SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
MARSH & MCLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
(212) 345-5000
COMMISSION FILE NUMBER 1-5998
STATE OF INCORPORATION: DELAWARE
I.R.S. EMPLOYER IDENTIFICATION NO. 36-2668272
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock New York Stock Exchange
(par value $1.00 per share) Chicago Stock Exchange
Preferred Stock Purchase Rights Pacific Exchange
London Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/. No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /
As of February 26, 1999, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $17,772,000,000.
As of February 26, 1999, there were outstanding 257,382,716 shares of common stock, par value $1.00 per share, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
(ONLY TO THE EXTENT SET FORTH IN THE PART INDICATED)
Parts I, II and
Annual Report to Stockholders for the year ended December 31, 1998........ IV
Notice of Annual Meeting of Stockholders and Proxy Statement dated
March 29, 1999.......................................................... Part III
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MARSH & MCLENNAN COMPANIES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
PART I
ITEM 1. BUSINESS.
Marsh & McLennan Companies, Inc. ("MMC"), a professional services organization with origins dating from 1871 in the United States, is a holding company which, through its subsidiaries and affiliates, provides clients with analysis, advice and transactional capabilities in the fields of risk and insurance services, investment management and consulting. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 27 through 35 of the Annual Report to Stockholders for the year ended December 31, 1998 (the "1998 Annual Report"), which is incorporated herein by reference, for a discussion of MMC's revenues and operating income by industry segment for each of the last three fiscal years.
On September 4, 1998, MMC commenced a cash tender offer to acquire all of the capital stock of Sedgwick Group plc ("Sedgwick") for a total cash consideration of approximately $2.2 billion. The offer was declared unconditional on November 3, 1998 and the compulsory acquisition of all previously untendered Sedgwick shares was completed in February 1999. Sedgwick, through its subsidiaries and affiliates, was one of the world's leading insurance, reinsurance and consulting groups. It is anticipated that during 1999 the risk and insurance services business of Sedgwick will be combined with J&H Marsh & McLennan and the employee benefits consulting business of Sedgwick Noble Lowndes will be combined with that of William M. Mercer Companies LLC.
RISK AND INSURANCE SERVICES. MMC's risk and insurance services are provided by its subsidiaries and their affiliates on a worldwide basis, as broker, agent or consultant for insureds, insurance underwriters and other brokers. These services are provided by Marsh Inc. through its subsidiaries and affiliates which include J&H Marsh & McLennan, Inc. and Sedgwick, each providing risk management and insurance broking services, Guy Carpenter & Company, Inc., a reinsurance intermediary, and Seabury & Smith, Inc., an insurance program manager. In addition, Marsh & McLennan Capital, Inc. provides services principally in connection with originating, structuring and managing insurance and related industry investments.
MARSH INC. Marsh Inc., formed in connection with the planned integration of J&H Marsh & McLennan, Inc. and Sedgwick, is a world leader in providing risk management and insurance broking services. These services, carried on throughout the world, are provided for a predominantly corporate clientele located in more than 100 countries, primarily in North and South America, Europe and Asia Pacific. Client companies are engaged in a broad range of commercial activities, including general industries, financial and professional services, aviation, marine, energy, construction, land transportation, healthcare and utility concerns. Clients also include professional, institutional and public entities and individuals.
Such risk management and insurance broking services relate to various types of property and liability loss exposures, including large and complex risks that require access to world insurance markets. Services provided to clients include insurance broking and risk transfer activities and professional counseling services on risk management issues, including risk analysis, coverage requirements, self-insurance (in which the insured retains a portion of its insurance risks), and alternative insurance and risk financing methods, as well as claims collection, injury management, loss prevention and other insurance related services. Services also include organization and administrative services for special purpose insurance companies and other risk assumption alternatives. Insurance placement services include the placement of insurance coverages with insurers worldwide, sometimes involving other intermediaries. Correspondent relationships are maintained with unaffiliated firms in certain countries.
Reinsurance broking services are provided to insurance and reinsurance risk takers worldwide, principally by Guy Carpenter & Company, Inc. and its subsidiaries and affiliates, from offices principally in North America and Europe. Such services primarily involve acting as an intermediary for insurance and reinsurance organizations on all classes of reinsurance, including specialty lines such as professional liability, medical malpractice, accident, life and health. The intermediary assists the insurer by providing advice, placing reinsurance coverage with reinsurance organizations located around the world, placing risk-transfer financing with capital markets, and furnishing related services such as actuarial, financial and regulatory consulting, portfolio analysis and catastrophe modeling. Claims services are often performed for policies placed a number of years ago. The insurance company may seek reinsurance or other risk-transfer financing on all or a portion of the risks it insures. Intermediary services are also provided to reinsurance companies, which may also seek reinsurance on the risks they have reinsured.
Seabury & Smith, Inc. and its subsidiaries and affiliates provide insurance program management services (including the design, placement and administration of life, health, accident, disability, automobile, homeowners, professional liability and other insurance, and related products) primarily on a group marketing basis to individuals, businesses and their employees, and associations and other affinity groups (both sponsored and non-sponsored) and their members, principally in the United States and Canada. It provides underwriting management services to insurers in the United States, Canada and the United Kingdom, primarily for professional liability coverages and wholesale broking services in the United States and the United Kingdom for a broad range of products.
As part of the acquisition of Sedgwick, MMC acquired several insurance companies that were in run-off and a Lloyd's members' agency.
MARSH & MCLENNAN CAPITAL, INC. Marsh & McLennan Capital, Inc. ("MMCAP") provides services in connection with originating, structuring and managing insurance and related industry investments. It is an advisor to The Trident Partnership L.P., an independent private investment partnership formed in 1993 to make private equity investments in the global insurance and reinsurance industry. MMCAP is also an advisor to Risk Capital Reinsurance Company, which was formed in 1995 to provide reinsurance, both on a stand-alone basis and as part of integrated capital solutions for insurance companies. MMCAP and its predecessor operations were instrumental in the formation of several substantial insurance and reinsurance entities, including A.C.E. Insurance Company, Ltd., X.L. Insurance Company, Ltd., and Risk Capital Reinsurance Company. MMCAP also advises its immediate parent company, Marsh & McLennan Risk Capital Holdings, Ltd., regarding the latter's ownership holdings in certain insurance and reinsurance entities and funds, primarily ones initiated by MMCAP. As a result of the foregoing activities, subsidiaries and affiliates of MMC may have direct or indirect investments in insurance and reinsurance companies, including entities at Lloyd's, which are considered for client placements by MMC's insurance and reinsurance brokerage businesses.
COMPENSATION FOR SERVICES. The revenue attributable to MMC's risk and insurance services consists primarily of fees paid by clients; commissions and fees paid by insurance and reinsurance companies; interest income on funds held in a fiduciary capacity for others, such as premiums and claims proceeds; placement services revenues or contingent fees earned from insurers; and compensation for services provided in connection with the organization, structuring and management of insurance and related industry investments, including fees and dividends, as well as appreciation that has been realized on sales of holdings in such entities.
Revenue generated by risk and insurance services is fundamentally derived from the value of the service provided to clients and insurance markets, and is affected by premium rate levels in the property and casualty insurance markets and available insurance capacity, because compensation is frequently related to the premiums paid by insureds. In many cases compensation may be negotiated in advance based upon the estimated value of the services to be performed. Revenue is also affected by fluctuations in the amount of risk retained by insurance and reinsurance clients themselves and by insured values, the
development of new products, markets and services, new and lost business, merging of clients (including insurance companies that are clients in the reinsurance intermediary business) and the volume of business from new and existing clients, as well as by interest rates for fiduciary funds.
Revenue and fees also may be received from originating, structuring and managing investments in insurers and related industry investments, and income and proceeds also may be derived from investments made by MMC. Placement services revenue and contingent fees includes payments or allowances by insurance companies based upon such factors as the overall volume of business placed by the broker with that insurer, the aggregate commissions paid by the insurer for that business during specific periods, or the loss performance to the insurer of that business.
Revenues vary from quarter to quarter as a result of the timing of policy renewals, the net effect of new and lost business production and realizing on investments, whereas expenses tend to be more uniform throughout the year.
Commission rates vary in amount depending upon the type of insurance or reinsurance coverage provided, the particular insurer or reinsurer, and the capacity in which the broker acts, in addition to negotiations with clients. In some cases, compensation for brokerage or advisory services is paid directly as a fee by the client. Occasionally, commissions are shared with other brokers that have participated in placing insurance or servicing insureds.
The investment of fiduciary funds is governed by the applicable laws or regulations of insurance authorities of the states in the United States and in other jurisdictions in which MMC's subsidiaries do business. These laws and regulations typically limit the type of investments that may be made with such funds. The general amount of funds invested and interest rates vary from time to time.
INVESTMENT MANAGEMENT. Investment management and related services are provided by Putnam Investments, Inc. and its subsidiaries ("Putnam"). Putnam has been engaged in the investment management business since 1937, with its principal offices in Boston, Massachusetts. Putnam also has offices in London and Tokyo. Putnam provides individual and institutional investors with a broad range of equity and fixed income investment products and services designed to meet varying investment objectives and which afford its clients the opportunity to allocate their investment resources among various alternative investment products as changing worldwide economic and market conditions warrant.
INVESTMENT MANAGEMENT SERVICES. Putnam's investment management services, which are performed principally in the United States, include securities investment advisory and management services consisting of investment research and management, and accounting and related services for a group of publicly-held investment companies. As of December 31, 1998, there were 113 such funds (the "Putnam Funds") registered under the Investment Company Act of 1940, including 16 closed-end investment companies whose shares are traded on various major domestic stock exchanges. A number of the open-end funds serve as funding vehicles for variable insurance contracts. Investment management services are also provided to corporate profit sharing and pension funds, state and other governmental and public employee retirement funds, university endowment funds, charitable foundations, collective investment vehicles (both U.S. and non-U.S.) and other domestic and foreign institutional accounts.
Substantially all of Putnam's assets under management are derived from U.S. individuals and institutions. In recent years Putnam has been expanding its international client base on a selective basis through joint ventures and the development of products such as offshore funds. Many international markets are well developed with many established investment management firms. It may be difficult for Putnam to establish businesses whose profitability equals that of its business in the U.S. where it is one of the market leaders. Putnam seeks to manage the risks of international expansion by using joint ventures with established firms in selected countries and otherwise carefully choosing which markets to enter.
Assets managed by Putnam, on which management fees are based, were approximately $294.4 billion and $235.1 billion as of December 31, 1998 and 1997, respectively. Mutual fund assets aggregated
$221.5 billion at December 31, 1998 and $182.0 billion at December 31, 1997. Assets under management at December 31, 1998 consisted of approximately 73% equity securities and 27% fixed income products, invested both domestically and globally.
Putnam's revenues are derived primarily from its investment management fees received from the Putnam Funds and institutional accounts. Assets under management and revenue levels are particularly affected by fluctuations in domestic and international bond and stock market prices, and by the level of investments and withdrawals for current and new fund shareholders and clients. They are also affected by investment performance, service to clients, the development and marketing of new investment products, the relative attractiveness of the investment style under prevailing market conditions and changes in the investment patterns of clients. Fluctuations in the prices of stocks will have an effect on equity assets under management and may influence the flow of monies to and from equity funds and accounts. Fluctuations in interest rates and in the yield curve have a similar effect on fixed income assets under management and may influence the flow of monies to and from fixed-income funds and accounts. Putnam offers investment products that allow investors to diversify between stocks and bonds, domestically and internationally.
The investment management services provided to the Putnam Funds and institutional accounts are performed pursuant to advisory contracts which provide for a fee payable to the Putnam company that manages the account. The amount of the fee varies depending on the individual mutual fund or account and is usually based upon a sliding scale in relation to the level of assets under management and, in certain instances, is also based on investment performance. Such contracts automatically terminate in the event of their "assignment", generally may be terminated by either party without penalty and, as to contracts with the Putnam Funds, continue in effect only so long as approved, at least annually, by their shareholders or by the Putnam Funds' trustees, including a majority who are not affiliated with Putnam. "Assignment" includes any direct or indirect transfer of a controlling block of voting stock in Putnam or MMC. The management of Putnam and the trustees of the funds regularly review the fund fee structure in light of fund performance, the level and range of services provided, industry conditions and other relevant factors.
In recent years U.S. securities markets, especially equity markets, have risen substantially, in many cases to historical highs. This increase has contributed significantly to the assets under management and, accordingly, to increases in revenues. A substantial slowdown in the rise of markets or an actual decrease in general market levels will reduce revenue growth or, in some circumstances, could lead to a decline in revenue.
PUTNAM FIDUCIARY TRUST COMPANY. A Putnam subsidiary, Putnam Fiduciary Trust Company, a Massachusetts trust company, serves as transfer agent, dividend disbursing agent, registrar and custodian for the Putnam Funds and provides custody services to several external clients. Putnam Fiduciary Trust Company receives compensation from the Putnam Funds for such services pursuant to written agreements which may be terminated by either party on 90 days' notice, and for providing custody services pursuant to written agreements which may be terminated by either party on 30 days' notice. These contracts generally provide for compensation on the basis of several factors which vary with the type of service being provided. In addition, Putnam Fiduciary Trust Company provides administrative and trustee (or custodian) services for employee benefit plans (in particular 401(k) plans), IRA's and other clients for which it receives compensation pursuant to service and trust or custodian contracts. In the case of employee benefit plans, investment options are usually selected by the plan sponsors and may include Putnam mutual funds and other Putnam managed products, as well as employer stock and other non-Putnam investments.
PUTNAM MUTUAL FUNDS CORP. Putnam Mutual Funds Corp., a Putnam subsidiary, acts as principal underwriter of the shares of the open-end Putnam Funds, selling primarily through independent broker/ dealers, financial planners and financial institutions, including banks, and directly to certain large 401(k) plans and other institutional accounts. Shares of the open-end funds are generally sold at their respective net asset value per share plus a sales charge, which varies depending on the individual fund and the amount purchased. In some cases the sales charge is assessed only if the shares are redeemed within a
stated time period. In accordance with certain terms and conditions described in the prospectuses for such funds, certain investors are eligible to purchase shares at net asset value or at reduced sales charges, and investors may generally exchange their shares of a fund at net asset value for shares of another Putnam Fund without the payment of additional sales charges.
Commissions to selling dealers are typically paid at the time of the purchase as a percentage of the amount invested. Essentially all Putnam Funds are available with a contingent deferred sales charge in lieu of a front-end load. The related prepaid dealer commissions initially paid by Putnam to broker/dealers for distributing such funds are recovered through charges and fees received over a number of years.
Nearly all of the open-end Putnam Funds have adopted distribution plans pursuant to Rule 12b-1 under the Investment Company Act of 1940 under which the Putnam Funds make payments to Putnam Mutual Funds Corp., a Putnam subsidiary, to cover costs relating to distribution of the Putnam Funds and services provided to shareholders. These payments enable the Putnam subsidiary to pay service fees and other continuing compensation to firms that provide services to Putnam Fund shareholders and distribute shares of the Putnam Funds. Some Rule 12b-1 fees are retained by the Putnam Mutual Funds Corp. as compensation for the costs of distribution and other services provided by Putnam to shareholders and for commissions advanced by Putnam at the point of sale (and recovered through fees received over time) to firms that distribute shares of the Putnam Funds. These distribution plans, and payments made by the Putnam Funds thereunder, are subject to annual renewal by the trustees of the Putnam Funds and to termination by vote of the shareholders of the Putnam Funds or by vote of a majority of the Putnam Funds' trustees who are not affiliated with Putnam. Failure of the Trustees to approve continuation of the Rule 12b-1 plans for Class B (deferred sales charge) shares would have a material adverse effect on Putnam. The Trustees also have the ability to reduce the level of 12b-1 fees paid by a fund or to make other changes that would reduce the amount of 12b-1 fees received by Putnam. Such changes could have a material adverse effect on Putnam.
Putnam provides investor services through three separate facilities in the Boston area and has one of the largest image processing facilities in the world.
CONSULTING. Through Mercer Consulting Group, Inc., subsidiaries and affiliates of MMC, separately and in collaboration, provide consulting services to a predominantly corporate clientele from locations around the world, in the areas of human resources and employee benefit programs, including retirement, health care and compensation; and general management consulting, which comprises strategy, operations and marketing. Mercer Consulting Group, Inc. also provides economic consulting and analysis.
William M. Mercer Companies LLC ("William M. Mercer"), through its subsidiaries and affiliates including Sedgwick Noble Lowndes, provides professional advice and services to corporate, government and institutional clients from offices in more than 30 countries and territories, primarily in North and South America, Western Europe, Asia, Australia and New Zealand. Consultants help organizations design, implement, administer and communicate retirement, compensation and other human resource programs, and provide other types of actuarial advice. In addition, William M. Mercer advises the management of health care providers on various business issues. Through its investment consultants, the firm assists trustees of pension funds and others in the selection of investment managers and investment strategies. William M. Mercer also advises investment managers on fund design and positioning. In certain locations outside the United States, William M. Mercer advises individuals in the investment and disposition of lump sum retirement benefits and other retirement savings and provides related trustee services.
Mercer Management Consulting, Inc. provides advice and assistance on issues of business strategy, primarily to large corporations in North America, Europe and Asia. Consultants help senior executives more fully understand the behavior of their customers, optimize the economics of their business, and structure their organizations, processes and systems to achieve their strategic goals. In addition, under the Lippincott & Margulies name, Mercer Management Consulting, Inc. advises leading corporations on issues relating to brand, corporate identity and image.
National Economic Research Associates, Inc. ("NERA"), a firm of consulting economists, serves law firms, corporations, trade associations and governmental agencies, from offices in the United States, Australia, England and Spain. NERA provides research and analysis of economic and financial issues arising in litigation, regulation, public policy and management.
The major component of Mercer Consulting Group's revenue is fees paid by clients for advice and services. In addition, commission revenue is received from insurance companies for the placement of individual and group insurance contracts, primarily life, health and accident coverages. A relatively small amount of revenue is derived from brokerage commissions in connection with a registered securities broker dealer.
Revenue in the consulting business is fundamentally derived from the value of the advice and services provided to clients. It is affected by changes in clients' industries, including government regulation, as well as new products and services, the stage of the economic cycle and broad trends in employee demographics and in the management of large organizations.
REGULATION. The activities of MMC are subject to licensing requirements and extensive regulation under the laws of the United States and its various states, territories and possessions, as well as laws of other countries in which MMC's subsidiaries operate. These laws and regulations are primarily intended to benefit clients.
MMC's three business segments depend on the validity of, and continued good standing under, the licenses and approvals pursuant to which they operate, as well as compliance with pertinent regulations. MMC therefore devotes significant effort toward maintaining its licenses and to ensuring compliance with a diverse and complex regulatory structure.
In all jurisdictions the applicable laws and regulations are subject to amendment or interpretation by regulatory authorities. Generally, such authorities are vested with relatively broad discretion to grant, renew and revoke licenses and approvals, and to implement regulations. Licenses may be denied or revoked for various reasons, including the violation of such regulations, conviction of crimes and the like. Possible sanctions which may be imposed include the suspension of individual employees, limitations on engaging in a particular business for specified periods of time, revocation of licenses, censures and fines. In some instances, MMC follows practices based on its interpretations, or those generally followed by the industry, of laws or regulations, which may prove to be different from those of regulatory authorities. Accordingly, the possibility exists that MMC may be precluded or temporarily suspended from carrying on some or all of its activities or otherwise fined or penalized in a given jurisdiction.
No assurances can be given that MMC's risk and insurance services, investment management or consulting activities can continue to be conducted in any given jurisdiction as in the past.
RISK AND INSURANCE SERVICES. While the laws and regulations vary among jurisdictions, every state of the United States and most foreign jurisdictions require an insurance broker or agent (and in some cases a reinsurance broker or intermediary) or insurance consultant, managing general agent or third party administrator to have an individual and/or company license from a governmental agency or self-regulatory organization. In addition, certain of MMC's risk and insurance activities are governed by the rules of the Lloyd's insurance market in London and self-regulatory organizations in the United Kingdom and in other jurisdictions, as well as securities and futures licensing authorities. A few jurisdictions issue licenses only to individual residents or locally-owned business entities. In some of these jurisdictions, if MMC has no licensed subsidiary, MMC may maintain arrangements with residents or business entities licensed to act in such jurisdiction. Also, in some jurisdictions, various insurance related taxes may also be due either by clients directly or from the broker. In the latter case, the broker customarily looks to the client for payment.
INVESTMENT MANAGEMENT. Putnam's securities investment management activities are subject to regulation in the United States by the Securities and Exchange Commission, and other federal, state and self regulatory authorities, as well as in certain other countries in which it does business. Putnam's officers, directors and employees may from time to time own securities which are also held by the Putnam Funds or institutional accounts. Putnam's internal policies with respect to individual investments require prior clearance and reporting of transactions and restrict certain transactions so as to reduce the possibility of conflicts of interest.
To the extent that existing or future regulations affecting the sale of Putnam fund shares or other investment products or their investment strategies, cause or contribute to reduced sales of Putnam fund shares or investment products or impair the investment performance of the Putnam Funds or such other investment products, Putnam's aggregate assets under management and its revenues might be adversely affected. Changes in regulations affecting the free movement of international currencies might also adversely affect Putnam.
CONSULTING. No licensing or other regulatory requirements are material to the consulting activities of MMC's subsidiaries in the aggregate nor apply to that activity in general; however, the subject matter of certain consulting services is subject to regulation. For example, employee benefit plans are subject to various governmental regulations, and services related to brokerage activities, trustee services, investment matters (including advice to individuals on the investment of personal pension assets) and the placing of individual and group insurance contracts subject MMC's subsidiaries to insurance, investment or securities regulations and licensing in various jurisdictions.
COMPETITIVE CONDITIONS. Principal methods of competition in risk and insurance services and consulting include the quality and types of services and products that a broker or consultant provides its clients and their cost. Putnam competes with other providers of investment products and services primarily on the basis of the range of investment products offered, the investment performance of such products, as well as the manner in which such products are distributed, and the scope and quality of the shareholder and other services provided. Sales of Putnam fund shares are also influenced by general securities market conditions, government regulations, global economic conditions and advertising and sales promotional efforts.
All these businesses also encounter strong competition from both public corporations and private firms in attracting and retaining qualified employees.
RISK AND INSURANCE SERVICES. The insurance and reinsurance broking services business of MMC is believed to be among the largest of its type in the world.
MMC encounters strong competition in the risk and insurance services business from other insurance brokerage firms which also operate on a nationwide or worldwide basis, from a large number of regional and local firms in the United States, the European Union and in other countries and regions, from insurance and reinsurance companies that market and service their insurance products without the assistance of brokers or agents and from other businesses, including commercial and investment banks, accounting firms and consultants that provide risk-related services and products.
Certain insureds and groups of insureds have established programs of self insurance (including captive insurance companies), as a supplement or alternative to third-party insurance, thereby reducing in some cases the need for insurance placements. There are also many other providers of insurance program management services, including many insurance companies, and many other organizations seeking to structure and manage investments in the insurance industry.
INVESTMENT MANAGEMENT. Putnam Investments is one of the largest investment management firms in the United States. The investment management business is highly competitive. In addition to competition from firms already in the investment management business, including commercial banks, stock brokerage
and investment banking firms, and insurance companies, there is competition from other firms offering financial services and other investment alternatives.
Many securities dealers, whose large retail distribution systems play an important role in the sale of shares in the Putnam Funds, also sponsor competing proprietary mutual funds. To the extent that such securities dealers value the ability to offer customers a broad selection of investment alternatives, they will continue to sell independent funds, notwithstanding the availability of proprietary products. However, to the extent that these firms limit or restrict the sale of Putnam fund shares through their brokerage systems in favor of their proprietary mutual funds, assets under management might decline and Putnam's revenues might be adversely affected. In addition, a number of mutual fund sponsors presently market their funds to the general public without sales charges. Certain firms also offer passively managed funds such as index funds to the general public.
CONSULTING. Mercer Consulting Group, one of the largest global consulting firms, is a leader in many of its businesses. William M. Mercer is the world's largest human resources consulting organization. Mercer Management Consulting is a leader in strategy consulting. NERA is a leading firm of consulting economists.
William M. Mercer, Mercer Management Consulting and NERA compete with other privately held and publicly held worldwide and national consulting companies, as well as regional and local firms. Competitors include independent consulting firms as well as consulting organizations affiliated with accounting firms, information systems providers, and financial services firms, some of which provide administrative or consulting services as an adjunct to other primary services.
SEGMENTATION OF ACTIVITY BY TYPE OF SERVICE AND GEOGRAPHIC AREA OF OPERATION. Financial information relating to the types of services provided by MMC and the geographic areas of its operations is incorporated herein by reference to Note 16 of the Notes to Consolidated Financial Statements on pages 53 and 54 of the 1998 Annual Report. MMC's non-U.S. operations are subject to the customary risks involved in doing business in other countries, including currency fluctuations and exchange controls.
EMPLOYEES. As of December 31, 1998, MMC and its consolidated subsidiaries employed about 54,300 people worldwide, of whom approximately 34,900 were employed by subsidiaries providing risk and insurance services, approximately 5,300 were employed by subsidiaries providing investment management services, approximately 13,700 were employed by subsidiaries providing consulting services, and approximately 400 were employed by MMC.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS. This report and MMC's financial statements and other documents incorporated herein by reference contain certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, discussions concerning revenue and expense growth, cost savings and efficiencies expected from the integration of Johnson & Higgins and Sedgwick Group plc, year 2000 remediation and testing of computer systems, market and industry conditions, interest rates, foreign exchange rates, contingencies and matters relating to MMC's operations and income taxes. Such forward-looking statements are based on available current market and industry materials, expert's reports and opinions, as well as management's expectations concerning future events impacting MMC. Forward looking statements by their very nature involve risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by any forward looking statements contained or incorporated herein include, in the case of MMC's risk and insurance services and consulting businesses, the failure to successfully integrate the business of Johnson & Higgins and Sedgwick Group plc (including the achievement of synergies and cost reductions) or other adverse consequences from those transactions in the case of MMC's risk and insurance service business, changes in competitive conditions, a decrease in the premium rate levels in the global property and casualty insurance markets, the impact of changes in insurance markets and natural catastrophes; in the
case of MMC's investment management business, changes in worldwide and national equity and fixed income markets; and with respect to all of MMC's activities, the failure of MMC and/or its significant business partners to be year 2000 compliant on a timely basis, changes in general worldwide and national economic conditions, fluctuations in foreign currencies, actions of competitors or regulators, changes in interest rates, developments relating to claims and lawsuits, changes in the tax or accounting treatment of MMC's operations and the impact of tax and other legislation and regulation in the jurisdictions in which MMC operates. A description of certain of these factors is included elsewhere in this Annual Report and are incorporated herein by reference.
ITEM 2. PROPERTIES.
MMC and four of its subsidiaries, as tenants in common, own a 56% condominium interest in a 44-story building in New York City which serves as their worldwide headquarters and have entered into a contract to purchase an additional six floors, subject to certain regulatory and other conditions. If there is a failure of any condition, seller has agreed to lease the space to MMC.
The principal offices of MMC's risk and insurance services subsidiaries in the UK are located on the eastern side of the City of London in The Sedgwick Centre. This freehold building, owned by a subsidiary of MMC, comprises 360,000 square feet containing offices located around a central atrium, and ancillary facilities including a shopping mall.
The remaining business activities of MMC and its subsidiaries are conducted principally in leased office space in cities throughout the world. In general, no difficulty is anticipated in negotiating renewals as leases expire or in finding other satisfactory space if the premises become unavailable. From time to time, MMC may have unused space and may seek to sublet such space to third parties, depending upon the demands for office space in the locations involved.
On June 30, 1998, MMC sold a 37.58% condominium interest in a 40 story building in New York City, which it had acquired in the business combination with Johnson & Higgins.
ITEM 3. LEGAL PROCEEDINGS.
MMC and its subsidiaries are subject to various claims and lawsuits consisting principally of alleged errors and omissions in connection with the placement of insurance or reinsurance and in rendering investment and consulting services. Some of these claims and lawsuits seek damages, including punitive damages, in amounts which could, if assessed, be significant.
On November 24, 1997, an action captioned "AIENA, ET AL. V. OLSEN, ET AL." ("Aiena") was brought in the United States District Court for the Southern District of New York by certain former directors of Johnson & Higgins ("J&H"), which was acquired by MMC in March 1997, against twenty-four selling shareholders of J&H, as well as J&H itself and MMC. The action essentially challenges the allocation of the consideration paid in connection with MMC's combination with J&H as between the defendants who were directors and shareholders of J&H at the time of the transaction and the plaintiffs who were former directors and shareholders of J&H. The complaint asserts, among others, claims for breach of fiduciary duty, federal securities law violations, breach of contract, and ERISA violations. Plaintiffs seek compensatory and punitive damages. Two other former directors of J&H have commenced similar actions (SEMPIER V. OLSEN ET AL.; and CLEMENTS V. OLSEN ET AL.), which are also pending before the United States District Court for the Southern District of New York and are contemplated to be heard together with the Aiena action.
In 1993, several years prior to the acquisition of J&H, the Equal Employment Opportunity Commission ("EEOC") commenced a lawsuit against J&H in the United States District Court for the Southern District of New York. The action alleges that a mandatory retirement policy for directors then in effect at J&H violated the federal Age Discrimination in Employment Act ("ADEA"). In 1995, the District Court ruled in the EEOC's favor that the J&H mandatory retirement policy violated the ADEA. The Court of
Appeals for the Second Circuit affirmed that ruling in 1996. The EEOC seeks to recover damages on behalf of certain former directors and a trial on the matter of damages, unless the action is resolved, may be held later in 1999. Pursuant to the Stock Purchase Agreement between MMC and J&H and the stockholders of J&H, MMC will bear one-half of all damages and expenses in this action.
Sedgwick Group plc, since prior to its acquisition, has been engaged in a review of previously undertaken personal pension plan business as required by United Kingdom regulators to determine whether redress should be made to customers. Settlements and related costs previously paid amount to $80 million of which $30 million is due from insurers. The contingent exposure of Sedgwick for pension redress and related costs as of Sedgwick's acquisition by MMC is estimated to be $220 million. Sedgwick had recorded $150 million of reserves and recognized approximately $70 million of insurance recoveries related to this exposure.
Other present and former subsidiaries of MMC are engaged in a comparable review of their personal pension plan businesses, although the extent of their activity in this area, and consequently their financial exposure, was proportionally much less than Sedgwick. The contingent exposure of the present and former non-Sedgwick subsidiaries of MMC for pension redress and related costs is estimated to be approximately $135 million. Approximately $100 million of this amount is expected to be recovered from insurers and accounting reserves have been provided for the remaining balance. Settlements and related costs previously paid total approximately $15 million.
MMC's ultimate exposure from the United Kingdom's personal pension plan review, as presently calculated and including Sedgwick, is subject to a number of variable factors including, among others, equity markets, the rate of response to the pension review mailings, the interest rate established quarterly by the U.K. Pension Investment Authority for calculating compensation, and the precise scope, duration, and methodology of the review as required by that Authority.
On the basis of present information, anticipated insurance coverage and advice received from counsel, it is the opinion of MMC's management that the disposition or ultimate determination of these claims, lawsuits and proceedings will not have a material adverse effect on MMC's consolidated results of operations or its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR MMC'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market and dividend information regarding MMC's common stock on page 56 of the 1998 Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data on page 57 of the 1998 Annual Report are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Information on pages 27 through 35 of the 1998 Annual Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information under the heading "Market Risk" on pages 33 and 34 of the 1998 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements and the Report of Independent Auditors thereto on pages 36 through 55 of the 1998 Annual Report and Selected Quarterly Financial Data (Unaudited) on page 56 of the 1998 Annual Report are incorporated herein by reference. Supplemental Notes to Consolidated Financial Statements are included on page 18 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MMC.
Information as to the directors of MMC is incorporated herein by reference to the material under the heading "Directors" in the Notice of Annual Meeting of Stockholders and Proxy Statement dated March 29, 1999 (the "1999 Proxy Statement").
The executive officers of MMC as of March 24, 1999 are Messrs. Barham, Borelli, Coster, Greenberg, Lasser, Sinnott, Smith and White-Cooper, with respect to whom information is incorporated herein by reference to the 1999 Proxy Statement, and:
Francis N. Bonsignore, age 52, has been Senior Vice President--Human Resources & Administration of MMC since 1990. Immediately prior thereto, he was partner and National Director-- Human Resources for Price Waterhouse.
Gregory F. Van Gundy, age 53, is Secretary and General Counsel of MMC. He joined MMC in 1974.
ITEM 11. EXECUTIVE COMPENSATION.
Information under the headings "Executive Compensation", "Compensation Committee Report" and "Comparison of Cumulative Total Stockholder Return" in the 1999 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information under the heading "Security Ownership" in the 1999 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information under the headings "Employment Agreements" and "Transactions with Management and Others; Other Information" in the 1999 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements (incorporated herein by reference to pages
36 through 54 of the 1998 Annual Report):
Consolidated Statements of Income for the three years ended December 31,
1998
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Cash Flows for the three years ended December
31, 1998
Consolidated Statements of Stockholders' Equity for the three years
ended December 31, 1998
Notes to Consolidated Financial Statements
Report of Independent Auditors
Supplemental Notes to Consolidated Financial Statements
Report of Independent Auditors
Other:
Selected Quarterly Financial Data and Supplemental Information
(Unaudited) for the three years ended December 31, 1998 (incorporated
herein by reference to page 56 of the 1998 Annual Report)
Five-Year Statistical Summary of Operations (incorporated herein by
reference to page 57 of the 1998 Annual Report)
2. All required Financial Statement Schedules are included in the Consolidated
Financial Statements, the Notes to Consolidated Financial Statements or the
Supplemental Notes to Consolidated Financial Statements.
3. The following exhibits are filed as a part of this report:
(3.1) --the registrant's restated certificate of incorporation (incorporated by
reference to the registrant's Annual Report on Form 10-K for the year
ended December 31, 1997)
(3.2) --the registrant's by-laws
(10.1) --Stock Purchase Agreement, dated as of March 12, 1997, by and among the
registrant, Johnson & Higgins and the stockholders of Johnson & Higgins
(incorporated by reference to the registrant's Current Report on Form 8-K
dated March 14, 1997)
|
(10.2) --First Amendment to the Stock Purchase Agreement, dated as of March 27,
1997 by and among the registrant, Johnson & Higgins and the stockholders
of Johnson & Higgins (incorporated by reference to the registrant's
Current Report on Form 8-K dated April 7, 1997)
(10.3)* --Marsh & McLennan Companies, Inc. 1997 Senior Executive Incentive and Stock
Award Plan (incorporated by reference to the registrant's Annual Report on
Form 10-K for the year ended December 31, 1996)
(10.4)* --Marsh & McLennan Companies, Inc. Restricted Shares Voluntary Deferral
Program for U.S. Employees (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December 31, 1995)
(10.5)* --Marsh & McLennan Companies Stock Investment Supplemental Plan
(incorporated by reference to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1994)
(10.6)* --Amendment to Marsh & McLennan Companies Stock Investment Supplemental Plan
dated June 16, 1997 (incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1997)
(10.7)* --Marsh & McLennan Companies Special Severance Pay Plan (incorporated by
reference to the registrant's Annual Report on Form 10-K for the year
ended December 31, 1996)
(10.8)* --Putnam Investments, Inc. Executive Deferred Compensation Plan
(incorporated by reference to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1994)
(10.9)* --Marsh & McLennan Companies Supplemental Retirement Plan (incorporated by
reference to the registrant's Annual Report on Form 10-K for the year
ended December 31, 1992)
(10.10)* --Marsh & McLennan Companies Senior Management Incentive Compensation Plan
(incorporated by reference to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1994)
(10.11)* --Marsh & McLennan Companies, Inc. U.S. Employee 1998 Cash Bonus Award
Voluntary Deferral Plan
(10.12)* --Marsh & McLennan Companies, Inc. Canadian Employee 1998 Cash Bonus Award
Voluntary Deferral Plan
(10.13)* --Marsh & McLennan Companies, Inc. Directors Stock Compensation Plan (as
amended and restated 6/27/97) (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended December 31,
1997)
(10.14)* --Employment Agreement between Jeffrey W. Greenberg and Marsh & McLennan
Capital, Inc. and related Guaranty of the registrant (incorporated by
reference to the registrant's Annual Report on Form 10-K for the year
ended December 31, 1995)
(10.15)* --Employment Agreement between Lawrence J. Lasser and Putnam Investments,
Inc. effective as of December 31, 1997 (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended December 31,
1997)
(10.16)* --Marsh & McLennan Capital, Inc. Long Term Incentive Plan
|
(10.17)* --Letter Agreement with respect to the Employment Agreement between Jeffrey
W. Greenberg and Marsh & McLennan Capital, Inc. and related Guaranty of
the registrant
(13) --Annual Report to Stockholders for the year ended December 31, 1998, to be
deemed filed only with respect to those portions which are expressly
incorporated by reference
(21) --list of subsidiaries of the registrant (as of 2/28/99)
(23) --consent of independent auditors
(24) --powers of attorney
(27) --Financial Data Schedule (filed with SEC for EDGAR purposes only)
|
* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) Two reports on Form 8-K were filed by the registrant in the fiscal quarter ended December 31, 1998. On November 12, 1998 and December 23, 1998, respectively, the registrant filed a report on Form 8-K (i) announcing that the tender offer to acquire all of the issued and unissued share capital of Sedgwick Group plc ("Sedgwick") was declared unconditional in all respects on November 3, 1998 and (ii) disclosing certain historical financial statements for Sedgwick and pro forma financial information for the registrant giving effect to the Sedgwick acquisition.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed this 31st day of March, 1999 on its behalf by the undersigned, thereunto duly authorized.
MARSH & MCLENNAN COMPANIES, INC.
By /s/ A.J.C. SMITH
-----------------------------------------
A.J.C. Smith
Chairman of the Board
and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated this 31st day of March, 1999.
/s/ A.J.C. SMITH *
------------------------------------------- -------------------------------------------
A.J.C. Smith Norman Barham
Director, Chairman of the Board and Director
Chief Executive Officer
/s/ FRANK J. BORELLI *
------------------------------------------- -------------------------------------------
Frank J. Borelli Lewis W. Bernard
Senior Vice President and Director
Chief Financial Officer, Director
/s/ DOUGLAS C. DAVIS *
------------------------------------------- -------------------------------------------
Douglas C. Davis Peter Coster
Vice President and Controller Director
(Chief Accounting Officer)
* *
------------------------------------------- -------------------------------------------
Robert F. Erburu David A. Olsen
Director Director
* *
------------------------------------------- -------------------------------------------
Jeffrey W. Greenberg John D. Ong
Director Director
* *
------------------------------------------- -------------------------------------------
Ray J. Groves George Putnam
Director Director
* *
------------------------------------------- -------------------------------------------
Stephen R. Hardis Saxon Riley
Director Director
|
* *
------------------------------------------- -------------------------------------------
Gwendolyn S. King Adele Smith Simmons
Director Director
* *
------------------------------------------- -------------------------------------------
The Rt. Hon. Lord Lang Of Monkton John T. Sinnott
Director Director
* *
------------------------------------------- -------------------------------------------
Lawrence J. Lasser Frank J. Tasco
Director Director
*
-------------------------------------------
W.R.P. White-Cooper
Director
|
* Gregory F. Van Gundy, pursuant to Powers of Attorney executed by each of the individuals whose name is followed by an (*) and filed herewith, by signing his name hereto does hereby sign and execute this Form 10-K of Marsh & McLennan Companies, Inc. on behalf of such individual in the capacities in which the names of each appear above.
/s/ GREGORY F. VAN GUNDY --------------------------------------------- GREGORY F. VAN GUNDY |
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of Marsh & McLennan Companies, Inc.:
We have audited the consolidated balance sheets of Marsh & McLennan Companies, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1998, and have issued our report thereon dated March 5, 1999; such financial statements and report are included in your 1998 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the supplemental notes to the consolidated financial statements (the "Supplemental Notes") listed in Item 14. These Supplemental Notes are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such Supplemental Notes, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
March 5, 1999
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. INFORMATION CONCERNING MMC'S VALUATION ACCOUNTS FOLLOWS:
An analysis of the allowance for doubtful accounts for the three years ended December 31, 1998 follows (in millions of dollars):
1998 1997 1996
----- --------- ---------
Balance at beginning of year.................................. $ 53 $ 43 $ 54
Provision charged to operations............................... 19 8 10
Accounts written-off, net of recoveries....................... (5) (4) (10)
Effect of exchange rate changes............................... 2 (1) 1
Other (A)..................................................... 29 7 (12)
--- --- ---
Balance at end of year........................................ $ 98 $ 53 $ 43
--- --- ---
--- --- ---
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(A) Relates primarily to the acquisitions of Sedgwick and Johnson & Higgins in 1998 and 1997, respectively and the sale of Frizzell in 1996.
An analysis of the valuation allowance for certain foreign deferred tax assets as of December 31, 1998, 1997 and 1996 follows (in millions of dollars):
1998 1997 1996
---- ----- ------
Balance at beginning of year...................... -- $ 27 $ 25
Effect of exchange rate changes................... -- -- 2
Other............................................. -- (27)(A) --
---- ----- ------
Balance at end of year............................ $-- $-- $ 27(B)
---- ----- ------
---- ----- ------
|
(A) Reflects the write-off of the underlying tax assets, since it was determined that MMC will not realize any future tax benefit.
(B) Included in other liabilities in the Consolidated Balance Sheets.
17. AN ANALYSIS OF INTANGIBLE ASSETS AT DECEMBER 31, 1998 AND 1997 FOLLOWS (IN MILLIONS OF DOLLARS):
1998 1997
---------- --------
Goodwill..................................... $ 4,965 $ 2,509
Other intangible assets...................... 141 105
---------- --------
Subtotal................................... 5,106 2,614
Less--accumulated amortization............... (280) (197)
---------- --------
Total.................................... $ 4,826(A) $ 2,417
---------- --------
---------- --------
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(A) The increase from December 31, 1997 is primarily due to the acquisition of Sedgwick ($2.0 billion).
