TIDMMHM
Marsh & McLennan Companies, Inc. (NYSE:MMC), the world's
leading professional services firm in the areas of risk, strategy
and people, today reported financial results for the fourth quarter
and year ended December 31, 2019.
"2019 was a historic year for Marsh & McLennan," said Dan
Glaser, President and CEO. "We closed the largest transaction in
our Company's history, maintained our momentum through the
integration and met our key milestones. We grew total revenue 11%
and generated 4% underlying growth. We increased our adjusted
operating income by 14%, adjusted margin by 110 basis points and
adjusted EPS by 7%. With a solid fourth quarter, we enter 2020 well
positioned for continued growth."
Consolidated ResultsConsolidated revenue in the fourth quarter
of 2019 was $4.3 billion, an increase of 15% compared with the
fourth quarter of 2018, or 3% on an underlying basis. Underlying
revenue growth is calculated as if Marsh & McLennan and Jardine
Lloyd Thompson were a combined company a year ago, but excludes the
impact of currency, other acquisitions, dispositions, and transfers
among businesses. Operating income was $592 million compared with
$621 million in the prior year period. Adjusted operating income,
which excludes noteworthy items as presented in the attached
supplemental schedules, rose 17% to $856 million. Net income
attributable to the Company was $391 million, or $0.76 per diluted
share, compared with $0.30 in the fourth quarter of 2018. Adjusted
earnings per share increased 9% to $1.19 compared with $1.09 for
the prior year period.
For the year 2019, revenue was $16.7 billion, an increase of 11%
compared with 2018, or 4% on an underlying basis. Operating income
was $2.7 billion, while adjusted operating income rose 14% to $3.4
billion. Net income attributable to the Company was $1.7 billion.
Earnings per share increased 6% to $3.41. Adjusted earnings per
share increased 7% to $4.66 compared with $4.35 in 2018.
Risk & Insurance ServicesRisk & Insurance Services
revenue was $2.4 billion in the fourth quarter of 2019, an increase
of 24%, or 3% on an underlying basis. Operating income was $365
million, compared with $383 million in the fourth quarter of 2018.
Adjusted operating income increased 31% to $550 million. For the
year 2019, revenue was $9.6 billion, an increase of 17%, or 4% on
an underlying basis. Operating income was $1.8 billion, compared to
$1.9 billion for the full year of 2018. Adjusted operating income
rose 17% to $2.3 billion.
Marsh's revenue in the fourth quarter of 2019 was $2.2 billion,
an increase of 23%, or 3% on an underlying basis. In U.S./Canada,
underlying revenue rose 4%. International operations produced
underlying revenue growth of 1%, reflecting underlying growth of 7%
in Asia Pacific and 2% in Latin America, partially offset by a
decline of 1% in EMEA. For the year 2019, Marsh's revenue growth
was 17%, or 4% on an underlying basis.
Guy Carpenter's fourth quarter revenue was $152 million, up 10%
on an underlying basis. For the year 2019, Guy Carpenter's
underlying revenue growth was 5%.
ConsultingConsulting revenue was $1.9 billion in the fourth
quarter of 2019, an increase of 4%, or 2% on an underlying basis.
Operating income of $336 million rose 14%. Adjusted operating
income was flat at $359 million. For the year 2019, revenue was
$7.1 billion, up 5%, or 3% on an underlying basis. Operating income
increased 10% to $1.2 billion, and adjusted operating income
increased 9% to $1.3 billion.
Mercer's revenue was $1.3 billion in the fourth quarter of 2019,
an increase of 8%, or 4% on an underlying basis. Health, with
revenue of $455 million, was up 6% on an underlying basis. Career
revenue of $250 million increased 4% on an underlying basis, and
Wealth revenue of $621 million increased 2% on an underlying basis.
For the year 2019, Mercer's revenue growth was 6%, or 2% on an
underlying basis.
Oliver Wyman's revenue was $559 million in the fourth quarter of
2019, a decrease of 2% on an underlying basis. For the year 2019,
Oliver Wyman's revenue increased to $2.1 billion, up 6% on an
underlying basis.
Other ItemsThe Company repurchased 1.8 million shares of its
common stock for $185 million in the fourth quarter. For the year
2019, 4.8 million shares were repurchased for $485 million.
Conference CallA conference call to discuss fourth quarter and
full year 2019 results will be held today at 8:30 a.m. Eastern
time. To participate in the teleconference, please dial +1 888 204
4368. Callers from outside the United States should dial +1 323 794
2434. The access code for both numbers is 3870718. The live audio
webcast may be accessed at MMC.com. A replay of the webcast will be
available approximately two hours after the event.
