said, the outlook really is going to be mostly a function of what the rate picture looks like.
John Doyle (President and CEO)
Thank you, Jimmy. Andrew, next question.
Operator (participant)
Our next question comes from the line of Elyse Greenspan with Wells Fargo.
Elyse Greenspan (Managing Director)
Hi, thanks, good morning. My first question, within RIS, can you give us a sense of how much the expense saves helped your margins in the quarter?
John Doyle (President and CEO)
Expense saves?
Elyse Greenspan (Managing Director)
From your savings program, how much-
John Doyle (President and CEO)
Can you give me a-
Elyse Greenspan (Managing Director)
Yeah.
John Doyle (President and CEO)
Oh, okay. Okay.
Elyse Greenspan (Managing Director)
Yeah.
John Doyle (President and CEO)
Sure, sure. Thanks, Elyse. Mark?
Mark McGivney (CFO)
Yeah, Elyse, we're definitely seeing the benefit of it. We've stayed away from quantifying, you know, specifically how much is going to drop quarter to quarter. But you just even see the trend in expense growth quarter to quarter, that was definitely a factor. Our strong growth and the benefit of savings contributed to that 130 basis points of margin expansion. So we're, as I said, we haven't quantified the amount that we're seeing each quarter, but we are on track for the level of savings that we talked about, and we're seeing the benefit of it.
John Doyle (President and CEO)
Do you have a follow-up, Elyse?
Elyse Greenspan (Managing Director)
Yes, and then my second question: within Marsh, could you just give us a sense of what you're seeing, some more color in both the U.S. and internationally within, organic growth, both for the Q2 and then how you think about the outlook, in the back half of the year? And are U.S. or internationally, are you guys more indexed to property in one versus the other?
John Doyle (President and CEO)
Yeah, I mean, the markets are, you know, quite dynamic, right? And so, you know, just caution you a little bit on pricing, right? I think Guy Carpenter is a good indication of that, right? So, you know, we saw a better market lead to, you know, to increased demand. But, you know, as I mentioned earlier, it was a good, solid growth by region and by practice, you know, again, on in the second quarter and on top of a tough comp. But Martin, maybe you could share a little bit more color on growth international versus US and the demand you're seeing.
Martin South (President and CEO)
Sure. Well, just to, you know, to restate seven in the quarter, which is on top of 10 for the second quarter of 2023. Quite balanced growth at international at seven and U.S. at six, U.S. and Canada at six.
... Our U.S. business, MMA and Victor, continued to perform very well, in the U.S. Canada had a weaker quarter, some macros there affected that, that pulled down a little bit. But across the international region, international was a seven on top of 10 in 2023. Asia Pacific accelerated from seven on top of six in 2023. Latin America did eight on top of 17 in the second quarter of 2023, and EMEA did seven on top of 11, in 2023. The performance, you know, was driven really by, very strong performance internationally and, in the benefits business. Construction, energy, and power all came off strong double-digit growth as well, repeating what happened last year.
We're beginning to see some revitalization in the U.S. capital markets, which has been a headwind for new business growth going back to 2021. Renewal base growth was strong and solid, as was new business in both U.S. and Canada and international. And our lost business improved slightly as we continue to build stickier relationships with clients as we engage more deeply, and we aspire to be the risk advisor of the future, talking to them well beyond conventional risk. You know, we feel very well positioned. You know, overall, the mix of premium in the U.S. will be more weighted to casualty, in its broad terms, and probably more balanced in international for property casualty, property to answer your question.
John Doyle (President and CEO)
Yeah, reflection of the liability environment in the U.S. for sure. Thank you, Elyse. And thanks, Martin. Andrew, next question?
Operator (participant)
Our next question comes from the line of Scott Heleniak with RBC Capital Markets.
Scott Heleniak (Analyst)
Yeah, good morning. Just a quick question. Given the M&A pace has been pretty strong over, you know, past few quarters and certainly for the year, just wondering if we should assume, you know, kind of a deceleration in the run rate for share buybacks in the second half versus the first half. How are you thinking about that, and how is your M&A tracking versus kind of what you thought going into the year?
