Underlying Revenue Increases 4% Reflecting
Growth Across All Operating Companies
Strong Growth in GAAP Operating Income of
10% and Adjusted Operating Income of 9%
GAAP EPS Rises 20% to $1.09 and Adjusted EPS
Increases 17% to $1.08
Marsh & McLennan Companies, Inc. (NYSE:MMC), a global
professional services firm offering clients advice and solutions in
risk, strategy and people, today reported financial results for the
first quarter ended March 31, 2017.
Dan Glaser, President and CEO, said: "We are pleased with our
performance in the first quarter. Marsh & McLennan Companies
had underlying revenue growth across all of our operating
companies, with growth of 5% in Risk & Insurance Services and
3% in Consulting. We delivered strong operating income growth with
solid margin expansion."
"With a strong start to the year, we believe the Company is well
positioned to deliver underlying revenue growth, margin expansion
in both operating segments and strong earnings per share growth in
2017," concluded Mr. Glaser.
Consolidated Results
Earnings per share increased 20% to $1.09. Adjusted EPS rose 17%
to $1.08. The tax provision for the first quarter of 2017 includes
a benefit from the required change in accounting for share-based
awards of approximately $0.08 per share.
Consolidated revenue in the first quarter of 2017 was $3.5
billion, an increase of 5%, or 4% on an underlying basis, compared
with the first quarter of 2016. Operating income was $809 million,
an increase of 10% from the prior year. Adjusted operating income,
which excludes noteworthy items as presented in the attached
supplemental schedules, rose 9% to $802 million. Net income
attributable to the Company was $569 million.
Risk & Insurance Services
Risk & Insurance Services revenue was $2.0 billion in the
first quarter of 2017, an increase of 6%, or 5% on an underlying
basis. Operating income was $613 million, an increase of 15%.
Adjusted operating income rose 10% to $600 million compared with
$543 million in last year’s first quarter.
Marsh's revenue in the first quarter was $1.6 billion, an
increase of 5% on an underlying basis. International operations
produced underlying revenue growth of 5%, reflecting growth of 3%
in EMEA, 11% in Asia Pacific and 7% in Latin America. In US/Canada,
underlying revenue also rose 5%.
Guy Carpenter's revenue in the first quarter was $385 million,
an increase of 4% on an underlying basis.
Consulting
Consulting revenue in the first quarter was $1.5 billion, an
increase of 3% on both a reported and underlying basis. Operating
income decreased 1% to $241 million. Adjusted operating income
increased 3% to $245 million compared with $238 million in last
year’s first quarter.
Beginning in the first quarter of 2017, Mercer established a
Wealth business reflecting a unified client strategy for its former
Retirement and Investments businesses. Please see the attached
supplemental schedules for further information. Additionally,
moving forward we will refer to the Talent business as Career.
Mercer's revenue was $1.1 billion in the first quarter, an
increase of 3% on an underlying basis. Wealth, with revenue of $520
million, grew 3% on an underlying basis. Within Wealth, Defined
Benefit Consulting & Administration was flat, while Investment
Management & Related Services increased 9%. Health revenue of
$415 million was up 2% on an underlying basis, and Career revenue
of $142 million increased 7%.
Oliver Wyman Group’s revenue was $449 million in the first
quarter, an increase of 4% on an underlying basis.
Other Items
In January, the Company issued $500 million of 2.75% senior
notes due in 2022 and $500 million 4.35% senior notes due in 2047,
the net proceeds of which are being used for general corporate
purposes, including the repayment of $250 million 2.30% senior
notes on April 1, 2017. The Company repurchased approximately 2.7
million shares of its common stock for $200 million in the first
quarter.
In the first quarter, Marsh & McLennan Agency (MMA)
completed the acquisition of J. Smith Lanier & Co. (JSL), one
of the nation’s largest privately held insurance brokers. JSL has
annual revenue of approximately $130 million.
