Welcome to the Marsh & McLennan Companies conference call. Today's call is being recorded. Second quarter 2019 financial results and supplemental information were issued earlier this morning. They're available on the company's website at www.mmc.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risk 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 our most recent SEC filings, including our most recent Form 10-K, all of which are available on the MMC website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to more closely comparable GAAP measures, please refer to the schedule on today's earnings release.
I'll now turn over to Dan Glaser, President and CEO of Marsh & McLennan Companies. Please go ahead.
Good morning. Thank you for joining us to discuss our second quarter results reported earlier today. I'm Dan Glaser, President and CEO of Marsh & McLennan. Joining me on the call today is Mark McGivney, our CFO, and the CEOs of our businesses, John Doyle of Marsh, Peter Hearn of Guy Carpenter, Martine Ferland of Mercer, and Scott McDonald of Oliver Wyman. Also with us this morning is Sarah DeWitt, Head of Investor Relations. We are pleased with our second quarter results, which include JLT for the first time. Since we closed the acquisition on April 1st, we are off and running with our leadership in place and our teams in formation, working together to serve clients with greater expertise, capabilities, and content. We have more conviction than ever that the acquisition better positions us to help our clients with their greatest challenges.
JLT's impressive talent has added to our thought leadership and ability to innovate. We've added about 10,000 colleagues to the organization, resulting in the broadest and deepest talent base in the industry. JLT has made us stronger in several specialty areas and has deepened our footprint in the faster-growing geographies of Asia-Pacific and Latin America. JLT has enhanced our scale. In the second quarter, we grew total revenue by 16%, and RIS revenue by 23% compared to a year ago, despite a meaningful FX drag. This is a huge leap forward for our firm. Scale is becoming increasingly important, and this combination extends our position as the leading firm in the areas of risk, strategy, and people. However, as I said last quarter, size and scale aren't everything.
Quality, capability, and responsiveness are what really matter to clients, and on that score, we deliver world-class service one client at a time. We have been hard at work on this integration since the day we announced the transaction, and post-closing, we shifted aggressively from planning to execution. Mark McGivney will update you on some of our guidance items, but broadly speaking, things are tracking well with our expectations. We moved quickly to integrate our financial reporting, and from the first month after closing, began viewing our results on a combined basis throughout the firm. We are beginning to realize efficiencies and are meeting our milestones in terms of cost savings. We are acting swiftly to integrate our teams and shared facilities around the world. We have already moved and co-located 5,000 of our colleagues in several cities, including London, Hong Kong, Sydney, and Johannesburg.
By the end of 2019, we will have nearly all colleagues around the world sitting side by side in their respective areas of operation. This involves the movement of 10,000 colleagues in 80 offices. Integrating our teams in this way is significant because it enables our colleagues to come together for clients and coalesce into a single team. We've spent a lot of time understanding the respective cultures of JLT and MMC and are focused on bringing them together in a shared, more powerful firm. Our complementary strengths offer revenue growth potential, which we believe should enhance our long-term growth profile. While these are early days and we are not yet operating as a single team in all markets or lines of business, I still wouldn't want to compete against us.
We have already seen several examples where joint collaboration and the best content and solutions helped us to expand existing relationships and win new business. For example, our Marsh colleagues in Europe won business by presenting our combined capabilities to a client with a complex set of risks that required a combination of multinational expertise, specialty coverage, risk consulting, and captive support. In the U.S., Marsh successfully retained and expanded the business of a large financial institution. By leveraging Marsh's existing relationship and Marsh JLT's specialty analytics, expertise, and innovative solutions, the team added coverages for cyber and other specialty lines. In Australia, where we have an $800 million business with nearly 4,000 colleagues, clients and prospects are reacting positively to the expanded capabilities of the combined organization.
We retained two important risk clients by demonstrating the depth of talent and the benefits of the new value proposition, and we were able to extend our position to include Mercer. Guy Carpenter recently won an RFP for a top 10 U.S. insurer by leveraging a terror model developed by JLT Re, combined with the analytical capabilities of Guy Carpenter. Mercer Marsh Benefits, enhanced by the addition of JLT, partnered on Britain's Healthiest Workplace launch, taking the largest survey of its kind in the U.K. to clients. We also see potential in the medium term to improve reliability and efficiency by leveraging JLT's shared services operations in India. JLT adds 1,700 colleagues in India to Marsh & McLennan. In summary, we are off to a good start. The value creation that will be generated by the combined company is significant, and we are excited about our future together.
Let me spend a moment on current P&C insurance pricing trends. Pricing is firming in specific lines and geographies, especially for complex risks or those with CAT exposure. The Marsh Global Insurance Market Index saw an increase of nearly 6% in the second quarter, compared with 3% in the first quarter and 2% in the fourth quarter of 2018. Property lines are seeing average renewal price increases of 8%, with U.S. up 10%. Casualty prices increased for the first time since 2013 and saw average renewal rate increases of 1% in the second quarter. Financial and professional lines saw average renewal rate increases of 10% in the quarter, with the U.S. up 7% and U.K. and Asia Pacific up double digits. Note that the Marsh index skews to larger risks, and we generally see less movement in the middle market.
