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") is a global professional services firm offering clients advice in the areas of risk, strategy and people. The Company’s more than 85,000 colleagues advise clients in over 130 countries. With annual revenue of over $20 billion, the Company helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses.

Marsh provides data-driven risk advisory services and insurance solutions to commercial and consumer clients. Guy Carpenter develops advanced risk, reinsurance and capital strategies that help clients grow profitably and identify and capitalize on emerging opportunities. Mercer delivers advice and technology-driven solutions that help organizations redefine the future of work, shape retirement and investment outcomes, and advance 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 solutions and products, and specialized management, strategic, economic and brand consulting services. The Company conducts business in this segment through Mercer and Oliver Wyman Group.

The results of operations in the Management Discussion & Analysis ("MD&A") includes an overview of the Company's consolidated results for the three months ended March 31, 2023, compared to the corresponding quarter in 2022, and should be read in conjunction with the consolidated financial statements and notes. This section also includes a discussion of the key drivers impacting the Company's financial results of operations both on a consolidated basis and by reportable segments.

We describe the primary sources of revenue and categories of expense for each segment in the discussion of segment financial results. A reconciliation of segment operating income to total operating income is included in Note 18, Segment Information, in the notes to the consolidated financial statements included in Part I, Item 1, of this report.

For information and comparability of the Company's results of operations and liquidity and capital resources for the three months ended March 31, 2022, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-Q for the quarter ended March 31, 2022.

This MD&A contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Refer to "Information Concerning Forward-Looking Statements" at the outset of this report.

Non-GAAP measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States (U.S.), referred to as in accordance with "GAAP" or "reported" results. The Company also refers to and presents a non-GAAP financial measure in non-GAAP revenue, within the meaning of Regulation G and Item 10(e) of Regulation S-K in accordance with the Securities Exchange Act of 1934. The Company has included a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated in accordance with GAAP as part of the consolidated revenue and expense discussion. Percentage changes, referred to as non-GAAP underlying revenue, are calculated by dividing the period over period change in non-GAAP revenue by the prior period non-GAAP revenue.

The Company believes this non-GAAP financial measure provides useful supplemental information that enables investors to better compare the Company’s performance across periods. Management also uses this measure internally to assess the operating performance of its businesses and to decide how to allocate resources. However, investors should not consider this non-GAAP measure in isolation from, or as a substitute for, the financial information that the Company reports in accordance with GAAP. The Company's non-GAAP measure includes adjustments that reflect how management views its businesses and may differ from similarly titled non-GAAP measures presented by other companies.

Financial Highlights

*•*Consolidated revenue for the three months ended March 31, 2023 was $5.9 billion, an increase of 7% or 9% on an underlying basis.

*•*Consolidated operating income increased $281 million, or 19% to $1.7 billion for the three months ended March 31, 2023, compared to the corresponding quarter in the prior year. Net income attributable to the Company was $1.2 billion. Earnings per share on a diluted basis increased from $2.10 to $2.47, or 18% compared to the corresponding quarter in the prior year.

• Risk and Insurance Services revenue for the three months ended March 31, 2023 was $3.9 billion, an increase of 10%, or 11% on an underlying basis. Operating income was $1.4 billion compared with $1.1 billion in the corresponding quarter in the prior year.

• Consulting revenue for the three months ended March 31, 2023 was $2.0 billion, an increase of 1%, or 5% on an underlying basis. Operating income was $411 million, compared with $392 million in the corresponding quarter in the prior year.

*•*The Company issued $600 million of 5.45% senior notes due 2053.

• In the first quarter of 2023, the Company repurchased 1.8 million shares of stock for $300 million.

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

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

Consolidated Results of Operations

									Three Months Ended March 31,
(In millions, except per share data)															2023						2022
Revenue															$	5,924					$	5,549
Expense:
Compensation and benefits															3,207						3,100
Other operating expenses															991						1,004
Operating expenses															4,198						4,104
Operating income															$	1,726					$	1,445
Income before income taxes															$	1,664					$	1,424
Net income before non-controlling interests															$	1,252					$	1,086
Net income attributable to the Company															$	1,235					$	1,071
Net income per share attributable to the Company:
– Basic															$	2.50					$	2.13
– Diluted															$	2.47					$	2.10
Average number of shares outstanding:
– Basic															495						503
– Diluted															500						509
Shares outstanding at March 31,															495						502

Consolidated operating income increased $281 million, or 19% to $1.7 billion for the three months ended March 31, 2023, compared to the $1.4 billion in the prior year, reflecting a 7% increase in revenue and a 2% increase in expenses.

