GAAP EPS and Adjusted EPS Increase
13%
Higher Adjusted Operating Income and Margin
Expansion
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
third quarter ended September 30, 2015.
Marsh & McLennan Companies President and CEO Dan Glaser
said: "We are pleased with our results and continue to perform well
in a challenging macro environment. We produced underlying revenue
growth in the third quarter and year-to-date across all operating
companies, along with higher adjusted operating income and margin
expansion. On a consolidated basis, underlying revenue grew 4% in
the third quarter, reflecting growth of 2% in Risk & Insurance
Services and 6% in Consulting. Adjusted earnings per share
increased 13% to $.63 for the third quarter and 8% year-to-date. We
remain on track to deliver underlying revenue growth, margin
expansion and high single-digit growth in earnings per share this
year."
Consolidated Results
Consolidated revenue in the third quarter of 2015 was $3.1
billion, a decline of 1% from the third quarter of 2014, reflecting
the continuing impact of the strong US dollar. On an underlying
basis, consolidated revenue increased 4%. Operating income rose 4%
to $461 million, compared with $445 million in the prior year. Net
income attributable to the Company was $323 million, or $.61 per
share, compared with $297 million, or $.54 per share, in the prior
year. Adjusted earnings per share increased 13% to $.63, compared
with $.56 in last year’s third quarter.
For the nine months ended September 30, 2015, revenue was $9.6
billion, a decline of 2%. On an underlying basis, revenue increased
3%. Operating income was $1.8 billion, and net income attributable
to the Company was $2.27 per share, an increase of 8% from $2.11
per share last year. Adjusted earnings per share rose 8% to
$2.34.
Risk and Insurance Services
Risk & Insurance Services revenue was $1.6 billion in the
third quarter of 2015, an increase of 2% on an underlying basis.
Operating income was $225 million, compared with $229 million in
the prior year. Adjusted operating income rose 3% to $248 million,
compared with $242 million last year. For the nine months of 2015,
revenue was $5.1 billion, reflecting growth of 2% on an underlying
basis. Operating income rose to $1.2 billion, and adjusted
operating income increased 4%.
Marsh's revenue in the third quarter of 2015 was $1.3 billion,
an increase of 2% on an underlying basis. The US/Canada division
had underlying revenue growth of 2%. International operations
produced underlying revenue growth of 2%, with EMEA and Asia
Pacific each rising 1% and Latin America growing 6%. Guy
Carpenter's third quarter revenue was $261 million, an increase of
2% on an underlying basis.
Consulting
Consulting revenue of $1.5 billion in the third quarter
increased 6% on an underlying basis from the third quarter of 2014.
Both operating income and adjusted operating income rose 4% to $285
million. For the nine months of 2015, revenue was $4.4 billion, up
5% on an underlying basis. Operating income grew 5% to $781
million, and adjusted operating income increased 4%.
Mercer's revenue was $1.1 billion in the third quarter, an
increase of 5% on an underlying basis. Health, with revenue of $394
million, grew 6% on an underlying basis; Retirement, with revenue
of $317 million, rose 2%; Investments, with revenue of $202
million, increased 6%; and Talent, with revenue of $177 million,
was up 6%. Oliver Wyman Group’s revenue was $450 million in the
third quarter, an increase of 9% on an underlying basis.
Other Items
In the third quarter of 2015, Marsh & McLennan Companies had
investment income of $34 million, which was predominantly carried
interest from Trident III no longer subject to clawback. Investment
income in the third quarter of last year was $26 million. In
September 2015, the Company issued $600 million of 3.75% senior
notes due in 2026, the net proceeds of which are being used for
general corporate purposes. The Board also increased the quarterly
dividend 11%, to $.31 per share, effective with the third quarter
payment on August 14, 2015. The Company repurchased 9.9 million
shares of its common stock for $550 million in the third quarter.
For the nine months of 2015, the Company repurchased 23.4 million
shares for $1.3 billion.
Conference Call
A conference call to discuss third quarter 2015 results will be
held today at 8:30 a.m. Eastern time. To participate in the
teleconference, please dial +1 800 500 0920. Callers from outside
the United States should dial +1 719 457 2646. The access code for
both numbers is 520888. 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
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 talent, health,
retirement, and investment consulting; and Oliver Wyman is a leader in management consulting.
