Canadian Underwriter

Will brokers’ travel expenses return to 2019 levels?

July 27, 2021   by Greg Meckbach

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As economies re-open with more people getting their COVID-19 vaccinations, corporate executives will put more thought into their decisions on whether or not employees travel, suggests the CEO of Marsh & McLennan Companies Inc.

New York City-based Marsh & McLennan will gradually increase its travel and entertainment spending throughout the remainder of 2021, CEO Dan Glaser said last week.

“I think that companies – not just Marsh & McLennan – will travel with more purpose. They will be more thoughtful about travelling,” Glaser said July 22 during a conference call discussing his firm’s financial results for the three months ending June 30. Glaser was replying to an investment banking analyst who asked about the impact on Marsh & McLennan’s profit margin if travel and entertainment expenses return to pre-COVID levels.

Marsh & McLennan is the parent company of Marsh, the largest global commercial P&C brokerage. Marsh & McLennan also owns reinsurance intermediary Guy Carpenter and consulting firms Mercer and Oliver Wyman.

Marsh & McLennan reported operating expenses, in Q2 2021, of US$3.79 billion, up from US$3.3 billion during the same period of 2020. The firm said its underlying expenses increased 4% due to higher incentive compensation and base salaries due to increased headcount, but this was partly offset by lower travel and entertainment. Like most firms, Marsh & McLennan imposed strict restrictions on travel and entertainment ,in early 2020, because of the COVID-19 pandemic.

“We do expect, and hope, that over time, [travel and entertainment] gets back to kind of 2019 levels but we may be quite a ways away from that point in time,” Glaser said July 22 during the earnings call.

Marsh & McLennan reported net earnings of US$820 million on revenues of US$5 billion in the most recent quarter. In Q2 2020, its revenues were US$4.2 billion.

The growth potential for Marsh & McLennan is “significant” because the firm is guiding corporate clients “through the complexities of the new normal,” Glaser suggested.

“We not fearful about the economy. We are fearful about continuing waves of COVID but the economies have adjusted somewhat in many parts of the world and are more resilient than they were in the spring of 2020. So the economic impact won’t be as severe as we had seen even with continuing waves of COVID,” Glaser said.

“The shape of this economic recovery is very different from any we have seen before. Some industries are thriving while others are being impacted by supply chain disruption, inventory issues and labour shortages. Navigating this economic landscape is challenging, even confounding, for some businesses,” he said.

Glaser warned that despite encouraging economic indicators, the pandemic is not over yet.

“Vaccine hesitancy creates risk and there are many parts of the world where vaccine availability is limited. As a result, much of the world is experiencing another wave of the pandemic with rising case counts due to the spread of variants.”

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