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 second quarter
ended June 30, 2019.
Dan Glaser, President and CEO, said: "We are pleased with our
second quarter results, which include Jardine Lloyd Thompson for
the first time. We generated solid growth in underlying revenue and
adjusted EPS while welcoming 10,000 new colleagues. In the quarter,
consolidated underlying revenue grew 4%, adjusted operating income
rose 19% to $894 million, adjusted EPS grew 7% to $1.18 and our
overall adjusted margin expanded 150 basis points. We are tracking
well against our plans and are excited about the long-term growth
prospects for our combined firm."
"We delivered solid performance in the first half of 2019, with
4% underlying revenue growth, 9% adjusted EPS growth, and adjusted
margin expansion of 160 basis points," concluded Mr. Glaser.
Consolidated Results
Consolidated revenue in the second quarter of 2019 was $4.3
billion, an increase of 16% compared with the second quarter of
2018. Underlying revenue grew 4% compared to a year ago. Underlying
revenue growth is calculated as if MMC and JLT were a combined
company a year ago, but excludes the impact of currency and other
acquisitions, dispositions, and transfers among businesses.
Operating income was $680 million compared with $691 million in the
prior year. Adjusted operating income, which excludes noteworthy
items as presented in the attached supplemental schedules, rose 19%
to $894 million. Net income attributable to the Company was $332
million, or $0.65 per diluted share, compared with $1.04 in the
second quarter of 2018. Adjusted earnings per share rose 7% to
$1.18 per diluted share compared with $1.10 for the prior year
period.
For the six months ended June 30, 2019, consolidated revenue was
$8.4 billion, an increase of 9%, or 4% on an underlying basis.
Operating income was $1.6 billion, an increase of 1% from the prior
year period. Adjusted operating income, which excludes noteworthy
items as presented in the attached supplemental schedules, rose 14%
to $1.9 billion. Net income attributable to the Company was $1.0
billion. Fully diluted earnings per share was $2.05 compared with
$2.38 in the first six months of 2018. Adjusted earnings per share
increased 9% to $2.70 compared with $2.47 for the comparable period
in 2018.
Risk & Insurance Services
Risk & Insurance Services revenue was $2.6 billion in the
second quarter of 2019, an increase of 23%, or 3% on an underlying
basis. Operating income rose 10% to $517 million and adjusted
operating income was $641 million, an increase of 21% from the
prior year period. For the six months ended June 30, 2019, revenue
was $5.0 billion, an increase of 13%, or 4% on an underlying basis.
Operating income rose 5% to $1.3 billion and adjusted operating
income rose 13% to $1.4 billion.
Marsh's revenue in the second quarter was $2.2 billion, an
increase of 4% on an underlying basis. In U.S./Canada, underlying
revenue rose 5%. International operations produced underlying
revenue growth of 2%, reflecting 7% underlying revenue growth in
Asia Pacific, 4% in Latin America, and flat in EMEA. For the six
months ended June 30, 2019, Marsh's underlying revenue growth was
4%.
Guy Carpenter's revenue in the second quarter was $392 million,
a decrease of 3% on an underlying basis. For the six months ended
June 30, 2019, Guy Carpenter's underlying revenue growth was
2%.
Consulting
Consulting revenue in the second quarter was $1.8 billion, an
increase of 9%, or 5% on an underlying basis. Operating income
increased 4% to $278 million and adjusted operating income
increased 14% to $305 million. For the first six months of 2019,
revenue was $3.5 billion, an increase of 5%, or 4% on an underlying
basis. Operating income of $557 million increased 8% and adjusted
operating income increased 16% to $596 million.
Mercer's revenue was $1.3 billion in the second quarter, an
increase of 2% on an underlying basis. Wealth, with revenue of $613
million, was flat on an underlying basis. Health revenue of $458
million was up 4% on an underlying basis and Career revenue of $189
million increased 6% on an underlying basis. For the six months
ended June 30, 2019, Mercer's revenue was $2.4 billion, an increase
of 1% on an underlying basis.
Oliver Wyman's revenue was $540 million in the second quarter,
an increase of 13% on an underlying basis. For the first six months
ended June 30, 2019, Oliver Wyman's revenue was $1.1 billion, up
10% on an underlying basis.
Other Items
On April 1, 2019, the Company completed the acquisition of
Jardine Lloyd Thompson Group (JLT) for $5.6 billion in fully
diluted equity value, and assumed existing JLT debt of
approximately $1 billion. The Company repaid JLT's $450 million
revolving credit facility with proceeds from 2019 debt issuances.
