Marsh & McLennan Cos. Inc. President and CEO Daniel Glaser said Feb. 2 that he views the operating environment in 2017 as being "broadly similar to last year" as he projected consolidated underlying revenue growth to remain between 3% and 5%.
"We see geopolitical risks, specifically its impact on foreign exchange rates, being a potential downside but difficult to predict," Glaser said during a conference call. "That said, I have more hope that I had six months ago with regard to the U.S. around GDP growth, inflation, interest rates and possible U.S. corporate tax reform."
Marsh & McLennan reported underlying revenue growth of 3% in the fourth quarter of 2016 and for the full year.
Glaser expects the company to also expand its margins, produce "strong" adjusted EPS growth and return a "meaningful" amount of capital to shareholders. He declined to give specific adjusted EPS guidance but said "we expect 2017 to be a pretty decent year" in that respect.
Regarding the prospects for U.S. corporate tax reform, Glaser said it would be a "huge potential positive for us" in the context of the Marsh & McLennan Agency middle-market brokerage business. He said the company had committed more than $2.5 billion in capital to that business since 2009, and its return on that investment has been "good" at the current, higher corporate tax rate.
"So ultimately, if the U.S. tax rate comes down, it means the money that we've already committed, that $2.5 billion return profile, is far better than the good returns that we already receiving," Glaser explained.
The bulk of the benefit from tax reform would "fall into" Marsh & McLennan's earnings and free cash flow, he added, saying the company would apply its "regular, balanced capital allocation strategy" to those funds in the form of organic investments in the business, dividends, acquisitions and share buybacks.