REG-Marsh & McLennan Marsh McLennan Reports Third Quarter 2022 Results
20/10/2022 12:00
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Marsh McLennan Reports Third Quarter 2022 Results
GAAP Revenue Increases 4%; Underlying Revenue Rises 8%
Growth in GAAP Operating Income of 7% and Adjusted Operating Income of 12%
Third Quarter GAAP EPS Rises 3% to $1.08 and Adjusted EPS Increases 9% to
$1.18
Nine Months GAAP EPS Rises 12% to $5.11 and Adjusted EPS Increases 12% to
$5.38
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 third quarter ended September 30, 2022.
Dan Glaser, President and CEO, said: "Marsh McLennan had another excellent
quarter, demonstrating continued momentum across the business. We generated 8%
underlying revenue growth and 110 basis points of adjusted operating margin
expansion, which translated into solid 9% growth in adjusted EPS. Our advice
and solutions remain in high demand as our clients navigate an uncertain and
volatile macroeconomic and geopolitical landscape."
As previously announced, Dan Glaser will retire at the end of the year and
John Doyle will succeed him as President and Chief Executive Officer,
effective January 1, 2023. Mr. Glaser said, "It has been a privilege to work
side by side with our talented colleagues, and I am proud of everything we
have accomplished together. There is no one I trust more than John to lead our
Company, and I am confident Marsh McLennan's extraordinary success will
continue under his leadership."
Consolidated Results
Consolidated revenue in the third quarter of 2022 was $4.8 billion, an
increase of 4% compared with the third quarter of 2021. On an underlying
basis, revenue increased 8%. Operating income was $791 million, an increase of
7% from the prior year. Adjusted operating income, which excludes noteworthy
items as presented in the attached supplemental schedules, rose 12% to $851
million. Net income attributable to the Company was $546 million, or $1.08 per
diluted share, compared with $1.05 in the third quarter of 2021. Adjusted
earnings per share rose 9% to $1.18 per diluted share compared with $1.08 a
year ago.
For the nine months ended September 30, 2022, consolidated revenue was $15.7
billion, an increase of 7% compared to the prior year period. On an underlying
basis, revenue increased 9%. Operating income was $3.6 billion, an increase of
8% from a year ago. Adjusted operating income, which excludes noteworthy items
as presented in the attached supplemental schedules, rose 11% to $3.7 billion.
Net income attributable to the Company was $2.6 billion, or $5.11 per diluted
share, compared with $4.56 in the first nine months of 2021. Adjusted earnings
per share rose 12% to $5.38 per diluted share compared with $4.82 for the
first nine months of 2021.
Risk & Insurance Services
Risk & Insurance Services revenue was $2.8 billion in the third quarter of
2022, an increase of 6%, or 9% on an underlying basis. Operating income rose
32% to $529 million, and adjusted operating income was $562 million, an
increase of 20% versus a year ago. For the first nine months ended September
30, 2022, revenue was $9.7 billion, an increase of 7%, or 10% on an underlying
basis. Operating income rose 8% to $2.6 billion, and adjusted operating income
was $2.8 billion, an increase of 13% versus a year ago.
Marsh's revenue in the third quarter was $2.5 billion, an increase of 8% on an
underlying basis. In U.S./Canada, underlying revenue rose 5%. International
operations produced underlying revenue growth of 11%, reflecting 15% growth in
Latin America, 14% growth in Asia Pacific, and 9% growth in EMEA. For the
first nine months ended September 30, 2022, Marsh's underlying revenue growth
was 9%.
Guy Carpenter's revenue in the third quarter was $328 million, an increase of
7% on an underlying basis. For the first nine months ended September 30, 2022,
Guy Carpenter's underlying revenue growth was 10%.
Consulting
Consulting revenue was $2.0 billion in the third quarter of 2022, an increase
of 1%, or 8% on an underlying basis. Operating income decreased 14% to $350
million, while adjusted operating income increased 3% to $362 million. For the
first nine months ended September 30, 2022, Consulting revenue was $6.0
billion, an increase of 6%, or 9% on an underlying basis. Operating income of
$1.2 billion increased 10% and adjusted operating income increased 5% to $1.1
billion.
