Marsh Q3 2026 Earnings Call Transcript
On Thursday, Marsh (NYSE:MRSH) discussed third-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Marsh's third-quarter revenue increased 8% to $6.9 billion, with underlying growth of 5%. Adjusted EPS grew 10% to $2.03.
The company raised its savings target from the Thrive program to $600 million, aiming for greater efficiency and investment in growth areas like AI and technology.
Marsh launched the Competitive Resilience Coalition with Bloomberg to enhance business resilience amid global uncertainties.
AI is a focus area, with initiatives like Marsh Risk Companion and the Stratus Exchange supporting digital infrastructure growth.
Market conditions reflected a decrease in primary commercial insurance rates by 5% in Q3, with Marsh seeing mixed performance across its segments.
The company expects continued underlying revenue growth and margin expansion in 2026, despite economic and geopolitical uncertainties.
Full Transcript
OPERATOR
Hello and welcome to Marsh's earnings conference call. Today's call is being recorded. Third quarter 2026 financial results and supplemental information were issued earlier this morning. They are available on the company's website at marsh.com. Please note that remarks made today may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by such statements.
For a more detailed discussion of those factors, please refer to our earnings release for this quarter and to our most recent SEC filings, including our most recent Form 10-K, all of which are available on the Marsh website. During the call today, we may also discuss certain non-GAAP financial measures. For a reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule in today's earnings release. If you have a question, please press star 11 on your touchtone phone.
If you wish to be removed from the queue, please press star 11 again. If you are using a speakerphone, you may need to pick up the handset before pressing the numbers once again. If you have a question, please press star 11 on your touchtone phone. I will now turn this over to John Doyle, President and CEO of Marsh.
John Doyle, President and CEO of Marsh
Good morning and thank you for joining us to discuss our third quarter results. I'm John Doyle, President and CEO of Marsh. On the call with me is Mark McGivney, our COO and CFO, and our business CEOs: Nick Studer from Risk, Dean Klisura, Reinsurance, Pat Tomlinson of People and Investments, and Ted Moynihan from Management Consulting. Also with us is Jay Gelb, Head of Investor Relations. Let me start by commenting on the conditions confronting businesses today.
We're clearly in a period of change and uncertainty in the world. This change is structural, not cyclical, and it's happening at pace and all at once. Wars, geoeconomics, extreme weather and AI advances are challenging long established norms. Businesses require a new playbook, better insights and perspectives, and the flexibility to adapt as never before. At the same time, access to information and technology as well as greater focus on resilience offers businesses great opportunity.
It's why Marsh and Bloomberg announced the Competitive Resilience Coalition. As knowledge partner for the Bloomberg New Economy, Marsh will co-chair the coalition and bring together business and government leaders to strengthen resilience and help organizations in an increasingly complex environment. Marsh's vision and capabilities as a professional services firm across risk, strategy, people and investments have us well positioned to help clients be more resilient and to thrive in this moment.
When it comes to AI, we believe it will be good for our country and the global economy. However, we need to deploy the technology responsibly to avoid potentially severe systemic or irreversible risks. We're particularly concerned about the potential for heightened cyber exposure from AI, and we are working with governments, insurance companies and businesses to create awareness and resilience to this risk. Responsible AI implementation begins with the developers, but businesses and governments have a role to play in ensuring safeguards are in place.
Marsh will be active in helping clients manage the risks and capture the opportunities from AI. Turning to results, Marsh had a strong quarter reflecting our market leading positions, the value we deliver to clients and the commitment of our colleagues around the world. In our consulting segment, growth was strong in People and Investments and Management Consulting. In Risk, growth accelerated in our risk business while Reinsurance faced continued market headwinds but executed well.
Overall revenue grew 8% in the quarter, underlying revenue growth was 5%, adjusted operating income grew 6% and adjusted EPS grew 10%, and we repurchased $500 million of stock in the quarter, bringing us to $2 billion year to date. We also made meaningful progress executing our Thrive program and successfully completed our brand transition. When we launched Thrive a year ago, we targeted $400 million in savings. We're now seeing greater opportunities coming from Business and Client Services, or BCS, and advances in technology.
As a result, we are increasing our Thrive savings target to $600 million. The expanded savings will create additional capacity to invest in sales, new capabilities, our brand and technology. Let me touch on some of the progress from our reinvestments. Thrive has enabled us to invest in sales capacity at a higher rate this quarter and year to date, and we're hiring producers and consultants in areas where we see the greatest opportunity for growth.
Our colleague value proposition is strong and we remain the destination for top talent in our business. I've been pleased with the strong positive reaction from colleagues and clients to our new brand strategy, the efficiencies we've captured from it, and our progress marketing Marsh to prospective clients. As a result of very favorable market research, we accelerated the transition of Guy Carpenter and Mercer to Marsh several months ahead of schedule.
We believe we can be the most impactful professional services firm in the world and we're investing in our new brand to reflect that ambition. Since its introduction last year, BCS has fundamentally changed how we work. An important part of the team's mission is to build shared services for greater efficiency, including in areas such as client onboarding, data ingestion, commercial enablement and operational excellence. BCS is also re-engineering our processes and moving work to our capability centers, which is generating additional savings.
