What is the financial performance of Marsh & McLennan Companies (MMC) for the third quarter and first nine months of 2005?

For the third quarter of 2005, MMC reported a 2% decrease in revenue to $2.9 billion and a net income of $65 million, or $0.12 per diluted share. For the first nine months, revenue was flat at $9.2 billion, while net income was $365 million, or $0.67 per diluted share. The company experienced revenue declines in its Risk and Insurance Services and Investment Management segments.

What are the main factors impacting MMC's results, particularly the increase in expenses?

Expenses have been impacted by several factors. Significant restructuring charges of $245 million were incurred in the first nine months of 2005 related to the '2005 Plan.' Additionally, the adoption of SFAS 123(R) on July 1, 2005, resulted in $37 million of incremental compensation costs, primarily for stock options. Employee retention costs and higher benefit costs also contributed to increased expenses.

How is MMC addressing the legal and regulatory challenges, such as the NYAG settlement?

MMC has made significant progress in resolving issues stemming from regulatory investigations. The company established an $850 million policyholder compensation fund as part of its settlement with the NYAG and NYSID, with approximately $750 million opted into by eligible policyholders. They also reached a multi-state regulatory settlement with the National Association of Insurance Commissioners (NAIC). These actions involve business reforms and compensation to clients.

What is the status of Putnam Investments' performance?

Putnam Investments experienced an 11% decrease in revenue for the third quarter of 2005, largely due to a 7% decline in average assets under management to $195 billion, driven by net redemptions and market performance. Assets under management stood at $192 billion as of September 30, 2005. Expenses were down 19% year-to-date due to lower regulatory settlement costs and severance expenses.

MRSH/MMC 10-Q Quarterly Report Q3 FY2005 — Revenue, Net Income, EPS

Summary

Marsh & McLennan Companies, Inc. (MMC) reported its third-quarter and nine-month results for 2005, showing a decrease in revenue compared to the prior year, largely attributed to challenges in its Risk and Insurance Services segment and lower assets under management at Putnam Investments. The company has been actively implementing restructuring plans (2005 Plan) aimed at improving efficiency and realizing significant cost savings, with substantial charges already incurred and more expected. These initiatives, alongside the adoption of SFAS 123(R) for stock-based compensation, have impacted reported expenses. Significant progress has been made in resolving the aftermath of regulatory investigations, particularly the settlement with the New York Attorney General (NYAG) and the New York State Insurance Department (NYSID), which involved establishing an $850 million client compensation fund and implementing business reforms. These settlements, along with multi-state regulatory agreements, are reshaping Marsh's operational model. Despite ongoing litigation and regulatory scrutiny across its various segments, MMC has focused on strengthening its financial position through debt offerings and refinancing, while managing its liquidity. The company is navigating a complex environment marked by litigation, restructuring, and the ongoing transformation of its business practices.

Key Highlights

1Revenue for the third quarter of 2005 decreased by 2% to $2.9 billion, and for the nine months by 0%, to $9.2 billion, reflecting declines in Risk and Insurance Services and Investment Management.
2Net income for the third quarter of 2005 was $65 million ($0.12 per diluted share), an improvement from $21 million ($0.04 per diluted share) in the same period of 2004.
3The company incurred significant restructuring charges of $245 million in the first nine months of 2005 related to the 2005 Plan, with further charges expected.
4MMC adopted SFAS 123(R) on July 1, 2005, leading to $37 million in incremental compensation costs for the nine months, primarily related to stock options.
5The company made substantial progress in resolving the $850 million policyholder compensation fund from the NYAG/NYSID settlement, with approximately $750 million opted into by policyholders.
6Debt offerings in September 2005 raised $1.3 billion, which was used to pay down outstanding bank borrowings, and the company refinanced its headquarters building mortgage.
7Assets under management at Putnam Investments decreased by 7% year-over-year to $192 billion as of September 30, 2005, impacting revenue.

MARSH & MCLENNAN COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2005

Summary

Key Highlights

Frequently Asked Questions