Q2 2025 Marsh & McLennan Co Inc Earnings Call
To marshmallows earnings conference calls. Today's call is being recorded, second quarter, 2025 Financial results. And supplemental information were issued earlier this morning.
They are available on the company's website at Marsh McLennan.
Please note that today's remarks may include forward-looking, statements, forward-looking statements are subject to risks and uncertainties and a variety of factors may cause actual results to different materially from those contemplated by such statements.
For more detailed discussion of those factors, please refer to our earnings release for this quarter into our most recent SEC filings including our most recent form. 10K, all of which are available on the market and website,
During the call today we may also discuss certain non-gaap Financial measures for a Reconciliation of these measures to the most closely comparable, gaap measures, please refer to the schedule in today's earnings release.
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John Doyle: 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 second quarter results. Reported earlier today, I'm John Doyle president and CEO of marsh McLennan.
Speaker Change: On the call with me is Mark mcgibney our CFO and the CEOs of our businesses, Martin south of marsh, dean casur of guy Carpenter, Pat Tomlinson of Mercer and Nick stutter of Oliver Wyman.
Speaker Change: Also, with us this morning is Jay Gelb head of investor relations.
Speaker Change: Marshman had a solid second quarter.
Speaker Change: As we said, coming into the year, we anticipated impacts from a changing macro environment and our performance continues to track. Well, with our expectations overall, we grew Revenue, 12%, in the quarter.
Reflecting continued momentum in our business and contributions from an active year of Acquisitions in 2024.
Speaker Change: Underlying Revenue increased 4% for the quarter.
Speaker Change: I was pleased with our execution, especially given the impact of lower fiduciary interest income.
Declining PNC pricing and Market uncertainty affecting our clients especially here in the US.
Speaker Change: Adjusted operating income increased 14% from a year ago.
Speaker Change: 4 and adjusted. The EPS grew 11%.
Speaker Change: Turning to the macro environment.
The global economic Outlook remains uncertain as we move into the second half of the year.
Ground Wars culture wars, trade Wars, extreme weather, and the opportunities and risks from the rapid development of AI are creating complex operating conditions.
Speaker Change: Oliver Wyman recently, teamed up with the New York Stock Exchange to see how CEOs are thinking about and responding to the challenges they face.
Speaker Change: 165 CEOs responded on topics ranging from managing geopolitical, instability and supply chain, disruption to capturing value from AI.
Speaker Change: in all 89% of CEOs, rated geopolitics along with trade and industrial policies as a risk to their company up, 20% points from 2024,
Speaker Change: CEOs are focused on extracting growth in a slowing economy and a more complex geopolitical environment while tightly managing costs and spending more time on near-term issues.
Speaker Change: While the environment presents challenges for our clients, it also provides Marsh McLennan with an opportunity to support them.
Speaker Change: We're advising clients on near and long-term strategies and guiding them on growth and building resilience during this Dynamic period.
Speaker Change: This includes analyzing supply chain risks and helping them consider the impacts of AI on their Workforce.
Speaker Change: Together, we can transform these challenges into opportunities.
Speaker Change: I also want to take a moment to address the current litigation environment in the US.
Excessive litigation and the abuse of our legal system. Are effectively imposing a tax on our economy and causing a surge in US. Liability insurance costs
us already has the highest liability insurance rates in the world and escalating costs will only make it harder for companies to decide to invest and grow here.
Speaker Change: And for those that do, they will ultimately have to pass along these increased costs to Consumers.
Our tort system is intended to provide Fair, compensation to Injured parties, who have been wrong.
Speaker Change: But too often, we see tort litigation backed by a vast and growing industry with outside investors.
The result in many cases is that agreed parties see less than half of the settlement Awards.
Speaker Change: Our clients are feeling the effects of this growing problem.
Speaker Change: consider the rise of so-called nuclear verdicts cases exceeding 100 million dollars have grown 400% over the past decade, according to the US Chamber of Commerce,
Speaker Change: this trend is encouraging more lawsuits and Blockbuster verdicts, which drive up Insurance costs.
Speaker Change: In fact, in 2024 us liability insurance experience the most severe adverse Reserve development of any single line of coverage since the 2008 Global financial crisis.
Speaker Change: This was more than double the amount from the previous year.
Speaker Change: And over the past decade us excess casualty insurance rates have increased by a cumulative 150%.
Addressing these tour. Abuses will be challenging and take time. We are committed to working with the business community and policy makers to tackle this challenge.
Speaker Change: Now turning to Insurance market conditions, overall rates, continue to decrease particularly in property insurance and property cat reinsurance.
Speaker Change: According to the marsh Global Insurance market index, commercial insurance rates, decreased 4% in the second quarter driven by property despite a surge in cat losses in the first 6 months of the year.
Speaker Change: This follows a 3% decline in the first quarter of 2025.
As a reminder, our index skus to large account business.
Overall rates in the US were flat.
Speaker Change: Latin, America, Europe, UK, and Asia were all down. Bid single digits and Pacific was down double digits.
Speaker Change: Global casualty rates, increased 4%.
Speaker Change: With us excess casualty up, 18% reflecting the previously mentioned liability environment.
Speaker Change: Workers compensation decreased by 4%.
Speaker Change: Global property rates decreased by 7% year-over-year compared to a 6%. Decrease last quarter,
Speaker Change: Global Financial and Professional liability rates were down 4% while cyber decreased 7%.
Speaker Change: In reinsurance mid-year, renewal rates decreased by 5 to 15%.
Speaker Change: For non-law impacted programs.
Speaker Change: The cap bond market is on Pace for a record year of issuance with over 50, new Bonds in the first half involving approximately 17 billion dollars of limit.
Speaker Change: In US casualty, reinsurance renewals were largely stable with sufficient capacity reflecting the underwriting actions of primary carriers.
As always, we continue to help our clients navigate a range of market conditions.
