TIDMMHM
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, 2016.
Dan Glaser, President and CEO, said: "We produced another
quarter of strong earnings growth, delivering double-digit growth
in both GAAP and adjusted EPS, with margin expansion in both
segments. Through nine months, we have generated underlying revenue
growth of 3%, solid earnings growth and margin expansion in each
segment. For the full year, we continue to expect to deliver
underlying revenue growth, meaningful margin expansion and strong
growth in earnings per share."
Consolidated Results
Consolidated revenue in the third quarter of 2016 was $3.1
billion, an increase of 1% on both a reported and underlying basis
compared with the third quarter of 2015. Operating income rose 24%
to $572 million. Adjusted operating income, which excludes
noteworthy items as presented in the attached supplemental
schedules, increased 16% to $562 million. Net income attributable
to the Company was up 17% to $379 million. Earnings per share
increased 20% to $.73. Adjusted earnings per share rose 10% to $.69
compared with $.63 in last year's third quarter.
For the nine months ended September 30, 2016, revenue was $9.8
billion, an increase of 3% on both a reported and underlying basis.
Net income attributable to the Company was up 9% to $1.3 billion,
and earnings per share rose 12% to $2.54. Adjusted earnings per
share increased 8% to $2.53 compared with $2.34 for the comparable
period in 2015.
Risk & Insurance Services
Risk & Insurance Services revenue was $1.6 billion in the
third quarter of 2016, an increase of 3%. Revenue grew 2% on an
underlying basis. Operating income was $315 million, an increase of
39%. Adjusted operating income rose 22% to $302 million compared
with $248 million in last year's third quarter. For the nine months
ended September 30, 2016, revenue was $5.4 billion, an increase of
4%, or 2% on an underlying basis. Operating income rose 13% to $1.3
billion. Adjusted operating income rose 8% to $1.3 billion,
compared with $1.2 billion last year.
Marsh's revenue in the third quarter of 2016 was $1.4 billion,
an increase of 2% on an underlying basis. The U.S./Canada division
produced underlying revenue growth of 3%, while International
operations rose 2%: EMEA was flat, Asia Pacific rose 2% and Latin
America increased 9%. Guy Carpenter's third quarter revenue was
$260 million, flat on an underlying basis.
Consulting
Consulting revenue was $1.5 billion in the third quarter, a
decrease of 2%. Revenue was flat on an underlying basis. Operating
income rose 8% to $308 million. Adjusted operating income increased
8% to $309 million compared with $285 million in last year's third
quarter. For the nine months of 2016, revenue was $4.5 billion, up
2%, or 3% on an underlying basis. Operating income rose 7% to $838
million. Adjusted operating income increased 8% to $835 million
compared with $776 million in 2015.
Mercer's revenue was $1.1 billion in the third quarter, an
increase of 3% on an underlying basis. Investments grew 7% on an
underlying basis; Talent increased 7%; Health grew 2%; and
Retirement was flat. Oliver Wyman Group's revenue was $404 million
in the third quarter, a decrease of 9% on an underlying basis.
Other Items
Investment income was negligible in the third quarter, compared
with $34 million in the prior year period. The Company repurchased
3 million shares of stock for $200 million in the third quarter.
Through nine months, the Company has repurchased 10 million shares
for $625 million.
Conference Call
A conference call to discuss third quarter 2016 results will be
held today at 8:30 a.m. Eastern time. To participate in the
teleconference, please dial +1 888 349 9618. Callers from outside
the United States should dial +1 719 325 2202. The access code for
both numbers is 9526128. 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 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," "future,"
"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 ability to maintain adequate safeguards to protect the security of
our information systems and confidential, personal or
proprietary
information;
-- our ability to successfully recover if we experience a business
continuity problem due to cyberattack, natural disaster or
otherwise;
-- our exposure to potential losses and liabilities, including
reputational impact, arising from errors and omissions, breach
of
fiduciary duty and similar claims against us;
-- our ability to compete effectively and adapt to changes in the
competitive environment, including to 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
rising protectionist laws and business practices;
-- the impact of changes in applicable tax laws and regulations,
particularly in the United States and Europe;
-- 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 financial and operational impact of complying with laws and
regulations where we operate;
-- our exposure to potential civil remedies or criminal penalties if we
fail to comply with applicable U.S. and non-U.S. laws and
regulations;
-- the impact of fluctuations in foreign exchange, interest rates and
securities markets on our results;
-- the impact on our competitive position of our tax rate relative to our
competitors;
-- our ability to incentivize and retain key employees; and
-- the impact of changes in accounting rules or in our accounting
estimates or assumptions.
