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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1996

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
- ------------------- -----------------------
Common Stock New York Stock Exchange
(par value $1.00
per share) Chicago Stock Exchange
Preferred Stock
Purchase Rights Pacific Stock 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, 1997, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $8,449,000,000.

As of February 28, 1997, there were outstanding 72,700,750 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 the
year ended December 31, 1996 . . . . . . Parts I, II and IV
Notice of Annual Meeting of
Stockholders and Proxy Statement dated
March 31, 1997 . . . . . . . . . . . . . Part III


MARSH & McLENNAN COMPANIES, INC.

-----------------------

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 1996

-----------------------

PART I

Item 1. Business.

Marsh & McLennan Companies, Inc. (the "registrant"), a professional
services organization with origins dating from 1871 in the United States, is a
holding company which, through its subsidiaries and affiliates, provides clients
with analysis, advice and transactional capabilities in the fields of insurance
and reinsurance broking, investment management and consulting. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 23 through 29 of the Annual Report to Stockholders for the year ended
December 31, 1996 (the "1996 Annual Report"), which is incorporated herein by
reference, for a discussion of the registrant's revenues and operating income by
industry segment for each of the last three fiscal years.

On March 27, 1997, Johnson & Higgins, the leading privately held
insurance services and employee benefit consulting firm, became a subsidiary of
the registrant pursuant to an agreement entered into on March 12, 1997.
Established in New York in 1845, Johnson & Higgins provides risk management and
benefit consulting services to clients worldwide. Its 1996 revenues totaled $1.2
billion. Except to the extent specifically identified herein, the information
contained in this Form 10-K reflects the business and operations of the
registrant without giving effect to the consummation of the transaction with
Johnson & Higgins.

Insurance Services. Registrant's insurance services are provided by its
subsidiaries and their affiliates on a worldwide basis, as broker, agent or
consultant for insureds, insurance underwriters and other brokers. These
services are principally provided by Marsh & McLennan, Incorporated and Guy
Carpenter & Company, Inc., a reinsurance intermediary, and their subsidiaries
and affiliates. Seabury & Smith, Inc. and its subsidiaries and affiliates
provide insurance program management services involving a wide range of
insurance and related products for individuals and others through both sponsored
and non-sponsored affinity group programs primarily in the United States and
Canada. Marsh & McLennan Risk Capital Corp. provides services principally in
connection with originating, structuring and managing investments in the
insurance industry.




Risk management and insurance broking services, carried on throughout the
world principally by Marsh & McLennan, Incorporated and its subsidiaries and
affiliates, are provided for a predominantly corporate clientele through offices
in more than 80 countries, primarily in North and South America, Europe and Asia
Pacific. Clients are companies engaged in a broad range of commercial
activities, including general industries, financial and professional services,
aviation, marine, energy construction, land transportation, healthcare and
utility concerns. Clients also include various government and related agencies,
non-profit and other organizations, and individuals.

Such risk management and insurance broking services involve various types
of property and liability loss exposures, including large and complex risks that
require access to world insurance markets. Services provided to clients include
insurance broking activities and professional counseling services on risk
management issues, including risk analysis, coverage requirements,
self-insurance (in which the insured retains a portion of its insurance risks),
and alternative insurance and risk financing methods, as well as claims
collection, injury management, loss prevention and other insurance related
services. Services also include organization and administrative services for
special purpose insurance companies and other risk assumption alternatives.
Insurance placement services include the placement of insurance coverages with
insurers world-wide, sometimes involving other intermediaries. Correspondent
relationships are maintained with unaffiliated firms in certain countries. In
January 1997, the registrant acquired CECAR SA, a French insurance broker,
resulting in the registrant becoming the largest insurance broker in France.

Reinsurance services are provided to insurance and reinsurance risk takers
worldwide, principally by Guy Carpenter & Company, Inc. and its subsidiaries and
affiliates, from offices principally in North America and Europe. Such services
primarily involve acting as an intermediary for insurance and reinsurance
organizations on all classes of reinsurance. The intermediary assists the
insurer by providing advice, placing reinsurance coverage with reinsurance
organizations located around the world, and furnishing related services such as
actuarial, financial and regulatory consulting, portfolio analysis and
catastrophe modeling. Claims services are often performed for policies placed a
number of years previously. The insurance company may seek reinsurance or other
risk-transfer financing on all or a portion of the risks it insures.
Intermediary services are also provided to reinsurance companies, which may also
seek reinsurance on the risks they have reinsured.