Mercer's revenue in the third quarter was $1.3 billion, an increase of 5% on
an underlying basis. Career revenue of $272 million was up 15% on an
underlying basis. Health revenue of $451 million increased 10% on an
underlying basis, and Wealth revenue of $561 million decreased 1% on an
underlying basis. For the first nine months ended September 30, 2022, Mercer's
revenue was $4.0 billion, an increase of 6% on an underlying basis.
Oliver Wyman’s revenue in the third quarter was $667 million, an increase of
13% on an underlying basis. For the first nine months ended September 30,
2022, Oliver Wyman’s revenue was $2.0 billion, an increase of 15% on an
underlying basis.
Other Items
The Company repurchased 3.1 million shares of stock for $500 million in the
third quarter. Through nine months, the Company has repurchased 10.1 million
shares of stock for $1.6 billion.
Conference Call
A conference call to discuss third quarter 2022 results will be held today at
8:30 a.m. Eastern time. The live audio webcast may be accessed at
marshmclennan.com
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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 86,000 colleagues
advise clients in 130 countries. With annual revenue of over $20 billion,
Marsh McLennan helps clients navigate an increasingly dynamic and complex
environment through four market-leading businesses. Marsh
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.marsh.com%2F&esheet=52948657&newsitemid=20221019006112&lan=en-US&anchor=Marsh&index=3&md5=1a888e2d667ff5613fd3600410f3f385)
provides data-driven risk advisory services and insurance solutions to
commercial and consumer clients. Guy Carpenter
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.guycarp.com%2F&esheet=52948657&newsitemid=20221019006112&lan=en-US&anchor=Guy+Carpenter&index=4&md5=d57036a3056c96a0b9c7cad02e6bcdc2)
develops advanced risk, reinsurance and capital strategies that help clients
grow profitably and pursue emerging opportunities. Mercer
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.mercer.com%2F&esheet=52948657&newsitemid=20221019006112&lan=en-US&anchor=Mercer&index=5&md5=e0b0225c304c798ed0558a7304553ac0)
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
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.oliverwyman.com%2F&esheet=52948657&newsitemid=20221019006112&lan=en-US&anchor=Oliver+Wyman&index=6&md5=861bcc64813f9fd878454f535cff8bf7)
serves as a critical strategic, economic and brand advisor to private sector
and governmental clients. For more information, visit marshmclennan.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 impact of geopolitical or macroeconomic conditions on us, our clients and
the countries and industries in which we operate, including from conflicts
such as the war in Ukraine, slower GDP growth or recession, capital markets
volatility and inflation;
* the increasing prevalence of ransomware, supply chain and other forms of cyber
attacks, and their potential to disrupt our operations and result in the
disclosure of confidential client or company information;
* 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, including claims related to our investment
business’ ability to execute timely trades;
* the financial and operational impact of complying with laws and regulations,
including domestic and international sanctions regimes, anti-corruption laws
such as the U.S. Foreign Corrupt Practices Act, U.K. Anti Bribery Act and
cybersecurity and data privacy regulations;
* our ability to attract, retain and develop industry leading talent;
* our ability to compete effectively and adapt to competitive pressures in each
of our businesses, including from disintermediation as well as technological
change, digital disruption and other types of innovation;
* our ability to manage potential conflicts of interest, including where our
services to a client conflict, or are perceived to conflict, with the
interests of another client or our own interests;
* the impact of changes in tax laws, guidance and interpretations, or
disagreements with tax authorities; and
* the regulatory, contractual and reputational risks that arise based on
insurance placement activities and insurer revenue streams.
