Marsh Q2 FY26 Earnings Call | $MRSH | 🔴 WATCH LIVE

0:00 Forward-looking statements 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 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 10K, 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 GAP measures, please refer to the schedule in today's earnings release. If you have a question, please press star1 on your Touchtone phone. If you wish to be removed from the queue, please press star1 again. If you're using a speaker phone, you may need to pick up the handset before pressing the numbers.

0:48 Once again, if you have a question, please press star 111 on your Touchstone phone. 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 second quarter results. I'm John Doyle, president and CEO of Marsh. On the call with me is Mark McGibney, our COO and CFO and the CEOs of our businesses, Nick Stutter of Marsh Risk, Dean Classur of Guy Carpenter, Pat Tomlinson of Mercer, and Ted Moahan of Marsh Management Consulting.

1:25 Also with us this morning is Jay Gelb, head of investor relations. To start, I'd like to acknowledge the United States 250th anniversary commemorated earlier this month. Marsh is proud to be a US-based company and of the ideals embodied in our nation's founding. We're also proud of the contributions Marsh has made to the US economy and society, supporting growth since our founding in Chicago 155 years ago. And we are grateful to our clients for the trust that lets us do the same today all around the world.

2:01 I would also like to extend our sympathies and concern for the people of Venezuela. We recently celebrated our 70th anniversary in Venezuela and we have 100 colleagues in the country. We're grateful that they're all safe and we will continue to support them and our clients with their recovery. Turning to results, we had a solid second quarter as demand for our advice and capabilities remained strong. Overall, revenue grew 6% in the quarter.

2:31 Underlying revenue growth accelerated to 5% from 4% in the prior quarter. Adjusted operating income grew 5%. Adjust 9%. You alsion of stock in the quarter now totaling $1.5 billion for the first half of 2026. I want to spend a moment on our thrive program, an important part of our strategy. We aspire to be the most impactful professional services firm in the world and we have the talent, capabilities and market position to achieve this.

3:10 We are leaders in most markets in which we operate and have a truly unique set of capabilities across risk, strategy, people, and investments that differentiates us and drives value for clients. We're focused on allocating capital and resources to strategic priorities where we see significant growth potential and we remain disciplined in our approach to delivering in the near term while investing for the future. Thrive is designed to accelerate growth by creating the capacity to invest in the Marsh brand, expanding our capabilities and sales capacity, and leveraging the benefits of our scale in operations and technology through our business and client services team.

3:58 We've seen a strong positive response to the new Marsh brand. As a result, we're accelerating the transition of Guy Carpenter and Mercer to Marsh in September. A unified brand strategy signals the value we can deliver together to clients across a range of industries, segments, and geographies, and its efficiency has allowed us to increase our brand reach, improve marketing ROI, and become the official risk partner of Formula 1.

4:28 F1 increases our visibility among its over 800 million global fans and importantly its high concentration of seauite leaders and decision makers. The precision datadriven approach to risk and relentless pursuit of excellence is what aligns Marsh and F1's cultures and I'm excited for the growth possibilities from the partnership. We're also accelerating our investment in sales capacity through Thrive. We're building new capabilities and adding client-f facing talent in sectors where we see meaningful growth opportunity.

5:06 One example is our work with energy clients in the digital infrastructure ecosystem where we are creating multi-billion dollar insurance solutions for counterparty credit exposures. These programs integrate traditional insurance and reinsurance sidecars backed by thirdparty capital which we source for the client. It's the combination of our capabilities in insurance consulting and investments as well as deep client relationships and expertise across sectors which enables Marsh to design and deliver these solutions for clients.

5:43 Our AI plans are also benefiting from Thrive. As I as I've stated before, BARCH is well positioned to be an AI winner. It's clear that our large large proprietary data sets in risk, health, and benefits, talent, and investments, as well as our long-standing client relationships are a significant advantage. Our strategy is to drive AI development in three areas, growth, productivity, and efficiency.

6:14 Related to growth, we recently introduced Marsh Risk Companion at the Rims conference in Philadelphia. This new client platform has market leading analytics, insights, and capabilities in one AI enabled application. It will enhance our ability to analyze their risks and develop optimal solutions. And we're excited about our coverage intelligence platform, which gives producers serving the middle market the ability to model risk and evaluate coverage options at the point of sale.

6:48 The AIdriven platform can quickly find coverage gaps and analyze and compare quotes for clients, a significant advantage for our producers in the marketplace. We also introduced Atlas, an AI enabled platform that delivers real-time insights to support development of client reinsurance strategies. Atlas curates and expedites information including hazard scores, litigation risk, market pricing, economic indep indicators, and other financial data for clients.

7:23 And finally, our quotient team is doing extensive work advising clients on AI strategy and transformation. For example, in the last quarter, we launched the build of several new AI native banks in different regions around the world. We are also introducing AI tools that increase our colleagues productivity and enhance our colleague value proposition. For example, we rolled out Claims IQ to our 3,000 claim professionals. The tool draws anonymized data on millions of claims to help us manage the claims life cycle and deliver insights to improve client outcomes.

8:04 Colleagues also now have access to LenWork, an Aentic assistant that builds on our Len AI suite. LenWork helps colleagues develop new product ideas, create sales strategies, and respond to RFPs, among other use cases. It leverages frontier models while being purpose-built for our ecosystem. As a result, LenWork delivers a more secure, relevant, and agile experience. And amid rising token costs, a more costefficient approach to enterprise LLM usage.

