Final Results
Marsh & McLennan Co Inc
13 February 2007
News Release
Media Contact: Investor Contact:
Rich Myers Mike Bischoff
Edelman for MMC MMC
212 819 4807 212 345 5470
MMC REPORTS FOURTH QUARTER AND YEAR-END 2006 RESULTS
NEW YORK, NEW YORK, February 13, 2007-Marsh & McLennan Companies, Inc. (MMC)
today reported financial results for the fourth quarter and year ended December
31, 2006. Consolidated revenues in the fourth quarter were $3.1 billion, an
increase of 9 percent from 2005. Consolidated net income was $226 million, an
increase of over 500 percent from the fourth quarter of 2005, and earnings per
share grew to $.40 from $.06. Earnings per share from continuing operations rose
to $.39 in the fourth quarter from $.03 last year.
Full-year consolidated revenues were $11.9 billion, an increase of 3 percent
from $11.6 billion in 2005. Consolidated net income was $990 million, or $1.76
per share, compared with $404 million, or $.74 per share, in 2005. Results from
discontinued operations, net of tax, were $172 million, or $.31 per share,
resulting primarily from MMC's sale of its investment in Sedgwick Claims
Management in early 2006. Results from discontinued operations in 2005 were $37
million, or $.07 per share. Income from continuing operations was $818 million,
or $1.45 per share, compared with $367 million, or $.67 per share, in 2005.
Stock option expense in 2006 was $116 million. Stock option expense in 2005 was
$64 million, and related only to the last two quarters of 2005 since MMC adopted
SFAS No. 123(R), 'Share-Based Payment,' on July 1, 2005.
A number of noteworthy items affected financial results, including restructuring
costs and credits; legal and regulatory costs primarily related to market
service agreements; and other items indicated in the attached supplemental
information. In the fourth quarter of 2006, noteworthy items were a credit of $5
million, including the realized gain of $74 million on the sale of five floors
in MMC's corporate headquarters, while noteworthy items in 2005 reduced earnings
per share from continuing operations by $.18. For the full year, noteworthy
items reduced earnings per share by $.19 in 2006, compared with $.76 in 2005.
'MMC had another good quarter, reporting its strongest revenue growth in three
years,' said Michael G. Cherkasky, president and chief executive officer of MMC.
'The progress we saw at Marsh in the first nine months of 2006 continued in the
fourth quarter, including improved revenue trends and increased profitability.
Revenues from new business at Marsh were the highest they have been since the
first half of 2004. In light of this, we are encouraged about Marsh's prospects
in 2007. Throughout the year, Guy Carpenter rose to the challenges of a complex
reinsurance marketplace, producing increased revenues driven by double-digit
growth in new business. Kroll's increased revenues in the quarter were driven by
solid results in its technology business. In the quarter, Mercer Human Resource
Consulting improved margins and produced strong revenue growth, and Mercer
Specialty Consulting continued its exceptional performance, reporting
double-digit revenue growth. Putnam's net flows were neutral in the quarter,
achieving a long-standing goal.
'The announced sale of Putnam will enhance our financial flexibility and allow
us to concentrate on our market-leading risk and human capital businesses. We
have reignited MMC's engines of growth, and we look forward to the future with
confidence,' Mr. Cherkasky concluded.
Risk and Insurance Services
Risk and insurance services revenues in the fourth quarter increased 4 percent
to $1.4 billion, or 5 percent on an underlying basis. Operating income more than
doubled to $127
million, compared with $62 million in the fourth quarter of 2005, reflecting
gains from private equity investments, operating efficiencies, cost discipline,
and restructuring efforts.
Marsh's underlying revenues grew 3 percent, excluding the impact of market
service revenues, the second consecutive quarter of revenue growth by this
measure and the largest in over two years. Strong new business growth across all
geographies drove Marsh's performance. For the full year, new business increased
a robust 10 percent, with accelerating growth as the year progressed, including
9 percent growth in the Americas. As reported, Marsh's revenues declined 1
percent to $1.1 billion in the fourth quarter.
Guy Carpenter's revenues increased 9 percent in the fourth quarter to $171
million, or 8 percent on an underlying basis, driven by 13 percent growth in new
business. These results were achieved despite a reinsurance marketplace where
increases in U.S. property catastrophe rates were mitigated by reduced
reinsurance capacity and higher client risk retentions, and where rates in most
other lines of business were stable to down globally.
