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 third quarter
ended September 30, 2020.
Dan Glaser, President and CEO, said: "Marsh & McLennan's
strong performance in this period of uncertainty demonstrates our
continued excellent execution and the resilience of our business.
In the third quarter, we generated 9% adjusted operating income
growth and 6% growth in adjusted EPS, despite a modest decline in
underlying revenue. For the first nine months of 2020, we achieved
1% underlying revenue growth, 12% adjusted operating income growth
and 9% adjusted EPS growth.
"I am proud of the extraordinary dedication of our colleagues in
serving our clients and supporting each other."
Consolidated Results
Consolidated revenue in the third quarter of 2020 was $4.0
billion, flat compared with the third quarter of 2019. Underlying
revenue declined 1% compared to the prior period. Operating income
was $540 million compared with $467 million in the prior year.
Adjusted operating income, which excludes noteworthy items as
presented in the attached supplemental schedules, rose 9% to $638
million. Net income attributable to the Company was $316 million,
or $0.62 per diluted share, compared with $0.59 in the third
quarter of 2019. Adjusted earnings per share increased 6% to $0.82
compared with $0.77 for the prior year period.
For the nine months ended September 30, 2020, consolidated
revenue was $12.8 billion, an increase of 3%, or 1% on an
underlying basis. Operating income was $2.5 billion, while adjusted
operating income, which excludes noteworthy items as presented in
the attached supplemental schedules, rose 12% to $2.8 billion. Net
income attributable to the Company was $1.6 billion. Fully diluted
earnings per share was $3.21 compared with $2.64 in the first nine
months of 2019. Adjusted earnings per share increased 9% to $3.77
compared with $3.47 for the comparable period in 2019.
Risk & Insurance Services
Risk & Insurance Services revenue was $2.3 billion in the
third quarter of 2020, an increase of 4%, or 2% on an underlying
basis. Operating income was $333 million compared with $218 million
in the third quarter of 2019. Adjusted operating income was $388
million, an increase of 24% compared with $313 million in the prior
year period. For the nine months ended September 30, 2020, revenue
was $7.8 billion, an increase of 8%, or 3% on an underlying basis.
Operating income increased 28% to $1.9 billion, and adjusted
operating income rose 20% to $2.1 billion.
Marsh's revenue in the third quarter was $2.0 billion, an
increase of 3% on an underlying basis. In US/Canada, underlying
revenue rose 5%. International operations produced 2% underlying
revenue growth with 4% growth in Asia Pacific, 2% growth in Latin
America and flat in EMEA on an underlying basis. For the nine
months ended September 30, 2020, Marsh's underlying revenue growth
was 3%.
Guy Carpenter's revenue in the third quarter was $274 million,
flat on an underlying basis, compared with the third quarter 2019.
For the nine months ended September 30, 2020, Guy Carpenter's
underlying revenue growth was 6%.
Consulting
Consulting revenue in the third quarter was $1.7 billion, a
decrease of 5%, or 4% decline on an underlying basis. Operating
income decreased 12% to $278 million, and adjusted operating income
decreased 5% to $306 million. For the first nine months of 2020,
revenue was $5.1 billion, a decrease of 4%, or 2% decline on an
underlying basis. Operating income of $815 million decreased 7%,
and adjusted operating income decreased 6% to $860 million.
Mercer's revenue was $1.2 billion in the third quarter, a
decrease of 3% on an underlying basis. Health, with revenue of $430
million, was flat on an underlying basis compared with third
quarter 2019. Wealth revenue of $566 million decreased 3% on an
underlying basis, and Career revenue of $220 million was down 11%
on an underlying basis. For the nine months ended September 30,
2020, Mercer's revenue was $3.6 billion, a decrease of 1% on an
underlying basis.
Oliver Wyman's revenue was $480 million in the third quarter, a
decrease of 6% on an underlying basis. For the first nine months
ended September 30, 2020, Oliver Wyman's revenue was $1.5 billion,
down 6% on an underlying basis.
Conference Call
A conference call to discuss third quarter 2020 results will be
held today at 8:30 a.m. Eastern time. To participate in the
teleconference, please dial +1 866 437 7574. Callers from outside
the United States should dial +1 409 220 9376. The access code for
both numbers is 8343803. The live audio webcast will be accessible
at mmc.com, and a replay will be available approximately two hours
after the event.
