Fitch Affirms Marsh & McLennan’s Ratings; Takes Off from Rating Watch

April 14, 2004

Fitch Ratings has affirmed the ‘A+’ senior debt rating and ‘F1’ short-term rating of Marsh & McLennan Companies Inc. (MMC). The senior debt rating has been removed from Rating Watch Negative and the Rating Outlook is now Stable.

The action follows the recent settlements between MMC and both the Securities and Exchange Commission (SEC) and Massachusetts regulators regarding market-timing at Putnam, MMC’s investment management operation. Total cost of the settlements is $110 million, a significant expense but very manageable given MMC’s cash flow levels.

The ratings are supported by MMC’s strong operating earnings, diverse business profile and excellent cash flow generation. Although internal and external factors at Putnam depressed assets under management growth in recent periods causing a material decline in investment management’s operating profits, MMC’s overall earnings have grown through strong results in the insurance brokerage operation. The rating analysis also considers MMC’s large cash demands, which include fixed obligations, rents, common-stock dividends, potential stock buybacks and employee retirement costs.

In the fourth quarter 2003, Putnam lost $54 billion in assets through net redemptions. This was a material amount of business relative to the $272 billion of assets under management at the start of the quarter. However, with market appreciation, year-end assets were $240 million. At the end of the first quarter 2004, assets under management fell to $227 billion.

Fitch will continue to monitor issues surrounding Putnam – and anticipates that assets under management will begin to show a slowdown in outflows during 2004.

Further, Fitch recognizes that other investigations and class action lawsuits are ongoing surrounding the Putnam market-timing activity, but at the current time considers these items to be secondary relative to the charges settled last week. If this view should change, Fitch will revisit its rating analysis as needed.

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