MITRE MINING CORPORATION LTD (MMC) — Q2 2025 Earnings Call Transcript

Good morning, and thank you for joining us to discuss our second quarter results reported earlier today. I'm John Doyle, President and CEO of Marsh & McLennan. On the call with me is Mark McGivney, our CFO; and the CEOs of our businesses: Martin South of Marsh, Dean Klisura of Guy Carpenter; Pat Tomlinson of Mercer; and Nick Studer of Oliver Wyman. Also with us this morning is Jay Gelb, Head of Investor Relations. Marsh & McLennan had a solid second quarter. As we said coming into the year, we anticipated impacts from a changing macro environment, and our performance continues to track well with our expectations. Overall, we grew revenue 12% in the quarter, reflecting continued momentum in our business and contributions from an active year of acquisitions in 2024. Underlying revenue increased 4% for the quarter. I was pleased with our execution, especially given the impact of lower fiduciary interest income, declining P&C pricing and market uncertainty affecting our clients, especially here in the U.S. Adjusted operating income increased 14% from a year ago. Our adjusted operating margin increased 50 basis points compared to the second quarter of 2024, and adjusted EPS grew 11%. Turning to the macro environment. The global economic outlook remains uncertain as we move into the second half of the year. Ground wars, culture wars, trade wars, extreme weather and the opportunities and risks from the rapid development of AI are creating complex operating conditions. Oliver Wyman recently teamed up with the New York Stock Exchange to see how CEOs are thinking about and responding to the challenges they face. 165 CEOs responded on topics ranging from managing geopolitical instability and supply chain disruption to capturing value from AI. In all, 89% of CEOs rated geopolitics along with trade and industrial policies as a risk to their company, up 20 percentage points from 2024. CEOs are focused on extracting growth in a slowing economy and a more complex geopolitical environment while tightly managing costs and spending more time on near-term issues. While the environment presents challenges for our clients, it also provides Marsh & McLennan with an opportunity to support them. We're advising clients on near- and long-term strategies and guiding them on growth and building resilience during this dynamic period. This includes analyzing supply chain risks and helping them consider the impacts of AI on their workforce. Together, we can transform these challenges into opportunities. I also want to take a moment to address the current litigation environment in the U.S. Excessive litigation and the abuse of our legal system are effectively imposing a tax on our economy and causing a surge in U.S. liability insurance costs. The U.S. already has the highest liability insurance rates in the world, and escalating costs will only make it harder for companies to decide to invest and grow here. And for those that do, they will ultimately have to pass along these increased costs to consumers. Our tort system is intended to provide fair compensation to injured parties who have been wronged. But too often, we see tort litigation backed by a vast and growing industry with outside investors. The result in many cases is that agreed parties see less than half of the settlement awards. Our clients are feeling the effects of this growing problem. Consider the rise of so-called nuclear verdicts. Cases exceeding $100 million have grown 400% over the past decade according to the U.S. Chamber of Commerce. This trend is encouraging more lawsuits and blockbuster verdicts, which drive up insurance costs. In fact, in 2024, U.S. liability insurance experienced the most severe adverse reserve development of any single line of coverage since the 2008 global financial crisis. This was more than double the amount from the previous year. And over the past decade, U.S. excess casualty insurance rates have increased by a cumulative 150%. Addressing these tort abuses will be challenging and take time. We are committed to working with the business community and policymakers to tackle this challenge. Now turning to insurance market conditions. Overall rates continue to decrease, particularly in property insurance and property cat reinsurance. According to the Marsh Global Insurance Market Index, commercial insurance rates decreased 4% in the second quarter, driven by property despite a surge in cat losses in the first six months of the year. This follows a 3% decline in the first quarter of 2025. As a reminder, our index skews to large account business. Overall, rates in the U.S. were flat. Latin America, Europe, the U.K. and Asia were all down mid-single digits, and Pacific was down double digits. Global casualty rates increased 4%, with U.S. excess casualty up 18%, reflecting the previously mentioned liability environment. Workers' compensation decreased by 4%. Global property rates decreased by 7% year-over-year compared to a 6% decrease last quarter. Global Financial and Professional liability rates were down 4%, while cyber decreased 7%. In Reinsurance, midyear renewal rates decreased by 5% to 15% for non-loss impacted programs. A moderate increase in client demand was offset by reinsurers' increasing capacity, as well as increased ceded cat bond issuance. The cat bond market is on pace for a record year of issuance with over 50 new bonds in the first half, involving approximately $17 billion of limit. In U.S. Casualty Reinsurance, renewals were largely stable with sufficient capacity reflecting the underwriting actions of primary carriers. As always, we continue to help our clients navigate a range of market conditions. Now let me turn to our second quarter financial performance and outlook, which Mark will cover in more detail. Consolidated revenue increased 12% to $7 billion and grew 4% on an underlying basis, with 4% growth in RIS and 3% growth in Consulting. Marsh was up 5%; Guy Carpenter grew 5%; Mercer, 3%; and Oliver Wyman was up 3%. We had adjusted operating income growth of 14%, and we generated adjusted EPS in the quarter of $2.72, which is up 11% from a year ago. We also announced a 10% increase to our quarterly dividend to $0.90 and completed $300 million of share repurchases during the quarter. Turning to our outlook for 2025. We continue to expect to deliver mid-single-digit underlying revenue growth, solid growth in adjusted EPS and our 18th consecutive year of reported margin expansion. Of course, this outlook is based on conditions today and the economic backdrop could turn out to be materially different than our assumptions. In summary, we are pleased with our first half performance in a complex and dynamic macro environment. We're confident that the enduring value we provide to clients makes our business resilient even during times of economic uncertainty. Our collection of capabilities is unique, and there is strong client demand around the world for our advice and solutions. We believe we are the best positioned company in our markets, and we've earned our leadership position through 154 years of innovation and growth. Our discipline to invest for the future while delivering consistent results is not new. It's a fundamental philosophy that guides our planning and capital allocation. With that, let me turn it over to Mark for a more detailed review of our results.

