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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
MARSH & MCLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
(212) 345-5000
COMMISSION FILE NUMBER 1-5998
STATE OF INCORPORATION: DELAWARE
I.R.S. EMPLOYER IDENTIFICATION NO. 36-2668272
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock New York Stock Exchange
(par value $1.00 per share) Chicago Stock Exchange
Preferred Stock Purchase Rights Pacific Exchange
London Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/. No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
As of February 28, 2001, the aggregate market value of the voting stock held
by non-affiliates of the registrant was approximately $29,787,002,930.
As of February 28, 2001, there were outstanding 276,148,279 shares of common
stock, par value $1.00 per share, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
(ONLY TO THE EXTENT SET FORTH IN THE PART INDICATED)
Annual Report to Stockholders for year ended December 31,
2000...................................................... Parts I, II and IV
Notice of Annual Meeting of Stockholders and Proxy Statement
dated
March 29, 2001............................................ Part III
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MARSH & MCLENNAN COMPANIES, INC.
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ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2000
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PART I
ITEM 1. BUSINESS.
Marsh & McLennan Companies, Inc. ("MMC"), a professional services
organization with origins dating from 1871 in the United States, is primarily a
holding company which, through its subsidiaries and affiliates, provides clients
with analysis, advice and transactional capabilities in the fields of risk and
insurance services, investment management and consulting.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 25 through 32 of the Annual Report to Stockholders for
the year ended December 31, 2000 (the "2000 Annual Report"), which is
incorporated herein by reference, for a discussion of MMC's revenues and
operating income by industry segment for each of the last three fiscal years.
RISK AND INSURANCE SERVICES. MMC's risk and insurance services are provided
by its subsidiaries and their affiliates as broker, agent or consultant for
insureds, insurance underwriters and other brokers on a worldwide basis. These
services are provided by Marsh Inc., which delivers risk and insurance services
and solutions to clients through its various subsidiaries and affiliates. Risk
management, insurance broking and program management services are provided for
businesses, public entities, professional services organizations and private
clients under the Marsh name. Reinsurance broking, financial modeling services
and related advisory functions are conducted for insurance and reinsurance
companies, principally under the Guy Carpenter name. The Consumer and Program
Practices unit delivers program management services for associations primarily
under the Seabury & Smith or Marsh names. Wholesale underwriting management
services, primarily in the area of professional liability insurance, are
performed for a wide range of clients under various names. In addition, MMC
Capital, Inc. provides services principally in connection with originating,
structuring and managing insurance, financial services and other industry
focused investments.
Marsh Inc. serves clients with risk and insurance services in more than 100
countries in all major regions of the world where insurance business is done.
These clients are engaged in essentially all of the major areas of manufacturing
and services found in the world economy. Business clients range from major
worldwide corporations to mid-size and small businesses and professional
services organizations. Marsh Inc.'s clientele also includes government
agencies, high-net-worth individuals, and consumers served through affinity
groups and employer-based programs.
The services provided include the identification, analysis, valuation,
mitigation, financing and transfer of risks that arise from client operations.
These risks relate to damage to property, various liability exposures, and other
factors that could result in financial loss, including large and complex risks
that require access to world insurance markets. In recent years, the risks
addressed by Marsh Inc.'s operating units have expanded beyond traditional
property-liability areas to include a widening range of exposures. Major
examples of these risks include employment practices liability, the launch and
operation of rockets and spacecraft, the development and operation of technology
resources (such as computers, communications networks and Web sites), the theft
or loss of intellectual property, copyright infringement, the remediation of
environmental pollution, merger and acquisition issues, the interruption of
revenue streams
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derived from leasing and credit operations, political risks and various other
financial, strategic and operating exposures.
To deal with client risks, Marsh Inc.'s subsidiaries provide a broad
spectrum of services requiring expertise in multiple disciplines: risk
identification, valuation and mitigation; conducting negotiations and placement
transactions with the worldwide insurance and capital markets; gaining knowledge
of specific insurance product lines and technical aspects of client operations,
industries and fields of business; actuarial analysis; and understanding the
regulatory and legal environments of various countries.
Once client risks are identified, Marsh provides advice on addressing the
exposures. This includes structuring programs for retaining, mitigating,
financing, and transferring the risks in combinations that vary according to the
risk profiles, requirements and preferences of clients. Specific professional
functions provided in this process include loss-control services, the placement
of client risks with the worldwide insurance and capital markets (risk transfer)
sometimes involving other intermediaries, the development of alternative risk
financing methods, establishment and management of specialized insurance
companies owned by clients ("captive insurance companies"); claims collection,
injury management, and other insurance and risk related services.
Marsh operates through offices in various countries around the world.
Correspondent relationships are maintained with unaffiliated firms in certain
countries.
The provision of reinsurance services to insurance and reinsurance companies
and other risk assumption entities by Guy Carpenter and its subsidiaries and
affiliates primarily involves acting as a broker or intermediary on all classes
of reinsurance. It's offices are principally in North America, Europe and Asia
Pacific. The predominant lines addressed are property and casualty. In addition,
Guy Carpenter's reinsurance activities include specialty lines such as
professional liability, medical malpractice, accident, life and health. Services
include providing advice, placing coverages with reinsurance markets, arranging
risk-transfer financing with capital markets, and furnishing related services
such as actuarial, financial and regulatory consulting, portfolio analysis,
catastrophe modeling and claims services. An insurance or reinsurance company
may seek reinsurance or other risk-transfer financing on all or a portion of the
risks it insures.
Marsh Inc.'s Consumer and Program Practices unit provides a diverse range of
services to clients in North America and also in Europe. It serves small
businesses with property-casualty insurance and insured employee benefits
programs under the Marsh name. Services related to employee voluntary payroll
deduction programs and the administration of insurance- and benefit-related
programs also are provided under the Marsh name for corporations and employer
coalitions. Specialized risk and insurance programs are delivered directly to
high-net-worth individuals under the Marsh name. For associations, the Consumer
and Program Practices unit designs, markets and administers primarily life,
health, accident, disability, automobile, homeowners, professional liability and
other insurance-related products purchased by members of the associations. These
activities are conducted under the Seabury & Smith name. The Consumer and
Program Practices unit also provides underwriting management services to
insurers in the United States, Canada and the United Kingdom, primarily for
professional liability coverages, as well as wholesale broking services in the
United States and the United Kingdom for a broad range of products on behalf of
both affiliated and unaffiliated brokers. These services are provided under
various names apart from Marsh and Seabury & Smith.
