Marsh & McLennan Companies, Inc. (MRSH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed outlook. While there are positive developments like new business opportunities in digital infrastructure and AI-driven productivity gains, there are also challenges such as headwinds in property cat pricing and unclear growth prospects for RIS. The Q&A section reveals management's vague responses on certain issues, which could raise investor concerns. The lack of clear strategic guidance and the mixed economic environment suggest a neutral impact on stock price over the next two weeks.
Key Financial Performance
Total Revenue $27 billion, a 10% increase year-over-year, with underlying revenue growth of 4%. The growth was attributed to strong execution against strategic objectives.
Adjusted Operating Income $7.3 billion, an 11% increase year-over-year. This growth followed an 11% increase in 2024, driven by operational efficiency and strategic execution.
Adjusted Operating Margin Improved by 30 basis points, marking the 18th consecutive year of reported margin expansion.
Adjusted EPS $9.75 for the full year, a 9% increase year-over-year, reflecting strong financial performance.
Free Cash Flow Increased by 25% to $5 billion, driven by disciplined working capital management and strong business performance.
Capital Deployment $850 million invested in acquisitions and $2 billion in share repurchases, the largest annual amount in the company's history. Additionally, there was a 10% increase in the quarterly dividend.
Consolidated Revenue (Q4) $6.6 billion, a 9% increase year-over-year, with underlying growth of 4%. Growth was supported by 2% growth in Risk & Insurance Services (RIS) and 5% in Consulting.
Adjusted Operating Income (Q4) $1.6 billion, a 12% increase year-over-year, reflecting strong execution despite a challenging environment.
Adjusted EPS (Q4) $2.12, a 10% increase year-over-year, driven by operational efficiency and revenue growth.
Risk & Insurance Services Revenue (Full Year) $17.3 billion, with underlying growth of 4%. Adjusted operating income increased 12% to $5.5 billion, and the adjusted operating margin was 32%.
Consulting Revenue (Full Year) $9.8 billion, reflecting underlying growth of 5%. Adjusted operating income increased 10% to $2.1 billion, and the adjusted operating margin increased 40 basis points to 21.1%.
Mercer Revenue (Q4) $1.6 billion, a 9% increase year-over-year, with underlying growth of 4%. Growth was driven by Health (6%) and Wealth (5%).
Marsh Management Consulting Revenue (Q4) $1 billion, an 8% increase year-over-year, reflecting solid demand across most regions and sectors.
Fiduciary Interest Income (Q4) $92 million, down $20 million year-over-year, reflecting lower interest rates.
Free Cash Flow (Full Year) $5 billion, up from $4 billion in the previous year, reflecting strong business performance and disciplined working capital management.
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Operating Highlights
Thrive Program: Introduced to provide financial flexibility and organizational agility over the next 3 years. Focuses on investments in digital infrastructure, healthcare, private capital, insurance capital strategies, and energy. Includes AI-driven productivity tools and client-facing technologies like Sentrisk and Aida.
New Marsh Brand: Launched a unified brand to simplify value proposition and support business strategy. Includes a new ticker symbol MRSH.
Insurance and Reinsurance Market: Primary commercial insurance rates decreased 4% in Q4 2025. U.S. rates were flat, while other regions like the U.K., Canada, and Latin America saw declines. Reinsurance market saw price decreases and increased demand, with a record $24 billion in cat bonds issued.
Health Trends: Medical costs are expected to rise by 7% in the U.S. in 2026, with high single to low double-digit increases in other regions.
Operational Efficiencies: BCS (Business and Client Services) introduced to harness AI and advanced analytics for improved client outcomes and operational excellence. Expected to generate $400 million in savings, with $500 million in associated charges.
Financial Performance: 2025 revenue grew 10% to $27 billion, with adjusted operating income up 11% to $7.3 billion. Adjusted EPS increased 9% to $9.75. Free cash flow grew 25% to $5 billion.
Capital Deployment: Invested $850 million in acquisitions and returned $2 billion to shareholders through share repurchases. Increased quarterly dividend by 10%.