Thank you, John, and good morning. Our second quarter results were solid, reflecting our strong position and execution despite a more challenging environment. Consolidated revenue increased 12% to $7 billion with underlying growth of 4%. Operating income was $1.8 billion, and adjusted operating income was $2.1 billion, up 14%. Our adjusted operating margin increased 50 basis points to 29.5%. GAAP EPS was $2.45, and adjusted EPS was $2.72, up 11% over last year. For the first six months of 2025, underlying revenue growth was 4%. Adjusted operating income grew 11% to $4.3 billion. Our adjusted operating margin increased 20 basis points, and adjusted EPS increased 8% to $5.78. Looking at Risk and Insurance Services, second quarter revenue was $4.6 billion, up 15% from a year ago or 4% on an underlying basis. Operating income in RIS was $1.4 billion. Adjusted operating income was $1.6 billion, up 16% over last year, and the adjusted operating margin expanded 30 basis points to 35.6%. For the first six months of the year, revenue in RIS was $9.4 billion with underlying growth of 4%. Adjusted operating income increased 12% to $3.5 billion, adjusted operating margin was 36.9%. At Marsh, revenue in the quarter was $3.8 billion, up 18% from a year ago or 5% on an underlying basis. This comes on top of 7% underlying growth in the second quarter of last year. It was a good result given the softening rate environment in property as well as uncertainty in the economic outlook, especially in the U.S. In U.S. and Canada, underlying growth was 4% for the quarter. In International, underlying growth remained excellent at 7%, with EMEA up 8%, Asia Pacific up 4%, and Latin America, up 3%. For the first six months of the year, Marsh's revenue was $7.3 billion with underlying growth of 5%. U.S. and Canada grew 4%, and international was up 6%. Guy Carpenter's revenue in the quarter was $677 million, up 7% from a year ago or 5% on an underlying basis. Growth remains solid despite softer reinsurance market conditions and came on top of 11% growth in the second quarter of last year. For the first six months of the year, Guy Carpenter generated $1.9 billion of revenue and 5% underlying growth. In the Consulting segment, second quarter revenue was $2.4 billion, up 7% or 3% on an underlying basis. Consulting operating income was $456 million, and adjusted operating income was $479 million, up 9%. Our adjusted operating margin in Consulting was 20.2%, up 40 basis points from a year ago. In the first six months, Consulting revenue was $4.7 billion, reflecting underlying growth of 4%. Adjusted operating income increased 9% to $970 million, and the adjusted operating margin increased 40 basis points to 20.7%. Mercer's revenue was $1.5 billion in the quarter, up 9% or 3% on an underlying basis. Health grew 7%, reflecting continued solid growth across all regions. Wealth was up 2%, led by investment management. Our assets under management were $670 billion at the end of the second quarter, up 9% sequentially and up 36% compared to the second quarter of last year. Year-over-year growth was driven by our acquisitions of Cardano and SECOR, positive net flows, and the impact of capital markets and foreign exchange. Career was down 5% in the quarter, reflecting continued softness in project-related work in the U.S. and Canada. For the first six months of the year, revenue at Mercer was $3 billion with 3% underlying growth. Oliver Wyman's revenue in the second quarter was $873 million, up 5% or 3% on an underlying basis, led by solid growth in the U.S. For the first six months of the year, revenue at Oliver Wyman was $1.7 billion, an increase of 4% on an underlying basis. Fiduciary interest income was $99 million in the quarter, down $26 million compared with the second quarter last year, reflecting lower interest rates. Looking ahead to the third quarter, based on the current environment, we expect fiduciary interest income will be approximately $105 million. Foreign exchange had a de minimis effect on adjusted EPS in the second quarter. Exchange rates have been volatile, making it challenging to predict their impact looking forward. However, based on current rates, we anticipate FX will have a minimal impact on adjusted EPS in the third quarter and will be a modest benefit in the fourth quarter. Turning to our McGriff transaction. Our integration continues to go well, and we are pleased with McGriff's year-to-date performance. We continue to expect that McGriff will be modestly accretive to adjusted EPS for full year 2025, becoming more meaningfully accretive in 2026 and beyond. We still expect noteworthy charges associated with McGriff of approximately $450 million to $500 million in total through 2027, with the vast majority of these costs associated with retention incentives, a significant portion of which was put in place by the seller. As is our convention, we are excluding McGriff from our underlying growth calculations for the first year. Total noteworthy items in the second quarter were $88 million, the majority of which were acquisition-related costs. Interest expense in the second quarter was $243 million, up from $156 million in the second quarter of 2024. This increase reflects higher levels of debt associated with the McGriff transaction. Based on our current forecast, we expect interest expense will be approximately $240 million in the third quarter. Our adjusted effective tax rate in the second quarter was 25.3%. This compares with 26.2% in the second quarter last year. Excluding discrete items, our adjusted effective tax rate was approximately 25.5%. We continue to expect an adjusted effective tax rate of between 25% and 26% in 2025, excluding discrete items. Turning to capital management and our balance sheet. We ended the quarter with total debt of $19.7 billion. Our next scheduled debt maturity is in the first quarter of 2026, when $600 million of senior notes mature. Our cash position at the end of the second quarter was $1.7 billion. Uses of cash in the quarter totaled $776 million and included $405 million for dividends, $71 million for acquisitions, and $300 million for share repurchases. For the first six months, uses of cash totaled $1.6 billion and included $810 million for dividends, $166 million for acquisitions, and $600 million for share repurchase. We continue to expect to deploy approximately $4.5 billion of capital in 2025 across dividends, acquisitions, and share repurchases. The ultimate level of share repurchase will depend on how our M&A pipeline develops. Last week, we announced a 10% increase in our quarterly dividend, making this our 16th consecutive year of dividend increases. This reflects our solid earnings growth and confidence in our outlook. Overall, we are pleased with our second quarter results. For the full year, we continue to expect mid-single-digit underlying revenue growth, margin expansion, and solid growth in adjusted EPS. However, as John mentioned, this outlook is based on conditions today and the economic backdrop, especially in light of continued uncertainty around global trade policies could turn out to be materially different than our assumptions. With that, I'm happy to turn it back to John.

