REG-Marsh & McLennan Marsh McLennan Reports First Quarter 2021 Results
27/04/2021 12:00
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Marsh McLennan Reports First Quarter 2021 Results
First Quarter Revenue Growth of 9% Including Underlying Revenue Growth of 6%
First Quarter GAAP EPS of $1.91; Adjusted EPS Increases 21% to $1.99
GAAP Operating Income Rises 27%; Adjusted Operating Income Increases 20%
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 first quarter ended March 31, 2021.
Dan Glaser, President and CEO, said: “Marsh McLennan had an outstanding
first quarter. We delivered strong growth in underlying revenue and adjusted
earnings, and generated meaningful adjusted operating margin expansion in both
Risk & Insurance Services and Consulting. Our total revenue grew 9%, with
underlying revenue growth of 6%. Adjusted operating income rose 20%, adjusted
EPS grew 21%, and our adjusted operating margin increased 260 basis points to
29.6%.
“Our excellent start to 2021 positions us well for the balance of the year."
Consolidated Results
Consolidated revenue in the first quarter of 2021 was $5.1 billion, an
increase of 9%, or 6% on an underlying basis, compared with the first quarter
of 2020. Operating income was $1.4 billion compared with $1.1 billion in the
prior year. Adjusted operating income, which excludes noteworthy items as
presented in the attached supplemental schedules, rose 20% to $1.4 billion.
Net income attributable to the Company was $983 million, or $1.91 per diluted
share, in the first quarter. This compares with $754 million, or $1.48 per
diluted share, in the prior year. Adjusted earnings per share rose 21% to
$1.99 compared with $1.64 for the prior year period.
Risk & Insurance Services
Risk & Insurance Services revenue was $3.2 billion in the first quarter of
2021, an increase of 11% compared with the first quarter 2020, or 7% on an
underlying basis. Operating income of $1.1 billion increased 24% from the
prior year. Adjusted operating income rose 17% to $1.1 billion compared with
$932 million in the prior year.
Marsh's revenue in the first quarter was $2.3 billion, an increase of 8% on an
underlying basis. In US/Canada, underlying revenue rose 9%. International
operations produced underlying revenue growth of 6%, reflecting growth of 8%
in Asia Pacific, 6% in EMEA and 6% in Latin America. Guy Carpenter's revenue
in the first quarter was $895 million, an increase of 7% on an underlying
basis.
Consulting
Consulting revenue in the first quarter was $1.9 billion, an increase of 6%,
or 3% on an underlying basis. Operating income of $361 million increased 28%
from the prior year. Adjusted operating income rose 28% to $370 million
compared with $289 million in the prior year.
Mercer, with revenue of $1.3 billion in the first quarter, was flat on an
underlying basis. Wealth revenue of $623 million increased 1% on an underlying
basis. Career revenue of $178 million increased 1% on an underlying basis.
Health, with revenue of $487 million, was flat on an underlying basis.
Oliver Wyman’s revenue was $585 million in the first quarter, an increase of
11% on an underlying basis.
Other Items
In April, Marsh McLennan Agency (MMA) announced the acquisition of
Montana-based PayneWest Insurance, one of the largest independent agencies in
the U.S. With 26 locations and more than 700 employees, PayneWest will operate
as MMA’s Northwest regional hub.
The Company repurchased approximately 1 million shares of its common stock for
$112 million in the first quarter of 2021. On April 15, the Company repaid
$500 million of senior notes maturing in July 2021.
Conference Call
A conference call to discuss first 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 4568747. The live audio webcast may
be accessed at mmc.com
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event.
About Marsh McLennan
Marsh McLennan
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(NYSE: MMC) is the world’s leading professional services firm in the areas
of risk, strategy and people. The Company’s 76,000 colleagues advise clients
in over 130 countries. With annual revenue of $17 billion, Marsh McLennan
helps clients navigate an increasingly dynamic and complex environment through
four market-leading businesses. Marsh
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provides data-driven risk advisory services and insurance solutions to
commercial and consumer clients. Guy Carpenter
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develops advanced risk, reinsurance and capital strategies that help clients
grow profitably and pursue emerging opportunities. Mercer
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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
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serves as a critical strategic, economic and brand advisor to private sector
and governmental clients. For more information, visit mmc.com
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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;
* the impact of investigations, reviews, or other activity by regulatory or law
enforcement authorities;
* 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 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;
* 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;
* the impact of changes in tax laws, guidance and interpretations, particularly
due to proposals from the current administrations in the U.S. and U.K., 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 various insurer revenue streams.
The factors identified above are not exhaustive. Marsh & McLennan
Companies, Inc. and its subsidiaries (the "Company" or "Marsh McLennan")
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 Quarterly Report on
Form 10-Q and Annual Report on Form 10-K.
Marsh & McLennan Companies, Inc.
