TIDMMHM
Marsh & McLennan (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, 2020.
Dan Glaser, President and CEO, said: "2020 was a year like no
other. I am proud of how our colleagues rose to the challenge,
helping clients and one another and achieving impressive financial
performance. We ended the year with a strong fourth quarter with
positive underlying revenue growth. In 2020, we achieved revenue
growth of 3% with underlying revenue growth of 1% and grew adjusted
EPS 7%.
"We demonstrated our resilience as a company in 2020 and are
well positioned for growth in 2021."
Consolidated Results
Consolidated revenue in the fourth quarter of 2020 was $4.4
billion, an increase of 4% compared with the fourth quarter of
2019, or 1% on an underlying basis. Operating income was $571
million compared with $592 million in the prior year period.
Adjusted operating income, which excludes noteworthy items as
presented in the attached supplemental schedules, was $855 million,
compared with $856 million in the prior year period. Net income
attributable to the Company was $374 million, or $0.73 per diluted
share, compared with $0.76 in the fourth quarter of 2019. Adjusted
earnings per share was $1.19, compared with $1.19 for the prior
year period.
For the year 2020, revenue was $17.2 billion, an increase of 3%
compared with 2019, or 1% on an underlying basis. Operating income
was $3.1 billion, while adjusted operating income rose 9% to $3.6
billion. Net income attributable to the Company was $2.0 billion.
Earnings per share increased 16% to $3.94. Adjusted earnings per
share increased 7% to $4.97 compared with $4.66 in 2019.
Risk & Insurance Services
Risk & Insurance Services revenue was $2.5 billion in the
fourth quarter of 2020, an increase of 6%, or 3% on an underlying
basis. Operating income was $463 million, compared with $365
million in the fourth quarter of 2019. Adjusted operating income
decreased 5% to $525 million. For the year 2020, revenue was $10.3
billion, an increase of 8%, or 3% on an underlying basis. Operating
income was $2.3 billion, compared to $1.8 billion in 2019. Adjusted
operating income rose 14% to $2.6 billion.
Marsh's revenue in the fourth quarter of 2020 was $2.4 billion,
an increase of 7%, or 4% on an underlying basis. In U.S./Canada,
underlying revenue rose 7%. International operations underlying
revenue was flat compared to the prior year period, reflecting
underlying growth of 3% in Latin America and 1% in Asia Pacific,
and partially offset by a decline of 2% in EMEA. For the year 2020,
Marsh's revenue growth was 7%, or 3% on an underlying basis.
Guy Carpenter's fourth quarter revenue was $162 million, an
increase of 7%, or 5% on an underlying basis. For the year 2020,
Guy Carpenter's revenue grew 15% compared to a year ago, or 6% on
an underlying basis.
Consulting
Consulting revenue was $1.9 billion in the fourth quarter of
2020, an increase of 1%, or a decline of 1% on an underlying basis.
Operating income declined to $179 million, compared with $336
million in the fourth quarter of 2019, primarily due to a provision
for a legacy JLT E&O. Adjusted operating income was $387
million, an increase of 8% compared with $359 million in the fourth
quarter of 2019. For the year 2020, revenue was $7.0 billion, a
decrease of 2% on both a GAAP and underlying basis. Operating
income was $1.0 billion, compared with $1.2 billion in 2019.
Adjusted operating income decreased 2% to $1.2 billion.
Mercer's revenue was $1.3 billion in the fourth quarter of 2020,
a decrease of 1%, or a 3% decline on an underlying basis. Wealth,
with revenue of $629 million, decreased 1% on an underlying basis.
Health, with revenue of $445 million, decreased 2% on an underlying
basis. Career revenue of $238 million decreased 7% on an underlying
basis. For the year 2020, Mercer's revenue declined 2%, or 1% on an
underlying basis.
Oliver Wyman's revenue was $590 million in the fourth quarter of
2020, an increase of 4% on an underlying basis. For the year 2020,
Oliver Wyman's revenue was $2.0 billion, a decline of 4% on an
underlying basis.
