MMC REPORTS THIRD QUARTER RESULTS

PDF of Press Release with Financial Information

NEW YORK, NEW YORK, November 1, 2005 - Marsh & McLennan Companies, Inc. (MMC) today reported financial results for the third quarter and nine months ended September 30, 2005. Consolidated revenues for the quarter decreased 2 percent to $2.9 billion. Net income was $65 million, or $.12 per share, an increase from $21 million, or $.04 per share, in the third quarter of 2004. For the nine months of 2005, consolidated revenues were unchanged at $9.2 billion. Net income was $365 million, or $.67 per share, compared with $856 million, or $1.60 per share, in the 2004 period. Excluding noteworthy items described in the attached supplemental schedules, earnings per share in the third quarter of 2005 was $.35, a decline of 17 percent from $.42 in the same period of 2004. Excluding the same items, earnings per share for the nine months of 2005 was $1.30, compared with $2.11 in 2004.

In the third quarter, MMC adopted FASB Statement No. 123(R) entitled "Share-Based Payment." Incremental compensation expense of $37 million, primarily related to stock options, and an increase in fully diluted shares of 2.3 million in the third quarter reduced earnings per share by slightly less than $.05.

Michael G. Cherkasky, president and chief executive officer of MMC, said: "MMC continued in the quarter to make progress and take the steps which will make it a better and more profitable company next year. Cost savings from the restructuring programs are being realized as anticipated, and we expect to see improved earnings performance beginning next year. Marsh continues successfully, but slowly, to restore its business from the effects of the events of last fall. Marsh launched its pricing initiative, and we are optimistic about its impact for 2006. Both Kroll and Mercer's specialty consulting businesses continue to produce impressive revenue growth, and Mercer Human Resource Consulting is investing to enhance its position as a global leader for human resource advice, services, and solutions. Putnam is improving its investment performance and controlling costs diligently."

Risk and Insurance Services
Risk and insurance services revenues declined 6 percent to $1.4 billion in the third quarter. The percentage decline is an improvement from the first half of the year, primarily due to market services revenues having less of an effect on a year-over-year basis. Third quarter revenues were affected by declining commercial insurance premium rates, a trend that has continued throughout the year. Although it is too early to assess the total effect of recent hurricanes on insurance marketplace conditions, insurance premium rates in U.S. property catastrophe and certain specialty lines appear to be strengthening.

Marsh's risk management and insurance broking revenues declined 11 percent in the third quarter to $885 million. The percentage decline in revenues and operating income in North American operations improved, compared with the first two quarters of 2005. Weaker revenues in Europe in the third quarter reflected the sale of a small affinity business in France and delays due to restructuring efforts and the implementation of compliance protocols. Strong new business gains in Latin America and Asia Pacific led to growth in client revenues in those regions.

Guy Carpenter's revenues in the third quarter were $207 million, compared with $209 million last year, as new business nearly offset premium rate declines in the reinsurance markets and higher risk retentions by clients. These marketplace conditions have been evident throughout the year.

Related insurance services revenues rose 8 percent in the third quarter to $285 million, driven by particular strength in the claims management business.

Risk Consulting and Technology
Kroll produced strong revenue growth in the third quarter. Revenues increased 22 percent to $268 million, or 15 percent on an underlying basis, led by the corporate advisory and restructuring businesses. Technology services had solid growth, reflecting higher demand for mortgage-related and background screening, as well as electronic discovery services.

Consulting
Mercer's revenues increased 4 percent in the third quarter to $936 million, a reflection of continued excellent performance in specialty consulting. The 16 percent increase in specialty consulting revenues to $222 million was driven by strong growth in Mercer Oliver Wyman, a leader in financial services strategy and risk management consulting, and solid results in strategy and operations consulting. Mercer Human Resource Consulting reported revenues of $668 million in the quarter, compared with $666 million last year. Retirement consulting revenues were essentially unchanged, while revenue growth in human capital consulting was offset by declines in health and benefits consulting and HR services.

Investment Management
Putnam's revenues in the third quarter declined 11 percent to $371 million, consistent with the percentage declines in the prior two quarters. Average assets under management during the third quarter were $195 billion, compared with $209 billion in the third quarter of 2004. Net redemptions in the quarter were $8.5 billion. Total assets under management on September 30, 2005 were $192 billion, comprising $129 billion of mutual fund assets and $63 billion of institutional assets.

Other Items
As discussed in this year's second quarter earnings release, the 2004 restructuring program has been fully implemented, resulting in annualized cost savings totaling $400 million, of which $300 million has been realized through the third quarter. The 2005 restructuring program should be completed in early 2006 and result in $375 million of annualized savings in risk and insurance services, $30 million of which was realized in the second quarter and $60 million in the third quarter of this year.

MMC's net debt position declined by over $400 million in the third quarter to $3.8 billion from $4.2 billion as the company generated strong cash flow in the quarter. MMC took financing actions in the quarter to enhance liquidity by significantly extending debt maturities and to secure favorable long-term fixed interest rates.

In September, MMC made a discretionary tax-deductible contribution to its U.S. defined benefit retirement plan with company stock valued at $205 million. The value of plan assets now exceeds current estimates of both accumulated and projected plan benefit obligations.

