MARSH & MCLENNAN COMPANIES, INC. (MRSH) FY 2021 MD&A

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 in the areas of risk, strategy and people. The Company’s 83,000 colleagues advise clients in over 130 countries. With annual revenue of nearly $20 billion, the Company helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses. Marsh provides data-driven risk advisory services and insurance solutions to commercial and consumer clients. Guy Carpenter develops advanced risk, reinsurance and capital strategies that help clients grow profitably and identify and capitalize on emerging opportunities. Mercer delivers advice and solutions that help organizations create a dynamic world of work, shape retirement and investment outcomes, and unlock health and well being for a changing workforce. Oliver

Wyman Group serves as critical strategic, economic and brand advisor to private sector and governmental clients.

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.

The results of operations in the Management Discussion & Analysis ("MD&A") includes an overview of the Company’s consolidated 2021 results compared to the 2020 results, and should be read in conjunction with the consolidated financial statements and notes. This section also includes a discussion of the key drivers impacting the Company’s financial results of operations both on a consolidated basis and by reportable segments.

We describe the primary sources of revenue and categories of expense for each segment in the discussion of segment financial results. A reconciliation of segment operating income to total operating income is included in Note 17, Segment Information, in the notes to the consolidated financial statements included in Part II, Item 8 in this report.

For information and comparability of the Company's results of operations and liquidity and capital resources for fiscal 2019, including the impact from the acquisition of Jardine Lloyd Thompson Group plc ("JLT"), 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, 2020.

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.

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Financial Highlights

•Consolidated revenue for the year 2021 was $19.8 billion, an increase of 15% compared with 2020, or 10% on an underlying basis.

•Consolidated operating income increased $1.2 billion, or 41% to $4.3 billion in 2021 compared to $3.1 billion in 2020. Net income attributable to the Company was $3.1 billion. Earnings per share increased 56% to $6.13.

•Risk and Insurance Services revenue for the year 2021 was $12.1 billion, an increase of 17%, or 10% on an underlying basis. Operating income was $3.1 billion, compared to $2.3 billion in 2020.

•Consulting revenue for the year 2021 was $7.8 billion, an increase of 12%, or 10% on an underlying basis. Operating income was $1.5 billion, compared with $1.0 billion in 2020.

•In 2021, Marsh McLennan Agency ("MMA") completed a number of transactions, including the acquisition of PayneWest, one of the largest independent agencies in the U.S.

•In December 2021, the Company increased its ownership in Marsh India Insurance Brokers Pvt. Ltd.("Marsh India") from 49% to 92%.

•For the year ended December 31, 2021, the Company repurchased 7.9 million shares for $1.2 billion.

•In 2021, the Company raised $750 million of senior notes and repaid $500 million of senior notes in April 2021, and $500 million in December 2021 due in January 2022.

For additional details, refer to the Consolidated Results of Operations and Liquidity and Capital Resources sections in this MD&A.

Business Update Related To COVID-19

The World Health Organization declared COVID-19 a pandemic in March 2020. For almost two years, the pandemic has impacted businesses globally including virtually every geography in which the Company operates. Our businesses have been resilient throughout the pandemic and demand for our advice and services remains strong as the global economic conditions continue to improve.

Although the majority of our colleagues continue to work remotely, the Company has provided guidelines on return to the office depending on the level of virus containment and local health and safety regulations in each geography. The safety and well-being of our colleagues is paramount and the Company expects to continue to service clients effectively in both the remote and in-office environments.

The Company had strong revenue growth in 2021 and benefited from the continued recovery of the global economy. However, uncertainty remains in the economic outlook and the ultimate extent of the impact of COVID-19 to the Company will depend on future developments that it is unable to predict, including new "waves" of infection from emerging variants of the virus, potential renewed restrictions and mandates by various governments or agencies, and the distribution and uptake of vaccines and vaccine boosters.

Acquisition of JLT

On April 1, 2019, the Company completed the acquisition (the "Transaction") of all of the outstanding shares of JLT, a public company organized under the laws of England and Wales. As of December 31, 2021, the Company has substantially integrated JLT into all of its business operations.

