Marsh & McLennan Companies, Inc.
Supplemental Information - ProForma Consolidated Statements of Income
(Millions) (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
| | | 2017 |
| As Reported: | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Full Year |
| Revenue | | $ | 3,503 |
| | $ | 3,495 |
| | $ | 3,341 |
| | $ | 3,685 |
| | $ | 14,024 |
|
| Expense: | | | | | | | | | | |
| Compensation and Benefits | | 1,945 |
| | 1,935 |
| | 1,906 |
| | 2,098 |
| | 7,884 |
|
| Other Operating Expenses | | 749 |
| | 796 |
| | 838 |
| | 901 |
| | 3,284 |
|
| Operating Expenses | | 2,694 |
| | 2,731 |
| | 2,744 |
| | 2,999 |
| | 11,168 |
|
| Operating Income | | 809 |
| | 764 |
| | 597 |
| | 686 |
| | 2,856 |
|
| Net Interest Expense and Other | | (56 | ) | | (53 | ) | | (60 | ) | | (44 | ) | | (213 | ) |
| Income Before Income Taxes | | 753 |
| | 711 |
| | 537 |
| | 642 |
| | 2,643 |
|
| Income Tax Expense | | 175 |
| | 204 |
| | 140 |
| | 614 |
| | 1,133 |
|
| Net Income Before Non-Controlling Interests | | 578 |
| | 507 |
| | 397 |
| | 28 |
| | 1,510 |
|
| Net Income Attributable to the Company | | $ | 569 |
| | $ | 501 |
| | $ | 393 |
| | $ | 29 |
| | $ | 1,492 |
|
| Diluted Net Income Per Share | | $ | 1.09 |
| | $ | 0.96 |
| | $ | 0.76 |
| | $ | 0.06 |
| | $ | 2.87 |
|
| Adjusted Net Income Per Share | | $ | 1.08 |
| | $ | 1.00 |
| | $ | 0.79 |
| | $ | 1.05 |
| | $ | 3.92 |
|
| | | | | | | | | | | |
| Adjustments Related to New Standards: | | | | | | | | | | |
| Revenue | | $ | 151 |
| | $ | 25 |
| | $ | (70 | ) | | $ | (109 | ) | | $ | (3 | ) |
| Expense: | | | | | | | | | | |
| Compensation and Benefits | | | | | | | | | | |
| Revenue Standard | | 67 |
| | 13 |
| | (10 | ) | | (74 | ) | | (4 | ) |
| Pension Standard (a) | | 60 |
| | 63 |
| | 62 |
| | 16 |
| | 201 |
|
| Operating Expenses | | 127 |
| | 76 |
| | 52 |
| | (58 | ) | | 197 |
|
| Operating Income | | 24 |
| | (51 | ) | | (122 | ) | | (51 | ) | | (200 | ) |
| Other Net Periodic Benefit Credit (a) | | 60 |
| | 63 |
| | 62 |
| | 16 |
| | 201 |
|
| Income Before Income Taxes | | 84 |
| | 12 |
| | (60 | ) | | (35 | ) | | 1 |
|
| Income Tax Expense | | 24 |
| | 3 |
| | (17 | ) | | (10 | ) | | — |
|
| Net Income Before Non-Controlling Interests | | 60 |
| | 9 |
| | (43 | ) | | (25 | ) | | 1 |
|
| Net Income Attributable to the Company | | $ | 60 |
| | $ | 9 |
| | $ | (43 | ) | | $ | (25 | ) | | $ | 1 |
|
| Diluted and Adjusted Net Income Per Share | | $ | 0.12 |
| | $ | 0.02 |
| | $ | (0.09 | ) | | $ | (0.05 | ) | | $ | — |
|
| | | | | | | | | | | |
| ProForma: | | | | | | | | | | |
| Revenue | | $ | 3,654 |
| | $ | 3,520 |
| | $ | 3,271 |
| | $ | 3,576 |
| | $ | 14,021 |
|
| Expense: | | | | | | | | | | |
| Compensation and Benefits | | 2,072 |
| | 2,011 |
| | 1,958 |
| | 2,040 |
| | 8,081 |
|
| Other Operating Expenses | | 749 |
| | 796 |
| | 838 |
| | 901 |
| | 3,284 |
|
| Operating Expenses | | 2,821 |
| | 2,807 |
| | 2,796 |
| | 2,941 |
| | 11,365 |
|
| Operating Income | | 833 |
| | 713 |
| | 475 |
| | 635 |
| | 2,656 |
|
| Net Interest Expense and Other | | (56 | ) | | (53 | ) | | (60 | ) | | (44 | ) | | (213 | ) |
