Marsh & McLennan Companies(MMC) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents the unaudited consolidated financial statements, including statements of income, comprehensive income, balance sheets, cash flows, and equity, along with detailed notes explaining the company's accounting policies, financial performance, and significant transactions CONSOLIDATED STATEMENTS OF INCOME Consolidated Statements of Income Highlights | Metric (In millions, except per share data) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $6,351 | $5,697 | $20,386 | $18,391 | | Operating income | $1,170 | $1,108 | $5,004 | $4,675 | | Net income attributable to the Company | $747 | $747 | $3,339 | $3,272 | | Diluted Net income per share | $1.51 | $1.51 | $6.75 | $6.59 | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Consolidated Statements of Comprehensive Income Highlights | Metric (In millions) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income before non-controlling interests | $757 | $752 | $3,400 | $3,316 | | Other comprehensive income (loss), net of tax | $(197) | $537 | $799 | $305 | | Comprehensive income attributable to the Company | $550 | $1,284 | $4,138 | $3,577 | CONSOLIDATED BALANCE SHEETS Consolidated Balance Sheets Highlights | Metric (In millions) | September 30, 2025 | December 31, 2024 | | :------------------------------- | :----------------- | :---------------- | | Total current assets | $23,699 | $22,117 | | Goodwill | $23,949 | $23,306 | | Total assets | $58,783 | $56,481 | | Total current liabilities | $21,098 | $19,518 | | Long-term debt | $18,317 | $19,428 | | Total equity | $15,359 | $13,535 | CONSOLIDATED STATEMENTS OF CASH FLOWS Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30) | Metric (In millions) | 2025 | 2024 | | :----------------------------------------------------------------------------------- | :------ | :------ | | Net cash provided by (used for) operations | $3,131 | $2,346 | | Net cash provided by (used for) financing activities | $(2,586) | $(1,820) | | Net cash provided by (used for) investing activities | $(322) | $(1,176) | | Increase (Decrease) in cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity | $838 | $(431) | | Cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity at end of period | $14,512 | $13,721 | CONSOLIDATED STATEMENTS OF EQUITY Consolidated Statements of Equity Highlights (Nine Months Ended Sep 30) | Metric (In millions, except per share data) | 2025 | 2024 | | :---------------------------------------- | :------ | :------ | | Retained earnings | $26,948 | $24,520 | | Accumulated other comprehensive loss | $(5,441) | $(4,990) | | Treasury shares | $(8,372) | $(7,692) | | Total equity | $15,359 | $13,882 | | Dividends declared per share | $3.43 | $3.05 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of Operations Marsh & McLennan Companies, Inc. is a global professional services firm structured into two main business segments: Risk and Insurance Services (RIS) and Consulting - The Company operates through two business segments: Risk and Insurance Services (RIS) and Consulting[22] - RIS includes Marsh, providing data-driven risk advisory and insurance solutions, and Guy Carpenter, developing risk, reinsurance, and capital strategies[23] - Consulting includes Mercer, offering health, wealth, and career advice and solutions, and Oliver Wyman Group, serving as a strategic, economic, and brand advisor[24] 2. Principles of Consolidation and Other Matters This note details the basis of financial statement preparation, including consolidation of subsidiaries, management's use of estimates, and specific accounting policies for cash, credit losses, investments, income taxes, restructuring costs, and foreign currency - The consolidated financial statements include all wholly-owned and majority-owned subsidiaries, with all significant inter-company transactions eliminated[26] - The Company's results for the three and nine months ended September 30, 2025, include the operations of McGriff Insurance Services, LLC in the Risk and Insurance Services segment[27] Effective Tax Rates | Period | 2025 | 2024 | | :----------------------------------- | :------ | :------ | | Three Months Ended September 30, | 25.1% | 27.3% | | Nine Months Ended September 30, | 24.2% | 25.8% | - The Company's gross unrecognized tax benefits were $113 million at September 30, 2025, with a potential decrease of up to approximately $69 million within the next twelve months[41] - The enactment of the U.S. 