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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 2002
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036
(212) 345-5000
Commission file number 1-5998
State of Incorporation: Delaware
I.R.S. Employer Identification No. 36-2668272
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 ___.
As of July 31, 2002, there were outstanding 535,729,083 shares of common
stock, par value $1.00 per share, of the registrant.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Marsh & McLennan Companies, Inc. and its subsidiaries ("MMC") and their
representatives may from time to time make verbal or written statements
(including certain statements contained in this report and other MMC filings
with the Securities and Exchange Commission and in our reports to stockholders)
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 revenues, expenses,
earnings, cash flow, capital structure, financial losses and expected insurance
recoveries resulting from the September 11, 2001 attack on the World Trade
Center in New York City, as well as market and industry conditions, premium
rates, financial markets, 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,
experts' reports and opinions and long-term trends, 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 or referred to herein
include, in the case of MMC's risk and insurance services and consulting
businesses, the amount of actual insurance recoveries and financial loss from
the September 11 attack on the World Trade Center or other adverse consequences
from that incident. Other factors that should be considered in the case of MMC's
risk and insurance services business are changes in competitive conditions,
movements in premium rate levels, the continuation of challenging marketplace
conditions for the transfer of commercial risk and other changes in the global
property and casualty insurance markets, the impact of terrorist attacks,
natural catastrophes and mergers between client organizations, including
insurance and reinsurance companies. Factors to be considered in the case of
MMC's investment management business include changes in worldwide and national
equity and fixed income markets, actual and relative investment performance, the
level of sales and redemptions and the ability to maintain investment management
and administrative fees at appropriate levels; and with respect to all of MMC's
activities, changes in general worldwide and national economic conditions,
changes in the value of investments made in individual companies and investment
funds, fluctuations in foreign currencies, actions of competitors or regulators,
changes in interest rates or in the ability to access financial markets,
developments relating to claims, lawsuits and contingencies, prospective and
retrospective 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.
Forward-looking statements speak only as of the date on which they are made, and
MMC undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which it is made or to reflect the
occurrence of unanticipated events.
MMC is committed to providing timely and materially accurate information to the
investing public, consistent with our legal and regulatory obligations. To that
end, MMC and its operating companies use their websites to convey meaningful
information about their businesses, including the posting of updates of assets
under management at Putnam. Monthly updates of assets under management at Putnam
will be posted on the first business day following the end of each month, except
at the end of March, June, September and December, when such information will be
released with MMC's quarterly earnings announcement. Investors can link to MMC
and its operating company websites through www.mmc.com.
PART 1. FINANCIAL INFORMATION
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share figures)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------ ------- ------- -------
Revenue $ 2,612 $ 2,541 $ 5,247 $ 5,172
Expense 2,047 2,015 3,995 4,001
------- ------- ------- -------
Operating Income 565 526 1,252 1,171
Interest Income 4 7 9 12
Interest Expense (38) (56) (75) (108)
------- ------- ------- -------
Income Before Income Taxes
And Minority Interest 531 477 1,186 1,075
Income Taxes 189 179 421 403
Minority Interest, Net of Tax 6 5 11 10
------- ------- ------- -------
Net Income $ 336 $ 293 $ 754 $ 662
======= ======= ======= =======
Basic Net Income
Per Share $ 0.62 $ 0.53 $ 1.38 $ 1.20
======= ======= ======= =======
Diluted Net Income
Per Share $ 0.60 $ 0.51 $ 1.33 $ 1.14
======= ======= ======= =======
Average Number of Shares
Outstanding - Basic 545 551 546 552
======= ======= ======= =======
Average Number of Shares
Outstanding - Diluted 562 573 565 574
======= ======= ======= =======
Dividends Declared $ 0.28 $ 0.27 $ 0.55 $ 0.52
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated statements.
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
(Unaudited)
June 30, December 31,
2002 2001
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 471 $ 537
-------- --------
Receivables-
Commissions and fees 2,326 2,288
Advanced premiums and claims 154 188
Other receivables 379 355
-------- --------
2,859 2,831
Less-allowance for doubtful accounts and cancellations (142) (139)
-------- --------
Net receivables 2,717 2,692
-------- --------
Prepaid dealer commissions -
current portion 258 308
Other current assets 270 255
-------- --------
Total current assets 3,716 3,792
Goodwill and intangible assets 5,349 5,327
Fixed assets, net 1,242 1,235
(net of accumulated depreciation and
amortization of $1,171 at June 30, 2002
and $1,022 at December 31, 2001)
Long-term investments 691 826
Prepaid dealer commissions 419 528
Other assets 1,707 1,585
-------- --------
$ 13,124 $ 13,293
======== ========
The accompanying notes are an integral part of these consolidated statements.
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share figure)
(Unaudited)
June 30, December 31,
2002 2001
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 647 $ 757
Accounts payable and accrued liabilities 1,392 1,347
Accrued compensation and employee benefits 758 1,088
Accrued income taxes 453 600
Dividends payable 152 146
-------- --------
Total current liabilities 3,402 3,938
-------- --------
Fiduciary liabilities 4,162 3,630
Less - cash and investments held in
a fiduciary capacity (4,162) (3,630)
-------- --------
Long-term debt 2,857 2,334
-------- --------
Other liabilities 1,828 1,848
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value, authorized
6,000,000 shares, none issued - -
Common stock, $1 par value, authorized
800,000,000 shares, issued 560,641,640
shares at June 30, 2002 and at
December 31, 2001 561 561
Additional paid-in capital 1,550 1,620
Retained earnings 4,181 3,723
Accumulated other comprehensive loss (214) (227)
-------- --------
6,078 5,677
Less - treasury shares, at cost,
22,498,655 shares at June 30, 2002 and
11,988,096 shares at December 31, 2001 (1,041) (504)
-------- --------
Total stockholders' equity 5,037 5,173
-------- --------
$ 13,124 $ 13,293
======== ========
The accompanying notes are an integral part of these consolidated statements.
