To Our Shareholders, Colleagues and Clients,
I am honored to be writing this letter to you as Marsh McLennan’s new President and CEO, and grateful for the opportunity to lead this exceptional company.
2022 was an outstanding year for our firm. We delivered strong revenue and earnings, while continuing to invest in capabilities to support our clients and maintain our momentum.
It’s a privilege to do the work we do, helping clients find opportunity and navigate pressing issues in the areas of risk, strategy and people. When the world is uncertain, demand for this work is high. In the current environment, business leaders are facing immediate and urgent economic and geopolitical risks, along with significant issues related to pandemic, supply chain, tight labor markets, cybersecurity, and climate and severe weather events, among others.
As our clients face risks and opportunities that continue to grow and evolve in complexity, our approach to serving them also continues to evolve. We’re increasingly bringing our four global businesses together in new ways to realize new possibilities. To deliver greater value to our stakeholders, we’re striving to be an even more agile and connected organization.
With significant capabilities and strong client relationships, Marsh McLennan is well positioned for 2023 and beyond. We’ve got talented leaders and well-defined succession planning in place, as demonstrated by the seamless leadership transitions in two of our four global businesses last year. We’ve got excellent momentum, and our more than 85,000 colleagues continue to live our purpose every day, making a difference in the moments that matter for our colleagues, clients, shareholders and communities.
It’s an exciting time for our company and it’s my pleasure to bring you up to date on our progress.
Driving Growth
Fundamentally, Marsh McLennan is a growth company. We focus on delivering consistent, solid performance in the near term while investing for sustained growth over the long term. 2022 was another year of outstanding performance in this regard. We grew underlying revenue 9% for the year and delivered strong earnings growth, while deploying a significant amount of capital to invest for the future.
Our Risk and Insurance Services segment generated 9% underlying revenue growth, with Marsh increasing 8% and Guy Carpenter 9%, extending the segment’s strongest period of growth in nearly two decades. Underlying revenue growth in our Consulting segment was 8%, with Mercer posting 6%, the strongest since 2008, and Oliver Wyman delivering 13%, a second consecutive year of double-digit growth.
Our total revenue grew 5% and surpassed $20 billion for the first time. We grew adjusted operating income 11% to $4.8 billion, which followed an 18% increase in 2021.
Our bottom-line performance included delivering 11% adjusted earnings per share (EPS) growth, which came on top of 24% in 2021. Also, for the 15th consecutive year, we reported adjusted operating margin expansion, reflecting our ability to generate operating leverage in our business as we invest and expand.
Despite uncertainty about the current global economic outlook, we see many factors that are favorable for the continued growth of our business. For example, inflation remains high and supportive of insured values and higher loss costs. P&C insurance rates continue to increase as insurers account for factors such as rising frequency and severity of catastrophe losses. And tight labor markets can be a tailwind for our benefits business at Mercer and Marsh, as well as our workers’ compensation business.
While we’re not immune to the challenges of a slowing economy, we’ve proven to be resilient, with a track record of performance across economic cycles. We believe Marsh McLennan is well positioned to continue to deliver the value our clients, communities and shareholders expect from us.
Delivering Growth and Long-Term Value
The key to our strong financial performance, year in and year out, is our approach to expense and capital management. We focus on growing revenue faster than expenses—which contributes to annual margin expansion and adjusted EPS growth—and we manage capital allocation to balance performance in the near term with investing for the long term.
We favor reinvestment in our business, and aim to increase our dividend and reduce share count each year. In 2022, we raised our dividend for the 13th consecutive year, and completed $1.9 billion of share repurchases, the largest annual amount in our history.
Achieving and sustaining growth requires consistent reinvestment for the long term. One way we do that is through mergers and acquisitions. The past year was another active one for M&A, as we completed 20 acquisitions, two investments and seven divestitures. Marsh McLennan Agency acquired two top-100 agencies in 2022 and has now surpassed 100 acquisitions since its inception in 2009. Oliver Wyman expanded its capabilities and geographic reach with the acquisitions of specialty consultant Avascent and Booz Allen Hamilton’s Middle East and North Africa (MENA) practice. And Mercer expects to close its transactions with Westpac in Australia in the first half of 2023.
