Marsh & Mclennan Companies, Inc 10-Q for FY2021 Q1

Marsh & Mclennan Companies, Inc. (MRSH)

10-Q 2021-04-27 For: 2021-03-31

Added on April 08, 2026

About this 10-Q

Marsh & Mclennan Companies, Inc filed this 10-Q on April 27, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $5.08B; up 9.3% from $4.65B a year earlier
Net income: $983M; up 30.4% from net income of $754M a year earlier
Diluted EPS: $1.91; up 29.1% from $1.48 a year earlier

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PART I. FINANCIAL INFORMATION		4

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	4

	CONSOLIDATED STATEMENTS OF INCOME	4

	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5

	CONSOLIDATED BALANCE SHEETS	6

	CONSOLIDATED STATEMENTS OF CASH FLOWS	8

	CONSOLIDATED STATEMENTS OF EQUITY	9

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	10

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS	34
	OF OPERATIONS
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	44

ITEM 4.	CONTROLS & PROCEDURES	45

PART II. OTHER INFORMATION		46

ITEM 1.	LEGAL PROCEEDINGS	46

ITEM 1A.	RISK FACTORS	46

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	46

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	46

ITEM 4.	MINE SAFETY DISCLOSURE	46

ITEM 5.	OTHER INFORMATION	46

ITEM 6.	EXHIBITS	46


	Three Months Ended March 31,
(In millions, except per share amounts)		2021		2020
Revenue		$	5,083	$	4,651
Expense:
Compensation and benefits		2,807		2,555
Other operating expenses		918		1,026
Operating expenses		3,725		3,581
Operating income		1,358		1,070
Other net benefit credits		71		64
Interest income		—		2
Interest expense		(118)		(127)

Investment income (loss)		11		(2)

Income before income taxes		1,322		1,007
Income tax expense		324		240


Net income before non-controlling interests		998		767
Less: Net income attributable to non-controlling interests		15		13
Net income attributable to the Company		$	983	$	754
Net income per share attributable to the Company:
Basic		$	1.93	$	1.49

Diluted		$	1.91	$	1.48

Average number of shares outstanding:
Basic		509		505
Diluted		514		510
Shares Outstanding at March 31,		509		506


	Three Months Ended March 31,
(In millions)		2021		2020
Net income before non-controlling interests		$	998	$	767
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments		(91)		(941)

Gain related to pension/post-retirement plans		6		175
Other comprehensive loss, before tax		(85)		(766)
Income tax expense on other comprehensive income		2		26
Other comprehensive loss, net of tax		(87)		(792)
Comprehensive income (loss)		911		(25)
Less: comprehensive income attributable to non-controlling interest		15		13
Comprehensive income (loss) attributable to the Company		$	896	$	(38)


(In millions, except share amounts)	(Unaudited) March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,120	$	2,089
Receivables
Commissions and fees	5,032		4,679
Advanced premiums and claims	119		112

Other	592		677
	5,743		5,468
Less-allowance for credit losses	(146)		(142)
Net receivables	5,597		5,326


Other current assets	832		740
Total current assets	7,549		8,155
Goodwill	15,458		15,517
Other intangible assets	2,603		2,699
Fixed assets (net of accumulated depreciation and amortization of $2,197 at March 31, 2021 and $2,159 at December 31, 2020)	830		856
Pension related assets	1,823		1,768
Right of use assets	1,824		1,894
Deferred tax assets	704		702
Other assets	1,482		1,458
	$	32,273	$	33,049


(In millions, except share amounts)	(Unaudited) March 31, 2021		December 31, 2020
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	1,015	$	517
Accounts payable and accrued liabilities	2,940		3,050
Accrued compensation and employee benefits	1,220		2,400

Current lease liabilities	342		342
Accrued income taxes	368		247
Dividends payable	238		—
Total current liabilities	6,123		6,556
Fiduciary liabilities	8,782		8,585
Less – cash and investments held in a fiduciary capacity	(8,782)		(8,585)
	—		—
Long-term debt	10,242		10,796
Pension, post-retirement and post-employment benefits	2,594		2,662
Long-term lease liabilities	1,850		1,924
Liabilities for errors and omissions	354		366
Other liabilities	1,514		1,485
Commitments and contingencies	—		—
Equity:
Preferred stock, $1 par value, authorized 6,000,000 shares, none issued	—		—
Common stock, $1 par value, authorized 1,600,000,000 shares, issued 560,641,640 shares at March 31, 2021 and December 31, 2020	561		561
Additional paid-in capital	851		943
Retained earnings	16,780		16,272
Accumulated other comprehensive loss	(5,197)		(5,110)
Non-controlling interests	162		156
	13,157		12,822
Less – treasury shares, at cost, 51,871,847 shares at March 31, 2021 and 52,914,550 shares at December 31, 2020	(3,561)		(3,562)
Total equity	9,596		9,260
	$	32,273	$	33,049


