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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Marsh & Mclennan Cos. Inc | LSE:MHM | London | Ordinary Share | COM US$1 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 81.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Ins Agents,brokers & Service | 22.74B | 3.76B | 7.6395 | 26.50 | 99.52B |
From Apr 2019 to Apr 2024
TIDMMHM
Marsh & McLennan Companies, Inc. (NYSE: MMC), a global professional services firm offering clients advice and solutions in risk, strategy and people, today reported financial results for the third quarter ended September 30, 2018.
Dan Glaser, President and CEO, said: "We are pleased with our performance for the third quarter and first nine months of the year. In the quarter, we produced excellent underlying revenue growth of 5% in both Risk & Insurance Services and Consulting, and adjusted EPS growth of 8% excluding the impact of the new revenue standard. For the first nine months of 2018, we achieved strong underlying revenue growth of 4% on a consolidated basis and 10% adjusted EPS growth excluding the impact of the new revenue standard. Given our solid performance in the first nine months of 2018, the Company is well positioned to deliver full year underlying revenue growth in the 3 to 5% range, as well as margin expansion and strong growth in earnings per share."
"The highlight of the quarter was our agreement to acquire Jardine Lloyd Thompson Group. JLT is a premier organization in our industry that we have admired for a long time. The combination of Marsh & McLennan and JLT will create innovative solutions for our clients, career opportunities for our colleagues, and value for our shareholders," concluded Mr. Glaser.
Consolidated Results
Consolidated revenue in the third quarter of 2018 was $3.5 billion, an increase of 5% compared with the third quarter of 2017. On an underlying basis, revenue increased 5%. Net income attributable to the Company was $276 million. Operating income was $541 million while adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, decreased 5% to $535 million. Excluding the impact of the new revenue recognition standard, ASC 606, adjusted operating income rose 3%.
On a per share basis, net income attributable to the Company in the third quarter declined to $0.54 from $0.76 in the prior year. Adjusted earnings per share of $0.78 was down 1% from the prior year period. The 1% decrease in adjusted EPS includes a $0.07 per share reduction from the application of ASC 606. Excluding ASC 606, adjusted EPS increased 8%.
For the nine months ended September 30, 2018, consolidated revenue was $11.2 billion, an increase of 9% and 4% on an underlying basis. Operating income was $2.1 billion, an increase of 8% from the prior year period. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 9% to $2.2 billion. Excluding the impact of ASC 606, adjusted operating income rose 5%. Net income attributable to the Company increased 2% to $1.5 billion. Earnings per share increased 4% to $2.93. Adjusted earnings per share increased 14% to $3.26 compared with $2.87 for the comparable period in 2017. The 14% increase in adjusted EPS includes a $0.10 per share benefit from the application of ASC 606. Excluding ASC 606, adjusted EPS increased 10%.
Risk & Insurance Services
Risk & Insurance Services revenue was $1.9 billion in the third quarter of 2018, an increase of 6%, or 5% on an underlying basis. Operating income was $293 million, an increase of 9%, and adjusted operating income declined 3% to $283 million. Excluding ASC 606, adjusted operating income increased 13%. For the nine months ended September 30, 2018, revenue was $6.3 billion, an increase of 11%, or 4% on an underlying basis. Operating income rose 12% to $1.5 billion and adjusted operating income rose 15% to $1.5 billion. Excluding ASC 606, adjusted operating income increased 10%.
Marsh's revenue in the third quarter was $1.6 billion, an increase of 10%, or 3% on an underlying basis. In U.S./Canada, underlying revenue rose 5%. International operations produced underlying revenue growth of 2%, reflecting flat underlying growth in EMEA, 3% in Asia Pacific, and 7% in Latin America. For the nine months ended September 30, 2018, Marsh's underlying revenue growth was 3%.
Guy Carpenter's revenue in the third quarter was $215 million, an increase of 11% on an underlying basis. For the nine months ended September 30, 2018, Guy Carpenter's underlying revenue growth was 7%.
Consulting
Consulting revenue in the third quarter was $1.7 billion, an increase of 4%, or 5% on an underlying basis. Operating income decreased 6% to $291 million and adjusted operating income decreased 6% to $293 million. For the first nine months of 2018, revenue was $5.0 billion, an increase of 6%, or 4% on an underlying basis. Operating income of $805 million increased 1% and adjusted operating income decreased 2% to $808 million. Excluding ASC 606, adjusted operating income decreased 1%.
Mercer's revenue was $1.2 billion in the third quarter, an increase of 3% on an underlying basis. Wealth, with revenue of $525 million, grew 2% on an underlying basis. Within Wealth, Defined Benefit Consulting & Administration decreased 3%, while Investment Management & Related Services increased 9%. Health revenue of $415 million was up 4% on an underlying basis and Career revenue of $235 million increased 5% on an underlying basis. For the nine months ended September 30, 2018, Mercer's revenue was $3.5 billion, an increase of 3% on an underlying basis.
