Marsh McLennan Reports Second Quarter 2021 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 figures) (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue	$	5,017	$	4,189	$	10,100	$	8,840
Expense:
Compensation and benefits	2,860		2,429		5,667		4,984
Other operating expenses	929		875		1,847		1,901
Operating expenses	3,789		3,304		7,514		6,885
Operating income	1,228		885		2,586		1,955
Other net benefit credits	71		63		142		127
Interest income	1		2		1		4
Interest expense	(110)		(132)		(228)		(259)
Investment income (loss)	19		(31)		30		(33)
Income before income taxes	1,209		787		2,531		1,794
Income tax expense	382		207		706		447
Net income before non-controlling interests	827		580		1,825		1,347
Less: Net income attributable to non-controlling interests	7		8		22		21
Net income attributable to the Company	$	820	$	572	$	1,803	$	1,326
Net income per share attributable to the Company:
- Basic	$	1.61	$	1.13	$	3.55	$	2.62
- Diluted	$	1.60	$	1.12	$	3.51	$	2.60
Average number of shares outstanding
- Basic	508		506		508		505
- Diluted	513		511		514		510
Shares outstanding at June 30	507		506		507		506

						Components of Revenue Change*
	Three Months Ended June 30,				% 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	$	2,650	$	2,161	23%	4%	5%	14%
Guy Carpenter	488		433		13%	1%	—	12%
Subtotal	3,138		2,594		21%	4%	4%	14%
Fiduciary Interest Income	3		9
Total Risk and Insurance Services	3,141		2,603		21%	4%	4%	13%
Consulting
Mercer	1,274		1,149		11%	6%	(1)%	6%
Oliver Wyman Group	618		467		33%	5%	—	28%
Total Consulting	1,892		1,616		17%	5%	—	12%
Corporate Eliminations	(16)		(30)
Total Revenue	$	5,017	$	4,189	20%	4%	2%	13%

							Components of Revenue Change*
	Three Months Ended June 30,				% 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	$	796	$	597	33	%	9	%	9	%	16	%
Asia Pacific	347		298		16	%	8	%	(1)	%	10	%
Latin America	103		99		4	%	2	%	—		2	%
Total International	1,246		994		25	%	8	%	5	%	13	%
U.S./Canada	1,404		1,167		20	%	1	%	5	%	15	%
Total Marsh	$	2,650	$	2,161	23	%	4	%	5	%	14	%
Mercer:
Wealth	625		561		11	%	8	%	(1)	%	4	%
Health	462		432		7	%	3	%	—		4	%
Career	187		156		20	%	5	%	—		15	%
Total Mercer	$	1,274	$	1,149	11	%	6	%	(1)	%	6	%

							Components of Revenue Change*
	Six Months Ended June 30,				% 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	$	4,975	$	4,222	18	%	4	%	3	%	11	%
Guy Carpenter	1,383		1,260		10	%	2	%	—		8	%
Subtotal	6,358		5,482		16	%	3	%	3	%	10	%
Fiduciary Interest Income	8		32
Total Risk and Insurance Services	6,366		5,514		15	%	3	%	3	%	10	%
Consulting
Mercer	2,562		2,400		7	%	5	%	(1)	%	3	%
Oliver Wyman Group	1,203		978		23	%	4	%	—		19	%
Total Consulting	3,765		3,378		11	%	5	%	(1)	%	8	%
Corporate Eliminations	(31)		(52)
Total Revenue	$	10,100	$	8,840	14	%	4	%	1	%	9	%

							Components of Revenue Change*
	Six Months Ended June 30,				% 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	$	1,633	$	1,351	21	%	7	%	3	%	11	%
Asia Pacific	621		536		16	%	7	%	—		9	%
Latin America	193		190		2	%	(2	)%	—		4	%
Total International	2,447		2,077		18	%	7	%	2	%	9	%
U.S./Canada	2,528		2,145		18	%	1	%	5	%	12	%
Total Marsh	$	4,975	$	4,222	18	%	4	%	3	%	11	%
Mercer:
Wealth	1,248		1,153		8	%	7	%	(1	)%	2	%
Health	949		918		3	%	2	%	(1	)%	2	%
Career	365		329		11	%	4	%	—		8	%
Total Mercer	$	2,562	$	2,400	7	%	5	%	(1	)%	3	%