John Doyle (President and CEO)
Yeah, sure, Scott. Thanks, thanks for the question. You know, no change to our philosophy. We, you know, continue to take a balanced approach to capital management. We have about $4.5 billion to deploy during the course of the year. Broadly speaking, we favor, you know, attractive investments in our business, whether it's organic or inorganic, over buybacks, but we're not gonna let cash build up on the balance sheet either. You know, as I noted earlier, you know, we increased our dividend beginning in this quarter, and we aspire to raise our dividend every year. We bought back $300 million of shares in the second quarter. You know, we're pleased with what we've seen in the M&A market.
As I said, it was an active quarter. And we announced a couple of deals really at the, you know, at the start here of the second quarter, just after the first of July. And so we're excited about those deals, and, you know, we'll continue to be active in the market. But ultimately, the amount of share repurchase will depend on, you know, what's obviously a volatile, you know, M&A. You know, you never know what the ultimate outcome will be, in M&A. But we're seeing some good opportunities to invest in our business. Do you have a follow-up?
Scott Heleniak (Analyst)
Yeah, just, just one quick one, too. Just generally on Mercer, the health organic growth really strong again, and 9% has been strong for quite a while. And the career and wealth, I guess, is a little bit, a little bit slower, compared to health. But just wondering if you can just kind of flesh out what you're seeing there, the strength in health versus the other areas, if there's anything kind of holding those back, those areas, besides just the kind of difficult comps?
John Doyle (President and CEO)
Yeah. Thanks, Scott. And I'll ask Pat to comment in a second. But, you know, I mentioned, you know, rising healthcare costs in my opening remarks. It's a big pressure point, you know, for our clients, in this economy, and so, particularly given tight labor markets in, you know, in most major economies around the world. So, it's really terrific value we're delivering to our clients in a, you know, in a very tough marketplace there. You know, wealth's gonna have some, you know, volatility as will career, you know, quarter to quarter. But Pat, maybe you could talk a little bit about, you know, what we're seeing in the marketplace.
Pat Tomlinson (President and CEO)
Sure. Thanks, and thanks so much for the question. First off, we're pleased with the Q2 underlying growth of 5%, as Mark highlighted our thirteenth consecutive quarter with 5% or more growth, and that all the practices are contributing to growth. Certainly, health has been, has been contributing at a higher rate. Quickly to kind of go through the practices and what we're seeing, you know, health, as you highlighted, had that impressive quarter with 9% growth. The strong performance was broad-based, right? So there was double-digit growth across most regions. It comes predominantly from investments in hiring new talent, investments in thought leadership, including our Health on Demand survey, new digital tools, and a focus on client segmentation that's really designed to match our clients' healthcare needs with our innovative and tailored solutions.
We benefited from renewal and some new business growth, some insurer revenue, and as has been highlighted a couple of times in the call, medical cost inflation, certainly. We continue to see strong demand for digital solutions and innovative benefits, underscoring really the value of, and the breadth of advice and solutions we bring to clients. Little less growth in wealth and career, so let me quickly go through them. Wealth, we grew to 3% in Q2. That was balanced between the DB and IMS. All right, so DB plans, funding status, continue to benefit from elevated interest rates. It's driving an increase in project work, predominantly revolving around risk transfers, as well as certain regulatory requirements that are out in some of the jurisdictions around the world.
When you add in the volatile capital markets, it's been driving some strong demand for actuarial and the investment solutions. John had highlighted that in OCIO, we did benefit from the transaction with Vanguard. We had some net new inflows, and capital markets also provided a revenue lift. It's important to note that on IMS, from a business perspective, it's a portfolio of solutions, right? That includes some advisory work and some DC administration in addition to OCIO. So a lot of times, it's typically looked at as OCIO, and only our OCIO business is directly impacted by AUM. So as we've seen a market run up, really, we only have a subset of that business that's direct, that's directly impacted by AUM.
Our AUM is a, is a diversified portfolio, where equities only make up about half of our exposure, right? Because we have a lot of, a lot of clients that have heavy fixed income exposure. So while the markets can drive some volatility for us, the impact of equity markets is a bit more muted in IMS growth. And then on career, which had the most modest growth of 2%, which was up sequentially over quarter, it is following a long period of growth after the pandemic. We saw good growth momentum from a couple of our practices, talent and transformation.
Rewards was a bit more muted, and I think that's predominantly reflecting the impact of, of lower wage inflation, and reduced employee turnover, which is driving some slightly lower demand at, for, for clients at rewards projects. But I think it's also important to note here that while the growth rates, slowed down and been flat, even over the last couple of quarters, it's been a bit more modest. The overall size of our career practice is nearly 20% larger than it was pre-pandemic. So, that's, so we feel very strong about that, that we've been able to maintain those levels in a predominantly project-based, based business. So, overall, I think the conditions, have us very positive about the outlook for Mercer.