EXHIBIT INDEX
(3.1) --the registrant's restated certificate of incorporation (incorporated by reference
to the registrant's Annual Report on Form 10-K for the year ended December 31,
1997)
(3.2) --the registrant's by-laws
(10.1) --Stock Purchase Agreement, dated as of March 12, 1997, by and among the registrant,
Johnson & Higgins and the stockholders of Johnson & Higgins (incorporated by
reference to the registrant's Current Report on Form 8-K dated March 14, 1997)
(10.2) --First Amendment to the Stock Purchase Agreement, dated as of March 27, 1997 by and
among the registrant, Johnson & Higgins and the stockholders of Johnson & Higgins
(incorporated by reference to the registrant's Current Report on Form 8-K dated
April 7, 1997)
(10.3)* --Marsh & McLennan Companies, Inc. 1997 Senior Executive Incentive and Stock Award
Plan (incorporated by reference to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1996)
(10.4)* --Marsh & McLennan Companies, Inc. Restricted Shares Voluntary Deferral Program for
U.S. Employees (incorporated by reference to the registrant's Annual Report on
Form 10-K for the year ended December 31, 1995)
(10.5)* --Marsh & McLennan Companies Stock Investment Supplemental Plan(incorporated by
reference to the registrant's Annual Report on Form 10-K for the year ended
December 31, 1994)
(10.6)* --Amendment to the Marsh & McLennan Companies Stock Investment Supplemental Plan
dated June 16, 1997 (incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1997)
(10.7)* --Marsh & McLennan Companies Special Severance Pay Plan (incorporated by reference
to the registrant's Annual Report on Form 10-K for the year ended December 31,
1996)
(10.8)* --Putnam Investments, Inc. Executive Deferred Compensation Plan (incorporated by
reference to the registrant's Annual Report on Form 10-K for the year ended
December 31, 1994)
(10.9)* --Marsh & McLennan Companies Supplemental Retirement Plan (incorporated by reference
to the registrant's Annual Report on Form 10-K for the year ended December 31,
1992)
(10.10)* --Marsh & McLennan Companies Senior Management Incentive Compensation Plan
(incorporated by reference to the registrant's Annual Report on Form 10-K for the
year ended December 31, 1994)
(10.11)* --Marsh & McLennan Companies, Inc. U.S. Employee 1998 Cash Bonus Award Voluntary
Deferral Plan
(10.12)* --Marsh & McLennan Companies, Inc. Canadian Employee 1998 Cash Bonus Award Voluntary
Deferral Plan
(10.13)* --Marsh & McLennan Companies, Inc. Directors Stock Compensation Plan (as amended and
restated 6/27/97) (incorporated by reference to the registrant's Annual Report on
Form 10-K for the year ended December 31, 1997)
(10.14)* --Employment Agreement between Jeffrey W. Greenberg and Marsh & McLennan Capital
Inc. and related Guaranty of the registrant (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended December 31, 1995)
|
(10.15)* --Employment Agreement between Lawrence J. Lasser and Putnam Investments, Inc.
effective as of December 31, 1997 (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December 31, 1997)
(10.16)* --Marsh & McLennan Capital, Inc. Long Term Incentive Plan
(10.17)* --Letter Agreement with respect to the Employment Agreement between Jeffrey W.
Greenberg and Marsh & McLennan Capital, Inc. and related Guaranty of the
registrant
(13) --Annual Report to Stockholders for the year ended December 31, 1998, to be deemed
filed only with respect to those portions which are expressly incorporated by
reference
(21) --list of subsidiaries of the registrant (as of 2/28/99)
(23) --consent of independent auditors
(24) --powers of attorney
(27) --Financial Data Schedule (filed with SEC for EDGAR purposes only)
|
* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
Exhibit 3.2
BY-LAWS
OF
MARSH & McLENNAN COMPANIES, INC.
RESTATED AS LAST AMENDED
JANUARY 21, 1999
Offices............................................. 1
ARTICLE II
Meetings of the Stockholders........................ 1
ARTICLE III
Directors........................................... 9
ARTICLE IV
Officers............................................ 11
ARTICLE V
Committees.......................................... 15
ARTICLE VI
Indemnification..................................... 20
ARTICLE VII
Checks, Contracts, Other Instruments................ 26
ARTICLE VIII
Capital Stock....................................... 26
ARTICLE IX
Miscellaneous....................................... 29
ARTICLE X
Amendments.......................................... 30
BY-LAWS
OF
MARSH & McLENNAN COMPANIES, INC.
ARTICLE I
Offices
The principal office of the Corporation in Delaware shall be at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, in the State of Delaware, and The Corporation Trust Company shall be the resident agent of the Corporation in charge thereof. The Corporation may also have such other offices at such other places as the Board of Directors may from time to time designate or the business of the Corporation may require.
ARTICLE II
Meetings of the Stockholders
SECTION 1. Place of Meetings. Meetings of the stockholders may be held at such place as the Board of Directors may determine.
SECTION 2. Annual Meetings. The annual meeting of the stockholders shall be held on the third Thursday of May in each year, or such other day in May as may be determined from time to time by the Board of Directors, at such time and place as the Board of Directors may designate. At said meeting the stockholders shall elect a Board of Directors and transact any other business authorized or required to be transacted by the stockholders.
SECTION 3. Special Meetings. Special meetings of the stockholders, except as otherwise provided by law, shall be called by the Chairman of the Board, or whenever the Board of Directors shall so direct, the Secretary.
SECTION 4. Notice of Meetings. Except as otherwise provided by law, written
or printed notice stating the place, day and hour of the meeting, and in the
case of a special meeting the purpose or purposes for which the meeting is
called, shall be delivered personally or mailed, postage prepaid, at least ten
(10) days but not more than sixty (60) days before such meeting to each
stockholder at such address as appears on the stock books of the Corporation.
SECTION 5. Fixing of Record Date. In order to determine the stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, and no more than sixty (60) days prior to any other action.
If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice of the meeting is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and such date for any other purpose shall be the date on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 6. Quorum. The holders of a majority of the stock issued and outstanding present in person or represented by proxy shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by law, by the Restated Certificate of Incorporation or by these by-laws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders present in person or by proxy shall have power to adjourn the meeting from time to time without notice other than announcement at the meeting until the requisite amount of stock shall be represented. At such adjourned meeting at which the requisite amount of stock shall be represented, any business may be transacted which might have been transacted at the meeting as originally called.
SECTION 7. Voting. Each stockholder entitled to vote in accordance with the terms of the Restated Certificate of Incorporation and in accordance with the provisions of these by-laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. The vote for directors and, upon demand of any stockholder, the vote upon any question before the meeting shall be by ballot. All elections of directors shall be decided by plurality vote; all other questions shall be decided by a majority of the shares present in person or represented by proxy at the meeting of stockholders and entitled to vote on the subject matter, except as otherwise provided in the Restated Certificate of Incorporation or by law or regulation.
SECTION 8. Inspectors of Election. All elections of directors and all votes where a ballot is required shall be conducted by two inspectors of election who shall be appointed by the Board of Directors; but in the absence of such appointment by the Board of Directors, the Chairman of the meeting shall appoint such inspectors who shall not be directors or candidates for the office of director.
SECTION 9. Voting List. The Secretary shall prepare and make, at least ten days before every election of directors, a complete list of the stockholders entitled to vote, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in his name. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 10. Stockholder Nominations of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors at a meeting of stockholders. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any person appointed by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 10. Such nominations, other than those made by or at the direction of the Board of Directors
or by any person appointed by the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary, Marsh & McLennan Companies, Inc. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that the meeting is not to be held on the date set forth in Article II, Section 2 and less than 75 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such public disclosure was made. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder and (ii) the class and number of shares of capital stock of the Corporation which are
beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.
SECTION 11. Advance Notice of Stockholder Proposed Business at Annual Meetings. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors, or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary, Marsh & McLennan Companies,
Inc. To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation, not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that the meeting is not to be held on the date set forth in Article II,
Section 2 and less than 75 days' notice or prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of capital stock
of the Corporation which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business.
Notwithstanding anything in these by-laws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 11; provided, however, that nothing in this
Section 11
shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with said procedure.
The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
ARTICLE III
Directors
SECTION 1. Powers, Number, Tenure, Qualifications and Compensation. The business and affairs of the Corporation shall be managed by its Board of Directors which shall consist of the number of members set forth in Article FIFTH of the Restated Certificate of Incorporation, none of whom need be stockholders, but no person shall be eligible to be nominated or elected a director of the Corporation who has attained the age of 72 years. In addition to the powers and duties by these by-laws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Restated Certificate of Incorporation or by these by-laws directed or required to be
exercised or done by the stockholders. The Board of Directors may provide for compensation of directors who are not otherwise compensated by the Corporation or any subsidiary thereof.
SECTION 2. Meetings and Notice. The Board shall, for the purposes of organization, the election and appointment of officers and the transaction of other business, hold a meeting as soon as convenient after the annual meeting of stockholders. Regular meetings of the directors may be held without notice at such places and times as shall be determined from time to time by resolution of the directors. Special meetings of the Board may be called by the Chairman of the Board on at least twenty-four (24) hours' notice to each director, personally or by mail or by telegram or by telephone. Special meetings shall also be called in like manner on the written request of any three (3) directors. The attendance of a director at any meeting shall dispense with notice to him of the meeting. Members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting.
SECTION 3. Offices, Books, Place of Meeting. The Board of Directors may have one or more offices and keep the books of the Corporation outside of Delaware, and may hold its meetings at such places as it may from time to time determine.
SECTION 4. Quorum. At all meetings of the Board of Directors one-third (1/3) of the total number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Restated Certificate of Incorporation or by these by-laws.
SECTION 5. Informal Action. The Board of Directors shall, except as otherwise provided by law, have power to act in the following manner: A resolution in writing, signed by all of the members of the Board of Directors shall be deemed to be action by such Board to the effect therein expressed with the same force and effect as if the same had been duly passed at a duly convened meeting, and it shall be the duty of the Secretary of the Corporation to record any such resolution in the minute book of the Corporation, under its proper date.
ARTICLE IV
Officers
SECTION 1. Election. The Board of Directors shall elect officers of the Corporation, including a Chairman of the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer and a Controller.
SECTION 2. Term and Removal. The officers of the Corporation designated in
SECTION 1 of this Article IV, shall hold office for one year and until their
respective successors are chosen and qualify in their stead. Any officer may be
removed at any time, with or without cause, by the Board of Directors. An
officer appointed by the Executive Committee may also be removed at any time,
with or without cause by said Committee.
SECTION 3. Chairman of the Board. The Chairman of the Board of Directors shall be the Chief Executive Officer of the Corporation and, subject to the control of the Board of Directors, and of the committees exercising functions of the Board of Directors, shall have general supervision over the business and property of the Corporation. He shall preside at all meetings of the stockholders and of the Board of Directors. He shall review and recommend to the Board of Directors both short-term objectives and long-term planning for the business. He shall also preside at meetings of any committee of which he is a member which is not attended by the chairman of such committee. He or his delegate may vote on behalf of the Corporation the shares owned by the Corporation in other corporations in such manner as they deem advisable unless otherwise directed by the Board of Directors. He shall have full authority to take other
action on behalf of the Corporation in respect of shares of stock in other corporations owned by the Corporation, directly or indirectly, including the obtaining of information and reports.
SECTION 4. President. Subject to the control of the Board of Directors, and of the committees exercising functions of the Board of Directors, the President shall assist the Chairman of the Board in the performance of his general duties and perform such other duties as may from time to time be assigned to him by the Chairman of the Board.
SECTION 5. Vice Presidents. The Vice President shall have such powers, duties, supplementary titles and other designations as the Board of Directors may from time to time determine.
SECTION 6. Secretary. The Secretary shall attend all meetings of the stockholders and the Board of Directors. He shall, at the invitation of the chairman thereof, attend meetings of the committees elected by the Board or established by these by-laws. He shall record all votes and minutes of all proceedings which he attends and receive and maintain custody of all votes and minutes of all such proceedings. Votes and minutes of meetings of the Compensation and Audit Committees shall be recorded and maintained as each such committee shall determine. The Secretary shall give or cause to be given notice of meetings of the stockholders, Board of Directors, and, when instructed to do so by the Chairman thereof, committees of the Board of
Directors, and shall have such other powers and duties as may be prescribed by appropriate authority. The Secretary shall keep in safe custody the seal of the Corporation and shall affix the seal to any instrument requiring the same. The Assistant Secretaries shall have such powers and perform such duties as may be prescribed by appropriate authority.
SECTION 7. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by, or in accordance with general policies adopted by, the Board of Directors or Executive Committee. He shall disburse the funds of the Corporation as may be ordered by the Chairman, the chief financial officer, the Board of Directors or the Executive Committee, taking proper vouchers for such disbursements, and shall render to the Chairman, the chief financial officer and the Board of Directors whenever they may require it, an account of all his transactions as Treasurer. He shall have such powers and perform such duties as shall be assigned to him by appropriate authority. The Assistant Treasurers shall have such powers and perform such duties as may be prescribed by the chief financial officer or the Treasurer.
SECTION 8. Controller. The Controller shall be the chief accounting officer of the Corporation. He shall keep or cause to be kept all books of account and accounting records of the Corporation and shall render to the Chairman, the chief financial officer and the Board of Directors whenever they may require it, a report of the financial condition of the Corporation. He shall have such other powers and duties as shall be assigned to him by appropriate authority. The Assistant Controllers shall have such powers and perform such duties as may be prescribed by the chief financial officer or the Controller.
SECTION 9. Bond. The Board of Directors may, or the Chairman may, require any officers, agents or employees of the Corporation to furnish bonds conditioned on the faithful performance of their respective duties with a surety company satisfactory to the Board of Directors or the Chairman as surety. The expenses of such bond shall be paid by the Corporation.
ARTICLE V
Committees
SECTION 1. Executive Committee. An Executive Committee, composed of the Chairman of the Board and such other directors as the Board of Directors may determine from time to time shall be elected by the Board of Directors. Except as provided hereinafter or in resolutions of the Board of Directors, the Executive Committee shall have, and may exercise when the
Board of Directors is not in session, all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. The Executive Committee shall not, however, have power or
authority in reference to (a) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the provisions of the
General Corporation Law of Delaware to be submitted to stockholders for
approval, (b) adopting, amending or repealing the by-laws of the Corporation,
(c) electing or appointing the Chairman of the Board of the Corporation or (d)
declaring a dividend.
SECTION 2. Compensation Committee. A Compensation Committee, including a chairman, having such number of directors as the Board of Directors shall determine from time to time, shall be elected by the Board of Directors. No member of the Compensation Committee while holding such office and within the previous year shall, in addition to usual compensation as a director, receive or be granted or be eligible for any award or any other benefit under any compensation, stock option or other benefit plans that the committee may supervise, administer, or review or while holding such office shall be a full-time employee of the Corporation or any of its subsidiaries. The Compensation Committee shall fix the compensation of the chief executive officer of the Corporation and approve the compensation of senior
executives of the Corporation or any of its subsidiaries designated under
procedures established by the Committee from time to time. The Compensation
Committee will approve, disapprove or modify the retention by the Corporation of
advisors or consultants on matters relating to the compensation of the chief
executive officer and senior executives of the Corporation. The Compensation
Committee shall also satisfy itself, if in its opinion circumstances make it
desirable to do so, that the general compensation policies and practices
followed by the Corporation and its subsidiaries are in the Corporation's best
interests. The Compensation Committee shall have such other duties as may be set
forth in the Corporation's compensation, stock option or other benefit plans as
they may exist from time to time, or otherwise as provided by the Board of
Directors. The Compensation Committee shall report to the Board at least
annually and whenever the Board may require respecting the discharge of the
committee's duties and responsibilities. The term "compensation" as used in this
Section shall mean salaries, bonuses, agreements to pay deferred compensation,
and discretionary benefits such as stock options, but shall not include payments
to or under any employee pension, retirement, profit sharing, stock investment,
or similar plan.
SECTION 3. Audit Committee. An Audit Committee, including a chairman, having such number of directors as the Board of Directors may determine from time to time, shall be elected by the Board of Directors. The members of the Audit Committee shall be elected by the Board of Directors from among the members of the Board who are not officers or employees of the Corporation. The Audit Committee shall meet at least annually with the Corporation's independent public accountants, and at any time during the year when considered appropriate by the independent public accountants or the committee. The committee shall review the annual financial statements of the Corporation with the independent public accountants and shall review the practices and procedures adopted by the Corporation in the preparation of such financial statements. The Audit Committee shall submit recommendations to the Board of Directors with respect to the selection of independent public accountants to examine the Corporation's annual financial statements and shall review the independent public accountant's annual scope of audit. The Audit Committee shall, as it may deem appropriate from time to time, report and make recommendations to the Board of Directors.
SECTION 4. Reports. The Executive Committee shall report to each regular meeting and, if directed, to each special meeting of the Board of Directors all action taken by such
committee subsequent to the date of its last report, and other committees shall report to the Board of Directors at least annually.
SECTION 5. Other Committees. The Board of Directors may appoint such other committee or committees as it deems desirable.
SECTION 6. Election and Term. The Chairman and each member of every committee shall be a member of and, except as provided in Section 7 of this Article V, elected by the Board of Directors and shall serve until such person shall cease to be a member of the Board of Directors or such person's membership on the committee shall be terminated by the Board.
SECTION 7. Meetings, Quorum and Notice. The Chairman of any committee shall be the presiding officer thereof. Any committee may meet at such time or times on notice to all the members thereof by the Chairman or by a majority of the members or by the Secretary of the Corporation and at such place or places as such notice may specify. At least twenty-four (24) hours' notice of the meeting shall be given but such notice may be waived. Such notice may be given by mail, telegraph, telephone or personally. Each committee shall cause minutes to be kept of its meetings which record all actions taken. Such minutes shall be placed in the custody of the Secretary of the Corporation except that the Compensation and Audit Committees shall each determine who shall maintain custody of its minutes or
portions thereof. Any committee may, except as otherwise provided by law, act in its discretion by a resolution or resolutions in writing signed by all the members of such committee with the same force and effect as if duly passed by a duly convened meeting. Any such resolution or resolutions shall be recorded in the minute book of the committee under the proper date thereof. Members of any committee may also participate in a meeting of such committee by means of conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other and participation in the meeting pursuant to this provision shall constitute presence in person at such meeting. A majority of the members of each committee shall constitute a quorum. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
ARTICLE VI
Indemnification
SECTION 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter, a "proceeding"), by reason of the fact that, on or after May 21, 1987, he or she is serving or had served as a director, officer or employee of the Corporation or, while serving as such director, officer or employee, is serving or had served at the request of the Corporation as a director, officer, employee or agent of, or in any other capacity with respect to, another corporation or a partnership, joint venture, trust or other entity or enterprise, including service with respect to employee benefit plans (hereinafter, an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer or employee of the Corporation, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by Delaware law, as the same exists or may hereafter be changed or amended (but, in the case of any such change or amendment, only to the extent that such change or amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably incurred or suffered by an indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer or employee of the Corporation and shall inure
to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that except as provided in Section 3 of this Article with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify an indemnitee in connection with a proceeding (or part thereof) initiated by the indemnitee only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Article shall be a contract right.
SECTION 2. Advancement of Expenses. An indemnitee who is a director or officer of the Corporation, and any other indemnitee to the extent authorized from time to time by the board of directors of the Corporation, shall have the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter, an "advancement of expenses"); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter, an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which
there is no further right to appeal (hereinafter, a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Article or otherwise.
SECTION 3. Right of Indemnitee to Bring Suit. If a claim under Section 1 or
Section 2 of this Article is not paid in full by the Corporation within sixty
days in the case of Section 1 and twenty days in the case of Section 2 after a
written claim has been received by the Corporation, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (other than a suit
brought by the indemnitee to enforce a right to an advancement of expenses), it
shall be a defense that, and (ii) any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its board of directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to the action. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article or otherwise shall be on the Corporation.
SECTION 4. Indemnification of Agents of the Corporation. The Corporation may, to the extent authorized from time to time by its board of directors, grant rights to indemnification, and to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification of directors, officers and employees of the
Corporation and advancement of expenses of directors and officers of the Corporation.
SECTION 5. Non-Exclusivity of Rights. The right to indemnification and to the advancement of expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation's Restated Certificate of Incorporation, these by-laws, any agreement, vote of stockholders or disinterested directors, or otherwise.
SECTION 6. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.
SECTION 7. Survival of Prior Indemnification Provisions; Effect of Subsequent Change on Existing Rights. Nothing contained in this Article shall be construed as altering or eliminating the rights to indemnification existing, or based upon service by an indemnitee, prior to May 21, 1987. Any repeal or modification of this Article shall not adversely affect any right or protection of a director, officer or employee of the Corporation existing at the time of such repeal or modification.
ARTICLE VII
Checks, Contracts, Other Instruments
SECTION 1. Documents, Instruments Not Requiring Seal. All checks, notes, drafts, acceptances, bills of exchange, orders for the payment of money, and all written contracts and instruments of every kind which do not require a seal shall be signed by such officer or officers, or person or persons as these by-laws, or the Board of Directors or Executive Committee by resolution, may from time to time prescribe.
SECTION 2. Documents, Instruments Requiring Seal. All bonds, deeds, mortgages, leases, written contracts and instruments of every kind which require the corporate seal of the Corporation to be affixed thereto, shall be signed and attested by such officer or officers as these by-laws, or the Board of Directors or Executive Committee, by resolution, may from time to time prescribe.
ARTICLE VIII
Capital Stock
SECTION 1. Stock Certificates. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with the Restated Certificate of Incorporation, as shall be approved by the Board of Directors. Each certificate shall be signed by the Chairman of the Board of Directors or a Vice President and also by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer,
provided, however, that any such signature of an officer of the Corporation or of the Transfer Agent, Assistant Transfer Agent, Registrar or Assistant Registrar, or any of them, may be a facsimile. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be used and delivered as though the officer or officers who signed the said certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be said officer or officers of the Corporation. All certificates shall be consecutively numbered, shall bear the corporate seal and the names and addresses of all persons owning shares of capital stock of the Corporation with the number of shares owned by each; and, the date or dates of issue of the shares of stock held by each shall be entered in books kept for that purpose by the proper officers or agents of the Corporation.
SECTION 2. Recognition of Holders of Record. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it has actual or other notice thereof, save as expressly provided by the laws of the State of Delaware.
SECTION 3. Lost Certificates. Except in cases of lost or destroyed certificates, and in that case only after conforming to the requirements hereinafter provided, no new certificates shall be issued until the former certificate for the shares represented thereby shall have been surrendered and cancelled. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates to be lost or destroyed; and the Board of Directors may, in its discretion and as a condition precedent to the issuance of any such new certificate or certificates, require (i) that the owner of such lost or destroyed certificate or certificates, or his legal representative give the Corporation and its transfer agent or agents, registrar or registrars a bond in such form and amount as the Board of Directors may direct as indemnity against any claim that may be made against the Corporation and its transfer agent or agents, registrar or registrars, or (ii) that the person requesting such new certificate or certificates obtain a final order or decree of a court of competent jurisdiction as to his right to receive such new certificate or certificates.
SECTION 4. Transfer of Shares. Shares of stock shall be transferred on the books of the Corporation by the holder thereof or by his attorney thereunto duly authorized upon the surrender and cancellation of certificates for a like number of shares.
SECTION 5. Regulations Governing Transfer of Shares. The Board of Directors may make such regulations as it may deem expedient concerning the issue, transfer and registration of stock.
SECTION 6. Appointment of Transfer Agent, Registrar. The Board may appoint a Transfer Agent or Transfer Agents and Registrar or Registrars for transfers and may require all certificates to bear the signature of either or both.
ARTICLE IX
Miscellaneous
SECTION 1. Inspection of Books. The Board of Directors or the Executive Committee shall determine from time to time whether and, if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically open to inspection), or any of them shall be open to the inspection of the stockholders, and the stockholders' rights in this respect are and shall be restricted and limited accordingly.
SECTION 2. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization, and the words "Corporate Seal, Delaware".
SECTION 3. Fiscal Year. The fiscal year shall begin on the first day of January of each year.
SECTION 4. Waiver of Notice. Whenever by statute, the provisions of the Restated Certificate of Incorporation, or these by-laws, the stockholders, the Board of Directors or any committee established by the Board of Directors in accordance with these by-laws are authorized to take any action after notice, such notice may be waived, in writing, before or after the holding of the meeting at which such action is to be taken, by the person or persons entitled to such notice or, in the case of a stockholder, by his attorney thereunto authorized.
ARTICLE X
Amendments
SECTION 1. By Stockholders. These by-laws, or any of them, may be amended, altered, changed, added to or repealed at any regular or special meeting of the stockholders, by the affirmative vote of a majority of the shares of stock then issued and outstanding.
SECTION 2. By the Board of Directors. The Board of Directors, by affirmative vote of a majority of its members, may, at any regular or special meeting, amend, alter, change, add to
or repeal these by-laws, or any of them, but any by-laws made by the Directors may be amended, altered, changed, added to or repealed by the stockholders.
Exhibit 10.11
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
1. ELIGIBILITY
All active U.S. employees of Marsh & McLennan Companies, Inc. (the "Corporation") and its subsidiaries who are designated as eligible for participation in the MMC Partners Bonus Plan or a Local Bonus Plan, and who are presently in salary grade 15 (or its equivalent) or above, may, at management's discretion, be considered for participation in the Marsh & McLennan Companies, Inc. U.S. Employee 1998 Cash Bonus Award Voluntary Deferral Plan (the "1998 Plan"). Participants in the 1998 Plan may make deferral elections pursuant to the rules outlined in Section 2 below.
2. PROGRAM RULES
Except as otherwise provided herein, the 1998 Plan shall be administered by the Compensation Committee of the Board of Directors of the Corporation (the "Committee"). The Committee shall have authority in its sole discretion to interpret the 1998 Plan and make all determinations, including the determination of bonus awards eligible to be deferred, with respect to the 1998 Plan. All determinations made by the Committee shall be final and binding. The Committee may delegate to any other individual or entity the authority to perform any or all of the functions of the Committee under the 1998 Plan, and references to the Committee shall be deemed to include any such delegate. Exercise of deferral elections under the 1998 Plan must be made in accordance with the following rules.
a. Rights to an Award and to a Deferral Election
The right to a deferral election applies only to the annual cash bonus scheduled to be awarded in early 1999 in respect of 1998 services, the payment of which bonus would normally be made by the end of the first quarter of the 1999 calendar year. The granting of such an annual cash bonus award is discretionary, and neither delivery of deferral election materials nor an election to defer shall affect entitlement to such an award. The right to a deferral election does not apply to bonuses (including, but not limited to, bonuses pursuant to an employment agreement, sign-on or guaranteed bonuses, commissions or non-annual incentive payments) that are not awarded as part of an annual cash bonus plan.
b. Election Forms
In order to ensure that elections to defer bonus amounts are effective under applicable tax laws, please complete and sign the attached election form(s), and return them (postmarked or delivered) no later than December 4, 1998. Form(s) should be returned, and any questions should be directed, to:
William Palazzo Manager, HR Systems and Administration Marsh & McLennan Companies, Inc. 1166 Avenue of the Americas New York, NY 10036-2774 (212) 345-5663
c. Deferral Options
(i) Deferral Amount. An eligible employee may elect to defer a portion of such employee's bonus award until January of a specific year ("year certain") or until January of the year following retirement in an amount represented by one of the following two choices:
1. 25%, 50% or 75% of the employee's cash bonus award, subject to a maximum limit established by the Committee, or
2. the lowest of 25%, 50% or 75% of the employee's cash bonus award which results in a deferral of at least $10,000.
If the percentage selected times the amount of the cash bonus award is less than $10,000, no deferral will be made or deducted from the award.
(ii) 1998 Deferred Bonus Accounts. If a deferral election is made, deferrals may
be made into one or both of the two accounts which the Corporation shall make
available to the participating employee. The relevant portion of the award
deferral will be credited to the relevant account on the first business day
following the date on which the bonus payment would have been made had it not
been deferred. The available accounts for deferrals of bonuses (the "1998
Deferred Bonus Accounts") shall consist of (a) the 1998 Putnam Fund Account and
(b) the 1998 Corporation Stock Account. Amounts may not be transferred between
the 1998 Corporation Stock Account and either the 1998 Putnam Fund Account or
the "Putnam Transfer Fund Account" (as referred to in Section 2.e. below).
d. 1998 Putnam Fund Account
(i) Account Valuation. The 1998 Putnam Fund Account is a bookkeeping account, the value of which shall be based upon the performance of selected funds of the Putnam mutual fund group. The Corporation will determine, in its sole discretion, the funds of the Putnam mutual fund group into which deferrals may be made. Deferrals among selected funds comprising the 1998 Putnam Fund Account must be made in multiples of 5% of the total amounts deferred into the 1998 Putnam Fund Account. Deferred amounts will be credited to the 1998 Putnam Fund Account with units each reflecting one Class A share of the elected fund. Fractional units will also be credited to such account, if applicable. The number of such credited units will be determined by dividing the value of the bonus award deferred into the elected fund by the net asset value of such fund of the 1998 Putnam Fund Account as of the close of business on the day on which such bonus payment would have been made had it not been deferred. All dividends paid with respect to an elected fund of a 1998 Putnam Fund Account will be deemed to be immediately reinvested in such fund.
(ii) Fund Transfers. Amounts deferred into a 1998 Putnam Fund Account and the Putnam Transfer Fund Account may be transferred between eligible funds of these respective accounts (but not between the 1998 Putnam Fund Account and the Putnam Transfer Fund Account) pursuant to an election which may be made daily. Such election shall be effective, and the associated transfer shall be based upon the net asset values of the applicable funds of the 1998 Putnam Fund Account or the Putnam Transfer Fund Account, as of the close of business on the business day the election is received by facsimile or mail, if received by 2:30 p.m. Eastern Time of that day. If received later than 2:30 p.m., the election shall be effective as of the close of business on the following business day.
e. Putnam Transfer Fund Account
By December 4, 1998, each individual with respect to whom there is maintained an "Interest Factor Account" (established for deferrals of all pre-1993 bonus awards), whether or not any such individual is eligible for participation under Section 1 above, may make an irrevocable election to transfer all (but not less than all) of such participant's Interest Factor Account into a "Putnam Transfer Fund Account", which election shall be effective, and which transfer shall be based upon the net asset value of the selected funds of such Putnam Transfer Fund Account, as of the close of business on the last trading day in 1998.
The Putnam Transfer Fund Account shall be administered in a manner consistent with the administration of the 1998 Putnam Fund Account pursuant to Section 2.d.(i) above. Distribution elections (including the form of payment) otherwise in effect for the Interest Factor Account shall remain in effect for amounts transferred to the Putnam Transfer Fund Account.
f. 1998 Corporation Stock Account
(i) Account Valuation. The 1998 Corporation Stock Account is a bookkeeping account, the value of which shall be based upon the performance of the common stock of the Corporation. Amounts deferred into the 1998 Corporation Stock Account will be credited to such account with units each reflecting one share of common stock of the Corporation. Fractional units will also be credited to such account, if applicable. The number of such credited units will be determined by dividing the value of the bonus award deferred into the 1998 Corporation Stock Account (plus the "supplemental amount" referred to in clause (ii) below) by the closing price of the common stock of the Corporation on the New York Stock Exchange on the day on which such bonus payment would have been made had it not been deferred. Dividends paid on the common stock of the Corporation shall be reflected in a participant's 1998 Corporation Stock Account by the crediting of additional units in such account equal to the value of the dividend and based upon the closing price of the common stock of the Corporation on the New York Stock Exchange on the date such dividend is paid. Deferrals into the 1998 Corporation Stock Account must be deferred to a date not earlier than January 1, 2002.
(ii) Supplemental Amount. With respect to that portion of a bonus award which a participating employee defers into the 1998 Corporation Stock Account, there shall be credited to such participant's 1998 Corporation Stock Account an amount equal to the amount deferred into such account plus an additional amount equal to 15% of the amount so deferred (the "supplemental amount"). The maximum percentage of any participating employee's annual bonus award permitted to be deferred into the 1998 Corporation Stock Account (prior to giving effect to the supplemental amount) is 50% of such award.
(iii) Stock Distributions. Distributions from the 1998 Corporation Stock Account will be deposited automatically via book entry for your personal account with the Corporation's stock transfer agent. If you (or you and your spouse, as joint tenants) already have such an account with the stock transfer agent, then the shares will be deposited into that account. If you do not have such an account, then one will be established in your name, and the shares will be deposited in the account.
g. Statement of Account
The Corporation shall provide periodically to each participant (but not less frequently than once per calendar quarter) a statement setting forth the balance to the credit of such participant in such participant's 1998 Deferred Bonus Accounts and Putnam Transfer Fund Account.
h. Irrevocability and Acceleration
Subject to the provisions of paragraphs i. (iii) and i. (vii) below, all deferral elections made under the 1998 Plan are irrevocable. However, the Committee may, in its sole discretion, and upon finding that a participant has demonstrated severe financial hardship, direct the acceleration of the payment of any or all deferred amounts then credited to the participant's 1998 Deferred Bonus Accounts.
i. Payment of Deferred Amounts
(i) Year Certain Deferrals. If the participant remains employed until the deferral year elected, all amounts relating to "year certain" deferrals will be paid in a single distribution, less applicable withholding taxes, in January of the deferral year elected, or the participant may elect (at the time of the original deferral election) to have distributions from the 1998 Corporation Stock Account or the 1998 Putnam Fund Account, as the case may be, made in up to fifteen (15) annual installments payable each January commencing with the deferral year elected. Annual installments will be paid in an amount, less applicable withholding taxes, determined by multiplying (i) the balance of the 1998 Corporation Stock Account or the 1998 Putnam Fund Account, as the case may be, by (ii) a fraction, the numerator of which is 1 and the denominator of which is a number equal to the remaining unpaid annual installments.
(ii) Retirement Deferrals. For participants who retire, amounts relating to deferrals until the year following retirement will be paid in a single distribution in January of the year following retirement, or the participant may elect (at the time of the original deferral election) to have distributions from the 1998 Corporation Stock Account or 1998 Putnam Fund Account, as the case may be, made in up to fifteen (15) annual installments payable each January commencing with the year following retirement. Annual installments will be paid in an amount, less applicable withholding taxes, determined by multiplying (i) the balance of the 1998 Corporation Stock Account or 1998 Putnam Fund Account, as the case may be, by (ii) a fraction, the numerator of which is 1 and the denominator of which is a number equal to the remaining unpaid annual installments.
(iii)Redeferral Election. Participants shall be permitted to delay the beginning date of distribution and/or increase the number of annual installments (up to the maximum number permitted under the 1998 Plan) for awards previously deferred or redeferred under the 1998 Plan, provided that the redeferral election must be made at least one full calendar year prior to the beginning date of distribution.
(iv) Termination of Employment Prior to End of Deferral Period. Subject to the provisions of paragraph (vi) below, in the event of termination of employment for any reason prior to completion of the elected deferral period, all amounts then in the participant's 1998 Deferred Bonus Accounts will be paid to the participant (or the participant's designated beneficiary in the event of death) in a single distribution, less applicable withholding taxes, as soon as practicable after the end of the quarter in which the termination occurred; provided, however, that, subject to the provisions of paragraph (vi) below, upon a participant's retirement or termination for total disability prior to completion of the elected deferral period, all such amounts shall be paid in January of the year following such retirement or termination for total disability, as the case may be.
(v) Death During Installment Period. If a participant dies after the commencement of payments from his or her 1998 Deferred Bonus Accounts, the designated beneficiary shall receive the remaining installments over the elected installment period.
(vi) Special Rules Applicable to 1998 Corporation Stock Account. Notwithstanding any provision in the 1998 Plan to the contrary (other than the second sentence of Section 2.h. above), with respect to a participant's 1998 Corporation Stock Account, in the event that prior to January 1, 2002, a participant's employment terminates for total disability or retirement, all amounts in such account will be paid to the participant, less applicable withholding taxes, in January of 2002. In the event that, prior to January 2002, a participant's employment terminates on account of death, or a participant whose employment was earlier terminated for total disability or retirement should die, the distribution rule in paragraph (iv) above will apply. If, however, the termination of employment prior to January 1, 2002 is on account of a reason other than death, total disability or retirement, the participant will receive, as soon as practicable following the end of the quarter in which the termination occurred, a single distribution, less applicable withholding taxes, of (a) the balance of the participant's 1998 Corporation Stock Account less (b) the portion of such balance attributable to the supplemental amount (including earnings thereon), which portion shall be forfeited in its entirety.
For purposes of determining the portion of the balance of the 1998 Corporation Stock Account attributable to the supplemental amount, the supplemental amount shall be increased or decreased by the respective gain or loss in the 1998 Corporation Stock Account attributable to such supplemental amount.
(vii) Acceleration of Distribution. A participant may elect to accelerate the
distribution of all or a portion of the 1998 Deferred Bonus Accounts for any
reason prior to the completion of the elected deferral period, subject to the
imposition of a significant penalty in accordance with applicable tax rules. The
penalty shall be an account forfeiture equal to (i) 6% of the amount that the
participant elects to have distributed from the 1998 Deferred Bonus Accounts and
(ii) 100% of any unvested supplemental amount as provided in Section 2(f)(ii)
above, including related earnings, that the participant elects to have
distributed from the 1998 Corporation Stock Account. Amounts distributed to the
participant will be subject to applicable tax withholding, but amounts forfeited
will not be subject to tax.
(viii) Change in Control. Notwithstanding any other provision in the 1998 Plan to the contrary, in the event of a "change in control" of the Corporation, as defined in the Corporation's 1997 Senior Executive Incentive and Stock Award Plan (the "1997 Senior Executive Plan") and 1997 Employee Incentive and Stock Award Plan (the "1997 Employee Plan"), all amounts credited to a participant's 1998 Deferred Bonus Accounts as of the effective date of such change in control will be distributed within five days of such change in control as a lump sum cash payment, less applicable withholding taxes.
(ix) Form of Payment. All payments in respect of the 1998 Putnam Fund Account shall be made in cash and payments in respect of the 1998 Corporation Stock Account shall be made in shares of common stock of the Corporation; provided, however, that in the event of a change in control of the Corporation, payments from the 1998 Corporation Stock Account shall be made in cash based upon (A) the highest price paid for shares of common stock of the Corporation in connection with such change in control or (B) if shares of common stock of the Corporation are not purchased or exchanged in connection with such change in control, the closing price of the common stock of the Corporation on the New York Stock Exchange on the last trading day on the New York Stock Exchange prior to the date of the change in control.
j. Tax Treatment
Under present Federal income tax laws, no portion of the balance credited to a participant's 1998 Deferred Bonus Accounts or Putnam Transfer Fund Account will be includable in income for Federal income tax purposes during the period of deferral. However, FICA tax withholding is required currently on the cash bonus amount (excluding any portion subject to a mandatory deferral) awarded to the participant, and such withholding is required on the supplemental amount in January of 2002. When any part of the 1998 Deferred Bonus Accounts or Putnam Transfer Fund Account is actually paid to the participant, such portion will be includable in income, and Federal, state and local income tax withholding will apply. The Corporation may make necessary arrangements in order to effectuate any such withholding, including the mandatory withholding of shares of common stock of the Corporation which would otherwise be distributed to a participant.
k. Beneficiary Designation
Each participant shall have the right, at any time, to designate any person or persons as beneficiary or beneficiaries (both principal and contingent) to whom payment shall be made under the 1998 Plan and every other Cash Bonus Award Voluntary Deferral Plan for which the participant has or will have an account balance (collectively, including the 1998 Plan, "the Plans"), in the event of death prior to complete distribution to the participant of the amounts due under the Plans. Any beneficiary designation may be changed by a participant by the filing of such change in writing on a form prescribed by the Corporation. The filing of a new beneficiary designation form will cancel all beneficiary designations previously filed and apply to all deferrals in the account. A beneficiary designation form is attached for use by a participant who either does not have such form on file or wishes to make a change in the beneficiary designation. Upon completion of the attached form, it should be forwarded to William Palazzo, at the address set forth in Section 2.b. above. If a participant does not have a beneficiary designation in effect, or if all designated beneficiaries predecease the participant, then any amounts payable to the beneficiary shall be paid to the participant's estate. The payment to the designated beneficiary or to the participant's estate shall completely discharge the Corporation's obligations under the Plans.
l. Changes in Capitalization
If there is any change in the number or class of shares of common stock of the Corporation through the declaration of stock dividend or other extraordinary dividends, or recapitalization resulting in stock splits, or combinations or exchanges of such shares or in the event of similar corporate transactions, each participant's 1998 Corporation Stock Account shall be equitably adjusted by the Committee to reflect any such change in the number or class of issued shares of common stock of the Corporation or to reflect such similar corporate transaction.
3. AMENDMENT AND TERMINATION OF THE 1998 PLAN
The Committee may, at its discretion and at any time, amend the 1998 Plan in whole or in part. The Committee may also terminate the 1998 Plan in its entirety at any time and, upon any such termination, each participant shall be paid in a single distribution, or over such period of time as determined by the Committee (not to extend beyond the earlier of 15 years or the elected deferral period), the then remaining balance in such participant's 1998 Deferred Bonus Accounts.
4. MISCELLANEOUS
a. A participant under the 1998 Plan is merely a general (not secured) creditor, and nothing contained in the 1998 Plan shall create a trust of any kind or a fiduciary relationship between the Corporation and the participant or the participant's estate. Nothing contained herein shall be construed as conferring upon the participant the right to continued employment with the Corporation or its subsidiaries, or to a cash bonus award. Except as otherwise provided by applicable law, benefits payable under the 1998 Plan may not be assigned or hypothecated, and no such benefits shall be subject to legal process or attachment for the payment of any claim of any person entitled to receive the same. The adoption of the 1998 Plan and any elections made pursuant to the 1998 Plan are subject to approval of the 1998 Plan by the Committee.
b. Participation in the 1998 Plan is subject to these terms and conditions and to the terms and conditions of (i) the 1997 Senior Executive Plan with respect to those participants hereunder who are subject thereto and (ii) the 1997 Employee Plan with respect to all other participants. Participation in the 1998 Plan shall constitute an agreement by the participant to all such terms and conditions and to the administrative regulations of the Committee.
In the event of any inconsistency between these terms and conditions and the provisions of the 1997 Senior Executive Plan or the 1997 Employee Plan, as applicable, the provisions of the latter shall prevail. The 1997 Senior Executive Plan and the 1997 Employee Plan are not subject to any of the provisions of the Employee Retirement Income Security Act Of 1974.
c. Not more than seven million, five hundred thousand (7,500,000) shares of the Corporation's common stock, plus such number of shares remaining unused under pre-existing stock plans approved by the Corporation's stockholders, may be issued under the 1997 Senior Executive Plan.
d. Not more than eighteen million (18,000,000) shares of the Corporation's common stock, plus such number of shares authorized and reserved for awards pursuant to certain preexisting share resolutions adopted by the Corporation's Board of Directors, may be issued under the 1997 Employee Plan.
5. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K of the Corporation for its last fiscal year, the Corporation's Registration Statement on Form 8 dated February 3, 1987, describing Corporation common stock, including any amendment or reports filed for the purpose of updating such description, and the Corporation's Registration Statement on Form 8-A dated October 10, 1997, describing the Preferred Stock Purchase Rights attached to the common stock, including any further amendment or reports filed for the purpose of updating such description, which have been filed by the Corporation under the Securities Exchange Act of 1934, as amended (the Exchange Act), are incorporated by reference herein.
All documents subsequently filed by the Corporation pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, subsequent to the end of
the Corporation's last fiscal year and prior to the filing of a
post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such documents.