The remaining $550 million of senior notes assumed was refinanced
in the quarter using cash on hand and an incremental $300 million
one year term loan.
The second quarter results include costs related to the JLT
acquisition of $150 million which is comprised of costs to close
the transaction and related debt refinancing. Restructuring and
integration costs related to JLT were $98 million in the
quarter.
The Company repurchased 1.0 million shares of its common stock
for $100 million in the second quarter. In May, the Board of
Directors increased the quarterly dividend 10%, to $0.455 per
share, effective with the third quarter dividend payable on August
15, 2019.
Conference Call
A conference call to discuss second 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 76,000 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:
-- our ability to successfully integrate or achieve the intended benefits of the acquisition of JLT;
-- 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 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 of any investigations, reviews, or other activity by regulatory or law enforcement authorities, including the ongoing investigation by the European Commission competition authority;
-- 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 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 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 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 EndedJune 30, Six Months EndedJune 30,
2019 2018 2019 2018
Revenue $ 4,349 $ 3,734 $ 8,420 $ 7,734
Expense:
Compensation 2,537 2,135 4,819 4,359
and Benefits
Other Operating 1,132 908 1,983 1,776
Expenses
Operating Expenses 3,669 3,043 6,802 6,135
Operating Income 680 691 1,618 1,599
Other Net Benefit 70 65 134 131
Credits
Interest Income 2 3 30 6
Interest Expense (141 ) (68 ) (261 ) (129 )
Cost (32 ) - (32 ) -
of Early Extinguishment
of Debt
Investment Income 8 28 13 28
Acquisition Related (37 ) - (8 ) -
Derivative
Contracts
Income Before 550 719 1,494 1,635
Income Taxes
Income Tax Expense 206 183 423 403
Net Income Before 344 536 1,071 1,232
Non-Controlling
Interests
Less: Net Income 12 5 23 11
Attributable
to Non-Controlling
Interests
Net Income Attributable $ 332 $ 531 $ 1,048 $ 1,221
to the Company
Net Income Per Share
Attributable
to the Company:
- Basic $ 0.66 $ 1.05 $ 2.07 $ 2.41
- Diluted $ 0.65 $ 1.04 $ 2.05 $ 2.38
Average Number
of Shares
Outstanding
- Basic 507 507 506 507
- Diluted 512 512 511 513
Shares Outstanding 507 505 507 505
at June 30
JLT's results of operations for the three months ended June 30,
2019 are included in the Company's results of operations for the
three- and six-month periods ended June 30, 2019. Prior periods in
2018 do not include JLT's results.
Marsh & McLennan Companies, Inc.Supplemental Information -
Revenue AnalysisThree Months Ended June 30, 2019(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
six months ended June 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 is reflected in the acquisitions/dispositions
column beginning in June 2019. All other acquisitions/dispositions
activity is included in the acquisitions/dispositions column.
Components of Revenue ChangeIncluding JLT*
Three MonthsEndedJune 30, %ChangeGAAPRevenue 2018IncludingJLT % ChangeIncludingJLT in2018 CurrencyImpact Acquisitions/Dispositions/Other Impact UnderlyingRevenue
2019 2018
Risk and Insurance Services
Marsh $ 2,156 $ 1,749 23 % $ 2,102 3 % (3 )% 2 % 4 %
Guy Carpenter 392 332 18 % 406 (4 )% (1 )% - (3 )%
Subtotal 2,548 2,081 22 % 2,508 2 % (2 )% 2 % 2 %
Fiduciary Interest Income 26 15 18
Total Risk and Insurance Services 2,574 2,096 23 % 2,526 2 % (3 )% 2 % 3 %
Consulting
Mercer 1,260 1,158 9 % 1,245 1 % (3 )% 2 % 2 %
Oliver Wyman 540 492 10 % 492 10 % (3 )% - 13 %
Total Consulting 1,800 1,650 9 % 1,737 4 % (3 )% 1 % 5 %
Corporate/Eliminations (25 ) (12 ) (12 )
Total Revenue $ 4,349 $ 3,734 16 % $ 4,251 2 % (3 )% 2 % 4 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue ChangeIncluding JLT*
Three MonthsEndedJune 30, %ChangeGAAPRevenue 2018IncludingJLT %ChangeIncludingJLT in2018 CurrencyImpact Acquisitions/Dispositions/Other Impact UnderlyingRevenue
2019 2018
Marsh:
EMEA $ 652 $ 526 24 % $ 678 (4 )% (4 )% - -
Asia Pacific 291 183 59 % 293 (1 )% (5 )% (3 )% 7 %
Latin America 116 99 17 % 135 (14 )% (10 )% (8 )% 4 %
Total International 1,059 808 31 % 1,106 (4 )% (5 )% (1 )% 2 %
U.S./Canada 1,097 941 16 % 996 10 % - 5 % 5 %
Total Marsh $ 2,156 $ 1,749 23 % $ 2,102 3 % (3 )% 2 % 4 %
Mercer:
Wealth 613 552 11 % 619 (1 )% (4 )% 3 % -
Health 458 429 6 % 448 2 % (1 )% - 4 %
Career 189 177 7 % 178 7 % (3 )% 4 % 6 %
Total Mercer $ 1,260 $ 1,158 9 % $ 1,245 1 % (3 )% 2 % 2 %
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.Supplemental Information -
Revenue AnalysisSix Months Ended June 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
six months ended June 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 is reflected in the acquisitions/dispositions
column beginning in June 2019. All other acquisitions/dispositions
activity is included in the acquisitions/dispositions column.