John Doyle (President and CEO)
Terrific. Thank you, Pat. Scott, thank you for your questions. Andrew, next question.
Operator (participant)
And our next question comes from the line of Michael Zaremski with BMO Capital Markets.
Michael Zaremski (Senior Equity Research Analyst)
Hey, great. Good morning. Focusing on the, the property casualty pricing, environment, I guess, competitive environment, John, I, I believe, you said that the Marsh Index devolved again, to 0 from 1. Just curious, you know, given Marsh does have a lot more small to mid-account business now, too, it, it feels like there's, like, two different tails or two different stories going on, between the large account and the mid accounts. I don't know if you'd agree with that, and if yes, if, you know, any, any color you'd -- you could offer on kind of why we're seeing, two different, trends there on pricing.
John Doyle (President and CEO)
Sure, sure. Sure, Mike. Thanks, thanks for the question. I'll share some high-level thoughts, and then maybe I'll ask both Martin and Dean to talk about, you know, some market observations. You know, I would note, Mike, just right out of the gate here, that typically, larger account pricing has more volatility attached to it. If you look back, you know, on historical cycles, that's been the case. Mid-market pricing has historically been more stable or more consistent, I guess, and have less volatility from cycle to cycle. And our index is weighted towards large accounts, you know, to be clear where we have the best data.
But insurance and reinsurance markets, you know, continue to settle in the quarter, you know, after what's been many years of, you know, of increases. You know, it's not just middle, you know, versus large, it's a collection of markets. And while, as I pointed out in my prepared remarks, you know, cyber and FinPro may be the best example, prices continue to moderate. Some segments of the market are showing some, you know, what might be early signs of stress. U.S. excess casualty, for example, you know, prices were up 10%, and loss cost inflation there remains quite challenging.
But, you know, overall, right now, markets are providing an opportunity for our clients to revisit some decisions they've made about financing risk and, you know, that tighter market conditions, you know, led them to make certain decisions. So, it's a welcome moment for, you know, for many of our clients to revisit some of those decisions. And, you know, Guy Carpenter, as I mentioned earlier, you know, it led to greater demand in the second quarter, as you know, evidenced by our strong growth. But Martin, maybe you could share a little bit more color on, you know, what we're seeing in the pricing market.
Martin South (President and CEO)
Sure. Just reminding ourselves, 26 quarters of rate increases, which just turned flat now. And as John noted, our index is geared much more towards the larger account segment of our business, and obviously, the mid-market business in the smaller end has less volatility in pricing. But, you know, just by line of business, casualty in the U.S. is up 3%, which, as John said, is really dominated by the 10% increase in the umbrella book, which we talked about in earlier quarterly calls about the volatility and claims inflation there.
Property's flat, in most regions, except for the Middle East and India, where we're still seeing some increases in property, maybe as a result of some of the activity in the Middle East in this past quarter. Core FinPro, contracting at 5%, with rate decline pretty much across the world, and cyber, contracting 6%, which is mostly consistent with what we saw in Q1. The pricing trend is consistent, with recent course, courses. We're seeing some slight increases in geographies, but rate contraction is more the norm.
... And so those are the key issues, really, that I would comment on now. But of course, as far as our business is concerned, you know, we're, you know, a lot of our business is fee-based or controlled commission basis, and exposure growth has been significant over the last few years as well, which is a counterweight to that.
John Doyle (President and CEO)
Thanks, Martin. Dean, maybe you could just quickly cover the reinsurance market.
Dean Klisura (President and CEO)
Yeah. Thanks, John. And Mike, just a couple headlines about the property cat reinsurance market, which certainly is connected to the underlying property market that Martin's describing. You know, as John noted, it's a much more predictable and smooth market than we experienced last year in the 2023 hard market for property cat. You know, placements have been completed on time. There's been adequate capacity in the marketplace for our clients. There's an increased reinsurer appetite in the market, and we know why, right? They're driving 20%+ ROEs in this market, given the rate increases of last year and the higher attachment points our clients have been forced to absorb with greater volatility. We're seeing very strong ILS activity in the market.
