10-QPeriod: Q1 FY2018

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 27, 2018For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. reported a strong first quarter for 2018, with consolidated revenue increasing by 14% year-over-year to $4.0 billion. This growth was driven by an 18% increase in the Risk and Insurance Services segment and a 9% increase in the Consulting segment. Notably, the adoption of the new revenue recognition standard significantly impacted reported revenue, particularly by accelerating recognition in the reinsurance broking operations. Operating income saw a substantial 21% increase, leading to a 23% rise in diluted earnings per share to $1.34. The company also demonstrated robust capital allocation, repurchasing $250 million of its stock during the quarter and continuing to invest in strategic acquisitions within both its segments. The company's financial health appears stable, with a strong liquidity position and ongoing efforts to optimize its capital structure, including debt issuance and share repurchases. Investors can take comfort from the company's consistent growth and its strategic focus on expanding its global professional services offerings.

Financial Highlights

51 data points
Beta

Revenue

$4.00B

Net Income

$690.00M

17.3% Net Margin

EPS (Diluted)

$1.34

Total Assets

$21.38B

Cash & Equivalents

$1.17B

Free Cash Flow

-$422.00M

Financial Statements
Beta
Revenue$4.00B
Operating Expenses$3.09B
Operating Income$908.00M
Interest Expense$61.00M
Net Income$690.00M
EPS (Basic)$1.36
EPS (Diluted)$1.34
Shares Outstanding (Basic)508.00M
Shares Outstanding (Diluted)514.00M

Key Highlights

  • 1Consolidated revenue for Q1 2018 increased 14% to $4.0 billion, compared to $3.5 billion in Q1 2017.
  • 2Operating income grew 21% to $908 million, up from $749 million in the prior year period.
  • 3Diluted earnings per share (EPS) rose 23% to $1.34 from $1.09 in Q1 2017.
  • 4Risk and Insurance Services revenue grew 18% to $2.3 billion, benefiting significantly from the adoption of new revenue recognition standards.
  • 5Consulting segment revenue increased 9% to $1.7 billion.
  • 6The company repurchased $250 million of its common stock in Q1 2018, under an authorization with approximately $1.3 billion remaining.
  • 7The effective tax rate for Q1 2018 was 23.9%, influenced by the Tax Cuts and Jobs Act of 2017.

Frequently Asked Questions

The adoption of the new revenue recognition standard, effective January 1, 2018, significantly impacted the timing of revenue recognition, particularly accelerating revenue in the Risk and Insurance Services segment, especially in reinsurance broking. This led to a substantial increase in reported revenue for Q1 2018. The standard also resulted in capitalizing certain costs that were previously expensed, shifting expense recognition.

Marsh & McLennan Companies is actively returning capital to shareholders through share repurchases, having bought back $250 million in the first quarter of 2018. They also continue to invest in growth through strategic acquisitions, with several completed in both the Risk and Insurance Services and Consulting segments during the quarter. The company also paid dividends and managed its debt levels.

The company faces risks including regulatory investigations (e.g., concerning competition in insurance and reinsurance markets), cybersecurity threats, potential litigation, competition, evolving regulatory environments (like data privacy), changes in tax laws, and macroeconomic and geopolitical factors. These are detailed in the 'Risk Factors' section of their SEC filings.

The company has a stable debt profile, with senior debt rated A- by S&P and Baa1 by Moody's. In March 2018, they issued $600 million of 4.20% senior notes due 2048, primarily for general corporate purposes. They also maintain a $1.5 billion revolving credit facility, on which no amounts were outstanding at the end of the quarter. The company actively manages its debt to support its operations and growth initiatives.