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Marsh & McLennan Companies(NYSE: MMC)
Q3 2023 Earnings Call
Oct 19, 2023, 8:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Welcome to Marsh McLennan's earnings conference call. Today's call is being recorded. Third 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 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 Doyle -- President and Chief Executive Officer
Good morning and thank you for joining us to discuss our third 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.
Before I get into our results, I'd like to take a moment to comment on the violent attacks on Israel and the tragic events unfolding in Israel and Gaza. We, along with our colleagues, condemn all acts of terror and violence and reject hatred. Our primary focus is on ensuring the safety and well-being of our colleagues in Tel Aviv and supporting colleagues around the world who have family and friends in Israel and Gaza. We're also supporting our clients as they grapple with the challenges of this conflict.
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Turning to our third quarter results, I'm very pleased with our performance. We extended our best run of quarterly underlying revenue growth in over two decades and reported significant growth in adjusted EPS. Top-line momentum continued with 10% underlying revenue growth, on top of 8% growth in the third quarter of last year. Adjusted operating income grew 24% versus a year ago.
Our adjusted operating margin expanded 170 basis points compared to the third quarter of 2022. Adjusted EPS grew 33%. And we completed $300 million of share repurchases during the quarter. These results reflect our consistent focus on delivering in the near term while investing for sustained growth over the long term.
We are seeing the benefit of investments we've made in our talent and capabilities, and we continue to see opportunities to add high-quality acquisitions. During the third quarter, we announced two significant transactions. In early August, Marsh McLennan Agency acquired Graham Company, a top 100 U.S. insurance and benefits broker and risk management consultancy with 215 employees and over $70 million in revenue.
Graham will provide significant business insurance and employee benefits expertise for MMA's clients in the mid-Atlantic. This acquisition is another example of us attracting the best agencies in the U.S. MMA is now a $3 billion revenue business. In the same month, Marsh announced an agreement to acquire Honan Insurance Group.
This deal expands our Australian middle market business and our position across the Pacific region and Asia. Honan specializes in corporate risk and employee benefits and serves over 30,000 clients. Beyond acquisitions, we continue to make targeted investments in talent, sales operations, and go-to-market strategies. We are also investing in new technologies and solutions to bring the best of Marsh McLennan to our clients.
For example, Guy Carpenter recently launched the next generation of our catastrophe analytics platform, GC AdvantagePoint. The new platform is a critical tool to help clients drive profitable risk selection and manage catastrophe exposure in a quickly evolving risk landscape. Earlier this year, Marsh announced the launch of Cyber Pathway, an integrated cybersecurity and insurance solution for U.S. small and mid-sized businesses that helps enhance their resilience in a volatile threat environment.
The program provides access to key security tools and capabilities, as well as insurance coverage that can grow as our clients evolve. And we are investing in technologies that enhance our internal productivity, insights for clients, and improve colleague experience. One example is LenAI, Marsh McLennan's internal AI assistant. LenAI offers the power of ChatGPT in a safe and data-secure environment and is available to all colleagues.
Developed by our Innovation Centre, it's also helping Oliver Wyman support clients in developing their own AI capabilities. Our approach to balancing investment and growth drives consistent, exceptional performance for shareholders and positions us well to deliver new solutions and insights for our clients. Turning to our strategic initiatives. The combined value proposition of our businesses continues to gain traction with clients, especially in certain industries and lines of business.
For example, we are focused on enterprise risks for healthcare clients. Our Marsh and Mercer teams are coming together to respond to emerging challenges such as health and safety, labor actions, and workforce and liability risks from AI. In the private equity and M&A space, Mercer, Marsh, and Oliver Wyman are combining capabilities to help clients close deals and create post-transaction value. This can include due diligence, advisory on large transformations, health and benefits carve-out transactions, and providing stop-loss solutions.
And in the insurance sector, Guy Carpenter is partnering with Mercer to provide portfolio management solutions to insurance clients. One example is our Advanced Balance Sheet solution, which is a collaborative approach that aligns risk and return across an insurer's balance sheet. This offering has already resulted in several regional insurers choosing to partner with Mercer for OCIO. We are also finding new ways to operate, reduce complexity, and organize for impact.
As we continue to execute on our restructuring actions, we've identified additional opportunities to rationalize technology, reduce our real estate footprint, and realign our workforce. We now expect to achieve total savings of roughly $400 million by 2024, with total cost to achieve these savings of $425 million to $475 million. Overall, the momentum we are seeing as our businesses increasingly serve clients together, combined with our restructuring efforts, offers opportunities to deliver enhanced value for clients, drive higher growth, and be more efficient and connected. Now, let me turn to the macro environment.
The outlook remains uncertain. Capital market volatility has returned with the continued rise in interest rates. The trajectory of inflation and further central bank tightening remain an open question, and the geopolitical situation remains volatile. Despite the environment, we continue to perform well, and we have a track record of resilience.
We believe we are well positioned to perform across economic cycles and manage our business to grow revenues faster than expenses in good, as well as challenging periods. Now, let me turn to insurance and reinsurance market conditions. Primary insurance rates continue to increase with the Marsh Global Insurance Market Index up 3% overall, in line with the second quarter. Property rates increased 7%, compared to 10% in the second quarter.
Casualty pricing was up in the low single-digit range. Workers' compensation increased slightly, while financial and professional liability insurance rates were down mid-single digits. Cyber insurance pricing decreased modestly after several years of increases. In reinsurance, our clients have faced consistent challenges throughout 2023.
