Marsh & McLennan Companies, Inc. (MMC) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong growth prospects with mid-single-digit revenue growth and solid EPS growth expected in 2025. The company's strategic initiatives, such as the Thrive program and McGriff acquisition, are expected to contribute positively to financial performance. Management expressed confidence in margin expansion and shareholder returns. The Q&A section highlighted optimism in growth areas like AI and M&A, despite some market hesitancy. Overall, the strategic focus and expected financial improvements suggest a positive sentiment, likely leading to a stock price increase in the short term.
Key Financial Performance
Revenue Consolidated revenue increased 11% to $6.4 billion, with underlying growth of 4%. The growth reflects continued momentum in the business and contributions from acquisitions in 2024.
Adjusted Operating Income Adjusted operating income increased 13% to $1.4 billion. This was driven by efficiencies and growth in the business.
Adjusted Operating Margin Adjusted operating margin increased 30 basis points to 22.7%, reflecting operational efficiencies.
Adjusted EPS Adjusted EPS grew 11% to $1.85, reflecting strong financial performance and operational improvements.
Risk & Insurance Services (RIS) Revenue RIS revenue was $3.9 billion, up 13% or 3% on an underlying basis. Growth was supported by contributions from acquisitions and solid performance in the segment.
Marsh Revenue Marsh revenue was $3.4 billion, up 16% or 4% on an underlying basis. Growth reflects contributions from McGriff and good new business growth.
Guy Carpenter Revenue Guy Carpenter revenue was $398 million, up 5% on both a GAAP and underlying basis, despite softer reinsurance market conditions.
Consulting Revenue Consulting revenue was $2.5 billion, up 9% or 5% on an underlying basis. Growth was driven by strong performance in Oliver Wyman and Mercer.
Mercer Revenue Mercer revenue was $1.6 billion, up 9% or 3% on an underlying basis. Growth was led by Health (up 6%) and Wealth (up 3%).
Oliver Wyman Revenue Oliver Wyman revenue was $886 million, up 9% or 8% on an underlying basis, reflecting growth across all regions.
Assets Under Management (AUM) Mercer's AUM was $683 billion, up 25% year-over-year, driven by acquisitions, positive net flows, and capital market impacts.
Fiduciary Interest Income Fiduciary interest income was $109 million, down $29 million year-over-year, reflecting lower interest rates.
Interest Expense Interest expense was $237 million, up from $154 million in the prior year, due to higher interest rates.
Adjusted Effective Tax Rate Adjusted effective tax rate was 24.8%, down from 26.8% in the prior year, reflecting discrete items and operational changes.
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Operating Highlights
AI tools: Introduced LenAI, a proprietary GenAI tool for internal use, handling 1 million inquiries weekly. Launched Aida, an AI-powered assistant for HR decision-making, and Sentrisk, an AI-enabled supply chain risk assessment platform.
Reinsurance market: Dedicated reinsurance capital projected to reach $650 billion by year-end 2025. CAT bond market on track for a record year with $17.5 billion in issuance from 60 new bonds in the first 9 months.
Thrive program: Aimed at generating $400 million in savings over 3 years, with $500 million in charges. Focuses on automation, workforce optimization, and AI deployment to improve efficiency and client value.
Brand strategy: Rebranding from Marsh & McLennan to Marsh in January 2026, including a ticker symbol change to MRSH. Aims to enhance visibility and value proposition.
Operational integration: Creation of Business and Client Services (BCS) unit to unify operations and technology teams, driving efficiency and innovation.
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Risk or Challenges
Economic Uncertainty: Economic uncertainty, particularly in the U.S., is affecting clients and could impact the company's operations and financial performance.
Declining P&C Pricing: Declining property and casualty (P&C) pricing is a challenge, as it affects revenue growth in the insurance and reinsurance markets.
Regulatory and Legal Risks: Unlawful and unethical hiring practices by competitors pose a risk to the company's talent retention and client trust.
Macroeconomic and Geopolitical Uncertainty: Ongoing macroeconomic and geopolitical uncertainties could impact reinsurance market conditions and client risk environments.
Natural Catastrophe Losses: Elevated natural catastrophe losses continue to challenge the reinsurance market, potentially affecting profitability.
Workforce Optimization Risks: The Thrive program involves workforce actions and operational changes, which could lead to execution risks and employee dissatisfaction.
