10-QPeriod: Q2 FY2009

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 7, 2009For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. (MMC) reported a net loss of $193 million for the second quarter of 2009, a significant downturn from a net income of $65 million in the same period of the previous year. This loss was heavily impacted by a substantial $315 million goodwill impairment charge in the Risk Consulting & Technology segment, alongside a $115 million charge in the prior year's quarter. Despite the net loss, excluding impairment charges, operating income remained relatively stable year-over-year, indicating underlying business resilience. Revenue declined across most segments, particularly in Consulting and Risk Consulting & Technology, reflecting the challenging economic environment. However, the Risk and Insurance Services segment showed a flat underlying revenue performance and improved operating margins, driven by Guy Carpenter's new business growth and Marsh's stable performance. The company is actively managing its expenses and implemented restructuring actions to reduce costs, which are expected to yield significant annualized savings.

Financial Highlights

47 data points
Beta

Revenue

$2.47B

Net Income

-$193.00M

-7.8% Net Margin

EPS (Diluted)

$-0.37

Total Assets

$14.92B

Cash & Equivalents

$1.29B

Free Cash Flow

$140.00M

Financial Statements
Beta
Revenue$2.47B
Operating Expenses$2.18B
Operating Income$294.00M
Interest Expense$65.00M
Net Income-$193.00M
EPS (Basic)$-0.36
EPS (Diluted)$-0.37
Shares Outstanding (Basic)522.00M
Shares Outstanding (Diluted)523.00M

Key Highlights

  • 1Reported a net loss of $193 million for Q2 2009, compared to a net income of $65 million in Q2 2008, primarily due to a $315 million goodwill impairment charge.
  • 2Consolidated revenue decreased by 13% year-over-year in Q2 2009, reflecting challenging economic conditions across segments.
  • 3Excluding impairment charges, operating income was stable year-over-year ($294 million in Q2 2009 vs. $295 million in Q2 2008), suggesting underlying business resilience.
  • 4The Risk and Insurance Services segment demonstrated stable underlying revenue and improved operating margins, with Guy Carpenter showing strength in new business.
  • 5Significant restructuring actions were undertaken, resulting in the elimination of approximately 875 positions and expected annualized cost savings of $110 million.
  • 6The company's liquidity remains adequate, with no borrowings outstanding under its $1.2 billion revolving credit facility as of June 30, 2009.

Frequently Asked Questions

The company reported a net loss of $193 million primarily due to a significant goodwill impairment charge of $315 million recognized in the Risk Consulting & Technology segment. This charge is non-cash and relates to the ongoing assessment of goodwill for impairment.

Consolidated revenue declined by 13% year-over-year. The Risk and Insurance Services segment saw a 5% decrease but was flat on an underlying basis. The Consulting segment experienced a 17% decline, while the Risk Consulting & Technology segment saw a substantial 40% decrease due to divestitures and underlying business challenges.

The company is actively managing expenses, with consolidated operating expenses decreasing in the quarter. This includes lower compensation and benefits, and other operating costs. Restructuring initiatives are also in place to reduce future costs, with expected annualized savings of $110 million.

MMC faces several significant legal proceedings, including securities class action lawsuits, ERISA class action lawsuits, and claims related to alleged professional negligence (e.g., the Alaska Retirement Management Board lawsuit against Mercer). Some of these are scheduled for trial in early 2010. While the company is unable to provide a precise estimate of potential losses for many of these matters, adverse outcomes could materially impact financial condition and results of operations.