Other Items
In December, Marsh & McLennan Agency (MMA) closed the
acquisitions of independent agencies INSPRO, Heritage Insurance
Service, Inc., and Compass Financial Partners. For the year 2020,
MMA achieved a record year of acquisitions, completing eight
transactions with approximately $235 million of combined revenue,
marking the largest year of acquired revenue since it was started
in 2009.
During the fourth quarter of 2020, the Company repaid $700
million of senior notes and prepaid $300 million of floating rate
notes due December 2021.
Conference Call
A conference call to discuss fourth 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 7838349. 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 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 over $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 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 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 maintain adequate safeguards to protect the security of
our information systems and confidential, personal or proprietary
information, particularly given the increased risk of phishing and other
cybersecurity attacks or unauthorized dissemination of information caused
by remote work arrangements;
-- 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 manage risks associated with our investment management and
related services business, particularly in the context of uncertain
equity markets, 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 attract and retain industry leading talent;
-- our ability to successfully recover if we experience a business
continuity problem due to cyberattack, natural disaster or otherwise;
-- the regulatory, contractual and reputational risks that arise based on
insurance placement activities and various insurer revenue streams; and
-- the impact of changes in tax laws, guidance and interpretations or
disagreements with tax authorities, particularly due to the change in
U.S. presidential administrations.
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 December Twelve Months Ended
31, December 31,
2020 2019 2020 2019
Revenue $4,416 $4,264 $17,224 $16,652
Expense:
Compensation and
Benefits 2,650 2,478 10,129 9,734
Other Operating
Expenses 1,195 1,194 4,029 4,241
Operating
Expenses 3,845 3,672 14,158 13,975
Operating Income 571 592 3,066 2,677
Other Net Benefit
Credits 70 62 257 265
Interest Income 2 5 7 39
Interest Expense (128 ) (130 ) (515 ) (524 )
Cost of
Extinguishment
of Debt -- -- -- (32 )
Investment Income
(Loss) 25 2 (22 ) 22
Acquisition
Related
Derivative
Contracts -- -- -- (8 )
Income Before
Income Taxes 540 531 2,793 2,439
Income Tax
Expense 161 135 747 666
Net Income Before
Non-Controlling
Interests 379 396 2,046 1,773
Less: Net Income
Attributable to
Non-Controlling
Interests 5 5 30 31
Net Income
Attributable to
the Company $374 $391 $2,016 $1,742
Net Income Per
Share
Attributable to
the Company
- Basic $0.74 $0.77 $3.98 $3.44
- Diluted $0.73 $0.76 $3.94 $3.41
Average Number
of Shares
Outstanding
- Basic 507 504 506 506
- Diluted 513 510 512 511
Shares
Outstanding at
December 31 508 504 508 504
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 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.
Components of Revenue Change*
Three Months % Change Acquisitions/
Ended December GAAP Currency Dispositions/ Underlying
31, Revenue Impact Other Impact Revenue
2020 2019
Risk and Insurance
Services
Marsh $2,364 $2,219 7 % 1 % 2 % 4 %
Guy Carpenter 162 152 7 % -- 1 % 5 %
Subtotal 2,526 2,371 7 % 1 % 2 % 4 %
Fiduciary Interest
Income 6 25
Total Risk and Insurance
Services 2,532 2,396 6 % 1 % 2 % 3 %
Consulting
Mercer 1,312 1,326 (1 )% 2 % -- (3 )%
Oliver Wyman 590 559 6 % 2 % -- 4 %
Total Consulting 1,902 1,885 1 % 2 % -- (1 )%
Corporate/Eliminations (18 ) (17 )
Total Revenue $4,416 $4,264 4 % 1 % 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 December GAAP Currency Dispositions/ Underlying
31, Revenue Impact Other Impact Revenue
2020 2019
Marsh:
EMEA $688 $661 4 % 3 % 3 % (2 )%