Conference Call
A conference call to discuss first quarter 2017 results will be
held today at 8:30 a.m. Eastern time. To participate in the
teleconference, please dial +1 888 882 8941. Callers from outside
the United States should dial +1 719 325 2346. The access code for
both numbers is 2511104. The live audio webcast may be accessed at
http://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
professional services firm offering clients advice and solutions in
the areas of risk, strategy and people. Marsh is a leader in
insurance broking and risk management; Guy Carpenter is a leader in
providing risk and reinsurance intermediary services; Mercer is a
leader in health, wealth and career consulting; and Oliver Wyman is
a leader in management consulting. With annual revenue of more than
$13 billion and more than 60,000 colleagues worldwide, Marsh &
McLennan Companies provides analysis, advice and transactional
capabilities to clients in more than 130 countries. The Company is
committed to being a responsible corporate citizen and making a
positive impact in the communities in which it operates. Visit
www.mmc.com for more information and follow us on LinkedIn and
Twitter @MMC_Global.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
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," "intend,"
"plan," "project" and similar terms, and future or conditional
tense verbs like "could," "may," "might," "should," "will" and
"would." Forward-looking statements are subject to inherent risks
and uncertainties that could cause actual results to differ
materially from those expressed or implied in our forward-looking
statements.
Factors that could materially affect our future results include,
among other things: our exposure to potential civil damages,
criminal penalties or other consequences, such as reputational
impact, if we fail to comply with applicable U.S. and non-U.S. laws
and regulations, including in connection with the U.K. Financial
Conduct Authority's ongoing investigation into the aviation
insurance and reinsurance sector; our exposure to potential
liabilities, including reputational impact, arising from errors and
omissions, breach of fiduciary duty and similar claims against us;
our organization's ability to maintain adequate safeguards to
protect the security of our information systems and confidential,
personal or proprietary information, particularly given the volume
of third party vendors we use; our ability to successfully recover
if we experience a business continuity problem due to cyberattack,
natural disaster or otherwise; our ability to compete effectively
and adapt to changes in the competitive environment, including to
respond to disintermediation, pricing pressures and technological
and other types of innovation; the impact of macroeconomic
conditions, political events and market conditions on us, our
clients and the industries in which we operate, including the
effects of the vote in the U.K. to exit the E.U. and the potential
for a move towards protectionist laws and business practices; the
financial and operational impact of complying with laws and
regulations where we operate, including the E.U.’s General Data
Protection Regulation; our ability to incentivize and retain key
employees; the effect of our global pension obligations on our
financial position, earnings and cash flows and the impact of low
interest rates on those obligations; the impact on our competitive
position of our tax rate relative to our competitors; the impact of
fluctuations in foreign exchange, interest rates and securities
markets on our results; and the impact of changes in accounting
rules or in our accounting estimates or assumptions.
The factors identified above are not exhaustive. Marsh &
McLennan Companies and its subsidiaries operate in a dynamic
business environment in which new risks emerge frequently.
Accordingly, we caution readers not to place undue reliance on any
forward-looking statements, which are based only on information
currently available to us and 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 and the "Management’s Discussion and Analysis of Financial
Condition and Results of Operations" 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 EndedMarch
31, 2017 2016
Revenue $
3,503 $ 3,336
Expense:
Compensation and Benefits
1,945 1,854 Other Operating
Expenses
749 749
Operating Expenses
2,694 2,603
Operating Income 809
733
Interest Income 2 2
Interest Expense
(58 ) (46 )
Investment Income (Loss) —
(3 )
Income Before Income Taxes 753 686
Income Tax Expense 175 196
Income
from Continuing Operations 578 490
Less: Net Income
Attributable to Non-Controlling Interests 9 9
Net Income Attributable to the Company $
569 $ 481
Basic Net Income Per Share
- Continuing Operations $ 1.10 $ 0.92
- Net Income Attributable to the Company $
1.10 $ 0.92
Diluted Net Income Per
Share - Continuing Operations $ 1.09
$ 0.91
- Net Income Attributable to the
Company $ 1.09 $ 0.91
Average
Number of Shares Outstanding - Basic 515
521
- Diluted 522 526
Shares
Outstanding at 3/31 515 521
Marsh & McLennan Companies,
Inc.