After the acquisition of JLT, the Company assumed the legal liabilities of JLT’s litigation and regulatory exposures as of April 1, 2019. Please see Note 16, Claims, Lawsuits and Other Contingencies, in the notes to the consolidated financial statements, which discusses certain errors and omission matters related to the acquisition.

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 are not included in the Company's results of operations and therefore, affect comparability. The Company’s results for the years ended December 31, 2021, 2020 and 2019 were impacted by JLT related acquisition restructuring and integration costs as discussed in Note 14, Integration and Restructuring Costs, in the notes to the consolidated financial statements.

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Consolidated Results of Operations

Consolidated operating income increased $1.2 billion, or 41% to $4.3 billion in 2021 compared to $3.1 billion in 2020, reflecting a 15% increase in revenue and a 10% increase in expenses. Revenue growth was driven by increases in the Risk and Insurance Services and Consulting segments of 17% and 12%, respectively, reflecting the strong demand for our advice and services and the improvement in global economic conditions. The increase in expense is primarily due to increased headcount and higher incentive compensation. These increases were partially offset by a reduction in JLT integration costs and the JLT legacy E&O provision recorded in 2020.

Diluted earnings per share increased 56% to $6.13 in 2021 compared with $3.94 in 2020. The increase is a result of higher operating income, lower interest expense and higher investment gains in 2021 compared to 2020. Results in 2021 also include a net charge of approximately $110 million related to the re-measurement of deferred tax assets and liabilities due to the enactment of a tax rate increase from 19% to 25% in the U.K. in the second quarter of 2021, offset by no tax impact on the gain from the re-measurement to fair value upon consolidation of the Company's previously held equity method investment in India, tax benefits from share-based compensation and planning that included the utilization of foreign tax credits and postponing the utilization of the losses in the U.K. to a future year when the tax rate will be 25%.

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The following table summarizes restructuring and other items discussed in more detail below:

In 2021 and 2020, the Company’s results of operations and earnings per share were impacted by the following items:

•Restructuring costs, excluding JLT: Includes severance, adjustments to restructuring liabilities for future rent under non-cancellable leases and other real estate exit costs, and restructuring costs related to the integration of recent acquisitions. These costs are discussed in more detail in Note 14, Integration and Restructuring, in the notes to the consolidated financial statements.

•Changes in contingent consideration: Primarily includes the change in fair value of contingent consideration related to acquisitions and dispositions as measured each quarter.

•JLT integration and restructuring costs: Includes severance, real estate and technology rationalization, process management consulting fees, and legal fees for the rationalization of legal entity structures. The Company has incurred JLT integration and restructuring costs of $679 million through 2021 and expects to incur the remaining $46 million in 2022, primarily related to real estate and technology, of which approximately $42 million will be cash expenditures. The Company has realized at least $425 million of annualized savings. These costs are discussed in more detail in Note 14, Integration and Restructuring, in the notes to the consolidated financial statements. The Company expects to complete the integration of JLT during 2022.

•JLT acquisition-related costs and other: Includes retention and legal charges related to the acquisition of JLT.

•JLT legacy E&O provision: In 2021, the Company recorded a $36 million reduction in the liability as well as $33 million of recoveries under indemnities for a legacy JLT Errors and Omissions ("E&O") provision relating to suitability of financial advice provided to individuals for defined benefit pension transfers. The reduction in liability primarily reflects lower redress payments than previously estimated, partly offset by higher costs to review and calculate redress. In 2020, the Company recorded an increase in the liability of $161 million related to this matter. See Note 16, Claims, Lawsuits and Other Contingencies, in the notes to the consolidated financial statements.

•Legal claims: The Company recorded settlement charges and legal costs related to strategic recruiting.

•Gain on consolidation of business: 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. In connection with the increased investment in Marsh India, the Company recorded a gain of $267 million, related to the re-measurement of its previously held investment to fair value.

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•Disposal of businesses: During 2021, the Company disposed of certain businesses and recognized a net gain of approximately $50 million, primarily related to the commercial networks business in the U.K. that provided broking and back-office solutions for small independent brokers. Results in 2020 include a contingent gain adjustment from the U.S. large market health and defined benefit administration business disposed in 2019.

