Marsh McLennan Reports Second Quarter 2021 Results

July 22, 2021 7:00 AM EDT

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GAAP Revenue Increases 20%; Underlying Revenue Rises 13%

Growth in GAAP Operating Income of 39% and Adjusted Operating Income of 24%

Second Quarter EPS Rises to $1.60 from $1.12 and Adjusted EPS Increases 33% to $1.75

Six Months EPS Rises to $3.51 from $2.60 and Adjusted EPS Increases 26% to $3.74

NEW YORK--(BUSINESS WIRE)-- 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 second quarter ended June 30, 2021.

Dan Glaser, President and CEO, said: “Our performance this quarter was outstanding. The company achieved the strongest underlying growth in two decades, and experienced an acceleration in growth across all of our businesses. We grew underlying revenue by 13%, adjusted operating income by 24%, and adjusted EPS by 33%.

“These results are a direct reflection of the hard work and dedication of our colleagues around the world. We look forward to carrying this momentum into the second half of the year.”

Consolidated Results

Consolidated revenue in the second quarter of 2021 was $5.0 billion, an increase of 20% compared with the second quarter of 2020. On an underlying basis, revenue increased 13%. Operating income was $1.2 billion, an increase of 39% from the prior year. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 24% to $1.2 billion. Net income attributable to the Company was $820 million, or $1.60 per diluted share, compared with $1.12 in the second quarter of 2020. Adjusted earnings per share rose 33% to $1.75 per diluted share compared with $1.32 for the prior year period.

For the six months ended June 30, 2021, consolidated revenue was $10.1 billion, an increase of 14%, or 9% on an underlying basis compared to the prior period. Operating income was $2.6 billion, an increase of 32% from the prior year period. Adjusted operating income rose 22% to $2.6 billion. Net income attributable to the Company was $1.8 billion. Fully diluted earnings per share was $3.51 compared with $2.60 in the first six months of 2020. Adjusted earnings per share increased 26% to $3.74 compared with $2.96 for the comparable period in 2020.

Risk & Insurance Services

Risk & Insurance Services revenue was $3.1 billion in the second quarter of 2021, an increase of 21%, or 13% on an underlying basis. Operating income rose 37% to $950 million, and adjusted operating income was $927 million, an increase of 22% from the prior year period. For the six months ended June 30, 2021, revenue was $6.4 billion, an increase of 15%, or 10% on an underlying basis. Operating income rose 30% to $2.0 billion, and adjusted operating income was $2.0 billion, an increase of 19% from the prior year period.

Marsh's revenue in the second quarter was $2.7 billion, an increase of 14% on an underlying basis. In US/Canada, underlying revenue rose 15%. International operations produced underlying revenue growth of 13%, reflecting 16% growth in EMEA, 10% growth in Asia Pacific, and 2% in Latin America. For the six months ended June 30, 2021, Marsh’s underlying revenue growth was 11% compared to the prior period a year ago.

Guy Carpenter's revenue in the second quarter was $488 million, an increase of 12% on an underlying basis. For the six months ended June 30, 2021, Guy Carpenter’s underlying revenue growth was 8%.

Consulting

Consulting revenue in the second quarter was $1.9 billion, an increase of 17% or 12% on an underlying basis compared to the same period a year ago. Operating income increased 35% to $344 million, and adjusted operating income increased 34% to $356 million. For the first six months of 2021, revenue was $3.8 billion, an increase of 11%, or an increase of 8% on an underlying basis. Operating income of $705 million increased 31% and adjusted operating income increased 31% to $726 million.

Mercer's revenue was $1.3 billion in the second quarter, an increase of 6% on an underlying basis. Career with revenue of $187 million, was up 15% on an underlying basis. Wealth revenue of $625 million increased 4% on an underlying basis, and Health revenue of $462 million increased 4% on an underlying basis. For the six months ended June 30, 2021, Mercer’s revenue was $2.6 billion, an increase of 3% on an underlying basis compared to the same period a year ago.

