Marsh & McLennan Companies, Inc. (NYSE: MMC), a global
professional services firm providing advice and solutions in risk,
strategy and human capital, today reported financial results for
the first quarter ended March 31, 2012.
Brian Duperreault, President and CEO, said: “Our performance in
the first quarter continues to build on the strong momentum
achieved by the Company over the past two years. This performance
reflects revenue growth from each of our operating companies, as
well as continued strong growth in adjusted operating income across
both our Risk and Insurance Services and Consulting segments.
“Marsh's performance was excellent, with strong new business
development and higher client revenue retention rates contributing
to underlying revenue growth across all geographies. Guy
Carpenter's strong underlying revenue growth in the quarter, which
was driven by international operations, extends the trend of
quarterly growth into the fourth consecutive year.
“Our Consulting segment also produced strong underlying revenue
growth in the quarter, with substantial margin improvement.
Mercer's results reflect revenue growth in its Health &
Benefits; Talent, Rewards & Communications; Outsourcing; and
Investments businesses. Oliver Wyman's revenue growth was led by
its Consumer and Health & Life Sciences industry sectors.
"We are pleased with the double-digit growth in adjusted
operating income and earnings per share in the first quarter,”
concluded Mr. Duperreault.
Consolidated Results
Consolidated revenue in the first quarter of 2012 was $3.1
billion, an increase of 6% on both a reported and underlying basis
from the first quarter of 2011. Underlying revenue measures the
change in revenue using consistent currency exchange rates,
excluding the impact of items such as acquisitions, dispositions
and transfers among businesses. Operating income rose 12% to $527
million. Adjusted operating income, which excludes noteworthy items
as presented in the attached supplemental schedules, rose 12% to
$530 million in the first quarter.
Income from continuing operations in the first quarter of 2012
was $354 million, or $.63 per share, compared with $319 million, or
$.56 per share, in the first quarter of 2011. Adjusted earnings per
share in the quarter was also $.63, an increase of 13% from $.56 in
the first quarter of 2011. Net income was $347 million, compared
with $325 million in the first quarter of 2011.
Risk and Insurance Services
Risk and Insurance Services revenue in the first quarter of 2012
was $1.7 billion, an increase of 7% on both a reported and
underlying basis. Operating income increased 9% to $417 million,
compared with $383 million. Adjusted operating income in the first
quarter increased 9% to $416 million from $383 million.
Marsh's revenue in the first quarter of 2012 increased 8% to
$1.4 billion, or 7% on an underlying basis. International
operations reported underlying revenue growth of 7% in the first
quarter, reflecting growth of 18% in Latin America, 10% in Asia
Pacific, and 5% in EMEA.
In the United States/Canada division, underlying revenue grew
6%. Guy Carpenter's first quarter revenue was $357 million, an
increase of 5%, or 7% on an underlying basis.
Consulting
Consulting segment revenue in the first quarter of 2012 was $1.3
billion, an increase of 4% on both a reported and underlying basis.
Operating income increased 24% to $159 million, compared with $128
million in the prior year period. Adjusted operating income in the
first quarter rose 24% to $162 million, compared with $131
million.
Mercer's revenue in the first quarter of 2012 was $957 million,
an increase of 4% on both a reported and underlying basis.
Retirement, with revenue of $278 million, was flat on an underlying
basis; Health & Benefits, with revenue of $253 million, was up
6%; Talent, Rewards & Communications, with revenue of $125
million, was up 5%; Outsourcing, with revenue of $177 million,
increased 4%; and Investments, with revenue of $124 million, rose
7%. Oliver Wyman's revenue increased 5% to $356 million in the
first quarter of 2012, or 6% on an underlying basis.
Other Items
Investment income, including mark-to-market gains in private
equity investments, was $20 million in the first quarter of 2012,
compared with $19 million in 2011. At the end of the first quarter
of 2012, cash and cash equivalents was $1.4 billion, compared with
$1.3 billion at the end of the first quarter of 2011. Net debt,
which is total debt less cash and cash equivalents, was $1.5
billion, compared with $1.7 billion at the end of the first quarter
of 2011.
Conference Call
A conference call to discuss first quarter 2012 results will be
held today at 8:30 a.m. Eastern Time. To participate in the
teleconference, please dial +1 888 500 6973. Callers from outside
the United States should dial +1 719 457 2601. The access code for
both numbers is 3462595. The live audio webcast may be accessed at
www.mmc.com. A replay of the webcast
will be available approximately two hours after the event.
About Marsh & McLennan Companies
MARSH & McLENNAN COMPANIES (NYSE: MMC) is a global team of
professional services companies offering clients advice and
solutions in the areas of risk, strategy and human capital.