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


For the Three Months Ended March 31,
(In millions)	2021		2020
Operating cash flows:
Net income before non-controlling interests	$	998	$	767
Adjustments to reconcile net income used for operations:
Depreciation and amortization of fixed assets and capitalized software	97		97
Amortization of intangible assets	100		86

Non cash lease expense	79		80
Adjustments and payments related to contingent consideration liability	(1)		(10)


Provision for deferred income taxes	14		9
Net (gain) loss on investments	(11)		2
Net loss (gain) on disposition of assets	3		(3)
Share-based compensation expense	78		72

Changes in assets and liabilities:
Net receivables	(275)		(313)
Other current assets	(91)		(34)
Other assets	(54)		57
Accounts payable and accrued liabilities	(73)		(140)
Accrued compensation and employee benefits	(1,180)		(1,178)
Accrued income taxes	121		91
Contributions to pension and other benefit plans in excess of current year credit	(102)		(85)
Other liabilities	26		(38)
Operating lease liabilities	(82)		(86)
Effect of exchange rate changes	(55)		(12)
Net cash used for operations	(408)		(638)
Financing cash flows:
Purchase of treasury shares	(112)		—
Net increase in commercial paper	—		193
Borrowings from term-loan and credit facilities	—		2,000

Repayments of debt	(4)		(503)


Purchase of non-controlling interests	—		(3)

Shares withheld for taxes on vested units – treasury shares	(93)		(112)
Issuance of common stock from treasury shares	35		44
Payments of deferred and contingent consideration for acquisitions	(32)		(29)
Distributions of non-controlling interests	(8)		(18)
Dividends paid	(237)		(232)
Net cash (used for) provided by financing activities	(451)		1,340
Investing cash flows:
Capital expenditures	(69)		(118)
Net sales of long-term investments	4		57



Dispositions	—		7
Acquisitions	—		(200)

Other, net	(2)		9
Net cash used for investing activities	(67)		(245)
Effect of exchange rate changes on cash and cash equivalents	(43)		(132)
(Decrease) increase in cash and cash equivalents	(969)		325
Cash and cash equivalents at beginning of period	2,089		1,155



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


(In millions)	March 31, 2021		December 31, 2020
Contract Assets	$	304	$	236
Contract Liabilities	$	737	$	676


Basic and Diluted EPS Calculation	Three Months Ended March 31,
(In millions, except per share amounts)	2021		2020
Net income before non-controlling interests	$	998	$	767
Less: Net income attributable to non-controlling interests	15		13
Net income attributable to the Company	$	983	$	754
Basic weighted average common shares outstanding	509		505
Dilutive effect of potentially issuable common shares	5		5
Diluted weighted average common shares outstanding	514		510
Average stock price used to calculate common stock equivalents	$	114.96	$	107.10



(In millions)	Pension/Post-Retirement Plans Gains (Losses)		Foreign Currency Translation Gains (Losses)		Total Gains (Losses)
Balance as of December 31, 2020	$	(4,126)	$	(984)	$	(5,110)

Other comprehensive loss before reclassifications	(36)		(91)		(127)
Amounts reclassified from accumulated other comprehensive income	40		—		40
Net current period other comprehensive income (loss)	4		(91)		(87)
Balance as of March 31, 2021	$	(4,122)	$	(1,075)	$	(5,197)


Three Months Ended March 31,	2021						2020
(In millions)	Pre-Tax		Tax (Credit)		Net of Tax		Pre-Tax		Tax (Credit)		Net of Tax
Foreign currency translation adjustments	$	(91)	$	—	$	(91)	$	(941)	$	(11)	$	(930)

Pension/post-retirement plans:
Amortization of (gains) losses included in net periodic pension cost:

Net actuarial losses (a)	52		12		40		40		11		29



Subtotal	52		12		40		40		11		29

Foreign currency translation adjustments	(37)		(8)		(29)		135		26		109
Other adjustments	(7)		(2)		(5)		—		—		—
Effect of remeasurement	(2)		—		(2)		—		—		—
Pension/post-retirement plans gains	6		2		4		175		37		138
Other comprehensive (loss) income	$	(85)	$	2	$	(87)	$	(766)	$	26	$	(792)
(a) Components of net periodic pension cost are included in other net benefit credits in the consolidated statements of income. Income tax expense on net actuarial losses are included in income tax expense.