As part of the acquisition of Sedgwick Group plc in 1998, MMC acquired
several insurance companies that were in run-off. MMC is seeking to dispose of
these interests.
MMC CAPITAL, INC. MMC Capital, Inc. (formerly known as Marsh & McLennan
Capital, Inc.)("MMCAP") is a private equity investment firm that manages fund
families focused on distinct industry sectors. It is an advisor to The Trident
Partnership L.P., a private investment partnership formed in 1993 with
$660 million in capital commitments, and Trident II, L.P. formed in 1999 with
$1.4 billion in
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capital commitments for investments in insurance, financial services and related
industries. MMCAP also is the advisor to two funds with aggregate capital
commitments of $330 million for investments in technology companies and to a
fund with capital commitments of $75 million for investments in communications
and information companies. Investors in these funds include MMCAP's corporate
parent and other investors.
MMCAP and its predecessor operations were instrumental in the formation of
several substantial insurance and reinsurance entities, including ACE Ltd. and
XL Capital Ltd. MMCAP advises its immediate parent company, Marsh & McLennan
Risk Capital Holdings, Ltd., regarding the latter's ownership holdings in
certain insurance and reinsurance entities and funds, primarily ones initiated
by MMCAP.
As a result of the foregoing activities, subsidiaries and affiliates of MMC
may have direct or indirect investments in insurance and reinsurance companies,
including entities at Lloyd's, which are considered for client placements by
MMC's insurance and reinsurance brokerage businesses.
MMC ENTERPRISE RISK, INC. MMC Enterprise Risk, Inc., along with certain
subsidiaries and affiliates ("MMC ER"), is a new operating entity that
implements value-based enterprise risk solutions that reduce the volatility in
operating performance and the cost of equity to client companies. MMC ER
provides both advice and transactions to assist clients to resolve strategic,
financial, operating, and hazard risks. By applying mathematical, economic,
actuarial and financial analysis to a wide range of risk issues, and
recommending tailored financial and organizational risk solutions, MMC ER
assists clients in creating a risk management approach that prioritizes key
risks, quantifies their impact, develops integrated solutions and establishes or
enhances governance and controls.
MMC ER is composed of previously existing businesses within MMC, including
Marsh & McLennan Securities, which, through registered securities
broker-dealers, provides merger & acquisition advisory services to the insurance
industry and offers capital markets solutions for transferring risk; William M.
Mercer's risk, finance & insurance unit which provides both property and
casualty and life and health actuarial consulting services; and the advanced
risk transfer, political risk and trade credit brokerage units of Marsh which
provide complex, structured risk transfer solutions. All of these businesses now
operate and are branded under MMC Enterprise Risk.
COMPENSATION FOR SERVICES. The revenue attributable to MMC's risk and
insurance services consists primarily of fees paid by clients; commissions and
fees paid by insurance and reinsurance companies; interest income on funds held
in a fiduciary capacity for others, such as premiums and claims proceeds;
contingent income for services provided to insurers; and compensation for
services provided in connection with the organization, structuring and
management of insurance, financial services and other industry-focused
investments, including fees and dividends, as well as appreciation that has been
realized on sales of holdings in such entities.
Revenue generated by risk and insurance services is fundamentally derived
from the value of the service provided to clients and insurance markets. These
revenues may be affected by premium rate levels in the property and casualty and
employee benefits insurance markets and available insurance capacity, since
compensation is frequently related to the premiums paid by insureds. In many
cases, compensation may be negotiated in advance based upon the estimated value
of the services to be performed. Revenue is also affected by fluctuations in the
amount of risk retained by insurance and reinsurance clients themselves and by
insured values, the development of new products, markets and services, new and
lost business, merging of clients (including insurance companies that are
clients in the reinsurance intermediary business) and the volume of business
from new and existing clients, as well as by interest rates for fiduciary funds.
Revenue and fees also may be received from originating, structuring and
managing investments in insurance, financial services and other industry-focused
investments, as well as income derived from investments made by MMC. Contingent
income for services provided includes payments or allowances by
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insurance companies based upon such factors as the overall volume of business
placed by the broker with that insurer, the aggregate commissions paid by the
insurer for that business during specific periods, or the profitability or loss
to the insurer of the risks placed. This revenue reflects compensation for
services provided by brokers to the insurance market. These services include new
product development, the development and provision of technology,
administration, and the delivery of information on developments among broad
client segments and the insurance markets.
Revenues vary from quarter to quarter as a result of the timing of policy
renewals, the net effect of new and lost business, interest and foreign exchange
rate fluctuations and the realization of investments, whereas expenses tend to
be more uniform throughout the year.
Commission rates vary in amount depending upon the type of insurance or
reinsurance coverage provided, the particular insurer or reinsurer, the capacity
in which the broker acts and negotiations with clients. In some cases,
compensation for brokerage or advisory services is paid directly as a fee by the
client. Occasionally, commissions are shared with other brokers that have
participated in placing insurance or servicing insureds.
The investment of fiduciary funds is governed by the applicable laws or
regulations of insurance authorities of the states in the United States and in
other jurisdictions in which MMC's subsidiaries do business. These laws and
regulations typically limit the type of investments that may be made with such
funds. The general amount of funds invested and interest rates vary from time to
time.
INVESTMENT MANAGEMENT. Investment management and related services are
provided by Putnam Investments, LLC (the successor to Putnam
Investments, Inc.), and its subsidiaries ("Putnam"). Putnam has been engaged in
the investment management business since 1937, with its principal offices in
Boston, Massachusetts. Putnam also has offices in London and Tokyo. Putnam
provides individual and institutional investors with a broad range of equity and
fixed income investment products and services designed to meet varying
investment objectives and which afford its clients the opportunity to allocate
their investment resources among various investment products as changing
worldwide economic and market conditions warrant.
