Marsh McLennan Reports Third 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 data) (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue	$	4,583		$	3,968		$	14,683		$	12,808
Expense:
Compensation and benefits	2,853			2,495			8,520			7,479
Other operating expenses	990			933			2,837			2,834
Operating expenses	3,843			3,428			11,357			10,313
Operating income	740			540			3,326			2,495
Other net benefit credits	69			60			211			187
Interest income	1			1			2			5
Interest expense	(107		)	(128		)	(335		)	(387		)
Investment income (loss)	13			(14		)	43			(47		)
Income before income taxes	716			459			3,247			2,253
Income tax expense	174			139			880			586
Net income before non-controlling interests	542			320			2,367			1,667
Less: Net income attributable to non-controlling interests	5			4			27			25
Net income attributable to the Company	$	537		$	316		$	2,340		$	1,642
Net income per share attributable to the Company:
- Basic	$	1.06		$	0.62		$	4.61		$	3.25
- Diluted	$	1.05		$	0.62		$	4.56		$	3.21
Average number of shares outstanding
- Basic	506			507			508			506
- Diluted	513			512			513			511
Shares outstanding at September 30	505			507			505			507

									Components of Revenue Change*
	Three Months Ended September 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	$	2,352		$	2,009		17	%	2	%	3	%	13	%
Guy Carpenter	314			274			15	%	—		—		15	%
Subtotal	2,666			2,283			17	%	1	%	2	%	13	%
Fiduciary interest income	4			8
Total Risk and Insurance Services	2,670			2,291			17	%	1	%	2	%	13	%
Consulting
Mercer	1,315			1,216			8	%	2	%	(1	)%	7	%
Oliver Wyman Group	610			480			27	%	1	%	—		25	%
Total Consulting	1,925			1,696			13	%	2	%	—		12	%
Corporate Eliminations	(12		)	(19		)
Total Revenue	$	4,583		$	3,968		16	%	2	%	1	%	13	%

							Components of Revenue Change*
	Three Months Ended September 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	$	600	$	536	12	%	4	%	—		8	%
Asia Pacific	281		254		10	%	2	%	—		9	%
Latin America	105		93		13	%	1	%	—		12	%
Total International	986		883		12	%	3	%	—		9	%
U.S./Canada	1,366		1,126		21	%	—		4	%	16	%
Total Marsh	$	2,352	$	2,009	17	%	2	%	3	%	13	%
Mercer:
Wealth	$	613	$	566	9	%	3	%	(1)	%	6	%
Health	449		430		4	%	1	%	(1)	%	4	%
Career	253		220		15	%	1	%	—		13	%
Total Mercer	$	1,315	$	1,216	8	%	2	%	(1)	%	7	%

									Components of Revenue Change*
	Nine Months Ended September 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	$	7,327		$	6,231		18	%	3	%	3	%	12	%
Guy Carpenter	1,697			1,534			11	%	1	%	—		10	%
Subtotal	9,024			7,765			16	%	3	%	2	%	11	%
Fiduciary interest income	12			40
Total Risk and Insurance Services	9,036			7,805			16	%	3	%	2	%	11	%
Consulting
Mercer	3,877			3,616			7	%	4	%	(1	)%	4	%
Oliver Wyman Group	1,813			1,458			24	%	3	%	—		21	%
Total Consulting	5,690			5,074			12	%	4	%	(1	)%	9	%
Corporate Eliminations	(43		)	(71		)
Total Revenue	$	14,683		$	12,808		15	%	3	%	1	%	10	%

							Components of Revenue Change*
	Nine Months Ended September 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	$	2,233	$	1,887	18	%	6	%	2	%	10	%
Asia Pacific	902		790		14	%	6	%	—		9	%
Latin America	298		283		5	%	(1)	%	—		6	%
Total International	3,433		2,960		16	%	5	%	1	%	9	%
U.S./Canada	3,894		3,271		19	%	1	%	5	%	14	%
Total Marsh	$	7,327	$	6,231	18	%	3	%	3	%	12	%
Mercer:
Wealth	$	1,861	$	1,719	8	%	6	%	(1)	%	4	%
Health	1,398		1,348		4	%	2	%	(1)	%	3	%
Career	618		549		13	%	3	%	—		10	%
Total Mercer	$	3,877	$	3,616	7	%	4	%	(1)	%	4	%