'One Big Beautiful Bill Act' (OBBBA) and the OECD's Pillar Two global minimum tax are not expected to have a material impact on the Company's current or future financial results[44][45] 3. Revenue This note outlines the company's revenue recognition principles, which adhere to a five-step model for identifying contracts, performance obligations, and transaction prices - Revenue recognition follows a five-step model: identify contract(s), identify performance obligations, determine transaction price, allocate transaction price, and recognize revenue when (or as) performance obligations are satisfied[53] Disaggregated Revenue by Segment (In millions) | Segment | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Marsh | $3,400 | $2,934 | $10,702 | $9,202 | | Guy Carpenter | $398 | $381 | $2,281 | $2,161 | | Fiduciary interest income | $109 | $138 | $311 | $385 | | Total Risk and Insurance Services | $3,907 | $3,453 | $13,294 | $11,748 | | Mercer | $1,579 | $1,452 | $4,573 | $4,256 | | Oliver Wyman Group | $886 | $810 | $2,577 | $2,436 | | Total Consulting | $2,465 | $2,262 | $7,150 | $6,692 | Contract Assets and Liabilities (In millions) | Metric | September 30, 2025 | December 31, 2024 | | :----------------- | :----------------- | :---------------- | | Contract assets | $557 | $473 | | Contract liabilities | $919 | $866 | 4. Fiduciary Assets and Liabilities The company holds unremitted insurance premiums and claims proceeds in a fiduciary capacity, which are segregated from corporate funds and not available for general corporate use - Unremitted insurance premiums and claims proceeds are held in a fiduciary capacity and are not available for corporate use[60] Fiduciary Interest Income (In millions) | Period | 2025 | 2024 | | :------------------------ | :--- | :--- | | Three Months Ended Sep 30 | $109 | $138 | | Nine Months Ended Sep 30 | $311 | $385 | - Net uncollected premiums and claims and related payables were $15.3 billion at September 30, 2025, and $15.1 billion at December 31, 2024[62] 5. Per Share Data This note details the calculation of basic and diluted net income per share, which are derived by dividing net income attributable to the company by the weighted average number of common shares outstanding Net Income Per Share Attributable to the Company | Metric (In millions, except per share data) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income attributable to the Company | $747 | $747 | $3,339 | $3,272 | | Basic EPS | $1.52 | $1.52 | $6.79 | $6.65 | | Diluted EPS | $1.51 | $1.51 | $6.75 | $6.59 | | Diluted weighted average common shares outstanding | 494 | 496 | 495 | 496 | 6. Supplemental Disclosures to the Consolidated Statements of Cash Flows This note provides additional details on cash flow activities not fully captured in the main cash flow statement, including net cash outflow for acquisitions, interest and income taxes paid, and the classification of contingent consideration payments Supplemental Cash Flow Information (Nine Months Ended Sep 30, In millions) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net cash outflow for acquisitions | $224 | $1,042 | | Interest paid | $775 | $538 | | Income taxes paid, net of refunds | $886 | $922 | | Share-based compensation expense | $305 | $283 | | Payments of deferred and contingent consideration for acquisitions | $(64) | $(91) | - The Company had non-cash issuances of common stock in accordance with its share-based payment plan of $356 million and $328 million for the nine months ended September 30, 2025 and 2024, respectively[68] 7. Other Comprehensive (Loss) Income This note details the changes in the components of Accumulated Other Comprehensive Income (AOCI), net of tax, for both the three and nine months ended September 30, 2025 and 2024 Net Current Period Other Comprehensive (Loss) Income (Net of Tax, In millions) | Period | 2025 | 2024 | | :------------------------ | :----- | :----- | | Three Months Ended Sep 30 | $(197) | $537 | | Nine Months Ended Sep 30 | $799 | $305 | Foreign Currency Translation Adjustments (Pre-Tax, In millions) | Period | 2025 | 2024 | | :------------------------ | :----- | :----- | | Three Months Ended Sep 30 | $(263) | $661 | | Nine Months Ended Sep 30 | $926 | $389 | - At September 30, 2025 and 2024, AOCI balances are net of deferred tax assets in pension and post-retirement plans gains (losses) of $1.6 billion and $1.5 billion, respectively[71][72] 8. Acquisitions and Dispositions This note outlines the company's acquisition and disposition activities, including the number of deals in each segment, total purchase consideration, and the preliminary allocation of purchase price to assets and liabilities - The Risk and Insurance Services segment completed 8 acquisitions and the Consulting segment completed 4 acquisitions for the nine months ended September 30, 2025[77] Total Purchase Consideration for 2025 Acquisitions (In millions) | Component | Amount (In millions) | | :-------------------------------------------- | :------------------- | | Cash paid | $254 | | Estimated fair value of deferred/contingent purchase consideration | $68 | | Fair value of previously-held equity method investment | $15 | | Total consideration | $337 | - Acquisition related expenses for the nine months ended September 30, 2025, were approximately $218 million, including $166 million of integration and retention costs for the McGriff acquisition[84] - In the first quarter of 2025, the Company recorded a $13 million gain related to the remeasurement of its previously held equity