NEW YORK, NEW YORK, August 7, 2007 — Marsh & McLennan Companies, Inc. (MMC) today reported financial results for the second quarter and six months ended June 30, 2007.
In the quarter, consolidated revenue was $2.8 billion, up 7 percent from the second quarter of 2006, or 4 percent on an underlying basis. Income from continuing operations was $140 million, or $.25 per share, compared with $131 million, or $.24 per share, last year. Income from discontinued operations, net of tax, which primarily reflects the results of Putnam Investments, was $37 million, or $.06 per share, compared with $41 million, or $.07 per share, last year. Net income rose 3 percent to $177 million, or $.31 per share, from $172 million, or $.31 per share, a year ago. Noteworthy items, described in the attached supplemental schedules, reduced earnings per share by $.04, compared with a reduction of $.05 per share in the second quarter of 2006.
For the six months ended June 30, consolidated revenue of $5.6 billion increased 6 percent from $5.3 billion in the year-ago period, or 3 percent on an underlying basis. Income from continuing operations was $368 million, or $.66 per share, an increase of 11 percent from $331 million, or $.60 per share, in the year-ago period. Income from discontinued operations, net of tax, was $77 million, or $.13 per share, compared with $257 million, or $.45 per share, in the prior-year period. Net income was $445 million, or $.79 per share, compared with $588 million, or $1.05 per share, last year, reflecting the gain on the sale of Sedgwick Claims Management Services in the first quarter of 2006.
"MMC achieved another quarter of solid revenue growth," said Michael G. Cherkasky, president and chief executive officer of MMC. "Although profitability varied across our business segments, the overall revenue gain illustrates our long-term growth strategy. We will continue our strategy of growing revenue and investing in the future, with continued attention on expense discipline. The sale of Putnam Investments, completed last week, will allow us to concentrate on our core businesses and return a substantial amount of capital to shareholders. We are very pleased that MMC's Board of Directors has approved a $1.5 billion share repurchase program, which will begin as soon as possible."
Risk and Insurance Services
In the quarter, Marsh's revenue was $1.1 billion, up 2 percent from last year. Excluding the impact of market services revenue of $34 million in the year ago period, underlying revenue increased 2 percent in the quarter with 3 percent growth in the Americas. The second quarter of 2006 was the last period in which Marsh recorded significant revenue from prior market service agreements, and there was no such revenue in this year's second quarter. Geographically, Marsh's revenue included $627 million in the Americas, $392 million in EMEA and $105 million in Asia Pacific. New business increased in the second quarter, marking the fifth consecutive quarter that new business increased. Premium rate declines in the commercial insurance marketplace continued.
Guy Carpenter's second quarter revenue was $217 million, representing 2 percent growth on a reported basis and 1 percent growth on an underlying basis. This was achieved despite a continued decline in U.S. property catastrophe rates from the peak levels at mid-year renewals of 2006, as well as higher risk retention by clients.
Risk Capital Holdings had revenue of $32 million in the second quarter, compared with $28 million in the same period of 2006.
Profitability in the Risk and Insurance Services segment declined from the prior year, reflecting the absence of market services revenue and that expenses to support Marsh's long-term growth initiatives impacted this quarter to a greater extent than expected.
For the first six months of 2007, revenue for the risk and insurances segment was $2.9 billion, an increase of 1 percent from the year-ago period. Marsh revenue of $2.3 billion rose 1 percent from the year-ago period, and Guy Carpenter's revenue rose 3 percent to $509 million.
Mercer Human Resource Consulting increased revenue 12 percent to $842 million in the second quarter, and 8 percent on an underlying basis. This growth was achieved throughout Mercer's operations: retirement and investment produced $319 million in revenue, an increase of 13 percent; health and benefits, $199 million or 9 percent growth; outsourcing, $185 million or 17 percent growth; and talent, $114 million or 8 percent growth.
The Oliver Wyman Group, now the umbrella brand for all of the former Mercer Specialty consulting businesses, grew revenue 27 percent to $376 million in the second quarter, or 18 percent on an underlying basis.
Overall, the Consulting segment's profitability grew 28 percent and its margin improved to 13.1 percent from 11.8 percent a year ago, driven primarily by double-digit earnings growth at Mercer.
For the six-month period, the Consulting segment posted revenue of $2.3 billion, a 15 percent increase over last year. Mercer increased revenue by 10 percent to $1.6 billion, while the Oliver Wyman Group grew revenue 26 percent to $705 million.
Risk Consulting and Technology
Quarterly revenue in Kroll's technology operations rose 7 percent, led by Kroll Ontrack, the legal technology and electronic data recovery business. Revenue in Kroll's consulting operations decreased 17 percent from a year ago, reflecting a significant reduction in the level of client success fees for completed engagements from those received in the second quarter of 2006.
For the six-month period, Kroll's revenue was $486 million, a decline of 3 percent, or 2 percent on an underlying basis.
Investment Management - Discontinued Operations
MMC's net debt position, which is total debt less cash and cash equivalents, was $3.8 billion at the end of the second quarter, compared with $4 billion at the end of the 2006 second quarter.
In July 2007, MMC completed a previously announced $500 million accelerated share repurchase program.
MMC (Marsh & McLennan Companies) 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 the world's leading risk experts and specialty consultants, including Marsh, the insurance broker and business risk advisor; Guy Carpenter, the risk and reinsurance specialist; Kroll, the risk consulting firm; Mercer Human Resource Consulting, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. With more than 54,000 employees worldwide and annual revenue of approximately $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," "should," "will" and "would." For example, we may use forward-looking statements when addressing topics such as: future actions by regulators; the outcome of contingencies; 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 restructuring and other cost-saving initiatives; share repurchase programs; the expected impact of acquisitions and dispositions; and MMC's cash flow and liquidity.
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 annual report on Form 10-K for the year ended December 31, 2006.