Business Wire | Apr 27, 2021 07:00AM EDT

Marsh McLennan Reports First Quarter 2021 Results

Apr. 27, 2021

NEW YORK--(BUSINESS WIRE)--Apr. 27, 2021--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 first quarter ended March 31, 2021.

Dan Glaser, President and CEO, said: "Marsh McLennan had an outstanding first quarter. We delivered strong growth in underlying revenue and adjusted earnings, and generated meaningful adjusted operating margin expansion in both Risk & Insurance Services and Consulting. Our total revenue grew 9%, with underlying revenue growth of 6%. Adjusted operating income rose 20%, adjusted EPS grew 21%, and our adjusted operating margin increased 260 basis points to 29.6%.

"Our excellent start to 2021 positions us well for the balance of the year."

Consolidated Results

Consolidated revenue in the first quarter of 2021 was $5.1 billion, an increase of 9%, or 6% on an underlying basis, compared with the first quarter of 2020. Operating income was $1.4 billion compared with $1.1 billion in the prior year. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 20% to $1.4 billion.

Net income attributable to the Company was $983 million, or $1.91 per diluted share, in the first quarter. This compares with $754 million, or $1.48 per diluted share, in the prior year. Adjusted earnings per share rose 21% to $1.99 compared with $1.64 for the prior year period.

Risk & Insurance Services

Risk & Insurance Services revenue was $3.2 billion in the first quarter of 2021, an increase of 11% compared with the first quarter 2020, or 7% on an underlying basis. Operating income of $1.1 billion increased 24% from the prior year. Adjusted operating income rose 17% to $1.1 billion compared with $932 million in the prior year.

Marsh's revenue in the first quarter was $2.3 billion, an increase of 8% on an underlying basis. In US/Canada, underlying revenue rose 9%. International operations produced underlying revenue growth of 6%, reflecting growth of 8% in Asia Pacific, 6% in EMEA and 6% in Latin America. Guy Carpenter's revenue in the first quarter was $895 million, an increase of 7% on an underlying basis.

Consulting

Consulting revenue in the first quarter was $1.9 billion, an increase of 6%, or 3% on an underlying basis. Operating income of $361 million increased 28% from the prior year. Adjusted operating income rose 28% to $370 million compared with $289 million in the prior year.

Mercer, with revenue of $1.3 billion in the first quarter, was flat on an underlying basis. Wealth revenue of $623 million increased 1% on an underlying basis. Career revenue of $178 million increased 1% on an underlying basis. Health, with revenue of $487 million, was flat on an underlying basis.

Oliver Wyman's revenue was $585 million in the first quarter, an increase of 11% on an underlying basis.

Other Items

In April, Marsh McLennan Agency (MMA) announced the acquisition of Montana-based PayneWest Insurance, one of the largest independent agencies in the U.S. With 26 locations and more than 700 employees, PayneWest will operate as MMA's Northwest regional hub.

The Company repurchased approximately 1 million shares of its common stock for $112 million in the first quarter of 2021. On April 15, the Company repaid $500 million of senior notes maturing in July 2021.

Conference Call

A conference call to discuss first quarter 2021 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 4568747. 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

Marsh McLennan (NYSE: MMC) is the world's leading professional services firm in the areas of risk, strategy and people. The Company's 76,000 colleagues advise clients in over 130 countries. With annual revenue of $17 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses. Marsh provides data-driven risk advisory services and insurance solutions to commercial and consumer clients. 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; * the impact of investigations, reviews, or other activity by regulatory or law enforcement authorities; * 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 cybersecurity attacks, including hacking, viruses, malware, ransomware and other types of data security breaches, as well as the heightened risk 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; * the impact of changes in tax laws, guidance and interpretations, particularly due to proposals from the current administrations in the U.S. and U.K., or disagreements with tax authorities; * our ability to successfully recover if we experience a business continuity problem due to cyberattack, natural disaster, government unrest or otherwise; and * the regulatory, contractual and reputational risks that arise based on insurance placement activities and various insurer revenue streams.

The factors identified above are not exhaustive. Marsh & McLennan Companies, Inc. and its subsidiaries (the "Company" or "Marsh McLennan") operate in a dynamic business environment in which new risks emerge frequently. Accordingly, we caution readers not to place undue reliance on any forward-looking statements, which are based only on information currently available to us and speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made.

