Marsh McLennan Reports First Quarter 2021 Results

Companies

Marsh & Mclennan Cos Inc. (MHM)

UK 100

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	Three Months Ended March 31,
	2021		2020
Revenue	$	5,083	$	4,651
Expense:
Compensation and benefits	2,807		2,555
Other operating expenses	918		1,026
Operating expenses	3,725		3,581
Operating income	1,358		1,070
Other net benefit credits	71		64
Interest income	—		2
Interest expense	(118)		(127)
Investment income (loss)	11		(2)
Income before income taxes	1,322		1,007
Income tax expense	324		240
Net income before non-controlling interests	998		767
Less: Net income attributable to non-controlling interests	15		13
Net income attributable to the Company	$	983	$	754
Net income per share attributable to the Company:
- Basic	$	1.93	$	1.49
- Diluted	$	1.91	$	1.48
Average number of shares outstanding
- Basic	509		505
- Diluted	514		510
Shares outstanding at March 31	509		506

							Components of Revenue Change*
	Three Months Ended March 31,				% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
	2021		2020		% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
Risk and Insurance Services
Marsh	$	2,325	$	2,061	13	%	3	%	2	%	8	%
Guy Carpenter	895		827		8	%	2	%	—		7	%
Subtotal	3,220		2,888		11	%	3	%	1	%	7	%
Fiduciary Interest Income	5		23
Total Risk and Insurance Services	3,225		2,911		11	%	3	%	1	%	7	%
Consulting
Mercer	1,288		1,251		3	%	4	%	(1)	%	—
Oliver Wyman Group	585		511		14	%	3	%	—		11	%
Total Consulting	1,873		1,762		6	%	4	%	(1)	%	3	%
Corporate/Eliminations	(15)		(22)
Total Revenue	$	5,083	$	4,651	9	%	3	%	—		6	%

						Components of Revenue Change*
	Three Months Ended March 31,				% Change GAAP Revenue	Currency Impact	Acquisitions/ Dispositions/ Other Impact	Underlying Revenue
	2021		2020		% Change GAAP Revenue	Currency Impact	Acquisitions/ Dispositions/ Other Impact	Underlying Revenue
Marsh:
EMEA	$	837	$	754	11%	7%	(2)%	6%
Asia Pacific	274		238		15%	7%	1%	8%
Latin America	90		91		(1)%	(7)%	—	6%
Total International	1,201		1,083		11%	5%	(1)%	6%
U.S./Canada	1,124		978		15%	1%	5%	9%
Total Marsh	$	2,325	$	2,061	13%	3%	2%	8%
Mercer:
Wealth	623		592		5%	6%	(1)%	1%
Health	487		486		—	1%	(1)%	—
Career	178		173		3%	3%	—	1%
Total Mercer	$	1,288	$	1,251	3%	4%	(1)%	—

	Risk & Insurance Services			Consulting			Corporate/ Eliminations		Total
Three Months Ended March 31, 2021
Operating income (loss)	$	1,060		$	361		$	(63)	$	1,358
Operating margin	32.9		%	19.3		%	N/A		26.7		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)	1			5			5		11
Changes in contingent consideration (b)	6			(6)			—		—
JLT integration and restructuring costs (c)	16			6			1		23
JLT acquisition-related costs (d)	11			1			—		12
Other	(2)			3			—		1
Operating income adjustments	32			9			6		47
Adjusted operating income (loss)	$	1,092		$	370		$	(57)	$	1,405
Total identified intangible amortization expense	$	86		$	14		$	—	$	100
Adjusted operating margin	36.6		%	20.5		%	N/A		29.6		%

Three Months Ended March 31, 2020
Operating income (loss)	$	854		$	282		$	(66)	$	1,070
Operating margin	29.4		%	16.0		%	N/A		23.0		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)	2			4			3		9
Changes in contingent consideration (b)	3			(4)			—		(1)
JLT integration and restructuring costs (c)	61			10			9		80
JLT acquisition-related costs (d)	12			1			—		13
Disposal of business	—			(4)			—		(4)
Operating income adjustments	78			7			12		97
Adjusted operating income (loss)	$	932		$	289		$	(54)	$	1,167
Total identified intangible amortization expense	$	72		$	14		$	—	$	86
Adjusted operating margin	34.5		%	17.2		%	N/A		27.0		%

	Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
	Amount				Adjusted EPS		Amount				Adjusted EPS
Net income before non-controlling interests, as reported			$	998					$	767
Less: Non-controlling interest, net of tax			15						13
Subtotal			$	983	$	1.91			$	754	$	1.48
Operating income adjustments	$	47					$	97
Investments adjustment	—						1
Impact of income taxes on above items	(9)						(17)
			38		0.08				81		0.16
Adjusted income, net of tax			$	1,021	$	1.99			$	835	$	1.64

	Three Months Ended March 31,
	2021		2020
Consolidated
Compensation and benefits	$	2,807	$	2,555
Other operating expenses	918		1,026
Total expenses	$	3,725	$	3,581

Depreciation and amortization expense	$	97	$	97
Identified intangible amortization expense	100		86
Total	$	197	$	183

Stock option expense	$	21	$	16

Risk and Insurance Services
Compensation and benefits	$	1,610	$	1,452
Other operating expenses	555		605
Total expenses	$	2,165	$	2,057

Depreciation and amortization expense	$	50	$	52
Identified intangible amortization expense	86		72
Total	$	136	$	124

Consulting
Compensation and benefits	$	1,074	$	991
Other operating expenses	438		489
Total expenses	$	1,512	$	1,480

Depreciation and amortization expense	$	29	$	28
Identified intangible amortization expense	14		14
Total	$	43	$	42

	(Unaudited) March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,120	$	2,089
Net receivables	5,597		5,326
Other current assets	832		740
Total current assets	7,549		8,155

Goodwill and intangible assets	18,061		18,216
Fixed assets, net	830		856
Pension related assets	1,823		1,768
Right of use assets	1,824		1,894
Deferred tax assets	704		702
Other assets	1,482		1,458
TOTAL ASSETS	$	32,273	$	33,049

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	1,015	$	517
Accounts payable and accrued liabilities	2,940		3,050
Accrued compensation and employee benefits	1,220		2,400
Current lease liabilities	342		342
Accrued income taxes	368		247
Dividends payable	238		—
Total current liabilities	6,123		6,556

Fiduciary liabilities	8,782		8,585
Less - cash and investments held in a fiduciary capacity	(8,782)		(8,585)
	—		—
Long-term debt	10,242		10,796
Pension, post-retirement and post-employment benefits	2,594		2,662
Long-term lease liabilities	1,850		1,924
Liabilities for errors and omissions	354		366
Other liabilities	1,514		1,485

Total equity	9,596		9,260
TOTAL LIABILITIES AND EQUITY	$	32,273	$	33,049

	Three Months Ended March 31,
	2021		2020
Operating cash flows:
Net income before non-controlling interests	$	998	$	767
Adjustments to reconcile net income to cash used for operations:
Depreciation and amortization	197		183
Non cash lease expense	79		80
Share-based compensation expense	78		72
Change in fair value of acquisition-related derivative contracts and other	5		(2)

Changes in Assets and Liabilities:
Accrued compensation and employee benefits	(1,180)		(1,178)
Net receivables	(275)		(313)
Other changes to assets and liabilities	(71)		(64)
Contributions to pension & other benefit plans in excess of current year credit	(102)		(85)
Operating lease liabilities	(82)		(86)
Effect of exchange rate changes	(55)		(12)
Net cash used for operations	(408)		(638)
Financing cash flows:
Purchase of treasury shares	(112)		—
Borrowings from term-loan and credit facilities	—		2,000
Net increase in commercial paper	—		193
Repayments of debt	(4)		(503)
Net issuance of common stock from treasury shares	(58)		(68)
Net distributions of non-controlling interests and deferred/contingent consideration	(40)		(50)
Dividends paid	(237)		(232)
Net cash (used for) provided by financing activities	(451)		1,340
Investing cash flows:
Capital expenditures	(69)		(118)
Net sales of long-term investments and other	2		66
Dispositions	—		7
Acquisitions	—		(200)
Net cash used for investing activities	(67)		(245)
Effect of exchange rate changes on cash and cash equivalents	(43)		(132)
(Decrease) increase in cash and cash equivalents	(969)		325
Cash and cash equivalents at beginning of period	2,089		1,155
Cash and cash equivalents at end of period	$	1,120	$	1,480