I mentioned earlier our index skews to major accounts. So, pricing in the middle-market continues to move up a bit more than the data points I mentioned earlier. But I would also say that insurers and reinsurers are cautious about that rising cost-of-risk environment that I mentioned as well. And so, while again, a stabilizing market is better for our clients overall, I don’t expect that relative stability to change anytime soon given some of the rising cost of risk issues that the insurance community is confronting. So, Dean, maybe you can talk a little bit more about what’s happening in reinsurance.
Dean Klisura: Yeah. Thanks, John. And Jimmy, I’ll give you a little bit more color on the April 1 reinsurance renewal, that would be helpful. As John noted, we saw a continuation of market conditions that we experienced at January 1. And as John noted, market conditions are stable, but we’re definitely seeing increased client demand to provide additional property cat limit, particularly at the top end of programs. That was very pronounced throughout the first quarter at 1/1 through the quarter. And certainly that trend continued on April 1. Strong capital inflows into the reinsurance market, driven by strong reinsurer returns, double-digit returns in 2023. We talked about last quarter on the call, reinsurer appetite has increased for property cat.
There is an inflow of capital and capacity. Competition at the top end of programs, it’s been good for both buyers and sellers in the marketplace. Specifically to property cat, in the US, at April 1, as I said, capacity was strong. As John noted, the market was generally flat to down incrementally for clients without cat losses. Accounts with cat losses saw 10% to 20% kind of rate increases. But keep in mind, we give you rate-adjusted figures. But when you factor in inflation, exposure growth, value growth, premiums on these cat programs are still increasing year-over-year. It continues to be a tailwind for Guy Carpenter in the marketplace. And as I said, there’s a lot of competition for cat business. US casualty, as John noted, was challenging, just as challenging on April 1 as it was at the January 1 renewal.
Reinsurers are exerting pressure on pricing in terms and conditions. Ceding commissions are facing downward pressure from reinsurers on certain quota-share contracts, particularly financial lines, which Martin has talked about in the past. Excess-of-loss contracts are seeing rate increases across the board, in some cases, double-digit. However, there was adequate casualty capacity in the marketplace at April 1, and all of the programs that we placed got completed in full. But I would balance that against continued reinsurer concern with the adverse development, driven by social inflation and increasing loss cost trends. I think that’s a good summary of where we were in the US market. Just a note on Japan. Big April 1 cat date in Japan, a very orderly market, sufficient capacity, many cat programs were oversubscribed.
We didn’t observe any structural changes. Attachment points stayed where they were from a year ago. And again, it was a market that was down on average 5% from a rating perspective, and we didn’t really observe any rate impact from the January earthquake in Japan. Overall, a very orderly market at April 1 in Japan.
John Doyle: Terrific, Dean. Thank you. Jimmy, do you have a follow-up?
Jimmy Bhullar: [Technical Difficulty] income, it was flat sequentially and lower than 3Q. I’m assuming that’s more seasonality. But if you could just talk about your expectation for that given where short-term rates are currently?
John Doyle: Mark, you want to jump on that one?
Mark McGivney: Yeah. Jimmy, there is a little season, as you pointed out. There is a little — tends to be a little seasonality in our fiduciary balances. Q1 and Q4 tend to be seasonal lows modestly. So that would explain that. In terms of outlook, we’ll see what happens to the rate environment. The interest — our fiduciary interest income is going to be a function of balances and rates, and we’ve got about $11.5 billion of balances. So, depending on what you want to assume for the trajectory of rates, the math is pretty straightforward.
John Doyle: Thank you, Mark. And thank you, Jimmy. Andrew, next question, please.
Operator: And our next question comes from the line of Elyse Greenspan with Wells Fargo.
Elyse Greenspan: Thanks. Good morning. My first question was on the margin guidance. You guys said more margin expansion in the back half of the year. What’s driving that? Is there just more investment in the first half, more savings falling in the second half, or something else that’s driving the seasonality within the margin expansion this year?
John Doyle: Good morning, Elyse. We expect again good margin expansion in 2024. As you pointed out, Mark noted, we expect the second half to be better than the first half. We have some expected headwinds, not really seasonality, but really driven from a higher [merit pool] (ph) a year ago, some acquisition-related costs, and some higher reimbursable expenses. But I want to remind everybody not to focus on any one particular quarter. Again, margin is an outcome of really how we run the business, and it’s not a primary objective of ours. Again, having said that, we see opportunity for margin improvement, continued margin improvement. But we’re going to continue to make attractive investments to support the medium to long-term growth of the business.
We have a number of different efforts underway, ongoing workflow and automation efforts at Marsh, Mercer and Guy Carpenter. And we continue to press for opportunities to improve efficiency at the intersections of our businesses as well. So, we see opportunity. And as we pointed out, we expect the second half to be better than the first. Do you have a follow-up, Elyse?
Elyse Greenspan: Yes, thanks. And then my second question, Marsh recently launched its wholesale venture Victor Access. I know it’s early days, but what was the impetus for this strategy? And is there any reason why the majority of the wholesale risk currently placed by Marsh with third-party wholesalers couldn’t potentially be internalized through Victor over time?