Asia Pacific 269 255 5 % 4 % -- 1 %
Latin America 141 156 (10 )% (8)% (6 )% 3 %
Total
International 1,098 1,072 2 % 2 % 1 % --
U.S./Canada 1,266 1,147 11 % -- 3 % 7 %
Total Marsh $2,364 $2,219 7 % 1 % 2 % 4 %
Mercer:
Wealth 629 621 2 % 3 % -- (1 )%
Health 445 455 (2 )% -- -- (2 )%
Career 238 250 (5 )% 2 % -- (7 )%
Total Mercer $1,312 $1,326 (1 )% 2 % -- (3 )%
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Twelve 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, 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
Twelve Months % Change 2019 Including Acquisitions/
Ended December GAAP Including JLT in Currency Dispositions/ Underlying
31, Revenue JLT 2019 Impact Other Impact Revenue
2020 2019
Risk and Insurance
Services
Marsh $8,595 $8,014 7 % $ 8,246 4 % (1)% 2 % 3 %
Guy Carpenter 1,696 1,480 15 % 1,598 6 % -- -- 6 %
Subtotal 10,291 9,494 8 % 9,844 5 % (1)% 1 % 4 %
Fiduciary Interest
Income 46 105 110
Total Risk and Insurance
Services 10,337 9,599 8 % 9,954 4 % (1)% 1 % 3 %
Consulting
Mercer 4,928 5,021 (2 )% 5,094 (3 )% -- (2 )% (1 )%
Oliver Wyman 2,048 2,122 (3 )% 2,122 (3 )% -- -- (4 )%
Total Consulting 6,976 7,143 (2 )% 7,216 (3 )% -- (1 )% (2 )%
Corporate/Eliminations (89 ) (90 ) (90 )
Total Revenue $17,224 $16,652 3 % $ 17,080 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
Twelve Months % Change 2019 Including Acquisitions/
Ended December GAAP Including JLT in Currency Dispositions/ Underlying
31, Revenue JLT 2019 Impact Other Impact Revenue
2020 2019
Marsh:
EMEA $2,575 $2,482 4 % $ 2,589 (1 )% -- -- --
Asia Pacific 1,059 953 11 % 1,019 4 % -- -- 4 %
Latin America 424 460 (8 )% 483 (12 )% (10)% (5 )% 3 %
Total
International 4,058 3,895 4 % 4,091 (1 )% (1 )% (1 )% 1 %
U.S./Canada 4,537 4,119 10 % 4,155 9 % -- 4 % 5 %
Total Marsh $8,595 $8,014 7 % $ 8,246 4 % (1 )% 2 % 3 %
Mercer:
Wealth 2,348 2,369 (1 )% 2,422 (3 )% -- (2 )% (1 )%
Health 1,793 1,796 -- 1,815 (1 )% (1 )% (2 )% 2 %
Career 787 856 (8 )% 857 (8 )% -- -- (8 )%
Total Mercer $4,928 $5,021 (2 )% $ 5,094 (3 )% -- (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 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, 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 acquisition of JLT on
April 1, 2019. For the three and twelve months ended December 31,
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
December 31, 2020
Operating income
(loss) $ 463 $ 179 $ (71 ) $571
Operating margin 18.3 % 9.4 % N/A 12.9%
Add (deduct) impact
of Noteworthy
Items:
Restructuring,
excluding JLT (a) 1 37 8 46
Changes in contingent
consideration (b) 3 1 -- 4
JLT integration and
restructuring costs
(c) 46 20 4 70
JLT legacy E&O
provision (d) -- 161 -- 161
JLT
acquisition-related
costs (e) 11 1 1 13
Disposal of
businesses (f) 1 (11 ) -- (10 )
Other -- (1 ) 1 --
Operating income
adjustments 62 208 14 284
Adjusted operating
income (loss) $ 525 $ 387 $ (57 ) $855
Total identified
intangible
amortization
expense $ 70 $ 16 $ -- $86
Adjusted operating
margin 23.5 % 21.4 % N/A 21.3%
As Reported Results
Three Months Ended
December 31, 2019
Operating income
(loss), as reported $ 365 $ 336 $ (109 ) $592
Operating margin 15.2 % 17.8 % N/A 13.9%
Add (deduct) impact
of Noteworthy
Items:
Restructuring,
excluding JLT (a) 28 13 15 56
Changes in contingent
consideration (b) 41 1 -- 42
JLT integration and
restructuring costs
(c) 95 8 40 143
JLT
acquisition-related
costs (e) 16 1 -- 17
Disposal of
businesses 2 -- -- 2
Other 3 -- 1 4
Operating income
adjustments 185 23 56 264
Adjusted operating
income (loss) $ 550 $ 359 $ (53 ) $856
Total identified
intangible
amortization
expense $ 66 $ 13 $ -- $79
Adjusted operating
margin 25.7 % 19.7 % N/A 21.9%
(a) Consulting charges in both 2020 and 2019 reflect severance and real estate
exit costs related to the Mercer restructuring program. Risk & Insurance
Services in 2019 reflects severance and related charges from non-JLT merger
integration costs. Corporate charges in 2020 primarily reflect restructuring
and consulting costs related to the Company's corporate led initiatives.