Turning to reinsurance, at the mid-year 2019 renewals, which primarily focuses on U.S. hurricane-exposed programs, multiple factors came together to result in double-digit property catastrophe rate increases in Florida on average for the first time in over a decade. This was driven by loss creep from the 2017 and 2018 loss events, reduced capital inflows, and evolving views of risk. Ultimately, we can't predict the mid- to long-term outlook for pricing, but the current conditions are firmer almost across the board. Let me turn to our second quarter financial performance. We delivered solid combined results in the quarter with underlying revenue growth across both risk and insurance services and consulting. We are executing well, both delivering for clients while working through the integration of JLT. Consolidated revenue was $4.3 billion, up 16%, or 4% on an underlying basis.
Adjusted operating income grew 19% to $894 million, and the adjusted operating margin expanded 150 basis points in the quarter. Adjusted earnings per share grew 7% to $1.18. In risk and insurance services, second quarter revenue was $2.6 billion, an increase of 23%. Underlying revenue growth was 3% in the quarter, reflecting 4% growth at Marsh despite a tough comparison to a year ago, partially offset by a decline at Guy Carpenter. The decline in Guy Carpenter's underlying revenue growth is a combination of timing and a decline in our new business pipeline. Not surprising for an acquisition of this size, JLT's new business slowed considerably during the period between deal announcement and closing. This impacted Marsh and Guy Carpenter but was felt more acutely in reinsurance. Although it will take time to rebuild the new business pipeline, we are confident in the long-term growth outlook for our combined business.
RIS adjusted operating income increased 21% to $641 million, and the adjusted operating margin expanded 80 basis points versus a year ago. In consulting, second quarter revenue was $1.8 billion, up 9% compared with a year ago. Underlying revenue was up 5% for the quarter, driven by strong underlying growth at Oliver Wyman of 13%, while Mercer generated 2% underlying revenue growth. Consulting adjusted operating income grew 14%, and the adjusted margin expanded 130 basis points versus a year ago. In summary, we are pleased with our second quarter results and our progress integrating the JLT acquisition. At a high level, we are tracking success in this period across three primary dimensions: growth, achievement of cost savings, and retention of key talent. Across each of these categories, we are satisfied with our performance to date. For 2019, we expect a solid first year as a combined company.
Underlying revenue growth in the 3%-5% range, margin expansion, and solid growth in adjusted EPS. With that, let me turn it over to Mark for a more detailed review of our results.
Thank you, Dan. Good morning. Our second quarter results represent a solid first quarter following the close of the JLT acquisition. Overall revenue grew 16% to $4.3 billion due to the addition of JLT beginning on April 1st and solid underlying growth of 4%. Note that underlying revenue growth in all of our communications and disclosures includes JLT. Operating income in the quarter was $680 million, while adjusted operating income increased 19% to $894 million. Overall, our adjusted operating margin increased 150 basis points in the quarter, with significant margin expansion in both segments. GAAP EPS was $0.65 in the quarter. Adjusted EPS increased 7% to $1.18. For the first six months of 2019, underlying revenue growth was 4%, our adjusted operating income grew 14%, and our adjusted EPS increased 9% to $2.70. Overall, our adjusted margin increased 160 basis points to 24.4% for the first half of 2019.
In Risk and Insurance Services, second quarter revenue grew 23% to $2.6 billion with underlying growth of 3%. Operating income increased 10% to $517 million. Adjusted operating income increased 21% to $641 million. The adjusted margin increased 80 basis points to 27.8%. For the first six months of the year, revenue was $5 billion with underlying growth of 4%. Adjusted operating income for the first half of the year was up 13%. At Marsh, revenue in the quarter was $2.2 billion with underlying growth of 4%, representing a solid first quarter with JLT, especially considering the tough comparison to a strong second quarter last year. U.S. and Canada continued its trend of strong growth, with 5% underlying revenue growth in the quarter. This marks the fifth consecutive quarter that U.S. and Canada has delivered 5% or higher underlying growth.
In international, underlying growth was 2%, with Asia Pacific up 7%, Latin America up 4%, and EMEA flat. For the first six months, revenue at Marsh was $3.9 billion, with underlying growth of 4%. U.S. and Canada was up 5%, while international grew 3%. Guy Carpenter's revenue was $392 million in the quarter, with an underlying decline of 3%. As Dan mentioned, the softness in the quarter was due to some quarterly variability, as well as a decrease in new business. For the first six months of the year, revenue was $1.1 billion, with 2% underlying growth. We are confident in Guy Carpenter's long-term growth outlook. Expect current trends will impact revenue growth for the balance of 2019. Guy Carpenter is executing its integration and cost savings plans, which will help them deliver solid earnings growth through 2019.
