Executive Summary / Key Takeaways

• Marsh McLennan (MMC) demonstrates robust financial resilience and consistent growth, achieving 4% underlying revenue growth in Q2 2025 despite significant macroeconomic headwinds, including declining P&C pricing and lower fiduciary income.
• The company's strategic focus on high-quality acquisitions, exemplified by the McGriff integration, and continuous investment in differentiated technology like AI-powered analytics, fortifies its competitive moat and drives long-term value.
• MMC maintains a leading global market position across risk, insurance, and consulting, leveraging its extensive network and specialized expertise to outperform competitors and address complex client needs.
• Management's outlook for mid-single-digit underlying revenue growth, solid adjusted EPS growth, and an 18th consecutive year of margin expansion in 2025 underscores confidence in its diversified business model and disciplined capital allocation.
• Key risks include escalating U.S. litigation costs, natural catastrophe frequency, and geopolitical uncertainties, which MMC actively addresses through client advisory and advocacy for systemic reforms.

Forging Resilience Through a Century and a Half of Evolution

Marsh McLennan, founded in 1871, has evolved from its origins into a global professional services powerhouse, advising clients across risk, strategy, and people. This extensive history has instilled a deep-seated resilience and a strategic imperative for continuous adaptation. Early exposures to complex liabilities from historical insurance underwriting ventures, such as the English American Insurance Company and River Thames Insurance Company Limited, underscored the critical importance of astute risk management and diversified service offerings. This foundational experience shaped MMC's current structure, organized into two formidable segments: Risk and Insurance Services (RIS), comprising Marsh and Guy Carpenter, and Consulting, delivered through Mercer and Oliver Wyman Group.

The company's strategic philosophy centers on disciplined growth, balanced investment, and unwavering client focus. Over the past decade, MMC has expanded its operating margin by over 900 basis points, achieving its 17th consecutive year of reported margin expansion in 2024. This consistent profitability is a direct outcome of its commitment to reinvesting cash flow into organic initiatives and high-quality acquisitions. MMC's long-term vision is reflected in its "string of pearls" acquisition strategy, investing approximately $24 billion across more than 200 transactions over the last decade. The $7.75 billion acquisition of McGriff Insurance Services in 2024 stands as a testament to this strategy, significantly extending Marsh McLennan Agency's (MMA) reach into the burgeoning middle market and enhancing its specialty capabilities. This approach is not merely about increasing size but about making the company "better, not just bigger," by integrating top talent and complementary expertise.

The Technological Edge: A Differentiated Moat

At the heart of MMC's enduring competitive advantage is its relentless pursuit of technological differentiation and innovation. The company leverages advanced analytics and AI-powered digital tools to provide superior insights and efficiencies for both its colleagues and clients, fundamentally reshaping how risk, strategy, and people solutions are delivered.

In Marsh, the AI-powered Centrist portal offers clients unparalleled visibility and productivity in supply chain analysis, a critical need amidst tariff disruptions, extreme weather, and geopolitical shifts. The proprietary Blue[i] Suite of analytics, built on a vast dataset of $1.12 trillion in analyzed premiums and over $100 billion in claims, provides unique market insights, establishing a formidable competitive moat against technology startups. Furthermore, Marsh has deployed an AI tool over its claims database, enabling clients to interrogate data, track insurer payment comparators, and identify emerging claims trends, thereby enhancing negotiation leverage and risk management.

Mercer is at the forefront of integrating "agentic AI interfaces" into its product offerings. A prime example is AIDA on its Talent All Access portal, which serves over 20,000 users. AIDA allows clients to query Mercer's worldwide benefit and employment guideline database live, transforming how they interact with and extract value from critical information, and is expected to significantly increase demand for these enhanced offerings.

Oliver Wyman, with 25-30% of its work rooted in advanced analytics and AI, has seen GenAI "turbocharge" its capabilities. The firm actively supports clients on their AI journeys, recognizing that 95% of clients view AI as an opportunity rather than a threat. Oliver Wyman's scale within Marsh McLennan provides a distinct advantage over mid-sized consulting firms, offering access to a broader suite of tools and greater buying power.

