Marsh & McLennan Companies Reports Fourth Q...

Revenue Growth Fuels Strong Earnings Growth

Fourth Quarter EPS Increases to $.37

Adjusted EPS Increases to $.41

Marsh & McLennan Companies Reports Fourth Quarter and Full-Year 2010 Results

Marsh & McLennan

Marsh & McLennan Companies, Inc. (NYSE: MMC) today reported financial results for the fourth quarter and year ended December 31, 2010.

Brian Duperreault, President and CEO, said: “We are very pleased with our Company’s performance. We achieved growth in both revenue and operating income in every one of our four operating companies, not only in the quarter; but for the full year.

“Marsh’s strong fourth quarter results capped a year of excellent performance. Robust new business development contributed to underlying revenue growth across all geographies. Guy Carpenter also had a very successful year. Both underlying revenue and profitability increased, supported by continued new business development.

“Our Consulting segment produced solid revenue growth in 2010 as the effects of the recession diminished. Mercer’s revenue growth accelerated in the second half of the year. Oliver Wyman produced excellent growth in revenue and profitability.

“The success we achieved in 2010 gives us a solid foundation on which to build. With excellent operating company leadership, continued expense discipline, and the commitment to achieve strong earnings growth, we are well-positioned for the future,” concluded Mr. Duperreault.

Consolidated Results

Consolidated revenue in the fourth quarter of 2010 was $2.8 billion, an increase of 9 percent from the fourth quarter of 2009, or 6 percent on an underlying basis. Underlying revenue measures the change in revenue before the impact of acquisitions and dispositions, using consistent currency exchange rates. For 2010, consolidated revenue was $10.6 billion, an increase of 7 percent from $9.8 billion in 2009, or 3 percent on an underlying basis.

In the fourth quarter of 2010, net income rose to $203 million, or $.37 per share, compared with net income of $23 million, or $.04 per share, in 2009. Earnings per share on an adjusted basis, which excludes noteworthy items as presented in the attached supplemental schedules, increased 8 percent to $.41, compared with $.38. Adjusted operating income in the fourth quarter rose 22 percent to $379 million compared with prior year.

For the full year, net income increased to $855 million from $227 million in 2009, and earnings per share increased to $1.55 from $.42 in the prior year. Adjusted earnings per share increased to $1.64. Adjusted operating income grew 14 percent to $1.5 billion for 2010.

Risk and Insurance Services

Risk and Insurance Services segment revenue increased 11 percent to $1.5 billion in the fourth quarter of 2010, or 5 percent on an underlying basis. Operating income was $225 million, compared with $127 million in the fourth quarter of 2009. Adjusted operating income in the fourth quarter of 2010 increased 22 percent to $259 million from $213 million in 2009. For the year, segment revenue rose 9 percent to $5.8 billion, or 2 percent on an underlying basis. Operating income grew 22 percent to $972 million, compared with $796 million in 2009; adjusted operating income increased 10 percent to $1.1 billion in 2010.

Marsh’s revenue in the fourth quarter of 2010 was $1.3 billion, an increase of 12 percent, or 6 percent on an underlying basis. International operations underlying revenue increased 8 percent in the fourth quarter of 2010, reflecting 10 percent growth in both Latin America and Asia Pacific and 8 percent growth in EMEA. In the United States/Canada region, underlying revenue grew 3 percent. For the year, Marsh reported revenue of $4.7 billion, an increase of 10 percent, or 2 percent on an underlying basis.

Guy Carpenter’s fourth quarter 2010 revenue increased 2 percent to $184 million, or 3 percent on an underlying basis. For the year, revenue increased to $975 million from $911 million, an increase of 7 percent, or 2 percent on an underlying basis.

Consulting

Consulting segment revenue increased 6 percent to $1.3 billion in the fourth quarter of 2010, or 6 percent on an underlying basis. Operating income was $150 million in the fourth quarter of 2010, up from $131 million in the prior year. Adjusted operating income rose 17 percent to $166 million in the fourth quarter of 2010, compared with $142 million in the prior year. For 2010, segment revenue was $4.8 billion, an increase of 5 percent, or 3 percent on an underlying basis.