You know, John noted, record cat bond issuance in the quarter, 34 discrete cat bonds, some $8 billion of limit in the quarter. And I think that, you know, we're seeing moderating cat rates in the market compared to 2023. But I would say that if you look at year-over-year premium spend for property cat and our rate online index, it's still up 1% year over year. It has not gone negative in the market. And really, as John noted, Mike, I think, I think the headline, the key takeaway is significant increased client demand for additional property cat limit. In the first half of the year, two-thirds of our US clients bought more property cat coverage across an additional $10 billion of limit, which is truly significant in the marketplace.
We're also seeing clients reinsurers buy more retrocession coverage with improved pricing, market dynamics, improved appetite by sellers, both rated and ILS vehicles in the market. And I think the last headline for you is, there's caution in the property market. There's $50 billion+ of insured losses in the first half of the year. When you think about severe convective storms in the US and Japan, Taiwanese earthquake, floods in Germany, the UAE, Baltimore bridge collapse, Hurricane Beryl, I mean, we could be on track for another $100 billion a year of insured losses. So there's, there's caution in the market around property and property cat.
John Doyle (President and CEO)
Thanks, Dean. So Mike, not a big shift from, you know, from the first quarter, but, you know, a modest, you know, evolving market, you know, more in favor of buyers. And so, you know, that obviously factors into the advice we, you know, we give to our clients and, you know, help them, navigate what's a, you know, a world where, again, the cost of risk continues to escalate. Do you have a follow-up?
Michael Zaremski (Senior Equity Research Analyst)
Yeah, very quick follow-up. Thank you. Just, you know, not to nitpick, but if I'm just looking at total revenue growth, and I guess ultimately, EBITDA adjusted, I think, divestitures, and, and maybe a little less tax is, is what, I think also maybe the, the consensus was off on a little bit. So just wanna make sure there's nothing I'm missing. And I, you know, still a net, net acquirer in terms of, of M&A. But is there, you know, chunky, chunky divestitures? Is that anything I should be thinking about in the, in the very near term that, that, in terms of that impact?
John Doyle (President and CEO)
No, no. I mean, at Mercer, we sold two admin businesses, you know, one in the U.S., one in the U.K., to Aptia. You know, and the reason we sold them is they're relatively low growth and lower margin businesses, and again, on a relative basis, they were capital intensive. And so, you know, we think they have a better owner now, and so, you know, we feel good about that decision. Thank you, Mike. Andrew, next question, please.
Operator (participant)
Our next question comes from the line of Gregory Peters with Raymond James.
Gregory Peters (Managing Director)
Well, good morning. I guess, I'd like to just go back to some comments you made in your prepared remarks. You mentioned Blue[i]. I was wondering if you could provide some more specific data around that. You know, it's a data analytics business. Just provide some scope of how big it is inside the business, because you called it out in your call.
John Doyle (President and CEO)
Yeah, it's, you know, it's not a business. It's, it's part of really how we advise our clients at Marsh. And so, you know, Blue[i] is kind of the, the brand, if you will, for, for our suite of analytics. And, you know, Martin, maybe you could just share some insight on the range of types of tools that we use that help our clients think about how they manage and finance risk.
Martin South (President and CEO)
Sure. So as you said, John, this is a suite of analytics tools that we use to help our clients across different product lines, assess what risks to retain, what risks they could transfer, the economic cost of that. We pay them across multiple lines to give them exposure and total cost of risk scenarios. We help them analyze claims, and the analytics tools in that are able to help our clients who self-insure a lot of losses, to identify which losses they need to get out early and how to settle those. So it's a range of real-time analytics built, really, and it's one of the unique things about our business, is that we have an enormous lake of data, and we think that's one of the big moats that we have to support our business.
And, you know, some of these analytics tools that we use, we call them generically, Blue[i]. We deploy on clients that actually don't even buy insurance. They tend to be some of our biggest clients, in the U.S. So,
... we'll continue to invest in that, and, as we announced in the call last year, we, you know, we added to that with supply chain, capability, and, so it's, it's the way clients expect to be engaged, and, and that's the tool with it, that we use.
John Doyle (President and CEO)
So, you know, we use these tools to help, and it's really mostly upfront, but to help them understand, our clients understand those risks, strategies to, to manage and mitigate those risks. We spend most of our time on these calls for, for good reasons, talking about the financing of risk when we go to market. But, but it's an important part of our value proposition.