Participants may receive without charge, upon written or oral request, a copy of any of the documents incorporated herein by reference and any other documents that constitute part of this Prospectus by contacting Mr. William Palazzo, Manager, HR Systems and Administration as indicated above.
Exhibit 10.12
1. ELIGIBILITY
All active Canadian employees of Marsh & McLennan Companies, Inc. (the "Corporation") and its subsidiaries who are designated as eligible for participation in the MMC Partners Bonus Plan or a Local Bonus Plan, and who are presently in salary grade 15 (or its equivalent) or above, may, at management's discretion, be considered for participation in the Marsh & McLennan Companies, Inc. Canadian Employee 1998 Cash Bonus Award Voluntary Deferral Plan (the "1998 Plan"). Participants in the 1998 Plan may make deferral elections pursuant to the rules outlined in Section 2 below.
2. PROGRAM RULES
Except as otherwise provided herein, the 1998 Plan shall be administered by the Compensation Committee of the Board of Directors of the Corporation (the "Committee"). The Committee shall have authority in its sole discretion to interpret the 1998 Plan and make all determinations, including the determination of bonus awards eligible to be deferred, with respect to the 1998 Plan. All determinations made by the Committee shall be final and binding. The Committee may delegate to any other individual or entity the authority to perform any or all of the functions of the Committee under the 1998 Plan, and references to the Committee shall be deemed to include any such delegate. Exercise of deferral elections under the 1998 Plan must be made in accordance with the following rules.
a. RIGHTS TO AN AWARD AND TO A DEFERRAL ELECTION The right to a deferral election applies only to the annual cash bonus scheduled to be awarded in early 1999 in respect of 1998 services, the payment of which bonus would normally be made by the end of the first quarter of the 1999 calendar year. The granting of such an annual cash bonus award is discretionary, and neither delivery of deferral election materials nor an election to defer shall affect entitlement to such an award. The right to a deferral election does not apply to bonuses (including, but not limited to, bonuses pursuant to an employment agreement, sign-on or guaranteed bonuses, commissions or non-annual incentive payments) that are not awarded as part of an annual cash bonus plan.
b. ELECTION FORMS In order to ensure that elections to defer bonus amounts are effective under applicable tax laws, please complete and sign the attached election form(s), and return them (postmarked or delivered) no later than December 4, 1998. Form(s) should be returned, and any questions should be directed, to:
William Palazzo Manager, HR Systems and Administration Marsh & McLennan Companies, Inc. 1166 Avenue of the Americas New York, NY 10036-2774 (212) 345-5663
c. DEFERRAL OPTIONS
(i) DEFERRAL AMOUNT. An eligible employee may elect to defer a portion of such employee's bonus award in an amount represented by one of the following two choices:
1. 25%, 50%, 75% or 100% of the employee's cash bonus award, subject to a maximum limit established by the Committee, or
2. the lowest of 25%, 50%, 75% or 100% of the employee's cash bonus award which results in a deferral of at least Canadian $10,000.
If the percentage selected times the amount of the cash bonus award is less than Canadian $10,000, NO deferral will be made or deducted from the award.
(ii) PERIOD OF DEFERRAL. The payment of a bonus award may be deferred to January of 2000 or January 2001, as elected by the participant.
(iii) 1998 DEFERRED BONUS ACCOUNTS. If a deferral election is made, deferrals may be made into one or both of the two accounts which the Corporation shall make available to the participating employee. The relevant portion of the award deferral will be credited to the relevant account on the first business day following the date on which the bonus payment would have been made had it not been deferred. The available accounts for deferrals of bonuses (the "1998 Deferred Bonus Accounts") shall consist of (a) the 1998 Putnam Fund Account and (b) the 1998 Interest Equivalent Account. Amounts may not be transferred between the 1998 Interest Equivalent Account and the 1998 Putnam Fund Account.
d. 1998 PUTNAM FUND ACCOUNT
(i) ACCOUNT VALUATION. The 1998 Putnam Fund account is a bookkeeping account, the value of which shall be based upon the performance of selected funds of the Putnam mutual fund group. The Corporation will determine, in its sole discretion, the funds of the Putnam mutual fund group into which deferrals may be made. Deferrals among selected funds comprising the 1998 Putnam Fund Account must be made in multiples of 5% of the total amounts deferred into the 1998 Putnam Fund Account. Deferred amounts will be credited to the 1998 Putnam Fund Account with units each reflecting one Class A share of the elected fund. Fractional units will also be credited to such account, if applicable. The number of such credited units will be determined by dividing the value of the bonus award deferred into the elected fund by the net asset value of such fund of the 1998 Putnam Fund Account as of the close of business on the day on which such bonus payment would have been made had it not been deferred. All dividends paid with respect to an elected fund of a 1998 Putnam Fund Account will be deemed to be immediately reinvested in such fund. All amounts credited to the 1998 Putnam Fund Account will be converted into U.S. dollars at the exchange rate in effect as of the applicable date.
(ii) FUND TRANSFERS. Amounts deferred into a 1998 Putnam Fund Account may be transferred between eligible funds pursuant to an election which may be made daily. Such election shall be effective, and the associated transfer shall be based upon the net asset values of the applicable funds of the 1998 Putnam Fund Account, as of the close of business on the business day the election is received by facsimile or mail, if received by 2:30 p.m. Eastern Time of that day. If received later than 2:30 p.m., the election shall be effective as of the close of business on the following business day.
e. 1998 INTEREST EQUIVALENT ACCOUNT An "Interest Equivalent" shall be calculated and added to each 1998 Interest Equivalent Account as of the last day of each calendar quarter based on the average principal balance in said account during said calendar quarter and on the average of the 30-day Banker's Acceptance rate of interest as published in the Toronto Globe & Mail during such calendar quarter.
f. STATEMENT OF ACCOUNT The Corporation shall provide periodically to each participant (but not less frequently than once per calendar quarter) a statement setting forth the balance to the credit of such participant in such participant's 1998 Deferred Bonus Accounts.
g. IRREVOCABILITY AND ACCELERATION
All deferral elections made under the 1998 Plan are irrevocable. However, the Committee may, in its sole discretion, and upon finding that a participant has demonstrated severe financial hardship, direct the acceleration of the payment of any or all deferred amounts then credited to the participant's 1998 Deferred Bonus Accounts.
h. PAYMENT OF DEFERRED AMOUNTS
(i) DEFERRAL YEAR DISTRIBUTIONS. If the participant remains employed until the deferral year elected, all amounts in the participant's 1998 Deferred Bonus Accounts will be paid in a single distribution, less applicable withholding taxes, in January of the deferral year elected.
(ii) TERMINATION OF EMPLOYMENT PRIOR TO END OF DEFERRAL PERIOD. In the event of termination of employment for any reason prior to the completion of the elected deferral period, all amounts then in the participant's 1998 Deferred Bonus Accounts will be paid to the participant (or the participant's designated beneficiary in the event of death) in a single distribution, less applicable withholding taxes, as soon as practicable after the end of the quarter in which the termination occurred; PROVIDED, HOWEVER, that upon a participant's retirement or termination for disability prior to completion of the elected deferral period, all such amounts shall be paid in a single distribution during January of the year following such retirement or termination for disability, as the case may be.
(iii)CHANGE IN CONTROL. Notwithstanding any other provision in the 1998 Plan to the contrary, in the event of a "change in control" of the Corporation, as defined in the Corporation's 1997 Employee Incentive and Stock Award Plan, all amounts credited to a participant's 1998 Deferred Bonus Accounts as of the effective date of such change in control will be distributed within five days of such change in control as a single distribution, less applicable withholding taxes.
(iv) FORM OF PAYMENT. All payments under the 1998 Plan shall be made in cash in Canadian dollars converted, if necessary, at the exchange rate in effect as of the applicable date.
i. TAX TREATMENT Under present Canadian tax law, all amounts of an employee's bonus deferred for a period not exceeding three years from the year in which the related service was rendered, as well as any Interest Equivalent thereon, will be exempt from Canadian taxation during the period of deferral. When any part of the 1998 Deferred Bonus Accounts is actually paid to a participant, taxable employment income will be incurred.
j. BENEFICIARY DESIGNATION
Each participant shall have the right, at any time, to designate any person or persons as beneficiary or beneficiaries (both principal and contingent) to whom payment shall be made under the 1998 Plan and every other Cash Bonus Award Voluntary Deferral Plan for which the participant has or will have an account balance (collectively, including the 1998 Plan, the "Plans"), in the event of death prior to complete distribution to the participant of the amounts due under the Plans. Any beneficiary designation may be changed by a participant by the filing of such change in writing on a form prescribed by the Corporation. The filing of a new beneficiary designation form will cancel all beneficiary designations previously filed and apply to all deferrals in the account. A beneficiary designation form is attached for use by a participant who either does not have such form on file or wishes to make a change in the beneficiary designation. Upon completion of the attached form, it should be forwarded to William Palazzo, at the address set forth in Section 2.b. above. If a participant does not have a beneficiary designation in effect, or if all designated beneficiaries predecease the participant, then any amounts payable to the beneficiary shall be paid to the participant's estate. The payment to the designated beneficiary or to the participant's estate shall completely discharge the Corporation's obligations under the Plans.
3. AMENDMENT AND TERMINATION OF THE 1998 PLAN
The Committee may, at its discretion and at any time, amend the 1998 Plan in
whole or in part. The Committee may also terminate the 1998 Plan in its entirety
at any time and, upon any such termination, each participant shall be paid in a
single distribution, or over such period of time as determined by the Committee
(provided such period of time falls within the restriction set forth in Section
2.c. (ii) above), the then remaining balance in such participant's 1998 Deferred
Bonus Accounts.
4. MISCELLANEOUS
A participant under the 1998 Plan is merely a general (not secured) creditor, and nothing contained in the 1998 Plan shall create a trust of any kind or a fiduciary relationship between the Corporation and the participant or the participant's estate. Nothing contained herein shall be construed as conferring upon the participant the right to continued employment with the Corporation or its subsidiaries, or to a cash bonus award. Except as otherwise provided by applicable law, benefits payable under the 1998 Plan may not be assigned or hypothecated, and no such benefits shall be subject to legal process or attachment for the payment of any claim of any person entitled to receive the same. The adoption of the 1998 Plan and any elections made pursuant to the 1998 Plan are subject to approval of the 1998 Plan by the Committee.
EXHIBIT 10.16
MARSH & MCLENNAN CAPITAL, INC.
LONG TERM INCENTIVE PLAN
I. STATEMENT OF PURPOSE
The purpose of the Marsh & McLennan Capital, Inc. Long Term Incentive Plan (the "LTIP") is to attract, retain and motivate key employees and consultants of Marsh & McLennan Capital, Inc. ("M&M Capital") and affiliates of M&M Capital to originate, structure and manage insurance and related industry investments by allowing them to participate in the profitability of such investments.
II. CERTAIN DEFINITIONS
(a) CAUSE shall mean "Cause" as defined in a Participant's employment, consulting or other written agreement with MMC or M&M Capital or, in the absence of any such agreement, (1) the conviction for any felony, (2) willful malfeasance or gross negligence in the performance of duties, (3) misconduct that causes actual material injury to MMC or any of its affiliates, or (4) prior to a Change in Control of MMC or Change in Control of M&M Capital (in each case, as defined in Paragraphs VI(b) and (c)), the continued and substantial failure to perform duties consistent with a Participant's position and responsibilities within 60 days after notice of such failure being given.
(b) DISABILITY shall mean total disability as defined in a Participant's employment, consulting or other written agreement with MMC or M&M Capital or, in the absence of such an agreement, as defined in the MMC benefits program.
(c) EXCEPTION GRANT PAYMENT shall mean an additional Grant Payment, which is not otherwise provided for in the applicable Grant.
(d) GRANT shall mean the right to receive a payment of an amount determined by reference to one or more Incentive Pools.
(e) GRANT PAYMENT shall mean a payment made with respect to a Grant.
(f) GROSS PROFITS shall mean, with respect to each MMRCH Designated
Investment (as defined in ------------- Paragraph II(g)(2)(aa)),
the sum (whether positive or negative) of all: (1) pre-tax gains
realized upon the sale of such investment, (2) pre-tax
distributions of dividends, interest, or other distributions
(including break-up fees) received in respect of the investment,
(3) pre-tax losses realized upon the sale of such investment, and
(4) pre-tax write-downs of such investment (decreases in value
which have been determined to be other than temporary in
accordance with Generally Accepted Accounting Principles as
reflected in the consolidated financial statements of Marsh &
McLennan Risk Capital Holdings, Ltd. ("MMRCH")). In the event a
MMRCH Designated Investment is held indefinitely and determined to
be a strategic investment, as agreed upon by the LTIP Committee
and MMC, the applicable Valuation Date and Gross Profits shall be
determined, in good faith, by the LTIP Committee and MMC.
(g) INCENTIVE POOL shall mean the aggregate amounts realized in cash and, accordingly, available for distribution as Grant Payments and Exception Grant Payments to Participants, determined separately solely for The Trident Partnership, L.P. ("Trident"), MMRCH and Risk Capital Reinsurance Company ("RCRe"), as follows:
(1) Trident Incentive Pool - 50% of the Trident Carry for the applicable Realization Period;
(2) MMRCH Incentive Pool - the sum of (aa) 50% of 20% (i.e., 10%) of Gross Profits realized in cash by MMRCH during the applicable Realization Period with respect to the investments to be set forth in a schedule of the MMRCH Incentive Pool, as amended from time to time (the "MMRCH Designated Investments"); and (bb) 50% of pre-tax gains realized by MMRCH for the applicable Realization
Period from (i) the sale of shares of common stock, $.01
par value per share, of Risk Capital Holdings, Inc. ("Risk
Capital Holdings"), received upon the exercise of any Class
A or Class B warrants, in each case to be set forth in a
schedule of the MMRCH Incentive Pool, owned by MMRCH (the
cost basis of the Class B warrants shall be $ per share
plus the exercise price per share of such warrants) and
(ii) the sale of such Class A or Class B warrants; and
(3) RCRe Fee Incentive Pool - 50% of the excess of (A) fees received by M&M Capital during the applicable Realization Period pursuant to the Investment Advisory Agreement dated September 19, 1995, between RCRe and M&M Capital (the "7.5% Fees"), with respect to investments made during the term of such agreement, to be set forth in a schedule of the RCRe Fee Incentive Pool, as amended from time to time (the "RCRe Designated Investments"), over (B) any amounts payable to Robert Clements with respect to 1998 and 2000 with respect to such 7.5% Fees under the Amended and Restated Employment Agreement, effective as of December 31, 1993, between M&M Capital and Robert Clements, as such agreement may be amended from time to time.
The computation of amounts available for distribution with respect to an Incentive Pool as of the applicable Realization Date (or Valuation Date, if earlier) shall be made available by M&M Capital to MMC for review and, if deemed appropriate, confirmation by MMC's independent auditors.
(h) LTIP COMMITTEE shall mean a committee with authority to administer
the LTIP, initially comprised of the following individuals:
Jeffrey W. Greenberg, Robert Clements, Stephen Friedman and
Charles A. Davis. The appointment of any additional or successor
members to the LTIP Committee shall be subject to approval by the
MMC Compensation Committee. Notwithstanding the foregoing, the
MMC Compensation Committee shall serve as the LTIP Committee with respect to employees or consultants of M&M Capital who either (1) are members of the MMC Partners Group or (2) are or were members of the LTIP Committee. In the event of a deadlock on any matter submitted to the LTIP Committee, the composition of the LTIP Committee will be expanded (solely for purposes of resolving such matter) by the appointment of an additional member selected by MMC.
(i) MMC shall mean Marsh & McLennan Companies, Inc.
(j) MMC COMPENSATION COMMITTEE shall mean the Compensation Committee of the Board of Directors of MMC.
(k) MMC PARTNERS GROUP shall mean the Partners Group of MMC, as then constituted.
(l) PARTICIPANT shall mean an employee or consultant of M&M Capital selected by the LTIP Committee for participation in the LTIP.
(m) REALIZATION DATE shall mean the end of each calendar quarter during which there occurred an increase in amounts realized in cash with respect to (or, in the discretion of the LTIP Committee, otherwise distributable from) an Incentive Pool, or any earlier date selected by the LTIP Committee within such calendar quarter.
(n) REALIZATION PERIOD shall mean a period commencing on the later of the next preceding Realization Date, and, with respect to the Trident Incentive Pool, the date of formation of Trident (i.e., 11/93); with respect to the MMRCH Incentive Pool, the date indicated on the schedule of the MMRCH Incentive Pool with respect to the applicable MMRCH Designated Investment or the date of formation of Risk Capital Holdings (i.e., 3/95), as applicable; and with respect to the RCRe Fee Incentive Pool, the date indicated on the schedule of the RCRe Fee Incentive Pool with respect to the applicable RCRe Designated Investment,
and ending on any Realization Date or Valuation Date, as applicable.
(o) RETIREMENT shall mean "Retirement" as defined in a Participant's employment, consulting or other written agreement with MMC or M&M Capital or, in the absence of such an agreement, a termination of a Participant's employment or service following the date the Participant attains age 65 or higher with five or more years of service with MMC or any of its affiliates or, subject to approval by the board of directors of M&M Capital, an earlier termination of employment.
(p) TRIDENT CARRY shall mean the sum of:
(1) the advisor's fee received by M&M Capital from Trident; and
(2) special limited partner distributions to MMRCH (after giving effect to any repayment to Trident resulting from a "clawback").
(q) VALUATION DATE with respect to an investment shall mean the earliest of (1) with respect to a MMRCH Designated Investment only, the tenth anniversary of the date such investment was originally made, (2) the fifth anniversary of the date of termination of M&M Capital as investment advisor with respect to such investment, or (3) the fifth anniversary of the date of termination of the LTIP.
III. GRANTS
(a) The original Grant (the "Original Grant") to each Participant
shall be determined by reference to some or all of the following:
a subset of the Trident Incentive Pool, which for this purpose may
also include limited partner distributions to MMRCH in excess of
the cumulative preferential return, determined pursuant to the
applicable agreement (after giving effect to any repayment to
Trident resulting from a "clawback") (a "Trident Pool Subset"),
certain MMRCH Designated Investments, and certain RCRe Designated
Investments, in each case stated as a percent-
age (the "Individual Carry Percentage"). Each Participant may be awarded additional Grants with respect to existing Incentive Pools or new investments in such Incentive Pools.
(b) The sum of all Grant Payments and Exception Grant Payments with respect to the Grants relating to a particular Incentive Pool shall not exceed the aggregate amount available for distribution with respect to such Incentive Pool.
(c) Unless otherwise provided in a Participant's employment, consulting or other written agreement with MMC or M&M Capital, Grants shall vest in accordance with a vesting schedule set forth in the applicable Grant, and Grant Payments shall be made in accordance with a Grant Payment schedule set forth in the applicable Grant. Unless otherwise provided in a Participant's employment, consulting or other written agreement with MMC or M&M Capital, the vesting and Grant Payment schedule with respect to the Original Grants is set forth in Exhibit A.
(d) In the event a Participant incurs an income tax liability relating to a Grant upon a Realization Date (or Valuation Date, if earlier) and the related Grant Payment is not then due to be made to the Participant, the LTIP Committee may authorize prepayment of a portion of such Grant Payment equal to the income tax liability. The amount of any such prepayment shall be subtracted from the Grant Payment when made or, if the Grant is forfeited and no such Grant Payment is due, the prepayment shall be repaid by the Participant upon the Participant's termination of employment.
(e) After the date of a Grant, the terms of the Grant shall not be amended adversely for any Participant.
IV. GRANT PAYMENTS AND EXCEPTION GRANT PAYMENTS
(a) Grant Payments shall be made to Participants as set forth in this Paragraph IV, except as
otherwise provided in a Participant's employment, consulting or other written agreement with MMC or M&M Capital, or as otherwise determined by the LTIP Committee.
(b) Grant Payments shall be made, subject to the applicable vesting and Grant Payment schedule, as soon as reasonably practicable after the end of each calendar quarter in which a Realization Date or Valuation Date occurs. A Participant's Grant Payment with respect to a Realization Date (or Valuation Date, if earlier) shall be determined by the LTIP Committee. With respect to an Original Grant, a Participant's Grant Payments (in all cases subject to the applicable vesting and Grant Payment schedule and to the limitations of Paragraph III.(b)) shall not be less than the Grant Payments determined as follows:
(1) With respect to the Trident Incentive Pool, the Grant Payment shall not be less than the product of the Participant's Individual Carry Percentage with respect to the applicable Trident Pool Subset, and such Trident Pool Subset;
(2) With respect to the MMRCH Incentive Pool, the Grant Payment shall not be less than the total of the products of (aa) the Participant's Individual Carry Percentage with respect to each applicable MMRCH Designated Investment, and (bb) the portion of the MMRCH Incentive Pool relating to such MMRCH Designated Investment; and
(3) With respect to the RCRe Fee Incentive Pool, the Grant
Payment shall not be less than the total of the products of
(aa) the Participant's Individual Carry Percentage with
respect to each applicable RCRe Designated Investment, and
(bb) the portion of the RCRe Fee Incentive Pool relating to
such RCRe Designated Investment.
(c) The LTIP Committee may authorize Exception Grant Payments to Participants with respect
to Grants, subject to the limitation set forth in Paragraph III(b).
(d) In the event that, upon a Realization Date or Valuation Date, after the distribution of all applicable Grant Payments and Exception Grant Payments, there remains an amount available for distribution with respect to the applicable Incentive Pool, the unallocated balance shall remain in a reserve account (the "Reserve Account") with respect to such Incentive Pool, to be distributed from time to time, in whole or in part, at the discretion of the LTIP Committee. Notwithstanding the foregoing, any amounts forfeited by a Participant who is or was a member of the MMC Partners Group shall not be redistributed without the approval of the MMC Compensation Committee if such redistribution would result in a material change to the remaining Participants' distributions, as determined by the MMC Compensation Committee.
(e) All Grant Payments and Exception Grant Payments shall be made in cash, unless otherwise determined by the LTIP Committee with the approval of MMC.
V. TERMINATION OF EMPLOYMENT
(a) Termination of employment and service provisions shall apply as set forth in this Paragraph V, except as otherwise provided in a Participant's employment, consulting or other written agreement with MMC or M&M Capital, or as otherwise determined at the time of Grant by the LTIP Committee.
(b) If a Participant's employment or service is terminated for Cause as defined in Paragraph II(a)(1), (2) or (3) (or for actions, other than those described in Paragraph II(a)(4), which constitute Cause pursuant to the Participant's employment, consulting or other written agreement with MMC or M&M Capital) the Participant's Grants shall be forfeited (regardless of whether the Grants are vested or unvested) and the value of the related Individual Carry Percentages of each Incentive Pool shall be returned to the applicable In-
centive Pool. If a Participant's employment or service is terminated for Cause as defined in Paragraph II(a)(4), (or for actions described in Paragraph II(a)(4) which constitute Cause pursuant to the Participant's employment, consulting or other written agreement with MMC or M&M Capital), any unvested portion of the Participant's Grants shall be forfeited and the value of the related Individual Carry Percentages of each Incentive Pool shall be returned to the applicable Incentive Pool, and Grant Payments with respect to any vested but unpaid portion of the Grants shall be made to the Participant as soon as practicable following such termination. Such Grant Payments shall be determined by calculating each Incentive Pool based upon the carrying value, as reported in the most recent quarterly financial statements, of the investments in such Incentive Pool as of the Participant's date of termination.
(c) If a Participant's employment or service terminates without Cause for any reason except death, Disability or Retirement, any unvested portion of the Participant's Grants shall be forfeited and the value of the related Individual Carry Percentages of each Incentive Pool shall be returned to the applicable Incentive Pool, and Grant Payments with respect to any vested but unpaid portion of the Grants shall be made in accordance with the applicable Grant Payment schedule.
(d) If a Participant's employment or service terminates because of death, Disability or Retirement, Grant Payments with respect to any unvested portion of the Participant's Grants shall become fully vested, and shall be made in accordance with the applicable Grant Payment schedule.
(e) For purposes of vesting only, a Participant's employment or service shall not be deemed to have terminated as long as the Participant is employed by, or renders services to, MMC or any of its affiliates; in such cases, the Participant's Grants shall continue to vest, subject to the limitations set forth in Paragraphs V(f) and (g). Upon the subsequent
termination of such Participant's employment or service with MMC or any of its affiliates, the provisions of Paragraphs V(b), (c) or (d) (as applicable) shall apply.
(f) With respect to each Incentive Pool except the Trident Incentive Pool, in no case shall a Grant Payment be made to a Participant with respect to an investment made following the date of termination of the Participant's employment or service with M&M Capital, and in no case shall a Grant Payment with respect to a Participant's Grant be reduced because of the performance of an investment made following the date of termination of the Participant's employment or service with M&M Capital.
(g) With respect to the Trident Incentive Pool, the sum of the Grant Payments made to any Participant shall not exceed an amount reflecting a portion of the Participant's Grant, such portion being equal to (i) the portion of the Grant that is vested, multiplied by, (ii) a fraction, the numerator of which is the aggregate value (determined on the cost basis) of funds invested (including amounts drawn down or committed) by Trident prior to the date of the termination of the Participant's employment or service with M&M Capital and the denominator of which is $667 million, the aggregate value (determined on the cost basis) of funds authorized for investment by Trident.
VI. CHANGE IN CONTROL
(a) Notwithstanding anything herein to the contrary, upon a Change in Control of MMC or Change in Control of M&M Capital: (1) any unvested Grants shall become fully vested as of the date of such change in control, (2) Grant Payments shall be based upon the appraised market value of the investments in each applicable Incentive Pool as of such date, and such payments shall be made to the Participants as soon as practicable following such date, (3) the outstanding balance in each Reserve Account as of such date shall be distributed to the Participants ratably (as determined by the LTIP Committee at its discretion) as Grant Payments or Exception Grant
Payments, and (4) the LTIP shall continue thereafter at the discretion of the LTIP Committee.
(b) For purposes of the LTIP, a "Change in Control of MMC" shall have occurred if:
(1) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than MMC, any trustee or other fiduciary holding securities under an employee benefit plan of MMC or any corporation owned, directly or indirectly, by the stockholders of MMC in substantially the same proportions as their ownership of stock of MMC), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of MMC representing 50% or more of the combined voting power of MMC's then outstanding voting securities;
(2) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of MMC, and any new director (other than a director designated by a person who has entered into an agreement with MMC to effect a transaction described in clause (1), (3), or (4) of this Paragraph VI(b)) whose election by the Board of Directors of MMC or nomination for election by MMC's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;
(3) the stockholders of MMC approve a merger or consolidation of MMC with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of MMC outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) 50% or more of the combined voting power of the voting securities of MMC or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of MMC (or similar transaction) in which no "person" (as hereinabove defined) acquired 50% or more of the combined voting power of MMC's then outstanding securities; or
(4) the stockholders of MMC approve a plan of complete liquidation of MMC or an agreement for the sale or disposition by MMC of all or substantially all of MMC's assets (or any transaction having a similar effect).
(c) For purposes of the LTIP, a "Change in Control of M&M Capital" shall have occurred if MMC no longer owns (directly or indirectly) at least 50% of the value and voting power of M&M Capital.
VII. ADMINISTRATION
(a) The LTIP Committee shall have the authority in its sole discretion, subject to and not inconsistent with the express provisions of the LTIP, to administer the LTIP and to exercise all the powers and authorities either specifically granted to it under the LTIP or necessary or advisable in the administration of the LTIP, including, without limitation, the authority to make Grants; to determine the persons to whom Grants shall be made; to determine the size of Grants to be made, and the terms and conditions relating to any Grant including vesting; to determine whether, to what extent, and under what circumstances a Grant may be settled, cancelled, forfeited or surrendered; to determine and make Grant Payments and Exception Grant Payments; to construe and interpret the LTIP and any Grant; and to prescribe, amend and rescind rules and regulations relating to the LTIP.
(b) No member of the LTIP Committee shall be liable for any action taken or determination made in good faith with respect to the LTIP or any Grant hereunder.
VIII. OTHER
(a) COMPLIANCE WITH LEGAL REQUIREMENTS. Awarding Grants, making Grant Payments and Exception Grant Payments, and any other terms pursuant to the LTIP shall be subject to applicable Federal and state laws, rules and regulations, and approvals by any regulatory or governmental agency as may be required.
(b) GOVERNING LAW. The LTIP and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of New York, without giving effect to the conflict of laws principles thereof.
(c) EFFECTIVE DATE. The effective date of the LTIP shall be December 31, 1998.
(d) PARTICIPANT RIGHTS. No Participant shall have any claim to receive any Grant (other than the Original Grant) under the LTIP, and there is no obligation for uniformity of treatment with respect to Participants.
(e) NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Nothing in the LTIP or in any Grant shall confer upon any Participant the right to continue in the employ or service of M&M Capital, MMC or an affiliate of MMC, interfere with or limit in any way the right of M&M Capital, MMC or an affiliate of MMC to terminate any Participant's employment or service, or entitle any Participant to remuneration or benefits not set forth in the LTIP.
(f) NONTRANSFERABILITY. Grants shall not be transferable by a Participant except by will or the laws of descent and distribution.
(g) BENEFICIARY DESIGNATION. Using the beneficiary designation form set forth in Exhibit B, a Participant shall have the right, at any time, to designate any person or persons as beneficiary or beneficiaries (both principal
and contingent) to whom payment shall be made in the event of the Participant's death prior to the complete distribution to the Participant of the amounts due under the LTIP. Upon completion of the form, it should be submitted to the LTIP Committee. A Participant may change a beneficiary designation by completing a new form and submitting it to the LTIP Committee. A new beneficiary designation shall cancel any prior beneficiary designation. If a Participant does not have a beneficiary designation in effect, or if all designated beneficiaries predecease the Participant, then any amounts otherwise payable to a beneficiary shall be paid to the Participant's estate. The payment to a designated beneficiary or to the Participant's estate shall completely discharge M&M Capital's obligations under the LTIP.
(h) AMENDMENT; TERMINATION. The Board of Directors of M&M Capital shall, with the consent of MMC, have the right to alter, amend, suspend and terminate the LTIP, provided that, without the written consent of the Participant, no such alteration, amendment, suspension or termination shall adversely affect the terms and conditions of any Grant theretofore made to such Participant under the LTIP.
Exhibit 10.17
MARSH & MCLENNAN COMPANIES, INC.
March 25, 1999
Mr. Jeffrey W. Greenberg
950 Park Avenue
New York, New York 10028
Dear Jeff:
On January 21, 1999, you were appointed President of Marsh & McLennan Companies, Inc. (the "Company") and it was announced in a Company press release that you will succeed A.J.C. Smith as Chief Executive Officer by the end of 1999. In consideration of that appointment and subject to the provisions of this letter, the employment agreement dated October 1, 1995 (the "Employment Agreement") between you and Marsh & McLennan Risk Capital Corp., now Marsh & McLennan Capital, Inc. ("Capital"), is terminated retroactive to January 21, 1999. This letter describes the new status of your employment with Marsh & McLennan Companies, Inc., namely:
o Your future compensation in all respects will be determined by the Compensation Committee of the Board of Directors of the Company.
o Your new status and the termination of the Employment Agreement will not in any way affect or reduce any rights you may have under any compensation plan, program or award of the Company, including without limitation any stock option award, restricted stock award, restricted stock unit award, deferred compensation award (including without limitation the deferred compensation award described in Section 5(c) of the Employment Agreement) or bonus award you have been granted. For purposes of the foregoing plans, programs and awards, your employment by the Company shall be treated as a continuation of your employment by Capital, and any termination of your employment with the Company shall be treated as a termination of your employment with Capital.
o In connection with any stock option or other award previously made to you, or any exercise thereof, you shall not be required to execute any non-competition agreement, and any non-competition or non-solicitation agreement previously executed by you shall be null and void. However, you will be required, in connection with any exercise of a stock option, to execute the Company's standard form of non-solicitation agreement (a copy of which is attached as Exhibit A).
In the event that a "Change in the Control of the Parent," as defined in the Employment Agreement, occurs before the date on which A.J.C. Smith resigns or otherwise terminates his position as Chief Executive Officer of the Company, and if, on or after the date of such Change in Control, your employment is terminated by the Company without Cause (as defined in the Employment Agreement), or if you resign within 60 days after the date of such Change in Control, you will be entitled to receive all of the compensation and benefits described in Section 7(e) of the Employment Agreement as if that agreement were in effect on the date of such termination. In addition,
- You will be entitled to any payments which would be required under Section 8 of the Employment Agreement to the extent those provisions are applicable.
- The provisions of Section 9 of your Employment
Agreement will also apply, so that you will not be
required to mitigate damages after termination of
your employment, except as specifically set forth in
Section 9.
o This letter will not affect your right to receive payments according to the terms of any existing carried interest programs or agreement, including without limitation the provisions relating to the Trident Performance Payment in Section 5(f) of the Employment Agreement, subject to the terms of any applicable award letters which were issued to you in connection therewith. It is, however, anticipated that new arrangements with respect to carried interest programs and agreements will shortly be documented by the Company as previously approved by the Compensation Committee of the Board of Directors, and when documented, the new arrangements shall supersede and replace in all respects your rights under any existing carried interest programs or agreements.
If this letter corresponds with your understanding, please indicate your agreement by signing your name in the space indicated below.
Very truly yours,
MARSH & McLENNAN COMPANIES, INC.
Date:____________________
MMC
MARSH & MCLENNAN COMPANIES
Annual Report 1998
[FRONT COVER: PAINTING OF GALLERY WITH VIEWS OF MODERN ROME]
MMC is a global professional services firm with annual revenues exceeding $7 billion. It is the parent company of Marsh Inc., the world's leading risk and insurance services firm; Putnam Investments, one of the largest investment management companies in the United States; and Mercer Consulting Group, a major global provider of consulting services. More than 50,000 employees provide analysis, advice and transactional capabilities to clients in over 100 countries.
Financial Highlights ================================================================================ For the Three Years Ended December 31, 1998 1997 1996 (in millions, except per share figures) -------------------------------------------------------------------------------- Revenue $7,190 $6,009 $4,404 Income Before Income Taxes(1) $1,305 $ 715 $ 668 Net Income(1) $ 796 $ 434 $ 459 Stockholders' Equity $3,659 $3,233 $1,889 -------------------------------------------------------------------------------- Diluted Net Income Per Share (1) $ 2.98 $ 1.73 $ 2.08 Dividends Paid Per Share $ 1.46 $ 1.26 $ 1.11 Year-end Stock Price $58.44 $49.71 $34.67 ================================================================================ |
(1) MMC's 1997 operating results include the impact of a special charge principally resulting from the combination with Johnson & Higgins.
[The following tables were represented as bar charts in the printed material.]
--------------------- -------------------
Year-end Year-end
Market Capitalization Share Price
(in billions)
--------------------- -------------------
Compound Compound
Annual Growth 28% Annual Growth 22%
--------------------- -------------------
94 $ 5.8 94 26.42
95 6.5 95 29.58
96 7.5 96 34.67
97 13.0 97 49.71
98 15.4 98 58.44
|
Dear Shareholder
MMC had an outstanding 1998. We solidified our long-term leadership in risk and insurance services with the strategic acquisition of Sedgwick Group, the largest European-based insurance broker; continued to expand our investment management business; and strengthened our position as a leading global provider of consulting services.
MMC's revenues for the year rose 20 percent to $7.2 billion from $6.0 billion in 1997. Net income grew 34 percent to $796 million and earnings per share increased 26 percent to $2.98, compared with $592 million and $2.36, respectively, excluding special charges in 1997.
These strong financial results reflect the excellent performance of all our business segments, and I am pleased to report that we see significant potential for continuing to increase earnings. In each of our businesses, we are consolidating our position as provider of choice. As a global firm, we have the resources and perspective to invest the assets of our institutional clients and mutual fund shareholders successfully and to work with clients to find solutions to their problems and respond to the increasingly more complex risks that affect their operations worldwide.
The leadership of MMC will be crucial in the years ahead. The Company is made stronger by the appointment of Jeffrey W. Greenberg, who was elected president in January 1999 and will succeed me as chief executive by the end of this year. Jeff is a respected and experienced professional whose reputation as an innovator was most recently evident in his work as chairman of Marsh & McLennan Capital, our private equity investment subsidiary. This, in addition to his earlier experience as a senior executive of American International Group and at Marsh & McLennan, where he began his professional career in 1976, will serve him well as he assumes his new responsibilities. I am certain that his exceptional talents and professional standards will be an asset to MMC for many years to come.
MMC's financial performance produced excellent results for its shareholders. During the year, we split our stock three-for-two and increased our quarterly dividend 20 percent, continuing our record of increasing total annual dividends paid to shareholders each year since we went public in 1962. The total return on our common stock including dividends was 21 percent in 1998.
Our investment management business, Putnam Investments, had another superb year. It is one of the leading money managers in the United States and its growth continues to exceed that of the industry. Despite market volatility, Putnam reported remarkable earnings growth, margin improvement and high levels of new institutional and mutual fund sales. For the year, revenues grew 22 percent, operating income climbed 46 percent and assets under management rose 25 percent to $294 billion. Mutual fund assets increased 22 percent to $221 billion, supported by investor preference for Putnam's breadth of products and disciplined investment style, as well as the company's strong marketing and sales efforts and award-winning investor services. Institutional assets rose to $73 billion, up 37 percent from 1997, reflecting robust growth in both the defined benefit and defined contribution plan business where Putnam excels, based on its product range, investment skills and client service.
For 1998, our risk and insurance services revenues reached $3.4 billion, an increase of 20 percent from 1997. Our businesses produced solid organic revenue growth and have sound prospects for increased earnings. In early 1999, we created a new holding company for our risk and insurance services business, Marsh Inc. This company reflects the integration of the three respected traditions of Marsh & McLennan, Johnson & Higgins and Sedgwick, which we acquired late in 1998. Sedgwick not only increased the presence of our risk and insurance services business worldwide, but that of our consulting business as well. Our cultures, areas of specialization and work-quality standards are similar, so we are able to combine capabilities with Sedgwick quickly, to deliver significant advantages to our clients. We expect Sedgwick to be accretive to earnings in 2000 based on the significant operating efficiencies and consolidation savings we will achieve.
[Photograph of A.J.C. Smith]
A.J.C. Smith
Marsh & McLennan Capital, our private equity investment firm, also had a very good year as it continued to organize and invest in insurance and related industries. It is forming Trident II, a fund expected to exceed $1 billion in capital commitments from investors for global opportunities in insurance, reinsurance and other financial services companies.
Mercer Consulting Group achieved its financial goal of double-digit revenue growth and margin improvement. Revenues for 1998 were $1.5 billion, up 15 percent over the prior year. Human resource consulting, where Mercer is the global leader, grew 11 percent, with excellent results for all practices. The compensation consulting area was reinforced by the addition of KPMG Peat Marwick's U.S. compensation practice and Control Resources Group, an international firm with particular strength in Asia and Europe. The management consulting business made progress in a very receptive market, capturing large new assignments in the United States and around the world. It expanded its European presence by acquiring one of Germany's top management consulting firms, Dr. Seebauer & Partner.
MMC elected several new members to the Board of Directors in 1998. We welcomed Saxon Riley and Rob White-Cooper, former chairman and chief executive officer, respectively, of Sedgwick, as well as three outside directors: Stephen R. Hardis, Gwendolyn S. King and John D. Ong. Richard S. Hickok and Richard M. Morrow retired from the Board. Richard H. Blum, vice chairman for Marsh Inc., who led Guy Carpenter & Company from 1984 to 1996, also retired. Dick made many important contributions to the firm over his long career, including his recent work on the integration of Johnson & Higgins. We are pleased that he will continue to serve in a consulting role.
As we look to 1999 and beyond, MMC has never been stronger. Over the past few years, we have strengthened our position in each of our business sectors, made strategic acquisitions and delivered excellent performance. In the pages following, the heads of our operating companies respond to questions about their firms' prospects.
MMC's continued success depends on the intelligence and dedication of the men and women who carry out our goals each day. We appreciate their efforts and our shareholders' support as we build the premier professional services firm.
/s/ A.J.C. Smith A.J.C. Smith Chairman and Chief Executive Officer March 5, 1999 |
Performance Over Time
Building on our history of innovation and leadership, MMC is today a $7 billion professional services firm with risk and insurance services, investment management and consulting companies that lead their respective industries. This unique mix is attractive to clients and investors alike, providing depth of specialist expertise and a source of diversified earnings, which have contributed to our excellent long-term performance. The leaders of our operating companies discuss achievements and opportunities for the future.
RISK AND INSURANCE SERVICES
Marsh Inc. has grown and prospered by responding quickly and effectively to changing market conditions and offering increasingly wide-ranging service and advice to its clients. The company's leadership has been reinforced by the recent combination with two of the best-known companies in risk and insurance services. John T. Sinnott, chairman and chief executive officer, shares his thoughts on recent developments and future prospects.
[Pages 6-7: Painting of the Rialto Bridge, Venice]
Please update us on the integration of Johnson & Higgins.
Our firms are fully integrated and I'm pleased to report that the results have exceeded our expectations. Johnson & Higgins had an excellent reputation and was a quality firm. The many compatibilities and complements that we saw in the joining together of our organizations have now been realized.
Quantitatively, you can look at the high levels of client and staff retentions and net new business. We achieved remarkable consolidation savings in 1998, and our 1999 results should reflect additional benefits from the merger. This combination has permanently strengthened our company's earnings power.
Qualitatively, we have created one organization that draws on the best practices and talents of each firm. I believe our company has the greatest expertise and knowledge in our industry, which in turn will benefit all of our clients.
How does the acquisition of Sedgwick strengthen the risk and insurance services business?
We feel the acquisition of Sedgwick is an excellent fit, both strategically and operationally. It was the largest European-based insurance broker with about $1.2 billion in annual risk and insurance services revenues. Our merger combines compatible resources, talented professionals and our excellent reputations to significantly enhance both our client service capabilities and potential for growth.
Sedgwick expands our coverage geographically. In the United Kingdom, Sedgwick's strong direct insurance broking business and London market operations complement Marsh's existing position. We expect to integrate our operations in the United Kingdom in much the same way that we so successfully integrated Johnson & Higgins' operations in the United States. Sedgwick also augments our operations in Continental Europe and Asia Pacific, especially in Australia and New Zealand.
Guy Carpenter & Company, our reinsurance unit, benefits from the Sedgwick acquisition on a worldwide basis. In the United States, we have greater representation in national accounts and facultative reinsurance. Our London practice has been expanded and Far East business has also been enhanced.
Sedgwick has operated in some U.S. cities where Marsh did not have a presence. And while Sedgwick has served a full range of clients, it has a particularly strong base of mid-sized customers, which will reinforce the excellent inroads we made in this market following the Johnson & Higgins merger. Seabury & Smith's program management business will be enhanced by the addition of Sedgwick, as will our specialty practices. Sedgwick also has an excellent claims man-
[The following table was represented as a bar chart in the printed material.]
