Marsh & McLennan Companies, Inc. (NYSE:MMC) Q1 2024 Earnings Call Transcript

Operator: Certainly. One moment, please. Our next question comes from the line of Meyer Shields with KBW.

Meyer Shields: Great. Thanks. I was hoping to discuss the competitive environment in RIS maybe from two perspectives. First, I’m wondering whether there is a difference in the market share gain potential when you’re in a rising rate environment and the enormously fragmented brokerage world includes a lot of companies that just don’t have the resources to help clients manage higher insurance costs as successfully as a company with Marsh’s resources. How much of a difference does that make?

John Doyle: It’s a good question, Meyer. We’re very, very focused on trying to bring scale benefits to our — well, to all of our key stakeholders, right, including our colleagues, right? We want them — when they work here, we want them to feel like they have nearly 90,000 folks helping support them with learning and development, data and analytics, market access that you might not have, should you choose to work somewhere else in our industry. So, we certainly think about it from the colleague perspective, we think about it from the client perspective, and we think about it from an investor point of view as well. What I would say, from a client perspective, broadly speaking, again, and this is maybe a bit more upmarket than some of the fragmented segments that you talked about before.

Our clients are more risk aware than they’ve been in the past. I think we have had a role to play in that in trying to make them more risk aware of some meta risks. And again, recent events have certainly helped heighten that. But it’s incumbent upon us to bring those scale benefits to the market. And not just scale benefits in terms of data analytics or market access, but different types of solutions. I mentioned earlier, our captive business. We’re the largest captive manager in the world, and that’s been a meaningful outlet for our clients to manage risk and the rising rate environment over the course of the last several years. So, yes, scale matters. I would also tell you that it plays a role for some of the sellers in the market as well as we talk through with potential M&A targets, why they may look to sell at the moment at times.

It’s regarding scale type — scaled-up-type capabilities that we have that are difficult for them to replicate. And so, as I said earlier, we’re looking for well led businesses with really solid growth fundamentals, but we know we can make them better too. And that’s the exciting part for us. Do you have a follow-up?

Meyer Shields: I do, but I want to thank you for that. That was very thorough. When we look at the parts of the brokerage market that are more concentrated here, I guess I’m thinking reinsurance or Fortune 100-type accounts, in your view, is the competitive — are competitors fighting at full strength? Are they all — is competition right now as intense as it normally is, or any differences from longer-term norms?

John Doyle: No, it’s — I mean, in both of the segments you mentioned, it is a highly competitive market, and we love competition. There’s nothing that gets me more fired up than getting out in front of clients and, of course, winning ultimately. And our team is the same way. We’re passionate about the value that we try to deliver to our clients. And so, as I mentioned earlier, we’re collaborating more than ever. And in those particular segments you mentioned, I think it’s been particularly meaningful over the course of the last year or so, our efforts to bring a broader set of capabilities to that client set. But no, it’s a very, very competitive market and we welcome it. It makes us better. Thanks, Meyer. Andrew, next question? And maybe the last one.

Operator: Our next question comes from the line of Robert Cox with Goldman Sachs.

Robert Cox: Hey, thanks. In the prepared remarks, there were some comments on healthcare costs continuing to rise. I was hoping you guys could talk about what you’re seeing there and maybe parts of the business, maybe between brokerage and consulting that are generating the strongest organic growth in that 10% organic in health.

John Doyle: Sure. Thank you, Robert. Healthcare and the healthcare industry is a big part of our business overall. And I don’t think it’s any secret that medical inflation and healthcare-related cost inflation is a major pressure point for our clients in many markets really around the world. It’s been a big driver of growth for us, and we continue to invest in it. I talked about in my prepared remarks some of the collaboration between Marsh and Mercer to try to bring some sort of relief to an angle of cost pressure in that marketplace. But Pat, maybe you could talk about the growth we’re seeing and some of the cost inflation as well.

Pat Tomlinson: Sure. So, the way that healthcare inflation impacts the business varies based upon the area of the world that we’re in. In certain areas of the world where predominantly fee based, it’s more large market that would predominantly be from a Mercer perspective inside like the US and some of our more mature larger markets. And then, in a lot of the markets, we are a little bit more brokerage-based to where it’s based that way. But let me be clear, even the spots where we’re fixed fee, healthcare inflation drives significant increased cost to clients. So, it does create a lot of — it creates demand for work for us, a lot of project work. So, we will see projects out of that healthcare inflation, it’s not necessarily directly driven that way.