Overall, our execution of Thrive has been excellent to date and we're excited about the investments in growth it's enabling. Turning to AI in our business, we're not thinking about it as something that will be a factor in our business; it already is a factor in our business. It's enhancing our client relationships, how we manage operations and how colleagues work every day. We are focused currently on several areas where AI is driving growth, including building AI-enabled products, consulting on AI transformation, serving the digital infrastructure ecosystem and adding to capabilities and productivity for our producers and consultants.
We've already deployed several AI-enabled products for clients that deliver valuable insights. These solutions tap into our large and expanding proprietary data sets in risk, health and talent. Marsh Risk Companion is a good example. This AI-enabled analytics suite provides actionable insights for client risk programs. We can more easily model and optimize client risk scenarios with a new platform. This is leading to faster, more informed decision making and reduced administrative burden for the client's risk management team.
We're also advising clients on AI transformation. For example, Oliver Wyman's fastest growing practice, Quotient, is working with private equity firms to serve their portfolio companies. They're engaging us on everything from agentic commerce and commercial effectiveness to cost reduction and technology transformation. Digital infrastructure continues to be a growth driver for Marsh. More and more clients across broad sectors of the economy are asking for our help in risk, capital, advisory, credit and consulting.
In the wake of extensive growth in digital infrastructure, we are also working to bring the insurance capacity needed to support digital infrastructure. Marsh recently launched the Stratus Exchange, which offers access up to $10 billion in property coverage for the ongoing operations of digital facilities. Stratus is a natural follow up to Nimbus, our $2.7 billion insurance facility for construction risks. We're also focused on growth from greater colleague productivity, notably Broker Workbench.
Launched in Q3 for our UK wholesale business, it uses our data and analytics to place the client's risks faster, matching risk and capital more efficiently. In fact, 93% of our wholesale trading in London is now digital and the time to process placements has reduced from two to four weeks to a couple of hours. With Workbench, although it's early—and it is early—AI is making us better now in delivering new perspectives and insights more efficiently and with greater impact for our clients.
Now turning to market conditions. According to the Marsh Global Insurance Market Index, primary commercial insurance rates decreased 5% in Q3. This follows a 6% decline in the second quarter. As a reminder, our index skews to large accounts. Rates in the US decreased 1%. Canada, Europe and Asia declined mid single digits, the UK and Latin America decreased in the high single digits, and the Pacific region had double digit decreases. Global property rates decreased 10%, global financial and professional liability rates were down 3% while cyber decreased 4%.
Global casualty rates increased 1% with US excess casualty up 13% reflecting inflationary pressure. Loss costs and workers compensation decreased 5%. In reinsurance, market conditions, led by short tail lines, remain soft, driven by abundant capacity from both traditional reinsurers and alternative capital. Property cat reinsurance losses have been relatively benign this year and capital is increasing, adding to a competitive market environment. We expect these conditions to persist through the January 1st renewal cycle.
In casualty, reinsurance capacity is generally adequate. Reinsurers are focused on loss development and they're differentiating terms based on claims experience, exposure data and portfolio quality. Our clients continue to explore alternative options to complement traditional strategies, including greater use of third-party capital solutions such as sidecar vehicles for their liability portfolios. Market conditions remain supportive of our insurance and reinsurance clients even as the cost of risk continues to rise.
We are committed to helping clients optimize their risk financing and strengthen resilience in an uncertain environment. Now to our third quarter financial performance, which Mark will cover in more detail. Consolidated revenue increased 8% to $6.9 billion, or an increase of 5% on an underlying basis, with 3% growth in Risk and 8% in consulting. Risk up 5%. Reinsurance declined 6%, People and Investments increased 5% and Management Consulting grew 14%.
Adjusted operating income grew 6% and adjusted EPS was $2.03, up 10% year over year. Looking ahead, we continue to expect underlying revenue growth in 2026 similar to last year. We also anticipate another year of margin expansion and solid adjusted EPS growth. Our outlook is based on current market conditions, but the economic and geopolitical environment could change materially from our assumptions. This is an exciting time for us. We have a new market brand and a Business to Client Services team optimizing how we work.
We have long standing trusted client relationships and the advantage of large proprietary data sets. We're upsizing the THRIVE program to drive greater efficiency and investment and we see new possibilities from AI to better serve clients who strive to manage risk and capitalize on the opportunity of this moment. With that, I'll turn the discussion to Mark for a more detailed review of our results.
Mark McGivney, CFO
Thank you, John, and good morning. We had a strong third quarter that showed continued momentum in underlying revenue growth and double-digit EPS growth, reflecting our strong position and great execution. Consolidated revenue increased 8% to $6.9 billion with underlying growth of 5%. Operating income was $1.2 billion and adjusted operating income was $1.5 billion, up 6%. Our adjusted operating margin was 22.7%. GAAP EPS was $1.69 and adjusted EPS was $2.03, up 10% over last year.
For the first nine months of 2026, underlying revenue growth was 5%. Adjusted operating income grew 7% to $6.1 billion. Our adjusted operating margin was 28.1% and adjusted EPS increased 9% to $8.29. As part of our previously announced brand change, we've updated several business categories in our earnings release. Guy Carpenter results are now reported as Reinsurance, and Mercer results are reported as People and Investments. Wealth is reported as Investments & Retirement, Health as Health & Benefits, and Career as Workforce & Reward.