It's another example of where we can bring scale benefits to the market, you know, given the unique data set that we have, and the range of proprietary analytics we use. And while it operates under a different brand, the same would be said for the way we approach our clients in the market at Guy Carpenter. Do you have a follow-up, Greg?
Gregory Peters (Managing Director)
I sure do. Thanks for the color on that.
John Doyle (President and CEO)
Yeah.
Gregory Peters (Managing Director)
Just going to the operating cash flow and the free cash flow for the six months, down a little bit. Looks like it's changes in working capital. Wondering if you could just provide some additional color on the operating cash flow for the quarter and the six-month basis.
John Doyle (President and CEO)
Sure, Greg. Yeah, it's going to be volatile from quarter to quarter, but Mark, maybe you can-
Mark McGivney (CFO)
Yeah, Greg, thanks. We always, we'll, we'll always caution against focusing too much on a quarter's results, and, and, you know, that's, that's certainly true when it comes to cash flows and free cash flow. They tend to be volatile, not only quarter to quarter, but year to year because of timing of balance sheet items. As you put... So when you look at the six months, we are seeing a decline. Of course, given the significant bonus payouts that we have in the first quarter, you have a little bit of a denominator, small denominator issue, and so you have to be cautious.
But the two big factors, just in the first six months, are the higher comp payouts that we had in the first quarter, and then receivables are up because of the growth in the business. Yeah, we've got, as you know, a long track record of double-digit growth in free cash flow that has stacked up well against our growth in earnings, and that's what you'd expect in a capital-light business like ours.
John Doyle (President and CEO)
Thank you, Mark, and thanks, Greg, for the questions. Andrew, next question, please.
Operator (participant)
Our next question comes from the line of Yaron Kinar with Jefferies.
Yaron Kinar (Equity Research Analyst)
Thank you. Good morning. Just had a follow-up on an earlier question on margins. So I, I think last quarter you had said that you expected the margin to accelerate, particularly in the second half of the year. Sounded like from the response this morning, that maybe that's no longer the case. So I guess just to be very clear, if we look at the 100 basis points or so of margin expansion in the first half of this year, would you expect that to be better in the second half or not? And I guess the second part of the question will be, if there was a bit of a change, is it because the margin expansion in the second quarter was greater than you initially expected, or are you expecting some softening relative to your guidance for the second half of the year?
John Doyle (President and CEO)
No, but we expect margin expansion in the second half to be better than the first half. You know, sorry if we created any confusion earlier, but that's, you know, what we continue to expect. And, you know, maybe I can, you know, just share, you know, a little bit of color. And just remind everybody, too, margin's an outcome, right? This will be year 17 of 17th consecutive year of margin expansion, and so, you know, we feel terrific about that. But margin is an outcome of the way we run the business. You know, we manage investments and costs, you know, within, you know, within the revenue growth of the business.
It's not going to happen in every business in every single quarter, but that's, you know, it's the way we approach, you know, our business, and we're going to continue to make attractive investments, you know, to support medium to long-term growth. But, you know, we see opportunities. You know, as I've mentioned in the past, we've got workflow and automation efforts inside of Marsh, Mercer, and Guy Carpenter. We're testing AI at scale, so you know, that value creation is not a meaningful 2024 or probably 2025 event. But, you know, as technologies emerge, we'll continue to challenge ourselves to get better. But again, we do expect second half margin expansion to be better than first half. Do you have a follow-up?
Yaron Kinar (Equity Research Analyst)
Thanks so much for the color and clarification.
John Doyle (President and CEO)
Yep.
Yaron Kinar (Equity Research Analyst)
I asked a two-part question, so I'll turn it back to you.
John Doyle (President and CEO)
Got it. Thank you. Andrew, next question, please.
Operator (participant)
One moment, please. Our next question comes from the line of Meyer Shields with KBW.
Meyer Shields (Managing Director)
Great. Thanks. Good morning, all. I guess to start, can you talk about how you're advising both insurance and reinsurance clients to think about their exposure to casualty lines following the overturning of the Chevron doctrine?
John Doyle (President and CEO)
Well, you know, I'm not sure I see a direct line between, you know, that particular case and the overall environment. But, you know, what I would say to you is that, and what we've talked about on this call, you know, historically, or I shouldn't say historically, but over the course of the last couple of years, is just, you know, troubling signs of loss cost inflation, particularly here, in the United States. And, you know, the amount of large, you know, or mega judgments and settlements, you know, is quite challenging. And so, and so we spend a lot of time, and, you know, Martin talked briefly about the suite of analytics we use. It's, you know, it's...
