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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 |
TIDMMHM
Marsh & McLennan (NYSE:MMC), the world's leading professional services firm in the areas of risk, strategy and people, today reported financial results for the fourth quarter and year ended December 31, 2020.
Dan Glaser, President and CEO, said: "2020 was a year like no other. I am proud of how our colleagues rose to the challenge, helping clients and one another and achieving impressive financial performance. We ended the year with a strong fourth quarter with positive underlying revenue growth. In 2020, we achieved revenue growth of 3% with underlying revenue growth of 1% and grew adjusted EPS 7%.
"We demonstrated our resilience as a company in 2020 and are well positioned for growth in 2021."
Consolidated Results
Consolidated revenue in the fourth quarter of 2020 was $4.4 billion, an increase of 4% compared with the fourth quarter of 2019, or 1% on an underlying basis. Operating income was $571 million compared with $592 million in the prior year period. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, was $855 million, compared with $856 million in the prior year period. Net income attributable to the Company was $374 million, or $0.73 per diluted share, compared with $0.76 in the fourth quarter of 2019. Adjusted earnings per share was $1.19, compared with $1.19 for the prior year period.
For the year 2020, revenue was $17.2 billion, an increase of 3% compared with 2019, or 1% on an underlying basis. Operating income was $3.1 billion, while adjusted operating income rose 9% to $3.6 billion. Net income attributable to the Company was $2.0 billion. Earnings per share increased 16% to $3.94. Adjusted earnings per share increased 7% to $4.97 compared with $4.66 in 2019.
Risk & Insurance Services
Risk & Insurance Services revenue was $2.5 billion in the fourth quarter of 2020, an increase of 6%, or 3% on an underlying basis. Operating income was $463 million, compared with $365 million in the fourth quarter of 2019. Adjusted operating income decreased 5% to $525 million. For the year 2020, revenue was $10.3 billion, an increase of 8%, or 3% on an underlying basis. Operating income was $2.3 billion, compared to $1.8 billion in 2019. Adjusted operating income rose 14% to $2.6 billion.
Marsh's revenue in the fourth quarter of 2020 was $2.4 billion, an increase of 7%, or 4% on an underlying basis. In U.S./Canada, underlying revenue rose 7%. International operations underlying revenue was flat compared to the prior year period, reflecting underlying growth of 3% in Latin America and 1% in Asia Pacific, and partially offset by a decline of 2% in EMEA. For the year 2020, Marsh's revenue growth was 7%, or 3% on an underlying basis.
Guy Carpenter's fourth quarter revenue was $162 million, an increase of 7%, or 5% on an underlying basis. For the year 2020, Guy Carpenter's revenue grew 15% compared to a year ago, or 6% on an underlying basis.
Consulting
Consulting revenue was $1.9 billion in the fourth quarter of 2020, an increase of 1%, or a decline of 1% on an underlying basis. Operating income declined to $179 million, compared with $336 million in the fourth quarter of 2019, primarily due to a provision for a legacy JLT E&O. Adjusted operating income was $387 million, an increase of 8% compared with $359 million in the fourth quarter of 2019. For the year 2020, revenue was $7.0 billion, a decrease of 2% on both a GAAP and underlying basis. Operating income was $1.0 billion, compared with $1.2 billion in 2019. Adjusted operating income decreased 2% to $1.2 billion.
Mercer's revenue was $1.3 billion in the fourth quarter of 2020, a decrease of 1%, or a 3% decline on an underlying basis. Wealth, with revenue of $629 million, decreased 1% on an underlying basis. Health, with revenue of $445 million, decreased 2% on an underlying basis. Career revenue of $238 million decreased 7% on an underlying basis. For the year 2020, Mercer's revenue declined 2%, or 1% on an underlying basis.
Oliver Wyman's revenue was $590 million in the fourth quarter of 2020, an increase of 4% on an underlying basis. For the year 2020, Oliver Wyman's revenue was $2.0 billion, a decline of 4% on an underlying basis.
