First Quarter GAAP EPS From Continuing Operations Increased 48 Percent to $.49
First Quarter Adjusted EPS Grew 31 Percent to $.51
NEW YORK, May 4, 2010 — Marsh & McLennan Companies, Inc. (MMC) today reported financial results for the first quarter ended March 31, 2010.
Brian Duperreault, MMC President and CEO said: “MMC’s performance in the first quarter of 2010 reflects effective management of our businesses throughout the economic downturn. We generated a 35 percent increase in operating income on a GAAP basis, or an increase of 18 percent on an adjusted basis. This was driven primarily by improved performance at Mercer, Oliver Wyman and Kroll.
“Results produced by our Risk and Insurance Services segment were strong, particularly in light of continued soft market conditions in the property and casualty insurance marketplace. We saw operating income growth in both Marsh and Guy Carpenter in the quarter.
“The Consulting segment’s growth in operating income in the quarter was led by Oliver Wyman, which had marked improvement in profitability, with a significant contribution from Mercer.
“Risk Consulting & Technology’s operating income increased substantially, as Kroll continued to streamline its business. The improvement was driven primarily by Ontrack, Kroll’s largest business.
“Overall, we are pleased with how all of our businesses performed this quarter,” Mr. Duperreault concluded.
MMC Consolidated Results
MMC’s consolidated revenue in the first quarter of 2010 rose 7 percent to $2.8 billion from the first quarter of 2009 and was flat on an underlying basis. Underlying revenue measures the change in revenue before the impact of acquisitions and dispositions, using consistent currency exchange rates.
MMC’s net income rose to $248 million, or $.45 per share, compared with net income of $176 million, or $.33 per share, in 2009. Earnings per share on an adjusted basis, which excludes noteworthy items as presented in the attached supplemental schedules, increased 31 percent to $.51, compared with $.39 in 2009.
Risk and Insurance Services
Risk and Insurance Services segment revenue in the first quarter of 2010 rose 9 percent to $1.5 billion from the first quarter of 2009 and was flat on an underlying basis. Operating income in the first quarter of 2010 rose 17 percent to $347 million, compared with $297 million in last year’s first quarter. Adjusted operating income increased 4 percent to $357 million, compared with $343 million in the same period last year.
Marsh’s revenue in the first quarter of 2010 increased 8 percent to $1.2 billion from the same period last year and was unchanged on an underlying basis. Underlying revenue growth in the United States / Canada was 1 percent. Underlying revenue growth in international operations was unchanged, reflecting growth of 3 percent in Latin America and 2 percent in Asia Pacific, offset by a 1 percent decline in EMEA. Marsh had strong growth in new business in the quarter.
On April 1, 2010 Marsh completed the acquisition of HSBC Insurance Brokers Ltd., an international provider of risk intermediary and risk advisory services. During the first
quarter, Marsh & McLennan Agency acquired Virginia-based Thomas Rutherfoord, Inc., one of the most highly regarded insurance broking firms in the Southeast and mid-Atlantic regions, with more than 300 employees and annual revenue of $80 million. Together with the acquisitions completed since last November, Marsh & McLennan Agency has annualized revenue approaching $200 million.
Guy Carpenter’s first quarter 2010 revenue increased 12 percent to $315 million, including the acquisitions of John B. Collins Associates and Rattner Mackenzie in 2009. Revenue increased 1 percent on an underlying basis.
Consulting
Consulting segment revenue increased 7 percent to $1.2 billion in the first quarter of 2010, or 1 percent on an underlying basis. Operating income was $116 million in the first quarter of 2010, up from $73 million in the first quarter of 2009. Adjusted operating income rose 57 percent to $116 million.
Mercer’s revenue increased 6 percent to $849 million in the first quarter of 2010 and declined 1 percent on an underlying basis. Mercer’s consulting operations produced revenue of $598 million, a decline of 4 percent on an underlying basis from the first quarter of 2009; outsourcing, with revenue of $162 million, increased 3 percent; and investment consulting and management, with revenue of $89 million, grew 17 percent. Oliver Wyman’s revenue increased 10 percent to $306 million in the first quarter of 2010, or 6 percent on an underlying basis. Financial services, Oliver Wyman’s largest practice, produced a double-digit revenue increase.
