Accelerating
our growth trajectory
MARSH & McLENNAN COMPANIES
2019 ANNUAL REPORT
We are
MARSH &
McLENNAN
Marsh & McLennan is the world’s leading professional services firm in the areas of
risk, strategy and people.
We are four global businesses united by a common purpose and a uniquely collaborative
culture. Our 76,000 colleagues advise organizations in over 130 countries, helping
them navigate an increasingly dynamic and complex environment.
We are committed to each other, to our clients and to the greater good. Every day,
we help clients change what’s possible, enabling enterprise around the world.
Risk & Insurance Services
Consulting
Insurance Broking &
Risk Management
MARSH
Reinsurance &
Capital Strategies
GUY CARPENTER
Health, Wealth &
Career Consulting
MERCER
Strategy, Economic &
Brand Consulting
OLIVER WYMAN
DAN GLASER
President and Chief Executive Officer
Marsh & McLennan Companies
To our shareholders, colleagues and clients,
Marsh & McLennan is a trusted advisor to clients around the
world on the issues that touch every organization at its core:
risk, strategy and people.
Enabling bold enterprise is the heart of our business. We
help our clients change what is possible, realizing ambitious
goals and making their futures more secure.
For nearly 150 years, this has been our role, but—like
business itself—the how has evolved greatly over time.
Marsh & McLennan Companies 2019 Annual Report | 1
Historically, most of our work was aimed at addressing specific
challenges that our clients needed to navigate, such as
technological shifts, changes in the competitive environment
or market volatility. Today, the challenges that confront our
clients are increasingly interrelated, and vastly more complex
as a result. Disruption is the operating environment and
uncertainty is the prevailing condition for leaders.
The most successful organizations have become more fluid.
They are adept at managing continuous change, and that
includes Marsh & McLennan. In 2019, our acquisition of Jardine
Lloyd Thompson launched our company on a new trajectory,
sparking closer collaboration and partnership across our
businesses and increased efficiencies in how we operate, as
we strive to deliver even greater value as one enterprise.
In 2020, we’re organizing to realize the vast new possibilities
that we’ve created for our clients, our colleagues and our
company. I am excited to bring you up to date.
A STEP CHANGE FOR OUR COMPANY
The acquisition of Jardine Lloyd Thompson, completed on
April 1, 2019, was the largest in our history. We welcomed
more than 10,000 talented colleagues into our organization,
providing us with more capabilities to serve our clients,
and that’s the real power in this combination. The need for
specialist advice has never been greater as clients deal with the
increasing size, complexity and range of business challenges.
JLT enhances our footprint and scale in key geographies and
markets—including the UK, Australia, Asia Pacific and Latin
America—and makes us stronger in several specialty areas and
across our lines of business. Our reach extends to more than
130 countries.
With an even more substantial presence in the market, we’re
now competing and winning as one company. Colleagues in
our businesses continue to learn from one another, finding
new ways of working—and growing our business.
2 | Marsh & McLennan Companies 2019 Annual Report
It’s early in this journey, but we’re already seeing how the
combination benefits clients. In 2019, Marsh showcased its
collective knowledge of the medical products and life sciences
space, deep understanding of the casualty risk landscape,
and insights into the changing dynamics of the property
market, turning a US-based life sciences prospect into a client.
Guy Carpenter pitched and won an RFP for terror modeling,
highlighting Guy Carpenter’s knowledge and data in the
terror space and JLT Re’s next-generation terrorism model.
And a leading UK internet provider liked Mercer’s Darwin
solution—an award-winning benefits management and
engagement platform—and JLT’s implementation team.
Now they have the best of both.
2019 was a step change for Marsh & McLennan—in revenue,
talent, capabilities and, most of all, possibilities.
OUR FINANCIAL STRENGTH
Financial strength is a great enabler. A smartly run organization
has more credibility, more opportunities and more time to do
great things. Consistent profits enable us to hire and retain
extraordinary people and pursue new ventures. Superior
financial performance enables us to build game-changing
technologies and acquire growth companies that can rewrite
the future for our company—and our clients’.
It’s a tribute to our 76,000 colleagues that we integrated our
largest-ever acquisition without skipping a beat in financial
performance. We emerged from 2019 as a stronger company.
Here’s a closer look at a milestone year.
Marsh & McLennan generated $16.7 billion in consolidated
revenue for the year, an increase of 11% compared with 2018,
our highest annual top-line growth in 20 years. It was also the
10th year in a row where we achieved underlying growth of
3% or above.
Adjusted operating income1 rose 14% and consolidated
adjusted margin increased 110 basis points, our 12th
consecutive year of margin improvement. Our adjusted
earnings per share grew 7%, consistent with our guidance
of modest dilution in the first year of the JLT acquisition.
1 For a reconciliation of non-GAAP results to GAAP results, as related to all non-
GAAP references presented in this letter, please refer to the Company’s Form
8-K, dated January 30, 2020, available on the Company’s website at mmc.com.
2019 marked the close of a
powerful decade for Marsh & McLennan:
GREW OUR REVENUE BY MORE THAN
TWO-THIRDS
NEARLY
TRIPLED
ADJUSTED EARNINGS PER SHARE
INCREASED OUR SHARE PRICE
FIVEFOLD
OUTPERFORMED THE S&P 500 BY
OVER 280%
IN TERMS OF TSR
ADDED
NEARLY 50%
MORE COLLEAGUES
Marsh & McLennan Companies 2019 Annual Report | 3
Our risk and insurance businesses produced $9.6 billion in
revenue for 2019, an increase of 17%, or 4% on an underlying
basis. Marsh’s revenue growth was 17% for the year, or 4%
on an underlying basis. Marsh took a significant leap forward
in regions like Asia Pacific, where it grew revenue 39%, and
Latin America, where it increased 15%. Guy Carpenter closed
out another strong year with overall revenue growth of 15%,
or 5% on an underlying basis.
Our consulting businesses delivered revenue of $7.1 billion
for 2019, up 5%, or 3% on an underlying basis. Mercer
achieved 6% revenue growth, 2% on an underlying basis,
lifted by a strong fourth-quarter performance. Oliver Wyman
increased revenue to $2.1 billion for the year, up 6% on an
underlying basis.
We met our capital management objectives to reduce our
share count and increase our dividend by double digits.
Over the past decade, we’ve completed 167 transactions
involving approximately $13 billion of capital deployed. In
2019, even while completing the largest transaction in our
history, we invested $500 million in areas of strategic focus,
including five acquisitions for Marsh & McLennan Agency,
our fast-growing US middle-market brokerage business.
Overall, I’m pleased with our performance in 2019, which
capped a remarkable 10 years for our company.
THE CHALLENGES OF OUR TIME
Our performance takes place in the context of a dynamic
global landscape that shapes the work we do to help our
clients succeed.
The 2020 Global Risks Report, which we help produce with
the World Economic Forum, includes perils that have always
been with us and dangers unique to the past 20 years: new
economic and political confrontations, the vulnerability of
digital systems to cyberattack and the growing effects of
climate change.
4 | Marsh & McLennan Companies 2019 Annual Report
The world can be a difficult place to do business. We can
do our best to cope, or set about creating the future that
we want. At Marsh & McLennan, we see it as our role to
enable what is possible. We’re optimists who thrive on the
challenges of our time—and on working side by side, with
our clients, to address them.
As an example, we’re helping governments, communities
and the insurance industry respond to the scourge of global
wildfires with our risk management and risk transfer expertise.
In August, Guy Carpenter was appointed sole reinsurance
intermediary for the California Wildfire Fund, while Marsh
worked closely to support some of the most affected industries
in the months leading up to the passage of the bill establishing
the fund.
Marsh and Guy Carpenter are also working together to expand
market capacity and develop coverage standards to help
clients protect themselves against increasing cyber threats.
Our consulting businesses are tackling complex challenges,
from healthcare access and innovation, to the impact of
artificial intelligence on the workforce, to the effects of a
changing climate on industry and society. Mercer and Oliver
Wyman have partnered to help public institutions get ahead
of long-term pension obligations. For example, a European
supranational chose us to help ensure its long-term financial
stability based on Oliver Wyman’s public sector experience
and Mercer’s expertise in pensions and capital markets.
We do things like this at every scale, all over the world. We
serve 95% of Fortune 1000 companies. We serve a growing
number of middle-market and small companies, and millions
of individuals. In some cases, we’ve developed markets that
no one was serving. Guy Carpenter and Oliver Wyman have
pioneered solutions that bring insurance and financial services
to whole populations for whom they are life-changing. For
example, Oliver Wyman has worked closely with a leading
microfinance provider in 28 countries, to rethink opportunities
for deepening financial inclusion—and using financial services
as a tool to lift families out of poverty.
Even as the issues of the day inevitably change, the collective
strength and expertise across our enterprise will continue
to serve the evolving needs of our clients—and drive growth
for our company.
Better Solutions for MORE CLIENTS
MARSH & McLENNAN HELPS MANY OF THE WORLD’S MOST RESPECTED COMPANIES
CREATE NEW MARKETS AND RESHAPE THEIR INDUSTRIES. Recently we’ve been reshaping
one of our own industries—insurance—by expanding in middle and small commercial markets
around the world.
In the last 10 years, we’ve built Marsh & McLennan Agency into a leading middle-market
commercial insurance broker in the US, increasing run-rate revenue from zero to $1.7 billion. We
made five new acquisitions in 2019 and have a robust pipeline for 2020. In the UK, our recently
rebranded Marsh Commercial business is one of the premier middle-market brokers. Worldwide,
the middle market is now Marsh’s largest segment by revenue.
We’re also in an ideal position to participate in the fragmented small commercial market,
leveraging our scale, scope and technology platforms. Victor, our leading managing general
agency and underwriter platform, is a robust distribution network to build on and we’re making
continuous investments in this area.
Marsh & McLennan’s digital ecosystem now includes Dovetail, our online marketplace that helps
insurance agencies get the best policies for their clients; and Bluestream, a cloud-based broker
for the affinity business.
Other tech platforms provide timely new options where the needs are acute. Marsh’s Torrent
Technologies accelerates transaction processing for flood insurance claims; and ICAT is changing
what’s possible for businesses and homeowners in hurricane- and earthquake-prone areas.
Using digital platforms to extend our risk expertise and deliver greater value for more clients is
one of the most exciting parts of our business.
THE POWER OF SHARED ENTERPRISE
Interrelated challenges require more holistic approaches.
The breadth and depth of expertise at Marsh & McLennan is
a distinct strength, and we are organizing to deploy our vast
array of capabilities in more seamless ways.
Bringing together our health and benefits expertise is a good
example. Health is a major growth sector for us, and the health
and benefits marketplace is a big opportunity, where Marsh and
Mercer have complementary strengths. Mercer Marsh Benefits
(MMB) now goes to market outside of the US as one brand, with
one leadership team, delivering a consistent client experience
across 73 countries. MMB is a core part of our industry-leading
global health and benefits business that generates more than
$3 billion in revenue.
For clients with unique opportunities, our Marsh & McLennan
Advantage platform delivers our expertise and capabilities
from wherever they are in the company to wherever they’re
needed in the client organization. Our global networks
of experts and advisors focus on the issues that matter
most to our clients and society—from strengthening
climate-change resilience to realizing the potential of
transformative technologies.
More and more, our businesses are teaming up to create
comprehensive solutions for clients. In 2019 a team of more
than 50 colleagues—across four continents and three of our
businesses—developed an infrastructure overhaul plan for
a large Asia-Pacific rail operator. Our team included experts
in placement, risk consulting, claims advocacy, forensic
accounting, catastrophe modeling and analytics, as well
as rail specialists from Australia, the US and the UK.
Marsh & McLennan Companies 2019 Annual Report | 5
We enable colleagues at every level to collaborate across
business lines and borders through peer-to-peer knowledge-
sharing platforms and a more cohesive approach to learning
and professional development.
Operating and going to market as a more unified company
isn’t a revolutionary idea; it’s a smarter way to realize the
significant opportunities in front of us.
A COMPANY OF IDEAS AND IDEALS
Environmental, social and governance (ESG) considerations
have long been part of our decision-making at every level.
We advise our clients on important issues ranging from
responsible investing to workforce of the future, pay equity,
climate change and cyber, to name just a few. Having created
the Corporate Responsibility Committee in 2008, our Board
has formally focused on ESG initiatives for more than a
decade. We’ve also disclosed and externally verified carbon
data since 2011.
Foundational to who we are is our strong culture of
integrity, reflected in The Greater Good, our code of
conduct everywhere we do business in the world.
The Greater Good supports colleagues in making the
right decision, especially in situations where it may
not be clear—or easy. We’ve just recreated The Greater
Good as a fully digital experience for our colleagues.
We continue to work at advancing full inclusion and
addressing issues of equity in pay and career advancement.
For example, we routinely assess gender and, in the US,
racial pay equity across our businesses using rigorous
statistical modeling methods. Our diversity and inclusion
initiatives, including colleague resource groups, are designed
to ensure our businesses promote a fair and inclusive work
environment—and that everyone has an equal opportunity
to succeed. Much of our internal work draws on Mercer’s
leading-edge Workforce Sciences capabilities that are helping
our clients achieve pay, career and employment equity.
We’re also partnering with other organizations, through
initiatives such as CEO Action for Diversity & Inclusion and the
30% Club, to change how business is done. It’s gratifying to
see our efforts recognized with membership in the Bloomberg
Gender-Equality Index for the second year in a row and our
12th consecutive “Best Places to Work for LGBTQ Equality”
award from Human Rights Campaign.
Sustainability is also an important issue for Marsh & McLennan.
Four years ago, we began our Smart Office project to
reconfigure select offices around the world. Fundamental
to this work is ensuring these offices consume less of every
resource that goes into them—land, materials, energy—and
reduce the emissions that come out of them. One by one, these
new workspaces are also becoming more egalitarian, creative,
collaborative and flexible. We’ll have at least 20 Smart Offices
by the end of 2020.
All of these priorities are organic to our culture, part of what
makes us us. We attract people who want to make a difference,
and our culture is their reflection.
Making a Difference in OUR COMMUNITIES
POWERFUL CHANNELS FOR COMMUNITY SERVICE ARE EMBEDDED IN OUR
ORGANIZATION because our colleagues share a commitment to improving the communities
where we live and work. Each year, all colleagues receive a paid day off to volunteer. In 2019, our
colleagues volunteered nearly 200,000 hours of their time, often sharing their professional skills
with communities that need them.
6 | Marsh & McLennan Companies 2019 Annual Report
22.0%
CONSOLIDATED ADJUSTED
MARGIN — AN INCREASE OF
1,320 BASIS POINTS SINCE 2008
Record High
ADJUSTED OPERATING INCOME
FOR BOTH RISK & INSURANCE
SERVICES AND CONSULTING
ANNUAL REVENUE OF
$16.7 Billion
CLOSED TRANSACTIONS
TOTALING MORE THAN
$14 Billion
ACROSS 190+ ACQUISITIONS
AND INVESTMENTS
SINCE 2009
10% Dividend
Growth
DELIVERING ON OUR ANNUAL
COMMITMENT TO INCREASE
DIVIDENDS PER SHARE BY
DOUBLE DIGITS
CLIENTS IN MORE THAN
130 Countries
REDUCED YEAR-END SHARES
OUTSTANDING FOR
6th Consecutive
Year
76,000
COLLEAGUES AROUND THE WORLD
MAKING A DIFFERENCE FOR CLIENTS
IN CRITICAL MOMENTS
10 years of consecutive underlying revenue growth in
the 3-5 percent range
5%
4%
3%
2%
1%
0
5%
5%
4%
4%
4%
4%
3%
3%
3%
3%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Marsh & McLennan Companies 2019 Annual Report | 7
Responsible INVESTING
MARSH & McLENNAN MANAGES BENEFITS AND RETIREMENT PROGRAMS FOR
ORGANIZATIONS AROUND THE WORLD. Through Mercer, we’re directly responsible for
$305 billion in client assets and serve as investment advisors on another $15 trillion. At this scale,
how and where money is invested can make as great a difference as how much.
Mercer’s Global Responsible Investment team, established in 2004, understands that it’s in our
clients’ financial interests to make risk and return decisions that consider environmental impacts
such as climate change; social impacts such as people’s health and safety; and company governance
factors, such as board quality and diversity.
None of this happens on its own. I’d like to thank our Board of
Directors, led by Ed Hanway, our Independent Chairman, for
their superb governance, wisdom and leadership.
I’d also like to thank our clients for the opportunity to earn
their trust, and our colleagues for their commitment, hard
work and for doing what’s right to serve our clients.
Finally, I’d like to thank our investors, whose support is
indispensable in enabling us to seize the vast opportunities
of the future.
Together, we have the talent, the scope and the scale to
change what’s possible—in our business, for our clients and
for the world around us. I look forward to all that we’ll achieve
in 2020 and beyond.
Best regards,
DAN GLASER
President and Chief Executive Officer
Marsh & McLennan Companies
February 20, 2020
LOOKING FORWARD
The work changes. Our purpose doesn’t. We are here
to serve clients, helping them realize the futures they
imagine—and to make those futures more secure. On the
eve of our 150th year, we are more successful than we’ve
ever been because we question the way things are, and
relentlessly seek a smarter way.
We have a greater capacity to invest in transformative
technologies that can extend innovative solutions to more
clients and markets. We have the capability to be at home
in the world’s fastest-growing regions, and the deep
specialization to enter new businesses that are shaping the
future. And we have the ambition to make Marsh & McLennan
a place where talented people can do the best work of their
careers—work that makes a difference.
We’re soundly positioned for continued growth, including in
markets where growth has historically outpaced the broader
economy globally. The global property and casualty insurance
market is underpenetrated, particularly in emerging markets
and perils such as flood and cyber. The global health insurance
market is complex and the retirement savings gap remains
largely unsolved, creating strong demand for our advice and
solutions in these areas.
Even in an exceptional year like 2019, we consistently
challenge ourselves to balance delivering for today while
positioning for future growth. Our performance last year
was a great example of strong overall execution, adding to
our track record of sustained value creation.
8 | Marsh & McLennan Companies 2019 Annual Report
RECOGNITION
Marsh awarded a
Business Insurance
Innovation Award
for FINTECH Protect
insurance option
GC Securities and Pool Re
awarded Reinsurance
Transaction of the Year
for Baltic Catastrophe
Bond
Mercer ranked #1 for
global outsourced assets
under management
and advisement by
Pensions & Investments*
Oliver Wyman recognized
as a firm that values
inclusivity, trust and
compassion
Marsh & McLennan
included in Bloomberg
Gender-Equality Index
for the second year
Marsh & McLennan named
a Best Place to Work for
LGBTQ Equality
Marsh & McLennan
ranked #1 broker by
Business Insurance
Marsh & McLennan named
a Military Friendly®
company
For the acquisition of Jardine Lloyd Thompson:
Marsh & McLennan
received Reactions
North America Awards’
M&A Deal of the Year
Marsh & McLennan
awarded M&A
Transaction of the Year
* Pension & Investments, AUA ranked by worldwide assets under advisement as of June 30, 2019 as reported by each firm to P&I. Pensions & Investments OCIO survey,
worldwide discretionary assets under management as of March 31, 2019 as reported by each firm to P&I. See Important Notices for important information about assets
under advisement and assets under management.
Marsh & McLennan Companies 2019 Annual Report | 9
Top, from left: R. David Yost, Marc D. Oken, Lloyd M. Yates, Daniel S. Glaser, Morton O. Schapiro, Bruce P. Nolop, Steven A. Mills,
Anthony K. Anderson Bottom, from left: Oscar Fanjul, Deborah C. Hopkins, H. Edward Hanway, Tamara Ingram
OUR BOARD OF DIRECTORS
ANTHONY K. ANDERSON
Former Vice Chair and
Midwest Area Managing Partner,
Ernst & Young LLP
OSCAR FANJUL
Vice Chairman, Omega Capital
Founding Chairman and Former
Chief Executive Officer,
Repsol
DANIEL S. GLASER
President and Chief Executive Officer,
Marsh & McLennan Companies
H. EDWARD HANWAY
Former Chairman and
Chief Executive Officer,
CIGNA Corporation
DEBORAH C. HOPKINS
Former Chief Executive Officer
of Citi Ventures and
Chief Innovation Officer,
Citigroup
TAMARA INGRAM
Global Chairman,
Wunderman Thompson
STEVEN A. MILLS
Former Executive Vice President,
Software & Systems,
International Business
Machines Corporation (IBM)
BRUCE P. NOLOP
Former Executive Vice President
and Chief Financial Officer,
E*TRADE Financial Corporation
MARC D. OKEN
Chairman,
Falfurrias Capital Partners
Former Chief Financial Officer,
Bank of America Corporation
MORTON O. SCHAPIRO
President and Professor of Economics,
Northwestern University
LLOYD M. YATES
Former Executive Vice President, Market
Solutions of Duke Energy and President
of Duke Energy’s Carolinas Region
R. DAVID YOST
Former President and
Chief Executive Officer,
AmerisourceBergen
10 | Marsh & McLennan Companies 2019 Annual Report
Top, from left: Peter Hearn, Martine Ferland, Scott McDonald, Peter J. Beshar, E. Scott Gilbert
Bottom, from left: John Q. Doyle, Daniel S. Glaser, Laurie Ledford, Dominic Burke, Mark McGivney
OUR EXECUTIVE COMMITTEE
PETER J. BESHAR
Executive Vice President and
General Counsel,
Marsh & McLennan Companies
DOMINIC BURKE
Vice Chair,
Marsh & McLennan Companies
E. SCOTT GILBERT
Senior Vice President and
Chief Information Officer,
Marsh & McLennan Companies
DANIEL S. GLASER
President and Chief Executive Officer,
Marsh & McLennan Companies
SCOTT McDONALD
President & CEO, Oliver Wyman
Vice Chair, Marsh & McLennan Companies
MARK McGIVNEY
Chief Financial Officer,
Marsh & McLennan Companies
JOHN Q. DOYLE
President & CEO, Marsh
Vice Chair, Marsh & McLennan Companies
PETER HEARN
President & CEO, Guy Carpenter
Vice Chair, Marsh & McLennan Companies
MARTINE FERLAND
President & CEO, Mercer
Vice Chair, Marsh & McLennan Companies
LAURIE LEDFORD
Senior Vice President and
Chief Human Resources Officer,
Marsh & McLennan Companies
2019 Annual Report | 11
What we
STAND FOR
Companies like ours have enormous power to shape the future
through investment, expertise and the advice that we provide
to a world of clients. Here are some of the principles that we try
to live by as a public entity.
WE RESPECT
the dignity and worth of every person. We work to
WE SUPPORT
the rule of law, sustained alliances based on shared values,
advance human rights and social and workplace equality
and keeping commitments.
everywhere we do business.
WE REJECT
racism, bigotry, homophobia and xenophobia, and
WE BELIEVE
that the best solutions haven’t been invented yet.
condemn any stance that limits people’s possibilities
Investment and policy decisions should look forward,
because of who they are or the circumstances that
not backward; outward, not inward; and they should
surround them.
be based on objective evidence.
WE CHAMPION
liberal democracy and the power of free enterprise to
WE STAND FOR
enabling enterprise around the world and a better
change what is possible. We embrace globalization and
future for all.
cooperative action to address the world’s great challenges
and create new opportunities for its citizens.
12 | Marsh & McLennan Companies 2019 Annual Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________
FORM 10-K
_____________________________________________
(Mark One)
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2019
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File No. 1-5998
_____________________________________________
Marsh & McLennan Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
36-2668272
(I.R.S. Employer Identification No.)
1166 Avenue of the Americas
New York, New York 10036-2774
(Address of principal executive offices; Zip Code)
(212) 345-5000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $1.00 per share
Trading symbol(s)
MMC
Name of each exchange on which registered
New York Stock Exchange
Chicago Stock Exchange
London Stock Exchange
No
No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting Company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting Company" in Rule 12b-2
of the Exchange Act. (Check one):
No
No
Large Accelerated Filer
Non-Accelerated Filer
Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
As of June 28, 2019, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was
approximately $50,438,773,243 computed by reference to the closing price of such stock as reported on the New York Stock
Exchange on June 28, 2019.
As of February 18, 2020, there were outstanding 503,897,894 shares of common stock, par value $1.00 per share, of the registrant.
Portions of Marsh & McLennan Companies, Inc.’s Notice of Annual Meeting and Proxy Statement for the 2020 Annual Meeting of
Stockholders (the "2020 Proxy Statement") are incorporated by reference in Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains "forward-looking statements," as defined in the Private
Securities Litigation Reform Act of 1995. These statements, which express management's current views
concerning future events or results, use words like "anticipate," "assume," "believe," "continue,"
"estimate," "expect," "intend," "plan," "project" and similar terms, and future or conditional tense verbs like
"could," "may," "might," "should," "will" and "would."
Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results
to differ materially from those expressed or implied in our forward-looking statements. Factors that could
materially affect our future results include, among other things:
•
•
•
•
•
•
•
•
•
•
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•
•
our ability to compete effectively and adapt to changes in the competitive environment, including
to respond to technological change, disintermediation, digital disruption and other types of
innovation;
the impact from lawsuits, other contingent liabilities and loss contingencies arising from errors
and omissions, breach of fiduciary duty or other claims against us;
our ability to attract and retain industry leading talent;
our organization's ability to maintain adequate safeguards to protect the security of our
information systems and confidential, personal or proprietary information, particularly given the
large volume of our vendor network and the need to identify and patch software vulnerabilities,
including those in the existing JLT information systems;
our ability to successfully integrate or achieve the intended benefits of our acquisitions, including
JLT;
the impact of investigations, reviews, or other activity by regulatory or law enforcement
authorities, including the ongoing investigation by the European Commission competition
authority;
our ability to maintain our credit ratings and repay our outstanding long-term debt in a timely
manner and on favorable terms, including approximately $6.5 billion issued in connection with the
acquisition of JLT;
the regulatory, contractual and reputational risks that arise based on insurance placement
activities and various insurer revenue streams;
the financial and operational impact of complying with laws and regulations where we operate
and the risks of noncompliance with such laws, including cybersecurity and data privacy
regulations such as the E.U.’s General Data Protection Regulation, anti-corruption laws such as
the U.S. Foreign Corrupt Practices Act, U.K. Anti-Bribery Act and trade sanctions regimes;
our ability to manage risks associated with our investment management and related services
business, including potential conflicts of interest between investment consulting and fiduciary
management services;
the impact of macroeconomic, political, regulatory or market conditions on us, our clients and the
industries in which we operate, including the impact of Brexit or the inability to collect on our
receivables;
our ability to successfully recover if we experience a business continuity problem due to
cyberattack, natural disaster, pandemic or otherwise; and
the impact of changes in tax laws, guidance and interpretations, including certain provisions of
the U.S. Tax Cuts and Jobs Act, or disagreements with tax authorities.
The factors identified above are not exhaustive. Further information concerning Marsh & McLennan
Companies and its businesses, including information about factors that could materially affect our results
of operations and financial condition, is contained in the Company's filings with the Securities and
Exchange Commission, including the "Risk Factors" section in Part I, Item 1A of this report and the
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" section in Part
II, Item 7 of this report. We caution readers not to place undue reliance on any forward-looking
statements, which are based only on information currently available to us and speak only as of the dates
on which they are made. We undertake no obligation to update or revise any forward-looking statement to
reflect events or circumstances arising after the date on which it is made.
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TABLE OF CONTENTS
Information Concerning Forward-Looking Statements
PART I
Item 1 —
Business
Item 1A —
Risk Factors
Item 1B —
Unresolved Staff Comments
Item 2 —
Item 3 —
Item 4 —
PART II
Item 5 —
Item 6 —
Item 7 —
Properties
Legal Proceedings
Mine Safety Disclosures
Market for the Company’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A —
Quantitative and Qualitative Disclosures About Market Risk
Item 8 —
Item 9 —
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 9A —
Controls and Procedures
Item 9B —
Other Information
PART III
Item 10 —
Directors, Executive Officers and Corporate Governance
Item 11 —
Executive Compensation
Item 12 —
Item 13 —
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director
Independence
Item 14 —
Principal Accountant Fees and Services
PART IV
Item 15 —
Exhibits and Financial Statement Schedules
Item 16 —
Form 10-K Summary
Signatures
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12
29
30
30
30
31
32
33
54
56
120
120
123
124
124
124
124
124
125
138
139
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Item 1. Business.
PART I
References in this report to "we", "us" and "our" are to Marsh & McLennan Companies, Inc. and its
consolidated subsidiaries (the "Company"), unless the context otherwise requires.
GENERAL
The Company is a global professional services firm offering clients advice and solutions in risk, strategy
and people. Its businesses include: Marsh, the insurance broker, intermediary and risk advisor; Guy
Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR and investment related advice
and services; and Oliver Wyman Group, the management, economic and brand consultancy. With 76,000
colleagues worldwide and annual revenue of $17 billion, the Company provides analysis, advice and
transactional capabilities to clients in more than 130 countries.
The Company conducts business through two segments:
• Risk and Insurance Services includes risk management activities (risk advice, risk transfer and
risk control and mitigation solutions) as well as insurance and reinsurance broking and services.
The Company conducts business in this segment through Marsh and Guy Carpenter.
• Consulting includes health, wealth and career services and products, and specialized
management, economic and brand consulting services. The Company conducts business in this
segment through Mercer and Oliver Wyman Group.
We describe our current segments in further detail below. We provide financial information about our
segments in our consolidated financial statements included under Part II, Item 8 of this report.
OUR BUSINESSES
RISK AND INSURANCE SERVICES
The Risk and Insurance Services segment generated approximately 57% of the Company's total revenue
in 2019 and employs approximately 43,600 colleagues worldwide. The Company conducts business in
this segment through Marsh and Guy Carpenter.
MARSH
Marsh is a leading global insurance broker and risk advisor, serving companies, institutions and
individuals. From its founding in 1871 to the present day, Marsh has demonstrated a commitment to
thought leadership, innovation and insurance expertise to meet its clients’ needs. Marsh’s pioneering
contributions include introducing the practice of client representation through brokerage, the discipline of
risk management, the globalization of risk management services and the development of service
platforms that identify, quantify, mitigate and transfer risk.
Currently, approximately 40,500 Marsh colleagues provide risk management, insurance broking,
insurance program management services, risk consulting, analytical modeling and alternative risk
financing services to a wide range of businesses, government entities, professional service organizations
and individuals in more than 130 countries. Marsh generated approximately 48% of the Company's total
revenue in 2019.
Insurance Broking and Risk Consulting
In its core insurance broking and risk advisory business, Marsh employs a team approach to identify,
quantify and address clients' risk management and insurance needs. Marsh’s product and service
offerings include risk analysis, insurance program design and placement, insurance program support and
administration, claims support and advocacy, alternative risk strategies and a wide array of risk analysis
and risk management consulting services. Clients benefit from Marsh’s advanced analytics, deep
technical expertise, collaborative global culture and the ability to develop innovative solutions and
products. The firm’s resources also include nearly three dozen specialty and industry practices, including
cyber, financial and professional service practices, along with a growing employee health & benefits
business.
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Marsh provides services to clients of all sizes, including large multinational companies ("Risk
Management"), high growth middle-market businesses ("Corporate"), small commercial enterprises and
high net-worth private clients ("Commercial & Consumer"). Marsh's segments are designed to build
stronger value propositions and operating models to optimize solutions and services for clients depending
on their needs.
Risk Management. Marsh has an extensive global footprint and market-leading advisory and placement
services that benefit large domestic and international companies and institutions facing complex risk
exposures. These clients are also supported by Marsh’s robust analytics and a growing digital experience
led by work from Marsh Labs.
In addition, Marsh’s largest multinational clients are serviced by a dedicated team of colleagues from
around the world focused on delivering service excellence and insurance solutions to clients wherever
they are located. Marsh provides global expertise and an intimate knowledge of local markets, helping
clients navigate local regulatory environments to address the worldwide risk issues that confront them.
• Marsh JLT Specialty. Marsh’s specialty unit combined with JLT Specialty to form Marsh JLT
Specialty as part of the 2019 acquisition of Jardine Lloyd Thompson Group plc ("JLT"). The new
unit offers leading expertise, global service and data-driven insights to clients across seven global
specialties: aviation; credit specialties; financial & professional services; private equity & mergers
& acquisitions; construction; energy & power; and marine & cargo. These teams of specialist
experts are globally committed to delivering consulting, placement, account management and
claims solutions to clients who require specialist advice and support. Marsh JLT Specialty has
bolstered Marsh’s leadership as a global specialty broker.
Corporate. A fast-growing segment, middle market clients are served by Marsh’s brokerage operations
globally and constitute a substantial majority of clients served by Marsh & McLennan Agency (MMA) in
the United States and large portions of Marsh’s international business.
• MMA offers a broad range of commercial property and casualty products and services, as well as
solutions for employee health and benefits, retirement and administration needs and a growing
personal lines business in the United States and Canada. Since its first acquisition in 2009, MMA
has acquired 75 agencies. MMA provides advice on insurance program structure and market
dynamics, along with industry expertise and transactional capability.
Commercial & Consumer. Clients in this market segment typically face less complex risks and are
served by Marsh’s innovative product and placement offerings and growing capabilities in digitally
enabled distribution.
• Victor Insurance Holdings is one of the largest underwriting managers of professional liability
and specialty insurance programs worldwide. In the United States, Victor Insurance Managers
(US) and ICAT Managers deliver risk management and insurance solutions to over 125,000
insureds through a national third-party distribution network of licensed brokers. Victor Insurance
Managers (Canada), a leading managing general agent in Canada with over 43,000 insureds,
delivers professional liability and construction insurance, as well as group and retiree benefits
programs and claims handling for individuals, organizations and businesses. Victor has a growing
business in the UK (where it was formerly known as Bluefin Underwriting) and Europe, where
new businesses have been launched in the Netherlands, Italy and Germany.
• Marsh Commercial (formerly branded as Jelf) services more than 250,000 clients, primarily in
the small to mid-market segment across the United Kingdom, and offers high quality technical
advice, bespoke products and distinctive services including claims consultancy, employee health
and benefits, personal lines solutions and risk management. With the completion of the
acquisition of JLT in 2019, and following the acquisitions of Bluefin in 2017 and Clark Thomson in
2018, Marsh Commercial has one of the United Kingdom's most extensive office networks
focused on providing smaller organizations with access to high quality risk and insurance advice.
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• Dovetail Insurance is a leading provider of cloud-based insurance services and transaction
processing tailored to the U.S. small commercial market. Dovetail deploys a cloud-based
technology platform that enables independent insurance agents, on behalf of their small business
clients, to obtain online quotes from multiple insurance providers and bind property and casualty
and workers compensation insurance policies in real time.
High Net Worth (HNW). Individual high net worth clients and family offices are serviced by Marsh USA's
Private Client Services (PCS), MMA and other personal lines businesses globally. These businesses
provide a single-source solution for high net worth clients and are dedicated to sourcing protections
across a broad spectrum of risk. Using a consultative approach, Marsh's HNW practices analyze
exposures and customizes programs to cover individual clients with complex asset portfolios.
Additional Services and Adjacent Businesses
In addition to insurance broking, Marsh provides certain other specialist advisory or placement services:
Marsh Risk Consulting (MRC) is a global practice comprising specialists that advise clients on
identifying exposures, use data and analytics to assess critical business activities and evaluate existing
risk practices and strategies. MRC provides client services in four main areas: Property Consulting;
Casualty Consulting; Strategic Risk and Cybersecurity Consulting; and Financial Advisory Services.
Marsh Data, Digital and Analytics provides solutions to enhance the insurance process and data and
analytical tools to better understand risks, make more informed decisions and support the implementation
of innovative solutions and strategies. Among the suite of solutions deployed by this team are:
Bluestream, a digital brokerage platform that enables clients to provide insurance to their customers or
suppliers in a B2B2C affinity model; Blockchain solutions, where Marsh is working in conjunction with
industry consortia and leading technology companies to help provide certificates of insurance digitally;
and Marsh’s proprietary suite of analytics applications that delivers risk insights to clients for better
decision making concerning retaining, mitigating, transferring risk and financing risk.
Marsh Captive Solutions serves more than 1,350 captive facilities, including single-parent captives,
reinsurance pools and risk retention groups. The Captive Solutions practice operates in 53 captive
domiciles and leverages the consulting expertise within Marsh’s brokerage offices worldwide. The
practice includes the Captive Advisory Group, a consulting arm that performs captive feasibility studies
and helps to structure and implement captive solutions; the Captive Management Group, an industry
leader in managing captive facilities and in providing administrative, consultative and insurance-related
services; and the Actuarial Services Group, which is comprised of credentialed actuaries and supporting
actuarial analysts.
Torrent Technologies is a service provider to Write Your Own (WYO) insurers participating in the
National Flood Insurance Program (NFIP) in the United States and also serves the NFIP directly as its
Direct Servicing Agent Torrent offers a comprehensive suite of both NFIP and private and excess flood
insurance products and services to WYO companies and agents.
Bowring Marsh is an international placement broker primarily for property and casualty risks. Bowring
Marsh uses placement expertise in major international insurance market hubs, including Bermuda, Brazil,
China, United Arab Emirates, Ireland, Spain, United Kingdom, the United States, Singapore, Japan and
Switzerland, and an integrated global network to secure advantageous terms and conditions for its clients
throughout the world.
Services for Insurers
Insurer Consulting Group provides services to insurance carriers. Through Marsh's patented electronic
platform, MarketConnect, and sophisticated data analysis, Marsh provides insurers with individualized
preference setting and risk identification capabilities, as well as detailed performance data and metrics.
Insurer consulting teams review performance metrics and preferences with insurers and provide
customized consulting services to insurers designed to improve business planning and strategy
implementation. Marsh's Insurer Consulting services are designed to improve the product offerings
available to clients, assist insurers in identifying new opportunities and enhance insurers’ operational
efficiency. The scope and nature of the services vary by insurer and by geography.
3
GUY CARPENTER
Guy Carpenter, the Company’s reinsurance intermediary and advisor, generated approximately 9% of the
Company's total revenue in 2019. The workforce consists of approximately 3,100 colleagues who provide
clients with a combination of specialized reinsurance broking expertise, strategic advisory services and
analytics solutions. Guy Carpenter creates and executes reinsurance and risk management solutions for
clients worldwide through risk assessment analytics, actuarial services, highly-specialized product
knowledge and trading relationships with reinsurance markets. Client services also include contract and
claims management and fiduciary accounting.
Acting as a broker or intermediary on all classes of reinsurance, Guy Carpenter places two main types of
property casualty and life / health reinsurance: treaty reinsurance, which involves the transfer of a
portfolio of risks; and facultative reinsurance, which involves the transfer of part or all of the coverage
provided by a single insurance policy.
Guy Carpenter provides reinsurance services in a broad range of centers of excellence and segments,
including: Automobile / Motor, Aviation, Crop/Agriculture, Cyber, D&O/Non-Medical Professional,
Engineering / Construction, Environmental, GL & Umbrella, Health, Life, Marine and Energy, Medical
Professional, Mortgage, Political Risk & Trade Credit, Program Manager Solutions, Property, Public
Sector, Retrocessional Reinsurance, Surety, Terror, and Workers Compensation / Employer Liability.
Guy Carpenter also offers clients alternatives to traditional reinsurance, including industry loss warranties
and, through its licensed affiliates, capital markets alternatives such as transferring catastrophe risk
through the issuance of risk-linked securities. GC Securities, the Guy Carpenter division of MMC
Securities LLC and MMC Securities (Europe) Limited, offers corporate finance solutions, including
mergers & acquisitions and private debt and equity capital raising, and capital markets-based risk transfer
solutions that complement Guy Carpenter's strong industry relationships, analytical capabilities and
reinsurance expertise.
Guy Carpenter also provides its clients with reinsurance-related services, including actuarial, enterprise
risk management, financial and regulatory consulting, portfolio analysis and advice on the efficient use of
capital. Guy Carpenter's Global Strategic Advisory ("GSA") unit helps clients better understand and
quantify the uncertainties inherent in their businesses. Working in close partnership with Guy Carpenter
account executives, GSA specialists help support clients' critical decisions in numerous areas, including
reinsurance utilization, catastrophe exposure portfolio management, new product and market
development, rating agency, regulatory and account impacts, loss reserve risk, capital adequacy and
return on capital.
Compensation for Services in Risk and Insurance Services
Marsh and Guy Carpenter are compensated for brokerage and consulting services through commissions
and fees. Commission rates and fees vary in amount and can depend on a number of factors, including
the type of insurance or reinsurance coverage provided, the particular insurer or reinsurer selected, and
the capacity in which the broker acts and negotiates with clients. In addition to compensation from its
clients, Marsh also receives other compensation, separate from retail fees and commissions, from
insurance companies. This other compensation includes, among other things, payments for consulting
and analytics services provided to insurers; compensation for administrative and other services (including
fees for services provided to or on behalf of insurers relating to the administration and management of
quota shares, panels and other facilities in which insurers participate); and contingent commissions,
which are paid by insurers based on factors such as volume or profitability of Marsh's placements,
primarily driven by MMA and parts of Marsh's international operations.
Marsh and Guy Carpenter receive interest income on certain funds (such as premiums and claims
proceeds) held in a fiduciary capacity for others. For a more detailed discussion of revenue sources and
factors affecting revenue in our Risk and Insurance Services segment, see Part II, Item 7 ("Management's
Discussion and Analysis of Financial Condition and Results of Operations") of this report.
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CONSULTING
The Company's Consulting segment generated approximately 43% of the Company's total revenue in
2019 and employs approximately 30,400 colleagues worldwide. The Company conducts business in this
segment through Mercer and Oliver Wyman Group.
MERCER
Mercer delivers advice and digital solutions that help organizations meet the health, wealth and career
needs of a changing workforce. Mercer has nearly 25,300 colleagues based in 43 countries. Clients
include a majority of the companies in the Fortune 1000 and FTSE 100, as well as medium- and small-
market organizations. Mercer generated approximately 30% of the Company's total revenue in 2019.
Mercer operates in the following areas:
Health. Mercer assists public and private sector employers in the design and management of employee
health care programs; administration of health benefits and flexible benefits programs, including benefits
outsourcing; employee engagement with their health benefits through a digital experience; compliance
with local benefits-related regulations; and the establishment of health and welfare benefits coverage for
employees. Mercer provides a range of advice and solutions to clients, which, depending on the
engagement, may include: total health and wellness management strategies; global health brokerage
solutions; vendor performance and audit; life and disability management; and measurement of healthcare
provider performance. These services are provided through traditional fee-based consulting as well as
commission-based brokerage services in connection with the selection of insurance companies and
healthcare providers. Mercer provides solutions for private active and retiree exchanges in the United
States, including its Mercer Marketplace 365SM and Mercer 365+SM offerings, as well as tools to enhance
employee engagement with their health benefits through its DarwinSM platform across the world.
Mercer also provides consulting and actuarial services to U.S. state governments to support the purchase
of healthcare through state Medicaid programs. In addition, outside of the U.S., Mercer provides
consulting services to insurance carriers to assist them with improving product offerings available to
clients, identifying new opportunities and enhancing insurers’ operational efficiency.
Wealth. Mercer assists clients worldwide in the design, governance and risk management of defined
benefit, defined contribution and hybrid retirement plans. Mercer provides retirement plan outsourcing,
including administration and delivery of defined benefit and defined contribution retirement benefits.
Mercer also provides investment advice and related services to the sponsors and trustees of pension
plans, master trusts, foundations, endowments, and insurance companies as well as wealth management
and other financial intermediary firms.
Mercer's Retirement business includes offerings primarily in defined benefit and actuarial consulting,
defined benefit investment consulting and defined benefit plan administration. Mercer provides a range of
retirement-related services and solutions to corporate, trustees, governmental and institutional clients.
Mercer's Investments business provides primarily investment consulting and investment management
(also referred to as “delegated solutions” or “fiduciary management”) services, defined contribution-
related consulting and investment and administration services, and financial wellness. Mercer's services
cover all stages of the investment process, from strategy, asset allocation and implementation to ongoing
portfolio management services. Mercer provides these services primarily to institutional and other
sophisticated investors including retirement plans (defined benefit and defined contribution), master
trusts, endowments and foundations and wealth managers and other financial intermediary firms,
primarily through manager of manager funds sponsored and managed by Mercer. Mercer also provides
services to individual investors, including financial planning and other discretionary investment services.
As of December 31, 2019, Mercer and its global affiliates had assets under management of approximately
$305 billion worldwide. Mercer’s financial wellness advice and services are designed to promote the
financial wellbeing of employees.
Career. Mercer's Career businesses advise organizations on the engagement, management and reward
of employees; the design of executive remuneration programs; people strategies during business
transformation, improvement of human resource (HR) effectiveness; and the implementation of digital and
cloud-based Human Resource Information Systems through Mercer Career Digital. In addition, through
proprietary survey data and decision support tools, Mercer's Career Products business provides clients
5
with human capital information and analytical capabilities to improve strategic human capital decision
making. Mercer's Communications business helps clients plan and implement HR programs and other
organizational changes designed to maximize employee engagement, drive desired employee behaviors
and achieve improvements in business performance.
OLIVER WYMAN GROUP
With more than 5,100 professionals and offices in 29 countries, Oliver Wyman Group delivers advisory
services to clients through three operating units, each of which is a leader in its field: Oliver Wyman,
Lippincott and NERA Economic Consulting. Oliver Wyman Group generated approximately 13% of the
Company's total revenue in 2019.
Oliver Wyman is a global leader in management consulting. Oliver Wyman combines deep industry
knowledge with specialized expertise in strategy, operations, risk management and organization
transformation. Industry groups include:
• Automotive
• Aviation, Aerospace & Defense
• Business Services
• Communications, Media & Technology
• Distribution & Wholesale
• Education
• Energy
• Financial Services (including corporate and institutional banking, insurance, wealth and asset
management, public policy, and retail and business banking)
• Health & Life Sciences
•
Industrial Products
• Public Sector
• Retail & Consumer Products
• Surface Transportation
• Travel & Leisure
Oliver Wyman overlays its industry knowledge with expertise in the following functional specializations:
• Actuarial. Oliver Wyman’s Actuarial Practice uses mathematical and statistical modeling skills
and qualitative assessment methodologies to assist clients in evaluating and addressing risk.
• Corporate Finance & Restructuring. Oliver Wyman provides an array of capabilities to support
investment decision making by private equity funds, hedge funds, sovereign wealth funds,
investment banks, commercial banks, arrangers, strategic investors and insurers.
• Digital. Oliver Wyman helps organizations capitalize on the opportunities created by digitization
of business, and anticipate and neutralize strategic threats.
• Operations. Oliver Wyman helps organizations leverage their operations for a competitive
advantage using a comprehensive set of capabilities, including performance improvement, digital
operations strategy, and risk management.
• Organizational Effectiveness. Oliver Wyman's Organizational Effectiveness capability brings
together deep functional expertise and industry knowledge to enable the whole organization to
work in service of its strategic vision and to address the most pressing organizational, people,
and change issues.
• Payments. Oliver Wyman draws on years of industry-shaping work in the Financial Services and
Retail industries, deep digital expertise, and renowned research partners in its Celent® business,
to help clients - from banks/issuers, to payments providers, to retailers - to build growth
strategies, form effective partnerships, optimize costs, and manage risk.
• Pricing, Sales, and Marketing. Oliver Wyman helps organizations drive top-line and margin
growth through outstanding strategy and decision making on pricing, marketing optimization, and
best practices on sales effectiveness.
• Risk Management. Oliver Wyman works with chief financial officers, chief risk officers, and other
senior finance and risk management executives of corporations and financial institutions on risk
6
management solutions. Oliver Wyman provides effective, customized solutions to the challenges
presented by the evolving roles, needs and priorities of these individuals and organizations.
• Strategy. Oliver Wyman is a leading provider of corporate strategy advice and solutions in the
areas of growth strategy and corporate portfolio; non-organic growth and M&A; performance
improvement; business design and innovation; corporate center and shared services; and
strategic planning.
• Sustainability Center. The Sustainability Center at Oliver Wyman supports leading companies
and governments around the world in their efforts to foster economic growth while encouraging
more responsible use of natural resources and environmental protection.
Lippincott is a creative consultancy specializing in brand and innovation that shapes recognized brands
and experiences for clients globally. With a team of visual and verbal designers, Lippincott has helped
create some of the world's most recognized brands.
NERA Economic Consulting provides economic analysis and advice to public and private entities to
achieve practical solutions to highly complex business and legal issues arising from competition,
regulation, public policy, strategy, finance and litigation. NERA professionals operate worldwide assisting
clients including corporations, governments, law firms, regulatory agencies, trade associations, and
international agencies. NERA's specialized practice areas include: antitrust; securities; complex
commercial litigation; energy; environmental economics; network industries; intellectual property; product
liability and mass torts; and transfer pricing.
Compensation for Services in Consulting
Mercer and the Oliver Wyman Group of businesses are compensated for advice and services primarily
through fees paid by clients. Mercer's Health business is also compensated through commissions for the
placement of insurance contracts and supplemental compensation from insurers based on such factors
as volume, growth of accounts, and total retention of accounts placed by Mercer (comprising more than
half of the revenue in the Health business). Mercer's Delegated Solutions business and certain of
Mercer's administration services are compensated typically through fees based on assets under
administration or management. For a majority of the Mercer-managed investment funds, revenue
received from Mercer's investment management clients as sub-advisor fees is reported in accordance
with U.S. GAAP, on a gross basis rather than a net basis. For a more detailed discussion of revenue
sources and factors affecting revenue in the Consulting segment, see Part II, Item 7 ("Management's
Discussion and Analysis of Financial Condition and Results of Operations") of this report.
REGULATION
The Company's activities are subject to licensing requirements and extensive regulation under U.S.
federal and state laws, as well as laws of other countries in which the Company's subsidiaries operate.
See Part I, Item 1A ("Risk Factors") below for a discussion of how actions by regulatory authorities or
changes in legislation and regulation in the jurisdictions in which we operate may have an adverse effect
on our businesses.