Thank you, Mark. Andrew, we're ready to begin Q&A.

So my first question, in your comments, John, you talked about the pricing index being down 4% in the second quarter, on top of being down 3% in the first quarter. Are you seeing anywhere in the system upward pressure on pricing? Or if we would look forward over the next 12 to 18 months, are we going to continually see these low-single-digit rate decreases in the broader market?

Yes, Greg, thanks for the question. The insurance and reinsurance markets are generally continuing to soften a bit in the second quarter. I mentioned that the reinsurance market has seen stable price decreases throughout the first half of the year, mainly driven by property. We're noticing more pressure on rates in the retail side, especially in property. The notable exception is in excess casualty, which relates to the high cost of risk in the U.S. The liability environment is one factor, along with a greater portion of our economy and population being exposed to extreme weather events, disrupting our economy. Additionally, health care-related risks are rising significantly, making these some of the most costly in the world. As our country focuses on infrastructure and technology investments, these costs are significant for our clients and impact our own business as well. It’s important to address this issue. The liability concerns relate to recent legislation, particularly an amendment proposed by Senator Tillis regarding tax policy for litigation financing. Currently, many injured parties receive less than 50% of settlement outcomes and face ordinary income tax in the U.S., while lit funders pay capital gains tax and foreign investors pay no tax. This represents a missed opportunity. There are other issues that need addressing, and we are focused on them for our clients. I expect casualty pricing to remain under pressure for our clients, with rates continuing to increase. I also mentioned the active first half of catastrophe events. Prices may be down now, but over time, pricing is likely to align with the rising cost of risk in the U.S. It's challenging to predict precisely over a 6 to 12 month period, but I firmly believe we're in an environment of increasing risk costs in the U.S. Do you have a follow-up?

