Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

Marsh & McLennan Companies, Inc. and its consolidated subsidiaries (the "Company" or "Marsh McLennan") is a global professional services firm offering clients advice in the areas of risk, strategy and people. The Company’s 81,000 colleagues advise clients in 130 countries. With annual revenue over $19 billion, the Company helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses. Marsh advises individual and commercial clients of all sizes on insurance broking and innovative risk management solutions. Guy Carpenter develops advanced risk, reinsurance and capital strategies that help clients grow profitably and pursue emerging opportunities. Mercer delivers advice and technology-driven solutions that help organizations redefine the world of work, reshape retirement and investment outcomes, and unlock health and well being for a changing workforce. Oliver Wyman Group serves as a 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.

A reconciliation of segment operating income to total operating income is included in Note 18 to the consolidated financial statements included in Part I Item 1 in this report. The accounting policies used for each segment are the same as those used for the consolidated financial statements.

For information on the three and nine months ended September 30, 2020 results and similar comparisons, see "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-Q for the quarter ended September 30, 2020.

Business Update Related To COVID-19

The World Health Organization declared COVID-19 a pandemic in March 2020. The pandemic has impacted businesses globally including virtually every geography in which the Company operates. Governments continue to ease restrictions or fully reopen their economies, as the various vaccines are effective in mitigating the effects of the virus. Our businesses have been resilient throughout the pandemic and demand for our advice and services remains strong as the global economic conditions improve.

Although the vast majority of colleagues continue to work in a remote environment, the Company has provided guidelines on a gradual and phased 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 the current remote environment and as colleagues gradually return to the office.

The Company had strong revenue growth through the first nine months of 2021 and benefited from the continued recovery of the global economy. However, uncertainty remains in the economic outlook and the ultimate extent of COVID-19 impact 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.

Factors that could adversely affect the Company’s financial statements related to the financial and operational impact of COVID-19 are outlined in “Item 1A - Risk Factors” in the Company’s Form 10-K for the year ended December 31, 2020.

Acquisitions and dispositions impacting the Risk and Insurance Services and Consulting segments are discussed in Note 8 to the consolidated financial statements.

This Management's Discussion & Analysis ("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.

Consolidated Results of Operations

			Three Months Ended September 30,												Nine Months Ended September 30,
(In millions, except per share data)			2021						2020						2021						2020
Revenue			$	4,583					$	3,968					$	14,683					$	12,808
Expense:
Compensation and benefits			2,853						2,495						8,520						7,479
Other operating expenses			990						933						2,837						2,834
Operating expenses			3,843						3,428						11,357						10,313
Operating income			740						540						3,326						2,495
Income before income taxes			716						459						3,247						2,253
Net income before non-controlling interests			542						320						2,367						1,667
Net income attributable to the Company			$	537					$	316					$	2,340					$	1,642
Net Income per share attributable to the Company:
Basic			$	1.06					$	0.62					$	4.61					$	3.25
Diluted			$	1.05					$	0.62					$	4.56					$	3.21
Average number of shares outstanding:
Basic			506						507						508						506
Diluted			513						512						513						511
Shares outstanding at September 30,			505						507						505						507

Risk and Insurance Services

The following reflects the results of operations for the Risk and Insurance Services segment:

For the Three and Nine Months Ended September 30,			Three Months												Nine Months
(In millions)			2021						2020						2021						2020
Revenue			$	2,670					$	2,291					$	9,036					$	7,805
Compensation and benefits			1,634						1,400						4,876						4,234
Other operating expenses			633						558						1,747						1,688
Expense			2,267						1,958						6,623						5,922
Operating income			$	403					$	333					$	2,413					$	1,883
Operating income margin			15.1%						14.5%						26.7%						24.1%

Consulting

The following reflects the results of operations for the Consulting segment:

