Marsh & McLennan Earnings Call Shows Strength Amid Headwinds

Marsh & Mclennan ((MRSH)) has held its Q4 earnings call. Read on for the main highlights of the call.

Marsh & McLennan Balances Strong Results With Market Headwinds in Latest Earnings Call

Marsh & McLennan’s latest earnings call struck a confident but measured tone. Management highlighted another year of solid revenue growth, expanding margins, strong cash generation, and active capital deployment, underscored by the launch of the Thrive efficiency program and a slate of technology initiatives. At the same time, executives were candid about headwinds from falling insurance and reinsurance pricing, lower fiduciary interest income, one-time transformation charges, and pockets of regional softness. Even so, the company signaled clear confidence in its ability to sustain growth and improve profitability through 2026.

Strong Full-Year Revenue and Underlying Growth

Marsh & McLennan reported full-year revenue of $27.0 billion, up 10% year over year, with underlying revenue growth of 4% for fiscal 2025. The figures point to broad-based top-line strength across the portfolio, demonstrating that the firm is still growing faster than many mature financial-services peers despite a tougher backdrop for insurance pricing. The 4% underlying growth rate, adjusted for currency and M&A, gives investors a clearer view of core demand for the company’s risk and consulting services.

Robust Profitability and Margin Expansion

Profitability continued to move in the right direction, with adjusted operating income up 11% to $7.3 billion and adjusted operating margin expanding by 30 basis points, extending the firm’s streak to 18 consecutive years of reported margin expansion. Full-year adjusted EPS grew 9% to $9.75, signaling that management is translating revenue growth and productivity improvements into meaningful earnings gains. The margin performance is particularly important given industry pricing pressure and underscores the impact of ongoing efficiency and scaling efforts.

Quarterly Financial Momentum

The fourth quarter added evidence of momentum heading into 2026. Consolidated Q4 revenue climbed 9% to $6.6 billion with underlying growth of 4%, mirroring the full-year trajectory. Adjusted operating income for the quarter rose 12% to $1.6 billion, while adjusted operating margin improved by 40 basis points to 23.7%. Adjusted EPS reached $2.12, up 10% from the prior year’s quarter. These results suggest that Marsh & McLennan is managing through pricing headwinds while still expanding profitability in the near term.

Strong Free Cash Flow and Capital Returns

Cash generation was a standout theme. The company produced $5.0 billion of free cash flow in 2025, a 25% increase from $4.0 billion the year before. Management used that strength to return substantial capital to shareholders, including a 10% hike in the quarterly dividend and $2.0 billion in share repurchases, the largest annual buyback in its history. For investors, this combination of rising free cash flow and stepped-up capital returns underscores the company’s confidence in its balance sheet and long-term earnings power.

Active M&A and Strategic Investments

Marsh & McLennan remained active on the deal front, investing roughly $850 million in acquisitions and deploying $847 million across the year, highlighted by the completion and integration of McGriff, the company’s largest acquisition ever. Management emphasized that it intends to continue leaning into M&A, focusing on transactions that are earnings-accretive and strategically aligned with key growth areas. While they acknowledged that industry valuation shifts could affect deal terms, the pipeline remains healthy, signaling that bolt-on acquisitions will continue to support growth.

Thrive Program, Brand Refresh, and Technology Push

A major strategic layer in the earnings call was the launch and execution of the Thrive program, which targets $400 million in cost savings. Alongside Thrive, the company unveiled a refreshed Marsh brand and a new ticker (MRSH), while forming the Business and Client Services (BCS) unit to scale AI and analytics across the organization. On the client side, Marsh & McLennan is rolling out technologies such as Centrisq and AIDA plus dozens of AI-driven productivity tools aimed at both improving client outcomes and boosting internal efficiency. While the program carries one-time costs, management views these initiatives as critical to driving future margin expansion and competitive differentiation.

Segment-Level Growth Across the Portfolio

Performance across business segments was broadly positive. Marsh Risk delivered full-year underlying growth of 4% (3% in Q4), while Guy Carpenter posted 5% underlying growth for the year and in the fourth quarter. The Consulting segment saw 5% underlying growth both for the year and in Q4, with Mercer up 4% on an underlying basis in the quarter and for the year. Marsh Management Consulting stood out with 6% underlying growth for the year and 8% in Q4. This balanced growth across risk and consulting lines supports the company’s claims of a diversified, resilient model, even as certain niches face pressure.

Assets Under Management on the Rise

Mercer continued to build scale in asset management, ending the quarter with $692 billion in assets under management, up 12% year over year and 1% sequentially. The increase was driven by both acquisitions and favorable capital markets. Higher AUM can translate into fee growth over time, adding a more recurring revenue component to the broader portfolio and providing a partial offset to cyclical weakness in other parts of the business.

Softening Insurance and Reinsurance Pricing

Despite the strong financials, market conditions in insurance and reinsurance pricing are becoming more challenging. The Marsh Global Insurance Market Index showed renewal rates down 4% year over year in the fourth quarter, with global property rates falling 9% and several regions facing mid- to double-digit declines. For Marsh & McLennan, lower pricing acts as a headwind to organic revenue growth in property and casualty and in reinsurance-exposed lines, since brokerage and commission revenue often scale off premium levels. Management’s strategy relies on volume growth, cross-selling, and value-added advisory to offset these pricing pressures.

