Revenue

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

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. Under the accounting guidance, a performance obligation is satisfied either at a “point in time” or “over time” depending on the nature of the product or service provided, and the specific terms of the contract with customers.

The Company's revenue recognition guidance is provided in more detail in Note 3 of the consolidated financial statements and the notes thereto included in 2019 Form 10-K for the year ended December 31, 2019.

The following schedule disaggregates components of the Company's revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2020		2019		2020		2019
Marsh:
EMEA	$	597	$	652	$	1,351	$	1,285
Asia Pacific	298		291		536		456
Latin America	99		116		190		194
Total International	994		1,059		2,077		1,935
U.S./Canada	1,167		1,097		2,145		1,958
Total Marsh	2,161		2,156		4,222		3,893
Guy Carpenter	433		392		1,260		1,055
Subtotal	2,594		2,548		5,482		4,948
Fiduciary interest income	9		26		32		49
Total Risk and Insurance Services	$	2,603	$	2,574	$	5,514	$	4,997
Mercer:
Wealth	$	561	$	613	$	1,153	$	1,156
Health	432		458		918		900
Career	156		189		329		359
Total Mercer	1,149		1,260		2,400		2,415
Oliver Wyman	467		540		978		1,058
Total Consulting	$	1,616	$	1,800	$	3,378	$	3,473

The Company recognizes commission revenue from arrangements for a significant portion of its brokerage arrangements at a point in time at effective date of the underlying policy. Commission revenue is estimated using historical information about the risks to be covered over the policy period, some of which are dependent on variable factors such as number of employees covered, covered payroll, airline passenger miles flown, shipped tonnage of marine cargo and others.

The following schedule provides contract assets and contract liabilities information from contracts with customers.

(In millions)	June 30, 2020		December 31, 2019
Contract Assets	$	298	$	207
Contract Liabilities	$	696	$	593

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. Contract assets are included in other current assets in the Company's consolidated balance sheet. Contract liabilities primarily relate to the advance

consideration received from customers. Contract liabilities are included in current liabilities in the Company's consolidated balance sheet. Revenue recognized in the first six months of 2020 and 2019 that was included in the contract liability balance at the beginning of each of those years was $418 million and $307 million, respectively.

The amount of revenue recognized in the first six months of 2020 and 2019 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 $67 million and $36 million, respectively.

During the second quarter of 2020, the Company recorded a revenue reduction of $36 million for estimated commission revenue accounted for on a point in time basis. The reduction relates to policy periods incepted from the third quarter of 2019 through the second quarter of 2020. Insurance exposures subject to variable factors described above are subject to mid-term and end of term adjustments, as well as policy audits, which may reduce premiums and corresponding commissions.  Estimates were updated based on internal data and industry specific economic data.  Approximately $33 million of the revenue reduction is related to Marsh in the U.S. and EMEA geographies. Mercer’s revenue was reduced by approximately $3 million in the Health segment.

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 $51 million for Marsh, $220 million for Mercer and $2 million for Oliver Wyman. The Company expects revenue in 2021, 2022, 2023, 2024 and 2025 and beyond of $146 million, $71 million, $36 million, $14 million and $6 million, respectively, related to these performance obligations.