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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 March 31, 2003
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 April 30, 2003, there were outstanding 535,412,029 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, pension funding, 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
losses 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 service business are changes in competitive
conditions, movements in premium rate levels, the continuation of difficult
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 anticipated release of
quarterly financial results, and the posting of updates of assets under
management at Putnam. Monthly updates of total assets under management at Putnam
will be posted to the MMC website 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. Putnam
posts mutual fund and performance data to its website regularly. Assets for most
Putnam retail mutual funds are posted approximately two weeks after each
month-end. Mutual fund net asset value (NAV) is posted daily. Historical
performance and Lipper rankings are also provided. Investors can link to MMC and
its operating company websites through www.mmc.com.
PART I, FINANCIAL INFORMATION
-----------------------------
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------------------- -------------------------
For the Three Months Ended March 31,
(In millions, except per share figures) 2003 2002
- ---------------------------------------------------- -------------------------
Revenue:
Service revenue $2,841 $2,603
Investment income (loss) 11 32
- ---------------------------------------------------- -------------------------
Operating revenue 2,852 2,635
- ---------------------------------------------------- -------------------------
Expense:
Compensation and benefits 1,378 1,249
Other operating expenses 757 699
- ---------------------------------------------------- -------------------------
Operating expenses 2,135 1,948
- ---------------------------------------------------- -------------------------
Operating income 717 687
Interest income 6 5
Interest expense (43) (37)
- ---------------------------------------------------- -------------------------
Income before income taxes and minority interest 680 655
Income taxes 232 232
Minority interest, net of tax 5 5
- ---------------------------------------------------- -------------------------
Net income $443 $ 418
- ---------------------------------------------------- -------------------------
Basic net income per share $ .83 $ .76
- ---------------------------------------------------- -------------------------
Diluted net income per share $ .81 $ .73
- ---------------------------------------------------- -------------------------
Average number of shares outstanding-Basic 536 548
- ---------------------------------------------------- -------------------------
Average number of shares outstanding-Diluted 547 569
- ---------------------------------------------------- -------------------------
The accompanying notes are an integral part of these consolidated statements.
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------
Unaudited
March 31, December 31,
(In millions of dollars) 2003 2002
- -----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 566 $ 546
- -----------------------------------------------------------------------------
Receivables
Commissions and fees 2,251 2,178
Advanced premiums and claims 121 119
Other 304 305
- -----------------------------------------------------------------------------
2,676 2,602
Less-allowance for doubtful accounts
and cancellations (126) (124)
- -----------------------------------------------------------------------------
Net receivables 2,550 2,478
- -----------------------------------------------------------------------------
Prepaid dealer commissions - current portion 201 226
Other current assets 289 414
- -----------------------------------------------------------------------------
Total current assets 3,606 3,664
Goodwill and intangible assets 5,412 5,404
Fixed assets, net 1,322 1,308
(net of accumulated depreciation and
amortization of $1,299 at March 31, 2003
and $1,275 at December 31, 2002)
Long-term investments 517 578
Prepaid dealer commissions 248 292
Other assets 2,752 2,609
- -----------------------------------------------------------------------------
$13,857 $13,855
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
MARSH & MCLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
Unaudited
March 31, December 31,
(In millions of dollars) 2003 2002
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 772 $ 543
Accounts payable and accrued liabilities 1,512 1,406
Accrued compensation and employee benefits 974 1,568
Accrued income taxes 282 194
Dividends payable 151 152
- --------------------------------------------------------------------------------
Total current liabilities 3,691 3,863
- --------------------------------------------------------------------------------
Fiduciary liabilities 4,378 4,010
Less - cash and investments held in
a fiduciary capacity (4,378) (4,010)
- --------------------------------------------------------------------------------
- -
Long-term debt 2,881 2,891
- --------------------------------------------------------------------------------
Other liabilities 2,131 2,083
- --------------------------------------------------------------------------------
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 March 31, 2003 and December 31, 2002 561 561
Additional paid-in capital 1,341 1,426
Retained earnings 4,784 4,490
Accumulated other comprehensive loss (453) (452)
