Summary
Marsh & McLennan Companies, Inc. (MMC) reported steady overall revenue for the first quarter of 2002, with total revenue largely flat compared to the prior year at $2,635 million. While the Risk and Insurance Services segment showed robust underlying revenue growth of approximately 12%, driven by higher commercial insurance rates and new business, this was partially offset by declines in the Investment Management and Consulting segments. Specifically, Investment Management revenue fell 14% due to a 12% decrease in average assets under management, reflecting market downturns. Consulting revenue also saw a slight decrease of 3% despite growth in specific areas like retirement and economic consulting, as other segments experienced reduced demand. The company's financial performance demonstrated improved profitability, with operating income increasing to $687 million from $645 million in the prior year, leading to a higher operating income margin. Net income rose to $418 million, or $1.53 per basic share, from $369 million, or $1.33 per basic share. This improvement was aided by a lower effective tax rate and the discontinuation of goodwill amortization following the adoption of SFAS No. 142, which positively impacted reported earnings. Cash flow from operations was a use of cash of $163 million, primarily due to seasonal compensation payments, though the company maintains a strong cash position.
Key Highlights
- 1Total revenue remained stable at $2,635 million, largely unchanged from the prior year, indicating resilience across the business.
- 2Operating income increased by 6.5% to $687 million, with operating margins improving across all segments, particularly in Risk and Insurance Services.
- 3Net income grew by 13.3% to $418 million, with basic earnings per share increasing to $1.53 from $1.33 in the prior year.
- 4Risk and Insurance Services segment demonstrated strong underlying revenue growth of approximately 12%, driven by higher premium rates and new business wins.
- 5Investment Management segment experienced a 14% revenue decline due to a 12% decrease in average assets under management, reflecting broader market conditions.
- 6The company adopted SFAS No. 142, discontinuing goodwill amortization, which positively impacted reported net income and EPS.
- 7MMC issued $750 million in new senior notes to repay commercial paper borrowings, strengthening its long-term debt structure and managing interest rate risk through swaps.