Revenue growth was primarily driven by an increase in the Risk and Insurance Services segment of 10%, reflecting strong renewal growth, increases in exposure, higher insurance and reinsurance rates and investments in talent. Revenue in Consulting increased 1% reflecting significant underlying growth in career and health, modest underlying growth in wealth, and flat underlying growth in Oliver Wyman Group offset by the impact of foreign exchange and net dispositions. The increase in expenses is primarily due to increased headcount. Expenses also reflect higher travel and entertainment costs compared to the corresponding quarter in the prior year. For the three months ended March 31, 2023, operating income was also impacted by foreign exchange movements across both segments due to the strengthening of the U.S. dollar.

Diluted earnings per share increased from $2.10 to $2.47, or 18% for the three months ended March 31, 2023, compared to the corresponding quarter in the prior year. The increase is primarily the result of higher operating income, offset by lower investment income, and higher interest expense and income taxes for the three months ended March 31, 2023, compared to the corresponding quarter in the prior year.

Results for the three months ended March 31, 2022 also include a charge of $52 million for the deconsolidation of the Company's Russian businesses and other related charges in Marsh and Oliver Wyman recorded in the first quarter of 2022.

For the three months ended March 31, 2023 and 2022, the Company's results of operations and earnings per share were impacted by the following items:

									Three Months Ended March 31,
(In millions)															2023						2022
Restructuring, excluding JLT															$	40					$	18
JLT integration and restructuring costs															13						12
Changes in contingent consideration															7						10
JLT legacy legal charges															(51)						(10)
Pre-acquisition related costs															17						—
Disposal of business															19						—
JLT acquisition-related costs and other															—						13
Legal claims															—						30
Deconsolidation of Russian businesses and other related charges															—						52
Impact on income before taxes															$	45					$	125

• Restructuring, excluding JLT:** In 2023, costs primarily include severance and lease exit costs for activities focused on workforce actions, rationalization of technology and functional resources, and reductions in real estate. Costs also reflect charges for Marsh's operational excellence program. These costs are discussed in more detail in Note 15, Restructuring Costs, in the notes to the consolidated financial statements.

• JLT integration and restructuring****:** Reflects adjustments to restructuring liabilities for future rent under non-cancelable leases for a legacy JLT U.K. location.

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

• JLT legacy legal charges:** Reflects insurance and indemnity recoveries for a legacy JLT errors and omissions ("E&O") matter relating to suitability of advice provided to individuals for defined benefit pension transfers in the U.K.

• Pre-acquisition related costs:** Includes integration costs for the Westpac Banking Corporation superannuation fund transaction in Australia, which closed on April 1, 2023. Refer to Note 8, Acquisitions and Dispositions, in the notes to the consolidated financial statements for additional detail.

• Disposal of Business:** Loss on sale of a small individual financial advisory business in Canada. This amount is reflected as a component of revenue in the consolidated statements of income and excluded from non-GAAP revenue.

• JLT acquisition-related costs and other:** Retention costs and legal charges related to the acquisition of JLT.

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

• Deconsolidation of Russian businesses and other related charges:** The loss on deconsolidation of the Company's Russian businesses of $39 million is reflected as a component of revenue in the consolidated statements of income and excluded from non-GAAP revenue. The remaining expense charges of $13 million are included in other operating expenses in the consolidated statements of income.

Consolidated Revenue and Expense

Revenue – Non-GAAP Revenue and Components of Change

The Company conducts business in 130 countries. As a result, foreign exchange rate movements may impact period-to-period comparisons of revenue. Similarly, certain other items such as acquisitions and dispositions, including transfers among businesses, may impact period over period comparisons of revenue. Non-GAAP revenue measures the change in revenue from one period to the next by isolating these impacts on an underlying revenue basis. Percentage changes, referred to as non-GAAP underlying revenue, are calculated by dividing the period over period change in non-GAAP revenue by the prior period non-GAAP revenue.

The non-GAAP revenue measure is presented on a constant currency basis excluding the impact of foreign currency fluctuations. The Company isolates the impact of foreign exchange rate movements period over period, by translating the current period foreign currency GAAP revenue into U.S. Dollars based on the difference in the current and corresponding prior period exchange rates.

The percentage change for acquisitions, dispositions, and other includes the impact of current and prior year items excluded from the calculation of non-GAAP underlying revenue for comparability purposes. Details on these items are provided in the reconciliation of non-GAAP revenue to GAAP revenue tables.