Consolidated Revenue and Expense

Revenue - Components of Change

The Company conducts business in 130 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 impact of foreign currency exchange fluctuations, acquisitions and dispositions, including transfers among businesses, on the Company’s operating revenues by segment are as follows:

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The following table provides more detailed revenue information for certain of the components presented above:

Consolidated Revenue

Consolidated revenue increased $2.6 billion, or 15%, to $19.8 billion in 2021, compared to $17.2 billion in 2020. Consolidated revenue increased 10% on an underlying basis, 2% from the impact of foreign currency translation and 3% from acquisitions. On an underlying basis, revenue increased 10% for the year ended December 31, 2021 in both the Risk and Insurance Services and Consulting segments.

Underlying growth in the Risk and Insurance Services and Consulting segments was driven by the strong demand for our advice and services and the improvement in global economic conditions.

Consolidated Operating Expense

Consolidated operating expenses increased $1.3 billion, or 10%, to $15.5 billion in 2021 compared to $14.2 billion in 2020, reflecting increases of 6% on an underlying basis, 2% from the impact of foreign currency translation and 1% from acquisitions. On an underlying basis, expenses increased 8% and 3% in 2021 in the Risk and Insurance Services and Consulting segments, respectively. Underlying expenses in 2021 is primarily due to increased headcount and 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 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. Revenues can be affected by premium rate levels in the insurance/reinsurance markets, the amount of risk retained by insurance and reinsurance clients and by the value of the risks that have been insured since commission-based compensation is frequently related to the premiums paid by insureds and 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

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value of risks that have been insured, as well as new and lost business, and the volume of business from new and existing 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, payment for consulting and analytics services provided to insurers; compensation for administrative and other services (including fees for underwriting services and 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. 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 previous revenue by segments tables.

The results of operations for the Risk and Insurance Services segment are presented below:

Revenue

Revenue in the Risk and Insurance Services segment increased $1.7 billion, or 17%, to $12.1 billion in 2021 compared with $10.3 billion in 2020. Revenue grew 10% on an underlying basis, 5% from the impact of acquisitions, and 2% related to the impact of foreign currency translation. The increase in underlying revenue was primarily due to strong growth in new business, solid retention, and benefits from pricing in the marketplace.

In Marsh, revenue increased $1.6 billion, or 19%, to $10.2 billion in 2021 compared to $8.6 billion in 2020. This reflects increases of 11% on an underlying basis, 6% from the impact of acquisitions, and 2% from the impact of foreign currency translation. In 2021, the increase in revenue from acquisitions reflects the gain of $267 million related to the re-measurement of the previously held equity method investment in Marsh India. On an underlying basis, U.S./Canada rose 13%. Total International operations, which includes Asia Pacific, Latin America and EMEA each produced underlying revenue growth of 9% compared to prior year.

At Guy Carpenter, revenue increased $171 million, or 10%, to $1.9 billion in 2021 compared with $1.7 billion in 2020. On an underlying basis, revenue increased 9%.

The Risk and Insurance Services segment completed eight acquisitions during 2021. Information regarding those acquisitions is included in Note 5, Acquisitions and Dispositions, in the notes to the consolidated financial statements.

Operating Expense

Expense in the Risk and Insurance Services segment increased $1.0 billion, or 13%, to $9.0 billion in 2021 compared with $8.0 billion in 2020. This reflects increases of 8% on an underlying basis, 2% from the impact of foreign currency, and 2% from acquisitions. The increase in underlying expense reflects increased headcount and higher incentive compensation, partly offset by lower JLT integration and restructuring costs.

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Consulting

The Company conducts business in its Consulting segment through Mercer and Oliver Wyman Group. Mercer delivers advice and solutions that help organizations create a dynamic world of work, shape

retirement and investment outcomes, and unlock health and well being for a changing workforce. Oliver

Wyman serves as critical strategic, economic and brand advisor to private sector and governmental

clients.

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 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. For a majority of the Mercer managed investment funds, revenue is recorded on a gross basis with sub-advisor fees included in other operating expenses.