Mercer’s revenue increased 6 percent to $910 million in the fourth quarter of 2010, an increase of 5 percent on an underlying basis. Mercer’s consulting operations produced revenue of $633 million, an increase of 3 percent on an underlying basis; outsourcing, with revenue of $180 million, increased 5 percent; and investment consulting and management, with revenue of $97 million, grew 14 percent. Oliver Wyman’s revenue increased 6 percent to $399 million in the fourth quarter of 2010, or 8 percent on an underlying basis.

Other Items

Investment income, primarily mark-to-market gains in private equity investments, was $19 million in the fourth quarter of 2010 compared with $23 million in 2009.

At the end of 2010, cash and cash equivalents was $1.9 billion. Net debt, which is total debt less cash and cash equivalents, was $1.1 billion, compared with $1.9 billion at the end of 2009. The previously announced $500 million share repurchase program was initiated in the fourth quarter of 2010, during which the company repurchased 3.4 million shares for $86 million.

Marsh continued to build its Marsh & McLennan Agency platform in the fourth quarter, acquiring Trion with $74 million in annual revenue and Strategic Benefit Solutions. In January, Marsh & McLennan Agency acquired RJF Agencies, one of the largest independent insurance agencies in the upper Midwest.

Also in January, Mercer completed the acquisition of Hammond Associates, which significantly strengthened Mercer’s U.S. investment consulting position in endowments and foundations.

Conference Call

A conference call to discuss fourth quarter and full-year 2010 results will be held today at 8:30 a.m. Eastern Time. To participate in the teleconference, please dial 877 723 9519. Callers from outside the United States should dial 719 325 4827. The access code for both numbers is 3072574. The live audio webcast may be accessed at www.mmc.com. A replay of the webcast will be available approximately two hours after the event at the same web address.

Marsh & McLennan Companies is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. It is the parent company of a number of the world’s leading risk experts and specialty consultants, including Marsh, the insurance broker and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. With 51,000 employees worldwide and annual revenue exceeding $10 billion, Marsh & McLennan Companies provides analysis, advice and transactional capabilities to clients in more than 100 countries. Its stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. Marsh & McLennan Companies’ website address is www.mmc.com.

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; market and industry conditions; 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 and the outcome of cost-saving or restructuring initiatives; dividend policy; the expected impact of acquisitions and dispositions; pension obligations; 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:

  • our exposure to potential liabilities arising from errors and omissions claims against us, particularly in our Marsh and Mercer businesses;
  • our ability to make strategic acquisitions and dispositions and to integrate, and realize expected synergies, savings or strategic benefits from the businesses we acquire;
  • changes in the funded status of our global defined benefit pension plans and the impact of any increased pension funding resulting from those changes;
  • 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;
  • our exposure to potential criminal sanctions or civil remedies if we fail to comply with foreign and U.S. laws and regulations that are applicable to our international operations, including import and export requirements, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and the pending Anti-Bribery law in the UK, local laws prohibiting corrupt payments to government officials, as well as various trade sanctions laws;
  • the impact on our net income caused by fluctuations in foreign currency exchange rates;
  • the extent to which we retain existing clients and attract new business, and our ability to incentivize and retain key employees;
  • the impact of competition, including with respect to pricing;
  • the impact of any regional, national or global political, economic, regulatory or market conditions on our results of operations and financial condition;
  • our ability to successfully recover should we experience a disaster or other business continuity problem;
  • 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 and ASC Topic No. 350 (“Intangibles – Goodwill and Other”), including the effect of any subsequent adjustments to the estimates we use in applying these accounting standards.

The factors identified above are not exhaustive. Marsh & McLennan Companies and its subsidiaries operate in a dynamic business environment in which new risks may emerge frequently. Accordingly, we caution readers not to place undue reliance on the above forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made. Further information concerning Marsh & McLennan Companies and its businesses, including information about factors that could materially affect our results of operations and financial condition, is contained in the Company’s filings with the Securities and Exchange Commission, including the “Risk Factors” section of our most recently filed Annual Report on Form 10-K.

 

Marsh & McLennan Companies, Inc.