On January 2, 2001, Putnam Investments, Inc. participated in an internal
corporate reorganization pursuant to which it became a wholly-owned subsidiary
of Putnam Investments Trust, a newly formed Massachusetts business trust, and it
was merged into Putnam Investments, LLC. Putnam Investments, LLC is the
successor to Putnam Investments, Inc.
INVESTMENT MANAGEMENT SERVICES. Putnam's investment management services,
which are performed principally in the United States, include securities
investment advisory and management services consisting of investment research
and management, and accounting and related services for a group of publicly-held
investment companies. As of December 31, 2000, there were 124 such funds (the
"Putnam Funds") registered under the Investment Company Act of 1940, including
16 closed-end investment companies whose shares are traded on various major
domestic stock exchanges. A number of the open-end funds serve as funding
vehicles for variable insurance contracts. Investment management services are
also provided to corporate profit-sharing and pension funds, state and other
governmental and public employee retirement funds, university endowment funds,
charitable foundations, collective investment vehicles (both U.S. and non-U.S.)
and other domestic and foreign institutional accounts.
The majority of Putnam's assets under management are derived from U.S.
individuals and institutions. In recent years Putnam has been expanding its
international client base on a selective basis through joint ventures and the
development of products such as offshore funds. Many international markets are
well developed with many established investment management firms. It may be
difficult for Putnam to establish businesses whose profitability equals that of
its business in the U.S. where it is one of the market leaders. Putnam seeks to
manage the risks of international expansion by using joint ventures with
established firms in selected countries and otherwise carefully choosing which
markets to enter.
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Putnam has a minority interest in Thomas H. Lee Partners ("THL"), a private
equity investment firm. In addition, Putnam and THL formed a joint venture
entity, TH Lee, Putnam Capital of which Putnam owns a 25% interest. THL and TH
Lee, Putnam Capital offer private equity and alternative investment funds for
institutional and high-net-worth investors.
Assets managed by Putnam, on which management fees are earned, aggregated
approximately $370 billion and $391 billion as of December 31, 2000 and 1999,
respectively, invested both domestically and globally. Mutual fund assets
aggregated $269 billion at December 31, 2000 and $289 billion at December 31,
1999. Assets held in equity securities at December 31, 2000 represented 83% of
assets under management, compared with 82% in 1999 and 73% in 1998, while
investments in fixed income products represented 17%, compared with 18% in 1999
and 27% in 1998. Assets under management averaged $397 billion in 2000.
Putnam's revenue is derived primarily from investment management and 12b-1
fees received from the Putnam Funds and institutional accounts. Assets under
management and revenue levels are particularly affected by fluctuations in
domestic and international stock and bond market prices, and by the level of
investments and withdrawals for current and new fund shareholders and clients.
U.S. equity markets were volatile throughout 2000 and declined for the year
after several years of substantial growth. This volatility contributed to the
fluctuations in assets under management and, accordingly, to growth rates of
revenue. A continued decline in general market levels will reduce revenue growth
or, in some circumstances, could lead to a decline in revenue. Items affecting
revenue also include, but are not limited to, 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 equity earnings associated
with THL investments.
Revenue levels are sensitive to all of the factors above, but in particular,
to significant changes in bond and stock market valuations. Fluctuations in the
prices of stocks will have an effect on equity assets under management and may
influence the flow of monies to and from equity funds and accounts. Fluctuations
in interest rates and in the yield curve have a similar effect on fixed income
assets under management and may influence the flow of monies to and from
fixed-income funds and accounts. Putnam provides individual and institutional
investors with a broad range of equity and fixed income investment products and
services designed to meet varying investment objectives and which afford its
clients the opportunity to allocate their investment resources among various
investment products as changing worldwide economic and market conditions
warrant.
The investment management services provided to the Putnam Funds and
institutional accounts are performed pursuant to advisory contracts which
provide for fees payable to the Putnam company that manages the account. The
amount of the fees varies depending on the individual mutual fund or account and
is usually based upon a sliding scale in relation to the level of assets under
management and, in certain instances, is also based on investment performance.
Such contracts automatically terminate in the event of their assignment,
generally may be terminated by either party without penalty and, as to contracts
with the Putnam Funds, continue in effect only so long as approved, at least
annually, by their shareholders or by the Putnam Funds' trustees, including a
majority who are not affiliated with Putnam. "Assignment" includes any direct or
indirect transfer of a controlling block of voting stock in Putnam or MMC. The
management of Putnam and the trustees of the funds regularly review the fund fee
structure in light of fund performance, the level and range of services
provided, industry conditions and other relevant factors.
PUTNAM FIDUCIARY TRUST COMPANY. A Putnam subsidiary, Putnam Fiduciary Trust
Company, a Massachusetts trust company, serves as transfer agent, dividend
disbursing agent, registrar and custodian for the Putnam Funds and provides
custody services to several external clients. Putnam Fiduciary Trust Company
receives compensation from the Putnam Funds for such services pursuant to
written investor servicing agreements which may be terminated by either party on
90 days' notice, and pursuant to written custody agreements which may be
terminated by either party on 30 days' notice. These contracts generally provide
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for compensation on the basis of several factors which vary with the type of
service being provided. In addition, Putnam Fiduciary Trust Company provides
administrative and trustee (or custodial) services for employee benefit plans
(in particular 401(k) plans), IRA's and other clients for which it receives
compensation pursuant to service and trust or custodian contracts. In the case
of employee benefit plans, investment options are usually selected by the plan
sponsors and may include Putnam mutual funds and other Putnam managed products,
as well as employer stock and other non-Putnam investments.
PUTNAM RETAIL MANAGEMENT, INC. Putnam Retail Management, Inc., a Putnam
subsidiary, acts as principal underwriter of the shares of the open-end Putnam
Funds, selling primarily through independent broker/dealers, financial planners
and financial institutions, including banks, and directly to certain large
401(k) plans and other institutional accounts. Shares of open-end funds are
generally sold at their respective net asset value per share plus a sales
charge, which varies depending on the individual fund and the amount and class
of shares purchased. In some cases the sales charge is assessed only if the
shares are redeemed within a stated time period. In accordance with certain
terms and conditions described in the prospectuses for such funds, certain
investors are eligible to purchase shares at net asset value or at reduced sales
charges, and investors may generally exchange their shares of a fund at net
asset value for shares of another Putnam Fund without the payment of additional
sales charges.
