News
MMC Reports Second Quarter 2009 Results
August 5, 2009 at 7:02 AM EDT
Media Contact
Email:media@mmc.com
Continued Strong Performance in Risk and Insurance Services
Q2 2009 Marsh & McLennan Companies Earnings Conference Call
8/5/2009 at 8:30 a.m. ET
“MMC performed well in the second quarter despite the continued difficult economic environment affecting our businesses. Results for our Risk and Insurance Services segment were excellent. Underlying revenue rose 2 percent, excluding fiduciary interest income. Strong growth in operating income drove a substantial improvement in margins,” said MMC President and CEO
“Marsh continued its excellent performance, achieving increased profitability through expense discipline.
“In the Consulting segment,
“Overall, we have made excellent progress strengthening our operating companies while at the same time managing through the worst effects of the economic recession.” Mr. Duperreault concluded.
In the second quarter of 2009, MMC’s consolidated revenue was
MMC completed the sale of its U.S. government security clearance screening business, Kroll Government Services, in the second quarter of 2009. Its results for the quarter are included in discontinued operations and the previous results of this business have been restated as discontinued operations. In connection with this transaction, MMC evaluated Kroll’s overall goodwill for impairment. This resulted in a non-cash charge of
As a result of the goodwill impairment charge, MMC reported a net loss of
Earnings per share on an adjusted basis, which excludes noteworthy items as presented in the attached supplemental schedules, was
For the six months ended
Risk and Insurance Services
Risk and Insurance Services segment revenue in the second quarter of 2009 was
In the second quarter, insurance premiums in the property and casualty marketplace continued to decline – similar to what was seen earlier in the year. Additionally, the global economic recession reduced demand for commercial insurance. Marsh’s revenue in the second quarter declined 7 percent from last year to
Guy Carpenter’s revenue rose 16 percent to
Consulting
Due to the impact of continued adverse global economic conditions, consulting segment revenue declined 17 percent to
Mercer’s revenue declined 13 percent to
Kroll’s revenue of
Other Items
As a result of mark-to-market declines within MMC’s private equity fund investments, an investment loss of
At
Conference Call
A conference call to discuss second quarter 2009 results will be held today at
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;
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:
- 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 scheduled for trial in early 2010;
- 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 impact of current financial market conditions on our results of operations and financial condition;
- the potential impact of legislative, regulatory, accounting and other initiatives which may be taken in response to the current financial crisis;
- our ability to meet our financing needs by generating cash from operations and accessing external financing sources, including the impact of current economic conditions on our cost of financing or ability to borrow;
- 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 impact on risk and insurance services commission revenues of changes in the availability of, and the premiums insurance carriers charge for, insurance and reinsurance products, including the impact on premium rates and market capacity attributable to catastrophic events;
- the extent to which we retain existing clients and attract new business, and our ability to incentivize and retain key employees;
- the challenges we face in achieving profitable revenue growth and improving operating margins at Marsh;
- the impact on our consulting segment of pricing trends, utilization rates, the general economic environment and legislative changes affecting client demand;
- 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;
- the impact of, and potential challenges in complying with, legislation and regulation in the jurisdictions in which we operate, particularly given the global scope of our businesses and the possibility of conflicting regulatory requirements across the jurisdictions in which we do business;
- 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;
- 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;
- potential income statement effects from the application of FIN 48 (“Accounting for Uncertainty in Income Taxes”) and SFAS 142 (“Goodwill and Other Intangible Assets”), including the effect of any subsequent adjustments to the estimates MMC uses in applying these accounting standards; and
- other risks detailed from time to time in MMC’s filings with the
Securities and Exchange Commission .