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 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.

The results of operations for the Consulting segment are presented below:

Revenue

Consulting revenue increased $813 million, or 12%, to $7.8 billion in 2021 compared with $7.0 billion in 2020. This reflects increases of 10% on an underlying basis and 3% from the impact of foreign currency translation.

Mercer's revenue increased $326 million, or 7%, to $5.3 billion in 2021 compared to $4.9 billion in 2020, or 5% on an underlying basis. Revenue also reflects an increase of 3% from the impact of foreign currency translation offset by a decrease of 1% from disposition of businesses. On an underlying basis, revenue for Career, Wealth and Health increased 12%, 4% and 3%, respectively. The increase in underlying revenue at Mercer for the year ended December 31, 2021 was due to higher investment management fees from growth in assets under management and increased demand and retention for Health and Career products and services.

Oliver Wyman Group's revenue increased $487 million, or 24%, to $2.5 billion in 2021 compared with $2.0 billion in 2020, reflecting an increase of 21% on an underlying basis and 2% from the impact of foreign currency translation. The increase in underlying revenue at Oliver Wyman for the year ended December 31, 2021 primarily reflects the impact of increased demand for project-based services across all industries.

The Consulting segment completed one acquisition during 2021. Information regarding the acquisition is included in Note 5, Acquisitions and Dispositions, in the notes to the consolidated financial statements.

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Operating Expense

Consulting expenses increased $303 million, or 5%, to $6.3 billion in 2021 compared to $6.0 billion in 2020. This reflects an increase of 3% on an underlying basis and 2% from the impact of foreign currency translation. The increase in underlying expense in the Consulting segment in 2021 is primarily due to increased headcount and higher incentive compensation. This is partially offset by a $69 million reduction in the legacy JLT E&O provision including recoveries under indemnities. In 2020, the Company recorded an increase in the liability of $161 million for the same matter.

Corporate and Other

Corporate expense in 2021 was $272 million compared with $274 million in 2020. Expenses decreased 1% on an underlying basis due to lower integration and restructuring costs primarily related to the JLT Transaction and savings realized from the completion of integration efforts to date, partly offset by higher headcount and incentive compensation.

Other Corporate Items

Interest

Interest expense decreased $71 million to $444 million in 2021 compared to $515 million in 2020 due to lower average debt levels in 2021 compared to the prior year.

Investment Income (Loss)

The caption "Investment income (loss)" 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 or 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 private equity funds.

The Company recorded net investment income of $61 million in 2021 compared to a net investment loss of $22 million in 2020. The income in 2021 is primarily driven by gains in the Company's private equity investments. The loss in 2020 was primarily due to a loss from the sale of shares of Alexander Forbes ("AF").

Income Taxes

The Company's consolidated effective tax rate was 24.6% and 26.7% in 2021 and 2020, respectively. The rates in all periods reflect the effects of tax planning and the impact of regulatory and other guidance as it became available.

The rate for the year ended December 31, 2021 reflects:

•The charge for re-measuring the Company’s U.K. deferred tax assets and liabilities upon the enactment of legislation on June 10, 2021, commonly referred to as the "Finance Act 2021." The legislation increased the U.K. corporate income tax rate from 19% to 25% effective April 1, 2023. This is the most significant discrete item in the year-to-date period, increasing the Company’s effective tax rate by 2.6% for the year ended December 31, 2021.

•The tax effect of the gain from the fair value re-measurement of the Company’s previously held equity method investment in Marsh India upon the Company increasing its ownership interest from 49% to 92%. The Company has indefinitely reinvested this gain, as it has no intent to dispose of the business, and did not record tax on the gain. This decreased the Company’s effective tax rate by 1.5% for the year ended December 31, 2021.

•Tax benefits from planning implemented in the period that postponed the utilization of losses in the U.K. to a future year when the tax rate will be 25%.

The tax rate in 2020 includes a valuation allowance for certain tax credits, the impact of uncertain tax positions, and certain tax planning benefits. The rate in 2020 also reflects costs of re-measuring the Company’s U.K. deferred tax assets and liabilities upon the enactment of legislation that cancelled a 2% reduction in the U.K. corporate income tax rate, partially offset by tax benefits for the implementation of a new international funding structure to facilitate global staffing and contracting.

