SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________________ 

FORM 10-Q

_____________________________________________ 

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2022

OR

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

____________________________________________ 

Marsh & McLennan Companies, Inc.

1166 Avenue of the Americas

New York, New York 10036

(212) 345-5000

_____________________________________________ 

Commission file number 1-5998

State of Incorporation: Delaware

I.R.S. Employer Identification No. 36-2668272

_____________________________________________ 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of exchange on which registered
Common Stock, par value $1.00 per share	MMC	New York Stock Exchange
		Chicago Stock Exchange
		London Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐(Do not check if a smaller reporting company)	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐   No  ý

As of October 17, 2022, there were outstanding 496,009,506 shares of common stock, par value $1.00 per share, of the registrant.

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management's current views concerning future events or results, use words like "anticipate," "assume," "believe," "continue," "estimate," "expect," "intend," "plan," "project" and similar terms, and future or conditional tense verbs like "could," "may," "might," "should," "will" and "would".

Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. Factors that could materially affect our future results include, among other things:

•the impact of geopolitical or macroeconomic conditions on us, our clients and the countries and industries in which we operate, including from conflicts such as the war in Ukraine, slower GDP growth or recession, capital markets volatility and inflation;

•the increasing prevalence of ransomware, supply chain and other forms of cyber attacks, and their potential to disrupt our operations and result in the disclosure of confidential client or company information;

•the impact from lawsuits or investigations arising from errors and omissions, breaches of fiduciary duty or other claims against us in our capacity as a broker or investment advisor, including claims related to our investment business’ ability to execute timely trades;

•the financial and operational impact of complying with laws and regulations, including domestic and international sanctions regimes, anti-corruption laws such as the U.S. Foreign Corrupt Practices Act, U.K. Anti Bribery Act and cybersecurity and data privacy regulations;

•our ability to attract, retain and develop industry leading talent;

•our ability to compete effectively and adapt to competitive pressures in each of our businesses, including from disintermediation as well as technological change, digital disruption and other types of innovation;

•our ability to manage potential conflicts of interest, including where our services to a client conflict, or are perceived to conflict, with the interests of another client or our own interests;

•the impact of changes in tax laws, guidance and interpretations, or disagreements with tax authorities; and

•the regulatory, contractual and reputational risks that arise based on insurance placement activities and insurer revenue streams.

The factors identified above are not exhaustive. Marsh McLennan and its subsidiaries (collectively, the "Company") operate in a dynamic business environment in which new risks emerge frequently. Accordingly, we caution readers not to place undue reliance on any forward-looking statements, which are based only on information currently available to us and speak only as of the dates on which they are made. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date on which it is made.

Further information concerning Marsh McLennan and its businesses, including information about factors that could materially affect our results of operations and financial condition, is contained in the Company's filings with the Securities and Exchange Commission, including the "Risk Factors" section and the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section of this Quarterly Report on Form 10-Q and our most recently filed Annual Report on Form 10-K.

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		4
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	4
	CONSOLIDATED STATEMENTS OF INCOME	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5
	CONSOLIDATED BALANCE SHEETS	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS	8
	CONSOLIDATED STATEMENTS OF EQUITY	9
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	10
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS	35
	OF OPERATIONS
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50
ITEM 4.	CONTROLS & PROCEDURES	51
PART II. OTHER INFORMATION		52
ITEM 1.	LEGAL PROCEEDINGS	52
ITEM 1A.	RISK FACTORS	52
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	52
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	52
ITEM 4.	MINE SAFETY DISCLOSURE	52
ITEM 5.	OTHER INFORMATION	52
ITEM 6.	EXHIBITS	52

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PART I.    FINANCIAL INFORMATION

Item 1.Financial Statements.

MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2022		2021		2022		2021
Revenue	$	4,770	$	4,583	$	15,698	$	14,683
Expense:
Compensation and benefits	2,923		2,853		9,033		8,520
Other operating expenses	1,056		990		3,065		2,837
Operating expenses	3,979		3,843		12,098		11,357
Operating income	791		740		3,600		3,326
Other net benefit credits	57		69		178		211
Interest income	4		1		6		2
Interest expense	(118)		(107)		(342)		(335)
Investment (loss) income	(1)		13		27		43
Income before income taxes	733		716		3,469		3,247
Income tax expense	181		174		853		880
Net income before non-controlling interests	552		542		2,616		2,367
Less: Net income attributable to non-controlling interests	6		5		32		27
Net income attributable to the Company	$	546	$	537	$	2,584	$	2,340
Net income per share attributable to the Company:
- Basic	$	1.10	$	1.06	$	5.16	$	4.61
- Diluted	$	1.08	$	1.05	$	5.11	$	4.56
Average number of shares outstanding:
- Basic	498		506		501		508
- Diluted	503		513		506		513
Shares outstanding at September 30,	497		505		497		505

The accompanying notes are an integral part of these unaudited consolidated statements.

4

MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2022		2021		2022		2021
Net income before non-controlling interests	$	552	$	542	$	2,616	$	2,367
Other comprehensive (loss) income, before tax:
Foreign currency translation adjustments	(895)		(346)		(1,928)		(413)
Gain related to pension/post-retirement plans	281		204		603		234
Other comprehensive loss, before tax	(614)		(142)		(1,325)		(179)
Income tax expense on other comprehensive loss	71		50		148		56
Other comprehensive loss, net of tax	(685)		(192)		(1,473)		(235)
Comprehensive (loss) income	(133)		350		1,143		2,132
Less: comprehensive income attributable to non-controlling interest	6		5		32		27
Comprehensive (loss) income attributable to the Company	$	(139)	$	345	$	1,111	$	2,105

The accompanying notes are an integral part of these unaudited consolidated statements.

5

MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)	(Unaudited) September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	802	$	1,752
Receivables
Commissions and fees	5,312		5,093
Advanced premiums and claims	144		136
Other	527		523
	5,983		5,752
Less-allowance for credit losses	(164)		(166)
Net receivables	5,819		5,586
Other current assets	953		926
Total current assets	7,574		8,264
Goodwill	15,576		16,317
Other intangible assets	2,403		2,810
Fixed assets (net of accumulated depreciation and amortization of $1,650 at September 30, 2022 and $1,589 at December 31, 2021)	865		847
Pension related assets	2,074		2,270
Right of use assets	1,615		1,868
Deferred tax assets	533		551
Other assets	1,383		1,461
	$	32,023	$	34,388

 The accompanying notes are an integral part of these unaudited consolidated statements.

6

MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

(In millions, except share data)	(Unaudited) September 30, 2022		December 31, 2021
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	967	$	17
Accounts payable and accrued liabilities	2,903		3,165
Accrued compensation and employee benefits	2,396		2,942
Current lease liabilities	298		332
Accrued income taxes	432		198
Dividends payable	296		—
Total current liabilities	7,292		6,654
Fiduciary liabilities	10,608		9,622
Less – cash and cash equivalents held in a fiduciary capacity	(10,608)		(9,622)
	—		—
Long-term debt	10,399		10,933
Pension, post-retirement and post-employment benefits	1,309		1,632
Long-term lease liabilities	1,620		1,880
Liabilities for errors and omissions	331		355
Other liabilities	1,281		1,712
Commitments and contingencies	—		—
Equity:
Preferred stock, $1 par value, authorized 6,000,000 shares, none issued	—		—
Common stock, $1 par value, authorized 1,600,000,000 shares, issued 560,641,640 shares at September 30, 2022 and December 31, 2021	561		561
Additional paid-in capital	1,111		1,112
Retained earnings	19,837		18,389
Accumulated other comprehensive loss	(6,048)		(4,575)
Non-controlling interests	226		213
	15,687		15,700
Less – treasury shares, at cost, 64,102,660 shares at September 30, 2022 and 57,105,619 shares at December 31, 2021	(5,896)		(4,478)
Total equity	9,791		11,222
	$	32,023	$	34,388

The accompanying notes are an integral part of these unaudited consolidated statements.

