Marsh & McLennan (MMC) Q3 Earnings Beat on Solid EMEA Unit
Marsh & McLennan Companies, Inc. MMC reported third-quarter 2023 adjusted earnings per share of $1.57, which surpassed the Zacks Consensus Estimate by 13.8%. The bottom line climbed 33% year over year.
Its consolidated revenues amounted to $5,382 million, which improved 13% year over year in the quarter under review. The figure grew 10% on an underlying basis. Also, the top line beat the consensus mark by 3.7%.
The quarterly results were aided by strong international operations of the Marsh business coupled with solid contributions from the Consulting unit in the form of expanding Wealth, Health and Career revenues. However, the upside was partly offset by increased expenses.
Total operating expenses increased 10.2% year over year to $4,386 million in the third quarter due to higher compensation and benefits and other operating expenses. The reported figure also came higher than our estimate of $4,282.7 million. Total expenses in the Risk and Insurance Services segment escalated 10.4% year over year, while the same in the Consulting segment witnessed an 11.3% year-over-year increase.
Total adjusted operating income of $1,059 million advanced 24% year over year and beat our estimate of $992.3 million. The adjusted operating margin improved 170 basis points year over year to 21.3% in the quarter under review.
Marsh & McLennan Companies, Inc. Price, Consensus and EPS Surprise
Marsh & McLennan Companies, Inc. price-consensus-eps-surprise-chart | Marsh & McLennan Companies, Inc. Quote
Segmental Update
Risk and Insurance Services
The segment’s revenues rose 12% year over year, or 11% on an underlying basis, to $3,190 million in the third quarter. The reported figure outpaced the Zacks Consensus Estimate of $3,158 million and our estimate of $3,179.2 million. Adjusted operating income of $671 million advanced 19% year over year but lagged our estimate of $715.1 million.
A unit within the segment, Marsh, recorded revenues of $2,700 million in the quarter under review, which grew 9% year over year, or 8% on an underlying basis. The reported figure beat the consensus mark of $2,689 million but missed our estimate of $2,722.3 million. In the United States/Canada, underlying revenues increased 6% year over year. International operations registered underlying revenue growth of 10%. Among the international operations, Latin America witnessed the highest underlying revenue growth of 14%, followed by increases of 10% in Asia Pacific and 9% in EMEA.
Guy Carpenter’s (another unit within the Risk and Insurance Services segment) revenues of $359 million improved 9% year over year, or 8% on an underlying basis, in the quarter under review. The figure surpassed the consensus mark of $354 million as well as our estimate of $344.4 million.
Consulting
Revenues in the segment amounted to $2,206 million, which advanced 13% year over year, or 9% on an underlying basis. The reported figure outpaced the Zacks Consensus Estimate of $2,055 million and our estimate of $2,038.4 million. Adjusted operating income of $447 million climbed 24% year over year and beat our estimate of $342.6 million.
Mercer’s (a unit within this segment) revenues rose 11% year over year, or 8% on an underlying basis, to $1,425 million. The figure surpassed the consensus mark of $1,344 million as well as our estimate of $1,331.4 million. Health revenues improved 8% on an underlying basis in the quarter under review. Meanwhile, Wealth and Career revenues registered underlying revenue growth of 7% each in the quarter under review.
Another unit under the Consulting segment, Oliver Wyman, reported revenues of $781 million, higher than the consensus mark as well as our estimate of $707 million. The figure climbed 17% year over year, or 12% on an underlying basis.
Financial Update (as of Sep 30, 2023)
Marsh & McLennan exited the third quarter with cash and cash equivalents of $2,901 million, which doubled from the figure at 2022 end. Total assets of $48 billion increased 8.8% from the 2022-end level.
Long-term debt amounted to $11.8 billion, up 4.9% from the figure as of Dec 31, 2022. Short-term debt increased nearly seven-fold from the 2022-end figure to $1,868 million.
Total equity of $11.6 billion rose 7.8% from the 2022-end level.
MMC generated cash flows from operations of $2,475 million in the first nine months of 2023, which grew 26.1% from the prior-year comparable period’s level.
Capital Deployment Update
In the third quarter, Marsh & McLennan bought back 1.6 million shares worth $300 million.
Management announced a quarterly dividend of 71 cents per share, which will be paid out on Nov 15, 2023, to shareholders of record as of Oct 6, 2023.
Zacks Rank
Marsh & McLennan currently carries a Zacks Rank #3 (Hold).
Performance of Another Insurer
Of the insurance industry players that have reported third-quarter 2023 results so far, the bottom-line result of The Progressive Corporation PGR beat the respective Zacks Consensus Estimate.
Progressive reported third-quarter earnings per share of $2.09, which beat the consensus estimate of earnings of $1.71 per share. The bottom line improved more than four-fold year over year. Net premiums earned grew 20% year over year to $14.9 billion. Operating revenues of PGR were about $4.9 billion, up 20.4% year over year. This improvement was driven by a 20.2% increase in premiums, 19.3% higher fees and other revenues and 33.3% higher investment income.
The combined ratio — the percentage of premiums paid out as claims and expenses — improved 680 basis points from the prior-year quarter’s level to 92.4. Policies in force were solid in the Personal Auto segment, increasing 12% from the year-ago month’s figure to 19.5 million.
Upcoming Releases
Cincinnati Financial Corporation CINF has an Earnings ESP of +3.00% and a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CINF’s third-quarter 2023 earnings is $1.07 per share, which indicates a surge of 46.6% from the year-ago quarter’s reported figure. The consensus mark for Cincinnati Financial’s third-quarter earnings has moved 2.9% north in the past 30 days.
The Hartford Financial Services Group, Inc. HIG has an Earnings ESP of +1.61% and a Zacks Rank #2, at present. The Zacks Consensus Estimate for HIG’s third-quarter 2023 earnings is $1.95 per share, implying 35.4% growth from the year-ago quarter’s reported figure.
Hartford Financial’s earnings beat estimates in three of the trailing four quarters and matched the mark once, the average surprise being 9.36%.
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