	Three Months Ended March 31,
(In millions, except per share figures)		2021		2020
Revenue		$	5,083	$	4,705

Net income attributable to the Company		$	983	$	755

Basic net income per share attributable to the Company		$	1.93	$	1.50


Diluted net income per share attributable to the Company		$	1.91	$	1.48


March 31,
(In millions)	2021		2020
Balance as of January 1,	$	15,517	$	14,671
Goodwill acquired	—		142
Other adjustments(a)	(59)		(401)
Balance at March 31,	$	15,458	$	14,412


For the Years Ending December 31,
(In millions)	Estimated Expense
2021 (excludes amortization through March 31, 2021)	$	258
2022	318
2023	293
2024	276
2025	238
Subsequent years	1,220
	$	2,603


	Three Months Ended March 31,
(In millions)		2021		2020
Marsh:
EMEA		$	837	$	754
Asia Pacific		274		238
Latin America		90		91
Total International		1,201		1,083
U.S./Canada		1,124		978
Total Marsh		2,325		2,061
Guy Carpenter		895		827
Subtotal		3,220		2,888
Fiduciary interest income		5		23
Total Risk and Insurance Services		$	3,225	$	2,911
Mercer:


Wealth		$	623	$	592
Health		487		486
Career		178		173
Total Mercer		1,288		1,251
Oliver Wyman		585		511
Total Consulting		$	1,873	$	1,762


	March 31, 2021						December 31, 2020
(In millions)	Gross Cost		Accumulated Amortization		Net Carrying Amount		Gross Cost		Accumulated Amortization		Net Carrying Amount
Client Relationships	$	3,717	$	1,260	$	2,457	$	3,713	$	1,170	$	2,543
Other (a)	387		241		146		386		230		156
Amortized intangibles	$	4,104	$	1,501	$	2,603	$	4,099	$	1,400	$	2,699


	Identical Assets (Level 1)				Observable Inputs (Level 2)				Unobservable Inputs (Level 3)				Total
(In millions)	03/31/21		12/31/20		03/31/21		12/31/20		03/31/21		12/31/20		03/31/21		12/31/20
Assets:
Financial instruments owned:
Exchange traded equity securities(a)	$	60	$	59	$	—	$	—	$	—	$	—	$	60	$	59
Mutual funds(a)	183		186		—		—		—		—		183		186
Money market funds(b)	65		587		—		—		—		—		65		587
Other equity investment(a)	—		—		8		8		—		—		8		8
Contingent purchase consideration asset(c)	—		—		—		—		66		68		66		68
Total assets measured at fair value	$	308	$	832	$	8	$	8	$	66	$	68	$	382	$	908
Fiduciary Assets:


U.S. Treasury Bills	$	—	$	150	$	—	$	—	$	—	$	—	$	—	$	150
Money market funds	241		173		—		—		—		—		241		173
Total fiduciary assets measured at fair value	$	241	$	323	$	—	$	—	$	—	$	—	$	241	$	323
Liabilities:
Contingent purchase consideration liability(d)	$	—	$	—	$	—	$	—	$	233	$	243	$	233	$	243

Total liabilities measured at fair value	$	—	$	—	$	—	$	—	$	233	$	243	$	233	$	243


Combined U.S. and significant non-U.S. Plans	Pension Benefits				Post-retirement Benefits

March 31,	2021		2020		2021		2020
Weighted average assumptions:
Expected return on plan assets	4.72	%	5.31	%	—		—
Discount rate	1.92	%	2.57	%	2.42	%	2.72	%
Rate of compensation increase	1.85	%	1.76	%	—		—


Payment Dates (In millions)	Real Estate Leases
Remainder of 2021	$	308
2022	381
2023	332
2024	289
2025	257
2026	235
Subsequent years	678
Total future lease payments	2,480
Less: Imputed interest	(288)
Total	$	2,192
Current lease liabilities	$	342
Long-term lease liabilities	1,850
Total lease liabilities	$	2,192


