Marsh McLennan Reports First Quarter 2023 Results

Companies

Marsh & Mclennan Cos Inc. (MHM)

UK 100

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Marsh & McLennan Companies, Inc. Consolidated Statements of Income (In millions, except per share data) (Unaudited)


	Three Months Ended March 31,
	2023			2022
Revenue	$	5,924		$	5,549
Expense:
Compensation and benefits		3,207			3,100
Other operating expenses		991			1,004
Operating expenses		4,198			4,104
Operating income		1,726			1,445
Other net benefit credits		58			62
Interest income		14			1
Interest expense		(136	)		(110	)
Investment income		2			26
Income before income taxes		1,664			1,424
Income tax expense		412			338
Net income before non-controlling interests		1,252			1,086
Less: Net income attributable to non-controlling interests		17			15
Net income attributable to the Company	$	1,235		$	1,071
Net income per share attributable to the Company:
- Basic	$	2.50		$	2.13
- Diluted	$	2.47		$	2.10
Average number of shares outstanding:
- Basic		495			503
- Diluted		500			509
Shares outstanding at March 31		495			502

								Components of Revenue Change*
	Three Months Ended March 31,						% Change GAAP Revenue*	Currency Impact	Acquisitions/ Dispositions/ Other Impact**	Non-GAAP Underlying Revenue
	2023			2022			% Change GAAP Revenue*	Currency Impact	Acquisitions/ Dispositions/ Other Impact**	Non-GAAP Underlying Revenue
Risk and Insurance Services
Marsh	$	2,744		$	2,546		8%	(3)%	2%	9%
Guy Carpenter		1,071			999		7%	(2)%	(1)%	10%
Subtotal		3,815			3,545		8%	(3)%	1%	9%
Fiduciary interest income		91			4
Total Risk and Insurance Services		3,906			3,549		10%	(3)%	1%	11%
Consulting
Mercer		1,344			1,343		—	(4)%	(3)%	7%
Oliver Wyman Group		687			667		3%	(2)%	5%	—
Total Consulting		2,031			2,010		1%	(3)%	(1)%	5%
Corporate Eliminations		(13	)		(10	)
Total Revenue	$	5,924		$	5,549		7%	(3)%	1%	9%

						Components of Revenue Change*
	Three Months Ended March 31,				% Change GAAP Revenue*	Currency Impact	Acquisitions/ Dispositions/ Other Impact**	Non-GAAP Underlying Revenue
	2023		2022		% Change GAAP Revenue*	Currency Impact	Acquisitions/ Dispositions/ Other Impact**	Non-GAAP Underlying Revenue
Marsh:
EMEA (a)	$	932	$	869	7%	(6)%	3%	10%
Asia Pacific (a)		312		294	6%	(5)%	—	11%
Latin America		115		104	11%	—	—	10%
Total International		1,359		1,267	7%	(5)%	2%	10%
U.S./Canada		1,385		1,279	8%	—	2%	7%
Total Marsh	$	2,744	$	2,546	8%	(3)%	2%	9%
Mercer:
Wealth	$	581	$	617	(6)%	(5)%	(4)%	2%
Health		545		524	4%	(3)%	(5)%	12%
Career		218		202	8%	(4)%	—	12%
Total Mercer	$	1,344	$	1,343	—	(4)%	(3)%	7%

(a)	Starting In the first quarter of 2023, the Company began reporting the Marsh India operations in EMEA. Prior year results for India have been reclassified from Asia Pacific to EMEA for comparative purposes.
*	Rounded to whole percentages. Components of revenue may not add due to rounding.
**	Acquisitions, dispositions, and other includes the impact of current and prior year items excluded from the calculation of non-GAAP underlying revenue for comparability purposes. Details on these items are provided in the reconciliation of non-GAAP revenue to GAAP revenue tables included in this release.

