Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | Apr. 30, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | MMC | |
Entity Registrant Name | MARSH & MCLENNAN COMPANIES, INC. | |
Entity Central Index Key | 0000062709 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 541,237,396 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Revenue | $2,795 | $2,609 |
Expense: | ||
Compensation and benefits | 1,650 | 1,571 |
Other operating expenses | 706 | 714 |
Operating expenses | 2,356 | 2,285 |
Operating income | 439 | 324 |
Interest income | 4 | 6 |
Interest expense | (60) | (56) |
Investment income (loss) | 8 | (15) |
Income before income taxes | 391 | 259 |
Income taxes | 117 | 80 |
Income from continuing operations | 274 | 179 |
Discontinued operations, net of tax | (22) | 1 |
Net income before non-controlling interests | 252 | 180 |
Less: Net income attributable to non-controlling interests | 4 | 4 |
Net income attributable to MMC | $248 | $176 |
Basic net income per share | ||
- Continuing operations | 0.5 | 0.33 |
- Net income | 0.46 | 0.33 |
Diluted net income per share | ||
- Continuing operations | 0.49 | 0.33 |
- Net income | 0.45 | 0.33 |
Weighted average number of shares outstanding | ||
- Basic | 533 | 515 |
- Diluted | 536 | 515 |
Shares outstanding at March 31, | 541 | 517 |
Dividends declared per share | 0.4 | 0.4 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current assets: | ||
Cash and cash equivalents | $1,167 | $1,777 |
Receivables | ||
Commissions and fees | 2,538 | 2,429 |
Advanced premiums and claims | 63 | 86 |
Other | 447 | 457 |
Commissions, Fees, Premiums, Claims, and Other Receivables, Gross, Total | 3,048 | 2,972 |
Less-allowance for doubtful accounts and cancellations | (113) | (117) |
Net receivables | 2,935 | 2,855 |
Other current assets | 490 | 299 |
Total current assets | 4,592 | 4,931 |
Goodwill and intangible assets | 7,250 | 7,173 |
Fixed assets (net of accumulated depreciation and amortization of $1,477 at March 31, 2010 and $1,465 at December 31, 2009) | 920 | 952 |
Pension related assets | 140 | 94 |
Deferred tax assets | 1,096 | 1,242 |
Other assets | 964 | 945 |
Total assets | 14,962 | 15,337 |
Current liabilities: | ||
Short-term debt | 558 | 558 |
Accounts payable and accrued liabilities | 1,870 | 1,826 |
Accrued compensation and employee benefits | 637 | 1,319 |
Dividends payable | 109 | |
Total current liabilities | 3,174 | 3,703 |
Fiduciary liabilities | 3,909 | 3,559 |
Less - cash and investments held in a fiduciary capacity | (3,909) | (3,559) |
Fiduciary liabilities net of cash and investments held in a fiduciary capacity, Total | ||
Long-term debt | 3,032 | 3,034 |
Retirement and post employment benefits | 1,163 | 1,184 |
Liabilities for errors and omissions | 517 | 518 |
Other liabilities | 1,062 | 1,035 |
Commitments and contingencies | ||
Stockholder's 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 at March 31, 2010 and December 31, 2009 | 561 | 561 |
Additional paid-in capital | 1,109 | 1,211 |
Retained earnings | 7,062 | 7,033 |
Accumulated other comprehensive loss | (2,246) | (2,171) |
Non-controlling interests | 37 | 35 |
Stockholders' equity before treasury stock | 6,523 | 6,669 |
Less - treasury shares, at cost, 19,825,614 shares at March 31, 2010 and 30,967,116 shares at December 31, 2009 | (509) | (806) |
Total stockholders' equity | 6,014 | 5,863 |
Total liabilities and stockholders' equity | $14,962 | $15,337 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Millions, except Share data | Mar. 31, 2010
| Dec. 31, 2009
|
Fixed assets, accumulated depreciation and amortization | $1,477 | $1,465 |
Preferred stock, par value | $1 | $1 |
Preferred stock, authorized | 6,000,000 | 6,000,000 |
Preferred stock, issued | 0 | 0 |
Common stock, par value | $1 | $1 |
Common stock, authorized | 1,600,000,000 | 1,600,000,000 |
Common stock, Issued | 560,641,640 | 560,641,640 |
Treasury shares, shares | 19,825,614 | 30,967,116 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating cash flows: | ||
Net income before non-controlling interests | $252 | $180 |
Adjustments to reconcile net income to cash used for operations: | ||
Depreciation and amortization of fixed assets and capitalized software | 80 | 74 |
Amortization of intangible assets | 17 | 16 |
Provision for deferred income taxes | 100 | 16 |
(Gain) loss on investments | (8) | 16 |
Loss on disposition of assets | 26 | 12 |
Accrual of stock based compensation | 6 | |
Changes in assets and liabilities: | ||
Net receivables | (73) | 9 |
Other current assets | (7) | (8) |
Other assets | (63) | (36) |
Accounts payable and accrued liabilities | 64 | (18) |
Accrued compensation and employee benefits | (682) | (629) |
Accrued income taxes | (37) | 19 |
Other liabilities | 15 | (113) |
Effect of exchange rate changes | 59 | 12 |
Net cash used for operations | (251) | (450) |
Financing cash flows: | ||
Proceeds from issuance of debt | 397 | |
Repayments of debt | (2) | (2) |
Purchase of non-controlling interests | (15) | (24) |
Shares withheld for taxes on vested units | (40) | (20) |
Issuance of common stock | 10 | 11 |
Dividends paid | (109) | (102) |
Net cash (used for) provided by financing activities | (156) | 260 |
Investing cash flows: | ||
Capital expenditures | (80) | (69) |
Net sales of long-term investments | 19 | 6 |
Proceeds from sales of fixed assets | 1 | 1 |
Dispositions | 110 | |
Acquisitions (including amount paid into escrow) | (197) | (2) |
Other, net | 5 | 2 |
Net cash used for investing activities | (142) | (62) |
Effect of exchange rate changes on cash and cash equivalents | (61) | (19) |
Decrease in cash and cash equivalents | (610) | (271) |
Cash and cash equivalents at beginning of period | 1,777 | 1,685 |
Cash and cash equivalents at end of period | $1,167 | $1,414 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (USD $) | |||||||
In Millions | COMMON STOCK
