10-QPeriod: Q2 FY2008

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 8, 2008For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. (MRSH) reported a net loss of $145 million for the six months ended June 30, 2008, a significant decline from a net income of $445 million in the same period of 2007. This downturn was heavily influenced by a substantial goodwill impairment charge of $540 million, primarily impacting the Risk Consulting & Technology segment. Excluding this charge, operating income showed resilience, increasing by 10% year-over-year for the first six months. Despite the bottom-line loss, the company's core businesses demonstrated continued revenue growth. Total revenue for the six months increased by 10% to $6.1 billion. The Risk and Insurance Services segment saw revenue grow 5%, with Marsh performing well internationally and in the U.S. The Consulting segment reported robust revenue growth of 14%, driven by strong performance at Mercer. While the Risk Consulting & Technology segment experienced revenue growth, it was overshadowed by the significant goodwill impairment.

Financial Highlights

30 data points
Beta

Revenue

$3.03B

Net Income

$65.00M

2.1% Net Margin

EPS (Diluted)

$0.12

Cash & Equivalents

$1.17B

Free Cash Flow

-$541.00M

Financial Statements
Beta
Revenue$3.03B
Operating Expenses$2.85B
Operating Income$180.00M
Interest Expense$55.00M
Net Income$65.00M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)512.00M
Shares Outstanding (Diluted)512.00M

Key Highlights

  • 1Reported a net loss of $145 million for the six months ended June 30, 2008, compared to a net income of $445 million in the prior year.
  • 2Recorded a significant goodwill impairment charge of $540 million in the Risk Consulting & Technology segment, impacting profitability.
  • 3Total consolidated revenue increased by 10% to $6.1 billion for the first six months of 2008.
  • 4Risk and Insurance Services segment revenue grew 5% to $2.9 billion, with Marsh showing strength.
  • 5Consulting segment revenue increased 14% to $2.7 billion, led by Mercer's performance.
  • 6Operating expenses increased significantly due to the goodwill impairment; however, underlying expenses were managed.
  • 7Cash used for operations was $379 million for the six months ended June 30, 2008.

Frequently Asked Questions

The primary reason for the net loss of $145 million in the first half of 2008 was a substantial goodwill impairment charge of $540 million, primarily related to the Risk Consulting & Technology segment. This non-cash charge significantly impacted the company's profitability.

The company's core business segments showed revenue growth. The Risk and Insurance Services segment revenue increased by 5% to $2.9 billion, and the Consulting segment revenue grew by 14% to $2.7 billion, driven by strong performance in Mercer. The Risk Consulting & Technology segment also saw revenue growth, but its performance was overshadowed by the goodwill impairment.

While consolidated operating expenses increased significantly in the first half of 2008 due to the $540 million goodwill impairment charge, the company managed its underlying expenses. For the Risk and Insurance Services segment, underlying expenses decreased, and for the Consulting segment, underlying expenses increased primarily due to higher compensation costs related to staff levels and reimbursable expenses. The company continues to monitor and control expenses.

For the six months ended June 30, 2008, Marsh & McLennan Companies used $379 million in cash from operations, compared to $269 million in the same period of 2007. The company also reported net cash used for financing activities of $399 million for the period, down from $617 million in the prior year. The company has a $1.2 billion multi-currency revolving credit facility, with no outstanding borrowings as of June 30, 2008.