Speaker Change: Now, let me turn to our second quarter, financial performance and Outlook which Mark will cover in more detail.
Consolidated Revenue, increased 12% to 7 billion dollars and grew 4% on an underlying basis with 4% growth in ra and 3% growth in Consulting.
Speaker Change: Marsh was up 5%.
Speaker Change: Guy Carpenter grew 5% Mercer 3% and Oliver Wyman was up 3%.
Speaker Change: We had adjusted operating income growth of 14% And we generated adjusted EPS in the quarter of $2.72 which is up 11% from a year ago.
Speaker Change: We also announced a 10% increase to our quarterly dividend to 90 cents and completed million dollars of share repurchases during the quarter.
Speaker Change: Turning to our outlook for 2025. We continue to expect to deliver mid single digit, underlying Revenue growth, solid growth and adjusted EPs and our 18th consecutive year of reported margin expansion.
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 summary, we are pleased with our first half performance in a complex and dynamic macro environment.
Speaker Change: We're confident that the enduring value. We provide to clients,
Speaker Change: Makes our business resilience, even during times of economic uncertainty.
Speaker Change: Our collection of capabilities is unique and there are strong client demand around the world for Our advice and solutions. We believe We are the best position company in our markets and we've earned our leadership position through 154 years of innovation and growth.
Speaker Change: Our discipline to invest for the future while, delivering consistent results is not new. It's a fundamental philosophy that guides our planning and capital allocation.
Mark: With that, let me turn it over to mark for a more detailed review of our results.
Thank you, John. Good morning.
Speaker Change: Our second quarter results were solid reflecting our strong position and execution despite a more challenging environment.
Speaker Change: Consolidated Revenue, increased 12% to 7 billion with underlying growth of 4%.
Speaker Change: Operating income was 1.8 billion and adjusted operating income was 2.1. Billion up to 14%.
Speaker Change: Our adjusted operating margin increased 50 basis points to 29.5%.
Speaker Change: Gaap EPS was 2.45 and adjusted. EPS was 2.72 up 11% over last year.
For the first 6 months of 2025, underlying Revenue growth is 4%. Adjusted operating income grew, 11% to 4.3 billion are adjusted operating margin increased, 20, basis points and adjusted EPS increased 8% to 5.78.
Speaker Change: Looking at risk and insurance services. Second quarter Revenue was 4.6 billion of 15% from a year ago or 4% on an underlying basis.
Speaker Change: Operating income and rais was 1.4 billion.
Speaker Change: Adjusted operating income was 1.6 billion up 16% over last year and the adjusted operating margin expanded 30 basis points to 35.6%.
The first 6 Months of the Year revenue and RIS was 9.4 billion with underlying growth 4%.
Adjusted operating income increased 12% to 3.5 billion and adjusted operating margin was 36.9%.
Speaker Change: At Marsh Revenue in the quarter was 3.8 billion up 18% from a year ago or 5% on an underlying basis.
Speaker Change: This comes on top of 7% underlying growth in the second quarter of last year, was a good result given the softening rate environment and property as well as uncertainty in the economic Outlook, especially in the US
In US and Canada, underlying growth was 4% for the quarter.
Speaker Change: In international, underlying growth remained. Excellent, at 7% with EMA up. 8% asia-pacific up. 4% in Latin America of 3%.
Speaker Change: US and Canada grew 4% and international was up 6%.
Guy Carpenter's Revenue in the quarter was 677 million up 7% from a year ago or 5% on an underlying basis.
Speaker Change: Growth remains solid, despite softer, reinsurance market conditions and came on top of 11% growth, underlying growth in the second quarter of last year.
Speaker Change: for the first 6 Months of the Year guy Carpenter generated 1.9 billion of Revenue and 5% underlying growth
Speaker Change: in the Consulting segment. Second quarter Revenue was 2.4 billion up to 7% or 3% on an underlying basis.
Consulting operating income was 456 million and adjusted operating income was. 479 million of 9%.
Speaker Change: Our adjusted operating margin and Consulting was 20.2% up. 40 basis points from a year ago.
Speaker Change: 6 months Consulting Revenue was 4.7 billion, reflecting underlying growth of 4%.
Speaker Change: adjusted operating income increased, 9% to 970 million and the adjusted operating margin increased 40 basis points to 20.7%
Speaker Change: Mercer's Revenue was 1.5 billion in the quarter of 9% or 3% on an underlying basis.
Health Group 7%. Reflecting continued solid growth across all regions.
Speaker Change: Wealth was up 2% led by investment management.
Speaker Change: Our assets under management were 670 billion at the end of the second quarter up, 9% sequentially, and up to 36% compared to the second quarter of last year.
Speaker Change: Year-over-year growth was driven by our Acquisitions of cardano and core positive. Net flows in the impact of capital markets and foreign exchange.
Speaker Change: Career was down 5% in the quarter, reflecting continued softness and project related, work in the US and Canada.
Speaker Change: For the first 6 Months of the Year Revenue At Mercer was 3 billion with 3% underlying growth.
Speaker Change: Oliver Wyman's Revenue in the second quarter was 873 million up 5% or 3% on an underlying basis. Led by solid growth in the US
Speaker Change: The first 6 Months of the Year Revenue at Oliver, Wyman was 1.7 billion, an increase of 4% on an underlying basis.
Speaker Change: Fiduciary interest income was 99 million in the quarter down. 26 million compared with the second quarter last year. Reflecting lower interest rates.
Speaker Change: Looking ahead to the third quarter based on the current environment, we expect fiduciary interest income will be approximately 105 million.
Foreign exchange had a diminishment effect on adjusted EPS in the second quarter.
Speaker Change: Exchange rates have been volatile, making it challenging to predict their impact looking forward.
Speaker Change: However, based on current rates, we anticipate FX will have a minimal impact on adjusted EPS in the third quarter and will be a modest benefit in the fourth quarter.
