(Source: Business Wire)
Marsh & McLennan Companies, Inc. (MMC) today reported financial results
for the quarter ended September 30, 2009.
Brian Duperreault, MMC President and CEO said: "MMC reported strong
earnings growth in the third quarter. The Risk and Insurance Services
segment produced a significant increase in operating income, with
substantial margin improvement. Marsh reported another excellent
quarter, significantly increasing its profitability. Guy Carpenter
produced strong new business and continued growth in profitability.
"The Consulting segment continued to be affected by the difficult
economic environment. Mercer's decline in underlying expenses matched
the percentage decline in its revenue. Oliver Wyman saw another quarter
of sequential improvement in profitability as a result of management
actions taken earlier in the year.
"Kroll reported its best quarter of the year, with sequential increases
in both revenue and profitability. The improvement was driven primarily
by Kroll's largest business, litigation support and data recovery, which
reported a modest increase in underlying revenue.
"While the economic environment continues to be challenging, MMC's
results reflect the effective management actions taken by our business
leaders over the past year, including significant expense reduction,"
Mr. Duperreault concluded.
In the third quarter of 2009, MMC's consolidated revenue was $2.5
billion, a decline of 11 percent from the third quarter of 2008, or 7
percent on an underlying basis. Underlying revenue measures the change
in revenue before the impact of acquisitions and dispositions, using
consistent currency exchange rates.
MMC reported net income of $221 million, or $.41 per share, in the third
quarter of 2009, compared with a net loss of $8 million, or a loss of
$.02 per share, in the third quarter of 2008. Earnings per share on an
adjusted basis, which excludes noteworthy items as presented in the
attached supplemental schedules, more than doubled to $.48 in the third
quarter of 2009, compared with $.20 in the same quarter last year. In
the current quarter, both GAAP and adjusted earnings per share were
favorably impacted by a net credit of approximately $.18 per share
relating to income taxes, primarily due to the resolution of tax matters
in several jurisdictions resulting from the expiration of statutes of
limitations and audit settlements.
For the nine months ended September 30, 2009, MMC's net income was $204
million, or $.38 per share, compared with a net loss of $153 million, or
a loss of $.30 per share, in the same period last year. Adjusted
earnings per share for the first nine months of 2009 was $1.20 compared
with $1.04 last year. GAAP and adjusted earnings per share include the
favorable impact relating to tax matters noted above.
Risk and Insurance Services
Risk and Insurance Services segment revenue in the third quarter of 2009
was $1.2 billion, a decline of 4 percent from the third quarter of 2008,
or 3 percent on an underlying basis. Excluding fiduciary interest
income, underlying revenue in Risk and Insurance Services was down 1
percent. Operating income in the third quarter increased substantially
to $127 million from a loss of $28 million last year. Adjusted operating
income more than doubled to $158 million from $69 million, reflecting
significantly improved performance at Marsh. For the first nine months
of 2009, segment revenue was $3.9 billion, a decline of 6 percent from
the prior year period, or 1 percent on an underlying basis. Excluding
fiduciary interest income, underlying revenue rose 1 percent.
Insurance premium rates in the property and casualty marketplace
declined in the third quarter, continuing the trend seen throughout the
year. As a result of the global economic recession, demand for
commercial insurance has moderated over the last year. Marsh's revenue
in the third quarter was $989 million, a decline of 5 percent from last
year, or 2 percent on an underlying basis. Revenue from international
operations was flat, including 7 percent growth in Asia Pacific and 8
percent growth in Latin America. Marsh had a significant increase in
profitability in the quarter as a result of a substantial reduction in
expenses. In September, Marsh acquired International Advisory Services
Ltd., the largest independent manager of captives and third-party
insurance companies in Bermuda.
Guy Carpenter's revenue in the third quarter was $223 million, an
increase of 13 percent, or 6 percent on an underlying basis. An increase
in new business as well as cost discipline led to continued growth in
Guy Carpenter's profitability. In October, Guy Carpenter completed the
acquisition of London-based specialty reinsurance broker Rattner
Mackenzie Limited from HCC Insurance Holdings, Inc.
Consulting
Consulting segment revenue was $1.1 billion in the third quarter of
2009, a decline of 14 percent from the third quarter of 2008, or 10
percent on an underlying basis. The revenue decline was largely due to
the impact of continued adverse global economic conditions. Operating
income in the third quarter was $105 million, and adjusted operating
income was $130 million. For the first nine months of 2009, segment
revenue declined 16 percent from the same period in 2008 to $3.4
billion, or 9 percent on an underlying basis.
