Marsh & McLennan (MMC) Beats Q1 Earnings On Higher Revenues

Marsh & McLennan Companies, Inc. ( (NYSE:MMC) reported first-quarter 2017 operating earnings per share of $1.08, which surpassed the Zacks Consensus Estimate of 99 cents. Earnings improved 17.4% year over year due to a benefit from the required change in accounting for share-based awards.

Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 9% to $802 million in the first quarter.

Marsh & McLennan’s consolidated revenues were $3.5 billion, up 5% year over year on an underlying basis. Revenues also surpassed the Zacks Consensus Estimate by 1.1%.

Total operating expenses of $2.7 billion increased 35% year over year.

Segment Results

Revenues from the Risk and Insurance Services segment were $2 billion, up 4% year over year on an underlying basis. Adjusted operating income also grew 10% to $600 million from the last-year quarter.

A unit within this segment – Marsh – reported revenues of $1.6 billion, up 5% year over year on an underlying basis. Underlying revenues grew 5% year over year in international operations due to growth of 7% in Latin America, 11% in the Asia Pacific, 35% in EMEA (Europe, the Middle East and Africa) and 5% in the U.S.-Canada region.

Another unit under this segment, Guy Carpenter, displayed revenue growth of 4% year over year on an underlying basis to $385 million.

The Consulting segment's revenues increased 3% year over year on an underlying basis to $1.56 billion. Additionally, adjusted operating income inched up 3% year over year to $245 million.

A unit within this segment – Mercer – reported revenues of $1.1 billion, up 3% year over year on an underlying basis. Mercer’s wealth business witnessed revenues of $520 million, up 3% year over year on an underlying basis.

Another unit, Oliver Wyman Group, reported revenues of $449 million, up 4% year over year on an underlying basis.

Financial Update

Marsh & McLennan exited the quarter with cash and cash equivalents of $930 million, down 9.4% from year-end 2016.

As of Mar 31, 2016, Marsh & McLennan’s total assets were $19 billion, up 4.3% year over year.

Total equity was $6.6 billion, up 10% from year-end 2016.

Capital Deployment

In Jan 2017, Marsh & McLennan issued $500 million of 2.75% senior notes due in 2022 and $500 million 4.35% senior notes due in 2047. The company intends to utilize the net proceeds for general corporate purposes, including repayment of $250 million 2.30% senior notes on Apr 1, 2017.

Marsh & McLennan repurchased approximately 2.7 million shares of its common stock for $200 million in the first quarter.

Marsh & McLennan Companies, Inc. Price, Consensus and EPS Surprise

Business Update

During the first quarter, Marsh & McLennan Agency (“MMA”), another unit of Marsh & McLennan, completed the acquisition of J. Smith Lanier & Co. (“JSL”), one of the nation’s largest privately held insurance brokers. JSL has annual revenue of approximately $130 million.

Zacks Rank and Performance of Other Insurers

Marsh & McLennan presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other players from the same space that have reported their first-quarter earnings so far, the bottom line at The Progressive Corporation (NYSE:PGR) , The Travelers Companies, Inc. (NYSE:TRV) and RLI Corp. (NYSE:RLI) missed their respective Zacks Consensus Estimate.

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