Further information concerning Marsh McLennan and its businesses, including information about factors that could materially affect our results of operations and financial condition, is contained in the Company's filings with the Securities and Exchange Commission, including the "Risk Factors" section and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our most recently filed Quarterly Report on Form 10-Q and Annual Report on Form 10-K.

Marsh & McLennan Companies, Inc.Consolidated Statements of Income(In millions, except per share figures) (Unaudited)

Three Months Ended March 31,

2021 2020

Revenue $ 5,083 $ 4,651

Expense:

Compensation and benefits 2,807 2,555

Other operating expenses 918 1,026

Operating expenses 3,725 3,581

Operating income 1,358 1,070

Other net benefit credits 71 64

Interest income - 2

Interest expense (118) (127)

Investment income (loss) 11 (2)

Income before income taxes 1,322 1,007

Income tax expense 324 240

Net income before non-controlling interests 998 767

Less: Net income attributable to non-controlling 15 13 interests

Net income attributable to the Company $ 983 $ 754

Net income per share attributable to the Company:

- Basic $ 1.93 $ 1.49

- Diluted $ 1.91 $ 1.48

Average number of shares outstanding

- Basic 509 505

- Diluted 514 510

Shares outstanding at March 31 509 506

Marsh & McLennan Companies, Inc.Supplemental Information - Revenue AnalysisThree Months Ended March 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 acquisitions and dispositions, including transfers among businesses, may impact period-to-period comparisons of revenue. Underlying revenue measures the change in revenue from one period to the next by isolating these impacts.

Components of Revenue Change*

Three Months Ended % Acquisitions Change Currency / Underlying March 31, GAAP Impact Dispositions Revenue Revenue / 2021 2020 Other Impact

Risk andInsurance Services

Marsh $ 2,325 $ 2,061 13 % 3 % 2 % 8 %

Guy 895 827 8 % 2 % - 7 %Carpenter

Subtotal 3,220 2,888 11 % 3 % 1 % 7 %

FiduciaryInterest 5 23 Income

Total Riskand 3,225 2,911 11 % 3 % 1 % 7 %InsuranceServices

Consulting

Mercer 1,288 1,251 3 % 4 % (1) % -

Oliver Wyman 585 511 14 % 3 % - 11 %Group

Total 1,873 1,762 6 % 4 % (1) % 3 %Consulting

Corporate/ (15) (22) Eliminations

Total $ 5,083 $ 4,651 9 % 3 % - 6 %Revenue







Revenue Details

The following table provides more detailed revenue information for certain of the components presented above:

Components of Revenue Change*

Three Months Ended % Acquisitions Change Currency / Underlying March 31, GAAP Impact Dispositions Revenue Revenue / 2021 2020 Other Impact

Marsh:

EMEA $ 837 $ 754 11% 7% (2)% 6%

Asia Pacific 274 238 15% 7% 1% 8%

Latin America 90 91 (1)% (7)% - 6%

Total 1,201 1,083 11% 5% (1)% 6%International

U.S./Canada 1,124 978 15% 1% 5% 9%

Total Marsh $ 2,325 $ 2,061 13% 3% 2% 8%

Mercer:

Wealth 623 592 5% 6% (1)% 1%

Health 487 486 - 1% (1)% -

Career 178 173 3% 3% - 1%

Total Mercer $ 1,288 $ 1,251 3% 4% (1)% -

* Components of revenue change may not add due to rounding.

Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP MeasuresThree Months Ended March 31(Millions) (Unaudited)

* Components of revenue change may not add due to rounding.

Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP MeasuresThree Months Ended March 31(Millions) (Unaudited)

Overview

The Company reports its financial results in accordance with accountingprinciples generally accepted in the United States (referred to in this releaseas in accordance with "GAAP" or "reported" results). The Company also refers toand presents below certain additional non-GAAP financial measures, within themeaning of Regulation G under the Securities Exchange Act of 1934. Thesemeasures are: adjusted operating income (loss), adjusted operating margin,adjusted income, net of tax and adjusted earnings per share (EPS). The Companyhas included reconciliations of these non-GAAP financial measures to the mostdirectly comparable financial measure calculated in accordance with GAAP in thefollowing tables.