Consolidated Statements of Income
(In millions, except per share figures)
(Unaudited)
Three Months Ended
March 31,
2021 2020
Revenue $ 5,083 $ 4,651
Expense:
Compensation and benefits 2,807 2,555
Other operating expenses 918 1,026
Operating expenses 3,725 3,581
Operating income 1,358 1,070
Other net benefit credits 71 64
Interest income — 2
Interest expense (118) (127)
Investment income (loss) 11 (2)
Income before income taxes 1,322 1,007
Income tax expense 324 240
Net income before non-controlling interests 998 767
Less: Net income attributable to non-controlling interests 15 13
Net income attributable to the Company $ 983 $ 754
Net income per share attributable to the Company:
- Basic $ 1.93 $ 1.49
- Diluted $ 1.91 $ 1.48
Average number of shares outstanding
- Basic 509 505
- Diluted 514 510
Shares outstanding at March 31 509 506
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended March 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 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 % Change Currency Acquisitions/ Underlying
GAAP
Impact
Dispositions/
Revenue
March 31,
Revenue
Other Impact
2021 2020
Risk and Insurance Services
Marsh $ 2,325 $ 2,061 13 % 3 % 2 % 8 %
Guy Carpenter 895 827 8 % 2 % — 7 %
Subtotal 3,220 2,888 11 % 3 % 1 % 7 %
Fiduciary Interest Income 5 23
Total Risk and Insurance Services 3,225 2,911 11 % 3 % 1 % 7 %
Consulting
Mercer 1,288 1,251 3 % 4 % (1) % —
Oliver Wyman Group 585 511 14 % 3 % — 11 %
Total Consulting 1,873 1,762 6 % 4 % (1) % 3 %
Corporate/Eliminations (15) (22)
Total Revenue $ 5,083 $ 4,651 9 % 3 % — 6 %
Revenue Details
The following table provides more detailed revenue information for certain of
the components presented above:
Components of Revenue Change*
Three Months Ended % Change Currency Acquisitions/ Underlying
GAAP
Impact
Dispositions/
Revenue
March 31,
Revenue
Other Impact
2021 2020
Marsh:
EMEA $ 837 $ 754 11% 7% (2)% 6%
Asia Pacific 274 238 15% 7% 1% 8%
Latin America 90 91 (1)% (7)% — 6%
Total International 1,201 1,083 11% 5% (1)% 6%
U.S./Canada 1,124 978 15% 1% 5% 9%
Total Marsh $ 2,325 $ 2,061 13% 3% 2% 8%
Mercer:
Wealth 623 592 5% 6% (1)% 1%
Health 487 486 — 1% (1)% —
Career 178 173 3% 3% — 1%
Total Mercer $ 1,288 $ 1,251 3% 4% (1)% —
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three Months Ended March 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 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 months ended March 31, 2021 and
2020. The following tables also present adjusted operating margin. For the
three months ended March 31, 2021 and 2020, 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 Consulting Corporate/ Total
Services
Eliminations
Three Months Ended March 31, 2021
Operating income (loss) $ 1,060 $ 361 $ (63) $ 1,358
Operating margin 32.9 % 19.3 % N/A 26.7 %
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a) 1 5 5 11
Changes in contingent consideration (b) 6 (6) — —
JLT integration and restructuring costs (c) 16 6 1 23
JLT acquisition-related costs (d) 11 1 — 12
Other (2) 3 — 1
Operating income adjustments 32 9 6 47
Adjusted operating income (loss) $ 1,092 $ 370 $ (57) $ 1,405
Total identified intangible amortization expense $ 86 $ 14 $ — $ 100
Adjusted operating margin 36.6 % 20.5 % N/A 29.6 %
Three Months Ended March 31, 2020
Operating income (loss) $ 854 $ 282 $ (66) $ 1,070
Operating margin 29.4 % 16.0 % N/A 23.0 %
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a) 2 4 3 9
Changes in contingent consideration (b) 3 (4) — (1)
JLT integration and restructuring costs (c) 61 10 9 80
JLT acquisition-related costs (d) 12 1 — 13
Disposal of business — (4) — (4)
Operating income adjustments 78 7 12 97
Adjusted operating income (loss) $ 932 $ 289 $ (54) $ 1,167
Total identified intangible amortization expense $ 72 $ 14 $ — $ 86
Adjusted operating margin 34.5 % 17.2 % N/A 27.0 %
(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 as measured each quarter of
contingent consideration related to acquisitions.
(c) Primarily costs incurred for staff reductions and real estate exit costs
related to the JLT Transaction.
(d) Reflects retention costs related to the closing of the JLT Transaction.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three Months Ended March 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 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 month periods ended March 31, 2021 and 2020.
