Marsh McLennan Reports Second Quarter 2022 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 June 30,						Six Months Ended June 30,
		2022			2021			2022			2021
Revenue	$	5,379		$	5,017		$	10,928		$	10,100
Expense:
Compensation and benefits		3,010			2,860			6,110			5,667
Other operating expenses		1,005			929			2,009			1,847
Operating expenses		4,015			3,789			8,119			7,514
Operating income		1,364			1,228			2,809			2,586
Other net benefit credits		59			71			121			142
Interest income		1			1			2			1
Interest expense		(114	)		(110	)		(224	)		(228	)
Investment income		2			19			28			30
Income before income taxes		1,312			1,209			2,736			2,531
Income tax expense		334			382			672			706
Net income before non-controlling interests		978			827			2,064			1,825
Less: Net income attributable to non-controlling interests		11			7			26			22
Net income attributable to the Company	$	967		$	820		$	2,038		$	1,803
Net income per share attributable to the Company:
- Basic	$	1.93		$	1.61		$	4.06		$	3.55
- Diluted	$	1.91		$	1.60		$	4.01		$	3.51
Average number of shares outstanding:
- Basic		501			508			502			508
- Diluted		506			513			508			514
Shares outstanding at June 30		499			507			499			507

									Components of Revenue Change*
	Three Months Ended June 30,						% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
		2022			2021		% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
Risk and Insurance Services
Marsh	$	2,778		$	2,650		5	%	(3	) %	(1	) %	9	%
Guy Carpenter		522			488		7	%	(3	) %	1	%	9	%
Subtotal		3,300			3,138		5	%	(3	) %	(1	) %	9	%
Fiduciary interest income		13			3
Total Risk and Insurance Services		3,313			3,141		5	%	(3	) %	(1	) %	9	%
Consulting
Mercer		1,389			1,274		9	%	(5	) %	7	%	7	%
Oliver Wyman Group		695			618		12	%	(4	) %	1	%	16	%
Total Consulting		2,084			1,892		10	%	(5	) %	5	%	10	%
Corporate Eliminations		(18	)		(16	)
Total Revenue	$	5,379		$	5,017		7	%	(4	) %	1	%	10	%

							Components of Revenue Change*
	Three Months Ended June 30,				% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
		2022		2021	% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
Marsh:
EMEA	$	745	$	796	(6	) %	(7	) %	(6	) %	7	%
Asia Pacific		382		347	10	%	(7	) %	6	%	11	%
Latin America		118		103	15	%	—		1	%	14	%
Total International		1,245		1,246	—		(6	) %	(2	) %	9	%
U.S./Canada		1,533		1,404	9	%	—		—		10	%
Total Marsh	$	2,778	$	2,650	5	%	(3	) %	(1	) %	9	%
Mercer:
Wealth	$	597	$	625	(5	) %	(6	) %	—		1	%
Health		587		462	27	%	(3	) %	20	%	10	%
Career		205		187	11	%	(6	) %	—		17	%
Total Mercer	$	1,389	$	1,274	9	%	(5	) %	7	%	7	%

									Components of Revenue Change*
	Six Months Ended June 30,						% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
		2022			2021		% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
Risk and Insurance Services
Marsh	$	5,324		$	4,975		7	%	(3	) %	—		10	%
Guy Carpenter		1,521			1,383		10	%	(2	) %	1	%	10	%
Subtotal		6,845			6,358		8	%	(2	) %	—		10	%
Fiduciary interest income		17			8
Total Risk and Insurance Services		6,862			6,366		8	%	(2	) %	—		10	%
Consulting
Mercer		2,732			2,562		7	%	(3	) %	4	%	7	%
Oliver Wyman Group		1,362			1,203		13	%	(3	) %	—		16	%
Total Consulting		4,094			3,765		9	%	(3	) %	2	%	10	%
Corporate Eliminations		(28	)		(31	)
Total Revenue	$	10,928		$	10,100		8	%	(3	) %	1	%	10	%

							Components of Revenue Change*
	Six Months Ended June 30,				% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
		2022		2021	% Change GAAP Revenue		Currency Impact		Acquisitions/ Dispositions/ Other Impact		Underlying Revenue
Marsh:
EMEA	$	1,587	$	1,633	(3	) %	(6	) %	(5	) %	8	%
Asia Pacific		703		621	13	%	(6	) %	5	%	14	%
Latin America		222		193	15	%	(1	) %	—		15	%
Total International		2,512		2,447	3	%	(5	) %	(2	) %	10	%
U.S./Canada		2,812		2,528	11	%	—		2	%	10	%
Total Marsh	$	5,324	$	4,975	7	%	(3	) %	—		10	%
Mercer:
Wealth	$	1,214	$	1,248	(3	) %	(4	) %	—		1	%
Health		1,111		949	17	%	(2	) %	10	%	10	%
Career		407		365	11	%	(4	) %	—		16	%
Total Mercer	$	2,732	$	2,562	7	%	(3	) %	4	%	7	%

