NEW YORK, August 6, 2008 — Marsh & McLennan Companies, Inc. (MMC) today reported financial results for the second quarter ended June 30, 2008.
In the quarter, consolidated revenue was $3 billion, up 9 percent from the second quarter of 2007. Revenue growth was 4 percent on an underlying basis, which measures the change in revenue before the impact of acquisitions and dispositions, using consistent currency exchange rates. For the six months ended June 30, consolidated revenue was $6.1 billion, an increase of 10 percent, or 4 percent on an underlying basis, from the comparable period in 2007.
In connection with the second step of the goodwill impairment assessment for the Risk Consulting and Technology segment, MMC recorded a non-cash charge of $115 million, or $.22 per share, in the second quarter of 2008. The total impairment charge reflected in the first six months of 2008 aggregates $540 million, or $1.04 per share. There is no tax benefit related to the impairment charge, nor any impact on MMC's cash flows, tangible equity, or debt covenants.
In the second quarter of 2008, income from continuing operations, net of tax, was $55 million, or $.11 per share, compared with $140 million, or $.25 per share, last year. Income from discontinued operations was $10 million, or $.02 per share, compared with $37 million, or $.06 per share, last year. Net income was $65 million, or $.13 per share, compared with $177 million, or $.31 per share, last year. Earnings per share on a non-GAAP basis, as presented in the attached supplemental schedules, increased 17 percent to $.41, compared with $.35 in the second quarter of last year.
For the six months ended June 30, 2008, MMC's net loss was $145 million, or $.28 per share, reflecting the goodwill impairment charge of $540 million, compared with net income of $445 million, or $.79 per share, last year.
Brian Duperreault, president and chief executive officer of MMC, said: "MMC's second quarter results were driven by marked improvement in Marsh's operating performance and strong revenue growth at Mercer and Kroll. The ongoing recovery at Marsh is reflected in its revenue growth, expense reduction, and significant increase in profitability. Guy Carpenter's previously announced restructuring program is aligning expenses with revenue levels. Mercer's continued strong revenue growth was evident across all of its businesses, while Oliver Wyman's growth slowed due to economic business conditions. Kroll reported impressive revenue growth in the quarter, led by litigation support and data recovery. Overall, I am pleased with our solid performance in the first half of the year and believe that MMC's performance will continue to improve as additional organizational and business improvements are implemented."
Commencing in the second quarter of 2008, investment gains and losses derived from investments strategically linked to MMC's operating companies, predominantly related to Risk Capital Holdings, are no longer included in operating revenue. These amounts are now reflected as "Investment income (loss)" in MMC's consolidated statements of income. The impact of this change is shown in the attached supplemental schedules.
Risk and Insurance Services
In the second quarter, Marsh's revenue was $1.2 billion, an increase of 8 percent from last year. Underlying revenue grew 3 percent, with the strongest results in international operations, including 5 percent growth in EMEA and 8 percent growth in Asia Pacific. Marsh's client revenue retention improved, and new business increased for the ninth consecutive quarter. These results were achieved in an environment of continued price competition in the global commercial property and casualty insurance marketplace.
Reinsurance premium rates continued to decline across most coverages globally, with clients' risk retention levels remaining high. Guy Carpenter's second quarter revenue was $204 million, a decline of 6 percent from the prior year's quarter, or 9 percent on an underlying basis.
Mercer increased revenue 14 percent to $959 million in the second quarter, with strong revenue growth achieved throughout its operations. On an underlying basis, Mercer's revenue increased 9 percent in the quarter. Mercer's consulting operations, with revenue of $692 million, increased 8 percent; outsourcing, with revenue of $182 million, grew 6 percent; and investment consulting and management, with revenue of $85 million, increased 22 percent.
Oliver Wyman's revenue increased 10 percent to $415 million in the second quarter, or 2 percent on an underlying basis.
Risk Consulting and Technology
Kroll's revenue was $240 million in the second quarter, an increase of 20 percent from the year-ago quarter, or 11 percent on an underlying basis. This growth was driven by a 21 percent increase in litigation support and data recovery and a 20 percent increase in risk mitigation and response.
Revenue for MMC's corporate advisory and restructuring business was $41 million in the second quarter, a decline of 13 percent from the prior year.
MMC's tax rate on ongoing operations, excluding noteworthy items and minority interest, was 30.5 percent for the first six months of 2008.
MMC's net debt, which is total debt less cash and cash equivalents, was $2.4 billion at the end of the second quarter of 2008, compared with $3.8 billion at the end of the year-ago quarter.
MMC is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. It is the parent company of a number of the world's leading risk experts and specialty consultants, including Marsh, the insurance broker and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR and related financial advice and services; Oliver Wyman, the management consultancy; and Kroll, the risk consulting firm. With more than 55,000 employees worldwide and annual revenue exceeding $11 billion, MMC provides analysis, advice and transactional capabilities to clients in more than 100 countries. Its stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. MMC's website address is www.mmc.com.
This press release contains "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management's current views concerning future events or results, use words like "anticipate," "assume," "believe," "continue," "estimate," "expect," "intend," "plan," "project" and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will" and "would." For example, we may use forward-looking statements when addressing topics such as: changes in our business strategies and methods of generating revenue; the development and performance of our services and products; market and industry conditions, including competitive and pricing trends; changes in the composition or level of MMC's revenues; our cost structure and the outcome of cost-saving or restructuring initiatives; dividend policy and share repurchase programs; the expected impact of acquisitions and dispositions; pension obligations; cash flow and liquidity; future actions by regulators; the outcome of contingencies; the impact of changes in accounting rules; and changes in senior management.
Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements include:
The factors identified above are not exhaustive. MMC and its subsidiaries operate in a dynamic business environment in which new risks may emerge frequently. Accordingly, MMC cautions readers not to place undue reliance on its forward-looking statements, which speak only as of the dates on which they are made. MMC undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made. Further information concerning MMC and its businesses, including information about factors that could materially affect our results of operations and financial condition, is contained in MMC's filings with the Securities and Exchange Commission, including the "Risk Factors" section of MMC's most recently filed Annual Report on Form 10-K.