Oliver Wyman Group's revenue was $481 million in the third quarter, an increase of 11% on an underlying basis. For the first nine months ended September 30, 2018, Oliver Wyman Group's revenue increased to $1.5 billion, up 5% on an underlying basis.
Other Items
On September 18, 2018, the Company announced an agreement to acquire Jardine Lloyd Thompson Group (JLT), a leading provider of insurance, reinsurance and employee benefits related advice, brokerage and associated services. JLT is based in London and has offices in over 40 countries including in key emerging markets across Asia and Latin America.
The transaction is expected to close in spring of 2019, subject to receipt of required antitrust and regulatory approvals and the approval of JLT shareholders. In order to protect the Company from pound sterling exchange rate volatility between announcement and closing, the Company entered into a deal contingent forward foreign exchange contract. As a result of entering into this contract, the Company recorded a charge of $100 million reflecting the fair value of the hedging instrument at the end of the quarter. This item is classified as noteworthy and excluded from our adjusted results.
In the third quarter, the Company recognized a charge of $81 million to reflect an other than temporary decline in the carrying value of its equity investment in South African based Alexander Forbes. Also in the quarter, a gain of $46 million was recognized on the sale of a business in Marsh. Both of these items are classified as noteworthy and therefore excluded from our adjusted results.
The Company repurchased 2.1 million shares of its common stock for $175 million in the third quarter. Through nine months, the Company has repurchased 8.2 million shares for $675 million.
Conference Call
A conference call to discuss third quarter 2018 results will be held today at 8:30 a.m. Eastern time. To participate in the teleconference, please dial +1 888 254 3590. Callers from outside the United States should dial +1 323 994 2093. The access code for both numbers is 5467774. 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 approximately 65,000 colleagues advise clients in over 130 countries. With annual revenue over $14 billion, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading firms. 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 meet the health, wealth and career needs of a changing workforce. Oliver Wymanserves 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:
Hot Features
Premium
-- our ability to successfully consummate, integrate or achieve the
intended benefits of the acquisition of JLT;
-- the impact of any investigations, reviews, market studies or other
activity by regulatory or law enforcement authorities, including the
ongoing investigations by the European Commission and the U.K. FCA
market study;
-- 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 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 patch software vulnerabilities;
-- our ability to compete effectively and adapt to changes in the
competitive environment, including to respond to disintermediation,
digital disruption and other types of innovation;
-- the financial and operational impact of complying with laws and
regulations where we operate, including cybersecurity and data privacy
regulations such as the E.U.'s General Data Protection Regulation,
anti-corruption laws and trade sanctions regimes;
-- the impact of macroeconomic, political, regulatory or market
conditions on us, our clients and the industries in which we operate,
including the inability to collect on our receivables in certain
high-risk jurisdictions;
-- the regulatory, contractual and reputational risks that arise based on
insurance placement activities and various broker revenue streams;
-- the extent to which we manage risks associated with the various
services, including fiduciary and investments and other advisory
services;
-- our ability to successfully recover if we experience a business
continuity problem due to cyberattack, natural disaster or otherwise;
-- the impact of changes in tax laws, guidance and interpretations,
including related to certain provisions of the U.S. Tax Cuts and Jobs
Act, or disagreements with tax authorities;
-- the impact of fluctuations in foreign exchange and interest rates on
our results; and
-- the impact of changes in accounting rules or in our accounting
estimates or assumptions, including the impact of the adoption of the
new revenue recognition, pension and lease accounting standards.
The factors identified above are not exhaustive. 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. 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. We undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made.
Marsh & McLennan
Companies, Inc.
Consolidated
Statements
of Income
(In millions,
except
per share figures)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Revenue $ 3,504 $ 3,341 $ 11,238 $ 10,339
Expense:
Compensation 2,083 1,968 6,442 5,971
and Benefits
Other Operating 880 838 2,656 2,383
Expenses
Operating Expenses 2,963 2,806 9,098 8,354
Operating Income 541 535 2,140 1,985
Other Net Benefit 63 62 194 185
Credits (a)
Interest Income 2 2 8 6
Interest Expense (69 ) (60 ) (198 ) (178 )
Investment (Loss) (52 ) (2 ) (24 ) 3
Income
Change in Fair (100 ) - (100 ) -
Value
of Acquisition
Related FX Contract
(b)
Income Before 385 537 2,020 2,001
Income Taxes
Income Tax Expense 106 140 509 519
Net Income Before 279 397 1,511 1,482
Non-Controlling
Interests
Less: Net Income 3 4 14 19
Attributable
to Non-Controlling
Interests
Net $ 276 $ 393 $ 1,497 $ 1,463
Income Attributable
to the Company
Net Income
Per Share
Attributable
to the Company:
- Basic $ 0.55 $ 0.77 $ 2.96 $ 2.85
- Diluted $ 0.54 $ 0.76 $ 2.93 $ 2.81
Average Number
of Shares
Outstanding
- Basic 504 512 506 514
- Diluted 510 519 512 520
Shares Outstanding 504 511 504 511
at 9/30
(a) Effective January 1, 2018, ASC 715, as amended, changed
the presentation of net periodic pension cost and net
periodic postretirement cost. The Company has restated prior
years and quarters for this revised presentation.