Risk and Insurance Services. While laws and regulations vary from location to location, every state of
the United States and most foreign jurisdictions require insurance market intermediaries and related
service providers (such as insurance brokers, agents and consultants, reinsurance brokers and managing
general agents) to hold an individual or company license from a government agency or self-regulatory
organization. Some jurisdictions issue licenses only to individual residents or locally-owned business
entities; in those instances, if the Company has no licensed subsidiary, it may maintain arrangements with
residents or business entities licensed to act in such jurisdiction. Such arrangements are subject to an
internal review and approval process. Licensing of reinsurance intermediaries is generally less rigorous
compared to that of insurance brokers, and most jurisdictions require only corporate reinsurance
intermediary licenses.
In 2005, the Insurance Mediation Directive which, as from October 1, 2018 has been superseded by the
Insurance Distribution Directive, was adopted by the United Kingdom and 27 other European Union
Member States. Its implementation gave powers to the Financial Services Authority ("FSA"), the United
Kingdom regulator at the time, to expand its responsibilities in line with the Financial Services and
7
Markets Act (2000), the result of which was the regulation of insurance and reinsurance intermediaries.
The enhanced regulatory regime implemented in the United Kingdom created a licensing system based
on an assessment of factors which included professional competence, financial capacity and the
requirement to hold professional indemnity insurance. In April 2013, the FSA was superseded by the
Financial Conduct Authority ("FCA"). In April 2014, the FCA’s responsibilities were expanded further to
include the regulation of credit activities for consumers. This included the broking of premium finance to
consumers who wished to spread the cost of their insurance. In April 2015, the FCA obtained concurrent
competition powers enabling it to enforce prohibitions on anti-competitive behavior in relation to financial
services.
Insurance authorities in the United States and certain other jurisdictions in which the Company's
subsidiaries do business, including the FCA in the United Kingdom, also have enacted laws and
regulations governing the investment of funds, such as premiums and claims proceeds, held in a fiduciary
capacity for others. These laws and regulations typically provide for segregation of these fiduciary funds
and limit the types of investments that may be made with them, and generally apply to both the insurance
and reinsurance business.
Certain of the Company's Risk and Insurance Services activities are governed by other regulatory bodies,
such as investment, securities and futures licensing authorities. In the United States, Marsh and Guy
Carpenter use the services of MMC Securities LLC, a SEC registered broker-dealer in the United States,
investment adviser and introducing broker. MMC Securities LLC is a member of the Financial Industry
Regulatory Authority ("FINRA"), the National Futures Association and the Securities Investor Protection
Corporation ("SIPC"), primarily in connection with capital markets and other investment banking-related
services relating to insurance-linked and alternative risk financing transactions. Also in the United States,
Marsh uses the services of MMA Securities LLC, a SEC registered broker-dealer, investment adviser and
member of FINRA and SIPC and JSL Securities, Inc., a SEC registered broker-dealer and member of
FINRA, SIPC and the Municipal Securities Rulemaking Board, primarily in connection with retirement,
executive compensation and benefits consulting and advisory services to qualified and non-qualified
benefits plans, companies and executives. In the United Kingdom, Marsh and Guy Carpenter use the
expertise of MMC Securities (Europe) Limited, which is authorized and regulated by the FCA to provide
advice on securities and investments, including mergers & acquisitions in the European Union. MMC
Securities LLC, MMC Securities (Europe) Limited, MMA Securities LLC and JSL Securities, Inc. are
indirect, wholly-owned subsidiaries of Marsh & McLennan Companies, Inc.
Consulting. Mercer's retirement-related consulting and investment services are subject to pension law
and financial regulation in many countries. In addition, the trustee services, investment services (including
advice to persons, institutions and other entities on the investment of pension assets and assumption of
discretionary investment management responsibilities) and retirement and employee benefit program
administrative services provided by Mercer and its subsidiaries and affiliates are also subject to
investment and securities regulations in various jurisdictions, including regulations imposed or enforced
by the SEC and the Department of Labor in the United States, the FCA in the United Kingdom, the
Central Bank of Ireland and the Australian Prudential Regulation Authority and the Australian Securities
and Investments Commission. In the United States, Mercer provides investment services through Mercer
Investments LLC, (formerly Mercer Investment Management, Inc.), an SEC-registered investment adviser,
which consolidated the activities of each of Mercer’s affiliated investment adviser entities in the United
States (including Mercer Investment Consulting LLC and Pavilion Advisory Group), earlier in 2019. Mercer
Trust Company, a limited purpose New Hampshire chartered trust bank, may also provide services for
certain clients of Mercer’s investment management business in the United States. The benefits insurance
consulting and brokerage services provided by Mercer and its subsidiaries and affiliates are subject to the
same licensing requirements and regulatory oversight as the insurance market intermediaries described
above regarding our Risk and Insurance Services businesses. Mercer uses the services of MMC
Securities LLC to provide certain services, including executive benefit and compensation services and
securities dealing services.
FATCA. Regulations promulgated by the U.S. Treasury Department pursuant to the Foreign Account Tax
Compliance Act and related legislation (FATCA) require the Company to take various measures relating to
non-U.S. funds, transactions and accounts. The regulations impose on Mercer certain client financial
account tracking and disclosure obligations with respect to non-U.S. financial institution and insurance
8
clients, and until recently, required Marsh and Guy Carpenter (and Mercer, in limited circumstances) to
collect, validate and maintain certain documentation from each foreign insurance entity that insures a risk
that is subject to the regulations. On December 13, 2018, the U.S. Treasury Department modified these
rules, effectively relieving Marsh and Guy Carpenter from FATCA compliance with respect to its handling
of non-cash value premium payments. As it relates to these non-cash value insurance premiums, the new
rules were put into immediate effect.
COMPETITIVE CONDITIONS
The Company faces strong competition in all of its businesses from providers of similar products and
services, including competition with regard to identifying and pursuing acquisition candidates. The
Company also encounters strong competition throughout its businesses from both public corporations
and private firms in attracting and retaining qualified employees. In addition to the discussion below, see
"Risks Relating to the Company Generally — Competitive Risks," in Part I, Item 1A of this report.
Risk and Insurance Services. The Company's combined insurance and reinsurance services
businesses are global in scope. Our insurance and reinsurance businesses compete principally on
sophistication, range, quality and cost of the services and products they offer to clients. The Company
encounters strong competition from other insurance and reinsurance brokerage firms that operate on a
global, regional, national or local scale, from a large number of regional and local firms in the United
States, the European Union and elsewhere, from insurance and reinsurance companies that market,
distribute and service their insurance and reinsurance products without the assistance of brokers or
agents and from other businesses, including commercial and investment banks, accounting firms,
consultants and online platforms, that provide risk-related services and products or alternatives to
traditional insurance brokerage services. In addition, third party capital providers have entered the
insurance and reinsurance risk transfer market offering products and capital directly to the Company’s
clients. Their presence in the market increases the competitive pressures that the Company faces.
Certain insureds and groups of insureds have established programs of self-insurance (including captive
insurance companies) as a supplement or alternative traditional third-party insurance, thereby reducing in
some cases their need for insurance placements. Certain insureds also obtain coverage directly from
insurance providers. There are also many other providers of managing general agency, affinity programs
and private client services, including specialized firms, insurance companies and other institutions.
Consulting. The Company's consulting businesses face strong competition from other privately and
publicly held worldwide and national companies, as well as regional and local firms. These businesses
generally compete on the basis of the range, quality and cost of the services and products they provide to
clients. Competitors include independent consulting and outsourcing firms, as well as consulting and
outsourcing operations affiliated with accounting, information systems, technology and financial services
firms. Mercer's investments business faces competition from many sources, including investment
consulting firms (many of which offer delegated services), investment management firms and other
financial institutions. In some cases, clients have the option of handling the services provided by Mercer
and Oliver Wyman Group internally, without assistance from outside advisors.
Segmentation of Activity by Type of Service and Geographic Area of Operation.
Financial information relating to the types of services provided by the Company and the geographic areas
of its operations is incorporated herein by reference to Note 17 to the consolidated financial statements
included under Part II, Item 8 of this report.
Employees
As of December 31, 2019, the Company and its consolidated subsidiaries employed 76,000 colleagues
worldwide, including approximately 43,600 in Risk and Insurance Services and 30,400 in Consulting.
9
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers and executive officer appointees of the Company are appointed annually by the
Company’s Board of Directors. The following individuals are the executive officers of the Company:
Peter J. Beshar, age 58, is Executive Vice President and General Counsel of Marsh & McLennan. In
addition to managing the Company’s Legal, Compliance & Public Affairs groups, Mr. Beshar also
oversees the Company’s Government Relations and Risk Management groups. Before joining Marsh &
McLennan in November 2004, Mr. Beshar was a Litigation Partner in the law firm of Gibson, Dunn &
Crutcher LLP. Mr. Beshar joined Gibson, Dunn & Crutcher in 1995 after serving as an Assistant Attorney
General in the New York Attorney General's office and as the Special Assistant to Cyrus Vance in
connection with the peace negotiations in the former Yugoslavia.
Dominic Burke, age 61, is Vice Chair of Marsh & McLennan. He joined the firm in 2019 following the
acquisition of Jardine Lloyd Thompson Group (JLT), after having served as JLT’s Group Chief Executive
for more than 13 years. He also serves as Chairman of Marsh JLT Specialty. Mr. Burke has more than
three decades of experience in the insurance industry. Prior to serving as JLT’s Group Chief Executive,
Mr. Burke held various roles at JLT including Group Chief Operating Officer and prior to that, CEO of
JLT’s UK Retail and Employee Benefits business. Mr. Burke joined JLT in 2000, when it acquired the
company he founded, Burke Ford Insurance Group. Mr. Burke serves as the Chairman of Newbury
Racecourse plc and is a Director for the charity Injured Jockeys Fund in the UK.
John Q. Doyle, age 56, is Vice Chair, Marsh & McLennan and President and Chief Executive Officer of
Marsh. He oversees all of Marsh’s businesses and operations globally. Mr. Doyle was named CEO of
Marsh in July 2017, having joined Marsh & McLennan as President of Marsh in April 2016. Prior to that,
he was Chief Executive Officer of AIG’s commercial insurance businesses. Mr. Doyle began his career at
AIG in 1986 and held several senior executive positions, including President and Chief Executive Officer
of AIG property and casualty in the U.S., President and Chief Executive Officer of National Union Fire
Insurance Company, and President of American Home Assurance Company.
Martine Ferland, age 58, is Vice Chair, Marsh & McLennan and President and Chief Executive Officer of
Mercer, a role she assumed in March 2019. Previously, she was Mercer’s Group President, responsible
for leading the firm’s regions and Global Business Solutions. She joined Mercer in 2011 as Retirement
Business Leader for the Europe and Pacific region, and has served as Europe and Pacific Region
President and Co-President, Global Health. Ms. Ferland began her career as a pension actuary and
consultant at Willis Towers Watson, where she spent 25 years and held various leadership positions in
Montreal and New York. Ms. Ferland is a Fellow of the Society of Actuaries and of the Canadian Institute
of Actuaries.
E. Scott Gilbert, age 64, is Senior Vice President and Chief Information Officer of Marsh & McLennan.
Mr. Gilbert is responsible for the Company’s global information technology strategy, systems, and
infrastructure and leads the Company’s firm-wide efforts to improve the experience of clients and
colleagues through the development and implementation of innovative and cost-effective technologies.
Mr. Gilbert also oversees the firm’s global Business Resiliency and Security operations. He joined the
Company in January 2005 as Chief Compliance Officer and was subsequently appointed Chief Risk and
Compliance Officer, a position he held until 2015, when he became Chief Information Officer. Prior to
joining the Company, Mr. Gilbert served as Chief Compliance Counsel of General Electric Company, and
served for over five years as an Assistant U.S. Attorney for the Southern District of New York.
Daniel S. Glaser, age 59, is President and Chief Executive Officer of Marsh & McLennan. Prior to starting
his current role in January 2013, Mr. Glaser served as Group President and Chief Operating Officer of the
Company. He rejoined Marsh & McLennan in December 2007 as Chairman and Chief Executive Officer of
Marsh, returning to the firm where he had begun his career right out of university in 1982. Mr. Glaser is an
insurance industry veteran who has held senior positions in commercial insurance and insurance
brokerage, working in the United States, Europe and the Middle East. Mr. Glaser serves as the Chairman
of the U.S. Federal Advisory Committee on Insurance (FACI). He is a member of: the Boards of Trustees
for The Institutes and Ohio Wesleyan University and the Board of Directors for the Partnership for New
York City. He is also Co-Chair of the International Advisory Board for BritishAmerican Business.
10
Peter Hearn, age 64, is Vice Chair, Marsh & McLennan and President and Chief Executive Officer of Guy
Carpenter. Previously, he was Global Chairman of Willis Re from March 2011 to June 2015. Prior to that,
Mr. Hearn served as the company’s Global CEO from February 2005 to March 2011, during which time he
was also a member of the Willis Group Executive Committee. Mr. Hearn began his reinsurance career in
1978 with Willis Faber and Dumas, working in the North American casualty, facultative, marine, and North
American reinsurance divisions until 1981, when he joined Towers Perrin Forster and Crosby. Mr. Hearn
joined Willis Re as a Senior Vice President in 1994.
Laurie Ledford, age 62, is Senior Vice President and Chief Human Resources Officer of Marsh &
McLennan. She is responsible for Marsh & McLennan's overall human capital and talent strategy and the
delivery of human resources services to all our colleagues worldwide. Prior to assuming her current role
in 2012, Ms. Ledford served as Chief Human Resources Officer (CHRO) for Marsh Inc. Ms. Ledford
joined Marsh in 2000 and was named CHRO in 2006, after having served as Senior Human Resources
Director for Marsh's International Specialty Operations. Her prior experience was with Citibank and
NationsBank.
Scott McDonald, age 53, is Vice Chair, Marsh & McLennan and President and Chief Executive Officer of
the Oliver Wyman Group. Prior to assuming this role in January 2014, Mr. McDonald was President of
Oliver Wyman. Before becoming President of Oliver Wyman in 2012, Mr. McDonald was the Managing
Partner of Oliver Wyman's Financial Services practice. Before joining Oliver Wyman in 1995, he was an
M&A investment banker with RBC Dominion Securities in Toronto.
Mark McGivney, age 52, is Chief Financial Officer of Marsh & McLennan. Prior to assuming this role in
January 2016, Mr. McGivney has held a number of senior financial management positions since joining
the Company in 2007. Most recently he was Senior Vice President, Corporate Finance of Marsh &
McLennan, and was responsible for leading and directing the Company’s Corporate Development,
Treasury and Investor Relations functions from 2014 until 2016. Prior to that, he served as Chief Financial
Officer of Marsh, and Chief Financial Officer and Chief Operating Officer of Mercer. His prior experience
includes senior positions at The Hanover Insurance Group, including serving as Senior Vice President of
Finance, Treasurer, and Chief Financial Officer of the Property & Casualty business, as well as positions
with Merrill Lynch and Price Waterhouse.
AVAILABLE INFORMATION
The Company is subject to the information reporting requirements of the Securities Exchange Act of
1934. In accordance with the Exchange Act, the Company files with, or furnishes to, the SEC its annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statement
for its annual shareholders' meeting. The Company makes these reports and any amendments to these
reports available free of charge through its website, www.mmc.com, as soon as reasonably practicable
after they are filed with or furnished to the SEC. The SEC also maintains a website at www.sec.gov that
contains reports, proxy and information statements and other information regarding issuers, like the
Company, that file electronically with the SEC.
The Company also posts on its website certain governance and other information for investors.
The Company encourages investors to visit these websites from time to time, as information is updated
and new information is posted. Website references in this report are provided as a convenience and do
not constitute, and should not be viewed as, incorporation by reference of the information contained on,
or available through, the websites. Therefore, such information should not be considered part of this
report.
11
Item 1A. Risk Factors
You should consider the risks described below in conjunction with the other information presented in this
report. These risks have the potential to materially adversely affect the Company's business, results of
operations or financial condition.
RISKS RELATING TO THE COMPANY GENERALLY
Technology, Cybersecurity and Data Protection Risks
Our business performance and growth plans could be negatively affected if we are not able to
develop and implement improvements in technology or respond effectively to the threat of digital
disruption and other technological change.
We depend in large part on our technology systems for conducting business, as well as for providing the
data and analytics we utilize to manage our business. As a result, our business success is dependent on
maintaining the effectiveness of existing technology systems and on continuing to develop and enhance
technology systems that support our business processes and strategic initiatives in a cost and resource
efficient manner, particularly as our business processes become more digital. We have a number of
strategic initiatives involving investments in or partnerships with technology companies as well as
investments in technology systems and infrastructure to support our growth strategy. These investments
may be costly and require significant capital expenditures, may not be profitable or may be less profitable
than what we have experienced historically. In addition, investments in technology systems may not
deliver the benefits or perform as expected, or may be replaced or become obsolete more quickly than
expected, which could result in operational difficulties or additional costs. In some cases, we also depend
on key vendors and partners to provide technology and other support for our strategic initiatives. If these
vendors or partners fail to perform their obligations or otherwise cease to work with us, our ability to
execute on our strategic initiatives could be adversely affected. If we do not keep up with technological
changes or execute effectively on our strategic initiatives, our business and results of operations could be
adversely impacted.
In addition, to remain competitive in many of our business areas, we must anticipate and respond
effectively to the threat of digital disruption and other technological change. The threat comes from
traditional players, such as insurers, through disintermediation as well as from new entrants, such as
technology companies, "Insurtech" start-up companies and others. These players are focused on using
technology and innovation, including artificial intelligence (AI), digital platforms, data analytics, robotics
and blockchain, to simplify and improve the client experience, increase efficiencies, alter business models
and effect other potentially disruptive changes in the industries in which we operate.
We could incur significant liability or our reputation could be damaged if our information systems
are breached or we otherwise fail to protect client or Company data or information systems.
In operating our business and providing services and solutions to clients, we collect, use, store, transmit
and otherwise process certain electronic information, including personal, confidential, proprietary and
sensitive data such as information related to financial records, health care, mergers and acquisitions and
personal data of our clients, colleagues and vendors. We rely on the efficient, uninterrupted and secure
operation of complex information technology systems and networks to operate our business and securely
process, transmit and store electronic information. In the normal course of business, we also share
electronic information with our vendors and other third parties. This electronic information comprises
sensitive and confidential data, including information related to financial records, health care, mergers
and acquisitions and clients’ personal data. Our information technology systems and safety control
systems, and those of our numerous third-party providers, as well as the control systems of critical
infrastructure they rely on, such as power grids, are potentially vulnerable to unauthorized access,
damage or interruption from a variety of external threats, including cyberattacks, computer viruses and
other malware, ransomware and other types of data and systems-related modes of attack. Our systems
are also subject to compromise from internal threats such as improper action by employees, vendors and
other third parties with otherwise legitimate access to our systems. Moreover, we face the ongoing
challenge of managing access controls in a complex environment. The latency of a compromise is often
measured in months but could be years, and we may not be able to detect a compromise in a timely
manner. We could experience significant financial and reputational harm if our information systems are
breached, sensitive client or Company data are compromised, surreptitiously modified, rendered
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inaccessible for any period of time or maliciously made public, or if we fail to make adequate or timely
disclosures to the public or law enforcement agencies following any such event, whether due to delayed
discovery or a failure to follow existing protocols.
Cyberattacks are increasing in frequency and evolving in nature. We are at risk of attack by a variety of
adversaries, including state-sponsored organizations, organized crime, hackers or "hactivists" (activist
hackers), through use of increasingly sophisticated methods of attack, including the deployment of
artificial intelligence to find and exploit vulnerabilities, such as “deep fakes”, and long-term, persistent
attacks referred to as advanced persistent threats. These techniques used to obtain unauthorized access
or sabotage systems include, among other things, computer viruses, malicious or destructive code,
ransomware, social engineering attacks (including phishing and impersonation), hacking and denial-of-
service attacks. Because these techniques change frequently and new techniques may not be identified
until they are launched against a target, we may be unable to anticipate these techniques or implement
adequate preventative measures, resulting in potential data loss, data unavailability, data corruption or
other damage to information technology systems.
As the breadth and complexity of the technologies we use and the software and platforms we develop
continue to grow, including as a result of the use of mobile devices, cloud services, "open source"
software, social media and the increased reliance on devices connected to the Internet (known as the
"Internet of Things"), the potential risk of security breaches and cyber-attacks also increases. Despite
ongoing efforts to improve our ability to protect data from compromise, we may not be able to protect all
of our data across our diverse systems. Our efforts to improve and protect data from compromise may
also identify previously undiscovered instances of security breaches or other cyber incidents. Our
policies, employee training (including phishing prevention training), procedures and technical safeguards
may also be insufficient to prevent or detect improper access to confidential, personal or proprietary
information. In addition, the competition for talent in the data privacy and cybersecurity space is intense,
and we may also be unable to hire, develop or retain suitable talent capable of adequately detecting,
mitigating or remediating these risks.
Should an attacker gain access to our network using compromised credentials of an authorized user, we
are at risk that the attacker might successfully leverage that access to compromise additional systems
and data. Certain measures that could increase the security of our systems, such as data encryption
(including encryption of data at rest), heightened monitoring and logging, scanning for source code errors
or deployment of multi-factor authentication, take significant time and resources to deploy broadly, and
such measures may not be deployed in a timely manner or be effective against an attack. The inability to
implement, maintain and upgrade adequate safeguards could have a material adverse effect on our
business.
Our information systems must be continually updated, patched, and upgraded to protect against known
vulnerabilities. The volume of new software vulnerabilities has increased markedly, as has the criticality of
patches and other remedial measures, including those in the existing JLT information systems. In addition
to remediating newly identified vulnerabilities, previously identified vulnerabilities must also be
continuously addressed. Accordingly, we are at risk that cyberattackers exploit these known vulnerabilities
before they have been communicated by vendors or addressed. Due to the large number and age of the
systems and platforms that we operate, the increased frequency at which vendors are issuing security
patches to their products, the need to test patches and, in some cases coordinate with clients and
vendors, before they can be deployed, we perpetually face the substantial risk that we cannot deploy
patches in a timely manner. We are also dependent on third party vendors to keep their systems patched
and secure in order to protect our data. Any failure related to these activities could have a material
adverse effect on our business.
We have numerous vendors and other third parties who receive personal information from us in
connection with the services we offer our clients. In addition, we have migrated certain data, and may
increasingly migrate data, to the cloud hosted by third-party providers. Some of these vendors and third
parties also have direct access to our systems. We are at risk of a cyberattack involving a vendor or other
third party, which could result in a breakdown of such third party’s data protection processes or the
cyberattackers gaining access to our infrastructure through the third party. To the extent that a vendor or
third party suffers a cyberattack that compromises its operations, we could incur significant costs and
possible service interruption, which could have an adverse effect on our business.
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We have a history of making acquisitions and investments, and in April 2019 we completed the acquisition
of JLT. The process of integrating the information systems of JLT and of such other businesses we
acquire is complex and exposes us to additional risk. For instance, we may not adequately identify
weaknesses and vulnerabilities in an acquired entity’s information systems, either before or after the
acquisition, which could affect the value we are able to derive from the acquisition, expose us to
unexpected liabilities or make our own systems more vulnerable to a cyberattack. In addition, if we
discover a historical compromise, security breach or other cyber incident related to the target’s
information systems following the close of the acquisition, we may be liable and exposed to significant
costs and other unforeseen liabilities. We may also be unable to integrate the systems of the businesses
we acquire into our environment in a timely manner, which could further increase these risks until such
integration takes place. In the case of JLT, our integration of the information systems is ongoing, and
given the size and complexity of the integration project, we remain exposed to these risks until the
integration is complete.
We have from time to time experienced data incidents and cybersecurity breaches, such as malware
incursions (including computer viruses and ransomware), users exceeding their data access
authorization, employee misconduct and incidents resulting from human error, such as loss of portable
and other data storage devices or misconfiguration of software or hardware resulting in inadvertent
exposure of personal, sensitive, confidential or proprietary information. Like many companies, we are
subject to social engineering attacks such as regular phishing email campaigns directed at our employees
that can result in malware infections and data loss. Although these incidents have resulted in data loss
and other damages, to date, they have not had a material adverse effect on our business or operations. In
the future, these types of incidents could result in personal, sensitive, confidential or proprietary
information being lost or stolen, surreptitiously modified, rendered inaccessible for any period of time, or
maliciously made public, including client, employee or Company data, which could have a material
adverse effect on our business. In the event of a cyberattack, we might have to take our systems offline,
which could interfere with services to our clients or damage our reputation. We also may be unable to
detect an incident, assess its severity or impact, or appropriately respond in a timely manner. In addition,
our liability insurance, which includes cyber insurance, may not be sufficient in type or amount to cover us
against claims related to security breaches, cyberattacks and other related data and system incidents.
The costs to comply with, or our failure to comply with, U.S. and foreign laws related to privacy,
data security and data protection, such as the E.U. General Data Protection Regulation (GDPR)
and the California Consumer Privacy Act (CCPA), could adversely affect our financial condition,
operating results and our reputation.
In operating our business and providing services and solutions to clients, we store and transfer sensitive
employee and client data, including personal data, in and across multiple jurisdictions. We leverage
systems and applications that are spread all over the world requiring us to regularly move data across
national borders. As a result, we are subject to a variety of laws and regulations in the United States,
Europe and around the world regarding privacy, data protection, data security and cyber-security. These
laws and regulations are continuously evolving and developing. Some of these laws and regulations are
increasing the level of data handling restrictions, including rules on data localization, all of which could
affect our operations and result in regulatory liability and high fines. In particular, high-profile security
breaches at major companies continue to be disclosed regularly, which is leading to even greater
regulatory scrutiny and fines at the highest levels they have ever been.
The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may
be conflicting. For example, the GDPR, which became effective in May 2018, greatly increased the
European Commission’s jurisdictional reach of its laws and added a broad array of requirements for
handling personal data, such as the public disclosure of data breaches, privacy impact assessments, data
portability and the appointment of data protection officers in some cases. In the U.S., the CCPA came into
effect in January 2019 and introduced several new concepts to local privacy requirements, including
increased transparency and rights such as access and deletion and an ability to opt out of the “sale” of
personal information. Despite a proliferation of regulatory guidance papers, much remains unclear with
respect to how to interpret and implement the GDPR and the CCPA, and that lack of clarity could result in
potential liability for our failure to meet our obligations under the GDPR and the CCPA. Given the breadth
and depth of changes in data protection obligations, including classifying data and committing to a range
14
of administrative, technical and physical controls to protect data and enable data transfers outside of the
E.U., our compliance with laws such as the GDPR and the CCPA will continue to require time, resources
and review of the technology and systems we use. Further, Brexit has created uncertainty with regard to
the future of the flow of personal information between the United Kingdom and the E.U., and that
uncertainty may impair our ability to offer our existing and planned products and services or increase our
cost of doing business.
Following the implementation of the GDPR, other jurisdictions have sought to amend, or propose
legislation to amend, their existing data protection laws to align with the requirements of the GDPR with
the aim of obtaining an adequate level of data protection to facilitate the transfer of personal data to most
jurisdictions from the E.U. Accordingly, the challenges we face in the E.U. will likely also apply to other
jurisdictions that adopt laws similar to the GDPR or regulatory frameworks of equivalent complexity. For
example, Brazil has enacted its general data protection law, the Lei Geral de Proteção de Dados
Pessoais, which is due to come into effect in August 2020, China has modified its law, India has a new
draft privacy law and Japan has adopted sweeping changes to its privacy law. In some cases, including
China and India, the laws include data localization elements that will require that certain personal data
stay within their borders. Looking at the U.S. following the passage of the CCPA, multiple other states
have introduced similar bills, some more comprehensive than the CCPA. There is also continued
legislative interest in passing a federal privacy law. In addition to data protection laws, countries and
states in the U.S. are enacting cybersecurity laws and regulations. For example, the New York State
Department of Financial Services issued in 2017 cybersecurity regulations which imposed an array of
detailed security measures on covered entities. These requirements were phased in and the last of them
came into effect on March 1, 2019. All of these evolving compliance and operational requirements impose
significant costs that are likely to increase over time, may divert resources from other initiatives and
projects and could restrict the way services involving data are offered, all of which may adversely affect
our results of operations.
Many statutory requirements, both in the United States and abroad, include obligations for companies to
notify individuals of security breaches involving certain personal information, which could result from
breaches experienced by us or our vendors. In addition to government regulation, privacy advocates and
industry groups have and may in the future propose self-regulatory standards from time to time. These
and other industry standards may legally or contractually apply to us, or we may elect to comply with such
standards. We expect that there will continue to be new proposed laws and regulations concerning data
privacy and security, and we cannot yet determine the impact such future laws, regulations and standards
may have on our business.
Furthermore, enforcement actions and investigations by regulatory authorities related to data security
incidents and privacy violations continue to increase. Unauthorized disclosure or transfer of sensitive or
confidential client or Company data, whether through systems failure, employee negligence, fraud or
misappropriation, by the Company, our vendors or other parties with whom we do business (if they fail to
meet the standards we impose) could subject us to significant litigation, monetary damages, regulatory
enforcement actions, fines and criminal prosecution in one or more jurisdictions. Given the complexity of
operationalizing the various privacy laws such as the GDPR and the CCPA, the maturity level of proposed
compliance frameworks and the continued lack of clarity on how to implement their requirements, we and
our clients are at risk of enforcement actions taken by E.U. and other data protection authorities or
litigation from consumer advocacy groups acting on behalf of data subjects. We may not be able to
respond quickly or effectively to regulatory, legislative and other developments, and these changes may in
turn impair our ability to offer our existing or planned products and services and/or increase our cost of
doing business.
Legal and Regulatory Risks
We are subject to significant uninsured exposures arising from errors and omissions, breach of
fiduciary duty and other claims.
Our businesses provide numerous professional services, including the placement of insurance and the
provision of consulting, investment advisory and actuarial services, to clients around the world. As a
result, the Company and its subsidiaries are subject to a significant number of errors and omissions,
breach of fiduciary duty and similar claims, which we refer to collectively as "E&O claims." In our Risk and
15
Insurance Services segment, such claims include allegations of damages arising from our failure to
assess clients’ risks, advise clients, place coverage or notify insurers of potential claims on behalf of
clients in accordance with our obligations to them. In our Consulting segment, where we increasingly act
in a fiduciary capacity through our investments business, such claims could include allegations of
damages arising from the provision of consulting, investments, actuarial, pension administration and other
services. We may also be exposed to claims related to assets or solutions offered by the Consulting
segment in complement to its traditional consulting services. These Consulting segment services
frequently involve complex calculations and other analysis, including (i) making assumptions about, and
preparing estimates concerning, contingent future events, (ii) drafting and interpreting complex
documentation governing pension plans, (iii) calculating benefits within complex pension structures, (iv)
providing individual financial planning advice including investment advice and advice relating to cashing
out of defined benefit pension plans; (v) providing investment advice, including guidance on asset
allocation and investment strategy, and (vi) managing client assets, including the selection of investment
managers and implementation of the client’s investment policy. We provide these services to a broad
client base, including clients in the public sector for our investment services. Matters often relate to
services provided by the Company dating back many years. Such claims may subject us to significant
liability for monetary damages, including punitive and treble damages, negative publicity and reputational
harm, and may divert personnel and management resources. We may be unable to effectively limit our
potential liability in certain jurisdictions, including through insurance, or in connection with certain types of
claims, particularly those concerning claims of a breach of fiduciary duty.
In establishing liabilities for E&O claims under U.S. generally accepted accounting principles ("U.S.
GAAP"), the Company uses case level reviews by inside and outside counsel, actuarial analysis by Oliver
Wyman Group, a subsidiary of the Company, and other methods to estimate potential losses. A liability is
established when a loss is both probable and reasonably estimable. The liability is assessed quarterly
and adjusted as developments warrant. In many cases, the Company has not recorded a liability, other
than for legal fees to defend the claim, because we are unable, at the present time, to make a
determination that a loss is both probable and reasonably estimable. Given the judgment involved in
estimating and establishing liabilities in accordance with U.S. GAAP, as well as the unpredictability of
E&O claims and the litigation that can flow from them, it is possible that an adverse outcome in a
particular matter could have a material adverse effect on the Company's business, results of operations
or financial condition.
We are subject to regulatory investigations, reviews and other inquiries that consume significant
management time and, if determined unfavorably to us, could have a material adverse effect on
our business, results of operations or financial condition.
We are subject to regulatory investigations, reviews and other inquiries that consume significant
management time and, if determined unfavorably to us, could have a material adverse effect on our
business, results of operations or financial condition. For example, in October 2017, the Company
received a notice that the Directorate-General for Competition of the European Commission had
commenced a civil investigation of a number of insurance brokers, including both Marsh and JLT,
regarding "the exchange of commercially sensitive information between competitors in relation to aviation
and aerospace insurance and reinsurance broking products and services in the European Economic
Area, as well as possible coordination between competitors." In January 2019, we received a notice that
the Administrative Council for Economic Defense anti-trust agency in Brazil had commenced an
administrative proceeding against a number of insurance brokers, including both Marsh and JLT, and
insurers “to investigate an alleged sharing of sensitive commercial and competitive confidential
information” in the aviation insurance and reinsurance sector. In addition, upon the consummation of the
acquisition of JLT, the Company assumed the legal liabilities and became responsible for JLT’s litigation
and regulatory exposures as of April 1, 2019.
These regulatory matters are ongoing, and we are unable to predict their likely timing, outcome or
ultimate impact. Additional information regarding these investigations and certain other legal and
regulatory proceedings is set forth in Note 16 to our consolidated financial statements included under Part
II, Item 8 of this report.
16
We cannot guarantee that we are or will be in compliance with all current and potentially
applicable U.S. federal and state or foreign laws and regulations, and actions by regulatory
authorities or changes in legislation and regulation in the jurisdictions in which we operate could
have a material adverse effect on our business.
Our activities are subject to extensive regulation under the laws of the United States and its various
states, the United Kingdom, the European Union and its member states and the other jurisdictions in
which we operate. For example, we are subject to regulation by agencies such as the Securities and
Exchange Commission, FINRA and state insurance regulators in the United States, the FCA and the
Competition and Markets Authority (CMA) in the United Kingdom, and the European Commission in the
European Union, as further described above under Part I, Item 1 - Business (Regulation) of this report.
We are also subject to trade sanctions laws relating to countries such as Cuba, Crimea, Iran, North
Korea, Russia, Syria and Venezuela, and anti-corruption laws such as the U.S. Foreign Corrupt Practices
Act and the U.K. Anti-Bribery Act. We are subject to numerous other laws on matters as diverse as
internal control over financial reporting and disclosure controls and procedures, securities regulation, data
privacy and protection, cybersecurity, taxation, anti-trust and competition, immigration, wage-and-hour
standards and employment and labor relations.
The U.S. and foreign laws and regulations that apply to our operations are complex and may change
rapidly, and our efforts to comply and keep up with them require significant resources. In some cases,
these laws and regulations may decrease the need for our services, increase our costs, negatively impact
our revenues or impose operational limitations on our business, including on the products and services
we may offer or on the amount or type of compensation we may collect. While we attempt to comply with
applicable laws and regulations, there can be no assurance that we, our employees, our consultants and
our contractors and other agents are in full compliance with such laws and regulations or interpretations
at all times, or that we will be able to comply with any future laws or regulations. If we fail to comply or are
accused of failing to comply with applicable laws and regulations, including those referred to above, we
may become subject to investigations, criminal penalties, civil remedies or other consequences, including
fines, injunctions, loss of an operating license or approval, increased scrutiny or oversight by regulatory
authorities, the suspension of individual employees, limitations on engaging in a particular business or
redress to clients or other parties, and we may become exposed to negative publicity or reputational
damage. Moreover, our failure to comply with laws or regulations in one jurisdiction may result in
increased regulatory scrutiny by other regulatory agencies in that jurisdiction or regulatory agencies in
other jurisdictions. The cost of compliance and the consequences of failing to be in compliance could
therefore have a material adverse effect on our business, results of operations and financial condition.
In most jurisdictions, government regulatory authorities have the power to interpret and amend or repeal
applicable laws and regulations, and have discretion to grant, renew and revoke the various licenses and
approvals we need to conduct our activities. Such authorities may require the Company to incur
substantial costs in order to comply with such laws and regulations. In some areas of our businesses, we
act on the basis of our own or the industry's interpretations of applicable laws or regulations, which may
conflict from state to state or country to country. In the event those interpretations eventually prove
different from the interpretations of regulatory authorities, we may be penalized or precluded from carrying
on our previous activities. Moreover, the laws and regulations to which we are subject may conflict among
the various jurisdictions and countries in which we operate, which increases the likelihood of our
businesses being non-compliant in one or more jurisdictions.
Our business or reputation could be harmed by our reliance on third-party providers or
introducers.
We currently partner with a large volume of third-party providers to meet the needs of our clients around
the world. In certain limited instances, we also work with third-party introducers that provide services for
public sector clients.
There is a risk that our third-party providers or introducers engage in business practices that are
prohibited by our internal policies or violate applicable laws and regulations, such as the U.S. Foreign
Corrupt Practices Act and the U.K. Anti-Bribery Act.
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Acquisitions and Dispositions Risks
We face risks when we acquire businesses, including risks relating to our integration of JLT.
We have a history of making acquisitions and investments, including a total of 123 in the period from 2013
to 2019. In particular, we completed the acquisition of the Jardine Lloyd Thompson Group plc ("JLT") on
April 1, 2019 (the “JLT Transaction”). We may not be able to successfully integrate the business of JLT or
any other businesses that we acquire into our own business, or achieve any expected cost savings or
synergies from the integration of JLT or any other such integration. The potential difficulties that we may
face which could cause the results of the acquisition of JLT or any other business to differ from our
expectations, include, but are not limited to, the following:
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the retention of key colleagues and clients;
failure to implement our business plan for the combined business or to achieve
anticipated revenue or profitability targets;
delays or difficulties in completing the integration of acquired companies or assets;
higher than expected costs, lower than expected cost savings and/or a need to allocate
resources to manage unexpected operating difficulties;
issues in integrating information and technology, accounting, tax, financial reporting,
human resources, and other systems;
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assumption of unknown liabilities, or other unanticipated issues, expenses and liabilities;
• weaknesses and vulnerabilities in an acquired entity’s information systems, either before
or after the acquisition, which could expose us to unexpected liabilities or make our own
systems more vulnerable to a cyberattack;
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changes in applicable laws and regulations or their interpretations, including changes in
tax laws, employment regulations and changes in the U.K. and Europe related to Brexit;
diversion of attention and resources of management;
promoting or retaining a positive corporate culture;
retaining and obtaining required regulatory approvals, licenses and permits;
for acquisitions in which the acquired company’s financial performance is incorporated
into our financial results, either in full or in part, the dependence on the acquired
company’s accounting, financial reporting and similar systems, controls and processes;
the difficulty of implementing the required controls, procedures and policies appropriate
for a U.S. public company, including compliance with the requirements under the
Sarbanes-Oxley Act of 2002, and the potential for significant deficiencies or material
weaknesses related to controls and procedures, particularly for acquisitions of companies
headquartered outside the U.S.;
the ability to receive dividends and other payments from newly acquired companies; and
compliance with all current and potentially applicable U.S. federal and state or foreign
laws and regulations, including the U.K. Anti-Bribery Act, U.S. Foreign Corrupt Practices
Act and U.S. anti-money laundering and sanctions laws.
In addition, if in the future the performance of our reporting units or an acquired business varies from our
projections or assumptions, or estimates about future profitability of our reporting units or an acquired
business change, the estimated fair value of our reporting units or an acquired business could change
materially and could result in an impairment of goodwill and other acquisition-related intangible assets
recorded on our balance sheet or in adjustments in contingent payment amounts. Given the significant
size of the Company's goodwill and intangible assets, an impairment could have a material adverse effect
on our results of operations in any given period.
We expect that acquisitions will continue to be a key part of our business strategy. Our success in this
regard will depend on our ability to identify and compete for appropriate acquisition candidates and to
finance and complete the transactions we decide to pursue on favorable terms with positive results.
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When we dispose of businesses, we may continue to be subject to certain liabilities of that business after
its disposition relating to the prior period of our ownership and may not be able to negotiate for limitations
on those liabilities. We are also subject to the risk that the sales price is less than the amount reflected on
our balance sheet.
Competitive Risks
The loss of members of our senior management team or other key colleagues could have a
material adverse effect on our business.
We rely upon the contributions of our senior management team to establish and implement our business
strategy and to manage the future growth of our business. The loss of any of the senior management
team could limit our ability to successfully execute our business strategy or adversely affect our ability to
retain existing and attract new clients. Moreover, we could be adversely affected if we fail to adequately
plan for the succession of members of our senior management team.
Across all of our businesses, our colleagues are critical to developing and retaining client relationships as
well as performing the services on which our revenues are earned. It is therefore important for us to
attract, incentivize and retain significant revenue-producing employees and the key managerial and other
professionals who support them. We face numerous challenges in this regard, including the intense
competition for talent, the general mobility of colleagues and fostering a diverse and inclusive workplace.
Losing colleagues who manage or support substantial client relationships or possess substantial
experience or expertise could adversely affect our ability to secure and complete client engagements,
which could adversely affect our results of operations. And, subject to applicable enforceable restrictive
covenants, if a key employee were to join an existing competitor or form a competing company, some of
our clients could choose to use the services of that competitor instead of our services.
Failure to maintain our corporate culture could damage our reputation.
We strive to foster a culture in which our colleagues act with integrity and feel comfortable speaking up
about potential misconduct. We are a people business, and our ability to attract and retain colleagues and
clients is dependent upon our commitment to a diverse and inclusive workplace, trustworthiness, ethical
business practices and other qualities. Our colleagues are the cornerstone of this culture, and acts of
misconduct by any colleague, and particularly by senior management, could erode trust and confidence
and damage our reputation among existing and potential clients and other stakeholders.
In addition, there is increased focus, including from governmental organizations, investors, colleagues
and clients, on environmental, social and governance (ESG) issues such as climate change. Our
reputation could be damaged if we do not, or are perceived not to, adequately address these issues.
We face significant competitive pressures in each of our businesses, including from
disintermediation, as our competitive landscape continues to evolve.
As a global professional services firm, the Company faces intense, sustained competition in each of its
businesses, and the competitive landscape continues to change and evolve. Our ability to compete
successfully depends on a variety of factors, including the quality and expertise of our colleagues, our
geographic reach, the sophistication and quality of our services, our pricing relative to competitors, our
clients’ ability to self-insure or use internal resources instead of consultants, and our ability to respond to
changes in client demand and industry conditions. Some of our competitors may have greater financial
resources, or may be better positioned to respond to technological and other changes in the industries we
serve, and they may be able to compete more effectively. If we are unable to respond successfully to the
changing conditions we face, our businesses, results of operations and financial condition will be
adversely impacted.
In our Risk and Insurance Services segment, in addition to the challenges posed by capital market
alternatives to traditional insurance and reinsurance, we compete intensely against a wide range of other
insurance and reinsurance brokerage and risk advisory firms that operate on a global, regional, national
or local scale for both client business and employee talent. In recent years, private equity sponsors have
invested tens of billions of dollars into the insurance brokerage sector, transforming existing players and
creating new ones to compete with large global and regional brokers. We also compete with in-house
brokers, captive insurance companies, insurance and reinsurance companies that market and service
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their insurance products directly to consumers and without the assistance of brokers or other market
intermediaries, and with various other companies that provide risk-related services or alternatives to
traditional brokerage services, including those that rely almost exclusively on technological solutions or
platforms. This competition is intensified by an often "syndicated" or "distributed" approach to the
purchase of insurance and reinsurance brokerage services, where a client engages multiple brokers to
service different portions of the client's account. In addition, third party capital providers have entered the
insurance and reinsurance risk transfer market offering products and capital directly to our clients that
serve as substitutes for traditional insurance.
In our Consulting segment, we compete for business with numerous consulting firms and similar
organizations, many of whom also provide, or are affiliated with firms that provide, accounting, information
systems, technology and financial services. Such competitors may be able to offer more comprehensive
products and services to potential clients, which may give them a competitive advantage.
Consolidation in the industries we serve could adversely affect our business.
Companies in the industries that we serve may seek to achieve economies of scale and other synergies
by combining with or acquiring other companies. If two or more of our current clients merge, or
consolidate or combine their operations, it may decrease the amount of work that we perform for these
clients. If one of our current clients merges or consolidates with a company that relies on another provider
for its services, we may lose work from that client or lose the opportunity to gain additional work. Any of
these or similar possible results of increasing or evolving industry consolidation could adversely affect our
business. For example, as insurance and reinsurance companies continue to consolidate, Guy
Carpenter’s smaller client base may be more susceptible to this risk given the limited number of
insurance company clients and reinsurers in the marketplace. In addition, in our Consulting segment in
Australia, Mercer faces increased competitive pressure as the superannuation industry is consolidating,
and superannuation providers, such as Mercer, face increased downward pressure on fees.
We rely on a large number of vendors and other third parties to perform key functions of our
business operations and to provide services to our clients. These vendors and third parties may
act in ways that could harm our business.
We rely on a large number of vendors and other third parties, and in some cases subcontractors, to
provide services, data and information such as technology, information security, funds transfers, business
process management, and administration and support functions that are critical to the operations of our
business. These third parties include correspondents, agents and other brokers and intermediaries,
insurance markets, data providers, plan trustees, payroll service providers, software and system vendors,
health plan providers, investment managers, risk modeling providers, and providers of human resource
functions, such as recruiters. Many of these providers are located outside the U.S., which exposes us to
business disruptions and political risks inherent when conducting business outside of the U.S. As we do
not fully control the actions of these third parties, we are subject to the risk that their decisions or
operations may adversely impact us and replacing these service providers could create significant delay
in services or operations and additional expense.
A failure by the third parties to (i) comply with service level agreements in a high quality and timely
manner, particularly during periods of our peak demand for their services, (ii) maintain adequate internal
controls that may impact our own financial reporting, or (iii) adequately maintain the confidentiality of any
of our data or trade secrets or adequately protect or properly use other intellectual property to which they
may have access, could result in economic and reputational harm to us. These third parties also face their
own technology, operating, business and economic risks, and any significant failures by them, including
the improper use or disclosure of our confidential client, employee, or Company information or failure to
comply with applicable law, could cause harm to our reputation or otherwise expose us to liability. An
interruption in or the cessation of service by any service provider as a result of systems failures, capacity
constraints, non-compliance with legal, regulatory or contractual obligations, financial difficulties or for any
other reason could disrupt our operations, impact our ability to offer certain products and services, and
result in contractual or regulatory penalties, liability claims from clients or employees, damage to our
reputation and harm to our business.
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Business Resiliency Risks
Our inability to successfully recover should we experience a disaster or other business continuity
or data recovery problem could cause material financial loss, loss of human capital, regulatory
actions, reputational harm or legal liability.
If we experience a local or regional disaster or other business continuity event, such as an earthquake,
hurricane, flood, terrorist attack, pandemic, security breach, cyberattack (including manipulating the
control systems of critical infrastructure), power loss or telecommunications failure, our ability to operate
will depend, in part, on the continued availability of our personnel, our office facilities and the proper
functioning of our computer, telecommunication and other related systems and operations. In such an
event, we could experience operational challenges that could have a material adverse effect on our
business. The risk of business disruption is more pronounced in certain geographic areas, including major
metropolitan centers, like New York or London, where we have significant operations and approximately
3,300 and 5,200 colleagues in those respective locations, and in certain countries and regions in which
we operate that are subject to higher potential threat of terrorist attacks or military conflicts.
Our operations depend in particular upon our ability to protect our technology infrastructure against
damage. If a business continuity event occurs, we could lose client or Company data or experience
interruptions to our operations or delivery of services to our clients, which could have a material adverse
effect. A cyberattack or other business continuity event affecting us or a key vendor or other third party
could result in a significant and extended disruption in the functioning of our information technology
systems or operations or our ability to recover data, requiring us to incur significant expense to address
and remediate or otherwise resolve such issues. For example, hackers have increasingly targeted
companies by attacking internet-connected industrial control and safety control systems. An extended
outage could result in the loss of clients and a decline in our revenues. In the worst case, any
manipulation of the control systems of critical infrastructure may even result in the loss of life.
We regularly assess and take steps to improve our existing business continuity, disaster recovery and
data recovery plans and key management succession. However, a disaster or other continuity event on a
significant scale or affecting certain of our key operating areas within or across regions, or our inability to
successfully recover from such an event, could materially interrupt our business operations and result in
material financial loss, loss of human capital, regulatory actions, reputational harm, damaged client
relationships and legal liability. Our business disruption insurance may also not fully cover, in type or
amount, the cost of a successful recovery in the event of such a disruption.
Financial Risks
Our results of operations and investments could be adversely affected by macroeconomic
conditions, political events and market conditions.
Macroeconomic conditions, political events and other market conditions around the world affect our
clients' businesses and the markets they serve. These conditions may reduce demand for our services or
depress pricing for those services, which could have a material adverse effect on our results of
operations. Changes in macroeconomic and political conditions could also shift demand to services for
which we do not have a competitive advantage, and this could negatively affect the amount of business
that we are able to obtain.
The United Kingdom’s exit from the European Union, referred to as "Brexit," continues to create political
and economic uncertainty, particularly in the United Kingdom and the European Union. The British
government and the E.U. continue to negotiate the terms of the U.K.'s future relationship with the E.U.
There remains inevitable uncertainty on topics such as financial laws and regulations, tax and free trade
agreements, immigration laws and employment laws. We have significant operations and a substantial
workforce in the U.K. Approximately 16% of our revenue is from the U.K., and the uncertainty surrounding
the implementation and effect of Brexit may cause increased economic volatility, affecting our operations
and business. The effects of Brexit will depend on the agreements the U.K. makes to retain access to
European Union markets during a transitional period and more permanently. The measures could
potentially disrupt the markets we serve and may cause us to lose clients and colleagues. In addition,
Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K.
determines which European Union laws to replace or replicate. These developments may have a material
adverse effect on global economic conditions and the stability of financial markets, both in the U.K. and
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globally. Any of these factors could affect the demand for our services. Furthermore, currency exchange
rates in GBP and the euro with respect to each other and the U.S. dollar have already been adversely
affected by these developments. Should this foreign exchange volatility continue, it could cause volatility
in our quarterly financial results.