About Marsh & McLennan CompaniesMarsh & McLennan
(NYSE:MMC) is the world's leading professional services firm in the
areas of risk, strategy and people. The Company's 76,000 colleagues
advise clients in over 130 countries. With annual revenue of $17
billion, Marsh & McLennan helps clients navigate an
increasingly dynamic and complex environment through four
market-leading businesses. Marsh advises individual and commercial
clients of all sizes on insurance broking and innovative risk
management solutions. Guy Carpenter develops advanced risk,
reinsurance and capital strategies that help clients grow
profitably and pursue emerging opportunities. Mercer delivers
advice and technology-driven solutions that help organizations
redefine the world of work, reshape retirement and investment
outcomes, and unlock health and wellbeing for a changing workforce.
Oliver Wyman serves as a critical strategic, economic and brand
advisor to private sector and governmental clients. For more
information, visit mmc.com, follow us on LinkedIn and Twitter
@mmc_global or subscribe to BRINK.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTSThis press
release contains "forward-looking statements," as defined in the
Private Securities Litigation Reform Act of 1995. These statements,
which express management's current views concerning future events
or results, use words like "anticipate," "assume," "believe,"
"continue," "estimate," "expect," "intend," "plan," "project" and
similar terms, and future or conditional tense verbs like "could,"
"may," "might," "should," "will" and "would." Forward-looking
statements are subject to inherent risks and uncertainties that
could cause actual results to differ materially from those
expressed or implied in our forward-looking statements. Factors
that could materially affect our future results include, among
other things:
-- our ability to compete effectively and adapt to changes in the competitive environment, including to respond to technological change, disintermediation, digital disruption and other types of innovation;
-- the impact from lawsuits, other contingent liabilities and loss contingencies arising from errors and omissions, breach of fiduciary duty or other claims against us;
-- our ability to attract and retain industry leading talent;
-- our organization's ability to maintain adequate safeguards to protect the security of our information systems and confidential, personal or proprietary information, particularly given the large volume of our vendor network and the need to identify and patch software vulnerabilities, including those in the existing JLT information systems;
-- our ability to successfully integrate or achieve the intended benefits of our acquisitions, including JLT;
-- the impact of investigations, reviews, or other activity by regulatory or law enforcement authorities, including the ongoing investigation by the European Commission competition authority;
-- our ability to maintain our credit ratings and repay our outstanding long-term debt in a timely manner and on favorable terms, including approximately $6.8 billion issued in connection with the acquisition of JLT;
-- the regulatory, contractual and reputational risks that arise based on insurance placement activities and various insurer revenue streams;
-- the financial and operational impact of complying with laws and regulations where we operate and the risks of noncompliance with such laws, including cybersecurity and data privacy regulations such as the E.U.'s General Data Protection Regulation, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act, U.K. Anti-Bribery Act and trade sanctions regimes;
-- our ability to manage risks associated with our investment management and related services business, including potential conflicts of interest between investment consulting and fiduciary management services;
-- the impact of macroeconomic, political, regulatory or market conditions on us, our clients and the industries in which we operate, including the impact of Brexit or the inability to collect on our receivables;
-- our ability to successfully recover if we experience a business continuity problem due to cyberattack, natural disaster, pandemic or otherwise; and
-- the impact of changes in tax laws, guidance and interpretations, including certain provisions of the U.S. Tax Cuts and Jobs Act, or disagreements with tax authorities.
The factors identified above are not exhaustive. Marsh &
McLennan Companies and its subsidiaries operate in a dynamic
business environment in which new risks emerge frequently.
Accordingly, we caution readers not to place undue reliance on any
forward-looking statements, which are based only on information
currently available to us and speak only as of the dates on which
they are made. The Company undertakes no obligation to update or
revise any forward-looking statement to reflect events or
circumstances arising after the date on which it is made.
Further information concerning Marsh & McLennan Companies
and its businesses, including information about factors that could
materially affect our results of operations and financial
condition, is contained in the Company's filings with the
Securities and Exchange Commission, including the "Risk Factors"
section and the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of our most recently
filed Annual Report on Form 10-K.
Marsh & McLennan
Companies, Inc.
Consolidated Statements
of Income
(In millions, except
per share figures)
(Unaudited)
Three Months EndedDecember 31, Twelve Months EndedDecember 31,
2019 2018 2019 2018
Revenue $ 4,264 $ 3,712 $ 16,652 $ 14,950
Expense:
Compensation and Benefits 2,478 2,163 9,734 8,605
Other Operating Expenses 1,194 928 4,241 3,584
Operating Expenses 3,672 3,091 13,975 12,189
Operating Income 592 621 2,677 2,761
Other Net Benefit Credits 62 21 265 215
Interest Income 5 3 39 11
Interest Expense (130 ) (92 ) (524 ) (290 )
Cost of Extinguishment - - (32 ) -
of Debt
Investment Income (Loss) 2 12 22 (12 )
Acquisition Related - (341 ) (8 ) (441 )
Derivative
Contracts
Income Before Income Taxes 531 224 2,439 2,244
Income Tax Expense 135 65 666 574
Income from Continuing 396 159 1,773 1,670
Operations
Discontinued Operations, - - - -
Net of Tax
Net Income Before 396 159 1,773 1,670
Non-Controlling
Interests
Less: Net Income 5 6 31 20
Attributable
to Non-Controlling Interests
Net Income Attributable $ 391 $ 153 $ 1,742 $ 1,650
to the Company
Net Income Per Share
Attributable
to the Company
- Basic $ 0.77 $ 0.30 $ 3.44 $ 3.26
- Diluted $ 0.76 $ 0.30 $ 3.41 $ 3.23
Average Number of Shares
Outstanding
- Basic 504 504 506 506
- Diluted 510 509 511 511
Shares Outstanding 504 504 504 504
at December 31
JLT's results of operations for the three months ended
December 31, 2019 are included in the Company's
results of operations for the fourth quarter of
2019. JLT's results of operations from April
1, 2019 through December 31, 2019 are included in the
Company's results of operations for the twelve-month
period ended December 31, 2019. Prior periods
in 2018 do not include JLT's results.