MARSH is a global leader in insurance
broking and risk management; GUY
CARPENTER is a global leader in providing risk and
reinsurance intermediary services; MERCER is a global leader in human resource
consulting and related services; and OLIVER
WYMAN is a global leader in management consulting. Marsh
& McLennan Companies' 53,000 colleagues worldwide provide
analysis, advice and transactional capabilities to clients in more
than 100 countries. The Company prides itself on being a
responsible corporate citizen and making a positive impact in the
communities in which it operates. Visit www.mmc.com for more corporate information, or
www.PartneringImpact.com to learn more
about the Company's world-class capabilities and its solutions to
the complex problems enterprises face today.
This press release contains “forward-looking statements,” as
defined in the Private Securities Litigation Reform Act of 1995.
These statements, which express management's current views
concerning future events or results, use words like “anticipate,”
“assume,” “believe,” “continue,” “estimate,” “expect,” “future,”
“intend,” “plan,” “project” and similar terms, and future or
conditional tense verbs like “could,” “may,” “might,” “should,”
“will” and “would.” For example, we may use forward-looking
statements when addressing topics such as: the outcome of
contingencies; the expected impact of acquisitions and
dispositions; pension obligations; market and industry conditions;
the impact of foreign currency exchange rates; our effective tax
rates; the impact of competition; changes in our business
strategies and methods of generating revenue; the development and
performance of our services and products; changes in the
composition or level of our revenues; our cost structure, dividend
policy, cash flow and liquidity; future actions by regulators; and
the impact of changes in accounting rules.
Forward-looking statements are subject to inherent risks and
uncertainties. Factors that could cause actual results to differ
materially from those expressed or implied in our forward-looking
statements include, among other things:
- our exposure to potential liabilities
arising from errors and omissions claims against us, particularly
in our Marsh and Mercer businesses;
- our ability to make strategic
acquisitions and dispositions and to integrate, and realize
expected synergies, savings or strategic benefits from the
businesses we acquire;
- changes in the funded status of our
global defined benefit pension plans and the impact of any
increased pension funding resulting from those changes;
- the impact of any regional, national or
global political, economic, regulatory or market conditions on our
results of operations and financial condition, including the
European debt crisis and market perceptions concerning the
instability of the Euro;
- the impact on our net income caused by
fluctuations in foreign currency exchange rates;
- the impact on our net income or cash
flows and our effective tax rate in a particular period caused by
settled tax audits and expired statutes of limitation;
- the extent to which we retain existing
clients and attract new business, and our ability to incentivize
and retain key employees;
- our exposure to potential criminal
sanctions or civil remedies if we fail to comply with foreign and
U.S. laws and regulations that are applicable to our international
operations, including import and export requirements,
anti-corruption laws such as the U.S. Foreign Corrupt Practices Act
and the UK Bribery Act 2010, local laws prohibiting corrupt
payments to government officials, as well as various trade
sanctions laws;
- the impact of competition, including
with respect to our geographic reach, the sophistication and
quality of our services, our pricing relative to competitors, our
customers' option to self-insure or utilize internal resources
instead of consultants, and our corporate tax rates relative to our
competitors;
- the potential impact of rating agency
actions on our cost of financing and ability to borrow, as well as
on our operating costs and competitive position;
- our ability to successfully recover
should we experience a disaster or other business continuity
problem;
- our ability to maintain adequate
physical, technical and administrative safeguards to protect the
security of our data;
- changes in applicable tax or accounting
requirements; and
- potential income statement effects from
the application of FASB's ASC Topic No. 740 (“Income Taxes”)
regarding accounting treatment of uncertain tax benefits and
valuation allowances, including the effect of any subsequent
adjustments to the estimates we use in applying this accounting
standard.
The factors identified above are not exhaustive. Marsh &
McLennan Companies and its subsidiaries operate in a dynamic
business environment in which new risks may emerge frequently.
Accordingly, we caution readers not to place undue reliance on the
above forward-looking statements, which speak only as of the dates
on which they are made. The Company undertakes no obligation to
update or revise any forward-looking statement to reflect events or
circumstances arising after the date on which it is made. Further
information concerning Marsh & McLennan Companies and its
businesses, including information about factors that could
materially affect our results of operations and financial
condition, is contained in the Company's filings with the
Securities and Exchange Commission, including the “Risk Factors”
section of our most recently filed Annual Report on Form 10-K.