Looking at Risk and Insurance Services, third quarter revenue was $4.2 billion, up 7% from a year ago, or 3% on an underlying basis. Operating income in RIS was $745 million. Adjusted operating income was $1 billion, up 4% over last year, and the adjusted operating margin was 24.6%. For the first nine months, revenue in RIS was $14.1 billion, reflecting underlying growth of 3%. Adjusted operating income increased 5% to $4.6 billion, and the adjusted operating margin was 33.2%.
At Risk, revenue in the quarter was $3.7 billion, up 10% from a year ago, or 5% on an underlying basis. Despite the headwind from a soft pricing environment, sales and new business growth remain solid, and areas such as digital infrastructure and transactional risk are creating demand. In US and Canada, underlying growth was 4%. In International, underlying growth was 6%, with EMEA up 7%, Asia Pacific up 4%, and Latin America flat. For the first nine months of the year, Risk’s revenue was $11.5 billion, with underlying growth of 4%.
US and Canada grew 4% and International was up 5%. In Reinsurance, revenue in the quarter was $374 million, down 6% on both a reported and underlying basis. Q3 is a small quarter for Reinsurance, and revenue was impacted by continued softness in property reinsurance rates as well as a tough comparison to a strong third quarter last year that benefited from non-recurring items. Through nine months, Reinsurance is down 1% on an underlying basis, which better reflects our top-line performance this year.
Significant rate pressure has more than offset strong new business growth and excellent client retention, which remains in the high 90s. In the Consulting segment, third quarter revenue was $2.7 billion, up 9% or 8% on an underlying basis. Operating income was $563 million and adjusted operating income was $593 million, up 9%. Our adjusted operating margin in Consulting was 22.1%. For the first nine months, Consulting revenue was $7.8 billion, reflecting underlying growth of 7%.
Adjusted operating income increased 11% to $1.7 billion. The adjusted operating margin was 21.4%. People and Investments revenue was $1.7 billion in the quarter, up 6% or 5% on an underlying basis. Health & Benefits grew 5%, reflecting continued growth across our regions. Investments & Retirement was up 8%, led by our Investments business. Our assets under management were $843 billion at the end of the third quarter, flat sequentially and up 23% from the third quarter last year.
Year-over-year growth was driven by new business and the impact of capital markets. Workforce & Rewards was down 1%, with growth in the US and most of International offset by the impact of a challenging environment in the Middle East. For the first nine months of the year, revenue at People and Investments was $4.9 billion with 5% underlying growth. Management Consulting generated revenue of $1 billion in the third quarter, up 14% on both a reported and underlying basis.
This great result reflected strong demand and delivery across the business, especially in AI-related work. The quarter also benefited from favorable timing on success fees that we had expected in the fourth quarter. For the first nine months of the year, revenue at Management Consulting was $2.9 billion, an increase of 11% on an underlying basis. For the full year, Management Consulting is on pace for high single-digit growth, which would imply a roughly flat top line in Q4, due in part to the timing I mentioned.
Fiduciary interest income was $100 million in the quarter, down $9 million from the third quarter last year. Looking ahead, we expect fiduciary interest income will be approximately $94 million in the fourth quarter. Foreign exchange was a $0.01 benefit in the third quarter. Based on current exchange rates, we expect FX will have an immaterial effect on earnings in the fourth quarter. Corporate expenses in the third quarter were $68 million on an adjusted basis compared to $71 million a year ago.
Looking ahead to the fourth quarter, we expect adjusted corporate expense of approximately $80 million. Building on John’s comments on Thrive, the program is going well and our early success has resulted in us seeing more opportunities. We now expect to generate $600 million savings, with the vast majority of our actions taken by the end of 2028 and savings realized fairly evenly over the three years of the program. We expect costs associated with generating savings will be approximately $750 million.
So far, most of our savings have come from simplifying and streamlining our organization, right-shoring actions, and efficiencies in BCS. We expect further savings in these areas. We are excited about our progress so far and the benefit we will get from the additional savings. Thrive is enabling us to accelerate investments that will help us sustain growth into the future while we continue to deliver solid results today. Total noteworthy items in the third quarter were $170 million, including $71 million of costs associated with Thrive.
Noteworthy items this quarter also included $144 million relating to the Greensill litigation. As disclosed in our 10-Q this morning, we have settled our involvement in this litigation and do not expect any additional charges relating to the case. Note that total settlement payments and costs are reflected in our statement of cash flow. Interest expense in the third quarter was $248 million. In our current forecast, we expect $255 million of interest expense in the fourth quarter.
Our adjusted effective tax rate in the third quarter was 24.6% compared to 24.8% in the third quarter last year, with both periods benefiting modestly from discrete items. When we give forward guidance around our tax rate, we do not project discrete items. Based on the current environment, we expect an adjusted effective tax rate of around 25% for 2026. Turning to capital management and our balance sheet, we ended the quarter with total debt of $20.5 billion.
We had €550 million of euro-denominated senior notes mature in September and we intend to replace them with new euro-denominated notes in the fourth quarter. Our cash position at the end of the third quarter was $1.8 billion. Uses of cash in the quarter totaled $1.3 billion and included $476 million for dividends, $288 million for acquisitions, and $500 million for share repurchases. For the first nine months, uses of cash totaled $4 billion and included $1.4 billion for dividends, $607 million for acquisitions, and $2 billion for share repurchases.
We continue to expect to deploy approximately $5.5 billion of capital in 2026 across dividends, acquisitions, and share repurchases. The ultimate level of share repurchase will depend on how our M&A pipeline develops. For the full year, we continue to expect underlying revenue growth similar to the levels we generated in 2025, along with another year of margin expansion and solid adjusted EPS growth. With that, I’m happy to turn it back to John.