For the Three and Nine Months Ended September 30,			Three Months												Nine Months
(In millions)			2021						2020						2021						2020
Revenue			$	1,925					$	1,696					$	5,690					$	5,074
Compensation and benefits			1,103						980						3,287						2,911
Other operating expenses			418						438						1,294						1,348
Expense			1,521						1,418						4,581						4,259
Operating income			$	404					$	278					$	1,109					$	815
Operating income margin			21.0%						16.4%						19.5%						16.1%

Consolidated operating income increased $200 million, or 37% to $740 million for the three months ended September 30, 2021 compared to $540 million for the three months ended September 30, 2020, reflecting a 16% increase in revenue and 12% increase in expense. The revenue growth was driven by increases in the Risk and Insurance Services and Consulting segments of 17% and 13%, respectively. There continues to be high demand for our advice and services as the U.S. and global economies continue to rebound from the impact of the pandemic. The increase in expense is primarily related to higher incentive compensation and increase in base salaries for additional headcount.

Consolidated operating income increased $831 million, or 33% to $3.3 billion for the nine months ended September 30, 2021 compared to $2.5 billion for the nine months ended September 30, 2020, reflecting a 15% increase in revenue and 10% increase in expense. The revenue growth was driven by increases in the Risk and Insurance Services and Consulting segments of 16% and 12%, respectively. The increase in revenue and expense for the nine months ended September 30, 2021 is due to the same factors as previously discussed for the third quarter. The Company also incurred lower Jardine Lloyd Thompson ("JLT") integration and restructuring costs in 2021 compared to 2020.

Diluted earnings per share increased 69% to $1.05 for the three months ended September 30, 2021 compared to $0.62 for the three months ended September 30, 2020 and 42% to $4.56 for the nine months ended September 30, 2021 compared to $3.21 for the nine months ended September 30, 2020. The increase for the three and nine months ended September 30, 2021 is a result of higher operating income, lower interest expense and higher investment gains in 2021 compared to 2020. The nine months ended September 30, 2021 also included a net charge of approximately $100 million related to the remeasurement 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.

The Company’s results of operations and earnings per share for the three and nine months ended September 30, 2021 and 2020 include costs related to JLT integration and restructuring activities, and other restructuring activities as discussed in more detail in Note 15 of the consolidated financial statements.

The following chart provides a summary of costs that are reflected as part of net operating income:

			Three Months Ended September 30,												Nine Months Ended September 30,
(In millions)			2021						2020						2021						2020
Restructuring costs, excluding JLT			$	12					$	23					$	35					$	43
JLT integration and restructuring costs			19						44						61						181
JLT acquisition related costs			11						15						35						41
JLT legacy E&O provision			(63)						—						(63)						—
Legal claims and other			22						—						29						—
Net (gain) loss on sale of businesses			—						—						(49)						2
Impact on operating income			$	1					$	82					$	48					$	267

JLT Integration and Restructuring Costs

The Company is in the final stages of its integration of JLT. The costs incurred in connection with the integration and restructuring of the combined businesses are primarily related to severance, real estate rationalization and technology, consulting fees related to the management of the integration processes and legal fees related to the rationalization of legal entity structures. Since the acquisition of JLT, the Company has incurred JLT integration and restructuring costs of $647 million through September 30, 2021. This reflects $61 million of costs incurred during the first nine months of 2021 compared to $181 million for the same period in the prior year. The Company expects to incur the remaining $77 million of costs substantially in 2021, primarily related to real estate and technology, of which approximately $69 million will be cash expenditures. Through September 30, 2021, the Company has exceeded the initial estimated savings of $350 million and has realized at least $425 million of annualized savings.

JLT Acquisition Related Costs

JLT acquisition related costs reflect retention costs related to the acquisition of JLT.

JLT Legacy E&O Provision

In the third quarter of 2021, the Company recorded a $36 million reduction in the liability for a legacy JLT Errors and Omissions ("E&O") related to the suitability of advice provided to individuals for defined benefit pension transfers in the UK, as well as $27 million of recoveries under indemnities and insurance. The reduction in liability primarily reflects lower redress payments than previously estimated, partly offset by higher costs to review and calculate redress. See Note 17 ("Claims, Lawsuits and Other Contingencies") to the consolidated financial statements in this report for additional detail.