Supplemental Information - Revenue
Analysis
Three Months Ended March 31,
2017
(Millions) (Unaudited)
Components of Revenue
Change* Three Months EndedMarch 31,
%
ChangeGAAPRevenue
CurrencyImpact
Acquisitions/DispositionsImpact
UnderlyingRevenue
2017 2016
Risk and Insurance Services Marsh
$ 1,596 $ 1,488 7 % (1 )% 4 % 5 % Guy Carpenter
385 374 3 % (1 )% — 4 % Subtotal
1,981
1,862 6 % (1 )% 3 % 5 % Fiduciary Interest Income
8 6
Total Risk and Insurance Services
1,989 1,868
6 % (1 )% 3 % 5 %
Consulting Mercer
1,077
1,039 4 % (2 )% 2 % 3 % Oliver Wyman Group
449 439
2 % (2 )% — 4 % Total Consulting
1,526 1,478
3 % (2 )% 2 % 3 %
Corporate / Eliminations (12
) (10 )
Total Revenue $ 3,503 $
3,336 5 % (1 )% 2 % 4 %
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
2017 2016
Marsh: EMEA
$ 589 $
570 3 % (4 )% 5 % 3 % Asia Pacific
152 146 4 % 1 % (8 )% 11
% Latin America
80 71 13 % 1 % 5 % 7 % Total
International
821 787 4 % (3 )% 2 % 5 % U.S. / Canada
775 701 10 % — 5 % 5 % Total Marsh
$
1,596 $ 1,488 7 % (1 )% 4 % 5 %
Mercer:
Defined Benefit Consulting & Administration
$ 334
$ 361 (8 )% (4 )% (4 )% — Investment Management & Related
Services
186 147 26 % 1 % 16 % 9 % Total
Wealth
520 508 2 % (2 )% 2 % 3 % Health
415 400 4 %
(1 )% 2 % 2 % Career
142 131 9 % (1 )% 3 % 7 %
Total Mercer
$ 1,077 $ 1,039 4 % (2 )%
2 % 3 % Notes Underlying revenue measures the change in
revenue using consistent currency exchange rates, excluding the
impact of certain items that affect comparability such as:
acquisitions, dispositions, transfers among businesses and the
deconsolidation of Marsh India. Effective January 1, 2017,
Mercer established a Wealth business reflecting a unified client
strategy for its former Retirement and Investments businesses. The
2016 information in the chart above has been conformed to the
current presentation. Please refer to the "Supplemental Information
- Mercer" schedules herein for additional information about the
Wealth business. * Components of revenue change may not add
due to rounding.
Marsh & McLennan Companies,
Inc.Reconciliation of Non-GAAP MeasuresThree Months
Ended March 31(Millions) (Unaudited)
Overview
The Company reports its financial results
in accordance with accounting principles generally accepted in the
United States (referred to in this release as “GAAP” or “reported”
results). The Company also refers to and presents below certain
additional non-GAAP financial measures, within the meaning of
Regulation G under the Securities Exchange Act of 1934. These
measures are: adjusted operating income (loss), adjusted operating
margin, adjusted income, net of tax and adjusted earnings per share
(EPS). The Company has included reconciliations of these non-GAAP
financial measures to the most directly comparable financial
measure calculated in accordance with GAAP in the following
tables.
The Company believes these non-GAAP financial measures provide
useful supplemental information that enables investors to better
compare the Company’s performance across periods. Management also
uses these measures internally to assess the operating performance
of its business, to assess performance for employee compensation
purposes and to decide how to allocate resources. 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 include adjustments that reflect how management views our
businesses, 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, 2017 and 2016. The following tables also present adjusted
operating margin. For the three months ended March 31, 2017 and
2016, adjusted operating margin is calculated by dividing adjusted
operating income by consolidated or segment GAAP revenue less the
proceeds related to the disposal of Mercer's U.S. defined
contribution recordkeeping business.
Risk
&InsuranceServices
Consulting
Corporate/Eliminations
Total Three Months Ended March 31, 2017
Operating income (loss) $ 613 $
241 $ (45 ) $ 809
Add (Deduct) impact of Noteworthy Items: Restructuring (a)
4 3 2 9 Adjustments to acquisition
related accounts (b)
(17 ) 1 —
(16 ) Operating income adjustments
(13 ) 4 2 (7
) Adjusted operating income (loss) $
600 $ 245 $ (43
) $ 802 Operating margin
30.8 % 15.8 % N/A 23.1
% Adjusted operating margin 30.2 %
16.1 % N/A 22.9 % Three
Months Ended March 31, 2016 Operating income (loss) $
535 $ 245 $ (47 ) $ 733 Add (Deduct) impact of
Noteworthy Items: Restructuring (a) 1 — 2 3 Adjustments to
acquisition related accounts (b) 7 (1 ) — 6
Disposal/deconsolidation of business (c) — (6 ) — (6
)
Operating income adjustments 8 (7 ) 2 3
Adjusted operating income (loss) $ 543 $ 238
$ (45 ) $ 736
Operating margin 28.6 % 16.6 %
N/A 22.0 %
Adjusted operating margin 29.1 % 16.2 % N/A 22.1
% (a) Primarily severance for center led initiatives, future rent
under non-cancellable leases, and integration costs related to
recent acquisitions.