8:40 One of the more exciting AI programs of work launched in the quarter is BCS and Oliver Wyman's partnership with Amazon Web Services to reimagine our mid and back office processes. We have already introduced AI into our operations, but this work will push the boundaries to redesign how work is executed to improve efficiency and service. The project is initially focused on pilots to re-engineer claim services and the issuance of reinsurance treaties.

9:11 We expect our Thrive investments in brand sales capacity and capabilities and new AI tools will support growth and continuous operational efficiency in the years ahead. Now turning to market conditions. According to the Marsh Global Insurance Market Index, primary commercial insurance rates decreased 6% in the second quarter. This follows a 5% decline in the first quarter of 2026. As a reminder, our index skews to large accounts.

9:45 Rates in the US decreased 2%. Europe and Asia declined mid-s single digits. Canada, the UK, and Latin America were down high single digits. and the Pacific region had doubledigit decreases. Global property rates decreased 12% year-over-year, which was an acceleration from the prior quarter. Global financial and professional liability rates were down 3% while cyber decreased 4%. Global casualty rates increased 2% with US excess casualty up 15% reflecting continued elevated loss experience and workers compensation decreased 4%.

10:26 In reinsurance, persistent softmarket conditions driven by abundant capacity and growing reinsurer appetite have led to a favorable market for insurers. As expected, the outcome of the June 1 Florida CAT renewals saw rate reductions in the 15 to 20% range from excess supply partially offset by a modest increase in demand. In US casualty reinsurance, renewals reflected adequate capacity and differentiated pricing based on loss experience and portfolio quality.

11:00 We continue to see record high catastrophe bond issuance with more than $61 billion of limit outstanding through the first half of 2026. Our clients are exploring alternative options to complement traditional strategies, including through the use of third-party capital solutions. Current market pricing remains favorable for our insurance and reinsurance clients despite the rising cost of risk. We continue to help clients optimize their risk financing and build greater resilience in a more uncertain world.

11:35 Now, let me turn to our second quarter financial performance and outlook, which Mark will cover in more detail. Consolidated revenue increased 6% to 7.4 billion, increasing to 5% on an underlying basis with 3% growth in RA and 8% in consulting. Marsh Risk was up 4%. Kai Carpenter declined 2%. Mercer increased 5% and Marsh Management Consulting grew 13%.

12:06 Adjusted operating income grew 5% and adjusted EPS was $2.96 up 9% year-over-year. Looking ahead, we continue to expect a good year in 2026 with underlying revenue growth similar to last year. We also anticipate another year of margin expansion and solid adjusted EPS growth. Our outlook is based on current conditions, but the economic and geopolitical environment could change materially from our assumptions.

12:38 In summary, I remain pleased with our performance in the first half of 2026. We are focused on executing our strategy, putting our clients at the center of everything we do, and building on our momentum. With that, I'll turn the discussion to Mark for a more detailed review of our results. >> Thank you, John, and good morning. We had a good second quarter, reflecting the diversification of our portfolio, our leading position, and strong execution. Consolidated revenue increased 6% to 7.4 billion with underlying growth of 5%, which we achieved despite continuing headwinds from fiduciary interest income and PNC pricing.

13:19 Operating income was 1.9 billion and adjusted operating income was 2.2 billion, up 5%. Our adjusted operating margin was 29.3%. GAAP EPS was $263 and adjusted EPS was $2.96, up 9% over last year. For the first six months of 2026, underlying revenue growth was 4%. Adjusted operating income grew 7% to 4.6 billion. Our adjusted operating margin was 30.5%.

13:55 And adjusted EPS increased 8% to $6.25. Looking at risk and insurance services, second quarter revenue was 4.8 billion, up 4% from a year ago or 3% on an underlying basis. Operating income in RAIS was 1.5 billion. Adjusted operating income was 1.7 billion, up 3% over last year and the adjusted operating margin is 35.3%.

14:27 For the first 6 months, revenue in RAIS was 9.9 billion reflecting underlying growth of 3%. Adjusted operating income increased 5% to 3.6 billion and the adjusted operating margin was 36.8%. At Marsh Risk, revenue in the quarter was 4.1 billion, up 6% from a year ago or 4% on an underlying basis, reflecting solid performances in the US and across international.

14:57 In US and Canada, underlying growth increased sequentially to 4%, up from 3% in the first quarter, reflecting strong new business. In international underlying growth remained solid at 5% with EMA up 5%, Asia-Pacific up 5% and Latin America up 8%. For the first six months of the year, Marsh Risk's revenue was 7.8 billion with underlying growth of 4%. US and Canada grew 4% and international was up 5%.

15:34 Guy Carpenters's revenue in the quarter was 664 million, down 2% on both a reported and underlying basis. Growth in the second quarter was impacted by a tough comparison to 5% underlying growth last year and continued declines in reinsurance rates, especially in property lines. This headwind from rates had a roughly six percentage point impact on Guy Carpenters's underlying growth in the quarter. For the first six months of the year, Guy Carpenter generated 1.9 billion of revenue, which was flat on an underlying basis. As a reminder, the first half of the year accounts for roughly 3/4 of Guy Carpenters's annual revenue.

