First Quarter Revenue Growth of 9% Including
Underlying Revenue Growth of 6%
First Quarter GAAP EPS of $1.91; Adjusted
EPS Increases 21% to $1.99
GAAP Operating Income Rises 27%; Adjusted
Operating Income Increases 20%
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 interests
15
13
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 Analysis Three 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
March 31,
% Change GAAP Revenue
Currency Impact
Acquisitions/
Dispositions/ Other Impact
Underlying Revenue
2021
2020
Risk and Insurance Services
Marsh
$
2,325
$
2,061
13
%
3
%
2
%
8
%
Guy Carpenter
895
827
8
%
2
%
—
7
%
Subtotal
3,220
2,888
11
%
3
%
1
%
7
%
Fiduciary Interest Income
5
23
Total Risk and Insurance Services
3,225
2,911
11
%
3
%
1
%
7
%
Consulting
Mercer
1,288
1,251
3
%
4
%
(1)
%
—
Oliver Wyman Group
585
511
14
%
3
%
—
11
%
Total Consulting
1,873
1,762
6
%
4
%
(1)
%
3
%
Corporate/Eliminations
(15)
(22)
Total Revenue
$
5,083
$
4,651
9
%
3
%
—
6
%
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue
Change*
Three Months Ended
March 31,
% Change GAAP
Revenue
Currency Impact
Acquisitions/
Dispositions/ Other Impact
Underlying Revenue
2021
2020
Marsh:
EMEA
$
837
$
754
11%
7%
(2)%
6%
Asia Pacific
274
238
15%
7%
1%
8%
Latin America
90
91
(1)%
(7)%
—
6%
Total International
1,201
1,083
11%
5%
(1)%
6%
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 Measures Three Months Ended
March 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 in accordance with
"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 its 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 reportable segment basis, for the three months ended March 31,
2021 and 2020. The following tables also present adjusted operating
margin. For the three months ended March 31, 2021 and 2020,
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
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
%
(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 Measures Three Months Ended
March 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
in the preceding tables and investments gains or losses related to
the impact of mark-to-market adjustments on certain equity
securities. Adjusted EPS is calculated by dividing the Company’s
adjusted income, net of tax, by 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
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 Information Three Months Ended March 31
(Millions) (Unaudited)
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) March
31, 2021
December 31, 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 capacity
(8,782)
(8,585)
—
—
Long-term debt
10,242
10,796
Pension, post-retirement and
post-employment benefits
2,594
2,662
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 contracts and other
5
(2)
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 of current year credit
(102)
(85)
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 deferred/contingent consideration
(40)
(50)
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 equivalents
(43)
(132)
(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/
Media Contact: Erick R. Gustafson Marsh McLennan +1 202
263 7788 erick.gustafson@mmc.com
Investor Contact: Sarah DeWitt Marsh McLennan +1 212 345
6750 sarah.dewitt@mmc.com
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