10-QPeriod: Q1 FY2017

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 28, 2017For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. reported solid financial performance for the first quarter of 2017, with a notable 5% increase in consolidated revenue to $3.5 billion, driven by growth across both its Risk and Insurance Services and Consulting segments. Underlying revenue, which excludes currency fluctuations and acquisitions, also showed a healthy 4% increase, indicating organic growth. Operating income rose by 10% to $809 million, and net income attributable to the company surged by 18% to $578 million, leading to a diluted EPS of $1.09, up from $0.91 in the prior year's quarter. The company demonstrated strong capital management through significant share repurchases totaling $200 million in the quarter and continued debt management with new issuances and existing facilities. Acquisitions remain a strategic focus, with several completed in the Risk and Insurance Services segment to bolster its offerings. While the company faces various risks, including regulatory scrutiny and market volatility, its diversified business model and strategic initiatives position it for continued performance.

Financial Highlights

51 data points
Beta

Revenue

$3.50B

Net Income

$569.00M

16.2% Net Margin

EPS (Diluted)

$1.09

Total Assets

$18.97B

Cash & Equivalents

$930.00M

Free Cash Flow

-$461.00M

Financial Statements
Beta
Revenue$3.50B
Operating Expenses$2.75B
Operating Income$749.00M
Interest Expense$58.00M
Net Income$569.00M
EPS (Basic)$1.10
EPS (Diluted)$1.09
Shares Outstanding (Basic)515.00M
Shares Outstanding (Diluted)522.00M

Key Highlights

  • 1Consolidated revenue increased by 5% year-over-year to $3.5 billion, with underlying revenue growing by 4%.
  • 2Operating income saw a 10% increase, reaching $809 million.
  • 3Net income attributable to the company grew by 18% to $578 million, resulting in diluted EPS of $1.09.
  • 4Risk and Insurance Services segment revenue grew by 6% (5% underlying), and Consulting segment revenue grew by 3% (3% underlying).
  • 5The company repurchased $200 million of its common stock during the quarter and has significant authorization remaining for future buybacks.
  • 6Acquisitions continue to be a growth driver, with several completed in the Risk and Insurance Services segment.
  • 7The effective tax rate decreased to 23.3% from 28.6% in the prior year, partly due to a new accounting standard for share-based compensation.

Frequently Asked Questions

Revenue growth was driven by increases in both the Risk and Insurance Services and Consulting segments. The Risk and Insurance Services segment saw revenue rise by 6% (5% on an underlying basis), fueled by Marsh and Guy Carpenter. The Consulting segment experienced a 3% increase (3% underlying), primarily from Mercer and Oliver Wyman Group. Acquisitions also contributed to the overall revenue increase.

Marsh & McLennan Companies actively managed its capital through significant share repurchases, buying back $200 million of its common stock. The company also issued new senior notes totaling $1 billion to fund general corporate purposes and manage its debt structure. Furthermore, it maintained access to a $1.5 billion revolving credit facility.

The company is cooperating with a civil competition investigation by the U.K. Financial Conduct Authority (FCA) into the aviation insurance and reinsurance sector. The FCA conducted an inspection at Marsh Limited, suspecting the sharing of competitively sensitive information. As the investigation is in its early stages, the ultimate impact is currently unpredictable. The company also faces other routine legal proceedings in the ordinary course of business.

The adoption of a new accounting standard for share-based compensation, effective January 1, 2017, reduced income tax expense by approximately $44 million in the first quarter of 2017. This led to a lower effective tax rate (23.3% compared to 28.6% in the prior year) and increased net income attributable to the company.