Overall, we committed approximately $806 million to acquisitions in 2022.
Our Work with Clients
Marsh McLennan brings exceptional talent and a wide range of capabilities to our clients’ needs and opportunities in the critical areas of risk, strategy and people. No other firm can match the unique collective expertise of Marsh, Guy Carpenter, Mercer and Oliver Wyman.
We also bring capabilities from across our organization to clients who have challenges that go beyond the expertise of just one of our businesses.
Recently, a global bank hired Oliver Wyman to assess the effects of climate change on its customers and their portfolios. By adding Marsh’s expertise in physical risk into the mix, we helped the bank develop new capabilities that are making them a leader in climate-related funding. We’re now using a similar approach for clients in the UK, Europe and the Americas.
After Oliver Wyman brought in Marsh to develop a new enterprise risk management strategy for an existing client, a US health system facing new competition and industry consolidation, a Mercer team helped them translate it into a new workforce strategy, enabling our client to act decisively across more dimensions of its business.
And when a leading personal-lines-focused P&C insurer wanted to grow a product offering to meet the full needs of its customers, Oliver Wyman and Guy Carpenter drew on their collective expertise in strategy development, operating model design and reinsurance risk advisory to help the client pursue its strategy while managing the capital and earnings implications of shifting its business mix.
The changing and increasingly complex needs of our clients don’t always fit neatly into the boxes on our org chart, so often it is our collective capabilities that are required. We’re finding new and different ways to connect our businesses at their intersections, where together our scale, data, insights and solutions create a unique and compelling value proposition.
Climate change is a prime example. Along with physical and social risks, it is precipitating a global industrial transition—and mobilization of capital, technologies and workforces. In addition to placing property insurance, we’re also helping clients understand and model risks in their portfolios to build resilience, and advising on business models and organizational transformations to realize new opportunities.
Similarly, in healthcare, breakthrough technologies and new therapies change what’s possible every day, but delivery, access and sustainability remain challenges. We’re helping clients address the financial, systemic and human issues that stand in the way of healthier societies.
This kind of client-centric growth is made possible by more than just our breadth of capabilities. It takes colleagues who are agile and strategic, thinking beyond the challenge or opportunity at hand, and collaboration and cohesion among our leadership.
Environmental, Social and Governance
Marsh McLennan has the privilege of helping our clients find opportunity and navigate pressing issues, a number of which fall in the broad spectrum of ESG. We’re working across our businesses—on everything from guiding sustainable investments, to supporting diversity and inclusion, to improving healthcare systems, confronting cyber threats, and helping close the world’s protection gaps—to help enable our clients to meet their ESG goals.
We have a long track record of ESG engagement and achievements, and it’s an area where we continue to see an opportunity to support our colleagues, clients and communities.
Some of this work takes place as part of broader, global initiatives such as the UN’s Race to Resilience program, where we’re championing disaster-risk-reduction initiatives that make communities stronger. But much of it takes place in our work with clients, such as Marsh’s role in helping to bring clean hydropower to New York City from Canada via a privately funded, fully buried transmission line, or Mercer’s market-leading efforts to help organizations address gender and racial pay equity and ensure fairness in their rewards.
In addition to helping clients and communities address ESG-related challenges and opportunities, we’re leading by example, starting with the commitment we announced in March 2022 to set and execute low-carbon transition strategies that chart a path to net-zero across our operations by 2050—and reduce our emissions by 50% by 2030.
Pay equity is a vital issue that we are committed to—and our managers around the world are accountable for. We conduct an annual study to identify any new discrepancies that might have emerged in pay based on gender (globally) and on race/ethnicity (in the US). This study helps inform the actions we take, including the continuous improvements we can make to our processes.
While we know there’s always more to be done, it’s gratifying to be recognized by Ethisphere as one of the 2022 World’s Most Ethical Companies, reflecting our dedication to “integrity, sustainability, governance and community.”
Our Colleagues and Culture
Our success has always been defined by our collaborative culture and our people—and our ability to attract talented colleagues and enable them to do their best work.