method investment in Carpenter Turner Cyprus Ltd. upon consolidation[85] - The Company sold MMA's Technology Consulting and Administrative Solutions (TCAS) business for approximately $25 million, recording a $15 million gain in Q1 2025[86] Unaudited Pro-Forma Financial Data (Nine Months Ended Sep 30, In millions) | Metric | 2025 | 2024 | | :-------------------------------------- | :------ | :------ | | Revenue | $20,438 | $19,764 | | Net income attributable to the Company | $3,349 | $3,264 | | Diluted net income per share attributable to the Company | $6.77 | $6.58 | 9. Goodwill and Other Intangibles This note details the company's annual impairment assessment for goodwill and indefinite-lived intangible assets, confirming no impairment in Q3 2025 - The Company completed a qualitative impairment assessment in the third quarter of 2025 and concluded that goodwill was not impaired[99] Changes in Carrying Amount of Goodwill (In millions) | Metric | 2025 | 2024 | | :---------------------- | :------ | :------ | | Balance at January 1, | $23,306 | $17,231 | | Goodwill acquired | $234 | $826 | | Other adjustments (FX) | $409 | $178 | | Balance at September 30 | $23,949 | $18,235 | - Goodwill allocated to the Risk and Insurance Services segment at September 30, 2025, is $19.2 billion, and $4.7 billion for Consulting[104] Aggregate Amortization Expense (In millions) | Period | 2025 | 2024 | | :------------------------ | :----- | :----- | | Three Months Ended Sep 30 | $133 | $90 | | Nine Months Ended Sep 30 | $412 | $269 | - The estimated future aggregate amortization expense for other intangible assets is $4,671 million[105] 10. Fair Value Measurements This note explains the three-level fair value hierarchy used for measuring assets and liabilities on a recurring basis, with Level 1 for quoted prices in active markets, Level 2 for observable inputs, and Level 3 for unobservable inputs - The Company categorizes assets and liabilities valued at fair value into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[106][110] Level 3 Liabilities for Contingent Purchase Consideration (In millions) | Metric | September 30, 2025 | December 31, 2024 | | :----------------------------------- | :----------------- | :---------------- | | Contingent purchase consideration liabilities | $230 | $161 | Changes in Fair Value of Level 3 Liabilities (Nine Months Ended Sep 30, In millions) | Metric | 2025 | 2024 | | :---------------------- | :--- | :--- | | Balance at beginning of period | $161 | $252 | | Net additions | $57 | $60 | | Payments | $(38) | $(163) | | Revaluation impact | $45 | $21 | | Balance at end of period | $230 | $168 | - The Company's investments in private equity funds were $215 million at September 30, 2025, and $182 million at December 31, 2024, with net investment income of $25 million for the nine months ended September 30, 2025[114] - At September 30, 2025, the Company has commitments of approximately $101 million for potential future investments in private equity funds[115] 11. Derivatives This note describes the company's net investment hedge strategy, where €1.1 billion senior note debt instruments are designated to hedge foreign currency risk from Euro-functional subsidiaries - The Company designated its €1.1 billion senior note debt instruments as a net investment hedge of its Euro denominated subsidiaries to manage foreign currency risk[119] - The hedge was highly effective, resulting in a $141 million increase to accumulated other comprehensive loss for the nine months ended September 30, 2025, due to changes in foreign exchange rates[120] 12. Leases This note details the company's operating leases for office facilities, which are recognized on the balance sheet as Right-of-Use (ROU) assets and operating lease liabilities - Operating leases are recognized on the consolidated balance sheets as ROU assets and operating lease liabilities[122] ROU Asset Impairment Charges (In millions) | Period | 2025 | 2024 | | :------------------------ | :--- | :--- | | Three Months Ended Sep 30 | $3 | $7 | | Nine Months Ended Sep 30 | $8 | $9 | Net Lease Cost and Operating Cash Outflows (Nine Months Ended Sep 30, In millions) | Metric | 2025 | 2024 | | :-------------------------------------- | :--- | :--- | | Net lease cost | $351 | $326 | | Operating cash outflows from operating leases | $300 | $278 | - Total future minimum lease payments for operating leases at September 30, 2025, amount to $2,109 million[125] 13. Retirement Benefits This note provides comprehensive information on the company's defined benefit pension plans (U.S. and non-U.S.) and defined contribution plans Net Benefit Credit for Defined Benefit Plans (Nine Months Ended Sep 30, In millions) | Metric | 2025 | 2024 | | :---------------------- | :------ | :------ | | Net periodic benefit credit | $(132) | $(182) | | Settlement loss | $10 | $1 | | Net benefit credit | $(122) | $(181) | - The Company made contributions to its U.S. and non-U.S. defined benefit pension plans of approximately $56 million for