Three Months Ended March 31, 2021 Three Months Ended March 31, 2020
Amount Adjusted Amount Adjusted
EPS
EPS
Net income before non-controlling interests, as reported $ 998 $ 767
Less: Non-controlling interest, net of tax 15 13
Subtotal $ 983 $ 1.91 $ 754 $ 1.48
Operating income adjustments $ 47 $ 97
Investments adjustment — 1
Impact of income taxes on above items (9) (17)
38 0.08 81 0.16
Adjusted income, net of tax $ 1,021 $ 1.99 $ 835 $ 1.64
Marsh & McLennan Companies, Inc.
Supplemental Information
Three Months Ended March 31
(Millions) (Unaudited)
Three Months Ended
March 31,
2021 2020
Consolidated
Compensation and benefits $ 2,807 $ 2,555
Other operating expenses 918 1,026
Total expenses $ 3,725 $ 3,581
Depreciation and amortization expense $ 97 $ 97
Identified intangible amortization expense 100 86
Total $ 197 $ 183
Stock option expense $ 21 $ 16
Risk and Insurance Services
Compensation and benefits $ 1,610 $ 1,452
Other operating expenses 555 605
Total expenses $ 2,165 $ 2,057
Depreciation and amortization expense $ 50 $ 52
Identified intangible amortization expense 86 72
Total $ 136 $ 124
Consulting
Compensation and benefits $ 1,074 $ 991
Other operating expenses 438 489
Total expenses $ 1,512 $ 1,480
Depreciation and amortization expense $ 29 $ 28
Identified intangible amortization expense 14 14
Total $ 43 $ 42
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets
(Millions)
(Unaudited) December 31,
March 31,
2020
2021
ASSETS
Current assets:
Cash and cash equivalents $ 1,120 $ 2,089
Net receivables 5,597 5,326
Other current assets 832 740
Total current assets 7,549 8,155
Goodwill and intangible assets 18,061 18,216
Fixed assets, net 830 856
Pension related assets 1,823 1,768
Right of use assets 1,824 1,894
Deferred tax assets 704 702
Other assets 1,482 1,458
TOTAL ASSETS $ 32,273 $ 33,049
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 1,015 $ 517
Accounts payable and accrued liabilities 2,940 3,050
Accrued compensation and employee benefits 1,220 2,400
Current lease liabilities 342 342
Accrued income taxes 368 247
Dividends payable 238 —
Total current liabilities 6,123 6,556
Fiduciary liabilities 8,782 8,585
Less - cash and investments held in a fiduciary capacity (8,782) (8,585)
— —
Long-term debt 10,242 10,796
Pension, post-retirement and post-employment benefits 2,594 2,662
Long-term lease liabilities 1,850 1,924
Liabilities for errors and omissions 354 366
Other liabilities 1,514 1,485
Total equity 9,596 9,260
TOTAL LIABILITIES AND EQUITY $ 32,273 $ 33,049
Marsh & McLennan Companies, Inc.
Consolidated Statements of Cash Flows
(Millions) (Unaudited)
Three Months Ended March 31,
2021 2020
Operating cash flows:
Net income before non-controlling interests $ 998 $ 767
Adjustments to reconcile net income to cash used for operations:
Depreciation and amortization 197 183
Non cash lease expense 79 80
Share-based compensation expense 78 72
Change in fair value of acquisition-related derivative contracts and other 5 (2)
Changes in Assets and Liabilities:
Accrued compensation and employee benefits (1,180) (1,178)
Net receivables (275) (313)
Other changes to assets and liabilities (71) (64)
Contributions to pension & other benefit plans in excess of current year (102) (85)
credit
Operating lease liabilities (82) (86)
Effect of exchange rate changes (55) (12)
Net cash used for operations (408) (638)
Financing cash flows:
Purchase of treasury shares (112) —
Borrowings from term-loan and credit facilities — 2,000
Net increase in commercial paper — 193
Repayments of debt (4) (503)
Net issuance of common stock from treasury shares (58) (68)
Net distributions of non-controlling interests and deferred/contingent (40) (50)
consideration
Dividends paid (237) (232)
Net cash (used for) provided by financing activities (451) 1,340
Investing cash flows:
Capital expenditures (69) (118)
Net sales of long-term investments and other 2 66
Dispositions — 7
Acquisitions — (200)
Net cash used for investing activities (67) (245)
Effect of exchange rate changes on cash and cash equivalents (43) (132)
(Decrease) increase in cash and cash equivalents (969) 325
Cash and cash equivalents at beginning of period 2,089 1,155
Cash and cash equivalents at end of period $ 1,120 $ 1,480
Media Contact:
Erick R. Gustafson
Marsh McLennan
+1 202 263 7788
erick.gustafson@mmc.com
(mailto:erick.gustafson@mmc.com)
Investor Contact:
Sarah DeWitt
Marsh McLennan
+1 212 345 6750
sarah.dewitt@mmc.com (mailto:sarah.dewitt@mmc.com)
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