Marsh McLennan Reports Fourth Quarter and Full-...

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 December 31,						Twelve Months Ended December 31,
	2021			2020			2021			2020
Revenue	$	5,137		$	4,416		$	19,820		$	17,224
Expense:
Compensation and benefits		2,905			2,650			11,425			10,129
Other operating expenses		1,246			1,195			4,083			4,029
Operating expenses		4,151			3,845			15,508			14,158
Operating income		986			571			4,312			3,066
Other net benefit credits		66			70			277			257
Interest income		—			2			2			7
Interest expense		(109	)		(128	)		(444	)		(515	)
Investment income (loss)		18			25			61			(22	)
Income before income taxes		961			540			4,208			2,793
Income tax expense		154			161			1,034			747
Net income before non-controlling interests		807			379			3,174			2,046
Less: net income attributable to non-controlling interests		4			5			31			30
Net income attributable to the Company	$	803		$	374		$	3,143		$	2,016
Net income per share attributable to the Company
- Basic	$	1.59		$	0.74		$	6.20		$	3.98
- Diluted	$	1.57		$	0.73		$	6.13		$	3.94
Average number of shares outstanding
- Basic		504			507			507			506
- Diluted		511			513			513			512
Shares outstanding at December 31		504			508			504			508

									Components of Revenue Change*
	Three Months Ended December 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	$	2,876		$	2,364		22	%	—		13	%	9	%
Guy Carpenter		170			162		4	%	(1	)%	—		5	%
Subtotal		3,046			2,526		21	%	—		12	%	9	%
Fiduciary Interest Income		3			6
Total Risk and Insurance Services		3,049			2,532		20	%	—		12	%	9	%
Consulting
Mercer		1,377			1,312		5	%	—		(1	)%	6	%
Oliver Wyman Group		722			590		22	%	(1	)%	1	%	22	%
Total Consulting		2,099			1,902		10	%	—		—		11	%
Corporate Eliminations		(11	)		(18	)
Total Revenue	$	5,137		$	4,416		16	%	—		7	%	10	%

							Components of Revenue Change*
	Three Months Ended December 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	$	713	$	688	4	%	(1	)%	(1	)%	5	%
Asia Pacific		560		269	109	%	(1	)%	100	%	10	%
Latin America		155		141	10	%	(4	)%	—		14	%
Total International		1,428		1,098	30	%	(1	)%	24	%	7	%
U.S./Canada		1,448		1,266	14	%	—		3	%	11	%
Total Marsh	$	2,876	$	2,364	22	%	—		13	%	9	%
Mercer:
Wealth	$	648	$	629	3	%	—		(1	)%	4	%
Health		457		445	3	%	(1	)%	(1	)%	4	%
Career		272		238	14	%	(1	)%	—		15	%
Total Mercer	$	1,377	$	1,312	5	%	—		(1	)%	6	%

									Components of Revenue Change*
	Twelve Months Ended December 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	$	10,203		$	8,595		19	%	2	%	6	%	11	%
Guy Carpenter		1,867			1,696		10	%	1	%	—		9	%
Subtotal		12,070			10,291		17	%	2	%	5	%	11	%
Fiduciary Interest Income		15			46
Total Risk and Insurance Services		12,085			10,337		17	%	2	%	5	%	10	%
Consulting
Mercer		5,254			4,928		7	%	3	%	(1	)%	5	%
Oliver Wyman Group		2,535			2,048		24	%	2	%	—		21	%
Total Consulting		7,789			6,976		12	%	3	%	—		10	%
Corporate Eliminations		(54	)		(89	)
Total Revenue	$	19,820		$	17,224		15	%	2	%	3	%	10	%

							Components of Revenue Change*
	Twelve Months Ended December 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	$	2,946	$	2,575	14	%	4	%	1	%	9	%
Asia Pacific		1,462		1,059	38	%	4	%	25	%	9	%
Latin America		453		424	7	%	(2	)%	—		9	%
Total International		4,861		4,058	20	%	4	%	7	%	9	%
U.S./Canada		5,342		4,537	18	%	1	%	4	%	13	%
Total Marsh	$	10,203	$	8,595	19	%	2	%	6	%	11	%
Mercer:
Wealth	$	2,509	$	2,348	7	%	4	%	(1	)%	4	%
Health		1,855		1,793	3	%	1	%	(1	)%	3	%
Career		890		787	13	%	2	%	—		12	%
Total Mercer	$	5,254	$	4,928	7	%	3	%	(1	)%	5	%

