Marsh & McLennan Companies Reports Second Quarter 2018 Results
Underlying Revenue Increases 3% for the Quarter and 4% for the First Half of 2018
Six Months GAAP EPS Rises 16% and Adjusted EPS Increases 19%
Excluding Revenue Standard Impact, Six Months EPS Grows 8% and Adjusted EPS Rises 11%
Marsh & McLennan Companies, Inc. (NYSE:MMC), a global professional services firm offering clients advice and solutions in
risk, strategy and people, today reported financial results for the second quarter ended June 30, 2018.
Dan Glaser, President and CEO, said: "We are pleased with our performance in the first half of the year. For the first six
months of 2018, we achieved 4% underlying revenue growth on a consolidated basis and 11% adjusted EPS growth excluding the impact
of the new revenue standard. In the second quarter, we delivered underlying revenue growth of 3%, highlighted by strong underlying
growth of 5% in Risk & Insurance Services with 1% growth in Consulting."
"With a solid first half of 2018, we believe the Company is well positioned to deliver underlying revenue growth in the 3-5%
range, margin expansion and strong growth in adjusted earnings per share in 2018," concluded Mr. Glaser.
Consolidated Results
Consolidated revenue in the second quarter of 2018 was $3.7 billion, an increase of 7% compared with the second quarter of 2017.
On an underlying basis, revenue increased 3%. Net income attributable to the Company was $531 million. Operating income was $691
million while adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules,
increased 4% to $754 million. Excluding the impact of ASC 606, adjusted operating income rose 2%.
On a per share basis, net income attributable to the Company in the second quarter rose 8% to $1.04 from $0.96 in the prior
year. Adjusted earnings per share of $1.10 was up 10% from the prior year period. The 10% increase in adjusted EPS includes a $0.02
per share benefit from the application of ASC 606, the new revenue accounting standard. Excluding ASC 606, adjusted EPS increased
8%.
For the six months ended June 30, 2018, consolidated revenue was $7.7 billion, an increase of 11% and 4% on an underlying basis.
Operating income was $1.6 billion, an increase of 10% from the prior year period. Adjusted operating income, which excludes
noteworthy items as presented in the attached supplemental schedules, rose 14% to $1.7 billion. Excluding the impact of ASC 606,
adjusted operating income rose 6%. Net income attributable to the Company increased 14% to $1.2 billion. Earnings per share rose
16% to $2.38. Adjusted earnings per share increased 19% to $2.47 compared with $2.08 for the comparable period in 2017. The 19%
increase in adjusted EPS includes a $0.16 per share benefit from the application of ASC 606. Excluding ASC 606, adjusted EPS
increased 11%.
Risk & Insurance Services
Risk & Insurance Services revenue was $2.1 billion in the second quarter of 2018, an increase of 9% or 5% on an underlying
basis. Operating income was $472 million, a decrease of 2%, and adjusted operating income rose 9% to $532 million. Excluding ASC
606, adjusted operating income increased 6%. For the six months ended June 30, 2018, revenue was $4.4 billion, an increase of 14%,
or 4% on an underlying basis. Operating income rose 13% to $1.2 billion and adjusted operating income rose 20% to $1.3 billion.
Excluding ASC 606, adjusted operating income increased 9%.
Marsh's revenue in the second quarter was $1.7 billion, an increase of 5% on an underlying basis. International operations
produced underlying revenue growth of 2%, reflecting 1% underlying growth in EMEA, 6% in Asia Pacific, and 3% in Latin America. In
U.S./Canada, underlying revenue rose 8%. For the six months ended June 30, 2018, Marsh’s underlying revenue growth was 3%.
Guy Carpenter's revenue in the second quarter was $332 million, an increase of 5% on an underlying basis. For the six months
ended June 30, 2018, Guy Carpenter’s underlying revenue growth was 6%.
Consulting
Consulting revenue in the second quarter was $1.7 billion, an increase of 4% or 1% on an underlying basis. Operating income
increased 1% to $267 million and adjusted operating income decreased 5% to $267 million. For the first six months of 2018, revenue
was $3.3 billion, an increase of 6% or 3% on an underlying basis. Operating income of $514 million increased 5% and adjusted
operating income increased 1% to $515 million. Excluding ASC 606, adjusted operating income increased 2%.
Mercer's revenue was $1.2 billion in the second quarter, an increase of 2% on an underlying basis. Wealth, with revenue of $552
million, grew 1% on an underlying basis. Within Wealth, Defined Benefit Consulting & Administration decreased 6%, while
Investment Management & Related Services increased 12%. Health revenue of $429 million was up 1% on an underlying basis and
Career revenue of $177 million increased 7% on an underlying basis. For the six months ended June 30, 2018, Mercer’s revenue was
$2.3 billion, an increase of 3% on an underlying basis.
Oliver Wyman Group’s revenue was $492 million in the second quarter, a decrease of 2% on an underlying basis. For the six months
ended June 30, 2018, Oliver Wyman Group’s revenue increased to $989 million, up 2% on an underlying basis.
Other Items
The Company repurchased 3.1 million shares of its common stock for $250 million in the second quarter. Through six months, the
Company has repurchased 6.1 million shares for $500 million. In May, the Board of Directors increased the quarterly dividend 11%,
to $0.415 per share, effective with the third quarter dividend payable on August 15, 2018.
In late June, Marsh announced an agreement to acquire Houston based Wortham Insurance. Wortham has annual revenue of
approximately $130 million and 530 colleagues.
Conference Call
A conference call to discuss second quarter 2018 results will be held today at 8:30 a.m. Eastern time. To participate in the
teleconference, please dial +1 866 548 4713. Callers from outside the United States should dial +1 323 794 2129. The access code
for both numbers is 2356303. The live audio webcast may be accessed at mmc.com. A replay of the webcast will be available approximately two hours after the event.
About Marsh & McLennan Companies
Marsh & McLennan (NYSE: MMC) is the world’s leading professional services firm in the areas of risk, strategy and people.