The factors identified above are not exhaustive. Marsh McLennan and its
subsidiaries (collectively, the "Company") 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 data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenue $ 4,770 $ 4,583 $ 15,698 $ 14,683
Expense:
Compensation and benefits 2,923 2,853 9,033 8,520
Other operating expenses 1,056 990 3,065 2,837
Operating expenses 3,979 3,843 12,098 11,357
Operating income 791 740 3,600 3,326
Other net benefit credits 57 69 178 211
Interest income 4 1 6 2
Interest expense (118 ) (107 ) (342 ) (335 )
Investment (loss) income (1 ) 13 27 43
Income before income taxes 733 716 3,469 3,247
Income tax expense 181 174 853 880
Net income before non-controlling interests 552 542 2,616 2,367
Less: Net income attributable to non-controlling interests 6 5 32 27
Net income attributable to the Company $ 546 $ 537 $ 2,584 $ 2,340
Net income per share attributable to the Company:
- Basic $ 1.10 $ 1.06 $ 5.16 $ 4.61
- Diluted $ 1.08 $ 1.05 $ 5.11 $ 4.56
Average number of shares outstanding:
- Basic 498 506 501 508
- Diluted 503 513 506 513
Shares outstanding at September 30 497 505 497 505
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended September 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 % Change Currency Impact Acquisitions/ Underlying Revenue
September 30, GAAP Revenue Dispositions/ Other Impact
2022 2021
Risk and Insurance Services
Marsh $ 2,470 $ 2,352 5 % (4 )% 1 % 8 %
Guy Carpenter 328 314 4 % (3 )% — 7 %
Subtotal 2,798 2,666 5 % (4 )% 1 % 8 %
Fiduciary interest income 40 4
Total Risk and Insurance Services 2,838 2,670 6 % (4 )% 1 % 9 %
Consulting
Mercer 1,284 1,315 (2 )% (6 )% (2 )% 5 %
Oliver Wyman Group 667 610 9 % (5 )% 1 % 13 %
Total Consulting 1,951 1,925 1 % (6 )% (1 )% 8 %
Corporate Eliminations (19 ) (12 )
Total Revenue $ 4,770 $ 4,583 4 % (5 )% — 8 %
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 Impact Acquisitions/ Underlying Revenue
September 30, GAAP Revenue Dispositions/ Other Impact
2022 2021
Marsh:
EMEA $ 589 $ 600 (2 )% (11 )% (1 )% 9 %
Asia Pacific 312 281 11 % (9 )% 7 % 14 %
Latin America 118 105 12 % (3 )% — 15 %
Total International 1,019 986 3 % (9 )% 2 % 11 %
U.S./Canada 1,451 1,366 6 % — 1 % 5 %
Total Marsh $ 2,470 $ 2,352 5 % (4 )% 1 % 8 %
Mercer:
Wealth $ 561 $ 613 (9 )% (7 )% — (1 )%
Health 451 449 1 % (4 )% (5 )% 10 %
Career 272 253 8 % (7 )% — 15 %
Total Mercer $ 1,284 $ 1,315 (2 )% (6 )% (2 )% 5 %
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Nine Months Ended September 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*
Nine Months Ended % Change Currency Impact Acquisitions/ Underlying Revenue
September 30, GAAP Revenue Dispositions/ Other Impact
2022 2021
Risk and Insurance Services
Marsh $ 7,794 $ 7,327 6 % (3 )% — 9 %
Guy Carpenter 1,849 1,697 9 % (2 )% 1 % 10 %
Subtotal 9,643 9,024 7 % (3 )% 1 % 9 %
Fiduciary interest income 57 12
Total Risk and Insurance Services 9,700 9,036 7 % (3 )% 1 % 10 %
Consulting
Mercer 4,016 3,877 4 % (4 )% 2 % 6 %
Oliver Wyman Group 2,029 1,813 12 % (4 )% 1 % 15 %
Total Consulting 6,045 5,690 6 % (4 )% 1 % 9 %
Corporate Eliminations (47 ) (43 )
Total Revenue $ 15,698 $ 14,683 7 % (3 )% 1 % 9 %
Revenue Details
The following table provides more detailed revenue information for certain of
the components presented above:
Components of Revenue Change*
Nine Months Ended % Change Currency Impact Acquisitions/ Underlying Revenue
September 30, GAAP Revenue Dispositions/ Other Impact
2022 2021
Marsh:
EMEA $ 2,176 $ 2,233 (3 ) % (7 ) % (4 ) % 8 %
Asia Pacific 1,015 902 13 % (7 ) % 6 % 14 %
Latin America 340 298 14 % (1 ) % — 15 %
Total International 3,531 3,433 3 % (6 ) % (1 ) % 10 %
U.S./Canada 4,263 3,894 9 % — 1 % 8 %
Total Marsh $ 7,794 $ 7,327 6 % (3 ) % — 9 %
Mercer:
Wealth $ 1,775 $ 1,861 (5 ) % (5 ) % — 1 %
Health 1,562 1,398 12 % (3 ) % 5 % 10 %
Career 679 618 10 % (5 ) % — 15 %
Total Mercer $ 4,016 $ 3,877 4 % (4 ) % 2 % 6 %
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three Months Ended September 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 certain additional non-GAAP financial measures, within
the meaning of Regulation G in accordance with 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, 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 (loss). The
following tables identify these noteworthy items and reconcile adjusted
operating income (loss) to GAAP operating income (loss), on a consolidated and
reportable segment basis, for the three and nine months ended September 30,
2022 and 2021. The following tables also present adjusted operating margin.