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
(Unaudited)
Six Months Ended
June 30,
2002 2001
----- -----
Operating cash flows:
Net income $ 754 $ 662
Adjustments to reconcile net income to cash generated
from operations:
Depreciation of fixed assets and capitalized software 159 168
Amortization of intangible assets 16 97
Provision for deferred income taxes 14 68
Other, net 21 (28)
Changes in assets and liabilities:
Net receivables (25) 110
Prepaid dealer commissions 159 118
Other current assets (24) 8
Other assets (71) (73)
Accounts payable and accrued liabilities 54 (200)
Accrued compensation and employee benefits (329) (627)
Accrued income taxes (151) 112
Other liabilities (17) (111)
----- -----
Net cash generated from operations 560 304
----- -----
Financing cash flows:
Net (decrease) increase in commercial paper (357) 796
Other borrowings 748 20
Other repayments of debt (6) (10)
Purchase of treasury shares (802) (308)
Issuance of common stock 235 144
Dividends paid (291) (274)
----- -----
Net cash (used for) provided by financing activities (473) 368
----- -----
Investing cash flows:
Additions to fixed assets and capitalized software (187) (224)
Proceeds from sale of fixed assets 12 103
Acquisitions (21) (47)
Other, net 38 (333)
----- -----
Net cash used for investing activities (158) (501)
----- -----
Effect of exchange rate changes on cash
and cash equivalents 5 (9)
----- -----
(Decrease)/Increase in cash & cash equivalents (66) 162
Cash & cash equivalents at beginning of period 537 240
----- -----
Cash & cash equivalents at end of period $ 471 $ 402
===== =====
The accompanying notes are an integral part of these consolidated statements
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Operations
--------------------
MMC, a professional services firm, is organized based on the different
services that it offers. Under this organization 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 and program management
services for businesses, public entities, insurance companies,
associations, professional services organizations and private clients. It
also provides services principally in connection with originating,
structuring and managing insurance, financial services and other industry
focused investments. The investment management segment primarily provides
securities investment advisory and management services and administrative
services for a group of publicly held investment companies and
institutional accounts. The consulting segment provides advice and services
to the managements of organizations primarily in the areas of human
resources and employee benefit programs, investment consulting, general
management consulting, organizational design and economic consulting and
expert testimony.
2. Principles of Consolidation
---------------------------
The consolidated financial statements included herein have been prepared by
MMC pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America, have been omitted
pursuant to such rules and regulations, although MMC believes that the
disclosures are adequate to make the information presented not misleading.
These consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in MMC's latest
Annual Report on Form 10-K.
The financial information contained herein reflects all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the three-month and six-month periods ended June
30, 2002 and 2001. Certain reclassifications have been made to the prior
year amounts to conform to the current year presentation.
In the normal course of business MMC makes investments through its
subsidiary Marsh & McLennan Risk Capital Holdings, Ltd. ("MMRCH"),
primarily in insurance and reinsurance entities, and periodically sells
these investments. In the second quarter of 2002, MMRCH sold an investment
that it had acquired in 1997 to Trident II, L.P. MMC Capital, Inc. a
wholly-owned subsidiary of MMRCH, serves as advisor to Trident II, L.P.
Revenue of $9 million from this transaction was recorded by MMRCH.
3. 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 $56 million and $95 million for the
six months ended June 30, 2002 and 2001, respectively.
Net uncollected premiums and claims and the related payables amounting to
$11.4 billion at June 30, 2002 and $10.8 billion at December 31, 2001 are
not included in the accompanying Consolidated Balance Sheets.
4. Per Share Data
--------------
Basic net income per share is calculated by dividing net income by the
weighted 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 Putnam Class B Common
Shares and adding back dividend equivalent expense related to common stock
equivalents. This result is then divided by the weighted average common
shares outstanding, which have been adjusted for the dilutive effect of
potentially issuable 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 and six-month
periods ended June 30, 2002 and 2001.
Three Months Six Months Ended
(In millions) Ended June 30, June 30,
------------- -------------- ----------------
2002 2001 2002 2001
----- ----- ----- -----
Net income $ 336 $ 293 $ 754 $ 662
Less: Potential minority interest
associated with Putnam Class B
Common Shares net of dividend
equivalent expense related to
common stock equivalents - (2) (1) (6)
----- ----- ----- -----
Net income for diluted
earnings per share $ 336 $ 291 $ 753 $ 656
===== ===== ===== =====
Basic weighted average
common shares outstanding 545 551 546 552
Dilutive effect of potentially
issuable common stock 17 22 19 22
--- --- --- ---
Diluted weighted average
common shares outstanding 562 573 565 574
=== === === ===
5. Supplemental Disclosure to the Consolidated Statements of Cash Flows
--------------------------------------------------------------------
The following schedule provides additional information concerning interest
and income taxes paid for the six-month periods ended June 30, 2002 and
2001.