Components of Revenue ChangeIncluding JLT*
Six Months EndedJune 30, %ChangeGAAPRevenue 2018IncludingJLT %ChangeIncludingJLT in2018 CurrencyImpact Acquisitions/Dispositions/Other Impact UnderlyingRevenue
2019 2018
Risk and Insurance Services
Marsh $ 3,893 $ 3,443 13 % $ 3,795 3 % (3 )% 2 % 4 %
Guy Carpenter 1,055 969 9 % 1,044 1 % (1 )% - 2 %
Subtotal 4,948 4,412 12 % 4,839 2 % (3 )% 1 % 4 %
Fiduciary Interest Income 49 28 31
Total Risk and Insurance Services 4,997 4,440 13 % 4,870 3 % (3 )% 1 % 4 %
Consulting
Mercer 2,415 2,329 4 % 2,416 - (3 )% 2 % 1 %
Oliver Wyman 1,058 989 7 % 989 7 % (3 )% - 10 %
Total Consulting 3,473 3,318 5 % 3,405 2 % (3 )% 2 % 4 %
Corporate/Eliminations (50 ) (24 ) (24 )
Total Revenue $ 8,420 $ 7,734 9 % $ 8,251 2 % (3 )% 1 % 4 %
Revenue Details
The following table provides more detailed revenue information
for certain of the components presented above:
Components of Revenue ChangeIncluding JLT*
Six Months EndedJune 30, %ChangeGAAPRevenue 2018IncludingJLT %ChangeIncludingJLT in2018 CurrencyImpact Acquisitions/Dispositions/Other Impact UnderlyingRevenue
2019 2018
Marsh:
EMEA $ 1,285 $ 1,169 10 % $ 1,321 (3 )% (5 )% 1 % 2 %
Asia Pacific 456 347 31 % 457 - (4 )% (3 )% 7 %
Latin America 194 183 6 % 218 (11 )% (11 )% (6 )% 6 %
Total International 1,935 1,699 14 % 1,996 (3 )% (6 )% (1 )% 3 %
U.S./Canada 1,958 1,744 12 % 1,799 9 % - 4 % 5 %
Total Marsh $ 3,893 $ 3,443 13 % $ 3,795 3 % (3 )% 2 % 4 %
Mercer:
Wealth 1,156 1,117 4 % 1,184 (2 )% (5 )% 3 % (1 )%
Health 900 871 3 % 890 1 % (2 )% - 3 %
Career 359 341 5 % 342 5 % (3 )% 4 % 4 %
Total Mercer $ 2,415 $ 2,329 4 % $ 2,416 - (3 )% 2 % 1 %
* Components of revenue change may not add due to rounding.
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP
Measures - Actual as ReportedThree Months Ended June 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
six months ended June 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 six
months ended June 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 June 30, 2019 and 2018.
Results for the three months ended June 30, 2018 are for MMC only,
as previously reported, and do not include JLT results.
