Marsh & McLennan Companies Reports Third Qu...

Strong Revenue and Profitability Growth Continues Across All Businesses

GAAP Operating Income Increases 30 Percent

Adjusted Operating Income Rises 18 Percent

Marsh & McLennan Companies Reports Third Quarter 2011 Results

Marsh & McLennan Companies, Inc.

Marsh & McLennan Companies, Inc. (NYSE: MMC), a global professional services firm providing advice in risk, strategy and human capital, today reported financial results for the third quarter ended September 30, 2011.

Brian Duperreault, President and CEO, said: “Third quarter results reflect our ongoing strong performance. All of our businesses continued to generate revenue growth and double-digit growth in profitability. Marsh’s high client revenue retention rates and new business development produced underlying revenue growth across all geographies. Guy Carpenter produced strong results, continuing a long-term trend of underlying revenue growth.

“Mercer’s underlying revenue growth has continued for more than a year, driven by strong results in its consulting and investments businesses. Oliver Wyman’s strong underlying revenue growth was broad-based across industry sectors.

“Our progress in re-establishing Marsh & McLennan Companies as a global growth company has been excellent, as reflected in our performance over the last four quarters,” concluded Mr. Duperreault.

Consolidated Results

Consolidated revenue in the third quarter of 2011 was $2.8 billion, an increase of 11 percent from the third quarter of 2010, or 5 percent on an underlying basis. Underlying revenue measures the change in revenue using consistent currency exchange rates, excluding the impact of certain items such as: acquisitions, dispositions and transfers among businesses. Operating income rose 30 percent to $310 million, compared with $239 million in the prior year period. Adjusted operating income in the third quarter, which excludes noteworthy items as presented in the attached supplemental schedules, rose 18 percent to $317 million.

Income from continuing operations, which includes a charge of $72 million related to the early extinguishment of debt, was $133 million, or $.23 per share, in the third quarter. This compares with $128 million, or $.22 per share, in the third quarter of 2010. Discontinued operations, net of tax, was $2 million in the third quarter, or $.01 per share, compared with $43 million, or $.08 per share, in the prior year period. Net income was $130 million, or $.24 per share, compared with $168 million in the third quarter of last year, or $.30 per share. Adjusted earnings per share in the quarter was also $.24.

For the nine months ended September 30, 2011, operating income was $1.2 billion, compared with $614 million in the prior year period. Income from continuing operations was $738 million, or $1.30 per share, compared with $373 million, or $.65 per share, in 2010. Discontinued operations, net of tax, was $17 million, or $.03 per share, compared with $292 million, or $.53 per share, for the nine months of 2010. Net income was $737 million, or $1.33 per share, compared with $652 million, or $1.18 per share, in the prior year period. Adjusted earnings per share for the nine months of 2011 increased to $1.30 from $1.23.

Risk and Insurance Services

Risk and Insurance Services revenue increased 11 percent to $1.5 billion in the third quarter of 2011, or 5 percent on an underlying basis. Operating income increased 31 percent to $186 million, compared with $142 million. Adjusted operating income in the quarter increased 13 percent to $186 million from $165 million. For the nine months of 2011, Risk and Insurance Services revenue was $4.7 billion, an increase of 11 percent from the prior year period, and 5 percent on an underlying basis.

Marsh’s revenue in the third quarter of 2011 was $1.2 billion, an increase of 12 percent, or 6 percent on an underlying basis. International operations reported underlying revenue growth of 8 percent in the third quarter, reflecting growth of 13 percent in both Asia Pacific and Latin America, with 6 percent growth in EMEA. In the United States/Canada division, underlying revenue grew 3 percent. Guy Carpenter’s third quarter revenue increased 8 percent from the third quarter of 2010 to $251 million, or 3 percent on an underlying basis. In August, Marsh announced it signed an agreement to acquire the brokerage business of Alexander Forbes, which will significantly expand Marsh’s presence in South Africa. The transaction is subject to regulatory and other approvals and is targeted for completion in the fourth quarter of 2011.

Consulting

Consulting revenue increased 11 percent to $1.3 billion in the third quarter of 2011, or 6 percent on an underlying basis. Operating income increased 17 percent to $161 million in the third quarter, compared with $138 million. Adjusted operating income increased 17 percent to $168 million in the third quarter of 2011, compared with $144 million. For the nine months of 2011, Consulting revenue increased 11 percent from the prior year period to $3.9 billion, or 6 percent on an underlying basis. Adjusted operating income rose 17 percent to $453 million, compared with $387 million in 2010.