16:16 Despite the challenging market conditions, Guy Carpenter executed well and delivered double-digit new business growth in the first half as well as high 90s client retention. In the consulting segment, second quarter revenue was 2.6 billion, up 10% or 8% on an underlying basis. Consulting operating income was 52 million and adjusted operating income was 533 million, up 11%. Our adjusted operating margin in consulting was 20.5%.

16:50 For the first 6 months, consulting revenue was 5.2 billion, reflecting underlying growth of 7%. Adjusted operating income increased 12% to 1.1 billion and the adjusted operating margin was 21%. Mercer's revenue was 1.6 billion in the quarter, up 7% or 5% on an underlying basis. Health grew 3% reflecting continued growth across our regions especially in international.

17:21 Wealth was up 8% led by in our investments business. This was the best quarter of growth in wealth since we started reporting on this basis in 2016. Our assets under management were 846 billion at the end of the second quarter, up 16% sequentially and up 26% compared to the second quarter of last year. Year-over-year growth was driven by new business and the impact of capital markets. Career was up 2% was led by growth in international For the first six months of the year, revenue at Mercer was 3.3 billion, 5% underlying growth.

18:04 Marsh Management Consulting generated generated revenue of 1 billion in the second quarter, up 15% or 13% on an underlying basis. This was the fastest quarter of growth in over two years, reflecting strong demand and delivery across the business. For the first six months of the year, revenue at Marsh Management Consulting was 1.9 billion, an increase of 10% on an underlying basis. Looking ahead to the third quarter, we expect underlying growth for Marsh Management Consulting will likely be in the mid to high single digits.

18:41 Fiduciary interest income was 88 million in the quarter, down 11 million compared with the second quarter of last year, reflecting lower interest rates. Looking ahead, we expect fiduciary interest income will be approximately 95 million in the third quarter. Foreign exchange was a twocent benefit in the second quarter. Based on current exchange rates, we expect FX will have an immaterial impact on earnings in the third quarter and the rest of this year. Corporate expenses in the second quarter were 67 million on an adjusted basis compared to 66 million a year ago.

19:18 Looking ahead to the third quarter, we expect adjusted corporate expense of approximately 75 million. We continue to execute well on our Thrive program and remain on track to deliver 400 million of total savings, a portion of which will be reinvested for growth. We continue to expect to incur approximately 500 million of charges to generate the savings. Total noteworthy items in the second quarter were 130 million, including 52 million of costs associated with Thrive.

19:52 Interest expense in the second quarter was 250 million. Based on our current forecast, we expect a similar level of interest expense in the third quarter. Our adjusted effective tax rate in the second quarter was 24.4% compared to 25.3% in the second quarter last year. with both periods benefiting modestly from discrete items. When we give forward guidance around our tax rate, we do not project discreet items. Based on the current environment, continue to expect an adjusted effective tax rate of between 24.5% and 25.5% in 2026.

20:31 Turning to capital management, our balance sheet, we ended the quarter with total debt of 20.6 billion. Our next scheduled debt maturity is 550 million of euro denominated senior notes in the third quarter which we anticipate refinancing with similar euro denominated notes. Our cash position at the end of the second quarter was 1.7 billion. Uses of cash in the quarter totaled 1.4 4 billion included 438 million for dividends, 230 million for acquisitions, and 750 million for share repurchases.

21:07 For the first 6 months, uses of cash total 2.7 billion, and included 878 million for dividends, 319 million for acquisitions, and 1.5 billion for share repurchases. We now expect to deploy approximately 5.5 billion of capital in 2026 across dividends, acquisitions, and share repurchases, up from 5 billion previously. The ultimate level of share repurchase will depend on how our M&A pipeline develops.

21:37 Earlier this month, we announced a 10% increase in our quarterly dividend, making this our 17th consecutive year of dividend increases, reflecting our solid earnings growth and confidence in our outlook. Turning to our outlook for 2026, 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.

22:07 For modeling purposes, we expect more margin expansion in the fourth quarter than in the third quarter. With that, I'm happy to turn it back to John. >> Thank you, Mark. Andrew, we're ready to begin Q&A. >> Certainly. We will now begin the question and answer session. If you have a question, please press star 111 on your touchtone phone. If you wish to be removed from the queue, please press star1 again. If you're using a speaker phone, you may need to pick up the handset before pressing the numbers.

22:37 Once again, if you have a question, please press star1 on your touchtone phone. And in the interest of addressing questions from as many participants as possible, we ask that participants limit themselves to one question and one follow-up question. One moment, please. And our first question comes from the line of Greg Peters with Raymond James. good morning everyone. so for the first question, I want to zero in on organic revenue growth at risk and insurance services. I certainly appreciate your pricing commentary and u I guess the impact on Guy Carpenter.

23:20 as we look forward, maybe you can help sort of reconcile how you're seeing the drag from pricing, presumably with offsets of new hires and new business wins that helps you get to your, you know, organic revenue guidance of similar to last year. >> Greg and good morning. Thanks for the for the question. I I'll share a couple of comments and then maybe I'll ask Nick and and Dean to to add some some color. You know, I thought it was a you know, good solid first half at Marsh Risk. It was a you know, good quarter.