Amounts Recorded in the Consolidated Statement of Income
Combined U.S. and significant non-U.S. Plans	Pension Benefits				Post-retirement Benefits
For the Three Months Ended March 31,
(In millions)	2021		2020		2021		2020
Compensation and benefits expense	$	10	$	8	$	—	$	—
Other net benefit credits	(71)		(64)		—		—
Total credit	$	(61)	$	(56)	$	—	$	—


U.S. Plans only	Pension Benefits				Post-retirement Benefits
For the Three Months Ended March 31,
(In millions)	2021		2020		2021		2020

Interest cost	$	46	$	53	$	—	$	—
Expected return on plan assets	(82)		(86)		—		—

Recognized actuarial loss	23		18		—		—
Net periodic benefit credit	$	(13)	$	(15)	$	—	$	—


Significant non-U.S. Plans only	Pension Benefits				Post-retirement Benefits
For the Three Months Ended March 31,
(In millions)	2021		2020		2021		2020
Service cost	$	10	$	8	$	—	$	—
Interest cost	39		53		—		1
Expected return on plan assets	(126)		(124)		—		—
Amortization of prior service credit	—		—		(1)		(1)
Recognized actuarial loss	29		22		1		—
Net periodic benefit credit	$	(48)	$	(41)	$	—	$	—


(In millions)	March 31, 2021		December 31, 2020
Short-term:



Current portion of long-term debt	$	1,015	$	517
	1,015		517
Long-term:





Senior notes – 4.80% due 2021	500		500

Senior notes – 2.75% due 2022	499		499
Senior notes – 3.30% due 2023	349		349
Senior notes – 4.05% due 2023	249		249
Senior notes – 3.50% due 2024	598		598
Senior notes – 3.875% due 2024	995		995
Senior notes – 3.50% due 2025	498		498
Senior notes – 1.349% due 2026	650		677
Senior notes – 3.75% due 2026	598		597
Senior notes – 4.375% due 2029	1,499		1,499
Senior notes – 1.979% due 2030	638		664
Senior notes – 2.250% due 2030	738		737
Senior notes – 5.875% due 2033	298		298
Senior notes – 4.75% due 2039	495		495
Senior notes – 4.35% due 2047	493		493
Senior notes – 4.20% due 2048	592		592
Senior notes – 4.90% due 2049	1,237		1,237
Mortgage – 5.70% due 2035	327		331

Other	4		5
	11,257		11,313
Less current portion	1,015		517
	$	10,242	$	10,796


(In millions)	Severance		Real Estate Related Costs (a)		Information Technology (a)		Consulting and Other Outside Services (b)		Total
Liability at 1/1/20	$	42	$	5	$	—	$	—	$	47
2020 Charges	43		69		62		77		251
Cash payments	(69)		(25)		(55)		(77)		(226)
Non-cash charges	—		(42)		(5)		—		(47)

Liability at 12/31/20	$	16	$	7	$	2	$	—	$	25
2021 Charges	2		6		7		8		23
Cash payments	(10)		(2)		(7)		(7)		(26)
Non-cash charges	—		(4)		—		—		(4)
Liability at 3/31/21	$	8	$	7	$	2	$	1	$	18


(In millions)	Liability at 1/1/20		Amounts Accrued		Cash Paid		Non-Cash/Other		Liability at 12/31/20		Amounts Accrued		Cash Paid		Non-Cash/Other		Liability at 3/31/21
Severance	$	51	$	39	$	(54)	$	—	$	36	$	5	$	(20)	$	—	$	21
Future rent under non-cancelable leases and other costs	51		50		(46)		(10)		45		6		(8)		—		43
Total	$	102	$	89	$	(100)	$	(10)	$	81	$	11	$	(28)	$	—	$	64


	Three Months Ended March 31,				% Change GAAP Revenue				Components of Revenue Change*
							Currency Impact	Acquisitions/ Dispositions/ Other Impact	Underlying Revenue
(In millions, except percentage figures)	2021		2020
Risk and Insurance Services
Marsh	$	2,325	$	2,061	13	%			3	%	2	%	8	%
Guy Carpenter	895		827		8	%			2	%	—		7	%
Subtotal	3,220		2,888		11	%			3	%	1	%	7	%
Fiduciary Interest Income	5		23
Total Risk and Insurance Services	3,225		2,911		11	%			3	%	1	%	7	%
Consulting
Mercer	1,288		1,251		3	%			4	%	(1)	%	—
Oliver Wyman Group	585		511		14	%			3	%	—		11	%
Total Consulting	1,873		1,762		6	%			4	%	(1)	%	3	%
Corporate/Eliminations	(15)		(22)
Total Revenue	$	5,083	$	4,651	9	%			3	%	—		6	%


