Marsh & Mclennan Companies, Inc. Q1 FY2026 Earnings Call

Welcome to Marsh's Earnings Conference Call. Today's call is being recorded. First quarter 2026 financial results and supplemental information were issued earlier this morning and are available on the company's website at corporate.marsh.com. Please note that remarks made today may include forward-looking statements that are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements. For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. I'll now turn this over to John Doyle, President and CEO of Marsh.

Thanks, Andrew. Good morning, and thank you for joining us today to discuss our first quarter results. I'm John Doyle, President and CEO of Marsh. On the call with me is Mark McGivney, our COO and CFO; and the CEOs of our businesses, Nick Studer of Marsh Risk; Dean Klisura of Guy Carpenter; Pat Tomlinson of Mercer; and Ted Moynihan of Marsh Management Consultant. Also with us this morning is Jay Gelb, Head of Investor Relations. Let me start by highlighting recent changes to our Executive Committee. Mark was named Chief Operating Officer of Marsh in addition to serving as our CFO. In this expanded role, Mark will take on more responsibility for evolving our strategy and working across our business to drive execution of top priorities, support collaboration, and accelerate pace. We also announced Nick as the CEO of Marsh Risk. Nick is a proven growth leader as demonstrated by his record as CEO of Oliver Wyman. His experience advising corporate and public sector leaders on the topics of risk and strategy positions Nick well to deliver on our growth ambitions. Nick succeeded Martin South, who is now our Chief Client Officer. Martin will focus on elevating the client experience across the company and help us better leverage AI to support clients. And Ted succeeded Nick as CEO of Marsh Management Consulting. Ted has more than 3 decades of leadership experience at Oliver Wyman, and he is a respected adviser to business and government leaders. I look forward to him driving continued growth at Marsh Management Consulting. Congratulations to Mark, Nick, Martin and Ted. These leadership changes are all about growth, enhancing the client experience and helping us capture the benefits of Thrive. Turning to results. Our performance in the first quarter reflects solid execution despite challenging market conditions. Overall, we grew revenue 8% in the quarter. Underlying revenue increased 4% despite lower fiduciary interest income and continued downward pricing pressure in insurance and reinsurance. We are seeing strong sales across our business, and we are pleased with the sequential improvement in the growth at Marsh Risk. Adjusted operating income grew 8% from a year ago, and adjusted EPS also grew 8%. Turning to the ongoing conflict in the Middle East. Our primary concern has been the safety and well-being of our colleagues and clients and helping them navigate the challenges in the region. The impact on our business and the broader insurance industry has been limited. The economic issues related to the conflict in the Gulf are not about insurance. While certain lines like marine coverage may experience price spikes for war risks, ultimately, the gating issue is the escalation. A sustained conflict in the region will create more uncertainty and risk for the world's economy. Broadly Marsh is advising clients on how to build greater resilience in their business planning; we're helping them address supply chain issues, review their cyber exposure, and we are advising on investment decisions. And of course, we are working with clients to manage insurable risks, particularly in marine, aviation, and energy. We've also engaged with governments as they work to minimize economic disruption and maintain global trade, particularly in energy, fertilizer, and other commodities. Challenging events like this underscore the purpose of our work. It's also why we believe Marsh provides a unique value to clients who need strategy, talent, investment, and risk advice in complex times. I'd like to take a moment to discuss our AI strategy and why we believe Marsh will be an AI winner. Our strategy leverages our scale and capacity to invest in AI to drive even greater value from our proprietary data assets and our role as our clients' trusted adviser. We are focused on three main pillars. The first is growth. We are building AI-enabled applications and services that are generating new revenue streams as well as enhancing world-class capabilities and data-driven insights in insurance, health, human capital, and investments. Examples of these products include ADA, Centrus, UCLI, and GC Quotebox, and many more of these applications are in development. We also see significant AI growth opportunity in consulting. Oliver Wyman's AI Quotient team created to help clients deploy their own AI strategies is its fastest-growing practice. We're advising clients in multiple sectors, such as banking, energy, government, and manufacturing around AI and workforce transformation. We've already advised on more than $50 billion of capital investment in AI deployment. And Mercer is working with clients to assess and inventory skills and redesign jobs as AI is integrated into ways of working. Our second pillar is productivity, which focuses on deploying AI capabilities to boost the performance of our colleagues. This is showing up in hundreds of different ways across a wide variety of roles. A good example of our work is to embed AI in our client management tools and to develop AI agents to help colleagues source and prequalify leads to support sales productivity. The final pillar is efficiency. Across our business, we are starting to see the impact of AI automation. A critical reason for creating our business and client services unit, or BCS, is to exploit the efficiency potential of AI. By consolidating our back-office operations and technology into scalable centers, BCS is accelerating the pace of AI-driven automation and process reengineering. For instance, our document ingestion capability