23:53 We've seen some improvement in our growth in the United States, which we're which we're excited about. It's been an area of focus for us where we've been hiring production talent there. So, it was a good first half of the year for us in in adding lateral talent in in the United States and elsewhere. But but we're particularly focused there in the in the US and it was a very strong new business quarter for us in in the US you know and reinsurance of course you know it's not the outcome we want but you know as Mark noted you know our execution was you know was really strong you know big big pricing headwinds but again we're delivering for our clients retention is strong very strong new business was excellent in the first half and you know I'd add that market consolidation, some M&A, you know, wasn't helpful to us in the quarter and and we have the largest cap portfolio, cap property portfolio in the market, but but there's a lot of opportunities for us to grow and in reinsurance and and Dean and the team are focused on that and so we're excited about what's in front of us in the in the second half. So with that, maybe Nick, you can talk a bit about the growth prospects at Marsh Risk.

25:05 >> Greg, yeah, thank you for the question. very pleased with the performance in the face of those rate headwinds that you mentioned. the really solid organic growth represents a continued focus on innovation for clients as well as on efficiency and execution. if I sort of walk you around the business a little bit in the US and Canada accelerated growth high singledigit new business growth which John talked about that was actually double digits in marsh risk coming from a range of businesses specialties we had doubledigit growth in marine in transactional risk in construction in aviation in energy and power a very robust pipeline in digital infrastructure which affects a number of those specialties which is you know beginning to make a meaningful contribution to growth. but also as you noted continued growth in our sales capacity, strong hiring in the market, strong growth of sales leaders a trend which we expect to continue into the second half. And then really underpinning the fact that our growth is very broad-based international gap revenue growth of 7% underlying growth 5% on top of 7% a year ago with strong growth in lack in in Asia and in AMIA really driven by the UK which has been growing strongly and the highlights in international our facultative reinsurance alongside Marsh re double digit growth specialties similar to the US and Canada, doubledigit growth in transactional risk in construction, marine and cyber.

26:47 and really strong new business growth in Pacific. and you really beginning to leverage some of our wholesale capabilities and marsh risk capabilities like McGriff MMA in London. so all of that makes us confident in our strategy. While pricing is down, our clients see more risk, more uncertainty, and more volatility. they have more lumpy problems they need our help with and we're confident in our strategy in investing in our middle market business in building in fast growing sectors like digital infrastructure but I could add defense and security and many others hiring and cultivating producer talent building our facilities building fastrack where utilization is progressing well and and really seeking to be both a gamechanging risk adviser and an allconed risk intermediary >> there you go thank you Nick Dean >> thanks Thanks John and Greg. Maybe a little bit of context for you on Guy Carpenters results and the reinsurance, you know, marketplace. You know, our negative growth in the quarter and our flat growth for the first half of the year, as John noted, were clearly driven by declining property cap pricing.

27:55 our property cat rate online index, which you see every quarter, was down 16% at midyear, accelerating down from -12% at the January 1 renewal and the steepest year-over-year decline we've observed since the index was created 25 years ago. And as you know, as John noted, property is 50% of our global portfolio and we have the largest property catbook in the global marketplace. You know, we continue to deliver strong execution in a very challenging market.

28:30 You know, and as John noted, despite pricing headwinds, we see strong opportunities to grow moving forward. We had record new business in the first half of the year, strong double-digit new business growth. Our RFP win rate has never been stronger. And outside of property, we have a number of businesses that are performing very well. as Nick mentioned, our international facultative business is growing double digit. Our casualty business continues to grow strong mids single digits.

29:05 Capital and advisory continues to deliver strong double-digit growth and M&A advisory, structure deals, sidec cars, and other capital structures. And we led 20 cap bond issuances in the first half of the year totaling $5 billion of limit, a record for Guy Carpenter. We continue to invest in top production talent around the world. We've grown our headcount for five straight years and demand for our advice and solutions from clients has never been stronger. So what I would sum it up, Greg, by saying, you know, despite our growth challenges in the first half, we feel great about our team, our talent, our platform, and our prospects for growth moving forward.

29:49 >> Thanks, Dean. So, Greg, hopefully that was helpful. some you know some unsurprising headwinds for us you know from a a pricing point of view but but execution is strong and and we feel good about our growth prospects as we look ahead. Do you have a followup? >> I do. thanks that was good detail. I I noticed John in your comments you mentioned token costs and you talked about AI you know driving growth, productivity and efficiency. you know, I I'm just curious how you're looking at the rising costs of technologies in infrastructure investment and how it it it might deliver on improving efficiency gains.

30:34 it seems like from some of the headlines that we're reading, it it it might the co rising costs might entirely offset the efficiency gains, but what are you seeing at at your company, please? >> Yeah. you know, thanks for the question. It's, you know, it's an important one. And, you know, again, you know, I want to reiterate, obviously, there's been lots of questions in the investor community about AI. We're very excited about AI, the impact it can have on the value that we deliver for our colleagues, for our clients, and for shareholders. And we think we're exceptionally well positioned to be a winner. And I've, you know, talked, you know, quite a bit about why. But but and our our we're an early mover and our CIO Paul Beswick has done a a terrific job really building the foundation for us to create the value that that we talked about. we expected rising costs to become you know a challenge for us over time.