The company’s nearly 65,000 colleagues advise clients in over 130 countries. With annual revenue over $14 billion, Marsh &
McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading firms. 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," "forecast," "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 impact of any investigations, reviews, market studies or other activity by regulatory or law
enforcement authorities, including the ongoing investigations by the European Commission, the Australian Royal Commission and the
U.K. FCA;
- 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 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 patch software vulnerabilities;
- 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,
including cybersecurity and data privacy regulations such as the E.U.’s General Data Protection Regulation, anti-corruption laws
and trade sanctions regimes;
- the regulatory, contractual and reputational risks that arise based on insurance placement activities
and various broker revenue streams;
- the extent to which we manage risks associated with the various services, including fiduciary and
investments and other advisory services;
- our ability to successfully recover if we experience a business continuity problem due to
cyberattack, natural disaster or otherwise;
- the impact of changes in tax laws, guidance and interpretations, including related to certain
provisions of the U.S. Tax Cuts and Jobs Act, or disagreements with tax authorities;
- the impact of fluctuations in foreign exchange and interest rates on our results;
- the impact of macroeconomic, political, regulatory or market conditions on us, our clients and the
industries in which we operate; and
- the impact of changes in accounting rules or in our accounting estimates or assumptions, including
the impact of the adoption of the new revenue recognition, pension and lease accounting standards.
The factors identified above are not exhaustive. 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. 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. We undertake no obligation to update
or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made.
| |
| |
|
Marsh & McLennan Companies, Inc.
Consolidated Statements of Income
(In millions, except per share figures)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
|
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
| Revenue |
|
|
$ |
3,734 |
|
|
$ |
3,495 |
|
|
|
$ |
7,734 |
|
|
$ |
6,998 |
|
|
|
|
|
|
|
|
|
|
|
|
| Expense: |
|
|
|
|
|
|
|
|
|
|
| Compensation and Benefits |
|
|
2,135 |
|
|
1,998 |
|
|
|
4,359 |
|
|
4,003 |
|
| Other Operating Expenses |
|
|
908 |
|
|
796 |
|
|
|
1,776 |
|
|
1,545 |
|
| Operating Expenses |
|
|
3,043 |
|
|
2,794 |
|
|
|
6,135 |
|
|
5,548 |
|
| Operating Income |
|
|
691 |
|
|
701 |
|
|
|
1,599 |
|
|
1,450 |
|
| Other Net Benefit Credits (a) |
|
|
65 |
|
|
63 |
|
|
|
131 |
|
|
123 |
|
| Interest Income |
|
|
3 |
|
|
2 |
|
|
|
6 |
|
|
4 |
|
| Interest Expense |
|
|
(68 |
) |
|
(60 |
) |
|
|
(129 |
) |
|
(118 |
) |
| Investment Income |
|
|
28 |
|
|
5 |
|
|
|
28 |
|
|
5 |
|
| Income Before Income Taxes |
|
|
719 |
|
|
711 |
|
|
|
1,635 |
|
|
1,464 |
|
| Income Tax Expense |
|
|
183 |
|
|
204 |
|
|
|
403 |
|
|
379 |
|
| Net Income Before Non-Controlling Interests |
|
|
536 |
|
|
507 |
|
|
|
1,232 |
|
|
1,085 |
|
| Less: Net Income Attributable to Non-Controlling Interests |
|
|
5 |
|
|
6 |
|
|
|
11 |
|
|
15 |
|
| Net Income Attributable to the Company |
|
|
$ |
531 |
|
|
$ |
501 |
|
|
|
$ |
1,221 |
|
|
$ |
1,070 |
|
| Net Income Per Share Attributable to the Company: |
|
|
|
|
|
|
|
|
|
|
| - Basic |
|
|
$ |
1.05 |
|
|
$ |
0.98 |
|
|
|
$ |
2.41 |
|
|
$ |
2.08 |
|
| - Diluted |
|
|
$ |
1.04 |
|
|
$ |
0.96 |
|
|
|
$ |
2.38 |
|
|
$ |
2.05 |
|
| Average Number of Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
| - Basic |
|
|
507 |
|
|
514 |
|
|
|
507 |
|
|
514 |
|
| - Diluted |
|
|
512 |
|
|
520 |
|
|
|
513 |
|
|
521 |
|
| Shares Outstanding at 6/30 |
|
|
505 |
|
|
513 |
|
|
|
505 |
|
|
513 |
|
| |
| (a) Effective January 1, 2018, ASC 715, as amended, changed the presentation of net
periodic pension cost and net periodic postretirement cost. The Company has restated prior years and quarters for this revised
presentation. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Consolidated Statements of Income - Impact of Revenue Standard
(In millions, except per share figures)
(Unaudited)
|
| |
| The Company adopted the new revenue standard ("ASC 606") using the modified
retrospective method, applied to all contracts. The guidance requires entities that elected the modified retrospective method
to disclose the impact to financial statement line items as a result of applying the new guidance (rather than previous U.S.
GAAP). The table below shows the impacts on the consolidated statement of income. |
|
|
|
Three Months Ended
June 30, 2018 |
|
Six Months Ended
June 30, 2018 |
|
|
|
As
Reported
|
|
Revenue
Standard
Impact
|
|
Prior to
Adoption
|
|
As
Reported
|
|
Revenue
Standard
Impact
|
|
Prior to
Adoption
|
| Revenue |
|
|
$ |
3,734 |
|
|
$ |
(24 |
) |
|
$ |
3,710 |
|
|
$ |
7,734 |
|
|
$ |
(185 |
) |
|
$ |
7,549 |
|
| Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Compensation and Benefits |
|
|
2,135 |
|
|
(10 |
) |
|
2,125 |
|
|
4,359 |
|
|
(70 |
) |
|
4,289 |
|
| Other Operating Expenses |
|
|
908 |
|
|
— |
|
|
908 |
|
|
1,776 |
|
|
— |
|
|
1,776 |
|
| Operating Expenses |
|
|
3,043 |
|
|
(10 |
) |
|
3,033 |
|
|
6,135 |
|
|
(70 |
) |
|
6,065 |
|
