MMC Notes Increased Q3 and Nine Months Results

October 21, 2003

Marsh & McLennan Companies, Inc. (MMC) reported financial results for the quarter and nine months ended Sept. 30.

Consolidated revenues for the quarter increased 11 percent to $2.8 billion. Net income rose 19 percent to $357 million, the largest increase since 2000, and earnings per share grew 18 percent to $.65 from $.55. For the nine months, consolidated revenues rose 10 percent to $8.6 billion. Net income grew 11 percent to $1.2 billion, and earnings per share increased 13 percent to $2.12 from $1.88.

Jeffrey Greenberg, chairman, noted, “MMC performed well in the third quarter, with improvement in each of our businesses. Marsh produced excellent results. Secular changes are having a lasting effect on the business of advice and risk transfer. Clients face risks that have grown in number, complexity, and severity. Heightened awareness of these risks creates a great need for expertise, and Marsh is uniquely qualified to address these needs around the world. Marsh also brings to clients a distinctive strength through collaboration with other MMC companies. For example, Marsh and MMC Capital worked together to form AXIS Capital to bring much needed new capacity to the insurance markets in a time of stress. And the addition of Mercer Oliver Wyman to MMC significantly strengthens our risk management capabilities in financial services.

“We’re pleased that both Mercer and Putnam showed improved results in the current environment. Over the last decade, MMC’s activities in retirement and benefits have alternated with risk and insurance services as our major business. Putnam and Mercer are dedicated to responding to retirement needs around the world. Demographic trends in the developed world and the need for a private sector response to retirement issues will provide important opportunities for growth. Putnam and Mercer will be well positioned to take advantage of these growing markets.”

Risk and insurance services revenues rose 15 percent in the third quarter to $1.6 billion. On a constant currency basis, which excludes changes in foreign exchange and acquisitions, revenues grew 13 percent. Operating income increased 16 percent to $388 million. Risk management and insurance broking, representing approximately 75 percent of Marsh’s revenues, grew 12 percent on a constant currency basis, with double-digit growth throughout the world. Reinsurance broking and services revenues increased 20 percent. Related insurance services revenues grew 9 percent, with strong growth in claims management and underwriting management, a modest increase at MMC Capital, and a slight decline in affinity business.

During the quarter, AXIS Capital Holdings Limited successfully completed its public offering. AXIS was formed through the collaboration of Marsh and MMC Capital in November 2001 with $1.6 billion of capital. As a founding shareholder, MMC invested $100 million directly in AXIS and an additional $60 million through its holding in Trident II.

Risk and insurance services revenues for the nine months reached $5.1 billion, an increase of 17 percent, 14 percent on a constant currency basis. Operating income increased 20 percent to $1.4 billion. Marsh’s operating margin expanded for the nine months to 26.5 percent. This indicates the strength of Marsh’s performance, particularly as it reflects investments in operating efficiencies to drive future profitability. Putnam has benefited from more favorable equity markets. It has posted stronger financial results, has higher assets under management, and has made a number of important changes in its business operations. Putnam’s revenues in the third quarter were $507 million, compared with $522 million last year. Operating income grew 17 percent to $136 million. Putnam’s total assets under management on Sept. 30, 2003 were $272 billion, 14 percent higher than assets under management at the end of last year’s third quarter.

Average assets under management during the third quarter were $270 billion, 5 percent higher than average assets in the third quarter last year. At the end of the quarter, mutual fund assets were $171 billion, up 6 percent, and institutional assets were $101 billion, an increase of 31 percent. This includes international assets of $39 billion, which were 44 percent higher than at the end of last year’s third quarter.

Mercer’s revenues in the third quarter increased 15 percent to $690 million from $600 million, and operating income rose 12 percent to $96 million. On a constant currency basis, revenues grew 3 percent. In the quarter, Mercer’s human resource practices reported strong revenue growth in Europe and Asia, partially offset by modest declines in North America. Mercer’s economic consulting practice performed well. Management consulting results reflect the strong new business growth of recently acquired Mercer Oliver Wyman. For the nine months, retirement services revenues on a constant currency basis grew 3 percent, health care and group benefits increased 7 percent, and economic consulting grew 9 percent.

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