Legal claims and other

The Company recorded settlement charges and legal costs related to strategic recruiting.

Net (gain) loss on sale of business

During the first nine months of 2021, the Company sold certain businesses in the U.S. and the U.K. 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.

Revenue

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 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 the next 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:

			Three Months Ended September 30,												% Change GAAP Revenue						Components of Revenue Change*
Currency Impact						Acquisitions/ Dispositions/ Other Impact						Underlying Revenue
(In millions, except percentage data)			2021						2020
Risk and Insurance Services
Marsh			$	2,352					$	2,009					17		%				2		%				3		%				13		%
Guy Carpenter			314						274						15		%				—						—						15		%
Subtotal			2,666						2,283						17		%				1		%				2		%				13		%
Fiduciary interest income			4						8
Total Risk and Insurance Services			2,670						2,291						17		%				1		%				2		%				13		%
Consulting
Mercer			1,315						1,216						8		%				2		%				(1)		%				7		%
Oliver Wyman Group			610						480						27		%				1		%				—						25		%
Total Consulting			1,925						1,696						13		%				2		%				—						12		%
Corporate Eliminations			(12)						(19)
Total Revenue			$	4,583					$	3,968					16		%				2		%				1		%				13		%

			Three Months Ended September 30,												% Change GAAP Revenue						Components of Revenue Change*
Currency Impact						Acquisitions/ Dispositions/ Other Impact						Underlying Revenue
(In millions, except percentage data)			2021						2020
Marsh:
EMEA			$	600					$	536					12		%				4		%				—						8		%
Asia Pacific			281						254						10		%				2		%				—						9		%
Latin America			105						93						13		%				1		%				—						12		%
Total International			986						883						12		%				3		%				—						9		%
U.S./Canada			1,366						1,126						21		%				—						4		%				16		%
Total Marsh			$	2,352					$	2,009					17		%				2		%				3		%				13		%
Mercer:
Wealth			$	613					$	566					9		%				3		%				(1)		%				6		%
Health			449						430						4		%				1		%				(1)		%				4		%
Career			253						220						15		%				1		%				—						13		%
Total Mercer			$	1,315					$	1,216					8		%				2		%				(1)		%				7		%

*			Components of revenue change may not add due to rounding.

			Nine Months Ended September 30,												% Change GAAP Revenue																		Components of Revenue Change*
Currency Impact						Acquisitions/ Dispositions/ Other Impact						Underlying Revenue
(In millions, except percentage data)			2021						2020
Risk and Insurance Services
Marsh			$	7,327					$	6,231					18		%																3		%				3		%				12		%
Guy Carpenter			1,697						1,534						11		%																1		%				—						10		%
Subtotal			9,024						7,765						16		%																3		%				2		%				11		%
Fiduciary interest income			12						40
Total Risk and Insurance Services			9,036						7,805						16		%																3		%				2		%				11		%
Consulting
Mercer			3,877						3,616						7		%																4		%				(1)		%				4		%
Oliver Wyman Group			1,813						1,458						24		%																3		%				—						21		%
Total Consulting			5,690						5,074						12		%																4		%				(1)		%				9		%
Corporate Eliminations			(43)						(71)
Total Revenue			$	14,683					$	12,808					15		%																3		%				1		%				10		%

			Nine Months Ended September 30,												% Change GAAP Revenue																		Components of Revenue Change*
Currency Impact						Acquisitions/ Dispositions/ Other Impact						Underlying Revenue
(In millions, except percentage data)			2021						2020
Marsh:
EMEA			$	2,233					$	1,887					18		%																6		%				2		%				10		%
Asia Pacific			902						790						14		%																6		%				—						9		%
Latin America			298						283						5		%																(1)		%				—						6		%
Total International			3,433						2,960						16		%																5		%				1		%				9		%
U.S./Canada			3,894						3,271						19		%																1		%				5		%				14		%
Total Marsh			$	7,327					$	6,231					18		%																3		%				3		%				12		%
Mercer:
Wealth			$	1,861					$	1,719					8		%																6		%				(1)		%				4		%
Health			1,398						1,348						4		%																2		%				(1)		%				3		%
Career			618						549						13		%																3		%				—						10		%
Total Mercer			$	3,877					$	3,616					7		%																4		%				(1)		%				4		%

*			Components of revenue change may not add due to rounding.

