Date of report (Date of earliest event reported) | February 1, 2018 |
Marsh & McLennan Companies, Inc. |
(Exact Name of Registrant as Specified in Charter) |
Delaware | 1-5998 | 36-2668272 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
1166 Avenue of the Americas, New York, NY | 10036 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code | (212) 345-5000 |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Emerging growth company o | |
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. o |
MARSH & McLENNAN COMPANIES, INC. | |||
By: | /s/ Katherine J. Brennan | ||
Name: | Katherine J. Brennan | ||
Title: | Deputy General Counsel, Chief Compliance Officer & Corporate Secretary |
• | the impact of any investigations, reviews, market studies or other activity by regulatory or law enforcement authorities, including the recently-announced UK FCA wholesale insurance broker market study and the ongoing investigations by the European Commission; |
• | 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 organization's ability to maintain adequate safeguards to protect the security of our information systems and confidential, personal or proprietary information, particularly given the volume of our vendor network and the need to patch software vulnerabilities; |
• | our ability to compete effectively and adapt to changes in the competitive environment, including to respond to disintermediation, digital disruption and other types of innovation; |
• | the financial and operational impact of complying with laws and regulations where we operate, including cybersecurity and data privacy regulations such as the E.U.’s General Data Protection Regulation, anti-corruption laws and trade sanctions regimes; |
• | the regulatory, contractual and reputational risks that arise based on insurance placement activities and various broker revenue streams; |
• | the extent to which we manage risks associated with the various services, including fiduciary and investments and other advisory services; |
• | our ability to successfully recover if we experience a business continuity problem due to cyberattack, natural disaster or otherwise; |
• | the impact of changes in tax laws, guidance and interpretations, including related to certain provisions of the U.S. Tax Cuts and Jobs Act, or disagreements with tax authorities; |
• | the impact of fluctuations in foreign exchange and interest rates on our results; |
• | the impact of macroeconomic, political, regulatory or market conditions on us, our clients and the industries in which we operate; and |
• | the impact of changes in accounting rules or in our accounting estimates or assumptions, including the impact of the adoption of the new revenue recognition and pension accounting standards. |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Revenue | $ | 3,685 | $ | 3,364 | $ | 14,024 | $ | 13,211 | |||||||||
Expense: | |||||||||||||||||
Compensation and Benefits | 2,098 | 1,918 | 7,884 | 7,461 | |||||||||||||
Other Operating Expenses | 901 | 813 | 3,284 | 3,086 | |||||||||||||
Operating Expenses | 2,999 | 2,731 | 11,168 | 10,547 | |||||||||||||
Operating Income | 686 | 633 | 2,856 | 2,664 | |||||||||||||
Interest Income | 3 | 1 | 9 | 5 | |||||||||||||
Interest Expense | (59 | ) | (48 | ) | (237 | ) | (189 | ) | |||||||||
Investment Income | 12 | 2 | 15 | — | |||||||||||||
Income Before Income Taxes | 642 | 588 | 2,643 | 2,480 | |||||||||||||