About Marsh & McLennan Companies
Marsh & 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 solutions to help organizations reshape work,
retirement, investment and health outcomes 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 STATEMENTS
This 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:
-- the financial and operational impact of COVID-19 on our revenue and
ability to generate new business, our overall level of profitability and
cash flow, and our liquidity, including the timeliness and collectability
of our receivables;
-- the impact of disruption in the credit or financial markets, or changes
to our credit ratings, including as a result of COVID-19, on our ability
to access capital or repay our significant outstanding indebtedness on
favorable terms and our compliance with the covenants contained in the
agreements that govern our indebtedness;
-- the impact from lawsuits, other contingent liabilities and loss
contingencies arising from errors and omissions, breach of fiduciary duty
or other claims against us, including claims related to pandemic
coverage;
-- the impact of investigations, reviews, or other activity by regulatory or
law enforcement authorities, including the ongoing U.K. FCA review of
legacy JLT enhanced transfer value advice;
-- the financial and operational impact of complying with laws and
regulations where we operate and the risks of noncompliance with such
laws, including anti-corruption laws such as the U.S. Foreign Corrupt
Practices Act, U.K. Anti-Bribery Act, trade sanctions regimes and
cybersecurity and data privacy regulations such as the E.U.'s General
Data Protection Regulation;
-- our ability to manage risks associated with our investment management and
related services business, particularly in the context of volatile equity
markets caused by COVID-19, including our ability to execute timely
trades in light of increased trading volume and to manage potential
conflicts of interest between investment consulting and fiduciary
management services;
-- 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;
-- our ability to attract and retain industry leading talent;
-- our ability to maintain adequate safeguards to protect the security of
our information systems and confidential, personal or proprietary
information, including those in the existing JLT information systems,
particularly given the increased risk of phishing and other cybersecurity
attacks or unauthorized dissemination of information caused by remote
work arrangements;
-- the regulatory, contractual and reputational risks that arise based on
insurance placement activities and various insurer revenue streams;
-- our ability to successfully recover if we experience a business
continuity problem due to cyberattack, natural disaster or otherwise; and
-- the impact of changes in tax laws, guidance and interpretations, 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 Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Revenue $3,968 $3,968 $12,808 $12,388
Expense:
Compensation and
Benefits 2,495 2,437 7,479 7,256
Other Operating
Expenses 933 1,064 2,834 3,047
Operating
Expenses 3,428 3,501 10,313 10,303
Operating Income 540 467 2,495 2,085
Other Net Benefit
Credits 60 69 187 203
Interest Income 1 4 5 34
Interest Expense (128 ) (133 ) (387 ) (394 )
Cost of Early
Extinguishment
of Debt -- -- -- (32 )
Investment (Loss)
Income (14 ) 7 (47 ) 20
Acquisition
Related
Derivative
Contracts -- -- -- (8 )
Income Before
Income Taxes 459 414 2,253 1,908
Income Tax
Expense 139 108 586 531
Net Income Before
Non-Controlling
Interests 320 306 1,667 1,377
Less: Net Income
Attributable to
Non-Controlling
Interests 4 3 25 26
Net Income
Attributable to
the Company $316 $303 $1,642 $1,351
Net Income Per
Share
Attributable to
the Company:
- Basic $0.62 $0.60 $3.25 $2.67
- Diluted $0.62 $0.59 $3.21 $2.64
Average Number
of Shares
Outstanding
- Basic 507 506 506 506
- Diluted 512 511 511 511
Shares
Outstanding at
September 30 507 505 507 505
The Company acquired JLT on April 1, 2019 and JLT's results are
included in the Company's consolidated results of operations from
that date.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended September 30
(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.