With annual revenue of $13 billion and approximately 58,000
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," "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; the impact of competition; pension obligations; the
impact of foreign currency exchange rates; our effective tax rates;
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 ability to maintain adequate
safeguards to protect the security of confidential, personal or
proprietary information, and the potential for the improper
disclosure or use of such information, whether due to human error,
improper action by employees, vendors or third parties, or as a
result of a cyberattack;
- the impact of competition on our
business, including the impact of our corporate tax rate, which is
higher than the tax rate of our international competitors;
- the impact of fluctuations in foreign
currency exchange rates, particularly in light of the strength of
the U.S. dollar against most other currencies worldwide;
- the impact on our global pension
obligations of changes in discount rates and asset returns, as well
as projected salary increases, mortality rates, demographics and
inflation, and the impact of cash contributions required to be made
to our global defined benefit pension plans due to changes in the
funded status of those plans;
- our exposure to potential liabilities
arising from errors and omissions claims against us;
- our exposure to potential civil
remedies or criminal penalties if we fail to comply with foreign
and U.S. laws that are applicable in the domestic and international
jurisdictions in which we operate;
- the extent to which we are able to
retain existing clients and attract new business, and our ability
to effectively incentivize and retain key employees;
- our ability to make acquisitions and
dispositions and to integrate, and realize expected synergies,
savings or benefits from, the businesses we acquire;
- our ability to successfully recover
should we experience a disaster or other business continuity
problem;
- the impact of changes in interest rates
and deterioration of counterparty credit quality on our cash
balances and the performance of our investment portfolios;
- the impact of potential rating agency
actions on our cost of financing and ability to borrow, as well as
on our operating costs and competitive position;
- 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 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 EndedSeptember 30, Nine Months
EndedSeptember 30, 2015 2014
2015 2014
Revenue $
3,115 $ 3,141
$ 9,555 $
9,705
Expense: Compensation and Benefits
1,878 1,904
5,434 5,619 Other Operating Expenses
776 792
2,296 2,321
Operating Expenses 2,654 2,696
7,730 7,940
Operating Income 461
445
1,825 1,765
Interest Income 3 6
9
16
Interest Expense (41 ) (45 )
(117
) (129 )
Investment Income 34 26
39 37
Income Before Income Taxes
457 432
1,756 1,689
Income Tax Expense
128 127
500 487
Income
from Continuing Operations 329 305
1,256 1,202
Discontinued Operations, Net of Tax 2 (1 )
(1 ) (4 )
Net Income Before Non-Controlling
Interests 331 304
1,255 1,198
Less: Net Income
Attributable to Non-Controlling Interests 8 7
31 27
Net Income Attributable to the
Company $ 323 $ 297
$
1,224 $ 1,171
Basic Net Income Per
Share - Continuing Operations $ 0.61
$ 0.55
$ 2.29 $ 2.15
-
Net Income Attributable to the Company $ 0.61
$ 0.55
$ 2.29 $ 2.14
Diluted Net Income Per Share - Continuing Operations
$ 0.60 $ 0.54
$ 2.27
$ 2.12
- Net Income Attributable to the
Company $ 0.61 $ 0.54
$
2.27 $ 2.11
Average Number of Shares
Outstanding - Basic 528 544
534 547
- Diluted 533 551
540 554
Shares Outstanding at
9/30 522 542
522 542
Marsh & McLennan Companies,
Inc. Supplemental Information - Revenue Analysis
Three Months Ended September 30,
2015
(Millions) (Unaudited)
Components of Revenue Change*
Three Months Ended September
30,
% Change GAAP
Revenue
Currency Impact
Acquisitions/Dispositions
Impact
Underlying Revenue
2015 2014
Risk and Insurance
Services Marsh
$ 1,317 $ 1,338 (2 )% (7 )% 4 % 2
% Guy Carpenter
261 266 (2 )% (4 )% — 2 %
Subtotal
1,578 1,604 (2 )% (7 )% 3 % 2 % Fiduciary Interest
Income
6 6 Total Risk and Insurance Services