Marsh & McLennan Companies, Inc.Supplemental Information -
Revenue AnalysisThree Months Ended December 31(Millions)
(Unaudited)
The Company conducts business in more than 130 countries. As a
result, foreign exchange rate movements may impact period-to-period
comparisons of revenue. Similarly, certain other items such as the
revenue impact of acquisitions and dispositions, including
transfers among businesses, may impact period-to-period comparisons
of revenue. Underlying revenue measures the change in revenue from
one period to the next by isolating these impacts.
The calculation of underlying revenue growth for the three
months ended December 31, 2019 includes the results of JLT. The
column "2018 Including JLT" includes JLT's prior year fourth
quarter revenue (See reconciliation of non-GAAP measures on page
14). All other acquisitions/dispositions activity is included in
the acquisitions/dispositions column.
Components of Revenue ChangeIncluding JLT*
Three Months EndedDecember 31, % Change GAAP 2018 Including % Change Including JLT in Currency Acquisitions/ Dispositions/ Underlying
2019 2018 Revenue JLT 2018 Impact Other Impact Revenue
Risk and Insurance Services
Marsh $ 2,219 $ 1,804 23 % $ 2,211 - (1 )% (1 )% 3 %
Guy Carpenter 152 102 49 % 150 2 % - (8 )% 10 %
Subtotal 2,371 1,906 24 % 2,361 - (1 )% (2 )% 3 %
Fiduciary Interest Income 25 19 24
Total Risk and Insurance Services 2,396 1,925 24 % 2,385 1 % (1 )% (2 )% 3 %
Consulting
Mercer 1,326 1,228 8 % 1,324 - (1 )% (3 )% 4 %
Oliver Wyman 559 577 (3 )% 577 (3 )% (1 )% - (2 )%
Total Consulting 1,885 1,805 4 % 1,901 (1 )% (1 )% (2 )% 2 %
Corporate/Eliminations (17 ) (18 ) (18 )
Total Revenue $ 4,264 $ 3,712 15 % $ 4,268 - (1 )% (2 )% 3 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue ChangeIncluding JLT*
Three Months EndedDecember 31, % Change GAAP 2018 Including % Change IncludingJLT in Currency Acquisitions/ Dispositions/ Underlying
2019 2018 Revenue JLT 2018 Impact Other Impact Revenue
Marsh:
EMEA $ 661 $ 522 26 % $ 736 (10 )% (1 )% (8 )% (1 )%
Asia Pacific 255 169 51 % 251 2 % (1 )% (4 )% 7 %
Latin America 156 121 30 % 165 (5 )% (6 )% (1 )% 2 %
Total International 1,072 812 32 % 1,152 (7 )% (2 )% (6 )% 1 %
U.S./Canada 1,147 992 15 % 1,059 8 % - 4 % 4 %
Total Marsh $ 2,219 $ 1,804 23 % $ 2,211 - (1 )% (1 )% 3 %
Mercer:
Wealth 621 543 14 % 618 - (1 )% - 2 %
Health 455 449 1 % 471 (3 )% - (9 )% 6 %
Career 250 236 6 % 235 6 % (1 )% 3 % 4 %
Total Mercer $ 1,326 $ 1,228 8 % $ 1,324 - (1 )% (3 )% 4 %
*Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.Supplemental Information -
Revenue AnalysisTwelve Months Ended December 31(Millions)
(Unaudited)
The Company conducts business in more than 130 countries. As a
result, foreign exchange rate movements may impact period-to-period
comparisons of revenue. Similarly, certain other items such as the
revenue impact of acquisitions and dispositions, including
transfers among businesses, may impact period-to-period comparisons
of revenue. Underlying revenue measures the change in revenue from
one period to the next by isolating these impacts.
The calculation of underlying revenue growth for the twelve
months ended December 31, 2019 includes the results of JLT. The
column "2018 Including JLT" includes JLT's prior year revenue
beginning April 1, 2018 (See reconciliation of non-GAAP measures on
page 14). The decrease in revenue due to the disposal of JLT's
aerospace business in the second quarter of 2019 is reflected in
the acquisitions/dispositions column. All other
acquisitions/dispositions activity is included in the
acquisitions/dispositions column.