Consolidated Statements of Income

(In millions, except per share figures)

(Unaudited)

           
Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010     2009 2010     2009
Revenue $ 2,785   $ 2,564   $ 10,550   $ 9,831  
 
Expense:
Compensation and Benefits 1,690 1,629 6,465 6,182
Other Operating Expenses   770     963     3,146     2,871  
Total Expense   2,460     2,592     9,611     9,053  
 
Operating Income (Loss) 325 (28 ) 939 778
 
Interest Income 7 4 20 17
 
Interest Expense (53 ) (61 ) (233 ) (241 )
 
Investment Income (Loss)   19     23     43     (2 )
 
Income (Loss) Before Income Taxes 298 (62 ) 769 552
 
Income Tax Expense (Credit)   106     (57 )   204     21  
 
Income (Loss) from Continuing Operations 192 (5 ) 565 531
 
Discontinued Operations, Net of Tax   14     30     306     (290 )
 
Net Income Before Non-Controlling Interests $ 206 $ 25 $ 871 $ 241
 
Less: Net Income Attributable to Non-Controlling Interests   3     2     16     14  
 
Net Income Attributable to MMC $ 203   $ 23   $ 855   $ 227  
 

Basic Net Income (Loss) Per Share
          – Continuing Operations

$

0.35

  $ (0.01 ) $ 1.01   $ 0.97  

  – Net Income, Attributable to MMC

$ 0.37   $ 0.04   $ 1.56   $ 0.43  
 

Diluted Net Income (Loss) Per Share
          – Continuing Operations

$

0.34

  $ (0.01 ) $ 1.00   $ 0.96  

  – Net Income, Attributable to MMC

$ 0.37   $ 0.04   $ 1.55   $ 0.42  
 
Average Number of Shares Outstanding – Basic   542     528     540     522  

                                                             – Diluted

  549     531     544     524  
Shares Outstanding at 12/31   541     530     541     530  
 

Marsh & McLennan Companies, Inc.

Supplemental Information – Revenue Analysis

Three Months Ended

(Millions) (Unaudited)

 
                 

 

Components of Revenue Change*
Three Months Ended

December 31,

 

% Change
GAAP

Currency     Acquisitions/

Dispositions

    Underlying
  2010         2009   Revenue Impact     Impact     Revenue
Risk and Insurance Services
Marsh $ 1,290 $ 1,151 12% - 7% 6%
Guy Carpenter   184     180   2% - - 3%
Subtotal 1,474 1,331 11% - 6% 5%
Fiduciary Interest Income   12     12   0% 1% 3% (4)%
Total Risk and Insurance Services   1,486     1,343   11% - 6% 5%
 
Consulting
Mercer 910 861 6% - 1% 5%
Oliver Wyman Group   399     378   6% (2)% - 8%
Total Consulting   1,309     1,239   6% (1)% 1% 6%
 
Corporate / Eliminations   (10 )   (18 )
 
Total Revenue $ 2,785   $ 2,564   9% (1)% 3% 6%

Revenue Details
The following table provides more detailed revenue information for certain of the components presented above: The following table provides more detailed revenue information for certain of the components presented above:

     

 

        Components of Revenue Change*
Three Months Ended

December 31,

 

% Change
GAAP

Currency     Acquisitions/

Dispositions

    Underlying

   2010   

   

  2009  

Revenue Impact     Impact     Revenue
Marsh:
EMEA $ 418 $ 373 12% (4)% 8% 8%
Asia Pacific 140 115 22% 6% 7% 10%
Latin America   107   95 12% 2% - 10%
Total International 665 583 14% (1)% 7% 8%
U.S. / Canada   625   568 10% 1% 7% 3%
Total Marsh $ 1,290 $ 1,151 12% - 7% 6%
 
Mercer:
Retirement $ 258 $ 280 (8)% (2)% - (6)%
Health and Benefits 224 209 7% (1)% - 8%
Rewards, Talent & Communications   151   120 25% - 9% 15%
Total Mercer Consulting 633 609 4% (1)% 2% 3%
Outsourcing 180 167 9% 2% 1% 5%
Investment Consulting & Management   97   85 15% 1% - 14%
Total Mercer $ 910 $ 861 6% - 1% 5%
 
Notes
Underlying revenue measures the change in revenue, before the impact of acquisitions and dispositions, including transfers among business segments, using consistent currency exchange rates.
 