the nine months ended September 30, 2025, compared to $67 million in the prior year[137] - The cost of the U.S. Defined Contribution Plans for the nine months ended September 30, 2025, was $159 million (vs $142 million in 2024), and for the U.K. DC Plans was $141 million (vs $130 million in 2024)[138] - In the third quarter of 2025, the Trustee of the MMC U.K. Pension Fund invested in a $2.5 billion (£1.9 billion) insurance policy (buy-in) to reimburse the Fund for future benefit payments to retirees in one section[131] 14. Debt This note provides a detailed breakdown of the company's outstanding short-term and long-term debt, including senior notes and credit facilities Outstanding Debt (In millions) | Metric | September 30, 2025 | December 31, 2024 | | :--------------- | :----------------- | :---------------- | | Short-term debt | $1,263 | $519 | | Long-term debt | $18,317 | $19,428 | | Total Debt | $19,580 | $19,947 | - The Company repaid $500 million of 3.50% senior notes at maturity in March 2025[144] - In November 2024, the Company issued $7.25 billion in senior notes, with proceeds used to fund the McGriff acquisition and for general corporate purposes[144][276] - The Company has a $3.5 billion multi-currency unsecured five-year credit facility expiring October 2028, with no borrowings outstanding at September 30, 2025, or December 31, 2024[142][273] 15. Restructuring Costs This note introduces the company's new three-year 'Thrive' restructuring program, aimed at enhancing brand strategy, client value, growth, and efficiency - In the third quarter of 2025, the Company launched a three-year restructuring program, 'Thrive', focusing on brand strategy, client value, growth, and efficiency[149] - The 'Thrive' program is estimated to incur approximately $500 million in costs over three years, with expected annualized savings of approximately $400 million[149][213] Restructuring Costs by Segment (In millions) | Segment | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Risk and Insurance Services | $20 | $22 | $51 | $73 | | Consulting | $18 | $14 | $32 | $30 | | Corporate | $8 | $18 | $13 | $37 | | Total | $46 | $54 | $96 | $140 | - Restructuring liability at September 30, 2025, was $73 million, down from $117 million at December 31, 2024[151] 16. Common Stock This note provides an update on the company's share repurchase program, detailing the number of shares repurchased and the remaining authorization - For the nine months ended September 30, 2025, the Company repurchased 4.6 million shares of its common stock for $1.0 billion[155] - At September 30, 2025, the Company remained authorized to repurchase up to approximately $1.3 billion in shares of its common stock, with no time limit on the authorization[155] - The Board of Directors declared quarterly dividends of $0.815 per share in January and March 2025, and $0.900 per share in July and September 2025[157][158] 17. Claims, Lawsuits and Other Contingencies This note discloses the significant claims, lawsuits, and regulatory proceedings the company faces, primarily related to alleged errors and omissions in professional services - The Company is subject to a significant number of claims, lawsuits, and proceedings, principally for alleged errors and omissions in professional services[159] - In the Greensill-related litigation, applicants in the Australian proceedings have collectively claimed losses totaling approximately $5 billion plus interest and costs[162] - Marsh Ltd. reached a settlement with White Oak in May 2025, which was recoverable through the Company's E&O insurance and had no impact on the consolidated statements of income[163] - The Company is currently unable to estimate the amount or range of loss for certain complex proceedings, including the Greensill litigation, due to inherent uncertainty[166][170] 18. Segment Information This note provides detailed financial information for the company's two operating and reporting segments: Risk and Insurance Services (Marsh, Guy Carpenter) and Consulting (Mercer, Oliver Wyman Group) - The Company's operating segments are Marsh, Guy Carpenter, Mercer, and Oliver Wyman Group, aggregated into two reporting segments: Risk and Insurance Services and Consulting[172][174] - The Chief Executive Officer, as the CODM, evaluates segment performance and allocates resources based on segment operating income[173] Segment Operating Income (In millions) | Segment | Three Months Ended Sep 30, 2025 Revenue | Three Months Ended Sep 30, 2025 Operating Income | Three Months Ended Sep 30, 2025 Operating Income Margin | Nine Months Ended Sep 30, 2025 Revenue | Nine Months Ended Sep 30, 2025 Operating Income | Nine Months Ended Sep 30, 2025 Operating Income Margin | | :-------------------------- | :------------------------------------ | :--------------------------------------- | :-------------------------------------- | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | | Risk and Insurance Services | $3,907 | $750 | 19.2% | $13,294 | $3,806 | 28.6% | | Consulting | $2,465 | $501 | 20.3% | $7,150 | $1,413 | 19.8% | 19. New Accounting Pronouncements This note discusses recently issued and adopted accounting pronouncements, covering new FASB guidance on internal-use software costs, disaggregated income statement expenses, and income tax disclosures - FASB issued new guidance on internal-use software costs (effective after Dec 15, 2027), disaggregated income statement expenses (effective after Dec 15, 2026), and income tax disclosures (effective after Dec 15, 2024)[177][178][179] - The Company is currently evaluating the impact of these new pronouncements on its results of operations, cash flows, or financial condition, expecting some to only impact disclosures[177][178][179] - The new segment reporting standard was adopted effective December 31, 2024, impacting disclosures only with no impact on financial results[180] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a comprehensive discussion and analysis of the company's financial condition and results of operations, covering consolidated performance, segment-specific results, and liquidity and capital resources General - Marsh & McLennan Companies is a global professional services firm with over $24 billion in annual revenue and more than 90,000 colleagues advising clients in 130 countries[181] - The Company operates through four market-leading businesses: Marsh, Guy Carpenter, Mercer, and Oliver Wyman Group, organized into two segments: Risk and Insurance Services and Consulting[182][189] Non-GAAP measures - The Company uses non-GAAP financial measures, specifically 'non-GAAP underlying revenue,' to provide supplemental information for investors and internal management[187][188] - Non-GAAP underlying revenue is calculated by isolating the impact of foreign exchange rate movements and the effects of acquisitions and dispositions from GAAP revenue[197][198] Financial Highlights Consolidated Financial Highlights (In billions, except percentages and per share data) | Metric | 3 Months Ended Sep 30, 2025 | 9 Months Ended Sep 30, 2025 | | :-------------------------------------- | :-------------------------- | :-------------------------- | | Consolidated Revenue | $6.4 (up 11%, 4% underlying) | $20.4 (up 11%, 4% underlying) | | Consolidated Operating Income | $1.2 (up 6%) | $5.0 (up 7%) | | Diluted EPS | $1.51 (consistent) | $6.75 (up 2%) | | Risk and Insurance Services Revenue | $3.9 (up 13%, 3% underlying) | $13.3 (up 13%, 4% underlying) | | Consulting Revenue | $2.5 (up 9%, 5% underlying) | $7.2 (up 7%, 4% underlying) | | Acquisitions in Q3 2025 | 5 for $189M | N/A | | Share Repurchases in Q3 2025 | 1.9M shares for $400M | 4.6M shares for $1B | | Quarterly Dividend (Sep 2025) | $0.900 per share | N/A | - The Company launched a three-year program, 'Thrive', in the third quarter of 2025, focusing on brand strategy, client value, accelerating growth, and improving efficiency[190] Consolidated Results of Operations Consolidated Operating Income and EPS (In millions, except per share data) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating income | $1,170 (up 6%) | $1,108 | $5,004 (up 7%) | $4,675 | | Diluted earnings per share | $1.51 (consistent) | $1.51 | $6.75 (up 2%) | $6.59 | - The increase in operating income was driven by an 11% increase in revenue for both the three and nine months ended September 30, 2025[193][194] - Diluted EPS for the three months remained consistent due to higher interest expense offsetting operating income growth, while for the nine months, it increased despite higher interest expense[195][196] Consolidated Revenue and Expense Revenue – Non-GAAP Revenue and Components of Change This section details the calculation of non-GAAP underlying revenue, which adjusts GAAP revenue for foreign currency fluctuations and the impact of acquisitions and dispositions - Consolidated non-GAAP underlying revenue increased by 4% for both the three and nine months ended September 30, 2025[199][204] Non-GAAP Underlying Revenue Change by Segment (Three Months Ended Sep 30) | Segment | 2025 Underlying Revenue Change (%) | | :-------------------------- | :------------------------------- | | Marsh | 4% | | Guy Carpenter | 5% | | Total Risk and Insurance Services | 3% | | Mercer | 3% | | Oliver Wyman Group | 8% | | Total Consulting | 5% | Non-GAAP Underlying Revenue Change by Segment (Nine Months Ended Sep 30) | Segment | 2025 Underlying Revenue Change (%) | | :-------------------------- | :------------------------------- | | Marsh | 5% | | Guy Carpenter | 5% | | Total Risk and Insurance Services | 4% | | Mercer | 3% | | Oliver Wyman Group | 5% | | Total Consulting | 4% | Consolidated Revenue Consolidated revenue increased by 11% for both the three and nine months ended September 30, 2025, driven by underlying growth, acquisitions, and foreign currency translation - Consolidated revenue increased $654 million, or 11%, to $6.4 billion for the three months ended September 30, 2025[208] - For the three months, revenue increased 4% on an underlying basis, 