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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 | 26.15 | 98.21B |
From Apr 2019 to Apr 2024
TIDMMHM
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 third quarter ended September 30, 2019.
Dan Glaser, President and CEO, said: "We are pleased with our third quarter results, which reflect excellent performance across the Company. In the quarter, we produced 13% revenue growth, 5% underlying revenue growth including growth across both segments, and 10% adjusted operating income growth. For the nine months of 2019, we achieved 4% underlying revenue growth, adjusted operating income grew 13%, and the adjusted operating margin increased 110 basis points to 22.0%."
"Our year-to-date results position us well for a solid year," concluded Mr. Glaser.
Consolidated ResultsConsolidated revenue in the third quarter of 2019 was $4.0 billion, an increase of 13% compared with the third quarter of 2018. Underlying revenue grew 5% compared to a year ago. 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 and other acquisitions, dispositions, and transfers among businesses. Operating income was $467 million compared with $541 million in the prior year. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 10% to $585 million. Net income attributable to the Company was $303 million, or $0.59 per diluted share, compared with $0.54 in the third quarter of 2018. Adjusted earnings per share decreased 1% to $0.77 compared with $0.78 for the prior year period.
For the nine months ended September 30, 2019, consolidated revenue was $12.4 billion, an increase of 10%, or 4% on an underlying basis. Operating income was $2.1 billion, while adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 13% to $2.5 billion. Net income attributable to the Company was $1.4 billion. Fully diluted earnings per share was $2.64 compared with $2.93 in the first nine months of 2018. Adjusted earnings per share increased 6% to $3.47 compared with $3.26 for the comparable period in 2018.
Risk & Insurance ServicesRisk & Insurance Services revenue was $2.2 billion in the third quarter of 2019, an increase of 18%, or 6% on an underlying basis. Operating income was $218 million compared to $293 million in the third quarter of 2018. Adjusted operating income was $313 million, an increase of 11% compared with $283 million in the prior year period. For the nine months ended September 30, 2019, revenue was $7.2 billion, an increase of 14%, or 4% on an underlying basis. Operating income declined 1% to $1.5 billion, and adjusted operating income rose 12% to $1.7 billion.
Marsh's revenue in the third quarter was $1.9 billion, an increase of 5% on an underlying basis. In U.S./Canada, underlying revenue rose 6%. International operations produced underlying revenue growth of 3%, reflecting 7% underlying revenue growth in Asia Pacific, 2% in EMEA and a decline of 1% in Latin America. For the nine months ended September 30, 2019, Marsh's underlying revenue growth was 4%.
Guy Carpenter's revenue in the third quarter was $273 million, an increase of 11% on an underlying basis. For the nine months ended September 30, 2019, Guy Carpenter's underlying revenue growth was 4%.
ConsultingConsulting revenue in the third quarter was $1.8 billion, an increase of 8%, or 4% on an underlying basis. Operating income increased 9% to $317 million, and adjusted operating income increased 9% to $320 million. For the first nine months of 2019, revenue was $5.3 billion, an increase of 6%, or 4% on an underlying basis. Operating income of $874 million increased 9%, and adjusted operating income increased 13% to $916 million.
Mercer's revenue was $1.3 billion in the third quarter, an increase of 3% on an underlying basis. Health, with revenue of $441 million, was up 7% on an underlying basis. Career revenue of $247 million increased 5% on an underlying basis, and Wealth revenue of $592 million was flat on an underlying basis. For the nine months ended September 30, 2019, Mercer's revenue was $3.7 billion, an increase of 2% on an underlying basis.
Oliver Wyman's revenue was $505 million in the third quarter, an increase of 7% on an underlying basis. For the first nine months ended September 30, 2019, Oliver Wyman's revenue was $1.6 billion, up 9% on an underlying basis.
Other ItemsThe Company repurchased 2.1 million shares of its common stock for $200 million in the third quarter. Through nine months, the Company has repurchased 3.1 million shares for $300 million.
During the third quarter, the Company repaid $300million of senior notes.