	Risk & Insurance Services			Consulting			Corporate/ Eliminations			Total
Three Months Ended September 30, 2021
Operating income (loss)	$	403		$	404		$	(67	)	$	740
Operating margin	15.1		%	21.0		%	N/A			16.1		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)	7			—			5			12
Changes in contingent consideration (b)	17			1			—			18
JLT integration and restructuring costs (c)	11			9			(1		)	19
JLT acquisition-related costs (d)	10			—			1			11
JLT legacy E&O provision (e)	—			(63		)	—			(63		)
Legal claims and other (f)	21			(1		)	2			22
Operating income adjustments	66			(54		)	7			19
Adjusted operating income (loss)	$	469		$	350		$	(60	)	$	759
Total identified intangible amortization expense	$	75		$	14		$	—		$	89
Adjusted operating margin	20.4		%	18.9		%	N/A			18.5		%


Three Months Ended September 30, 2020
Operating income (loss)	$	333		$	278		$	(71	)	$	540
Operating margin	14.5		%	16.4		%	N/A			13.6		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)	—			11			12			23
Changes in contingent consideration (b)	15			1			—			16
JLT integration and restructuring costs (c)	25			14			5			44
JLT acquisition-related costs (d)	15			1			(1		)	15
Other	—			1			(1		)	—
Operating income adjustments	55			28			15			98
Adjusted operating income (loss)	$	388		$	306		$	(56	)	$	638
Total identified intangible amortization expense	$	75		$	16		$	—		$	91
Adjusted operating margin	20.2		%	18.9		%	N/A			18.4		%


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

	Risk & Insurance Services			Consulting			Corporate/ Eliminations		Total
Nine Months Ended September 30, 2021
Operating income (loss)	$	2,413		$	1,109		$	(196)	$	3,326
Operating margin	26.7		%	19.5		%	N/A		22.7		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)	12			8			15		35
Changes in contingent consideration (b)	18			(4)			(3)		11
JLT integration and restructuring costs (c)	38			21			2		61
JLT acquisition-related costs (d)	32			2			1		35
JLT legacy E&O provision (e)	—			(63)			—		(63)
Legal claims and other (f)	27			—			2		29
Disposal of businesses (g)	(52)			3			—		(49)
Operating income adjustments	75			(33)			17		59
Adjusted operating income (loss)	$	2,488		$	1,076		$	(179)	$	3,385
Total identified intangible amortization expense	$	236		$	42		$	—	$	278
Adjusted operating margin	30.3		%	19.6		%	N/A		25.0		%

Nine Months Ended September 30, 2020
Operating income (loss)	$	1,883		$	815		$	(203)	$	2,495
Operating margin	24.1		%	16.1		%	N/A		19.5		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)	2			17			24		43
Changes in contingent consideration (b)	22			(2)			2		22
JLT integration and restructuring costs (c)	125			31			25		181
JLT acquisition-related costs (d)	39			2			—		41
Disposal of business (g)	6			(4)			—		2
Other	5			1			(1)		5
Operating income adjustments	199			45			50		294
Adjusted operating income (loss)	$	2,082		$	860		$	(153)	$	2,789
Total identified intangible amortization expense	$	222		$	43		$	—	$	265
Adjusted operating margin	29.5		%	17.8		%	N/A		23.8		%


	Three Months Ended September 30, 2021							Three Months Ended September 30, 2020
	Amount					Adjusted EPS		Amount					Adjusted EPS
Net income before non-controlling interests, as reported				$	542						$	320
Less: Non-controlling interest, net of tax				5							4
Subtotal				$	537	$	1.05				$	316	$	0.62
Operating income adjustments	$	19						$	98
Investments adjustment (a)	(1		)					16
Pension settlement adjustment	2							—
Income tax effect of adjustments (b)	(10		)					(12		)
Impact of U.K. tax rate change (c)	5							—
				15		0.03					102		0.20
Adjusted income, net of tax				$	552	$	1.08				$	418	$	0.82

	Nine Months Ended September 30, 2021							Nine Months Ended September 30, 2020
	Amount					Adjusted EPS		Amount					Adjusted EPS
Net income before non-controlling interests, as reported				$	2,367						$	1,667
Less: Non-controlling interest, net of tax				27							25
Subtotal				$	2,340	$	4.56				$	1,642	$	3.21
Operating income adjustments	$	59						$	294
Investments adjustment (a)	(2		)					42
Pension settlement adjustment	2							—
Income tax effect of adjustments (b)	(31		)					(50		)
Impact of U.K. tax rate change (c)	105							—
				133		0.26					286		0.56
Adjusted income, net of tax				$	2,473	$	4.82				$	1,928	$	3.77


