News
Marsh & McLennan Companies Reports Fourth Quarter and Full-Year 2014 Results
February 6, 2015 at 7:00 AM EST
Media Contact
Email:media@mmc.com
Excellent Underlying Revenue Growth
Growth in GAAP and Adjusted Operating Income Produces Strong Margin Expansion
Full-Year GAAP EPS Increases to
"For the year, Marsh & McLennan Companies' results were excellent. On a consolidated basis, adjusted operating income grew 10%, our seventh consecutive year of double-digit growth, while the adjusted margin increased 70 basis points to 18.1%. Marsh produced another year of outstanding performance, with substantial underlying revenue growth across all major geographies and record new business development. Guy Carpenter's results for the year were solid, with underlying revenue growth of 2%, despite significant industry-wide headwinds. Mercer's strong performance included 3% underlying revenue growth, driving the Consulting segment's record profitability of nearly
"We're proud to have delivered another year of excellent results, with strong revenue and EPS growth and the return of capital to shareholders through double-digit growth in dividends and increased share repurchases," concluded Mr. Glaser.
Consolidated Results
In the fourth quarter of 2014, consolidated revenue was
For the year 2014, revenue was
Risk and Insurance Services
Risk and Insurance Services revenue was
Marsh's revenue in the fourth quarter of 2014 was
Consulting
Consulting revenue of
Mercer's revenue was
Other Items
In
The Company repurchased 3.7 million shares of its common stock for
Conference Call
A conference call to discuss fourth quarter and full-year 2014 results will be held today at
About
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
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," "future," "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: the outcome of contingencies; the expected impact of acquisitions and dispositions; the impact of competition; pension obligations; the impact of foreign currency exchange rates; our effective tax rates; changes in our business strategies and methods of generating revenue; the development and performance of our services and products; changes in the composition or level of our revenues; our cost structure, dividend policy, cash flow and liquidity; future actions by regulators; and the impact of changes in accounting rules.
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, among other things:
- the impact of competition, including with respect to our geographic reach, the sophistication and quality of our services, our pricing relative to competitors, our customers' option to self-insure or use internal resources instead of consultants, and our corporate tax rates relative to a number of our competitors;
- the extent to which we retain existing clients and attract new business, and our ability to incentivize and retain key employees;
- the impact on expenses relating to our global pension plans of discount rates and asset returns and of projected salary increases, mortality rates, demographics, inflation, and cash contributions due to changes in the funded status of our global defined benefit pension plans;
- the impact on our net income of fluctuations in foreign currency exchange rates, particularly in light of the recent strengthening of the U.S. dollar against most other currencies worldwide;
- our ability to maintain adequate physical, technical and administrative safeguards to protect the security of confidential or personal information or data, and the potential of a system or network disruption that results in regulatory penalties, remedial costs or the improper disclosure of confidential or personal information or data;
- our exposure to potential liabilities arising from errors and omissions claims against us;
- our exposure to potential civil remedies or criminal penalties if we fail to comply with foreign and U.S. laws that are applicable in the domestic and international jurisdictions in which we operate, including evolving sanctions against
Russia and existing trade sanctions laws relating to countries such asCuba ,Iran ,Sudan andSyria , anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and theU.K. Bribery Act 2010, local laws prohibiting corrupt payments to government officials, as well as import and export restrictions; - our ability to make acquisitions and dispositions and to integrate, and realize expected synergies, savings or benefits from, the businesses we acquire;
- our ability to successfully recover should we experience a disaster or other business continuity problem, such as an earthquake, hurricane, flood, terrorist attack, pandemic, security breach, cyber attack, power loss, telecommunications failure or other natural or man-made disaster;
- the impact of changes in interest rates and deterioration of counterparty credit quality on our cash balances and the performance of our investment portfolios, including corporate and fiduciary funds;
- the potential impact of rating agency actions on our cost of financing and ability to borrow, as well as on our operating costs and competitive position;
- changes in applicable tax or accounting requirements; and
- potential income statement effects from the application of FASB's ASC Topic No. 740 ("Income Taxes") regarding accounting treatment of uncertain tax benefits and valuation allowances, including the effect of any subsequent adjustments to the estimates we use in applying this accounting standard.