Speaker Change: Turning to our McGriff transaction. Our integration continues to go well and we are pleased with mcgriff's. Year-to-date performance.
Speaker Change: We continue to expect that McGriff will be modestly agreed up to adjust the DPS for full year 2025 becoming more meaningfully accreted than 2026 and Beyond.
Speaker Change: We still expect noteworthy charges associated with McGriff of approximately 450 to 500 million in total through 2027.
Speaker Change: With the vast majority of these costs associated with retention incentives, a significant portion of which was put in place by the seller.
As is our convention, we are excluding McGriff from our underlying growth calculations for the first year.
Speaker Change: Total noteworthy items. In the second quarter were 88 million. The majority of which were acquisition related costs,
Speaker Change: Interest expense in the second quarter was 243 million up from 156 million in the second quarter of 2024.
Speaker Change: This increase reflects higher levels of debt associated with the McGriff transaction.
Speaker Change: Based on our current forecast, we expect interest expense will be approximately 240 million in the third quarter.
Our adjusted effective tax rate on the second quarter was 25.3%.
This Compares with 26.2% in the second quarter last year.
Percent.
We continue to expect an adjusted effective tax rate of between 25% and 26% in 2025 excluding discreet.
Speaker Change: Our next scheduled debt maturity is in the first quarter of 2026 when 600 million of senior notes mature.
Speaker Change: Our cash position at the end of the second quarter was 1.7 billion.
Speaker Change: Uses of cash in the quarter. Total to 776 million and included 405 million, for dividends 71 million for Acquisitions, is 300 million for share repurchases.
Speaker Change: For the first 6 months uses of cash totaled, 1.6 billion and included 810 million for dividends 166 million for Acquisitions, and 600 million for share repurchase.
Speaker Change: We continue to expect to deploy approximately 4.5 billion of capital in 2025 across. Dividends Acquisitions and share repurchases. The ultimate level of share repurchase, will depend on how our m&a pipeline develops.
Speaker Change: Last week, we announced that 10% increase in our quarterly dividends making this our 16th consecutive year of dividend increases.
Speaker Change: This reflects our solid earnings growth and confidence in our Outlook.
Speaker Change: Overall we are pleased with our second quarter results for the full year. We continue to expect mid single digit, underlying Revenue, growth margin expansion and solid growth and adjusted eps.
Speaker Change: However as John mentioned, the Outlook is based on conditions today and the economic backdrop special in light of continued 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.
John Doyle: Thank you, Mark. Andrew, we're ready to begin Q&A.
Speaker Change: All right, wonderful.
Speaker Change: We will now begin the question and answer session. If you have a question, please press star, 1 1, 1 on your touchtone phone, if you wish to be removed from the queue, please press star 1, 1 1 again, if you are 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 1 on your touchtone phone,
Speaker Change: And in the interest of addressing questions from as many participants as possible, we ask that participants limit themselves to 1 question and 1. Follow-up question. 1 moment, please.
Speaker Change: Our first question comes from the line of Gregory Peters with Raymond James.
Gregory Peters: Uh, good morning everyone. Um, so um, my first question in your comments, John, you talked about, um, the pricing index being down 4% in the second quarter um on top of being down through 3 3 and the first quarter.
Gregory Peters: Um, are you seeing anywhere in the system upward pressure on pricing? Or, you know, if we look forward over the next 12 to 18 months, are we going to continue continually see, you know, these low single digit rate decreases, uh, in the broader Market.
John Doyle: Yeah, good. Good morning Greg. Thanks for the for the question.
Yeah, insurance and reinsurance markets for the most part. Continue to soften a bit. Um, in the second quarter, you know, we talked to or I mentioned at least a little bit of the reinsurance market. It's a you know, pretty stable or consistent um price decreases through the, the first half of the year, you know, largely driven by property and and you know where we're seeing more.
John Doyle: Rate pressure. Um,
You know, on the retail side of course is, is in property as well. The big exception and I I spoke to it is is in excess casualty and, you know, it's in part why I keep, um, talking about, um, the US litigation environment, it's a, you know, it's a high cost of risk to operate, um, here in the United States.
The liability environment is 1 part of it. We have more.
John Doyle: Of our economy, more of our population here in the US exposed to, um, extreme weather events. And that's been, um, disruptive. Um, to our economy healthcare related risk, um, continues to escalate, um, quite a bit as well. All, you know, are among the most, if not the most expensive, um, in the world. And so, you know, at a time when our our country is focused on, um, investing in infrastructure and and, and investing in in technology, um, these are are meaningful costs on our on our clients. And, um, you know, we see them in our own business too. And so, you know, I think it's important for us to talk about it. And, you know, the the
John Doyle: By, um, the recent legislation and the 1, big beautiful Bill. There was a a proposed amendment by Senator Tillis to, um, to change um tax
John Doyle: Policy around litigation financing, you know, I mentioned right now, many cases an injured party gets less than 50% of the outcome of a settlement that injured Party. By the way, pays ordinary income tax in the United States.
John Doyle: A lit funer pays capital gains a foreign investor pays zero tax.
John Doyle: So it was a missed opportunity. It wasn't the only thing there's other things that need to happen and, you know, we're focused on this um, for our clients. So I expect casualty pricing um, to continue to be under pressure for our our clients and and rates to, to continue to grow
I also spoke to the you know, the active first half of cats, right? So um
John Doyle: You know, while prices are down now over time, pricing is going to attract.
John Doyle: You know, along, you know, with the growing cost of risk, um, here in the United States. And so it's difficult to predict over 6 months or 12 months period. Um, but there's no question in my mind. There's a rising cost of risk environment here in the United States.