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MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES                        

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Nine Months Ended September 30,
(In millions)	2022		2021
Operating cash flows:
Net income before non-controlling interests	$	2,616	$	2,367
Adjustments to reconcile net income provided by operations:
Depreciation and amortization of fixed assets and capitalized software	259		291
Amortization of intangible assets	258		278
Non-cash lease expense	223		241
Adjustments and payments related to contingent consideration assets and liabilities	—		(16)
Deconsolidation of Russian businesses	39		—
Net gain on investments	(27)		(43)
Net gain on disposition of assets	(112)		(37)
Share-based compensation expense	283		263
Changes in assets and liabilities:
Net receivables	(745)		(604)
Other assets	(14)		(276)
Accrued compensation and employee benefits	(451)		(20)
Provision for taxes, net of payments and refunds	156		196
Contributions to pension and other benefit plans in excess of current year credit	(306)		(282)
Other liabilities	28		(22)
Operating lease liabilities	(244)		(262)
Net cash provided by operations	1,963		2,074
Financing cash flows:
Purchase of treasury shares	(1,600)		(734)
Net proceeds from issuance of commercial paper	600		—
Repayments of debt	(14)		(512)
Shares withheld for taxes on vested units – treasury shares	(194)		(99)
Issuance of common stock from treasury shares	89		115
Payments of deferred and contingent consideration for acquisitions	(144)		(110)
Receipts of contingent consideration for dispositions	3		71
Distributions of non-controlling interests	(20)		(27)
Dividends paid	(840)		(750)
Change in fiduciary liabilities	2,148		1,919
Net cash provided by (used for) financing activities	28		(127)
Investing cash flows:
Capital expenditures	(367)		(268)
Purchases of long term investments	(19)		(28)
Sales of long term investments	84		30
Dispositions	138		84
Acquisitions, net of cash and cash held in a fiduciary capacity acquired	(213)		(384)
Other, net	14		(6)
Net cash used for investing activities	(363)		(572)
Effect of exchange rate changes on cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity	(1,592)		(243)
Increase in cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity	36		1,132
Cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity at beginning of period	11,374		10,674
Cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity at end of period	$	11,410	$	11,806

Reconciliation of cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity to the Consolidated Balance Sheets
Nine Months Ended September 30,	2022		2021
(In millions)
Cash and cash equivalents	$	802	$	1,398
Cash and cash equivalents held in a fiduciary capacity	10,608		10,408
Total cash, cash equivalents, and cash and cash equivalents held in a fiduciary capacity	$	11,410	$	11,806

The accompanying notes are an integral part of these unaudited consolidated statements.

8

MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2022		2021		2022		2021
COMMON STOCK
Balance, beginning and end of period	$	561	$	561	$	561	$	561
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period	$	1,044	$	945	$	1,112	$	943
Change in accrued stock compensation costs	60		89		(80)		41
Issuance of shares under stock compensation plans and employee stock purchase plans	7		—		79		50
Balance, end of period	$	1,111	$	1,034	$	1,111	$	1,034
RETAINED EARNINGS
Balance, beginning of period	$	19,880	$	17,597	$	18,389	$	16,272
Net income attributable to the Company	546		537		2,584		2,340
Dividend equivalents declared	(3)		(2)		(10)		(8)
Dividends declared	(586)		(543)		(1,126)		(1,015)
Balance, end of period	$	19,837	$	17,589	$	19,837	$	17,589
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of period	$	(5,363)	$	(5,153)	$	(4,575)	$	(5,110)
Other comprehensive (loss) income, net of tax	(685)		(192)		(1,473)		(235)
Balance, end of period	$	(6,048)	$	(5,345)	$	(6,048)	$	(5,345)
TREASURY SHARES
Balance, beginning of period	$	(5,429)	$	(3,842)	$	(4,478)	$	(3,562)
Issuance of shares under stock compensation plans and employee stock purchase plans	33		37		182		191
Purchase of treasury shares	(500)		(300)		(1,600)		(734)
Balance, end of period	$	(5,896)	$	(4,105)	$	(5,896)	$	(4,105)
NON-CONTROLLING INTERESTS
Balance, beginning of period	$	224	$	156	$	213	$	156
Net income attributable to non-controlling interests	6		5		32		27
Distributions and other changes	(4)		(7)		(19)		(29)
Balance, end of period	$	226	$	154	$	226	$	154
TOTAL EQUITY	$	9,791	$	9,888	$	9,791	$	9,888
Dividends declared per share	$	1.180	$	1.070	$	2.250	$	2.000

The accompanying notes are an integral part of these unaudited consolidated statements.