Conference CallA conference call to discuss third quarter 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 2423. The access code for both numbers is 3870718. The live audio webcast will be accessible at mmc.com, and a replay 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 75,000 colleagues advise clients in over 130 countries. With annualized revenue approaching $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 meet the health, wealth and career needs of 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:
Hot Features
Premium
-- our ability to successfully integrate or achieve the intended benefits of the acquisition of JLT;
-- the impact of any investigations, reviews, or other activity by regulatory or law enforcement authorities, including the ongoing investigation by the European Commission competition authority;
-- 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 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 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 compete effectively and adapt to changes in the competitive environment, including to respond to disintermediation, digital disruption and other types of innovation;
-- the impact of macroeconomic, political, regulatory or market conditions on us, our clients and the industries in which we operate, including the impact and uncertainty around Brexit or the inability to collect on our receivables;
-- 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 and trade sanctions regimes;
-- the regulatory, contractual and reputational risks that arise based on insurance placement activities and various broker revenue streams;
-- 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;
-- our ability to successfully recover if we experience a business continuity problem due to cyberattack, natural disaster 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 EndedSeptember 30, Nine Months EndedSeptember 30,
2019 2018 2019 2018
Revenue $ 3,968 $ 3,504 $ 12,388 $ 11,238
Expense:
Compensation and Benefits 2,437 2,083 7,256 6,442
Other Operating Expenses 1,064 880 3,047 2,656
Operating Expenses 3,501 2,963 10,303 9,098
Operating Income 467 541 2,085 2,140
Other Net Benefit Credits 69 63 203 194
Interest Income 4 2 34 8
Interest Expense (133 ) (69 ) (394 ) (198 )
Cost of Early Extinguishment - - (32 ) -
of Debt
Investment Income (Loss) 7 (52 ) 20 (24 )
Acquisition Related - (100 ) (8 ) (100 )
Derivative
Contracts
Income Before Income Taxes 414 385 1,908 2,020
Income Tax Expense 108 106 531 509
Net Income Before 306 279 1,377 1,511
Non-Controlling
Interests
Less: Net Income 3 3 26 14
Attributable
to Non-Controlling Interests
Net Income Attributable $ 303 $ 276 $ 1,351 $ 1,497
to the Company
Net Income Per Share
Attributable
to the Company:
- Basic $ 0.60 $ 0.55 $ 2.67 $ 2.96
- Diluted $ 0.59 $ 0.54 $ 2.64 $ 2.93
Average Number of Shares
Outstanding
- Basic 506 504 506 506
- Diluted 511 510 511 512
Shares Outstanding 505 504 505 504
at September 30
JLT's results of operations for the three months ended September 30, 2019 are included in the Company's results of operations for the three-month period ended September 30, 2019. JLT's results of operations from April 1, 2019 through September 30, 2019 are included in the Company's results of operations for the nine-month period ended September 30, 2019. Prior periods in 2018 do not include JLT's results.
Marsh & McLennan Companies, Inc.Supplemental Information - Revenue AnalysisThree Months Ended September 30(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 and nine months ended September 30, 2019 includes the results of JLT. The column "2018 Including JLT" includes JLT's prior year third quarter revenue (See reconciliation of non-GAAP measures on page 14).
Components of Revenue ChangeIncluding JLT*
Three MonthsEndedSeptember 30, %ChangeGAAPRevenue 2018IncludingJLT % ChangeIncludingJLT in2018 CurrencyImpact Acquisitions/Dispositions/Other Impact Underlying Revenue
2019 2018
Risk and Insurance Services
Marsh $ 1,902 $ 1,630 17% $ 1,889 1% (1)% (2)% 5%
Guy Carpenter 273 215 27% 248 10% - (1)% 11%
Subtotal 2,175 1,845 18% 2,137 2% (1)% (2)% 5%
Fiduciary Interest Income 31 18 23
Total Risk and Insurance Services 2,206 1,863 18% 2,160 2% (1)% (2)% 6%
Consulting
Mercer 1,280 1,175 9% 1,261 2% (2)% - 3%
Oliver Wyman 505 481 5% 481 5% (1)% - 7%
Total Consulting 1,785 1,656 8% 1,742 3% (2)% - 4%
Corporate/Eliminations (23 ) (15 ) (15 )
Total Revenue $ 3,968 $ 3,504 13% $ 3,887 2% (1)% (1)% 5%