This includes elevated cat losses, core and social inflation, and continued political instability. As we look to January 1st, the market appears to be more orderly than last year, but we expect underwriting discipline to continue. On the property side, we expect firm pricing but a more stable market with adequate capacity and increased reinsurer appetite. In casualty, the market is more cautious with reinsurers assessing prior-year loss development and inflation.
We expect capacity to remain stable. Overall, clients will need thorough preparation and a proactive strategy to achieve desired outcomes. We are well-positioned to help our clients navigate these dynamic market conditions. Now, let me turn to our third quarter financial performance.
We generated adjusted EPS of $1.57, which is up 33% from a year ago. On an underlying basis, revenue grew 10%. Underlying revenue grew 11% in RIS and 9% in consulting. Marsh was up 8%; Guy Carpenter, 8%; Mercer, 8%; and Oliver Wyman grew 12%.
Overall, the third quarter saw adjusted operating income growth of 24% and our adjusted operating margin expanded 170 basis points year over year. For the nine months, consolidated revenue grew 10% on an underlying basis, adjusted operating income grew 17%, and our adjusted operating margin expanded 130 basis points. Adjusted EPS was $6.31, up 17% from a year ago. With our outstanding results in the third quarter and year to date, we remain on track for a terrific year.
Based on our outlook today and assuming current market conditions persist, we now expect full year underlying revenue growth to be 9% to 10%. We also continue to expect margin expansion for the full year and strong growth in adjusted EPS. Finally, I want to provide an update on our recently announced leadership changes. Martine Ferland, the CEO of Mercer, will retire on March 31st of next year.
Pat Tomlinson has been appointed president of Mercer, where he will work closely with Martine through a transition period and have responsibility for Mercer's global health, wealth, and career practices. Pat will succeed Martine as president and CEO of Mercer upon her retirement. I'm excited to work with Pat in his new role. He brings an outstanding track record as a leader and strong knowledge of our business.
He currently serves as Marsh McLennan U.S. and Canada CEO and Mercer president of U.S. and Canada. Pat has 26 years of industry experience, including the last nine years in leadership roles at Mercer.
I also want to thank Martine for her leadership. In her five years as CEO of Mercer, she delivered strong growth, built and cultivated our talent, and delivered impact for our clients. This announcement is another example of our depth of exceptional talent and focus on succession planning. Overall, I'm proud of our third quarter performance, which demonstrates continued execution of our strategy and continued 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 -- Chief Financial Officer
Thank you, John, and good morning. Our third quarter results were outstanding: continued momentum in underlying growth, strong double-digit adjusted EPS growth, and significant margin expansion. Our consolidated revenue increased 13% to 5.4 billion, with underlying growth of 10%. Operating income was 996 million, and adjusted operating income was 1.1 billion, up 24% from a year ago.
Our adjusted operating margin increased 170 basis points to 21.3%. GAAP EPS was $1.47, and adjusted EPS was $1.57, up 33% over last year. Note that adjusted EPS in the third quarter included a $0.10 discrete tax benefit from the release of valuation allowance on foreign deferred tax assets. Even without this benefit, our adjusted EPS grew 25% in the quarter.
For the first nine months of 2023, underlying revenue growth was 10%, adjusted operating income grew 17% to 4.4 billion, our adjusted operating margin increased 130 basis points, and adjusted EPS increased 17% to $6.31. Looking at risk and insurance services, third quarter revenue was 3.2 billion, up 12% from a year ago or 11% on an underlying basis. This result marks the 10th consecutive quarter of 8% or higher underlying growth in RIS and continues the best stretch of growth in nearly two decades. Operating income increased 21% to 640 million, adjusted operating income increased 19% to 671 million, and our adjusted operating margin expanded 100 basis points to 23.4%.
For the first nine months of the year, revenue in RIS was 10.8 billion, with underlying growth of 12%. Adjusted operating income increased 18% to 3.3 billion. Margin increased 150 basis points to 32.6%. At Marsh, revenue in the quarter was 2.7 billion, up 9% from a year ago or 8% on an underlying basis.
This comes on top of 8% growth in the third quarter of last year. Growth in the third quarter reflected solid new business and strong retention. In U.S. and Canada, underlying growth was 6% for the quarter, led by strong growth in MMA.
In international, underlying growth was 10% and comes on top of 11% in the third quarter of last year. Latin America was up 14%, Asia-Pacific was up 10%, and EMEA grew 9%. For the first nine months of the year, Marsh's revenue was 8.5 billion, with underlying growth of 9%. U.S.
and Canada grew 7%, and international was up 10%. Guy Carpenter's revenue was 359 million in the quarter, up 9% or 8% on an underlying basis, driven by strong growth across our global specialties and regions. For the first nine months of the year, Guy Carpenter generated 2 billion of revenue, 10% underlying growth. In the consulting segment, third quarter revenue was $2.2 billion, up 13% from a year ago or 9% on an underlying basis.
Consulting operating income was 424 million, adjusted operating income increased 24% to 447 million, and the adjusted operating margin expanded 170 basis points to 20.8%. For the first nine months of 2023, consulting revenue was 6.4 billion, with underlying growth of 7%, adjusted operating income increased 11% to 1.3 billion, and the adjusted operating margin expanded 50 basis points to 20.1%. Mercer's revenue was 1.4 billion in the quarter, up 8% on an underlying basis. This was Mercer's best quarter of underlying growth in 15 years.
Wealth grew 7%, driven by continued demand in defined benefits consulting and higher growth in investment management. Our assets under management were $379 billion at the end of the third quarter, up 19% compared to the third quarter of last year and down 4% sequentially. Year-over-year growth was driven by our transaction with Westpac, a rebound in capital markets, and positive net flows. Health underlying growth was 8% and reflected strength in all segments and regions.
