RNS Number:1271R
Marsh & McLennan Co Inc
21 October 2003
News Release
Media Contacts: Investor Contact:
Barbara Perlmutter Jim Fingeroth Mike Bischoff
MMC Kekst and Company MMC
(212) 345-5585 (212) 521-4819 (212) 345-5470
MMC REPORTS INCREASED THIRD QUARTER
AND NINE MONTHS RESULTS
Quarterly Revenues Increase 11 Percent, Net Income Rises 19 Percent
NEW YORK, NEW YORK, October 21, 2003-Marsh & McLennan Companies, Inc. (MMC)
today reported financial results for the quarter and nine months ended September
30, 2003. Consolidated revenues for the quarter increased 11 percent to $2.8
billion. Net income rose 19 percent to $357 million, the largest increase since
2000, and earnings per share grew 18 percent to $0.65 from $0.55. For the nine
months, consolidated revenues rose 10 percent to $8.6 billion. Net income grew
11 percent to $1.2 billion, and earnings per share increased 13 percent to $2.12
from $1.88.
Jeffrey W. Greenberg, chairman, commented: "MMC performed well in the third
quarter, with improvement in each of our businesses. Marsh produced excellent
results. Secular changes are having a lasting effect on the business of advice
and risk transfer. Clients face risks that have grown in number, complexity, and
severity. Heightened awareness of these risks creates a great need for
expertise, and Marsh is uniquely qualified to address these needs around the
world. Marsh also brings to clients a distinctive strength through collaboration
with other MMC companies. For example, Marsh and MMC Capital worked together to
form AXIS Capital to bring much needed new capacity to the insurance markets in
a time of stress. And the addition of Mercer Oliver Wyman to MMC significantly
strengthens our risk management capabilities in financial services."
Mr. Greenberg continued: "We're pleased that both Mercer and Putnam showed
improved results in the current environment. Over the last decade, MMC's
activities in retirement and benefits have alternated with risk and insurance
services as our major business. Putnam and Mercer are dedicated to responding to
retirement needs around the world. Demographic trends in the developed world and
the need for a private sector response to retirement issues will provide
important opportunities for growth. Putnam and Mercer will be well positioned to
take advantage of these growing markets."
Risk and insurance services revenues rose 15 percent in the third quarter to
$1.6 billion. On a constant currency basis, which excludes changes in foreign
exchange and acquisitions, revenues grew 13 percent. Operating income increased
16 percent to $388 million. Risk management and insurance broking, representing
approximately 75 percent of Marsh's revenues, grew 12 percent on a constant
currency basis, with double-digit growth throughout the world. Reinsurance
broking and services revenues increased 20 percent. Related insurance services
revenues grew 9 percent, with strong growth in claims management and
underwriting management, a modest increase at MMC Capital, and a slight decline
in affinity business.
During the quarter, AXIS Capital Holdings Limited successfully completed its
public offering. AXIS was formed through the collaboration of Marsh and MMC
Capital in November 2001 with $1.6 billion of capital. As a founding
shareholder, MMC invested $100 million directly in AXIS and an additional $60
million through its holding in Trident II.
Risk and insurance services revenues for the nine months reached $5.1 billion,
an increase of 17 percent, 14 percent on a constant currency basis. Operating
income increased 20 percent to $1.4 billion. Marsh's operating margin expanded
for the nine months to 26.5 percent. This indicates the strength of Marsh's
performance, particularly as it reflects investments in operating efficiencies
to drive future profitability.
Putnam has benefited from more favorable equity markets. It has posted stronger
financial results, has higher assets under management, and has made a number of
important changes in its business operations. Putnam's revenues in the third
quarter were $507 million, compared with $522 million last year. Operating
income grew 17 percent to $136 million. Putnam's total assets under management
on September 30, 2003 were $272 billion, 14 percent higher than assets under
management at the end of last year's third quarter. Average assets under
management during the third quarter were $270 billion, 5 percent higher than
average assets in the third quarter last year. At the end of the quarter, mutual
fund assets were $171 billion, up 6 percent, and institutional assets were $101
billion, an increase of 31 percent. This includes international assets of $39
billion, which were 44 percent higher than at the end of last year's third
quarter.
