1st Quarter Results
Marsh & McLennan Co Inc
03 May 2005
News Release
Media Contacts: Jim Fingeroth Investor Contact:
Barbara Perlmutter Kekst and Company Mike Bischoff
MMC (212) 521-4819 MMC
(212) 345-5585 (212) 345-5470
MMC REPORTS FIRST QUARTER 2005 RESULTS
NEW YORK, NEW YORK, May 3, 2005-Marsh & McLennan Companies, Inc. (MMC) today
reported financial results for the quarter ended March 31, 2005. Consolidated
revenues totaled $3.2 billion, and net income was $134 million, or $.25 per
share. These results include pretax charges for restructuring, employee
retention, incremental regulatory and compliance, and potential Putnam fund
reimbursement expenses of approximately $225 million. Excluding these items,
earnings per share would have been $.52. In the first quarter of 2004, net
income was $446 million, or $.83 per share. Prior year quarterly results include
settlement expenses, insurance recoveries relating to World Trade Center losses,
severance, and regulatory and compliance costs, which reduced first quarter 2004
net income by $73 million. Excluding these items, earnings per share would have
been $.96 per share. Additional information on these items and their effect on
operating income and earnings per share is provided in the attached supplemental
schedules on pages 11 and 12.
Michael G. Cherkasky, president and chief executive officer of MMC, said: 'We
continue to take steps across MMC to make it a stronger, more streamlined
company. Marsh is executing its plan to simplify its management structure,
improve efficiencies and account profitability, and increase transparency. These
changes should enable Marsh to deliver profitable growth and margin expansion
next year. Kroll had a strong quarter, as demand for its technology services
increased significantly. Mercer Human Resource Consulting made significant
progress in expanding its outsourcing capabilities and range of investment
advice and services, including the combination of its existing benefits
administration operations with Putnam's defined contribution administration
activities. Mercer's specialty consulting businesses performed very well,
reporting strong revenue growth. Putnam's investment performance has continued
to improve, reflecting changes made over the last 18 months. We continue to see
a moderation in net redemptions.'
MMC now reports financial results in four segments:
• Risk and Insurance Services, comprising risk management and insurance
broking (Marsh), reinsurance broking and services (Guy Carpenter), and
related insurance services;
• Risk Consulting and Technology (Kroll);
• Consulting, including Mercer Human Resource Consulting and Mercer's
specialty consulting businesses; and
• Investment Management (Putnam).
Risk and Insurance Services
Risk and insurance services revenues declined 11 percent in the quarter to $1.7
billion. Underlying revenues, excluding acquisitions and foreign exchange,
declined 13 percent. Market services revenues declined $179 million to $32
million in the quarter. Excluding the loss of market services revenues,
underlying revenues declined 5 percent.
Marsh's risk management and insurance broking revenues declined 19 percent to
$1.2 billion due to the termination of market services agreements, the effect of
reduced insurance premium rates, and a lower volume of net new business. The
decline was most significant in the United States, with modest declines in the
rest of the world consistent with the softening of premium pricing.
Guy Carpenter reported first quarter revenues of $282 million, unchanged from
2004. Underlying revenues declined 2 percent. Carpenter's new business in the
quarter was stronger than the prior year quarter but was offset by the effect of
higher risk retentions and lower premium rates in the reinsurance marketplace.
Related insurance services revenues rose 26 percent to $294 million, an 18
percent increase on an underlying basis. This reflects strong growth in claims
management as well as higher investment gains in the quarter.
As expected, restructuring and other noteworthy expenses significantly affected
risk and insurance services operating income of $171 million. Approximately $65
million of savings associated with the fourth quarter restructuring were more
than offset by $96 million for additional restructuring, $43 million of
incremental regulatory and compliance costs, and $15 million for employee
retention programs in the first quarter. Bonus accruals for the full year are
being kept flat to 2004 levels to assure that the proper levels of incentives
are maintained in a challenging year. The elimination of market services
revenues removed a significant seasonality factor that had a corresponding
impact on bonus accruals. First quarter bonus accruals were $42 million higher
than the prior year quarter. Additional restructuring charges are anticipated
over the course of 2005 for severance and real estate costs.
Risk Consulting and Technology
Kroll performed well, reporting $264 million in revenues. Its growth was
excellent, with particular strength in technology services' electronic discovery
and background screening operations. First quarter revenues also reflect the
integration of portions of Marsh's risk consulting operations. Operating income
was $37 million for the quarter, including $16 million of identified intangible
amortization.
