Much attention was paid to ESG (environmental, social and governance) issues and the Russian invasion of Ukraine as Marsh McLennan reported the highest first-quarter underlying growth in more than 20 years.
First-quarter net income attributable to the company was up to about $1.1 billion compared with $983 million after the first three months of 2021, but CEO Dan Glaser’s prepared remarks during a call with analysts on April 21 turned to ESG initiatives.
“Advancing good in the world is important to us,” he said. “We believe in order to deliver long-term value for shareholders, we also have to be a good employer, a good global citizen and bring our best to our clients.”
Internally, Marsh McLennan recently announced a net-zero goal by 2050, and in 2021 Marsh became certified as a Carbon Neutral company, established its Inclusion and Diversity Center of Excellence and appointed its eighth director meeting the company’s diversity criteria to the board.
To help clients, Glaser said Marsh launched a new D&O initiative for U.S. based clients with superior ESG frameworks. Marsh McLennan’s reinsurance broker Guy Carpenter arranged FloodSmart Re cat bonds for FEMA to help pay claims from the National Flood Insurance Program. The company’s consulting arms are assisting clients in understanding pay equity and diversity challenges and developing low-carbon business models.
“ESG continues to be an area where we see significant growth potential and an opportunity to benefit our clients, colleagues and communities,” Glaser said.
Russian-Ukraine Impact
On the invasion of Russia, Marsh on March 10 said it was exiting all its businesses in the country. It did not come without a cost. CFO Mark McGivney said Marsh recorded a mostly non-cash charge of $52 million related to the move, as the broker transferred ownership of business to “local management who will operate independently in the Russian market.”
“In terms of ongoing impact, revenues and operating income from Russia are not significant,” McGivney told analysts.
John Doyle, chief operating officer, said Marsh McLennan “took a number of steps” to help colleagues, including evacuation support and “creating assistance programs in Poland and Ukraine.”
From a business perspective, Doyle said the company is advising clients on several issues such as economic effects, managing exposure, supply-chain issues, complexities of sanctions and claims aggregation.
Asked by analysts to explain potential implications of the Ukraine invasion, Glaser said they are unknown since the conflict isn’t over.
“We don’t know what those [implications] are,” Glaser said. “What’s the impact on energy prices? What’s the impact on GDP globally, in Europe? There’s a lot of factors. In terms of headwinds that it could conceivably create, I think it’s going to play out for quite a while.”