Components of Revenue Change*
% Change Acquisitions/
Three Months Ended GAAP Currency Dispositions/ Underlying
September 30, Revenue Impact Other Impact Revenue
2020 2019
Risk and Insurance
Services
Marsh $2,009 $1,902 6 % -- 3 % 3 %
Guy Carpenter 274 273 -- -- 1 % --
Subtotal 2,283 2,175 5 % -- 2 % 3 %
Fiduciary Interest
Income 8 31
Total Risk and Insurance
Services 2,291 2,206 4 % -- 2 % 2 %
Consulting
Mercer 1,216 1,280 (5) % 1 % (2) % (3) %
Oliver Wyman 480 505 (5) % 1 % -- (6) %
Total Consulting 1,696 1,785 (5) % 1 % (2) % (4) %
Corporate/Eliminations (19 ) (23 )
Total Revenue $3,968 $3,968 -- -- 1 % (1) %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue Change*
Three Months % Change Acquisitions/
Ended September GAAP Currency Dispositions/ Underlying
30, Revenue Impact Other Impact Revenue
2020 2019
Marsh:
EMEA $536 $536 -- 1 % (1) % --
Asia Pacific 254 242 5 % 1 % 1 % 4 %
Latin America 93 110 (15) % (12) % (5) % 2 %
Total
International 883 888 -- (1) % (1) % 2 %
U.S./Canada 1,126 1,014 11 % -- 6 % 5 %
Total Marsh $2,009 $1,902 6 % -- 3 % 3 %
Mercer:
Wealth 566 592 (4) % 2 % (3) % (3) %
Health 430 441 (3) % -- (3) % --
Career 220 247 (11) % -- -- (11) %
Total Mercer $1,216 $1,280 (5) % 1 % (2) % (3) %
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Nine Months Ended September 30
(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 nine months
ended September 30, 2020 includes the results of JLT. The column
"2019 Including JLT" includes JLT's prior year first quarter
revenue (See reconciliation of non-GAAP measures on page 14).
Components of Revenue Change
Including JLT*
%
% Change
Change 2019 Including Acquisitions/
Nine Months Ended GAAP Including JLT in Currency Dispositions/ Underlying
September 30, Revenue JLT 2019 Impact Other Impact Revenue
2020 2019
Risk and Insurance
Services
Marsh $6,231 $5,795 8 % $ 6,027 3 % (1)% 2 % 3 %
Guy Carpenter 1,534 1,328 15 % 1,446 6 % -- -- 6 %
Subtotal 7,765 7,123 9 % 7,473 4 % (1)% 1 % 4 %
Fiduciary Interest
Income 40 80 85
Total Risk and Insurance
Services 7,805 7,203 8 % 7,558 3 % (1)% 1 % 3 %
Consulting
Mercer 3,616 3,695 (2) % 3,769 (4) % (1)% (2) % (1) %
Oliver Wyman 1,458 1,563 (7) % 1,563 (7) % -- -- (6) %
Total Consulting 5,074 5,258 (4) % 5,332 (5) % (1)% (2) % (2) %
Corporate/Eliminations (71 ) (73 ) (73 )
Total Revenue $12,808 $12,388 3 % $ 12,817 -- (1)% -- 1 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue Change
Including JLT*
% % Change
Nine Months Change 2019 Including Acquisitions/
Ended September GAAP Including JLT in Currency Dispositions/ Underlying
30, Revenue JLT 2019 Impact Other Impact Revenue
2020 2019
Marsh:
EMEA $1,887 $1,821 4 % $1,928 (2) % (1) % (1) % 1 %
Asia Pacific 790 698 13 % 764 3 % (1) % -- 4 %
Latin America 283 304 (7) % 326 (13) % (12)% (4) % 3 %
Total
International 2,960 2,823 5 % 3,018 (2) % (2) % (1) % 2 %
U.S./Canada 3,271 2,972 10 % 3,009 9 % -- 5 % 4 %
Total Marsh $6,231 $5,795 8 % $6,027 3 % (1) % 2 % 3 %
Mercer:
Wealth 1,719 1,748 (2) % 1,803 (5) % (1) % (3) % (1) %
Health 1,348 1,341 1 % 1,360 (1) % (1) % (3) % 3 %
Career 549 606 (9) % 606 (9) % (1) % -- (9) %
Total Mercer $3,616 $3,695 (2) % $3,769 (4) % (1) % (2) % (1) %
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Actual as Reported
Three Months Ended September 30
(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 nine months ended September 30, 2020 and
2019. 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 nine
months ended September 30, 2020 and 2019, adjusted operating margin is
calculated by dividing the sum of adjusted operating income plus identified
intangible asset amortization by consolidated or segment adjusted revenue.
Risk &
Insurance Corporate/
Services Consulting Eliminations Total
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%
As Reported Results
Three Months Ended
September 30, 2019
Operating income
(loss), as reported $218 $ 317 $ (68 ) $467
Operating margin 9.9 % 17.7 % N/A 11.8%
Add (Deduct) impact
of Noteworthy
Items:
Restructuring,
excluding JLT (a) -- 10 2 12
Changes in contingent
consideration (b) 5 1 -- 6
JLT integration and
restructuring costs
(c) 58 5 14 77
JLT
acquisition-related
costs (d) 16 1 4 21
Disposal of
businesses (e) 13 (14 ) -- (1 )
Other 3 -- -- 3
Operating income
adjustments 95 3 20 118
Adjusted operating
income (loss) $313 $ 320 $ (48 ) $585
Total identified
intangible
amortization
expense $73 $ 11 $ -- $84
Adjusted operating
margin 17.4% 18.7 % N/A 16.9%
(a) Corporate charges in 2020 primarily reflect restructuring costs related to
the Company's corporate led initiatives. Consulting charges in both 2020 and
2019 reflect severance related to the Mercer restructuring program.
