Q2 2025 Earnings Call Transcript

Welcome to Marsh & McLennan's earnings conference call. Today's call is being recorded. Second quarter 2025 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marshmclennan.com.

Please note that today's remarks may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties, and a variety of factors that may cause actual results to differ materially from those contemplated by such statements. For a 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 & McLennan 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 GAAP measures, please refer to the schedule in today's earnings release. [Operator Instructions] I'll now turn this over to John Doyle, President and CEO of Marsh & McLennan.

Good morning, and thank you for joining us to discuss our second quarter results reported earlier today. I'm John Doyle, President and CEO of Marsh & McLennan. On the call with me is Mark McGivney, our CFO; and the CEOs of our businesses: Martin South of Marsh, Dean Klisura of Guy Carpenter; Pat Tomlinson of Mercer; and Nick Studer of Oliver Wyman. Also with us this morning is Jay Gelb, Head of Investor Relations.

Marsh & McLennan had a solid second quarter. As we said coming into the year, we anticipated impacts from a changing macro environment, and our performance continues to track well with our expectations. Overall, we grew revenue 12% in the quarter, reflecting continued momentum in our business and contributions from an active year of acquisitions in 2024. Underlying revenue increased 4% for the quarter. I was pleased with our execution, especially given the impact of lower fiduciary interest income, declining P&C pricing and market uncertainty affecting our clients, especially here in the U.S.

Adjusted operating income increased 14% from a year ago. Our adjusted operating margin increased 50 basis points compared to the second quarter of 2024, and adjusted EPS grew 11%. Turning to the macro environment. The global economic outlook remains uncertain as we move into the second half of the year.

Ground wars, culture wars, trade wars, extreme weather and the opportunities and risks from the rapid development of AI are creating complex operating conditions. Oliver Wyman recently teamed up with the New York Stock Exchange to see how CEOs are thinking about and responding to the challenges they face. 165 CEOs responded on topics ranging from managing geopolitical instability and supply chain disruption to capturing value from AI. In all, 89% of CEOs rated geopolitics along with trade and industrial policies as a risk to their company, up 20 percentage points from 2024. CEOs are focused on extracting growth in a slowing economy and a more complex geopolitical environment while tightly managing costs and spending more time on near-term issues.

While the environment presents challenges for our clients, it also provides Marsh & McLennan with an opportunity to support them. We're advising clients on near- and long-term strategies and guiding them on growth and building resilience during this dynamic period. This includes analyzing supply chain risks and helping them consider the impacts of AI on their workforce. Together, we can transform these challenges into opportunities.

I also want to take a moment to address the current litigation environment in the U.S. Excessive litigation and the abuse of our legal system are effectively imposing a tax on our economy and causing a surge in U.S. liability insurance costs. U.S. already has the highest liability insurance rates in the world and escalating costs will only make it harder for companies to decide to invest and grow here. And for those that do, they will ultimately have to pass along these increased costs to consumers.

Our torch system is intended to provide fair compensation to injured parties who have been wronged. But too often, we see tort litigation backed by a vast and growing industry with outside investors. The result in many cases, is that agreed parties see less than half of the settlement awards. Our clients are feeling the effects of this growing problem.

Consider the rise of so-called nuclear verdicts, cases exceeding $100 million have grown 400% over the past decade according to the U.S. Chamber of Commerce. This trend is encouraging more lawsuits and blockbuster verdicts, which drive up insurance costs. In fact, in 2024, U.S. liability insurance experienced the most severe adverse reserve development of any single line of coverage since the 2008 global financial crisis.

This was more than double the amount from the previous year. And over the past decade, U.S. excess casualty insurance rates have increased by a cumulative 150%. Addressing these tort abuses will be challenging and take time. We are committed to working with the business community and policymakers to tackle this challenge.

Now turning to insurance market conditions. Overall rates continue to decrease, particularly in property insurance and property cat reinsurance. According to the Marsh Global Insurance Market Index, commercial insurance rates decreased 4% in the second quarter, driven by property despite a surge in cat losses in the first 6 months of the year. This follows a 3% decline in the first quarter of 2025. As a reminder, our index skews to large account business.

Overall, rates in the U.S. were flat. Latin America, Europe, U.K. and Asia were all down mid-single digits and Pacific was down double digits. Global casualty rates increased 4% with U.S. excess casualty up 18%, reflecting the previously mentioned liability environment. Workers' compensation decreased by 4%.

Global property rates decreased by 7% year-over-year compared to a 6% decrease last quarter. Global Financial and Professional liability rates were down 4% while cyber decreased 7%. In Reinsurance, midyear renewal rates decreased by 5% to 15% for non-loss impacted programs. A moderate increase in client demand was offset by reinsurers' increasing capacity as well as increased ceded cat bond issuance.

The cat bond market is on pace for a record year of issuance with over 50 new bonds in the first half, involving approximately $17 billion of limit. In U.S. Casualty Reinsurance, renewals were largely stable with sufficient capacity reflecting the underwriting actions of primary carriers. As always, we continue to help our clients navigate a range of market conditions.