Consolidated revenue increased $615 million, or 16% to $4.6 billion for the three months ended September 30, 2021 compared to $4.0 billion for the three months ended September 30, 2020. Consolidated revenue increased 13% on an underlying basis, 2% from the impact of foreign currency translation and 1% from acquisitions. On an underlying basis, revenue increased 13% and 12% for the three months ended September 30, 2021 in Risk and Insurance Services and Consulting segments, respectively.

Consolidated revenue increased $1.9 billion, or 15% to $14.7 billion for the nine months ended September 30, 2021 compared to $12.8 billion for the nine months ended September 30, 2020. This reflects increases of 10% on an underlying basis, 3% from the impact of foreign currency translation and 1% from acquisitions. On an underlying basis, revenue increased 11% and 9% for the nine months ended September 30, 2021 in Risk and Insurance Services and Consulting segments, respectively.

Underlying revenue growth in the Risk and Insurance and Consulting segments for the three and nine months ended September 30, 2021 was driven by the high demand for our advice and services as the U.S. and global economies continue to rebound from the impact of the pandemic.

Risk and Insurance Services

Revenue in the Risk and Insurance Services segment increased $379 million, or 17% to $2.7 billion for the three months ended September 30, 2021 compared to $2.3 billion for the three months ended September 30, 2020. This reflects increases of 13% on an underlying basis, 1% from the impact of foreign currency translation and 2% from acquisitions.

Revenue in the Risk and Insurance Services segment increased $1.2 billion, or 16% to $9.0 billion for the nine months ended September 30, 2021 compared to $7.8 billion for the nine months ended September 30, 2020. This reflects increases of 11% in underlying revenue, 3% from the impact of foreign currency translation and 2% from acquisitions. The increase in underlying revenue in the Risk and Insurance Services segment for the three and nine months ended September 30, 2021, was primarily due to strong growth in new business, solid retention, and benefits from pricing in the marketplace.

At Marsh, revenue increased $343 million, or 17% to $2.4 billion for the third quarter of 2021 compared to $2.0 billion for the third quarter of 2020. This reflects an increase in underlying revenue of 13%, a 2% increase from the impact of foreign exchange translation, and a 3% increase from acquisitions. For Marsh, in U.S./Canada, underlying revenue rose 16%. International operations produced underlying revenue growth of 9%, reflecting growth of 9% in Asia Pacific, 8% in EMEA and 12% in Latin America.

At Marsh, revenue increased $1.1 billion, or 18% to $7.3 billion for the nine months ended September 30, 2021 compared to $6.2 billion for the nine months ended September 30, 2020. This reflects an increase in underlying revenue of 12%, a 3% increase from the impact of foreign exchange translation, and a 3% increase from acquisitions. In U.S./Canada, underlying revenue rose 14%. International operations produced underlying revenue growth of 9%, reflecting growth of 9% in Asia Pacific, 10% in EMEA and 6% in Latin America.

At Guy Carpenter, revenue increased $40 million, or 15% to $314 million for the three months ended September 30, 2021, compared to $274 million for the three months ended September 30, 2020, on both a reported and underlying basis.

At Guy Carpenter, revenue increased $163 million, or 11% to $1.7 billion for the nine months ended September 30, 2021 compared to $1.5 billion for the nine months ended September 30, 2020.

Consulting

Consulting revenue increased $229 million, or 13% to $1.9 billion for the three months ended September 30, 2021 compared to $1.7 billion for the three months ended September 30, 2020. This reflects increases of 12% in underlying revenue and 2% from the impact of foreign currency translation.

