Full-Year Revenue Growth of 11%; Underlying
Revenue Growth of 4%
Full-Year GAAP Operating Income Declines 3%;
Adjusted Operating Income Increases 14%
Full-Year GAAP EPS Increases 6% to $3.41;
Adjusted EPS Increases 7% to $4.66
Fourth Quarter GAAP EPS Rises to $0.76;
Adjusted EPS Grows 9% to $1.19
Marsh & McLennan Companies, Inc. (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, 2019.
"2019 was a historic year for Marsh & McLennan,” said Dan
Glaser, President and CEO. "We closed the largest transaction in
our Company’s history, maintained our momentum through the
integration and met our key milestones. We grew total revenue 11%
and generated 4% underlying growth. We increased our adjusted
operating income by 14%, adjusted margin by 110 basis points and
adjusted EPS by 7%. With a solid fourth quarter, we enter 2020 well
positioned for continued growth."
Consolidated Results Consolidated
revenue in the fourth quarter of 2019 was $4.3 billion, an increase
of 15% compared with the fourth quarter of 2018, or 3% on an
underlying basis. Underlying revenue growth is calculated as if
Marsh & McLennan and Jardine Lloyd Thompson were a combined
company a year ago, but excludes the impact of currency, other
acquisitions, dispositions, and transfers among businesses.
Operating income was $592 million compared with $621 million in the
prior year period. Adjusted operating income, which excludes
noteworthy items as presented in the attached supplemental
schedules, rose 17% to $856 million. Net income attributable to the
Company was $391 million, or $0.76 per diluted share, compared with
$0.30 in the fourth quarter of 2018. Adjusted earnings per share
increased 9% to $1.19 compared with $1.09 for the prior year
period.
For the year 2019, revenue was $16.7 billion, an increase of 11%
compared with 2018, or 4% on an underlying basis. Operating income
was $2.7 billion, while adjusted operating income rose 14% to $3.4
billion. Net income attributable to the Company was $1.7 billion.
Earnings per share increased 6% to $3.41. Adjusted earnings per
share increased 7% to $4.66 compared with $4.35 in 2018.
Risk & Insurance Services Risk
& Insurance Services revenue was $2.4 billion in the fourth
quarter of 2019, an increase of 24%, or 3% on an underlying basis.
Operating income was $365 million, compared with $383 million in
the fourth quarter of 2018. Adjusted operating income increased 31%
to $550 million. For the year 2019, revenue was $9.6 billion, an
increase of 17%, or 4% on an underlying basis. Operating income was
$1.8 billion, compared to $1.9 billion for the full year of 2018.
Adjusted operating income rose 17% to $2.3 billion.
Marsh's revenue in the fourth quarter of 2019 was $2.2 billion,
an increase of 23%, or 3% on an underlying basis. In U.S./Canada,
underlying revenue rose 4%. International operations produced
underlying revenue growth of 1%, reflecting underlying growth of 7%
in Asia Pacific and 2% in Latin America, partially offset by a
decline of 1% in EMEA. For the year 2019, Marsh’s revenue growth
was 17%, or 4% on an underlying basis.
Guy Carpenter's fourth quarter revenue was $152 million, up 10%
on an underlying basis. For the year 2019, Guy Carpenter’s
underlying revenue growth was 5%.
Consulting Consulting revenue was
$1.9 billion in the fourth quarter of 2019, an increase of 4%, or
2% on an underlying basis. Operating income of $336 million rose
14%. Adjusted operating income was flat at $359 million. For the
year 2019, revenue was $7.1 billion, up 5%, or 3% on an underlying
basis. Operating income increased 10% to $1.2 billion, and adjusted
operating income increased 9% to $1.3 billion.
Mercer’s revenue was $1.3 billion in the fourth quarter of 2019,
an increase of 8%, or 4% on an underlying basis. Health, with
revenue of $455 million, was up 6% on an underlying basis. Career
revenue of $250 million increased 4% on an underlying basis, and
Wealth revenue of $621 million increased 2% on an underlying basis.