Seabury & Smith, Inc. and its subsidiaries and affiliates provide
insurance program management services (including the


2


design, placement and administration of life, health, accident, disability,
automobile, homeowners, professional liability and other insurance, and related
products) primarily on a group marketing basis to individuals, businesses and
their employees, and associations and other affinity groups and their members in
the United States and Canada. It provides underwriting management services to
insurers in the United States, Canada and the United Kingdom, primarily for
professional liability coverages. The Frizzell Group Limited and its
subsidiaries, which provided insurance program management, personal financial
planning and consumer finance services in the United Kingdom, were sold in 1996.

Marsh & McLennan Risk Capital Corp. ("MMRCC") provides services in
connection with originating, structuring and managing investments in the
insurance industry. It is an advisor to The Trident Partnership L.P., an
independent private investment partnership formed in 1994 to make private equity
investments in the global insurance and reinsurance industry. MMRCC is also an
advisor to Risk Capital Reinsurance Company (a subsidiary of Risk Capital
Holdings, Inc., a publicly held corporation), which is based in the United
States and was formed in 1995 to provide traditional and other kinds of
reinsurance, both on a stand-alone basis and as part of integrated capital
solutions for insurance companies. MMRCC and its predecessor operations were
instrumental in the formation of several substantial insurance and reinsurance
entities, including A.C.E. Insurance Company, Ltd., X.L. Insurance Company, Ltd.
and Mid Ocean Reinsurance Company Ltd. MMRCC also advises its immediate parent
company, Marsh & McLennan Risk Capital Holdings, Ltd., regarding the latter's
ownership holdings in certain insurance and reinsurance entities and funds,
primarily ones initiated by MMRCC. As a result of the foregoing activities,
subsidiaries and affiliates of the registrant may have direct or indirect
investments in insurance and reinsurance companies, including entities at
Lloyd's, which are considered for client placements by the registrant's
insurance and reinsurance brokerage businesses.

The revenue attributable to the registrant's insurance services consists
primarily of fees paid by clients; commissions and fees paid by insurance and
reinsurance companies; interest income on premiums, and in certain cases on
claims, collected and not yet remitted to insurers, reinsurers or clients, such
funds being held in a fiduciary capacity; and compensation for services provided
in connection with the formation and capitalization of various insurers and
reinsurers, including fees, royalties and dividends, as well as appreciation
that has been realized on sales of holdings in such entities.


3


Revenue generated by insurance services is affected by premium rate levels
in the property and casualty insurance markets and available insurance capacity,
as compensation is frequently related to the premiums paid by insureds. Revenue
is also affected by fluctuations in the amount of risk retained by insurance and
reinsurance clients themselves and by insured values, the development of new
products, markets and services, 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. In many cases compensation may be negotiated in
advance with certain clients on an annual basis based upon the estimated value
of the services to be performed. Revenue and fees also may be received from
originating, structuring and managing investments in insurers, and income and
proceeds also may be derived from investments made by the registrant. Revenues
vary from quarter to quarter as a result of the timing of policy renewals and
the net effect of new and lost business production, whereas expenses tend to be
more uniform throughout the year.

Commission rates vary in amount depending upon the type of insurance or
reinsurance coverage provided, the particular insurer or reinsurer, and the
capacity in which the broker acts, in addition to negotiations with clients.
Occasionally, commissions are shared with other brokers that have participated
in placing insurance or servicing insureds. Placement services revenue includes
payments or allowances by insurance companies based upon such factors as the
overall volume of business placed by the broker with that insurer, the loss
performance to the insurer of that business or the aggregate commissions paid by
the insurer for that book during specific periods. In some cases, compensation
for brokerage or advisory services is paid directly as a fee by the client.

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 the registrant'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 may
vary from time to time.

Investment Management. Investment management and related services are
provided by Putnam Investments, Inc. and its subsidiaries ("Putnam"). Putnam
has been engaged in the investment management business since 1937, with its
principal offices in Boston, Massachusetts. Putnam also has offices in
London and Tokyo. Putnam provides individual and institutional investors with
a broad range of equity and fixed income


4


investment products and services designed to meet varying investment objectives
and which afford its clients the opportunity to allocate their investment
resources among various alternative investment products as changing worldwide
economic and market conditions warrant.

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, accounting and
related services for a group of publicly-held investment companies. As of
December 31, 1996, there were 99 such funds (the "Putnam Funds") registered
under the Investment Company Act of 1940, including 17 closed-end investment
companies whose shares are traded on various major domestic stock exchanges. A
number of the open-end funds serve as funding media 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 and other domestic and foreign institutional accounts.