31:30 It's why I talked about lend work in my in my prepared remarks, which, you know, essentially is a it's an in-house model that's built on third party LLMs. It's a couple of months behind Frontier models in terms of its capabilities, but it's more than adequate. In fact, it's quite capable to do the overwhelming amount of work that that our colleagues need from AI at the moment. And so, it's a lowcost, very efficient model for us. and we're we're quite excited about that. Now, of course, when we need to do other work that, you know, requires the most contemporary models in the marketplace and that happens probably most inside of Oliver Wyman and at at Mercer will supplement, you know, our you know, our work by by engaging with third party models. So, so we're excited about the path we're on. You know, so far the growth from AI has mostly come from or come into Oliver Wyman. as Nick pointed out, we're starting to see more and more growth and opportunity in digital infrastructure in that ecosystem is is driving some good growth for us.

32:37 but we're also excited about the efficiency gains. I talked about the partnership between our team at OW and AWS to to really attack some of the mid and back office work that we do. And so, so it's early days on that on that front, but we're excited about it. Excuse me, Andrew. Next question, please. Our next question comes from the line of Mike Serky with Capital Markets. >> Hey, a great good morning. in terms of some of your comments today and and and and earlier in the year about kind of reinvesting in growth any texture you you you'd be willing to provide on kind of producer headcount growth? Are you targeting kind of mid single digits, high single digits? And do those producers, you know, do should we think about them their the contribution to organic kind of phasing in over the next one one to two years or is it more front front and loaded etc. Thanks.

33:39 >> Yeah. you know thanks Mike for the you know for the question you know as I I mentioned briefly in the you know Greg's question. It was a you know it was a good first half for us and attracting production talent in in key markets. Our brand for talent is excellent in the markets that we that we operate in and compete. We have the best talent here in our in our company, but we see the opportunity to get even stronger. I would point out our colleague retention is very strong. Our colleague engagement is excellent and it's all anchored by a very strong and deliberate and transparent colleague value proposition. a conversation that we have with our colleagues and and with talent that's considering to work here and our investments in AI are another example of how we can make it even more attractive to work to work at our company. as I said, you know, I don't want to get into every quarter reporting on kind of how many people and you know, all of that. but but you know, it was a good a good first half and we expect that to continue our pipeline for talent.

34:46 you know remains quite strong. So we're going to continue to get at that. That's not the only source of improving the growth rate of the company. Of course, we do other things that will drive growth including expanding capabilities and and including through M&A. but but it is an important source of growth for us and we did have a good first half. Do you have a followup, Mike? >> Yes. thanks, John. also in your prepared remarks you continued to to highlight some of the I I think some risk manager facing analytics capabilities you all are investing in.

35:20 You know one of your com direct competitors publicly talked about seeing a 40% higher sales win rate using their new newer upgraded analyzers. but that seemed like a a big jump in in in a RFP win rate. just curious, are is are you all continuing to kind of invest in analyze and in your analytics and and continue to upgrade them to kind of keep up with competitors or do you feel like you're in a in a great spot? just any curious of any more texture there.

35:53 Thanks. >> Yeah, I haven't seen anybody in the market report 40% growth rates, so I'm a little bit skeptical there, but we're not trying to keep up with the market. we're leading the market and continuing to extend our our leading spot in the market. I I talked about you know the suite of of analytics under the brand of companion the Marsh risk companion suite that that we rolled out at rims an AI enabled application. So you know I think another great example as why as an incumbent and a market leader we're positioned to be an AI winner. The feedback we got from the roll out of that was you know was tremendous and I was actually in our cafe at rims to you know to witness it firsthand and to sit through some demos with the with some clients. So we're continuing to invest in that. We have a big advantage in data as I as I mentioned and AI just creates new opportunities for us to help our clients understand their risks model those risks benchmark those risks compared to anonymized of course but compared to others in the industries that they compete with set their risk appetites right and then think about risk financing and then when we finance risk we do it through captives we do it through traditional insurers we do through we do it through alternative capital. And so, you know, these are all the reasons why, you know, we're so well positioned to to continue to deliver for our clients.

37:24 >> Thanks, Mike. Next question, Andrew. >> Our next question comes from the line of Brian Meredith with UBS. >> Yeah, thanks. John, first question. I'm just curious with respect to capital management here and investing capital. If I look at your M&A in the first half, it's it's been relatively modest, let's call it, versus the free cash flow. As we look out second half of the year, do you expect maybe a pickup here? Maybe as bid spreads, call it narrow, is there anything in the first half that maybe caused MA to be a little lighter than expected?

37:57 I hope bid asks narrow, but it has gaps narrow, but I'm not sure I'm I'm ready to call that yet. In fact, you know, I would I would say, you know, there's still a bit of a at least between what I think, you know, Strategics might consider the right price and and maybe some financial sponsors, but but we'll see. You know, I would point out, I mean, we had previously announced Altar Cam and Alts Manager that we're excited to add to our investments business at Mercer. You know, that's expected to close in the second half subject to regulatory approval. on the 1 of July, we we closed on Astera a business in in Spain that we had a minority stake in previously. So, we're excited about both of those businesses.

38:42 We're very active in the market. but you know, aside from the gaps growing, we've even seen some assets just come off the market entirely. And of course, you know, we're going to remain you know, as disciplined as we as we've always been. Our strategy is the same, right? We you know, we have a balanced approach. we we do want to invest in our business that's going to drive growth going forward. so, you know, obviously we increased buybacks in the first half. We also announced an increase in our dividend by 10%. You know, as Mark noted in in his prepared remarks, we expect to deploy now 5 a.5 billion of capital throughout throughout the year. And so so the strategy remains the same. you know, we're, you know, again, we're going to continue to be active in the market, but but you're right, it was a bit slower in terms of what what we were able to close on in the first half, >> right?