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
Marsh & McLennan Companies, Inc. | |||||||||||||
Consolidated Statements of Income | |||||||||||||
(In millions, except per share figures) | |||||||||||||
(Unaudited) | |||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||
Revenue | $2,629 | $3,033 | $5,238 | $6,057 | |||||||||
Expense: | |||||||||||||
Compensation and Benefits | 1,604 | 1,879 | 3,175 | 3,701 | |||||||||
Other Operating Expenses | 731 | 859 | 1,445 | 1,726 | |||||||||
Goodwill Impairment Charge | 315 | 115 | 315 | 540 | |||||||||
Total Expense | 2,650 | 2,853 | 4,935 | 5,967 | |||||||||
Operating Income (Loss) | (21 | ) | 180 | 303 | 90 | ||||||||
Interest Income | 4 | 12 | 10 | 30 | |||||||||
Interest Expense | (65 | ) | (55 | ) | (121 | ) | (111 | ) | |||||
Investment Income (Loss) | (31 | ) | (16 | ) | (46 | ) | (8 | ) | |||||
Income (Loss) Before Income Taxes | (113 | ) | 121 | 146 | 1 | ||||||||
Income Taxes | 49 | 66 | 129 | 159 | |||||||||
Income (Loss) from Continuing Operations | (162 | ) | 55 | 17 | (158 | ) | |||||||
Discontinued Operations, Net of Tax | (26 | ) | 12 | (25 | ) | 18 | |||||||
Net Income (Loss) Before Non-Controlling Interest | $ (188 | ) | $ 67 | $ (8 | ) | $ (140 | ) | ||||||
Less: Net Income Attributable to Non-Controlling Interest | 5 | 2 | 9 | 5 | |||||||||
Net Income (Loss) Attributable to MMC | $ (193 | ) | $ 65 | $ (17 | ) | $ (145 | ) | ||||||
Basic Net Income (Loss) Per Share | |||||||||||||
– Continuing Operations | $(0.31 | ) | $ 0.10 | $0.01 | $ (0.30 | ) | |||||||
– Net Income (Loss) | $(0.36 | ) | $ 0.12 | $(0.03 | ) | $ (0.27 | ) | ||||||
Diluted Net Income (Loss) Per Share | |||||||||||||
– Continuing Operations | $(0.32 | ) | $ 0.10 | $0.01 | $ (0.32 | ) | |||||||
– Net Income (Loss) | $(0.37 | ) | $ 0.12 | $(0.03 | ) | $ (0.28 | ) | ||||||
Average Number of Shares Outstanding | – Basic | 522 | 512 | 519 | 515 | ||||||||
| – Diluted | 522 | 512 | 519 | 515 | ||||||||
Shares Outstanding at 6/30 | 523 | 512 | 523 | 512 |
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Marsh & McLennan Companies, Inc. | |||||||||||||||||||
Supplemental Information – Revenue Analysis | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
(Millions) (Unaudited) | |||||||||||||||||||
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| Components of Revenue Change* | ||||||||||||||||
Three Months Ended | % Change | Acquisitions/ | |||||||||||||||||
June 30, | GAAP | Currency | Dispositions | Underlying | |||||||||||||||
2009 | 2008 | Revenue | Impact | Impact | Revenue | ||||||||||||||
Risk and Insurance Services | |||||||||||||||||||
Marsh | $ | 1,103 | $ | 1,183 | (7 | )% | (7 | )% | - | 0 | % | ||||||||
Guy Carpenter | 227 | 196 | 16 | % | (6 | )% | 11 | % | 11 | % | |||||||||
Subtotal | 1,330 | 1,379 | (4 | )% | (7 | )% | 1 | % | 2 | % | |||||||||
Fiduciary Interest Income | 13 | 36 | (63 | )% | (4 | )% | - | (60 | )% | ||||||||||
Total Risk and Insurance Services | 1,343 | 1,415 | (5 | )% | (7 | )% | 1 | % | 0 | % | |||||||||
Consulting | |||||||||||||||||||
Mercer | 832 | 959 | (13 | )% | (9 | )% | - | (5 | )% | ||||||||||
Oliver Wyman Group | 311 | 415 | (25 | )% | (7 | )% | 1 | % | (19 | )% | |||||||||
Total Consulting | 1,143 | 1,374 | (17 | )% | (8 | )% | - | (9 | )% | ||||||||||
Risk Consulting & Technology | |||||||||||||||||||
Kroll | 161 | 225 | (29 | )% | (3 | )% | (2 | )% | (24 | )% | |||||||||
Corporate Advisory and Restructuring | - | 41 | (100 | )% | - | (100 | )% | 0 | % | ||||||||||
Total Risk Consulting & Technology | 161 | 266 | (40 | )% | (3 | )% | (16 | )% | (20 | )% | |||||||||
Corporate Eliminations | (18 | ) | (22 | ) | |||||||||||||||
Total Revenue | $ | 2,629 | $ | 3,033 | (13 | )% | (7 | )% | (1 | )% | (6 | )% | |||||||
Revenue Details | |||||||||||||||||||
The following table provides more detailed revenue information for certain of the components presented above: | |||||||||||||||||||
Three Months Ended |
| Components of Revenue Change* | |||||||||||||||||
| % Change | Acquisitions/ | |||||||||||||||||
June 30, |
| GAAP | Currency | Dispositions | Underlying | ||||||||||||||
2009 | 2008 | Revenue | Impact | Impact | Revenue | ||||||||||||||
