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Marsh & McLennan Companies Reports Third Quarter 2017 Results

Insurance Industry Company Results and Financials News: Marsh & McLennan Companies, Inc. has reported financial results for the third quarter ended September 30, 2017.

Dan Glaser, President and CEO, said, "In the third quarter, on a consolidated basis, we generated solid underlying revenue growth of 3% and adjusted operating income growth of 11%. Underlying revenue growth was 3% in Risk and Insurance Services and 2% in Consulting, with margin expansion in both segments on an adjusted basis. Earnings per share increased 4% to $0.76, while adjusted EPS rose 14% to $0.79."

"Through the first nine months we have generated underlying revenue growth in all four operating companies and solid earnings growth. With strong performance through the first three quarters of the year, we believe the Company is well positioned to deliver underlying revenue growth, margin expansion in both segments, and strong earnings per share growth for the full year," concluded Mr. Glaser.

Consolidated Results

Consolidated revenue in the third quarter of 2017 was $3.3 billion, an increase of 7% compared with the third quarter of 2016. On an underlying basis, revenue increased 3%. Operating income was $597 million, an increase of 4% from the prior year period. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, increased 11% to $624 million. Net income attributable to the Company was $393 million. Net income per share attributable to the Company rose 4% to $0.76 from $0.73 last year. Adjusted earnings per share was $0.79, up 14%.

For the nine months ended September 30, 2017, consolidated revenue was $10.3 billion, an increase of 5%, or 3% on an underlying basis. Net income attributable to the Company increased 10% to $1.5 billion. Earnings per share rose 11% to $2.81. Adjusted earnings per share increased 13% to $2.87 compared with $2.53 for the comparable period in 2016.

Risk & Insurance Services

Risk & Insurance Services revenue was $1.8 billion in the third quarter of 2017, an increase of 8%, or 3% on an underlying basis. Operating income of $314 million was essentially flat with the prior year and adjusted operating income rose 12% to $337 million. For the nine months ended September 30, 2017, revenue was $5.7 billion, an increase of 6%, or 3% on an underlying basis. Operating income rose 9% to $1.5 billion and adjusted operating income rose 10% to $1.5 billion.

Marsh's revenue in the third quarter was $1.5 billion, an increase of 9%, or 3% on an underlying basis. In U.S./Canada, underlying revenue rose 3%. International operations produced underlying revenue growth of 2%, reflecting underlying growth of 7% in Asia Pacific and 9% in Latin America, partially offset by a decline of 2% in EMEA. For the nine months ended September 30, 2017, Marsh’s underlying revenue growth was 3%.

Guy Carpenter's revenue in the third quarter was $270 million, an increase of 4% on an underlying basis for both the third quarter and the nine months.

Consulting

Consulting revenue in the third quarter was $1.6 billion, an increase of 5%, or 2% on an underlying basis. Operating income increased 6% to $329 million and adjusted operating income increased 7% to $330 million. For the nine months of 2017, revenue was $4.7 billion, an increase of 4%, or 3% on an underlying basis. Operating income of $853 million increased 2%, and adjusted operating income increased 5% to $873 million compared to $835 million in 2016.

Mercer's revenue was $1.1 billion in the third quarter, an increase of 4%, or flat on an underlying basis. Wealth, with revenue of $530 million, was down 1% on an underlying basis. Within Wealth, Investment Management & Related Services increased 10%, while Defined Benefit Consulting & Administration decreased 5%. Health revenue of $401 million was flat on an underlying basis, and Career revenue of $218 million increased 2% on an underlying basis. For the nine months ended September 30, 2017, Mercer’s revenue was $3.3 billion, an increase of 3%, or 2% on an underlying basis.

Oliver Wyman Group’s revenue was $438 million in the third quarter, an increase of 7% on an underlying basis. For the nine months Oliver Wyman Group’s revenue increased to $1.4 billion, up 6% on an underlying basis.

Other Items

The effective tax rate in the third quarter of 2017 was 26.2% compared with 26.8% in the prior year period. For the nine months of 2017, the effective tax rate was 25.9% compared with 28.4% for the prior year period. The tax rate in 2017 includes the impact of the required change in accounting for equity awards.

The Company repurchased 2.6 million shares of its common stock for $200 million in the third quarter. Through nine months, the Company has repurchased 8.0 million shares for $600 million.

During the quarter, Marsh acquired International Catastrophe Insurance Managers, LLC (ICAT), a managing general agent providing property catastrophe insurance to businesses and homeowners across the United States.

Conference Call

A conference call to discuss third quarter 2017 results will be held today at 8:30 a.m. Eastern time. To participate in the teleconference, please dial +1 888 394 8218. Callers from outside the United States should dial +1 719 325 4746. The access code for both numbers is 1823541. The live audio webcast may be accessed at mmc.com. A replay of the webcast will be available approximately two hours after the event.

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