SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Delaware | 36-2668272 | |||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
New York, New York 10036-2774
Title of each class | Name of Each Exchange on Which registered | |||||
---|---|---|---|---|---|---|
Common Stock, par value $1.00 per share | New York Stock Exchange | |||||
Preferred Stock Purchase Rights | Chicago Stock Exchange | |||||
Pacific Exchange | ||||||
London Stock Exchange |
Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]
• | the economic and reputational impact of: litigation and regulatory proceedings brought by federal and state regulators and law enforcement authorities concerning our insurance and reinsurance brokerage operations and our investment management operations (including the complaint filed in October 2004 by the New York Attorney General’s office relating to market service agreements and other matters, and proceedings relating to market-timing matters at Putnam); and class actions, derivative actions and individual suits filed by policyholders and shareholders in connection with the foregoing; |
• | the extent to which we are able to replace the revenues we previously derived from contingent commissions, which we eliminated in late 2004; |
• | our ability to retain existing clients and attract new business, particularly in our Risk and Insurance Services segment, and our ability to continue employment of key revenue producers and managers; |
• | period-to-period revenue fluctuations relating to the net effect of new and lost business production and the timing of policy inception dates; |
• | the impact on our commission revenues of changes in the availability of, and the premiums carriers charge for, insurance and reinsurance products, including the degree and timing of the impact on reinsurance premium rates of 2005 hurricanes; |
• | the actual and relative investment performance of Putnam’s mutual funds and institutional and other advisory accounts, and the extent to which Putnam reverses its recent net redemption experience, increases assets under management and maintains management and administrative fees at historical levels; |
• | our ability to implement our restructuring initiatives and otherwise reduce expenses; |
• | the impact of competition, including with respect to pricing and the emergence of new competitors; |
• | the impact of increasing focus by regulators, clients and others on potential conflicts of interest; |
• | changes in the value of MMC’s investments in individual companies and investment funds; |
• | our ability to make strategic acquisitions and to integrate, and realize expected synergies, savings or strategic benefits from, acquired businesses; |
• | our ability to meet our financing needs by generating cash from operations and accessing external financing sources, including the potential impact of rating agency actions on our cost of financing or ability to borrow; |
• | the impact on our operating results of foreign exchange fluctuations; and |
• | changes in the tax or accounting treatment of our operations, and the impact of other legislation and regulation in the jurisdictions in which we operate. |
Information Concerning Forward-Looking Statements | i | ||
PART I | |||
Item 1 — Business | 1 | ||
Item 1A — Risk Factors | 19 | ||
Item 1B — Unresolved Staff Comments | 25 | ||
Item 2 — Properties | 25 | ||
Item 3 — Legal Proceedings | 26 | ||
Item 4 — Submission of Matters to a Vote of Security Holders | 26 | ||
PART II | |||
Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 27 | ||
Item 6 — Selected Financial Data | 28 | ||
Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29 | ||
Item 7A — Quantitative and Qualitative Disclosures About Market Risk | 52 | ||
Item 8 — Financial Statements and Supplementary Data | 53 | ||
Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 111 | ||
Item 9A — Controls and Procedures | 111 | ||
Item 9B — Other Information | 113 | ||
PART III | |||
Item 10 — Directors and Executive Officers of the Registrant | 113 | ||
Item 11 — Executive Compensation | 114 | ||
Item 12 — Security Ownership of Certain Beneficial Owners and Management | 114 | ||
Item 13 — Certain Relationships and Related Transactions | 116 | ||
Item 14 — Principal Accounting Fees and Services | 117 | ||
PART IV | |||
Item 15 — Exhibits, Financial Statement Schedules | 117 | ||
Signatures | 121 |
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2005
ITEM 1. | BUSINESS. |
• | Risk and Insurance Services, which includes risk management and insurance and reinsurance broking and services; |
• | Risk Consulting and Technology, which includes risk consulting and related investigative, intelligence, financial, security and technology services; |
• | Consulting, which includes human resource consulting and related services, and specialized management and economic consulting services; and |
• | Investment Management, which includes investment management for both individual and institutional investors. |
• | risk management, insurance broking and insurance program management services, primarily under the name ofMarsh; and |
• | reinsurance broking, catastrophe and financial modeling services and related advisory functions, primarily under the name ofGuy Carpenter. |
group’s members or provided to employees of corporate clients as part of a voluntary payroll deduction program. Other areas of the Consumer & Commercial practice include: Private Client Services, which provides specialized risk and insurance programs to high-net-worth individuals and family offices; Marsh Financial Services, which offers key-person and executive benefit programs, as well as planning and wealth preservation solutions to affluent individuals; and the Small Commercial practice, which offers standardized insurance programs to small businesses and franchise operations.
• | Consulting Services; |
• | Corporate Advisory & Restructuring; |
• | Security; and |
• | Technology Services. |
• | Mercer Human Resource Consulting, consisting of the following lines of business: |
– | Retirement & Investment Consulting |
– | Human Resource (HR) Services & Investments |
– | Health & Benefits |
– | Human Capital |
• | Mercer Specialty Consulting, consisting of the following lines of business: |
– | Management Consulting |
– | Organizational Design and Change Management |
– | Economic Consulting |
savings under the Mercer Wealth Solutions name. Mercer Investment Consulting also advises Mercer’s multi-manager business (Mercer Global Investments, described below) on the selection of third-party managers for the investment of client assets.
had provided similar services to a different client base, to Mercer Health & Benefits. Marsh’s U.K. employee benefits business was also combined with Mercer and plans are underway for similar combinations in certain other countries.
corporations on the pricing of goods, services and intangible properties that move across different operating units or geographical boundaries.
perform. Putnam also incorporates a risk-management capability that analyzes securities across all the Putnam Funds and other portfolios to identify areas of over-concentration and potential risks.
December 31, 2005 | December 31, 2004 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Mutual Funds: | ||||||||||
Growth Equity | $ | 31 | $ | 38 | ||||||
Value Equity | 37 | 41 | ||||||||
Blend Equity | 26 | 28 | ||||||||
Fixed Income | 32 | 36 | ||||||||
Total Mutual Fund Assets | 126 | 143 | ||||||||
Institutional: | ||||||||||
Equity | 34 | 40 | ||||||||
Fixed Income | 29 | 30 | ||||||||
Total Institutional Assets | 63 | 70 | ||||||||
Total Ending Assets | $ | 189 | $ | 213 | ||||||
Assets from Non-US Investors | ||||||||||
(Included above) | $ | 32 | $ | 38 | ||||||
Average Assets Under Management: | ||||||||||
Quarter-to-Date | $ | 188 | $ | 211 | ||||||
Year-to-Date | $ | 196 | $ | 217 | ||||||
Net Redemptions including Dividends Reinvested: | ||||||||||
Quarter-to-Date | $ | (6.4 | ) | $ | (10.7 | ) | ||||
Year-to-Date | $ | (31.7 | ) | $ | (51.0 | ) | ||||
Impact of Market/Performance on Ending Assets Under Management | $ | 7.2 | $ | 16.5 |
• | the Putnam Funds; |
• | insurance products, such as variable annuities and variable life insurance policies, that use mutual funds as the underlying funding vehicles; and |
• | separately managed accounts and other platforms sponsored by broker-dealers, financial planners and registered investment advisers. |
(mutual funds), which are available for investments and withdrawals on most business days; and 12 closed-end funds, which are not available for investments or withdrawals but the shares of which are traded on various major domestic stock exchanges.
detailed discussion of revenue sources and factors affecting revenue in our Investment Management segment, see Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) of this report.
regulations, particularly relating to privacy, could interfere with Kroll’s historical access to and use of such data. Substance abuse testing laboratories operated by a Kroll subsidiary are certified on the federal level and licensed in a number of states.
commercial and investment banks, accounting firms and consultants, that provide risk-related services and products.
shares are also influenced by general securities market conditions, government regulations, global economic conditions and advertising and sales promotional efforts. Putnam competes with other mutual fund firms and institutional asset managers that offer investment products similar to Putnam’s as well as products which Putnam does not offer, including passively managed funds such as index funds. Putnam also experiences competition from a number of mutual fund sponsors that offer their funds to the general public without sales charges, which Putnam does not do.
Services Group in April 2004. From 1996 until his appointment as Kroll’s CEO, Mr. Freakley was also managing partner of Kroll Ltd. (previously Kroll Buchler Phillips and Buchler Phillips), Kroll’s U.K.-based corporate advisory and restructuring subsidiary. Mr. Freakley joined Buchler Phillips in 1992, and in 1999, the firm was acquired by Kroll.
the asset management subsidiary of Paine Webber, from 1999 until UBS AG’s acquisition of Paine Webber Group Inc. in November 2000. From 1996 through 1999 Mr. Storms was president of Prudential Investments.
• | Guidelines for Corporate Governance; |
• | Code of Business Conduct and Ethics; |
• | Procedures for addressing complaints and concerns of employees and others; and |
• | the charters of the Audit Committee, Compensation Committee and Directors and Governance Committee of MMC’s Board of Directors. |
Item 1A. | Risk Factors. |
securities and antitrust laws, ERISA, RICO, and other statutory and common law claims, and seek significant damages. In addition, the State of Connecticut has commenced a lawsuit against Marsh challenging Marsh’s conduct in connection with the placement of a loss portfolio transfer of workers’ compensation claims for the State of Connecticut’s Department of Administrative Services. Following the announcement of the NYAG lawsuit and the related actions taken by MMC, MMC’s stock price dropped from approximately $45 per share to a low of approximately $22.75 per share.
however, that we will achieve this level of cost savings, in which case our restructuring efforts would not affect our profitability as positively as we expect.
Putnam. Actions by the trustees 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, or the failure of the trustees to approve continuation of the 12b-1 plans for Class B (deferred sales charge) shares, would have a material adverse effect on the results of operations in our investment management segment.
and Insurance Services segment as a result of the recent legal and regulatory matters referred to above. In our investment management segment, Putnam’s competitive position has been adversely affected, and may continue to be adversely affected in the future, by the underperformance in prior years of certain Putnam funds relative to competing products in the mutual fund marketplace. Mercer’s consulting and administration businesses face increasing competitive pressures, due in part to an increasing focus by regulators, clients and others on potential conflicts of interest.
• | the economic and political conditions in foreign countries; |
• | the imposition of local investment or other restrictions by foreign governments; |
• | the imposition of controls or limitations on the conversion of foreign currencies or remittance of dividends and other payments from foreign subsidiaries; |
• | the imposition of withholding and other taxes on remittances and other payments from subsidiaries; |
• | difficulties in monitoring employees in geographically dispersed locations; and |
• | costs and difficulties in complying with a wide variety of foreign laws. |
revoked for various reasons, including the violation of such regulations, conviction of crimes and similar matters. Possible sanctions that 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, we follow practices based on our 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 we may be precluded or temporarily suspended from carrying on some or all of our activities or otherwise fined or penalized in a given jurisdiction.
Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
subsidiaries lease an additional 136,000 square feet of office space in and around London in support of their operations. The Mercer subsidiaries in and around London lease an additional 162,000 square feet of space. Mercer also leases 147,000 square feet in a new building in the City of London, of which it has subleased 95,000 square feet to third parties.
Item 3. | Legal Proceedings. |
Item 4. | Submission of Matters to a Vote of Security Holders. |
2005 Stock Price Range | 2004 Stock Price Range | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
High | Low | High | Low | ||||||||||||||||
First Quarter | $ | 34.25 | 27.00 | $ | 49.69 | 45.67 | |||||||||||||
Second Quarter | $ | 30.90 | 26.87 | $ | 47.51 | 42.05 | |||||||||||||
Third Quarter | $ | 30.50 | 26.67 | $ | 46.66 | 42.10 | |||||||||||||
Fourth Quarter | $ | 33.42 | 26.79 | $ | 47.35 | 22.75 | |||||||||||||
$ | 34.25 | 26.67 | $ | 49.69 | 22.75 |
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
October 1, 2005– October 31, 2005 | 0 | — | 0 | 49,904,636 | ||||||||||||||
November 1, 2005– November 30, 2005 | 0 | — | 0 | 49,904,636 | ||||||||||||||
December 1, 2005– December 31, 2005 | 0 | — | 0 | 49,904,636 | ||||||||||||||
Total | 0 | — | 0 | 49,904,636 |
(1) | On March 18, 1999, MMC’s board of directors authorized the repurchase of up to 40 million shares of MMC’s common stock, and on May 18, 2000 the board further authorized the repurchase of up to an additional 88 million shares. There is no expiration date specified under either of these authorizations. While MMC made no share repurchases in 2005, in previous years MMC has repurchased, and in the future may repurchase, shares of its common stock, in the open market or otherwise, for treasury and to meet requirements for the issuance of shares relating to MMC’s various stock compensation and benefit programs. The timing and level of MMC’s share repurchase activity may be affected by MMC’s priorities relating to the use of its cash flows for a variety of purposes. These purposes may include, in addition to share repurchases, the funding of dividends, investments, pension contributions and debt reduction. |
Item 6. | Selected Financial Data. |
FIVE-YEAR STATISTICAL SUMMARY OF OPERATIONS
For the Years Ended December 31, (In millions except per share figures)(c) | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | | Compound Growth Rate 2000–2005 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue: | ||||||||||||||||||||||||
Service Revenue | $ | 11,469 | $ | 11,561 | $ | 11,100 | $ | 10,039 | $ | 9,735 | 3 | % | ||||||||||||
Investment Income (Loss) | 183 | 200 | 100 | 67 | (142 | ) | 19 | % | ||||||||||||||||
Total Revenue | 11,652 | 11,761 | 11,200 | 10,106 | 9,593 | 3 | % | |||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Compensation and Benefits | 6,945 | 6,706 | 5,710 | 5,025 | 4,729 | 8 | % | |||||||||||||||||
Other Operating Expenses | 3,811 | 3,486 | 3,032 | 2,845 | 3,125 | 4 | % | |||||||||||||||||
Regulatory and Other Settlements | 40 | 969 | 10 | — | — | |||||||||||||||||||
Total Expenses | 10,796 | 11,161 | 8,752 | 7,870 | 7,854 | 6 | % | |||||||||||||||||
Operating Income | 856 | (a) | 600 | (a) | 2,448 | 2,236 | 1,739 | (b) | (17 | )% | ||||||||||||||
Interest Income | 47 | 21 | 24 | 19 | 23 | |||||||||||||||||||
Interest Expense | (332 | ) | (219 | ) | (185 | ) | (160 | ) | (196 | ) | ||||||||||||||
Income Before Income Taxes and Minority Interest | 571 | 402 | 2,287 | 2,095 | 1,566 | (22 | )% | |||||||||||||||||
Income Taxes | 192 | 240 | 751 | 731 | 591 | |||||||||||||||||||
Minority Interest, Net of Tax | 10 | 8 | 20 | 18 | 13 | |||||||||||||||||||
Income From Continuing Operations | 369 | 154 | 1,516 | 1,346 | 962 | (21 | )% | |||||||||||||||||
Discontinued Operations, Net of Tax | 35 | 22 | 24 | 19 | 12 | 31 | % | |||||||||||||||||
Net Income | $ | 404 | $ | 176 | $ | 1,540 | $ | 1,365 | $ | 974 | (19 | )% | ||||||||||||
Basic Income Per Share Information: | ||||||||||||||||||||||||
Income From Continuing Operations | $ | 0.69 | $ | 0.29 | $ | 2.85 | $ | 2.49 | $ | 1.75 | (20 | )% | ||||||||||||
Income From Discontinued Operations | $ | 0.06 | $ | 0.04 | $ | 0.04 | $ | 0.03 | $ | 0.02 | 25 | % | ||||||||||||
Net Income | $ | 0.75 | $ | 0.33 | $ | 2.89 | $ | 2.52 | $ | 1.77 | (19 | )% | ||||||||||||
Average Number of Shares Outstanding | 538 | 526 | 533 | 541 | 550 | |||||||||||||||||||
Diluted Income Per Share Information: | ||||||||||||||||||||||||
Income From Continuing Operations | $ | 0.67 | $ | 0.29 | $ | 2.77 | $ | 2.42 | $ | 1.67 | (20 | )% | ||||||||||||
Income From Discontinued Operations | $ | 0.07 | $ | 0.04 | $ | 0.04 | $ | 0.03 | $ | 0.03 | 28 | % | ||||||||||||
Net Income | $ | 0.74 | $ | 0.33 | $ | 2.81 | $ | 2.45 | $ | 1.70 | (18 | )% | ||||||||||||
Average Number of Shares Outstanding | 543 | 535 | 548 | 557 | 572 | |||||||||||||||||||
Dividends Paid Per Share | $ | 0.68 | $ | 1.30 | $ | 1.18 | $ | 1.09 | $ | 1.03 | (6 | )% | ||||||||||||
Return on Average Stockholders’ Equity | 8 | % | 3 | % | 29 | % | 27 | % | 19 | % | ||||||||||||||
Year-end Financial Position: | ||||||||||||||||||||||||
Working capital | $ | 911 | $ | 256 | $ | 189 | $ | (199 | ) | $ | (622 | ) | ||||||||||||
Total assets | $ | 17,892 | $ | 18,498 | $ | 15,053 | $ | 13,855 | $ | 13,769 | ||||||||||||||
Long-term debt | $ | 5,044 | $ | 4,691 | $ | 2,910 | $ | 2,891 | $ | 2,334 | ||||||||||||||
Stockholders’ equity | $ | 5,360 | $ | 5,056 | $ | 5,451 | $ | 5,018 | $ | 5,173 | ||||||||||||||
Total shares outstanding (excluding treasury shares) | 546 | 527 | 527 | 538 | 548 | |||||||||||||||||||
Other Information: | ||||||||||||||||||||||||
Number of employees | 54,900 | 63,900 | 60,400 | 59,400 | 57,800 | |||||||||||||||||||
Stock price ranges — | ||||||||||||||||||||||||
U.S. exchanges — High | $ | 34.25 | $ | 49.69 | $ | 54.97 | $ | 57.30 | $ | 59.03 | ||||||||||||||
— Low | $ | 26.67 | $ | 22.75 | $ | 38.27 | $ | 34.61 | $ | 39.70 |
(a) | Includes restructuring costs of $317 million and $337 million in 2005 and 2004, respectively. |
(b) | Includes charges related to September 11 and restructuring costs of $396 million. |
(c) | Certain balances have been reclassified to conform with current presentation. See Note 1 to the consolidated financial statements. |
appreciation or depreciation on the investments held by Risk Capital Holdings and has approximately $190 million of remaining capital commitments to funds managed by Stone Point.