| Operating Income |
|
|
691 |
|
|
(14 |
) |
|
677 |
|
|
1,599 |
|
|
(115 |
) |
|
1,484 |
|
| Other Net Benefit Credits |
|
|
65 |
|
|
— |
|
|
65 |
|
|
131 |
|
|
— |
|
|
131 |
|
| Interest Income |
|
|
3 |
|
|
— |
|
|
3 |
|
|
6 |
|
|
— |
|
|
6 |
|
| Interest Expense |
|
|
(68 |
) |
|
— |
|
|
(68 |
) |
|
(129 |
) |
|
— |
|
|
(129 |
) |
| Investment Income |
|
|
28 |
|
|
— |
|
|
28 |
|
|
28 |
|
|
— |
|
|
28 |
|
| Income Before Income Taxes |
|
|
719 |
|
|
(14 |
) |
|
705 |
|
|
1,635 |
|
|
(115 |
) |
|
1,520 |
|
| Income Tax Expense |
|
|
183 |
|
|
(4 |
) |
|
179 |
|
|
403 |
|
|
(30 |
) |
|
373 |
|
|
Net Income Before Non-Controlling
Interests
|
|
|
536 |
|
|
(10 |
) |
|
526 |
|
|
1,232 |
|
|
(85 |
) |
|
1,147 |
|
|
Less: Net Income Attributable to
Non-Controlling Interests
|
|
|
5 |
|
|
— |
|
|
5 |
|
|
11 |
|
|
— |
|
|
11 |
|
|
Net Income Attributable to the
Company
|
|
|
$ |
531 |
|
|
$ |
(10 |
) |
|
$ |
521 |
|
|
$ |
1,221 |
|
|
$ |
(85 |
) |
|
$ |
1,136 |
|
|
Net Income Per Share Attributable
to the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Basic |
|
|
$ |
1.05 |
|
|
$ |
(0.02 |
) |
|
$ |
1.03 |
|
|
$ |
2.41 |
|
|
$ |
(0.17 |
) |
|
$ |
2.24 |
|
| - Diluted |
|
|
$ |
1.04 |
|
|
$ |
(0.02 |
) |
|
$ |
1.02 |
|
|
$ |
2.38 |
|
|
$ |
(0.16 |
) |
|
$ |
2.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Basic |
|
|
507 |
|
|
507 |
|
|
507 |
|
|
507 |
|
|
507 |
|
|
507 |
|
| - Diluted |
|
|
512 |
|
|
512 |
|
|
512 |
|
|
513 |
|
|
513 |
|
|
513 |
|
| Shares Outstanding at 6/30 |
|
|
505 |
|
|
505 |
|
|
505 |
|
|
505 |
|
|
505 |
|
|
505 |
|
| |
| |
|
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended June 30
(Millions) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Revenue Change* |
|
|
|
Three Months Ended
June 30,
|
|
|
%
Change
GAAP
Revenue
|
|
Currency
Impact
|
|
Acquisitions/
Dispositions
Other Impact
|
|
Revenue
Standard
Impact
|
|
Underlying
Revenue
|
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
| Risk and Insurance Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Marsh |
|
|
$ |
1,749 |
|
|
$ |
1,614 |
|
|
|
8 |
% |
|
2 |
% |
|
1 |
% |
|
— |
|
|
5 |
% |
| Guy Carpenter |
|
|
332 |
|
|
293 |
|
|
|
13 |
% |
|
1 |
% |
|
— |
|
|
7 |
% |
|
5 |
% |
| Subtotal |
|
|
2,081 |
|
|
1,907 |
|
|
|
9 |
% |
|
2 |
% |
|
1 |
% |
|
1 |
% |
|
5 |
% |
| Fiduciary Interest Income |
|
|
15 |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
| Total Risk and Insurance Services |
|
|
2,096 |
|
|
1,916 |
|
|
|
9 |
% |
|
2 |
% |
|
1 |
% |
|
1 |
% |
|
5 |
% |
| Consulting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mercer |
|
|
1,158 |
|
|
1,109 |
|
|
|
5 |
% |
|
2 |
% |
|
1 |
% |
|
— |
|
|
2 |
% |
| Oliver Wyman Group |
|
|
492 |
|
|
483 |
|
|
|
2 |
% |
|
3 |
% |
|
— |
|
|
— |
|
|
(2 |
)% |
| Total Consulting |
|
|
1,650 |
|
|
1,592 |
|
|
|
4 |
% |
|
2 |
% |
|
1 |
% |
|
— |
|
|
1 |
% |
| Corporate / Eliminations |
|
|
(12 |
) |
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
| Total Revenue |
|
|
$ |
3,734 |
|
|
$ |
3,495 |
|
|
|
7 |
% |
|
2 |
% |
|
1 |
% |
|
1 |
% |
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
|
|
|
|
|
|
|
|
Components of Revenue Change* |
|
|
|
Three Months Ended
June 30,
|
|
|
%
Change
GAAP
Revenue
|
|
Currency
Impact
|
|
Acquisitions/
Dispositions
Other Impact
|
|
Revenue
Standard
Impact
|
|
Underlying
Revenue
|
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
| Marsh: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EMEA |
|
|
$ |
526 |
|
|
$ |
497 |
|
|
|
6 |
% |
|
5 |
% |
|
— |
|
|
— |
|
|
1 |
% |
| Asia Pacific |
|
|
183 |
|
|
168 |
|
|
|
9 |
% |
|
2 |
% |
|
— |
|
|
— |
|
|
6 |
% |
| Latin America |
|
|
99 |
|
|
99 |
|
|
|
— |
|
|
(5 |
)% |
|
3 |
% |
|
— |
|
|
3 |
% |
| Total International |
|
|
808 |
|
|
764 |
|
|
|
6 |
% |
|
3 |
% |
|
1 |
% |
|
— |
|
|
2 |
% |
| U.S. / Canada |
|
|
941 |
|
|
850 |
|
|
|
11 |
% |
|
— |
|
|
2 |
% |
|
1 |
% |
|
8 |
% |
| Total Marsh |
|
|
$ |
1,749 |
|
|
$ |
1,614 |
|
|
|
8 |
% |
|
2 |
% |
|
1 |
% |
|
— |
|
|
5 |
% |
| Mercer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Defined Benefit Consulting & Administration |
|
|
$ |
320 |
|
|
$ |
340 |
|
|
|
(6 |
)% |
|
3 |
% |
|
(3 |
)% |
|
— |
|
|
(6 |
)% |
| Investment Management & Related Services |
|
|
232 |
|
|
192 |
|
|
|
20 |
% |
|
2 |
% |
|
6 |
% |
|
— |
|
|
12 |
% |
| Total Wealth |
|
|
552 |
|
|
532 |
|
|
|
4 |
% |
|
3 |
% |
|
— |
|
|
— |
|
|
1 |
% |
| Health |
|
|
429 |
|
|
423 |
|
|
|
2 |
% |
|
1 |
% |
|
— |
|
|
(1 |
)% |
|
1 |
% |
| Career |
|
|
177 |
|
|
154 |
|
|
|
15 |
% |
|
2 |
% |
|
6 |
% |
|
— |
|
|
7 |
% |
| Total Mercer |
|
|
$ |
1,158 |
|
|
$ |
1,109 |
|
|
|
5 |
% |
|
2 |
% |
|
1 |
% |
|
— |
|
|
2 |
% |
| |
| Note: |
| Underlying revenue measures the change in revenue using consistent currency exchange
rates, excluding the impact of certain items that affect comparability such as: acquisitions, dispositions, transfers among
businesses, changes in estimate methodology and the impact of the new revenue standard. |
| |
| * Components of revenue change may not add due to rounding. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Six Months Ended June 30
(Millions) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Revenue Change* |
|
|
|
Six Months Ended
June 30,
|
|
%
Change
GAAP
Revenue
|
|
Currency
Impact
|
|
Acquisitions/
Dispositions/
Other Impact
|
|
Revenue
Standard
Impact
|
|
Underlying
Revenue
|
|
|
|
2018 |
|
2017 |
|
|
|
|
|
| Risk and Insurance Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Marsh |
|
|
$ |
3,443 |
|
|
$ |
3,210 |
|
|
7 |
% |
|
3 |
% |
|
2 |
