Marsh McLennan’s M&A activity surges, as revenue and profit climb

Marsh & McLennan Cos. Inc. is on track for the largest mergers and acquisitions year in its history, buoyed by its proposed $7.75 billion acquisition of McGriff Insurance Services LLC, top executives at the brokerage said Thursday as it reported higher revenue and profit for the quarter.

Meanwhile, insurance prices fell in the third quarter in several major lines, but casualty rates were up, with U.S. excess casualty rates up 20%, the executives said.

Next year’s property insurance and reinsurance pricing will be impacted by Hurricanes Helene and Milton, and property catastrophe rates could flatten, they said on an earnings call with analysts Thursday morning.

The ultimate insured loss from Hurricanes Helene and Milton won’t be known for some time, but “the impact of these storms will be significant,” Marsh McLennan President and CEO John Doyle said on the call.

Marsh McLennan has committed nearly $10 billion to acquisitions year-to-date including the McGriff transaction, which will add about $1.3 billion in annual revenue and 3,500 employees, Mr. Doyle said.

The McGriff acquisition, expected to close by year-end, will drive growth and expand the reach of Marsh McLennan Agency in the “vast and growing middle-market segment,” Mr. Doyle said.

Marsh McLennan reported third-quarter revenue of $5.69 billion, up 6% overall and 5% on an underlying basis from the same period last year, driven by strong growth in its risk and insurance services business.

Marsh LLC, its main brokerage arm, reported $2.93 billion in revenue, up 9% overall and 7% on an underlying basis. Marsh’s business in the U.S. and Canada recorded $1.71 billion in revenue, up 10% overall and 6% on an underlying basis.

Marsh saw a good balance of growth internationally and in the U.S., with double-digit growth in capital markets and M&A products, said Martin South, president and CEO of Marsh. Construction and aviation also performed well, he said.

Reinsurance brokerage arm Guy Carpenter & Co. LLC reported $381 million in third-quarter revenue, up 6% overall and 7% on an underlying basis.

In Marsh McLennan’s consulting business, Mercer reported $1.45 billion in revenue, a 2% increase overall, and Oliver Wyman reported $810 million, up 4% overall.

Net income rose to $747 million, a 2.3% increase over last year’s third quarter.

Marsh’s global insurance rate index fell 1% overall in the quarter, versus being flat in the second quarter, Mr. Doyle said. Rates in the U.S. and in Latin America were up by low single digits, while Europe was flat and rates were down mid-single digits in the United Kingdom and in Asia Pacific, he said.

Global property rates were down 2% versus flat in the second quarter, but global casualty rates increased 6%, with U.S. excess casualty up about 20%.

Workers compensation saw low-single-digit rate decreases. Global financial and professional liability rates were down 7%, while cyber rates decreased 6%.

Reinsurance demand continued to rise, and capacity remained adequate in the quarter, Mr. Doyle said.

“Post-Milton, it’s still early, but we see a flattening of pricing in the property cat market at the upcoming Jan. 1 renewal,” said Dean Klisura, president and CEO of Guy Carpenter.

Overall property cat demand should increase at Jan. 1, and capacity will be adequate, Mr. Klisura said.

“The majority of the cat losses this year will be borne by our clients, given the high attachment points that were imposed on them after Hurricane Ian two years ago,” he said.