The factors identified above are not exhaustive.
Marsh & McLennan Companies, Inc. | ||||||||||||||||||
Three Months Ended |
Twelve Months Ended | |||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||
Revenue | $ | 3,246 | $ | 3,115 | $ | 12,951 | $ | 12,261 | ||||||||||
Expense: | ||||||||||||||||||
Compensation and Benefits | 1,896 | 1,833 | 7,515 | 7,226 | ||||||||||||||
Other Operating Expenses | 814 | 793 | 3,135 | 2,958 | ||||||||||||||
Operating Expenses | 2,710 | 2,626 | 10,650 | 10,184 | ||||||||||||||
Operating Income | 536 | 489 | 2,301 | 2,077 | ||||||||||||||
Interest Income | 5 | 5 | 21 | 18 | ||||||||||||||
Interest Expense | (36 | ) | (43 | ) | (165 | ) | (167 | ) | ||||||||||
Cost of Extinguishment of Debt | (137 | ) | (24 | ) | (137 | ) | (24 | ) | ||||||||||
Investment Income | - | 11 | 37 | 69 | ||||||||||||||
Income Before Income Taxes | 368 | 438 | 2,057 | 1,973 | ||||||||||||||
Income Tax Expense | 99 | 131 | 586 | 594 | ||||||||||||||
Income from Continuing Operations | 269 | 307 | 1,471 | 1,379 | ||||||||||||||
Discontinued Operations, Net of Tax | 30 | - | 26 | 6 | ||||||||||||||
Net Income Before Non-Controlling Interests | 299 | 307 | 1,497 | 1,385 | ||||||||||||||
Less: Net Income Attributable to Non-Controlling Interests | 5 | 4 | 32 | 28 | ||||||||||||||
Net Income Attributable to the Company | $ | 294 | $ | 303 | $ | 1,465 | $ | 1,357 | ||||||||||
Basic Net Income Per Share | ||||||||||||||||||
- Continuing Operations | $ | 0.49 | $ | 0.55 | $ | 2.64 | $ | 2.46 | ||||||||||
- Net Income Attributable to the Company | $ | 0.54 | $ | 0.55 | $ | 2.69 | $ | 2.47 | ||||||||||
Diluted Net Income Per Share | ||||||||||||||||||
- Continuing Operations | $ | 0.48 | $ | 0.54 | $ | 2.61 | $ | 2.42 | ||||||||||
- Net Income Attributable to the Company | $ | 0.54 | $ | 0.54 | $ | 2.65 | $ | 2.43 | ||||||||||
Average Number of Shares Outstanding | ||||||||||||||||||
- Basic | 541 | 548 | 545 | 549 | ||||||||||||||
- Diluted | 548 | 557 | 553 | 558 | ||||||||||||||
Shares Outstanding at 12/31 | 540 | 547 | 540 | 547 | ||||||||||||||
Marsh & McLennan Companies, Inc. | ||||||||||||||||||||||
Components of Revenue Change* | ||||||||||||||||||||||
Three Months Ended |
% Change |
Currency |
Acquisitions/ |
Underlying | ||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||
Risk and Insurance Services | ||||||||||||||||||||||
Marsh | $ | 1,473 | $ | 1,418 | 4% | (4)% | 4% | 4% | ||||||||||||||
Guy Carpenter | 212 | 209 | 1% | (2)% | - | 3% | ||||||||||||||||
Subtotal | 1,685 | 1,627 | 4% | (3)% | 3% | 4% | ||||||||||||||||
Fiduciary Interest Income | 6 | 6 | ||||||||||||||||||||
Total Risk and Insurance Services | 1,691 | 1,633 | 4% | (3)% | 3% | 4% | ||||||||||||||||
Consulting | ||||||||||||||||||||||
Mercer | 1,106 | 1,084 | 2% | (3)% | - | 5% | ||||||||||||||||
Oliver Wyman Group | 460 | 408 | 12% | (3)% | 1% | 15% | ||||||||||||||||
Total Consulting | 1,566 | 1,492 | 5% | (3)% | - | 8% | ||||||||||||||||
Corporate / Eliminations | (11 | ) | (10 | ) | ||||||||||||||||||
Total Revenue | $ | 3,246 | $ | 3,115 | 4% | (3)% | 2% | 6% | ||||||||||||||
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue Change* | ||||||||||||||||||||||
Three Months Ended |
% Change |
Currency |
