10-QPeriod: Q3 FY2020

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 30, 2020For Securities:MRSHMMC

Summary

Marsh & McLennan Companies, Inc. (MRSH) reported steady revenue for the third quarter ended September 30, 2020, with $3,968 million, matching the prior year's performance. Net income attributable to the company increased to $316 million, or $0.62 per diluted share, up from $303 million, or $0.59 per diluted share, in the same period last year. For the first nine months, revenue grew to $12,808 million from $12,388 million, and net income increased to $1,642 million from $1,351 million. The company successfully managed operating expenses, which decreased slightly in the third quarter, contributing to a rise in operating income. This demonstrates resilience amidst the ongoing COVID-19 pandemic, with the company effectively operating remotely and reopening offices in various locations while adhering to local guidelines. Key drivers for the quarter included solid performance in the Risk and Insurance Services segment, which saw revenue growth, while the Consulting segment experienced a slight decline. The company continues to execute on its strategic priorities, including managing integration costs related to the JLT acquisition, which are winding down but still present. Liquidity remains strong, with substantial cash generated from operations. The balance sheet reflects an increase in goodwill, largely from recent acquisitions, and a significant amount of debt, although the company has taken steps to manage its debt structure. Marsh & McLennan remains focused on delivering value to clients and shareholders, navigating the economic uncertainties presented by the pandemic.

Financial Highlights

51 data points
Beta

Revenue

$3.97B

Net Income

$316.00M

8.0% Net Margin

EPS (Diluted)

$0.62

Total Assets

$32.68B

Cash & Equivalents

$2.39B

Free Cash Flow

$1.34B

Financial Statements
Beta
Revenue$3.97B
Operating Expenses$3.43B
Operating Income$540.00M
Interest Expense$128.00M
Net Income$316.00M
EPS (Basic)$0.62
EPS (Diluted)$0.62
Shares Outstanding (Basic)507.00M
Shares Outstanding (Diluted)512.00M

Key Highlights

  • 1Revenue for the third quarter of 2020 was $3,968 million, flat compared to the prior year, while nine-month revenue increased to $12,808 million.
  • 2Net income attributable to the company rose to $316 million ($0.62 per diluted share) in Q3 2020 from $303 million ($0.59 per diluted share) in Q3 2019.
  • 3Operating income increased to $540 million in Q3 2020 from $467 million in Q3 2019, driven by expense management.
  • 4The Risk and Insurance Services segment showed strong revenue growth (4% in Q3), driven by Marsh and Guy Carpenter.
  • 5The Consulting segment experienced a revenue decline (-5% in Q3), impacted by Mercer and Oliver Wyman.
  • 6The company continued to manage JLT integration and restructuring costs, which are decreasing.
  • 7Liquidity remains robust, with $2,388 million in cash and cash equivalents at quarter-end, and operating cash flows improved significantly year-over-year.

Frequently Asked Questions

Marsh & McLennan reported steady revenue and improved net income in the third quarter of 2020, indicating resilience despite the COVID-19 pandemic. The company successfully transitioned to a remote work environment with minimal disruption and has begun reopening offices. Cost containment measures, such as reduced travel and meeting expenses, helped offset some of the pandemic's potential negative impacts. While the full extent of the pandemic's impact is uncertain, the company demonstrated its ability to serve clients effectively.

The integration and restructuring costs related to the JLT acquisition are winding down, with $181 million incurred in the first nine months of 2020, down from previous periods. The company expects remaining costs to be incurred in the fourth quarter of 2020 and 2021. Significant cost savings have been realized from the integration efforts, contributing positively to operating income.

Marsh & McLennan maintained a strong liquidity position, with cash and cash equivalents totaling $2,388 million at September 30, 2020. The company generated $1,999 million in operating cash flow for the first nine months of 2020. While the company carries significant long-term debt ($11,532 million), it has actively managed its debt structure, issuing new notes and repaying others. The company also has access to substantial revolving credit facilities.

The Risk and Insurance Services segment, comprising Marsh and Guy Carpenter, showed strong performance with revenue increasing by 4% in the third quarter of 2020, driven by solid underlying growth and acquisitions. The Consulting segment, which includes Mercer and Oliver Wyman Group, experienced a revenue decrease of 5% in the third quarter, attributed to underlying declines and business dispositions, although foreign currency impacts provided a slight offset. This divergence highlights differing market dynamics affecting each segment.