For the three and nine months ended September 30, 2022 and 2021, 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/ Total
Eliminations
Three Months Ended September 30, 2022
Operating income (loss) $ 529 $ 350 $ (88 ) $ 791
Operating margin 18.7 % 17.9 % N/A 16.6 %
Add (deduct) impact of noteworthy items:
Restructuring (a) 18 5 15 38
Changes in contingent consideration (b) 11 — — 11
JLT acquisition-related costs (c) 4 — — 4
Other — 7 — 7
Operating income adjustments 33 12 15 60
Adjusted operating income (loss) $ 562 $ 362 $ (73 ) $ 851
Total identified intangible amortization expense $ 74 $ 10 $ — $ 84
Adjusted operating margin 22.4 % 19.1 % N/A 19.6 %
Three Months Ended September 30, 2021
Operating income (loss) $ 403 $ 404 $ (67 ) $ 740
Operating margin 15.1 % 21.0 % N/A 16.1 %
Add (deduct) impact of noteworthy items:
Restructuring (a) 18 9 4 31
Changes in contingent consideration (b) 17 1 — 18
JLT acquisition-related costs (c) 10 — 1 11
JLT legacy legal charges (d) — (63 ) — (63 )
Legal claims and other (e) 21 (1 ) 2 22
Operating income adjustments 66 (54 ) 7 19
Adjusted operating income (loss) $ 469 $ 350 $ (60 ) $ 759
Total identified intangible amortization expense $ 75 $ 14 $ — $ 89
Adjusted operating margin 20.4 % 18.9 % N/A 18.5 %
(a) Restructuring activities reflect costs primarily related to the Company's global information technology and HR functions, JLT integration costs, Marsh operational excellence 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 retention costs related to the acquisition of JLT.
(d) Reflects a reduction in the liability for a legacy JLT E&O relating to suitability of advice provided to individuals for defined benefit pension transfers in the U.K., as well as recoveries under indemnities and insurance.
(e) Primarily reflects settlement charges and legal costs related to strategic recruiting.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Nine Months Ended September 30
(Millions) (Unaudited)
Risk & Insurance Services Consulting Corporate/ Total
Eliminations
Nine Months Ended September 30, 2022
Operating income (loss) $ 2,617 $ 1,217 $ (234 ) $ 3,600
Operating margin 27.0 % 20.1 % N/A 22.9 %
Add (deduct) impact of noteworthy items:
Restructuring (a) 44 16 36 96
Changes in contingent consideration (b) 33 5 — 38
JLT acquisition-related costs (c) 24 1 3 28
JLT legacy legal charges (d) 14 (11 ) — 3
Disposal of businesses (e) — (114 ) — (114 )
Deconsolidation of Russian businesses and other related charges (f) 42 10 — 52
Legal claims and other (g) 30 9 — 39
Operating income adjustments 187 (84 ) 39 142
Adjusted operating income (loss) $ 2,804 $ 1,133 $ (195 ) $ 3,742
Total identified intangible amortization expense $ 223 $ 35 $ — $ 258
Adjusted operating margin 31.1 % 19.6 % N/A 25.6 %
Nine Months Ended September 30, 2021
Operating income (loss) $ 2,413 $ 1,109 $ (196 ) $ 3,326
Operating margin 26.7 % 19.5 % N/A 22.7 %
Add (deduct) impact of noteworthy items:
Restructuring (a) 50 29 17 96
Changes in contingent consideration (b) 18 (4 ) (3 ) 11
JLT acquisition-related costs (c) 32 2 1 35
JLT legacy legal charges (d) — (63 ) — (63 )
Disposal of businesses (e) (52 ) 3 — (49 )
Legal claims and other (g) 27 — 2 29
Operating income adjustments 75 (33 ) 17 59
Adjusted operating income (loss) $ 2,488 $ 1,076 $ (179 ) $ 3,385
Total identified intangible amortization expense $ 236 $ 42 $ — $ 278
Adjusted operating margin 30.3 % 19.6 % N/A 25.0 %
(a) Restructuring activities reflect costs primarily related to the Company's global information technology and HR functions, JLT integration costs, Marsh operational excellence 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 retention costs related to the acquisition of JLT.