Mercer’s revenue increased 11 percent to $975 million in the third quarter of 2011, an increase of 4 percent on an underlying basis. Mercer’s consulting operations produced revenue of $673 million, an increase of 5 percent on an underlying basis; outsourcing, with revenue of $186 million, was up 1 percent; and investment consulting and management, with revenue of $116 million, grew 10 percent. Oliver Wyman’s revenue increased 13 percent to $364 million in the third quarter of 2011, or 9 percent on an underlying basis.

Other Items

At the end of the third quarter of 2011, cash and cash equivalents was $1.7 billion, unchanged from the third quarter of 2010. Net debt, which is total debt less cash and cash equivalents, was $1.2 billion, compared with $1.3 billion at the end of the third quarter of 2010.

In August, the Board of Directors of Marsh & McLennan Companies authorized an increase in the Company’s share repurchase program to $1 billion from $500 million. Over the last year, the Company has repurchased a total of 15.6 million shares of its common stock for $447 million, including 4.4 million shares in the third quarter of 2011. The Company increased its quarterly dividend 5 percent to $.22 per share, effective with the third quarter payment on August 15, 2011.

In the third quarter, Marsh & McLennan Companies completed a tender offer that resulted in the retirement of an aggregate of $600 million of the senior notes scheduled to mature in 2014 and 2015. Also in the third quarter, the Company issued $500 million of 4.80 percent senior notes due 2021.

Conference Call

A conference call to discuss third quarter 2011 results will be held today at 8:30 a.m. Eastern Time. To participate in the teleconference, please dial 800 967 7185. Callers from outside the United States should dial 719 457 2644. The access code for both numbers is 9408324. 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.

About Marsh & McLennan Companies

MARSH & McLENNAN COMPANIES (NYSE: MMC) is a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. MARSH is a global leader in delivering risk and insurance services and solutions; GUY CARPENTER is a global leader in providing risk and reinsurance intermediary services; MERCER is a global leader in human resource consulting, outsourcing and investment services; and OLIVER WYMAN is a global leader in management consulting. Marsh & McLennan Companies’ 52,000 colleagues worldwide provide analysis, advice and transactional capabilities to clients in more than 100 countries. The Company prides itself on being a responsible corporate citizen and making a positive impact in the communities in which it operates. For more corporate information, visit www.mmc.com or www.PartneringImpact.com, which highlights the Company’s world-class capabilities and its solutions for the complex problems enterprises face today.

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; the expected impact of acquisitions and dispositions; pension obligations; 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; 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, among other things:

  • 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 impact of any regional, national or global political, economic, regulatory or market conditions on our results of operations and financial condition;
  • the impact on our net income caused by fluctuations in foreign currency exchange rates;
  • the impact on our net income or cash flows and our effective tax rate in a particular period caused by settled tax audits and expired statutes of limitation;
  • the extent to which we retain existing clients and attract new business, and our ability to incentivize and retain key employees;
  • 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 UK Bribery Act 2010, local laws prohibiting corrupt payments to government officials, as well as various trade sanctions laws;
  • the impact of competition, including with respect to pricing;
  • 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 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, including the effect of any subsequent adjustments to the estimates we use in applying this accounting standard.

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 Nine Months Ended
September 30, September 30,

2011

      2010 2011       2010
Revenue $ 2,806   $ 2,524   $ 8,618   $ 7,765  
 
Expense:
Compensation and Benefits 1,753 1,586 5,202 4,775
Other Operating Expenses   743     699     2,169     2,376  
Total Expense   2,496     2,285     7,371     7,151  
 
Operating Income 310 239 1,247 614
 
Interest Income 9 6 21 13
 
Interest Expense (49 ) (60 ) (149 ) (180 )
 
Early Extinguishment of Debt (72 ) – (72 ) –
 
Investment (Loss) Income   –     (2 )   13     24  
 
Income Before Income Taxes 198 183 1,060 471
 
Income Tax Expense   65     55     322     98  
 
Income from Continuing Operations 133 128 738 373
 
Discontinued Operations, Net of Tax   2     43     17     292  
 
Net Income Before Non-Controlling Interest $ 135 $ 171 $ 755 $ 665
 
Less: Net Income Attributable to Non-Controlling Interest   5     3     18     13  
 