| Other Net Periodic Benefit Credit (a) | | 60 |
| | 63 |
| | 62 |
| | 16 |
| | 201 |
|
| Income Before Income Taxes | | 837 |
| | 723 |
| | 477 |
| | 607 |
| | 2,644 |
|
| Income Tax Expense | | 199 |
| | 207 |
| | 123 |
| | 604 |
| | 1,133 |
|
| Net Income Before Non-Controlling Interests | | 638 |
| | 516 |
| | 354 |
| | 3 |
| | 1,511 |
|
| Net Income Attributable to the Company | | $ | 629 |
| | $ | 510 |
| | $ | 350 |
| | $ | 4 |
| | $ | 1,493 |
|
| Diluted Net Income Per Share | | $ | 1.21 |
| | $ | 0.98 |
| | $ | 0.67 |
| | $ | 0.01 |
| | $ | 2.87 |
|
| Adjusted Net Income Per Share | | $ | 1.20 |
| | $ | 1.02 |
| | $ | 0.70 |
| | $ | 1.00 |
| | $ | 3.92 |
|
See basis of presentation information on page 5.
(a) Reflects the reclassification of other net benefit credits.
Marsh & McLennan Companies, Inc.
Supplemental Information - ProForma Revenue Analysis
(Millions) (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
| | | 2017 |
| As Reported: | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | Full Year |
| Risk and Insurance Services | | | | | | | | | | |
| Marsh | | $ | 1,596 |
| | $ | 1,614 |
| | $ | 1,482 |
| | $ | 1,712 |
| | $ | 6,404 |
|
| Guy Carpenter | | 385 |
| | 293 |
| | 270 |
| | 239 |
| | 1,187 |
|
| Subtotal | | 1,981 |
| | 1,907 |
| | 1,752 |
| | 1,951 |
| | 7,591 |
|
| Fiduciary Interest Income | | 8 |
| | 9 |
| | 11 |
| | 11 |
| | 39 |
|
| Total Risk and Insurance Services | | 1,989 |
| | 1,916 |
| | 1,763 |
| | 1,962 |
| | 7,630 |
|
| Consulting | | | | | | | | | | . |
|
| Mercer | | 1,077 |
| | 1,109 |
| | 1,149 |
| | 1,193 |
| | 4,528 |
|
| Oliver Wyman Group | | 449 |
| | 483 |
| | 438 |
| | 546 |
| | 1,916 |
|
| Total Consulting | | 1,526 |
| | 1,592 |
| | 1,587 |
| | 1,739 |
| | 6,444 |
|
| Corporate/Eliminations | | (12 | ) | | (13 | ) | | (9 | ) | | (16 | ) | | (50 | ) |
| Total Revenue | | $ | 3,503 |
| | $ | 3,495 |
| | $ | 3,341 |
| | $ | 3,685 |
| | $ | 14,024 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| Adjustments Related to Revenue Standard: | | | | | | | | |
| Risk and Insurance Services | | | | | | | | | | |
| Marsh | | $ | (46 | ) | | $ | 14 |
| | $ | 20 |
| | $ | 11 |
| | $ | (1 | ) |
| Guy Carpenter | | 202 |
| | 15 |
| | (87 | ) | | (135 | ) | | (5 | ) |
| Subtotal | | 156 |
| | 29 |
| | (67 | ) | | (124 | ) | | (6 | ) |
| Fiduciary Interest Income | | — |
| | — |
| | — |
| | — |
| | — |
|
| Total Risk and Insurance Services | | 156 |
| | 29 |
| | (67 | ) | | (124 | ) | | (6 | ) |
| Consulting | | | | | | | | | | |
| Mercer | | (5 | ) | | (4 | ) | | (3 | ) | | 15 |
| | 3 |
|
| Oliver Wyman Group | | — |
| | — |
| | — |
| | — |
| | — |
|
| Total Consulting | | (5 | ) | | (4 | ) | | (3 | ) | | 15 |
| | 3 |
|
| Corporate/Eliminations | | — |
| | — |
| | — |
| | — |
| | — |
|
| Total Revenue | | $ | 151 |
| | $ | 25 |
| | $ | (70 | ) | | $ | (109 | ) | | $ | (3 | ) |
|
| | | | | | | | | | | | | | | | | | | | |
| ProForma: | | | | | | | | | | |
| Risk and Insurance Services | | | | | | | | | | |
| Marsh | | $ | 1,550 |
| | $ | 1,628 |
| | $ | 1,502 |
| | $ | 1,723 |
| | $ | 6,403 |
|