In the Consulting segment, revenue in the quarter was up 9% to $1.8 billion, with underlying growth of 5%. Operating income increased 4% to $278 million. Adjusted operating income increased 14% to $305 million, and the adjusted margin increased 130 basis points to 18%. Consulting's underlying revenue growth for the first six months of 2019 was 4%, with consolidated revenue of $3.5 billion. Adjusted operating income for the first half of the year was up 16% to $596 million. Mercer's revenue was $1.3 billion in the quarter, with underlying growth of 2%. Wealth underlying growth was flat, with mid-single-digit growth in investment management offset by a low single-digit decline in our defined benefit business. Our delegated asset management business continues to show strong growth, with assets under management increasing to $283 billion, benefiting from continued inflows, market appreciation, and assets from JLT.
Health increased 4% on an underlying basis in the quarter, and Career underlying growth was strong at 6%. For the first six months of the year, revenue at Mercer was $2.4 billion, with 1% underlying growth. Oliver Wyman's revenue was $540 million in the quarter with impressive underlying growth of 13%. Growth was broad-based by practice and geography. For the first six months of the year, revenue was $1.1 billion, with 10% underlying growth. Turning to corporate expenses, adjusted corporate expense was $52 million in the quarter. Based on our current outlook, we expect approximately $50 million per quarter for the remainder of this year. We are just over 100 days post the closing of JLT and are moving forward rapidly with the integration.
We continue to expect the transaction will be modestly dilutive to adjusted EPS in the first year, break even in year two, and be accretive in year three. At this point, we expect at least $250 million of run rate cost savings and $375 million or more of costs associated with achieving these savings. Of the $250 million of cost savings, we expect to realize roughly $75 million in 2019, $175 million in 2020, and the full $250 million in year three. In terms of the $375 million of cost to achieve these savings, we expect to incur roughly half in 2019, with the remainder incurred evenly over the next two years. During the second quarter, we incurred $141 million of interest expense and continue to expect around $140 million in the third quarter, consistent with our previous guidance.
As disclosed in our supplemental materials released on June 6th, we now expect annual deal-related amortization from the JLT transaction to be $180 million pre-tax. In the second quarter, we recorded $100 million of amortization, which includes the JLT related amortization as well as amortization from other transactions. Approximately $80 million of the $100 million was recorded in RIS and $20 million in Consulting. We currently expect the third quarter amortization will be roughly consistent with the level in the second quarter. In aggregate, the financial impact of the JLT transaction is tracking well with our initial expectations. In the second quarter, we reported $280 million of noteworthy items, mostly related to the JLT acquisition.
Included in this total are $98 million of integration costs, the largest category of which is severance, $150 million of charges associated with the closing and the refinancing of JLT debt, and $26 million of other restructuring costs, mainly related to Mercer. Turning to investment income. On an adjusted basis, we had $6 million of investment income in the quarter, and we continue to expect the contribution from investment income for the balance of 2019 will be immaterial. On a GAAP basis, investment income was $18 million in the quarter. Foreign exchange was a roughly $0.02 per share headwind to adjusted EPS in the quarter. Assuming exchange rates remain at current levels, we expect $0.01 per share of FX headwind in each of the third and fourth quarters. Our adjusted effective tax rate in the second quarter was 25.9%, compared with 25.2% in the second quarter last year.
Through the first half of the year, our adjusted effective tax rate was 24.1%, compared with 24.3% last year. Based on the current environment, we continue to expect a tax rate between 25%-26% for 2019, excluding discrete items. Total debt at the end of the second quarter was $13.1 billion, or $12.6 billion excluding commercial paper. During the quarter, we refinanced the remaining $550 million of senior notes assumed from JLT using a mix of cash and an additional $300 million one-year term loan. Our next debt maturity is in September 2019 when $300 million of senior notes will mature. At this point, our expectation is that we will retire these notes with cash on hand, in line with our planned deleveraging over the next couple of years. In the second quarter, we repurchased 1 million shares of our stock for $100 million.
We continue to expect to repurchase enough shares in 2019 to reduce our share count. Our cash position at the end of the second quarter was $1.3 billion. Uses of cash in the second quarter totaled $6.1 billion and included $5.8 billion for acquisitions, $212 million for dividends and $100 million for share repurchases. For the first six months, uses of cash totaled $6.6 billion and included $6.1 billion for acquisitions, $422 million for dividends, and $100 million for share repurchases. In May, our board of directors approved an increase in our quarterly cash dividend from $0.415 to $0.455 per share, an increase of 10%. Overall, we expect 2019 to be a solid first year with JLT. We are on track to achieve good underlying revenue growth, meet our integration savings targets and deliver margin expansion and solid growth in adjusted EPS.
