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Continued Revenue Growth Drives Strong Earnings Growth at Marsh & McClennan

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Posted on 14 Feb 2012

Marsh & McLennan Companies, Inc., a global professional services firm providing advice and solutions in risk, strategy and human capital, today reported financial results for the fourth quarter and year ended December 31, 2011.

Brian Duperreault, President and CEO, said: "We are very pleased with our Company's performance, both for the fourth quarter, and for the entire year. For the second consecutive year, we achieved double-digit growth in adjusted operating income. This growth was broad-based, with both our Risk and Insurance Services and Consulting segments generating double-digit growth in adjusted operating income.

"Marsh produced another year of excellent performance. In the fourth quarter, new business development and high retention rates drove underlying revenue growth across all geographies. Guy Carpenter also had another outstanding year, surpassing $1 billion in revenue for the first time in its history. Guy Carpenter continued its three year trend of underlying revenue growth.

"At Mercer, Consulting and Investments continued to drive underlying revenue growth in the quarter, as they did for the entire year. Despite challenging economic conditions in Europe, Oliver Wyman generated underlying revenue growth of 2% in the fourth quarter.

"We are proud of our accomplishments in 2011 and are pleased to have the talented colleagues, management strength and capabilities to provide superior service and solutions for our clients. Importantly, we continue to deliver on our strategy for long-term profitable growth for shareholders," concluded Mr. Duperreault.

Consolidated Results

Consolidated revenue in the fourth quarter of 2011 was $2.9 billion, an increase of 4% from the fourth quarter of 2010, or 3% 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 20% to $391 million, compared with $325 million in the prior year period. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 8% in the fourth quarter to $409 million.

Income from continuing operations was $244 million, or $.44 per share, in the fourth quarter. This compares with $192 million, or $.34 per share, in the fourth quarter of 2010. Discontinued operations, net of tax, was $16 million in the fourth quarter, compared with $14 million in the prior year period. Net income was $256 million compared with $203 million in the fourth quarter of 2010. Earnings per share increased to $.46 from $.37. Adjusted earnings per share in the quarter was also $.46, an increase of 12% from $.41 in the fourth quarter of 2010.

For the full year of 2011, revenue increased 9% to $11.5 billion, or 5% on an underlying basis. Operating income was $1.6 billion, compared with $939 million in the prior year. Income from continuing operations was $982 million, or $1.73 per share, compared with $565 million, or $1.00 per share, in 2010. Discontinued operations, net of tax, was $33 million, compared with $306 million for 2010. Net income was $993 million, or $1.79 per share, compared with $855 million, or $1.55 per share, in the prior year. Adjusted earnings per share for 2011 increased to $1.77 from $1.64. Results for 2011 include expense of $72 million from the early extinguishment of debt in July.

Risk and Insurance Services

Risk and Insurance Services revenue increased 6% to $1.6 billion in the fourth quarter of 2011, or 4% on an underlying basis. Operating income increased 35% to $304 million, compared with $225 million. Adjusted operating income in the quarter increased 11% to $288 million from $259 million. For the year, Risk and Insurance Services revenue was $6.3 billion, an increase of 9% from the prior year, and 5% on an underlying basis. Adjusted operating income rose 12% to $1.2 billion from $1.1 billion.

Marsh's revenue in the fourth quarter of 2011 was $1.4 billion, an increase of 6%, or 4% on an underlying basis. International operations reported underlying revenue growth of 6% in the fourth quarter, reflecting growth of 9% in Asia Pacific, 8% in Latin America and 4% in EMEA. In the United States/Canada division, underlying revenue grew 2%. In January 2012, Marsh completed its previously announced acquisition of the brokerage operations of Alexander Forbes in South Africa, Botswana and Namibia, which gives Marsh a leading market position. Guy Carpenter's fourth quarter revenue was $193 million, an increase of 5% on both a reported and underlying basis from the fourth quarter of 2010.

Consulting

Consulting segment revenue increased 3% to $1.3 billion in the fourth quarter of 2011, or 2% on an underlying basis. Operating income was $147 million in the fourth quarter, compared with $150 million in the prior year, and adjusted operating income was unchanged at $166 million. For the year, Consulting segment revenue increased 9% from the prior year period to $5.3 billion, or 5% on an underlying basis. Adjusted operating income rose 12% to $619 million, compared with $553 million in 2010.

Mercer's revenue increased 3% to $940 million in the fourth quarter of 2011, an increase of 2% on an underlying basis. Mercer's consulting operations produced revenue of $640 million, an increase of 3% on an underlying basis; outsourcing, with revenue of $183 million, was down 4%; and investments with revenue of $117 million, grew 9%. Oliver Wyman's revenue increased 2% on both a reported and underlying basis to $406 million in the fourth quarter of 2011.

Other Items

The Company had an investment loss of $4 million in the fourth quarter of 2011, compared with investment income of $19 million in the fourth quarter of 2010. For the year, investment income, including mark-to-market gains in private equity investments, was $9 million, compared with $43 million in 2010. At the end of 2011, cash and cash equivalents was $2.1 billion, compared with $1.9 billion at the end of 2010. Net debt, which is total debt less cash and cash equivalents, was $815 million, compared with $1.1 billion at the end of 2010.

About Marsh & McLennan Companies

Marsh & McLennan Companies 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 insurance broking and risk management; GUY CARPENTER is a global leader in providing risk and reinsurance intermediary services; MERCER is a global leader in human resource consulting and related 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. Visit www.mmc.com for more corporate information, or www.PartneringImpact.com to learn more about the Company's world-class capabilities and its solutions to the complex problems enterprises face today.

 


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