Acquisitions/ |
Underlying | ||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||
Marsh: | ||||||||||||||||||||||
EMEA | $ | 471 | $ | 466 | 1% | (5)% | 1% | 5% | ||||||||||||||
Asia Pacific | 163 | 163 | - | (5)% | - | 6% | ||||||||||||||||
Latin America | 128 | 132 | (4)% | (10)% | 3% | 3% | ||||||||||||||||
Total International | 762 | 761 | - | (6)% | 1% | 5% | ||||||||||||||||
U.S. / Canada | 711 | 657 | 8% | (1)% | 7% | 3% | ||||||||||||||||
Total Marsh | $ | 1,473 | $ | 1,418 | 4% | (4)% | 4% | 4% | ||||||||||||||
Mercer: | ||||||||||||||||||||||
Health | $ | 380 | $ | 376 | 1% | (2)% | (1)% | 4% | ||||||||||||||
Retirement | 343 | 338 | 1% | (4)% | - | 5% | ||||||||||||||||
Investments | 214 | 199 | 8% | (6)% | 1% | 12% | ||||||||||||||||
Talent | 169 | 171 | (1)% | (4)% | 1% | 2% | ||||||||||||||||
Total Mercer | $ | 1,106 | $ | 1,084 | 2% | (3)% | - | 5% | ||||||||||||||
Notes |
Underlying revenue measures the change in revenue using consistent currency exchange rates, excluding the impact of certain items that affect comparability such as: acquisitions, dispositions and transfers among businesses. |
* Components of revenue change may not add due to rounding. |
Marsh & McLennan Companies, Inc. | ||||||||||||||||||
Components of Revenue Change* | ||||||||||||||||||
Twelve Months Ended |
% Change |
Currency |
Acquisitions/ |
Underlying | ||||||||||||||
2014 | 2013 | |||||||||||||||||
Risk and Insurance Services | ||||||||||||||||||
Marsh | $ | 5,753 | $ | 5,438 | 6% | (1)% | 3% | 4% | ||||||||||
Guy Carpenter | 1,154 | 1,131 | 2% | - | 1% | 2% | ||||||||||||
Subtotal | 6,907 | 6,569 | 5% | (1)% | 3% | 4% | ||||||||||||
Fiduciary Interest Income | 24 | 27 | ||||||||||||||||
Total Risk and Insurance Services | 6,931 | 6,596 | 5% | (1)% | 3% | 3% | ||||||||||||
Consulting | ||||||||||||||||||
Mercer | 4,350 | 4,241 | 3% | (1)% | - | 3% | ||||||||||||
Oliver Wyman Group | 1,709 | 1,460 | 17% | - | 2% | 15% | ||||||||||||
Total Consulting | 6,059 | 5,701 | 6% | (1)% | - | 6% | ||||||||||||
Corporate / Eliminations | (39 | ) | (36 | ) | ||||||||||||||
Total Revenue | $ | 12,951 | $ | 12,261 | 6% | (1)% | 2% | 5% | ||||||||||
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue Change* | ||||||||||||||||||
Twelve Months Ended December 31, |
% Change |
Currency |
Acquisitions/ |
Underlying | ||||||||||||||
2014 | 2013 | |||||||||||||||||
Marsh: | ||||||||||||||||||
EMEA | $ | 1,980 | $ | 1,902 | 4% | - | 1% | 3% | ||||||||||
Asia Pacific | 683 | 659 | 4% | (4)% | - | 7% | ||||||||||||
Latin America | 413 | 392 | 5% | (10)% | 6% | 10% | ||||||||||||
Total International | 3,076 | 2,953 | 4% | (2)% | 1% | 5% | ||||||||||||
U.S. / Canada | 2,677 | 2,485 | 8% | (1)% | 6% | 3% | ||||||||||||
Total Marsh | $ | 5,753 | $ | 5,438 | 6% | (1)% | 3% | 4% | ||||||||||
Mercer: | ||||||||||||||||||
Health | $ | 1,553 | $ | 1,511 | 3% | (1)% | - | 3% | ||||||||||
Retirement | 1,375 | 1,344 | 2% | - | - | 2% | ||||||||||||
Investments | 836 | 780 | 7% | (3)% | 1% | 9% | ||||||||||||
Talent | 586 | 606 | (3)% | (2)% | - | (1)% | ||||||||||||
Total Mercer | $ | 4,350 | $ | 4,241 | 3% | (1)% | - | 3% | ||||||||||
Notes |