The following table presents the Company's non-GAAP revenue for the three months ended March 31, 2023 and 2022 and the related non-GAAP underlying revenue change:

Three months ended March 31, (in millions, except percentages)			GAAP Revenue						% Change GAAP Revenue*			Non-GAAP Revenue						Non-GAAP Underlying Revenue*
2023			2022			2023			2022
Risk and Insurance Services
Marsh			$	2,744		$	2,546		8		%	$	2,791		$	2,568		9		%
Guy Carpenter			1,071			999			7		%	1,075			980			10		%
Subtotal			3,815			3,545			8		%	3,866			3,548			9		%
Fiduciary interest income			91			4						93			4
Total Risk and Insurance Services			3,906			3,549			10		%	3,959			3,552			11		%
Consulting
Mercer			1,344			1,343			—			1,413			1,316			7		%
Oliver Wyman Group			687			667			3		%	679			678			—
Total Consulting			2,031			2,010			1		%	2,092			1,994			5		%
Corporate Eliminations			(13)			(10)						(13)			(10)
Total Revenue			$	5,924		$	5,549		7		%	$	6,038		$	5,536		9		%

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

Three Months Ended March 31, (In millions, except percentages)			GAAP Revenue						% Change GAAP Revenue*			Non-GAAP Revenue						Non-GAAP Underlying Revenue*
2023			2022			2023			2022
Marsh:
EMEA (a)			$	932		$	869		7		%	$	979		$	891		10		%
Asia Pacific (a)			312			294			6		%	326			294			11		%
Latin America			115			104			11		%	115			104			10		%
Total International			1,359			1,267			7		%	1,420			1,289			10		%
U.S./Canada			1,385			1,279			8		%	1,371			1,279			7		%
Total Marsh			$	2,744		$	2,546		8		%	$	2,791		$	2,568		9		%
Mercer:
Wealth			581			617			(6)		%	630			615			2		%
Health			545			524			4		%	558			499			12		%
Career			218			202			8		%	225			202			12		%
Total Mercer			$	1,344		$	1,343		—			$	1,413		$	1,316		7		%

(a) Starting in the first quarter of 2023, the Company began reporting the Marsh India operations in EMEA. Prior year results for India have been reclassified from Asia Pacific to EMEA for comparative purposes.

• Rounded to whole percentages.

Revenue – Reconciliation of Non-GAAP Measures

The following table provides the reconciliation of GAAP revenue to Non-GAAP revenue:

			2023															2022
Three Months Ended March 31, (In millions)			GAAP Revenue			Currency Impact			Acquisitions/ Dispositions/ Other Impact			Non-GAAP Revenue						GAAP Revenue			Acquisitions/ Dispositions/ Other Impact			Non-GAAP Revenue
Risk and Insurance Services
Marsh (a)			$	2,744		$	71		$	(24)		$	2,791					$	2,546		$	22		$	2,568
Guy Carpenter			1,071			18			(14)			1,075						999			(19)			980
Subtotal			3,815			89			(38)			3,866						3,545			3			3,548
Fiduciary interest income			91			2			—			93						4			—			4
Total Risk and Insurance Services			3,906			91			(38)			3,959						3,549			3			3,552
Consulting
Mercer (b)			1,344			50			19			1,413						1,343			(27)			1,316
Oliver Wyman Group (a)			687			16			(24)			679						667			11			678
Total Consulting			2,031			66			(5)			2,092						2,010			(16)			1,994
Corporate Eliminations			(13)			—			—			(13)						(10)			—			(10)
Total Revenue			$	5,924		$	157		$	(43)		$	6,038					$	5,549		$	(13)		$	5,536

(a) Acquisitions, dispositions, and other in 2022 includes the loss on deconsolidation of the Company's Russian businesses at Marsh of $27 million and Oliver Wyman Group of $12 million.

(b) Acquisitions, dispositions, and other in 2023 includes the loss on sale of a small individual financial advisory business in Canada of $19 million.

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

			2023															2022
Three Months Ended March 31, (In millions)			GAAP Revenue			Currency Impact			Acquisitions/ Dispositions/ Other Impact			Non-GAAP Revenue						GAAP Revenue			Acquisitions/ Dispositions/ Other Impact			Non-GAAP Revenue
Marsh:
EMEA (a) (b)			$	932		$	50		$	(3)		$	979					$	869		$	22		$	891
Asia Pacific (a)			312			15			(1)			326						294			—			294
Latin America			115			—			—			115						104			—			104
Total International			1,359			65			(4)			1,420						1,267			22			1,289
U.S./Canada			1,385			6			(20)			1,371						1,279			—			1,279
Total Marsh			$	2,744		$	71		$	(24)		$	2,791					$	2,546		$	22		$	2,568
Mercer:
Wealth (c)			$	581		$	28		$	21		$	630					$	617		$	(2)		$	615
Health			545			14			(1)			558						524			(25)			499
Career			218			8			(1)			225						202			—			202
Total Mercer			$	1,344		$	50		$	19		$	1,413					$	1,343		$	(27)		$	1,316

(a) Starting in the first quarter of 2023, the Company began reporting the Marsh India operations in EMEA. Prior year results for India have been reclassified from Asia Pacific to EMEA for comparative purposes.

(b) Acquisitions, dispositions, and other in 2022 includes the loss on deconsolidation of the Company's Russian businesses of $27 million.

