Marsh McLennan Reports Third Quarter 2021 Results

GAAP Revenue Increases 16%; Underlying Revenue Rises 13%
Growth in GAAP Operating Income of 37% and Adjusted Operating Income of 19%
Third Quarter EPS Rises to $1.05 from $0.62 and Adjusted EPS Increases 32% to $1.08
Nine Months EPS Rises to $4.56 from $3.21 and Adjusted EPS Increases 28% to $4.82

NEW YORK, October 21, 2021--(BUSINESS WIRE)--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 third quarter ended September 30, 2021.

Dan Glaser, President and CEO, said: "We delivered another quarter of excellent results. For the second consecutive quarter, underlying growth was at the highest level in over two decades. We grew underlying revenue by 13%, adjusted operating income by 19%, and adjusted EPS by 32%. For the first nine months of 2021, we achieved 10% underlying revenue growth, 21% adjusted operating income growth, and 28% adjusted EPS growth."

"Given the outstanding quarter and year-to-date performance, we are on track for a terrific year."

Consolidated Results

Consolidated revenue in the third quarter of 2021 was $4.6 billion, an increase of 16% compared with the third quarter of 2020. On an underlying basis, revenue increased 13%. Operating income was $740 million, an increase of 37% from the prior year. Adjusted operating income, which excludes noteworthy items as presented in the attached supplemental schedules, rose 19% to $759 million. Net income attributable to the Company was $537 million, or $1.05 per diluted share, compared with $0.62 in the third quarter of 2020. Adjusted earnings per share rose 32% to $1.08 per diluted share compared with $0.82 for the prior year period.

For the nine months ended September 30, 2021, consolidated revenue was $14.7 billion, an increase of 15%, or 10% on an underlying basis compared to the prior period. Operating income was $3.3 billion, an increase of 33% from the prior year period. Adjusted operating income rose 21% to $3.4 billion. Net income attributable to the Company was $2.3 billion. Fully diluted earnings per share was $4.56 compared with $3.21 in the first nine months of 2020. Adjusted earnings per share increased 28% to $4.82 compared with $3.77 for the comparable period in 2020.

Risk & Insurance Services

Risk & Insurance Services revenue was $2.7 billion in the third quarter of 2021, an increase of 17%, or 13% on an underlying basis. Operating income rose 21% to $403 million, and adjusted operating income was $469 million, an increase of 21% from the prior year period. For the nine months ended September 30, 2021, revenue was $9.0 billion, an increase of 16%, or 11% on an underlying basis. Operating income rose 28% to $2.4 billion, and adjusted operating income was $2.5 billion, an increase of 20% from the prior year period.

Marsh's revenue in the third quarter was $2.4 billion, an increase of 13% on an underlying basis. In U.S./Canada, underlying revenue rose 16%. International operations produced underlying revenue growth of 9%, reflecting 12% growth in Latin America, 9% growth in Asia Pacific, and 8% growth in EMEA. For the nine months ended September 30, 2021, Marsh’s underlying revenue growth was 12% compared to the prior period a year ago.

Guy Carpenter's revenue in the third quarter was $314 million, an increase of 15% on an underlying basis. For the nine months ended September 30, 2021, Guy Carpenter’s underlying revenue growth was 10%.

Consulting

Consulting revenue in the third quarter was $1.9 billion, an increase of 13% or 12% on an underlying basis compared to the same period a year ago. Operating income increased 45% to $404 million, and adjusted operating income increased 15% to $350 million. For the first nine months of 2021, revenue was $5.7 billion, an increase of 12%, or an increase of 9% on an underlying basis. Operating income of $1.1 billion increased 36% and adjusted operating income increased 25% to $1.1 billion.

Mercer's revenue was $1.3 billion in the third quarter, an increase of 7% on an underlying basis. Career revenue of $253 million was up 13% on an underlying basis. Wealth revenue of $613 million increased 6% on an underlying basis, and Health revenue of $449 million increased 4% on an underlying basis. For the nine months ended September 30, 2021, Mercer’s revenue was $3.9 billion, an increase of 4% on an underlying basis compared to the same period a year ago.

Oliver Wyman’s revenue was $610 million in the third quarter, an increase of 25% on an underlying basis. For the first nine months ended September 30, 2021, Oliver Wyman’s revenue was $1.8 billion, an increase of 21% on an underlying basis.

Other Items

The Company repurchased 1.9 million shares of stock for $300 million in the third quarter. Through nine months, the Company has repurchased 5.3 million shares for $734 million.

Conference Call

A conference call to discuss third quarter 2021 results will be held today at 8:30 a.m. Eastern time. To participate in the teleconference, please dial +1 866 437 7574. Callers from outside the United States should dial +1 409 220 9376. The access code for both numbers is 4336169. The live audio webcast may be accessed at marshmclennan.com. A replay of the webcast will be available approximately two hours after the event.

