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Marsh & McLennan posts strong Q1 revenue, profit

Dan Glaser

Marsh & McLennan Cos. Inc. expects full-year 2021 organic revenue growth could top its 3% to 5% guidance, as the economy turns the corner and growth accelerates, the company’s top executives said Tuesday during a first-quarter earnings call with analysts.

The New York-based brokerage said the recovering economy and still firm property/casualty insurance pricing were causes for optimism as it reported first-quarter underlying revenue growth of 6%.  

The company reported a profit of $983 million for the quarter, up 30% from the year-earlier period.

Marsh LLC, its commercial broking unit, recorded organic revenue growth of 8% in the first quarter, while Guy Carpenter & Co. LLC, the company’s reinsurance brokerage, reported organic revenue growth of 7%. Both businesses benefited from strong new-business growth and solid retention.

On the call, Dan Glaser, Marsh McLennan’s president and CEO, said GDP in the U.S. was close to flat in the first quarter and strong levels of growth are expected in the current quarter due to “a rebound in demand” as the impact of vaccines takes hold along with favorable economic comparisons with a year ago.

Marsh McLennan is pressing ahead with acquisitions, Mr. Glaser said, noting Marsh McLennan Agency LLC’s April 1 buy of PayneWest Insurance Inc.

“Overall, we are on track for a very good year. Demand for our advice and solutions is strong, the economy is recovering, P&C insurance pricing remains firm, and we are benefiting from industry disruption,” Mr. Glaser said.

Cyber was the outlier in a quarter that saw global property/casualty insurance pricing moderate, Marsh McLennan’s executives said.

The average price increase in cyber doubled from the high teens to the mid-30s due to the exposure environment, John Doyle, Marsh president and CEO, said during the call.

The Marsh Global Insurance Market Index showed an increase of 18% year over year versus 22% in the fourth quarter.

“The pace of price increases moderated sequentially in the first quarter after accelerating for 11 straight quarters. However, the 18% increase is still one of the highest since we started publishing the index in 2012,” Mr. Glaser said.

Global property insurance prices were up 15% in the first quarter, and global financial and professional lines rose 40%.  Global casualty rates were up 6% on average, while U.S. workers compensation rates were modestly negative.

U.S. small and mid-market pricing continues to rise, though the magnitude of increases is less than for large, complex accounts.

In reinsurance, Guy Carpenter’s global P/C rate-on-line index increased just under 5% at Jan. 1 reinsurance renewals, Mr. Glaser said.

Reinsurance pricing and terms and conditions in the U.S. on April 1 business were largely a continuation of the Jan. 1 pricing environment.

“Capacity is more than adequate, and demand remains high,” but reinsurance capacity remains constrained on certain lines of business, most notably for cyber risk, Mr. Glaser said.

“Overall price increases continue to persist in both the property/casualty insurance and reinsurance markets. … We are working hard to help clients navigate these challenges,” Mr. Glaser said.

Marsh McLennan reported consolidated revenue of $5.1 billion for the first quarter, an increase of 9%, or 6% on an underlying basis, from the year-earlier period.  

Mark McGivney, Marsh McLennan’s chief financial officer, said the company is positioned for a “very good 2021” despite the continued uncertainty associated with the pandemic.

“Underlying growth accelerated across all our businesses, and our margin expansion and earnings growth were impressive” in the first quarter, Mr. McGivney said.

Marsh reported $2.33 billion in revenue, up 8% on an underlying basis compared with the same period last year.

This was Marsh’s highest level of underlying growth in nearly two decades, Mr. McGivney said. Marsh’s U.S. and Canada division delivered underlying revenue growth of 9%, the highest quarterly underlying growth it has achieved, he said.

Specialty growth was particularly strong in the quarter in Marsh’s FinPro, private equity practice, construction and energy lines of business, Mr. Doyle said.

Guy Carpenter, its reinsurance brokerage unit, reported first-quarter revenue of $895 million, up 7% on an underlying basis.

Peter Hearne, CEO of Guy Carpenter, said the bulk of its income is coming from new business wins. “It’s well balanced across all of our businesses, from North America, Latin America, Middle East, Asia Pacific and global specialties. All have recognized strong growth in Q1, and we see the same holding true for Q2,” Mr. Hearne said on the call.

The company’s consulting business, which comprises Mercer LLC and Oliver Wyman LLC, saw revenue of $1.87 billion, up 3% on an underlying basis.




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