Assets managed by Putnam, on which management fees are based, were
approximately $173.4 billion and $125.7 billion as of December 31, 1996 and
1995, respectively. Mutual fund assets aggregated $133.8 billion at December 31,
1996 and $93.4 billion at December 31, 1995. Assets under management at December
31, 1996 consisted of approximately 62% equity securities and 38% fixed income
products, invested both domestically and globally.

Putnam's revenues are derived primarily from its investment management
fees. Assets under management and revenue levels are affected by fluctuations in
domestic and international bond and stock market prices, and by the level of
investments and withdrawals for current and new fund shareholders and clients.
They are also affected by investment performance, service to clients, the
development and marketing of new investment products, the relative
attractiveness of the investment style under prevailing market conditions and
changes in the investment patterns of clients. Fluctuations in interest rates
and in the yield curve will have an effect on fixed income assets under
management and may influence the flow of monies to and from fixed-income funds
and accounts. Fluctuations in the prices of stocks have a similar effect on
equity assets under management and may influence the flow of monies to and from
equity funds and accounts.

The investment management services provided to the Putnam Funds and
institutional accounts are performed pursuant to


5


advisory contracts which provide for a fee payable to the Putnam company that
manages the account. The amount of the fee varies depending on the individual
mutual fund or account and is usually based upon a sliding scale in relation to
the level of assets under management and, in certain instances, is also based on
investment performance. Such contracts automatically terminate in the event of
their "assignment", generally may be terminated by either party without penalty
and, as to contracts with the Putnam Funds, continue in effect only so long as
approved, at least annually, by their shareholders or by the Putnam Funds'
trustees, including a majority who are not affiliated with Putnam. "Assignment"
includes any direct or indirect transfer of a controlling block of voting stock
in Putnam or registrant. 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.

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 one or more of such services to
several external clients. Putnam Fiduciary Trust Company receives compensation
from the Putnam Funds for such services pursuant to written agreements which may
be terminated by either party on 90 days' notice, and for providing custody
services pursuant to written agreements which may be terminated by either party
on 30 days' notice. These contracts generally provide for compensation on the
basis of several factors which vary with the type of service being provided. In
addition, Putnam Fiduciary Trust Company provides administrative and trustee (or
custodian) services for employee benefit plans (in particular 401(k) plans),
IRA's and other clients for which it receives compensation pursuant to service
and trust or custodian contracts. In the case of employee benefit plans,
investment options are selected by the plan sponsors and include Putnam mutual
funds and other Putnam managed products, as well as employer stock and other
non-Putnam investments. In some instances, The Putnam Advisory Company, Inc., a
Putnam subsidiary, acts as investment manager for a plan's fixed income
portfolio and receives compensation for such investment management services
pursuant to an investment management agreement.

Putnam Mutual Funds Corp., a Putnam subsidiary, acts as principal
underwriter of the shares of the open-end Putnam Funds, selling primarily
through independent broker/dealers, financial planners and financial
institutions, including banks, and also directly to certain large 401(k) plans
and other institutional accounts. Shares of the open-end funds are generally
sold at their respective net asset value per share plus a sales charge,


6


which varies depending on the individual fund and the amount purchased. In some
cases the sales charge is assessed 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 when they believe such an investment decision is appropriate without the
payment of additional sales charges.

Commissions to selling dealers are typically paid at the time of the
purchase as a percentage of the amount invested. Essentially all Putnam Funds
are available with a contingent deferred sales charge in lieu of a front-end
load. The related prepaid dealer commissions initially paid by Putnam to
broker/dealers for distributing such funds are recovered through charges and
fees received over a number of years.

Nearly all of the open-end Putnam Funds have adopted distribution plans
pursuant to Rule 12b-1 under the Investment Company Act of 1940 under which the
Putnam Funds make payments to a Putnam subsidiary to cover costs relating to
distribution of the Putnam Funds and services provided to shareholders. These
payments enable the Putnam subsidiary to pay service fees and other continuing
compensation to firms that provide services to Putnam Fund shareholders and
distribute shares of the Putnam Funds. Some Rule 12b-1 fees are retained by the
Putnam subsidiary as compensation for the costs of 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.

Consulting. Through Mercer Consulting Group, Inc., subsidiaries and
affiliates of the registrant, separately and in collaboration, provide
consulting services to a predominantly corporate clientele from locations around
the world, primarily in the areas of human resources and employee benefit
programs, including retirement, health care and compensation; and general
management consulting, which comprises strategy, operations and marketing. The
Company also provides economic consulting and analysis.


