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Marsh & McLennan (MMC) Q1 Earnings Beat on Segmental Strength

Marsh & McLennan Companies, Inc. MMC reported first-quarter 2023 adjusted earnings per share of $2.53, which outpaced the Zacks Consensus Estimate of $2.45 by 3.3%. The bottom line advanced 10% year over year.

Consolidated revenues of MMC amounted to $5,924 million, which rose 7% year over year. The figure improved 9% on an underlying basis. The top line beat the consensus mark by 1.3%.

The quarterly results benefited on the back of solid contributions from its Risk and Insurance Services, and Consulting segments. However, the upside was partly offset by higher compensation and benefits costs.

Total operating expenses increased 2.3% year over year to $4,198 million in the quarter under review. Yet, it came lower than our estimate of $4,379 million. Total expenses at the Risk and Insurance Services, and Consulting segments were up 3.4% and 0.1%, respectively, year over year.

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Marsh & McLennan reported an adjusted operating income of $1,771 million, which climbed 13% year over year in the first quarter. Adjusted operating margin improved 150 basis points year over year to 31.2%.

Marsh & McLennan Companies, Inc. Price, Consensus and EPS Surprise

Marsh & McLennan Companies, Inc. Price, Consensus and EPS Surprise
Marsh & McLennan Companies, Inc. Price, Consensus and EPS Surprise

Marsh & McLennan Companies, Inc. price-consensus-eps-surprise-chart | Marsh & McLennan Companies, Inc. Quote

Segmental Performances

Risk and Insurance Services

The segment’s revenues amounted to $3,906 million, up 10% year over year, or 11% on an underlying basis. The metric surpassed the Zacks Consensus Estimate of $3,672 million. Adjusted operating income of $1,433 million improved 17% year over year in the quarter under review, which outpaced the consensus mark of $1,209 million.

Revenues of Marsh, a unit within the segment, grew 8% year over year, or 9% on an underlying basis to $2,744 million. In the United States/Canada, underlying revenues advanced 7% year over year. International operations registered underlying revenue growth of 10%. Among the international operations, Asia Pacific witnessed the highest underlying revenue growth of 11%, followed by increases of 10% each in EMEA and Latin America, respectively.

Another unit within the Risk and Insurance Services segment, Guy Carpenter, recorded revenues of $1,071 million. The figure rose 7% year over year, or 10% on an underlying basis.

Consulting

Revenues of the segment inched up 1% year over year, or 5% on an underlying basis to $2,031 million in the first quarter. However, the figure missed the Zacks Consensus Estimate of $2,036 million but beat our estimate of $1,934.9 million. Adjusted operating income of $406 million inched up 1% year over year and also surpassed the consensus mark of $396 million.

Mercer, a unit within this segment, generated revenues of $1,344 million. The metric improved 7% on an underlying basis in the quarter under review. It also came higher than our estimate of $1,259.5 million. Wealth revenues grew 2% year over year on an underlying basis whereas Career and Health revenues climbed 12% each.

Revenues of Oliver Wyman Group, another unit under the Consulting segment, increased 3% year over year to $687 million in the first quarter. The metric also beat our estimate of $675.4 million.

Financial Update (as of Mar 31, 2023)

Marsh & McLennan exited the first quarter with cash and cash equivalents of $1,006 million, which dropped 30.2% from the figure in 2022 end. Total assets of $34,358 million increased 2.7% from the 2022-end level.

Long-term debt of $10,841 million declined 3.4% from the figure as of Dec 31, 2022. Short-term debt increased nearly eightfold from the 2022-end figure to $2,111 million.

Total equity of $11,196 million advanced 4.2% from the figure at 2022 end.

Net cash used in operations totaled $819 million for Marsh & McLennan in the reported quarter. In the prior-year quarter, the same was $702 million.

Capital Deployment Update

The company bought back 1.8 million shares worth $300 million in the first quarter.

In March 2023, management approved a quarterly dividend of 59 cents per share, which will be paid out on May 15, 2023, to shareholders of record as of Apr 5, 2023.

Zacks Rank

Marsh & McLennan currently carries a Zacks Rank #3 (Hold).

Performance of Some Other Insurers

Of the other insurance industry players that have reported first-quarter results so far, the bottom-line results of The Travelers Companies, Inc. TRV and RLI Corp. RLI beat the respective Zacks Consensus Estimate.

Travelers reported first-quarter 2023 core income of $4.11 per share, which beat the Zacks Consensus Estimate of $3.64 and our estimate of $3.41. However, the bottom line decreased 2.6% year over year. Total revenues increased 10% from the year-ago quarter to $9.7 billion, primarily driven by higher premiums.

The top line, however, missed the Zacks Consensus Estimate of $9.8 billion. Net written premiums of TRV increased 12% year over year to a record $9.4 billion. Net investment income increased 4.1% year over year to $663 million.

RLI's first-quarter 2023 operating earnings of $1.63 per share, beating the Zacks Consensus Estimate by 34.7%. The bottom line improved 14% from the prior-year quarter. Operating revenues for the reported quarter were $335 million, up 19.4% year over year, driven by 14.3% higher net premiums earned and 51.5% higher net investment income.

The top line however missed the Zacks Consensus Estimate by 2.2%. Gross premiums written of RLI increased 15.6% year over year to $415 million. Net investment income increased 52% year over year to 27.1 million. The investment portfolio’s total return was 2.8% in the quarter.

An Upcoming Release

Here is an insurer, which, according to our model, has the right combination of elements to beat on earnings this time around:

CNO Financial Group, Inc. CNO currently has an Earnings ESP of +5.65% and a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CNO’s first-quarter 2023 earnings is pegged at 62 cents per share, indicating an improvement of 47.6% from the prior-year quarter’s reported number. Its earnings beat estimates in two of the trailing four quarters, matched the mark once and missed the same on the remaining occasion, with an average surprise of 14.15%.

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RLI Corp. (RLI) : Free Stock Analysis Report

CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report

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Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report

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