John Doyle, President and CEO of Marsh
Thank you, Mark, and we are ready to begin the Q&A session.
OPERATOR
Certainly. We will now begin the question-and-answer session. If you have a question, please press star 11 on your touchtone phone. If you wish to be removed from the queue, please press star 11 again. If you're using a speakerphone, you may need to pick up the handset before pressing the numbers. Once again, if you have a question, please press star 11 on your touchtone phone. And in the interest of addressing questions from as many participants as possible, we ask that participants limit themselves to one question and one follow-up question.
One moment, please. Our first question comes from the line of Greg Peters with Raymond James.
Greg Peters, Analyst at Raymond James
Good morning, everyone. Thanks for the comments on the AI and the update on Thrive. A couple of your peers have given some detail around how they plan to deploy AI to drive margin expansion, and I think that might be part of what's going on with your raising the Thrive targets. But maybe you could give us some more detail on what you're doing with technology and AI to drive the margin expansion.
John Doyle, President and CEO of Marsh
Good morning, Greg, and thanks for the question. I spoke to it a bit in my prepared remarks. We're quite excited about what these new technologies can mean to our business. And it's not just margin expansion. I also want to reinforce the importance of it to how we serve our clients and what it can mean to our growth over time. I think that's, you know, really a critical part of what we're thinking about and how we're investing against it. So, you know, we see clear benefits for our colleagues, for our clients, and earnings growth in it for our shareholders.
We think we're well positioned. You know, I spoke about—I've spoken not just on this call but on prior calls—about longstanding, deeply trusted client relationships. We have the data sets, the proprietary data sets, the analytics, the modeling, and risk management. All of these things are fundamental to our business model. This period of change is driving a lot of growth in our consulting businesses, so we're quite excited about how we're helping our clients as well.
But yes, it's helping drive some efficiency for us today. We're now not quite three years into BCS. We formed BCS almost three years ago. It was in the first quarter of 2024. We're excited about the work that our team is doing there—looking at leveraging the best tech, not just AI, I would point out, but automating processes, challenging workflows all across the company. And we had areas where we're doing things quite well; now we're taking the best from each part of those companies and optimizing our operating model.
So Paul Beswick leads all that for us. He's doing an excellent job. His team is deep and strong. It also allows for more efficient capex for us too. And so, yeah, we feel good about what it can mean to our margins. I'm not going to speak to 2027 on this call, Greg. I'll talk about that in January. But between BCS and—not just AI—right-shoring, automation, and the early returns from AI are all levers for us to drive future efficiency. So we feel good about that.
Do you have a follow-up, Greg?
Greg Peters, Analyst at Raymond James
Of course. I'm going to pivot, and it's on M&A. And I know you're not going to talk about your pipeline on a public call, but, you know, Ann's done this very large transaction and there's some concern in the marketplace that you might feel the need to respond with a similar big transaction. So maybe you could spend a minute and tell us about how you view your middle-market presence and, when you're looking at M&A, what kind of capabilities are you looking to bolt on to
John Doyle, President and CEO of Marsh
What you already have? Yeah, yeah, sure. Well, look, let me be clear. Our interest in the middle market isn't recent, right? It's been there for quite a long time. We're not following anyone. We have the best middle market business in the industry. I'm incredibly proud of Marsh. It's been thoughtfully constructed over 15 years by acquiring the best regional agencies all across the country. We've done over 130 deals since we began that strategy about 15 years ago.
It can't be replicated and I wouldn't change our business for any business in the market. And I remain very excited about the middle market. We've been bringing scale benefits to those customers, helping them realize other value through our services and help position them, help position our clients for better growth. It's not, of course, just P&C. It's health and benefits. And so it's a market we like quite a bit. We expect to continue to invest in that market both organically and inorganically.
Our capital management strategy, Greg, has not changed. It remains the same. We are going to be disciplined. Let me be clear. We will be disciplined and balanced in our approach. We do favor investing in the business. Our pipeline is good, there's no question about it, at least for some strategic buyers. There's a bit of a gap between bid and ask at the moment. We announced a deal on the 1st of October, Midwest agency, top 100 agency in the Midwest that we're excited about.
We closed on Astera earlier in the third quarter, so we remain very active in the market. But again, we're going to be disciplined about how we deploy our capital. And in our prepared remarks, both Mark and I touched on what we did in the quarter. We bought back a bit more stock. We're now at $2 billion kind of year to date. So hopefully that's helpful. We have the capacity to do big deals, but we're far more likely to do a string of pearls. Continue that approach.
Thank you, Greg. Andrew, do we have a follow up?
OPERATOR
Our next question comes from the line of Mike Zyrimski with BMO.
Mike Zyrimski, Analyst at BMO Capital Markets
Hey, great. Good morning. I guess I'll start with Oliver Wyman and consulting. As we've kind of dug into the excellent growth, some consultants have talked about AI making them much more efficient and then being able to work through their backlogs faster and kind of pull forward revenues. Just curious if that is a dynamic you think is contributing to Marsh's excellent results.
John Doyle, President and CEO of Marsh
Yeah, thanks, Mike, and good morning. Really terrific results. And as I mentioned on my prepared remarks, it's a great opportunity in this moment of change for us to help our clients position themselves for greater success. And so it's not only driving growth for our business, but it's also changing the way we're doing business with our clients as well. And so Ted, maybe you can talk more about that.