Career revenue increased 7%, on top of 15% growth in the third quarter of last year. We continue to see growth in rewards and talent strategy. For the first nine months of the year, revenue at Mercer was 4.1 billion, with 7% underlying growth. Oliver Wyman's revenue in the quarter was 781 million, an increase of 12% on an underlying basis that reflected strength in the Middle East and Europe.
For the first nine months of the year, revenue at Oliver Wyman was 2.3 billion, an increase of 8% on an underlying basis. Foreign exchange was a $0.01 headwind to EPS in the third quarter. Assuming exchange rates remain at current levels, we expect FX will have an immaterial effect on fourth quarter earnings. We reported 52 million of total restructuring costs in the quarter.
Approximately 37 million of which relates to the program we announced in the fourth quarter last year. These charges include costs related to severance, lease exits, and streamlining our technology environment. We've continued to pursue efficiencies under this program, and our outlook for savings has increased. As John noted, we now expect total charges of 425 million to 475 million and expect total savings of roughly 400 million, of which approximately 225 million will be realized in 2023.
To date, we have incurred approximately 325 million of charges under this program. We currently expect to incur the majority of the remaining charges by the end of 2023 and to realize the bulk of the remaining savings in 2024. Our other net benefit credit was 62 million in the quarter. For the full year of 2023, we expect our other net benefit credit will be about 240 million.
Investment income was 1 million in the third quarter on a GAAP basis and 2 million on an adjusted basis. Interest expense in the third quarter was 145 million, up from 118 million in the third quarter of 2022, reflecting higher levels of debt and higher interest rates. Based on our current forecast, we expect approximately 157 million of interest expense in the fourth quarter. Our effective adjusted tax rate in the third quarter was 20.5%, compared with 24.6% in the third quarter of last year.
Our tax rate in both periods benefited from favorable discrete items. The largest discrete item this quarter was a $48 million release of a valuation allowance on foreign deferred tax assets. 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 is reasonable to assume a tax rate of around 25.5% for 2023. Turning to capital management and our balance sheet. We ended the quarter with total debt of 13.6 billion. This includes the 1.6 billion of senior notes we issued in September.
Our next scheduled debt maturities are in March 2024, when 1 billion of senior notes mature; and in May, when another 600 million of senior notes come due. We also recently took the opportunity to increase borrowing capacity under our credit facility, increasing the size of the facility to 3.5 billion from 2.8 billion and extending the term of the facility by two and a half years to 2028. This was a prudent step to increase our access to short-term funding given the significant growth in our business since we last renewed the facility in April 2021. We are also pleased that Moody's upgraded our senior unsecured debt rating to A3 in September.
We continue to expect to deploy approximately 4 billion of capital in 2023 across dividends, acquisitions, and share repurchases. Our cash position at the end of the third quarter was 2.9 billion. Uses of cash in the quarter totaled 1 billion and included 353 million for dividends, 368 million for acquisitions, and 300 million for share repurchases. For the first nine months, uses of cash totaled 2.9 billion and included 944 million for dividends, 1.1 billion for acquisitions, and 900 million for share repurchases.
Overall, we remain on track for a terrific 2023. Based on our outlook today and assuming current conditions persist, we expect to generate 9% to 10% full year underlying revenue growth, strong growth in adjusted EPS, and to report margin expansion for the 16th consecutive year. And with that, I'm happy to turn it back to John.
John Doyle -- President and Chief Executive Officer
Thank you, Mark. Operator, we are ready to begin Q&A.
Questions & Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator instructions] And our first question comes from the line of Elyse Greenspan with Wells Fargo.
Elyse Greenspan -- Wells Fargo Securities -- Analyst
Hi. Thanks. Good morning. My first question is on the U.S., Canada within Marsh.
Organic of 6%, but that is a slowdown from where you guys were in the first part of the year. Can you just give a little bit more color on what's causing the slowdown? And then I think in the introductory comments, you guys mentioned that MMA saw strong growth. So, can you give us a sense of the growth within MMA and the growth outside of MMA within that segment?
John Doyle -- President and Chief Executive Officer
Sure, Elyse. Good morning and thanks for the question. Again, overall, I was quite pleased with the growth, the revenue growth in the quarter. We had good growth at Marsh, best growth at Mercer in 15 years, and again, strong performance at Guy Carpenter and Oliver Wyman.
Marsh U.S., inclusive of MMA, and I would also note, our MGA operation had a good quarter as well. You know, growth was strong. Marsh U.S. was up 6%, versus 5% a year ago.
Again, we caution you to look at growth at any one quarter. You know, we think we're well-positioned, and our team is executing well. Martin, do you have any other color on what impacted growth at Marsh on this quarter?
Martin South -- President and Chief Executive Officer of Marsh
Yeah. Thank you, John. You know, as you said, very strong growth for Marsh across the board, in international and North America. You know, as you said, we don't comment specifically on MMA, but they've had a good quarter.
The growth in the MGA business was strong. There's partially some impact from the capital markets and some moderating growth in financial construction, cyber lines, reflecting some pricing pressures. But as you say, we don't look at this on a quarter-over-quarter basis. We look at it over a longer period of time, and we feel very positive about the U.S.
and the Canadian business.
John Doyle -- President and Chief Executive Officer
Thanks, Martin. Elyse, do you have a follow-up?