Net Income Attributable to the Company $ 130   $ 168   $ 737   $ 652  
 
Basic Net Income Per Share
– Continuing Operations $ 0.24   $ 0.23   $ 1.32   $ 0.66  

- Net Income Attributable to the Company

$ 0.24   $ 0.30   $ 1.35   $ 1.19  
 
Diluted Net Income Per Share
– Continuing Operations $ 0.23   $ 0.22   $ 1.30   $ 0.65  
– Net Income Attributable to the Company $ 0.24   $ 0.30   $ 1.33   $ 1.18  
 

Average Number of Shares Outstanding

– Basic

  540     543     543     539  

 

- Diluted

  549     548     552     543  
Shares Outstanding at 9/30   538     543     538     543  
                 
Marsh & McLennan Companies, Inc.
Supplemental Information – Revenue Analysis
Three Months Ended
(Millions) (Unaudited)
 

 

Components of Revenue Change*
Three Months Ended % Change       Acquisitions/      
September 30, GAAP Currency Dispositions Underlying
2011       2010   Revenue Impact       Impact       Revenue
Risk and Insurance Services
Marsh $ 1,210 $ 1,083 12 % 3 % 3 % 6 %
Guy Carpenter   251     233   8 % 2 % 3 % 3 %
Subtotal 1,461 1,316 11 % 3 % 3 % 5 %
Fiduciary Interest Income   14     11  
Total Risk and Insurance Services   1,475     1,327   11 % 3 % 3 % 5 %
 
Consulting
Mercer 975 881 11 % 5 % 2 % 4 %
Oliver Wyman Group   364     322   13 % 4 % - 9 %
Total Consulting   1,339     1,203   11 % 4 % 1 % 6 %
 
Corporate / Eliminations   (8 )   (6 )
 
Total Revenue $ 2,806   $ 2,524   11 % 4 % 2 % 5 %
               
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
 

 

Components of Revenue Change*
Three Months Ended % Change       Acquisitions/      
September 30, GAAP Currency Dispositions Underlying
2011       2010   Revenue Impact       Impact       Revenue
Marsh:
EMEA $ 367 $ 332 11 % 5 % - 6 %
Asia Pacific 158 125 26 % 11 % 3 % 13 %
Latin America   84   73 16 % 3 % - 13 %
Total International 609 530 15 % 6 % 1 % 8 %
U.S. / Canada   601   553 9 % 1 % 5 % 3 %
Total Marsh $ 1,210 $ 1,083 12 % 3 % 3 % 6 %
 
Mercer:
Retirement $ 261 $ 256 2 % 4 % - (2 )%
Health and Benefits 239 224 7 % 3 % (3 )% 7 %
Rewards, Talent & Communications   173   142 21 % 4 % 4 % 13 %
Mercer Consulting   673   622 8 % 4 % - 5 %
Outsourcing 186 168 11 % 6 % 4 % 1 %
Investment Consulting & Management   116   91 28 % 8 % 11 % 10 %
Total Mercer $ 975 $ 881 11 % 5 % 2 % 4 %
Notes
 
Underlying revenue measures the change in revenue using consistent currency exchange rates, excluding the impact of certain items such as: acquisitions, dispositions and transfers among businesses.
 
* Components of revenue change may not add due to rounding.
               
Marsh & McLennan Companies, Inc.
Supplemental Information – Revenue Analysis
Nine Months Ended

(Millions) (Unaudited)

 

 

Components of Revenue Change*
Nine Months Ended % Change       Acquisitions/      
September 30, GAAP Currency Dispositions Underlying
2011       2010   Revenue Impact       Impact       Revenue
Risk and Insurance Services
Marsh $ 3,845 $ 3,454 11 % 3 % 4 % 5 %
Guy Carpenter   848     791   7 % 1 % 1 % 5 %
Subtotal 4,693 4,245 11 % 2 % 4 % 5 %
Fiduciary Interest Income   36     33  
Total Risk and Insurance Services   4,729     4,278   11 % 2 % 3 % 5 %
 
Consulting
Mercer 2,842 2,568 11 % 4 % 2 % 4 %
Oliver Wyman Group   1,077     958   12 % 4 % - 9 %
Total Consulting   3,919     3,526   11 % 4 % 1 % 6 %
 
Corporate / Eliminations   (30 )   (39 )
 