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MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.     Nature of Operations

Marsh & McLennan Companies, Inc. (the "Company"), a global professional services firm, is organized based on the different services that it offers. Under this structure, the Company’s two business segments are Risk and Insurance Services and Consulting.

The Risk and Insurance Services segment ("RIS") provides risk management solutions (risk advice, risk transfer and risk control and mitigation) as well as insurance and reinsurance broking and services for businesses, public entities, insurance companies, associations, professional services organizations, and private clients. The Company conducts business in this segment through Marsh and Guy Carpenter. Marsh provides data-driven risk advisory services and 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.

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

Deconsolidation of Russia

On February 24, 2022, Russian forces launched a military invasion of Ukraine. In response, the United States, the European Union, United Kingdom and other governments have imposed significant economic sanctions on Russia, and Russia has responded with counter-sanctions. The war in Ukraine has disrupted international commerce and the global economy.

In the first quarter of 2022, the Company concluded that it did not meet the accounting criteria for control over its wholly-owned Russian businesses due to the evolving trade and economic sanctions, and recorded a loss of $52 million on the deconsolidation of the Russian businesses and other related charges.

In June 2022, the Company entered into a definitive agreement to exit its businesses in Russia and transfer ownership to local management pending regulatory approvals. Refer to Note 8, Acquisitions and Dispositions, for additional information on the deconsolidation of the Russian businesses.

The Company continues to monitor the ongoing situation and its potential impact on our business, financial condition, results of operations and cash flows.

Business Update related to COVID-19

For nearly three years, the COVID-19 pandemic has impacted businesses globally including in every geography in which the Company operates. Our businesses have remained resilient throughout the pandemic and demand for our advice and services remains strong. The ultimate extent of the impact of COVID-19 to the Company will depend on future developments that it is unable to predict.

2.     Principles of Consolidation and Other Matters

The Company prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. For interim filings, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. The Company believes that the information and disclosures presented are adequate to make such information and disclosures not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K").

The financial information contained herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial statements as of and for the nine months ended September 30, 2022 and 2021.

Estimates: The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period.

On an ongoing basis, the Company evaluates its estimates, judgments and methodologies. The estimates are based on historical experience and on various other assumptions that the Company believes are reasonable.

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Such matters include:

•estimates of revenue;

•impairment assessments and charges;

•recoverability of long-lived assets;

•liabilities for errors and omissions;

•deferred tax assets, uncertain tax positions and income tax expense;

•share-based and incentive compensation expense;

•the allowance for current expected credit losses on receivables;

•useful lives assigned to long-lived assets, and depreciation and amortization; and

•fair value estimates of contingent consideration receivable or payable related to acquisitions or dispositions.

The Company believes these estimates are reasonable based on information currently available at the time they are made. The Company also considered the potential impact of macroeconomic factors including inflation, the war in Ukraine and COVID-19 to its customer base in various industries and geographies. Insurance exposures subject to variable factors 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 and industry specific economic data. Actual results may differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents primarily consist of certificates of deposit and time deposits, with original maturities of three months or less, and money market funds. The estimated fair value of the Company's cash and cash equivalents approximates their carrying value. The Company is required to maintain operating funds primarily related to regulatory requirements outside of the United States or as collateral under captive insurance arrangements. At September 30, 2022, the Company maintained $295 million compared to $303 million at December 31, 2021 related to these regulatory requirements.

Allowance for Credit Losses on Accounts Receivable

The Company’s policy for providing an allowance for credit losses on its accounts receivable is based on a combination of factors, including historical write-offs, aging of balances, and other qualitative and quantitative analyses. The charge related to expected credit losses was immaterial to the consolidated statements of income for the three and nine months ended September 30, 2022 and 2021, respectively.

Investments

The caption "Investment (loss) income" in the consolidated statements of income comprises realized and unrealized gains and losses from investments recognized in earnings. It includes, when applicable, other than temporary declines in the value of securities, mark-to-market increases or decreases in equity investments with readily determinable fair values and equity method gains or losses on the Company's investments in private equity funds.

