Marsh & McLennan Reports Fourth Quarter and Full-Year 2020 Results

Full-Year Revenue Growth of 3%; Underlying Revenue Growth of 1%
Full-Year GAAP Operating Income Rises 14%; Adjusted Operating Income Increases 9%
Full-Year GAAP EPS Increases 16% to $3.94; Adjusted EPS Increases 7% to $4.97
Fourth Quarter GAAP EPS of $0.73; Adjusted EPS of $1.19

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 fourth quarter and year ended December 31, 2020.

Dan Glaser, President and CEO, said: “2020 was a year like no other. I am proud of how our colleagues rose to the challenge, helping clients and one another and achieving impressive financial performance. We ended the year with a strong fourth quarter with positive underlying revenue growth. In 2020, we achieved revenue growth of 3% with underlying revenue growth of 1% and grew adjusted EPS 7%.

“We demonstrated our resilience as a company in 2020 and are well positioned for growth in 2021.”

Consolidated Results

Consolidated revenue in the fourth quarter of 2020 was $4.4 billion, an increase of 4% compared with the fourth quarter of 2019, or 1% on an underlying basis. Operating income was $571 million compared with $592 million in the prior year period. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, was $855 million, compared with $856 million in the prior year period. Net income attributable to the Company was $374 million, or $0.73 per diluted share, compared with $0.76 in the fourth quarter of 2019. Adjusted earnings per share was $1.19, compared with $1.19 for the prior year period.

For the year 2020, revenue was $17.2 billion, an increase of 3% compared with 2019, or 1% on an underlying basis. Operating income was $3.1 billion, while adjusted operating income rose 9% to $3.6 billion. Net income attributable to the Company was $2.0 billion. Earnings per share increased 16% to $3.94. Adjusted earnings per share increased 7% to $4.97 compared with $4.66 in 2019.

Risk & Insurance Services

Risk & Insurance Services revenue was $2.5 billion in the fourth quarter of 2020, an increase of 6%, or 3% on an underlying basis. Operating income was $463 million, compared with $365 million in the fourth quarter of 2019. Adjusted operating income decreased 5% to $525 million. For the year 2020, revenue was $10.3 billion, an increase of 8%, or 3% on an underlying basis. Operating income was $2.3 billion, compared to $1.8 billion in 2019. Adjusted operating income rose 14% to $2.6 billion.

Marsh's revenue in the fourth quarter of 2020 was $2.4 billion, an increase of 7%, or 4% on an underlying basis. In U.S./Canada, underlying revenue rose 7%. International operations underlying revenue was flat compared to the prior year period, reflecting underlying growth of 3% in Latin America and 1% in Asia Pacific, and partially offset by a decline of 2% in EMEA. For the year 2020, Marsh’s revenue growth was 7%, or 3% on an underlying basis.

Guy Carpenter's fourth quarter revenue was $162 million, an increase of 7%, or 5% on an underlying basis. For the year 2020, Guy Carpenter’s revenue grew 15% compared to a year ago, or 6% on an underlying basis.

Consulting

Consulting revenue was $1.9 billion in the fourth quarter of 2020, an increase of 1%, or a decline of 1% on an underlying basis. Operating income declined to $179 million, compared with $336 million in the fourth quarter of 2019, primarily due to a provision for a legacy JLT E&O. Adjusted operating income was $387 million, an increase of 8% compared with $359 million in the fourth quarter of 2019. For the year 2020, revenue was $7.0 billion, a decrease of 2% on both a GAAP and underlying basis. Operating income was $1.0 billion, compared with $1.2 billion in 2019. Adjusted operating income decreased 2% to $1.2 billion.

Mercer’s revenue was $1.3 billion in the fourth quarter of 2020, a decrease of 1%, or a 3% decline on an underlying basis. Wealth, with revenue of $629 million, decreased 1% on an underlying basis. Health, with revenue of $445 million, decreased 2% on an underlying basis. Career revenue of $238 million decreased 7% on an underlying basis. For the year 2020, Mercer’s revenue declined 2%, or 1% on an underlying basis.

Oliver Wyman’s revenue was $590 million in the fourth quarter of 2020, an increase of 4% on an underlying basis. For the year 2020, Oliver Wyman’s revenue was $2.0 billion, a decline of 4% on an underlying basis.

Other Items

In December, Marsh & McLennan Agency (MMA) closed the acquisitions of independent agencies INSPRO, Heritage Insurance Service, Inc., and Compass Financial Partners. For the year 2020, MMA achieved a record year of acquisitions, completing eight transactions with approximately $235 million of combined revenue, marking the largest year of acquired revenue since it was started in 2009.

During the fourth quarter of 2020, the Company repaid $700 million of senior notes and prepaid $300 million of floating rate notes due December 2021.

Conference Call

A conference call to discuss fourth quarter 2020 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 7838349. 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 76,000 colleagues advise clients in over 130 countries. With annual revenue over $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 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, including claims related to pandemic coverage;
• the impact of investigations, reviews, or other activity by regulatory or law enforcement authorities, including the ongoing U.K. FCA review of legacy JLT enhanced transfer value advice;
• 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 phishing and other cybersecurity attacks or unauthorized dissemination of information 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;
• our ability to successfully recover if we experience a business continuity problem due to cyberattack, natural disaster or otherwise;
• the regulatory, contractual and reputational risks that arise based on insurance placement activities and various insurer revenue streams; and
• the impact of changes in tax laws, guidance and interpretations or disagreements with tax authorities, particularly due to the change in U.S. presidential administrations.

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.

The Company acquired JLT on April 1, 2019 and JLT's results are included in the Company's consolidated results of operations from that date.

Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended December 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 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.

Revenue Details

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

Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Twelve Months Ended December 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 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 twelve months ended December 31, 2020 includes the results of JLT. The column "2019 Including JLT" includes JLT's prior year first quarter revenue (See reconciliation of non-GAAP measures on page 14).

Revenue Details

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

Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Actual as Reported
Three Months Ended December 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 "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 twelve months ended December 31, 2020 and 2019. 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 acquisition of JLT on April 1, 2019. For the three and twelve months ended December 31, 2020 and 2019, adjusted operating margin is calculated by dividing the sum of adjusted operating income plus identified intangible asset amortization by consolidated or segment adjusted revenue.

Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures - Actual as Reported
Twelve Months Ended December 31
(Millions) (Unaudited)

The information presented below represents the actual as reported data for the twelve months ended December 31, 2020 and 2019. Results for the twelve months ended December 31, 2019 do not include JLT's results of operations for the period January 1, 2019 through March 31, 2019.

Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three and Twelve Months Ended December 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 set forth in the preceding tables and investments gains or losses related to the impact of mark-to-market adjustments on certain equity securities. 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 twelve months ended December 31, 2020 and 2019. The information presented below represents the actual as reported results for the three and twelve month periods ended December 31, 2020 and 2019. Results for the twelve months ended December 31, 2019 do not include JLT's results of operations for the period January 1, 2019 through March 31, 2019.

The Company acquired JLT on April 1, 2019 and JLT's results are included in the Company's consolidated results of operations from that date.