10-QPeriod: Q3 FY2007

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2007

Filed November 9, 2007For Securities:MRSHMMC

Summary

Marsh & McLennan Companies (MMC) reported strong financial results for the nine months ended September 30, 2007, largely driven by a significant gain from the sale of its Putnam Investments segment. This divestiture, along with other strategic exits in 2006, has reshaped the company's business profile, moving it away from investment management. Operating performance showed mixed results, with revenue growth across segments but a decline in operating income for the Risk and Insurance Services segment due to increased expenses. The Consulting segment, however, demonstrated robust growth. The company also continued its share repurchase program, signaling confidence and a commitment to returning capital to shareholders. Investors should note the ongoing legal and regulatory matters, which, while substantial, are being managed and provisioned for, but continue to present a risk factor.

Key Highlights

  • 1Reported a significant net income of $2.39 billion for the nine months ended September 30, 2007, heavily influenced by a $1.9 billion after-tax gain from the sale of Putnam Investments.
  • 2Operating revenue grew by 7% to $8.425 billion for the nine months ended September 30, 2007, with the Consulting segment showing strong 14% revenue growth.
  • 3Operating income for the nine months ended September 30, 2007, was $854 million, a slight increase from the prior year, but operating income in the Risk and Insurance Services segment declined significantly.
  • 4The company actively repurchased shares, with accelerated share repurchase programs totaling $1.3 billion completed or initiated during the first nine months of 2007.
  • 5Balance sheet shows a strong cash position of $2.819 billion as of September 30, 2007.
  • 6The company is actively managing ongoing litigation and regulatory matters, with significant disclosures detailing various claims and investigations.
  • 7Effective tax rate for the nine months ended September 30, 2007, was 36%, compared to 28% in the prior year, impacted by international tax law changes.

Frequently Asked Questions

The primary driver of the significant net income in the third quarter and year-to-date 2007 was the $1.9 billion after-tax gain recognized from the sale of the Putnam Investments segment to Great-West Lifeco Inc. on August 3, 2007.

The Consulting segment showed strong performance with a 14% increase in revenue and a 27% increase in operating income for the nine months ended September 30, 2007. The Risk and Insurance Services segment experienced revenue growth but a decline in operating income due to higher expenses. The Risk Consulting & Technology segment saw modest revenue growth but a decrease in operating income.

Marsh & McLennan Companies has been actively engaged in share repurchases, initiating accelerated share repurchase programs totaling $1.3 billion during the first nine months of 2007. The company also maintained a strong cash position of $2.819 billion as of September 30, 2007, and paid dividends of $0.76 per share for the nine-month period.

The company is involved in numerous legal and regulatory matters, most notably related to its former brokerage compensation practices (settled with the NYAG in 2005, but with ongoing related litigation) and 'market-timing' allegations concerning Putnam. The company has established reserves and is actively managing these situations, but they represent a notable risk factor.