(b) To hedge the risk of appreciation of the
pound sterling ("GBP") denominated purchase
price of JLT relative to the U.S. dollar
("USD"), the Company entered into a deal
contingent forward exchange contract to, solely
upon consummation of the acquisition,
purchase GBP and sell USD at a contracted
exchange rate. An unrealized loss
of $100 million related to the fair value changes
to this derivative has been recognized
in the consolidated statement of earnings
for the three and nine month periods
ended September 30, 2018. The Company expects
to record fair value gains and losses
through its income statement until the completion of the transaction.
Marsh & McLennan Companies, Inc.
Consolidated Statements of Income - Impact of Revenue Standard
(In millions, except per share figures)
(Unaudited)
The Company adopted the new revenue standard ("ASC 606")
using the modified retrospective method, applied
to all contracts. The guidance requires entities that
elected the modified retrospective method to
disclose the impact to financial statement line items
as a result of applying the new guidance (rather
than previous U.S. GAAP). The table below shows the
impacts on the consolidated statement of income.
Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2018
AsReported RevenueStandardImpact Prior toAdoption AsReported RevenueStandardImpact Prior toAdoption
Revenue $ 3,504 $ 58 $ 3,562 $ 11,238 $ (127 ) $ 11,111
Expense:
Compensation 2,083 12 2,095 6,442 (58 ) 6,384
and Benefits
Other 880 - 880 2,656 - 2,656
Operating
Expenses
Operating 2,963 12 2,975 9,098 (58 ) 9,040
Expenses
Operating 541 46 587 2,140 (69 ) 2,071
Income
Other Net 63 - 63 194 - 194
Benefit
Credits
Interest 2 - 2 8 - 8
Income
Interest (69 ) - (69 ) (198 ) - (198 )
Expense
Investment (52 ) - (52 ) (24 ) - (24 )
(Loss)
Income
Change in Fair (100 ) - (100 ) (100 ) - (100 )
Value
of Acquisition
Related FX
Contract
Income Before 385 46 431 2,020 (69 ) 1,951
Income Taxes
Income Tax 106 12 118 509 (18 ) 491
Expense
Net Income 279 34 313 1,511 (51 ) 1,460
Before
Non-Controlling
Interests
Less: Net 3 - 3 14 - 14
Income
Attributable
to
Non-Controlling
Interests
Net $ 276 $ 34 $ 310 $ 1,497 $ (51 ) $ 1,446
Income
Attributable
to the Company
Net Income
Per Share
Attributable
to
the Company:
- Basic $ 0.55 $ 0.06 $ 0.61 $ 2.96 $ (0.10 ) $ 2.86
- Diluted $ 0.54 $ 0.07 $ 0.61 $ 2.93 $ (0.10 ) $ 2.83
Average Number
of Shares
Outstanding
- Basic 504 504 504 506 506 506
- Diluted 510 510 510 512 512 512
Shares 504 504 504 504 504 504
Outstanding
at 9/30
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended September 30
(Millions) (Unaudited)
Components of Revenue Change*
Three Months Ended %ChangeGAAPRevenue CurrencyImpact Acquisitions/Dispositions/Other Impact RevenueStandardImpact UnderlyingRevenue
September 30,
2018 2017
Risk and Insurance Services
Marsh $ 1,630 $ 1,482 10 % (1 )% 6 % 2 % 3 %
Guy Carpenter 215 270 (20 )% - - (31 )% 11 %
Subtotal 1,845 1,752 5 % (1 )% 5 % (3 )% 4 %
Fiduciary Interest Income 18 11
Total Risk and Insurance Services 1,863 1,763 6 % (1 )% 5 % (3 )% 5 %
Consulting
Mercer 1,175 1,149 2 % (2 )% 1 % - 3 %
Oliver Wyman Group 481 438 10 % (1 )% - - 11 %
Total Consulting 1,656 1,587 4 % (2 )% 1 % - 5 %
Corporate / Eliminations (15 ) (9 )
Total Revenue $ 3,504 $ 3,341 5 % (1 )% 3 % (2 )% 5 %
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue Change*
Three Months Ended %ChangeGAAPRevenue CurrencyImpact Acquisitions/Dispositions/Other Impact RevenueStandardImpact UnderlyingRevenue
September 30,
2018 2017
Marsh:
EMEA $ 441 $ 426 3 % (1 )% 4 % - -
Asia Pacific 167 164 2 % (3 )% 2 % - 3 %
Latin America 96 95 1 % (10 )% 5 % - 7 %
Total International 704 685 3 % (3 )% 4 % - 2 %
U.S. / Canada 926 797 16 % - 8 % 3 % 5 %
Total Marsh $ 1,630 $ 1,482 10 % (1 )% 6 % 2 % 3 %
Mercer:
Defined Benefit Consulting $ 300 $ 336 (10 )% (1 )% (7 )% - (3 )%
& Administration
Investment Management 225 194 16 % (5 )% 11 % - 9 %
& Related Services
Total Wealth 525 530 (1 )% (2 )% - - 2 %
Health 415 401 3 % (1 )% 1 % (1 )% 4 %
Career 235 218 8 % (2 )% 6 % - 5 %
Total Mercer $ 1,175 $ 1,149 2 % (2 )% 1 % - 3 %
Note:
Underlying revenue measures the change in revenue
using consistent currency exchange
rates, excluding the impact of certain items that affect comparability
such as: acquisitions, dispositions, transfers among businesses, changes
in estimate methodology and the impact of the new revenue standard.