% |
|
(1 |
)% |
|
3 |
% |
| Guy Carpenter |
|
|
969 |
|
|
678 |
|
|
43 |
% |
|
2 |
% |
|
— |
|
|
35 |
% |
|
6 |
% |
| Subtotal |
|
|
4,412 |
|
|
3,888 |
|
|
13 |
% |
|
3 |
% |
|
2 |
% |
|
5 |
% |
|
4 |
% |
| Fiduciary Interest Income |
|
|
28 |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
| Total Risk and Insurance Services |
|
|
4,440 |
|
|
3,905 |
|
|
14 |
% |
|
3 |
% |
|
2 |
% |
|
5 |
% |
|
4 |
% |
| Consulting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mercer |
|
|
2,329 |
|
|
2,186 |
|
|
7 |
% |
|
3 |
% |
|
1 |
% |
|
— |
|
|
3 |
% |
| Oliver Wyman Group |
|
|
989 |
|
|
932 |
|
|
6 |
% |
|
4 |
% |
|
— |
|
|
— |
|
|
2 |
% |
| Total Consulting |
|
|
3,318 |
|
|
3,118 |
|
|
6 |
% |
|
3 |
% |
|
1 |
% |
|
— |
|
|
3 |
% |
| Corporate / Eliminations |
|
|
(24 |
) |
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
| Total Revenue |
|
|
$ |
7,734 |
|
|
$ |
6,998 |
|
|
11 |
% |
|
3 |
% |
|
1 |
% |
|
3 |
% |
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Details
The following table provides more detailed revenue information for certain of the components presented above:
|
|
|
|
|
|
|
Components of Revenue Change* |
|
|
|
Six Months Ended
June 30,
|
|
%
Change
GAAP
Revenue
|
|
Currency
Impact
|
|
Acquisitions/
Dispositions/
Other Impact
|
|
Revenue
Standard
Impact
|
|
Underlying
Revenue
|
|
|
|
2018 |
|
2017 |
|
|
|
|
|
| Marsh: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EMEA |
|
|
$ |
1,169 |
|
|
$ |
1,086 |
|
|
8 |
% |
|
8 |
% |
|
— |
|
|
— |
|
|
(1 |
)% |
| Asia Pacific |
|
|
347 |
|
|
320 |
|
|
8 |
% |
|
3 |
% |
|
— |
|
|
— |
|
|
5 |
% |
| Latin America |
|
|
183 |
|
|
179 |
|
|
2 |
% |
|
(4 |
)% |
|
2 |
% |
|
— |
|
|
4 |
% |
| Total International |
|
|
1,699 |
|
|
1,585 |
|
|
7 |
% |
|
6 |
% |
|
— |
|
|
— |
|
|
1 |
% |
| U.S. / Canada |
|
|
1,744 |
|
|
1,625 |
|
|
7 |
% |
|
— |
|
|
4 |
% |
|
(2 |
)% |
|
6 |
% |
| Total Marsh |
|
|
$ |
3,443 |
|
|
$ |
3,210 |
|
|
7 |
% |
|
3 |
% |
|
2 |
% |
|
(1 |
)% |
|
3 |
% |
| Mercer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Defined Benefit Consulting & Administration |
|
|
$ |
659 |
|
|
$ |
674 |
|
|
(2 |
)% |
|
5 |
% |
|
(2 |
)% |
|
— |
|
|
(5 |
)% |
| Investment Management & Related Services |
|
|
458 |
|
|
378 |
|
|
21 |
% |
|
4 |
% |
|
4 |
% |
|
— |
|
|
14 |
% |
| Total Wealth |
|
|
1,117 |
|
|
1,052 |
|
|
6 |
% |
|
4 |
% |
|
— |
|
|
— |
|
|
2 |
% |
| Health |
|
|
871 |
|
|
838 |
|
|
4 |
% |
|
2 |
% |
|
(1 |
)% |
|
(1 |
)% |
|
4 |
% |
| Career |
|
|
341 |
|
|
296 |
|
|
15 |
% |
|
3 |
% |
|
6 |
% |
|
— |
|
|
6 |
% |
| Total Mercer |
|
|
$ |
2,329 |
|
|
$ |
2,186 |
|
|
7 |
% |
|
3 |
% |
|
1 |
% |
|
— |
|
|
3 |
% |
| |
| Note: |
| Underlying revenue measures the change in revenue using consistent currency exchange
rates, excluding the impact of certain items that affect comparability such as: acquisitions, dispositions, transfers among
businesses, changes in estimate methodology and the impact of the new revenue standard. |
| |
| * Components of revenue change may not add due to rounding. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Includes Revenue Standard Impact
Three 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 months ended June 30, 2018. The following tables also present adjusted operating margin. For the
three months ended June 30, 2018, adjusted operating margin is calculated by dividing adjusted operating income
by consolidated or segment GAAP revenue. |
|
|
|
Risk &
Insurance
Services
|
|
Consulting |
|
Corporate/
Eliminations
|
|
Total |
|
| Three Months Ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
|
$ |
472 |
|
|
$ |
267 |
|
|
$ |
(48 |
) |
|
$ |
|
|
|
691 |
|
|
| Add (Deduct) impact of Noteworthy Items: |
|
|
|
|
|
|
|
|
|
|
| Restructuring (a) |
|
|
55 |
|
|
— |
|
|
3 |
|
|
58 |
|
|
| Adjustments to acquisition related accounts (b) |
|
|
5 |
|
|
1 |
|
|
— |
|
|
6 |
|
|
| Other |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
(1 |
) |
|
| Operating income adjustments |
|
|
60 |
|
|
— |
|
|
3 |
|
|
63 |
|
|
| Adjusted operating income (loss) |
|
|
$ |
532 |
|
|
$ |
267 |
|
|
$ |
(45 |
) |
|
$ |
|
|
|
754 |
|
|
| Operating margin |
|
|
22.5 |
% |
|
16.2 |
% |
|
N/A
|
|
18.5 |
% |
|
| Adjusted operating margin |
|
|
25.4 |
% |
|
16.2 |
% |
|
N/A
|
|
20.2 |
% |
|
| |
| (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. 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. |
| |
| Note: |
| Comparative financial information for the three months ended June 30, 2017 is
presented on page 10. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Comparable Accounting Basis
Excludes the Revenue Standard Impact
Three Months Ended June 30
(Millions) (Unaudited)
|
| |
| As discussed earlier, the Company has adopted the new revenue standard using the
modified retrospective method, which requires the disclosure of the impacts of the standard on each financial statement line
item. The non-GAAP measures below present an analysis of results reflecting 2018 financial information excluding the impact of
the application of ASC 606, to facilitate a comparison to the 2017 results. Except for the adjustment for the effects of ASC
606 in 2018, these non-GAAP measures are calculated as described on the prior page. |
|
|
|
Risk &
Insurance
Services
|
|
Consulting |
|
Corporate/
Eliminations
|
|
Total |
| Three Months Ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
| Operating income (loss) without adoption |
|
|
$ |
458 |
|
|
$ |
267 |
|
|
$ |
(48 |
) |
|
$ |
|
|
|
677 |
|
| Add (Deduct) impact of Noteworthy Items: |
|
|
|
|
|
|
|
|
|