Marsh: | |||||||||||||||||||
EMEA | $ | 365 | $ | 426 | (14 | )% | (12 | )% | (1 | )% | (1 | )% | |||||||
Asia Pacific | 109 | 121 | (10 | )% | (12 | )% | - | 1 | % | ||||||||||
Latin America | 57 | 59 | (4 | )% | (16 | )% | 3 | % | 9 | % | |||||||||
Total International | 531 | 606 | (12 | )% | (12 | )% | - | 0 | % | ||||||||||
U.S. and Canada | 572 | 577 | (1 | )% | (2 | )% | - | 0 | % | ||||||||||
Total Marsh | $ | 1,103 | $ | 1,183 | (7 | )% | (7 | )% | - | 0 | % | ||||||||
Mercer: | |||||||||||||||||||
Retirement | $ | 271 | $ | 310 | (13 | )% | (10 | )% | - | (2 | )% | ||||||||
Health and Benefits | 224 | 242 | (8 | )% | (5 | )% | (1 | )% | (2 | )% | |||||||||
Other Consulting Lines | 110 | 140 | (22 | )% | (5 | )% | 2 | % | (18 | )% | |||||||||
Total Mercer Consulting | 605 | 692 | (13 | )% | (8 | )% | - | (5 | )% | ||||||||||
Outsourcing | 154 | 182 | (16 | )% | (10 | )% | - | (5 | )% | ||||||||||
Investment Consulting & Management | 73 | 85 | (13 | )% | (15 | )% | - | 2 | % | ||||||||||
Total Mercer | $ | 832 | $ | 959 | (13 | )% | (9 | )% | - | (5 | )% | ||||||||
Kroll: | |||||||||||||||||||
Litigation Support and Data Recovery | $ | 66 | $ | 96 | (32 | )% | (3 | )% | - | (29 | )% | ||||||||
Background Screening | 62 | 70 | (11 | )% | (2 | )% | - | (9 | )% | ||||||||||
Risk Mitigation and Response | 33 | 59 | (44 | )% | (4 | )% | (7 | )% | (33 | )% | |||||||||
Total Kroll | $ | 161 | $ | 225 | (29 | )% | (3 | )% | (2 | )% | (24 | )% | |||||||
Notes |
Underlying revenue measures the change in revenue, before the impact of acquisitions and dispositions, using consistent currency exchange rates. |
* Components of revenue change may not add due to rounding. |
Marsh & McLennan Companies, Inc. | |||||||||||||||||||||
Supplemental Information – Revenue Analysis | |||||||||||||||||||||
Six Months Ended | |||||||||||||||||||||
(Millions) (Unaudited) | |||||||||||||||||||||
Six Months Ended | Components of Revenue Change* | ||||||||||||||||||||
| % Change |
| Acquisitions/ | ||||||||||||||||||
June 30, |
| GAAP | Currency | Dispositions | Underlying | ||||||||||||||||
2009 | 2008 | Revenue | Impact | Impact | Revenue | ||||||||||||||||
Risk and Insurance Services | |||||||||||||||||||||
Marsh | $ | 2,179 | $ | 2,379 | (8 | )% | (8 | )% | - | 0 | % | ||||||||||
Guy Carpenter | 508 | 460 | 11 | % | (6 | )% | 7 | % | 10 | % | |||||||||||
Subtotal | 2,687 | 2,839 | (5 | )% | (8 | )% | 1 | % | 1 | % | |||||||||||
Fiduciary Interest Income | 28 | 76 | (63 | )% | (5 | )% | - | (58 | )% | ||||||||||||
Total Risk and Insurance Services | 2,715 | 2,915 | (7 | )% | (7 | )% | 1 | % | 0 | % | |||||||||||
Consulting | |||||||||||||||||||||
Mercer | 1,635 | 1,884 | (13 | )% | (10 | )% | - | (3 | )% | ||||||||||||
Oliver Wyman Group | 591 | 785 | (25 | )% | (8 | )% | 2 | % | (19 | )% | |||||||||||
Total Consulting | 2,226 | 2,669 | (17 | )% | (9 | )% | 1 | % | (8 | )% | |||||||||||
Risk Consulting & Technology | |||||||||||||||||||||
Kroll | 328 | 430 | (24 | )% | (4 | )% | (2 | )% | (18 | )% | |||||||||||
Corporate Advisory and Restructuring | | 78 | (100 | )% | - | (100 | )% | 0 | % | ||||||||||||
Total Risk Consulting & Technology | 328 | 508 | (36 | )% | (4 | )% | (16 | )% | (15 | )% | |||||||||||
Corporate Eliminations | (31 | ) | (35 | ) | |||||||||||||||||
Total Revenue | $ | 5,238 | $ | 6,057 | (14 | )% | (8 | )% | (1 | )% | (5 | )% | |||||||||
Revenue Details | |||||||||||||||||||||
The following table provides more detailed revenue information for certain of the components presented above: | |||||||||||||||||||||
Six Months Ended | Components of Revenue Change* | ||||||||||||||||||||
| % Change |
| Acquisitions/ | ||||||||||||||||||
June 30, |
| GAAP |
| Currency | Dispositions | Underlying | |||||||||||||||
2009 | 2008 | Revenue | Impact | Impact | Revenue | ||||||||||||||||
Marsh: | |||||||||||||||||||||
EMEA | $ | 865 | $ | 995 | (13 | )% | (12 | )% | (1 | )% | 1 | % | |||||||||
Asia Pacific | 195 | 211 | (7 | )% | (12 | )% | - | 5 | % | ||||||||||||
Latin America | 104 | 108 | (4 | )% | (17 | )% | 1 | % | 12 | % | |||||||||||
Total International | 1,164 | 1,314 | (11 | )% | (13 | )% | (1 | )% | 2 | % | |||||||||||
