NEW YORK, NEW YORK, May 3, 2006 - Marsh & McLennan Companies, Inc. (MMC) today reported financial results for the quarter ended March 31, 2006. Consolidated revenues were $3 billion, a decline of 1 percent from the 2005 first quarter. Net income was $416 million, or $.75 per share, compared with $134 million, or $.25 per share, in 2005. Results from discontinued operations, net of tax, were $178 million, or $.32 per share, primarily from MMC's sale of its investment in Sedgwick Claims Management Services in January 2006. Income from continuing operations was $238 million, or $.43 per share, compared with $129 million, or $.24 per share, in the first quarter of 2005.
A number of noteworthy items affected first quarter results in both 2006 and 2005, as described in the attached supplemental schedules. First quarter 2006 noteworthy items include restructuring, legal and regulatory costs related to market service agreements, and other expenses totaling $63 million. Stock option expense, which is now included in the operating results of each segment, was $40 million. These noteworthy items and stock option expense reduced first quarter 2006 earnings per share from continuing operations by $.11. In the first quarter of 2005, similar noteworthy items reduced earnings per share from continuing operations by $.27.
Michael G. Cherkasky, president and chief executive officer of MMC, said: "For the last 18 months, questions in the marketplace have been whether and when Marsh would recover. We began to see positive signs of recovery in Marsh in the fourth quarter of 2005. In the first quarter, with increasing momentum, we saw revenue improvement with a significant increase in operating income. We are also seeing an increase in our new business opportunities, a high win rate in competitive situations, a return of previously lost business, and an increase in retained business. All of this points to better performance for Marsh in the future. Guy Carpenter, our reinsurance broking business, reported an increase in underlying revenues. Mercer's revenue growth accelerated in the first quarter, as we continued to make investments for the future. Kroll's results were mixed as revenue growth slowed and margins weakened, but I remain confident of a good year. Putnam continues to execute its strategy, as it was helped by strong market performance. Overall, MMC's bottom-line performance continues to improve."
Risk and Insurance Services
Marsh's revenues declined to $1.1 billion, or 2 percent on an underlying basis, largely due to resigning from unprofitable accounts. Client retention improved substantially, as was also seen in the fourth quarter of 2005. In the United States, new business increased to its highest level since the beginning of last year. Marsh achieved these results in an insurance marketplace that had continued declines in commercial insurance pricing, particularly in Europe.
Guy Carpenter's first quarter revenues were $281 million, an increase of 2 percent on an underlying basis. Carpenter achieved double-digit growth in new business compared with last year. Higher risk retention by clients offset the effect of the meaningful increase in U.S. property catastrophe premium rates in the first quarter.
Risk Capital Holdings' revenues of $46 million reflected unrealized mark-to-market gains on private equity investments. In the first quarter of 2005, revenues were $63 million.
Risk Consulting and Technology
MMC's effective tax rate for the quarter was lower than the 35 percent effective tax rate on ongoing operations due to the favorable resolution of tax issues in certain jurisdictions. In addition, a benefit in excess of 35 percent was recognized for restructuring and other charges recorded in the period.
MMC is a global professional services firm with annual revenues of approximately $12 billion. It is the parent company of Marsh, the world's leading risk and insurance services firm; Guy Carpenter, the world's leading risk and reinsurance specialist; Kroll, the world's leading risk consulting company; Mercer, a major global provider of human resource and specialty consulting services; and Putnam Investments, one of the largest investment management companies in the United States. Approximately 55,000 employees provide analysis, advice, and transactional capabilities to clients in over 100 countries. Its stock (ticker symbol: MMC) is listed on the New York, Chicago, Pacific, 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 use words like "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "should" and similar terms, express management's current views concerning future events or results. For example, we may use forward-looking statements when addressing topics such as: future actions by our management or regulators; the outcome of contingencies; changes in our business strategy; changes in our business practices 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; the 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:
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.
MMC and its operating companies use their websites to convey meaningful information about their businesses, including the anticipated release of quarterly financial results and the posting of updates of assets under management at Putnam. Monthly updates of total assets under management at Putnam will be posted to the MMC website the first business day following the end of each month. Putnam posts mutual fund and performance data to its website regularly. Assets for most Putnam retail mutual funds are posted approximately two weeks after each month-end. Mutual fund net asset value (NAV) is posted daily. Historical performance and Lipper rankings are also provided. Investors can link to MMC and its operating company websites through www.mmc.com