| ADDITIONAL PAID-IN CAPITAL
| RETAINED EARNINGS
| ACCUMULATED OTHER COMPREHENSIVE LOSS
| TREASURY SHARES
| NON-CONTROLLING INTERESTS
| Total
|
Balance, beginning of year at Dec. 31, 2008 | $561 | $1,246 | $7,237 | ($2,098) | ($1,223) | $38 | $5,761 |
Net income attributable to MMC (a) | 176 | 176 | |||||
Net Income attributable to non-controlling interests, net of discontinued operations (e) | 4 | 4 | |||||
Change in accrued stock compensation costs | (31) | (31) | |||||
Foreign currency translation adjustments (b) | (43) | (43) | |||||
Dividend equivalents paid | (3) | (3) | |||||
Issuance of shares under stock compensation plans and employee stock purchase plans and related tax deficiency | 4 | 4 | |||||
Issuance of shares under stock compensation plans and employee stock purchase plans | 69 | 69 | |||||
Unrealized investment holding losses, net of reclassification adjustments (c) | (4) | (4) | |||||
Dividends declared-(per share amounts: $0.40 in 2010 and 2009) | (208) | (208) | |||||
Net changes under benefit plans, net of tax (d) | 13 | 13 | |||||
Purchase of subsidiary shares from non-controlling interests | (36) | (8) | (44) | ||||
TOTAL COMPREHENSIVE INCOME (LOSS) (a+b+c+d+e) | 146 | ||||||
Balance, end of period at Mar. 31, 2009 | 561 | 1,183 | 7,202 | (2,132) | (1,154) | 34 | 5,694 |
Balance, beginning of year at Dec. 31, 2009 | 561 | 1,211 | 7,033 | (2,171) | (806) | 35 | 5,863 |
Net income attributable to MMC (a) | 248 | 248 | |||||
Net Income attributable to non-controlling interests, net of discontinued operations (e) | 4 | 4 | |||||
Change in accrued stock compensation costs | (71) | (71) | |||||
Foreign currency translation adjustments (b) | (185) | (185) | |||||
Dividend equivalents paid | (4) | (4) | |||||
Issuance of shares under stock compensation plans and employee stock purchase plans and related tax deficiency | (16) | (16) | |||||
Issuance of shares under stock compensation plans and employee stock purchase plans | 105 | 105 | |||||
Unrealized investment holding losses, net of reclassification adjustments (c) | (8) | (8) | |||||
Dividends declared-(per share amounts: $0.40 in 2010 and 2009) | (215) | (215) | |||||
Net changes under benefit plans, net of tax (d) | 118 | 118 | |||||
Other changes | (2) | (2) | |||||
Issuance of shares for acquisitions | (15) | 192 | 177 | ||||
TOTAL COMPREHENSIVE INCOME (LOSS) (a+b+c+d+e) | 177 | ||||||
Balance, end of period at Mar. 31, 2010 | $561 | $1,109 | $7,062 | ($2,246) | ($509) | $37 | $6,014 |
1_CONSOLIDATED STATEMENTS OF ST
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (Parenthetical) (USD $) | ||
3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |
Dividends declared per share | 0.4 | 0.4 |
Nature of Operations
Nature of Operations | |
3 Months Ended
Mar. 31, 2010 | |
Nature of Operations | 1.Nature of Operations Marsh McLennan Companies, Inc. ("MMC"), a global professional services firm, is organized based on the different services that it offers. Under this organizational structure, MMC's three business segments are: Risk and Insurance Services; Consulting; and Risk Consulting Technology. The Risk and Insurance Services segment provides risk management and insurance broking, reinsurance broking and insurance program management services for businesses, public entities, insurance companies, associations, professional services organizations, and private clients. MMC conducts business in this segment through Marsh and Guy Carpenter. In February 2010, Marsh acquired Haake Companies, Inc., one of the largest insurance agencies in the Midwest. In March 2010, Marsh acquired Thomas Rutherfoord, Inc., one of the largest insurance broking firms in the Southeast and mid-Atlantic regions of the U.S. On April 1, 2010, Marsh completed the acquisition of HSBC Insurance Brokers Ltd., an international provider of risk intermediary and risk advisory services. On April 30, 2010, Marsh completed the acquisition of the Bostonian Group Insurance Agency, Inc. and Bostonian Solutions, Inc. (collectively the "Bostonian Group"), one of the largest regional insurance brokerages in New England. The Consulting segment provides advice and services to the managements of organizations in the area of human resource consulting, comprising retirement and investments, health and benefits, outsourcing and talent; and strategy and risk management consulting, comprising management, economic and brand consulting. MMC conducts business in this segment through Mercer and Oliver Wyman Group. The Risk Consulting Technology segment provides various risk consulting and related risk mitigation services to corporate, government, institutional and individual clients, including consulting services and security services; and technology-enabled services. MMC conducts business in this segment through Kroll. In the first quarter of 2010, Kroll completed the sale of Kroll Laboratory Specialists ("KLS"). The after-tax loss on this disposal is included in discontinued operations in 2010. The operating results of KLS have not been reclassified into discontinued operations, since the amounts are insignificant to MMC. |
Principles of Consolidation and
Principles of Consolidation and Other Matters | |
3 Months Ended
Mar. 31, 2010 | |