- --------------------------------------------------------------------------------
6,233 6,025
Less - treasury shares, at cost,
24,879,846 shares at March 31, 2003 and
22,441,817 shares at December 31, 2002 (1,079) (1,007)
- --------------------------------------------------------------------------------
Total stockholders' equity 5,154 5,018
- --------------------------------------------------------------------------------
$13,857 $13,855
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- -------------------------------------------------------------------------------
For Three Months ended March 31, 2003 2002
(In millions of dollars)
- -------------------------------------------------------------------------------
Operating cash flows:
Net income $ 443 $ 418
Adjustments to reconcile net income to cash generated from
(used for) operations:
Depreciation of fixed assets, capitalized software
and other intangible assets 95 86
Provision for deferred income taxes 45 43
(Gains) losses on investments (11) (32)
Changes in assets and liabilities:
Net receivables (72) 43
Prepaid dealer commissions 69 79
Other current assets 7 (8)
Other assets (30) (89)
Accounts payable and accrued liabilities 97 4
Accrued compensation and employee benefits (594) (505)
Accrued income taxes 88 (276)
Other liabilities 46 44
Effect of exchange rate changes (6) (5)
- -------------------------------------------------------------------------------
Net cash generated from (used for) operations 177 (198)
- -------------------------------------------------------------------------------
Financing cash flows:
Net decrease in commercial paper (236) (213)
Proceeds from issuance of debt 501 747
Other repayments of debt (38) (2)
Purchase of treasury shares (311) (217)
Issuance of common stock 164 162
Dividends paid (151) (145)
- -------------------------------------------------------------------------------
Net cash (used for) provided by financing activities (71) 332
- -------------------------------------------------------------------------------
Investing cash flows:
Capital expenditures (110) (102)
Proceeds from sales related to fixed assets
and capitalized software 6 3
Acquisitions - (2)
Other, net 8 (22)
- -------------------------------------------------------------------------------
Net cash used for investing activities (96) (123)
- -------------------------------------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents 10 (5)
- -------------------------------------------------------------------------------
Increase in cash & cash equivalents 20 6
Cash & cash equivalents at beginning of period 546 537
- -------------------------------------------------------------------------------
Cash & cash equivalents at end of period $ 566 $ 543
- -------------------------------------------------------------------------------
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 risk management
and insurance broking, reinsurance broking and insurance 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 retirement services, human capital, health care and group benefit programs,
management consulting, organizational change and organizational design, economic
consulting and corporate identity.
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 periods ended March 31, 2003 and 2002. Certain
reclassifications have been made to the prior year amounts to conform to the
current year presentation.
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 service revenue, amounted to $31 million and $27 million for the three-month
periods ended March 31, 2003 and 2002, respectively. Since fiduciary assets are
not available for corporate use, they are shown in the balance sheet as an
offset to fiduciary liabilities.
Net uncollected premiums and claims and the related payables amounted to $12.0
billion at March 31, 2003 and $11.7 billion at December 31, 2002, respectively.
MMC is not a principal to the contracts under which the right to receive
premiums or the right to receive reimbursement of insured losses arises. Net
uncollected premiums and claims and the related payables are, therefore, not
assets and liabilities of MMC and 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 shares granted under the Putnam Equity
Partnership Plan 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-month periods ended March 31, 2003 and
2002.
- --------------------------------------------------------------------------------
(In millions of dollars) 2003 2002
- --------------------------------------------------------------------------------
Net income $443 $418
Less: Potential minority interest associated
with the Putnam Class B Common Shares
net of dividend equivalent expense related to
common stock equivalents - (1)
- --------------------------------------------------------------------------------
Net income for diluted earnings per share $443 $417
- --------------------------------------------------------------------------------
Basic weighted average common shares outstanding 536 548
Dilutive effect of potentially issuable common shares 11 21
- --------------------------------------------------------------------------------
Diluted weighted average common shares outstanding 547 569
- --------------------------------------------------------------------------------
5. Supplemental Disclosure to the Consolidated Statements of Cash Flows
--------------------------------------------------------------------
The following schedule provides additional information concerning interest and
income taxes paid for the three-month periods ended March 31, 2003 and 2002.
