Q1 2025 Marsh & McLennan Companies Inc Earnings Call
Welcome to Marsh & McLennan's earnings conference call. Today's call is being recorded. First quarter, 2025 financial results and supplemental information were issued earlier this morning. They are available on the company's website at Marsh & McLennan.com
Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties and the variety of factors may cause actual results to differ materially from those contemplated by such statements.
For more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings including our most recent forum 10K, all of which are available on the Marsh & McLennan website
During the call today, we may also discuss certain non-GAAP financial measures. For reconciliation of these measures to the most closely comparable GAAP measures , please refer to the schedule in today's earnings release.
If you have a question, please press star 1-1 on your touchtone phone. If you wish to be removed from the queue, please press star 1-1 again.
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I'll now turn this over to John Doyle, President and CEO of Marsh & McLennan.
Good morning and thank you for joining us to discuss our first quarter results reported earlier today. I'm John Doyle, President and CEO of Marsh & McLennan.
Speaker Change: On the call with me is Mark McGivney, our CFO and the CEOs of our businesses, Martin South of Marsh, Dean Klisura of Guy Corpenter, Pat Tomlinson of Mercer, and Nick Studer of Oliver Wyman
Also with us this morning is Jay Gelb, Head of Investor Relations . . .
Marsh & McLennan had a solid start to 2025.
Speaker Change: As we said, coming into the year, results in Q1 faced headwinds due to several factors and our performance tracked well with our expectations.
Speaker Change: Underlying revenue grew 4% despite lower fiduciary interest income and a tough comparison to a strong Q1 last year and we saw good growth in all four of our businesses.
Adjusted operating income increased 8% from a year ago. [inaudible]
Speaker Change: Our adjusted operating margin declined 20 basis points compared to the first quarter of 2024, reflecting seasonality at McGriff, and adjusted the EPS grew 5%.
Speaker Change: Turning to the macro picture, clearly the global economic outlook has become more uncertain since the start of the year.
Speaker Change: On-going trade negotiations will continue to create challenges for businesses and this has led to reduce consumer and business confidence as well as financial market volatility.
Speaker Change: The outlook is likely to remain uncertain, as stakeholders continue to assess the potential impacts on global trade and businesses' paused new investments.
Speaker Change: As a result, expectations for GDP growth, inflation, interest rates, and other factors have become less predictable.
Speaker Change: As far as the insurance industry is concerned, tariffs would likely be inflationary to the overall cost of risk
Speaker Change: This comes on top of the increasing frequency and severity of natural catastrophes and rising social inflation costs.
Speaker Change: We continue to support our clients by leveraging our expertise and solutions as they navigate challenges and make decisions in this period of extreme uncertainty [inaudible]
Speaker Change: In fact, we've been advising clients for years on risks to their global supply chains [inaudible]
which now includes disruptions and trade policies.
Speaker Change: Centrisk, our AI-powered supply chain platform, which we've highlighted in past calls, is a good example of our work to assess client's vulnerabilities to ongoing trade negotiations.
Speaker Change: In addition, through webinars and thought leadership, access by thousands of clients, we are helping them understand the complexity of the moment.
Speaker Change: In times like these, our clients find value in Marsh & McLennan's unique perspectives, talent and capabilities across risk, strategy and people.
Speaker Change: And while we are not immune to shocks in the macroeconomy, we are well positioned to navigate these environments.
Speaker Change: Our track record of performance across economic cycles is the result of the strength of our business and the consistent demand for our advice and solutions.
Speaker Change: I would like to share some thoughts on resilience and preparedness for natural disasters and the role of insurance.
Speaker Change: The earthquake that struck Myanmar and Thailand is just the latest tragic reminder that we live in a time of heightened exposures to catastrophes
Speaker Change: This tragedy, along with the California wildfires and recent flooding in the US, highlights the devastating human toll and economic impact caused by natural disasters.
Speaker Change: especially taking into consideration the significant proportion of losses that are typically uninsured.
Speaker Change: These events show the urgent need for resilience and risk mitigation planning in disaster prone areas
Speaker Change: Enhancing risk mitigation is essential for sustainable development and reducing the devastating impact of these events on individuals, businesses, and economies.
Speaker Change: In catastrophe-prone areas, we must invest in ways that strengthen our infrastructure and less in the impact of future disasters.
Speaker Change: To put this in perspective, a recent report from the US Chamber of Commerce shows that every dollar spent on resilience saves communities $13 in damages, cleanup costs and economic impact.
Speaker Change: US homeowners are increasingly reliant on state-sponsored insurers of last resort in catastrophe-prone areas
in these circumstances.
Speaker Change: Pricing that accurately reflects the true cost of risk can often be compromised in favor of making insurance more available and affordable.
Speaker Change: Governments and regulators can help by prioritizing resilience and creating the right economic incentives to mitigate losses and foster sustainable improvements in insurance markets.
Thank you.
Speaker Change: Without increased resilience, the human toll will remain high and the cost of risk will continue to be a significant tax on economies, diverting funds from other important societal priorities.
Speaker Change: Turning to insurance market conditions, according to the Marsh Global Insurance Market Index, rates decrease 3% in the first quarter despite an elevated risk landscape. This follows a 2% decline in the fourth quarter of 2024.
as a reminder, our index skews the large account business.
Overall, rates in the US decreased 1%
Latin America was down low single digits, Joseph Smith,
Europe , UK, and Asia, we're down low to mid-single digits . . .
and Pacific was down high single digits. [inaudible]
Global property rates decreased 6% year-over-year, following a 3% decline last quarter.
Speaker Change: Global Casualty rates increase 4%, with U.S. Access Casualty up approximately 16% in the quarter.