is now handling thousands of documents weekly already improving efficiency in these processes by 20% and enhancing the quality of the data and its usability to further support clients with valuable insights. We are beginning to reduce the cost and time associated with upgrading code to modernize applications. For example, we recently used AI to turn a legacy tool into a newly designed broker workbench in days, saving months of team effort. We have deployed agentic AI in our IT help desk, significantly reducing inquiries, improving colleague experience and creating downstream efficiencies in our support centers. And in our policy renewal center, AI has enabled us to transform a traditionally manual email-heavy process into a streamlined digital solution in weeks, a project that otherwise would have taken many months. AI-enabled savings will fuel additional growth investments, including in producer talent and new capabilities while building our confidence in continued margin improvement. It's important to remember that Marsh is not selling commoditized products or simply procuring insurance at the lowest possible price. That's not who we are or what we do. AI will help us serve our clients who have bespoke and complex needs even better. It will not replace the trusted advice, expertise, and capabilities with which we deliver value to clients. In our risk business, we help clients identify and understand their exposures, implement loss prevention strategies, and provide data and insights to make real-time decisions. And after developing the strategy, we help them finance their risk through self-insurance, traditional insurance, capital markets, or captive management solutions to achieve their goals. Similarly, in consulting, we provide high-impact services to help organizations confront their biggest strategy and talent challenges. And we service trusted advisers to executive leadership in their company's transformative moments. Our client relationships, data and insights, and the expertise of our professionals worldwide built over 155 years of market leadership is why we see AI as a powerful accelerator and enabler in delivering value to our clients, colleagues, and shareholders. Now turning to market conditions. We continue to see a competitive insurance and reinsurance environment. According to the Marsh Global Insurance Market Index, primary commercial insurance rates decreased 5% in Q1, driven largely by property. This follows a 4% decline in the fourth quarter of 2025. As a reminder, our index skews to large accounts. Rates in the U.S. were down 1%. Europe, Asia, and Canada declined mid-single digits. The U.K. and Latin America were down high single digits, and the Pacific region had double-digit decreases. Global property rates decreased 9% year-over-year, which was the same pace as last quarter. Global Financial and Professional liability rates were down 5%, while cyber also decreased 5%. Global Casualty rates increased 3% with U.S. excess casualty up 18%, reflecting ongoing pressure in the liability permit, and workers' compensation decreased 1%. In reinsurance, there is substantial capacity to support client demand as reinsurers pursue growth. Throughout the first quarter, market conditions were generally consistent with what we saw at January 1. The strong reinsurer profitability, high ROEs, and increased capital levels have resulted in ample supply of property cat capacity and meaningful rate reductions. It was also another active quarter for cap bond issuance. U.S. property cat reinsurance rates remain competitive for the April 1 renewal period. Rates for non-loss impacted accounts were down 15% to 20%, a slight acceleration from the January 1 renewal season. In U.S. Casualty Reinsurance, we continue to see a range of outcomes depending on loss experience with primary carriers demonstrating limit, rate and underwriting discipline. In Japan, April 1 property cat rates overall were down 15% to 20% on a risk-adjusted basis. Early signs for June 1 Florida cat renewals point to similar market conditions characterized by rate reductions and excess supply as seen in January and April. There are early indications that Florida's legal reforms will contribute to further risk-adjusted decreases. Our clients are benefiting from the current market conditions. And as always, we continue to advise them on designing the best risk programs aligned to their goals. Now let me turn to our first quarter financial performance and outlook, which Mark will cover in more detail. Consolidated revenue increased 8% to $7.6 billion, growing 4% on an underlying basis, with 3% growth in RIS and 5% in Consulting. Marsh Risk was up 4%. Guy Carpenter grew 2% and Mercer increased 5% and Marsh Management Consulting grew 6%. Adjusted operating income grew 8% and adjusted EPS was $3.29, up 8% year-over-year. We also repurchased $750 million of our stock. Looking ahead, we are well positioned for another solid year despite headwinds from lower interest rates and decreasing insurance and reinsurance pricing. We continue to expect underlying revenue growth in 2026 to be similar to last year. We also anticipate continued margin expansion and solid adjusted EPS growth. Our outlook is based on current conditions and the economic and geopolitical environment could change materially from our assumptions. In summary, we're off to a solid start in 2026. Despite challenging market conditions, we remain focused on executing our strategy and continuing our track record of strong results. The Thrive program will drive growth through investments in talent and AI, strengthen our brand, and generate greater efficiency. We're excited for AI's potential and committed to being an AI winner through growth, productivity, and efficiency gains. Marsh is a resilient business that provides critically important advice and solutions particularly in complex times such as these. We have proven our ability to deliver across cycles, and I am confident in Marsh's future. With that, I'll turn the discussion to Mark for a more detailed review of our results.