Other Items
In December, Marsh & McLennan Agency (MMA) closed the acquisitions of independent agencies INSPRO, Heritage Insurance Service, Inc., and Compass Financial Partners. For the year 2020, MMA achieved a record year of acquisitions, completing eight transactions with approximately $235 million of combined revenue, marking the largest year of acquired revenue since it was started in 2009.
During the fourth quarter of 2020, the Company repaid $700 million of senior notes and prepaid $300 million of floating rate notes due December 2021.
Conference Call
A conference call to discuss fourth quarter 2020 results will be held today at 8:30 a.m. Eastern time. To participate in the teleconference, please dial +1 866 437 7574. Callers from outside the United States should dial +1 409 220 9376. The access code for both numbers is 7838349. The live audio webcast may be accessed at MMC.com. 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 over $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 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:
-- the financial and operational impact of COVID-19 on our revenue and ability to generate new business, our overall level of profitability and cash flow, and our liquidity, including the timeliness and collectability of our receivables; -- the impact from lawsuits, other contingent liabilities and loss contingencies arising from errors and omissions, breach of fiduciary duty or other claims against us, including claims related to pandemic coverage; -- the impact of investigations, reviews, or other activity by regulatory or law enforcement authorities, including the ongoing U.K. FCA review of legacy JLT enhanced transfer value advice; -- the financial and operational impact of complying with laws and regulations where we operate and the risks of noncompliance with such laws, including anti-corruption laws such as the U.S. Foreign Corrupt Practices Act, U.K. Anti-Bribery Act, trade sanctions regimes and cybersecurity and data privacy regulations such as the E.U.'s General Data Protection Regulation; -- our ability to maintain adequate safeguards to protect the security of our information systems and confidential, personal or proprietary information, particularly given the increased risk of phishing and other cybersecurity attacks or unauthorized dissemination of information caused by remote work arrangements; -- our ability to compete effectively and adapt to changes in the competitive environment, including to respond to technological change, disintermediation, digital disruption and other types of innovation; -- our ability to manage risks associated with our investment management and related services business, particularly in the context of uncertain equity markets, including our ability to execute timely trades in light of increased trading volume and to manage potential conflicts of interest between investment consulting and fiduciary management services; -- our ability to attract and retain industry leading talent; -- our ability to successfully recover if we experience a business continuity problem due to cyberattack, natural disaster or otherwise; -- the regulatory, contractual and reputational risks that arise based on insurance placement activities and various insurer revenue streams; and -- the impact of changes in tax laws, guidance and interpretations or disagreements with tax authorities, particularly due to the change in U.S. presidential administrations.
The factors identified above are not exhaustive. Marsh & McLennan Companies and its subsidiaries operate in a dynamic business environment in which new risks emerge frequently. Accordingly, we caution readers not to place undue reliance on any forward-looking statements, which are based only on information currently available to us and speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made.
Further information concerning Marsh & McLennan Companies and its businesses, including information about factors that could materially affect our results of operations and financial condition, is contained in the Company's filings with the Securities and Exchange Commission, including the "Risk Factors" section and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our most recently filed Annual Report on Form 10-K.
Marsh & McLennan Companies, Inc. Consolidated Statements of Income (In millions, except per share figures) (Unaudited) Three Months Ended December Twelve Months Ended 31, December 31, 2020 2019 2020 2019 Revenue $4,416 $4,264 $17,224 $16,652 Expense: Compensation and Benefits 2,650 2,478 10,129 9,734 Other Operating Expenses 1,195 1,194 4,029 4,241 Operating Expenses 3,845 3,672 14,158 13,975 Operating Income 571 592 3,066 2,677 Other Net Benefit Credits 70 62 257 265 Interest Income 2 5 7 39 Interest Expense (128 ) (130 ) (515 ) (524 ) Cost of Extinguishment of Debt -- -- -- (32 ) Investment Income (Loss) 25 2 (22 ) 22 Acquisition Related Derivative Contracts -- -- -- (8 ) Income Before Income Taxes 540 531 2,793 2,439 Income Tax Expense 161 135 747 666 Net Income Before Non-Controlling Interests 379 396 2,046 1,773 Less: Net Income Attributable to Non-Controlling Interests 5 5 30 31 Net Income Attributable to the Company $374 $391 $2,016 $1,742 Net Income Per Share Attributable to the Company - Basic $0.74 $0.77 $3.98 $3.44 - Diluted $0.73 $0.76 $3.94 $3.41 Average Number of Shares Outstanding - Basic 507 504 506 506 - Diluted 513 510 512 511 Shares Outstanding at December 31 508 504 508 504
The Company acquired JLT on April 1, 2019 and JLT's results are included in the Company's consolidated results of operations from that date.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended December 31
(Millions) (Unaudited)
The Company conducts business in more than 130 countries. As a result, foreign exchange rate movements may impact period-to-period comparisons of revenue. Similarly, certain other items such as the revenue impact of acquisitions and dispositions, including transfers among businesses, may impact period-to-period comparisons of revenue. Underlying revenue measures the change in revenue from one period to the next by isolating these impacts.