7


William M. Mercer Companies, Inc. ("William M. Mercer") provides
professional advice and services to corporate, government and institutional
clients from offices in approximately 27 countries and territories, primarily in
North and South America, Western Europe, East Asia, Australia and New Zealand.
Consultants help organizations design, implement, administer and communicate
retirement, compensation and other human resource programs, and provide other
types of actuarial advice. In addition, William M. Mercer advises the management
of health care providers on various business issues, including operational
reengineering, improving clinical effectiveness and establishing strategic
partnerships. Through its investment consultants, William M. Mercer assists
trustees of pension funds and others in the selection of investment managers and
investment strategies.

Mercer Management Consulting, Inc. provides advice and assistance on
issues of business strategy, primarily to large corporations in North America,
Europe and Asia. Consultants help senior executives more fully understand the
behavior of their customers, optimize the economics of their business, and
structure their organizations, processes and systems to achieve their strategic
goals. In addition, under the Lippincott & Margulies name, Mercer Management
Consulting, Inc. provides consulting services relating to brand and corporate
identity and image.

National Economic Research Associates, Inc. ("NERA"), a firm of consulting
economists, provides advice to law firms, corporations, trade associations and
governmental agencies, from offices in the United States, England and Spain.
NERA provides research and analysis of economic and financial issues arising in
litigation, regulation, public policy and management.

The major component of Mercer Consulting Group's revenue is fees paid by
clients for advice. In addition, commission revenue is received from insurance
companies for the placement of individual and group insurance contracts,
primarily life, health and accident coverages. Also, in the 401(k) record
keeping business, 12(b)(1) fees are received from mutual funds for which record
keeping services are provided.

Revenue in the consulting business is affected by changes in clients'
industries, including government regulation, as well as new products and
services, the stage of the economic cycle and broad trends in the management of
large organizations.

Regulation. The activities of the registrant are subject to licensing
requirements and extensive regulation under the laws of the United States and
its various states, territories and


8


possessions, as well as laws of other countries in which the registrant's
subsidiaries operate. These laws and regulations are primarily intended to
benefit clients.

The registrant'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. The registrant
therefore devotes significant effort toward maintaining its licenses and to
ensuring compliance with a diverse and complex regulatory structure.

In all jurisdictions the applicable laws and regulations are subject to
amendment or interpretation by regulatory authorities. Generally, such
authorities are vested with relatively broad discretion to grant, renew and
revoke licenses and approvals, and to implement regulations. Licenses may be
denied or revoked for various reasons, including the violation of such
regulations, conviction of crimes and the like. Possible sanctions which may be
imposed include the suspension of individual employees, limitations on engaging
in a particular business for specified periods of time, revocation of licenses,
censures and fines. In some instances, the registrant follows practices based on
its interpretations, or those generally followed by the industry, of laws or
regulations, which may prove to be different from those of regulatory
authorities. Accordingly, the possibility exists that the registrant 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 the registrant's insurance, investment
management or consulting activities can continue to be conducted in any given
jurisdiction as in the past.

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 the registrant's
insurance activities are governed by the rules of the Lloyd's insurance market
in London and self-regulatory organizations in other jurisdictions. A few
jurisdictions issue licenses only to individual residents or locally-owned
business entities. In some of these jurisdictions, if the registrant has no
licensed subsidiary, the registrant 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


9


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 interests.

To the extent that existing or future regulations affecting the sale of
Putnam fund shares or other investment products or their investment strategies
cause or contribute to reduced sales of Putnam fund shares or investment
products or impair the investment performance of the Putnam funds or such other
investment products, Putnam's aggregate assets under management and its revenues
might be adversely affected. Changes in regulations affecting the free movement
of international currencies might also adversely affect Putnam.

Consulting. No licensing or other regulatory requirements material in the
aggregate to the consulting activities of the registrant's subsidiaries apply to
that activity in general; however, the subject matter of certain consulting
services may result in regulation. For example, employee benefit plans are
subject to various governmental regulations, and services related to investment
matters or the placing of individual and group insurance contracts subject the
registrant's subsidiaries to insurance or investment and securities regulations
and licensing in various jurisdictions.

Competitive Conditions. Principal methods of competition in 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.


10


All these businesses also encounter strong competition from both public
corporations and private firms in attracting and retaining qualified employees.

Insurance Services. The insurance and reinsurance broking services
business of the registrant is believed to be among the largest of its type in
the world.