Risk & InsuranceServices Consulting Corporate/Eliminations Total
Three Months Ended
June 30, 2019
Operating income (loss) $ 517 $ 278 $ (115 ) $ 680
Operating margin 20.1 % 15.5 % N/A 15.6 %
Add (Deduct) impact of
Noteworthy Items:
Restructuring, 1 22 3 26
excluding
JLT (a)
Changes in contingent 9 - - 9
consideration (b)
JLT integration and 75 5 18 98
restructuring
costs (c)
JLT acquisition related 41 - 41 82
costs (d)
Other (2 ) - 1 (1 )
Operating income 124 27 63 214
adjustments
Adjusted operating $ 641 $ 305 $ (52 ) $ 894
income (loss)
Total identified $ 80 $ 20 $ - $ 100
intangible
amortization expense
Adjusted operating 27.8 % 18.0 % N/A 22.8 %
margin
As Reported Results
Three Months Ended
June 30, 2018
Operating income $ 472 $ 267 $ (48 ) $ 691
(loss),
as reported
Operating margin 22.5 % 16.2 % N/A 18.5 %
Add (Deduct) impact of
Noteworthy Items:
Restructuring, 55 - 3 58
excluding
JLT (a)
Changes in contingent 5 1 - 6
consideration (b)
Other - (1 ) - (1 )
Operating income 60 - 3 63
adjustments
Adjusted operating $ 532 $ 267 $ (45 ) $ 754
income (loss)
Total identified $ 35 $ 8 $ - $ 43
intangible
amortization expense
Adjusted operating 27.0 % 16.7 % N/A 21.3 %
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 and
Insurance Services in 2018 reflects severance and consulting
costs related to the Marsh simplification initiative.
(b) Primarily includes the change in fair value as measured each
quarter of contingent consideration related to acquisitions.
(c) Includes costs incurred in Marsh and Corporate for staff
reductions, as well as consulting costs related to the
JLT Transaction. Also includes the loss on the sale of JLT's
aerospace business, which is included in revenue.
(d) Primarily advisor fees and stamp duty taxes
related to the closing of the JLT Transaction.
Marsh & McLennan Companies, Inc.Reconciliation of Non-GAAP
Measures - Actual as ReportedSix Months Ended June 30(Millions)
(Unaudited)
The information presented below represents the actual as
reported data for the six months ended June 30, 2019 and 2018.
Results for the six months ended June 30, 2018 are for MMC only, as
previously reported, and do not include JLT results.
Risk &InsuranceServices Consulting Corporate/ Total
Eliminations
Six Months Ended
June 30, 2019
Operating income $ 1,250 $ 557 $ (189 ) $ 1,618
(loss)
Operating margin 25.0 % 16.1 % N/A 19.2 %
Add impact of
Noteworthy
Items:
Restructuring, 6 33 5 44
excluding
JLT (a)
Changes in 19 1 - 20
contingent
consideration (b)
JLT integration and 95 5 34 134
restructuring
costs (c)
JLT acquisition 46 - 47 93
related
costs (d)
Other - - 1 1
Operating income 166 39 87 292
adjustments
Adjusted operating $ 1,416 $ 596 $ (102 ) $ 1,910
income (loss)
Total identified $ 121 $ 30 $ - $ 151
intangible
amortization expense
Adjusted operating 30.6 % 18.0 % N/A 24.4 %
margin
As Reported Results
Six Months Ended
June 30, 2018
Operating income $ 1,188 $ 514 $ (103 ) $ 1,599
(loss),
as reported
Operating margin 26.8 % 15.5 % N/A 20.7 %
Add (Deduct)
impact of
Noteworthy Items:
Restructuring, 58 1 5 64
excluding
JLT (a)
Changes in 9 1 - 10
contingent
consideration (b)
Other - (1 ) - (1 )
Operating income 67 1 5 73
adjustments
Adjusted operating $ 1,255 $ 515 $ (98 ) $ 1,672
income (loss)
Total identified $ 72 $ 16 $ - $ 88
intangible
amortization expense
Adjusted operating 29.9 % 16.0 % N/A 22.8 %
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 and
Insurance Services in 2018 reflects severance and consulting
costs related to the Marsh simplification initiative.
(b) Primarily includes the change in fair value as measured each
quarter of contingent consideration related to acquisitions.
(c) Includes costs incurred in Marsh and Corporate for staff
reductions, as well as consulting costs related to the
JLT Transaction. Also includes the loss on the sale of JLT's
aerospace business, which is included in revenue.
(d) Primarily advisor fees and stamp duty taxes
related to the closing of the JLT Transaction.