(c) Acquisitions, dispositions, and other in 2023 includes the loss on sale of a small individual financial advisory business in Canada of $19 million.

Consolidated Revenue

Consolidated revenue increased $375 million, or 7% to $5.9 billion for the three months ended March 31, 2023, compared to $5.5 billion for the three months ended March 31, 2022. Consolidated revenue increased 9% on an underlying basis and 1% from acquisitions, partially offset by a decrease of 3% from the impact of foreign currency translation. On an underlying basis, revenue increased 11% and 5% for the three months ended March 31, 2023, in the Risk and Insurance Services and Consulting segments, respectively.

Underlying revenue growth in the Risk and Insurance Services and Consulting segments was driven by the continued demand for our advice and services, new business growth, and solid retention including continued benefits from pricing in the marketplace.

Consolidated Operating Expenses

Consolidated operating expenses increased $94 million, or 2% to $4.2 billion for the three months ended March 31, 2023, compared to $4.1 billion for the three months ended March 31, 2022. Expenses reflect a 1% increase from acquisitions and a decline of 3% from foreign currency translation. Expenses, excluding the impact from foreign currency translation and acquisitions, increased 6% and 2% for the three months ended March 31, 2023, in the Risk and Insurance Services and Consulting segments, respectively.

The increase in expenses is primarily due to increased headcount and higher travel and entertainment costs compared to the corresponding quarter in the prior year.

In the fourth quarter of 2022, the Company initiated activities focused on workforce actions, rationalization of technology and functional services, and reductions in real estate. Based on current estimates, the Company anticipates total charges related to these activities to be between $375 million and $400 million. The Company has incurred $243 million of restructuring costs through March 31, 2023, primarily severance and lease exit charges, of which $24 million were for the three months ended March 31, 2023. The majority of the remaining costs are expected to be incurred in 2023. Related estimated savings are expected to be in the range of $280 million to $310 million by 2024. The Company's plans are still being finalized, which may change the expected timing, estimates of expected costs and related savings, as the Company continues to refine its detailed plans for each business and location.

Risk and Insurance Services

In the Risk and Insurance Services segment, the Company’s subsidiaries and other affiliated entities act as brokers, agents or consultants for insureds, insurance underwriters and other brokers in the areas of risk management, insurance broking, insurance program management, risk consulting, analytical modeling and alternative risk financing services, primarily under the brand of Marsh, and engage in specialized reinsurance broking, strategic advisory services and analytics solutions, primarily under the brand of Guy Carpenter.

The results of operations for the Risk and Insurance Services segment are as follows:

									Three Months Ended March 31,
(In millions, except percentages)															2023						2022
Revenue															$	3,906					$	3,549
Compensation and benefits															1,880						1,801
Other operating expenses															631						627
Operating expenses															2,511						2,428
Operating income															$	1,395					$	1,121
Operating income margin															35.7		%				31.6		%

Revenue

Revenue in the Risk and Insurance Services segment increased $357 million or 10% to $3.9 billion for the three months ended March 31, 2023, compared to $3.5 billion for the three months ended March 31, 2022. Revenue increased 11% on an underlying basis and 1% from acquisitions, partially offset by a decrease of 3% from the impact of foreign currency translation. Interest earned on fiduciary funds increased by $87 million to $91 million for the three months ended March 31, 2023, compared to $4 million for the corresponding quarter in the prior year.

The increase in revenue on an underlying basis in the Risk and Insurance Services segment was primarily due to strong growth in new business and solid retention across most markets and geographies, driven by continued

benefits from pricing in the marketplace and tighter reinsurance market conditions. The increase in interest earned on fiduciary funds in 2023 is a result of higher interest rates compared to the corresponding quarter in the prior year.

At Marsh, revenue increased $198 million, or 8% to $2.7 billion for the three months ended March 31, 2023, compared to $2.5 billion for the three months ended March 31, 2022. This reflects increases of 9% on an underlying basis and 2% from the impact of acquisitions, partially offset by a decrease of 3% from the impact of foreign currency translation. On an underlying basis, the U.S. and Canada rose 7%. Total International operations produced underlying revenue growth of 10%, reflecting growth of 11% in Asia Pacific, and 10% in both EMEA and in Latin America.

Results for the three months ended March 31, 2022 also included a charge of approximately $27 million related to the loss on deconsolidation of the Company's Russian businesses.

At Guy Carpenter, revenue increased $72 million, or 7% to $1.1 billion for the three months ended March 31, 2023, compared to $1.0 billion for the three months ended March 31, 2022. This reflects an increase of 10% on an underlying basis, partially offset by decreases of 2% from the impact of foreign currency translation and 1% from dispositions.

The Risk and Insurance Services segment completed no acquisitions during the three months ended March 31, 2023.