Income Tax Expense | 614 | 147 | 1,133 | 685 | |||||||||||||
Income from Continuing Operations | 28 | 441 | 1,510 | 1,795 | |||||||||||||
Discontinued Operations, Net of Tax | 2 | — | 2 | — | |||||||||||||
Net Income Before Non-Controlling Interests | 30 | 441 | 1,512 | 1,795 | |||||||||||||
Less: Net Income Attributable to Non-Controlling Interests | 1 | 5 | 20 | 27 | |||||||||||||
Net Income Attributable to the Company | $ | 29 | $ | 436 | $ | 1,492 | $ | 1,768 | |||||||||
Basic Net Income Per Share | |||||||||||||||||
- Continuing Operations | $ | 0.05 | $ | 0.85 | $ | 2.91 | $ | 3.41 | |||||||||
- Net Income Attributable to the Company | $ | 0.06 | $ | 0.85 | $ | 2.91 | $ | 3.41 | |||||||||
Diluted Net Income Per Share | |||||||||||||||||
- Continuing Operations | $ | 0.05 | $ | 0.84 | $ | 2.87 | $ | 3.38 | |||||||||
- Net Income Attributable to the Company | $ | 0.06 | $ | 0.84 | $ | 2.87 | $ | 3.38 | |||||||||
Average Number of Shares Outstanding | |||||||||||||||||
- Basic | 510 | 515 | 513 | 519 | |||||||||||||
- Diluted | 517 | 521 | 519 | 524 | |||||||||||||
Shares Outstanding at 12/31 | 509 | 514 | 509 | 514 |
Components of Revenue Change* | ||||||||||||||||||||
Three Months Ended December 31, | % Change GAAP Revenue | Currency Impact | Acquisitions/ Dispositions Impact | Underlying Revenue | ||||||||||||||||
2017 | 2016 | |||||||||||||||||||
Risk and Insurance Services | ||||||||||||||||||||
Marsh | $ | 1,712 | $ | 1,565 | 9 | % | 1 | % | 6 | % | 3 | % | ||||||||
Guy Carpenter | 239 | 222 | 8 | % | 1 | % | — | 7 | % | |||||||||||
Subtotal | 1,951 | 1,787 | 9 | % | 1 | % | 5 | % | 3 | % | ||||||||||
Fiduciary Interest Income | 11 | 6 | ||||||||||||||||||
Total Risk and Insurance Services | 1,962 | 1,793 | 9 | % | 1 | % | 5 | % | 3 | % | ||||||||||
Consulting | ||||||||||||||||||||
Mercer | 1,193 | 1,096 | 9 | % | 2 | % | 2 | % | 4 | % | ||||||||||
Oliver Wyman Group | 546 | 486 | 12 | % | 3 | % | — | 9 | % | |||||||||||
Total Consulting | 1,739 | 1,582 | 10 | % | 2 | % | 2 | % | 6 | % | ||||||||||
Corporate / Eliminations | (16 | ) | (11 | ) | ||||||||||||||||
Total Revenue | $ | 3,685 | $ | 3,364 | 10 | % | 2 | % | 3 | % | 4 | % |
Components of Revenue Change* | ||||||||||||||||||||
Three Months Ended December 31, | % Change GAAP Revenue | Currency Impact | Acquisitions/ Dispositions Impact | Underlying Revenue | ||||||||||||||||
2017 | 2016 | |||||||||||||||||||
Marsh: | ||||||||||||||||||||
EMEA | $ | 521 | $ | 481 | 8 | % | 4 | % | 7 | % | (3 | )% | ||||||||
Asia Pacific | 161 | 153 | 5 | % | 1 | % | — | 5 | % | |||||||||||
Latin America | 130 | 122 | 7 | % | (5 | )% | 3 | % | 9 | % | ||||||||||
Total International | 812 | 756 | 8 | % | 2 | % | 5 | % | 1 | % | ||||||||||
U.S. / Canada | 900 | 809 | 11 | % | — | 6 | % | 4 | % | |||||||||||
Total Marsh | $ | 1,712 | $ | 1,565 | 9 | % | 1 | % | 6 | % | 3 | % | ||||||||
Mercer: | ||||||||||||||||||||
Defined Benefit Consulting & Administration | $ | 371 | $ | 364 | 2 | % | 3 | % | (2 | )% | 1 | % | ||||||||
Investment Management & Related Services | 195 | 152 | 28 | % | 2 | % | 14 | % | 12 | % | ||||||||||
Total Wealth | 566 | 516 | 10 | % | 3 | % | 3 | % | 4 | % | ||||||||||
Health | 409 | 381 | 7 | % | 1 | % | 2 | % | 3 | % | ||||||||||
Career | 218 | 199 | 10 | % | 2 | % | 2 | % | 6 | % | ||||||||||
Total Mercer | $ | 1,193 | $ | 1,096 | 9 | % | 2 | % | 2 | % | 4 | % |