(In millions, except per share figures) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue: | ||||||||||||||
Service Revenue | $ | 11,469 | $ | 11,561 | $ | 11,100 | ||||||||
Investment Income (Loss) | 183 | 200 | 100 | |||||||||||
Operating Revenue | 11,652 | 11,761 | 11,200 | |||||||||||
Expense: | ||||||||||||||
Compensation and Benefits | 6,945 | 6,706 | 5,710 | |||||||||||
Other Operating Expenses | 3,811 | 3,486 | 3,032 | |||||||||||
Regulatory and Other Settlements | 40 | 969 | 10 | |||||||||||
Operating Expenses | 10,796 | 11,161 | 8,752 | |||||||||||
Operating Income | $ | 856 | $ | 600 | $ | 2,448 | ||||||||
Income From Continuing Operations | $ | 369 | $ | 154 | $ | 1,516 | ||||||||
Discontinued Operations, net of tax | 35 | 22 | 24 | |||||||||||
Net Income | $ | 404 | $ | 176 | $ | 1,540 | ||||||||
Income from Continuing Operations Per Share: | ||||||||||||||
Basic | $ | 0.69 | $ | 0.29 | $ | 2.85 | ||||||||
Diluted | $ | 0.67 | $ | 0.29 | $ | 2.77 | ||||||||
Net Income Per Share: | ||||||||||||||
Basic | $ | 0.75 | $ | 0.33 | $ | 2.89 | ||||||||
Diluted | $ | 0.74 | $ | 0.33 | $ | 2.81 | ||||||||
Average Number of Shares Outstanding: | ||||||||||||||
Basic | 538 | 526 | 533 | |||||||||||
Diluted | 543 | 535 | 548 |
decreased 6% on an underlying basis, which measures the change in revenue before the impact of acquisitions and dispositions and using constant currency rates. Excluding the impact of the elimination of MSAs, underlying revenue decreased 3%.
Twelve Months Ended | Components of Revenue Change | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, | |||||||||||||||||||||||||
(In millions, except percentage figures) | 2005 | | 2004 | | % Change GAAP Revenue | | Currency Impact | | Acquisitions/ Dispositions Impact | | Underlying Revenue(a) | ||||||||||||||
Risk and Insurance Services | |||||||||||||||||||||||||
Insurance Services (a) | $ | 4,567 | $ | 5,166 | (12 | )% | 1 | % | — | (13 | )% | ||||||||||||||
Reinsurance Services | 836 | 859 | (3 | )% | 1 | % | — | (4 | )% | ||||||||||||||||
Risk Capital Holdings (b) | 189 | 180 | 5 | % | — | (8 | )% | 13 | % | ||||||||||||||||
Total Risk and Insurance Services (c) | 5,592 | 6,205 | (10 | )% | 1 | % | — | (11 | )% | ||||||||||||||||
Risk Consulting & Technology (c) | 946 | 405 | 133 | % | (1 | )% | 113 | % | 21 | % | |||||||||||||||
Consulting | |||||||||||||||||||||||||
Human Resource Consulting (c) | 2,708 | 2,704 | — | 1 | % | — | (1 | )% | |||||||||||||||||
Specialty Consulting | 909 | 774 | 17 | % | — | 1 | % | 16 | % | ||||||||||||||||
3,617 | 3,478 | 4 | % | 1 | % | — | 3 | % | |||||||||||||||||
Reimbursed Expenses | 185 | 159 | |||||||||||||||||||||||
Total Consulting | 3,802 | 3,637 | 4 | % | 1 | % | — | 3 | % | ||||||||||||||||
Investment Management | 1,506 | 1,710 | (12 | )% | — | — | (12 | )% | |||||||||||||||||
Total Operating Segments (c) | $ | 11,846 | $ | 11,957 | (1 | )% | 1 | % | 4 | % | (6 | )% | |||||||||||||
Corporate/Eliminations | (194 | ) | (196 | ) | |||||||||||||||||||||
Total (c) | $ | 11,652 | $ | 11,761 | (1 | )% | 1 | % | 4 | % | (6 | )% |
Twelve Months Ended | Components of Revenue Change | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, | ||||||||||||||||||||
(In millions, except percentage figures) | | 2004 | | 2003 | | % Change GAAP Revenue | | Underlying Revenue(a) | | Currency/ Acquisitions Impact | ||||||||||
Risk and Insurance Services (c) | $ | 6,205 | $ | 6,133 | 1 | % | (3 | )% | 4 | % | ||||||||||
Risk Consulting & Technology (c) | 405 | 19 | 100 | +% | (18 | )% | 100+% | |||||||||||||
Consulting (c) | 3,637 | 3,290 | 11 | % | 3 | % | 8 | % | ||||||||||||
Investment Management | 1,710 | 1,955 | (13 | )% | (13 | )% | — | |||||||||||||
Total Operating Segments | $ | 11,957 | $ | 11,397 | 5 | % | (3 | )% | 8 | % | ||||||||||
Corporate/Eliminations | (196 | ) | (197 | ) | ||||||||||||||||
Total Revenue (c) | $ | 11,761 | $ | 11,200 | 5 | % | (3 | )% | 8 | % |
(a) | Underlying revenue measures the change in revenue before the impact of acquisitions and dispositions, using constant currency exchange rates. Underlying revenue for Insurance Services in 2005 decreased 13% in the twelve months, including a 7% decline related to market services agreements, and for the Risk and Insurance Services segment underlying revenue decreased 11% in the twelve months, including a 6% decline related to market services agreements. |
(b) | Risk Capital Holdings owns MMC’s investments in insurance and financial services firms such as Ace Ltd., XL Capital Ltd., and Axis Capital Holdings Ltd., as well as the Trident funds. |
(c) | Certain reclassifications have been made to prior year amounts to conform with current presentation. The data presented above excludes the results of the U.S. wholesale broking and claims management businesses, which are classified as discontinued operations. |
(In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | $ | 5,592 | $ | 6,205 | $ | 6,133 | ||||||||
Expense | 5,287 | 6,121 | 4,526 | |||||||||||
Operating Income | $ | 305 | $ | 84 | $ | 1,607 | ||||||||
Operating Income Margin | 5.5 | % | 1.4 | % | 26.2 | % |
market services revenue recognized in 2005 relates to placements made prior to October 1, 2004. Marsh did not accrue a portion of market services revenue earned on those placements because it could not complete its normal process to determine that collection of these amounts was reasonably assured for certain contracts. Any such revenue earned prior to but not accrued at September 30, 2004 is recognized when collected or when confirmation of the amount of payment is received from the carriers. This resulted in the recognition of market services revenue of $119 million in 2005. It is expected that market services revenue in 2006 will be significantly lower than in 2005.
also included $8 million for employee retention programs. In connection with accounting guidance issued by the Institute of Chartered Accountants in the U.K., MMC reassessed its obligation to provide future claims handling and certain administrative services for brokerage clients in the European marketplace. MMC determined that under certain circumstances it is obligated to provide such services based on its current business practices and recorded a pre-tax charge of approximately $65 million to reflect the change in estimated cost to provide these services. The effects of acquisitions and foreign exchange increased expenses by 6%. On an underlying basis, and excluding the items previously discussed, expenses increased 4%.
(In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | $ | 946 | $ | 405 | $ | 19 | ||||||||
Expense | 822 | 357 | 27 | |||||||||||
Operating Income | $ | 124 | $ | 48 | $ | (8 | ) | |||||||
Operating Income Margin | 13.1 | % | 11.9 | % | (42.1 | )% |
(In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | $ | 3,802 | $ | 3,637 | $ | 3,290 | ||||||||
Expense | 3,351 | 3,228 | 2,829 | |||||||||||
Operating Income | $ | 451 | $ | 409 | $ | 461 | ||||||||
Operating Income Margin | 11.9 | % | 11.2 | % | 14.0 | % |
rent under non-cancelable leases and lease termination costs as well as incremental expense of $7 million related to accelerated amortization or abandonment of leasehold improvements and other assets. Expenses in 2004 also included $4 million for employee retention programs. In addition, the impact of acquisitions and foreign exchange increased expense by 9%. On an underlying basis, and excluding the items discussed above, expenses increased 2%, primarily due to higher employee compensation and benefit costs.
time) to firms that distribute shares of the Putnam Funds. These 12b-1 plans, and Rule 12b-1 fees paid by the Putnam Funds thereunder, are subject to annual renewal by the fund trustees and to termination by vote of the fund shareholders or by vote of a majority of the trustees who are not affiliated with Putnam.
(In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | $ | 1,506 | $ | 1,710 | $ | 1,955 | ||||||||
Expense | 1,243 | 1,612 | 1,452 | |||||||||||
Operating Income | $ | 263 | $ | 98 | $ | 503 | ||||||||
Operating Income Margin | 17.5 | % | 5.7 | % | 25.7 | % |
December 31, 2004 compared with $240 billion at December 31, 2003. The change from December 31, 2003 primarily resulted from net redemptions of $51 billion, partly offset by increases due to market appreciation of $16 billion and the consolidation of PanAgora’s $8 billion of assets under management as of July 2004.
(In billions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mutual Funds: | ||||||||||||||
Growth Equity | $ | 31 | $ | 38 | $ | 46 | ||||||||
Value Equity | 37 | 41 | 43 | |||||||||||
Blend Equity | 26 | 28 | 32 | |||||||||||
Fixed Income | 32 | 36 | 42 | |||||||||||
126 | 143 | 163 | ||||||||||||
Institutional: | ||||||||||||||
Equity | 34 | 40 | 51 | |||||||||||
Fixed Income | 29 | 30 | 26 | |||||||||||
63 | 70 | 77 | ||||||||||||
Year-end Assets | $ | 189 | $ | 213 | $ | 240 | ||||||||
Assets from Non-US Investors | $ | 32 | $ | 38 | $ | 39 | ||||||||
Average Assets | $ | 196 | $ | 217 | $ | 258 | ||||||||
Components of year-to-date change in ending assets under management: | ||||||||||||||
Net Redemptions including Dividends Reinvested | $ | (31 | ) | $ | (51 | ) | $ | (61 | ) | |||||
Impact of PanAgora Acquisition | $ | — | $ | 8 | $ | — | ||||||||
Impact of Market/Performance | $ | 7 | $ | 16 | $ | 50 |
$26 million, including $10 million related to a start-up hedge fund management business at MMC that was subsequently discontinued. Other significant items recorded in 2004 were severance of $57 million incurred prior to the fourth quarter restructuring, as well as incremental costs related to regulatory issues and repositioning Putnam, including legal and audit costs of $45 million and communications costs of $16 million. In 2004, Putnam discontinued the practice of directing brokerage commissions and virtually eliminated the use of soft dollars, causing expenses to increase by approximately $40 million. These increases were partially offset by a decrease in amortization expense for prepaid dealer commissions and a $25 million credit to compensation expense associated with the settlement with Putnam’s former chief executive officer.
(In millions of dollars) | | Costs Incurred | | Savings Realized | | Incremental Savings Expected | | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2004 | | 2005 | | 2005 | | 2006 | ||||||||||||
2004 Plan | $ | 337 | $ | 3 | $ | 400 | — | ||||||||||||
2005 Plan | — | 310 | 160 | 215 |
expected under the 2005 plan with the remaining $215 million of savings expected to be realized in 2006. Savings under the 2004 plan were $400 million, substantially all of which was realized in 2005.
provided on net operating losses in certain state and foreign jurisdictions. In 2003 the effective tax rate was 32.8%. The increase in the effective rate in 2004 compared with 2003 results primarily from the tax impact of the aforementioned settlements, and a partially offsetting benefit for foreign earnings taxed at lower rates.
years, which would indicate an expected capital call of approximately $35–$50 million per year. Actual capital calls may occur more quickly. The majority of MMC’s other investment commitments for funds managed by Stone Point are related to Trident II, the investment period for which is now closed for new investments. Any remaining capital calls for Trident II would relate to follow-on investments in existing portfolio companies or for management fees or other partnership expenses. Significant future capital calls related to Trident II are not expected. Although it is anticipated that Trident II will be harvesting its remaining portfolio in 2006 and thereafter, the timing of any portfolio company sales and capital distributions is unknown and not controlled by MMC.