Speaker Change: Do you have a follow-up? Um, yes, I do, of course. Um, I'm going to Pivot to the Mercer segment and I just wanted to um pick apart or have you provide more detail on the wealth and career components of organic. I guess, you know, I was listening to Mark's comments about AUM, um, being up. I think he said, 36% year-over-year and and wealth. Yeah, we're only seeing 2% organic Revenue growth. So I'm trying to understand the connection there and then on career,
John Doyle: You know, I I think that's probably a little bit more of your more economically sensitive business but maybe you could speak to the outlook for both of those businesses, please. Yeah, sure. Greg. Thanks, you know, thanks for the question again. I think, you know, overall for the company we had a a terrific quarter of growth again, 12% on a Consolidated basis, you know, um, good, underlying, you know, good solid underlying effort. Um, you know, at Martian GC.
John Doyle: Parts of our Consulting businesses where they're, um, you know, maybe even more discretionary spend, if you will parts of career, um, parts of our business at at Oliver Wyman, as well. Um, you know, notably branding, um, for example, you know, or some of the softer parts that are more exposed to, um,
John Doyle: Not just a declining economy, just but just some of the uncertainty, as many big businesses in the US are playing a bit of Defense. But, you know, we had a terrific quarter of growth in in health, um, at Bursar. But Pat, maybe you could talk a little bit about, um, you know, what, you're seeing in both career and in the investment business. Great, uh, thanks, John and, and thanks for the question Greg. Um, Let me let me start with wealth since that seems to be the spot. You you started uh, a little bit more detail on your question. Um, it's important to note that the wealth business is a portfolio of services, uh, across defined benefits, pension Consulting, uh, investment advisory, services and Ocio. So you mentioned AUM, only the Oco business segments,
For the revenue there, it's are we compensated by AUM, so that's the only spot that that impacts that first off overall wealth. As, as Mark mentioned, we grew 2% in, in Q2, um, driven by the growth in our investments business, particularly the O offering right, tied tied to AUM. Uh, we were challenged by some tougher comps in the DB pension Consulting work.
John Doyle: Now, while we have mentioned in the past that the defined benefits pension space is in, structural decline. In recent years, we've actually seen an increase in demand for project-based Consulting.
John Doyle: On the back of higher plan funded, statuses that has been driven by higher interest rates as well as there's been a bump in regulatory requirements in certain in certain jurisdictions around the world. Now this year the demand for that type of work that I've described is starting to slow specifically in the US and in the UK
John Doyle: Tied to AUM, has been a strong growth engine for Mercer over the long term. And over the past year we've, we've seen Strong net inflows, both organically and inorganically, and the 36% that you mentioned that market mentioned, uh, included, our inorganic, and our growth rate. We take, we exclude that. So that's a, a component there that likely ties, um, ties to that component. Um,
And while cap capital markets, they've been volatile in 2025. I would say, they still provided us. Uh, a bit of a year, a year-over-year Tailwind in Q2, so that's good. Um, bottom line, we met, we really maintain, um, that our capabilities and the value we're creating for clients here, we'll continue to drive growth for us inside of this segment. So I think the difference between the 36 and the 9%, that he talked about sequentially was really uh, tied to the inorganic and organic component of the AUM growth. Now career, which is the second part of your question. I've got to provide a little bit of context on the career business, uh, to be able to answer that 1.
John Doyle: First, it's a portfolio of offerings. So some of them are project-based Consulting assignments. So, typically 1-time type things and others are more product like offerings. So think here, compensation benchmarking, surveys assessments, Employee Engagement, surveys, and those tend to be more recurring in nature for the work we're doing for clients.
Additionally, career is naturally prone to some seasonality in client work.
John Doyle: It's got a peak period specifically around the annual comp and reward cycle. Uh, that clients do as in their year-end planning in late Q3 and in Q4
Speaker Change: Now, in this quarter uh Market mentioned career, contracted 5%, right? That was primarily driven by softness in Project demand in the United States, uh, which is facing a couple of market dynamics, which are more pronounced than we've seen in international.
Speaker Change: The first Dynamic, there is the current environment of economic uncertainty means that clients are less inclined to commit to larger long-term, transformational HR technology projects and big, programmatic changes. And we tend to do more of those projects in the United States. All right? So there's the first impact. The second is demand for talent and rewards projects.
Speaker Change: Tend to be higher during periods with higher inflation. So which typically drives up wages salaries, uh, thinking about bonuses, things like that.
Speaker Change: The reality in the current employment Market is, we are seeing relatively low voluntary, turnover at clients and that is reducing the urgency for those types of projects. Now this contraction I'm describing in US and Canada was partially offset by the growth. We had in international and we had growth across all 3, major areas of our business, the talent work we do the rewards work we do and the transformation work we do across International so we saw uh good solid growth there. Um, we feel like we're the leading rewards consultant business in the world with real capabilities expertise and Geographic reach.
Speaker Change: The business overall has performed well for us over the over the last few years. It's continuing to grow in international. So we do remain confident about the longer term growth momentum that we see in our career business and the value, we're going to go ahead and be able to bring to clients. Thank thanks. Pat. So, you know, well, positioned in both of our businesses, you know, obviously um, exposed to some of the uncertainty in the US and in our career business and then, um, in our investment business, you know, some some structural issues with, with defined benefit growth and, uh, and prior years. So, so thank you. Greg Andrew next question, please.
Speaker Change: Thank you.
Speaker Change: our next question comes from the line of Mike zorinsky with BMO
Hey thanks. Good morning. Um, um question, I'm kind of maybe related to the uh the first uh question uh specifically on the, on the RIS segment. So um, just want to make sure we're thinking about things correctly, so when we kind of think from a macro level about um, total organic growth in the IRS segment, you know, usually we think, um, you know, nominal GDP is kind of the biggest corll and very secondary. Kind of would be, would be pricing power levels. Um, since you know a lot, a lot of this is, is more fee based too. Um, you know, would would you agree with that kind of high level statement? Because I'm, I'm trying to, I'm trying to think out, you know, the we, we can kind of have a view on pricing, you've helped us with the view on pricing, you know, the, the nominal GDP decline is, is lighter. Um, just want to see if I'm missing anything maybe in terms of just Talent hiring in the past or, or now, or, or other other.
