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Marsh & McLennan boosts first-quarter revenue, but net income flat

Marsh & McLennan boosts first-quarter revenue, but net income flat

Marsh & McLennan Cos. Inc.'s revenue for the first quarter of 2016 rose 3.8% year over year to $3.34 billion, spurred in part by a nearly 10% jump in revenue from Marsh L.L.C.'s business in the United States and Canada.

Marsh & McLennan said Thursday that its net income for the period remained virtually flat at $481 million.

“I am pleased with” the first-quarter results, Marsh & McLennan President and CEO Dan Glaser said during an earnings call. Noting the brokerage had growth across all four of its operating companies, Mr. Glaser said the company expects underlying revenue growth of 3% to 5% for the year as a whole.

In its earnings statement, Marsh & McLennan noted that its first-quarter results last year reflected a net credit of about $125 million owing to it terminating its post-65 retiree medical reimbursement program in the United States in March 2015, a credit it did not have this year.

He also cited the “continuing strong performance” by the company's Marsh & McLennan Agency operation, which targets middle-market accounts.

For the first quarter of this year, revenue for its Marsh L.L.C. brokerage and risk management consulting unit rose 4.1% to $1.49 billion. Within Marsh, revenue from its U.S. and Canadian operations grew 9.9% to $701 million for the quarter.

Revenue at Marsh & McLennan's Guy Carpenter & Co. L.L.C. reinsurance brokerage operation rose 1.6% to $374 million. Total income for its risk and insurance services operations, including fiduciary interest income, rose 3.6% to $1.87 billion. On its consulting side, revenue for Marsh & McLennan's Mercer L.L.C. consulting unit increased less than 1% to $1.04 billion while, while that of its Oliver Wyman Group grew 14.3% to $439 million.

Mr. Glaser also addressed the impact of the United Kingdom's potential withdrawal from the European Union, a question on which British citizens will vote in June.

Mr. Glaser said Marsh & McLennan supports the E.U., and believes a British withdrawal would create an environment of uncertainty for both the United Kingdom and European Union that could last for years.

He said the immediate impact on Marsh & McLennan would be foreign exchange volatility. He also said a U.K. exit could “jeopardize” London's position as a major financial center.

Marsh & McLennan posted a “pretty good result,” said Mark Dwelle, an analyst with RBC Capital Markets Inc. in Richmond, Virginia, in a note. “Both units posted strong margins and top-line growth was evident in both units, which shows how much (foreign exchange) had impacted results for most of last year (no mention of it in this quarter's report so we assume it was benign).”

“Marsh & McLennan reported first quarter 2016 adjusted earnings per share of $0.92, vs. our estimate of $0.87, as compared to consensus looking for $0.89,” wrote Paul Newsome, managing director at Sandler O'Neill & Partners L.P. in Chicago in a note. He noted that adjusted margin outperformance drove results “to more than offset modestly lower than expected revenues.”

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