Marsh & McLennan Companies, Inc. (MRSH) Earnings

Management highlights

### Strategic Brand Alignment - The company is accelerating the transition of Guy Carpenter and Mercer to the unified Marsh brand in September 2026, following strong positive feedback on the new Marsh brand. The unified strategy improves marketing ROI and expands brand reach, including securing a partnership as the official risk partner of Formula One, which targets over 800 million global fans and a high concentration of C-suite decision-makers. ### AI Investment and Product Development - AI development is focused on three core areas: growth, productivity, and efficiency. New AI-enabled client and internal tools launched in Q2 include: - Marsh Risk Companion: An integrated client platform with market-leading risk analytics launched at the RIMS Conference - Coverage Intelligence: A point-of-sale platform for middle-market producers that identifies coverage gaps and compares quotes - Atlas: A reinsurance strategy platform that delivers curated, real-time insights on hazards, litigation risk, pricing and economic data - ClaimsIQ: A tool for 3,000 claim professionals that leverages anonymized millions of claims data to streamline the claims lifecycle - Lendwork: A purpose-built in-house agentic AI assistant for colleagues that reduces LLM token costs while meeting most enterprise use case needs - A new partnership between BCS, Oliver Wyman and AWS to redesign mid- and back-office processes, with initial pilots focused on claim services and reinsurance treaty issuance - Quotient, the firm's AI strategic advisory team, saw strong growth and launched builds for new AI-native banks across multiple global regions in Q2. ### Capital and Talent Strategy - The Thrive transformation program is on track to deliver $400 million in total cost savings, with $500 million in total expected restructuring charges; savings are reinvested into growth priorities. The firm ended Q2 with $1.5 billion in completed share repurchases for H1 2026, and announced a 10% increase in the quarterly dividend, marking the 17th consecutive year of dividend increases. - The firm continues to add client-facing sales talent in high-growth sectors, with strong talent retention and a robust hiring pipeline in key markets. ### Market Conditions - The Marsh Global Insurance Market Index recorded a 6% Q2 2026 decrease in primary commercial insurance rates (following a 5% Q1 decline), skewed to large accounts. Global property rates decreased 12% YoY (accelerating from Q1), financial and professional liability down 3%, cyber down 4%, and global casualty up 2% (U.S. excess casualty up 15% on elevated loss experience). - Reinsurance remains in a soft market with abundant capacity. June 2024 Florida catastrophe renewals saw rate reductions of 15-20% from excess supply. Catastrophe bond issuance reached a record high, with over $61 billion of limit outstanding through H1 2026, as clients increasingly use third-party capital to complement traditional reinsurance strategies.

Guidance

- Full-year 2026 underlying revenue growth is expected to remain similar to 2025 levels, with continued margin expansion and solid adjusted EPS growth. Margin expansion is projected to be larger in Q4 2026 than in Q3 2026. - Q3 2026 underlying growth for Marsh Management Consulting is expected to be in the mid-to-high single digits. - Fiduciary interest income is projected to be approximately $95 million in Q3 2026. - Adjusted corporate expenses are expected to be around $75 million in Q3 2026, with interest expense projected to remain at a similar level to Q2 2026's $250 million. - Foreign exchange is expected to have an immaterial impact on full-year 2026 earnings. - The 2026 adjusted effective tax rate is projected to be between 24.5% and 25.5%. - Total 2026 capital deployment across dividends, acquisitions, and share repurchases was revised upward to $5.5 billion, from the prior guidance of $5 billion. - The Thrive program remains on track to deliver $400 million in total annual cost savings, with $500 million in total expected charges to achieve these savings.