As you think ahead to the remainder of 2019, keep in mind that JLT had heightened seasonality, as shown in the supplemental quarterly materials we released on June 6th. Their first and third quarters were seasonally smallest, while their second and fourth quarters were seasonally stronger. With that, I'm happy to turn it back to Dan.
Thanks, Mark. Operator, we're happy to go to the Q&A.
Thank you. In the interest of addressing questions from as many participants as possible, we would ask the participants to limit themselves to one question and one follow-up question. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you find your question has been answered, you may remove yourself from the queue by pressing star two. We will now take our first question from Mike Phillips from Morgan Stanley. Please go ahead.
Good morning, thank you, and congrats on your first quarter with the acquisition under your belt. My first question, lots of moving parts here, obviously, with JLT. I guess, could you comment on the impact to the margins in the quarter from the aviation business that you sold?
Yeah, at the end, the aerospace business that we sold would have had a very negligible impact on the margin in this quarter. The reality of that business, it's a very big fourth quarter business, but it's much smaller throughout other parts of the year.
Okay, great. Thanks. I guess secondly, you're still talking of the long-term organic growth in the 3%-5% range. How do we think about the impact on your margins and how the margin can expand if you stay below 5% on that?
Yeah, a couple of things. One, when we think long term, what we've said before is we have been growing in the 3%-5% range annually for the last decade. Until we are able to break out of that range, you are what your results say you are, and we've been performing in that 3%-5% range. That's not to say we view our long-term growth possibilities as somehow parameter based or bucketed within that range. We have aspirations to grow more than that, clearly. Now, we have proven over a long period of time that we're able to grow margins within 3%-5%, even when we're performing at 3% growth. Our key to expansion is the way we run the business, where revenue growth almost always exceeds expense growth, and we've done that consistently.
Over a period of 12 years, we're now in the 12th consecutive year of margin expansion. I feel comfortable that this leadership team will be able to continue to grow margins by growing our revenue faster than growing our expense into the future.
We will now take the next question-
Next question
from Elyse Greenspan from Wells Fargo. Please go ahead.
Hi. Thanks. Good morning. My first question is on the margin within RIS in the quarter. A lot stronger than what I had expected. If you could just help us understand, I know you guys gave us some financials for JLT last year, and based off of that, I would have thought that that would have been a drag on your margins because they run lower than historical RIS. Could you just give us a sense of what drove that? How much saves came through in the quarter? Was it employees that potentially left after the deal closed? I'm just trying to tie together the moving parts that drove pretty strong margin improvement within RIS.
Yeah, sure. As we said earlier, Elyse, we expected margins to expand this year for the company, and we said that going into the year, and that is our expectation. This was not a big surprise to us. I would caution everybody, as we've done in the past, not to look at margins in any one quarter, but look over a length of time, either on an annual basis, rolling 12 months, et cetera, because there are puts and takes in every quarter that impact margins. When we talk about we're not going to detail individual cost saves and what's dropping to the bottom line. Although, it's fair to say that a lot of our cost saves in the $250 million or the at least $250 million will drop because, as you cited, JLT ran their business at a lower margin than Marsh & McLennan did.
Our view is that we will bring the combined business to the margins of Marsh & McLennan and expand from that point in time, and that's why you're seeing some expansion now.
Okay, thanks. My second question, reinsurance, Guy Carpenter declined in the quarter. I think both of you guys, in your prepared remarks, referenced a lower new business pipeline or lower new business growth. If you can just expand on that. Also, could you give us a sense of the retention that you're seeing in both legacy JLT and Marsh & McLennan, just so we could get a sense of kind of the drag I know you referenced you might see for the balance of this year?
I'll take that, and then I'll hand over to Peter to give it a little bit more. I'd start by saying Guy Carpenter has been a terrific performer on multi-levels for us for many years. In fact, this negative quarter is only their second negative quarter in the last decade. As you cited, new business was the primary feature. It's quite common in acquisitions. We even see it in much smaller acquisitions within Marsh McLennan Agency, where post-acquisition, there's a little bit of a lull for a period of time. It's natural. Certainly from deal announcement through to closing, there was a period where the pipeline was beginning to weaken. This is correctable. It's not going to take years, but then again, it's not going to take weeks.
There'll be a period of time that we work it through, and we'll get the pipeline going again. It's not something that we're overly concerned with. I would say that new business, both for Marsh and for Guy Carpenter, is vitally important. If you're a primary broker, as an example, if you're not growing your base by 10% or 20% of new business every year, you're going to go backwards. It gives you the magnitude of the hill that we've climbed successfully, in my view, with RIS overall. Peter, you want to add some more color to that?
I think you're absolutely right, Dan. Elyse, the reinsurance business typically has a long duration sales cycle. When you put any uncertainty or doubt into a buyer's mind, it's going to impact the business pipeline, and that's what we've seen from the legacy JLT business. Quite frankly, what we're doing is we're bringing the legacy JLT and Guy Carpenter sales processes together. We've had a very successful discipline global sales model in Guy Carpenter, which has created significant results for us over the past two and a half years. As Dan said, it's not going to happen overnight, but in a short period of time, we will ingratiate the JLT business into our business pipeline and grow it successfully.
