Q4 2024 Earnings Summary
- Consistent strong revenue growth across key segments: Marsh achieved 8% revenue growth in Q4 2024, marking the 16th consecutive quarter of 6% or higher underlying growth. Mercer reported 5% underlying growth in Q4, its 15th consecutive quarter of 5% or more growth, with all practices contributing to that growth. This consistent performance demonstrates the resilience and strength of MMC's business model.
- Positive outlook and continued investment for future growth: MMC remains optimistic about growth for 2025, expecting mid-single-digit underlying revenue growth, margin expansion, and solid adjusted EPS growth. The company continues to invest in talent, technology, and capabilities, including workflow optimization and automation, positioning itself well for future opportunities.
- Strategic acquisition of McGriff enhances market position: The acquisition of McGriff extends MMC's presence and capabilities in the growing middle market, bringing in terrific talent and leadership. McGriff is expected to be modestly accretive to adjusted EPS for full year 2025 and more meaningfully accretive in 2026 and beyond, strengthening MMC's growth prospects.
- Guidance suggests potential slowdown in revenue growth: Analysts pointed out that Marsh McLennan's guidance for 2025 indicates mid-single-digit underlying revenue growth, which is more cautious than previous communications that suggested mid-single-digit or better growth. This could signal potential challenges in maintaining past growth rates. ,
- Deceleration in Mercer's Health business growth: Mercer's Health segment reported underlying growth of 5% in the fourth quarter of 2024, the lowest since 2021, despite expectations of increasing medical costs. This slowdown could reflect challenges in this business line and impact future performance.
- Flat margins and missed margin improvement expectations: The company's margins were flat in the fourth quarter, contrary to earlier expectations of greater margin improvement in the second half of the year. This may indicate difficulties in achieving operational efficiencies or integrating recent acquisitions like McGriff.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +9% | The increase to $6,067 million was driven by continued strong performance in both Risk & Insurance Services (RIS) and Consulting, solid underlying growth, and recent acquisitions that built on the momentum established in prior quarters. Minimal currency impact also helped maintain the positive trend. |
Risk & Insurance Services | +12% | Growth to $3,647 million was fueled by MARSH’s strong new business and retention, offsetting a decline at Guy Carpenter. High fiduciary interest income (as seen in prior quarters) and favorable market conditions also contributed to the segment’s performance. |
Marsh | +10% | Marsh’s revenue reached $3,256 million , reflecting robust underlying growth and acquisition benefits, consistent with previous quarters’ patterns of U.S./Canada and international expansion. Strong client retention and continued demand for risk and insurance solutions further propelled this growth. |
Guy Carpenter | -47% | Despite reaching $157 million , the steep decline reflects the cyclical nature of reinsurance renewals and challenging market factors in property catastrophe lines. This compares to a higher prior-year base, where Guy Carpenter benefited from significant reinsurance pricing tailwinds and strong specialty growth. |
Consulting | +6% | Rising to $2,441 million , Consulting growth was supported by Mercer’s solid performance in Health, Career, and Wealth and Oliver Wyman’s continued expansion, echoing earlier quarters’ double-digit growth in certain regions. Dispositions slightly dampened results, but overall demand remained robust. |
Oliver Wyman Group | +11% | At $954 million , Oliver Wyman benefited from acquisitions completed over the past year (e.g., SeaTec Consulting) and growth in the Middle East and Asia. While the underlying growth was more moderate compared to the prior quarter, the expanded client offerings and strong sector demand helped sustain momentum. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Fiduciary income | Q1 2025 | no prior guidance | Approximately $100 million | no prior guidance |
Foreign exchange impact | Q1 2025 | no prior guidance | Headwind of $0.04 | no prior guidance |
Revenue growth | FY 2025 | no prior guidance | Mid-single-digit underlying revenue growth | no prior guidance |