Principles of Consolidation and Other Matters | 2.Principles of Consolidation and Other Matters The consolidated financial statements included herein have been prepared by MMC pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been omitted pursuant to such rules and regulations for interim filings, although MMC believes that the information and disclosures presented are adequate to make such information and disclosure not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in MMC's Annual Report on Form 10-K for the year ended December 31, 2009 (the "2009 10-K"). The financial information contained herein reflects all adjustments consisting only of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of MMC's results of operations for the three-month periods ended March 31, 2010 and 2009. Effective January 1, 2009, the Company adopted retrospectively the new standards issued by the Financial Accounting Standards Board ("FASB") affecting the calculation of earnings per share, Financial Accounting Standards Codification ("ASC") Topic No. 260 ("Earnings per Share") and the presentation of non-controlling interests (previously referred to as minority interests), ASC Topic No. 160 ("Non-controlling Interests"), which are described more fully in Notes 4 and 18 to the Consolidated Financial Statements. The caption "Investment income (loss)" in the consolidated statements of income comprises realized and unrealized gains and losses from investments recognized in current earnings. It includes, when applicable, other than temporary declines in the value of available for sale securities and the change in value of MMC's holdings in certain private equity funds. MMC's investments may include direct investments in insurance or consulting companies and investments in private equity funds. Equity method losses of $1 million and $18 million are included in this line in 2010 and 2009, respectively. MMC has an investment in Trident II limited partnership, a private equity investment fund. At March 31, 2010, MMC's investment in Trident II was approximately $160 million, reflected in Other assets in the consolidated balance sheet. MMC's maximum exposure to loss is equal to its investment plus any calls on its remaining capital commitment of $81 million. Since this fund is closed to new investments, none of the remaining capital commitment is expected to be called. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in the tax return. It is reasonably possible that the total amount of unrecognized tax benefits will decrease between zero and approximately $80 million within the next twelve months due to settlement of audits and expiration of statutes of limitation. |
Fiduciary Assets and Liabilitie
Fiduciary Assets and Liabilities | |
3 Months Ended
Mar. 31, 2010 | |
Fiduciary Assets and Liabilities | 3.Fiduciary Assets and Liabilities In its capacity as an insurance broker or agent, MMC collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurance underwriters. MMC also collects claims or refunds from underwriters on behalf of insureds. Unremitted insurance premiums and claims proceeds are held by MMC in a fiduciary capacity. Risk and Insurance Services revenue includes interest on fiduciary funds of $11 million and $15 million for the three-month periods ended March 31, 2010 and 2009, respectively. The Consulting segment recorded fiduciary interest income of $1 million in each of 2010 and 2009. Since fiduciary assets are not available for corporate use, they are shown in the consolidated balance sheets as an offset to fiduciary liabilities. Fiduciary assets include approximately $449 million of fixed income securities classified as available for sale. Unrealized gains or losses from available for sale securities are recorded in other comprehensive income until the securities are disposed of, or mature. Unrealized gains, net of tax, at March 31, 2010 were $10 million. Net uncollected premiums and claims and the related payables amounted to $9.5 billion at March 31, 2010 and $9.9 billion at December 31, 2009. MMC is not a principal to the contracts under which the right to receive premiums or the right to receive reimbursement of insured losses arises. Net uncollected premiums and claims and the related payables are, therefore, not assets and liabilities of MMC and are not included in the accompanying consolidated balance sheets. In certain instances, MMC advances premiums, refunds or claims to insurance underwriters or insureds prior to collection. These advances are made from corporate funds and are reflected in the accompanying consolidated balance sheets as receivables. |
Per Share Data
Per Share Data | |
3 Months Ended
Mar. 31, 2010 | |
Per Share Data | 4.Per Share Data Effective January 1, 2009, MMC adopted the guidance in ASC Topic No. 260 10 45 ("Earnings Per Share") which applies to the calculation of earnings per share ("EPS") for share-based payment awards with rights to dividends or dividend equivalents. The guidance indicates that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and should be included in the computation of basic and dilutive EPS using the two-class method. Basic net income per share attributable to MMC and income from continuing operations per share are calculated by dividing the respective after-tax income attributable to common shares by the weighted average number of outstanding shares of MMC's common stock. Diluted net income per share attributable to MMC and income from continuing operations per share are calculated by dividing the respective after-tax income attributable to common shares by the weighted average number of outstanding shares of MMC's common stock, which have been adjusted for the dilutive effect of potentially issuable common shares (excluding those that are considered participating securities). The diluted earnings per share calculation reflects the more dilutive effect of either (a) the two-class method that assumes that the participating securities have not been exercised or (b) the treasury stock method. Reconciliation of the applicable income components used for diluted earnings per share and basic weighted average common shares outstanding to diluted weighted average common shares outstanding is presented below. Basic EPS Calculation Continuing Operations For the Three Months Ended March31, (In millions) 2010 2009 Net income from continuing operations $ 274 $ 179 Less: Net income attributable to non-controlling interests 4 4 Net income from continuing operations attributable to MMC 270 175 Less: Portion attributable to participating securities 