Operating Expenses

Expenses in the Risk and Insurance Services segment increased $83 million, or 3% to $2.5 billion for the three months ended March 31, 2023, compared to $2.4 billion for the three months ended March 31, 2022. Expenses reflect a 1% increase from the impact of acquisitions, and a decline of 4% from the impact of foreign currency translation.

The increase in expenses excluding the impact from acquisitions and foreign currency translation for the three months ended March 31, 2023 is primarily due to increased headcount and higher incentive compensation. Expenses also reflect higher travel and entertainment costs compared to the corresponding quarter in the prior year.

For the three months ended March 31, 2023, the Company incurred $32 million of restructuring costs in Risk and Insurance Services, of which $11 million, mostly severance, related to the Company's activities focused on workforce actions, rationalization of technology and functional services, and reductions in real estate. The remaining restructuring costs relate primarily to adjustments to restructuring liabilities for future rent under non-cancellable leases.

Consulting

The Company conducts business in its Consulting segment through Mercer and Oliver Wyman Group. Mercer delivers advice and technology-driven solutions that help organizations redefine the future of work, shape retirement and investment outcomes, and advance health and well-being for a changing workforce. Oliver Wyman Group serves as critical strategic, economic and brand advisor to private sector and governmental clients.

The results of operations for the Consulting segment are as follows:

									Three Months Ended March 31,
(In millions, except percentages)															2023						2022
Revenue															$	2,031					$	2,010
Compensation and benefits															1,168						1,164
Other operating expenses															452						454
Operating expenses															1,620						1,618
Operating income															$	411					$	392
Operating income margin															20.2		%				19.5		%

Revenue

Consulting revenue increased $21 million, or 1% to $2.0 billion for the three months ended March 31, 2023, compared to the corresponding quarter in the prior year. This reflects an increase of 5% on an underlying basis, offset by decreases of 3% from the impact of foreign currency translation and 1% from the disposition of businesses.

Mercer's revenue for the three months ended March 31, 2023 was $1.3 billion, consistent with the corresponding quarter in the prior year. This reflects an increase of 7% on an underlying basis, offset by decreases of 4% from the

impact of foreign currency translation and 3% from the disposition of businesses. On an underlying basis, revenue for both Career and Health increased 12%, while revenue for Wealth increased 2%, as compared to the corresponding quarter in the prior year.

The increase in revenue on an underlying basis at Mercer was primarily due to continued demand for our advice and services. The increase in Career products and services was due to continued demand in rewards, talent strategy, and workforce transformation consulting. Health continued to benefit from growth in new business, higher retention, increased enrolled lives from a strong labor market, and medical inflation. Revenue in Wealth on an underlying basis grew in project-based services for the three months ended March 31, 2023, partially offset by a decrease in investment management fees from the decline in assets under management due to market volatility on investments.

Results for the three months ended March 31, 2022 included a loss of $19 million related to the sale of a small individual financial advisory business in Canada.

Oliver Wyman Group's revenue increased $20 million, or 3% to $687 million for the three months ended March 31, 2023, compared to $667 million for the three months ended March 31, 2022. This reflects an increase of 5% from the impact of acquisitions, partially offset by a decrease of 2% related to the impact of foreign currency translation, while underlying revenue growth for the quarter remained flat due to a decrease in overall market demand.

Results for the three months ended March 31, 2022 also included a charge of approximately $12 million related to the loss on the deconsolidation of the Company's Russian businesses.

The Consulting segment completed one acquisition during the three months ended March 31, 2023. Information regarding this acquisition is included in Note 8, Acquisitions and Dispositions, in the notes to the consolidated financial statements.

Operating Expenses

Consulting expenses for the three months ended March 31, 2023 were $1.6 billion consistent with the corresponding quarter in the prior year. Expenses reflect a 1% increase from the impact of acquisitions and a decline of 3% from the impact of foreign currency translation.

The increase in expenses excluding the impact from acquisitions and foreign currency translation for the three months ended March 31, 2023, is primarily due to increased headcount and higher travel and entertainment costs compared to the corresponding quarter in the prior year. The increase in expenses is partially offset by $51 million of insurance recoveries for a legacy JLT E&O matter relating to suitability of advice provided to individuals for defined benefit pension transfers in the U.K.

Corporate and Other

Corporate expenses increased $12 million or 18% to $80 million for the three months ended March 31, 2023, compared to $68 million for the three months ended March 31, 2022. Expenses declined 2% from the impact of foreign currency translation.

The increase in expenses, excluding the impact of foreign currency translation, is primarily due to restructuring costs for improving and streamlining the Company's global information technology function.