For Guy Carpenter, the analytics platform is deemed "the most important thing we do for clients," extending value beyond traditional reinsurance transactions. The greatest application of AI for Guy Carpenter lies in managing the impact of client change, including modeling future climate change impacts and building proprietary AI-driven models to help clients navigate volatility, optimize profitable growth, and maximize capital efficiency.

These technological advancements are not just operational enhancements; they are strategic imperatives that directly contribute to MMC's competitive moat, driving higher client retention, enabling more efficient service delivery, and ultimately bolstering financial performance through improved margins and sustained long-term growth.

Competitive Dynamics: Leading in a Fragmented Landscape

MMC operates in a highly competitive global landscape, facing direct challenges from industry giants like Aon (AON), Willis Towers Watson (WTW), and Arthur J. Gallagher & Co. (AJG), alongside a myriad of smaller, specialized firms and emerging indirect competitors from the technology sector.

MMC's competitive strength is rooted in its unparalleled global brand, extensive network effects, and a unique ability to offer integrated risk and consulting solutions. Marsh, with its leading positions in virtually every international market, differentiates itself through its vast network and data-driven insights, which create a significant barrier for local players. Guy Carpenter is recognized for having the "best team on the field" and superior analytics, which are critical differentiators in the reinsurance market. Oliver Wyman leverages its scale within MMC to attract top talent and build a new leader in strategy consulting, offering a distinct advantage over smaller, less integrated firms.

Compared to Aon, MMC's broad service portfolio and established client relationships provide a comprehensive approach to risk management, while Aon often emphasizes its data analytics capabilities. Against Willis Towers Watson, MMC's integrated risk solutions offer a competitive edge, though WTW's specialized focus in health and wealth consulting can drive growth in those niches. Arthur J. Gallagher, known for its aggressive acquisition strategy, competes on brokerage scale, but MMC's strategic consulting alongside risk services provides a more holistic, client-centric value proposition.

Indirect competitors, particularly technology firms offering AI-driven risk analytics, pose a long-term threat by potentially offering more accessible and cost-effective tools. However, MMC's deep industry expertise, proprietary data sets, and substantial investment capacity enable it to integrate these technologies internally and offer them as part of its comprehensive service, rather than being disintermediated. The company's ability to bring "scale benefits" to the middle market, as evidenced by MMA's standalone position as the fifth-largest broker in the U.S., further strengthens its competitive standing by offering enhanced value to a crucial client segment.

Financial Strength and Strategic Execution

MMC's financial performance in the first half of 2025 underscores its operational effectiveness and strategic execution amidst a challenging macro environment. In the second quarter of 2025, consolidated revenue grew 12% to $7.0 billion, with underlying revenue increasing a solid 4%. This growth was propelled by strong contributions from both the Risk and Insurance Services (RIS) and Consulting segments, which saw underlying revenue increases of 4% and 3%, respectively. Marsh achieved 5% underlying growth, while Guy Carpenter posted 5% underlying growth, reflecting robust new business and renewals. In Consulting, Mercer grew 3% underlying, driven by Health (+7%) and Wealth (+2%), while Oliver Wyman Group also achieved 3% underlying growth, led by strength in the Americas.

Profitability metrics remained strong, with adjusted operating income increasing 14% in Q2 2025, leading to a 50 basis point expansion in the adjusted operating margin to 29.5%. For the first six months of 2025, adjusted operating income grew 11%, and adjusted EPS increased 8% to $5.78. This performance was achieved despite headwinds from lower fiduciary interest income, which decreased by $26 million in Q2 2025 due to lower average interest rates, and higher interest expense, which rose to $243 million in Q2 2025, primarily due to increased debt from the McGriff acquisition. The adjusted effective tax rate for Q2 2025 was 25.3%, aligning with the company's full-year expectation of 25% to 26% (excluding discrete items).