Workers' Compensation Decrease Mid-Single Digits
Global financial and professional liability rates were down 6%
while cyber also decreased by 6%
Speaker Change: In re-insurance, despite the California wildfire losses, capacity remains more than sufficient to support compliant demand, including additional limits in loss-impacted programs.
Speaker Change: Throughout the first quarter, market conditions were consistent with what we saw at January 1st.
It was also a record quarter for cap-bond issuance
Speaker Change: U.S. Property Cat Reinsurance Rates remain competitive for the April 1 renewal period
Speaker Change: Non-loss-impacted rates were down 5-15%, while loss-impacted programs typically experienced 10-20% rate increases.
Speaker Change: In U.S. casualty reinsurance, we continue to see a range of outcomes depending on loss experience with primary carriers demonstrating limit, rate, and underwriting discipline. [inaudible]
Speaker Change: In Japan, April 1 property cat rates overall were down 10% to 15% on a risk adjusted basis.
Speaker Change: Early Science for the June 1 Florida Cat Risk Renoles Point to Similar Market Conditions seen in January and April
Speaker Change: with an anticipated increase in demand ready to be absorbed by more than adequate supply.
Speaker Change: As always, our focus is on helping clients navigate these dynamic market conditions.
Speaker Change: Now let me provide a brief update on our acquisition of McGriff, which closed on November 15th of last year [inaudible]
Speaker Change: Our colleagues at McGriff performed well in the quarter, and the integration remains on track. The team is quickly leveraging the broader capabilities of our company.
Speaker Change: while bringing their own distinct advantages to the market. We are already seeing wins from bringing together the best of both.
Speaker Change: As we said when we announced the transaction, McGriff is a business without standing talent and a track record of strong growth and I'm excited to have them as part of our firm
Speaker Change: Now, let me turn to our first quarter financial performance and outlook which Mark will cover in more detail.
Revenue grew 4% on an underlying basis.
with 4% growth in RIS and 4% in consulting. [inaudible]
Speaker Change: Marsh was up 5%, Guy Carpenter grew 5%, Mercer, 4%, and Oliver Wyman was up 4%.
Speaker Change: We had adjusted operating income growth of 8% and we generated adjusted EPS in the quarter of $3.06, which was up 5% from a year ago.
We also repurchased $300M of stock in the quarter. We also repurchased $300M of stock in the quarter.
Speaker Change: Turning to our outlook for 2025. We continue to expect mid-single digit underlying revenue growth, another year of margin expansion, and solid adjusted EPS growth.
Speaker Change: Of course, this outlook is based on conditions today, and the economic backdrop could turn out to be materially different than our assumptions
Speaker Change: In particular, and as discussed earlier, the uncertainty in ongoing trade negotiations and their affect on consumer and business confidence .
Speaker Change: could have a significant impact on the global economy and our results.
Speaker Change: In summary, we are pleased with our results and are off to a good start in 2025.
Speaker Change: We are well positioned and have a resilient business that provides critically important advice and solutions and we have proven our ability to deliver across cycles.
Mark Mcgivney: With that, let me turn it over to Mark for a more detailed review of our results.
Thank you, John . Good morning.
Mark Mcgivney: Our first quarter results are represented as solid start to the year.
Mark Mcgivney: Insolidated revenue increased 9% in the first quarter to $7.1 billion with underlying growth of 4%.
Mark Mcgivney: Operating income was 2 billion, and adjusted operating income was 2.2 billion, up 8 percent.
Our adjusted operating margin was 31.8%
Mark Mcgivney: Gap EPS was $2.79 and adjusted EPS was $3.06 of 5% over last year.
Mark Mcgivney: Looking at risk and insurance services, the first quarter revenue was 4.8 billion up 11% or 4% on an underlying basis
Mark Mcgivney: Operating income in RIS was 1.6 billion in the first quarter.
Mark Mcgivney: Adjusted operating income was 1.8 billion, up 8% over last year, and our adjusted margin was 38.2%.
Mark Mcgivney: Our margin in RIS reflected the impact of seasonality in McGriss Revenue we previously guided to.
Mark Mcgivney: At Marsh, revenue in the quarter was 3.5 billion up 15% from a year ago, or 5% on an underlying basis.
Mark Mcgivney: This comes on top of 8% underlying growth in the first quarter of last year.
The U.S. and Canada, underlying growth would 4% for the court.
International Underline Growth with 6%
Mark Mcgivney: Latin America, up 8%, EMEA up 6%, and Asia Pacific up 4%.
Mark Mcgivney: Dicarpenter's revenue in the quarter was 1.2 billion, a 5% on both a gap and underlying basics.
Growth remains solid, despite softer re-insurance market conditions. [inaudible]
Mark Mcgivney: and cave on top of 8% growth in the first quarter of last year.
Mark Mcgivney: In the consulting segment, first quarter revenue was 2.3 billion up 5% or 4% on an underlying basis.
Mark Mcgivney: Consulting operating income was $456 million, and adjusted operating income was $491 million, up 8%.
Mark Mcgivney: Our adjusted operating margin in consulting was 21.2% of 50 basis points from a year ago.
Mark Mcgivney: Mercer's revenue was 1.5 billion in the quarter up 5% or 4% on an underlying basis.
Health underlying growth was 7% [inaudible]
Reflecting continued solid growth across all regions.
Wealth was up 3% led by investment management.
Mark Mcgivney: Our assets under management were $613 billion at the end of the first quarter, down 1% sequentially and up 25% compared to the first quarter of last year.
Mark Mcgivney: Year-over-year growth was driven by our acquisition of Cardano, positive net flows in the impact of capital markets.
Mark Mcgivney: Career Declined 1% reflecting growth in international offset by continued slower demand in the US.
Mark Mcgivney: Oliver Wyman's revenue in first quarter was $818 million, an increase of 4% on both a gap and underlying basis.
Mark Mcgivney: Growth in the quarter was led by Strength in the US and came on top of 13% growth in the first quarter of last year.