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue ChangeIncluding JLT*
Three MonthsEndedSeptember 30, %ChangeGAAPRevenue 2018IncludingJLT %ChangeIncludingJLT in2018 CurrencyImpact Acquisitions/Dispositions/Other Impact Underlying Revenue
2019 2018
Marsh:
EMEA $ 536 $ 441 22% $ 550 (2)% (2)% (2)% 2%
Asia Pacific 242 167 45% 240 1% (2)% (4)% 7%
Latin America 110 96 14% 132 (17)% (5)% (11)% (1)%
Total International 888 704 26% 922 (4)% (3)% (4)% 3%
U.S./Canada 1,014 926 10% 967 5% - (1)% 6%
Total Marsh $ 1,902 $ 1,630 17% $ 1,889 1% (1)% (2)% 5%
Mercer:
Wealth 592 525 13% 592 - (3)% 2% -
Health 441 415 7% 432 2% (1)% (3)% 7%
Career 247 235 5% 237 5% (2)% 1% 5% Total Mercer $ 1,280 $ 1,175 9% $ 1,261 2% (2)% - 3% * Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.Supplemental Information - Revenue AnalysisNine Months Ended September 30(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 and nine months ended September 30, 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 ChangeIncluding JLT*
Nine Months EndedSeptember 30, %ChangeGAAPRevenue 2018IncludingJLT %ChangeIncludingJLT in2018 CurrencyImpact Acquisitions/Dispositions/Other Impact UnderlyingRevenue
2019 2018
Risk and Insurance Services
Marsh $ 5,795 $ 5,073 14% $ 5,684 2% (2)% - 4%
Guy Carpenter 1,328 1,184 12% 1,292 3% (1)% - 4%
Subtotal 7,123 6,257 14% 6,976 2% (2)% - 4%
Fiduciary Interest Income 80 46 54
Total Risk and Insurance Services 7,203 6,303 14% 7,030 2% (2)% - 4%
Consulting
Mercer 3,695 3,504 5% 3,677 - (3)% 1% 2%
Oliver Wyman 1,563 1,470 6% 1,470 6% (2)% - 9%
Total Consulting 5,258 4,974 6% 5,147 2% (3)% 1% 4%
Corporate/Eliminations (73 ) (39 ) (39 )
Total Revenue $ 12,388 $ 11,238 10% $ 12,138 2% (2)% 1% 4%
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
Components of Revenue ChangeIncluding JLT*
Nine Months EndedSeptember 30, %ChangeGAAPRevenue 2018IncludingJLT %ChangeIncludingJLT in2018 CurrencyImpact Acquisitions/Dispositions/Other Impact UnderlyingRevenue
2019 2018
Marsh:
EMEA $ 1,821 $ 1,610 13% $ 1,871 (3)% (4)% - 2%
Asia Pacific 698 514 36% 697 - (4)% (3)% 7%
Latin America 304 279 9% 350 (13)% (8)% (8)% 3%
Total International 2,823 2,403 17% 2,918 (3)% (5)% (2)% 3%
U.S./Canada 2,972 2,670 11% 2,766 7% - 3% 5%
Total Marsh $ 5,795 $ 5,073 14% $ 5,684 2% (2)% - 4%
Mercer:
Wealth 1,748 1,642 6% 1,776 (2)% (4)% 3% (1)%
Health 1,341 1,286 4% 1,322 1% (2)% (1)% 4%
Career 606 576 5% 579 5% (3)% 3% 5%
Total Mercer $ 3,695 $ 3,504 5% $ 3,677 - (3)% 1% 2%
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP Measures - Actual as ReportedThree 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 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 nine months ended September 30, 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 nine months ended September 30, 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 September 30, 2019 and 2018. Results for the three months ended September 30, 2018 are for MMC only, as previously reported, and do not include JLT results.
Risk & InsuranceServices Consulting Corporate/Eliminations Total
Three Months Ended
September 30, 2019
Operating income $ 218 $ 317 $ (68 ) $ 467
(loss)
Operating margin 9.9 % 17.7 % N/A 11.8 %
Add (Deduct) impact of
Noteworthy Items:
Restructuring, - 10 2 12
excluding
JLT (a)
Changes in contingent 5 1 - 6
consideration (b)
JLT integration and 58 5 14 77
restructuring
costs (c)
JLT 16 1 4 21
acquisition-related
costs (d)
Disposal of businesses 13 (14 ) - (1 )
(e)
Other 3 - - 3
Operating income 95 3 20 118
adjustments
Adjusted operating $ 313 $ 320 $ (48 ) $ 585
income (loss)
Total identified $ 73 $ 11 $ - $ 84
intangible
amortization expense
Adjusted operating 17.4 % 18.7 % N/A 16.9 %
margin
As Reported Results
Three Months Ended
September 30, 2018
Operating income $ 293 $ 291 $ (43 ) $ 541
(loss),
as reported
Operating margin 15.7 % 17.6 % N/A 15.5 %
Add (Deduct) impact of
Noteworthy Items:
Restructuring, 29 - 2 31
excluding
JLT (a)
Changes in contingent 7 2 - 9
consideration (b)
Disposal of business (46 ) - - (46 )
(f)
Operating income (10 ) 2 2 (6 )
adjustments
Adjusted operating $ 283 $ 293 $ (41 ) $ 535
income (loss)
Total identified $ 39 $ 8 $ - $ 47
intangible
amortization expense
Adjusted operating 17.7 % 18.2 % N/A 16.8 %
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. 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) Reflects retention costs in the Risk &
Insurance Services and Consulting segments
and legal fees at corporate related to the closing of the JLT Transaction.