Oliver Wyman’s revenue was $618 million in the second quarter, an increase of 28% on an underlying basis. For the first six months ended June 30, 2021, Oliver Wyman’s revenue was $1.2 billion, an increase of 19% on an underlying basis.

Other Items

The Company repurchased 2.4 million shares of stock for $322 million in the second quarter. Through six months, the Company has repurchased 3.4 million shares for $434 million.

Last week, the Board of Directors increased the quarterly dividend 15% to $0.535 per share, with the third quarter dividend payable on August 13, 2021.

Conference Call

A conference call to discuss second quarter 2021 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 5668714. 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

Marsh McLennan (NYSE: MMC) is the world’s leading professional services firm in the areas of risk, strategy and people. The Company’s 78,000 colleagues advise clients in 130 countries. With annual revenue of over $18 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses. Marsh provides data-driven risk advisory services and insurance solutions to commercial and consumer clients. 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 well being 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:

  • 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 cybersecurity attacks, including hacking, viruses, malware, ransomware and other types of data security breaches, as well as the heightened risk caused by remote work arrangements;
  • the impact from lawsuits or investigations arising from errors and omissions, breaches of fiduciary duty or other claims against us in our capacity as a broker or investment advisor;
  • increased regulatory activity and scrutiny by regulatory or law enforcement authorities in the financial services industry;
  • the financial and operational impact of complying with laws and regulations where we operate and the risks of noncompliance with such laws by us or third-party providers, including anti-corruption laws such as the U.S. Foreign Corrupt Practices Act, U.K. Anti-Bribery Act and cybersecurity and data privacy regulations such as the E.U.’s General Data Protection Regulation;
  • the impact of COVID-19 on our business operations, results of operations, cash flows and financial position;
  • 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;
  • our ability to attract and retain industry leading talent;
  • the impact of changes in tax laws, guidance and interpretations, particularly due to recently enacted legislation in the U.K. and proposals from the U.S. government or from the Organization for Economic Development and Cooperation, or disagreements with tax authorities;
  • our ability to successfully recover if we experience a business continuity problem due to cyberattack, natural disaster, government unrest or otherwise; and
  • the regulatory, contractual and reputational risks that arise based on insurance placement activities and growing insurer revenue streams.

The factors identified above are not exhaustive. Marsh McLennan 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 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
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

Revenue

 

$

5,017

 

 

$

4,189

 

 

$

10,100

 

 

$

8,840

 

Expense:

 

 

 

 

 

 

 

 

Compensation and benefits

 

2,860

 

 

2,429

 

 

5,667

 

 

4,984

 

Other operating expenses

 

929

 

 

875

 

 

1,847

 

 

1,901

 

Operating expenses

 

3,789

 

 

3,304

 

 

7,514

 

 

6,885

 

Operating income

 

1,228

 

 

885

 

 

2,586

 

 

1,955

 

Other net benefit credits

 

71

 

 

63

 

 

142

 

 

127

 

Interest income

 

1

 

 

2

 

 

1

 

 

4

 

Interest expense

 

(110)

 

 

(132)

 

 

(228)

 

 

(259)

 

Investment income (loss)

 

19

 

 

(31)

 

 

30

 

 

(33)

 

Income before income taxes

 

1,209

 

 

787

 

 

2,531

 

 

1,794

 

Income tax expense

 

382

 

 

207

 

 

706

 

 

447

 

Net income before non-controlling interests

 

827

 

 

580

 

 

1,825

 

 

1,347

 

Less: Net income attributable to non-controlling interests

 

7

 

 

8

 

 

22

 

 

21

 

Net income attributable to the Company

 

$

820

 

 

$

572

 

 

$

1,803

 

 

$

1,326

 

Net income per share attributable to the Company:

 

 

 

 

 

 

 

 

- Basic

 

$

1.61

 

 

$

1.13

 

 

$

3.55

 

 

$

2.62

 

- Diluted

 