Mercer's revenues in the third quarter increased 15 percent to $690 million from
$600 million, and operating income rose 12 percent to $96 million. On a constant
currency basis, revenues grew 3 percent. In the quarter, Mercer's human resource
practices reported strong revenue growth in Europe and Asia, partially offset by
modest declines in North America. Mercer's economic consulting practice
performed well. Management consulting results reflect the strong new business
growth of recently acquired Mercer Oliver Wyman. For the nine months, retirement
services revenues on a constant currency basis grew 3 percent, health care and
group benefits increased 7 percent, and economic consulting grew 9 percent.
Year-to-date, MMC has paid $452 million in dividends to shareholders, including
an 11 percent increase in the quarterly dividend effective in the third quarter.
MMC also repurchased 8.2 million shares of common stock in the third quarter,
bringing its total repurchases for the year to 19.6 million shares for $910
million.
MMC is a global professional services firm with annual revenues exceeding $10
billion. It is the parent company of Marsh Inc., the world's leading risk and
insurance services firm; Putnam Investments, one of the largest investment
management companies in the United States; and Mercer Inc., a major global
provider of consulting services. Approximately 60,000 employees provide
analysis, advice and transactional capabilities to clients in over 100
countries. Its stock (ticker symbol: MMC) is listed on the New York, Chicago,
Pacific, and London stock exchanges. MMC's website address is www.mmc.com.
This press release contains certain statements relating to future results, which
are forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such statements may include, without limitation,
discussions concerning revenues, expenses, earnings, cash flow, capital
structure, pension funding, financial losses and expected insurance recoveries
resulting from the September 11, 2001 attack on the World Trade Center in New
York City, as well as market and industry conditions, premium rates, financial
markets, interest rates, foreign exchange rates, contingencies and matters
relating to MMC's operations and income taxes. Such forward-looking statements
are based on available current market and industry materials, experts' reports
and opinions and long-term trends, as well as management's expectations
concerning future events impacting MMC. Forward-looking statements by their very
nature involve risks and uncertainties. Factors that may cause actual results to
differ materially from those contemplated by any forward-looking statements
contained herein include, in the case of MMC's risk and insurance services and
consulting businesses, the amount of actual insurance recoveries and financial
losses from the September 11 attack on the World Trade Center, or other adverse
consequences from that incident. Other factors that should be considered in the
case of MMC's risk and insurance services business are changes in competitive
conditions, movements in premium rate levels, the continuation of difficult
conditions for the transfer of commercial risk and other changes in the global
property and casualty insurance markets, natural catastrophes, mergers between
client organizations, and insurance or reinsurance company insolvencies. Factors
to be considered in the case of MMC's investment management business include
changes in worldwide and national equity and fixed income markets, actual and
relative investment performance, the level of sales and redemptions, and the
ability to maintain investment management and administrative fees at appropriate
levels; and with respect to all of MMC's activities, changes in general
worldwide and national economic conditions, the impact of terrorist attacks,
changes in the value of investments made in individual companies and investment
funds, fluctuations in foreign currencies, actions of competitors or regulators,
changes in interest rates or in the ability to access financial markets,
developments relating to claims, lawsuits and contingencies, prospective and
retrospective changes in the tax or accounting treatment of MMC's operations,
and the impact of tax and other legislation and regulation in the jurisdictions
in which MMC operates.
Forward-looking statements speak only as of the date on which they are made, and
MMC undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which it is made or to reflect the
occurrence of unanticipated events. Please refer to Marsh & McLennan Companies'
2002 Annual Report on Form 10-K for "Information Concerning Forward-Looking
Statements," its reports on Form 8-K, and quarterly reports on Form 10-Q.
MMC is committed to providing timely and materially accurate information to the
investing public, consistent with our legal and regulatory obligations. To that
end, MMC and its operating companies use their websites to convey meaningful
information about their businesses, including the anticipated release of
quarterly financial results, and the posting of updates of assets under
management at Putnam. Monthly updates of total assets under management at Putnam
will be posted to the MMC website the first business day following the end of
each month, except at the end of March, June, September, and December, when such
information will be released with MMC's quarterly earnings announcement. Putnam
posts mutual fund and performance data to its website regularly. Assets for most
Putnam retail mutual funds are posted approximately two weeks after each
month-end. Mutual fund net asset value (NAV) is posted daily. Historical
performance and Lipper rankings are also provided. Investors can link to MMC and
its operating company websites through www.mmc.com.
Marsh & McLennan Companies, Inc.