	Risk & Insurance Services			Consulting			Corporate/ Eliminations			Total
Three Months Ended December 31, 2021
Operating income (loss)	$	667		$	395		$	(76	)	$	986
Operating margin		21.9	%		18.8	%		N/A			19.2	%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)		19			4			12			35
Changes in contingent consideration (b)		45			1			—			46
JLT integration and restructuring costs (c)		15			15			2			32
JLT acquisition-related costs and other (d)		45			1			—			46
JLT legacy E&O provision (e)		—			(6	)		—			(6	)
Legal claims (f)		33			—			—			33
Gain on consolidation of business (g)		(267	)		—			—			(267	)
Operating income adjustments		(110	)		15			14			(81	)
Adjusted operating income (loss)	$	557		$	410		$	(62	)	$	905
Total identified intangible amortization expense	$	73		$	14		$	—		$	87
Adjusted operating margin		22.7	%		20.2	%		N/A			20.4	%


Three Months Ended December 31, 2020
Operating income (loss)	$	463		$	179		$	(71	)	$	571
Operating margin		18.3	%		9.4	%		N/A			12.9	%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)		1			37			8			46
Changes in contingent consideration (b)		3			1			—			4
JLT integration and restructuring costs (c)		46			20			4			70
JLT acquisition-related costs and other (d)		11			1			1			13
JLT legacy E&O provision (e)		—			161			—			161
Disposal of businesses (h)		1			(11	)		—			(10	)
Other		—			(1	)		1			—
Operating income adjustments		62			208			14			284
Adjusted operating income (loss)	$	525		$	387		$	(57	)	$	855
Total identified intangible amortization expense	$	70		$	16		$	—		$	86
Adjusted operating margin		23.5	%		21.4	%		N/A			21.3	%

(a)	Primarily includes restructuring expenses associated with the Company's global information technology and HR functions and adjustments to restructuring liabilities for future rent under non-cancellable leases. RIS in 2021 also includes costs related to a Marsh operational excellence program to improve efficiencies and client service. Consulting charges in 2020 reflect severance and real estate exit costs related to the Mercer restructuring program completed in 2020.
(b)	Primarily includes the change in fair value of contingent consideration related to acquisitions and dispositions as measured each quarter.
(c)	Includes costs incurred for staff reductions, lease related exit costs, technology and consulting costs related to the JLT integration.
(d)	Includes retention and legal charges related to the acquisition of JLT.
(e)	Reflects recoveries under indemnities for a legacy JLT E&O matter relating to suitability of advice provided to individuals for defined benefit pension transfers in the U.K. For the year-ended 2021, there was a reduction of $69 million in the liability including recoveries, following an increase of $161 million in the recorded liability related to this matter in 2020.
(f)	Settlement charges and legal costs related to strategic recruiting.
(g)	Reflects a gain from the fair value re-measurement of the Company’s previously held equity method investment in Marsh India upon the Company increasing its ownership interest from 49% to 92%. The gain is reflected in revenue and excluded from underlying revenue calculations and adjusted operating margin.
(h)	Consulting in 2020 includes a contingent gain adjustment, included in revenue from Mercer's U.S. large market health and defined benefit administration business sold in 2019. This amount is removed from GAAP revenue in the calculation of adjusted operating margin.

	Three Months Ended December 31, 2021									Three Months Ended December 31, 2020
(In millions, except per share data)	Amount						Adjusted EPS			Amount					Adjusted EPS
Net income before non-controlling interests, as reported				$	807								$	379
Less: Non-controlling interest, net of tax					4									5
Subtotal				$	803		$	1.57					$	374	$	0.73
Operating income adjustments	$	(81	)							$	284
Investments adjustment (a)		(4	)								(14	)
Pension settlement charges (b)		3									3
Income tax effect of adjustments (c)		(33	)								(35	)
Impact of U.K. tax rate change (d)		5									—
					(110	)		(0.21	)					238		0.46
Adjusted income, net of tax				$	693		$	1.36					$	612	$	1.19

