Exhibit 99.1
Marsh & McLennan Companies, Inc.
Note to Unaudited Pro Form Consolidated Financial Statements
Note 1 – Basis of Presentation
The unaudited pro forma financial information reflects the impact of the dispositions of Kroll Inc. and Kroll Laboratory Specialists (“Kroll”) on MMC’s operating results. The unaudited pro forma balance sheet as of March 31, 2010 is based on historical statements of MMC as of March 31, 2010, adjusted to reflect the impact of the disposition of the Kroll operations as if it had occurred on March 31, 2010. The unaudited pro forma statements of operations for the three months ended March 31, 2010 and the fiscal year ended December 31, 2009 are based on the historical financial statements of MMC for such periods after giving effect to the Kroll disposition as if it had occurred on January 1, 2009. The unaudited pro forma financial information should be read in conjunction with MMC’s consolidated financial statements and notes thereto contained in MMC’s 2009 Annual Report of Form 10-K filed on February 26, 2010, and MMC’s Quarterly Report on Form 10-Q for the three months ended March 31, 2010, filed on May 7, 2010.
The preparation of the unaudited pro forma consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates that affect the reported amounts of revenues and expenses. Actual results could differ from those estimates.
The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations would have been had the transactions occurred on the respective date assumed, nor is it necessarily indicative of the Company’s future operating results. However, the pro forma adjustments reflected in the accompanying unaudited pro forma consolidated financial information reflect estimates and assumptions that the Company’s management believes to be reasonable.
Marsh & McLennan Companies, Inc.
Pro Forma Consolidated Statements of Income
Three-Months Ended March 31, 2010
(In millions, except per share figures)
(Unaudited)
| MMC As Reported |
Kroll Disposition (1) |
MMC Pro Forma |
||||||||||
| Revenue |
$ | 2,795 | $ | (160 | ) | $ | 2,635 | |||||
| Expense: |
||||||||||||
| Compensation and Benefits |
1,650 | (75 | ) | 1,575 | ||||||||
| Other Operating Expenses |
706 | (71 | ) | 635 | ||||||||
| Goodwill Impairment Charge |
— | — | ||||||||||
| Total Expense |
2,356 | (146 | ) | 2,210 | ||||||||
| Operating Income |
439 | (14 | ) | 425 | ||||||||
| Interest Income |
4 | 4 | ||||||||||
| Interest Expense |
(60 | ) | (60 | ) | ||||||||
| Investment Income (Loss) |
8 | 8 | ||||||||||
| Income Before Income Taxes |
391 | (14 | ) | 377 | ||||||||
| Income Tax Expense |
117 | (14 | ) | 103 | ||||||||
| Income From Continuing Operations |
274 | — | 274 | |||||||||
| Less: Income Attributable to Non Controlling Interest |
4 | — | 4 | |||||||||
| Income From Continuing Operations Attributable to MMC |
$ | 270 | $ | — | $ | 270 | ||||||
| Income From Continuing Operations Per Share |
||||||||||||
| Basic |
$ | 0.50 | $ | 0.50 | ||||||||
| Fully Diluted |
$ | 0.49 | $ | 0.49 | ||||||||
| Average Number of Shares Outstanding |
||||||||||||
| Basic |
533 | 533 | ||||||||||
| Fully Diluted |
536 | 536 | ||||||||||
| Shares Outstanding at 12/31 |
541 | 541 | ||||||||||
| (1) | Adjustment to eliminate operating results of Kroll and Kroll Laboratory Specialists. |
Marsh & McLennan Companies, Inc.