6 5 Net income attributable to common shares for basic earnings per share $ 264 $ 170 Basic weighted average common shares outstanding 533 515 Basic EPS Calculation Net Income For the Three Months Ended March31, (In millions) 2010 2009 Net income attributable to MMC $ 248 $ 176 Less: Portion attributable to participating securities 5 5 Net income attributable to common shares for basic earnings per share $ 243 $ 171 Basic weighted average common shares outstanding 533 515 Diluted EPS Calculation Continuing Operations For the Three Months Ended March31, (In millions, except per share figures) 2010 2009 Net income from continuing operations $274 $179 Less: Net income attributable to non-controlling interests 4 4 Net income from continuing operations attributable to MMC 270 175 Less: Portion attributable to participating securities 6 5 Net income attributable to common shares $264 $170 Basic weighted average common shares outstanding 533 515 |
Supplemental Disclosures to the
Supplemental Disclosures to the consolidated Statements of Cash Flows | |
3 Months Ended
Mar. 31, 2010 | |
Supplemental Disclosures to the Consolidated Statements of Cash Flows | 5.Supplemental Disclosures to the Consolidated Statements of Cash Flows The following schedule provides additional information concerning acquisitions, interest and income taxes paid for the three-month periods ended March 31, 2010 and 2009. (In millions of dollars) 2010 2009 Assets acquired, excluding cash $260 $2 Liabilities assumed (36 ) Shares issued (7.4 million shares) (178 ) Contingent purchase consideration (55 ) Deferred purchase consideration 12 Subtotal 3 2 Cash paid into escrow for future acquisition 194 Net cash outflow for acquisitions $197 $2 (In millions of dollars) 2010 2009 Interest paid $86 $85 Income taxes paid $69 $60 MMC had non-cash issuances of common stock under its share-based payment plan of $119 million and $75 million for the three months ended March 31, 2010 and 2009, respectively. On March 31, 2010, MMC paid $194 million into an escrow fund for an acquisition that closed on April 1, 2010. This amount is included in other current assets in the consolidated balance sheet and is reported as an investing cash flow in the consolidated statement of cash flows. |
Comprehensive Income
Comprehensive Income (Loss) | |
3 Months Ended
Mar. 31, 2010 | |
Comprehensive Income (Loss) | 6.Comprehensive Income (Loss) The components of comprehensive income (loss) for the three-month periods ended March 31, 2010 and 2009 are as follows: (In millions of dollars) 2010 2009 Foreign currency translation adjustments $(185 ) $(43 ) Unrealized investment holding losses, net of income taxes (8 ) (4 ) Gains related to pension/retiree plans 118 13 Other comprehensive (loss) (75 ) (34 ) Net income 252 180 Comprehensive income before non-controlling interests 177 146 Less: Comprehensive (loss) attributable to non-controlling interests (4 ) (4 ) Comprehensive income attributable to MMC $173 $142 |
Acquisitions
Acquisitions | |
3 Months Ended
Mar. 31, 2010 | |
Acquisitions | 7.Acquisitions During the first quarter of 2010, MMC made two acquisitions in its Risk and Insurance Services segment. In February 2010, Marsh acquired Haake Companies, Inc., one of the largest independent insurance broking firms in the Midwest. In March 2010, Marsh acquired Thomas Rutherfoord, Inc., one of the largest insurance agencies in the Southeast and mid-Atlantic regions in the U.S. These acquisitions were made to expand Marsh's share in the middle-market through Marsh McLennan Agency. Total purchase consideration for these two acquisitions was $253 million which consisted of cash paid of $20 million, the issuance of 7.4 million shares with a fair value of $178 million, and estimated contingent consideration of $55 million. Contingent consideration arrangements are primarily based on EBITDA and revenue targets over two to four years. The fair value of the contingent consideration was based on earnings projections of the acquired entities. Estimated fair values of assets acquired and liabilities assumed are subject to adjustment when purchase accounting is finalized. The following table presents the preliminary allocation of the acquisition cost for Haake Companies, Inc. and Thomas Rutherfoord, Inc. to the assets acquired and liabilities assumed, based on their fair values (amounts in millions): Cash $20 MMC common shares 178 Contingent consideration 55 Total Consideration $253 Allocation of purchase price: Cash and cash equivalents $29 Accounts receivable, net 8 Property, plant, and equipment 3 Other assets 9 Intangible assets 83 Goodwill 157 Total assets acquired 289 Current liabilities 7 Other liabilities 29 Total liabilities assumed 36 Net assets acquired $253 Acquisitions Subsequent to the Balance Sheet Date On April 1, 2010, Marsh completed the acquisition of HSBC Insurance Brokers Ltd. This transaction will deepen Marsh's presence in the U.K., Hong Kong, Singapore, China and the Middle East. As part of that agreement, Marsh also entered into a strategic partnership with HSBC Bank, that gives MMC preferred access to provide insurance broking and risk management services to HSBC and their corporate and private clients. MMC paid $194 million into an escrow account on March 31, 2010 related to this acquisition, which is included in other current assets in the consolidated balance sheets. The funds were released from the escrow account on April 1, 2010 to complete the acquisition. On April 30, 2010, Marsh McLennan Agency acquired the Bostonian Group, one of the largest regional insurance brokerages in New England. This transaction will deepen Marsh's middle market presence in the North East. MMC paid approximately $230 million for these two acquisitions. In the first quarter of 2010, MMC paid deferred purchase consideration of $15 million related to the purchase in 2009 of the minority interest of a previously controlled entity. Prior Year Acquisitions In the first quarter of 2009, MMC's Risk Insurance Services segment acquired the remaining minority interest of a previously majority owned entity for total purchase |