(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 as
well as legal and consulting costs related to the JLT integration.
(d) Reflects retention costs in both 2020 and 2019 and legal fees related to
the closing of the JLT Transaction in 2019.
(e) Reflects the loss on the sale in 2019 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.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Actual as Reported
Nine Months Ended September 30
(Millions) (Unaudited)
The information presented below represents the actual as
reported data for the nine months ended September 30, 2020 and
2019. Results for the nine months ended September 30, 2019 do not
include JLT's results of operations for the period January 1, 2019
through March 31, 2019.
Risk &
Insurance Corporate/
Services Consulting Eliminations Total
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
businesses (e) 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 %
As Reported Results
Nine Months Ended
September 30, 2019
Operating income
(loss), as reported $1,468 $ 874 $ (257 ) $2,085
Operating margin 20.4 % 16.6 % N/A 16.8 %
Add (Deduct) impact
of Noteworthy
Items:
Restructuring,
excluding JLT (a) 6 43 7 56
Changes in contingent
consideration (b) 24 2 -- 26
JLT integration and
restructuring costs
(c) 134 10 48 192
JLT
acquisition-related
costs (d) 81 1 51 133
Disposal of business
(f) 13 (14 ) -- (1 )
Other 3 -- 1 4
Operating income
adjustments 261 42 107 410
Adjusted operating
income (loss) $1,729 $ 916 $ (150 ) $2,495
Total identified
intangible
amortization
expense $194 $ 41 $ -- $235
Adjusted operating
margin 26.6 % 18.3 % N/A 22.0 %
(a) Corporate charges in 2020 reflect restructuring and consulting costs
related to the Company's corporate led initiatives, including adjustments to
restructuring liabilities for future rent under non-cancellable leases. Risk &
Insurance Services reflects severance and related charges from non-JLT merger
integration costs. Consulting reflects severance related to the Mercer
restructuring program.
(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 as
well as legal and consulting costs related to the JLT integration.
(d) Reflects retention costs in 2020 and in 2019 retention costs, advisor
fees, stamp duty taxes and legal fees related to the closing of the JLT
Transaction. 2019 also includes the loss on the sale of JLT's aerospace
business, included in revenue. This loss is removed from GAAP revenue in the
calculation of adjusted operating income.
(e) Reflects net loss on disposal of specialty businesses sold in the U.S.,
U.K. and Canada, previously acquired as part of the JLT Transaction.
(f) Reflects the loss on the sale in 2019 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.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three and Nine Months Ended September 30,
(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. 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 nine month periods
ended September 30, 2020 and 2019. The information presented below represents
the actual as reported results for the three and nine month periods ended
September 30, 2020 and 2019. Results for the nine months ended September 30,
2019 do not include JLT's results of operations for the period January 1, 2019
through March 31, 2019.
Three Months Ended Three Months Ended
September 30, 2020 September 30, 2019
Adjusted Adjusted
Amount EPS Amount EPS
Net income
before
non-controlling
interests, as
reported $320 $306
Less:
Non-controlling
interest, net
of tax 4 3
Subtotal $316 $0.62 $303 $0.59
Operating income
adjustments $98 $118
Investments
adjustment (a) 16 (4 )
Pension
settlement
adjustment -- (2 )
Impact of income
taxes on above
items (12 ) (23 )
102 0.20 89 0.18
Adjusted income,
net of tax $418 $0.82 $392 $0.77
Nine Months Ended Nine Months Ended
September 30, 2020 September 30, 2019
Adjusted Adjusted
Amount EPS Amount EPS
Net income
before
non-controlling
interests, as
reported $1,667 $1,377
Less:
Non-controlling
interest, net
of tax 25 26
Subtotal $1,642 $3.21 $1,351 $2.64
Operating income
adjustments $294 $410
Investments
adjustment (a) 42 (10 )
Pension
settlement
adjustment -- (2 )
Change in fair
value of
acquisition
related
derivative
contracts (b) -- 8
Financing costs
(c) -- 53
Interest on
funds held in
escrow (d) -- (25 )
Early
extinguishment
of debt -- 32
Impact of income
taxes on above
items (50 ) (45 )
286 0.56 421 0.83
Adjusted income,
net of tax $1,928 $3.77 $1,772 $3.47
(a) The Company recorded mark-to-market losses of $1 million and gains of $4
million for the three month periods ended September 30, 2020 and September 30,
2019, respectively, and losses of $4 million and gains of $10 million for the
nine month periods ended September 30, 2020 and September 30, 2019,
respectively, which are included in investment (loss) income in the
consolidated statements of income.