Total Revenue $ 8,618   $ 7,765   11 % 3 % 3 % 5 %
                 
Revenue Details

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

 

 

Components of Revenue Change*
Nine Months Ended % Change       Acquisitions/      
September 30, GAAP Currency Dispositions Underlying
2011       2010   Revenue Impact       Impact       Revenue
Marsh:
EMEA $ 1,363 $ 1,256 9 % 3 % 2 % 4 %
Asia Pacific 452 363 24 % 11 % 5 % 9 %
Latin America   228   191 19 % 2 % - 17 %
Total International 2,043 1,810 13 % 4 % 2 % 6 %
U.S. / Canada   1,802   1,644 10 % 1 % 6 % 3 %
Total Marsh $ 3,845 $ 3,454 11 % 3 % 4 % 5 %
 
Mercer:
Retirement $ 813 $ 795 2 % 4 % - (1 )%
Health and Benefits 717 676 6 % 2 % (3 )% 7 %
Rewards, Talent & Communications   417   337 24 % 4 % 7 % 13 %
Mercer Consulting 1,947 1,808 8 % 3 % - 4 %
Outsourcing 550 491 12 % 6 % 5 % 1 %
Investment Consulting & Management   345   269 29 % 8 % 9 % 12 %
Total Mercer $ 2,842 $ 2,568 11 % 4 % 2 % 4 %
Notes
 
Underlying revenue measures the change in revenue using consistent currency exchange rates, excluding the impact of certain items such as: acquisitions, dispositions and transfers among businesses.
 
* Components of revenue change may not add due to rounding.
 
Marsh & McLennan Companies, Inc.
Non-GAAP Measures
Three Months Ended September 30

(Millions) (Unaudited)

 
The Company 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 (loss); adjusted operating margin; and adjusted income, net of tax.
 
The Company 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 the Company’s businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP. The Company’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 the Company’s GAAP operating income or loss. The following table identifies these noteworthy items and reconciles adjusted operating income (loss) to GAAP operating income or loss, on a consolidated and segment basis, for the three months ended September 30, 2011 and 2010. The following table also presents adjusted operating margin, which is calculated by dividing adjusted operating income by consolidated or segment GAAP revenue.
      Risk &                  
Insurance Corporate/
Services Consulting Eliminations Total

Three Months Ended September 30, 2011

Operating income (loss) $ 186   $ 161   $ (37 ) $ 310  
Add (deduct) impact of noteworthy items:
Restructuring Charges (a) 3 7 1 11
Settlement, Legal and Regulatory (b) (3 ) - - (3 )
Other   -     -     (1 ) (c)   (1 )
Operating income adjustments   -     7     -     7  
 
Adjusted operating income (loss) $ 186   $ 168   $ (37 ) $ 317  
 
Operating margin   12.6 %   12.0 %   N/A     11.0 %
Adjusted operating margin   12.6 %   12.5 %   N/A     11.3 %

Three Months Ended September 30, 2010

Operating income (loss) $ 142   $ 138   $ (41 ) $ 239  
Add (deduct) impact of noteworthy items:
Restructuring Charges (a) 20 6 4 30
Settlement, Legal and Regulatory (b) 3 – – 3
Other   –     –     (3 ) (c)   (3 )
Operating income adjustments   23     6     1     30  
 
Adjusted operating income (loss) $ 165   $ 144   $ (40 ) $ 269  
 
Operating margin   10.7 %   11.5 %   N/A     9.5 %
Adjusted operating margin   12.4 %   12.0 %   N/A     10.7 %
(a) 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 initiatives. The third quarters of 2011 and 2010 include charges of $4 million and $9 million, respectively, for cost reduction activities related 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 the Company 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. The third quarter of 2011 includes insurance recoveries of $11 million.
(c) Reflects payments received related to the Corporate Advisory and Restructuring businesses divested in 2008, which was previously included in the Risk Consulting & Technology segment.
 
Marsh & McLennan Companies, Inc.
Non-GAAP Measures
Nine Months Ended September 30
(Millions) (Unaudited)
 
The Company 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.
 