Underlying revenue measures the change in revenue using consistent currency exchange rates, excluding the impact of certain items that affect comparability such as: acquisitions, dispositions, transfers among businesses and the deconsolidation of Marsh India. |
Effective January 1, 2017, Mercer established a Wealth business reflecting a unified client strategy for its former Retirement and Investment business. The 2016 information in the chart above has been conformed to the current presentation. Please refer to the "Supplemental Information - Mercer" schedules included in the first quarter 2017 press release for additional information about the Wealth business. |
* Components of revenue change may not add due to rounding. |
Components of Revenue Change* | ||||||||||||||||||||
Twelve Months Ended December 31, | % Change GAAP Revenue | Currency Impact | Acquisitions/ Dispositions Impact | Underlying Revenue | ||||||||||||||||
2017 | 2016 | |||||||||||||||||||
Risk and Insurance Services | ||||||||||||||||||||
Marsh | $ | 6,404 | $ | 5,976 | 7 | % | — | 5 | % | 3 | % | |||||||||
Guy Carpenter | 1,187 | 1,141 | 4 | % | — | — | 4 | % | ||||||||||||
Subtotal | 7,591 | 7,117 | 7 | % | — | 4 | % | 3 | % | |||||||||||
Fiduciary Interest Income | 39 | 26 | ||||||||||||||||||
Total Risk and Insurance Services | 7,630 | 7,143 | 7 | % | — | 4 | % | 3 | % | |||||||||||
Consulting | ||||||||||||||||||||
Mercer | 4,528 | 4,323 | 5 | % | — | 2 | % | 2 | % | |||||||||||
Oliver Wyman Group | 1,916 | 1,789 | 7 | % | — | — | 7 | % | ||||||||||||
Total Consulting | 6,444 | 6,112 | 5 | % | — | 2 | % | 4 | % | |||||||||||
Corporate / Eliminations | (50 | ) | (44 | ) | ||||||||||||||||
Total Revenue | $ | 14,024 | $ | 13,211 | 6 | % | — | 3 | % | 3 | % |
Components of Revenue Change* | ||||||||||||||||||||
Twelve Months Ended December 31, | % Change GAAP Revenue | Currency Impact | Acquisitions/ Dispositions Impact | Underlying Revenue | ||||||||||||||||
2017 | 2016 | |||||||||||||||||||
Marsh: | ||||||||||||||||||||
EMEA | $ | 2,033 | $ | 1,924 | 6 | % | (1 | )% | 7 | % | — | |||||||||
Asia Pacific | 645 | 635 | 2 | % | — | (5 | )% | 6 | % | |||||||||||
Latin America | 404 | 374 | 8 | % | (3 | )% | 3 | % | 7 | % | ||||||||||
Total International | 3,082 | 2,933 | 5 | % | (1 | )% | 4 | % | 2 | % | ||||||||||
U.S. / Canada | 3,322 | 3,043 | 9 | % | — | 6 | % | 4 | % | |||||||||||
Total Marsh | $ | 6,404 | $ | 5,976 | 7 | % | — | 5 | % | 3 | % | |||||||||
Mercer: | ||||||||||||||||||||
Defined Benefit Consulting & Administration | $ | 1,381 | $ | 1,447 | (5 | )% | (1 | )% | (2 | )% | (2 | )% | ||||||||
Investment Management & Related Services | 767 | 606 | 26 | % | 1 | % | 15 | % | 10 | % | ||||||||||
Total Wealth | 2,148 | 2,053 | 5 | % | — | 3 | % | 2 | % | |||||||||||
Health | 1,648 | 1,588 | 4 | % | — | 2 | % | 2 | % | |||||||||||
Career | 732 | 682 | 7 | % | — | 2 | % | 5 | % | |||||||||||
Total Mercer | $ | 4,528 | $ | 4,323 | 5 | % | — | 2 | % | 2 | % |
Underlying revenue measures the change in revenue using consistent currency exchange rates, excluding the impact of certain items that affect comparability such as: acquisitions, dispositions, transfers among businesses and the deconsolidation of Marsh India. |
Effective January 1, 2017, Mercer established a Wealth business reflecting a unified client strategy for its former Retirement and Investment business. The 2016 information in the chart above has been conformed to the current presentation. Please refer to the "Supplemental Information - Mercer" schedules included in the first quarter 2017 press release for additional information about the Wealth business. |