Thank you, John. Good morning. Our first quarter results represented a solid start to the year, reflecting strong execution despite a challenging environment. Consolidated revenue increased 8% to $7.6 billion with underlying growth of 4%, which came despite a headwind from fiduciary interest income and declining P&C rates. Operating income was $1.8 billion and adjusted operating income was $2.4 billion, up 8%. Our adjusted operating margin was unchanged at 31.8%. GAAP EPS was $2.36 and adjusted EPS was $3.29, up 8% over last year. Looking at Risk & Insurance Services. First quarter revenue was $5.1 billion, up 6% from a year ago or 3% on an underlying basis. Operating income in RIS was $1.3 billion. Adjusted operating income was $1.9 billion, up 7% over last year, and the adjusted operating margin was 38.3%, up 10 basis points from a year ago. At Marsh Risk, revenue in the quarter was $3.7 billion, up 8% from a year ago or 4% on an underlying basis. Growth increased sequentially despite the more challenging market conditions, reflecting solid performances in the U.S., including MMA and across international. In U.S. and Canada, underlying growth was 3%. In international, underlying growth was 5%, with EMEA up 6%; Asia Pacific up 5% and Latin America up 2%. Guy Carpenter's revenue in the quarter was $1.2 billion, up 3% or 2% on an underlying basis, a good result considering the current pricing environment. Growth was impacted by softer reinsurance market conditions and a tough comparison to 5% underlying growth in the first quarter of last year. However, Guy Carpenter executed well and drove strong new business despite the tough market conditions. In the Consulting segment, first quarter revenue was $2.6 billion, up 11% or 5% on an underlying basis. Consulting operating income was $525 million and adjusted operating income was $552 million, up 13%. Our adjusted operating margin in Consulting was 21.6%, up 40 basis points from a year ago. Mercer's revenue was $1.7 billion in the quarter, up 11% or 5% on an underlying basis. Health grew 6%, reflecting continued growth across our regions, especially in international. Wealth was up 5%, led by our investments business. Our assets under management were $727 billion at the end of the first quarter, up 5% sequentially and up 19% compared to the first quarter of last year. Year-over-year growth was driven primarily by new wins, the impact of capital markets, and acquisitions. Career was down 2%, reflecting continued softness in project-related work in the U.S. partially offset by sustained demand in International. Marsh Management Consulting generated revenue of $897 million in the first quarter, up 10% and or 6% on an underlying basis, reflecting solid demand across most regions and sectors. Fiduciary interest income was $85 million in the quarter, down $18 million compared with the first quarter of last year, reflecting lower interest rates. Looking ahead to the second quarter, we expect fiduciary interest income will be approximately $80 million. Foreign exchange was an $0.11 benefit in the first quarter. Based on current exchange rates, we expect that FX will have an immaterial impact on earnings in the second quarter and the rest of the year. Corporate expense in the first quarter was $74 million on an adjusted basis compared to $81 million in the fourth quarter. Looking ahead to the second quarter, we anticipate corporate expense of approximately $90 million, which includes some one-off timing items. We're making good progress on executing our Thrive program. We remain on track to generate $400 million of total savings, a portion of which will be reinvested for growth and incur approximately $500 million of charges to generate the savings. Total noteworthy items in the first quarter were $521 million, including $37 million of costs associated with Thrive. Noteworthy items this quarter also include a $425 million charge relating to litigation stemming from the collapse of Greenfield Capital in 2021. As we have previously disclosed, Marsh served as Greenfield's insurance broker starting in 2014. The charge in the quarter represents the best estimate of our liability in this case, and was influenced by a recent court-sponsored mediation among the parties involved. Our 10-Q filed earlier today includes further information on this matter and the charge. As you can appreciate, this litigation is ongoing, so we aren't able to comment further at this time. Interest expense in the first quarter was $240 million. Based on our current forecast, we expect interest expense in the second quarter to be approximately $245 million. Our adjusted effective tax rate in the first quarter was 25.1%. This compares with 23.1% in the first quarter last year, which benefited from discrete items, most notably a meaningful benefit related to share-based compensation. When we give forward guidance around our tax rate, we do not project discrete items. Based on the current environment, we expect an adjusted effective tax rate of between 24.5% and 25.5% in 2026. Turning to capital management and our balance sheet. We ended the quarter with total debt of $20.6 billion. Our next scheduled debt maturity is in the third quarter with $550 million of euro-denominated senior notes mature. Our cash position at the end of the first quarter was $1.6 billion. Uses of cash in the quarter totaled $1.3 billion, which included $440 million for dividends, $89 million for acquisitions, and $750 million for share repurchases. We continue to expect to deploy approximately $5 billion of capital in 2026 across dividends, acquisitions, and share repurchases. The ultimate level of share repurchase will depend on how our M&A pipeline develops. Turning to our outlook for 2026. Despite the challenging environment, we remain well positioned for another solid year. We continue to expect underlying revenue growth will be similar to the levels we generated in 2025 along with another year of margin expansion and solid adjusted EPS growth. For modeling purposes, we expect to generate more margin expansion in the second half of this year than in the first half. With that, I'm happy to turn it back to John.