Payment due by Period | | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Contractual Obligations | | Total | | Within 1 Year | | 1–3 Years | | 4–5 Years | | After 5 Years | |||||||||||||
Bank Borrowings-International | $ | 597 | $ | 429 | $ | 168 | $ | — | $ | — | |||||||||||||
Current portion of long-term debt | 69 | 69 | — | — | — | ||||||||||||||||||
Long-term debt | 4,874 | — | 1,271 | 965 | 2,638 | ||||||||||||||||||
NYAG/NYSID settlement | 595 | 255 | 340 | — | — | ||||||||||||||||||
Net operating leases | 3,349 | 466 | 763 | 542 | 1,578 | ||||||||||||||||||
Service agreements | 181 | 65 | 70 | 44 | 2 | ||||||||||||||||||
Other long-term obligations | 66 | 38 | 28 | — | — | ||||||||||||||||||
Total | $ | 9,731 | $ | 1,322 | $ | 2,640 | $ | 1,551 | $ | 4,218 |
(In millions of dollars) | | December 31, 2005 | ||||
---|---|---|---|---|---|---|
Cash and cash equivalents invested in certificates of deposit and time deposits (Note 1) | $ | 2,020 | ||||
Fiduciary cash and investments (Note 1) | $ | 3,795 | ||||
Variable rate debt outstanding (Note 11) | $ | 1,076 |
0.5 Percentage Point Increase | | 0.5 Percentage Point Decrease | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In millions of dollars) | | U.S. | | U.K. | | U.S. | | U.K. | |||||||||||
Assumed Rate of Return | $ | (13.2 | ) | $ | (21.1 | ) | $ | 13.2 | $ | 21.1 | |||||||||
Discount Rate | $ | (29.1 | ) | $ | (54.3 | ) | $ | 31.2 | $ | 57.3 |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 8. | Financial Statements and Supplementary Data. |
For the Years Ended December 31, (In millions except per share figures) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | $ | 11,652 | $ | 11,761 | $ | 11,200 | ||||||||
Income Before Income Taxes and Minority Interest | $ | 571 | $ | 402 | $ | 2,287 | ||||||||
Income From Continuing Operations | $ | 369 | $ | 154 | $ | 1,516 | ||||||||
Net Income | $ | 404 | $ | 176 | $ | 1,540 | ||||||||
Stockholders’ Equity | $ | 5,360 | $ | 5,056 | $ | 5,451 | ||||||||
Diluted Income Per Share: | ||||||||||||||
Income From Continuing Operations | $ | 0.67 | $ | 0.29 | $ | 2.77 | ||||||||
Net Income | $ | 0.74 | $ | 0.33 | $ | 2.81 | ||||||||
Dividends Paid Per Share | $ | 0.68 | $ | 1.30 | $ | 1.18 | ||||||||
Year-end Stock Price | $ | 31.76 | $ | 32.90 | $ | 47.89 |
For the Years Ended December 31, (In millions except per share figures) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue: | ||||||||||||||
Service revenue | $ | 11,469 | $ | 11,561 | $ | 11,100 | ||||||||
Investment income (loss) | 183 | 200 | 100 | |||||||||||
Operating revenue | 11,652 | 11,761 | 11,200 | |||||||||||
Expense: | ||||||||||||||
Compensation and benefits | 6,945 | 6,706 | 5,710 | |||||||||||
Other operating expenses | 3,811 | 3,486 | 3,032 | |||||||||||
Settlement and other costs | 40 | 969 | 10 | |||||||||||
Operating expenses | 10,796 | 11,161 | 8,752 | |||||||||||
Operating income | 856 | 600 | 2,448 | |||||||||||
Interest income | 47 | 21 | 24 | |||||||||||
Interest expense | (332 | ) | (219 | ) | (185 | ) | ||||||||
Income before income taxes and minority interest | 571 | 402 | 2,287 | |||||||||||
Income taxes | 192 | 240 | 751 | |||||||||||
Minority interest, net of tax | 10 | 8 | 20 | |||||||||||
Income from continuing operations | 369 | 154 | 1,516 | |||||||||||
Discontinued operations, net of tax | 35 | 22 | 24 | |||||||||||
Net income | $ | 404 | $ | 176 | $ | 1,540 | ||||||||
Basic net income per share — Continuing operations | $ | 0.69 | $ | 0.29 | $ | 2.85 | ||||||||
— Net income | $ | 0.75 | $ | 0.33 | $ | 2.89 | ||||||||
Diluted net income per share — Continuing operations | $ | 0.67 | $ | 0.29 | $ | 2.77 | ||||||||
— Net income | $ | 0.74 | $ | 0.33 | $ | 2.81 | ||||||||
Average number of shares outstanding — Basic | 538 | 526 | 533 | |||||||||||
— Diluted | 543 | 535 | 548 |
December 31, (In millions of dollars) | | 2005 | | 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 2,020 | $ | 1,370 | ||||||
Receivables | ||||||||||
Commissions and fees | 2,407 | 2,475 | ||||||||
Advanced premiums and claims | 117 | 102 | ||||||||
Other | 363 | 424 | ||||||||
2,887 | 3,001 | |||||||||
Less — allowance for doubtful accounts and cancellations | (157 | ) | (142 | ) | ||||||
Net receivables | 2,730 | 2,859 | ||||||||
Assets of discontinued operations | 153 | 173 | ||||||||
Other current assets | 359 | 597 | ||||||||
Total current assets | 5,262 | 4,999 | ||||||||
Goodwill and intangible assets | 7,773 | 8,055 | ||||||||
Fixed assets, net | 1,178 | 1,363 | ||||||||
Long-term investments | 277 | 558 | ||||||||
Prepaid pension | 1,596 | 1,394 | ||||||||
Other assets | 1,806 | 2,129 | ||||||||
$ | 17,892 | $ | 18,498 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Short-term debt | $ | 498 | $ | 636 | ||||||
Accounts payable and accrued liabilities | 1,733 | 1,818 | ||||||||
Regulatory settlements — current portion | 333 | 394 | ||||||||
Accrued compensation and employee benefits | 1,413 | 1,568 | ||||||||
Accrued income taxes | 192 | 281 | ||||||||
Dividends payable | 93 | — | ||||||||
Liabilities of discontinued operations | 89 | 46 | ||||||||
Total current liabilities | 4,351 | 4,743 | ||||||||
Fiduciary liabilities | 3,795 | 4,111 | ||||||||
Less — cash and investments held in a fiduciary capacity | (3,795 | ) | (4,111 | ) | ||||||
— | — | |||||||||
Long-term debt | 5,044 | 4,691 | ||||||||
Regulatory settlements | 348 | 595 | ||||||||
Pension, postretirement and postemployment benefits | 1,180 | 1,326 | ||||||||
Other liabilities | 1,609 | 2,087 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders’ equity: | ||||||||||
Preferred stock, $1 par value, authorized 6,000,000 shares, none issued | — | — | ||||||||
Common stock, $1 par value, authorized 1,600,000,000 shares, issued 560,641,640 shares in 2005 and 2004 | 561 | 561 | ||||||||
Additional paid-in capital | 1,143 | 1,316 | ||||||||
Retained earnings | 4,989 | 5,044 | ||||||||
Accumulated other comprehensive loss | (756 | ) | (370 | ) | ||||||
5,937 | 6,551 | |||||||||
Less — treasury shares at cost, 15,057,704 shares in 2005 and 33,831,782 shares in 2004 | (577 | ) | (1,495 | ) | ||||||
Total stockholders’ equity | 5,360 | 5,056 | ||||||||
$ | 17,892 | $ | 18,498 |
For the Years Ended December 31, (In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating cash flows: | ||||||||||||||
Net income | $ | 404 | $ | 176 | $ | 1,540 | ||||||||
Adjustments to reconcile net income to cash generated from operations: | ||||||||||||||
Depreciation of fixed assets and capitalized software | 391 | 392 | 349 | |||||||||||
Amortization of intangible assets | 99 | 64 | 42 | |||||||||||
Provision (benefit) for deferred income taxes | 36 | (71 | ) | 90 | ||||||||||
(Gains) losses on investments | (183 | ) | (200 | ) | (100 | ) | ||||||||
Disposition or write-offs of assets | (19 | ) | — | — | ||||||||||
Accrual of stock-based compensation, resulting from adoption of SFAS 123(R) | 64 | — | — | |||||||||||
Changes in assets and liabilities: | ||||||||||||||
Net receivables | 57 | (107 | ) | (199 | ) | |||||||||
Other current assets | 122 | 60 | (34 | ) | ||||||||||
Other assets | (229 | ) | 93 | (289 | ) | |||||||||
Accounts payable and accrued liabilities | (35 | ) | 858 | 23 | ||||||||||
Accrued compensation and employee benefits | (167 | ) | 328 | 125 | ||||||||||
Accrued income taxes | 4 | (39 | ) | 85 | ||||||||||
Other liabilities | (72 | ) | 446 | 135 | ||||||||||
Effect of exchange rate changes | (73 | ) | 69 | 100 | ||||||||||
Net cash generated from operations | 399 | 2,069 | 1,867 | |||||||||||
Financing cash flows: | ||||||||||||||
Net decrease in commercial paper | (129 | ) | (311 | ) | (817 | ) | ||||||||
Proceeds from issuance of debt | 2,341 | 4,265 | 800 | |||||||||||
Other repayments of debt | (1,990 | ) | (2,003 | ) | (55 | ) | ||||||||
Purchase of treasury shares | — | (536 | ) | (1,195 | ) | |||||||||
Issuance of common stock | 269 | 456 | 573 | |||||||||||
Dividends paid | (363 | ) | (681 | ) | (631 | ) | ||||||||
Net cash provided by (used for) financing activities | 128 | 1,190 | (1,325 | ) | ||||||||||
Investing cash flows: | ||||||||||||||
Capital expenditures | (345 | ) | (376 | ) | (436 | ) | ||||||||
Net sales of long-term investments | 318 | 120 | 75 | |||||||||||
Proceeds from sales related to fixed assets and capitalized software | 46 | 23 | 8 | |||||||||||
Dispositions | 156 | — | — | |||||||||||
Acquisitions | (74 | ) | (2,364 | ) | (178 | ) | ||||||||
Other, net | 52 | 41 | 61 | |||||||||||
Net cash provided by (used for) investing activities | 153 | (2,556 | ) | (470 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (43 | ) | 28 | 47 | ||||||||||
Increase in cash and cash equivalents | 637 | 731 | 119 | |||||||||||
Cash and cash equivalents at beginning of year | 1,396 | 665 | 546 | |||||||||||
Cash and cash equivalents at end of year | 2,033 | 1,396 | 665 | |||||||||||
Cash and cash equivalents — reported as discontinued operations | (13 | ) | (26 | ) | (14 | ) | ||||||||
Cash and cash equivalents — continuing operations | $ | 2,020 | $ | 1,370 | $ | 651 |
For the Years Ended December 31, (In millions of dollars, except per share figures) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
COMMON STOCK | ||||||||||||||
Balance, beginning of year | $ | 561 | $ | 561 | $ | 561 | ||||||||
Issuance of shares under stock compensation plans and employee stock purchase plans | — | — | — | |||||||||||
Balance, end of year | $ | 561 | $ | 561 | $ | 561 | ||||||||
ADDITIONAL PAID-IN CAPITAL | ||||||||||||||
Balance, beginning of year | $ | 1,316 | $ | 1,301 | $ | 1,426 | ||||||||
Acquisitions | (15 | ) | 1 | 2 | ||||||||||
SFAS 123R implementation adjustment | 135 | — | — | |||||||||||
SFAS 123R periodic compensation costs | 67 | — | — | |||||||||||
Issuance of shares to MMC retirement plan | (160 | ) | — | — | ||||||||||
Issuance of shares under stock compensation plans and employee stock purchase plans and related tax benefits | (200 | ) | 14 | (127 | ) | |||||||||
Balance, end of year | $ | 1,143 | $ | 1,316 | $ | 1,301 | ||||||||
RETAINED EARNINGS | ||||||||||||||
Balance, beginning of year | $ | 5,044 | $ | 5,386 | $ | 4,490 | ||||||||
Net income (a) | 404 | 176 | 1,540 | |||||||||||
Dividend equivalents paid | (2 | ) | — | — | ||||||||||
Dividends declared — (per share amounts: $.85 in 2005, $.99 in 2004 and $1.21 in 2003) | (457 | ) | (518 | ) | (644 | ) | ||||||||
Balance, end of year | $ | 4,989 | $ | 5,044 | $ | 5,386 | ||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ||||||||||||||
Balance, beginning of year | $ | (370 | ) | $ | (279 | ) | $ | (452 | ) | |||||
Foreign currency translation adjustments (b) | (271 | ) | 234 | 302 | ||||||||||
Unrealized investment holding (losses) gains, net of reclassification adjustments (c) | (85 | ) | (58 | ) | 76 | |||||||||
Minimum pension liability adjustment (d) | (30 | ) | (266 | ) | (201 | ) | ||||||||
Net deferred loss on cash flow hedges (e) | — | (1 | ) | (4 | ) | |||||||||
Balance, end of year | $ | (756 | ) | $ | (370 | ) | $ | (279 | ) | |||||
TREASURY SHARES | ||||||||||||||
Balance, beginning of year | $ | (1,495 | ) | $ | (1,518 | ) | $ | (1,007 | ) | |||||
Purchase of treasury shares | — | (524 | ) | (1,209 | ) | |||||||||
Acquisitions | 82 | 7 | 16 | |||||||||||
Issuance of shares to MMC retirement plan | 365 | — | — | |||||||||||
Issuance of shares under stock compensation plans and employee stock purchase plans | 471 | 540 | 682 | |||||||||||
Balance, end of year | $ | (577 | ) | $ | (1,495 | ) | $ | (1,518 | ) | |||||
TOTAL STOCKHOLDERS’ EQUITY | $ | 5,360 | $ | 5,056 | $ | 5,451 | ||||||||
TOTAL COMPREHENSIVE INCOME (a+b+c+d+e) | $ | 18 | $ | 85 | $ | 1,713 |
1. | Summary of Significant Accounting Policies |
Unremitted insurance premiums and claims are held in a fiduciary capacity. Interest income on these fiduciary funds, included in service revenue, amounted to $151 million in 2005, $130 million in 2004, and $114 million in 2003. Since fiduciary assets are not available for corporate use, they are shown in the balance sheet as an offset to fiduciary liabilities. At December 31, 2005, Putnam managed the investment of approximately $1.3 billion of the fiduciary assets.
December 31, (In millions of dollars) | | 2005 | | 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Furniture and equipment | $ | 1,557 | $ | 1,612 | ||||||
Land and buildings | 457 | 457 | ||||||||
Leasehold and building improvements | 888 | 897 | ||||||||
2,902 | 2,966 | |||||||||
Less — accumulated depreciation and amortization | (1,724 | ) | (1,603 | ) | ||||||
$ | 1,178 | $ | 1,363 |
accordance with APB Opinion No. 18 (“APB 18”). Changes in the fair value of trading securities are recorded in earnings when they occur. Changes in the fair value of available for sale securities are recorded in stockholders’ equity, net of applicable taxes, until realized. Securities classified as trading or available for sale under SFAS 115, or carried at cost under APB 18, are included in Long-term investments in the consolidated balance sheets.
No. 5. The possibility that a taxing authority may not assert an issue is not taken into account. It is assumed that the taxing authority will become fully aware of all facts relating to an issue and propose adjustments as appropriate. Allowances are evaluated based upon the facts and circumstances that exist at each reporting period. Allowances for issues that have been asserted by tax authorities and resolved by agreement are adjusted in the quarter when agreement is reached. If the statute of limitations operates to bar assessment of an issue that has not been asserted by a taxing authority, the related allowance is reversed at that time.
For the Years Ended December 31, (In millions) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income from continuing operations | $ | 369 | $ | 154 | $ | 1,516 | ||||||||
Less:Potential minority interest expense associated with Putnam Class B Common Shares | (5 | ) | — | (1 | ) | |||||||||
Add: Dividend equivalent expense related to common stock equivalents | 1 | 2 | 2 | |||||||||||
Income from continuing operations for diluted earnings per share | $ | 365 | $ | 156 | $ | 1,517 | ||||||||
Basic weighted average common shares outstanding | 538 | 526 | 533 | |||||||||||
Dilutive effect of potentially issuable common shares | 5 | 9 | 15 | |||||||||||
Diluted weighted average common shares outstanding | 543 | 535 | 548 | |||||||||||
Average stock price used to calculate common stock equivalents | $ | 29.65 | $ | 42.12 | $ | 46.99 |
the Limited Partners Have Certain Rights” (Issue 04-05). The effective date for Issue 04-05 is June 29, 2005 for all new or modified partnerships and January 1, 2006 for all remaining partnerships for the applicable provisions. MMC is currently evaluating the impact of the adoption of the provisions of EITF 04-05 on its financial position and results of operations; however, the adoption of EITF 04-05 is not expected to have a material impact on MMC’s financial statements.
2. | Supplemental Disclosures |
For the Years Ended December 31, (In millions of dollars) | 2005 | 2004 | 2003 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Purchase acquisitions: | ||||||||||||||
Assets acquired, excluding cash | $ | 68 | $ | 2,353 | $ | 408 | ||||||||
Liabilities assumed | — | (17 | ) | (9 | ) | |||||||||
Issuance of debt and other obligations | (8 | ) | (33 | ) | (115 | ) | ||||||||
Deferred purchase consideration | 80 | 61 | — | |||||||||||
Shares issuable | (66 | ) | — | (106 | ) | |||||||||
Net cash outflow for acquisitions | $ | 74 | $ | 2,364 | $ | 178 | ||||||||
Interest paid | $ | 307 | $ | 198 | $ | 172 | ||||||||
Income taxes paid | $ | 156 | $ | 383 | $ | 542 |
(In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at beginning of year | $ | 142 | $ | 115 | $ | 122 | ||||||||
Provision charged to operations | 49 | 30 | 18 | |||||||||||
Accounts written-off, net of recoveries | (25 | ) | (10 | ) | (35 | ) | ||||||||
Effect of exchange rate changes | (9 | ) | 7 | 10 | ||||||||||
Balance at end of year | $ | 157 | $ | 142 | $ | 115 |
3. | Other Comprehensive Income (Loss) |
For the Years Ended December 31, (In millions of dollars) | | 2005 | | 2004 | | 2003 | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Foreign currency translation adjustments | $ | (271 | ) | $ | 234 | $ | 302 | ||||||
Unrealized investment holding gains, net of income tax liability of $10, $3 and $54 in 2005, 2004 and 2003, respectively | 18 | 8 | 98 | ||||||||||
Less: | Reclassification adjustment for realized gains included in net income, net of income tax liability of $55, $36 and $12 in 2005, 2004 and 2003, respectively | (103 | ) | (66 | ) | (22 | ) | ||||||
Minimum pension liability adjustment, net of income tax benefit of $3 in 2005, $123 in 2004 and $77 in 2003 | (30 | ) | (266 | ) | (201 | ) | |||||||
Deferred loss on cash flow hedges, net of income tax benefit of $0, $(1) and $(2) in 2005, 2004 and 2003, respectively | — | (1 | ) | (4 | ) | ||||||||