Marsh & McLennan Companies, Inc. Reconciliation of Non-GAAP
MeasuresThree and Six Months Ended June 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 six months ended June 30, 2019 and 2018. Results
for the three and six months ended June 30, 2018 are for MMC only,
as previously reported, and do not include JLT results.
Three Months EndedJune 30, 2019 Three Months EndedJune 30, 2018
Amount AdjustedEPS Amount AdjustedEPS
Net income before $ 344 $ 536
non-controlling
interests, as reported
Less: Non-controlling 12 5
interest, net of tax
Subtotal $ 332 $ 0.65 $ 531 $ 1.04
Operating income $ 214 $ 63
adjustments
Investments adjustment (a) (2 ) (26 )
Change in fair value 37 -
of acquisition
related derivative
contracts (b)
Financing costs (c) (1 ) -
Early extinguishment 32 -
of debt
Impact of income taxes (10 ) (6 )
on above items
270 0.53 31 0.06
Adjusted income, net of tax $ 602 $ 1.18 $ 562 $ 1.10
Six Months EndedJune 30, 2019 Six Months Ended June30, 2018
Amount AdjustedEPS Amount AdjustedEPS
Net income before $ 1,071 $ 1,232
non-controlling
interests, as reported
Less: Non-controlling 23 11
interest, net of tax
Subtotal $ 1,048 $ 2.05 $ 1,221 $ 2.38
Operating income $ 292 $ 73
adjustments
Investments adjustment (a) (6 ) (18 )
Change in fair value 8 -
of acquisition
related derivative
contracts (b)
Financing costs (c) 53 -
Interest on funds held (25 ) -
in escrow (d)
Early extinguishment 32 -
of debt
Impact of income taxes (22 ) (10 )
on above items
Adjustments to provisional - 3
2017 tax estimates (e)
332 0.65 48 0.09
Adjusted income, net of tax $ 1,380 $ 2.70 $ 1,269 $ 2.47
(a) The Company recorded mark-to-market gains
of $2 million and gains of $26 million
for the three month period and gains of
$6 million and gains of $18 million
for the six month period ended June 30, 2019
and June 30, 2018, respectively, which
are included in investment income in the
consolidated statements of income.
(b) Reflects the change in fair value of derivatives that
were not redesignated as accounting hedges following the
JLT acquisition, the 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.
JLT's results of operations for the three months ended June 30,
2019 are included in the Company's results of operations for the
three- and six-month periods ended June 30, 2019. Prior periods in
2018 do not include JLT's results.
Marsh & McLennan
Companies, Inc.
Consolidated Balance
Sheets
(Millions)
(Unaudited)June 30, 2019 December 31,2018
ASSETS
Current assets:
Cash and cash $ 1,294 $ 1,066
equivalents
Net receivables 5,553 4,317
Other current assets 679 551
Total current assets 7,526 5,934
Goodwill and 17,562 11,036
intangible
assets
Fixed assets, net 799 701
Pension related 1,821 1,688
assets
Right of use assets 2,016 -
Deferred tax assets 628 680
Other assets 1,764 1,539
TOTAL ASSETS $ 32,116 $ 21,578
LIABILITIES
AND EQUITY
Current liabilities:
Short-term debt $ 1,663 $ 314
Accounts payable and 2,600 2,234
accrued liabilities
Accrued compensation 1,375 1,778
and
employee benefits
Acquisition related - 441
derivatives
Current lease 347 -
liabilities
Accrued income taxes 165 157
Dividends payable 232 -
Total current 6,382 4,924
liabilities
Fiduciary 6,807 5,001
liabilities
Less - cash and (6,807 ) (5,001 )
investments
held
in a fiduciary
capacity
- -
Long-term debt 11,459 5,510
Pension, 2,044 1,911
post-retirement
and
post-employment
benefits
Long-term lease 1,981 -
liabilities
Liabilities 319 287
for errors
and omissions
Other liabilities 1,594 1,362
Total equity 8,337 7,584
TOTAL LIABILITIES $ 32,116 $ 21,578
AND EQUITY
Marsh & McLennan
Companies, Inc.