Dispositions
Dispositions | |
3 Months Ended
Mar. 31, 2010 | |
Dispositions | 8.Dispositions In the first quarter of 2010, Kroll completed the sale of KLS. The after-tax loss on this disposal is included in discontinued operations in 2010. The operating results of KLS have not been reclassified into discontinued operations, since the amounts are immaterial to MMC. In the second quarter of 2009, Kroll completed the sale of Kroll Government Services ("KGS"). The financial results of KGS for the first quarter of 2009 are included in discontinued operations. Discontinued operations in the first quarter of 2010 and 2009 also includes the accretion of interest related to an indemnity for uncertain tax positions provided as part of the purchase by Great West Lifeco Inc. of Putnam Investments Trust from MMC in August 2007. Summarized Statements of Income data for discontinued operations is as follows: ThreeMonthsEndedMarch31, (In millions of dollars) 2010 2009 Revenue $ $20 Income before provision for income tax $ $6 Provision for income tax 2 Income from discontinued operations 4 Gain on disposal of discontinued operations 16 Provision for income tax 38 3 Net loss on disposal of discontinued operations, net of tax (22 ) (3 ) Discontinued operations, net of tax $(22 ) $1 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | |
3 Months Ended
Mar. 31, 2010 | |
Goodwill and Other Intangibles | 9.Goodwill and Other Intangibles MMC is required to assess goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred. MMC performs the annual impairment test for each of its reporting units during the third quarter of each year. Fair values of the reporting units are estimated using a market approach or a discounted cash flow model. Carrying values for the reporting units are based on balances at the prior quarter end and include directly identified assets and liabilities as well as an allocation of those assets and liabilities not recorded at the reporting unit level. As previously reported, in the second quarter of 2009, Kroll completed the sale of KGS, its U.S. government security clearance screening business. As a result of the sale, MMC allocated goodwill between KGS (the portion of the reporting unit sold) and Kroll (the portion of the reporting unit retained), based on the relative fair value of the two portions. In addition, as required under GAAP, MMC evaluated the portion of the reporting unit retained for potential impairment. Fair value was estimated using a market approach, based on management's latest projections and outlook for the businesses in the current environment. This fair value determination was categorized as level 3 in the fair value hierarchy. On the basis of the step one impairment test, MMC concluded that goodwill in the reporting unit was impaired. Due to the timing of the trigger event and subsequent completion of the step one test, MMC was unable to fully complete the required step two portion of the impairment assessment prior to the issuance of its second quarter 2009 financial statements. A step two impairment test, which under ASC Topic No. 350 ("Intangibles Goodwill and Other") is required to be completed after an impairment is indicated in a step one test, requires a complete re-valuation of all assets and liabilities of the reporting units in the same manner as a business combination. Based on a preliminary estimate of the step two assessment, MMC recorded a non-cash charge of $315 million in the second quarter of 2009 which represented management's best estimate of the goodwill impairment at June 30, 2009. MMC finalized the second step of the goodwill assessment during the third quarter of 2009 and determined that no adjustment to the charge was required. Other intangible assets that are not deemed to have an indefinite life are amortized over their estimated lives and reviewed for impairment upon the occurrence of certain triggering events in accordance with applicable accounting literature. Changes in the carrying amount of goodwill are as follows: (In millions of dollars) 2010 2009 Goodwill recorded $7,636 $7,365 Accumulated impairment losses (855 ) (540 ) Balance as of January1, $6,781 $6,825 Goodwill acquired 157 2 Disposals (72 ) Other adjustments (a) (65 ) (1 ) Balance as of March31, Goodwill recorded 7,656 7,366 Accumulated Impairment losses (855 ) (540 ) Balance at March3 |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value Measurements | 10.Fair Value Measurements Fair Value Hierarchy MMC has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy as defined by the FASB in ASC Topic No. 820 ("Fair Value Measurements and Disclosures"). The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assets and liabilities recorded in the consolidated balance sheets at fair value are categorized based on the inputs in the valuation techniques as follows: Level1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market (examples include active exchange-traded equity securities, most U.S.Government and agency securities, money market mutual funds and certain other sovereign government obligations). Level2. Assets and liabilities whose values are based on the following: a) Quoted prices for similar assets or liabilities in active markets; b) Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently); c) Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps);and d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full asset or liability (for example, certain mortgage loans). Level3. Assets and liabilities whose values are based on prices, or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include private equity investments, certain commercial mortgage whole loans, and long-dated or complex derivatives including certain foreign exchange options and long-dated options on gas and power). Valuation Techniques Equity Securities Mutual Funds Investments for which market quotations are readily available are valued at the sale price on their principal exchange, or official closing bid price for certain markets. If no sales are reported, the security is valued at its last reported bid price. Other Sovereign Government Obligations, Municipal Bonds and Corporate Bonds The investments listed in the caption above are valued on the basis of valuations furnished by an independent pricing service approved by the trustees or dealers selected b |