---------------------
Revenue
(in billions)
---------------------
Compound
Annual Growth 15%
---------------------
94 $1.9
95 2.0
96 1.9
97 2.8
98 3.4
----------
|
agement business, which will add to our capabilities in the United States. We will add to our client base as well as achieve operational efficiencies.
Finally, we also expect to realize significant consolidation savings from the merger, which will be accretive to our earnings beginning in 2000.
What are the prospects for growth in risk and insurance services?
There are significant engines of growth for our industry and, in particular, for our firm. Few organizations--in any industry--can deliver the breadth and scope of our services. Over the last 20 years, we have carefully built a worldwide organization and invested in resources and specializations that are available on a global basis. Our specialist practices, which are organized by industry, type of risk exposure and client-service style, are designed to handle each client's unique insurance needs. This strategy has consistently strengthened client service and contributed to our revenue growth. It should continue to do so, particularly as risks become more complex.
The opportunities for long-term growth worldwide are exciting. In Europe, economic trends of market liberalization, privatization and unification all signal the need for our services. There is also increased awareness of and exposure to product, professional and environmental liabilities, which pose serious threats to commercial clients' earnings.
We are also well positioned in Latin America. In spite of the recent turmoil in its financial markets, this region has had some of the fastest growing economies and highest growth rates in property and casualty insurance products and services for the past decade.
We remain optimistic about the opportunities in Asia Pacific and anticipate that these markets will welcome providers who specialize in advice and services that are critical to asset protection.
[Architectural Drawing]
There have been a number of recent innovations that have expanded the company's approach to risk. Please comment.
In 1998, we had an unprecedented year of new service and product offerings. Our clients are facing risks that are growing not only in number but also in complexity. Working together as partners, we have helped them create new ways to manage and transfer risk, including capital market solutions, which supplement traditional insurance and reinsurance programs. As an example, our new investment banking unit, Marsh & McLennan Securities, worked with our broking specialists in London and Bermuda to arrange a pioneering program for an international aircraft manufacturer that limits the client's liabilities arising from the leasing of aircraft it produces. Another
breakthrough program protects a major newspaper against increases in the price of newsprint.
We have also created innovative programs that protect and enhance a client's earnings stream. These include environmental policies, tax-opinion guarantees, insurance alternatives to credit lines, coverages that facilitate mergers and acquisitions and other financially oriented products. We recently introduced a unique employment practices liability program specifically designed to protect large organizations against the sharp increase in employee lawsuits. In addition, we are applying a comprehensive approach to risks, bundling a wide range of property and liability exposures within a single, multiyear financing solution. This benefits our clients by reducing the cost of the total program and simplifying administration.
Traditionally, companies have looked at financial, strategic, operational and hazard risks separately. More and more, we are seeing a blending of disparate risks. We help our clients combine traditional hazard protection with coverage against financial risks, such as fluctuations in interest and currency rates. Combining all of a company's exposures in a comprehensive approach may produce lower costs and better risk management over time. Our Enterprise Risk Management initiative draws on the expertise of other colleagues within MMC in consulting and investment management, and this unique combination of resources helps us to identify and address the range of exposures that major organizations increasingly face today.
[The following was represented as a pie chart in the printed material.]
1998 Operating Income
by Geographic Region
$613 million
I: United States 55%
II: Europe 30%
III: Canada 6%
IV: Latin America 5%
V: Asia Pacific/Other 4%
What is the function of Marsh & McLennan Capital in the company's risk and insurance services activities?
This operation is a continuation and broadening of our market-making role that began decades ago. Its combination of expertise in insurance and finance has enabled us to take advantage of capital from different funding alternatives. This activity was heightened during the mid-1980s, when we established ACE and EXEL, when clients weren't able to find coverage at any price.
More recently, we have expanded this role by investing in funds to capitalize the insurance industry. In 1994, we launched Trident, an investment fund with approximately $660 million in capital commitments from investors for the global insurance and reinsurance markets. As a follow-up to this extremely successful undertaking, we are forming Trident II, a fund expected to exceed $1 billion.
Marsh & McLennan Capital keeps us at the forefront of financial developments in insurance. Its results have been excellent. Over time, we have built up effectively and carefully a private equity business that reaps financial rewards for our shareholders. Marsh & McLennan Capital's access to MMC's global network of professionals provides it with a significant competitive advantage over other similar private equity investors in identifying attractive investment opportunities.
Please comment on the role technology will play in Marsh's future.
Technology mobilizes our global expertise and enables us to improve the quality of our services to clients. Our communications and database networks connect our professionals with one another and our clients, which fosters teamwork and provides access to a wealth of capabilities and information. For example, we have created an Internet-based tool that clients can access to stay current on all the elements involved in a complex risk management program. Clients can also tap into databases that provide information on a wide range of business, financial and risk subjects, such as the insurance and regulatory environments worldwide.
On the transactional side, we are implementing technology that will vastly improve the collection and analysis of pricing and coverage information in the global markets. It will produce substantial efficiencies and enhance accuracy by substituting electronic processes for the current paper-based methods of conducting insurance transactions. It also gives us improved data handling and retrieval capabilities as well as the ability to conduct more specific research on behalf of our clients.
How do you manage your business in an environment of premium rate reductions?
For many of our professionals, the current down cycle in insurance rates is the only environment that they have ever known. Plentiful capacity and expanded terms and conditions have characterized the U.S. marketplace for 12 years and more recently have been evident in the world's insurance markets. This has created a very competitive market with lower pricing for the transfer of commercial risk.
We've learned to prosper in any environment by constantly examining the way we do business and by making sure that we are at the forefront of industry practices. We emphasize efficiency and are reaping the benefits of expanding geographically. All this positions us to grow profitably as demand for our expertise expands in the world's major economies, as well as in developing countries.
[Architectural Drawing]
INVESTMENT MANAGEMENT
Putnam Investments has been transformed over the last decade, emerging from a group of small to medium-sized firms to hold a commanding presence in investment management. It is today one of the largest and fastest growing money management firms in the United States and is turning its sights globally. Prospects for continued growth are superb, supported by demographic trends throughout the world and investors' growing preference for Putnam's products and services. Lawrence J. Lasser, president and chief executive officer, discusses the company's near- and long-term outlook.
[Pages 12-13: Painting of the Arrival of Aeneas at Carthage]
How would you characterize Putnam's growth and transformation over the last several years?
No matter the measurement period--from 1970, when MMC acquired Putnam and assets were less than $2 billion, or five years ago, when assets were $90 billion--Putnam has experienced strong, even unimaginable, growth. We have emerged from a largely undifferentiated group of small to medium-sized competitors to become an industry leader with $294 billion in assets under management.
To attain this success, we transformed Putnam. We instilled an aggressive, entrepreneurial can-do culture, with an emphasis on profitable growth. Our paramount interest is not in growing the top line or becoming the largest firm--we have aimed to be the best, most profitable company. In addition, we've attempted to manage our growth in terms of asset quality. By that, I mean our goal is not merely to gain new business, but profitable, high value-added business.
In 1998, how has Putnam been affected by the market's volatility?
Historically, the stock market's average annual growth has been 8 percent to 10 percent. In the period from 1995 to 1998, growth exceeded 20 percent for each of those years, which is unprecedented in terms of both its level and duration. An adjustment would seem to be inevitable--unless the rules of the history of the stock market, going back 150 years, suddenly were no longer to apply.
A principal driver of both Putnam's and the industry's growth has been the market. If it is down, then the main generator of Putnam's revenue and profit growth is absent. If the market rises, all firms gain, but not equally. We have succeeded in outdistancing our competitors to the degree that Putnam's marketing and sales in mutual funds, robust defined benefit business, highly competitive defined contribution business and international initiatives have been able to win market share. Putnam's investment-style breadth and above average investment performance also contributed to our growth.
[Architectural Drawing]
Will the market's return to more normal levels affect Putnam adversely?
Putnam's growth rate, which exceeded 30 percent over the last five years, would slow, but our business initiatives--in marketing, sales, distribution, new product and global business development--show no signs of losing momentum. And the need for our services should not lessen either. Institutional clients are required to maintain and fund defined benefit programs on behalf of their employees. Individual customers' retirement aspirations have not changed as a consequence of market turns. The number
of baby boomers moving into retirement and requiring money management expertise will not decline.
Remember that the world's stock markets are replete with innovative companies managed by smart, entrepreneurial people who are prepared to adapt to and exploit change. It is up to us to continue to find and invest in those companies. If we deliver competitive performance, we will get our share of business. If we continue to deliver superior performance, we will get more than our share and in that way cushion any market reversal.
[The following table was represented as a bar chart in the printed material.]
---------------------
Operating Income
(in millions)
---------------------
Compound
Annual Growth 34%
---------------------
94 208
95 244
96 338
97 463
98 677
|
Please comment on Putnam's long-term growth outlook.
Barring any prolonged market downturn, the scenario for Putnam is very positive. The emphasis on retirement planning and the establishment of mutual funds as the preferred savings vehicle in an increasingly savings-oriented society will continue to support Putnam's U.S. growth. Further, non-U.S. markets that share demographic, sociological and economic wealth factors represent a new and largely untapped source of business for a globally focused, U.S.-based money manager like Putnam.
The inherent economics of the investment management business are excellent, where Putnam has been a major factor as measured by its size, breadth, prestige and asset quality. Fundamental demand for and acceptance of the products and services of the industry, and of Putnam in particular, has never been stronger or more widespread. Individuals' need for advice in making financial decisions should continue to grow as their portfolios increase in size and investment options multiply. And their need for a disciplined investment management style that they can count on will intensify. Our professional staff is of the highest caliber, and the diversity of our asset classes and distribution channels gives us great flexibility and coverage.
Would you describe the distinguishing characteristics of Putnam's money management philosophy.
Putnam has built a balanced business by having a presence in all sectors of money management across the entire investment spectrum for individual and institutional investors. We manage equity and fixed income, domestic and global, aggressive and conservative products. We place great importance on delivering consistent and competitive returns for clients through disciplined investment strategies and by strictly adhering to our investment-style guidelines. A globally integrated investment process also distinguishes Putnam, assuring better communication and knowledge sharing in a
team environment. Putnam, in fact, was the first firm to make the transition to a team management approach in the mid-1980s, breaking away from the star system of portfolio managers that has traditionally dominated investment management. While we depend on enormously skilled and gifted individuals, the team process allows us to capture the best aspects of individual thinking and collective judgments.
Please discuss the role technology has played in Putnam's development.
We have benefited from the power of the computer combined with quantitative techniques to support the management of money. For example, technology enables us to screen and test portfolios and to forecast performance by substituting one variable for another. More important, it allows us to measure risk and to gauge what can be earned in relation to the risk taken. This, in turn, has encouraged more specific client mandates.
Technology has revolutionized the service side of Putnam's business for both our individual mutual fund and institutional investors. We recognized early on that beyond excellent investment results, our shareholders, plan sponsors and the intermediaries who distribute our funds want outstanding service. Our solution was to create a "factory" whose product would be superior, almost flawless, service. Putnam's three major service centers in the Boston suburbs--Andover, Quincy and Franklin--each required a high capital investment; they are staffed with dedicated, carefully trained and supervised people and utilize an enormous amount of technology to provide client-focused service.
We have been standard setters in our industry, achieving a series of firsts in using new technology to deliver excellent service. Putnam has been acknowledged for its leadership, having won for the second straight year the prestigious Dalbar "triple crown" award for service to mutual fund investors, variable annuity clients and financial advisors. Putnam was the only company to be recognized for outstanding service in all three categories.
Putnam is one of the first major mutual fund companies to be Year 2000 compliant--one year early. We began to eliminate potential problems starting in early 1995, adjusting hundreds of programs and working with business partners, suppliers and clients to ensure that data from outside the company were acceptable. By year-end 1998, we had already used our upgraded systems to produce shareholder statements. Our internal teams will continue to conduct tests throughout 1999 to ensure we are prepared for the turn of the century.
[The following was represented as a pie chart in the printed material.]
Year-end
1998 Assets
Under Management
$294 billion
I: Funds Retail 66%
II: Defined Benefit 22%
III: Defined
Contribution 12%
What is the position of Putnam's international business?
Putnam began investing internationally more than 25 years ago on behalf of U.S. clients. The aggregate assets we invest internationally today are about $35 billion.
Over the last four years, we have worked to attract assets from non-U.S. sources and have been extremely successful through our activities in Japan and Italy. In 1997, we established a very effective joint venture with Nippon Life Insurance Company, one of the world's largest life insurance companies with a commanding position in the Japanese pension market, to manage money for its institutional clients. We recently strengthened that alliance by taking a stake in Nippon's mutual fund affiliate and are working together to develop a retail mutual fund business in Japan. In 1995, we entered into a joint venture with an Italian financial services organization to develop, manage and distribute mutual funds in Italy. That relationship has also been very profitable. We now manage $3 billion and our partner has expanded its distribution network by a factor of three or four.
In the next five years, our goal is to derive about one-fifth of our total assets from sources outside the United States. A confluence of factors should help us to achieve this. The shift from government-sponsored pension plans to more individual responsibility for retirement financing; the deregulation of banking and financial services enabling foreign participation; the lack of investment management capabilities in many countries; the growing awareness of investment products such as mutual funds--all of these represent enormous long-term global opportunities for select U.S. money managers such as Putnam. Based upon the depth of our investment management skills and resources and, in particular, our strength in investor services and knowledge of distribution, Putnam should become a major global player as we apply our expertise abroad.
[Architectural Drawing]
How would you like Putnam to be perceived by your current and prospective customers?
Putnam has gained prominence in the investment management industry as measured by its size, reputation for excellence, professionalism and uncompromising integrity. Most important, we have grown by keeping our organization centered on--and responsive to--the needs of our clients. Beyond these attributes, I would hope we are recognized for our dedication to the very serious business of delivering investment performance that benefits people's lives. We help our customers--and we have more than 10 million individual mutual fund shareholders--finance their retirements and their children's educations, buy homes and build financial wealth. We are very aware of our responsibilities and consider ourselves fortunate to do such important work.
CONSULTING
A number of trends have come together in the 1990s--demographic, geographic and economic--fueling the demand by organizations for high value-added human resource and management consulting advice worldwide. Mercer Consulting Group is a major global provider of consulting services; it has continued to strengthen and expand its areas of expertise and the geographies in which it operates to position itself as a market leader. Peter Coster, president, addresses Mercer's prospects for growth.
[Pages 18-19: Painting of Rome with the Bridge and Castel St. Angelo by the Tiber.]
Please update us on Mercer Consulting Group's recent performance and tell us how it fits the company's historical growth pattern.
We had an outstanding year in 1998. Revenues increased 15 percent and operating earnings grew 36 percent. Looking back over the past five years, our compound earnings growth rate is 20 percent.
Our recent record is quite consistent with what we have achieved long term. When MMC separated its consulting business from insurance broking in 1975, the Mercer name was unknown outside of Canada, and the business consisted largely of benefits advice in North America. Over the intervening period, Mercer has established itself as a broad-based human resource consulting firm with a leadership position in every major market in the world, and we have added outstanding capabilities in the areas of business strategy, economic and corporate image consulting. Since 1975, revenues and earnings have grown at compound annual rates of 16 percent and 13 percent, respectively.
Our reputation for thought leadership and top quality advice has never been higher, and we continue to attract the most talented people to come work for us. Not surprisingly, this leads to an impressive number of major new client relationships.
What is driving the growth?
The consulting industry benefits from a number of broad economic and social trends--rapid change, global competition, deregulation, technical complexity and the increasing size of many organizations--all of which drive demand for objective, third-party expertise. We also see attractive opportunities for consulting as governments, employers and individuals react and adjust to the increasing burden of state-provided benefits. Part of the opportunity lies in the retirement area, where governments are struggling to provide for the future security of state-funded retirement programs in the face of developments that are leading to fewer tax-paying workers supporting more and more retirees. One leading alternative is increased dependence on the private sector and individuals, which represents opportunities for Mercer. Also, we are finding that the knowledge we have gained on health care cost control in the United States is equally valuable in countries where health care is still largely a governmental responsibility.
Within this broad framework, Mercer's success is linked to our people and our ideas. I believe we have the best.
Our access to capital as part of MMC is also a major advantage. In contrast to many competitors, our network of global locations is wholly owned, which is a big plus in terms of knowledge sharing, level of service and our ability to order client priorities.
[The following table was represented as a bar chart in the printed material.]
94 96.4
95 108.7
96 119.4
97 148.4
98 201.8
How do acquisitions fit Mercer's growth strategy?
We don't make acquisitions with the objective of gaining market share. We make acquisitions to build critical mass where we need it and to secure new customer segments and capabilities where we have gaps. They enable us to achieve a position that accelerates our rate of organic growth.
From a practice standpoint, our recent acquisition activity has been focused on high value-added sectors, such as executive compensation, investment consulting and management consulting. Geographically, we have concentrated on East Asia, Latin America and Continental Europe. In late 1997, for example, Mercer Management Consulting acquired Corporate Decisions, Inc., a strategy consulting firm that is prominent for its advice on building shareholder value. The acquisition of KPMG's U.S. compensation practice in 1998 brings us a number of nationally prominent consultants as well as a new stream of consulting opportunities through KPMG. The addition of Corporate Resources Group, a compensation consulting and human resource data firm with particular strength in Asia and Europe, also strengthens our compensation area. Eager & Associates, which advises investment managers in fund design, product positioning and product development, enhances our investment-related consulting. And Dr. Seebauer & Partner, one of Germany's top management consulting firms with specialization in the financial services industry, is an important addition to our European presence.
[The following was represented as a pie chart in the printed material.]
1998 Revenue
by Practice
$1.5 billion
I: Pension &
Retirement 41%
II: Management
Consulting 17%
III: Health Care 17%
IV: Compensation &
Communication 12%
V: Other Human Resource
Consulting 8%
VI: Economic 5%
Would you discuss the impact of the Foster Higgins integration and what you anticipate for Sedgwick Noble Lowndes.
We integrated Foster Higgins into our organization quickly and have achieved significant consolidation savings, which have contributed to MMC's overall growth and bottom line. We plan to do the same with Sedgwick Noble Lowndes.
The insurance broking side of MMC, through the Johnson & Higgins and Sedgwick acquisitions, strategically drove both of these transactions, which brought a lot of talented people and excellent client relationships to Mercer. This is especially the case for Sedgwick Noble Lowndes, which has been one of Mercer's largest and most highly regarded competitors in human resource consulting in the United Kingdom, Ireland, Australia and Continental Europe.
Please comment on Mercer's businesses outside of the human resource consulting arena.
Mercer Management Consulting is a major player in strategy consulting and its prospects for growth are excellent. It has developed the intellectual capital for helping clients grow and maximize shareholder value. Mercer's book, The Profit Zone, was named one of the ten best business books of 1998 by Business Week, and a new book, Profit Patterns, is slated to appear in the spring of 1999. The marketplace reception for these insights has been excellent. Still, Mercer Management Consulting is a relative newcomer in a market dominated by firms founded decades ago; it will take a while to achieve market leadership. Our plans embrace organic growth, selective acquisition, market-leading intellectual capital and top quality work, and 1998 marked another year of solid progress. Demand for the services of National Economic Research Associates, the leading firm of consulting economists, is also strong, including large assignments in Asia and Latin America relating to deregulation and privatization. Lippincott & Margulies, the leading consultant to major companies on issues of corporate image, has grown significantly.
Where do you see your best growth opportunities?
Wherever we look in the world, companies are under increasing pressure to be more profitable, and Mercer Consulting Group is ideally positioned to help them. We continue to see the major English-speaking countries as excellent markets, and we are also looking to Asia, Europe and Latin America to fuel growth in the longer term. In Europe in particular, we believe the adoption of the euro will trigger changes that will greatly increase the demand for business consulting services of all types. Privatization has also brought formerly government-owned and -operated enterprises into the competitive mix, which continues to generate significant consulting opportunities.
In terms of practice areas, we expect to see a growing convergence of human resource and traditional management consulting. Of all the strategic changes initiated by companies, a large percentage never achieve full potential because their people strategies are not aligned with their business strategies. Our studies show that mobilizing the organization behind change is the most important element in business success--more important even than understanding the market or competition or economics. We believe Mercer is the best qualified of all consulting firms to combine human resource and strategy consulting to bring value to our clients' bottom lines.
[Architectural Drawing]
[Architectural Drawing]
Are you working on other internal synergies?
One of our most important goals presently is to strengthen our global client management process to ensure that we respond to multicountry client issues with the right teams and the right mix of practice expertise. The combinations of Daimler-Chrysler, BP-Amoco and Deutsche Bank-Bankers Trust are standout examples of the ways in which business is becoming ever larger and more global. One way this affects Mercer is that greater numbers of clients are interested in global approaches to human resource issues that are fair and equitable across national borders despite the different social, economic and regulatory environments.
While Mercer continues to have many excellent clients whose businesses are local or regional only, our work is increasingly for multinational organizations, and we need to improve continuously how we use our network of offices to serve them.
Looking to 1999 and beyond, what are Mercer's prospects?
Our near-term financial objectives are to continue our double-digit growth and to further improve profit margins. In this context, a priority is to improve the profitability of the newly acquired Sedgwick Noble Lowndes business.
As to the long term, we are positioned strongly in large and growing markets, and the economic trends favor our business. Mercer has name recognition and an excellent reputation, which we expect to reinforce and enhance. The future looks good.
MMC WORLDWIDE
RISK AND INSURANCE SERVICES
Marsh Inc. is the world's leading risk and insurance services firm. Insurance broking is generally conducted under various forms of the Marsh name and includes the total range of services to identify, value, control, transfer and finance risk. Worldwide reinsurance broking advice and services for insurance and reinsurance companies are provided through Guy Carpenter & Company, Inc. The company structures and places reinsurance coverage and other risk-transfer financing with reinsurance firms and capital markets worldwide. Insurance program management services in the United States and Canada are provided through Seabury & Smith, Inc., which designs, markets and administers specialized insurance programs. The company also provides underwriting management services in North America and the United Kingdom to insurers, primarily for professional liability coverages.
Marsh & McLennan Capital, Inc. originates, structures and manages insurance-related private equity investments on a global basis.
INVESTMENT MANAGEMENT
Putnam Investments, Inc., one of the oldest and largest money management organizations in the United States, offers a full range of both equity and fixed income products, invested domestically and globally, for individual and institutional investors. Putnam, which manages more than 110 mutual funds, has over 900 institutional clients and 10 million individual shareholder accounts. It had $294 billion in assets under management at year-end 1998.
CONSULTING
Mercer Consulting Group, Inc., one of the largest consulting firms in the world, provides advice and services to organizations. William M. Mercer Companies LLC is a market leader in human resource, employee benefit and compensation consulting. Mercer Management Consulting, Inc. is a leader in helping enterprises achieve sustained shareholder value growth through the development and implementation of innovative business designs. National Economic Research Associates, Inc. (NERA), the leading firm of consulting economists, specializes in providing solutions to problems involving competition, regulation, finance and public policy.
[Pages 24-25: Painting of Gallery with Views of Modern Rome]
Financial Contents
27 Management's Discussion and Analysis of Financial Condition and Results of Operations
36 Consolidated Statements of Income
37 Consolidated Balance Sheets
38 Consolidated Statements of Cash Flows
39 Consolidated Statements of Stockholders' Equity and Comprehensive Income
40 Notes to Consolidated Financial Statements
55 Report of Management
55 Report of Independent Auditors
56 Selected Quarterly Financial Data and Supplemental Information (Unaudited)
57 Five-Year Statistical Summary of Operations
Marsh & McLennan Companies, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Marsh & McLennan Companies, Inc. and Subsidiaries ("MMC") is a professional services firm providing risk and insurance services, investment management and consulting. More than 50,000 employees worldwide provide analysis, advice and transactional capabilities to clients in over 100 countries.
MMC is organized in three principal business segments based on the services that each provides. Segment performance is evaluated based on operating income, which is after deductions for directly related expenses but before special charges. The accounting policies of the segments are identical to those used for the consolidated financial statements, described in Note 1 to the consolidated financial statements.
This management's discussion and analysis of financial condition and results of operations contains certain statements relating to future results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. See "Cautionary Language Regarding Forward-Looking Information" on the inside back cover page of this annual report.
The consolidated results of operations follow:
================================================================================
(In millions, except per share figures) 1998 1997 1996
--------------------------------------------------------------------------------
Revenue:
Risk and Insurance Services $ 3,351 $ 2,789 $ 1,907
Investment Management 2,296 1,882 1,338
Consulting 1,543 1,338 1,159
--------------------------------------------------------------------------------
7,190 6,009 4,404
--------------------------------------------------------------------------------
Expense:
Compensation and Benefits 3,565 3,044 2,204
Other Operating Expenses 2,209 1,923 1,425
Special Charges/(Credits), net (4) 244 60
--------------------------------------------------------------------------------
5,770 5,211 3,689
--------------------------------------------------------------------------------
Operating Income $ 1,420 $ 798 $ 715
================================================================================
Net Income $ 796 $ 434 $ 459
================================================================================
Net Income Per Share:
Basic(a) $ 3.11 $ 1.77 $ 2.11
================================================================================
Diluted(a) $ 2.98 $ 1.73 $ 2.08
================================================================================
Average Number of
Shares Outstanding:
Basic(a) 256 245 217
================================================================================
Diluted(a) 264 251 221
================================================================================
|
(a) Information for 1997 and 1996 has been restated to reflect the three-for-two stock distribution in the form of a stock dividend issued on June 26, 1998.
During the third quarter of 1998, MMC announced its offer to acquire Sedgwick Group plc ("Sedgwick"), a London-based holding company of one of the world's leading insurance and reinsurance broking and consulting groups, for total cash consideration of approximately $2.2 billion. On November 3, 1998, MMC announced that all conditions of the merger had been satisfied. On November 16, 1998, MMC remitted approximately $1.9 billion to the United Kingdom receiving agent for immediate distribution to Sedgwick security holders who had tendered outstanding ordinary shares and convertible bonds representing 87.6% and 97.5% of such securities, respectively. The compulsory acquisition of all previously untendered Sedgwick shares was completed in February 1999. MMC has reflected the acquisition of Sedgwick in its results of operations beginning in November 1998.
In 1997, the results of operations reflected MMC's business combination with Johnson & Higgins ("J&H"), completed on March 27, 1997 beginning with the second quarter of 1997.
In 1998, revenue, derived mainly from commissions and fees, rose 20% from 1997 due, in part, to the impact of the J&H transaction, which was not reflected in the results of operations in the first quarter of 1997, as well as the acquisition of Sedgwick in November 1998. Excluding acquisitions and dispositions, revenue grew approximately 11% over 1997. This growth was driven by a 22% increase in revenue in the investment management segment as average assets under management in 1998 were substantially higher than 1997. Risk and insurance services revenue grew 5% for the year reflecting net new business development partially offset by premium rate declines. Also, the consulting segment experienced 12% growth in revenue due to an increased level of services provided in all lines of business.
In 1997, revenue rose 36% from 1996 primarily reflecting the impact of the combination with J&H and the acquisition of Compagnie Europeenne De Courtage d'Assurances et de Reassurances ("CECAR") in January 1997. Excluding acquisitions and dispositions, revenue grew approximately 14% over 1996, principally due to a 41% increase in the investment management segment attributable to higher assets under management. In addition, an increased level of services provided in the retirement consulting area contributed to a 10% growth in revenue from MMC's consulting segment.
In 1998, expenses increased 11% over 1997 primarily reflecting higher compensation and client service related costs in the investment management and consulting segments to support a higher volume of business in 1998. The expense growth in 1998 also reflects one additional quarter of J&H operating expenses in 1998 as compared with 1997 as well as the acquisition of Sedgwick in November 1998. These increases were offset, in part, by approximately $75 million of net integration savings associated with the combination with J&H and the year-over-year impact of the $244 million of special charges recorded in 1997. Of the $75 million net integration savings achieved in 1998, approximately $55 million was realized by risk and insurance services, approximately $15 million by consulting and approximately $5 million by corporate.
Expenses increased 41% in 1997 compared with 1996, primarily due to the combination with J&H, the acquisition of CECAR, and special
charges totaling $244 million. The special charges for 1997 included $168 million of merger costs predominantly related to the combination with J&H, a charge of $61 million related to lease abandonment costs associated with the consolidation of various London operations along with costs to abandon and redevelop MMC's London building and $15 million for the disposal of certain EDP assets, which were written-off in 1997. These charges are explained, in more detail, under the caption Special Charges in this Management's Discussion and Analysis.
Excluding acquisitions, dispositions, and the special charges, expenses grew 12% in 1997 mostly as a result of staff growth in the investment management and consulting segments as well as higher incentive compensation levels in the investment management segment commensurate with very strong operating performance. Client service related costs for investment management also increased resulting from the higher level of business activity.
Net income for 1996 included a tax adjustment that reduced the income tax provision by $40 million. The tax adjustment primarily related to the permanent deployment of funds outside the United States in a tax-efficient manner and favorable state and local tax developments in the U.S. The net impact of the tax adjustment and net special charges increased earnings per share in 1996 by $.01 for the year.
Effective January 1, 1998, MMC adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which was effective for fiscal years beginning after December 15, 1997. As described more fully in Note 3 to the consolidated financial statements, SFAS No. 130 established standards for reporting and displaying comprehensive income and its components; such comprehensive income information is included in Note 3 to the consolidated financial statements.
In 1998, MMC adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which was effective for fiscal years beginning after December 15, 1997. The required segment disclosure is provided in Note 16 to the consolidated financial statements.
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." The new standard did not change the measurement or recognition of those plans, but revised pension and other postretirement benefit plan disclosures. MMC adopted SFAS No. 132 in fiscal 1998 and the required disclosure is provided in Note 6 to the consolidated financial statements.
In 1998, MMC adopted the American Institute of Certified Public Accountants Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This statement provided guidance on accounting for the costs of internal use software and is effective for fiscal years beginning after December 15, 1998, with earlier adoption encouraged.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard, which establishes new accounting and reporting requirements for derivative instruments, is effective for fiscal years beginning after June 15, 1999. MMC does not expect the adoption of this standard to have a material impact on its results of operations or consolidated financial condition.
Risk and Insurance Services
The operations within this segment provide risk and insurance services to insureds, insurance underwriters and other brokers. J&H Marsh & McLennan, Inc. is a world leader in providing risk management and insurance broking services. Guy Carpenter & Co. provides reinsurance broking services to insurance and reinsurance risk takers worldwide and Seabury & Smith provides insurance program management services to individuals, businesses and their employees, and associations and other affinity groups and their members. In addition, Marsh & McLennan Capital provides services principally in connection with originating, structuring and managing insurance and related industry investments. The recently acquired Sedgwick operations are being integrated into the various businesses noted above.
Insurance broking services are provided to clients primarily in connection with risk management and the insurance placement process and involve analyzing various types of property and liability loss exposures including large and complex risks that require access to global insurance markets. Services include insurance broking and risk transfer activities and professional consulting services on risk management issues, including risk analysis, coverage requirements, self insurance and alternative insurance and risk financing methods, as well as claims collection, injury management and loss prevention. Insurance placement services include the placement of insurance coverages with insurers worldwide, sometimes involving other intermediaries.
Reinsurance broking services primarily involve acting as an intermediary for insurance and reinsurance organizations on all classes of reinsurance. The intermediary assists the insurer by providing advice, placing reinsurance coverage with reinsurance organizations located around the world, placing risk transfer financing with capital markets, and furnishing related services such as actuarial, financial and regulatory consulting, portfolio analysis and catastrophe modeling. Generally, the purpose of reinsurance is to spread the risk of primary insurance or the reinsurance thereof to lessen the concentration of risk with any one insurance or reinsurance company.
The insurance program management operation primarily designs, places and administers life, health, accident, disability, automobile, homeowners and professional liability and other insurance programs usually on a group marketing basis to individuals, businesses and their employees, and associations and other affinity groups and their members in the United States and Canada. In addition, it provides underwriting management services to insurers in the United States, Canada and the United Kingdom, principally for professional liability coverages.
MMC has been instrumental in the formation of several substantial insurance and reinsurance entities. Marsh & McLennan Capital is also an adviser to The Trident Partnership L.P., an independent private investment partnership formed in 1994 to make private equity investments in the global insurance and reinsurance industry.
Revenue attributable to the risk and insurance services segment consists primarily of fees paid by clients; commissions and fees paid by insurance and reinsurance companies; interest income on funds held in a fiduciary capacity for others, such as premiums and claims proceeds; and placement services revenues earned from insurance carriers. Through Marsh & McLennan Capital, MMC receives compensation in various forms including fees and dividends,
as well as appreciation that has been realized on sales of MMC's holdings in insurance and related industry entities.
Revenue generated by risk and insurance services is fundamentally derived from the value of services provided to clients and markets, and is affected by premium rate levels in the property and casualty insurance markets and available insurance capacity because compensation is frequently related to the premiums paid by insureds. Revenue is also affected by fluctuations in the amount of risk retained by insurance and reinsurance clients themselves and by insured values, the development of new products, markets and services, new and lost business, merging of clients and the volume of business from new and existing clients, as well as by interest rates for fiduciary funds. Placement services revenue includes payments or allowances by insurance companies based upon such factors as the overall volume of business placed by the broker with that insurer, the aggregate commissions paid by the insurer for that book during specific periods, or the loss performance to the insurer of that business.
The results of operations for the risk and insurance services segment are presented below:
================================================================================ (In millions of dollars) 1998 1997 1996 -------------------------------------------------------------------------------- Revenue $3,351 $2,789 $1,907 Expense(a) 2,738 2,293 1,544 -------------------------------------------------------------------------------- Operating Income $ 613 $ 496 $ 363 ================================================================================ Operating Income Margin 18.3% 17.8% 19.0% ================================================================================ (a) Excluding special charges, which are detailed below. |
Revenue
Revenue for the risk and insurance services segment grew 20% over 1997 primarily due to the fact that 1998 was the first full year of combined operations after the merger with J&H, whereas 1997 had only three quarters. Furthermore, the Sedgwick acquisition was completed late in the fourth quarter of 1998, adding somewhat to revenue growth in 1998. Excluding acquisitions and dispositions, risk and insurance services revenue rose approximately 5%. Insurance broking revenue, which represented 74% of risk and insurance services, grew 5% reflecting net new business development partially offset by continued premium rate declines in virtually all lines of coverage. The increased level of net new business development was primarily concentrated in the United States and the United Kingdom. Revenues from reinsurance broking and insurance program management increased by 5% and 6%, respectively, in 1998.
In 1997, risk and insurance services revenue increased 46% primarily due to the J&H transaction, the acquisitions of CECAR, a French insurance and reinsurance broking operation, and the acquisition of Albert H. Wohlers & Co., a U.S.-based insurance program management operation offset, in part, by the year-over-year impact of the sale of Frizzell in 1996. Excluding the effect of acquisitions and dispositions, risk and insurance services revenue grew 4% in 1997, as revenue rose 3% in insurance broking and 6% in insurance program management while reinsurance broking fell 2% in 1997 from 1996 levels. The increase in insurance broking revenue, which represented 76% of risk and insurance services revenue in 1997, primarily reflected net new business development partially offset by declines in commercial property and casualty premium rates.
Expense
Risk and insurance services expenses increased 19%, largely attributable to the business combination with J&H, which was effective as of the end of the first quarter of 1997 resulting in 1998 having one additional quarter of expense, and the acquisition of Sedgwick in November 1998. Excluding acquisitions and dispositions, expenses increased approximately 2% from 1997 reflecting salary progressions for continuing staff and higher technology and systems spending. The increases in spending were offset by the realization of approximately $55 million of net integration savings related to the J&H transaction.
In 1997, risk and insurance services expenses increased 48% primarily due to the impact of acquisitions. Excluding acquisitions and dispositions, expenses increased approximately 1% from 1996.
Investment Management
The operations within the investment management segment provide services primarily under the "Putnam" name. The services, which are performed principally in the United States, include securities investment advisory and management services consisting of investment research and management, and accounting and related services for a group of publicly held investment companies (the "Putnam Funds"). A number of the open-end funds serve as funding vehicles for variable insurance contracts. Investment management services are also provided to corporate profit-sharing and pension funds, state and other government and public employee retirement funds, university endowment funds, charitable foundations, collective investment vehicles (both U.S. and non-U.S.) and other domestic and foreign institutional accounts. Putnam serves as transfer agent, dividend disbursing agent, registrar and custodian for the Putnam Funds and provides custody services to several external clients. In addition, Putnam provides administrative and trustee (or custodial) services for employee benefit plans (in particular 401(k) plans), IRA's and other clients for which it receives compensation pursuant to service and trust or custodian contracts. Putnam also acts as principal underwriter of the shares of the open-end Putnam Funds, selling primarily through independent broker/dealers, financial planners and financial institutions, including banks, and directly to certain large 401(k) plans and other institutional accounts. Shares of open-end funds are generally sold at their respective net asset value per share plus a sales charge, which varies depending on the individual fund and the amount purchased. Essentially all Putnam Funds are available with a contingent deferred sales charge in lieu of a front-end load. The related prepaid dealer commissions initially paid by Putnam to broker/dealers for distributing such funds are recovered through charges and fees received over a number of years.
Putnam's revenue is derived primarily from investment management and 12b-1 fees received from the Putnam Funds and institutional accounts. Fees paid by the Putnam Funds are approved annually by the trustees or shareholders of the Putnam Funds and are charged at various rates depending on the individual mutual fund or account and are usually based upon a sliding scale in relation to the level of assets under management and, in certain instances, are also based on investment performance. The management of Putnam and the trustees of the Putnam Funds regularly review the fund fee structure in light of fund performance, the level and range of services provided, industry
conditions and other relevant factors. Putnam also receives compensation for providing certain shareholder and custody services.
The results of operations for the investment management segment are presented below:
================================================================================ (In millions of dollars) 1998 1997 1996 -------------------------------------------------------------------------------- Revenue $2,296 $1,882 $1,338 Expense 1,619 1,419 1,000 -------------------------------------------------------------------------------- Operating Income $ 677 $ 463 $ 338 ================================================================================ Operating Income Margin 29.5% 24.6% 25.3% ================================================================================ |
Revenue
Putnam's revenue increased 22% in 1998 reflecting significant growth in the level of average assets under management on which management fees are earned. Assets under management aggregated $294 billion at December 31, 1998 compared with $235 billion at December 31, 1997 reflecting $28 billion of net new sales of mutual funds and net additional investments by institutional accounts, as well as a $31 billion growth in market value related to an increase in securities market levels during the year.
Putnam's revenue increased 41% in 1997 reflecting record growth in the level of average assets under management. Net new sales of mutual funds and net additional investments by institutional accounts amounted to $33 billion while higher securities markets contributed $29 billion to the growth in assets under management.
Expense
Putnam's expenses increased 14% in 1998 primarily reflecting increased client service-related costs, including the amortization of deferred commissions, resulting from the higher level of business activity as well as increased incentive compensation.
In 1997, Putnam's expenses increased 42% reflecting the effect of staff growth to support new business, increased incentive compensation levels commensurate with very strong operating performance and increased client service-related costs, including a new service center, resulting from the higher level of business activity.
Year-end and average assets under management are presented below:
================================================================================
(In billions of dollars) 1998 1997 1996
--------------------------------------------------------------------------------
Mutual Funds:
Domestic Equity $153 $119 $ 80
Taxable Bond 38 36 30
Tax-Free Income 16 16 16
International Equity 14 11 8
--------------------------------------------------------------------------------
221 182 134
--------------------------------------------------------------------------------
Institutional Accounts:
Fixed Income 25 22 19
Domestic Equity 32 21 14
International Equity 16 10 6
--------------------------------------------------------------------------------
73 53 39
--------------------------------------------------------------------------------
Year-end Assets $294 $235 $173
================================================================================
Average Assets $264 $206 $149
================================================================================
|
Assets under management and revenue levels are particularly affected by fluctuations in domestic and international bond and stock market prices and by the level of investments and withdrawals for current and new fund shareholders and clients. They are also affected by investment performance, service to clients, the development and marketing of new investment products, the relative attractiveness of the investment style under prevailing market conditions and changes in the investment patterns of clients. Revenue levels are sensitive to all of the factors above, but in particular, to significant changes in bond and stock market valuations.
Putnam provides individual and institutional investors with a broad range of equity and fixed income investment products and services designed to meet varying investment objectives and which affords its clients the opportunity to allocate their investment resources among various alternative investment products as changing worldwide economic and market conditions warrant.
At the end of 1998, assets held in equity securities represented 73% of assets under management, compared with 69% in 1997 and 62% in 1996, while investments in fixed income products represented 27%, compared with 31% last year and 38% in 1996.
Consulting
Through Mercer Consulting Group, Inc., the operations within this segment provide consulting services to a predominantly corporate clientele from locations around the world, in the areas of human resources and employee benefit programs, including retirement, health care, and compensation; and general management consulting, which comprises strategy, operations and marketing. Economic consulting and analysis services are also provided.
William M. Mercer provides professional advice and services to corporate, government and institutional clients worldwide. Consultants help organizations design, implement, administer and communicate retirement, compensation and other human resource programs, and provide other types of actuarial advice. In addition, William M. Mercer advises the management of health care providers on various business issues.
Mercer Management Consulting, Inc. provides advice and assistance on issues of business strategy, primarily to large corporations in North America, Europe and Asia. Consultants help senior executives more fully understand the behavior of their customers, optimize the economics of their business, and structure their organizations, processes and systems to achieve their strategic goals.
National Economic Research Associates, Inc. ("NERA"), a firm of consulting economists, serves law firms, corporations, trade associations and governmental agencies. NERA provides research and analysis of economic and financial issues arising in litigation, regulation, public policy and management.
The major component of Mercer Consulting Group's revenue is fees paid by clients for advice and services. In addition, commission revenue is received from insurance companies for the placement of individual and group insurance contracts, primarily life, health and accident coverages. A relatively small amount of revenue is derived from brokerage commissions in connection with a registered securities broker dealer.
Revenue in the consulting business is affected by changes in clients' industries including government regulation, as well as new products and services, the stage of the economic cycle and broad trends in employee demographics and in the management of large organizations.
The results of operations for the consulting segment are presented below:
================================================================================ (In millions of dollars) 1998 1997 1996 -------------------------------------------------------------------------------- Revenue $1,543 $1,338 $1,159 Expense(a) 1,341 1,190 1,040 -------------------------------------------------------------------------------- Operating Income $ 202 $ 148 $ 119 ================================================================================ Operating Income Margin 13.1% 11.1% 10.3% ================================================================================ (a) Excluding special charges, which are detailed below. |
Revenue
Consulting services revenue increased 15% in 1998 reflecting an increase in the level of services provided as well as the impact of the combination with J&H, the Sedgwick acquisition and several small acquisitions. Partially offsetting these increases was the impact of a transfer of certain business lines to Automatic Data Processing ("ADP"), as part of a strategic alliance, in October 1997. Excluding acquisitions and dispositions, consulting's revenue increased approximately 12% in 1998. Retirement consulting revenue, which represented 41% of the consulting segment, grew 11% over 1997 principally due to a higher level of services provided. In addition, revenue rose 22% in the economic consulting practice, 18% in global compensation consulting, 8% in health care consulting and 6% in general management consulting due to a higher volume of business in these practice lines in 1998.