For the year 2019, Mercer’s revenue growth was 6%, or 2% on an
underlying basis.
Oliver Wyman’s revenue was $559 million in the fourth quarter of
2019, a decrease of 2% on an underlying basis. For the year 2019,
Oliver Wyman’s revenue increased to $2.1 billion, up 6% on an
underlying basis.
Other Items The Company repurchased
1.8 million shares of its common stock for $185 million in the
fourth quarter. For the year 2019, 4.8 million shares were
repurchased for $485 million.
Conference Call A conference call
to discuss fourth quarter and full year 2019 results will be held
today at 8:30 a.m. Eastern time. To participate in the
teleconference, please dial +1 888 204 4368. Callers from outside
the United States should dial +1 323 794 2434. The access code for
both numbers is 3870718. The live audio webcast may be accessed at
MMC.com. A replay of the webcast will be available approximately
two hours after the event.
About Marsh & McLennan Companies Marsh & McLennan
(NYSE:MMC) is the world’s leading professional services firm in the
areas of risk, strategy and people. The Company’s 76,000 colleagues
advise clients in over 130 countries. With annual revenue of $17
billion, Marsh & McLennan helps clients navigate an
increasingly dynamic and complex environment through four
market-leading businesses. Marsh advises individual and commercial
clients of all sizes on insurance broking and innovative risk
management solutions. Guy Carpenter develops advanced risk,
reinsurance and capital strategies that help clients grow
profitably and pursue emerging opportunities. Mercer delivers
advice and technology-driven solutions that help organizations
redefine the world of work, reshape retirement and investment
outcomes, and unlock health and wellbeing for a changing workforce.
Oliver Wyman serves as a critical strategic, economic and brand
advisor to private sector and governmental clients. For more
information, visit mmc.com, follow us on LinkedIn and Twitter
@mmc_global 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 compete effectively and adapt to changes in the
competitive environment, including to respond to technological
change, disintermediation, digital disruption and other types of
innovation;
- the impact from lawsuits, other contingent liabilities and loss
contingencies arising from errors and omissions, breach of
fiduciary duty or other claims against us;
- our ability to attract and retain industry leading talent;
- our organization's ability to maintain adequate safeguards to
protect the security of our information systems and confidential,
personal or proprietary information, particularly given the large
volume of our vendor network and the need to identify and patch
software vulnerabilities, including those in the existing JLT
information systems;
- our ability to successfully integrate or achieve the intended
benefits of our acquisitions, including JLT;
- the impact of investigations, reviews, or other activity by
regulatory or law enforcement authorities, including the ongoing
investigation by the European Commission competition
authority;
- our ability to maintain our credit ratings and repay our
outstanding long-term debt in a timely manner and on favorable
terms, including approximately $6.8 billion issued in connection
with the acquisition of JLT;
- the regulatory, contractual and reputational risks that arise
based on insurance placement activities and various insurer revenue
streams;
- the financial and operational impact of complying with laws and
regulations where we operate and the risks of noncompliance with
such laws, including cybersecurity and data privacy regulations
such as the E.U.’s General Data Protection Regulation,
anti-corruption laws such as the U.S. Foreign Corrupt Practices
Act, U.K. Anti-Bribery Act and trade sanctions regimes;
- our ability to manage risks associated with our investment
management and related services business, including potential
conflicts of interest between investment consulting and fiduciary
management services;
- the impact of macroeconomic, political, regulatory or market
conditions on us, our clients and the industries in which we
operate, including the impact of Brexit or the inability to collect
on our receivables;
- our ability to successfully recover if we experience a business
continuity problem due to cyberattack, natural disaster, pandemic
or otherwise; and
- the impact of changes in tax laws, guidance and
interpretations, including certain provisions of the U.S. Tax Cuts
and Jobs Act, or disagreements with tax authorities.
The factors identified above are not exhaustive. Marsh &
McLennan Companies and its subsidiaries operate in a dynamic
business environment in which new risks emerge frequently.