Ted Moynihan
Yeah, Mike, thank you. I mean, we had a great quarter. The performance was strong and pretty broad based across industries and capabilities and regions. It's certainly the case that our Quotient AI platform that helps our clients transform around AI was the strongest growing part of the portfolio and has really been contributing to what's a good year for us. I would say, you know, we ourselves, in terms of your question about how we are actually delivering for clients, we've been on that journey for probably three years now, transforming how we deliver for our clients.
And, you know, we're using a very sophisticated range of tools. We've built a lot of agentic solutions ourselves that can create more value for our clients. We've built a lot of specialist capabilities, so across data analytics, forward-deployed engineers that are blended into consulting teams. Increasingly we partner with technology companies, be that frontier model companies, hyperscalers, cloud providers and so on. And certainly as our business has shifted from advice 10 years ago to today really generating outcomes for our clients on their transformation journeys, we started to increase the amount of success pricing in our business.
Our clients have been encouraging and willing to allow us to participate in the value that we're creating for them. And I think Mark mentioned that in Q3, some of our performance pulling forward some success fees that we might have seen in Q4. And so that certainly contributed to the level of growth you see in the numbers there.
John Doyle, President and CEO of Marsh
Thanks, Ted. Mike, do you have a follow up?
Mike Zyrimski, Analyst at BMO Capital Markets
Yeah, a quick follow up maybe dovetailing on Greg Peters’ question on Thrive. You know, John, you talked about still early days of AI, you know, use cases impacting every employee's daily lives. You know, is it reasonable if we are thinking out into 27 or 28 that whether it's called Thrive or not, that there could be a much larger, broader program that is impacting Marsh when we're thinking about productivity gains?
John Doyle, President and CEO of Marsh
Yeah, look, I would say, Mike, we're excited about the path that we're on. As I said, it is early, so I don't want to get ahead of ourselves. Right. There's a lot involved and the tools are changing and changing fairly rapidly. We'll see whether they continue to change at the same pace, but our colleagues are actively using these tools. Our tech team, again led by Paul Beswick, has done a terrific job. We've built a proprietary model that we call Len AI inside of our company and we introduce new tools literally every week to our colleagues.
Now every one of those tools impacts different parts of our employee population, our colleague population in different ways. I'm very encouraged by the take-up rate and so yeah, we're transforming the way we operate and we see certainly efficiency possibilities down the road. But more important than anything else is how we serve our customer and what that can mean to our growth. Thanks, Mike. Andrew, next question please.
OPERATOR
Our next question comes from the line of Rob Cox with Goldman Sachs.
Rob Cox, Analyst at Goldman Sachs
Hey, good morning. My first question just on competition in the marketplace. Just thinking about levered private brokers right now. It seems like the softening pricing environment and higher interest rates combo could put some pressure on their business models right now. And it seems like there could be some disruption going on. I'm just wondering if you think that could help Marsh potentially win some more business in the open market, win on talent or potentially make opportunistic M&A more attractive.
John Doyle, President and CEO of Marsh
Yeah, thanks, Rob. I want to be careful because there's obviously a range of PE-owned or levered-back brokers out there. Some are much smaller than others and of course they serve kind of different markets. What I would say though is that we're certainly well capitalized. We have the ability to invest in our business again. And I'm talking about organic investment really here. What I'm excited about is how scale is going to matter through this period of transformation again.
That's why I keep reinforcing the deep, long-standing trusted client relationships. The proprietary data sets, the analytics we have, the modeling, all being improved with new technology. I don't think it's debatable that scale matters in this changing time. That has us incredibly well positioned. I think it will help us win business, of course organically in the market, but it's also going to help us probably as the M&A pipeline develops over time as well, where others will realize it will be difficult to invest at the same rate that we're investing.
So I'm excited about how we're positioned competitively. It starts with our people. Our people still matter. They are what deliver the insights to our clients and we have the deepest, best talent in the marketplace. Do you have a follow up, Rob?
Rob Cox, Analyst at Goldman Sachs
Yeah, thank you. And that's helpful. Just maybe on the, you know, AI exclusion discussion. You know, I know there's been some media coverage about brokers being against broad AI exclusions in policies and I was hoping you could unpack that view for us a little bit and any views you guys have on that.
John Doyle, President and CEO of Marsh
Yeah, and I'll ask Nick to talk about it in a second. But you know, AI is embedded in most companies’ workflows in lots of different ways and processes and products. Right. So a broad-based exclusion could create, you know, real confusion and uncertainty. We're not trying to poke insurers, we just are really trying to have a thoughtful discussion about how this might change exposures, very limited claim activity to date and really better understand how these risks aggregate.
By the way, kudos to Nick and to Dean for leading on this issue really for the broader marketplace. But Nick, maybe you could talk. We're just back from a conference actually where we had a lot of engagement on this conversation.
Nick Studer, President and CEO
Yeah, I do want to emphasize that we see our role here as to advise our clients, look out for the best interests of our clients while working with carriers and with the reinsurance markets to make sure that the market is reflecting the risks that are there. And if I unpack it a little bit, you know, there are sort of two—we certainly see two, and there's probably, over time, a third category will emerge. The first category is just where AI is an elaboration or an evolution of an existing risk or peril.