Consolidated Statements of Income
(In millions, except per share figures)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- --------------
2003 2002 2003 2002
------- ------- -------- -------
Revenue:
Risk and $1,640 $1,431 $5,093 $4,343
Insurance
Services
Investment 507 522 1,447 1,697
Management
Consulting 690 600 2,014 1,760
---------- ---------- ----------- ---------
Total Revenue 2,837 2,553 8,554 7,800
--------- --------- ----------- ---------
Expense:
Compensation 1,486 1,299 4,339 3,829
and Benefits
Other Operating 758 742 2,306 2,207
Expenses ---------- ---------- ----------- ---------
Total Expense 2,244 2,041 6,645 6,036
--------- --------- ----------- ---------
Operating 593 512 1,909 1,764
Income
Interest 6 5 19 14
Income
Interest (48) (43) (137) (118)
Expense ------------ ------------ ------------ -----------
Income Before 551 474 1,791 1,660
Income Taxes
and Minority
Interest
Expense
Income Taxes 188 168 609 589
Minority 6 7 17 18
Interest ------------ ------------ ------------- -----------
Expense, Net of
Tax
Net Income $ 357 $ 299 $1,165 $1,053
========= ========= ========== ========
Basic Net $0.67 $0.56 $2.18 $1.94
Income Per ========= ========= =========== =========
Share
Diluted Net $0.65 $0.55 $2.12 $1.88
Income Per ========= ========= =========== =========
Share
Average Number
of
Shares 531 535 534 542
Outstanding - ========== ========== ============ ==========
Basic
Average Number
of
Shares 550 548 550 559
Outstanding - ========== ========== ============ ==========
Diluted
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Third Quarter
(Millions) (Unaudited)
Three Months Ended % Change Currency/
September 30, GAAP Constant Acquisitions
2003 2002 Revenue Currency Impact
------- ------- -------- -------- ---------
Risk and
Insurance
Services
Risk $1,207 $1,052 15% 12% 3%
Management and
Insurance
Broking
Reinsurance 204 168 21% 20% 1%
Broking and
Services
Related 229 211 9% 9% -
Insurance -------- --------
Services
Total Risk and 1,640 1,431 15% 13% 2%
Insurance -------- --------
Services
Investment 507 522 (3)% (3)% -
Management -------- --------
Consulting
Retirement 300 283 6% 1% 5%
Services
Health Care 99 93 7% 3% 4%
and Group
Benefits
Human 100 92 8% (1)% 9%
Capital
Management and 117 65 76% 3% 73%
Organizational
Change
Economic 38 33 18% 16% 2%
-------- --------
654 566 15% 2% 13%
Reimbursed 36 34 7% 7% -
Expenses -------- --------
Total 690 600 15% 3% 12%
Consulting -------- --------
Total $2,837 $2,553 11% 7% 4%
Revenue ======== ========
Revenue from
Investment
Income (Loss)
Included
Above $ 28 $ 15
Notes to Consolidated Income Statement and Supplemental Information:
Constant currency measures the change in revenue, before the impact of
acquisitions and dispositions, using consistent currency exchange rates.
Related insurance services includes U.S. affinity, claims management,
underwriting management and MMC Capital businesses.
Interest income on fiduciary funds amounted to $30 million and $91 million for
the three months and nine months ended September 30, 2003, respectively,
compared with $34 million and $90 million for the same periods of 2002.
Investment income (loss) includes realized and unrealized gains and losses from
investments recognized in the income statement, as well as other than temporary
declines in the value of available for sale securities. MMC's investments may
include seed shares for mutual funds, direct investments in insurance,
consulting or investment management companies and investments in private equity
funds.
MMC's direct investment in AXIS is classified as an available for sale security.
As restrictions on the sale of AXIS shares expire, changes in fair value are
reflected on the Balance Sheet until realized. Trident II's investments are
carried at fair value, in accordance with investment company accounting. MMC's
proportionate share of the change in value of its investment in Trident II is
recorded as part of investment income (loss) in the Consolidated Income
Statement.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Year-to-Date
(Millions) (Unaudited)
Nine Months Ended % Change Currency/
September 30, GAAP Constant Acquisitions
2003 2002 Revenue Currency Impact
------- ------- -------- -------- ---------
Risk and
Insurance
Services
Risk $3,800 $3,210 18% 14% 4%
Management and
Insurance
Broking
Reinsurance 627 502 25% 23% 2%
Broking and
Services
Related 666 631 6% 5% 1%
Insurance -------- --------
Services
Total Risk and 5,093 4,343 17% 14% 3%
Insurance -------- --------
Services
Investment 1,447 1,697 (15)% (15)% -
Management -------- --------
Consulting
Retirement 912 832 10% 3% 7%
Services
Health Care 300 269 12% 7% 5%
and Group
Benefits
Human 275 255 8% 2% 6%
Capital
Management and 315 204 54% (1)% 55%
Organizational
Change
Economic 109 98 12% 9% 3%
-------- --------
1,911 1,658 15% 3% 12%
Reimbursed 103 102 1% 1% -
Expenses -------- --------
Total 2,014 1,760 14% 3% 11%
Consulting -------- --------
Total $8,554 $7,800 10% 5% 5%
Revenue ======== ========
Revenue from
Investment
Income (Loss)
Included
Above $ 64 $ 52
Marsh & McLennan Companies, Inc.