Retirement Benefits
Retirement Benefits | |
3 Months Ended
Mar. 31, 2010 | |
Retirement Benefits | 11.Retirement Benefits MMC maintains qualified and non-qualified defined benefit pension plans for its U.S. and non-U.S. eligible employees. MMC's policy for funding its tax qualified defined benefit retirement plans is to contribute amounts at least sufficient to meet the funding requirements set forth by U.S. law and the laws of the non-U.S. jurisdictions in which MMC offers defined benefit plans. The target asset allocation for the U.S. Plan is 65% equities and 35% fixed income. At the end of the first quarter of 2010, the actual allocation for the U.S. Plan was 69% equities and 31% fixed income. The target asset allocation for the U.K. Plan, which comprises approximately 83% of non-U.S. Plan assets, is 58% equities and 42% fixed income. At the end of the first quarter of 2010, the actual allocation of assets for the U.K. Plan was 58% equities and 42% fixed income. The components of the net periodic benefit cost for defined benefit and other postretirement plans are as follows: Combined U.S. and significant non-U.S. Plans For the Three Months Ended March31, PensionBenefits PostretirementBenefits (In millions of dollars) 2010 2009 2010 2009 Service cost $50 $46 $1 $1 Interest cost 145 130 3 4 Expected return on plan assets (204 ) (187 ) Amortization of prior service credit (5 ) (12 ) (3 ) (3 ) Recognized actuarial loss 35 17 Net periodic benefit cost (credit) $21 $(6 ) $1 $2 U.S. Plans only For the Three Months Ended March31, PensionBenefits PostretirementBenefits (In millions of dollars) 2010 2009 2010 2009 Service cost $19 $20 $1 $1 Interest cost 56 54 2 3 Expected return on plan assets (73 ) (73 ) Amortization of prior service credit (4 ) (12 ) (3 ) (3 ) Recognized actuarial loss 17 13 Net periodic benefit cost $15 $2 $ $1 Significant non-U.S. Plans only For the Three Months Ended March31, PensionBenefits PostretirementBenefits (In millions of dollars) 2010 2009 2010 2009 Service cost $31 $26 $ $ Interest cost 89 76 1 1 Expected return on plan assets (131 ) (114 ) Amortization of prior service cost (1 ) Recognized actuarial loss 18 4 Net periodic benefit cost (credit) $6 $(8 ) $1 $1 The weighted average actuarial assumptions utilized to calculate the net periodic benefit costs for the U.S. and significant non-U.S. defined benefit plans are as follows: Combined U.S. and significant non-U.S. Plans PensionBenefits PostretirementBenefits 2010 2009 2010 2009 Weighted average assumptions: Expected return on plan assets 8.1 % 8.2 % Discount rate 6.0 % 6.5 % 6.3 % 6.7 % Rate of compensation increase 4.2 % 3.7 % MMC made $59 million of contributions to its U.S. non-qu |
Debt
Debt | |
3 Months Ended
Mar. 31, 2010 | |
Debt | 12.Debt MMC's outstanding debt is as follows: (In millions of dollars) March31, 2010 December31, 2009 Short-term: Current portion of long-term debt $558 $558 Long-term: Senior notes 6.25% due 2012 (5.1% effective interest rate) $255 $255 Senior notes 4.850% due 2013 250 249 Senior notes 5.875% due 2033 296 296 Senior notes 5.375% due 2014 648 648 Senior notes 5.15% due 2010 549 549 Senior notes 5.75% due 2015 746 747 Senior notes 9.25% due 2019 398 398 Mortgage 5.70% due 2035 445 447 Other 3 3 3,590 3,592 Less current portion 558 558 $3,032 $3,034 On October 23, 2009, MMC and certain of its foreign subsidiaries entered into a new $1.0 billion multi-currency three-year unsecured revolving credit facility, which replaced the $1.2 billion facility discussed below. The interest rate on this facility varies based upon MMC's credit ratings and MMC's credit default swap levels subject to floors and caps. The facility requires MMC to maintain certain coverage and leverage ratios which are tested quarterly. There were no borrowings outstanding under this facility at March 31, 2010. MMC and certain of its foreign subsidiaries previously maintained a $1.2 billion multi-currency five-year revolving credit facility. The facility was previously due to expire in December 2010 and was in effect until October 2009. There were no borrowings outstanding under this facility at the time it was terminated. |
Restructuring Costs
Restructuring Costs | |
3 Months Ended
Mar. 31, 2010 | |
Restructuring Costs | 13.Restructuring Costs MMC recorded total restructuring costs of $9 million in the first quarter of 2010, that are primarily in connection with actions initiated in prior years, due to adjustments to the estimated future rent and real estate costs related to previously vacated space. During the first quarter of 2010, MMC made $53 million of payments related to its restructuring plans. As of March 31, 2010, the remaining liability for these initiatives was $215 million, primarily related to future severance and benefit payments ($45 million) and future lease agreements ($133 million). The expenses associated with the above initiatives are included in compensation and benefits and other operating expenses in the consolidated statements of income. The liabilities associated with these initiatives are classified on the consolidated balance sheets as Accounts payable, Other liabilities, or Accrued compensation, depending on the nature of the items. |
Financial Instruments