Marsh & McLennan Companies, Inc. Consolidated
Statements of Income
(In millions, except per share
figures)
(Unaudited)
Three Months Ended
March 31,
2012 2011
Revenue $
3,051 $ 2,884
Expense: Compensation and
Benefits
1,796 1,721 Other Operating Expenses
728
691
Total Expense 2,524 2,412
Operating Income 527 472
Interest
Income 6 7
Interest Expense (46 )
(51 )
Investment Income 20 19
Income
Before Income Taxes 507 447
Income Tax Expense
153 128
Income from Continuing
Operations 354 319
Discontinued Operations, Net of
Tax — 12
Net Income Before
Non-Controlling Interest $ 354 $ 331
Less: Net
Income Attributable to Non-Controlling Interest 7
6
Net Income Attributable to the Company $
347 $ 325
Basic Net Income Per Share
- Continuing Operations $ 0.64 $ 0.57
- Net Income Attributable to the Company $
0.64 $ 0.59
Diluted Net Income Per
Share - Continuing Operations $ 0.63
$ 0.56
- Net Income Attributable to the
Company $ 0.63 $ 0.58
Average Number of Shares
Outstanding
- Basic
542 544
- Diluted
551 552
Shares Outstanding at 3/31
546 548
Marsh & McLennan
Companies, Inc. Supplemental Information - Revenue
Analysis Three Months Ended
(Millions) (Unaudited)
Components of Revenue Change*
Three Months EndedMarch
31,
%
ChangeGAAPRevenue
Currency Impact
Acquisitions/DispositionsImpact
Underlying Revenue 2012
2011
Risk and Insurance Services Marsh
$ 1,379 $ 1,282 8 % (1 )% 2 % 7 % Guy Carpenter
357 340 5 % (1 )% (1 )% 7 % Subtotal
1,736 1,622 7 % (1 )% 1 % 7 % Fiduciary Interest Income
11 12 Total Risk and Insurance Services
1,747 1,634 7 % (1 )% 1 % 7 %
Consulting Mercer
957 922 4 % (1 )% 1 % 4 % Oliver
Wyman Group
356 339 5 % (1 )% — 6 % Total
Consulting
1,313 1,261 4 % (1 )% — 4 %
Corporate / Eliminations (9 ) (11 )
Total
Revenue $ 3,051 $ 2,884 6 % (1 )% 1
% 6 %
Revenue Details
The following table provides more detailed
revenue information for certain of the components presented
above:
Components of Revenue Change*
Three Months EndedMarch
31,
%
ChangeGAAPRevenue
Currency Impact
Acquisitions/DispositionsImpact
UnderlyingRevenue
2012 2011
Marsh: EMEA
$
577 $ 551 5 % (4 )% 3 % 5 % Asia Pacific
142 125 14 %
3 % 1 % 10 % Latin America
74 61 22 % 4 % — 18
% Total International
793 737 8 % (2 )% 3 % 7 % U.S. /
Canada
586 545 7 % — 1 % 6 % Total Marsh
$ 1,379 $ 1,282 8 % (1 )% 2 % 7 %
Mercer: Retirement
$ 278 $ 281 (1 )% (2 )% 1 %
— Health and Benefits
253 237 7 % (1 )% 1 % 6 % Talent,
Rewards & Communications
125 117 7 % (1 )% 3 % 5 %
Outsourcing
177 176 0 % 1 % (5 )% 4 % Investments
124
111 12 % — 4 % 7 % Total Mercer
$ 957
$ 922 4 % (1 )% 1 % 4 %
Notes
Underlying revenue measures the change in
revenue using consistent currency exchange rates, excluding the
impact of certainitems such as: acquisitions, dispositions and
transfers among businesses.
* Components of revenue change may not add
due to rounding.
Marsh & McLennan Companies,
Inc.Non-GAAP MeasuresThree Months Ended March
31(Millions) (Unaudited)
The Company presents below certain additional financial measures
that are "non-GAAP measures," within the meaning of Regulation G
under the Securities Exchange Act of 1934. These measures are:
adjusted operating income (loss); adjusted operating margin; and
adjusted income, net of tax.
The Company presents these non-GAAP measures to provide
investors with additional information to analyze the Company's
performance from period to period. Management also uses these
measures to assess performance for incentive compensation purposes
and to allocate resources in managing the Company's businesses.
However, investors should not consider these non-GAAP measures in
isolation from, or as a substitute for, the financial information
that the Company reports in accordance with GAAP. The Company's
non-GAAP measures reflect subjective determinations by management,
and may differ from similarly titled non-GAAP measures presented by
other companies.
Adjusted Operating Income (Loss) and Adjusted Operating
Margin
Adjusted operating income (loss) is calculated by excluding the
impact of certain noteworthy items from the Company's GAAP
operating income or loss. The following tables identify these
noteworthy items and reconcile adjusted operating income (loss) to
GAAP operating income or loss, on a consolidated and segment basis,
for the three months ended March 31, 2012 and 2011. The following
tables also present adjusted operating margin, which is calculated
by dividing adjusted operating income by consolidated or segment
GAAP revenue.