(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) Relates to a gain on the disposal of a risk management
software and services business unit of Marsh.
The $46 million gain is removed from GAAP revenue
in the calculation of adjusted operating margin.
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP Measures - Actual as ReportedNine Months Ended September 30(Millions) (Unaudited)
The information presented below represents the actual as reported data for the nine months ended September 30, 2019 and 2018. Results for the nine months ended September 30, 2018 are for MMC only, as previously reported, and do not include JLT results.
Risk &InsuranceServices Consulting Corporate/Eliminations Total
Nine Months Ended
September
30, 2019
Operating income $ 1,468 $ 874 $ (257 ) $ 2,085
(loss)
Operating margin 20.4 % 16.6 % N/A 16.8 %
Add (Deduct)
impact of
Noteworthy Items:
Restructuring, 6 43 7 56
excluding
JLT (a)
Changes in 24 2 - 26
contingent
consideration (b)
JLT integration 134 10 48 192
and
restructuring
costs (c)
JLT 81 1 51 133
acquisition-related
costs (d)
Disposal of 13 (14 ) - (1 )
businesses
(e)
Other 3 - 1 4
Operating income 261 42 107 410
adjustments
Adjusted operating $ 1,729 $ 916 $ (150 ) $ 2,495
income (loss)
Total identified $ 194 $ 41 $ - $ 235
intangible
amortization
expense
Adjusted operating 26.6 % 18.3 % N/A 22.0 %
margin
As Reported
Results
Nine Months Ended
September
30, 2018
Operating income $ 1,481 $ 805 $ (146 ) $ 2,140
(loss),
as reported
Operating margin 23.5 % 16.2 % N/A 19.1 %
Add (Deduct)
impact of
Noteworthy Items:
Restructuring, 87 1 7 95
excluding
JLT (a)
Changes in 16 3 - 19
contingent
consideration (b)
Disposal of (46 ) - - (46 )
business
(f)
Other - (1 ) - (1 )
Operating income 57 3 7 67
adjustments
Adjusted operating $ 1,538 $ 808 $ (139 ) $ 2,207
income (loss)
Total identified $ 111 $ 24 $ - $ 135
intangible
amortization
expense
Adjusted operating 26.4 % 16.7 % N/A 20.9 %
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. 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 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) Relates to a gain on the disposal of a risk management
software and services business unit of Marsh.
The $46 million gain is removed from GAAP revenue
in the calculation of adjusted operating margin.
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP MeasuresThree and Nine Months Ended September 30(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 nine months ended September 30, 2019 and 2018. Results for the three and nine months ended September 30, 2018 are for MMC only, as previously reported, and do not include JLT results.
Three Months EndedSeptember 30, 2019 Three Months EndedSeptember 30, 2018
Amount AdjustedEPS Amount AdjustedEPS
Net income before $ 306 $ 279
non-controlling
interests, as reported
Less: Non-controlling 3 3
interest, net of tax
Subtotal $ 303 $ 0.59 $ 276 $ 0.54
Operating income adjustments $ 118 $ (6 )
Investments adjustment (a) (4 ) 55
Pension settlement adjustment (2 ) -
Change in fair value - 100
of acquisition
related derivative contracts (b)
Financing costs (c) - 3
Impact of income taxes (23 ) (16 )
on above items
Adjustments to provisional - (14 )
2017 tax estimates (e)
89 0.18 122 0.24
Adjusted income, net of tax $ 392 $ 0.77 $ 398 $ 0.78
Nine Months EndedSeptember 30, 2019 Nine Months EndedSeptember 30, 2018
Amount AdjustedEPS Amount AdjustedEPS
Net income before $ 1,377 $ 1,511
non-controlling
interests, as reported
Less: Non-controlling 26 14
interest, net of tax
Subtotal $ 1,351 $ 2.64 $ 1,497 $ 2.93
Operating income adjustments $ 410 $ 67
Investments adjustment (a) (10 ) 37
Pension settlement adjustment (2 ) -
Change in fair value 8 100
of acquisition
related derivative contracts (b)
Financing costs (c) 53 3
Interest on funds held (25 ) -
in escrow (d)
Early extinguishment of debt 32 -
Impact of income taxes (45 ) (26 )
on above items
Adjustments to provisional - (11 )
2017 tax estimates (e)
421 0.83 170 0.33
Adjusted income, net of tax $ 1,772 $ 3.47 $ 1,667 $ 3.26
(a) The Company recorded mark-to-market gains
of $4 million and gains of $25 million
for the three month period and gains of $10
million and gains of $43 million for the
nine month period ended September 30, 2019 and
September 30, 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 $81 million in investment gain or loss.