Components of Revenue Change* Three Months % Change Acquisitions/ Ended December GAAP Currency Dispositions/ Underlying 31, Revenue Impact Other Impact Revenue 2020 2019 Risk and Insurance Services Marsh $2,364 $2,219 7 % 1 % 2 % 4 % Guy Carpenter 162 152 7 % -- 1 % 5 % Subtotal 2,526 2,371 7 % 1 % 2 % 4 % Fiduciary Interest Income 6 25 Total Risk and Insurance Services 2,532 2,396 6 % 1 % 2 % 3 % Consulting Mercer 1,312 1,326 (1 )% 2 % -- (3 )% Oliver Wyman 590 559 6 % 2 % -- 4 % Total Consulting 1,902 1,885 1 % 2 % -- (1 )% Corporate/Eliminations (18 ) (17 ) Total Revenue $4,416 $4,264 4 % 1 % 1 % 1 %
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue Change* Three Months % Change Acquisitions/ Ended December GAAP Currency Dispositions/ Underlying 31, Revenue Impact Other Impact Revenue 2020 2019 Marsh: EMEA $688 $661 4 % 3 % 3 % (2 )% Asia Pacific 269 255 5 % 4 % -- 1 % Latin America 141 156 (10 )% (8)% (6 )% 3 % Total International 1,098 1,072 2 % 2 % 1 % -- U.S./Canada 1,266 1,147 11 % -- 3 % 7 % Total Marsh $2,364 $2,219 7 % 1 % 2 % 4 % Mercer: Wealth 629 621 2 % 3 % -- (1 )% Health 445 455 (2 )% -- -- (2 )% Career 238 250 (5 )% 2 % -- (7 )% Total Mercer $1,312 $1,326 (1 )% 2 % -- (3 )% * Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Twelve Months Ended December 31
(Millions) (Unaudited)
The Company conducts business in more than 130 countries. As a result, foreign exchange rate movements may impact period-to-period comparisons of revenue. Similarly, certain other items such as the revenue impact of acquisitions and dispositions, including transfers among businesses, may impact period-to-period comparisons of revenue. Underlying revenue measures the change in revenue from one period to the next by isolating these impacts.
The calculation of underlying revenue growth for the twelve months ended December 31, 2020 includes the results of JLT. The column "2019 Including JLT" includes JLT's prior year first quarter revenue (See reconciliation of non-GAAP measures on page 14).