(In millions of dollars) 2002 2001
------------------------ ---- ----
Interest paid $ 62 $117
Income taxes paid $468 $133
6. Comprehensive Income
--------------------
The components of comprehensive income for the six-month periods ended June
30, 2002 and 2001 are as follows:
(In millions of dollars) 2002 2001
------------------------ ----- -----
Foreign currency translation adjustments $ 60 $ (82)
Unrealized investment holding losses,
net of income taxes (33) (93)
Less: Reclassification adjustment for gains
included in net income, net of income taxes (18) (41)
Deferred gain on cash flow hedges, net of income taxes 4 -
------ ------
Other comprehensive income/(loss) 13 (216)
Net income 754 662
------ ------
Comprehensive income $ 767 $ 446
====== ======
7. Integration and Restructuring Costs
-----------------------------------
In 1999, as part of the 1998 combination with Sedgwick Group, plc
("Sedgwick") and the integration of Sedgwick, MMC adopted a plan to reduce
staff and consolidate duplicative offices. The estimated cost of this plan
relating to employees and offices of Sedgwick ("1999 Sedgwick Plan")
amounted to $285 million and was included in the cost of the acquisition.
Merger-related costs for employees and offices of MMC ("1999 MMC Plan")
amounted to $266 million and were recorded as part of a 1999 special
charge.
In the third quarter of 2001, as a result of weakening business conditions,
which were exacerbated by the events of September 11, MMC adopted a plan to
provide for staff reductions and office consolidations, primarily in the
consulting segment ("2001 Plan"). The charge of $61 million related to this
Plan is comprised of $44 million for severance and related benefits
affecting 750 people and $17 million for future rent under noncancelable
leases.
The utilization of these charges is summarized as follows:
1999 Sedgwick Plan: Utilized and
(In millions of dollars) Initial changes in Utilized in Balance
Balance estimates Six Months 2002 June 30, 2002
through 2001
------- ------------ --------------- -------------
Termination payments to employees $183 $(180) $(1) $ 2
Other employee-related costs 5 (5) - -
Future rent under noncancelable leases 48 (28) (2) 18
Leasehold termination and related costs 49 (30) (1) 18
---- ----- ---- ----
$285 $(243) $(4) $38
---- ----- ---- ----
Number of employee terminations 2,400 (2,400) - -
Number of office consolidations 125 (125) - -
- -------------------------------------------------------------------------------
1999 MMC Plan: Utilized and
(In millions of dollars) Initial changes in Utilized in Balance
Balance estimates Six Months 2002 June 30, 2002
through 2001
------- ------------ --------------- -------------
Termination payments to employees $194 $ (187) $(2) $ 5
Future rent under noncancelable leases 31 (19) (1) 11
Leasehold termination and related costs 16 (13) - 3
Other integration related costs 25 (25) - -
---- ------- ----- ----
$266 $ (244) $(3) $19
---- ------- ----- ----
Number of employee terminations 2,100 (2,100) - -
Number of office consolidations 50 (50) - -
- -------------------------------------------------------------------------------
The actions contemplated by the 1999 Sedgwick Plan and the 1999 MMC Plan were
substantially complete by year-end 2000. Some accruals, primarily for future
rent under noncancelable leases and salary continuance arrangements, are
expected to be paid over several years. Accruals for lease termination costs are
primarily related to expenses payable at the expiration of the
lease terms.
2001 Plan
(In millions of dollars) Initial Utilized Utilized in Balance
Balance 2001 Six Months 2002 June 30, 2002
------- -------- --------------- -------------
Termination payments to employees $44 $(14) $ (19) $11
Future rent under noncancelable leases 17 - (2) 15
---- ----- ------ ----
$61 $(14) $ (21) $26
---- ----- ------ ----
Number of employee terminations 750 (506) (221) 23
Number of office consolidations 9 (2) (7) -
- --------------------------------------------------------------------------------
Actions under the 2001 Plan are expected to be substantially complete by
September 30, 2002. Some accruals, primarily for future rent under noncancelable
leases and salary continuance arrangements are expected to be paid over several
years.
8. Goodwill and Other Intangibles
------------------------------
In accordance with SFAS No. 142, MMC discontinued the amortization of
goodwill effective January 1, 2002. A reconciliation of previously reported
net income and earnings per share to the amounts adjusted for the exclusion
of goodwill amortization net of the pro-forma effect of directly related
expenses and income taxes for the three and six-month periods ended June
30, 2002 and 2001 is as follows:
(In millions, except per share figures)
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -----------------
2002 2001 2002 2001
------- ------- ------- -------
Reported Net Income $ 336 $ 293 $ 754 $ 662
Net amortization adjustment - 34 - 67
------- ------- ------- -------
Adjusted Net Income $ 336 $ 327 $ 754 $ 729
======= ======= ======= =======
Reported earnings per share - Basic $ 0.62 $ 0.53 $ 1.38 $ 1.20
======= ======= ======= =======
Adjusted earnings per share - Basic $ 0.62 $ 0.59 $ 1.38 $ 1.32
======= ======= ======= =======
Reported earnings per share - Diluted $ 0.60 $ 0.51 $ 1.33 $ 1.14
======= ======= ======= =======
Adjusted earnings per share - Diluted $ 0.60 $ 0.57 $ 1.33 $ 1.26
======= ======= ======= =======
Changes in the carrying amount of goodwill for the six-month period ended
June 30, 2002, are as follows:
Balance as of January 1, 2002 $5,069
Goodwill acquired 7
Other adjustments (primarily foreign exchange) 22
------
Balance as of June 30, 2002 $5,098
======
The goodwill balance at June 30, 2002 includes approximately $115 million
of equity method goodwill.
MMC has completed the transitional goodwill impairment test and determined
that there is no impairment of goodwill.