The Company holds investments in certain private equity funds. Investments in private equity funds are accounted for in accordance with the equity method of accounting using a consistently applied three-month lag period adjusted for any known significant changes from the lag period to the reporting date of the Company. The underlying private equity funds follow investment company accounting, where investments within the fund are carried at fair value. Investment gains or losses for its proportionate share of the change in fair value of the funds are recorded in earnings. Investments accounted for in accordance with the equity method of accounting are included in "other assets" in the consolidated balance sheets.

The Company recorded a net investment loss of $1 million and investment income of $27 million for the three and nine months ended September 30, 2022, respectively, compared to investment income of $13 million and $43 million for the corresponding periods in the prior year. The decrease in 2022 reflects lower mark-to-market gains in the Company's private equity investments compared to the corresponding periods in the prior year. In the third quarter of 2022, the Company also recorded a net loss of $4 million from the sale of certain investments.

Income Taxes

The Company's effective tax rate for the three months ended September 30, 2022 was 24.6%, compared with 24.2% for the corresponding quarter of 2021. The effective tax rates for the nine months ended September 30, 2022 and 2021, were 24.6% and 27.1%, respectively.

The tax rates in both 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

11

nontaxable adjustments related to contingent consideration for acquisitions. The rate in both periods also reflects tax benefits from planning that postponed the utilization of current year losses in the U.K. to a future year when the tax rate will be 25%.

The excess tax benefit related to share-based payments is the most significant discrete item for the three and nine months ended September 30, 2022, reducing the effective tax rate by 0.9% and 1.2%, respectively. The reduction for both the three and nine months ended September 30, 2021 was 0.9%.

The effective tax rate for the nine months ended September 30, 2021 reflects the charge related to re-measuring the Company’s U.K. deferred tax assets and liabilities upon the enactment of legislation increasing the U.K. corporate income tax rate from 19% to 25%, effective April 1, 2023. The Company recorded a net charge of $100 million in the second quarter of 2021, which reflected the re-measurement of the Company's U.K. deferred tax assets and liabilities upon enactment of the legislation. The re-measurement of the Company's U.K. deferred tax assets and liabilities was the most significant discrete item in the prior year, increasing the Company's effective tax rate by 3.1% for the nine month period ended September 30, 2021.

On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was enacted into law. The Company is currently evaluating the provisions of the new legislation, the most significant of which are the corporate alternative minimum tax and the share repurchase tax. The Company does not expect the IRA to have a significant impact on its financial results of operations when it becomes effective on January 1, 2023.

The Company's tax rate reflects its income, statutory tax rates, and tax planning in the various jurisdictions in which it operates. Significant judgment is required in determining the annual effective tax rate and in evaluating uncertain tax positions.

Losses in one jurisdiction, generally, cannot offset earnings in another, and within certain jurisdictions profits and losses may not offset between entities. Consequently, losses in certain jurisdictions may require valuation allowances affecting the effective tax rate, depending on estimates of the realizability of associated deferred tax assets. The tax rate is also sensitive to changes in unrecognized tax benefits, including the impact of settled tax audits and expired statutes of limitations.

Changes in tax laws or tax rulings may have a significant impact on our effective tax rate. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in tax returns. The Company's gross unrecognized tax benefits were $107 million at September 30, 2022, and $94 million at December 31, 2021. It is reasonably possible that the total amount of unrecognized tax benefits will decrease between zero and approximately $48 million within the next twelve months due to settlements of audits and expirations of statutes of limitations.

Integration and Restructuring Charges

Severance and related costs are recognized based on amounts due under established severance plans or estimates of one-time benefits that will be provided. Typically, severance benefits are recognized when the impacted colleagues are notified of their expected termination and such termination is expected to occur within the legally required notification period. These costs are included in compensation and benefits in the consolidated statements of income.

Costs for real estate consolidation are recognized based on the type of cost, and the expected future use of the facility. For locations where the Company does not expect to sub-lease the property, the amortization of any Right-of-use ("ROU") asset is accelerated from the decision date to the cease use date. For locations where the Company expects to sub-lease the properties subsequent to its vacating the property, the ROU asset is reviewed for potential impairment at the earlier of the cease use date or the date a sub-lease is signed. To determine the amount of impairment, the fair value of the ROU asset is determined based on the present value of the estimated net cash flows related to the property. Contractual costs outside of the ROU asset are recognized based on the net present value of expected future cash outflows for which the Company will not receive any benefit. Such amounts are reliant on estimates of future sub-lease income to be received and future contractual costs to be incurred. These costs are included in other operating expenses in the consolidated statements of income.