Components of Revenue ChangeIncluding JLT*
Twelve Months EndedDecember 31, % Change GAAP 2018 Including % Change Including JLT in Currency Acquisitions/ Dispositions/ Underlying
2019 2018 Revenue JLT 2018 Impact Other Impact Revenue
Risk and Insurance Services
Marsh $ 8,014 $ 6,877 17 % $ 7,895 2 % (2 )% - 4 %
Guy Carpenter 1,480 1,286 15 % 1,442 3 % (1 )% (1 )% 5 %
Subtotal 9,494 8,163 16 % 9,337 2 % (2 )% - 4 %
Fiduciary Interest Income 105 65 78
Total Risk and Insurance Services 9,599 8,228 17 % 9,415 2 % (2 )% - 4 %
Consulting
Mercer 5,021 4,732 6 % 5,001 - (2 )% - 2 %
Oliver Wyman Group 2,122 2,047 4 % 2,047 4 % (2 )% - 6 %
Total Consulting 7,143 6,779 5 % 7,048 1 % (2 )% - 3 %
Corporate/Eliminations (90 ) (57 ) (57 )
Total Revenue $ 16,652 $ 14,950 11 % $ 16,406 2 % (2 )% - 4 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue ChangeIncluding JLT*
Twelve Months EndedDecember 31, % Change GAAP 2018 Including % Change Including JLT in Currency Acquisitions/ Dispositions/ Underlying
2019 2018 Revenue JLT 2018 Impact Other Impact Revenue
Marsh:
EMEA $ 2,482 $ 2,132 16 % $ 2,607 (5 )% (3 )% (2 )% 1 %
Asia Pacific 953 683 39 % 948 1 % (3 )% (3 )% 7 %
Latin America 460 400 15 % 515 (11 )% (8 )% (6 )% 3 %
Total International 3,895 3,215 21 % 4,070 (4 )% (4 )% (3 )% 3 %
U.S./Canada 4,119 3,662 12 % 3,825 8 % - 3 % 5 %
Total Marsh $ 8,014 $ 6,877 17 % $ 7,895 2 % (2 )% - 4 %
Mercer:
Wealth 2,369 2,185 8 % 2,394 (1 )% (3 )% 2 % -
Health 1,796 1,735 4 % 1,793 - (1 )% (3 )% 5 %
Career 856 812 5 % 814 5 % (2 )% 3 % 5 %
Total Mercer $ 5,021 $ 4,732 6 % $ 5,001 - (2 )% - 2 %
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP
Measures - Actual as ReportedThree Months Ended December
31(Millions) (Unaudited)
Overview
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States
(referred to in this release as "GAAP" or "reported" results). The
Company also refers to and presents below certain additional
non-GAAP financial measures, within the meaning of Regulation G
under the Securities Exchange Act of 1934. These measures are:
adjusted operating income (loss), adjusted operating margin,
adjusted income, net of tax and adjusted earnings per share (EPS).
The Company has included reconciliations of these non-GAAP
financial measures to the most directly comparable financial
measure calculated in accordance with GAAP in the following
tables.
The Company believes these non-GAAP financial measures provide
useful supplemental information that enables investors to better
compare the Company's performance across periods. Management also
uses these measures internally to assess the operating performance
of its businesses, to assess performance for employee compensation
purposes and to decide how to allocate resources. However,
investors should not consider these non-GAAP measures in isolation
from, or as a substitute for, the financial information that the
Company reports in accordance with GAAP. The Company's non-GAAP
measures include adjustments that reflect how management views our
businesses, and may differ from similarly titled non-GAAP measures
presented by other companies.
Adjusted Operating Income (Loss) and Adjusted Operating
Margin
Adjusted operating income (loss) is calculated by excluding the
impact of certain noteworthy items from the Company's GAAP
operating income or (loss). The following tables identify these
noteworthy items and reconcile adjusted operating income (loss) to
GAAP operating income or loss, on a consolidated and segment basis,
for the three and twelve months ended December 31, 2019 and 2018.
The following tables also present adjusted operating margin. In
2019, the Company changed its methodology for calculating adjusted
operating margin due to the significant amount of identified
intangible asset amortization related to the JLT Transaction on
April 1, 2019. For the three and twelve months ended December 31,
2019 and 2018, adjusted operating margin is calculated by dividing
the sum of adjusted operating income plus identified intangible
asset amortization by consolidated or segment adjusted revenue.
The information presented below represents the actual as
reported results for the three months ended December 31, 2019 and
2018. Results for the three months ended December 31, 2018 are for
MMC only, as previously reported, and do not include JLT
results.