Commissions to selling dealers are typically paid at the time of the
purchase as a percentage of the amount invested. Essentially all Putnam Funds
are available with a contingent deferred sales charge in lieu of a front-end
load. The related prepaid dealer commissions initially paid by Putnam to
broker/dealers for distributing such funds can be recovered through charges and
fees received over a number of years.
All of the open-end Putnam Funds have adopted distribution plans pursuant to
Rule 12b-1 under the Investment Company Act of 1940 under which the Putnam Funds
make payments to Putnam Retail Management, Inc., a Putnam subsidiary, to cover
costs relating to distribution of the Putnam Funds and services provided to
shareholders. These payments enable the Putnam subsidiary to pay service fees
and other continuing compensation to firms that provide services to Putnam Fund
shareholders and distribute shares of the Putnam Funds. Some Rule 12b-1 fees are
retained by Putnam Retail Management, Inc. as compensation for the costs of
distribution and other services provided by Putnam to shareholders and for
commissions advanced by Putnam at the point of sale (and recovered through fees
received over time) to firms that distribute shares of the Putnam Funds. These
distribution plans, and payments made by the Putnam Funds thereunder, are
subject to annual renewal by the trustees of the Putnam Funds and to termination
by vote of the shareholders of the Putnam Funds or by vote of a majority of the
Putnam Funds' trustees who are not affiliated with Putnam. Failure of the
Trustees to approve continuation of the Rule 12b-1 plans for Class B (deferred
sales charge) shares would have a material adverse effect on Putnam. The
Trustees also have the ability to reduce the level of 12b-1 fees paid by a fund
or to make other changes that would reduce the amount of 12b-1 fees received by
Putnam. Such changes could have a material adverse effect on Putnam.
Putnam provides investor services through several separate facilities in the
Boston area and has one of the largest image processing facilities in the world.
CONSULTING. Through Mercer Consulting Group, Inc., subsidiaries and
affiliates of MMC, separately and in collaboration, provide consulting services
from locations around the world, predominantly to corporate clients in the areas
of human resources and employee benefit programs, including retirement, health
care and compensation, as well as communication and human resource strategy;
general management consulting, which comprises strategy, operations and
marketing; and organizational change and economic consulting and analysis
services.
William M. Mercer Companies LLC ("William M. Mercer"), through its
subsidiaries and affiliates provides professional advice and services to
corporate, government and institutional clients from offices in more than 35
countries and territories in North and South America, Europe, Asia, Australia
and New Zealand. Consultants help organizations design, implement, administer
and communicate employee
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benefit, compensation and other human resource programs and strategies. Through
its investment consultants, the firm assists trustees of pension funds and
others in the selection of investment managers and investment strategies.
William M. Mercer also advises investment managers on product design and
positioning. In certain locations outside of the United States, William M.
Mercer advises individuals in the investment and disposition of lump sum
retirement benefits and other retirement savings and offers a retirement trust
service, incorporating plan administration, trustee services and investment
manager selection.
Mercer Management Consulting, Inc. provides advice and assistance on issues
of business strategy, primarily to large corporations in North America, Europe
and Asia. Consultants help clients understand customer dynamics, optimize the
economics of their business, and structure their organizations, processes and
systems to achieve their strategic goals and maximize shareholder value.
Mercer Delta Consulting Inc., with offices in North America, works with
senior executives and CEOs of major corporations and other institutions on the
design and leadership of organizational change.
National Economic Research Associates, Inc. ("NERA"), a firm of consulting
economists, serves law firms, corporations, trade associations and governmental
agencies, from offices in the United States, Europe and Australia. NERA provides
research and analysis of economic and financial issues arising in litigation,
regulation, public policy and management.
Under the Lippincott & Margulies name, Mercer advises leading corporations
on issues relating to brand, corporate identity and image.
The major component of Mercer Consulting Group's revenue is fees paid by
clients for advice and services. In a relatively small number of situations,
fees are partly contingent on the client having successful outcomes. In
addition, commission revenue is received from insurance companies for the
placement of individual and group insurance contracts, primarily life, health
and accident coverages. A relatively small amount of revenue is derived from
brokerage commissions in connection with a registered securities broker dealer,
and in the form of equity interests in clients of Mercer Management
Consulting, Inc.
Revenue in the consulting business is fundamentally derived from the value
of the advice and services provided to clients. It is affected by changes in
clients' industries, including government regulation, as well as new products
and services, the stage of the economic cycle, broad trends in employee
demographics and in the management of large organizations and interest and
foreign exchange rate fluctuations.
REGULATION. The activities of MMC are subject to licensing requirements and
extensive regulation under the laws of the United States and its various states,
territories and possessions, as well as laws of other countries in which MMC's
subsidiaries operate. These laws and regulations are primarily intended to
benefit clients.
MMC's three business segments depend on the validity of, and continued good
standing under, the licenses and approvals pursuant to which they operate, as
well as compliance with pertinent regulations. MMC therefore devotes significant
effort toward maintaining its licenses and to ensuring compliance with a diverse
and complex regulatory structure.
In all jurisdictions the applicable laws and regulations are subject to
amendment or interpretation by regulatory authorities. Generally, such
authorities are vested with relatively broad discretion to grant, renew and
revoke licenses and approvals, and to implement regulations. Licenses may be
denied or revoked for various reasons, including the violation of such
regulations, conviction of crimes and the like. Possible sanctions which may be
imposed include the suspension of individual employees, limitations on engaging
in a particular business for specified periods of time, revocation of licenses,
censures, redress to clients and fines. In some instances, MMC follows practices
based on its interpretations, or those generally followed by the industry, of
laws or regulations, which may prove to be different from those of regulatory
8
authorities. Accordingly, the possibility exists that MMC may be precluded or
temporarily suspended from carrying on some or all of its activities or
otherwise fined or penalized in a given jurisdiction.
No assurances can be given that MMC's risk and insurance services,
investment management or consulting activities can continue to be conducted in
any given jurisdiction as they have been in the past.