Mark Mcgivney: The due sharing income was 103 million in the quarter, down 9 million from the fourth quarter, and 19 million compared with the first quarter last year, reflecting lower interest rates. [inaudible]
Mark Mcgivney: Looking ahead to the second quarter, we expect fiduciary income will be approximately $100.00
Foreign Exchange was a five cent headwind in the first quarter. [inaudible]
Mark Mcgivney: Exchange rates have been volatile over the past several trading days, making it challenging to predict their impact looking forward. However, based on current rates, we anticipate that FX will have an immaterial impact on earnings in the second quarter and the rest of the year.
Mark Mcgivney: Turnip Farmer Grip Transaction, as John mentioned, our integration continues to go well.
Mark Mcgivney: As we said last quarter, the first quarter is McGriff's seasonally smallest from a revenue perspective which resulted in modest delusion to adjusted EPS in the quarter.
Mark Mcgivney: We continue to expect that McGriff will be modestly accretive to adjusted ETS for full year 2025 becoming more meaningfully accreted in 2026 and beyond.
Mark Mcgivney: We still expect noteworthy charges associated with McGriff of approximately 450 to 500 million in total through 2027. With the vast majority of these costs associated with retention and sentence, a significant portion of which was put in place by the seller.
Mark Mcgivney: These costs flowed through our financial statements, but were funded by the seller through a purchase price adjustment.
Mark Mcgivney: As is our convention, we are excluding McGriff from our underlying growth calculations for the first year.
Mark Mcgivney: As we mentioned last quarter, we are now excluding acquisition related intangible amortization and the net benefit credit from our adjusted earnings.
Mark Mcgivney: Last quarter we provided a supplement to our press release that recasts historical financial information on this new basis of reporting
Mark Mcgivney: Total note where the items in the quarter were 91 million, the largest of which was 69 million related to McLennan
Mark Mcgivney: Interest expense in the first quarter was $245 million, up from $159 million in the first quarter of 2024
Mark Mcgivney: This increase reflects higher levels of debt associated with the McGriff transaction.
Mark Mcgivney: Our adjusted effective tax rate in the first quarter was 23.1%, which compares with 23.9% in the first quarter last year.
Mark Mcgivney: Our tax rate benefited from favorable discrete items, the largest of which was the accounting for share-based compensation, similar to a year ago.
Mark Mcgivney: Excluding discrete items, our adjusted effective tax rate was approximately 25.5%.
Mark Mcgivney: When we give forward guidance around our tax rate, we do not project discrete items which can be positive or negative
Mark Mcgivney: Based on the current environment, we expect an adjusted effective tax rate of between 25% and 26% in 2025.
Mark Mcgivney: Turning to capital management or balance sheet. We ended the quarter with total debt of $20.5 billion.
Mark Mcgivney: In the first quarter of 2025, we repaid 500 million of senior notes that matured in March.
Mark Mcgivney: Our next scheduled debt maturity is in the first quarter of 2026 when 600 million of senior notes mature.
Mark Mcgivney: Our cash position at the end of the first quarter was 1.6 billion [inaudible]
Mark Mcgivney: Uses of cash in the quarter totaled approximately 800 million and included 405 million for dividends, 95 million for acquisitions, and 300 million for sharey purchases.
Mark Mcgivney: We continue to expect to deploy approximately 4.5 billion of capital in 2025 across dividends, acquisitions, and share repurchases.
Mark Mcgivney: The ultimate level of sharey purchase will depend on how our M&A pipeline develops.
Overall, we are pleased with our first quarter results.
Mark Mcgivney: For the full year, we continue to expect mid-single digit underlying growth, margin expansion, solid growth and adjusted EPS
Mark Mcgivney: However, as John mentioned, this outlook is based on conditions today and the economic backdrop especially in light of recent uncertainty around global trade policies could turn out to be materially different than our assumptions.
With that, I'm happy to turn it back to John .
Thank you, Mark, Andrew. We are ready to begin Q&A. We are ready to begin Q&A.
Speaker Change: Certainly. We will now begin the question and answer session. If you have a question, please press star 1 1 on your touchtone phone. If you wish to be removed from the queue, please press star 1 1 again.
Speaker Change: If you're using a speaker phone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star 1-1 on your touch-tone phone.
Speaker Change: In the interest of addressing questions from as many participants as possible, we ask that participants limit themselves to one question and one follow-up question
One moment for our first question.
Gregory Peters: Our first question comes from the line of Gregory Peters with Raymond James [inaudible]
The tariffs and the trade issues that challenges the trade issues.
Maybe you can provide some additional color on...
Gregory Peters: Yeah, I'm sure Greg, you know, look, I think it's difficult to say on a country by country basis what
Gregory Peters: You know, what parts of our business might be more impacted? Obviously, you know, there's much more in front of...
Gregory Peters: us all, you know, in terms of those negotiations, and so, you know, it's quite a fluid situation, you know, at this point anyway I would say there's no real direct impact to our business, but of course we'll be indirect impacts.
Global GDP, may slow at least until there's some resolution.
Gregory Peters: as business confidence declines. You know, see market volatility, of course, in our investment business. You know, and that's...
Gregory Peters: You know, could create some challenges in our OCIO business, but also create some possibilities around the advisory work that we do on behalf of our clients. And as I noted in my prepared remarks, it's likely to be inflationary on lost costs again.
Gregory Peters: We'll see how things settle out. Here remains to be seen, of course, what it might mean to drug costs in the United States and our employee health and benefits clients here in the US.
Gregory Peters: Obviously, for the global economy, a quicker resolution to these negotiations is important.
So businesses and consumers can move forward with greater confidence.
