MHM.L Regulatory News (MHM)

13 Feb 2007 12:11

Marsh & McLennan Co Inc13 February 2007 News Release Media Contact: Investor Contact:Rich Myers Mike BischoffEdelman for MMC MMC212 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 December31, 2006. Consolidated revenues in the fourth quarter were $3.1 billion, anincrease of 9 percent from 2005. Consolidated net income was $226 million, anincrease of over 500 percent from the fourth quarter of 2005, and earnings pershare grew to $.40 from $.06. Earnings per share from continuing operations roseto $.39 in the fourth quarter from $.03 last year. Full-year consolidated revenues were $11.9 billion, an increase of 3 percentfrom $11.6 billion in 2005. Consolidated net income was $990 million, or $1.76per share, compared with $404 million, or $.74 per share, in 2005. Results fromdiscontinued operations, net of tax, were $172 million, or $.31 per share,resulting primarily from MMC's sale of its investment in Sedgwick ClaimsManagement in early 2006. Results from discontinued operations in 2005 were $37million, 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 adoptedSFAS No. 123(R), "Share-Based Payment," on July 1, 2005. A number of noteworthy items affected financial results, including restructuringcosts and credits; legal and regulatory costs primarily related to marketservice agreements; and other items indicated in the attached supplementalinformation. In the fourth quarter of 2006, noteworthy items were a credit of $5million, including the realized gain of $74 million on the sale of five floorsin MMC's corporate headquarters, while noteworthy items in 2005 reduced earningsper share from continuing operations by $.18. For the full year, noteworthyitems reduced earnings per share by $.19 in 2006, compared with $.76 in 2005. "MMC had another good quarter, reporting its strongest revenue growth in threeyears," 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 thefourth quarter, including improved revenue trends and increased profitability.Revenues from new business at Marsh were the highest they have been since thefirst half of 2004. In light of this, we are encouraged about Marsh's prospectsin 2007. Throughout the year, Guy Carpenter rose to the challenges of a complexreinsurance marketplace, producing increased revenues driven by double-digitgrowth in new business. Kroll's increased revenues in the quarter were driven bysolid results in its technology business. In the quarter, Mercer Human ResourceConsulting improved margins and produced strong revenue growth, and MercerSpecialty Consulting continued its exceptional performance, reportingdouble-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 allowus to concentrate on our market-leading risk and human capital businesses. Wehave reignited MMC's engines of growth, and we look forward to the future withconfidence," Mr. Cherkasky concluded. Risk and Insurance Services Risk and insurance services revenues in the fourth quarter increased 4 percentto $1.4 billion, or 5 percent on an underlying basis. Operating income more thandoubled to $127 million, compared with $62 million in the fourth quarter of 2005, reflectinggains from private equity investments, operating efficiencies, cost discipline,and restructuring efforts. Marsh's underlying revenues grew 3 percent, excluding the impact of marketservice revenues, the second consecutive quarter of revenue growth by thismeasure and the largest in over two years. Strong new business growth across allgeographies drove Marsh's performance. For the full year, new business increaseda robust 10 percent, with accelerating growth as the year progressed, including9 percent growth in the Americas. As reported, Marsh's revenues declined 1percent to $1.1 billion in the fourth quarter. Guy Carpenter's revenues increased 9 percent in the fourth quarter to $171million, or 8 percent on an underlying basis, driven by 13 percent growth in newbusiness. These results were achieved despite a reinsurance marketplace whereincreases in U.S. property catastrophe rates were mitigated by reducedreinsurance capacity and higher client risk retentions, and where rates in mostother 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 entirelydue to mark-to-market