(b) Primarily includes the change in fair value as measured each
quarter of contingent consideration related to acquisitions. (c)
Reflects contingent proceeds related to the disposal of Mercer's
U.S. defined contribution recordkeeping business in 2015. The $6
million is also removed from GAAP revenue in the calculation of
adjusted operating margin.
Marsh & McLennan Companies,
Inc.Reconciliation of Non-GAAP MeasuresThree Months
Ended March 31(Millions) (Unaudited)
Adjusted Income, Net of Tax and Adjusted Earnings per Share
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 tables. Adjusted EPS is calculated by dividing the
Company’s adjusted income, net of tax, by MMC's average number of
shares outstanding-diluted for the relevant period. The following
tables reconcile adjusted income, net of tax to GAAP income from
continuing operations and adjusted EPS to GAAP EPS for the three
months ended March 31, 2017 and 2016.
Three Months EndedMarch 31,
2017 Three Months EndedMarch 31, 2016
Amount
AdjustedEPS
Amount
AdjustedEPS
Income from continuing operations
$ 578 $ 490 Less:
Non-controlling interest, net of tax
9 9
Subtotal
$ 569 $ 1.09 $ 481 $ 0.91
Operating income adjustments
$ (7 ) $ 3 Impact
of income taxes
1 —
(6 )
(0.01 ) 3 0.01 Adjusted income, net of tax
$ 563 $ 1.08 $ 484
$ 0.92
Marsh & McLennan Companies,
Inc.
Supplemental Information
Three Months Ended March 31
(Millions) (Unaudited)
Three Months Ended March
31, 2017 2016
Consolidated Compensation
and Benefits
$ 1,945 $ 1,854 Other operating expenses
749 749 Total Expenses
$ 2,694 $
2,603 Depreciation and amortization expense
$
80 $ 78 Identified intangible amortization expense
40
33 Total
$ 120 $ 111 Stock
option expense
$ 14 $ 11 Capital expenditures
$ 62 $ 51
Risk and Insurance Services
Compensation and Benefits
$ 980 $ 921 Other operating
expenses
396 412 Total Expenses
$ 1,376
$ 1,333 Depreciation and amortization expense
$ 35 $ 36 Identified intangible amortization expense
32 28 Total
$ 67 $ 64
Consulting Compensation and Benefits
$ 875 $
847 Other operating expenses
410 386 Total Expenses
$ 1,285 $ 1,233 Depreciation and
amortization expense
$ 27 $ 25 Identified intangible
amortization expense
8 5 Total
$ 35
$ 30
Marsh & McLennan Companies,
Inc.Supplemental Information - MercerRevenue
Reclassification Analysis
Effective January 1, 2017, Mercer established a Wealth business
reflecting a unified client strategy for its former Retirement and
Investments businesses.
Wealth is comprised of two practices, Defined Benefit Consulting
& Administration (DBA), and Investment Management & Related
Services (IMS). DBA encompasses mature businesses primarily in
defined benefit and actuarial consulting, along with defined
benefit administration. IMS includes businesses primarily in
delegated solutions, defined contribution related investment
services, and financial wellness. Among the changes, defined
benefit investment consulting, previously reported in the
Investments business, will now be included in Defined Benefit
Consulting & Administration. Revenue information will be
reported for these two practices to provide investors better
insight into the underlying growth dynamics within Wealth. This
change has no impact on previously reported Mercer total revenue,
Consulting segment revenue or operating income, or consolidated
revenue or financial results. In addition, moving forward the
Company will refer to the Talent business as Career.
For information purposes only, the following schedules show
Mercer’s line of business revenue reflecting these changes for each
of the three years ended December 31, 2014, 2015 and 2016, as well
as the revenue change by quarter for the year ended December 31,
2016 and full year 2015.