	Risk & Insurance Services			Consulting			Corporate/ Eliminations			Total
Three Months Ended June 30, 2022
Operating income (loss)	$	967		$	475		$	(78	)	$	1,364
Operating margin		29.2	%		22.8	%		N/A			25.4	%
Add (deduct) impact of noteworthy items:
Restructuring (a)		11			4			13			28
Changes in contingent consideration (b)		12			5			—			17
JLT acquisition-related costs (c)		11			—			3			14
JLT legacy legal charges (d)		11			(1	)		—			10
Disposal of businesses (e)		—			(112	)		—			(112	)
Deconsolidation of the Russian businesses related charges		2			(2	)		—			—
Operating income adjustments		47			(106	)		16			(43	)
Adjusted operating income (loss)	$	1,014		$	369		$	(62	)	$	1,321
Total identified intangible amortization expense	$	71		$	12		$	—		$	83
Adjusted operating margin		32.8	%		19.3	%		N/A			26.7	%

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 (a)		15			9			7			31
Changes in contingent consideration (b)		(5	)		1			(3	)		(7	)
JLT acquisition-related costs (c)		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	%

(a)		Restructuring activities reflect costs related to the Company's global information technology and HR functions, JLT integration costs, Marsh operational excellence and adjustments to restructuring liabilities for future rent under non-cancellable leases.
(b)		Primarily includes the change in fair value of contingent consideration related to acquisitions and dispositions as measured each quarter.
(c)		Includes retention costs related to the acquisition of JLT.
(d)		Reflects charges and recoveries related to legacy JLT legal matters.
(e)		Reflects a gain of $112 million on the sale of the Mercer U.S. affinity business during the second quarter of 2022. The second quarter of 2021 reflects a gain of $50 million primarily on the sale of the U.K. commercial networks business. These amounts are included in revenue in the consolidated statements of income and excluded from underlying revenue and adjusted revenue in the calculation of adjusted operating margin.

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, 2022
Operating income (loss)	$	2,088		$	867		$	(146	)	$	2,809
Operating margin		30.4	%		21.2	%		N/A			25.7	%
Add (deduct) impact of noteworthy items:
Restructuring (a)		26			11			21			58
Changes in contingent consideration (b)		22			5			—			27
JLT acquisition-related costs (c)		20			1			3			24
JLT legacy legal charges (d)		14			(11	)		—			3
Disposal of businesses (e)		—			(112	)		—			(112	)
Deconsolidation of Russian businesses and other related charges (f)		42			10			—			52
Legal claims (g)		30			—			—			30
Operating income adjustments		154			(96	)		24			82
Adjusted operating income (loss)	$	2,242		$	771		$	(122	)	$	2,891
Total identified intangible amortization expense	$	149		$	25		$	—		$	174
Adjusted operating margin		34.7	%		19.9	%		N/A			28.2	%

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 (a)		32			20			13			65
Changes in contingent consideration (b)		1			(5	)		(3	)		(7	)
JLT acquisition-related costs (c)		22			2			—			24
Disposal of businesses (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	%

	Three Months Ended June 30, 2022									Three Months Ended June 30, 2021
	Amount						Adjusted EPS			Amount					Adjusted EPS
Net income before non-controlling interests, as reported				$	978								$	827
Less: Non-controlling interest, net of tax					11									7
Subtotal				$	967		$	1.91					$	820	$	1.60
Operating income adjustments	$	(43	)							$	(7	)
Investments adjustment (a)		1									(1	)
Pension settlement adjustment (b)		1									—
Income tax effect of adjustments (c)		33									(12	)
Impact of U.K. tax rate change (d)		—									100
					(8	)		(0.02	)					80		0.15
Adjusted income, net of tax				$	959		$	1.89					$	900	$	1.75


	Six Months Ended June 30, 2022									Six Months Ended June 30, 2021
	Amount						Adjusted EPS			Amount					Adjusted EPS
Net income before non-controlling interests, as reported				$	2,064								$	1,825
Less: Non-controlling interest, net of tax					26									22
Subtotal				$	2,038		$	4.01					$	1,803	$	3.51
Operating income adjustments	$	82								$	40
Investments adjustment (a)		(8	)								(1	)
Pension settlement adjustment (b)		1									—
Income tax effect of adjustments (c)		15									(21	)
Impact of U.K. tax rate change (d)		—									100
					90			0.18						118		0.23
Adjusted income, net of tax				$	2,128		$	4.19					$	1,921	$	3.74