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The tax rates in all periods reflect the impact of discrete tax matters such as excess tax benefits related to share-based compensation, enacted tax legislation, changes in uncertain tax positions, deferred tax adjustments and non-taxable 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 of earnings and repatriation of the Company's earnings, which may result in higher or lower tax rates. In 2021, pre-tax income in the U.K., Barbados, Canada, Ireland, Bermuda, and Australia accounted for approximately 60% of the Company's total non-U.S. pre-tax income, with effective rates in those countries of 21% (excluding the non-cash deferred tax impact of U.K. tax legislation enacted in 2021), 1%, 27%, 17%, 0.3% and 16%, 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. Details are provided in Note 7, Income Taxes, in the notes to 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 U.S. 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 continues to evaluate its global investment and repatriation strategy in light of our capital requirements and potential costs of repatriation.

The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was signed into law on March 27, 2020. The CARES Act provided over $2 trillion in economic relief to individuals, governmental agencies and companies, to deal with the public health and economic impacts of COVID-19. Pursuant to the CARES Act, the Company deferred payroll taxes due from March 27, 2020 through December 31, 2020 and paid 50% in 2021 and will pay the remaining 50% in 2022.

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 in financing cash flows.

The Company derives a significant portion of its revenue and operating profit from operating subsidiaries located outside of the U.S. Funds from those operating subsidiaries are regularly repatriated to the U.S. out of annual earnings. At December 31, 2021, the Company had approximately $737 million of cash and cash equivalents in its foreign operations, which includes $280 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.

During 2021, the Company recorded foreign currency translation adjustments which decreased net equity by $389 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

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the translated U.S. dollar value of cash repatriations from those subsidiaries. Conversely, strengthening of the U.S. dollar against foreign currencies would decrease 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 and cash equivalents 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 $3.5 billion of cash from operations in 2021 and $3.4 billion in 2020. 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 2021, the Company contributed $35 million to its U.S. pension plans and $95 million to non-U.S. pension plans compared to contributions of $65 million to U.S. plans and $78 million to non-U.S. plans in 2020.

In the U.S., 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 in accordance with the ERISA guidelines. In 2021, the Company made $30 million of contributions to non-qualified plans and $5 million to its qualified plans. The Company expects to contribute approximately $31 million to its non-qualified U.S. pension plans in 2022. The Company is not required to make any contributions to its U.S. qualified plan in 2022.

Outside the U.S., 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, 2021. 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.

The Company contributed $55 million to its U.K. plans in 2021. The Company's contributions to its U.K. plans in 2022 are expected to be approximately $124 million.

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

compared to U.S. GAAP and may result in contributions irrespective of the U.S. GAAP funded status.

During 2021, the JLT Pension Scheme was merged into the MMC U.K. Pension Fund with a new segregated JLT section created. The Company made deficit contributions of $38 million to the JLT section in 2021 and is expected to make contributions totaling approximately $112 million in 2022. The funding level of the JLT section will be reassessed during 2022 to determine contributions in 2023 and onwards.

For the MMC U.K. Pension Fund, excluding the JLT section, an agreement was reached with the trustee in fourth quarter of 2019 based on the surplus funding position at December 31, 2018. In accordance with the agreement, no deficit funding is required until 2023. The funding level will be re-assessed during 2022 as part of the December 31, 2021 actuarial valuation 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 £450 million over a seven-year period.

In the aggregate, the Company expects to contribute approximately $147 million to its non-U.S. defined benefit plans in 2022, comprising approximately $124 million to the U.K. plans and $23 million to plans outside of the U.K.

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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 $1.8 billion and $2.9 billion at December 31, 2021 for the U.S. plans and non-U.S. plans, respectively, compared with losses of $2.4 billion and $3.5 billion at December 31, 2020. The decreases in both the U.S. and non-U.S. plans were primarily due to an increase in the discount rate used to measure plan liabilities and 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 2021 increased in the U.S. and U.K., the Company's largest plans, following decreases in 2020 and 2019. 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 2021, the Company's defined benefit pension plan assets had gains of 13.2% and 1.9% in the U.S. and U.K., respectively, as compared to gains of 13.1% and 12.0% in the U.S. and U.K., respectively, in 2020.