Now let me turn to our second quarter financial performance and outlook, which Mark will cover in more detail. Consolidated revenue increased 12% to $7 billion and grew 4% on an underlying basis, with 4% growth in RIS and 3% growth in Consulting. Marsh was up 5%; Guy Carpenter grew 5%; Mercer, 3%; and Oliver Wyman was up 3%. We had adjusted operating income growth of 14%, and we generated adjusted EPS in the quarter of $2.72, which is up 11% from a year ago.

We also announced a 10% increase to our quarterly dividend to $0.90 and completed $300 million of share repurchases during the quarter. Turning to our outlook for 2025. We continue to expect to deliver mid-single-digit underlying revenue growth, solid growth in adjusted EPS and our 18th consecutive year of reported margin expansion. Of course, this outlook is based on conditions today and the economic backdrop could turn out to be materially different than our assumptions. In summary, we are pleased with our first half performance in a complex and dynamic macro environment.

We're confident that the enduring value we provide to clients makes our business resilience even during times of economic uncertainty. Our collection of capabilities is unique and there is strong client demand around the world for our advice and solutions. We believe we are the best positioned company in our markets, and we've earned our leadership position through 154 years of innovation and growth. Our discipline to invest for the future while delivering consistent results is not new.

It's a fundamental philosophy that guides our planning and capital allocation. With that, let me turn it over to Mark for a more detailed review of our results.

Thank you, John, and good morning. Our second quarter results were solid, reflecting our strong position and execution despite a more challenging environment. Consolidated revenue increased 12% to $7 billion with underlying growth of 4%. Operating income was $1.8 billion, and adjusted operating income was $2.1 billion, up 14%.

Our adjusted operating margin increased 50 basis points to 29.5%. GAAP EPS was $2.45, and adjusted EPS was $2.72, up 11% over last year. For the first 6 months of 2025, underlying revenue growth was 4%. Adjusted operating income grew 11% to $4.3 billion.

Our adjusted operating margin increased 20 basis points adjusted EPS increased 8% to $5.78. Looking at Risk and Insurance Services. Second quarter revenue was $4.6 billion, up 15% from a year ago or 4% on an underlying basis. Operating income in RIS was $1.4 billion. Adjusted operating income was $1.6 billion, up 16% over last year, and the adjusted operating margin expanded 30 basis points to 35.6%.

For the first 6 months of the year, revenue in RIS was $9.4 billion with underlying growth 4%. Adjusted operating income increased 12% to $3.5 billion, adjusted operating margin was 36.9%. At Marsh, revenue in the quarter was $3.8 billion, up 18% from a year ago or 5% on an underlying basis. This comes on top of 7% underlying growth in the second quarter of last year.

It was a good result given the softening rate environment in property as well as uncertainty in the economic outlook, especially in the U.S. In U.S. and Canada, underlying growth was 4% for the quarter. In International, underlying growth remained excellent at 7%, with EMEA up 8%, Asia Pacific up 4%; and Latin America, up 3%. For the first 6 months of the year, Marsh's revenue was $7.3 billion with underlying growth of 5%.

U.S. and Canada grew 4% and international was up 6%. Guy Carpenter's revenue in the quarter was $677 million, up 7% from a year ago or 5% on an underlying basis. Growth remains solid despite softer reinsurance market conditions and came on top of 11% growth -- underlying growth in the second quarter of last year. For the first 6 months of the year, Guy Carpenter generated $1.9 billion of revenue and 5% underlying growth.

In the Consulting segment, second quarter revenue was $2.4 billion, up 7% or 3% on an underlying basis. Consulting operating income was $456 million, and adjusted operating income was $479 million, up 9%. Our adjusted operating margin in Consulting was 20.2%, up 40 basis points from a year ago. The first 6 months, Consulting revenue was $4.7 billion, reflecting underlying growth of 4%.

Adjusted operating income increased 9% to $970 million, and the adjusted operating margin increased 40 basis points to 20.7%. Mercer's revenue was $1.5 billion in the quarter, up 9% or 3% on an underlying basis. Health grew 7%, reflecting continued solid growth across all regions. Wealth was up 2%, led by investment management.

Our assets under management were $670 billion at the end of the second quarter, up 9% sequentially and up 36% compared to the second quarter of last year. Year-over-year growth was driven by our acquisitions of Cardano and SECOR, positive net flows and the impact of capital markets and foreign exchange. Career was down 5% in the quarter, reflecting continued softness in project-related work in the U.S. and Canada. For the first 6 months of the year, revenue at Mercer was $3 billion with 3% underlying growth.

Oliver Wyman's revenue in the second quarter was $873 million, up 5% or 3% on an underlying basis, led by solid growth in the U.S. For the first 6 months of the year, revenue at Oliver Wyman was $1.7 billion, an increase of 4% on an underlying basis. Fiduciary interest income was $99 million in the quarter, down $26 million compared with the second quarter last year, reflecting lower interest rates. Looking ahead to the third quarter.