Risk Capital Holdings generated revenues of $74 million in the fourth quarter,
compared with $27 million in the same period of 2005. This increase was entirely
due to mark-to-market gains in private equity investments. Full-year revenues
were $193 million, compared with $189 million in 2005.
Risk Consulting and Technology
Kroll's revenues increased 12 percent in the fourth quarter to $241 million, or
4 percent on an underlying basis. Kroll's technology enabled solutions business
produced 17 percent growth in revenues, including double-digit growth in
background screening and technology services. Kroll's profitability in the
quarter increased significantly, due to revenue growth, expense control, and the
early termination of a licensing agreement. Results reflect the sale of Kroll's
international security business, which has been included in MMC's discontinued
operations.
Consulting
Revenues for consulting increased 15 percent to $1.1 billion in the fourth
quarter, or 10 percent on an underlying basis. Operating income grew 24 percent.
Full-year revenues increased 11 percent to $4.2 billion, or 9 percent on an
underlying basis.
Mercer Human Resource Consulting increased revenues 12 percent to $769 million
in the fourth quarter, or 8 percent on an underlying basis. This strong growth
was driven by the retirement and investment business and the talent business.
Full-year revenues increased 8 percent to $3 billion, or 7 percent on an
underlying basis.
Mercer Specialty Consulting's revenues grew 23 percent to $341 million in the
fourth quarter, or 15 percent on an underlying basis. Full-year revenues
increased 19 percent to $1.2 billion, or 16 percent on an underlying basis. Each
of the Mercer Specialty companies contributed to this exceptional performance,
led by Mercer Oliver Wyman, which increased underlying revenues 22 percent.
Investment Management
Putnam's revenues of $359 million were flat, compared with the fourth quarter
last year. Ending assets on December 31, 2006 were $192 billion, comprising $124
billion in mutual fund assets and $68 billion in institutional assets. Average
assets under management were $189 billion, compared with $188 billion in the
fourth quarter of 2005.
Operating income increased on a year-over-year basis, due to lower expenses.
With the announced sale of Putnam on February 1, Putnam will be classified as a
discontinued operation in 2007.
Other Items
MMC's net debt position, which is total debt less cash and cash equivalents, was
$2.9 billion at year-end 2006, a decrease of $520 million in the fourth quarter
and $640 million in the year, driven by strong operating cash flows. The company
increased its quarterly dividend by 12 percent, from $.17 to $.19, payable in
the first quarter of 2007.
During the fourth quarter, MMC made a discretionary contribution of its
investment position in Trident III of $182 million to its U.K. defined benefits
plans.
Conference Call
A conference call to discuss fourth quarter and year-end 2006 results will be
held today at 10:00 a.m. Eastern Time. To participate in the teleconference,
please dial 866 564 7444 or 719 234 0008 (international). The access code for
both numbers is 2424845. The audio webcast may be accessed at www.mmc.com. A
replay of the webcast will be available approximately two hours after the event
at the same web address.
MMC is a global professional services firm with annual revenues of approximately
$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; Mercer, a major
global provider of human resource and specialty consulting services; and Putnam
Investments, one of the largest investment management companies in the United
States. Approximately 55,000 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, and London stock exchanges.
MMC's website address is www.mmc.com.
This press release contains 'forward-looking statements,' as defined in the
Private Securities Litigation Reform Act of 1995. These statements, which
express management's current views concerning future events or results, use
words like 'anticipate,' 'assume,' 'believe,' 'continue,' 'estimate,' 'expect,'
'intend,' 'plan,' 'project' and similar terms, and future or conditional tense
verbs like 'could,' 'should,' 'will' and 'would.' For example, we may use
forward-looking statements when addressing topics such as: the impact of
acquisitions and dispositions; future actions by our management or regulators;
the outcome of contingencies; changes in our business strategy; changes in our
business practices and methods of generating revenue; the development and
performance of our services and products; market and industry conditions,
including competitive and pricing trends; changes in the composition or level of
MMC's revenues; our cost structure and the outcome of restructuring and other
cost-saving initiatives; and MMC's cash flow and liquidity.
Forward-looking statements are subject to inherent risks and uncertainties.
