By David Bull

April 17 - Marsh McLennan CEO John Doyle told analysts on Thursday that the developing situation on tariffs and trade is not expected to have a real direct impact on the company’s business, adding that it is maintaining its financial targets for the year despite the potential for slowing economic growth.

The executive was commenting after the intermediary and consulting company reported an earnings beat for the first quarter with underlying growth of 4% that slowed from the fourth quarter but was within its targeted range of mid-single-digits.

However, investors reacted negatively to the performance, with the company’s stock trading down around 5% mid-morning in New York.

KBW analyst Meyer Shields said shares in Marsh McLennan were expected to trade down modestly on margin and organic growth misses, despite the headline beat.

In prepared remarks, Doyle noted that ongoing trade negotiations will continue to create challenges for businesses, with reduced consumer and business confidence as well as financial markets volatility.

“The outlook is likely to remain uncertain as stakeholders continue to assess the potential impacts on global trade and businesses paused new investments. As a result, expectations for GDP growth, inflation, interest rates and other factors have become less predictable.

“As far as the insurance industry is concerned, tariffs would likely be inflationary to the overall cost of risk. This comes on top of the increasing frequency and severity of natural catastrophes and rising social inflation costs,” he observed.

Doyle reaffirmed Marsh McLennan’s expectation of delivering mid-single-digit underlying revenue growth and another year of margin expansion and solid adjusted earnings per share growth in 2025.

“Of course, this outlook is based on conditions today and the economic backdrop could turn out to be materially different than our assumptions. In particular, and as discussed earlier, the uncertainty in ongoing trade negotiations and their effect on consumer and business confidence could have a significant impact on the global economy and our results,” he added.

Asked about how tariff changes and trade policy might directly affect Marsh McLennan, Doyle noted that the outcome and timeline of negotiations is unclear.

“So it’s quite a fluid situation. At this point, anyway, I would say there’s no real direct impact to our business. But, of course, there will be indirect impacts. Global GDP may slow at least until there’s some resolution as business confidence declines,” he said.

He suggested that market volatility could hit the company’s investment business but also create possibilities around the advisory work it does for clients.

Speaking on the effect on the wider insurance industry, Doyle highlighted loss cost inflation, as well as drug costs and how that could impact employee health and benefits clients in the US.

“We are not immune at all to macro GDP pressure, but we are a resilient business,” he added.

He said Marsh McLennan has a number of levers it can pull in response to revenue pressures, including expense management in areas such as travel and entertainment, outside services and slowing discretionary spending.

MCGRIFF ‘PERFORMED’ WELL IN Q1

McGriff, which the retail broker acquired from TIH in November, performed well in the first quarter, Doyle said.

“The team is quickly leveraging the broader capabilities of our company while bringing their own distinct advantages to the market. We are already seeing wins from bringing together the best of both. As we said when we announced the transaction, McGriff is a business with outstanding talent and track record of strong growth, and I'm excited to have them as part of our firm,” he said.

Although he wouldn’t disclose revenue for the business in Q1, he noted that the acquisition now positions Marsh McLennan Agency as a $5 billion operation with a strong focus on the middle market segment.

Marsh McLennan CFO Mark McGivney added that the first quarter is seasonally the smallest for McGriff from a revenue perspective, leading to a modest dilution in adjusted EPS for the quarter.

“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,” he said.

He said the expectation remains that there will be $450 million to $500 million of charges related to McGriff through 2027 with the vast majority of the costs associated with retention incentives. They were funded by the seller through a purchase price adjustment.

McGriff does not get included in Marsh McLennan’s underlying growth calculations for the first year following the acquisition.