U.S. and Canada | 1,015 | 1,065 | (5 | )% | (2 | )% | - | (3 | )% | ||||||||||||
Total Marsh | $ | 2,179 | $ | 2,379 | (8 | )% | (8 | )% | - | 0 | % | ||||||||||
Mercer: | |||||||||||||||||||||
Retirement | $ | 547 | $ | 623 | (12 | )% | (12 | )% | - | 0 | % | ||||||||||
Health and Benefits | 436 | 462 | (6 | )% | (6 | )% | (1 | )% | 1 | % | |||||||||||
Other Consulting Lines | 215 | 266 | (19 | )% | (6 | )% | 2 | % | (15 | )% | |||||||||||
Total Mercer Consulting | 1,198 | 1,351 | (11 | )% | (9 | )% | - | (3 | )% | ||||||||||||
Outsourcing | 296 | 370 | (20 | )% | (12 | )% | - | (8 | )% | ||||||||||||
Investment Consulting & Management | 141 | 163 | (14 | )% | (17 | )% | - | 4 | % | ||||||||||||
Total Mercer | $ | 1,635 | $ | 1,884 | (13 | )% | (10 | )% | - | (3 | )% | ||||||||||
Kroll: | |||||||||||||||||||||
Litigation Support and Data Recovery | $ | 137 | $ | 175 | (22 | )% | (4 | )% | - | (19 | )% | ||||||||||
Background Screening | 124 | 141 | (12 | )% | (2 | )% | - | (9 | )% | ||||||||||||
Risk Mitigation and Response | 67 | 114 | (41 | )% | (7 | )% | (8 | )% | (26 | )% | |||||||||||
Total Kroll | $ | 328 | $ | 430 | (24 | )% | (4 | )% | (2 | )% | (18 | )% | |||||||||
Notes |
Underlying revenue measures the change in revenue, before the impact of acquisitions and dispositions, using consistent currency exchange rates. |
* Components of revenue change may not add due to rounding. |
Marsh & McLennan Companies, Inc. |
Non-GAAP Measures |
Three Months Ended June 30 |
(Millions) (Unaudited) |
MMC 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; adjusted operating margin; and adjusted income, net of tax. |
MMC 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 MMC’s businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that MMC reports in accordance with GAAP. MMC’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 and Adjusted Operating Margin |
Adjusted operating income is calculated by excluding the impact of certain noteworthy items from MMC’s GAAP operating income. The following tables identify these noteworthy items and reconcile adjusted operating income to GAAP operating income, on a consolidated and segment basis, for the three months ended June 30, 2009 and 2008. 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 | Risk Consulting & Technology | Corporate | Total | |||||||||||
Three Months Ended June 30, 2009 | |||||||||||||||
Operating income (loss) | $245 | $ 96 | $(316 | ) | $(46 | ) | $ (21 | ) | |||||||
Add (deduct) impact of noteworthy items: | |||||||||||||||
Restructuring Charges (a) | 50 | 5 | 6 | 6 | (b) | 67 | |||||||||
Settlement, Legal and Regulatory (c) | (27 | ) | - | - | - | (27 | ) | ||||||||
Goodwill Impairment Charge | - | - | 315 | - | 315 | ||||||||||
Accelerated Amortization | 3 | - | - | - | 3 | ||||||||||
Other | - | - | 2 | - | 2 | ||||||||||
Operating income adjustments | 26 | 5 | 323 | 6 | 360 | ||||||||||
Adjusted operating income (loss) | $271 | $101 | $ 7 | $(40 | ) | $339 | |||||||||
Operating margin | 18.2 | % | 8.4 | % | N/A | N/A | N/A | ||||||||
Adjusted operating margin | 20.2 | % | 8.8 | % | 4.3 | % | N/A | 12.9 | % | ||||||
Three Months Ended June 30, 2008 | |||||||||||||||
Operating income (loss) | $150 | $165 | $(88 | ) | $(47 | ) | $180 | ||||||||
Add (deduct) impact of noteworthy items: | |||||||||||||||
Restructuring Charges (a) | 47 | - | 4 | 2 | 53 | ||||||||||
Settlement, Legal and Regulatory (c) | 10 | - | - | - | 10 | ||||||||||
Goodwill Impairment Charge | - | - | 115 | - | 115 | ||||||||||
Operating income adjustments | 57 | - | 119 | 2 | 178 | ||||||||||
Adjusted operating income (loss) | $207 | $165 | $31 | $(45 | ) | $358 | |||||||||
Operating margin | 10.6 | % | 12.0 | % | N/A | N/A | 5.9 | % | |||||||
Adjusted operating margin | 14.6 | % | 12.0 | % | 11.7 | % | N/A | 11.8 | % |
(a) Primarily includes severance from restructuring activities and related charges, costs for future rent and other real estate costs, and fees and consulting costs related to cost reduction activities. |
(b) Primarily reflects adjustments to estimated future rent and other real estate costs related to previously vacated space in MMC’s New York headquarters. |