Thank you, Mark. Andrew, we are ready to begin the Q&A session.

Our first question comes from Greg Peters with Raymond James.

I wanted for my first question, to focus on our margin results. John, I know we're quite proud of the 18 years of consecutive margin expansion and presumably, you're going to hit your 19th year in 2026. But because of these results, it's caught the attention of many about where the ability to generate future margin expansion will come from? And maybe it's embedded in your AI comments. But with your margin results being so high, curious about the risks of AI disintermediation across the various businesses that you have?

Sure, Greg. Let me address the margin aspect first and then discuss the risks of AI disintermediation. We've provided examples in my prepared remarks about the efficiency gains we're already experiencing. I want to remind everyone that we expect to achieve margin expansion for the 19th consecutive year this year. Thrive is a significant driver for us. In the broader AI conversation among businesses and governments, AI is often seen as just automation, but I make a distinction between the two. We still have great opportunities and are actively developing our capability centers while applying traditional digitizing strategies to improve efficiency. There’s a lot ahead of us, and we are excited about our progress. As mentioned earlier, we aim to be a leader in AI, having taken early steps in this field, which is already enhancing our operations and will continue to do so in the future. Our scale, along with our data and insights, allows us to act quickly. We have a history of competing successfully with early-stage tech-driven startups and direct insurers. Our strong client relationships, data, modeling, and our ability to advise on risk beyond just insurance are crucial. We connect to a complex ecosystem of risk financing, providing far more than just insurance for our clients. Considering our strengths and potential in AI, I couldn’t ask for a better position to begin exploring what AI can offer. Do you have a follow-up, Greg?

Yes, I do. And I'm going to pivot to capital management. The public brokers, the stock prices, everyone's reset lower, I'm not sure on the M&A side that the prices or valuations of acquisitions have reset lower yet. So I'm just curious on how you're thinking about the allocation or difference between growth through M&A versus repurchase of your own stock considering the reset and value of the stock price?

Yes, that's a great question. Our strategy is still the same. We aim for a balanced approach to capital management, prioritizing investments in our business, both organically and inorganically. Our goal is to increase our dividend annually, and buybacks will ultimately depend on mergers and acquisitions. In the first quarter, we executed $750 million in buybacks, and we anticipate deploying around $5 billion in capital this year. We are active in the market and have a strong pipeline, which is encouraging. Just to remind everyone, we closed our largest deal to date about 18 months ago, and last year we allocated about $850 million to M&A. We completed a significant transaction in Hawaii during the fourth quarter, along with a few smaller deals and the sale of an administrative business in the Pacific. We also announced the acquisition of AltamarCAM, a private asset manager with approximately $20 billion in assets under management, pending regulatory approval. We expect that to close later this year. We will likely continue with our strategy of smaller acquisitions, while being open to larger deals, depending on market valuations for private equity-backed assets. Recently, we have noted widening gaps between bidding and asking prices. Financial sponsors seem to be more aggressive than strategic buyers. We will remain disciplined in how we allocate our capital. Andrew, please go ahead with the next question.

Our next question comes from the line of Mike Zaremski with BMO.

Great. Just one question on maybe around the AI conversation, specifically on the Value-Add services that you offer your clients. Curious a couple of your peers have talked about the Claims Advocacy Group, and they've offered some stats around how the Claims Advocacy Group has made sure your clients get their claims paid in a timely manner. Just curious if you see that as one of the bigger value adds, and if yes, if there's any stats or anything you'd like to share?