Gregory Peters: But, you know, as you mentioned, change is generally good for, you know, our consulting businesses. And so, again, we're not immune at all to macro GDP pressure, but we are a resilient business. And, you know, again, as we see it now.
Gregory Peters: We continue to expect mid-single digit revenue growth, margin expansion, and solid growth and adjust to the EPS.
Do you have a follow-up correct?
Gregory Peters: Absolutely. My follow-up question just put it back to the capital allocation commentary.
Gregory Peters: One of your peers, you know, is also pretty active in the marketplace and and encountered some.
Anti-trust issues with their pending acquisition.
Gregory Peters: And I know you have a robust record of doing acquisitions in North America and elsewhere. I'm just curious what your view is as you continue to evaluate the landscape of potential opportunities. How that might be.
Square are reconciled with growing antitrust potential risks.
Gregory Peters: Yeah, I'm not familiar with the details of course of, you know, of that particular issue, you know, obviously, you know, you can check with them, worked.
We're very thoughtful and mindful of antitrust risks.
Gregory Peters: and, you know, and, and broadly speaking on, you know, on M&A. As you point out, for a long time, it's been an important value creator for us. We remain quite active in the market.
Gregory Peters: We did four small deals in the first quarter. Our pipeline remained strong.
and we have a really attractive...
Gregory Peters: Reputation as a as a partner in that marketplace and so and you know
Gregory Peters: Last year, again, was just an outstanding year for us. I talked about McGriff and my prepared remarks, Greg. But I would also note, we acquired two other top 100 agencies, Summit MMA last year.
Gregory Peters: Fisher, Brown Patrell, and Horton. And in addition to that, we acquired Cardano and Vanguard's USOCIO business and our investment business. So, it was really a terrific year for us in that respect.
Gregory Peters: So, you know, we're excited about the possibilities going forward. You know, I'd also note, you know, while we're on this subject, you know, we're more likely to continue with mostly
Gregory Peters: We have the capacity to do something bigger but we're not just looking to get bigger you know we do want to grow of course but we want to get better along the way and the businesses that I mentioned
Thank you, Greg. Andrew, next question, please?
Speaker Change: Certainly, our next question comes from the line of Mike Zaremski with BMO Capital Markets.
Mike Zaremsky: Hey, thanks. Good morning. Maybe going back to the macro backdrop and make sense in the remarks, you know, the less predictable and uncertainty, you know, those words were used. I guess when we, you know, historically, when we look at
Mike Zaremsky: Marsh's revenue growth, kind of sensitivity to the macro. The company's done a great job kind of managing.
Mike Zaremsky: It's expenses to kind of manage through on the profit margins to make it kind of a more shallow of an impact.
Mike Zaremsky: I know over the years too that I think you've worked, marshes work to make some of its businesses like Career Potential, also less macro sensitive but I'm just kind of curious are you guys adopting a similar playbook right now given the uncertainty to kind of manage?
Mike Zaremsky: Your expenses and are used in kind of the same playbook as the past or is it is it's tougher now given just the unpredictability of certain factors.
Speaker Change: Yeah, thanks, Mike, for the question. Let me talk about the first quarter, just for a second, as I said, it was a solid start to the year. It was largely in line with what we had expected. We guided to a slower start to the year, right? So we did anticipate...
Speaker Change: Lower GDP in the first quarter, fiduciary income, of course, was going to be under some pressure due to lower interest rates. Mark talked about the impact there. And we anticipated a bit softer pricing in the PNC market. And so all of that factored into our guidance and our expectations around the first quarter. Thank you for joining us today.
Speaker Change: And then, at the same time, last year, we just had an outstanding start to the year, and it was our strongest quarter of growth during the year. And so, we expected some macro headwinds and got them, and we had a very tough comp as well. But again, in line with our expectations, growth overall was good, though. It was solid across all of our businesses.
You know, and I've shared our outlook.
Speaker Change: But yeah, we certainly model downsides scenarios to revenue. We model upside scenarios too. I think it's important so that we're constantly doing that, so we're being this thoughtful about capital allocation.
Speaker Change: As thoughtful about expense management, regardless of the, you know, the environment, again, whether we have tailwinds or headwinds, we're constantly doing that. It's a critical part of our management, our management playbook. In in downside scenarios, yes, we have levers to pull and you know, we know what they are. We're in, we're in, we're in.
Speaker Change: We spent a fair amount of time talking about them and so if things, Mike Lyckin, Sentiment, Tails Comp that are naturally going to fall off in a slower revenue growth environment, we of course would look to slow discretionary spending
Speaker Change: T&E, other outside services, you know, as an example, and we can slow hiring, great comp and bend is obviously a meaningful part of our.
Speaker Change: of our overall expense picture. And we can harvest voluntary turnover attrition as well. And then in more severe scenarios, there are other levers to pull. And so, you know, we model those things. We're not, however, going to damage the business in the medium to long term. We want to grow our business and be there for our clients. [inaudible]
Speaker Change: You know, we know the levers to pull and we will pull them as we see data emerge that requires it.
Do you have a follow-up, Mike?
Yeah, quick follow-up Um,
I don't know if you have any [inaudible]
Speaker Change: You know, I think you cited in the Mars pricing index that global property continued to to decelerate [inaudible]
Speaker Change: You know, I know you guys are working hard, obviously, to get your clients better rate. But, you know, would you expect at a macro level global property rates to continue to be a negative territory?
Speaker Change: Kind of assuming normal catastrophe levels, just given just the extent of how hard that market was for a long period of time I don't know if there's any terms of conditions changes that are taking place or any color there it seems to be the
Speaker Change: The, you know, I think we all know casualties is the problem trial, but property seems like it's it's it's continues to soften. So just looking for color. Thanks.
Speaker Change: Yeah, sure, maybe I'll share a couple of high-level comments and I'll ask both Martin and Dean just to talk about what they see in the market. So as I said, we expected a bit of a softer market prices.