Yes, I do, of course. I'm going to pivot to the Mercer segment. And I just wanted to pick a part or have you provide more detail on the wealth and career components of organic. I guess I was listening to Mark's comments about AUM being up. I think he said 36% year-over-year in wealth, yet we're only seeing 2% organic revenue growth. So I'm trying to understand the connection there. And then on Career, I think that's probably a little bit more of your more economically sensitive business, but maybe you could speak to the outlook for both of those businesses, please?

Yes, thanks for the question. Overall, we had a great quarter of growth, achieving 12% on a consolidated basis, with strong underlying performance at Marsh and GC. Some areas of our Consulting businesses, particularly parts of Career and our Oliver Wyman segment, like branding, are facing more discretionary spending and are affected by a declining economy and uncertainty as large U.S. companies adopt a more cautious approach. Despite this, we experienced significant growth in health at Mercer. Pat, could you share your insights on the trends in both the career and investment sectors?

Thanks, John, and thank you for the question, Greg. I'll start with wealth since that seems to be the focus of your inquiry. It's essential to understand that our wealth business encompasses a variety of services, including defined benefits, pension consulting, investment advisory services, and OCIO. You mentioned AUM, and it's crucial to note that only the OCIO segment generates revenue tied to AUM. Overall, our wealth division, as Mark pointed out, grew by 2% in Q2, primarily due to the expansion of our Investments business, particularly the OCIO offering linked to AUM, although we faced tougher comparisons in the DB pension consulting area. While we have previously discussed the structural decline in the defined benefits pension space, we've recently seen a rise in demand for project-based consulting due to improved plan funded status driven by higher interest rates, along with increased regulatory requirements in various regions globally. However, this year, demand for such projects is beginning to slow, especially in the U.S. and the U.K., as clients are pausing discretionary projects due to changing macro priorities. Additionally, there has been a downturn in demand for the regulatory changes I mentioned. Conversely, demand for DC plan solutions, such as Master Trust in Australia and the U.K., as well as 401(k) plans in the U.S., is still on the rise. We're also enhancing our investment advice and OCIO solutions for diversified asset owners like insurers, endowments and foundations, family offices, and wealth management firms. The OCIO segment, linked to AUM, has been a robust growth driver for Mercer historically. Over the past year, we've witnessed strong net inflows, both organically and through acquisitions. The 36% growth Mark referred to reflected our overall growth rate, excluding the inorganic components. Although capital markets have been volatile in 2025, they provided a year-over-year tailwind in Q2. Ultimately, we believe our capabilities and the value we provide for clients will continue to spur growth in this segment. The difference between the 36% and the 9% growth Mark mentioned sequentially relates to the organic versus inorganic AUM growth. Now moving on to Career, which is the second part of your question, I want to give some context regarding our Career business. It's a mix of offerings, including project-based consulting assignments that are typically one-time engagements and more product-like services such as compensation benchmarking surveys, assessments, and employee engagement surveys, which are generally recurring. The Career segment experiences natural seasonality, peaking around the annual compensation and reward cycle during our clients' year-end planning in late Q3 and Q4. In this quarter, Mark noted that Career contracted by 5%, primarily due to weakened project demand in the U.S., influenced by several market dynamics. One major factor is the prevailing economic uncertainty, leading clients to hesitate in committing to large, long-term HR technology projects, which we typically see more of in the U.S. Another factor is that demand for talent and rewards projects tends to be higher in inflationary periods when wage pressures, bonuses, and salary increases elevate. Additionally, increased voluntary employee turnover usually drives project demand as employers aim to attract, retain, and incentivize their workforce. Currently, the employment market reflects relatively low voluntary turnover among clients, which diminishes the urgency for such projects. This contraction in the U.S. and Canada was partially offset by growth in our international market, where we experienced increases across all three major areas of our business: talent, rewards, and transformation. We see ourselves as the leading rewards consulting firm globally, equipped with strong capabilities, expertise, and a vast geographic reach. The overall performance of this business has been robust in recent years, and it continues to thrive internationally. Therefore, we remain optimistic about the long-term growth prospects in our Career business and the value we will deliver to our clients.

Thanks, Pat. So well positioned in both of our businesses obviously exposed to some of the uncertainty in the U.S. in our Career business. And then in our investment business, some structural issues with defined benefit growth in prior years. So thank you Greg. Andrew, next question please.

