Marsh & McLennan Cos. Inc. reported a jump in revenue for the fourth quarter of 2019, largely due to the addition of business from Jardine Lloyd Thompson Group PLC, but organic growth was more modest as integration of the two businesses continued, the brokerage’s top executive reported Thursday.
Insurance and reinsurance prices increased in various lines as insurers seek to improve their financial results, but the duration of the hardening market will likely depend on future catastrophe losses and liability loss developments, he said.
Marsh & McLennan reported fourth-quarter revenue of $4.26 billion, a 14.9% increase over the same period in 2018. Excluding the effect of the April 2019 JLT purchase, other deals and foreign exchange changes, underlying or organic revenue grew 3%, according to the brokerage’s earnings statement.
Full-year revenue for 2019 increased 11.4% compared with the prior year to $16.65 billion and 4% on an underlying basis.
Dan Glaser, president and CEO of Marsh & McLennan, told analysts on an earnings call Thursday that he was pleased with the firm’s 3% underlying revenue growth in the fourth quarter given there was a “tough” comparison with the 2018 fourth quarter when underlying revenue grew 5% and JLT reported strong new business growth.
“In the context of the largest acquisition in our history, I’m quite happy with the underlying growth levels,” he said.
Risk and insurance services, its insurance and reinsurance broking business, reported fourth-quarter revenue of $2.37 billion, a 24.4% increase overall and a 3% increase on an underlying basis.
Marsh LLC, its commercial insurance unit, reported $2.22 billion in revenue, a 23% increase over the 2018 period and 3% on an underlying basis. Marsh’s U.S. and Canadian underlying revenue increased 4%, but international revenue only inched up 1%, largely due to a 1% decline in revenue in Europe, the Middle East and Africa. Revenue from Latin American operations grew 2% on an underlying basis.
“EMEA includes the U.K., which is our biggest area of overlap with JLT and where we knew we were going to be a bit choppy for a while,” Mr. Glaser said.
Guy Carpenter & Co. LLC, the firm’s reinsurance brokerage, reported $152 million in fourth-quarter revenue, up 10% on an underlying basis.
Marsh & McLennan’s profit more than doubled in the fourth quarter to $391 million, compared with $153 million in the 2018 period, which was hit by acquisition-related derivative contracts, according to the earnings report. For the full year, profit increased 5.6% to $1.74 billion
Insurance prices continued to increase in several lines in the fourth quarter as insurers continue to look for improved results, Mr. Glaser said.
“They’ve got a little blood in the eye and they’re looking to get back to a better position,” he said. “You also have the thoughts around social inflation and how real that is and how it’s impacting their prior books as it rolls forward.”
In addition, reinsurance prices are increasing, “which may build throughout the year and put some pressure on primary carriers,” Mr. Glaser said.
The duration of the market hardening will likely be driven by losses, he said.
“If it’s a tough cat year, we are in for quite a ride. If it’s a benign year, in the Southeast particularly, well maybe some of the wind goes out of the sail. I also think a lot has to do with how casualty develops,” Mr. Glaser said.