Factors that could cause actual results to differ materially from those
expressed or implied in our forward-looking statements include:
• the economic and reputational impact of litigation and regulatory
proceedings concerning our insurance and reinsurance brokerage and
investment management operations;
• the fact that MMC's agreement to sell Putnam, announced on February 1,
2007, is subject to a number of closing conditions, some of which are
outside of MMC's control, and we cannot be certain that the transaction will
close as planned or that the announced sale price will not be adjusted
pursuant to the terms of the sale agreement;
• Putnam's performance between now and the closing of the announced sale
later in 2007, including the actual and relative investment performance of
Putnam's mutual funds and institutional and other advisory accounts,
Putnam's net fund flows and the level of Putnam's assets under management;
• our ability to effectively deploy MMC's proceeds from the sale of
Putnam, and the timing of our use of those proceeds;
• the fact that our estimate of the dilutive impact of the sale of Putnam
on MMC's future earnings per share is necessarily based on a set of current
management assumptions, including assumptions about MMC's use of sale
proceeds and the operating results of Putnam and MMC's other subsidiaries;
• our ability to achieve profitable revenue growth in our risk and
insurance services segment by providing both traditional insurance brokerage
services and additional risk advisory services;
• our ability to retain existing clients and attract new business, and our
ability to retain key employees;
• revenue fluctuations in risk and insurance services relating to the net
effect of new and lost business production and the timing of policy
inception dates;
• the impact on risk and insurance services commission revenues of changes
in the availability of, and the premiums insurance carriers charge for,
insurance and reinsurance products, including the impact on premium rates
and market capacity attributable to catastrophic events such as hurricanes;
• the impact on renewals in our risk and insurance services segment of
pricing trends in particular insurance markets, fluctuations in the general
level of economic activity and decisions by insureds with respect to the
level of risk they will self-insure;
• the impact on our consulting segment of pricing trends, utilization
rates, legislative changes affecting client demand, and the general economic
environment;
• our ability to implement our restructuring initiatives and otherwise
reduce or control expenses and achieve operating efficiencies, including our
ability to generate anticipated savings and operational improvements from
the actions we announced in September 2006;
• the impact of competition, including with respect to pricing and the
emergence of new competitors;
• fluctuations in the value of Risk Capital Holdings' investments;
• our ability to make strategic acquisitions and dispositions and to
integrate, and realize expected synergies, savings or strategic benefits
from, the businesses we acquire;
• our exposure to potential liabilities arising from errors and omissions
claims against us;
• our ability to meet our financing needs by generating cash from
operations and accessing external financing sources, including the potential
impact of rating agency actions on our cost of financing or ability to
borrow;
• the impact on our operating results of foreign exchange fluctuations;
and
• changes in the tax or accounting treatment of our operations and the
impact of other legislation and regulation, including as to licensing
matters, in the jurisdictions in which we operate, particularly given the
global scope of our businesses.
The factors identified above are not exhaustive. MMC and its subsidiaries
operate in a dynamic business environment in which new risks may emerge
frequently. Accordingly, MMC cautions readers not to place undue reliance on its
forward-looking statements, which speak only as of the dates on which they are
made.
MMC undertakes no obligation to update or revise any forward-looking statement
to reflect events or circumstances arising after the date on which it is made.
Further information concerning MMC and its businesses, including information
about factors that could materially affect our results of operations and
financial condition, is contained in MMC's filings with the Securities and
Exchange Commission.
Marsh & McLennan Companies, Inc.