Elyse Greenspan -- Wells Fargo Securities -- Analyst
Yeah. And then my second question, so on the revised savings program, is there a way to give us a sense -- you mentioned, John, it came from rationalizing tech, real estate, and realigning the workforce. How much each of those buckets are contributing to the extra savings? And then is it still fair to assume that most of the savings that you're expecting this year should be falling to the bottom line?
John Doyle -- President and Chief Executive Officer
So, you know, really, backing up a little bit, Elyse, as our business is operated more closely together, we've just identified additional opportunities. They are largely in the same areas, right? It's around realigning our workforce and mostly in functions, you know, I would say, as opposed to market-facing workforce, talent, real estate, and technology, but not broken it out, you know, by group, but, you know, the costs for severance, lease terminations, and streamlining technology. So, again, we're excited about some of the opportunities that we've uncovered, and, you know, I'm proud of the team. We're executing against them.
Thanks, Elyse. Operator, next question, please.
Operator
Thank you. And our next question comes from the line of Jimmy Bhullar with J.P. Morgan.
Jimmy Bhullar -- JPMorgan Chase and Company -- Analyst
Hey. Good morning. So, first question on the reinsurance market, I think you mentioned the word firm in terms of pricing, and are you expecting prices to be up further from these current levels or firm just means that they'll be somewhat stable? And then how do you think that will affect your growth at Guy Carpenter? You've grown double digits this year. Not sure how much of that is because of the tailwind from pricing.
John Doyle -- President and Chief Executive Officer
Yeah. Thanks, Jimmy. I did use the word firm. There's no question.
You know, our team at Guy Carpenter has done a terrific job this year helping our clients navigate what's a -- you know, what's a challenging market. As I said, I expect that the market on January 1 will certainly be more orderly than last year. But there are concerns, both in the insurance and reinsurance market, about rising loss costs. And so, you know, we don't want to project and can't really project with accuracy, and there's still a quarter to run.
You know, we expect underwriting discipline to remain. But with that, maybe Dean, you could offer some thoughts on Guy Carpenter and what we think of the market.
Dean Klisura -- President and Chief Executive Officer of Guy Carpenter
Thanks, John. And, Jimmy, maybe I'll give you a little color between property cat and casualty, as John mentioned. You know, as John noted, we expect challenging market conditions to persist for property cat at the upcoming January 1 renewal, as John noted, driven by inflation. As you're reading about, I mean cat losses continue to be very elevated.
You know, many attritional losses. You know, many billion-dollar-plus events this year. Political instability continues. We do expect pricing to remain firm in property cat.
You know, it'll vary region by region. It won't be what we saw last year, as an example, in the U.S. and Europe. But we do think that firmness will be there.
We do expect additional capacity and an increased appetite from reinsurers to write more business, particularly at higher attaching property cat layers. But I think the key is we expect reinsurers to continue to exhibit that discipline on attachment points, pricing, and terms. And I don't see anything going backwards. As John noted, we think property cat capacity in the market will remain adequate.
And as John noted, we think it'll be a more manageable renewal for our clients, without that significant supply demand imbalance and dislocation that we saw last year. And we do expect increased demand for our clients to buy more reinsurance and particularly key regions like Europe. You know, on the casualty side, for U.S. casualty, as John noted, the market is trending very cautiously.
In all of our meetings with reinsurers this fall, everybody expressed concern with prior-year loss development in U.S. casualty and certain lines, you know, again, driven by economic and social inflation. And we do expect some downward pressure from reinsurers on ceding commissions for our clients with quota share contracts and certain casualty lines. But in casualty, we do expect capacity to remain adequate.
John Doyle -- President and Chief Executive Officer
The cost of risk, Jimmy, is rising, and, you know, it's up to us to find the best solutions in the market for both our insurance and reinsurance clients. And so, I think we're well positioned to do that. Do you have a follow-up?
Jimmy Bhullar -- JPMorgan Chase and Company -- Analyst
Yeah. Just on Oliver Wyman, I think, typically, you think of Oliver Wyman as being sensitive to economic uncertainty. And this year, the business has shown a lot of momentum. So, maybe -- I know you won the UBS -- I don't know, UBS-Credit Suisse integration contract, but I'm not sure how material that is.
But what's really driving Oliver Wyman and what's your sort of pipeline look like and how do you think about it performing if the economy does, in fact, slow down?
John Doyle -- President and Chief Executive Officer
Yeah. Thanks, Jimmy. Oliver Wyman has been more sensitive to GDP over time, but it's also been a faster-growing part of our business over time as well. And after a relatively slow start to the year, you know, Oliver Wyman's had a terrific run.
It is now having strong growth year to date and a very, very strong quarter. So, Nick, maybe you can share with Jimmy some color on how things look at Oliver Wyman.
Nick Studer -- President and Chief Executive Officer of Oliver Wyman
Thank you, John, and thank you, Jimmy. Yeah, let me enlarge on that a little bit. It's definitely not an easy environment for discretionary spending in our clients. I still see a fairly wide range of possible economic paths.
But John called out our wider resilience as Marsh McLennan, and I'm proud that Oliver Wyman has demonstrated that resilience in clawing our way back from a flat Q1. And as Martin said as well, we do try to look at the business on a year-over-year basis more than a quarter-over-quarter basis, but it does matter. We're quite a diverse business now, and we've been becoming more diverse. So, if you think about the sectors that are driving our growth in the regions, our India, Middle East, and Africa region has been the biggest contributor to our regional growth, with Europe also contributing strongly.