7% from acquisitions, and 1% from foreign currency translation[208] - Consolidated revenue increased $2.0 billion, or 11%, to $20.4 billion for the nine months ended September 30, 2025, with 4% underlying growth and 7% from acquisitions[209] Consolidated Operating Expenses Consolidated operating expenses increased by 13% for the three months and 12% for the nine months ended September 30, 2025, primarily due to acquisitions and foreign currency translation - Consolidated operating expenses increased $592 million, or 13%, to $5.2 billion for the three months ended September 30, 2025, with 7% from acquisitions and 1% from foreign currency translation[210] - For the nine months, expenses increased $1.7 billion, or 12%, to $15.4 billion, with an 8% increase from acquisitions[211] - The 'Thrive' program, launched in Q3 2025, is a three-year initiative with an estimated cost of $500 million and expected annualized savings of $400 million, focusing on innovation, operational excellence, data, and AI[212][213] - Costs incurred for the 'Thrive' program were $38 million for the three months ended September 30, 2025, primarily related to severance and outside services[214] Risk and Insurance Services The Risk and Insurance Services segment reported significant revenue growth, driven by acquisitions and underlying business expansion at Marsh and Guy Carpenter Risk and Insurance Services Segment Performance (In millions, except percentages) | Metric (RIS) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $3,907 (up 13%) | $3,453 | $13,294 (up 13%) | $11,748 | | Operating income | $750 | $733 | $3,806 | $3,595 | | Operating income margin | 19.2% | 21.2% | 28.6% | 30.6% | - RIS revenue growth for the three months was 3% underlying, 9% from acquisitions, and 1% from foreign currency translation[217] - Marsh's revenue increased 16% to $10.7 billion for the nine months, with 5% underlying growth and 12% from acquisitions[221] - Guy Carpenter's revenue increased 6% to $2.3 billion for the nine months, with 5% underlying growth and 1% from acquisitions[223] - Expenses in RIS increased 16% to $9.5 billion for the nine months, including $164 million in McGriff integration and retention costs and $124 million higher intangible amortization costs[226][227] Consulting The Consulting segment experienced revenue growth, driven by both Mercer and Oliver Wyman Group, with underlying growth in Health and Wealth, though Career saw a contraction Consulting Segment Performance (In millions, except percentages) | Metric (Consulting) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $2,465 (up 9%) | $2,262 | $7,150 (up 7%) | $6,692 | | Operating income | $501 | $462 | $1,413 | $1,304 | | Operating income margin | 20.3% | 20.4% | 19.8% | 19.5% | - Consulting revenue growth for the three months was 5% underlying, 3% from acquisitions, and 2% from foreign currency translation[229] - Mercer's underlying revenue for the nine months showed Health up 6% and Wealth up 3%, but Career decreased 2% due to softness in project-related work[233][234] - Oliver Wyman Group's underlying revenue increased 8% for the three months and 5% for the nine months, driven by growth across regions[235][236][237] - Expenses in Consulting increased 6% to $5.7 billion for the nine months, driven by higher compensation and benefits and acquisitions[240] Corporate and Other Corporate Expenses (In millions) | Period | 2025 | 2024 | | :------------------------ | :--- | :--- | | Three Months Ended Sep 30 | $81 | $87 | | Nine Months Ended Sep 30 | $215 | $224 | - Corporate expenses decreased by 6% for the three months and 4% for the nine months ended September 30, 2025[242] Interest Income Interest Income (In millions) | Period | 2025 | 2024 | | :------------------------ | :--- | :--- | | Three Months Ended Sep 30 | $10 | $12 | | Nine Months Ended Sep 30 | $34 | $61 | - Interest income decreased by $2 million and $27 million for the three and nine months ended September 30, 2025, respectively, due to lower average interest rates[244] Interest Expense Interest Expense (In millions) | Period | 2025 | 2024 | | :------------------------ | :--- | :--- | | Three Months Ended Sep 30 | $237 | $154 | | Nine Months Ended Sep 30 | $725 | $469 | - Interest expense increased by $83 million and $256 million for the three and nine months ended September 30, 2025, respectively, primarily due to debt raised to fund the McGriff acquisition[245] Investment Income - Investment income includes realized and unrealized gains and losses from investments, mark-to-market increases/decreases in equity investments, and equity method gains/losses on private equity funds[246] Net Investment Income (In millions) | Period | 2025 | 2024 | | :------------------------ | :--- | :--- | | Three Months Ended Sep 30 | $15 | $1 | | Nine Months Ended Sep 30 | $27 | $3 | - The increase in net investment income for both periods in 2025 is primarily driven by higher mark-to-market gains from the Company's investments[247] Income and Other Taxes This section