Accordingly, we caution readers not to place undue reliance on any
forward-looking statements, which are based only on information
currently available to us and speak only as of the dates on which
they are made. The Company undertakes no obligation to update or
revise any forward-looking statement to reflect events or
circumstances arising after the date on which it is made.
Further information concerning Marsh & McLennan Companies
and its businesses, including information about factors that could
materially affect our results of operations and financial
condition, is contained in the Company's filings with the
Securities and Exchange Commission, including the "Risk Factors"
section and the "Management’s Discussion and Analysis of Financial
Condition and Results of Operations" section of our most recently
filed Annual Report on Form 10-K.
Marsh & McLennan
Companies, Inc.
Consolidated Statements of
Income
(In millions, except per share
figures)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Revenue
$
4,264
$
3,712
$
16,652
$
14,950
Expense:
Compensation and Benefits
2,478
2,163
9,734
8,605
Other Operating Expenses
1,194
928
4,241
3,584
Operating Expenses
3,672
3,091
13,975
12,189
Operating Income
592
621
2,677
2,761
Other Net Benefit Credits
62
21
265
215
Interest Income
5
3
39
11
Interest Expense
(130
)
(92
)
(524
)
(290
)
Cost of Extinguishment of Debt
—
—
(32
)
—
Investment Income (Loss)
2
12
22
(12
)
Acquisition Related Derivative
Contracts
—
(341
)
(8
)
(441
)
Income Before Income Taxes
531
224
2,439
2,244
Income Tax Expense
135
65
666
574
Income from Continuing
Operations
396
159
1,773
1,670
Discontinued Operations, Net of
Tax
—
—
—
—
Net Income Before Non-Controlling
Interests
396
159
1,773
1,670
Less: Net Income Attributable to
Non-Controlling Interests
5
6
31
20
Net Income Attributable to the
Company
$
391
$
153
$
1,742
$
1,650
Net Income Per Share Attributable to
the Company
- Basic
$
0.77
$
0.30
$
3.44
$
3.26
- Diluted
$
0.76
$
0.30
$
3.41
$
3.23
Average Number of Shares
Outstanding
- Basic
504
504
506
506
- Diluted
510
509
511
511
Shares Outstanding at December
31
504
504
504
504
JLT’s results of operations for the three
months ended December 31, 2019 are included in the Company’s
results of operations for the fourth quarter of 2019. JLT's results
of operations from April 1, 2019 through December 31, 2019 are
included in the Company's results of operations for the
twelve-month period ended December 31, 2019. Prior periods in 2018
do not include JLT’s results.
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.
The calculation of underlying revenue growth for the three
months ended December 31, 2019 includes the results of JLT. The
column "2018 Including JLT" includes JLT's prior year fourth
quarter revenue (See reconciliation of non-GAAP measures on page
14). All other acquisitions/dispositions activity is included in
the acquisitions/dispositions column.