* Components of revenue change may not add due to rounding.
                 

Marsh & McLennan Companies, Inc.

Supplemental Information – Revenue Analysis

Twelve Months Ended

(Millions) (Unaudited)

 

 

Components of Revenue Change*
Twelve Months Ended

December 31,

 

% Change
GAAP

Currency     Acquisitions/

Dispositions

    Underlying
2010     2009 Revenue Impact Impact Revenue
Risk and Insurance Services
Marsh $ 4,744 $ 4,319 10% 1% 6% 2%
Guy Carpenter   975     911   7% 1% 4% 2%
Subtotal 5,719 5,230 9% 1% 6% 2%
Fiduciary Interest Income   45     54   (16)% 3% 2% (21)%
Total Risk and Insurance Services   5,764     5,284   9% 1% 6% 2%
 
Consulting
Mercer 3,478 3,327 5% 2% 1% 2%
Oliver Wyman Group   1,357     1,282   6% (1)% - 7%
Total Consulting   4,835     4,609   5% 1% - 3%
 
Corporate / Eliminations   (49 )   (62 )
 
Total Revenue $ 10,550   $ 9,831   7% 1% 3% 3%

Revenue Details
The following table provides more detailed revenue information for certain of the components presented above: 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
GAAP

Currency     Acquisitions/

Dispositions

    Underlying

 2010 

   

 2009 

Revenue Impact     Impact     Revenue
Marsh:
EMEA $ 1,674 $ 1,555 8% - 5% 3%
Asia Pacific 503 419 20% 8% 5% 7%
Latin America   298   267 11% 4% - 8%
Total International 2,475 2,241 10% 2% 5% 4%
U.S. / Canada   2,269   2,078 9% 1% 7% 1%
Total Marsh $ 4,744 $ 4,319 10% 1% 6% 2%
 
Mercer:
Retirement $ 1,053 $ 1,091 (4)% 1% - (4)%
Health and Benefits 900 857 5% - - 5%
Rewards, Talent & Communications   488   456 7% 1% 4% 2%
Mercer Consulting 2,441 2,404 2% 1% 1% -
Outsourcing 671 620 8% 4% 1% 3%
Investment Consulting & Management   366   303 21% 4% - 16%
Total Mercer $ 3,478 $ 3,327 5% 2% 1% 2%
 
Notes
Underlying revenue measures the change in revenue, before the impact of acquisitions and dispositions, including transfers among business segments, using consistent currency exchange rates.
 
* Components of revenue change may not add due to rounding.
 

Marsh & McLennan Companies, Inc.

Non-GAAP Measures

Three Months Ended December 31

(Millions) (Unaudited)

 
MMC 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; adjusted operating margin; and adjusted income, net of tax.
 
MMC 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 MMC’s businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that MMC reports in accordance with GAAP. MMC’s non-GAAP measures reflect subjective determinations by management, and may differ from similarly titled non-GAAP measures presented by other companies.
 
Adjusted Operating Income (Loss) and Adjusted Operating Margin
Adjusted operating income (loss) is calculated by excluding the impact of certain noteworthy items from MMC’s GAAP operating income (loss). The following tables identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income (loss), on a consolidated and segment basis, for the three months ended December 31, 2010 and 2009. The following tables also present adjusted operating margin, which is calculated by dividing adjusted operating income by consolidated or segment GAAP revenue.
                   

Risk &
Insurance Services

Consulting Corporate/

Other

   Total   

Three Months Ended December 31, 2010

Operating income (loss) $ 225   $ 150   $ (50 ) $ 325  
Add (deduct) impact of noteworthy items:
Restructuring Charges (a) 32 16 6 54
Settlement, Legal and Regulatory (b) 2 - - 2
Other (c)   -     -     (2 )   (2 )
Operating income adjustments   34     16     4     54  
 
Adjusted operating income (loss) $ 259   $ 166   $ (46 ) $ 379  
 
Operating margin   15.1 %   11.5 %   N/A     11.7 %
Adjusted operating margin   17.4 %   12.7 %   N/A     13.6 %
 