| Restructuring (a) |
|
|
55 |
|
|
— |
|
|
3 |
|
|
58 |
|
| Adjustments to acquisition related accounts (b) |
|
|
5 |
|
|
1 |
|
|
— |
|
|
6 |
|
| Other |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
(1 |
) |
| Operating income adjustments |
|
|
60 |
|
|
— |
|
|
3 |
|
|
63 |
|
| Adjusted operating income (loss) |
|
|
$ |
518 |
|
|
$ |
267 |
|
|
$ |
(45 |
) |
|
$ |
|
|
|
740 |
|
| Operating margin - Comparable basis |
|
|
22.2 |
% |
|
16.2 |
% |
|
N/A
|
|
18.3 |
% |
| Adjusted operating margin - Comparable basis |
|
|
25.0 |
% |
|
16.2 |
% |
|
N/A
|
|
20.0 |
% |
|
|
|
|
|
|
|
|
|
|
| Three Months Ended June 30, 2017 |
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
|
$ |
482 |
|
|
$ |
265 |
|
|
$ |
(46 |
) |
|
$ |
|
|
|
701 |
|
| Add (Deduct) impact of Noteworthy Items: |
|
|
|
|
|
|
|
|
|
| Restructuring (a) |
|
|
— |
|
|
13 |
|
|
2 |
|
|
15 |
|
| Adjustments to acquisition related accounts (b) |
|
|
7 |
|
|
2 |
|
|
— |
|
|
9 |
|
| Operating income adjustments |
|
|
7 |
|
|
15 |
|
|
2 |
|
|
24 |
|
| Adjusted operating income (loss) |
|
|
$ |
489 |
|
|
$ |
280 |
|
|
$ |
(44 |
) |
|
$ |
|
|
|
725 |
|
| Operating margin |
|
|
25.2 |
% |
|
16.6 |
% |
|
N/A
|
|
20.1 |
% |
| Adjusted operating margin |
|
|
25.5 |
% |
|
17.6 |
% |
|
N/A
|
|
20.7 |
% |
| |
| (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. Risk and Insurance Services in 2018 reflects severance and consulting costs
related to the Marsh simplification initiative. Consulting in 2017 reflects severance related to the Mercer business
restructure. |
| (b) Primarily includes the change in fair value as measured each quarter of
contingent consideration related to acquisitions. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Includes Revenue Standard Impact
Six 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 six months ended June 30, 2018. The following tables also present adjusted operating margin. For the six
months ended June 30, 2018, adjusted operating margin is calculated by dividing adjusted operating income by
consolidated or segment GAAP revenue. |
|
|
|
Risk &
Insurance
Services
|
|
Consulting |
|
Corporate/
Eliminations |
|
Total |
| Six Months Ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
|
$ |
1,188 |
|
|
$ |
514 |
|
|
$ |
(103 |
) |
|
$ |
|
|
1,599 |
|
| Add (Deduct) impact of Noteworthy Items: |
|
|
|
|
|
|
|
|
|
| Restructuring (a) |
|
|
58 |
|
|
1 |
|
|
5 |
|
|
64 |
|
| Adjustments to acquisition related accounts (b) |
|
|
9 |
|
|
1 |
|
|
— |
|
|
10 |
|
| Other |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
(1 |
) |
| Operating income adjustments |
|
|
67 |
|
|
1 |
|
|
5 |
|
|
73 |
|
| Adjusted operating income (loss) |
|
|
$ |
1,255 |
|
|
$ |
515 |
|
|
$ |
(98 |
) |
|
$ |
|
|
1,672 |
|
| Operating margin |
|
|
26.8 |
% |
|
15.5 |
% |
|
N/A
|
|
20.7 |
% |
| Adjusted operating margin |
|
|
28.3 |
% |
|
15.5 |
% |
|
N/A
|
|
21.6 |
% |
| |
| (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. 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. |
| |
| Note: |
| Comparative financial information for the six months ended June 30, 2017 is presented
on page 12. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Comparable Accounting Basis
Excludes the Revenue Standard Impact
Six Months Ended June 30
(Millions) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Measures - Comparable Accounting Basis (cont’d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk &
Insurance
Services
|
|
Consulting |
|
Corporate/
Eliminations
|
|
Total |
| Six Months Ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
| Operating income (loss) without adoption |
|
|
$ |
1,068 |
|
|
$ |
519 |
|
|
$ |
(103 |
) |
|
$ |
|
|
1,484 |
|
| Add (Deduct) impact of Noteworthy Items: |
|
|
|
|
|
|
|
|
|
| Restructuring (a) |
|
|
58 |
|
|
1 |
|
|
5 |
|
|
64 |
|
| Adjustments to acquisition related accounts (b) |
|
|
9 |
|
|
1 |
|
|
— |
|
|
10 |
|
| Other |
|
|
— |
|
|
(1 |
) |
|
— |
|
|
(1 |
) |
| Operating income adjustments |
|
|
67 |
|
|
1 |
|
|
5 |
|
|
73 |
|
| Adjusted operating income (loss) |
|
|
$ |
1,135 |
|
|
$ |
520 |
|
|
$ |
(98 |
) |
|
$ |
|
|
1,557 |
|
| Operating margin - Comparable basis |
|
|
25.2 |
% |
|
15.6 |
% |
|
N/A
|
|
19.7 |
% |
| Adjusted operating margin - Comparable basis |
|
|
26.7 |
% |
|
15.6 |
% |
|
N/A
|
|
20.6 |
% |
| Six Months Ended June 30, 2017 |
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
|
$ |
1,050 |
|
|
$ |
490 |
|
|
$ |
(90 |
) |
|
$ |
|
|
1,450 |
|
| Add (Deduct) impact of Noteworthy Items: |
|
|
|
|
|
|
|
|
|
| Restructuring (a) |
|
|
4 |
|
|
16 |
|
|
4 |
|
|
24 |
|
| Adjustments to acquisition related accounts (b) |
|
|
(10 |
) |
|
3 |
|
|
— |
|
|
(7 |
) |
| Operating income adjustments |
|
|
(6 |
) |
|
19 |
|
|
4 |
|
|
17 |
|
| Adjusted operating income (loss) |
|
|
$ |
1,044 |
|
|
$ |
509 |
|
|
$ |
(86 |
) |
|
$ |
|
|
1,467 |
|
| Operating margin |
|
|
26.9 |
% |
|
15.7 |
% |
|
N/A
|
|
20.7 |
% |
| Adjusted operating margin |
|
|
26.7 |
% |
|
16.3 |
% |
|
N/A
|
|
21.0 |
% |
| |
| (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. Risk and Insurance Services in 2018 reflects severance and consulting costs
related to the Marsh simplification initiative. Consulting in 2017 reflects severance related to the Mercer business
restructure. |
| (b) Primarily includes the change in fair value as measured each quarter of
contingent consideration related to acquisitions. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Includes the Revenue Standard Impact
Three and Six Months Ended June 30
(Millions) (Unaudited)
