Home / International / "Terrific year" for Marsh McLennan
25 October 2021
Marsh McLennan has reported a 16% jump in quarterly sales to $US4.6 billion ($6.14 billion), marking a record for third quarter revenue amid strong momentum across all businesses on solid demand.
Marsh McLennan says climate, diversity & inclusion, the future of work, cyber and digital strategies were the most pressing concerns for its clients and climate was a “significant opportunity”.
“We are on track for a terrific year,” President and CEO Dan Glaser said. “We expect to generate the best underlying revenue and adjusted earnings growth in over two decades and expand margins for the 14th consecutive year. Our entire organisation is on its front foot.”
Headcount was up by nearly 5000, or around 7%, so far this year, with an emphasis on client-facing roles, he told analysts.
Mr Glaser says margins have improved for 14 consecutive years and the latest results are “really remarkable from a basis point improvement”. The firm’s margin was up 120 basis points for the year-to-date, on top of 120 basis points in 2020 and 110 basis points in 2019.
“I would expect that our margins next year are going to be better than they are this year,” he said during the analyst call.
Mr Glaser says factors that drove the Property & Casualty (P&C) market to harden over the last few years continue, suggesting “an inflection to a soft market is unlikely in the near-term”.
Marsh calculates price increases of 15% year-over-year, consistent with the second quarter and the 16th consecutive quarter of rate increases in the commercial P&C insurance marketplace. Global property insurance was up 9% while global, financial and professional lines were up 32% driven in part by a 90% jump in cyber rates. Global casualty rates were up high single-digits on average.
“It's a tough market out there,” he said.
Public D&O pricing was up about 10 points, versus 15 points in the second quarter, “so starting to see a little bit of settling”.
Measured and moderate rate increases in global P&C reinsurance witnessed in the first half of 2021 could persist throughout the remainder of the year, Mr Glaser says, reflecting elevated global catastrophes and US concerns around inflation and large individual risk lawsuits.
Global catastrophe losses in 2021 were approaching $US100 billion ($134 billion) and would influence property reinsurance pricing in January given it was the fifth year reinsurers have had losses. Clients were “certainly frustrated” and some were electing to retain more risk over paying the higher rates.
Mr Glaser says that after COVID, “one of the biggest features is that most organisations of our size and scale will adapt some sort of hybrid model. I think the days of 9 to 5 or 8 to 6, 5 days a week in the office are over for most companies.”
He also said Travel & Expenses would not bounce back immediately as the “hop on a plane anytime-anywhere culture probably takes quite a long time to come back, if ever”.
Marsh's revenue in the third quarter was up 13% on an underlying basis at $US2.35 billion ($6.68 billion), growing 9% in the Asia Pacific and 16% in North America.
Guy Carpenter's revenue in the third quarter was up 15% at $US314 million ($419.45 billion).
2021 represents Marsh McLennan's 150th year.