(d) Reflects charges and recoveries related to legacy JLT legal matters. 2021 reflects a reduction in the liability for a legacy JLT E&O relating to suitability of advice provided to individuals for defined benefit pension transfers in the U.K., as well as recoveries under indemnities and insurance.
(e) Reflects primarily a gain of $112 million during the second quarter of 2022 on the sale of the Mercer U.S. affinity business. In 2021, the amount reflects a gain of $49 million primarily related to the sale of the U.K. commercial networks business. These amounts are included in revenue in the consolidated statements of income and excluded from underlying revenue and adjusted revenue in the calculation of adjusted operating margin.
(f) Loss on deconsolidation of Russian businesses and other related charges. The loss on deconsolidation of $39 million is included in revenue in the consolidated statements of income and excluded from underlying revenue and adjusted revenue used in the calculation of adjusted operating margin.
(g) Primarily reflects settlement charges and legal costs related to strategic recruiting.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three and Nine Months Ended September 30
(In millions, except per share data)
(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 the additional items
listed below. Adjusted EPS is calculated by dividing the Company’s adjusted
income, net of tax, by the 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 nine months ended September 30, 2022 and 2021.
Three Months Ended Three Months Ended
September 30, 2022 September 30, 2021
Amount Adjusted EPS Amount Adjusted EPS
Net income before non-controlling interests, as reported $ 552 $ 542
Less: Non-controlling interest, net of tax 6 5
Subtotal $ 546 $ 1.08 $ 537 $ 1.05
Operating income adjustments $ 60 $ 19
Investments adjustment (a) 4 (1 )
Pension settlement adjustment (b) — 2
Income tax effect of adjustments (c) (16 ) (10 )
Impact of U.K. tax rate change (d) — 5
48 0.10 15 0.03
Adjusted income, net of tax $ 594 $ 1.18 $ 552 $ 1.08
Nine Months Ended Nine Months Ended
September 30, 2022 September 30, 2021
Amount Adjusted EPS Amount Adjusted EPS
Net income before non-controlling interests, as reported $ 2,616 $ 2,367
Less: Non-controlling interest, net of tax 32 27
Subtotal $ 2,584 $ 5.11 $ 2,340 $ 4.56
Operating income adjustments $ 142 $ 59
Investments adjustment (a) (4 ) (2 )
Pension settlement adjustment (b) 1 2
Income tax effect of adjustments (c) (1 ) (31 )
Impact of U.K. tax rate change (d) — 105
138 0.27 133 0.26
Adjusted income, net of tax $ 2,722 $ 5.38 $ 2,473 $ 4.82
(a) In the third quarter of 2022, amount represents a net loss from the sale of investments, including the Company's remaining investment in Alexander Forbes ("AF"). Amounts for the other periods presented reflect mark to market gains.
(b) Charges resulting from lump sum pension settlements elected by participants.
(c) 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.