The registrant encounters strong competition in the 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 and in other countries, from insurance and reinsurance companies
that market and service their insurance products without the assistance of
brokers or agents and from other financial services businesses, including
commercial and investment banks that provide risk-related services and products.

Certain insureds and groups of insureds have established programs of self
insurance, as a supplement or alternative to third-party insurance, thereby
reducing in some cases the need for insurance placement services. There are also
many other providers of insurance program management services, including many
insurance companies, and many other organizations seeking to structure and
manage investments in the insurance industry.

Investment Management. Putnam Investments is one of the largest investment
management firms in the United States. The investment management business is
highly competitive. In addition to competition from firms already in the
investment management business, including commercial banks, stock brokerage and
investment banking firms, and insurance companies, there is competition from
other firms offering financial services and other investment alternatives.

Many securities dealers, whose large retail distribution systems play an
important role in the sale of shares in the Putnam funds, also sponsor competing
proprietary mutual funds. To the extent that such securities dealers value the
ability to offer customers a broad selection of investment alternatives, they
will continue to sell independent funds, notwithstanding the availability of
proprietary products. However, to the extent that these firms limit or restrict
the sale of Putnam fund shares through their brokerage systems in favor of their
proprietary mutual funds, assets under management might decline and Putnam's
revenues might be adversely affected. In addition, a number of mutual fund
sponsors presently market their funds to the general public without sales
charges. Certain firms also offer passively managed funds such as index funds to
the general public.


11


Consulting. Mercer Consulting Group, one of the largest global consulting
firms, is a leader in many of its businesses. William M. Mercer is the world's
largest human resources consulting organization. Mercer Management Consulting is
a leader in strategy consulting. NERA is a leading firm of consulting
economists.

William M. Mercer, Mercer Management Consulting and NERA compete with
other privately held and publicly held worldwide and national consulting
companies, as well as regional and local firms. Competitors include independent
consulting firms as well as consulting organizations affiliated with accounting
firms, information systems providers, investment management organizations and
other financial services firms, some of which emphasize administrative or
consulting services related to other services, including the management of
401(k) plan funds, the design of information and other technology systems, and
administrative functions outsourced by corporations.

Segmentation of Activity by Type of Service and Geographic Area of
Operation. Financial information relating to the types of services provided by
the registrant and the geographic areas of its operations is incorporated herein
by reference to Note 15 of the Notes to Consolidated Financial Statements on
page 45 of the 1996 Annual Report. The registrant's non-U.S. operations are
subject to the customary risks involved in doing business in other countries,
such as currency fluctuations and exchange controls.

Employees. As of December 31, 1996, the registrant and its consolidated
subsidiaries employed about 27,000 people worldwide, of whom approximately
13,250 were employed by subsidiaries providing insurance services, approximately
4,200 were employed by subsidiaries providing investment management services,
approximately 9,250 were employed by subsidiaries providing consulting services,
and approximately 300 were employed by the registrant.

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS. This report and the
registrant's financial statements and other documents incorporated herein by
reference may contain forward-looking statements. Such statements may include,
without limitation, discussions concerning revenue and expense growth, market
and industry conditions, interest rates, foreign exchange rates, contingencies
and matters relating to the registrant's operations and income taxes. Such
forward-looking statements are based on available current market and industry
materials, expert's reports and opinions, as well as management's expectations
concerning future events impacting the registrant. Forward looking statements by
their very nature involve risks and


12


uncertainties. Factors that may cause actual results to differ materially from
those contemplated by any forward looking statements contained or incorporated
herein include the impact of changes in insurance markets and natural
catastrophes in the case of registrant's insurance services business, changes in
worldwide and national securities and fixed income markets in the case of
registrant's investment management business and, with respect to all of
registrant's activities, changes in worldwide and national economies,
fluctuations in foreign currencies, changes in interest rates and the impact of
tax and other legislation and regulation in the jurisdictions in which the
registrant operates.

Item 2. Properties.

The registrant and four of its subsidiaries, as tenants in common, own a
56% condominium interest in a 44-story building in New York City which serves as
their worldwide headquarters. The principal offices of the registrant's Bowring
subsidiaries in London are located in two adjoining buildings on land under a
lease which expires in 2077.

The remaining business activities of the registrant and its subsidiaries
are conducted principally in leased office space in cities throughout the world.
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, the registrant 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.