analyzes the company's effective tax rate, which decreased for both the three and nine months ended September 30, 2025, highlighting the impact of discrete tax items and the non-material impact of recent tax legislation Effective Tax Rates | Period | 2025 | 2024 | | :----------------------------------- | :------ | :------ | | Three Months Ended September 30, | 25.1% | 27.3% | | Nine Months Ended September 30, | 24.2% | 25.8% | - Excess tax benefits related to share-based payments reduced the effective tax rate by 0.3% for the three months and 1.0% for the nine months ended September 30, 2025[250] - It is reasonably possible that unrecognized tax benefits could decrease by up to approximately $69 million within the next twelve months due to audit settlements and statute expirations[253] - Recent U.S. tax legislation (OBBBA) and the OECD's Pillar Two global minimum tax are not expected to have a material impact on the Company's current or future financial results[255][256] Liquidity and Capital Resources This section analyzes the company's liquidity and capital resources, detailing cash flows from operations, financing, and investing activities, covering pension contributions, debt management, share repurchases, and dividends Operating Cash Flows - The Company provided $3.1 billion of cash from operations for the nine months ended September 30, 2025, an increase from $2.3 billion in the prior year[263] - Cash used for restructuring activities amounted to $138 million for the nine months ended September 30, 2025[263] Pension Related Items - Contributions to U.S. and non-U.S. defined benefit pension plans for the nine months ended September 30, 2025, totaled $56 million[264] - The Company expects to contribute approximately $24 million to its U.S. and non-U.S. defined benefit pension plans during the remainder of 2025[137][270] - For the MMC U.K. Pension Fund (excluding the JLT section), no deficit funding is required until 2026, based on an agreement with the trustee[269] Financing Cash Flows - Net cash used for financing activities was $2.6 billion for the nine months ended September 30, 2025, compared with $1.8 billion in the prior year[271] - The Company repaid $500 million of senior notes in March 2025 and issued $7.25 billion in senior notes in November 2024, partly to fund the McGriff acquisition[275][276] - Share repurchases for the nine months ended September 30, 2025, amounted to $1.0 billion for 4.6 million shares[279] - Dividends paid on common stock totaled $1.3 billion ($2.53 per share) for the nine months ended September 30, 2025[280] - Remaining estimated future contingent payments are $230 million, and deferred consideration payments are $140 million, as of September 30, 2025[284] Investing Cash Flows - Net cash used for investing activities was $322 million for the first nine months of 2025, a decrease from $1.2 billion in the prior year[288] - Cash paid for acquisitions, net of cash acquired, was $224 million for the first nine months of 2025, compared to $1.0 billion in 2024[289] - The Company sold MMA's Technology Consulting and Administrative Solutions (TCAS) business for approximately $25 million in Q1 2025, recording a $15 million gain[290] - Capital expenditures for the nine months ended September 30, 2025, amounted to $186 million, primarily for software development, office refurbishing, and technology equipment[292] Commitments and Obligations Future Contractual Obligations at September 30, 2025 (In millions) | Type of Obligation | Total (In millions) | Within 1 Year (In millions) | 1-3 Years (In millions) | 4-5 Years (In millions) | After 5 Years (In millions) | | :-------------------------- | :------------------ | :-------------------------- | :---------------------- | :---------------------- | :-------------------------- | | Current portion of long-term debt | $1,263 | $1,263 | $— | $— | $— | | Long-term debt | $18,478 | $— | $1,292 | $3,190 | $13,996 | | Interest on long-term debt | $13,102 | $893 | $1,711 | $1,502 | $8,996 | | Net operating leases | $2,109 | $390 | $637 | $415 | $667 | | Service agreements | $289 | $166 | $108 | $14 | $1 | | Other long-term obligations | $458 | $200 | $205 | $52 | $1 | | Total | $35,699 | $2,912 | $3,953 | $5,173 | $23,661 | - The table excludes $113 million in unrecognized tax benefits (except for $59 million potentially payable within one year) and $13 million in remaining transitional tax payments related to the Tax Cuts and Jobs Act due in 2026[295] Management's Discussion of Critical Accounting Policies and Estimates - A detailed discussion of the Company's critical accounting policies and estimates is provided in the Management's Discussion and Analysis section of its 2024 Annual Report on Form 10-K[296] New Accounting Pronouncements - Information regarding recently issued accounting guidance and its potential impact on the Company's financial results is discussed in Note 19 to the consolidated financial statements[297] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details the company's