Consulting
Consulting revenues increased 4 percent in the first quarter to $834 million.
Underlying revenues increased 1 percent. Operating income of $84 million
includes $10 million of retention expenses.
Mercer Human Resource Consulting reported revenues of $586 million, compared
with $589 million last year. The reduction in underlying revenues was due to the
decline in revenues associated with defined contribution plan assets previously
administered by Putnam. The health and benefits business and the performance,
rewards, and information business both reported good revenue growth. A modest
decline in the retirement business was largely due to lower demand in the United
Kingdom.
Mercer's specialty consulting businesses produced $210 million in revenues, an
increase of 17 percent from last year. Underlying revenues grew 13 percent.
Mercer Management Consulting, Mercer Oliver Wyman, and NERA Economic Consulting
each reported solid revenue growth.
Investment Management
Putnam's revenues in the first quarter declined 12 percent to $398 million, in
line with the year-over-year change in average assets under management. Average
assets under management during the first quarter were $204 billion, compared
with $234 billion in the first quarter of 2004. Total assets under management on
March 31, 2005 were $199 billion, comprising $135 billion of mutual fund assets
and $64 billion of institutional assets. Assets under management at year-end
2004 were $213 billion.
Putnam's operating income of $49 million includes a charge of $30 million for
the estimated cost that it believes will be necessary to address issues relating
to the calculation of certain amounts paid by the Putnam mutual funds in
previous years. The previous payments were cost reimbursements by the Putnam
mutual funds to Putnam for transfer agent services relating to defined
contribution operations.
The steps Putnam has taken over the last 18 months have led to an improvement in
investment performance. For the one-year period ended March 31, 2005, 61 percent
of all Putnam mutual fund A-share assets, including 50 percent of equity
products and 95 percent of fixed income products, were above median for
investment performance in their respective Lipper categories. Net redemptions of
$9.7 billion in the quarter include $2.7 billion related to the termination of
certain Putnam international alliances on the first day of 2005. Since then, net
redemptions have been lower than they were in each of the previous five
quarters. Putnam had modest gains in mutual funds sales for the second quarter
in a row.
Conference Call
A conference call to discuss first quarter 2005 results will be held today at
10:00 a.m. Eastern Daylight Time. To participate in the live teleconference,
please dial (888) 283-6901 or (719) 955-1564 (international). The live audio
webcast (which will be listen-only) may be accessed at www.mmc.com. A replay of
the webcast will be available beginning approximately two hours after the event.
A continuous telephone replay will be available beginning at 1:00 p.m. Eastern
Daylight Time, May 3 and continuing until midnight Eastern Daylight Time, May 9.
To listen to the replay, please dial (888) 203-1112. Callers from outside the
United States may listen to the replay by dialing (719) 457-0820. The access
code for both numbers is 7633433.
MMC is a global professional services firm with annual revenues exceeding $12
billion. It is the parent company of Marsh, the world's leading risk and
insurance services firm; Guy Carpenter, the world's leading risk and reinsurance
specialist; Kroll, the world's leading risk consulting company; Putnam
Investments, one of the largest investment management companies in the United
States; and Mercer, a major global provider of consulting services.
Approximately 60,000 employees provide analysis, advice, and transactional
capabilities to clients in over 100 countries. Its stock (ticker symbol: MMC) is
listed on the New York, Chicago, Pacific, and London stock exchanges. MMC's
website address is www.mmc.com.
This press release contains statements relating to future results, which are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such statements may include, without limitation,
discussions concerning:
• the new business model of Marsh Inc.;
• the elimination of market services agreements ('MSA');
• growth in revenue and margin improvement;
• elimination of unprofitable accounts;
• investigations being conducted by state attorneys general and state
superintendents or commissioners of insurance;
• net redemptions of Putnam mutual fund shares;
• pension funding; and
• insurance premium rates.
Such forward-looking statements are based on available current market and
industry materials, experts' reports and opinions, and long-term trends, as well
as management's expectations concerning current and future events impacting MMC.