The Company 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 the Company’s businesses. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP. The Company’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 and Adjusted Operating Margin
Adjusted operating income is calculated by excluding the impact of certain noteworthy items from the Company’s GAAP operating income. The following tables identify these noteworthy items and reconcile adjusted operating income to GAAP operating income, on a consolidated and segment basis, for the nine months ended September 30, 2011 and 2010. The following tables also present adjusted operating margin, which is calculated by dividing adjusted operating income by consolidated or segment GAAP revenue.
      Risk &                  
Insurance Corporate/
Services Consulting Eliminations Total

Nine Months Ended September 30, 2011

Operating income (loss) $ 925   $ 441   $ (119 ) $ 1,247  
Add (deduct) impact of noteworthy items:
Restructuring Charges (a) 1 12 3 16
Settlement, Legal and Regulatory (b) (5 ) - - (5 )
Other   -     -     (6 ) (c)   (6 )
Operating income adjustments   (4 )   12     (3 )   5  
 
Adjusted operating income (loss) $ 921   $ 453   $ (122 ) $ 1,252  
 
Operating margin   19.6 %   11.3 %   N/A     14.5 %
Adjusted operating margin   19.5 %   11.6 %   N/A     14.5 %

Nine Months Ended September 30, 2010

Operating income (loss) $ 747   $ (21 ) $ (112 ) $ 614  
Add (deduct) impact of noteworthy items:
Restructuring Charges (a) 70 8 9 87
Alaska Litigation Settlement – 400 (d ) – 400
Settlement, Legal and Regulatory (b) 8 – – 8
Accelerated Amortization 1 – – 1
Other   (1 )   –     (10 ) (c)   (11 )
Operating income adjustments   78     408     (1 )   485  
 
Adjusted operating income (loss) $ 825   $ 387   $ (113 ) $ 1,099  
 
Operating margin   17.5 %   N/A     N/A     7.9 %
Adjusted operating margin   19.3 %   11.0 %   N/A     14.2 %
(a) Includes severance from restructuring activities and related charges, costs for future rent and other real estate costs, and fees and consulting costs related to cost reduction activities. The nine months of 2011 and 2010 include charges of $5 million and $34 million, respectively, for cost reduction activities related 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 the Company 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. The first nine months of 2011 includes insurance recoveries of $14 million.
(c) Reflects payments received related to the Corporate Advisory and Restructuring businesses divested in 2008, which was previously included in the Risk Consulting & Technology segment.
(d) Reflects net settlement of litigation brought by the Alaska Retirement Management Board against Mercer. Under the settlement agreement, Mercer paid $500 million, of which $100 million was covered by insurance.
 
Marsh & McLennan Companies, Inc.
Non-GAAP Measures
Three and Nine Months Ended September 30

(Millions) (Unaudited)

 
Adjusted income, net of tax
Adjusted income, net of tax is calculated as: the Company’s GAAP income 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 Nine Months Ended September 30, 2011 and 2010:
            Portion       Adjusted
Consolidated Attributable to Diluted
Results Common Shareholders EPS

Three Months Ended September 30, 2011

   
Income from continuing operations $ 133 $ 127 $ 0.23
Add operating income adjustments $ 7
Deduct impact of related income tax expense   (3 )
  4   4   0.01
Income from continuing operations, as adjusted $ 137 $ 131 $ 0.24
 

Nine Months Ended September 30, 2011

Income from continuing operations $ 738 $ 715 $ 1.30
Add operating income adjustments $ 5
Deduct impact of related income tax expense   -  
  5   5   –
Income from continuing operations, as adjusted $ 743 $ 720 $ 1.30
 

Three Months Ended September 30, 2010

Income from continuing operations $ 128 $ 123 $ 0.22
Add operating income adjustments $ 30
Deduct impact of related income tax expense   (10 )
  20   20   0.04
Income from continuing operations, as adjusted $ 148 $ 143 $ 0.26
Add Kroll adjusted operating income, net of tax   3   3   0.01
Adjusted income, net of tax $ 151 $ 146 $ 0.27
 

Nine Months Ended September 30, 2010

Income from continuing operations $ 373 $ 353 $ 0.65
Add operating income adjustments $ 485
Deduct impact of related income tax expense   (185 )
  300   296   0.55
Income from continuing operations, as adjusted $ 673 $ 649 $ 1.20
Add Kroll adjusted operating income, net of tax   20   20   0.03
Adjusted income, net of tax $ 693 $ 669 $ 1.23
The results in the table above are not adjusted for debt extinguishment costs of $72 million, which reduced earnings in the three and nine months ended September 30, 2011.
 