Market Positioning: Aims to be the most impactful professional services firm globally, expanding beyond insurance into risk, reinsurance, health, and management consulting.
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Risk or Challenges
Competitive Insurance and Reinsurance Environment: The company faces a competitive insurance and reinsurance market, with primary commercial insurance rates decreasing 4% in Q4 2025. This includes declines in property rates globally and financial and professional liability rates, which could impact revenue growth.
Rising Medical Costs: Medical costs are expected to rise by 7% in the U.S. and high single to low double digits in other regions in 2026, posing challenges for clients and potentially impacting the company's health-related services.
Economic and Market Uncertainty: The company acknowledges a complex environment with polycrises such as trade wars, social unrest, and AI disruption, which could create operational and strategic challenges.
Expense Management and Thrive Program Costs: The Thrive program aims to generate $400 million in savings but will incur approximately $500 million in charges, creating short-term financial pressures.
Interest Rate and Fiduciary Income Headwinds: Lower interest rates have led to a decline in fiduciary interest income, which is expected to continue into 2026, impacting financial performance.
Casualty Market Pressure: Global casualty rates increased 4%, with U.S. excess casualty up 19%, reflecting ongoing liability pressures that could affect the company's risk and insurance services.
Softening Reinsurance Market: The property catastrophe reinsurance market is softening, with price decreases and increased demand for better risk-sharing arrangements, which could impact profitability.
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Guidance & Outlook
Revenue Growth: The company expects underlying revenue growth in 2026 to be similar to the 4% growth achieved in 2025.
Margin Expansion: Continued margin expansion is anticipated in 2026.
Adjusted EPS Growth: Solid adjusted EPS growth is expected in 2026.
Thrive Program: The Thrive program is expected to generate $400 million in total savings, with a portion reinvested for growth, and incur approximately $500 million in charges to achieve these savings.
Fiduciary Interest Income: Fiduciary interest income is expected to be approximately $83 million in Q1 2026.
Interest Expense: Interest expense is forecasted to be approximately $240 million in Q1 2026.
Adjusted Effective Tax Rate: The adjusted effective tax rate for 2026 is expected to be between 24.5% and 25.5%.
Capital Deployment: Approximately $5 billion is expected to be deployed across dividends, acquisitions, and share repurchases in 2026.
Medical Cost Trends: Medical costs are projected to rise by 7% in the U.S. and high single to low double digits in other regions in 2026.
Insurance and Reinsurance Market: The company anticipates a competitive insurance and reinsurance environment, with decreasing pricing trends in primary commercial insurance and reinsurance markets.
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Shareholder Return Plan
Quarterly Dividend Increase: 10% increase in quarterly dividend in 2025.
Total Dividends Paid in 2025: $1.7 billion paid in dividends for the full year.
Share Repurchase Program: $2 billion in share repurchases in 2025, the largest annual amount in the company's history.
Q4 Share Repurchases: $1 billion of stock repurchased in the fourth quarter of 2025.
2026 Share Repurchase Outlook: Approximately $5 billion expected to be deployed across dividends, acquisitions, and share repurchases in 2026, with the level of share repurchase depending on the M&A pipeline.
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Key Q&A
Q:How do you think the trends of investment in AI and digital infrastructure by your clients could affect the long-term revenue outlook for RIS, Consulting, and the health business?
A:The company is excited about the $3 trillion investment in digital infrastructure over the next 5 years. They have a digital infrastructure practice and are focused on risk advisory, risk financing, capital management, workforce strategies, energy solutions, and community engagement. They see this as a big opportunity despite a soft job market.
Q:What is Marsh Risk doing in the digital infrastructure landscape?
A:Marsh Risk is a leader in the technology sector and digital infrastructure, including data centers and ancillary services. They estimate 2,000-3,000 data centers will be constructed worldwide in the next 5 years. Marsh U.S. had the leading market share of $205 billion in data center construction values in 2025. They support clients with builders' risk and property insurance, capital facilitation, and supply chain issues. They also collaborate with Guy Carpenter to develop innovative capacity solutions like Nimbus, which doubled its capacity to $2.7 billion.