Risk &InsuranceServices Consulting Corporate/Eliminations Total
Three Months Ended
December 31, 2019
Operating income $ 365 $ 336 $ (109 ) $ 592
(loss)
Operating margin 15.2 % 17.8 % N/A 13.9 %
Add (Deduct)
impact of
Noteworthy Items:
Restructuring, 28 13 15 56
excluding
JLT (a)
Changes in 41 1 - 42
contingent
consideration (b)
JLT integration 95 8 40 143
and
restructuring
costs (c)
JLT 16 1 - 17
acquisition-related
costs (d)
Disposal of 2 - - 2
businesses
Other 3 - 1 4
Operating income 185 23 56 264
adjustments
Adjusted operating $ 550 $ 359 $ (53 ) $ 856
income (loss)
Total identified $ 66 $ 13 $ - $ 79
intangible
amortization
expense
Adjusted operating 25.7 % 19.7 % N/A 21.9 %
margin
As Reported
Results
Three Months Ended
December 31, 2018
Operating income $ 383 $ 294 $ (56 ) $ 621
(loss),
as reported
Operating margin 19.9 % 16.3 % N/A 16.7 %
Add (Deduct)
impact of
Noteworthy Items:
Restructuring, 12 51 3 66
excluding
JLT (a)
Changes in 6 7 - 13
contingent
consideration (b)
JLT acquisition 5 - 7 12
related
costs (c)
Subsidiary or 11 6 - 17
affiliate
transactions (e)
Other 1 1 - 2
Operating income 35 65 10 110
adjustments
Adjusted operating $ 418 $ 359 $ (46 ) $ 731
income (loss)
Total identified $ 40 $ 8 $ - $ 48
intangible
amortization
expense
Adjusted operating 23.7 % 20.3 % N/A 20.9 %
margin
(a) Includes severance and related charges
from restructuring activities, adjustments
to restructuring liabilities for future rent under non-cancellable
leases and other real estate costs, and restructuring costs related to
the integration of recent acquisitions. Risk & Insurance Services in
2019 reflects severance and related charges
from non-JLT merger integration costs.
Consulting in 2019 reflects severance related to the Mercer restructuring
program. Risk & Insurance Services in 2018 reflects severance and
consulting costs related to the Marsh simplification initiative.
(b) Primarily includes the change in fair value as measured each
quarter of contingent consideration related to acquisitions.
(c) Includes costs incurred for staff reductions, lease related exit
costs as well as consulting costs related to the JLT Transaction.
(d) Reflects retention costs in the Risk
& Insurance Services and Consulting
segments related to the closing of the JLT Transaction.
(e) Dispositions or deconsolidation of businesses
and results of certain equity method
investments are reflected as an increase
or decrease of other revenue, which is
reflected as part of revenue in the consolidated
statements of income. These items
are removed from GAAP revenue in the calculation
of adjusted operating margin.
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP
Measures - Actual as ReportedTwelve Months Ended December
31(Millions) (Unaudited)
The information presented below represents the actual as
reported data for the twelve months ended December 31, 2019 and
2018. Results for the twelve months ended December 31, 2018 are for
MMC only, as previously reported, and do not include JLT
results.
Risk &InsuranceServices Consulting Corporate/Eliminations Total
Twelve Months Ended
December 31, 2019
Operating income $ 1,833 $ 1,210 $ (366 ) $ 2,677
(loss)
Operating margin 19.1 % 16.9 % N/A 16.1 %
Add (Deduct) impact of
Noteworthy Items:
Restructuring, 34 56 22 112
excluding
JLT (a)
Changes in contingent 65 3 - 68
consideration (b)
JLT integration and 229 18 88 335
restructuring
costs (c)
JLT 97 2 51 150
acquisition-related
costs (d)
Disposal of businesses 15 (14 ) - 1
(e)
Other 6 - 2 8
Operating income 446 65 163 674
adjustments
Adjusted operating $ 2,279 $ 1,275 $ (203 ) $ 3,351
income (loss)
Total identified $ 260 $ 54 $ - $ 314
intangible
amortization expense
Adjusted operating 26.3 % 18.6 % N/A 22.0 %
margin
As Reported Results
Twelve Months Ended
December 31, 2018
Operating income $ 1,864 $ 1,099 $ (202 ) $ 2,761
(loss),
as reported
Operating margin 22.7 % 16.2 % N/A 18.5 %
Add (Deduct) impact of
Noteworthy Items:
Restructuring, 99 52 10 161
excluding
JLT (a)
Changes in contingent 22 10 - 32
consideration (b)
JLT acquisition 5 - 7 12
related
costs (d)
Subsidiary or (35 ) 6 - (29 )
affiliate
transactions (f)
Other 1 - - 1
Operating income 92 68 17 177
adjustments
Adjusted operating $ 1,956 $ 1,167 $ (185 ) $ 2,938
income (loss)
Total identified $ 151 $ 32 $ - $ 183
intangible
amortization expense
Adjusted operating 25.7 % 17.7 % N/A 20.9 %
margin
(a) Includes severance and related charges
from restructuring activities, adjustments
to restructuring liabilities for future rent under non-cancellable
leases and other real estate costs, and restructuring costs related to
the integration of recent acquisitions. Risk & Insurance Services in
2019 reflects severance and related charges
from non-JLT merger integration costs.