Margins | FY 2025 | no prior guidance | 18th consecutive year of margin expansion | no prior guidance |
Adjusted EPS | FY 2025 | no prior guidance | Solid growth in adjusted EPS | no prior guidance |
Capital deployment | FY 2025 | no prior guidance | $4.5 billion deployed across dividends, acquisitions, and share repurchases | no prior guidance |
Foreign exchange impact | FY 2025 | no prior guidance | Headwind of $0.09 for the full year | no prior guidance |
Adjusted effective tax rate | FY 2025 | no prior guidance | 25%–26% | no prior guidance |
Free cash flow | FY 2025 | no prior guidance | Expected to track earnings growth over time | no prior guidance |
McGriff acquisition | FY 2025 | no prior guidance | Modestly accretive to adjusted EPS for the full year | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Interest Expense | Q4 2024 | $151 million | 231 | Missed |
Share Repurchases | Q4 2024 | Paused | -1,206 (in USD millions) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Strong and consistent revenue growth across Marsh, Mercer, and Oliver Wyman | Mentioned repeatedly in Q1–Q3 2024, all three businesses sustaining mid-single-digit or higher growth | Q4 2024: Marsh +8%, Mercer +5%, Oliver Wyman +7%, maintaining consistent growth | Recurring topic, consistently positive |
Margin expansion expectations (including periods of missed improvement) | Featured in Q1–Q3 with confidence in continued expansion but some missed timing of improvements | Q4 2024: Achieved 80 bps expansion, 17th consecutive year, though second-half improvement lagged expectations | Recurring focus, overall positive despite minor shortfalls |
McGriff acquisition and broader M&A strategy | Q3 discussion emphasized a US$7.75B transaction, with numerous smaller deals ongoing | Q4 2024: Closed in mid-Nov; modestly dilutive to EPS in Q1 2025, accretive later, integration is on track | Newer major deal under active integration |
Potential slowdown in 2025 revenue guidance | No explicit 2025 guidance in earlier quarters, only general caution in Q3 | Q4 2024: Indicated mid-single-digit growth but flagged headwinds (interest rates, tax items) | Emerging topic with uncertain macro impact |
Mercer Health segment growth (acceleration followed by deceleration) | Q1–Q3 showed robust levels around 8–10% | Q4 2024: Grew 5% in Q4 vs. 8% full-year, noting quarterly variability | Recurring growth, slight Q4 slowdown |
Oliver Wyman performance volatility (early strength followed by slowing growth) | Q1–Q3 saw varying quarterly growth (13%, 3%, 1%), reflecting its shorter backlog | Q4 2024: Ended at +7% growth, no major volatility noted | Ongoing fluctuations but strong finish |
Risk and Insurance Services (RIS) decelerating growth | Q3 had 6% underlying, slightly lower than past double-digit rates | Q4 2024: No sign of deceleration, +8% underlying growth | Minor deceleration noted earlier, stable in Q4 |
Pressure from rising casualty insurance rates | Discussed in Q1–Q3 as a notable headwind, with US excess casualty often +10–15% | Q4 2024: Brief mention of global casualty +4%; little detail | Continuing concern, less emphasis in Q4 |
Reinsurance dynamics and cat bond issuance (Guy Carpenter) | Q2–Q3 emphasized record cat bond issuance and evolving cat renewals | Q4 2024: Limited mention; focus on wildfire losses and capacity impacts | Ongoing topic, quieter update in Q4 |
Operating and free cash flow fluctuations | Q3–Q2 explained inherent quarter-to-quarter volatility | Q4 2024: Free cash flow +4% vs. +28% prior year, though doubled since 2019 | Recurring variability, long-term growth trend |
Higher interest expense due to increased debt and rates | Q1–Q3 showed progression from US$159M to US$154–156M, reflecting more debt and rate hikes | Q4 2024: Interest expense rose to US$231M, including bridge financing costs for McGriff | Ongoing rising trend |
Elevated valuations affecting M&A opportunities | Q3, Q1 highlighted stubbornly high multiples even for lesser-quality assets | Q4 2024: Not mentioned in the documents | Previously noted, no Q4 update |
Slower growth in Mercer’s Wealth and Career segments | Q2–Q1 indicated weaker growth in Wealth (+3%) and Career (+1−2%) | Q4 2024: No specific slowdown called out, Mercer overall +5% | Prior concern, not highlighted in Q4 |
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Organic Growth Guidance
Q: Why did guidance change to mid-single-digit growth?