Reinsurance Market Pressure and January Price Acceleration

The reinsurance market, particularly property catastrophe, has shifted from the hard conditions of recent years to a more accommodating environment for buyers. As reinsurers deployed additional capital, pricing pressure intensified, and at the key January 1 renewal date some cedents secured double-digit price reductions. While this is positive for Marsh & McLennan’s clients, it can weigh on brokerage commissions and reinsurance-related revenue. The company will need to lean on volume growth, new business, and expanded services around risk analytics and advisory to maintain growth in this segment.

Fiduciary Interest Income Under Pressure

Lower interest rates are beginning to show up in Marsh & McLennan’s numbers through reduced fiduciary interest income—the interest earned on client funds held temporarily in trust. This income dropped by $20 million to $92 million in the quarter versus the prior year. Management expects further pressure, guiding to about $83 million of fiduciary interest income for the first quarter. While this is not the core of the earnings story, it represents a meaningful headwind in a funding line that had previously benefited from higher rates, and it slightly dampens earnings leverage from the float-like nature of these balances.

One-Time and Transformation Costs

Transformation does not come free. In the fourth quarter, Marsh & McLennan recorded $210 million of notable items, including $112 million of costs tied to Thrive. Management anticipates around $500 million in total charges to achieve the program’s targeted $400 million in savings, with some of those savings earmarked for reinvestment in technology and growth initiatives. While this creates near-term pressure on GAAP earnings and introduces execution risk, the company is framing Thrive as a multi-year margin and productivity lever, intended to help offset market and macro headwinds.

Regional and Product Softness

Not all regions and product lines are moving in lockstep. Latin America revenue declined 4% on an underlying basis in the quarter, largely due to 18-month policy renewals that cause revenue recognition to be lumpy. Within Mercer, the Career offering fell 2%, reflecting softer project demand in the U.S. and Canada. Workers’ compensation also saw a modest 1% decrease. While these areas of weakness are relatively contained compared with the broader portfolio, they highlight that growth is not uniform and that certain discretionary and cyclical businesses remain sensitive to client spending patterns.

Elevated Debt and Capital Structure Considerations

The company closed the quarter with $19.6 billion of total debt, an elevated but manageable level for a business of its scale and cash generation. The next scheduled maturity is $600 million in the first half of 2026. Management’s plan to deploy about $5.0 billion of capital in 2026—across dividends, buybacks, and acquisitions—will require continued discipline around leverage and interest costs. Investors will be watching how the company balances shareholder returns, M&A ambitions, and balance sheet strength amid a shifting rate environment.

Industry Valuation and M&A Multiple Risk

Management acknowledged a broader industry risk: the deterioration in publicly traded broker valuations. Lower sector multiples can widen bid-ask spreads between buyers and sellers in private M&A, potentially slowing deal activity or forcing re-pricing. For Marsh & McLennan, which has consistently leaned on acquisitions to enhance capabilities and expand geographically, a tougher deal-making environment could influence the pace and economics of future transactions. Even so, the company is signaling a willingness to remain opportunistic and disciplined when deploying capital for deals.

Operating in a ‘Polycrisis’ Environment

The call also highlighted the complex macroeconomic and geopolitical backdrop. Management described the current environment as one of “polycrises,” citing geopolitical conflict, trade tensions, AI disruption, and extreme weather, all of which complicate risk profiles for clients. While this complexity can pressure demand in certain areas, it also reinforces the strategic role of Marsh & McLennan’s risk advisory and consulting capabilities. The firm is positioning itself as a partner to help clients navigate these overlapping crises, which could support demand for its services even in volatile conditions.

Forward-Looking Guidance and Capital Deployment Plans

Looking ahead, Marsh & McLennan guided to 2026 underlying revenue growth similar to 2025, around 4%, with continued margin expansion and “solid” adjusted EPS growth on top of the 2025 base of $9.75. The company reiterated its Thrive target of $400 million in savings, offset by roughly $500 million in one-time charges, with a portion of the savings reinvested in technology and growth initiatives. Near-term, management expects about $83 million in fiduciary interest income and around $240 million in interest expense in the first quarter, and an adjusted effective tax rate of 24.5%–25.5% for 2026. They also plan to deploy approximately $5.0 billion of capital in 2026 through dividends, share repurchases, and acquisitions, alongside a $600 million senior-note maturity in the first half of the year, with all guidance subject to changes in economic conditions.

In summary, Marsh & McLennan’s earnings call painted a picture of a company executing well on fundamentals while proactively preparing for a more challenging market. Revenue and earnings are growing, margins continue to expand, cash generation is robust, and the firm is investing in both technology and acquisitions to sustain its competitive position. At the same time, softening insurance and reinsurance pricing, lower fiduciary income, transformation costs, and pockets of regional weakness are real headwinds. For investors focused on long-term compounding, the key takeaway is that management remains confident in delivering steady underlying growth and rising profitability, even as it navigates a more volatile and competitive landscape.