AI Implementation Risks: The deployment of AI tools and automation under the Thrive program may face challenges in achieving the expected efficiencies and savings.
Interest Rate Impact: Lower fiduciary interest income due to declining interest rates is a headwind for financial performance.
Cost of Risk: The growing cost of risk, despite decreasing property casualty prices, is an unsustainable trend that could impact long-term profitability.
Foreign Exchange Volatility: Foreign exchange fluctuations could impact financial results, as noted in the discussion of adjusted EPS.
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Guidance & Outlook
Revenue Growth: The company expects mid-single-digit underlying revenue growth for 2025, with solid growth in adjusted EPS and margin expansion.
Thrive Program Savings: The Thrive program is expected to generate approximately $400 million in savings over the next three years, with a portion reinvested for growth. The company will incur around $500 million in charges to achieve these savings.
AI and Technology Investments: The company plans to increase investments in AI and technology to enhance client service, insights, and efficiency. This includes leveraging AI-enabled enhancements and concentrating operations in cost-effective locations.
Insurance and Reinsurance Market Conditions: The company anticipates current insurance and reinsurance market conditions, including decreasing property casualty prices and growing cost of risk, to continue into 2026 barring significant changes in large loss activity or the broader macro environment.
Capital Deployment: The company plans to deploy approximately $4.5 billion in 2025 across dividends, acquisitions, and share repurchases, with the level of share repurchase depending on the M&A pipeline.
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Shareholder Return Plan
Dividends in Q3 2025: $445 million
Dividends in first 9 months of 2025: $1.3 billion
Share repurchases in Q3 2025: $400 million
Share repurchases in first 9 months of 2025: $1 billion
Expected capital deployment for share repurchases in 2025: Approximately $4.5 billion across dividends, acquisitions, and share repurchases
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Key Q&A
Q:Do you think with the government shutdown and uncertainty, we might be on a glide path to low to mid-single digit growth over the next 24 or 36 months?
A:John Doyle stated that he was not projecting into 2026 or 2027 but acknowledged pressures from the macro environment and P&C-related pricing. He emphasized confidence in their ability to execute across different economic cycles and highlighted their reshaping of the business mix to focus on growth.
Q:Can you elaborate on the company's intention to start a wholesale business?
A:John Doyle clarified that they are not looking to build a third-party wholesale business but aim to enhance internal capabilities. He mentioned the creation of a new desk in London to bring in business from third-party wholesalers, which is expected to contribute to revenue synergies by 2026.
Q:Why is the Thrive expense program expected to achieve $400 million in savings for $500 million in costs?
A:Mark McGivney explained that the program builds on existing work, with costs mainly associated with severance and transitioning work. He expressed confidence in the savings and charges, noting that the majority of savings would flow to the bottom line.
Q:Should we expect the U.S. organic growth to follow the current trend line in the near term?
A:John Doyle noted hesitancy among larger U.S. clients and highlighted uneven economic conditions. Despite challenges, he expressed satisfaction with their growth, citing 11% growth in the quarter and 4% growth at Marsh.
Q:Can you discuss the pipeline and growth potential for Oliver Wyman?
A:John Doyle and Nicholas Studer highlighted strong growth at Oliver Wyman, driven by performance transformation and AI-related work. They noted moderating growth in the fourth quarter but expressed optimism about the demand funnel and pipeline.
Q:Is the environment for Marsh and MMA improving due to upticks in capital markets, M&A, and IPOs?
A:John Doyle acknowledged an uptick in M&A activity, which contributed to growth. He noted better growth in the middle market compared to the upmarket and expressed confidence in their investments and capabilities.
Q:How will the Thrive program's $400 million in gross savings be reinvested?
A:John Doyle stated that the savings would be reinvested in talent acquisition and accelerating their AI journey. He emphasized that Thrive is focused on growth and improving operational efficiency.
Q:What caused the deceleration in organic growth in the U.S. and Canada this quarter?
A:John Doyle attributed the deceleration to uneven economic conditions and hesitancy among larger clients. He noted that while pricing and the economy may be slowing, the demand for their services remains resilient.
Q:Are you more sensitive to pricing in certain geographies versus others?
A:John Doyle and Martin South discussed competitive markets and noted that rates are slightly more down internationally. They highlighted strong growth in regions like Asia Pacific, EMEA, and Latin America, despite pricing pressures.