Components of Revenue Change Including JLT* % Change Twelve Months % Change 2019 Including Acquisitions/ Ended December GAAP Including JLT in Currency Dispositions/ Underlying 31, Revenue JLT 2019 Impact Other Impact Revenue 2020 2019 Risk and Insurance Services Marsh $8,595 $8,014 7 % $ 8,246 4 % (1)% 2 % 3 % Guy Carpenter 1,696 1,480 15 % 1,598 6 % -- -- 6 % Subtotal 10,291 9,494 8 % 9,844 5 % (1)% 1 % 4 % Fiduciary Interest Income 46 105 110 Total Risk and Insurance Services 10,337 9,599 8 % 9,954 4 % (1)% 1 % 3 % Consulting Mercer 4,928 5,021 (2 )% 5,094 (3 )% -- (2 )% (1 )% Oliver Wyman 2,048 2,122 (3 )% 2,122 (3 )% -- -- (4 )% Total Consulting 6,976 7,143 (2 )% 7,216 (3 )% -- (1 )% (2 )% Corporate/Eliminations (89 ) (90 ) (90 ) Total Revenue $17,224 $16,652 3 % $ 17,080 1 % -- -- 1 %
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue Change Including JLT* % Change Twelve Months % Change 2019 Including Acquisitions/ Ended December GAAP Including JLT in Currency Dispositions/ Underlying 31, Revenue JLT 2019 Impact Other Impact Revenue 2020 2019 Marsh: EMEA $2,575 $2,482 4 % $ 2,589 (1 )% -- -- -- Asia Pacific 1,059 953 11 % 1,019 4 % -- -- 4 % Latin America 424 460 (8 )% 483 (12 )% (10)% (5 )% 3 % Total International 4,058 3,895 4 % 4,091 (1 )% (1 )% (1 )% 1 % U.S./Canada 4,537 4,119 10 % 4,155 9 % -- 4 % 5 % Total Marsh $8,595 $8,014 7 % $ 8,246 4 % (1 )% 2 % 3 % Mercer: Wealth 2,348 2,369 (1 )% 2,422 (3 )% -- (2 )% (1 )% Health 1,793 1,796 -- 1,815 (1 )% (1 )% (2 )% 2 % Career 787 856 (8 )% 857 (8 )% -- -- (8 )% Total Mercer $4,928 $5,021 (2 )% $ 5,094 (3 )% -- (2 )% (1 )% * Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Actual as Reported
Three Months Ended December 31
(Millions) (Unaudited)
Overview
The Company reports its financial results in accordance with accounting principles generally accepted in the United States (referred to in this release as "GAAP" or "reported" results). The Company also refers to and presents below certain additional non-GAAP financial measures, within the meaning of Regulation G under the Securities Exchange Act of 1934. These measures are: adjusted operating income (loss), adjusted operating margin, adjusted income, net of tax and adjusted earnings per share (EPS). The Company has included reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP in the following tables.
The Company believes these non-GAAP financial measures provide useful supplemental information that enables investors to better compare the Company's performance across periods. Management also uses these measures internally to assess the operating performance of its businesses, to assess performance for employee compensation purposes and to decide how to allocate resources. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP. The Company's non-GAAP measures include adjustments that reflect how management views our businesses, and may differ from similarly titled non-GAAP measures presented by other companies.
Adjusted Operating Income (Loss) and Adjusted Operating Margin
Adjusted operating income (loss) is calculated by excluding the impact of certain noteworthy items from the Company's GAAP operating income or (loss). The following tables identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income or loss, on a consolidated and segment basis, for the three and twelve months ended December 31, 2020 and 2019. The following tables also present adjusted operating margin. In 2019, the Company changed its methodology for calculating adjusted operating margin due to the significant amount of identified intangible asset amortization related to the acquisition of JLT on April 1, 2019. For the three and twelve months ended December 31, 2020 and 2019, adjusted operating margin is calculated by dividing the sum of adjusted operating income plus identified intangible asset amortization by consolidated or segment adjusted revenue.
