REG-Marsh & McLennan Marsh & McLennan Reports Fourth Quarter and Full-Year 2020 Results
28/01/2021 12:00
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Marsh & McLennan Reports Fourth Quarter and Full-Year 2020 Results
Full-Year Revenue Growth of 3%; Underlying Revenue Growth of 1%
Full-Year GAAP Operating Income Rises 14%; Adjusted Operating Income Increases
9%
Full-Year GAAP EPS Increases 16% to $3.94; Adjusted EPS Increases 7% to $4.97
Fourth Quarter GAAP EPS of $0.73; Adjusted EPS of $1.19
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
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. A replay of the webcast will be available approximately two hours after the
event.
About Marsh & McLennan Companies
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 over $17 billion, Marsh & McLennan
helps clients navigate an increasingly dynamic and complex environment through
four market-leading businesses. Marsh
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advises individual and commercial clients of all sizes on insurance broking
and innovative risk management solutions. 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, 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 Twelve Months Ended
December 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 Ended % Change Currency Acquisitions/ Un
December 31,
GAAP
Impact
Dispositions/ de
Revenue
Other Impact rl
yi
ng
R
ev
en
ue
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 Ended % Change Currency Acquisitions/ Un
December 31,
GAAP
Impact
Dispositions/ de
Revenue
Other Impact rl
yi
ng
R
ev
en
ue
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*
Twelve Months Ended % Change 2019 % Change Currency Acquisitions/ Un
December 31,
GAAP
Including
Including
Impact
Dispositions/ de
Revenue
JLT
JLT in 2019
Other Impact rl
yi
ng
R
ev
en
ue
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*
Twelve Months Ended % Change 2019 % Change Currency Acquisitions/ Un
December 31,
GAAP
Including
Including
Impact
Dispositions/ de
Revenue
JLT
JLT in 2019
Other Impact rl
yi
ng
R
ev
en
ue
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 & Consulting Corporate/ Total
Insurance
Eliminations
Services
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 & Consulting Corporate/ Total
Insurance
Eliminations
Services
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
Amount Adjusted Amount Adjusted
EPS
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
Amount Adjusted Amount Adjusted
EPS
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 (356 ) (369 )
expense/credit
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 (159 ) (161 )
consideration
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/
(https://www.businesswire.com/news/home/20210128005576/en/)
Media:
Erick R. Gustafson
Marsh & McLennan Companies
+1 202 263 7788
erick.gustafson@mmc.com (mailto:erick.gustafson@mmc.com)
Investors:
Sarah DeWitt
Marsh & McLennan Companies
+1 212 345 6750
sarah.dewitt@mmc.com (mailto:sarah.dewitt@mmc.com)
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