SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For quarter ended September 30, 1995
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036
(212) 345-5000
Commission file number 1-5998
State of Incorporation: Delaware
I.R.S. Employer Identification No. 36-2668272
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . NO .
As of October 31, 1995, there were outstanding 73,158,866
shares of common stock, par value $1.00 per share, of the
registrant.
PART I, FINANCIAL INFORMATION
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share figures)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994*
Revenue $921.6 $826.9 $2,812.0 $2,577.6
Expense 763.2 678.3 2,265.1 2,036.8
Operating Income 158.4 148.6 546.9 540.8
Interest Income 4.7 2.4 13.2 8.3
Interest Expense (15.8) (13.1) (47.3) (37.0)
Income Before Income Taxes
and Cumulative Effect of
Accounting Change 147.3 137.9 512.8 512.1
Income Taxes 56.0 54.5 194.9 202.3
Income Before Cumulative
Effect of Accounting
Change 91.3 83.4 317.9 309.8
Cumulative Effect of
Accounting Change, Net of
Income Tax Benefit - - - (10.5)
Net Income $ 91.3 $ 83.4 $ 317.9 $ 299.3
Per Share Data:
Income Before Cumulative
Effect of Accounting
Change $1.26 $1.14 $4.37 $4.21
Cumulative Effect of
Accounting Change - - - (.14)
Net Income $1.26 $1.14 $4.37 $4.07
Average Number of
Shares Outstanding 72.5 73.3 72.8 73.6
Dividends Declared $0.80 $.725 $2.25 $2.125
* Reflects the adoption, effective January 1, 1994, of SFAS No.
112, "Employers' Accounting for Postemployment Benefits."
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
(Unaudited)
September 30, December 31,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents
(including interest-bearing amounts
of $349.4 at September 30, 1995 and
$265.6 at December 31, 1994) $ 383.2 $ 294.9
Receivables-
Commissions and fees 799.3 692.3
Advanced premiums and claims 80.6 78.0
Consumer finance and other 215.1 229.6
1,095.0 999.9
Less-allowance for doubtful accounts (48.9) (44.9)
Net receivables 1,046.1 955.0
Other current assets 181.4 196.1
Total current assets 1,610.7 1,446.0
Consumer finance receivables, net 157.4 150.4
Long-term securities 397.9 282.8
Fixed assets, net 754.4 740.3
(net of accumulated depreciation and
amortization of $644.1 at September 30,
1995 and $574.5 at December 31, 1994)
Intangible assets 733.6 701.0
Other assets 567.1 510.1
$4,221.1 $3,830.6
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
(Unaudited)
September 30, December 31,
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 539.9 $ 403.0
Accrued compensation and employee benefits 204.4 220.8
Accounts payable and accrued liabilities 437.8 496.7
Accrued income taxes 237.2 218.7
Dividends payable 58.5 53.1
Total current liabilities 1,477.8 1,392.3
Fiduciary liabilities 1,699.8 1,652.1
Less - cash and investments held in
a fiduciary capacity (1,699.8) (1,652.1)
- -
Long-term debt 411.2 409.4
Other liabilities 652.1 568.3
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $1 par value, authorized
6,000,000 shares, none issued - -
Common stock, $1 par value, authorized
200,000,000 shares, issued 76,794,531
shares at September 30, 1995 and
December 31, 1994 76.8 76.8
Additional paid-in capital 156.2 166.1
Retained earnings 1,661.6 1,507.7
Unrealized securities holding gains,
net of income taxes 142.8 91.6
Cumulative translation adjustments (70.2) (105.4)
1,967.2 1,736.8
Less - treasury shares, at cost,
3,688,228 shares at September 30, 1995 and
3,594,342 shares at December 31, 1994 (287.2) (276.2)
Total stockholders' equity 1,680.0 1,460.6
$4,221.1 $3,830.6
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
(Unaudited)
Nine Months Ended
September 30,
1995 1994
Operating cash flows:
Net income $317.9 $299.3
Depreciation and amortization 99.9 90.8
Deferred income taxes 39.8 36.1
Other liabilities (3.5) (5.0)
Cumulative effect of accounting change - 10.5
Prepaid dealer commissions (64.2) (109.7)
Other, net (12.4) (13.6)
Net changes in operating working capital
other than cash and cash equivalents -
Receivables (85.0) (40.4)
Other current assets 41.0 (24.1)
Accrued compensation and employee benefits (17.4) (.4)
Accounts payable and accrued liabilities (35.4) (3.5)
Accrued income taxes 0.3 3.5
Effect of exchange rate changes (9.0) 14.8
Net cash generated from operations 272.0 258.3
Financing cash flows:
Net change in debt 140.9 96.0
Purchase of treasury shares (90.5) (94.6)
Issuance of common stock 67.8 65.1
Dividends paid (158.6) (152.9)
Other, net 2.4 (22.4)
Net cash used for financing activities (38.0) (108.8)
Investing cash flows:
Additions to fixed assets (100.0) (87.9)
Acquisitions (6.8) (10.3)
Other, net (46.1) (53.2)
Net cash used for investing activities (152.9) (151.4)
Effect of exchange rate changes on cash
and cash equivalents 7.2 8.8
Increase in cash & cash equivalents 88.3 6.9
Cash & cash equivalents at beginning of period 294.9 332.0
Cash & cash equivalents at end of period $383.2 $338.9
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated financial statements included herein have
been prepared by the Company 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 generally
accepted accounting principles have been omitted pursuant to
such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented
not misleading. These consolidated financial statements
should be read in conjunction with the Company's latest annual
report on Form 10-K.
The financial information contained herein reflects all
adjustments which are, in the opinion of management, necessary
for a fair presentation of the results of operations for the
three and nine month periods ended September 30, 1995 and
1994.
