Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Marsh & McLennan Companies Inc (MMC, Financial) reported 6% underlying revenue growth, building on 11% growth from the same quarter last year.
- Adjusted operating income increased by 11%, and adjusted EPS grew by 10%.
- The company announced a 15% increase in its quarterly dividend to $0.815 and completed $300 million in share repurchases.
- Several significant acquisitions were announced, including Cardano, Veritas Total Solutions, and multiple insurance agencies, enhancing MMC's market position.
- Innovative solutions like Blue[i], CatStop+, SelectRx, and Quotient were launched, showcasing MMC's commitment to leveraging data and technology for client solutions.
Negative Points
- The geopolitical backdrop remains unsettled, with ongoing wars and areas of tension globally, adding uncertainty to the business environment.
- Uncertainty around extreme weather events, escalating cyber attacks, and economic variables like inflation and central bank policies could impact future performance.
- The Marsh Global Insurance market index was flat overall, indicating potential challenges in maintaining growth momentum in certain regions.
- Financial and professional liability rates and cyber pricing saw declines of 5% and 6%, respectively, which could affect revenue from these segments.
- Interest expense increased to $156 million from $146 million in the same quarter last year, reflecting higher levels of debt and interest rates.
Q & A Highlights
Q: Just had a question on the underlying revenue growth outlook of mid-single digit or greater. You guys just did 8% in the first half of underlying revenue growth, but aren't increasing the range to high single digit. Could you just help me think through the puts and takes in terms of why you guys aren't increasing the range?
A: Good morning, David. Sure. First of all, I'll just say I was pleased with our growth in the quarter, is on top of a very big quarter a year ago at 11%. Marsh had good, solid growth by region and practice on top of a tough comp. Guy Carpenter had an excellent quarter. Market improvements led to increased demand after a pretty volatile reinsurance market in 2023. Mercer again, had another solid quarter of growth. As Mark noted in his comments, best growth, stretch growth in a long period of time. Health remains very strong. Wealth growth was solid. And we actually saw an uptick in Career growth from the first quarter. Oliver Wyman had a very tough comp, but had growth and has had good growth year to date and as we pointed out in the past, we'll have more quarter to quarter volatility than our other businesses. What I would say is broadly speaking, the macros continue to be supportive of growth. It's a risky environment we're all operating in, but GDP, inflation, labor markets, the costs, rising cost of risk, rising cost of healthcare, all supportive and I feel like we're very well-positioned. We have the best talent in the markets that we we compete in. And so we're positive on our outlook. For the second half, that again remains a good market for us. And so we feel good about where we are.
Q: And then Mark, I think you mentioned on last quarter's call that you guys are expecting greater margin expansion in the second half than in the first half, is that still the case?
A: Yeah, we're really happy with 130 basis points, and it validated the statements we made about the first quarter margin expansion facing headwinds from several items. So we're glad to see the acceleration, and we're on track for solid margin expansion for the year.
Q: John, just following up on your comments on Oliver Wyman, the growth this quarter slowed versus what it's been the last few quarters. How much of that is a function of just tough comps and normal volatility in the business versus maybe a slowdown in the pipeline?
A: Yeah, Jimmy, thanks for the question. And I'll hand it to Nick here. But I think it's some of both, right, but it was a tough comp for sure. But we feel very good about the year-to-date growth. Nick, you want to add a little bit more data?
Nick Studer: I think John's right, Jimmy, it's a little bit of both, but in the same way that I noted last quarter, that 13% was against a weak 0% comp this three years against the tougher 11%. About 8% year to date, I think is bang in that zone of mid to high single digit growth we expect to average through the cycle. And as you know, our quarters are always somewhat volatile. Mark kindly noted in his comments that the first half actually accelerated versus the first half last year. To give you a little bit of color on where we are seeing higher growth regionally, both Asia and India, Middle East, and Africa regions have continued on strong growth. From an industry perspective, our communications media, and technology practice has been our fastest growing year to date, but our very strong banking and insurance practices also in positive territory, as is our public sector practice and we have a wide array of capabilities. Our economic research business mirror growing strongly, our market leading finance and risk practice, particularly financial services, our pricing team, and importantly, our people and organizational performance practice, which really was across our industries to help on big client transformative moment. But the market is a little bit uncertain. While the economy seems to be better, it's still a pressured environment for discretionary spending. Some uncertainties, as John and Mark have highlighted. And we do see, we're sort of working through some pricing pressure due to excess capacity as some of our competitors work through some of our headcount actions.
Q: Just on and maybe for Mark on fiduciary investment income, it's been sort of flattish on a sequential basis, so should we assume given where rates are that going forward it's going to grow just with the growth in the business or was the sequential flat results in 2Q more of a function of seasonality and balances and other factors?
A: Jimmy, there is seasonality in balances as we've talked about in the past. But I think the biggest driver I think from here is just going to be the outlook for rates as we've talked about and you saw in our balance sheet in the quarter, it's got about $11.5 billion of fiduciary balances. So I think just where we go from here is just going to be what the central banks do with short-term interest rates. And just as you're modeling going forward, keep in mind our balances do reflect the revenue mix of our business. So it's not just US rates, obviously that drive we've got balances because of the distributed nature of business all over the world. Yeah, so as I said, the outlook really is going to be mostly a function of what the rate picture looks like.
Q: Within RIS, can you give us a sense of how much the expenses, healthcare margins in the quarter?
A: At least we're definitely seeing the benefit of it. We've stayed away from quantifying specifically how much is going to drop quarter to quarter. But you just even see the trend in expense growth quarter to quarter. That was definitely a factor. Our strong growth and the benefit of savings contributed to the 130 basis points of margin expansion. So as I said, we haven't quantified the amount that we're seeing each quarter, but we are on track for the level of savings that we talked about. And we're seeing the benefit of it.
Q: Within Marsh, could you just give us a sense of what you're seeing some more color in both the US and internationally within organic growth, both for the Q2? And then how you think about the outlook comps in the back half of the year, and US or internationally, are you guys more indexed to property in one versus the other?
A: Yeah, I mean, the markets are quite dynamic, right. And so I would just caution you a little bit on pricing, right. I think Guy Carpenter's a good indication of that, right. So we saw a better market lead to increase demand. But as I mentioned earlier, it was a good solid growth by region and by practice, again inn the second quarter and on top of a tough comp. But Martin, maybe you could share a little bit more more color on the growth international versus US and
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