The registrant and its subsidiaries are subject to claims and lawsuits
that arise in the ordinary course of business, consisting principally of alleged
errors and omissions in connection with the placement of insurance or
reinsurance and in rendering investment and consulting services. Some of these
claims and lawsuits seek damages, including punitive damages, in amounts which
could, if assessed, be significant. Information regarding disputes involving
run-off reinsurance contract placements primarily in the Lloyd's market and
relating to advice with respect to client purchases of guaranteed investment
contracts and annuities issued by Executive Life Insurance Company are
incorporated herein by reference to Note 14 of the Notes to Consolidated
Financial Statements on page 44 of the 1996 Annual Report.

On the basis of present information, available insurance coverage and
advice received from counsel, it is the opinion of the registrant's management
that the disposition or ultimate


13


determination of these claims and lawsuits will not have a material adverse
effect on the registrant's consolidated results of operations or its
consolidated financial position.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Market and dividend information regarding the registrant's common stock on
page 47 of the 1996 Annual Report is incorporated herein by reference.

Item 6. Selected Financial Data.

The selected financial data on pages 48 and 49 of the 1996 Annual Report
are incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Information on pages 23 through 29 of the 1996 Annual Report is
incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data.

The Consolidated Financial Statements and the Report of Independent
Auditors thereto on pages 30 through 46 of the 1996 Annual Report and Selected
Quarterly Financial Data (Unaudited) on page 47 of the 1996 Annual Report are
incorporated herein by reference. Supplemental Notes to Consolidated Financial
Statements are included on pages 23 and 24 hereof.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.


14


PART III

Item 10. Directors and Executive Officers of the Registrant.

Information as to the directors of the registrant and compliance with
Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by
reference to the material under the headings "Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Notice of Annual Meeting of
Stockholders and Proxy Statement dated March 31, 1997 (the "1997
Proxy Statement").

The executive officers of the registrant as of December 31, 1996 are
Messrs. Blum, Borelli, Coster, Greenberg, Holbrook, Lasser, Sinnott and Smith,
with respect to whom information is incorporated herein by reference to the 1997
Proxy Statement, and:

Francis N. Bonsignore, age 50, has been Senior Vice President-Human
Resources & Administration of the registrant since 1990. Immediately prior
thereto, he was partner and National Director-Human Resources for Price
Waterhouse.

Gregory F. Van Gundy, age 51, is Secretary and General Counsel of
the registrant. He joined the registrant in 1974.

Item 11. Executive Compensation.

Information under the headings "Executive Compensation", "Compensation
Committee Report" and "Comparison of Cumulative Total Stockholder Return" in the
1997 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 1997 Proxy
Statement is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

Information under the headings "Employment and Consulting Agreements" and
"Transactions with Management and Others; Other Information" in the 1997 Proxy
Statement is incorporated herein by reference.


15


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 30 through 46 of the 1996 Annual Report):

Consolidated Statements of Income for the three years
ended December 31, 1996

Consolidated Balance Sheets as of December 31, 1996 and
1995

Consolidated Statements of Cash Flows for the three
years ended December 31, 1996

Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1996

Notes to Consolidated Financial Statements

Report of Independent Auditors

Supplemental Notes to Consolidated Financial Statements

Report of Independent Auditors

Other:

Selected Quarterly Financial Data and Supplemental
Information (Unaudited) for the three years ended
December 31, 1996 (incorporated herein by reference to
page 47 of the 1996 Annual Report)

Ten-Year Statistical Summary of Operations (incorporated
herein by reference to pages 48 and 49 of the 1996
Annual Report)


16


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) --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, 1987)

--the registrant's by-laws

(10)--Stock Purchase Agreement, dated as of March 12, 1997, by and
among the registrant, Johnson & Higgins and the stockholders
of Johnson & Higgins (incorporated by reference to the
registrant's Current Report on Form 8-K dated March 14, 1997)

--Marsh & McLennan Companies, Inc. 1997 Senior Executive
Incentive and Stock Award Plan (subject to stockholder
approval at the 1997 annual meeting)

--Marsh & McLennan Companies, Inc. 1992 Incentive and Stock
Award Plan (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1995)

--Marsh & McLennan Companies, Inc. Restricted Shares Voluntary
Deferral Program for U.S. Employees (incorporated by reference
to the registrant's Annual Report on Form 10-K for the year
ended December 31, 1995)

--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)

--Marsh & McLennan Companies Special Severance Pay Plan (as
amended and restated 11/21/96)


17


--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)

--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)

--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)

--Marsh & McLennan Companies, Inc. U.S. Employee 1996 Cash
Bonus Award Voluntary Deferral Plan

--Marsh & McLennan Companies, Inc. Canadian Employee 1996 Cash
Bonus Award Voluntary Deferral Plan

--Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (as amended and restated 11/21/96)

--Amended and Restated Employment Agreement effective as of
December 31, 1993 between Robert Clements and Marsh & McLennan
Risk Capital Corp. and related Guaranty of the registrant
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1994)

--Amendment to Amended and Restated Employment Agreement made
as of March 21, 1996 between Robert Clements and Marsh &
McLennan Risk Capital Corp. and related Guaranty of the
registrant (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1995)

--Agreement made as of March 29, 1996 between Robert Clements,
Marsh & McLennan Risk Capital Corp. and Marsh & McLennan Risk
Capital Holdings, Ltd.