Corporate charges in 2019 are primarily related to adjustments to
restructuring liabilities for future rent under non-cancellable leases.
(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 and real estate exit costs,
as well as consulting costs related to the JLT Transaction.
(d) Reflects a provision for a legacy JLT E&O relating to suitability of
financial advice provided to individuals for defined benefit pension
transfers.
(e) Reflects retention costs in the Risk & Insurance Services and Consulting
segments related to the closing of the JLT Transaction.
(f) Consulting in 2020 includes a contingent gain adjustment from Mercer's
U.S. large market health and defined benefit administration business sold in
2019. 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
Twelve Months Ended December 31
(Millions) (Unaudited)
The information presented below represents the actual as
reported data for the twelve months ended December 31, 2020 and
2019. Results for the twelve months ended December 31, 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
Twelve Months Ended
December 31, 2020
Operating income
(loss) $ 2,346 $ 994 $ (274 ) $3,066
Operating margin 22.7 % 14.3 % N/A 17.8 %
Add (deduct) impact
of Noteworthy
Items:
Restructuring,
excluding JLT (a) 3 54 32 89
Changes in contingent
consideration (b) 25 (1 ) 2 26
JLT integration and
restructuring costs
(c) 171 51 29 251
JLT legacy E&O
provision (d) -- 161 -- 161
JLT
acquisition-related
costs (e) 50 3 1 54
Disposal of
businesses (f) 7 (15 ) -- (8 )
Other 5 -- -- 5
Operating income
adjustments 261 253 64 578
Adjusted operating
income (loss) $ 2,607 $ 1,247 $ (210 ) $3,644
Total identified
intangible
amortization
expense $ 292 $ 59 $ -- $351
Adjusted operating
margin 28.0 % 18.8 % N/A 23.2 %
As Reported Results
Twelve Months Ended
December 31, 2019
Operating income
(loss), as reported $ 1,833 $ 1,210 $ (366 ) $2,677
Operating margin 19.1 % 16.9 % N/A 16.1 %
Add (deduct) impact
of Noteworthy
Items:
Restructuring,
excluding JLT (a) 34 56 22 112
Changes in contingent
consideration (b) 65 3 -- 68
JLT integration and
restructuring costs
(c) 229 18 88 335
JLT
acquisition-related
costs (e) 97 2 51 150
Disposal of
businesses (f) 15 (14 ) -- 1
Other 6 -- 2 8
Operating income
adjustments 446 65 163 674
Adjusted operating
income (loss) $ 2,279 $ 1,275 $ (203 ) $3,351
Total identified
intangible
amortization
expense $ 260 $ 54 $ -- $314
Adjusted operating
margin 26.3 % 18.6 % N/A 22.0 %
(a) Consulting charges in both 2020 and 2019 reflect severance and real estate
exit costs related to the Mercer restructuring program. Risk & Insurance
Services in 2019 reflects severance and related charges from non-JLT merger
integration costs. Corporate charges in 2020 primarily 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. Corporate charges in 2019 are primarily related to
adjustments to restructuring liabilities for future rent under non-cancellable
leases.
(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 and real estate exit costs,
as well as legal and consulting costs related to the integration.
(d) Reflects a provision for a legacy JLT E&O relating to suitability of
financial advice provided to individuals for defined benefit pension
transfers.
(e) Reflects retention costs in 2020 and 2019, advisor fees and stamp duty
taxes and legal fees related to the closing of the JLT Transaction and
retention costs. 2019 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.
(f) Consulting in 2020 includes a contingent gain adjustment from Mercer's
U.S. large market health and defined benefit administration business sold in
2019. 2019 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.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three 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.