	Risk & Insurance Services			Consulting			Corporate/ Eliminations			Total
Three Months Ended March 31, 2023
Operating income (loss)	$	1,395		$	411		$	(80	)	$	1,726
Operating margin		35.7	%		20.2	%		N/A			29.1	%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)		19			9			12			40
Changes in contingent consideration (b)		6			1			—			7
JLT integration and restructuring costs (c)		13			—			—			13
JLT legacy legal charges (d)		—			(51	)		—			(51	)
Pre-acquisition related costs (e)		—			17			—			17
Disposal of business (f)		—			19			—			19
Operating income adjustments		38			(5	)		12			45
Adjusted operating income (loss)	$	1,433		$	406		$	(68	)	$	1,771
Total identified intangible amortization expense	$	74		$	11		$	—		$	85
Adjusted operating margin		38.6	%		20.3	%		N/A			31.2	%

Three Months Ended March 31, 2022
Operating income (loss)	$	1,121		$	392		$	(68	)	$	1,445
Operating margin		31.6	%		19.5	%		N/A			26.0	%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)		9			2			7			18
Changes in contingent consideration (b)		10			—			—			10
JLT integration and restructuring costs (c)		6			5			1			12
JLT legacy legal charges (d)		—			(10	)		—			(10	)
JLT acquisition-related costs and other (g)		12			1			—			13
Legal claims (h)		30			—			—			30
Deconsolidation of Russian businesses and other related charges (i)		40			12			—			52
Operating income adjustments		107			10			8			125
Adjusted operating income (loss)	$	1,228		$	402		$	(60	)	$	1,570
Total identified intangible amortization expense	$	78		$	13		$	—		$	91
Adjusted operating margin		36.5	%		20.6	%		N/A			29.7	%

(a)		In 2023, costs primarily include severance and lease exit charges for activities focused on workforce actions, rationalization of technology and functional resources, and reductions in real estate. Costs also reflect charges for Marsh's operational excellence program.
(b)		Change in fair value of contingent consideration related to acquisitions and dispositions measured each quarter.
(c)		Reflects adjustments to restructuring liabilities for future rent under non-cancelable leases for a legacy JLT U.K. location.
(d)		Reflects insurance and indemnity recoveries for a legacy JLT E&O matter relating to suitability of advice provided to individuals for defined benefit pension transfers in the U.K.
(e)		Integration costs for the Westpac superannuation fund transaction in Australia, which closed on April 1, 2023.
(f)		Loss on sale of a small individual financial advisory business in Canada. This amount is included in revenue in the consolidated statements of income and excluded from non-GAAP revenue and adjusted revenue used in the calculation of adjusted operating margin.
(g)		Retention costs and legal charges related to the acquisition of JLT.
(h)		Settlement charges and legal costs related to strategic recruiting.
(i)		Loss on deconsolidation of Russian businesses and other related charges. The loss on deconsolidation of $39 million is included in revenue in the consolidated statements of income and excluded from non-GAAP revenue and adjusted revenue used in the calculation of adjusted operating margin. The remaining expense charges of $13 million are included in other operating expenses in the consolidated statements of income.

	Three Months Ended March 31, 2023							Three Months Ended March 31, 2022
	Amount					Adjusted EPS		Amount					Adjusted EPS
Net income before non-controlling interests, as reported				$	1,252						$	1,086
Less: Non-controlling interest, net of tax					17							15
Subtotal				$	1,235	$	2.47				$	1,071	$	2.10
Operating income adjustments	$	45						$	125
Investments adjustment (a)		2							(9	)
Income tax effect of adjustments (b)		(16	)						(18	)
					31		0.06					98		0.20
Adjusted income, net of tax				$	1,266	$	2.53				$	1,169	$	2.30

(a)		Represents mark-to-market losses and gains.
(b)		For items with an income tax impact, the tax effect was calculated using an effective tax rate based on the tax jurisdiction for each item.