- ---------------------------------------------------------------
(In millions of dollars) 2003 2002
- ---------------------------------------------------------------
Interest paid $ 19 $ 18
Income taxes paid $ 57 $ 399
6. Comprehensive Income
--------------------
The components of comprehensive income for the three-month periods ended March
31, 2003 and 2002 are as follows:
- --------------------------------------------------------------------------------
(In millions of dollars) 2003 2002
- --------------------------------------------------------------------------------
Foreign currency translation adjustments $ 18 $(31)
Unrealized investment holding (losses)gains,
net of income taxes (14) 3
Less: Reclassification adjustment for realized gains
included in net income, net of income taxes (5) (20)
Deferred (loss) on cash flow hedges,
net of income taxes - (1)
- --------------------------------------------------------------------------------
Other comprehensive loss (1) (49)
Net income 443 418
- --------------------------------------------------------------------------------
Comprehensive income $442 $369
- --------------------------------------------------------------------------------
7. Goodwill and Other Intangibles
------------------------------
Changes in the carrying amount of goodwill for the three-month period ended
March 31, 2003, are as follows:
- --------------------------------------------------- ----------
(in millions of dollars) 2003
- --------------------------------------------------- ----------
Balance as of January 1, $5,151
Goodwill acquired -
Other adjustments (primarily foreign exchange) 12
- --------------------------------------------------- ----------
Balance as of March 31, $5,163
- --------------------------------------------------- ----------
The goodwill balance at March 31, 2003 and December 31, 2002 includes
approximately $121 million of equity method 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 with indefinite
lives. The gross carrying amount and accumulated amortization by major
intangible asset class is as follows:
- ----------------------------------------- -----------------------------------------------------------------------
March 31, 2003 December 31, 2002
-----------------------------------------------------------------------
Net Net
Gross Accumulated Carrying Gross Accumulated Carrying
(In millions of dollars) Cost Amortization Amount Cost Amortization Amount
- ----------------------------------------- ---------- -------------- --------------------- -------------- --------
Client lists and client relationships $153 $ 52 $101 $148 $ 50 $ 98
acquired
Future revenue streams related to 216 77 139 216 70 146
existing private equity funds
- ----------------------------------------- ---------- -------------- --------------------- -------------- --------
Total amortized intangibles $369 $129 $240 $364 $120 $244
- ----------------------------------------- ---------- -------------- --------------------- -------------- --------
Aggregate amortization expense for the quarter ended March 31, 2003 and 2002 was
$9 million and $8 million, respectively and the estimated future aggregate
amortization expense is as follows:
- ----------------------------------- ---------- --------------------------------
For the Years
Ending December 31, Estimated
(in millions of dollars) Expense
- ----------------------------------- ---------- --------------------------------
2003 $35
2004 $35
2005 $32
2006 $26
2007 $24
- ----------------------------------- ---------- --------------------------------
8. Stock Benefit Plans
-------------------
MMC has stock-based benefit plans under which employees are awarded grants of
restricted stock, stock options and other forms of awards. As provided under
SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123") 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.
Pro Forma Information: 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 Equity Partnership Plan. If compensation
cost for MMC's stock-based compensation plans had been determined consistent
with the fair value method prescribed by SFAS No. 123, MMC's net income and net
income per share for the three-month periods ended March 31, 2003 and 2002 would
have been reduced to the pro forma amounts indicated in the table below.
- --------------------------------------------------------------------------------
(In millions of dollars, except per share figures) 2003 2002
- --------------------------------------------------------------------------------
Net Income:
As reported $443 $418
Adjustment for fair value method, net of tax (47) (35)
- --------------------------------------------------------------------------------
Pro forma net income $396 $383
- --------------------------------------------------------------------------------
Net Income Per Share:
Basic:
As reported $.83 $.76
Pro forma $.74 $.70
Diluted:
As reported $.81 $.73
Pro forma $.72 $.67
- --------------------------------------------------------------------------------
The pro forma information reflected above includes stock options issued under
MMC incentive and stock award plans and the Putnam Investments Equity
Partnership Plan and stock issued under MMC stock purchase plans.
The estimated fair value of options granted was calculated using the
Black-Scholes option pricing valuation model. The weighted average assumptions
used in the valuation models are evaluated and revised, as necessary, to reflect
market conditions and experience.