Components of Revenue Change
Including JLT*
Three Months Ended December
31,
% Change
GAAP
2018 Including
% Change Including
JLT in
Currency
Acquisitions/
Dispositions/
Underlying
2019
2018
Revenue
JLT
2018
Impact
Other Impact
Revenue
Risk and Insurance Services
Marsh
$
2,219
$
1,804
23
%
$
2,211
—
(1
)%
(1
)%
3
%
Guy Carpenter
152
102
49
%
150
2
%
—
(8
)%
10
%
Subtotal
2,371
1,906
24
%
2,361
—
(1
)%
(2
)%
3
%
Fiduciary Interest Income
25
19
24
Total Risk and Insurance Services
2,396
1,925
24
%
2,385
1
%
(1
)%
(2
)%
3
%
Consulting
Mercer
1,326
1,228
8
%
1,324
—
(1
)%
(3
)%
4
%
Oliver Wyman
559
577
(3
)%
577
(3
)%
(1
)%
—
(2
)%
Total Consulting
1,885
1,805
4
%
1,901
(1
)%
(1
)%
(2
)%
2
%
Corporate/Eliminations
(17
)
(18
)
(18
)
Total Revenue
$
4,264
$
3,712
15
%
$
4,268
—
(1
)%
(2
)%
3
%
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue Change
Including JLT*
Three Months Ended December
31,
% Change
GAAP
2018 Including
% Change Including
JLT in
Currency
Acquisitions/
Dispositions/
Underlying
2019
2018
Revenue
JLT
2018
Impact
Other Impact
Revenue
Marsh:
EMEA
$
661
$
522
26
%
$
736
(10
)%
(1
)%
(8
)%
(1
)%
Asia Pacific
255
169
51
%
251
2
%
(1
)%
(4
)%
7
%
Latin America
156
121
30
%
165
(5
)%
(6
)%
(1
)%
2
%
Total International
1,072
812
32
%
1,152
(7
)%
(2
)%
(6
)%
1
%
U.S./Canada
1,147
992
15
%
1,059
8
%
—
4
%
4
%
Total Marsh
$
2,219
$
1,804
23
%
$
2,211
—
(1
)%
(1
)%
3
%
Mercer:
Wealth
621
543
14
%
618
—
(1
)%
—
2
%
Health
455
449
1
%
471
(3
)%
—
(9
)%
6
%
Career
250
236
6
%
235
6
%
(1
)%
3
%
4
%
Total Mercer
$
1,326
$
1,228
8
%
$
1,324
—
(1
)%
(3
)%
4
%
*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, 2019 includes the results of JLT. The
column "2018 Including JLT" includes JLT's prior year revenue
beginning April 1, 2018 (See reconciliation of non-GAAP measures on
page 14). The decrease in revenue due to the disposal of JLT's
aerospace business in the second quarter of 2019 is reflected in
the acquisitions/dispositions column. All other
acquisitions/dispositions activity is included in the
acquisitions/dispositions column.
Components of Revenue Change
Including JLT*
Twelve Months Ended December
31,
% Change
GAAP
2018 Including
% Change Including
JLT in
Currency
Acquisitions/
Dispositions/
Underlying
2019
2018
Revenue
JLT
2018
Impact
Other Impact
Revenue
Risk and Insurance Services
Marsh
$
8,014
$
6,877
17
%
$
7,895
2
%
(2
)%
—
4
%
Guy Carpenter
1,480
1,286
15
%
1,442
3
%
(1
)%
(1
)%
5
%
Subtotal
9,494
8,163
16
%
9,337
2
%
(2
)%
—
4
%
Fiduciary Interest Income
105
65
78
Total Risk and Insurance Services
9,599
8,228
17
%
9,415
2
%
(2
)%
—
4
%
Consulting
Mercer
5,021
4,732
6
%
5,001
—
(2
)%
—
2
%
Oliver Wyman Group
2,122
2,047
4
%
2,047
4
%
(2
)%
—
6
%
Total Consulting
7,143
6,779
5
%
7,048
1
%
(2
)%
—
3
%
Corporate/Eliminations
(90
)
(57
)
(57
)
Total Revenue
$
16,652
$
14,950
11
%
$
16,406
2
%
(2
)%
—
4
%
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 December
31,
% Change
GAAP
2018 Including
% Change Including
JLT in
Currency
Acquisitions/
Dispositions/
Underlying
2019
2018
Revenue
JLT
2018
Impact
Other Impact
Revenue
Marsh:
EMEA
$
2,482
$
2,132
16
%
$
2,607
(5
)%
(3
)%
(2
)%
1
%
Asia Pacific
953
683
39
%
948
1
%
(3
)%
(3
)%
7
%
Latin America
460
400
15
%
515
(11
)%
(8
)%
(6
)%
3
%
Total International
3,895
3,215
21
%
4,070
(4
)%
(4
)%
(3
)%
3
%
U.S./Canada
4,119
3,662
12
%
3,825
8
%
—
3
%
5
%
Total Marsh
$
8,014
$
6,877
17
%
$
7,895
2
%
(2
)%
—
4
%
Mercer:
Wealth
2,369
2,185
8
%
2,394
(1
)%
(3
)%
2
%
—
Health
1,796
1,735
4
%
1,793
—
(1
)%
(3
)%
5
%
Career
856
812
5
%
814
5
%
(2
)%
3
%
5
%
Total Mercer
$
5,021
$
4,732
6
%
$
5,001
—
(2
)%
—
2
%
* 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, 2019 and 2018.