The factors identified above are not exhaustive. 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 Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Revenue $ 3,135 $ 3,115 $ 9,847 $ 9,555
Expense:
Compensation 1,817 1,878 5,543 5,434
and
Benefits
Other 746 776 2,273 2,296
Operating
Expenses
Operating 2,563 2,654 7,816 7,730
Expenses
Operating 572 461 2,031 1,825
Income
Interest - 3 4 9
Income
Interest (47 ) (41 ) (141 ) (117 )
Expense
Investment - 34 (2 ) 39
Income
(Loss)
Income 525 457 1,892 1,756
Before
Income
Taxes
Income Tax 141 128 538 500
Expense
Income 384 329 1,354 1,256
from
Continuing
Operations
Discontinued - 2 - (1 )
Operations,
Net of Tax
Net Income 384 331 1,354 1,255
Before
Non-Controlling
Interests
Less: Net 5 8 22 31
Income
Attributable
to
Non-Controlling
Interests
Net $ 379 $ 323 $ 1,332 $ 1,224
Income
Attributable
to
the Company
Basic Net
Income
Per Share
- $ 0.73 $ 0.61 $ 2.56 $ 2.29
Continuing
Operations
- $ 0.73 $ 0.61 $ 2.56 $ 2.29
Net Income
Attributable
to
the Company
Diluted
Net
Income
Per Share
- $ 0.73 $ 0.60 $ 2.54 $ 2.27
Continuing
Operations
- $ 0.73 $ 0.61 $ 2.54 $ 2.27
Net Income
Attributable
to
the Company
Average
Number
of Shares
Outstanding
- Basic 518 528 520 534
- Diluted 523 533 525 540
Shares 516 522 516 522
Outstanding
at 9/30
Marsh & McLennan Companies, Inc.Supplemental
Information - Revenue Analysis
Three Months Ended September 30,
2016(Millions) (Unaudited)
Components of Revenue Change*
Three Months EndedSeptember 30, % ChangeGAAPRevenue CurrencyImpact Acquisitions/ UnderlyingRevenue
DispositionsImpact
2016 2015
Risk and Insurance Services
Marsh $ 1,364 $ 1,317 4 % (1)% 2% 2 %
Guy Carpenter 260 261 - - - -
Subtotal 1,624 1,578 3 % (1)% 2% 2 %
Fiduciary Interest Income 8 6
Total Risk and Insurance 1,632 1,584 3 % (1)% 2% 2 %
Services
Consulting
Mercer 1,109 1,090 2 % (2)% 1% 3 %
Oliver Wyman Group 404 450 (10)% (1)% - (9)%
Total Consulting 1,513 1,540 (2)% (2)% - -
Corporate / Eliminations (10 ) (9 )
Total Revenue $ 3,135 $ 3,115 1 % (1)% 1% 1 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue Change*
Three Months Ended % Change CurrencyImpact Acquisitions/ UnderlyingRevenue
September 30, GAAPRevenue DispositionsImpact
2016 2015
Marsh:
EMEA $ 394 $ 378 5 % (3)% 7 % -
Asia Pacific 153 156 (3)% 3 % (7)% 2%
Latin America 88 86 2 % (7)% - 9%
Total 635 620 2 % (2)% 3 % 2%
International
U.S. / Canada 729 697 5 % - 2 % 3%
Total Marsh $ 1,364 $ 1,317 4 % (1)% 2 % 2%
Mercer:
Health $ 397 $ 394 1 % (1)% (1)% 2%
Retirement 292 317 (8)% (4)% (3)% -
Investments 213 202 5 % (2)% - 7%
Talent 207 177 17 % (1)% 11 % 7%
Total Mercer $ 1,109 $ 1,090 2 % (2)% 1 % 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.
* Components of revenue change may not add due to rounding.
Marsh & McLennan
Companies, Inc.
Supplemental
Information
- Revenue
Analysis
Nine Months Ended
September
30, 2016
(Millions)
(Unaudited)
Components of Revenue Change*
Nine Months Ended % ChangeGAAPRevenue CurrencyImpact Acquisitions/ UnderlyingRevenue
September 30, Dispositions Impact
2016 2015
Risk
and Insurance
Services
Marsh $ 4,411 $ 4,217 5% (2)% 5% 2%
Guy Carpenter 919 904 2% - - 2%
Subtotal 5,330 5,121 4% (2)% 4% 2%
Fiduciary 20 16
Interest
Income
Total Risk and 5,350 5,137 4% (2)% 4% 2%
Insurance
Services
Consulting
Mercer 3,227 3,173 2% (2)% 1% 3%
Oliver Wyman 1,303 1,275 2% (1)% 1% 3%
Group
Total Consulting 4,530 4,448 2% (2)% 1% 3%
Corporate (33 ) (30 )
/ Eliminations
Total Revenue $ 9,847 $ 9,555 3% (2)% 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 % Change CurrencyImpact Acquisitions/ UnderlyingRevenue
September 30, GAAPRevenue DispositionsImpact
2016 2015
Marsh:
EMEA $ 1,443 $ 1,380 5 % (4)% 7 % 1%
Asia Pacific 482 480 - (1)% (1)% 2%
Latin America 252 262 (4)% (13)% - 9%
Total 2,177 2,122 3 % (4)% 5 % 2%
International
U.S. / Canada 2,234 2,095 7 % - 5 % 2%
Total Marsh $ 4,411 $ 4,217 5 % (2)% 5 % 2%
Mercer:
Health $ 1,207 $ 1,169 3 % (1)% - 5%
Retirement 918 973 (6)% (3)% (3)% -
Investments 619 614 1 % (4)% - 4%
Talent 483 417 16 % (2)% 12 % 5%
Total Mercer $ 3,227 $ 3,173 2 % (2)% 1 % 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.