9. Long-term Debt
--------------
In February 2003, MMC issued $250 million of 3.625% Senior Notes due 2008 and
$250 million of 4.85% Senior Notes due 2013. The net proceeds from the notes
were used to pay down commercial paper borrowings.
In January 2003, MMC terminated and settled interest rate swaps that had hedged
the fair value of senior notes issued in 2002. The cumulative amount of
previously recognized adjustments of the fair value of the hedged notes is being
amortized over the remaining life of those notes in accordance with SFAS No.
133. As a result, the effective interest rate over the remaining life of the
notes, including the amortization of the fair value adjustments, is 4.0% for the
$500 million Senior Notes due in 2007 (5.375% coupon rate) and 5.1% for the $250
million Senior Notes due in 2012 (6.25% coupon rate).
Commercial paper borrowings of $250 million and $750 million respectively, at
March 31, 2003 and December 31, 2002, 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. 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 non-cancelable leases.
The utilization of these charges is summarized as follows:
Utilized and
1999 Sedgwick Plan: changes in Utilized in Balance March
(In millions of dollars) Initial estimates First Qtr. 2003 31, 2003
Balance through 2002
- ---------------------------------------------- ----------- ---------------- ---------------- ----------------
Termination payments to employees $ 183 $ (181) $ - $ 2
Other employee-related costs 5 (5) - -
Future rent under noncancelable leases 48 (33) (1) 14
Leasehold termination and related costs 49 (32) - 17
- ---------------------------------------------- ----------- ---------------- ---------------- ----------------
$ 285 $ (251) $(1) $ 33
- ---------------------------------------------- ----------- ---------------- ---------------- ----------------
Number of employee terminations 2,400 (2,400) - -
Number of office consolidations 125 (125) - -
- ---------------------------------------------- ----------- ---------------- ---------------- ----------------
Utilized and
1999 MMC Plan: changes in Utilized in Balance March
(In millions of dollars) Initial estimates First Qtr. 2003 31, 2003
Balance through 2002
- ---------------------------------------------- ----------- ---------------- ---------------- ----------------
Termination payments to employees $ 194 $ (190) $ - $ 4
Future rent under noncancelable leases 31 (21) - 10
Leasehold termination and related costs 16 (13) - 3
Other integration related costs 25 (25) - -
- ---------------------------------------------- ----------- ---------------- ---------------- ----------------
$ 266 $ (249) $ - $ 17
- ---------------------------------------------- ----------- ---------------- ---------------- ----------------
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.
- -----------------------------------------------------------------------------------------------------
Utilized Utilized in Balance March
2001 Plan Initial through First Qtr. 2003 31, 2003
(In millions of dollars) Balance 2002
- -----------------------------------------------------------------------------------------------------
Termination payments to employees $ 44 $ (39) $ (1) $ 4
Future rent under noncancelable leases 17 (4) (1) 12
- -----------------------------------------------------------------------------------------------------
$ 61 $ (43) $ (2) $ 16
- -----------------------------------------------------------------------------------------------------
Number of employee terminations 750 (750) - -
Number of office consolidations 9 (9) - -
- -----------------------------------------------------------------------------------------------------
Actions under the 2001 Plan were completed 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.
11. Common Stock
------------
In 2003, MMC repurchased shares of its common stock for treasury as well as to
meet requirements for issuance of shares for its various stock compensation and
benefit programs. During the first three months of 2003, MMC repurchased 7.8
million shares for total consideration of $321 million.
MMC repurchases shares 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, pursuant
to a written plan that may not be changed. MMC currently plans to continue to
repurchase shares in 2003, subject to market conditions.
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 that could, if assessed, be significant. Insurance coverage applicable
to such matters includes elements of both risk retention and risk transfer.
As part of the combination with Sedgwick, MMC acquired River Thames Insurance
Company Limited ("River Thames"), an insurance underwriting business that was
already in run-off, which was sold in 2001. Sedgwick guaranteed payment of
claims on certain policies underwritten through the Institute of London
Underwriters by River Thames ("ILU Guarantee"). The policies covered by the ILU
Guarantee are reinsured up to (pound)40 million by a related party of River
Thames. Payment of claims under the reinsurance agreement is collateralized by
segregated assets held in a trust. As of March 31, 2003, the reinsurance
coverage exceeded the best estimate of the projected liability of the policies
covered by the ILU Guarantee. To the extent River Thames or the reinsurer are
unable to meet their obligations under those policies, a claimant may seek to
recover from MMC under the guarantee. MMC does not expect any material net
impact on its consolidated financial position or results of operations related
to this guarantee.