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 JLT Transaction on
April 1, 2019. For the three and twelve months ended December 31,
2019 and 2018, adjusted operating margin is calculated by dividing
the sum of adjusted operating income plus identified intangible
asset amortization by consolidated or segment adjusted revenue.
The information presented below represents the actual as
reported results for the three months ended December 31, 2019 and
2018. Results for the three months ended December 31, 2018 are for
MMC only, as previously reported, and do not include JLT
results.
Risk & Insurance
Services
Consulting
Corporate/
Eliminations
Total
Three Months Ended December 31,
2019
Operating income (loss)
$
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 (d)
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
%
As Reported Results
Three Months Ended December 31,
2018
Operating income (loss), as
reported
$
383
$
294
$
(56
)
$
621
Operating margin
19.9
%
16.3
%
N/A
16.7
%
Add (Deduct) impact of Noteworthy
Items:
Restructuring, excluding JLT (a)
12
51
3
66
Changes in contingent consideration
(b)
6
7
—
13
JLT acquisition related costs (c)
5
—
7
12
Subsidiary or affiliate transactions
(e)
11
6
—
17
Other
1
1
—
2
Operating income adjustments
35
65
10
110
Adjusted operating income (loss)
$
418
$
359
$
(46
)
$
731
Total identified intangible amortization
expense
$
40
$
8
$
—
$
48
Adjusted operating margin
23.7
%
20.3
%
N/A
20.9
%
(a) Includes severance and related charges
from restructuring activities, adjustments to restructuring
liabilities for future rent under non-cancellable leases and other
real estate costs, and restructuring costs related to the
integration of recent acquisitions. Risk & Insurance Services
in 2019 reflects severance and related charges from non-JLT merger
integration costs. Consulting in 2019 reflects severance related to
the Mercer restructuring program. Risk & Insurance Services in
2018 reflects severance and consulting costs related to the Marsh
simplification initiative.
(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, lease related exit costs as well as consulting costs
related to the JLT Transaction.
(d) Reflects retention costs in the Risk
& Insurance Services and Consulting segments related to the
closing of the JLT Transaction.
(e) Dispositions or deconsolidation of
businesses and results of certain equity method investments 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 - 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, 2019 and
2018. Results for the twelve months ended December 31, 2018 are for
MMC only, as previously reported, and do not include JLT
results.
Risk & Insurance
Services
Consulting
Corporate/
Eliminations
Total
Twelve Months Ended December 31,
2019
Operating income (loss)
$
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 (d)
97
2
51
150
Disposal of businesses (e)
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
%
As Reported Results
Twelve Months Ended December 31,
2018
Operating income (loss), as
reported
$
1,864
$
1,099
$
(202
)
$
2,761
Operating margin
22.7
%
16.2
%
N/A
18.5
%
Add (Deduct) impact of Noteworthy
Items:
Restructuring, excluding JLT (a)
99
52
10
161
Changes in contingent consideration
(b)
22
10
—
32
JLT acquisition related costs (d)
5
—
7
12
Subsidiary or affiliate transactions
(f)
(35
)
6
—
(29
)
Other
1
—
—
1
Operating income adjustments
92
68
17
177
Adjusted operating income (loss)
$
1,956
$
1,167
$
(185
)
$
2,938
Total identified intangible amortization
expense
$
151
$
32
$
—
$
183
Adjusted operating margin
25.7
%
17.7
%
N/A
20.9
%
(a) Includes severance and related charges
from restructuring activities, adjustments to restructuring
liabilities for future rent under non-cancellable leases and other
real estate costs, and restructuring costs related to the
integration of recent acquisitions. Risk & Insurance Services
in 2019 reflects severance and related charges from non-JLT merger
integration costs. Consulting in 2019 reflects severance related to
the Mercer restructuring program. Risk & Insurance Services in
2018 reflects severance and consulting costs related to the Marsh
simplification initiative.