$ | (386 | ) | $ | (91 | ) | $ | 173 |
December 31, (In millions of dollars) | | 2005 | | 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Foreign currency translation adjustments | $ | (27 | ) | $ | 244 | |||||
Net unrealized investment gains | 53 | 138 | ||||||||
Minimum pension liability adjustment | (782 | ) | (752 | ) | ||||||
$ | (756 | ) | $ | (370 | ) |
4. | Acquisitions and Dispositions |
5. | Discontinued Operations |
For the Years Ended December 31, (In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Total Revenue | $ | 457 | $ | 399 | $ | 344 | ||||||||
Income before provision for income tax | $ | 41 | $ | 41 | $ | 43 | ||||||||
Provision for income tax | 20 | 19 | 19 | |||||||||||
Income from discontinued operations, net of tax | 21 | 22 | 24 | |||||||||||
Gain on disposal of discontinued operations | 55 | — | — | |||||||||||
Provision for income tax | 41 | — | — | |||||||||||
Gain on disposal of discontinued operations, net of tax | 14 | — | — | |||||||||||
Discontinued operations, net of tax | $ | 35 | $ | 22 | $ | 24 |
For the Years Ended December 31, (In millions of dollars) | | 2005 | | 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Assets of discontinued operations: | ||||||||||
Current assets | $ | 40 | $ | 62 | ||||||
Fixed assets, net | 31 | 24 | ||||||||
Goodwill and intangible assets | 78 | 83 | ||||||||
Other assets | 4 | 4 | ||||||||
Total assets of discontinued operations | $ | 153 | $ | 173 | ||||||
Liabilities of discontinued operations | $ | 89 | $ | 46 |
6. | Goodwill and Other Intangibles |
(In millions of dollars) | | |||||
---|---|---|---|---|---|---|
Balance as of January 1, 2005 | $ | 7,459 | ||||
Goodwill acquired | 45 | |||||
Disposals | (95 | ) | ||||
Transfer to identified intangible asset (purchase accounting adjustment) | (38 | ) | ||||
Other adjustments(a) | (125 | ) | ||||
Balance as of December 31, 2005 | $ | 7,246 |
(a) | Primarily includes foreign exchange. |
2005 | | 2004 | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, (In millions of dollars) | Gross Cost | | Accumulated Amortization | | Net Carrying Amount | | Gross Cost | | Accumulated Amortization | | Net Carrying Amount | |||||||||||||
Customer and marketing related | $ | 638 | $ | 191 | $ | 447 | $ | 613 | $ | 115 | $ | 498 | ||||||||||||
Future revenue streams related to existing private equity funds | 200 | 125 | 75 | 199 | 108 | 91 | ||||||||||||||||||
Total amortized intangibles | $ | 838 | $ | 316 | $ | 522 | $ | 812 | $ | 223 | $ | 589 |
For the Years Ending December 31, (In millions of dollars) | | Estimated Expense | ||||
---|---|---|---|---|---|---|
2006 | $ | 92 | ||||
2007 | $ | 74 | ||||
2008 | $ | 64 | ||||
2009 | $ | 56 | ||||
2010 | $ | 41 |
7. | Income Taxes |
For the Years Ended December 31, (In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Income before income taxes and minority interest: | ||||||||||||||
U.S. | $ | 142 | $ | (111 | ) | $ | 1,386 | |||||||
Other | 429 | 513 | 901 | |||||||||||
$ | 571 | $ | 402 | $ | 2,287 | |||||||||
Income taxes: | ||||||||||||||
Current— | ||||||||||||||
U.S. Federal | $ | (22 | ) | $ | 187 | $ | 419 | |||||||
Other national governments | 125 | 80 | 159 | |||||||||||
U.S. state and local | 53 | 44 | 83 | |||||||||||
156 | 311 | 661 | ||||||||||||
Deferred— | ||||||||||||||
U.S. Federal | 49 | (118 | ) | 45 | ||||||||||
Other national governments | (5 | ) | 67 | 60 | ||||||||||
U.S. state and local | (8 | ) | (20 | ) | (15 | ) | ||||||||
36 | (71 | ) | 90 | |||||||||||
Total income taxes | $ | 192 | $ | 240 | $ | 751 |
December 31, (In millions of dollars) | | 2005 | | 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Deferred tax assets: | ||||||||||
Accrued expenses not currently deductible(a) | $ | 793 | $ | 807 | ||||||
Differences related to non-U.S. operations | 215 | 242 | ||||||||
Net operating losses(b) | 31 | 9 | ||||||||
Other | 62 | 54 | ||||||||
$ | 1,101 | $ | 1,112 | |||||||
Deferred tax liabilities: | ||||||||||
Unrealized investment holding gains | $ | 29 | $ | 74 | ||||||
Differences related to non-U.S. operations | 91 | 123 | ||||||||
Depreciation and amortization | 282 | 277 | ||||||||
Accrued retirement benefits | 107 | 34 | ||||||||
Other | 24 | 28 | ||||||||
$ | 533 | $ | 536 |
(a) | Net of valuation allowance of $9 million and $10 million, respectively. |
(b) | Net of valuation allowance of $68 million and $41 million, respectively. |
Balance sheet classifications: | ||||||||||
Current assets | $ | 153 | $ | 282 | ||||||
Other assets | $ | 415 | $ | 294 |
For the Years Ended December 31, | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| % | | % | | % | |||||||||
U.S. Federal statutory rate | 35.0 | 35.0 | 35.0 | |||||||||||
U.S. state and local income taxes — net of U.S. Federal income tax benefit | 5.1 | 1.6 | 1.9 | |||||||||||
Differences related to non-U.S. operations | (5.1 | ) | (8.2 | ) | (4.2 | ) | ||||||||
NYAG lawsuit, including state taxes | — | 12.9 | — | |||||||||||
Putnam regulatory settlements | — | 19.4 | — | |||||||||||
Meals and entertainment | 1.5 | 2.9 | .5 | |||||||||||
Dividends paid to employees | (1.4 | ) | (3.3 | ) | (.6 | ) | ||||||||
Other | (1.5 | ) | (.9 | ) | .2 | |||||||||
Effective tax rate | 33.6 | 59.4 | 32.8 |
8. | Retirement Benefits |
Pension Benefits | Postretirement Benefits | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | | 2004 | | 2005 | | 2004 | ||||||||||||
Weighted average assumptions: | |||||||||||||||||||
Discount rate (for expense) | 5.5 | % | 5.8 | % | 5.9 | % | 6.3 | % | |||||||||||
Expected return on plan assets | 8.4 | % | 8.4 | % | — | — | |||||||||||||
Rate of compensation increase (for expense) | 3.6 | % | 3.7 | % | — | — | |||||||||||||
Discount rate (for benefit obligation) | 5.1 | % | 5.5 | % | 5.6 | % | 5.9 | % | |||||||||||
Rate of compensation increase (for benefit obligation) | 3.8 | % | 3.6 | % | — | — |
For the Years Ended December 31, | Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In millions of dollars) | | 2005 | | 2004 | | 2003 | | 2005 | | 2004 | | 2003 | |||||||||||||||
Service cost | $ | 245 | $ | 232 | $ | 190 | $ | 9 | $ | 11 | $ | 9 | |||||||||||||||
Interest cost | 472 | 422 | 363 | 18 | 20 | 20 | |||||||||||||||||||||
Expected return on plan assets | (640 | ) | (618 | ) | (545 | ) | — | — | — | ||||||||||||||||||
Amortization of prior service credit | (41 | ) | (38 | ) | (38 | ) | (3 | ) | (2 | ) | (2 | ) | |||||||||||||||
Amortization of transition asset | — | (5 | ) | (5 | ) | — | — | — | |||||||||||||||||||
Recognized actuarial loss | 177 | 90 | 26 | 1 | 3 | 5 | |||||||||||||||||||||
Net Periodic Benefit Cost (Income) | $ | 213 | $ | 83 | $ | (9 | ) | $ | 25 | $ | 32 | $ | 32 |
U.S. Pension Benefits | U.S. Postretirement Benefits | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, (In millions of dollars) | | 2005 | | 2004 | | 2005 | | 2004 | |||||||||||
Change in benefit obligation: | |||||||||||||||||||
Benefit obligation at beginning of year | $ | 3,013 | $ | 2,538 | $ | 309 | $ | 290 | |||||||||||
Service cost | 88 | 78 | 8 | 10 | |||||||||||||||
Interest cost | 176 | 164 | 15 | 17 | |||||||||||||||
Amendments | (138 | ) | — | (92 | ) | — | |||||||||||||
Actuarial loss | 80 | 347 | (27 | ) | 3 | ||||||||||||||
Benefits paid | (125 | ) | (114 | ) | (19 | ) | (11 | ) | |||||||||||
Benefit obligation at end of year | $ | 3,094 | $ | 3,013 | $ | 194 | $ | 309 | |||||||||||
Change in plan assets: | |||||||||||||||||||
Fair value of plan assets at beginning of year | $ | 2,635 | $ | 2,407 | $ | — | $ | — | |||||||||||
Actual return on plan assets | 276 | 298 | — | — | |||||||||||||||
Employer contributions | 229 | 44 | 19 | 11 | |||||||||||||||
Benefits paid | (125 | ) | (114 | ) | (19 | ) | (11 | ) | |||||||||||
Fair value of plan assets at end of year | $ | 3,015 | $ | 2,635 | $ | — | $ | — | |||||||||||
Funded status | $ | (79 | ) | $ | (378 | ) | $ | (194 | ) | $ | (309 | ) | |||||||
Unrecognized net actuarial loss | 858 | 899 | 38 | 66 | |||||||||||||||
Unrecognized prior service credit | (282 | ) | (185 | ) | (93 | ) | (5 | ) | |||||||||||
Unrecognized transition asset | — | — | — | — | |||||||||||||||
Net asset (liability) recognized | $ | 497 | $ | 336 | $ | (249 | ) | $ | (248 | ) | |||||||||
Amounts recognized in the Consolidated Balance sheets consist of: | |||||||||||||||||||
Prepaid benefit cost | $ | 746 | $ | 580 | $ | — | $ | — | |||||||||||
Accrued benefit liability | (314 | ) | (316 | ) | (249 | ) | (248 | ) | |||||||||||
Accumulated other comprehensive loss | 65 | 72 | — | — | |||||||||||||||
Net asset (liability) recognized | $ | 497 | $ | 336 | $ | (249 | ) | $ | (248 | ) | |||||||||
Accumulated benefit obligation at December 31 | $ | 3,021 | $ | 2,846 | $ | — | $ | — |
U.S. Pension Benefits | U.S. Postretirement Benefits | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2005 | | 2004 | | 2005 | | 2004 | ||||||||||||
Weighted average assumptions: | |||||||||||||||||||
Discount rate (for expense) | 6.0 | % | 6.4 | % | 6.0 | % | 6.4 | % | |||||||||||
Expected return on plan assets | 8.75 | % | 8.75 | % | — | ||||||||||||||
Rate of compensation increase (for expense) | 3.0 | % | 3.15 | % | — | ||||||||||||||
Discount rate (for benefit obligation) | 5.9 | % | 6.0 | % | 5.9 | % | 6.0 | % | |||||||||||
Rate of compensation increase (for benefit obligation) | 3.4 | % | 2.85 | % | — |
For the Years Ended December 31, | U.S. Pension Benefits | U.S. Postretirement Benefits | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In millions of dollars) | | 2005 | | 2004 | | 2003 | | 2005 | | 2004 | | 2003 | |||||||||||||||
Service cost | $ | 88 | $ | 78 | $ | 66 | $ | 8 | $ | 10 | $ | 8 | |||||||||||||||
Interest cost | 176 | 164 | 153 | 15 | 17 | 17 | |||||||||||||||||||||
Expected return on plan assets | (233 | ) | (230 | ) | (228 | ) | — | — | — | ||||||||||||||||||
Amortization of prior service credit | (40 | ) | (38 | ) | (38 | ) | (3 | ) | (2 | ) | (2 | ) | |||||||||||||||
Amortization of transition asset | — | (5 | ) | (5 | ) | — | — | — | |||||||||||||||||||
Recognized actuarial loss | 78 | 46 | 18 | 1 | 3 | 5 | |||||||||||||||||||||
Net Periodic Benefit Cost (Income) | $ | 69 | $ | 15 | $ | (34 | ) | $ | 21 | $ | 28 | $ | 28 | ||||||||||||||
Curtailment (Gain)/loss | — | — | — | (1 | ) | — | — | ||||||||||||||||||||
Total Expense | $ | 69 | $ | 15 | $ | (34 | ) | $ | 20 | $ | 28 | $ | 28 |
(In millions of dollars) | | 1 Percentage Point Increase | | 1 Percentage Point Decrease | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Effect on total of service and interest cost components | $ | 4 | $ | (3 | ) | |||||
Effect on postretirement benefit obligation | $ | 2 | $ | (8 | ) |
December 31, | Non-U.S. Pension Benefits | Non-U.S. Postretirement Benefits | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In millions of dollars) | | 2005 | | 2004 | | 2005 | | 2004 | |||||||||||
Change in benefit obligation: | |||||||||||||||||||
Benefit obligation at beginning of year | $ | 5,936 | $ | 4,666 | $ | 62 | $ | 55 | |||||||||||
Service cost | 157 | 154 | 1 | 1 | |||||||||||||||
Interest cost | 296 | 258 | 3 | 3 | |||||||||||||||
Employee contributions | 37 | 36 | — | — | |||||||||||||||
Actuarial loss (gain) | 648 | 591 | 9 | 1 | |||||||||||||||
Effect of settlement | (14 | ) | (11 | ) | — | — | |||||||||||||
Effect of Curtailment | (40 | ) | — | — | — | ||||||||||||||
Special termination benefits | 17 | 6 | — | — | |||||||||||||||
Benefits paid | (210 | ) | (162 | ) | (3 | ) | (3 | ) | |||||||||||
Foreign currency changes | (539 | ) | 429 | (2 | ) | 5 | |||||||||||||
Plan amendments | — | (31 | ) | — | — | ||||||||||||||
Benefit obligation at end of year | $ | 6,288 | $ | 5,936 | $ | 70 | $ | 62 | |||||||||||
Change in plan assets: | |||||||||||||||||||
Fair value of plan assets at beginning of year | $ | 4,815 | $ | 3,934 | $ | — | $ | — | |||||||||||
Actual return on plan assets | 785 | 427 | — | — | |||||||||||||||
Effect of settlement | (12 | ) | (11 | ) | — | — | |||||||||||||
Company contributions | 498 | 239 | 3 | 3 | |||||||||||||||
Employee contributions | 37 | 36 | — | — | |||||||||||||||
Benefits paid | (210 | ) | (162 | ) | (3 | ) | (3 | ) | |||||||||||
Foreign currency changes | (443 | ) | 352 | — | — | ||||||||||||||
Fair value of plan assets at end of year | $ | 5,470 | $ | 4,815 | $ | — | $ | — | |||||||||||
Funded status | $ | (818 | ) | $ | (1,121 | ) | $ | (70 | ) | $ | (62 | ) | |||||||
Unrecognized net actuarial loss | 2,251 | 2,322 | 17 | 9 | |||||||||||||||
Unrecognized prior service cost | (24 | ) | (20 | ) | (2 | ) | (3 | ) | |||||||||||
Net asset (liability) recognized | $ | 1,409 | $ | 1,181 | $ | (55 | ) | $ | (56 | ) | |||||||||
Amounts recognized in the Balance Sheet consist of: | |||||||||||||||||||
Prepaid benefit cost | $ | 827 | $ | 800 | $ | — | $ | — | |||||||||||
Accrued benefit liability | (452 | ) | (631 | ) | (55 | ) | (56 | ) | |||||||||||
Intangible asset | 6 | 9 | — | — | |||||||||||||||
Accumulated other comprehensive loss | 1,028 | 1,003 | — | — | |||||||||||||||
Net asset (liability) recognized | $ | 1,409 | $ | 1,181 | $ | (55 | ) | $ | (56 | ) | |||||||||
Accumulated benefit obligation at December 31 | $ | 5,680 | $ | 5,261 | $ | — | $ | — | |||||||||||
Weighted average assumptions: | |||||||||||||||||||
Discount rate (for expense) | 5.3 | % | 5.4 | % | 5.6 | % | 5.7 | % | |||||||||||
Expected return on plan assets | 8.2 | % | 8.2 | % | — | — | |||||||||||||
Rate of compensation increase (for expense) | 4.0 | % | 4.0 | % | — | — | |||||||||||||
Discount rate (for benefit obligation) | 4.7 | % | 5.3 | % | 4.8 | % | 5.6 | % | |||||||||||
Rate of compensation increase (for benefit obligation) | 4.0 | % | 4.0 | % | — | — |
For the Years Ended December 31, | Non-U.S. Pension Benefits | Non-U.S. Postretirement Benefits | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In millions of dollars) | | 2005 | | 2004 | | 2003 | | 2005 | | 2004 | | 2003 | |||||||||||||||
Service cost | $ | 157 | $ | 154 | $ | 124 | $ | 1 | $ | 1 | $ | 1 | |||||||||||||||
Interest cost | 296 | 258 | 210 | 3 | 3 | 3 | |||||||||||||||||||||
Expected return on plan assets | (407 | ) | (388 | ) | (317 | ) | — | — | — | ||||||||||||||||||
Amortization of Prior Service Credit | (1 | ) | — | — | — | — | — | ||||||||||||||||||||
Recognized actuarial loss | 99 | 44 | 8 | — | — | — | |||||||||||||||||||||
Net periodic benefit cost | $ | 144 | $ | 68 | $ | 25 | $ | 4 | $ | 4 | $ | 4 | |||||||||||||||
Settlement loss | (1 | ) | 3 | — | — | — | — | ||||||||||||||||||||
Special termination benefits | 17 | 6 | 4 | — | — | — | |||||||||||||||||||||
Total expense | $ | 160 | $ | 77 | $ | 29 | $ | 4 | $ | 4 | $ | 4 |
(In millions of dollars) | | 1 Percentage Point Increase | | 1 Percentage Point Decrease | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Effect on total of service and interest cost components | $ | 1 | $ | (1 | ) | |||||
Effect on postretirement benefit obligation | $ | 10 | $ | (8 | ) |
December 31, | Pension Benefits | Postretirement Benefits | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In millions of dollars) | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | |||||||||||
2006 | $ | 140 | $ | 333 | $ | 11 | $ | 3 | |||||||||||
2007 | 148 | 195 | 11 | 3 | |||||||||||||||
2008 | 155 | 213 | 12 | 3 | |||||||||||||||
2009 | 164 | 237 | 12 | 4 | |||||||||||||||
2010 | 173 | 255 | 12 | 4 | |||||||||||||||
2011–2015 | $ | 1,041 | $ | 1,444 | $ | 64 | $ | 21 |
9. | Stock Benefit Plans |
respectively, if MMC had not adopted SFAS 123 (R), compared to reported basic and diluted earnings per share of $0.75 and $0.74, respectively.
(In millions of dollars, except per share figures) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Income: | ||||||||||||||
As reported | $ | 404 | $ | 176 | $ | 1,540 | ||||||||
Adjustment for fair value method, net of tax | (69 | ) | (146 | ) | (171 | ) | ||||||||
Pro forma net income | $ | 335 | $ | 30 | $ | 1,369 | ||||||||
Net Income Per Share: | ||||||||||||||
Basic: | ||||||||||||||
As reported | $ | 0.75 | $ | 0.33 | $ | 2.89 | ||||||||
Pro forma | $ | 0.62 | $ | 0.06 | $ | 2.57 | ||||||||
Diluted: | ||||||||||||||
As reported | $ | 0.74 | $ | 0.33 | $ | 2.81 | ||||||||
Pro forma | $ | 0.61 | $ | 0.06 | $ | 2.50 |
conditions thereof. The right of an employee to receive an award may be subject to performance conditions as specified by the Compensation Committee. The 2000 Plans contain provisions which, in the event of a change in control of MMC, may accelerate the vesting of the awards. Awards relating to not more than 80,000,000 shares of common stock may be made over the life of the 2000 Employee Plan plus shares remaining unused under pre-existing employee stock plans. Awards relating to not more than 8,000,000 shares of common stock may be made over the life of the 2000 Executive Plan plus shares remaining unused under pre-existing executive stock plans.
