Marsh & McLennan Cos. Inc. (MMC) reported fourth-quarter 2013 operating earnings per share of 57 cents. The results were a penny higher thanthe Zacks Consensus Estimate of 56 cents a nickel higher than the year-ago quarter earnings of 52 cents.
Operating net income, which excludes one-time items in both the comparable periods, increased 9.7% year over year to $316 million. On a reported basis, Marsh & McLennan recorded net income of $303 million or 54 cents per share, up from $261 million or 47 cents per share in the prior-year quarter.
Marsh & McLennan posted improved results led by modest revenue growth across its insurance and consulting businesses along with strict expense control, which also drove the operating margin. These were, however, partially offset by higher tax expense.
Consolidated revenues were $3.12 billion, up 3.8% year over year and 4% on an underlying basis. However, top line marginally missed the Zacks Consensus Estimate of $3.14 billion.
Meanwhile, total operating expenses inched up 1.2% year over year to $2.63 billion. This was on account of other operating expenses remaining flat at $793 million, and an increase of 1.7% in compensation and benefits to $1.83 billion.
Consequently, adjusted operating margin improved to 16.3% from 15.0% in the year-ago period. However, tax expenses escalated 24.8% to $131 million.
Segment Results
Revenues for the Risk and Insurance Services segment were $1.63 billion, up 4% on both year-over-year and underlying basis. Moreover, adjusted operating income scaled up 9% year over year to $327 million, reflecting improved performance at Marsh and Guy Carpenter.
Marsh's revenues came in at $1.41 billion, up 4% on both year-over-year and underlying basis, driven by strong new businesses and growth across the different geographical regions. Underlying revenues grew 4% in international operations reflecting 13% growth in Latin America, 4% in Asia Pacific and 3% each in both EMEA and U.S.-Canada region.
Guy Carpenter's revenues during the reported quarter were $209 million, up 6% on both year-over-year and underlying basis.
The Consulting segment's revenues rose 4% on both year-over-year and underlying basis to $1.49 billion. Additionally, adjusted operating income grew 16% year over year to $222 million.
Mercer's revenues stood at $1.08 billion, up 2% year over year and 4% on underlying basis. Mercer's retirement operations generated revenues of $338 million, with nil growth on an underlying basis.
Additionally, Health revenues grew 6% to $376 million, while revenues from Talent dipped 3% to $171 million. Revenues from Investments increased 10% to $199 million, on an underlying basis.
Moreover, Oliver Wyman’s revenues increased 8% year over year and 5% on an underlying basis to $408 million in the reported quarter.
Full-Year 2013 Highlights
For full-year 2013, Marsh & McLennan’s operating earnings per share stood at $2.48, a penny above the Zacks Consensus Estimate of $2.47. However, earnings were noticeably higher than $2.15 a share recorded in 2012.
Operating net income jumped 16.3% year over year to $1.38 billion. On a reported basis, net income grew to $1.35 billion or $2.42 per share in 2013, up from $1.18 billion or $2.13 per share in 2012.
Consolidated revenues grossed $12.26 billion, up 2.8% year over year and 3% on an underlying basis. However, it slightly lagged the Zacks Consensus Estimate of $12.29 billion. Total operating expenses inched up 0.9% year over year to $10.2 billion, while adjusted operating margin improved to 17.4% in 2013 from 15.6% in 2012.
Financial Update
During the reported quarter, Marsh & McLennan’s total investment income, including private equity investments, surged to $11 million from $4 million recorded in the year-ago quarter.
Meanwhile, capital expenditure escalated 59.2% year over year to $131 million in the reported quarter, while it rose 25.3% to $402 million in 2013.
Marsh & McLennan exited 2013 with cash and cash equivalents of $2.3 billion, at par with the 2012-end level. Long-term debt dipped to $2.62 billion from $2.66 billion at the end of 2012.
As of Dec 31, 2013, Marsh & McLennan’s total assets appreciated to $16.93 billion, while total equity increased to $7.98 billion from 2012-end.
Share Repurchase Update
Marsh & McLennan bought back 3.2 million shares for $150 million during the reported quarter, while 13.2 million shares worth $550 million were repurchased in 2013.
In Aug 2013, the board sanctioned the expansion of the share buyback program to $1.0 billion, of which approximately $562 million worth of stock remains available for repurchase at the end of Dec 2013.
Dividend Update
On Jan 15, 2014, the board of Marsh & McLennan declared a quarterly dividend of 25 cents a share, payable on Feb 18, 2014, to shareholders of record as on Jan 29.
On Nov 15, 2013, Marsh & McLennan paid a quarterly dividend of 25 cents a share to shareholders of record as on Oct 11, 2013. In Aug 2013, Marsh & McLennan hiked the quarterly common stock dividend by 9% to 25 cents per share from the prior 23 cents.
Others
Marsh & McLennan currently carries a Zacks Rank #3 (Hold). Other better-ranked insurers include RLI Corp. (RLI), White Mountains Insurance Group Ltd. (WTM) and OneBeacon Insurance Group Ltd. (OB), each sporting a Zacks Rank #1 (Strong Buy).
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