10-QPeriod: Q1 FY2015

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 4, 2015For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. (MRSH) reported solid financial results for the first quarter ended March 31, 2015. While consolidated revenue saw a slight 1% decrease to $3.2 billion compared to the prior year, this was primarily due to a significant 6% negative impact from foreign currency translation. On an underlying basis, revenue grew 4%, indicating operational strength. The company's operating income increased by a healthy 9% to $735 million, driven by effective expense management, including a notable $125 million benefit from the termination of a retiree medical plan, which more than offset increased pension expenses. Diluted earnings per share from continuing operations rose 11% to $0.89. Key drivers of performance included a 3% underlying revenue growth in the Risk and Insurance Services segment, despite headwinds from currency, and a strong 5% underlying revenue increase in the Consulting segment. The company also actively managed its capital through share repurchases, spending $300 million in the quarter, and issued $500 million in new senior notes, demonstrating a proactive approach to its financial structure. Despite these positives, investors should note the impact of a strengthening U.S. dollar on reported international earnings and the ongoing sensitivity of pension expenses to interest rate fluctuations.

Financial Highlights

51 data points
Beta

Revenue

$3.21B

Net Income

$482.00M

15.0% Net Margin

EPS (Diluted)

$0.88

Total Assets

$16.83B

Cash & Equivalents

$1.10B

Free Cash Flow

-$614.00M

Financial Statements
Beta
Revenue$3.21B
Operating Expenses$2.48B
Operating Income$735.00M
Interest Expense$36.00M
Net Income$482.00M
EPS (Basic)$0.89
EPS (Diluted)$0.88
Shares Outstanding (Basic)539.00M
Shares Outstanding (Diluted)545.00M

Key Highlights

  • 1Consolidated revenue was $3.2 billion, down 1% year-over-year, but underlying revenue grew 4%, indicating underlying business strength.
  • 2Operating income increased 9% to $735 million, driven by expense control and a significant one-time benefit from a retiree medical plan termination.
  • 3Diluted EPS from continuing operations grew 11% to $0.89, outpacing revenue growth.
  • 4Risk and Insurance Services segment showed 3% underlying revenue growth, demonstrating resilience despite currency impacts.
  • 5Consulting segment reported a strong 5% underlying revenue growth, highlighting expansion in services like Health, Talent, and Investments.
  • 6The company repurchased $300 million of its common stock in the quarter, signaling confidence and returning capital to shareholders.
  • 7Long-term debt increased due to the issuance of $500 million in new senior notes, while the company maintained access to a $1.2 billion revolving credit facility.

Frequently Asked Questions

The primary driver for the reported decrease in consolidated revenue was the strengthening U.S. dollar, which negatively impacted the translation of foreign earnings. On an underlying basis, excluding currency impacts and other one-time items, revenue actually grew by 4%.

The company effectively managed its expenses, leading to a 4% decrease in consolidated operating expenses. A significant contributing factor was a $125 million net benefit realized from the termination of its U.S. post-65 retiree medical reimbursement plan. This benefit helped offset increases in pension expenses due to lower interest rates.

Marsh & McLennan Companies actively returns capital to shareholders through share repurchases and dividends. In the first quarter of 2015, the company repurchased approximately $300 million of its common stock under an existing $2 billion authorization. Dividends paid in the quarter amounted to $151 million.

The company issued $500 million in new senior notes in March 2015, increasing its long-term debt but also extending its maturity profile. It maintains a $1.2 billion revolving credit facility, which had no borrowings outstanding at the end of the quarter, indicating strong liquidity. The company also repatriates foreign earnings through dividends from subsidiaries, managing its cash flow effectively.