Marsh & McLennan Companies, Inc. (MMC) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Q2 Performance: Marsh McLennan reported 6% underlying revenue growth and an 11% increase in adjusted operating income. Adjusted EPS grew by 10%, and the quarterly dividend increased by 15%.
• Strategic Acquisitions: Announced significant transactions, including Mercer's agreement to acquire Cardano and Oliver Wyman's agreement to acquire Veritas Total Solutions. These acquisitions enhance the company's scale and capabilities.
• Innovation Investments: Investments in Blue[i], CatStop+, SelectRx, and Quotient demonstrate a focus on creating new solutions for clients in a complex environment.
• Resilient Business Model: The company's diverse and resilient business model has allowed for sustained demand for its advice and solutions across economic cycles.
• Insurance and Reinsurance Market Conditions: Despite a flat Marsh Global Insurance Market Index, there was increased demand for property cat coverage and a record quarter for cat bond issuance.

Pessimistic Highlights

• Geopolitical and Economic Uncertainties: Ongoing wars, tension across the globe, and uncertainties around extreme weather, cyber-attacks, and economic variables like inflation and central bank policy present challenges.
• Insurance Market Conditions: Some segments of the insurance market are showing early signs of stress, particularly in US Excess Casualty with prices up 10%.

Company Outlook

• Positive Outlook for 2024: Marsh McLennan expects mid-single-digit or better underlying revenue growth, another year of margin expansion, and strong growth in adjusted EPS, assuming current macro conditions persist.

Q & A Highlights

• Q: Underlying revenue growth outlook and why not increasing the range? (David Motemaden, Evercore ISI)

  A: Positive on outlook for the second half, macros continue to be supportive of growth. The company is well-positioned with the best talent and sees a good market for its services. (John Doyle)

• Q: Expectations for greater margin expansion in the second half? (David Motemaden, Evercore ISI)

  A: Happy with 130 basis points in Q2 and on track for solid margin expansion for the year. (Mark McGivney)

• Q: Oliver Wyman's growth slowdown - function of tough comps or slowdown in pipeline? (Jimmy Bhullar, JPMorgan)

  A: Both, but 8% year-to-date growth is in line with expectations. The market is a bit uncertain, but Oliver Wyman is seeing growth in specific regions and practices. (Nick Studer)

• Q: Fiduciary investment income trends? (Jimmy Bhullar, JPMorgan)

  A: Volatility in balances due to seasonality and the outlook will depend on central bank actions on short-term interest rates. (Mark McGivney)

• Q: Expenses helping RIS margins in the quarter? (Elyse Greenspan, Wells Fargo)

  A: Seeing the benefit of expense savings, contributing to margin expansion. (Mark McGivney)

• Q: Organic growth within Marsh, US vs. international? (Elyse Greenspan, Wells Fargo)

  A: Balanced growth, with strong performance internationally and in the benefits business. US business also performed well, with an uptick in capital markets activity. (Martin South)

• Pace of M&A and impact on share buybacks? (Scott Heleniak, RBC Capital Markets)

  A: No change in capital management philosophy, balanced approach to capital deployment. Excited about M&A opportunities seen. (John Doyle)

• Mercer's Health organic growth vs. Career and Wealth? (Scott Heleniak, RBC Capital Markets)

  A: Health continues strong growth due to investments in talent and digital tools. Wealth and Career growth is more modest, reflecting market conditions and client needs. (Pat Tomlinson)

• Property cat's competitive environment? (Michael Zaremski, BMO Capital Markets)

  A: Insurance and reinsurance markets continue to settle, with some early signs of stress in certain areas. The company is focused on managing clients' outcomes directly. (John Doyle, Martin South, Dean Klisura)

• Operating cash flow trends? (Gregory Peters, Raymond James)

  A: Decline in the first six months due to higher comp payouts and receivables up from business growth. Long track record of double-digit growth in free cash flow. (Mark McGivney)

• Exposure to casualty lines post-Chevron doctrine overturning? (Meyer Shields, KBW)

  A: No direct line between the case and overall environment, but focusing on advising clients amid challenging loss cost inflation in the US. (John Doyle)

• E&S market solutions and percentage of premiums placed directly? (Rob Cox, Goldman Sachs)

  A: Majority of E&S market solutions accessed directly, with a focus on managing clients' outcomes and experiences as directly as possible. (John Doyle)