Amortized intangible assets consist of the cost of client lists and client
relationships acquired and the rights to future revenue streams from
certain existing private equity funds. MMC has no intangible assets that
are not amortized. The gross carrying amount and accumulated amortization
by major intangible asset class is as follows:
(In millions of dollars) Balance at June 30, 2002
------------------------ -------------------------------------
Gross Accumulated Net Carrying
Cost Amortization Value
----- ------------ ----------------
Client lists and client
relationships acquired $135 $ 45 $ 90
Future revenue streams related
to existing private equity funds 219 58 161
---- ---- ----
Total Amortized Intangibles $354 $103 $251
==== ==== ====
Aggregate amortization expense for the six-months ended June 30, 2002 was
$16 million and the estimated aggregate amortization expense is as follows:
Year Ending December 31, Estimated Expense
------------------------ -----------------
2002 $32
2003 $32
2004 $32
2005 $32
2006 $23
9. Long-term Debt
--------------
In March 2002, MMC issued $500 million of 5.375% Senior Notes due 2007 and
$250 million of 6.25% Senior Notes due 2012 (the "Notes"). Interest is
payable semi-annually on March 15 and September 15 of each year commencing
September 15, 2002. The proceeds of these Notes were used to repay a
portion of commercial paper borrowings.
MMC entered into interest rate swap transactions to hedge its exposure to
changes in the fair value of the Notes. The swap transactions effectively
converted the fixed rate obligations into floating rate obligations. Under
the terms of the swaps, the swap counterparties will pay MMC a fixed rate
equal to the coupon rate on the Notes. MMC will pay the swap counterparties
a floating rate of 6-month Libor plus 9.25 bps for the five-year swap and
6-month Libor plus 25.45 bps for the ten-year swap. The swaps qualify for
hedge accounting and meet all the criteria necessary to conclude that the
hedge will be perfectly effective under SFAS No. 133.
Commercial paper borrowings of $750 million at June 30, 2002 and $1.0
billion at December 31, 2001 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.
10. Share Repurchases
-----------------
During the first six months of 2002, MMC repurchased approximately 16.5
million shares of its common stock at a cost of approximately $841 million.
MMC currently plans to continue to repurchase shares throughout 2002,
subject to market conditions, including from time to time pursuant to the
terms of a 10b5-1 plan.
MMC uses written put options to supplement its share repurchase program.
The contracts are European style options, which generally expire three
months from the date of sale. Settlement terms of the contracts are
controlled by MMC and include physical, net-cash or net-share settlement.
The contracts are recorded as equity transactions in accordance with EITF
Issue No. 00-19, "Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock." At June 30, 2002, MMC had
open contracts on 2.3 million shares, with strike prices ranging from
$41.85 to $48.15 with a maximum potential purchase commitment of $104
million. The open contracts expire between July 22, 2002 and September 24,
2002 and have a fair value of $2 million at June 30, 2002. Approximately 43
thousand shares could be issuable if the company were to elect a net-share
settlement of the contracts based on the fair value at June 30, 2002.
11. Common Stock
------------
On May 16, 2002, 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 28, 2002.
12. Claims, Lawsuits and Other Contingencies
----------------------------------------
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. Insurance coverage applicable to such matters includes
elements of both risk retention and risk transfer.
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. 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. As of June 30, 2002,
settlements and related costs previously paid amount to approximately $500
million, of which approximately $175 million is due from or has been paid
by insurers. The remaining estimated payments for pension redress and
related costs accrued in the financial statements is $130 million,
essentially all of which is expected to be recovered from insurers.
MMC's ultimate exposure from the review by the Personal Investment
Authority (now part of the U.K. Financial Services Authority), as presently
calculated and including Sedgwick, is subject to a number of variable
factors including, among others, the interest rate established quarterly by
the U.K. regulators for calculating compensation, equity markets, 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 businesses that were already in run-off, including River
Thames Insurance Company Limited. MMC has subsequently disposed of
substantially all of these insurance entities, however, guarantees issued
by Sedgwick with respect to certain liabilities of River Thames remain
open.
Although the ultimate outcome of all matters referred to above cannot be
ascertained and liabilities in indeterminate amounts may be imposed on MMC
and its subsidiaries, on the basis of present information, 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.
13. Segment Information
-------------------
MMC operates in three principal business segments based on the services
provided. Segment performance is evaluated based on operating income, which
is after deductions for directly related expenses and minority interest but
before special charges. The accounting policies of the segments are the
same as those used for the consolidated financial statements.
Selected information about MMC's operating segments for the six-month
periods ended June 30, 2002 and 2001 follow:
(In millions of dollars) Revenue Segment
------------------------ from External Operating
Customers Income
------------- --------------
2002
----
Risk and Insurance Services $2,912 (a) $ 791
Investment Management 1,175 344
Consulting 1,160 (b) 164
------ ------
$5,247 $1,299
====== ======
2001
----
Risk and Insurance Services $2,605 (a) $ 634
Investment Management 1,386 424
Consulting 1,181 (b) 161
------ ------
$5,172 $1,219
====== ======
(a) Includes interest income on fiduciary funds ($56 million in 2002 and
$95 million in 2001).
(b) Revenue and expense for 2001 reflect the reclassification of reimbursed
(out-of-pocket) expenses. Effective January 1, 2002, expense reimbursements
received from clients within the Consulting segment are recorded as revenue
rather than an offset to expense, in compliance with guidance provided by
the Financial Accounting Standards Board (EITF Issue No. 01-14).