The other thing I would just add is Carpenter did a really nice job in the quarter delivering bottom line. That's going to be the focus over the next couple of years. There's quite a spread between respective margins in the businesses. Our first order of business is to achieve Carpenter-style margins on the combined reinsurance business. It's a bit more for Carpenter, unlike some of the other businesses, it's a bit more of a bottom-line earnings focus as opposed to top line. We want both, but I'm just giving you a little bit more of the focus. Next question, please.
The next question comes from Brian Foran from Autonomous Research. Please go ahead.
Hey, thanks. I guess just following up here on Guy Carpenter. I guess I would have expected some of the revenue disruption to come from the revenue overlap you potentially had between those two businesses. It sounds like you've only really alluded to issues relating to new business. I was hoping, Dan, maybe you could give us some idea of are there any dis-synergies there? How much of that negative three might be stemming from that versus what you said on the new business side?
Yeah, it's a good question. Certainly, we've seen some revenue breakage, particularly in RIS. The magnitude of the revenue headwind for us was new business in both Marsh and Guy Carpenter. It just has felt more acutely in this particular quarter in Guy Carpenter. We modeled a lot of revenue breakage in the deal, so things are tracking along with our expectations. From that standpoint, it'll be an issue that we'll work through over the next couple of years, but ultimately, we feel we will be able to, in most circumstance, overcome that headwind.
Got it. Yeah, as you said, we can't really see it in other places other than Guy Carpenter, but there's certainly also some overlap in London. If you broke out London separately, would we see something similar to the story playing out in Guy Carpenter on the retail side?
London is where we have the most levels of overlap. On the insurance side, it's the capital of the insurance world. From that basis, you would expect to see more overlap in London than you would see in other parts of the world. Next question, please.
The next question comes from Larry Greenberg from Janney Montgomery Scott. Please go ahead.
Thank you, and good morning. Dan, you talked about pricing and the environment in property casualty. Without the JLT combination, do you think you would be characterizing the environment for underlying growth above that 3%-5% historical range that you've been using?
I'm going to hand off to John and Peter a little bit to give a little bit more pricing commentary in general. The 3%-5% is sort of where we've been for a while. Pre-JLT and post-JLT, we're saying the same thing. I wouldn't view it as impactful on that. You could imagine from our standpoint, we're focused as a combined company. There is no us and them. We're one organization, one set of expectations, one set of numbers as we move forward. I'm actually very proud of the organization in being able to pull together that from the date of close, from the first month, looking at a single set of numbers, not trying to be, well, JLT would have been this, and Marsh would have been that. It's just one set of numbers. John, you want to talk about the price-
In his prepared comments, the market moved a bit in the quarter. Most regions and products saw increases in rate changes compared to the first quarter. As I said on the last call, market's more challenging for some clients than it's been quite some time. Dan shared the high-level data. What I would say is our index skews a bit to large accounts, and larger accounts with complex risks are the accounts that are moving the most. D&O pricing, lead umbrella, property CAT, all high single-digit range globally. The U.S. and Australia and the U.K. wholesale market are the geographies with the highest level of increases. I would say that the SME market to upper middle market, pricing is much more muted on average, and in effect, it's in the low single-digit range or even flat to down in some products and in some markets.
We're seeing signs of loss cost inflation and exposure shifts in certain classes, D&O, EPLI, cyber. Commercial auto, you're seeing an increase in frequency and severity. There's some very big losses in the market. The industry remains very well capitalized, but some are reducing their risk appetite and moving attachment points and moving pricing. That's what we see at Marsh. Peter?
I think as Dan said in his comments, it's very specific to lines of business and geographies. In some areas of the world, take Florida, we saw significant increases at 6/1 on Japanese wind exposed, not earthquake exposed business. They were all responsive based on exposure and loss. They weren't blanket as we've seen in previous cycles. I think the other thing that's important to note too is that insurance and reinsurance pricing are sort of moving in synchronicity. It isn't a top-down reinsurance pricing being forced on the primary business. It's primary rates rising as reinsurance rates respond to the underlying growth of premiums as well.
Thanks. Anything else, Larry?
Yeah, Dan. I think one thing that investors will be struggling with and trying to tackle is just how long these headwinds, particularly at Guy Carpenter, are going to persist. I know it's impossible to say with precision, but would you venture some sort of timeframe for when some sort of inflection may arise where that was yesterday's conversation, and now we're having a new conversation about growth?
Yeah. As you say, it's near on impossible to peg something like that. What I can say is that there's no finer leadership team of this combined organization, and that execution capability has been proven over a long period of time. As I mentioned before, this will not take years, but then again, it won't take weeks either. This will be a period of time that we come together as one firm. I mentioned in my prepared remarks that we are not operating as a single team in every geography, in every line of business. That is a process. This is real life. I would say that even given that headwind that we'll have to absorb and overcome over the coming months, I would not trade strategic positioning with any other firm in our competitive space.