RISK AND INSURANCE SERVICES. While the laws and regulations vary among
jurisdictions, every state of the United States and most foreign jurisdictions
require an insurance broker or agent (and in some cases a reinsurance broker or
intermediary) or insurance consultant, managing general agent or third party
administrator to have an individual and/or company license from a governmental
agency or self-regulatory organization. In addition, certain of MMC's risk and
insurance activities are governed by the rules of the General Insurance
Standards Council in London and self-regulatory organizations in the United
Kingdom and in other jurisdictions, as well as investment, securities and
futures licensing and regulatory authorities. A few jurisdictions issue licenses
only to individual residents or locally-owned business entities. In some of
these jurisdictions, if MMC has no licensed subsidiary, MMC may maintain
arrangements with residents or business entities licensed to act in such
jurisdiction. Also, in some jurisdictions, various insurance related taxes may
also be due either by clients directly or from the broker. In the latter case,
the broker customarily looks to the client for payment.
INVESTMENT MANAGEMENT. Putnam's securities investment management activities
are subject to regulation in the United States by the Securities and Exchange
Commission, and other federal, state and self regulatory authorities, as well as
in certain other countries in which it does business. Putnam's officers,
directors and employees may from time to time own securities which are also held
by the Putnam Funds or institutional accounts. Putnam's internal policies with
respect to individual investments require prior clearance and reporting of
transactions and restrict certain transactions so as to reduce the possibility
of conflicts of interest.
To the extent that existing or future regulations affecting the sale of
Putnam fund shares or other investment products or their investment strategies,
cause or contribute to reduced sales of Putnam fund shares or investment
products or impair the investment performance of the Putnam Funds or such other
investment products, Putnam's aggregate assets under management and its revenues
might be adversely affected. Changes in regulations affecting the free movement
of international currencies might also adversely affect Putnam.
CONSULTING. In general, the consulting activities of MMC's subsidiaries are
not subject to licensing or other regulatory requirements; however, the subject
matter of certain consulting services is subject to regulation. For example,
employee benefit plans are subject to various governmental regulations, and
services related to brokerage activities, trustee services, investment matters
(including advice to individuals on the investment of personal pension assets)
and the placing of individual and group insurance contracts subject MMC's
subsidiaries to insurance, investment or securities regulations and licensing in
various jurisdictions.
COMPETITIVE CONDITIONS. Principal methods of competition in risk and
insurance services and consulting include the quality and types of services and
products that a broker or consultant provides its clients and their cost. Putnam
competes with other providers of investment products and services primarily on
the basis of the range of investment products offered, the investment
performance of such products, as well as the manner in which such products are
distributed, and the scope and quality of the shareholder and other services
provided. Sales of Putnam fund shares are also influenced by general securities
market conditions, government regulations, global economic conditions and
advertising and sales promotional efforts.
All these businesses also encounter strong competition from both public
corporations and private firms in attracting and retaining qualified employees.
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RISK AND INSURANCE SERVICES. The combined insurance and reinsurance broking
services business of MMC is the largest of its type in the world.
MMC encounters strong competition in the risk and insurance services
business from other insurance brokerage firms which also operate on a nationwide
or worldwide basis, from a large number of regional and local firms in the
United States, the European Union and in other countries and regions, from
insurance and reinsurance companies that market and service their insurance
products without the assistance of brokers or agents and from other businesses,
including commercial and investment banks, accounting firms and consultants that
provide risk-related services and products.
Certain insureds and groups of insureds have established programs of self
insurance (including captive insurance companies), as a supplement or
alternative to third-party insurance, thereby reducing in some cases the need
for insurance placements. There are also many other providers of insurance
program management services, including many insurance companies, and many other
organizations seeking to structure and manage investments in the insurance
industry.
INVESTMENT MANAGEMENT. Putnam Investments is one of the largest investment
management firms in the United States. The investment management business is
highly competitive. In addition to competition from firms already in the
investment management business, including commercial banks, stock brokerage and
investment banking firms, and insurance companies, there is competition from
other firms offering financial services and other investment alternatives.
Although Putnam Investments has expanded its marketing and distribution outside
the U.S., it competes in non-U.S. markets with local and global firms, many of
whom have much larger investment management businesses in their respective
non-U.S. markets.
Many securities dealers, whose large retail distribution systems play an
important role in the sale of shares in the Putnam Funds, also sponsor competing
proprietary mutual funds. To the extent that such securities dealers value the
ability to offer customers a broad selection of investment alternatives, they
will continue to sell independent funds, notwithstanding the availability of
proprietary products. However, to the extent that these firms limit or restrict
the sale of Putnam fund shares through their brokerage systems in favor of their
proprietary mutual funds, assets under management might decline and Putnam's
revenues might be adversely affected. In addition, a number of mutual fund
sponsors presently market their funds to the general public without sales
charges. Certain firms also offer passively managed funds such as index funds to
the general public.
CONSULTING. Mercer Consulting Group, one of the largest global consulting
firms, is a leader in many of its businesses. William M. Mercer is the world's
largest human resources consulting organization. Mercer Management Consulting is
a leader in strategy consulting. NERA is a leading firm of consulting
economists.
William M. Mercer, Mercer Management Consulting and NERA compete with other
privately held and publicly held worldwide and national consulting companies, as
well as regional and local firms. Competitors include independent consulting
firms and consulting organizations affiliated with accounting, information
systems, technology and financial services firms, some of which provide
administrative or consulting services as an adjunct to other primary services.
SEGMENTATION OF ACTIVITY BY TYPE OF SERVICE AND GEOGRAPHIC AREA OF
OPERATION. Financial information relating to the types of services provided by
MMC and the geographic areas of its operations is incorporated herein by
reference to Note 16 of the Notes to Consolidated Financial Statements on pages
51 and 52 of the 2000 Annual Report. MMC's non-U.S. operations are subject to
the customary risks involved in doing business in other countries, including
currency fluctuations and exchange controls.
