10-KPeriod: FY2017

MARSH & MCLENNAN COMPANIES, INC. Annual Report, Year Ended Dec 31, 2017

Filed February 22, 2018For Securities:MRSHMMC

Summary

Marsh & McLennan Companies (MMC) reported solid performance in 2017, with revenue growing 6% to $14 billion. The company operates through two main segments: Risk and Insurance Services (54% 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 million. 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 million 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.

Financial Highlights

51 data points
Beta

Revenue

$14.02B

Net Income

$1.49B

10.6% Net Margin

EPS (Diluted)

$2.87

Total Assets

$20.43B

Cash & Equivalents

$1.21B

Free Cash Flow

$1.59B

Financial Statements
Beta
Revenue$14.02B
Operating Expenses$11.37B
Operating Income$2.65B
Interest Expense$237.00M
Net Income$1.49B
EPS (Basic)$2.91
EPS (Diluted)$2.87
Shares Outstanding (Basic)513.00M
Shares Outstanding (Diluted)519.00M

Key Highlights

  • 1Total revenue for 2017 increased by 6% to $14.02 billion, with underlying revenue growth of 3%.
  • 2Operating income rose by 7% to $2.86 billion.
  • 3The 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.
  • 4The Consulting segment (Mercer and Oliver Wyman Group) contributed 46% of revenue, with a 5% increase to $6.44 billion, and 4% underlying growth.
  • 5The company recorded a provisional charge of $460 million in the fourth quarter of 2017 due to the Tax Cuts and Jobs Act (TCJA).
  • 6Shareholders received $1.43 per share in dividends, and the company repurchased $900 million in common stock during 2017.

Frequently Asked Questions

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.

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.

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.

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.