MHM.L Regulatory News (MHM)

3 May 2005 12:19

Marsh & McLennan Co Inc03 May 2005 News Release Media Contacts: Jim Fingeroth Investor Contact:Barbara Perlmutter Kekst and Company Mike BischoffMMC (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) todayreported financial results for the quarter ended March 31, 2005. Consolidatedrevenues totaled $3.2 billion, and net income was $134 million, or $.25 pershare. These results include pretax charges for restructuring, employeeretention, incremental regulatory and compliance, and potential Putnam fundreimbursement expenses of approximately $225 million. Excluding these items,earnings per share would have been $.52. In the first quarter of 2004, netincome was $446 million, or $.83 per share. Prior year quarterly results includesettlement expenses, insurance recoveries relating to World Trade Center losses,severance, and regulatory and compliance costs, which reduced first quarter 2004net income by $73 million. Excluding these items, earnings per share would havebeen $.96 per share. Additional information on these items and their effect onoperating income and earnings per share is provided in the attached supplementalschedules on pages 11 and 12. Michael G. Cherkasky, president and chief executive officer of MMC, said: "Wecontinue to take steps across MMC to make it a stronger, more streamlinedcompany. Marsh is executing its plan to simplify its management structure,improve efficiencies and account profitability, and increase transparency. Thesechanges should enable Marsh to deliver profitable growth and margin expansionnext year. Kroll had a strong quarter, as demand for its technology servicesincreased significantly. Mercer Human Resource Consulting made significantprogress in expanding its outsourcing capabilities and range of investmentadvice and services, including the combination of its existing benefitsadministration operations with Putnam's defined contribution administrationactivities. Mercer's specialty consulting businesses performed very well,reporting strong revenue growth. Putnam's investment performance has continuedto improve, reflecting changes made over the last 18 months. We continue to seea 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 $1.7billion. Underlying revenues, excluding acquisitions and foreign exchange,declined 13 percent. Market services revenues declined $179 million to $32million 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 ofreduced insurance premium rates, and a lower volume of net new business. Thedecline was most significant in the United States, with modest declines in therest of the world consistent with the softening of premium pricing. Guy Carpenter reported first quarter revenues of $282 million, unchanged from2004. Underlying revenues declined 2 percent. Carpenter's new business in thequarter was stronger than the prior year quarter but was offset by the effect ofhigher risk retentions and lower premium rates in the reinsurance marketplace.Related insurance services revenues rose 26 percent to $294 million, an 18percent increase on an underlying basis. This reflects strong growth in claimsmanagement as well as higher investment gains in the quarter. As expected, restructuring and other noteworthy expenses significantly affectedrisk and insurance services operating income of $171 million. Approximately $65million of savings associated with the fourth quarter restructuring were morethan offset by $96 million for additional restructuring, $43 million ofincremental regulatory and compliance costs, and $15 million for employeeretention programs in the first quarter. Bonus accruals for the full year arebeing kept flat to 2004 levels to assure that the proper levels of incentivesare maintained in a challenging year. The elimination of market servicesrevenues removed a significant seasonality factor that had a correspondingimpact on bonus accruals. First quarter bonus accruals were $42 million higherthan the prior year quarter. Additional restructuring charges are anticipatedover the course of 2005 for severance and real estate costs. Risk Consulting and Technology Kroll performed well, reporting $264 million in revenues. Its growth wasexcellent, with particular strength in technology services' electronic discoveryand background screening operations. First quarter revenues also reflect theintegration of portions of Marsh's risk consulting operations. Operating incomewas $37 million for the quarter, including $16 million of identified intangibleamortization. Consulting Consulting revenues increased 4 percent in the first quarter to $834 million.Underlying revenues increased 1 percent. Operating income of $84 millionincludes $10 million of retention expenses. Mercer Human Resource Consulting reported revenues of $586 million, comparedwith $589 million last year. The reduction in underlying revenues was due to thedecline in revenues associated with defined contribution plan assets previouslyadministered by Putnam. The health and benefits business and the performance,rewards, and information business both reported good revenue growth. A modestdecline in the retirement business was largely due to lower demand in the UnitedKingdom. Mercer's specialty consulting businesses produced $210 million in revenues, anincrease of 17 percent from last year. Underlying revenues grew 13 percent.Mercer Management Consulting, Mercer Oliver