We have a mountain of talent, we will be able to deliver very interesting solutions to clients in future years. The best is certainly yet to come for this organization. Next question, please.
The next question comes from Meyer Shields from KBW. Please go ahead.
Great, thanks. Dan, I was hoping you could elaborate a little bit on your comments of Guy Carpenter being more bottom-line focused. I guess specifically what I'm trying to understand is that if the new business pipeline is down, we accept the premise that new business is typically more expensive to originally obtain, are there some expenses that would come back as the new business pipeline rebuilds?
Yeah, I think your basic premise there, Meyer, is not right. It's probably right in a lot of industries, the reality is new business can be even more profitable. The marginal profitability of the next account in our industry is quite high because we're putting new revenue on existing infrastructure. We don't necessarily have to go out, hire new people, do more technology, et cetera. We can add revenue onto the existing expense base. New business is profitable.
That's actually very positive. Thanks. Second, this is sort of unrelated to JLT, but I was hoping you could update us on the M&A environment.
Well, thank you for remembering we've got other parts of the company. John, you want to talk a little bit about what's going on in Marsh McLennan Agency?
Sure. MMA had a strong quarter and remains quite active in the M&A market. In fact, MMA is our priority in the near term as we integrate JLT. There's a good pipeline. We've earned a favorable reputation for honoring our commitments, and it gives us a real good shot, in many cases, a first look at some really high-quality firms that are in the market. We closed on Bouchard in Florida in the middle of the first quarter. We closed on Lovitt & Touche based in Arizona on the 1st of April. Both were top 100 firms in the U.S. High-quality businesses with really terrific leadership. We have a good, strong pipeline as we look forward as well. We're excited about the prospects there.
Thanks, John. Next question please.
The next question comes from Yaron Kinar from Goldman Sachs. Please go ahead.
Thank you. Good morning, everybody. I guess getting back on the Guy Carpenter wagon. I think you'd also mentioned some timing issues there. Can you maybe talk about what drove that timing issue and if you expect revenues to come back in the third quarter?
Yeah. I'll start, but ultimately, I would say that the new business pipeline was larger than the timing issue, although timing did have an impact. Peter, do you want to talk about that?
Yeah. This is an inherently volatile business. Buying decisions from one quarter to the next can have an impact as we've seen. It probably was a function more of the market as it was buying decisions, as the market is transitioning, it's taking longer and longer to place business, therefore renewals that should have happened in the second quarter are now bleeding over into the third quarter.
Okay. As I think about the third quarter here, we only have one year of data for JLT here on a quarterly basis. It seems like JLT's margins were a little weak a year ago. Is that a good run rate to use as we think of forward estimates, or was there something in particular that drove margins down last year?
Mark, you want to take that?
Yeah, Yaron Kinar, I think if you refer back to the supplemental materials that we passed out, that's why in my commentary, I highlighted the seasonality too. I would use 2018 as a decent baseline. I don't think there was anything unusual in JLT's results quarter to quarter. The third quarter was seasonally weakest. If you look back to that
That statement, they actually had negative NOI in the third quarter just because of the dip in revenue.
Next question, please.
The next question comes from Paul Newsome from Sandler O'Neill. Please go ahead.
Good morning. [inaudible] . Just to more follow up here, the lag that we're seeing that you talked about a lot in Guy Carpenter, but also seeing in Marsh, is that going to mainly come through the EMEA segment? That seemed to be the segment that was a little bit slow, and I guess, should we essentially think of your comments on Guy Carpenter as expecting a similar behavior there?
Yeah. If you look at the JLT organization, is almost 50% in the U.K. Rather than really broad EMEA, of course, the U.K. is in our EMEA, but it's pretty focused on the U.K. more than any other factor as being that's where most of the overlaps occur, that's where a lot of the flow goes into the London market for placement. Overall, when we look at the geographies, it's business as usual in places like Asia Pacific, and we're just continuing very rapidly to integrate the teams and work with clients and prospects. I want to make it clear that any of the revenue headwind that we have faced was completely anticipated. If you go back to when we first made the deal announcement in the last quarter, we spoke about there'll be a period of choppiness.
Delivering a 4% level of growth for the company, in that period of choppiness, I view as being very acceptable to us. In fact, the 4% growth for Marsh & McLennan in the second quarter is the first time we actually hit 4% growth in the last five years. The last time was second quarter of 2014. There's been a period of time, so we feel we're doing pretty well in the circumstances.
I wouldn't disagree. Is the lag effect that you talk about in Guy Carpenter through the balance of the year similar in for the Marsh impact?