Question kind of maybe related to the first question, specifically on the RIS segment. So I just want to make sure we're thinking about things correctly. So when we kind of think from a macro level about total organic growth in the RIS segment. Usually, we think nominal GDP is kind of the biggest corollary, and very secondary kind of would be pricing power levels since a lot of this is more fee-based too. Would you agree with that kind of high-level statement because I'm trying to kind of think out the we can kind of have a view on pricing? You've helped us with a view on pricing. The nominal GDP decline is slighter. Just want to see if I'm missing anything maybe in terms of just talent hiring in the past or now or other factors.

No. Thanks for the question. No, I don't have any argument with the way you characterized it. I feel good about our execution. I feel good about how we're positioned. Our international growth was quite strong. What we're seeing here is in the United States, particularly upmarket and more of our large account segment, if you will, you're seeing businesses defer project work, right? We're seeing a slowdown in construction activity, M&A activity, IPOs, hiring has obviously slowed, all those on some level are inputs. So we have a macro environment, it is what it is. We power through it and continue to deliver solid results, but declining P&C pricing, slowing economic growth, interest rate headwinds with fiduciary interest income and moderating inflation as well, at least up until now. Obviously, that's a hot debate in the world. But Marsh and GC 5% ex fid, given some of those headwinds. I feel good about that.

Got it. And my quick follow-up, and I feel like you started off the call, John saying performance track is kind of in line with the expectations overall. I feel like the beauty of Marsh historically and currently is that you guys have had good line of sight into your reps, so you've been able to pull the expense levers accordingly. It sounds like from everything you're saying is there's obviously a lot of uncertainty, but you still feel like there's uncertainties at a level where you feel comfortable being able to manage the profit margin piece of the business. Is that fair?

Yes. Thanks, Mike. I appreciate that. I think there was a compliment in there. I think there was a bit of debate about our guidance about the top line coming into the year. We didn't obviously know exactly what would unfold during the course of the year, but we did expect lower interest rates, lower P&C pricing, slightly slowing economy. Probably more uncertainty has persisted that's impacted some of the more discretionary parts of our business. But I feel good about the work we've done to again manage expense growth in a tighter environment. And we do a lot of scenario planning around tighter conditions. And by the way, we do scenario planning around more positive environments too where how we're going to allocate capital if growth is above what our expectations are. I expect these conditions to persist in the second half. We'll see obviously what unfolds. And 2026 will be a new year, right? A lot that's going to happen around trade and geopolitically over the course of the next six months. And then we'll see what the environment looks like as we head into next year. But I feel good about how we're positioned. I feel good about how we're executing. We're continuing to invest. It gets a little tighter, obviously, at moments like this. And but we've consistently not only delivered margin expansion but invested in our business over time. And we try to get that balance right.

John, regarding your comments on the slowdown in IPOs and M&A, growth comparisons have indeed been challenging. However, looking at capital markets activity, it seems like we may have reached a low point. While next month could change things, it appears that both IPOs and M&A are on the rise. Are you experiencing similar trends in your business? Should we assume your growth is nearing its lowest point, or is there still significant uncertainty?

Jimmy, M&A and IPOs are just one part of a much broader macro picture. We still anticipate mid-single-digit revenue growth and continued margin expansion this year, along with solid growth in adjusted EPS. We're optimistic about this outlook, but we'll see how things progress. Currently, U.S. businesses seem to be taking a more defensive stance as they search for stability. Uncertainty is a constant factor, and while I may have used that term frequently this year, it's true that the level of uncertainty has posed challenges for many of our clients. We're working to assist them through this, which also presents an opportunity. However, it's still too soon to determine if there will be a significant increase in M&A activity, IPO activity, or even construction. Do you have a follow-up, Jimmy?

And then, yes, regarding Guy Carpenter. The growth was quite strong considering the tough comparisons, and that's despite a soft pricing environment. Is that primarily due to a low base, or is the momentum in your business stronger than what the pricing would indicate in reinsurance?

I'll ask Dean just to talk about the growth in the quarter, but I think we have the best team on the field, the best analytics in the business. And ultimately, it's a reflection of the confidence that our clients have in our ability to deliver value. But Dean, maybe you can talk a little bit about growth in the quarter for Jimmy.

We're happy with our 5% growth this quarter, which follows an 11% growth in the second quarter of 2024, a record new business quarter for us. This quarter, we experienced significant growth internationally, particularly in Latin America and EMEA, along with solid growth in the London market and Asia, despite some pricing challenges in Japan and China during the April 1 renewal. The new business remains robust and is well-balanced across our platform. Notably, we saw significant ILS activity, with record cat bond growth this quarter. Guy Carpenter was involved in 14 cat bond issuances this quarter and 23 year-to-date, setting a record for our firm. We continue to identify new opportunities in our capital and advisory practice, successfully winning several mandates to raise third-party capital for both large and small clients in the U.S. and London, especially well-known MGAs. We're also securing M&A mandates, offering M&A advice, and supporting various client activities. One key point is that property cat demand did ease at the midyear renewal, but we still sold an additional $5 billion of property cat limit during that period, boosting our top line. We're confident in our talent acquisition, attracting top talent, and building a well-rounded organization. Overall, we are optimistic about our future prospects.