(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, lease related exit costs as well as legal and
consulting costs related to the integration.
(d) Includes advisor fees and stamp duty
taxes related to the closing of the JLT Transaction and retention
costs. 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.
(e) 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.
(f) Dispositions or deconsolidation of
businesses and results of certain equity method investments 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 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
and adjustments to provisional 2017 tax estimates. 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, 2019 and 2018. Results for the
three and twelve months ended December 31, 2018 are for MMC only,
as previously reported, and do not include JLT results.
Three Months Ended December
31, 2019
Three Months Ended December 31,
2018
Amount
Adjusted EPS
Amount
Adjusted EPS
Net income before non-controlling
interests, as reported
$
396
$
159
Less: Non-controlling interest, net of
tax
5
6
Subtotal
$
391
$
0.76
$
153
$
0.30
Operating income adjustments
$
264
$
110
Investments adjustment (a)
—
(8
)
Pension settlement adjustment/charge
(b)
9
42
Change in fair value of acquisition
related derivative contracts (c)
—
341
Financing costs (d)
—
27
Impact of income taxes on above items
(54
)
(113
)
Adjustments to provisional 2017 tax
estimates (f)
—
6
219
0.43
405
0.79
Adjusted income, net of tax
$
610
$
1.19
$
558
$
1.09
Twelve Months Ended December
31, 2019
Twelve Months Ended December 31,
2018
Amount
Adjusted EPS
Amount
Adjusted EPS
Net income before non-controlling
interests, as reported
$
1,773
$
1,670
Less: Non-controlling interest, net of
tax
31
20
Subtotal
$
1,742
$
3.41
$
1,650
$
3.23
Operating income adjustments
$
674
$
177
Investments adjustment (a)
(10
)
29
Pension settlement adjustment/charge
(b)
7
42
Change in fair value of acquisition
related derivative contracts (c)
8
441
Financing costs (d)
53
30
Interest on funds held in escrow (e)
(25
)
—
Early extinguishment of debt
32
—
Impact of income taxes on above items
(99
)
(139
)
Adjustments to provisional 2017 tax
estimates (f)
—
(5
)
640
1.25
575
1.12
Adjusted income, net of tax
$
2,382
$
4.66
$
2,225
$
4.35
(a) The Company recorded mark-to-market
gains of $8 million for the three month period ended December 31,
2018 and gains of $10 million and $54 million for the twelve month
periods ended December 31, 2019 and 2018, respectively, which are
included in investment income in the consolidated statements of
income.
In 2018, the Company had an investment in
Alexander Forbes (“AF”), which is accounted for using the equity
method. Based on the extent of and duration over which the shares
traded below the Company’s carrying value, the Company determined
the decline was other than temporary and during the third quarter
of 2018, recorded a charge of $83 million in Investment gain or
loss.
(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 that were not redesignated as accounting hedges
following the JLT acquisition, a deal contingent foreign exchange
contract and derivative contracts related to debt issuances.
(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).
(f) Reflects adjustments to provisional
2017 year-end estimates of transition taxes and U.S. deferred tax
assets and liabilities from U.S. tax reform.
Marsh & McLennan
Companies, Inc.