In 1997, consulting services revenue increased 15% reflecting the J&H combination as well as an increase in the level of services provided partially offset by the business transfer to ADP. Adjusting for the impact of acquisitions and dispositions, consulting's revenue increased approximately 10% in 1997. Retirement consulting revenue, which represented 43% of the consulting segment, grew 10% over 1996 reflecting higher worldwide request for services. In addition, revenue rose 24% in the global compensation practice, 8% in general management consulting and 1% in health care consulting in 1997.
Expense
Consulting services expenses increased 13% in 1998. Excluding acquisitions and dispositions, expenses increased approximately 9% reflecting the effect of staff growth to support new business, higher incentive compensation commensurate with strong operating performance along with compensation expense increases. These increases were partially offset by approximately $15 million of realized net integration savings related to the J&H transaction.
Consulting services expenses increased 14% in 1997. Excluding acquisitions and dispositions, expenses increased approximately 9% reflecting salary progressions, the impact of staff growth to support new business and investments in information technology systems and networks.
Special Charges, net
In 1996, MMC recorded, among others, a $17 million special charge for costs associated with restructuring certain elements of its insurance and reinsurance back-office operations in London. MMC was committed to implementing this plan; however, within three months of its approval, J&H was acquired. Consequently, the plan was temporarily suspended in order to evaluate it in light of the J&H transaction and its U.K. operation. In the fall of 1997, it was determined that the plan could proceed and negotiations were finalized to lease office space to house the back office group which would enable MMC to achieve the planned economies. After a build-out of the space, the group moved into their new location in the summer of 1998. Before the staff reduction portion of the plan could be implemented, the acquisition of Sedgwick was announced and the plans needed to be evaluated again in light of this potential change in circumstances, which would occur only if the governmental approvals were secured and no other suitor out-bid MMC's offer. The acquisition of Sedgwick became unconditional in the fourth quarter of 1998 and, with Sedgwick's substantial presence in the U.K., it was determined that the remaining staff reduction plan could no longer be executed. As a result, the remaining reserve of $15 million was reversed in 1998. While MMC still intends to complete a staff reduction plan, the acquisition of Sedgwick will require a total reassessment of the individuals and the severance benefits to be offered and the accrual for such charges will be recorded when all of the appropriate requirements are met. Partially offsetting this credit in 1998 is an $11 million charge associated with acquisition related stock unit awards issued to certain senior employees of Sedgwick in 1998.
The $244 million of special charges for 1997 included $168 million of merger costs predominantly related to the combination with J&H, a charge of $61 million related to lease abandonment costs associated with the consolidation of various London operations along with costs to abandon and redevelop MMC's London building and $15 million for the disposal of certain EDP assets, which were written-off in 1997. Of the total $244 million of special charges, $224 million was applicable to risk and insurance services, $17 million related to consulting and $3 million was recorded in general corporate. The net impact of the special charges was $158 million after tax, or $.63 per diluted share.
The $168 million of merger costs, which related to employees and offices of MMC, included personnel-related expenses principally involving severance and related benefits associated with the reduction of approximately 1,300 positions worldwide ($117 million), costs related to the planned consolidations of approximately 30 offices ($38 million) and other integration costs ($13 million). In addition, $143 million of merger costs for planned reductions of over 900 positions and consolidations of approximately 50 offices of J&H were allocated to the cost of the acquisition. The utilization of these charges is summarized in Note 4 to the consolidated financial statements. In 1998, the actions contemplated by these plans were substantially completed and the remaining actions are expected to be completed in early 1999.
Of the combined merger-related costs totaling $311 million, cash payments of approximately $86 million and $122 million were made in 1997 and 1998, respectively. Estimated cash payments of
approximately $40 million are expected to be made in 1999. Some accruals, primarily representing future rent under noncancelable leases (net of anticipated sublease income), and salary continuance arrangements, primarily in Canada and the Netherlands, are expected to be paid out over several years.
Management believes the gross annual savings associated with the J&H integration should approximate $200 million when it is completed by the end of 1999, most of which will result from reduced compensation and benefits expense reflecting the elimination of approximately 2,200 positions and lower facilities costs reflecting the consolidation of approximately 80 offices, primarily in the United States. Net annual savings are expected to be approximately $125 million for the full year 1999 after giving effect to incremental goodwill amortization. Net savings of approximately $75 million were realized in 1998.
During 1996, MMC completed the sale of Frizzell for approximately $290 million which resulted in a $33 million pretax gain. In addition, pretax charges aggregating $93 million were recorded representing a provision of approximately $34 million principally for London real estate consolidations; $27 million primarily for severance and related benefits associated with the planned reduction of over 600 employees relating to restructuring certain elements of MMC's insurance and reinsurance back-office operations in London and several office closings; $17 million for goodwill write-offs; and $15 million related to the Lloyd's Reconstruction and Renewal Plan. The net impact of the gain on sale, the special charges and the 1996 tax adjustment discussed in Note 5 increased diluted net income per share by $.01 for the year.
The London insurance and reinsurance operations were restructured because there were duplicative back office groups performing similar functions which could be consolidated into shared services departments at an estimated annual savings of between $20 and $25 million. Of the net $60 million special charge, $49 million was applicable to risk and insurance services, $9 million related to consulting and $2 million was recorded in general corporate.
Of the total charge of $93 million, $25 million of assets were written-off and cash payments of $20 million were made during 1997. During 1998, an additional $6 million of payments were made and $15 million of the reserve was reversed as part of the 1998 net special credit described above. The remaining balance of $27 million relates primarily to the London real estate reserve and it is expected to be paid out over several years. Estimated cash payments of approximately $7 million are expected to be made in 1999.
During 1997, MMC continued the evaluation of its London real estate issues and in the fourth quarter recorded an additional special charge of $61 million relating to the further consolidation of offices and the razing and redevelopment of its London building.
The above actions did not result in any meaningful disruptions of MMC's operations.
MMC is currently in the process of completing its integration plans associated with the acquisition of Sedgwick. This initiative will result in a special charge that will be recorded in 1999. Since this process has not been finalized, the amount of the special charge cannot be quantified at this time. However, MMC expects to achieve gross synergy savings of approximately $200 million associated with the integration of Sedgwick and net annual savings should be similar to that achieved as part of the J&H integration.
Interest
Interest income earned on corporate funds increased to $25 million in 1998 from $24 million in 1997. Interest expense increased to $140 million in 1998 from $107 million in 1997 primarily due to interest expense associated with the incremental debt incurred in November 1998 to finance the Sedgwick acquisition as well as the additional quarter of interest expense in 1998 related to increased bank borrowings associated with the J&H transaction.
Interest income earned on corporate funds increased to $24 million in 1997 compared with $14 million in 1996 due, in large part, to the J&H combination. Interest expense increased to $107 million in 1997 from $61 million in 1996 as a result of increased bank borrowings used to finance the acquisitions of J&H and CECAR as well as the assumption of J&H's long-term debt.
Income Taxes
MMC's consolidated tax rate was 39.00% of income before income taxes in 1998 compared with 39.30% in 1997. In 1997, excluding the tax effect of the special charges, the underlying rate was 38.25%. In 1996, the underlying tax rate was 37.25% (prior to the tax adjustment described below). Comparing the underlying tax rates, the increase in the tax rate was largely attributable to the nondeductibility of goodwill associated with the J&H acquisition and other acquisitions. The overall tax rates are higher than the U.S. federal statutory rate primarily because of provisions for state and local income taxes.
In 1996, MMC recorded a tax adjustment that reduced the income tax provision by $40 million. The tax adjustment primarily related to the permanent deployment of funds outside the United States in a tax-efficient manner and favorable state and local tax developments in the U.S.
Liquidity and Capital Resources
MMC's cash and cash equivalents aggregated $610 million at the end of 1998, an increase of $186 million from the end of 1997.
Operating Cash Flows
MMC generated $1.1 billion of cash from operations in 1998 compared with $415 million in 1997. These amounts reflect the net income earned by MMC in those years adjusted for non-cash charges and working capital changes. Included in the cash flow from operations are the net cash requirements of Putnam's prepaid dealer commissions, which amounted to $75 million in 1998 compared with $140 million in 1997. The tax benefit associated with these prepaid dealer commissions is recorded as a deferred tax liability.
As further explained in Note 15 to the consolidated financial statements, certain present and former English subsidiaries are under review by the Personal Investment Authority concerning the disclosure and advice given to clients regarding certain private pension transactions. The contingent exposure for pension redress and related cost is estimated to be approximately $355 million of which $170 million is expected to be recovered from insurers. Approximately two-thirds of the contingent exposure is associated
with the recently completed Sedgwick acquisition while the balance is associated with other current and former subsidiaries of MMC. All amounts in excess of anticipated insurance recoveries have been reserved for in the accompanying balance sheet. Although the timing and amount of payments relating to the pension review process cannot be predicted with certainty, it may be that MMC will temporarily fund such payments by drawing upon its existing credit lines.
Financing Cash Flows
As previously mentioned, during the fourth quarter, MMC acquired Sedgwick, a
London-based holding company of one of the world's leading insurance and
reinsurance broking and consulting groups, for total cash consideration of
(pound)1.25 billion or approximately $2.2 billion. MMC has initially financed
the transaction with commercial paper that has been supported by a committed
bank facility comprising 19 banks and led by J. P. Morgan. MMC intends to
finalize a permanent financing arrangement, consisting of a combination of
long-term debt and equity, during 1999.
MMC completed its business combination with J&H, a leading insurance broker, on March 27, 1997 for total consideration of approximately $1.8 billion. Approximately one-third of the total consideration was cash and two-thirds MMC's common stock. MMC also purchased CECAR for approximately $200 million during January 1997. The cash portion of these transactions is being financed with bank borrowings.
Financing activities for MMC used cash of $366 million in 1998 and contributed cash of $399 million in 1997. Dividends paid by MMC amounted to $375 million in 1998 ($1.46 per share) and $306 million in 1997 ($1.26 per share). MMC periodically purchases shares of its common stock to meet the requirements of the various stock compensation and benefit programs. MMC purchased 4.1 million shares in 1998 and 3.7 million shares in 1996.
MMC, in connection with the Sedgwick transaction, assumed debt amounting to $108 million at December 31, 1998. This debt consists of $60 million of 7.68% Senior Loan notes, $36 million related to capital leases and $12 million of other borrowings.
During 1997, MMC executed a revolving credit facility with several banks to support its commercial paper borrowings and to fund other general corporate requirements. This noncancelable facility, which expires June 2002, provides that MMC may borrow up to $1.2 billion at market rates of interest which may vary depending upon the level of usage of the facility and MMC's credit ratings. Outstanding borrowings under revolving credit facilities at December 31, 1998 and 1997 amounted to $583 million and $709 million, respectively. Borrowings under revolving credit facilities have been classified as long-term debt based on MMC's intent and ability to maintain or refinance these obligations on a long-term basis. MMC also maintains other credit facilities with various banks, primarily related to operations located outside the United States, aggregating $553 million as of December 31, 1998. MMC has borrowed $25 million under these facilities at December 31, 1998 and has included $15 million of these borrowings in long-term debt in the Consolidated Balance Sheet.
MMC has a fixed rate non-recourse mortgage note agreement due in 2009 amounting to $200 million, at an interest rate of 9.8%, in connection with its interest in its worldwide headquarters building. Also related to the purchase and renovation of the building, MMC has an interest rate swap that fixes the interest rate at approximately 9.5% on $100 million of variable rate borrowings. This swap expired in February 1999.
During 1997, in connection with the J&H transaction, MMC assumed a note payable due 2012 which has an outstanding balance of $86 million at December 31, 1998. Interest on this debt is fixed at 8.62%.
Investing Cash Flows
Investing activities for MMC reduced cash by $587 million in 1998 and by $676 million in 1997. In 1998, cash used for acquisition activity, related to several insurance and reinsurance broking, insurance program management and consulting businesses, was $302 million. In 1997, cash used for acquisition activity, primarily related to J&H and CECAR, was $473 million. MMC's capital expenditures, which amounted to $297 million in 1998 and $202 million in 1997 have primarily related to computer equipment purchases and the refurbishing and modernizing of office facilities.
Market Risk
Certain of MMC's recorded revenues, expenses, assets and liabilities are exposed to the impact of interest rate changes and fluctuations in foreign currency exchange rates. MMC manages its net exposure to interest rate changes by utilizing a mixture of variable and fixed rate borrowings to finance MMC's asset base. Interest rate swaps are utilized on a very limited basis. MMC does not enter into foreign currency or interest rate transactions for trading or other speculative purposes.
MMC had the following investments and debt instruments subject to variable interest rates:
================================================================================ Year Ended December 31, (In millions of dollars) 1998 -------------------------------------------------------------------------------- Cash and cash equivalents invested in certificates of deposit and time deposits $ 520 Fiduciary cash and investments $3,257 Variable rate debt outstanding $3,396 Interest rate swaps $ 140 ================================================================================ |
MMC's results of operations are affected by changes in short-term interest rates and their impact on the above-noted items. Based on the above balances, if short-term interest rates increase by 25 basis points, annual interest income would increase by approximately $9 million; however, this would be partially offset by an $8 million increase in interest expense resulting in a net increase to income before income taxes of $1 million.
The translated values of revenue and expense from MMC's international risk and insurance services and consulting operations are subject to fluctuations due to changes in currency exchange rates. However, the net impact of these fluctuations on MMC's results of operations or cash flows has not been material.
Forward contracts and options are periodically utilized by MMC to limit foreign currency exchange rate exposure on net income and cash flows for specific, clearly defined transactions arising in the ordinary course of its business. At December 31, 1998, MMC primarily had open forward exchange contracts to both sell U.S. dollars for sterling and purchase U.S. dollars for sterling
for underlying principal amounts of $28 million and $70 million, respectively. These contracts were entered into by Sedgwick principally to hedge both firm commitments and anticipated transactions.
Year 2000 Issue
MMC is in the final stages of updating its systems in preparation for the Year 2000. For this purpose, the term "systems" includes computer equipment and software that are commonly thought of as information technology ("IT") systems including accounting, data processing, telephone and other miscellaneous systems, as well as non-information technology ("non-IT") systems, such as embedded technology in MMC's facilities and equipment.
In connection with this project, which began in 1995, MMC and each of its operating segments has undertaken a five-step process consisting of (1) taking an inventory of all technical areas, including hardware, software (application and system), data, third-party services and infrastructure that could potentially be affected by the Year 2000 issue, (2) assessing the scope and severity of the issue, (3) performing necessary remediation, (4) testing/implementation and (5) preparing contingency plans for internal and external failures. Steering committees have been established comprising executive level management in each operating segment, and at the MMC level. The Audit Committee of MMC's Board of Directors is regularly updated on the status of MMC's Year 2000 efforts.
Each operating segment has already enhanced or replaced a number of systems to ensure their Year 2000 readiness. At this time, all of MMC's operating segments are predominantly in the testing/implementation phase of the process for mission critical IT and non-IT systems.
A detailed review and evaluation of Sedgwick's Year 2000 plans has also been conducted. That review determined that the approach adopted by Sedgwick was broadly consistent with MMC's. In January 1999, the individual components of the Sedgwick plans were incorporated into the Year 2000 project plans of the existing operating segments with which they will be aligned. As a result of the integration analysis, it is anticipated that Sedgwick's pre-existing plans will be carried out to completion or, where appropriate, Sedgwick's non-compliant systems will be replaced by MMC's compliant systems. The incremental costs of the Sedgwick plans are included in the amounts shown below.
The total cost of the Year 2000 project is estimated to be $65 million. Of the total cost, $22 million is anticipated to be incurred in 1999, $26 million was expensed during 1998 and $17 million prior to 1998. Such costs do not include expenses incurred in replacing systems and applications in the ordinary course which have the effect of making such systems and applications Year 2000 compliant, but which were not incurred for that specific purpose. Costs of modifying computer software for Year 2000 conversion are being charged to expense as they are incurred and are funded from operating cash flows. No projects have been deferred or canceled as a result of Year 2000 efforts. In 1998, Year 2000 expenses represented approximately 5% of MMC's overall information technology budget. Future costs associated with addressing this issue are not expected to have a material adverse impact on MMC's financial position or results of operations.
MMC expects that all of its mission critical IT and non-IT systems, including those associated with supporting the Sedgwick operations, will be Year 2000 compliant by mid-1999. Non-mission critical IT and non-IT systems that could impact MMC's ability to serve clients and conduct business beyond January 1, 2000 have been assessed and are expected to be Year 2000 ready before the end of 1999. MMC recognizes that there may be some non-mission critical IT and non-IT systems utilized for internal purposes that may not be compliant by the end of 1999. It is expected that these systems will be replaced or phased out of use.
In addition, MMC is continuing its inquiries as to the state of readiness of its significant third party relationships including clients and vendors. This process has included a review of third parties' Year 2000 readiness and the incorporation of certain third party dependencies into MMC's test plans. Although MMC is unable to verify the Year 2000 readiness of third parties, where MMC has been unable to validate the status of a third party, but has received information such that the timing or status of that third party's Year 2000 project does not align with its own, if significant, that supplier has or will be replaced. For example, J&H Marsh & McLennan is notifying clients when responses are not received from insurance companies.
The individual operating segments of MMC are currently in the process of analyzing the operational problems and costs (including loss of revenues) that would be reasonably likely to result from MMC's failure or the failure of certain third parties to complete efforts necessary to achieve Year 2000 readiness on a timely basis. For internal systems, although our expectation is that no significant disruption will occur, MMC's 1999 test plans and contingency processes have been designed to address such a risk. For third party risks, every effort is being made to assess and test those risks. For example, Putnam is actively involved in industry-wide Year 2000 testing. In July 1998, Putnam participated in the "Street-wide Test" carried out under the auspices of the Securities Industry Association. Putnam will participate in all future testing, which will include the simulation of a trading cycle from order entry to settlement in a Year 2000 environment.
MMC is in the process of completing a contingency plan for dealing with the most reasonably likely worst case scenarios presented by the Year 2000 problem. This process has been based, in part, upon MMC's existing disaster recovery process. These analyses and contingency plans will be completed during 1999. While MMC expects its Year 2000 efforts to reduce the scope and likelihood of potential Year 2000 failures, due to the overall uncertainty of the effect of a potential failure in Year 2000 readiness, particularly with respect to MMC's business partners or the communities in which MMC operates, MMC is unable specifically to determine whether any particular failure or groups of failures will have a material adverse impact on MMC.
Other
MMC has been instrumental in developing new sources of insurance capacity. MMC, through Marsh & McLennan Capital, maintains ownership interest in various entities it assisted in organizing. These investments have been classified as available for sale securities and, as discussed more fully in Note 11 to the consolidated financial statements, the aggregate fair value of these holdings is included in long-term securities in the Consolidated Balance Sheets. Marsh & McLennan Capital expects to continue to manage and develop further these activities.
The insurance coverage for potential liability resulting from alleged errors and omissions in the professional services provided by MMC includes elements of both risk retention and risk transfer. MMC believes it has adequately reserved for the self-insurance contingencies. Payments related to the respective self-insured layers are made as legal fees are incurred and claims are resolved and generally extend over a considerable number of years. The amounts paid in that regard vary in relation to the severity of the claims and the number of claims active in any particular year. The long-term portion of this liability is included in other liabilities in the Consolidated Balance Sheets.
MMC's policy for funding its tax qualified U.S. defined benefit retirement plan is to contribute amounts at least sufficient to meet the funding requirements set forth in U.S. employee benefit and tax laws. As illustrated more fully in Note 6 to the consolidated financial statements, the plan has been and continues to be well funded; consequently, MMC has not been able to make a tax deductible contribution since 1986. Because this situation is expected to continue, a 1999 cash contribution is currently not anticipated.
MMC contributes to certain health care and life insurance benefits provided to its retired employees. The cost of these postretirement benefits for employees in the United States is accrued during the period up to the date employees are eligible to retire, but is funded by MMC as incurred. This postretirement liability is included in other liabilities in the Consolidated Balance Sheets.
In September 1997, Putnam adopted the Putnam Investments, Inc. Equity Partnership Plan ("Plan") pursuant to which Putnam is authorized to grant or sell to certain key employees of Putnam or its subsidiaries restricted shares of a new class of common stock of Putnam ("Class B Common Stock") and options to acquire the Class B Common Stock. Such awards or options generally vest over a four-year period. Holders of Putnam Class B shares are not entitled to vote and have no rights to convert their shares into any other securities of Putnam. However, in the event of certain change in control events, Class B shares will be converted into Class A Common Stock on a share for share basis. Awards of restricted stock and/or options may be made under the Plan with respect to a maximum of 12,000,000 shares of Class B Common Stock, which would represent approximately 12% of the outstanding shares on a fully diluted basis. Through December 31, 1998, Putnam has made awards pursuant to the Plan with respect to approximately 7,660,000 shares of Class B Common Stock, including 3,830,000 shares of restricted stock and 3,830,000 shares subject to options. The purpose of the Plan is to foster and promote the long-term success of Putnam and to increase shareholder value by enabling Putnam to attract and retain the services of an outstanding management team and professional staff. Pursuant to an executive compensation agreement, Putnam has also awarded 300,000 restricted stock units and 325,000 options related to Class B Common Stock to a key executive of Putnam.
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
================================================================================ For the Three Years Ended December 31, 1998 (In millions, except per share figures) 1998 1997 1996 -------------------------------------------------------------------------------- Revenue $ 7,190 $ 6,009 $ 4,404 Expense 5,770 5,211 3,689 -------------------------------------------------------------------------------- Operating income 1,420 798 715 Interest income 25 24 14 Interest expense (140) (107) (61) -------------------------------------------------------------------------------- Income before income taxes 1,305 715 668 Income taxes 509 281 209 -------------------------------------------------------------------------------- Net income $ 796 $ 434 $ 459 ================================================================================ Basic net income per share $3.11 $1.77 $2.11 ================================================================================ Diluted net income per share $2.98 $1.73 $2.08 ================================================================================ Average number of shares outstanding -- Basic 256 245 217 ================================================================================ Average number of shares outstanding -- Diluted 264 251 221 ================================================================================ |
The accompanying notes are an integral part of these consolidated statements.
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
====================================================================================================================================
December 31, 1998 and 1997
(In millions of dollars) 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents (including interest-bearing amounts
of $520 in 1998 and $378 in 1997) $ 610 $ 424
------------------------------------------------------------------------------------------------------------------------------------
Receivables--
Commissions and fees 1,584 1,296
Advanced premiums and claims 129 95
Other 294 160
------------------------------------------------------------------------------------------------------------------------------------
2,007 1,551
Less -- allowance for doubtful accounts (98) (53)
------------------------------------------------------------------------------------------------------------------------------------
Net receivables 1,909 1,498
------------------------------------------------------------------------------------------------------------------------------------
Prepaid dealer commissions -- current portion 315 283
Deferred tax assets 76 166
Other current assets 335 196
------------------------------------------------------------------------------------------------------------------------------------
Total current assets 3,245 2,567
Long-term securities 828 720
Fixed assets, net 1,287 957
Intangible assets 4,826 2,417
Prepaid dealer commissions 799 756
Other assets 886 495
------------------------------------------------------------------------------------------------------------------------------------
$ 11,871 $ 7,912
====================================================================================================================================
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 2,234 $ 237
Accounts payable and accrued liabilities 1,438 1,223
Accrued compensation and employee benefits 841 564
Accrued income taxes 385 234
Dividends payable 104 85
------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 5,002 2,343
------------------------------------------------------------------------------------------------------------------------------------
Fiduciary liabilities 3,257 2,282
Less -- cash and investments held in a fiduciary capacity (3,257) (2,282)
------------------------------------------------------------------------------------------------------------------------------------
-- --
Long-term debt 1,590 1,240
------------------------------------------------------------------------------------------------------------------------------------
Other liabilities 1,620 1,096
------------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies -- --
------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, $1 par value, authorized 6,000,000 shares, none issued -- --
Common stock, $1 par value, authorized 400,000,000 shares,
issued 258,867,125 shares in 1998 and 258,586,766 shares in 1997 259 172
Additional paid-in capital 889 994
Retained earnings 2,412 2,010
Accumulated other comprehensive income 206 167
------------------------------------------------------------------------------------------------------------------------------------
3,766 3,343
Less -- treasury shares, at cost 1,956,825 shares in 1998 and 3,661,256 shares in 1997 (107) (110)
------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 3,659 3,233
------------------------------------------------------------------------------------------------------------------------------------
$ 11,871 $ 7,912
====================================================================================================================================
|
The accompanying notes are an integral part of these consolidated statements.
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
====================================================================================================================================
For the Three Years Ended December 31, 1998
(In millions of dollars) 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Operating cash flows:
Net income $ 796 $ 434 $ 459
Gain on sale of businesses -- (13) (33)
Special charges (credits) (4) 244 93
Depreciation of fixed assets 169 149 119
Amortization of intangible assets 82 50 21
Provision (benefit) for deferred income taxes 79 (139) (21)
Prepaid dealer commissions (75) (140) (339)
Other liabilities 18 22 19
Other, net (23) (1) (11)
Net changes in operating working capital other than cash and cash equivalents --
Receivables (171) (155) (95)
Other current assets 63 (3) (61)
Accrued compensation and employee benefits 175 160 137
Accounts payable and accrued liabilities (121) (111) (21)
Accrued income taxes 147 (79) 29
Effect of exchange rate changes (2) (3) 21
------------------------------------------------------------------------------------------------------------------------------------
Net cash generated from operations 1,133 415 317
------------------------------------------------------------------------------------------------------------------------------------
Financing cash flows:
Net increase (decrease) in commercial paper 425 (161) (165)
Other borrowings 52 2,358 255
Repayments of other borrowings (411) (1,702) (91)
Purchase of treasury shares (242) -- (230)
Issuance of common stock 185 210 143
Dividends paid (375) (306) (239)
Other, net -- -- 2
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (366) 399 (325)
------------------------------------------------------------------------------------------------------------------------------------
Investing cash flows:
Additions to fixed assets (297) (202) (157)
Net cash proceeds from sale of businesses -- 54 242
Acquisitions (302) (473) (7)
Other, net 12 (55) (92)
------------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (587) (676) (14)
------------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 6 (14) (6)
------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 186 124 (28)
Cash and cash equivalents at beginning of year 424 300 328
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 610 $ 424 $ 300
====================================================================================================================================
|
The accompanying notes are an integral part of these consolidated statements.
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
====================================================================================================================================
For the Three Years Ended December 31, 1998
(In millions of dollars, except per share figures) 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance, beginning of year $ 172 $ 77 $ 77
Acquisitions -- 9 --
Common stock split 87 86 --
------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 259 $ 172 $ 77
------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year $ 994 $ 148 $ 155
Acquisitions -- 908 --
Common stock split (87) (86) --
Exercise of stock options and related tax benefits (11) 15 (10)
Issuance of shares under compensation plans and related tax benefits 7 10 8
Issuance of shares under employee stock purchase plans and related tax benefits (14) (1) (5)
------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 889 $ 994 $ 148
------------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance, beginning of year $ 2,010 $ 1,902 $ 1,689
Net income 796(a) 434(a) 459(a)
Cash dividends declared -- (per share amounts:
$1.53 in 1998, $1.29 in 1997 and $1.14 in 1996) (394) (326) (246)
------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 2,412 $ 2,010 $ 1,902
------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 167 $ 145 $ 62
Foreign currency translation adjustments 18(b) (66)(b) 11(b)
Unrealized securities holding gains, net of reclassification adjustments 45(c) 88(c) 72(c)
Minimum pension liability adjustment (24)(d) -- --
------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 206 $ 167 $ 145
------------------------------------------------------------------------------------------------------------------------------------
TREASURY SHARES
Balance, beginning of year $ (110) $ (383) $ (317)
Acquisitions -- 47 --
Purchase of treasury shares (242) -- (230)
Exercise of stock options 97 147 95
Issuance of shares under compensation plans 29 15 10
Issuance of shares under employee stock purchase plans 119 64 59
------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ (107) $ (110) $ (383)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 3,659 $ 3,233 $ 1,889
------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME (a+b+c+d) $ 835 $ 456 $ 542
====================================================================================================================================
|
The accompanying notes are an integral part of these consolidated statements.
Marsh & McLennan Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Marsh & McLennan Companies, Inc. and all its subsidiaries ("MMC"). Various subsidiaries and affiliates have transactions with each other in the ordinary course of business. All significant intercompany accounts and transactions have been eliminated.
Fiduciary Assets and Liabilities: In its capacity as an insurance broker or agent, MMC collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurance underwriters; MMC also collects claims or refunds from underwriters on behalf of insureds. Unremitted insurance premiums and claims are held in a fiduciary capacity. Interest income on these fiduciary funds, included in revenue, amounted to $137 million in 1998, $111 million in 1997 and $94 million in 1996.
Net uncollected premiums and claims and the related payables, amounting to $10.0 billion at December 31, 1998 and $5.2 billion at December 31, 1997, are not included in the accompanying Consolidated Balance Sheets.
In certain instances, MMC advances premiums, refunds or claims to insurance underwriters or insureds prior to collection. These advances are made from corporate funds and are reflected in the accompanying Consolidated Balance Sheets as receivables.
Revenue: Revenue includes insurance commissions, fees for services rendered, placement services revenue earned from insurance carriers, compensation for services provided in connection with the formation or capitalization of various insurers and reinsurers and related firms, including gains from sales of interests in such entities, commissions on the sale of mutual fund shares and interest income on fiduciary funds. Insurance commissions generally are recorded as of the effective date of the applicable policies or, in certain cases (primarily in MMC's reinsurance and London market operations), as of the effective date or billing date, whichever is later. Fees for services rendered are recorded as earned. Sales of mutual fund shares are recorded on a settlement date basis and commissions thereon are recorded on a trade date basis, in accordance with industry practice.
Cash and Cash Equivalents: Cash and cash equivalents primarily consist of certificates of deposit and time deposits, generally with original maturities of three months or less.
Fixed Assets, Depreciation and Amortization: Fixed assets are stated at cost less accumulated depreciation and amortization. Expenditures for improvements are capitalized. Upon sale or retirement, the cost and related accumulated depreciation and amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in income. Expenditures for maintenance and repairs are charged to operations as incurred.
Depreciation of buildings, building improvements, furniture and equipment is provided on a straight-line basis over the estimated useful lives of these assets. Leasehold improvements are amortized on a straight-line basis over the periods covered by the applicable leases or the estimated useful life of the improvement, whichever is less.
The components of fixed assets are as follows:
================================================================================
December 31, 1998 and 1997
(In millions of dollars) 1998 1997
--------------------------------------------------------------------------------
Land and buildings $ 628 $ 471
Furniture and equipment 1,011 878
Leasehold and building improvements 468 406
--------------------------------------------------------------------------------
2,107 1,755
Less -- accumulated depreciation
and amortization (820) (798)
--------------------------------------------------------------------------------
$ 1,287 $ 957
================================================================================
|
Intangible Assets: Acquisition costs in excess of the fair value of net assets acquired are amortized on a straight-line basis over periods up to 40 years. Other intangible assets are amortized on a straight-line basis over their estimated lives. MMC periodically assesses the recoverability of intangible assets by comparing expected undiscounted future cash flows from the underlying business operation with recorded intangible asset balances. If such assessments indicate that the undiscounted future cash flows are not sufficient to recover the related carrying value, the assets are adjusted to fair values.
Prepaid Dealer Commissions: Essentially all of the mutual funds marketed by MMC's investment management segment are also made available with a contingent deferred sales charge in lieu of a front end load. The related commissions, initially paid by MMC to broker/dealers for distributing the funds, are recovered through charges and fees received over a number of years. The prepaid dealer commissions are generally amortized over a six year period.
Capitalized Software Costs: MMC capitalizes certain costs to develop, purchase or modify software for the internal use of MMC in accordance with American Institute of Certified Public Accountants Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which was adopted in 1998. These costs are amortized on a straight-line basis not to exceed five years. Unamortized computer software costs amounting to $110 million and $53 million at December 31, 1998 and 1997, respectively, are included in other assets in the Consolidated Balance Sheets.
Income Taxes: Income taxes provided reflect the current and deferred tax consequences of events that have been recognized in MMC's financial statements or tax returns. U.S. Federal income taxes are provided on unremitted foreign earnings except those that are considered permanently reinvested, which at December 31, 1998 amounted to approximately $500 million. However, if these earnings were not considered permanently reinvested, the incremental tax liability which otherwise might be due upon distribution, net of foreign tax credits, would be approximately $60 million.
Risk Management Instruments: Net amounts received or paid under interest rate swaps and foreign exchange contracts are included in the Consolidated Statements of Income as incurred.
Concentrations of Credit Risk: Financial instruments which potentially subject MMC to concentrations of credit risk consist primarily of cash and cash equivalents and commissions receivable. MMC maintains a policy providing for the diversification of cash and cash equivalents and places its investments in an extensive number of high quality financial institutions to limit the amount of credit risk exposure. Concentrations of credit risk with respect to receivables are limited due to the large number of clients and markets in which MMC does business, as well as the dispersion across many geographic areas.
Per Share Data: Basic net income per share is calculated by dividing net income by the average number of shares of MMC's common stock outstanding. Diluted net income per share is calculated by reducing net income for the potential minority interest associated with unvested shares under the Putnam Equity Partnership Plan. This result is then divided by the average common shares outstanding which have been adjusted for the dilutive effect of potential common shares.
The following reconciles net income to net income for diluted earnings per share and basic weighted average common shares outstanding to diluted weighted average common shares outstanding:
==================================================================================================================================== For the Three Years Ended December 31, 1998 (In millions) 1998 1997 1996 ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 796 $ 434 $ 459 Less: Potential minority interest associated with Putnam Equity Partnership Plan (10) -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net income for diluted earnings per share $ 786 $ 434 $ 459 ==================================================================================================================================== Basic weighted average common shares outstanding 256 245 217 Dilutive effect of stock options 8 6 4 ------------------------------------------------------------------------------------------------------------------------------------ Diluted weighted average common shares outstanding 264 251 221 ==================================================================================================================================== |
Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard, which establishes new accounting and reporting requirements for derivative instruments, is effective for fiscal years beginning after June 15, 1999. MMC does not expect the adoption of this standard to have a material impact on its results of operations or consolidated financial condition.
Reclassifications: Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.
The following schedule provides additional information concerning acquisitions and interest and income taxes paid:
================================================================================
For the Three Years Ended December 31, 1998
(In millions of dollars) 1998 1997 1996
--------------------------------------------------------------------------------
Purchase acquisitions:
Assets acquired, excluding cash $ 3,345 $ 2,832 $ 10
Liabilities assumed (852) (1,165) (3)
Issuance of debt and other obligations (2,191) (221) --
Shares issued -- (973) --
--------------------------------------------------------------------------------
Net cash outflow for acquisitions $ 302 $ 473 $ 7
================================================================================
Interest paid $ 164 $ 92 $ 60
Income taxes paid $ 305 $ 471 $ 200
================================================================================
----------
|
Effective January 1, 1998, MMC adopted SFAS No. 130, "Reporting Comprehensive Income," which requires the reporting and display of comprehensive income and its components. The adoption of SFAS No. 130 had no impact on MMC's results of operations or consolidated financial condition. Net unrealized gains and losses on MMC's available for sale securities as well as foreign exchange gains or losses, which prior to adoption were reported separately in stockholders' equity, are now included in other comprehensive income. Prior year consolidated financial statements have been reclassified to conform to the requirements of SFAS No. 130.
The components of other comprehensive income are as follows:
====================================================================================================================================
For the Three Years Ended December 31, 1998
(In millions of dollars) 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation adjustments $ 18 $ (66) $ 11
Unrealized securities holding gains, net of income taxes of $39, $60 and $45 in 1998, 1997 and 1996 71 111 83
Less: Reclassification adjustment for gains included in net income, net of income taxes of $14, $13
and $6 in 1998, 1997 and 1996 (26) (23) (11)
Minimum pension liability adjustment, net of income taxes of $16 (24) -- --
------------------------------------------------------------------------------------------------------------------------------------
$ 39 $ 22 $ 83
====================================================================================================================================
|
The components of accumulated other comprehensive income are as follows:
================================================================================
December 31, 1998 and 1997
(In millions of dollars) 1998 1997
--------------------------------------------------------------------------------
Foreign currency translation adjustments $(124) $(142)
Unrealized securities holding gains 354 309
Minimum pension liability adjustment (24) --
--------------------------------------------------------------------------------
$ 206 $ 167
================================================================================
|
Acquisitions: In the fourth quarter of 1998, MMC consummated a business combination with Sedgwick Group plc ("Sedgwick"), a London-based holding company of one of the world's leading insurance and reinsurance broking and consulting groups, for total cash consideration of approximately $2.2 billion, which has been initially funded with commercial paper borrowings. The business combination is being accounted for using the purchase method of accounting. Accordingly, goodwill of approximately $2.0 billion resulting from the preliminary purchase price allocation is being amortized over 40 years. Assets acquired and liabilities assumed have been recorded at their estimated fair values and are subject to adjustment when purchase accounting is finalized in 1999.
In March 1997, MMC consummated a business combination with Johnson & Higgins ("J&H"), a privately-held risk and insurance services and employee benefit consulting firm. MMC agreed to pay total consideration of approximately $1.8 billion consisting of $600 million in cash and approximately $1.2 billion or 29.4 million shares (adjusted to reflect subsequent stock splits) of MMC's common stock. Approximately $1.3 billion was paid at closing or shortly thereafter and approximately $500 million is being paid in annual installments over the four years following the closing. The business combination is being accounted for using the purchase method of accounting. Accordingly, goodwill of approximately $1.7 billion which resulted from the purchase price allocation is being amortized over 40 years. In arriving at fair value, MMC discounted the market value of the $1.2 billion stock issuance by $120 million reflecting certain transfer restrictions associated with the shares issued. MMC allocated the cost of the acquisition to assets acquired and liabilities assumed based on its estimate of fair values. No intangible assets, other than goodwill, were acquired as part of the business combination with J&H.
An agreed upon number of shares issued in connection with the J&H transaction carry restrictions and, consequently, cannot be sold in the first and second years following the closing. In addition, approximately 2.4 million of the 29.4 million shares of common stock were placed in escrow for a period of up to two years in order to secure indemnification obligations with respect to representations and warranties.
The following unaudited pro forma summary presents the consolidated results of operations of MMC as if the Sedgwick business combination had occurred on January 1, 1997 and as if the J&H combination had occurred on January 1, 1996. The pro forma results are shown for illustrative purposes only and do not purport to be
indicative of the results which would have been reported if the business combinations had occurred on the dates indicated or which may occur in the future. The pro forma information reflected below includes the impact of pretax special charges in 1998 of $201 million recorded by Sedgwick prior to its being acquired by MMC, primarily related to pension redress issues discussed in Note 15, and pretax special charges recorded by MMC of $244 million in 1997 and $60 million in 1996 discussed in Note 12.
================================================================================ Year Ended December 31, (In millions of dollars, except per share figures) 1998 1997 1996 -------------------------------------------------------------------------------- Revenue $ 8,646 $ 7,902 $ 5,552 Net Income 641 427 482 Basic net income per share 2.42 1.63 1.96 Diluted net income per share 2.31 1.60 1.93 ================================================================================ |
During 1998, MMC also acquired or increased its interest in several other insurance and reinsurance broking, insurance program management, and consulting businesses for a total cost of $413 million in transactions accounted for as purchases. The cost of these acquisitions exceeded the fair value of net assets acquired by $422 million.
During 1997, MMC also acquired or increased its interest in several other insurance and reinsurance broking and consulting businesses for a total cost of $285 million in transactions accounted for as purchases. The cost of these acquisitions exceeded the fair value of net assets acquired by $317 million. In addition, MMC issued approximately 1.4 million shares of common stock (adjusted to reflect subsequent stock splits) in connection with the acquisition of an insurance program management business accounted for as a pooling of interests.
During 1996, MMC acquired an insurance broking business and various other insurance and reinsurance broking assets for a total cost of $13 million in transactions accounted for as purchases. The cost of these acquisitions exceeded the fair value of net assets acquired by $8 million.
Dispositions: As part of the combination with Sedgwick, MMC acquired several insurance underwriting companies that were already in run-off along with consulting businesses not compatible with its existing operations. MMC intends to sell these operations in the near future and accordingly, $84 million of net assets of these businesses at December 31, 1998 are included in other current assets in the Consolidated Balance Sheet as assets to be sold. The net assets at December 31, 1998 are stated at their estimated realizable value.
During 1997, MMC sold an insurance program management business and a consulting operation for $54 million and recognized pretax gains of $13 million.
During 1996, MMC sold The Frizzell Group Limited ("Frizzell") for approximately $290 million and recognized a pretax gain of $33 million.
In 1997, as part of the integration of J&H, MMC adopted plans to consolidate duplicative offices and reduce staff. The estimated cost of the plans relating to employees and offices of J&H ("J&H Plan") amounted to $143 million and was allocated to the cost of the acquisition. Merger related costs for employees and offices of MMC ("MMC Plan") amounted to $168 million and were recorded as part of a special charge in 1997.
The $143 million allocated to the cost of the J&H acquisition included $69 million of costs principally related to the planned consolidations of approximately 50 offices and $74 million for employee related costs, primarily severance and related benefits associated with the reduction of over 900 positions worldwide. The $168 million recorded as part of the MMC special charge included $117 million of severance and related benefits associated with the reduction of approximately 1,300 positions worldwide; $38 million of costs principally related to the planned consolidations of approximately 30 offices; and $13 million for other integration related costs. The office consolidation costs primarily represent future rent under noncancelable leases (net of anticipated sublease income) and lease termination payments.
The utilization of the charges is summarized as follows:
================================================================================
Balance
Initial Utilized Utilized Dec. 31,
(In millions of dollars) Balance in 1997 in 1998 1998
--------------------------------------------------------------------------------
J&H Plan:
Termination payments to
employees $ 70 $ (17) $ (37) $ 16
Other employee related costs 4 (2) (1) 1
Future rent under
noncancelable leases 45 (1) (5) 39
Leasehold termination costs 24 (4) (13) 7
--------------------------------------------------------------------------------
$ 143 $ (24) $ (56) $ 63
================================================================================
Number of employee
terminations 900 (600) (250) 50
Number of office
consolidations 50 (10) (35) 5
================================================================================
MMC Plan:
Termination payments to
employees $ 117 $ (44) $ (58) $ 15
Future rent under
noncancelable leases 21 (2) (4) 15
Leasehold termination costs 17 (10) (2) 5
Other integration related costs 13 (6) (2) 5
--------------------------------------------------------------------------------
$ 168 $ (62) $ (66) $ 40
================================================================================
Number of employee
terminations 1,300 (800) (450) 50
Number of office
consolidations 30 (10) (17) 3
================================================================================
|
In January 1999, the final group of nearly 100 employees who were determined to be redundant under the Plans were severed from employment with MMC. The remaining real estate actions are expected to be completed during 1999. The remaining balances, primarily representing future rent under noncancelable leases and salary continuance arrangements, primarily in Canada and the Netherlands, are expected to be paid out over several years.