Consulting in 2019 reflects severance related to the Mercer restructuring
program. Risk & Insurance Services in 2018 reflects severance and
consulting costs related to the Marsh simplification initiative.
(b) Primarily includes the change in fair value as measured each
quarter of contingent consideration related to acquisitions.
(c) Includes costs incurred for staff reductions, lease related exit costs
as well as legal and consulting costs related to the integration.
(d) Includes advisor fees and stamp duty
taxes related to the closing of the
JLT Transaction and retention costs. Also includes the loss on the sale
of JLT's aerospace business, which is included
in revenue. This loss is removed
from GAAP revenue in the calculation of adjusted operating income.
(e) Reflects the loss on the sale of a U.S.
Specialty business at Marsh and a gain
on the sale of Mercer's stand-alone U.S.
large market health and defined benefit
administration business, which are both
included in revenue. These amounts are
removed from GAAP revenue in the calculation of adjusted operating income.
(f) Dispositions or deconsolidation of businesses
and results of certain equity method
investments are reflected as an increase
or decrease of other revenue, which is
reflected as part of revenue in the consolidated
statements of income. These items
are removed from GAAP revenue in the calculation
of adjusted operating margin.
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP
MeasuresThree and Twelve Months Ended December 31(Millions)
(Unaudited)
Adjusted income, net of tax is calculated as the Company's GAAP
income from continuing operations, adjusted to reflect the after
tax impact of the operating income adjustments set forth in the
preceding tables and investments gains or losses related to the
impact of mark-to-market adjustments on certain equity securities
and adjustments to provisional 2017 tax estimates. Adjustments also
include JLT acquisition related items, including change in fair
value of derivative contracts, financing costs and interest income
on funds held in escrow. Adjusted EPS is calculated by dividing the
Company's adjusted income, net of tax, by MMC's average number of
shares outstanding-diluted for the relevant period. The following
tables reconcile adjusted income, net of tax to GAAP income from
continuing operations and adjusted EPS to GAAP EPS for the three
and twelve months ended December 31, 2019 and 2018. Results for the
three and twelve months ended December 31, 2018 are for MMC only,
as previously reported, and do not include JLT results.
Three Months EndedDecember 31, 2019 Three Months EndedDecember 31, 2018
Amount AdjustedEPS Amount AdjustedEPS
Net income before $ 396 $ 159
non-controlling
interests, as reported
Less: Non-controlling 5 6
interest, net of tax
Subtotal $ 391 $ 0.76 $ 153 $ 0.30
Operating income adjustments $ 264 $ 110
Investments adjustment (a) - (8 )
Pension settlement 9 42
adjustment/charge
(b)
Change in fair value - 341
of acquisition
related derivative contracts (c)
Financing costs (d) - 27
Impact of income taxes (54 ) (113 )
on above items
Adjustments to provisional - 6
2017 tax estimates (f)
219 0.43 405 0.79
Adjusted income, net of tax $ 610 $ 1.19 $ 558 $ 1.09
Twelve Months EndedDecember 31, 2019 Twelve Months EndedDecember 31, 2018
Amount AdjustedEPS Amount AdjustedEPS
Net income before $ 1,773 $ 1,670
non-controlling
interests, as reported
Less: Non-controlling 31 20
interest, net of tax
Subtotal $ 1,742 $ 3.41 $ 1,650 $ 3.23
Operating income adjustments $ 674 $ 177
Investments adjustment (a) (10 ) 29
Pension settlement 7 42
adjustment/charge
(b)
Change in fair value 8 441
of acquisition
related derivative contracts (c)
Financing costs (d) 53 30
Interest on funds held (25 ) -
in escrow (e)
Early extinguishment of debt 32 -
Impact of income taxes (99 ) (139 )
on above items
Adjustments to provisional - (5 )
2017 tax estimates (f)
640 1.25 575 1.12
Adjusted income, net of tax $ 2,382 $ 4.66 $ 2,225 $ 4.35
(a) The Company recorded mark-to-market gains
of $8 million for the three month
period ended December 31, 2018 and gains
of $10 million and $54 million for
the twelve month periods ended December
31, 2019 and 2018, respectively, which
are included in investment income in the
consolidated statements of income.
In 2018, the Company had an investment in Alexander
Forbes ("AF"), which is accounted for using
the equity method. Based on the extent of and duration
over which the shares traded below the
Company's carrying value, the Company determined
the decline was other than temporary and during
the third quarter of 2018, recorded a charge
of $83 million in Investment gain or loss.
(b) Pension settlement charge resulting from lump sum settlements elected
by participants. Recognition of these payments as a partial settlement
was required because in each respective plan the lump sum payments
exceeded the total of interest and service cost for the year.
(c) Reflects the change in fair value of derivatives that
were not redesignated as accounting hedges following the
JLT acquisition, a deal contingent foreign exchange contract
and derivative contracts related to debt issuances.
(d) Reflects interest expense on debt issuances and amortization of bridge
financing fees related to the acquisition of JLT (prior to April 1, 2019).