Risk & Insurance Corporate/ Services Consulting Eliminations Total Three Months Ended December 31, 2020 Operating income (loss) $ 463 $ 179 $ (71 ) $571 Operating margin 18.3 % 9.4 % N/A 12.9% Add (deduct) impact of Noteworthy Items: Restructuring, excluding JLT (a) 1 37 8 46 Changes in contingent consideration (b) 3 1 -- 4 JLT integration and restructuring costs (c) 46 20 4 70 JLT legacy E&O provision (d) -- 161 -- 161 JLT acquisition-related costs (e) 11 1 1 13 Disposal of businesses (f) 1 (11 ) -- (10 ) Other -- (1 ) 1 -- Operating income adjustments 62 208 14 284 Adjusted operating income (loss) $ 525 $ 387 $ (57 ) $855 Total identified intangible amortization expense $ 70 $ 16 $ -- $86 Adjusted operating margin 23.5 % 21.4 % N/A 21.3% As Reported Results Three Months Ended December 31, 2019 Operating income (loss), as reported $ 365 $ 336 $ (109 ) $592 Operating margin 15.2 % 17.8 % N/A 13.9% Add (deduct) impact of Noteworthy Items: Restructuring, excluding JLT (a) 28 13 15 56 Changes in contingent consideration (b) 41 1 -- 42 JLT integration and restructuring costs (c) 95 8 40 143 JLT acquisition-related costs (e) 16 1 -- 17 Disposal of businesses 2 -- -- 2 Other 3 -- 1 4 Operating income adjustments 185 23 56 264 Adjusted operating income (loss) $ 550 $ 359 $ (53 ) $856 Total identified intangible amortization expense $ 66 $ 13 $ -- $79 Adjusted operating margin 25.7 % 19.7 % N/A 21.9% (a) Consulting charges in both 2020 and 2019 reflect severance and real estate exit costs related to the Mercer restructuring program. Risk & Insurance Services in 2019 reflects severance and related charges from non-JLT merger integration costs. Corporate charges in 2020 primarily reflect restructuring and consulting costs related to the Company's corporate led initiatives. Corporate charges in 2019 are primarily related to adjustments to restructuring liabilities for future rent under non-cancellable leases. (b) Primarily includes the change in fair value as measured each quarter of contingent consideration related to acquisitions. (c) Includes costs incurred for staff reductions and real estate exit costs, as well as consulting costs related to the JLT Transaction. (d) Reflects a provision for a legacy JLT E&O relating to suitability of financial advice provided to individuals for defined benefit pension transfers. (e) Reflects retention costs in the Risk & Insurance Services and Consulting segments related to the closing of the JLT Transaction. (f) Consulting in 2020 includes a contingent gain adjustment from Mercer's U.S. large market health and defined benefit administration business sold in 2019. These amounts are removed from GAAP revenue in the calculation of adjusted operating income.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Actual as Reported
Twelve Months Ended December 31
(Millions) (Unaudited)
The information presented below represents the actual as reported data for the twelve months ended December 31, 2020 and 2019. Results for the twelve months ended December 31, 2019 do not include JLT's results of operations for the period January 1, 2019 through March 31, 2019.
Risk & Insurance Corporate/ Services Consulting Eliminations Total Twelve Months Ended December 31, 2020 Operating income (loss) $ 2,346 $ 994 $ (274 ) $3,066 Operating margin 22.7 % 14.3 % N/A 17.8 % Add (deduct) impact of Noteworthy Items: Restructuring, excluding JLT (a) 3 54 32 89 Changes in contingent consideration (b) 25 (1 ) 2 26 JLT integration and restructuring costs (c) 171 51 29 251 JLT legacy E&O provision (d) -- 161 -- 161 JLT acquisition-related costs (e) 50 3 1 54 Disposal of businesses (f) 7 (15 ) -- (8 )
Other 5 -- -- 5 Operating income adjustments 261 253 64 578 Adjusted operating income (loss) $ 2,607 $ 1,247 $ (210 ) $3,644 Total identified intangible amortization expense $ 292 $ 59 $ -- $351 Adjusted operating margin 28.0 % 18.8 % N/A 23.2 % As Reported Results Twelve Months Ended December 31, 2019 Operating income (loss), as reported $ 1,833 $ 1,210 $ (366 ) $2,677 Operating margin 19.1 % 16.9 % N/A 16.1 % Add (deduct) impact of Noteworthy Items: Restructuring, excluding JLT (a) 34 56 22 112 Changes in contingent consideration (b) 65 3 -- 68 JLT integration and restructuring costs (c) 229 18 88 335 JLT acquisition-related costs (e) 97 2 51 150 Disposal of businesses (f) 15 (14 ) -- 1 Other 6 -- 2 8 