And, you know, it would be impossible to unbundle it from the causal pathways to whatever outcome may be. And that's really where we were focused on not excluding things which we think would lead to uncertainty, to contention, to gaps in cover. There are places, a second category, where AI risks will require us to evolve established products or services because the AI exposes gaps or flaws in the existing marketplace. There's an evolutionary opportunity there.
We're not certain there's a third category where there's something totally unique to AI that has never been previously contemplated in the insurance market. But we're open to the possibility. And in all three categories, we're working with our clients and looking to work with carriers to help the market evolve.
John Doyle, President and CEO of Marsh
Thank you, Nick. And thank you, Rob. Andrew.
OPERATOR
Next question. Our next question comes from the line of Meyer Shields with KBW.
Meyer Shields, Analyst at KBW
Great, thanks so much and good morning. Mark, you mentioned the, I guess, pull-forward acceleration of the success fees in Oliver Wyman. I was hoping you could give us a sense as to maybe the revenue and earnings impact of that.
John Doyle, President and CEO of Marsh
Mark, you want to take that?
Mark McGivney, CFO
Yeah, Meyer, we wanted to point it out. Certainly not explaining the preponderance of growth in management consulting. Even without that, management consulting had a very strong growth, growth quarter. But as Ted mentioned, success fees are becoming a big part, a bigger part, of how we're structuring fees with clients. It's good for us to participate in that gain sharing. And so that was a factor. But management consulting had strong growth, strong growth year to date.
But we just wanted to point that out.
John Doyle, President and CEO of Marsh
Do you have a follow up?
Meyer Shields, Analyst at KBW
Yeah, just a quick one. So if we take the commentary from the Marsh index. So it looks like property pricing got a little bit less bad to 10% down from 12. Are the books of business that renew in the second quarter comparable to the third?
John Doyle, President and CEO of Marsh
Yeah, good question. You called it less bad. I want to point out it's very good for our clients. Right. You know, rate relief is—we're trying to have efficient risk financing rate for, you know, for our clients. But of course it does impact our growth. I wouldn't over-index certainly on a quarter, but I would also say, Meyer, that even in Marsh Risk, more of our property cat renewals exist in the first and second quarter. So yes, there's a bit of a different mix of business here in the third quarter.
Hopefully that helps. Thank you, Meyer. Andrew. Next question, please.
OPERATOR
Our next question comes from the line of David Motimadin with Evercore ISI.
David Motemaden, Analyst
Hey, thanks. Good morning. I know it's a smaller reinsurance quarter, but the growth there over the last three quarters has been, or at least over the prior two has been softer than your peers. And I hear your commentary on the pricing environment likely continuing to be a headwind into next year. Could you just unpack some of the moving pieces there between net new and then the drag from pricing and if we should expect the same type of growth as we've seen in the first nine months into 2027, given the pricing environment, sounds like it'll continue.
John Doyle, President and CEO of Marsh
Sure, sure. Good morning, David. Thank you. You know, as Mark noted, we're minus one through nine months, which we think is really kind of reflective of where we are. Mark spoke of course about pricing and the impact of that. We're a bit overweight on property cat relative to some others. We're a bit overweight U.S. as well compared to some others. And you know, we had a bit. It was a noisy quarter in the third quarter too, a small quarter but also a bit noisy with some nonrecurring items.
Been hit a little bit by some of the consolidation that's happened in the industry as well during the course of the year. But again, no excuses, we're well positioned. We have, we think, the best reinsurance team in the market. I would also point out to you, David, that some business that we do for the insurance industry in our company is in Oliver Wyman actuarial, Oliver Wyman, and some business in Marsh Risk as well. So it's a critical business to us.
It's really important on so many levels. And so we feel like we're well positioned. Dean and the team see good growth in fact in M&A advisory, alternative capital, alternative structures, driving opportunities. So we're facing some market headwinds. We've seen them before, but we feel good about how we're positioned over the medium to long term. Do you have a follow up, David?
David Motemaden, Analyst
I do, yeah. Thanks for that, John. Just within the management consulting business, it sounds like the growth there is being driven by quotient, the AI transformation. It sounds like some competitors are passing through some of the AI efficiencies that they're getting in their business through, I guess, lowering price to improve volume in AI transformation engagements. Is that something that you guys are doing? Is it something you're considering? Just hoping for a little bit of color there.
Thank you.
John Doyle, President and CEO of Marsh
Yeah. I would first note, David, that our growth is more broad based than quotient and maybe I'll ask Pat to talk about some of the impacts in a second in people and investments as well. But Ted, maybe you could talk about. I mean we're excited about AI driving kind of greater value of work that we're doing as opposed to it driving some pricing change. But Ted, maybe you can start and pass it off to Pat.
Ted Moynihan
Yeah, we'll just reiterate John's point that the growth was pretty broad based. To give you another example, we saw pretty good demand for example in our M&A business and our post-merger integration business over the last quarter as well. The nature of work is changing and a lot of the AI transformation work that we are doing brings different skills in. The pricing structures change a little bit. As I mentioned, outcome-based pricing is growing a little bit, but we're seeing our clients are really happy to pay for value.
One of the points that John drew out in his comments was around the private equity companies that are increasingly bringing us in to look at their portfolio companies and do everything from AI strategy to cost transformation to agentic commerce and so on. So it's really, I think we see a multi-year transformation for a lot of our client base around AI and that's why we're very excited about the opportunities for quotient for us and for our clients.