Underlying revenue measures the change in revenue using consistent currency exchange rates, excluding the impact of certain items that affect comparability such as: acquisitions, dispositions and transfers among businesses. |
* Components of revenue change may not add due to rounding. |
Marsh & McLennan Companies, Inc. |
Non-GAAP Measures |
Three Months Ended December 31 |
(Millions) (Unaudited) |
The Company presents below certain additional financial measures that are "non-GAAP measures," within the meaning of Regulation G under the Securities Exchange Act of 1934. These measures are: adjusted operating income (loss); adjusted operating margin; and adjusted income, net of tax.
The Company presents these non-GAAP measures to provide investors with additional information to analyze the Company's performance from period to period. Management also uses these measures to assess performance for incentive compensation purposes and to allocate resources in managing the Company's businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP.
Adjusted Operating Income (Loss) and Adjusted Operating Margin
Adjusted operating income (loss) is calculated by excluding the impact of certain noteworthy items from the Company's GAAP operating income or loss. The following tables identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income or (loss), on a consolidated and segment basis, for the three months ended
Risk & |
Consulting |
Corporate/ |
Total | |||||||||||
Three Months Ended December 31, 2014 | ||||||||||||||
Operating income (loss) | $ | 339 | $ | 250 | $ | (53) | $ | 536 | ||||||
Add impact of Noteworthy Items: | ||||||||||||||
Restructuring charges (a) | 1 | 1 | - | 2 | ||||||||||
Adjustments to acquisition related accounts (b) | 15 | - | - | 15 | ||||||||||
Operating income adjustments | 16 | 1 | - | 17 | ||||||||||
Adjusted operating income (loss) | $ | 355 | $ | 251 | $ | (53) | $ | 553 | ||||||
Operating margin | 20.1% | 16.0% | N/A | 16.5% | ||||||||||
Adjusted operating margin | 21.0% | 16.1% | N/A | 17.0% | ||||||||||
Three Months Ended December 31, 2013 | ||||||||||||||
Operating income (loss) | $ | 310 | $ | 221 | $ | (42) | $ | 489 | ||||||
Add (Deduct) impact of Noteworthy Items: | ||||||||||||||
Restructuring charges (a) | 2 | 1 | 2 | 5 | ||||||||||
Adjustments to acquisition related accounts (b) | 15 | 1 | - | 16 | ||||||||||
Other | - | (1) | - | (1) | ||||||||||
Operating income adjustments | 17 | 1 | 2 | 20 | ||||||||||
Adjusted operating income (loss) | $ | 327 | $ | 222 | $ | (40) | $ | 509 | ||||||
Operating margin | 18.9% | 14.8% | N/A | 15.7% | ||||||||||
Adjusted operating margin | 20.0% | 14.9% | N/A | 16.3% | ||||||||||
(a) Primarily severance, future rent under non-cancellable leases, and integration costs related to recent acquisitions. |
(b) Primarily includes the change in fair value as measured each quarter of contingent consideration related to acquisitions. |
Marsh & McLennan Companies, Inc. |
Non-GAAP Measures |
Twelve Months Ended December 31 |
(Millions) (Unaudited) |
The Company presents below certain additional financial measures that are "non-GAAP measures," within the meaning of Regulation G under the Securities Exchange Act of 1934. These measures are: adjusted operating income (loss); adjusted operating margin; and adjusted income, net of tax.