* Components of revenue change may not add due to rounding. |
Overview |
The Company reports its financial results in accordance with accounting principles generally accepted in the United States (referred to in this release as "GAAP" or “reported” results). The Company also refers to and presents below certain additional non-GAAP financial measures, within the meaning of Regulation G under the Securities Exchange Act of 1934. These measures are: adjusted operating income (loss), adjusted operating margin, adjusted income, net of tax and adjusted earnings per share (EPS). The Company has included reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP in the following tables. |
The Company believes these non-GAAP financial measures provide useful supplemental information that enables investors to better compare the Company’s performance across periods. Management also uses these measures internally to assess the operating performance of its businesses, to assess performance for employee compensation purposes and to decide how to allocate resources. However, investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP. The Company's non-GAAP measures include adjustments that reflect how management views our businesses, and may differ from similarly titled non-GAAP measures presented by other companies. |
Adjusted Operating Income (Loss) and Adjusted Operating Margin |
Adjusted operating income (loss) is calculated by excluding the impact of certain noteworthy items from the Company's GAAP operating income or loss. The following tables identify these noteworthy items and reconcile adjusted operating income (loss) to GAAP operating income or loss, on a consolidated and segment basis, for the three and twelve months ended December 31, 2017 and 2016. The following tables also present adjusted operating margin. For the three and twelve months ended December 31, 2017 and 2016, adjusted operating margin is calculated by dividing adjusted operating income by consolidated or segment GAAP revenue less, where applicable, the net gain on the deconsolidation of Marsh's India subsidiary and the proceeds related to the disposal of Mercer's U.S. defined contribution recordkeeping business. |
Risk & Insurance Services | Consulting | Corporate/ Eliminations | Total | |||||||||||||
Three Months Ended December 31, 2017 | ||||||||||||||||
Operating income (loss) | $ | 416 | $ | 321 | $ | (51 | ) | $ | 686 | |||||||
Add impact of Noteworthy Items: | ||||||||||||||||
Restructuring (a) | 4 | 1 | 3 | 8 | ||||||||||||
Adjustments to acquisition related accounts (b) | 5 | 1 | — | 6 | ||||||||||||
Pension settlement charge (c) | 47 | 7 | — | 54 | ||||||||||||
Other | 1 | — | — | 1 | ||||||||||||
Operating income adjustments | 57 | 9 | 3 | 69 | ||||||||||||
Adjusted operating income (loss) | $ | 473 | $ | 330 | $ | (48 | ) | $ | 755 | |||||||
Operating margin | 21.2 | % | 18.5 | % | N/A | 18.6 | % | |||||||||
Adjusted operating margin | 24.1 | % | 19.0 | % | N/A | 20.5 | % | |||||||||
Three Months Ended December 31, 2016 | ||||||||||||||||
Operating income (loss) | $ | 413 | $ | 265 | $ | (45 | ) | $ | 633 | |||||||
Add impact of Noteworthy Items: | ||||||||||||||||
Restructuring (a) | 1 | 33 | 1 | 35 | ||||||||||||