About Marsh McLennan

Marsh McLennan (NYSE: MMC) is the world’s leading professional services firm in the areas of risk, strategy and people. The Company’s 81,000 colleagues advise clients in 130 countries. With annual revenue over $19 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses. Marsh provides data-driven risk advisory services and insurance solutions to commercial and consumer clients. Guy Carpenter develops advanced risk, reinsurance and capital strategies that help clients grow profitably and pursue emerging opportunities. Mercer delivers advice and technology-driven solutions that help organizations redefine the world of work, reshape retirement and investment outcomes, and unlock health and well being 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 marshmclennan.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 increasing prevalence of ransomware, supply chain and other forms of cyber attacks, and their potential to disrupt our operations and result in the disclosure of confidential client or company information;

• the impact from lawsuits or investigations arising from errors and omissions, breaches of fiduciary duty or other claims against us in our capacity as a broker or investment advisor;

• increased regulatory activity and scrutiny by regulatory or law enforcement authorities;

• the financial and operational impact of complying with laws and regulations where we operate and the risks of noncompliance with such laws by us or third-party providers, including anti-corruption laws such as the U.S. Foreign Corrupt Practices Act, U.K. Anti-Bribery Act and cybersecurity and data privacy regulations such as the E.U.’s General Data Protection Regulation;

• the impact of COVID-19, including emerging vaccine mandates, on our business operations, results of operations, cash flows and financial position;

• 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;

• our ability to attract and retain industry leading talent;

• the impact of changes in tax laws, guidance and interpretations, or disagreements with tax authorities; and

• the regulatory, contractual and reputational risks that arise based on insurance placement activities and insurer revenue streams.

The factors identified above are not exhaustive. Marsh McLennan 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 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 data) (Unaudited)
		Three Months Ended September 30,										Nine Months Ended September 30,
		2021					2020					2021					2020
Revenue		$	4,583				$	3,968				$	14,683				$	12,808
Expense:
Compensation and benefits		2,853					2,495					8,520					7,479
Other operating expenses		990					933					2,837					2,834
Operating expenses		3,843					3,428					11,357					10,313
Operating income		740					540					3,326					2,495
Other net benefit credits		69					60					211					187
Interest income		1					1					2					5
Interest expense		(107		)			(128		)			(335		)			(387		)
Investment income (loss)		13					(14		)			43					(47		)
Income before income taxes		716					459					3,247					2,253
Income tax expense		174					139					880					586
Net income before non-controlling interests		542					320					2,367					1,667
Less: Net income attributable to non-controlling interests		5					4					27					25
Net income attributable to the Company		$	537				$	316				$	2,340				$	1,642
Net income per share attributable to the Company:
- Basic		$	1.06				$	0.62				$	4.61				$	3.25
- Diluted		$	1.05				$	0.62				$	4.56				$	3.21
Average number of shares outstanding
- Basic		506					507					508					506
- Diluted		513					512					513					511
Shares outstanding at September 30		505					507					505					507

Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three Months Ended September 30
(Millions) (Unaudited)

The Company conducts business in 130 countries. As a result, foreign exchange rate movements may impact period-to-period comparisons of revenue. Similarly, certain other items such as acquisitions and dispositions, including transfers among businesses, may impact period-to-period comparisons of revenue. Underlying revenue measures the change in revenue from one period to the next by isolating these impacts.

															Components of Revenue Change*
		Three Months Ended September 30,										% Change GAAP Revenue			Currency Impact			Acquisitions/ Dispositions/ Other Impact				Underlying Revenue
		2021					2020
Risk and Insurance Services
Marsh		$	2,352				$	2,009				17	%		2	%		3	%			13	%
Guy Carpenter		314					274					15	%		—			—				15	%
Subtotal		2,666					2,283					17	%		1	%		2	%			13	%
Fiduciary interest income		4					8
Total Risk and Insurance Services		2,670					2,291					17	%		1	%		2	%			13	%
Consulting
Mercer		1,315					1,216					8	%		2	%		(1	)%			7	%
Oliver Wyman Group		610					480					27	%		1	%		—				25	%
Total Consulting		1,925					1,696					13	%		2	%		—				12	%
Corporate Eliminations		(12			)		(19		)
Total Revenue		$	4,583				$	3,968				16	%		2	%		1	%			13	%

Revenue Details

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

													Components of Revenue Change*
		Three Months Ended September 30,								% Change GAAP Revenue			Currency Impact			Acquisitions/ Dispositions/ Other Impact			Underlying Revenue
		2021				2020
Marsh:
EMEA		$	600			$	536			12	%		4	%		—			8	%
Asia Pacific		281				254				10	%		2	%		—			9	%
Latin America		105				93				13	%		1	%		—			12	%
Total International		986				883				12	%		3	%		—			9	%
U.S./Canada		1,366				1,126				21	%		—			4	%		16	%
Total Marsh		$	2,352			$	2,009			17	%		2	%		3	%		13	%
Mercer:
Wealth		$	613			$	566			9	%		3	%		(1)	%		6	%
Health		449				430				4	%		1	%		(1)	%		4	%
Career		253				220				15	%		1	%		—			13	%
Total Mercer		$	1,315			$	1,216			8	%		2	%		(1)	%		7	%

* Components of revenue change may not add due to rounding.

Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Nine Months Ended September 30
(Millions) (Unaudited)

The Company conducts business in 130 countries. As a result, foreign exchange rate movements may impact period-to-period comparisons of revenue. Similarly, certain other items such as acquisitions and dispositions, including transfers among businesses, may impact period-to-period comparisons of revenue. Underlying revenue measures the change in revenue from one period to the next by isolating these impacts.

															Components of Revenue Change*
		Nine Months Ended September 30,										% Change GAAP Revenue			Currency Impact			Acquisitions/ Dispositions/ Other Impact				Underlying Revenue
		2021					2020
Risk and Insurance Services
Marsh		$	7,327				$	6,231				18	%		3	%		3	%			12	%
Guy Carpenter		1,697					1,534					11	%		1	%		—				10	%
Subtotal		9,024					7,765					16	%		3	%		2	%			11	%
Fiduciary interest income		12					40
Total Risk and Insurance Services		9,036					7,805					16	%		3	%		2	%			11	%
Consulting
Mercer		3,877					3,616					7	%		4	%		(1	)%			4	%
Oliver Wyman Group		1,813					1,458					24	%		3	%		—				21	%
Total Consulting		5,690					5,074					12	%		4	%		(1	)%			9	%
Corporate Eliminations		(43		)			(71		)
Total Revenue		$	14,683				$	12,808				15	%		3	%		1	%			10	%

Revenue Details

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

													Components of Revenue Change*
		Nine Months Ended September 30,								% Change GAAP Revenue			Currency Impact			Acquisitions/ Dispositions/ Other Impact			Underlying Revenue
		2021				2020
Marsh:
EMEA		$	2,233			$	1,887			18	%		6	%		2	%		10	%
Asia Pacific		902				790				14	%		6	%		—			9	%
Latin America		298				283				5	%		(1)	%		—			6	%
Total International		3,433				2,960				16	%		5	%		1	%		9	%
U.S./Canada		3,894				3,271				19	%		1	%		5	%		14	%
Total Marsh		$	7,327			$	6,231			18	%		3	%		3	%		12	%
Mercer:
Wealth		$	1,861			$	1,719			8	%		6	%		(1)	%		4	%
Health		1,398				1,348				4	%		2	%		(1)	%		3	%
Career		618				549				13	%		3	%		—			10	%
Total Mercer		$	3,877			$	3,616			7	%		4	%		(1)	%		4	%

* Components of revenue change may not add due to rounding.

Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three Months Ended September 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 in accordance with "GAAP" or "reported" results). The Company also refers to and presents certain additional non-GAAP financial measures, within the meaning of Regulation G under the Securities Exchange Act of 1934. These measures are: adjusted operating income (loss), adjusted operating margin, adjusted income, net of tax and adjusted earnings per share (EPS). The Company has included reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP in the following tables.

The Company believes these non-GAAP financial measures provide useful supplemental information that enables investors to better compare the Company’s performance across periods. Management also uses these measures internally to assess the operating performance of its businesses, to assess performance for employee compensation purposes, and to decide how to allocate resources. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP. The Company's non-GAAP measures include adjustments that reflect how management views its businesses, and may differ from similarly titled non-GAAP measures presented by other companies.

Adjusted Operating Income (Loss) and Adjusted Operating Margin

Adjusted operating income (loss) is calculated by excluding the impact of certain noteworthy items from the Company's GAAP operating income (loss). The following tables identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income (loss), on a consolidated and reportable segment basis, for the three and nine months ended September 30, 2021 and 2020. The following tables also present adjusted operating margin. For the three and nine months ended September 30, 2021 and 2020, adjusted operating margin is calculated by dividing the sum of adjusted operating income and identified intangible asset amortization by consolidated or segment adjusted revenue.

		Risk & Insurance Services				Consulting					Corporate/ Eliminations					Total
Three Months Ended September 30, 2021
Operating income (loss)		$	403			$	404				$	(67	)			$	740
Operating margin		15.1		%		21.0		%			N/A					16.1		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)		7				—					5					12
Changes in contingent consideration (b)		17				1					—					18
JLT integration and restructuring costs (c)		11				9					(1		)			19
JLT acquisition-related costs (d)		10				—					1					11
JLT legacy E&O provision (e)		—				(63		)			—					(63		)
Legal claims and other (f)		21				(1		)			2					22
Operating income adjustments		66				(54		)			7					19
Adjusted operating income (loss)		$	469			$	350				$	(60	)			$	759
Total identified intangible amortization expense		$	75			$	14				$	—				$	89
Adjusted operating margin		20.4		%		18.9		%			N/A					18.5		%
Three Months Ended September 30, 2020
Operating income (loss)		$	333			$	278				$	(71	)			$	540
Operating margin		14.5		%		16.4		%			N/A					13.6		%
Add (deduct) impact of noteworthy items:
Restructuring, excluding JLT (a)		—				11					12					23
Changes in contingent consideration (b)		15				1					—					16
JLT integration and restructuring costs (c)		25				14					5					44
JLT acquisition-related costs (d)		15				1					(1		)			15
Other		—				1					(1		)			—		...
Operating income adjustments		55				28					15					98
Adjusted operating income (loss)		$	388			$	306				$