$

1.60

 

 

$

1.12

 

 

$

3.51

 

 

$

2.60

 

Average number of shares outstanding

 

 

 

 

 

 

 

 

- Basic

 

508

 

 

506

 

 

508

 

 

505

 

- Diluted

 

513

 

 

511

 

 

514

 

 

510

 

Shares outstanding at June 30

 

507

 

 

506

 

 

507

 

 

506

 

 

Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended June 30
(Millions) (Unaudited)

The Company conducts business in 130 countries. As a result, foreign exchange rate movements may impact period-to-period comparisons of revenue. Similarly, certain other items such as 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 Ended
June 30,

 

%
Change
GAAP
Revenue

 

Currency
Impact

 

Acquisitions/
Dispositions/
Other Impact

 

Underlying
Revenue

 

 

2021

 

2020

 

Risk and Insurance Services

 

 

 

 

 

 

 

 

 

 

 

 

Marsh

 

$

2,650

 

 

$

2,161

 

 

23%

 

4%

 

5%

 

14%

Guy Carpenter

 

488

 

 

433

 

 

13%

 

1%

 

 

12%

Subtotal

 

3,138

 

 

2,594

 

 

21%

 

4%

 

4%

 

14%

Fiduciary Interest Income

 

3

 

 

9

 

 

 

 

 

 

 

 

 

Total Risk and Insurance Services

 

3,141

 

 

2,603

 

 

21%

 

4%

 

4%

 

13%

Consulting

 

 

 

 

 

 

 

 

 

 

 

 

Mercer

 

1,274

 

 

1,149

 

 

11%

 

6%

 

(1)%

 

6%

Oliver Wyman Group

 

618

 

 

467

 

 

33%

 

5%

 

 

28%

Total Consulting

 

1,892

 

 

1,616

 

 

17%

 

5%

 

 

12%

Corporate Eliminations

 

(16)

 

 

(30)

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

5,017

 

 

$

4,189

 

 

20%

 

4%

 

2%

 

13%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue Details

The following table provides more detailed revenue information for certain of the components presented above:

 

 

 

 

 

 

Components of Revenue Change*

 

 

Three Months Ended
June 30,

 

% Change
GAAP
Revenue

 

Currency
Impact

 

Acquisitions/
Dispositions/
Other Impact

 

Underlying
Revenue

 

 

2021

 

2020

 

Marsh:

 

 

 

 

 

 

 

 

 

 

 

 

EMEA

 

$

796

 

 

$

597

 

 

33

%

 

9

%

 

9

%

 

16

%

Asia Pacific

 

347

 

 

298

 

 

16

%

 

8

%

 

(1)

%

 

10

%

Latin America

 

103

 

 

99

 

 

4

%

 

2

%

 

 

 

2

%

Total International

 

1,246

 

 

994

 

 

25

%

 

8

%

 

5

%

 

13

%

U.S./Canada

 

1,404

 

 

1,167

 

 

20

%

 

1

%

 

5

%

 

15

%

Total Marsh

 

$

2,650

 

 

$

2,161

 

 

23

%

 

4

%

 

5

%

 

14

%

Mercer:

 

 

 

 

 

 

 

 

 

 

 

 

Wealth

 

625

 

 

561

 

 

11

%

 

8

%

 

(1)

%

 

4

%

Health

 

462

 

 

432

 

 

7

%

 

3

%

 

 

 

4

%

Career

 

187

 

 

156

 

 

20

%

 

5

%

 

 

 

15

%

Total Mercer

 

$

1,274

 

 

$

1,149

 

 

11

%

 

6

%

 

(1)

%

 

6

%

* Components of revenue change may not add due to rounding.

Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Six Months Ended June 30
(Millions) (Unaudited)

The Company conducts business in 130 countries. As a result, foreign exchange rate movements may impact period-to-period comparisons of revenue. Similarly, certain other items such as 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*

 

 

Six Months Ended
June 30,

 

% Change
GAAP
Revenue

 

Currency
Impact

 

Acquisitions/
Dispositions/
Other Impact

 

Underlying
Revenue

 

 

2021

 

2020

 

Risk and Insurance Services

 

 

 

 

 

 

 

 

 

 

 

 

Marsh

 

$

4,975

 

 

$

4,222

 

 

18

%

 

4

%

 

3

%

 

11

%

Guy Carpenter

 

1,383

 

 

1,260

 

 

10

%

 

2

%

 

 

 

8

%

Subtotal

 

6,358

 

 

5,482

 

 

16

%

 

3

%

 

3

%

 

10

%

Fiduciary Interest Income

 

8

 

 

32

 

 

 

 

 

 

 

 

 

Total Risk and Insurance Services

 

6,366

 

 

5,514

 

 

15

%

 

3

%

 

3

%

 

10

%

Consulting

 

 

 

 

 

 

 

 

 

 

 

 

Mercer

 

2,562

 

 

2,400

 

 

7

%

 

5

%

 

(1)

%

 

3

%

Oliver Wyman Group

 

1,203

 

 

978

 

 

23

%

 

4

%

 

 

 

19

%

Total Consulting

 

3,765

 

 

3,378

 

 

11

%

 

5

%

 

(1)

%

 

8

%

Corporate Eliminations

 

(31)

 

 

(52)

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

10,100

 

 

$

8,840

 

 

14

%

 

4

%

 

1

%

 

9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue Details

The following table provides more detailed revenue information for certain of the components presented above:

 

 

 

 

 

 

Components of Revenue Change*

 

 

Six Months Ended
June 30,

 

% Change
GAAP
Revenue

 

Currency
Impact

 

Acquisitions/
Dispositions/
Other Impact

 

Underlying
Revenue

 

 

2021

 

2020

 

Marsh:

 

 

 

 

 

 

 

 

 

 

 

 

EMEA

 

$

1,633

 

 

$

1,351

 

 

21

%

 

7

%

 

3

%

 

11

%

Asia Pacific

 

621

 

 

536

 

 

16

%

 

7

%

 

 

 

9

%

Latin America

 

193

 

 

190

 

 

2

%

 

(2

)%

 

 

 

4

%

Total International

 

2,447

 

 

2,077

 

 

18

%

 

7

%

 

2

%

 

9

%

U.S./Canada

 

2,528

 

 

2,145

 

 

18

%

 

1

%

 

5

%

 

12

%

Total Marsh

 

$

4,975

 

 

$

4,222

 

 

18

%

 

4

%

 

3

%

 

11

%

Mercer:

 

 

 

 

 

 

 

 

 

 

 

 

Wealth

 

1,248

 

 

1,153

 

 

8

%

 

7

%

 

(1

)%

 

2

%

Health

 

949

 

 

918

 

 

3

%

 

2

%

 

(1

)%

 

2

%

Career

 

365

 

 

329

 

 

11

%

 

4

%

 

 

 

8

%

Total Mercer

 

$

2,562

 

 

$

2,400

 

 

7

%

 

5

%

 

(1

)%

 

3

%

* Components of revenue change may not add due to rounding.

Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three Months Ended June 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 in accordance with "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 its 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 reportable segment basis, for the three and six months ended June 30, 2021 and 2020. The following tables also present adjusted operating margin. For the three and six months ended June 30, 2021 and 2020, adjusted operating margin is calculated by dividing the sum of adjusted operating income and identified intangible asset amortization by consolidated or segment adjusted revenue.