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 three-month periods
ended March 31, 2003 and 2002 follow:
- -----------------------------------------------------------------------------
Segment Operating
(In millions of dollars) Revenue Income
- -----------------------------------------------------------------------------
2003
Risk and Insurance Services $ 1,773 (a) $ 560
Investment Management 445 103
Consulting 634 83
- -----------------------------------------------------------------------------
$ 2,852 $ 746
- -----------------------------------------------------------------------------
2002
Risk and Insurance Services $1,476 (a) $ 462
Investment Management 594 175
Consulting 565 74
- -----------------------------------------------------------------------------
$2,635 $ 711
- -----------------------------------------------------------------------------
(a)Includes interest income on fiduciary funds ($31 million in 2003 and $27
million in 2002).
A reconciliation of the total segment operating income to income before income
taxes and minority interest in the consolidated financial statements is as
follows:
- --------------------------------------------------------------------------------
(In millions of dollars) 2003 2002
- --------------------------------------------------------------------------------
Total segment operating income $746 $711
Corporate expense (34) (29)
Reclassification of minority interest 5 5
- --------------------------------------------------------------------------------
Operating income 717 687
Interest income 6 5
Interest expense (43) (37)
- --------------------------------------------------------------------------------
Total income before income taxes and
minority interest $680 $655
- --------------------------------------------------------------------------------
Operating segment revenue by product for the three-month periods ended March 31,
2003 and 2002 is as follows:
- --------------------------------------------------------------------------------
(In millions of dollars) 2003 2002
- --------------------------------------------------------------------------------
Risk & Insurance Services
Risk Management and Insurance Broking $1,323 $1,076
Reinsurance Broking and Services 234 185
Related Insurance Services 216 215
- --------------------------------------------------------------------------------
Total Risk & Insurance Services 1,773 1,476
- --------------------------------------------------------------------------------
Investment Management 445 594
- --------------------------------------------------------------------------------
Consulting
Retirement Services 300 270
Health Care & Group Benefits 98 84
Human Capital 86 78
Management and Organizational Change 81 68
Economic 37 33
- --------------------------------------------------------------------------------
602 533
Reimbursed Expenses 32 32
- --------------------------------------------------------------------------------
Total Consulting 634 565
- --------------------------------------------------------------------------------
Total $2,852 $ 2,635
- --------------------------------------------------------------------------------
14. New Accounting Pronouncements
-----------------------------
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). FIN 46 interprets Accounting Research
Bulletin No. 51, "Consolidated Financial Statements" and addresses consolidation
by business enterprises qualifying as variable interest entities ("VIE"). FIN 46
defines a VIE as a corporation, partnership, trust or other legal structure used
for business purposes that either (a) does not have equity investors with voting
rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. FIN 46 applies immediately
to VIEs created after January 31, 2003 in which the company obtains an interest
after that date. FIN 46 applies to the first fiscal year or interim period
beginning after June 15, 2003 for VIEs in which MMC holds a variable interest
that it acquired before February 1, 2003.
MMC through Putnam, manages $2.3 billion in the form of Collateralized Debt
Obligations ("CDO") and Collateralized Bond Obligations ("CBO"). The CDOs and
CBOs were created prior to January 31, 2003. Separate limited liability
companies were established to issue the notes and to hold the underlying
collateral, which consists of high-yield bonds and other securities. Putnam
serves as the collateral manager for the CDOs and CBOs. The maximum loss
exposure related to the CDOs and CBOs is limited to Putnam's investment totaling
$4.0 million, reflected in Long-term investments in the Consolidated Balance
Sheets at March 31, 2003. MMC is assessing the overall impact of this
pronouncement and does not expect the implementation of FIN 46 to have a
significant impact on its consolidated results of operations.
