Summary
Marsh & McLennan Companies, Inc. (MMC) reported solid financial results for the second quarter and the first six months of 2004, demonstrating revenue growth across its core segments, particularly in Risk and Insurance Services and Consulting. Despite a decline in revenue within the Investment Management segment, primarily due to market conditions affecting assets under management at Putnam, the company's overall operating income saw a notable increase. A significant development during the period was the acquisition of Kroll Inc. in July 2004 for $1.9 billion, a strategic move aimed at expanding MMC's risk consulting and advisory capabilities. While this acquisition was funded through commercial paper and later refinanced with debt, it is expected to be EPS neutral for the remainder of 2004. The company also continued its share repurchase program and dividend payments, indicating a commitment to shareholder returns. However, investors should remain aware of the ongoing legal and regulatory matters, particularly those related to market-timing issues at Putnam, which have resulted in settlements and ongoing litigation, although management believes these will not materially impact the company's financial position or cash flows in the long term.
Key Highlights
- 1Total revenue increased by 6% to $3,036 million for the second quarter of 2004 compared to the prior year, driven by underlying growth in Risk and Insurance Services and Consulting.
- 2Operating income for the second quarter rose to $632 million from $599 million in the same period last year, reflecting improved operational performance.
- 3The company completed the strategic acquisition of Kroll Inc. for $1.9 billion in July 2004, significantly expanding its risk mitigation and advisory services.
- 4Despite market pressures leading to a 10% revenue decline in the Investment Management segment, the Risk and Insurance Services segment saw an 8% revenue increase, and Consulting revenue grew by 12%.
- 5Net income for the second quarter was $389 million, or $0.73 per diluted share, up from $365 million, or $0.66 per diluted share, in the prior year's quarter.
- 6MMC paid $325 million in dividends during the first six months of 2004 and raised its quarterly dividend by 10%.
- 7Ongoing legal and regulatory matters related to market-timing at Putnam have led to settlements and continued litigation, with the company cooperating fully with authorities.