Carl Hess: Thanks. Yes, I mean, market conditions have been reasonable, especially with respect to bulk lump sum activity, and with pension funds in general still better funded than they were in prior years. We are seeing — people looking at annuity purchase and buyout options as well. Part of our strong results in BD&O during the quarter were the result of preparation with bulk lump sum programs. And while those conditions may be more temporal, we do think that plan sponsors have more options and will consider their options. And we are fortunate that they use us to consider those options.
Mark Hughes: And then Verita, you talked about the meaningful expansion there. When will that be big enough to kind of influence organic growth?
Carl Hess: It’s early days yet. We think we have a very good proposition. For Verita, we are launching it at a controllable size across a number of industry verticals. If the reception is as we hope, we will expand that to additional industries and additional geographies over time.
Operator: Thank you. Our next question or comment comes from Michael Zaremski from BMO. Mr. Zaremski, your line is open.
Michael Zaremski: Hey, good morning. I guess back to the commentary about reinsurance. Clearly, we all appreciate that that’s a great business. You guys did a great job in that business in the past. So it makes sense what you’re saying. I guess my question is, given that reinsurance has a great margin profile, it’s seen — by some investors it seen as being an expensive proposition to get into — to grow into over time. So, if that was the path Willis took, is it — could it be done within the context of guidance, for the 2024 guidance? Or is that sacred? Or is this a board level conversation where you might be willing to change that guidance if the decision was to make this a big commitment?
Andrew Krasner: I think the way I would phrase it is it’s within the context of the guidance we had. This is the strategic direction. And we look at what the potential path of spend and revenue might be in the context of our overall strategy. And yes, it’s an attractive business, but there are other attractive possibilities as well. We want to be judicious on how we approach any such decision.
Michael Zaremski: Okay. That’s helpful. And I guess, switching gears a bit, there’s a lot of — we can clearly see that margins improved more than expected with this quarter, which is great to see. And you had a lot of commentary about strengthened discipline on costs, but you’ve also had this expense program in place for a while. Is just kind of – did something change recently that you’ve put, they’re just more hitting the bottom line, or is it really just the operating leverage and the strategic hires and that dynamic really taking fold?
Andrew Krasner: It’s actually all of that. Clearly, with the strong organic growth combined with the expense discipline and the transformation results, we generate strong margin accretion. We’ve been maintaining discipline with respect to our cost structure, especially as the inflationary environment has put pressure on some of our costs. We did take some specific actions regarding travel expenses, looking at vendor spend and some targeted management of marketing costs. In addition, as it specifically relates to the transformation program, now that we’ve optimized processes and improved our technology as part of that program, we’ve been able to take some workforce-related actions, which enhanced some of the leverage that you’re seeing come through.
Operator: Thank you. Our next question or comment comes from the line of Shlomo Rosenbaum from Stefil. Mr. Rosenbaum, your line is open.
Shlomo Rosenbaum: Hi. Thank you for taking my questions. I just wanted to ask a little bit about some of the comments on timing of expenses, benefiting margins in health and welfare segment. Can you just give us a little bit more detail on what that was and how investors should consider that with regard to the fourth quarter expectations? Similarly, sometimes there’s timing items that benefit organic revenue growth, like the survey work can sometimes move between third and fourth quarter, where you’ll end up with software sales or something. Was there anything unusual in terms of any of those things? So just kind of timing in both expenses and revenue?
Andrew Krasner: Yes, sure. Why don’t I take you through the pieces of HWC’s organic growth? There was 9% for the quarter. Across the segment there was strong demand driven by the complex macro environment, our strategic focus on cross-selling and data and analytics. We feel very confident about the pipeline that we’ll be able to finish off the year with good results in line with recent historical trends for Q4 growth. Within BD&O, which had 14%, there was organic growth driven by new clients and increased compliance and other project activity and outsourcing and growth from higher volumes and placements of life and Medicare Advantage in individual marketplace. In wealth, 7% was generated from higher levels of retirement work in North America and Europe, along with new client acquisitions and higher fees and investments.
Health, which was 7% or 8% excluding the book of business headwinds. There was organic growth driven by continued expansion of our global benefits management client portfolio, new local clients, expanded consulting work for existing clients and increased brokerage income. Career, which was 8%, had organic growth driven by increased compensation survey sales, executive compensation, and other reward-based advisory services, including trade pay transparency and some change communication services. Within BD&O, which had the 14% growth, I think it’s important to point out what was driving that and what we might expect going forward. So that was driven, like I said, by both project work and outsourcing, as well as TRANZACT. TRANZACT’s growth for the quarter is also timing related, and given that this is one of their lowest revenue quarters of the year-over-year impact becomes magnified.
So, and again, the best way to think about TRANZACT’s growth is on a full-year basis, and we expect that to be substantially similar to the full year 2022.
Carl Hess: We’ve got a couple points of color commentary in there to address sort of Q2, Q3, Q4 differential. I mean, you talked about our survey business. Demand for there has actually stayed quite strong, and that’s the fastest growing area within career. Within health, the uptick in healthcare costs did cause quite a bit of activity during the quarter. I think that as you look to farther out, for managing healthcare costs will continue to be a priority for our client base, but now we’re into sort of enrollment season, and largely sort of those design actions which were taken during Q2 and Q3 in anticipation of enrollment. That’s not a Q4 activity typically for our client base. So — and then retirement, the business had an awful lot of delivery during the summer months and sort of effective strategic projects and some of the de-risking activity we talked about earlier in the call. So, we were very comfortable with longer-term prospects for the business.