In addition, any changes in U.S. trade policy could trigger retaliatory actions by affected countries,
resulting in “trade wars,” which could affect the volume of economic activity and performance of stock
markets in the United States, including demand for our services.
Our investments, including our minority investments in other companies as well as our cash investments
and those held in a fiduciary capacity, are subject to general credit, liquidity, counterparty, foreign
exchange, market and interest rate risks. These risks may be exacerbated by global macroeconomic
conditions, market volatility and regulatory, financial and other difficulties affecting the companies in which
we have invested or that may be faced by financial institution counterparties. During times of stress in the
banking industry, counterparty risk can quickly escalate, potentially resulting in substantial trading and
investment losses for corporate and other investors. In addition, we may incur investment losses as a
result of unusual and unpredictable market developments, and we may continue to experience reduced
investment earnings if the yields on investments deemed to be low risk remain at or near their current low
levels. If the banking system or the fixed income, interest rate, credit or equity markets deteriorate, the
value and liquidity of our investments could be adversely affected. Finally, the value of the Company's
assets held in other jurisdictions, including cash holdings, may decline due to foreign exchange
fluctuations.
If we are unable to collect our receivables, our results of operations and cash flows could be
adversely affected.
Our business depends on our ability to obtain payment from our clients of the amounts they owe us for
the work we perform. As of December 31, 2019, our receivables for our commissions and fees were
approximately $4.6 billion, or approximately one-quarter of our total annual revenues, and portions of our
receivables are increasingly concentrated in certain businesses and geographies.
Macroeconomic or political conditions could result in financial difficulties for our clients, which could cause
clients to delay payments to us, request modifications to their payment arrangements that could increase
our receivables balance or default on their payment obligations to us.
We may not be able to obtain sufficient financing on favorable terms.
The maintenance and growth of our business, including our ability to finance acquisitions, the payment of
dividends and our ability to make share repurchases rely on our access to capital, which depends in large
part on cash flow generated by our business and the availability of equity and debt financing. Certain of
our businesses such as GC Securities, a division of MMC Securities, LLC and MMC Securities (Europe)
Limited also rely on financings by us to fund their underwriting of debt and equity capital raising offerings
by their clients. We incurred significant debt to finance the JLT Transaction, and there can be no
assurance that our operations will generate sufficient positive cash flow to finance all of our capital needs
or that we will be able to obtain equity or debt financing on favorable terms. In addition, our ability to
obtain financing will depend in part upon prevailing conditions in credit and capital markets, which are
beyond our control.
Our defined benefit pension plan obligations could cause the Company's financial position,
earnings and cash flows to fluctuate.
Our defined benefit pension obligations and the assets set aside to fund those obligations are sensitive to
certain changes in the financial markets. Any such changes may result in increased pension expense or
additional cash payments to fund these plans.
The Company has significant defined benefit pension obligations to its current and former employees,
including obligations assumed as part of the JLT Transaction, totaling approximately $17.6 billion, and
related plan assets of approximately $17.0 billion, at December 31, 2019 on a U.S. GAAP basis. As part
of the JLT Transaction, the Company assumed responsibility for a number of pension plans throughout
the world, with $255 million of net pension liabilities as of December 31, 2019 ($1,003 million in liabilities
and $748 million of plan assets as of December 31, 2019). The Company's policy for funding its defined
benefit pension plans is to contribute amounts at least sufficient to meet the funding requirements set
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forth by law. In the United States, contributions to these plans are based on ERISA guidelines. Outside
the United States, contributions are generally based on statutory requirements and local funding
practices, which may differ from measurements under U.S. GAAP. In the U.K., for example, the
assumptions used to determine pension contributions are the result of legally-prescribed negotiations
between the Company and the plans' trustees. Currently, the use of these assumptions results in a lower
funded status than determined under U.S. GAAP and may result in contributions irrespective of the U.S.
GAAP funded status.
The financial calculations relating to our defined benefit pension plans are complex. Pension plan assets
could decrease as the result of poor future asset performance. In addition, the estimated return on plan
assets would likely be impacted by changes in the interest rate environment and other factors, including
equity valuations, since these factors reflect the starting point used in the Company’s projection models.
For example a reduction in interest rates may result in a reduction in the estimated return on plan assets.
Also, pension plan liabilities, periodic pension expense and future funding amounts could increase as a
result of a decline in the interest rates we use to discount our pension liabilities, longer lifespans than
those reflected in our mortality assumptions, changes in investment markets that result in lower expected
returns on assets, actual investment return that is less than the expected return on assets, adverse
changes in laws or regulations and other variables.
While we have taken steps to mitigate the impact of pension volatility on our earnings and cash funding
requirements, these strategies may not be successful. Accordingly, given the magnitude of our worldwide
pension plans, variations in or reassessment of the preceding or other factors or potential miscalculations
relating to our defined benefit pension plans could cause significant fluctuation from year to year in our
earnings and cash flow, as well as our pension plan assets, liabilities and equity, and may result in
increased levels of contributions to our pension plans.
Our significant non-U.S. operations expose us to exchange rate fluctuations and various risks that
could impact our business.
Approximately 53% of our business is located outside of the United States. We are subject to exchange
rate movement because we must translate the financial results of our foreign subsidiaries into U.S. dollars
and also because some of our subsidiaries receive revenue other than in their functional currencies.
Exchange rate movements may change over time, and they could have a material adverse impact on our
financial results and cash flows reported in U.S. dollars. Our U.S. operations earn revenue and incur
expenses primarily in U.S. dollars. In certain jurisdictions, however, while Risk and Insurance Services
operations generate revenue in a number of different currencies, expenses are almost entirely incurred in
local currency. Due to fluctuations in foreign exchange rates, we are subject to economic exposure as
well as currency translation exposure on the net operating results of our operations. Because the non-
U.S. based revenue that is exposed to foreign exchange fluctuations is approximately 53% of total
revenue, exchange rate movement can have a significant impact on our business, financial condition,
results of operations and cash flow. For additional discussion, see "Market Risk and Credit Risk-Foreign
Currency Risk" in Part II, Item 7A ("Quantitative and Qualitative Disclosures about Market Risk") of this
report.
We may not be able to receive dividends or other distributions in needed amounts from our
subsidiaries.
The Company is organized as a legal entity separate and distinct from our operating subsidiaries.
Because we do not have significant operations of our own, we are dependent upon dividends and other
payments from our operating subsidiaries to meet our obligations for paying principal and interest on
outstanding debt obligations, paying dividends to stockholders, repurchasing our common stock under
our share repurchase program and paying corporate expenses. In the event our operating subsidiaries
are unable to pay sufficient dividends and make other payments to the Company, we may not be able to
service our debt, pay dividends on or repurchase our common stock or meet our other obligations.
Further, the Company derives a significant portion of its revenue and operating profit from operating
subsidiaries located outside the United States. Funds from the current year’s earnings of the Company's
non-U.S. operating subsidiaries are regularly repatriated to the United States. A number of factors could
arise that could limit our ability to repatriate funds or could make repatriation cost-prohibitive, including,
but not limited to, the imposition of currency controls and other government restrictions on repatriation in
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the jurisdictions in which our subsidiaries operate, fluctuations in foreign exchange rates and the
imposition of withholding and other taxes on such payments.
In the event we are unable to generate or repatriate cash from our operating subsidiaries, our overall
liquidity could deteriorate and our ability to finance our obligations, including to pay dividends on or
repurchase our common stock, could be adversely affected.
Our quarterly revenues and profitability may fluctuate significantly.
Quarterly variations in revenues and operating results may occur due to several factors. These include:
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the number of client engagements during a quarter;
the possibility that clients may decide to delay or terminate a current or anticipated
project as a result of factors unrelated to our work product or progress;
fluctuations in hiring and utilization rates and clients' ability to terminate engagements
without penalty;
potential limitations on the clients or industries we serve resulting from increased
regulation or changing stakeholder expectations on ESG issues;
the impact of changes in accounting standards or in our accounting estimates or
assumptions, including from the adoption of the revenue recognition, pension or lease
accounting standards;
the impact on us or our clients of changes in legislation, regulation and legal guidance or
interpretations in the jurisdictions in which we operate, including with respect to the
TCJA;
seasonality due to the impact of regulatory deadlines, policy renewals and other timing
factors to which our clients are subject;
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the success of our acquisitions or investments;
• macroeconomic factors such as changes in foreign exchange rates, interest rates and
global securities markets, particularly in the case of Mercer, where fees in its investments
business and certain other business lines are derived from the value of assets under
management or administration; and
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general economic conditions, including factors beyond our control affecting economic
conditions such as severe weather, climate change, global health crises and pandemics,
geopolitical unrest or other catastrophic events, since our results of operations are
directly affected by the levels of business activity of our clients, which in turn are affected
by the level of economic activity in the industries and markets that they serve.
A significant portion of our total operating expenses is relatively fixed in the short term. Therefore, a
variation in the number of client assignments or in the timing of the initiation or the completion of client
assignments can cause significant variations in quarterly operating results for these businesses.
Credit rating downgrades would increase our financing costs and could subject us to operational
risk.
Currently, the Company's senior debt is rated A- by S&P and Baa1 by Moody's. The ratings from both
S&P and Moody's currently carry a Negative outlook.
If we need to raise capital in the future (for example, in order to fund maturing debt obligations or finance
acquisitions or other initiatives), credit rating downgrades would increase our financing costs, and could
limit our access to financing sources. Further, a downgrade to a rating below investment-grade could
result in greater operational risks through increased operating costs and increased competitive pressures.
We have significantly increased our debt as a result of the JLT acquisition, which could adversely
affect our financial flexibility.
As of December 31, 2019, we had total consolidated debt outstanding of approximately $12.0 billion. In
2019 alone, we incurred $6.5 billion of additional debt to finance the JLT acquisition.
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The level of debt outstanding could adversely affect our financial flexibility by reducing our cash flows and
our ability to use cash from operations for other purposes, including working capital, dividends to
shareholders, share repurchases, acquisitions, capital expenditures and general corporate purposes. In
addition, we are subject to risks that, at the time any of our outstanding debt matures, we will not be able
to retire or refinance the debt on terms that are acceptable to us. We also face the risk of a credit rating
downgrade if we do not retire or refinance the debt to levels acceptable to the credit rating agencies in a
timely manner.
The ongoing effects from the 2017 Tax Cuts and Jobs Act continue to make our results more
difficult to predict.
Our effective tax rate may fluctuate in the future as a result of the 2017 Tax Cuts and Jobs Act (the
"TCJA") and the continuing issuance of interpretive guidance related to the TCJA. The TCJA included
significant changes in U.S. income tax law that has a meaningful impact on our provision for income taxes
and requires significant judgments and estimates in interpretation and calculations. Given the significant
complexity of the TCJA, the potential for new legislation or additional guidance from U.S. Treasury, the
Securities and Exchange Commission, the Financial Accounting Standards Board or other regulatory
authorities related to the TCJA, recognized impacts in future periods could be significantly different from
our current estimates. Such uncertainty may also result in increased scrutiny from, or disagreements with,
tax authorities.
The enacted tax legislation included, among other provisions, a reduction in the corporate tax rate, new
limitations on the deductibility of net interest, a tax on Global Intangible Low-Taxed Income ("GILTI"), and
the Base Erosion and Anti-Abuse Tax ("BEAT"). With respect to GILTI, we are experiencing relatively high
effective tax rates on our foreign source earnings because of the limitation on foreign tax credits on
income already subject to tax rates higher than the U.S. rate. The provision continues to be subject to
regulatory guidance and possible legislative changes, which make predicting its impact on our tax rate
difficult. In addition, the interaction of GILTI with the interest expense limitations may negatively impact
our effective tax rate. Also, due to the lack of court cases testing the TCJA and related regulations, it
cannot be certain that we will not be subject to the BEAT. The BEAT levies a significant tax on cross
border payments to related group companies. While we operate in a manner that currently limits our
exposure to BEAT, uncertainty about the financial impact on us of this tax remains and there can be no
assurance that we will not be subject to material amounts of BEAT in the future.
Global Operations
We are exposed to multiple risks associated with the global nature of our operations.
We conduct business globally. In 2019, approximately 53% of the Company's total revenue was
generated from operations outside the United States, and over one-half of our employees were located
outside the United States. The JLT Transaction significantly expanded our non-U.S. operations in
jurisdictions such as the U.K., Asia, South America and Australia, and we expect to expand our non-U.S.
operations further.
The geographic breadth of our activities subjects us to significant legal, economic, operational, market,
compliance and reputational risks. These include, among others, risks relating to:
•
•
•
•
economic and political conditions in the countries in which we operate;
client concentration in certain high-growth countries in which we operate;
the length of payment cycles and potential difficulties in collecting accounts receivable;
unexpected increases in taxes or changes in U.S. or foreign tax laws, rulings, policies or
related legal and regulatory interpretations, including recent international initiatives to
require multinational enterprises, like ours, to report profitability on a country-by-country
basis, which could increase scrutiny by, or cause disagreements with, foreign tax
authorities and the potential imposition of new global minimum tax;
•
potential transfer pricing-related tax exposures that may result from the flow of funds
among our subsidiaries and affiliates in the various jurisdictions in which we operate;
• withholding or other taxes that foreign governments may impose on the payment of
dividends or other remittances to us from our non-U.S. subsidiaries;
25
•
•
•
•
•
•
•
•
•
•
•
potential conflicts of interest that may arise as we expand the scope of our businesses
and our client base;
international hostilities, international trade disputes, terrorist activities, natural disasters
and infrastructure disruptions;
local investment or other financial restrictions that foreign governments may impose;
potential lawsuits, investigations, market studies, reviews or other activity by foreign
regulatory or law enforcement authorities or legislatively appointed commissions, which
may result in potential modifications to our businesses, related private litigation or
increased scrutiny from U.S. or other regulators;
potential costs and difficulties in complying with a wide variety of foreign laws and
regulations (including tax systems) administered by foreign government agencies, some
of which may conflict with U.S. or other sources of law;
potential costs and difficulties in complying, or monitoring compliance, with foreign and
U.S. laws and regulations that are applicable to our operations abroad, including trade
sanctions laws relating to countries such as Cuba, Crimea, Iran, North Korea, Russia,
Syria and Venezuela and anti-corruption laws such as the U.S. Foreign Corrupt Practices
Act and the U.K. Bribery Act 2010;
limitations or restrictions that foreign or U.S. governments and regulators may impose on
the products or services we sell, the methods by which we sell our products and services
and the manner in which and the amounts we are compensated;
potential limitations or difficulties in protecting our intellectual property in various foreign
jurisdictions;
limitations that foreign governments may impose on the conversion of currency or the
payment of dividends or other remittances to us from our non-U.S. subsidiaries;
engaging and relying on third parties to perform services on behalf of the Company; and
potential difficulties in monitoring employees in geographically dispersed locations.
RISKS RELATING TO OUR RISK AND INSURANCE SERVICES SEGMENT
Our Risk and Insurance Services segment, conducted through Marsh and Guy Carpenter, represented
57% of the Company's total revenue in 2019. Our business in this segment is subject to particular risks.
Results in our Risk and Insurance Services segment may be adversely affected by a general
decline in economic activity.
Demand for many types of insurance and reinsurance generally rises or falls as economic growth
expands or slows. This dynamic affects the level of commissions and fees generated by Marsh and Guy
Carpenter. To the extent our clients become adversely affected by declining business conditions, they
may choose to limit their purchases of insurance and reinsurance coverage, as applicable, which would
inhibit our ability to generate commission revenue and other revenue based on premiums placed by us.
Also, the insurance they seek to obtain through us may be impacted by changes in their assets, property
values, sales or number of employees, which may reduce our commission revenue, and they may decide
not to purchase our risk advisory or other services, which would inhibit our ability to generate fee revenue.
Moreover, insolvencies and combinations associated with an economic downturn, especially insolvencies
and combinations in the insurance industry, could adversely affect our brokerage business through the
loss of clients or by limiting our ability to place insurance and reinsurance business, as well as our
revenues from insurers. Guy Carpenter is especially susceptible to this risk given the limited number of
insurance company clients and reinsurers in the marketplace.
Volatility or declines in premiums and other market trends may significantly impede our ability to
grow revenues and profitability.
A significant portion of our Risk and Insurance Services revenue consists of commissions paid to us out
of the premiums that insurers and reinsurers charge our clients for coverage. We do not determine the
insurance premiums on which our commissions are generally based. Our revenues and profitability are
26
subject to change to the extent that premium rates fluctuate or trend in a particular direction. The potential
for changes in premium rates is significant, due to the normal cycles of pricing in the commercial
insurance and reinsurance markets.
As traditional insurance companies continue to rely on non-affiliated brokers or agents to generate
premium, those insurance companies may seek to reduce their expenses by lowering their commission
rates. The reduction of these commission rates, along with general volatility or declines in premiums, may
significantly affect our revenue and profitability. Because we do not determine the timing or extent of
premium pricing changes, it is difficult to accurately forecast our commission revenues, including whether
they will significantly decline. As a result, we may have to adjust our plans for future acquisitions, capital
expenditures, dividend payments, loan repayments and other expenditures to account for unexpected
changes in revenues, and any decreases in premium rates may adversely affect the results of our
operations.
In addition to movements in premium rates, our ability to generate premium-based commission revenue
may be challenged by disintermediation and the growing availability of alternative methods for clients to
meet their risk-protection needs. This trend includes a greater willingness on the part of corporations to
self-insure, the use of captive insurers, and the presence of capital markets-based solutions for traditional
insurance and reinsurance needs. Further, the profitability of our Risk and Insurances Services segment
depends in part on our ability to be compensated for the analytical services and other advice that we
provide, including the consulting and analytics services that we provide to insurers. If we are unable to
achieve and maintain adequate billing rates for all of our services, our margins and profitability could
decline.
Adverse legal developments and future regulations concerning how intermediaries are
compensated by insurers or clients, as well as allegations of anti-competitive behavior or
conflicts of interest more broadly, could have a material adverse effect on Marsh’s business,
results of operations and financial condition.
The ways in which insurance intermediaries are compensated receive scrutiny from regulators in part
because of the potential for anti-competitive behavior and conflicts of interest. The vast majority of the
compensation that Marsh receives is in the form of retail fees and commissions that are paid by the client
or paid from premium that is paid by the client. The amount of other compensation that we receive from
insurance companies, separate from retail fees and commissions, has increased in the last several years,
both on an underlying basis and through acquisition. This other compensation includes payment for (i)
consulting and analytics services provided to insurers; (ii) administrative and other services provided to
insurers (including services relating to the administration and management of quota shares, panels and
other facilities); and (iii) contingent commissions, primarily at MMA and outside the U.S., paid by insurers
based on factors such as volume or profitability. These other revenue streams present potential
regulatory, litigation and reputational risks that may arise from alleged anti-competitive behavior or
conflicts of interest, and future changes in the regulatory environment may impact our ability to collect
such revenue. Adverse regulatory, legal or other developments could have a material adverse effect on
our business and expose the Company to negative publicity and reputational harm.
RISKS RELATING TO OUR CONSULTING SEGMENT
Our Consulting segment, conducted through Mercer and Oliver Wyman Group, represented 43% of our
total revenue in 2019. Our businesses in this segment are subject to particular risks.
Mercer’s Investments business is subject to a number of risks, including risks related to third-
party investment managers, operational risk, conflicts of interest, asset performance and
regulatory compliance, that, if realized, could result in significant damage to our business.
Mercer’s Investments business provides clients with investment consulting and investment management
(also referred to as "delegated solutions" or "fiduciary management") services. In the investment
consulting business, clients make and implement their own investment decisions based upon advice
provided by Mercer. In its delegated solutions business, Mercer implements the client’s investment policy
by engaging and overseeing third-party asset managers who determine which investments to buy and
sell. To effect implementation of a client’s investment policy, Mercer may utilize its "manager of managers"
investment funds.
27
Mercer’s Investments business is subject to a number of risks, including risks related to third-parties, our
operations, conflicts of interest, asset performance and regulatory compliance and scrutiny, which could
arise in connection with these offerings. For example, Mercer’s due diligence on an asset manager may
fail to uncover material deficiencies or fraud that could result in investment losses to a client. There is a
risk that Mercer will fail to properly implement a client’s investment policy, which could cause an incorrect
or untimely allocation of client assets among asset managers or strategies. Mercer may also be perceived
as recommending certain asset managers to clients, or offering delegated solutions to an investment
consulting client, solely to enhance its own compensation. Asset classes may perform poorly, or asset
managers may underperform their benchmarks, due to poor market performance, a downturn in the
global equity markets, negligence or other reasons, resulting in poor returns or loss of client capital.
Changes in the value levels of equity, debt, real assets, commodities, foreign exchange or other asset
markets, in particular as a result of a downturn in the global markets, may cause our assets under
management, revenue and earnings to decline. These risks, if realized, could result in significant liability
and damage our business.
Revenues for the services provided by our Consulting segment may decline for various reasons,
including as a result of changes in economic conditions, the value of equity, debt and other asset
markets, our clients’ or an industry's financial condition or government regulation or an
accelerated trend away from actively managed investments to passively managed investments.
Global economic conditions may negatively impact businesses and financial institutions. Many of our
clients, including financial institutions, corporations, government entities and pension plans, have reduced
expenses, including amounts spent on consulting services, and used internal resources instead of
consultants during difficult economic periods. The evolving needs and financial circumstances of our
clients may reduce demand for our consulting services and could adversely affect our revenues and
profitability. If the economy or markets in which we operate experience weakness or deteriorate, our
business, financial condition and results of operations could be materially and adversely affected.
In addition, some of Mercer's Investments business generate fees based upon the value of the clients’
assets under management or advisement. Changes in the value of equity, debt, currency, real estate,
commodities or other asset classes could cause the value of assets under management or advisement,
and the fees received by Mercer, to decline. Such changes could also cause clients to withdraw funds
from Mercer’s Investments business in favor of other investment service providers. In either case, our
business, financial condition and results of operations could be materially and adversely affected.
Mercer’s Investments business also could be adversely affected by an accelerated shift away from
actively managed investments to passively managed investments with associated lower fees. Further,
revenue received by Mercer as investment manager to the majority of the Mercer-managed investment
funds is reported in accordance with U.S. GAAP on a gross basis rather than a net basis, with sub-
advisor fees reflected as an expense. Therefore, the reported revenue for these offerings does not fully
reflect the amount of net revenue ultimately attributable to Mercer.
Demand for many of Mercer's benefits services is affected by government regulation and tax laws,
rulings, policies and interpretations, which drive our clients' needs for benefits-related services. Significant
changes in government regulations affecting the value, use or delivery of benefits and human resources
programs, including changes in regulations relating to health and welfare plans, defined contribution plans
or defined benefit plans, may adversely affect the demand for or profitability of Mercer's services.
Factors affecting defined benefit pension plans and the services we provide relating to those
plans could adversely affect Mercer.
Mercer currently provides corporate trustees, multi-employer and public clients with actuarial, consulting
and administration services relating to defined benefit pension plans. The nature of our work is complex.
Many clients, particularly in the public sector, have sizeable pension deficits and are subject to impact
from volatility in the global stock markets and interest rate fluctuations. A number of Mercer's clients have
frozen or curtailed their defined benefit plans and have moved to defined contribution plans resulting in
reduced revenue for Mercer's retirement business. These developments and a continued or accelerated
rate of decline in revenues for our defined benefit pension plans business could adversely affect Mercer's
business and operating results. In addition, our actuarial services involve numerous assumptions and
estimates regarding future events, including interest rates used to discount future liabilities, estimated
28
rates of return for a plan's assets, healthcare cost trends, salary projections and participants' life
expectancies. Our consulting services involve the drafting and interpretation of trust deeds and other
complex documentation governing pension plans. Our administration services include calculating benefits
within complicated pension plan structures. Our investments services include investment advice and
management relating to defined benefit pension plan assets intended to fund present and future benefit
obligations. Clients dissatisfied with our services have brought, and may bring, significant claims against
us, particularly in the United States and the United Kingdom.
The profitability of our Consulting segment may decline if we are unable to achieve or maintain
adequate utilization and pricing rates for our consultants.
The profitability of our Consulting businesses depends in part on ensuring that our consultants maintain
adequate utilization rates (i.e., the percentage of our consultants' working hours devoted to billable
activities). Our utilization rates are affected by a number of factors, including:
•
•
•
•
•
•
•
•
•
our ability to transition consultants promptly from completed projects to new assignments,
and to engage newly-hired consultants quickly in revenue-generating activities;
our ability to continually secure new business engagements, particularly because a
portion of our work is project-based rather than recurring in nature;
our ability to forecast demand for our services and thereby maintain appropriate
headcount in each of our geographies and workforces;
our ability to retain key colleagues and consulting professionals;
unanticipated changes in the scope of client engagements;
the potential for conflicts of interest that might require us to decline client engagements
that we otherwise would have accepted;
our need to devote time and resources to sales, training, professional development and
other non-billable activities;
the potential disruptive impact of acquisitions and dispositions; and
general economic conditions.
If the utilization rate for our consulting professionals declines, our profit margin and profitability could
decline.
In addition, the profitability of our Consulting businesses depends in part on the prices we are able to
charge for our services. The prices we charge are affected by a number of factors, including:
•
clients' perception of our ability to add value through our services;
• market demand for the services we provide;
•
•
•
our ability to develop new services and the introduction of new services by competitors;
the pricing policies of our competitors;
the extent to which our clients develop in-house or other capabilities to perform the
services that they might otherwise purchase from us; and
•
general economic conditions.
If we are unable to achieve and maintain adequate billing rates for our services, our profit margin and
profitability could decline.
Item 1B. Unresolved Staff Comments.
There are no unresolved comments to be reported pursuant to Item 1B.
29
Item 2. Properties.
Marsh & McLennan Companies maintains its corporate headquarters in New York City. We also maintain
other offices around the world, primarily in leased space. In certain circumstances we may have space
that we sublet to third parties, depending upon our needs in particular locations.
Marsh & McLennan Companies and certain of its subsidiaries own, directly and indirectly through special
purpose subsidiaries, a 58% condominium interest covering approximately 900,000 square feet of office
space in a 44 story condominium in New York City. This real estate serves as the Company's
headquarters and is occupied primarily by the Company and its subsidiaries for general corporate use.
The condominium interests are financed by a 30-year mortgage loan that is non-recourse to the Company
unless the Company (i) is downgraded below B (stable outlook) by S&P or Fitch or B2 (stable outlook) by
Moody's and such downgrade is continuing or (ii) an event of default under the mortgage loan has
occurred. The mortgage is secured by a first priority assignment of leases and rents, including the leases
which the Company and certain of its subsidiaries entered into with their affiliated special purpose
subsidiaries which own the mortgaged condominium interests. The net rent due under those leases in
effect services the mortgage debt.
Item 3. Legal Proceedings.
In April 2017, the Financial Conduct Authority in the United Kingdom (the "FCA") commenced a civil
competition investigation into the aviation insurance and reinsurance sector. In connection with that
investigation, the FCA carried out an on-site inspection at the London offices of Marsh Limited, our Marsh
and Guy Carpenter operating subsidiary in the United Kingdom, and JLT Specialty Ltd., JLT's U.K.
operating subsidiary. The FCA indicated that it had reasonable grounds for suspecting that Marsh Limited,
JLT Specialty Ltd. and other participants in the market had been sharing competitively sensitive
information within the aviation insurance and reinsurance broking sector.
In October 2017, the Company received a notice that the Directorate-General for Competition of the
European Commission had commenced a civil investigation of a number of insurance brokers, including
both Marsh and JLT, regarding "the exchange of commercially sensitive information between competitors
in relation to aviation and aerospace insurance and reinsurance broking products and services in the
European Economic Area ("EEA"), as well as possible coordination between competitors." In light of the
action taken by the European Commission, the FCA informed Marsh Limited and JLT Specialty Ltd. that it
had discontinued its investigation under U.K. competition law. In May 2018, the FCA advised that it would
not be taking any further action with Marsh Limited or JLT Specialty Ltd. in connection with this matter.
In January 2019, the Company received a notice that the Administrative Council for Economic Defense
anti-trust agency in Brazil had commenced an administrative proceeding against a number of insurance
brokers, including both Marsh and JLT, and insurers “to investigate an alleged sharing of sensitive
commercial and competitive confidential information" in the aviation insurance and reinsurance sector.
We are cooperating with these investigations and are conducting our own reviews. At this time, we are
unable to predict their likely timing, outcome or ultimate impact. There can be no assurance that the
ultimate resolution of these or any related matters will not have a material adverse effect on our
consolidated results of operations, financial condition or cash flows.
We and our subsidiaries are also party to a variety of other legal, administrative, regulatory and
government proceedings, claims and inquiries arising in the normal course of business.
Additional information regarding certain legal proceedings and related matters is set forth in Note 16 to
the consolidated financial statements appearing under Part II, Item 8 ("Financial Statements and
Supplementary Data") of this report.
Item 4. Mine Safety Disclosures.
Not applicable.
30
PART II
Item 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
For information regarding dividends paid and the number of holders of the Company’s common stock, see
the table entitled "Selected Quarterly Financial Data and Supplemental Information (Unaudited)" below on
the last page of Part II, Item 8 ("Financial Statements and Other Supplementary Data") of this report.
The Company’s common stock is listed on the New York, Chicago and London Stock Exchanges. The
following table indicates the high and low prices (NYSE composite quotations) of the Company’s common
stock during 2019 and 2018 and each quarterly period thereof:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Full Year
2019
Stock Price Range
2018
Stock Price Range
High
$94.96
$100.20
$103.37
$113.94
$113.94
Low
$77.85
$91.67
$94.81
$95.00
$77.85
High
$85.94
$84.52
$87.89
$89.59
$89.59
Low
$78.69
$78.60
$81.38
$74.30
$74.30
On February 18, 2020, the closing price of the Company’s common stock on the NYSE was $119.45.
During 2019, the Company repurchased 4.8 million shares of its common stock for total consideration of
$485 million. In November 2019, the Board of Directors of the Company authorized the Company to
repurchase up to $2.5 billion in shares of the Company's common stock, which superseded any prior
authorizations. As of December 31, 2019, the Company remained authorized to repurchase up to
approximately $2.4 billion in shares of its common stock. There is no time limit on the authorization.
Period
Oct 1-31, 2019
Nov 1-30, 2019
Dec 1-31, 2019
Total
Total Number
of Shares
(or Units)
Purchased
Average Price
Paid per Share
(or Unit)
553,907 $
685,452 $
537,171 $
1,776,530 $
97.4891
105.0219
109.858
104.1355
Total Number of
Shares (or Units)
Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Number
(or Approximate
Dollar Value)
of Shares (or
Units) that May
Yet Be Purchased
Under the Plans or
Programs
553,907 $
685,452 $
537,171 $
1,776,530 $
511,753,209
2,482,000,302
2,422,987,756
2,422,987,756
31
Item 6. Selected Financial Data.
Marsh & McLennan Companies, Inc. and Subsidiaries
FIVE-YEAR STATISTICAL SUMMARY OF OPERATIONS
For the Years Ended December 31,
(In millions, except per share figures)
Revenue
Expense:
Compensation and Benefits
Other Operating Expenses
Operating Expenses
Operating Income (a)
Other Net Benefits Credits
Interest Income
Interest Expense
Cost of Extinguishment of Debt
Investment Income (loss)
Acquisition Related Derivative Contracts
Income Before Income Taxes
Income Tax Expense (b)
Income From Continuing Operations
Discontinued Operations, Net of Tax
Net Income Before Non-Controlling Interests
Less: Net Income Attributable to Non-Controlling Interests
Net Income Attributable to the Company
Basic Net Income Per Share Information:
Income From Continuing Operations
Income From Discontinued Operations
Net Income Attributable to the Company
Average Number of Shares Outstanding
Diluted Income Per Share Information:
Income From Continuing Operations
Discontinued Operations, Net of Tax Per Share
Net Income Attributable to the Company
Average Number of Shares Outstanding
Dividends Paid Per Share
Return on Average Equity
Year-End Financial Position:
Working capital
Total assets
Long-term debt
Total equity
Total shares outstanding (net of treasury shares)
Other Information:
Number of employees
Stock price ranges—
U.S. exchanges — High
— Low
$
$
$
$
$
$
$
2019
2018
2017
2016
2015
$ 16,652
$ 14,950
$ 14,024
$ 13,211
$ 12,893
9,734
4,241
13,975
2,677
265
39
(524)
(32)
22
(8)
2,439
666
1,773
—
1,773
31
1,742
3.44
—
3.44
506
3.41
—
3.41
511
1.74
8,605
3,584
12,189
2,761
215
11
(290)
—
(12)
(441)
2,244
574
1,670
—
1,670
20
1,650
3.26
—
3.26
506
3.23
—
3.23
511
1.58
$
$
$
$
$
$
8,085
3,284
11,369
2,655
201
9
(237)
—
15
—
2,643
1,133
1,510
2
1,512
20
1,492
2.91
—
2.91
513
2.87
—
2.87
519
1.43
$
$
$
$
$
$
22%
22%
22%
7,694
3,086
10,780
2,431
233
5
(189)
—
—
—
2,480
685
1,795
—
1,795
27
1,768
3.41
—
3.41
519
3.38
—
3.38
524
1.30
7,569
3,140
10,709
2,184
235
13
(163)
—
38
—
2,307
671
1,636
—
1,636
37
1,599
3.01
—
3.01
531
2.98
—
2.98
536
1.18
$
$
$
$
$
$
27%
23%
$
$
$
$
$
$
$
389
$ 31,357
$ 10,741
7,943
$
504
$
1,010
$ 21,578
5,510
$
$
7,584
504
$
1,300
$ 20,429
5,225
$
$
7,442
509
802
$ 18,190
4,495
$
$
6,272
514
1,336
$
$ 18,216
4,402
$
$
6,602
522
76,000
66,000
64,000
60,000
60,000
$ 113.94
77.85
$
$
$
89.59
74.30
$
$
86.54
66.75
$
$
69.77
50.81
$
$
59.99
50.90
(a)
Includes the impact of net restructuring costs of $112 million, $161 million, $40 million, $44 million, and $28 million in
2019, 2018, 2017, 2016 and 2015, respectively, and JLT integration, restructuring and acquisition related costs of $485
million in 2019 and $12 million in 2018.
(b)
Income tax expense in 2017 includes a $460 million provisional charge related to the enactment of U.S. tax reform.
See "Management’s Discussion and Analysis of Financial Condition and Results of Operations", appearing under Part II, Item 7 of
this report, for discussion of significant items affecting the results of operations in 2019 and 2018.
32
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
Marsh & McLennan Companies, Inc. and its consolidated subsidiaries (the "Company") is a global
professional services firm offering clients advice and solutions in risk, strategy and people. Its businesses
include: Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and
reinsurance specialist; Mercer, the provider of HR and Investment related financial advice and services;
and Oliver Wyman Group, the management, economic and brand consultancy. With 76,000 colleagues
worldwide and annual revenue of $17 billion, the Company provides analysis, advice and transactional
capabilities to clients in more than 130 countries.
The Company conducts business through two segments:
• Risk and Insurance Services includes risk management activities (risk advice, risk transfer and
risk control and mitigation solutions) as well as insurance and reinsurance broking and services.
The Company conducts business in this segment through Marsh and Guy Carpenter.
• Consulting includes health, wealth and career consulting services and products, and specialized
management, economic and brand consulting services. The Company conducts business in this
segment through Mercer and Oliver Wyman Group.
We describe the primary sources of revenue and categories of expense for each segment below, in our
discussion of segment financial results. A reconciliation of segment operating income to total operating
income is included in Note 17 to the consolidated financial statements included in Part II, Item 8 in this
report. The accounting policies used for each segment are the same as those used for the consolidated
financial statements.
Changes to Requirements for Prior Year Discussion of Results
On March 20, 2019, the Securities and Exchange Commission ("SEC") adopted changes to its rules and
forms in an effort to modernize and simplify disclosure requirements for public companies. These rule
changes include a registrant's option to omit the earliest year in its discussion in Management's
Discussion and Analysis ("MD&A"). Under the previous rules, registrants generally provided a discussion
covering the three-year period of the financial statements with year-to-year comparisons. The
amendments allow registrants to eliminate the discussion of the earliest of the three years, if such a
discussion was included in a prior 10-K filing and if there were no material changes to such older periods.
The Company has elected to adopt this rule change and eliminate the prior year-to-year comparisons in
this current December 31, 2019 Annual Report on Form 10-K filing. For information on fiscal 2017 results
and similar comparisons, see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" of our Form 10-K for the fiscal year ended December 31, 2018.
Acquisition of JLT
On April 1, 2019, the Company completed the acquisition (the "Transaction") of all of the outstanding
shares of Jardine Lloyd Thompson Group plc ("JLT"), a public company organized under the laws of
England and Wales. Under the terms of the Transaction, JLT shareholders received £19.15 in cash for
each JLT share, which valued JLT’s existing share capital at approximately £4.3 billion (or approximately
$5.6 billion based on the exchange rate of U.S. $1.31:£1) on the Transaction closing date.
JLT's results of operations for the period April 1, 2019 through December 31, 2019 are included in the
Company’s results of operations for 2019. Under applicable accounting guidance, JLT's results of
operations for the period January 1 through March 31, 2019 and for the years ended 2018 and 2017 are
not included in the Company's results of operations and therefore, affect comparability. Prior to being
acquired by the Company, JLT operated in three segments: Specialty, Reinsurance and Employee
Benefits. JLT operated in 41 countries, with significant revenue in the United Kingdom, Pacific, Asia and
the United States. As of April 1, 2019, the historical JLT businesses were combined into MMC operations
as follows: JLT Specialty is included by geography within Marsh, JLT Reinsurance is included in Guy
Carpenter and the majority of JLT's Employee Benefits business was included in Mercer Health and
Wealth.
33
Upon the consummation of the acquisition of JLT, the Company assumed the legal liabilities and became
responsible for JLT’s litigation and regulatory exposures as of April 1, 2019. Please see the "Risk Factors"
section of this Annual Report on Form 10-K for risks associated with the acquisition.
The Company’s results for the year ended December 31, 2019 were impacted by JLT related acquisition,
restructuring and integration costs as well as legacy MMC restructuring programs as discussed in Note 14
to the consolidated financial statements.
Acquisitions and dispositions impacting the Risk and Insurance Services and Consulting segments are
discussed in Note 5 to the consolidated financial statements.
This MD&A contains forward-looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. See "Information Concerning Forward-Looking Statements" at the outset of this
report.
Consolidated Results of Operations
For the Years Ended December 31,
(In millions, except per share figures)
Revenue
Expense
Compensation and Benefits
Other Operating Expenses
Operating Expenses
Operating Income
Income Before Income Taxes
Income from Continuing Operations
Discontinued Operations, Net of Tax
Net Income Before Non-Controlling Interests
Net Income Attributable to the Company
Basic net income per share
– Continuing Operations
– Net income attributable to the Company
Diluted net income per share
– Continuing operations
– Net income attributable to the Company
Average number of shares outstanding
– Basic
– Diluted
Shares outstanding at December 31,
2019
2018
2017
$ 16,652
$ 14,950
$
14,024
9,734
4,241
8,605
3,584
13,975
12,189
$
$
$
$
$
$
$
$
$
2,677
2,439
1,773
—
1,773
1,742
3.44
3.44
3.41
3.41
506
511
504
$
$
$
$
$
$
$
$
$
2,761
2,244
1,670
—
1,670
1,650
3.26
3.26
3.23
3.23
506
511
504
$
$
$
$
$
$
$
$
$
8,085
3,284
11,369
2,655
2,643
1,510
2
1,512
1,492
2.91
2.91
2.87
2.87
513
519
509
Consolidated operating income was $2.7 billion in 2019 compared with $2.8 billion in 2018. Improvements
in the Company's ongoing operating results, both legacy and from the inclusion of JLT's results beginning
on April 1, 2019 was offset by the year-over-year increase in JLT integration, restructuring and acquisition
related costs as per the chart below.
Income before income taxes increased 9% to $2.4 billion as compared to $2.2 billion in 2018, reflecting
the change in operating income discussed immediately above and the increase in year-over-year interest
expense, primarily related to new debt issued to finance the JLT Transaction, partly offset by lower
derivative related costs, pension settlement charges and the 2018 impairment charge related to
Alexander Forbes.
Diluted earnings per share increased 6% to $3.41 in 2019 compared with $3.23 in 2018. This increase is
a result of the factors discussed above, and a lower effective tax rate in 2019. Average diluted shares
34
outstanding for 2019 remained unchanged from 2018 at 511 million. Share repurchases during the year
were offset by the shares issued related to vesting of share awards and the exercise of employee stock
options.
Risk and Insurance Services operating income decreased $31 million, or 2%, in 2019 compared with
2018. Revenue increased 17%, reflecting a 4% increase on an underlying basis partly offset by a 2%
decrease from the impact of foreign currency translation. Expense increased 22% or 5% on an underlying
basis in 2019 compared with 2018 primarily due to JLT related integration, restructuring and acquisition
related costs.
Consulting operating income increased $111 million, or 10%, to $1.2 billion in 2019 compared with 2018,
reflecting the combined impact of increases in revenue of 5% and expense of 4%.
The following chart summarizes the activity related to the restructuring and noteworthy items discussed in
more detail below:
(In millions)
Twelve Months Ended December 31,
2019
2018
2017
Restructuring costs, excluding JLT
$
112 $
161 $
JLT integration and restructuring costs
JLT acquisition related costs
Impact on operating income
Change in fair value of acquisition related
derivative contracts
Pension settlement charges
Early extinguishment of JLT debt
JLT related interest income - pre-acquisition
JLT related interest expense - pre-acquisition
Investment loss (impairment loss)
Impact on income before taxes
335
150
597
8
7
32
(25)
53
—
—
12
173
441
42
—
—
30
83
$
672 $
769 $
40
—
—
40
—
54
—
—
—
—
94
In 2019 and 2018, the Company’s results of operations and earnings per share were significantly
impacted by the following items:
• Restructuring costs, excluding JLT: Includes severance and related charges from restructuring
activities, adjustments to restructuring liabilities for future rent under non-cancellable leases and
other real estate costs, and restructuring costs related to the integration of recent acquisitions.
These costs are discussed in more detail in Note 14 of the consolidated financial statements.
•
•
JLT integration and restructuring costs: Includes costs incurred for staff reductions, lease
related exit costs as well as consulting costs related to the JLT Transaction. These costs are
discussed in more detail in Note 14 of the consolidated financial statements.
JLT acquisition related costs: Includes advisor fees and stamp duty taxes related to the closing
of the JLT Transaction and retention costs. These costs are reflected as part of net operating
income. Also includes the loss on the sale of JLT's aerospace business, which is included in
revenue.
• Change in fair value of acquisition related derivatives: In connection with the JLT
Transaction, to hedge the risk of appreciation of the GBP-denominated purchase price relative to
the U.S. dollar, in September 2018, the Company entered into a deal contingent foreign exchange
contract (the "FX Contract") to, solely upon consummation of the JLT Transaction, purchase £5.2
billion and sell a corresponding amount of U.S. dollars at a contracted exchange rate. The FX
Contract is discussed in Note 11 to the consolidated financial statements. An unrealized loss of
$325 million related to the fair value changes to this derivative was recognized in the consolidated
35
statement of income for the year ended December 31, 2018, largely due to the depreciation of the
GBP from September 2018. In 2019, the Company recorded a gain of $31 million upon final
settlement of the FX Contract.
In addition, to hedge the economic risk of increases in interest rates prior to its issuance of senior
notes in January 2019, in the fourth quarter of 2018, the Company entered into Treasury lock
contracts related to $2 billion of the expected debt issuance. These economic hedges were not
designated as accounting hedges. The Company recorded an unrealized loss of $116 million
related to the changes in the fair value of these derivatives in the consolidated statement of
income for the year ended December 31, 2018. In January 2019, upon issuance of the $5 billion
of senior notes, the Company settled the Treasury lock contracts and made a payment to its
counter party for $122 million. In 2019, an additional charge of $6 million was recorded to the
consolidated statement of income related to the settlement of the Treasury lock derivatives.
JLT related interest income and expense: To secure funding for the Transaction, the Company
entered into a bridge loan agreement with aggregate commitments of £5.2 billion in September
2018. The Company paid the customary upfront fees related to the bridge loan, which were
amortized as interest expense based on the period of time the facility was expected to be in
effect. The Company recorded interest expense of approximately $30 million for the year ended
December 31, 2018 related to the amortization of the bridge loan fees and an additional $6 million
in 2019 upon termination of the bridge loan agreement in connection with the closing of the JLT
Transaction. The Company recorded approximately $47 million of interest expense related to the
senior notes issued in the first quarter of 2019 and $25 million of interest income from the
investment of the proceeds prior to the closing of the JLT Transaction.
Investment loss-impairment charge: The Company owns approximately 34% of the common
stock of Alexander Forbes ("AF"), a South African company listed on the Johannesburg Stock
Exchange, which it purchased in 2014 for 7.50 South African Rand per share. Based on the
duration of time and the extent to which the shares traded below their cost, the Company
concluded the decline in value of the investment was other than temporary and recorded a
charge of $83 million in the 2018 consolidated statement of income. See Note 5 to the
consolidated financial statements for additional information regarding the pending sale of the
Company's remaining investment in AF.
•
•
• Pension settlement charge: The Defined Benefit Pension Plans in the U.K. and certain other
countries allow participants an option for the payment of a lump sum distribution from plan assets
before retirement in full satisfaction of the retirement benefits due to the participant as well as any
survivor’s benefit. The Company’s policy under applicable U.S. GAAP is to treat these lump sum
payments as a partial settlement of the plan liability if they exceed the sum of service cost plus
interest cost components of net period pension cost of a plan for the year ("settlement
thresholds"). The amount of lump sum payments through December 31, 2018 exceeded the
settlement thresholds in two of the U.K. plans. The Company recorded non-cash settlement
charges, primarily related to these plans of $42 million and $54 million for the years ended
December 31, 2018 and 2017, respectively, of which approximately 90% impacted Risk and
Insurance Services. In 2019, the Company recorded $7 million of non-cash pension settlement
charges related to certain of its non U.S. plans.
JLT Integration and Restructuring Costs
The Company is currently integrating JLT, which is discussed in more detail in Note 14 to the consolidated
financial statements, and will incur costs in connection with the integration and restructuring of the
combined businesses, primarily related to severance, real estate rationalization, technology, consulting
fees related to the management of the integration processes and legal fees related to the rationalization
of legal entity structures. Based on current estimates, the Company expects to incur pre-tax charges of
$700 million, of which approximately $625 million will be cash charges. These costs reflect $335 million
incurred in 2019 and projected costs of approximately $365 million, most of which will be incurred in 2020
and the remainder in 2021. Based on further analysis and review during the second half of 2019, the
Company identified additional opportunities for further efficiencies that will result in additional future cost
savings and is currently tracking ahead of our prior guidance. The Company expects to achieve run rate
savings of at least $350 million. The Company has realized cost savings in 2019 of approximately $125
36
million and expects to achieve the remainder by the end of 2021. The Company incurred cash charges of
approximately $265 million during 2019 and expects most of the remaining cash expenditures to occur in
2020, with a modest amount in 2021, related to this initiative. These integration and restructuring plans
are still being finalized, which may change our current cost and related savings estimates, as the
Company continues to refine its detailed plans for each business and location.
JLT Acquisition Related Costs
JLT acquisition related costs include costs directly related to completing the Transaction, such as
retention costs, investment banking fees, legal fees and stamp duty tax. It also includes the loss on
disposal of JLT's aerospace business.
Consolidated Revenue and Expense
Revenue - Components of Change
The Company conducts business in many countries. As a result, foreign exchange rate movements may
impact period-to-period comparisons of revenue. Similarly, certain other items such as the revenue impact
of acquisitions and dispositions, including transfers among businesses may impact period-to-period
comparisons of revenue. Underlying revenue measures the change in revenue from one period to
another by isolating these impacts.
The calculation of underlying revenue growth for the twelve-month period ended December 31, 2019, is
calculated as if MMC and JLT were a combined company a year ago, but excludes the impact of currency
and other acquisitions, dispositions, and transfers among businesses. Combined prior year revenue
information for MMC and JLT for the twelve-month periods ended December 31, 2018 are presented
below. The unaudited 2018 JLT revenue amounts in the "2018 including JLT" column reflect historical JLT
revenue information following IFRS, adjusted to conform with U.S. GAAP and the Company's specific
accounting policies, primarily related to development of constraints and subsequent release of those
constraints related to the reinsurance business. The decrease in revenue due to the disposal of JLT's
Aerospace business is reflected in the acquisitions/dispositions column beginning in June 2019, when the
sale was completed. See the reconciliation of non-GAAP measures on page 55. All other acquisitions/
dispositions activity is included in the acquisitions/dispositions column. Underlying expense growth is
calculated in a similar manner.