Consolidated Statements of Income
(In millions, except per share figures)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
------- ------- ------- --------
Revenue:
Service Revenue $2,982 $2,784 $11,699 $11,395
Investment Income 81 27 222 183
------- ------- ------- --------
Total Revenue 3,063 2,811 11,921 11,578
------- ------- ------- --------
Expense:
Compensation and Benefits 1,843 1,588 7,113 6,897
Other Operating Expenses 823 1,107 3,350 3,828
------- ------- ------- --------
Total Expenses 2,666 2,695 10,463 10,725
------- ------- ------- --------
Operating Income 397 116 1,458 853
Interest Income 19 14 64 47
Interest Expense (72) (79) (303) (332)
------- ------- ------- --------
Income Before Income Taxes and
Minority Interest Expense 344 51 1,219 568
Income Taxes 117 30 388 191
Minority Interest Expense, Net
of Tax 4 4 13 10
------- ------- ------- --------
Income from Continuing 223 17 818 367
Operations
Discontinued Operations, Net of
Tax 3 18 172 37
------- ------- ------- --------
Net Income $ 226 $ 35 $ 990 $ 404
======= ======= ======= ========
Basic Net Income Per Share
- Continuing Operations $0.41 $0.03 $1.49 $0.68
======= ======= ======= ========
- Net Income $0.41 $0.06 $1.80 $0.75
======= ======= ======= ========
Diluted Net Income Per Share
- Continuing Operations $0.39 $0.03 $1.45 $0.67
======= ======= ======= ========
- Net Income $0.40 $0.06 $1.76 $0.74
======= ======= ======= ========
Average Number of Shares
Outstanding - Basic 551 546 549 538
======= ======= ======= ========
- Diluted 561 555 557 543
======= ======= ======= ========
Shares Outstanding at 12/31 552 546 552 546
======= ======= ======= ========
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis
Three and Twelve Months Ended
(Millions) (Unaudited)
Components of Revenue Change
----------------------------
Three Months Ended % Change Acquisitions/
December 31, GAAP Currency Dispositions Underlying
2006 2005 Revenue Impact Impact Revenue
------- ------ ------- ------- -------- --------
Risk and Insurance
Services
Insurance
Services $1,129 $ 1,135 (1)% 2% (3)% -
Reinsurance
Services 171 155 9% 1% - 8%
Risk Capital
Holdings 74 27 174% - - 174%
------- ------
Total Risk and
Insurance
Services 1,374 1,317 4% 2% (3)% 5%
------- ------
Risk Consulting &
Technology 241 215 12% 3% 5% 4%
------- ------
Consulting
Human Resource
Consulting 769 690 12% 4% - 8%
Specialty
Consulting 341 276 23% 3% 5% 15%
------- ------
Total Consulting 1,110 966 15% 3% 2% 10%
------- ------
Investment
Management 359 360 - - - -
------- ------
Total Operating
Segments 3,084 2,858 8% 2% - 6%
Corporate
Eliminations (21) (47)
------- ------
Total Revenue $3,063 $2,811 9% 2% - 7%
======= ======
Components of Revenue Change
----------------------------
Twelve Months Ended % Change Acquisitions/
December 31, GAAP Currency Dispositions Underlying
2006 2005 Revenue Impact Impact Revenue
------- ------ ------- ------- -------- -------
Risk and Insurance
Services
Insurance
Services $4,390 $4,567 (4)% - (2)% (2)%
Reinsurance
Services 880 836 5% - - 5%
Risk Capital
Holdings 193 189 2% - (5)% 7%
------- ------
Total Risk and
Insurance
Services 5,463 5,592 (2)% - (2)% -
------- ------
Risk Consulting &
Technology 979 872 12% - 3% 9%
------- ------
Consulting
Human Resource
Consulting 3,021 2,794 8% 1% - 7%
Specialty
Consulting 1,204 1,008 19% 1% 2% 16%
------- ------
Total Consulting 4,225 3,802 11% 1% 1% 9%
------- ------
Investment
Management 1,385 1,506 (8)% - - (8)%
------- ------
Total Operating
Segments 12,052 11,772 2% - - 2%
Corporate
Eliminations (131) (194)
------- ------
Total Revenue $11,921 $11,578 3% - - 3%
======= ======
Notes
Underlying revenue measures the change in revenue, before the impact of
acquisitions and dispositions, using consistent currency exchange rates.
Interest income on fiduciary funds amounted to $45 and $37 million for the three
months ended December 31, 2006 and 2005, respectively and $180 and $151 million
for the twelve months ended December 31, 2006 and 2005, respectively.
Revenue includes net investment income (loss) of $72 and $29 million for Risk
and Insurance Services and $9 and $(2) million for Investment Management for the
three months ended December 31, 2006 and 2005, respectively. Net investment
income (loss) was $196 and $180 million for Risk and Insurance Services, $1 and
$0 million for Consulting, and $25 and $3 million for Investment Management for
the twelve months ended December 31, 2006 and 2005, respectively.
Risk Capital Holdings owns investments in private equity funds and insurance and
financial services firms.
Effective January 1, 2007, Risk Consulting and Technology transferred to
Insurance Services certain businesses which had revenue of approximately $25
million in 2006.
