Marsh & McLennan Q3 Earnings Beat on Solid Marsh Unit Performance

Marsh & McLennan Companies, Inc. MMC reported third-quarter 2024 adjusted earnings per share of $1.63, which beat the Zacks Consensus Estimate by 1.2%. The bottom line advanced 3.8% year over year. 

Consolidated revenues rose 6% year over year to $5.7 billion. The figure also improved 5% on an underlying basis. The top line, however, fell short of the consensus mark by 0.2%.

The strong quarterly earnings were aided by strength in the Marsh unit within the Risk and Insurance Services segment. Higher profits from its consulting business were a major tailwind. The company's strong United States/Canada operations contributed to the positive results. The upside was partly offset by an overall elevated expense level. 

The company agreed to acquire McGriff Insurance Services on Sept. 29, 2024, for $7.75 billion.

MMC’s Q3 Performance

Total operating expenses of $4.59 billion increased 4.6% year over year and were higher than our model estimate of $4.55 billion. The year-over-year increase was due to higher compensation and benefits costs and other operating expenses. Expenses of the Risk and Insurance Services segment escalated 6.7% year over year, while the Consulting segment’s expenses inched up 1% year over year. 

Marsh & McLennan’s adjusted operating income was $1.19 billion in the third quarter, which grew 12% year over year but missed our estimate of $1.21 billion. Adjusted operating margin improved 110 basis points year over year to 22.4%.

Q3 Segmental Update

Risk and Insurance Services

Revenues in the segment were $3.45 billion, which advanced 8% year over year and 6% on an underlying basis. The reported figure outpaced the Zacks Consensus Estimate by 1.3% and our estimate by 1.9%. Adjusted operating income advanced 15.5% year over year to $775 million, higher than the consensus mark of $768.9 million. 

Revenues of Marsh, a unit within the segment, improved 9% year over year and 7% on an underlying basis to $2.93 billion. The reported figure outpaced the Zacks Consensus Estimate of $2.91 billion and our estimate of $2.89 billion. In the United States/Canada operations, revenues grew 10% year over year. International operations also witnessed revenue growth of 7%. Among the international operations, Asia Pacific saw the highest revenue growth of 10%, followed by an increase of 8% in EMEA.

Revenues of Guy Carpenter, another unit within the segment, rose 6% year over year and 7% on an underlying basis to $381 million. The figure was slightly lower than the consensus mark of $383.8 million and our estimate of $377 million.

Consulting

The unit recorded revenues of $2.26 billion, which increased 3% year over year and 4% on an underlying basis. However, the reported figure lagged the Zacks Consensus Estimate by 2.1%. Adjusted operating income advanced 6.9% year over year to $478 million and beat the consensus estimate by 3.5%.

Revenues of Mercer, a unit within this segment, increased 2% year over year and grew 5% on an underlying basis to $1.45 billion. Yet, the figure fell short of the consensus mark by 2.4%. Health revenues climbed 8% on an underlying basis while Wealth and Career revenues witnessed underlying increases of 4% and 5%, respectively.

Oliver Wyman, another unit within the segment, recorded revenues of $810 million, which advanced 1% on an underlying basis. The metric lagged the Zacks Consensus Estimate of $828.6 million and our estimate of $820.1 million.

Financial Update (as of Sept. 30, 2024)

Marsh & McLennan exited the third quarter with cash and cash equivalents of $1.8 billion, which declined from the 2023-end figure of $3.36 billion. Total assets of $49.86 billion inched up from the $48.03 billion figure at 2023-end.

Long-term debt amounted to $12.33 billion, which increased from the $11.84 billion figure as of the end of Dec. 31, 2023. Short-term debt amounted to $518 million.

Total equity of $13.88 billion rose from the 2023-end level of $12.37 billion.

Marsh & McLennan generated operating cash flows of $2.35 billion in the first three months of 2024, which dropped from the prior-year comparable period’s $2.48 billion. 

Capital Deployment Update

Marsh & McLennan bought back 1.4 million shares worth $300 million in the third quarter.

Zacks Rank & Price Performance

Marsh & McLennan currently has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of MMC have gained 20.7% in the year-to-date period, underperforming the industry’s average of 33.3%. In comparison, its peers like Arthur J. Gallagher & Co. AJG, Aon plc AON, and American International Group, Inc. AIG have returned 28.6%, 23.9%, and 15.4%, respectively.

MMC’s YTD Price Performance

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