Based on the current environment, we expect fiduciary interest income will be approximately $105 million. Foreign exchange had a de minimis effect on adjusted EPS in the second quarter. Exchange rates have been volatile, making it challenging to predict their impact looking forward. However, based on current rates, we anticipate FX will have a minimal impact on adjusted EPS in the third quarter and will be a modest benefit in the fourth quarter.

Turning to our McGriff transaction. Our integration continues to go well, and we are pleased with McGriff's year-to-date performance. We continue to expect that McGriff will be modestly accretive to adjusted EPS for full year 2025 becoming more meaningfully accretive in 2026 and beyond. We still expect noteworthy charges associated with McGriff of approximately $450 million to $500 million in total through 2027, with the vast majority of these costs associated with retention incentives, a significant portion of which was put in place by the seller.

As is our convention, we are excluding McGriff from our underlying growth calculations for the first year. Total noteworthy items in the second quarter were $88 million, the majority of which were acquisition-related costs. Interest expense in the second quarter was $243 million, up from $156 million in the second quarter of 2024. This increase reflects higher levels of debt associated with the McGriff transaction. Based on our current forecast, we expect interest expense will be approximately $240 million in the third quarter.

Our adjusted effective tax rate in the second quarter was 25.3%. This compares with 26.2% in the second quarter last year. Excluding discrete items, our adjusted effective tax rate was approximately 25.5%. We continue to expect an adjusted effective tax rate of between 25% and 26% in 2025, excluding discrete items.

Turning to capital management and our balance sheet. We ended the quarter with total debt of $19.7 billion. Our next scheduled debt maturity is in the first quarter of 2026, when $600 million of senior notes mature. Our cash position at the end of the second quarter was $1.7 billion.

Uses of cash in the quarter totaled $776 million and included $405 million for dividends, $71 million for acquisitions and $300 million for share repurchases. For the first 6 months, uses of cash totaled $1.6 billion and included $810 million for dividends, $166 million for acquisitions and $600 million for share repurchase. We continue to expect to deploy approximately $4.5 billion of capital in 2025 across dividends, acquisitions and share repurchases. The ultimate level of share repurchase will depend on how our M&A pipeline develops.

Last week, we announced a 10% increase in our quarterly dividend, making this our 16th consecutive year of dividend increases. This reflects our solid earnings growth and confidence in our outlook. Overall, we are pleased with our second quarter results. For the full year, we continue to expect mid-single-digit underlying revenue growth, margin expansion and solid growth in adjusted EPS.

However, as John mentioned, this outlook is based on conditions today and the economic backdrop, especially in light of continued uncertainty around global trade policies could turn out to be materially different than our assumptions. With that, I'm happy to turn it back to John.

Thank you, Mark. Andrew, we're ready to begin Q&A.

[Operator Instructions] And our first question comes from the line of Gregory Peters with Raymond James.

So my first question, in your comments, John, you talked about the pricing index being down 4% in the second quarter, on top of being down 3% in the first quarter. Are you seeing anywhere in the system upward pressure on pricing? Or if we would look forward over the next 12 to 18 months, are we going to continually see these low-single-digit rate decreases in the broader market?

Yes. Greg, thanks for the question. Insurance and reinsurance markets, for the most part, continue to soften a bit in the second quarter. We talked -- or I mentioned at least a little bit of the reinsurance market, it's pretty stable or consistent on price decreases through the first half of the year, largely driven by property and where we're seeing more rate pressure on the retail side, of course, is in property as well.

The big exception, and I spoke to it, is in excess casualty. And it's in part why I keep talking about the U.S. litigation environment. It's a high cost of risk to operate here in the United States. The liability environment is one part of it.

We have more of our economy, more of our population here in the U.S. exposed to extreme weather events, and that's been disruptive to our economy. Health care-related risk continues to escalate quite a bit as well. All are among the most, if not the most expensive in the world. And so at a time when our country is focused on investing in infrastructure and investing in technology, these are meaningful costs on our clients.

And we see them in our own business, too. And so I think it's important for us to talk about it. And the liability comments were in part driven by the recent legislation in the one big beautiful bill. There was a proposed amendment by Senator Tillis to change tax policy around litigation financing.

I mentioned right now, in many cases, an injured party gets less than 50% of the outcome of a settlement. That injured party by the way, pays ordinary income tax in the United States. A lit funder pays capital gains, a foreign investor pay 0 tax. So it was a missed opportunity.

It wasn't the only thing. There's other things that need to happen, and we're focused on this for our clients. So I expect casualty pricing to continue to be under pressure for our clients and rates to continue to grow. I also spoke to the active first half of cats, right?

So while prices are down now, over time, pricing is going to track along with the growing cost of risk here in the United States. And so it's difficult to predict over a 6-month or 12-month period, but there's no question in my mind, there's a rising cost of risk environment here in the United States. You have a follow-up?

Yes, I do, of course. I'm going to pivot to the Mercer segment. And I just wanted to pick a part or have you provide more detail on the wealth and career components of organic. I guess I was listening to Mark's comments about AUM being up.