Risk
&InsuranceServices
Consulting
Corporate/Eliminations
Total Three Months Ended March 31,
2012 Operating income (loss) $ 417
$ 159 $ (49 ) $
527 Add (Deduct) Impact of Noteworthy Items:
Restructuring Charges (a)
(1 ) 3 2
4 Other (b)
— — (1
) (1 ) Operating income adjustments
(1 ) 3 1 3
Adjusted operating income (loss) $ 416
$ 162 $ (48 ) $
530 Operating margin 23.9 %
12.1 % N/A 17.3 % Adjusted
operating margin 23.8 % 12.4 %
N/A 17.4 % Three Months Ended March
31, 2011 Operating income (loss) $ 383 $ 128
$ (39 ) $ 472 Add (Deduct) Impact of Noteworthy
Items: Restructuring Charges (a) — 3 1 4 Other (b) — —
(3 ) (3 )
Operating income adjustments — 3
(2 ) 1
Adjusted operating income (loss) $ 383
$ 131 $ (41 ) $ 473
Operating margin
23.4 % 10.2 % N/A 16.4 %
Adjusted operating margin 23.4 %
10.4 % N/A 16.4 %
(a) Includes severance from restructuring
activities and related charges, costs for future rent and other
real estate costs, and fees andconsulting costs related to recent
acquisitions and cost reduction activities.
(b) Includes credits for payments received
related to the Corporate Advisory and Restructuring businesses
divested in 2008.
Marsh & McLennan Companies,
Inc.Non-GAAP MeasuresThree Months Ended March
31(Millions) (Unaudited)
Adjusted income, net of tax
Adjusted income, net of tax is calculated as: the Company's GAAP
income from continuing operations, adjusted to reflect the
after-tax impact of the operating income adjustments set forth in
the preceding table. The related adjusted diluted earnings per
share as calculated under the two-class method, reflects reductions
for the portion of each item attributable to non-controlling
interests and participating securities so that the calculation is
based only on the amounts attributable to common shareholders.
Reconciliation of the Impact of
Non-GAAP Measures on diluted earnings per share - Three
MonthsEnded March 31, 2012 and 2011:
Amount
Diluted EPS Three Months Ended March 31,
2012 Income from continuing operations
$ 354
Less: Non-controlling interest, net of tax
7 Amount
attributable to participating securities
1 Subtotal
$ 346 0.63 Add operating income adjustments
$
3
Deduct impact of income taxes
(1
)
2 — Income from continuing operations,
as adjusted
$ 348 $ 0.63
Three Months Ended March 31,
2011
Income from continuing operations
$
319
Less: Non-controlling interest,
net of tax
6
Amount attributable to participating
securities
3
Subtotal
$
310
0.56
Add operating income adjustments
$
1
Deduct impact of income taxes
-
1
—
Income from continuing operations, as
adjusted
$
311
$
0.56
Marsh & McLennan Companies, Inc. Supplemental
Information
(Millions) (Unaudited)
Three Months Ended
March 31,
2012 2011 Depreciation and amortization
expense
$ 83 $ 83 Stock option expense (a)
$
11 $ 7 Change in accrual for contingent acquisition
consideration
$ 1 $ (6 ) Capital expenditures
$ 51 $ 67
(a) The increase from 2012 is primarily
due to accelerated amortization for retiree eligible senior
executives.
Marsh & McLennan Companies, Inc. Consolidated
Balance Sheets
(Millions) (Unaudited)
March 31,2012
December 31,2011
ASSETS Current assets: Cash and cash equivalents
$ 1,410 $ 2,113 Net receivables
3,008 2,906
Other current assets
617 629
Total current
assets 5,035 5,648 Goodwill and intangible assets
7,129 6,963 Fixed assets, net
795 804 Pension related
assets
67 39 Deferred tax assets
1,143 1,205 Other
assets
841 795
TOTAL ASSETS $
15,010 $ 15,454
LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Short-term
debt
$ 259 $ 260 Accounts payable and accrued
liabilities
1,873 2,016 Accrued compensation and employee
benefits
699 1,400 Accrued income taxes
80 63
Dividends payable
121 —
Total current
liabilities 3,032 3,739 Fiduciary liabilities
4,284 4,082 Less - cash and investments held in a fiduciary
capacity
(4,284 ) (4,082 ) — — Long-term debt
2,664 2,668 Pension, post-retirement and post-employment
benefits
1,606 1,655 Liabilities for errors and omissions
472 468 Other liabilities
971 984
Total
equity 6,265 5,940
TOTAL
LIABILITIES AND EQUITY $ 15,010 $ 15,454
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