Pat Tomlinson
Yeah, thanks for the question as well. And we're pleased with our overall growth across the people and investments business and across the various different practices. But on AI we see that probably the most at this point inside of our workforce and rewards practice and our overarching view on it is that the potential impact to the business I would say is positive. It's strengthening our opportunity with clients and the value we're delivering. We are seeing clients expecting us to use AI in our work.
Right. And where I would say the biggest impact we're seeing is we're expecting them to. They're expecting faster timelines, they expect it to be used responsibly, they expect us to be able to protect their data, but they also expect increased value. I think Ted was hitting on this and increased speed to outcomes and that's what we're really seeing the most. We've got proprietary data sets as John has mentioned in his opening, and those differentiated data sets combined with our AI capabilities that we're building to be able to drive value for clients and with our consultants and recommendations is really allowing us to create more precision, more relevance for clients and getting them the outcomes that they are looking for faster. I would say also that clients also understand from the question was about cost. The clients also understand that AI is not free. They're all seeing it on their side as well. And they expect us to continue to invest in AI tools and invest in the platform to be able to go ahead and deliver them these outcomes in a faster, more consistent basis to where they can go ahead and capture speed to value.
John Doyle, President and CEO of Marsh
Thanks, Pat and David. I would add that as I mentioned, the Lens suite of tools that we're introducing to our colleagues are able to handle overwhelmingly the work that we do for our clients and how it's changed our processes internally. We do use frontier models, third-party frontier models when working with our clients and we build those costs into the pricing of the work that we're doing for our clients. Thank you, David. Andrew, next question please.
OPERATOR
Our next question comes from the line of Bob Huang with Morgan Stanley.
Bob Huang, Analyst at Morgan Stanley
Yeah, good morning. One thing I want to just maybe unpack a little bit is if we look at the EMEA business within Risk Insurance Services, EMEA not only had a strong quarter, in fact EMEA had a really strong year. As we think about the drivers here, can you maybe just help us give us a little bit more details in terms of how durable is this business? What's kind of driving it now and then, where are the drivers going from here? What is driving the growth?
John Doyle, President and CEO of Marsh
So thank you for that. Yeah, thanks Bob. Yeah, we have outstanding team, incredibly well positioned all throughout that region. And you know, I'll ask Nick to unpack some of the drivers of growth there.
Nick Studer, President and CEO
Yes, I think very robust, strong business, quite diversified in the geographic range of the region. We had really strong growth, very high single digit growth in new business, strong growth in specialties and actually so specialty-wise growth in Cyber, Credit, Marine, we saw growth in FAC where we worked very closely with Dean's teams. We saw growth in capturing some of what had previously been leakage to the wholesale markets through our London wholesaler, through MMA London, growth in facilities, growth across the board.
John Doyle, President and CEO of Marsh
And you know, I would add, Bob, that obviously there's a tremendous amount of disruption given the ongoing geopolitical conflict all throughout the region. We have over 2,500 colleagues in the Middle East and we're incredibly proud of their resilience, their focus on delivering for our clients. So I just want to point out the Middle East part of that territory as we reported and growth has remained resilient for us as a company. Do you have a follow up, Bob.
Bob Huang, Analyst at Morgan Stanley
Yeah, thank you for that. I really appreciate it. My follow up is a little bit more on consulting. I know we talked about AI workload, things of that nature, but I want to maybe focus a little bit on the traditional work as we go into this year so far and going into next year. Do you see any visible signs of maybe the traditional non-AI-related consulting work, perhaps facing pressure or cannibalization from AI implementation? Does it make sense that as AI becomes a bigger part of the business, that AI workload will start to cannibalize or become a bigger part of consulting going forward, if that makes sense?
John Doyle, President and CEO of Marsh
I'm not sure I really understand your question. Maybe I'll share a couple of thoughts that come to mind. Obviously, AI is driving a lot of change inside of companies all around the world. And Ted spoke and Pat both spoke about how that's driving some opportunity for us at the moment. What I would also though say in my prepared remarks, I talked about broader change, geopolitical conflict, geoeconomics. I didn't talk much about extreme weather. It's been obviously a relatively modest year from a cat risk perspective. But all of these themes, social issues, labor market challenges, all driving lots of change and uncertainty for clients, all of those factors, not just AI, are driving demand for our services, not just in consulting, but in risk as well. Right.
And so one of the unique attributes about our firm is that we help clients understand their risks, develop a plan to mitigate those risks, help them finance some of those tail risks when that's appropriate. And we do that in lots of different ways. But then we also help them capture the opportunity in this moment. And, you know, that's really why we're coming together on one unified brand and why we're excited about not just helping companies build greater resilience in this time of change, but using that resilience as an offensive weapon so that our clients can help grow and thrive in moments like this. Hopefully that helps. Andrew, next question.
OPERATOR
Our next question comes from the line of Elise Greenspan with Wells Fargo.
Elise Greenspan, Analyst at Wells Fargo
Hi. Thanks. Good morning. My first question is on the margins guidance for the year. You guys pointed to margin improvement for 26. I just wanted to clarify, do you guys expect margin improvement for the year in both segments or just on an overall basis?
Mark McGivney, CFO
Yeah. Thanks, Elyse, and good morning. We don't guide by segment, but as Mark and I both in our prepared remarks, we do expect continued margin expansion for the year for the company. Again, we want to balance margin expansion with continued investment in future growth. We want to deliver growth in earnings for our company over the long term, of course. And so we delivered solid growth in adjusted EPS in the quarter and margins were flat. But we do expect to drive margin expansion for the year for the company.