Forward-looking statements by their very nature involve risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by forward-looking statements that we make include:
• the impact of litigation and regulatory proceedings brought by various
state attorneys general and state insurance regulators;
• the impact of class actions, derivative actions and individual suits
brought by policyholders and shareholders (including MMC employees)
asserting various claims, including claims under U.S. securities laws,
ERISA, RICO, unfair business practices and other common law or
statutory claims;
• loss of producers or key managers;
• inability to negotiate satisfactory compensation arrangements with
insurance carriers or clients;
• inability to reduce expenses to the extent necessary to achieve
desired levels of profitability;
• inability to collect previously accrued MSA revenue;
• changes in the availability of, and the market conditions and the
premiums insurance carriers charge for, insurance products;
• the impact of litigation and other regulatory matters stemming from
market-timing issues at Putnam;
• changes in worldwide and national equity and fixed income markets;
• actual and relative investment performance of the Putnam mutual funds;
• the level of sales and redemptions of Putnam mutual fund shares;
• changes in the value of investments made in individual companies and
investment funds; and
• changes in interest rates or the inability to access financial markets.
Forward-looking statements speak only as of the date on which they are made, and
MMC undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which it is made or to reflect the
occurrence of unanticipated events.
MMC is committed to providing timely and materially accurate information to the
investing public, consistent with our legal and regulatory obligations. To that
end, MMC and its operating companies use their websites to convey meaningful
information about their businesses, including the anticipated release of
quarterly financial results and the posting of updates of assets under
management at Putnam. Monthly updates of total assets under management at Putnam
will be posted to the MMC website the first business day following the end of
each month. Putnam posts mutual fund and performance data to its website
regularly. Assets for most Putnam retail mutual funds are posted approximately
two weeks after each month-end. Mutual fund net asset value (NAV) is posted
daily. Historical performance and Lipper rankings are also provided. Investors
can link to MMC and its operating company websites through www.mmc.com.
Marsh & McLennan Companies, Inc.
Consolidated Statements of Income
(In millions, except per share figures)
(Unaudited)
---------------------------
Three Months Ended
March 31,
---------------------------
2005 2004
------------- -------------
Revenue:
Service Revenue $3,125 $3,163
Investment Income (Loss) 57 33
------------- -------------
Total Revenue 3,182 3,196
------------- -------------
Expense:
Compensation and Benefits 1,932 1,635
Other Operating Expenses 978 793
Regulatory and Other Settlements - (5)
------------- -------------
Total Expense 2,910 2,423
------------- -------------
Operating Income 272 773
Interest Income 9 5
Interest Expense (69) (50)
------------- -------------
Income Before Income Taxes and Minority Interest
Expense 212 728
Income Taxes 74 281
Minority Interest Expense, Net of Tax 4 1
------------- -------------
Net Income $ 134 $ 446
============= =============
Basic Net Income Per Share $ 0.25 $ 0.85
============= =============
Diluted Net Income Per Share $ 0.25 $ 0.83
============= =============
Average Number of Shares Outstanding - Basic 531 525
============= =============
Average Number of Shares Outstanding - Diluted 536 540
============= =============
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
First Quarter
(Millions) (Unaudited)
Three Months Ended Components of Revenue Change
---------------------------------------
March 31, % Change Acquisitions/ Underlying Revenue
--------- --------- GAAP Currency Dispositions Underlying excluding
2005 2004 Revenue Impact Impact Revenue MSA Impact
---------- -------- ----------------------------------------------------------------------
Risk &
Insurance
Services
Risk
Management
and
Insurance $1,172 $1,451 (19)% 2% - (21)% (11)%
Broking
Reinsurance
Broking and
Services 282 283 - 2% - (2)% (2)%
Related
Insurance
Services 294 233 26% - 8% 18% 18%
--------- ---------
Total Risk
and
Insurance 1,748 1,967 (11)% 1% 1% (13)% (5)%
Services
--------- ---------
Risk
Consulting &
Technology 264 26 933% - 933% -
--------- ---------
Consulting
Human
Resource 586 589 - 2% - (2)%
Consulting
Specialty
Consulting 210 180 17% 2% 2% 13%
--------- ---------
796 769 4% 2% 1% 1%
Reimbursed
Expenses 38 35
--------- ---------
Total
Consulting 834 804 4% 2% 1% 1%
--------- ---------
Investment
Management 398 450 (12)% - - (12)%
--------- ---------
Total
Operating
Segments 3,244 3,247 - 1% 8% (9)% (4)%
Corporate
Eliminations (62) (51)
--------- ---------
Total $3,182 $3,196
Revenue ========== =========
Notes
Underlying revenue measures the change in revenue, before the impact of
acquisitions and dispositions, using consistent currency exchange rates.