| Guy Carpenter | | 587 |
| | 308 |
| | 183 |
| | 104 |
| | 1,182 |
|
| Subtotal | | 2,137 |
| | 1,936 |
| | 1,685 |
| | 1,827 |
| | 7,585 |
|
| Fiduciary Interest Income | | 8 |
| | 9 |
| | 11 |
| | 11 |
| | 39 |
|
| Total Risk and Insurance Services | | 2,145 |
| | 1,945 |
| | 1,696 |
| | 1,838 |
| | 7,624 |
|
| Consulting | | | | | | | | | | |
| Mercer | | 1,072 |
| | 1,105 |
| | 1,146 |
| | 1,208 |
| | 4,531 |
|
| Oliver Wyman Group | | 449 |
| | 483 |
| | 438 |
| | 546 |
| | 1,916 |
|
| Total Consulting | | 1,521 |
| | 1,588 |
| | 1,584 |
| | 1,754 |
| | 6,447 |
|
| Corporate/Eliminations | | (12 | ) | | (13 | ) | | (9 | ) | | (16 | ) | | (50 | ) |
| Total Revenue | | $ | 3,654 |
| | $ | 3,520 |
| | $ | 3,271 |
| | $ | 3,576 |
| | $ | 14,021 |
|
See basis of presentation information on page 5.
Marsh & McLennan Companies, Inc.
Supplemental Information - ProForma Adjustments Related to New Accounting Standards
(Millions) (Unaudited) |
| | | | | | | | | | | | | | | | | | | | |
| | | 2017 |
| | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Full Year |
| Risk and Insurance Services | | | | | | | | | | |
| Revenue | | $ | 156 |
| | $ | 29 |
| | $ | (67 | ) | | $ | (124 | ) | | $ | (6 | ) |
| Expense: | | | | | | | | | | |
| Related to Revenue Standard | | 70 |
| | 17 |
| | (6 | ) | | (70 | ) | | 11 |
|
| NOI Impact of Revenue Standard | | 86 |
| | 12 |
| | (61 | ) | | (54 | ) | | (17 | ) |
| NOI Impact of Pension Standard (a) | | (45 | ) | | (46 | ) | | (46 | ) | | (3 | ) | | (140 | ) |
| Operating Income | | 41 |
| | (34 | ) | | (107 | ) | | (57 | ) | | (157 | ) |
| Noteworthy Items (a) | | — |
| | — |
| | — |
| | (47 | ) | | (47 | ) |
| Adjusted Operating Income | | 41 |
| | (34 | ) | | (107 | ) | | (104 | ) | | (204 | ) |
| | | | | | | | | | | |
| Consulting | | | | | | | | | | |
| Revenue | | (5 | ) | | (4 | ) | | (3 | ) | | 15 |
| | 3 |
|
| Expense: | | | | | | | | | | |
| Related to Revenue Standard | | (3 | ) | | (4 | ) | | (4 | ) | | (4 | ) | | (15 | ) |
| NOI Impact of Revenue Standard | | (2 | ) | | — |
| | 1 |
| | 19 |
| | 18 |
|
| NOI Impact of Pension Standard (a) | | (16 | ) | | (18 | ) | | (18 | ) | | (12 | ) | | (64 | ) |
| Operating Income | | (18 | ) | | (18 | ) | | (17 | ) | | 7 |
| | (46 | ) |
| Noteworthy Items (a) | | — |
| | — |
| | — |
| | (7 | ) | | (7 | ) |
| Adjusted Operating Income | | (18 | ) | | (18 | ) | | (17 | ) | | — |
| | (53 | ) |
| | | | | | | | | | | |
| Corporate | | | | | | | | | | |
| Operating Income (b) | | 1 |
| | 1 |
| | 2 |
| | (1 | ) | | 3 |
|
| Adjusted Operating Income (b) | | 1 |
| | 1 |
| | 2 |
| | (1 | ) | | 3 |
|
| | | | | | | | | | | |
| Consolidated Adjustments | | | | | | | | | | |
| Revenue | | 151 |
| | 25 |
| | (70 | ) | | (109 | ) | | (3 | ) |
| Expense: | | | | | | | | | | |
| Related to Revenue Standard | | 67 |
| | 13 |
| | (10 | ) | | (74 | ) | | (4 | ) |
| NOI Impact of Revenue Standard | | 84 |
| | 12 |
| | (60 | ) | | (35 | ) | | 1 |
|
| NOI Impact of Pension Standard (a) | | (60 | ) | | (63 | ) | | (62 | ) | | (16 | ) | | (201 | ) |
| Operating Income | | 24 |
| | (51 | ) | | (122 | ) | | (51 | ) | | (200 | ) |