Have an argument with the way you.
Speaker Change: With the way you characterized it, you know, it's I, you know, I feel good about our execution, I feel good about how we're we're positioned. Um, our International growth was, you know, was quite strong. You know, we're seeing here is in the United States.
Speaker Change: You know, particularly up market and and and more of our large account segment, if you will in your same businesses, defer.
Um you know Project work right? We're seeing slowdown in construction, activity m&a, activity IPOs hiring you know is obviously slowed you know all those on some level are you know, are inputs. So you know so we have we have a macro environment, it is what it is. We you know, we
You know, we power through it and continue to deliver, you know, solid results but you know, declining PNC pricing, slowing economic growth, interest rate headwinds with fiduciary interest income and and moderating inflation as well at least up until now. Um obviously that's a a hot debate in the in in the world but you know, Martian GC 5% xfit, you know, given some of those headwinds. I, you know, I feel I feel good about that.
Speaker Change: Got it and my quick follow-up and um and I feel like you you started off the call John saying, you know, performance tracked kind of in line with the expectations overall. Um, I feel like the the the beauty of of marsh historically and currently is that, you know, you guys have have had good line of sight into your revs so you'd be able to to pull the expense
Speaker Change: Levers accordingly. Um, it sounds like from everything you're saying is, you know, there's obviously a lot of uncertainty, but you still feel like there's uncertainties at a level, where you feel comfortable being able to, to manage, uh, the profit margin, a piece of the business. Is that, is that fair?
Yeah you know, thanks Mike. You know I appreciate that. I think there was a compliment in there. I I uh you know we you know I think there was a bit of debate, you know, about our guidance about, you know, the top line coming into the year. You know, we didn't obviously know exactly what would unfold during the course of the year but you know we you know we did expect lower interest rates, lower BNC pricing, you know, slightly slower, you know economy, um you know, probably more uncertainty has persisted, that's impacted, you know, some some of the more discretionary parts of our business. But um, but I feel good about the work we've done to, you know, again manage expense growth in a, in a tighter environment and we do a lot of scenario planning, you know, around tighter conditions and by the way, we do scenario planning, you know, around more positive, um, environments too. Where you know how we're going to allocate Capital? If you know if growth, um, if growth is above, you know what, our our expectations are. No, I I expect these conditions.
Speaker Change: Conditions to persist, um, in the second half. Um, you know, we'll see, obviously what, you know what unfolds and you know the 2026 will be a new year, right? Um, you know, a lot that's going to happen.
Speaker Change: Um around trade and geopolitically over the course of the next 6 months and you know, and then we'll see um, you know, see what the environment looks like as we as we head into next year but I feel good about how our position. I feel good about how we're executing. We're continuing to invest that, you know, gets a little tighter obviously um at moments like this. And um but we've consistently not only delivered margin expansion but invested in our business over time and you know we try to get that balance, right?
Thank you. Mike. Andrew next question.
Speaker Change: Our next question comes from the line of Jimmy Bueller with JP Morgan.
Hey, good morning. Uh, John just on your comments on slow down in IPOs and m&a and obviously your comps on growth have been tough as well. But just if we look at at least Capital markets activity, it seems like it's dropped already and obviously it's next month could be different, but it seems like IPOs are picking up m&a's picking up as well. Um are you seeing that in your business as well and should be assumed that your growth is close to dropping? Or is there still a lot of uncertainty? Uh, otherwise, I mean,
Thanks Jimmy. I mean, m&a and IPOs are obviously just a, you know, a component of a, you know, much, you know, much more complex macro. Um, picture. Um, you know, we said we continue to expect mid single digit, underlying Revenue growth, um, you know, in 18th year, margin expansion and and solid growth in adjusted EPs. And so, you know, we feel good about that Outlook. We'll see, you know, as things, you know, things move forward. Um, you know, um, there's
Speaker Change: again, I think we see it a bit more.
Speaker Change: Um, a bit more defensive posture um, in US businesses.
Speaker Change: Always uncertain, right? I mean, I think that word's probably been overused, including by myself during the course of this year. Um, there there's never a certainty. Um, but the level of uncertainty, you know, has been challenging, um, for many of our clients, we're trying to help them navigate that, and that's an opportunity as I mentioned. But uh, but we'll see. I think it's it's too early to know, whether we'll see a a meaningful uptick in m&a activity or IPO activity for that matter construction, you know as well. So, okay, you have a follow
Speaker Change: Yeah, just relatedly on guy, Carpenter the growth was fairly strong. Given tough comps. Um, is that more? Uh, and that's despite soft pricing? Environment, is that more of a function of just the fact that it's a low base or is the momentum in your business that other than what pricing would suggest and reinsurance.
Speaker Change: Steam just to talk about the growth. I mean the quarter but, you know, I think we have the best team on the field, the best analytics in the business. And, you know, ultimately, it's a reflection of the confidence that our clients have, you know, and our ability to deliver value. But Dean, maybe you could talk a little about growth in the quarter for Jimmy. Yeah, thanks, Sean. Um, Jimmy look, we were, we're pleased with our 5% growth in the quarter as John noted and as Mark noted, you know, came on top of 11% growth in the second quarter of 2024. And it was a record new business quarter in the second quarter of 2024, you know, as respects this quarter we saw really
Speaker Change: Strong growth across our International platform.
Speaker Change: Exceptional growth in Latin America, exceptional growth in IA, strong growth in the London Market in the UK you know strong growth in Asia, despite clear pricing headwinds in Japan in China on the April 1st. Renewal new business is very strong.
Speaker Change: Strong in its balance across.