2005 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Pre 7/1/05 | Post 6/30/05 | 2004 | 2003 | |||||||||||||||
Risk-free interest rate | 3.7% | 3.9%–4.3 | % | 2.8 | % | 2.75 | % | |||||||||||
Expected life (in years) | 5.0 | 5.0 | 5.0 | 5.0 | ||||||||||||||
Expected volatility | 18.5% | 29.0 | % | 19.6 | % | 21.0 | % | |||||||||||
Expected dividend yield | 2.2% | 2.3 | % | 2.3 | % | 2.3 | % |
2005 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Pre 7/1/05 | Post 6/30/05 | ||||||||||
Risk-free interest rate | 4.1%–4.5% | 4.0%–4.1% | |||||||||
Expected life (in years) | 6.7–6.8 | 5.2–6.5 | |||||||||
Expected volatility | 17.9% | 29.0% | |||||||||
Expected dividend yield | 2.2% | 2.3% |
| Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value ($000) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at January 1, 2005 | 86,210,687 | $ | 43.22 | |||||||||||||||
Granted(including 16,300,436 options granted in connection with Exchange Offer) | 33,166,937 | $ | 29.22 | |||||||||||||||
Exercised | (2,547,092 | ) | $ | 17.51 | ||||||||||||||
Canceled or exchanged | (41,762,766 | ) | $ | 47.75 | ||||||||||||||
Forfeited | (8,772,370 | ) | $ | 43.39 | ||||||||||||||
Expired | — | — | ||||||||||||||||
Balance at December 31, 2005 | 66,295,396 | $ | 34.33 | 5.8 years | $ 134,744 | |||||||||||||
Options vested or expected to vest at December 31, 2005 | 60,531,432 | $ | 34.27 | 5.6 years | $ 126,654 | |||||||||||||
Options exercisable at December 31, 2005 | 32,817,410 | $ | 38.61 | 3.8 years | $ 58,808 |
1.5 years. Cash received from the exercise of stock options for the years ended December 31, 2005, 2004 and 2003 was $44.6 million, $110.5 million, and $157.8 million, respectively.
| Shares | | Weighted Average Grant Date Fair Value | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-vested balance at January 1, 2005 | 1,749,062 | $ | 42.13 | |||||||
Granted | 385,514 | $ | 28.87 | |||||||
Vested | (313,300 | ) | $ | 35.57 | ||||||
Forfeited | (801,221 | ) | $ | 43.91 | ||||||
Non-vested Balance at December 31, 2005 | 1,020,055 | $ | 37.73 |
| Shares | | Weighted Average Grant Date Fair Value | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-vested balance at January 1, 2005 | 1,429,898 | $ | 44.40 | |||||||
Granted | 143,291 | $ | 29.43 | |||||||
Vested | (709,184 | ) | $ | 44.94 | ||||||
Forfeited | (80,420 | ) | $ | 48.57 | ||||||
Non-vested Balance at December 31, 2005 | 783,585 | $ | 40.74 |
| Shares | | Weighted Average Grant Date Fair Value | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-vested balance at January 1, 2005 | 6,960,404 | $ | 44.95 | |||||||
Granted | 4,478,514 | $ | 29.88 | |||||||
Vested | (1,764,891 | ) | $ | 48.43 | ||||||
Forfeited | (606,156 | ) | $ | 40.27 | ||||||
Non-vested Balance at December 31, 2005 | 9,067,871 | $ | 37.14 |
were available for issuance under the International Plan. Based on the terms in effect as of October 1, 2005, the plan is considered non-compensatory under SFAS 123(R).
(In millions of dollars, except per share figures) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Risk-free interest rate | 4.1 | % | 3.5 | % | 2.5 | % | ||||||||
Expected life (in years) | 4.5 | 5.0 | 5.0 | |||||||||||
Expected volatility | 27.9 | % | 26.8 | % | 29.4 | % | ||||||||
Expected dividend yield | 5.0 | % | 5.0 | % | 5.0 | % |
| Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value ($000) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at January 1, 2005 | 4,869,555 | $ | 61.61 | |||||||||||||||
Granted | 5,138,000 | $ | 28.62 | |||||||||||||||
Exercised | — | — | ||||||||||||||||
Canceled | — | — | ||||||||||||||||
Forfeited or exchanged | (3,182,925 | ) | $ | 63.62 | ||||||||||||||
Expired | — | — | ||||||||||||||||
Balance at December 31, 2005 | 6,824,630 | $ | 35.83 | 6.7 years | $0 | |||||||||||||
Options vested or expected to vest at December 31, 2005 | 6,268,964 | $ | 36.37 | 6.7 years | $0 | |||||||||||||
Options exercisable at December 31, 2005 | 1,487,505 | $ | 57.63 | 4.2 years | $0 |
| Shares | | Weighted Average Grant Date Fair Value | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-vested balance at January 1, 2005 | 1,929,496 | $ | 41.69 | |||||||
Granted(including 139,388 shares granted in connection with the Offer to Exchange) | 4,111,304 | $ | 28.38 | |||||||
Vested | (657,353 | ) | $ | 49.21 | ||||||
Forfeited | (173,401 | ) | $ | 33.96 | ||||||
Non-vested Balance at December 31, 2005 | 5,210,046 | $ | 30.50 |
10. | Long-term Commitments |
For the Years Ended December 31, (In millions of dollars) | | Gross Rental Commitments | | Rentals from Subleases | | Net Rental Commitments | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2006 | $ | 499 | $ | 33 | $ | 466 | ||||||||
2007 | 455 | 44 | 411 | |||||||||||
2008 | 396 | 44 | 352 | |||||||||||
2009 | 329 | 41 | 288 | |||||||||||
2010 | 295 | 41 | 254 | |||||||||||
Subsequent years | 1,952 | 374 | 1,578 | |||||||||||
$ | 3,926 | $ | 577 | $ | 3,349 |
For the Years Ending December 31, (In millions of dollars) | | Future Minimum Commitments | ||||
---|---|---|---|---|---|---|
2006 | $ | 65 | ||||
2007 | 38 | |||||
2008 | 32 | |||||
Subsequent years | 46 | |||||
$ | 181 |
11. | Debt |
(In millions of dollars) | | December 31, 2005 | | December 31, 2004 | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Short-term: | ||||||||||
Commercial paper | $ | — | $ | 129 | ||||||
Bank borrowings — U.S. | — | 376 | ||||||||
Bank borrowings — International | 429 | 61 | ||||||||
Current portion of long-term debt | 69 | 70 | ||||||||
$ | 498 | $ | 636 | |||||||
Long-term: | ||||||||||
Term loan — 2 year floating rate note due 2006 | $ | — | $ | 1,300 | ||||||
Senior notes — 7.125% due 2009 | 399 | 399 | ||||||||
Senior notes — 5.375% due 2007 (4.0% effective interest rate) | 508 | 514 | ||||||||
Senior notes — 6.25% due 2012 (5.1% effective interest rate) | 264 | 266 | ||||||||
Senior notes — 3.625% due 2008 | 249 | 249 | ||||||||
Senior notes — 4.850% due 2013 | 249 | 249 | ||||||||
Senior notes — 5.875% due 2033 | 295 | 295 | ||||||||
Senior notes — 5.375% due 2014 | 647 | 646 | ||||||||
Senior notes — 3 year floating rate note due 2007 (4.27% at December 31, 2005) | 499 | 499 | ||||||||
Senior notes — 5.15% due 2010 | 547 | — | ||||||||
Senior notes — 5.75% due 2015 | 745 | — | ||||||||
Mortgage — 5.70% due 2035 | 473 | — | ||||||||
Mortgage — 9.8% due 2009 | — | 200 | ||||||||
Notes payable — 8.62% due 2005 | — | 65 | ||||||||
Notes payable — 7.68% due 2006 | 60 | 61 | ||||||||
Bank borrowings — International | 168 | — | ||||||||
Other | 10 | 18 | ||||||||
5,113 | 4,761 | |||||||||
Less current portion | 69 | 70 | ||||||||
$ | 5,044 | $ | 4,691 |
headquarters building in New York City. MMC prepaid its existing $200 million 9.8% mortgage due 2009. The incremental proceeds from the refinancing, net of mortgage prepayment costs, were used to repay outstanding short-term debt. In the event the mortgage is foreclosed following a default, MMC would be entitled to remain in the space and would be obligated to pay rent sufficient to cover interest on the notes or at fair market value if greater. Mortgage prepayment costs of $34 million related to this transaction are included in interest expense in the consolidated statements of income.
12. | Financial Instruments |
2005 | 2004 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, (In millions of dollars) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | |||||||||||
Cash and cash equivalents | $ | 2,020 | $ | 2,020 | $ | 1,370 | $ | 1,370 | |||||||||||
Long-term investments | $ | 277 | $ | 277 | $ | 558 | $ | 558 | |||||||||||
Short-term debt | $ | 498 | $ | 498 | $ | 636 | $ | 636 | |||||||||||
Long-term debt | $ | 5,044 | $ | 5,062 | $ | 4,691 | $ | 4,705 |
13. | Integration and Restructuring Costs |
(In millions of dollars) | | Accrued in 2005 | | Utilized in 2005 | | Remaining Liability at 12/31/05 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Severance and benefits | $ | 197 | $ | (128 | ) | $ | 69 | |||||||
Future rent on non-cancelable leases | 114 | (37 | ) | 77 | ||||||||||
Other exit costs | (1 | ) | 12 | (a) | 11 | |||||||||
$ | 310 | $ | (153 | ) | $ | 157 |
(a) | Includes approximately $36 million of payments received on the disposals of small commercial accounts and other dispositions. |
(In millions of dollars) | | Accrued in 2004 | | Utilized in 2004 | | Utilized in 2005 | | Additions/ Changes in Estimates 2005 | | Remaining Liability at 12/31/05 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Severance and benefits | $ | 273 | $ | (48 | ) | $ | (194 | ) | $ | (1 | ) | $ | 30 | |||||||||
Future rent on non-cancelable leases | 28 | (1 | ) | (17 | ) | (2 | ) | 8 | ||||||||||||||
Lease termination costs | 18 | — | (2 | ) | 1 | 17 | ||||||||||||||||
Other exit costs | 18 | (10 | ) | (8 | ) | 5 | 5 | |||||||||||||||
$ | 337 | $ | (59 | ) | $ | (221 | ) | $ | 3 | $ | 60 |
14. | Common Stock |
15. | Stockholder Rights Plan |
16. | Claims, Lawsuits and Other Contingencies |
subsidiaries and affiliates that hold New York insurance licenses to appear at a hearing and show cause why regulatory action should not be taken against them. The Amended Citation charged the respondents with the use of fraudulent, coercive and dishonest practices; violations of Section 340 of the New York General Business Law relating to contracts or agreements for monopoly or in restraint of trade; and violations of the New York Insurance Law that resulted from unfair methods of competition and unfair or deceptive acts or practices. The Amended Citation contemplated a number of potential actions the NYSID could take, including the revocation of licenses held by the respondents.
a. | Marsh will accept compensation for its services in placing, renewing, consulting on or servicing any insurance policy only by a specific fee paid by the client; or by a specific percentage commission on premium to be paid by the insurer; or a combination of both. The amount of such compensation must be fully disclosed to, and consented to in writing, by the client prior to the binding of any policy; |
b. | Marsh must give clients prior notification before retaining interest earned on premiums collected on behalf of insurers; |
c. | In placing, renewing, consulting on or servicing any insurance policy, Marsh will not accept from or request of any insurer any form of contingent compensation; |
d. | In placing, renewing, consulting on or servicing any insurance policy, Marsh will not knowingly use wholesalers for the placement, renewal, consultation on or servicing of insurance without the agreement of its client; |
e. | Prior to the binding of an insurance policy, Marsh will disclose to clients all quotes and indications sought or received from insurers, including the compensation to be received by Marsh in connection with each quote. Marsh also will disclose to clients at year-end Marsh’s compensation in connection with the client’s policy; and |
f. | Marsh will implement company-wide written standards of conduct relating to compensation and will train relevant employees in a number of subject matters, including business ethics, professional obligations, conflicts of interest, anti-trust and trade practices compliance, and record keeping. |
• | Approximately 21 putative class actions purportedly brought on behalf of policyholders were filed in various federal courts. A number of these federal cases were transferred to the District of New Jersey for coordination or consolidated pretrial proceedings (the “MDL Cases”). On August 1, 2005, two consolidated amended complaints were filed in the MDL Cases (one on behalf of a purported class of “commercial” policyholders and the second on behalf of a purported class of “employee benefit” policyholders), which as against MMC and certain affiliates allege statutory claims for violations of the Racketeering Influenced and Corrupt Organizations Act and federal and state antitrust laws, together with common law claims for breach of fiduciary duty and unjust enrichment. The complaints seek a variety of remedies, including unspecified monetary damages, treble damages, disgorgement, restitution, punitive damages, declaratory and injunctive relief, and attorneys’ fees and costs. The class periods alleged in the MDL Cases begin on August 26, 1994 and purport to continue to the date of any class certification. On November 29, 2005, MMC and the other defendants moved to dismiss the two consolidated amended complaints. |
• | On January 21, 2005, the State of Connecticut brought an action against Marsh in the Connecticut Superior Court. The State alleged that Marsh violated Connecticut’s Unfair Trade Practices Act by accepting $50,000 from an insurer in connection with a placement Marsh made for Connecticut’s Department of Administrative Services (the “DAS”). On September 21, 2005, the State amended its complaint. In addition to its allegations about the DAS transaction, the amended complaint asserts that Marsh violated Connecticut’s antitrust and unfair trade practices acts by engaging in bid rigging and other improper conduct that purportedly damaged particular customers and inflated insurance premiums. The State also claims that Marsh improperly accepted contingent commissions and concealed these commissions from its clients. Marsh has moved to stay this action pending the outcome of the MDL Cases. |
• | Four purported class actions on behalf of individuals and entities who purchased or acquired MMC’s publicly-traded securities during the purported class periods are pending in the United States District Court for the Southern District of New York. On January 26, 2005, the Court issued an order consolidating these complaints into a single proceeding and appointing co-lead plaintiffs and co-lead counsel to represent the purported class. On April 19, 2005, the co-lead plaintiffs filed a lengthy consolidated complaint. The consolidated complaint names MMC, Marsh, Inc., MMC’s independent registered public accounting firm and twenty present and former directors and officers of MMC and certain affiliates as defendants. The purported class period in the consolidated complaint extends from October 14, 1999 to October 13, 2004. |
• | Four individual shareholder actions have been filed against MMC and others in various state courts around the country. MMC and other defendants removed these four actions to federal court. Two actions have since been remanded to state court. One remains pending in federal court, and one has been transferred for inclusion in the consolidated proceeding described immediately above. |
• | A number of shareholder derivative actions are pending against MMC’s current and former directors and officers. Five actions in the Court of Chancery of the State of Delaware have been consolidated as a single action (the “Delaware Derivative Action”). Five actions in the United States District Court for the Southern District of New York have been consolidated as a single action (the “Federal Derivative Action”). One action is pending in the New York Supreme Court for New York County. These shareholder derivative actions allege, among other things, that current and former directors and officers of MMC breached their fiduciary duties with respect to the alleged misconduct described in the NYAG Lawsuit, are liable to MMC for damages arising from their alleged breaches of fiduciary duty, and must contribute to or indemnify MMC for any damages MMC has suffered. The Delaware Derivative Action is stayed pending a ruling on a motion to dismiss the Southern District of New York securities class action. The derivative action pending in the New York Supreme Court has also been stayed pending resolution of the Federal Derivative Action. |
this derivative action have agreed that it will also remain stayed pending resolution of the motions to dismiss the Southern District of New York securities class action.