(e) Interest income earned on funds held in escrow related
to the JLT acquisition (prior to April 1, 2019).
(f) Reflects adjustments to provisional
2017 year-end estimates of transition
taxes and U.S. deferred tax assets and liabilities from U.S. tax reform.
Marsh & McLennan Companies, Inc.
Supplemental Information
Three and Twelve Months
Ended December 31
(Millions) (Unaudited)
Three Months EndedDecember 31, Twelve Months Ended December 31,
2019 2018 2019 2018
Consolidated
Compensation and Benefits $ 2,478 $ 2,163 $ 9,734 $ 8,605
Other operating expenses 1,194 928 4,241 3,584
Total Expenses $ 3,672 $ 3,091 $ 13,975 $ 12,189
Depreciation and amortization $ 88 $ 75 $ 333 $ 311
expense
Identified intangible 79 48 314 183
amortization expense
Total $ 167 $ 123 $ 647 $ 494
Stock option expense $ 3 $ 2 $ 26 $ 22
Risk and Insurance Services
Compensation and Benefits $ 1,358 $ 1,069 $ 5,370 $ 4,485
Other operating expenses 673 473 2,396 1,879
Total Expenses $ 2,031 $ 1,542 $ 7,766 $ 6,364
Depreciation and amortization $ 42 $ 31 $ 156 $ 139
expense
Identified intangible 66 40 260 151
amortization expense
Total $ 108 $ 71 $ 416 $ 290
Consulting
Compensation and Benefits $ 1,002 $ 1,007 $ 3,934 $ 3,760
Other operating expenses 547 504 1,999 1,920
Total Expenses $ 1,549 $ 1,511 $ 5,933 $ 5,680
Depreciation and amortization $ 27 $ 24 $ 102 $ 98
expense
Identified intangible 13 8 54 32
amortization expense
Total $ 40 $ 32 $ 156 $ 130
JLT's results of operations for the three months ended December
31, 2019 are included in the Company's results of operations for
the fourth quarter of 2019. JLT's results of operations from April
1, 2019 through December 31, 2019 are included in the Company's
results of operations for the twelve-month period ended December
31, 2019. Prior periods in 2018 do not include JLT's results.
Marsh & McLennan
Companies, Inc.
Consolidated Balance
Sheets
(Millions)
(Unaudited)
December 31,2019 December 31,2018
ASSETS
Current assets:
Cash and cash $ 1,155 $ 1,066
equivalents
Net receivables 5,236 4,317
Other current assets 677 551
Total current assets 7,068 5,934
Goodwill and 17,405 11,036
intangible
assets
Fixed assets, net 858 701
Pension related 1,632 1,688
assets
Right of use assets 1,921 -
Deferred tax assets 676 680
Other assets 1,757 1,539
TOTAL ASSETS $ 31,317 $ 21,578
LIABILITIES
AND EQUITY
Current liabilities:
Short-term debt $ 1,215 $ 314
Accounts payable and 2,746 2,234
accrued liabilities
Accrued compensation 2,197 1,778
and
employee benefits
Acquisition related - 441
derivatives
Current lease 342 -
liabilities
Accrued income taxes 179 157
Total current 6,679 4,924
liabilities
Fiduciary 7,344 5,001
liabilities
Less - cash and (7,344 ) (5,001 )
investments
held
in a fiduciary
capacity
- -
Long-term debt 10,741 5,510
Pension, 2,336 1,911
post-retirement
and
post-employment
benefits
Long-term lease 1,926 -
liabilities
Liabilities 335 287
for errors
and omissions
Other liabilities 1,357 1,362
Total equity 7,943 7,584
TOTAL LIABILITIES $ 31,317 $ 21,578
AND EQUITY
Marsh & McLennan
Companies, Inc.