Promoted, um significant ILS activity, you know, record cap, Bond growth in the quarter. You know, guy Carpenter participated in 14 cap, bond issuances in the quarter and 23 year to date, which is a record for guy Carpenter.
Speaker Change: We continue to see, you know, new opportunities in our capital and advisory practice.
Speaker Change: You know, in the quarter, we won several mandates to raise third-party capital for clients, large and small in the US and London. Um, a number of well-known mgas in particular and we're winning m&a mandates, providing m&a, advice and supporting activities for a number of those clients.
Speaker Change: And then I would say last you, you know, 1 of the headlines is property. Cap demand did ease up at the mid-year, renewal we sold an additional 5 billion dollars of property cat limit, uh, through the mid-year, renewals helping to drive the drive the top line. And, uh, you know, we feel really good about our talent as John noted, we're attracting top talent in the market.
Speaker Change: Um, and we've got a great balanced organization. Um, we feel good about our prospects.
Speaker Change: Thank you, Dean.
And thanks, Jimmy Andrew next question, please.
Speaker Change: Our next question comes from the line of David motum Maiden with evercore isi.
David motum: Hey, thanks. Good morning. Um, I'm wondering, uh, was wondering if you could just talk a little bit about the strength, uh, within Martian, International overall and and how durable you think it is. Um, I, you know, I heard the pricing was negative and a lot of the regions, but the growth, uh, continues to be to be solid. How long do you think that can sustain?
David motum: Yeah, thanks David and, and good morning. I'll ask Martin maybe to talk a little bit about growth, but again, overall, I was pleased with growth at Marsh, um, in the quarter. You know, um, you mentioned the pricing headwinds, but, you know, some other macro headwinds as well. And and I feel good about, um, executing our our execution and, in, in this environment, you know, we're um, you know, in in many markets doing it in different ways but um, building our capabilities in the middle market around the world, um, that's part of the growth. But, uh, but we're well positioned. Um, and well LED, um, outside of the US Martin, maybe you could talk a little about the growth in the quarter. Thank you, John. Yeah, very, very pleased with our International growth in the closet 7 on top of 7 and 224. Um, really strong new business growth with the whole business. Um, Emir was up, um, 8% on top of 7 in second quarter, 24 Aja, Pacific
Martin: 4% on top of 7. Um in the second quarter 24 Latin America 3 on top of an 8. Uh so very strong uh Geographic growth I'll dig into some of the the capabilities as well.
Martin: And penetration into our clients, as people, uh, particularly internationally, uh, realized the risk posed by cyber. Uh, our thin Pro business grew and capital markets business, across International was was stronger than in North America, uh, but really 1 of the standouts was our benefits business, which continues to show real strength and momentum,
Martin: And then geographically really pleasing in some of the areas where we've allocated capital and, uh, we will really well positioned. Japan in the year in the United Arab Emirates, Brazil, Italy, Spain China, all showing really strong growth. So we feel we have a great momentum for capabilities that we have across International really differentiate ourselves against any of the local players and we have the best and the strongest Network. There's also able to serve the US business and other International businesses that we have. So we are highly differentiated where we operate and we have leading positions in virtually every Market that we operate in across International. So so feel really good about it.
David: Thanks, Martin. David, do you have a follow-up?
David: yeah, I was just just, just more of a big picture question and and you sort of talked about this in, in a few of the different segments, just the the difference between, um,
Speaker Change: You know, some of the, some of the trends that you're seeing and some of the more discretionary and Project based, uh, parts of the business compared to the more, um, more durable more, renewal oriented businesses. Um, could you just level set us? Um, you know, the business mixes change for a while. How much of the the revenue base at Marsh is exposed to that more discretionary or Project based uh, spend
Speaker Change: Yeah, you know David, that's a hard question to answer. I think, um, all 25 billion on some level is last year, you know, last year's number is a, you know, exposed to, you know, to the economy obviously. Um,
Speaker Change: You know, we have a defensive and resilient, um, business, um, demand remains, um, you know, quite strong, you know, Pat talked about some aspects of our career business that are a bit more exposed, um, to, uh, um, you know, to the economy than than others, you know, I mean, when we, we take a look at it, it's probably 15 to 20% or so of our of our Revenue base is, um, you know, this is the right expression even more exposed, um, you know, to softer moments of, uh, of the economy. And, you know, it's, and we're in this interesting moment, right? I mean the
Speaker Change: The economy is okay. It's not like these companies in the bank, but we have, you know, we have, you know, in certain segments of our business, you know, seeing a softer conditions just from, um, you know, a challenging, you know, a challenging. Um, you know, environment where uncertainty is driving a defensive posture, um, from some of our clients, maybe David would be helpful. Maybe I'll ask Nick to talk a little bit about, um, our growth in Oliver, why I'm an overall in the quarter and maybe where you, you know, you see more resilience and and some of the softer parts of the ow offerings. Yeah. Absolutely. Thank you. And and Pat touched on on the career business, maybe you're sort of compliment to that, you know, we we all we always guide the olive. 1 will be a mid to high single digit growth.
Speaker Change: Business through the cycle. Um, you all know that it has probably a wider range of growth as you go through that cycle and I think, um, we're extremely happy with how we've executed in a slower Market. There were some timing and other idiosyncratic effects that are slightly dampened Q2. Um, but what we're seeing there are many different drivers to our business. We're seeing positive trends, like John talked at the beginning about the hunt for growth at the same time as efficiency. And the need to invest in resilience, uh, many companies finding that challenging, um, where supporting many clients as they explore their AI strategies and what that does for their business changes in supply chain, the challenges of the energy trend,
Speaker Change: Transition. Um, these are all
Speaker Change: positive Trends supporting growth in the business.
Speaker Change: That's balanced at the moment. Um, you know, back to Jimmy's question, we have seen lower m&a, so some of our private Capital Works. Some of the work we do in economics Consulting, uh, is affected by that. And we are seeing client uncertainty. I don't want to uh, further overuse uh, John's word. Um, but when lots of things change, there's a need for strategic advice. When people are not sure of things are going to change. They they wait for a little while and we are saying some of that as well. We also see on the supply side uh continued excess capacity working its way out of some parts of the Consulting industry.