MMC's robust cash flow generation supports its balanced capital management strategy. Operating cash flow for the first six months of 2025 was $1.0 billion. The company deployed $600 million for share repurchases and paid $810 million in dividends during this period. The recent 10% increase in the quarterly dividend to $0.90 per share, payable in August 2025, marks the 16th consecutive year of dividend increases, reflecting confidence in sustained earnings growth and cash generation. The McGriff acquisition, while contributing to higher debt, is expected to be modestly accretive to adjusted EPS for the full year 2025 and more meaningfully accretive in 2026 and beyond, with integration progressing smoothly.

Navigating a Complex Risk Landscape

MMC operates within a dynamic and often volatile global risk landscape. The company acknowledges that the global economic outlook remains uncertain, influenced by "multiple major wars and global conflicts, tariffs or changes in trade policies, slower GDP growth or recession, fluctuations in foreign exchange rates, lower interest rates, capital markets volatility, inflation and changes in insurance premium rates." These factors create complex operating conditions for clients, prompting a "defensive posture" from many U.S. businesses that are deferring discretionary project work.

A significant challenge is the escalating U.S. litigation environment, which MMC's CEO, John Doyle, describes as "effectively imposing a tax on our economy and causing a surge in U.S. liability insurance costs." The rise of "nuclear verdicts" (cases exceeding $100 million) has grown 400% over the past decade, driving up insurance costs. In 2024, U.S. liability insurance experienced its "most severe adverse reserve development" since the 2008 financial crisis. MMC is actively working with policymakers to address these tort abuses.

Natural catastrophes also present a persistent risk. 2024 marked the fifth consecutive year of over $100 billion in insured natural catastrophe losses. Events like the California wildfires and Hurricanes Helene and Milton highlight a "meaningful disparity between economic loss and insured loss," underscoring the urgent need for greater resilience and risk mitigation planning. MMC advocates for governments and regulators to prioritize resilience, noting that "every dollar spent on resilience saves communities $13 in damages."

Despite these headwinds, MMC's diversified business model and critical advisory services position it favorably. While the Marsh Global Insurance Market Index showed a 4% decrease in Q2 2025 (skewed to large accounts), U.S. excess casualty rates continued to climb, up 18%, reflecting the ongoing liability challenges. Global medical costs are also expected to increase 11% in 2025, driving demand for Mercer's health consulting services.

Outlook: Sustained Momentum and Strategic Investment

Marsh McLennan's outlook for 2025 remains confident, projecting mid-single-digit underlying revenue growth, solid adjusted EPS growth, and its 18th consecutive year of reported margin expansion. This guidance is predicated on current macro conditions persisting, though management remains vigilant regarding potential shifts in the economic backdrop.

The company anticipates continued headwinds from lower fiduciary interest income and foreign exchange fluctuations but expects these to be manageable. The McGriff acquisition is slated to be modestly accretive to adjusted EPS for the full year 2025, with more significant accretion expected in 2026 and beyond, reinforcing the long-term value of strategic M&A. MMC's commitment to deploying approximately $4.5 billion of capital in 2025 across dividends, acquisitions, and share repurchases highlights its confidence in robust cash flow generation and financial flexibility. The company's disciplined approach to capital allocation, coupled with its focus on high-quality acquisitions and organic investments in talent and technology, underpins its strategy for sustained growth.

Conclusion

Marsh McLennan stands as a testament to enduring leadership in professional services, consistently demonstrating its ability to adapt and thrive amidst complex global dynamics. Its deep-rooted history, coupled with a forward-looking strategy centered on technological innovation and disciplined capital deployment, positions the company for sustained success. By leveraging its unique data-driven insights and AI-powered platforms, MMC not only fortifies its competitive moat against rivals but also delivers indispensable value to clients grappling with escalating risks, from geopolitical tensions to climate change and social inflation.

The company's consistent financial performance, robust cash flow, and commitment to shareholder returns, even while integrating significant acquisitions like McGriff, underscore a resilient business model. As MMC continues to invest in its market-leading businesses and expand its capabilities, particularly in the high-growth middle market and through advanced technological solutions, it is well-equipped to convert global volatility into opportunities. For investors, MMC represents a compelling proposition: a market leader with a proven track record, strategically positioned to deliver consistent growth and value in an ever-changing world.