Marsh & McLennan Cos. Inc. is facing tougher revenue headwinds in the second half of the year due to the economic downturn from COVID-19, the company's top executives said Thursday during a second-quarter earnings talk with analysts.
The New York-based broker continues to expect a "modest decline" in this year's total revenue, but now predicts "modest growth" in adjusted earnings per share for 2020, executives said.
Revenue at Marsh LLC, the company's Insurance Broker, has the potential for "modest growth" for the full year, but the back half of 2020 will be challenging, they said.
During the conversation, Dan Glaser, Marsh & McLennan's president and CEO, said that while worst case scenarios had been avoided, economic and uncertain pandemic uncertainties could last a year or more and challenge companies well into 2021
When navigating During the first months of the crisis, Marsh & McLennan maintained strong control over their costs, but also maintained jobs and continued with annual pay rises, he said.
Global real estate / non-life insurance and reinsurance markets remain challenging, with "faster price increases and reduced terms," Glaser said.
"Underwriters continue to push for higher interest rate hikes, due to social inflationary pressures, consistently low returns and a number of large insurance losses including COVID-19," he said.
Marsh & McLennan reported consolidated revenue of $ 4.19 billion dollars in the second quarter, a decrease of 4% from the same period last year, offset by a 9% increase in revenues at the reinsurance broker Guy Carpenter LLC.
The company recognized a decrease of 36 million dollars to previously reported revenues during the quarter to
Mark McGivney, Marsh & McLennan's CFO, said the estimated impact of the downturn on exposure units mainly affected Marsh, the company's insurance broker, but it also decreased at Mercer LLC, the company's distribution consulting unit, in its healthcare.
Marsh LLC reported e $ 2.16 billion in revenue for the second quarter, up 1% on an underlying basis, compared to the same period last year.
Total growth is historically correlated with economic growth, said John Doyle, President and CEO of Marsh, during the interview. "The second half will be a little more challenging given the economic consequences of the pandemic," Doyle said.
Guy Carpenter LLC reported "strong" second-quarter revenue of $ 433 million, an increase of 9% on an underlying basis, compared to the same period last year.
The reinsurance business was driven by solid retention, strong demand for new business and a tailwind from pricing, Glaser said.
Marsh & McLennan reported a profit of $ 572 million for the quarter, compared to $ 332 million for the same period last year.
Mercer LLC reported $ 1.15 billion in revenue for the quarter, an increase of 3% on an underlying basis. Management consulting firm Oliver Wyman LLC reported revenue of $ 467 million, a decrease of 13% on an underlying basis.
In the consulting segment, the career business saw the biggest effect of lockdown, as expected, the managers said.
Even though COVID-19 will affect Marsh & McLennan's results for the rest of the year, the "strong" second-quarter development is proof that the business is resilient and can handle through the crisis, Glaser said.
Consolidated revenue was $ 8.84 billion for the first half year, an increase of 5%, or 2% on an underlying basis, from the same period last year, according to the income statement.
Net profit for the first half year was $ 1.33 billion, compared to $ 1.05 billion for the same period last year, according to the statement.
More insurance and risk management news about the coronavirus crisis here .