The impact of foreign currency exchange fluctuations, acquisitions and dispositions, including transfers
among businesses, on the Company’s operating revenues by segment are as follows:
(In millions, except
percentage figures)
Risk and Insurance
Services
Marsh
Guy Carpenter
Subtotal
Fiduciary Interest Income
Total Risk and Insurance
Services
Consulting
Mercer
Oliver Wyman Group
Total Consulting
Year Ended
December 31,
2019
2018
% Change
GAAP
Revenue
2018
Including
JLT
% Change
Including
JLT in
2018
Components of Revenue Change
Including JLT*
Currency
Impact
Acquisitions/
Dispositions/
Other Impact
Underlying
Revenue
$
8,014
$
1,480
9,494
105
6,877
1,286
8,163
65
17% $
15%
16%
7,895
1,442
9,337
78
2%
3%
2%
(2)%
(1)%
(2)%
9,599
8,228
17%
9,415
2%
(2)%
5,021
2,122
7,143
4,732
2,047
6,779
6%
4%
5%
5,001
2,047
7,048
(57)
—
4%
1%
2%
(2)%
(2)%
(2)%
(2)%
—
(1)%
—
—
—
—
—
—
4%
5%
4%
4%
2%
6%
3%
4%
Corporate/Eliminations
(90)
(57)
Total Revenue
$
16,652
$
14,950
11% $
16,406
37
The following table provides more detailed revenue information for certain of the components presented
above:
Year Ended
December 31,
(In millions, except
percentage figures)
2019
2018
% Change
GAAP
Revenue
2018
Including
JLT
%
Change
Including
JLT in
2018
Components of Revenue Change
Including JLT*
Currency
Impact
Acquisitions/
Dispositions/
Other
Underlying
Revenue
Marsh:
EMEA
Asia Pacific
Latin America
Total International
U.S./Canada
Total Marsh
Mercer:
Wealth
Health
Career
$ 2,482
$ 2,132
16 % $
2,607
953
460
3,895
4,119
683
400
3,215
3,662
39 %
15 %
21 %
12 %
948
515
4,070
3,825
$ 8,014
$ 6,877
17 % $
7,895
2,369
1,796
856
2,185
1,735
812
8 %
4 %
5 %
2,394
1,793
814
Total Mercer
$ 5,021
$ 4,732
6 % $
5,001
* Components of revenue change may not add due to rounding.
Revenue
(5)%
1 %
(11)%
(4)%
8 %
2 %
(1)%
—
5 %
—
(3)%
(3)%
(8)%
(4)%
—
(2)%
(3)%
(1)%
(2)%
(2)%
(2)%
(3)%
(6)%
(3)%
3 %
—
2 %
(3)%
3 %
—
1%
7%
3%
3%
5%
4%
—
5%
5%
2%
Consolidated revenue was $17 billion in 2019, an increase of 11%, or 4% on an underlying basis.
Revenue in the Risk and Insurance Services segment increased 17% in 2019 compared with 2018, or 4%
on an underlying basis. Revenue increased 4% and 5% on an underlying basis at Marsh and Guy
Carpenter, respectively, as compared with 2018. The Consulting segment's revenue increased 5%
compared with 2018, or 3% on an underlying basis. Revenue increased 2% and 6% on an underlying
basis at Mercer and Oliver Wyman Group, respectively, as compared with 2018.
Operating Expense
Consolidated operating expenses increased 15% in 2019 compared with 2018, or 4% on an underlying
basis. The increase in underlying expenses is primarily due to the JLT acquisition, integration and
restructuring as discussed in more detail in Notes 5 and 14 of the consolidated financial statements, as
well as higher incentive compensation.
Risk and Insurance Services
In the Risk and Insurance Services segment, the Company’s subsidiaries and other affiliated entities act
as brokers, agents or consultants for insureds, insurance underwriters and other brokers in the areas of
risk management, insurance broking and insurance program management services, primarily under the
name of Marsh; and engage in reinsurance broking, catastrophe and financial modeling services and
related advisory functions, primarily under the name of Guy Carpenter.
Marsh and Guy Carpenter are compensated for brokerage and consulting services primarily through fees
paid by clients or commissions paid out of premiums charged by insurance and reinsurance companies.
Commission rates vary in amount depending upon the type of insurance or reinsurance coverage
provided, the particular insurer or reinsurer, the capacity in which the broker acts and negotiates with
clients. Revenues can be affected by premium rate levels in the insurance/reinsurance markets, the
amount of risk retained by insurance and reinsurance clients themselves and by the value of the risks that
have been insured since commission-based compensation is frequently related to the premiums paid by
insureds/reinsureds. In many cases, fee compensation may be negotiated in advance, based on the type
of risk, coverage required and service provided by the Company and ultimately, the extent of the risk
placed into the insurance market or retained by the client. The trends and comparisons of revenue from
one period to the next can be affected by changes in premium rate levels, fluctuations in client risk
retention and increases or decreases in the value of risks that have been insured, as well as new and lost
business, and the volume of business from new and existing clients.
38
Marsh also receives other compensation from insurance companies, separate from retail fees and
commissions. This compensation includes, among other things, payment for consulting and analytics
services provided to insurers; administrative and other services provided to or on behalf of insurers
(including services relating to the administration and management of quota share, panels and other
facilities in which insurers participate); and contingent commissions. Marsh and Guy Carpenter also
receive interest income on certain funds (such as premiums and claims proceeds) held in a fiduciary
capacity for others. The investment of fiduciary funds is regulated by state and other insurance
authorities. These regulations typically require segregation of fiduciary funds and limit the types of
investments that may be made with them. Interest income from these investments varies depending on
the amount of funds invested and applicable interest rates, both of which vary from time to time. For
presentation purposes, fiduciary interest is segregated from the other revenues of Marsh and Guy
Carpenter and separately presented within the segment, as shown in the revenue by segments charts
presented earlier in this MD&A.
The results of operations for the Risk and Insurance Services segment are presented below:
(In millions of dollars, except percentages)
Revenue
Compensation and Benefits
Other Operating Expenses
Operating Expenses
Operating Income
Operating Income Margin
Revenue
2019
9,599
5,370
2,396
7,766
1,833
$
$
2018
8,228
4,485
1,879
6,364
1,864
2017
7,630
4,171
1,728
5,899
1,731
$
$
$
$
19.1%
22.7%
22.7%
Revenue in the Risk and Insurance Services segment increased 17% in 2019 compared with 2018,
reflecting the inclusion of JLT for the last three quarters of 2019. Revenue grew 4% on an underlying
basis partly offset by a 2% decrease related to the impact of foreign currency translation.
In Marsh, revenue increased 4% on an underlying basis, partly offset by a 2% decrease from the impact
of foreign currency translation. U.S./Canada had underlying revenue growth of 5%. International
operations increased 3% on an underlying basis, reflecting increases of 7% in Asia Pacific, 3% in Latin
America and 1% in EMEA.
Guy Carpenter’s revenue increased 15% to $1.5 billion in 2019 compared with 2018, or 5% on an
underlying basis.
Fiduciary interest income was $105 million in 2019 compared with $65 million in 2018 primarily due to the
inclusion of JLT's results from April 1 to December 31, 2019.
The Risk and Insurance Services segment completed five acquisitions during 2019, other than JLT.
Information regarding those acquisitions is included in Note 5 to the consolidated financial statements.
Expense
Expense in the Risk and Insurance Services segment increased 22% in 2019 compared with 2018,
reflecting the inclusion of JLT for the last three quarters of 2019. The underlying expense increases of 5%
and 3% from acquisitions, were partly offset by a 3% decrease from the impact of foreign currency. The
increase in underlying expense reflects the impact of acquisition, restructuring and integration related
costs of $326 million, primarily due to severance, lease related exit costs and consulting fees related to
the JLT Transaction as well as higher incentive compensation.
Consulting
The Company conducts business in its Consulting segment through two main business groups, Mercer
and Oliver Wyman Group. Mercer provides consulting expertise, advice, services and solutions in the
areas of health, wealth and career. Oliver Wyman Group provides specialized management, economic
and brand consulting services.
The major component of revenue in the Consulting business is fees paid by clients for advice and
services. Mercer, principally through its health line of business, also earns revenue in the form of
39
commissions received from insurance companies for the placement of group (and occasionally individual)
insurance contracts, primarily life, health and accident coverages. Revenue for Mercer’s investment
management business and certain of Mercer’s defined contribution administration services consists
principally of fees based on assets under management or administration.
Revenue in the Consulting segment is affected by, among other things, global economic conditions,
including changes in clients’ particular industries and markets. Revenue is also affected by competition
due to the introduction of new products and services, broad trends in employee demographics, including
levels of employment, the effect of government policies and regulations, and fluctuations in interest and
foreign exchange rates. Revenues from the provision of investment management services and retirement
trust and administrative services are significantly affected by the level of assets under management or
administration, which is impacted by securities market performance.
For the investment management business, revenues from the majority of funds are included on a gross
basis in accordance with U.S. GAAP and include reimbursable expenses incurred by professional staff
and sub-advisory fees, and the related expenses are included in other operating expenses.
The results of operations for the Consulting segment are presented below:
(In millions of dollars, except percentages)
Revenue
Compensation and Benefits
Other Operating Expenses
Operating Expenses
Operating Income
Operating Income Margin
Revenue
2019
7,143
3,934
1,999
5,933
1,210
$
$
2018
6,779
3,760
1,920
5,680
1,099
$
$
2017
6,444
3,573
1,761
5,334
1,110
$
$
16.9%
16.2%
17.2%
Consulting revenue in 2019 increased 5% compared with 2018, reflecting the inclusion of JLT for the last
three quarters of 2019. Revenue increased 3% on an underlying basis, partly offset by a 2% decrease
from the impact of foreign currency translation.
Mercer's revenue in 2019 increased 2% on an underlying basis. Mercer's year-over-year revenue
comparison also reflects a 2% decrease from the impact of foreign currency translation. The underlying
revenue growth reflects increases in both Career and Health of 5%, while Wealth remained flat. Oliver
Wyman Group’s revenue increased 4% in 2019 compared with 2018, or 6% on an underlying basis.
Expense
Consulting expense in 2019 increased 4% compared with 2018, reflecting the inclusion of JLT for the last
three quarters of 2019. The underlying expense increase of 2% was offset by a 2% decrease from the
impact of foreign currency translation. The increase in underlying expense reflects higher incentive
compensation and restructuring-related costs. Consulting expense in 2019 included $56 million related to
a business restructuring at Mercer.
Corporate and Other
Corporate expense in 2019 was $366 million compared with $202 million in 2018. Expenses increased
54% on an underlying basis, primarily due to acquisition, integration and restructuring costs related to the
JLT Transaction of $139 million recorded in 2019 as well as higher incentive compensation.
Other Corporate Items
Interest
Interest income earned on corporate funds amounted to $39 million in 2019 compared with $11 million in
2018. Interest expense in 2019 was $524 million compared with $290 million in 2018. During the first
quarter of 2019, the Company issued approximately $6.5 billion of senior notes related to the JLT
acquisition. The funds were held in escrow and released for payment in April 2019, when the acquisition
was completed. The increase in interest income from the prior year is primarily due to interest earned on
40
these funds. The increase in interest expense was primarily due to new debt issuances related to the JLT
acquisition.
Investment Income
The caption "Investment income" in the consolidated statements of income comprises realized and
unrealized gains and losses from investments. It includes, when applicable, other-than-temporary
declines in the value of securities, mark-to-market increases/decreases in equity investments with readily
determinable fair values and equity method gains or losses on its investments in private equity funds. The
Company's investments may include direct investments in insurance, consulting or other strategically
linked companies and investments in private equity funds.
As discussed in Note 1 to the consolidated financial statements, effective January 1, 2018, the Company
prospectively adopted a new accounting standard that requires equity investments (except those
accounted for under the equity method of accounting or those that result in consolidation of the investee)
to be measured at fair value with changes in fair value recognized in net income. The Company holds
certain equity investments that under legacy U.S. GAAP were previously treated as available for sale
securities, whereby the mark-to-market change was recorded to other comprehensive income in its
consolidated balance sheet. The Company recorded a cumulative-effect adjustment increase to retained
earnings as of the beginning of the period of adoption of $14 million, reflecting the reclassification of
cumulative unrealized gains, net of tax, as of December 31, 2017 from other comprehensive income to
retained earnings. Prior periods have not been restated.
The Company recorded net investment income of $22 million in 2019 which included $10 million related
to mark-to-market changes to equity securities and $12 million of gains related to investments in private
equity funds and other investments. The Company recorded a net investment loss of $12 million in 2018,
that included an $83 million charge related to an other than temporary decline in the Company's equity
method investment in Alexander Forbes (see Note 10 to the consolidated financial statements), partly
offset by investment gains of $54 million related to mark-to-market changes in equity securities and $17
million related to investments in private equity funds and other investments.
Income Taxes
As noted above, on April 1, 2019, the Company completed the JLT Transaction. The integration of this
global organization required intercompany transfers of acquired entities into the Company's country
structures and combination of those entities within the equivalent Company businesses. The integration
transactions were designed to be tax efficient. The Company's global effective tax rate on JLT's earnings
was reduced compared to JLT's pre-acquisition tax rate by utilizing debt for the restructuring transactions
to be capital efficient, and reducing the generation of post-acquisition tax losses by merging historically
unprofitable JLT entities with profitable Company operations. The provisions for deferred taxes and
uncertain tax positions have been established as part of the purchase price allocation as of April 1, 2019.
The broader JLT organization is now held under the Company, which makes it part of a U.S.-based
multinational company and subjects it to full U.S. taxation.
In 2017, the tax reform legislation known as the "Tax Cuts and Jobs Act" (the "TCJA"), significantly
changed the U.S. federal income tax regime. It provided for a reduction in the U.S. corporate tax rate to
21% and the creation of a quasi-territorial system to tax non-U.S. based operations, including adding a
minimum tax on Global Intangible Low-Taxed Income ("GILTI"). The TCJA also changed the deductibility
of certain expenses, primarily meals and entertainment, executive officers’ compensation and interest. As
further discussed in Note 7 to the consolidated financial statements, in the fourth quarter of 2017, the
Company recorded a provisional charge of $460 million related to the enactment of the TCJA, and this
provisional charge was finalized in 2018. State treatment of certain TCJA provisions is still evolving.
The Company's consolidated effective tax rate was 27.3%, 25.6%, and 42.9% in 2019, 2018, and 2017,
respectively. The rates in 2019 and 2018 reflect ongoing impacts of the TCJA, primarily the reduced 21%
U.S. statutory tax rate, and certain tax planning benefits, largely offset by higher U.S. tax costs under the
quasi-territorial system, greater disallowance of compensation and entertainment deductions, a decrease
in excess tax benefits related to share compensation primarily due to the lower U.S. tax rate, lower
federal benefit for State taxes and treatment by States of certain TCJA provisions. The 2019 rate reflects
items related to the JLT acquisition, including non-deductible goodwill allocated to the sale of Aerospace
41
and non-deductible expenses incurred in relation to the JLT acquisition. The 2018 rate includes the effect
of a charge related to the Company’s investment in Alexander Forbes as discussed in Note 10. The tax
rates in all periods reflect the impact of discrete tax matters, tax legislation, and nontaxable adjustments
to contingent acquisition consideration.
The effective tax rate may vary significantly from period to period for the foreseeable future. The effective
tax rate is sensitive to the geographic mix and repatriation of the Company's earnings, which may result in
higher or lower tax rates. Thus, a shift in the mix of profits among jurisdictions can affect the effective tax
rate. In 2019, pre-tax income in Barbados, Canada, Australia, Ireland, Germany, the U.K. and Bermuda
accounted for approximately 60% of the Company's total non-U.S. pre-tax income, with effective rates in
those countries of 1%, 28%, 32%, 14%, 29%, 105% and 1% respectively.
In addition, losses in certain jurisdictions cannot be offset by earnings from other operations, and may
require valuation allowances that affect the rate, depending on estimates of the value of associated
deferred tax assets which can be realized. A valuation allowance was recorded to reduce deferred tax
assets to the amount that the Company believes is more likely than not to be realized. The details are
provided in Note 7 of the consolidated financial statements. The effective tax rate is also sensitive to
changes in unrecognized tax benefits, including the impact of settled tax audits and expired statutes of
limitation.
Changes in tax laws, rulings, policies or related legal and regulatory interpretations occur frequently and
may also have significant favorable or adverse impacts on our effective tax rate.
As a U.S. domiciled parent holding company, the Company is the issuer of essentially all of the
Company's external indebtedness, and incurs the related interest expense in the U.S. The Company’s
interest expense deductions are not currently limited. Further, most senior executive and oversight
functions are conducted in the U.S. and the associated costs are incurred primarily in the United States.
Some of these expenses may not be deductible in the U.S., which may impact the effective tax rate.
The quasi-territorial tax regime provides an opportunity for the Company to repatriate foreign earnings
more tax efficiently and there is less incentive for permanent reinvestment of these earnings. However,
permanent reinvestment continues to be a component of the Company’s global capital strategy. The
Company revised its permanent reinvestment assertion related to accumulated earnings that were
subject to the 2017 transition tax of the TCJA, to facilitate repatriation of most of those accumulated
earnings. For post-2017 years, including 2019, the Company continues to evaluate its global investment
and repatriation strategy in light of our capital requirements, considering the TCJA and the quasi-territorial
tax regime for future foreign earnings.
Liquidity and Capital Resources
The Company is organized as a legal entity separate and distinct from its operating subsidiaries. As the
Company does not have significant operations of its own, the Company is dependent upon dividends and
other payments from its operating subsidiaries to pay principal and interest on its outstanding debt
obligations, pay dividends to stockholders, repurchase its shares and pay corporate expenses. The
Company can also provide financial support to its operating subsidiaries for acquisitions, investments and
certain parts of their business that require liquidity, such as the capital markets business of Guy
Carpenter. Other sources of liquidity include borrowing facilities discussed below in financing cash flows.
The Company derives a significant portion of its revenue and operating profit from operating subsidiaries
located outside of the United States. Funds from those operating subsidiaries are regularly repatriated to
the United States out of annual earnings. At December 31, 2019, the Company had approximately $1.0
billion of cash and cash equivalents in its foreign operations, which includes $178 million of operating
funds required to be maintained for regulatory requirements or as collateral under certain captive
insurance arrangements. The Company expects to continue its practice of repatriating available funds
from its non-U.S. operating subsidiaries out of current annual earnings. Where appropriate, a portion of
the current year earnings will continue to be permanently reinvested. With respect to repatriating 2018
and prior earnings, the Company has evaluated such factors as its short- and long-term capital needs,
acquisition and borrowing strategies, and the availability of cash for repatriation for each of its
subsidiaries. The Company has determined that, in general, its permanent reinvestment assertions, in
light of the enactment of the Tax Cuts and Jobs Act, should allow the Company to repatriate previously
taxed earnings from the deemed repatriations as cash becomes available.
42
During 2019, the Company recorded foreign currency translation adjustments which increased net equity
by $151 million. Continued weakening of the U.S. dollar against foreign currencies would further increase
the translated U.S. dollar value of the Company’s net investments in its non-U.S. subsidiaries, as well as
the translated U.S. dollar value of cash repatriations from those subsidiaries.
Cash on our consolidated balance sheets includes funds available for general corporate purposes. Funds
held on behalf of clients in a fiduciary capacity are segregated and shown separately in the consolidated
balance sheets as an offset to fiduciary liabilities. Fiduciary funds cannot be used for general corporate
purposes, and should not be considered as a source of liquidity for the Company.
Operating Cash Flows
The Company generated $2.4 billion of cash from operations in both 2019 and 2018. These amounts
reflect the net income of the Company during those periods, excluding gains or losses from investments,
adjusted for non-cash charges and changes in working capital which relate primarily to the timing of
payments of accrued liabilities or receipts of assets and pension contributions.
Pension-Related Items
Contributions
During 2019, the Company contributed $35 million to its U.S. pension plans and $87 million to non-U.S.
pension plans compared to contributions of $30 million to U.S. plans and $82 million to non-U.S. plans in
2018.
In the United States, contributions to the tax-qualified defined benefit plans are based on ERISA
guidelines and the Company generally expects to maintain a funded status of 80% or more of the liability
determined under the ERISA guidelines. In 2019, the Company made $31 million of contributions to its
non-qualified plans and $4 million to plans acquired in the JLT acquisition. The Company expects to
contribute approximately $76 million to its U.S. pension plans in 2020, including $47 million to the US
qualified plans to meet ERISA funding requirements and $29 million for its non-qualified plans.
The Company contributed $27 million to the U.K. plans in 2019, including an expense allowance of
approximately $10 million. The Company's contributions to the U.K. plans in 2020 are expected to be
approximately $39 million, including an expense allowance of $10 million.
Outside the United States, the Company has a large number of non-U.S. defined benefit pension plans,
the largest of which are in the U.K., which comprise approximately 81% of non-U.S. plan assets at
December 31, 2019. Contribution rates for non-U.S. plans are generally based on local funding practices
and statutory requirements, which may differ significantly from measurements under U.S. GAAP. In the
U.K., the assumptions used to determine pension contributions are the result of legally-prescribed
negotiations between the Company and the plans' trustee that typically occur every three years in
conjunction with the actuarial valuation of the plans. Currently, this results in a lower funded status than
under U.S. GAAP and may result in contributions irrespective of the U.S. GAAP funded status. For the
MMC U.K. Pension Fund, a new agreement was reached with the trustee in the fourth quarter of 2019
based on the surplus funding position at December 31, 2018. Under the agreement no deficit funding is
required until 2023. The funding level will be re-assessed during 2022 to determine if contributions are
required in 2023. As part of a long-term strategy, which depends on having greater influence over asset
allocation and overall investment decisions, in November 2019 the Company renewed its agreement to
support annual deficit contributions by the U.K. operating companies under certain circumstances, up to
GBP 450 million over a seven-year period. In addition, in the U.K. the Company assumed responsibility
for JLT's Pension Scheme ("JLT U.K. plan"). Deficit funding of approximately $28 million is expected
during 2020 with a new funding agreement expected to be reached with the Trustee during 2020.
In the aggregate, the Company expects to contribute approximately $84 million to its non-U.S. defined
benefit plans in 2020, comprising approximately $45 million to plans outside of the U.K. and $39 million to
the U.K. plans.
Changes to Pension Plans
As part of the JLT Transaction, the Company assumed responsibility for a number of pension plans
throughout the world, with $255 million of net pension liabilities as of December 31, 2019 ($1,003 million
in liabilities and $748 million of plan assets as of December 31, 2019). The JLT U.K. plan has a defined
43
benefit section which was frozen to future accruals in 2006 and a defined contribution section. The assets
of the JLT U.K. plan are held in a trustee administered fund separate from the Company.
Changes in Funded Status and Expense
The year-over-year change in the funded status of the Company's pension plans is impacted by the
difference between actual and assumed results, particularly with regard to return on assets, and changes
in the discount rate, as well as the amount of Company contributions, if any. Unrecognized actuarial
losses were approximately $2.1 billion and $3.1 billion at December 31, 2019 for the U.S. plans and non-
U.S. plans, respectively, compared with losses of $1.9 billion and $2.6 billion at December 31, 2018. The
increases in both the U.S. and non-U.S. plans was primarily due to a decrease in the discount rate used
to measure plan liabilities partly offset by an increase in asset values. In the past several years, the
amount of unamortized losses has been significantly impacted, both positively and negatively, by actual
asset performance and changes in discount rates. The discount rate used to measure plan liabilities in
2019 decreased in the U.S. and U.K. (the Company's largest plans) following increases in the U.S. and
the U.K. in 2018. The discount rate used to measure plan liabilities decreased in 2017. An increase in the
discount rate decreases the measured plan benefit obligation, resulting in actuarial gains, while a
decrease in the discount rate increases the measured plan obligation, resulting in actuarial losses. During
2019, the Company's defined benefit pension plan assets had gains of 21.4% and 13.1% in the U.S. and
U.K., respectively as compared to losses of 7.4% and 1.0% in the U.S. and U.K., respectively in 2018.
During 2017, the Company's defined benefit pension plan assets had actual returns of 19.3% in the U.S.
and 9.1% in the U.K.
Overall, based on the measurement at December 31, 2019, total benefit credits related to the Company’s
defined benefit plans are expected to decrease in 2020 by approximately $5 million compared to 2019,
reflecting a decrease in non-U.S. plans of approximately $8 million, offset by an increase in U.S. plans of
$3 million.
The Company’s accounting policies for its defined benefit pension plans, including the selection of and
sensitivity to assumptions, are discussed below under Management’s Discussion of Critical Accounting
Policies. For additional information regarding the Company’s retirement plans, see Note 8 to the
consolidated financial statements.
Financing Cash Flows
Net cash provided by financing activities was $3.3 billion in 2019 compared with $1.3 billion used in 2018.
Debt
The Company increased outstanding debt by approximately $6.1 billion in 2019, discussed in more detail
below. Outstanding debt increased $340 million in 2018.
In January 2019, the Company issued $5 billion aggregate amount of Senior Notes consisting of $700
million of 3.50% Senior Notes due 2020, $1 billion of 3.875% Senior Notes due 2024, $1.25 billion of
4.375% Senior Notes due 2029, $500 million of 4.75% Senior Notes due 2039, $1.25 billion of 4.90%
Senior Notes due 2049 and $300 million of Floating Rate Senior Notes due 2021.
In March 2019, the Company issued €550 million of 1.349% Senior Notes due 2026 and €550 million of
1.979% Senior Notes due 2030. In addition, the Company issued an additional $250 million of 4.375%
Senior Notes due 2029, in March 2019. These notes constitute a further issuance of the 4.375% Senior
Notes due 2029, of which $1.25 billion aggregate principal amount was issued in January 2019 (see
above). After giving effect to the issuance of the notes, the Company has $1.5 billion aggregate principal
amount of 4.375% Senior Notes due 2029. The Company used part of the net proceeds from these
offerings, along with the $5 billion of Senior Notes issued in January 2019 (discussed above) to primarily
fund the acquisition of JLT, including the payment of related fees and expenses, and to repay certain JLT
indebtedness, as well as for general corporate purposes.
In connection with the closing of the JLT Transaction, the Company assumed approximately $1 billion of
historical JLT indebtedness. In April and June of 2019, the Company repaid approximately $450 million
and $553 million, respectively, which represented all of the JLT debt acquired upon the acquisition of JLT.
The Company incurred debt extinguishment costs of $32 million in regard to the repayment of this debt.
In September 2019, the Company repaid $300 million of maturing senior notes.
44
The Company has established a short-term debt financing program of up to $1.5 billion through the
issuance of commercial paper. The proceeds from the issuance of commercial paper are used for general
corporate purposes. The Company had no commercial paper outstanding at December 31, 2019.
In October 2018, the Company repaid $250 million of maturing senior notes.
In March 2018, the Company issued $600 million of 4.20% senior notes due 2048. The Company used
the net proceeds for general corporate purposes.
Credit Facilities
In January 2020, the Company closed on $500 million one-year and $500 million two-year term loan
facilities. The interest rate on these facilities is based on LIBOR plus a fixed margin which varies with the
Company's credit ratings. The facilities require the Company to maintain coverage ratios and leverage
ratios consistent with the revolving credit facility discussed below. The Company has no current
borrowings outstanding under these facilities.
In March 2019, the Company closed on $300 million one-year and $300 million three-year term loan
facilities. The interest rate on these facilities was based on LIBOR plus a fixed margin which varies with
the Company's credit ratings. In August 2019, the Company terminated the $300 million three-year term
loan facility. The Company had $300 million of borrowings outstanding under the one-year term facility at
September 30, 2019 which was terminated and repaid in December 2019.
In September 2018, the Company entered into a bridge loan agreement to finance the proposed JLT
transaction. The Company paid approximately $35 million of customary upfront fees related to the bridge
loan at the inception of the loan commitment. The bridge loan agreement was terminated on April 1, 2019.
In October 2018, the Company and certain of its foreign subsidiaries increased its multi-currency five-year
unsecured revolving credit facility from $1.5 billion to $1.8 billion. The interest rate on this facility is based
on LIBOR plus a fixed margin which varies with the Company's credit ratings. This facility expires in
October 2023 and requires the Company to maintain certain coverage and leverage ratios which are
tested quarterly. There were no borrowings outstanding under this facility at December 31, 2019.
The Company also maintains other credit facilities, guarantees and letters of credit with various banks,
aggregating $598 million at December 31, 2019 and $594 million at December 31, 2018. There were no
outstanding borrowings under these facilities at December 31, 2019 or December 31, 2018.
The Company's potential exposure to the discontinuance of LIBOR is discussed in Note 13 to the
consolidated financial statements.
The Company's senior debt is currently rated A- by Standard & Poor's and Baa1 by Moody's. The
Company's short-term debt is currently rated A-2 by Standard & Poor's and P-2 by Moody's. The
Company carries a Negative outlook from both firms.
Share Repurchases
During 2019, the Company repurchased 4.8 million shares of its common stock for total consideration of
$485 million at an average price per share of $100.48. In November 2019, the Board of Directors
authorized an increase in the Company’s share repurchase program, which supersedes any prior
authorization, allowing management to buy back up to $2.5 billion of the Company’s common stock. As of
December 31, 2019, the Company remained authorized to purchase additional shares of its common
stock up to a value of approximately $2.4 billion. There is no time limit on this authorization.
During 2018, the Company repurchased 8.2 million shares of its common stock for total consideration of
$675 million at an average price per share of $82.61.
Dividends
The Company paid total dividends of $890 million in 2019 ($1.74 per share), $807 million in 2018 ($1.58
per share) and $740 million in 2017 ($1.43 per share).
Contingent Payments Related To Acquisitions
During 2019, the Company paid $63 million of contingent payments related to acquisitions made in prior
years. These payments are split between financing and operating cash flows in the consolidated
statements of cash flows. Payments of $22 million related to the contingent consideration liability that was
45
recorded on the date of acquisition are reflected as financing cash flows. Payments related to increases
in the contingent consideration liability subsequent to the date of acquisition of $41 million are reflected as
operating cash flows. Remaining estimated future contingent consideration payments of $223 million for
acquisitions completed in 2019 and in prior years are included in accounts payable and accrued liabilities
or other liabilities in the consolidated balance sheet at December 31, 2019. The Company paid deferred
purchase consideration related to prior years' acquisitions of $43 million and $62 million for the years
ended December 31, 2019 and 2018, respectively. Remaining deferred cash payments of approximately
$193 million are included in accounts payable and accrued liabilities or other liabilities in the consolidated
balance sheet at December 31, 2019.
In 2018, the Company paid $91 million of contingent payments related to acquisitions made in prior
periods, of which $55 million was reported as financing cash flows and $36 million as operating cash
flows.
Derivatives
JLT Fair Value Debt Derivative contracts
Prior to the JLT Transaction closing, a significant portion of JLT's outstanding senior notes were
denominated in U.S. dollars. In order to hedge its exposure against the risk of fluctuations between the
GBP and the U.S. dollar, JLT entered into foreign exchange and interest rate swaps, which were
designated as fair value hedges. In June 2019, the Company redeemed these U.S. dollar denominated
senior notes and settled the related derivative contracts. Both the change in fair value of the debt and the
change in fair value of the derivative contracts were recorded in the consolidated statement of income in
the second quarter of 2019. The Company received approximately $112 million upon settlement of these
derivative contracts.
JLT Cash Flow Hedges
JLT also had a number of foreign exchange contracts to hedge the risk of foreign exchange movements
between the U.S. dollar and GBP, related to JLT’s U.S. dollar denominated revenue in the U.K. Prior to
the acquisition, these derivative contracts were designated as cash flow hedges. Upon acquisition, the
derivative contracts were not re-designated as cash flow hedges by the Company. The contracts were
settled in June 2019. The change in fair value between the acquisition date and the settlement date
resulted in a charge of $26 million in the second quarter of 2019. The charge is recorded as a change in
fair value of acquisition related derivative contracts in the consolidated statement of income.
Foreign Exchange Forward Contract
In connection with the JLT Transaction, to hedge the risk of appreciation of the GBP-denominated
purchase price relative to the U.S. dollar, on September 20, 2018, the Company entered into the FX
Contract to, solely upon consummation of the Transaction, purchase £5.2 billion and sell a corresponding
amount of U.S. dollars at a contracted exchange rate. The FX Contract, which did not qualify for hedge
accounting treatment under applicable accounting guidance, is discussed in Note 11 to the consolidated
financial statements. The Company settled the FX Contract on April 1, 2019, recording a realized gain to
the consolidated statement of income of approximately $31 million in 2019. The cash outflow related to
the settlement of the FX Contract was approximately $294 million in 2019.
Foreign Exchange Contract on Euro Debt Issuance
In March 2019, the Company issued €1.1 billion of senior notes related to the JLT Transaction. See Note
14 for additional information related to the Euro senior note issuances. In connection with the senior note
issuances of €1.1 billion, the Company entered into a forward exchange contract to hedge the economic
risk of changes in foreign exchange rates from the issuance date to settlement date of the Euro senior
notes. This forward exchange contract was settled in March 2019 and the Company recorded a charge of
$7 million in the first quarter of 2019 related to the settlement of this contract.
Treasury Locks on Senior Notes
In connection with the JLT Transaction, to hedge the risk of increases in future interest rates prior to its
issuance of senior notes, in the fourth quarter of 2018, the Company entered into treasury locks related to
$2 billion of the expected debt. The fair value at December 31, 2018 was based on the published treasury
rate plus forward premium as of December 31, 2018 compared to the all in rate at the inception of the
46
contract. The contracts were not designated as an accounting hedge. The Company recorded an
unrealized loss of $116 million related to the change in the fair value of these derivatives in the
consolidated statement of income for the twelve month period ended December 31, 2018. In January
2019, upon issuance of the $5 billion of senior notes, the Company settled the treasury lock derivatives
and made a payment to its counter party for $122 million. An additional charge of $6 million was recorded
in the first quarter of 2019 related to the settlement of the Treasury lock derivatives.
Net Investment Hedge
The Company has investments in various subsidiaries with Euro functional currencies. As a result, the
Company is exposed to the risk of fluctuations between the Euro and U.S. dollar exchange rates. As part
of its risk management program to fund the JLT acquisition, the Company issued €1.1 billion senior notes,
as discussed above, and designated the debt instruments as a net investment hedge of its Euro
denominated subsidiaries. The hedge is re-assessed each quarter to confirm that the designated equity
balance at the beginning of each period continues to equal or exceed 80% of the outstanding balance of
the Euro debt instrument and that all the critical terms of the hedging instrument and the hedged net
investment continue to match. If the Company concludes that the hedge is highly effective, the change in
the debt balance related to foreign exchange fluctuations will be recorded in foreign currency translation
gains (losses) in the consolidated balance sheet. The U.S. dollar value of the Euro notes decreased by
$28 million during 2019 related to the change in foreign exchange rates. Since the Company concluded
that the hedge was highly effective, it recorded an increase to foreign currency translation gains (losses)
for the twelve months ended December 31, 2019.
Investing Cash Flows
Net cash used for investing activities amounted to $5.7 billion in 2019 compared with $1.1 billion used for
investing activities in 2018.
The Company paid $5,505 million and $884 million, net of cash acquired, for acquisitions it made during
2019 and 2018, respectively.
In January 2019, the Company increased its equity ownership in Marsh India from 26% to 49% for
approximately $88 million. Marsh India is carried under the equity method.
The Company’s additions to fixed assets and capitalized software, which amounted to $421 million in
2019 and $314 million in 2018, primarily relate to computer equipment purchases, the refurbishing and
modernizing of office facilities and software development costs.
The Company has commitments for potential future investments of approximately $60 million in four
private equity funds that invest primarily in financial services companies.
Commitments and Obligations
The following sets forth the Company’s future contractual obligations by the types identified in the table
below as of December 31, 2019:
Payment due by Period
Contractual Obligations
(In millions of dollars)
Current portion of long-term debt
Long-term debt
Interest on long-term debt
Net operating leases
Service agreements
Other long-term obligations
Total
Total
1,217 $
$
10,808
5,556
2,610
349
448
$ 20,988 $
Within
1 Year
1,217 $
—
456
413
184
195
2,465 $
1-3
Years
— $
1,334
807
694
89
243
3,167 $
— $
4-5
Years
After 5
Years
—
7,240
3,604
974
15
5
3,518 $ 11,838
2,234
689
529
61
5
The above does not include the liability for unrecognized tax benefits of $86 million as the Company is
unable to reasonably predict the timing of settlement of these liabilities, other than approximately $2
million that may become payable during 2020.
The above does not include the remaining transitional tax payments related to the TCJA of $69 million.
47
Management’s Discussion of Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States ("GAAP") requires management to make estimates and judgments that affect reported
amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.
Management considers the policies discussed below to be critical to understanding the Company’s
financial statements because their application places the most significant demands on management’s
judgment, and requires management to make estimates about the effect of matters that are inherently
uncertain. Actual results may differ from those estimates.
Purchase Price Allocation
Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their
fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired
and liabilities assumed is recorded as goodwill. The JLT Transaction has increased the significance of
judgments and estimates management must make to complete the purchase price allocation.
Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires
management to make estimates, which are based on all available information and in some cases
assumptions with respect to the timing and amount of future revenues and expenses associated with an
asset. These estimates directly impact the amount of identified intangible assets recognized and the
related amortization expense in future periods.
Revenue Recognition
The adoption of the new revenue standard on January 1, 2018 has increased the significance of
judgments and estimates management must make to apply the guidance. In particular, in the Risk and
Insurance Services segment, judgments related to the amount of variable revenue consideration to
ultimately be received on placement of quota share reinsurance treaties and contingent commission from
insurers, which was previously recognized when the contingency was resolved, now requires significant
judgments and estimates.
Under the new standard, certain costs to obtain or fulfill a contract that were previously expensed as
incurred have been capitalized. The Company capitalizes the incremental costs to obtain contracts
primarily related to commissions or sales bonus payments. These deferred costs are amortized over the
expected life of the underlying customer relationships. The Company also capitalizes certain pre-
placement costs that are considered fulfillment costs that are amortized at a point in time when the
associated revenue is recognized.
Management also makes significant judgments and estimates to measure the progress toward
completing performance obligations and realization rates for consideration related to contracts as well as
potential performance-based fees in the Consulting segment.
See Note 2 to the consolidated financial statements for additional information.
Legal and Other Loss Contingencies
The Company and its subsidiaries are subject to numerous claims, lawsuits and proceedings including
claims for errors and omissions ("E&O"). GAAP requires that a liability be recorded when a loss is both
probable and reasonably estimable. Significant management judgment is required to apply this guidance.
The Company utilizes case level reviews by inside and outside counsel, an internal actuarial analysis by
Oliver Wyman Group, a subsidiary of the Company, and other methods to estimate potential losses. The
liability is reviewed quarterly and adjusted as developments warrant. In many cases, the Company has
not recorded a liability, other than for legal fees to defend the claim, because we are unable, at the
present time, to make a determination that a loss is both probable and reasonably estimable. Given the
unpredictability of E&O claims and of litigation that could flow from them, it is possible that an adverse
outcome in a particular matter could have a material adverse effect on the Company’s businesses, results
of operations, financial condition or cash flow in a given quarterly or annual period.
In addition, to the extent that insurance coverage is available, significant management judgment is
required to determine the amount of recoveries that are probable of collection under the Company’s
various insurance programs.
48
Retirement Benefits
The Company maintains qualified and non-qualified defined benefit pension and defined contribution
plans for its eligible U.S. employees and a variety of defined benefit and defined contribution plans for its
eligible non-U.S. employees. The Company’s policy for funding its tax-qualified defined benefit retirement
plans is to contribute amounts at least sufficient to meet the funding requirements set forth in U.S. and
applicable foreign laws.
The Company recognizes the funded status of its over-funded defined benefit pension and retiree medical
plans as a net benefit plan asset and its unfunded and underfunded plans as a net benefit plan liability.
The gains or losses and prior service costs or credits that have not been recognized as components of
net periodic costs are recorded as a component of Accumulated Other Comprehensive Income ("AOCI"),
net of tax, in the Company’s consolidated balance sheets. The gains and losses that exceed specified
corridors are amortized prospectively out of AOCI over a period that approximates the remaining life
expectancy of participants in plans where substantially all participants are inactive or the average
remaining service period of active participants for plans with active participants. The vast majority of
unrecognized losses relate to inactive plans and are amortized over the remaining life expectancy of the
participants.
The determination of net periodic pension cost is based on a number of assumptions, including an
expected long-term rate of return on plan assets, the discount rate, mortality and assumed rate of salary
increase. The assumptions used in the calculation of net periodic pension costs and pension liabilities are
disclosed in Note 8 to the consolidated financial statements. The assumptions for expected rate of return
on plan assets and the discount rate are discussed in more detail below.
The long-term rate of return on plan assets assumption is determined for each plan based on the facts
and circumstances that exist as of the measurement date, and the specific portfolio mix of each plan’s
assets. The Company utilizes a model developed by Mercer, a subsidiary of the Company, to assist in the
determination of this assumption. The model takes into account several factors, including: actual and
target portfolio allocation; investment, administrative and trading expenses incurred directly by the plan
trust; historical portfolio performance; relevant forward-looking economic analysis; and expected returns,
variances and correlations for different asset classes. These measures are used to determine
probabilities using standard statistical techniques to calculate a range of expected returns on the portfolio.
The target asset allocation for the U.S. plans is 64% equities and equity alternatives and 36% fixed
income. At the end of 2019, the actual allocation for the U.S. plans was 64% equities and equity
alternatives and 36% fixed income. The target asset allocation for the U.K. plans, which comprise
approximately 81% of non-U.S. plan assets, is 34% equities and equity alternatives and 66% fixed
income. At the end of 2019, the actual allocation for the U.K. plans was 35% equities and equity
alternatives and 65% fixed income.
The discount rate selected for each U.S. plan is based on a model bond portfolio with coupons and
redemptions that closely match the expected liability cash flows from the plan. Discount rates for non-U.S.
plans are based on appropriate bond indices adjusted for duration; in the U.K., the plan duration is
reflected using the Mercer yield curve.
The table below shows the weighted average assumed rate of return and the discount rate at the
December 31, 2019 measurement date (for measuring pension expense in 2020) for the total Company,
the U.S. and the Rest of World ("ROW").
Assumed Rate of Return on Plan Assets
Discount Rate
Total Company
5.31%
2.57%
U.S.
7.82%
3.44%
ROW
4.35%
2.09%
49
Holding all other assumptions constant, a half-percentage point change in the rate of return on plan
assets and discount rate assumptions would affect net periodic pension cost for the U.S. and U.K. plans,
which together comprise approximately 85% of total pension plan liabilities, as follows:
(In millions of dollars)
Assumed Rate of Return on Plan Assets
Discount Rate
0.5 Percentage
Point Increase
0.5 Percentage
Point Decrease
U.S.
(22) $
1
$
U.K.
(47) $
$
2
U.S.
22
$
(2) $
U.K.
47
(3)
$
$
The impact of discount rate changes shown above relates to the increase or decrease in actuarial gains
or losses being amortized through net periodic pension cost, as well as the increase or decrease in
interest expense, with all other facts and assumptions held constant. It does not contemplate nor include
potential future impacts a change in the interest rate environment and discount rates might cause, such
as the impact on the market value of the plans’ assets. In addition, the assumed return on plan assets
would likely be impacted by changes in the interest rate environment and other factors, including equity
valuations, since these factors reflect the starting point used in the Company’s projection models. For
example, a reduction in interest rates may result in a reduction in the assumed return on plan assets.
Changing the discount rate and leaving the other assumptions constant also may not be representative of
the impact on expense, because the long-term rates of inflation and salary increases are often correlated
with the discount rate. Changes in these assumptions will not necessarily have a linear impact on the net
periodic pension cost.
The Company contributes to certain health care and life insurance benefits provided to its retired
employees. The cost of these post-retirement benefits for employees in the U.S. is accrued during the
period up to the date employees are eligible to retire, but is funded by the Company as incurred. The key
assumptions and sensitivity to changes in the assumed health care cost trend rate are discussed in Note
8 to the consolidated financial statements.
Income Taxes
Significant judgment is required in determining the annual effective tax rate and in evaluating uncertain
tax positions. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax
positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step
process:
• First, the Company determines whether it is more likely than not that a tax position will be sustained
upon tax examination, including resolution of any related appeals or litigation, based on only the
technical merits of the position. If a tax position does not meet the more-likely-than-not recognition
threshold, the benefit of that position is not recognized in the financial statements.
• The second step is measurement. A tax position that meets the more-likely-than-not recognition
threshold is measured to determine the amount of benefit to recognize in the financial statements.
The tax position is measured as the largest amount of benefit that is greater than 50-percent likely of
being realized upon ultimate resolution with a taxing authority. Uncertain tax positions are evaluated
based upon the facts and circumstances that exist at each reporting period and involve significant
management judgment. Subsequent changes in judgment based upon new information may lead to
changes in recognition, de-recognition, and measurement. Adjustments may result, for example, upon
resolution of an issue with the taxing authorities, or expiration of a statute of limitations barring an
assessment for an issue.
The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax
expense.
Certain items are included in the Company's tax returns at different times than the items are reflected in
the financial statements. As a result, the annual tax expense reflected in the consolidated statements of
income is different than that reported in the tax returns. Some of these differences are permanent, such
as non-deductible expenses, and some differences are temporary and reverse over time, such as
depreciation expense. Temporary differences create deferred tax assets and liabilities, which are
measured at existing tax rates. Deferred tax liabilities generally represent tax expense recognized in the
50
financial statements for which payment has been deferred, or expense for which a deduction has been
taken already in the tax return but the expense has not yet been recognized in the financial statements.
Deferred tax assets generally represent items that can be used as a tax deduction or credit in tax returns
in future years for which a benefit has already been recorded in the financial statements. The Company
evaluates all significant available positive and negative evidence, including the existence of losses in
recent years and its forecast of future taxable income by jurisdiction, in assessing the need for a valuation
allowance. The Company also considers tax planning strategies that would result in realization of deferred
tax assets, and the presence of taxable income in prior period tax filings in jurisdictions that allow for the
carryback of tax attributes pursuant to the applicable tax law. The underlying assumptions the Company
uses in forecasting future taxable income require significant judgment and take into account the
Company's recent performance. The ultimate realization of deferred tax assets is dependent on the
generation of future taxable income during the periods in which temporary differences or carry-forwards
are deductible or creditable. Valuation allowances are established for deferred tax assets when it is
estimated that it is more likely than not that future taxable income will be insufficient to fully use a
deduction or credit in that jurisdiction.
Fair Value Determinations
Goodwill Impairment Testing – The Company is required to assess goodwill and any indefinite-lived
intangible assets for impairment annually, or more frequently if circumstances indicate impairment may
have occurred. The Company performs the annual impairment assessment for each of its reporting units
during the third quarter of each year. In accordance with applicable accounting guidance, a company can
assess qualitative factors to determine whether it is necessary to perform a goodwill impairment test.
Alternatively, the company may elect to proceed directly to the quantitative goodwill impairment test. In
2019, the Company elected to perform a quantitative impairment assessment. Fair values of the reporting
units were estimated using a market approach. Carrying values for the reporting units are based on
balances at the prior quarter end and include directly identified assets and liabilities as well as an
allocation of those assets and liabilities not recorded at the reporting unit level. The Company completed
its 2019 annual review in the third quarter and concluded goodwill was not impaired, as the fair value of
each reporting unit exceeded its carrying value by a substantial margin.
Share-Based Payment
The guidance for accounting for share-based payments requires, among other things, that the estimated
grant date fair value of stock options be charged to earnings. Significant management judgment is
required to determine the appropriate assumptions for inputs such as volatility and expected term
necessary to estimate option values. In addition, management judgment is required to analyze the terms
of the plans and awards granted thereunder to determine if awards will be treated as equity awards or
liability awards, as defined by the accounting guidance.
As of December 31, 2019, there was $19 million of unrecognized compensation cost related to stock
option awards. The weighted-average period over which the costs are expected to be recognized is 1.25
years. Also as of December 31, 2019, there was $357 million of unrecognized compensation cost related
to the Company’s restricted stock, restricted stock unit and performance stock unit awards. The weighted-
average period over which that cost is expected to be recognized is approximately 1.11 years.
See Note 9 to the consolidated financial statements for additional information regarding accounting for
share-based payments.
Investments and Derivatives
Although not directly recorded in the Company’s consolidated balance sheets, the Company's defined
benefit pension plans hold investments of approximately $17 billion, which include private equity and
other non-liquid investments. The fair value of the plan investments determines, in part, the over-or under-
funded status of those plans, which is included in the Company’s consolidated balance sheets. The
Company also has minority positions in certain equity securities (primarily Alexander Forbes) as well as
approximately $107 million of investments in private equity funds accounted for using the equity method
of accounting.
The Company reviews the carrying value of its investments (both direct and held through its pension
plans) to determine if any valuation adjustments are appropriate under the applicable accounting
51
pronouncements. The Company bases its review on the facts and circumstances as they relate to each
investment. In those instances where quoted market prices are not available, particularly for private equity
funds, significant management judgment is required to determine the appropriate value of the Company’s
investments. Fair value of investments in private equity funds is determined by the funds’ investment
managers. Factors considered in determining the fair value of private equity investments include: implied
valuation of recently completed financing rounds that included sophisticated outside investors;
performance multiples of comparable public companies; restrictions on the sale or disposal of the
investments; trading characteristics of the securities; and the relative size of the holdings in comparison to
other private investors and the public market float.
In connection with the JLT Transaction, the Company entered into several derivative contracts, described
in Note 11 to the consolidated financial statements. These derivative contracts are recorded at fair value
at the end of each period, with the change in fair value recorded in the consolidated statements of
income. Prior to the settlement, determination of the fair value of these contracts, in particular the deal
contingent foreign exchange contract, required significant management judgments or estimates about the
potential closing dates of the transaction and remaining value of the deal contingency feature. All
derivative contracts related to the JLT Transaction were settled during 2019.
New Accounting Pronouncements
Note 1 to the consolidated financial statements contains a summary of the Company’s significant
accounting policies, including a discussion of recently issued accounting pronouncements and their
impact or potential future impact on the Company’s financial results, if determinable, under the sub-
heading "New Accounting Pronouncements".
Reconciliation of Non-GAAP Measures
On April 1, 2019, the Company completed its previously announced acquisition of JLT. JLT's results of
operations for the three months ended December 31, 2019 are included in the Company’s results of
operations for the fourth quarter of 2019. JLT's results of operations from April 1, 2019 are included in the
Company's results of operations for the twelve month-period ended December 31, 2019. Prior periods in
2018 do not include JLT’s results. Prior to being acquired by the Company, JLT operated in three
segments, Specialty, Reinsurance and Employee Benefits. As of April 1, 2019, the historical JLT
businesses were combined into MMC operations as follows: JLT Specialty is included by geography
within Marsh, JLT Reinsurance is included within Guy Carpenter and the majority of the JLT Employee
Benefits business is included in Mercer Health and Wealth.