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
(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
reconcileadjusted operating income
(loss)to GAAP operating income or loss,
on a consolidated and segment basis,
for the three months and nine months
ended September 30, 2016 and 2015. The
following tables also presentadjusted operating
margin. For the three months
ended September 30, 2016 and 2015,adjusted
operating marginis calculated by dividing
adjusted operating income by consolidated or segment GAAP revenue.
For the nine months ended September 30, 2016 and
2015,adjusted operating marginis calculated
by dividing adjusted operating income by consolidated
or segment GAAP revenue less the
net gain on the deconsolidation of Marsh's India
subsidiary and contingent proceeds related
to the disposal of Mercer's U.S. defined
contribution recordkeeping business.
Risk &InsuranceServices Consulting Corporate/ Total
Eliminations
Three Months
Ended
September
30, 2016
Operating $ 315 $ 308 $ (51 ) $ 572
income
(loss)
Add (Deduct)
impact of
Noteworthy
Items:
Restructuring (1 ) - 2 1
(a)
Adjustments to (13 ) 1 - (12 )
acquisition
related accounts
(b)
Other 1 - - 1
Operating (13 ) 1 2 (10 )
income
adjustments
Adjusted $ 302 $ 309 $ (49 ) $ 562
operating
income (loss)
Operating 19.2 % 20.4 % N/A 18.2 %
margin
Adjusted 18.5 % 20.4 % N/A 18.0 %
operating
margin
Three Months
Ended
September
30, 2015
Operating $ 225 $ 285 $ (49 ) $ 461
income
(loss)
Add impact of
Noteworthy
Items:
Restructuring 1 - 2 3
(a)
Adjustments to 22 - - 22
acquisition
related accounts
(b)
Operating 23 - 2 25
income
adjustments
Adjusted $ 248 $ 285 $ (47 ) $ 486
operating
income (loss)
Operating 14.2 % 18.5 % N/A 14.8 %
margin
Adjusted 15.7 % 18.5 % N/A 15.6 %
operating
margin
(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.
Marsh & McLennan
Companies, Inc.
Reconciliation
of Non-GAAP
Measures
(Millions)
(Unaudited)
Adjusted Operating
Income (Loss) and
Adjusted Operating
Margin (cont'd)
Risk &InsuranceServices Consulting Corporate/ Total
Eliminations
Nine Months Ended
September
30, 2016
Operating income $ 1,340 $ 838 $ (147 ) $ 2,031
(loss)
Add (Deduct)
impact of
Noteworthy Items:
Restructuring (a) 2 1 6 9
Adjustments to 7 2 - 9
acquisition
related accounts
(b)
Disposal/deconsolidation (12 ) (6 ) - (18 )
of business (c)
Other 1 - - 1
Operating income (2 ) (3 ) 6 1
adjustments
Adjusted operating $ 1,338 $ 835 $ (141 ) $ 2,032
income (loss)
Operating margin 25.0 % 18.5 % N/A 20.6 %
Adjusted operating 25.1 % 18.5 % N/A 20.7 %
margin
Nine Months Ended
September
30, 2015
Operating income $ 1,185 $ 781 $ (141 ) $ 1,825
(loss)
Add (Deduct)
impact of
Noteworthy Items:
Restructuring (a) 3 - 5 8
Adjustments to 51 (5 ) - 46
acquisition
related accounts
(b)
Other - - (1 ) (1 )
Operating income 54 (5 ) 4 53
adjustments
Adjusted operating $ 1,239 $ 776 $ (137 ) $ 1,878
income (loss)
Operating margin 23.1 % 17.6 % N/A 19.1 %
Adjusted operating 24.1 % 17.5 % N/A 19.7 %
margin
(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 the net gain on the deconsolidation
of Marsh's India subsidiary
and contingent proceeds related to the disposal of Mercer's U.S.
defined contribution recordkeeping business. The amounts are removed
from GAAP revenue in the calculation of adjusted operating margin.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
(Millions) (Unaudited)
Adjusted Income, Net of Tax and Adjusted Earnings per Share
Adjusted income,net of taxis 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
EPSis calculated by dividing the Company'sadjusted income, net of
tax, by MMC's average number of shares
outstanding-diluted for the relevant
period. The following tables reconcileadjusted income, net of taxto
GAAP income from continuing operations andadjusted EPSto GAAP EPS for
the three months and nine months ended September 30, 2016 and 2015.