Interest

Interest expense was $136 million for the three months ended March 31, 2023, compared to $110 million for the three months ended March 31, 2022. Interest expense increased $26 million due to new debt issuances in October 2022 and March 2023, and higher interest rates on the Company's short term borrowings in 2023, compared to the corresponding quarter in the prior year.

Investment Income

The caption "Investment income" 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 $2 million for the three months ended March 31, 2023 compared to net investment income of $26 million for the three months ended March 31, 2022. The decrease in 2023 is primarily driven by lower investment income in the Company's private equity investments compared to the corresponding quarter in the prior year. In the first quarter of 2022, the Company also recorded mark-to-market gains of $9 million relating to its investment in Alexander Forbes, which was sold later in the year.

Income and Other Taxes

The Company's effective tax rate for the three months ended March 31, 2023 was 24.7%, compared with 23.7% for the corresponding quarter of 2022.

The tax rates in both periods reflect the impact of discrete tax items 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 related to contingent consideration for acquisitions, and valuation allowances for certain tax credits and/or losses. The rate in the first quarter of 2023 reflects the previously enacted change in the U.K. corporate income tax rate from 19% to 25%, effective April 1, 2023. The blended U.K. statutory tax rate for 2023 is 23.5%.

The excess tax benefit related to share-based payments is the most significant discrete item in both periods, reducing the effective tax rate by 1.3% and 1.8% for the three months ended March 31, 2023 and 2022, respectively.

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. Therefore, 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 limitations.

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 could decrease up to approximately $53 million within the next twelve months due to settlement of audits and expiration of statutes of limitations.

Changes in tax laws, rulings, policies, or related legal and regulatory interpretations occur frequently and may have significant favorable or adverse impacts on our effective tax rate.

As a U.S. domiciled parent holding company, the Company is the issuer of essentially all the Company's external indebtedness, and incurs the related interest expense in the U.S. The Company’s interest expense deductions are not currently limited. Further, most senior executive and oversight functions are conducted in the U.S. and the associated costs are incurred primarily in the U.S. Some of these expenses may not be deductible in the U.S., which may impact the effective tax rate.

Changes to the U.S. tax law in recent years have allowed the Company to repatriate foreign earnings without incurring additional U.S. federal income tax costs as foreign income is generally already taxed in the U.S. However, permanent reinvestment continues to be a component of the Company's global capital strategy. The Company continues to evaluate its global investment and repatriation strategy in light of our capital requirements and potential costs of repatriation, which are generally limited to local country withholding taxes.

In August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was enacted into law. The Company evaluated the provisions of the new legislation, the most significant of which are the corporate alternative minimum tax and the share repurchase tax. The IRA was effective as of January 1, 2023, and does not have a significant impact on the Company's financial results of operations for the current year.

In addition to U.S. tax law changes, the Company's global operations make the tax rate sensitive to significant foreign tax law changes. A number of countries have begun to enact legislation to implement the Organization for Economic Cooperation and Development's ("OECD") international tax framework, including the Pillar II minimum tax regime with effect from January 1, 2024 or later. The Company is currently monitoring these developments and is in the process of evaluating the potential impact on its results of operations.

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 U.S. Funds from those operating subsidiaries are regularly repatriated to the U.S. out of annual earnings. At March 31, 2023, the Company had approximately $975 million of cash and cash equivalents in its foreign operations, which includes $379 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.

For the three months ended March 31, 2023, the Company recorded foreign currency translation adjustments which increased net equity by $77 million. Continued weakening of the U.S. dollar against foreign currencies would further increase the translated U.S. dollar value of the Company’s net investments in its non-U.S. subsidiaries, as well as the translated U.S. dollar value of cash repatriations from those subsidiaries.

Cash and cash equivalents on our consolidated balance sheets includes funds available for general corporate purposes. Funds held on behalf of clients in a fiduciary capacity are segregated and shown separately in the consolidated balance sheets as an offset to fiduciary liabilities. Fiduciary funds cannot be used for general corporate purposes, and should not be considered as a source of liquidity for the Company.

Operating Cash Flows

The Company used $819 million of cash for operations for the three months ended March 31, 2023, compared to $702 million used for operations in the first three months of 2022. 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, including incentive compensation, or receipts of receivables and pension plan contributions. The Company used cash of $79 million and $39 million related to its restructuring activities for the three months ended March 31, 2023 and 2022, 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 the three months of 2023, the Company contributed $8 million to its U.S. defined benefit pension plans and $13 million to its non-U.S. defined benefit pension plans. For the first three months of 2022, the Company contributed $8 million to its U.S. defined benefit pension plans and $60 million to its non-U.S. defined benefit pension plans.

In the U.S., contributions to the tax-qualified defined benefit plans are based on Employee Retirement Income Security Act ("ERISA") guidelines and the Company generally expects to maintain a funded status of 80% or more of the liability determined in accordance with the ERISA guidelines. In the first three months of 2023, the Company made $8 million of contributions to its non-qualified plans and expects to fund approximately an additional $23 million over the remainder of 2023. The Company is not required to make any contributions to its U.S. qualified plans in 2023.