On the sectoral side: public sector, which is quite present in the Middle East; our communications, media, and technology practice; followed by banking; followed by transportation and services. So, again, quite a wide array of industry sectors there. And maybe just an interesting case study, on the industry side would be our private equity, private capital practice. Clearly, it's not been a great deal environment.
But that practice has been doing quite well, driven by portfolio company work. And over the last few years, I've said a few times and have been asked questions about our offerings through the cycle, which we've been seeking to broaden, our economic research practices grew strongly. Our digital team, our restructuring practice, which is nascent, grew very strongly. Our work on performance transformation with clients, which is more of a tough economic environment offering, as well as our people and organizational performance work where we do a lot of collaboration with Mercer.
So, ultimately, I'm optimistic in our long-term growth prospects, but we continue to plan for mid to high single-digit growth over the longer term. And our pipeline is looking in line with that at this moment.
John Doyle -- President and Chief Executive Officer
Thanks, Nick, and thank you, Jimmy. Operator, next question.
Operator
Thank you. And our next question comes from the line of Mike Zaremski with BMO Capital Markets.
Mike Zaremski -- BMO Capital Markets -- Analyst
Hey. Good morning. Thanks. I guess just a follow-up to the last question about kind of global growth.
So, Marsh's growth clearly record high levels. I feel like historically there's been more of a correlation between growth and nominal GDP. If you do agree with that, it just feels like there's been a decoupling of that relationship recently in a good way for you, obviously. And just curious if there's anything structurally permanently that's changed or is it -- are there kind of temporary phenomenon with hires or anything you want to call out if you agree with the premise of my question?
John Doyle -- President and Chief Executive Officer
Sure, Mike. You know, what I would say is it is a volatile macro environment, certainly both the economy and geopolitically, as I mentioned before. But I do believe nominal GDP is a better indicator of demand over time. And with inflation, tight labor markets, and pricing, you know, positive in the P&C market, those macro factors are certainly supportive of growth.
But what I would also say is we've been working very hard to shift our mix of business to better growth markets over time. You know, a handful of examples: MMA, of course; the middle market at both Marsh and Mercer; our OCIO business we've been investing in. We have invested organically and inorganically throughout Asia. And then more broadly, we've invested in talent, sales operations, and our client engagement models.
So, we believe we're a better growth business and better positioned. And while, again, that macro environment is quite volatile, you know, we're confident in our ability to perform over economic cycles.
Mike Zaremski -- BMO Capital Markets -- Analyst
OK. That's helpful. If I could ask a follow-up and hopefully it's not out of left field, but there's been chatter in the media and at a recent wholesale conference about potentially some of the larger brokers getting back into the wholesale business. I'm not sure if you want to comment on that or can, but maybe you can at least offer some perspective on why Marsh doesn't have as big of a wholesale presence as, you know, relative to just its market share of nonwholesale insurance.
John Doyle -- President and Chief Executive Officer
Yeah. Sure, Mark -- Mike, excuse me. I'm happy to comment. I mean, first of all, I would say that E&S -- the E&S market volumes historically have moved with pricing cycles.
I think given the volatile risk environment, I suspect that E&S market volumes will be more durable than they've been historically. Underwriters are looking for flexibility, and third-party wholesalers can give us access to certain markets. At the same time, we access some E&S markets directly today. And so, in terms of a third-party wholesale, I think we'd have to be thoughtful about whether or not we would be a good owner.
We do have a business in Victor that does a lot of business with independent, really small commercial Main Street agents. That's a marketplace we can serve and do serve today with solutions. But our focus, again, broadly speaking in Marsh's business, is about bringing the entirety of the market, all solutions that are out there, whether they are standard market or admitted market solutions or not admitted solutions, we want to have the flexibility to do that. And that's what we do to make sure that we can protect and bring the best solutions to our client.
Hopefully, that was helpful. Operator, next question.
Operator
And our next question comes from the line of David Motemaden with Evercore ISI.
David Motemaden -- Evercore ISI -- Analyst
Thanks. Good morning. John, in the press release, you mentioned continuing to make investments for the future in this quarter. I'm just wondering if there was an acceleration in some of those investments this quarter, particularly in RIS.
And if so, if you could walk through the nature of them and how we can think about the future revenue contribution?
John Doyle -- President and Chief Executive Officer
No, I don't -- thanks, David. I don't see it as an acceleration in the quarter. Certainly, on a GAAP basis in the quarter, expense growth was impacted by M&A, restructuring, but also FX. And even on an adjusted basis, obviously, FX played a role there.
But as I said earlier, we're trying to balance delivering today and investing for the future. We're not trying to optimize margins in a particular quarter or, for that matter, in a year. We've got a track record, a disciplined track record of growing revenue faster than expense. But we're not going to do it in every quarter -- in every business in every quarter.
And so, we see right opportunities to make investments that we think are going to create opportunities for us to deliver value for our clients, we're going to make them.
David Motemaden -- Evercore ISI -- Analyst
Got it. Thanks. And then on -- just on the Marsh Global Pricing Index, I guess I'm wondering, you know, just if we're seeing an acceleration in some of the casualty lines, you know, excluding workers' comp and excluding financial lines. If you're seeing an acceleration there, it sounded like on the reinsurance side, there's, you know, a bit more discipline that's entering the market given some social inflation concerns.
I'm wondering if you're seeing any signs of that in the primary market.
John Doyle -- President and Chief Executive Officer
Yeah. You know, it's not a market. You know, I would suggest it's really a collection of markets. And what we saw in the third quarter was, on average, pretty similar to what we experienced in the second quarter.
