MMC posts improved Q4 results; leaders speculate on wildfire impact

The California wildfires could temper the pace of reinsurance rate decreases going into the April 1 renewal season, top executives at Marsh & McLennan Cos. Inc. said Thursday as the brokerage reported fourth-quarter revenue of $6.07 billion, up 9% overall and 7% on an underlying basis from the year-earlier period.

Net income rose to $788 million, up 4.2% from the fourth quarter of 2023.

For the full year 2024, revenue totaled $24.46 billion, an 8% increase overall and up 7% on an underlying basis. Net income for the year was $4.06 billion, up 8.1% from 2023.

The Los Angeles wildfires are expected to result in insured losses of more than $30 billion, ranking it among the top 10 losses in history, John Doyle, Marsh McLennan president and CEO, said on an earnings call with analysts.

“The increasing frequency and severity of natural disasters, along with rising property values and continued development in catastrophe-prone areas, underscore the need for greater resilience and risk mitigation planning,” Mr. Doyle said.

The impact of the California wildfires on the reinsurance market is “uncertain” and will depend on the ultimate magnitude of the reinsurance loss, but “the risk-adjusted rate reductions we witnessed at Jan. 1 could certainly be tempered moving forward,” Dean Klisura, president and CEO of Guy Carpenter & Co. LLC, Marsh McLennan’s reinsurance brokerage arm, told analysts on the call.

The world’s largest brokerage spent $9.4 billion on acquisitions last year, including its $7.75 billion purchase of McGriff Insurance Services LLC, marking the largest year of acquisitions in its history.

“We are well positioned for another strong year,” Mr. Doyle said. The brokerage expects mid-single-digit underlying revenue growth this year, including an anticipated headwind from fiduciary income, he said.

Fourth-quarter fiduciary income totaled $112 million, a decline of $26 million from the third quarter, reflecting lower interest rates, Chief Financial Officer Mark McGivney said.

“Looking ahead to the first quarter of 2025, we expect fiduciary income will be approximately $100 million,” he said.

Fourth-quarter revenue for the brokerage’s risk and insurance services segment totaled $3.65 billion, up 11% from the prior-year period and 8% on an underlying basis. Consulting revenue totaled $2.44 billion, up 6% overall and 6% on an underlying basis.

Marsh LLC, its main brokerage arm, reported $3.33 billion in revenue, up 15% overall and 8% on an underlying basis. Marsh’s business in the U.S. and Canada recorded $1.96 billion in revenue, up 21% overall and 8% on an underlying basis.

Marsh’s global insurance rate index decreased 2% overall in the fourth quarter, compared with a third-quarter decline of 1%,  Mr. Doyle said.

Overall, rates in the U.S. were flat, and rates in Latin America were up by low single digits. Rates declined by low to mid-single digits in Europe, the United Kingdom and Asia and by high single digits in the Pacific.

Global property rates were down 3%, compared with a 2% decline in the third quarter, but global casualty rates increased 4%, with U.S. excess casualty up around 15%, Mr. Doyle said.

Workers compensation rates decreased by mid-single digits. Global financial and professional liability rates were down 6%, while cyber decreased 7%.

In reinsurance, underwriting discipline persisted, particularly on program retentions. Capacity increased at a more significant pace than client demand, Mr. Doyle said.

In global property cat reinsurance, accounts not impacted by loss saw risk-adjusted rates down 5% to 15%, while risk-adjusted rates for loss-impacted accounts were flat to up 30%. “Casualty renewals were completed with varying outcomes. Excess of loss placements continue to face pressure on treaty terms. Quota shares were more stable with sufficient capacity, while ceding commissions were flat to slightly down,” Mr. Doyle said.

Reinsurance brokerage arm Guy Carpenter reported $201 million in fourth-quarter revenue, down 20% overall but up 7% on an underlying basis. The prior-year period included a gain from a legal settlement with a competitor, MMC said in its earnings statement.

In Marsh McLennan’s consulting business, Mercer reported $1.49 billion in revenue for the fourth quarter, a 3% increase overall, and Oliver Wyman reported $954 million in revenue, up 11% overall.

The McGriff acquisition is expected to result in total charges of $450 million to $500 million in the next three years, Mr. McGivney said.