Fourth quarter 2021 net income at Marsh McLennan more than doubled compared to the same period in 2020, to $803 million.
Full year net income increased about 56% to $3.1 billion from $2 billion for all of 2020. Net income was $374 million during the fourth quarter 2020.
CEO Dan Glaser said Marsh McLennan, in its 150th year, “produced one of the finest results in our company’s history.” He highlighted underlying revenue growth for the full year 2021 of 10%, the highest in 20 years.
Revenue was $19.8 billion for 2021 compared to $17.2 billion in 2020. Fourth-quarter revenue was $5.1 billion, a year-over-year increase from $4.4 billion. During an earnings call, Glaser said the company sees a “good runway from growth given the outlook for above-average GDP growth, sustained firm P&C pricing conditions, the inflationary impact on exposures, further opportunities from disruption in the brokerage sector, and the benefit of our recent organic investments.”
Glaser said Marsh McLennan invested in talent, adding 6,000 employees in 2021. Marsh McLennan Agency completed 11 transaction in 2021. Asked about the acquisition pipeline and competition for deals, Glaser said, “We have no budget on acquisitions. We’re not opportunistic. We’re strategic. We built the pipeline over years, and we’re patient. When you talk about competition around acquisitions, that’s not us.”
On market conditions, the fourth quarter saw rate increases of 13% year-over-year in the commercial P&C insurance market, “reflecting losses, low returns, concerns about inflation and a firming reinsurance market,” Glaser said. It was the 17th consecutive quarter of rate increases. At January renewals, capacity was available but carriers pushed for price increases and in some cases, coverage changes and tighter terms, Glaser added.
Capacity was also available at Jan. 1 reinsurance renewals, but the appetite for certain risks and pricing thresholds adjusted for certain risks in response to “ongoing and emerging challenges such as the frequency and severity of catastrophe losses, climate change, core inflation, social inflation, and underlying rate increases,” Glaser said.
John Doyle, group president and COO, added that the “market remains challenging” but there was some moderation of rate increases in the fourth quarter, with cyber insurance being the exception.
“The underwriting community in cyber is still reacting to frequency and severity of ransomware claims,” he said. “They’re worried about systemic events as well, but I think the market reaction right now is more driven by ransomware losses.”
When asked about the potential for clients to either stop or reduce purchases of cyber insurance due to price, Glaser said the line will continue to be a growth market.
“You have to bear in mind that this is a significant issue for most boards,” Glaser said. “It’s like an ESG issue. You’d have to be a brave company to decide to not buy cyber if it’s presented to you at the board level.”
The company’s risk and insurance services operations recorded underlying revenue growth of 9% to $3 billion during the fourth quarter 2021 compared with the last three month of 2020. Most of the revenue from the fourth quarter, $2.9 billion, came from Marsh. The balance, about $170 million, was attributed to Guy Carpenter.
Overall revenue during the last quarter 2021 from consulting operations was $2.1 billion, an 11% increase on an underlying basis. The company’s Mercer subsidiary accounted for $1.4 billion of the total, with Oliver Wyman recording fourth quarter revenue of $722 million.
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