Insurance Services revenue includes market service revenue of $0 and $29 million
for the three months ended December 31, 2006 and 2005, respectively and $43
million and $114 million for the twelve months ended December 31, 2006 and 2005,
respectively.
Marsh & McLennan Companies, Inc.
Supplemental Information
(Millions) (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
2006 2005 2006 2005
------- -------- ------- -------
Revenue:
Risk and Insurance Services $1,374 $1,317 $5,463 $5,592
Risk Consulting & Technology 241 215 979 872
Consulting 1,110 966 4,225 3,802
Investment Management 359 360 1,385 1,506
------- -------- ------- -------
3,084 2,858 12,052 11,772
Corporate/Eliminations (21) (47) (131) (194)
------- -------- ------- -------
$3,063 $2,811 $11,921 $11,578
------- -------- ------- -------
Operating Income (Loss):
Risk and Insurance Services $ 127 $ 62 $ 677 $ 305
Risk Consulting & Technology 45 16 149 121
Consulting 117 94 466 451
Investment Management 86 59 303 263
Corporate 22 (115) (137) (287)
------- -------- ------- -------
$ 397 $ 116 $ 1,458 $ 853
------- -------- ------- -------
Segment Operating Margins:
Risk and Insurance Services 9.2% 4.7% 12.4% 5.5%
Risk Consulting & Technology 18.7% 7.4% 15.2% 13.9%
Consulting 10.5% 9.7% 11.0% 11.9%
Investment Management 24.0% 16.4% 21.9% 17.5%
Consolidated Operating
Margin 13.0% 4.1% 12.2% 7.4%
Pretax Margin 11.2% 1.8% 10.2% 4.9%
Effective Tax Rate 34.0% 58.8% 31.8% 33.7%
Potential Minority Interest
Associated with the Putnam
Equity Partnership Plan Net of
Dividend Equivalent
Expense Related to MMC
Common Stock Equivalents $ 4 $ 3 $ 13 $ 4
Marsh & McLennan Companies, Inc.
Supplemental Information- Continuing Operations
(Millions) (Unaudited)
Significant Items Impacting the Comparability of Financial Results:
The year-over-year comparability of MMC's fourth quarter and twelve-month
financial results is affected by a number of noteworthy items and stock option
expense. The following table identifies the impact of noteworthy items on
operating income for the periods indicated.
Risk & Risk
Insurance Consulting & Investment
Services Technology Consulting Management Corporate Total
----------------------------------------------------------------------------
Three Months Ended
December 31, 2006
Restructuring Charges (a) $ 37 $ - $ 10 $ - $ (72) $ (25)
Accelerated Amortization/ 5 - - - 4 9
Depreciation
Settlement, Legal and 11 - - - - 11
Regulatory (b)
----------------------------------------------------------------------------
Total Impact in 2006 $ 53 $ - $ 10 $ - $ (68) $ (5)
----------------------------------------------------------------------------
Three Months Ended
December 31, 2005
Restructuring Charges (a) $ 62 $ - $ 1 $ - $ 4 $ 67
Employee Retention Awards (10) - 7 - - (3)
Settlement, Legal and 19 - - 10 28 57
Regulatory (b)
Other 1 - - - 11 12
----------------------------------------------------------------------------
Total Impact in 2005 $ 72 $ - $ 8 $ 10 $ 43 $ 133
----------------------------------------------------------------------------
Twelve Months Ended
December 31, 2006
Restructuring Charges (a) $ 100 $ 1 $ 27 $ - $ (41) $ 87
Accelerated Amortization/ 28 - - - 10 38
Depreciation
Settlement, Legal and 43 - - (7) - 36
Regulatory (b)
----------------------------------------------------------------------------
Total Impact in 2006 $ 171 $ 1 $ 27 $ (7) $ (31) $ 161
----------------------------------------------------------------------------
Twelve Months Ended
December 31, 2005
Restructuring Charges (a) $ 257 $ - $ 1 $ - $ 59 $ 317
Employee Retention Awards 78 - 37 - - 115
Settlement, Legal and 88 - - (2) 4 90
Regulatory (b)
Estimated Mutual Fund - - - 35 - 35
Reimbursement (c)
Other 12 - - 4 9 25
----------------------------------------------------------------------------
Total Impact in 2005 $ 435 $ - $ 38 $ 37 $ 72 $ 582
----------------------------------------------------------------------------
Notes:
(a) Primarily includes severance and related charges, costs for future rent and
other costs for real estate resulting from cost reduction initiatives and the
gain on the sale of certain floors in MMC's headquarters building (see MMC's
Form 10-Q for the period ended March 31, 2005 and Form 8-K dated September 20,
2006 for more information).