Supplemental
Information
Three and Twelve Months Ended
December 31
(Millions) (Unaudited)
Three Months Ended December
31,
Twelve Months Ended
December 31,
2019
2018
2019
2018
Consolidated
Compensation and Benefits
$
2,478
$
2,163
$
9,734
$
8,605
Other operating expenses
1,194
928
4,241
3,584
Total Expenses
$
3,672
$
3,091
$
13,975
$
12,189
Depreciation and amortization expense
$
88
$
75
$
333
$
311
Identified intangible amortization
expense
79
48
314
183
Total
$
167
$
123
$
647
$
494
Stock option expense
$
3
$
2
$
26
$
22
Risk and Insurance Services
Compensation and Benefits
$
1,358
$
1,069
$
5,370
$
4,485
Other operating expenses
673
473
2,396
1,879
Total Expenses
$
2,031
$
1,542
$
7,766
$
6,364
Depreciation and amortization expense
$
42
$
31
$
156
$
139
Identified intangible amortization
expense
66
40
260
151
Total
$
108
$
71
$
416
$
290
Consulting
Compensation and Benefits
$
1,002
$
1,007
$
3,934
$
3,760
Other operating expenses
547
504
1,999
1,920
Total Expenses
$
1,549
$
1,511
$
5,933
$
5,680
Depreciation and amortization expense
$
27
$
24
$
102
$
98
Identified intangible amortization
expense
13
8
54
32
Total
$
40
$
32
$
156
$
130
JLT’s results of operations for the three months ended December
31, 2019 are included in the Company’s results of operations for
the fourth quarter of 2019. JLT's results of operations from April
1, 2019 through December 31, 2019 are included in the Company's
results of operations for the twelve-month period ended December
31, 2019. Prior periods in 2018 do not include JLT’s results.
Marsh & McLennan
Companies, Inc.
Consolidated Balance
Sheets
(Millions) (Unaudited)
December 31, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
1,155
$
1,066
Net receivables
5,236
4,317
Other current assets
677
551
Total current assets
7,068
5,934
Goodwill and intangible assets
17,405
11,036
Fixed assets, net
858
701
Pension related assets
1,632
1,688
Right of use assets
1,921
—
Deferred tax assets
676
680
Other assets
1,757
1,539
TOTAL ASSETS
$
31,317
$
21,578
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt
$
1,215
$
314
Accounts payable and accrued
liabilities
2,746
2,234
Accrued compensation and employee
benefits
2,197
1,778
Acquisition related derivatives
—
441
Current lease liabilities
342
—
Accrued income taxes
179
157
Total current liabilities
6,679
4,924
Fiduciary liabilities
7,344
5,001
Less - cash and investments held in a
fiduciary capacity
(7,344
)
(5,001
)
—
—
Long-term debt
10,741
5,510
Pension, post-retirement and
post-employment benefits
2,336
1,911
Long-term lease liabilities
1,926
—
Liabilities for errors and omissions
335
287
Other liabilities
1,357
1,362
Total equity
7,943
7,584
TOTAL LIABILITIES AND EQUITY
$
31,317
$
21,578
Marsh & McLennan
Companies, Inc.