18


--Employment Agreement between Jeffrey W. Greenberg and Marsh
& McLennan Risk Capital Corp. and related Guaranty of the
registrant (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1995)

(13)--Annual Report to Stockholders for the year ended December 31,
1996, 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 2/28/97)

(23)--consent of independent auditors

(24)--powers of attorney

(27)--Financial Data Schedule (filed only with SEC for EDGAR
purposes)

(b) No reports on Form 8-K were filed by the registrant in the fiscal
quarter ended December 31, 1996.


19


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
this 31st day of March, 1997 on its behalf by the undersigned, thereunto duly
authorized.

MARSH & McLENNAN COMPANIES, INC.


By /s/ A.J.C. SMITH
-------------------------------
A.J.C. SMITH
Chairman of the Board
and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated this 31st day of March, 1997.

/s/A.J.C. SMITH LEWIS W. BERNARD*
- ----------------------------------- -------------------------------
A.J.C. SMITH LEWIS W. BERNARD
Director, Chairman of the Board Director
and Chief Executive Officer


/s/FRANK J. BORELLI RICHARD H. BLUM*
- ----------------------------------- -------------------------------
FRANK J. BORELLI RICHARD H. BLUM
Senior Vice President and Director
Chief Financial Officer,
Director


/s/DOUGLAS C. DAVIS ROBERT CLEMENTS*
- ----------------------------------- -------------------------------
DOUGLAS C. DAVIS ROBERT CLEMENTS
Vice President and Controller Director
(Chief Accounting Officer)


PETER COSTER* RICHARD M. MORROW*
- ----------------------------------- -------------------------------
PETER COSTER RICHARD M. MORROW
Director Director


20


ROBERT F. ERBURU* GEORGE PUTNAM*
- ----------------------------------- -------------------------------
ROBERT F. ERBURU GEORGE PUTNAM
Director Director


JEFFREY W. GREENBERG* ADELE SMITH SIMMONS*
- ----------------------------------- -------------------------------
JEFFREY W. GREENBERG ADELE SMITH SIMMONS
Director Director


RAY J. GROVES* JOHN T. SINNOTT*
- ----------------------------------- -------------------------------
RAY J. GROVES JOHN T. SINNOTT
Director Director


RICHARD S. HICKOK* FRANK J. TASCO*
- ----------------------------------- -------------------------------
RICHARD S. HICKOK FRANK J. TASCO
Director Director


DAVID D. HOLBROOK* R. J. VENTRES*
- ----------------------------------- -------------------------------
DAVID D. HOLBROOK R. J. VENTRES
Director Director


LAWRENCE J. LASSER*
- -----------------------------------
LAWRENCE J. LASSER
Director


- ----------
* Gregory F. Van Gundy, pursuant to Powers of Attorney executed by each of
the individuals whose name is followed by an (*) and filed herewith, by
signing his name hereto does hereby sign and execute this Form l0-K of
Marsh & McLennan Companies, Inc. on behalf of such individual in the
capacities in which the names of each appear above.


/s/GREGORY F. VAN GUNDY
-----------------------------
GREGORY F. VAN GUNDY


21


REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders of
Marsh & McLennan Companies, Inc.:

We have audited the consolidated balance sheets of Marsh & McLennan Companies,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996, and have issued our
report thereon dated February 26, 1997 (March 12, 1997, as to the last paragraph
of Note 3); such financial statements and report are included in your 1996
Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the supplemental notes to the consolidated financial
statements (the "Notes") listed in Item 14. These Notes are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such 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
February 26, 1997


22


MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Information concerning the Company's valuation accounts follows:

An analysis of the allowance for doubtful accounts for the three years ended
December 31, 1996 follows (in millions of dollars):

1996 1995 1994
----- ----- -----

Balance at beginning of year ......... $54.6 $52.2 $50.9
Provision charged to operations ...... 9.9 12.8 11.6
Accounts written-off, net of
recoveries ......................... (10.2) (10.5) (11.3)
Effect of exchange rate changes ...... 0.9 .1 1.2
Other ................................ (11.9)(B) -- (.2)
----- ----- -----
Balance at end of year (A)............ $43.3 $54.6(A) $52.2
===== ===== =====

(A) Includes allowance for doubtful accounts related to long-term
consumer finance receivables amounting to $6.3 million in 1995 and
$7.3 million in 1994.