During the second quarter of 2020, the Company sold a portion of its
investment in Alexander Forbes ("AF"). The Company no longer accounts for this
investment under the equity method, and records the change in fair value in
each subsequent period as an investment gain or loss in the consolidated
statement of income. The Company recorded a loss of $15 million in the third
quarter of 2020 related to the change in the market value of AF from June 30,
2020. The nine month period ended September 30, 2020 also reflects a loss of
$23 million on the portion of AF sold in the second quarter of 2020.
(b) 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.
(c) Reflects interest expense on debt issuances and amortization of bridge
financing fees related to the acquisition of JLT (prior to April 1, 2019).
(d) Interest income earned on funds held in escrow related to the JLT
acquisition (prior to April 1, 2019).
Marsh & McLennan Companies, Inc.
Supplemental Information
Three and Nine Months Ended September 30,
(Millions) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Consolidated
Compensation and
Benefits $ 2,495 $2,437 $ 7,479 $7,256
Other Operating
Expenses 933 1,064 2,834 3,047
Total Expenses $ 3,428 $3,501 $ 10,313 $10,303
Depreciation and
amortization
expense $ 94 $85 $ 282 $245
Identified
intangible
amortization
expense 91 84 265 235
Total $ 185 $169 $ 547 $480
Stock option
expense $ 4 $4 $ 25 $23
Risk and Insurance
Services
Compensation and
Benefits $ 1,400 $1,373 $ 4,234 $4,012
Other Operating
Expenses 558 615 1,688 1,723
Total Expenses $ 1,958 $1,988 $ 5,922 $5,735
Depreciation and
amortization
expense $ 49 $43 $ 146 $114
Identified
intangible
amortization
expense 75 73 222 194
Total $ 124 $116 $ 368 $308
Consulting
Compensation and
Benefits $ 980 $967 $ 2,911 $2,932
Other Operating
Expenses 438 501 1,348 1,452
Total Expenses $ 1,418 $1,468 $ 4,259 $4,384
Depreciation and
amortization
expense $ 29 $24 $ 86 $75
Identified
intangible
amortization
expense 16 11 43 41
Total $ 45 $35 $ 129 $116
The Company acquired JLT on April 1, 2019 and JLT's results are
included in the Company's consolidated results of operations from
that date.
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets
(Millions)
(Unaudited)
September 30, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $ 2,388 $ 1,155
Net receivables 5,236 5,236
Other current assets 688 677
Total current assets 8,312 7,068
Goodwill and intangible assets 17,745 17,445
Fixed assets, net 864 858
Pension related assets 1,825 1,632
Right of use assets 1,884 1,921
Deferred tax assets 623 676
Other assets 1,505 1,757
TOTAL ASSETS $ 32,758 $ 31,357
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 1,216 $ 1,215
Accounts payable and accrued
liabilities 2,662 2,746
Accrued compensation and employee
benefits 1,762 2,197
Current lease liabilities 335 342
Accrued income taxes 318 179
Dividends payable 237 --
Total current liabilities 6,530 6,679
Fiduciary liabilities 8,765 7,344
Less - cash and investments held in
a fiduciary capacity (8,765 ) (7,344 )
-- --
Long-term debt 11,532 10,741
Pension, post-retirement and
post-employment benefits 2,163 2,336
Long-term lease liabilities 1,902 1,926
Liabilities for errors and
omissions 352 335
Other liabilities 1,450 1,397
Total equity 8,829 7,943
TOTAL LIABILITIES AND EQUITY $ 32,758 $ 31,357
Marsh & McLennan Companies, Inc.