Consolidated Statements
of Cash Flows
(Millions) (Unaudited)
For the Years EndedDecember 31,
2019 2018
Operating cash flows:
Net income before $ 1,773 $ 1,670
non-controlling
interests
Adjustments to reconcile
net income
to cash provided
by operations:
Depreciation and 333 311
amortization
of fixed
assets and capitalized
software
Amortization of intangible 314 183
assets
Non cash lease expense 315 -
Adjustments and payments 27 (4 )
related to
contingent consideration
liability
Loss on deconsolidation - 11
of a business
Cost 32 -
of early extinguishment
of debt
(Benefit) Provision for 84 (39 )
deferred income taxes
Loss (Gain) on investments (22 ) 12
Loss (Gain) on disposition 56 (48 )
of assets
Share-based compensation 252 193
expense
Change in fair value 8 441
of acquisition
related derivative
contracts
Changes in assets
and liabilities:
Net receivables (130 ) (78 )
Other current assets (13 ) 26
Other assets (1 ) (37 )
Accounts payable and 120 23
accrued liabilities
Accrued compensation and 154 68
employee benefits
Accrued income taxes 42 (40 )
Contributions to pension (369 ) (291 )
and other benefit plans
in excess of current
year expense/credit
Other liabilities (172 ) 9
Operating lease (327 ) -
liabilities
Effect of exchange (115 ) 18
rate changes
Net cash provided 2,361 2,428
by operations
Financing cash flows:
Purchase of treasury (485 ) (675 )
shares
Increase in short 300 -
term borrowings
Proceeds from issuance 6,459 591
of debt
Repayments of debt (1,064 ) (263 )
Payment of bridge - (35 )
loan fees
Payments for early (585 ) -
extinguishment
of debt
Purchase (80 ) -
of non-controlling
interests
Acquisition-related (337 ) -
derivative
payments
Shares withheld for (89 ) (67 )
taxes on vested
units - treasury shares
Issuance of common stock 158 93
from treasury shares
Payments of deferred (65 ) (117 )
and contingent
consideration for
acquisitions
Distributions of (16 ) (30 )
non-controlling
interests
Dividends paid (890 ) (807 )
Net cash provided by (used 3,306 (1,310 )
for) financing activities
Investing cash flows:
Capital expenditures (421 ) (314 )
Net sales of long-term 183 4
investments
Purchase of equity (91 ) -
investment
Proceeds from sales 10 3
of fixed assets
Dispositions 229 110
Acquisitions (5,505 ) (884 )
Other, net (76 ) (8 )
Net cash used for (5,671 ) (1,089 )
investing
activities
Effect of exchange 93 (168 )
rate changes
on cash and cash
equivalents
Increase (decrease) 89 (139 )
in cash
and cash equivalents
Cash and cash equivalents 1,066 1,205
at beginning of year
Cash and cash equivalents $ 1,155 $ 1,066
at end of year
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP
Measures - 2018 Revenue Including JLTThree and Twelve Months Ended
December 31, 2018(Millions) (Unaudited)
On April 1, 2019, the Company completed its previously announced
acquisition of Jardine Lloyd Thompson Group, plc. JLT results of
operations for the three months ended December 31, 2019 are
included in the Company's results of operations for the fourth
quarter of 2019. Prior periods in 2018 do not include JLT's
results. Prior to being acquired by the Company, JLT operated in
three segments, Specialty, Reinsurance and Employee Benefits. As of
April 1, 2019, the historical JLT businesses were combined into MMC
operations as follows: JLT Specialty was included by geography
within Marsh, JLT Reinsurance was included within Guy Carpenter and
the majority of the JLT Employee Benefits business was included in
Mercer Health and Wealth.
The JLT Transaction had a significant impact on the Company's
results of operations in 2019. The Company believes that in
addition to the change in reported GAAP revenue, a comparison of
2019 revenue to the combined 2018 revenue of MMC and JLT would
provide investors useful information about the year-over-year
results.
The table below sets forth revenue information as if the
companies were combined on April 1, 2018. Consistent with
consolidated revenue in 2019, the twelve months ended December 31,
2018 does not include JLT revenue for the period from January 1 to
March 31, 2018. JLT 2018 revenue information is derived from the
"JLT Supplemental Information - Revenue Analysis" furnished to the
SEC on June 6, 2019 on Form 8-K and includes the revenue from JLT's
aerospace business. Please see the notes to the supplemental
information on that Form 8-K for additional information.
Three Months EndedDecember 31, 2018 Twelve Months EndedDecember 31, 2018
MMC As Previously Reported
Risk & Insurance Services
Marsh $ 1,804 $ 6,877
Guy Carpenter 102 1,286
Subtotal 1,906 8,163
Fiduciary Interest Income 19 65
Total Risk & Insurance Services 1,925 8,228
Consulting
Mercer 1,228 4,732
Oliver Wyman 577 2,047
Total Consulting 1,805 6,779
Corporate/Eliminations (18 ) (57 )
Total Revenue $ 3,712 $ 14,950
JLT 2018
Specialty (Marsh) $ 407 $ 1,018
Reinsurance (Guy Carpenter) 48 156
Employee Benefits (Mercer) 96 269
Subtotal 551 1,443
Fiduciary Interest Income 5 13
Total Revenue $ 556 $ 1,456
2018 Including JLT
Marsh $ 2,211 $ 7,895
Guy Carpenter 150 1,442
Subtotal 2,361 9,337
Fiduciary Interest Income 24 78
Total Risk & Insurance Services 2,385 9,415
Consulting
Mercer 1,324 5,001
Oliver Wyman 577 2,047
Total Consulting 1,901 7,048
Corporate/Eliminations (18 ) (57 )
Total Revenue $ 4,268 $ 16,406
Media: Erick R. GustafsonMarsh & McLennan Companies+1 202
263 7788erick.gustafson@mmc.com
Investors: Sarah DeWittMarsh & McLennan Companies+1 212 345
6750sarah.dewitt@mmc.com
View source version on businesswire.com:
https://www.businesswire.com/news/home/20200130005472/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
January 30, 2020 08:17 ET (13:17 GMT)
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