The JLT Transaction had a significant impact on the Company’s results of operations in 2019. The
Company believes that in addition to the change in reported GAAP revenue, a comparison of 2019 GAAP
reported revenue to the combined 2018 revenue of MMC and JLT, as if the companies were combined on
April 1, 2018, provides investors with meaningful information as to the Company’s year-over-year
underlying operating results. Investors should not consider the comparison of these non-GAAP measures
in isolation from, or as a substitute for, the financial information that the Company reports in accordance
with GAAP.
The 2018 Including JLT revenue information set forth in the table below presents revenue information as if
the companies were combined on April 1, 2018 and is not necessarily indicative of what the results would
have been had we operated the business since April 1, 2018.
The MMC revenue amounts are as previously reported by the Company in its quarterly filings on Form
10-Q for the applicable periods. The unaudited 2018 JLT revenue amounts reflect historical JLT revenue
information following IFRS, adjusted to conform with U.S. GAAP and MMC’s specific accounting policies,
primarily related to the development of constraints and subsequent release of those constraints related to
the reinsurance business. The revenue includes JLT’s aerospace business. Additional information can be
found in the supplemental information furnished to the SEC on June 6, 2019 on Form 8-K, which is not
incorporated by reference in this Form 10-K.
52
(In millions)
MMC As Previously Reported
Risk & Insurance Services
Marsh
Guy Carpenter
Subtotal
Fiduciary Interest Income
Total Risk & Insurance Services
Consulting
Mercer
Oliver Wyman Group
Total Consulting
Corporate Eliminations
Total Revenue
JLT 2018
Specialty (Marsh)
Reinsurance (Guy Carpenter)
Employee Benefits (Mercer)
Subtotal
Fiduciary Interest Income
Total Revenue
2018 Including JLT
Marsh
Guy Carpenter
Subtotal
Fiduciary Interest Income
Total Risk & Insurance Services
Consulting
Mercer
Oliver Wyman Group
Total Consulting
Corporate Eliminations
Total Revenue Including JLT
Three Months Ended
December 31, 2018
Twelve Months Ended
December 31, 2018
1,804 $
102
1,906
19
1,925
1,228
577
1,805
(18)
3,712 $
407 $
48
96
551
5
556 $
2,211 $
150
2,361
24
2,385
1,324
577
1,901
(18)
4,268 $
6,877
1,286
8,163
65
8,228
4,732
2,047
6,779
(57)
14,950
1,018
156
269
1,443
13
1,456
7,895
1,442
9,337
78
9,415
5,001
2,047
7,048
(57)
16,406
$
$
$
$
$
$
53
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk and Credit Risk
Certain of the Company’s revenues, expenses, assets and liabilities are exposed to the impact of interest
rate changes and fluctuations in foreign currency exchange rates and equity markets.
Interest Rate Risk and Credit Risk
Interest income generated from the Company’s cash investments as well as invested fiduciary funds will
vary with the general level of interest rates.
The Company had the following investments subject to variable interest rates:
(In millions of dollars)
Cash and cash equivalents invested in money market funds, certificates of
deposit and time deposits
Fiduciary cash and investments
December 31,
2019
$
$
1,155
7,344
Based on the above balances, if short-term interest rates increased or decreased by 10%, or 15 basis
points, over the full year, annual interest income, including interest earned on fiduciary funds, would
increase or decrease by approximately $8 million.
In addition to interest rate risk, our cash investments and fiduciary fund investments are subject to
potential loss of value due to counter-party credit risk. To minimize this risk, the Company and its
subsidiaries invest pursuant to a Board approved investment policy. The policy mandates the preservation
of principal and liquidity and requires broad diversification with counter-party limits assigned based
primarily on credit rating and type of investment. The Company carefully monitors its cash and fiduciary
fund investments and will further restrict the portfolio as appropriate to market conditions. The majority of
cash and fiduciary fund investments are invested in short-term bank deposits and liquid money market
funds.
Foreign Currency Risk
The translated values of revenue and expense from the Company’s international operations are subject to
fluctuations due to changes in currency exchange rates. The non-U.S. based revenue that is exposed to
foreign exchange fluctuations is approximately 53% of total revenue. We periodically use forward
contracts and options to limit foreign currency exchange rate exposure on net income and cash flows for
specific, clearly defined transactions arising in the ordinary course of business. Although the Company
has significant revenue generated in foreign locations which is subject to foreign exchange rate
fluctuations, in most cases both the foreign currency revenue and expenses are in the functional currency
of the foreign location. As such, under normal circumstances, the U.S. dollar translation of both the
revenues and expenses, as well as the potentially offsetting movements of various currencies against the
U.S. dollar, generally tends to mitigate the impact on net operating income of foreign currency risk.
However, there have been periods where the impact was not mitigated due to external market factors,
and external macroeconomic events, such as the impact of "Brexit" in the United Kingdom, may result in
greater foreign exchange rate fluctuations in the future. If foreign exchange rates of major currencies
(Euro, Sterling, Australian dollar and Canadian dollar) moved 10% in the same direction against the U.S.
dollar compared with the foreign exchange rates in 2019, the Company estimates net operating income
would increase or decrease by approximately $53 million. The Company has exposure to approximately
85 foreign currencies overall. In Continental Europe, the largest amount of revenue from renewals for the
Risk & Insurance Services segment occurs in the first quarter.
Equity Price Risk
As discussed in Note 1 to the consolidated financial statements, effective January 1, 2018, the Company
adopted a new accounting standard that requires equity investments with readily determinable market
values to be measured at fair value with changes in fair value recognized in net income.
54
The Company holds investments in both public and private companies as well as private equity funds,
including investments of approximately $19 million that are valued using readily determinable fair values
and approximately $67 million of investments without readily determinable fair values. The Company also
has investments of approximately $434 million that are accounted for using the equity method, including
the Company's investment in Alexander Forbes. The investments are subject to risk of decline in market
value, which, if determined to be other than temporary for assets without readily determinable fair values,
could result in realized impairment losses. The Company periodically reviews the carrying value of such
investments to determine if any valuation adjustments are appropriate under the applicable accounting
pronouncements.
The Company owns approximately 34% of the common stock of Alexander Forbes, a South African
company listed on the Johannesburg Stock Exchange, which it purchased in 2014 for 7.50 South African
Rand per share. In the third quarter of 2018, the Company concluded the decline in value of the
investment was other than temporary and recorded an impairment charge of $83 million in 2018. As of
December 31, 2019, the carrying value of the Company’s investment in Alexander Forbes was
approximately $144 million. As of December 31, 2019, the market value of the approximately 443 million
shares of Alexander Forbes owned by the Company, based on the December 31, 2019 closing share
price of 5.55 South African Rand per share, was approximately $173 million. See Note 5 to the
consolidated financial statements for additional information regarding the pending sale of the Company's
remaining investment in AF.
Other
A number of lawsuits and regulatory proceedings are pending. See Note 16 ("Claims, Lawsuits and Other
Contingencies") to the consolidated financial statements included in this report.
55
Item 8. Financial Statements and Supplementary Data
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
(In millions, except per share figures)
Revenue
Expense:
Compensation and benefits
Other operating expenses
Operating expenses
Operating income
Other net benefits credits
Interest income
Interest expense
Cost of extinguishment of debt
Investment income (loss)
Acquisition related derivative contracts
Income before income taxes
Income tax expense
Income from continuing operations
Discontinued operations, net of tax
Net income before non-controlling interests
Less: Net income attributable to non-controlling interests
Net income attributable to the Company
Basic net income per share
– Continuing operations
– Net income attributable to the Company
Diluted net income per share
– Continuing operations
– Net income attributable to the Company
Average number of shares outstanding
– Basic
– Diluted
Shares outstanding at December 31,
2019
2018
2017
$ 16,652 $ 14,950 $ 14,024
9,734
4,241
13,975
2,677
8,605
3,584
12,189
2,761
8,085
3,284
11,369
2,655
265
39
(524)
(32)
22
(8)
2,439
666
1,773
—
1,773
31
215
11
(290)
—
(12)
(441)
2,244
574
1,670
—
1,670
20
201
9
(237)
—
15
—
2,643
1,133
1,510
2
1,512
20
$
$
$
$
$
1,742 $
1,650 $
1,492
3.44 $
3.44 $
3.26 $
3.26 $
3.41 $
3.41 $
3.23 $
3.23 $
506
511
504
506
511
504
2.91
2.91
2.87
2.87
513
519
509
The accompanying notes are an integral part of these consolidated statements.
56
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31,
(In millions)
Net income before non-controlling interests
Other comprehensive (loss) income, before tax:
Foreign currency translation adjustments
Unrealized investment (loss) income
(Loss) gain related to pension/post-retirement plans
Other comprehensive (loss) income, before tax
Income tax (credit) expense on other comprehensive (loss)
income
Other comprehensive (loss) income, net of tax
Comprehensive income
2019
2018
2017
$ 1,773 $ 1,670
$ 1,512
148
—
(702)
(554)
(146)
(408)
(529)
—
(91)
(620)
(30)
(590)
1,365
1,080
717
(7)
408
1,118
68
1,050
2,562
Less: Comprehensive income attributable to non-controlling
interests
31
20
20
Comprehensive income attributable to the Company
$ 1,334 $ 1,060
$ 2,542
The accompanying notes are an integral part of these consolidated statements.
57
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(In millions, except share figures)
ASSETS
Current assets:
Cash and cash equivalents
Receivables
Commissions and fees
Advanced premiums and claims
Other
Less-allowance for doubtful accounts and cancellations
Net receivables
Other current assets
Total current assets
Goodwill
Other intangible assets
Fixed assets, net
Pension related assets
Right of use assets
Deferred tax assets
Other assets
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt
Accounts payable and accrued liabilities
Accrued compensation and employee benefits
Acquisition related derivatives
Current lease liabilities
Accrued income taxes
Total current liabilities
Fiduciary liabilities
Less – cash and investments held in a fiduciary capacity
Long-term debt
Pension, postretirement and postemployment benefits
Long-term lease liabilities
Liability for errors and omissions
Other liabilities
Commitments and contingencies
Equity:
Preferred stock, $1 par value, authorized 6,000,000 shares, none issued
Common stock, $1 par value, authorized
1,600,000,000 shares, issued 560,641,640 shares at December 31, 2019 and December 31, 2018
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Non-controlling interests
Less – treasury shares, at cost, 57,013,097 shares at December 31, 2019 and 56,804,468 shares
at December 31, 2018
Total equity
The accompanying notes are an integral part of these consolidated statements.
58
2019
2018
$
1,155
$
1,066
4,608
123
645
5,376
(140)
5,236
677
7,068
14,671
2,774
858
1,632
1,921
676
1,757
3,984
79
366
4,429
(112)
4,317
551
5,934
9,599
1,437
701
1,688
—
680
1,539
$
31,357
$
21,578
$
$
1,215
2,746
2,197
—
342
179
6,679
7,344
(7,344)
—
10,741
2,336
1,926
335
1,397
—
—
561
862
15,199
(5,055)
150
11,717
(3,774)
7,943
314
2,234
1,778
441
—
157
4,924
5,001
(5,001)
—
5,510
1,911
—
287
1,362
—
—
561
817
14,347
(4,647)
73
11,151
(3,567)
7,584
$
31,357
$
21,578
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
(In millions)
Operating cash flows:
Net income before non-controlling interests
2019
2018
2017
$
1,773
$
1,670
$
1,512
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization of fixed assets and capitalized software
Amortization of intangible assets
Non cash lease expense
Adjustments and payments related to contingent consideration liability
Loss on deconsolidation of entity
Charge for early extinguishment of debt
Provision (Benefit) for deferred income taxes
(Gain) loss on investments
Loss (gain) on disposition of assets
Share-based compensation expense
Change in fair value of acquisition-related derivative contracts
Changes in assets and liabilities:
Net receivables
Other current assets
Other assets
Accounts payable and accrued liabilities
Accrued compensation and employee benefits
Accrued income taxes
Contributions to pension and other benefit plans in excess of current year
expense/credit
Other liabilities
Operating lease liabilities
Effect of exchange rate changes
Net cash provided by operations
Financing cash flows:
Purchase of treasury shares
Net increase in short term borrowings
Proceeds from issuance of debt
Repayments of debt
Payment of bridge loan fees
Payments for early extinguishment of debt
Purchase of non-controlling interests
Acquisition-related derivative payments
Shares withheld for taxes on vested units – treasury shares
Issuance of common stock from treasury shares
Payments of deferred and contingent consideration for acquisitions
Distributions of non-controlling interests
Dividends paid
Net cash provided by (used for) financing activities
Investing cash flows:
Capital expenditures
Net sales (purchases) of long-term investments
Purchase of equity investment
Proceeds from sales of fixed assets
Dispositions
Acquisitions
Other, net
Net cash used for investing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
The accompanying notes are an integral part of these consolidated statements.
59
333
314
315
27
—
32
84
(22)
56
252
8
(130)
(13)
(1)
120
154
42
(369)
(172)
(327)
(115)
2,361
(485)
300
6,459
(1,064)
—
(585)
(80)
(337)
(89)
158
(65)
(16)
(890)
3,306
(421)
183
(91)
10
229
(5,505)
(76)
(5,671)
93
89
1,066
1,155
311
183
—
(4)
11
—
(39)
12
(48)
193
441
(78)
26
(37)
23
68
(40)
(291)
9
—
18
2,428
(675)
—
591
(263)
(35)
—
—
—
(67)
93
(117)
(30)
(807)
(1,310)
(314)
4
—
3
110
(884)
(8)
(1,089)
(168)
(139)
1,205
1,066
312
169
—
(24)
—
—
396
(15)
10
149
—
(454)
(3)
(199)
87
63
37
(457)
406
—
(96)
1,893
(900)
—
987
(315)
—
—
—
—
(49)
166
(136)
(22)
(740)
(1,009)
(302)
(13)
—
8
—
(655)
6
(956)
251
179
1,026
1,205
$
$
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
For the Years Ended December 31,
(In millions, except per share figures)
COMMON STOCK
Balance, beginning and end of year
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year
Change in accrued stock compensation costs
Issuance of shares under stock compensation plans and employee stock
purchase plans and related tax impact
Other
Balance, end of year
RETAINED EARNINGS
Balance, beginning of year
Net income attributable to the Company
Cumulative effect of adoption of the revenue recognition standard (See
Note 1)
Cumulative effect of adoption of other accounting standards (See Note 1)
Dividend equivalents declared and paid - (per share amounts: $1.74 in
2019, $1.58 in 2018, and $1.43 in 2017)
Dividends declared and paid – (per share amounts: $1.74 in 2019, $1.58
in 2018, and $1.43 in 2017)
Balance, end of year
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance, beginning of year
Cumulative effect of adoption of the financial instruments standard (See
Note 1)
Other comprehensive (loss) income, net of tax
Balance, end of year
TREASURY SHARES
Balance, beginning of year
Issuance of shares under stock compensation plans and employee stock
purchase plans
Purchase of treasury shares
Balance, end of year
NON-CONTROLLING INTERESTS
Balance, beginning of year
Net income attributable to non-controlling interests
Distributions and other changes
Net non-controlling interests acquired
Balance, end of year
TOTAL EQUITY
2019
2018
2017
$
$
561 $
561 $
561
817 $
784 $
89
(44)
—
66
(35)
2
842
63
(120)
(1)
$
862 $
817 $
784
$ 14,347 $ 13,140 $ 12,388
1,742
1,650
1,492
—
—
364
—
(10)
(7)
—
—
(6)
(880)
(800)
(734)
$ 15,199 $ 14,347 $ 13,140
$ (4,647) $ (4,043) $ (5,093)
—
(408)
(14)
(590)
—
1,050
$ (5,055) $ (4,647) $ (4,043)
$ (3,567) $ (3,083) $ (2,506)
278
(485)
191
(675)
323
(900)
$ (3,774) $ (3,567) $ (3,083)
$
73 $
83 $
31
(27)
73
20
(30)
—
$
150 $
73 $
80
20
(17)
—
83
$ 7,943 $ 7,584 $ 7,442
The accompanying notes are an integral part of these consolidated statements.
60
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of Operations: Marsh & McLennan Companies, Inc. (the "Company"), a global professional
services firm, is organized based on the different services that it offers. Under this structure, the
Company’s two business segments are Risk and Insurance Services and Consulting.
The Risk and Insurance Services segment provides risk management solutions, services, advice and
insurance broking, reinsurance broking and insurance program management services for businesses,
public entities, insurance companies, associations, professional services organizations, and private
clients. The Company conducts business in this segment through Marsh and Guy Carpenter.
The Company conducts business in its Consulting segment through Mercer and Oliver Wyman Group.
Mercer provides consulting expertise, advice, services and solutions in the areas of health, wealth and
career consulting services and products. Oliver Wyman Group provides specialized management and
economic and brand consulting services.
On April 1, 2019, the Company completed the acquisition (the "Transaction") of all of the outstanding
shares of Jardine Lloyd Thompson Group plc ("JLT"), a public company organized under the laws of
England and Wales. JLT's results of operations for the period April 1, 2019 through December 31, 2019
are included in the Company’s results of operations for 2019. JLT's results of operations for the period
January 1 through March 31, 2019 and for the years ended 2018 and 2017 are not included in the
Company's results of operations and therefore, affect comparability. Prior to being acquired by the
Company, JLT operated in three segments: Specialty, Reinsurance and Employee Benefits. JLT operated
in 41 countries, with significant revenue in the United Kingdom, Pacific, Asia and the United States. As of
April 1, 2019, the historical JLT businesses were combined into MMC operations as follows: JLT Specialty
is included by geography within Marsh, JLT Reinsurance is included in Guy Carpenter and the majority of
JLT's Employee Benefits business is included in Mercer Health and Wealth.
Principles of Consolidation: The accompanying consolidated financial statements include all wholly-
owned and majority-owned subsidiaries. All significant inter-company transactions and balances have
been eliminated.
Fiduciary Assets and Liabilities: In its capacity as an insurance broker or agent, generally the
Company collects premiums from insureds and after deducting its commissions, remits the premiums to
the respective insurance underwriters. The Company also collects claims or refunds from underwriters on
behalf of insureds. Unremitted insurance premiums and claims proceeds are held by the Company in a
fiduciary capacity. Risk and Insurance Services revenue includes interest on fiduciary funds of $105
million, $65 million and $39 million in 2019, 2018 and 2017, respectively. The Consulting segment
recorded fiduciary interest income of $4 million, $3 million and $4 million in 2019, 2018 and 2017,
respectively. Since fiduciary assets are not available for corporate use, they are shown in the
consolidated balance sheets as an offset to fiduciary liabilities.
Net uncollected premiums and claims and the related payables were $8.9 billion and $7.3 billion at
December 31, 2019 and 2018, respectively. The increase reflects the inclusion of JLT's balances at
December 31, 2019. The Company is not a principal to the contracts under which the right to receive
premiums or the right to receive reimbursement of insured losses arises. Accordingly, net uncollected
premiums and claims and the related payables are not assets and liabilities of the Company and are not
included in the accompanying consolidated balance sheets.
In certain instances, the Company advances premiums, refunds or claims to insurance underwriters or
insureds prior to collection. These advances are made from corporate funds and are reflected in the
accompanying consolidated balance sheets as receivables.
Mercer manages assets in trusts or funds for which Mercer’s management or trustee fee is not
considered a variable interest, since the fees are commensurate with the level of effort required to provide
those services. Mercer is not the primary beneficiary of these trusts or funds. Mercer’s maximum
exposure to loss of its interests is, therefore, limited to collection of its fees.
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Revenue: The Company provides detailed discussion regarding its revenue policies in Note 2 to the
consolidated financial statements.
Cash and Cash Equivalents: Cash and cash equivalents primarily consist of certificates of deposit and
time deposits, with original maturities of three months or less, and money market funds. The estimated
fair value of the Company's cash and cash equivalents approximates their carrying value. The Company
is required to maintain operating funds primarily related to regulatory requirements outside the United
States or as collateral under captive insurance arrangements. At December 31, 2019, the Company
maintained $197 million related to these regulatory requirements.
Fixed Assets: Fixed assets are stated at cost less accumulated depreciation and amortization.
Expenditures for improvements are capitalized. Upon sale or retirement of an asset, the cost and related
accumulated depreciation and amortization are removed from the accounts and any gain or loss is
reflected in income. Expenditures for maintenance and repairs are charged to operations as incurred.
Depreciation of buildings, building improvements, furniture, and equipment is provided on a straight-line
basis over the estimated useful lives of these assets. Furniture and equipment is depreciated over
periods ranging from three to ten years. Leasehold improvements are amortized on a straight-line basis
over the periods covered by the applicable leases or the estimated useful life of the improvement,
whichever is less. Buildings are depreciated over periods ranging from thirty to forty years. The Company
periodically reviews long-lived assets for impairment whenever events or changes indicate that the
carrying value of assets may not be recoverable.
The components of fixed assets are as follows:
December 31,
(In millions of dollars)
Furniture and equipment
Land and buildings
Leasehold and building improvements
Less-accumulated depreciation and amortization
2019
$ 1,268
377
1,214
2,859
(2,001)
858
$
2018
$ 1,159
377
1,007
2,543
(1,842)
701
$
Investments: The caption "Investment income (loss)" in the consolidated statements of income
comprises realized and unrealized gains and losses from investments recognized in earnings. It includes,
when applicable, other than temporary declines in the value of securities, mark-to-market increases or
decreases in equity investments with readily determinable fair values and equity method gains or losses
on the Company's investments in private equity funds.
The Company holds investments in certain private equity funds. Investments in private equity funds are
accounted for under the equity method of accounting using a consistently applied three-month lag period
adjusted for any known significant changes from the lag period to the reporting date of the Company. The
underlying private equity funds follow investment company accounting, where investments within the fund
are carried at fair value. Investment gains or losses for its proportionate share of the change in fair value
of the funds are recorded in earnings. Investments using the equity method of accounting are included in
"other assets" in the consolidated balance sheets.
In 2019, the Company recorded investment income of $22 million compared to investment loss of $12
million in 2018 and investment income of $15 million in 2017. The investment gain in 2019 includes gains
of $10 million related to mark-to-market changes in equity securities and gains of $12 million related to
investments in private equity funds and other investments. The investment loss in 2018 includes an
impairment charge of $83 million related to its investment in Alexander Forbes (see Note 10). The net
investment loss in 2018 also includes gains of $54 million related to mark-to-market changes in equity
securities and gains of $17 million related to investments in private equity funds and other investments.
The investment income in 2017 was due to a gain on the sale of an equity investment and gains related
to investments in private equity funds.
62
Goodwill and Other Intangible Assets: Goodwill represents acquisition costs in excess of the fair value
of net assets acquired. Goodwill is reviewed at least annually for impairment. The Company performs an
annual impairment test for each of its reporting units during the third quarter of each year. In accordance
with applicable accounting guidance, a company can assess qualitative factors to determine whether it is
necessary to perform a goodwill impairment test. Alternatively, the company may elect to proceed directly
to the quantitative goodwill impairment test. When a quantitative test is performed, fair values of the
reporting units are estimated using either a market approach or a discounted cash flow model. Carrying
values for the reporting units are based on balances at the prior quarter-end and include directly identified
assets and liabilities as well as an allocation of those assets and liabilities not recorded at the reporting
unit level. As discussed in Note 6, the Company elected to perform a quantitative impairment assessment
during 2019. Other intangible assets, which primarily consist of acquired customer lists, that are not
deemed to have an indefinite life, are amortized over their estimated lives, typically ranging from 10 to 15
years, and reviewed for impairment upon the occurrence of certain triggering events in accordance with
applicable accounting literature. The Company had no indefinite lived identified intangible assets at
December 31, 2019 and 2018.
Capitalized Software Costs: The Company capitalizes certain costs to develop, purchase or modify
software for the internal use of the Company. These costs are amortized on a straight-line basis over
periods ranging from 3 to 10 years. Costs incurred during the preliminary project stage and post
implementation stage, are expensed as incurred. Costs incurred during the application development
stage are capitalized. Costs related to updates and enhancements are only capitalized if they will result in
additional functionality. Capitalized computer software costs of $496 million and $435 million, net of
accumulated amortization of $1.4 billion and $1.3 billion as of December 31, 2019 and 2018, respectively,
are included in other assets in the consolidated balance sheets.
Legal and Other Loss Contingencies: The Company and its subsidiaries are subject to a significant
number of claims, lawsuits and proceedings including claims for errors and omissions ("E&O"). The
preparation of financial statements in conformity with accounting principles generally accepted in the
United States ("GAAP") requires that a liability be recorded when a loss is both probable and reasonably
estimable. Significant management judgment is required to apply this guidance. The Company utilizes
case level reviews by inside and outside counsel, an internal actuarial analysis by Oliver Wyman Group, a
subsidiary of the Company, and other methods to estimate potential losses, including estimated legal
costs. The liability is reviewed quarterly and adjusted as developments warrant. In many cases, the
Company has not recorded a liability, other than for legal fees to defend the claim, because we are
unable, at the present time, to make a determination that a loss is both probable and reasonably
estimable. Given the unpredictability of E&O claims and of litigation that could flow from them, it is
possible that an adverse outcome in a particular matter could have a material adverse effect on the
Company’s businesses, results of operations, financial condition or cash flow in a given quarterly or
annual period.
In addition, to the extent that insurance coverage is available, significant management judgment is
required to determine the amount of recoveries that are probable of collection under the Company’s
various insurance programs.
The legal and other contingent liabilities described above are not discounted.
Income Taxes: The Company's effective tax rate reflects its income, statutory tax rates and tax planning
in the various jurisdictions in which it operates. Significant judgment is required in determining the annual
tax provision and in evaluating uncertain tax positions and the ability to realize deferred tax assets. See
Part II, Item 7. ("Management’s Discussion and Analysis of Financial Condition and Results of
Operations" - Income Taxes) for a discussion of accounting policies governing the Company’s income tax
provision.
The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken
or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first
step involves recognition. The Company determines whether it is more likely than not that a tax position
will be sustained upon tax examination, including resolution of any related appeals or litigation, based on
only the technical merits of the position. The technical merits of a tax position derive from both statutory
and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and
63
their applicability to the facts and circumstances of the tax position. If a tax position does not meet the
more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial
statements. The second step is measurement. A tax position that meets the more-likely-than-not
recognition threshold is measured to determine the amount of benefit to recognize in the financial
statements. The tax position is measured as the largest amount of benefit that is greater than 50 percent
likely to be realized upon ultimate resolution with a taxing authority. Uncertain tax positions are evaluated
based upon the facts and circumstances that exist at each reporting period. Subsequent changes in
judgment based upon new information may lead to changes in recognition, de-recognition, and
measurement. Adjustments may result, for example, upon resolution of an issue with the taxing
authorities, or expiration of a statute of limitations barring an assessment for an issue. The Company
recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Tax law may require items be included in the Company's tax returns at different times than the items are
reflected in the financial statements. As a result, the annual tax expense reflected in the consolidated
statements of income is different than that reported in the income tax returns. Some of these differences
are permanent, such as expenses that are not deductible in the returns, and some differences are
temporary and reverse over time, such as depreciation expense. Temporary differences create deferred
tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax
deduction or credit in tax returns in future years for which benefit has already been recorded in the
financial statements. Valuation allowances are established for deferred tax assets when it is estimated
that future taxable income will be insufficient to use a deduction or credit in that jurisdiction. Deferred tax
liabilities generally represent tax expense recognized in the financial statements for which payment has
been deferred, or expense for which a deduction has been taken already in the tax return but the expense
has not yet been recognized in the financial statements.
Integration and Restructuring Charges: Severance and related costs are recognized based on
amounts due under established severance plans or estimates of one-time benefits that will be provided.
Typically, severance benefits are recognized when the impacted colleagues are notified of their expected
termination and such termination is expected to occur within the legally required notification period. These
costs are included in compensation and benefits in the consolidated statements of income.
Costs for real estate consolidation are recognized based on the type of cost, and the expected future use
of the facility. For locations where the Company does not expect to sub-lease the property, the
amortization of any right-of-use asset is accelerated from the decision date to the cease use date. For
locations where the Company expects to sub-lease the properties subsequent to its vacating the property,
the right-of-use asset is reviewed for potential impairment at the earlier of the cease use date or the date
a sub-lease is signed. To determine the amount of impairment, the fair value of the right-of-use asset is
determined based on the present value of the estimated net cash flows related to the property.
Contractual costs outside of the right-of-use asset are recognized based on the net present value of
expected future cash outflows for which the Company will not receive any benefit. Such amounts are
reliant on estimates of future sub-lease income to be received and future contractual costs to be incurred.
These costs are included in other operating expenses in the consolidated statements of income.
Other costs related to integration and restructuring, such as moving, legal or consulting costs are
recognized as incurred. These costs are included in other operating expenses in the consolidated
statements of income.
Derivative Instruments: All derivatives, whether designated in hedging relationships or not, are
recorded on the balance sheet at fair value. If the derivative is designated as a fair value hedge, the
changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are
recognized in earnings. The fair value of the derivative is recorded in the consolidated balance sheet in
other receivables or accounts payable and accrued liabilities. If the derivative is designated as a cash
flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other
comprehensive income and are recognized in the income statement when the hedged item affects
earnings. Changes in the fair value attributable to the ineffective portion of cash flow hedges are
recognized in earnings. If a derivative is not designated as an accounting hedge, the change in fair value
is recorded in earnings.
64
Concentrations of Credit Risk: Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents, commissions and fees
receivable and insurance recoverables. The Company maintains a policy providing for the diversification
of cash and cash equivalent investments and places its investments in a large number of high quality
financial institutions to limit the amount of credit risk exposure. Concentrations of credit risk with respect
to receivables are generally limited due to the large number of clients and markets in which the Company
does business, as well as the dispersion across many geographic areas.
Per Share Data: Basic net income per share attributable to the Company and income from continuing
operations per share are calculated by dividing the respective after-tax income attributable to common
shares by the weighted average number of outstanding shares of the Company’s common stock.
Diluted net income per share attributable to the Company and income from continuing operations per
share are calculated by dividing the respective after-tax income attributable to common shares by the
weighted average number of outstanding shares of the Company’s common stock, which have been
adjusted for the dilutive effect of potentially issuable common shares. Reconciliations of the applicable
components used to calculate basic and diluted EPS - Continuing Operations are presented below. The
reconciling items related to the EPS calculation are the same for both basic and diluted EPS.
Basic and Diluted EPS Calculation - Continuing Operations
(In millions, except per share figures)
Net income from continuing operations
Less: Net income attributable to non-controlling interests
Basic weighted average common shares outstanding
Dilutive effect of potentially issuable common shares
Diluted weighted average common shares outstanding
Average stock price used to calculate common stock equivalents
31
20
2018
2019
2017
$ 1,773 $ 1,670 $ 1,510
20
$ 1,742 $ 1,650 $ 1,490
513
6
519
$ 97.23 $ 83.13 $ 77.30
506
5
511
506
5
511
Estimates: GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Actual
results may vary from those estimates.
New Accounting Pronouncements Effective January 1, 2019:
The following new accounting standard was adopted using a modified retrospective approach
through a cumulative-effect adjustment to retained earnings as of January 1, 2019:
Leases
Effective January 1, 2019, the Company adopted new guidance intended to improve financial reporting for
leases. Under the new guidance, a lessee is required to recognize assets and liabilities for leases.
Consistent with legacy GAAP, the recognition, measurement and presentation of expenses and cash
flows arising from a lease by a lessee will depend on the classification of the lease as financing or
operating. However, unlike legacy GAAP, which requires that only capital leases are recognized on the
balance sheet, the new guidance requires that both operating and financing leases be recognized on the
balance sheet. The Company adopted this new standard using a modified retrospective method, applying
the new guidance as of the beginning of the year of adoption, with a cumulative effect of initially applying
the guidance recognized as an adjustment to retained earnings at January 1, 2019. Therefore, prior
period information has not been restated. The Company has elected the package of practical expedients,
which among other things, allows historical lease classifications to be carried forward. The Company did
not elect the hindsight practical expedient in determining lease term and impairment of an entity's Right of
Use Assets ("ROU assets"). On January 1, 2019, the Company recognized a lease liability of $1.9 billion
and ROU asset of $1.7 billion, related to real estate operating leases. The ROU asset also reflected
reclassification adjustments primarily from other liabilities related to existing deferred rent, unamortized
lease incentives and restructuring liabilities of approximately $200 million upon adoption. There was no
65
cumulative-effect adjustment required to be booked to retained earnings upon transition. The adoption of
this standard did not have a material impact on our income statement as compared to prior periods.
The following new accounting standards were adopted prospectively as of January 1, 2019:
Derivatives and Hedging
Effective January 1, 2019, the Company adopted new guidance intended to refine and expand hedge
accounting for both financial and commodity risks. The guidance creates more transparency around how
economic results are presented in both the financial statements and the footnotes, as well as making
targeted improvements to simplify the application of hedge accounting guidance. The Company adopted
this guidance effective January 1, 2019. The adoption of this standard did not have an impact on the
Company's financial position or results of operations.
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
Effective January 1, 2019, the Company adopted new guidance that allowed an entity to reclassify the
stranded tax effects resulting from the Tax Cuts and Job Act (the "TCJA") from accumulated other
comprehensive income ("AOCI") to retained earnings. The guidance is effective for the period beginning
January 1, 2019. The Company elected not to reclassify the stranded income tax effects of the TCJA from
AOCI to retained earnings. The adoption of this standard had no impact on the Company's financial
position or results of operations. The Company’s accounting policy related to releasing income tax effects
from AOCI follows the portfolio approach.
New Accounting Pronouncements Effective January 1, 2018:
The following new accounting standards were adopted using a modified retrospective approach
through a cumulative-effect adjustment to retained earnings as of January 1, 2018:
Revenue Recognition
Effective January 1, 2018, the Company adopted new accounting guidance related to revenue from
contracts with customers. The core principle of the guidance is that an entity should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The
Company adopted the new guidance effective January 1, 2018, using the modified retrospective method,
which applies the new guidance beginning with the year of adoption, with the cumulative effect of initially
applying the guidance recognized as an adjustment to retained earnings at January 1, 2018. The
Company elected to apply the modified retrospective method to all contracts. The cumulative effect of
adopting the standard, net of tax, on January 1, 2018 resulted in an increase to the opening balance of
retained earnings of $364 million, with offsetting increases/decreases to other balance sheet accounts
(accounts receivable, other assets and deferred income taxes).
Recognition and Measurement of Financial Instruments
Effective January 1, 2018, the Company adopted new guidance intended to improve the recognition and
measurement of financial instruments. The new guidance requires investments in equity securities
(except those accounted for under the equity method of accounting, or those that result in consolidation of
the investee) to be measured at fair value with changes in fair value recognized in net income; requires
public business entities to use the exit price notion when measuring the fair value of financial instruments
for disclosure purposes; requires separate presentation of financial assets and financial liabilities by
measurement category and form of financial asset (i.e., securities or loans and receivables) on the
balance sheet or the accompanying notes to the financial statements; eliminates the requirement for
public business entities to disclose the method(s) and significant assumptions used to estimate the fair
value that is required to be disclosed for financial instruments measured at amortized cost on the balance
sheet; and requires a reporting organization to present separately in other comprehensive income the
portion of the total change in the fair value of a liability resulting from a change in the instrument-specific
credit risk (also referred to as "own credit") when the organization has elected to measure the liability at
fair value in accordance with the fair value option for financial instruments. The Company holds certain
equity investments that under legacy GAAP were previously treated as available for sale securities,
whereby the mark-to-market change was recorded to AOCI in its consolidated balance sheet. The
Company adopted the new accounting guidance, effective January 1, 2018, and recorded a cumulative-
66
effect adjustment increase to retained earnings as of the beginning of the period of adoption of $14
million, reflecting the reclassification of cumulative unrealized gains, net of tax as of December 31, 2017
from AOCI to retained earnings.
Income Tax Consequences of Intra-Entity Transfers
Effective January 1, 2018, the Company adopted new guidance which requires an entity to recognize the
income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer
occurs. The new guidance eliminates the exception for an intra-entity transfer of an asset other than
inventory. The new guidance is effective for public companies for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years. The new guidance was applied on a modified
retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the
period of adoption. The Company adopted the new guidance effective January 1, 2018, and recorded a
cumulative-effect adjustment decrease to retained earnings of approximately $14 million as of the
beginning of the period of adoption.
Adoption of amended accounting standard using the retrospective application approach
Effective January 1, 2018, the Company adopted new guidance that changes the presentation of net
periodic pension cost and net periodic postretirement cost (''net periodic benefit costs"). The new
guidance requires employers to report the service cost component of net periodic benefit costs in the
same line item as other compensation costs in the income statement. The other components of net
periodic benefit costs are required to be presented in the income statement separately from the service
cost component and outside a subtotal of income from operations. The new guidance required
retrospective application for the presentation of the service cost component and the other components of
net periodic benefit costs. Accordingly, the Company reclassified prior period information in the
consolidated results of operations, segment data and related disclosures contained in our notes to the
consolidated financial statements to reflect the retrospective adoption of this standard.
New Accounting Pronouncements Not Yet Adopted
In December 2019, the Financial Accounting Standards Board ("FASB") issued guidance related to the
accounting for income taxes. The standard removes specific exceptions in the current rules and
eliminates the need for an organization to analyze whether the following apply in a given period: (a)
exception to the incremental approach for intraperiod tax allocation; (b) exceptions to accounting for basis
differences when there are ownership changes in foreign investments and (c) exception in interim period
income tax accounting for year-to-date losses that exceed anticipated losses. The standard also is
designed to improve financial statement preparers’ application of income tax-related guidance and
simplify GAAP for (a) franchise taxes that are partially based on income; (b) transactions with a
government that result in a step-up in the tax basis of goodwill; (c) separate financial statements of legal
entities that are not subject to tax and (d) enacted changes in tax laws in interim periods. The standard
takes effect for public business entities for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2020. The Company is currently evaluating the impact this standard will
have on the Company’s financial position.
In August 2018, the FASB issued new guidance that amends required fair value measurement
disclosures. The guidance adds new requirements, eliminates some current disclosures and modifies
other required disclosures. The new disclosure requirements, along with modifications made to
disclosures as a result of the change in requirements for narrative descriptions of measurement
uncertainty, must be applied on a prospective basis. The effects of all other amendments included in the
guidance must be applied retrospectively for all periods presented. The guidance is effective for fiscal
years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted.
Adoption of this guidance will impact disclosures only and will not have an impact on the Company's
financial position or results of operations.
In August 2018, the FASB issued new guidance that amends disclosures related to Defined Benefit Plans.
The guidance removes disclosures that no longer are considered cost-beneficial, clarifies the specific
requirements of certain disclosures, and adds disclosure requirements identified as relevant. The
guidance must be applied on a retrospective basis. The guidance is effective for fiscal years ending after
67
December 15, 2020. Early adoption is permitted. Adoption of this guidance will impact disclosures only
and will not have an impact on the Company's financial position or results of operations.
In January 2017, the FASB issued new guidance to simplify the test for goodwill impairment. The new
guidance eliminates the second step in the current two-step goodwill impairment process, under which a
goodwill impairment loss is measured by comparing the implied fair value of a reporting unit's goodwill
with the carrying amount of that goodwill for that reporting unit. The new guidance requires a one-step
impairment test, in which the goodwill impairment charge is based on the amount by which the carrying
amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total
amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative
assessment for a reporting unit to determine if the quantitative impairment test is necessary. The
guidance should be applied on a prospective basis with the nature of and reason for the change in
accounting principle disclosed upon transition. The guidance is effective for annual or any interim goodwill
impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. The
Company does not expect the adoption of this standard to have a material impact on its financial position
or results of operations.
In June 2016, the FASB issued new guidance on the impairment of financial instruments. The new
guidance adds an impairment model (known as the current expected credit loss (CECL) model) that is
based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as
an allowance its estimate of lifetime expected credit losses, which the FASB believes will result in more
timely recognition of such losses. The new standard is also intended to reduce the complexity of U.S.
GAAP by decreasing the number of credit impairment models that entities use to account for debt
instruments. Further, the new standard makes targeted changes to the impairment model for available-
for-sale debt securities. The new standard is effective for public companies for annual reporting periods
beginning after December 15, 2019, and interim periods therein. The adoption of this standard will not
have a material impact on the Company's financial position or results of operations.
2. Revenue
Effective January 1, 2018, the Company adopted new accounting guidance related to revenue from
contracts with customers. The Company adopted the new guidance using the modified retrospective
method, which applies the new guidance beginning in the year of adoption, with the cumulative effect of
initially applying the guidance recognized as an adjustment to retained earnings at January 1, 2018. The
Company elected to apply the modified retrospective method to all contracts. Results for reporting periods
beginning after January 1, 2018 are presented under the new revenue recognition guidance, while 2017
and prior amounts are not adjusted and continue to be reported in accordance with legacy accounting
guidance that were in effect for that period. The adoption of this new revenue recognition standard shifted
revenue in the Risk and Insurance Services segment among quarters from historical patterns, but did not
have a significant year-over-year impact on annual revenue in either segment.
The core principle of the revenue recognition guidance is that an entity should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. To
achieve that principle, the entity applies the following steps: identify the contract(s) with the customer,
identify the performance obligations in the contract(s), determine the transaction price, allocate the
transaction price to the performance obligations in the contract and recognize revenue when (or as) the
entity satisfies a performance obligation.
Other revenue included in the consolidated statements of income that is not from contracts with
customers is less than 1% of total revenue, and therefore is not presented as a separate line item.
Risk and Insurance Services
Risk and Insurance Services revenue reflects compensation for brokerage and consulting services
through commissions and fees. Commission rates and fees vary in amount and can depend upon a
number of factors, including the type of insurance or reinsurance coverage provided, the particular insurer
or reinsurer selected, and the capacity in which the broker acts and negotiates with clients. For the
majority of the insurance and reinsurance brokerage arrangements, advice and services provided which
culminate in the placement of an effective policy are considered a single performance obligation.
68
Arrangements with clients may include the placement of a single policy, multiple policies or a combination
of policy placements and other services. Consideration related to such "bundled arrangements" is
allocated to the individual performance obligations based on their relative fair value. Revenue for policy
placement is generally recognized on the policy effective date, at which point control over the services
provided by the Company has transferred to the client and the client has accepted the services. In many
cases, fee compensation may be negotiated in advance, based on the type of risk, coverage required and
service provided by the Company and ultimately, the extent of the risk placed into the insurance market or
retained by the client. The trends and comparisons of revenue from one period to the next can be affected
by changes in premium rate levels, fluctuations in client risk retention and increases or decreases in the
value of risks that have been insured, as well as new and lost business, and the volume of business from
new and existing clients. For such arrangements, revenue is recognized using output measures, which
correspond to the progress toward completing the performance obligation. Fees for non-risk transfer
services provided to clients are recognized over time in the period the services are provided, using a
proportional performance model, primarily based on input measures. These measures of progress
provide a faithful depiction of the progress towards completion of the performance obligation.
Revenue related to reinsurance brokerage for excess of loss ("XOL") treaties is estimated based on
contractually specified minimum or deposit premiums, and adjusted as additional evidence of the ultimate
amount of brokerage is received. Revenue for quota share treaties is estimated based on indications of
estimated premium income provided by the ceding insurer. The estimated brokerage revenue recognized
for quota share treaties is constrained to an amount that is probable to not have a significant negative
adjustment. The estimated revenue and the constraint are evaluated as additional evidence of the
ultimate amount of underlying risks to be covered is received over the 12 to 18 months following the
effective date of the placement.
In addition to commissions and fees from its clients, the Company also receives other compensation from
insurance companies. This other insurer compensation includes, among other things, payments for
consulting and analytics services provided to insurers, fees for administrative and other services provided
to or on behalf of insurers (including services relating to the administration and management of quota
shares, panels and other facilities in which insurers participate). The Company is also eligible for certain
contingent commissions from insurers based on the attainment of specified metrics (i.e., volume and loss
ratio measures) relating to Marsh's placements, particularly in Marsh & McLennan Agency ("MMA") and in
parts of Marsh's international operations. Revenue for contingent commissions from insurers is estimated
based on historical evidence of the achievement of the respective contingent metrics and recorded as the
underlying policies that contribute to the achievement of the metric are placed. Due to the uncertainty of
the amount of contingent consideration that will be received, the estimated revenue is constrained to an
amount that is probable to not have a significant negative adjustment. Contingent consideration is
generally received in the first quarter of the subsequent year.
A significant majority of the Company's Risk and Insurance Services revenue is for performance
obligations recognized at a point in time. Marsh and Guy Carpenter also receive interest income on
certain funds (such as premiums and claims proceeds) held in a fiduciary capacity for others.
Insurance brokerage commissions are generally invoiced on the policy effective date. Fee based
arrangements generally include a percentage of the total fee due upon signing the arrangement, with
additional fixed installments payable over the remainder of the year. Payment terms range from receipt of
invoice up to 30 days from invoice date.
Reinsurance brokerage revenue is recognized on the effective date of the treaty. Payment terms depend
on the type of reinsurance. For XOL treaties, brokerage revenue is typically collected in four installments
during an annual treaty period based on a contractually specified minimum or deposit premium. For
proportional or quota share treaties, brokerage is billed as underlying insured risks attach to the
reinsurance treaty, generally over 12 to 18 months.
Consulting
The major component of revenue in the Consulting business is fees paid by clients for advice and
services. Mercer, principally through its health line of business, also receives revenue in the form of
commissions received from insurance companies for the placement of group (and occasionally individual)
insurance contracts, primarily health, life and accident coverages. Revenue for Mercer’s investment
69
management business and certain of Mercer’s defined benefit administration services consists principally
of fees based on assets under delegated management or administration.
Consulting projects in Mercer’s wealth and career businesses, as well as consulting projects in Oliver
Wyman, typically consist of a single performance obligation, which is recognized over time as control is
transferred continuously to customers. Typically, revenue is recognized over time using an input measure
of time expended to date relative to total estimated time to be incurred at project completion. Incurred
hours represent services rendered and thereby faithfully depicts the transfer of control to the customer.
On a limited number of engagements, performance fees may also be earned for achieving certain
prescribed performance criteria. Revenue for achievement is estimated and constrained to an amount
that is probable to not have a significant negative adjustment.
A significant majority of fee revenues in the Consulting segment is recognized over time.
For consulting projects, Mercer generally invoices monthly in arrears with payment due within 30 days of
the invoice date. Fees for delegated management services are either deducted from the net asset value
of the fund or invoiced to the client on a monthly or quarterly basis in arrears. Oliver Wyman typically bills
its clients 30-60 days in arrears with payment due upon receipt of the invoice.
Health brokerage and consulting services are components of both Marsh, which includes MMA, and
Mercer, with approximately 63% of such revenues reported in Mercer. Health contracts typically involve a
series of distinct services that are treated as a single performance obligation. Revenue for these services
is recognized over time based on the amount of remuneration the Company expects to be entitled in
exchange for these services. Payments for health brokerage and consulting services are typically paid
monthly in arrears from carriers based on insured lives under the contract.
The following schedule disaggregates various components of the Company's revenue:
Marsh:
EMEA
Asia Pacific
Latin America
Total International
U.S./Canada
Total Marsh
Guy Carpenter
Subtotal
Fiduciary interest income
Total Risk and Insurance Services
Mercer:
Wealth
Health
Career
Total Mercer
Oliver Wyman
Total Consulting
Twelve Months Ended December 31,
2019
2018
$
2,482 $
2,132 $
953
460
3,895
4,119
8,014
1,480
9,494
105
683
400
3,215
3,662
6,877
1,286
8,163
65
$
$
$
9,599 $
8,228 $
2,369 $
2,185 $
1,796
856
5,021
2,122
1,735
812
4,732
2,047
7,143 $
6,779 $
2017
2,033
645
404
3,082
3,322
6,404
1,187
7,591
39
7,630
2,148
1,648
732
4,528
1,916
6,444
70
The following schedule provides contract assets and contract liabilities information from contracts with
customers.
(In millions)
Contract Assets
Contract Liabilities
December 31, 2019
December 31, 2018
January 1, 2018
$
$
207 $
593 $
112 $
545 $
128
583
The Company records accounts receivable when the right to consideration is unconditional, subject only
to the passage of time. Contract assets primarily relate to quota share reinsurance brokerage and
contingent insurer revenue. The Company does not have the right to bill and collect revenue for quota
share brokerage until the underlying policies written by the ceding insurer attach to the treaty. Estimated
revenue related to achievement of volume or loss ratio metrics cannot be billed or collected until all
related policy placements are completed and the contingency is resolved. The change in contract assets
from January 1, 2019 to December 31, 2019 is primarily due to $437 million of additions during the period
(including JLT), partly offset by $342 million transferred to accounts receivables, as the rights to bill and
collect became unconditional. The change in contract assets from January 1, 2018 to December 31, 2018
is primarily due to $331 million of additions during the period offset by $347 million transferred to accounts
receivables. Contract assets are included in other current assets in the Company's consolidated balance
sheets. Contract liabilities primarily relate to the advance consideration received from customers. Contract
liabilities are included in current liabilities in the Company's consolidated balance sheets. The change in
contract liabilities from January 1, 2019 to December 31, 2019 includes cash received for performance
obligations not yet fulfilled of $518 million and $42 million related to JLT, offset by revenue recognized in
2019 of $531 million that was included in the contract liability balance at the beginning of the year. The
Company recognized revenue of $582 million in 2018 that was included in the contract liability balance at
January 1, 2018. The amount of revenue recognized in 2019 and 2018 from performance obligations
satisfied in previous periods, mainly due to variable consideration from contracts with insurers, quota
share business and consulting contracts previously considered constrained was $79 million and $51
million, respectively. The 2019 amount includes a $17 million adjustment of previous estimates related to
a multi-year Guy Carpenter contract in the third quarter of 2019.
