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 
 

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January 28, 2021 07:00 ET (12:00 GMT)

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