Inside of that suite of analytics, we help, you know, we help our clients think about a range of outcomes, what type of limits they should consider buying, how they might benchmark anonymously, you know, against others, you know, in their industry, you know, as an example. But those are all important inputs. You know, and ultimately, our clients, you know, make decisions and judgments and, you know, some have the ability to finance more risk or choose to finance more risk on their own, and others will, you know, will look to finance risk on the, you know, on the balance sheets of insurance companies or, in certain cases, to capital markets as well. So, I hope that's helpful, Meyer.
Meyer Shields (Managing Director)
It is. Thank you. It's very good, big picture. This is more of a small picture issue, but when we look at, let's say, the two-year stacked organic growth in career that slowed dramatically from the first quarter. I guess you had 12 + 1 is 13, in this quarter, 6 + 2 is 8. Is your outlook, for career based on the, items or the issues that you identified earlier, is that slowing compared to maybe what you thought at the end of the first quarter?
John Doyle (President and CEO)
No, I don't think there's a real change from the first quarter. As you know, as Pat mentioned, some of the dynamics, you know, of less active labor markets from a, you know, from a turnover point of view, lower comp event. So, you know, it's a-- you know, we didn't have expectations of higher growth, you know, in that business, you know, during the course of 2024, and, you know, we haven't seen anything through six months that, you know, that changes that outlook.
Meyer Shields (Managing Director)
Fantastic. Thank you very much.
John Doyle (President and CEO)
Thank you. Andrew, time for maybe one more?
Operator (participant)
Certainly. And our final question comes from the line of Rob Cox with Goldman Sachs.
Rob Cox (VP and Equity Research Analyst)
Hey, thanks for fitting me in. John, I want to go back to something you said last quarter, which is that Marsh accesses most of its E&S market solutions directly today. I'm curious how that's split between the percentage of premiums placed directly in E&S versus through a third-party wholesaler has trended over recent years, and how you think that might trend going forward.
John Doyle (President and CEO)
Yeah, you know, again, I, you know, just to be clear, we're not looking to build a third-party wholesale business. You know, we, we want to bring the best solutions to our clients. You know, the E&S market's moved quite a bit, you know, over the course of the last several years. That's really a reflection of the high-risk environment that, you know, I've talked about and, you know, where insurers have, broadly speaking, more freedom to change rate, to get off risk, to change price, or to change terms and conditions as well. And so, you know, broadly speaking, you know, we want to manage our clients' outcomes and experiences directly as possible and not outsource what's an important part of the value proposition.
It's not to say that wholesalers don't do a nice job for us, they do, and we'll continue to access them, you know, where it, where it makes sense. But, but we—most of the majority of the wholesale premium, we actually access directly today, or E&S markets, we, we, we do that directly today. But there's been more growth in intermediated wholesale premium over the course of the last couple of years. And so, you know, so our efforts are to, you know, try to get as much access to, to market as we can. Do you have a follow-up, Robert?
Rob Cox (VP and Equity Research Analyst)
Yeah. Thank you. That's great color. Yeah, and the second question was just on sort of the different economics Guy Carpenter gets from cat bonds versus traditional reinsurance placement, and if you can help us think about how much that record cat bond quarter contributed to organic growth.
John Doyle (President and CEO)
Yeah, you know, the economics can be different, of course, you know, and they're different from treaty to treaty as well. You know, we work with our insurance company clients. You know, as we talked about when the market was particularly tight last year, you know, while commission is a factor and growing price was a factor, in many respects, really, what we do with our large insurance company clients is big wholesale relationships, where effectively we work on what amounts to a fee.
Rob Cox (VP and Equity Research Analyst)
Thank you.
Operator (participant)
Thank you. I would now like to-
John Doyle (President and CEO)
Go ahead, Andrew.
Operator (participant)
I would now like to turn the call back over to John Doyle, President and CEO of Marsh McLennan, for any closing remarks.
John Doyle (President and CEO)
Thanks, Andrew, and thank you all for joining us on the call this morning. In closing, I want to thank our colleagues for their hard work and dedication. I also want to thank our clients for their continued support. Thank you all very much, and we look forward to speaking to you again next quarter.