A: Management remains optimistic about 2025 growth, highlighting strong Q4 performance with 7% underlying revenue growth. They advised against reading too much into the language change, emphasizing that the business is well-positioned. -
Flat Margins in Q4
Q: Why were margins flat in Q4 versus expectations?
A: Despite a flat Q4, management was pleased with 80 basis points of margin expansion for the year, marking the 17th consecutive year of growth. Q4 margins were impacted by FX and acquisitions/divestitures, but they expect the 18th consecutive year of margin expansion in 2025. -
McGriff Acquisition Impact
Q: Will McGriff positively impact growth and earnings?
A: Management is excited about McGriff, expecting it to be modestly dilutive early in the year but accretive over the full year and more so in 2026 and beyond. The acquisition enhances reach into the middle market with added talent and capabilities. -
Marsh's Strong Organic Growth
Q: What's driving Marsh's strong organic growth?
A: Marsh achieved 8% revenue growth in Q4, marking the 16th consecutive quarter of 6% or better growth. Growth was broad-based across regions, with U.S. and Canada up 7% and international up 8%. -
Mercer Health Growth Deceleration
Q: Why did Mercer's Health growth decelerate to 5%?
A: Quarterly variability led to Q4 growth of 5%, but full-year growth was 8%. Management maintains a positive outlook, citing factors like medical cost inflation driving demand for health expertise. -
Restructuring Charges in 2025
Q: What restructuring charges should we expect in 2025?
A: The restructuring program that started in 2022 has effectively closed, with remaining charges in Q4 2024. Future noteworthy items will primarily relate to McGriff. -
Reading Into Growth Guidance
Q: Should we read into mid-single-digit growth guidance?
A: Management advised not to overinterpret the guidance, noting that P&C pricing exposure is mostly in the stable middle market. Macroeconomic uncertainties are the primary issues affecting outlook. -
Capital Deployment Guidance
Q: What's behind the $4.5B capital deployment guide for 2025?
A: Despite spending close to $12 billion last year, the company plans to deploy $4.5 billion in 2025. They have significant flexibility for M&A, dividends, and share buybacks. -
McGriff Retention Incentives Impact
Q: How will McGriff's retention incentives impact finances?
A: Management expects $450 million to $500 million in noteworthy charges over the next 3 years, mainly from retention incentives funded by the seller. These will be amortized and are considered noteworthy. -
California Wildfires Impact
Q: How will $30B wildfire losses affect markets?
A: The impact on reinsurance markets is uncertain and depends on the final loss amount. Risk-adjusted rate reductions may be tempered moving forward. Primary market effects are too early to determine. -
M&A and IPO Activity Impact
Q: How will increased M&A and IPOs benefit you?
A: The company supports clients in M&A and IPOs across its businesses. They observed a pickup in Q4 M&A activity but are cautious about 2025 IPO prospects. -
McGriff Integration and Big Deals
Q: Does McGriff integration impede doing big deals?
A: While integration requires effort, management believes they can still pursue bigger deals if appropriate. They prefer to continue their "string of pearls" acquisition strategy. -
Shift to Larger Insurers in Middle Market
Q: Do you see a shift to larger insurers in the middle market?
A: Management acknowledges that scale and data are important. They leverage their scale to benefit the middle market and have strong relationships with larger insurers. -
McGriff's Impact on Margins
Q: Will McGriff be additive or dilutive to margins?
A: McGriff doesn't offer significant expense synergies, but management expects to bring scale benefits to clients, colleagues, and shareholders. They anticipate positive impacts on EPS in 2025 and beyond.
Research analysts covering MARSH & MCLENNAN COMPANIES.