Adjusted income, net of tax for the three and nine months ended September 30, 2010 includes the adjusted after-tax operating income of Kroll (but not the impact of the disposal transaction) to appropriately reflect the operating benefit derived by the Company during its ownership. This facilitates a more meaningful comparison to 2011 results which will benefit from the use of proceeds from the Kroll sale. For the three and nine months ended September 30, 2010, Kroll’s adjusted operating income, net of tax was insignificant.
           
Marsh & McLennan Companies, Inc.
Supplemental Expense Information
(Millions) (Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2011       2010 2011       2010
Depreciation and Amortization Expense $ 85 $ 79 $ 250 $ 237
Stock Option Expense $ 4 $ 3 $ 16 $ 14
Capital Expenditures $ 63 $ 48 $ 205 $ 179
 
Marsh & McLennan Companies, Inc.
Supplemental Information – Discontinued Operations
(Millions) (Unaudited)
 
On August 3, 2010, the Company completed its sale of Kroll to Altegrity. Kroll's results of operations are reported as discontinued operations in the Company's consolidated statements of income. The three and nine months ended September 30, 2010 include the gain on the sale of Kroll. The nine months ended September 30, 2010 also includes the loss on the sale of Kroll Lab Specialists ("KLS").The provision/(credit) for income taxes related to the disposal of discontinued operations for the nine months ended September 30, 2010 includes the recognition of tax benefits related to the Kroll disposition recorded in the second quarter of 2010 and a tax provision of $36 million on the sale of KLS. The tax credit for the nine months ended September 30, 2011 is primarily due to a tax recovery included in the indemnity agreement related to the Putnam sale.
           

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

 
Three Months Ended Three Months Ended
September 30, 2011 September 30, 2010
Kroll Operations
Revenue $ - $ 56
Expense   -     52  
Net operating income - 4
Provision for income tax   -     1  
Income from discontinued operations, net of tax - 3
Other discontinued operations, net of tax   -     (7 )
Income (loss) from discontinued operations, net of tax   -     (4 )
 
Disposals of discontinued operations 3 35
Provision (credit) for income tax   1     (12 )
Disposals of discontinued operations, net of tax   2     47  
Discontinued operations, net of tax $ 2   $ 43  
 
Nine Months Ended Nine Months Ended
September 30, 2011 September 30, 2010
Kroll Operations
Revenue $ - $ 381
Expense   -     345  
Net operating income - 36
Provision for income tax   -     16  
Income from discontinued operations, net of tax - 20
Other discontinued operations, net of tax   -     (7 )
Income (loss) from discontinued operations, net of tax   -     13  
 
Disposals of discontinued operations 11 42
Provision (credit) for income tax   (6 )   (237 )
Disposals of discontinued operations, net of tax   17     279  
Discontinued operations, net of tax $ 17   $ 292  
           
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets
(Millions) (Unaudited)
 
September 30, December 31,
2011 2010
ASSETS
 
Current assets:
Cash and cash equivalents $ 1,714 $ 1,894
Net receivables 2,925 3,035
Other current assets   391     347  
 
Total current assets 5,030 5,276
 
Goodwill and intangible assets 6,933 6,823
Fixed assets, net 804 822
Pension related assets 477 265
Deferred tax assets 1,084 1,205
Other assets 793 919
   
TOTAL ASSETS $ 15,121   $ 15,310  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Short-term debt $ 260 $ 8
Accounts payable and accrued liabilities 1,819 1,741
Accrued compensation and employee benefits 1,106 1,294
Accrued income taxes 80 62
Dividends payable   119    

-

 
 
Total current liabilities 3,384 3,105
 
Fiduciary liabilities 4,118 3,824
Less – cash and investments held in a fiduciary capacity   (4,118 )   (3,824 )

-

-

 
Long-term debt 2,670 3,026
Pension, postretirement and postemployment benefits 1,148 1,211
Liabilities for errors and omissions 446 430
Other liabilities 1,008 1,123
 
Total equity 6,465 6,415
   
TOTAL LIABILITIES AND EQUITY $ 15,121   $ 15,310  

Marsh & McLennan Companies

Media:

Silvia Davi, +1-212-345-4371

silvia.davi@mmc.com

or

Investors:

Scott Douglas, +1-212-345-5488

scott.d.douglas@mmc.com

Companies

Marsh & Mclennan Cos Inc. (MHM)
UK 100
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