 

 

 

Risk & Insurance
Services

 

Consulting

 

Corporate/
Eliminations

 

Total

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

950

 

 

$

344

 

 

$

(66)

 

 

$

1,228

 

Operating margin

 

30.2

%

 

18.1

%

 

N/A

 

24.5

%

Add (deduct) impact of noteworthy Items:

 

 

 

 

 

 

 

 

Restructuring, excluding JLT (a)

 

4

 

 

3

 

 

5

 

 

12

 

Changes in contingent consideration (b)

 

(5)

 

 

1

 

 

(3)

 

 

(7)

 

JLT integration and restructuring costs (c)

 

11

 

 

6

 

 

2

 

 

19

 

JLT acquisition-related costs (d)

 

11

 

 

1

 

 

 

 

12

 

Disposal of businesses (e)

 

(51)

 

 

1

 

 

 

 

(50)

 

Other

 

7

 

 

 

 

 

 

7

 

Operating income adjustments

 

(23)

 

 

12

 

 

4

 

 

(7)

 

Adjusted operating income (loss)

 

$

927

 

 

$

356

 

 

$

(62)

 

 

$

1,221

 

Total identified intangible amortization expense

 

$

75

 

 

$

14

 

 

$

 

 

$

89

 

Adjusted operating margin

 

32.4

%

 

19.5

%

 

N/A

 

26.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

Operating income (loss), as reported

 

$

696

 

 

$

255

 

 

$

(66)

 

 

$

885

 

Operating margin

 

26.7

%

 

15.8

%

 

N/A

 

21.1

%

Add (deduct) impact of noteworthy Items:

 

 

 

 

 

 

 

 

Restructuring, excluding JLT (a)

 

 

 

2

 

 

9

 

 

11

 

Changes in contingent consideration (b)

 

4

 

 

1

 

 

2

 

 

7

 

JLT integration and restructuring costs (c)

 

39

 

 

7

 

 

11

 

 

57

 

JLT acquisition-related costs (d)

 

12

 

 

 

 

1

 

 

13

 

Disposal of businesses (e)

 

6

 

 

 

 

 

 

6

 

Other

 

5

 

 

 

 

 

 

5

 

Operating income adjustments

 

66

 

 

10

 

 

23

 

 

99

 

Adjusted operating income (loss)

 

$

762

 

 

$

265

 

 

$

(43)

 

 

$

984

 

Total identified intangible amortization expense

 

$

75

 

 

$

13

 

 

$

 

 

$

88

 

Adjusted operating margin

 

32.1

%

 

17.3

%

 

N/A

 

25.5

%

 

 

 

 

 

 

 

 

 

(a) Primarily includes restructuring expenses associated with the Company's global information technology and HR functions and adjustments to restructuring liabilities for future rent under non-cancellable leases.

(b) Primarily includes the change in fair value of contingent consideration related to acquisitions and dispositions measured each quarter.

(c) Includes costs incurred for staff reductions, lease related exit costs, technology and consulting costs related to the JLT integration.

(d) Reflects retention costs related to the closing of the JLT Transaction.

(e) Primarily reflects a gain on the sale of the U.K. commercial networks business that provided broking and back-office solutions for small independent brokers during the second quarter of 2021. 2020 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. These amounts are reflected as an increase or decrease of other revenue, which is reflected as part of revenue in the consolidated statements of income. These items are removed from GAAP revenue in the calculation of adjusted operating margin.

 

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

 

 

 

Risk & Insurance
Services

 

Consulting

 

Corporate/
Eliminations

 

Total

Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

2,010

 

 

$

705

 

 

$

(129)

 

 

$

2,586

 

Operating margin

 

31.6

%

 

18.7

%

 

N/A

 

25.6

%

Add (deduct) impact of noteworthy items:

 

 

 

 

 

 

 

 

Restructuring, excluding JLT (a)

 

5

 

 

8

 

 

10

 

 

23

 

Changes in contingent consideration (b)

 

1

 

 

(5)

 

 

(3)

 

 

(7)

 

JLT integration and restructuring costs (c)

 

27

 

 

12

 

 

3

 

 

42

 

JLT acquisition-related costs (d)

 

22

 

 

2

 

 

 

 

24

 

Disposal of business (e)

 

(53)

 

 

4

 

 

 

 

(49)

 

Other

 

7

 

 

 

 

 

 

7

 