Yes. Sure, Mike. And maybe what I'll do is I'll ask all of our business leaders just to share some thoughts on how we're investing in AI and how it impacts the value that we deliver. But we have the largest Claims Advocacy Group in the industry by some measures. So maybe I'll start with Nick. Maybe you could share some thoughts, Nick?

Yes, thank you for the question, Mike. Let me begin by addressing the claims advocacy topic. We have a large team along with specialists who manage complex claims. It's important to emphasize that having clear policy drafting and placement is essential to avoid rejected claims that then need advocacy. When advocacy is required, ours is robust. For instance, Claims IQ, our AI-enabled toolkit, now allows several thousand colleagues to utilize AI analysis on nearly $200 billion of loss data, which enhances decision-making and advocacy. Expanding on John's remarks, this is a custom, complex ecosystem encompassing client service and advice to placement. While a significant focus is on AI, this ecosystem is steadily digitizing, which is vital for effective AI deployment. There remains much work to be done on digitization, and we recognize the ongoing importance of human relationships and judgment. Our investments in AI are significantly boosting growth, productivity, and efficiency. As you mentioned, we're heavily investing in our digital client experience. We have tools like Blue[i] and Centrus, which we've discussed previously, evolving into the Marsh Risk Companion. This will help clients assess and understand their risks and options more comprehensively. A key aspect of these tools is their integration with a new analytics engine designed to optimize AI use on a large scale. Through AI, we can rapidly adapt to changing client needs. Our first applications powered by the risk cortex, such as our renewal and captives companions, are set to launch in a couple of weeks. Expect more developments from our data and analytics capabilities. Additionally, we've mentioned our proprietary AI suite within Marsh Risk, which handles over 2 million prompts each month, boosting productivity across the organization. For specific examples, we've implemented tools for coverage gap analysis and quote comparisons in our risk management and Marsh agency sectors, leading to a 50% increase in sales velocity in pilot areas, with potential for broader scalability. There’s a lot of activity underway to support our client-facing and operational teams.

Thank you, Nick. You're starting to sound like an insurance broker. Dean? Any thoughts from Guy Carpenter?

Thanks, John. And Mike, you heard John in his prepared remarks mention GC Quotebox, which is an AI-driven document ingestion tool. This is really a game changer for Guy Carpenter in our business. We get huge quantities of unstructured data from our clients, and this tool helps us ingest all of that data and makes it more efficient to match risk and capital through this tool, which will certainly improve turnaround times, make our teams, our brokers more efficient, and deliver better turnaround times and more efficiency for our clients.

Perfect, Dean? Pat, how are you using AI Mercer?

Let me go one of those examples and maybe give you one where we're using it directly with clients. So Mercer Fiber is one of the tools where we're leveraging the broader AI stack that we have at Marsh to further enable our existing digital tools. So health consultants leverage fiber when they're working directly with the client. It enables them to have these real-time iterative discussions on all aspects of their benefit programs, an incredibly powerful scenario planning and modeling during strategy sessions. What we do is we use fiber throughout the year as well to help with budget tracking, with updates with benchmarking, and other plan management activities. And what it does is it allows us to visually display these insights and the data from across our health and benefits practice and then it combines it with the client's actual population and their actual claims data. And that allows us to understand and show clients directly the geographic differences in health care cost and quality based on their actual data, and we could do that live. And it allows us to really work to identify the most effective health care options for a specific population, right? And this is differentiating us in the market, really by showcasing the capabilities we've got the insights in a single integrated platform to be very client-specific because it's very targeted to them and very client-centric.

Thank you, Pat. Ted, welcome to the call. You want to share some thoughts on why we're excited about AI at Oliver Wyman.

Thank you, John. I appreciate it. You mentioned that our AI platform, Quotient, is currently our fastest-growing capability. AI is emerging as a significant opportunity for us in consulting, particularly in strategy and transformation. I’d like to highlight a few examples. In performance transformation, we're assisting clients in enhancing their business operations, which involves extensive reengineering of processes and systems using AI. We’re seeing rapid growth in industries such as banking, healthcare, and advanced manufacturing. In growth and strategy work, we’re helping clients rethink customer service and distribution channels. We’ve already assisted several clients in developing new apps, and ChatGPT is introducing a significant shift in commerce that we believe will be transformative in sectors like media, retail, and communications. Additionally, we are collaborating with governments and investors to mobilize funding for AI skills, capabilities, new AI startups, and related costs. This is also revolutionizing how we deliver our services, enabling us to provide greater value to our clients. For instance, in our private capital business, Quotient diligence is altering our approach to client investments. We are utilizing advanced tools for market analysis, competitive analysis, and growth opportunity analysis, which empowers our clients to make better and, when they choose, quicker investment decisions in the private capital arena.