Three Months Ended Three Months Ended
September 30, 2016 September 30, 2015
Amount AdjustedEPS Amount AdjustedEPS
Income $ 384 $ 329
from
continuing
operations
Less: 5 8
Non-controlling
interest,
net
of tax
Subtotal $ 379 $ 0.73 $ 321 $ 0.60
Operating $ (10 ) $ 25
income
adjustments
Impact of (7 ) (8 )
income
taxes
(17 ) (0.04 ) 17 0.03
Adjusted $ 362 $ 0.69 $ 338 $ 0.63
income,
net of tax
Nine Months Ended Nine Months Ended
September 30, 2016 September 30, 2015
Amount AdjustedEPS Amount AdjustedEPS
Income $ 1,354 $ 1,256
from
continuing
operations
Less: 22 31
Non-controlling
interest,
net
of tax
Subtotal $ 1,332 $ 2.54 $ 1,225 $ 2.27
Operating $ 1 $ 53
income
adjustments
Impact of (7 ) (15 )
income
taxes
(6 ) (0.01 ) 38 0.07
Adjusted $ 1,326 $ 2.53 $ 1,263 $ 2.34
income,
net of tax
Marsh
& McLennan
Companies,
Inc.
Supplemental
Information
Three and
Nine
Months
Ended
September
30
(Millions)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Consolidated
Compensation $ 1,817 $ 1,878 $ 5,543 $ 5,434
and
Benefits
Other 746 776 2,273 2,296
operating
expenses
Total $ 2,563 $ 2,654 $ 7,816 $ 7,730
Expenses
Depreciation $ 77 $ 77 $ 231 $ 233
and
amortization
expense
Identified 32 31 99 79
intangible
amortization
expense
Total $ 109 $ 108 $ 330 $ 312
Stock $ 3 $ 5 $ 18 $ 18
option
expense
Capital $ 60 $ 73 $ 174 $ 249
expenditures
Risk
and
Insurance
Services
Compensation $ 924 $ 926 $ 2,779 $ 2,697
and
Benefits
Other 393 433 1,231 1,255
operating
expenses
Total $ 1,317 $ 1,359 $ 4,010 $ 3,952
Expenses
Depreciation $ 35 $ 35 $ 105 $ 107
and
amortization
expense
Identified 26 28 83 69
intangible
amortization
expense
Total $ 61 $ 63 $ 188 $ 176
Consulting
Compensation $ 807 $ 861 $ 2,506 $ 2,475
and
Benefits
Other 398 394 1,186 1,192
operating
expenses
Total $ 1,205 $ 1,255 $ 3,692 $ 3,667
Expenses
Depreciation $ 25 $ 27 $ 75 $ 80
and
amortization
expense
Identified 6 3 16 10
intangible
amortization
expense
Total $ 31 $ 30 $ 91 $ 90
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets
(Millions)
(Unaudited) December 31,
September 30, 2015
2016
ASSETS
Current assets:
Cash and cash equivalents $ 1,388 $ 1,374
Net receivables 3,603 3,471
Other current assets 218 199
Total current assets 5,209 5,044
Goodwill and intangible assets 8,882 8,925
Fixed assets, net 717 773
Pension related assets 1,253 1,159
Deferred tax assets 1,085 1,138
Other assets 1,212 1,177
TOTAL ASSETS $ 18,358 $ 18,216
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 262 $ 12
Accounts payable and 1,862 1,886
accrued liabilities
Accrued compensation and 1,310 1,656
employee benefits
Accrued income taxes 213 154
Dividends payable 178 -
Total current liabilities 3,825 3,708
Fiduciary liabilities 4,532 4,146
Less - cash and investments held (4,532 ) (4,146 )
in a fiduciary capacity
- -
Long-term debt 4,494 4,402
Pension, post-retirement and 1,969 2,058
post-employment benefits
Liabilities for errors and omissions 317 318
Other liabilities 999 1,128
Total equity 6,754 6,602
TOTAL LIABILITIES AND EQUITY $ 18,358 $ 18,216
Media:
Marsh & McLennan Companies
Laura Schooler, +1-212-345-0370
laura.schooler@mmc.com
or
Investors:
Marsh & McLennan Companies
Keith Walsh, +1-212-345-0057
keith.walsh@mmc.com
View source version on businesswire.com:
http://www.businesswire.com/news/home/20161025005842/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
October 25, 2016 07:00 ET (11:00 GMT)
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