gains in private equity investments. Full-year revenueswere $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, or4 percent on an underlying basis. Kroll's technology enabled solutions businessproduced 17 percent growth in revenues, including double-digit growth inbackground screening and technology services. Kroll's profitability in thequarter increased significantly, due to revenue growth, expense control, and theearly termination of a licensing agreement. Results reflect the sale of Kroll'sinternational security business, which has been included in MMC's discontinuedoperations. Consulting Revenues for consulting increased 15 percent to $1.1 billion in the fourthquarter, 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 anunderlying basis. Mercer Human Resource Consulting increased revenues 12 percent to $769 millionin the fourth quarter, or 8 percent on an underlying basis. This strong growthwas driven by the retirement and investment business and the talent business.Full-year revenues increased 8 percent to $3 billion, or 7 percent on anunderlying basis. Mercer Specialty Consulting's revenues grew 23 percent to $341 million in thefourth quarter, or 15 percent on an underlying basis. Full-year revenuesincreased 19 percent to $1.2 billion, or 16 percent on an underlying basis. Eachof 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 quarterlast year. Ending assets on December 31, 2006 were $192 billion, comprising $124billion in mutual fund assets and $68 billion in institutional assets. Averageassets under management were $189 billion, compared with $188 billion in thefourth 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 adiscontinued 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 quarterand $640 million in the year, driven by strong operating cash flows. The companyincreased its quarterly dividend by 12 percent, from $.17 to $.19, payable inthe first quarter of 2007. During the fourth quarter, MMC made a discretionary contribution of itsinvestment position in Trident III of $182 million to its U.K. defined benefitsplans. Conference Call A conference call to discuss fourth quarter and year-end 2006 results will beheld 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 forboth numbers is 2424845. The audio webcast may be accessed at www.mmc.com. Areplay of the webcast will be available approximately two hours after the eventat 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 andinsurance services firm; Guy Carpenter, the world's leading risk and reinsurancespecialist; Kroll, the world's leading risk consulting company; Mercer, a majorglobal provider of human resource and specialty consulting services; and PutnamInvestments, one of the largest investment management companies in the UnitedStates. Approximately 55,000 employees provide analysis, advice, andtransactional capabilities to clients in over 100 countries. Its stock (tickersymbol: 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 thePrivate Securities Litigation Reform Act of 1995. These statements, whichexpress management's current views concerning future events or results, usewords like "anticipate," "assume," "believe," "continue," "estimate," "expect,""intend," "plan," "project" and similar terms, and future or conditional tenseverbs like "could," "should," "will" and "would." For example, we may useforward-looking statements when addressing topics such as: the impact ofacquisitions and dispositions; future actions by our management or regulators;the outcome of contingencies; changes in our business strategy; changes in ourbusiness practices and methods of generating revenue; the development andperformance of our services and products; market and industry conditions,including competitive and pricing trends; changes in the composition or level ofMMC's revenues; our cost structure and the outcome of restructuring and othercost-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 thoseexpressed 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 subsidiariesoperate in a dynamic business environment in which new risks may emergefrequently. Accordingly, MMC cautions readers not to place undue reliance on itsforward-looking statements, which speak only as of the dates on which they