Adjustments to acquisition related accounts (b) | 5 | 1 | — | 6 | ||||||||||||
Deconsolidation of business (d) | 1 | — | — | 1 | ||||||||||||
Other | 1 | — | — | 1 | ||||||||||||
Operating income adjustments | 8 | 34 | 1 | 43 | ||||||||||||
Adjusted operating income (loss) | $ | 421 | $ | 299 | $ | (44 | ) | $ | 676 | |||||||
Operating margin | 23.0 | % | 16.8 | % | N/A | 18.8 | % | |||||||||
Adjusted operating margin | 23.5 | % | 18.9 | % | N/A | 20.1 | % |
(a) 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. |
(b) Primarily includes the change in fair value as measured each quarter of contingent consideration related to acquisitions. |
(c) Pension settlement charge resulting from lump sum settlements elected by participants in certain U.K. pension plans. Recognition of these payments as a partial settlement was required because in each respective plan the lump sum payments exceeded the total of interest and service cost for the year. |
(d) Relates to net gain on the deconsolidation of Marsh India. |
Adjusted Operating Income (Loss) and Adjusted Operating Margin (cont’d) |
Risk & Insurance Services | Consulting | Corporate/ Eliminations | Total | |||||||||||||
Twelve Months Ended December 31, 2017 | ||||||||||||||||
Operating income (loss) | $ | 1,871 | $ | 1,174 | $ | (189 | ) | $ | 2,856 | |||||||
Add impact of Noteworthy Items: | ||||||||||||||||
Restructuring (a) | 11 | 19 | 10 | 40 | ||||||||||||
Adjustments to acquisition related accounts (b) | — | 3 | — | 3 | ||||||||||||
Other Settlement, Legal and Regulatory (c) | 15 | — | — | 15 | ||||||||||||
Pension settlement charge (d) | 47 | 7 | — | 54 | ||||||||||||
Other | 1 | — | — | 1 | ||||||||||||
Operating income adjustments | 74 | 29 | 10 | 113 | ||||||||||||
Adjusted operating income (loss) | $ | 1,945 | $ | 1,203 | $ | (179 | ) | $ | 2,969 | |||||||
Operating margin | 24.5 | % | 18.2 | % | N/A | 20.4 | % | |||||||||
Adjusted operating margin | 25.5 | % | 18.7 | % | N/A | 21.2 | % | |||||||||
Twelve Months Ended December 31, 2016 | ||||||||||||||||
Operating income (loss) | $ | 1,753 | $ | 1,103 | $ | (192 | ) | $ | 2,664 | |||||||
Add (Deduct) impact of Noteworthy Items: | ||||||||||||||||
Restructuring (a) | 3 | 34 | 7 | 44 | ||||||||||||
Adjustments to acquisition related accounts (b) | 12 | 3 | — | 15 | ||||||||||||
Disposal/deconsolidation of business (e) | (11 | ) | (6 | ) | — | (17 | ) | |||||||||
Other | 2 | — | — | 2 | ||||||||||||
Operating income adjustments | 6 | 31 | 7 | 44 | ||||||||||||
Adjusted operating income (loss) | $ | 1,759 | $ | 1,134 | $ | (185 | ) | $ | 2,708 | |||||||
Operating margin | 24.5 | % | 18.1 | % | N/A | 20.2 | % | |||||||||
Adjusted operating margin | 24.7 | % | 18.6 | % | N/A | 20.5 | % |
(a) Includes severance and related charges from restructuring activities and the Mercer business restructure (initially announced in Q4 2016), adjustments to restructuring liabilities related to future rent under non-cancellable leases and other real estate costs, as well as restructuring costs related to the integration of recent acquisitions. |
(b) Primarily includes the change in fair value as measured each quarter of contingent consideration related to acquisitions. |
(c) Reflects the settlement of the final legacy litigation, originally filed in 2006, regarding Marsh’s use of market service agreements. |