(c) Reflects settlements of and legal fees arising out of the civil complaint relating to market service agreements and other issues filed against MMC and Marsh by the New York State Attorney General in October 2004 and settled in January 2005, and similar actions initiated by other states, including indemnification of former employees for legal fees. The second quarter of 2009 includes a credit of $38 million related to insurance recoveries of previously expensed legal fees. |
Marsh & McLennan Companies, Inc. |
Non-GAAP Measures |
Six Months Ended June 30 |
(Millions) (Unaudited) |
MMC 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; adjusted operating margin; and adjusted income, net of tax. |
MMC 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 MMC’s businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that MMC reports in accordance with GAAP. MMC’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 and Adjusted Operating Margin |
Adjusted operating income is calculated by excluding the impact of certain noteworthy items from MMC’s GAAP operating income. The following tables identify these noteworthy items and reconcile adjusted operating income to GAAP operating income, on a consolidated and segment basis, for the six months ended June 30, 2009 and 2008. 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 | Risk Consulting & Technology | Corporate | Total | |||||||||||
Six Months Ended June 30, 2009 | |||||||||||||||
Operating income (loss) | $542 | $169 | $(312 | ) | $(96 | ) | $303 | ||||||||
Add (deduct) impact of noteworthy items: | |||||||||||||||
Restructuring Charges (a) | 77 | 6 | 7 | 17 | (b) | 107 | |||||||||
Settlement, Legal and Regulatory (c) | (9 | ) | - | - | - | (9 | ) | ||||||||
Goodwill Impairment Charge | - | - | 315 | - | 315 | ||||||||||
Accelerated Amortization | 4 | - | - | - | 4 | ||||||||||
Other | - | - | 2 | - | 2 | ||||||||||
Operating income adjustments | 72 | 6 | 324 | 17 | 419 | ||||||||||
Adjusted operating income | $614 | $175 | $ 12 | $(79 | ) | $722 | |||||||||
Operating margin | 20.0 | % | 7.6 | % | N/A | N/A | 5.8 | % | |||||||
Adjusted operating margin | 22.6 | % | 7.9 | % | 3.7 | % | N/A | 13.8 | % | ||||||
Six Months Ended June 30, 2008 | |||||||||||||||
Operating income (loss) | $384 | $316 | $(502 | ) | $(108 | ) | $90 | ||||||||
Add (deduct) impact of noteworthy items: | |||||||||||||||
Restructuring Charges (a) | 61 | - | 7 | 18 | 86 | ||||||||||
Settlement, Legal and Regulatory (c) | 23 | - | - | - | 23 | ||||||||||
Goodwill Impairment Charge | - | - | 540 | - | 540 | ||||||||||
Other | 3 | - | - | - | 3 | ||||||||||
Operating income adjustments | 87 | - | 547 | 18 | 652 | ||||||||||
Adjusted operating income | $471 | $316 | $ 45 | $(90 | ) | $742 | |||||||||
Operating margin | 13.2 | % | 11.8 | % | N/A | N/A | 1.5 | % | |||||||
Adjusted operating margin | 16.2 | % | 11.8 | % | 8.9 | % | N/A | 12.3 | % |
(a) Primarily includes severance from restructuring activities and related charges, costs for future rent and other real estate costs, and fees and consulting costs related to cost reduction activities. |
(b) Primarily reflects adjustments to estimated future rent and other real estate costs related to previously vacated space in MMC’s New York headquarters. |
(c) Reflects settlements of and legal fees arising out of the civil complaint relating to market service agreements and other issues filed against MMC and Marsh by the New York State Attorney General in October 2004 and settled in January 2005, and actions initiated by other states, including indemnification of former employees for legal fees. The first six months of 2009 includes a credit of $38 million related to insurance recoveries of previously expensed legal fees. |
Marsh & McLennan Companies, Inc. |
Non-GAAP Measures |
Three and Six Months Ended June 30 |
(Millions) (Unaudited) |
Adjusted Income, net of tax |
Adjusted income, net of tax is calculated as: MMC’s GAAP (loss) income from continuing operations, adjusted to reflect the after-tax impact of the operating income adjustments set forth in the preceding table. The related adjusted diluted earnings per share as calculated under the two-class method, reflects reductions for the portion of each item attributable to non-controlling interests and participating securities so that the calculation is based only on the amounts attributable to common shareholders. |
