10-QPeriod: Q3 FY2014

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 4, 2014For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. (MRSH) reported solid financial results for the nine months ended September 30, 2014, with consolidated revenue increasing 6% to $9.7 billion and income from continuing operations rising 12% to $1.2 billion. The company demonstrated effective cost management, with operating expenses growing at a slower pace than revenue, leading to a 15% increase in consolidated operating income. This performance was driven by growth across both its Risk and Insurance Services and Consulting segments, with particular strength noted in Oliver Wyman's 19% revenue increase. Key financial strengths highlighted include robust operating cash flow generation of $1.1 billion for the nine months, significantly up from the prior year. The company also actively managed its capital structure, issuing new debt while repurchasing shares and paying dividends, indicating a commitment to shareholder returns. While the company faces ongoing risks such as potential errors and omissions claims and regulatory scrutiny, its diversified business model and continued strategic acquisitions position it for sustained performance.

Financial Highlights

51 data points
Beta

Revenue

$3.14B

Net Income

$297.00M

9.5% Net Margin

EPS (Diluted)

$0.54

Total Assets

$17.99B

Cash & Equivalents

$2.65B

Free Cash Flow

$800.00M

Financial Statements
Beta
Revenue$3.14B
Operating Expenses$2.70B
Operating Income$445.00M
Interest Expense$45.00M
Net Income$297.00M
EPS (Basic)$0.55
EPS (Diluted)$0.54
Shares Outstanding (Basic)544.00M
Shares Outstanding (Diluted)551.00M

Key Highlights

  • 1Consolidated revenue for the nine months ended September 30, 2014, increased by 6% to $9.7 billion, compared to $9.1 billion in the prior year period.
  • 2Income from continuing operations for the nine months ended September 30, 2014, rose by 12% to $1.2 billion, up from $1.1 billion in the same period of 2013.
  • 3Operating income for the nine months increased by 14% to $1.76 billion, driven by strong performance in both the Risk and Insurance Services and Consulting segments.
  • 4The Consulting segment showed particular strength, with Oliver Wyman experiencing an 18% revenue increase in Q3 and a 19% increase year-to-date.
  • 5Operating cash flow for the nine months was $1.14 billion, a substantial increase from $575 million in the prior year period.
  • 6The company actively engaged in capital allocation, repurchasing approximately $600 million of common stock in the first nine months of 2014 and paying dividends of $429 million.
  • 7Total debt increased in the period, with the company issuing new senior notes while also redeeming some existing debt.

Frequently Asked Questions

Consolidated revenue increased by 7% to $3.1 billion in the third quarter of 2014. The Risk and Insurance Services segment grew 7% (4% underlying), driven by Marsh's performance across geographies and Guy Carpenter's steady growth. The Consulting segment saw a 7% increase (6% underlying), with Mercer growing 4% (3% underlying) and Oliver Wyman demonstrating significant strength with an 18% increase (16% underlying).

Consolidated operating expenses increased by 7% in the third quarter of 2014, a rate aligned with revenue growth. On an underlying basis, expenses grew 4%, which was slower than the underlying revenue growth of 5%. This suggests effective cost management, with increases in compensation and benefits offset by lower pension costs.

Marsh & McLennan Companies actively pursued growth through acquisitions, completing twelve acquisitions in the first nine months of 2014, totaling $573 million in consideration. The company also returned capital to shareholders through share repurchases, buying back approximately 11.8 million shares for $600 million during the first nine months of 2014, and continuing to authorize significant repurchase programs.

The company noted that foreign currency fluctuations can impact period-to-period comparisons. For the third quarter, currency impact was minimal on revenue, with a flat percentage change. However, the company estimates that a 10% movement of major foreign currencies could impact full-year net operating income by approximately $50 million, indicating a potential for both upside and downside risk.