Wyman, and NERA Economic Consultingeach reported solid revenue growth. Investment Management Putnam's revenues in the first quarter declined 12 percent to $398 million, inline with the year-over-year change in average assets under management. Averageassets under management during the first quarter were $204 billion, comparedwith $234 billion in the first quarter of 2004. Total assets under management onMarch 31, 2005 were $199 billion, comprising $135 billion of mutual fund assetsand $64 billion of institutional assets. Assets under management at year-end2004 were $213 billion. Putnam's operating income of $49 million includes a charge of $30 million forthe estimated cost that it believes will be necessary to address issues relatingto the calculation of certain amounts paid by the Putnam mutual funds inprevious years. The previous payments were cost reimbursements by the Putnammutual funds to Putnam for transfer agent services relating to definedcontribution operations. The steps Putnam has taken over the last 18 months have led to an improvement ininvestment performance. For the one-year period ended March 31, 2005, 61 percentof all Putnam mutual fund A-share assets, including 50 percent of equityproducts and 95 percent of fixed income products, were above median forinvestment performance in their respective Lipper categories. Net redemptions of$9.7 billion in the quarter include $2.7 billion related to the termination ofcertain Putnam international alliances on the first day of 2005. Since then, netredemptions have been lower than they were in each of the previous fivequarters. Putnam had modest gains in mutual funds sales for the second quarterin a row. Conference Call A conference call to discuss first quarter 2005 results will be held today at10:00 a.m. Eastern Daylight Time. To participate in the live teleconference,please dial (888) 283-6901 or (719) 955-1564 (international). The live audiowebcast (which will be listen-only) may be accessed at www.mmc.com. A replay ofthe webcast will be available beginning approximately two hours after the event.A continuous telephone replay will be available beginning at 1:00 p.m. EasternDaylight 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 theUnited States may listen to the replay by dialing (719) 457-0820. The accesscode for both numbers is 7633433. MMC is a global professional services firm with annual revenues exceeding $12billion. It is the parent company of Marsh, the world's leading risk andinsurance services firm; Guy Carpenter, the world's leading risk and reinsurancespecialist; Kroll, the world's leading risk consulting company; PutnamInvestments, one of the largest investment management companies in the UnitedStates; and Mercer, a major global provider of consulting services.Approximately 60,000 employees provide analysis, advice, and transactionalcapabilities to clients in over 100 countries. Its stock (ticker symbol: MMC) islisted on the New York, Chicago, Pacific, and London stock exchanges. MMC'swebsite address is www.mmc.com. This press release contains statements relating to future results, which areforward-looking statements as that term is defined in the Private SecuritiesLitigation 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 andindustry materials, experts' reports and opinions, and long-term trends, as wellas 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 thosecontemplated 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, andMMC undertakes no obligation to update any forward-looking statement to reflectevents or circumstances after the date on which it is made or to reflect theoccurrence of unanticipated events. MMC is committed to providing timely and materially accurate information to theinvesting public, consistent with our legal and regulatory obligations. To thatend, MMC and its operating companies use their websites to convey meaningfulinformation about their businesses, including the anticipated release ofquarterly financial results and the posting of updates of assets undermanagement at Putnam. Monthly updates of total assets under management at Putnamwill be posted to the MMC website the first business day following the end ofeach month. Putnam posts mutual fund and performance data to its websiteregularly. Assets for most Putnam retail mutual funds are posted approximatelytwo weeks after each month-end. Mutual fund net asset value (NAV) is posteddaily. Historical performance and Lipper rankings are also provided. Investorscan 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 $3,163Investment Income (Loss) 57 33 ------------- -------------Total Revenue 3,182 3,196 ------------- ------------- Expense:Compensation and Benefits 1,932 1,635Other Operating Expenses 978 793Regulatory 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 InterestExpense 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 &InsuranceServicesRiskManagementandInsurance $1,172 $1,451 (19)% 2% - (21)% (11)%BrokingReinsuranceBroking andServices 282 283 - 2% - (2)% (2)%RelatedInsuranceServices 294 233 26% - 8% 18% 18% --------- --------- Total RiskandInsurance 1,748 1,967 (11)% 1% 1% (13)% (5)%Services --------- --------- RiskConsulting &Technology 264 26 933% - 933% - --------- --------- ConsultingHumanResource 586 589 - 2% - (2)%ConsultingSpecialtyConsulting 210 180 17% 2% 2% 13% --------- --------- 796 769 4% 2% 1% 1%ReimbursedExpenses 38 35 --------- --------- TotalConsulting 834 804 4% 2% 1% 1% --------- --------- InvestmentManagement 398 450 (12)% - - (12)% --------- --------- TotalOperatingSegments 3,244 3,247 - 1% 8% (9)% (4)% CorporateEliminations (62) (51) --------- --------- Total $3,182 $3,196Revenue ========== ========= NotesUnderlying revenue measures the change in revenue, before the impact ofacquisitions and dispositions, using consistent currency exchange rates.Underlying revenue for risk management and insurance broking decreased 21% inthe first quarter, including a 10% decline related to market servicesagreements; and for the risk and insurance services segment underlying revenuedecreased 13% in the first quarter including an 8% decline related to marketservices agreements.Effective October 1, 2004 Marsh agreed to eliminate contingent compensationagreements with insurers. Market services revenue earned but not accrued atSeptember 30, 2004 is recognized when collected or when confirmation of theamount of payment is received from the carriers. First quarter results includemarket 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 forthe three months ended March 31, 2005 and 2004, respectively. Segment ReclassificationMMC has reclassified prior year amounts to reflect organizational changes thataffected MMC's reportable segments. The following changes are reflected in the2004 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 businesspreviously managed by Marsh. Services include: forensic accounting andlitigation support; business continuity management; mass tort and complexliability mitigation; and comprehensive data services for the management ofinsurance, claims and legal data. Putnam's defined contribution administration business was transferred fromPutnam (Investment Management) to Human Resource Consulting (Consulting).Approximately 75% of the revenues earned by Mercer Human Resources from thistransferred business are paid by Putnam. Putnam receives fees for investmentmanagement and administrative services, which are recorded as revenue. A feerelated to administrative services is recorded as an expense by Putnam and asrevenue by Mercer Human Resources. The inter-company revenue and expense areeliminated in consolidation. Corporate eliminations for 2004 reflect theadditional inter-company revenue and expense resulting from the transfer of thisbusiness. Marsh & McLennan Companies, Inc. Supplemental Information (Millions) (Unaudited) ----------------------- Three Months Ended March 31, ----------------------- 2005 2004 --------- --------- Operating Income (Loss) Including Minority InterestExpense:Risk & Insurance Services $ 171 $ 633Risk Consulting & Technology 37 4Consulting 84 87Investment Management 49 (24)Corporate (73) 72 --------- --------- 268 772 --------- ---------Minority Interest Expense, Net of Tax, Included Above:Risk & Insurance Services 3 3Investment 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 PutnamEquity Partnership Plan Net of Dividend EquivalentExpense 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 $ 45Value Equity 40 41 39 41 42Blend Equity 26 28 27 28 30Fixed Income 35 36 37 38 40 --------- --------- --------- --------- ---------Total MutualFund Assets 135 143 140 148 157 --------- --------- --------- --------- --------- Institutional:Equity 35 40 40 39 44Fixed Income 29 30 29 26 26 --------- --------- --------- --------- ---------TotalInstitutionalAssets 64 70 69 65 70 -------- -------- -------- -------- --------Total EndingAssets $199 $213 $209 $213 $227 ======== ======== ======== ======== ========Assets fromNon-USInvestors $ 35 $ 38 $ 36 $ 36 $ 38 ======== ======== ======== ======== ======== Average Assets UnderManagement:Quarter-to-Date $204 $211 $209 $216 $234 ======== ======== ======== ======== ========Year-to-Date $204 $217 $220 $225 $234 ======== ======== ======== ======== ======== Impact of NetRedemptionsincludingDividendsReinvested: (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 onEndingAssets UnderManagement $ (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 ---------- ---------- ---------- ---------- ------------ ---------OperatingIncome AsReported $ 171 $ 37 $ 84 $ 49 $ (73) $ 268 ---------- ---------- ---------- ---------- ------------ --------- RestructuringCharges (b) 96 - - - 49 145 ---------- ---------- ---------- ---------- ------------ --------- OtherIncrementalRegulatoryand 43 - - - (17) 26Compliance(c)EstimatedMutual FundReimbursement(d) - - - 30 - 30EmployeeRetentionAwards 15 - 10 - - 25Other (e) 3 - - - (3) -MinorityInterest - - - (1) - (1) ---------- ---------- ---------- ---------- ------------ --------- 61 - 10 29 (20) 80 ---------- ---------- ---------- ---------- ------------ --------- NetAdjustments 157 - 10 29 29 225 ---------- ---------- ---------- ---------- ------------ --------- OperatingIncome AsAdjusted $ 328 $ 37 $ 94 $ 78 $ (44) $ 493 ========== ========== ========== ========== ============ ========== OperatingIncome MarginAs 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 $134Net Adjustments $225Tax Effect 79 ------- 146 -------Net Income, As Adjusted 280Average Diluted Shares Outstanding 536 -------Earnings Per Share, As Adjusted $0.52 ======= NON-GAAP MEASURES: MMC believes that investors' understanding of its results andoperations is enhanced by the disclosure of additional non-GAAP financialinformation. A number of noteworthy items impacted