• | Twenty purported class actions alleging violations of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), have been filed in the United States District Court for the Southern District of New York on behalf of participants and beneficiaries of the Marsh & McLennan Companies Stock Investment Plan (the “Plan”). On February 9, 2005, the Court issued an order consolidating these complaints into a single proceeding and appointing co-lead plaintiffs and lead counsel to represent the purported class. Plaintiffs filed a consolidated class action complaint (the “Consolidated Complaint”) on June 15, 2005, naming MMC and various current and former employees, officers and directors as defendants. The Consolidated Complaint alleges, among other things, that in view of the purportedly fraudulent bids and the receipt of contingent commissions pursuant to the market service agreements referred to above, the defendants knew or should have known that the investment of the Plan’s assets in MMC stock was imprudent. The Consolidated Complaint also asserts that certain defendants failed to provide the Plan’s participants with complete and accurate information about MMC stock, that certain defendants responsible for selecting, removing and monitoring other fiduciaries did not comply with ERISA, and that MMC knowingly participated in other defendants’ breaches of fiduciary duties. The Consolidated Complaint seeks, among other things, unspecified compensatory damages, injunctive relief and attorneys’ fees and costs. The amount of Plan assets invested in MMC stock at October 13, 2004 (immediately prior to the announcement of the NYAG Lawsuit) was approximately $1.2 billion. The Consolidated Complaint alleges that during the purported class period, which extends from July 1, 2000 until January 31, 2005, MMC stock fell from $52.22 to $32.50. MMC and the other defendants have filed a motion to dismiss the Consolidated Complaint. |
• | On February 23, 2005, the plaintiffs in a shareholder derivative suit pending in the Delaware Court of Chancery against the directors and officers of American International Group, Inc. (“AIG”) filed a consolidated complaint which, as subsequently amended, names as additional defendants MMC, Marsh, Inc., Marsh USA Inc., Marsh Global Broking Inc. (collectively, the “MMC Corporate Defendants”), MMC’s former CEO, and five former Marsh employees who have pleaded guilty to certain criminal charges (the former CEO and former employees, together with the MMC Corporate Defendants, the “MMC Defendants”). This action alleges, among other things, that the MMC Defendants, certain AIG employees and others engaged in conspiracy and common law fraud with respect to the alleged misconduct described in the NYAG Lawsuit, including, but not limited to, illegal bid rigging and kickback schemes, and |
that AIG was harmed thereby. This action further alleges that the MMC Corporate Defendants aided and abetted the current and former directors and officers of AIG in breaching their fiduciary duties to AIG with respect to AIG’s participation in the alleged misconduct described in the NYAG Lawsuit and that the MMC Corporate Defendants were unjustly enriched. The consolidated complaint asserts that the MMC Defendants are liable to AIG for damages and also seeks the return of all contingent commission payments made by AIG to the MMC Corporate Defendants. |
• | On May 13, 2005, the plaintiffs in a purported securities fraud class action suit pending in the United States District Court for the Southern District of New York against Axis Capital Holdings Limited (“Axis”) and certain of its officers filed a consolidated complaint that named MMC, among others, as an additional defendant. This purported class action is on behalf of all persons and entities that purchased or acquired Axis’s publicly traded common stock during a purported class period from August 6, 2003 to October 14, 2004. The complaint alleges violations of federal securities laws in connection with defendants’ purported failure to disclose alleged improper business practices concerning incentive commission payments by Axis to (among others) Marsh Inc. With regard to MMC, the complaint also alleges that various entities and partnerships managed by or associated with MMC Capital Inc. sold Axis common stock to members of the purported class knowing of the alleged inflated valuation of such stock, and seeks damages for alleged violations of federal securities laws. MMC and the other defendants have moved to dismiss this action. |
• | Following the filing of the NYAG Lawsuit, MMC and certain of its subsidiaries received notices of investigations and inquiries, together with requests for documents and information, from attorneys general, departments of insurance and other state and federal governmental entities in a number of jurisdictions (other than New York) that relate to the allegations in the NYAG Lawsuit. As of February 24, 2006, offices of attorneys general in 22 jurisdictions have issued one or more requests for information or subpoenas calling for the production of documents or for witnesses to provide testimony. Subpoenas, letters of inquiry and other information requests have been received from departments of insurance or other state agencies in 38 jurisdictions. MMC and its subsidiaries are cooperating with these requests from regulators. MMC has been contacted by certain of the above state entities indicating that they may file civil actions or otherwise seek additional monetary or other remedies from MMC. In addition, MMC or its subsidiaries may face administrative |
proceedings or other regulatory actions, fines or penalties, including, without limitation, actions to revoke or suspend their insurance broking licenses. |
• | On September 21, 2005, the National Association of Insurance Commissioners (the “NAIC”) issued a press release indicating that over 30 state insurance regulators working collaboratively through the NAIC had reached a multi-state regulatory settlement with MMC and Marsh Inc. The NAIC settlement agreement reaffirms MMC’s commitment, under the Settlement Agreement with NYAG and the NYSID, to establish a no-fault compensation fund for policyholder clients across the United States, and provides for state-by-state enforcement of the business reforms agreed to be implemented pursuant to the Settlement Agreement. The NAIC settlement agreement has been executed by MMC and Marsh Inc. and, as of February 24, 2006, has been adopted by insurance commissioners in thirty-three states, the District of Columbia and Guam. |
• | In 2003 and 2004, Putnam entered into settlements with the Securities and Exchange Commission (the “SEC”) and the Commonwealth of Massachusetts (the “Massachusetts Securities Division”) with respect to excessive short-term trading by certain former Putnam employees in shares of the Putnam mutual funds (the “Putnam Funds”). Under the settlements, Putnam paid in 2004 a total of $110 million ($10 million in restitution and $100 million in civil fines and penalties). Putnam also agreed to undertake a number of remedial compliance actions and to engage an independent assessment consultant (the “IAC”) to determine the amount of restitution that Putnam would be required to pay to make investors in the Putnam Funds whole for losses attributable to the short-term trading. |
• | In the Spring of 2004, Putnam received document requests and subpoenas from the Massachusetts Securities Division, NYAG, the SEC and the Department of Labor relating to plan expense reimbursement agreements between Putnam and certain multi-employer deferred compensation plans that are Putnam clients, and also relating to Putnam’s |
relationships with consultants retained by multi-employer deferred compensation plans. At that time, the Massachusetts Securities Division took testimony from a number of Putnam employees relating to these matters. |
• | Commencing in 2004, the Enforcement Staff of the SEC’s Boston Office investigated certain matters that arose in the defined contribution plan administration business formerly conducted by Putnam Fiduciary Trust Company (“PFTC”). One of the matters related to the manner in which certain operational errors were corrected in connection with a January 2001 transfer and investment of assets on behalf of a 401(k) defined contribution plan. The manner in which these errors were corrected affected the plan and five of the Putnam Funds in which certain plan assets were invested. Following the discovery of this matter, Putnam notified the regulatory authorities, made restitution to the plan and the affected Putnam Funds and made a number of changes in its personnel and procedures. A second matter related to the source and use of funds paid to a third-party vendor by PFTC in exchange for information consulting services. Putnam has re-processed the payment of these consulting expenses in accordance with Putnam’s corporate expense payment procedures. |
• | In October 2004 the Department of Labor indicated its preliminary belief that Putnam may have violated certain provisions of ERISA related to investments by the Putnam Profit Sharing Retirement Plan and certain discretionary ERISA accounts in Putnam Funds that pay 12b-1 fees. Putnam has made a written submission to the Department of Labor addressing these issues. |
• | Since December 2003, Putnam has received various requests for information from the Department of Labor regarding the Putnam Profit Sharing Retirement Plan, including requests for information relating to (i) Plan governance, (ii) Plan investments, including investments in MMC stock, (iii) the purported ERISA class actions relating to MMC’s receipt of contingent commissions and other matters, which are discussed above, (iv) the market timing-related “ERISA Actions,” which are discussed below, and (v) the suspensions of trading in MMC stock imposed by Putnam on its employees in October and November 2004. |
• | The Fort Worth office of the SEC has stated that it does not believe that the previous structure of the Putnam Research Fund’s investment management fee, which included a performance component in addition to a base fee, fully complied with SEC regulations concerning performance fees. In order to resolve this matter, Putnam submitted an offer of settlement to the SEC’s Fort Worth office on December 30, 2005. The offer of settlement, pursuant to which Putnam would neither admit nor deny wrongdoing, remains subject to acceptance by the SEC. On November 18, 2005, in connection with the proposed |
settlement, Putnam reimbursed the Putnam Research Fund in a total amount of $1.65 million. The reimbursement represents a retroactive adjustment to the fee structure from April 1, 1997 (the date when the performance fee was put in effect) through September 27, 2004 (when the performance fee was terminated). |
• | Starting in May 2004, Putnam received and responded to requests for information from the Washington staff of the SEC’s Office of Compliance Inspections and Examinations, in the context of an SEC sweep concerning closed-end fund distributions. In April and July 2005, Putnam received and responded to follow-up requests concerning the same subject matter from the SEC’s Division of Enforcement, which has indicated its belief that Putnam’s issuance of notices to shareholders in connection with dividend payments by certain of Putnam’s closed-end funds did not comply with applicable SEC disclosure requirements. Putnam is currently engaged in discussions with the SEC staff regarding a resolution of this matter. |
• | Starting in January 2004, the NASD has made several requests for information relating to reimbursement of expenses to participants at certain sales meetings (during the period from 2001 to 2004). Putnam has fully responded to these requests and is cooperating with the NASD’s investigation. |
• | MMC and Putnam, along with certain of their former officers and directors, were named in a consolidated amended class action complaint (the “MMC Class Action”) purportedly brought on behalf of all purchasers of the publicly-traded securities of MMC between January 3, 2000 and November 3, 2003 (the “Class Period”). In general, the MMC Class Action alleges that the defendants, including MMC, allowed certain mutual fund investors and fund managers to engage in market-timing in the Putnam Funds. The complaint further alleges that this conduct was not disclosed until late 2003, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint alleges that, as a result of defendants’ purportedly misleading statements or omissions, MMC’s stock traded at inflated levels during the Class Period. The suit seeks unspecified damages and equitable relief. In an opinion dated February 27, 2006, the district court granted defendants’ motions to dismiss all claims against them. |
• | MMC and Putnam were also named as defendants in a consolidated amended complaint filed on behalf of a putative class of investors in certain Putnam Funds, and in another consolidated amended complaint in which certain fund investors purport to assert derivative claims on behalf of all Putnam Funds. These suits seek to recover unspecified damages allegedly suffered by the funds and their shareholders as a result of purported market-timing and late-trading activity that allegedly occurred in certain Putnam Funds. The derivative suit seeks additional relief, including termination of the investment advisory contracts between Putnam and the funds, cancellation of the funds’ 12b-1 plans and the return of all advisory and 12b-1 fees paid by the funds over a certain period of time. In addition to MMC and |
Putnam, the derivative suit names as defendants various Putnam affiliates, certain trustees of Putnam Funds, certain present and former Putnam officers and employees, and persons and entities that allegedly engaged in or facilitated market-timing or late trading activities in Putnam Funds. The complaints allege violations of Sections 11, 12(a), and 15 of the Securities Act of 1933, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, Sections 36(a) and (b), 47 and 48(a) of the Investment Company Act of 1940, and Sections 206 and 215 of the Investment Advisers Act, as well as state law claims for breach of fiduciary duty, breach of contract, unjust enrichment and civil conspiracy. On November 3, 2005, with regard to the class action complaint, the court dismissed all claims against Putnam except for claims alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 36(b) and 48(a) of the Investment Company Act of 1940. The court deferred ruling on MMC’s motion to dismiss claims against MMC. With regard to the derivative complaint, the court further dismissed all claims against Putnam and MMC except for claims alleging violations of Section 36(b) and Section 48(a). Putnam has also been named as a defendant in its capacity as a sub-advisor to a non-Putnam fund in a class action suit pending in the District of Maryland against another mutual fund complex. |
• | A consolidated amended complaint asserting shareholder derivative claims has been filed, purportedly on behalf of MMC, against current and former members of MMC’s Board of Directors, two of Putnam’s former officers, and MMC as a nominal defendant (the “MMC Derivative Action”). The MMC Derivative Action generally alleges that the members of MMC’s Board of Directors violated the fiduciary duties they owed to MMC and its shareholders as a result of a failure of oversight of market-timing in the Putnam Funds. The MMC Derivative Action alleges that, as a result of the alleged violation of defendants’ fiduciary duties, MMC suffered damages. The suit seeks unspecified damages and equitable relief. MMC has also received two demand letters from stockholders asking the MMC Board of Directors to take action to remedy alleged breaches of duty by certain officers, directors, trustees or employees of MMC or Putnam, based on allegations of market-timing in the Putnam Funds. The first letter asked to have the Board of Trustees of the Putnam Funds, as well as the MMC Board, take action to remedy those alleged breaches of fiduciary duty. The second letter demanded that MMC commence legal proceedings against the MMC directors, the senior management of Putnam, the Putnam Funds’ Trustees and MMC’s auditor to remedy those alleged breaches of fiduciary duty. |
• | MMC, Putnam, and various of their current and former officers, directors and employees have been named as defendants in two consolidated amended complaints that purportedly assert class action claims under ERISA (the “ERISA Actions”). The ERISA Actions, which have been brought by participants in MMC’s Stock Investment Plan and Putnam’s Profit Sharing Retirement Plan, allege, among other things, that, in view of the market-timing trading activity that was allegedly allowed to occur at Putnam, the defendants knew or should have known that the investment of the plans’ funds in MMC stock and Putnam’s mutual fund shares was imprudent and that the defendants breached their fiduciary duties to the plan participants in making these investments. The ERISA Actions seek unspecified damages and equitable relief, including the restoration to the plans of all profits the defendants allegedly made through the use of the plans’ assets, an order compelling the defendants to make good to the plans all losses to the plans allegedly resulting from defendants’ alleged breaches of their fiduciary duties, and the imposition of a constructive trust on any amounts by which any defendant allegedly was unjustly enriched at the expense of the plans. |
• | A number of the Putnam Funds have been named as defendants in a purported class action brought on behalf of certain holders of the funds’ Class B shares who either (i) held such shares and were subject to certain contingent deferred sales charges (“CDSCs”) as of October 28, 2003, or (ii) were assessed a CDSC for redeeming such shares on or after October 28, 2003. Plaintiff alleges that Putnam engaged in misconduct constituting a breach of contract and breach of the covenant of good faith and fair dealing with purported class members by allowing market-timing. Plaintiff seeks, among other things, actual damages or statutory damages of $25 for each class member (whichever is greater) and relief from paying a CDSC for redeeming Class B shares. In August 2005, this action was transferred to the consolidated proceedings in the United States District Court for the District of Maryland, described above. |
• | Putnam Investment Management, LLC and Putnam Retail Management Limited Partnership have been sued in the United States District Court for the District of Massachusetts for alleged violations of Section 36(b) of the Investment Company Act of 1940 in connection with the receipt of purportedly excessive advisory and distribution fees paid by certain Putnam Funds in which plaintiffs purportedly owned shares. Plaintiffs seek, among other things, to recover the “excessive” advisory and distribution fees paid to defendants by those funds beginning one year prior to the filing of the complaint, rescission of the management and distribution agreements between defendants and the funds, and a prospective reduction in fees. On March 28, 2005, the Court granted in part and denied in part defendants’ motion to dismiss the complaint. Plaintiffs served an amended complaint on April 4, 2005. On January 19, 2006, the Court granted plaintiffs’ motion for leave to file a second amended complaint, and granted defendants’ motion for partial summary judgment, limiting the scope of the suit to the fees paid by the five Putnam Funds. |
• | Certain Putnam entities have been named as defendants in a suit brought in the District Court of Travis County, Texas by a former institutional client, the Employee Retirement System of Texas (“ERS”). ERS alleges that Putnam breached its investment management agreement and did not make appropriate disclosures to ERS at the time the investment management agreement was executed. Putnam has removed the action to the United States District Court for the Western District of Texas, and ERS has moved to remand the action to state court. Putnam also is awaiting the conclusion of an arbitration process involving similar issues with another former institutional client. Putnam has provided for the estimated liability related to this matter. |
• | Putnam may be subject to employment-related claims by former employees who left Putnam in connection with various regulatory inquiries, including claims relating to deferred compensation. A former Putnam senior executive has notified Putnam of his intention to initiate an arbitration proceeding against Putnam arising from the circumstances of his separation from Putnam. To date, no such action has been commenced. |
• | Commencing on July 9, 2004, PFTC, as well as Cardinal Health and a number of other Cardinal-related fiduciaries, were named as defendants in a litigation pending in the United States District Court for the Southern District of Ohio relating to the allegedly imprudent investment of retirement plan assets in Cardinal stock in the Cardinal Health Profit Sharing, |
Retirement and Savings Plan and its predecessor plans. PFTC was a directed trustee of this plan. At a hearing on February 10, 2006, the judge stated that he expected to dismiss the complaint with respect to PFTC and to issue a written opinion within two to three weeks. |
• | On June 13, 2005, the European Commission announced its intention to commence an investigation (a so-called sector inquiry) into competition in the financial services sector. In announcing the investigation, the Commission stated, among other things: “The Commission is concerned that in some areas of business insurance (the provision of insurance products and services to businesses), competition may not be functioning as well as it could.... Insurance and reinsurance intermediation will also be part of the inquiry.” |
• | On May 19, 2005, the SEC issued a subpoena to MMC relating to certain loss mitigation insurance and reinsurance products. The SEC had previously issued a subpoena to MMC in early 2003 relating to loss mitigation products. MMC and its subsidiaries have received similar inquiries from regulators and other authorities in several states. On April 18, 2005, the Office of Insurance Regulation in the State of Florida issued a subpoena to Guy Carpenter & Company, Inc. concerning certain reinsurance products. On May 4, 2005, the Office of Insurance and Fire Safety Commissioner in the State of Georgia issued a subpoena to MMC that requested, among other things, information relating to finite insurance placements. On May 23, 2005, the Office of the Attorney General in the State of Connecticut issued a subpoena to MMC concerning finite insurance. MMC and its subsidiaries are cooperating with these and other informal inquiries. |
• | The SEC is examining the practices, compensation arrangements and disclosures of consultants that provide services to sponsors of pension plans or other market participants, including among other things, practices with respect to advice regarding the selection of investment advisors to manage plan assets. On March 22, 2005, Mercer Investment Consulting, Inc. (“Mercer IC”) received a letter from the SEC outlining its findings and requesting that Mercer IC improve certain disclosures and procedures. On April 22, 2005, Mercer IC responded to that letter, indicating that it had made or will make the improvements requested by the SEC. Since that time, Mercer IC received separate letters from the Boston office of the Enforcement Division of the SEC requesting additional information. Mercer IC has responded to these requests and continues to cooperate with the SEC. |
• | In November 2004, MMC, Putnam and Mercer received requests for information from the Boston office of the Enforcement Division of the SEC in connection with an informal investigation of a former program pursuant to which MMC affiliates referred business to one another and received compensation for such referrals. MMC, Putnam and Mercer responded to these requests and are cooperating with the SEC. |
• | On February 8, 2005 the Department of Labor served a subpoena on MMC seeking documents pertaining to services provided by MMC subsidiaries to employee benefit plans, including but not limited to documents relating to how such subsidiaries have been compensated for such services. The request also sought information concerning market service agreements and the solicitation of bids from insurance companies in connection with such services. MMC is cooperating with the Department of Labor. |
• | On December 21, 2004, MMC received a request for information pursuant to a formal investigation commenced by the SEC. The request for information seeks documents |
concerning related-party transactions of MMC or MMC subsidiaries in which transactions a director, executive officer or 5% stockholder of MMC had a direct or indirect material interest. On April 29, 2005, MMC received a subpoena from the SEC broadening the scope of the original request. MMC is cooperating in the investigation. Certain current and former employees of MMC have been noticed to testify in connection with this matter. |
• | MMC and its subsidiaries are subject to a significant number of other claims, lawsuits and proceedings in the ordinary course of business. Such claims and lawsuits consist principally of alleged errors and omissions (known as E&O’s) in connection with the performance of professional services. Some of these claims seek damages, including punitive damages, in amounts that could, if awarded, be significant. MMC provides for these exposures by a combination of third-party insurance and self-insurance. For policy years 2000–2001 and prior, substantial third-party insurance is in place above the annual aggregate limits of MMC’s self-insured retention, which was $50 million annually for policy years 1998–1999, 1999–2000 and 2000–2001. To the extent that expected losses exceed MMC’s self-insured retention in any policy year, MMC records an asset for the amount that MMC expects to recover under its third-party insurance programs. The policy limits and coverage terms of the third-party insurance vary to some extent by policy year, but MMC is not aware of coverage defenses or other obstacles to coverage that would limit recoveries in those years in a material amount. In policy years subsequent to 2000–2001, the availability of third-party insurance has declined substantially which has caused MMC to assume increasing levels of self-insurance. MMC utilizes internal actuarial and other estimates, and case level reviews by inside and outside counsel, to establish loss reserves which it believes are adequate to provide for this self-insured retention. These reserves are reviewed quarterly and adjusted as developments warrant. |
• | On February 7, 2005, Olwyco LLC (“Olwyco”) commenced a lawsuit in the United States District Court for the Southern District of New York, and, after voluntarily dismissing that action, subsequently filed a new complaint in New York State Supreme Court, County of New York (the “State Lawsuit”). The claims in the State Lawsuit, which named MMC, Mercer Management Consulting, Inc. (“Mercer Management”) and Mercer Inc. as defendants, arose from a February 21, 2003 agreement in which Mercer Management agreed to purchase substantially all of Olwyco’s assets and, as part of the consideration, to transfer shares of MMC stock to Olwyco in April 2005, 2006 and 2007. Olwyco alleged that the price of MMC stock at the time of the agreement was inflated artificially as a result of a failure to disclose alleged violations of law that later became the subject of the NYAG Lawsuit and the Putnam “market timing” litigation. In December 2005, the parties agreed to settle this matter, and the State Lawsuit has been dismissed with prejudice. |
• | In connection with its acquisition of U.K.-based Sedgwick Group in 1998, MMC acquired several insurance underwriting businesses that were already in run-off, including River Thames Insurance Company Limited (“River Thames”), which MMC sold in 2001. Sedgwick guaranteed payment of claims on certain policies underwritten through the Institute of London Underwriters (the “ILU”) by River Thames (such guarantee being hereinafter referred to as the “ILU Guarantee”). The policies covered by the ILU Guarantee are reinsured up to £40 million by a related party of River Thames. Payment of claims under the reinsurance agreement is collateralized by segregated assets held in a trust. As of December 31, 2005, the reinsurance coverage exceeded the best estimate of the projected liability of the policies covered by the ILU Guarantee. To the extent River Thames or the reinsurer is unable to |
17. | Segment Information |
• | Risk and Insurance Services, comprising insurance services (Marsh), reinsurance services (Guy Carpenter), and Risk Capital Holdings; |
• | Risk Consulting and Technology (Kroll); |
• | Consulting, including Mercer Human Resource Consulting and Mercer’s Specialty Consulting businesses; and |
• | Investment Management (Putnam). |
investment income and losses attributable to each segment, directly related expenses, and charges or credits related to integration and restructuring but not MMC corporate-level expenses.