* 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)
Components of Revenue Change*
Nine Months Ended %ChangeGAAPRevenue CurrencyImpact Acquisitions/Dispositions/Other Impact RevenueStandardImpact UnderlyingRevenue
September 30,
2018 2017
Risk and Insurance Services
Marsh $ 5,073 $ 4,692 8 % 2 % 3 % - 3 %
Guy Carpenter 1,184 948 25 % 1 % - 16 % 7 %
Subtotal 6,257 5,640 11 % 2 % 3 % 2 % 4 %
Fiduciary Interest Income 46 28
Total Risk and Insurance Services 6,303 5,668 11 % 2 % 3 % 2 % 4 %
Consulting
Mercer 3,504 3,335 5 % 1 % 1 % - 3 %
Oliver Wyman Group 1,470 1,370 7 % 2 % - - 5 %
Total Consulting 4,974 4,705 6 % 2 % 1 % - 4 %
Corporate / Eliminations (39 ) (34 )
Total Revenue $ 11,238 $ 10,339 9 % 2 % 2 % 1 % 4 %
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue Change*
Nine Months Ended %ChangeGAAPRevenue CurrencyImpact Acquisitions/Dispositions/Other Impact RevenueStandardImpact UnderlyingRevenue
September 30,
2018 2017
Marsh:
EMEA $ 1,610 $ 1,512 6 % 5 % 1 % - -
Asia Pacific 514 484 6 % 1 % 1 % - 4 %
Latin America 279 274 2 % (6 )% 3 % - 5 %
Total International 2,403 2,270 6 % 3 % 1 % - 1 %
U.S. / Canada 2,670 2,422 10 % - 5 % (1 )% 5 %
Total Marsh $ 5,073 $ 4,692 8 % 2 % 3 % - 3 %
Mercer:
Defined Benefit Consulting $ 959 $ 1,010 (5 )% 3 % (3 )% - (4 )%
& Administration
Investment Management 683 572 19 % 1 % 6 % - 12 %
& Related Services
Total Wealth 1,642 1,582 4 % 2 % - - 2 %
Health 1,286 1,239 4 % 1 % - (1 )% 4 %
Career 576 514 12 % 1 % 6 % - 5 %
Total Mercer $ 3,504 $ 3,335 5 % 1 % 1 % - 3 %
Note:
Underlying revenue measures the change in revenue
using consistent currency exchange
rates, excluding the impact of certain items that affect comparability
such as: acquisitions, dispositions, transfers among businesses, changes
in estimate methodology and the impact of the new revenue standard.
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Includes Revenue Standard Impact
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 "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 taxandadjusted 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 reconcileadjusted
operating income (loss)to GAAP operating
income or loss, on a consolidated and segment
basis, for the three months ended
September 30, 2018. The following tables also
presentadjusted operating margin. For the
three months ended September 30, 2018,adjusted
operating marginis calculated by
dividingadjusted operating incomeby consolidated
or segment GAAP revenue less the gain
on the disposal of Marsh's risk management
software and services business unit.
Risk &InsuranceServices Consulting Corporate/Eliminations Total
Three Months Ended
September 30, 2018
Operating income $ 293 $ 291 $ (43) $ 541
(loss)
Add (Deduct)
impact of
Noteworthy Items:
Restructuring (a) 29 - 2 31
Adjustments to 7 2 - 9
acquisition
related accounts (b)
Disposal of business (46) - - (46)
(c)
Operating income (10) 2 2 (6)
adjustments
Adjusted operating $ 283 $ 293 $ (41) $ 535
income (loss)
Operating margin 15.7% 17.6% N/A 15.5%
Adjusted operating 15.5% 17.7% N/A 15.5%
margin
(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 and 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) Relates to a gain on the disposal of a risk management
software and services business unit of Marsh. The
$46 million gain is also removed from GAAP revenue
in the calculation of adjusted operating margin.