It's hard to say, I would say the way to look at this is that the new business impact, in terms of pipeline, applies to both Marsh and to Guy Carpenter. It was felt more acutely by Guy Carpenter, partly because of size, relative sizes and quarters. The other thing that you have to know, the revenue breakage is likely to take longer to materialize. Even though we're seeing some revenue breakage now, there'll be other revenue breakage in the future, particularly in areas like third-party business, as an example, or clients that have a view of having multiple brokers, and they had relied on JLT and Marsh or JLT and Guy Carpenter in the past. They'd want to go find another broker if they want to have two brokers if they view that as part of their approach to the market.
Think of it more along the lines of the new business lag will be regenerated based upon the efforts of Marsh & Guy Carpenter to recreate business pipelines, get people working together, and that is very solvable. The revenue breakage is a short term to midterm phenomena that will be a bit of a headwind for us over the next couple of years. We believe even in those circumstances, we will be able to grow our business in the 3%-5% range organically as a company and deliver margin expansion. Next question, please.
The next question comes from Mike Zaremski from Credit Suisse. Please go ahead.
Hey, good morning. In John's remarks about the P&C market, it described it as more challenging for some clients than it's been for a long time. You guys made the point that it's more a large account focused. I'm curious, how is that impacting Marsh's financials? I believe the large account space is more fee weighted rather than commission weighted. How should we think about those dynamics?
Hey, John, you want to give some more detail?
Sure. I think the overall market pricing dynamics has had some positive impact on the revenue growth of the company. As you know, most of the price increases are happening in the segment of the market where we're paid largely on fees. Some of the business that migrates to the London market, though, we'll get some wholesale lift in that marketplace. I think the improved growth trajectory of Marsh over the last couple of years has also come as our retention has improved and our new business has improved as well. We're getting a little bit of lift from the market for sure. I think we're executing better as well.
Thanks.
Okay.
Next question.
Can I ask one-
You have a follow-up?
Yeah, one follow-up on cyber. Could you comment whether you'd help us understand the size or maybe the growth dynamics going on with your cyber consulting business? We all know that cyber is growing a lot on the insurance side, and I'm curious if there's also growth coming from perhaps a cyber consulting business that you have. Thanks.
Yeah, sure. Let me speak broadly for a second. As you mentioned, cyber is a significant growth area, viewed as one of the primary risks for almost all companies today, regardless of where you're located anywhere in the world and regardless of your size. Everyone's concerned with cyber. Certainly within our Risk and Insurance Services business, it's one of our fastest-growing practices and has been over the last several years.
That, to me is the road without end in terms of there will be, as the IoT and globalization continues and the technological advances and the pace of technological advance just continues to accelerate, we will see more and more risk exposure and risk awareness around that level of connectivity. Certainly Marsh & Guy Carpenter will be very helpful. Turning to your question on consultants, I'll hand over to Scott McDonald first at Oliver Wyman to address it. Scott?
Yeah, Mike, the business, as you suspect, I think is growing pretty rapidly on the consulting side as well. There are advisory elements of it, governance elements, technology pieces, and that's being bought, I'd say, by the boards, by the C-suites, and by others on the management team. It's a very rapidly growing space, has been rapidly growing for the last few years. Although it's still relatively small for us, but one of our fastest-growing businesses.
Thanks. Next question, please.
The next question comes from Brian Meredith from UBS. Please go ahead.
Yeah. Thanks. Just sticking with Oliver Wyman, I'm just curious, the comps get a little bit tougher second half of the year. Should we be expecting the same type of growth continuing at Oliver Wyman or certain kind of big projects, something happening in the quarter?
Brian, from your lips to God's ears. At the end. As we've said many times before, Oliver Wyman, over the last five years, has been our fastest growing operating company on a CAGR basis, but it also has the most volatility. I think you have to look at longer term periods of time in order to evaluate their growth. Mid to high single digits is where they tend to grow over long stretches of time. Scott, you want to surprise me to the upside, or is it
Yeah, Dan covered most of it. Brian, I really appreciate the question as well. I was wondering what we had to deliver at Oliver Wyman. We got a question. I like getting one. We had a really good quarter, which we are happy with. The interesting thing is that it's strong right across the portfolio, across almost all the industrial segments and across all of the regions, perhaps with the exception of Europe, which has been slower. The economy still feels okay out there. Employment is good, but there is some slowing growth now in pockets in the world. There's some slowing business sentiment. While we see our clients still interested in doing things around growth, technology, managing disruption, they continue to get more nervous. We don't see anything on the horizon that gets immediately tougher.
If you look at the results over the last few years, as Dan highlighted, we do pop up and down depending on where we put big projects and programs into the quarters, I think this is a pop up, I wouldn't expect it to continue at that level, the comp from last year is high.
Thanks.
You have something to add, Brian?
Thanks. Just a quick one on JLT. In the expense saves guidance that you guys have provided, have you contemplated any type of retention bonuses to try to keep key producers from JLT or the combined organization? Was there any impact in the quarter at all from retention bonuses?