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 79% of non-U.S. plan assets at December 31, 2022. 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.

In 2021, the JLT Pension Scheme was merged into the MMC U.K. Pension Fund with a new segregated JLT section created. During the first three months of 2023, the Company made deficit contributions of $10 million to its U.K. plans, all in respect of the JLT section, and is expected to make $31 million of contributions in the remainder of 2023.

For the Marsh McLennan U.K. Pension Fund, excluding the JLT section, an agreement was reached with the trustee in the fourth quarter of 2022 based on the surplus funding position at December 31, 2021. In accordance with the agreement, no deficit funding is required until 2026. The funding level will be re-assessed during 2025 as part of the December 31, 2024 actuarial valuation to determine if contributions are required in 2026. As part of a long term strategy which depends on having greater influence over asset allocation and overall investment decisions, in December 2022, the Company renewed its agreement to support annual deficit contributions by the U.K. operating companies under certain circumstances, up to £450 million (or $554 million) over a seven-year period.

The Company expects to fund an additional $63 million to its non-U.S. defined benefit plans over the remainder of 2023, comprising approximately $31 million to the U.K. plans and $32 million to plans outside of the U.K.

Financing Cash Flows

Net cash provided by financing activities was $773 million for the three months ended March 31, 2023, compared with $855 million provided by financing activities for the corresponding quarter in 2022.

Credit Facilities

The Company has a multi-currency unsecured $2.8 billion five-year revolving credit facility (the "Credit Facility"), entered into on April 1, 2021. The interest rate on the Credit Facility is based on LIBOR plus a fixed margin which varies with the Company’s credit ratings. The Credit Facility expires in April 2026, and requires the Company to maintain certain coverage and leverage ratios which are tested quarterly. The Credit 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 March 31, 2023 and December 31, 2022 the Company had no borrowings under this facility.

In connection with the Credit Facility, the Company terminated its previous multi-currency unsecured $1.8 billion five-year and its unsecured $1 billion 364-day revolving credit facilities.

In May 2022, the Company secured a $250 million uncommitted revolving credit facility. The facility expires in May 2023, and has similar coverage and leverage ratios as the Credit Facility. At March 31, 2023, the Company had $250 million borrowings outstanding under this facility with a weighted average interest rate of 5.19% There were no borrowings outstanding under this facility at December 31, 2022.

The Company also maintains other credit and overdraft facilities with various financial institutions aggregating $112 million at March 31, 2023. There were no outstanding borrowings under these facilities at March 31, 2023 and December 31, 2022. The Company also has outstanding guarantees and letters of credit with various banks aggregating $102 million at March 31, 2023.

Debt

The Company has a short-term commercial paper financing program of $2.8 billion. The program was increased from $2.0 billion in October 2022. The Company had $594 million of commercial paper outstanding at March 31, 2023, at an average effective interest rate of 5.22%.

In March 2023, the Company issued $600 million of 5.45% senior notes due 2053. The Company used the net proceeds from this issuance for general corporate purposes.

In October 2022, the Company issued $500 million of 5.75% senior notes due 2032 and $500 million of 6.25% senior notes due 2052. The Company used the net proceeds from these issuances for general corporate purposes, and repaid $350 million of 3.30% senior notes in November 2022, with an original maturity date of March 2023.

The Company's senior debt is currently rated A- by Standard & Poor's ("S&P"), Baa1 by Moody's and A- by Fitch. The Company's short-term debt is currently rated A-2 by S&P, P-2 by Moody's and F-2 by Fitch. The Company carries a Positive outlook with Moody's and a Stable outlook with both S&P and Fitch.

Share Repurchases

In the first three months of 2023, the Company repurchased 1.8 million shares of its common stock for $300 million. As of March 31, 2023, the Company remained authorized to repurchase up to approximately $4.0 billion in shares of its common stock. There is no time limit on the authorization.

During the first three months of 2022, the Company repurchased 3.2 million shares of its common stock for $500 million.

Dividends

The Company paid dividends on its common shares of $296 million ($0.59 per share) during the first three months of 2023, as compared with $272 million ($0.535 per share) in the first three months of 2022.

In March 2023, the Board of Directors of the Company declared a quarterly dividend of $0.59 per share on outstanding common stock, payable on May 15, 2023, to stockholders of record on April 5, 2023.

