10-QPeriod: Q3 FY2019

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 30, 2019For Securities:MRSHMMC

Summary

Marsh & McLennan Companies (MRSH) reported solid performance for the nine months ended September 30, 2019, with revenue increasing by 10% to $12.4 billion. This growth was primarily driven by the significant acquisition of Jardine Lloyd Thompson (JLT), which closed on April 1, 2019. While the integration of JLT has incurred substantial restructuring and acquisition-related costs, impacting short-term operating income, the underlying business performance shows resilience. Net income attributable to the company for the nine months was $1.35 billion, a decrease from the prior year, largely due to increased interest expenses from debt financing the JLT acquisition and higher integration costs. Despite these headwinds, the company's strategic acquisitions and focus on its core Risk and Insurance Services and Consulting segments position it for long-term growth. Investors should monitor the ongoing integration process, the realization of synergies from the JLT acquisition, and the management of significant debt levels.

Financial Highlights

51 data points
Beta

Revenue

$3.97B

Net Income

$303.00M

7.6% Net Margin

EPS (Diluted)

$0.59

Total Assets

$31.10B

Cash & Equivalents

$1.21B

Free Cash Flow

$927.00M

Financial Statements
Beta
Revenue$3.97B
Operating Expenses$3.50B
Operating Income$467.00M
Interest Expense$133.00M
Net Income$303.00M
EPS (Basic)$0.60
EPS (Diluted)$0.59
Shares Outstanding (Basic)506.00M
Shares Outstanding (Diluted)511.00M

Key Highlights

  • 1Revenue for the nine months ended September 30, 2019, increased 10% year-over-year to $12.4 billion, significantly boosted by the acquisition of JLT.
  • 2Net income attributable to the company decreased to $1.35 billion for the nine months, down from $1.5 billion in the prior year, impacted by acquisition and integration costs and higher interest expenses.
  • 3The JLT acquisition, completed on April 1, 2019, is a major strategic move, integrating JLT's operations into Marsh's Risk and Insurance Services and Mercer's Consulting segments.
  • 4Significant integration and restructuring costs of $192 million were incurred in the first nine months of 2019 related to the JLT acquisition, with an expected total of at least $375 million.
  • 5Long-term debt increased substantially to $11.4 billion from $5.5 billion at year-end 2018, primarily to finance the JLT acquisition.
  • 6Operating income for the Risk and Insurance Services segment decreased to $1.47 billion for the nine months, impacted by higher expenses and integration costs.
  • 7The Consulting segment showed revenue growth of 6% for the nine months, with underlying revenue increasing by 4%, demonstrating continued strength in Mercer and Oliver Wyman.

Frequently Asked Questions

The primary driver of revenue growth was the acquisition of Jardine Lloyd Thompson (JLT), which closed on April 1, 2019. This acquisition significantly expanded the company's scale and geographic reach.

While the JLT acquisition is expected to drive long-term growth and synergies, it has resulted in substantial integration and restructuring costs. These costs, along with increased interest expense from financing the acquisition, led to a decrease in net income attributable to the company for the nine-month period compared to the prior year.

The company's long-term debt increased significantly to $11.4 billion as of September 30, 2019, up from $5.5 billion at the end of 2018, primarily to fund the JLT acquisition. The company is managing this increased leverage through its operating cash flows and capital management strategies.

The company disclosed ongoing investigations related to competition law in the aviation insurance and reinsurance sector in Europe and Brazil. While the company is cooperating and conducting its own reviews, the ultimate outcome and impact are uncertain and could potentially be material.