Underlying revenue for risk management and insurance broking decreased 21% in
the first quarter, including a 10% decline related to market services
agreements; and for the risk and insurance services segment underlying revenue
decreased 13% in the first quarter including an 8% decline related to market
services agreements.
Effective October 1, 2004 Marsh agreed to eliminate contingent compensation
agreements with insurers. Market services revenue earned but not accrued at
September 30, 2004 is recognized when collected or when confirmation of the
amount of payment is received from the carriers. First quarter results include
market services revenue of $32 million and $211 million in 2005 and 2004,
respectively.
Interest income on fiduciary funds amounted to $35 million and $29 million for
the three months ended March 31, 2005 and 2004, respectively.
Segment Reclassification
MMC has reclassified prior year amounts to reflect organizational changes that
affected MMC's reportable segments. The following changes are reflected in the
2004 segment data presented above:
Risk Consulting and Technology, a new reportable segment, includes Kroll, Inc.,
which was acquired by MMC in July 2004 and portions of risk consulting business
previously managed by Marsh. Services include: forensic accounting and
litigation support; business continuity management; mass tort and complex
liability mitigation; and comprehensive data services for the management of
insurance, claims and legal data.
Putnam's defined contribution administration business was transferred from
Putnam (Investment Management) to Human Resource Consulting (Consulting).
Approximately 75% of the revenues earned by Mercer Human Resources from this
transferred business are paid by Putnam. Putnam receives fees for investment
management and administrative services, which are recorded as revenue. A fee
related to administrative services is recorded as an expense by Putnam and as
revenue by Mercer Human Resources. The inter-company revenue and expense are
eliminated in consolidation. Corporate eliminations for 2004 reflect the
additional inter-company revenue and expense resulting from the transfer of this
business.
Marsh & McLennan Companies, Inc.
Supplemental Information
(Millions) (Unaudited)
-----------------------
Three Months Ended
March 31,
-----------------------
2005 2004
--------- ---------
Operating Income (Loss) Including Minority Interest
Expense:
Risk & Insurance Services $ 171 $ 633
Risk Consulting & Technology 37 4
Consulting 84 87
Investment Management 49 (24)
Corporate (73) 72
--------- ---------
268 772
--------- ---------
Minority Interest Expense, Net of Tax, Included Above:
Risk & Insurance Services 3 3
Investment Management 1 (2)
--------- ---------
4 1
--------- ---------
Operating Income $ 272 $ 773
========= =========
Segment Operating Margins:
Risk & Insurance Services 9.8% 32.2%
Risk Consulting & Technology 14.0% 15.4%
Consulting 10.1% 10.8%
Investment Management 12.3% (5.3)%
Consolidated Operating Margin 8.5% 24.2%
Pretax Margin 6.7% 22.8%
Effective Tax Rate 34.9% 38.6%
Shares Outstanding at End of Period 530 524
Potential Minority Interest Associated with the Putnam
Equity Partnership Plan Net of Dividend Equivalent
Expense Related to MMC Common Stock Equivalents $ - $ (1)
Note
MMC's consolidated effective tax rate was 34.9% in the first quarter of 2005.
The effective tax rate applicable to ongoing operating income was 35%.
Marsh & McLennan Companies, Inc.