EMPLOYEES. As of December 31, 2000, MMC and its consolidated subsidiaries
employed about 57,000 people worldwide, of whom approximately 35,500 were
employed by subsidiaries providing risk and insurance services, approximately
6,100 were employed by subsidiaries providing investment management
10
services, approximately 15,000 were employed by subsidiaries providing
consulting services, and approximately 400 were employed by MMC.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS. MMC and its subsidiaries
and their representatives may from time to time make verbal or written
statements (including certain statements contained in this report and MMC's
financial statements and other documents incorporated herein by reference or in
other MMC filings with the Securities and Exchange Commission) relating to
future results, which are forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. Such statements may
include, without limitation, discussions concerning revenue and expense growth,
cash flow, capital structure, cost savings and efficiencies expected from the
integration of Sedgwick Group plc, market and industry conditions, interest
rates, foreign exchange rates, contingencies and matters relating to MMC's
operations and income taxes. Such forward-looking statements are based on
available current market and industry materials, experts' reports and opinions,
as well as management's expectations concerning future events impacting MMC.
Forward-looking statements by their very nature involve risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by any forward-looking statements contained or incorporated or
referred to herein include, in the case of MMC's risk and insurance services and
consulting businesses, the integration of the business of Sedgwick Group plc
(including the achievement of synergies and cost reductions) or other adverse
consequences from that transaction. 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 and other changes in the global
property and casualty insurance markets, the impact of 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; and with respect to all of MMC's activities, changes in general
worldwide and national economic conditions, fluctuations in foreign currencies,
actions of competitors or regulators, changes in interest rates, developments
relating to claims, 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. A description of certain of these factors is included elsewhere in
this Annual Report and is incorporated herein by reference.
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 Web sites to convey
meaningful information about their businesses, including the posting of updates
of assets under management at Putnam, and from time to time, Marsh Inc.'s view
of insurance market conditions. 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 earning announcement. Investors can link
to MMC and its operating company Web sites through www.mmc.com.
ITEM 2. PROPERTIES.
MMC and certain of its subsidiaries, as tenants in common, own a 69%
condominium interest in a 44-story building in New York City which serves as
their worldwide headquarters.
The principal offices of MMC's risk and insurance services subsidiaries in
the UK are located on the eastern side of the City of London in The Marsh
Centre. This freehold building, owned by a subsidiary of MMC, comprises 360,000
square feet containing offices located around a central atrium, and ancillary
facilities including a shopping mall.
The remaining business activities of MMC and its subsidiaries are conducted
principally in leased office space in cities throughout the world. In general,
no difficulty is anticipated in negotiating renewals as leases expire or in
finding other satisfactory space if the premises become unavailable. From time
to time,
11
MMC may have unused space and may seek to sublet such space to third parties,
depending upon the demands for office space in the locations involved.
ITEM 3. LEGAL PROCEEDINGS.
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.
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. As of December 31, 2000, settlements and related costs previously
paid amount to approximately $200 million of which approximately $30 million is
due from or has been paid by insurers. The contingent exposure of Sedgwick for
pension redress and related costs is estimated to be $240 million. Sedgwick has
recorded $100 million of reserves and recognized approximately $140 million of
insurance recoveries related to this exposure.
Other present and former subsidiaries of MMC are engaged in a comparable
review of their personal pension plan businesses, although the extent of their
activity in this area, and consequently their financial exposure, was
proportionally much less than Sedgwick. The contingent exposure of the present
and former non-Sedgwick subsidiaries of MMC for pension redress and related
costs is estimated to be approximately $110 million, essentially all of which is
expected to be recovered from insurers. As of December 31, 2000, net settlements
and related costs previously paid total approximately $55 million.
MMC's ultimate exposure from the United Kingdom Personal Investment
Authority review, as presently calculated and including Sedgwick, is subject to
a number of variable factors including, among others, the interest rates
established quarterly by the U.K. Personal Investment Authority for calculating
compensation, equity markets, and the precise scope, duration, and methodology
of the review as required by that Authority.
On the basis of present information, anticipated insurance coverage and
advice received from counsel, it is the opinion of MMC's management that the
disposition or ultimate determination of these claims, lawsuits and proceedings
will not have a material adverse effect on MMC's consolidated results of
operations or its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
12
PART II
ITEM 5. MARKET FOR MMC'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market and dividend information regarding MMC's common stock on page 54 of
the 2000 Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data on page 55 of the 2000 Annual Report are
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Information on pages 25 through 32 of the 2000 Annual Report is incorporated
herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information under the heading "Market Risk" on pages 31 and 32 of the 2000
Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements and the Independent Auditors' Report
thereto on pages 33 through 53 of the 2000 Annual Report and Selected Quarterly
Financial Data (Unaudited) on page 54 of the 2000 Annual Report are incorporated
herein by reference. Supplemental Notes to Consolidated Financial Statements are
included on page 21 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MMC.
Information as to the directors and nominees for the Board of Directors of
MMC is incorporated herein by reference to the material under the heading
"Election of Directors" in the Notice of Annual Meeting of Stockholders and
Proxy Statement dated March 29, 2001 (the "2001 Proxy Statement").
The executive officers of MMC as of March 24, 2001 are
Messrs. Cabiallavetta, Coster, Davis, Greenberg, Lasser, and Sinnott, with
respect to whom information is incorporated herein by reference to the 2001
Proxy Statement, and:
Francis N. Bonsignore, age 54, has been Senior Vice President-Human
Resources & Administration of MMC since 1990. Immediately prior thereto he
was partner and National Director-Human Resources for Price Waterhouse.
William L. Rosoff, age 54, became Senior Vice President and General
Counsel of MMC in October 2000. Before joining MMC, Mr. Rosoff was a partner
at the law firm of Davis Polk & Wardwell, having rejoined that firm after
serving two years as senior vice president and general counsel of RJR
Nabisco, Inc. Mr. Rosoff first joined Davis Polk & Wardwell in 1978 and
became a partner in 1985.
Sandra S. Wijnberg, age 44, became Senior Vice President and Chief
Financial Officer of MMC in January 2000. Before joining MMC, Ms. Wijnberg
was a senior vice president and treasurer of Tricon Global
Restaurants, Inc. from 1997 until December 1999. Prior to that,
Ms. Wijnberg spent three years with PepsiCo., last serving as senior vice
president and chief financial officer of its KFC corporation division.
ITEM 11. EXECUTIVE COMPENSATION.