Other costs related to integration and restructuring, such as moving, legal or consulting costs are recognized as incurred. These costs are included in other operating expenses in the consolidated statements of income.

3.     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.

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To achieve this 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. 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.

Other revenue included in the consolidated statements of income that is not from contracts with customers is less than 2% of total revenue and is not presented as a separate line item.

The Company's revenue policies are provided in more detail in Note 2, Revenue, in the Form 2021 10-K.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2022		2021		2022		2021
Marsh:
EMEA	$	589	$	600	$	2,176	$	2,233
Asia Pacific	312		281		1,015		902
Latin America	118		105		340		298
Total International	1,019		986		3,531		3,433
U.S./Canada	1,451		1,366		4,263		3,894
Total Marsh	2,470		2,352		7,794		7,327
Guy Carpenter	328		314		1,849		1,697
Subtotal	2,798		2,666		9,643		9,024
Fiduciary interest income	40		4		57		12
Total Risk and Insurance Services	$	2,838	$	2,670	$	9,700	$	9,036
Mercer:
Wealth	$	561	$	613	$	1,775	$	1,861
Health	451		449		1,562		1,398
Career	272		253		679		618
Total Mercer	1,284		1,315		4,016		3,877
Oliver Wyman Group	667		610		2,029		1,813
Total Consulting	$	1,951	$	1,925	$	6,045	$	5,690

The Company recognizes commission revenue for a significant portion of its brokerage arrangements at a point in time on the 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 table provides contract assets and contract liabilities information from contracts with customers:

(In millions)	September 30, 2022		December 31, 2021
Contract assets	$	370	$	290
Contract liabilities	$	783	$	776

The Company records accounts receivable when the right to consideration is unconditional, subject only to the passage of time. Contract assets primarily relate to quota share reinsurance brokerage and contingent insurer revenue. The Company does not have the right to bill and collect revenue for quota share brokerage until the underlying policies written by the ceding insurer attach to the treaty. Estimated contingent insurer revenue related to the achievement of volume or loss ratio metrics cannot be billed or collected until all related policy placements are completed and the contingency is resolved. Contract assets are included in other current assets in the Company's consolidated balance sheets. Contract liabilities primarily relate to the advance consideration received from customers. Contract liabilities are included in current liabilities in the Company's consolidated balance sheets. Revenue recognized in the three and nine months ended September 30, 2022 that was included in the contract liability balance at the beginning of each of those periods was $75 million and $529 million, respectively, compared to revenue recognized of $131 million and $511 million for the corresponding periods in the prior year.

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The amount of revenue recognized in the three and nine months ended September 30, 2022 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 $13 million and $74 million, respectively, and $6 million and $68 million for the corresponding periods in the prior year.

The Company applies the practical expedient and 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 $234 million, primarily related to Mercer. The Company expects revenue in 2023, 2024, 2025, 2026 and 2027 and beyond of $98 million, $66 million, $39 million, $21 million and $10 million, respectively, related to these performance obligations.

4.     Fiduciary Assets and Liabilities

In its capacity as an insurance broker or agent, generally the Company collects premiums from insureds and after deducting its commissions, remits the premiums to the respective insurance underwriters. The Company also collects claims or refunds from underwriters on behalf of insureds. Unremitted insurance premiums and claims proceeds are held by the Company in a fiduciary capacity. The Company's fiduciary assets primarily include bank or short term time deposits and liquid money market funds, and are classified as cash and cash equivalents. Risk and Insurance Services revenue includes interest on fiduciary funds of $40 million and $57 million for the three and nine months ended September 30, 2022, respectively, and $4 million and $12 million for the three and nine months ended September 30, 2021, respectively. Since cash and cash equivalents held in a fiduciary capacity are not available for corporate use, they are shown in the consolidated balance sheets as an offset to fiduciary liabilities.

Net uncollected premiums and claims and the related payables amounted to $12.5 billion at September 30, 2022, and $13.0 billion at December 31, 2021. The Company is not a principal to the contracts under which the right to receive premiums or the right to receive reimbursement of insured losses arises. Accordingly, net uncollected premiums and claims and the related payables are not assets and liabilities of the Company and are not included in the accompanying consolidated balance sheets.