Pro Forma Consolidated Statements of Income
Year Ended December 31, 2009
(In millions, except per share figures)
(Unaudited)
| MMC As Reported |
Kroll Disposition (1) |
MMC Pro Forma |
||||||||||
| Revenue |
$ | 10,493 | $ | (662 | ) | $ | 9,831 | |||||
| Expense: |
||||||||||||
| Compensation and Benefits |
6,484 | (302 | ) | 6,182 | ||||||||
| Other Operating Expenses |
3,185 | (314 | ) | 2,871 | ||||||||
| Goodwill Impairment Charge |
315 | (315 | ) | — | ||||||||
| Total Expense |
9,984 | (931 | ) | 9,053 | ||||||||
| Operating Income |
509 | 269 | 778 | |||||||||
| Interest Income |
17 | 17 | ||||||||||
| Interest Expense |
(241 | ) | (241 | ) | ||||||||
| Investment Income (Loss) |
(2 | ) | (2 | ) | ||||||||
| Income Before Income Taxes |
283 | 269 | 552 | |||||||||
| Income Tax Expense |
41 | (20 | ) | 21 | ||||||||
| Income From Continuing Operations |
242 | 289 | 531 | |||||||||
| Less: Income Attributable to Non Controlling Interest |
15 | (1 | ) | 14 | ||||||||
| Income From Continuing Operations Attributable to MMC |
$ | 227 | $ | 290 | $ | 517 | ||||||
| Income From Continuing Operations Per Share |
||||||||||||
| Basic |
$ | 0.43 | $ | 0.97 | ||||||||
| Fully Diluted |
$ | 0.43 | $ | 0.96 | ||||||||
| Average Number of Shares Outstanding |
||||||||||||
| Basic |
522 | 522 | ||||||||||
| Fully Diluted |
524 | 524 | ||||||||||
| Shares Outstanding at 12/31 |
530 | 530 | ||||||||||
| (1) | Adjustment to eliminate operating results of Kroll and Kroll Laboratory Specialists. |
Marsh & McLennan Companies, Inc.
Pro Forma Consolidated Statements of Income
Year Ended December 31, 2008
(In millions, except per share figures)
(Unaudited)
| MMC As Reported |
Kroll Disposition (1) |
MMC Pro Forma |
||||||||||
| Revenue |
$ | 11,518 | $ | (788 | ) | $ | 10,730 | |||||
| Expense: |
||||||||||||
| Compensation and Benefits |
7,181 | (351 | ) | 6,830 | ||||||||
| Other Operating Expenses |
3,549 | (328 | ) | 3,212 | ||||||||
| Goodwill Impairment Charge |
540 | (540 | ) | — | ||||||||
| Total Expense |
11,270 | (1,219 | ) | 10,051 | ||||||||
| Operating Income |
248 | 431 | 679 | |||||||||
| Interest Income |
48 | -1 | 47 | |||||||||
| Interest Expense |
(220 | ) | (220 | ) | ||||||||
| Investment Income (Loss) |
(12 | ) | (12 | ) | ||||||||
| Income Before Income Taxes |
64 | 430 | 494 | |||||||||
| Income Tax Expense |
133 | (20 | ) | 113 | ||||||||
| Income (Loss) From Continuing Operations |
(69 | ) | 450 | 381 | ||||||||
| Less: Income Attributable to Non Controlling Interest |
11 | 11 | ||||||||||
| Income (Loss) From Continuing Operations Attributable to MMC |
$ | (80 | ) | $ | 450 | $ | 370 | |||||
| Income (Loss) From Continuing Operations Per Share |
||||||||||||
| Basic |
$ | (0.14 | ) | $ | 0.70 | |||||||
| Fully Diluted |
$ | (0.15 | ) | $ | 0.70 | |||||||
| Average Number of Shares Outstanding |
||||||||||||
| Basic |
514 | 514 | ||||||||||
| Fully Diluted |
514 | 515 | ||||||||||
| Shares Outstanding at 12/31 |
514 | 514 | ||||||||||
| (1) | Adjustment to eliminate operating results of Kroll and Kroll Laboratory Specialists. |
Marsh & McLennan Companies, Inc.
Pro Forma Consolidated Statements of Income
Year Ended December 31, 2007
(In millions, except per share figures)
(Unaudited)
| MMC As Reported |
Kroll Disposition (1) |
MMC Pro Forma |
||||||||||
| Revenue |
$ | 11,135 | $ | (758 | ) | $ | 10,377 | |||||
| Expense: |
||||||||||||
| Compensation and Benefits |
6,937 | (367 | ) | 6,570 | ||||||||
| Other Operating Expenses |
3,344 | (301 | ) | 3,043 | ||||||||
| Goodwill Impairment Charge |
— | — | — | |||||||||
| Total Expense |
10,281 | (668 | ) | 9,613 | ||||||||
| Operating Income |
854 | (90 | ) | 764 | ||||||||
| Interest Income |
95 | 0 | 95 | |||||||||
| Interest Expense |
(267 | ) | 1 | (266 | ) | |||||||
| Investment Income (Loss) |
173 | 173 | ||||||||||
| Income Before Income Taxes |
855 | (89 | ) | 766 | ||||||||
| Income Tax Expense |
298 | (20 | ) | 278 | ||||||||
| Income From Continuing Operations |
557 | (69 | ) | 488 | ||||||||
| Less: Income Attributable to Non Controlling Interest |
14 | — | 14 | |||||||||
| Income From Continuing Operations Attributable to MMC |
$ | 543 | $ | (69 | ) | $ | 474 | |||||
| Income From Continuing Operations Per Share |
||||||||||||
| Basic |
$ | 0.98 | $ | 0.86 | ||||||||
| Fully Diluted |
$ | 0.98 | $ | 0.85 | ||||||||
| Average Number of Shares Outstanding |
||||||||||||
| Basic |
539 | 539 | ||||||||||
| Fully Diluted |
542 | 542 | ||||||||||
| Shares Outstanding at 12/31 |
520 | 520 | ||||||||||
| (1) | Adjustment to eliminate operating results of Kroll and Kroll Laboratory Specialists. |
Marsh & McLennan Companies, Inc.