Income before income taxes shown below is based on the geographic location to which such income is attributable. Although income taxes related to such income may be assessed in more than one jurisdiction, the income tax provision corresponds to the geographic location of the income.
(In millions of dollars) 1998 1997 1996
--------------------------------------------------------------------------------
Income before income taxes:
U.S $ 897 $ 510 $ 437
Other 408 205 231
--------------------------------------------------------------------------------
$ 1,305 $ 715 $ 668
================================================================================
Income taxes:
Current--
U.S. Federal $ 284 $ 218 $ 94
Other national governments 89 141 97
U.S. state and local 57 61 39
--------------------------------------------------------------------------------
430 420 230
--------------------------------------------------------------------------------
Deferred--
U.S. Federal 30 (55) 48
Other national governments 49 (71) (40)
U.S. state and local -- (13) (29)
--------------------------------------------------------------------------------
79 (139) (21)
--------------------------------------------------------------------------------
Total income taxes $ 509 $ 281 $ 209
================================================================================
|
The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:
================================================================================
December 31, 1998 and 1997
(In millions of dollars) 1998 1997
--------------------------------------------------------------------------------
Deferred tax assets:
Accrued expenses not currently deductible $ 752 $ 616
Accrued retirement benefits 137 117
Differences related to non-U.S. operations 215 119
Depreciation and amortization -- 11
Other 18 15
--------------------------------------------------------------------------------
$ 1,122 $ 878
================================================================================
Deferred tax liabilities:
Depreciation and amortization $ 43 $ --
Prepaid dealer commissions 401 376
Safe harbor leasing 10 14
Unbilled revenue 14 18
Unrealized securities holding gains 192 167
Differences related to non-U.S. operations 71 36
Other 56 18
--------------------------------------------------------------------------------
$ 787 $ 629
================================================================================
Balance sheet classifications:
Current assets $ 76 $ 166
Other assets 359 181
Accrued income taxes (100) (98)
================================================================================
|
A reconciliation from the U.S. Federal statutory income tax rate to MMC's effective income tax rate is as follows:
================================================================================ For the Three Years Ended December 31, 1998 1998 1997 1996 -------------------------------------------------------------------------------- U.S. Federal statutory rate 35.00% 35.00% 35.00% U.S. state and local income taxes-- net of U.S. Federal income tax benefit 2.90 4.40 3.90 Differences related to non-U.S operations (.40) (.20) (1.25) Tax adjustment -- -- (6.00) Other 1.50 .10 (.40) -------------------------------------------------------------------------------- Effective tax rate 39.00% 39.30% 31.25% ================================================================================ |
During 1996, MMC recorded a tax adjustment that reduced the income tax provision by $40 million. The tax adjustment primarily related to the permanent deployment of funds outside of the United States in a tax efficient manner and favorable state and local tax developments in the U.S.
In 1997, MMC received a Notice of Proposed Adjustment from a local field office of the Internal Revenue Service ("IRS") challenging its tax treatment related to 12b-1 fees paid by the Putnam Funds. The notice reflected the preliminary thinking of the IRS field office and did not constitute a formal assertion of liability by the IRS. The notice in question asserts a position contrary to the position enunciated in an IRS 1993 Technical Advice Memorandum. The IRS field office withdrew the Notice of Proposed Adjustment and submitted the matter to the national office of the IRS for consideration in a request for technical advice. Consequently, the issue is under consideration by the IRS. MMC believes its tax treatment of these fees is consistent with current industry practice and applicable requirements of the Internal Revenue Code and previously issued IRS technical advice.
Taxing authorities periodically challenge positions taken by MMC on its tax returns. On the basis of present information and advice received from counsel, it is the opinion of MMC's management that any assessments resulting from current tax audits will not have a material adverse effect on MMC's consolidated results of operations or its consolidated financial position.
In 1998, MMC adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." The new standard does not change the measurement or recognition of those plans, but revises disclosures about pensions and other postretirement benefit plans. Restatement of disclosures for the prior year has been made for comparative purposes.
The following schedules provide information concerning MMC's U.S. defined benefit pension plans and postretirement benefit plans:
====================================================================================================================================
U.S. Pension U.S. Postretirement
Benefits Benefits
December 31, 1998 and 1997 --------------------------------------------------------------
(In millions of dollars) 1998 1997 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 1,434 $ 798 $ 175 $ 88
Service cost 46 39 3 4
Interest cost 104 90 10 10
Actuarial (gain) loss 87 107 (6) 13
Acquisitions 365 464 6 66
Benefits paid (82) (64) (5) (6)
Plan amendments 2 -- (18) --
------------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 1,956 1,434 165 175
------------------------------------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year 1,651 947 -- --
Actual return on plan assets 256 272 -- --
Acquisitions 392 399 -- --
Employer contributions 19 97 5 6
Benefits paid (82) (64) (5) (6)
------------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 2,236 1,651 -- --
------------------------------------------------------------------------------------------------------------------------------------
Funded status 280 217 (165) (175)
Unrecognized net actuarial gain (245) (216) (7) (1)
Unrecognized prior service cost (credit) 10 15 (14) --
Unrecognized transition amount (28) (33) -- --
------------------------------------------------------------------------------------------------------------------------------------
Net asset (liability) recognized $ 17 $ (17) $ (186) $ (176)
====================================================================================================================================
Amounts recognized in Balance Sheet consist of:
Prepaid benefit cost $ 144 $ 111 $ -- $ --
Accrued benefit liability (161) (128) (186) (176)
Intangible asset 10 -- -- --
Accumulated other comprehensive income 24 -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net asset (liability) recognized $ 17 $ (17) $ (186) $ (176)
====================================================================================================================================
|
The weighted average actuarial assumptions utilized in determining the above amounts for the U.S. defined benefit and other postretirement benefit plans as of the end of the year were as follows:
================================================================================
U.S. Pension U.S. Postretirement
Benefits Benefits
-------------------------------------------
1998 1997 1998 1997
--------------------------------------------------------------------------------
Weighted average assumptions:
Discount rate 7.0% 7.25% 7.0% 7.25%
Expected return on plan assets 10.0% 10.0% -- --
Rate of compensation increase 4.0% 4.0% -- --
================================================================================
|
The increases in benefit obligation and plan assets relating to acquisitions pertain to MMC's acquisitions of Sedgwick (and the current terms of its plans) and J&H in 1998 and 1997, respectively. In 1998, the discount rate used to value the liabilities of the U.S. defined benefit pension plans and postretirement benefit plans was decreased to reflect current interest rates of high quality fixed income debt securities.
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the U.S. pension plans with accumulated benefit obligations in excess of plan assets were $279 million, $247 million and $114 million, respectively, as of December 31, 1998 and $239 million, $206 million and $99 million, respectively, as of December 31, 1997.
The components of the net periodic benefit cost for the U.S. defined benefit and other postretirement benefit plans are as follows:
====================================================================================================================================
U.S. Pension Benefits U.S. Postretirement Benefits
For the Three Years Ended December 31, 1998 -----------------------------------------------------------------------
(In millions of dollars) 1998 1997 1996 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Service cost $ 46 $ 39 $ 28 $ 3 $ 4 $ 2
Interest cost 104 90 60 10 10 6
Expected return on plan assets (146) (115) (81) -- -- --
Amortization of prior service cost (credit) 7 7 7 (2) -- --
Amortization of transition asset (4) (4) (4) -- -- --
Recognized actuarial (gain) loss 5 (5) (6) -- (1) (1)
------------------------------------------------------------------------------------------------------------------------------------
$ 12 $ 12 $ 4 $ 11 $ 13 $ 7
====================================================================================================================================
|
The assumed health care cost trend rate was approximately 9% in 1998, gradually declining to 4% in the year 2041. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects (in millions of dollars):
====================================================================================================================================
1-Percentage- 1-Percentage-
Point Increase Point Decrease
------------------------------------------------------------------------------------------------------------------------------------
Effect on total of service and interest cost components $ 2 $ (2)
Effect on postretirement benefit obligation $ 17 $(15)
====================================================================================================================================
|
The following schedules provide information on MMC's significant non-U.S. defined benefit pension plans:
================================================================================
Non-U.S. Pension Benefits
December 31, 1998 and 1997 --------------------------
(In millions of dollars) 1998 1997
--------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 900 $ 724
Service cost 48 41
Interest cost 66 62
Employee contributions 10 10
Actuarial loss 209 10
Acquisitions 1,503 109
Benefits paid (48) (44)
Foreign currency changes (9) (23)
Plan amendments 1 11
--------------------------------------------------------------------------------
Benefit obligation at end of year 2,680 900
--------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year 1,202 948
Actual return on plan assets 172 172
Acquisitions 1,385 128
Company contributions 15 11
Employee contributions 10 10
Benefits paid (48) (44)
Foreign currency changes (15) (23)
--------------------------------------------------------------------------------
Fair value of plan assets at end of year 2,721 1,202
--------------------------------------------------------------------------------
Funded status 41 302
Unrecognized net actuarial gain (35) (170)
Unrecognized prior service cost 8 8
Unrecognized net asset (12) (18)
--------------------------------------------------------------------------------
Net asset recognized $ 2 $ 122
================================================================================
Amounts recognized in Balance Sheet consist of:
Prepaid benefit cost $ 143 $ 140
Accrued benefit liability (141) (18)
--------------------------------------------------------------------------------
Net asset recognized $ 2 $ 122
================================================================================
Weighted average assumptions:
Discount rate 5.9% 7.6%
Expected return on plan assets 8.9% 9.1%
Rate of compensation increase 4.2% 5.4%
================================================================================
|
The increases in benefit obligation and plan assets relating to acquisitions pertain primarily to MMC's acquisitions of Sedgwick and J&H in 1998 and 1997, respectively. In 1998, the discount rates used to value the liabilities of the non-U.S. plans were decreased to reflect current worldwide interest rates. Assumptions, including projected compensation increases and potential cost of living adjustments for retirees, were also revised to reflect current expectations as to future levels of inflation.
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the non-U.S. pension plans with accumulated benefit obligations in excess of plan assets were $1.55 billion, $1.52 billion and $1.40 billion, respectively, as of December 31, 1998 and $41 million, $33 million and $14 million, respectively, as of December 31, 1997. The increase in the pension obligation and related assets in 1998 was due principally to the Sedgwick acquisition.
The components of the net periodic benefit cost for the non-U.S. defined benefit pension plans are as follows:
================================================================================
For the Three Years Non-U.S. Pension Benefits
Ended December 31, 1998 ---------------------------
(In millions of dollars) 1998 1997 1996
--------------------------------------------------------------------------------
Service cost $ 48 $ 41 $ 32
Interest cost 66 62 51
Expected return on plan assets (98) (90) (75)
Amortization of prior service cost 1 -- --
Amortization of transition asset (6) (6) (6)
--------------------------------------------------------------------------------
$ 11 $ 7 $ 2
================================================================================
|
Contribution Plans: MMC maintains certain defined contribution plans for its employees, including the Marsh & McLennan Companies Stock Investment Plan ("SIP"), the Putnam Investments, Inc. Profit Sharing Retirement Plan (the "Putnam Plan") and the Johnson & Higgins Cash Accumulation Plan ("J&H Plan"). Under these plans, eligible employees may contribute a percentage of their base salary, subject to certain limitations. For the SIP and the J&H Plan, MMC matches a portion of the employees' contributions, while under the Putnam Plan the contributions are at the discretion of MMC subject to IRS limitations. The cost of these defined contribution plans was $62 million, $55 million and $40 million for 1998, 1997 and 1996, respectively.
As provided under SFAS No. 123, "Accounting for Stock-Based Compensation," MMC has elected to continue to account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and has provided the required additional pro forma disclosures.
In accordance with the intrinsic value method allowed by APB 25, no compensation cost has been recognized in the Consolidated Statements of Income for MMC's stock option and stock purchase plans and the stock options awarded under the Putnam Investments, Inc. Equity Partnership Plan. Had compensation cost for MMC's stock-based compensation plans been determined consistent with the fair value method prescribed by SFAS No. 123, MMC's net income and net income per share for 1998, 1997 and 1996 would have been reduced to the pro forma amounts indicated in the table below.
The fair value of each of MMC's option grants included in pro forma net income is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 1998, 1997 and 1996, respectively; dividend yield of 3.0% in 1998 and 1997 and 3.5% in 1996; expected volatility of 18.9% in 1998, 17.5% in 1997 and 14.0% in 1996; risk-free interest rate of 5.6% in 1998, 6.5% in 1997 and 6.0% in 1996; and an expected life of five years. The compensation cost as generated by the Black-Scholes model may not be indicative of the future benefit, if any, that may be received by the option holder. The weighted average fair value of options granted during the years ended December 31, 1998, 1997 and 1996 was $11.65, $8.47 and $4.90 per share, respectively.
================================================================================ (In millions of dollars, except per share figures) 1998 1997 1996 -------------------------------------------------------------------------------- Net Income: As reported $ 796 $ 434 $ 459 Pro forma $ 762 $ 414 $ 448 Net Income Per Share: Basic: As reported $3.11 $1.77 $2.11 Pro forma $2.98 $1.69 $2.06 Diluted: As reported $2.98 $1.73 $2.08 Pro forma $2.85 $1.65 $2.03 ================================================================================ |
The pro forma information reflected above may not be representative of the amounts to be expected in future years as the fair value method of accounting contained in SFAS No. 123 has not been applied to options granted prior to January 1995.
Incentive and Stock Award Plans: During 1997, MMC adopted the Marsh & McLennan Companies, Inc. 1997 Employee Incentive and Stock Award Plan (the "Employee Plan") and the Marsh & McLennan Companies, Inc. 1997 Senior Executive Incentive and Stock Award Plan (the "Executive Plan"). The Employee and Executive Plans (the "1997 Plans") replace the 1992 Incentive and Stock Award Plan (the "1992 Plan"). The types of awards permitted under these Plans include stock options, restricted stock, stock bonus units, restricted and deferred stock units payable in MMC common stock or cash, and other stock-based and performance-based awards. The Compensation Committee of the Board of Directors (the "Compensation Committee") determines, at its discretion, which affiliates may participate in the plans, which eligible employees will receive awards, the types of awards to be received and the terms and conditions thereof. The right of an employee to receive an award may be subject to performance conditions as specified by the Compensation Committee. The 1997 Plans contain provisions which, in the event of a change in control of MMC, may accelerate the vesting of the awards. Awards relating to not more than 18,000,000 shares of common stock may be made over the life of the Employee Plan plus shares remaining unused under pre-existing approved stock plans. Awards relating to not more than 7,500,000 shares of common stock may be made over the life of the Executive Plan plus shares remaining unused under pre-existing approved stock plans. There were 24,506,619 and 31,203,936 shares available for awards under the 1997 Plans and prior plans at December 31, 1998 and 1997, respectively.
Stock Options: Options granted under the 1997 Plans may be designated as incentive stock options or as non-qualified stock options. The Compensation Committee shall determine the terms and conditions of the option, including the time or times at which an option may be exercised, the methods by which such exercise price may be paid and the form of such payment. Except under certain limited circumstances, no stock option may be granted with an exercise price of less than the fair market value of the stock at the time the stock option is granted.
Stock option transactions under the 1997 Plans and prior plans are as follows:
====================================================================================================================================
1998 1997 1996
---------------------------- --------------------------- ---------------------------
Weighted Average Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------------------------------------------------------------------------------------------------------------------------------------
Balance at beginning of period 24,332,522 $31.18 25,666,431 $28.11 26,162,385 $26.88
Granted 6,115,165 $60.19 5,166,120 $41.39 4,122,180 $31.70
Exercised (3,427,830) $26.63 (5,865,160) $26.59 (3,861,090) $23.55
Forfeited (527,037) $38.76 (634,869) $31.99 (757,044) $28.50
---------- ---------- ----------
Balance at end of period 26,492,820 $38.27 24,332,522 $31.18 25,666,431 $28.11
====================================================================================================================================
Options exercisable at year-end 14,587,332 $30.01 14,706,623 $28.17 16,468,995 $27.12
====================================================================================================================================
|
The following table summarizes information about stock options at December 31, 1998:
====================================================================================================================================
Options Outstanding Options Exercisable
------------------------------------------------------- ------------------------------------
Weighted Average
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Prices at 12/31/98 Contractual Life Exercise Price at 12/31/98 Exercise Price
------------------------------------------------------------------------------------------------------------------------------------
$16.46-26.44 5,981,218 3.6 years $25.82 5,344,951 $25.77
$26.94-33.35 9,818,089 5.2 years $31.06 8,000,598 $30.93
$35.25-60.59 10,693,513 8.7 years $51.85 1,241,783 $42.35
---------- ----------
$16.46-60.59 26,492,820 6.3 years $38.27 14,587,332 $30.01
====================================================================================================================================
|
Restricted Stock: Restricted shares of MMC's common stock may be awarded and shall be subject to such restrictions on transferability and other restrictions, if any, as the Compensation Committee may impose. The Compensation Committee may also determine when and under what circumstances the restrictions may lapse and whether the participant shall have the rights of a stockholder, including, without limitation, the right to vote and receive dividends. Unless the Compensation Committee determines otherwise, restricted stock that is still subject to restrictions shall be forfeited upon termination of employment.
There were 124,350, 135,000 and 158,400 restricted shares granted in 1998, 1997 and 1996, respectively. MMC recorded compensation expense of $7 million in 1998 and $6 million in 1997 and 1996, related to these shares. Shares that have been granted generally become unrestricted at the earlier of: (1) January 1 of the eleventh year following the grant or (2) the later of the recipient's normal or actual retirement date.
Restricted Stock Units: Restricted stock units, payable in stock or cash, may be awarded under the Plans. The Compensation Committee shall determine the restrictions on such units, when the restrictions shall lapse, when the units shall vest and be paid, and upon what terms the units shall be forfeited.
There were 94,902, 98,856 and 119,277 restricted stock units awarded during 1998, 1997 and 1996, respectively. MMC recorded compensation expense of $6 million, $4 million and $5 million in 1998, 1997 and 1996, respectively, related to restricted stock units.
Deferred Stock Units: Deferred stock units, payable in stock or cash, may be awarded under the Plans. The Compensation Committee shall determine the restrictions on such units, when the restrictions shall lapse, when the units shall vest and be paid, and upon what terms the units shall be forfeited.
There were 557,542 and 445,833 deferred stock units awarded during 1998 and 1997, respectively. MMC recorded compensation expense of $20 million and $6 million in 1998 and 1997, respectively, related to deferred stock units. The 1998 expense includes an $11 million charge associated with acquisition related stock unit awards issued to certain senior employees of Sedgwick (see Note 12).
Putnam Investments, Inc. Equity Partnership Plan: In September 1997, Putnam adopted the Putnam Investments, Inc. Equity Partnership Plan (the "Equity Plan") pursuant to which Putnam is authorized to grant or sell to certain key employees of Putnam or its subsidiaries restricted shares of a new class of common stock of Putnam ("Class B Common Stock") and options to acquire the Class B Common Stock. Such awards or options generally vest over a four-year period. Holders of Putnam Class B shares are not entitled to vote and have no rights to convert their shares into any other securities of Putnam. However, in the event of certain change in control events, Class B shares will be converted into Class A common stock on a share for share basis. Awards of restricted stock and/or options may be made under the Equity Plan with respect to a maximum of 12,000,000 shares of Class B Common Stock which would represent approximately 12% of the outstanding shares on a fully diluted basis. In 1998, Putnam made awards pursuant to the Equity Plan with respect to approximately 3,660,000 shares of Class B Common Stock, including 1,830,000 shares of restricted stock with a value of $94 million and 1,830,000 shares subject to options. In 1997, Putnam made awards with respect to approximately 4,000,000 shares of Class B Common Stock, including 2,000,000 shares of restricted stock with a value of $83 million and 2,000,000 shares subject to options. There were approximately 4,774,000 shares available for grant related to the Equity Plan at December 31, 1998.
Pursuant to an executive compensation agreement, Putnam has also awarded 300,000 restricted stock units with a value of $14 million and 325,000 options related to Class B Common Stock to a key executive of Putnam.
The fair value of each option grant included in the pro forma net income is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for grants in 1998 and 1997: dividend yield of 5.0% for 1998 and 1997; expected volatility of 28.3% in 1998 and 26.4% in 1997; risk-free interest rate of 5.6% in 1998 and 6.1% in 1997; and an expected life of five years. The compensation cost as generated by the Black-Scholes model may not be indicative of the future benefit, if any, that may be received by the option holder. The weighted average fair value of each Class B option was $10.42 in 1998 and $8.30 in 1997.
Stock Purchase Plans: In May 1994, MMC's stockholders approved an employee stock purchase plan (the "1994 Plan") to replace the 1990 Employee Stock Purchase Plan which terminated on September 30, 1994 following its fourth annual offering. Under these plans, eligible employees may purchase shares of MMC's common stock, subject to certain limitations, at prices not less than 85% of the lesser of the fair market value of the stock at the beginning or end of any offering period. Under the 1994 Plan, no more than 12,000,000 shares of MMC's common stock plus the remaining unissued shares in the 1990 Plan may be sold. Employees purchased 1,932,060, 1,855,500 and 1,959,000 shares in 1998, 1997 and 1996, respectively. At December 31, 1998, 5,500,440 shares were available for issuance under the 1994 Plan. During 1995, MMC's Board of Directors approved the Marsh & McLennan Companies Stock Purchase Plan for International Employees (the "International Plan") which is similar to the 1994 Plan. Under the International Plan, no more than 1,500,000 shares of MMC's common stock may be sold. Employees purchased 238,854, 211,500 and 15,000 shares in 1998, 1997 and 1996, respectively. At December 31, 1998, 1,034,646 shares were available for issuance under the International Plan. The fair value of each employee purchase right granted under these Stock Purchase Plans is included in the pro forma net income for 1998, 1997 and 1996 and was estimated using the Black-Scholes model with the following assumptions: dividend yield of 3.0% for 1998 and 1997 and 3.5% for 1996; expected life of one year; expected volatility of 18.9% for 1998, 17.5% for 1997 and 14.0% for 1996; and risk-free interest rate of 4.4% for 1998, 5.5% for 1997 and 5.6% for 1996. The weighted average fair value of each purchase right granted in 1998, 1997 and 1996 was $10.61, $10.96 and $6.38, respectively.
MMC leases office facilities, equipment and automobiles under noncancelable operating leases. These leases expire on varying dates; in some instances contain renewal and expansion options; do not restrict the payment of dividends or the incurrence of debt or additional lease obligations; and contain no significant purchase options. In addition to the base rental costs, occupancy lease agreements generally provide for rent escalations resulting from increased assessments for real estate taxes and other charges. Approximately 95% of MMC's lease obligations are for the use of office space.
At December 31, 1998, the aggregate future minimum rental commitments under all noncancelable operating lease agreements are as follows:
================================================================================
For the Years Ending Gross Rentals Net
December 31, Rental from Rental
(In millions of dollars) Commitments Subleases Commitments
--------------------------------------------------------------------------------
1999 $ 310 $ 12 $ 298
2000 263 9 254
2001 211 6 205
2002 163 4 159
2003 129 3 126
Subsequent years 570 15 555
--------------------------------------------------------------------------------
$1,646 $ 49 $1,597
================================================================================
|
The accompanying Consolidated Statements of Income include net rental costs of $313 million, $265 million and $217 million for 1998, 1997 and 1996, respectively, after deducting rentals from subleases ($7 million in 1998 and 1997 and $8 million in 1996).
MMC has entered into agreements with various service companies to outsource certain information systems activities and responsibilities. Under these agreements, MMC is required to pay minimum annual service charges. Additional fees may be payable depending upon the volume of transactions processed with all future payments subject to increases for inflation. At December 31, 1998, the aggregate fixed future minimum commitments under these agreements are as follows:
================================================================================
Future
For the Years Ending December 31, Minimum
(In millions of dollars) Commitments
--------------------------------------------------------------------------------
1999 $ 68
2000 56
2001 35
2002 28
2003 25
Subsequent years 20
--------------------------------------------------------------------------------
$232
================================================================================
9 Short-term Debt
--------------------------------------------------------------------------------
MMC's outstanding short-term debt is as follows:
================================================================================
December 31, 1998 and 1997
(In millions of dollars) 1998 1997
--------------------------------------------------------------------------------
Commercial paper $2,213 $ 230
Bank loans 10 --
Current portion of long-term debt 11 7
--------------------------------------------------------------------------------
$2,234 $ 237
================================================================================
|
The weighted average interest rates on outstanding commercial paper borrowings at December 31, 1998 and 1997 are 5.3% and 6.1%, respectively.
During 1998, MMC executed an additional revolving credit facility with several banks to support its commercial paper borrowings made to initially finance its acquisition of Sedgwick. This facility, which expires in August 1999, provides that MMC may borrow up to $2.25 billion at market rates of interest which may vary depending upon the level of usage of the facility and MMC's credit ratings.
MMC maintains credit facilities with various banks, primarily related to operations located outside the United States, aggregating $553 million at December 31, 1998. MMC has borrowed $25 million under these facilities and has included $15 million of these borrowings in Long-term Debt.
MMC's outstanding long-term debt is as follows:
================================================================================
December 31, 1998 and 1997
(In millions of dollars) 1998 1997
--------------------------------------------------------------------------------
Commercial paper $ 600 $ --
Revolving credit facility 583 709
Mortgage -- 9.8% due 2009 200 200
Notes payable -- due 2012 86 111
Notes payable -- 7.68% due 2006 60 --
Bank borrowings -- 184
Other 72 43
--------------------------------------------------------------------------------
1,601 1,247
Less current portion 11 7
--------------------------------------------------------------------------------
$1,590 $1,240
================================================================================
|
Commercial paper borrowings of $600 million at December 31, 1998 have been classified as long-term debt based on MMC's intent and ability to maintain or refinance these obligations on a long-term basis.
During 1997, MMC executed a revolving credit facility with several banks to support its commercial paper borrowings and to fund other general corporate requirements. This noncancelable facility, which expires in June 2002, provides that MMC may borrow up to $1.2 billion at market rates of interest which may vary depending upon the level of usage of the facility and MMC's credit ratings. Commitment fees of 7 basis points are payable on any unused portion. The facility requires MMC to maintain consolidated net worth of at least $1.7 billion and contains other restrictions relating to consolidations, mergers and the sale or pledging of assets.
Outstanding borrowings at December 31, 1998 under this revolving credit facility amounted to $583 million and have been classified as long-term debt based on MMC's intent and ability to maintain or refinance these obligations on a long-term basis. The weighted average interest rate associated with these borrowings was 5.6% and 6.0% at December 31, 1998 and 1997, respectively.
MMC has a fixed rate non-recourse mortgage note agreement due in 2009 amounting to $200 million, bearing an interest rate of 9.8%, in connection with its interest in its worldwide headquarters building. In the event the mortgage is foreclosed following a default, MMC would be entitled to remain in the space and would be obligated to pay rent sufficient to cover interest on the notes or, starting in 1999, at fair market value if greater.
MMC has an interest rate swap which was entered into as part of the acquisition and renovation of MMC's worldwide headquarters which fixes the interest rate at approximately 9.5% on $100 million of variable rate borrowings. This swap expired in February 1999. The weighted average interest rate received on this swap at December 31, 1998, 1997 and 1996 was 5.7%, 5.8% and 5.7%, respectively. The difference between the fixed rate and the weighted average rate is included in interest expense in the Consolidated Statements of Income.
MMC has a note payable due 2012, the outstanding balance of which was $86 million and $111 million at December 31, 1998 and 1997, respectively. Interest on this debt is fixed at 8.62%. The decrease from 1997 reflects MMC's repayment of the variable rate portion of the note.
In connection with the Sedgwick transaction, MMC assumed debt amounting to $108 million at December 31, 1998. This debt consists of $60 million of 7.68% Senior Loan Notes, $36 million related to capital leases and $12 million of other borrowings.
Scheduled repayments of long-term debt in 1999 and in the four succeeding years are $11 million, $21 million, $9 million, $1.2 billion and $6 million, respectively.
The estimated fair value of MMC's significant financial instruments is provided below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that MMC would realize upon disposition nor do they indicate MMC's intent or ability to dispose of the financial instrument.
================================================================================
1998 1997
---------------------------------------
December 31, 1998 and 1997 Carrying Fair Carrying Fair
(In millions of dollars) Amount Value Amount Value
--------------------------------------------------------------------------------
Nonderivatives:
Cash and cash equivalents $ 610 $ 610 $ 424 $ 424
Long-term securities 828 828 720 720
Short-term debt 2,234 2,234 237 237
Long-term debt 1,590 1,665 1,240 1,313
Derivatives:
Other assets (liabilities):
Interest rate swaps -- 4 -- (5)
Forward exchange contracts -- 1 -- --
================================================================================
|
Cash and Cash Equivalents: The estimated fair value of MMC's cash and cash equivalents approximates their carrying value.
Long-term Securities: Long-term securities primarily consist of available for sale securities recorded at quoted market prices. MMC also has certain additional long-term securities, for which there are no readily available market prices, amounting to $82 million and $73 million at December 31, 1998 and 1997, respectively, which are carried on a cost basis. Based on present information, MMC believes that the cost of these investments approximates their fair value.
Short-term and Long-term Debt: The fair value of MMC's short-term debt, which consists primarily of commercial paper borrowings, approximates its carrying value. The estimated fair value of MMC's long-term debt is based on discounted future cash flows using current interest rates available for debt with similar terms and remaining maturities. The estimated fair value of borrowings under the revolving credit facility approximates the carrying value.
Interest Rate Swaps: Historically, MMC has managed its net exposure to interest rate changes by utilizing a mixture of variable and fixed rate borrowings to finance MMC's asset base. Interest rate swaps have been utilized on a limited basis to convert variable rate borrowings into fixed rate borrowings. Sedgwick has utilized interest rate swaps to manage its exposure to interest rate movements on its cash and investments as well as its interest expense on borrowings. MMC does not utilize financial instruments for trading or other speculative purposes. The counterparties to these contracts are major financial institutions. Management believes that risk of loss is remote and in any event would be immaterial.
The fair value of these interest rate swaps are the estimated amounts that MMC would pay to terminate the agreements at the reporting date, taking into account the current interest rate environment. Amounts currently due to or from interest rate swap counterparties are recorded in interest expense in the period in which they accrue.
A summary of MMC's interest rate swaps as of December 31, 1998 and 1997 is as follows:
================================================================================
Weighted Average
Interest Rates
Notional Termination ------------------
(In millions of dollars) Amount Dates Receive Pay
--------------------------------------------------------------------------------
1998 --
Receive fixed --
pay variable $599 1999-2003 6.8% 5.9%
Receive variable --
pay fixed $140 1999-2005 5.7% 8.4%
1997 --
Receive variable --
pay fixed $142 1999-2005 5.8% 8.4%
================================================================================
|
Forward Exchange Contracts: At December 31, 1998, MMC primarily had open forward exchange contracts to both sell U.S. dollars for sterling and purchase U.S. dollars for sterling for underlying principal amounts of $28 million and $70 million, respectively. These contracts were entered into by Sedgwick principally to hedge both firm commitments and anticipated transactions.
Unrealized Securities Holding Gains: MMC has classified as available for sale primarily equity securities having an aggregate fair value of $746 million and $647 million at December 31, 1998 and 1997, respectively. Gross unrealized gains, amounting to $546 million and $476 million at December 31, 1998 and 1997, respectively, have been excluded from earnings and reported as accumulated other comprehensive income which is a component of stockholders' equity, net of deferred income taxes.
Proceeds from the sale of available for sale securities for the years ended December 31, 1998, 1997 and 1996 were $62 million, $69 million and $28 million, respectively. Gross realized gains on available for sale securities sold during 1998, 1997 and 1996 amounted to $40 million, $36 million and $17 million, respectively. The cost of securities sold is determined using the average cost method for equity securities.
A portion of insurance fiduciary funds which MMC holds to satisfy fiduciary obligations are invested in high quality debt securities which are generally held to maturity. The difference between cost and fair value of these investments is not material.
During 1998, MMC recorded a special charge of $11 million representing acquisition related stock unit awards issued to certain senior employees of Sedgwick. In addition, as further explained below, a reserve related to a 1996 provision for restructuring of approximately $15 million was reversed in 1998. The resulting net special credit of $4 million increased diluted net income per share by $.01 for the year.
During 1997, MMC recorded special charges totaling $244 million. The net impact of the special charges on diluted net income per share was $.63 for the year. These charges included $168 million of merger costs predominantly related to the combination with J&H, a charge of $61 million related to London real estate, and $15 million for the disposal of certain EDP assets which were written-off in 1997. The merger costs are discussed in detail in Note 4. The $61 million charge for London real estate included $35 million associated with a plan to abandon and demolish a company-owned building and $26 million of lease abandonment costs (net of anticipated sublease income) relating to vacating several leased locations. Payments and write-offs associated with this reserve began in 1998 and are expected to continue for several years. The remaining London real estate reserve is $25 million at December 31, 1998.
During 1996, MMC completed the sale of Frizzell for approximately $290 million which resulted in a $33 million pretax gain. In addition, pretax charges aggregating $93 million were also recorded. The net impact of these special charges and the 1996 tax adjustment discussed in Note 5 increased diluted net income per share by $.01 for the year. These charges included a provision of $34 million primarily for London real estate representing lease abandonment costs for certain leased locations (net of anticipated sublease income); $27 million primarily for severance and related benefits associated with the planned reduction of over 600 employees relating to restructuring certain elements of MMC's insurance and reinsurance back office operations in London and several office closings; $17 million for goodwill write-offs; and $15 million related to the Lloyd's Reconstruction and Renewal Plan.
The utilization of the 1996 special charges is summarized as follows:
====================================================================================================================================
Balance
Initial Non-Cash Payments Amount December 31,
(In millions of dollars) Balance Charges Made Reversed 1998
------------------------------------------------------------------------------------------------------------------------------------
Real estate consolidations $34 $ (8) $ (2) $ -- $24
Staff reductions and office closings 27 -- (12) (15) --
Goodwill write-offs 17 (17) -- -- --
Lloyd's Reconstruction and Renewal Plan 15 -- (12) -- 3
------------------------------------------------------------------------------------------------------------------------------------
$93 $(25) $(26) $(15) $27
====================================================================================================================================
|
The London real estate and staff reduction plans were expected to commence in 1997 and continue through 1998; however, execution of these plans was delayed as a result of the J&H acquisition and put under review. After further evaluation, management still was committed to carrying out these plans and in the fall of 1997 leased space in the East India Dock section of London to begin the consolidation of its back office operations. The leased space was built out and then occupied during the summer of 1998. However, with the acquisition of Sedgwick in the fourth quarter of 1998, management concluded that the remaining staff reduction plan to reorganize the London back office could no longer be executed and, therefore, the remaining severance accrual of $15 million was reversed. The remaining balance, primarily representing future rent under noncancelable leases, is expected to be paid out over several years.
On May 20, 1998, the Board of Directors authorized a three-for-two stock distribution of MMC's common stock, which was issued as a stock dividend on June 26, 1998.
On May 21, 1997, the Board of Directors authorized a two-for-one stock distribution of MMC's common stock, which was issued as a stock dividend on June 27, 1997.
All references to per share amounts have been restated for these stock distributions.
On September 18, 1997, MMC's Board of Directors approved the extension of the benefits afforded by MMC's existing rights plan by adopting a new stockholder rights plan. Under the new plan, Rights to purchase stock, at a rate of one Right for each common share held, were distributed to shareholders of record on September 29, 1997 and automatically attach to shares acquired thereafter. Under the plan, the Rights generally become exercisable after a person or group (i) acquires 15% or more of MMC's outstanding common stock or (ii) commences a tender offer that would result in such a person or group owning 15% or more of MMC's common stock. When the Rights first become exercisable, a holder will be entitled to buy from MMC a unit consisting of one two-hundredth of a share of Series A Junior Participating Preferred Stock of MMC at a purchase price of $260. Alternatively, if any person acquires 15% or more of MMC's common stock except pursuant to an offer for all shares at a price which is fair and not inadequate or if a 15% holder acquires MMC by means of a reverse merger in which MMC and its stock survive, each Right not owned by a 15% or more shareholder would become exercisable for common stock of MMC (or in certain circumstances, other consideration) having a market value equal to twice the exercise price of the Right. The Rights expire on September 29, 2007, except as otherwise provided in the plan.
MMC and its subsidiaries are subject to various claims, lawsuits and proceedings consisting principally of alleged errors and omissions in connection with the placement of insurance or reinsurance and in rendering investment and consulting services. Some of these matters seek damages, including punitive damages, in amounts which could, if assessed, be significant.
On November 24, 1997, an action captioned "Aiena et al. vs. Olsen et al." ("Aiena") was brought in the United States District Court for the Southern District of New York by certain former directors of J&H, which was acquired by MMC in March 1997, against twenty-four selling shareholders of J&H, as well as J&H itself and MMC. The action essentially challenges the allocation of the consideration paid in connection with MMC's combination with J&H as between the defendants who were directors and shareholders of J&H at the time of the transaction and the plaintiffs who were former directors and shareholders of J&H. The complaint asserts, among others, claims for breach of fiduciary duty, federal securities law violations, breach of contract, and ERISA violations. Plaintiffs seek compensatory and punitive damages. Two other former directors of J&H have commenced similar actions (Sempier v. Olsen et al.; and Clements v. Olsen et al.), which are also pending before the United States District Court for the Southern District of New York and are contemplated to be heard together with the Aiena action.
In 1993, several years prior to the acquisition of J&H, the Equal Employment Opportunity Commission ("EEOC") commenced a lawsuit against J&H in the United States District Court for the Southern District of New York. The action alleges that a mandatory retirement policy for directors then in effect at J&H violated the federal Age Discrimination in Employment Act ("ADEA"). In 1995, the District Court ruled in the EEOC's favor that the J&H mandatory retirement policy violated the ADEA. The Court of Appeals for the Second Circuit affirmed that ruling in 1996. The EEOC seeks to recover damages on behalf of certain former directors and a trial on the matter of damages, unless the action is resolved, may be held later in 1999. Pursuant to the Stock Purchase Agreement between MMC and J&H and the stockholders of J&H, MMC will bear one-half of all damages and expenses in this action.
Sedgwick Group plc, since prior to its acquisition, has been engaged in a review of previously undertaken personal pension plan business as required by United Kingdom regulators to determine whether redress should be made to customers. Settlements and related costs previously paid amount to $80 million of which $30 million is due from insurers. The contingent exposure of Sedgwick for pension redress and related costs as of Sedgwick's acquisition by MMC is estimated to be $220 million. Sedgwick had recorded $150 million of reserves and recognized approximately $70 million of insurance recoveries related to this exposure.
Other present and former subsidiaries of MMC are engaged in a comparable review of their personal pension plan businesses, although the extent of their activity in this area, and consequently their financial exposure, was proportionally much less than Sedgwick. The contingent exposure of the present and former non-Sedgwick subsidiaries of MMC for pension redress and related costs is estimated to be approximately $135 million. Approximately $100 million of this amount is expected to be recovered from insurers and accounting reserves have been provided for the remaining balance. Settlements and related costs previously paid total approximately $15 million.
MMC's ultimate exposure from the United Kingdom's personal pension plan review, as presently calculated and including Sedgwick, is subject to a number of variable factors including, among others, equity markets, the rate of response to the pension review mailings, the interest rate established quarterly by the U.K. Pension Investment Authority for calculating compensation, and the precise scope, duration, and methodology of the review as required by that Authority.
As part of the combination with Sedgwick, MMC acquired several insurance underwriting companies that were already in run-off. MMC intends to sell these operations in the near future. Sedgwick had given guarantees with respect to certain liabilities relating to some of these operations.
On the basis of present information, anticipated insurance coverage and advice received from counsel, it is the opinion of MMC's management that the disposition or ultimate determination of these claims, lawsuits, proceedings or guarantees will not have a material adverse effect on MMC's consolidated results of operations or its consolidated financial position.
MMC has adopted SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information" effective with the 1998 year-end. Prior year information has been restated to conform with the current year presentation.
MMC, a professional services firm, is organized based on the different services that it offers. Under this organizational structure, MMC operates in three principal business segments: risk and insurance services, investment management, and consulting. The risk and insurance services segment provides insurance broking, reinsurance broking and insurance program management for business, professional, institutional and public-entity clients. It also provides services principally in connection with originating, structuring and managing insurance and related industry investments. The investment management segment primarily provides securities investment advisory and management services and administrative services for a group of publicly held investment companies. The consulting segment provides advice and services to the managements of organizations primarily in the areas of human resources and employee benefit programs, general management consulting, and economic consulting and analysis.
MMC evaluates segment performance based on operating income, which is after deductions for directly related expenses but before special charges. The accounting policies of the segments are the same as those used for the consolidated financial statements, described in Note 1. Revenues are attributed to geographic areas on the basis of where the services are performed.