Mercer's revenue was $831 million in the third quarter of 2009, a
decline of 12 percent from the third quarter of 2008, or 8 percent on an
underlying basis. Mercer's consulting operations produced revenue of
$597 million, a decline of 10 percent on an underlying basis, reflecting
reductions across its retirement, health and benefits, and human capital
businesses. Outsourcing, with revenue of $157 million, declined 9
percent on an underlying basis, and investment consulting and
management, with revenue of $77 million, increased 8 percent. Oliver
Wyman's revenue declined 17 percent to $313 million in the third
quarter, or 14 percent on an underlying basis.
Risk Consulting and Technology
Kroll's revenue of $170 million in the third quarter of 2009 declined 14
percent from the year-ago quarter, or 9 percent on an underlying basis.
Revenue in the litigation support and data recovery business was up 1
percent from last year's third quarter. Background screening was down 8
percent, and risk mitigation and response decreased 25 percent.
Other Items
Investment income of $21 million was reported in the third quarter of
2009, primarily as a result of mark-to-market increases within MMC's
private equity fund investments.
On October 23, 2009, MMC and certain of its foreign subsidiaries entered
into a new $1.0 billion multi-currency, three-year unsecured revolving
credit facility. The facility will expire in 2012 and replaces MMC's
previous $1.2 billion revolving credit facility.
Conference Call
A conference call to discuss third quarter 2009 results will be held
today at 8:30 a.m. Eastern Time. To participate in the teleconference,
please dial 888 329 8875. Callers from outside the United States should
dial 719 785 1754. The access code for both numbers is 2835124. 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
approximately 52,000 employees worldwide and annual revenue of $11
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: market and industry
conditions, including competitive and pricing trends; 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; the outcome of contingencies;
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 from errors and
omissions claims against us, including claims of professional
negligence in providing actuarial services, such as those alleged by
the Alaska Retirement Management Board in a pending lawsuit against
Mercer that is scheduled for trial in the spring of 2010;
the potential impact of an adverse ruling in, or the settlement of,
the purported securities class action against MMC, Marsh and certain
of their former officers concerning the late 2004 decline in MMC's
share price and the purported ERISA class action pending against MMC
and various current and former employees, officers and directors on
behalf of participants and beneficiaries of an MMC retirement plan,
both of which are currently scheduled for trial in the fall of 2010;
the impact of current economic and financial market conditions on our
results of operations and financial condition;
the impact on our consulting segment of pricing trends, utilization
rates, the general economic environment and legislative changes
affecting client demand;
the potential impact of legislative, regulatory, accounting and other
initiatives which may be taken in response to the current financial
crisis;
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 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 on our net income caused by fluctuations in foreign
exchange rates;
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 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, the
emergence of new competitors, and the fact that many of Marsh's
competitors are not constrained in their ability to receive contingent
commissions;
our ability to successfully obtain payment from our clients of the
amounts they owe us for work performed;
our ability to make strategic acquisitions and dispositions and to
integrate, and realize expected synergies, savings or strategic
benefits from, the businesses we acquire;
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
uncertainties in income taxes 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.
Consolidated Statements of Income
(In millions, except per share figures)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Revenue $ 2,523 $ 2,819 $ 7,761 $ 8,876
Expense:
Compensation and Benefits 1,606 1,805 4,781 5,506
Other Operating Expenses 701 950 2,146 2,676
Goodwill Impairment Charge - - 315 540
Total Expense 2,307 2,755 7,242 8,722
Operating Income 216 64 519 154
Interest Income 3 10 13 40
Interest Expense (59 ) (54 ) (180 ) (165 )
Investment Income (Loss) 21 (23 ) (25 ) (31 )
Income (Loss) Before Income Taxes 181 (3 ) 327 (2 )
Income Taxes (40 ) (20 ) 89 139
Income (Loss) from Continuing Operations 221 17 238 (141 )
Discontinued Operations, Net of Tax 4 (22 ) (21 ) (4 )
Net Income (Loss) Before Non-Controlling Interest $ 225 $ (5 ) $ 217 $ (145 )
Less: Net Income Attributable to Non-Controlling Interest 4 3 13 8
Net Income (Loss) Attributable to MMC $ 221 $ (8 ) $ 204 $ (153 )
Basic Net Income (Loss) Per Share
- Continuing Operations $ 0.41 $ 0.03 $ 0.42 $ (0.28 )
- Net Income (Loss) $ 0.41 $ (0.02 ) $ 0.38 $ (0.29 )
Diluted Net Income (Loss) Per Share
- Continuing Operations $ 0.40 $ 0.03 $ 0.42 $ (0.29 )
- Net Income (Loss) $ 0.41 $ (0.02 ) $ 0.38 $ (0.30 )
Average Number of Shares Outstanding - Basic 524 513 521 514
- Diluted 526 516 522 514
Shares Outstanding at 9/30 526 514 526 514
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Marsh & McLennan Companies, Inc.