Three Months Ended December 31, 2009

Operating income (loss) $ 127   $ 131   $ (286 ) $ (28 )
Add (deduct) impact of noteworthy items:
Restructuring Charges (a) 63 11 14 88
Settlement, Legal and Regulatory

21

 (b)

–

230

 (d)

251
Accelerated Amortization 2 – – 2
Other   –     –     (2 )   (2 )
Operating income adjustments   86     11     242     339  
 
Adjusted operating income (loss) $ 213   $ 142   $ (44 ) $ 311  
 
Operating margin   9.5 %   10.6 %   N/A     N/A  
Adjusted operating margin   15.9 %   11.5 %   N/A     12.1 %
 
(a) Primarily includes severance from restructuring activities and related charges, costs for future rent and other real estate costs, and fees and consulting costs related to recent acquisitions and cost reduction activities. The fourth quarter of 2010 amounts include costs of $29 million primarily related to severance and related charges pertaining to recent acquisitions.
 
(b) Reflects settlements of and legal fees arising out of the civil complaint relating to market service agreements and other issues filed against MMC and Marsh by the New York State Attorney General in October 2004 and settled in January 2005 and similar actions initiated by other states, including indemnification of former employees for legal fees.
 
(c) Primarily reflects payments received related to the Corporate Advisory and Restructuring businesses divested in 2008, which was previously included in the former Risk Consulting & Technology segment.
 
(d) Reflects settlement of the securities and ERISA class action lawsuits filed in the U.S. District court for the Southern District of New York, partly offset by $230 million of insurance recoveries.
 

Marsh & McLennan Companies, Inc.

Non-GAAP Measures

Twelve Months Ended December 31

(Millions) (Unaudited)

 
MMC 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; adjusted operating margin; and adjusted income, net of tax.
 
MMC 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 MMC’s businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that MMC reports in accordance with GAAP. MMC’s non-GAAP measures reflect subjective determinations by management, and may differ from similarly titled non-GAAP measures presented by other companies.
 
Adjusted Operating Income (Loss) and Adjusted Operating Margin
Adjusted operating income (loss) is calculated by excluding the impact of certain noteworthy items from MMC’s GAAP operating income (loss). The following tables identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income (loss), on a consolidated and segment basis, for the twelve months ended December 31, 2010 and 2009. The following tables also present adjusted operating margin, which is calculated by dividing adjusted operating income by consolidated or segment GAAP revenue.
       

Risk &
Insurance Services

    Consulting     Corporate/

Other

   

   Total   

Twelve Months Ended December 31, 2010

Operating income (loss) $ 972   $ 129   $ (162 ) $ 939  
Add (deduct) impact of noteworthy items:
Restructuring Charges (a) 102 24 15 141
Alaska Litigation Settlement -

400

 (c)

- 400
Settlement, Legal and Regulatory (b) 10 - - 10
Accelerated Amortization 1 - - 1
Other   (1 )   -     (12 ) (d)   (13 )

Operating income adjustments

  112     424     3     539  
 
Adjusted operating income (loss) $ 1,084   $ 553   $ (159 ) $ 1,478  
 
Operating margin   16.9 %   2.7 %   N/A     8.9 %
Adjusted operating margin   18.8 %   11.4 %   N/A     14.0 %
 

Twelve Months Ended December 31, 2009

Operating income (loss) $ 796   $ 405   $ (423 ) $ 778  
Add (deduct) impact of noteworthy items:
Restructuring Charges (a) 169 42 32 243
Incremental Professional Liability costs –

30

 (e)

– 30
Settlement, Legal and Regulatory

12

 (b)

–

230

 (f)