Financial Instruments | |
3 Months Ended
Mar. 31, 2010 | |
Financial Instruments | 14.Financial Instruments The estimated fair value of MMC's significant financial instruments is provided below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that MMC would realize upon disposition, nor do they indicate MMC's intent or need to dispose of the financial instrument. March31, 2010 December31,2009 (In millions of dollars) CarryingAmount FairValue Carrying Amount FairValue Cash and cash equivalents $1,167 $1,167 $1,777 $1,777 Long-term investments $92 $87 $109 $102 Short-term debt $558 $566 $558 $572 Long-term debt $3,032 $3,169 $3,034 $3,174 Cash and Cash Equivalents: The estimated fair value of MMC's cash and cash equivalents approximates their carrying value. Long-term Investments: Long-term investments include available for sale securities recorded at quoted market prices, certain investments carried at cost and unrealized gains related to available for sale investments in insurance fiduciary funds as discussed below. MMC has certain long-term investments, for which there are no readily available market prices, amounting to $54 million and $53 million at March 31, 2010 and December 31, 2009, respectively, which are carried on a cost basis. These investments are included in Other assets in the consolidated balance sheets. MMC monitors these investments for impairment and makes appropriate reductions in carrying values when necessary. MMC had available for sale securities with an aggregate fair value of $24 million and $38 million at March 31, 2010 and December 31, 2009, respectively, which are carried at market value under ASC Topic No. 320. MMC had gross unrealized gains (pre-tax) on these securities of $8 million and $15 million included in accumulated other comprehensive income at March 31, 2010 and December 31, 2009, respectively. MMC recorded the following net unrealized gains and (losses) related to its available for sale securities for the three-month periods ended March 31, 2010 and 2009. (In millions of dollars) 2010 2009 Net unrealized gains (losses) pre-tax $ $(2 ) These amounts have been excluded from earnings and reported, net of deferred income taxes, in accumulated other comprehensive income (loss), which is a component of stockholders' equity. MMC has a portion of insurance fiduciary funds described in Note 3, that are invested in high quality debt securities and classified as available for sale. Gross unrealized gains (pre-tax) on these securities that are included in other assets and accumulated other comprehensive income in the consolidated balance sheets was $14 million and $17 million at March 31, 2010 and December 31, 2009, respectively. MMC had no gross unrealized gains on these securities for the three months ended March 31, 2010 and 2009, respectively. For the three months ended March 31, 2010 and 2009, MMC recorded net unrealized losses (pre-tax) of $3 million and $1 million, respectively, related to these investments. These amounts have been excluded from |
Common Stock
Common Stock | |
3 Months Ended
Mar. 31, 2010 | |
Common Stock | 15.Common Stock MMC did not purchase any treasury shares in 2010 or 2009. |
Claims, Lawsuits and Other Cont
Claims, Lawsuits and Other Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Claims, Lawsuits and Other Contingencies | 16.Claims, Lawsuits and Other Contingencies Governmental Inquiries and Claims In December 2007, the Alaska Retirement Management Board filed a civil lawsuit against Mercer (US) Inc. in Alaska state court. Plaintiff, represented by the Alaska Law Department (through the Alaska Attorney General) and the law firm of Paul, Weiss, Rifkind, Wharton Garrison LLP, filed an amended complaint in May 2009. The amended complaint alleges professional negligence and malpractice, breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, unfair trade practices and fraud and misrepresentation related to actuarial services that Mercer provided to the Alaska Division of Retirement and Benefits relating to two State pension and benefit plans, the Alaska Public Employees Retirement System and the Alaska Teachers Retirement System. The amended complaint seeks damages of "at least $2.8 billion" plus treble damages related to the unfair trade practices claim, punitive damages, attorneys' fees, costs and interest. Mercer filed a motion to dismiss the amended complaint, which was denied in December 2009. Mercer has filed other pre-trial motions that are pending. Trial is scheduled for July 2010 in Juneau, Alaska. In October 2007, the State of Connecticut brought a civil action against Guy Carpenter in Connecticut state court alleging that Guy Carpenter violated the state's antitrust and unfair trade practices laws by engaging in allocation of markets, price-fixing and other allegedly improper conduct by taking part in the operation of several reinsurance facilities over a period of decades. An amended complaint was filed in October 2009. The amended complaint alleges damages to Guy Carpenter's insurance company clients and their customers, as well as to the general economy of Connecticut, and seeks monetary damages, civil penalties, attorneys' fees, costs and injunctive and other equitable relief. Discovery is underway in this matter. Our activities are regulated under the laws of the United States and its various states, the European Union and its member states, and the other jurisdictions in which we operate. In the ordinary course of business, in addition to private party lawsuits, we may be subject to investigations, lawsuits and/or other regulatory actions undertaken by governmental authorities. Errors and Omissions Claims 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 in connection with the performance of professional services. Certain of these claims, including the action filed against Mercer by the Alaska Retirement Management Board described above, seek damages, including punitive and treble damages, in amounts that could, if awarded, be significant. In establishing liabilities for errors and omissions claims in accordance with FASB ASC Subtopic No. 450-20 (ContingenciesLoss Contingencies), MMC utilizes internal actuarial and other estimates, and case level reviews by inside and outside counsel. A liabi |