Speaker Change: I'm not declaring it a soft market, just to be clear, but price is softened a bit in the quarter. We expected that, you know, and it is, as you point out, welcome relief to our client after the clients after five years of, you know, pricing. I mentioned in my prepared remarks, you know, you've seen [inaudible]
Speaker Change: Strong underwriting results for both insurers and re-insurers. And, you know, I'm...
You're giving the...
Speaker Change: Those results, they're more growth oriented, maybe than they've been, you know, over the course of the last couple of years. Property was the, you know,
Most notable...
Speaker Change: Rate of increase decline on the other side, as you point out, casualty, particularly casualty here in the United States and excess liability. That market is under some stress from our clients perspective, but Martin, maybe you could talk a little about the insurance market in the quarter. We're in.
Speaker Change: I'm sure some thoughts were like, of course, do I have to say, as we mentioned, the Global Rate Index declined 3% in Q1.
Speaker Change: The third sequential course of rate declines and overall the composite rate index remains up one and a half times since its inception in 2012. So to your point, it's been a long period of pain for our clients.
Speaker Change: I'm just going through the lines of coverage, casualty, saw rates of 4% globally.
Speaker Change: Providence is down six with the US and the Pacific experienced the largest decreases followed by the UK at six percent and all other regions saw those single-digit declines
Thin Pro's down 6% cyber down 6% reflecting previous trends.
Speaker Change: to keep in mind that our end excuse to lodge your account, as we mentioned.
Speaker Change: We've a diversified business with large exposures to the middle market where pricing tends to be invests equal.
Speaker Change: However, our focus is obtaining the best outcome for our clients with the bullish coverage and the best value and we continue to do the next job doing that. Thank you, Martin. Dean, maybe you could share some thoughts on the reinsurance market.
Dean Klusur: Great. Thanks, John . Michael, give me a little bit of color on the April 1 re-insurance market. Mostly focused on property cat here, which I think a key driver in the ecosystem of the market.
Dean Klusur: But in April 1, we saw a continuation of market conditions that we experienced in January 1.
Dean Klusur: As John noted, we continue to see a very competitive market with the modest increase in client demand.
mostly from personal lines and E and S riders.
that are both driving underlying primary insurance rate increases.
Dean Klusur: John noted, capacity in the property market has been ample, driven by very strong green and sure returns.
Dean Klusur: in 2024 reported at 16% as an indices. The reinsure appetite for property cat continues to increase.
They're writing more. They've been more aggressive.
Dean Klusur: But I think the real takeaway, the headline, Mark, is that, you know, the California wildfires . . .
Dean Klusur: had really little of no impact on pricing terms and conditions in the property cat market at April 1. John talked about a US property cat. We saw 5-15% rate decreases for non-moss-impacted accounts.
. . .
Dean Klusur: You know, turning to Japan, which John touched on, we saw a very orderly property cat renewal at April 1
Again, capacity was strong. [inaudible]
Many of our cap programs were oversubscribed in the market.
Dean Klusur: We see stable demand from clients in Japan, really offset by greater increases in capacity, few structural changes.
Dean Klusur: Attachment points that were hard fought two years ago, literally stayed unchanged in the Japanese marketplace.
Dean Klusur: You know, in property cat rates were down 10% to 15% on average in Japan, again, really no impact from the California wildfires, you know, on the Japanese market, you know, capital is plentiful in the reinsurance market [inaudible]
Dean Klusur: You know, we talked about at the January 1 or in a while that dedicated reinsurance capital was up 7 percent
Dean Klusur: We see capital increasing, we see reinsurance to point more capital, we see a very strong ILS market, you know, John talked about record cap on issuance so all these things are adding up to additional capital and capital deployment in the property cap market. [inaudible]
Dean Klusur: Thank you, Dean. You know, Mike just one last thought is, you know, the market's now pricing in well and excess of a hundred billion dollars of insured cat losses. So it's obviously, you know, early in the year.
Dean Klusur: You know, though, as you know, Guy Carpenter's biggest quarters are the first and second quarter rates, so...
Dean Klusur: You know, that's really a reflection of treaty renewals and where they are in the calendar. They are so...
Speaker Change: So, you know, impacts to us will be, you know, really down the road if the cat sees and turns that to be very different than what we expect. But thank you Mike. Andrew, next question please.
Speaker Change: Our next question comes from the line of Jimmy Bhullar with J.P. Morgan . .
Jimmy Buehler: Hey, good morning. So I had a question just first on Oliver Meyman.
Speaker Change: And I'm assuming that the uncertainty and all the great talk is creating some demand in certain verticals but overall is the environment and the increased uncertainty positive or is it overall a negative for all of our environment just as it is.
Yeah, thanks Jimmy.
Speaker Change: I think a good start to the year for Oliver Wyman, it was on 4% growth on top of 13% last year, so just, you know
Speaker Change: Big, big quarter year ago, so a tough comp, but sales have been solid. As you point out, it is discretionary spend, so maybe I'll ask Nick to share a little bit more color about what we're seeing in that market. Thank you Jimmy, it may be just a bit of context, which I know I often...
Speaker Change: The geopolitical policy and economic uncertainty is not brand new, but also on the supply side you've had a couple of years where oversupply on the industry has been working its way through.
Speaker Change: And, you know, you'll have noted we did not appear on the list of new large suppliers to the US government, but that has created some increase over supply.
Speaker Change: But notwithstanding all of that bumpiness the market continues to grow We are very happy with the first quarter as John said given the high comp within that
As you note, there are some strong areas of growth. The US and Canada mockled out, but also...
Speaker Change: are insurance and asset management and actuarial practices, which are increasingly working closely together have standout growth.
Speaker Change: We saw good growth in consumer telecoms and technology, also a very strong growth in transportation and advanced industrials.