MMC's consolidated tax rate of 27.8 percent for the third quarter primarily reflects favorable adjustments resulting from the filing of its 2004 U.S. tax return. MMC expects the effective tax rate on ongoing operations to be 35 percent for the fourth quarter of this year.

As previously reported, Marsh sold Crump Group, Inc., its U.S.-based wholesale broking operation, in October. The gain on the sale will be reflected in the fourth quarter.

The MMC Victims Relief Fund came to the aid of colleagues who lived in the areas devastated by Hurricane Katrina and who are in need of financial assistance to meet emergency needs. To date, contributions to the fund total $1.2 million, including the company's donation and match of employee contributions, as well as additional money raised by employees in fundraisers held by many MMC offices around the world.

Conference Call
A conference call to discuss third quarter 2005 results will be held today at 10:00 a.m. Eastern Standard Time. To participate in the teleconference, please dial (800) 811-8824 or (913) 981-4903 (international). The access code for both numbers is 1057498. The audio webcast (which will be listen-only) may be accessed at www.mmc.com. A replay of the webcast will be available beginning approximately two hours after the event at the same web address.

MMC is a global professional services firm with annual revenues exceeding $12 billion. It is the parent company of Marsh, the world's leading risk and insurance services firm; Guy Carpenter, the world's leading risk and reinsurance specialist; Kroll, the world's leading risk consulting company; Mercer, a major global provider of human resource and specialty consulting services; and Putnam Investments, one of the largest investment management companies in the United States. Approximately 59,000 employees provide analysis, advice, and transactional capabilities to clients in over 100 countries. Its stock (ticker symbol: MMC) is listed on the New York, Chicago, Pacific, and London stock exchanges. MMC's website address is www.mmc.com.

This press release contains "forward-looking statements," as defined in the Private Securities Litigation Reform Act of 1995. These statements, which use words like "anticipate," "believe," "estimate," "expect," "intend," "plan," "project" and similar terms, express management's current views concerning future events or results. For example, we may use forward-looking statements when addressing topics such as future actions by our management or regulators; the outcome of contingencies; changes in our business strategy; changes in our business practices and methods of generating revenue; the development and performance of our services and products; market and industry conditions, including competitive and pricing trends; changes in the composition or level of MMC's revenues; our cost structure; the impact of acquisitions and dispositions; and MMC's cash flow and liquidity.

Forward-looking statements are subject to inherent risks and uncertainties. Factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements include:

• the economic and reputational impact of litigation and regulatory proceedings brought by the New York Attorney General's Office, the Connecticut Attorney General's Office and other federal and state regulators and law enforcement authorities concerning our insurance and reinsurance brokerage operations;
  
  
• the economic and reputational impact of class actions, derivative actions and individual suits brought against us by policyholders and shareholders asserting various claims under federal and state laws;
  
  
• the impact on our investment management revenues of litigation and regulatory proceedings relating to market-timing and other issues at Putnam;
  
  
• other developments relating to claims, lawsuits and other contingencies;
  
  
• the extent to which we are able to negotiate compensation arrangements with clients or insurance carriers to replace the revenue stream historically associated with contingent commissions, which we have eliminated under Marsh's new business model;
  
  
• the continued strength of our client relationships and our ability to retain key producers and managers;
  
  
• our success in implementing restructuring initiatives and otherwise reducing expenses;
  
  
• the impact of competition, including with respect to pricing and the emergence of new competitors;
  
  
• changes in the availability of, and the premiums insurance carriers charge for, insurance products;
  
  
• the actual and relative investment performance of the Putnam mutual funds, including the impact of changes in U.S. and global equity and fixed income markets;
  
  
• the extent to which Putnam succeeds in reversing its recent net redemption experience, increasing assets under management, and maintaining management and administrative fees at historical levels;
  
  
• the impact of increasing focus by regulators, clients and others on potential conflicts of interest;
  
  
• changes in the value of MMC's investments in individual companies and investment funds;
  
  
• our ability to integrate acquired businesses and realize expected synergies, savings or strategic benefits;
  
  
• MMC's ability to meet its substantial financing needs by generating cash from operations and accessing the capital markets, including the potential impact of rating agency actions on our cost of financing or ability to borrow; and
  
  
• changes in the tax or accounting treatment of MMC's operations, and the impact of other legislation and regulation in the jurisdictions in which MMC operates.
  
  

Forward-looking statements speak only as of the date on which they are made, and MMC undertakes no obligation to update any such statement to reflect events or circumstances after the date on which it is made. Further information concerning MMC and its businesses, including information about factors that could materially affect our results of operations and financial position, is contained in MMC's filings with the Securities and Exchange Commission.

MMC and its operating companies use their websites to convey meaningful information about their businesses, including the anticipated release of quarterly financial results and the posting of updates of assets under management at Putnam. Monthly updates of total assets under management at Putnam will be posted to the MMC website the first business day following the end of each month. Putnam posts mutual fund and performance data to its website regularly. Assets for most Putnam retail mutual funds are posted approximately two weeks after each month-end. Mutual fund net asset value (NAV) is posted daily. Historical performance and Lipper rankings are also provided. Investors can link to MMC and its operating company websites through www.mmc.com.