Marsh & McLennan Companies, Inc. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
First Quarter Ended March 31, 2003
General
Marsh & McLennan Companies, Inc. and Subsidiaries ("MMC") is a professional
services firm. MMC subsidiaries include Marsh, the world's largest 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 59,000 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, 2002.
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:
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(In millions of dollars) 2003 2002
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Revenue:
Service Revenue $2,841 $2,603
Investment Income (Loss) 11 32
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Operating Revenue 2,852 2,635
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Expense:
Compensation and Benefits 1,378 1,249
Other Operating Expenses 757 699
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Operating Expenses 2,135 1,948
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Operating Income $ 717 $ 687
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Operating Income Margin 25.1% 26.1%
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Revenue, derived mainly from commissions and fees, increased 8% from the first
quarter of 2002. Revenue increased 4% on a constant currency basis which
measures the change in revenue using consistent current exchange rates, before
acquisitions. Revenue increases in the risk and insurance services and
consulting segments, were partially offset by a revenue decline in the
investment management segment.
The impact of foreign currency translation and acquisitions on MMC's reported
revenue is as follows:
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Three Months Ended % Change Currency/
March 31, GAAP Constant Acquisitions
2003 2002 Revenue Currency (b) Impact
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Risk & Insurance Services
Risk Management and Insurance Broking $1,323 $1,076 23% 17% 6%
Reinsurance Broking and Services 234 185 26% 23% 3%
Related Insurance Services (a) 216 215 - - -
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Total Risk & Insurance Services 1,773 1,476 20% 15% 5%
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Investment Management 445 594 (25)% (25)% -
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Consulting
Retirement Services 300 270 11% 4% 7%
Health Care & Group Benefits 98 84 17% 13% 4%
Human Capital 86 78 10% 5% 5%
Management and Organizational Change 81 68 19% (5)% 24%
Economic 37 33 12% 11% 1%
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602 533 13% 5% 8%
Reimbursed Expenses 32 32 - - -
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Total Consulting 634 565 12% 5% 7%
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Total $2,852 $2,635 8% 4% 4%
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(a) Includes affinity, claims management and MMC Capital businesses.
(b) Constant currency measures the change in revenue using consistent currency
exchange rates, before acquisitions and dispositions.
Revenue growth on a constant currency basis in the risk and insurance services
segment was 15%, reflecting strong growth across all geographies in both
insurance and reinsurance broking. Consulting revenue on a constant currency
basis grew 5% resulting from a higher volume of business in retirement services,
health care and group benefits, human capital, economic and organizational
change consulting, partially offset by a decline in management consulting.
Revenue decreased 25% in the investment management segment as average assets
under management declined 21% from the first quarter of 2002.
Operating expenses increased 10% in the first quarter of 2003 (5% on a constant
currency basis) primarily due to increased compensation and benefit costs in the
risk and insurance services and consulting segments partially offset by lower
incentive compensation and volume related expenses in the investment management
segment. Operating expenses also reflect an increase in costs for office space
and insurance.
Risk and Insurance Services
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(In millions of dollars) 2003 2002
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Revenue $1,773 $1,476
Expense 1,213 1,014
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Operating Income $ 560 $ 462
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Operating Income Margin 31.6% 31.3%
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Revenue
Revenue for the risk and insurance services segment grew 20% over the first
quarter of 2002 and on a constant currency basis grew 15%. The revenue growth
was due to an increase in net new business, higher renewals and the effect of
higher premium rates. In the first quarter, constant currency revenues grew 17%
in risk management and insurance broking, which accounts for approximately three
quarters of the risk and insurance services segment, and grew 23% in reinsurance
broking and services. Related insurance services revenues, which includes
affinity, claims management and MMC Capital were unchanged, with revenue
increases in claims management offset by declines in the affinity business.
Within risk management and insurance broking, revenue growth was strong across
all geographies with increases of 19% in the United States, 13% in Europe and
25% in other geographies measured in constant currency.
Although price increases for certain coverages are beginning to moderate,
particularly property, the difficult market continued, with clients facing
restricted terms and conditions, coverage exclusions and higher prices for
commercial liability coverages.