Consulting revenue increased $616 million, or 12% to $5.7 billion for the nine months ended September 30, 2021, compared to $5.1 billion for the nine months ended September 30, 2020. This reflects increases of 9% in underlying revenue and 4% from the impact of foreign currency translation offset by a decrease of 1% from the disposition of businesses.

Mercer's revenue increased $99 million, or 8% to $1.3 billion for the three months ended September 30, 2021 compared to $1.2 billion for the three months ended September 30, 2020, or 7% on an underlying basis. Revenue also reflects an increase of 2% from the impact of foreign currency translation offset by a 1% decrease from dispositions. On an underlying basis, revenue for Health and Wealth increased 4% and 6% respectively, while Career increased 13% as compared to the same period last year.

Mercer's revenue increased $261 million, or 7% to $3.9 billion for the nine months ended September 30, 2021 compared to $3.6 billion for the nine months ended September 30, 2020. This reflects an increase of 4% from the impact of foreign currency translation and 4% in underlying revenue, offset by a 1% decrease from dispositions. On an underlying basis, revenue in Health and Wealth increased 3% and 4%, respectively, while Career increased 10% as compared to prior year. The increase in underlying revenue at Mercer for the three and nine months ended September 30, 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's revenue increased $130 million, or 27% to $610 million for the three months ended September 30, 2021 compared to $480 million for the three months ended September 30, 2020, reflecting an increase of 25% on an underlying basis and a 1% increase from the impact of foreign currency translation.

Oliver Wyman's revenue increased $355 million, or 24% to $1.8 billion for the nine months ended September 30, 2021 compared to $1.5 billion for the nine months ended September 30, 2020, reflecting an increase of 21% on an underlying basis and a 3% increase from the impact of foreign currency translation. The increase in underlying revenue at Oliver Wyman for the three and nine months ended September 30, 2021 primarily reflects the impact of increased demand for project-based services in the U.S.

Operating Expense

Consolidated operating expense increased $415 million, or 12% to $3.8 billion for the three months ended September 30, 2021 compared to $3.4 billion for the three months ended September 30, 2020, reflecting increases of 9% on an underlying basis, 2% from the impact of foreign currency translation and 1% from acquisitions. On an underlying basis, expenses increased 12% and 6% for the three months ended September 30, 2021 in Risk and Insurance Services and Consulting, respectively.

Consolidated operating expense increased $1.0 billion, or 10% to $11.4 billion for the nine months ended September 30, 2021 compared to $10.3 billion for the nine months ended September 30, 2020, reflecting increases of 6% on an underlying basis, 3% increase from the impact of foreign currency translation and 1% from acquisitions. On an underlying basis, expenses increased 7% and 5% for the nine months ended September 30, 2021 in Risk and Insurance Services and Consulting, respectively. Underlying expenses for the three and nine months ended September 30, 2021 primarily reflect higher incentive compensation and increase in base salaries for additional headcount.

Risk and Insurance Services

Expenses in the Risk and Insurance Services segment increased $309 million, or 16% to $2.3 billion for the three months ended September 30, 2021 compared to $2.0 billion for the three months ended September 30, 2020. This reflects increases of 2% for both foreign currency translation and acquisitions. On an underlying basis, expenses increased 12%, reflecting the impact of higher incentive compensation and increases in base salaries for additional headcount.

Expenses in the Risk and Insurance Services segment increased $701 million, or 12% to $6.6 billion for the nine months ended September 30, 2021 compared to $5.9 billion for the nine months ended September 30, 2020. This reflects increases of 3% for foreign currency translation and 2% for acquisitions. On an underlying basis, expenses increased 7%, reflecting higher incentive compensation and increases in base salaries for additional headcount, partly offset by lower JLT integration and restructuring costs.

Consulting

Consulting expenses increased $103 million, or 7% to $1.5 billion for the three months ended September 30, 2021 compared to $1.4 billion for the three months ended September 30, 2020. This reflects increases of 1% from the impact of foreign currency translation and 6% on an underlying basis.