242
Accelerated Amortization   8     –     1     9  
Operating income adjustments   189     72     263     524  
 
Adjusted operating income (loss) $ 985   $ 477   $ (160 ) $ 1,302  
 
Operating margin   15.1 %   8.8 %   N/A     7.9 %
Adjusted operating margin   18.6 %   10.3 %   N/A     13.2 %
(a) Primarily includes severance from restructuring activities and related charges, costs for future rent and other real estate costs, and fees and consulting costs related to recent acquisitions and cost reduction activities. The twelve months of 2010 amounts include costs of $63 million primarily related to severance and related charges pertaining to recent acquisitions.
(b) Reflects settlements of and legal fees arising out of the civil complaint relating to market service agreements and other issues filed against MMC and Marsh by the New York State Attorney General in October 2004 and settled in January 2005, and similar actions initiated by other states, including indemnification of former employees for legal fees.
(c) Reflects net settlement of litigation brought by the state of Alaska against Mercer. Under the terms of the settlement agreement, Mercer paid $500 million, of which $100 million was covered by insurance.
(d) Primarily reflects $10 million of payments received related to the Corporate Advisory and Restructuring businesses divested in 2008, which was previously included in the former Risk Consulting & Technology segment.
(e) Reflects incremental professional liability costs in the period at Mercer, which are now presented as a noteworthy item solely for the purpose of providing a more meaningful comparison of year-over-year adjusted operating income in the Consulting segment.
(f) Reflects settlement of the securities and ERISA class action lawsuits filed in the U.S. District court for the Southern District of New York, partly offset by $230 million of insurance recoveries.
 

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: MMC’s GAAP income (loss) from continuing operations, adjusted to reflect the after-tax impact of the operating income adjustments set forth in the preceding table. The related adjusted diluted earnings per share as calculated under the two-class method, reflects reductions for the portion of each item attributable to non-controlling interests and participating securities so that the calculation is based only on the amounts attributable to common shareholders.

Reconciliation of the Impact of Non-GAAP Measures and Kroll discontinued operations on Diluted Earnings Per Share – Three and Twelve Months Ended December 31, 2010 and 2009:

 

       

MMC
Consolidated Results

   

Portion
Attributable to
Common Shareholders

   

Adjusted
Diluted EPS

Three Months Ended December 31, 2010

   
Income from continuing operations $ 192 $ 188 $ 0.34
Add operating income adjustments $ 54
Deduct impact of income tax expense   (16 )
  38     36     0.07  
Income from continuing operations, as adjusted 230 224 0.41
Add Kroll adjusted income, net of tax   -     -     -  
Adjusted income, net of tax $ 230   $ 224   $ 0.41  
 

Twelve Months Ended December 31, 2010

Income from continuing operations $ 565 $ 543 $ 1.00
Add operating income adjustments $ 539
Deduct impact of income tax expense   (201 )
  338     332     0.61  
Income from continuing operations, as adjusted 903 875 1.61
Add Kroll adjusted income, net of tax   20     20     0.03  
Adjusted income, net of tax $ 923   $ 895   $ 1.64  
 

Three Months Ended December 31, 2009

Income from continuing operations $ (5 ) $ (6 ) $ (0.01 )
Add operating income adjustments $ 339
Deduct impact of income tax expense   (136 )
  203     199     0.37  
Income from continuing operations, as adjusted 198 193 0.36
Add Kroll adjusted income, net of tax   10     10     0.02  
Adjusted income, net of tax $ 208   $ 203   $ 0.38  
 

Twelve Months Ended December 31, 2009

Income from continuing operations $ 531 $ 505 $ 0.96
Add operating income adjustments $ 524
Deduct impact of income tax expense   (201 )
  323     316     0.60  
Income from continuing operations, as adjusted 854 821 1.56
Add Kroll adjusted income, net of tax   26     25     0.05  
Adjusted income, net of tax $ 880   $ 846   $ 1.61  

 

Notes:

1) Income from continuing operations and adjusted income, net of tax for the three and twelve months ended December 31, 2009 include a net benefit of $0.18 per share, recorded in the third quarter 2009, from the resolution of tax matters in certain jurisdictions resulting from the expiration of statutes of limitations and audit settlements.
2) Adjusted income, net of tax includes the adjusted operating income of Kroll (but not the impact of the disposal transaction) to appropriately reflect the operating benefit derived by MMC during its ownership. This will facilitate a more meaningful comparison to future results which are expected to benefit from the use of proceeds from the Kroll sale.
             

Marsh & McLennan Companies, Inc.