Thank you, Ted. Sorry, Mike, for that long answer, I just want to make sure everyone realizes why we're so excited and why we think we're best positioned to deliver greater value than we ever have to our clients and to our shareholders. So do you have a follow-up, Mike?

Yes, really quick. That was helpful follow-up. Just on the pace of Marsh's hiring in terms of the producer level, do you expect that trajectory to change materially in 2016 and has higher or lower?

Yes. No. Thanks, Mike. We had a good quarter attracting production talent to the team in key markets, our brand in the market for talent and in the areas where we compete and deliver for our clients is very, very strong. We start with the best talent and the most talent in the markets that we compete with. Would also maybe not your question, but our colleague retention is strong, our colleague engagement is outstanding. And so it's all anchored by a colleague value proposition, which is a really important way in which we try to convince people to stay and to give big parts of their career to our company. So thank you, Mike. Next question, Andrew?

Our next question comes from the line of Brian Meredith with UBS.

A couple of them here for you, John. First one, I'm just curious, given the level of rate decreases that we're seeing out there. What are you seeing with respect to client demand at Marsh, given this uncertain kind of macro environment, are you using savings to purchase more coverage? Are they kind of holding back right now to see how the year kind of unfolds?

Thank you, Brian, for your question. I'm not sure I have a very helpful answer, but here's what I can share. The market has become somewhat more competitive in the first quarter. While we've seen strong returns in reinsurance, insurers and reinsurers have also reported solid underwriting results and are all in search of growth. Although rates are decreasing, the cost of risk is clearly on the rise, likely at a rate about twice that of GDP, influenced by factors like liability and medical cost inflation, as well as the accelerating cyber risk due to AI. Additionally, the frequency of extreme weather events is increasing, exposing more of the economy and society to these risks. This could become a significant driver of demand for us in the medium term. I’ll let Nick and Dean discuss a few market observations and what our clients are doing regarding their purchasing decisions. Nick?

Yes, as John mentioned, the answer is sometimes. Generally, I believe the answer is yes. We are experiencing a consistent and growing trend in new business growth. For instance, in the U.S. and Canada, we are seeing double-digit growth in new business, strong performance at Marsh Agency, and double-digit growth in the specialties sector. Both transaction risk and construction segments are expanding significantly. Additionally, globally, new business has been trending upward for four consecutive quarters. However, we remain cautiously optimistic as we move through the rest of the year.

Dean?

Thank you, John. Brian, I wanted to discuss new business opportunities in general. Despite the challenges in the property market that John and Mark mentioned, which have impacted Guy Carpenter's growth this quarter, we are experiencing record levels of new business across our platform. We achieved double-digit growth in new business in every region globally during this quarter, which I found very encouraging. As noted by Mark and John, the cat bond and ILS markets remain robust. We issued a record seven cat bonds this quarter. There has been an influx of over $2 billion in new third-party capital into the market, focused on casualty sidecars, whole account quota shares, and similar options. We have received several new mandates in these areas, which are very promising. In previous calls, I discussed our capital and advisory business and our investment banking boutique, and we are seeing a record number of M&A advisory mandates, formations of new sidecars, and efforts to raise capital for MGA's Lloyd’s platforms, along with our structured credit and MGA businesses. In our last call, we mentioned data centers, and there are currently around 50 deals in the marketplace seeking more than $7.5 billion in capital. All of our clients at Guy Carpenter are eager to pursue more data center projects, but they require additional reinsurance protections. A new trend we are observing is clients considering issuing cat bonds to leverage third-party capital for more data center business. All in all, Guy Carpenter is seeing more diverse new business opportunities than we have in several years.

Thanks, Dean. Brian, do you have a follow-up?

Yes, absolutely. So John, it's clear that AI is going to have productivity benefits; it's going to benefit client experience and growth, et cetera. But one of the debates I'm having with investors is how much of the productivity gains is Marsh going to be able to keep and see a benefit from a margin perspective versus protecting being competed away or giving back to clients. Maybe give us your perspective on that.

It's a great question, Brian. I discussed where we see opportunities for efficiency, productivity, and new revenue generation. We believe we are well-positioned to take advantage of these technological advancements. I'm quite excited about that. Our fees have remained stable as a percentage of premium for a long time and are relatively small compared to the risk costs we help our clients manage. We feel confident about our position and what it implies. As I mentioned earlier, if you think of us as a discounted insurance broker, I might share some concerns, but that’s not our approach. We are optimistic about how this technology will benefit our business. Thanks, Brian. Andrew, what’s the next question?

