NEW YORK, May 7, 2008 — Marsh & McLennan Companies, Inc. (MMC) today reported financial results for the first quarter ended March 31, 2008.
Consolidated revenue was $3 billion, up 8 percent from the first quarter of 2007, or 2 percent on an underlying basis, which measures the change in revenue before the impact of acquisitions and dispositions, using consistent currency exchange rates.
In connection with its assessment of Kroll, MMC tested the related goodwill on its balance sheet. This resulted in a non-cash goodwill impairment charge of $425 million, or $.81 per share, in the first quarter. There is no tax effect related to the impairment charge, nor any impact on MMC's cash flows, tangible equity or debt covenants. As a result of the goodwill impairment charge, MMC reported a first-quarter net loss of $210 million, or $.40 per share.
Excluding the goodwill impairment charge and including discontinued operations, net income was $215 million, or $.41 per share, compared with $268 million, or $.47 per share, in the first quarter of 2007. First quarter 2008 earnings per share, on a non-GAAP basis as presented in the attached supplemental schedules, was $.46.
Brian Duperreault, president and chief executive officer of MMC, said: "MMC had solid revenue growth in the quarter, primarily driven by Mercer and Marsh. Mercer's results reflected a continuation of strong revenue performance with growth throughout all of its businesses. Marsh grew revenue on both a reported and underlying basis, generated strong new business results and showed marked improvement in client revenue retention - all important indicators of its progress. As part of our review of Kroll, we determined that the corporate advisory and restructuring operations should be managed separately; additionally, we recorded a non-cash goodwill impairment charge. We continue to evaluate Kroll to identify those businesses that have the greatest growth potential within MMC's portfolio. Overall, actions taken across MMC's businesses during the quarter should improve operating performance and profitability."
Risk and Insurance Services
In the quarter, Marsh's revenue was $1.2 billion, up 7 percent from last year, with the strongest growth in Asia Pacific. Underlying revenue grew 1 percent, including 3 percent growth in EMEA; 8 percent growth in Asia Pacific; and 3 percent growth in Latin America. Marsh's new business production increased 10 percent, a continuation of the strong performance achieved over the last two years. Marsh's results were achieved in an environment of significant price competition in the global commercial property and casualty insurance marketplace.
Guy Carpenter's first quarter revenue was $273 million, a decline of 6 percent from the prior year's quarter and 8 percent on an underlying basis. Reinsurance premium rates continued to decline across most coverages globally, with clients' risk retention levels remaining high.
Mercer increased revenue 16 percent to $925 million in the first 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 operation, with revenue of $659 million, increased 7 percent; outsourcing, with revenue of $188 million, grew 12 percent; and investment consulting and management, with revenue of $78 million, grew 23 percent.
Oliver Wyman's revenue grew 13 percent to $370 million in the first quarter, or 6 percent on an underlying basis.Risk Consulting and Technology
MMC's Risk Consulting and Technology segment recorded an operating loss of $410 million as a result of the goodwill impairment charge. Excluding this charge, and noteworthy items of $3 million, adjusted operating income was $18 million.
Segment revenue was $259 million, an increase of 10 percent from $235 million in the first quarter of 2007. On an underlying basis, revenue increased 3 percent in the current quarter.
Kroll's revenue was $220 million in the first quarter, an increase of 14 percent from the year-ago quarter, or 5 percent on an underlying basis. This growth was driven by an 11 percent increase in risk mitigation and response and a 7 percent increase in litigation support and data recovery, partially offset by a decline of 2 percent in background screening.
Revenue for MMC's corporate advisory and restructuring business, which now operates as a separate business within the Risk Consulting and Technology segment, was $39 million in the first quarter, a decline of 7 percent. This performance reflected growth in the United States that was more than offset by a decline in Europe.
MMC's net debt position, which is total debt less cash and cash equivalents, was $2.3 billion at the end of the first quarter of 2008, compared with $3.5 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 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.