Reconciliation of the Impact of Non-GAAP Measures on Diluted Earnings Per Share – Three and Six Months Ended June 30, 2009 and 2008: |
MMC Consolidated Results | Portion Attributable to Common Shareholders | Adjusted Diluted EPS | ||||||||||||||||
Three Months Ended June 30, 2009 | ||||||||||||||||||
(Loss) income from continuing operations | $(162 | ) | $ | (163 | ) | $(0.32 | ) | |||||||||||
Add operating income adjustments | $ | 360 | ||||||||||||||||
Deduct impact of income tax expense | (17 | ) | ||||||||||||||||
343 | 335 | 0.65 | ||||||||||||||||
Adjusted income, net of tax | $181 | $ | 172 | $ 0.33 | ||||||||||||||
Six Months Ended June 30, 2009 | ||||||||||||||||||
(Loss) income from continuing operations | $ 17 | $ | 8 | $ 0.01 | ||||||||||||||
Add operating income adjustments | $ | 419 | ||||||||||||||||
Deduct impact of income tax expense | (43 | ) | ||||||||||||||||
376 | 365 | 0.71 | ||||||||||||||||
Adjusted income, net of tax | $393 | $ | 373 | $ 0.72 | ||||||||||||||
Three Months Ended June 30, 2008 | ||||||||||||||||||
(Loss) income from continuing operations | $ 55 | $ | 51 | $ 0.10 | ||||||||||||||
Add operating income adjustments | $ | 178 | ||||||||||||||||
Deduct impact of income tax expense | (22 | ) | ||||||||||||||||
156 | 150 | 0.29 | ||||||||||||||||
Adjusted income, net of tax | $211 | $ | 201 | $ 0.39 | ||||||||||||||
Six Months Ended June 30, 2008 | ||||||||||||||||||
(Loss) income from continuing operations | $(158 | ) | $ | (156 | ) | $(0.32 | ) | |||||||||||
Add operating income adjustments | $ | 652 | ||||||||||||||||
Deduct impact of income tax expense | (40 | ) | ||||||||||||||||
612 | 590 | 1.16 | ||||||||||||||||
Adjusted income, net of tax | $454 | $ | 434 | $ 0.84 | ||||||||||||||
Marsh & McLennan Companies, Inc. | ||||||||||||||||||
Supplemental Expense Information | ||||||||||||||||||
(Millions) (Unaudited) | ||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||
Depreciation and Amortization Expense |
| $93 | $103 |
| $183 | $204 | ||||||||||||
Stock Option Expense |
| $4 | $7 |
| $4 | $22 |
Marsh & McLennan Companies, Inc. | ||||||||||||||||||||||||
Supplemental Information – Discontinued Operations Reclassification | ||||||||||||||||||||||||
(Millions) (Unaudited) | ||||||||||||||||||||||||
The following table provides prior period reported amounts after the reclassification of Kroll Government Services, which was sold in May 2009 into discontinued operations. | ||||||||||||||||||||||||
Revenue | First Quarter 2008 | Second Quarter 2008 | Third Quarter 2008 | Fourth Quarter 2008 | Full Year 2008 | First Quarter 2009 | ||||||||||||||||||
Risk and Insurance Services | ||||||||||||||||||||||||
Marsh | $ | 1,196 | $ | 1,183 | $ | 1,040 | $ | 1,105 | $ | 4,524 | $ | 1,076 | ||||||||||||
Guy Carpenter | 264 | 196 | 197 | 146 | 803 | 281 | ||||||||||||||||||
Subtotal | 1,460 | 1,379 | 1,237 | 1,251 | 5,327 | 1,357 | ||||||||||||||||||
Fiduciary Interest Income | 40 | 36 | 38 | 25 | 139 | 15 | ||||||||||||||||||
Total Risk and Insurance Services | 1,500 | 1,415 | 1,275 | 1,276 | 5,466 | 1,372 | ||||||||||||||||||
Consulting | ||||||||||||||||||||||||
Mercer | 925 | 959 | 951 | 807 | 3,642 | 803 | ||||||||||||||||||
Oliver Wyman Group | 370 | 415 | 377 | 392 | 1,554 | 280 | ||||||||||||||||||
Total Consulting | 1,295 | 1,374 | 1,328 | 1,199 | 5,196 | 1,083 | ||||||||||||||||||
Risk Consulting & Technology | ||||||||||||||||||||||||
Kroll | 205 | 225 | 199 | 168 | 797 | 167 | ||||||||||||||||||
Corporate Advisory and Restructuring | 37 | 41 | 36 | 13 | 127 | - | ||||||||||||||||||
Total Risk Consulting & Technology | 242 | 266 | 235 | 181 | 924 | 167 | ||||||||||||||||||
Corporate Eliminations | (13 | ) | (22 | ) | (19 | ) | (14 | ) | (68 | ) | (13 | ) | ||||||||||||
Total Revenue | $ | 3,024 | $ | 3,033 | $ | 2,819 | $ | 2,642 | $ | 11,518 | $ | 2,609 | ||||||||||||
Revenue Details | First Quarter 2008 | Second Quarter 2008 | Third Quarter 2008 | Fourth Quarter 2008 | Full Year 2008 | First Quarter 2009 | ||||||||||||||||||
Kroll: | ||||||||||||||||||||||||