(d) Pension settlement charge resulting from lump sum settlements elected by participants in certain U.K. pension plans. Recognition of these payments as a partial settlement was required because in each respective plan the lump sum payments exceeded the total of interest and service cost for the year. |
(e) Relates to a net gain on the deconsolidation of Marsh India and contingent proceeds related to the disposal of Mercer's U.S. defined contribution recordkeeping business. The amounts are excluded from GAAP revenue in the calculation of adjusted operating margin. |
Adjusted income, net of tax and Adjusted Earnings per Share |
Adjusted income, net of tax is calculated as the Company's GAAP income from continuing operations, adjusted to reflect the after-tax impact of the operating income adjustments set forth in the preceding tables and the impact related to recently enacted U.S. tax reform legislation. Adjusted EPS is calculated by dividing the Company’s adjusted income, net of tax, by MMC's average number of shares outstanding-diluted for the relevant period. The following tables reconcile adjusted income, net of tax to GAAP income from continuing operations and adjusted EPS to GAAP EPS for the three and twelve months ended December 31, 2017 and 2016. |
Three Months Ended December 31, 2017 | Three Months Ended December 31, 2016 | |||||||||||||||||||||||
Amount | Adjusted EPS | Amount | Adjusted EPS | |||||||||||||||||||||
Income from continuing operations | $ | 28 | $ | 441 | ||||||||||||||||||||
Less: Non-controlling interest, net of tax | 1 | 5 | ||||||||||||||||||||||
Subtotal | $ | 27 | $ | 0.05 | $ | 436 | $ | 0.84 | ||||||||||||||||
Operating income adjustments | $ | 69 | $ | 43 | ||||||||||||||||||||
Impact of income taxes | (12 | ) | (14 | ) | ||||||||||||||||||||
Subtotal | 57 | 29 | ||||||||||||||||||||||
Impact of U.S. tax reform* | 460 | — | ||||||||||||||||||||||
517 | 1.00 | 29 | 0.05 | |||||||||||||||||||||
Adjusted income, net of tax | $ | 544 | $ | 1.05 | $ | 465 | $ | 0.89 | ||||||||||||||||
Twelve Months Ended December 31, 2017 | Twelve Months Ended December 31, 2016 | |||||||||||||||||||||||
Amount | Adjusted EPS | Amount | Adjusted EPS | |||||||||||||||||||||
Income from continuing operations | $ | 1,510 | $ | 1,795 | ||||||||||||||||||||
Less: Non-controlling interest, net of tax | 20 | 27 | ||||||||||||||||||||||
Subtotal | $ | 1,490 | $ | 2.87 | $ | 1,768 | $ | 3.38 | ||||||||||||||||
Operating income adjustments | $ | 113 | $ | 44 | ||||||||||||||||||||
Impact of income taxes | (28 | ) | (21 | ) | ||||||||||||||||||||
Subtotal | 85 | 23 | ||||||||||||||||||||||
Impact of U.S. tax reform* | 460 | — | ||||||||||||||||||||||
545 | 1.05 | 23 | 0.04 | |||||||||||||||||||||
Adjusted income, net of tax | $ | 2,035 | $ | 3.92 | $ | 1,791 | $ | 3.42 | ||||||||||||||||
*The provisional estimates are based on the Company's initial analysis of the Tax Cuts and Jobs Act (the "Act"). Given the significant complexity of the Act, anticipated guidance from the U.S. Treasury about implementing the Act, and the potential for additional guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board related to the Act, these estimates may be adjusted during 2018. |
Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Consolidated | |||||||||||||||||
Compensation and Benefits | $ | 2,098 | $ | 1,918 | $ | 7,884 | $ | 7,461 | |||||||||
Other operating expenses | 901 | 813 | 3,284 | 3,086 | |||||||||||||
Total Expenses | $ | 2,999 | $ | 2,731 | $ | 11,168 | $ | 10,547 | |||||||||