2. Fiduciary Cash and Liabilities
In its capacity as an insurance broker or agent, the Company
collects premiums from insureds and, after deducting its
commissions, remits the premiums to the respective insurance
underwriters; the Company also collects claims or refunds from
underwriters on behalf of insureds. Unremitted insurance
premiums and claims are held in a fiduciary capacity.
Interest income on these fiduciary funds, included in revenue,
amounted to $77.4 million and $56.8 million for the nine
months ended September 30, 1995 and 1994, respectively.
Net uncollected premiums and claims and the related payables
amounting to $3.1 billion at September 30, 1995 and $2.8
billion at December 31, 1994, are not included in the
accompanying Consolidated Balance Sheets.
3. Net Income Per Share
Net income per share is computed by dividing net income by the
average number of shares of common stock outstanding. Common
stock equivalents (relating principally to stock options),
which have been excluded from the calculation because their
dilutive effect is immaterial, are shown below for the three
and nine month periods ended September 30, 1995 and 1994.
(In millions of shares)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Primary .9 .8 .8 .8
Fully Diluted 1.2 .8 1.1 .8
4. Supplemental Disclosure to the Consolidated Statements
of Cash Flows
The following schedule provides additional information
concerning acquisitions:
Nine Months Ended
September 30,
(In millions of dollars) 1995 1994
Purchase acquisitions:
Assets acquired, excluding cash $21.5 $10.3
Liabilities assumed (8.2) -
Issuance of debt and other
obligations (6.5) -
Net cash outflow for acquisitions $ 6.8 $10.3
The following schedule provides details of changes in the
Company's short-term and long-term debt. Although a portion
of the Company's commercial paper borrowings is classified as
long-term debt in the Consolidated Balance Sheets, borrowings
and repayments of commercial paper are shown below based on
original maturities.
Nine Months Ended
September 30,
(In millions of dollars) 1995 1994
Net change in debt with maturities
of three months or less $ (84.7) $331.9
Borrowings with maturities
over three months 528.9 47.9
Repayments of debt with maturities
over three months (303.3) (283.8)
Net increase in debt $ 140.9 $ 96.0
Interest paid during the nine months ended September 30, 1995
and 1994 was $52.1 million and $36.7 million, respectively.
Income taxes paid during the nine months ended September 30,
1995 and 1994 were $163.5 million and $164.5 million,
respectively.
5. Income Taxes
Taxing authorities periodically challenge positions taken by
the Company on its tax returns. On the basis of present
information and advice received from counsel, it is the
opinion of the Company's management that any assessments
resulting from current tax audits will not have a material
adverse effect on the Company's consolidated results of
operations or its consolidated financial position.
6. Claims, Lawsuits and Other Contingencies
The Company and its subsidiaries are subject to claims and
lawsuits that arise in the ordinary course of business,
consisting principally of alleged errors and omissions in
connection with the placement of insurance or reinsurance and
in rendering consulting and investment services. Some of
these claims and lawsuits seek damages, including punitive
damages, in amounts which could, if assessed, be significant.
Among these is a group of claims relating to reinsurance
contracts placed by reinsurance broking subsidiaries of the
Company that were called into question by certain reinsurers.
In general, these contracts concern so-called run-off
exposures under which reinsurers assumed some or all remaining
liability for claims against Lloyd's syndicates or other
London insurers on policies, typically written in the past
over a period of many years and sometimes without aggregate
limits. The initial disputes, primarily between reinsurers
and cedants, concerned these contracts, and have largely been
resolved by negotiation, arbitration or litigation. More
recently, related disputes, including litigation, have arisen
or been deferred by agreement between the members of
syndicates, their underwriting and members' names agencies
and, in some cases, subsidiaries of the Company. The
syndicate members have experienced significant and continuing
losses on policies, some of which were the subject of run-off
reinsurance contracts that have been voided or compromised.
The Company believes that its subsidiaries performed their
reinsurance broking services in conformity with accepted and
customary practices in the London market.
Subsidiaries of the Company in the course of their consulting
and insurance activities advised certain clients in connection
with their purchase of guaranteed investment contracts and
annuities issued by Executive Life Insurance Company, which is
currently being rehabilitated under the supervision of the
California Insurance Department. Some of those clients as
well as the Company's subsidiaries have been or may be subject
to claims or lawsuits relating to losses in connection with
those investments. In some instances, the subsidiaries have
entered into agreements extending the time in which possible
claims may be asserted against them, or have engaged in
negotiating the deferral or resolution of claims and
litigation. The Company believes that its subsidiaries acted
in a proper and professional manner in connection with these
matters.
On the basis of present information, available insurance
coverage and advice received from counsel, it is the opinion
of the Company's management that the disposition or ultimate
determination of these claims and lawsuits will not have a
material adverse effect on the Company's consolidated results
of operations or its consolidated financial position.
7. Cumulative Effect of Accounting Changes
Effective January 1, 1994, the Company adopted SFAS No. 112
"Employers' Accounting for Postemployment Benefits," which
requires the Company to accrue for the cost of certain
benefits provided to former or inactive employees after
employment but before retirement. The cumulative effect of
adopting this standard resulted in a noncash charge, net of
income taxes, of $10.5 million or $.14 per share.
PART II, OTHER INFORMATION
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
INFORMATION REQUIRED FOR FORM 10-Q QUARTERLY REPORT
SEPTEMBER 30, 1995
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
None.
MARSH & McLENNAN COMPANIES, INC.
AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Company has duly caused this report to be
signed this 14th day of November, 1995 on its behalf by
the undersigned, thereunto duly authorized and in the
capacity indicated.
MARSH & McLENNAN COMPANIES, INC.
By:/s/FRANK J. BORELLI
Senior Vice President and
Chief Financial Officer