Speaker Change: and our banking practice as well. Did well and our finance, risk and restructuring practices were also in double digits.
Let's even grow
Speaker Change: Elsewhere. I think to get to the other of your question, as you know we have relatively short visibility, when the big questions for our clients change that tends to be very good for our business.
Speaker Change: When there's a lot of confusion and short term uncertainty, that is less so. It can often lead to a little bit of a freeze.
Speaker Change: I don't think current events necessarily pressage a tough period ahead, it's a bit too early to tell so we're on watch
Speaker Change: But for now we remain very busy. We're confident in our ability to help our clients in their most transformative moments when the big questions change.
Thank you Nick, Jimmy, do you have a follow-up? [inaudible]
Jimmy Buehler: Yeah, maybe just for Dean, you gave some good color on renewals recently, 1-1 and April as well. Should we, are you expecting media renewals to be similar in terms of...
Speaker Change: Terms and changes in attachment points and pricing, or do you expect a change one way or the other? [inaudible]
Yeah, thank you.
Yeah, thanks, John . The answer is yes.
Speaker Change: that we experienced at January 1 and April 1. You know, the market in Florida remains very stable despite the hurricanes last fall.
Speaker Change: So we expect cap pricing to be very, very similar, you know, as 1-1 and 4-1. We see an adequate supply of capital in the Florida market.
Speaker Change: and certainly the active cap on market is kind of bolstered that impact to capacity. We see clients buying more property cap limit at the June 1 renewal and we're starting to see benefits from the Florida Legal Reform.
and Rob Green.
Thank you, Dean. And thank you, Jimmy. Andrew, next question please.
David Mothamaden: Certainly. Our next question comes from the line of David Motemaden, with Evercore ISI.
David Mothamaden: Hey, thanks. Good morning. Just another question just given the macro environment and some of the policy questions. Could you help me think through how much exposure Marsh has across the company to government consulting or government contracts?
David Mothamaden: Yeah, thanks David for the question. Nick talked about it touched on it a bit in terms of U.S. governments, at Oliver Wyman. We do work for governments all over the world.
David Mothamaden: Most of that work is in Oliver Wyman, then then Vursor, but Marsh & GC have a little bit of it as well.
A lot of that work is really important advice [inaudible]
David Mothamaden: You know, I talked about resilience and sustainable development in my, in my prepared marks [inaudible]
David Mothamaden: A lot of the work is around that, those subjects. But what I would say to you, David, is that overall, that work is not material to the company overall.
Great, thanks. And then…
Speaker Change: I know the comp was tougher but I'm wondering was it all just the pricing slowdown or was there any impact from...
David Mothamaden: Maybe a little bit of overlap with McGriff and some of the existing Marsh Book.
Just looking for a little bit of color there, thanks.
David Mothamaden: Yeah, I'm for sure, and I'll ask Martin to jump in, but unrelated at all to McGriff and Mark Notem, McGriff's not in or on drawing revenue calculation, you know, and...
David Mothamaden: We couldn't be more pleased with how my grip has gone to date. We've got a lot of work still in front of us, but so far so good and remain very, very excited about that. But more and maybe you could talk about growth in the US in particular. Of course, John , yeah.
David Mothamaden: So, a solid start to the year with our 5% growth, which as you say was on top of a big comp.
Mark: and in the US in particular, US growing up 4% which is on top of 8 in 1 to 24, still strong performance in MMA and whilst McRiff is not an armed line growth, we're thrilled to start the year.
Mark: Specialty Performance was particularly strong. We saw an uptick in Thimpro. Offsetting this performance, there was weakness in construction and property. Construction really is a reduction in new business driven by some of the uncertainty around the geopolitical environment and the cost to rebuild.
and Property Rates in them accelerated their declines to 9%
Mark: So, whilst we don't look to one quarter to go to evaluate performance over time, our US business has seen tremendous growth in the post pandemic area. We're very well positioned in the future and our international business.
Mark: continues to grow well, 6% on top of 8% in the first quarter of 24, and so strong new business growth
Mark: Latin America, eight on top of eight in the Q1 last year, Amir six on top of nine, Apex four on top of six, and particularly strong growth in our benefits business, which is performing well around the world.
Speaker Change: Thank you. Thanks, Martin. And thank you, David. Andrew, next question, please.
Speaker Change: Our next question comes from the line of Alex Scott with Barkley's [inaudible]
Thank you.
Thank you. Good morning.
Speaker Change: You know, I think a couple of different times you mentioned how much your indices kind of skew towards the larger end of the market. So I was wondering if you could give maybe some color on what you've seen in your middle market business and, you know, just
Speaker Change: There is a divergence, how big is that divergence you're seeing in terms of how cyclical the businesses are to pricing?
Speaker Change: Yeah, Alex, thanks for the question. Good morning to you as well. It's, you know, it's interesting. I mean, I think it's not a recent phenomenon but really over a long period of time where the middle market, you know, tends to be...
Speaker Change: Tense Provide, you know, much more consistent pricing, you know, from year-to-year. So middle-market pricing was essentially up a couple of points in the quarter.
You know, you'll hear underwriters, of course, insurers. [inaudible]
Speaker Change: Report on Rate Change throughout the earning season here. The biggest difference between what they report and what we report.
Speaker Change: is new business and so we have a view because it was our client a year ago of how that rate change materialized. And typically new business will trade at a slightly better price than from the client's perspective. Thank you.
and then a business that has renewed. So, but...
Speaker Change: The gap is what you see a couple of points favourable.
Speaker Change: in the middle market is what we observed here in the United States and large account market can move much more in a cyclical fashion.
Do you have a follow-up Alex?
Yes, and thanks for that response [inaudible]
Speaker Change: But we need to think about 2Q and just being a more property heavy renewal quarter. I mean, you know, how much seasonality I get I guess it's not typical seasonality, but just how much year-to-year .