(b) Reflects costs of certain legal and regulatory matters, including legal fees
and settlement costs arising out of: the civil complaint relating to market
service agreements and other issues filed against MMC and Marsh by the New York
State Attorney General in October 2004 and settled in January 2005; and market-
timing and other issues at Putnam. Regulatory expenses in Risk and Insurance
Services include fees for professional services provided by other MMC companies;
the resulting inter-company balances are eliminated in Corporate. The credits
for Investment Management represent insurance recoveries relating to previously
expensed legal fees.
(c) Reflects costs 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.
Interest Expense. A noteworthy item affecting 2005 net income was the $34
million prepayment penalty related to a mortgage refinancing of MMC's
headquarters building in New York, recorded as interest expense.
Stock Option Expense. The year-over-year comparability of MMC's fourth quarter
and twelve-month financial results is affected by MMC's adoption, effective July
1, 2005, of SFAS 123(R) ('Share Based Payment'). Stock option expense for the
three months ended December 31, 2006 was $23 million: Risk and Insurance
Services - $9 million, Risk Consulting & Technology - $0 million, Consulting -
$9 million, Investment Management - $3 million, Corporate - $2 million. Stock
option expense for the twelve months ended December 31, 2006 was $116 million:
Risk and Insurance Services - $47 million, Risk Consulting & Technology - $2
million, Consulting - $41 million, Investment Management - $14 million,
Corporate - $12 million. A charge of $33 million and $64 million for the quarter
and twelve months ended December 31, 2005, respectively, is reflected in
Corporate results.
Impact on Operating Income and Margins in Risk and Insurance Services. In Risk
and Insurance Services, noteworthy items and stock option expense together
totaled $218 million for the twelve months of 2006, affecting segment operating
margin by 4 percentage points. Noteworthy items totaled $435 million for twelve
months of 2005, affecting segment operating margin by 7.7 percentage points.
Adjusting for these impacts, the segment's adjusted operating income was $895
million and adjusted operating margin was 16.4 percent for the twelve months of
2006, compared to adjusted operating income of $740 million and an adjusted
operating margin of 13.2 percent for the twelve months of 2005. The adjusted
operating income and adjusted segment operating margin are non-GAAP financial
measures within the meaning of Regulation G promulgated by the Securities and
Exchange Commission. MMC believes that presenting these measures may help
investors and others understand aspects of Risk and Insurance Services operating
performance that may not be apparent from MMC's reported GAAP results. However,
non-GAAP financial measures are not a substitute for MMC's reported GAAP
information, and may not be comparable to similar information provided by
industry peers.
--------------------------------------------------------------------------------
Marsh & McLennan Companies, Inc.
Supplemental Information - Putnam Assets Under Management
(Billions) (Unaudited)
Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
2006 2006 2006 2006 2005
-------- -------- -------- -------- -------
Mutual Funds:
Growth Equity $ 26 $ 26 $ 27 $ 31 $ 31
Value Equity 37 36 36 37 37
Blend Equity 28 26 26 27 26
Fixed Income 33 30 30 31 32
-------- -------- -------- -------- -------
Total Mutual
Fund Assets 124 118 119 126 126
-------- -------- -------- -------- -------
Institutional:
Equity 36 34 32 34 34
Fixed Income 32 30 29 29 29
-------- -------- -------- -------- -------
Total
Institutional
Assets 68 64 61 63 63
-------- -------- -------- -------- -------
Total Ending
Assets $192 $182 $180 $189 $189
======== ======== ======== ======== =======
The asset information above
includes the following:
Assets from
Non-US
Investors $ 36 $ 34 $ 31 $ 32 $ 32
======== ======== ======== ======== =======
Assets in
Prime Money
Market Funds $ 4.3 $ .5 $ .6 $ .2 $ .5
======== ======== ======== ======== =======
Average Assets
Under Management:
Quarter $189 $179 $185 $190 $188
======== ======== ======== ======== =======
Year-to-Date $186 $185 $188 $190 $196
======== ======== ======== ======== =======
Net Flows including
Dividends
Reinvested:
Quarter $ (0.1) $ (3.1) $ (6.0)* $ (6.6) $ (6.4)
======== ======== ======== ======== =======
Year-to-Date $ (15.8) $(15.7) $(12.6) $ (6.6) $(31.7)
======== ======== ======== ======== =======
Impact of Market/
Performance on
Ending
Assets Under
Management $ 9.9 $ 5.5 $ (3.5) $ 7.0 $ 2.8
======== ======== ======== ======== =======
* Net redemptions in the quarter ended June 30, 2006 include $2.8 billion of
redemptions in institutional equity resulting from ending Putnam's alliance with
an Australian partner.