Risk Consulting & Technology
Kroll’s revenue decreased 3 percent to $162 million in the first quarter of 2010, or 2 percent on an underlying basis. The segment’s adjusted operating income in the first quarter of 2010 rose to $15 million from $5 million in the prior year’s quarter. Kroll’s litigation support and data recovery business, Ontrack, had an 8 percent increase in underlying revenue.
Discontinued Operations
In the first quarter of 2010, Kroll completed the sale of Kroll Laboratory Specialists for a pre-tax gain of $16 million. The low tax basis associated with this entity resulted in an after-tax loss on disposal of $22 million, which is included in discontinued operations. The operating results of this business through the date of sale have not been reclassified into discontinued operations.
Conference Call
A conference call to discuss first quarter 2010 results will be held today at 8:30 a.m. Eastern Time. To participate in the teleconference, please dial 877 856 1968. Callers from outside the United States should dial 719 325 4901. The access code for both numbers is 3574917. 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 at the same web address.
MMC is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. It is the parent company of a number of the world’s leading risk experts and specialty consultants, including Marsh, the insurance broker and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR and related financial advice and services; Oliver Wyman, the management consultancy; and Kroll, the risk consulting firm. With over 52,000 employees worldwide and annual revenue exceeding $10 billion, MMC provides analysis, advice and transactional capabilities to clients in more than 100 countries. Its stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. MMC’s website address is www.mmc.com.
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.” For example, we may use forward-looking statements when addressing topics such as: the outcome of contingencies; market and industry conditions; 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 MMC’s revenues; our cost structure and the outcome of cost-saving or restructuring initiatives; dividend policy; the expected impact of acquisitions and dispositions; pension obligations; 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:
| | · | our exposure to potential liabilities arising out of a civil lawsuit against Mercer filed by the Alaska Retirement Management Board in Alaska state court that is scheduled for trial in July 2010 in Juneau, which alleges professional negligence and malpractice, breach of contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, unfair trade practices and fraud and misrepresentation related to actuarial services provided by Mercer; |
| | · | 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; |
| | · | the impact of current economic and financial market conditions on our results of operations and financial condition, particularly with respect to our consulting businesses; |
| | · | the potential impact of legislative, regulatory, accounting and other initiatives which may be taken in response to the current financial crisis; |
| | · | 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; |
| | · | our exposure to potential liabilities arising from errors and omissions claims against us; |
| | · | 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, U.S. laws such as the Foreign Corrupt Practices Act, and local laws prohibiting corrupt payments to government officials; |
| | · | the impact on our net income caused by fluctuations in foreign currency exchange rates; |
| | · | the extent to which we retain existing clients and attract new business, and our ability to incentivize and retain key employees; |
| | · | the impact of competition, including with respect to pricing, and the emergence of new competitors; |
| | · | our ability to successfully obtain payment from our clients of the amounts they owe us for work performed; |
| | · | our ability to successfully recover should we experience a disaster or other business continuity problem; |
| | · | 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 and ASC Topic No. 350 (“Intangibles – Goodwill and Other”), including the effect of any subsequent adjustments to the estimates MMC uses in applying these accounting standards. |
The factors identified above are not exhaustive. MMC and its subsidiaries operate in a dynamic business environment in which new risks may emerge frequently. Accordingly, MMC cautions readers not to place undue reliance on its forward-looking statements, which speak only as of the dates on which they are made. MMC 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 MMC and its businesses, including information about factors that could materially affect our results of operations and financial condition, is contained in MMC’s filings with the Securities and Exchange Commission, including the “Risk Factors” section of MMC’s most recently filed Annual Report on Form 10-K.
Marsh & McLennan Companies, Inc.
Marsh & McLennan Companies, Inc.
Marsh & McLennan Companies, Inc.
Marsh & McLennan Companies, Inc.