exposure to various market risks, including interest rate risk, foreign currency risk, and equity price risk, outlining their potential impact on financial performance and mitigation strategies Market Risk and Credit Risk - The Company's revenues, expenses, assets, and liabilities are exposed to interest rate changes, foreign currency exchange rate fluctuations, and equity market movements[298] Interest Rate Risk and Credit Risk - A 10% (33 basis points) increase or decrease in short-term interest rates would impact annual interest income by approximately $12 million[299] - The Company manages credit risk in its cash investments through a Board-approved investment policy that mandates principal preservation, liquidity, and broad diversification[301] Foreign Currency Risk - Approximately 50% of the Company's total revenue is exposed to foreign exchange fluctuations[302] - The Company uses forward contracts and options to limit foreign currency exchange rate exposure on net income and cash flows[302] - A 10% movement in major currencies (Euro, British Pound, Australian dollar, and Canadian dollar) in the same direction against the U.S. dollar could increase or decrease full-year net operating income by approximately $106 million[303] Equity Price Risk - The Company holds investments in public and private companies, as well as private equity funds, totaling approximately $23 million with readily determinable fair values and $16 million without, plus $295 million accounted for using the equity method[305] - These investments are subject to the risk of decline in market value, which could result in impairment losses[305] Other - Information on pending lawsuits and regulatory proceedings is provided in Note 17, 'Claims, Lawsuits and Other Contingencies,' to the consolidated financial statements[306] ITEM 4. CONTROLS & PROCEDURES This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the last fiscal quarter Evaluation of Disclosure Controls and Procedures - The Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of September 30, 2025[307] Changes in Internal Control - There were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control during the last fiscal quarter[308] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section refers to Note 17 of the consolidated financial statements for detailed information regarding the company's legal, administrative, regulatory, and government proceedings, claims, and inquiries - Additional information regarding legal proceedings, claims, and inquiries is incorporated by reference from Note 17, 'Claims, Lawsuits and Other Contingencies,' in Part I of this report[310] ITEM 1A. RISK FACTORS This section directs readers to the comprehensive discussion of risk factors in the company's most recently filed Annual Report on Form 10-K, emphasizing that these risks could materially adversely affect the business, results of operations, or financial condition - Readers should carefully consider the risk factors discussed in 'Part I, Item 1A. Risk Factors' in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[311] - The occurrence of any described risks could materially adversely affect the Company's business, results of operations, or financial condition[312] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section provides details on the company's common stock repurchase activities for the nine months ended September 30, 2025, including the number of shares bought back, the average price paid, and the remaining authorization under the repurchase program - For the nine months ended September 30, 2025, the Company repurchased 4.6 million shares of its common stock for $1.0 billion[313] - At September 30, 2025, the Company remained authorized to repurchase up to approximately $1.3 billion in shares of its common stock, with no time limit[313] Issuer Repurchases of Equity Securities (July 1 - Sep 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :--------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------------------- | | July 1 - 31, 2025 | 508,882 | $209.8319 | 508,882 | $1,557,309,823 | | August 1 - 31, 2025 | 586,551 | $205.1523 | 586,551 | $1,436,977,509 | | September 1 - 30, 2025 | 860,040 | $201.0213 | 860,040 | $1,264,091,170 | | Total | 1,955,473 | $204.5532 | 1,955,473 | $1,264,091,170 | ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[315] ITEM 4. MINE SAFETY DISCLOSURE This section indicates that the disclosure requirements for mine safety are not applicable to the company - Mine Safety Disclosure is not applicable to the Company[316] ITEM 5. OTHER INFORMATION This section states that there is no other information to report under this item - No other information is reported under this item[317] ITEM 6. EXHIBITS This section refers to the Exhibit Index, which immediately follows the signature page of the report, for a complete list of all exhibits filed - The Exhibit Index, incorporated by reference, lists all exhibits and is located immediately following the signature page of this report[318]