Expense
Risk and insurance services expenses increased 20% over 2002, 15% on a constant
currency basis, primarily reflecting increased incentive compensation
commensurate with the current operating environment along with higher
compensation and benefit costs associated with staff growth due to a higher
volume of business. Operating expenses also reflect an increase in costs for
office space and insurance.
Investment Management
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(In millions of dollars) 2003 2002
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Revenue $445 $594
Expense 342 419
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Operating Income $103 $175
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Operating Income Margin 23.1% 29.5%
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Revenue
Putnam's revenue decreased 25% compared with the first quarter of 2002
reflecting a decline in the level of average assets under management on which
fees are earned along with a write-down in value of Putnam's investments,
including start-up funds. Assets under management averaged $244 billion in the
first quarter of 2003, a 21% decline from the $310 billion managed in the first
quarter of 2002. Assets under management aggregated $241 billion at March 31,
2003 compared with $314 billion at March 31, 2002 and $251 billion at December
31, 2002. The change from December 31, 2002 results primarily from a decline in
equity market levels. In addition, Putnam experienced net redemptions of $1.3
billion, including reinvested dividends, as positive flows from institutional
and international business were more than offset by net outflows in retail
mutual funds. Assets under management at April 30, 2003 aggregated $255 billion.
Expense
Putnam's expenses decreased 18% in the first quarter of 2003 from the same
period of 2002 primarily due to lower incentive compensation reflecting the
current operating environment, as well as a reduction in volume related
expenses.
Quarter-end and average assets under management are presented below:
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(In billions of dollars) 2003 2002
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Mutual Funds:
Growth Equity $ 43 $ 73
Value Equity 36 55
Blend Equity 30 46
Fixed Income 46 43
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155 217
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Institutional:
Equity 64 79
Fixed Income 22 18
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86 97
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Quarter-end Assets $241 $314
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Assets from Non-US Investors $33 $30
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Average Assets $244 $310
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The categories of mutual fund assets reflect style designations aligned with
each fund's prospectus. All prior year amounts have been reclassified to conform
with the current investment mandate for each product.
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 declined in 2002 for the third consecutive year after several years of
substantial growth prior to 2000 and declined again in the first quarter of
2003. 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, 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 significant changes in stock and
bond market valuations.
Putnam provides individual and institutional investors with a broad range of
both 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 first quarter, assets held in equity securities represented
72% of assets under management, compared with 81% at March 31, 2002, while
investments in fixed income products represented 28%, compared with 19% at March
31, 2002.
Consulting
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(In millions of dollars) 2003 2002
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Revenue $634 $ 565
Expense 551 491
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Operating Income $83 $ 74
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Operating Income Margin 13.1% 13.1%
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Revenue
Consulting revenue increased 12% over 2002 and on a constant currency basis
increased 5% reflecting growth in almost all practices. Retirement services
revenue, which represented approximately 50% of the consulting segment,
increased 4% on a constant currency basis due to an increased demand for advice
on retirement issues. Constant currency revenue increased 13% for health care &
group benefits consulting, 5% for human capital consulting, and 11% for economic
consulting partially offset by a 13% decline in management consulting.
Expense
Consulting expenses increased 12% over 2002. Expenses grew 5% on a constant
currency basis over 2002 reflecting increased compensation and benefits costs,
including an increase in incentive compensation reflecting improved operating
results.
Interest
Interest income earned on corporate funds amounted to $6 million in the first
quarter of 2003, an increase of $1 million from the first quarter of 2002.
Interest expense of $43 million in 2003 increased from $37 million in the first
quarter of 2002 due to an increase in the average outstanding debt and in the
average interest rates on outstanding debt in the first quarter of 2003. Over
the past twelve months, MMC has improved liquidity and extended the average
maturity of its debt through the issuance of long-term senior notes discussed in
the Liquidity and Capital Resources section of this MD&A. The net proceeds from
the notes were used to pay down outstanding commercial paper balances. The
increase in the average interest rate results from the conversion of a
significant portion of the company's debt from floating to fixed rates.
Income Taxes
MMC's consolidated effective tax rate was 34% of income before income taxes and
minority interest in the first quarter of 2003 compared with 35.5% in the first
quarter of 2002. As a result of the geographic mix of MMC's businesses, the
effective tax rate for 2003 should remain at 34%.