	Twelve Months Ended December 31, 2021									Twelve Months Ended December 31, 2020
(In millions, except per share data)	Amount						Adjusted EPS			Amount					Adjusted EPS
Net income before non-controlling interests, as reported				$	3,174								$	2,046
Less: Non-controlling interest, net of tax					31									30
Subtotal				$	3,143		$	6.13					$	2,016	$	3.94
Operating income adjustments	$	(22	)							$	578
Investments adjustment (a)		(6	)								28
Pension settlement charges (b)		5									3
Income tax effect of adjustments (c)		(64	)								(85	)
Impact of U.K. tax rate change (d)		110									—
					23			0.04						524		1.03
Adjusted income, net of tax				$	3,166		$	6.17					$	2,540	$	4.97

(a)	Represents mark-to-market (gains) losses primarily related to the Company’s investment in Alexander Forbes ("AF").
(b)	Charges resulting from lump sum pension settlements elected by participants.
(c)	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.
(d)	Reflects the re-measurement of the Company's U.K. deferred tax assets and liabilities upon enactment of legislation that increased the corporate income tax rate applicable to U.K. based entities from 19% to 25%, effective April 1, 2023.

Marsh & McLennan Companies, Inc. Consolidated Balance Sheets (Millions) (Unaudited)
	December 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,752		$	2,089
Net receivables		5,586			5,326
Other current assets		926			740
Total current assets		8,264			8,155

Goodwill and intangible assets		19,127			18,216
Fixed assets, net		847			856
Pension related assets		2,270			1,768
Right of use assets		1,868			1,894
Deferred tax assets		551			702
Other assets		1,461			1,458
TOTAL ASSETS	$	34,388		$	33,049

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	17		$	517
Accounts payable and accrued liabilities		3,165			3,050
Accrued compensation and employee benefits		2,942			2,400
Current lease liabilities		332			342
Accrued income taxes		198			247
Total current liabilities		6,654			6,556

Fiduciary liabilities		9,622			8,585
Less - cash and cash equivalents held in a fiduciary capacity		(9,622	)		(8,585	)
		—			—
Long-term debt		10,933			10,796
Pension, post-retirement and post-employment benefits		1,632			2,662
Long-term lease liabilities		1,880			1,924
Liabilities for errors and omissions		355			366
Other liabilities		1,712			1,485

Total equity		11,222			9,260
TOTAL LIABILITIES AND EQUITY	$	34,388		$	33,049

Marsh & McLennan Companies, Inc. Consolidated Statements of Cash Flows^(a) (Millions) (Unaudited)

	For the Years Ended
	December 31,
	2021			2020
Operating cash flows:
Net income before non-controlling interests	$	3,174		$	2,046
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization		747			741
Non cash lease expense		327			355
Gain on consolidation of entity		(267	)		—
Share-based compensation expense		348			290
Net (gain) loss on investments, disposition of assets and other		(130	)		64

Changes in assets and liabilities:
Accrued compensation and employee benefits		527			207
Net receivables		(252	)		(75	)
Other changes to assets and liabilities		(199	)		429
Contributions to pension and other benefit plans in excess of current year credit		(372	)		(356	)
Operating lease liabilities		(349	)		(351	)
Effect of exchange rate changes		(38	)		32
Net cash provided by operations		3,516			3,382
Financing cash flows:
Purchase of treasury shares		(1,159	)		—
Borrowings from term-loan and credit facilities		—			1,000
Proceeds from issuance of debt		743			737
Repayments of debt		(1,016	)		(2,515	)
Net issuance of common stock from treasury shares		60			—
Net distributions from non-controlling interests and deferred/contingent consideration		(82	)		(159	)
Dividends paid		(1,026	)		(943	)
Increase in fiduciary liabilities		1,183			955
Net cash used for financing activities		(1,297	)		(925	)
Investing cash flows:
Capital expenditures		(406	)		(348	)
Net sales of long-term investments and other		17			104
Dispositions		84			98
Acquisitions, net of cash and cash held in a fiduciary capacity acquired		(859	)		(647	)
Net cash used for investing activities		(1,164	)		(793	)
Effect of exchange rate changes on cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity		(355	)		511
Increase in cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity		700			2,175
Cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity at beginning of period		10,674			8,499
Cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity at end of period	$	11,374		$	10,674


Reconciliation of cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity to the Consolidated Balance Sheets
For the Years Ended December 31,	2021			2020
(In millions of dollars)
Cash and cash equivalents	$	1,752		$	2,089
Cash and cash equivalents held in a fiduciary capacity		9,622			8,585
Total cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity	$	11,374		$	10,674