Our next question comes from the line of Rob Cox with Goldman Sachs.

First question I had for you was just going back to the capital deployment and M&A side. I'm just curious how, if at all, AI is changing the M&A strategy. Are you staying away from certain businesses pivoting towards others, and have your technology requirements or anything else changed?

No, that's a good question, Rob. We've explored some opportunities and evaluated businesses that have incorporated AI into their value proposition. I've noticed a significant disparity between how these companies were valuing their technology and our assessment of it. I understand that planning based on hope isn’t practical. With that in mind, I am optimistic that our scale, along with our investments in AI, data sets, client relationships, and advisory work, will enable us to consolidate smaller brokers over time. Many of them will find it challenging to compete and invest in these technologies. Even when they try to allocate resources for investment, they lack the data assets and capabilities we possess. Therefore, I believe this will eventually drive M&A for us. Do you have a follow-up, Rob?

Yes, that's very helpful. Just had a follow-up on the MMA business. I understand you guys don't break that out. But just curious if you would characterize that business as a tailwind to organic growth for the RIS business and if it is, like, do you think it could continue to be a tailwind despite more pricing pressure for a commission-based model here?

Yes, the answer is yes. MMA has typically supported our growth in most years and quarters, though not all. As we have discussed previously, our penetration into the middle market remains relatively modest. While Dave and the team have made significant progress, and we are thrilled about the business we've established, I feel we are just beginning. There is definitely potential for much greater growth. Regarding pricing, for several rational reasons, the pricing in the middle market has remained stable throughout various cycles, and this trend continues. We are focused on providing productivity tools to enhance our producers' effectiveness. We are excited about the opportunities in the middle market, not just in the United States, where we have gained considerable knowledge over the past 15 years and benefited from talented executives, but also in other economies worldwide. Thank you, Rob. Andrew, what’s the next question?

Our next question comes from the line of Meyer Shields with KBW.

Great. First question for John. I completely understand the growing value that you're going to bring to clients and carriers through AI. Are commissions still the appropriate method of compensation for that, or do you anticipate compensation becoming more clearly linked to the individual services?

We have a wide range of compensation methods, including fees, commissions, and success fees, among others. We are very open with our clients about how we are paid. We'll see how those discussions develop over time. I don't see any significant trends in that area. However, we are willing to accept compensation in any form. We believe we provide exceptional value to our clients and deserve appropriate payment for that, provided we meet their expectations. Our commissions and fees represent a small part of the overall cost of risk and have remained relatively stable as a percentage of premium over time. Do you have a follow-up, Meyer?

Yes, just a quick modeling question. Is there any way of teasing out roughly how much of the wealth revenues come directly from assets under management?

We haven't disclosed that historically, but it's obviously a range of delegated management assets under management and advisory fees. We're excited about how we're positioned in the investment advice business globally. We advise on close to $17 trillion in assets around the world. As a leading adviser in pension and retirement markets for a long time globally, we're very well positioned. I would also note that we're the largest Outsourced Chief Investment Office in the market, and we continue to see many possibilities for growth there. I mentioned AltamarCAM and maybe Pat can discuss AltamarCAM and some of the investments we're making in our businesses that strengthen us further.

Thank you. Regarding our wealth business, we're pleased with the growth, particularly in our Investments sector, especially with our OCIO offering. I understand the essence of your question. We're also experiencing strong growth in our investment consulting business, which is not solely influenced by market volatility and reflects the significant demand from clients. To address your point, we've been diversifying our overall business and assets under management away from defined benefit plans. We have been actively enhancing our defined contribution solutions globally and strengthening our capabilities for non-pension clients, which has become a major focus for us including insurers, endowments, foundations, family offices, and wealth management. This aligns with our recent M&A activity, particularly the acquisition of AltamarCAM, which specializes in asset management solutions for private markets. With approximately EUR 20 billion in assets under management, we believe this will greatly enhance our capabilities in private markets. It will introduce expertise in areas like secondaries, co-investments, bespoke accounts, and evergreen vehicles, allowing us to provide more comprehensive multi-asset private market solutions to our clients. We are committed to investing heavily in this area, as demonstrated by our recent deals, while also making organic investments to broaden our capabilities as a key investment player.

Thanks, Pat. Thanks, Meyer. Andrew, next question please?

Our next question comes from the line of Elyse Greenspan with Wells Fargo.