I think he said 36% year-over-year in wealth, yet we're only seeing 2% organic revenue growth. So I'm trying to understand the connection there. And then on Career, I think that's probably a little bit more of your more economically sensitive business, but maybe you could speak to the outlook for both of those businesses, please?

Yes. Sure, Greg. Thanks for the question. Yes, I think overall for the company, we had a terrific quarter of growth.

Again, 12% on a consolidated basis, good underlying -- good solid underlying effort at Marsh and GC. Parts of our Consulting businesses where they are maybe even more discretionary spend, if you will, parts of Career, parts of our business at Oliver Wyman as well, notably branding, for example, some of the softer parts that are more exposed to not just a declining economy, but just some of the uncertainty as many big businesses in the U.S. are playing a bit of defense. But -- and we had a terrific quarter of growth in health at Mercer, but Pat, maybe you could talk a little bit about what you're seeing in both career and in the investment business.

Great. Thanks, John, and thanks for the question, Greg. Let me start with wealth since that seems to be the spot you started a little bit more detail on your question. It's important to note that the wealth business is a portfolio of services across defined benefits, pension consulting, investment advisory services and OCIO.

So you mentioned AUM, only the OCIO business segment for the revenue there, are we compensated by AUM. So that's the only spot that impacts that, first off. Overall, wealth, as Mark mentioned, we grew 2% in Q2, driven by the growth in our Investments business, particularly the OCIO offering, right, tied to AUM. We were challenged by some tougher comps in the DB pension consulting work.

Now while we have mentioned in the past that the defined benefits pension space is in structural decline, in recent years, we've actually seen an increase in demand for project-based consulting on the back of higher plan funded statuses that has been driven by higher interest rates as well as there's been a bump in regulatory requirements in certain jurisdictions around the world. Now this year, the demand for that type of work that I've described is starting to slow, specifically in the U.S. and in the U.K. as clients look to pause discretionary project work due to shifting priorities in the macro environment.

And then there's been slowing demand for those regulatory changes that I mentioned. All right. And demand for the DC type plan solutions. So think of Master Trust in Australia or the U.K. or things like 401(k)s in the United States.

Those continue to grow. And we're also advancing our investment advice and OCIO solutions for diversified asset owners, right? So there it's insurers, endowments and foundations, family office, wealth management, those types of asset owners. Now OCIO tied to AUM has been a strong growth engine for Mercer over the long term.

And over the past year, we've seen strong net inflows, both organically and inorganically. And the 36% that you mentioned that Mark had mentioned, included our inorganic and our growth rate, we take -- we exclude that. So that's a component there that likely ties to that component. And while capital markets, they've been volatile in 2025, I would say they still provided us a bit of a year-over-year tailwind in Q2. So that's good.

Bottom line, we really maintain that our capabilities and the value we're creating for clients here will continue to drive growth for us inside of this segment. So I think the difference between the 36% and the 9% that he talked about sequentially was really tied to the inorganic and organic component of the AUM growth. Now Career, which is the second part of your question, I've got to provide a little bit of context on the Career business to be able to answer that one. First, it's a portfolio of offerings.

So some of them are project-based consulting assignments, so typically onetime type things and others are more product-like offerings. So think here, compensation benchmarking surveys, assessments, employee engagement surveys. And those tend to be more recurring in nature for the work we're doing for clients. Additionally, Career is naturally prone to some seasonality and client work.

It's got a peak period, specifically around the annual comp and reward cycle that clients do as in their year-end planning in late Q3 and in Q4. Now in this quarter, Mark had mentioned Career contracted 5%, right? That was primarily driven by softness in project demand in the United States, which is facing a couple of market dynamics, which are more pronounced than we've seen in international. The first dynamic there is the current environment of economic uncertainty means that clients are less inclined to commit to larger long-term transformational HR technology projects and big programmatic changes and we tend to do more of those projects in the United States, all right?

So there's the first impact. The second is demand for talent and rewards projects tend to be higher during periods with higher inflation, so -- which typically drives up wages, salaries, thinking about bonuses, things like that. And then also when we see higher voluntary employee turnover clients. So both of those activities both drive projects at employers as they look to attract, retain and incent their workforce.

The reality in the current employment market is we are seeing relatively low voluntary turnover at clients, and that is reducing the urgency for those types of projects. Now this contraction I'm describing in U.S. and Canada was partially offset by the growth we had in international, and we had growth across all 3 major areas of our business. The talent work we do, the rewards work we do and the transformation work we do across international. So we saw good solid growth there.

We feel like we're the leading rewards consultant business in the world with real capabilities, expertise and geographic reach. The business overall has performed well for us over the last few years. It's continuing to grow in international. So we do remain confident about the longer-term growth momentum that we see in our career business and the value we're going to go ahead and be able to bring to clients.

Thanks, Pat. So well positioned in both of our businesses obviously exposed to some of the uncertainty in the U.S. in our Career business. And then in our investment business, some structural issues with defined benefit growth in prior years. So thank you Greg. Andrew, next question please.