| Noteworthy Items (a) | | — |
| | — |
| | — |
| | (54 | ) | | (54 | ) |
| Adjusted Operating Income | | $ | 24 |
| | $ | (51 | ) | | $ | (122 | ) | | $ | (105 | ) | | $ | (254 | ) |
See basis of presentation information on page 5.
(a) The reclassification of the non-service cost components of net periodic benefit costs will impact the line item presentation of operating income, but will have no impact on the Company’s income before taxes, net income or earnings per share. The net periodic benefit cost reclassification of $16 million in the fourth quarter of 2017 is comprised of a credit of $70 million, partly offset by a pension settlement charge of $54 million. After the reclassification of net periodic benefit costs, the $54 million pension settlement charge is no longer a part of operating income, but continues to be included as an adjustment in the calculation of Adjusted Earnings Per Share.
(b) Adjustment related to the reclassification of other net benefit credits.
Marsh & McLennan Companies, Inc.
Supplemental Information - ProForma Operating Income and Margin
(Millions) (Unaudited) |
| | | | | | | | | | | | | | | | | | | | |
| | | 2017 |
| | | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Full Year |
| Risk and Insurance Services | | | | | | | | | | |
| Revenue | | $ | 2,145 |
| | $ | 1,945 |
| | $ | 1,696 |
| | $ | 1,838 |
| | $ | 7,624 |
|
| Expense: | | | | | | | | | | |
| Compensation and Benefits | | 1,095 |
| | 1,031 |
| | 1,039 |
| | 1,017 |
| | 4,182 |
|
| Other Operating Expenses | | 396 |
| | 420 |
| | 450 |
| | 462 |
| | 1,728 |
|
| Operating Expenses | | 1,491 |
| | 1,451 |
| | 1,489 |
| | 1,479 |
| | 5,910 |
|
| Operating Income | | 654 |
| | 494 |
| | 207 |
| | 359 |
| | 1,714 |
|
| Noteworthy Items | | (13 | ) | | 7 |
| | 23 |
| | 10 |
| | 27 |
|
| Adjusted Operating Income | | 641 |
| | 501 |
| | 230 |
| | 369 |
| | 1,741 |
|
| Operating Margin | | 30.5 | % | | 25.4 | % | | 12.2 | % | | 19.5 | % | | 22.5 | % |
| Adjusted Operating Margin | | 29.9 | % | | 25.8 | % | | 13.6 | % | | 20.1 | % | | 22.8 | % |
| | | | | | | | | | | |
| Consulting | | | | | | | | | | . |
|
| Revenue | | 1,521 |
| | 1,588 |
| | 1,584 |
| | 1,754 |
| | 6,447 |
|
| Expense: | | | | | | | | | | |
| Compensation and Benefits | | 888 |
| | 897 |
| | 839 |
| | 934 |
| | 3,558 |
|
| Other Operating Expenses | | 410 |
| | 426 |
| | 433 |
| | 492 |
| | 1,761 |
|
| Operating Expenses | | 1,298 |
| | 1,323 |
| | 1,272 |
| | 1,426 |
| | 5,319 |
|
| Operating Income | | 223 |
| | 265 |
| | 312 |
| | 328 |
| | 1,128 |
|
| Noteworthy Items | | 4 |
| | 15 |
| | 1 |
| | 2 |
| | 22 |
|
| Adjusted Operating Income | | 227 |
| | 280 |
| | 313 |
| | 330 |
| | 1,150 |
|
| Operating Margin | | 14.7 | % | | 16.7 | % | | 19.7 | % | | 18.7 | % | | 17.5 | % |
| Adjusted Operating Margin | | 14.9 | % | | 17.6 | % | | 19.8 | % | | 18.8 | % | | 17.8 | % |
| | | | | | | | | | | |
| Corporate | | | | | | | | | | |
| Operating Income | | (44 | ) | | (46 | ) | | (44 | ) | | (52 | ) | | (186 | ) |
| Adjusted Operating Income | | (42 | ) | | (44 | ) | | (41 | ) | | (49 | ) | | (176 | ) |