Speaker Change: Region uh Europe has done a good job of replacing some very large client programs which have rolled off the Middle East has done a great job of diversifying. What has been a Slowdown in the Saudi Arabian Market? Um, but we're very broad across that region.
On the industry, side insurance, and asset management and our Actuarial practice grew again. Well, Diversified businesses. We have Actuarial Consulting in life in PMC and in health, um, all of which grew uh strongly
Speaker Change: Our consumer telecoms and Tech practices and our transportation and advanced Industrials practices grew. So you know in the past you may have heard me talking about other parts of Oliver 1 minute. It's a it's a very Diversified business and and um maybe just to Echo some of the comments that Dean and Martin and Pat have all made
Speaker Change: Our pipeline of sales remain solid. Um we're very comfortable in our ability to manage the cost base.
Speaker Change: And we continue to find ourselves being an incredibly attractive home for established top talent in the industry who are eager to help build a new leader in strategy Consulting. I encumbered by some of the challenges of previous models,
Speaker Change: Thanks, Nick, David. Thanks for the questions. Andrew next question, please.
Speaker Change: And our next question comes from the line of Alex Scott.
With Barkleys.
Hi, good morning.
Speaker Change: Uh, first we had is on just some of the rising medical costs that we're hearing about out there. Um, I think a few companies have kind of cited it and changed guidance in the, in the health insurance world and, uh, just was interested in if you could take us through, you know, some of the ways that, uh, that impacts your business, you know, from a pricing standpoint and so forth.
Speaker Change: Thanks Alex and good morning to you as well. I'm a healthcare overall, is an important part of our our business. The biggest component of that, overwhelmingly, the component of of our business is really helping our clients, secure employee sponsored health insurance. Um, and that enables them, of course, to to compete for talent medical inflation is, you know, a stress point. Um, there's on the 1 hand, extraordinary medical Innovation happening. Um, specialty Pharma is an important part of the medical inflation um uh calculation right now. So, so it's great Innovation. But it's creating stress, you know, for, you know, for our clients we see it again in our own business that Rising, you know, Rising healthcare costs, particularly um, here, um, here in the United States, we also um,
Speaker Change: At both Mercer and olive oil. I'm in consult to the to the healthcare industry um, and helping them sort through. Um, some of the Innovation, some of the challenges and complexities um, of the marketplace, some of the challenges around, um, Pharmacy Benefit Management, um, you know, as as an example. So all are are important parts of our business
Much of the employee sponsored business, um, that we support. Um,
Speaker Change: Operates more on a fee or fee like basis. Um, so um, you know, we're obviously thoughtful and transparent about um, how we get paid um, with our clients in a, you know, in a challenging environment. Pat, do you have anything to add to that? Uh, no. I think you you've hit it right there, John. I mean, the the key thing to remember is that in different around the world. We have different models around fee and commission for the most part, most of our business in the US, which is a pretty large business. Um, is predominantly fixie. Um, we don't see the full impact of inflation from that. It clearly drives demand for work, because medical inflation is a major challenge for clients, so they're going to go ahead and think about how to do more projects and how to do plan design. Work to control those costs. But you, you really can't draw the correlation between, you know, 5.8 or 7.2 or 10% medical inflation and commit and commissions for the most part um on the major on the majority of our client base, we do have some clients that are commissioned based, but
Speaker Change: But I would say especially in the US, the majority of more fixed. Yeah. Um,
Speaker Change: Thanks. Alex for that question. It's, you know, it's a big part of our business and it's it's a really important part of it. Um, so, um, and it said, um, strong growth, um, over the course of the last couple of years. And, you know, I think, again, that's a reflection of of
Speaker Change: the capabilities that we can bring to the clients and that inflationary environment. Do you have a follow-up?
Speaker Change: Yeah, uh, so separate follow-up. I wanted to ask you about, you know, just technology, implementation of AI, Etc. I mean,
Speaker Change: The the impacts that you'd expect us to to actually be able to see in the financials and so forth and and we'll change, you know, the industry in your point of view from you know, consolidation standpoint.
Speaker Change: I'm excited about the possibilities, Alex. Um, you know, we're we're starting to see, um,
Speaker Change: See more clearly into what some of those possibilities are. You know, I've talked in the past about moving more quickly, creating efficiency creating, um, you know, better insights. Um, I think our technology team has done an outstanding job, um, providing us the tools to to learn and to experiment. Um,
Speaker Change: our Tech Team and our
Speaker Change: colleagues and our people function have put together a broad-based training and support, um, for our colleagues.
Speaker Change: I'm encouraged by our cultural response um to these tools.
Speaker Change: You know, we have a learning culture and a Professional Services firm, that's really important. And I think this is indicative of that. They're, they're embracing the tools. Um, and, and so we're, you know, we're starting to see some early signs and, and, and some breakthroughs. Um, you know, we 1 of the areas where we've had some more recent changes in analytics and and, you know, maybe I'll ask, um, ask our Business Leaders to just talk, um, you know, quickly about some of the things we've done. Pat, maybe I'll start with you. We're obviously working our way through internal
Pat: A tool um, earlier this week. But um, how is it impacting analytics? And what you see in terms of what we're offering to clients today and how it's changing? Yeah, I think, uh, the biggest area where it's impacting is it first off, we think it's going to create demand, um, we're especially, uh, on some of our career product side. Uh, and I would think we would enhance it into the other areas, uh, from a product perspective. We're introducing agentic, AI interfaces, uh, into our product offerings, that are going to allow clients to interact with the data and the products and enhance way, it'll allow them to make it easier to get more value. We expect that, that would increase demand. Um,
Pat: You know a specific example that we've got is we're we're adding an agentic AI interface that we call Ada on our talent all access portal, which is something that we have uh out with more than 20,000 users out in in the in the client in the client world. So it's really um where they're going to have access to our worldwide benefit and employment guideline database. Uh, it's going to update the user experience and really compliance to query the database live versus do it. Use it in a more traditional way that they've typically had access to it. So we're really optimistic about the benefits that will bring to clients.