Supplemental Information - Putnam Assets Under Management
(Billions) (Unaudited)
March 31, Dec. 31, Sept. 30, June 30, March 31,
2005 2004 2004 2004 2004
--------- --------- --------- --------- ---------
Mutual Funds:
Growth Equity $ 34 $ 38 $ 37 $ 41 $ 45
Value Equity 40 41 39 41 42
Blend Equity 26 28 27 28 30
Fixed Income 35 36 37 38 40
--------- --------- --------- --------- ---------
Total Mutual
Fund Assets 135 143 140 148 157
--------- --------- --------- --------- ---------
Institutional:
Equity 35 40 40 39 44
Fixed Income 29 30 29 26 26
--------- --------- --------- --------- ---------
Total
Institutional
Assets 64 70 69 65 70
-------- -------- -------- -------- --------
Total Ending
Assets $199 $213 $209 $213 $227
======== ======== ======== ======== ========
Assets from
Non-US
Investors $ 35 $ 38 $ 36 $ 36 $ 38
======== ======== ======== ======== ========
Average Assets Under
Management:
Quarter-to-Date $204 $211 $209 $216 $234
======== ======== ======== ======== ========
Year-to-Date $204 $217 $220 $225 $234
======== ======== ======== ======== ========
Impact of Net
Redemptions
including
Dividends
Reinvested: (a)
Quarter-to-Date $ (9.7) $(10.7) $ (10.5) $ (12.2) $ (17.6)
======== ======== ======== ======== ========
Year-to-Date $ (9.7) $(51.0) $ (40.3) $ (29.8) $ (17.6)
======== ======== ======== ======== ========
Impact of Market/
Performance on
Ending
Assets Under
Management $ (4.3) $ 15.4 $ (2.1) $ (1.4) $ 4.5
======== ======== ======== ======== ========
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three Months Ended March 31, 2005
(Millions) (Unaudited)
Risk &
Insurance Risk
Services Consulting & Investment Corporate &
(a) Technology Consulting Management Eliminations Total
---------- ---------- ---------- ---------- ------------ ---------
Operating
Income As
Reported $ 171 $ 37 $ 84 $ 49 $ (73) $ 268
---------- ---------- ---------- ---------- ------------ ---------
Restructuring
Charges (b) 96 - - - 49 145
---------- ---------- ---------- ---------- ------------ ---------
Other
Incremental
Regulatory
and 43 - - - (17) 26
Compliance
(c)
Estimated
Mutual Fund
Reimbursement
(d) - - - 30 - 30
Employee
Retention
Awards 15 - 10 - - 25
Other (e) 3 - - - (3) -
Minority
Interest - - - (1) - (1)
---------- ---------- ---------- ---------- ------------ ---------
61 - 10 29 (20) 80
---------- ---------- ---------- ---------- ------------ ---------
Net
Adjustments 157 - 10 29 29 225
---------- ---------- ---------- ---------- ------------ ---------
Operating
Income As
Adjusted $ 328 $ 37 $ 94 $ 78 $ (44) $ 493
========== ========== ========== ========== ============ ==========
Operating
Income Margin
As Adjusted 18.8% 14.0% 11.3% 19.6% N/A 15.5%
========== ========== ========== ========== ============ ==========
Reconciliation of the Impact of Non-GAAP Measures on Diluted Earnings Per Share
Net Income, As Reported $134
Net Adjustments $225
Tax Effect 79
-------
146
-------
Net Income, As Adjusted 280
Average Diluted Shares Outstanding 536
-------
Earnings Per Share, As Adjusted $0.52
=======
NON-GAAP MEASURES: MMC believes that investors' understanding of its results and
operations is enhanced by the disclosure of additional non-GAAP financial
information. A number of noteworthy items impacted operating income in 2005. MMC
believes this schedule provides a concise analysis of the effects of these
items. Nonetheless, it is pertinent to note that the amounts shown in the
captions Operating Income As Adjusted and Operating Income Margin As Adjusted
are non-GAAP measures.
(a) Market services revenue of $32 million is included in Operating Income As
Reported and Operating Income As Adjusted.
(b) Corporate expenses in 2005 include restructuring charges of $49 million
related to the consolidation of office space in London. Mercer colleagues
that were expected to occupy newly leased space will be relocated to
existing Marsh office space.
Because London real estate is managed by MMC and actions undertaken
benefited MMC as a whole, rather than any particular operating company, the
related charge was recorded in corporate expenses.
(c) Regulatory and compliance costs in the risk and insurance services segment
includes professional services provided by other MMC companies. The
inter-company amounts are eliminated in corporate.
(d) Represents estimated costs that Putnam believes will be necessary to
address issues relating to the calculation of certain amounts paid by the
Putnam mutual funds in previous years. The previous payments were cost
reimbursements by the Putnam mutual funds to Putnam for transfer agency
services related to defined contribution operations.
(e) Other primarily reflects accelerated leasehold amortization and gain on the
sale of the corporate jet.
Marsh & McLennan Companies, Inc.