39:33 >> You have a follow, Brian? >> Yeah, absolutely. So, Marsh Management Consulting, thanks for the guidance on third quarter, Mark, but maybe a little more color on second quarter. Were there any kind of one big one on one time success fees or is this AI related the big organic raptor growth in the quarter? Yeah, you know, Brian, we're very excited obviously about that growth. you know, Ted and the team have been executing well. It's an incredibly complex environment that businesses are operating through. So, the opportunities for us to not only help clients understand the risks and manage those risks more effectively, but to capitalize on the opportunities amidst the complexity and all the change that drives opportunity for us in our in our consulting businesses. and and and we're doing quite well at it.

40:19 But Ted, maybe you can share a bit a bit of color on what's what's driving demand. >> Yeah, sure. Hi Brian. look, in answer to your question, actually, it was pretty broad growth. we saw growth in all regions. We saw growth in most business lines. the strongest growth was in Europe and in Asia. by region, by industry, and energy, insurance, telco, transportation. if you look at the kind of service offering side for sure our strongest growth by some distance was in quotient which is in our AI strategic advisory team. but we also saw a lot of activity in in efficiency related work more broadly several deals in M&A where we're doing pre-deal work and post merger integration and we saw you know significant growth in in private equity in in capital deployment as well. So pretty broad-based.

41:10 >> Thank you Brian. Andrew, we have the next question, please. >> Yes, our next question comes from the line of Rob Cox with Goldman Sachs. >> Hey, thanks. Good morning. Yeah, I just wanted to ask about the the strong growth in international within Marsh risk. it's, you know, positive mids single digits. and I know Marsh is, you know, by no means a pricing index, but the pricing headwinds for at least the larger accounts in the international geographies seem to be, you know, a pretty strong headwind that you're growing strongly against. So, is is it fair to say the average client you know in your client base is seeing lower rate decreases than some of these you numbers that you guys have quoted in the in indicy and you know how should we think about organic growth resilience there?

42:05 >> Yeah, thank thanks Rob. you know actually the rate change is is down more or price change is down more in international generally speaking obviously it's a it's not one market it's a you know a collection of markets by geography by product and there's a a range of issues of course you know driving price competition but but broadly speaking pricing in international is down more of course in the US you know I talked about excess casualty pricing still up in mid- teens which is you know really you know a reflection of the you know very challenging litigation environment and liability environment here in the US you know of course there are bigger protection gaps in the US we're attacking the middle market more in other parts of the world all driving big opportunities for us to grow and so we're excited about our position and Nick I don't know if you have any more color you want to add to that >> yeah Rob, I' I'd just say it's similar to to my comments earlier on, our clients face a really complicated world. So, while pricing is down, and that's good for our clients after, you know, quite a few years previously of of tougher market pricing, they have big messy challenges. you take something like Pacific where we saw very strong new business growth. you know, as John alluded to, pricing headwinds were pretty high. led by property but really across the board.

43:39 but there's no one more capable of solving large risk management and risk transfer type problems. and so those are the things that are driving growth. I I also think that we are just working you know more smartly across regions and across capabilities to make sure we're connecting our clients risks to all the available sources of capital which we can connect them to. So Dean and I both talked about fat. talked about I talked about some of the wholesale market activity which we've been seeking to channel to MMA McGriffin London and those kind of things. so just in general we're working the system harder but but yeah there's lots of risk out there and we're seeing growth I listed out earlier but across a range of products and specialties.

44:26 >> Thanks Nick. Rob, do you have a followup? >> Yeah, that's very helpful. And if I could just follow up on international, you know, I think last quarter you guys mentioned limited impact from the Middle East conflict overall on results. How did that trend this quarter? And you know, if you have any expectations for the back half of the year >> Yeah, you know, thanks Rob. I mean, you know, first and foremost, you know, I want to, you know, give a shout out to our over 200 colleagues throughout the region. I mean, I can't be more proud of their resilience. You know, I talked about the tragedy that unfolded in Venezuela, you know, more recently with the earthquakes, but you know, our our colleagues in all throughout the Middle East have been have just been incredible and they continue to deliver for our for our clients there. The mix of business for us is different in you know, in that region. Our consulting business is much larger than or meaningfully larger anyway than our our risk business. you know sales slowed a bit in the second quarter and you know that fed a little bit into you know what we pointed to in terms of second half growth in consulting but we're still working our way through you know what's quite a healthy backlog and you know the impact so far has been limited and that continued through the second quarter but you know if if current conditions persist for you know for many months you know that obviously could you know could change over time and you know what I was also say apart from our colleagues resilience, it's our clients resilience and and is remarkable too. I mean they're all you know doing the best they can to you know proceed as you know as if business is as usual. Of course it's not. but it's you know it's really remarkable what we're seeing across the region and so so so far so good and you know again we're incredibly well positioned in that region and we're excited about the growth from that region for our business you know over time and you know we'll we'll see how it goes but but but it's been quite manageable so far.

46:29 Thank you Rob Andrew. Next question please. >> Next question comes from the line of Mayor Shields with KBW. Great. Thanks so much. Good morning. Mark, can you get a little color on what underlies that $500 million increase in deployable capital, when we come into the year, you know, there's a lot of uncertainty in the outlook. So we, you know, we start with a number we feel good about and as we've talked about through six months, our results are tracking really well with our expectations. We also came into the year with a little little extra cash on our balance sheets. It's really as simple as that. We we just got more conviction about our outlook for the year. and so at this point we see more like 5.5 billion than the five billion we guided to earlier.

