Second quarter operating income rises 30% and adjusted operating income increases 10%
Marsh & McLennan Companies reports second quarter 2020 results. (Credit: mohamed Hassan from Pixabay)
Marsh & McLennan Companies, Inc. (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, today reported financial results for the second quarter ended June 30, 2020.
Dan Glaser, President and CEO, said: “In the midst of the pandemic, we delivered another strong quarter reflecting outstanding execution and the resilience of our business. In the second quarter, despite a modest decline in underlying revenue due to the global impact of COVID-19, we generated 10% adjusted operating income growth and 12% growth in adjusted EPS. For the first six months of 2020, we achieved 2% underlying revenue growth and 10% adjusted EPS growth.
“I am humbled by our colleagues’ exceptional support of our clients and one another during these tumultuous times.”
Consolidated Results
Consolidated revenue in the second quarter of 2020 was $4.2 billion, a decrease of 4%, or a 2% decline on an underlying basis compared with the second quarter of 2019. In the second quarter, the Company recognized a $36 million reduction to previously recorded revenue, the vast majority in Marsh, to reflect the estimated impact of the economic crisis on exposure units. This reduction is included in underlying revenue growth and adjusted earnings for the second quarter.
Operating income was $885 million, an increase of 30% from the prior year. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 10% to $984 million. Net income attributable to the Company was $572 million, or $1.12 per diluted share, compared with $0.65 in the second quarter of 2019. Adjusted earnings per share rose 12% to $1.32 per diluted share compared with $1.18 for the prior year period.
For the six months ended June 30, 2020, consolidated revenue was $8.8 billion, an increase of 5%, or 2% on an underlying basis compared to the prior period a year ago. Operating income was $2.0 billion, an increase of 21% from the prior year period. Adjusted operating income rose 13% to $2.2 billion. Net income attributable to the Company was $1.3 billion. Fully diluted earnings per share was $2.60 compared with $2.05 in the first six months of 2019. Adjusted earnings per share increased 10% to $2.96 compared with $2.70 for the comparable period in 2019.
Risk & Insurance Services
Risk & Insurance Services revenue was $2.6 billion in the second quarter of 2020, an increase of 1%, or 2% on an underlying basis. Operating income rose 34% to $696 million, and adjusted operating income was $762 million, an increase of 19% from the prior year period. For the six months ended June 30, 2020, revenue was $5.5 billion, an increase of 10%, or 4% on an underlying basis. Operating income rose 24% to $1.6 billion, and adjusted operating income was $1.7 billion, an increase of 20% from the prior year period.
Marsh’s revenue in the second quarter was $2.2 billion, an increase of 1% on an underlying basis. In US/Canada, underlying revenue rose 3%. In International, underlying revenue was flat compared to the prior year period, reflecting 4% underlying revenue growth in Asia Pacific, 4% growth in Latin America, and a decline of 3% in EMEA. For the six months ended June 30, 2020, Marsh’s underlying revenue growth was 3% compared to the prior period a year ago.
Guy Carpenter’s revenue in the second quarter was $433 million, an increase of 9% on an underlying basis. For the six months ended June 30, 2020, Guy Carpenter’s underlying revenue growth was 8%.
Consulting
Consulting revenue in the second quarter was $1.6 billion, a decrease of 10%, or a decline of 6% on an underlying basis compared to the same period a year ago. Operating income decreased 8% to $255 million, and adjusted operating income decreased 13% to $265 million. For the first six months of 2020, revenue was $3.4 billion, a decrease of 3%, or a decline of 1% on an underlying basis. Operating income of $537 million decreased 4% and adjusted operating income decreased 7% to $554 million.
Mercer’s revenue was $1.1 billion in the second quarter, a decrease of 3% on an underlying basis. Health, with revenue of $432 million, was up 1% on an underlying basis. Wealth revenue of $561 million declined 2% on an underlying basis, and Career revenue of $156 million decreased 16% on an underlying basis. For the six months ended June 30, 2020, Mercer’s revenue was $2.4 billion, an increase of 1% on an underlying basis compared to the same period a year ago.
Oliver Wyman’s revenue was $467 million in the second quarter, a decrease of 13% on an underlying basis. For the first six months ended June 30, 2020, Oliver Wyman’s revenue was $978 million, a decline of 7% on an underlying basis.
Other Items
In May 2020, the Company issued $750 million of 10-year senior unsecured notes. The Company used the net proceeds to reduce outstanding short term borrowings.
In July, the Board of Directors increased the quarterly dividend to $0.465 per share, effective with the third quarter dividend payable on August 14, 2020.
Source: Company Press Release