You know, I would note, you know, as it relates to our income statement, we have different levels of commission exposure to different products, right, so, it doesn't always add up to the same amount. But it's a mixed market and maybe I'll ask Martin to share some thoughts. And just to remind everyone, it's -- our role is to get the best solution for our retail clients in the marketplace, and we have a role as a market maker, too. And so, you know, we've done a few things as a market maker to try to bring more efficient financing solutions to our clients.
Martin.
Martin South -- President and Chief Executive Officer of Marsh
Yeah. I agree with that, John. That's our job. Just to level set, we're in the 24th consecutive quarter of rate increases.
We'll release our survey in a couple of weeks' time. And I think we're at an inflection point when it comes to pricing. The pricing cycles we're seeing across the different geographies and product lines are beginning to show a mix of strengths and weaknesses, depending on the combination. The third quarter casualty grew at 3%.
It grew in 3% the quarter before and the quarter before and the quarter before. So, we're not seeing an acceleration, but I would say we're hearing a lot more talk from carriers about pressures on pricing and social placing and some of the nuclear verdicts that are out there. And we're keeping our clients closely posted on those. Property was at 7%.
These rates were roughly in line with the prior quarter. We saw some softness in FINPRO lines. FINPRO lines came down by 6% in the third quarter. They were down 8% in the quarter before.
So, I don't know if that's a trend yet, but it's certainly less. And as you mentioned in the introduction, John, our Cyber Index came down by 2%, and it was up by 1% in the quarter, so a 3-percentage-point delta between the quarters. So, it's a relatively calm market that we'll see on casualty.
John Doyle -- President and Chief Executive Officer
Yeah. Thanks, Martin. You know, what I would also say, David, and I mentioned this to Jimmy, but clearly, the cost of risk is rising, right? So, whether it's a frequency of cat events, including extreme weather, casualty loss costs, whether it's core inflation, social inflation, some of the underwriting community referring to it as legal system abuse, the growth in litigation funding, you know, concerns for our clients, for sure, and the underwriting community as well. Thanks, David.
Operator, our next question.
Operator
Thank you. And our next question comes from the line of Rob Cox with Goldman Sachs.
Robert Cox -- Goldman Sachs -- Analyst
Hey. Thanks for taking my question. So, I think, last quarter, there were some comments that I interpreted as expectations for the level of margin expansion to accelerate in RIS in the second half, but it was just a bit lower. So, just curious if you could talk about the puts and takes with respect to the margin relative to 2Q and whether it's still fair to assume that the second half of the year will have stronger margin expansion than 2Q.
John Doyle -- President and Chief Executive Officer
Yeah. You know, Sure, Rob. Again, you know, margins and outcome, it's not our primary objective. Our focus is on growing earnings and free cash flow over time.
We're not trying to optimize margin expansion in any period -- certainly, in any business in any period. We do expect solid margin expansion in 2023, which will be our 16th consecutive year of margin expansion. You know, there were FX headwinds in RIS', you know, margins in the third quarter. But again, I'm pleased with the progress that we've made there.
And, you know, as I mentioned in my prepared remarks, again, we expect good solid margin expansion in 2023.
Robert Cox -- Goldman Sachs -- Analyst
Got it. Thank you. And maybe just to follow up, I think some peers have highlighted expectations for medical costs to increase. So, I was hoping if you could discuss the trends you're seeing in the health and benefit space and expectations as we look into 2024.
John Doyle -- President and Chief Executive Officer
You know, sure, Rob, and I'll ask Martine to comment in a second, but we've had good growth in our health and benefits business at Mercer, at -- in our business internationally, which is Mercer Marsh Benefits, and at MMA. It is a pressure point, clearly, for our clients in this economy. And so, clients are more and more looking to us for solutions there. Martine, maybe share some insights.
Martine Ferland -- President and Chief Executive Officer of Mercer
Yeah. Thank you, Robert, for the question. Thank you, John. Indeed, medical inflation is increasing and, as John just said, it's a challenge for our clients.
At the same time, it's not a big part of our revenue sources because lots of our clients are on fee-based and those kind of things. And when -- and we're also working a lot with clients to try to control those costs, control those increases because, as you may know, in the health benefit space, very, very often, the employers would share the costs with the employee base. So, in this time of inflation, they're pretty concerned about passing on those costs. So, we're looking at design of the plan, access in a different way, leveraging technology, etc.
So, there's many different ways that our client -- that we can help our clients address those increasing costs, and it's impacting revenue a little bit. But honestly, it's a small part for us given all of the counterpoints.
John Doyle -- President and Chief Executive Officer
Thanks, Martine. Operator, next question.
Operator
Thank you. And our next question comes from the line of Meyer Shields with KBW.
Meyer Shields -- Keefe, Bruyette and Woods -- Analyst
Great. Good morning. So, two quick questions if I can. First, John, you talked about macroeconomic uncertainty, and I'm wondering how that impacts near-term visibility, specifically for Mercer in terms of the revenue pipeline.
John Doyle -- President and Chief Executive Officer
Yeah. Thanks, Meyer. You know, I would say, as I said, obviously, the macro economy remains uncertain and there is, you know, a fair amount of questions about it. What I would say is mature markets have remained relatively resilient, but inflation across persists.
You know, central banks are -- you know, their primary mission is to reduce inflation, but, you know, we do see, you know, meaningful risk of recession, and we're prepared for that, for sure. And some markets are in recession now. But I'll ask Nick and Martine again. I think Oliver Wyman historically has been a bit more sensitive to GDP and Mercer's career business has as well.