Operating income adjustments

 

9

 

 

21

 

 

10

 

 

40

 

Adjusted operating income (loss)

 

$

2,019

 

 

$

726

 

 

$

(119)

 

 

$

2,626

 

Total identified intangible amortization expense

 

$

161

 

 

$

28

 

 

$

 

 

$

189

 

Adjusted operating margin

 

34.5

%

 

20.0

%

 

N/A

 

28.0

%

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

Operating income (loss)

 

$

1,550

 

 

$

537

 

 

$

(132)

 

 

$

1,955

 

Operating margin

 

28.1

%

 

15.9

%

 

N/A

 

22.1

%

Add (deduct) impact of noteworthy items:

 

 

 

 

 

 

 

 

Restructuring, excluding JLT (a)

 

2

 

 

6

 

 

12

 

 

20

 

Changes in contingent consideration (b)

 

7

 

 

(3)

 

 

2

 

 

6

 

JLT integration and restructuring costs (c)

 

100

 

 

17

 

 

20

 

 

137

 

JLT acquisition-related costs (d)

 

24

 

 

1

 

 

1

 

 

26

 

Disposal of business (e)

 

6

 

 

(4)

 

 

 

 

2

 

Other

 

5

 

 

 

 

 

 

5

 

Operating income adjustments

 

144

 

 

17

 

 

35

 

 

196

 

Adjusted operating income (loss)

 

$

1,694

 

 

$

554

 

 

$

(97)

 

 

$

2,151

 

Total identified intangible amortization expense

 

$

147

 

 

$

27

 

 

$

 

 

$

174

 

Adjusted operating margin

 

33.4

%

 

17.2

%

 

N/A

 

26.3

%

(a) Primarily includes restructuring expenses associated with the Company's global information technology and HR functions and adjustments to restructuring liabilities for future rent under non-cancellable leases. Consulting charges in 2020 reflect severance and real estate exit costs related to the Mercer restructuring program completed in 2020.

(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, technology and consulting costs related to the JLT integration.

(d) Reflects retention costs related to the closing of the JLT Transaction.

(e) Primarily reflects a gain on the sale of the U.K. commercial networks business that provided broking and back-office solutions for small independent brokers during the second quarter of 2021. 2020 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. These amounts are reflected as an increase or decrease of other revenue, which is reflected as part of revenue in the consolidated statements of income. These items are removed from GAAP revenue in the calculation of adjusted operating margin.

Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three and Six Months Ended June 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 in the preceding tables and investments gains or losses related to the impact of mark-to-market adjustments on certain equity securities. Adjusted EPS is calculated by dividing the Company’s adjusted income, net of tax, by 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 six month periods ended June 30, 2021 and 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2021

 

Three Months Ended June 30, 2020

 

Amount

 

Adjusted
EPS

 

Amount

 

Adjusted
EPS

Net income before non-controlling interests, as reported

 

 

$

827

 

 

 

 

 

 

$

580

 

 

 

Less: Non-controlling interest, net of tax

 

 

7

 

 

 

 

 

 

8

 

 

 

Subtotal

 

 

$

820

 

 

$

1.60

 

 

 

 

$

572

 

 

$

1.12

 

Operating income adjustments

$

(7)

 

 

 

 

 

 

$

99

 

 

 

 

 

Investments adjustment (a)

(1)

 

 

 

 

 

 

25

 

 

 

 

 

Income tax effect of adjustments (b)

(12)

 

 

 

 

 

 

(21)

 

 

 

 

 

Impact of U.K. tax rate change (c)

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80

 

 

0.15

 

 

 

 

103

 

 

0.20

 

Adjusted income, net of tax

 

 

$

900

 

 

$

1.75

 

 

 

 

$

675

 

 

$

1.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2021

 

Six Months Ended June 30, 2020

 

Amount

 

Adjusted
EPS

 

Amount

 

Adjusted
EPS

Net income before non-controlling interests, as reported

 

 

$

1,825

 