Note:
Comparative financial information for the three months
ended September 30, 2017 is presented on page 11.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Comparable Accounting Basis
Excludes the Revenue Standard Impact
Three Months Ended September 30
(Millions) (Unaudited)
As discussed earlier, the Company has adopted
the new revenue standard using
the modified retrospective method, which requires the disclosure
of the impacts of the standard on each financial statement line item.
The non-GAAP measures below present an analysis of results
reflecting 2018 financial information excluding
the impact of the application
of ASC 606, to facilitate a comparison to the 2017 results.
Except for the adjustment for the effects of ASC 606 in 2018, these
non-GAAP measures are calculated as described on the prior page.
Risk &InsuranceServices Consulting Corporate/Eliminations Total
Three Months
Ended
September
30, 2018
Operating $ 340 $ 290 $ (43 ) $ 587
income
(loss)
without
adoption
Add (Deduct)
impact of
Noteworthy
Items:
Restructuring 29 - 2 31
(a)
Adjustments to 7 2 - 9
acquisition
related accounts
(b)
Disposal of (46 ) - - (46 )
business
(c)
Operating (10 ) 2 2 (6 )
income
adjustments
Adjusted $ 330 $ 292 $ (41 ) $ 581
operating
income (loss)
Operating 17.7 % 17.5 % N/A 16.5 %
margin -
Comparable
basis
Adjusted 17.6 % 17.6 % N/A 16.5 %
operating
margin
- Comparable
basis
Three Months
Ended
September
30, 2017
Operating $ 268 $ 311 $ (44 ) $ 535
income
(loss)
Add (Deduct)
impact of
Noteworthy
Items:
Restructuring 3 2 3 8
(a)
Adjustments to 5 (1 ) - 4
acquisition
related accounts
(b)
Other 15 - - 15
Settlement,
Legal
and Regulatory
(d)
Operating 23 1 3 27
income
adjustments
Adjusted $ 291 $ 312 $ (41 ) $ 562
operating
income (loss)
Operating 15.2 % 19.6 % N/A 16.0 %
margin
Adjusted 16.5 % 19.7 % N/A 16.8 %
operating
margin
(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 and Insurance Services in 2018
reflects severance and consulting costs related to the
Marsh simplification initiative. Consulting in 2017 reflects
severance related to the Mercer business restructure.
(b) Primarily includes the change in fair value as measured each
quarter of contingent consideration related to acquisitions.
(c) Relates to a gain on the disposal of a risk management
software and services business unit of Marsh. The
$46 million gain is also removed from GAAP revenue
in the calculation of adjusted operating margin.
(d) Reflects the settlement of the final legacy litigation, originally
filed in 2006, regarding Marsh's use of market service agreements.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Includes Revenue Standard Impact
Nine 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 "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 andadjusted 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 reconcileadjusted
operating income (loss)to GAAP operating
income or loss, on a consolidated and segment
basis, for the nine months ended
September 30, 2018. The following tables also
presentadjusted operating margin. For
the nine months ended September 30, 2018,adjusted
operating marginis calculated by
dividingadjusted operating incomeby consolidated
or segment GAAP revenue less the gain
on the disposal of Marsh's risk management
software and services business unit.
Risk &InsuranceServices Consulting Corporate/Eliminations Total
Nine Months
Ended
September
30, 2018
Operating $ 1,481 $ 805 $ (146 ) $ 2,140
income
(loss)
Add (Deduct)
impact of
Noteworthy
Items:
Restructuring 87 1 7 95
(a)
Adjustments 16 3 - 19
to
acquisition
related
accounts
(b)
Disposal of (46 ) - - (46 )
business
(c)
Other - (1 ) - (1 )
Operating 57 3 7 67
income
adjustments
Adjusted $ 1,538 $ 808 $ (139 ) $ 2,207
operating
income
(loss)
Operating 23.5 % 16.2 % N/A 19.1 %
margin
Adjusted 24.6 % 16.3 % N/A 19.7 %
operating
margin
(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 and 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) Relates to a gain on the disposal of a risk management
software and services business unit of Marsh. The
$46 million gain is also removed from GAAP revenue
in the calculation of adjusted operating margin.
Note:
Comparative financial information for the nine months
ended September 30, 2017 is presented on page 13.
Marsh
& McLennan
Companies, Inc.