But, Nick, maybe you could share some thoughts on the economy and what you think that might mean to our business.
Nick Studer -- President and Chief Executive Officer of Oliver Wyman
Yeah. Thank you, John. Thank you, Meyer. It's -- as I said earlier on, I think it is a wide range of economic paths that I see.
Different of our sectors do react differently. And some of our industries have been having a pretty tough time since sort of through and since the pandemic. Some have seen little spurts of growth. We've been growing in some sectors, for example, aerospace and defense where we made a significant acquisition last year, which we see as being more robust through the cycle.
I do think that a tough economic outlook tends to result in slower growth for Oliver Wyman. But as I said earlier, we've been trying to develop a wider set of through-the-cycle offerings. And, you know, sometimes, when the questions all change, people need help answering them. So, it's definitely not a correlation anymore.
I think it -- probably, that correlation has declined over time and is pretty low now.
John Doyle -- President and Chief Executive Officer
Thank you, Nick. Martine, maybe you can share some thoughts on Mercer career.
Martine Ferland -- President and Chief Executive Officer of Mercer
Yes, yes, absolutely. And over the last few years, we have focused also on diversifying our portfolio of businesses and we've improved our business mix a little bit away from the more discretionary nature of the business, particularly in career, with more recurring type of work. And I would add to that that with our -- with the current environment is also lots of demand, as Nick just said. You look at volatile capital markets, for example, drives demand for advice in our defined benefits and our defined contribution businesses.
Well-funded defined benefit plan on the back of high interest rates is also creating demand for pension risk transfer. We talked about tight labor markets, the different -- the change in the ways of working the upcoming of digital health and technology in the workplace. It's all driving demand and countering the more traditional, I would say, of previous years' impact of direct correlation to GDP, as we discussed earlier.
John Doyle -- President and Chief Executive Officer
Thanks, Martine. So, we, of course, Meyer, are not immune to economic growth, but we're a resilient business. And again, we have a track record of performing across economic cycles. And at the moment, demand remains strong.
Do you have a follow-up?
Meyer Shields -- Keefe, Bruyette and Woods -- Analyst
OK. I do. Yeah, just a quick one, and thanks so much. That was very helpful.
With regard to Oliver Wyman, in the past, I guess, you've communicated that Oliver Wyman, when you have strong growth, there could be some pressure on consulting margins just because of the nature of that business, and we didn't see that in this quarter. I'm wondering, is that concept of lower margins of Oliver Wyman less true now?
John Doyle -- President and Chief Executive Officer
No, it's not less true. But again, keep in mind, Mercer had its best quarter of growth. It's a bigger business than Oliver Wyman and it has best quarter of growth in 15 years. So, that's the reason you didn't see anything there.
Thank you, Meyer. Operator, next question.
Operator
And our next question comes from the line of Scott Heleniak with RBC Capital Markets.
Scott Heleniak -- RBC Capital Markets -- Analyst
Yes. Good morning. Just at Marsh, just wondering if you could comment what's driving the double-digit growth there at EMEA and Latin America. I know that's been strong for a few quarters, but can you give more detail on that? Is there any new areas we're seeing growth and is there much of a benefit from rate increases there?
John Doyle -- President and Chief Executive Officer
Yeah. Sure. Happy to talk about that, Scott. Again, very pleased with our growth at Marsh.
It was particularly strong in the international segment in the quarter. And in spite of mixed economic outcomes in Europe, our business is performing exceptionally well there, and we've had good growth over a long period of time in Latin America. Martin, maybe you could share some color on growth in both of those markets.
Martin South -- President and Chief Executive Officer of Marsh
I'd be thrilled to. Yeah. As you say, great growth in international, 10%. Latin America were up 14%; APAC, 10%; EMEA at 9%.
So, really, really pleasing growth. I'd say there are a few areas that are outstanding at the moment. The energy and power business, the transition is fueling growth. Credit specialties had a terrific quarter and aviation, as well as MMB, which is a big part of our business in Europe, delivered strong double-digit growth.
And our advisory business, our value proposition is to go to market through a lens to help our clients think through the cost of risk. And so, that's been a big growth area for us as we think that, and we think that will continue to broaden our opportunities. That's been great growth. It's been good growth between renewal and new business across the business.
And we've had less lost business. The clients are staying with us longer as they see the value in an organization like ours that has such broad capabilities. So, we feel very good about that across the board. And of course, you've got the fundamentals in Latin America with protection gap and somewhat emerging markets in Eastern Europe as well that have had a very strong growth as well.
So, we feel well-positioned and very positive about the trajectory there.
John Doyle -- President and Chief Executive Officer
Thanks, Martin. Scott, do you have a follow-up?
Scott Heleniak -- RBC Capital Markets -- Analyst
Yeah, just one other quick follow-up here, just on M&A. You did those couple of bigger-sized deals in the quarter. Just wondering if you could just comment on the -- your M&A pipeline versus where it was maybe six to nine months ago. You're feeling a bit better about those opportunities as you go into 2024 and maybe some areas that you're looking at, in particular, with focus areas.
John Doyle -- President and Chief Executive Officer
Sure. You know, we remain quite active in the market and the pipeline remains solid, for sure. And again, I want to emphasize how pleased we were to welcome Graham to the family in the third quarter, and we expect to close Honan relatively soon. They're two well-led businesses, well-positioned.
Solid growth fundamentals in both of them, expanding our presence in the middle market, which gets back to the mix point that I was making earlier. So, overall, we closed five deals in the quarter. Those were the two bigger ones. We're very excited about it.
