John Doyle: Thank you. Mike, do you have a follow-up?
Michael Zaremski: Yeah, a quick follow-up. And I know you gave a lot of commentary on kind of commercial primary insurance pricing power, you told us the Marsh Index declined a bit. Just curious if you can offer any more context. 1% kind of feels like a soft market number. What is it — are you seeing just returns on behalf of your career partners being kind of excellent that’s kind of driving the pricing power downwards in light of kind of what still seems like inflationary trends, or just any more color there on kind of what’s causing the decel? I know you gave us by-line commentary. So, I don’t know if there’s a lot more to add.
John Doyle: Yeah. Mike, I would say that, it doesn’t feel like a soft market to our clients after five years of price increases. And as I noted, our index skews to larger accounts and where there’s a bit more volatility, typically, throughout the cycle. I expect cycles to be shorter and narrower than what they’ve been in the past, right? There’s better data, better technology on the underwriting front. Capital moves so much more quickly in and out. That’s part of the E&S market dynamic that you all have observed over the course of the last several years. So, I expect kind of more relative stability. And from time to time, of course, certain areas of risk, things will change in some meaningful way and that will maybe bounce a particular product outside of a normal cycle.
Insurer and reinsurer underwriting results have improved in the aggregate over the course of the last couple of years. And I think most feel good about how their book — how their portfolios are positioned. It’s not all one result, of course. We saw some reserve additions in the fourth quarter results overall. And as I mentioned on our call in the first quarter, the great unknown is casualty loss costs, right? There’s lots of emerging data that’s troubling for our entire ecosystem, for our client, and it contributes to that rising cost of risk that I mentioned earlier. I maybe should also point out, and Dean touched on this a little bit that our index adjusts for limit, exposure, attachment point, and it includes new business, right? You see some other indices that are out in the market that don’t necessarily adjust for all of those factors.
And then maybe the last point, Mike, that I would make is that, that number doesn’t necessarily correlate directly with what premium growth is in the market, right, because at the end of the day, I mean, it might be at — you might have less of an increase, you might have certain clients buying more. I think that’s most prevalent in the reinsurance market at the moment, but we’re seeing that in some cases at Marsh as well, where clients again having adjusted to the new market pricing and new market equilibrium has led to a higher level of demand for coverage from our clients. So, anyway, I hope that’s helpful. Andrew, next question, please.
Operator: Our next question comes from the line of Yaron Kinar with Jefferies.
Yaron Kinar: Thank you. Good morning. Two questions on Marsh and the market environment you’re seeing there. And I think the first one maybe ties well to your last comments, John. Are you surprised to see casualty rates only up 3% just given the loss trends? I guess I’d love to hear your views both as the CEO of Marsh but also maybe as a former underwriter.
John Doyle: It’s a — I actually — it’s very, very hard right now. As I mentioned earlier, there’s some troubling data points, right? And thrown in the mix of the last several accident years, of course, a couple of years of the impact of the pandemic, right? And so, just on the clients where we help them, larger clients, with big risk management programs that have a level of frequency, it’s very, very difficult to project where loss costs are. But as I said, the underwriting community is better than it’s ever been. They have better data, better technology. But there, again, are some troubling signs. It’s not just increased frequency. It’s not just kind of nuclear verdicts, that term gets kind of thrown around or even some of the bigger settlements.
There’s a frequency of larger events. See the Francis Scott Key Bridge as an example, that will be a big loss in the market, maybe not as much a casualty loss, but a big loss in the market. But even in like commercial auto, and you’ve certainly seen that play out in the personal lines auto market, just kind of more frequency type events just costing more to get resolved. And so, we’re putting our efforts to helping our clients think through how to better run off liabilities that they assume and even transfer into the market. And the insurers are investing quite a bit in their claims capabilities as well to try to get ahead of this. But I think we’re all pointing to again some flashing yellow signals out there about the rising costs overall.
Do you have a follow-up?
Yaron Kinar: Yes, I do. And thanks for the color there. So, in Marsh, organic, obviously, was strong and then we certainly saw a very nice result in US and Canada. I guess the only place I could maybe poke a little bit if I were to try would be Asia Pacific where we saw a step down. Is that — is there a timing issue there with some one-offs? I know you had a very, very strong 1Q ’23 there. But anything you could point to in terms of the organic results in Asia Pacific would be helpful.
John Doyle: Yeah, I don’t — no one-offs or major issues there, just on top of a couple of years of very, very good comps and strong growth. We love how we’re positioned in Asia, big protection gaps throughout Asia. We have really strong country — in-country operations all throughout the region. So, we’re not just a regional center. We’re in-country and working very, very closely with our clients there. As we’ve said to you in the past, I wouldn’t look at any one particular quarter. And again, it’s on top of what’s been some outstanding growth in Asia over the last couple of years. So, we feel good about where we’re headed in Asia overall. Andrew, next question, please.