Categories of mutual fund assets reflect style designations aligned with
Putnam's various prospectuses. All quarter-end assets conform with the current
investment mandate for each product.
Marsh & McLennan Companies, Inc.
Consolidated Balance Sheets
(Millions) (Unaudited)
December 31, December 31,
2006 2005
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,089 $ 2,020
Net receivables 3,008 2,730
Assets of discontinued operations - 153
Other current assets 737 359
----------- ----------
Total current assets 5,834 5,262
Goodwill and intangible assets 7,775 7,773
Fixed assets, net 1,043 1,178
Long-term investments 597 277
Pension related asset 613 1,596
Other assets 2,275 1,806
----------- ----------
TOTAL ASSETS $18,137 $17,892
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 1,111 $ 498
Accounts payable and accrued liabilities 2,477 1,733
Regulatory settlements-current portion 238 333
Accrued compensation and employee benefits 1,507 1,413
Liabilities of discontinued operations - 89
Accrued income taxes 216 192
Dividends payable - 93
----------- ----------
Total current liabilities 5,549 4,351
Fiduciary liabilities 3,704 3,795
Less - cash and investments held in a fiduciary
capacity (3,704) (3,795)
----------- ----------
- -
Long-term debt 3,860 5,044
Regulatory settlements 173 348
Pension, postretirement and postemployment
benefits 1,089 1,180
Other liabilities 1,647 1,609
Total stockholders' equity 5,819 5,360
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $18,137 $17,892
=========== ==========
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis - Discontinued Operations
Reclassification
(Millions) (Unaudited)
The following table provides reclassified prior period reported amounts to
reflect discontinued operations classification for Kroll Security International,
which was sold in December 2006.
Three Months Ended Twelve Months Ended
---------------------------------------------------------------------------
2006 March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
---------------------------------------------------------------------------
Risk and
Insurance
Services
Insurance
Services $ 1,146 $ 1,106 $ 1,009 $ 1,129 $ 4,390
Reinsurance
Services 281 214 214 171 880
Risk Capital
Holdings 46 28 45 74 193
-------- -------- -------- -------- ---------
Total Risk
and
Insurance 1,473 1,348 1,268 1,374 5,463
Services -------- -------- -------- -------- ---------
Risk
Consulting &
Technology 234 265 239 241 979
-------- -------- -------- -------- ---------
Consulting
Human
Resource 739 751 762 769 3,021
Consulting
Specialty
Consulting 262 297 304 341 1,204
-------- -------- -------- -------- ---------
Total
Consulting 1,001 1,048 1,066 1,110 4,225
-------- -------- -------- -------- ---------
Investment
Management 345 339 342 359 1,385
-------- -------- -------- -------- ---------
Total
Operating
Segments 3,053 3,000 2,915 3,084 12,052
Corporate
Eliminations (37) (30) (43) (21) (131)
-------- -------- -------- -------- ---------
Total $ 3,016 $ 2,970 $ 2,872 $ 3,063 $ 11,921
Revenue ======== ======== === ======== ======== =========
Three Months Ended Twelve Months Ended
---------------------------------------------------------------------------
2005 March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
---------------------------------------------------------------------------
Risk and
Insurance
Services
Insurance
Services $ 1,232 $ 1,172 $ 1,028 $ 1,135 $ 4,567
Reinsurance
Services 282 192 207 155 836
Risk Capital
Holdings 63 54 45 27 189
-------- -------- -------- -------- ---------
Total Risk and
Insurance
Services 1,577 1,418 1,280 1,317 5,592
-------- -------- -------- -------- ---------
Risk
Consulting &
Technology 216 219 222 215 872
-------- -------- -------- -------- ---------
Consulting
Human Resource
Consulting 695 718 691 690 2,794
Specialty
Consulting 229 254 249 276 1,008
-------- -------- -------- -------- ---------
Total
Consulting 924 972 940 966 3,802
-------- -------- -------- -------- ---------
Investment
Management 398 377 371 360 1,506
-------- -------- -------- -------- ---------
Total
Operating
Segments 3,115 2,986 2,813 2,858 11,772
Corporate
Eliminations (62) (31) (54) (47) (194)
-------- -------- -------- -------- ---------
Total Revenue $ 3,053 $ 2,955 $ 2,759 $ 2,811 $ 11,578
======== ======== ======== ======== =========
Marsh & McLennan Companies, Inc.