Consolidated Statements of Cash Flows
(Millions) (Unaudited)
Nine Months Ended September 30,
2020 2019
Operating cash flows:
Net income before non-controlling
interests $ 1,667 $ 1,377
Adjustments to reconcile net
income to cash provided by
operations:
Depreciation and amortization 547 480
Non cash lease expense 241 236
Charge for early extinguishment
of debt -- 32
Share-based compensation expense 219 184
Change in fair value of
acquisition-related derivative
contracts and other 48 110
Changes in Assets and
Liabilities:
Accrued compensation and employee
benefits (431 ) (281 )
Net receivables 77 (84 )
Other changes to assets and
liabilities 58 (184 )
Contributions to pension & other
benefit plans in excess of
current year expense/credit (240 ) (269 )
Operating lease liabilities (254 ) (240 )
Effect of exchange rate changes 67 (70 )
Net cash provided by operations 1,999 1,291
Financing cash flows:
Purchase of treasury shares -- (300 )
Net borrowings from term-loan and
credit facilities 1,000 300
Net increase in commercial paper -- 325
Proceeds from issuance of debt 737 6,459
Repayments of debt (1,011 ) (760 )
Payments for early extinguishment
of debt -- (585 )
Acquisition-related derivative
payments -- (337 )
Net issuance of common stock from
treasury shares (33 ) 43
Net distributions of
non-controlling interests and
deferred/contingent
consideration (154 ) (153 )
Dividends paid (702 ) (655 )
Net cash provided by financing
activities (163 ) 4,337
Investing cash flows:
Capital expenditures (278 ) (284 )
Net sales of long-term
investments and other 98 55
Dispositions 93 225
Acquisitions (559 ) (5,500 )
Net cash used for investing
activities (646 ) (5,504 )
Effect of exchange rate changes
on cash and cash equivalents 43 23
Increase in cash and cash
equivalents 1,233 147
Cash and cash equivalents at
beginning of period 1,155 1,066
Cash and cash equivalents at end
of period $ 2,388 $ 1,213
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - 2019 Revenue Including
JLT
Nine Months Ended September 30, 2019
(Millions) (Unaudited)
On April 1, 2019, the Company completed its previously announced
acquisition of Jardine Lloyd Thompson Group, plc. JLT's results of
operations for the three and nine month periods ended September 30,
2020 are included in the Company's results of operations for 2020.
The Company's prior period 2019 results of operations do not
include JLT's results for the three months ended March 31, 2019.
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
2020 revenue to the combined 2019 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 January 1, 2019. Consolidated revenue in
2019 for the nine months ended September 30, 2019 "MMC as
previously reported" does not include JLT revenue for the period
from January 1 to March 31, 2019. The "2019 Including JLT" revenue
information set forth in the table below presents revenue
information as if the companies were combined on January 1, 2019
and is not necessarily indicative of what the results would have
been had we operated the business since January 1, 2019.
The MMC revenue amounts are as previously reported by the
Company in its quarterly filings on Form 10-Q for the applicable
periods. JLT 2019 revenue information is derived using the same
policies and adjustments as 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.
Nine Months Ended
September 30, 2019
MMC As Previously Reported
Risk & Insurance Services
Marsh $ 5,795
Guy Carpenter 1,328
Subtotal 7,123
Fiduciary Interest Income 80
Total Risk & Insurance Services 7,203
Consulting
Mercer 3,695
Oliver Wyman 1,563
Total Consulting 5,258
Corporate/Eliminations (73 )
Total Revenue $ 12,388
JLT 2019
Specialty (Marsh) $ 232
Reinsurance (Guy Carpenter) 118
Employee Benefits (Mercer) 74
Subtotal 424
Fiduciary Interest Income 5
Total Revenue $ 429
2019 Including JLT
Marsh $ 6,027
Guy Carpenter 1,446
Subtotal 7,473
Fiduciary Interest Income 85
Total Risk & Insurance Services 7,558
Consulting
Mercer 3,769
Oliver Wyman 1,563
Total Consulting 5,332
Corporate/Eliminations (73 )
Total Revenue Including JLT $ 12,817
Media:
Erick R. Gustafson
Marsh & McLennan Companies
+1 202 263 7788
erick.gustafson@mmc.com
Investor:
Sarah DeWitt
Marsh & McLennan Companies
+1 212 345 6750
sarah.dewitt@mmc.com
View source version on businesswire.com:
https://www.businesswire.com/news/home/20201029005610/en/
CONTACT:
Marsh & McLennan Companies
SOURCE: Marsh & McLennan
Copyright Business Wire 2020
(END) Dow Jones Newswires
October 29, 2020 07:03 ET (11:03 GMT)
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