I'm curious if you could discuss the strength within Marsh and International overall and how sustainable you believe it is. I understand that pricing was negative in many regions, yet growth remains strong. How long do you think this can continue?

Yes. Thanks, David. I'll ask Martin to discuss growth in more detail. Overall, I was pleased with Marsh's growth this quarter. While there were pricing challenges and other macroeconomic headwinds, I feel confident about our execution in this environment. We are active in various markets and approaching growth in diverse ways, enhancing our capabilities in the middle market globally. This contributes to our growth, and we are well positioned and effectively led outside the U.S. Martin, could you share some insights on the growth this quarter?

Thank you, John. Yes, very pleased with our international growth in the quarter, 7% on top of 7% in 2Q '24, really strong new business growth across the whole business. EMEA was up 8% on top of 7% in second quarter '24; Asia Pacific, up 4% on top of 7% in the second quarter '24; Latin America, 3% on top of 8%. So very strong geographic growth. And I'll dig into some of the capabilities as well. We had a really good quarter in construction activity around the business. Our credit specialties grew. Cyber, despite rate decreases, saw strong growth and penetration to our clients as people, particularly internationally realized the risk posed by Cyber. Our FinPro business grew, and Capital Markets business across international was stronger than in North America. But really, one of the standouts was our benefits business, which continues to show real strength and momentum. And then geographically, really pleasing in some of the areas where we've allocated capital and feel we're really well positioned. Japan, India, United Arab Emirates, Brazil, Italy, Spain, China, all showing really strong growth. So we feel we have a great momentum. The capabilities that we have across international really differentiate ourselves against any of the local players, and we have the best and the strongest network that is also able to serve the U.S. business and other international businesses that we have. So we are highly differentiated, where we operate, and we have leading positions in virtually every market that we operate in across international. So we feel really good about it.

Thanks, Martin. David, do you have a follow-up?

Yes. I was just more of a big picture question, and you sort of talked about this in a few of the different segments, just the difference between some of the trends that you're seeing in some of the more discretionary and project-based parts of the business compared to the more durable, more renewal-oriented businesses. Could you just level set us? The business mix has changed for a while? How much of the revenue base at Marsh is exposed to that more discretionary or project-based spend?

Yes, David, that's a challenging question to address. I believe all of our $25 billion in revenue is to some extent affected by economic conditions. However, our business remains defensive and resilient, with demand staying strong. Pat highlighted that certain parts of our career business are more vulnerable to economic fluctuations. Approximately 15% to 20% of our revenue is notably sensitive to downturns in the economy. Currently, the economy is stable, but we've observed weaker conditions in specific segments of our business due to a challenging environment, which has led some clients to adopt a more cautious approach. Perhaps it would be beneficial for Nick to discuss our overall growth in Oliver Wyman for the quarter and where we see more stability despite some of the softer areas in OW offerings.

Yes, absolutely. Thank you, and Pat touched on the career business, maybe a sort of complement to that. We always guide that Oliver Wyman will be a mid- to high-single-digit growth business through the cycle. And you all know that it has probably a wider range of growth as you go through that cycle. And I think we're extremely happy with how we've executed in a slower market. There were some timing and other idiosyncratic effects that slightly dampened Q2. But what we're seeing, there are many different drivers to our business. We're seeing positive trends like John talked at the beginning about the hunt for growth at the same time as efficiency and the need to invest in resilience. Many companies are finding that challenging. We're supporting many clients as they explore their AI strategies and what that does for their business, changes in supply chain, the challenges of the energy transition, these are all positive trends supporting growth in the business. That's balanced at the moment. Back to Jimmy's question, we have seen lower M&A, so some of our private capital work, some of the work we do in economic consulting is affected by that. And we are seeing client uncertainty. I don't want to further overuse John's word. But when lots of things change, there's a need for strategic advice. When people are not sure if things are going to change, they wait for a little while. And then we are seeing some of that as well. We also see on the supply side continued excess capacity working its way out of some parts of the consulting industry. But as a whole, we're happy with the execution. As Mark noted, the Americas grew strongly. That was our fastest-growing region. Europe has done a good job of replacing some very large cloud programs, which have rolled off. The Middle East has done a great job of diversifying what has been a slowdown in the Saudi Arabian market, but we're very broad across that region. On the industry side, insurance and asset management and our actuarial practice grew, again, well diversified businesses. We have actuarial consulting in life in P&C and in health, all of which grew strongly. Our consumer telecoms and tech practices and our transportation and advanced industrial practices grew. So in the past, you may have heard me talking about other parts of Oliver Wyman. It's a very diversified business. And maybe just to echo some of the comments that Dean and Martin and Pat have all made, our pipeline of sales remains solid. We're very comfortable in our ability to manage the cost base. And we continue to find ourselves being an incredibly attractive home for established top talent in the industry who are eager to help build a new leader in strategy consulting, unincumbent by some of the challenges of previous models.