Reconciliation of Non-GAAP Measures
Three Months Ended March 31, 2004
(Millions) (Unaudited)
Risk &
Insurance Risk
Services Consulting & Investment Corporate &
(a) Technology Consulting Management Eliminations Total
---------- ---------- ---------- ---------- ------------ ---------
Operating
Income As
Reported $ 633 $ 4 $ 87 $ (24) $ 72 $ 772
---------- ---------- ---------- ---------- ------------ ---------
Settlements
(b) - - - 100 (105) (5)
---------- ---------- ---------- ---------- ------------ ---------
Other
Severance 7 - 11 25 - 43
Incremental
Regulatory
and - - - 14 - 14
Compliance
Other (c) - - - 1 - 1
Minority
Interest - - - (5) - (5)
---------- ---------- ---------- ---------- ------------ ---------
7 - 11 35 - 53
---------- ---------- ---------- ---------- ------------ ---------
Net
Adjustments 7 - 11 135 (105) 48
---------- ---------- ---------- ---------- ------------ ---------
Operating
Income As
Adjusted $ 640 $ 4 $ 98 $ 111 $ (33) $ 820
========== ========== ========== ========== ============ ==========
Operating
Income
Margin 32.5% 15.4% 12.2% 24.7% N/A 25.7%
As Adjusted
========== ========== ========== ========== ============ ==========
Reconciliation of the Impact of Non-GAAP Measures on Diluted Earnings Per Share
Net Income, As Reported $446
Net Adjustments $ 48
Tax Credit (d) (25)
-------
73
-------
Net Income, As Adjusted 519
Average Diluted Shares Outstanding 540
-------
Earnings Per Share, As Adjusted $0.96
=======
NON-GAAP MEASURES: MMC believes that investors' understanding of its results and
operations is enhanced by the disclosure of additional non-GAAP financial
information. A number of noteworthy items impacted operating income in 2004. MMC
believes this schedule provides aconcise analysis of the effects of these items.
Nonetheless, it is pertinent to note that the amounts shown in the captions
Operating Income As Adjusted and Operating Income Margin As Adjusted are non-
GAAP measures.
(a) Market services revenue of $211 million is included in Operating Income As
Reported and Operating Income As Adjusted.
(b) Settlements include:
Putnam's Settlements with the SEC and State of Massachusetts Corporate -
Final Insurance Settlement related to WTC
(c) Other reflects incremental communication costs and the bonus impact on
certain items.
(d) Reflects non-deductible Putnam settlement, credit related to insurance
settlement at 40% tax rate and other charges and credit at 33%
tax rate.
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis 2004 Segment Reclassifications
(Millions) (Unaudited)
The table below reflects the impact on previously reported segment revenue
resulting from changes in business segments.
Three Months Ended Year Ended
--------------------------
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
---------- ---------- ---------- ---------- ----------
Risk &
Insurance
Services
As Reported in
2004 $1,994 $1,817 $1,774 $1,806 $7,391
Risk
Consulting (27) (28) (219) (236) (510)
---------- ---------- ---------- ---------- ----------
1,967 1,789 1,555 1,570 6,881
---------- ---------- ---------- ---------- ----------
Risk
Consulting &
Technology
As Reported in - - - - -
2004
Risk
Consulting 26 26 218 235 505
---------- ---------- ---------- ---------- ----------
26 26 218 235 505
---------- ---------- ---------- ---------- ----------
Consulting
Human Resource
Consulting, As
Reported in
2004 541 548 537 518 2,144
Defined
Contribution
Administration 48 47 47 42 184
---------- ---------- ---------- ---------- ----------
589 595 584 560 2,328
---------- ---------- ---------- ---------- ----------
Specialty
Consulting, As
Reported in
2004 179 185 190 213 767
Business Risk
Consulting 1 2 1 1 5
---------- ---------- ---------- ---------- ----------
180 187 191 214 772
---------- ---------- ---------- ---------- ----------
769 782 775 774 3,100
Reimbursed
Expenses 35 40 39 45 159
---------- ---------- ---------- ---------- ----------
804 822 814 819 3,259
---------- ---------- ---------- ---------- ----------
Investment
Management
As Reported in
2004 461 446 429 421 1,757
Defined
Contribution
Administration (11) (12) (14) (10) (47)
---------- ---------- ---------- ---------- ----------
450 434 415 411 1,710
---------- ---------- ---------- ---------- ----------
Total
Operating
Segments 3,247 3,071 3,002 3,035 12,355
Corporate
Eliminations
As Reported in
2004 (14) (8) (19) (18) (59)
Impact of
Defined
Contribution
Administration (37) (35) (33) (32) (137)
---------- ---------- ---------- ---------- ----------
(51) (43) (52) (50) (196)
---------- ---------- ---------- ---------- ----------
Total $3,196 $3,028 $2,950 $2,985 $12,159
Revenue ========== ========== ========== ========== ==========
Note
In the consulting segment, amounts included in caption 'As Reported in 2004'
reflect the 2005 product line presentation.