Pat: Nick. You want to jump in quick? Yeah, I mean 25 to 30% of our work rests on Advanced analytics and AI. We've been doing that for a very long time and Jai has obviously turbocharged that further. Um, and olive oil has incredibly strong capabilities to support clients on their own, AI Journeys. I think 95% of our clients, see it as opportunity rather than threats. So everything from supporting
Pat: Governments and their National AI program officers through the helping clients, build new businesses through the re-engineering processes, like the ones you described and you mentioned consolidation, I do think in The Advisory business, um, scale helps here. And the fact that olive oil is part of Marshall Penn and has access to our fantastic set of tools, and buying power. And so on is a real Advantage for us compared to mid-sized consulting, firms.
Thanks, Nick, Martin.
Speaker Change: This building on on that point there, uh, 1 of our leading analytics rollouts last year, our Centrist, uh, portal. Uh, has been built heavily using AI to get in deep into company Supply chains. We had a fantastic quarter last year, Rolling that out. Um, our clients are very excited about it, given all the Tariff disruption what's happening in weather climate um geopolitics um giving clients visibility and productivity into into those tools is is game changing for us and we're uniquely positioned on that.
Speaker Change: All of our blue eyes Suite of analytics, which you know, are built on unique data. We have 1.12 trillion dollars of Premium that we've analyzed, um, and over a hundred billion of claims, uh, are in our databases that gives us a unique insight into that. And most recently 1 of the AI tools that we've done is we've laid over an agentic tool over our claims database and so clients can interrogate that we can track uh comparators between how insurance companies.
Positioned. It's the the tip of the spear and how we approach our clients around cost of risk and thinking about uh, the future of, uh, of risk more broadly. So, uh, we can upend the Paradigm of just being tied to GDP, which is not how we see things. Uh, we think risk is growing, uh, and we need real insights from our our tools and across our businesses. We are incredibly well positioned with what we have.
Dean, any thoughts from guy Carpenter? Yeah, Alex certainly. Um, guy. Carpenters analytics platform. You know, might be the most important thing we do for clients, you know, bringing value to our clients beyond the reinsurance transaction. And we really think our analytics platform is what differentiates us and our clients eyes. You know as they spend all their focus managing volatility in this environment thinking about profitable growth and maximizing Capital efficiency.
Speaker Change: I think the greatest application for AI, you know, in our sector will be managing the impact of client change. Our clients want to know and they want to help them want us to help them manage. Catastrophe risk, moving forward, looking at their portfolios, providing advice, helping them model future. Climate change impact building proprietary models using AI. That will be the true differentiator for guy Carpenter as we try to support our clients. Thanks Dean. So Alex it you know I'm encouraged but it is still early um you know to be clear but you know our
Speaker Change: unique data sets um our capacity to invest you know in the progress we've made so far I you know I'm encouraged and I I feel good about how we're positioned
Andrew next question, please.
Speaker Change: Our next question comes from the line of Mayor Shields with KBW.
Mayor Shields: Great. Thanks so much, and good morning. Uh, 2 quick questions. If I can first, uh, John you talk obviously about the pressure on the litigation system to clients appreciate that in terms of seeking additional cover. I know they're paying more for what they're getting, but is there more demand for protection?
Mayor Shields: Yeah, it's a great, great question, mayor. I think, you know, in this economic environment and you know, and I talked about the work Oliver Wyman's done with the New York Stock Exchange.
Mayor Shields: You know.
Mayor Shields: Many businesses are here in the US are trying to grind out earnings growth in a you know in a slower Topline growth environment, right. So, um, so we're not seeing big take up. Um, what I can tell you, we're saying to our clients, though, is that you can't buy enough excess liability insurance. Um, in this environment, of course not all clients are, you know, are the same many, are are more exposed to, you know, to this than, you know, than others. And so, um, so they're, you know, they're, they're, they're, you know, some real challenges that many are confronting and when we talk to them about whether its nuclear verdicts or even outside of nuclear verdict,
Mayor Shields: And just the rising frequency and severity in, you know, kind of more standard, um, areas of risk. Um, you know, it's it's an eye-opening discussion. The nuclear verdict thing, you know, many will um, maybe try to say, hey, it's not us. Couldn't happen here kind of thing. But our concern, when we look at our portfolio is that it's just happening with happening with too much frequency, um, you know across
Mayor Shields: Across our economy here in the US.
Do you have a follow up there? That's very helpful. Um yeah just a quick 1. Uh so Latin America, organic growth slowed a little bit. I'm wondering is that uncertainty? Or is that the flip side of tariffs translating into deflation in markets near the US? Is there any way of distinguishing that? Yeah, we had some idiosyncratic issues, um, in Latin America, you know, growth there year to date is good. We feel good about how we're, you know, how we're positioned. Um, so no, I don't, I don't, I wouldn't draw any major conclusions from, you know, from macros there. Um, you know, there's a big protection Gap, um, in Latin America and you know, that's an area of opportunity for us in our, in our risk business. So you know it's 1 quarter, I wouldn't I wouldn't uh, draw any, you know, major conclusions. Um for that. We again, we have excellent teams. Um,
Mayor Shields: In many of the, in all of the big economies throughout throughout Latin America. So, um, so we're quite bullish on our prospects there.
Mayor Shields: Thank you, mayor.
Mayor Shields: Um Andrew. Um let's uh let's bring the call to to a close here. I want to um,
Mayor Shields: Look forward to speaking with you next quarter.