Information under the headings "Executive Compensation", "Compensation
Committee Report" and "Comparison of Cumulative Total Stockholder Return" in the
2001 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information under the heading "Security Ownership" in the 2001 Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information under the headings "Employment Agreement" "Directors
Compensation" and "Transactions with Management and Others; Other Information"
in the 2001 Proxy Statement is incorporated herein by reference.
14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements (incorporated herein by reference to
pages 33 through 53 of the 2000 Annual Report):
Consolidated Statements of Income for each of the three years in the
period ended December 31, 2000
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 2000
Consolidated Statements of Stockholders' Equity and Comprehensive
Income for each of the three years in the period ended December 31,
2000
Notes to Consolidated Financial Statements
Independent Auditors' Report
Supplemental Notes to Consolidated Financial Statements
Independent Auditors' Report
Other:
Selected Quarterly Financial Data and Supplemental Information
(Unaudited) for the three years ended December 31, 2000 (incorporated
herein by reference to page 54 of the 2000 Annual Report)
Five-Year Statistical Summary of Operations (incorporated herein by
reference to page 55 of the 2000 Annual Report)
2. All required Financial Statement Schedules are included in the
Consolidated Financial Statements, the Notes to Consolidated Financial
Statements or the Supplemental Notes to Consolidated Financial
Statements.
3. The following exhibits are filed as a part of this report:
(3.1) -- the registrant's restated certificate of incorporation
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1999)
(3.2) -- the registrant's by-laws
(4.1) -- Indenture dated as of June 14, 1999 between MMC and State
Street Bank and Trust Company, as trustee (incorporated by
reference to the registrant's Registration Statement on
Form S-3, Registration No. 333-67543)
(4.2) -- First Supplemental Indenture dated as of June 14, 1999
between MMC and State Street Bank and Trust Company, as
trustee (incorporated by reference to the registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999)
(4.3) -- Amended and Restated Rights Agreement dated as of
January 20, 2000 between the registrant and Harris Trust
Company of New York (incorporated by reference to the
registrant's Registration Statement on Form 8-A/A filed on
January 27, 2000)
15
(10.1)* -- Marsh & McLennan Companies, Inc. 2000 Senior Executive
Incentive and Stock Award Plan (incorporated by reference to
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1999)
(10.2)* -- Marsh & McLennan Companies Stock Investment Supplemental
Plan (incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994)
(10.3)* -- Amendment to Marsh & McLennan Companies Stock Investment
Supplemental Plan dated June 16, 1997 (incorporated by
reference to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)
(10.4)* -- Amendment to Marsh & McLennan Companies Stock Investment
Supplemental Plan dated November 20, 1997
(10.5)* -- Amendment to Marsh & McLennan Companies Stock Investment
Supplemental Plan dated January 1, 2000
(10.6)* -- Marsh & McLennan Companies Special Severance Pay Plan
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1996)
(10.7)* -- Putnam Investments, Inc. Executive Deferred Compensation
Plan (incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994)
(10.8)* -- Putnam Investments, LLC Executive Deferred Bonus Plan
(10.9)* -- Marsh & McLennan Companies Supplemental Retirement Plan
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1992)
(10.10)* -- Marsh & McLennan Companies Senior Management Incentive
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1994)
(10.11)* -- Marsh & McLennan Companies, Inc. U.S. Employee 2000 Cash
Bonus Award Voluntary Deferral Plan
(10.12)* -- Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1997)
(10.13)* -- Employment Agreement between Lawrence J. Lasser and Putnam
Investments, Inc. effective as of December 31, 1997
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1997)
(10.14)* -- First Amendment effective as of January 1, 2001 to the
Employment Agreement between Lawrence J. Lasser and Putnam
Investments, Inc.
(10.15)* -- Second Amendment effective as of March 22, 2001 to the
Employment Agreement between Lawrence J. Lasser and Putnam
Investments, LLC
(10.16)* -- MMC Capital, Inc. Amended and Restated Long Term Incentive
Plan dated as of March 19, 2001
- ------------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
16
(10.17)* -- Consulting Agreement between A.J.C. Smith and MMC effective
as of June 1, 2000 (Incorporated by reference to the
registrant's Quarterly Report on Form 10-Q for the quarter
ending June 30, 2000)
(12) -- Statement Re: Computation of Ratio of Earnings to Fixed
Charges
(13) -- Annual Report to Stockholders for the year ended
December 31, 2000, to be deemed filed only with respect to
those portions which are expressly incorporated by reference
(21) -- list of subsidiaries of the registrant (as of 2/28/2001)
(23) -- independent auditors' consent
(24) -- powers of attorney
(b) No reports on Form 8-K were filed by the registrant in the fiscal quarter
ended December 31, 2000
- ------------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
this 29th day of March, 2001 on its behalf by the undersigned, thereunto duly
authorized.
MARSH & McLENNAN COMPANIES, INC.
By /s/ J. W. GREENBERG
--------------------------------------
J. W. Greenberg
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated this 29th day of March, 2001.
/s/ J. W. GREENBERG MATHIS CABIALLAVETTA*
- ---------------------------------- ----------------------------------------
J. W. GREENBERG MATHIS CABIALLAVETTA
Director, Chairman of the Board Director
and Chief Executive Officer
/s/ SANDRA S. WIJNBERG PETER COSTER*
- ---------------------------------- ----------------------------------------
SANDRA S. WIJNBERG PETER COSTER
Senior Vice President and Chief Director
Financial Officer
/s/ ROBERT J. RAPPORT CHARLES A. DAVIS*
- ---------------------------------- ----------------------------------------
ROBERT J. RAPPORT CHARLES A. DAVIS
Vice President and Controller Director
(Chief Accounting Officer)
LEWIS W. BERNARD * ROBERT F. ERBURU*
- ---------------------------------- ----------------------------------------
LEWIS W. BERNARD ROBERT F. ERBURU
Director Director
RAY J. GROVES* DAVID A. OLSEN*
- ---------------------------------- ----------------------------------------
RAY J. GROVES DAVID A. OLSEN
Director Director
STEPHEN R. HARDIS* JOHN D. ONG*
- ---------------------------------- ----------------------------------------
STEPHEN R. HARDIS JOHN D. ONG
Director Director
18
GWENDOLYN S. KING* ADELE SIMMONS*
- ---------------------------------- ----------------------------------------
GWENDOLYN S. KING ADELE SIMMONS
Director Director
THE RT. HON. LORD LANG OF MONKTON* JOHN T. SINNOTT*
- ---------------------------------- ----------------------------------------
THE RT. HON. LORD LANG OF MONKTON JOHN T. SINNOTT
Director Director
LAWRENCE J. LASSER* A.J.C. SMITH*
- ---------------------------------- ----------------------------------------
LAWRENCE J. LASSER A.J.C. SMITH
Director Director
- ------------------------
* William L. Rosoff, pursuant to Powers of Attorney executed by each of the
individuals whose name is followed by an (*) and filed herewith, by signing
his name hereto does hereby sign and execute this Form 10-K of Marsh &
McLennan Companies, Inc. on behalf of such individual in the capacities in
which the names of each appear above.
