Marsh & McLennan Companies, Inc. (MMC) reported 4Q2021 results today with adjusted Earnings Per Share (EPS) of $1.36. Consolidated revenue rose to $5.1 billion which is up 16% compared to the fourth quarter of 2020. This compares to consensus analyst estimates of $1.35 in adjusted EPS and $4.9 billion revenue.
Notable Takeaways from MMC Q4 Earnings:
- MMC reported organic revenue growth of 10% during 4Q21, compared to 13% in 3Q21, which was “the third consecutive quarter of double-digit growth and the longest stretch of double-digit quarterly growth in over two decades.”
- MMC’s global proprietary pricing index showed price increases of 13% year-over-year, compared to the increases of 15% in 3Q21 and 13% of 2Q21. It was the 17th consecutive quarter of rate increases in the commercial Property & Casualty (P&C) insurance market. Rate increases were driven by multiple factors including low returns, concerns about inflation and losses. The index is skewed towards large account business, but MMC noted pricing continues to rise in small to middle market placements but at a more modest rate vs. large accounts.
- By line, the MMC market pricing index showed global property insurance was up 8%, while global financial and professional lines were up 31%. The latter was driven in part by cyber rates more than doubling in some geographies. Global casualty rates were up approximately mid-single digits.
- Organic growth in its Risk & Insurance Services (RIS) division in the fourth quarter was 9%, vs. an increase of 13% in the third quarter of 2021. Part of MMC’s strategy for the group involves organic hiring to boost growth.
- Organic growth in the Guy Carpenter Consulting division, primarily project-based revenue, was up 5% year-over-year in the fourth quarter. This is down from the 15% growth in the third quarter of 2021.
- MMC ended the year with $11 billion of total debt including the $750 million of senior notes issued in December. A portion was used to redeem $500 million of senior notes that were set to mature in January 2022. The next scheduled debt maturity is in March of 2023.
- The company currently expects to deploy approximately $4 billion of capital in 2022 across dividends, acquisitions and share repurchases. “The ultimate level of share repurchase will depend on how the merger & acquisition (M&A) pipeline develops,” noted CFO Mark McGivney. When asked about the M&A pipeline, CEO Daniel Glaser stated that “our pipeline looks good and that we’re not on any timetable or budget, and we’ll just see how it goes. We will deploy that capital.”
- For 2022, MMC projects “underlying revenue growth of mid-single-digit or better, margin expansion, and solid growth in adjusted EPS.” The company is optimistic about growth in 2022, driven by factors including projected above average GDP growth, continued firm P&C pricing conditions, and inflationary impact on exposures. The company also expects growth to benefit from opportunities from disruption in the brokerage sector and its recent organic investments.
MMC’s leaders continue to be optimistic about the company’s growth prospects and outlook, with rising demand for the company’s solutions as complexity, volatility and uncertainty increase in the world. While MMC was generally positive around the current economic outlook, it noted potential risks around inflation, monetary tightening, COVID-19, geopolitical pressures and supply chain issues.
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This earnings summary has been prepared by Marsh, Berry & Co., LLC. and is not intended to provide investment recommendations on any company. It is not a research report, as such term is defined by applicable laws and regulations, and it does not contain sufficient information upon which to make an investment decision. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. These materials are based solely on information contained in publicly available documents and Marsh, Berry & Co., LLC has not independently attempted to investigate or to verify such information.