We offer colleagues the opportunity to do meaningful work in the areas of risk, strategy and people, and we help them reach their full potential by providing robust training and professional development opportunities. From global learning festivals to our continuous performance management framework to collaborative sales training programs, it’s gratifying to see so many colleagues grow and thrive.
Look no further than Marsh McLennan Agency, where we’ve retained 98% of “super producers” (individuals generating $1 million or more in revenue) following the acquisition of their firms by our company. In aggregate, our number of super producers has grown 80% over the years, demonstrating the strength of our colleagues and culture.
We continue to make significant strides toward our commitments to increase diverse representation, facilitate empowerment and create impact within and beyond our company. In 2022, we met our initial goal of having more than 30% female representation on our Board of Directors. Overall, women now make up 54% of our workforce globally. Of our leadership roles globally, 32% are held by women, up from 29% in 2020.
Last year, we achieved our goal of $100 million of diverse supplier spend in the US. To help diverse business leaders and owners grow and thrive, this year we are launching Equity = Possibility, an offering that includes issues-based research and insights, an annual Black Leaders Symposium, customized solutions and a commitment to providing opportunities and access for the next generation of diverse leaders.
We’re proud of our commitment to advancing good in the communities where we live and work. In 2022, we saw the highest level of colleague volunteerism since we started tracking this metric in 2012. This commitment was also reflected in our colleagues’ charitable giving—which totaled $7.7 million with company match in 2022—toward worthy causes such as helping the people of Ukraine and supporting organizations that advocate for social justice.
The foundation of our culture and the work we do is trust. The Greater Good, our code of conduct, spells out our values and our obligations. We are fortunate to have so many talented colleagues who are focused not only on the work they are doing and how to achieve the best outcomes, but on why it matters. They bring their ideas and their ideals to work.
Looking Ahead
We enter 2023 with great momentum, yet the outlook for the global economy remains uncertain. In addition to ripple effects from the global pandemic, the world faces a host of urgent issues, including geopolitical instability, economic uncertainty, social inequities, energy security and the ongoing war in Ukraine. Despite these challenges, we are confident in our position and the relevance of our work—and optimistic about our prospects.
As we help our clients navigate their increasingly interconnected challenges, we’re becoming more focused on opportunities at the intersections of our four global businesses to deliver client impact and accelerate growth, improve the client and colleague experience, and become a more agile and efficient firm. We’re also evolving our leadership model to enable more purposeful collaboration, including the recent appointments of Marsh McLennan leaders responsible for working across our businesses to identify and capture opportunities for outperformance.
While we intend to pursue our strategy of leveraging our collective capabilities for greater client impact, growth and efficiency, there are core elements of our strategy and philosophy that will continue. Clients remain at the center of everything we do as a firm. We will continue to support our colleagues, as they are our company. And we remain committed to achieving exceptional results over time by striving to strike the balance between delivering in the near term while investing to sustain our momentum into the future.
None of this happens on its own. I’d like to thank my predecessor, Dan Glaser, who retired from Marsh McLennan at the end of 2022. During his decade-long tenure as CEO, our company’s revenue nearly doubled, our adjusted EPS more than tripled and our market cap quadrupled. Total shareholder return also more than doubled the S&P 500. Our company owes Dan a debt of gratitude for guiding our firm with vision, courage and integrity, and we wish him all the best.
Thank you to our Independent Chairman, Ed Hanway, and the members of our Board of Directors, whose wisdom and guidance help keep us moving forward.
Thank you to the members of our Executive Committee, who deliver the leadership and passion for excellence that our clients, colleagues and stakeholders expect, and that I rely on.
Thank you to our colleagues around the world for your hard work and dedication to our clients and each other, and thank you to our clients for the ongoing opportunity to earn your trust each day.
Finally, thank you to our investors for your support and belief in the value we deliver.
It’s a privilege to do the work that we do. It’s also a pleasure to work with so many talented people who are relentlessly focused on client impact.
We are ready for what comes next and excited by the opportunity to create new possibilities for our clients, our colleagues, our communities and our company. Together, we are writing the next chapter in Marsh McLennan’s growth story.
All the best,
John Q. Doyle
President and Chief Executive Officer
Marsh McLennan
February 13, 2023
Read the original letter here.