Supplemental Information
(Millions) (Unaudited)
------------- --------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- --------------
2003 2002 2003 2002
------- ------- -------- -------
Operating Income
Including
Minority
Interest
Expense:
Risk and $ 388 $ 334 $1,351 $1,125
Insurance
Services
Investment 136 116 364 460
Management
Consulting 96 86 278 250
Corporate (33) (31) (101) (89)
---------- -------- --------- ---------
587 505 1,892 1,746
---------- -------- --------- ---------
Minority
Interest
Expense, Net of
Tax, Included
Above:
Risk and 3 4 9 7
Insurance
Services
Investment 3 3 8 11
Management -------- -------- -------- --------
6 7 17 18
--------- -------- -------- --------
Operating $ 593 $ 512 $1,909 $1,764
Income ========= ========= ======== ========
Segment
Operating
Margins:
Risk and 23.7% 23.3% 26.5% 25.9%
Insurance
Services
Investment 26.8% 22.2% 25.2% 27.1%
Management
Consulting 13.9% 14.3% 13.8% 14.2%
Consolidated 20.9% 20.1% 22.3% 22.6%
Operating
Margin
Pretax Margin 19.4% 18.6% 20.9% 21.3%
Effective Tax 34.0% 35.5% 34.0% 35.5%
Rate
Shares 533 537
Outstanding at
End of Period
Potential
Minority
Interest
Associated with
the Putnam
Equity
Partnership Plan
Net of Dividend
Equivalent
Expense Related $- $- $- $1
to MMC Common
Stock
Equivalents
Included in operating results in the third quarter of 2002 was a write down of
Putnam's investment related to Thomas H. Lee Equity Fund IV, partially offset by
a contractual payment received from Putnam's Italian joint venture partner. The
net impact of these items reduced operating income by approximately $20 million.
The remaining intangible asset related to Fund IV was written off in the third
quarter of 2003 and had a net impact of approximately $10 million.
Marsh & McLennan Companies, Inc.
Supplemental Information - Putnam Assets Under Management
(Billions) (Unaudited)
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2003 2003 2003 2002 2002
-------- ------- -------- ------- -------
Mutual Funds:
Growth Equity $ 48 $ 48 $ 43 $ 45 $ 45
Value Equity 42 42 36 40 38
Blend Equity 36 35 30 33 32
Fixed Income 45 46 46 46 46
------- -------- -------- -------- --------
Total Mutual Fund 171 171 155 164 161
Assets ------- -------- -------- -------- -------
Institutional:
Equity 76 72 64 66 59
Fixed Income 25 24 22 21 18
-------- -------- -------- -------- --------
Total 101 96 86 87 77
Institutional -------- -------- -------- -------- --------
Assets
Total Ending $272 $267 $241 $251 $238
Assets ======== ======== ======== ======= ========
Assets from Non-US $ 39 $ 37 $ 33 $ 33 $ 27
Investors ======== ======== ======== ======= ========
Average Assets
Under Management:
Quarter-to-Date $270 $260 $244 $249 $257
======== ======== ======== ======== ========
Year-to-Date $258 $252 $244 $279 $289
======== ======== ======== ======== ========
Net New Sales/
(Redemptions)
including
Dividends
Reinvested:
Quarter-to-Date $(2.7) $(3.0) $(1.3) $ 0.4 $ (7.1)
======== ======== ======== ======== ========
Year-to-Date $(7.0) $(4.3) $(1.3) $(10.3) $(10.7)
======== ======== ======== ======== ========
Categories of mutual fund assets reflect style designations aligned with
Putnam's various prospectuses. All quarter-end assets conform with the current
investment mandate for each product.
This information is provided by RNS
The company news service from the London Stock Exchange
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