Marsh & McLennan (MMC) Reports In Line Earnings In Q2

Marsh & McLennan Companies, Inc. (NYSE:MMC) reported second-quarter 2016 operating earnings per share of 91 cents, in line with the Zacks Consensus Estimate. Earnings improved 13.8% year over year.

The quarter witnessed margin expansion in both Risk and Insurance Services and Consulting segments.

Quarterly Details

Marsh & McLennan’s consolidated revenues were $3.4 billion, up 5% year over year. Revenues surpassed the Zacks Consensus Estimate of $3.3 billion.

Total operating expenses of $2.7 billion increased nearly 2.1% year over year due to higher compensation and benefits and other operating expenses.

Adjusted operating margin at Marsh & McLennan expanded 190 basis points year over year to 21.8%.

Segment Results

Revenues from the Risk and Insurance Services segment were $1.9 billion, up 2% on an underlying basis. However, adjusted operating income increased 5% year over year to $1 billion.

Marsh's revenues came in at $1.6 billion, up 2% on an underlying basis. Underlying revenues grew 4% year over year in international operations, reflecting 11% growth in Latin America, 2% in Asia Pacific and 3% in EMEA (Europe, the Middle East and Africa). Revenues were flat year over year in the U.S.-Canada region.

Guy Carpenter's revenues came in at $285 million, up 3% year over year on an underlying basis.

The Consulting segment's revenues increased 5% year over year on an underlying basis to $1.5 billion. Additionally, adjusted operating income increased 7% year over year to $526 million.

Mercer's revenues were $1.1 billion, up 4% on an underlying basis. The segment's Retirement operations generated revenues of $314 million, up 2% on an underlying basis. Additionally, underlying revenues grew 5% to $410 million for Health, 6% to $145 million for Talent and 6% to $210 million for Investments, all on a year-over-year basis. Oliver Wyman’s revenues increased 5% on an underlying basis to $460 million in the reported quarter.

Financial Update

Marsh & McLennan exited the quarter with cash and cash equivalents of $0.9 billion, down 29% from $1.4 billion at year-end 2015.

As of Jun 30, 2016, Marsh & McLennan’s total assets were $18.1 billion, down 0.5% from $18.2 billion at the end of 2015. Total equity was $6.7 billion, up 1.5% from $6.6 billion at year-end 2015 end.

Capital Deployment

Marsh & McLennan bought back 3.5 million shares for $225 million during the quarter, taking the six-month tally to 7 million shares bought for $425 million.

In May, the board of directors hiked the quarterly dividend by 10% to 34 cents per share. The dividend will be paid on Aug 15, 2016.

Zacks Rank

Marsh & McLennan carries a Zacks Rank #3 (Hold).

MARSH &MCLENNAN Price, Consensus and EPS Surprise

MARSH &MCLENNAN Price, Consensus and EPS Surprise | MARSH &MCLENNAN Quote

Performance of Other Insurers

The bottom line at The Travelers Companies, Inc. (NYSE:TRV) and First American Financial Corporation (NYSE:FAF) beat their respective Zacks Consensus Estimate, while earnings of RLI Corp. (NYSE:RLI) missed the same.

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