Sure. We clearly put into place a retention program for the combined company, and it includes people who are critical to our future, whether they work for JLT or whether they work for Marsh & McLennan. Obviously, it was a little bit weighted towards JLT because we wanted to have people give it a real chance. The program, as you would expect, is a multi-year program, and it's really more like a three-year cliff-based retention program. It's in our deal model. We put significant amounts. There's no significant impact in any quarter since it's over a three-year period. I would just say, that program is not viewed in our way as to part of the cost-saving program. That is more a securing the organization, securing future growth.
I do want to say that because I know that a couple of you have mentioned it in the past that you've been reading about some level of staff departures from JLT, et cetera. As I said in my script, we're evaluating the acquisition across 3 dimensions, really broadly on growth. Growth in talent, capabilities, revenues, earnings, et cetera. Expense savings, clearly, and also talent retention, and we are satisfied across all 3. Specifically on talent retention, sure, there's some people who have left who we would've preferred that they stayed with the organization. However, you got to put that in context. The overall level of JLT voluntary turnover in the second quarter of 2019 is very consistent with the overall level of voluntary turnover within JLT in the second quarter of 2018.
It's running a little bit higher in the U.K., and it's actually running lower than last year in the rest of the world. In the context of talent retention, broadly, we're quite satisfied. Next question, please.
The next question comes from David Styblo from Jefferies. Please go ahead.
Hi. Good morning. Thanks for the questions. Just wanted to circle back at a broader view of just the JLT financial impact as you guys compare how things have progressed since you initially provided the EPS accretion dilution, over the three-year timeframe. The supplement that you provided not too long ago gave us some insight about the amortization being a little bit better, and then the aerospace sale was a bad guy, but still seems like that was net good. I am wondering if you could share any other details about moving parts that have been positive or negative, just because as we glean those financials, it seems like net-net, things are a little bit better than originally expected from a pro forma standpoint.
Let me hand it over to Mark in a second. There's always going to be some puts and takes as you dig into a business and you create a unique new company in combination. There are several things that have met with our expectations, along with our original planning, and a few which we're doing a bit better with. Mark, you want to add some more to that?
Dave, I think what Dan said is right. Actually, it's pretty remarkable if you go back to what we talked about last September and see how closely things are tracking in the aggregate. As I said earlier, at a high level, we're tracking very closely to the initial expectations. There's been a lot of puts and takes, so you pick up something in one category, give it back in another. When it comes to the amount of debt we issued, the interest cost that we paid on that debt, the cost savings, the amount of revenue headwind that we're facing, all of these things are tracking really well.
That's why we've been able to stick with this broad guidance that we're still in this category of modest dilution this year, breaking even by year two and accretive in year three, and also that we're seeing the margin expansion that we said we would this year. Everything's tracking really well.
I'm particularly psyched about when you look at RIS in particular, up 23% in the quarter and the company up 16%. That's a step change in growth for the overall company. Yes, we are focused on underlying growth and our ability to drive underlying growth. Every once in a while, you get an opportunity to really change the trajectory of a firm, and that's not about underlying. This is about total growth for the firm. We're very pleased. Do you have a follow-up?
I do. On the other side, Canada, U.S. organic growth was a solid 5%, especially against a tougher comp of 8% a year ago. I guess, trying to reconcile comments of just disruption from the deal and so forth. Curious what you're seeing in that business that's holding up so well to the extent that the market pricing dynamics are having any impact and sustainability of that trajectory going forward.
Thanks. John, do you want to take that?
Well, Mark mentioned in his prepared comments, we've had a good run in the U.S. results there have been consistently at the high end of our revenue range. I mentioned earlier, MMA had good strong growth on both in P&C and E&HB, so I was quite pleased with that. I mentioned the pricing dynamics. A very modest price increase in the MMA portfolio, so not a big driver of the outcome, but it helps a bit. Marsh U.S. also had very strong new business after really an outstanding new business quarter in the second quarter of 2018, so I was quite pleased there. Our MGA operation in the U.S., Victor, had a nice quarter, and our captive management business also had a strong quarter in the United States. Overall, I was quite pleased with the results in the U.S.
I would now like to turn the call back over to Dan Glaser, President and Chief Executive Officer of Marsh & McLennan Companies, for any closing remarks.
Yeah. Thank you, operator. Thanks to everybody for joining us on the call this morning. I wanted to express my gratitude to our 76,000 colleagues for the commitment and hard work that they've shown, as well as to our clients for their support. We had two core priorities in the second quarter. First, to provide world-class service to our clients, second, to begin the successful integration of JLT. I'm delighted with the progress that we've made on both fronts. I've seen firsthand how hard our colleagues have been working and the dedication they have shown to our company. We are building something special here. It is the trust and confidence of all of our clients that makes that possible. Thank you all very much. I look forward to speaking with you next quarter.
That will conclude today's call. Thank you for your participation. You may now disconnect.