| | | | | | | | | | | |
| Consolidated ProForma | | | | | | | | | | |
| Revenue | | 3,654 |
| | 3,520 |
| | 3,271 |
| | 3,576 |
| | 14,021 |
|
| Expenses | | 2,821 |
| | 2,807 |
| | 2,796 |
| | 2,941 |
| | 11,365 |
|
| Operating Income | | 833 |
| | 713 |
| | 475 |
| | 635 |
| | 2,656 |
|
| Noteworthy Items | | (7 | ) | | 24 |
| | 27 |
| | 15 |
| | 59 |
|
| Adjusted Operating Income | | $ | 826 |
| | $ | 737 |
| | $ | 502 |
| | $ | 650 |
| | $ | 2,715 |
|
| Operating Margin | | 22.8 | % | | 20.3 | % | | 14.5 | % | | 17.8 | % | | 18.9 | % |
| Adjusted Operating Margin | | 22.6 | % | | 20.9 | % | | 15.3 | % | | 18.2 | % | | 19.4 | % |
See basis of presentation information on page 5.
Marsh & McLennan Companies, Inc.
Supplemental Information - Basis for Presentation - Non-GAAP Information
ProForma Financial information included herein reflects the following:
| |
| • | Adjustments to present information as if ASC Topic 606 ("ASC 606") had been applied effective January 1, 2017, using the modified retrospective approach. |
| |
| • | The impact of foreign currency exchange rates on revenues and expenses related to ASC 606 that have shifted among quarterly or annual periods has been excluded for ProForma purposes. |
| |
| • | The impact of reclassifying the 2017 financial information to reflect the adoption of ASC Topic 715 ("ASC 715") as amended. |
Non-GAAP Measures:
The Company reports its financial results in accordance with accounting principles generally accepted in the United States (referred to as "GAAP" or "As 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 and adjusted earnings per share (EPS). All ProForma information included herein is non-GAAP.
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 tables in the Company’s quarterly earnings releases identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income or loss, on a consolidated and segment basis. The non-GAAP adjustments reflected in the attached supplemental financial information, including the adjusted ProForma information, are the same as those in the quarterly earnings releases furnished with the SEC in 2017, except that in the ProForma information, the $54 million pension settlement charge recorded in the fourth quarter does not impact operating income. After the reclassification of non-service cost components of net periodic benefit costs, that charge is reflected in the line "net interest expense and other", below operating income. Adjusted operating margin is calculated by dividing adjusted operating income or ProForma adjusted operating income by consolidated or segment GAAP revenue, or ProForma revenue, as applicable.
Adjusted Income, Net of Tax and Adjusted EPS
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 discussed above and excludes the impact on income tax related to recently enacted U.S. tax reform legislation. 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 equivalent ProForma non-GAAP measures are calculated reflecting the same adjustments. The reconciling items are the same as those reported in the Company's quarterly earnings releases furnished to the SEC in 2017.