(B) Includes $11.2 million relating to the sale of Frizzell.

An analysis of the valuation allowance for certain foreign deferred tax assets
as of December 31, 1996, 1995 and 1994 follows (in millions of dollars):

1996 1995 1994
----- ----- -----

Balance at beginning of year ............... $25.2 $24.7 $23.6
Provision .................................. -- -- .5
Effect of exchange rate changes ............ 2.2 .5 .6
----- ----- -----
Balance at end of year (A) ................. $27.4 $25.2 $24.7
===== ===== =====

(A) Included in other liabilities in the Consolidated Balance Sheets.


23


MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. An analysis of intangible assets at December 31, 1996 and 1995 follows (in
millions of dollars):

1996 1995
------ ------

Goodwill ....................................... $608.7 $787.4
Other intangible assets ........................ 92.3 92.3
------ ------
Subtotal ..................................... 701.0 879.7
Less - accumulated amortization ................ (155.7) (150.0)
------ ------
Total .................................... $545.3 (A) $729.7
====== ======

(A) The decrease from December 31, 1995 is primarily due to the sale of
Frizzell ($142.5 million) and goodwill write-offs ($17 million).

18. Per share data, as presented in the Consolidated Statements of Income, is
computed by using the average number of shares of the Company's common
stock outstanding. Common stock equivalents (relating principally to stock
options), which have been excluded from the calculation because their
dilutive effect is immaterial, are shown below for the three years ended
December 31, 1996 (in millions of shares).

1996 1995 1994
---- ---- ----

Primary 1.3 .8 .7
=== === ===
Fully Diluted 1.7 1.1 .7
=== === ===


24


EXHIBIT INDEX

(3)(a) --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, 1987)

(b) --the registrant's by-laws

(10)(a) --Stock Purchase Agreement, dated as of March 12, 1997, by and
among the registrant, Johnson & Higgins and the stockholders
of Johnson & Higgins (incorporated by reference to the
registrant's Current Report on Form 8-K dated March 14, 1997)

(b) --Marsh & McLennan Companies, Inc. 1997 Senior Executive
Incentive and Stock Award Plan (subject to stockholder
approval at the 1997 annual meeting)

(c) --Marsh & McLennan Companies, Inc. 1992 Incentive and
Stock Award Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1995)

(d) --Marsh & McLennan Companies, Inc. Restricted Shares Voluntary
Deferral Program for U.S. Employees (incorporated by reference
to the registrant's Annual Report on Form 10-K for the year
ended December 31, 1995)

(e) --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)

(f) --Marsh & McLennan Companies Special Severance Pay Plan (as
amended and restated 11/21/96)

(g) --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)


EXHIBIT INDEX (cont'd)

(h) --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)

(i) --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)

(j) --Marsh & McLennan Companies, Inc. U.S. Employee 1996 Cash
Bonus Award Voluntary Deferral Plan

(k) --Marsh & McLennan Companies, Inc. Canadian Employee 1996 Cash
Bonus Award Voluntary Deferral Plan

(l) --Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (as amended and restated 11/21/96)

(m) --Amended and Restated Employment Agreement effective as of
December 31, 1993 between Robert Clements and Marsh & McLennan
Risk Capital Corp. and related Guaranty of the registrant
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1994)

(n) --Amendment to Amended and Restated Employment Agreement made
as of March 21, 1996 between Robert Clements and Marsh &
McLennan Risk Capital Corp. and related Guaranty of the
registrant (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1995)

(o) --Agreement made as of March 29, 1996 between Robert Clements,
Marsh & McLennan Risk Capital Corp. and Marsh & McLennan Risk
Capital Holdings, Ltd.


EXHIBIT INDEX (cont'd)

(p) --Employment Agreement between Jeffrey W. Greenberg and Marsh
& McLennan Risk Capital Corp. and related Guaranty of the
registrant (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1995)

(13) --Annual Report to Stockholders for the year ended December 31,
1996, 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 2/28/97)

(23) --consent of independent auditors

(24) --powers of attorney

(27) --Financial Data Schedule (filed only with SEC for EDGAR
purposes)