And our next question comes from the line of Mike Zaremski with BMO.

Question kind of maybe related to the first question, [ specifically ] on the RIS segment. So I just want to make sure we're thinking about things correctly. So when we kind of think from a macro level about total organic growth in the RIS segment. Usually, we think nominal GDP is kind of the biggest corollary and very secondary kind of would be pricing power levels since a lot of this is more fee-based too.

Would you agree with that kind of high-level statement because I'm trying to kind of think out the we can kind of have a view on pricing. You've helped us with a view on pricing. The nominal GDP decline is slighter. Just want to see if I'm missing anything maybe in terms of just talent hiring in the past or now or other factors...

No. Thanks for the question. No, I don't have any argument with the way you characterized it. I feel good about our execution.

I feel good about how we're positioned. Our international growth was quite strong. What we're seeing here is in the United States, particularly upmarket and more of our large account segment, if you will, you're seeing businesses defer project work, right? We're seeing a slowdown in construction activity, M&A activity, IPOs, hiring has obviously slowed, all those on some level are inputs.

So we have a macro environment, it is what it is. We power through it. And continue to deliver solid results, but declining P&C pricing, slowing economic growth, interest rate headwinds with fiduciary interest income and moderating inflation as well, at least up until now. Obviously, that's a hot debate in the world.

But Marsh and GC 5% ex fid, given some of those headwinds. I feel good about that.

Got it. And my quick follow-up, and I feel like you started off the call, John saying performance track is kind of in line with the expectations overall. I feel like the beauty of Marsh historically and currently is that you guys have had good line of sight into your reps, so you've been able to pull the expense levers accordingly. It sounds like from everything you're saying is there's obviously a lot of uncertainty, but you still feel like there's uncertainties at a level where you feel comfortable being able to manage the profit margin piece of the business.

Is that fair?

Yes. Thanks, Mike. I appreciate that. I think there was a compliment in there.

I think there was a bit of debate about our guidance about the top line coming into the year. We didn't obviously know exactly what would unfold during the course of the year, but we did expect lower interest rates, lower P&C pricing, slightly slowing economy. Probably more uncertainty has persisted that's impacted some of the more discretionary parts of our business. But I feel good about the work we've done to again manage expense growth in a tighter environment.

And we do a lot of scenario planning around tighter conditions. And by the way, we do scenario planning around more positive environments too where how we're going to allocate capital if growth is above what our expectations are. I expect these conditions to persist in the second half. We'll see obviously what unfolds.

And 2026 will be a new year, right? A lot that's going to happen around trade and geopolitically over the course of the next 6 months. And then we'll see what the environment looks like as we head into next year. But I feel good about how we're positioned.

I feel good about how we're executing. We're continuing to invest. It gets a little tighter, obviously, at moments like this. And but we've consistently not only delivered margin expansion but invested in our business over time.

And we try to get that balance right.

Our next question comes from the line of Jimmy Bhullar with JPMorgan.

John, just on your comments on slowdown in IPOs and M&A. And obviously, your comps on growth have been tough as well. But just -- if we look at least capital markets activity, it seems like it's troughed already. And obviously, next month could be different, but it seems like IPOs are picking up, M&A is picking up as well.

Are you seeing that in your business as well? And should we assume that your growth is close to troughing or is there still a lot of uncertainty throughout?

Jimmy, I mean, M&A and IPOs are obviously just a component of a much more complex macro picture. We said we continue to expect mid-single-digit underlying revenue growth and 18th year margin expansion and solid growth in adjusted EPS. And so we feel good about that outlook. We'll see as things move forward.

There's -- again, I think we see it a bit more defensive posture in U.S. businesses today, really trying to find a leveling of -- it's always uncertain, right? I mean I think that word has probably been overused, including by myself during the course of this year. There's never certainty, but the level of uncertainty has been challenging for many of our clients. We're trying to help them navigate that, and that's an opportunity, as I mentioned.

But we'll see. I think it's too early to know whether we'll see a meaningful uptick in M&A activity or IPO activity or for that matter, construction as well. Do you have a follow-up, Jimmy?

And then, yes, just relatedly on Guy Carpenter. The growth was fairly strong given tough comps. Is that more -- and that's despite a soft pricing environment. Is that more a function of just the fact that it's a low base? Or is the momentum in your business better than what pricing would suggest in reinsurance?

I'll ask Dean just to talk about the growth in the quarter, but I think we have the best team on the field, the best analytics in the business. And ultimately, it's a reflection of the confidence that our clients have in our ability to deliver value. But Dean, maybe you can talk a little bit about growth in the quarter for Jimmy.

Yes. Thanks, John. Jimmy, look, we're pleased with our 5% growth in the quarter, as John noted. And as Mark noted, came on top of 11% growth in the second quarter of 2024, and it was a record new business quarter in the second quarter of 2024. As respect to this quarter, we saw really strong growth across our international platform, exceptional growth in Latin America, exceptional growth in EMEA, strong growth in the London market in the U.K., strong growth in Asia despite clear pricing headwinds in Japan and China on the April 1 renewal.