The Company applies the practical expedient and therefore does not disclose the value of unsatisfied
performance obligations for (1) contracts with original contract terms of one year or less and (2) contracts
where the Company has the right to invoice for services performed. The revenue expected to be
recognized in future periods during the non-cancellable term of existing contracts greater than one year
that is related to performance obligations that are unsatisfied or partially satisfied at the end of the
reporting period is approximately $39 million for Marsh, $104 million for Mercer and $4 million for Oliver
Wyman. The Company expects revenue in 2020, 2021, 2022, 2023 and 2024 and beyond of $105 million,
$36 million, $5 million, $1 million and $1 million, respectively, related to these performance obligations.
Costs to Obtain and Fulfill a Contract
Under the new standard, certain costs to obtain or fulfill a contract that were previously expensed as
incurred have been capitalized.
The Company capitalized the incremental costs to obtain contracts primarily related to commissions or
sales bonus payments in both segments. These deferred costs are amortized over the expected life of the
underlying customer relationships.
In Risk and Insurance Services, the Company capitalizes certain pre-placement costs that are considered
fulfillment costs that meet the following criteria: these costs (1) relate directly to a contract, (2) enhance
resources used to satisfy the Company’s performance obligation and (3) are expected to be recovered
through revenue generated by the contract. These costs are amortized at a point in time when the
associated revenue is recognized.
In Consulting, the Company incurs implementation costs necessary to facilitate the delivery of the
contracted services. These costs are capitalized and amortized over the initial contract term plus
expected renewal periods.
71
At December 31, 2019, the Company’s capitalized assets related to deferred implementation costs, costs
to obtain and costs to fulfill were $30 million, $222 million and $262 million, respectively. At December 31,
2018, the Company's capitalized assets related to deferred implementation costs, costs to obtain and
costs to fulfill were $41 million, $206 million, and $227 million, respectively. Costs to obtain and deferred
implementation costs are primarily included in other assets and costs to fulfill are primarily included in
other current assets in the Company's consolidated balance sheets. The Company recorded amortization
of compensation and benefits expense of $1.2 billion and $1.0 billion for the years ended December 31,
2019 and 2018, respectively, related to these capitalized costs.
A significant portion of deferred costs to fulfill in Risk and Insurance Services is amortized within three to
six months. Therefore, the deferral of the cost and its amortization often occur in the same annual period.
The Company has elected to use the practical expedient and recognizes the incremental costs of
obtaining contracts as an expense when incurred if the amortization period of the assets is one year or
less.
3. Supplemental Disclosures
The following schedule provides additional information concerning acquisitions, interest and income taxes
paid:
(In millions of dollars)
Assets acquired, excluding cash
Liabilities assumed
Non-controlling interests assumed
Contingent/deferred purchase consideration
Net cash outflow for acquisitions
(In millions of dollars)
Interest paid
Income taxes paid, net of refunds
2019
2018
$ 8,655 $ 1,100 $
(2,804)
(280)
(66)
(83)
—
(133)
2017
898
(134)
—
(109)
$ 5,505 $
884 $
655
2019
2018
$
$
427 $
661 $
264 $
632 $
2017
199
583
The classification of contingent consideration payments in the consolidated statement of cash flows is
dependent upon whether the payment was part of the initial liability established on the acquisition date
(financing) or an adjustment to the acquisition date liability (operating).
The following amounts are included in the consolidated statements of cash flows as a financing activity.
The Company paid deferred and contingent consideration of $65 million in the year ended December 31,
2019, consisting of deferred purchase consideration of $43 million and contingent purchase consideration
of $22 million. In the year ended December 31, 2018, the Company paid deferred and contingent
consideration of $117 million, consisting of deferred purchase consideration of $62 million and contingent
consideration of $55 million, and in the year ended December 31, 2017 the Company paid deferred and
contingent consideration of $136 million, consisting of deferred purchase consideration of $55 million and
contingent consideration of $81 million.
The following amounts are included in the operating section of the consolidated statements of cash flows.
For the year ended December 31, 2019, the Company recorded a net charge for adjustments to
acquisition related accounts of $68 million and contingent consideration payments of $41 million. For the
year ended December 31, 2018, the Company recorded a net charge for adjustments to acquisition
related accounts of $32 million and contingent consideration payments of $36 million, and for the year
ended December 31, 2017 the Company recorded a net charge for adjustments to acquisition related
accounts of $3 million and contingent consideration payments of $27 million.
The Company had non-cash issuances of common stock under its share-based payment plan of $165
million, $130 million and $88 million for the years ended December 31, 2019, 2018 and 2017,
respectively. The Company recorded stock-based compensation expense related to restricted stock units,
performance stock units and stock options of $252 million, $193 million and $149 million for the years
ended December 31, 2019, 2018 and 2017, respectively.
72
Effective January 1, 2019, the Company adopted the new accounting guidance related to leases, which
requires a lessee to recognize assets and liabilities for its leases. Upon adoption of this accounting
standard, the Company recorded a non-cash ROU asset of $1.7 billion and lease liability of $1.9 billion in
the first quarter of 2019.
An analysis of the allowance for doubtful accounts is as follows:
For the Years Ended December 31,
(In millions of dollars)
Balance at beginning of year
Provision charged to operations
Accounts written-off, net of recoveries
Effect of exchange rate changes and other
Balance at end of year
2019
112
32
(16)
12
140
$
$
2018
110
34
(24)
(8)
112
$
$
2017
96
31
(17)
—
110
$
$
4. Accumulated Other Comprehensive Income (Loss)
The changes in the balances of each component of AOCI for the years ended December 31, 2019 and
2018, including amounts reclassified out of AOCI, are as follows:
(In millions of dollars)
Unrealized
Investment
Gains (Losses)
Pension/Post-
Retirement
Plans Gains
(Losses)
Foreign
Currency
Translation
Adjustments
Total
Balance as of January 1, 2019
$
— $
(2,953) $
(1,694) $
(4,647)
Other comprehensive (loss)
gain before reclassifications
Amounts reclassified from
accumulated other
comprehensive loss
Net current period other
comprehensive (loss) gain
—
—
—
Balance as of December 31, 2019 $
— $
(643)
84
(559)
(3,512) $
151
—
151
(1,543) $
(492)
84
(408)
(5,055)
(In millions of dollars)
Unrealized
Investment
Gains (Losses)
Pension/Post-
Retirement
Plans Gains
(Losses)
Foreign
Currency
Translation
Adjustments
Total
Balance as of January 1, 2018
$
14 $
(2,892) $
(1,165) $
(4,043)
Cumulative effect of amended
accounting standard
Other comprehensive loss
before reclassifications
Amounts reclassified from
accumulated other
comprehensive loss
Net current period other
comprehensive loss
(14)
—
—
—
—
(205)
144
(61)
—
(529)
—
(529)
Balance as of December 31, 2018 $
— $
(2,953) $
(1,694) $
(14)
(734)
144
(590)
(4,647)
73
The components of other comprehensive income (loss) are as follows:
For the Year Ended December 31,
(In millions of dollars)
Foreign currency translation adjustments
Pension/post-retirement plans:
Amortization of (gains) losses included in net periodic pension cost:
Prior service credits (a)
Net actuarial losses (a)
Effect of curtailment (a)
Effect of settlement (a)
Effect of remeasurement (a)
Plan Termination (a)
Subtotal
Net losses arising during period
Foreign currency translation adjustments
Pension/post-retirement plans losses
Other comprehensive loss
2019
Tax
(Credit) Net of Tax
151
(3) $
Pre-Tax
$
148 $
(2)
102
—
6
—
—
106
(758)
(50)
(702)
(1)
22
—
1
—
—
22
(154)
(11)
(143)
$
(554) $
(146) $
(1)
80
—
5
—
—
84
(604)
(39)
(559)
(408)
(a) These components of net periodic pension cost are included in other net benefits credits in the Consolidated
Statements of Income. Tax on prior service gains and net actuarial losses is included in income tax expense.
For the Year Ended December 31,
(In millions of dollars)
Foreign currency translation adjustments
Pension/post-retirement plans:
Amortization of (gains) losses included in net periodic pension cost:
Prior service credits (a)
Net actuarial losses (a)
Effect of settlement (a)
Subtotal
Net losses arising during period
Foreign currency translation adjustments
Other adjustments
Pension/post-retirement plans losses
Other comprehensive loss
2018
Tax
(Credit)
Pre-Tax
Net of Tax
$
(529) $
— $
(529)
(4)
145
42
183
(374)
141
(41)
(91)
(1)
32
8
39
(88)
25
(6)
(30)
(3)
113
34
144
(286)
116
(35)
(61)
$
(620) $
(30) $
(590)
(a) These components of net periodic pension cost are included in other net benefits credits in the consolidated
statements of income. Tax on prior service gains and net actuarial losses is included in income tax expense.
74
For the Year Ended December 31,
(In millions of dollars)
Foreign currency translation adjustments
Unrealized investment gains
Pension/post-retirement plans:
Amortization of (gains) losses included in net periodic pension cost:
Prior service credits (a)
Net actuarial losses (a)
Effect of curtailment (a)
Effect of settlement (a)
Subtotal
Net gains arising during period
Foreign currency translation adjustments
Other adjustments
Pension/post-retirement plans gains
Other comprehensive income
2017
Tax
(Credit)
Net of Tax
2 $
(2)
715
(5)
Pre-Tax
$
717 $
(7)
(1)
167
(1)
54
219
374
(201)
16
408
—
30
—
9
39
62
(36)
3
68
(1)
137
(1)
45
180
312
(165)
13
340
$
1,118 $
68 $
1,050
(a) These components of net periodic pension cost are included in other net benefits credits in the consolidated
statements of income. Tax on prior service gains and net actuarial losses is included in income tax expense.
The components of accumulated other comprehensive income (loss) are as follows:
(In millions of dollars)
Foreign currency translation adjustments (net of deferred tax asset of $14 in
2019 and net of deferred tax asset of $15 in 2018)
Net charges related to pension/post-retirement plans (net of deferred tax
asset of $1,635 and $1,493 in 2019 and 2018, respectively)
December 31,
2019
December 31,
2018
$
$
(1,543)
$
(1,694)
(3,512)
(5,055)
$
(2,953)
(4,647)
75
5. Acquisitions and Dispositions
The Company’s acquisitions have been accounted for as business combinations. Net assets and results
of operations are included in the Company’s consolidated financial statements commencing at the
respective purchase closing dates. In connection with acquisitions, the Company records the estimated
values of the net tangible assets and the identifiable intangible assets purchased, which typically consist
of customer relationships, developed technology, trademarks and non-compete agreements. The
valuation of purchased intangible assets involves significant estimates and assumptions. The Company
estimates the fair value of purchased intangible assets, primarily using the income approach, by
determining the present value of future cash flows over the remaining economic life of the respective
assets. The significant estimates and assumptions used in this approach include the determination of the
discount rate, economic life, future revenue growth rates, expected account attrition rates and earnings
margins. Refinement and completion of final valuation of net assets acquired could affect the carrying
value of tangible assets, goodwill and identifiable intangible assets.
On April 1, 2019, the Company completed the JLT Transaction and purchased all of the outstanding
shares of JLT. Under the terms of the Transaction, JLT shareholders received £19.15 in cash for each JLT
share, which valued JLT’s existing issued and to be issued share capital at approximately £4.3 billion (or
approximately $5.6 billion based on an exchange rate of U.S. $1.31:£1). The Company also assumed
existing JLT long-term indebtedness of approximately $1 billion. The Company implemented the
Transaction by way of a scheme of arrangement under Part 26 of the United Kingdom Companies Act
2006, as amended.
The Company believes the Transaction strengthens MMC’s leadership position in insurance and
reinsurance broking, health and retirement. The addition of over 10,000 colleagues provides deeper
industry expertise in almost every part of the Company. The Transaction also builds on MMC’s efforts to
expand in faster-growing geographies and market segments, and facilitates investment in data and
analytics.
The Risk and Insurance Services segment completed five other acquisitions during 2019.
• February – MMA acquired Bouchard Insurance, Inc., a Florida-based full service agency and
Employee Benefits Group, Inc., a Maryland-based independent insurance agency.
• April – MMA acquired Lovitt & Touche, Inc., an Arizona-based insurance agency and The
Centurion Group, LLC, a Pennsylvania-based retirement consulting, asset management and
benefit plan advisory firm.
• October – MMA acquired Benefits Reports Insurance Services, Inc., a Massachusetts-based
independent insurance agency.
Total purchase consideration for acquisitions made during 2019 was approximately $5,927 million, which
consisted of cash paid of $5,861 million and deferred purchase and estimated contingent consideration of
$66 million. Contingent consideration arrangements are based primarily on earnings before interest, tax,
depreciation and amortization ("EBITDA") or revenue targets over a period of two to four years. During
2019, the Company also paid $43 million of deferred purchase consideration and $63 million of
contingent consideration related to acquisitions made in prior years. Estimated fair values of assets
acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized.
76
The following table presents the preliminary allocation of purchase consideration to the assets acquired
and liabilities assumed during 2019 based on the estimated fair values for JLT and other acquisitions as
of their respective acquisition dates:
Acquisitions for the Year-Ended December 31,
2019
(In millions)
Cash
Estimated fair value of deferred/contingent
consideration
Total consideration
Allocation of purchase price:
Cash and cash equivalents
Accounts receivable, net
Other current assets
Fixed assets, net
Other intangible assets
Goodwill
Right of use assets
Deferred tax assets
Other assets
Total assets acquired
Current liabilities
Fiduciary liabilities
Less - fiduciary assets
Long-term debt
Long-term lease liability
Pension, post-retirement and post-employment
liabilities
Liabilities for errors and omissions
Other liabilities
Total liabilities assumed
Non-controlling interests
Net assets acquired
JLT
Other
Total
Acquisitions
$
$
$
$
5,568 $
—
5,568 $
293 $
66
359 $
349 $
7 $
695
132
89
1,545
4,912
382
66
473
8,643
708
1,275
(1,275)
1,044
389
248
31
375
2,795
280
5,568 $
6
—
1
134
212
—
—
8
368
9
—
—
—
—
—
—
—
9
—
359 $
5,861
66
5,927
356
701
132
90
1,679
5,124
382
66
481
9,011
717
1,275
(1,275)
1,044
389
248
31
375
2,804
280
5,927
The purchase price allocation above is based on estimates that are preliminary in nature and subject to
adjustments, which could be material. Any necessary adjustments must be finalized during the
measurement period, which for a particular asset, liability, or non-controlling instrument ends once the
acquirer determines that either (1) the necessary information has been obtained or (2) the information is
not available. However, the measurement period for all items is limited to one year from the acquisition
date. During the fourth quarter of 2019, the Company made certain adjustments to the above JLT
purchase price allocation, which included an increase to goodwill of approximately $90 million, an
increase to other liabilities, and decreases to net receivables, other assets and current liabilities.
Items subject to change include:
• Amounts of intangible assets, fixed assets, capitalized software assets and right-of-use assets,
subject to finalization of valuation efforts;
• Amounts for contingencies, pending the finalization of the Company’s assessment of the portfolio
of contingencies;
77
• Amounts for deferred tax assets and liabilities pending the finalization of valuations of the assets
acquired, liabilities assumed and associated goodwill discussed below; and
• Amounts for income tax assets, receivables and liabilities, pending the filing of the acquired
companies' pre-acquisition income tax returns and receipt of information from taxing authorities
which may change certain estimates and assumptions used.
The estimation of fair value requires numerous judgments, assumptions and estimates about future
events and uncertainties, which could materially impact these values, and the related amortization, where
applicable, in the Company’s results of operations.
The following chart provides information about intangible assets acquired during 2019:
Intangible assets through
December 31, 2019
(In millions)
JLT
Other
Total
Customer relationships
$ 1,435 $
126 $ 1,561
Other
110
8
118
$ 1,545 $
134 $ 1,679
JLT Weighted
Average
Amortization
Period
Other Weighted
Average
Amortization
Period
13 years
4 years
12 years
4 years
Subsequent to the JLT acquisition, the Company purchased the outstanding non-controlling interests of
several JLT subsidiaries for cash payments of approximately $79 million.
In January 2019, Marsh increased its equity ownership in Marsh India from 26% to 49%. Marsh India is
accounted for under the equity method.
Prior Year Acquisitions
During 2018, the Risk and Insurance Services segment completed 12 acquisitions.
• February – MMA acquired Highsmith Insurance Agency, a North Carolina-based independent
insurance brokerage firm.
• March – Marsh acquired Hoken Soken, Inc., a Japan-based insurance agency.
• May – Marsh acquired Mountlodge Limited, a Scotland-based independent insurance broker and
Lorant Martínez Salas y Compañía Agente de Seguros y de Fianzas, S.A. de C.V., a Mexico-
based multi-line insurance broker.
•
June – MMA acquired Bleakley Insurance Services, a California-based provider of employee
benefits solutions; Klein Agency, Inc., a Minnesota-based surety and property/casualty agency;
and Insurance Associates, Inc., a Maryland-based independent insurance agency.
• August – Marsh acquired John L. Wortham & Son, L.P., a Houston-based independent insurance
broker.
• October – MMA acquired Eustis Insurance, Inc., a Louisiana-based insurance agency.
• November – MMA acquired James P. Murphy & Associates, Inc., a Connecticut-based insurance
agency.
• December – MMA acquired Otis-Magie Insurance Agency, Inc., a Minnesota-based insurance
agency, and Marsh acquired Hector Insurance PCC Ltd, a U.K.-based captive management
company.
The Consulting segment completed 8 acquisitions during 2018.
•
January – Oliver Wyman acquired Draw Ltd., a U.K.-based digital transformation agency.
• March – Oliver Wyman acquired 8Works Limited, a U.K.-based design thinking consultancy.
• May – Mercer acquired EverBe SAS, a France-based Workday implementer and advisory firm;
and Evolve Intelligence Pty Ltd., an Australia-based talent strategy firm.
•
June – Mercer acquired India Life Capital Private Ltd., an India-based investment advisor.
78
• November – Mercer acquired Induslynk Training Services Private Ltd., an India-based talent
assessment company, Pavilion Financial Corp., a Canada-based investment services firm and
Summit Strategies Inc., a Missouri-based investment consulting firm.
Total purchase consideration for acquisitions made during 2018 was approximately $1.04 billion, which
consisted of cash paid of $910 million and deferred purchase and estimated contingent consideration of
$133 million. Contingent consideration arrangements are based primarily on EBITDA and/or revenue
targets over periods of two to four years. The fair value of the contingent consideration was based on
projected revenue and earnings of the acquired entities. Estimated fair values of assets acquired and
liabilities assumed are subject to adjustment when purchase accounting is finalized. During 2018, the
Company also paid $62 million of deferred purchase consideration and $91 million of contingent
consideration related to acquisitions made in prior years.
Subsequent Event Transactions
During January 2020, MMA completed the acquisition of two independent insurance brokers, Momentous
Insurance Brokerage ("Momentous") and Ironwood Insurance Services ("Ironwood"). Momentous is a
California-based full-service risk management and employee benefits firm specializing in high net worth
private client services and insurance solutions for the entertainment industry. Ironwood is an Atlanta-
based broker that provides commercial property/casualty insurance, employee benefits, and private client
solutions to mid-size businesses and individuals throughout the US.
At December 31, 2019, the Company owned approximately 34% of Alexander Forbes ("AF"). In January
2020, the Company announced that it would dispose of a substantial portion of its investment in AF in the
form of two independent transactions. In February 2020, the Company, in a separate transaction, sold the
shares not subject to the agreements above to an independent third party. The consummation of all three
transactions will result in a total liquidation of the Company's investment in AF.
Pro-Forma Information
The following unaudited pro-forma financial data gives effect to the acquisitions made by the Company
during 2019, 2018 and 2017. In accordance with accounting guidance related to pro-forma disclosures,
the information presented for current year acquisitions is as if they occurred on January 1, 2018 and
reflects acquisitions made in 2018 as if they occurred on January 1, 2017. The 2017 information includes
2017 acquisitions as if they occurred on January 1, 2016. The pro-forma information includes the effects
of amortization of acquired intangibles and additional interest expense related to the issuance of debt
related to the JLT Transaction. The unaudited pro-forma financial data is presented for illustrative
purposes only and is not necessarily indicative of the operating results that would have been achieved if
such acquisitions had occurred on the dates indicated, nor is it necessarily indicative of future
consolidated results.
(In millions, except per share data)
Revenue
Net income attributable to the Company
Basic net income per share attributable to the Company
Diluted net income per share attributable to the Company
Years Ended December 31,
2019
$ 17,095
$ 1,866
3.69
$
3.65
$
2018
$ 17,106
$ 1,302
2.58
$
2.55
$
2017
$ 14,400
$ 1,498
2.92
$
2.89
$
The unaudited pro-forma information presented in the table above includes adjustments for acquisition
related costs, the change in fair value of JLT acquisition related derivatives, bridge financing costs and the
early extinguishment of debt, including $207 million of costs incurred in 2019 that were reflected in the
2018 pro-forma results presented above.
The consolidated statement of income for 2019 includes approximately $1.2 billion of revenue and an
operating loss of $40 million related to acquisitions made during 2019. The consolidated statement of
income for 2018 includes approximately $120 million of revenue and $2 million of operating income
related to acquisitions made during 2018, and the consolidated statement of income for 2017 includes
approximately $156 million of revenue and $19 million of operating income related to acquisitions made
during 2017.
79
The Company incurred acquisition related costs, primarily related to legal, investment banking and U.K.
stamp duty tax of $125 million for the year ended December 31, 2019, primarily related to the acquisition
of JLT. These costs are included in other operating expenses in the Company's consolidated statement of
income.
Acquisition-related expenses incurred in 2018 were $7 million.
Dispositions
During the third quarter of 2019, the Company completed the sale of a U.S. Specialty business at Marsh
and a U.S. large market health and defined benefit business at Mercer for cash proceeds of
approximately $60 million.
Also, on June 1, 2019, the Company completed its disposition of JLT’s global aerospace business for
cash proceeds of $165 million and contingent consideration receivable of approximately $65 million,
based on the aerospace business achieving certain revenue milestones in 2020. The aerospace business
was divested as part of the European Commission's approval of the JLT Transaction.
In September 2018, Marsh completed its sale of a risk management software and services business
resulting in a pre-tax gain of $46 million, which is included in revenue in the consolidated statement of
income.
6. Goodwill and Other Intangibles
The Company is required to assess goodwill and any indefinite-lived intangible assets for impairment
annually, or more frequently if circumstances indicate impairment may have occurred. The Company
performs the annual impairment assessment for each of its reporting units during the third quarter of each
year. In accordance with applicable accounting guidance, a company can assess qualitative factors to
determine whether it is necessary to perform a goodwill impairment test. Alternatively, the company may
elect to proceed directly to the quantitative goodwill impairment test. In 2019, the Company elected to
perform a quantitative impairment assessment. Fair values of the reporting units were estimated using a
market approach. Carrying values for the reporting units are based on balances at the prior quarter end
and include directly identified assets and liabilities, as well as an allocation of those assets and liabilities
not recorded at the reporting unit level. The Company completed its 2019 annual assessment in the third
quarter and concluded goodwill was not impaired, as the fair value of each reporting unit exceeded its
carrying value by a substantial margin.
Other intangible assets that are not deemed to have an indefinite life are amortized over their estimated
lives and reviewed for impairment upon the occurrence of certain triggering events in accordance with
applicable accounting literature. The Company does not have any indefinite lived intangible assets.
Changes in the carrying amount of goodwill are as follows:
(In millions of dollars)
Balance as of January 1, as reported
Goodwill acquired (a)
Other adjustments (b)
Balance at December 31,
2019
$ 9,599
5,124
(52)
$ 14,671
2018
$ 9,089
626
(116)
$ 9,599
(a) Includes $4.9 billion from the acquisition of JLT in 2019.
(b) Primarily reflects the impact of dispositions in 2019 and foreign exchange translation in 2018.
The goodwill acquired of $5.1 billion in 2019 (approximately $213 million of which is deductible for tax
purposes) is comprised of $5 billion related to the Risk and Insurance Services segment and $167 million
related to the Consulting segment.
Goodwill allocable to the Company’s reportable segments is as follows: Risk and Insurance Services,
$11.7 billion and Consulting, $3 billion.
80
The gross cost and accumulated amortization of intangible assets at December 31, 2019 and 2018 are as
follows:
(In millions of dollars)
2019
2018
Customer relationships
Other (a)
Amortized intangibles
Gross
Cost
$ 3,494 $
380
$ 3,874 $
Accumulated
Amortization
Net
Carrying
Amount
Gross
Cost
Accumulated
Amortization
897 $
203
1,100 $
2,597 $ 1,970 $
177
259
2,774 $ 2,229 $
Net
Carrying
Amount
639 $ 1,331
153
106
792 $ 1,437
(a) Primarily non-compete agreements, trade names and developed technology.
Aggregate amortization expense was $314 million for the year ended December 31, 2019, $183 million
for the year ended December 31, 2018 and $169 million for the year ended December 31, 2017. The
estimated future aggregate amortization expense is as follows:
For the Years Ending December 31,
(In millions of dollars)
2020
2021
2022
2023
2024
Subsequent years
7. Income Taxes
$
$
344
328
299
278
267
1,258
2,774
For financial reporting purposes, income before income taxes includes the following components:
For the Years Ended December 31,
(In millions of dollars)
Income before income taxes:
U.S.
Other
The expense (benefit) for income taxes is comprised of:
Current –
U.S. Federal
Other national governments
U.S. state and local
Deferred –
U.S. Federal
Other national governments
U.S. state and local
$
$
$
2019
2018
2017
657 $
1,782
2,439 $
460 $
1,784
2,244 $
819
1,824
2,643
70 $
82 $
455
57
582
69
(16)
31
84
449
82
613
(30)
(1)
(8)
(39)
574 $
313
388
36
737
286
72
38
396
1,133
Total income taxes
$
666 $
81
The significant components of deferred income tax assets and liabilities and their balance sheet
classifications are as follows:
December 31,
(In millions of dollars)
Deferred tax assets:
Accrued expenses not currently deductible
Differences related to non-U.S. operations (a)
Accrued U.S. retirement benefits
Net operating losses (b)
Income currently recognized for tax
Other
Deferred tax liabilities:
Differences related to non-U.S. operations
Depreciation and amortization
Accrued retirement & postretirement benefits - non-U.S. operations
Capitalized expenses currently recognized for tax
Other
2019
2018
$
$
$
$
492 $
324
438
70
19
27
1,370 $
400 $
594
151
77
37
1,259 $
526
170
406
48
20
16
1,186
287
342
171
78
49
927
(a) Net of valuation allowances of $54 million in 2019 and $21 million in 2018.
(b) Net of valuation allowances of $72 million in 2019 and $45 million in 2018.
December 31,
(In millions of dollars)
Balance sheet classifications:
Deferred tax assets
Other liabilities
2019
2018
$
$
676 $
565 $
680
421
Taxes are not provided on the excess of the amount for financial reporting over the tax basis of
investments in foreign subsidiaries that are essentially permanent in duration, which, at December 31,
2019, the Company estimates amounted to approximately $1.8 billion. The determination of the
unrecognized deferred tax liability with respect to these investments is not practicable.
A reconciliation from the U.S. Federal statutory income tax rate to the Company’s effective income tax
rate is shown below:
For the Years Ended December 31,
U.S. Federal statutory rate
U.S. state and local income taxes—net of U.S. Federal income
tax benefit
Differences related to non-U.S. operations
U.S. Tax Reform
Equity compensation
Other
Effective tax rate
2019
21.0%
3.0
3.0
—
(1.3)
1.6
27.3%
2018
21.0%
2.3
3.3
(0.3)
(1.0)
0.3
25.6%
2017
35.0%
1.5
(8.6)
17.4
(2.6)
0.2
42.9%
82
The Company’s consolidated effective tax rate was 27.3%, 25.6% and 42.9% in 2019, 2018 and 2017,
respectively. The rates in 2019 and 2018 reflect ongoing impacts of the Tax Cuts and Jobs Act (TCJA)
and certain tax planning benefits, largely offset by higher estimated tax costs from the TCJA quasi-
territorial system, greater disallowance of certain expenses, a decrease in excess tax benefits related to
share compensation primarily due to the 21% U.S. tax rate, lower Federal benefit for State tax deductions
and State treatment of certain TCJA provisions. The 2019 rate includes certain tax costs of the JLT
integration. The 2018 rate includes the effect of a charge related to the Company’s investment in
Alexander Forbes as discussed in Note 10. The tax rate in 2017 reflects the fact that foreign operations
were generally taxed at rates lower than the U.S. statutory tax rate prior to the TCJA, as well as including
a provisional estimate of the impact of the enactment of the TCJA.
The TCJA provided for a transition to a quasi-territorial tax system for taxing foreign earnings via a
transition tax on undistributed earnings of non-U.S. subsidiaries. The Company recorded a provisional
transition tax charge of $240 million upon enactment of the TCJA in 2017. The reduction of the U.S.
corporate tax rate from 35% to 21% reduced the value of the U.S. deferred tax assets and liabilities;
accordingly, a charge of $220 million was recorded. These amounts were decreased by $5 million and
finalized in 2018.
A valuation allowance was recorded to adjust deferred tax assets to the amount that the Company
believes is more likely than not to be realized. Valuation allowances had net increases of $60 million and
$36 million in 2019 and 2018, respectively. There was no change to income tax expense as a result of
adjustments of the beginning of the year valuation allowances in 2019. Adjustments of the beginning of
the year balances of valuation allowances increased income tax expense by $1 million during 2018.
Approximately 69% of the Company’s net operating loss carryforwards expire from 2020 through 2040,
and others are unlimited. The potential tax benefit from net operating loss carryforwards at the end of
2019 comprised federal, state and local, and non-U.S. tax benefits of $32 million, $34 million and $84
million, respectively, before reduction for valuation allowances.
Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the years ended
December 31, 2019, 2018 and 2017:
(In millions of dollars)
Balance at January 1,
Additions, based on tax positions related to current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Lapses in statutes of limitation
Balance at December 31,
2019
78
8
15
(1)
(1)
(13)
86
$
$
2018
71
6
6
—
(2)
(3)
78
$
$
2017
65
1
14
(6)
—
(3)
71
$
$
Of the total unrecognized tax benefits at December 31, 2019, 2018 and 2017, $75 million, $64 million and
$56 million, respectively, represent the amount that, if recognized, would favorably affect the effective tax
rate in any future periods. The total gross amount of accrued interest and penalties at December 31,
2019, 2018 and 2017, before any applicable federal benefit, was $31 million, $15 million and $12 million,
respectively.
The Company is routinely examined by the jurisdictions in which it has significant operations. In the U.S.
federal jurisdiction, the Company participates in the Internal Revenue Service’s (IRS) Compliance
Assurance Process (CAP), which is structured to be, in effect, a real-time audit. The IRS is currently
examining the Company’s 2017 and 2018 tax returns and is performing a pre-filing review of 2019. In
2019, the Company settled its federal audit for the year 2016.
New York is a significant jurisdiction for the Company. During 2019, New York State initiated an audit for
the 2015 tax year. During 2018, New York State and New York City closed the examination of tax years
2007 through 2009. New York State and New York City have examinations underway for various entities
covering the years 2010 through 2014.
83
The status of audits for significant jurisdictions outside the United States are summarized in the table
below:
Tax Audit (Years)
Jurisdiction:
Canada
France
Germany
Italy
Singapore
United Kingdom
Initiated in 2019
Ongoing
Concluded
2018
2017-2018
2013-2016
2016
2017
2015
2016
2013-2016 during 2019
2011-2012 during 2018
2009-2012 during 2018
2014-2016 during 2019
2014-2015 during 2018
The Company has established liabilities for uncertain tax positions in relation to potential assessments in
the jurisdictions in which it operates. The Company believes the resolution of tax matters will not have a
material effect on the consolidated financial position of the Company, although a resolution of tax matters
could have a material impact on the Company's net income or cash flows and on its effective tax rate in a
particular future period. It is reasonably possible that the total amount of unrecognized tax benefits will
decrease between zero and approximately $10 million within the next twelve months due to settlement of
audits and expiration of statutes of limitation.
8. Retirement Benefits
The Company maintains qualified and non-qualified defined benefit pension plans for its U.S. and non-
U.S. eligible employees. The Company’s policy for funding its tax qualified defined benefit retirement
plans is to contribute amounts at least sufficient to meet the funding requirements set forth by U.S. law
and the laws of the non-U.S. jurisdictions in which the Company offers defined benefit plans.
Combined U.S. and Non-U.S. Plans
The weighted average actuarial assumptions utilized for the U.S. and significant non-U.S. defined benefit
plans and post-retirement benefit plans are as follows:
Weighted average assumptions:
Discount rate (for expense)
Expected return on plan assets
Rate of compensation increase (for expense)*
Discount rate (for benefit obligation)
Rate of compensation increase (for benefit
obligation)*
Pension
Benefits
Post-retirement
Benefits
2019
2018
2019
2018
3.48%
5.74%
1.74%
2.57%
3.07%
5.83%
1.73%
3.48%
3.65%
—
—
2.72%
3.21%
—
—
3.65%
1.76%
1.74%
—
—
*Rate of compensation increase assumptions do not include a rate of compensation increase for the U.S.
defined benefit plans since future benefit accruals were discontinued for those plans after December 31,
2016.
The Company uses actuaries from Mercer, a subsidiary of the Company, to perform valuations of its
pension plans. The long-term rate of return on plan assets assumption is determined for each plan based
on the facts and circumstances that exist as of the measurement date, and the specific portfolio mix of
each plan’s assets. The Company utilizes a model developed by the Mercer actuaries to assist in the
determination of this assumption. The model takes into account several factors, including: actual and
target portfolio allocation; investment, administrative and trading expenses incurred directly by the plan
trust; historical portfolio performance; relevant forward-looking economic analysis; and expected returns,
variances and correlations for different asset classes. These measures are used to determine
84
probabilities using standard statistical techniques to calculate a range of expected returns on the portfolio.
Generally, the Company does not adjust the rate of return assumption from year to year if, at the
measurement date, it is within the range between the 25th and 75th percentile of the expected long-term
annual returns. Historical long-term average asset returns of the most significant plans are also reviewed
to determine whether they are consistent and reasonable compared with the rate selected. The expected
return on plan assets is determined by applying the assumed long-term rate of return to the market-
related value of plan assets. This market-related value recognizes investment gains or losses over a five-
year period from the year in which they occur. Investment gains or losses for this purpose are the
difference between the expected return calculated using the market-related value of assets and the actual
return based on the market value of assets. Since the market-related value of assets recognizes gains or
losses over a five-year period, the future market-related value of the assets will be impacted as previously
deferred gains or losses are reflected.
The target asset allocation for the U.S. plans is 64% equities and equity alternatives and 36% fixed
income. At the end of 2019, the actual allocation for the U.S. plans was 64% equities and equity
alternatives and 36% fixed income. The target asset allocation for the U.K. plans, which comprise
approximately 81% of non-U.S. plan assets, is 34% equities and equity alternatives and 66% fixed
income. At the end of 2019, the actual allocation for the U.K. plans was 35% equities and equity
alternatives and 65% fixed income. The assets of the Company's defined benefit plans are diversified and
are managed in accordance with applicable laws and with the goal of maximizing the plans' real return
within acceptable risk parameters. The Company uses threshold-based portfolio re-balancing to ensure
the actual portfolio remains consistent with target asset allocation ranges.
The discount rate selected for each U.S. plan is based on a model bond portfolio with coupons and
redemptions that closely match the expected liability cash flows from the plan. Discount rates for non-U.S.
plans are based on appropriate bond indices adjusted for duration; in the U.K., the plan duration is
reflected using the Mercer yield curve.
JLT Defined Benefit Pension Plans
As part of the JLT Transaction, the Company assumed responsibility for a number of pension plans
throughout the world, with $255 million of net pension liabilities as of December 31, 2019 ($1,003 million
in liabilities and $748 million of plan assets as of December 31, 2019), the most significant of which is the
Jardine Lloyd Thompson U.K. Pension Scheme ("JLT U.K. plan"). The JLT U.K. plan has a defined benefit
section which was frozen to future accrual in 2006 and a defined contribution section. The assets of the
JLT U.K. plan are held in a trustee administered fund separate from the Company.
The components of the net periodic benefit cost for defined benefit and other post-retirement plans are as
follows:
Combined U.S. and significant non-U.S. Plans
For the Years Ended December 31,
(In millions of dollars)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service (credit) cost
Recognized actuarial loss (gain)
Net periodic benefit (credit) cost
Curtailment (loss) gain
Settlement loss
Total (credit) cost
Pension
Benefits
Post-retirement
Benefits
2019
2018
2017
2019
2018
$
31 $
34 $
76 $ — $
487
(863)
—
104
463
(864)
(2)
146
497
(921)
(2)
167
3
—
(2)
(1)
$ (241) $ (223) $ (183) $ — $
—
7
—
42
(1)
54
—
—
1 $
3
—
(2)
(1)
1 $
—
—
$ (234) $ (181) $ (130) $ — $
1 $
2017
1
4
—
1
—
6
—
—
6
85
The following chart provides the amounts reported in the consolidated statements of income:
Combined U.S. and significant non-U.S. Plans
For the Years Ended December 31,
(In millions)
Compensation and benefits expense (Operating
income)
Other net benefit (credit) cost
Total (credit) cost
Pension Settlement Charge
Pension
Benefits
Post-retirement
Benefits
2019
2018
2017
2019
2018
2017
$
31 $
34 $
76 $ — $
1 $
(265)
(215)
(206)
—
—
$ (234) $ (181) $ (130) $ — $
1 $
1
5
6
Defined Benefit Pension Plans in the U.K. and certain other countries allow participants an option for the
payment of a lump sum distribution from plan assets before retirement in full satisfaction of the retirement
benefits due to the participant as well as any survivor’s benefit. The Company’s policy under applicable
U.S. GAAP is to treat these lump sum payments as a partial settlement of the plan liability if they exceed
the total of interest plus service costs ("settlement thresholds"). Based on the amount of lump sum
payments through December 31, 2018, the lump sum payments exceeded the settlement thresholds in
two of the U.K. plans. The Company recorded non-cash settlement charges of $42 million and $54
million, in the consolidated statements of income for the twelve month periods ended December 31, 2018,
and 2017, respectively, primarily related to these plans. The Company recorded $7 million of non-cash
settlement charges in 2019 related to other non-U.S. plans.
Plan Assets
For the U.S. plans, investment allocation decisions are made by a fiduciary committee composed of
senior executives appointed by the Company’s Chief Executive Officer. For the non-U.S. plans,
investment allocation decisions are made by local fiduciaries, in consultation with the Company for the
larger plans. Plan assets are invested in a manner consistent with the fiduciary standards set forth in all
relevant laws relating to pensions and trusts in each country. Primary investment objectives are (1) to
achieve an investment return that, in combination with current and future contributions, will provide
sufficient funds to pay benefits as they become due, and (2) to minimize the risk of large losses. The
investment allocations are designed to meet these objectives by broadly diversifying plan assets among
numerous asset classes with differing expected returns, volatilities, and correlations.
The major categories of plan assets include equity securities, equity alternative investments, and fixed
income securities. For the U.S. plan, the category ranges are 59-69% for equities and equity alternatives,
and 31-41% for fixed income. For the U.K. plans, the category ranges are 31-37% for equities and equity
alternatives, and 63-69% for fixed income. Asset allocation is monitored frequently and re-balancing
actions are taken as appropriate.
Plan investments are exposed to stock market, interest rate, and credit risk. Concentrations of these risks
are generally limited due to diversification by investment style within each asset class, diversification by
investment manager, diversification by industry sectors and issuers, and the dispersion of investments
across many geographic areas.
Unrecognized Actuarial Gains/Losses
In accordance with applicable accounting guidance, the funded status of the Company's pension plans is
recorded in the consolidated balance sheets and provides for a delayed recognition of actuarial gains or
losses arising from changes in the projected benefit obligation due to changes in the assumed discount
rates, differences between the actual and expected value of plan assets and other assumption changes.
The unrecognized pension plan actuarial gains or losses and prior service costs not yet recognized in net
periodic pension cost are recognized in Accumulated Other Comprehensive Income ("AOCI"), net of tax.
These gains and losses are amortized prospectively out of AOCI over a period that approximates the
remaining life expectancy of participants in plans where substantially all participants are inactive, or the
average remaining service period of active participants for plans with active participants.
86
U.S. Plans
The following schedules provide information concerning the Company’s U.S. defined benefit pension
plans and post-retirement benefit plans:
U.S. Pension
Benefits
U.S. Post-retirement
Benefits
2019
2018
2019
2018
36
1
4
—
(1)
(8)
32
2
—
3
4
(8)
—
1
(31)
(2)
(29)
(31)
6
6
(37)
(31)
—
(In millions of dollars)
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Employee contributions
Plan combination
Actuarial (gain) loss
Benefits paid
Benefit obligation, December 31
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Employee contributions
Benefits paid
Other
Fair value of plan assets, December 31
Net funded status, December 31
Amounts recognized in the consolidated balance
sheets:
Current liabilities
Non-current liabilities
Net liability recognized, December 31
Amounts recognized in other comprehensive income
(loss):
Net actuarial (loss) gain
Total recognized accumulated other comprehensive
(loss) income, December 31
$
$
$
$
$
$
$
5,529 $
241
—
64
753
(265)
6,322 $
4,062 $
834
35
—
(265)
49
4,715 $
(1,607) $
6,221 $
235
—
—
(502)
(425)
5,529 $
4,787 $
(330)
30
—
(425)
—
4,062 $
(1,467) $
(29) $
(28) $
(1,578)
(1,607) $
(1,439)
(1,467) $
32 $
1
4
—
1
(7)
31 $
1 $
—
4
4
(7)
—
2 $
(29) $
(1) $
(28)
(29) $
(2,114)
(1,896)
4
$
(2,114) $
(1,896) $
4 $
Cumulative employer contributions in excess of (less
than) net periodic cost
Net amount recognized in consolidated balance sheet $
$
Accumulated benefit obligation at December 31
507
(1,607) $
6,322 $
429
(1,467) $
5,529 $
(33)
(29) $
— $
87
(In millions of dollars)
Reconciliation of net actuarial (loss) gain recognized
in accumulated other comprehensive income (loss):
Beginning balance
Recognized as component of net periodic benefit cost
(credit)
Changes in plan assets and benefit obligations
recognized in other comprehensive income (loss):
Liability experience
Asset experience
U.S. Pension
Benefits
U.S. Post-retirement
Benefits
2019
2018
2019
2018
$
(1,896) $
(1,766) $
6 $
44
55
(753)
491
502
(687)
(185)
(1)
(1)
—
(1)
6
(1)
1
—
1
6
Total (loss) gain recognized as change in plan assets
and benefit obligations
Net actuarial (loss) gain, December 31
(262)
(2,114) $
$
(1,896) $
4 $
For the Years Ended December 31,
(In millions of dollars)
Total recognized in net periodic benefit cost
and other comprehensive loss (income)
U.S. Pension
Benefits
2018
2019
2017
U.S. Post-retirement
Benefits
2018
2019
2017
$
160 $
63 $
(10) $
2 $ — $
5
Estimated amounts that will be amortized from accumulated other comprehensive loss to net periodic
pension cost in the next fiscal year:
(In millions of dollars)
Net actuarial loss
U.S. Pension
Benefits
U.S. Post-retirement
Benefits
$
2020
72
$
2020
1
The weighted average actuarial assumptions utilized in determining expense during the year and benefit
obligation at the end of the year for the U.S. defined benefit and other U.S. post-retirement plans are as
follows:
Weighted average assumptions:
Discount rate (for expense)
Expected return on plan assets
Discount rate (for benefit obligation)
U.S. Pension
Benefits
U.S. Post-retirement
Benefits
2019
2018
2019
2018
4.45%
7.95%
3.44%
3.86%
7.95%
4.45%
4.24%
—
3.10%
3.67%
—
4.24%
88
The projected benefit obligation, accumulated benefit obligation and aggregate fair value of plan assets
for U.S. pension plans with accumulated benefit obligations in excess of plan assets were $6.3 billion,
$6.3 billion and $4.7 billion, respectively, as of December 31, 2019 and $5.5 billion, $5.5 billion and $4.1
billion, respectively, as of December 31, 2018.
The projected benefit obligation and fair value of plan assets for U.S. pension plans with projected benefit
obligations in excess of plan assets was $6.3 billion and $4.7 billion, respectively, as of December 31,
2019 and $5.5 billion and $4.1 billion, respectively, as of December 31, 2018.
As of December 31, 2019, the U.S. qualified plan holds 2 million shares of the Company’s common stock
which were contributed to the qualified plan by the Company in 2005. This represented approximately
4.8% of that plan's assets as of December 31, 2019.
The components of the net periodic benefit cost (credit) for the U.S. defined benefit and other post-
retirement benefit plans are as follows:
U.S. Plans only
For the Years Ended December 31,
(In millions of dollars)
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss (gain)
Net periodic benefit (credit) cost
Pension
Benefits
2018
235
(357)
—
55
(67) $
2019
241
(343)
—
44
(58) $
$
Post-retirement
Benefits
2018
1
—
—
(1)
— $
2017
264
(357)
—
37
(56) $ — $
2019
1
—
—
(1)
2017
2
—
3
(1)
4
The assumed health care cost trend rate for Medicare eligibles and non-Medicare eligibles is
approximately 6% in 2019, gradually declining to 4.5% in 2039. Assumed health care cost trend rates
have a small effect on the amounts reported for the U.S. health care plans because the Company caps its
share of health care trend at 5%. A one percentage point change in assumed health care cost trend rates
would have no effect on the total service and interest cost components or the post-retirement benefit
obligation.
Estimated Future Contributions
The Company expects to contribute approximately $76 million to its U.S. plans in 2020. The Company’s
policy for funding its tax-qualified defined benefit retirement plans is to contribute amounts at least
sufficient to meet the funding requirements set forth in the U.S. and applicable foreign law.
89
Non-U.S. Plans
The following schedules provide information concerning the Company’s non-U.S. defined benefit pension
plans and non-U.S. post-retirement benefit plans:
(In millions of dollars)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Employee contributions
Plan combination
Actuarial loss (gain)
Plan amendments
Effect of settlement
Benefits paid
Foreign currency changes
Other
Benefit obligation, December 31
Change in plan assets:
Fair value of plan assets at beginning of year
Plan combination
Actual return on plan assets
Effect of settlement
Company contributions
Employee contributions
Benefits paid
Foreign currency changes
Fair value of plan assets, December 31
Net funded status, December 31
Amounts recognized in the consolidated balance
sheets:
Non-current assets
Current liabilities
Non-current liabilities
Net asset (liability) recognized, December 31
Amounts recognized in other comprehensive
(loss) income:
Prior service credit
Net actuarial loss
Total recognized accumulated other
comprehensive (loss) income, December 31
Cumulative employer contributions in excess of
(less than) net periodic cost
Net asset (liability) recognized in consolidated
balance sheets, December 31
Accumulated benefit obligation, December 31
Non-U.S. Pension
Benefits
2019
2018
Non-U.S.
Post-retirement Benefits
2018
2019
8,969 $
31
246
2
915
1,339
(1)
(25)
(364)
209
—
11,321 $
10,306 $
683
1,367
(25)
87
2
(364)
257
12,313 $
992 $
10,053 $
34
228
2
—
(450)
44
(162)
(290)
(491)
1
8,969 $
11,388 $
—
(141)
(162)
82
2
(290)
(573)
10,306 $
1,337 $
57 $
—
2
—
—
3
—
—
(3)
2
—
61 $
— $
—
—
—
3
—
(3)
—
— $
(61) $
1,632 $
(6)
(634)
992 $
1,687 $
— $
(5)
(345)
(3)
(58)
1,337 $
(61) $
(2) $
(2) $
(3,055)
(2,568)
11 $
(5)
(3,057) $
(2,570) $
6 $
4,049
3,907
(67)
992 $
11,079 $
1,337 $
8,752 $
(61) $
— $
68
1
2
—
—
(8)
—
—
(3)
(3)
—
57
—
—
—
—
3
—
(3)
—
—
(57)
—
(3)
(54)
(57)
12
(1)
11
(68)
(57)
—
$
$
$
$
$
$
$
$
$
$
$
90
(In millions of dollars)
Reconciliation of prior service credit (cost)
recognized in accumulated other
comprehensive income (loss):
Non-U.S. Pension
Benefits
Non-U.S.
Post-retirement Benefits
2019
2018
2019
2018
Beginning balance
$
(2) $
43 $
12 $
15
Recognized as component of net periodic
benefit credit:
Amortization of prior service credit
Total recognized as component of net periodic
benefit credit
Changes in plan assets and benefit obligations
recognized in other comprehensive income:
Plan amendments
Exchange rate adjustments
—
—
1
(1)
(2)
(2)
(44)
1
(2)
(2)
—
1
Prior service credit, December 31
$
(2) $
(2) $
11 $
(2)
(2)
—
(1)
12
(In millions of dollars)
Reconciliation of net actuarial (loss) gain
recognized in accumulated other
comprehensive (loss) income:
Non-U.S. Pension
Benefits
Non-U.S.
Post-retirement Benefits
2019
2018
2019
2018
Beginning balance
$
(2,568) $
(2,646) $
(1) $
(10)
Recognized as component of net periodic
benefit cost:
Amortization of net loss
Effect of settlement
Total recognized as component of net periodic
benefit credit
Changes in plan assets and benefit obligations
recognized in other comprehensive income
(loss):
Liability experience
Asset experience
Other
Total amount recognized as change in plan
assets and benefit obligations
Exchange rate adjustments
60
7
67
(1,339)
847
—
(492)
(62)
91
42
133
450
(648)
3
(195)
140
—
—
—
(3)
—
—
(3)
(1)
Net actuarial loss, December 31
$
(3,055) $
(2,568) $
(5) $
—
—
—
8
—
—
8
1
(1)
For the Years Ended December 31,
(In millions of dollars)
Total recognized in net periodic benefit
cost and other comprehensive loss
(income)
Non-U.S. Pension
Benefits
2018
2019
2017
Non-U.S. Post-retirement
Benefits
2018
2019
2017
$
311 $ (147) $ (513) $
5 $
(5) $
(14)
91
Estimated amounts that will be amortized from accumulated other comprehensive loss to net periodic
pension cost in the next fiscal year:
(In millions of dollars)
Prior service credit
Net actuarial loss
Projected cost
Non-U.S.