(d) 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 Nine Months Ended September 30
(Millions) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Consolidated
Compensation and benefits $ 2,923 $ 2,853 $ 9,033 $ 8,520
Other operating expenses 1,056 990 3,065 2,837
Total expenses $ 3,979 $ 3,843 $ 12,098 $ 11,357
Depreciation and amortization expense $ 85 $ 90 $ 259 $ 291
Identified intangible amortization expense 84 89 258 278
Total $ 169 $ 179 $ 517 $ 569
Risk and Insurance Services
Compensation and benefits $ 1,688 $ 1,634 $ 5,239 $ 4,876
Other operating expenses 621 633 1,844 1,747
Total expenses $ 2,309 $ 2,267 $ 7,083 $ 6,623
Depreciation and amortization expense $ 40 $ 44 $ 123 $ 152
Identified intangible amortization expense 74 75 223 236
Total $ 114 $ 119 $ 346 $ 388
Consulting
Compensation and benefits $ 1,107 $ 1,103 $ 3,416 $ 3,287
Other operating expenses 494 418 1,412 1,294
Total expenses $ 1,601 $ 1,521 $ 4,828 $ 4,581
Depreciation and amortization expense $ 26 $ 29 $ 79 $ 87
Identified intangible amortization expense 10 14 35 42
Total $ 36 $ 43 $ 114 $ 129
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets
(Millions)
(Unaudited) December 31, 2021
September 30,
2022
ASSETS
Current assets:
Cash and cash equivalents $ 802 $ 1,752
Net receivables 5,819 5,586
Other current assets 953 926
Total current assets 7,574 8,264
Goodwill and intangible assets 17,979 19,127
Fixed assets, net 865 847
Pension related assets 2,074 2,270
Right of use assets 1,615 1,868
Deferred tax assets 533 551
Other assets 1,383 1,461
TOTAL ASSETS $ 32,023 $ 34,388
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 967 $ 17
Accounts payable and accrued liabilities 2,903 3,165
Accrued compensation and employee benefits 2,396 2,942
Current lease liabilities 298 332
Accrued income taxes 432 198
Dividends payable 296 —
Total current liabilities 7,292 6,654
Fiduciary liabilities 10,608 9,622
Less - cash and cash equivalents held in a fiduciary capacity (10,608 ) (9,622 )
— —
Long-term debt 10,399 10,933
Pension, post-retirement and post-employment benefits 1,309 1,632
Long-term lease liabilities 1,620 1,880
Liabilities for errors and omissions 331 355
Other liabilities 1,281 1,712
Total equity 9,791 11,222
TOTAL LIABILITIES AND EQUITY $ 32,023 $ 34,388
Marsh & McLennan Companies, Inc.
Consolidated Statements of Cash Flows
(Millions) (Unaudited)
Nine Months Ended
September 30,
2022 2021
Operating cash flows:
Net income before non-controlling interests $ 2,616 $ 2,367
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization 517 569
Non-cash lease expense 223 241
Deconsolidation of Russian businesses 39 —
Share-based compensation expense 283 263
Net gain on investments, disposition of assets and other (139 ) (96 )
Changes in assets and liabilities:
Accrued compensation and employee benefits (451 ) (20 )
Provision for taxes, net of payments and refunds 156 196
Net receivables (745 ) (604 )
Other changes to assets and liabilities 14 (298 )
Contributions to pension and other benefit plans in excess of current year (306 ) (282 )
credit
Operating lease liabilities (244 ) (262 )
Net cash provided by operations 1,963 2,074
Financing cash flows:
Purchase of treasury shares (1,600 ) (734 )
Net proceeds from issuance of commercial paper 600 —
Repayments of debt (14 ) (512 )
Net issuance of common stock from treasury shares (105 ) 16
Net distributions of non-controlling interests and deferred/contingent (161 ) (66 )
consideration
Dividends paid (840 ) (750 )
Increase in fiduciary liabilities 2,148 1,919
Net cash provided by (used for) financing activities 28 (127 )
Investing cash flows:
Capital expenditures (367 ) (268 )
Purchases of long term investments and other (5 ) (34 )
Sales of long term investments 84 30
Dispositions 138 84
Acquisitions, net of cash and cash held in a fiduciary capacity acquired (213 ) (384 )
Net cash used for investing activities (363 ) (572 )
Effect of exchange rate changes on cash, cash equivalents, and cash and cash (1,592 ) (243 )
equivalents held in a fiduciary capacity
Increase in cash, cash equivalents, and cash and cash equivalents held in a 36 1,132
fiduciary capacity
Cash, cash equivalents, and cash and cash equivalents held in a fiduciary 11,374 10,674
capacity at beginning of period
Cash, cash equivalents, and cash and cash equivalents held in a fiduciary $ 11,410 $ 11,806
capacity at end of period
Reconciliation of cash, cash equivalents, and cash and cash equivalents held
in a fiduciary capacity to the Consolidated Balance Sheets
Nine Months Ended September 30, 2022 2021
(In millions)
Cash and cash equivalents $ 802 $ 1,398
Cash and cash equivalents held in a fiduciary capacity 10,608 10,408
Total cash, cash equivalents, and cash and cash equivalents held in a $ 11,410 $ 11,806
fiduciary capacity
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)
View source version on businesswire.com:
https://www.businesswire.com/news/home/20221019006112/en/
(https://www.businesswire.com/news/home/20221019006112/en/)
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