Litigation Support and Data Recovery | $ | 79 | $ | 96 | $ | 82 | $ | 69 | $ | 326 | $ | 71 | ||||||||||||
Background Screening | 71 | 70 | 65 | 57 | 263 | 62 | ||||||||||||||||||
Risk Mitigation and Response | 55 | 59 | 52 | 42 | 208 | 34 | ||||||||||||||||||
Total Kroll | $ | 205 | $ | 225 | $ | 199 | $ | 168 | $ | 797 | $ | 167 |
Marsh & McLennan Companies, Inc. | ||||||||||||||||||||||||
Supplemental Information – Discontinued Operations Reclassification | ||||||||||||||||||||||||
Continued | ||||||||||||||||||||||||
(Millions) (Unaudited) | ||||||||||||||||||||||||
The following table provides the revenue, expense and net operating income of Kroll Government Services that has been reclassified into discontinued operations. | ||||||||||||||||||||||||
KGS Operations | First Quarter 2008 | Second Quarter 2008 | Third Quarter 2008 | Fourth Quarter 2008 | Full Year 2008 | First Quarter 2009 | ||||||||||||||||||
Revenue | $ | 15 | $ | 15 | $ | 19 | $ | 20 | $ | 69 | $ | 20 | ||||||||||||
Expense | 13 | 13 | 13 | 15 | 54 | 13 | ||||||||||||||||||
Operating Income | $ | 2 | $ | 2 | $ | 6 | $ | 5 | $ | 15 | $ | 7 | ||||||||||||
The following table provides prior period reported amounts after the reclassification of Kroll Government Services into discontinued operations. | ||||||||||||||||||||||||
Operating Income | First Quarter 2008 | Second Quarter 2008 | Third Quarter 2008 | Fourth Quarter 2008 | Full Year 2008 | First Quarter 2009 | ||||||||||||||||||
Risk and Insurance Services | $ | 234 | $ | 150 | $ | (28 | ) | $ | 104 | $ | 460 | $ | 297 | |||||||||||
Consulting | 151 | 165 | 157 | 82 | 555 | 73 | ||||||||||||||||||
Risk Consulting & Technology | (414 | ) | (88 | ) | 22 | (32 | ) | (512 | ) | 4 | ||||||||||||||
Corporate | (61 | ) | (47 | ) | (87 | ) | (60 | ) | (255 | ) | (50 | ) | ||||||||||||
(90 | ) | 180 | 64 | 94 | 248 | 324 | ||||||||||||||||||
Interest Income | 18 | 12 | 10 | 8 | 48 | 6 | ||||||||||||||||||
Interest Expense | (56 | ) | (55 | ) | (54 | ) | (55 | ) | (220 | ) | (56 | ) | ||||||||||||
Investment Income (Loss) | 8 | (16 | ) | (23 | ) | 19 | (12 | ) | (15 | ) | ||||||||||||||
Income (Loss) Before Income Taxes | (120 | ) | 121 | (3 | ) | 66 | 64 | 259 | ||||||||||||||||
Income Taxes | 93 | 66 | (20 | ) | (6 | ) | 133 | 80 | ||||||||||||||||
Income (Loss) From Continuing Operations | (213 | ) |
| 55 | 17 | 72 | (69 | ) | 179 | |||||||||||||||
Discontinued Operations, Net of Tax | 6 | 12 | (22 | ) | 11 | 7 | 1 | |||||||||||||||||
Net Income (Loss) Before Non-Controlling Interest | (207 | ) | 67 | (5 | ) | 83 | (62 | ) | 180 | |||||||||||||||
Less: Net Income Attributable to Non-Controlling Interest | 3 | 2 | 3 | 3 | 11 | 4 | ||||||||||||||||||
Net Income (Loss) Attributable to MMC | $ | (210 | ) | $ | 65 | $ | (8 | ) | $ | 80 | $ | (73 | ) | $ | 176 | |||||||||
Basic Net Income (Loss) Per Share | ||||||||||||||||||||||||
- Continuing Operations | $ | (0.40 | ) | $ | 0.10 | $ | 0.03 | $ | 0.14 | $ | (0.14 | ) | $ | 0.33 | ||||||||||
Diluted Net Income (Loss) Per Share | ||||||||||||||||||||||||
- Continuing Operations | $ | (0.42 | ) | $ | 0.10 | $ | 0.03 | $ | 0.13 | $ | (0.15 | ) | $ | 0.33 | ||||||||||
Segment Operating Margin | ||||||||||||||||||||||||
Risk and Insurance Services | 15.6 | % | 10.6 | % | N/A | 8.2 | % | 8.4 | % | 21.6 | % | |||||||||||||
Consulting | 11.7 | % | 12.0 | % | 11.8 | % | 6.8 | % | 10.7 | % | 6.7 | % | ||||||||||||
Risk Consulting & Technology | N/A | N/A | 9.4 | % | N/A | N/A | 2.4 | % | ||||||||||||||||
Consolidated Operating Margin | N/A | 5.9 | % | 2.3 | % | 3.6 | % | 2.2 | % | 12.4 | % |
Marsh & McLennan Companies, Inc. | ||||||||||||||||||||||||
Supplemental Information – Discontinued Operations Reclassification | ||||||||||||||||||||||||
(Millions) (Unaudited) | ||||||||||||||||||||||||
Non-GAAP Earnings Per Share | ||||||||||||||||||||||||
The following table presents adjusted income, net of tax, a non-GAAP measure described on Page 13 of this release, for the first quarter of 2009 and each quarter of 2008 to reflect the reclassification of Kroll Government Services to discontinued operations. | ||||||||||||||||||||||||