aremade. MMC undertakes no obligation to update or revise any forward-looking statementto reflect events or circumstances arising after the date on which it is made.Further information concerning MMC and its businesses, including informationabout factors that could materially affect our results of operations andfinancial condition, is contained in MMC's filings with the Securities andExchange 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 $11,395Investment 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 6,897Other 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 andMinority Interest Expense 344 51 1,219 568 Income Taxes 117 30 388 191 Minority Interest Expense, Netof Tax 4 4 13 10 ------- ------- ------- -------- Income from Continuing 223 17 818 367Operations Discontinued Operations, Net ofTax 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 SharesOutstanding - 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 InsuranceServicesInsuranceServices $1,129 $ 1,135 (1)% 2% (3)% -ReinsuranceServices 171 155 9% 1% - 8%Risk CapitalHoldings 74 27 174% - - 174% ------- ------Total Risk andInsuranceServices 1,374 1,317 4% 2% (3)% 5% ------- ------ Risk Consulting &Technology 241 215 12% 3% 5% 4% ------- ------ ConsultingHuman ResourceConsulting 769 690 12% 4% - 8%SpecialtyConsulting 341 276 23% 3% 5% 15% ------- ------Total Consulting 1,110 966 15% 3% 2% 10% ------- ------ InvestmentManagement 359 360 - - - - ------- ------ Total OperatingSegments 3,084 2,858 8% 2% - 6% CorporateEliminations (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 InsuranceServicesInsuranceServices $4,390 $4,567 (4)% - (2)% (2)%ReinsuranceServices 880 836 5% - - 5%Risk CapitalHoldings 193 189 2% - (5)% 7% ------- ------Total Risk andInsuranceServices 5,463 5,592 (2)% - (2)% - ------- ------ Risk Consulting &Technology 979 872 12% - 3% 9% ------- ------ ConsultingHuman ResourceConsulting 3,021 2,794 8% 1% - 7%SpecialtyConsulting 1,204 1,008 19% 1% 2% 16% ------- ------Total Consulting 4,225 3,802 11% 1% 1% 9% ------- ------ InvestmentManagement 1,385 1,506 (8)% - - (8)% ------- ------ Total OperatingSegments 12,052 11,772 2% - - 2% CorporateEliminations (131) (194) ------- ------ Total Revenue $11,921 $11,578 3% - - 3% ======= ====== NotesUnderlying revenue measures the change in revenue, before the impact ofacquisitions and dispositions, using consistent currency exchange rates. Interest income on fiduciary funds amounted to $45 and $37 million for the threemonths ended December 31, 2006 and 2005, respectively and $180 and $151 millionfor the twelve months ended December 31, 2006 and 2005, respectively. Revenue includes net investment income (loss) of $72 and $29 million for Riskand Insurance Services and $9 and $(2) million for Investment Management for thethree months ended December 31, 2006 and 2005, respectively. Net investmentincome (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 forthe twelve months ended December 31, 2006 and 2005, respectively. Risk Capital Holdings owns investments in private equity funds and insurance andfinancial services firms. Effective January 1, 2007, Risk Consulting and Technology transferred toInsurance Services certain businesses which had revenue of approximately $25million in 2006. Insurance Services revenue includes market service revenue of $0 and $29 millionfor the three months ended December 31, 2006 and 2005, respectively and $43million 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 $5,592Risk Consulting & Technology 241 215 979 872Consulting 1,110 966 4,225 3,802Investment Management 359 360 1,385 1,506 ------- -------- ------- ------- 3,084 2,858 12,052 11,772Corporate/Eliminations (21) (47) (131) (194) ------- -------- ------- ------- $3,063 $2,811 $11,921 $11,578 ------- -------- ------- -------Operating Income (Loss):Risk and Insurance Services $ 127 $ 62 $ 677 $ 305Risk Consulting & Technology 45 16 149 121Consulting 117 94 466 451Investment Management 86 59 303 263Corporate 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 OperatingMargin 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 InterestAssociated with the PutnamEquity Partnership Plan Net ofDividend EquivalentExpense Related to MMCCommon 