operating income in 2005. MMCbelieves this schedule provides a concise analysis of the effects of theseitems. Nonetheless, it is pertinent to note that the amounts shown in thecaptions Operating Income As Adjusted and Operating Income Margin As Adjustedare 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 andoperations is enhanced by the disclosure of additional non-GAAP financialinformation. A number of noteworthy items impacted operating income in 2004. MMCbelieves this schedule provides aconcise analysis of the effects of these items.Nonetheless, it is pertinent to note that the amounts shown in the captionsOperating 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 revenueresulting from changes in business segments. Three Months Ended Year Ended -------------------------- March 31, June 30, Sept. 30, Dec. 31, Dec. 31, ---------- ---------- ---------- ---------- ----------Risk &InsuranceServicesAs Reported in2004 $1,994 $1,817 $1,774 $1,806 $7,391RiskConsulting (27) (28) (219) (236) (510) ---------- ---------- ---------- ---------- ---------- 1,967 1,789 1,555 1,570 6,881 ---------- ---------- ---------- ---------- ---------- RiskConsulting &TechnologyAs Reported in - - - - -2004RiskConsulting 26 26 218 235 505 ---------- ---------- ---------- ---------- ---------- 26 26 218 235 505 ---------- ---------- ---------- ---------- ---------- ConsultingHuman ResourceConsulting, AsReported in2004 541 548 537 518 2,144DefinedContributionAdministration 48 47 47 42 184 ---------- ---------- ---------- ---------- ---------- 589 595 584 560 2,328 ---------- ---------- ---------- ---------- ---------- SpecialtyConsulting, AsReported in2004 179 185 190 213 767Business RiskConsulting 1 2 1 1 5 ---------- ---------- ---------- ---------- ---------- 180 187 191 214 772 ---------- ---------- ---------- ---------- ---------- 769 782 775 774 3,100ReimbursedExpenses 35 40 39 45 159 ---------- ---------- ---------- ---------- ---------- 804 822 814 819 3,259 ---------- ---------- ---------- ---------- ---------- InvestmentManagementAs Reported in2004 461 446 429 421 1,757DefinedContributionAdministration (11) (12) (14) (10) (47) ---------- ---------- ---------- ---------- ---------- 450 434 415 411 1,710 ---------- ---------- ---------- ---------- ----------TotalOperatingSegments 3,247 3,071 3,002 3,035 12,355 CorporateEliminationsAs Reported in2004 (14) (8) (19) (18) (59)Impact ofDefinedContributionAdministration (37) (35) (33) (32) (137) ---------- ---------- ---------- ---------- ---------- (51) (43) (52) (50) (196) ---------- ---------- ---------- ---------- ----------Total $3,196 $3,028 $2,950 $2,985 $12,159Revenue ========== ========== ========== ========== ========== 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 thataffected MMC's reportable segments. The following changes are reflected in the2004 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 businesspreviously managed by Marsh. Services include: forensic accounting and litigationsupport; business continuity management; mass tort and complex liabilitymitigation; 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). Approximately75% of the revenues earned by Mercer Human Resources from this transferredbusiness are paid by Putnam. Putnam receives fees for investment management andadministrative services, which are recorded as revenue. A fee related toadministrative services is recorded as an expense by Putnam and as revenue byMercer Human Resources. The inter-company revenue and expense are eliminated inconsolidation. Corporate eliminations for 2004 reflect the additionalinter-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) ---------- ---------- ---------- ---------- ---------- OperatingIncomeIncluding 772 627 122 (888) 633Minority Interest Minority InterestExpense, Net of Tax,Included Above:Risk &InsuranceServices 3 4 5 3 15InvestmentManagement (2) 1 1 - - ---------- ---------- ---------- ---------- ---------- 1 5 6 3 15 ---------- ---------- ---------- ---------- ----------OperatingIncome $ 773 $ 632 $ 128 $ (885) $ 648 ========== ========== ========== ========== ========== Marsh & McLennan Companies, Inc. Consolidated Balance Sheet (Millions) (Unaudited) March 31, December 31, 2005 2004ASSETSCurrent assets :Cash and cash equivalents $ 910 $ 1,396Net receivables 3,024 2,890Other current assets 275 601 --------- ---------Total current assets 4,209 4,887 Goodwill and intangible assets 8,112 8,139 Fixed assets, net 1,319 1,387Long-term investments 375 558Prepaid pension 1,371 1,394Other assets 2,161 1,972 --------- --------- $17,547 $18,337 ========= =========LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Short-term debt $ 547 $ 636Accounts payable and accrued liabilities 1,793 1,834Regulatory settlements - current portion 311 394Accrued compensation and employee benefits 1,024 1,591Accrued income taxes 300 280Dividends payable 91 - --------- ---------Total current liabilities 4,066 4,735 Fiduciary liabilities 4,112 4,136Less - cash and investments held ina fiduciary capacity (4,112) (4,136) --------- --------- - -Long-term debt 4,689 4,691Regulatory settlements 595 595Pension, postretirement and postemployment benefits 1,347 1,333Other liabilities 1,822 1,927 Total stockholders' equity 5,028 5,056 --------- --------- $17,547 $18,337 ========= ========= This information is provided by RNS The company news service from the London Stock Exchange