A reconciliation of the total segment operating income to income before
income taxes and minority interest in the consolidated financial statements
is as follows:
2002 2001
-------- -------
Total segment operating income $ 1,299 $ 1,219
Corporate expense (58) (58)
Reclassification of minority interest 11 10
------- -------
Operating income 1,252 1,171
Interest income 9 12
Interest expense (75) (108)
------- -------
Total income before income taxes and
minority interest $ 1,186 $ 1,075
======= =======
14. Subsequent Event
----------------
On August 9, 2002, Conseco, Inc. announced its intent to exercise a 30-day
grace period on bond interest payments and engage financial and legal
advisors for the purpose of beginning discussions with bondholders with a
goal of restructuring the capital of the parent company. Thomas H. Lee
Equity Fund IV, L.P. ("Fund IV") holds a significant preferred investment
position in Conseco. In 1999, Putnam acquired an equity interest in Thomas
H. Lee Partners, L. P., and the general partner of Fund IV. The significant
capital restructuring that may result from the actions announced by Conseco
may adversely impact the value of Fund IV's investment in Conseco, and
consequently the value of Putnam's investments related to Fund IV. Putnam
is assessing the impact of this event on its investments in Fund IV, which
could result in a reduction of pre-tax operating income (non-cash) in the
range of $10-15 million in the third quarter.
Marsh & McLennan Companies, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Second Quarter and Six Months Ended June 30, 2002
General
Marsh & McLennan Companies, Inc. and Subsidiaries ("MMC") is a professional
services firm. MMC subsidiaries include Marsh, the world's leading risk and
insurance services firm; Putnam Investments, one of the largest investment
management companies in the United States; and Mercer, a major global provider
of consulting services. Approximately 58,000 employees worldwide provide
analysis, advice and transactional capabilities to clients in over 100
countries.
MMC operates in three principal business segments based on the services
provided. Segment performance is evaluated based on operating income, which is
after deductions for directly related expenses and minority interest.
For a description of critical accounting policies, including those which involve
significant management judgment, see Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note 1 to the consolidated
financial statements in MMC's Annual Report on Form 10-K for the year ended
December 31, 2001.
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 "Information Concerning Forward-Looking
Statements" on page one of this filing. This Form 10-Q should be read in
conjunction with MMC's latest Annual Report on Form 10-K.
The consolidated results of operations follow:
- -------------------------------------- ------------------- --------------------
Second Quarter Six Months
(In millions of dollars) 2002 2001 2002 2001
- -------------------------------------- ------------------- --------------------
Revenue:
Risk and Insurance Services $1,436 $1,251 $2,912 $2,605
Investment Management 581 696 1,175 1,386
Consulting (a) 595 594 1,160 1,181
------ ------ ------ ------
2,612 2,541 5,247 5,172
------ ------ ------ ------
Expense:
Compensation and Benefits 1,281 1,222 2,530 2,438
Other Operating Expenses 766 793 1,465 1,563
------ ------ ------ ------
2,047 2,015 3,995 4,001
------ ------ ------ ------
Operating Income $ 565 $ 526 $1,252 $1,171
====== ====== ====== ======
Operating Income Margin 21.6% 20.7% 23.9% 22.6%
====== ====== ====== ======
- --------------------------------------------------------------------------------
(a) Revenue and expense for 2001 reflect the reclassification of reimbursed
(out-of-pocket) expenses to conform with current year presentation.
Revenue, derived mainly from commissions and fees, rose 3% from the second
quarter of 2001 and rose 1% for the six months. Expenses increased 2% for the
second quarter and were essentially unchanged for the six months. Revenue
increased in the risk and insurance services segment, principally driven by a
higher volume of business, partially offset by a revenue decline in the
investment management segment. The 2002 expenses reflect the change in
accounting for goodwill discussed under "New Accounting Pronouncements" in this
Management's Discussion and Analysis.
On a consolidated basis, underlying revenue which excludes the effect of such
items as foreign exchange, acquisitions and dispositions, increased 3% as
compared with the second quarter of 2001. The risk and insurance services
segment experienced underlying revenue growth of approximately 16% primarily due
to net new business and the effect of higher commercial insurance premium rates
partially offset by lower fiduciary interest income. Revenue decreased 17% in
the investment management segment as average assets under management declined
from the prior year. Consulting revenue decreased 2% for the second quarter
primarily reflecting a decline in the general management consulting, the
rewards/talent management, and the communication practices partially offset by
increased levels of service provided by its retirement consulting,
administration and economic consulting practices. For the six months,
consolidated underlying revenue declined approximately 2%.
Operating expenses, excluding the effect of foreign exchange, acquisitions and
dispositions, and the change in accounting for goodwill, increased approximately
3% in the second quarter of 2002 primarily due to increased compensation and
benefit costs in the risk and insurance services segment offset by lower
incentive compensation and lower volume related expenses in the investment
management segment. Underlying expenses increased 2% for the first six months of
2002 compared with the same period of 2001.
Risk and Insurance Services
- -------------------------------------------------------------------------------
Second Quarter Six Months
(In millions of dollars) 2002 2001 2002 2001
- -------------------------------------------------------------------------------
Revenue $1,436 $1,251 $2,912 $2,605
Expense 1,107 998 2,121 1,971
------ ------ ------ ------
Operating Income $ 329 $ 253 $ 791 $ 634
====== ====== ====== ======
Operating Income Margin 22.9% 20.2% 27.2% 24.3%
====== ====== ====== ======
- -------------------------------------------------------------------------------
Revenue
Revenue for the risk and insurance services segment grew 15% over the second
quarter of 2001. On a comparable basis, underlying revenue for the risk and
insurance services segment rose approximately 16% primarily reflecting net new
business and higher premium rates. Underlying revenue for insurance broking and
risk management, which accounted for approximately 75% of the entire risk and
insurance services segment, grew approximately 19%. This increase includes the
impact of a 35% decrease in fiduciary interest income, resulting from a decline
in interest rates, partially offset by higher average funds invested. Underlying
revenue for the reinsurance broking unit grew 20%, which includes the impact of
a 33% decline in fiduciary interest income. For the first six months of 2002,
underlying revenue grew 14% over the same period of 2001.