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, 2020 and
2019. The information presented below represents the actual as
reported results for the three and twelve month periods ended
December 31, 2020 and 2019. Results for the twelve months ended
December 31, 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
December 31, 2020 December 31, 2019
Adjusted Adjusted
Amount EPS Amount EPS
Net income before
non-controlling
interests, as
reported $379 $396
Less:
Non-controlling
interest, net of
tax 5 5
Subtotal $374 $ 0.73 $391 $ 0.76
Operating income
adjustments $284 $264
Investments
adjustment (a) (14 ) --
Pension settlement
adjustment/charge
(b) 3 9
Impact of income
taxes on above
items (35 ) (54 )
238 0.46 219 0.43
Adjusted income,
net of tax $612 $ 1.19 $610 $ 1.19
Twelve Months Ended Twelve Months Ended
December 31, 2020 December 31, 2019
Adjusted Adjusted
Amount EPS Amount EPS
Net income before
non-controlling
interests, as
reported $2,046 $1,773
Less:
Non-controlling
interest, net of
tax 30 31
Subtotal $2,016 $ 3.94 $1,742 $ 3.41
Operating income
adjustments $578 $674
Investments
adjustment (a) 28 (10 )
Pension settlement
adjustment/charge
(b) 3 7
Change in fair
value of
acquisition
related
derivative
contracts (c) -- 8
Financing costs
(d) -- 53
Interest on funds
held in escrow
(e) -- (25 )
Early
extinguishment of
debt -- 32
Impact of income
taxes on above
items (85 ) (99 )
524 1.03 640 1.25
Adjusted income,
net of tax $2,540 $ 4.97 $2,382 $ 4.66
(a) Represents mark-to-market gains of $14 million for the three months ended
December 31, 2020, primarily related to the Company's investment in Alexander
Forbes ("AF").
The investment adjustment for the twelve months ended December 31, 2020
primarily relates to AF, and includes mark to market gains and losses, as well
as a loss on the sale of AF shares in June 2020.
(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 related to the JLT
acquisition.
(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).
Marsh & McLennan Companies, Inc.
Supplemental Information
Three and Twelve Months Ended December 31
(Millions) (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2020 2019 2020 2019
Consolidated
Compensation
and Benefits $ 2,650 $2,478 $ 10,129 $9,734
Other
operating
expenses 1,195 1,194 4,029 4,241
Total Expenses $ 3,845 $3,672 $ 14,158 $13,975
Depreciation
and
amortization
expense $ 108 $88 $ 390 $333
Identified
intangible
amortization
expense 86 79 351 314
Total $ 194 $167 $ 741 $647
Stock option
expense $ 3 $3 $ 28 $26
Risk and
Insurance
Services
Compensation
and Benefits $ 1,456 $1,358 $ 5,690 $5,370
Other
operating
expenses 613 673 2,301 2,396
Total Expenses $ 2,069 $2,031 $ 7,991 $7,766
Depreciation
and
amortization
expense $ 62 $42 $ 208 $156
Identified
intangible
amortization
expense 70 66 292 260
Total $ 132 $108 $ 500 $416
Consulting
Compensation
and Benefits $ 1,084 $1,002 $ 3,995 $3,934
Other
operating
expenses 639 547 1,987 1,999
Total Expenses $ 1,723 $1,549 $ 5,982 $5,933
Depreciation
and
amortization
expense $ 29 $27 $ 115 $102
Identified
intangible
amortization
expense 16 13 59 54
Total $ 45 $40 $ 174 $156
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)
December 31, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $ 2,089 $ 1,155
Net receivables 5,287 5,236
Other current assets 740 677
Total current assets 8,116 7,068
Goodwill and intangible assets 18,216 17,445
Fixed assets, net 856 858
Pension related assets 1,768 1,632
Right of use assets 1,894 1,921
Deferred tax assets 722 676
Other assets 1,458 1,757
TOTAL ASSETS $ 33,030 $ 31,357
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 517 $ 1,215
Accounts payable and accrued
liabilities 3,050 2,746
Accrued compensation and employee
benefits 2,400 2,197
Current lease liabilities 342 342
Accrued income taxes 208 179
Total current liabilities 6,517 6,679
Fiduciary liabilities 8,585 7,344
Less - cash and investments held in a
fiduciary capacity (8,585 ) (7,344 )
-- --
Long-term debt 10,796 10,741
Pension, post-retirement and
post-employment benefits 2,662 2,336
Long-term lease liabilities 1,924 1,926
Liabilities for errors and omissions 366 335
Other liabilities 1,505 1,397
Total equity 9,260 7,943
TOTAL LIABILITIES AND EQUITY $ 33,030 $ 31,357
Marsh & McLennan Companies, Inc.