Overall, based on the measurement at December 31, 2021, net benefit credits related to the Company’s defined benefit plans are expected to decrease in 2022 by approximately $23 million compared to 2021, reflecting a decrease in non-U.S. plans of approximately $40 million, offset by an increase in U.S. plans of $17 million.

The Company’s accounting policies for its defined benefit pension plans, including the selection of and sensitivity to assumptions, are discussed in Management’s Discussion of Critical Accounting Policies. For additional information regarding the Company’s retirement plans, see Note 1, Summary of Significant Accounting Policies, and Note 8, Retirement Benefits, in the notes to the consolidated financial statements.

Financing Cash Flows

Net cash used for financing activities was $1.3 billion in 2021 compared with $925 million used by financing activities in 2020.

Credit Facilities

On April 2, 2021, the Company entered into an amended and restated multi-currency unsecured $2.8 billion five-year revolving credit facility ("New Facility"). The interest rate on the New Facility is based on LIBOR plus a fixed margin which varies with the Company’s credit ratings. The New Facility expires in April 2026 and requires the Company to maintain certain coverage and leverage ratios which are tested quarterly. The New Facility includes provisions for determining a LIBOR successor rate in the event LIBOR reference rates are no longer available or in certain other circumstances which are determined to make using an alternative rate desirable. As of December 31, 2021, the Company had no borrowings under this facility. In connection with the New Facility, the Company terminated its previous multicurrency unsecured $1.8 billion five-year revolving credit facility and its unsecured $1.0 billion 364-day unsecured revolving credit facility.

In January 2020, the Company entered into two new term loan facilities: a $500 million one-year facility and a $500 million two-year facility. During 2020, the Company borrowed and repaid $1.0 billion against these facilities. These two facilities were terminated as of December 31, 2020 after repayment of the initial draw down.

The Company also maintains other credit facilities, guarantees and letters of credit with various banks, aggregating $508 million at December 31, 2021 and $573 million at December 31, 2020. There were no outstanding borrowings under these facilities as of December 31, 2021 or as of December 31, 2020.

Debt

On April 9, 2021, the Company increased its short-term commercial paper financing program to $2.0 billion from $1.5 billion. The Company had no commercial paper outstanding at December 31, 2021.

In December 2021, the Company issued $400 million of 2.375% senior notes due 2031 and $350 million of 2.90% senior notes due 2051. The Company used the net proceeds from these issuances for general

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corporate purposes and repaid $500 million of 2.75% senior notes with an original maturity date of January 2022 in December 2021.

On April 15, 2021, the Company repaid $500 million of senior notes maturing in July 2021.

In December 2020, the Company repaid $700 million of maturing senior notes and $300 million of floating rate notes with an original maturity of December 2021.

In May 2020, the Company issued $750 million of 2.250% senior notes due 2030. The Company used the net proceeds from this offering to pay outstanding borrowings under the revolving credit facility.

In March 2020, the Company repaid $500 million of maturing senior notes.

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 Stable outlook with both Standard & Poor's and Moody's.

Share Repurchases

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. During 2021, the Company repurchased 7.9 million shares of its common stock for total consideration of approximately $1.2 billion. As of December 31, 2021, the Company remained authorized to purchase shares of its common stock up to a value of approximately $1.3 billion. There is no time limit on this authorization.

The Company did not repurchase any of its common stock during 2020.

Dividends

The Company paid total dividends of $1.0 billion in 2021 ($2.00 per share) and $943 million in 2020 ($1.84 per share).

Contingent Payments Related To Acquisitions

The classification of contingent consideration payments in the consolidated statement of cash flows is dependent upon whether the receipt, payment, or adjustment 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 operating and financing activities:

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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, 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 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 $100 million during 2021 related to the change in foreign exchange rates. The Company concluded that the hedge was highly effective and recorded a decrease to accumulated other comprehensive loss for the year ended December 31, 2021.