The Company believes these non-GAAP financial measures provide usefulsupplemental information that enables investors to better compare the Company'sperformance across periods. Management also uses these measures internally toassess the operating performance of its businesses, to assess performance foremployee compensation purposes, and to decide how to allocate resources.However, investors should not consider these non-GAAP measures in isolationfrom, or as a substitute for, the financial information that the Companyreports in accordance with GAAP. The Company's non-GAAP measures includeadjustments that reflect how management views its businesses, and may differfrom 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 ofcertain noteworthy items from the Company's GAAP operating income or (loss).The following tables identify these noteworthy items and reconcile adjustedoperating income (loss) to GAAP operating income or loss, on a consolidated andreportable segment basis, for the three months ended March 31, 2021 and 2020.The following tables also present adjusted operating margin. For the threemonths ended March 31, 2021 and 2020, adjusted operating margin is calculatedby dividing the sum of adjusted operating income plus identified intangibleasset amortization by consolidated or segment adjusted revenue.

Risk & Insurance Services

Consulting

Corporate/Eliminations

Total

Three Months Ended March 31, 2021

Operating income (loss)

$

1,060

$

361

$

(63)

$

1,358

Operating margin

32.9

%

19.3

%

N/A

26.7

%

Add (deduct) impact of noteworthy items:

Restructuring, excluding JLT (a)

1

5

5

11

Changes in contingent consideration (b)

6

(6)

-

-

JLT integration and restructuring costs (c)

16

6

1

23

JLT acquisition-related costs (d)

11

1

-

12

Other

(2)

3

-

1

Operating income adjustments

32

9

6

47

Adjusted operating income (loss)

$

1,092

$

370

$

(57)

$

1,405

Total identified intangible amortization expense

$

86

$

14

$

-

$

100

Adjusted operating margin

36.6

%

20.5

%

N/A

29.6

%

Three Months Ended March 31, 2020

Operating income (loss)

$

854

$

282

$

(66)

$

1,070

Operating margin

29.4

%

16.0

%

N/A

23.0

%

Add (deduct) impact of noteworthy items:

Restructuring, excluding JLT (a)

2

4

3

9

Changes in contingent consideration (b)

3

(4)

-

(1)

JLT integration and restructuring costs (c)

61

10

9

80

JLT acquisition-related costs (d)

12

1

-

13

Disposal of business

-

(4)

-

(4)

Operating income adjustments

78

7

12

97

Adjusted operating income (loss)

$

932

$

289

$

(54)

$

1,167

Total identified intangible amortization expense

$

72

$

14

$

-

$

86

Adjusted operating margin

34.5

%

17.2

%

N/A

27.0

%

Risk & Corporate/ Insurance Consulting Eliminations Total Services

Three Months Ended March 31, 2021

Operating income (loss) $ 1,060 $ 361 $ (63) $ 1,358

Operating margin 32.9 % 19.3 % N/A 26.7 %

Add (deduct) impact of noteworthy items:

Restructuring, excluding JLT 1 5 5 11 (a)

Changes in contingent 6 (6) - - consideration (b)

JLT integration and 16 6 1 23 restructuring costs (c)

JLT acquisition-related costs 11 1 - 12 (d)

Other (2) 3 - 1

Operating income adjustments 32 9 6 47

Adjusted operating income $ 1,092 $ 370 $ (57) $ 1,405 (loss)

Total identified intangible $ 86 $ 14 $ - $ 100 amortization expense

Adjusted operating margin 36.6 % 20.5 % N/A 29.6 %



Three Months Ended March 31, 2020

Operating income (loss) $ 854 $ 282 $ (66) $ 1,070

Operating margin 29.4 % 16.0 % N/A 23.0 %

Add (deduct) impact of noteworthy items:

Restructuring, excluding JLT 2 4 3 9 (a)

Changes in contingent 3 (4) - (1) consideration (b)

JLT integration and 61 10 9 80 restructuring costs (c)

JLT acquisition-related costs 12 1 - 13 (d)

Disposal of business - (4) - (4)

Operating income adjustments 78 7 12 97

Adjusted operating income $ 932 $ 289 $ (54) $ 1,167 (loss)

Total identified intangible $ 72 $ 14 $ - $ 86 amortization expense

Adjusted operating margin 34.5 % 17.2 % N/A 27.0 %

(a) Primarily includes restructuring expenses associated with the Company's global information technology and HR functions and adjustments to restructuring liabilities for future rent under non-cancellable leases. Consulting charges in 2020 reflect severance and real estate exit costs related to the Mercer restructuring program completed in 2020.