Supplemental Information

(Millions) (Unaudited)

 
Three Months Ended

December 31,

Twelve Months Ended

December 31,

  2010  

 

  2009  

  2010  

 

  2009  

Depreciation and Amortization Expense $ 82 $ 73 $ 319 $ 302
Stock Option Expense $ 4 $ 3 $ 18 $ 11
Capital Expenditures - continuing operations $ 79 $ 87 $ 258 $ 261
 

Marsh & McLennan Companies, Inc.

Supplemental Information – Discontinued Operations

(Millions) (Unaudited)

On August 3, 2010, MMC completed the sale of Kroll to Altegrity. Kroll’s results of operations are reported as discontinued operations in MMC’s consolidated statements of income. The twelve month periods include the gain on the sale of Kroll and Kroll Lab Specialists (“KLS”) in 2010 and the loss on the sale of Kroll Government Services in 2009. The provision/(credit) for income taxes related to the disposal of discontinued operations for the twelve months ended December 31, 2010 primarily represents the recognition of tax benefits recorded in connection with the sale of Kroll. The twelve months of 2010 also includes a tax provision of $36 million on the sale of KLS. Kroll operations include a goodwill impairment charge of $315 million in the twelve month period ended December 31, 2009. The three months ended December 31, 2010 reflects insurance recoveries related to Putnam market-timing related matters.

Summarized Statements of Income data for discontinued operations is as follows:

         
Three Months Ended

December 31,

2010       2009
Kroll Operations
Revenue $ - $ 169
Expense   -     152  
Net operating income - 17
Provision (credit) for income tax   -     8  
Income from Kroll operations, net of tax - 9
Other discontinued operations, net of tax   -     -  
Income (loss) from discontinued operations, net of tax   -     9  
 
Disposals of discontinued operations 16 4
Provision (credit) for income tax   2     (17 )
Disposals of discontinued operations, net of tax   14     21  
Discontinued operations, net of tax $ 14   $ 30  
 
Twelve Months Ended

December 31,

2010 2009
Kroll Operations
Revenue $ 381 $ 699
Expense   345     958  
Net operating income 36 (259 )
Provision for income tax   16     24  
Income from discontinued operations, net of tax 20 (283 )
Other discontinued operations, net of tax   (7 )   -  
Income (loss) from discontinued operations, net of tax   13     (283 )
 
Disposals of discontinued operations 58 8
Provision (credit) for income tax   (235 )   15  
Disposals of discontinued operations, net of tax   293     (7 )
Discontinued operations, net of tax $ 306   $ (290 )
               

Marsh & McLennan Companies, Inc.

Consolidated Balance Sheets

(Millions) (Unaudited)

 
December 31,

2010

December 31,

2009

ASSETS
 
Current assets:
Cash and cash equivalents $ 1,894 $ 1,707
Net receivables 3,035 2,724
Current assets of discontinued operations

 

221
Other current assets   347     279  
 
Total current assets 5,276 4,931
 
Goodwill and intangible assets 6,823 6,219
Fixed assets, net 822 850
Pension related assets 265 94
Deferred tax assets 1,205 1,234
Non-current assets of discontinued operations

 

1,085
Other assets 919 924
   
TOTAL ASSETS $ 15,310   $ 15,337  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Short-term debt $ 8 $ 558
Accounts payable and accrued liabilities 1,741 1,751
Accrued compensation and employee benefits 1,294 1,290
Liabilities of discontinued operations

 

116
Accrued income taxes   62  

 

 
Total current liabilities 3,105 3,715
 
Fiduciary liabilities 3,824 3,559
Less – cash and investments held in a fiduciary capacity   (3,824 )   (3,559 )

 

 

 
Long-term debt 3,026 3,034
Pension, postretirement and post-employment benefits 1,211 1,182
Liabilities for errors and omissions 430 518
Other liabilities 1,123 1,025
 
Total stockholders’ equity 6,415 5,863
   
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 15,310   $ 15,337  
 

Media:

Marsh & McLennan Companies
Jeremy Lehrman, 212-345-9775

jeremy.lehrman@mmc.com

or

Investors:

Marsh & McLennan Companies
Mike Bischoff, 212-345-5470

jmichael.bischoff@mmc.com

Companies

Marsh & Mclennan Cos Inc. (MHM)
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