(b) 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.
(c) Reflects interest expense on debt
issuances and amortization of bridge
financing fees related to the acquisition
of JLT (prior to April 1, 2019).
(d) Interest income earned on funds held in escrow related
to the JLT acquisition (prior to April 1, 2019).
(e) 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 Nine Months
Ended September 30
(Millions) (Unaudited)
Three Months EndedSeptember 30, Nine Months EndedSeptember 30,
2019 2018 2019 2018
Consolidated
Compensation and Benefits $ 2,437 $ 2,083 $ 7,256 $ 6,442
Other Operating Expenses 1,064 880 3,047 2,656
Total Expenses $ 3,501 $ 2,963 $ 10,303 $ 9,098
Depreciation and amortization $ 85 $ 77 $ 245 $ 236
expense
Identified intangible 84 47 235 135
amortization expense
Total $ 169 $ 124 $ 480 $ 371
Stock option expense $ 4 $ 3 $ 23 $ 20
Risk and Insurance Services
Compensation and Benefits $ 1,373 $ 1,103 $ 4,012 $ 3,416
Other Operating Expenses 615 467 1,723 1,406
Total Expenses $ 1,988 $ 1,570 $ 5,735 $ 4,822
Depreciation and amortization $ 43 $ 36 $ 114 $ 108
expense
Identified intangible 73 39 194 111
amortization expense
Total $ 116 $ 75 $ 308 $ 219
Consulting
Compensation and Benefits $ 967 $ 895 $ 2,932 $ 2,753
Other Operating Expenses 501 470 1,452 1,416
Total Expenses $ 1,468 $ 1,365 $ 4,384 $ 4,169
Depreciation and amortization $ 24 $ 23 $ 75 $ 74
expense
Identified intangible 11 8 41 24
amortization expense
Total $ 35 $ 31 $ 116 $ 98
JLT's results of operations for the three months ended September 30, 2019 are included in the Company's results of operations for the three-month period ended September 30, 2019. JLT's results of operations from April 1, 2019 through September 30, 2019 are included in the Company's results of operations for the nine-month period ended September 30, 2019. Prior periods in 2018 do not include JLT's results.
Marsh & McLennan
Companies, Inc.
Consolidated Balance
Sheets
(Millions)
(Unaudited)September 30,2019 December 31,2018
ASSETS
Current assets:
Cash and cash equivalents $ 1,213 $ 1,066
Net receivables 5,198 4,317
Other current assets 645 551
Total current assets 7,056 5,934
Goodwill and intangible 17,155 11,036
assets
Fixed assets, net 816 701
Pension related assets 1,857 1,688
Right of use assets 1,957 -
Deferred tax assets 603 680
Other assets 1,653 1,539
TOTAL ASSETS $ 31,097 $ 21,578
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 1,139 $ 314
Accounts payable and 2,479 2,234
accrued liabilities
Accrued compensation and 1,762 1,778
employee benefits
Acquisition related - 441
derivatives
Current lease liabilities 341 -
Accrued income taxes 251 157
Dividends payable 232 -
Total current liabilities 6,204 4,924
Fiduciary liabilities 7,547 5,001
Less - cash and (7,547 ) (5,001 )
investments
held
in a fiduciary capacity
- -
Long-term debt 11,429 5,510
Pension, post-retirement 1,998 1,911
and
post-employment benefits
Long-term lease 1,957 -
liabilities
Liabilities for errors 324 287
and omissions
Other liabilities 1,388 1,362
Total equity 7,797 7,584
TOTAL LIABILITIES $ 31,097 $ 21,578
AND EQUITY
Marsh & McLennan
Companies, Inc.