New business is very strong. I mean it's strong and it's balanced across our platform. As John noted, significant ILS activity, record cat bond growth in the quarter. Guy Carpenter participated in 14 cat bond issuances in the quarter and 23 year-to-date, which is a record for Guy Carpenter.

We continue to see new opportunities in our capital and advisory practice. In the quarter, we won several mandates to raise third-party capital for clients large and small in the U.S. and London, a number of well-known MGAs in particular. And we're winning M&A mandates, providing M&A advice and supporting activities for a number of those clients. And then I would say last -- one of the headlines is property cat demand did ease up at the midyear renewal.

We sold an additional $5 billion of property cat limit through the midyear renewals, helping to drive the top line. And we feel really good about our talent. As John noted, we're attracting top talent in the market, and we've got a great balanced organization. We feel good about our prospects.

Our next question comes from the line of David Motemaden with Evercore ISI.

I'm wondering -- I was wondering if you could just talk a little bit about the strength within Marsh and International overall and how durable you think it is. I heard the pricing was negative in a lot of the regions, but the growth continues to be to be solid. How long do you think that can sustain?

Yes. Thanks, David, and I'll ask Martin maybe to talk a little bit about growth. But again, overall, I was pleased with the growth at Marsh in the quarter. You mentioned the pricing headwinds, but some other macro headwinds as well.

And I feel good about executing -- our execution in this environment. We're in many markets, doing it in different ways, but building our capabilities in the middle market around the world. That's part of the growth, but we're well positioned and well led outside of the U.S. Martin, maybe you could talk a little bit about the growth in the quarter?

Thank you, John. Yes, very pleased with our international growth in the quarter, 7% on top of 7% in 2Q '24, really strong new business growth across the whole business. EMEA was up 8% on top of 7% in second quarter '24; Asia Pacific, up 4% on top of 7% in the second quarter '24; Latin America, 3% on top of 8%. So very strong geographic growth.

And I'll dig into some of the capabilities as well. We had a really good quarter in construction activity around the business. Our credit specialties grew. Cyber, despite rate decreases, saw strong growth and penetration to our clients as people, particularly internationally realized the risk posed by Cyber.

Our FinPro business grew and Capital Markets business across international was stronger than in North America. But really, one of the standouts was our benefits business, which continues to show real strength and momentum. And then geographically, really pleasing in some of the areas where we've allocated capital and feel we're really well positioned. Japan, India, United Arab Emirates, Brazil, Italy, Spain, China, all showing really strong growth.

So we feel we have a great momentum. The capabilities that we have across international really differentiate ourselves against any of the local players, and we have the best and the strongest network that is also able to serve the U.S. business and other international businesses that we have. So we are highly differentiated, where we operate, and we have leading positions in virtually every market that we operate in across international. So we feel really good about it.

Thanks, Martin. David, do you have a follow-up?

Yes. I was just more of a big picture question, and you sort of talked about this in a few of the different segments, just the difference between some of the trends that you're seeing in some of the more discretionary and project-based parts of the business compared to the more durable, more renewal oriented businesses. Could you just level set us the business mix has changed for a while? How much of the revenue base at Marsh is exposed to that more discretionary or project-based spend?

Yes. David, that's a hard question to answer. I think all $25 billion on some level is -- last year's numbers are exposed to the economy. Obviously, we have a defensive and resilient business.

Demand remains quite strong. Pat talked about some aspects of our career business that are a bit more exposed to the economy than others. I mean, when we take a look at it, it's probably 15% to 20% or so of our revenue base is, this is the right expression, even more exposed to softer moments of the economy. And we're in this interesting moment, right?

I mean the economy is okay. It's not like [indiscernible], but we have in certain segments of our business, seeing softer conditions just from a challenging environment where uncertainty is driving a defensive posture from some of our clients. Maybe, David, it would be helpful. Maybe I'll ask Nick to talk a little bit about our growth in Oliver Wyman overall in the quarter and maybe where you see more resilience in some of the softer parts of the OW offerings?

Yes, absolutely. Thank you, and Pat touched on the career business, maybe a sort of complement to that. We always guide that Oliver Wyman will be a mid- to high-single-digit growth business through the cycle. And you all know that it has probably a wider range of growth as you go through that cycle.

And I think we're extremely happy with how we've executed in a slower market. There were some timing and other idiosyncratic effects that slightly dampened Q2. But what we're seeing, there are many different drivers to our business. We're seeing positive trends like John talked at the beginning about the hunt for growth at the same time as efficiency and the need to invest in resilience. Many companies are finding that challenging.

We're supporting many clients as they explore their AI strategies and what that does for their business, changes in supply chain, the challenges of the energy transition, these are all positive trends supporting growth in the business. That's balanced at the moment. Back to Jimmy's question, we have seen lower M&A. So some of our private capital work, some of the work we do in economic consulting is affected by that.

And we are seeing client uncertainty. I don't want to further overuse John's word. But when lots of things change, there's a need for strategic advice. When people are not sure if things are going to change, they wait for a little while.