 

 

 

 

 

$

1,347

 

 

 

Less: Non-controlling interest, net of tax

 

 

22

 

 

 

 

 

 

21

 

 

 

Subtotal

 

 

$

1,803

 

 

$

3.51

 

 

 

 

$

1,326

 

 

$

2.60

 

Operating income adjustments

$

40

 

 

 

 

 

 

$

196

 

 

 

 

 

Investments adjustment (a)

(1)

 

 

 

 

 

 

26

 

 

 

 

 

Income tax effect of adjustments (b)

(21)

 

 

 

 

 

 

(38)

 

 

 

 

 

Impact of U.K. tax rate change (c)

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

118

 

 

0.23

 

 

 

 

184

 

 

0.36

 

Adjusted income, net of tax

 

 

$

1,921

 

 

$

3.74

 

 

 

 

$

1,510

 

 

$

2.96

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Represents mark-to-market gains in 2021 and losses in 2020, primarily related to the Company’s investment in Alexander Forbes (“AF”).

(b) For items with an income tax impact, the tax effect was calculated using an effective tax rate based on the tax jurisdiction for each item.

(c) Reflects the re-measurement of the Company's U.K. deferred tax assets and liabilities upon enactment of legislation that increased the corporate income tax rate applicable to U.K. based entities from 19% to 25%, effective April 1, 2023.

 

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

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

Consolidated

 

 

 

 

 

 

 

 

Compensation and benefits

 

$

2,860

 

 

$

2,429

 

 

$

5,667

 

 

$

4,984

 

Other operating expenses

 

929

 

 

875

 

 

1,847

 

 

1,901

 

Total expenses

 

$

3,789

 

 

$

3,304

 

 

$

7,514

 

 

$

6,885

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

$

104

 

 

$

91

 

 

$

201

 

 

$

188

 

Identified intangible amortization expense

 

89

 

 

88

 

 

189

 

 

174

 

Total

 

$

193

 

 

$

179

 

 

$

390

 

 

$

362

 

 

 

 

 

 

 

 

 

 

Stock option expense

 

$

4

 

 

$

5

 

 

$

25

 

 

$

21

 

 

 

 

 

 

 

 

 

 

Risk and Insurance Services

 

 

 

 

 

 

 

 

Compensation and benefits

 

$

1,632

 

 

$

1,382

 

 

$

3,242

 

 

$

2,834

 

Other operating expenses

 

559

 

 

525

 

 

1,114

 

 

1,130

 

Total expenses

 

$

2,191

 

 

$

1,907

 

 

$

4,356

 

 

$

3,964

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

$

58

 

 

$

45

 

 

$

108

 

 

$

97

 

Identified intangible amortization expense

 

75

 

 

75

 

 

161

 

 

147

 

Total

 

$

133

 

 

$

120

 

 

$

269

 

 

$

244

 

 

 

 

 

 

 

 

 

 

Consulting

 

 

 

 

 

 

 

 

Compensation and benefits

 

$

1,110

 

 

$

940

 

 

$

2,184

 

 

$

1,931

 

Other operating expenses

 

438

 

 

421

 

 

876

 

 

910

 

Total expenses

 

$

1,548

 

 

$

1,361

 

 

$

3,060

 

 

$

2,841

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

$

29

 

 

$

29

 

 

$

58

 

 

$

57

 

Identified intangible amortization expense

 

14

 

 

13

 

 

28

 

 

27

 

Total

 

$

43

 

 

$

42

 

 

$

86

 

 

$

84

 

 

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

 

 

 

(Unaudited)
June 30,
2021

 

December 31,
2020

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

888

 

 

$

2,089

 

Net receivables

 

5,839

 

 

5,326

 

Other current assets

 

846

 

 

740

 

Total current assets

 

7,573

 

 

8,155

 

 

 

 

 

 

Goodwill and intangible assets

 

18,492

 

 

18,216

 

Fixed assets, net

 

816

 

 

856

 