Pension
Benefits
Non-U.S.
Post-retirement
Benefits
$
$
2020
— $
90
90
$
2020
(2)
—
(2)
The weighted average actuarial assumptions utilized in determining expense during the year and benefit
obligation at the end of the year for the non-U.S. defined benefit and post-retirement plans are as follows:
Weighted average assumptions:
Discount rate (for expense)
Expected return on plan assets
Rate of compensation increase (for expense)
Discount rate (for benefit obligation)
Rate of compensation increase (for benefit
obligation)
Non-U.S. Pension
Benefits
Non-U.S.
Post-retirement Benefits
2019
2018
2019
2018
2.89%
4.87%
2.82%
2.09%
2.58%
4.94%
2.80%
2.89%
3.32%
2.97%
—
—
—
—
2.53%
3.32%
2.75%
2.82%
—
—
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the non-
U.S. pension plans with accumulated benefit obligations in excess of plan assets were $2.9 billion, $2.7
billion and $2.2 billion, respectively, as of December 31, 2019 and $1.7 billion, $1.6 billion and $1.3 billion,
respectively, as of December 31, 2018.
The projected benefit obligation and fair value of plan assets for non-U.S. pension plans with projected
benefit obligations in excess of plan assets was $3.0 billion and $2.3 billion, respectively, as of
December 31, 2019 and $1.9 billion and $1.6 billion, respectively, as of December 31, 2018.
Non-U.S. Plan Amendments
In March 2017, the Company modified its defined benefit pension plans in Canada to discontinue further
benefit accruals for participants after December 31, 2017 and replaced them with a defined contribution
arrangement. The Company also amended its post-retirement benefits plan in Canada so that individuals
who retire after April 1, 2019 will not be eligible to participate, except in certain situations. The Company
re-measured the assets and liabilities of the plans, based on assumptions and market conditions on the
amendment date.
92
Components of Net Periodic Benefits Costs
The components of the net periodic benefit cost for the non-U.S. defined benefit and other post-retirement
benefit plans and the curtailment, settlement and termination expenses are as follows:
For the Years Ended December 31,
(In millions of dollars)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service credit
Recognized actuarial loss
Net periodic benefit (credit) cost
Settlement loss
Curtailment (gain) loss
Non-U.S. Pension
Benefits
Non-U.S. Post-retirement
Benefits
2019
2018
2017
2019
2018
2017
$
31 $
34 $
76 $
— $
1 $
246
(520)
—
60
(183)
7
—
228
(507)
(2)
91
(156)
42
—
233
(564)
(2)
130
(127)
54
(1)
2
—
(2)
—
—
—
—
2
—
(2)
—
1
—
—
1
2
—
(2)
1
2
—
—
2
Total (credit) cost
$ (176) $ (114) $
(74) $
— $
1 $
The assumed health care cost trend rate was approximately 4.98% in 2019, gradually declining to 4.34%
in 2029. Assumed health care cost trend rates can have a significant effect on the amounts reported for
the non-U.S. health care plans. A one percentage point change in assumed health care cost trend rates
would have the following effects:
(In millions of dollars)
Effect on total of service and interest cost components
Effect on post-retirement benefit obligation
$
$
Estimated Future Contributions
1 Percentage
Point Increase
1 Percentage
Point Decrease
—
(5)
— $
$
6
The Company expects to contribute approximately $84 million to its non-U.S. pension plans in 2020.
Funding requirements for non-U.S. plans vary by country. Contribution rates are generally based on local
funding practices and requirements, which may differ significantly from measurements under U.S. GAAP.
Funding amounts may be influenced by future asset performance, the level of discount rates and other
variables impacting the assets and/or liabilities of the plan. Discretionary contributions may also be
affected by alternative uses of the Company’s cash flows, including dividends, investments and share
repurchases.
In the U.K., the assumptions used to determine pension contributions are the result of legally-prescribed
negotiations between the Company and the plans' trustee that typically occurs every three years in
conjunction with the actuarial valuation of the plans. Currently, this results in a lower funded status than
under U.S. GAAP and may result in contributions irrespective of the U.S. GAAP funded status. For the
MMC UK Pension Fund, in November 2016, the Company and the trustee agreed to a funding deficit
recovery plan for the U.K. defined benefit pension plans. A new agreement was reached with the trustee
in the fourth quarter of 2019 based on the surplus funding position at December 31, 2018. Under the
agreement no deficit funding is required until 2023. The funding level will be re-assessed during 2022 to
determine if contributions are required in 2023. As part of a long-term strategy, which depends on having
greater influence over asset allocation and overall investment decisions, in November 2019 the Company
renewed its agreement to support annual deficit contributions by the U.K. operating companies under
certain circumstances, up to GBP 450 million over a seven-year period. In addition in the U.K. the
Company assumed responsibility for the JLT's Pension Scheme (JLT U.K. plan). Deficit funding of
approximately $28 million is expected during 2020 with a new funding agreement expected to be reached
with the trustee during 2020.
93
Estimated Future Benefit Payments
The estimated future benefit payments for the Company's pension and post-retirement benefit plans are
as follows:
For the Years Ended December 31,
(In millions of dollars)
2020
2021
2022
2023
2024
2025-2029
Pension
Benefits
Post-retirement
Benefits
U.S.
281
293
305
312
318
1,675
$
$
$
$
$
$
Non-U.S.
322
$
328
$
338
$
358
$
368
$
2,019
$
$
$
$
$
$
$
U.S.
Non-U.S.
3
$
3
$
3
$
3
$
3
$
15
$
4
4
3
3
3
11
Defined Benefit Plans Fair Value Disclosures
The U.S. and non-U.S. plan investments are classified into Level 1, which refers to investments valued
using quoted prices from active markets for identical assets; Level 2, which refers to investments not
traded on an active market but for which observable market inputs are readily available; Level 3, which
refers to investments valued based on significant unobservable inputs; and NAV, which refers to
investments valued using net asset value as a practical expedient. Assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the fair value measurement.
94
The following table sets forth, by level within the fair value hierarchy, a summary of the U.S. and non-U.S.
plans' investments measured at fair value on a recurring basis at December 31, 2019 and 2018:
Fair Value Measurements at December 31, 2019
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
NAV
Total
$
492 $
— $
— $
5,959 $
—
2,871
—
20
—
309
223
15
4,063
34
—
679
—
3
—
17
—
1
—
—
—
—
—
682
—
—
1,055
—
660
—
—
2
6,451
4,063
2,906
1,055
699
660
312
223
716
Assets
(In millions of dollars)
Common/collective trusts
Corporate obligations
Corporate stocks
Private equity/partnerships
Government securities
Real estate
Short-term investment
funds
Company common stock
Other investments
Total investments
$
3,930 $
4,796 $
683 $
7,676 $
17,085
Fair Value Measurements at December 31, 2018
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
NAV
Total
$
291 $
— $
— $
5,329 $
—
2,046
—
15
—
286
319
13
3,673
33
—
535
—
—
—
20
—
1
—
—
—
—
—
333
—
—
921
—
563
—
—
—
5,620
3,673
2,080
921
550
563
286
319
366
$
2,970 $
4,261 $
334 $
6,813 $
14,378
Assets
(In millions of dollars)
Common/collective trusts
Corporate obligations
Corporate stocks
Private equity/partnerships
Government securities
Real estate
Short-term investment
funds
Company common stock
Other investments
Total investments
The tables below set forth a summary of changes in the fair value of the plans’ Level 3 assets for the
years ended December 31, 2019 and December 31, 2018:
Assets
(In millions)
Other
investments
Corporate stocks
Total assets
Fair Value,
January 1,
2019
Purchases Sales
Unrealized
Gain/
(Loss)
Realized
Gain/
(Loss)
Exchange
Rate
Impact
Transfers
in/(out)
and
Other (a)
Fair
Value,
December
31, 2019
$
$
333
$
1
334
$
17
—
17
$ (14) $
—
$ (14) $
72
—
72
$
$
1
—
1
$
$
(9) $
282
$
—
—
(9) $
282
$
682
1
683
(a) Transfers in during 2019 are primarily related to the inclusion of JLT plan assets.
95
Assets
(In millions)
Other
investments
Corporate stocks
Corporate
obligations
$
350
$
2
20
Total assets
$
372
$
Fair Value,
January 1,
2018
Purchases Sales
Unrealized
Gain/
(Loss)
Realized
Gain/
(Loss)
Exchange
Rate
Impact
Transfers
in/(out)
and
Other
Fair
Value,
December
31, 2018
20
—
—
20
$ (19) $
(5) $
—
—
—
—
$ (19) $
(5) $
1
—
—
1
$
(14) $
— $
—
—
(1)
(20)
$
(14) $
(21) $
333
1
—
334
The following is a description of the valuation methodologies used for assets measured at fair value:
Company common stock: Valued at the closing price reported on the New York Stock Exchange.
Common stocks, preferred stocks, convertible equity securities, rights/warrants and real estate
investment trusts (included in Corporate stocks): Valued at the closing price reported on the primary
exchange.
Corporate bonds (included in Corporate obligations): The fair value of corporate bonds is estimated using
recently executed transactions, market price quotations (where observable) and bond spreads. The
spread data used are for the same maturity as the bond. If the spread data does not reference the issuer,
then data that references a comparable issuer are used. When observable price quotations are not
available, fair value is determined based on cash flow models.
Commercial mortgage-backed and asset-backed securities (included in Corporate obligations): Fair
value is determined using discounted cash flow models. Observable inputs are based on trade and quote
activity of bonds with similar features including issuer vintage, purpose of underlying loan (first or second
lien), prepayment speeds and credit ratings. The discount rate is the combination of the appropriate rate
from the benchmark yield curve and the discount margin based on quoted prices.
Common/Collective trusts: Valued at the net asset value of units of a bank collective trust. The net asset
value as provided by the trustee, is used as a practical expedient to estimate fair value. The net asset
value is based on the fair value of the underlying investments held by the fund less its liabilities. This
practical expedient is not used when it is determined to be probable that the fund will sell the investment
for an amount different than the reported net asset value.
U.S. government bonds (included in Government securities): The fair value of U.S. government bonds is
estimated by pricing models that utilize observable market data including quotes, spreads and data points
for yield curves.
U.S. agency securities (included in Government securities): U.S. agency securities are comprised of two
main categories consisting of agency issued debt and mortgage pass-throughs. Agency issued debt
securities are valued by benchmarking market-derived prices to quoted market prices and trade data for
identical or comparable securities. Mortgage pass-throughs include certain "To-be-announced" (TBA)
securities and mortgage pass-through pools. TBA securities are generally valued using quoted market
prices or are benchmarked thereto. Fair value of mortgage pass-through pools are model driven with
respect to spreads of the comparable TBA security.
Private equity and real estate partnerships: Investments in private equity and real estate partnerships are
valued based on the fair value reported by the manager of the corresponding partnership and reported on
a one quarter lag. The managers provide unaudited quarterly financial statements and audited annual
financial statements which set forth the value of the fund. The valuations obtained from the managers are
based on various analyses on the underlying holdings in each partnership, including financial valuation
models and projections, comparable valuations from the public markets, and precedent private market
transactions. Investments are valued in the accompanying financial statements based on the Plan’s
beneficial interest in the underlying net assets of the partnership as determined by the partnership
agreement.
Insurance group annuity contracts: The fair values for these investments are based on the current market
value of the aggregate accumulated contributions plus interest earned.
96
Swap assets (included in Other investments): Fair values for interest rate swaps, equity index swaps and
inflation swaps are estimated using a discounted cash flow pricing model. These models use observable
market data such as contractual fixed rate, spot equity price or index value and dividend data. The fair
values of credit default swaps are estimated using an income approach model which determines
expected cash flows based on default probabilities from the issuer-specific credit spread curve and credit
loss recovery rates, both of which are dependent on market quotes.
Short-term investment funds: Primarily high-grade money market instruments valued at net asset value
at year-end.
Registered investment companies: Valued at the closing price reported on the primary exchange.
Defined Contribution Plans
The Company maintains certain defined contribution plans for its employees, including the Marsh &
McLennan Companies 401(k) Savings & Investment Plan ("401(k) Plan"), that are qualified under U.S. tax
laws. Under these plans, eligible employees may contribute a percentage of their base salary, subject to
certain limitations. For the 401(k) Plan, the Company matches a fixed portion of the employees’
contributions. In addition, as mentioned above, as part of the modification to its U.S. defined benefit
pension plans, the Company also amended its U.S. defined contribution retirement plans for most of its
U.S. employees to add an automatic Company contribution equal to 4% of eligible base pay beginning on
January 1, 2017. The 401(k) Plan contains an Employee Stock Ownership Plan feature under U.S. tax
law. Approximately $556 million of the 401(k) Plan’s assets at December 31, 2019 and $444 million at
December 31, 2018 were invested in the Company’s common stock. If a participant does not choose an
investment direction for his or her future contributions, they are automatically invested in a BlackRock
LifePath Portfolio that most closely matches the participant’s expected retirement year. The cost of these
defined contribution plans was $139 million in 2019, $133 million in 2018 and $130 million in 2017. In
addition, the Company has significant defined contribution plans in the U.K. As noted above, effective
August 1, 2014, a newly formed defined contribution plan replaced the existing defined contribution and
defined benefit plans with regard to future service. In addition, the Company has assumed responsibility
for the defined contribution section of the JLT U.K. plan. The cost of the U.K. defined contribution plan
was $100 million, $80 million and $75 million in 2019, 2018 and 2017, respectively.
97
9. Stock Benefit Plans
The Company maintains multiple stock-based payment arrangements under which employees are
awarded grants of restricted stock units, stock options and other forms of stock-based benefits.
Marsh & McLennan Companies, Inc. Incentive and Stock Award Plans
On May 19, 2011, the Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (the
"2011 Plan") was approved by the Company's stockholders. The 2011 Plan replaced the Company's two
previous equity incentive plans (the 2000 Senior Executive Incentive and Stock Award Plan and the 2000
Employee Incentive and Stock Award Plan).
The types of awards permitted under the 2011 Plan include stock options, restricted stock and restricted
stock units payable in Company common stock or cash, and other stock-based and performance-based
awards. The Compensation Committee of the Board of Directors (the "Compensation Committee")
determines, at its discretion, which affiliates may participate in the 2011 Plan, which eligible employees
will receive awards, the types of awards to be received, and the terms and conditions thereof. The right of
an employee to receive an award may be subject to performance conditions as specified by the
Compensation Committee. The 2011 Plan contains a provision which, in the event of a change in control
of the Company, may accelerate the vesting of the awards. This provision requires both a change in
control of the Company and a subsequent specified termination of employment for vesting to be
accelerated.
The 2011 Plan retains the remaining share authority of the two previous plans as of the date the 2011
Plan was approved by stockholders. Thus, approximately 23.2 million shares of common stock, plus
shares remaining unused under the previous plans, are available for awards over the life of the 2011
Plan.
The current practice is to grant non-qualified stock options, restricted stock units and/or performance
stock units ("PSUs") on an annual basis to senior executives and a limited number of other employees as
part of their total compensation. Restricted stock units are also granted to new hires or as retention
awards for certain employees. Restricted stock has not been granted since 2005.
Stock Options: Options granted under the 2011 Plan may be designated as either incentive stock options
or non-qualified stock options. The Compensation Committee determines the terms and conditions of the
option, including the time or times at which an option may be exercised, the methods by which such
exercise price may be paid, and the form of such payment. Options are generally granted with an
exercise price equal to the market value of the Company's common stock on the date of grant. These
option awards generally vest 25% per annum and have a contractual term of 10 years.
The estimated fair value of options granted is calculated using the Black-Scholes option pricing valuation
model. This model takes into account several factors and assumptions. The risk-free interest rate is
based on the yield on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life
assumption at the time of grant. The expected life (estimated period of time outstanding) is estimated
using the contractual term of the option and the effects of employees' expected exercise and post-vesting
employment termination behavior. The Company uses a blended volatility rate based on the following: (i)
volatility derived from daily closing price observations for the 10-year period ended on the valuation date,
(ii) implied volatility derived from traded options for the period one week before the valuation date and (iii)
average volatility for the 10-year periods ended on 15 anniversaries prior to the valuation date, using daily
closing price observations. The expected dividend yield is based on expected dividends for the expected
term of the stock options.
The assumptions used in the Black-Scholes option pricing valuation model for options granted by the
Company in 2019, 2018 and 2017 are as follows:
Risk-free interest rate
Expected life (in years)
Expected volatility
Expected dividend yield
2019
2018
2017
2.51%
6.0
20.93%
1.82%
2.73%
6.0
23.23%
1.81%
2.09%
6.0
23.23%
1.86%
98
A summary of the status of the Company’s stock option awards as of December 31, 2019 and changes
during the year then ended is presented below:
Balance at January 1, 2019
Granted
Exercised
Forfeited
Balance at December 31, 2019
Options vested or expected to vest
at December 31, 2019
Options exercisable at
December 31, 2019
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Shares
Aggregate
Intrinsic Value
($000)
9,968,038 $
1,661,590 $
(2,655,288) $
(115,212) $
8,859,128 $
53.94
91.15
40.10
82.96
64.69
6.2 years $
414,756
8,714,264 $
64.43
6.1 years $
410,231
5,133,064 $
52.36
4.7 Years $
303,612
In the above table, forfeited options are unvested options whose requisite service period has not been
met. Expired options are vested options that were not exercised. The weighted-average grant-date fair
value of the Company's option awards granted during the years ended December 31, 2019, 2018 and
2017 was $17.87, $18.29 and $15.01, respectively. The total intrinsic value of options exercised during
the same periods was $136.7 million, $72.9 million and $195.3 million, respectively.
As of December 31, 2019, there was $19.0 million of unrecognized compensation cost related to the
Company's option awards. The weighted-average period over which that cost is expected to be
recognized is approximately 1.25 years. Cash received from the exercise of stock options for the years
ended December 31, 2019, 2018 and 2017 was $106.5 million, $46.7 million and $126.7 million,
respectively.
The Company's policy is to issue treasury shares upon option exercises or share unit conversion. The
Company intends to issue treasury shares as long as an adequate number of those shares is available.
Restricted Stock Units and Performance Stock Units: Restricted stock units may be awarded under the
Company's 2011 Incentive and Stock Award Plan. The Compensation Committee determines the
restrictions on such units, when the restrictions lapse, when the units vest and are paid, and under what
terms the units are forfeited. The cost of these awards is amortized over the vesting period, which is
generally three years. Awards to senior executives and other employees may include three-year
performance-based restricted stock units and three-year service-based restricted stock units. The payout
of performance stock units (payable in shares of the Company's common stock) ranges, generally, from
0-200% of the number of units granted, based on the achievement of objective, pre-determined Company
performance measure(s), generally, over a three-year performance period. The Company accounts for
these awards as performance condition restricted stock units. The performance condition is not
considered in the determination of grant date fair value of such awards. Compensation cost is recognized
over the performance period based on management's estimate of the number of units expected to vest
and shares to be paid and is adjusted to reflect the actual number of shares paid out at the end of the
three-year performance period. Dividend equivalents are not paid out unless and until such time that the
award vests and shares are distributed.
99
A summary of the status of the Company's restricted stock units and performance stock units as of
December 31, 2019 and changes during the period then ended is presented below:
Non-vested balance at January 1, 2019
Granted
Vested
Forfeited
Non-vested balance at December 31, 2019
Restricted Stock Units
Performance Stock Units
Weighted
Average
Grant Date
Fair Value
Shares
4,330,231 $
4,266,983 $
(2,023,355) $
(616,122) $
5,957,737 $
76.49
92.50
72.96
89.55
87.80
Weighted
Average
Grant Date
Fair Value
70.33
91.17
57.50
83.30
82.75
Shares
698,798 $
245,065 $
(262,820) $
(30,496) $
650,547 $
The weighted-average grant-date fair value of the Company's restricted stock units granted during the
years ended December 31, 2018 and 2017 was $83.05 and $73.23, respectively. The weighted average
grant date fair value of the Company's performance stock units granted during the years ended
December 31, 2018 and 2017 was $83.05 and $73.20, respectively. The total fair value of the shares
distributed during the years ended December 31, 2019, 2018 and 2017 in connection with the Company's
non-option equity awards was $211.9 million, $170.3 million and $117.1 million, respectively.
The payout of shares in 2019 with respect to the PSUs awarded in 2016 was 97% of target based on
performance for the three-year performance period. In aggregate, 254,993 shares became distributable in
respect to PSUs vested in 2019.
As of December 31, 2019, there was $357 million of unrecognized compensation cost related to the
Company's restricted stock units and performance stock unit awards. The weighted-average period over
which that cost is expected to be recognized is approximately 1.11 years.
Marsh & McLennan Companies Stock Purchase Plans
In May 1999, the Company's stockholders approved an employee stock purchase plan (the "1999 Plan")
to replace the 1994 Employee Stock Purchase Plan (the "1994 Plan"), which terminated on September
30, 1999 following its fifth annual offering. Under the current terms of the Plan, shares are purchased four
times during the plan year at a price that is 95% of the average market price on each quarterly purchase
date. Under the 1999 Plan, after including the available remaining unused shares in the 1994 Plan and
reducing the shares available by 10,000,000 consistent with the Company's Board of Directors' action in
March 2007 and the addition of 4,750,000 shares due to a shareholder action in May 2018, no more than
40,350,000 shares of the Company's common stock may be sold. Employees purchased 405,872 shares
during the year ended December 31, 2019 and at December 31, 2019, 5,272,708 shares were available
for issuance under the 1999 Plan. Under the 1995 Company Stock Purchase Plan for International
Employees (the "International Plan"), after reflecting the additional 5,000,000 shares of common stock for
issuance approved by the Company's Board of Directors in July 2002, the addition of 4,000,000 shares
due to a shareholder action in May 2007 and reducing the shares available by 1,000,000 consistent with
the Company's Board of Directors' action in March 2018, no more than 11,000,000 shares of the
Company's common stock may be sold. Employees purchased 103,635 shares during the year ended
December 31, 2019 and there were 1,271,213 shares available for issuance at December 31, 2019 under
the International Plan. The plans are considered non-compensatory.
100
10. Fair Value Measurements
Fair Value Hierarchy
The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis
into a three-level fair value hierarchy as defined by the FASB. The fair value hierarchy gives the highest
priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to
unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall into
different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy, for disclosure
purposes, is determined based on the lowest level input that is significant to the fair value measurement.
Assets and liabilities recorded in the consolidated balance sheets at fair value are categorized based on
the inputs in the valuation techniques as follows:
Level 1.
Assets and liabilities whose values are based on unadjusted quoted prices for identical
assets or liabilities in an active market (examples include active exchange-traded equity
securities and exchange-traded money market mutual funds).
Assets and liabilities using Level 1 inputs include exchange-traded equity securities, exchange-traded
mutual funds and money market funds.
Level 2.
Assets and liabilities whose values are based on the following:
a)
b)
c)
d)
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in non-active markets
(examples include corporate and municipal bonds, which trade infrequently);
Pricing models whose inputs are observable for substantially the full term of the
asset or liability (examples include most over-the-counter derivatives, including
interest rate and currency swaps); and
Pricing models whose inputs are derived principally from or corroborated by
observable market data through correlation or other means for substantially the
full asset or liability (for example, certain mortgage loans).
Assets and liabilities using Level 2 inputs include treasury locks and an equity security.
Level 3.
Assets and liabilities whose values are based on prices, or valuation techniques that
require inputs that are both unobservable and significant to the overall fair value
measurement. These inputs reflect management’s own assumptions about the
assumptions a market participant would use in pricing the asset or liability (certain
commercial mortgage whole loans, and long-dated or complex derivatives including
certain foreign exchange options and long-dated options on gas and power).
Assets and liabilities using Level 3 inputs include liabilities for contingent purchase consideration and the
deal contingent foreign exchange contract (the "FX Contract").
Valuation Techniques
Equity Securities, Money Market Funds and Mutual Funds - Level 1
Investments for which market quotations are readily available are valued at the sale price on their
principal exchange or, for certain markets, official closing bid price. Money market funds are valued using
a valuation technique that results in price per share at $1.00.
Treasury Locks - Level 2
In connection with the JLT Transaction, to hedge the risk of increases in future interest rates prior to its
issuance of fixed rate debt in the fourth quarter of 2018, the Company entered into Treasury locks related
to $2 billion of expected issuances of senior notes in January 2019. The fair value at December 31, 2018
was based on the published treasury rate plus forward premium as of December 31, 2018 compared to
the all in rate at the inception of the contract. These treasury locks were settled during the first quarter of
2019.
101
Contingent Purchase Consideration Liability - Level 3
Purchase consideration for some acquisitions made by the Company includes contingent consideration
arrangements. These arrangements typically provide for the payment of additional consideration if
earnings and revenue targets are met over periods from two to four years. The fair value of contingent
consideration is estimated as the present value of future cash flows resulting from the projected revenue
and earnings of the acquired entities.
Foreign Exchange Forward Contract Liabilities - Level 3
In connection with the JLT Transaction, the Company entered into the FX Contract, to hedge the risk of
appreciation of the GBP-denominated purchase price. The Company settled the FX contract on April 1,
2019, upon completion of the JLT Transaction.
The fair value at December 31, 2018, was determined using the probability distribution approach,
comparing the all in forward rate to the foreign exchange rate for possible dates the JLT Transaction could
close, discounted to the valuation date and adjusted for the fair value of the deal contingency feature.
Determining the fair value of the FX Contract required significant management judgments or estimates
about the potential closing dates of the transaction and remaining value of the deal contingency feature.
The following fair value hierarchy table presents information about the Company’s assets and liabilities
measured at fair value on a recurring basis as of December 31, 2019 and 2018:
(In millions of dollars)
Identical Assets
(Level 1)
Observable Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Total
12/31/19
12/31/18
12/31/19
12/31/18
12/31/19
12/31/18
12/31/19
12/31/18
Assets:
Financial instruments owned:
Exchange traded equity
securities (a)
Mutual funds(a)
Money market funds(b)
Other equity investment(a)
Contingent purchase
consideration asset(a)
Total assets measured at fair
value
Fiduciary Assets:
Money market funds
U.S. Treasury Bills
Total fiduciary assets measured
at fair value
Liabilities:
Contingent purchase
consideration liability(c)
Acquisition related derivative
contracts
Total liabilities measured at fair
value
$
4
$
166
55
—
—
133
151
118
—
—
$
— $
— $
— $
— $
4
$
—
—
8
—
—
—
8
—
—
—
—
84
—
—
—
—
166
55
8
84
133
151
118
8
—
$
$
$
$
$
225
$
402
$
8
$
8
$
84
$
— $
317
$
410
360
$
40
80
20
$
— $
— $
— $
— $
360
$
—
—
—
—
40
80
20
400
$
100
$
— $
— $
— $
— $
400
$
100
— $
— $
— $
— $
225
$
183
$
225
$
183
—
—
—
116
—
325
—
441
— $
— $
— $
116
$
225
$
508
$
225
$
624
(a) Included in other assets in the consolidated balance sheets.
(b) Included in cash and cash equivalents in the consolidated balance sheets.
(c) Included in accounts payable and accrued liabilities and other liabilities in the consolidated balance sheets.
The level 3 assets in the above chart reflects contingent purchase consideration from the sale of
businesses during 2019, including accretion of approximately $2 million.
During the year ended December 31, 2019, there were no assets or liabilities that were transferred
between any of the levels.
102
The table below sets forth a summary of the changes in fair value of the Company’s Level 3 liabilities for
the years ended December 31, 2019 and December 31, 2018.
(In millions)
Balance at January 1,
Additions
Payments
Revaluation Impact
Change in fair value of acquisition related derivative contracts
Other (a)
Balance at December 31,
(a) Primarily reflects the impact of foreign exchange.
2019
2018
$
508
$
36
(63)
70
(325)
(1)
$
225
$
189
54
(91)
32
325
(1)
508
The fair value of the contingent purchase consideration asset and liability is based on projections of
revenue and earnings for the acquired or disposed entities that are reassessed on a quarterly basis. As
set forth in the table above, based on the Company's ongoing assessment of the fair value of contingent
consideration, the Company recorded a net increase in the estimated fair value of such liabilities for prior
period acquisitions of $70 million for the year ended December 31, 2019. A 5% increase in the above
mentioned projections would increase the liability by approximately $25 million. A 5% decrease in the
above mentioned projections would decrease the liability by approximately $28 million.
Long-Term Investments
The Company holds investments in certain private equity investments, public companies and private
companies that are accounted for using the equity method of accounting. The carrying value of these
investments was $434 million and $287 million at December 31, 2019 and 2018, respectively.
Investments Accounted For Using the Equity Method of Accounting
Investments in Public and Private Companies
Alexander Forbes: The Company owns approximately 34% of the common stock of Alexander Forbes, a
South African company listed on the Johannesburg Stock Exchange, which it purchased in 2014 for 7.50
South African Rand per share. In the third quarter of 2018, the Company concluded the decline in value of
the investment was other than temporary and recorded a charge of $83 million in 2018. As of
December 31, 2019, the carrying value of the Company’s investment in Alexander Forbes was
approximately $144 million. As of December 31, 2019, the market value of the approximately 443 million
shares of Alexander Forbes owned by the Company, based on the December 31, 2019 closing share
price of 5.55 South African Rand per share, was approximately $173 million. See Note 5 to the
consolidated financial statements for additional information regarding the pending sale of the Company's
remaining investment in AF.
The Company has other investments in private insurance and consulting companies with a carrying value
of $183 million and $61 million at December 31, 2019 and December 31, 2018, respectively.
The Company’s investment in Alexander Forbes and its other equity investments in private insurance and
consulting companies are accounted for using the equity method of accounting, the results of which are
included in revenue in the consolidated income statements and the carrying value of which is included in
other assets in the consolidated balance sheets. The Company records its share of income or loss on its
equity method investments on a one quarter lag basis.
Private Equity Investments
The Company's investments in private equity funds were $107 million and $82 million at December 31,
2019 and December 31, 2018, respectively. The carrying values of these private equity investments
approximates fair value. The underlying private equity funds follow investment company accounting,
where investments within the fund are carried at fair value. The Company records in earnings, investment
gains/losses for its proportionate share of the change in fair value of the funds. These investments are
included in other assets in the consolidated balance sheets. The Company recorded net investment
103
income of $13 million and $16 million for the years ended December 31, 2019 and 2018, respectively,
related to these investments.
Other Investments
At December 31, 2019 and December 31, 2018 the Company held certain equity investments with readily
determinable market values of $19 million and $146 million, respectively. In 2019 and 2018, the Company
recorded investment gains of $10 million and $54 million, respectively, which reflects the mark-to-market
changes in equity securities. The Company also held investments without readily determinable market
values of $67 million and $75 million at December 31, 2019 and 2018, respectively. The Company
recorded a net loss of approximately $1 million in 2019 and a net gain of approximately $1 million in 2018
on these investments. In March 2019, the Company disposed of its investment in BenefitFocus for total
proceeds of approximately $132 million. The Company received $115 million in the first quarter of 2019
and $17 million in April 2019 as final settlement on the sale. During the second quarter of 2019, the
Company disposed of its investment in Payscale and received proceeds of approximately $47 million.
The summarized financial information presented below reflects the aggregated financial information of all
equity method investees as of and for the twelve months ended September 30 of each year (or portion of
those twelve months the Company owned its investment), consistent with the Company’s recognition of
the results of its equity method investments on a one quarter lag. The investment income information
presented below reflects the net realized and unrealized gains/losses, net of expenses, related to the
Company's investment in Alexander Forbes and several private equity funds. Certain of the Company’s
equity method investments, including Alexander Forbes, have unclassified balance sheets. Therefore, the
asset and liability information presented below are not split between current and non-current.
Below is a summary of the financial information for the Company's equity method investees:
For the Twelve Months Ended September 30,
(In millions of dollars)
Revenue
Net investment income (a)
Net income
As of September 30,
(In millions of dollars)
Total assets
Total liabilities
Non-controlling interests
2019
719
959
482
$
$
$
2018
733
1,699
554
$
$
$
2019
23,366
21,013
23
$
$
$
2017
628
1,834
476
2018
24,644
22,257
22
$
$
$
$
$
$
(a) Net investment income in 2019, 2018 and 2017 includes approximately $645 million, $1.2 billion and
$1.5 billion, respectively, related to Alexander Forbes, substantially all of which is credited to policy
holders.
11. Derivatives
On September 20, 2018, the Company entered into the FX Contract to purchase £5.2 billion at a
contracted exchange rate, to hedge the risk of appreciation of the GBP-denominated purchase price of
JLT, which was settled on April 1, 2019 upon the closing of the JLT Transaction. The FX Contract did not
qualify for hedge accounting treatment under applicable accounting guidance, which required the
Company to record the change in the fair value of the FX Contract on each reporting date to the
statement of income. The Company recorded a gain of $31 million in the consolidated statement of
income for the year ended December 31, 2019, related to the FX Contract. An unrealized loss of $325
million related to the change in fair value of the FX contract was recorded in the consolidated statement of
income during 2018.
In connection with the JLT Transaction, to hedge the economic risk of changes in future interest rates
prior to its issuance of fixed rate debt, in the fourth quarter of 2018, the Company entered into Treasury
locks related to $2 billion of senior notes issued in January 2019. The fair value of the Treasury locks at
104
December 31, 2018 was based on the published treasury rate plus the forward premium as of December
31, 2018 compared to the all in rate at the inception of the contract. The contracts were not designated as
an accounting hedge. The Company recorded an unrealized loss of $116 million related to the change in
the fair value of this derivative in the consolidated statement of income for the twelve months ended
December 31, 2018. In January 2019, upon issuance of the $5 billion of senior notes, the Company
settled the treasury lock derivatives and made a payment to its counter party for $122 million. An
additional charge of $6 million was recorded in the first quarter of 2019 related to the settlement of the
Treasury lock derivatives.
In March 2019, the Company issued €1.1 billion of senior notes related to the JLT Transaction. See Note
14 for additional information related to the Euro senior note issuances. In connection with the senior note
issuances, the Company entered into a forward exchange contract to hedge the economic risk of
changes in foreign exchange rates from the issuance date to settlement date of the Euro senior notes.
The Company recorded a charge of $7.3 million in the consolidated statement of income for the year
ended December 31, 2019, related to the settlement of this contract.
Acquired JLT Derivatives and Hedging Activity
A significant portion of JLT's outstanding senior notes at the time of completion of the Transaction were
denominated in U.S. dollars. In order to hedge its exposure against the risk of fluctuations between the
GBP and the U.S. dollar, JLT entered into foreign exchange contracts and interest rate swaps, which were
designated as fair value hedges. In June, 2019, the Company redeemed these U.S. dollar denominated
senior notes and settled the related derivative contracts. The offsetting changes in fair value of the debt
and the change in fair value of the derivative contracts were recorded in the consolidated statement of
income for the year ended December 31, 2019.
JLT also had a number of foreign exchange contracts to hedge the risk of foreign exchange movements
between the U.S. dollar and the GBP, related to JLT’s U.S. dollar denominated revenue in the U.K. Prior
to the acquisition, these derivative contracts were designated as cash flow hedges. Upon completion of
the JLT Transaction, these derivative contracts were not re-designated as cash flow hedges by the
Company. The contracts were settled in June 2019. The change in fair value between the acquisition date
and the settlement date resulted in a charge of $26 million for the year ended December 31, 2019. The
charge is recorded as a change in fair value of acquisition related derivative contracts in the consolidated
statement of income.
Net Investment Hedge
The Company has investments in various subsidiaries with Euro functional currencies. As a result, the
Company is exposed to the risk of fluctuations between the Euro and U.S. dollar exchange rates. The
Company designated its €1.1 billion senior note debt instruments ("euro notes") as a net investment
hedge (the "Hedge") of its Euro denominated subsidiaries. The Hedge effectiveness is re-assessed each
quarter to confirm that the designated equity balance at the beginning of each period continues to equal
or exceed 80% of the outstanding balance of the Euro debt instrument and that all the critical terms of the
hedging instrument and the hedged net investment continue to match. If the Company concludes that the
hedge is highly effective, the change in the debt balance related to foreign exchange fluctuations will be
recorded in foreign currency translation gains (losses) in the consolidated balance sheet. The Company
concluded that the hedge continues to be highly effective as of December 31, 2019. During 2019, the
U.S. dollar value of the euro notes decreased $28 million through December 31, 2019 due to the impact
of foreign exchange rates, with a corresponding increase to foreign currency translation gains (losses).
12. Leases
A lease is defined as a party obtaining the right to use an asset legally owned by another party. The
Company determines if an arrangement is a lease at inception. For operating leases entered into prior to
January 1, 2019, the ROU assets and operating lease liabilities are recognized in the balance sheet
based on the present value of the remaining future minimum payments over the lease term from the
implementation date of the standard, January 1, 2019. The ROU asset was adjusted for unamortized
lease incentives and restructuring liabilities that were reported, prior to January 1, 2019, as other liabilities
in the consolidated balance sheet. For leases entered into subsequent to January 1, 2019, the operating
105
lease ROU asset and operating lease liabilities are based on the present value of minimum payments
over the lease term at the commencement date of the lease.
The Company uses discount rates to determine the present value of future lease payments. The
Company primarily uses its incremental borrowing rate adjusted to reflect a secured rate, based on the
information available for leases, including the lease term and interest rate environment in the country in
which the lease exists. The lease terms used to calculate the ROU asset and lease liability may include
options to extend or terminate when it is reasonably certain that the Company will exercise that option.
The Company leases office facilities under non-cancelable operating leases with terms generally ranging
between 10 and 25 years. The Company utilizes these leased office facilities for use by its employees in
countries in which the Company conducts its business. Leases are negotiated with third-parties and, in
some instances contain renewal, expansion and termination options. The Company also subleases
certain office facilities to third-parties when the Company no longer utilizes the space. None of the
Company’s leases restrict the payment of dividends or the incurrence of debt or additional lease
obligations, or contain significant purchase options. In addition to the base rental costs, our lease
agreements generally provide for rent escalations resulting from increased assessments for real estate
taxes and other charges. A portion of our real estate lease portfolio contains base rents subject to annual
changes in the Consumer Price Index ("CPI") as well as charges for operating expenses which are
reimbursable to the landlord based on actual usage. Changes to the CPI and payments for such
reimbursable operating expenses are considered variable and are recognized as variable lease costs in
the period in which the obligation for those payments was incurred.
As a practical expedient, the Company has elected an accounting policy not to separate non-lease
components from lease components and instead, accounts for these components as a single lease
component. The Company has made an accounting policy election not to recognize ROU assets and
lease liabilities for leases that, at the commencement date, are for 12 months or less. Approximately 99%
of the Company’s lease obligations are for the use of office space. All of the Company’s material leases
are operating leases.
On April 1, 2019, the Company assumed approximately $400 million, of ROU assets and lease liabilities
from the JLT Transaction. As part of the Company's real estate rationalization plan related to the JLT
Transaction, the Company has determined that approximately $9 million of its ROU assets have been
impaired, and therefore, recorded a charge to the consolidated statement of income for the twelve month
period ended December 31, 2019, with an offsetting reduction to ROU assets. The Company expects
additional impairments as it continues to assess its future real estate requirements.
The following chart provides additional information about the Company’s property leases:
For the Year Ended December 31, 2019
(In millions)
Lease Cost:
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
Net lease cost
Other information:
Operating cash outflows from operating leases
Right of use assets obtained in exchange for new operating lease
liabilities
Weighted-average remaining lease term – real estate
Weighted-average discount rate – real estate leases
$
$
$
$
371
8
150
(18)
511
392
140
8.78 years
3.10%
106
Future minimum lease payments for the Company’s operating leases as of December 31, 2019 are as
follows:
Payment Dates (In millions)
Real Estate Leases
2020
2021
2022
2023
2024
Subsequent years
Total future lease payments
Less: Imputed interest
Total
Current lease liabilities
Long-term lease liabilities
Total lease liabilities
$
$
413
359
335
288
241
974
2,610
(342)
2,268
342
1,926
2,268
Note: Table excludes obligations for leases with original terms of 12 months or less which have not been
recognized as a right to use asset or liability in the consolidated balance sheets.
As of December 31, 2019, the Company had additional operating real estate leases that had not yet
commenced of $45 million. These operating leases will commence over the next 12 months.
The consolidated statements of income include net rental costs of $383 million and $354 million in 2018
and 2017, respectively, after deducting rentals from subleases ($8 million in 2018 and 2017). These net
rental costs exclude rental costs and sublease income for previously accrued restructuring charges
related to vacated space.
At December 31, 2018, the aggregate future minimum rental commitments under all non-cancelable
operating lease agreements were:
Rentals
from
Subleases
Net
Rental
Commitments
329
309
265
242
205
721
32 $
31 $
12 $
10 $
9 $
32 $
For the Years Ended December 31,
(In millions of dollars)
2019
2020
2021
2022
2023
Subsequent years
Gross
Rental
Commitments
$
$
$
$
$
$
361 $
340 $
277 $
252 $
214 $
753 $
107
13. Debt
The Company’s outstanding debt is as follows:
December 31,
(In millions)
Short-term:
Current portion of long-term debt
Long-term:
Senior notes – 2.35% due 2019
Senior notes – 2.35% due 2020
Senior notes – 3.50% due 2020
Senior notes – 4.80% due 2021
Senior notes – Floating rate due 2021
Senior notes – 2.75% due 2022
Senior notes – 3.30% due 2023
Senior notes – 4.05% due 2023
Senior notes – 3.50% due 2024
Senior notes – 3.875% due 2024
Senior notes – 3.50% due 2025
Senior notes – 1.349% due 2026
Senior notes – 3.75% due 2026
Senior notes – 4.375% due 2029
Senior notes – 1.979% due 2030
Senior notes – 5.875% due 2033
Senior notes – 4.75% due 2039
Senior notes – 4.35% due 2047
Senior notes – 4.20% due 2048
Senior notes – 4.90% due 2049
Mortgage – 5.70% due 2035
Other
Less current portion
2019
2018
1,215 $
1,215
—
500
698
499
298
498
349
249
597
994
497
609
597
1,499
607
298
494
492
592
1,237
345
7
11,956
1,215
$
10,741 $
314
314
300
499
—
499
—
497
348
249
597
—
496
—
596
—
—
297
—
492
592
—
358
4
5,824
314
5,510
The senior notes in the table above are registered by the Company with the Securities and Exchange
Commission, and are not guaranteed.
The Company has established a short-term debt financing program of up to $1.5 billion through the
issuance of commercial paper. The proceeds from the issuance of commercial paper are used for general
corporate purposes. The Company had no commercial paper outstanding at December 31, 2019.
Bridge Loan Financing
On September 18, 2018, the Company entered into a bridge loan agreement to finance the JLT
acquisition. The bridge loan agreement provided for commitments in the aggregate principal amount of
£5.2 billion. In 2018, the Company paid approximately $35 million of customary upfront fees related to the
bridge loan at the inception of the loan commitment, of which $30 million was amortized in 2018 and $5
million in the first quarter of 2019 as interest expense. The Company terminated its bridge loan
agreement on April 1, 2019.
108
Senior Notes
In January 2020, the Company closed on $500 million one-year and $500 million two-year term loan
facilities. The interest rate on these facilities is based on LIBOR plus a fixed margin which varies with the
Company's credit ratings. The facilities require the Company to maintain coverage ratios and leverage
ratios consistent with the revolving credit facility discussed below. The Company has no current
borrowings outstanding under these facilities. The facility includes a provision for determining a LIBOR
successor rate in the event LIBOR reference rates are no longer available, which is expected to occur by
the end of 2021.These facilities are expected to expire on or around the time that LIBOR is expected to
be replaced by a successor rate.
In September 2019, the Company repaid $300 million of maturing senior notes.
In connection with the closing of the JLT Transaction, the Company assumed approximately $1 billion of
historical JLT indebtedness. In April and June of 2019, the Company repaid approximately $450 million
and $553 million, respectively, representing all of JLT's debt it acquired upon the closing of the JLT
Transaction. The Company incurred debt extinguishment costs of $32 million due to the debt repayments.
In March 2019, the Company closed on $300 million one-year and $300 million three-year term loan
facilities. The interest rate on these facilities was based on LIBOR plus a fixed margin which varies with
the Company's credit ratings. In August 2019, the Company terminated the $300 million three-year term
facility. The Company had $300 million of borrowings outstanding under the one-year term facility at
September 30, 2019, which was repaid and terminated in December 2019.
Also in March 2019, the Company issued €550 million of 1.349% Senior Notes due 2026 and €550 million
of 1.979% Senior Notes due 2030. In addition, in March 2019, the Company issued an additional $250
million of 4.375% Senior Notes due 2029. These notes constitute a further issuance of the 4.375% Senior
Notes due 2029, of which $1.25 billion aggregate principal amount was issued in January 2019 (see
above). After giving effect to the issuance of the notes, the Company has $1.5 billion aggregate principal
amount of 4.375% Senior Notes due 2029. The Company used part of the net proceeds from these
offerings, along with the $5 billion of Senior Notes issued in January 2019 (discussed above) primarily to
fund the acquisition of JLT, including the payment of related fees and expenses, and to repay certain JLT
indebtedness, as well as for general corporate purposes.
In January 2019, the Company issued $700 million of 3.50% Senior Notes due 2020, $1.0 billion of
3.875% Senior Notes due 2024, $1.25 billion of 4.375% Senior Notes due 2029, $500 million of 4.75%
Senior Notes due 2039, $1.25 billion of 4.90% Senior Notes due 2049 and $300 million of Floating Rate
Senior Notes due 2021. The floating rate notes are based on LIBOR plus a fixed margin. These notes are
due prior to the date that LIBOR is expected to be replaced by a successor rate.
In October 2018 the Company repaid $250 million of maturing senior notes.
In March 2018, the Company issued $600 million of 4.20% senior notes due 2048. The Company used
the net proceeds for general corporate purposes.
Other Credit Facilities
In October 2018, the Company and certain of its foreign subsidiaries increased its multi-currency five-year
unsecured revolving credit facility from $1.5 billion to $1.8 billion. The interest rate on this facility is based
on LIBOR plus a fixed margin which varies with the Company's credit ratings. This facility expires in
October 2023 and requires the Company to maintain certain coverage and leverage ratios which are
tested quarterly. There were no borrowings outstanding under this facility at December 31, 2019. The
facility includes a provision for determining a LIBOR successor rate in the event LIBOR reference rates
are no longer available. In such case, the rate would be determined using an alternate reference rate that
has been broadly accepted by the syndicated loan market in the United States in lieu of LIBOR (the
“LIBOR successor rate”). If no LIBOR successor rate has been determined, the rate will be based on the
higher of the rate announced publicly by Citibank, New York, NY, as its base rate or the fed funds rate
plus a fixed margin.
Additional credit facilities, guarantees and letters of credit are maintained with various banks, primarily
related to operations located outside the United States, aggregating $598 million at December 31, 2019
109
and $594 million at December 31, 2018. There were no outstanding borrowings under these facilities at
December 31, 2019 and December 31, 2018.
Scheduled repayments of long-term debt in 2020 and in the four succeeding years are $1.2 billion, $815
million, $515 million, $617 million and $1.6 billion, respectively.
Fair value of Short-term and Long-term Debt
The estimated fair value of the Company’s short-term and long-term debt is provided below. Certain
estimates and judgments were required to develop the fair value amounts. The fair value amounts shown
below are not necessarily indicative of the amounts that the Company would realize upon disposition, nor
do they indicate the Company’s intent or need to dispose of the financial instrument.
(In millions of dollars)
Short-term debt
Long-term debt
December 31, 2019
Carrying
Amount
Fair
Value
December 31, 2018
Carrying
Amount
Fair
Value
$
$
1,215 $
10,741 $
1,229
11,953
$
$
314 $
313
5,510 $
5,437
The fair value of the Company’s short-term debt consists primarily of term debt maturing within the next
year and its fair value approximates its carrying value. The estimated fair value of a primary portion of the
Company's long-term debt is based on discounted future cash flows using current interest rates available
for debt with similar terms and remaining maturities. Short- and long-term debt would be classified as
Level 2 in the fair value hierarchy.
14. Integration and Restructuring Costs
JLT Related Integration and Restructuring
The Company is currently integrating JLT, which will involve combining the business practices and co-
locating colleagues in most geographies, rationalization of real estate leases around the world, realization
of synergies and migration of legacy JLT systems onto the Company's information technology
environment and security protocols, consulting fees related to integration management processes and
legal fees related to the rationalization of legal entity structures that will reduce costs, mitigate risks and
improve operational transparency.
Costs will be recognized based on applicable accounting guidance which includes accounting for disposal
or exit activities, guidance related to impairment of long lived assets (for right of use assets related to real
estate leases), as well as other costs resulting from accelerated depreciation or amortization of leasehold
improvements and other property and equipment. Based on its current estimates, the Company expects
to incur costs of approximately $700 million in connection with the integration and restructuring of the
combined businesses, primarily related to severance, real estate rationalization, information technology
rationalization, consulting fees related to the management of the integration processes and legal fees
related to the rationalization of legal entity structures. The Company has incurred $335 million in 2019
and expects most of the remaining costs to be incurred in 2020, with a modest amount in 2021. These
integration and restructuring plans are still being finalized, which may change our current cost and related
savings estimates, as the Company continues to refine its detailed plans for each business and location.
In connection with the JLT integration and restructuring, for the twelve month period ended December 31,
2019, costs incurred were $229 million in RIS, $18 million in Consulting, and $88 million in Corporate. The
severance and related costs were included in compensation and benefits and the other costs were
included in other operating expenses in the consolidated statement of income.
110
Details of the JLT integration and restructuring activity from January 1, 2019 through December 31, 2019,
are as follows:
(In millions)
Severance
Real Estate
Related Costs
(a)
Information
Technology
(a)
Consulting
and Other
Outside
Services (b)
Liability at 1/1/19
$
— $
— $
— $
— $
2019 Charges
Cash payments
Non-cash charges
Liability at 12/31/19
$
154
(112)
—
42
38
(14)
(19)
45
(45)
—
98
(94)
(4)
$
5
$
— $
— $
Total
—
335
(265)
(23)
47
(a) Includes data center contract termination costs and temporary infrastructure leasing costs.