For the Years Ended December 31, (In millions of dollars) | | Revenue | | Operating Income | | Total Assets | | Depreciation and Amortization | | Capital Expenditures | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005— | ||||||||||||||||||||
Risk and Insurance Services | $ | 5,592 | (a) | $ | 305 | $ | 11,465 | $ | 221 | $ | 153 | |||||||||
Risk Consulting & Technology | 946 | (b) | 124 | 2,524 | 84 | 54 | ||||||||||||||
Consulting | 3,802 | (c) | 451 | 3,595 | 96 | 83 | ||||||||||||||
Investment Management | 1,506 | (d) | 263 | 1,882 | 69 | 36 | ||||||||||||||
Total Operating Segments | $ | 11,846 | $ | 1,143 | $ | 19,466 | $ | 470 | $ | 326 | ||||||||||
Corporate/Eliminations | (194 | ) | (287 | ) (e) | (1,727 | ) (f) | 11 | 2 | ||||||||||||
Assets of Discontinued Operations | — | — | 153 | — | 17 | |||||||||||||||
Total Consolidated | $ | 11,652 | $ | 856 | $ | 17,892 | $ | 481 | $ | 345 | ||||||||||
2004— | ||||||||||||||||||||
Risk and Insurance Services | $ | 6,205 | (a) | $ | 84 | $ | 9,428 | $ | 225 | $ | 223 | |||||||||
Risk Consulting & Technology | 405 | (b) | 48 | 2,284 | 33 | 21 | ||||||||||||||
Consulting | 3,637 | (c) | 409 | 3,858 | (g) | 99 | 55 | |||||||||||||
Investment Management | 1,710 | (d) | 98 | 2,038 | 79 | 49 | ||||||||||||||
Total Operating Segments | $ | 11,957 | $ | 639 | $ | 17,608 | $ | 436 | $ | 348 | ||||||||||
Corporate/Eliminations | (196 | ) | (39 | ) | (717 | )(f) | 14 | 14 | ||||||||||||
Assets of Discontinued Operations | — | — | 173 | — | 14 | |||||||||||||||
Total Consolidated | $ | 11,761 | $ | 600 | $ | 18,498 | $ | 450 | $ | 376 | ||||||||||
2003— | ||||||||||||||||||||
Risk and Insurance Services | $ | 6,133 | (a) | $ | 1,607 | $ | 8,876 | $ | 199 | $ | 275 | |||||||||
Risk Consulting & Technology | 19 | (b) | (8 | ) | — | — | — | |||||||||||||
Consulting | 3,290 | (c) | 461 | 3,552 | (g) | 89 | 70 | |||||||||||||
Investment Management | 1,955 | (d) | 503 | 2,303 | 87 | 45 | ||||||||||||||
Total Operating Segments | $ | 11,397 | $ | 2,563 | $ | 14,731 | $ | 375 | $ | 390 | ||||||||||
Corporate/Eliminations | (197 | ) | (115 | ) | 185 | (f) | 12 | 40 | ||||||||||||
Assets of Discontinued Operations | — | — | 137 | — | 6 | |||||||||||||||
Total Consolidated | $ | 11,200 | $ | 2,448 | $ | 15,053 | $ | 387 | $ | 436 |
(a) | Includes interest income on fiduciary funds ($151 million in 2005, $130 million in 2004 and $114 million in 2003). |
(b) | Includes inter-segment revenue ($27 million in 2005 and $2 million in 2004). |
(c) | Includes inter-segment revenue ($154 million in 2005, $173 million in 2004, and $184 million in 2003). |
(d) | Includes inter-segment revenue ($10 million in 2005 and 2004, and $8 million in 2003). |
(e) | Corporate expenses in 2005 include $64 million of incremental expense, primarily related to stock options, resulting from the implementation of SFAS 123(R) effective July 1, 2005. |
(f) | Corporate assets primarily include unallocated goodwill, insurance recoverables, prepaid pension and a portion of MMC’s headquarters building. |
(g) | Total consulting assets are higher than previously reported in 2004 due to the Investment in Delta held by Human Resource Consulting not eliminated after the split of the two consulting product lines. Offset included in Corporate/Eliminations. |
(In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Risk & Insurance Services | ||||||||||||||
Insurance Services | $ | 4,567 | $ | 5,166 | $ | 5,167 | ||||||||
Reinsurance Services | 836 | 859 | 836 | |||||||||||
Risk Capital Holdings | 189 | 180 | 130 | |||||||||||
Total Risk & Insurance Services | 5,592 | 6,205 | 6,133 | |||||||||||
Risk Consulting & Technology | 946 | 405 | 19 | |||||||||||
Consulting | ||||||||||||||
Human Resource Consulting | 2,708 | 2,704 | 2,533 | |||||||||||
Specialty Consulting | 909 | 774 | 612 | |||||||||||
3,617 | 3,478 | 3,145 | ||||||||||||
Reimbursed Expenses | 185 | 159 | 145 | |||||||||||
Total Consulting | 3,802 | 3,637 | 3,290 | |||||||||||
Investment Management | 1,506 | 1,710 | 1,955 | |||||||||||
Total Operating Segments | $ | 11,846 | $ | 11,957 | $ | 11,397 | ||||||||
Corporate/Eliminations | (194 | ) | (196 | ) | (197 | ) | ||||||||
Total | $ | 11,652 | $ | 11,761 | $ | 11,200 |
(In millions of dollars) | | 2005 | | 2004 | | 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Geographic Area: | ||||||||||||||
External Revenue — | ||||||||||||||
United States | $ | 6,818 | $ | 7,033 | $ | 7,180 | ||||||||
United Kingdom | 2,043 | 2,083 | 1,760 | |||||||||||
Continental Europe | 1,461 | 1,456 | 1,241 | |||||||||||
Other | 1,524 | 1,385 | 1,216 | |||||||||||
$ | 11,846 | $ | 11,957 | $ | 11,397 | |||||||||
Corporate/Eliminations | (194 | ) | (196 | ) | (197 | ) | ||||||||
$ | 11,652 | $ | 11,761 | $ | 11,200 | |||||||||
Fixed Assets — | ||||||||||||||
United States | $ | 782 | $ | 882 | $ | 907 | ||||||||
United Kingdom | 232 | 308 | 308 | |||||||||||
Continental Europe | 74 | 85 | 78 | |||||||||||
Other | 90 | 88 | 82 | |||||||||||
$ | 1,178 | $ | 1,363 | $ | 1,375 |
• | The transfer of Marsh’s U.K. employee benefits business from Insurance Services to Human Resource Consulting. |
• | The transfer of several consulting businesses, which included business continuity management, mass tort and complex liability mitigation, and data services for the management of insurance, claims and legal data, from Risk Consulting & Technology to Insurance Services. |
• | The discontinued operations classifications for the U.S. wholesale broking and claims management businesses, which were previously part of Related Insurance Services. |
Revenue: | Three Months Ended (Unaudited) | Twelve Months Ended | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | March 31, | June 30, | Sept. 30, | Dec. 31, | Dec. 31, | ||||||||||||||||||
Risk and Insurance Services | |||||||||||||||||||||||
Insurance Services | $ | 1,232 | $ | 1,172 | $ | 1,028 | $ | 1,135 | $ | 4,567 | |||||||||||||
Reinsurance Services | 282 | 192 | 207 | 155 | 836 | ||||||||||||||||||
Risk Capital Holdings | 63 | 54 | 45 | 27 | 189 | ||||||||||||||||||
Total Risk and Insurance Services | 1,577 | 1,418 | 1,280 | �� | 1,317 | 5,592 | |||||||||||||||||
Risk Consulting & Technology | 233 | 241 | 242 | 230 | 946 | ||||||||||||||||||
Consulting | |||||||||||||||||||||||
Human Resource Consulting | 676 | 696 | 672 | 664 | 2,708 | ||||||||||||||||||
Specialty Consulting | 210 | 229 | 222 | 248 | 909 | ||||||||||||||||||
886 | 925 | 894 | 912 | 3,617 | |||||||||||||||||||
Reimbursed Expenses | 38 | 47 | 46 | 54 | 185 | ||||||||||||||||||
Total Consulting | 924 | 972 | 940 | 966 | 3,802 | ||||||||||||||||||
Investment Management | 398 | 377 | 371 | 360 | 1,506 | ||||||||||||||||||
Total Operating Segments | 3,132 | 3,008 | 2,833 | 2,873 | 11,846 | ||||||||||||||||||
Corporate Eliminations | (62 | ) | (31 | ) | (54 | ) | (47 | ) | (194 | ) | |||||||||||||
Total Revenue | $ | 3,070 | $ | 2,977 | $ | 2,779 | $ | 2,826 | $ | 11,652 |
Three Months Ended (Unaudited) | Twelve Months Ended | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | March 31, | June 30, | Sept. 30, | Dec. 31, | Dec. 31, | ||||||||||||||||||
Risk and Insurance Services | |||||||||||||||||||||||
Insurance Services | $ | 1,478 | $ | 1,365 | $ | 1,127 | $ | 1,196 | $ | 5,166 | |||||||||||||
Reinsurance Services | 283 | 211 | 209 | 156 | 859 | ||||||||||||||||||
Risk Capital Holdings | 37 | 40 | 45 | 58 | 180 | ||||||||||||||||||
Total Risk and Insurance Services | 1,798 | 1,616 | 1,381 | 1,410 | 6,205 | ||||||||||||||||||
Risk Consulting & Technology | 4 | 4 | 196 | 201 | 405 | ||||||||||||||||||
Consulting | |||||||||||||||||||||||
Human Resource Consulting | 688 | 694 | 674 | 648 | 2,704 | ||||||||||||||||||
Specialty Consulting | 180 | 187 | 192 | 215 | 774 | ||||||||||||||||||
868 | 881 | 866 | 863 | 3,478 | |||||||||||||||||||
Reimbursed Expenses | 35 | 40 | 39 | 45 | 159 | ||||||||||||||||||
Total Consulting | 903 | 921 | 905 | 908 | 3,637 | ||||||||||||||||||
Investment Management | 450 | 434 | 415 | 411 | 1,710 | ||||||||||||||||||
Total Operating Segments | 3,155 | 2,975 | 2,897 | 2,930 | 11,957 | ||||||||||||||||||
Corporate Eliminations | (51 | ) | (43 | ) | (52 | ) | (50 | ) | (196 | ) | |||||||||||||
Total Revenue | $ | 3,104 | $ | 2,932 | $ | 2,845 | $ | 2,880 | $ | 11,761 |
Consolidated Statements of Income: | Three Months Ended (Unaudited) | Twelve Months Ended | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | March 31, | June 30, | Sept. 30, | Dec. 31, | Dec. 31, | ||||||||||||||||||
Operating Income (Loss): | |||||||||||||||||||||||
Risk and Insurance Services | $ | 137 | $ | 86 | $ | 20 | $ | 62 | $ | 305 | |||||||||||||
Risk Consulting & Technology | 37 | 36 | 36 | 15 | 124 | ||||||||||||||||||
Consulting | 110 | 130 | 117 | 94 | 451 | ||||||||||||||||||
Investment Management | 50 | 71 | 83 | 59 | 263 | ||||||||||||||||||
Corporate | (73 | ) | (30 | ) | (69 | ) | (115 | ) | (287 | ) | |||||||||||||
261 | 293 | 187 | 115 | 856 | |||||||||||||||||||
Interest Income | 9 | 11 | 13 | 14 | 47 | ||||||||||||||||||
Interest Expense | (69 | ) | (73 | ) | (111 | ) | (79 | ) | (332 | ) | |||||||||||||
Income Before Income Taxes and Minority Interest, Net of Tax | 201 | 231 | 89 | 50 | 571 | ||||||||||||||||||
Income Taxes | 70 | 69 | 24 | 29 | 192 | ||||||||||||||||||
Minority Interest Expense, Net of Tax | 2 | 2 | 2 | 4 | 10 | ||||||||||||||||||
Income From Continuing Operations | 129 | 160 | 63 | 17 | 369 | ||||||||||||||||||
Discontinued Operations, Net of Tax | 5 | 7 | 5 | 18 | 35 | ||||||||||||||||||
Net Income | $ | 134 | $ | 167 | $ | 68 | $ | 35 | $ | 404 | |||||||||||||
Basic Income Per Share — Continuing Operations | $ | 0.24 | $ | 0.30 | $ | 0.12 | $ | 0.03 | $ | 0.69 | |||||||||||||
Diluted Income Per Share — Continuing Operations | $ | 0.24 | $ | 0.30 | $ | 0.11 | $ | 0.03 | $ | 0.67 |
Three Months Ended (Unaudited) | Twelve Months Ended | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | March 31, | June 30, | Sept. 30, | Dec. 31, | Dec. 31, | ||||||||||||||||||
Operating Income (Loss): | |||||||||||||||||||||||
Risk and Insurance Services | $ | 600 | $ | 418 | $ | (63 | ) | $ | (871 | ) | $ | 84 | |||||||||||
Risk Consulting & Technology | — | — | 26 | 22 | 48 | ||||||||||||||||||
Consulting | 116 | 138 | 125 | 30 | 409 | ||||||||||||||||||
Investment Management | (26 | ) | 99 | 56 | (31 | ) | 98 | ||||||||||||||||
Corporate | 72 | (36 | ) | (33 | ) | (42 | ) | (39 | ) | ||||||||||||||
762 | 619 | 111 | (892 | ) | 600 | ||||||||||||||||||
Interest Income | 5 | 4 | 6 | 6 | 21 | ||||||||||||||||||
Interest Expense | (50 | ) | (48 | ) | (55 | ) | (66 | ) | (219 | ) | |||||||||||||
Income (Loss) Before Income Taxes and Minority Interest, Net of Tax | 717 | 575 | 62 | (952 | ) | 402 | |||||||||||||||||
Income Taxes | 278 | 188 | 45 | (271 | ) | 240 | |||||||||||||||||
Minority Interest Expense, Net of Tax | — | 3 | 3 | 2 | 8 | ||||||||||||||||||
Income (Loss) From Continuing Operations | 439 | 384 | 14 | (683 | ) | 154 | |||||||||||||||||
Discontinued Operations, Net of Tax | 7 | 5 | 7 | 3 | 22 | ||||||||||||||||||
Net Income (Loss) | $ | 446 | $ | 389 | $ | 21 | $ | (680 | ) | $ | 176 | ||||||||||||
Basic Income (Loss) Per Share — Continuing Operations | $ | 0.84 | $ | 0.74 | $ | 0.03 | $ | (1.29 | ) | $ | 0.29 | ||||||||||||
Diluted Income (Loss) Per Share — Continuing Operations | $ | 0.82 | $ | 0.72 | $ | 0.03 | $ | (1.29 | ) | $ | 0.29 |
Marsh & McLennan Companies, Inc.:
New York, New York
February 27, 2006
SUPPLEMENTAL INFORMATION (UNAUDITED)
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In millions of dollars, except per share figures) | |||||||||||||||||||
2005: | |||||||||||||||||||
Revenue | $ | 3,070 | $ | 2,977 | $ | 2,779 | $ | 2,826 | |||||||||||
Operating income(a) | $ | 261 | $ | 293 | $ | 187 | $ | 115 | |||||||||||
Income from continuing operations | $ | 129 | $ | 160 | $ | 63 | $ | 17 | |||||||||||
Income from discontinued operations | $ | 5 | $ | 7 | $ | 5 | $ | 18 | |||||||||||
Net income | $ | 134 | $ | 167 | $ | 68 | $ | 35 | |||||||||||
Basic Per Share Data: | |||||||||||||||||||
Income from continuing operations | $ | 0.24 | $ | 0.30 | $ | 0.12 | $ | 0.03 | |||||||||||
Income from discontinued operations | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.03 | |||||||||||
Net income | $ | 0.25 | $ | 0.31 | $ | 0.13 | $ | 0.06 | |||||||||||
Diluted Per Share Data:(a) | |||||||||||||||||||
Income from continuing operations | $ | 0.24 | $ | 0.30 | $ | 0.11 | $ | 0.03 | |||||||||||
Income from discontinued operations | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.03 | |||||||||||
Net income | $ | 0.25 | $ | 0.31 | $ | 0.12 | $ | 0.06 | |||||||||||
Dividends Paid Per Share | $ | 0.17 | $ | 0.17 | $ | 0.17 | $ | 0.17 | |||||||||||
2004: | |||||||||||||||||||
Revenue | $ | 3,104 | $ | 2,932 | $ | 2,845 | $ | 2,880 | |||||||||||
Operating income (loss) | $ | 762 | $ | 619 | $ | 111 | $ | (892 | ) | ||||||||||
Income (loss) from continuing operations | $ | 439 | $ | 384 | $ | 14 | $ | (683 | ) | ||||||||||
Income from discontinued operations | $ | 7 | $ | 5 | $ | 7 | $ | 3 | |||||||||||
Net income (loss) | $ | 446 | $ | 389 | $ | 21 | $ | (680 | ) | ||||||||||
Basic Per Share Data: | |||||||||||||||||||
Income (loss) from continuing operations | $ | 0.84 | $ | 0.74 | $ | 0.03 | $ | (1.29 | ) | ||||||||||
Income from discontinued operations | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | — | |||||||||||
Net income (loss) | $ | 0.85 | $ | 0.75 | $ | 0.04 | $ | (1.29 | ) | ||||||||||
Diluted Per Share Data: | |||||||||||||||||||
Income (loss) from continuing operations | $ | 0.82 | $ | 0.72 | $ | 0.03 | $ | (1.29 | ) | ||||||||||
Income from discontinued operations | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | — | |||||||||||
Net income (loss) | $ | 0.83 | $ | 0.73 | $ | 0.04 | $ | (1.29 | ) | ||||||||||
Dividends Paid Per Share | $ | 0.31 | $ | 0.31 | $ | 0.34 | $ | 0.34 |
Michael G. Cherkasky | Sandra S. Wijnberg | |||||
President and | Senior Vice President and | |||||
Chief Executive Officer | Chief Financial Officer | |||||
February 27, 2006 | February 27, 2006 |
Marsh & McLennan Companies, Inc.:
February 27, 2006
Plan category | | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)(2) | | (b) Weighted-average exercise price of outstanding options, warrants and rights (2) | | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (2) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by stockholders | 17,945,747 | $ | 35.8552 | 39,694,843 | (3) | |||||||||
Equity compensation plans not approved by stockholders | 48,329,828 | $ | 33.7637 | 44,008,145 | (4) | |||||||||
Total | 66,275,575 | (5) | $ | 34.3300 | 83,702,988 | (5) |
(1) | This column reflects shares subject to unexercised options granted over the last ten years under MMC’s2000 Senior Executive Incentive and Stock Award Plan, 1997 Senior Executive Incentive and Stock Award Plan, 1992 Incentive and Stock Award Plan, 2000 Employee Incentive and Stock Award Plan and1997 Employee Incentive and Stock Award Plan. This column contains information regarding stock options only; there are no warrants or stock appreciation rights outstanding. |
(2) | The number of shares that may be issued at the close of current offering periods under stock purchase plans, and the weighted-average exercise price of such shares, is uncertain and is consequently not reflected in columns (a) and (b). The number of shares to be purchased will depend on the amount of contributions with interest accumulated under these plans as of the close of the offering periods. The shares remaining available for future issuance in column (c) includes any shares that may be acquired under all current offering periods for these plans. See notes (3) and (4) below. |
(3) | Includes the following: |
• | 24,180,209 shares available for future awards under the1999 Employee Stock Purchase Plan, a stock purchase plan qualified under Section 423 of the Internal Revenue Code. Employees may acquire shares at a discounted purchase price on four quarterly purchase dates within the one-year offering period with the proceeds of their contributions plus interest accumulated during the respective quarter. Prior to October 3, 2005, the shares could be |
purchased at a 15% discount. Effective October 3, 2005, the discount was reduced to 5%; therefore, the purchase price may be no less than 95% of the market price of the stock on the purchase date. |