Pension related assets

 

1,911

 

 

1,768

 

Right of use assets

 

1,983

 

 

1,894

 

Deferred tax assets

 

669

 

 

702

 

Other assets

 

1,509

 

 

1,458

 

TOTAL ASSETS

 

$

32,953

 

 

$

33,049

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Short-term debt

 

$

516

 

 

$

517

 

Accounts payable and accrued liabilities

 

2,830

 

 

3,050

 

Accrued compensation and employee benefits

 

1,775

 

 

2,400

 

Current lease liabilities

 

342

 

 

342

 

Accrued income taxes

 

353

 

 

247

 

Total current liabilities

 

5,816

 

 

6,556

 

 

 

 

 

 

Fiduciary liabilities

 

9,936

 

 

8,585

 

Less - cash and investments held in a fiduciary capacity

 

(9,936)

 

 

(8,585)

 

 

 

 

 

 

Long-term debt

 

10,257

 

 

10,796

 

Pension, post-retirement and post-employment benefits

 

2,539

 

 

2,662

 

Long-term lease liabilities

 

1,992

 

 

1,924

 

Liabilities for errors and omissions

 

365

 

 

366

 

Other liabilities

 

1,720

 

 

1,485

 

 

 

 

 

 

Total equity

 

10,264

 

 

9,260

 

TOTAL LIABILITIES AND EQUITY

 

$

32,953

 

 

$

33,049

 

 

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

 

 

Six Months Ended June 30,

 

2021

 

2020

Operating cash flows:

 

 

 

Net income before non-controlling interests

$

1,825

 

 

$

1,347

 

Adjustments to reconcile net income to cash used for operations:

 

 

 

Depreciation and amortization

390

 

 

362

 

Non cash lease expense

158

 

 

165

 

Share-based compensation expense

176

 

 

147

 

Change in fair value of acquisition-related derivative contracts and other

53

 

 

15

 

 

 

 

 

Changes in Assets and Liabilities:

 

 

 

Accrued compensation and employee benefits

(642)

 

 

(848)

 

Net receivables

(551)

 

 

(389)

 

Other changes to assets and liabilities

(205)

 

 

114

 

Contributions to pension & other benefit plans in excess of current year credit

(187)

 

 

(165)

 

Operating lease liabilities

(172)

 

 

(164)

 

Effect of exchange rate changes

(95)

 

 

(6)

 

Net cash provided by operations

750

 

 

578

 

Financing cash flows:

 

 

 

Purchase of treasury shares

(434)

 

 

 

Borrowings from term-loan and credit facilities

 

 

1,000

 

Proceeds from issuance of debt

 

 

737

 

Repayments of debt

(509)

 

 

(507)

 

Net issuance of common stock from treasury shares

(23)

 

 

(49)

 

Net distributions of non-controlling interests and deferred/contingent consideration

(47)

 

 

(94)

 

Dividends paid

(478)

 

 

(466)

 

Net cash (used for) provided by financing activities

(1,491)

 

 

621

 

Investing cash flows:

 

 

 

Capital expenditures

(151)

 

 

(200)

 

Net (purchase) sale of long-term investments and other

(4)

 

 

105

 

Dispositions

81

 

 

93

 

Acquisitions

(363)

 

 

(562)

 

Net cash used for investing activities

(437)

 

 

(564)

 

Effect of exchange rate changes on cash and cash equivalents

(23)

 

 

(79)

 

(Decrease) increase in cash and cash equivalents

(1,201)

 

 

556

 

Cash and cash equivalents at beginning of period

2,089

 

 

1,155

 

Cash and cash equivalents at end of period

$

888

 

 

$

1,711

 

 

Media Contact:
Erick R. Gustafson
Marsh McLennan
+1 202 263 7788
erick.gustafson@mmc.com

Investor Contact:
Sarah DeWitt
Marsh McLennan
+1 212 345 6750
sarah.dewitt@mmc.com

Source: Marsh McLennan



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