	Risk & Insurance Services			Consulting			Corporate/ Eliminations		Total
Three Months Ended June 30, 2021
Operating income (loss)	$	950		$	344		$	(66)	$	1,228
Operating margin	30.2		%	18.1		%	N/A		24.5		%
Add (deduct) impact of noteworthy Items:
Restructuring, excluding JLT (a)	4			3			5		12
Changes in contingent consideration (b)	(5)			1			(3)		(7)
JLT integration and restructuring costs (c)	11			6			2		19
JLT acquisition-related costs (d)	11			1			—		12
Disposal of businesses (e)	(51)			1			—		(50)
Other	7			—			—		7
Operating income adjustments	(23)			12			4		(7)
Adjusted operating income (loss)	$	927		$	356		$	(62)	$	1,221
Total identified intangible amortization expense	$	75		$	14		$	—	$	89
Adjusted operating margin	32.4		%	19.5		%	N/A		26.4		%


Three Months Ended June 30, 2020
Operating income (loss), as reported	$	696		$	255		$	(66)	$	885
Operating margin	26.7		%	15.8		%	N/A		21.1		%
Add (deduct) impact of noteworthy Items:
Restructuring, excluding JLT (a)	—			2			9		11
Changes in contingent consideration (b)	4			1			2		7
JLT integration and restructuring costs (c)	39			7			11		57
JLT acquisition-related costs (d)	12			—			1		13
Disposal of businesses (e)	6			—			—		6
Other	5			—			—		5
Operating income adjustments	66			10			23		99
Adjusted operating income (loss)	$	762		$	265		$	(43)	$	984
Total identified intangible amortization expense	$	75		$	13		$	—	$	88
Adjusted operating margin	32.1		%	17.3		%	N/A		25.5		%


Marsh & McLennan Companies, Inc. Reconciliation of Non-GAAP Measures Six Months Ended June 30 (Millions) (Unaudited)


	Risk & Insurance Services			Consulting			Corporate/ Eliminations		Total
Six Months Ended June 30, 2021
Operating income (loss)	$	2,010		$	705		$	(129)	$	2,586
Operating margin	31.6		%	18.7		%	N/A		25.6		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)	5			8			10		23
Changes in contingent consideration (b)	1			(5)			(3)		(7)
JLT integration and restructuring costs (c)	27			12			3		42
JLT acquisition-related costs (d)	22			2			—		24
Disposal of business (e)	(53)			4			—		(49)
Other	7			—			—		7
Operating income adjustments	9			21			10		40
Adjusted operating income (loss)	$	2,019		$	726		$	(119)	$	2,626
Total identified intangible amortization expense	$	161		$	28		$	—	$	189
Adjusted operating margin	34.5		%	20.0		%	N/A		28.0		%

Six Months Ended June 30, 2020
Operating income (loss)	$	1,550		$	537		$	(132)	$	1,955
Operating margin	28.1		%	15.9		%	N/A		22.1		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)	2			6			12		20
Changes in contingent consideration (b)	7			(3)			2		6
JLT integration and restructuring costs (c)	100			17			20		137
JLT acquisition-related costs (d)	24			1			1		26
Disposal of business (e)	6			(4)			—		2
Other	5			—			—		5
Operating income adjustments	144			17			35		196
Adjusted operating income (loss)	$	1,694		$	554		$	(97)	$	2,151
Total identified intangible amortization expense	$	147		$	27		$	—	$	174
Adjusted operating margin	33.4		%	17.2		%	N/A		26.3		%


	Three Months Ended June 30, 2021						Three Months Ended June 30, 2020
	Amount				Adjusted EPS		Amount				Adjusted EPS
Net income before non-controlling interests, as reported			$	827					$	580
Less: Non-controlling interest, net of tax			7						8
Subtotal			$	820	$	1.60			$	572	$	1.12
Operating income adjustments	$	(7)					$	99
Investments adjustment (a)	(1)						25
Income tax effect of adjustments (b)	(12)						(21)
Impact of U.K. tax rate change (c)	100						—
			80		0.15				103		0.20
Adjusted income, net of tax			$	900	$	1.75			$	675	$	1.32

	Six Months Ended June 30, 2021						Six Months Ended June 30, 2020
	Amount				Adjusted EPS		Amount				Adjusted EPS
Net income before non-controlling interests, as reported			$	1,825					$	1,347
Less: Non-controlling interest, net of tax			22						21
Subtotal			$	1,803	$	3.51			$	1,326	$	2.60
Operating income adjustments	$	40					$	196
Investments adjustment (a)	(1)						26
Income tax effect of adjustments (b)	(21)						(38)
Impact of U.K. tax rate change (c)	100						—
			118		0.23				184		0.36
Adjusted income, net of tax			$	1,921	$	3.74			$	1,510	$	2.96