First one I had for you is on just some of the rising medical costs that we're hearing about out there. I think a few companies have kind of cited it and changed guidance in the health insurance world. And just was interested if you could take us through some of the ways that impacts your business from a pricing standpoint and so forth.

Thanks, Alex, and good morning to you as well. I mean health care overall is an important part of our business. The biggest component of that, overwhelmingly, the component of our business is really helping our clients secure employee-sponsored health insurance and that enables them, of course, to compete for talent. Medical inflation is a stress point. There's, on the one hand, extraordinary medical innovation happening; specialty pharma is an important part of the medical inflation calculation right now. So it's great innovation, but it's creating stress for our clients. We see it again in our own business, rising health care costs, particularly here in the United States. We also, at both Mercer and Oliver Wyman consult to the health care industry and helping them sort through some of the innovation, some of the challenges, and complexities of the marketplace, some of the challenges around pharmacy benefit management as an example. So all are important parts of our business. Much of the employee-sponsored business that we support operates more on a fee or fee-like basis. So we're obviously thoughtful and transparent about how we get paid with our clients in a challenging environment. Pat, do you have anything to add to that?

No, I think you've captured it well, John. The important thing to note is that globally, we operate under various models for fees and commissions. A significant portion of our business in the U.S., which is substantial, primarily relies on fixed fees. Consequently, we do not experience the full effects of inflation in that area. However, it does influence the demand for our services since medical inflation poses a significant challenge for clients. They are likely to consider undertaking more projects and planned design work to manage those expenses. That said, it is difficult to establish a direct correlation between medical inflation percentages and commissions for most of our clients. While there are some clients that operate on a commission basis, the majority in the U.S. are primarily on fixed fees.

Thank you, Alex, for that question. It's a significant aspect of our business, and it holds great importance. We've experienced strong growth in this area over the last few years, which reflects the capabilities we offer our clients in the current inflationary environment. Do you have a follow-up?

Yes. So separate follow-up. I wanted to ask you about just technology, implementation of AI, et cetera. I mean, I know some of the stuff is probably still in reasonably early phase, but it seems like this could have a pretty big impact over the next year, especially on businesses that are more service-oriented. I just wanted to see where your head was at on it. I mean how big of a change do you think it will be? What are the impacts that you'd expect us to actually be able to see in the financials and so forth? And what would change the industry and your point of view from a consolidation standpoint?

I'm excited about the possibilities, Alex. We're beginning to gain clearer insights into what those possibilities are. I've previously discussed the importance of speeding up processes, improving efficiency, and gaining better insights. I believe our technology team has done an excellent job equipping us with the tools necessary for learning and experimentation. Our tech team, along with our colleagues in human resources, have developed extensive training and support for our staff. I'm pleased with our cultural adaptation to these tools. We have a learning culture in our professional services firm, which is crucial, and this reflects that. Our team is embracing these tools, and we're beginning to notice early signs of progress and breakthroughs. One area where we've recently made changes in analytics is something I'd like our business leaders to address briefly, starting with you, Pat. We're currently navigating an internal tool from earlier this week, but how is it affecting analytics, and what are you seeing in terms of our client offerings and the changes that are occurring?

Yes. I think the biggest area where it's impacting is, first off, we think it's going to create demand, especially on some of our Career product side. And I would think we would enhance it into the other areas from a product perspective. We're introducing agentic AI interfaces into our product offerings that are going to allow clients to interact with the data and the products in an enhanced way. It will allow them to make it easier to get more value. We expect that this would increase demand. A specific example that we've got is we're adding an agentic AI interface that we call AIDA on our Talent All Access portal, which is something that we have out with more than 20,000 users out in the client world. So it's really where they're going to have access to our worldwide benefit and employment guideline database. It's going to update the user experience and really clients to query the database live versus use it in a more traditional way that they've typically had access to it. So we're really optimistic about the benefits that we'll bring to clients.