Pro Forma Consolidated Balance Sheet
March 31, 2010
(In millions)
(Unaudited)
| MMC As Reported |
Kroll Disposition (1) |
Pro-forma Adjustments |
MMC Pro-Forma |
|||||||||||||
| ASSETS |
||||||||||||||||
| Current assets: |
||||||||||||||||
| Cash and cash equivalents |
$ | 1,167 | $ | $ | 1,092 | (2) | $ | 2,259 | ||||||||
| Net receivables |
2,935 | (134 | ) | 265 | (3) | 3,066 | ||||||||||
| Other current assets |
490 | (12 | ) | 478 | ||||||||||||
| Total current assets |
4,592 | (146 | ) | 1,357 | 5,803 | |||||||||||
| Goodwill and intangible assets |
7,250 | (861 | ) | 6,389 | ||||||||||||
| Fixed assets, net |
920 | (92 | ) | 828 | ||||||||||||
| Pension-related Assets |
140 | 140 | ||||||||||||||
| Deferred tax Assets |
1,096 | (20 | ) | 1,076 | ||||||||||||
| Other assets |
964 | (14 | ) | 950 | ||||||||||||
| TOTAL ASSETS |
$ | 14,962 | $ | (1,133 | ) | $ | 1,357 | $ | 15,186 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||||||
| Current liabilities: |
||||||||||||||||
| Short-term debt |
$ | 558 | $ | $ | $ | 558 | ||||||||||
| Accounts payable and accrued liabilities |
1,870 | (61 | ) | 1,809 | ||||||||||||
| Accrued compensation and employee benefits |
637 | (22 | ) | 615 | ||||||||||||
| Accrued income taxes |
— | — | — | |||||||||||||
| Dividends payable |
109 | 109 | ||||||||||||||
| Total current liabilities |
3,174 | (83 | ) | 3,091 | ||||||||||||
| Fiduciary liabilities |
3,909 | 3,909 | ||||||||||||||
| Less—cash and investments held in a fiduciary capacity |
(3,909 | ) | (3,909 | ) | ||||||||||||
| — | — | |||||||||||||||
| Long-term debt |
3,032 | 3,032 | ||||||||||||||
| Pension, postretirement and postemployment benefits |
1,163 | (2 | ) | 1,161 | ||||||||||||
| Liabilities for errors and omissions |
517 | 517 | ||||||||||||||
| Other liabilities |
1,062 | (2 | ) | 1,060 | ||||||||||||
| Common stock |
561 | 561 | ||||||||||||||
| Additional paid-in capital |
1,109 | 1,109 | ||||||||||||||
| Retained earnings |
7,062 | (1,056 | ) | 1,357 | (2,3) | 7,363 | ||||||||||
| Accumulated other comprehensive loss |
(2,246 | ) | 10 | (2,236 | ) | |||||||||||
| Non-controlling interest |
37 | 37 | ||||||||||||||
| 6,523 | (1,046 | ) | 1,357 | 6,834 | ||||||||||||
| Less: Treasury shares, at cost |
(509 | ) | (509 | ) | ||||||||||||
| Total stockholders’ equity |
6,014 | (1,046 | ) | 1,357 | 6,325 | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 14,962 | $ | (1,133 | ) | $ | 1,357 | $ | 15,186 | |||||||
| (1) | Adjustment to eliminate the Kroll balance sheet at March 31, 2010. This excludes approximately $400 million of cash and intercompany balances that were settled with MMC and its subsidiaries and certain investments and other receivables that have been transferred to MMC. |
| (2) | Adjustment to reflect the cash proceeds on the sale of Kroll, including an estimated working capital adjustment, net of transaction expenses of approximately $50 million (i.e., investment banking fees, legal fees, audit fees, etc.). |
| (3) | Adjustment for the estimated tax benefit from the disposal of Kroll. |