|
| |
| Adjusted Income, Net of Tax and Adjusted Earnings per Share |
| 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 previously recorded to equity. 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, 2018. |
|
|
|
|
Three Months Ended
June 30, 2018 |
|
|
|
|
Amount |
|
|
Adjusted EPS |
| Income from continuing operations |
|
|
|
|
|
$ |
|
|
536 |
|
|
|
|
| Less: Non-controlling interest, net of tax |
|
|
|
|
|
5 |
|
|
|
|
| Subtotal |
|
|
|
|
|
$ |
|
|
531 |
|
|
|
$ |
1.04 |
| Operating income adjustments |
|
|
|
$ |
|
|
|
|
63 |
|
|
|
|
|
|
| Investments adjustment (a) |
|
|
|
(26 |
) |
|
|
|
|
|
| Impact of income taxes |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
31 |
|
|
|
0.06 |
| Adjusted income, net of tax |
|
|
|
|
|
$ |
|
|
562 |
|
|
|
$ |
1.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2018 |
|
|
|
|
Amount |
|
|
Adjusted EPS |
| Income from continuing operations |
|
|
|
|
|
$ |
|
|
1,232 |
|
|
|
|
| Less: Non-controlling interest, net of tax |
|
|
|
|
|
11 |
|
|
|
|
| Subtotal |
|
|
|
|
|
$ |
|
|
1,221 |
|
|
|
$ |
2.38 |
| Operating income adjustments |
|
|
|
$ |
|
|
|
|
73 |
|
|
|
|
|
|
| Investments adjustment (a) |
|
|
|
(18 |
) |
|
|
|
|
|
| Impact of income taxes |
|
|
|
(10 |
) |
|
|
|
|
|
| Adjustments to provisional 2017 tax estimates (b) |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
48 |
|
|
|
0.09 |
| Adjusted income, net of tax |
|
|
|
|
|
$ |
|
|
1,269 |
|
|
|
$ |
2.47 |
| |
|
(a) Mark-to-market adjustments for investments classified as available for sale under prior guidance
were recorded to equity, net of tax. Beginning January 1, 2018 such adjustments must be recorded as part of investment
income. Prior periods were not restated. The Company excludes such mark-to-market gains or losses from its calculation of
adjusted earnings per share. The Company recorded mark-to-market gains of $26 million and $18 million for the three and
six-month periods ended June 30, 2018, respectively, which are included in Investment Income in the Consolidated Statement of
Income.
|
| (b) Relates to adjustments to provisional 2017 year-end estimates of transition taxes
and U.S. deferred tax assets and liabilities from U.S. tax reform. |
| |
| Note: |
| Comparative financial information for the three and six months ended June 30, 2017 is
presented on page 14. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Comparable Accounting Basis
Excludes the Revenue Standard Impact
Three and Six Months Ended June 30
(Millions) (Unaudited)
|
| |
| As discussed earlier, the Company adopted the new revenue standard using the modified
retrospective method, which requires the disclosure of the impacts of the standard on each financial statement line item. The
non-GAAP measures below present an analysis of results reflecting 2018 financial information excluding the impact of the
application of ASC 606, to facilitate a comparison to the 2017 results. Except for the adjustment for the effects of ASC 606 in
2018, these non-GAAP measures are calculated as described on the prior page. |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2018
|
|
|
Three Months Ended
June 30, 2017 |
|
|
|
Amount |
|
Adjusted
EPS
|
|
|
Amount |
|
Adjusted
EPS
|
|
Income from continuing operations,
(2018 prior to the impact of ASC 606)
|
|
|
|
|
$ |
|
526 |
|
|
|
|
|
|
|
$ |
|
507 |
|
|
|
| Less: Non-controlling interest, net of tax |
|
|
|
|
5 |
|
|
|
|
|
|
|
6 |
|
|
|
| Subtotal |
|
|
|
|
$ |
|
521 |
|
|
$ |
|
1.02 |
|
|
|
|
|
$ |
|
501 |
|
|
$ |
|
0.96 |
| Operating income adjustments |
|
|
$ |
|
|
|
63 |
|
|
|
|
|
|
|
$ |
|
|
|
24 |
|
|
|
|
|
| Investments adjustment (a) |
|
|
(26 |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
| Impact of income taxes |
|
|
(6 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
31 |
|
|
0.06 |
|
|
|
|
|
17 |
|
|
0.04 |
| Adjusted income, net of tax |
|
|
|
|
$ |
|
552 |
|
|
$ |
|
1.08 |
|
|
|
|
|
$ |
|
518 |
|
|
$ |
|
1.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2018
|
|
|
Six Months Ended
June 30, 2017
|
|
|
|
Amount |
|
Adjusted
EPS
|
|
|
Amount |
|
Adjusted
EPS
|
|
Income from continuing operations,
(2018 prior to the impact of ASC 606)
|
|
|
|
|
$ |
|
1,147 |
|
|
|
|
|
|
|
$ |
|
1,085 |
|
|
|
| Less: Non-controlling interest, net of tax |
|
|
|
|
11 |
|
|
|
|
|
|
|
15 |
|
|
|
| Subtotal |
|
|
|
|
$ |
|
1,136 |
|
|
$ |
|
2.22 |
|
|
|
|
|
$ |
|
1,070 |
|
|
$ |
|
2.05 |
| Operating income adjustments |
|
|
$ |
|
|
|
73 |
|
|
|
|
|
|
|
$ |
|
|
|
17 |
|
|
|
|
|
| Investments adjustment (a) |
|
|
(18 |
) |
|
|
|
|
|
|
— |
|
|
|
|
|
| Impact of income taxes |
|
|
(10 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
| Adjustments to provisional 2017 tax estimates (b) |
|
|
3 |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
48 |
|
|
0.09 |
|
|
|
|
|
11 |
|
|
0.03 |
| Adjusted income, net of tax |
|
|
|
|
$ |
|
1,184 |
|
|
$ |
|
2.31 |
|
|
|
|
|
$ |
|
1,081 |
|
|
$ |
|
2.08 |
| |
|
(a) Mark-to-market adjustments for investments classified as available for sale under prior guidance
were recorded to equity, net of tax. Beginning January 1, 2018 such adjustments must be recorded as part of investment
income. Prior periods were not restated. The Company excludes such mark-to-market gains or losses from its calculation of
adjusted earnings per share. The Company recorded mark-to-market gains of $26 million and $18 million for the three and
six-month periods ended June 30, 2018, respectively, which are included in Investment Income in the Consolidated Statement of
Income.