47:15 >> Okay. >> Yeah. Just just a quick one. I was hoping we get an update on the percentage of the Marsh book that's represented by the Marsh Pricing Index. Well, it's effectively kind of XMMA right now. I mean, we do have data into MMA where you know in the US pricing is is is relatively stable and at least historically that market has operated within kind of a tighter band up and down you know from you know from year to year. And so so effectively that's what's you know what's excluded from it.

48:00 Thank you, Mayor. Andrew, next question. >> Andrew, are you there? >> Operator, are you there? >> Yes. Our next question comes from the line of Alex Scott with Barkley. >> Hi, good morning. first one I had for you is on the competition for talent and just if you could provide commentary around you know the margin improvement expectations you have and you know how how much are you expecting from some of the efficiency initiatives that you've got going on and you know verse you know maybe an offset from from this war for for talent that we've all been hearing about.

48:47 >> Okay. So you want to you're doing two for one here. I'll go you know on the talent front. I'll I'll start with that and you know I mentioned this earlier we have the best team in the market and we're excited about that. We had a good first half in terms of adding production talent in inky markets and I love the fact that you all are asking about people because people do matter. That's what makes our company that is what makes our company go. but our brand for talent and attracting talent in the market is excellent and we have a colleague value proposition that again leads to a very transparent dialogue. You know, it's about our culture, it's about the work that we do, it's about the learning and development opportunities, mobility, course rewards, important part of why we all come here.

49:39 and fundamentally what we talk about is we want our colleagues to be their best at Marsh. And so that's what it's what it's all about. you know, lots of headlines in trade press, you know, about you know, talent wars. you know, our colleague retention data wouldn't support that there's something new from like, you know, that would you know, would say that it's a war compared to, you know, kind of other markets for talent. It's a competitive market for talent. That's good. I'm I'm I'm good with that. I like how we're positioned to compete in that respect. Of course, there's been you know, team raids and, you know, unethical conduct in the market, which I think is probably what's really behind some of those headlines. But but we feel very good about how we're positioned and how we attract talent in the market. You know, in terms of margin, you know, Mark talked about it in his is prepared Marks. We expect margin improvement for the year.

50:36 we've always cautioned in the past about overindexing on any quarter results. We had expected to make some investments in the first half of this year and we did that as I just talked about talent investments primarily and you know we also expected the property market to be a bit a bit challenging and u property reinsurance market I mean and of course that was the the case but we've talked in the past about BCS you know our shared ops and tech team that's really coming together under the leadership of Paul Beswick doing the team there is doing a terrific job so we've been doing more right shoring automation and you know in my prepared remarks I talked about some of the productivity and efficiency gains from from AI and so so we're excited about all that and we're going to obviously look to deliver here in the second half next question Andrew certainly our next question comes from the line of David Multimmaten with Evercore ISI Hey, thanks. Good morning. John, I was hoping maybe you could just talk a little bit specifically about retention within Marsh Risk US Canada specifically. I think over the past few quarters and and this quarter as well, you've talked about strong new business. but haven't heard much on the on the retention front. So, I was hoping you'd comment on that.

52:05 >> Yeah. you know, retention's been solid. it's not been something you know to you know to crow about. think you know the you know the bigger achievement been has been for us in u you know in in new business strength and so you know and of course it's a very active M&A market not just in the insurance market but in fact it's much more active outside of insurance markets you know that's created some retention challenges but but overall retention remains quite solid in the US and outside of the US. I would I would note. Do you have a follow-up, David?

52:44 >> Yeah, thank thanks for that. And and maybe just just on the the health business within Mercer Mercer this quarter. >> I was surprised you know the 3% that's the first sub 4% growth quarter we've had in in several years and and below the 6% where you guys have been running on an organic basis. So you know you I know you guys called out international as being strong. So that implies the US may have been a little weak. but just hoping to get some color around what specifically decelerated within the health within the >> sure is probably a good example of where new business has been quite strong and and retention is you know just been kind of more ordinary you know in a market where obviously medical inflation's you know creating you know lots of strain for for employers. But but you're right, David. our growth in international is good. let me I'll ask Pat to talk a bit more about it.

53:42 >> Sure. and thanks David for the for the question. listen, we've been pleased with the growth momentum that we've had in health over the last several years as you highlighted right with the we've actually had five plus percent growth over the last over the last few years each quarter. and while this quarter did go to three, right, and it is below that, let me start by cautioning against extrapolating too much from from any single quarter, we we think that the 5% that we delivered in the first half is probably a better reflection of the underlying growth profile of the overall business. Overall, from a strategy perspective, you know, we're out there providing innovative and tailored solutions to our clients. There's a lot of demand for them. We're expanding the functionality of our digitally enabled tools. We're now live in over a 100 countries. You highlight international as part of your question and we have been very active in expanding our tools and our capabilities around the world to enable the consultants to be able to drive this technical advice in real time with them. Be able to sharpen their focus on the client segmentation in different areas around the world both multinational, large and mid-market. You highlighted international and and US. I want to I want to talk a second about multinationals because we have an awful lot of US multinationals that we're spending a lot of time with driving growth and winning global benefits management deals with. We built facilities around the world that are leveraging that large global broad network that we've built where we've got best-in-class brokerage locally in the countries. I would say the solutions are really resonating with our larger global benefits management opportunities both in continental Europe but as well as really in the US with the large employers driving more value for those clients bringing together the local and multinational advisory capabilities that we built combination of brokerage and consulting to really help them navigate costs and then access to care around the world. I so I would say overall we have a very positive outlook on the growth trajectory of the business. We expect the growth momentum to continue.

