Marsh

Welcome to Marsh's earnings conference call. Today's call is being recorded. Second quarter 2026 financial results and supplemental information were issued earlier this morning. They are available on the company's website at corporate.marsh.com. Please note that remarks made today may include forward-looking statements. 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 10-K, all of which are available on the Marsh website. During the call today, we may also discuss certain non-GAAP financial measures. For reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. If you have a question, please press star 1-1 on your touchtone phone. If you wish to be removed from the queue, please press star 11 again. If you're using a speakerphone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star 11 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 McGivney, our COO and CFO, and the CEOs of our businesses, Nick Studer of Marsh Risk, Dean Klusura of Guy Carpenter, Pat Tomlinson of Mercer, and Ted Moynihan of Marsh Management Consulting. 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 U.S.-based company and of the ideals embodied in our nation's founding. We are also proud of the contributions Marsh has made to the U.S. 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. 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. Underlying revenue growth accelerated to 5% from 4% in the prior quarter. Adjusted operating income grew 5%. Adjusted EPS grew 9%. We also have $1.5 billion 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. 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. 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 One. F1 increases our visibility among its over 800 million global fans, and importantly, its high concentration of C-suite leaders and decision makers. The precision, data-driven 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-facing talent in sectors where we see meaningful growth opportunity. One example is our work with energy clients in the digital infrastructure ecosystem, where we are creating multibillion-dollar insurance solutions for counterparty credit exposures. These programs integrate traditional insurance and reinsurance sidecars backed by third-party 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. Our AI plans are also benefiting from Thrive. As I've stated before, Marsh is well positioned to be an AI winner. It's clear that our 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. 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. The AI driven 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 indicators, and other financial data for clients. 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 ClaimsIQ to our 3,000 claim professionals. The tool draws anonymized data on millions of claims to help us manage the claims lifecycle and deliver insights to improve client outcomes. Colleagues also now have access to Lendwork, an agentic assistant that builds on our Lend AI suite. Lendwork 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, Lendwork delivers a more secure, relevant, and agile experience, and amid rising token costs, a more cost-efficient approach to enterprise LLM usage. 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. 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. Rates in the U.S. decreased 2%. Europe and Asia declined mid-single digits. Canada, the U.K., and Latin America were down high single digits, and the Pacific region had double-digit 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 U.S. excess casualty up 15%, reflecting continued elevated loss experience, and workers' compensation decreased 4%. In reinsurance, persistent soft market 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 U.S. casualty reinsurance, renewals reflected adequate capacity and differentiated pricing based on loss experience and portfolio quality. 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. 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 RIS and 8% in consulting. Marsh risk was up 4%. Kai Carpenter declined 2%. Mercer increased 5%, and Marsh Management Consulting grew 13%. 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. 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. Operating income was $1.9 billion, and adjusted operating income was $2.2 billion, up 5%. Our adjusted operating margin was 29.3%. Gap EPS was $2.63. An 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%. An 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 RIS was $1.5 billion. Adjusted operating income was $1.7 billion, up 3% over last year, and the adjusted operating margin, 35.3%. For the first six months, revenue in RIS 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 March 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 U.S. and across international. In U.S. 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 EMEA up 5%, Asia Pacific up 5%, and Latin America up 8%. For the first six months of the year, March risks revenue was $7.8 billion, with underlying growth of 4%. U.S. and Canada grew 4%, and international was up 5%. Guy Carpenter's revenue in the quarter was $664 million, down 2% on both the 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 6 percentage point impact on Guy Carpenter'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 three-quarters of Guy Carpenter's annual revenue. 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 $502 million, and adjusted operating income was $533 million, up 11%. Our adjusted operating margin in consulting is 20.5%. For the first six 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. Wealth was up 8%, led by 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% and was led by growth in international. For the first six months of the year, revenue at Mercer was $3.3 billion, 5% underlying growth. Marsh Management Consulting 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. 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 two cent 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 the year. Corporate expenses in the second quarter were $67 million on an adjusted basis compared to $66 million a year ago. 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 RISE. 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 discrete items. Based on the current environment, continue to expect an adjusted effective tax rate of between 24.5% and 25.5% in 2026. 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 billion, included 438 million for dividends, 230 million for acquisitions, and 750 million for share repurchases. For the first six months, uses of cash totaled 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. Earlier this month, we announced a 10% increase in our quarterly dividends, 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. 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.