Consolidated Statements
of Cash Flows
(Millions) (Unaudited)
Six Months Ended June 30,
2019 2018
Operating cash flows:
Net income before $ 1,071 $ 1,232
non-controlling
interests
Adjustments to reconcile
net income
to cash provided
by operations:
Depreciation and 159 159
amortization
of fixed
assets and capitalized
software
Amortization of 151 88
intangible
assets
Amortization of right 151 -
of use asset
Adjustments and payments (9 ) 2
related to
contingent consideration
liability
Charge for early 32 -
extinguishment
of debt
Provision for deferred 82 34
income taxes
Gain on investments (13 ) (28 )
(Gain) loss on 21 (1 )
disposition
of assets
Share-based compensation 117 99
expense
Change in fair value of 8 -
acquisition-related
derivative contracts
Changes in assets
and liabilities:
Net receivables (437 ) (388 )
Other current assets (4 ) 4
Other assets (33 ) (10 )
Accounts payable and 29 30
accrued liabilities
Accrued compensation and (670 ) (614 )
employee benefits
Accrued income taxes 6 18
Contributions to pension (172 ) (178 )
and other benefit plans
in excess of current
year expense/credit
Other liabilities 36 (10 )
Operating lease (155 ) -
liabilities
Effect of exchange (129 ) (24 )
rate changes
Net cash provided 241 413
by operations
Financing cash flows:
Purchase of treasury (100 ) (500 )
shares
Net increase in 549 175
commercial
paper
Net increase in short 300 -
term borrowings
Proceeds from issuance 6,459 592
of debt
Repayments of debt (457 ) (6 )
Payments for early (585 ) -
extinguishment
of debt
Purchase (50 ) -
of non-controlling
interests
Acquisition-related (337 ) -
derivative
payments
Shares withheld for (87 ) (62 )
taxes on vested
units - treasury shares
Issuance of common stock 108 48
from treasury shares
Payments of deferred (39 ) (85 )
and contingent
consideration for
acquisitions
Distributions of (15 ) (11 )
non-controlling
interests
Dividends paid (422 ) (383 )
Net cash provided 5,324 (232 )
by (used
for) financing activities
Investing cash flows:
Capital expenditures (161 ) (135 )
Sales (Purchases) 202 (3 )
of long-term
investments
Purchase of equity (91 ) -
investment
Proceeds from sales 2 1
of fixed assets
Dispositions 165 4
Acquisitions (5,500 ) (144 )
Other, net (47 ) (2 )
Net cash used for (5,430 ) (279 )
investing
activities
Effect of exchange 93 (71 )
rate changes
on cash and cash
equivalents
Increase (decrease) 228 (169 )
in cash
and cash equivalents
Cash and cash equivalents 1,066 1,205
at beginning of period
Cash and cash equivalents $ 1,294 $ 1,036
at end of period
Marsh and McLennan Companies, Inc.Reconciliation of Non-GAAP
Measures - 2018 Revenue Including JLTThree and Six Months Ended
June 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 June 30, 2019 are included in
the Company's results of operations for the second 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 six months ended June 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 Ended June 30, 2018 Six Months Ended June 30, 2018
MMC As Previously Reported
Risk & Insurance Services
Marsh $ 1,749 $ 3,443
Guy Carpenter 332 969
Subtotal 2,081 4,412
Fiduciary Interest Income 15 28
Total Risk & Insurance Services 2,096 4,440
Consulting
Mercer 1,158 2,329
Oliver Wyman Group 492 989
Total Consulting 1,650 3,318
Corporate Eliminations (12 ) (24 )
Total Revenue $ 3,734 $ 7,734
JLT 2018*
Specialty (Marsh) $ 353 $ 352
Reinsurance (Guy Carpenter) 74 75
Employee Benefits (Mercer) 87 87
Subtotal 514 514
Fiduciary Interest Income 3 3
Total Revenue $ 517 $ 517
2018 Including JLT
Marsh $ 2,102 $ 3,795
Guy Carpenter 406 1,044
Subtotal 2,508 4,839
Fiduciary Interest Income 18 31
Total Risk & Insurance Services 2,526 4,870
Consulting
Mercer 1,245 2,416
Oliver Wyman Group 492 989
Total Consulting 1,737 3,405
Corporate Eliminations (12 ) (24 )
Total Revenue $ 4,251 $ 8,251
*JLT 2018 revenue information for the three and six months
differ due to rounding.
Media: Erick R. GustafsonMarsh & McLennan Companies+1 202
263 7788erick.gustafson@mmc.com
Investor: Sarah DeWittMarsh & McLennan Companies+1 212 345
6750sarah.dewitt@mmc.com
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190730005545/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
July 30, 2019 07:03 ET (11:03 GMT)
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