Q:Will the Thrive program support above-average margin expansion?
A:John Doyle expressed confidence that the Thrive program would support margin expansion, even in a lower growth environment. He highlighted their track record of 18 consecutive years of margin expansion.
Q:What is the current state of the insurance brokerage M&A environment?
A:John Doyle noted that the bid-ask spread might be widening due to the slower growth environment. He mentioned that private equity buyers seem more willing to pay higher multiples than strategics.
Q:What is the organic growth outlook for McGriff?
A:John Doyle stated that McGriff's organic growth might slow in the first few quarters post-acquisition due to integration challenges. However, he expressed confidence in its long-term contribution to MMA.
Q:Will the organic revenue target for next year be similar to this year?
A:John Doyle indicated that the guidance for next year would be provided in 90 days but noted that mid-single-digit growth was a prudent target given the current environment.
Q:How does the rebranding of the company aim to drive incremental revenue?
A:John Doyle explained that the rebranding aims to simplify their story and showcase their capabilities, talent, and culture. It is not specifically about cross-selling but about presenting a more connected approach to clients.
Q:How does the Thrive program affect your appetite for M&A?
A:John Doyle stated that the Thrive program does not significantly impact their M&A appetite. They remain active in the market, focusing on smaller to midsized deals that align with their strategy.
Q:Why is growth better in the middle market compared to the large market?
A:John Doyle attributed better growth in the middle market to their scale benefits, analytics, specialty capabilities, and global reach. He noted that the large market is more penetrated, requiring new ways to advise clients.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about whether the organic revenue target for next year would be similar to this year. John Doyle deferred the guidance to 90 days later, citing the dynamic and complex environment.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI analytics
AI area
AI assistant
AI brand
AI enhancement
AI era
AI increase
CAT
CEO McLennan
Mercer basis
Services
Thrive
automation
charge saving
client colleague
effort
insight
insurance reinsurance
journey
location
model
month Consulting
people BCS
point month
rate property
result program
risk people
saving efficiency
saving portion
step
stock
tool colleague
unit
use
value client
value proposition
week
workforce
year AI
MMC Transcript
Marsh & McLennan Companies, Inc. (MMC) Q3 2025 Earnings Call Transcript
Positive10-16
The earnings call summary indicates strong growth prospects with mid-single-digit revenue growth and solid EPS growth expected in 2025. The company's strategic initiatives, such as the Thrive program and McGriff acquisition, are expected to contribute positively to financial performance. Management expressed confidence in margin expansion and shareholder returns. The Q&A section highlighted optimism in growth areas like AI and M&A, despite some market hesitancy. Overall, the strategic focus and expected financial improvements suggest a positive sentiment, likely leading to a stock price increase in the short term.
Marsh & McLennan Companies, Inc. (MMC) Q2 2025 Earnings Call Transcript
Unknown7-17
The earnings call summary presents mixed signals: positive aspects include the strategic integration of McGriff and the promising Centrisk AI platform. However, the Q&A reveals concerns about the softening insurance market, economic headwinds, and uncertainties in macro factors affecting growth. Despite some positive guidance on revenue and EPS growth, management's unclear responses on key issues like M&A recovery and AI impact, along with pressures on pricing and discretionary spending, balance the overall sentiment to neutral.
Marsh & McLennan Companies, Inc. (NYSE:MMC) Q1 2025 Earnings Call Transcript
Unknown4-18
The earnings call presented mixed signals. Positive aspects included strong revenue growth and a 15% dividend increase. However, concerns about rising debt, increased interest expenses, and vague management responses regarding tariffs and antitrust risks create uncertainty. The company's focus on acquisitions and capital deployment could be promising, yet the fluctuating insurance market and macro uncertainties pose challenges. Without a clear market cap, the overall sentiment remains neutral, as positive financial performance is counterbalanced by potential risks and uncertainties.
Earnings call transcript: Marsh McLennan Q1 2025 sees EPS growth amid stock dip
Unknown4-17
The earnings call shows mixed signals: strong revenue and EPS growth, alongside increased dividends and share repurchases, are positives. However, declining margins, higher interest expenses, and management's evasive responses about specific metrics raise concerns. The Q&A reveals uncertainties in macroeconomic impacts and M&A risks. Despite some optimism in guidance and strategic plans, these mixed factors suggest a neutral stock price movement in the short term.
MMC Report
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