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Fair Value Measurements

12 Months Ended

Dec. 31, 2023

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. 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 measured 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)quoted prices for similar assets or liabilities in active markets;

b)quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);

c)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

d)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 are related to 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.

Assets and liabilities measured using Level 3 inputs relate to assets and liabilities for contingent purchase consideration.

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 at a readily determinable price.

Contingent Purchase Consideration Assets and Liabilities - Level 3

Purchase consideration for some acquisitions and dispositions made by the Company includes contingent consideration arrangements. Contingent consideration arrangements are based primarily on EBITDA or revenue targets over a period of 2 to 4 years. The fair value of the contingent purchase consideration asset and liability is estimated as the present value of future cash flows to be paid, based on projections of revenue and earnings and related targets of the acquired and disposed entities.

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2023 and 2022:


(In millions)	Identical Assets (Level 1)				Observable Inputs (Level 2)				Unobservable Inputs (Level 3)				Total
	12/31/23		12/31/22		12/31/23		12/31/22		12/31/23		12/31/22		12/31/23		12/31/22
Assets:
Financial instruments owned:
Exchange traded equity securities (a)	$	5	$	6	$	—	$	—	$	—	$	—	$	5	$	6
Mutual funds (a)	178		162		—		—		—		—		178		162
Money market funds (b)	606		146		—		—		—		—		606		146
Other equity investment (a)	—		—		—		13		—		—		—		13
Contingent purchase consideration asset (c)	—		—		—		—		1		3		1		3

Total assets measured at fair value	$	789	$	314	$	—	$	13	$	1	$	3	$	790	$	330
Fiduciary Assets:




Money market funds	180		201		—		—		—		—		180		201

Total fiduciary assets measured at fair value	$	180	$	201	$	—	$	—	$	—	$	—	$	180	$	201
Liabilities:
Contingent purchase consideration liability (d)	$	—	$	—	$	—	$	—	$	252	$	377	$	252	$	377

Total liabilities measured at fair value	$	—	$	—	$	—	$	—	$	252	$	377	$	252	$	377

(a) Included in other assets in the consolidated balance sheets.

(b) Included in cash and cash equivalents in the consolidated balance sheets.

(d) Included in accounts payable and accrued liabilities and other liabilities in the consolidated balance sheets.

The Level 3 assets in the table reflect contingent purchase consideration from the sale of businesses. The change in the contingent purchase consideration assets from December 31, 2022 is driven primarily by cash receipts of approximately $3 million.

In 2023 and 2022, there were no assets or liabilities that were transferred between levels.

The following table sets forth a summary of the changes in fair value of the Company’s Level 3 liabilities for the years ended December 31, 2023 and December 31, 2022.


(In millions)	2023		2022
Balance at January 1,	$	377	$	352
Net additions	22		46
Payments	(176)		(70)
Revaluation impact	29		49


Balance at December 31,	$	252	$	377

Long-Term Investments

The Company holds investments in public and private companies as well as certain private equity investments that are accounted for using the equity method of accounting. The carrying value of these investments was $266 million and $215 million at December 31, 2023 and 2022, respectively.

Investments in Public and Private Companies

The Company has investments in private insurance and consulting companies with a carrying value of $63 million and $56 million at December 31, 2023 and 2022, respectively. These investments are accounted for using the equity method of accounting, the results of which are included in revenue in the consolidated statements of income 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, some of which are on a one quarter lag basis. In December 2021, the Company increased its ownership in Marsh India from 49% to 92%. Prior to the increase in ownership, the Company accounted for the investment under the equity method of accounting.

Private Equity Investments

The Company's investments in private equity funds were $203 million and $159 million at December 31, 2023 and 2022, 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 its proportionate share of the change in fair value of the funds in the investment income line in the consolidated statements of income. These investments are included in other assets in the consolidated balance sheets. The Company recorded net investment income from these investments of $7 million, $18 million and $56 million in 2023, 2022 and 2021, respectively.

At December 31, 2023, the Company has commitments for potential future investments of approximately $121 million in private equity funds that invest primarily in financial services companies.

Other Investments

The Company held certain equity investments with readily determinable market values at December 31, 2023 and 2022, of $16 million and $17 million, respectively. In 2023, the Company recorded a mark-to-market loss on these investments of $1 million, and mark-to-market gains of $11 million and $5 million in 2022 and 2021, respectively.

The Company also held investments without readily determinable market values of $20 million and $42 million at December 31, 2023 and 2022, respectively. In 2023, the Company recorded a net loss of $1 million on these investments. In 2022, the Company sold certain of these investments for cash proceeds of approximately $62 million, including its remaining investment in the common stock of Alexander Forbes, and recorded a net loss of $4 million.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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