You know, we're certainly -- you know, it's an active marketplace. While there's fewer transactions, you know, there's a lot that is at play, and so, you know, we're wide-eyed about and clear on what we're looking for. Valuations remain elevated for strong businesses that are in the market. But we know we're looking for and we know how to manage the risk of M&A.
And so, we're going to be selective and disciplined, but we expect to continue to deploy capital in organically. Thank you, Scott. Operator, next question.
Operator
Thank you. And our next question comes from the line of Bob Huang with Morgan Stanley.
Bob Huang -- Morgan Stanley -- Analyst
Hi. Thank you. So, maybe if we can just go back to Oliver Wyman a little bit there. Previously, you mentioned that -- regarding the UBS and Credit Suisse merger deal.
That happened in the second quarter. Just curious if that was a meaningful driver of organic growth for Oliver Wyman in the second quarter and third quarter. And also, on top of that, do you expect any residual from that deal to come through in the fourth quarter and going forward for Oliver Wyman?
John Doyle -- President and Chief Executive Officer
Yeah. You know, Thanks, Bob. We're not going to comment on individual clients and the work that we do for individual clients. So, you know, as Nick talked about a couple of different times on this call, we have an increasingly diverse set of offerings that we think is more resilient and we're very, very pleased with the growth at Oliver Wyman through three quarters.
Again, quarter to quarter, you know, we could see more volatility and expect to see more volatility at Oliver Wyman's top line than our other businesses. But we also expect Oliver Wyman to grow faster over a medium term and longer term, and that's certainly been the case. That's been the case in this year, and we expect it to be the case over the longer term. Do you have a follow-up?
Bob Huang -- Morgan Stanley -- Analyst
Yeah. Sure. So, one more thing, very quickly, regarding your cyber insurance practice. I know you mentioned that cyber insurance pricing growth is slowing down a little bit.
There have been a few relatively large headline of cyber incidents, as well as some cyber claims, namely in the casino gaming area, as well as the government and other areas. Do you expect the current slowdown in cyber pricing may be just sort of in a soft patch, but do you expect that pricing growth to rebound back, or do you think the cyber insurance pricing will just kind of stay where it is right now?
John Doyle -- President and Chief Executive Officer
You know, Bob, what I -- you know, again, the most important point to make here is it's our job to find efficient risk financing solutions for our clients. So, what I would say is yes, there's been some major breaches that will drive some insured losses in the marketplace. There's also been an increase, again, in the number of ransomware claims that's -- you know, that have happened during the course of this year. But I would also note that the underwriting community has reacted to growing ransomware claims over the course of the last couple of years through higher attachment points.
The market is also -- the underwriting market is also reacting to possible systemic events that could aggregate losses in their portfolios. We're, of course, helping them at Guy Carpenter and, at the same time, working with Marsh to build better solutions for that. But the market's been restricting coverage for systemic-type events, and so that's a factor in that marketplace as well. And so, I don't think the market will move meaningfully based on a couple of losses.
But we have some work to do collectively to help in a digital economy. When I say collectively, I mean the royal we, the entire marketplace, in coming up with better solutions to help clients manage the risks -- cyber-related risks in a digital economy. So, thank you. Underwriter -- underwriter operator, sorry.
Andrew, do you have another question?
Operator
Our next question comes from the line of Ryan Tunis with Autonomous Research.
Ryan Tunis -- Autonomous Research -- Analyst
Hey. Thanks. I'll just ask one here. I know we're at the top of the hour.
So, some competitors have like very specifically highlighted pressures -- organic growth pressures in the U.S. from D&O capital markets-related transactions. You mentioned it briefly. Just curious, when we look at your U.S.
and Canada within Marsh, is there any reason to believe that you guys wouldn't be wearing a headwind of similar magnitude?
John Doyle -- President and Chief Executive Officer
Yeah. Thanks, Ryan, for the question. Yes, you know, I think Martin pointed this out, there's -- you know, I can't talk about relative exposure, but clearly, capital market volatility, rising cost of capital. M&A activity is down.
IPO activity is down. SPACs are down. De-SPACs, you know, down. All those kinds of things that drive risk and create opportunities for us to offer advice and solutions are under some pressure.
And somewhat related to that, as Martin also noted earlier, D&O pricing is down as well. And so, those are headwinds. But again, we have a well-diversified business in the United States. We help our clients manage a wide range of risks.
And broadly speaking, again, the cost of risk continues to rise for the factors that I mentioned earlier on the call. So, thank you, Ryan. I appreciate that, and I want to thank you all for joining us on the call. 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. Thank you all very much, and we look forward to speaking with you again next quarter.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
John Doyle -- President and Chief Executive Officer
Mark McGivney -- Chief Financial Officer
Elyse Greenspan -- Wells Fargo Securities -- Analyst
Martin South -- President and Chief Executive Officer of Marsh
Jimmy Bhullar -- JPMorgan Chase and Company -- Analyst
Dean Klisura -- President and Chief Executive Officer of Guy Carpenter
Nick Studer -- President and Chief Executive Officer of Oliver Wyman
Mike Zaremski -- BMO Capital Markets -- Analyst
David Motemaden -- Evercore ISI -- Analyst
Robert Cox -- Goldman Sachs -- Analyst
Martine Ferland -- President and Chief Executive Officer of Mercer
Meyer Shields -- Keefe, Bruyette and Woods -- Analyst
Scott Heleniak -- RBC Capital Markets -- Analyst
Bob Huang -- Morgan Stanley -- Analyst
Ryan Tunis -- Autonomous Research -- Analyst
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