Marsh & McLennan Companies,
Inc.
Supplemental Information -
Mercer
Quarterly 2016 vs 2015 Revenue
Reclassification Analysis
(Millions) (Unaudited)
%
ChangeGAAPRevenue
UnderlyingRevenue
First Quarter 2016 2015 Defined Benefit
Consulting & Administration
$ 361 $ 391 (7
)%
— Investment Management & Related Services
147
145 1 % — Total Wealth
508 536 (5 )% — Health
400 384 4 % 6 % Career
131 117 11 % 1 %
Total Mercer
$ 1,039 $ 1,037 — 3 %
Second Quarter Defined Benefit Consulting &
Administration
$ 371 $ 383 (3 )% 3 % Investment
Management & Related Services
153 149 3 %
4 % Total Wealth
524 532 (2 )% 3 % Health
410 391 5 %
5 % Career
145 123 18 % 6 % Total Mercer
$ 1,079 $ 1,046 3 % 4 %
Third
Quarter Defined Benefit Consulting & Administration
$ 351 $ 374 (6 )% 1 % Investment Management &
Related Services
154 145 7 % 7 % Total Wealth
505 519 (3 )% 2 % Health
397 394 1 % 2 % Career
207 177 17 % 7 % Total Mercer
$
1,109 $ 1,090 2 % 3 %
Fourth
Quarter Defined Benefit Consulting & Administration
$ 364 $ 431 (16 )% (2 )% Investment Management &
Related Services
152 145 5 % 11 % Total Wealth
516 576 (11 )% 2 % Health
381 389 (2 )% (1 )% Career
199 175 14 % 3 % Total Mercer
$
1,096 $ 1,140 (4 )% 1 %
Full
Year Defined Benefit Consulting & Administration
$
1,447 $ 1,579 (8 )% — Investment Management & Related
Services
606 584 4 % 6 % Total Wealth
2,053 2,163 (5 )% 2 % Health
1,588 1,558 2 % 3 %
Career
682 592 15 % 5 % Total Mercer
$
4,323 $ 4,313 — 3 %
Marsh & McLennan Companies,
Inc.
Supplemental Information -
Mercer
Full Year 2015 vs 2014 Revenue
Reclassification Analysis
(Millions) (Unaudited)
2015 2014
%
ChangeGAAPRevenue
UnderlyingRevenue
Defined Benefit Consulting & Administration
$
1,579 $ 1,627 (3 )% — Investment Management & Related
Services
584 584 — 10 % Total Wealth
2,163 2,211 (2 )% 3 % Health
1,558 1,553 — 6 % Career
592 586 1 % 5 % Total Mercer
$
4,313 $ 4,350 (1 )% 4 %
Marsh & McLennan Companies,
Inc.
Consolidated Balance Sheets
(Millions)
(Unaudited)March 31, 2017
December 31,2016
ASSETS Current assets: Cash and cash equivalents
$ 930 $ 1,026 Net receivables
3,795 3,643
Other current assets
256 215
Total current
assets 4,981 4,884 Goodwill and intangible assets
10,060 9,495 Fixed assets, net
722 725 Pension
related assets
872 776 Deferred tax assets
1,009
1,097 Other assets
1,325 1,213
TOTAL
ASSETS $ 18,969 $ 18,190
LIABILITIES AND EQUITY Current liabilities:
Short-term debt
$ 412 $ 312 Accounts payable and
accrued liabilities
2,033 1,969 Accrued compensation and
employee benefits
765 1,655 Accrued income taxes
202
146 Dividends payable
176 —
Total current
liabilities 3,588 4,082 Fiduciary liabilities
4,601 4,241 Less - cash and investments held in a fiduciary
capacity
(4,601 ) (4,241 )
— — Long-term debt
5,479 4,495 Pension, post-retirement and post-employment
benefits
2,025 2,076 Liabilities for errors and omissions
300 308 Other liabilities
958 957
Total
equity 6,619 6,272
TOTAL LIABILITIES
AND EQUITY $ 18,969 $ 18,190
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427005807/en/
Marsh & McLennan CompaniesMedia:Laura
Schooler, +1 212 345
0370laura.schooler@mmc.comorInvestor:Keith
Walsh, +1 212 345 0057keith.walsh@mmc.com
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