Marsh & McLennan Companies, Inc. Supplemental Information Three and Six Months Ended June 30 (Millions) (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Consolidated
Compensation and benefits	$	2,860	$	2,429	$	5,667	$	4,984
Other operating expenses	929		875		1,847		1,901
Total expenses	$	3,789	$	3,304	$	7,514	$	6,885

Depreciation and amortization expense	$	104	$	91	$	201	$	188
Identified intangible amortization expense	89		88		189		174
Total	$	193	$	179	$	390	$	362

Stock option expense	$	4	$	5	$	25	$	21

Risk and Insurance Services
Compensation and benefits	$	1,632	$	1,382	$	3,242	$	2,834
Other operating expenses	559		525		1,114		1,130
Total expenses	$	2,191	$	1,907	$	4,356	$	3,964

Depreciation and amortization expense	$	58	$	45	$	108	$	97
Identified intangible amortization expense	75		75		161		147
Total	$	133	$	120	$	269	$	244

Consulting
Compensation and benefits	$	1,110	$	940	$	2,184	$	1,931
Other operating expenses	438		421		876		910
Total expenses	$	1,548	$	1,361	$	3,060	$	2,841

Depreciation and amortization expense	$	29	$	29	$	58	$	57
Identified intangible amortization expense	14		13		28		27
Total	$	43	$	42	$	86	$	84


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


	(Unaudited) June 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	888	$	2,089
Net receivables	5,839		5,326
Other current assets	846		740
Total current assets	7,573		8,155

Goodwill and intangible assets	18,492		18,216
Fixed assets, net	816		856
Pension related assets	1,911		1,768
Right of use assets	1,983		1,894
Deferred tax assets	669		702
Other assets	1,509		1,458
TOTAL ASSETS	$	32,953	$	33,049

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	516	$	517
Accounts payable and accrued liabilities	2,830		3,050
Accrued compensation and employee benefits	1,775		2,400
Current lease liabilities	342		342
Accrued income taxes	353		247
Total current liabilities	5,816		6,556

Fiduciary liabilities	9,936		8,585
Less - cash and investments held in a fiduciary capacity	(9,936)		(8,585)
	—		—
Long-term debt	10,257		10,796
Pension, post-retirement and post-employment benefits	2,539		2,662
Long-term lease liabilities	1,992		1,924
Liabilities for errors and omissions	365		366
Other liabilities	1,720		1,485

Total equity	10,264		9,260
TOTAL LIABILITIES AND EQUITY	$	32,953	$	33,049


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


	Six Months Ended June 30,
	2021		2020
Operating cash flows:
Net income before non-controlling interests	$	1,825	$	1,347
Adjustments to reconcile net income to cash used for operations:
Depreciation and amortization	390		362
Non cash lease expense	158		165
Share-based compensation expense	176		147
Change in fair value of acquisition-related derivative contracts and other	53		15

Changes in Assets and Liabilities:
Accrued compensation and employee benefits	(642)		(848)
Net receivables	(551)		(389)
Other changes to assets and liabilities	(205)		114
Contributions to pension & other benefit plans in excess of current year credit	(187)		(165)
Operating lease liabilities	(172)		(164)
Effect of exchange rate changes	(95)		(6)
Net cash provided by operations	750		578
Financing cash flows:
Purchase of treasury shares	(434)		—
Borrowings from term-loan and credit facilities	—		1,000
Proceeds from issuance of debt	—		737
Repayments of debt	(509)		(507)
Net issuance of common stock from treasury shares	(23)		(49)
Net distributions of non-controlling interests and deferred/contingent consideration	(47)		(94)
Dividends paid	(478)		(466)
Net cash (used for) provided by financing activities	(1,491)		621
Investing cash flows:
Capital expenditures	(151)		(200)
Net (purchase) sale of long-term investments and other	(4)		105
Dispositions	81		93
Acquisitions	(363)		(562)
Net cash used for investing activities	(437)		(564)
Effect of exchange rate changes on cash and cash equivalents	(23)		(79)
(Decrease) increase in cash and cash equivalents	(1,201)		556
Cash and cash equivalents at beginning of period	2,089		1,155
Cash and cash equivalents at end of period	$	888	$	1,711