In certain instances, the Company advances premiums, refunds or claims to insurance underwriters or insureds prior to collection. These advances are made from corporate funds and are reflected in the accompanying consolidated balance sheets as receivables.

The Company, through its Mercer subsidiary, manages assets in trusts or funds for which Mercer’s management or trustee fee is not considered a variable interest, since the fees are commensurate with the level of effort required to provide those services. Mercer is not the primary beneficiary of these trusts or funds. Mercer’s maximum exposure to loss of its interests is, therefore, limited to collection of its fees.

5.    Per Share Data

Basic net income per share attributable to the Company is calculated by dividing the after-tax income attributable to the Company by the weighted average number of outstanding shares of the Company’s common stock.

Diluted net income per share attributable to the Company is calculated by dividing the after-tax income attributable to the Company by the weighted average number of outstanding shares of the Company’s common stock, which have been adjusted for the dilutive effect of potentially issuable common shares.

Basic and Diluted EPS Calculation	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2022		2021		2022		2021
Net income before non-controlling interests	$	552	$	542	$	2,616	$	2,367
Less: Net income attributable to non-controlling interests	6		5		32		27
Net income attributable to the Company	$	546	$	537	$	2,584	$	2,340
Basic weighted average common shares outstanding	498		506		501		508
Dilutive effect of potentially issuable common shares	5		7		5		5
Diluted weighted average common shares outstanding	503		513		506		513
Average stock price used to calculate common stock equivalents	$	160.14	$	151.22	$	159.35	$	133.41

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6.    Supplemental Disclosures to the Consolidated Statements of Cash Flows

The following table provides additional information concerning acquisitions, interest and income taxes paid for the nine month periods ended September 30, 2022 and 2021.

(In millions)	2022		2021
Assets acquired, excluding cash, and cash and cash equivalents held in a fiduciary capacity	$	236	$	601
Acquisition-related deposit	24		—
Fiduciary liabilities assumed	(2)		(17)
Liabilities assumed	(28)		(59)
Contingent/deferred purchase consideration	(17)		(141)
Net cash outflow for acquisitions	$	213	$	384

(In millions)	2022		2021
Interest paid	$	388	$	407
Income taxes paid, net of refunds	$	697	$	686

The classification of contingent consideration in the consolidated statements 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:

For the Nine Months Ended September 30,
(In millions)	2022		2021
Operating:
Contingent consideration payments for prior year acquisitions	$	(38)	$	(46)
Receipt of contingent consideration for dispositions	—		19
Acquisition/disposition related net charges (credits) for adjustments	38		11
Adjustments and payments related to contingent consideration	$	—	$	(16)
Financing:
Contingent consideration for prior year acquisitions	$	(28)	$	(26)
Deferred consideration related to prior year acquisitions	(116)		(84)
Payments of deferred and contingent consideration for acquisitions	$	(144)	$	(110)
Receipt of contingent consideration for dispositions	$	3	$	71

The Company had non-cash issuances of common stock under its share-based payment plan of $366 million and $225 million for the nine months ended September 30, 2022 and 2021, respectively. The Company recorded share-based compensation expense related to restricted stock units, performance stock units and stock options of $89 million and $283 million for the three and nine months ended September 30, 2022, respectively, and $87 million and $263 million for the three and nine months ended September 30, 2021, respectively.

Statement of Cash Flows Reclassifications

In the first quarter of 2022, the Company refined the statements of cash flows presentation to combine and reclassify certain line items within the operating cash flows section. In the third quarter, the Company further refined the statements of cash flows presentation to separately present purchases and sales of long term investments within the investing cash flows section. The prior year presentation was conformed to the current presentation with no impact on either operating or investing cash flows.

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7.    Other Comprehensive Income (Loss)

The changes, net of tax, in the balances of each component of Accumulated Other Comprehensive Income ("AOCI") for the three and nine months ended September 30, 2022 and 2021, including amounts reclassified out of AOCI, are as follows:

(In millions)	Pension/Post-Retirement Plans Gains (Losses)		Foreign Currency Translation Adjustments		Total
Balance as of July 1, 2022	$	(2,957)	$	(2,406)