Over the past two years, the transfer of commercial risk has become more
difficult and costly with proportionate increases in premiums. Since the
terrorist attacks in 2001, insurance and reinsurance markets worldwide have
tightened, capacity is reduced and rates increased. The size of the increases
varies according to product line and clients' loss experience, which reflects a
dynamic and changing marketplace. These trends are continuing into the third
quarter of 2002.
Expense
Risk and insurance services expenses increased 11% in the second quarter and 8%
for the six months over 2001. On a comparable basis, excluding the effect of
such items as acquisitions, foreign exchange, and the change in accounting for
goodwill, expenses increased approximately 13% from the second quarter of 2001
and 11% for the six months primarily reflecting increased incentive compensation
commensurate with strong operating performance and increased benefit costs and
increased costs due to a higher volume of business.
Investment Management
- --------------------------------------------------------------------------------
Second Quarter Six Months
(In millions of dollars) 2002 2001 2002 2001
- --------------------------------------------------------------------------------
Revenue $581 $696 $1,175 $1,386
Expense 412 489 831 962
----- ----- ----- -----
Operating Income $169 $207 $344 $ 424
===== ===== ===== =====
Operating Income Margin 29.1% 29.7% 29.3% 30.6%
===== ===== ===== =====
- --------------------------------------------------------------------------------
Revenue
Putnam's revenue decreased 17% compared with the second quarter of 2001
primarily reflecting a decline in the level of average assets under management
on which fees are earned, as well as a decline in equity earnings for the Thomas
H. Lee investment. Assets under management averaged $301 billion in the second
quarter of 2002, an 11% decline from the $340 billion managed in the second
quarter of 2001. Assets under management aggregated $284 billion at June 30,
2002 compared with $339 billion at June 30, 2001 and $315 billion at December
31, 2001. The change from December 31, 2001 results from a $27 billion decrease
due to a decline in equity market levels and $3.6 billion of net fund
redemptions. Assets under management at July 31, 2002 aggregated $261 billion.
Revenue for Putnam decreased 15% for the first six months of 2002 compared with
the same period of 2001.
Expense
Putnam's expenses decreased 16% in the second quarter of 2002 from the same
period of 2001 and 14% in the first six months of 2002 compared to 2001,
primarily due to a reduction in volume related expenses, as well as lower
incentive compensation reflecting the current operating environment.
Quarter-end and average assets under management are presented below:
- ---------------------------------------------------------------------
(In billions of dollars) 2002 2001
- ----------------------------------- ---------------- ----------------
Mutual Funds:
Core Equity $53 $ 64
Value Equity 49 55
Growth Equity 39 76
Fixed Income 50 47
- ----------------------------------- ---------------- ----------------
191 242
- ----------------------------------- ---------------- ----------------
Institutional Accounts:
Core Equity 47 46
Value Equity 7 7
Growth Equity 20 28
Fixed Income 19 16
- ----------------------------------- ---------------- ----------------
93 97
- ----------------------------------- ---------------- ----------------
Quarter-end Assets $284 $339
- ----------------------------------- ---------------- ----------------
Assets from Non-US Investors $30 $29
- ----------------------------------- ---------------- ----------------
Average Assets $301 $340
- ----------------------------------- ---------------- ----------------
Assets under management and revenue levels are particularly affected by
fluctuations in domestic and international stock and bond market prices, the
composition of assets under management and by the level of investments and
withdrawals for current and new fund shareholders and clients. U.S. equity
markets have recorded declines in each of the past two years and over the first
six months of 2002 after several years of substantial growth prior to 2000.
These market declines are a primary cause to the decrease in assets under
management and, accordingly, to the decrease in revenue. Items affecting revenue
also include, but are not limited to, actual and relative 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 and the
ability to maintain investment management and administrative fees at appropriate
levels. Revenue levels are sensitive to all of the factors above, but in
particular, to changes in stock and bond market valuations.
Putnam provides individual and institutional investors with a broad range of
equity and fixed income investment products and services, invested domestically
and globally, designed to meet varying investment objectives and which afford
its clients the opportunity to allocate their investment resources among various
investment products as changing worldwide economic and market conditions
warrant.
At the end of the second quarter, assets held in equity securities represented
76% of assets under management, compared with 81% at June 30, 2001, while
investments in fixed income products represented 24%, compared with 19% at June
30, 2001.
Consulting
- --------------------------------------------------------------------------------
Second Quarter Six Months
(In millions of dollars) 2002 2001 (a) 2002 2001(a)
- -------------------------------------------------------------------------------
Revenue $595 $594 $1,160 $1,181
Expense 505 503 996 1,020
---- ---- ------ ------
Operating Income $90 $91 $ 164 $ 161
===== ===== ====== ======
Operating Income Margin 15.1% 15.3% 14.1% 13.6%
===== ===== ====== ======
- ------------------------------------------ ------------- ------------ ----------
(a) Revenue and expense for 2001 reflect the reclassification of reimbursed
(out-of-pocket) expenses to conform with current year presentation.
Revenue
Consulting revenue was essentially unchanged in the second quarter of 2002
compared with the same period of 2001. Excluding items such as foreign exchange,
acquisitions and dispositions, underlying consulting revenue decreased 2%.
General management consulting revenue declined 24% and rewards/talent management
and communications consulting revenue declined 13% due to reduced demand for
these services. Retirement consulting and administration revenue, which
represented 46% of the consulting segment, grew 6% in the second quarter and
economic consulting revenue rose 16%. For the six months of 2002, underlying
revenue decreased 2% compared with the same period of 2001.