The Company presents these non-GAAP measures to provide investors with additional information to analyze the Company's performance from period to period. Management also uses these measures to assess performance for incentive compensation purposes and to allocate resources in managing the Company's businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP.
Adjusted Operating Income (Loss) and Adjusted Operating Margin
Adjusted operating income (loss) is calculated by excluding the impact of certain noteworthy items from the Company's GAAP operating income or loss. The following tables identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income or (loss), on a consolidated and segment basis, for the twelve months ended
Risk & |
Consulting |
Corporate/ |
Total | |||||||||||
Twelve Months Ended December 31, 2014 | ||||||||||||||
Operating income (loss) | $ | 1,509 | $ | 996 | $ | (204) | $ | 2,301 | ||||||
Add (Deduct) impact of Noteworthy Items: | ||||||||||||||
Restructuring charges (a) | 5 | 1 | 6 | 12 | ||||||||||
Adjustments to acquisition related accounts (b) | 37 | - | - | 37 | ||||||||||
Other | - | - | (1) | (1) | ||||||||||
Operating income adjustments | 42 | 1 | 5 | 48 | ||||||||||
Adjusted operating income (loss) | $ | 1,551 | $ | 997 | $ | (199) | $ | 2,349 | ||||||
Operating margin | 21.8% | 16.4% | N/A | 17.8% | ||||||||||
Adjusted operating margin | 22.4% | 16.5% | N/A | 18.1% | ||||||||||
Twelve Months Ended December 31, 2013 | ||||||||||||||
Operating income (loss) | $ | 1,421 | $ | 845 | $ | (189) | $ | 2,077 | ||||||
Add (Deduct) impact of Noteworthy Items: | ||||||||||||||
Restructuring charges (a) | 7 | 2 | 13 | 22 | ||||||||||
Adjustments to acquisition related accounts (b) | 31 | 1 | - | 32 | ||||||||||
Other | (1) | (1) | (1) | (3) | ||||||||||
Operating income adjustments | 37 | 2 | 12 | 51 | ||||||||||
Adjusted operating income (loss) | $ | 1,458 | $ | 847 | $ | (177) | $ | 2,128 | ||||||
Operating margin | 21.5% | 14.8% | N/A | 16.9% | ||||||||||
Adjusted operating margin | 22.1% | 14.9% | N/A | 17.4% | ||||||||||
(a) Primarily severance, future rent under non-cancellable leases, and integration costs related to recent acquisitions. |
(b) Primarily includes the change in fair value as measured each quarter of contingent consideration related to acquisitions. |
Marsh & McLennan Companies, Inc. |
Non-GAAP Measures |
Three and Twelve Months Ended December 31 |
(Millions) (Unaudited) |
Adjusted income, net of tax
Adjusted income, net of tax is calculated as: the Company's GAAP income from continuing operations, adjusted to reflect (i) the after-tax impact of the operating income adjustments set forth in the preceding table and (ii) for 2014, due to its significance, the cost of extinguishment of debt of
Reconciliation of the Impact of Non-GAAP Measures on diluted earnings per share - | |||||||||||||||||||||||||
Three Months Ended December 31, |
Three Months Ended December 31, | ||||||||||||||||||||||||
Amount |
Diluted |
Amount |
Diluted | ||||||||||||||||||||||
Income from continuing operations | $ | 269 | $ | 307 | |||||||||||||||||||||
Less: Non-controlling interest, net of tax | 5 | 4 | |||||||||||||||||||||||