|
| (b) Relates to 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 - Impact of Revenue Recognition Standard
Three and Six Months Ended June 30
(Millions) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
|
|
Excludes
Impact of
Revenue
Standard
|
|
|
|
|
|
|
Excludes
Impact of
Revenue
Standard
|
|
|
|
|
|
2018 |
|
2018 |
|
2017 |
|
|
2018 |
|
2018 |
|
2017 |
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Compensation and Benefits |
|
|
$ |
2,135 |
|
|
$ |
2,125 |
|
|
$ |
1,998 |
|
|
|
$ |
4,359 |
|
|
$ |
4,289 |
|
|
$ |
4,003 |
| Other operating expenses |
|
|
908 |
|
|
908 |
|
|
796 |
|
|
|
1,776 |
|
|
1,776 |
|
|
1,545 |
| Total Expenses |
|
|
$ |
3,043 |
|
|
$ |
3,033 |
|
|
$ |
2,794 |
|
|
|
$ |
6,135 |
|
|
$ |
6,065 |
|
|
$ |
5,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization expense |
|
|
$ |
79 |
|
|
$ |
79 |
|
|
$ |
76 |
|
|
|
$ |
159 |
|
|
$ |
159 |
|
|
$ |
156 |
| Identified intangible amortization expense |
|
|
43 |
|
|
43 |
|
|
40 |
|
|
|
88 |
|
|
88 |
|
|
80 |
| Total |
|
|
$ |
122 |
|
|
$ |
122 |
|
|
$ |
116 |
|
|
|
$ |
247 |
|
|
$ |
247 |
|
|
$ |
236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock option expense |
|
|
$ |
3 |
|
|
$ |
3 |
|
|
$ |
3 |
|
|
|
$ |
17 |
|
|
$ |
17 |
|
|
$ |
17 |
| Capital expenditures |
|
|
$ |
77 |
|
|
$ |
77 |
|
|
$ |
82 |
|
|
|
$ |
135 |
|
|
$ |
135 |
|
|
$ |
144 |
| Operating cash flows |
|
|
$ |
777 |
|
|
$ |
777 |
|
|
$ |
742 |
|
|
|
$ |
413 |
|
|
$ |
413 |
|
|
$ |
343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Risk and Insurance Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Compensation and Benefits |
|
|
$ |
1,145 |
|
|
$ |
1,132 |
|
|
$ |
1,014 |
|
|
|
$ |
2,313 |
|
|
$ |
2,238 |
|
|
$ |
2,039 |
| Other operating expenses |
|
|
479 |
|
|
479 |
|
|
420 |
|
|
|
939 |
|
|
939 |
|
|
816 |
| Total Expenses |
|
|
$ |
1,624 |
|
|
$ |
1,611 |
|
|
$ |
1,434 |
|
|
|
$ |
3,252 |
|
|
$ |
3,177 |
|
|
$ |
2,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization expense |
|
|
$ |
35 |
|
|
$ |
35 |
|
|
$ |
35 |
|
|
|
$ |
72 |
|
|
$ |
72 |
|
|
$ |
70 |
| Identified intangible amortization expense |
|
|
35 |
|
|
35 |
|
|
33 |
|
|
|
72 |
|
|
72 |
|
|
65 |
| Total |
|
|
$ |
70 |
|
|
$ |
70 |
|
|
$ |
68 |
|
|
|
$ |
144 |
|
|
$ |
144 |
|
|
$ |
135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consulting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Compensation and Benefits |
|
|
$ |
902 |
|
|
$ |
905 |
|
|
$ |
901 |
|
|
|
$ |
1,858 |
|
|
$ |
1,863 |
|
|
$ |
1,792 |
| Other operating expenses |
|
|
481 |
|
|
481 |
|
|
426 |
|
|
|
946 |
|
|
946 |
|
|
836 |
| Total Expenses |
|
|
$ |
1,383 |
|
|
$ |
1,386 |
|
|
$ |
1,327 |
|
|
|
$ |
2,804 |
|
|
$ |
2,809 |
|
|
$ |
2,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization expense |
|
|
$ |
26 |
|
|
$ |
26 |
|
|
$ |
24 |
|
|
|
$ |
51 |
|
|
$ |
51 |
|
|
$ |
51 |
| Identified intangible amortization expense |
|
|
8 |
|
|
8 |
|
|
7 |
|
|
|
16 |
|
|
16 |
|
|
15 |
| Total |
|
|
$ |
34 |
|
|
$ |
34 |
|
|
$ |
31 |
|
|
|
$ |
67 |
|
|
$ |
67 |
|
|
$ |
66 |
| |
| |
|
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets
(Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
June 30,
2018 |
|
|
December 31,
2017
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
|
|
$ |
1,036 |
|
|
|
$ |
1,205 |
|
| Net receivables |
|
|
|
|
4,601 |
|
|
|
4,133 |
|
| Other current assets |
|
|
|
|
538 |
|
|
|
224 |
|
| Total current assets |
|
|
|
|
6,175 |
|
|
|
5,562 |
|
|
|
|
|
|
|
|
|
|
| Goodwill and intangible assets |
|
|
|
|
10,411 |
|
|
|
10,363 |
|
| Fixed assets, net |
|
|
|
|
698 |
|
|
|
712 |
|
| Pension related assets |
|
|
|
|
1,808 |
|
|
|
1,693 |
|
| Deferred tax assets |
|
|
|
|
532 |
|
|
|
669 |
|
| Other assets |
|
|
|
|
1,535 |
|
|
|
1,430 |
|
| TOTAL ASSETS |
|
|
|
|
$ |
21,159 |
|
|
|
$ |
20,429 |
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Short-term debt |
|
|
|
|
$ |
439 |
|
|
|
$ |
262 |
|
| Accounts payable and accrued liabilities |
|
|
|
|