And then we are seeing some of that as well. We also see on the supply side continued excess capacity working its way out of some parts of the consulting industry. But as a whole, we're happy with the execution. As Mark noted, the Americas grew strongly.

That was our fastest-growing region. Europe has done a good job of replacing some very large cloud programs, which have rolled off. The Middle East has done a great job of diversifying what has been a slowdown in the Saudi Arabian market but we're very broad across that region. On the industry side, insurance and asset management and our actuarial practice grew, again, well diversified businesses.

We have actuarial consulting in life in P&C and in health, all of which grew strongly. Our consumer telecoms and tech practices and our transportation and advanced industrial practices grew. So in the past, you may have heard me talking about other parts of Oliver Wyman. It's a very diversified business.

And maybe just to echo some of the comments that Dean and Martin and Pat have all made, our pipeline of sales remains solid. We're very comfortable in our ability to manage the cost base. And we continue to find ourselves being an incredibly attractive home for established top talent in the industry who are eager to help build a new leader in strategy consulting, unincumbent by some of the challenges of previous models.

And our next question comes from the line of Alex Scott with Barclays.

First one I had for you is on just some of the rising medical costs that we're hearing about out there. I think a few companies have kind of cited it and changed guidance in the health insurance world. And just was interested if you could take us through some of the ways that impacts your business from a pricing standpoint and so forth.

Thanks, Alex, and good morning to you as well. I mean health care overall is an important part of our business. The biggest component of that, overwhelmingly, the component of our business is really helping our clients secure employee-sponsored health insurance and that enables them, of course, to compete for talent. Medical inflation is a stress point.

There's on the 1 hand, extraordinary medical innovation happening, specialty pharma is an important part of the medical inflation calculation right now. So it's great innovation, but it's creating stress for our clients. We see it again in our own business, rising health care costs, particularly here in the United States. We also, at both Mercer and Oliver Wyman consult to the health care industry and helping them sort through some of the innovation, some of the challenges and complexities of the marketplace, some of the challenges around pharmacy benefit management as an example.

So all are important parts of our business. Much of the employee-sponsored business that we support operates more on a fee or fee like basis. So we're obviously thoughtful and transparent about how we get paid with our clients in a challenging environment. Pat, do you have anything to add to that?

No, I think you've hit it right there, John. I mean the key thing to remember is that in different -- around the world, we have different models around fee and commission. For the most part, most of our business in the U.S., which is a pretty large business is predominantly fixed fee. We don't see the full impact of inflation from that.

It clearly drives demand for work because medical inflation is a major challenge for clients. So they're going to go ahead and think about how to do more projects and how to do planned design work to control those costs. But you really can't draw the correlation between 5.8% or 7.2% or 10% medical inflation and commissions for the most part, on the majority of our client base. We do have some clients that are commission-based, but I would say, especially in the U.S., the majority are more fixed fee.

Yes, thanks, Alex, for that question. It's a big part of our business, and it's a really important part of it. So -- and it's had strong growth over the course of the last couple of years. And I think, again, that's a reflection of the capabilities that we can bring to the clients in that inflationary environment. Do you have a follow-up?

Yes. So separate follow-up. I wanted to ask you about just technology, implementation of AI, et cetera. I mean, I know some of the stuff is probably still in reasonably early phase, but it seems like this could have a pretty big impact over the next year, especially on businesses that are more service-oriented.

I just wanted to see where your head was at on it. I mean how big of a change do you think it will be? What are the impacts that you'd expect us to actually be able to see in the financials and so forth? And what would change the industry and your point of view from a consolidation standpoint?

I'm excited about the possibilities, Alex. We're starting to see more clearly into what some of those possibilities are. I've talked in the past about moving more quickly, creating efficiency, creating better insights. I think our technology team has done an outstanding job providing us the tools to learn and to experiment.

Our tech team and our colleagues and our people function have put together broad- based training and support for our colleagues. I'm encouraged by our cultural response to these tools. We have a learning culture and a professional services firm, that's really important, and I think this is indicative of that. They're embracing the tools.

And so we're starting to see some early signs and some breakthroughs. We -- one of the areas where we've had some more recent changes in analytics, and maybe I'll ask our business leaders to just talk quickly about some of the things we've done, Pat, maybe I'll start with you. We're obviously working our way through internally on a tool earlier this week. But how is it impacting analytics and what you see in terms of what we're offering to clients today and how it's changing?

Yes. I think the biggest area where it's impacting is, first off, we think it's going to create demand, especially on some of our career product side. And I would think we would enhance it into the other areas from a product perspective. We're introducing agentic AI interfaces into our product offerings that are going to allow clients to interact with the data and the products in an enhanced way.

It will allow them to make it easier to get more value. We expect that, that would increase demand. A specific example that we've got is we're adding an agentic AI interface that we call AIDA on our Talent All Access portal, which is something that we have out with more than 20,000 users out in the client world. So it's really where they're going to have access to our worldwide benefit and employment guideline database.