Consulting expenses increased $322 million, or 8% to $4.6 billion for the nine months ended September 30, 2021 compared to $4.3 billion for the first nine months ended September 30, 2020. This reflects an increase of 3% from the impact of foreign currency translation and 5% on an underlying basis. The increase in underlying expense in the Consulting segment for the three and nine months ended September 30, 2021 primarily reflects higher incentive compensation expense, partially offset by a $63 million reduction in the liability for a legacy JLT E&O, as well as recoveries under indemnities and insurance.

Corporate and Other

Corporate expenses were $67 million for the three months ended September 30, 2021 compared to $71 million for the three months ended September 30, 2020 and $196 million for the nine months ended September 30, 2021 compared to $203 million for the nine months ended September 30, 2020. The decrease is primarily due to lower integration and restructuring costs.

Interest

Interest expense decreased $21 million and $52 million in the three and nine months ended September 30, 2021 compared with the same periods of 2020 due to lower average debt levels in 2021 compared with the same period last 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 investments in private equity funds.

The Company recorded net investment income of $13 million and $43 million for the three and nine periods ended September 30, 2021 compared to net investment losses of $14 million and $47 million for the same periods last

year. The income in 2021 is primarily driven by gains in the Company's private equity investments compared to losses for the same periods in prior year. The net investment loss reported in the third quarter of 2020 is primarily

due to the mark-to-market change related to the Company's investment in Alexander Forbes ("AF"). Prior year also included a loss of $23 million for the nine month period ended September 30, 2020 related to the Company's investment in AF.

Income and Other Taxes

The Company's effective tax rate in the third quarter of 2021 was 24.2% compared with 30.3% in the third quarter of 2020. The effective tax rates for the nine months ended September 30, 2021 and 2020 were 27.1% and 26.0%, respectively.

The rate in the third quarter of 2021 reflects tax benefits from planning implemented in the period that postponed the utilization of current-year losses in the U.K. to a future year when the tax rate will be 25%, additional tax benefits related to share-based compensation offset by changes to uncertain tax positions, deferred tax and other tax adjustments. The rate for the nine months ended September 30, 2021 reflects the charge recorded in the second quarter of approximately $100 million 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 3.1% for the nine months ended September 30, 2021.

The rate in the third quarter and nine months ended September 30, 2020 reflects costs of re-measuring the Company’s U.K. deferred tax assets and liabilities upon the enactment of legislation that cancelled a scheduled 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.

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 non-taxable adjustments to contingent acquisition consideration.

The effective tax rate may vary significantly from period to period. The effective tax rate is sensitive to the geographic mix and repatriation of the Company's earnings, which may result in higher or lower effective tax rates. Thus, a shift in the mix of profits among jurisdictions, or changes in the Company’s repatriation strategy to access offshore cash, can affect the effective tax rate.

In addition, losses in certain jurisdictions cannot be offset by earnings from other operations, and may require valuation allowances that affect the rate in a particular period, 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. 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 have a significant favorable or adverse impact on our effective tax rate.

As a U.S. domiciled parent holding company, the Company is the issuer of essentially all of the 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 U.S. 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. For post 2017 years, including 2021, the Company continues to evaluate its global investment and repatriation strategy in light of its capital requirements, considering the Tax Cuts and Jobs Act (the "TCJA") and the quasi-territorial tax regime for future foreign earnings.

The Company has established liabilities for uncertain tax positions in relation to potential assessments in the jurisdictions in which it operates. The Company believes the resolution of tax matters will not have a material effect on the consolidated financial position of the Company, although a resolution of tax matters could have a material impact on the Company's net income or cash flows and on its effective tax rate in a particular future period. It is reasonably possible that the total amount of unrecognized tax benefits will decrease between zero and approximately $33 million within the next twelve months due to settlement of audits and expiration of statutes of limitation.

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, payroll taxes due from March 27, 2020 through December 31, 2020 were deferred until 2021 and 2022 (50% to be paid each year) without interest or penalties.

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 discussed in financing cash flows.