Marsh & McLennan Companies, Inc. Supplemental Information Three Months Ended March 31 (Millions) (Unaudited)


	Three Months Ended March 31,
	2023		2022
Consolidated
Compensation and benefits	$	3,207	$	3,100
Other operating expenses		991		1,004
Total expenses	$	4,198	$	4,104

Depreciation and amortization expense	$	84	$	89
Identified intangible amortization expense		85		91
Total	$	169	$	180

Risk and Insurance Services
Compensation and benefits	$	1,880	$	1,801
Other operating expenses		631		627
Total expenses	$	2,511	$	2,428

Depreciation and amortization expense	$	37	$	43
Identified intangible amortization expense		74		78
Total	$	111	$	121

Consulting
Compensation and benefits	$	1,168	$	1,164
Other operating expenses		452		454
Total expenses	$	1,620	$	1,618

Depreciation and amortization expense	$	21	$	26
Identified intangible amortization expense		11		13
Total	$	32	$	39


Marsh & McLennan Companies, Inc. Consolidated Balance Sheets (Millions)


	(Unaudited) M arch 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,006		$	1,442
Net receivables		6,700			5,852
Other current assets		1,407			1,005
Total current assets		9,113			8,299

Goodwill and intangible assets		18,752			18,788
Fixed assets, net		867			871
Pension related assets		2,200			2,127
Right of use assets		1,586			1,562
Deferred tax assets		369			358
Other assets		1,471			1,449
TOTAL ASSETS	$	34,358		$	33,454

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	2,111		$	268
Accounts payable and accrued liabilities		3,406			3,278
Accrued compensation and employee benefits		1,443			3,095
Current lease liabilities		306			310
Accrued income taxes		356			221
Dividends payable		292			—
Total current liabilities		7,914			7,172

Fiduciary liabilities		10,834			10,660
Less - cash and cash equivalents held in a fiduciary capacity		(10,834	)		(10,660	)
		—			—
Long-term debt		10,841			11,227
Pension, post-retirement and post-employment benefits		896			921
Long-term lease liabilities		1,723			1,667
Liabilities for errors and omissions		355			355
Other liabilities		1,433			1,363

Total equity		11,196			10,749
TOTAL LIABILITIES AND EQUITY	$	34,358		$	33,454

Reconciliation of cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity to the Consolidated Balance Sheets
Balance at March 31,	2023		2022
(In millions)
Cash and cash equivalents	$	1,006	$	772
Cash and cash equivalents held in a fiduciary capacity		10,834		10,461
Total cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity	$	11,840	$	11,233

	2023											2022
Three Months Ended March 31,	GAAP Revenue			Currency Impact		Acquisitions/ Dispositions/ Other Impact			Non-GAAP Revenue			GAAP Revenue			Acquisitions/ Dispositions/ Other Impact			Non-GAAP Revenue
Risk and Insurance Services
Marsh (a)	$	2,744		$	71	$	(24	)	$	2,791		$	2,546		$	22		$	2,568
Guy Carpenter		1,071			18		(14	)		1,075			999			(19	)		980
Subtotal		3,815			89		(38	)		3,866			3,545			3			3,548
Fiduciary interest income		91			2		—			93			4			—			4
Total Risk and Insurance Services		3,906			91		(38	)		3,959			3,549			3			3,552
Consulting
Mercer (b)		1,344			50		19			1,413			1,343			(27	)		1,316
Oliver Wyman Group (a)		687			16		(24	)		679			667			11			678
Total Consulting		2,031			66		(5	)		2,092			2,010			(16	)		1,994
Corporate Eliminations		(13	)		—		—			(13	)		(10	)		—			(10	)
Total Revenue	$	5,924		$	157	$	(43	)	$	6,038		$	5,549		$	(13	)	$	5,536

(a)		Acquisitions, dispositions, and other in 2022 includes the loss on deconsolidation of the Company's Russian businesses at Marsh of $27 million and Oliver Wyman Group of $12 million.
(b)		Acquisitions, dispositions and other in 2023 includes the loss on sale of a small individual financial advisory business in Canada of $19 million.