It's going to update the user experience and really clients to query the database live versus use it in a more traditional way that they've typically had access to it. So we're really optimistic about the benefits that we'll bring to clients.

Nick, do you want to jump in quick?

Yes. I mean, 25% to 30% of our work rests on advanced analytics and AI. We've been doing that for a very long time, and GenAI has obviously turbocharged that further and then Oliver Wyman has incredibly strong capabilities to support clients on their own AI journey. I think 95% of our clients see it as opportunity rather than threat.

So everything from supporting governments in their national AI program offices through to helping clients build new businesses through to reengineering processes like the ones you described. And you mentioned consolidation. I do think in the advisory business, scale helps it and the fact that Oliver Wyman is part of Marsh & McLennan, has access to our fantastic set of tools and buying power and so on is a real advantage for us compared to midsized consulting firms.

Thanks Nick. Martin?

Just building on that point there, one of our leading analytics rollouts last year, our Centrist portal has been built heavily using AI to get in deep into company supply chains. We had a fantastic quarter last year, rolling that out. Our clients are very excited about it given all the tariff disruption, what's happening in weather, climate, geopolitics, giving clients visibility and productivity into those tools is game changing for us, and we're uniquely positioned on that. All of our Blue[i] Suite of analytics, which are built on unique data.

We have $1.12 trillion of premium that we've analyzed and over $100 billion of claims are in our databases that gives us a unique insight into that. And most recently, one of the AI tools that we've done is we've laid over an agentic tool over our claims database, and so clients can interrogate that, we can track comparators between how insurance companies pay their claims over which space, which puts us in a good position to negotiate great terms for them. We can see the latest trends in claims and overlaid that with premium. It's a very powerful tool.

And so not only do we have great tools, but we've got great underlying data. We think that's a huge moat around our business that had been very difficult for startups with technology to compete with. So we feel very well positioned. It's the tip of the spear in how we approach our clients around cost of risk and thinking about the future of risk more broadly.

So we can upend the paradigm of just being tied to GDP, which is not how we see things. We think risk is growing and we need real insights from our tools and across our businesses, we are incredibly well positioned with what we have.

Dean, any thoughts from Guy Carpenter?

Yes. Alex, certainly, Guy Carpenter's analytics platform might be the most important thing we do for clients, bringing value to our clients beyond the reinsurance transaction and we really think our analytics platform is what differentiates us in our clients' eyes as they spend all their focus, managing volatility in this environment, thinking about profitable growth and maximizing capital efficiency. I think the greatest application for AI in our sector will be managing the impact of client change. Our clients want to know and they want to help them -- want us to help them manage catastrophe risk moving forward, looking at their portfolios, providing advice, helping them model future climate change impact, building proprietary models using AI.

That will be the true differentiator for Guy Carpenter as we try to support our clients.

Thanks, Dean. So Alex, I'm encouraged, but it is still early to be clear. But our unique data sets, our capacity to invest and the progress we've made so far, I'm encouraged and I feel good about how we're positioned.

And our next question comes from the line of Meyer Shields with KBW.

Two quick questions, if I can. First, John, you talked obviously about the pressure on the litigation system. Do clients appreciate that in terms of seeking additional cover. I know they're paying more for what they're getting. But is there more demand for protection?

Yes, it's a great question, Meyer. I think in this economic environment, and I talked about the work Oliver Wyman has done with the New York Stock Exchange. Many businesses are -- here in the U.S. are trying to grind out earnings growth in a slower top line growth environment, right? So we're not seeing big take-up.

What I can tell you we're saying to our clients, though, is that you can't buy enough excess liability insurance in this environment. Of course, not all clients are the same. Many are more exposed to this than others. And so there are some real challenges that many are confronting.

And when we talk to them about whether it's nuclear verdicts or even outside of nuclear verdicts and just the rising frequency and severity in kind of more standard areas of risk. It's an eye-opening discussion. The nuclear verdict thing, many will maybe try to say, "Hey, it's not us couldn't happen here kind of thing." But our concern when we look at our portfolio is that it's just happening with too much for frequency across our economy here in the U.S. Do you have a follow-up here?

That's very helpful. Yes. Just a quick one. So Latin America organic growth slowed a little bit. I'm wondering, is that uncertainty? Or is it that the flip side of tariffs translating into deflation in markets in the U.S., is there any way of distinguishing that?

Yes. We had some idiosyncratic issues in Latin America. Growth there year-to-date is good. We feel good about how we're positioned.

So no, I don't -- I wouldn't draw any major conclusions from macros there. There's a big protection gap in Latin America, and that's an area of opportunity for us in our risk business. So it was 1 quarter, I wouldn't draw any major conclusions for that. We -- again, we have excellent teams in many of the -- in all of the big economies throughout Latin America.

And so we're quite bullish on our prospects there. Andrew, let's bring the call to a close here. I want to thank everyone for joining us on the call this morning. I also want to thank our colleagues for their hard work and dedication.

And of course, I want to thank our clients for their continued support and confidence in our team. Thank you all very much, and I look forward to speaking with you next quarter.