1,584 1,610 (2 )% (7 )% 3 % 2 %
Consulting Mercer
1,090 1,112 (2 )% (8 )% 1 % 5 %
Oliver Wyman Group
450 429 5 % (6 )% 2 % 9 %
Total Consulting
1,540 1,541 — (7 )% 1 % 6 %
Corporate / Eliminations (9 ) (10 )
Total
Revenue $ 3,115 $ 3,141 (1 )% (7 )%
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 Ended September
30,
% Change GAAP
Revenue
Currency Impact
Acquisitions/Dispositions
Impact
Underlying Revenue
2015 2014
Marsh: EMEA
$ 378 $ 414 (9 )% (10 )% 1 % 1 % Asia Pacific
156 175 (10 )% (13 )% 2 % 1 % Latin America
86
99 (14 )% (21 )% 2 % 6 % Total International
620 688
(10 )% (13 )% 1 % 2 % U.S. / Canada
697 650 7
% (2 )% 7 % 2 % Total Marsh
$ 1,317 $ 1,338
(2 )% (7 )% 4 % 2 %
Mercer: Health
$
394 $ 392 — (4 )% (2 )% 6 % Retirement
317 330 (4 )%
(8 )% 2 % 2 % Investments
202 213 (5 )% (14 )% 3 % 6 %
Talent
177 177 1 % (8 )% 3 % 6 % Total Mercer
$ 1,090 $ 1,112 (2 )% (8 )% 1 % 5 %
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 and transfers among businesses. *
Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis Nine Months
Ended September 30, 2015
(Millions) (Unaudited)
Components of Revenue Change*
Nine Months Ended September
30,
% Change GAAP
Revenue
Currency Impact
Acquisitions/Dispositions
Impact
Underlying Revenue
2015 2014
Risk and Insurance
Services Marsh
$ 4,217 $ 4,280 (1 )% (7 )% 3 % 3
% Guy Carpenter
904 942 (4 )% (4 )% (1 )% 1 %
Subtotal
5,121 5,222 (2 )% (6 )% 2 % 2 % Fiduciary Interest
Income
16 18 Total Risk and Insurance Services
5,137 5,240 (2 )% (6 )% 2 % 2 %
Consulting Mercer
3,173 3,244 (2 )% (7 )% 1 % 4 %
Oliver Wyman Group
1,275 1,249 2 % (6 )% 2 % 6
% Total Consulting
4,448 4,493 (1 )% (7 )% 1 %
5 %
Corporate / Eliminations (30 ) (28 )
Total Revenue $ 9,555 $ 9,705 (2
)% (7 )% 2 % 3 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue Change*
Nine Months Ended September
30,
% Change GAAP
Revenue
Currency Impact
Acquisitions/Dispositions
Impact
Underlying Revenue
2015 2014
Marsh: EMEA
$ 1,380 $ 1,509 (9 )% (11 )% 1 % 2 % Asia Pacific
480 520 (8 )% (10 )% 1 % 1 % Latin America
262
285 (8 )% (17 )% 3 % 5 % Total International
2,122
2,314 (8 )% (11 )% 1 % 2 % U.S. / Canada
2,095 1,966
7 % (1 )% 5 % 3 % Total Marsh
$ 4,217 $
4,280 (1 )% (7 )% 3 % 3 %
Mercer: Health
$
1,169 $ 1,173 — (4 )% (2 )% 5 % Retirement
973 1,032
(6 )% (8 )% 2 % — Investments
614 622 (1 )% (12 )% 2 % 9 %
Talent
417 417 — (7 )% 3 % 5 % Total Mercer
$ 3,173 $ 3,244 (2 )% (7 )% 1 % 4 %
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 and transfers among businesses. *
Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc. Non-GAAP
Measures Three Months Ended September 30
(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 September 30, 2015
and 2014. The following tables also present adjusted operating
margin, which is calculated by dividing adjusted operating income
by consolidated or segment GAAP revenue.
Risk & Insurance
Services
Consulting
Corporate/Eliminations
Total Three Months Ended September 30, 2015
Operating income (loss) $ 225 $
285 $ (49 ) $ 461
Add impact of Noteworthy Items: Restructuring charges (a)
1 — 2 3 Adjustments to acquisition
related accounts (b)
22 — —
22 Operating income adjustments
23 — 2 25
Adjusted operating income (loss) $ 248
$ 285 $ (47 ) $
486 Operating margin 14.2 %
18.5 % N/A 14.8 %
Adjusted operating margin 15.7 % 18.5
% N/A 15.6 % Three Months
Ended September 30, 2014 Operating income (loss) $ 229
$ 274 $ (58 ) $ 445 Add (Deduct) impact of
Noteworthy Items: Restructuring charges (a) 2 — 2 4 Adjustments to
acquisition related accounts (b) 11 — — 11 Other — —
(2 ) (2 )
Operating income adjustments 13 — —
13
Adjusted operating income (loss) $ 242
$ 274 $ (58 ) $ 458
Operating margin
14.2 % 17.8 % N/A 14.2 %
Adjusted operating margin
15.0 % 17.8 % N/A 14.6 % (a) Primarily
severance, 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.
Marsh & McLennan Companies, Inc. Non-GAAP
Measures Nine Months Ended September 30
(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 nine months ended September 30, 2015 and
2014. The following tables also present adjusted operating margin,
which is calculated by dividing adjusted operating income by
consolidated or segment GAAP revenue.