Selected information about MMC's operating segments and geographic areas of operation follow:
====================================================================================================================================
For the Three Years Ended Revenue Segment
December 31, 1998 from External Operating Total Depreciation and Capital
(In millions of dollars) Customers Income Assets Amortization Expenditures
------------------------------------------------------------------------------------------------------------------------------------
1998--
Risk and Insurance Services $ 3,351(a) $ 613 $ 8,084 $ 163 $ 216
Investment Management 2,296 677 1,437 45 38
Consulting 1,543 202 1,490 38 40
------------------------------------------------------------------------------------------------------------------------------------
$ 7,190 $ 1,492 $ 11,011 $ 246 $ 294
====================================================================================================================================
1997--
Risk and Insurance Services $ 2,789(a) $ 496 $ 5,231 $ 126 $ 87
Investment Management 1,882 463 1,163 37 81
Consulting 1,338 148 909 32 32
------------------------------------------------------------------------------------------------------------------------------------
$ 6,009 $ 1,107 $ 7,303 $ 195 $ 200
====================================================================================================================================
1996--
Risk and Insurance Services $ 1,907(a) $ 363 $ 3,039 $ 82 $ 67
Investment Management 1,338 338 1,010 27 52
Consulting 1,159 119 652 27 33
------------------------------------------------------------------------------------------------------------------------------------
$ 4,404 $ 820 $ 4,701 $ 136 $ 152
====================================================================================================================================
|
A reconciliation of the totals for the operating segments to the applicable line items in the consolidated financial statements is as follows:
================================================================================
1998 1997 1996
--------------------------------------------------------------------------------
Income Before Income Taxes:
Total segment operating income $ 1,492 $ 1,107 $ 820
Special (charges) credits
(see Note 12) 4 (244) (93)
Gain on sale of Frizzell
(see Note 12) -- -- 33
Corporate (76) (65) (45)
--------------------------------------------------------------------------------
Operating income 1,420 798 715
Interest income 25 24 14
Interest expense (140) (107) (61)
--------------------------------------------------------------------------------
Total income before income taxes $ 1,305 $ 715 $ 668
================================================================================
===============================================================================
Total
Operating Adjustments/ Total
Segments Corporate Eliminations Consolidated
--------------------------------------------------------------------------------
Other Significant Items:
1998 --
Total assets $11,011 $ 5,983(b) $(5,123)(c) $11,871
Depreciation and
amortization 246 5 -- 251
Capital expenditures 294 3 -- 297
1997 --
Total assets 7,303 4,681(b) (4,072)(c) 7,912
Depreciation and
amortization 195 4 -- 199
Capital expenditures 200 2 -- 202
1996 --
Total assets 4,701 2,982(b) (3,138)(c) 4,545
Depreciation and
amortization 136 4 -- 140
Capital expenditures 152 5 -- 157
================================================================================
|
Information by geographic area is as follows:
================================================================================
Revenue
from External Fixed
Customers Assets
--------------------------------------------------------------------------------
Geographic Area:
1998 --
United States $5,235 $ 720
United Kingdom 820 413
Continental Europe 551 85
Other 584 69
--------------------------------------------------------------------------------
$7,190 $1,287
================================================================================
1997 --
United States $4,316 $ 702
United Kingdom 657 136
Continental Europe 564 56
Other 472 63
--------------------------------------------------------------------------------
$6,009 $ 957
================================================================================
1996 --
United States $3,064 $ 573
United Kingdom 595 120
Continental Europe 372 35
Other 373 42
--------------------------------------------------------------------------------
$4,404 $ 770
================================================================================
(a) Includes interest income on fiduciary funds ($137 million in 1998, $111
million in 1997, and $94 million in 1996).
|
(b) Corporate assets primarily include investments in consolidated
subsidiaries, intercompany receivables, unallocated goodwill, and a
portion of MMC's headquarters building.
(c) Primarily represents the elimination of investments in consolidated
subsidiaries and intercompany balances.
The management of Marsh & McLennan Companies, Inc. has prepared and is responsible for the accompanying financial statements and other related financial information contained in this annual report. MMC's financial statements were prepared in accordance with generally accepted accounting principles, applying certain estimates and informed judgments as required. Deloitte & Touche LLP, independent auditors, have audited the financial statements and have issued their report thereon.
MMC maintains a system of internal accounting controls designed to provide reasonable assurance that transactions are executed in accordance with management's authorization, that assets are safeguarded and that proper financial records are maintained. Key elements of MMC's internal controls include securing the services of qualified personnel and proper segregation of duties. Internal auditors monitor the control system by examining financial reports, by testing the accuracy of transactions, and by otherwise obtaining assurance that the system is operating in accordance with MMC's objectives.
The Audit Committee of the Board of Directors is composed entirely of outside directors and is responsible for recommending to the Board the independent auditors to be engaged to audit MMC's financial statements, subject to stockholder ratification. In addition, the Audit Committee meets periodically with internal auditors and the independent auditors, both with and without management, to discuss MMC's internal accounting controls, financial reporting and other related matters. The internal auditors and independent auditors have full and unrestricted access to the Audit Committee.
/s/ Frank J. Borelli Frank J. Borelli Senior Vice President and Chief Financial Officer March 5, 1999 |
The Board of Directors and Stockholders of Marsh & McLennan Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Marsh & McLennan Companies, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Marsh & McLennan Companies, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP New York, New York March 5, 1999 |
Marsh & McLennan Companies, Inc. and Subsidiaries
SELECTED QUARTERLY FINANCIAL DATA AND
SUPPLEMENTAL INFORMATION (UNAUDITED)
====================================================================================================================================
Net Income (Loss)
Net Per Share(a) Dividends Stock
(In millions of dollars, Operating Income --------------- Paid Per Price Range
except per share figures) Revenue Income (Loss) Basic Diluted Share High-Low
------------------------------------------------------------------------------------------------------------------------------------
1998:
First quarter $ 1,776 $ 404 $ 231 $ .90 $ .87 $ .33 $61.67-46.38
Second quarter 1,750 346 193 .75 .72 .33 $63.25-54.83
Third quarter 1,719 335 186 .73 .69 .40 $64.31-46.13
Fourth quarter 1,945 335 186 .73 .70 .40 $61.94-43.38
------------------------------------------------------------------------------------------------------------------------------------
$ 7,190 $ 1,420 $ 796 $3.11 $2.98 $1.46 $64.31-43.38
====================================================================================================================================
1997:
First quarter $ 1,295 $ 277 $ 164 $ .75 $ .73 $ .30 $43.21-34.21
Second quarter 1,540 262 145 .57 .56 .30 $50.17-37.71
Third quarter 1,548 249 140 .55 .54 .33 $53.17-45.50
Fourth quarter 1,626 10 (15) (.05) (.05) .33 $53.33-44.00
------------------------------------------------------------------------------------------------------------------------------------
$ 6,009 $ 798 $ 434 $1.77 $1.73 $1.26 $53.33-34.21
====================================================================================================================================
1996:
First quarter $ 1,123 $ 243 $ 143 $ .65 $ .65 $ .27 $33.88-28.08
Second quarter 1,098 193 115 .53 .51 .27 $32.54-29.67
Third quarter 1,057 174 103 .48 .47 .27 $33.00-29.33
Fourth quarter 1,126 105 98 .45 .45 .30 $38.29-31.83
------------------------------------------------------------------------------------------------------------------------------------
$ 4,404 $ 715 $ 459 $2.11 $2.08 $1.11 $38.29-28.08
====================================================================================================================================
|
(a) Net income per share is computed independently for each of the periods presented. Accordingly, the sum of the quarterly net income per share amounts exceeds the total for the year in 1997.
All per share amounts have been restated for a three-for-two stock distribution of MMC's common stock, which was issued as a stock dividend on June 26, 1998.
MMC's common stock (ticker symbol:MMC) is traded on the New York, Chicago, Pacific and London stock exchanges. As of February 26, 1999, there were 26,100 stockholders of record.
Marsh & McLennan Companies, Inc. and Subsidiaries
FIVE-YEAR STATISTICAL SUMMARY OF OPERATIONS
====================================================================================================================================
Compound
For the Five Years Ended December 31, 1998 Growth Rate
(In millions of dollars, except per share figures) 1998 1997(b) 1996(d) 1995 1994 1993-1998
------------------------------------------------------------------------------------------------------------------------------------
Revenue:
Risk and Insurance Services $ 3,351 $2,789 $1,907 $1,964 $1,887 13%
Investment Management 2,296 1,882 1,338 917 747 32%
Consulting 1,543 1,338 1,159 1,056 933 13%
------------------------------------------------------------------------------------------------------------------------------------
Total Revenue 7,190 6,009 4,404 3,937 3,567 17%
------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Compensation and benefits 3,561 3,044 2,204 1,949 1,740 17%
Other operating expenses 2,209 2,167 1,485 1,293 1,157 17%
------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 5,770 5,211 3,689 3,242 2,897 17%
------------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,420 798(c) 715(e) 695 670 19%
Interest Income 25 24 14 18 12
Interest Expense (140) (107) (61) (63) (51)
------------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes and Cumulative
Effect of Accounting Changes 1,305 715 668 650 631 19%
Income Taxes 509 281 209(f) 247 249
------------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes $ 796 $ 434 $ 459 $ 403 $ 382 19%
====================================================================================================================================
Net Income $ 796 $ 434 $ 459 $ 403 $ 372(g) 19%
====================================================================================================================================
Basic Net Income Per Share Information:
Income Before Cumulative Effect of Accounting Changes $3.11 $1.77 $2.11 $1.84 $1.73 16%
Net Income Per Share $3.11 $1.77 $2.11 $1.84 $1.68(g) 16%
Average Number of Shares Outstanding 256 245 217 219 221
====================================================================================================================================
Diluted Net Income Per Share Information:
Income Before Cumulative Effect of Accounting Changes $2.98 $1.73 $2.08 $1.82 $1.71 15%
Net Income Per Share $2.98 $1.73 $2.08 $1.82 $1.67(g) 15%
Average Number of Shares Outstanding 264 251 221 221 223
====================================================================================================================================
Dividends Paid Per Share $1.46 $1.26 $1.11 $ .99 $ .93 10%
Return on Average Stockholders' Equity 23% 17% 26% 26% 26%
Year-end Financial Position:
Working capital $(1,757)(a) $ 224 $ 192 $ 110 $ 54
Total assets $11,871 $7,912 $4,545 $4,330 $3,831
Long-term debt $ 1,590 $1,240 $ 458 $ 411 $ 409
Stockholders' equity $ 3,659 $3,233 $1,889 $1,666 $1,461
Total shares outstanding (excluding treasury shares) 257 255 217 218 220
Other Information:
Number of employees 54,300 36,400 27,000 27,200 26,100
Stock price ranges--
U.S. exchanges--High $64.31 $53.33 $38.29 $30.04 $29.59
--Low $43.38 $34.21 $28.08 $25.37 $23.75
London Stock Exchange--High (Pd.)38.78 (Pd.)32.71 (Pd.)22.78 (Pd.)19.50 (Pd.)19.65
--Low (Pd.)25.59 (Pd.)20.37 (Pd.)18.29 (Pd.)15.96 (Pd.)15.11
Price/earnings multiple 19.6 28.7 16.7 16.3 15.9
====================================================================================================================================
|
(a) Includes $2.2 billion of commercial paper borrowings made to initially
finance the acquisition of Sedgwick.
(b) Includes the operating results of Johnson & Higgins, an insurance broking
and consulting services firm, acquired in March 1997 and CECAR, a French
insurance services firm.
(c) Includes a special charge of $244 million.
(d) The Frizzell Group Limited was sold in June 1996.
(e) Includes net special charges of $93 million partially offset by a $33
million gain on the sale of Frizzell.
(f) Includes a tax adjustment that reduced income taxes by $40 million.
(g) Reflects the adoption, effective January 1, 1994, of SFAS No. 112,
"Employers' Accounting for Postretirement Benefits."
See Management's Discussion and Analysis of Financial Condition and Results of Operations for discussion of significant items affecting the results of operations in 1998 and 1997.
BOARD OF DIRECTORS AND CORPORATE OFFICERS
BOARD OF DIRECTORS
A.J.C. Smith
Chairman and Chief Executive Officer
Jeffrey W. Greenberg
President
Norman Barham
Vice Chairman, Marsh Inc.
Lewis W. Bernard
Chairman, Classroom, Inc.
Former Chief Administrative
and Financial Officer,
Morgan Stanley & Co., Inc.
Frank J. Borelli
Senior Vice President and
Chief Financial Officer
Peter Coster
President,
Mercer Consulting Group, Inc.
Robert F. Erburu
Former Chairman,
The Times Mirror Company
Ray J. Groves
Chairman, Legg Mason
Merchant Banking, Inc.
Former Chairman, Ernst & Young
Stephen R. Hardis
Chairman, Eaton Corporation
Gwendolyn S. King
Former Senior Vice President,
PECO Energy
The Rt. Hon. Lord Lang of Monkton
Former British Secretary of State
for Trade & Industry
Lawrence J. Lasser
President and Chief Executive Officer,
Putnam Investments, Inc.
David A. Olsen
Former Chairman, Johnson & Higgins
John D. Ong
Chairman Emeritus,
The BFGoodrich Company
George Putnam
Chairman, The Putnam Funds
Saxon Riley
Former Chairman, Sedgwick Group
Adele Smith Simmons
President,
John D. and Catherine T. MacArthur Foundation
John T. Sinnott
Chairman and Chief Executive Officer,
Marsh Inc.
Frank J. Tasco
Former Chairman, MMC
W.R.P. White-Cooper
Chairman and
Chief Executive Officer-International, Marsh Inc.
ADVISORY DIRECTORS
Richard E. Heckert
Former Chairman,
E.I. du Pont de Nemours and Company
Richard S. Hickok
Former Chairman,
KMG Main Hurdman
Dean R. McKay
Former Senior Vice President,
IBM Corporation
Richard M. Morrow
Former Chairman, Amoco Corporation
Arthur C. Nielsen, Jr.
Former Chairman, A.C. Nielsen Company
John M. Regan, Jr.
Former Chairman, MMC
R. J. Ventres
Former Chairman, Borden, Inc.
COMMITTEES OF THE BOARD
Audit
The Rt. Hon. Lord Lang of Monkton, Chairman
Stephen R. Hardis
Gwendolyn S. King
John D. Ong
Adele Smith Simmons
Frank J. Tasco
Compensation
Lewis W. Bernard, Chairman
Robert F. Erburu
Ray J. Groves
Executive
A.J.C. Smith, Chairman
Lewis W. Bernard
Ray J. Groves
Adele Smith Simmons
Frank J. Tasco
OTHER CORPORATE OFFICERS
Francis N. Bonsignore
Senior Vice President,
Human Resources and Administration
Gregory F. Van Gundy
General Counsel and Secretary
INTERNATIONAL ADVISORY BOARD
Abdlatif Y. Al-Hamad (Middle East)
Chairman, Arab Fund for Economic
and Social Development
Raymond Barre (France)
Deputy, National Assembly
Former Prime Minister
Mathis Cabiallavetta (Switzerland)
Former Chairman, UBS AG
John R. Evans (Canada)
Chairman, Torstar Corporation
Oscar Fanjul (Spain)
Honorary Chairman, Repsol
Toyoo Gyohten (Japan)
President, Institute for
International Monetary Affairs
Former Chairman, The Bank of Tokyo
Erno Kemenes (Eastern Europe)
Former Minister of Economics, Hungary
Walther Leisler Kiep (Germany)
International Advisory Board Chairman
Former General Partner,
Gradmann & Holler
Marcilio Marques Moreira (Brazil)
Senior International Advisor,
Merrill Lynch
Former Ambassador of Brazil
to the United States
Paul F. Oreffice (United States)
Former Chairman
and Chief Executive Officer,
The Dow Chemical Company
Saxon Riley (United Kingdom)
Director, MMC
Jesus Silva-Herzog (Mexico)
Institute for Monetary Affairs
Former Ambassador of Mexico
to the United States
Wei Ming Yi (China)
Chairman, International
Advisory Council
China International Trust and Investment Corporation
SHAREHOLDER INFORMATION
Annual Meeting
The 1999 annual meeting of shareholders will be held at 10 a.m., Thursday, May 20, in the 2nd floor auditorium of the McGraw-Hill Building, 1221 Avenue of the Americas, New York City. At the time of the mailing of this annual report, the notice of the annual meeting and proxy statement, together with a proxy card, is scheduled to be sent to each shareholder.
Anticipated 1999 Dividend Payment Dates
February 12 (paid), May 14, August 13, November 15
Financial and Investor Information
Shareholders and prospective investors inquiring about reinvestment and payment of dividends, consolidation of accounts, changes of registration and stock certificate holdings should contact:
The Bank of New York
Shareholder Relations Department
P.O. Box 11258
Church Street Station
New York, NY 10286
Telephone: (800) 457-8968
(212) 815-2560
Certificates for transfer and address changes should be sent to:
The Bank of New York
Receive and Deliver Department
P.O. Box 11002
Church Street Station
New York, NY 10286
The Bank of New York
c/o Computershare Services
Registrar's Department
P.O. Box 82, Caxton House
Redcliffe Way, Bristol BS99 7NH
England
Telephone: 117-9306666
The Bank of New York's Web site:
http://stock.bankofny.com
E-mail inquiries:
Shareowner-svcs@Email.bankofny.com
Copies of our annual and quarterly reports, and Forms 10-K and 10-Q, may be obtained by contacting:
Corporate Development
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
Telephone: (212) 345-5475
MMC's Web site: www.marshmac.com
Stock Listings
MMC's common stock (ticker symbol: MMC) is listed on the New York, Chicago,
Pacific and London stock exchanges.
Cautionary Language
Regarding Forward-Looking Information
This annual report to shareholders contains forward-looking statements, which by their nature involve risks and uncertainties. Please refer to Marsh & McLennan Companies' 1998 Annual Report on Form 10-K for "Information Concerning Forward-Looking Statements" and a description of certain factors that may cause actual results to differ from goals referred to herein or contemplated by such statements.
Art Credits:
Pages 6-7:
"The Rialto Bridge,Venice" by Canaletto
Christie's Images Ltd; Bridgeman Art Library
Pages 12-13:
"The Arrival of Aeneas at Carthage" attributed to Monsu` Desiderio
(C) Christie's Images Ltd, 1999
Pages 18-19:
"A View of Rome with the Bridge and Castel St. Angelo
by the Tiber" by Gaspar van Wittel
Roy Miles Esq.; Bridgeman Art Library
Cover and Pages 24-25:
"Gallery with Views of Modern Rome" by Giovanni Paolo Pannini
Louvre; Bridgeman Art Library; RMN
Designed and Produced by Taylor & Ives, Inc., NYC
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
(212) 345-5000
www.marshmac.com
[BACK COVER: PAINTING OF GALLERY WITH VIEWS OF MODERN ROME]
Exhibit 21
SUBSIDIARIES OF
MARSH & MCLENNAN COMPANIES, INC. (DELAWARE)
Where Percent Owned
Name Incorporated by Parent
---- ------------ ---------
*Marsh & McLennan Real Estate Advisors, Inc. Delaware 100%
MMC Realty, Inc. New York 100%
*Omega Indemnity (Bermuda) Limited Bermuda 100%
*Epsilon Insurance Company, Ltd. Cayman Islands 100%
*Marsh Inc. Delaware 100%
*J&H Marsh & McLennan, Inc. Delaware 100%
J&H Marsh & McLennan of Alabama, Inc. Alabama 100%
J&H Marsh & McLennan of Alaska, Inc. Alaska 100%
J&H Marsh & McLennan of Arkansas, Inc. Arkansas 100%
J&H Marsh & McLennan of Connecticut, Inc. Connecticut 100%
Marsh & McLennan Financial Markets, Inc. Delaware 100%
Marsh & McLennan GbR Holdings, Inc. Delaware 100%
Marsh & McLennan Pallas Holdings, Inc. Delaware 100%
Marsh & McLennan Pallas Holdings GmbH Germany 100%
Gradmann & Holler GbR Germany 98%
Pallas Gradmann & Holler do Brasil Corretores de Seguros Ltda. Brazil 100%
Assivalo Comercial E Representacoes Ltda Brazil 30%
Triad Services, Inc. Delaware 100%
Marsh & McLennan Agency, Incorporated District of Columbia 100%
J&H Marsh & McLennan of Idaho, Inc. Idaho 100%
J&H Marsh & McLennan of Illinois, Inc. Illinois 100%
J&H Marsh & McLennan of Indiana, Inc. Indiana 100%
J&H Marsh & McLennan of Kentucky, Inc. Kentucky 100%
J&H Marsh & McLennan of Louisiana, Inc. Louisiana 100%
J&H Marsh & McLennan of Maine, Inc. Maine 100%
J&H Marsh & McLennan of Massachusetts, Inc. Massachusetts 100%
J&H Marsh & McLennan of Michigan, Inc. Michigan 100%
J&H Marsh & McLennan of Mississippi, Inc. Mississippi 100%
J&H Marsh & McLennan of Nevada, Inc. Nevada 100%
J&H Marsh & McLennan of Ohio, Inc. Ohio 100%
J&H Marsh & McLennan of Oklahoma, Inc. Oklahoma 100%
J&H Marsh & McLennan of Pennsylvania, Inc. Pennsylvania 100%
Marsh & McLennan of Puerto Rico, Inc. Puerto Rico 100%
J&H Marsh & McLennan of Rhode Island, Inc. Rhode Island 100%
J&H Marsh & McLennan, Inc. Texas
J&H Marsh & McLennan of Texas Inc. Texas 100%
J&H Marsh & McLennan of Utah, Inc. Utah 100%
J&H Marsh & McLennan of Virginia, Inc. Virginia 100%
J&H Marsh & McLennan of West Virginia, Inc. West Virginia 100%
J&H Marsh & McLennan International, Inc. Wisconsin 100%
|
J&H Marsh & McLennan, Inc. (cont.)
J&H Marsh & McLennan Global Broking, Inc. Illinois 100%
J&H Marsh & McLennan Global Broking (Bermuda) Ltd. Bermuda 100%
J&H Bowring (Bermuda) Investments Ltd. Bermuda 100%
J&H Marsh & McLennan Global Broking, Inc. Connecticut 100%
J&H Marsh & McLennan Global Broking, Inc. Missouri 100%
J&H Marsh & McLennan Global Broking, Inc. New Jersey 100%
J&H Marsh & McLennan Intermediaries, Inc. New York 100%
Marsh & McLennan Global Broking, Inc. Texas 100%
Marsh & McLennan Global Broking (Dublin) Ltd. Ireland 100%
JHM Holdings, Inc. New York 100%
Marsh & McLennan Properties, Inc. Delaware 100%
Marsh & McLennan Properties (Bermuda) Ltd. Bermuda 100%
Marsh & McLennan Holdings, Inc. Delaware 100%
Marsh & McLennan (Korea) Ltd. Korea 100%
Marsh & McLennan (Malaysia) SDN BHD Malaysia 100%
Marsh & McLennan Argentina SA Asesores de Seguros Argentina 86%
Ayling & Barrios SA Argentina
Marsh & McLennan Argentina SA Corredores de Reaseguros Argentina 86%
Marsh & McLennan Argentina SA Risk Management Consultants Argentina 100%
J&H Marsh & McLennan Pty. Ltd. Australia 100%
Marsh & McLennan Global Broking Pty. Ltd. Australia 100%
Marsh & McLennan (PNG) Pty. Ltd. Papua New Guinea 100%
Kila Marsh & McLennan Limited Papua New Guinea 52%
Fenchurch Insurance Brokers Pty. Limited Australia 100%
Marsh & McLennan (SA) Pty. Ltd. Australia 100%
Marsh & McLennan (WA) Pty. Ltd. Australia 100%
Marsh & McLennan (WA Division) Pty. Ltd. Australia 100%
Marsh & McLennan Agencies Pty. Ltd. Australia 100%
Marsh & McLennan Captive Management Services Pty. Ltd. Australia 100%
Marsh & McLennan Versicherungs-Service GmbH Austria 100%
Marsh & McLennan Management Services (Barbados), Ltd. Barbados 100%
Henrijean, S.A Belgium 47%
Marsh & McLennan Europe S.A Belgium 100%
Marsh & McLennan Management Services (Bermuda) Limited Bermuda 100%
Transglobe Management (Bermuda) Ltd. Bermuda 100%
Marsh & McLennan (Cayman Islands) Ltd. Cayman Islands 100%
Marsh & McLennan Management Services (L) Ltd. Labuan 100%
Tudor, Marsh & McLennan Corretores de Seguros Ltda Brazil 100%
|
J&H Marsh & McLennan, Inc. (cont.)
J&H Marsh & McLennan Ltd. Canada 100%
D.G. Watt & Associates Ltd. Canada 100%
Charbonneau, Dulude & Associes (1985) Limitee/Charbonneau,
Dulude & Associates (1985) Limited Canada 100%
M&M Insurance Management Canada Ltd. British Columbia 100%
Marshcan Insurance Brokers Limited Canada 100%
Irish & Maulson Limited Ontario 100%
Pratte-Morrissette, Inc. Quebec 100%
Schatz Insurance Agencies, Inc. Saskatchewan 100%
Marsh & McLennan (SASK) Ltd. Saskatchewan 100%
Claro J&H Marsh & McLennan S.A. Corredores De Seguros Chile 100%
Claro Marsh & McLennan Consultores en Recursos Humanos, Ltda Chile 100%
Marsh & McLennan Denmark A/S Denmark 100%
Marsh & McLennan Norway A.S Norway 100%
Marsh & McLennan Sweden AB Sweden 100%
Marsh & McLennan Companies GmbH Germany 100%
Marsh & McLennan Companies Beteiligungsgesellschaft II GmbH Germany 100%
Gradmann & Holler, K.G Germany 100%
Erwin Warnecke GmbH Germany 100%
Gradmann & Holler GmbH Germany 89.1%
RMB-Risk Management Beratungs-GmbH Germany 100%
Wolf & Hasselmann GmbH Germany 100%
Gradmann & Holler-William M. Mercer GmbH Germany 90%
VW-Versicherungsvermittlungs-GmbH Germany 33.3%
VVG Gradmann & Holler Versicherungs-Vermittlungs-GmbH Germany 24%
Airport Asserkuranz Vermittlungs GmbH Germany 50%
GMFS Versicherungs-Vermittlungs GmbH Germany 49%
Sudzucker Versicherungsvermittlungs GmbH Germany 49%
Senator Assercuranz Contor GmbH Germany 49%
Gradman & Holler Kiefhaber GmbH Germany 100%
Gradman & Holler AG Switzerland 100%
Bau Asserkuranz Vermittlungs GmbH Germany 45%
Westfalia Asserkuranz Versicherungsvermittlungs GmbH Germany 33%
Gradmann & Holler Kiefhaber GmbH Germany 100%
Gradmann & Holler AG Switzerland 100%
Marsh & McLennan-Hellas-L.L.C Greece 100%
Marsh & McLennan Limited Hong Kong 100%
J&H Marsh & McLennan Budapest Insurance Brokers & Consultants Ltd. Hungary 100%
Marsh & McLennan Management Services (Dublin) Limited Ireland 100%
J&H Marsh & McLennan Italia, S.P.A Italy 100%
J&H Marsh & McLennan Japan Ltd. Japan 100%
Marsh & McLennan Co. Inc. Liberia 100%
|
J&H Marsh & McLennan, Inc. (cont.)
Marsh & McLennan Luxembourg, S.A Luxembourg 100%
Marsh & McLennan Insurance Management Services, S.A Luxembourg 100%
S.P.K. Bowring Marsh & McLennan Sdn. Bhd Malaysia 30%
Organizacion Brockman y Schuh, S.A. de C.V Mexico 20%
Servicios Actuariales, S.A. de C.V Mexico 82%
Compensacion Tecnica Consultores, S.A. de C.V Mexico 50%
Servicios Actuariales Guatemala, S.A Guatemalan 50%
Bysap Servicios Administrativos, S.A. de C.V Mexico 99%
Professional Indemnity Re, Ltd. Bermuda 100%
Consultores en Garantias, S.A. de C.V Mexico 99%
Border Insurance Services, Inc. California 100%
Travelgold Mexico, S.A. de C.V Mexico 50%
Grupo Medicos, S.A. de C.V Mexico 25%
Brockman y Schuh Marsh & McLennan Agente de Seguros
y de Fianzas, S.A. de C.V Mexico 20%
Inverbys, S.A. de C.V Mexico 1%
Administradora de Inmuebles Fin, S.A. de C.V Mexico 20%
ByS Servicios Especiales, Agente de Seguros, S.A. de C.V Mexico 45.5%
Reinmex, Intermediario de Reaseguros, S.A. de C.V Mexico 51%
Guy Carpenter Reinmex Corredores de Reaseguros Limitada Columbian 87.5%
Reinmex Florida, Inc. Florida 100%
Corredores Internacionales de Reaseguros S.A Mexico 60%
Marsh & McLennan Polska Sp.zO.O Poland 100%
Marsh & McLennan Romania SRL Romania 100%
Marsh & McLennan Management Services (S) Pte. Ltd. Singapore 100%
Marsh & McLennan Bowring Pte. Ltd. Singapore 100%
Marsh & McLennan Slovakia s.r.o Slovakia 100%
Marsh & McLennan Correduria de Reaseguros S.A Spain 100%
Marsh & McLennan Espana, S.A., Correduria de Seguros Spain 60%
Marsh Privat AIE Spain 50%
J&H Marsh & McLennan AG Switzerland 100%
Marsh & McLennan (Thai) Company Ltd. Thailand 49%
San J&H Marsh & McLennan Turkey 100%
J&H Marsh & McLennan International Broking Holdings, Limited United Kingdom 100%
Insurance Brokers of Nigeria Ltd. Nigeria 40%
|
J&H Marsh & McLennan, Inc. (cont.)
Marsh & McLennan Bowring Marine & Energy Group Ltd. United Kingdom 100%
Marsh & McLennan Limited United Kingdom 100%
J&H Marsh & McLennan Management (USVI) Ltd. Virgin Islands 100%
Marsh & McLennan, Incorporated Virgin Islands 100%
Muir Beddall (Zimbabwe) Limited Zimbabwe 100%
C.T. Bowring and Associates (Private) Limited Zimbabwe 28.82%
Jay R. Corp. New York 100%
Casualty Insurance Company Services, Inc. California 100%
Johnson & Higgins Agency of Korea, Ltd. Korea 100%
J&H Marsh & McLennan (Colombia) Ltda Colombia 100%
Johnson & Higgins Securities, Inc. Montana 100%
Retach Corporation Delaware 100%
Shipowners of Claims Bureau, Inc. New York 100%
Caribbean Marine Associates, Inc. Florida 100%
Pacific Marine Associates, Inc. California 100%
Johnson & Higgins (USVI) Ltd. Virgin Islands 100%
J&H Marsh & McLennan Intermediaries of Washington, Inc. Washington 100%
Healthcare Risk Management Services, Inc. Washington 100%
Espana Uno, Inc. Delaware 100%
Espana Dos, Inc. Delaware 100%
Espana Tres, Inc. Delaware 100%
Espana Cuatro, Inc. Delaware 100%
Espana Cinco, Inc. Delaware 100%
Espana Seis, Inc. Delaware 100%
Espana Siete, Inc. Delaware 100%
Espana Ocho, Inc. Delaware 100%
J&H Interests New York 100%
Henry Ward Johnson & Company Insurance Services, Inc. California 100%
Johnson & Higgins/Kirke-Van Orsdel, Inc. Delaware 100%
Johnson & Higgins Willis Faber Holdings, Inc. New York 50%
J&H Marsh & McLennan Management, Inc. New York 100%
New, S.A Peru 100%
Willcox, Barringer & Co. (California) Inc. California 100%
Willcox Johnson & Higgins Asia, Pte. Ltd. Singapore 100%
Johnson & Higgins Willis Faber (U.S.A.) Inc. New York 100%
SBI Reinsurance Company, Ltd. Bermuda 100%
Interco, S.A 100%
Wilson McBride, Inc. Ohio **
AM-Grip, Inc. Texas **
Johnson & Higgins W.F. Ltd. Canada 100%
Worldwide Energy Insurance Services, Inc. 100%
Transbrasil Ltda Brazil 50%
Johnson & Higgins Holdings B.V Netherlands 100%
J&H Unison Holdings B.V Netherlands 50%
Max Mattheissen Holdings A.B Sweden 100%
Unison Belgium Belgium 100%
Mees & Zoonen Marsh & McLennan B.V Netherlands 100%
R. Mees & Zoonen Assurante B.V Netherlands 100%
|
J&H Marsh & McLennan, Inc. (cont.)
Unison Management (Scandinavia) AB Scandinavia 50%
Albert Willcox & Co. De Venezuela, CA Venezuela 100%
Foster Higgins (Far East) Limited Hong Kong 100%
Intercontinental De Reaseguros, S.A
Inversiones Orquidea, S.A Colombia 82%
J&H Aviation Plc United Kingdom 100%
Johnson & Higgins Aviation Pty. Ltd. Australia 100%
J&H Marsh & McLennan Managment (Barbados) Limited Barbados 100%
J&H Intermediaries (Barbados) Limited Barbados 100%
Johnson & Higgins (Bermuda) Limited Bermuda 100%
Unison Management (Bermuda) Ltd. Bermuda 100%
Johnson & Higgins of (Cayman Islands) Ltd. Cayman Islands 100%
IMC (Turks & Caicos) Limited Cayman Islands 100%
Johnson & Higgins Intermediaries (Cayman) Ltd. Cayman Islands 100%
Victoria Hall Company Limited Bermuda 20%
Johnson & Higgins of (Chile) Limitada Chile 100%
Johnson & Higgins Mediservice - Administradora De Planos De Saude Ltda Brazil 80%
Albert Willcox & Co. of Canada Ltd. Canada 100%
Dupuis, Parizeau, Tremblay, Inc. Canada 100%
Les Conseillers Dpt. Inc. Canada 100%
Johnson & Higgins Corretores De Seguros Ltda Brazil 100%
Johnson & Higgins (H.K.) Limited Hong Kong 100%
Johnson & Higgins (Peru) S.A. Corredores De Seguro Peru 100%
J&H Marsh & McLennan Pte Singapore 100%
Johnson & Higgins PB Co., Ltd. Singapore 40%
Johnson & Higgins Risk Management Services (S) Pte. Ltd. Singapore 100%
Johnson & Higgins Consulting S.r.L Italy 100%
Unison Consultants Europe Belgium 96%
J&H Employee Benefit S.p.A Italy 100%
Mednorte Internacional - Sociedade Mediadora De Seguros, Limitada 100%
Johnson & HIggins Sociadad Anonima 100%
Johnson & Higgins (Uruguay) Inc. Uruguay 100%
Llenrup Participaues S.C. Ltda Brazil 100%
Sersur Brazil 100%
Unison Management Luxembourg, S.A Luxembourg 23%
Willcox Phillippines Inc. Phillippines 40%
Johnson & Higgins Managment Services, Ltd. Bermuda 100%
Inter-Ocean Management (Cayman) Limited Cayman Islands 100%
Johnson & Higgins Luxembourg, S.A Luxembourg 100%
Transglobal (Guernsey) Ltd. Guernsey 100%
Unison Management (Dublin) Limited Ireland 100%
Vista Insurance Company, Ltd. Bermuda 100%
Mactras (Bermuda) Limited Bermuda 100%
Gem Insurance Company Limited Bermuda 100%
Uniservice Insurance Service Limited Bermuda 100%
H.I. Group - Johnson & Higgins Phillippines, Inc. Phillippines 70%
JHINDAH (Asia) Limited Indonesia 50%
|
J&H Marsh & McLennan, Inc. (cont.)
Guy Carpenter & Company, Inc. Delaware 100%
The Carpenter Management Corporation Delaware 100%
Paul Napolitan, Inc. Delaware 100%
Paul Napolitan Canada, Inc. Canada 100%
Sellon Associates, Inc. New York 100%
Balis & Co., Inc. Pennsylvania 100%
Philadelphia Insurance Management Company Delaware 100%
Guy Carpenter Broking, Inc. Delaware 100%
Market Street Underwriters, Inc. Delaware 100%
MMSC Holdings, Inc. Delaware 100%
Marsh & McLennan Securities Corporation Delaware 100%
Intermediary Systems Limited Delaware 100%
Triad Underwriting Management Agency, Inc. Delaware 100%
Guy Carpenter Advisors, Inc. Delaware 100%
Inter-Americas Insurance Services, Inc. California 51%
Guy Carpenter & Company, S.A Argentina 100%
Normandy Reinsurance Company Limited Bermuda 100%
Guy Carpenter & Company, S.A Belgium 100%
American Overseas Management Corporation (Canada) Canada 100%
Guy Carpenter & Company (Canada) Limited Canada 100%
Guy Carpenter & Company, A/S Denmark 100%
Guy Carpenter & Company GmbH Germany 60%
Guy Carpenter & Company (Asia) Limited Hong Kong 100%
Guy Carpenter Italia, S.R.L Italy 100%
Guy Carpenter y Cia (Mexico) S.A. de C.V Mexico 100%
Guy Carpenter & Company (S) Pte. Ltd. Singapore 100%
Guy Carpenter & Company (Stockholm) AB Sweden 100%
Bennich Reinsurance Management AB Sweden 100%
Guy Carpenter (U.K.) Ltd. United Kingdom 100%
Intermediary Systems Ltd. United Kingdom
Geological Information Services United Kingdom
Marsh & McLennan Risk Capital Holdings, Ltd. Delaware 100%
Marsh & McLennan Capital, Inc. Delaware 100%
Marsh & McLennan GPI, Inc. Delaware 100%
Marsh & McLennan LP II, Inc. Delaware 100%
MMRCH LLC Delaware 30%
MMRC LLC Delaware 30%
The ARC Group LLC Delaware 33%
Terra Nova (Bermuda) Holdings Ltd. Bermuda 9.9%
VIC Corporation Maine 51%
|
J&H Marsh & McLennan, Inc. (cont.)
J&H Marsh & McLennan (Holdings) Ltd. United Kingdom 100%
Marsh & McLennan Management Services (Guernsey) Limited Guernsey 100%
J&H Marsh & McLennan (IOM) Ltd. Isle of Man 100%
Marsh & McLennan Management Services (Isle of Man) Ltd. Isle of Man 100%
J&H Marsh & McLennan Financial Services Ltd. United Kingdom 100%
J&H Marsh & McLennan (UK) Limited United Kingdom 100%
Marsh & McLennan Services Ltd. United Kingdom 100%
Marsh & McLennan Holdings Ltd. United Kingdom 100%
Marsh & McLennan Nederland B.V Netherlands 100%
Marsh & McLennan s.r.o Czech Republic 100%
Marsh & McLennan Lda Portugal 100%
Marsh & McLennan Bowring Ltd. United Kingdom 100%
Bowring Risk Management Ltd. United Kingdom 100%
Bowring Professional Indemnity Scotland Ltd. Scotland 100%
Microsafe Ltd. United Kingdom 100%
Ulster Insurance Services Ltd. N. Ireland 100%
RIAS Insurance Services Ltd. Scotland 100%
Bowring Limited United Kingdom 100%
RIC Management Services Ltd. Ireland 100%
Insurance Management Services Ltd. Ireland 100%
Marsh & McLennan Ireland Ltd. Ireland 100%
C. T. Bowring Ireland Ltd. Ireland 100%
Mathews Mulcahy & Sutherland Ltd. Ireland 100%
Surveyors Insurance Brokers Ltd. United Kingdom 50%
Marsh & McLennan Ltd. New Zealand 100%
Reinsurances New Zealand Ltd. New Zealand 100%
Risk Management Ltd. New Zealand 100%
Marsh & McLennan Ltd. Fiji 90%
Reinsurances (Pacific) Ltd. Fiji 100%
Marsh & McLennan France SA France 100%
Mercer-Faugere & Jutheau SA France 100%
Compagnie Europeenne De Courtage d'Assurances et de Reassurances France 100%
Franchelli & Louvet S.A France 100%
Franchelli & Louvet Services France 100%
Cecar Reassurances France 100%
Cecar PRB France 95%
Consultants en Assurance, Prevoyance, Assistance France 80%
Ratio France 100%
Prevoyance Retraite International Management France 56%
Office des Assures France 55%
Energie Courtage France 55%
Societe d'Assurance et de Participation Guian S.A France 24%
Societe d'Assistance a la Gestion et a L'Ingeniere des Risques France 100%
Societe Bargheon France 100%
Elysees Prevoyance Gestion France 80%
Cecar Assurances & Finances France 50%
|
Marsh & McLennan France SA (cont'd)
Compagnie Europeenne De Courtage d'Assurances et de Reassurances (cont'd)
Cecar Deutschland Deutschland 100%
Cecar Belgium Belgium 100%
Ibercecar Spain 82.5%
AB-Ibercecar Spain 64%
Sasia Spain 100%
Comesa Spain 100%
Cecar Portugal Portugal 70%
Cecar Austria Austria 52%
Cecar Hungaria Hungarian 100%
Risiko Services (Czech Republic) Czech Republic 100%
Italcecar Italy 51.4%
Cecar Turkiye Turkey 51%
Cecar Argentina Argentina 100%
Cecar Brasil Brazil 71.5%
Cecar Inchcape Asia Hong Kong 50%
Cecar Tunisie Tunisia 49%
Cecar & Jutheau, S.A France 100%
Faugere & Jutheau Bermuda Bermuda 100%
Assureurs Conseils Tchadiens (S.A.R.L.) Chad 83%
Assureur Conseil de Djibouti- Faugere & Jutheau et Cie SARL Djibouti 75%
Ancien Cabinet Pierre de Kerpezdron (S.A.) France 100%
SNC P. Deleplanque France 100%
Boistel S.A France 100%
Bureau Gogioso Eyssautier S.A France 100%
Eyssautier Flepp Malatier & Pages S.A France 100%
Boistel Eyssautier S.A France 100%
Omnium d'Assurances Maritimes France 100%
Astramar S.A France 100%
Cires SARL France 100%
Sogescor SARL France 100%
Gatier S.A Switzerland 100%
Assurances Maritimes Eyssautier Malatier Inter SARL France 100%
Ivoiriennes Assurances Conseil Ivory Coast 100%
Societe Internationale de Courtage d'Assurances
et de Reassurances-F&J (SARL) Burkina Faso 30%
Socodel-Paris S.A France 100%
Union Francaise de Reassurances (S.A.) France 100%
Guy Carpenter & Cia, S.A. - 34 Spain 81.08%
William M. Mercer-Faugere & Jutheau (S.A.R.L.) France 100%
Societe d'Etude et de Gestion et de Conseil en Assurance SA Senegal 39.25%
|
Mercer Consulting Group, Inc. Delaware 100%
National Economic Research Associates, Inc. California 100%
National Economic Research Associates, Inc. Delaware 100%
Mercer Management Consulting, Inc. Delaware 100%
Corporate Decisions, Inc. 100%
Decision Research Corporation Massachusetts 100%
LAR/Decision Research Corporation New York 100%
Lippincott & Margulies, Inc. New York 100%
Mercer Management Consulting, Ltd. Bermuda 100%
Marketing/Innovation/Development pour l'industrie-MID, S.A France 100%
Mercer Management Consulting GmbH Germany 100%
Mercer Consulting Group Verwaltungs GmbH Germany 100%
Dr. Seebauer & Partner GmbH - Management Consulting
Group & Co. KG Germany 100%
UBM Consultoria Internacional S/C Ltda Brazil 30%
UBM Consulting France International Management Consultants France 100%
Mercer Management Consulting Limited Switzerland 100%
Mercer Management Consulting S.L Spain 100%
Mercer Management Consulting SNC France 100%
Mercer Management Consulting Portugal 100%
Mercer Consulting Services S.A Switzerland 100%
Mercer MN Ltda Brazil 100%
Mercer MW Corredore de Seguro Brazil 100%
William M. Mercer Companies LLC Delaware 100%
William M. Mercer Holdings, Inc. Delaware 100%
William M. Mercer Holdings Canada, Inc. Delaware 100%
William M. Mercer Pty. Ltd. Australia 100%
Superfund Nominees Pty. Ltd. Australia 100%
William M. Mercer S.A Belgium 100%
William M. Mercer Limited Canada 50%
Mercer Management Consulting Limited Canada 100%
Societe Conseil Mercer Limitee Quebec 100%
Mercer Limited Ireland 100%
P.I.C. Advisory Services Limited Ireland 100%
P.I.C. Management Services Limited Ireland 100%
Mercer Fraser P.I.C. Trustees Limited Ireland 100%
William M. Mercer Limited of Japan Japan 100%
William M. Mercer (Korea) Co., Ltd. Korea 100%
William M. Mercer Limited Hong Kong 100%
William M. Mercer Pte. Ltd. Singapore 100%
William M. Mercer (Malaysia) Sdn. Bhd Malaysia 100%
William M. Mercer Zainal Fraser Sdn. Bhd Malaysia 70%
Mercer C & B Servicios, S.A. de C.V Mexico 100%
Mercer C & B S.A. de C.V Mexico 100%
William M. Mercer Agente de Seguros S.A. de C.V Mexico 100%
|
Mercer Consulting Group, Inc. (cont.)