Depreciation and amortization expense | $ | 78 | $ | 77 | $ | 312 | $ | 308 | |||||||||
Identified intangible amortization expense | 47 | 31 | 169 | 130 | |||||||||||||
Total | $ | 125 | $ | 108 | $ | 481 | $ | 438 | |||||||||
Stock option expense | $ | 1 | $ | 3 | $ | 20 | $ | 21 | |||||||||
Capital expenditures | $ | 85 | $ | 79 | $ | 302 | $ | 253 | |||||||||
Risk and Insurance Services | |||||||||||||||||
Compensation and Benefits | $ | 1,084 | $ | 953 | $ | 4,031 | $ | 3,732 | |||||||||
Other operating expenses | 462 | 427 | 1,728 | 1,658 | |||||||||||||
Total Expenses | $ | 1,546 | $ | 1,380 | $ | 5,759 | $ | 5,390 | |||||||||
Depreciation and amortization expense | $ | 37 | $ | 34 | $ | 143 | $ | 139 | |||||||||
Identified intangible amortization expense | 39 | 26 | 139 | 109 | |||||||||||||
Total | $ | 76 | $ | 60 | $ | 282 | $ | 248 | |||||||||
Consulting | |||||||||||||||||
Compensation and Benefits | $ | 926 | $ | 879 | $ | 3,509 | $ | 3,385 | |||||||||
Other operating expenses | 492 | 438 | 1,761 | 1,624 | |||||||||||||
Total Expenses | $ | 1,418 | $ | 1,317 | $ | 5,270 | $ | 5,009 | |||||||||
Depreciation and amortization expense | $ | 23 | $ | 25 | $ | 99 | $ | 100 | |||||||||
Identified intangible amortization expense | 8 | 5 | 30 | 21 | |||||||||||||
Total | $ | 31 | $ | 30 | $ | 129 | $ | 121 | |||||||||
December 31, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,205 | $ | 1,026 | ||||
Net receivables | 4,133 | 3,643 | ||||||
Other current assets | 224 | 215 | ||||||
Total current assets | 5,562 | 4,884 | ||||||
Goodwill and intangible assets | 10,363 | 9,495 | ||||||
Fixed assets, net | 712 | 725 | ||||||
Pension related assets | 1,693 | 776 | ||||||
Deferred tax assets | 669 | 1,097 | ||||||
Other assets | 1,430 | 1,213 | ||||||
TOTAL ASSETS | $ | 20,429 | $ | 18,190 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 262 | $ | 312 | ||||
Accounts payable and accrued liabilities | 2,083 | 1,969 | ||||||
Accrued compensation and employee benefits | 1,718 | 1,655 | ||||||
Accrued income taxes | 199 | 146 | ||||||
Total current liabilities | 4,262 | 4,082 | ||||||
Fiduciary liabilities | 4,847 | 4,241 | ||||||
Less - cash and investments held in a fiduciary capacity | (4,847 | ) | (4,241 | ) | ||||
— | — | |||||||
Long-term debt | 5,225 | 4,495 | ||||||
Pension, post-retirement and post-employment benefits | 1,888 | 2,076 | ||||||
Liabilities for errors and omissions | 301 | 308 | ||||||
Other liabilities | 1,311 | 957 | ||||||
Total equity | 7,442 | 6,272 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 20,429 | $ | 18,190 |
On January 1, 2018, new accounting guidance became effective that changes the presentation of net periodic pension and postretirement benefit cost ("net benefit cost") under ASC 715. Under the new standard, the service cost component of net benefit cost will continue to be included in compensation and benefit costs in operating income. All other components of net benefit cost, which include interest cost, expected return on plan assets, amortization of gains and losses and settlements costs or credits, will be reported in a separate line item below operating income. This change in presentation will have no impact on income before income taxes, net income, earnings per share or cash flow. To aid investors in their understanding of these presentation changes, the tables below provide the restatements of both 2017 and 2016 results that will be reflected when the Company files its 2018 financial statements. |
