01—Abstract
Summary
Summary of the 10-K filed February 22, 2018. Cited figures are marked; the original filing is the authoritative source.
Marsh & McLennan Companies (MMC) reported solid performance in 2017, with revenue growing 6% to $14 billiona.
The company operates through two main segments: Risk and Insurance Services (54%b of revenue) and Consulting (46% of revenue). The Risk and Insurance Services segment, driven by Marsh and Guy Carpenter, showed strong underlying revenue growth. The Consulting segment, comprising Mercer and Oliver Wyman Group, also demonstrated consistent revenue increases.
A significant event impacting the 2017 results was the enactment of the Tax Cuts and Jobs Act (TCJA), which resulted in a provisional charge of $460 millionc. This charge primarily relates to the re-measurement of deferred tax assets and a one-time repatriation tax on foreign earnings. Despite this one-time expense, the company's operating income increased by 7% year-over-year.
MMC also continued its commitment to shareholder returns, repurchasing $900 milliond of its common stock and paying dividends. Looking ahead, the company faces ongoing regulatory scrutiny in Europe related to competition practices, particularly for Marsh.
Cybersecurity and data protection remain key risk areas, as does the company's ability to adapt to digital disruption. The company's financial health appears robust, supported by strong operating cash flows and a revolving credit facility.
02—Key points
Key Highlights
- Total revenue for 2017 increased by 6% to $14.02 billion, with underlying revenue growth of 3%.
- Operating income rose by 7% to $2.86 billion.
- The Risk and Insurance Services segment (Marsh and Guy Carpenter) contributed 54% of revenue, showing a 7% increase to $7.63 billion, with 3% underlying growth.
- The Consulting segment (Mercer and Oliver Wyman Group) contributed 46% of revenue, with a 5% increase to $6.44 billion, and 4% underlying growth.
- The company recorded a provisional charge of $460 million in the fourth quarter of 2017 due to the Tax Cuts and Jobs Act (TCJA).
- Shareholders received $1.43 per share in dividends, and the company repurchased $900 million in common stock during 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 22, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $14.02B$13.21B | +6.2% |
| Operating Expenses | $11.37B$10.78B | +5.5% |
| Operating Income | $2.65B$2.43B | +9.2% |
| Interest Expense | $237.00M$189.00M | +25.4% |
| Net Income | $1.49B$1.77B | −15.6% |
| EPS (Basic) | $2.91$3.41 | −14.7% |
| EPS (Diluted) | $2.87$3.38 | −15.1% |
| Shares Outstanding (Basic) | 513.00M519.00M | −1.2% |
| Shares Outstanding (Diluted) | 519.00M524.00M | −1.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of Marsh & McLennan Companies' revenue growth in 2017?
Marsh & McLennan Companies' revenue growth in 2017 was driven by a combination of factors across its two main segments. The Risk and Insurance Services segment, through Marsh and Guy Carpenter, saw a 7% increase in revenue (3% underlying growth), supported by acquisitions and organic client demand. The Consulting segment, comprising Mercer and Oliver Wyman Group, experienced a 5% revenue increase (4% underlying growth), also benefiting from acquisitions and increased demand for its advisory services.
How did the Tax Cuts and Jobs Act (TCJA) impact Marsh & McLennan's financial results in 2017?
The enactment of the TCJA in December 2017 resulted in a significant one-time provisional charge of $460 million for Marsh & McLennan Companies in the fourth quarter of 2017. This charge was primarily due to the re-measurement of U.S. deferred tax assets and liabilities and a deemed repatriation tax on undistributed foreign earnings. While this impacted net income negatively in the short term, the lower corporate tax rate is expected to provide a long-term benefit.
What is the company's strategy regarding share repurchases and dividends?
Marsh & McLennan Companies demonstrates a commitment to returning capital to shareholders. In 2017, the company repurchased $900 million of its common stock, indicating confidence in its valuation and a desire to enhance shareholder returns. Additionally, the company paid a total of $740 million in dividends, reflecting a consistent dividend policy. The company had an authorized share repurchase program with approximately $1.5 billion remaining as of December 31, 2017.
What are the key risks highlighted by the company in its 2017 10-K filing?
Key risks highlighted include legal and regulatory risks, particularly concerning ongoing investigations in Europe related to competition practices for Marsh. Cybersecurity and data protection are significant concerns, with potential liabilities and reputational damage from data breaches. The company also faces risks from digital disruption and the need to adapt to technological changes, as well as competition and the potential loss of key personnel. Macroeconomic conditions and geopolitical events can also impact client demand and operations globally. Lastly, the company acknowledges the complexities and potential impacts of U.S. tax reform.
06—Continue