Liquidity and Capital Resources
Operating Cash Flows
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 $177 million of cash from operations for the period ended March
31, 2003 compared with a use of cash of $198 million for the same period in
2002. These amounts reflect the net income earned by MMC during those periods
adjusted for non-cash charges and working capital changes. In 2003, MMC's tax
payments decreased as compared to the first quarter of 2002. MMC's estimated tax
payments related to the third quarter of 2001 were paid in the first quarter of
2002 due to the events of September 11, 2001 and the government's subsequent
directives.
MMC's cash and cash equivalents aggregated $566 million on March 31, 2003, an
increase of $20 million from the end of 2002.
Financing Cash Flows
In February 2003, MMC issued $250 million of 3.625% Senior Notes due in 2008 and
$250 million of 4.85% Senior Notes due in 2013 (the "2003 Notes"). The net
proceeds from the 2003 Notes were used to pay down commercial paper borrowings.
Commercial paper outstanding decreased $236 million during the first quarter of
2003 as a result of these repayments partially offset by seasonal demands
related to incentive compensation payments.
In January 2003, MMC terminated and settled interest rate swaps that had hedged
the fair value of senior notes issued in 2002. The cumulative amount of
previously recognized adjustments of the fair value of the hedged notes is being
amortized over the remaining life of those notes in accordance with SFAS No.
133. As a result, the effective interest rate over the remaining life of the
notes, including the amortization of the fair value adjustments, is 4.0% for the
$500 million Senior Notes due in 2007 (5.375% coupon rate) and 5.1% for the $250
million Senior Notes due in 2012 (6.25% coupon rate).
During the first quarter of 2003, MMC repurchased 7.8 million shares of its
common stock at a cost of $321 million. MMC repurchases shares 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, pursuant to a written plan that may not be
changed.
Investing Cash Flows
MMC's additions to fixed assets and capitalized software, which amounted to $110
million in the first three months of 2003 and $102 million in the first quarter
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 $455 million
in connection with various MMC Capital funds and other MMC investments.
Approximately $70 million is expected to be invested during the remainder of
2003. MMC expects to fund future commitments, in part, with sales proceeds from
existing investments.
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 interest expense on
borrowings, 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. 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 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 realized impairment losses. MMC
periodically 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
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 portion of the 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.
New Accounting Pronouncements
New accounting pronouncements are discussed in Note 14 to the consolidated
financial statements.
Part I - Item 4. Controls & Procedures
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a. Evaluation of Disclosure Controls and Procedures
Based on their evaluation, as of a date within 90 days of the filing of this
Form 10-Q, the Company's Chief Executive Officer and Chief Financial Officer
have concluded the Company's disclosure controls and procedures (as defined in
Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are effective
in timely alerting them to material information relating to the Company required
to be included in our reports filed under the Exchange Act.
b. Changes in Internal Controls
There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II. OTHER INFORMATION
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MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
INFORMATION REQUIRED FOR FORM 10-Q QUARTERLY REPORT
March 31, 2003
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. MMC's by-laws
4. Second Supplemental Indenture dated as of February 19, 2003
between MMC and U.S. Bank National Association (as successor to
State Street Bank and Trust Company), as trustee
10. Amendment to Marsh & McLennan Companies Supplemental
Retirement Plan
12. Statement re: Computation of Ratio of Earnings to Fixed
Charges
99. Certification of CEO and CFO pursuant to Section 906 of the
Sarbanes-Oxley Act
(b) Reports on Form 8-K
A current report on Form 8-K dated January 29, 2003 was filed by the
registrant to report its issuance of a press release announcing its
unaudited fourth quarter and year-end financial results for the year
ended December 31, 2002.
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, MMC has
duly caused this report to be signed this 13th day of May, 2003 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
CERTIFICATIONS
I, Jeffrey W. Greenberg, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Marsh & McLennan
Companies, Inc. (the "registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 13, 2003 /s/ Jeffrey W. Greenberg
------------------------
Chief Executive Officer
CERTIFICATIONS
I, Sandra S. Wijnberg, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Marsh & McLennan
Companies, Inc. (the "registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 13, 2003 /s/ Sandra W. Wijnberg
----------------------
Senior Vice President & Chief Financial Officer