• | 2,925,530 shares that may be issued to settle outstanding restricted stock unit, deferred stock unit and deferred bonus unit awards and other deferred compensation obligations. |
• | 8,536,883 shares available for future awards under the2000 Senior Executive Incentive and Stock Award Plan. Awards may consist of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, deferred bonus units, dividend equivalents, stock bonus, performance awards and other unit-based or stock-based awards. |
• | 3,106,310 shares available for future deferrals directed into share units under theStock Investment Supplemental Plan, a nonqualified deferred compensation plan providing benefits to employees whose benefits are limited under the tax-qualifiedStock Investment Plan, an employee stock ownership plan with a 401(k) feature. |
• | 945,911 shares available for future awards under theDirectors Stock Compensation Plan. Awards may consist of shares, deferred stock units and dividend equivalents. |
(4) | Includes the following: |
• | 10,016,065 shares available for future awards under theStock Purchase Plan for International Employees, Stock Purchase Plan for French Employees, Save as You Earn Plan (U.K.), andIrish Savings Related Share Option Scheme. |
• | 11,933,931 shares that may be issued to settle outstanding restricted stock unit, deferred stock unit and deferred bonus unit awards under the2000 Employee Incentive and Stock Award Plan and predecessor plans and programs. |
• | 19,920,081 shares available for future awards under the2000 Employee Incentive and Stock Award Plan. Awards may consist of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, deferred bonus units, dividend equivalents, stock bonus, performance awards and other unit-based or stock-based awards. |
• | 128,176 shares available for future awards under theApproved Share Participation Schemes for employees in Ireland. Awards are made in shares of stock. |
• | 1,508,762 shares available for future awards, and 501,130 shares that may be issued to settle outstanding awards, under theSpecial Severance Pay Plan. Awards consist of stock units and dividend equivalents. |
(5) | MMC’s Board of Directors has authorized the repurchase of common stock, including an ongoing authorization to repurchase shares in connection with awards granted under equity-based compensation plans, subject to market conditions and other factors. MMC did not repurchase any stock in 2005. See the “Liquidity and Capital Resources” section of Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) of this report, and the “Issuer Repurchases of Equity Securities” table under Item 5 (“Market for MMC’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities”) of this report. |
result of the exchange program, 25,462,330 shares are no longer available for future awards under the plans. This amount represents the difference between the total number of shares underlying the options tendered and the new options granted by MMC in the exchange.
• | Stock Purchase Plan for International Employees, Stock Purchase Plan for French Employees, Save As You Earn Plan (U.K.) and Irish Savings Related Share Option Scheme. Eligible employees may elect to contribute to these plans through regular payroll deductions over an offering period which varies by plan from 1 to 5 years. On each purchase date, generally the end of the offering period, participants may receive their contributions plus interest in cash or use that amount to acquire shares of stock at a discounted purchase price. Prior to the changes detailed below, under the International Plan, the purchase price may be no less than 85% of the market price of the stock on each of four quarterly purchase dates within the one-year offering period. Under the French Plan, the purchase price may be no less than 85% of the market price of the stock at the end of the offering period. Under the U.K. and Irish Plans, the purchase price may be no less than 80% of the market price of the stock at the beginning of the offering period. The discount for each of these plans was reduced to 5%, with effective dates as follows; Save as You Earn Plan (U.K.), October 1, 2005; Stock Purchase Plan for International Employees, October 3, 2005; Irish Savings Related Share Option Scheme, November 1, 2005; and Stock Purchase Plan for French Employees, January 1, 2006. |
• | 2000 Employee Incentive and Stock Award Plan and predecessor plans and programs. The terms of this plan and the 1997 Employee Incentive and Stock Award Plan are described in Note 8 to the Consolidated Financial Statements included below under Item 8 of this report. In addition, the Stock Bonus Award Program provided for the payment of up to 50% of annual bonuses otherwise payable in cash, in the form of deferred stock units or deferred bonus units which are settled in shares. No future awards may be granted under any predecessor plan or program. |
• | Approved Share Participation Schemes for Employees in Ireland. Eligible participants may elect to acquire shares of stock at market price by allocating their bonus and up to an equivalent amount of their basic salary. The acquired shares are held in trust and generally may not be transferred for two years following their acquisition. The initial value of any shares held in trust for more than three years is not subject to income tax. |
• | Special Severance Pay Plan. Under this plan, certain holders of restricted stock or awards in lieu of restricted stock with at least 10 years of service will receive payment in shares upon forfeiture of their award if their employment with MMC or one of its subsidiaries terminates. The amount of such payment is based on years of service, with the individual receiving up to a maximum of 90% of the value of the restricted shares after 25 years of service and is subject to execution of a non-solicitation agreement. |
1. | Consolidated Financial Statements: |
2. | All required Financial Statement Schedules are included in the Consolidated Financial Statements or the Notes to Consolidated Financial Statements. |
3. | The following exhibits are filed as a part of this report: |
(3.1) | MMC’s restated certificate of incorporation (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2003) | |||||
(3.2) | MMC’s By-Laws (incorporated by reference to MMC’s Current Report on Form 8-K dated March 16, 2005) | |||||
(4.1) | Indenture dated as of June 14, 1999 between MMC and State Street Bank and Trust Company, as trustee (incorporated by reference to MMC’s Registration Statement on Form S-3, Registration No. 333-108566) | |||||
(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 MMC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999) | |||||
(4.3) | Second Supplemental Indenture dated as of February 19, 2003 between MMC and U.S. Bank National Association (as successor to State Street Bank and Trust Company), as trustee (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003) |
(4.4) | Third Supplemental Indenture dated as of July 30, 2003 between MMC and U.S. National Bank Association (as successor to State Street Bank and Trust Company), as trustee (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003) | |||||
(4.5) | Indenture dated as of March 19, 2002 between MMC and State Street Bank and Trust Company, as trustee (incorporated by reference to MMC’s Registration Statement on Form S-4, Registration No. 333-87510) | |||||
(4.6) | Indenture, dated as of July 14, 2004, between MMC and The Bank of New York, as trustee (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004) | |||||
(4.7) | First Supplemental Indenture, dated as of July 14, 2004, between MMC and The Bank of New York, as trustee (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004) | |||||
(4.8) | Second Supplemental Indenture, dated as of September 16, 2005, between MMC and The Bank of New York, as trustee (incorporated by reference to MMC’s Current Report on Form 8-K dated September 13, 2005) | |||||
(4.9) | Amended and Restated Rights Agreement dated as of January 20, 2000 between MMC and Harris Trust Company of New York (incorporated by reference to MMC’s Registration Statement on Form 8-A/A filed on January 27, 2000) | |||||
(4.10) | Amendment No. 1 to Amended and Restated Rights Agreement dated as of June 7, 2002, by and between MMC and Harris Trust Company of New York (incorporated by reference to MMC’s Registration Statement on Form 8-A12B/A filed on June 20, 2002) | |||||
(10.1) | Agreement dated January 30, 2005 between the Attorney General of the State of New York and the Superintendent of Insurance of the State of New York, and Marsh & McLennan Companies, Inc., Marsh Inc. and their subsidiaries and affiliates (“the Settlement Agreement”) (incorporated by reference to MMC’s Current Report on Form 8-K dated January 31, 2005) | |||||
(10.2) | Amendment No. 1, effective as of January 30, 2005, to the Settlement Agreement (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005) | |||||
(10.3) | Amendment No. 2, dated September 27, 2005, to the Settlement Agreement (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005) | |||||
(10.4) | *Marsh & McLennan Companies, Inc. 2000 Senior Executive Incentive and Stock Award Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 1999) | |||||
(10.5) | *Amendments to Marsh & McLennan Companies, Inc. 2000 Senior Executive Incentive and Stock Award Plan and 2000 Employee Incentive and Stock Award Plan (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005) | |||||
(10.6) | *Form of Awards under the 2000 Senior Executive Incentive and Stock Award Plan (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004) | |||||
(10.7) | *Additional Forms of Awards under the 2000 Senior Executive Incentive and Stock Award Plan (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005) |
(10.8) | *Form of Restricted Stock Award under the MMC 2000 Senior Executive Incentive and Stock Award Plan (incorporated by reference to MMC’s Current Report on Form 8-K dated May 18, 2005) | |||||
(10.9) | *Marsh & McLennan Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2001) | |||||
(10.10) | *Form of Awards under the 2000 Employee Incentive and Stock Award Plan (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004) | |||||
(10.11) | *Additional Forms of Awards under the 2000 Employee Incentive and Stock Award Plan (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005) | |||||
(10.12) | *Marsh & McLennan Companies Stock Investment Supplemental Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 1994) | |||||
(10.13) | *Amendment to Marsh & McLennan Companies Stock Investment Supplemental Plan dated June 16, 1997 (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 1997) | |||||
(10.14) | *Amendment to Marsh & McLennan Companies Stock Investment Supplemental Plan dated November 20, 1997 (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2000) | |||||
(10.15) | *Amendment to Marsh & McLennan Companies Stock Investment Supplemental Plan dated January 1, 2000 (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2000) | |||||
(10.16) | *Marsh & McLennan Companies Special Severance Pay Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 1996) | |||||
(10.17) | *Marsh & McLennan Companies Supplemental Retirement Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 1992) | |||||
(10.18) | *Amendment to Marsh & McLennan Companies Supplemental Retirement Plan (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003) | |||||
(10.19) | *Marsh & McLennan Companies Senior Management Incentive Compensation Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 1994) | |||||
(10.20) | *Marsh & McLennan Companies, Inc. Directors Stock Compensation Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 1997) | |||||
(10.21) | *Putnam Investments, Inc. Executive Deferred Compensation Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 1994) | |||||
(10.22) | *Putnam Investments, LLC Executive Deferred Bonus Plan (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2000) | |||||
(10.23) | *Putnam Investments Trust Equity Partnership Plan |
(10.24) | *Employment Agreement, dated as of July 20, 2005, by and between Marsh & McLennan Companies, Inc. and Michael G. Cherkasky (incorporated by reference to MMC’s Current Report on Form 8-K dated July 25, 2005) | |||||
(10.25) | *Employment Agreement, dated as of August 22, 2005, by and between Marsh & McLennan Companies, Inc. and Sandra S. Wijnberg (incorporated by reference to MMC’s Current Report on Form 8-K dated August 22, 2005) | |||||
(10.26) | *Employment Agreement, amended and restated November 7, 2005, effective as of September 9, 2005, by and between Marsh & McLennan Companies, Inc. and Brian M. Storms (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005) | |||||
(10.27) | *Employment Agreement, dated November 17, 2005 and effective as of November 1, 2005, between Marsh & McLennan Companies, Inc. and Mathis Cabiallavetta (incorporated by reference to MMC’s Current Report on Form 8-K dated November 17, 2005) | |||||
(10.28) | *Employment Agreement, dated as of December 19, 2005, between Marsh & McLennan Companies, Inc. and M. Michele Burns (incorporated by reference to MMC’s Current Report on Form 8-K dated December 16, 2005) | |||||
(10.29) | *Employment Agreement, dated as of February 27, 2006, between Marsh & McLennan Companies, Inc. and Charles E. Haldeman Jr. | |||||
(10.30) | *Description of Compensation Arrangement with Robert F. Erburu, Chairman of the Board of Directors of MMC (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005) | |||||
(10.31) | *Amended and Restated Limited Partnership Agreement of Marsh & McLennan Affiliated Fund, L.P. dated October 12, 1999 (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2001) | |||||
(10.32) | *Limited Liability Company Agreement of Putnam Investments Employees’ Securities Company I LLC dated as of October 3, 2000 (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2001) | |||||
(10.33) | *Limited Liability Company Agreement of Putnam Investments Employees’ Securities Company II LLC dated as of June 15, 2002 (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2001) | |||||
(10.34) | Representative Fund Advisory Contract with each of the Putnam Funds (incorporated by reference to MMC’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2002) | |||||
(12) | Statement Re: Computation of Ratio of Earnings to Fixed Charges | |||||
(14) | Code of Ethics for Chief Executive and Senior Financial Officers (incorporated by reference to MMC’s Annual Report on Form 10-K for the year ended December 31, 2002) | |||||
(21) | List of Subsidiaries of MMC (as of 2/17/2006) | |||||
(23) | Consent of Independent Registered Public Accounting Firm | |||||
(31) | Rule 13a-14(a)/15d-14(a) Certifications | |||||
(32) | Section 1350 Certifications |
* | Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of Form 10-K. |
By | /s/Michael G. Cherkasky Michael G. Cherkasky Chief Executive Officer and President |
Name | Title | Date | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/Michael G. Cherkasky Michael G. Cherkasky | Director, Chief Executive Officer & President | March 1, 2006 | ||||||||
/s/Sandra S. Wijnberg Sandra S. Wijnberg | Senior Vice President & Chief Financial Officer | March 1, 2006 | ||||||||
/s/Robert J. Rapport Robert J. Rapport | Vice President & Controller (Chief Accounting Officer) | March 1, 2006 | ||||||||
/s/Leslie M. Baker, Jr. Leslie M. Baker, Jr. | Director | March 1, 2006 | ||||||||
/s/Lewis W. Bernard Lewis W. Bernard | Director | March 1, 2006 | ||||||||
/s/Zachary W. Carter Zachary W. Carter | Director | March 1, 2006 | ||||||||
/s/Robert F. Erburu Robert F. Erburu | Director | March 1, 2006 | ||||||||
/s/Oscar Fanjul Oscar Fanjul | Director | March 1, 2006 | ||||||||
/s/Stephen R. Hardis Stephen R. Hardis | Director | March 1, 2006 |
Name | Title | Date | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/Gwendolyn S. King Gwendolyn S. King | Director | March 1, 2006 | ||||||||
/s/The Rt. Hon. Lord Lang of Monkton, DL The Rt. Hon. Lord Lang of Monkton, DL | Director | March 1, 2006 | ||||||||
/s/Marc D. Oken Marc D. Oken | Director | March 1, 2006 | ||||||||
/s/David A. Olsen David A. Olsen | Director | March 1, 2006 | ||||||||
/s/Morton O. Schapiro Morton O. Schapiro | Director | March 1, 2006 | ||||||||
/s/Adele Simmons Adele Simmons | Director | March 1, 2006 |