Expense
Consulting expenses were essentially unchanged in the second quarter of 2002
compared with the same period of 2001 and declined 2% for the six months. On a
comparable basis, excluding the effect of such items as foreign exchange,
acquisitions and dispositions, and the change in accounting for goodwill,
expenses were flat for the second quarter and declined 1% for the six months.
New Accounting Pronouncements
In accordance with SFAS No. 142 "Goodwill and Other Intangible Assets", MMC
discontinued amortization of goodwill on a prospective basis, effective January
1, 2002. Although results of prior periods are not to be restated, SFAS No. 142
requires disclosure of the effect of the accounting change on all prior periods
presented. The impact of this change on 2001 results, after the effect of taxes
and directly related expenses, is an increase in diluted earnings per share as
follows for the quarter ended: March 31 - $0.06; June 30 - $0.06; September 30 -
$0.06; and December 31 - $0.05. Approximately 70% of the impact of this change
is related to the Risk and Insurance Services segment.
Effective January 1, 2002, expense reimbursements received from clients within
the consulting segment are recorded as revenue, rather than an offset to
expense, in accordance with guidance provided in EITF Issue 01-14, "Income
Statement Characterization of Reimbursements Received for 'Out-of-Pocket'
Expenses Incurred." Revenue and expense for prior periods reflect the
reclassification of reimbursed expenses as follows:
Reclassification of Consulting Reimbursed Expenses
2001
---------------------------------------------------------
1Q 2Q 3Q 4Q YR
----------- ------------ ---------- --------- -----------
Revenue:
As Previously Reported $550 $558 $536 $516 $2,160
Reimbursements 37 36 36 39 148
----------- ------------ ---------- --------- -----------
After Reclassification $587 $594 $572 $555 $2,308
----------- ------------ ---------- --------- -----------
Expense:
As Previously Reported $480 $467 $455 $445 $1,847
Reimbursements 37 36 36 39 148
----------- ------------ ---------- --------- -----------
After Reclassification $517 $503 $491 $484 $1,995
----------- ------------ ---------- --------- -----------
Operating Income $70 $91 $81 $71 $313
=========== ============ ========== ========= ===========
Operating Margin:
As Previously Reported 12.7% 16.3% 15.1% 13.8% 14.5%
After Reclassification 11.9% 15.3% 14.2% 12.8% 13.6%
Interest
Interest income earned on corporate funds amounted to $4 million in the second
quarter of 2002, compared with $7 million in the second quarter of 2001.
Interest expense of $38 million decreased from $56 million in the second quarter
of 2001. The decrease in both interest income and interest expense is primarily
due to lower average interest rates in 2002.
Income Taxes
MMC's consolidated effective tax rate was 35.5% of income before income taxes
and minority interest in the second quarter of 2002 compared with 37.5% in the
second quarter of 2001. The reduction in the effective tax rate results
primarily from the implementation of SFAS No. 142, as a significant portion of
the goodwill amortization expense recorded in prior years was not deductible for
tax purposes.
Subsequent Event
On August 9, 2002, Conseco, Inc. announced its intent to exercise a 30-day grace
period on bond interest payments and engage financial and legal advisors for the
purpose of beginning discussions with bondholders with a goal of restructuring
the capital of the parent company. Thomas H. Lee Equity Fund IV, L.P. ("Fund
IV") holds a significant preferred investment position in Conseco. In 1999,
Putnam acquired an equity interest in Thomas H. Lee Partners, L. P., and the
general partner of Fund IV. The significant capital restructuring that may
result from the actions announced by Conseco may adversely impact the value of
Fund IV's investment in Conseco, and consequently the value of Putnam's
investments related to Fund IV. Putnam is assessing the impact of this event on
its investments in Fund IV, which could result in a reduction of pre-tax
operating income (non-cash) in the range of $10-15 million in the third quarter.
Liquidity and Capital Resources
MMC anticipates that funds generated from operations will be sufficient to meet
its foreseeable recurring operating cash requirements as well as to fund
dividends, capital expenditures and scheduled repayments of long-term debt.
MMC's ability to generate cash flow from operations is subject to the business
risks inherent in each operating segment.
MMC generated $560 million of cash from operations for the period ended June 30,
2002 compared with $304 million for the same period in 2001. These amounts
reflect the net income earned by MMC during those periods adjusted for non-cash
charges and working capital changes.
MMC's cash and cash equivalents aggregated $471 million on June 30, 2002, a
decrease of $66 million from the end of 2001.
Financing Activity
In March 2002, MMC issued $500 million of 5.375% Senior Notes due in 2007 and
$250 million of 6.25% Senior Notes due in 2012 (the "Notes"). The net proceeds
from the Notes were used to pay down commercial paper borrowings.
MMC entered into interest rate swap transactions to hedge its exposure to
changes in the fair value of the Notes. The swap transactions effectively
convert the fixed rate obligations into floating rate obligations. Under the
terms of the swaps, the swap counterparties will pay MMC a fixed rate equal to
the coupon rate on the bonds. MMC will pay the swap counterparties a floating
rate of 6-month Libor plus 9.25 bps for the five-year swap and 6 month Libor
plus 25.45 bps for the ten year swap. The swaps qualify for hedge accounting and
meet all criteria necessary to conclude that the hedge will be perfectly
effective under SFAS No. 133.
During the first six months of 2002, MMC repurchased approximately 16.5 million
shares of its common stock at a cost of approximately $841 million. MMC
currently plans to continue to repurchase shares throughout 2002, subject to
market conditions, including from time to time pursuant to the terms of a 10b5-1
plan. A 10b5-1 plan allows a company to purchase shares during a blackout
period, provided the company communicates its share purchase instructions to the
broker prior to the blackout period.
