Summary
Marsh & McLennan Companies, Inc. (MMC) reported solid financial results for the second quarter and first six months of 2002, demonstrating resilience in a challenging economic environment. Revenue saw a modest increase, driven by strong performance in the Risk and Insurance Services segment, which benefited from higher commercial insurance premium rates and net new business. This growth helped offset a decline in the Investment Management segment, where assets under management were impacted by market downturns. The company's expense management remained effective, with total expenses for the first six months largely unchanged year-over-year. Net income and earnings per share showed healthy increases compared to the prior year, reflecting improved operational efficiency and the benefit of the discontinuance of goodwill amortization under SFAS No. 142. MMC also continued its capital return strategy through share repurchases and dividends. Looking ahead, while the company faces continued market volatility, particularly in investment management, the underlying strength of its core businesses and strategic initiatives position it for sustained performance. Investors should note the company's proactive approach to managing debt and its ongoing commitment to shareholder returns. The company also highlighted a subsequent event concerning Conseco, Inc. which could have a minor non-cash impact on third-quarter operating income.
Key Highlights
- 1Revenue increased by 3% in the second quarter and 1% for the first six months of 2002 compared to the prior year, driven by strong growth in Risk and Insurance Services.
- 2Net income rose to $336 million ($0.60/share diluted) for the second quarter and $754 million ($1.33/share diluted) for the first six months, showing significant year-over-year improvement.
- 3The Risk and Insurance Services segment experienced robust underlying revenue growth of approximately 16% in Q2 2002, attributed to net new business and higher commercial insurance premium rates.
- 4Investment Management segment revenue decreased by 17% in Q2 2002 due to a decline in average assets under management, which fell 11% year-over-year.
- 5Effective January 1, 2002, Marsh & McLennan discontinued the amortization of goodwill, leading to adjusted earnings per share being higher than reported for prior periods, and impacting the effective tax rate favorably.
- 6The company repurchased approximately 16.5 million shares of common stock for $841 million in the first six months of 2002 and plans to continue share repurchases.
- 7A subsequent event disclosed concerns the potential restructuring of Conseco, Inc. could adversely impact Putnam's related investments, possibly resulting in a $10-15 million reduction in pre-tax operating income in Q3.