Consolidated Statements of Cash Flows
(Millions) (Unaudited)
For the Years Ended December 31,
2020 2019
Operating cash flows:
Net income before
non-controlling interests $ 2,046 $ 1,773
Adjustments to reconcile net
income to cash provided by
operations:
Depreciation and amortization 741 647
Non cash lease expense 355 315
Charge for early
extinguishment of debt -- 32
Share-based compensation
expense 290 252
Change in fair value of
acquisition-related
derivative contracts and
other 64 153
Changes in Assets and
Liabilities:
Accrued compensation and
employee benefits 207 154
Net receivables (36 ) (130 )
Other changes to assets and
liabilities 390 (24 )
Contributions to pension &
other benefit plans in excess
of current year
expense/credit (356 ) (369 )
Operating lease liabilities (342 ) (327 )
Effect of exchange rate
changes 23 (115 )
Net cash provided by
operations 3,382 2,361
Financing cash flows:
Purchase of treasury shares -- (485 )
Net borrowings from term-loan
and credit facilities 1,000 300
Proceeds from issuance of debt 737 6,459
Repayments of debt (2,515 ) (1,064 )
Payments for early
extinguishment of debt -- (585 )
Acquisition-related derivative
payments -- (337 )
Net issuance of common stock
from treasury shares -- 69
Net distributions from
non-controlling interests and
deferred/contingent
consideration (159 ) (161 )
Dividends paid (943 ) (890 )
Net cash (used for) provided
by financing activities (1,880 ) 3,306
Investing cash flows:
Capital expenditures (348 ) (421 )
Net sales of long-term
investments and other 104 26
Dispositions 98 229
Acquisitions (668 ) (5,505 )
Net cash used for investing
activities (814 ) (5,671 )
Effect of exchange rate
changes on cash and cash
equivalents 246 93
Increase in cash and cash
equivalents 934 89
Cash and cash equivalents at
beginning of period 1,155 1,066
Cash and cash equivalents at
end of period $ 2,089 $ 1,155
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - 2019 Revenue Including
JLT
Twelve Months Ended December 31, 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 twelve month period ended December 31, 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 twelve months ended December 31, 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.
Twelve Months Ended
December 31, 2019
MMC As Previously Reported
Risk & Insurance Services
Marsh $ 8,014
Guy Carpenter 1,480
Subtotal 9,494
Fiduciary Interest Income 105
Total Risk & Insurance Services 9,599
Consulting
Mercer 5,021
Oliver Wyman 2,122
Total Consulting 7,143
Corporate/Eliminations (90 )
Total Revenue $ 16,652
JLT 2019
Specialty (Marsh) $ 232
Reinsurance (Guy Carpenter) 118
Employee Benefits (Mercer) 73
Subtotal 423
Fiduciary Interest Income 5
Total Revenue $ 428
2019 Including JLT
Marsh $ 8,246
Guy Carpenter 1,598
Subtotal 9,844
Fiduciary Interest Income 110
Total Risk & Insurance Services 9,954
Consulting
Mercer 5,094
Oliver Wyman 2,122
Total Consulting 7,216
Corporate/Eliminations (90 )
Total Revenue $ 17,080
View source version on businesswire.com:
https://www.businesswire.com/news/home/20210128005576/en/
CONTACT: Media:
Erick R. Gustafson
Marsh & McLennan Companies
+1 202 263 7788
erick.gustafson@mmc.com
Investors:
Sarah DeWitt
Marsh & McLennan Companies
+1 212 345 6750
sarah.dewitt@mmc.com
SOURCE: Marsh & McLennan
Copyright Business Wire 2021
(END) Dow Jones Newswires
January 28, 2021 07:00 ET (12:00 GMT)
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