2,246 |
|
|
|
2,083 |
|
| Accrued compensation and employee benefits |
|
|
|
|
1,103 |
|
|
|
1,718 |
|
| Accrued income taxes |
|
|
|
|
216 |
|
|
|
199 |
|
| Dividends payable |
|
|
|
|
212 |
|
|
|
— |
|
| Total current liabilities |
|
|
|
|
4,216 |
|
|
|
4,262 |
|
|
|
|
|
|
|
|
|
|
| Fiduciary liabilities |
|
|
|
|
5,118 |
|
|
|
4,847 |
|
| Less - cash and investments held in a fiduciary capacity |
|
|
|
|
(5,118 |
) |
|
|
(4,847 |
) |
|
|
|
|
|
— |
|
|
|
— |
|
| Long-term debt |
|
|
|
|
5,813 |
|
|
|
5,225 |
|
| Pension, post-retirement and post-employment benefits |
|
|
|
|
1,768 |
|
|
|
1,888 |
|
| Liabilities for errors and omissions |
|
|
|
|
303 |
|
|
|
301 |
|
| Other liabilities |
|
|
|
|
1,262 |
|
|
|
1,311 |
|
|
|
|
|
|
|
|
|
|
| Total equity |
|
|
|
|
7,797 |
|
|
|
7,442 |
|
| TOTAL LIABILITIES AND EQUITY |
|
|
|
|
$ |
21,159 |
|
|
|
$ |
20,429 |
|
| |
| Note: |
| Effective January 1, 2018, the Company, upon the adoption of the new revenue
recognition standard, recorded a cumulative effect adjustment, net of tax resulting in an increase to the opening balance of
retained earnings of $364 million, with offsetting increases/decreases to other balance sheet accounts, e.g. accounts
receivable, other current assets, other assets and deferred income taxes. |
| |
| |
|
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets - Impact of Revenue Standard
(Millions) (Unaudited)
|
| |
| As discussed earlier, the Company adopted the new revenue standard (ASC 606) using
the modified retrospective method, applied to all contracts. The guidance requires entities that elected the modified
retrospective method to disclose the impact to financial statement line items as a result of applying the new guidance (rather
than previous U.S. GAAP). The table below shows the impacts on the consolidated balance sheet. |
|
|
|
June 30, 2018 |
|
|
|
As Reported |
|
Impact of
Revenue
Standard
|
|
Prior to
Adoption
|
| ASSETS |
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
$ |
1,036 |
|
|
$ |
— |
|
|
$ |
1,036 |
|
| Net receivables |
|
|
4,601 |
|
|
(254 |
) |
|
4,347 |
|
| Other current assets |
|
|
538 |
|
|
(298 |
) |
|
240 |
|
| Total current assets |
|
|
6,175 |
|
|
(552 |
) |
|
5,623 |
|
|
|
|
|
|
|
|
|
| Goodwill and intangible assets |
|
|
10,411 |
|
|
— |
|
|
10,411 |
|
| Fixed assets, net |
|
|
698 |
|
|
— |
|
|
698 |
|
| Pension related assets |
|
|
1,808 |
|
|
— |
|
|
1,808 |
|
| Deferred tax assets |
|
|
532 |
|
|
133 |
|
|
665 |
|
| Other assets |
|
|
1,535 |
|
|
(230 |
) |
|
1,305 |
|
| TOTAL ASSETS |
|
|
$ |
21,159 |
|
|
$ |
(649 |
) |
|
$ |
20,510 |
|
|
|
|
|
|
|
|
|
| LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
| Short-term debt |
|
|
$ |
439 |
|
|
$ |
— |
|
|
$ |
439 |
|
| Accounts payable and accrued liabilities |
|
|
2,246 |
|
|
(177 |
) |
|
2,069 |
|
| Accrued compensation and employee benefits |
|
|
1,103 |
|
|
— |
|
|
1,103 |
|
| Accrued income taxes |
|
|
216 |
|
|
— |
|
|
216 |
|
| Dividends payable |
|
|
212 |
|
|
— |
|
|
212 |
|
| Total current liabilities |
|
|
4,216 |
|
|
(177 |
) |
|
4,039 |
|
|
|
|
|
|
|
|
|
| Fiduciary liabilities |
|
|
5,118 |
|
|
— |
|
|
5,118 |
|
| Less - cash and investments held in a fiduciary capacity |
|
|
(5,118 |
) |
|
— |
|
|
(5,118 |
) |
|
|
|
— |
|
|
— |
|
|
— |
|
| Long-term debt |
|
|
5,813 |
|
|
— |
|
|
5,813 |
|
| Pension, post-retirement and post-employment benefits |
|
|
1,768 |
|
|
— |
|
|
1,768 |
|
| Liabilities for errors and omissions |
|
|
303 |
|
|
— |
|
|
303 |
|
| Other liabilities |
|
|
1,262 |
|
|
(23 |
) |
|
1,239 |
|
|
|
|
|
|
|
|
|
| Total equity |
|
|
7,797 |
|
|
(449 |
) |
|
7,348 |
|
| TOTAL LIABILITIES AND EQUITY |
|
|
$ |
21,159 |
|
|
$ |
(649 |
) |
|
$ |
20,510 |
|
Media:
Marsh & McLennan Companies
Erick R. Gustafson, +1 202-263-7788
erick.gustafson@mmc.com
or
Investors:
Marsh & McLennan Companies
Dan Farrell, +1 212-345-3713
daniel.farrell@mmc.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20180726005395/en/