(b) Primarily includes the change in fair value as measured each quarter of contingent consideration related to acquisitions.

(c) Primarily costs incurred for staff reductions and real estate exit costs related to the JLT Transaction.

(d) Reflects retention costs related to the closing of the JLT Transaction.

Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP MeasuresThree Months Ended March 31(Millions) (Unaudited)

(a) Primarily includes restructuring expenses associated with the Company'sglobal information technology and HR functions and adjustments to restructuringliabilities for future rent under non-cancellable leases. Consulting charges in2020 reflect severance and real estate exit costs related to the Mercerrestructuring program completed in 2020.

(b) Primarily includes the change in fair value as measured each quarter ofcontingent consideration related to acquisitions.

(c) Primarily costs incurred for staff reductions and real estate exit costsrelated to the JLT Transaction.

(d) Reflects retention costs related to the closing of the JLT Transaction.



Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP MeasuresThree Months Ended March 31(Millions) (Unaudited)

Adjusted income, net of tax is calculated as the Company's GAAP income fromcontinuing operations, adjusted to reflect the after tax impact of theoperating income adjustments in the preceding tables and investments gains orlosses related to the impact of mark-to-market adjustments on certain equitysecurities. Adjusted EPS is calculated by dividing the Company's adjustedincome, net of tax, by average number of shares outstanding-diluted for therelevant period. The following tables reconcile adjusted income, net of tax toGAAP income from continuing operations and adjusted EPS to GAAP EPS for thethree month periods ended March 31, 2021 and 2020.

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Amount

Adjusted EPS

Amount

Adjusted EPS

Net income before non-controlling interests, as reported

$

998

$

767

Less: Non-controlling interest, net of tax

15

13

Subtotal

$

983

$

1.91

$

754

$

1.48

Operating income adjustments

$

47

$

97

Investments adjustment

-

1

Impact of income taxes on above items

(9)

(17)

38

0.08

81

0.16

Adjusted income, net of tax

$

1,021

$

1.99

$

835

$

1.64

Marsh & McLennan Companies, Inc.Supplemental InformationThree Months Ended March 31(Millions) (Unaudited)

Three Months Ended March 31, Three Months Ended March 2021 31, 2020

Amount Adjusted Amount Adjusted EPS EPS

Net income beforenon-controlling $ 998 $ 767 interests, asreported

Less:Non-controlling 15 13 interest, net oftax

Subtotal $ 983 $ 1.91 $ 754 $ 1.48

Operating income $ 47 $ 97 adjustments

Investments - 1 adjustment

Impact of incometaxes on above (9) (17) items

38 0.08 81 0.16

Adjusted income, $ 1,021 $ 1.99 $ 835 $ 1.64 net of tax



Marsh & McLennan Companies, Inc.Supplemental InformationThree Months Ended March 31(Millions) (Unaudited)

Three Months EndedMarch 31,

2021

2020

Consolidated

Compensation and benefits

$

2,807

$

2,555

Other operating expenses

918

1,026

Total expenses

$

3,725

$

3,581

Depreciation and amortization expense

$

97

$

97

Identified intangible amortization expense

100

86

Total

$

197

$

183

Stock option expense

$

21

$

16

Risk and Insurance Services

Compensation and benefits

$

1,610

$

1,452

Other operating expenses

555

605

Total expenses

$

2,165

$

2,057

Depreciation and amortization expense

$

50

$

52

Identified intangible amortization expense

86

72

Total

$

136

$

124

Consulting

Compensation and benefits

$

1,074

$

991

Other operating expenses

438

489

Total expenses

$

1,512

$

1,480

Depreciation and amortization expense

$

29

$

28

Identified intangible amortization expense

14

14

Total

$

43

$

42

Marsh & McLennan Companies, Inc.Consolidated Balance Sheets(Millions)