Yes. I mean, 25% to 30% of our work rests on advanced analytics and AI. We've been doing that for a very long time, and GenAI has obviously turbocharged that further. And then Oliver Wyman has incredibly strong capabilities to support clients on their own AI journey. I think 95% of our clients see it as an opportunity rather than a threat. So everything from supporting governments in their national AI program offices to helping clients build new businesses through to reengineering processes like the ones you described. And you mentioned consolidation. I do think in the advisory business, scale helps it, and the fact that Oliver Wyman is part of Marsh & McLennan has access to our fantastic set of tools and buying power and so on is a real advantage for us compared to midsized consulting firms.

Thanks, Nick. Martin?

Building on that point, one of our key analytics rollouts last year was the Centrist portal, which was developed with a strong focus on AI to delve deep into company supply chains. We had a remarkable quarter last year with its rollout. Our clients are very enthusiastic about it, especially in light of all the tariffs, weather disruptions, and geopolitical issues. Providing clients with visibility and productivity through these tools is transformative for us, and we are uniquely positioned to offer this. Our Blue Suite of analytics is built on unique data, with $1.12 trillion of analyzed premiums and over $100 billion of claims in our databases, giving us exceptional insights. Recently, we implemented an AI tool over our claims database, enabling clients to analyze data; we can track how various insurance companies handle claim payments in different areas, allowing us to negotiate favorable terms for them. We're able to observe the latest trends in claims and correlate that with premium data, making it a powerful tool. We not only offer exceptional tools but also have excellent underlying data, creating a significant barrier for startups with technology to compete against us. We believe we are very well positioned; this is a key aspect of how we engage with our clients concerning risk costs and the broader perspective of risk in the future. We aim to shift the paradigm away from merely being linked to GDP, as we view risk as increasing, requiring real insights from our tools and businesses. We are exceptionally well positioned with what we have.

Dean, any thoughts from Guy Carpenter?

Yes, Guy Carpenter's analytics platform is likely the most crucial service we provide to clients, offering them value that extends beyond reinsurance transactions. We believe our analytics platform sets us apart in their eyes as they focus on managing volatility in the current environment, aiming for profitable growth and maximizing capital efficiency. I see the greatest application of AI in our industry as addressing the effects of changes from clients. Our clients are eager to understand their risks and seek our assistance in managing catastrophe risk moving forward, analyzing their portfolios, providing guidance, and helping them model the impacts of future climate change by developing proprietary models with AI. This will be the key differentiator for Guy Carpenter as we work to support our clients.

Thanks, Dean. So Alex, I'm encouraged, but it is still early to be clear. But our unique data sets, our capacity to invest, and the progress we've made so far, I'm encouraged and I feel good about how we're positioned.

Two quick questions, if I can. First, John, you talked obviously about the pressure on the litigation system. Do clients appreciate that in terms of seeking additional cover? I know they're paying more for what they're getting. But is there more demand for protection?

Yes, it's a great question, Meyer. I think in this economic environment, and I talked about the work Oliver Wyman has done with the New York Stock Exchange. Many businesses here in the U.S. are trying to grind out earnings growth in a slower top line growth environment, right? So we're not seeing big take-up. What I can tell you we're saying to our clients, though, is that you can't buy enough excess liability insurance in this environment. Of course, not all clients are the same. Many are more exposed to this than others. And so there are some real challenges that many are confronting. And when we talk to them about whether it's nuclear verdicts or even outside of nuclear verdicts and just the rising frequency and severity in kind of more standard areas of risk. It's an eye-opening discussion. The nuclear verdict thing, many will maybe try to say, 'Hey, it's not us; it couldn't happen here kind of thing.' But our concern when we look at our portfolio is that it's just happening with too much for frequency across our economy here in the U.S.

That's very helpful. Yes. Just a quick one. So Latin America organic growth slowed a little bit. I'm wondering, is that uncertainty? Or is it that the flip side of tariffs translating into deflation in markets in the U.S., is there any way of distinguishing that?

We encountered some unique challenges in Latin America. However, year-to-date growth has been positive, and we are optimistic about our positioning in the region. I wouldn't make any significant conclusions based on the macro factors there. There is a substantial protection gap in Latin America, which presents a significant opportunity for our risk business. It was just one quarter, and I don't think we should draw major conclusions from that. We have strong teams across all the major economies in Latin America, and we remain very positive about our future in those markets. As we wrap up the call, I want to express my gratitude to everyone for joining us today. I also want to thank our colleagues for their hard work and commitment, and of course, I appreciate our clients for their ongoing support and trust in our team. Thank you all, and I look forward to our next conversation next quarter.