10-QPeriod: Q1 FY2010

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 7, 2010For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. (MMC) reported a solid first quarter for 2010, demonstrating revenue growth across its key segments and improved operating income. Consolidated revenue increased by 7% to $2.8 billion, driven by a strong performance in Risk and Insurance Services and Consulting. Operating income saw a significant rise to $439 million from $324 million in the prior year, reflecting effective cost management and a decrease in restructuring charges. The company also highlighted strategic acquisitions, particularly within its Marsh segment, aimed at expanding its market presence and capabilities. Financially, MMC maintained a healthy liquidity position, though operating cash flows were negative for the quarter, consistent with historical patterns due to incentive compensation payments. The company also continued its shareholder-friendly capital allocation, with consistent dividend payments. Despite ongoing legal proceedings and market risks, MMC's proactive approach to acquisitions and cost controls positions it for continued operational improvement.

Financial Highlights

47 data points
Beta

Revenue

$2.63B

Net Income

$248.00M

9.4% Net Margin

EPS (Diluted)

$0.45

Total Assets

$14.96B

Cash & Equivalents

$1.17B

Free Cash Flow

-$331.00M

Financial Statements
Beta
Revenue$2.63B
Operating Expenses$2.21B
Operating Income$425.00M
Interest Expense$60.00M
Net Income$248.00M
EPS (Basic)$0.46
EPS (Diluted)$0.45
Shares Outstanding (Basic)533.00M
Shares Outstanding (Diluted)536.00M

Key Highlights

  • 1Consolidated revenue grew 7% year-over-year to $2.8 billion, driven by strong performance in Risk and Insurance Services and Consulting segments.
  • 2Operating income significantly increased to $439 million, up from $324 million in the prior year's first quarter, indicating improved profitability.
  • 3The company made several strategic acquisitions in the Risk and Insurance Services segment, including Haake Companies, Inc. and Thomas Rutherfoord, Inc., to expand market reach.
  • 4Effective cost management was evident, with operating expenses increasing at a slower rate (3%) than revenue, leading to improved operating margins.
  • 5Despite a use of cash from operations ($251 million), the company maintained sufficient liquidity, with financing activities reflecting dividend payments and debt management.
  • 6Legal proceedings remain a factor, with significant ongoing litigation, notably the Alaska Retirement Management Board lawsuit against Mercer, but the company continues to manage these risks.

Frequently Asked Questions

The primary driver of revenue growth was the strong performance across the Risk and Insurance Services and Consulting segments. The Risk and Insurance Services segment saw a 9% increase in revenue, while the Consulting segment grew by 7%, both contributing significantly to the consolidated revenue increase.

Marsh & McLennan managed its expenses effectively, with consolidated operating expenses increasing by 3%, which was a slower rate than the 7% revenue growth. This led to an expansion of operating margins. The company benefited from lower restructuring charges and efficient cost controls within its operating segments.

The company continues to be involved in various legal proceedings, including a significant lawsuit against Mercer by the Alaska Retirement Management Board. While these matters present potential risks, Marsh & McLennan states that it is unable to provide a reasonable estimate of the range of possible loss or impact at this time due to their complexity and developing nature. However, they are actively defending these cases.

The company has been actively pursuing strategic acquisitions, particularly within its Risk and Insurance Services segment. Notable acquisitions during the quarter included Haake Companies, Inc. and Thomas Rutherfoord, Inc., aimed at expanding its footprint and service offerings in the insurance brokerage market. They also completed the acquisition of HSBC Insurance Brokers Ltd. shortly after the quarter ended.