The Company derives a significant portion of its revenue and operating profit from operating subsidiaries located outside of the United States. Funds from those operating subsidiaries are regularly repatriated to the United States out of annual earnings. At September 30, 2021, the Company had approximately $815 million of cash and cash equivalents in its foreign operations, which includes $283 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. With respect to repatriating 2018 and prior earnings, the Company has evaluated such factors as its short- and long-term capital needs, acquisition and borrowing strategies, and the availability of cash for repatriation for each of its subsidiaries. The Company has determined that, in general, its permanent reinvestment assertions, in light of the enactment of the Tax Cuts and Jobs Act, should allow the Company to repatriate previously taxed earnings from the deemed repatriations as cash becomes available.

During the first nine months of 2021, the Company recorded foreign currency translation adjustments which decreased net equity by $413 million. Continued strengthening of the U.S. dollar against foreign currencies would further 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 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 $2.1 billion of cash from operations for the nine months ended September 30, 2021 compared to $2.0 billion generated by operations in the first nine months of 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 and pension plan contributions or receipts of assets. The Company paid $58 million and $169 million related to the JLT integration and restructuring activity for the nine months ended September 30, 2021 and 2020, respectively.

Pension Related Items

Contributions

The Company's policy for funding its tax-qualified defined benefit plans is to contribute amounts at least sufficient to meet the funding requirements set forth in accordance with applicable law. During the first nine months of 2021, the Company contributed $63 million to its non-U.S. defined benefit pension plans and $27 million to its U.S. defined benefit pension plans. In the first nine months of 2020, the Company contributed $56 million to its non-U.S. defined benefit pension plans and $25 million to its U.S. defined benefit pension plans.

In the United States, contributions to the tax-qualified defined benefit plans are based on ERISA guidelines.

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, 2020. 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.

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. For the MMC U.K. Pension Fund, a new agreement was reached with the trustee in the 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 to determine if contributions are required in 2023. In order to have 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 GBP 450 million over a seven-year period.

The Company has agreed to a deficit funding plan with the trustee of the U.K. JLT Pension Scheme to fund $41 million in 2021.

The Company expects to fund an additional $31 million to its non-U.S. defined benefit plans over the remainder of 2021, comprising approximately $17 million to plans outside of the U.K. and $14 million to the U.K. plans. The Company expects to fund an additional $8 million to its U.S. defined benefit plans during the remainder of 2021.

Financing Cash Flows

Net cash used for financing activities was $2.0 billion for the nine months ended September 30, 2021, compared with $163 million of net cash used by such activities for the same period in 2020.

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 September 30, 2021.

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 September 30, 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 billion 364-day unsecured revolving credit facility ("364-day Facility").

In January 2020, the Company closed on $500 million one-year and $500 million two-year term loan facilities. In the first quarter of 2020 the Company borrowed $1 billion against these facilities, which were subsequently repaid during the third and fourth quarters of 2020. These two facilities were terminated as of December 31, 2020 after repayment of the initial draw down.

Additional credit facilities, guarantees and letters of credit are maintained with various banks, primarily related to operations located outside the United States, aggregating $512 million at September 30, 2021 and $573 million at December 31, 2020. There were no outstanding borrowings under these facilities at September 30, 2021 and December 31, 2020.

Debt

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

In May 2020, the Company issued $750 million of senior notes.

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 ("S&P") and Baa1 by Moody's. The Company's short-term debt is currently rated A-2 by S&P and P-2 by Moody's. The Company carries a Stable outlook with both S&P 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 the first nine months of 2021, the Company repurchased 5.3 million shares of its common stock for total consideration of approximately $734 million. As of September 30, 2021, the Company remained authorized to purchase shares of its common stock up to a value of approximately $1.7 billion. There is no time limit on this authorization. There were no repurchases of the Company's common stock during the nine months ending September 30, 2020.