Reconciliation
of Non-GAAP
Measures
- Comparable
Accounting
Basis
Excludes the
Revenue
Standard Impact
Nine Months
Ended
September 30
(Millions)
(Unaudited)
Reconciliation
of Non-GAAP
Measures -
Comparable
Accounting
Basis
(cont'd)
Risk &InsuranceServices Consulting Corporate/ Total
Eliminations
Nine Months
Ended
September
30, 2018
Operating $ 1,408 $ 809 $ (146 ) $ 2,071
income
(loss)
without
adoption
Add (Deduct)
impact of
Noteworthy
Items:
Restructuring 87 1 7 95
(a)
Adjustments to 16 3 - 19
acquisition
related accounts
(b)
Disposal of (46 ) - - (46 )
business
(c)
Other - (1 ) - (1 )
Operating 57 3 7 67
income
adjustments
Adjusted $ 1,465 $ 812 $ (139 ) $ 2,138
operating
income (loss)
Operating 22.9 % 16.2 % N/A 18.6 %
margin -
Comparable
basis
Adjusted 23.9 % 16.3 % N/A 19.3 %
operating
margin
- Comparable
basis
Nine Months
Ended
September
30, 2017
Operating $ 1,318 $ 801 $ (134 ) $ 1,985
income
(loss)
Add (Deduct)
impact of
Noteworthy
Items:
Restructuring 7 18 7 32
(a)
Adjustments to (5 ) 2 - (3 )
acquisition
related accounts
(b)
Other 15 - - 15
Settlement,
Legal
and Regulatory
(d)
Operating 17 20 7 44
income
adjustments
Adjusted $ 1,335 $ 821 $ (127 ) $ 2,029
operating
income (loss)
Operating 23.3 % 17.0 % N/A 19.2 %
margin
Adjusted 23.6 % 17.5 % N/A 19.6 %
operating
margin
(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 and Insurance Services in 2018
reflects severance and consulting costs related to the
Marsh simplification initiative. Consulting in 2017 reflects
severance related to the Mercer business restructure.
(b) Primarily includes the change in fair value as measured each
quarter of contingent consideration related to acquisitions.
(c) Relates to a gain on the disposal of a risk management
software and services business unit of Marsh. The
$46 million gain is also removed from GAAP revenue
in the calculation of adjusted operating margin.
(d) Reflects the settlement of the final legacy litigation, originally
filed in 2006, regarding Marsh's use of market service agreements.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Includes the Revenue Standard Impact
Three and Nine Months Ended September 30
(Millions) (Unaudited)
Adjusted Income, Net of Tax and Adjusted Earnings per Share
Adjusted income,net of taxis 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 previously recorded to equity, change
in fair value of fx forward, bridge financing
fees and adjustments to provisional 2017 tax estimates.Adjusted
EPSis calculated by dividing the Company'sadjusted
income, net of tax, by MMC's average number of
shares outstanding-diluted for the relevant
period. The following tables reconcileadjusted income,
net of taxto GAAP income from continuing
operations andadjusted EPSto GAAP EPS for the three
and nine months ended September 30, 2018.
Three Months Ended
September 30, 2018
Amount Adjusted EPS
Income from continuing operations $ 279
Less: Non-controlling 3
interest, net of tax
Subtotal $ 276 $ 0.54
Operating income adjustments $ (6 )
(from page 10)
Investments adjustment (a) 55
Change in fair value 100
of FX forward (b)
Amortization of bridge 3
financing fees (c)
Impact of income taxes (16 )
on above items
Adjustments to provisional (14 )
2017 tax estimates (d)
122 0.24
Adjusted income, net of tax $ 398 $ 0.78
Nine Months Ended
September 30, 2018
Amount Adjusted EPS
Income from continuing operations $ 1,511
Less: Non-controlling 14
interest, net of tax
Subtotal $ 1,497 $ 2.93
Operating income adjustments $ 67
(from page 12)
Investments adjustment (a) 37
Change in fair value 100
of FX forward (b)
Amortization of bridge 3
financing fees (c)
Impact of income taxes (26 )
on above items
Adjustments to provisional (11 )
2017 tax estimates (d)
170 0.33
Adjusted income, net of tax $ 1,667 $ 3.26
(a) Mark-to-market adjustments for investments
classified as available for sale
under prior guidance were recorded to equity,
net of tax. Beginning January
1, 2018 such adjustments must be recorded
as part of investment income. Prior
periods were not restated. The Company excludes such mark-to-market
gains or losses from its calculation of
adjusted earnings per share. The Company
recorded mark-to-market gains of $25 million
and $43 million for the three
and nine-month periods ended September
30, 2018, respectively, which are
included in Investment Income in the Consolidated Statement of Income.
The Company has an investment in Alexander Forbes ("AF"), which
is accounted for using the equity method. AF's shares
(which are publicly traded on the Johannesburg stock exchange)
have been trading below the Company's carrying value.
Based on the extent of and duration over which the shares have
traded below the Company's carrying value, the Company
determined the decline was other than temporary and recorded
a charge of $81 million in Investment gain or loss.
(b) Reflects the change in fair value of the deal contingent foreign
exchange contract related to the acquisition of JLT.
(c) Reflects amortization of fees on the bridge financing included
in interest expense related to the acquisition of JLT.
(d) Relates to adjustments to provisional
2017 year-end estimates of transition
taxes and U.S. deferred tax assets and
liabilities from U.S. tax reform.