Fiduciary Liabilities

Since cash and cash equivalents held in a fiduciary capacity are not available for corporate use, they are shown in the consolidated balance sheet as an offset to fiduciary liabilities. Financing cash flows reflect an increase of $1.2 billion and $955 million in 2021 and 2020, respectively, related to the increase in fiduciary liabilities.

Investing Cash Flows

Net cash used for investing activities amounted to $1.2 billion in 2021 compared with $793 million used for investing activities in 2020.

The Company paid $859 million and $647 million, net of cash, cash equivalents and cash and cash equivalents held in a fiduciary capacity acquired, for acquisitions it made during 2021 and 2020, respectively, including the Company's increased ownership interest in Marsh India from 49% to 92% in December 2021.

During 2021 and 2020, the Company sold certain businesses, primarily in the U.S. and U.K., for cash proceeds of approximately $84 million and $98 million, respectively.

The Company sold 242 million shares of the common stock of AF during 2020.

The Company’s additions to fixed assets and capitalized software, which amounted to $406 million in 2021 and $348 million in 2020, primarily related 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 $52 million in six 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, 2021:

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The above table does not include the liability for unrecognized tax benefits of $94 million as the Company is unable to reasonably predict the timing of settlement of these liabilities, other than approximately $34 million that may become payable during 2022.

The above does not include the remaining transitional tax payments related to the Tax Cuts and Jobs Act ("TCJA") of $62 million, which will be paid in installments beginning in 2023 through 2026.

Management’s Discussion of Critical Accounting Policies and Estimates

Management makes 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.

Revenue Recognition

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.

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.

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.

See Note 2, Revenue, in the notes 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"). The Company records a liability when a loss is both probable and reasonably estimable which requires significant management judgment. The Company utilizes case level reviews by inside and outside counsel, an internal actuarial analysis by Oliver Wyman, 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 arise from such claims, 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.

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"),

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net of tax, in the Company’s consolidated balance sheets. The gains and losses that exceed specified corridors, 10% of the greater of the projected benefit obligation or the market-related value of plan assets, 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, Retirement Benefits, in the notes to the consolidated financial statements.

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: 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 60% equities and equity alternatives and 40% fixed income. At the end of 2021, the actual allocation for the U.S. plans was 65% equities and equity alternatives and 35% fixed income. The target asset allocation for the U.K. plans, which comprise approximately 81% of non-U.S. plan assets, is 26% equities and equity alternatives and 74% fixed income. At the end of 2021, the actual allocation for the U.K. plans was 28% equities and equity alternatives and 72% 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 following table shows the weighted average assumed rate of return and the discount rate at the December 31, 2021 measurement date used to measure pension expense in 2022 for the total Company, the U.S. and the Rest of World ("ROW").

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 86% of total pension plan liabilities, as follows:

The impact of discount rate changes 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

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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, Retirement Benefits, in the notes 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 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. The Company’s accounting policy follows the portfolio approach that leaves stranded income tax effects in AOCI.

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 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 carry back 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.

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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. A company can assess qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. Alternatively, the Company may elect to proceed directly to the quantitative goodwill impairment test. In 2021, the Company elected to perform a qualitative impairment assessment. As part of its assessment, the Company considered numerous factors, including:

•that the fair value of each reporting unit exceeds its carrying value by a substantial margin based on its most recent quantitative assessment in 2019;

•whether significant acquisitions or dispositions occurred which might alter the fair value of its reporting units;

•macroeconomic conditions and their potential impact on reporting unit fair values;

•actual performance compared with budget and prior projections used in its estimation of reporting unit fair values;

•industry and market conditions; and

•the year-over-year change in the Company’s share price.

The Company completed its qualitative assessment in the third quarter of 2021 and concluded that a quantitative goodwill impairment test was not required in 2021 and that goodwill was not impaired.

Purchase Price Allocation

Assets acquired and liabilities assumed, including contingent consideration, 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. 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.

New Accounting Pronouncements

Note 1, Summary of Significant Accounting Policies, in the notes 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."

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