Three Months Ended March 31,

2021 2020

Consolidated

Compensation and benefits $ 2,807 $ 2,555

Other operating expenses 918 1,026

Total expenses $ 3,725 $ 3,581



Depreciation and amortization expense $ 97 $ 97

Identified intangible amortization expense 100 86

Total $ 197 $ 183



Stock option expense $ 21 $ 16



Risk and Insurance Services

Compensation and benefits $ 1,610 $ 1,452

Other operating expenses 555 605

Total expenses $ 2,165 $ 2,057



Depreciation and amortization expense $ 50 $ 52

Identified intangible amortization expense 86 72

Total $ 136 $ 124



Consulting

Compensation and benefits $ 1,074 $ 991

Other operating expenses 438 489

Total expenses $ 1,512 $ 1,480



Depreciation and amortization expense $ 29 $ 28

Identified intangible amortization expense 14 14

Total $ 43 $ 42

Marsh & McLennan Companies, Inc.Consolidated Balance Sheets(Millions)

(Unaudited) December March 31, 31, 2021 2020

ASSETS

Current assets:

Cash and cash equivalents $ 1,120 $ 2,089

Net receivables 5,597 5,326

Other current assets 832 740

Total current assets 7,549 8,155



Goodwill and intangible assets 18,061 18,216

Fixed assets, net 830 856

Pension related assets 1,823 1,768

Right of use assets 1,824 1,894

Deferred tax assets 704 702

Other assets 1,482 1,458

TOTAL ASSETS $ 32,273 $ 33,049



LIABILITIES AND EQUITY

Current liabilities:

Short-term debt $ 1,015 $ 517

Accounts payable and accrued liabilities 2,940 3,050

Accrued compensation and employee benefits 1,220 2,400

Current lease liabilities 342 342

Accrued income taxes 368 247

Dividends payable 238 -

Total current liabilities 6,123 6,556



Fiduciary liabilities 8,782 8,585

Less - cash and investments held in a fiduciary (8,782) (8,585) capacity

- -

Long-term debt 10,242 10,796

Pension, post-retirement and post-employment 2,594 2,662 benefits

Long-term lease liabilities 1,850 1,924

Liabilities for errors and omissions 354 366

Other liabilities 1,514 1,485



Total equity 9,596 9,260

TOTAL LIABILITIES AND EQUITY $ 32,273 $ 33,049

Marsh & McLennan Companies, Inc.Consolidated Statements of Cash Flows(Millions) (Unaudited)

Three Months Ended March 31,

2021 2020

Operating cash flows:

Net income before non-controlling interests $ 998 $ 767

Adjustments to reconcile net income to cash used for operations:

Depreciation and amortization 197 183

Non cash lease expense 79 80

Share-based compensation expense 78 72

Change in fair value of acquisition-related derivative 5 (2) contracts and other



Changes in Assets and Liabilities:

Accrued compensation and employee benefits (1,180) (1,178)

Net receivables (275) (313)

Other changes to assets and liabilities (71) (64)

Contributions to pension & other benefit plans in excess (102) (85) of current year credit

Operating lease liabilities (82) (86)

Effect of exchange rate changes (55) (12)

Net cash used for operations (408) (638)

Financing cash flows:

Purchase of treasury shares (112) -

Borrowings from term-loan and credit facilities - 2,000

Net increase in commercial paper - 193

Repayments of debt (4) (503)

Net issuance of common stock from treasury shares (58) (68)

Net distributions of non-controlling interests and (40) (50) deferred/contingent consideration

Dividends paid (237) (232)

Net cash (used for) provided by financing activities (451) 1,340

Investing cash flows:

Capital expenditures (69) (118)

Net sales of long-term investments and other 2 66

Dispositions - 7

Acquisitions - (200)

Net cash used for investing activities (67) (245)

Effect of exchange rate changes on cash and cash (43) (132) equivalents

(Decrease) increase in cash and cash equivalents (969) 325

Cash and cash equivalents at beginning of period 2,089 1,155

Cash and cash equivalents at end of period $ 1,120 $ 1,480

View source version on businesswire.com: https://www.businesswire.com/news/home/20210427005600/en/

CONTACT: Media Contact: Erick R. Gustafson Marsh McLennan +1 202 263 7788 erick.gustafson@mmc.com

CONTACT: Investor Contact: Sarah DeWitt Marsh McLennan +1 212 345 6750 sarah.dewitt@mmc.com