Marsh & McLennan Companies, Inc. Q1 FY2026 earnings call

John Doyle started by highlighting recent changes to the Executive Committee. Turned to results, noting solid execution despite challenging market conditions with 8% revenue growth, 8% adjusted operating income growth, and 8% adjusted EPS growth. Discussed the impact of the ongoing conflict in the Middle East, focusing on safety and advising clients. Talked about AI strategy with 3 main pillars: growth, productivity, and efficiency. Market conditions were discussed with competitive insurance and reinsurance environment. Mark McGivney covered detailed first quarter financial performance and outlook, including RIS and Consulting segment details.

Consolidated revenue increased 8% to $7.6 billion, growing 4% on an underlying basis. Risk & Insurance Services (RIS) revenue was $5.1 billion, up 6% from a year ago or 3% on an underlying basis. Marsh Risk revenue was $3.7 billion, up 8% from a year ago or 4% on an underlying basis. Guy Carpenter's revenue was $1.2 billion, up 3% or 2% on an underlying basis. Consulting segment revenue was $2.6 billion, up 11% or 5% on an underlying basis. Mercer's revenue was $1.7 billion in the quarter, up 11% or 5% on an underlying basis. Marsh Management Consulting generated revenue of $897 million in the first quarter, up 10% and or 6% on an underlying basis.

Expect underlying revenue growth in 2026 to be similar to last year, anticipate continued margin expansion and solid adjusted EPS growth. Expect to generate more margin expansion in the second half of 2026 than in the first half. Expect an adjusted effective tax rate of between 24.5% and 25.5% in 2026. Expect to deploy approximately $5 billion of capital in 2026 across dividends, acquisitions and share repurchases.

Ongoing litigation stemming from the collapse of greenfield capital in 2021, with the charge in the first quarter being the best estimate of liability, and the litigation being ongoing. Potential risks related to AI disintermediation across various businesses, although Marsh believes its scale, data, client relationships, and ability to advise on risk beyond just insurance mitigate this risk to some extent.

Q: Focus on margin results and AI disintermediation risk; A: John Doyle discussed margin expansion and AI efficiency gains.

Q: Pivot to capital management and M&A vs share repurchase; A: John Doyle talked about balanced capital management, M&A pipeline, and share repurchases.

Q: On AI value-add services, specifically Claims Advocacy Group; A: Nick Studer, Dean Klisura, Patrick Tomlinson, Ted Moynihan shared examples of AI use in delivering value.

Q: On pace of Marsh's hiring in producer level; A: John Doyle said hiring of production talent is strong with strong colleague retention and engagement.

Q: On rate decreases and client demand; A: Nick Studer and Dean Klisura talked about new business growth.

Q: On AI productivity gains and margin protection; A: John Doyle said Marsh is well-positioned to capitalize on AI and fees are small compared to cost of risk.

Q: On AI changing M&A strategy; A: John Doyle said optimistic about AI creating M&A opportunities.

Q: On MMA business and organic growth; A: John Doyle said MMA is a tailwind and has potential for greater growth.

Q: On commissions and compensation tied to services; A: John Doyle said compensation methods vary and transparent with clients.

Q: On Guy Carpenter's performance and capital deployment; A: John Doyle and Mark McGivney talked about Guy Carpenter's execution and capital deployment strategy.

Q: On AI spending and partners; A: John Doyle said Marsh has a healthy tech CapEx budget and works with multiple providers.

Q: On exposure to personal lines brokerage; A: John Doyle said personal lines is a high net worth personalized client area with growth but not material part of business