Contingent Payments Related to Acquisitions

During the first nine months of 2021, the Company paid $72 million of contingent payments related to acquisitions made in prior periods and received cash of $90 million related to dispositions made in prior years. These payments are split between financing and operating cash flows in the consolidated statements of cash flows. Payments of $26 million related to the contingent consideration liability that was recorded on the date of acquisition are reflected as financing cash flows. Payments related to increases in the contingent consideration liability subsequent to the date of acquisition of $46 million are reflected as operating cash flows. Operating cash flows also include cash receipts of approximately $19 million due to increases in the contingent consideration receivables subsequent to the date of dispositions. Remaining estimated future contingent consideration payments of $303 million for acquisitions completed in the first nine months of 2021 and in prior years are recorded in accounts payable and accrued liabilities or other liabilities in the consolidated balance sheet at September 30, 2021.

The Company paid deferred purchase consideration related to prior years' acquisitions of $84 million in the first nine months of 2021. Financing cash flows also reflect the receipt of contingent consideration of $71 million related to prior year dispositions. Remaining deferred cash payments of approximately $203 million for acquisitions completed in prior years are recorded in accounts payable and accrued liabilities or other liabilities in the consolidated balance sheet at September 30, 2021.

In the first nine months of 2020, the Company paid $101 million of contingent payments related to acquisitions made in prior periods. Of this amount, $65 million was reported as financing cash flows and $36 million as operating cash flows.

Dividends

The Company paid dividends on its common shares of $750 million ($1.465 per share) during the first nine months of 2021, as compared with $702 million ($1.375 per share) during the first nine months of 2020.

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. The Company concluded that the hedge continues to be highly effective as of September 30, 2021, and the change in the debt balance related to foreign exchange fluctuations was recorded in foreign currency translation gains (losses) in the consolidated balance sheet. The U.S. dollar value of the Euro notes decreased by $63 million through September 30, 2021 due to the impact foreign exchange rates, with a corresponding decrease to accumulated other comprehensive loss.

Investing Cash Flows

Net cash used for investing activities amounted to $589 million in the first nine months of 2021, compared with $646 million used during the same period in 2020.

The Company paid $401 million and $559 million, net of cash acquired, for acquisitions it made during the first nine months of 2021 and 2020, respectively.

During the first nine months of 2021 and 2020, the Company sold certain businesses, primarily in the U.S. and U.K., for cash proceeds of approximately $84 million and $93 million, respectively.

The Company used cash of $268 million to purchase fixed assets and capitalized software in the first nine months of 2021, compared with $278 million in the first nine months of 2020, primarily related to computer equipment and software purchases, software development costs and the refurbishing and modernizing of office facilities.

In 2020, the Company sold approximately 240 million shares of the common stock of AF.

The Company has commitments for potential future investments of approximately $27 million in five private equity funds that invest primarily in financial services companies.

Commitments and Obligations

The following table reflects the Company’s contractual obligations by type as of September 30, 2021:

(In millions)			Payment due by Period
Contractual Obligations			Total						Within 1 Year						1-3 Years						4-5 Years						After 5 Years
Short-term debt			$	516					$	516					$	—					$	—					$	—
Long-term debt			10,292						—						2,235						1,780						6,277
Interest on long-term debt			5,026						420						775						612						3,219
Net operating leases			2,533						396						660						521						956
Service agreements			196						98						72						23						3
Other long-term obligations			574						209						353						10						2
Total			$	19,137					$	1,639					$	4,095					$	2,946					$	10,457

The table does not include unrecognized tax benefits of $101 million as the Company is unable to reasonably predict the timing of settlement of these liabilities, other than approximately $22 million that may become payable within one year. The table also excludes the provisional estimate of remaining transitional tax payments related to the Tax Cuts and Job Act ("the TCJA") of $66 million.

Management’s Discussion of Critical Accounting Policies

The Company’s discussion of critical accounting policies that place the most significant demands on management’s judgment and requires management to make significant estimates about matters that are inherently uncertain are discussed in the MD&A in the 2020 Form 10-K.

New Accounting Guidance

Note 19 to the consolidated financial statements in this report contains a discussion of recently issued accounting guidance and their impact or potential future impact on the Company’s financial results, if determinable.