For the Three Months Ended March 31,	Three Months
(In millions)		2021			2020
Revenue		$	3,225		$	2,911
Compensation and Benefits		1,610			1,452
Other Operating Expenses		555			605
Expense		2,165			2,057
Operating Income		$	1,060		$	854
Operating Income Margin		32.9		%	29.4		%


(In millions)	Payment due by Period
Contractual Obligations	Total		Within 1 Year		1-3 Years		4-5 Years		After 5 Years



Short-term debt	1,015		1,015		—		—		—
Long-term debt	10,309		—		1,635		1,736		6,938
Interest on long-term debt	5,255		445		806		644		3,360
Net operating leases	2,480		407		690		530		853
Service agreements	296		164		92		32		8
Other long-term obligations	512		153		311		47		1


Total	$	19,867	$	2,184	$	3,534	$	2,989	$	11,160


(In millions of dollars)	March 31, 2021
Cash and cash equivalents invested in money market funds, certificates of deposit and time deposits	$	1,120
Fiduciary cash and investments	$	8,782


Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2021	—	$	—	—	$	2,422,987,756
February 1-28, 2021	—	$	—	—	$	2,422,987,756
March 1-31, 2021	1,008,148	$	117.57	1,008,148	$	2,304,455,428
Total	1,008,148			1,008,148	$	2,304,455,428


Date:	April 27, 2021	/s/ Mark C. McGivney
		Mark C. McGivney
		Chief Financial Officer

Date:	April 27, 2021	/s/ Stacy M. Mills
		Stacy M. Mills
		Vice President & Controller
		(Chief Accounting Officer)


Exhibit No.						Exhibit Name

10.1						Letter Agreement, effective February 19, 2019, between Marsh & McLennan Companies, Inc. and Peter C. Hearn (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019)

10.2						Non-Competition and Non-Solicitation Agreement, effective as of June 1, 2016, between Marsh & McLennan Companies, Inc. and Peter C. Hearn (incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019)

10.3						Letter Agreement, effective as of January 20, 2021, between Marsh & McLennan Companies, Inc. and Martine Ferland

10.4						Form of Deferred Stock Unit Award, with grant dates from March 1, 2021 through February 1, 2022, under the Marsh & McLennan Companies, Inc. 2020 Incentive and Stock Award Plan – Cliff Vesting

10.5						Form of Deferred Stock Unit Award, with grant dates from March 1, 2021 through February 1, 2022, under the Marsh & McLennan Companies, Inc. 2020 Incentive and Stock Award Plan – Ratable Vesting

10.6						Form of Restricted Stock Unit Award, dated as of February 22, 2021, under the Marsh & McLennan Companies, Inc. 2020 Incentive and Stock Award Plan

10.7						Form of Performance Stock Unit Award, dated as of February 22, 2021, under the Marsh & McLennan Companies, Inc. 2020 Incentive and Stock Award Plan

10.8						Form of Stock Option Award, dated as of February 22, 2021, under the Marsh & McLennan Companies, Inc. 2020 Incentive and Stock Award Plan

10.9						Amended and Restated 5 Year Credit Agreement, dated as of April 2, 2021, among Marsh & McLennan Companies, Inc., the designated subsidiaries party thereto as borrowers, Citibank, N.A., as administrative agent, and the lenders from time to time party thereto (incorporated by reference to the Company’s Current Report on Form 8-K filed on April 2, 2021)

31.1						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2						Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.1						Section 1350 Certifications

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			Daniel S. Glaser President and Chief Executive Office Marsh & McLennan Companies, Inc. 1166 Avenue of the Americas New York, New York 10036 212 345 4874 Fax 212 345 6676 dan.glaser@mmc.com www.mmc.com


Annual Base Salary			$850,000
Annual Target Bonus Opportunity			Bonus awards are discretionary. Target bonus of $1,900,000 commencing with the 2021 performance year (awarded in 2022). Actual bonus may range from 0% - 200% of target, based on achievement of individual performance objectives, Mercer’s performance and/or Marsh & McLennan Companies’ performance as Marsh & McLennan Companies may establish from time to time.
Annual Target Long-Term Incentive Opportunity			Long-term incentive awards are discretionary. Target award value of $2,300,000, commencing with the award made in 2021.


Date:	April 27, 2021	/s/ Daniel S. Glaser
		Daniel S. Glaser
		President and Chief Executive Officer