Supplemental Information - Revenue Analysis - Discontinued Operations
Reclassification
(Millions) (Unaudited)
The following table provides reclassified prior period reported amounts to
reflect discontinued operations classification for Kroll Security International,
which was sold in December 2006.
Three Months Ended Twelve Months Ended
---------------------------------------------------------------------------
2006 March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
---------------------------------------------------------------------------
Operating
Income
(Loss):
Risk and
Insurance
Services $ 268 $ 139 $ 143 $ 127 $ 677
Risk
Consulting &
Technology 24 42 38 45 149
Consulting 113 124 112 117 466
Investment
Management 64 76 77 86 303
Corporate (68) (42) (49) 22 (137)
-------- -------- -------- -------- ---------
401 339 321 397 1,458
-------- -------- -------- -------- ---------
Interest 16 13 16 19 64
Income
Interest
Expense (78) (78) (75) (72) (303)
-------- -------- -------- -------- ---------
Income
Before
Income Taxes
and
Minority
Interest,
Net 339 274 262 344 1,219
of Tax
Income Taxes 96 97 78 117 388
Minority
Interest
Expense, Net
of Tax 2 3 4 4 13
-------- -------- -------- -------- ---------
Income From
Continuing
Operations 241 174 180 223 818
Discontinued
Operations,
Net of Tax 175 (2) (4) 3 172
-------- -------- -------- -------- ---------
Net Income $ 416 $ 172 $ 176 $ 226 $ 990
======== ======== ======== ======== =========
Basic Income
Per Share - $ 0.44 $ 0.32 $ 0.33 $ 0.41 $1.49
Continuing
Operations ======== ======== ======== ======== =========
Diluted
Income $ 0.43 $ 0.31 $ 0.32 $ 0.39 $1.45
Per Share -
Continuing
Operations ======== ======== ======== ======== =========
Three Months Ended Twelve Months Ended
--------------------------------------------------------------------------
2005 March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
--------------------------------------------------------------------------
Operating
Income
(Loss):
Risk and
Insurance
Services $ 137 $ 86 $ 20 $ 62 $ 305
Risk
Consulting &
Technology 37 34 34 16 121
Consulting 110 130 117 94 451
Investment
Management 50 71 83 59 263
Corporate (73) (30) (69) (115) (287)
-------- -------- -------- -------- ---------
261 291 185 116 853
-------- -------- -------- -------- ---------
Interest 9 11 13 14 47
Income
Interest
Expense (69) (73) (111) (79) (332)
-------- -------- -------- -------- ---------
Income
Before
Income Taxes
and
Minority
Interest,
Net 201 229 87 51 568
of Tax
Income Taxes 70 68 23 30 191
Minority
Interest
Expense, Net
of Tax 2 2 2 4 10
-------- -------- -------- -------- ---------
Income From
Continuing
Operations 129 159 62 17 367
Discontinued
Operations,
Net of Tax 5 7 7 18 37
-------- -------- -------- -------- ---------
Net Income $ 134 $ 166 $ 69 $ 35 $ 404
======== ======== ======== ======== =========
Basic Income
Per Share - $ 0.24 $ 0.30 $ 0.11 $ 0.03 $ 0.68
Continuing
Operations ======== ======== ======== ======== =========
Diluted
Income $ 0.24 $ 0.29 $ 0.11 $ 0.03 $ 0.67
Per Share -
Continuing
Operations ======== ======== ======== ======== =========
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