MMC uses written put options to supplement its share repurchase program. The
contracts are European style options, which generally expire three months from
the date of sale. Settlement terms of the contracts are controlled by MMC and
include physical, net-cash or net-share settlement. The contracts are recorded
as equity transactions in accordance with EITF Issue No. 00-19, "Derivative
Financial Instruments Indexed to, and Potentially Settled in a Company's Own
Stock." At June 30, 2002, MMC had open contracts on 2,300,000 shares, with
strike prices ranging from $41.85 to $48.15. The open contracts expire between
July 22, 2002 and September 24, 2002.
Investment Activity
MMC's additions to fixed assets and capitalized software, which amounted to $187
million in the first six months of 2002 and $224 million in the six months last
year, primarily relate to computer equipment purchases and the refurbishing and
modernizing of office facilities and software development costs.
MMC has committed to potential future investments of approximately $535 million
in connection with various MMC Capital funds and other MMC investments.
Approximately $200 million is expected to be invested during the remainder of
2002. MMC expects to fund future commitments, in part, with sales proceeds from
existing investments.
In the normal course of business MMC makes investments through its subsidiary
Marsh & McLennan Risk Capital Holdings, Ltd., primarily in insurance and
reinsurance entities, and periodically sells these investments. In the second
quarter of 2002, MMC sold an investment that it had acquired in 1997 to Trident
II, L.P. MMC Capital, Inc. a wholly-owned subsidiary of MMRCH, serves as advisor
to Trident II, L.P. Revenue of $9 million from this transaction was recorded by
MMRCH. The underlying revenue growth rate for the Risk and Insurance Services
segment excludes the revenue from investment transactions.
Market Risk
Certain of MMC's revenues, expenses, assets and liabilities are exposed to the
impact of interest rate changes and fluctuations in foreign currency exchange
rates and equity markets.
Interest Rate Risk
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 used on a limited basis to manage MMC's exposure to interest rate
movements on its cash and investments, as well as to hedge the fair value of
fixed rate debt, and are only executed with counterparties of high
creditworthiness.
Foreign Currency Risk
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.
Equity Price Risk
MMC has both "available for sale" investments which are carried at market value
under SFAS No. 115 and investments which are accounted for using the equity
method under APB Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock." The investments are subject to risk of changes in
market value, which if determined to be other than temporary, could result in
impairment losses. MMC reviews the carrying value of such investments to
determine if any valuation adjustments are appropriate under the applicable
accounting pronouncements.
MMC utilizes option contracts to hedge the variability of cash flows from
forecasted sales of certain available for sale investments. The hedge is
achieved through the use of European style put and call options, which mature on
the dates of the forecasted sales. The hedges are only executed with
counterparties of high creditworthiness.
Other
As further explained in Note 12 to the consolidated financial statements, the
disclosure and advice given to clients regarding certain personal pension
transactions by certain present and former subsidiaries in the United Kingdom
are under review by the Financial Services Authority. At current rates of
exchange, the estimated payments for pension redress and related costs accrued
in the financial statements is $130 million, essentially all of which is
expected to be recovered from insurers. Approximately two-thirds of the
contingent exposure is associated with the Sedgwick acquisition while the
balance is associated with other current and former subsidiaries of MMC. Such
amounts in excess of anticipated insurance recoveries have been provided for in
the accompanying financial statements.
PART II. OTHER INFORMATION
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
INFORMATION REQUIRED FOR FORM 10-Q QUARTERLY REPORT
JUNE 30, 2002
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders of MMC was held on May 16, 2002.
Represented at the Meeting, at which stockholders took the following
actions, were 229,537,807 shares or 85 percent of MMC's 271,579,404
shares of common stock outstanding and entitled to vote:
1. MMC's stockholders elected the six director nominees named below
with each receiving the following votes:
Number of Number of Shares
Shares Voted For Voted to be Withheld
---------------- --------------------
Jeffrey W. Greenberg 196,216,063 33,321,744
Stephen R. Hardis 224,335,999 5,201,808
Rt. Hon. Lord Lang 225,455,231 4,082,576
Morton O. Schapiro 224,747,356 4,790,451
Adele Simmons 224,215,303 5,322,504
A.J.C. Smith 224,585,370 4,952,437
2. Deloitte & Touche LLP was ratified as MMC's independent public
accountants for the year ending December 31, 2002 with a
favorable vote of 219,132,973 of the shares represented
(9,142,489 against and 1,261,985 abstaining).
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Renewal of Consulting Agreement between A.J.C. Smith
and MMC dated as of May 16, 2002.
10.2 Form of Waiver dated June 24, 2002 of certain
provisions of the MMC Capital Long-Term Incentive Plan
executed by Messrs. Greenberg and Davis.
10.3 Representative Fund Advisory Contract with each of the
Putnam Funds.
12.1 Statement Re: Computation of Ratio of Earnings to Fixed
Charges.
(b) Reports on Form 8-K
A Current Report on Form 8-K dated June 25, 2002 was filed by the
registrant announcing it had extended its offer to exchange up to
$500,000,000 aggregate principal amount of its registered 5.375%
Senior Notes due 2007 and $250,000,000 aggregate principal amount
of its registered 6.25% Senior Notes due 2012 for any and all
outstanding unregistered 5.375% Senior Notes due 2007 and
unregistered 6.25% Senior Notes due 2012 until 5:00 p.m., New
York City time, on July 1, 2002.
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
SIGNATURE
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, MMC has
duly caused this report to be signed this 12th day of August, 2002 on its behalf
by the undersigned, thereunto duly authorized and in the capacity indicated.
MARSH & McLENNAN COMPANIES, INC.
/s/ Sandra S. Wijnberg
-------------------------
Senior Vice President and
Chief Financial Officer