Segment Information
Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information | 17. Segment Information MMC is organized based on the types of services provided. Under this organizational structure, MMC's business segments are: Risk and Insurance Services, comprising insurance services (Marsh) and reinsurance services (Guy Carpenter); Consulting, comprising Mercer and Oliver Wyman Group; and Risk Consulting Technology, which is comprised of Kroll. The accounting policies of the segments are the same as those used for the consolidated financial statements described in Note 1 to MMC's 2009 10-K. Segment performance is evaluated based on segment operating income, which includes directly related expenses, and charges or credits related to integration and restructuring but not MMC corporate-level expenses. Revenues are attributed to geographic areas on the basis of where the services are performed. Selected information about MMC's operating segments for the three-month periods ended March 31, 2010 and 2009 follows: Three Months EndedMarch 31, (In millions of dollars) Revenue Operating Income(Loss) 2010 Risk and Insurance Services $1,492 (a) $347 Consulting 1,155 (b) 116 Risk Consulting Technology 162 (c) 16 Total Operating Segments 2,809 479 Corporate Eliminations (14 ) (40 ) Total Consolidated $2,795 $439 2009 Risk and Insurance Services $1,372 (a) $297 Consulting 1,083 (b) 73 Risk Consulting Technology 167 (c) 4 Total Operating Segments 2,622 374 Corporate Eliminations (13 ) (50 ) Total Consolidated $2,609 $324 (a) Includes inter-segment revenue of $2 million in each of 2010 and 2009, interest income on fiduciary funds of $11 million and $15 million in 2010 and 2009, respectively, and equity method income of $1 million and $2 million in 2010 and 2009, respectively. (b) Includes inter-segment revenue of $11 million and $10 million in 2010 and 2009, respectively, and interest income on fiduciary funds of $1 million in each of 2010 and 2009. (c) Includes inter-segment revenue of $1 million in each of 2010 and 2009. Details of operating segment revenue for the three-month periods ended March 31, 2010 and 2009 is as follows: Three MonthsEnded March31, (In millions of dollars) 2010 2009 Risk and Insurance Services Marsh $1,175 $1,088 Guy Carpenter 317 284 Total Risk and Insurance Services 1,492 1,372 Consulting Mercer 849 803 Oliver Wyman Group 306 280 Total Consulting 1,155 1,083 Risk Consulting Technology Kroll 162 167 Corporate Advisory and Restructuring Total Risk Consulting Technology 162 167 Total Operating Segments 2,809 2,622 Corporate Eliminations (14 ) (13 ) Total $2,795 $2,609 |
New Accounting Pronouncements
New Accounting Pronouncements | |
3 Months Ended
Mar. 31, 2010 | |
New Accounting Pronouncements | 18.New Accounting Pronouncements Effective January 1, 2009, MMC adopted the guidance for calculating EPS using the two-class method with retroactive application to prior periods. The impact of adopting the guidance is discussed in Note 4 to the consolidated financial statements. Effective January 1, 2009, the Company adopted the new guidance issued by the FASB for Business Combinations. The guidance requires entities in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose all information needed by investors and other users to evaluate and understand the nature and financial effect of the business combination. Effective January 1, 2009, the Company adopted the new guidance issued by the FASB for Consolidation Non-controlling Interests, which did not have a material impact on our financial condition, results of operations or cash flows. However, it did impact the presentation and disclosure of non-controlling (minority) interests in our consolidated financial statements. The effects of this change are reflected herein. The new guidance also requires adjustment of net income to include the net income attributable to the non-controlling interests and a new separate caption for net income attributable to MMC to be presented in the consolidated statement of earnings. In February 2008, the FASB issued guidance related to Fair Value Measurements which delayed until the second quarter of 2009, fair value measurement for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company has applied the provision of this new guidance to its financial statement disclosures beginning in the second quarter of 2009. On April 1, 2009, the FASB issued guidance for "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies", to address application issues raised by preparers, auditors and attorneys. The guidance requires recognition of contingent assets or liabilities (arising from a business combination contingency) at fair value, at the acquisition date if the acquisition-date fair value of the asset or liability can be determined during the measurement period, or if certain criteria are met. Otherwise, the acquirer should not recognize an asset or liability as of the acquisition date. The guidance is effective for business combinations occurring on or after January 1, 2009. This new guidance did not have a material impact on MMC's financial condition or reported results. In the second quarter of 2009, MMC adopted the guidance issued by the FASB for interim disclosures about fair value of financial instruments. The guidance, which is effective for interim periods ending after June 15, 2009, requires disclosures about the fair values of financial instruments in interim period reports of publicly traded companies as well as in annual financial statements. The |