Subtotal | $ | 264 | $ | 0.48 | $ | 303 | $ | 0.54 | |||||||||||||||||
Operating income adjustments | $ | 17 | $ | 20 | |||||||||||||||||||||
Adjustment for cost of extinguishment of debt | 137 | - | |||||||||||||||||||||||
Impact of income taxes |
(55) |
|
(7) |
|
|||||||||||||||||||||
99 | 0.18 | 13 | 0.03 | ||||||||||||||||||||||
Adjusted income, net of tax | $ | 363 | $ | 0.66 | $ | 316 | $ | 0.57 | |||||||||||||||||
Twelve Months Ended December 31, |
Twelve Months Ended December 31, | |||||||||||||||||||||
Amount |
Diluted |
Amount |
Diluted | |||||||||||||||||||
Income from continuing operations | $ | 1,471 | $ | 1,379 | ||||||||||||||||||
Less: Non-controlling interest, net of tax | 32 | 28 | ||||||||||||||||||||
Subtotal | $ | 1,439 | $ | 2.61 | $ | 1,351 | $ | 2.42 | ||||||||||||||
Operating income adjustments | $ | 48 | $ | 51 | ||||||||||||||||||
Adjustment for cost of extinguishment of debt | 137 | - | ||||||||||||||||||||
Impact of income taxes |
(66) |
|
(18) |
|
||||||||||||||||||
119 | 0.21 | 33 | 0.06 | |||||||||||||||||||
Adjusted income, net of tax | $ | 1,558 | $ | 2.82 | $ | 1,384 | $ | 2.48 | ||||||||||||||
Marsh & McLennan Companies, Inc. | |||||||||||||||
Three Months Ended |
Twelve Months Ended | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Depreciation and amortization expense | $ | 77 | $ | 73 | $ | 302 | $ | 286 | |||||||
Identified intangible amortization expense | $ | 22 | $ | 19 | $ | 86 | $ | 72 | |||||||
Stock option expense | $ | 3 | $ | 3 | $ | 17 | $ | 18 | |||||||
Capital expenditures | $ | 83 | $ | 113 | $ | 368 | $ | 401 | |||||||
Marsh & McLennan Companies, Inc. | ||||||||||
December 31, |
December 31, |
|||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 1,958 |
$ |
2,303 |
||||||
Net receivables | 3,377 |
3,310 |
||||||||
Other current assets | 686 |
687 |
||||||||
Total current assets | 6,021 |
6,300 |
||||||||
Goodwill and intangible assets | 7,933 |
7,365 |
||||||||
Fixed assets, net | 809 |
828 |
||||||||
Pension related assets | 967 |
979 |
||||||||
Deferred tax assets | 910 |
626 |
||||||||
Other assets | 1,200 |
882 |
||||||||
TOTAL ASSETS | $ | 17,840 |
$ |
16,980 |
||||||
LIABILITIES AND EQUITY | ||||||||||
Current liabilities: | ||||||||||
Short-term debt | $ | 11 |
$ |
334 |
||||||
Accounts payable and accrued liabilities | 1,883 |
1,861 |
||||||||
Accrued compensation and employee benefits | 1,633 |
1,466 |
||||||||
Accrued income taxes | 178 |
148 |
||||||||
Total current liabilities | 3,705 |
3,809 |
||||||||
Fiduciary liabilities | 4,552 |
4,234 |
||||||||
Less - cash and investments held in a fiduciary capacity | (4,552 | ) |
(4,234 |
) | ||||||
- |
- |
| ||||||||
Long-term debt | 3,376 |
2,621 |
||||||||
Pension, post-retirement and post-employment benefits | 2,244 |
1,150 |
||||||||
Liabilities for errors and omissions | 341 |
373 |
||||||||
Other liabilities | 1,041 |
1,052 |
||||||||
Total equity | 7,133 |
7,975 |
||||||||
TOTAL LIABILITIES AND EQUITY | $ | 17,840 |
$ |
16,980 |
||||||
Source:
Marsh & McLennan Companies
Media:
Edward L. Dandridge, +1-212-345-9751
ed.dandridge@mmc.com
or
Investors:
Keith Walsh, +1-212-345-0057
keith.walsh@mmc.com