Operating income adjustments 446 65 163 674 Adjusted operating income (loss) $ 2,279 $ 1,275 $ (203 ) $3,351 Total identified intangible amortization expense $ 260 $ 54 $ -- $314 Adjusted operating margin 26.3 % 18.6 % N/A 22.0 % (a) Consulting charges in both 2020 and 2019 reflect severance and real estate exit costs related to the Mercer restructuring program. Risk & Insurance Services in 2019 reflects severance and related charges from non-JLT merger integration costs. Corporate charges in 2020 primarily reflect restructuring and consulting costs related to the Company's corporate led initiatives, including adjustments to restructuring liabilities for future rent under non-cancellable leases. Corporate charges in 2019 are primarily related to adjustments to restructuring liabilities for future rent under non-cancellable leases. (b) Primarily includes the change in fair value as measured each quarter of contingent consideration related to acquisitions. (c) Includes costs incurred for staff reductions and real estate exit costs, as well as legal and consulting costs related to the integration. (d) Reflects a provision for a legacy JLT E&O relating to suitability of financial advice provided to individuals for defined benefit pension transfers. (e) Reflects retention costs in 2020 and 2019, advisor fees and stamp duty taxes and legal fees related to the closing of the JLT Transaction and retention costs. 2019 also includes the loss on the sale of JLT's aerospace business, which is included in revenue. This loss is removed from GAAP revenue in the calculation of adjusted operating income. (f) Consulting in 2020 includes a contingent gain adjustment from Mercer's U.S. large market health and defined benefit administration business sold in 2019. 2019 reflects the loss on the sale of a U.S. Specialty business at Marsh and a gain on the sale of Mercer's stand-alone U.S. large market health and defined benefit administration business, which are both included in revenue. These amounts are removed from GAAP revenue in the calculation of adjusted operating income.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three and Twelve Months Ended December 31
(Millions) (Unaudited)
Adjusted income, net of tax is calculated as the Company's GAAP income from continuing operations, adjusted to reflect the after tax impact of the operating income adjustments set forth in the preceding tables and investments gains or losses related to the impact of mark-to-market adjustments on certain equity securities. Adjustments also include JLT acquisition related items, including change in fair value of derivative contracts, financing costs and interest income on funds held in escrow. Adjusted EPS is calculated by dividing the Company's adjusted income, net of tax, by MMC's average number of shares outstanding-diluted for the relevant period. The following tables reconcile adjusted income, net of tax to GAAP income from continuing operations and adjusted EPS to GAAP EPS for the three and twelve months ended December 31, 2020 and 2019. The information presented below represents the actual as reported results for the three and twelve month periods ended December 31, 2020 and 2019. Results for the twelve months ended December 31, 2019 do not include JLT's results of operations for the period January 1, 2019 through March 31, 2019.
Three Months Ended Three Months Ended December 31, 2020 December 31, 2019 Adjusted Adjusted Amount EPS Amount EPS Net income before non-controlling interests, as reported $379 $396 Less: Non-controlling interest, net of tax 5 5 Subtotal $374 $ 0.73 $391 $ 0.76 Operating income adjustments $284 $264 Investments adjustment (a) (14 ) -- Pension settlement adjustment/charge (b) 3 9 Impact of income taxes on above items (35 ) (54 ) 238 0.46 219 0.43 Adjusted income, net of tax $612 $ 1.19 $610 $ 1.19 Twelve Months Ended Twelve Months Ended December 31, 2020 December 31, 2019 Adjusted Adjusted Amount EPS Amount EPS Net income before non-controlling interests, as reported $2,046 $1,773 Less: Non-controlling interest, net of tax 30 31 Subtotal $2,016 $ 3.94 $1,742 $ 3.41 Operating income adjustments $578 $674 Investments adjustment (a) 28 (10 ) Pension settlement adjustment/charge (b) 3 7 Change in fair value of acquisition related derivative contracts (c) -- 8 Financing costs (d) -- 53 Interest on funds held in