Contingent and Deferred Payments Related to Acquisitions

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 Three Months Ended March 31,
(In millions)			2023						2022
Operating:
Receipt of contingent consideration for dispositions			$	1					$	—
Acquisition/disposition related net charges for adjustments			7						10
Adjustments and payments related to contingent consideration			$	8					$	10
Financing:
Contingent consideration for prior year acquisitions			$	(1)					$	(4)
Deferred consideration related to prior year acquisitions			(12)						(12)
Payments of deferred and contingent consideration for acquisitions			$	(13)					$	(16)
Receipt of contingent consideration for dispositions			$	2					$	3

For acquisitions completed in the first three months of 2023 and in prior years, remaining estimated future contingent payments of $383 million and deferred consideration payments of $131 million, are recorded in accounts payable and accrued liabilities or other liabilities in the consolidated balance sheet at March 31, 2023.

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, the Company issued €1.1 billion Senior Notes, and designated the debt instruments as a net investment hedge of its Euro denominated subsidiaries. The hedge is re-assessed each quarter to confirm that the designated equity balance at the beginning of each period continues to equal or exceed 80% of the outstanding balance of the Euro debt instrument and that all the critical terms of the hedging instrument and the hedged net investment continue to match. If the hedge is highly effective, the change in the debt balance related to foreign exchange fluctuations is recorded in accumulated other comprehensive loss in the consolidated balance sheets.

The U.S. dollar value of the Euro notes increased by $25 million through March 31, 2023, related to the change in foreign exchange rates. The Company concluded that the hedge was highly effective and recorded a loss as an increase to accumulated other comprehensive loss for the three months ended March 31, 2023.

Fiduciary Liabilities

Since cash and cash equivalents held in a fiduciary capacity are not available for corporate use, they are shown in the consolidated balance sheets as an offset to fiduciary liabilities. Financing cash flows reflect an increase of $48 million and $926 million for the three months ended March 31, 2023 and 2022, respectively, related to fiduciary liabilities.

Investing Cash Flows

Net cash used for investing activities amounted to $368 million for the first three months of 2023, compared with $159 million used for investing activities for the corresponding quarter in 2022.

The Company paid $11 million and $24 million, net of cash, cash equivalents and cash and cash equivalents held in a fiduciary capacity acquired, for acquisitions it made during the first three months of 2023 and 2022, respectively.

On April 1, 2023, the Company completed the acquisition of Westpac Banking Corporation’s ("Westpac") financial advisory business, Advance Asset Management, and the transfer from Westpac of BT Financial Group's personal and corporate pension funds to the Mercer Super Trust managed by Mercer Australia (referred to collectively, as the "Transaction"). In consideration for the Transaction, on March 30, 2023, the Company transferred $252 million to a Westpac separate trust account in advance of the completion of the Transaction. The consideration transferred is included as a cash outflow in acquisitions, net of cash and cash equivalents held in a fiduciary capacity acquired, in the consolidated statements of cash flows.

In connection with the 2022 disposition of Mercer's U.S. affinity business, the Company transferred to the buyer an additional $20 million of cash and cash equivalents held in a fiduciary capacity in the first quarter of 2023.

During the first three months of 2022, the Company sold certain businesses in Brazil for cash proceeds of approximately $4 million.

The Company's additions to fixed assets and capitalized software, which amounted to $84 million in the first three months of 2023, and $122 million in the first three months of 2022, primarily related to computer equipment purchases, the refurbishing and modernizing of office facilities, and software development costs.

The Company has commitments for potential future investments of approximately $159 million in private equity funds that invest primarily in financial services companies, including a $100 million commitment to invest in a private equity fund entered into on April 1, 2022.

Commitments and Obligations

The following sets forth the Company’s future contractual obligations by the type as of March 31, 2023:

			Payment due by Period
(In millions)			Total						Within 1 Year						1-3 Years						4-5 Years						After 5 Years
Commercial paper			$	594					$	594					$	—					$	—					$	—
Term loan facility			250						250						—						—						—
Current portion of long-term debt			1,267						1,267						—						—						—
Long-term debt			10,926						—						1,739						637						8,550
Interest on long-term debt			6,842						491						832						746						4,773
Net operating leases			2,304						362						632						515						795
Service agreements			445						220						180						45						—
Other long-term obligations (a)			579						245						279						51						4
Total			$	23,207					$	3,429					$	3,662					$	1,994					$	14,122

(a) Primarily reflects the future payments of deferred and contingent purchase consideration

The table does not include the liability for unrecognized tax benefits of $107 million as the Company is unable to reasonably predict the timing of settlement of these liabilities, other than approximately $43 million that may become payable within one year. The table also does not include the remaining transitional tax payments related to the Tax Cuts and Jobs Act ("the TCJA") of $62 million, which will be paid in installments beginning in 2023 through 2026.

Management’s Discussion of Critical Accounting Policies and Estimates

The Company’s discussion of critical accounting policies and estimates 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 2022 Form 10-K.

New Accounting Guidance

Note 19, New Accounting Guidance, in the notes 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.