First Quarter 2008 | Second Quarter 2008 | Third Quarter 2008 | Fourth Quarter 2008 | Full Year 2008 | First Quarter 2009 | |||||||||||||||||||
Non-GAAP Results | ||||||||||||||||||||||||
Adjusted income, net of tax, as reported* | $ | 241 | $ | 211 | $ | 111 | $ | 192 | $ | 755 | $ | 212 | ||||||||||||
Reclass to discontinued operations | (1 | ) | (2 | ) | (4 | ) | (4 | ) | (11 | ) | (5 | ) | ||||||||||||
Adjusted income, net of tax as restated | 240 | 209 | 107 | 188 | 744 | 207 | ||||||||||||||||||
Earnings attributable to unvested shares | 7 | 8 | 4 | 3 | 22 | 6 | ||||||||||||||||||
Earnings attributable to common shares | $ | 233 | $ | 201 | $ | 103 | $ | 185 | $ | 722 | $ | 201 | ||||||||||||
Adjusted earnings per share, as reported | $ | 0.45 | $ | 0.40 | $ | 0.21 | $ | 0.37 | $ | 1.42 | $ | 0.40 | ||||||||||||
Adjusted earnings per share, as restated | $ | 0.45 | $ | 0.39 | $ | 0.20 | $ | 0.36 | $ | 1.40 | $ | 0.39 | ||||||||||||
* Includes reduction for net income attributable to non-controlling interests (previously reported as minority interest expense). | ||||||||||||||||||||||||
Operating Income, Adjusted Operating Income and Related Margins | ||||||||||||||||||||||||
The following table shows operating income, adjusted operating income and related margin information for the Risk Consulting & Technology segment reflecting the reclassification of Kroll Government Services as a discontinued operation. | ||||||||||||||||||||||||
First Quarter 2008 | Second Quarter 2008 | Third Quarter 2008 | Fourth Quarter 2008 | Full Year 2008 | First Quarter 2009 | |||||||||||||||||||
Risk Consulting & Technology | ||||||||||||||||||||||||
Operating income (loss), as reported | $ | (412 | ) | $ | (86 | ) | $ | 28 | $ | (27 | ) | $ | (497 | ) | $ | 11 | ||||||||
Reclassification to discontinued operations | (2 | ) | (2 | ) | (6 | ) | (5 | ) | (15 | ) | (7 | ) | ||||||||||||
Operating income (loss), as restated | (414 | ) | (88 | ) | 22 | (32 | ) | (512 | ) | 4 | ||||||||||||||
Adjusted operating income, as reported | 16 | 33 | 28 | 11 | 88 | 12 | ||||||||||||||||||
Reclassification to discontinued operations | (2 | ) | (2 | ) | (6 | ) | (5 | ) | (15 | ) | (7 | ) | ||||||||||||
Adjusted operating income, as restated | $ | 14 | $ | 31 | $ | 22 | $ | 6 | $ | 73 | $ | 5 | ||||||||||||
Operating margin, as reported | N/A | N/A | 11.0 | % | N/A | N/A | 5.9 | % | ||||||||||||||||
Operating margin, as restated | N/A | N/A | 9.4 | % | N/A | N/A | 2.4 | % | ||||||||||||||||
Adjusted operating margin, as reported | 6.2 | % | 11.7 | % | 11.0 | % | 5.5 | % | 8.9 | % | 8.4 | % | ||||||||||||
Adjusted operating margin, as restated | 5.8 | % | 11.7 | % | 9.4 | % | 3.3 | % | 7.9 | % | 3.0 | % |
Marsh & McLennan Companies, Inc. | ||||||||
Consolidated Balance Sheets | ||||||||
(Millions) (Unaudited) | ||||||||
June 30, 2009 | December 31, 2008 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,291 | $ | 1,685 | ||||
Net receivables | 2,854 | 2,755 | ||||||
Other current assets | 345 | 344 | ||||||
Total current assets | 4,490 | 4,784 | ||||||
Goodwill and intangible assets | 6,983 | 7,163 | ||||||
Fixed assets, net | 970 | 969 | ||||||
Pension related assets | 397 | 150 | ||||||
Other assets | 2,081 | 2,140 | ||||||
TOTAL ASSETS | $ | 14,921 | $ | 15,206 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 9 | $ | 408 | ||||
Accounts payable and accrued liabilities | 1,712 | 1,688 | ||||||
Accrued compensation and employee benefits | 820 | 1,224 | ||||||
Accrued income taxes | 24 | 66 | ||||||
Dividends payable | 105 | - | ||||||
Total current liabilities | 2,670 | 3,386 | ||||||
Fiduciary liabilities | 3,647 | 3,297 | ||||||
Less – cash and investments held in a fiduciary capacity | (3,647 | ) | (3,297 | ) | ||||
- | - | |||||||
Long-term debt | 3,588 | 3,194 | ||||||
Pension, postretirement and postemployment benefits | 1,168 | 1,217 | ||||||
Liabilities for errors and omissions | 515 | 512 | ||||||
Other liabilities | 1,220 | 1,137 | ||||||
Total stockholders’ equity | 5,760 | 5,760 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 14,921 | $ | 15,206 |
Source:
Media:
MMC
Christine Walton, 212-345-0675
christine.walton@mmc.com
or
Investor:
MMC
Mike Bischoff, 212-345-5470
jmichael.bischoff@mmc.com