Consolidated Statements of
Cash Flows
(Millions) (Unaudited)
For the Years Ended December
31,
2019
2018
Operating cash flows:
Net income before non-controlling
interests
$
1,773
$
1,670
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization of fixed
assets and capitalized software
333
311
Amortization of intangible assets
314
183
Non cash lease expense
315
—
Adjustments and payments related to
contingent consideration liability
27
(4
)
Loss on deconsolidation of a business
—
11
Cost of early extinguishment of debt
32
—
(Benefit) Provision for deferred income
taxes
84
(39
)
Loss (Gain) on investments
(22
)
12
Loss (Gain) on disposition of assets
56
(48
)
Share-based compensation expense
252
193
Change in fair value of acquisition
related derivative contracts
8
441
Changes in assets and liabilities:
Net receivables
(130
)
(78
)
Other current assets
(13
)
26
Other assets
(1
)
(37
)
Accounts payable and accrued
liabilities
120
23
Accrued compensation and employee
benefits
154
68
Accrued income taxes
42
(40
)
Contributions to pension and other benefit
plans in excess of current year expense/credit
(369
)
(291
)
Other liabilities
(172
)
9
Operating lease liabilities
(327
)
—
Effect of exchange rate changes
(115
)
18
Net cash provided by operations
2,361
2,428
Financing cash flows:
Purchase of treasury shares
(485
)
(675
)
Increase in short term borrowings
300
—
Proceeds from issuance of debt
6,459
591
Repayments of debt
(1,064
)
(263
)
Payment of bridge loan fees
—
(35
)
Payments for early extinguishment of
debt
(585
)
—
Purchase of non-controlling interests
(80
)
—
Acquisition-related derivative
payments
(337
)
—
Shares withheld for taxes on vested units
– treasury shares
(89
)
(67
)
Issuance of common stock from treasury
shares
158
93
Payments of deferred and contingent
consideration for acquisitions
(65
)
(117
)
Distributions of non-controlling
interests
(16
)
(30
)
Dividends paid
(890
)
(807
)
Net cash provided by (used for)
financing activities
3,306
(1,310
)
Investing cash flows:
Capital expenditures
(421
)
(314
)
Net sales of long-term investments
183
4
Purchase of equity investment
(91
)
—
Proceeds from sales of fixed assets
10
3
Dispositions
229
110
Acquisitions
(5,505
)
(884
)
Other, net
(76
)
(8
)
Net cash used for investing
activities
(5,671
)
(1,089
)
Effect of exchange rate changes on cash
and cash equivalents
93
(168
)
Increase (decrease) in cash and cash
equivalents
89
(139
)
Cash and cash equivalents at beginning
of year
1,066
1,205
Cash and cash equivalents at end of
year
$
1,155
$
1,066
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - 2018 Revenue Including
JLT Three and Twelve Months Ended December 31, 2018
(Millions) (Unaudited)
On April 1, 2019, the Company completed its previously announced
acquisition of Jardine Lloyd Thompson Group, plc. JLT results of
operations for the three months ended December 31, 2019 are
included in the Company’s results of operations for the fourth
quarter of 2019. Prior periods in 2018 do not include JLT’s
results. 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
2019 revenue to the combined 2018 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 April 1, 2018. Consistent with
consolidated revenue in 2019, the twelve months ended December 31,
2018 does not include JLT revenue for the period from January 1 to
March 31, 2018. JLT 2018 revenue information is derived from 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. Please see the notes to the supplemental
information on that Form 8-K for additional information.
Three Months Ended December
31, 2018
Twelve Months Ended December
31, 2018
MMC As Previously Reported
Risk & Insurance Services
Marsh
$
1,804
$
6,877
Guy Carpenter
102
1,286
Subtotal
1,906
8,163
Fiduciary Interest Income
19
65
Total Risk & Insurance Services
1,925
8,228
Consulting
Mercer
1,228
4,732
Oliver Wyman
577
2,047
Total Consulting
1,805
6,779
Corporate/Eliminations
(18
)
(57
)
Total Revenue
$
3,712
$
14,950
JLT 2018
Specialty (Marsh)
$
407
$
1,018
Reinsurance (Guy Carpenter)
48
156
Employee Benefits (Mercer)
96
269
Subtotal
551
1,443
Fiduciary Interest Income
5
13
Total Revenue
$
556
$
1,456
2018 Including JLT
Marsh
$
2,211
$
7,895
Guy Carpenter
150
1,442
Subtotal
2,361
9,337
Fiduciary Interest Income
24
78
Total Risk & Insurance Services
2,385
9,415
Consulting
Mercer
1,324
5,001
Oliver Wyman
577
2,047
Total Consulting
1,901
7,048
Corporate/Eliminations
(18
)
(57
)
Total Revenue
$
4,268
$
16,406
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200130005429/en/
Media: Erick R. Gustafson Marsh & McLennan Companies
+1 202 263 7788 erick.gustafson@mmc.com
Investors: Sarah DeWitt Marsh & McLennan Companies +1
212 345 6750 sarah.dewitt@mmc.com
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