escrow (e) -- (25 ) Early extinguishment of debt -- 32 Impact of income taxes on above items (85 ) (99 ) 524 1.03 640 1.25 Adjusted income, net of tax $2,540 $ 4.97 $2,382 $ 4.66 (a) Represents mark-to-market gains of $14 million for the three months ended December 31, 2020, primarily related to the Company's investment in Alexander Forbes ("AF"). The investment adjustment for the twelve months ended December 31, 2020 primarily relates to AF, and includes mark to market gains and losses, as well as a loss on the sale of AF shares in June 2020. (b) Pension settlement charge resulting from lump sum settlements elected by participants. Recognition of these payments as a partial settlement was required because in each respective plan the lump sum payments exceeded the total of interest and service cost for the year. (c) Reflects the change in fair value of derivatives related to the JLT acquisition. (d) Reflects interest expense on debt issuances and amortization of bridge financing fees related to the acquisition of JLT (prior to April 1, 2019). (e) Interest income earned on funds held in escrow related to the JLT acquisition (prior to April 1, 2019). Marsh & McLennan Companies, Inc. Supplemental Information Three and Twelve Months Ended December 31 (Millions) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2020 2019 2020 2019 Consolidated Compensation and Benefits $ 2,650 $2,478 $ 10,129 $9,734 Other operating expenses 1,195 1,194 4,029 4,241 Total Expenses $ 3,845 $3,672 $ 14,158 $13,975 Depreciation and amortization expense $ 108 $88 $ 390 $333 Identified intangible amortization expense 86 79 351 314 Total $ 194 $167 $ 741 $647 Stock option expense $ 3 $3 $ 28 $26 Risk and Insurance Services Compensation and Benefits $ 1,456 $1,358 $ 5,690 $5,370 Other operating expenses 613 673 2,301 2,396 Total Expenses $ 2,069 $2,031 $ 7,991 $7,766 Depreciation and amortization expense $ 62 $42 $ 208 $156 Identified intangible amortization expense 70 66 292 260 Total $ 132 $108 $ 500 $416 Consulting Compensation and Benefits $ 1,084 $1,002 $ 3,995 $3,934 Other operating expenses 639 547 1,987 1,999 Total Expenses $ 1,723 $1,549 $ 5,982 $5,933 Depreciation and amortization expense $ 29 $27 $ 115 $102 Identified intangible amortization expense 16 13 59 54 Total $ 45 $40 $ 174 $156
The Company acquired JLT on April 1, 2019 and JLT's results are included in the Company's consolidated results of operations from that date.
Marsh & McLennan Companies, Inc. Consolidated Balance Sheets (Millions) (Unaudited) December 31, December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 2,089 $ 1,155 Net receivables 5,287 5,236 Other current assets 740 677 Total current assets 8,116 7,068 Goodwill and intangible assets 18,216 17,445 Fixed assets, net 856 858 Pension related assets 1,768 1,632 Right of use assets 1,894 1,921 Deferred tax assets 722 676 Other assets 1,458 1,757 TOTAL ASSETS $ 33,030 $ 31,357 LIABILITIES AND EQUITY Current liabilities: Short-term debt $ 517 $ 1,215 Accounts payable and accrued liabilities 3,050 2,746 Accrued compensation and employee benefits 2,400 2,197 Current lease liabilities 342 342 Accrued income taxes 208 179 Total current liabilities 6,517 6,679 Fiduciary liabilities 8,585 7,344 Less - cash and investments held in a fiduciary capacity (8,585 ) (7,344 ) -- -- Long-term debt 10,796 10,741 Pension, post-retirement and post-employment benefits 2,662 2,336 Long-term lease liabilities 1,924 1,926 Liabilities for errors and omissions 366 335 Other liabilities 1,505 1,397 Total equity 9,260 7,943 TOTAL LIABILITIES AND EQUITY $ 33,030 $ 31,357 Marsh & McLennan Companies, Inc. Consolidated Statements of Cash Flows (Millions) (Unaudited) For the Years Ended December 31, 2020 2019 Operating cash flows: Net income before non-controlling interests $ 2,046 $ 1,773 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 741 647 Non cash lease expense 355 315 Charge for early extinguishment of debt -- 32 Share-based compensation expense 290 252 Change in fair value of acquisition-related derivative contracts and other 64 153 Changes in Assets and Liabilities: Accrued compensation and employee benefits 207 154 Net receivables (36 ) (130 ) Other changes to assets and liabilities 390 (24 ) Contributions to pension & other benefit plans in excess of current year expense/credit (356 ) (369 ) Operating lease