(b) Includes consulting fees related to the management of the integration processes and legal fees related to the
rationalization of legal entity structures.
Other Restructuring
During 2018 and 2019, Marsh initiated programs to simplify its organization structure and realign and
rebrand certain of its businesses. The Company incurred severance and consulting costs of $34 million
for the twelve month period ended December 31, 2019, related to these initiatives.
During the fourth quarter of 2018, Mercer initiated a program to restructure its business to further optimize
the way Mercer operates, setting up the Company for a more fluid and nimble structure and operating
model for the future. The Company incurred restructuring severance and consulting costs of $56 million
for the twelve month period ended December 31, 2019 related to this initiative.
In addition to the changes discussed above, the Company incurred at Corporate $22 million of
restructuring costs primarily related to future rent under non-cancelable leases.
Details of the restructuring liability activity from January 1, 2018 through December 31, 2019, including
actions taken prior to 2019, are as follows:
(In
millions)
Severance $
Balance at
1/1/18
Amounts
Accrued
Cash
Paid
Other
Liability at
12/31/18
Amounts
Accrued
Cash
Paid
Other
Balance at
12/31/19
15 $
137 $
(77) $
(2) $
73 $
73 $
(91) $
(4) $
51
Future rent
under non-
cancelable
leases and
other costs
50
24
(37)
2
39
39
(21)
(6)
Total
$
65 $
161 $ (114) $ — $
112 $
112 $ (112) $
(10) $
As of January 1, 2017, the liability balance related to restructuring activity was $93 million. In 2017, the
Company accrued $40 million and had cash payments and other adjustments of $68 million related to
restructuring activities that resulted in the liability balance at December 31, 2017 reported above.
The expenses associated with the above initiatives are included in compensation and benefits and other
operating expenses in the consolidated statements of income. The liabilities associated with these
initiatives are classified on the consolidated balance sheets as accounts payable and accrued liabilities,
other liabilities or accrued compensation and employee benefits, depending on the nature of the items.
These programs are substantially completed as of December 31, 2019.
51
102
15. Common Stock
During 2019, the Company repurchased 4.8 million shares of its common stock for total consideration of
$485 million. In November 2019, the Board of Directors of the Company authorized the Company to
repurchase up to $2.5 billion of the Company's common stock, which superseded any prior
authorizations. The Company remains authorized to purchase additional shares of its common stock up to
111
a value of approximately $2.4 billion. There is no time limit on the authorization. During 2018, the
Company purchased 8.2 million shares of its common stock for total consideration of $675 million.
The Company issued approximately 4.6 million and 3.3 million shares related to stock compensation and
employee stock purchase plans during the years ended December 31, 2019 and 2018, respectively.
16. Claims, Lawsuits and Other Contingencies
Acquisition of Jardine Lloyd Thompson Group plc
On April 1, 2019, the Company completed its previously announced acquisition of all of the outstanding
shares of JLT. See Note 5 to the consolidated financial statements for additional information. Upon the
consummation of the acquisition of JLT, the Company assumed the legal liabilities and became
responsible for JLT’s litigation and regulatory exposures as of April 1, 2019.
Litigation Matters
The Company and its subsidiaries are subject to a significant number of claims, lawsuits and proceedings
in the ordinary course of business. Such claims and lawsuits consist principally of alleged errors and
omissions in connection with the performance of professional services, including the placement of
insurance, the provision of actuarial services for corporate and public sector clients, the provision of
investment advice and investment management services to pension plans, the provision of advice relating
to pension buy-out transactions and the provision of consulting services relating to the drafting and
interpretation of trust deeds and other documentation governing pension plans. These claims may seek
damages, including punitive and treble damages, in amounts that could be significant. In establishing
liabilities for errors and omissions claims in accordance with FASB guidance on Contingencies - Loss
Contingencies, the Company uses case level reviews by inside and outside counsel, and internal
actuarial analysis by Oliver Wyman Group, a subsidiary of the Company, and other methods to estimate
potential losses. A liability is established when a loss is both probable and reasonably estimable. The
liability is reviewed quarterly and adjusted as developments warrant. In many cases, the Company has
not recorded a liability, other than for legal fees to defend the claim, because we are unable, at the
present time, to make a determination that a loss is both probable and reasonably estimable. To the
extent that expected losses exceed our deductible in any policy year, the Company also records an asset
for the amount that we expect to recover under any available third-party insurance programs. The
Company has varying levels of third-party insurance coverage, with policy limits and coverage terms
varying significantly by policy year.
Governmental Inquiries and Enforcement Matters
Our activities are regulated under the laws of the United States and its various states, the European
Union and its member states, and the other jurisdictions in which the Company operates.
Risk and Insurance Services Segment
In April 2017, the Financial Conduct Authority in the United Kingdom (the "FCA") commenced a civil
competition investigation into the aviation insurance and reinsurance sector. In connection with that
investigation, the FCA carried out an on-site inspection at the London offices of Marsh Limited, our Marsh
and Guy Carpenter operating subsidiary in the United Kingdom, and JLT Specialty Ltd., JLT's U.K.
operating subsidiary. The FCA indicated that it had reasonable grounds for suspecting that Marsh Limited,
JLT Specialty Ltd. and other participants in the market had been sharing competitively sensitive
information within the aviation insurance and reinsurance broking sector.
In October 2017, the Company received a notice that the Directorate-General for Competition of the
European Commission had commenced a civil investigation of a number of insurance brokers, including
both Marsh and JLT, regarding "the exchange of commercially sensitive information between competitors
in relation to aviation and aerospace insurance and reinsurance broking products and services in the
European Economic Area ("EEA"), as well as possible coordination between competitors." In light of the
action taken by the European Commission, the FCA informed Marsh Limited and JLT Specialty Ltd. that it
had discontinued its investigation under U.K. competition law. In May 2018, the FCA advised that it would
not be taking any further action with Marsh Limited or JLT Specialty Ltd. in connection with this matter.
112
In January 2019, the Company received a notice that the Administrative Council for Economic Defense
anti-trust agency in Brazil had commenced an administrative proceeding against a number of insurance
brokers, including both Marsh and JLT, and insurers “to investigate an alleged sharing of sensitive
commercial and competitive confidential information" in the aviation insurance and reinsurance sector.
We are cooperating with these investigations and are conducting our own reviews. At this time, we are
unable to predict their likely timing, outcome or ultimate impact. There can be no assurance that the
ultimate resolution of these or any related matters will not have a material adverse effect on our
consolidated results of operations, financial condition or cash flows.
Consulting Segment
In 2014, the FCA conducted a thematic review of the suitability of financial advice provided to individuals
by a number of firms, including JLT’s employee benefits business, relating to enhanced transfer value
("ETV") pension transfers. In January 2015, the FCA notified JLT that it was commissioning a Skilled
Person review of JLT’s ETV advice. In February 2019, prior to the completion of the acquisition, JLT
recorded a gross liability of approximately £59 million (or approximately $77 million) arising from the
Skilled Person report and ETV review. Pending the outcome of the FCA’s review, and based on our
review as of December 31, 2019, the Company has a gross liability of approximately £65 million (or
approximately $85 million) recorded on its consolidated balance sheet for the estimated liabilities and
costs arising from this matter. We expect this gross liability to be partially offset by insurance and
indemnification claims under existing arrangements.
Other Contingencies-Guarantees
In connection with its acquisition of U.K.-based Sedgwick Group in 1998, the Company acquired several
insurance underwriting businesses that were already in run-off, including River Thames Insurance
Company Limited ("River Thames"), which the Company sold in 2001. Sedgwick guaranteed payment of
claims on certain policies underwritten through the Institute of London Underwriters (the "ILU") by River
Thames. The policies covered by this guarantee were reinsured up to £40 million by a related party of
River Thames. Payment of claims under the reinsurance agreement is collateralized by segregated
assets held in a trust. As of December 31, 2019, the reinsurance coverage exceeded the best estimate of
the projected liability of the policies covered by the guarantee. To the extent River Thames or the
reinsurer is unable to meet its obligations under those policies, a claimant may seek to recover from the
Company under the guarantee.
From 1980 to 1983, the Company owned indirectly the English & American Insurance Company ("E&A"),
which was a member of the ILU. The ILU required the Company to guarantee a portion of E&A's
obligations. After E&A became insolvent in 1993, the ILU agreed to discharge the guarantee in exchange
for the Company's agreement to post an evergreen letter of credit that is available to pay claims by
policyholders on certain E&A policies issued through the ILU and incepting between July 3, 1980 and
October 6, 1983. Certain claims have been paid under the letter of credit and the Company anticipates
that additional claimants may seek to recover against the letter of credit.
* * * *
The pending proceedings described above and other matters not explicitly described in this Note 16 on
Claims, Lawsuits and Other Contingencies may expose the Company or its subsidiaries to liability for
significant monetary damages, fines, penalties or other forms of relief. Where a loss is both probable and
reasonably estimable, the Company establishes liabilities in accordance with FASB guidance on
Contingencies - Loss Contingencies. Except as described above, the Company is not able at this time to
provide a reasonable estimate of the range of possible loss attributable to these matters or the impact
they may have on the Company's consolidated results of operations, financial position or cash flows. This
is primarily because these matters are still developing and involve complex issues subject to inherent
uncertainty. Adverse determinations in one or more of these matters could have a material impact on the
Company's consolidated results of operations, financial condition or cash flows in a future period.
113
17. Segment Information
The Company is organized based on the types of services provided. Under this structure, the Company’s
segments are:
Risk and Insurance Services, comprising insurance services (Marsh) and reinsurance services
(Guy Carpenter); and
Consulting, comprising Mercer and Oliver Wyman Group
The accounting policies of the segments are the same as those used for the consolidated financial
statements described in Note 1. Segment performance is evaluated based on segment operating income,
which includes directly related expenses, and charges or credits related to integration and restructuring
but not the Company’s corporate-level expenses. Revenues are attributed to geographic areas on the
basis of where the services are performed.
Prior to being acquired by the Company, JLT operated in three segments: Specialty, Reinsurance and
Employee Benefits. JLT operated in 41 countries, with significant revenue in the United Kingdom, Pacific,
Asia and the United States. As of April 1, 2019, the historical JLT businesses were combined into MMC
operations as follows: JLT Specialty is included by geography within Marsh, JLT Reinsurance is included
in Guy Carpenter and the majority of JLT's Employee Benefits business was included in Mercer Health
and Wealth.
Selected information about the Company’s segments and geographic areas of operation are as follows:
For the Year Ended December 31,
(In millions of dollars)
Revenue
Operating
Income
(Loss)
Total
Assets
Depreciation
and
Amortization
Capital
Expenditures
2019 –
Risk and Insurance Services
Consulting
Total Segments
Corporate/Eliminations
Total Consolidated
2018 –
Risk and Insurance Services
Consulting
Total Segments
Corporate/Eliminations
Total Consolidated
2017 –
Risk and Insurance Services
Consulting
Total Segments
Corporate/Eliminations
Total Consolidated
$ 9,599 (a) $
7,143 (b)
16,742
(90)
$ 16,652
$
$ 8,228 (a) $
6,779 (b)
15,007
(57)
$ 14,950
$
$ 7,630 (a) $
6,444 (b)
14,074
(50)
$ 14,024
$
1,833
1,210
3,043
(366)
2,677
1,864
1,099
2,963
(202)
2,761
1,731
1,110
2,841
(186)
2,655
$ 26,098 (d) $
9,722 (e)
35,820
(4,463) (c)
$ 31,357
$
$ 15,868 (d) $
8,003 (e)
23,871
(2,293) (c)
$ 21,578
$
$ 16,490 (d) $
8,200 (e)
24,690
(4,261) (c)
$ 20,429
$
416
156
572
75
647
290
130
420
74
494
282
129
411
70
481
$
$
$
$
$
$
184
150
334
87
421
158
97
255
59
314
139
88
227
75
302
(a)
(b)
Includes inter-segment revenue of $8 million, $6 million and $5 million in 2019, 2018 and 2017, respectively, interest income on
fiduciary funds of $105 million, $65 million and $39 million in 2019, 2018 and 2017, respectively, and equity method income of
$25 million, $13 million and $14 million in 2019, 2018 and 2017, respectively and $40 million related to the sale of business in
2018.
Includes inter-segment revenue of $82 million, $51 million and $45 million in 2019, 2018 and 2017, respectively, interest
income on fiduciary funds of $4 million, $3 million and $4 million in 2019, 2018 and 2017, respectively, and equity method
income of $16 million, $8 million and $17 million in 2019, 2018 and 2017, respectively.
(c) Corporate assets primarily include insurance recoverables, pension related assets, the owned portion of the Company
(d)
(e)
headquarters building and intercompany eliminations.
Includes equity method investments of $179 million, $57 million and $60 million at December 31, 2019, 2018 and 2017,
respectively.
Includes equity method investments of $149 million, $148 million and $269 million at December 31, 2019, 2018 and 2017,
respectively.
114
Details of operating segment revenue are as follows:
For the Years Ended December 31,
(In millions of dollars)
Risk and Insurance Services
Marsh
Guy Carpenter
Total Risk and Insurance Services
Consulting
Mercer
Oliver Wyman Group
Total Consulting
Total Segments
Corporate/Eliminations
Total
Information by geographic area is as follows:
For the Years Ended December 31,
(In millions of dollars)
Revenue
United States
United Kingdom
Continental Europe
Asia Pacific
Other
Corporate/Eliminations
Total
For the Years Ended December 31,
(In millions of dollars)
Fixed Assets, Net
United States
United Kingdom
Continental Europe
Asia Pacific
Other
Total
2019
2018
2017
$
8,085
1,514
9,599
5,021
2,122
7,143
$
6,923
1,305
8,228
4,732
2,047
6,779
$
6,433
1,197
7,630
4,528
1,916
6,444
16,742
15,007
14,074
(90)
(57)
(50)
$ 16,652
$ 14,950
$ 14,024
2019
2018
2017
$
7,840
2,679
2,837
2,001
1,385
$
7,219
2,243
2,694
1,616
1,235
$
6,870
2,112
2,197
1,517
1,378
16,742
15,007
14,074
(90)
(57)
(50)
$ 16,652
$ 14,950
$ 14,024
2019
2018
2017
$
$
462
149
68
101
78
858
$
$
403
91
59
74
74
701
$
$
399
91
57
78
87
712
115
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Marsh & McLennan Companies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Marsh & McLennan Companies, Inc.
and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated
statements of income, comprehensive income, cash flows, and equity for each of the three years in the
period ended December 31, 2019, and the related notes (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2019, in conformity with
accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the Company's internal control over financial reporting as of December
31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20,
2020, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company's financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the
financial statements that were communicated or required to be communicated to the audit committee and
that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or
on the accounts or disclosures to which they relate.
116
Liability for Errors and Omissions - Refer to Notes 1 and 16 to the financial statements
Critical Audit Matter Description
The Company is subject to a significant number of claims, lawsuits and proceedings in the ordinary
course of business. Such claims and lawsuits consist principally of alleged errors and omissions (“E&O”)
in connection with the performance of professional services. These claims may seek damages, including
punitive and treble damages, in amounts that could be significant. The Company uses case level reviews
performed by inside and outside counsel, internal actuarial analysis and other methods to estimate
potential losses resulting from reported and unreported claims.
Given that the determination of the liability for E&O requires management to make significant estimates
and assumptions in projecting ultimate settlement values of reported and unreported claims, performing
audit procedures to evaluate the reasonableness of such estimates and assumptions required a high
degree of auditor judgment, including the need to involve our actuarial specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the determination of the liability for E&O included the following, among
others:
• We tested the effectiveness of internal controls related to the determination of the liability for E&O,
including controls over the projection of ultimate settlement values of reported and unreported claims
determined through internal actuarial analyses and management’s independent review of case level
estimates provided by inside and outside counsel, as applicable.
• For selected E&O matters, we made inquiries of the Company’s inside and outside counsel, as
applicable, regarding the status of these matters and likelihood of settlement.
• We compared total incurred losses and current case estimates as of the balance sheet date to
amounts reported in prior periods to evaluate trends and developments in reported cases.
• With the assistance of our actuarial specialists, we evaluated the reasonableness of the assumptions
and methodologies involved in the development of the liability for E&O by:
– Testing the underlying data that served as the basis for the actuarial analysis, including historical
claims, to evaluate whether the inputs to the actuarial estimate were reasonable.
– Comparing management’s prior-year assumptions of expected development and ultimate loss to
actual amounts incurred during the current year to identify potential bias in the determination of
the liability for E&O.
– Developing a range of independent estimates and comparing those to the liability for E&O
recorded by the Company.
Other Intangible Assets - Valuation of Customer Relationship Intangible Assets for the Jardine
Lloyd Thompson Group plc (“JLT”) Transaction - Refer to Note 5 to the financial statements
Critical Audit Matter Description
The Company completed the acquisition of JLT for approximately $5.6 billion on April 1, 2019. The
Company accounted for the acquisition under the acquisition method of accounting for business
combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities
assumed based on their respective fair values, including customer relationship intangible assets of
$1,435 million. Management estimated the fair value of customer relationship intangible assets using the
income approach, which determines the fair value as the present value of future cash flows over the
remaining economic life of the asset. The fair value determination of customer relationship intangible
assets involves significant estimates and assumptions related to future cash flows and the selection of the
respective discount rates.
117
Given that the fair value determination of customer relationship intangible assets requires management to
make significant estimates and assumptions in determining the forecasted future cash flows and the
selection of discount rates, performing audit procedures to evaluate the reasonableness of these
estimates and assumptions required a high degree of auditor judgment and an increased extent of effort,
including the need to involve our valuation specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the determination of future cash flows and the selection of the discount
rates relating to the customer relationship intangible assets included the following, among others:
• We tested the effectiveness of internal controls over the assumptions related to the determination of
forecasted future cash flows, selection of the discount rates and the valuation methodology used.
• With the assistance of our valuation specialists, we evaluated the reasonableness of the
determination of the forecasted future cash flows, discount rates and valuation methodology by:
– Testing the source information underlying the determination of the discount rates and testing the
mathematical accuracy of the calculations.
– Developing a range of independent estimates of discount rates for each selected customer
relationship intangible asset and comparing those to the respective discount rates utilized by
management.
– Evaluating the reasonableness of the estimated economic life of each selected customer
relationship intangible asset.
• When assessing the reasonableness of assumptions related to future cash flows for each selected
customer relationship intangible asset, specifically the assumptions relating to revenue growth,
attrition rates and earnings margins, we evaluated whether the assumptions used were reasonable
considering the past performance of the acquired company and the Company’s historical experience
related to similar acquisitions.
• We evaluated whether the estimated future cash flows were consistent with evidence obtained in
other areas of the audit, such as assumptions utilized by the Company in the determination of their
budget.
/s/ Deloitte & Touche LLP
New York, New York
February 20, 2020
We have served as the Company’s auditor since 1989.
118
Marsh & McLennan Companies, Inc. and Subsidiaries
SELECTED QUARTERLY FINANCIAL DATA AND
SUPPLEMENTAL INFORMATION (UNAUDITED)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In millions, except per share figures)
2019:
Revenue
Operating income
Net income before non-controlling interests
Net income attributable to the Company
Basic Per Share Data:
Net income attributable to the Company
Diluted Per Share Data:
Net income attributable to the Company
Dividends Paid Per Share
2018:
Revenue
Operating income
Net income before non-controlling interests
Net income attributable to the Company
Basic Per Share Data:
Net income attributable to the Company
Diluted Per Share Data:
Net income attributable to the Company
Dividends Paid Per Share
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4,071 $
4,349 $
3,968 $
4,264
938 $
727 $
716 $
680 $
344 $
332 $
467 $
306 $
303 $
592
396
391
1.42 $
0.66 $
0.60 $
0.77
1.40 $
0.65 $
0.59 $
0.415 $
0.415 $
0.455 $
0.76
0.455
4,000 $
3,734 $
3,504 $
3,712
908 $
696 $
690 $
691 $
536 $
531 $
541 $
279 $
276 $
621
159
153
1.36 $
1.05 $
0.55 $
0.30
1.34 $
1.04 $
0.54 $
0.375 $
0.375 $
0.415 $
0.30
0.415
As of February 18, 2020, there were 4,875 stockholders of record.
119
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures. Based on their evaluation, as of the end of the period covered
by this annual report on Form 10-K, the Company’s chief executive officer and chief financial officer have
concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934) are effective.
Internal Control over Financial Reporting.
(a) Management’s Annual Report on Internal Control Over Financial Reporting
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Marsh & McLennan Companies, Inc. is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company. The Company’s internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures relating to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; the recording of all necessary transactions to permit the
preparation of the Company’s consolidated financial statements in accordance with generally accepted
accounting principles; the proper authorization of receipts and expenditures in accordance with
authorizations of the Company’s management and directors; and the prevention or timely detection of the
unauthorized acquisition, use or disposition of assets that could have a material effect on the Company’s
consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management evaluated the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2019 under the supervision and with the participation of the Company’s principal executive
and principal financial officers. In making this evaluation, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—
Integrated Framework issued in 2013. Based on its evaluation, management determined that the
Company maintained effective internal control over financial reporting as of December 31, 2019.
As allowed by SEC guidance, management excluded from its assessment the internal control over
financial reporting at JLT, which was acquired on April 1, 2019. JLT accounted for approximately 5% of the
Company's total assets as of December 31, 2019 and JLT’s revenue from the acquisition date through
December 31, 2019 comprised 7% of the Company's consolidated revenue for the year ended December
31, 2019.
Deloitte & Touche LLP, the Independent Registered Public Accounting Firm that audited and reported on
the Company’s consolidated financial statements included in this annual report on Form 10-K, also issued
an audit report on the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2019.
120
(b) Audit Report of the Registered Public Accounting Firm.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Marsh & McLennan Companies, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Marsh & McLennan Companies, Inc. and
subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2019, based on criteria established in Internal Control
- Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended
December 31, 2019, of the Company and our report dated February 20, 2020, expressed an unqualified
opinion on those financial statements.
As described in Management’s Annual Report on Internal Control over Financial Reporting, management
excluded from its assessment the internal control over financial reporting at Jardine Lloyd Thompson
Group plc (“JLT”), which was acquired on April 1, 2019, and whose financial statements constitute 5% of
total assets and 7% of total revenue of the Company’s consolidated financial statement amounts as of
and for the year ended December 31, 2019. Accordingly, our audit did not include the internal control over
financial reporting at JLT.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on
our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance
121
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
New York, New York
February 20, 2020
122
(c) Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting identified in connection
with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Securities Exchange Act of 1934
that occurred during the quarter ended December 31, 2019 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
None.
123
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information as to the directors and nominees for the board of directors of the Company is incorporated
herein by reference to the material set forth under the heading "Item 1: Election of Directors" in the 2020
Proxy Statement.
The executive officers and executive officer appointees of the Company are Peter J. Beshar, Dominic
Burke, John Q. Doyle, Martine Ferland, E. Scott Gilbert, Daniel S. Glaser, Peter Hearn, Laurie Ledford,
Scott McDonald and Mark C. McGivney. Information with respect to these individuals is provided in Part I,
Item 1 above under the heading "Executive Officers of the Company".
The information set forth in the 2020 Proxy Statement in the sections "Corporate Governance—Codes of
Conduct", "Board of Directors and Committees—Committees—Audit Committee" and "Additional
Information—Transactions with Management and Others" is incorporated herein by reference.
Item 11. Executive Compensation.
The information set forth in the sections "Additional Information—Director Compensation" and "Executive
Compensation—Compensation of Executive Officers" in the 2020 Proxy Statement is incorporated herein
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The information set forth in the sections "Additional Information—Stock Ownership of Directors,
Management and Certain Beneficial Owners" and "Additional Information—Equity Compensation Plan
Information" in the 2020 Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information set forth in the sections "Corporate Governance—Director Independence", "Corporate
Governance—Review of Related-Person Transactions" and "Additional Information—Transactions with
Management and Others" in the 2020 Proxy Statement is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information set forth under the heading "Item 3: Ratification of Selection of Independent Registered
Public Accounting Firm—Fees of Independent Registered Public Accounting Firm" in the 2020 Proxy
Statement is incorporated herein by reference.
124
PART IV
Item 15. Exhibits and Financial Statement Schedules. †
The following documents are filed as a part of this report:
(1)
Consolidated Financial Statements:
Consolidated Statements of Income for each of the three years in the period ended December 31,
2019
Consolidated Statements of Comprehensive Income for each of the three years in the period
ended December 31, 2019
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2019
Consolidated Statements of Shareholders Equity for each of the three years in the period ended
December 31, 2019
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Other:
Selected Quarterly Financial Data and Supplemental Information (Unaudited) for fiscal years
2019 and 2018
Five-Year Statistical Summary of Operations
(2)
All required Financial Statement Schedules are included in the Consolidated Financial
Statements or the Notes to Consolidated Financial Statements.
(3)
The following exhibits are filed as a part of this report:
(2.1)
Stock Purchase Agreement, dated as of June 6, 2010, by and between Marsh & McLennan
Companies, Inc. and Altegrity, Inc. (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2010)
(2.2)
Rule 2.7 Announcement, dated as of September 18, 2018 (incorporated by reference to the
Company’s Current Report on Form 8-K dated September 18, 2018)
†As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Company has not filed with this Form 10-K
certain instruments defining the rights of holders of long-term debt of the Company and its subsidiaries
because the total amount of securities authorized under any of such instruments does not exceed 10% of
the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to
furnish a copy of any such agreement to the Commission upon request.
125
(2.3)
Co-operation Agreement, dated as of September 18, 2018, by and among Marsh &
McLennan Companies, Inc., MMC Treasury Holdings (UK) Limited and Jardine Lloyd
Thompson Group plc. (incorporated by reference to the Company’s Current Report on Form
8-K dated September 18, 2018)
(3.1)
Restated Certificate of Incorporation of Marsh & McLennan Companies, Inc. (incorporated by
reference to the Company’s Current Report on Form 8-K dated July 17, 2008)
(3.2)
Amended and Restated By-Laws of Marsh & McLennan Companies, Inc. (incorporated by
reference to the Company’s Current Report on Form 8-K dated January 12, 2017)
(4.1)
Indenture dated as of June 14, 1999 between Marsh & McLennan Companies, Inc. and State
Street Bank and Trust Company, as trustee (incorporated by reference to the Company’s
Registration Statement on Form S-3, Registration No. 333-108566)
(4.2)
Third Supplemental Indenture dated as of July 30, 2003 between Marsh & McLennan
Companies, Inc. and U.S. Bank National Association (as successor to State Street Bank and
Trust Company), as trustee (incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2003)
(4.3)
Indenture dated as of March 19, 2002 between Marsh & McLennan Companies, Inc. and
State Street Bank and Trust Company, as trustee (incorporated by reference to the
Company’s Registration Statement on Form S-4, Registration No. 333-87510)
(4.4)
Indenture, dated as of July 15, 2011, between Marsh & McLennan Companies, Inc. and The
Bank of New York Mellon, as trustee (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2011)
(4.5)
First Supplemental Indenture, dated as of July 15, 2011, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to
the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011)
(4.6)
Form of Third Supplemental Indenture between Marsh & McLennan Companies, Inc. and The
Bank of New York Mellon, as trustee (incorporated by reference to the Company’s Current
Report on Form 8-K dated September 24, 2013)
(4.7)
Form of Fourth Supplemental Indenture between Marsh & McLennan Companies, Inc. and
The Bank of New York Mellon, as trustee (incorporated by reference to the Company’s
Current Report on Form 8-K dated May 27, 2014)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
126
(4.8)
Form of Fifth Supplemental Indenture between Marsh & McLennan Companies, Inc. and The
Bank of New York Mellon, as trustee (incorporated by reference to the Company’s Current
Report on Form 8-K dated September 10, 2014)
(4.9)
Sixth Supplemental Indenture, dated as of March 6, 2015, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to
the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015)
(4.10)
Seventh Supplemental Indenture, dated as of September 14, 2015, between Marsh &
McLennan Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by
reference to the Company's Current Report on Form 8-K filed on September 14, 2015)
(4.11)
Eighth Supplemental Indenture, dated as of March 14, 2016, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to
the Company's Quarterly Report on Form 10-Q filed on May 2, 2016)
(4.12)
Ninth Supplemental Indenture, dated as of January 12, 2017, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to
the Company's Annual Report on Form 10-K filed on February 24, 2017)
(4.13)
Tenth Supplemental Indenture, dated as of March 1, 2018, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to
the Company's Current Report on Form 8-K filed on March 1, 2018)
(4.14)
Eleventh Supplemental Indenture, dated January 15, 2019, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to
the Company's Current Report on Form 8-K filed on January 15, 2019)
(4.15)
Twelfth Supplemental Indenture, dated March 21, 2019, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to
the Company's Current Report on Form 8-K filed on March 21, 2019)
(4.16)
Description of Marsh & McLennan Companies, Inc.’s Securities Registered Pursuant to
Section 12 of the Securities Exchange Act of 1934
(10.1)
*Marsh & McLennan Companies, Inc. U.S. Employee 1996 Cash Bonus Award Voluntary
Deferral Plan (incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996)
(10.2)
*Marsh & McLennan Companies, Inc. U.S. Employee 1997 Cash Bonus Award Voluntary
Deferral Plan (incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
127
(10.3)
*Marsh & McLennan Companies, Inc. U.S. Employee 1998 Cash Bonus Award Voluntary
Deferral Plan (incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998)
(10.4)
*Marsh & McLennan Companies, Inc. 2000 Senior Executive Incentive and Stock Award Plan
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1999)
(10.5)
*Amendments to Marsh & McLennan Companies, Inc. 2000 Senior Executive Incentive and
Stock Award Plan and the Marsh & McLennan Companies, Inc. 2000 Employee Incentive and
Stock Award Plan (incorporated by reference to the Company’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2005)
(10.6)
*Form of Awards under the Marsh & McLennan Companies, Inc. 2000 Senior Executive
Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004)
(10.7)
*Additional Forms of Awards under the Marsh & McLennan Companies, Inc. 2000 Senior
Executive Incentive and Stock Award Plan (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005)
(10.8)
*Marsh & McLennan Companies, Inc. 2000 Employee Incentive and Stock Award Plan
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2001)
(10.9)
*Form of Awards under the Marsh & McLennan Companies, Inc. 2000 Employee Incentive
and Stock Award Plan (incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2004)
(10.10)
*Additional Forms of Awards under the Marsh & McLennan Companies, Inc. 2000 Employee
Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2005)
(10.11)
*Form of Long-term Incentive Award under the Marsh & McLennan Companies, Inc. 2000
Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan Companies,
Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
128
(10.12)
*Form of 2007 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007)
(10.13)
*Form of 2008 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008)
(10.14)
*Form of 2009 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009)
(10.15)
*Form of 2010 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010)
(10.16)
*Form of 2011 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011)
(10.17)
*Form of 2011 Long-term Incentive Award dated as of June 1, 2011 under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011)
(10.18)
*Form of 2012 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2011 Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2012)
(10.19)
*Form of 2013 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2011 Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2013)
(10.20)
*Form of 2014 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2011 Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2014)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
129
(10.21)
*Form of 2015 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2011 Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2015)
(10.22)
*Form of 2016 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2011 Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2016)
(10.23)
*Form of Deferred Stock Unit Award, dated as of February 24, 2012, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)
(10.24)
*Form of Deferred Stock Unit Award, dated as of March 1, 2013, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013)
(10.25)
*Form of Deferred Stock Unit Award, dated as of March 1, 2014, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014)
(10.26)
*Form of Deferred Stock Unit Award, dated as of March 1, 2015, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015)
(10.27)
*Form of Deferred Stock Unit Award, dated as of March 1, 2016 under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016)
(10.28)
*Form of Deferred Stock Unit Award, with grant dates from March 1, 2017 through February
1, 2018, under the Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan
(incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2017)
(10.29)
*Form of Deferred Stock Unit Award, with grant dates from March 1, 2018 through February
1, 2019, under the Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan
(incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2018)
(10.30)
*Form of Deferred Stock Unit Award, with grant dates from March 1, 2019 through February
1, 2020, under the Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan
(incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2019)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
130
(10.31)
*Form of Deferred Stock Unit Award, with grant dates from May 1, 2019 through February 1,
2020, under the Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan -
Form A (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2019)
(10.32)
*Form of Deferred Stock Unit Award, with grant dates from May 1, 2019 through February 1,
2020, under the Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan -
Form B (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2019)
(10.33)
*Form of Restricted Stock Unit Award, dated as of April 1, 2016 under the Marsh & McLennan
Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016)
(10.34)
*Form of Restricted Stock Unit Award, dated as of February 22, 2017 under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017)
(10.35)
*Form of Restricted Stock Unit Award, dated as of February 21, 2018 under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018)
(10.36)
*Form of Restricted Stock Unit Award, dated as of February 19, 2019, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019)
(10.37)
*Form of Restricted Stock Unit Award, dated as of May 1, 2019, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan - Form A (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2019)
(10.38)
*Form of Restricted Stock Unit Award, dated as of May 1, 2019, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan - Form B (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2019)
(10.39)
*Form of Restricted Stock Unit Award, dated as of May 1, 2019, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan - Form C (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2019)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
131
(10.40)
*Form of Performance Stock Unit Award, dated as of February 22, 2017, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017)
(10.41)
*Form of Performance Stock Unit Award, dated as of February 21, 2018, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018)
(10.42)
*Form of Performance Stock Unit Award, dated as of February 19, 2019, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019)
(10.43)
*Form of Performance Stock Unit Award, dated as of May 1, 2019, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019)
(10.44)
*Form of Stock Option Award, dated as of February 22, 2017, under the Marsh & McLennan
Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017)
(10.45)
*Form of Stock Option Award, dated as of February 21, 2018, under the Marsh & McLennan
Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018)
(10.46)
*Form of Stock Option Award, dated as of February 19, 2019, under the Marsh & McLennan
Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019)
(10.47)
*Form of Stock Option Award, dated as of May 1, 2019, under the Marsh & McLennan
Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019)
(10.48)
*Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by
reference to the Company’s Registration Statement on Form S-8 dated August 5, 2011,
Registration No. 333-176084)
(10.49)
*Amendment to the Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award
Plan (incorporated by reference to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2018)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
132
(10.50)
*Amendments to Certain Marsh & McLennan Companies Equity-Based Awards Due to U.S.
Tax Law Changes Affecting Equity-Based Awards granted under the Marsh & McLennan
Companies, Inc. 2000 Senior Executive Incentive and Stock Award Plan and the Marsh &
McLennan Companies, Inc. 2000 Employee Incentive and Stock Award Plan, effective
January 1, 2009 (incorporated by reference to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2008)
(10.51)
*Section 409A Amendment Document, effective as of January 1, 2009 (incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December 31,
2008)
(10.52)
*Section 409A Amendment Regarding Payments Conditioned Upon Employment-Related
Action to Any and All Plans or Arrangements Entered into by the Marsh & McLennan
Companies, Inc., or any of its Direct or Indirect Subsidiaries, that Provide for the Payment of
Section 409A Nonqualified Deferred Compensation, effective December 21, 2012
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2012)
(10.53)
*Marsh & McLennan Companies Supplemental Savings & Investment Plan (formerly the
Marsh & McLennan Companies Stock Investment Supplemental Plan) Restatement, effective
January 1, 2012 (incorporated by reference to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2012)
(10.54)
*First Amendment to the Marsh & McLennan Companies Supplemental Savings & Investment
Plan Restatement effective January 1, 2012 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 2016)
(10.55)
*Second Amendment to the Marsh & McLennan Companies Supplemental Savings &
Investment Plan Restatement effective January 1, 2012 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 2017)
(10.56)
*Third Amendment to the Marsh & McLennan Companies Supplemental Savings &
Investment Plan Restatement effective January 1, 2012 (incorporated by reference to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2018)
(10.57)
*Marsh & McLennan Companies Benefit Equalization Plan and Marsh & McLennan
Companies Supplemental Retirement Plan as Restated, effective January 1, 2012
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2012)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
133
(10.58)
*First Amendment to the Marsh & McLennan Companies Benefit Equalization Plan and
Marsh & McLennan Companies Supplemental Retirement Plan as Restated effective January
1, 2012 (incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 2016)
(10.59)
*Second Amendment to the Marsh & McLennan Companies Benefit Equalization Plan and
Marsh & McLennan Companies Supplemental Retirement Plan as Restated effective January
1, 2012 (incorporated by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 2016)
(10.60)
*Marsh & McLennan Companies, Inc. Senior Executive Severance Pay Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31,
2008)
(10.61)
*Amendment to the Marsh & McLennan Companies, Inc. Senior Executive Severance Pay
Plan, effective December 31, 2009 (incorporated by reference to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009)
(10.62)
*Marsh & McLennan Companies, Inc. Senior Management Incentive Compensation Plan
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1994)
(10.63)
*Marsh & McLennan Companies, Inc. Directors' Stock Compensation Plan - May 31, 2009
Restatement (incorporated by reference to the Company’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2009)
(10.64)
*Marsh & McLennan Companies International Retirement Plan As Amended and Restated
Effective January 1, 2009 (incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2014)
(10.65)
*Description of compensation arrangements for independent directors of Marsh & McLennan
Companies, Inc. effective June 1, 2016 (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2016)
(10.66)
*Letter Agreement, effective as of March 20, 2013, between Marsh & McLennan Companies,
Inc. and Daniel S. Glaser (incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2013)
(10.67)
*Non-Competition and Non-Solicitation Agreement, effective as of September 18, 2013,
between Marsh & McLennan Companies, Inc. and Daniel S. Glaser (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 2013)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
134
(10.68)
*Letter Agreement, effective as of May 14, 2014, between Marsh & McLennan Companies,
Inc. and Daniel S. Glaser (incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2014)
(10.69)
*Letter Agreement, effective as of February 22, 2016, between Marsh & McLennan
Companies, Inc. and Daniel S. Glaser (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2016)
(10.70)
*Letter Agreement, effective as of February 22, 2017, between Marsh & McLennan
Companies, Inc. and Daniel S. Glaser (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2017)
(10.71)
*Letter Agreement, dated as of September 18, 2019, between Marsh & McLennan
Companies, Inc. and Daniel S. Glaser (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2019)
(10.72)
*Letter Agreement, effective as of January 1, 2016, between Marsh & McLennan Companies,
Inc. and Mark C. McGivney (incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2015)
(10.73)
*Non-Competition and Non-Solicitation Agreement, effective as of January 1, 2016, between
Marsh & McLennan Companies, Inc. and Mark C. McGivney (incorporated by reference to
the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015)
(10.74)
*Letter Agreement, effective as of January 17, 2018, between Marsh & McLennan
Companies, Inc. and Mark C. McGivney (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 2017)
(10.75)
Letter Agreement, effective as of January 16, 2019, between Marsh & McLennan, Inc. and
Mark C. McGivney (incorporated by reference to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2018)
(10.76)
*Letter Agreement, effective as of March 20, 2013, between Marsh & McLennan Companies,
Inc. and Julio A. Portalatin (incorporated by reference to the Company’s Annual Report on
Form 10-K for the year ended December 31 2013)
(10.77)
Calculation Agency Agreement, dated as of January 15, 2019, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as calculation agent (incorporated by
reference to the Company's Current Report on Form 8-K filed on January 15, 2019)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
135
(10.78)
Paying Agency Agreement, dated as of March 21, 2019, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, London Branch, as paying agent
(incorporated by reference to the Company's Current Report on Form 8-K filed on March 21,
2019)
(10.79)
*Non-Competition and Non-Solicitation Agreement, effective as of November 21, 2013,
between Marsh & McLennan Companies, Inc. and Julio A. Portalatin (incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December 31,
2013)
(10.80)
*Letter Agreement, effective as of May 14, 2014, between Marsh & McLennan Companies,
Inc. and Julio A. Portalatin (incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2014)
(10.81)
*Letter Agreement, effective as of May 18, 2016, between Marsh & McLennan Companies,
Inc. and Julio A. Portalatin (incorporated by reference to the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2016)
(10.82)
*Letter Agreement, effective as of July 12, 2017, between Marsh & McLennan Companies,
Inc. and Julio A Portalatin (incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2017)
(10.83)
*Letter Agreement, effective as of March 1, 2019, between Marsh & McLennan Companies,
Inc. and Julio A. Portalatin (incorporated by reference to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2018)
(10.84)
*Waiver and Release Agreement, dated as of February 14, 2019, between Marsh &
McLennan Companies, Inc. and Julio A. Portalatin (incorporated by reference to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2018)
(10.85)
*Letter Agreement, effective as of July 5, 2017, between Marsh & McLennan Companies, Inc.
and John Q. Doyle (incorporated by reference to the Company’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2018)
(10.86)
*Non-Competition and Non-Solicitation Agreement, dated as of February 25, 2016, between
Marsh & McLennan Companies, Inc. and John Q. Doyle (incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018)
(10.87)
*Letter Agreement, effective as of February 19, 2019, between Marsh & McLennan
Companies, Inc. and Peter C. Hearn (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2019)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
136
(10.88)
*Non-Competition and Non-Solicitation Agreement, effective as of June 1, 2016, between
Marsh & McLennan Companies, Inc. and Peter C. Hearn (incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019)
(10.89)
Shareholder Undertaking, dated as of September 18, 2018 (incorporated by reference to the
Company’s Current Report on Form 8-K dated September 18, 2018)
(10.90)
Form of Director Undertaking, dated as of September 18, 2018 (incorporated by reference to
the Company’s Current Report on Form 8-K dated September 18, 2018)
(10.91)
Bridge Loan Agreement, dated as of September 18, 2018 by and between Marsh &
McLennan Companies, Inc., the lenders party thereto and Goldman Sachs Bank USA, as
administrative agent (incorporated by reference to the Company’s Current Report on Form 8-
K dated September 18, 2018)
(10.92)
Calculation Agency Agreement, dated as of January 15, 2019, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as calculation agent (incorporated by
reference to the Company's Current Report on Form 8-K filed on January 15, 2019)
(14.1)
Code of Ethics for Chief Executive and Senior Financial Officers (incorporated by reference to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2002)
(21.1)
List of Subsidiaries of Marsh & McLennan Companies, Inc.
(23.1)
Consent of Independent Registered Public Accounting Firm
(24.1)
Power of Attorney (included on signature page)
(31.1)
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
(31.2)
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
(32.1)
Section 1350 Certifications
101.INS
XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
104.
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(b) of Form 10-K.
137
Item 16. Form 10-K Summary
None.
138
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MARSH & McLENNAN COMPANIES, INC.
Dated: February 20, 2020
By
/S/ DANIEL S. GLASER
Daniel S. Glaser
President and Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints Katherine J. Brennan and
Connor Kuratek, and each of them singly, such person’s lawful attorneys-in-fact and agents, with full
power to them and each of them to sign for such person, in the capacity indicated below, any and all
amendments to this Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities indicated this 20th day of
February, 2020.
Name
Title
Date
/S/ DANIEL S. GLASER
Daniel S. Glaser
/S/ MARK C. MCGIVNEY
Mark C. McGivney
/S/ STACY M. MILLS
Stacy M. Mills
/S/ ANTHONY K. ANDERSON
Anthony K. Anderson
/S/ OSCAR FANJUL
Oscar Fanjul
/S/ H. EDWARD HANWAY
H. Edward Hanway
/S/ DEBORAH C. HOPKINS
Deborah C. Hopkins
/S/ TAMARA INGRAM
Tamara Ingram
/S/ STEVEN A. MILLS
Steven A. Mills
/S/ BRUCE P. NOLOP
Bruce P. Nolop
/S/ MARC D. OKEN
Marc D. Oken
/S/ MORTON O. SCHAPIRO
Morton O. Schapiro
/S/ LLOYD M. YATES
Lloyd M. Yates
/S/ R. DAVID YOST
R. David Yost
Director, President &
Chief Executive Officer
February 20, 2020
Chief Financial Officer
February 20, 2020
Vice President & Controller
(Chief Accounting Officer)
February 20, 2020
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
Exhibit 31.1
I, Daniel S. Glaser, certify that:
CERTIFICATIONS
1. I have reviewed this Annual Report on Form 10-K of Marsh & McLennan Companies, Inc. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 20, 2020
/s/ Daniel S. Glaser
Daniel S. Glaser
President and Chief Executive Officer
Exhibit 31.2
I, Mark C. McGivney, certify that:
CERTIFICATIONS
1. I have reviewed this Annual Report on Form 10-K of Marsh & McLennan Companies, Inc. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 20, 2020
/s/ Mark C. McGivney
Mark C. McGivney
Chief Financial Officer
Exhibit 32.1
Certification of Chief Executive Officer and Chief Financial Officer
The certification set forth below is being submitted in connection with the Annual Report on Form 10-K for the year
ended December 31, 2019 of Marsh & McLennan Companies, Inc. (the "Report") for the purpose of complying with
Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Daniel S. Glaser, the President and Chief Executive Officer, and Mark C. McGivney, the Chief Financial Officer, of
Marsh & McLennan Companies, Inc. each certifies that, to the best of his knowledge:
1.
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of Marsh & McLennan Companies, Inc.
Date: February 20, 2020
Date: February 20, 2020
/s/ Daniel S. Glaser
Daniel S. Glaser
President and Chief Executive Officer
/s/ Mark C. McGivney
Mark C. McGivney
Chief Financial Officer
STOCK PERFORMANCE GRAPH
The following graph compares the annual cumulative stockholder return for the five-year period ended December 31, 2019
of Marsh & McLennan Companies common stock with the Standard & Poor’s 500® Stock Index, assuming an investment of
$100 on December 31, 2014, with dividends reinvested.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
($100 INVESTED 12/31/14 WITH DIVIDENDS REINVESTED)
225
200
175
150
125
100
2014
2015
2016
2017
2018
2019
Marsh & McLennan Companies
100
S&P 500
100
99
101
123
113
151
138
151
132
215
174
STOCKHOLDER INFORMATION
ANNUAL MEETING
The 2020 Annual Meeting of Stockholders
will be held at 10:00 a.m., Thursday,
May 21, 2020, at the principal executive
offices of Marsh & McLennan Companies, Inc.
at the following location:
1166 Avenue of the Americas
New York, NY 10036
INVESTOR INFORMATION
Stockholders of record inquiring about
reinvestment and payment of dividends,
consolidation of accounts, stock certificate
holdings, stock certificate transfers and
address changes should contact:
EQ Shareowner Services
P.O. Box 64854
St. Paul, MN 55164-0854
Telephone: 800 457 8968 or
651 450 4064 (Outside US/Canada)
Mailing Address:
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
EQ’s website:
shareowneronline.com
Stockholders who hold shares of Marsh &
McLennan Companies beneficially
through a broker, bank or other
intermediary organization should contact
that organization for these services.
DIRECT PURCHASE PLAN
Stockholders of record and other interested
investors can purchase Marsh & McLennan
Companies common stock directly through
the Company’s transfer agent and the
Administrator for the Plan, EQ Shareowner
Services. A brochure on the Plan is available
on the EQ Shareowner Services website or by
contacting EQ Shareowner Services directly:
EQ Shareowner Services
P.O. Box 64854
St. Paul, MN 55164-0854
Telephone: 800 457 8968 or
651 450 4064 (Outside US/Canada)
EQ’s website:
shareowneronline.com
FINANCIAL INFORMATION
Copies of Marsh & McLennan Companies
annual reports and Forms 10-K and
10-Q are available on the Company’s
website. These documents also may
be requested by contacting:
Marsh & McLennan Companies, Inc.
Investor Relations
1166 Avenue of the Americas
New York, NY 10036
Telephone: 212 345 1227
Website: mmc.com
STOCK LISTINGS
Marsh & McLennan Companies
common stock (NYSE ticker symbol: MMC)
is listed on the New York, Chicago
and London Stock Exchanges.
PROCEDURES FOR RAISING
COMPLAINTS AND CONCERNS
REGARDING ACCOUNTING MATTERS
Marsh & McLennan Companies is committed
to complying with all applicable accounting
standards, internal accounting controls,
audit practices and securities laws and
regulations (collectively, “Accounting
Matters”). To raise a complaint or concern
regarding Accounting Matters, you may
contact the Company by mail, telephone
or online. You may review the Company’s
procedures for handling complaints and
concerns regarding Accounting Matters
at mmc.com.
By mail:
Marsh & McLennan Companies, Inc.
Audit Committee
c/o Katherine J. Brennan,
Corporate Secretary
1166 Avenue of the Americas
New York, NY 10036
By telephone or online:
Visit ethicscomplianceline.com
for dialing instructions or to raise
a concern online.
Important Notices
Mercer may calculate worldwide assets under management differently than other responding firms. The assets under advisement data (AUA Data) reported here include aggregated assets
under advisement for Mercer Investments LLC and their affiliated companies globally (Mercer). The AUA Data have been derived from a variety of sources, including, but not limited to, third-
party custodians or investment managers, regulatory filings, and client self-reported data. Mercer has not independently verified the AUA Data. Where available, the AUA Data are provided as
of the date indicated (the Reporting Date). To the extent information was not available as of the Reporting Date, information from a date closest in time to the Reporting Date, which may be of a
date more recent in time than the Reporting Date, was included in the AUA Data. The AUA Data include assets of clients that have engaged Mercer to provide project-based services within the
12-month period ending on the Reporting Date, as well as assets of clients that subscribe to Mercer’s Manager Research database delivered through the MercerInsight® platform.
The assets under management data (the AUM Data) reported here include aggregated assets for which Mercer Investments LLC (Mercer Investments) and their global affiliates provide
discretionary investment management services as of the dates indicated. The AUM Data reported here may differ from regulatory assets under management reported in the Form ADV for
Mercer Investments. For regulatory assets under management, please see the Form ADV for Mercer Investments, which is available upon request by contacting Compliance Department,
Mercer Investments, 99 High Street, Boston, MA 02110.
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