William M. Mercer Companies LLC (cont.)
William M. Mercer Holdings, Inc. (cont.)
William M. Mercer Ten Pas B.V Netherlands 100%
WMM Haneveld Investment Consulting B.V Netherlands 100%
Reitmulders & Partners B.V Netherlands 100%
William M. Mercer Services B.V Netherlands 100%
William M. Mercer Limited New Zealand 100%
William M. Mercer, S.A Switzerland 100%
William M. Mercer Limited United Kingdom 100%
William M. Mercer Fraser (Irish Pensioneer Trustees) Limited Ireland 100%
William M. Mercer Srl Italy 100%
William M. Mercer Fraser Pension Fund Trustees Limited United Kingdom 100%
Duncan C. Fraser & Co. United Kingdom 100%
William M. Mercer Fraser Computer Services Limited United Kingdom 100%
Mercer Management Consulting, Limited United Kingdom 100%
MF Trustees Limited United Kingdom 100%
William M. Mercer Fraser Pension Fund Trustees Limited United Kingdom 100%
William M. Mercer (Isle of Man) Limited Isle of Man 100%
Pensioneer Trustees (Leeds) Limited England 100%
William M. Mercer Lda Portugal 100%
William M. Mercer Fraser Limited United Kingdom 100%
MPA (International) Limited United Kingdom 100%
Pension Trustees Limited United Kingdom 100%
Pensioneer Trustees Limited United Kingdom 100%
Pensioneer Trustees (London) Limited United Kingdom 100%
Southampton Place Trustee Co. Ltd. United Kingdom 100%
William M. Mercer, Incorporated Delaware 100%
WMM Services, Inc. Delaware 100%
William M. Mercer Securities Corp. Delaware 100%
National Medical Audit California 100%
Hansen International Limited Delaware 100%
William M. Mercer of Indiana, Incorporated Indiana 100%
William M. Mercer Investment Consulting, Inc. Kentucky 100%
William M. Mercer of Kentucky, Inc. Kentucky 100%
William M. Mercer, Incorporated Louisiana 100%
William M. Mercer, Incorporated Massachusetts 100%
William M. Mercer of Michigan, Incorporated Michigan 100%
William M. Mercer, Incorporated Nevada 100%
William M. Mercer, Incorporated Ohio 100%
William M. Mercer, Incorporated Oklahoma 100%
William M. Mercer of Texas, Inc. Texas 100%
William M. Mercer of Virginia, Incorporated Virginia 100%
OCR Ltd. Australia 100%
MPA Superannuation Services Limited Australia 100%
MPA Superfund Nominees Pty. Limited Australia 100%
|
Mercer Consulting Group, Inc. (cont.)
William M. Mercer Companies LLC (cont.)
William M. Mercer, Incorporated (cont.)
Mercer R.H. SARL France 100%
William M. Mercer-MPA Limited Hong Kong 100%
William M. Mercer Philippines, Incorporated Philippines 100%
William M. Mercer, Incorporated Puerto Rico 100%
William M. Mercer S.A Argentina 100%
William M. Mercer S.A. Asesores de Seguros Argentina 100%
William M. Mercer Comercio Consultoria e Servicos Ltda Brazil 100%
William M. Mercer Consultoria Ltda Brazil 33.3%
Grupo Assistencial De Economia E Financas Tudor S/C Ltda. Brazil 33%
William M. Mercer, S.A Belgium 100%
William M. Mercer Limitada Chile 100%
William M. Mercer Claro Corredores de Seguros Chile 100%
William M. Mercer A/S Denmark 60%
William M. Mercer A.B Sweden 100%
William M. Mercer Broking (Taiwan) Ltd. Taiwan 100%
William M. Mercer Consulting (Taiwan) Ltd. Taiwan 100%
Seabury & Smith, Inc. Delaware 100%
Seabury & Smith of Arkansas, Inc. Arkansas 100%
Appleby & Sterling Agency, Inc. Delaware 100%
J&H Marsh & McLennan Private Client Services, Inc. Delaware 100%
J&H Marsh & McLennan Financial Services, Inc. New York 100%
J&H Marsh & McLennan Financial Services, Inc. Indiana 100%
J&H Marsh & McLennan Financial Insurance Services of Massachusetts, Inc. Massachusetts 100%
J&H Marsh & McLennan Financial Services of Texas, Inc. Texas 100%
Albert H. Wohlers & Co. Illinois 100%
Smith-Sternau Organization, Inc. Delaware 100%
The Schinnerer Group, Inc. Delaware 100%
Victor O. Schinnerer & Company, Inc. Delaware 100%
Victor O. Schinnerer of Illinois, Inc. Illinois 100%
Victor O. Schinnerer & Company, Inc. Ohio 100%
Encon Holdings, Inc. Texas 100%
Panhandle Insurance Agency, Inc. Texas 100%
Encon Underwriting Agency, Inc. Texas 100%
Encon Holdings, Inc. Ontario 100%
Encon Insurance Managers Inc. Canada 100%
Encon Management Services, Inc. Canada 100%
Encon Reinsurance Managers Inc. Canada 100%
Encon Title Insurance Managers Inc. Canada 100%
Victor O. Schinnerer & Company Ltd. United Kingdom 100%
Encon Underwriting Limited United Kingdom 100%
Admiral Holdings Limited United Kingdom 100%
Admiral Underwriting Agencies Limited United Kingdom 100%
Admiral Ireland Limited Ireland 100%
Admiral Underwriting Agencies (Ireland) Ltd. Ireland 100%
|
Seabury & Smith, Inc. (cont'd)
Seabury & Smith of Georgia, Inc. Georgia 100%
M. A. Gesner of Illinois, Inc. Illinois 100%
Seabury & Smith of Illinois, Inc. Illinois 100%
Seabury & Smith, Inc. Indiana 100%
Seabury & Smith, Inc. Kentucky 100%
Seabury & Smith, Inc. Louisiana 100%
Seabury & Smith, Inc. Massachusetts 100%
Seabury & Smith, Inc. Michigan 100%
Seabury & Smith, Inc. Nevada 100%
Seabury & Smith Agency, Inc. Ohio 100%
Seabury & Smith, Inc. Oklahoma 100%
Seabury & Smith, Inc. Texas 100%
Seabury & Smith, Inc. Virginia 100%
Seabury & Smith Limited Ontario 100%
G. E. Freeman Insurance Agency Limited Ontario 100%
Seabury & Smith Limited United Kingdom 100%
Putnam Investments, Inc. Massachusetts 100%
Putnam Investment Management, Inc. Massachusetts 100%
Putnam Future Advisors, Inc. Massachusetts 100%
Putnam Fiduciary Trust Company Massachusetts 100%
Putnam Investor Services, Inc. Massachusetts 100%
Putnam Mutual Funds Corp. Massachusetts 100%
Putnam Insurance Agency, Inc. Massachusetts 100%
The Putnam Advisory Company, Inc. Massachusetts 100%
Putnam Europe Ltd. United Kingdom 100%
The Putnam Corporation Massachusetts 100%
Pan Agora Asset Management Delaware 50%
Pan Agora Management, Ltd. United Kingdom 50%
Putnam Rhumbline Corporation Massachusetts 100%
Primary Funds Service Corp. Delaware 51%
Putnam Overseas Institutional Management Company Ltd. Bahamas 100%
Putnam International Distributors, Ltd. Cayman Islands 100%
Putnam Deutschland GmbH Germany 100%
Putnam International Advisory Company, S.A Luxembourg 100%
NKK-Putnam Management, S.A Luxembourg 100%
Putnam International Growth Management S.A Luxembourg 100%
Putnam Luxembourg S.A Luxembourg 100%
Putnam Management (Luxembourg), S.A Luxembourg 100%
|
Sedgwick Group plc United Kingdom 100%
Crown Court Trust Limited United Kingdom 100%
Sedgwick Lamda Limited United Kingdom 100%
Sedgwick Europe Risk Services Limited United Kingdom 100%
Sedgwick Analysis Services Limited United Kingdom 100%
Americas Insurance Services Limited United Kingdom 100%
Sedgwick Theta Limited United Kingdom 100%
Sedgwick Group Nominees Limited United Kingdom 100%
Sedgwick Group Development Limited United Kingdom 100%
Blackwood, Scott & Company Limited United Kingdom 100%
Bland Welch & Company Limited United Kingdom 100%
Sedgwick Lark Limited United Kingdom 100%
Ross Collins Holdings Limited United Kingdom 100%
Hobson, Allfrey & Wheeler Limited United Kingdom 100%
JWP Overseas Holdings Limited United Kingdom 100%
Sedgwick Consulting Group Limited United Kingdom 100%
Sedgwick Overseas Limited United Kingdom 100%
Sedgwick Finance plc United Kingdom 100%
Rivers Group Limited United Kingdom 100%
Exmoor Management Company Limited Bermuda 100%
River Thames Insurance Company Limited United Kingdom 98.74%
R.W. Gibbon & Son (Underwriting Agencies) Limited United Kingdom 100%
Regis Agencies Limited United Kingdom 100%
Bevington Vaizey & Foster Limited United Kingdom 100%
Rhone Limited United Kingdom 100%
Sedgwick Management Services (London) Limited United Kingdom 100%
Sedgwick Management Services (Guernsey) Limited Guernsey 100%
Sedgwick Management Services
(Singapore) Pte Limited Singapore 100%
Sedgwick Omega Limited United Kingdom 100%
Sedgwick Epsilon Limited United Kingdom 100%
Sedgwick Eta Limited United Kingdom 100%
Sedgwick Russia Limited United Kingdom 100%
Lloyd George Insurance Services Limited United Kingdom 95%
Sedgwick Delta Limited United Kingdom 100%
Sedgwick Far East Limited United Kingdom 100%
Sedgwick Kazakhstan Limited United Kingdom 100%
Sedgwick Ukraine Limited United Kingdom 100%
Wigham Poland (Hellas) Limited United Kingdom 5%
Sedgwick Japan Limited United Kingdom 100%
B.K. Thomas & Partners Limited United Kingdom 100%
B.K. Thomas & Partners (General) Limited United Kingdom 100%
Sedgwick Turkey Limited United Kingdom 100%
Sedgwick Azeri Limited United Kingdom 100%
Sedgwick OS Limited United Kingdom 100%
Whitechapel Corporate Services Limited United Kingdom 100%
SG Services Limited United Kingdom 100%
Sedgwick International Broking Services Limited United Kingdom 100%
Sedgwick Global Limited United Kingdom 100%
Sedgwick Computer & Network
Service Company Limited United Kingdom 100%
Sedgwick Credit Limited United Kingdom 100%
Sedgwick Europe Risk Solutions Limited United Kingdom 100%
ReSolutions International Limited United Kingdom 100%
Sedgwick Energy Limited United Kingdom 100%
Aldgate Insurance Brokers (Marine) Limited United Kingdom 100%
Sedgwick UK Risk Services Limited United Kingdom 100%
Sedgwick Bankrisk Limited United Kingdom 100%
E.W. Payne & Co. (Marine) Limited United Kingdom 100%
Sedgwick Aviation Limited United Kingdom 100%
|
Sedgwick Energy & Marine Limited United Kingdom 100%
Price Forbes Limited United Kingdom 100%
Sedgwick Georgia Limited United Kingdom 100%
Sedgwick Special Risks Limited United Kingdom 100%
Reclaim Limited United Kingdom 100%
Sedgwick Limited United Kingdom 100%
Sedgwick Northern Ireland Risk Services Limited Northern Ireland 100%
The Sedgwick Information Exchange Limited United Kingdom 100%
Sedgwick Agency Services Limited United Kingdom 100%
Wigham Poland Limited United Kingdom 100%
Wigham Poland Aviation Limited United Kingdom 100%
Wigham Poland Professional
Indemnity Limited United Kingdom 100%
Wigham Poland Reinsurance Brokers Limited United Kingdom 100%
Wigham Poland Scotland Limited United Kingdom 100%
Wigham Poland Marine Limited United Kingdom 100%
Anthony Lumsden & Company Limited United Kingdom 100%
Anthony Lumsden Group Limited United Kingdom 100%
Anthony Lumsden & Co (Pte) Limited Singapore 100%
Sedgwick Reinsurance Services Limited United Kingdom 100%
Sedgwick Credit Europe Limited United Kingdom 100%
Marine Risk Management Services Limited United Kingdom 100%
Sedgwick UK Risk Services Limited United Kingdom 100%
Roger Lark & Sedgwick (Partnership) United Kingdom 30%
RL & S Limited United Kingdom 100%
Roger Lark & Sedgwick Limited United Kingdom 14%
Racal Insurance Services Limited United Kingdom 50%
Richard Sparrow Holdings Limited United Kingdom 100%
Richard Sparrow and Company Limited United Kingdom 100%
Richard Sparrow and Company (International
Non Marine) Limited United Kingdom 100%
Sedgwick Georgia Limited United Kingdom 100%
Grupo Internacional de Reaseguro
Intermediario de Reaseguro, S.A. de C.V Mexico 10%
Sedgwick Group Properties & Services Limited United Kingdom 100%
Avongrove Limited United Kingdom 99.6%
Matchgrange Holdings Limited United Kingdom 100%
Matchgrange Limited United Kingdom 100%
Sedgwick Alpha Limited United Kingdom 100%
Sedgwick Noble Lowndes Group Limited United Kingdom 100%
Sedgwick Noble Lowndes (UK) Limited United Kingdom 100%
Sedgwick Financial Services Limited United Kingdom 100%
Sedgwick Actuarial Services Limited United Kingdom 100%
Sedgwick Trustees Limited United Kingdom 100%
Sedgwick Affinity Group Services Limited United Kingdom 100%
The Financial & Insurance
Advice Centre Limited United Kingdom 100%
Sedgwick Noble Lowndes Limited United Kingdom 100%
English Pension Trustees Limited United Kingdom 100%
Sedgwick Noble Lowndes Trust
Corporation Limited United Kingdom 100%
Sedgwick Noble Lowndes
Actuarial Services Limited United Kingdom 100%
Advantage Independent Limited United Kingdom 100%
Advantage Advisors Services Limited United Kingdom 100%
Flexifund Limited United Kingdom 100%
Sedgwick Northern Ireland Limited Northern Ireland 100%
Noble Lowndes Pensions Limited United Kingdom 100%
Noble Lowndes Personal Financial
Services Limited United Kingdom 100%
|
Noble Lowndes Settlement
Trustees Limited United Kingdom 100%
Sedgwick Ulster Pension
Trustees Limited Northern Ireland 100%
Lowndes (N.I.) Limited Northern Ireland 100%
Scotttish Pension Trustees Limited United Kingdom 100%
Settlement Trustees Limited United Kingdom 100%
Combined Actuarial Performance
Services Limited United Kingdom 25%
Sedgwick Noble Lowndes (Europe) Limited United Kingdom 100%
Sedgwick Financial Services
(Deutschland) GmbH Germany 25%
Sedgwick Noble Lowndes GmbH Germany 75%
Sedgwick Investment Services Limited United Kingdom 100%
Chancery Eastcheap Limited United Kingdom 100%
Chancery Aldgate Limited United Kingdom 100%
The International Employer Limited United Kingdom 100%
TIE Systems Limited United Kingdom 100%
Health Care Management Limited United Kingdom 100%
Allied Medical Assurance Services Limited United Kingdom 100%
Healthcare Agencies Limited United Kingdom 100%
Sedgwick Wiggmoore Communications Limited United Kingdom 100%
Sedgwick Noble Lowndes Occupational
Health Limited United Kingdom 100%
Sedgwick Noble Lowndes Occupational
Health (Midlands) Limited United Kingdom 100%
Sedgwick Noble Lowndes Healthcare Limited United Kingdom 100%
Medisure Marketing and Management Limited United Kingdom 100%
Affinity Groups Advantage Limited United Kingdom 100%
Sedgwick Oakwood Lloyd's Underwriting Agents Limited United Kingdom 100%
Exford One Limited United Kingdom 100%
Names Taxation Service Limited United Kingdom 100%
Sedgwick Taxation Consultants Limited United Kingdom 100%
Standon Underwriting Management Limited United Kingdom 99.96%
Winsford One Limited United Kingdom 100%
Sedgwick Corporate Capital Services Limited United Kingdom 100%
Sedgwick Group Pension Scheme Trustee Limited United Kingdom 100%
Sedgwick Global Reinsurance Services Limited United Kingdom 100%
Incorporated Names Advisers Limited United Kingdom 100%
E.W. Payne (UK) Limited United Kingdom 100%
Sedgwick Insurance Strategy Group Limited United Kingdom 100%
Sedgwick Insurance Strategy Limited United Kingdom 100%
Aldgate Actuarial Services Limited United Kingdom 100%
Euings (London) Limited United Kingdom 100%
Sedgwick Reinsurance Brokers Limited United Kingdom 100%
Aldgate US Investments United Kingdom 100%
Digitsuper Limited United Kingdom 100%
Cruiselook Limited United Kingdom 100%
Sedgwick Guernsey Limited Guernsey100%
Sedgwick Group Inc. USA 100%
Sedgwick, Inc. (Delaware) USA 100%
Regency International Limited Bermuda 100%
Sedgwick James of Puerto Rico, Inc. Puerto Rico 100%
Stephen F. Beard, Inc. Puerto Rico 100%
Sedgwick Limited Taiwan 100%
Sedgwick Asia Pacific Private Limited Singapore 100%
Sedgwick of the Carolinas, Inc. USA 100%
Sedgwick International Risk Management, Inc. USA 100%
Sedgwick U.S. Holdings, Inc. USA 100%
Mariners Insurance Agency, Inc. USA 100%
|
Maritime Adjusters, Inc. USA 100%
Sedgwick of Mississippi, Inc. Mississippi 100%
Sedgwick, Inc. USA 100%
Sedgwick Energy (Insurance Services) Inc. USA 100%
Members Insurance Club Agency, Inc. USA 100%
Sedgwick Investments, Inc. USA 100%
Sedgwick of New Jersey, Inc. New Jersey 100%
Sedgwick of New Mexico, Inc. New Mexico 100%
Sedgwick of Wisconsin, Inc. Wisconsin 100%
Sedgwick Benefits, Inc. USA 100%
Unused Subsidiary, Inc. USA 100%
Sedgwick of Tennessee, Inc. Tennessee 100%
Sedgwick of Tennessee Agency, Inc. Tennessee 100%
Countryside, Inc. USA 50.38%
Sedgwick Louisiana Holdings, Inc. Louisiana 100%
Sedgwick of New Orleans, Inc. New Orleans 100%
Members Insurance Club Agency, Inc. USA 100%
Sedgwick of Alabama, Inc. Alabama 100%
Sedgwick of Alabama Agency, Inc. Alabama 100%
Sedgwick of Pennsylvania, Inc. Pennsylvania 100%
Route 413 Associates, Inc. USA 100%
Sedgwick U.S. Holdings, Inc. USA 100%
Sedgwick of Arizona, Inc. Arizona 100%
Sedgwick of Arkansas, Inc. Arkansas 100%
Sedgwick of Colorado, Inc. Colorado 100%
Sedgwick of Florida, Inc. Florida 100%
Sedgwick of Georgia, Inc. Georgia 100%
Sedgwick of Idaho, Inc. Kansas 100%
Sedgwick of Kentucky, Inc. Kentucky 100%
Sedgwick Risk Services of Maine, Inc. Maine 100%
Sedgwick of Maryland, Inc. Maryland 100%
Sedgwick of Michigan, Inc. Michigan 100%
Sedgwick of Minnesota, Inc. Minnesota 100%
Sedgwick of Missouri, Inc. Missouri 100%
Sedgwick of Montana, Inc. Montana 100%
Sedgwick of Nebraska, Inc. Nebraska 100%
Sedgwick of New England, Inc. New England 100%
Sedgwick of New Hampshire, Inc. New Hampshire 100%
Sedgwick of Oklahoma, Inc. Oklahoma 100%
Sedgwick of Oregon, Inc. Oregon 100%
Sedgwick of Texas, Inc. Texas 100%
Sedgwick of Utah, Inc. Utah 100%
Sedgwick Management Services
(U.S.) Limited USA 100%
Sedgwick of Virginia, Inc. Virginia 100%
Sedgwick of Washington, Inc. Washington 100%
Sedgwick Managing General
Agency, Inc. USA 100%
Sedgwick Noble Lowndes North
America, Inc. USA 100%
Galbraith & Green, Inc. of Ohio USA 100%
Paladin Reinsurance Corporation USA 20%
S.J. Petrakis Insurance Services, Inc. USA 100%
Sedgwick of California, Inc. California 100%
APRIMAN, Inc. USA 100%
Sedgwick of Connecticut, Inc. Connecticut 100%
Sedgwick of Illinois, Inc. Illinois 100%
Sedgwick Claims Management
Services, Inc. USA 100%
SCMS Administrative
|
Services, Inc. USA 100%
Sedgwick of New York, Inc. New York 100%
Sedgwick of Nevada, Inc. Nevada 100%
CVA Consultants, Inc. USA 100%
Don A. Harris & Associates, Inc. USA 100%
Sedgwick of Ohio, Inc. Ohio 100%
Sedgwick Life and Benefits, Inc. USA 100%
Southern Marine & Aviation Underwriters, Inc. USA 100%
Americas Insurance Company USA 100%
Americas Surplus Lines Insurance Company USA 100%
Southern Marine and Aviation, Inc. USA 100%
Sedgwick International Marketing Services Inc. USA 100%
Unused Subsidiary, Inc. USA 100%
Syndicate and Corporate Management Services, Inc. USA 100%
Crump Group, Inc. USA 100%
Crump Insurance Services of Houston, Inc. Texas 100%
Crump E & S of California Insurance
Services, Inc. California 100%
Crump Insurance Services Northwest, Inc. USA 100%
Crump E & S of Sacramento Insurance
Services, Inc. California 100%
Crump Insurance Services of Atlanta, Inc. Georgia 100%
Crump of New York, Inc. New York 90%
Crump Insurance Services of Texas, Inc. Texas 100%
Crump Insurance Services of Illinois, Inc.I llinois 100%
Crump E & S of San Francisco
Insurance Services, Inc. California 100%
Crump Insurance Services of Boston, Inc. Massachusetts 100%
Crump Insurance Services of Florida, Inc. Florida 100%
Crump Insurance Services of
Memphis, Inc. Tennessee 100%
Crump Financial Services, Inc. USA 100%
Crump Insurance Services, Inc. USA 100%
Crump Insurance Services of
Colorado, Inc. Colorado 100%
Sedgwick Financial Services Inc. USA 100%
Sedgwick Re Holdings, Inc. USA 100%
Claims, Inc. USA 100%
Sedgwick Re Inc. of Dallas Texas 100%
Sedgwick Diversified Programs, Inc. USA 100%
Sedgwick Re, Inc. USA 100%
Sedgwick Re Insurance Strategy, Inc. USA 100%
Reinsurance Solutions International, L.L.C.USA 50%
Sedgwick Lane Financial L.L.C USA 80%
Syndicate & Corporate Management Services Limited Bermuda 100%
Overseas Reinsurance Corporation Limited Bermuda 100%
Alcombe One Limited United Kingdom 100%
Oakwood Underwriting Agencies Limited United Kingdom 100%
Sedgwick Overseas Investments Limited United Kingdom 100%
Sedgwick Overseas Group Limited United Kingdom 100%
Sedgwick Asia Pacific Limited Australia 100%
Sedgwick Internationaal BV Netherlands 100%
Sedgwick Management Services (Antigua) Limited Antigua 100%
Sedgwick Group (Australia) Pty Limited Australia 100%
Sedgwick (Holdings) Pty Limited Australia 100%
Bland Payne (South Aust.) Pty Limited Australia 100%
Sedgwick Limited Australia 100%
Adam and Adam (Aust.) Pty Limited Australia 100%
Sedgwick Insurance Agencies Pty Limited Australia 100%
Sedgwick Re Asia Pacific Limited Australia 100%
|
Sedgwick Corporate and Employee
Benefits Limited Australia 100%
Price Forbes Australia Limited Australia 100%
Australian Commercial Insurance
Agencies Limited Australia 100%
Technical Insurance Management
Services Pty Limited Australia 100%
Sedgwick Superannuation Pty Limited Australia 100%
Sedgwick Noble Lowndes Asia
Pacific Limited Australia 100%
Sedgwick Noble Lowndes Limited Australia 100%
Sedgwick Noble Lowndes
Actuarial Limited Australia 100%
Sedgwick Noble Lowndes
Group Limited Australia 100%
Noble Lowndes (PNG) Limited Papua New Guinea 100%
Cullen Egan Dell Limited Australia 100%
Sedgwick Noble Lowndes
Accounting Pty Limited Australia 100%
McPhee Andrewartha
CED Pty Limited Australia 50%
Sedgwick Noble Lowndes
Financial Planning Limited Australia 100%
Sedgwick Noble Lowndes
Trusteeship Services Limited Australia 100%
Sedgwick Noble Lowndes
Superannuation Services Limited Australia 51%
Sedgwick Versicherungsmakler Gesellschaft m.b.H Austria 100%
MVM Versicherungsberatungs Gesellschaft m.b.H. Austria 100%
Sedgwick Argentina SA Argentina 49%
Marinaro Dundas SA Uruguay 49%
Marinaro Dundas SA Argentina 100%
Admiseg SA Asesora y Productora
de Seguros Argentina 100%
Sedgwick (Deutschland) GmbH Germany 100%
Sedgwick Noble Lowndes GmbH Germany 100%
Neuburger Noble Lowndes GmbH Germany 50%
Sedgwick Verwaltungs-GmbH Germany 100%
Sedgwick Consulting GmbH Germany 100%
Sedgwick International Broking Services GmbH Germany 100%
Sedgwick GmbH & Co Germany 100%
Buir-Bliesheimer Versicherungsservice GmbH Germany 49%
Hamm Versicherungsmakler GmbH Germany 100%
MVM Versicherungsmakler AG Switzerland 49%
Sedgwick (Continental) SA Switzerland 100%
Sedgwick AG Switzerland 100%
Sedgwick (Isle of Man) Limited Isle of Man 100%
Sedgwick Management Services
(Isle of Man) Limited Isle of Man 100%
Whitechapel Corporate Services Limited Isle of Man 100%
Whitechapel Insurance Services
Limited Isle of Man 100%
Whitechapel New Company Limited Isle of Man 100%
Whitechapel Financial Services Limited Isle of Man 100%
Sedgwick Management Services (Jersey) Limited Jersey 100%
Sedgwick S.A.-N.V Belgium 99.6%
Sedgwick S.A Luxembourg 100%
Sedgwick Management Services
(Luxembourg) SA Luxembourg 100%
|
Thilly Van Eessel NV-SA Belgium 100%
Continental Insurance & Reinsurance
Agency SA Belgium 100%
Thilly Van Eessel L.-C. SA Belgium 100%
Cecode SA Belgium 100%
European Professional Indemnity Mutual Belgium 100%
Thilly Reinsurance Services SA Belgium 100%
Sedgwick Europe Benefit Consultants BV Netherlands 100%
Sedgwick Noble Lowndes S.A.-N.V Belgium 100%
Sedgwick Noble Lowndes S.A Spain 100%
Portominas-Administracao e Corretagem de Seguros Ltda Brazil 100%
Shariffuddin-Sedgwick (B) Sendiran Berhad Brunei 45%
Sedgwick Holdings (Netherlands) BV Netherlands 100%
Sedgwick Management Services (Curacao) N.V. N. Antilles 100%
Sedgwick Nederland BV Netherlands 100%
P.T. Sedgwick Dharmala Indonesia 55%
Verenigde Reassurantie Makelaars BV Netherlands 100%
Schlencker BV Netherlands 100%
Sedgwick BV Netherlands 100%
"Praevenio" Technische Verzekeringen BV Netherlands 100%
O.W.J. Schlencker Assuradeuren BV Netherlands 100%
Singel Reinsurance Underwriting BV Netherlands 100%
NV Algemene Verzekering
Maatschappij "De Zee" Netherlands 100%
Pontier & Karreman BV Netherlands 100%
Sedgwick European Risk Services BV Netherlands 100%
Sedgwick Noble Lowndes B.V Netherlands 100%
Sedgwick Noble Lowndes Insurance
Division BV Netherlands 100%
Sedgwick Financial Services Consulting
Division BV Netherlands 100%
Nikols Sedgwick B.V Netherlands 100%
Sedgwick Group (Netherlands) BV Netherlands 100%
Cullen Egan Dell (NZ) Limited New Zealand 100%
Sedgwick Bergvall Holdings AS Norway 100%
Sedgwick Energy A/S Norway 100%
Sedgwick Bergvall AS Norway 100%
Sedgwick Norge AS Norway 100%
Sedgwick Bergvall AB Sweden 100%
Sedgwick Bergvall Inc. USA 100%
Sedgwick (PNG) Pty Limited Papua New Guinea 100%
Sedgwick Kassman Pty Limited Papua New Guinea 49%
Sedgwick Corretores de Seguros, Ltda Portugal 60%
Sedgwick - Resseguros e Consultores de Seguros, Ltda Portugal 60%
Sedgwick Correduria de Seguros, SA Spain 100%
Sedgwick Holdings (S.A.) (Proprietary) Limited South Africa 100%
Ginsburg Malan & Carsons Consultants and
Actuaries (Pty) Limited South Africa 50%
Superflex Limited South Africa 100%
Ginsburg Malan & Carsons Consultants and
Actuaries (Pretoria) Pty) Limited South Africa 100%
Ginsburg Malan & Carsons Consultants and
Actuaries (Durban) (Pty) Limited South Africa 100%
Ginsburg Malan & Carsons Consultants and
Actuaries (Cape) (Pty) Limited South Africa 100%
Ginsburg Malan & Carsons Consultants and
Actuaries (Johannesburg) (Pty) Limited South Africa 100%
Ginsburg Malan & Carsons Actuaries (Pty) Limited South Africa 100%
Ginsburg Malan & Carsons Healthcare
Services (Pty) Limited South Africa 100%
|
Sedgwick Noble Lowndes & Ginsburg
Systems (SA) (Pty) Limited South Africa 100%
Ginsburg Malan & Carsons Consultants and
Actuaries (Swaziland) (Pty) Limited Swaziland 100%
Ginsburg Malan & Carsons Actuaries
(Namibia) (Pty) Limited Namibia 100%
Puno Employee Benefit Consultants (Pty) Limited South Africa 100%
Ginsburg Malan & Carsons Investment
Services (Pty) Limited South Africa 100%
Pencon Holdings (Pty) Limited Namibia 33.33%
United Pension Administrators of
Namibia (Pty) Limited Namibia 100%
Benchmark Advisors (Pty) Limited South Africa 33.33%
Professional Risk Services (Proprietary) Limited South Africa 70%
Professional Risk Consultants (Proprietary) Limited South Africa 70%
Sedgwick Holdings (Namibia) (Pty) Limited Namibia 100%
Sedgwick Sweden AB Sweden 100%
Sedgwick Risk Services AB Sweden 100%
Sedgwick Dineen Group Limited Ireland 100%
Sedgwick Dineen Ireland Limited Ireland 100%
Sedgwick Dineen Trustees Limited Ireland 100%
Sedgwick Dineen Consulting Group Limited Ireland 100%
Sedgwick Dineen Employee Benefits Limited Ireland 100%
Sedgwick Dineen Personal Financial
Management Limited Ireland 100%
M.B. Fitzpatrick Limited Ireland 100%
Irish Pensions Trust Limited Ireland 100%
Payment Protection Services Limited Ireland 100%
IPT Actuarial Services Limited Ireland 100%
Sedgwick Noble Lowndes Limited Ireland 100%
Irish Pension Trustees Limited Ireland 100%
Combined Performance Measurement
Services Limited Ireland 50%
Sedgwick Dineen Limited Ireland 100%
Sedgwick Zeta Limited United Kingdom 100%
Sedgwick Claims Management
Services Limited Ireland 100%
Sedgwick Risk Consulting Limited Ireland 100%
Legal & Commercial Insurances Limited Ireland 100%
Gaelarachas Teoranta Ireland 50%
Sedgwick Management Services
(Ireland) Limited Ireland 100%
Lowndes Limited Ireland 100%
Sedgwick S.p.A Italy 100%
M.V.M. Italia S.r.l. Broker di Assicurazione Italy 100%
Sedgwick Thai Limited Thailand 50%
All Asia Sedgwick Insurance Brokers Corporation Philippines 51%
Sedgwick Group (Canada) Inc. Canada 100%
Crump Euings, Inc. Canada 100%
Sedgwick Limited Canada 100%
Lamarre, Caty, Houle Ltee Canada 100%
Guy Bergeron & Associes Inc. Canada 100%
Sedgwick Management Services
(Canada) Limited Canada 100%
B.V. Armstrong Consulting Limited Canada 100%
John Phillip Green Insurance Brokers Corp. Canada 100%
PlanDirect Insurance Services Inc. Canada 100%
Sedgwick Reinsurance Intermediaries
(Canada) Limited Canada 100%
|
Sedgwick Claims Management Services
(Canada) Limited Canada 100%
Sedgwick Insurance and Risk Management
Consultants (China) Limited China 100%
Sedgwick Polska sp. z o.o Poland 100%
Sedgwick a.s Czech Republic 100%
Sedgwick Slovakia a.s Slovakia 80%
Sedgwick Holding A/S Denmark 100%
Sedgwick A/S Denmark 100%
E. Dahl-Jorgensen & Co A/S Denmark 100%
Sedgwick Oy Finland 100%
Cofast - EBC SA France 100%
Sedgwick SA France 100%
Societe Francaise de Courtage d'Assurance de Risques
Petroliers et d'Energie SA France 100%
PRIESTIM SCI France 95%
Cabinet Billet et Cie SA France 100%
ARC Sud-Quest SA France 100%
Sedgwick Noble Lowndes Conseil SA France 100%
CEGAM France 100%
Sedgwick Noble Lowndes Data Consulting Limited Hungary 82.56%
Sedgwick Parekh Health Management
(Private) Limited India 80%
Lynch Insurance Brokers Limited Barbados 30%
Sedgwick Management Services (Barbados) Limited Barbados 33.33%
Media Reinsurance Corporation Barbados 25%
Sedgwick Kft Hungary 100%
James Wigham Poland International Limited United Kingdom 100%
Wigham Poland Australia Pty Limited Australia 100%
Wigham Poland (Hellas) Limited Greece 95%
Wigham Poland Reinsurance Brokers Hellas Limited Greece 100%
Sepakat James Insurance Brokers Sdn Bhd Malaysia 30%
Sedgwick Gamma Limited United Kingdom 100%
Sedgwick Group (Bermuda) Limited Bermuda 100%
Sedgwick (Bermuda) Limited Bermuda 100%
Sedgwick Noble Lowndes Limited Hong Kong 100%
Cumberland Brokerage Limited Bermuda 100%
Monalsa Assessoria Economico Financiera Ltda Brazil 100%
SCIB (Bermuda) Limited Bermuda 100%
Sedgwick Limited Hong Kong 100%
Sedgwick Hung Kai Insurance & Risk
Management Consultants Limited Hong Kong 50%
Sedgwick Construction Asia Limited Hong Kong 100%
Antah Sedgwick Insurance Brokers Sdn Bhd Malaysia30%
Sedgwick Private Limited Singapore 100%
Sedgwick Re Asia Pacific (Consultants)
Pte Limited Singapore 100%
Aldgate Investments Limited Bermuda 100%
Yarmouth Insurance Limited Bermuda 100%
Sedgwick Management Services (Bermuda) Limited Bermuda 100%
Sedgwick Management Services
(Cayman) Limited Cayman Isles 100%
Ace Holding Inc. British Virgin Isles 32.63%
Sedgwick Insurance Brokers (Pty) Limited Botswana 95%
Penguin Investments (Pty) Limited Botswana 100%
Sedgwick Comercial Ltda Brazil 100%
Sedgwick Brasil Administradora e Coretora de
Seguros Ltda Brazil 100%
Sedgwick Payne Brasil Resseguros Ltda Brazil 100%
Excess Corredores de Reaseguros S/A Chile 100%
|
Andueza y Compania Corredores de Seguros SA Chile 80%
Inversiones Andueza y Sedgwick SA Chile 60%
Sedgwick Consulting Group (Chile) SA Chile 100%
Andueza y Sedgwick, Corredores de Seguros SA Chile 100%
Andueza y Sedgwick, Agentes de Mutuos
Hipotecarios SA Chile 100%
Probenefits Sedgwick Noble Lowndes Chile SA Chile 60%
Tattersall Andueza & Sedgwick Corredores
de Seguros Chile 45%
Sedgwick Colombia Holdings S.A Colombia 51%
Sedgwick Centurion Corredores de Seguros Ltda Colombia 100%
Administradora Centurion Ltda Colombia 100%
Salud Centurion Ltda Colombia 100%
Sedgwick Corredores de Reaseguros Ltda Colombia 100%
Artemis Securities Limited Guernsey 100%
Sedgwick Brimex (Guernsey) Limited Guernsey 100%
Sedgwick Brimex Romania SRL Romania 99%
Sedgwick Kenya Insurance Brokers Limited Kenya 40%
Sedgwick Group (NZ) Limited New Zealand 100%
Sedgwick Limited New Zealand 100%
Sedgwick Re Limited New Zealand 100%
Sedgwick (Fiji) Limited Fiji 100%
Sedgwick Noble Lowndes (NZ) Limited New Zealand 100%
Sedgwick Professional Services Limited New Zealand 100%
SEDFEMA Insurance Brokers Inc. Philippines 100%
Sedgwick Korea Limited South Korea 100%
Sedgwick Venezuela Corredores de Reaseguros, CA Venezuela 100%
Sedgwick Group (Zimbabwe) Limited Zimbabwe 100%
Sedgwick Holdings (Private) Limited Zimbabwe 50%
Sedgwick Insurance Brokers (Private) Limited Zimbabwe 100%
Sedgwick Management Services
(Private) Limited Zimbabwe 100%
Sedgwick Risk Management and
Consultancy (Private) Limited Zimbabwe 100%
|
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the previously filed Registration Statements of Marsh & McLennan Companies, Inc. on Form S-8 (Registration Statement File Nos. 2-58660, 2-65096, 2-82938, 33-21566, 33-32880, 33-48803, 33-48804, 33-48807, 33-54349, 33-59603, 33-63389, 333-35739, 333-35741, 333-29627 and 333-51141) and, the previously filed Registration Statements on Form S-3 (Registration Statement Nos. 333-25069, 333-28201, 333-41021, 333-48707 and 333-67543) of our reports dated March 5, 1999 appearing in, and incorporated by reference in, this Annual Report on Form 10-K of Marsh & McLennan Companies, Inc. for the year ended December 31, 1998.
/s/ Deloitte & Touche LLP New York, New York March 26, 1999 |
Exhibit 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Norman Barham ---------------------------- Norman Barham |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Lewis W. Bernard ------------------------------ Lewis W. Bernard |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Frank J. Borelli --------------------------------- Frank J. Borelli |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Peter Coster ----------------------------- Peter Coster |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Robert F. Erburu ------------------------------- Robert F. Erburu |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Jeffrey W. Greenberg ------------------------------- Jeffrey W. Greenberg |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Ray J. Groves ------------------------------- Ray J. Groves |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Stephen R. Hardis --------------------------------- Stephen R. Hardis |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Gwendolyn S. King --------------------------------- Gwendolyn S. King |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ The Rt. Hon. Lord Lang of Monkton ------------------------------------------ The Rt. Hon. Lord Lang of Monkton |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Lawrence J. Lasser -------------------------------- Lawrence J. Lasser |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ David A. Olsen ------------------------------- David A. Olsen |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ John D. Ong --------------------------- John D. Ong |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ George Putnam ------------------------------ George Putnam |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Saxon Riley ------------------------------ Saxon Riley |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Adele Smith Simmons --------------------------------- Adele Smith Simmons |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ John T. Sinnott ------------------------------ John T. Sinnott |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ A. J. C. Smith ----------------------------- A. J. C. Smith |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ Frank J. Tasco --------------------------- Frank J. Tasco |
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint any one of A. J. C. Smith, Jeffrey W. Greenberg, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's agent and attorney-in-fact, each with the power to act fully hereunder without the other and with full power of substitution to act in the name and on behalf of the undersigned:
To sign or to transmit electronically in the name and on behalf of the undersigned, as a Director of the Company, and file with the Securities and Exchange Commission on behalf of the Company an Annual Report on Form 10-K for the year ended December 31, 1998, any registration statements for the registration of the Company's common stock and related interests to be issued pursuant to the Company's duly adopted employee benefit, compensation and stock plans, any registration statements for the registration of the Company's common stock for issuance in connection with acquisitions or for resale by the holders thereof who acquired or will acquire such stock in connection with past or future acquisitions, and any amendments or supplements to such Annual Report on Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically, any agreements, instruments, certificates or other documents which they shall deem necessary or proper in connection with the filing of such Annual Report on Form 10-K, registration statements and prospectuses and amendments or supplements thereto and generally to act for and in the name of the undersigned with respect to such filings as fully as could the undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney effective the 18th day of March, 1999.
/s/ W.R.P. White-Cooper ------------------------------- W.R.P. White-Cooper |
| ARTICLE 5 |
| This schedule contains summary financial information extracted from the consolidated Marsh & McLennan Companies, Inc. and subsidiaries December 31, 1998 financial statements and is qualified in its entirety by reference to such financial statements. |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1998 |
| PERIOD END | DEC 31 1998 |
| CASH | 610,000,000 |
| SECURITIES | 0 |
| RECEIVABLES | 2,007,000,000 |
| ALLOWANCES | 98,000,000 |
| INVENTORY | 0 |
| CURRENT ASSETS | 3,245,000,000 |
| PP&E | 2,107,000,000 |
| DEPRECIATION | 820,000,000 |
| TOTAL ASSETS | 11,871,000,000 |
| CURRENT LIABILITIES | 5,002,000,000 |
| BONDS | 1,590,000,000 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 259,000,000 |
| OTHER SE | 3,400,000,000 |
| TOTAL LIABILITY AND EQUITY | 11,871,000,000 |
| SALES | 0 |
| TOTAL REVENUES | 7,190,000,000 |
| CGS | 0 |
| TOTAL COSTS | 5,770,000,000 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 19,000,000 |
| INTEREST EXPENSE | 140,000,000 |
| INCOME PRETAX | 1,305,000,000 |
| INCOME TAX | 509,000,000 |
| INCOME CONTINUING | 796,000,000 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 796,000,000 |
| EPS PRIMARY | 3.11 |
| EPS DILUTED | 2.98 |