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-monthfinancial results is affected by a number of noteworthy items and stock optionexpense. The following table identifies the impact of noteworthy items onoperating income for the periods indicated. Risk & Risk Insurance Consulting & Investment Services Technology Consulting Management Corporate Total ---------------------------------------------------------------------------- Three Months EndedDecember 31, 2006 Restructuring Charges (a) $ 37 $ - $ 10 $ - $ (72) $ (25)Accelerated Amortization/ 5 - - - 4 9DepreciationSettlement, Legal and 11 - - - - 11Regulatory (b) ---------------------------------------------------------------------------- Total Impact in 2006 $ 53 $ - $ 10 $ - $ (68) $ (5) ---------------------------------------------------------------------------- Three Months EndedDecember 31, 2005 Restructuring Charges (a) $ 62 $ - $ 1 $ - $ 4 $ 67Employee Retention Awards (10) - 7 - - (3)Settlement, Legal and 19 - - 10 28 57Regulatory (b)Other 1 - - - 11 12 ---------------------------------------------------------------------------- Total Impact in 2005 $ 72 $ - $ 8 $ 10 $ 43 $ 133 ---------------------------------------------------------------------------- Twelve Months EndedDecember 31, 2006 Restructuring Charges (a) $ 100 $ 1 $ 27 $ - $ (41) $ 87Accelerated Amortization/ 28 - - - 10 38DepreciationSettlement, Legal and 43 - - (7) - 36Regulatory (b) ---------------------------------------------------------------------------- Total Impact in 2006 $ 171 $ 1 $ 27 $ (7) $ (31) $ 161 ---------------------------------------------------------------------------- Twelve Months EndedDecember 31, 2005 Restructuring Charges (a) $ 257 $ - $ 1 $ - $ 59 $ 317Employee Retention Awards 78 - 37 - - 115Settlement, Legal and 88 - - (2) 4 90Regulatory (b)Estimated Mutual Fund - - - 35 - 35Reimbursement (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 andother costs for real estate resulting from cost reduction initiatives and thegain on the sale of certain floors in MMC's headquarters building (see MMC'sForm 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 feesand settlement costs arising out of: the civil complaint relating to marketservice agreements and other issues filed against MMC and Marsh by the New YorkState Attorney General in October 2004 and settled in January 2005; and market-timing and other issues at Putnam. Regulatory expenses in Risk and InsuranceServices include fees for professional services provided by other MMC companies;the resulting inter-company balances are eliminated in Corporate. The creditsfor Investment Management represent insurance recoveries relating to previouslyexpensed legal fees. (c) Reflects costs to address issues relating to the calculation of certainamounts paid by the Putnam mutual funds in previous years. The previous paymentswere cost reimbursements by the Putnam mutual funds to Putnam for transferagency services related to defined contribution operations. Interest Expense. A noteworthy item affecting 2005 net income was the $34million prepayment penalty related to a mortgage refinancing of MMC'sheadquarters building in New York, recorded as interest expense. Stock Option Expense. The year-over-year comparability of MMC's fourth quarterand twelve-month financial results is affected by MMC's adoption, effective July1, 2005, of SFAS 123(R) ("Share Based Payment"). Stock option expense for thethree months ended December 31, 2006 was $23 million: Risk and InsuranceServices - $9 million, Risk Consulting & Technology - $0 million, Consulting -$9 million, Investment Management - $3 million, Corporate - $2 million. Stockoption expense for the twelve months ended December 31, 2006 was $116 million:Risk and Insurance Services - $47 million, Risk Consulting & Technology - $2million, Consulting - $41 million, Investment Management - $14 million,Corporate - $12 million. A charge of $33 million and $64 million for the quarterand twelve months ended December 31, 2005, respectively, is reflected inCorporate results. Impact on Operating Income and Margins in Risk and Insurance Services. In Riskand Insurance Services, noteworthy items and stock option expense togethertotaled $218 million for the twelve months of 2006, affecting