Speaker Change: Do we need to be thinking about for property specific to 2Q because of that concentration?
Yeah, you know, look, I think it's um...
Speaker Change: It's hard to predict future markets. Dean talked about it in terms of re-internance. There is a seasonality.
Speaker Change: to the re-insurance business, right? So, with a lot of property cat exposure, of course, being in the United States.
Speaker Change: and because insurance companies want to have some level of certainty around what their insurance programs look like if they, you know, pursue their goals during the course of the year.
Speaker Change: The beginning part of the year is where really almost all the action is from a re-insurance perspective so Dean spoke to that, it's been a competitive market and it's really a reflection of what's been very strong
Speaker Change: underwriting results at insurers and re-insurers. And as I said, many of them are looking to grow given the results they've printed the last couple of years. So we expected that, for sure.
Speaker Change: You know, at Marsh, it's going to be, you know, in a retail business, it's going to be, you know, more account to account and driven by some market forces, of course, but, you know, ultimate loss experience, you know, by clients. So, you know, again, we continue to see
Speaker Change: an increase in frequency and severity of Natcats, not just here in the United States. And we see, you know, inflation.
Continuing to be a challenge.
Speaker Change: So, you know, over time, you know, we think the cost of risk is continuing to rise, it's why I was...
Speaker Change: Spend some time in my prepared remarks, talking about the need for communities to invest.
Speaker Change: in Resilience, right? There's in my view too much discussion about
How to find cheap insurance or subsidized insurance [inaudible]
Speaker Change: Of course, insurance costs are important to the local economy. I'm not trying to discount the importance of that But ultimately, the way to deal with that is to bend the risk curve [inaudible]
Speaker Change: and we need investment. We have much more exposure to capron areas than we've had in the past. So we'll manage through the cycle of pricing. We expect it to be more competitive throughout the year, but over time those costs are continuing to grow.
Thank you, Alex. Andrew, next question, please.
Speaker Change: Our next question comes from the line of Meyer Shields with KBW Thank you.
Great. Thanks for taking my question. Good morning.
Speaker Change: from an external perspective. In other words, from our perspective, how should we think about the impact of? [inaudible]
Speaker Change: Re-insurance pricing, impacting guy carpenters organic growth. Is it comparable to what we see in primary insurance? Are dynamics different there? And out of the, I guess significant amount of loss impacted accounts coming up for renewal at mid-year impact organic growth prospector guy carpenters?
Speaker Change: Yeah, thanks, Mayor. You know, what I would say is if you recall when re-insurance pricing was going up, you know, meaningfully, you know, we talked a bit about this because I think you all were trying to get a sense of
Speaker Change: Revenue growth to the upside in our business there. Thank you very much.
Speaker Change: We get paid in commission at Guy Carpenter, but of course we're very transparent with insurance company clients and so we negotiate essentially an outcome and so in some respects it can act feel like but but again with pricing pressure, you know that you know that does impact. So, um...
Speaker Change: It does impact our revenue line overall but we thought we had a terrific start to the year at Guy Carpenter, some of the market forces that helped
Speaker Change: You know, what's been just an outstanding period of growth over the last couple of years have subsided, but again, we've factored that into our guidance. And the work we do on behalf of insurance companies is absolutely critical, you know, helping them navigate the complexity and the volatility, you know, that economies.
Speaker Change: and of course natural catastrophes are a huge part of that. So, you know, again, think commission, but also think negotiated outcomes.
Speaker Change: Okay, so that's very healthy. You have a follow-up there? Second. Yeah, just a quick one. You talked about the overall EPS impact on from foreign exchange. Did that impact either of the segments and margins material? Yeah, that's very healthy.
Speaker Change: Mark, maybe you can jump in. Yeah, man, no, FX was not a story for margins in the quarter and actually the impact even on earning segment to segment was pretty even.
Speaker Change: and Mayor, I would just add that, you know, I would just add that, you know,
Speaker Change: The headwinds on margin expansion came from MNA, right? And, you know, primarily McGriff, but the other deals that I mentioned, you know, last year as well. And, you know, there's, Mark and I both have mentioned the seasonality of McGriff on revenues.
Speaker Change: All those businesses clearly make us better. So, you know, habitat trade, you know, a quarter of margin contraction for, you know, what will become a bigger and better business as a result of those deals.
Thank you.
Thank you. Andrew, next question please. Please.
Speaker Change: Our next question comes from the line of Elyse Greenspan with Will's Fargo
Thank you.
Elyse Greenspan: Hi, thanks. Good morning. My first question. I wanted to go back to Guy Carpenter. I'm the 5% organic growth in the quarter. I was just trying to get a better sense of what's driving that. I know you guys are talking about pricing demand, etc. But what kind of drove the slow down there in the quarter? And I'm particularly interested in you can give us a sense of new business as well as renewal trends in the Q1 within that 5%. I'm sorry. I'm sorry. I'm sorry.
Elyse Greenspan: Sure, sure. So Elyse, again, we're pleased with the start to the year at Guy Carpenter, you know, with 5% growth, we had an excellent start to the year. Last year, we had 8% on the line of growth in the quarter.
Elyse Greenspan: You know, client demand for our services remains quite strong. Obviously, you know, as we just talked about with Mayor, you know, pricing, you know, impacts, you know, growth at least in the near term. But Dean, maybe you could share some thoughts on where, you know, where we see opportunities for growth and. [inaudible]
and you know some of the-
Dean Klusur: contributing factors aside from price that impacted us in the quarter. Yeah, thanks, John . And good morning, Louise. You know, as John noted, you know, property cat, you know, is a growth headwind, you know, in the quarter and moving forward.