liabilities (342 ) (327 ) Effect of exchange rate changes 23 (115 ) Net cash provided by operations 3,382 2,361 Financing cash flows: Purchase of treasury shares -- (485 ) Net borrowings from term-loan and credit facilities 1,000 300 Proceeds from issuance of debt 737 6,459 Repayments of debt (2,515 ) (1,064 ) Payments for early extinguishment of debt -- (585 ) Acquisition-related derivative payments -- (337 ) Net issuance of common stock from treasury shares -- 69 Net distributions from non-controlling interests and deferred/contingent consideration (159 ) (161 ) Dividends paid (943 ) (890 ) Net cash (used for) provided by financing activities (1,880 ) 3,306 Investing cash flows: Capital expenditures (348 ) (421 ) Net sales of long-term investments and other 104 26 Dispositions 98 229 Acquisitions (668 ) (5,505 ) Net cash used for investing activities (814 ) (5,671 ) Effect of exchange rate changes on cash and cash equivalents 246 93 Increase in cash and cash equivalents 934 89 Cash and cash equivalents at beginning of period 1,155 1,066 Cash and cash equivalents at end of period $ 2,089 $ 1,155
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - 2019 Revenue Including JLT
Twelve Months Ended December 31, 2019
(Millions) (Unaudited)
On April 1, 2019, the Company completed its previously announced acquisition of Jardine Lloyd Thompson Group, plc. JLT's results of operations for the twelve month period ended December 31, 2020 are included in the Company's results of operations for 2020. The Company's prior period 2019 results of operations do not include JLT's results for the three months ended March 31, 2019. Prior to being acquired by the Company, JLT operated in three segments, Specialty, Reinsurance and Employee Benefits. As of April 1, 2019, the historical JLT businesses were combined into MMC operations as follows: JLT Specialty was included by geography within Marsh, JLT Reinsurance was included within Guy Carpenter and the majority of the JLT Employee Benefits business was included in Mercer Health and Wealth.
The JLT Transaction had a significant impact on the Company's results of operations in 2019. The Company believes that in addition to the change in reported GAAP revenue, a comparison of 2020 revenue to the combined 2019 revenue of MMC and JLT would provide investors useful information about the year-over-year results.
The table below sets forth revenue information as if the companies were combined on January 1, 2019. Consolidated revenue in 2019 for the twelve months ended December 31, 2019 "MMC as previously reported" does not include JLT revenue for the period from January 1 to March 31, 2019. The "2019 Including JLT" revenue information set forth in the table below presents revenue information as if the companies were combined on January 1, 2019 and is not necessarily indicative of what the results would have been had we operated the business since January 1, 2019.
The MMC revenue amounts are as previously reported by the Company in its quarterly filings on Form 10-Q for the applicable periods. JLT 2019 revenue information is derived using the same policies and adjustments as the "JLT Supplemental Information - Revenue Analysis" furnished to the SEC on June 6, 2019 on Form 8-K, and includes the revenue from JLT's aerospace business.
Twelve Months Ended December 31, 2019 MMC As Previously Reported Risk & Insurance Services Marsh $ 8,014 Guy Carpenter 1,480 Subtotal 9,494 Fiduciary Interest Income 105 Total Risk & Insurance Services 9,599 Consulting Mercer 5,021 Oliver Wyman 2,122 Total Consulting 7,143 Corporate/Eliminations (90 ) Total Revenue $ 16,652 JLT 2019 Specialty (Marsh) $ 232 Reinsurance (Guy Carpenter) 118 Employee Benefits (Mercer) 73 Subtotal 423 Fiduciary Interest Income 5 Total Revenue $ 428 2019 Including JLT Marsh $ 8,246 Guy Carpenter 1,598 Subtotal 9,844 Fiduciary Interest Income 110 Total Risk & Insurance Services 9,954 Consulting Mercer 5,094 Oliver Wyman 2,122 Total Consulting 7,216 Corporate/Eliminations (90 ) Total Revenue $ 17,080
View source version on businesswire.com: https://www.businesswire.com/news/home/20210128005576/en/
CONTACT: 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
SOURCE: Marsh & McLennan Copyright Business Wire 2021
(END) Dow Jones Newswires
January 28, 2021 07:00 ET (12:00 GMT)
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