segment operatingmargin by 4 percentage points. Noteworthy items totaled $435 million for twelvemonths of 2005, affecting segment operating margin by 7.7 percentage points.Adjusting for these impacts, the segment's adjusted operating income was $895million and adjusted operating margin was 16.4 percent for the twelve months of2006, compared to adjusted operating income of $740 million and an adjustedoperating margin of 13.2 percent for the twelve months of 2005. The adjustedoperating income and adjusted segment operating margin are non-GAAP financialmeasures within the meaning of Regulation G promulgated by the Securities andExchange Commission. MMC believes that presenting these measures may helpinvestors and others understand aspects of Risk and Insurance Services operatingperformance that may not be apparent from MMC's reported GAAP results. However,non-GAAP financial measures are not a substitute for MMC's reported GAAPinformation, and may not be comparable to similar information provided byindustry 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 $ 31Value Equity 37 36 36 37 37Blend Equity 28 26 26 27 26Fixed Income 33 30 30 31 32 -------- -------- -------- -------- -------Total MutualFund Assets 124 118 119 126 126 -------- -------- -------- -------- ------- Institutional:Equity 36 34 32 34 34Fixed Income 32 30 29 29 29 -------- -------- -------- -------- -------TotalInstitutionalAssets 68 64 61 63 63 -------- -------- -------- -------- -------Total EndingAssets $192 $182 $180 $189 $189 ======== ======== ======== ======== ======= The asset information aboveincludes the following: Assets fromNon-USInvestors $ 36 $ 34 $ 31 $ 32 $ 32 ======== ======== ======== ======== =======Assets inPrime MoneyMarket Funds $ 4.3 $ .5 $ .6 $ .2 $ .5 ======== ======== ======== ======== ======= Average AssetsUnder Management:Quarter $189 $179 $185 $190 $188 ======== ======== ======== ======== =======Year-to-Date $186 $185 $188 $190 $196 ======== ======== ======== ======== ======= Net Flows includingDividendsReinvested: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 onEndingAssets UnderManagement $ 9.9 $ 5.5 $ (3.5) $ 7.0 $ 2.8 ======== ======== ======== ======== ======= * Net redemptions in the quarter ended June 30, 2006 include $2.8 billion ofredemptions in institutional equity resulting from ending Putnam's alliance withan Australian partner. Categories of mutual fund assets reflect style designations aligned withPutnam's various prospectuses. All quarter-end assets conform with the currentinvestment 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 $ 2,020Net receivables 3,008 2,730Assets of discontinued operations - 153Other current assets 737 359 ----------- ---------- Total current assets 5,834 5,262 Goodwill and intangible assets 7,775 7,773Fixed assets, net 1,043 1,178Long-term investments 597 277Pension related asset 613 1,596Other assets 2,275 1,806 ----------- ----------TOTAL ASSETS $18,137 $17,892 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:Short-term debt $ 1,111 $ 498Accounts payable and accrued liabilities 2,477 1,733Regulatory settlements-current portion 238 333Accrued compensation and employee benefits 1,507 1,413Liabilities of discontinued operations - 89Accrued income taxes 216 192Dividends payable - 93 ----------- ---------- Total current liabilities 5,549 4,351 Fiduciary liabilities 3,704 3,795Less - cash and investments held in a fiduciarycapacity (3,704) (3,795) ----------- ---------- - -Long-term debt 3,860 5,044Regulatory settlements 173 348Pension, postretirement and postemploymentbenefits 1,089 1,180Other 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 toreflect 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 andInsuranceServicesInsuranceServices $ 1,146 $ 1,106 $ 1,009 $ 1,129 $ 4,390ReinsuranceServices 281 214 214 171 880Risk CapitalHoldings 46 28 45 74 193 -------- -------- -------- -------- ---------Total RiskandInsurance 1,473 1,348 1,268 1,374 5,463Services -------- -------- -------- -------- --------- RiskConsulting &Technology 234 265 239 241 979 -------- -------- -------- -------- --------- ConsultingHumanResource 739 751 762 769 3,021ConsultingSpecialtyConsulting 262 297 304 341 1,204 -------- -------- -------- -------- ---------TotalConsulting 1,001 1,048 1,066 1,110 4,225 -------- -------- -------- -------- --------- InvestmentManagement 345 339 342 359 1,385 -------- -------- -------- -------- --------- TotalOperatingSegments 3,053 3,000 2,915 3,084 12,052 CorporateEliminations (37) (30) (43) (21) (131) -------- -------- -------- -------- --------- Total $ 3,016 $ 2,970 $ 2,872 $ 3,063 $ 11,921Revenue ======== ======== === ======== ======== ========= Three Months Ended Twelve Months Ended ---------------------------------------------------------------------------2005 March 31, June 30, Sept. 30, Dec. 31, Dec. 31, ---------------------------------------------------------------------------Risk andInsuranceServicesInsuranceServices $ 1,232 $ 1,172 $ 1,028 $ 1,135 $ 4,567ReinsuranceServices 282 192 207 155 836Risk CapitalHoldings 63 54 45 27 189 -------- -------- -------- -------- ---------Total Risk andInsuranceServices 1,577 1,418 1,280 1,317 5,592 -------- -------- -------- -------- --------- RiskConsulting &Technology 216 219 222 215 872 -------- -------- -------- -------- --------- ConsultingHuman ResourceConsulting 695 718 691 690 2,794SpecialtyConsulting 229 254 249 276 1,008 -------- -------- -------- -------- ---------TotalConsulting 924 972 940 966 3,802 -------- -------- -------- -------- --------- InvestmentManagement 398 377 371 360 1,506 -------- -------- -------- -------- --------- TotalOperatingSegments 3,115 2,986 2,813 2,858 11,772 CorporateEliminations (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 toreflect 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, ---------------------------------------------------------------------------OperatingIncome(Loss):Risk andInsuranceServices $ 268 $ 139 $ 143 $ 127 $ 677RiskConsulting &Technology 24 42 38 45 149Consulting 113 124 112 117 466InvestmentManagement 64 76 77 86 303Corporate (68) (42) (49) 22 (137) -------- -------- -------- -------- --------- 401 339 321 397 1,458 -------- -------- -------- -------- --------- Interest 16 13 16 19 64Income InterestExpense (78) (78) (75) (72) (303) -------- -------- -------- -------- --------- IncomeBeforeIncome TaxesandMinorityInterest,Net 339 274 262 344 1,219of Tax Income Taxes 96 97 78 117 388 MinorityInterestExpense, Netof Tax 2 3 4 4 13 -------- -------- -------- -------- --------- Income FromContinuingOperations 241 174 180 223 818 DiscontinuedOperations,Net of Tax 175 (2) (4) 3 172 -------- -------- -------- -------- --------- Net Income $ 416 $ 172 $ 176 $ 226 $ 990 ======== ======== ======== ======== =========Basic IncomePer Share - $ 0.44 $ 0.32 $ 0.33 $ 0.41 $1.49ContinuingOperations ======== ======== ======== ======== =========DilutedIncome $ 0.43 $ 0.31 $ 0.32 $ 0.39 $1.45Per Share -ContinuingOperations ======== ======== ======== ======== ========= Three Months Ended Twelve Months Ended --------------------------------------------------------------------------2005 March 31, June 30, Sept. 30, Dec. 31, Dec. 31, --------------------------------------------------------------------------OperatingIncome(Loss):Risk andInsuranceServices $ 137 $ 86 $ 20 $ 62 $ 305RiskConsulting &Technology 37 34 34 16 121Consulting 110 130 117 94 451InvestmentManagement 50 71 83 59 263Corporate (73) (30) (69) (115) (287) -------- -------- -------- -------- --------- 261 291 185 116 853 -------- -------- -------- -------- --------- Interest 9 11 13 14 47Income InterestExpense (69) (73) (111) (79) (332) -------- -------- -------- -------- --------- IncomeBeforeIncome TaxesandMinorityInterest,Net 201 229 87 51 568of Tax Income Taxes 70 68 23 30 191 MinorityInterestExpense, Netof Tax 2 2 2 4 10 -------- -------- -------- -------- --------- Income FromContinuingOperations 129 159 62 17 367 DiscontinuedOperations,Net of Tax 5 7 7 18 37 -------- -------- -------- -------- --------- Net Income $ 134 $ 166 $ 69 $ 35 $ 404 ======== ======== ======== ======== =========Basic IncomePer Share - $ 0.24 $ 0.30 $ 0.11 $ 0.03 $ 0.68ContinuingOperations ======== ======== ======== ======== =========DilutedIncome $ 0.24 $ 0.29 $ 0.11 $ 0.03 $ 0.67Per Share -ContinuingOperations ======== ======== ======== ======== ========= This information is provided by RNS The company news service from the London Stock Exchange