Speaker Change: But again, we saw a very balanced growth globally across our regions and our global specialty business. We're driving outstanding growth in Latin America in the Middle East, where we invested heavily. To your point, at least we had very strong new business in the quarter.
you know, including record cap bond issuance.
Thank you so much.
Speaker Change: and we started a small boutique banking practice. We're raising capital for clients for providing M&A advisory.
We're designing side cars, reciprocals and other capital structures for clients [inaudible]
and that business is really going well.
Speaker Change: You know, and we do see clients purchasing, you know, additional property cab limit, you know, given favorable market conditions.
Thank you, Dean Elyse, the other follow-up.
Elyse Greenspan: Yeah, my follow up question, I was hoping that maybe you'd be willing to disclose the revenue growth McGriff saw in the quarter and then is there seasonality we need to think about in the other three quarters of the year, or is it more consistent, you know, revenue and margins, you know, relative to obviously there was, you know, a negative seasonality in the Q1.
League retention and notably producer retention has been outstanding to date. So it was a good start and extends our reach into the middle market, which we really like they had industry and specialty capability that we know can strengthen MMA as well and in our positions MMA is about a $5 billion business.
Elyse Greenspan: On an annual basis, and so and the possibilities for us to bring scale benefits to middle market clients.
Elyse Greenspan: A real opportunity there so.
Mark: So I don't think there's any kind of big lumps up and down Mark, but maybe you could talk more about the seasonality from a growth for the rest of the year. Yes, Q1 is their softest quarter from a revenue perspective, Q2 Q4 tend to be there. They are biggest so Q3, <unk> or smaller small yeah. It wasn't so it was because it was good it was good growth.
Elyse Greenspan: Sure.
Elyse Greenspan: Q3 will be.
Speaker Change: A little bit of a seasonal low as well, but nothing on the order of what we saw in Q1. So the trend we saw in Q1 will moderate as we go through the year terrific. Thank you Mark. Thanks, Elyse Andrew next question. Please.
Speaker Change: Our next question comes from the line of Paul Newsome with Piper Sandler.
Paul Newsome: Good morning, I was hoping to focus a little bit more on M&A.
Speaker Change: If you had any thoughts as to the increase in uncertainty.
Paul Newsome: <unk> changed the M&A outlook more.
Speaker Change: Through the market.
Paul Newsome: Thanks, Paul for the question no I don't think so I mean, we're.
Paul Newsome: Again quite active in that in that market.
Paul Newsome: There are businesses out there much like I've described mcgriff that we've admired for a long time and we think can can make us better. We think we can bring benefits to to.
Paul Newsome: To those businesses as well and so.
Paul Newsome: It's.
Paul Newsome: When we acquire.
Paul Newsome: Companies, we we know them right. We spent a lot of time.
Paul Newsome: Thinking about culture thinking about fit.
Paul Newsome: And thinking about the possibilities for growing together, so we have a long term view of it.
Paul Newsome: What the macro environment does too.
Paul Newsome: Cost of capital or for other investor interest in in some of these businesses is a different thing who knows.
Paul Newsome: But we've we're 150 years old this year 154 years old excuse me this year.
Paul Newsome: We've been a consolidator for for 154 years, and we continue to see that as an opportunity and it doesn't just delivered for the shareholders of course, where we wanted to deliver growth for all of you.
Speaker Change: Ted before we can bring scale benefits to the middle market.
Speaker Change: That can enable greater economic sustainability and greater success for our clients in the middle market and so it starts with the it starts with client value in acquiring talent that can help us make that happen.
Paul Newsome: Do you have a follow up Paul.
Paul Newsome: A little bit more of a detailed question.
Paul Newsome: Wonderful commentary about the property cat reinsurance market.
Paul Newsome: One question I had was about whether or not you thought.
<unk>.
Paul Newsome: Florida has had an impact.
Paul Newsome: As well.
Paul Newsome: Given the peak.
Paul Newsome: Obviously peak load.
Paul Newsome: Property cat.
Paul Newsome: Yes, Thanks Paul.
Paul Newsome: Dean mentioned, it very briefly but.
Speaker Change: It's early but the early signs have been positive right and.
Paul Newsome: Hi.
Speaker Change: I chose to spend a little bit of time.
Paul Newsome: In my prepared remarks talking about resilience.
Paul Newsome: And the important to invest in resilience by communities.
Paul Newsome: And.
Paul Newsome: In the case of Florida, there obviously.
Paul Newsome: Largely focused on the property cat market those reforms that are important reforms in Georgia.
Paul Newsome: That are.
Paul Newsome: Being rolled out now that.
Paul Newsome: That attack more of the liability issues.
Paul Newsome: I mentioned, the rising cost of risk and I referenced in my prepared remarks.
Paul Newsome: Social inflation some of the insurance companies that we do business with don't even like that label.
Paul Newsome: They prefer to call it legal system abuse and.
Paul Newsome: But the litigation environment here in the United States is clearly.
Paul Newsome: Tax on our economy, and so we're working to have to support sensible reforms by state.
Paul Newsome: The federal government level, because it continues to be a challenge, but but I think the.
Paul Newsome: The steps, Florida took our helpful. We'll see ultimately where it goes.
Paul Newsome: Keep an eye on what happened there in Georgia, I think thats those are important steps as well and of course state by state get different challenges.
Paul Newsome: Different the legislature makeup is going to be different state to state as well and so.
Paul Newsome: We're investing against those.
Paul Newsome: <unk> to try to help our clients navigate what is a very expensive litigation environment here in the U S.
Speaker Change: Thank you. Thank you Paul.
Speaker Change: Andrew with that we're ready to wrap up certainly want to thank you all I want to thank you all for joining us on our call. This morning in closing I want to thank our colleagues for their hard work and dedication and I also want to thank our clients for their continued support. Thank you all very much and we look forward to speaking with you all next quarter.
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