Note:
Comparative financial information for the three and nine months
ended September 30, 2017 is presented on page 15.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Comparable Accounting Basis
Excludes the Revenue Standard Impact
Three and Nine Months Ended September 30
(Millions) (Unaudited)
As discussed earlier, the Company adopted the new revenue standard using
the modified retrospective method, which requires the disclosure of
the impacts of the standard on each financial statement line item. The
non-GAAP measures below present an analysis of results reflecting
2018 financial information excluding the impact of the application of
ASC 606, to facilitate a comparison to the 2017 results. Except
for the adjustment for the effects of ASC 606 in 2018, these non-GAAP
measures are calculated as described on the prior page.
Three Months Ended Three Months Ended
September 30, 2018 September 30, 2017
Amount AdjustedEPS Amount AdjustedEPS
Income $ 313 $ 397
from
continuing
operations,
(2018
prior to
the
impact
of ASC
606)
Less: 3 4
Non-controlling
interest,
net
of tax
Subtotal $ 310 $ 0.61 $ 393 $ 0.76
Operating $ (6 ) $ 27
income
adjustments
(from page
11)
Investments 55 -
adjustment
(a)
Change in 100 -
fair
value
of
FX forward
(b)
Amortization 3 -
of bridge
financing
fees (c)
Impact of (16 ) (10 )
income
taxes
on above
items
Adjustments (14 ) -
to
provisional
2017
tax
estimates
(d)
122 0.24 17 0.03
Adjusted $ 432 $ 0.85 $ 410 $ 0.79
income,
net of tax
Nine Months Ended Nine Months Ended
September 30, 2018 September30, 2017
Amount AdjustedEPS Amount AdjustedEPS
Income $ 1,460 $ 1,482
from
continuing
operations,
(2018
prior to
the
impact
of ASC
606)
Less: 14 19
Non-controlling
interest,
net
of tax
Subtotal $ 1,446 $ 2.83 $ 1,463 $ 2.81
Operating $ 67 $ 44
income
adjustments
(from page
13)
Investments 37 -
adjustment
(a)
Change in 100 -
fair
value
of
FX forward
(b)
Amortization 3 -
of bridge
financing
fees (c)
Impact of (26 ) (16 )
income
taxes
on above
items
Adjustments (11 ) -
to
provisional
2017
tax
estimates
(d)
170 0.33 28 0.06
Adjusted $ 1,616 $ 3.16 $ 1,491 $ 2.87
income,
net of tax
(a) Mark-to-market adjustments for investments
classified as available for sale
under prior guidance were recorded to equity,
net of tax. Beginning January
1, 2018 such adjustments must be recorded
as part of investment income. Prior
periods were not restated. The Company excludes such mark-to-market
gains or losses from its calculation of
adjusted earnings per share. The Company
recorded mark-to-market gains of $25 million
and $43 million for the three
and nine-month periods ended September
30, 2018, respectively, which are
included in Investment Income in the Consolidated Statement of Income.
The Company has an investment in Alexander Forbes ("AF"), which
is accounted for using the equity method. AF's shares
(which are publicly traded on the Johannesburg stock exchange)
have been trading below the Company's carrying value.
Based on the extent of and duration over which the shares have
traded below the Company's carrying value, the Company
determined the decline was other than temporary and recorded
a charge of $81 million in Investment gain or loss.
(b) Reflects the change in fair value of the deal contingent foreign
exchange contract related to the acquisition of JLT.
(c) Reflects amortization of fees on the bridge financing included
in interest expense related to the acquisition of JLT.
(d) Relates to 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
- Impact
of Revenue Recognition
Standard
Three and Nine Months
Ended September 30
(Millions) (Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
ExcludesImpact ofRevenueStandard ExcludesImpact ofRevenueStandard
2018 2018 2017 2018 2018 2017
Consolidated
Compensation $ 2,083 $ 2,095 $ 1,968 $ 6,442 $ 6,384 $ 5,971
and Benefits
Other operating 880 880 838 2,656 2,656 2,383
expenses
Total Expenses $ 2,963 $ 2,975 $ 2,806 $ 9,098 $ 9,040 $ 8,354
Depreciation and $ 77 $ 77 $ 78 $ 236 $ 236 $ 234
amortization
expense
Identified intangible 47 47 42 135 135 122
amortization expense
Total $ 124 $ 124 $ 120 $ 371 $ 371 $ 356
Stock option expense $ 3 $ 3 $ 2 $ 20 $ 20 $ 19
Capital expenditures $ 87 $ 87 $ 73 $ 222 $ 222 $ 217
Operating cash flows $ 906 $ 906 $ 794 $ 1,319 $ 1,319 $ 1,137
Risk and Insurance
Services
Compensation $ 1,103 $ 1,111 $ 1,045 $ 3,416 $ 3,349 $ 3,084
and Benefits
Other operating 467 467 450 1,406 1,406 1,266
expenses
Total Expenses $ 1,570 $ 1,578 $ 1,495 $ 4,822 $ 4,755 $ 4,350
Depreciation and $ 36 $ 36 $ 36 $ 108 $ 108 $ 106
amortization
expense
Identified intangible 39 39 35 111 111 100
amortization expense
Total $ 75 $ 75 $ 71 $ 219 $ 219 $ 206
Consulting
Compensation $ 895 $ 899 $ 843 $ 2,753 $ 2,762 $ 2,635
and Benefits
Other operating 470 470 433 1,416 1,416 1,269
expenses
Total Expenses $ 1,365 $ 1,369 $ 1,276 $ 4,169 $ 4,178 $ 3,904
Depreciation and $ 23 $ 23 $ 25 $ 74 $ 74 $ 76
amortization
expense
Identified intangible 8 8 7 24 24 22
amortization expense
Total $ 31 $ 31 $ 32 $ 98 $ 98 $ 98
Marsh & McLennan
Companies, Inc.