Q:What is Guy Carpenter doing to support the digital infrastructure effort?
A:Guy Carpenter sees a significant new business opportunity in 2026, with up to $10 billion of new premium entering the market. They are addressing the need for more capacity by introducing third-party capital and securitizing risks via sidecars and other vehicles. They believe this is the single biggest new business opportunity in 2026.
Q:What is Mercer doing in the digital infrastructure ecosystem?
A:Mercer is focusing on workforce planning, skills assessment, mobility, rewards, and healthcare plan designs. They are helping clients with global mobility policy redesigns and upskilling talent, particularly in Asia. They are also working on technical skills design projects for manufacturers of supplies for building chips and raw materials.
Q:What is Marsh Management Consulting doing to help clients in the digital infrastructure space?
A:Marsh Management Consulting is helping clients integrate strategy, risk, and execution planning for AI-enabled data centers. They are also focusing on energy practice, grid strategy, supply chain resilience, and cost work to fund investments in growth and AI.
Q:How does the company view the reinsurance market and property rate reductions?
A:The company acknowledges strong rate reductions in property reinsurance, which is good for cedents but poses challenges for organic revenue growth. They are focusing on diverse areas of new business, including capital and advisory, casualty sidecars, and structured solutions. They see the casualty market as a growth opportunity despite headwinds in property cat pricing.
Q:Does the Thrive program encompass AI technologies, and how does it impact headcount?
A:Thrive is a growth program that fuels efficiency and margin expansion while enabling investment in market-facing talent. The company has introduced dozens of productivity tools and is focused on making colleagues power users of these tools. While some job families may be more impacted, the tools are expected to make employees more efficient and better at serving clients.
Q:What is the outlook for organic growth in 2026, particularly for Consulting and RIS?
A:The company expects a similar environment to 2025, with uneven economic growth and headwinds from pricing and interest rates. They see opportunities in digital infrastructure, healthcare, energy, and private capital. Consulting is expected to lead organic growth, while RIS may face challenges due to the P&C backdrop.
Q:What is the impact of team dynamics and talent retention on the company's performance?
A:The company has strong talent retention above historic norms and is adding market-facing talent. Team dynamics from last summer were not material to results. They emphasize a collaborative culture and are focused on holding individuals accountable for unethical practices.
Q:What are clients' insurance budgets looking like in 2026?
A:Clients are mixed in their spending, with some harvesting savings due to lower property casualty prices. However, the company advises clients to buy more coverage, particularly in casualty, due to rising liability costs and extreme weather exposure.
Q:How is AI impacting the Management Consulting business?
A:AI has positively impacted productivity and is not causing revenue headwinds. The company is using AI for advanced analytics, client transformation, and enhancing delivery models. They are also investing in performance transformation and cost efficiency to support growth and AI investments.
Q:What is the company's approach to buybacks and M&A?
A:The company ramped up buybacks in Q4 due to a less active M&A pipeline. They deployed $850 million to M&A in 2025 and maintain a balanced approach to capital management. They are optimistic about their M&A pipeline for 2026.
Q:What is the company's view on the cost of brokerage talent and M&A multiples?
A:The company does not see increased pressure on brokerage talent costs despite market movement. They note a bid-ask gap in M&A due to lower public company valuations, with high-quality assets still commanding higher multiples.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the potential impact of AI on headcount numbers and the specific organic growth outlook for RIS in 2026. They also used vague language when discussing the uneven economy and its implications for client spending.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
America
BCS
Canada
Consulting
Risk
Thrive
acquisition share
basis point
brand
business
capital
cash
casualty
client
condition
digit
dividend
environment
health
income margin
increase
insurance
interest
investment
margin basis
market
measure
opportunity
outlook
program
region
reinsurance
result
share repurchase
talent
tax rate
technology
today
year
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