Segment Reclassification
MMC has reclassified prior year amounts to reflect organizational changes that
affected MMC's reportable segments. The following changes are reflected in the
2004 segment data presented above:
Risk Consulting & Technology, a new reportable segment, includes Kroll, Inc.,
which was acquired by MMC in July 2004 and portions of risk consulting business
previously managed by Marsh. Services include: forensic accounting and litigation
support; business continuity management; mass tort and complex liability
mitigation; and comprehensive data services for the management of insurance,
claims and legal data.
Putnam's defined contribution administration business was transferred from Putnam
(Investment Management) to Human Resource Consulting (Consulting). Approximately
75% of the revenues earned by Mercer Human Resources from this transferred
business are paid by Putnam. Putnam receives fees for investment management and
administrative services, which are recorded as revenue. A fee related to
administrative services is recorded as an expense by Putnam and as revenue by
Mercer Human Resources. The inter-company revenue and expense are eliminated in
consolidation. Corporate eliminations for 2004 reflect the additional
inter-company revenue and expense resulting from the transfer of this business.
Marsh & McLennan Companies, Inc.
Supplemental Information - Operating Income 2004 Segment Reclassifications
(Millions) (Unaudited)
The table below reflects the impact on previously reported segment operating income
resulting from changes in business segments.
Year
Three Months Ended Ended
----------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
---------- ---------- ---------- ---------- ----------
Risk & Insurance
Services
As Reported in
2004 $ 637 $ 455 $ (6) $ (834) $ 252
Risk
Consulting (4) (5) (30) (26) (65)
---------- ---------- ---------- ---------- ----------
633 450 (36) (860) 187
---------- ---------- ---------- ---------- ----------
Risk Consulting &
Technology
As Reported in 2004 - - - - -
Risk
Consulting 4 5 30 26 65
---------- ---------- ---------- ---------- ----------
4 5 30 26 65
---------- ---------- ---------- ---------- ----------
Consulting
As Reported in
2004 89 113 106 22 330
Defined
Contribution
Administration (2) (3) - (3) (8)
---------- ---------- ---------- ---------- ----------
87 110 106 19 322
---------- ---------- ---------- ---------- ----------
Investment Management
As Reported in
2004 (26) 95 55 (34) 90
Defined
Contribution
Administration 2 3 - 3 8
---------- ---------- ---------- ---------- ----------
(24) 98 55 (31) 98
---------- ---------- ---------- ---------- ----------
Corporate, As
Reported in
2004 72 (36) (33) (42) (39)
---------- ---------- ---------- ---------- ----------
Operating
Income
Including 772 627 122 (888) 633
Minority Interest
Minority Interest
Expense, Net of Tax,
Included Above:
Risk &
Insurance
Services 3 4 5 3 15
Investment
Management (2) 1 1 - -
---------- ---------- ---------- ---------- ----------
1 5 6 3 15
---------- ---------- ---------- ---------- ----------
Operating
Income $ 773 $ 632 $ 128 $ (885) $ 648
========== ========== ========== ========== ==========
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheet
(Millions) (Unaudited)
March 31, December 31,
2005 2004
ASSETS
Current assets :
Cash and cash equivalents $ 910 $ 1,396
Net receivables 3,024 2,890
Other current assets 275 601
--------- ---------
Total current assets 4,209 4,887
Goodwill and intangible assets 8,112 8,139
Fixed assets, net 1,319 1,387
Long-term investments 375 558
Prepaid pension 1,371 1,394
Other assets 2,161 1,972
--------- ---------
$17,547 $18,337
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 547 $ 636
Accounts payable and accrued liabilities 1,793 1,834
Regulatory settlements - current portion 311 394
Accrued compensation and employee benefits 1,024 1,591
Accrued income taxes 300 280
Dividends payable 91 -
--------- ---------
Total current liabilities 4,066 4,735
Fiduciary liabilities 4,112 4,136
Less - cash and investments held in
a fiduciary capacity (4,112) (4,136)
--------- ---------
- -
Long-term debt 4,689 4,691
Regulatory settlements 595 595
Pension, postretirement and postemployment benefits 1,347 1,333
Other liabilities 1,822 1,927
Total stockholders' equity 5,028 5,056
--------- ---------
$17,547 $18,337
========= =========
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