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MMC acquisition pipeline ‘very strong’: Glaser


Marsh & McLennan Companies (MMC) CEO Dan Glaser has said the acquisition pipeline for the company is “very strong” and M&A remains a priority for capital deployment.

On a call to analysts after the firm published above-forecast third-quarter results, he explained that “if push came to shove, we would favour acquisitions over share repurchase”.

The comments came after Glaser revealed in an interview with the Financial Times in September that MMC expects to spend between $400mn and $800mn on acquisitions in the coming years.

Marsh reported a more-than 9 percent increase in adjusted operating income in the third quarter, and beat analyst expectations for earnings per share.

Organic growth at Guy Carpenter was 11 percent in the quarter, after having contracted by 3 percent in Q2 following the completion in April of MMC’s £4.9bn ($6.3bn) acquisition of JLT.

Glaser called the reinsurance broker’s performance a “positive surprise” but added that Q3 is a small revenue quarter for Guy Carpenter, which can skew results. “It doesn’t take much for an outsized quarter in either direction,” he noted.

He also noted that JLT would continue to impact on the organic growth at Guy Carpenter.

“JLT is going to continue to be a drag to underlying revenue growth as Guy Carpenter rebuild the new business pipeline,” Glaser explained.

“That’s something that takes multiple quarters to do, but that effort is already underway, and so it's not going to last for years. It's temporary, and in the meantime, Guy Carpenter is doing a great job managing expenses to deliver earnings growth.”

CFO Mark McGivney said he “couldn’t be happier” with the progress made since the JLT acquisition, and the firm was confident it would exceed the $250mn of expenses savings it had initially forecast.

Glaser added: “We feel very happy with the level of talent and capabilities, the opportunities for colleagues that are developing, and we expect revenues and earnings over time to be better as a result of this combination.”

The CEO said insurers were “clearly concerned about rising loss cost trends” in the casualty market also pointing out that he expected upward pricing pressure to continue throughout the next year.

Meanwhile, Marsh’s organic growth in Latin America deteriorated by 1 percent in the third quarter, which Glaser noted was the first negative growth in the region since the first quarter of 2008.

According to Marsh CEO John Doyle the decline was JLT-related, with some large, non-recurring business in the region.

“While it will be a choppy second half for Latin America, I do expect good growth from the region in 2020,” Doyle added.

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