55:50 We've got good strong macros and client demand supporting the value that we bring to clients. >> Yeah, thanks David for that question. Yeah, our outlook remains positive and health. So Andrew, next question please. >> Our next question comes from the line of Ely Greenspan with Wells Fargo. >> Hi, thanks. good morning. My first question just going back to Guy Carpenter you know guys were obviously you know unable to offset you know the rate headwind on that business like in prior quarters. So just given the current pricing environment would you expect you know negative organic within that business for the foreseeable future?

56:32 >> You know thanks Elise. you know as I mentioned it it wasn't just price of course you know we you know were impacted a bit by market consolidation so you know which wasn't you know wasn't helpful to us but you know Dean mentioned some of the opportunities for growth you know not just in the second half but u you know but but looking ahead and you know in fact and casualty and M&A advisory all the alternative capital work and so you know we're excited about that and so I wouldn't you know I wouldn't you know, look too far forward in terms of, you know, what happened in the second quarter and, you know, a flat first half and and even in the second half, our mix of business is different than what it was. It's obviously a much smaller second half, but but it's a different mix of business than the first half.

57:20 You have a follow-up, please. >> Yeah, thanks. So, then my second question was on the US and Canada. was just hoping to get a little bit more color on the contribution just from data centers as well as you know M&A transactional type business in in the second quarter and how you think about both of those contributions going forward. >> Yeah, both both digital infrastructure and TR transaction risk were you know were important drivers of you know growth for us in u you know in the first half and in the second quarter. So we feel good about it. Digital infrastructure has been you know we've been in the TR business obviously for many many years. The growth and investment obviously in the digital infrastructure ecosystem is also an area that you know has been a focus of ours for some time and it's not just insurance. I would point out our consulting business our investment operations and Mercer Investments had an you know an outstanding quarter.

58:17 We're very excited about how that business is is is positioned. But we have a unique capability set. and so you know advising on on contracts and SLAs's between the various parties is an important part of it. business interruption mapping and modeling is important work. I talked in my prepared remarks about some of the energy related issues and the counterparty credit exposures that that utilities have to some of these data center owners. And so, it's it it was a a good contribution, you know, in the second quarter and we have a very, as Nick pointed out, a very robust P pipeline going forward.

59:01 >> Thank you. >> Thank you, Elise. And Andrew, one more. >> Certainly. Our next question comes from the line of Pablo Singon with JP Morgan. >> Oh, hi. Thanks for speaking, man. I I wanted to follow up on one of your comments about leveraging more of your internal wholesaling capabilities and I'm I'm actually more interested in how your counterparties are acting as you're internalizing more of that function. Right. So any commentary you can provide on you know the willingness of ENS insurers to deal with you directly rather than a wholesaler and sort of how is your relationship with the wholesaling community evolving? Thanks.

59:36 Yeah, I mean, you know, of course, it's not you know, it's not a robust moment for the ENS market as, you know, property pricing is under pressure and, you know, more business has, you know, has migrated back to, you know, to the admitted marketplace. But, you know, I think Nick mentioned when he was talking about some of the growth opportunities for us. so when we acquire agencies in the middle market here in the United States, we typically pick up a trail of, you know, thirdparty wholesale business and and some of those some of those companies have chosen to compete with us in in places.

60:10 And so we created a desk for MMA and McGriff in the London market which has been driving a bit of growth from us and enabled us to bring back some some business from third parties in the London London market. So, we're not looking to build a third party wholesale business, but and we have exceptionally specialty talent and so the third party wholesalers do a nice job for us, but you know, we want to use them when we need to use them. Do you have a followup, Pablo, before we wrap up?

60:38 >> yeah, just just one quick one. on the wealth business, how much of the revenues there are tied to markets and just, you know, generic type fees that are maybe tied to cases or or headcount? Thank you. >> Yeah, thanks for that question. it was an excellent quarter and obviously markets were strong but we had an excellent new business quarter. Pat, very briefly. >> Yeah. listen, we're really pleased with where we were on the on the wealth business. we've been able to build on a lot of the recent acquisitions we've made to enhance our capabilities over the last couple of years. you know, we've also done a great job increasing the partnership across the firm working with Guy Carpenter, Marsh Risk, Marsh Management Consulting, you know, to raise capital and develop different solutions. Mark mentioned the AUMM growth. We're pleased with the AUMM growth up 26% up to 8 846 billion. But I will highlight we also continue to see really strong growth in investment consulting where assets under adisement not not paid for invas fees is up to 16 trillion right so we are having big impact in the market.

61:41 >> Thank you Pat and thank you Pablo. Thank you all for joining us this morning. I want to thank our colleagues for the dedication of Marsh and our clients for their continued support. We thank you all very much and we look forward to speaking with you again next quarter. Andrew, >> back to you. >> Thank you. Ladies and gentlemen, this does conclude today's program and you may now disconnect.

62:35 >> >> Goodbye. >>