Consolidated Statements
of Cash Flows
(Millions) (Unaudited)
Nine Months Ended September 30,
2019 2018
Operating cash flows:
Net income before $ 1,377 $ 1,511
non-controlling
interests
Adjustments to reconcile
net income
to cash provided
by operations:
Depreciation and amortization 245 236
of fixed
assets and capitalized
software
Amortization of intangible 235 135
assets
Non cash lease expense 236 -
Adjustments and payments (9 ) (10 )
related to
contingent consideration
liability
Charge for early 32 -
extinguishment
of debt
Provision for deferred 95 66
income taxes
Loss (gain) on investments (20 ) 24
Loss (gain) on disposition 36 (53 )
of assets
Share-based compensation 184 146
expense
Change in fair value of 8 100
acquisition-related
derivative contracts
Changes in assets
and liabilities:
Net receivables (84 ) (210 )
Other current assets 30 19
Other assets (59 ) (51 )
Accounts payable and (126 ) (3 )
accrued liabilities
Accrued compensation and (281 ) (312 )
employee benefits
Accrued income taxes 120 (13 )
Contributions to pension (269 ) (250 )
and other benefit plans
in excess of current
year expense/credit
Other liabilities (149 ) 11
Operating lease liabilities (240 ) -
Effect of exchange (70 ) (27 )
rate changes
Net cash provided 1,291 1,319
by operations
Financing cash flows:
Purchase of treasury shares (300 ) (675 )
Net increase in commercial 325 75
paper
Net increase in short 300 -
term borrowings
Proceeds from issuance of debt 6,459 592
Repayments of debt (760 ) (10 )
Acquisition-related derivative (337 ) -
payments
Payment of bridge loan fees - (24 )
Payments for early (585 ) -
extinguishment
of debt
Purchase of non-controlling (75 ) -
interests
Shares withheld for (89 ) (62 )
taxes on vested
units - treasury shares
Issuance of common stock 132 72
from treasury shares
Payments of deferred (60 ) (106 )
and contingent
consideration for acquisitions
Distributions of (18 ) (15 )
non-controlling
interests
Dividends paid (655 ) (594 )
Net cash provided by (used 4,337 (747 )
for) financing activities
Investing cash flows:
Capital expenditures (284 ) (222 )
Sales (Purchases) of long-term 193 (1 )
investments
Purchase of equity investment (91 ) -
Proceeds from sales 4 3
of fixed assets
Dispositions 225 5
Acquisitions (5,500 ) (536 )
Other, net (51 ) (1 )
Net cash used for investing (5,504 ) (752 )
activities
Effect of exchange 23 (74 )
rate changes
on cash and cash equivalents
Increase (decrease) in cash 147 (254 )
and cash equivalents
Cash and cash equivalents 1,066 1,205
at beginning of period
Cash and cash equivalents $ 1,213 $ 951
at end of period
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP Measures - 2018 Revenue Including JLTThree and Nine Months Ended September 30, 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 September 30, 2019 are included in the Company's results of operations for the third 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 nine months ended September 30, 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 EndedSeptember 30, 2018 Nine Months EndedSeptember 30, 2018
MMC As Previously Reported
Risk & Insurance Services
Marsh $ 1,630 $ 5,073
Guy Carpenter 215 1,184
Subtotal 1,845 6,257
Fiduciary Interest Income 18 46
Total Risk & Insurance Services 1,863 6,303
Consulting
Mercer 1,175 3,504
Oliver Wyman 481 1,470
Total Consulting 1,656 4,974
Corporate/Eliminations (15 ) (39 )
Total Revenue $ 3,504 $ 11,238
JLT 2018
Specialty (Marsh) $ 259 $ 611
Reinsurance (Guy Carpenter) 33 108
Employee Benefits (Mercer) 86 173
Subtotal 378 892
Fiduciary Interest Income 5 8
Total Revenue $ 383 $ 900
2018 Including JLT
Marsh $ 1,889 $ 5,684
Guy Carpenter 248 1,292
Subtotal 2,137 6,976
Fiduciary Interest Income 23 54
Total Risk & Insurance Services 2,160 7,030
Consulting
Mercer 1,261 3,677
Oliver Wyman 481 1,470
Total Consulting 1,742 5,147
Corporate/Eliminations (15 ) (39 )
Total Revenue $ 3,887 $ 12,138
Media: Erick R. GustafsonMarsh & McLennan Companies+1 202 263 7788erick.gustafson@mmc.com
Investors: Sarah DeWittMarsh & McLennan Companies+1 212 345 6750sarah.dewitt@mmc.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20191029005560/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
October 29, 2019 07:00 ET (11:00 GMT)
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