Risk & Insurance
Services
Consulting
Corporate/Eliminations
Total Nine Months Ended September 30, 2015
Operating income (loss) $ 1,185
$ 781 $ (141 ) $
1,825 Add (Deduct) impact of Noteworthy Items:
Restructuring charges (a)
3 — 5 8
Adjustments to acquisition related accounts (b)
51 (5
) — 46 Other
— —
(1 ) (1 ) Operating income
adjustments 54 (5 ) 4
53 Adjusted operating income (loss) $
1,239 $ 776 $ (137
) $ 1,878 Operating margin
23.1 % 17.6 % N/A 19.1
% Adjusted operating margin 24.1 %
17.5 % N/A 19.7 % Nine Months
Ended September 30, 2014 Operating income (loss) $ 1,170
$ 746 $ (151 ) $ 1,765 Add (Deduct) impact of
Noteworthy Items: Restructuring charges (a) 4 — 6 10 Adjustments to
acquisition related accounts (b) 22 — — 22 Other — —
(1 ) (1 )
Operating income adjustments 26 — 5
31
Adjusted operating income (loss) $ 1,196
$ 746 $ (146 ) $ 1,796
Operating margin
22.3 % 16.6 % N/A 18.2 %
Adjusted operating margin 22.8 %
16.6 % N/A 18.5 % (a) Primarily severance, 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.
Marsh & McLennan Companies,
Inc. Non-GAAP Measures Three and Nine Months Ended
September 30
(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 tables;
divided by MMC's average number of shares outstanding-diluted for
the period.
Reconciliation of the Impact of
Non-GAAP Measures on diluted earnings per share -
Three Months Ended September 30,
2015
Three Months EndedSeptember 30, 2014
Amount
Diluted EPS
Amount
DilutedEPS
Income from continuing operations
$ 329
$ 305 Less: Non-controlling interest, net of tax
8 7
Subtotal
$ 321 $ 0.60 $ 298 $
0.54 Operating income adjustments
$ 25 $ 13 Impact of
income taxes
(8 ) (4 )
17 0.03
9 0.02 Adjusted income, net of tax
$
338 $ 0.63 $ 307 $ 0.56
Nine Months Ended September 30,
2015
Nine Months EndedSeptember 30, 2014
Amount
Diluted EPS
Amount
DilutedEPS
Income from continuing operations
$ 1,256 $ 1,202
Less: Non-controlling interest, net of tax
31 27
Subtotal
$ 1,225 $ 2.27 $ 1,175
$ 2.12 Operating income adjustments
$ 53 $ 31 Impact
of income taxes
(15 ) (11 )
38
0.07 20 0.04 Adjusted income, net of tax
$ 1,263 $ 2.34 $ 1,195
$ 2.16
Marsh & McLennan
Companies, Inc. Supplemental Information
(Millions) (Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2015 2014
2015 2014 Depreciation and
amortization expense
$ 77 $ 76
$ 233 $
225 Identified intangible amortization expense
$ 31 $
22
$ 79 $ 64 Stock option expense
$ 5 $
4
$ 18 $ 14 Capital expenditures
$ 73 $
83
$ 249 $ 285
Marsh
& McLennan Companies, Inc. Consolidated Balance
Sheets
(Millions)
(Unaudited) September 30,
2015
December 31,2014
ASSETS Current assets: Cash and cash equivalents
$ 1,330 $ 1,958 Net receivables
3,517 3,377
Other current assets
679 720
Total current
assets 5,526 6,055 Goodwill and intangible assets
8,342 7,933 Fixed assets, net
786 809 Pension related
assets
1,182 967 Deferred tax assets
667 876 Other
assets
1,260 1,200
TOTAL ASSETS
$ 17,763 $ 17,840
LIABILITIES
AND EQUITY Current liabilities: Short-term debt
$
62 $ 11 Accounts payable and accrued liabilities
1,759 1,883 Accrued compensation and employee benefits
1,313 1,633 Accrued income taxes
107 178 Dividends
payable
163 —
Total current liabilities
3,404 3,705 Fiduciary liabilities
4,374 4,552
Less - cash and investments held in a fiduciary capacity
(4,374 ) (4,552 )
— — Long-term debt
4,422 3,376 Pension, post-retirement and post-employment
benefits
2,114 2,244 Liabilities for errors and omissions
358 341 Other liabilities
1,083 1,041
Total
equity 6,382 7,133
TOTAL LIABILITIES
AND EQUITY $ 17,763 $ 17,840
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151027005843/en/
Media:Marsh & McLennan CompaniesEdward L. Dandridge,
+1-212-345-9751ed.dandridge@mmc.comorInvestors:Marsh &
McLennan CompaniesKeith Walsh, +1-212-345-0057keith.walsh@mmc.com
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