Consolidated Balance Sheets
(Millions)
(Unaudited) December 31,2017
September 30,
2018
ASSETS
Current assets:
Cash and cash equivalents $ 951 $ 1,205
Net receivables 4,476 4,133
Other current assets 539 224
Total current assets 5,966 5,562
Goodwill and intangible assets 10,764 10,363
Fixed assets, net 707 712
Pension related assets 1,814 1,693
Deferred tax assets 497 669
Other assets 1,381 1,430
TOTAL ASSETS $ 21,129 $ 20,429
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 638 $ 262
Accounts payable and 2,293 2,083
accrued liabilities
Accrued compensation and 1,406 1,718
employee benefits
Accrued income taxes 179 199
Dividends payable 211 -
Total current liabilities 4,727 4,262
Fiduciary liabilities 5,185 4,847
Less - cash and investments (5,185 ) (4,847 )
held
in a fiduciary capacity
- -
Long-term debt 5,512 5,225
Pension, post-retirement and 1,727 1,888
post-employment benefits
Liabilities for errors 303 301
and omissions
Other liabilities 1,322 1,311
Total equity 7,538 7,442
TOTAL LIABILITIES AND EQUITY $ 21,129 $ 20,429
Note:
Effective January 1, 2018, the Company, upon the adoption
of the new revenue recognition standard, recorded
a cumulative effect adjustment, net of tax resulting
in an increase to the opening balance
of retained earnings of $364 million, with offsetting
increases/decreases to other balance sheet accounts,
e.g. accounts receivable, other current assets,
other assets and deferred income taxes.
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets - Impact of Revenue Standard
(Millions) (Unaudited)
As discussed earlier, the Company adopted the new revenue
standard (ASC 606) using the modified retrospective
method, applied to all contracts. The guidance requires
entities that elected the modified retrospective
method to disclose the impact to financial statement
line items as a result of applying the new guidance
(rather than previous U.S. GAAP). The table below shows
the impacts on the consolidated balance sheet.
September 30, 2018
As Reported Impact ofRevenueStandard Prior toAdoption
ASSETS
Current assets:
Cash and cash $ 951 $ - $ 951
equivalents
Net receivables 4,476 (175 ) 4,301
Other current 539 (290 ) 249
assets
Total current 5,966 (465 ) 5,501
assets
Goodwill and 10,764 - 10,764
intangible
assets
Fixed assets, 707 - 707
net
Pension related 1,814 - 1,814
assets
Deferred tax 497 121 618
assets
Other assets 1,381 (238 ) 1,143
TOTAL ASSETS $ 21,129 $ (582 ) $ 20,547
LIABILITIES
AND EQUITY
Current
liabilities:
Short-term debt $ 638 $ - $ 638
Accounts payable 2,293 (143 ) 2,150
and
accrued
liabilities
Accrued 1,406 - 1,406
compensation
and
employee
benefits
Accrued income 179 - 179
taxes
Dividends 211 - 211
payable
Total current 4,727 (143 ) 4,584
liabilities
Fiduciary 5,185 - 5,185
liabilities
Less - cash and (5,185 ) - (5,185 )
investments
held
in a fiduciary
capacity
- - -
Long-term debt 5,512 - 5,512
Pension, 1,727 - 1,727
post-retirement
and
post-employment
benefits
Liabilities 303 - 303
for errors
and omissions
Other 1,322 (24 ) 1,298
liabilities
Total equity 7,538 (415 ) 7,123
TOTAL $ 21,129 $ (582 ) $ 20,547
LIABILITIES
AND EQUITY
Media:
Marsh & McLennan Companies
Erick R. Gustafson, +1 202-263-7788
erick.gustafson@mmc.com
or
Investors:
Marsh & McLennan Companies
Dan Farrell, +1 212-345-3713
daniel.farrell@mmc.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20181025005449/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
October 25, 2018 07:01 ET (11:01 GMT)
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