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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Consolidated
Compensation and benefits	$	2,853	$	2,495	$	8,520	$	7,479
Other operating expenses	990		933		2,837		2,834
Total expenses	$	3,843	$	3,428	$	11,357	$	10,313

Depreciation and amortization expense	$	90	$	94	$	291	$	282
Identified intangible amortization expense	89		91		278		265
Total	$	179	$	185	$	569	$	547

Stock option expense	$	4	$	4	$	29	$	25

Risk and Insurance Services
Compensation and benefits	$	1,634	$	1,400	$	4,876	$	4,234
Other operating expenses	633		558		1,747		1,688
Total expenses	$	2,267	$	1,958	$	6,623	$	5,922

Depreciation and amortization expense	$	44	$	49	$	152	$	146
Identified intangible amortization expense	75		75		236		222
Total	$	119	$	124	$	388	$	368

Consulting
Compensation and benefits	$	1,103	$	980	$	3,287	$	2,911
Other operating expenses	418		438		1,294		1,348
Total expenses	$	1,521	$	1,418	$	4,581	$	4,259

Depreciation and amortization expense	$	29	$	29	$	87	$	86
Identified intangible amortization expense	14		16		42		43
Total	$	43	$	45	$	129	$	129

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

	(Unaudited) September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,398		$	2,089
Net receivables	5,624			5,326
Other current assets	855			740
Total current assets	7,877			8,155

Goodwill and intangible assets	18,235			18,216
Fixed assets, net	824			856
Pension related assets	1,935			1,768
Right of use assets	1,899			1,894
Deferred tax assets	692			702
Other assets	1,520			1,458
TOTAL ASSETS	$	32,982		$	33,049

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	516		$	517
Accounts payable and accrued liabilities	2,833			3,050
Accrued compensation and employee benefits	2,365			2,400
Current lease liabilities	339			342
Accrued income taxes	333			247
Dividends payable	273			—
Total current liabilities	6,659			6,556

Fiduciary liabilities	10,408			8,585
Less - cash and investments held in a fiduciary capacity	(10,408		)	(8,585		)
	—			—
Long-term debt	10,228			10,796
Pension, post-retirement and post-employment benefits	2,387			2,662
Long-term lease liabilities	1,900			1,924
Liabilities for errors and omissions	356			366
Other liabilities	1,564			1,485

Total equity	9,888			9,260
TOTAL LIABILITIES AND EQUITY	$	32,982		$	33,049


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

	Nine Months Ended September 30,
	2021			2020
Operating cash flows:
Net income before non-controlling interests	$	2,367		$	1,667
Adjustments to reconcile net income to cash used for operations:
Depreciation and amortization	569			547
Non cash lease expense	241			241
Share-based compensation expense	263			219
Net (gain) loss on investments, disposition of assets and other	(89		)	48

Changes in Assets and Liabilities:
Accrued compensation and employee benefits	(53		)	(431		)
Net receivables	(336		)	77
Other changes to assets and liabilities	(299		)	135
Contributions to pension and other benefit plans in excess of current year credit	(282		)	(240		)
Operating lease liabilities	(262		)	(254		)
Effect of exchange rate changes	(45		)	(10		)
Net cash provided by operations	2,074			1,999
Financing cash flows:
Purchase of treasury shares	(734		)	—
Borrowings from term-loan and credit facilities	—			1,000
Proceeds from issuance of debt	—			737
Repayments of debt	(512		)	(1,011		)
Net issuance of common stock from treasury shares	16			(33		)
Net distributions of non-controlling interests and deferred/contingent consideration	(66		)	(154		)
Dividends paid	(750		)	(702		)
Net cash used for financing activities	(2,046		)	(163		)
Investing cash flows:
Capital expenditures	(268		)	(278		)
Net (purchase) sale of long-term investments and other	(4		)	98
Dispositions	84			93
Acquisitions	(401		)	(559		)
Net cash used for investing activities	(589		)	(646		)
Effect of exchange rate changes on cash and cash equivalents	(130		)	43
(Decrease) increase in cash and cash equivalents	(691		)	1,233
Cash and cash equivalents at beginning of period	2,089			1,155
Cash and cash equivalents at end of period	$	1,398		$	2,388