My first question is on Guy Carpenter. So you guys were at 2% for the quarter, and I think you did point out, right, the elevated comp at 5% last Q1. I believe you were at 5% right throughout last year. So does the 2% feel like where this business should trend, I guess, at least in the near term, given it sounds like your pricing views or, if anything, right pointing to things getting a little bit worse post the renewals?

Yes. Elyse, as we've talked about, it's a very soft property cat reinsurance market. And so we're confronting that. We're particularly exposed to that in the first quarter. In the second quarter a bit as well with Japan and Florida, as we talked about. What I would say to you, Elyse, is that I'm quite pleased with our execution in spite of the kind of current market headwinds. And again, these market headwinds are good for our clients, right? So we're delivering for our clients in the moment. But client retention was strong, and we had an excellent new business quarter. So I feel terrific about how the team is executing, what's a challenging market. It's not likely to be Guy Carpenter's best growth year this year, right? And so we've been planning for that and guiding to that. Do you have a follow-up, Elyse?

Yes. My second question is just on capital, right? You guys were more active in the Q1 relative to prior first quarters. Obviously, we've seen a pullback in the stock price and just the group in general. As you guys think about balancing right M&A potential as well as where your stock is, could this be a year, I guess, where you continue to front-load I guess, more buybacks, even a little bit more independent of what's going on, on the M&A side?

Sure. Maybe I'll ask Mark to jump in here, Elyse.

Elyse, as John said earlier, there's no change in strategy. Our strategy of balanced capital deployment with a bias to reinvest and grow the business through high-quality acquisitions remains. But as we've consistently said, two, where our goal is not to build cash on the balance sheet. We're generating a lot of capital these days. Where we see M&A light, we’ll ramp up share repurchases. We did that in the fourth quarter. We bought back $1 billion and we started the year with $750 million. But the pipeline remains active. Our commitment to grow through M&A remains. It was relatively light M&A spending in the first quarter. But as John mentioned, this AltamarCAM transaction, which is a nice chunky deal that will close sometime later in the year. So we did start the year with a heavy amount of share repurchase. Ultimately, what we end up deploying to share repurchase will depend on how the M&A pipeline develops through the year.

Thanks, Mark, and thank you, Elyse. Andrew, maybe time for one more here.

Certainly. Our next question comes from the line of David Motemaden with Evercore ISI.

Just had another follow-up question on AI? And maybe just a refresher, John, could you just remind us how much you guys are spending on AI just broadly within the tech budget? And I guess, who are you partnering with? What LLM providers are you partnering with? What tools are you using? That would be helpful.

Yes, David. We haven't shared that data before, so it wouldn't be a refresher. Our tech capital expenditure budget is healthy, and we analyze it thoroughly. This is another example of how our scale allows us to increase our spending and investment, and we feel good about these investments. Regarding AI, the broader community needs to be cautious about its definition. However, we're significantly investing in enhancing our technology stack and improving our digitization of workflows and client interactions. We're confident in our positioning. We collaborate with various providers, and AI encompasses many different aspects. There are numerous opportunities for us to derive value from these new technologies. It's not as simple as choosing a hyperscaler and integrating them into our data set to eliminate every inefficiency or productivity issue. Instead, we're working with multiple major tech companies and selecting those that offer the most value for our specific goals. Do you have a follow-up, David?

Yes. Maybe just a quick one in the interest of time. In Marsh, I'm just sort of wondering what's your exposure to in terms of revenues from personal lines, brokerage or micro-commercial, where like you guys are only placing a single policy or as low dollar value and could be considered less complex?

Yes. I'm not ready to say that placing someone's personal insurance is simple. If you have a client who is personally exposed, you need to work with them to manage risk and advise on their most valuable assets. We don't view the client experience as just finding commoditized products, which are already available through direct digital distribution. I believe that AI will present opportunities for those direct markets to enhance their client interactions. However, that is not our target audience. In personal lines, we primarily cater to high net worth clients who appreciate a personalized approach. This area is an exciting growth opportunity for us. While it's not a significant portion of our overall business, we are seeing continued growth. If you're a restaurant in a small town, there is considerable complexity involved. We have very little involvement in this type of business, but I don't think it's something an entrepreneur can just develop an app for and hope to succeed without significant effort. Regardless, we're very enthusiastic about our position to leverage technological advancements. We need to execute well, but we've been doing that for 150 years. We're optimistic about our trajectory and anticipate accelerating our growth. Andrew, we've gone over time. Can you conclude for us? I want to thank everyone for joining us today and express our gratitude to our colleagues for their commitment to Marsh and to our clients for their ongoing support and trust in our services.

Ladies and gentlemen, this does conclude today's conference. You may now disconnect.