Segment performance

Marsh reported consolidated Q2 2026 revenue of $7.4 billion, a 6% year-over-year increase (5% underlying growth). 1. Risk and Insurance Services (RIS): Q2 revenue was $4.8 billion (up 4% reported, 3% underlying), accounting for 64.9% of total consolidated revenue. Adjusted operating income was $1.7 billion (up 3% YoY), with an adjusted operating margin of 35.3%. Year-to-date (H1 2026) revenue was $9.9 billion (3% underlying growth), with adjusted operating income of $3.6 billion (up 5% YoY) and a 36.8% adjusted margin. - Marsh Risk: Q2 revenue was $4.1 billion (up 6% reported, 4% underlying). U.S. and Canada underlying growth accelerated to 4% (from 3% in Q1), and international underlying growth held at 5% (EMEA +5%, Asia Pacific +5%, Latin America +8%). H1 2026 revenue was $7.8 billion (4% underlying growth). - Guy Carpenter: Q2 revenue was $664 million (down 2% reported and underlying), making up 9.0% of total consolidated revenue. A 6 percentage point headwind from declining reinsurance property rates impacted growth. H1 2026 revenue was $1.9 billion (flat underlying), with double-digit new business growth and high 90s client retention. 2. Consulting Segment: Q2 revenue was $2.6 billion (up 10% reported, 8% underlying), accounting for 35.1% of total consolidated revenue. Adjusted operating income was $533 million (up 11% YoY), with an adjusted operating margin of 20.5%. H1 2026 revenue was $5.2 billion (7% underlying growth), with adjusted operating income of $1.1 billion (up 12% YoY) and a 21% adjusted margin. - Mercer: Q2 revenue was $1.6 billion (up 7% reported, 5% underlying). Health grew 3%, Wealth grew 8% (best growth quarter since 2016), with end-of-quarter assets under management of $846 billion (up 26% YoY), and Career grew 2%. H1 2026 revenue was $3.3 billion (5% underlying growth). - Marsh Management Consulting: Q2 revenue was $1 billion (up 15% reported, 13% underlying, the fastest growth quarter in over two years), making up 13.5% of total consolidated revenue. H1 2026 revenue was $1.9 billion (10% underlying growth).

Risks & headwinds

- Soft reinsurance market conditions, particularly large declines in property catastrophe pricing (down 16% YoY at mid-year 2026, the steepest decline in 25 years), created significant headwinds for Guy Carpenter's top-line growth, with Q2 2026 revenue down 2% YoY and H1 2026 revenue flat. - Elevated token costs for frontier large language models could offset AI efficiency gains if not properly managed. - Persistent bid-ask spread gaps in the M&A market have slowed completed acquisitions, with some assets being pulled from the market entirely, leading to slower than expected M&A closed volume in H1 2026. - The ongoing Middle East conflict slowed sales growth slightly in Q2 2026, though the impact has remained limited to date; persistent current conditions could lead to larger negative impacts in the second half of 2026. - Market consolidation in the insurance and reinsurance sector created modest headwinds for growth in Q2 2026. - Economic and geopolitical conditions could change materially from management's current assumptions, leading to actual results differing from forward guidance. - Elevated U.S. liability and litigation environment continues to push up loss costs for excess casualty lines.

Analyst Q&A

• Q: How can pricing headwinds at Guy Carpenter and RIS be offset by new hires and new business to meet full-year organic growth guidance? /

  A: Pricing headwinds are largely concentrated in property catastrophe reinsurance, but execution remains strong across both segments. Marsh Risk achieved double-digit new business growth in the U.S. and Canada, with broad-based growth across specialties like marine, transactional risk, construction, energy and digital infrastructure, and continued 5% underlying international growth. Guy Carpenter delivered record double-digit new business growth in H1 2026 with a record RFP win rate, and strong growth in non-property lines including casualty, facultative reinsurance, and capital advisory, and led a record $5 billion of catastrophe bond issuances in H1. Management is confident growth will offset pricing headwinds in the second half. (543 characters)

• Q: Will rising AI infrastructure costs offset the expected efficiency gains from AI investments? /

  A: Management expected rising token costs to become a challenge, so they developed Lendwork, a low-cost purpose-built in-house model based on slightly lagged third-party LLMs that meets 99% of internal colleague needs, cutting costs substantially. The firm will only use more expensive contemporary frontier models for specialized use cases, primarily at Oliver Wyman and Mercer. Early efficiency projects with AWS targeting mid- and back-office operations are progressing, and management is confident AI will deliver net positive growth and efficiency gains over time. (527 characters)

• Q: Why was Mercer's health business growth slower than expected in Q2, and what is the outlook for the segment? /

  A: Q2's 3% underlying growth was below the segment's 5+% recent quarterly trend, and management cautions against extrapolating this one-quarter slowdown, noting 5% H1 growth is a better reflection of underlying momentum. The segment continues to see strong demand for its innovative digital tools, which are now live in over 100 countries, and has strong momentum winning new global benefits management deals for U.S. and international multinationals. Management maintains a positive long-term growth outlook for the health business. (481 characters)

• Q: Why did the firm increase 2026 total planned capital deployment by $500 million? /

  A: The firm entered 2026 with extra cash on the balance sheet, and year-to-date results have tracked exactly in line with management's expectations, increasing conviction in the full-year outlook. The firm will deploy the extra capital primarily via increased share repurchases, with the ultimate level of repurchases dependent on how the M&A pipeline develops over the second half. (312 characters)