2016 | 2017 | |||||||||||||||||||||||
Consolidated Income Statements | FY | Q1 | Q2 | Q3 | Q4 | FY | ||||||||||||||||||
Revenue | $ | 13,211 | $ | 3,503 | $ | 3,495 | $ | 3,341 | $ | 3,685 | $ | 14,024 | ||||||||||||
Expense: | ||||||||||||||||||||||||
Compensation and Benefits As Reported | 7,461 | 1,945 | 1,935 | 1,906 | 2,098 | 7,884 | ||||||||||||||||||
Add: Other Net Benefit Credits (a) | 233 | 60 | 63 | 62 | 16 | 201 | ||||||||||||||||||
Compensation and Benefits As Restated | 7,694 | 2,005 | 1,998 | 1,968 | 2,114 | 8,085 | ||||||||||||||||||
Other Operating Expenses | 3,086 | 749 | 796 | 838 | 901 | 3,284 | ||||||||||||||||||
Operating Expenses As Restated | 10,780 | 2,754 | 2,794 | 2,806 | 3,015 | 11,369 | ||||||||||||||||||
Operating Income As Restated | 2,431 | 749 | 701 | 535 | 670 | 2,655 | ||||||||||||||||||
Other Net Benefit Credits (a) | 233 | 60 | 63 | 62 | 16 | 201 | ||||||||||||||||||
Interest Income | 5 | 2 | 2 | 2 | 3 | 9 | ||||||||||||||||||
Interest Expense | (189 | ) | (58 | ) | (60 | ) | (60 | ) | (59 | ) | (237 | ) | ||||||||||||
Investment Income (Loss) | — | — | 5 | (2 | ) | 12 | 15 | |||||||||||||||||
Income Before Income Taxes | $ | 2,480 | $ | 753 | $ | 711 | $ | 537 | $ | 642 | $ | 2,643 |
Operating Income and Margin | ||||||||||||||||||||||||
Risk and Insurance Services | ||||||||||||||||||||||||
GAAP Operating Income | ||||||||||||||||||||||||
Originally Reported | $ | 1,753 | $ | 613 | $ | 528 | $ | 314 | $ | 416 | $ | 1,871 | ||||||||||||
Other Net Benefit Credits (a) | (172 | ) | (45 | ) | (46 | ) | (46 | ) | (3 | ) | (140 | ) | ||||||||||||
As Restated | $ | 1,581 | $ | 568 | $ | 482 | $ | 268 | $ | 413 | $ | 1,731 | ||||||||||||
GAAP Operating Margin | ||||||||||||||||||||||||
Originally Reported | 24.5 | % | 30.8 | % | 27.5 | % | 17.8 | % | 21.2 | % | 24.5 | % | ||||||||||||
As Restated | 22.1 | % | 28.6 | % | 25.2 | % | 15.2 | % | 21.0 | % | 22.7 | % | ||||||||||||
Consulting | ||||||||||||||||||||||||
GAAP Operating Income | ||||||||||||||||||||||||
Originally Reported | $ | 1,103 | $ | 241 | $ | 283 | $ | 329 | $ | 321 | $ | 1,174 | ||||||||||||
Other Net Benefit Credits (a) | (65 | ) | (16 | ) | (18 | ) | (18 | ) | (12 | ) | (64 | ) | ||||||||||||
As Restated | $ | 1,038 | $ | 225 | $ | 265 | $ | 311 | $ | 309 | $ | 1,110 | ||||||||||||
GAAP Operating Margin | ||||||||||||||||||||||||
Originally Reported | 18.1 | % | 15.8 | % | 17.8 | % | 20.7 | % | 18.5 | % | 18.2 | % | ||||||||||||
As Restated | 17.0 | % | 14.7 | % | 16.6 | % | 19.6 | % | 17.8 | % | 17.2 | % | ||||||||||||
Consolidated | ||||||||||||||||||||||||
GAAP Operating Income | ||||||||||||||||||||||||
Originally Reported | $ | 2,664 | $ | 809 | $ | 764 | $ | 597 | $ | 686 | $ | 2,856 | ||||||||||||
Other Net Benefit Credits (a) | (233 | ) | (60 | ) | (63 | ) | (62 | ) | (16 | ) | (201 | ) | ||||||||||||
As Restated | $ | 2,431 | $ | 749 | $ | 701 | $ | 535 | $ | 670 | $ | 2,655 | ||||||||||||
GAAP Operating Margin | ||||||||||||||||||||||||
Originally Reported | 20.2 | % | 23.1 | % | 21.9 | % | 17.9 | % | 18.6 | % | 20.4 | % | ||||||||||||
As Restated | 18.4 | % | 21.4 | % | 20.1 | % | 16.0 | % | 18.2 | % | 18.9 | % | ||||||||||||
(a) The net benefit credit in the fourth quarter of 2017 includes the U.K. pension settlement charge of $54 million, which is excluded from our adjusted results. |