(a)		Represents mark-to-market losses and gains, 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.
Supplemental Information
Three and Six Months Ended June 30
(Millions) (Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
Consolidated
Compensation and benefits	$	3,010	$	2,860	$	6,110	$	5,667
Other operating expenses		1,005		929		2,009		1,847
Total expenses	$	4,015	$	3,789	$	8,119	$	7,514

Depreciation and amortization expense	$	85	$	104	$	174	$	201
Identified intangible amortization expense		83		89		174		189
Total	$	168	$	193	$	348	$	390

Stock option expense	$	7	$	4	$	12	$	25

Risk and Insurance Services
Compensation and benefits	$	1,750	$	1,632	$	3,551	$	3,242
Other operating expenses		596		559		1,223		1,114
Total expenses	$	2,346	$	2,191	$	4,774	$	4,356

Depreciation and amortization expense	$	40	$	58	$	83	$	108
Identified intangible amortization expense		71		75		149		161
Total	$	111	$	133	$	232	$	269

Consulting
Compensation and benefits	$	1,145	$	1,110	$	2,309	$	2,184
Other operating expenses		464		438		918		876
Total expenses	$	1,609	$	1,548	$	3,227	$	3,060

Depreciation and amortization expense	$	27	$	29	$	53	$	58
Identified intangible amortization expense		12		14		25		28
Total	$	39	$	43	$	78	$	86


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

	(Unaudited) June 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	909		$	1,752
Net receivables		6,286			5,586
Other current assets		974			926
Total current assets		8,169			8,264

Goodwill and intangible assets		18,501			19,127
Fixed assets, net		863			847
Pension related assets		2,160			2,270
Right of use assets		1,744			1,868
Deferred tax assets		537			551
Other assets		1,466			1,461
TOTAL ASSETS	$	33,440		$	34,388

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	1,311		$	17
Accounts payable and accrued liabilities		3,029			3,165
Accrued compensation and employee benefits		1,914			2,942
Current lease liabilities		314			332
Accrued income taxes		448			198
Total current liabilities		7,016			6,654

Fiduciary liabilities		10,530			9,622
Less - cash and cash equivalents held in a fiduciary capacity		(10,530	)		(9,622	)
		—			—
Long-term debt		10,487			10,933
Pension, post-retirement and post-employment benefits		1,407			1,632
Long-term lease liabilities		1,752			1,880
Liabilities for errors and omissions		340			355
Other liabilities		1,521			1,712

Total equity		10,917			11,222
TOTAL LIABILITIES AND EQUITY	$	33,440		$	34,388


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

	Six Months Ended
	June 30,
		2022			2021
Operating cash flows:
Net income before non-controlling interests	$	2,064		$	1,825
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization		348			390
Non-cash lease expense		152			158
Deconsolidation of Russian businesses		39			—
Share-based compensation expense		194			176
Net (gain) loss on investments, disposition of assets and other		(130	)		(66	)

Changes in assets and liabilities:
Accrued compensation and employee benefits		(992	)		(630	)
Provision for taxes, net of payments and refunds		235			297
Net receivables		(978	)		(626	)
Other changes to assets and liabilities		40			(415	)
Contributions to pension and other benefit plans in excess of current year credit		(226	)		(187	)
Operating lease liabilities		(166	)		(172	)
Net cash provided by operations		580			750
Financing cash flows:
Purchase of treasury shares		(1,100	)		(434	)
Net proceeds from issuance of commercial paper		944			—
Repayments of debt		(8	)		(509	)
Net issuance of common stock from treasury shares		(115	)		(23	)
Net distributions of non-controlling interests and deferred/contingent consideration		(104	)		(47	)
Dividends paid		(547	)		(478	)
Increase in fiduciary liabilities		1,428			1,277
Net cash provided by (used for) financing activities		498			(214	)
Investing cash flows:
Capital expenditures		(239	)		(151	)
Net purchase of long-term investments and other		(3	)		(4	)
Dispositions		135			81
Acquisitions, net of cash and cash held in a fiduciary capacity acquired		(151	)		(350	)
Net cash used for investing activities		(258	)		(424	)
Effect of exchange rate changes on cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity		(755	)		38
Increase in cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity		65			150
Cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity at beginning of period		11,374			10,674
Cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity at end of period	$	11,439		$	10,824

Reconciliation of cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity to the Consolidated Balance Sheets
Six Months Ended June 30,		2022		2021
(In millions)
Cash and cash equivalents	$	909	$	888
Cash and cash equivalents held in a fiduciary capacity		10,530		9,936
Total cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity	$	11,439	$	10,824