/s/ WILLIAM L. ROSOFF
-----------------------------------
WILLIAM L. ROSOFF
19
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Marsh & McLennan Companies, Inc.:
We have audited the consolidated balance sheets of Marsh & McLennan
Companies, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for each of the three years in the period
ended December 31, 2000, and have issued our report thereon dated March 2, 2001;
such financial statements and report are included in your 2000 Annual Report to
Stockholders and are incorporated herein by reference. Our audits also included
the supplemental notes to the consolidated financial statements (the
"Supplemental Notes") listed in Item 14. These Supplemental Notes are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such Supplemental Notes, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
New York, New York
March 2, 2001
20
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. INFORMATION CONCERNING MMC'S VALUATION ACCOUNTS FOLLOWS:
An analysis of the allowance for doubtful accounts for the three years ended
December 31, 2000 follows (in millions of dollars):
2000 1999 1998
-------- -------- --------
Balance at beginning of year................................ $132 $128 $ 53
Provision charged to operations............................. 18 18 19
Accounts written-off, net of recoveries..................... (9) (12) (5)
Effect of exchange rate changes............................. (6) (2) 2
Other (A)................................................... -- -- 59
---- ---- ----
Balance at end of year...................................... $135 $132 $128
==== ==== ====
- ------------------------
(A) Relates primarily to the acquisition of Sedgwick in 1998.
17. AN ANALYSIS OF INTANGIBLE ASSETS AT DECEMBER 31, 2000 AND 1999 FOLLOWS (IN
MILLIONS OF DOLLARS):
2000 1999
-------- --------
Goodwill.................................................... $5,891 $5,799
Other intangible assets..................................... 141 142
------ ------
Subtotal.................................................. 6,032 5,941
Less--accumulated amortization.............................. (556) (399)
------ ------
Total................................................... $5,476 $5,542
====== ======
21
EXHIBIT INDEX
(3.1) -- the registrant's restated certificate of incorporation
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1999)
(3.2) -- the registrant's by-laws
(4.1) -- Indenture dated as of June 14, 1999 between MMC and State
Street Bank and Trust Company, as trustee (incorporated by
reference to the registrant's Registration Statement on
Form S-3, Registration No. 333-67543)
(4.2) -- First Supplemental Indenture dated as of June 14, 1999
between MMC and State Street Bank and Trust Company, as
trustee (incorporated by reference to the registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999)
(4.3) -- Amended and Restated Rights Agreement dated as of
January 20, 2000 between the registrant and Harris Trust
Company of New York (incorporated by reference to the
registrant's Registration Statement on Form 8-A/A filed on
January 27, 2000)
(10.1)* -- Marsh & McLennan Companies, Inc. 2000 Senior Executive
Incentive and Stock Award Plan (incorporated by reference to
the registrant's Annual Report on Form 10-K for the year
ended December 31, 1999)
(10.2)* -- Marsh & McLennan Companies Stock Investment Supplemental
Plan (incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994)
(10.3)* -- Amendment to Marsh & McLennan Companies Stock Investment
Supplemental Plan dated June 16, 1997 (incorporated by
reference to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)
(10.4)* -- Amendment to Marsh & McLennan Companies Stock Investment
Supplemental Plan dated November 20, 1997
(10.5)* -- Amendment to Marsh & McLennan Companies Stock Investment
Supplemental Plan dated January 1, 2000
(10.6)* -- Marsh & McLennan Companies Special Severance Pay Plan
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1996)
(10.7)* -- Putnam Investments, Inc. Executive Deferred Compensation
Plan (incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994)
(10.8)* -- Putnam Investments, LLC Executive Deferred Bonus Plan
(10.9)* -- Marsh & McLennan Companies Supplemental Retirement Plan
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1992)
(10.10)* -- Marsh & McLennan Companies Senior Management Incentive
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1994)
(10.11)* -- Marsh & McLennan Companies, Inc. U.S. Employee 2000 Cash
Bonus Award Voluntary Deferral Plan
- ------------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
22
(10.12)* -- Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1997)
(10.13)* -- Employment Agreement between Lawrence J. Lasser and Putnam
Investments, Inc. effective as of December 31, 1997
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1997)
(10.14)* -- First Amendment effective as of January 1, 2001 to the
Employment Agreement between Lawrence J. Lasser and Putnam
Investments, Inc.
(10.15)* -- Second Amendment effective as of March 22, 2001 to the
Employment Agreement between Lawrence J. Lasser and Putnam
Investments, LLC
(10.16)* -- MMC Capital, Inc. Amended and Restated Long Term Incentive
Plan dated as of March 19, 2001
(10.17)* -- Consulting Agreement between A.J.C. Smith and MMC effective
as of June 1, 2000 (Incorporated by reference to the
registrant's Quarterly Report on Form 10-Q for the quarter
ending June 30, 2000)
(12) -- Statement Re: Computation of Ratio of Earnings to Fixed
Charges
(13) -- Annual Report to Stockholders for the year ended
December 31, 2000, to be deemed filed only with respect to
those portions which are expressly incorporated by reference
(21) -- list of subsidiaries of the registrant (as of 2/28/2001)
(23) -- independent auditors' consent
(24) -- powers of attorney
- ------------------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
23