You have a follow up, Elyse?
Elise Greenspan, Analyst at Wells Fargo
Yeah, thanks. Then my second question you guys had called out, I think transactional oriented businesses and data centers as benefiting the U.S. and Canada organic growth in the quarter. Can you just give us a sense of the contribution in the Q3 and how that's compared to other quarters this year and just in any sense of expectations going forward as well?
John Doyle, President and CEO of Marsh
Yeah, we're not going to give exact revenue contribution from those sectors and obviously it's a dynamic economy and we're continuing to invest in areas where we see growth. So digital infrastructure has been an area where we've been investing. The active M&A environment has driven some growth for us there and we continue to invest there. Health care continues to be a strong driver of demand. Private capital. Ted spoke about it, but it's more broad based than in our management consulting team.
We're seeing real opportunities in energy, I think I. Did I mention energy? I can't recall, sorry. I mentioned energy. So we're investing against kind of the fast-moving rivers, if you will, that are out there and both transaction risk and we just wanted to call out how transaction risk and digital infrastructure continue to be good sources of growth for us. Do you have a follow up, Elyse, or was that the second one? I care. Sorry about that.
Elise Greenspan, Analyst at Wells Fargo
That was the follow up.
John Doyle, President and CEO of Marsh
Sorry, Elyse. Thank you, Andrew. Next question.
OPERATOR
Our next question comes from the line of Alex Scott with Barclays.
Alex Scott, Analyst at Barclays
Hey, good morning. I just wanted to see if you could dig a little more into the transactional risk, construction, digital infrastructure, on how that impacted things this quarter and maybe what you're seeing in terms of a little more real time. I think things have maybe slowed down in September and in October. So is that something, on any of those fronts, that we should be considering into the end of the year?
John Doyle, President and CEO of Marsh
I'm sorry, Alex, what slowed down in September and October? I didn't hear that part.
Alex Scott, Analyst at Barclays
I think transactional risk, and I don't know about construction, but rates are certainly up. So I just wanted to see if there was any impact from some of those things.
John Doyle, President and CEO of Marsh
No, I mean for our business, demand remained pretty strong through the quarter. Our pipelines remain, in both of those—both segments of our business remain strong as well. In digital infrastructure, of course I mentioned in my prepared remarks that the Stratus exchange that we put together as these data centers transition to being operational risks, and so really important transitions. So while there can be a nonrecurring aspect to some aspects of construction or a heightened period of risk, we do serve those clients through the operational phase of those facilities.
I mentioned also in my prepared remarks that there's kind of a broader wake; there's broader investment that happens around data center construction and so it's driving growth for us in Marsh and other parts of the company as well, as other investment happens kind of around this big capital infusion that happens in communities. So we're excited about how we're positioned there. Obviously lots of politics around data center construction and, as I mentioned also in my prepared remarks, we're all for responsible AI deployment.
That includes the construction of data centers, and we're working with clients on community engagement and how to show up in the right way so that it can be a win-win for communities not just here in the United States, but in other parts of the world as well. Do you have a follow-up, Alex?
Alex Scott, Analyst at Barclays
Yeah, maybe if I could do a follow-up on just hiring and the saves that you're expecting related to some of the implementation of AI, the Thrive program, etc. To what degree is that allowing you to begin investing more in hiring and how do you balance that versus the margin improvement as we think in the next year?
John Doyle, President and CEO of Marsh
Yeah, you know, it's a good question and it is a balance. Right. We're constantly trying to balance it and it connects back to my comments to Elise about margin expansion. We want to continue to drive growth in the business and, well, really margin expansion is an outcome of the way we run the business. It's not really a primary KPI for us inside of the company. Again, we do expect to drive margin expansion this year. I'm very pleased with the state of our talent.
We have the best talent in the market, hands down. Our retention is strong, our engagement scores are excellent. We work really hard on our colleague value proposition. We know we have to earn where we stand in the market and earn the time and commitment of our colleagues to the work that we do here. We have been adding to market-facing talent both laterally and from an early career point of view. We continue to hire early career at the same rate we have, I think might be a little bit different than some others not in our industry but broadly in the economy.
But we continue to see really strong returns from hiring early career folks, and we've begun to harvest some attrition really in our mid and back office. So it's been part of the process improvement and cost improvement that our team in BCS, and some of the automation and workflows. So quarter to quarter, when you look at our total colleague headcount, there are going to be ins and outs with M&A and contractors. So it's a dynamic time obviously for people.
What we tell our colleagues is that be good users of AI and you're going to become more valuable to us, more valuable to our clients. And it'll be a win-win for both our colleagues and for our business. Thank you, Alex. Andrew, thank you.
OPERATOR
I would now like to turn the call back over to John Doyle, president and CEO of Marsh, for any closing remarks.
John Doyle, President and CEO of Marsh
Thanks so much, Andrew. And thank you all for joining us this morning in an active quarter for our industry. I want to recognize our colleagues for their focus and discipline and thank our clients for their continued trust and support. We remain confident in our strategy and energized about what's ahead. I look forward to speaking with you all again next quarter. Thanks, Andrew.
OPERATOR
Thank you. Ladies and gentlemen, thank you for participating. This does conclude today's program and you may now disconnect.
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